Mumbai: Indicating that more policy tightening measures will have to be undertaken, Reserve Bank deputy governor Subir Gokarn today said headline inflation is not easing as fast as the apex bank would like it to do and that upside risks still remain high, reports PTI.
"Inflation is not easing as we would like it to be...
Upside risks to inflation are still high," Mr Gokarn told newsmen on the sidelines of a seminar on debt markets organised by the credit rating agency Care here today.
However, he said, the current skyrocketing prices of onions will only have a temporary impact on inflation. "I don't think high onion prices will have a long-term impact on inflationary pressures, as the government has said that it has been doing everything to manage supply side issues. Also, high food price inflation was driven more by persistent rise in nutritional food items like cereals," he said.
Mr Gokarn further pointed out that the rising commodity prices in the global markets also point to the rising risk of headline inflation.
The Reserve Bank of India (RBI) had left interest rates unchanged last Thursday at its mid-quarter review but warned that inflation was still well above its comfort level and unveiled steps to address the persistently tight liquidity by permanently bringing down the statutory liquidity ratio-a prudential measure that requires banks to invest a portion of their funds into government bonds, gold and other illiquid assets-by 100 basis points to 24%, which would release Rs48,000 crore into the system.
Due to the persistently high inflation numbers, the RBI has revised upwards its annual inflation numbers to 6.5% by end March, which is one full percentage point above its earlier projection.
Headline inflation eased in line with expectations to 7.48% in November, its lowest level in a year. The finance ministry is expecting further decline in headline inflation numbers.
However, food inflation, which has been on the rise for the past three weeks, is likely to go up in the weeks ahead on account of sky-high higher onion and other certain other vegetables. For the week ended 4th December food inflation rose to 9.46% as vegetables turned expensive. The previous week it was 8.69%. Against this, in the corresponding week last year, food inflation was ruling at 20.90%.
Rising crude prices as well as the commodities are likely to have their cascading impact on inflation back home.
Also, last week oil marketing companies had upped the retail price of petrol by Rs2.95 a litre and the Empowered Group of Ministers is meeting end of the month to review subsidy on diesel and cooking gas. While petrol price hike will not have any serious adverse impact on headline inflation, any spike in diesel will have a serious implication on it.
Options to deal with the worsening water shortage are many, but they may not be quite easy or affordable to implement, according to Professor T Arsiwalla, who has been associated with this work
Mumbai has been in troubled waters for quite some time. With the ground water table depleting fast, a failing sewerage system and monsoons becoming a nightmare season with inadequate storm water drainage, the city has been facing difficulties in managing the elements of life. With increased environmental consciousness, demands for rainwater harvesting and the use of sea water have grown steadily. But how feasible are these new measures? Does it come without a price? Apparently not.
Professor T Arsiwalla (retd), who has been part of several water treatment projects in India, thinks that there is a flip side to the proposed technologies. Speaking at a seminar on Mumbai's infrastructure and governance requirements, he said, "These are noble intentions, but we have to consider how feasible they are. How do you go about storing the rainwater that you harvest? Ideally, it is to be stored underground. But then, most of the underground sewerage lines and dumps we have in this city are leaking. Ultimately, that will contaminate this stored water. Once that happens, the water has to go through the lengthy process of purification, which becomes unprofitable."
The question of desalinising sea water is also a tricky one. Firstly, it is an expensive process, and then, it requires very sophisticated technology, which will require a lot of effort. Ultimately, for getting the water into the plant and treating it, a massive pumping system is needed, which would require money, labour and skill. Is Mumbai, or for that matter India ready to go for that, especially when there are more pressing demands to attend to in the basic infrastructure segment?
"The funny part about this is that the non-exhaustible sources of energy required to operate these plants or processes are far from reach," said Mr Arsiwalla. Having a desalinating plant, or for that matter, an advanced waste-water treatment plant, will burn up a lot of energy. While it can save water, if conventional fossil fuels or thermal power is used, the amount of carbon dioxide and air-pollutants it will emit will be massive.
And after that, it will be an ongoing chain of disasters. Carbon dioxide emission will contribute to global warming, which will lead to a rise in sea levels. Mumbai's sea level is already rising at 3-6 millimetres per year. The increased sea level will create more trouble during the rains and drainage will worsen. Moreover, salinity will seep into aquifers. And again, more energy will be required to pump up that extra volume of saline water to the processing plants.
"It is time that India starts taking a global view in matters of environment," said Mr Arsiwalla. "Without renewable green energy resources, we cannot take such steps. While adopting new technologies, we have to think twice about how much these 'green' measures are going to cost in the long run."
Let us hope that with India's commitment towards mitigation we will be able to widen our horizons.
Based on a strong quarter of consulting sales and bookings by Accenture, and robust growth in new licence sales by Oracle, Kotak Institutional Equities expects blockbuster growth for the top three Indian IT services firms–TCS, Infosys and Cognizant—in the new year
Accenture's November 2010 earnings saw consulting revenues driving growth with a 15% quarter-on-quarter uptick, which clearly suggests increasing discretionary spends, according to Kotak Institutional Equities. Outsourcing revenues also grew a strong 6.5%. Constant currency revenue growth hit double digits for the first time in several quarters and outsourcing order booking was up 28%.
Oracle saw a 14% q-o-q growth in dollar terms. New software licence sales amounted to $2 billion, up 23% year-on-year. This was the highest-ever new licence sales in the November quarter.
Based on these numbers, Kotak Institutional Equities gave a heads-up to its clients about possible upgrades in estimates of tier-I companies. "Our current estimates do not factor in this possibility yet (potential of 30%+ constant currency revenue growth year) and we believe that neither do the consensus numbers. We clearly see a possibility of further revenue upgrades for tier-I names. Also, with most of the Street having reset their rupee/$ assumptions to 43-44.5 for FY12, a weaker rupee could lead to meaningful EPS upgrades as such."
A large part of the hope for higher discretionary spending by US companies is based on Federal Reserve data which suggests that American corporations are sitting on roughly $1.9 trillion in cash!
Kotak expects the best growth to come in mid-cap names such as Hexaware, Mindtree and Satyam. Best large-cap growth is expected from HCL Tech and Infosys. TCS and Wipro seem to be lagging behind in terms of growth and yet they are the most expensive.
IT companies have been outperformers in the last month or so, as they were considered safe havens in the middle of the scams that broke out, and the relatively positive data coming out of the US. Infosys has gone up almost 14% from a low of Rs2,950 on 24th November, while TCS and HCL Technologies are up 16% and Wipro is up by as much as 20%.