IMF says India to grow 8% in FY11

The Fund said that with India’s long-term prospects remaining strong and private sector balance sheets sound, it expects growth to be back on track in 2010-11 even if advanced economies grow below trend

The International Monetary Fund (IMF) said that it expects India to grow at 8% in FY11 from 6.75% in FY10 with expected momentum in non-agricultural gross domestic product (GDP).

In a note, under Article IV of the IMF's Articles of Agreement, the Fund said that with India’s long-term prospects remaining strong and private sector balance sheets sound, it expects growth to be back at potential in 2010-11 even if advanced economies grow below trend.

Private consumption would benefit from better employment prospects and less uncertainty, investment would be boosted by robust corporate profits, rising business confidence, and favourable financing conditions, the IMF said.

The Fund said that it sees India's merchandise exports increasing by 22.1% to $178 billion in FY11 from $145.80 billion estimated in FY10 and imports rising 20% to $310.80 billion in the next fiscal year.

India's near-term risks are broadly balanced, the Fund said, adding that an acceleration of reforms and capital inflows could spur investment in the country. However, there are key risks like elevated inflation and financing constraints arising from—among other things—the fiscal deficit, which could put breaks on the recovery, the IMF said.

Terming India's growth prospects in the medium-term as 'bright', the Fund said that the country was not at the centre of the global crisis and its growth is well-balanced and mainly reliant on domestic drivers. There could be some risks such as difficulties in implementing productivity-enhancing reforms and continued supply bottlenecks to this favourable outlook, the Fund warned.

Given long transmission lags and the low policy rates, most directors of the IMF advised a timely start of the withdrawal of monetary stimulus that would help anchor inflation expectations and soften the impact on long-term interest rates.

The IMF said that most of its directors considered that rupee appreciation would help contain inflation and manage capital inflows, although a few directors argued for caution in this area. Sterilised intervention could help reduce excessive exchange-rate volatility, provided it does not generate further inflows, the Fund said.

The directors of the IMF also stressed the importance of developing a vibrant corporate bond market and reforms that would foster greater participation by pension funds and the insurance sector in funding infrastructure.


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    Shopper’s Stop says it’ll sustain growth in Q4

    Shopper’s Stop hopes to touch double-digit like-to-like sales growth by Q4FY10 and is positive that it will maintain this momentum. A majority of retailers are witnessing improved footfalls

    Shopper’s Stop Ltd has said that it is confident on sustaining its growth achieved during the third quarter of FY10 over the next quarter. It also hopes that its like-for-like sales will grow into double digits in Q4FY10.

    “We are confident that we can sustain the same numbers in the next quarter also. In Q4FY10, we hope to see an increase in like-to-like sales growth which has almost touched double digits in Q3FY10. We will definitely be able to maintain earnings before interest, taxes, depreciation, and amortisation (EBITDA) between 7%-8.5%,” said Govind Shrikhande, president and chief executive officer of Shopper’s Stop.

    During the third quarter to end-December, the retailer reported a net profit of Rs13.60 crore compared to a net loss of Rs3.10 crore in the same period a year ago. Its total revenues during the third quarter also rose to Rs421.10 crore on increase in average selling price and space additions.

    During Q3FY10, the company registered EBITDA of Rs30.20 crore, a growth of 210% on a year- on-year basis, due to the combination of lowered operating costs, steady profit margins and increase in sales. 

    For the past four years, the company claims that the third quarter has always reported good sales numbers due to the marriage and festival season. “This time also, our sales are up by 15% on a quarter-on-quarter basis,” said Mr Shrikhande.

    Shopper’s Stop also reduced its electricity consumption by 14%. The company shifted to Tata Power from Reliance Infrastructure, which helped it to reduce electricity costs. It has also cut down on advertising. Last year, it had to spend around Rs14 crore on a logo change. The company has also cut down usage of office space by 15%.

    A majority of retailers are witnessing improved footfalls and better conversion on the back of improved consumer sentiment. Like-to-like sales have seen strong growth for some large retailers. However, Shopper’s Stop’s like-to-like sales have been under pressure for the past two quarters.

    “We expect the company’s top-line to grow by 19% in FY10 and operating margin to be at about 6.5%-6.8% in FY11. Shopper’s Stop has been able to turn around its operations over the past two quarters and is expected to deliver steady performance going forward,” said KR Choksey Shares and Securities Pvt Ltd, in a report.

    Profitability of many retailers is likely to sustain due to the revival in fashion retailing and rebound in home retailing sales, which are poised to improve on account of revival in the real-estate sector. Expansion plans are back on track, at a slower pace and at strategic locations.

    Shopper’s Stop has been able to hold the top-line steady, despite decline in conversion ratio and muted customer entry. However, the key concern still is de-growth in like-to-like sales for stores, indicating low brand loyalty, KR Choksey added.

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    Steel price should stabilise at current levels: SAIL

    SAIL had raised prices of flat products by Rs500 per tonne and does not see any further rise in steel prices

    Steel Authority of India Ltd (SAIL) on Thursday said that steel prices should stabilise at current levels after hikes in recent months, reports PTI.

    "Prices have been raised and we don't see any further rise in steel prices," SAIL’s chairman and managing director SK Roongta said on the sidelines of an international conference on the refractory industry.

    On 2nd February, SAIL had raised prices of flat products by Rs500 per tonne.

    Recently, Tata Steel's managing director, HM Nerurkar, had also indicated that steel prices were likely to stay stable till March. "Prices of long products had risen sharply in December after which there was some correction and we don't see prices going up again," he said.

    Meanwhile, Mr Roongta said that SAIL's 50:50 joint venture with Tata Steel, S&T Mining, had been shortlisted by Coal India Ltd.

    "Coal India had invited an Expression of Interest and our joint venture, S&T Mining, has been short listed," Mr Roongta said.

    SAIL and Tata Steel had formed the joint venture in 2008 with an aim to scout for and develop coal mines to secure a key energy source for their existing and planned steel capacities.

    When asked about International Coal Ventures, the special purpose vehicle formed by several state-run units to acquire coal properties abroad, Mr Roongta said that it had made little progress till date.

    However, he said, SAIL had not yet made any decision to exit the venture.

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