<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>Speedbreaker in charge </b>
The Pioneer Edit Desk
Can highways survive Baalu?
Friday's front page report in this newspaper on the abysmal progress of the highway development and road upgrade programme over the past year is a reality-check for booming India. It is well-known that in the three years of the UPA Government the National Highways Development Programme (NHDP) and the Golden Quadrilateral -- meant to fast-track, literally, connectivity between the four metropolitan zones of the country -- have been delayed considerably. Vital for economic acceleration in the North-East, the East-West corridor is now three years behind schedule. It was meant to be completed this month but is expected to be ready not before December 2010. Admittedly, not all the blame can be laid at the doors of the Centre. State Governments have been mixed in their support for road development and in helping the National Highways Authority of India (NHAI) acquire land. Yet, it has to be said that the Road Transport and Highways Ministry and the NHAI have suffered under a Minister who lacks the missionary zeal that made his predecessor, Mr BC Khanduri, an iconic new-age political administrator. It is worth asking why the very departments and officers that were so successful under Mr Khanduri have had poor report cards under the present incumbent, Mr TR Baalu. The reasons are not economic or technical; they are related to politics and political ownership.
In the NDA years, the then Prime Minister, Mr Atal Bihari Vajpayee, made highway augmentation his vision statement, his legacy project. This was not unusual. Political leaders and chief executives often link their terms in office to blockbuster achievements. In his years in office, Mr Vajpayee gave his Minister-in-charge, Mr Khanduri, leeway for contractual innovation to bring about genuine public-private partnerships: Reward performing contractors and punish laggards and so create an incentive for quick completion of the NHDP. Business analysts praised the NHAI for transparency in its contracts system and saw it as a model for other infrastructure-related sectors. <span style='font-size:14pt;line-height:100%'>The UPA experience has been decidedly different. In any standard State Government the roads department is a "lucrative" one: There is money to be made by awarding contracts to firms that build sub-standard roads that have to be rebuilt the following year. Put bluntly, this has been the sort of approach Mr Baalu is comfortable with. In this scenario, institutionalised transparency -- a hallmark of the NHAI that Mr Baalu inherited -- is a nuisance.</span>
Matters cannot be allowed to rest here. The Prime Minister has often spoken of India's infrastructure deficit. Indeed, with help from the Planning Commission, his Government has devised new, innovative public-private financing mechanisms for projects in areas such as power, roads, ports and airports. Infrastructure is the buzz in the financial markets, much as IT was at the turn of the millennium. There is a lot of money -- external as well as raised in Indian markets -- being pushed into India-specific infrastructure funds. Even so, all the money in the world means nothing if the delivery system and the project implementation gateway are presided over by the types of Mr Baalu.<b> Does Mr Manmohan Singh have an answer to that? As Prime Minister, shouldn't he? </b>
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India slips two places to a rank of 128 on the UN Human Development Index
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Yet, there is something disconcerting about this. In 2004 we were told that India was not shining. In fact, India was stinking. Poverty was rampant, so was social inequity. Then they came back with their schemes and plans. We made feeble protests. We were called names. They claimed that they would fix India once and for all. Bridge the rural-urban divide, make our society more equitable, provide better opportunities for the needy.
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Understatement is not a virtue
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->The UPA government has been claiming that it has done well on fiscal consolidation. But as always, there is a difference between appearance and reality. Off balance sheet items have meant effectively larger budget deficits than the magnitudes talked about in the discussion under the Fiscal Responsibility and Budget Management (FRBM) Act.
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<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->The index of industrial production (IIP) grew a meager 3 per cent in March this year, putting pressure on the Reserve Bank of India to back off from taking further monetary-tightening measures in its war against inflation.
Although economists attributed the weak industrial output in March - the lowest in six years - partly to a high base effect, they said, it did hint at a slowdown in the Indian economy. The IIP had jumped 15 per cent in March last.
Rajive Kumar, chief executive and director, ICRIER, an independent economic think-tank, did not mince words and said the low growth rates must serve as a wake-up call to policymakers, especially the RBI, that has been tightening its monetary stance since last April. "They must realise that growth is important too," he said.
The rupee, already under pressure from poor stock market sentiments and record oil prices, fell 1.2 per cent to 42.115 before closing at 42.05 to a dollar, after the government released the IIP data. The currency has plunged 2.3 per cent in just a week, the most since 1998, bringing some cheer to exporters and a cushion in times when the economy is powering down.
Not surprisingly, the consumer durables sector, that is most sensitive to interest rates, decelerated 2.1 per cent in March compared with March 2007, according to the government's use-based classification.
While the mining and electricity sectors grew 3.8 percent and 3.7 percent, respectively, manufacturing took a beating and rose just 2.9 percent in March this year. For the full year though, manufacturing output increased grew 8.6 per cent. The mining and electricity sectors grew 5 per cent and 6.4 percent, respectively in 2007-08 compared with the previous year.
Not all economists, however, expect the RBI to relent in its efforts to keep prices at bay. D K Joshi, Principal Economist, Crisil, said, "The RBI is faced with a real Catch-22 situation. But I expect further monetary tightening to follow as inflation is a bigger threat in the time of elections."
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<b>India's infrastructure growth slips to 9.6%</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->
Â
India's infrastructure growth slipped to 9.6 per cent in March 2008 from 10.5 per cent in the same month last year.
Growth in six core infrastructure industries slowed down to 5.6 per cent during the fiscal 2007-08 from 9.2 per cent in the previous year.
Barring cement and finished steel production, the other industries -- crude oil, petroleum refinery products, coal and electricity -- registered a decline in growth in March 2008.
Sluggish performance of the manufacturing sector pulled down growth in overall industrial production to a six-year low of 3 per cent in March this year from 14.8 per cent in the year-ago period.
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<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Â <b>Highway to nowhere </b>
The Pioneer Edit Desk
NHAI founders as UPA watches
It is deeply unfortunate that the National Highways Development Programme has recorded the lowest ever progress rate under the UPA Government over the past year. The latest statistics on progress in various regions is not at all encouraging; indeed, the future of highways development appears extremely bleak unless there is a regime change or a change in the mindset of the incumbent Government. The National Highways Authority of India has posted a 56 per cent project completion rate across all phases of the NHDP in 2007-2008 -- this despite tall claims to the contrary. This is the lowest in the last four years, and much lower than the speed of project implementation during the NDA years. <b>Even die-hard optimists would say that it's a dismal report card. In contrast, the project completion rate was 81 per cent in 2004-2005, 78 per cent in 2006-2007, 73 per cent in 2005-06. That was before the NDA-imparted speed lost momentum. Similarly, the project award rate is down from 70 per cent in 2005-2006 to 17 per cent in 2007-2008. What is worse is the progress on the Golden Quadrilateral and the North-South, East-West corridors has been very slow.</b> This led the Committee on Infrastructure, which is chaired by the Prime Minister, to express acute dissatisfaction with NHAI's progress. Strange as it may sound, this amounted to the Prime Minister admitting his Government's utter failure on this front which is crucial to infrastructure development. Subsequently he has done little to correct the situation. The picture that has emerged after a Planning Commission review of NHAI's various projects conducted last month, painted in the bleakest of colours, underscores this point.
The Planning Commission has pointed out that the NHAI is taking 20 months on an average to award a project against a set timeframe of five months. It has also been reported that other than work being sluggish on these projects, investments have also been slow, thanks to a listless NHAI. In its defence, the NHAI has argued that the slowdown in investments is because the Government is yet to notify and approve the new toll rules and Model Concession Agreements for toll collection. It has also claimed that there is a dearth of technical and financial staff, shortage of raw materials as well as shortage of skilled manpower in the industry. There is no doubt that these reasons are valid to some extent, but to stress them beyond a point serves little or no purpose other than passing on the buck, which Government agencies excel in. For, neither the NHAI nor the government can deny that there appears to be inefficency all around. Highways are important infrastructure projects and hold the key to rapid economic development. This simple point is lost on the UPA Government. The Congress, of course, will point a finger at the DMK because it controls the relevant Ministry. But what about the <b>Congress, which leads the UPA? And a Prime Minister who is totally clueless about his Government's performance? </b>
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There is general consensus that the inflation rate would go over 9 per cent, which will be a 13-year high. Inflation was over 9 per cent nearly 13 years back, in September 1995.
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>Big blow to<i> aam admi</i></b>
Major blunder was with 'election' Budget ignoring harsh economic realities
Mammoth subsidies to win votes proving counterproductive
Sonia asking to slash sales tax, duties to burden States
More subsidy in Delhi on LPG
Andhra Pradesh to fully bear increased cost of LPG cylinder
Prices of essential commodities begin to go up
Economists feel Prime Minister's appeal on austerity won't make much difference
-- Visit Edit section: Fuelling inflation-- Congress deserts aam admi<!--QuoteEnd--><!--QuoteEEnd-->
Queen is very intelligent, destroy state economy, but 10 Janpath should stay intact.
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->This really is the root of the problem. What development activities are they talking about? Are you getting an assured supply of electricity, without wild fluctuations? Do you get clean water around the clock? Have the potholes in the roads in your town been filled up? Does anyone believe that the local government schools or the primary health centres are functioning adequately? (Or functioning at all!) So where is the money going?
One weak excuse being trotted out is that the funds are being targeted at rural areas, whether in the form of loan waivers or the National Rural Employment Guarantee schemes. This is a joke. <!--QuoteEnd--><!--QuoteEEnd-->
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->What of the NREG? Sonia Gandhi's pet ploy to win votes is coming a cropper. On May 14, this year a man named Lalit Kumar Mehta was murdered in Jharkhand. The police tried to pass it off as a case of robbery, but the real facts soon emerged. Lalit Kumar Mehta was an activist in the Vikas Sahyog Kendra, which works for adivasis. At the time of his death, he was carrying out a social audit of the local NREG. scheme, and his father, Jagdish Mehta, insists that he was carrying a CD-ROM with hard proof of misuse of funds.
Please note that this particular social audit was being carried out not by just another unknown non-governmental organisation, but under the direct supervision of Professor Jean Dreze (the Belgian economist associated with Dr Amartya Sen). Media reports confirm the Vikas Sahyog Kendra's suspicions about the daylight robbery passing off as NREG schemes. And this, I am fairly certain, is being replicated all over in India.
Let me sum it up. There is no money for fuel subsidies because it is, supposedly, being used for developmental activities. But nobody can see any effect of these activities. (The highway development schemes started in the days of the Vajpayee ministry, for instance, have practically ground to a halt.) I repeat: Where is the money going?<!--QuoteEnd--><!--QuoteEEnd--> Where is money going?
NEW DELHI: Between the governmentâs predilection to use monetary measures to control runaway inflation and its apparent reluctance to give paddy farmers a remunerative price for their produce, the BJP seems to have been handed an opportunity to harness a rather unhappy constituency to its advantage. http://economictimes.indiatimes.com/News/P...how/3127979.cms
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>Govt has lost control on prices, says industry </b>
Pioneer News Service | New Delhi
The Indian industry chambers have expressed great concern over inflation reaching the double-digit level, saying that managing it has gone beyond the Government's control.
<b>Top chambers like the CII, FICCI and Assocham on Friday said inflation touching a 13-year high of 11.05 per cent had reached the concern zone and was posing a major threat to growth.</b>
"Inflation is not only a concern for the Government but also for the industry... Many things seem to have gone beyond its (the Government's) hands," Assocham said in a statement.
<b>"At 11.05 per cent growth in WPI for the week ending June 7, 2008, inflation is reaching the concern zone," </b>said CII president KV Kamath.
A CII release also stated that the double-digit inflation was a <b>"threat to the growth prospects" of the country and posed a "huge challenge" to the Government. "The current level of inflation reduces the space for fiscal and monetary policy manoeuvrability,"</b> the release added.
The Indian economy has been growing at an average of over 8.5 per cent for the last four years. It was accompanied by a moderate inflation for the last three years. But it started rising since February this year.
FCCI said maintaining the GDP growth would be a serious challenge before the Government and the prospects of strong economic growth as seen in the past would certainly take a hit. However, the chamber added that following the recent increase in the prices of petrol and diesel, such an increase in the rate of inflation was anticipated.
Out-of-the-box solutions are required to be explored and the industry would be happy to work with the Government in containing inflation and ensuring that the growth momentum of the economy was not seriously damaged, said the CII release.
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This is when so called self proclaimed Finance experts are ruling country. <!--emo&--><img src='style_emoticons/<#EMO_DIR#>/biggrin.gif' border='0' style='vertical-align:middle' alt='biggrin.gif' /><!--endemo-->
They could have fixed or reduced this problem long time back, but spinesless don't have spine to make decisions.
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>Promise: 2-digit growth Reality: 2-digit inflation </b>
Pioneer News Service | New Delhi
Prices at 13-yr high at 11.05%; don't expect relief
The inflation spiked to 11.05 per cent on Friday, touching a 13-year high. There are serious apprehensions that it may stay at this level for months even if crude prices ease up, since edible oil has flared up on destruction of crops in the US due to flooding and storm.Â
<b>Growth could take a big hit. The last time when inflation reared its head so monstrously, it took three years for revival of the economy. The previous high inflation of 11.11 per cent was witnessed on May 6, 1995</b>.
Though the Government tried to blame the inflation on rising international crude prices and their impact on the domestic economy, <b>the fact remained that the petro price hike was expected to add little more than 0.5 per cent to the price index</b>. When the prices of petroleum products were raised in the first week of June, the inflation hovered only around 8 per cent. Besides fuel prices, the rise in prices of food products -- particularly edible oil and manufactured goods -- added to the pressure and woes of the Government. The latest development is likely to put more pressure on the Government, which is already facing heat from the Left parties on the issue of going ahead with the India-US nuclear agreement.
<b>There was almost an all-round increase in edible oil prices, led by sunflower oil (which became costlier by 10 per cent), followed by groundnut and cotton seed oil (3 per cent), imported edible oil, vanaspati and soyabean oil (2 per cent each). </b>The edible oil crisis has cropped up because of destruction of crops in the US due to floods and storms and is not likely to get over any time soon.
The runaway rise of inflation is a big setback for the Government, which had the dream of double-digit growth for the country. The issue of double-digit growth is also a lesson for the Finance Ministry, which compromised on controlling fiscal deficit for populist measures which ate into the resources. There is little hope that the inflation would come down in near future. The fundamentals of macro economics have been seriously derailed and it could take long to undo the damage. Meanwhile, the inevitable upward tempering with the repo rate and the cash reserve ration by the Reserve Bank of India-related rise of interest by commercial banks, both private and public, could starve the industry of resources for carrying out the capex. There are serious fears that the growth could come down to around 7 per cent and stay there for a long time.
The monetary policy measures could also lead to increased interest rates for cars, homes and consumer finance. "The high inflation may force the RBI to increase the repo rate (short-term lending rate to banks) by up to 0.5 per cent," principal economist of rating agency CRISIL D K Joshi told PTI, adding that prices would be a major challenge unless fuel prices were controlled.
Though the market had braced up for double-digit inflation, it fell like ninepins when news tricked in that the number stood above 11 per cent. Some of the biggest scripts, like Reliance Industry, lost over six per cent in a day and many others hit three- to five-year low. The index toughed the all-time low this year and bears took a tight grip of the market. With selling coming on high volumes, the days ahead look critical for the market as experts see no convincing support at the lower levels.
During the week under consideration, the Fuel Index rose by 7.8 per cent on account of higher prices of diesel (21 per cent), LPG (20 per cent), naptha (17 per cent), furnace oil (15 per cent), ATF (14 per cent), petrol (11 per cent), high speed diesel (10 per cent) and bitumen (7 per cent), a government release said. Though the food index declined by 1.1 per cent due to lower prices of fruits, vegetables and coarse grains, prices of fish, spices, maize and gram moved up by about 1 per cent, it added. According to the index, iron and steel sectors witnessed a hefty price increase during the week.
<b>While the price of steel soared by 14 per cent, pig and foundry iron became costlier by 11 per cent. The price of bar and rounds rose by 9 per cent, followed by steel sheets (4 per cent) and pipes and tubes (2 per cent). The index of the textile products, according to the data, also grew by 0.1 per cent on account of higher prices of cloth, sacking bags and woollens</b>.
Among the manufactured products category, <b>the prices of ceiling fans during the week went up by 6 per cent.</b> As regards chemical products, the index rose by 0.2 per cent due to rising prices of all kinds of acids, caustic soda and blank cassettes. However, in the non-metallic minerals products category, the prices of cement declined marginally.
Attributing the surge in inflation to the rise in administered prices of petroleum products, Union Finance Minister P Chidambaram hinted at more steps to curb the demand and improve supply side to control the price rise. "These are difficult times. The Government is aware of the difficulties... Naturally, we will have to look at stronger measures on demand and monetary sides...We will try to address to the best of our abilities the demand and monetary sides and try to improve supply side also," Chidambaram said.
He, however, refused to divulge what steps the Government or the RBI intended to take.
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<b>Risk to Indian rupee persists: Moody's</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->A number of central banks across the Asian region have likely intervened on foreign exchange markets," Moody's Economy said.
<b>"The Bank of Korea, Bank of Thailand, Bangko Sentral ng Pilipinas and Reserve Bank of India are all suspected to have sold US dollars to boost domestic currencies in order to contain inflation,"</b> the agency added.
"There is still considerable downside risk to the Indian currency in the coming weeks." The assessment comes against the backdrop of India's annual rate of inflation shooting up to a 13-year high to a double-digit level of 11.05 per cent in recent weeks.
<b>"Although the Indian rupee strengthened to 42.96 to a US dollar, continued inflationary concerns in the emerging economy - especially after wholesale price growth accelerated to a double-digit rate - will continue to weigh on investor sentiment."</b><!--QuoteEnd--><!--QuoteEEnd-->
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>'Rupee to test 47-level vs USD' </b>
Pioneer.com
PTI | New Delhi
Posted online: June 29, 2008
Continuing flight of foreign capital from Indian equity markets and the persisting global financial crisis, hit by surging crude oil prices, are likely to send the domestic currency crashing to 47-level against the US dollar in the coming months, the experts have warned.
Since the beginning of 2008, the rupee has depreciated by over 8 per cent against the US dollar in a downward rally, which started after a sharp appreciation of over 11 per cent in the Indian currency spanning over a year-long period.
During its last appreciation leg, the rupee rose from about 45-level to a high of close to 39 per dollar mark, while it is currently inching towards 43-level amid continuing pull- out of foreign capital from India and surge in oil price.
Global brokerage and equity research major CLSA's analyst and a renowned portfolio manager Christopher Wood has said in the latest June edition of his famed "Greed and Fear" report that further rise in oil price would continue to be particularly bad news for India.
"This is both despite and because of the Reserve Bank of India's increasingly pre-emptive monetary tightening stance. The RBI raised on Tuesday the repo rate and the cash reserve ratio (CRR) by 50 bps each to 8.5 per cent and 8.75 per cent, respectively.
"Certainly, a re-test of the 12,000 level on the Sensex cannot be ruled out in these circumstances. And that will be accompanied by a further weakening in the rupee," Wood wrote.
<b>Separately, research and analytics firm Evalueserve's Chairman Alok Aggarwal has written in a whitepaper that the rupee is expected to fall to 47 against the US dollar and GDP growth could slow down to six per cent by the fourth quarter of this fiscal. </b>
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It just took four years to destroy India's financial fundamentals which was built during NDA rule.
<b>India Output Growth Slumps, S&P Says Rating May Be Cut to Junk </b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->July 11 (Bloomberg) -- <b>India's industrial production grew at the slowest pace in more than six years and Standard & Poor's said it may cut the nation's credit rating to junk if the economy deteriorates further. </b>
Stocks fell after the government released figures showing industrial output gained 3.8 percent in May from a year earlier, almost half the median forecast in a Bloomberg survey. Bonds dropped after S&P said its BBB- ranking on India's long-term local currency debt may be lowered to ``speculative grade.''
<b>``A rating downgrade would be a blow to India</b>,'' said Ramya Suryanarayanan, an economist at DBS Bank Ltd. in Singapore. ``Heading in that direction isn't good as investors are already panicking about inflation, growth and fiscal prospects.''
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Another proud moment for Moron Singh.
India Rating May Be Cut on Fiscal Concerns, S&P Says <!--QuoteBegin-->QUOTE<!--QuoteEBegin-->July 11 (Bloomberg) -- India's credit rating may be cut to ``speculative grade'' if faster inflation and higher government spending ahead of next year's election impair the budget deficit, Standard & Poor's said.
<b>India's long-term local currency debt is rated BBB- by S&P, the lowest investment grade. A one-notch drop in its ranking would place Asia's third-largest economy on par with Indonesia, El Salvador and Guatemala. </b>
``<b>Political compulsions may make it difficult for the government to take timely measures to staunch fiscal or monetary slippages,'' </b>S&P analyst Takahira Ogawa said in an e-mailed statement today. ``Failure to respond adequately to negative developments could point to a sustained deterioration in macroeconomic stability and increase the probability that the government's ratings could be lowered to speculative grade.''
The risk of a downgrade comes just 18 months after India was lifted to the investment category by S&P for the first time since 2002. A lower rating may deter foreign investors and make it more expensive for Indian companies to raise money, slowing growth in the $912 billion economy.
<b>``A rating downgrade on India will be detrimental for companies' investment plans,'' </b>said Amandeep Chopra, who helps manage the equivalent of $6.3 billion of stocks and bonds at UTI Asset Management in Mumbai. ``It will further widen the cost of borrowing for companies.''
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<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>Forex reserves fall further by over $3 bn </b>
Pioneer.com
PTI | Mumbai
Posted online: July 12, 2008
A $4 billion decline in the foreign currency assets (FCA) caused a further fall in India's foreign exchange reserves for the second consecutive week.
<b>Reserves fell by a whopping $3.393 billion for the week ended July 4 to $ 308.397 from $311.790 in the previous week, the Reserve Bank weekly data said.</b>
<b>The reserves had dropped by a marginal $691 million in last week.
FCAs declined from $302.744 billion in the previous week to $298.661 billion, down $4.083 billion, RBI data said.</b>
FCAs expressed in US dollar terms include the effect of appreciation or depreciation of non-US currencies such as Euro, Sterling and Yen held in reserves, RBI said.
Meanwhile, the gold reserves improved marginally this week to $9.208 billion as compared to $9.202 billion in the previous week while the Special Drawing Rights remained static at $11 million, the apex bank said.
India's reserve position in the International Monetary Fund fell by $10 million during the week and stood at $517 million as against $ 527 million in the previous week, the central bank said.
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