INDIA NEWS ROOM
Industrial growth in April down to 7%
New Delhi, June 13, 2008: Fiscal 2008-09 began on somber note with industrial growth in April dropping to 7 per cent compared to 11.3 per cent in the same month a year ago, reflecting the impact of higher interest rates and rising input costs.
The performance in April, however, was much better than the 3.9 per cent growth rate witnessed during March, the last month of the previous fiscal, according the Index of Industrial Production (IIP) data released today.
"We expected the IIP to be weaker as the economy is clearly slowing down. But compared to the last 3 per cent industrial growth, the 7 per cent figure gives us some reassurance that though the economic growth will slowdown but it will not be as severe as it seemed," S&P Chief Economist Subir Gokarn told PTI.
The stock markets seemed charged up after the IIP data was released with the benchmark Sensex, which was down by over 400 points in morning trade, recovered to end the day higher by over 60 points at 15,250.
Marketmen said 7 per cent growth better is than expected and it has boosted investors confidence.
Attributing the reason for slowdown to high interest rates and increasing input costs, CRISIL Principal Economist D K Joshi said the average industrial growth during 2008-09 is likely to be around 7 per cent.
While the growth in manufacturing and electricity sectors dipped in the month, mining posted a robust growth.
The growth in manufacturing declined sharply to 7.5 per cent from 12.4 per cent in the corresponding period last year.
The electricity generation also saw a steep fall to 1.4 per cent against 8.7 per cent during the same month last year. The mining sector, however, posted an impressive show of 8.
According to Joshi, "the sectors sensitive to interest rate movement will bear the maximum brunt. We were expecting around 8.1 per cent economic growth but now we will have to revise our projections."
Meanwhile, the Reserve Bank yesterday hiked the short-term lending rate by 0.25 per cent to 8 per cent, which is widely expected to further strengthen interest rates.
With industrial production slowing down, he added, it was unlikely that the economy will record a growth rate of 8.1 per cent during the current fiscal.
Coupled with a soaring inflation rate that touched a 45-month high at 8.24 per cent for the week ended May 24, the industrial performance was poorest in the consumer goods sector in the use-based classification.
Consumer goods recorded a growth of 8.9 per cent against 14.7 per cent in the last year and consumer non-durables growth rate dipped to 9.8 per cent in April from 18.7 per cent during the last year.
However, much to the respite of the white good industry, consumer durable segment registered a growth of 5.5 per cent during the month versus 2.4 per cent in the corresponding month the previous year.
Intermediate goods production declined to 4.2 per cent compared to 10.6 per cent a year ago.
Capital goods, the key sector for industrial growth, however, surged to 14.2 per cent against 10.9 per cent in April 2007. Joshi said that the best part is that the though there is a moderation in industrial activities but capital goods growth has not been hit by the slowdown, he added.
Basic goods decelerated to 4.6 per cent against 8.6 per cent in the previous year.
RBI hikes repo rate to 8%
Mumbai, June 12, 2008: The Reserve Bank today hiked its short term lending rate by 0.25 per cent with immediate effect, a move that is likely to force banks to increase interest rates and help check inflation.
"The Reserve Bank of India has decided to increase the repo rate by 25 basis points to 8.00 per cent from 7.75 per cent with immediate effect," the central bank said in a statement in Mumbai.
The reverse repo rate, at which RBI borrows money from banks in exchange of the government papers, however, has been kept intact at 6 per cent.
The Reserve Bank said the decision has been taken with a view to containing inflation expectations among other things.
The RBI statement said: 'The annual policy statement for the year 2008-09 (April 29, 2008) had stated, inter alia, that the overall stance of monetary policy in 2008-09 will broadly be to ensure a monetary and interest rate environment that accords high priority to price stability, well-anchored inflation expectations and orderly conditions in financial markets while being conducive to continuation of the growth momentum.'
Further, it was proposed to respond swiftly on a continuing basis to the evolving constellation of adverse international developments and to the domestic situation impinging on inflation expectations, financial stability and growth momentum, with both conventional and unconventional measures, as appropriate.
The year-on-year WPI inflation which was 4.36 per cent on January 12, 2008 (at the time of announcement of the third quarter review for 2007-08) increased to 7.33 per cent on April 12, 2008 (at the time of announcement of the annual policy statement for 2008-09) and to a high of 8.24 per cent on May 24, 2008.
Further, various measures of CPI inflation, which ranged from 4.8 to 5.9 per cent in January 2008 have increased to a range of 7.8 to 8.9 per cent in April 2008.
The annual policy statement for the year 2008-09 (April 29, 2008) had referred to the unprecedented uncertainties and dilemmas that exist and added "while monetary policy has to respond proactively to immediate concerns, it cannot afford to ignore considerations over a relatively longer term perspective of, say, one to two years, with respect to overall macroeconomic prospects.
At the same time, it is critical at this juncture to demonstrate on a continuing basis a determination to act decisively, effectively and swiftly to curb any signs of adverse developments in regard to inflation expectations.
In light of the above, and on a review of the current macroeconomic and overall monetary conditions and with a view to containing inflation expectations, it is essential to take appropriate action on an urgent basis.
Accordingly, the Reserve Bank of India has decided to increase the repo rate under the Liquidity Adjustment Facility (LAF) by 25 basis points to 8.00 per cent from 7.75 per cent with immediate effect. There is no change in the reverse repo rate.
WTO: Nath holds talks with senior US leaders
Washington, June 12, 2008: Minister for Commerce and Industry Kamal Nath, who arrived in Washington had critical bilateral discussions with senior administration and Congressional leaders on issues related to WTO and bilateral issues.
On arrival in the Capital, Nath met the Secretary of Treasury, Henry M Paulson, where in addition to the the Doha Development Agenda (DDA), discussions also touched other issues of mutual interest in bilateral relations, including a Bilateral Investment Treaty (BIT).
The Second round of exploratory discussions on BIT are being held in Washington on June 11-13, according to a release issued by the Embassy of India.
Nath also met the chairman of the Senate Finance Committee, Senator Max Baucus, Democrat from Montana, where the two discussed issues related to the current status of the Doha Round negotiations and recent positive developments in bilateral commercial and economic relations.
The Minister also met the Secretary of Agriculture, Ed Schafer, and the US Commerce Secretary, Carlos M Gutierrez. Nath, the release stated, also held discussions with the US Trade representative Susan C Schwab and the two slated to meet again today for detailed deliberations on the Doha Development Round.
The Indian Commerce Minister will be participating in the US-India Global Partnership Summit hosted by the US India Business Council (USIBC) where he features in a live programme hosted by Charlie Rose titled "India in the 21st Century A Partner in Free-market Democracy".
Indian art work fetches record price at Christie's
London, June 12, 2008: A work of art by Indian artist Francis Newton Souza has fetched a world auction record price of 1,273,250 pounds at the Christie's here.
"Amongst the masterpieces offered, Francis Newton Souza's 'Birth' (1955) realised 1,273,250 pounds, setting a new world auction record for the artist and for any Indian Modern and Contemporary work of art," Hugo Weihe, Christie's International Director of Asian Art and Yamini Mehta, head of Sale said yesterday.
"Today's exceptional sale which realised 5,432,050 pounds, presented Christie's global clients with an inspiring array of works by over 50 of South Asia's leading modern and contemporary artists," they said in a joint statement.
Twelve artists' records were set in total, reflecting the continuing strength and depth of demand for this important and vibrant category. "We are pleased that the works from the Harmony Art Foundation in association with Barclays Wealth were well received, setting 3 world auction records, led by Navjot Altaf's December 15th, which realised 22,500 pounds." This sale draws Christie's Asian art sales for the first half of 2008 to an exhilarating conclusion, realising an overall total for New York, Hong Kong and London of 13,198,396 pounds - the highest ever total achieved for one season in South Asian Modern plus Contemporary Art.
"We now look forward to offering Syed Haider Raza's key work 'La Terre' at Christie's London Post War and Contemporary Art Evening sale on June 30. This will be followed by a highly anticipated set of Autumn auctions, led by Christie's New York on September 16," they said.
