The government of India is planning to allow multi-brand retail to the foreign direct investment (FDI) showing its resolve to open up the sector to international chains.
The department of industrial policy and promotion (DIPP) was written a letter to the finance ministry and is also carrying out discussions with the agriculture ministry about the allowing FDI into the sector.
DIPP is responsible for framing the foreign investment policy for the central government. The department is under the commerce and industry ministry and is proposing to allow 100% FDI in defence production.
"The move to open up retail is part of the government's strategy to plug gaps in the food supply chain and more importantly, help bring down the difference between farm-gate prices and retail prices," said a DIPP official.
Presently, the government allows 51% foreign investment in single-brand retail only and it has been reluctant in opening up the sector to the FDI fearing blackish from the political parties.
The government will put forward the argument that the control of the units will remain in the Indian hands. The official indicated that government will put a cap of 49%.
International chains like US-based Wal-Mart and Germany's Metro AG who have set up shops in the country have been asking the government to open up the sector for FDI.
Monday, April 12, 2010
All-India 3G bid at Rs 4,324 cr; Delhi, Guj see highest prices
NEW DELHI: The third day of spectrum auction for 3G telephony saw the all-India licence bid touching Rs 4,324 crore at the end of 16 rounds, ensuring that the government would get a minimum of Rs 17,636 crore.
With today's closing, the bid has gone up nearly 24 per cent more than the base price of Rs 3,500 crore and 5.85 per cent higher than Rs 4,085 crore in the last round on Saturday.
The government has set a target of garnering up to Rs 35,000 crore from sale of spectrum for 3G and broadband wireless access (BWA) services.
The Rs 416.43-crore bid for Delhi was the highest among all metros. The bid for Gujarat at Rs 416.42 crore almost matched the one for Delhi, according to details available with the Department of Telecom (DoT).
The bid for Gujarat also saw the highest increase of Rs 20.82 crore from the last round of auction on Saturday.
Andhra Pradesh, Tamil Nadu and Maharashtra saw bids rising to Rs 404.54 crore, while that for Karnataka was Rs 396.58 crore ahead of Mumbai at Rs 392.66 crore.
The bid for Rajasthan was Rs 159.47 crore, UP (E) Rs 157.66 crore, Kolkata, Kerala Rs 150.16 crore each, Madhya Pradesh Rs 149.02 crore, Haryana Rs 140.09 crore and Punjab Rs 123.63 crore.
There were negative demands in nine circles -- West Bengal, HP, Bihar, Orissa, Assam, North East, J&K and Haryana. Excess demands were seen for eight circles with the maximum being for UP (E). These circles did not see any increase in their bid price since Friday.
The government is auctioning three slots of 3G airwaves in 17 telecom service areas. Only two slots are up for sale across the country for broadband airwaves, which will begin after the conclusion of the 3G auctions.
On Friday, the first day of the 3G spectrum sale process, the government had received bids worth a total of Rs 3,919 crore for a pan India licence- this was 12% higher than the base price of Rs 3,500 crore.
With today's closing, the bid has gone up nearly 24 per cent more than the base price of Rs 3,500 crore and 5.85 per cent higher than Rs 4,085 crore in the last round on Saturday.
The government has set a target of garnering up to Rs 35,000 crore from sale of spectrum for 3G and broadband wireless access (BWA) services.
The Rs 416.43-crore bid for Delhi was the highest among all metros. The bid for Gujarat at Rs 416.42 crore almost matched the one for Delhi, according to details available with the Department of Telecom (DoT).
The bid for Gujarat also saw the highest increase of Rs 20.82 crore from the last round of auction on Saturday.
Andhra Pradesh, Tamil Nadu and Maharashtra saw bids rising to Rs 404.54 crore, while that for Karnataka was Rs 396.58 crore ahead of Mumbai at Rs 392.66 crore.
The bid for Rajasthan was Rs 159.47 crore, UP (E) Rs 157.66 crore, Kolkata, Kerala Rs 150.16 crore each, Madhya Pradesh Rs 149.02 crore, Haryana Rs 140.09 crore and Punjab Rs 123.63 crore.
There were negative demands in nine circles -- West Bengal, HP, Bihar, Orissa, Assam, North East, J&K and Haryana. Excess demands were seen for eight circles with the maximum being for UP (E). These circles did not see any increase in their bid price since Friday.
The government is auctioning three slots of 3G airwaves in 17 telecom service areas. Only two slots are up for sale across the country for broadband airwaves, which will begin after the conclusion of the 3G auctions.
On Friday, the first day of the 3G spectrum sale process, the government had received bids worth a total of Rs 3,919 crore for a pan India licence- this was 12% higher than the base price of Rs 3,500 crore.
Feb industrial output rises at slower-than-expected 15.1%
The Index of Industrial Production (IIP) for the month of February rose at a slower-than-expected 15.1% as against 16.7% on a month-on-month basis, helped by stimulus measures that boosted domestic demand. The output is expected to ease further following moves to withdraw an economic stimulus, including a interest rate hike in March. A CNBC-TV18 poll indicates a figure of 16.5% for the month.
While the manufacturing sector for grew at 16% in February as compared to 17.9% in January 2010, the mining sector posted a growth at 12.2% versus 14.6% (MoM). The electricity sector too grew at 8.4% in February versus 10.7% in January.
Basic goods for the month grew at 6.7% as compared to 5.6% growth posted in January. The capital goods sector, which showed a growth of 56.2% in January, grew 44.4% in February and the intermediate goods posted 15.6% growth versus 21.3% in January. The consumer goods for the same month grew at 8.9% as against 4.2%.
A pick up in the economy has seen a rise in inflation with the headline number poised to breach 10% in March, above February's 9.89%.
Headline inflation, which was initially driven by high food prices, is now getting a push from other segments. Inflation in manufacturing accelerated to 7.4% in February from 6.5% in January, a sign that inflation is fast becoming a demand-driven problem.
The Reserve Bank of India, citing inflationary pressures and an improving economy, hiked key rates by 25 basis points last month and is expected to raise the rates again by at least the same amount at its policy review on April 20.
Commenting on the figures Atsi Sheth, Chief Economist at Macro-Sutra said, this was still an excellent number. “We stick by our view that the RBI will increase the repo and reverse repo rates by a modest 25 basis points at its policy review on April 20.”
"The number to watch now is inflation, and if it stays in the 10-percent range, especially with non-food inflation not accelerating, this bodes well for our forecast that the RBI's post-April 20 tightening will be measured and moderated," she added.
The numbers are certainly lower than the consensus expectation but some of this was possibly given the core index numbers because there was some slackness on steel, cement and so on, said Abheek Baruah of HDFC Bank. “That has probably got reflected in manufacturing and I think there has been some moderation in both durables and capital goods production, which was again expected because the surge in both December and January have been quite spectacular. So it is just moderation, I wouldn’t be too disappointed but certainly lower than expectations.”
Preferring to use a month-on-month seasonally adjusted numbers rather than year-on-year number, Samiran Chakrabarty, Chief Economist at Standard Chartered Bank says, from that perspective, it’s about 1% MoM drop seasonally adjusted. “However, I am not too surprised because typically we have seen that if in a particular month, the MoM number is very high as happened in January where it was almost a 5% MoM growth, then the next month is somewhat down. So that kind of an adjustment has happen and that’s why this number has come out lower than what the market would have been anticipating. I am not too worried about any reversal of trend in industrial production. I think the momentum is still on.
The yield on the benchmark 10-year bond fell two basis points to 8.03% after the news, but climbed back to 8.04%.
Commenting on the movement, Arun Kaul Executive Director at Central Bank of India, said, “The bond market has seen some worries, the last week auction the yield went up at 7.96 and there on the secondary market the yields have moved upto 8.06% right now. The worry in the market is two-fold; one, inflation has started moving up, we thought inflation was only in primary articles but it looks like non-primary articles it is spilling over too, particularly, the commodity prices are moving up so that is a cause of concern. Particularly oil, oil has moved to USD 86-87 per barrel that is very worrisome. Second, is in terms of the RBI possible action. There is a feeling in the market that the RBI could increase CRR and it could even increase the repo rate to contain inflationary expectations. So that worry is leading to expectation whereby players are not willing to initiate large positions and yields have moved up.”
Finance Minister Pranab Mukherjee has said the government could consider to further roll back stimulus, after hiking factory gate duties in the February budget.
The March purchasing managers' index for India showed the pace of manufacturing activity slowed down, dropping from a 20-month-record in February, as mounting cost pressures took a toll on expansion in output.
India, the world's second fastest growing economy after China, is expected to grow 8.5% in the current fiscal year and 9% in the next.
While the manufacturing sector for grew at 16% in February as compared to 17.9% in January 2010, the mining sector posted a growth at 12.2% versus 14.6% (MoM). The electricity sector too grew at 8.4% in February versus 10.7% in January.
Basic goods for the month grew at 6.7% as compared to 5.6% growth posted in January. The capital goods sector, which showed a growth of 56.2% in January, grew 44.4% in February and the intermediate goods posted 15.6% growth versus 21.3% in January. The consumer goods for the same month grew at 8.9% as against 4.2%.
A pick up in the economy has seen a rise in inflation with the headline number poised to breach 10% in March, above February's 9.89%.
Headline inflation, which was initially driven by high food prices, is now getting a push from other segments. Inflation in manufacturing accelerated to 7.4% in February from 6.5% in January, a sign that inflation is fast becoming a demand-driven problem.
The Reserve Bank of India, citing inflationary pressures and an improving economy, hiked key rates by 25 basis points last month and is expected to raise the rates again by at least the same amount at its policy review on April 20.
Commenting on the figures Atsi Sheth, Chief Economist at Macro-Sutra said, this was still an excellent number. “We stick by our view that the RBI will increase the repo and reverse repo rates by a modest 25 basis points at its policy review on April 20.”
"The number to watch now is inflation, and if it stays in the 10-percent range, especially with non-food inflation not accelerating, this bodes well for our forecast that the RBI's post-April 20 tightening will be measured and moderated," she added.
The numbers are certainly lower than the consensus expectation but some of this was possibly given the core index numbers because there was some slackness on steel, cement and so on, said Abheek Baruah of HDFC Bank. “That has probably got reflected in manufacturing and I think there has been some moderation in both durables and capital goods production, which was again expected because the surge in both December and January have been quite spectacular. So it is just moderation, I wouldn’t be too disappointed but certainly lower than expectations.”
Preferring to use a month-on-month seasonally adjusted numbers rather than year-on-year number, Samiran Chakrabarty, Chief Economist at Standard Chartered Bank says, from that perspective, it’s about 1% MoM drop seasonally adjusted. “However, I am not too surprised because typically we have seen that if in a particular month, the MoM number is very high as happened in January where it was almost a 5% MoM growth, then the next month is somewhat down. So that kind of an adjustment has happen and that’s why this number has come out lower than what the market would have been anticipating. I am not too worried about any reversal of trend in industrial production. I think the momentum is still on.
The yield on the benchmark 10-year bond fell two basis points to 8.03% after the news, but climbed back to 8.04%.
Commenting on the movement, Arun Kaul Executive Director at Central Bank of India, said, “The bond market has seen some worries, the last week auction the yield went up at 7.96 and there on the secondary market the yields have moved upto 8.06% right now. The worry in the market is two-fold; one, inflation has started moving up, we thought inflation was only in primary articles but it looks like non-primary articles it is spilling over too, particularly, the commodity prices are moving up so that is a cause of concern. Particularly oil, oil has moved to USD 86-87 per barrel that is very worrisome. Second, is in terms of the RBI possible action. There is a feeling in the market that the RBI could increase CRR and it could even increase the repo rate to contain inflationary expectations. So that worry is leading to expectation whereby players are not willing to initiate large positions and yields have moved up.”
Finance Minister Pranab Mukherjee has said the government could consider to further roll back stimulus, after hiking factory gate duties in the February budget.
The March purchasing managers' index for India showed the pace of manufacturing activity slowed down, dropping from a 20-month-record in February, as mounting cost pressures took a toll on expansion in output.
India, the world's second fastest growing economy after China, is expected to grow 8.5% in the current fiscal year and 9% in the next.
Greek Stocks, Bonds Rally on $61 Billion EU Aid Plan
April 12 (Bloomberg) -- Greek stocks and bonds rallied and the euro gained after European governments offered the debt- plagued nation a rescue package worth as much as 45 billion euros ($61 billion) at below-market interest rates.
Forced into action by a surge in Greek borrowing costs to an 11-year high, euro-region finance ministers said yesterday they would offer as much as 30 billion euros in three-year loans in 2010 at around 5 percent. Its three-year bond yields plunged 90 basis points to 6.18 percent. As much as 15 billion euros would also come from the International Monetary Fund.
“This is a huge amount,” said Stephen Jen, managing director at BlueGold Capital Management LLP in London and a former IMF economist. “This is more than a bazooka. They have gone nuclear on the issue of Greece. In the short run, the market is short Greek assets so we’ll get a rally in those.”
With the euro facing the stiffest test since its debut in 1999, the 16-nation bloc maneuvered around rules barring the bailout of debt-stricken countries, aiming to prevent Greece’s financial plight from spreading and to mute concerns about the currency’s viability. Germany also abandoned an earlier demand that Greece pay market rates.
Bonds Surge
The yield premium investors demand to hold Greek 10-year debt instead of benchmark German bunds dropped 67 basis points to 331 basis points as of 9:58 a.m. in London. Greece’s benchmark ASE Index climbed 4.8 percent, led by National Bank of Greece SA. That would be its biggest one-day gain since Feb. 9.
The yield on Greece’s 2-year note fell 149 basis points to 5.67 percent, the biggest one-day decline since at least 1998 when Bloomberg began collecting the data. Credit-default swaps on Greek sovereign debt tumbled 69 basis points to 357, the largest single-day drop ever, according to CMA DataVision prices.
The euro rose as much as 1.4 percent to $1.3629. The single currency has dropped 4.9 percent against the dollar this year as the discord within Europe over the response to the Greek crisis sapped faith in Europe’s economic management.
Bond investors’ response will determine whether Greece needs to tap the aid, a Greek Finance Ministry official said in Athens yesterday. Finance Minister George Papaconstantinou said the government plans to go ahead with debt sales, including a dollar-denominated bond, without taking up the offer for aid.
Beyond 2010
The package “sends a clear message that nobody can play with our common currency and our common fate,” Greek Prime Minister George Papandreou told reporters in Larnaca, Cyprus.
Yesterday’s teleconference of euro-region officials, which included European Central Bank President Jean-Claude Trichet, left open just how much Greece might need in 2011 and 2012, the final years covered by the package.
“It shows there is money behind this,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels yesterday after chairing the conference call. “The initiative for activating the mechanism rests with the Greek government.”
Europe’s contribution would represent about two-thirds of any aid, with the IMF chipping in the rest, European Union Economic and Monetary Commissioner Olli Rehn said.
“We cannot speak on behalf of the IMF, but we know that they are ready to cooperate and contribute with a substantial amount,” Rehn said. Greek, EU and IMF officials will meet today to start working on details.
IMF ‘Ready’
The IMF was “ready to join the effort,” Managing Director Dominique Strauss-Kahn said an in e-mailed statement, without giving more details on the IMF contribution.
European rhetorical support in February and March failed to prevent Greek 10-year bond yields from soaring to 7.51 percent on April 8, according to Bloomberg generic prices, amid concern that Papandreou’s government will be swamped by its bills.
The jump in Greek yields to the highest since December 1998 helped overcome resistance to an aid package in Germany, which as Europe’s biggest economy would contribute almost a third of the loans, the largest single share.
Germany “has lost the competition,” said Carsten Brzeski, an economist at ING Group in Brussels who used to work at the European Commission. “All that fuss and talk about not putting taxpayer money at risk has been made obsolete.”
In the compromise hammered out yesterday, the European loans would be tied to Euribor and priced above rates charged by the IMF, a nod to German opposition to subsidizing a country that lived beyond its means. The EU will offer a mix of fixed- rate and floating-rate loans.
Record Deficit
The IMF would charge less than the EU. Both types of funding would be offered at the same time, Rehn said. Transfers to Greece would be made by the ECB.
Greece last week raised its estimate of the 2009 deficit from 12.7 percent of gross domestic product to 12.9 percent, the highest in the euro’s history and more than four times the EU’s 3 percent limit.
While rules dictated by Germany in the 1990s foresee fines for countries that go over the limit, no penalty has ever been imposed. Germany also led the charge to loosen the rules in 2005 after three years of excessive deficits.
While all euro-region governments vowed to contribute, some would need parliamentary approval. Ireland, itself reeling from the financial crisis, would require “national legislation,” Finance Minister Brian Lenihan said in an e-mailed statement.
No Request
The Greek government has yet to request a European lifeline, confident that this year’s planned budget cut of 4 percentage points will stem speculation that it is heading for the euro region’s first-ever default. Fitch Ratings highlighted that risk by shaving Greece’s debt rating to BBB-, one level above junk, on April 9.
A combination of higher taxes, lower spending and salary cuts for public workers has prompted strikes and protests against Papandreou, a socialist elected in October on promises of raising wages.
The EU showed no sign of demanding further Greek austerity measures. Rehn hailed the Greek government for implementing “a very bold and ambitious program.”
Greece needs to raise 11.6 billion euros by the end of May to cover maturing bonds, and another 20 billion euros by the end of the year to pay debt coupons and finance this year’s deficit.
The debt agency plans to offer 1.2 billion euros of six- month and one-year notes tomorrow, in a test of investor confidence.
The amount provided by European governments was larger than expected, said Erik Nielsen, London-based chief European economist at Goldman Sachs Group Inc., though approving money transfers through national parliaments and disbursing the funds on time remains an issue. He expressed concern about Greece’s solvency in the longer term.
“I remain a tad worried about the process of making the money available in time as well as (very) concerned about the issue of longer term sustainability,” Nielsen wrote in a note to investors.
Forced into action by a surge in Greek borrowing costs to an 11-year high, euro-region finance ministers said yesterday they would offer as much as 30 billion euros in three-year loans in 2010 at around 5 percent. Its three-year bond yields plunged 90 basis points to 6.18 percent. As much as 15 billion euros would also come from the International Monetary Fund.
“This is a huge amount,” said Stephen Jen, managing director at BlueGold Capital Management LLP in London and a former IMF economist. “This is more than a bazooka. They have gone nuclear on the issue of Greece. In the short run, the market is short Greek assets so we’ll get a rally in those.”
With the euro facing the stiffest test since its debut in 1999, the 16-nation bloc maneuvered around rules barring the bailout of debt-stricken countries, aiming to prevent Greece’s financial plight from spreading and to mute concerns about the currency’s viability. Germany also abandoned an earlier demand that Greece pay market rates.
Bonds Surge
The yield premium investors demand to hold Greek 10-year debt instead of benchmark German bunds dropped 67 basis points to 331 basis points as of 9:58 a.m. in London. Greece’s benchmark ASE Index climbed 4.8 percent, led by National Bank of Greece SA. That would be its biggest one-day gain since Feb. 9.
The yield on Greece’s 2-year note fell 149 basis points to 5.67 percent, the biggest one-day decline since at least 1998 when Bloomberg began collecting the data. Credit-default swaps on Greek sovereign debt tumbled 69 basis points to 357, the largest single-day drop ever, according to CMA DataVision prices.
The euro rose as much as 1.4 percent to $1.3629. The single currency has dropped 4.9 percent against the dollar this year as the discord within Europe over the response to the Greek crisis sapped faith in Europe’s economic management.
Bond investors’ response will determine whether Greece needs to tap the aid, a Greek Finance Ministry official said in Athens yesterday. Finance Minister George Papaconstantinou said the government plans to go ahead with debt sales, including a dollar-denominated bond, without taking up the offer for aid.
Beyond 2010
The package “sends a clear message that nobody can play with our common currency and our common fate,” Greek Prime Minister George Papandreou told reporters in Larnaca, Cyprus.
Yesterday’s teleconference of euro-region officials, which included European Central Bank President Jean-Claude Trichet, left open just how much Greece might need in 2011 and 2012, the final years covered by the package.
“It shows there is money behind this,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels yesterday after chairing the conference call. “The initiative for activating the mechanism rests with the Greek government.”
Europe’s contribution would represent about two-thirds of any aid, with the IMF chipping in the rest, European Union Economic and Monetary Commissioner Olli Rehn said.
“We cannot speak on behalf of the IMF, but we know that they are ready to cooperate and contribute with a substantial amount,” Rehn said. Greek, EU and IMF officials will meet today to start working on details.
IMF ‘Ready’
The IMF was “ready to join the effort,” Managing Director Dominique Strauss-Kahn said an in e-mailed statement, without giving more details on the IMF contribution.
European rhetorical support in February and March failed to prevent Greek 10-year bond yields from soaring to 7.51 percent on April 8, according to Bloomberg generic prices, amid concern that Papandreou’s government will be swamped by its bills.
The jump in Greek yields to the highest since December 1998 helped overcome resistance to an aid package in Germany, which as Europe’s biggest economy would contribute almost a third of the loans, the largest single share.
Germany “has lost the competition,” said Carsten Brzeski, an economist at ING Group in Brussels who used to work at the European Commission. “All that fuss and talk about not putting taxpayer money at risk has been made obsolete.”
In the compromise hammered out yesterday, the European loans would be tied to Euribor and priced above rates charged by the IMF, a nod to German opposition to subsidizing a country that lived beyond its means. The EU will offer a mix of fixed- rate and floating-rate loans.
Record Deficit
The IMF would charge less than the EU. Both types of funding would be offered at the same time, Rehn said. Transfers to Greece would be made by the ECB.
Greece last week raised its estimate of the 2009 deficit from 12.7 percent of gross domestic product to 12.9 percent, the highest in the euro’s history and more than four times the EU’s 3 percent limit.
While rules dictated by Germany in the 1990s foresee fines for countries that go over the limit, no penalty has ever been imposed. Germany also led the charge to loosen the rules in 2005 after three years of excessive deficits.
While all euro-region governments vowed to contribute, some would need parliamentary approval. Ireland, itself reeling from the financial crisis, would require “national legislation,” Finance Minister Brian Lenihan said in an e-mailed statement.
No Request
The Greek government has yet to request a European lifeline, confident that this year’s planned budget cut of 4 percentage points will stem speculation that it is heading for the euro region’s first-ever default. Fitch Ratings highlighted that risk by shaving Greece’s debt rating to BBB-, one level above junk, on April 9.
A combination of higher taxes, lower spending and salary cuts for public workers has prompted strikes and protests against Papandreou, a socialist elected in October on promises of raising wages.
The EU showed no sign of demanding further Greek austerity measures. Rehn hailed the Greek government for implementing “a very bold and ambitious program.”
Greece needs to raise 11.6 billion euros by the end of May to cover maturing bonds, and another 20 billion euros by the end of the year to pay debt coupons and finance this year’s deficit.
The debt agency plans to offer 1.2 billion euros of six- month and one-year notes tomorrow, in a test of investor confidence.
The amount provided by European governments was larger than expected, said Erik Nielsen, London-based chief European economist at Goldman Sachs Group Inc., though approving money transfers through national parliaments and disbursing the funds on time remains an issue. He expressed concern about Greece’s solvency in the longer term.
“I remain a tad worried about the process of making the money available in time as well as (very) concerned about the issue of longer term sustainability,” Nielsen wrote in a note to investors.
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