|
Third Quarter Review of Annual Statement on Monetary Policy
for 2006-07 announced by RBI
>· Repo Rate increased to 7.50 per cent from 7.25 per cent.
>· Reverse Repo Rate, Bank Rate and Cash Reserve Ratio (CRR) kept unchanged.
>· GDP growth forecast at 8.5-9.0 per cent during 2006-07.
>· Inflation to be brought down as close as possible to 5.0-5.5 per cent at the earliest, while continuing to pursue the medium-term goal of a ceiling on inflation at 5.0 per cent.
>· Provisioning requirement increased to two per cent for standard assets in the real estate sector, outstanding credit card receivables, loans and advances qualifying as capital market exposure and personal loans (excluding residential housing loans).
>· Provisioning requirement increased to two per cent for the banks' exposures in the standard assets category to the non-deposit taking systemically important non-banking financial companies (NBFCs).
>· Interest rate ceiling on NRE deposits reduced from 100 basis points to 50 basis points above LIBOR/SWAP rates for US dollar of corresponding maturity.
>· Interest rate ceiling on FCNR(B) deposits reduced from LIBOR/SWAP rates to 25 basis points below LIBOR/SWAP rates for respective currency/ maturities.
>· Banks restrained from granting fresh loans, in excess of Rs. 20 lakh, against NRE and FCNR(B) deposits and being advised not to undertake artificial slicing of the loan amount to circumvent the ceiling.
(Source: RBI release)
CASH RESERVE RATIO HIKED
The Reserve Bank of India on the 13th of this month hiked the Cash Reserve Ratio by 50 basis points to 6 per cent which will suck in about Rs 14,000 crore from the banking system. The hike in CRR will be effective in two phases - by 25 basis points effective from February 17 and another 25 basis points from March 3. On December 8 2006, the CRR was hiked by 50 basis points to 5.5 percent and on January 31 2007, the repo rate was increased by 25 basis points to 7.5 per cent.
As a fallout, the yields in the government and corporate debt markets will go up and make borrowings, across sectors, dear. The RBI press release cited the "need to contain inflation expectations in the light of the current liquidity conditions" as the reason.
ECONOMY SET TO GROW AT 9.2%
The Indian economy is in the midst of its best-ever growth phase in recorded history with the GDP slated to grow by 9.2% in the current fiscal. That makes it the highest-ever growth rate since the all-time high of 10.5 per cent achieved in 1988-89. With the current fiscal, there have been 4 successive years of 7.5- plus per cent growth of which 3 have registered annual increases of over 8.5 per cent. The Finance Minister described the 9.2 per cent GDP growth (as per the "advance estimates" of national income, released by the Central Statistical Organisation) as particularly gratifying as it was recorded over a base year growth of 9 per cent.
The present boom is largely led by manufacturing industry and services. While industry as a whole is expected to grow by 9.9 per cent his fiscal, the corresponding rates for manufacturing are even higher at 11.3 per cent. During 2006-07, the country's GDP at current market prices is estimated at Rs:41,000,636 crore or around $ 930 billion at current exchange rates. The coming fiscal is likely to see this cross the one-trillion mark, making India the tenth one-trillion dollar economy after the US, Japan, Germany, China, UK, France, Italy, Spain and Canada.
|
Market participants have begun to look for early signals that would set the tone and price direction for 2007-08.
Unchanged output, rising consumption and lower ending stocks will combine next season to push global cotton prices up by over 10 per cent from the current levels. World cotton production is forecast to remain stable at 25.3 million tonnes next year whereas consumption is expected to increase to 26.5 mt, according to Washington based International Cotton Advisory Committee. As a result of output trailing consumption, world cotton stocks are expected to decline by 7 per cent to 10.7 mt by the end of 2007-08, the agency pointed out.
After declining by a million tonne in 2006-07 to 8.8 mt, world cotton trade is forecast to once again move up to 9.1 mt next year on expectation of strong Chinese demand. In view of these anticipated developments in demand and supply fundamentals, season average Cotlook A-Index is forecast at 66 cents a pound next year up from average of 59 cents for 2006-07. There is expectation that some part of cotton acerage in the US may be lost to corn as a result of which output at the origin may decline next season which can potentially push world prices higher.
Price prospects for next season should provide encouragement to cotton growers in India. Current season output is estimated at 270 lakh bales. A 10 per cent increase next season should be targeted so that Indian cotton exports can expand further.
(Courtesy: The Busuiness Line )
|
Aircraft manufacturer Airbus estimates that India will require 1100 new aircraft, estimated to cost $ 105 billion over the next 20 years, going by the growth in demand for air travel. According to estimate of Airbus, India will need 712 single-aisle, 121 medium twin-aisle, 58 long range and 44 large aircraft during this period. "India will continue to be the fastest growing country for air travel for the next 20 years, as per an Indian market forecast by Airbus", said a company official. Demand for air travel in India is growing at a CAGR of 7.7 per cent against the world average of 4.8 per cent with the Indian domestic market growing at 16.4 per cent per annum.
In the freight sector, over the next 20 years, there would be a demand for 165 new air craft - 70 small jets, 55 regional jets, 30 long range aircraft and 10 large aircraft.
(Courtesy: The Busuiness Line )
|
