Govt of India launches austerity drive

Posted: Thursday, May 31, 2012 at 1857 hrs IST
http://www.financialexpress.com/news/govt-of-india-launches-austerity-drive/956244/0

New Delhi: Faced with the worst economic performance in nine years, the government today launched an austerity drive banning creation of new posts and holding of its meetings in five-star hotels besides restricting foreign travel by officials.

There will also be a ban on purchase of new vehicles, the Finance Ministry said in a direction to all ministries and departments.

These directives, aimed at cutting non-Plan expenditure by 10 per cent during the current fiscal, were announced on a day when the country's growth rate declined to nine-year low of 6.5 per cent in 2011-12 and rupee touched a new low of 56.51 to a dollar.

"There is tremendous pressure on government's resources, there is an urgent need for rationalisation of expenditure and optimisation of available resources with a view to improve macreoeconomic environment", the Ministry said.

Interestingly, the measures this time around do not include any direction on a travel by economy class. This issue had led to a controversial "cattle class" remark by the then Minister of State for External Affairs Shashi Tharoor in 2009.

The Centre will also observe discipline in fiscal transfers to state, public sector units and autonomous bodies.

"No amount shall be released to any entity (including state governments) which has defaulted in furnishing utilisation certificates for grants-in-aid released by the central government without prior approval of the Ministry of of Finance", it said.

However, directive to cut non-Plan expenditure by 10 per cent will exclude interest payment, defence purchases, salaries, pension and the grants to states.

The secretary in each department, it added, would be responsible for ensuring compliance of the austerity measures.

The memorandum said that "there will be a total ban on holding of meetings and conferences in five-star hotels... purchase of vehicles is banned until further orders".

On foreign travel, it said, the size of the delegation and the duration of the visit be kept to "absolute minimum".

It also said that holding of exhibitions, seminars and conferences abroad is "strongly discouraged".

The Finance Ministry further said that rush of expenditure on procurement should be avoided during the last quarter of the fiscal and, in particular, the last month of the year "so as to ensure that all procedures are complied with and there is no infructuous or wasteful expenditure".

Secretaries of the ministries and departments would be "fully charged" with the responsibility of ensuring compliance of the measures, the memorandum said.

The memorandum also listed some specific steps to be adopted, including that unspent balances available with states and implementation agencies must be taken into account before further release are made.

As regards to discipline in fiscal transfers to states, it said the state governments are required to furnish monthly returns of Plan expenditure in respect of central and centrally sponsored schemes.

"This requirement may be scrupulously enforced," the memorandum added

The Finance Ministry also made it clear that no fresh financial commitments should be made on items which are not provided for in the budget approved by Parliament.

Finance Minister Pranab Mukherjee had earlier said in the Rajya Sabha that his Ministry would come out with austerity measures to check fiscal deficit, which he proposed to bring down to 5.1 per cent of the GDP in the current fiscal from 5.76 per cent a year ago.

The measures on "fiscal prudence and economy" has come into force with immediate effect.

Indian GDP 2010 -11 2011 - 12

BAE plans to cut 600 jobs in Newcastle

By Graham Ruddick

11:03AM BST 31 May 2012

http://www.telegraph.co.uk/finance/newsbysector/industry/defence/9302364/BAE-plans-to-cut-600-jobs-in-Newcastle.html

The defence company is battling to deal with spending cuts by the Government and has already cut thousands of jobs in the UK.

The Newcastle site is producing the Terrier engineering vehicle but BAE says there is “no prospect of new UK armoured vehicle manufacturing” beyond the end of 2013, when it plans to close the factory.

BAE has launched consultations with trade unions about cutting 330 jobs at Newcastle as well as 280 at its munitions business in Crewe, Washington in the north east, and Glascoed in south Wales. A further ten jobs could be lost at BAE’s head office in Farnborough.

Following the cuts, BAE says it will consolidate its UK armoured vehicle support work in Telford.

Charlie Blakemore, BAE managing director, said: “We need to adapt to very challenging market conditions and further reduce our overheads to drive better value for our customers and increase our competitiveness in the export market.

“I know that this is difficult news for employees and we will do all we can to help them through this difficult period and mitigate the proposed job losses wherever possible.”

Choosing who lives and who dies: the methodical assassinations of Barack Obama's 'kill list'

By David Blair/ Last updated: May 30th, 2012

http://blogs.telegraph.co.uk/news/davidblair/100161679/choosing-who-lives-and-who-dies-the-methodical-assassinations-of-barack-obamas-kill-list/

There is something deeply unsettling about the disclosure in The New York Times that America has developed a clinical, dispassionate procedure for selecting the targets of drone strikes in Pakistan, Yemen and Somalia.

Every week or so, about 100 national security officials gather by video conference to pore over the photographs and biographies of al-Qaeda terrorists. They decide who should be spared and who should be marked for death.

Those “nominated” for assassination (yes, “nominated” is apparently the official word) are placed on a “kill list” that passes directly to Barack Obama.

He then exercises the judgment of Solomon, going through the list name by name and deciding who will die. The CIA’s drones are then programmed to dispatch the President’s chosen targets.

The aim is to keep the drones on a “tight leash”, to use Obama’s phrase, and ensure that killings only happen with the strictest oversight.

This procedure has been revealed presumably because the White House wants to reassure us that drones are not dealing death from the skies at random. The fact that it is all so methodical is supposed to be a virtue. Nonetheless, the idea that a formal process has developed at all is grounds for deep discomfort.

I have a minor personal connection with this argument. Back in 2002 – 03, I happened to interview three senior figures in Hamas, all of whom were later assassinated by Israeli missile strikes.

Within months of my meeting Abdel-Aziz Rantissi, Ismail Abu Shanab and Sheikh Ahmed Yassin, each had fallen victim to carefully targeted, clinical operations of the kind that Obama now approves week by week.

But things were different then. Whenever Israel assassinated a Hamas leader, the world would voice its outrage. Pretty much every country – including America – would issue a statement of condemnation. The US would say that it disapproved of extra-judicial killings. Meanwhile, Britain would get quite worked up.

I remember Jack Straw, then Foreign Secretary, expressing great indignation when Rantissi was dispatched by an Israeli missile within weeks of succeeding Yassin as Hamas leader in 2004.

The fact that targeted assassinations are now happening on a far wider scale – with a fraction of the protest – shows how much the world has changed.

There is no doubt that drones have become the single most effective counter-terrorism weapon in the US arsenal. Few doubt that al-Qaeda has been crippled by the systematic elimination of its core leadership. Obama can credibly argue that lives have duly been saved.

But in his inaugural address back in January 2009, he also said: “We reject as false the choice between our safety and our ideals.” The fact that he now pores over death lists shows the utter fatuity of that statement. The tension between safety and idealism, between liberty and security, is ever-present and unavoidable. As of today, Obama’s point on that spectrum is to believe that he can take upon himself the right to decide who lives and who dies.

His defence will be that he deals death in the cause of saving lives. The drones have doubtless averted terrorist attacks; many people are alive today only because they happened.

When I was a student, the first philosophical question I was set was the proposition that the greatest happiness of the greatest number should always prevail. I read about how this crude utilitarian calculation was morally indefensible in the modern world because it inevitably entailed the end justifying the means. It seems we are all utilitarians now.

It may seem painless, but drone war in Afghanistan is destroying the West's reputation

http://www.telegraph.co.uk/news/worldnews/asia/afghanistan/9300187/It-may-seem-painless-but-drone-war-in-Afghanistan-is-destroying-the-Wests-reputation.html

By Peter Oborne

7:51PM BST 30 May 2012

The theory and practice of warfare has evolved with amazing speed since al-Qaeda’s attack on mainland America in September, 2001. In less than 11 years it is already possible to discern three separate phases.

First, we had the era of ground invasion followed by military occupation. This concept, which feels terribly 20th-century today, appeared at first to work well, with the fall of the Taliban in Afghanistan followed by the easy destruction of Saddam Hussein in Iraq.

But by 2005, it was obvious that the strategy was failing. The resurgence of the Taliban, and the success of the Iraqi insurgencies, led to an urgent reassessment.

In desperation, the United States turned to the more sophisticated methodology once favoured by the British and before them the Romans – the elaboration of a system of alliances, otherwise known as “divide and rule”.

This was the second phase, the “surge” of 2007, which made the reputation of General David Petraeus and rescued the second Bush presidency from disaster.

Of greater significance than the temporary increase in troop numbers on the ground was the decision by the Western Iraqi tribes, encouraged by the payment of enormous bribes, to detach themselves, at least temporarily, from al-Qaeda.

The same tactics did not work, however, when duplicated two years later in Afghanistan – and so US policy has unobtrusively moved into a third phase: a new and as yet only partially understood doctrine of secret, unaccountable and illegal warfare.

The guiding force has once again been General Petraeus, who is already being tipped as favourite to win the Republican nomination in the 2016 presidential elections.

Appointed director of the CIA last summer, he is converting the intelligence agency into a paramilitary organisation.

Conventional military forces are scarcely relevant: it is Petraeus who now masterminds what George Bush used to call the “war on terror” from the CIA headquarters in Langley, Virginia.

President Obama has reportedly allowed his CIA chief to deepen the connection between Special Forces and secret intelligence, a potentially unconstitutional move because it can mean that military operations are no longer answerable to Congress.

More important still, the CIA also seems to mastermind and direct the drone strikes which have suddenly become the central element of US (and therefore British) military strategy.

Even 10 years ago, drones – remotely operated killing machines – were unthinkable because they seemed to spring direct from the imagination of a deranged science-fiction movie director. But today they dominate. Already, more US armed forces personnel are being trained as drone operators (computer geeks who sit in front of a computer screen somewhere in the mid-west of America doling out real-life death and destruction) than air force pilots.

It is easy to understand why. First of all, they can be deadly accurate. Tribal Afghans have been amazed not just that the car a Taliban leader was travelling in was precisely targeted – but that the missile went in through the door on the side he was sitting. The US claims that drones have proved very effective at targeting and killing Taliban or al-Qaeda leaders, but with the very minimum of civilian casualties.

Second, US soldiers and airmen are not placed in harm’s way. This is very important in a democracy. In America, the killing of a dozen military personnel is a political event. The death of a dozen Afghan or Pakistani villagers in a remote part of what used to be called the north‑west frontier does not register, unless a US military spokesmen labels them “militants”, in which case it becomes a victory.

There is no surprise, then – as the New York Times revealed in an important article on Tuesday – that Mr Obama “has placed himself at the helm of a top secret 'nominations’ process to designate terrorists for kill or capture, of which the capture part has become largely theoretical”.

The least enviable task of an old-fashioned British home secretary was to sign the death warrant for convicted murderers.

According to the New York Times, the President has taken these exquisite agonies one stage further: “When a rare opportunity for a drone strike at a top terrorist arises, but his family is with him, it is the President who has reserved to himself the final moral calculation.”

So, in the US, drone strikes are a good thing. In Pakistan, from where I write this, it is impossible to overestimate the anger and distress they cause.

Almost all Pakistanis feel that they are personally under attack, and that America tramples on their precarious national sovereignty.

There are good reasons for this. When, last year in Lahore, an out-of-control CIA operative shot dead two reportedly unarmed Pakistanis, and his follow-up car ran over and killed a third, the American was spirited out of the country.

Meanwhile, America refuses to apologise for killing 24 Pakistani servicemen in a botched ISAF operation. This is election year and Mr Obama, having apologised already over Koran-burning, may be nervous about a second apology, and has therefore confined himself to an expression of “regret”.

I am told by a number of credible sources that this refusal to behave decently – allied to dismay at the use of drones as the weapon of default in tribal areas – is the reason for the unusual decision of the US ambassador in Islamabad, Cameron Munter, to step down after less than two years in his post.

Secretary of State Hillary Clinton – increasingly irrelevant and marginalised in an administration dominated by the partnership between Leon Panetta, the Secretary of Defence, and Petraeus – has protested but been ignored.

We need a serious public debate on drones. They are still in their infancy, but have already changed the nature of warfare. The new technology points the way, within just a few decades, to a battlefield where soldiers never die or even risk their lives, and only alleged enemies of the state, their family members, and civilians die in combat – a world straight out of the mouse’s tale in Alice in Wonderland: “ 'I’ll be judge, I’ll be jury’, said cunning old Fury. 'I’ll try the whole cause and condemn you to death.’ ” Justice as dealt out by drones cannot be reconciled with the rule of law which we say we wish to defend.

Supporters of drones – and they make up practically the entire respectable political establishment in Britain and the US – argue that they are indispensable in the fight against al-Qaeda. But plenty of very experienced voices have expressed profound qualms.

The former army officer David Kilcullen, one of the architects of the 2007 Iraqi surge, has warned that drone attacks create more extremists than they eliminate. Sir Sherard Cowper-Coles, Britain’s former special representative to Afghanistan and Pakistan, is equally adamant that drone attacks are horribly counter-productive because of the hatred they have started to generate: according to a recent poll, more than two thirds of Pakistanis regard the United States as an enemy.

Britain used to be popular and respected in this part of the world for our wisdom and decency. Now, thanks to our refusal to challenge American military doctrine, we are hated, too.

Euro break-up 'could wipe 50pc off London house prices'

By Emma Rowley

6:00AM BST 31 May 2012

http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/9300780/Euro-break-up-could-wipe-50pc-off-London-house-prices.html

Property prices in the capital’s most sought-after postcodes have been driven up by investors moving funds out of assets held in euros to buy into what is seen as a “safe haven” alternative.

Foreign money seeking a refuge from the wider economic turmoil accounted for 60pc of acquisitions of prime central London property between 2007 and 2011, according to a report by Fathom Consulting for Development Securities.

If the shared currency broke up completely, London property would initially be boosted by the continued flight towards a safe haven, the report predicts.

But, once the break-up had taken place, demand for these assets as an insurance against this event would start to ebb

“Although fears about a messy end to the euro debt crisis may account for much of the gain in prime central London (PCL) prices that has taken place over the past two years, we find that a break-up of the single currency area is also the single greatest threat to PCL,” said researchers.

“In our judgment, a collapse of the single currency area could ultimately produce a 50pc fall in the value of PCL property.”

Spain looks to Vienna and Berlin for answers to jobs crisis

Ian Traynor in Toledo
guardian.co.uk, Wednesday 30 May 2012 13.30 EDT

http://www.guardian.co.uk/world/2012/may/30/europa-jobs-crisis-spain-austria-germany


All her professional life, Lola Santillana has been trying to help Spain's unemployed. Now the 45-year-old is joining their ranks. The former school careers officer and social worker has been running the local government department in Toledo, wrestling with the problems thrown up by the ancient town's immigrants and its swelling army of jobless. She's seldom been busier.

"We've never seen anything like this. The jobs are going so fast," she says. "Usually at this time of year the jobs market grows. Not now. In the past year in the region we've lost 50,000 jobs."

With unemployment in the Castilla-La Mancha region, south of Madrid, at 28% and the jobless rate among young people 54%, Santillana's department of 60 staff has its work cut out.

Mired in recession, burdened by a mountain of private debt, its banks in freefall, Spain is being touted as the new Greece. The rightwing government of Mariano Rajoy is committed to slashing spending to make the country fit to remain in the euro.

Not so long ago, Spain seemed the epitome of European cool. From football to food, Bilbao to Barcelona, fashion to breathtaking architecture or sleek high speed rail, the country oozed style and self-confidence. Those good times are gone.

"We were living a fantasy," says Valeriano Gómez, until late last year the country's labour minister. "It was absurd. Now we have to face reality."

In Castilla-La Mancha, under a regional prime minister viewed as a rightwing radical, the axe is falling on education and health spending. And on Santillana's department. "In June 80 jobs are to go, in December another 100. I'm gonna get fired," she murmurs. "I'm thinking of going to Nicaragua."

In Toledo, the impact of austerity Europe is plain to see. A half-built hospital has been abandoned. Romanian migrant workers are going home. In a reversal of the migratory flows of the past decade, some local building workers are heading to the Balkans in search of jobs. Men in their 30s are moving back in with their parents.

"I know that my work is over. I'll either have to change trades or emigrate," said Jesús Felix, a 33-year-old building engineer. "Everything has stopped here. There's nothing. I had my own place with a mortgage, but the bank repossessed it. I've moved home to my mother's."

Toledo's troubles are but a fragment of the tragedy hitting Spain, where anyone under 25 is more likely to be out of work than in a job.

The same can be said of Greece, in the throes of the greatest social upheavals of the democratic era. Portugal is similarly afflicted.

And in Ireland, where the unemployment rate is 15% – and more than double that for the young – figures last week showed a 7% increase in the numbers of 19- to 24-year-olds returning home to live with their parents.

With more than 25 million people without a job in the EU and the unemployment rate in the eurozone nudging 11%, it is apparent that Europe isn't working. Or large parts of it, at least.

In year three of the euro crisis, the overall picture for unemployment is one of acute imbalance, as with almost all key social and economic indicators from the cost of borrowing to current account balances, from debt and deficit levels to unit labour costs.

While Spain has the highest jobless rate in the EU, at more than 24%, Austria is effectively enjoying full employment. Eurozone unemployment is the highest since 1997 but in Germany, it is the lowest over the same period.

Thirteen years into the life of the distressed single currency, the opposite of what was supposed to happen has come to pass. The euro's architects believed that the same money, the same interest rate and the same inflation levels would bring the convergence of economies. The outcome, though, is acute divergence.

Vienna has become a place of pilgrimage for politicians, diplomats, academics and labour market experts seeking the secret to banishing mass unemployment. "Delegations are arriving from all over Europe to ask us how we do it," says Johannes Kopf of Austria's public employment service or AMS.

One clue is to be found in the Top-Lokal on Vienna's tourist trail. It looks like a restaurant and tastes like a restaurant, but the Top-Lokal is a publicly funded social project returning long-term unemployed people to work. A kind of Jamie Oliver project without the celebrity.

Waiting at tables, serving drinks and scrubbing pots are 70 staff who might otherwise be viewed as hopeless cases: ex-convicts, drug addicts and drifters likely to be rejected for openings in the private sector. In the city of Sigmund Freud, there's also a psychiatrist on the staff to help with employees' personal and psychological problems.

"It's a restaurant, but it's effectively a charity," says Elisabeth Schügerl-Kiener, who is in charge. "It's basically social work, but you're not allowed to say that."

"I love it," said Nicoletta Kerojevic, a Romanian in Vienna for 20 years who worked in a quarry until she was fired a year ago. "I'm allowed to stay here for six months, then I hope I can find more work in catering. I love working in the kitchens."

There are dozens such publicly funded projects across Austria, where the 4% jobless rate is the lowest in Europe. Only 2.5% of university graduates are out of work, according to the AMS. On average, anyone on the dole is back at work within three months, compared with about two years in Spain.

"Austria is still a blessed island," says Schügerl-Kiener. "Anyone who wants a job can get one."

There is an endless array of explanations for Austria's success and Spain's failure – geography, culture, economic strength, ease of hiring and firing, unit labour costs, wages policies, education, apprenticeship schemes. The list goes on.

The single biggest reason for Spain's plight is the collapse of its building sector after the euro-era boom, costing 1.6m jobs and littering the country with 800,000 unsold properties owned by banks sitting on billions in toxic assets.

"Our economy was totally dependent on the construction sector, which was twice the size of the EU average," said Ignacio Toxo, the head of CCOO, one of the two big trade union federations.

"We've got five million unemployed. This year it will rise to six million. The roots of the crisis are Spanish. It's our fault. But it's also two years of austerity policies in Europe pushing Spain too far, too fast, to get our budget deficit to 3% [of GDP] by next year [from almost 9% last year]. That's impossible."

With the Rajoy government in Madrid pushing through laws to open up a rigid labour market that has condemned the young to mass unemployment, Toxo negotiated a deal with employers this year which is likely to result in real pay cuts for his members.

The opposite is happening in Germany, by far Europe's biggest economy, which is often held up as a model for successful labour policies and low unemployment – now about 5.7%. The big IG Metall union has just won 4.3% increases in the latest pay round, the biggest raise in 20 years.

Analysts and economists say this is long overdue, since the low jobless rate follows a decade of deflationary pay policy in Germany, where wages failed to keep up with productivity, boosting competitiveness relative to the rest of the eurozone – an imbalance central to the debt and currency crisis.

Experts on the European economy reckon that labour in Germany is roughly 10% undervalued – that German workers are only earning nine-tenths of what they should – while Spanish and Portuguese workers are paid up to 20% too much and Greeks and Italians are 30% and 10% overpaid, respectively.

This helps explain Germany's vaunted "jobs miracle".

Radical welfare and benefits cuts and labour market reforms almost a decade ago under a centre-left chancellor, Gerhard Schröder, combined with the downward pressure on wages from cheap labour competition in central Europe have kept pay relatively low and employment high.

But European commission officials note that there are plenty of downsides to German success.

There is no minimum wage, relatively low female participation in the workforce and plenty of "working poor" as a result of the boom in "McJobs", known as "mini-" or "midi-jobs".

A recent survey showed that half of the female workforce in Germany were in the part-time, low-paid sector – one third were happy that way, another third could not find anything else and the rest hoped to climb the career ladder.

But government policy matters hugely. During the 2008-9 financial crash, Germany, Austria and Belgium used part of their fiscal stimulus to stop dole queues lengthening. They paid firms to put staff on short time rather than laying them off, and topped up salaries to compensate for some of the lost income. When things picked up in 2010, the workers returned to full-time employment at companies well-placed to benefit quickly from the recovery.

Even in the worst recession year of 2008-9, when the German and Austrian economies shrank by 5% and 4%, there were minimal increases in unemployment (0.3% and 1%). In the same year Spanish and Irish jobless rates soared by almost 7% and 6%.

If the overall situation is grim, the problem for those entering the labour market is disastrous in the worst-hit countries. For 16- to 24-year-olds, unemployment rates are more than 50% in Spain and Greece, 35% in Portugal, and 32% in Italy and Ireland. In Germany and Austria, the pattern persists of even greater disparities, with youth unemployment of around 8%.

"Look what happened to Greece and Ireland and now it's going to happen here," said Ryan, a 15-year-old protesting in Madrid. "We're always having rows about it at the dinner table every evening. More and more kids are asking their parents if they can go abroad to study. There's no future here."

In a recent study, the International Labour Organisation in Geneva said Europe was rearing a "lost generation"; others speak of the "jinxed generation".

"I say to the young people, it's very hard. You can't even enter the labour market. And this is the best educated generation Spain has ever had," said Francisco Utrera Mora, a senator for the governing centre-right Popular party. "The conditions are so rigid here that companies won't even take on young people when they need them."

The ILO predicted it would be at least 2016 before things took a turn for the better for Europe's youth.

With banks reluctant to lend, public purses closed, austerity universal and investment lagging, there will clearly be no quick improvement.

Despite constant complaints from politicians and employers about skills shortages, a survey of 500 companies in April found that 86% of companies in Europe had cut or frozen investment in training over the past year.

"Anything over 20% for youth unemployment and it becomes a huge social problem. That's when you get car-burning and stone-throwing," said Kopf. "This is one of the most burning problems in Europe."

The chaos in Greece and a throw-the-bums-out mood among Europe's voters are symptoms of a popular reaction to Europe's time of troubles. There are smaller, less-noticed omens. In April, for example, when Portugal celebrated the military coup of 1974 that took the country from dictatorship to democracy, a group of army officers refused for the first time to go to parliament to mark the event amid mutterings about "foreign occupation" – a reference to the eurozone's imposition of austerity in return for a bailout.

Another little-noticed ideological shift came when the European commission tried last month to come up with pan-European employment policies, such as introducing differentiated minimum wages.

The commission performed a policy U-turn by switching from its traditional backing for more rightwing "supply-side" measures, where the onus is on the individual to make themselves more employable, to neo-Keynesian "demand-led action" urging governments to use the tax system, minimum wages and other instruments to spur job creation. It was a recognition that there are no jobs, rather than the usual urging of people to go out and find them.

Unlike Greece, there has been little unrest in, say, Spain or Ireland.

"People here have always taken the view that Spain is the problem and Europe the solution," said Gómez. "But that's changing right now. We're entering a period of political risk. People are getting frustrated. They're getting fed up with Europe."

Aban Offshore Q4 profits drop 46%

http://www.thehindubusinessline.com/companies/article3476366.ece?homepage=true&ref=wl_home

 Our Bureau

 Mumbai, May 31: 

Offshore drilling services provider, Aban Offshore, has reported a 46 per cent drop in net profit to Rs 81 crore in January to March quarter of 2011-12 fiscal.

Net profit during the same quarter last ficsal stood at Rs 152 crore.

Total income declined 11 per cent to Rs 803 crore against Rs 899 crore.

For the year ended March 31, 2012, the net profit increased 122 per cent to Rs 322 crore from Rs 145 crore last year. Total income stood at Rs 3,163 crore (Rs 3,347 crore), down 5 per cent.

At 2.10 pm, the shares of the company were trading lower by 1.90 per cent at Rs 359.60 on the Bombay Stock Exchange.

Q4 GDP growth slumps to 5.3% as manufacturing shrinks

K.R.Srivats

http://www.thehindubusinessline.com/industry-and-economy/economy/article3475946.ece?homepage=true

New Delhi, May 31: 

Indian economy grew 5.3 per cent in the fourth quarter of 2011-12, the lowest quarterly growth rate in three years.

The fourth quarter GDP growth, lowest quarterly growth for 2011-12, was pulled down by weakness in industrial performance, official data released by the central statistics office showed.

For the fourth quarter under review, agriculture grew 1.7 per cent against growth of 7.5 per cent in January-March quarter of 2010-11.

While mining grew 4.3 per cent (0.6 per cent), manufacturing contracted 0.3 per cent (growth of 7.3 per cent).

While construction grew 4.8 per cent (8.9 per cent), electricty output was up 4.9 per cent (5.1 per cent).

Services sector

On the services sector, financing, real estate, insurance saw robust growth of 10 per cent, the same growth level as seen in the quarter ended March 2010.

Trade, hotels saw fourth quarter growth of 7 per cent, lower than 11.6 per cent growth seen in the same quarter in previous year.

India's GDP grew 6.1 per cent in the third quarter of 2011-12. After factoring in the fourth quarter data, the revised estimate for GDP growth for 2011-12 has now been pegged at 6.5 per cent, lower than the advance estimate of 6.9 per cent put out in February this year. (Economy grew 8.4 per cent in 2010-11 and 9.2 per cent in the fourth quarter of 2010-11.)

Downward revision

The Central Statistics Office (CSO) attributed the downward revision in GDP growth rate for 2011-12 to lower performance in manufacturing and 'trade, hotels, transport and communications' than anticipated.

For 2011-12, the revised GDP growth estimate has factored in agricultural growth at 2.8 per cent, higher than the level of 2.5 per cent at the Advance Estimate stage. The manufacturing sector output is pegged at 2.5 per cent, lower than the 3.9 per cent growth put out at the advance estimate stage.

Construction sector is now estimated to have grown 5.3 per cent in 2011-12, higher than 4.8 per cent estimated earlier in February this year.

Cabinet clears New Telecom Policy, paves way for abolition of roaming charges

http://www.thehindubusinessline.com/industry-and-economy/info-tech/article3476310.ece?homepage=true

New Delhi, May 31: 

The Cabinet on Thursday approved the New Telecom Policy 2012 paving the way for a number of consumer-centric initiatives including abolition of roaming charges across the country.

The policy also envisages pan-India Mobile Number Portability which will enable users to retain the same phone number even while shifting from one circle to another.

The policy, however, does not give any timeframe on when these measures will be implemented. For the telecom industry, the policy envisages pan-India single licence under a new unified licence regime. Under this regime, licence has been delinked from spectrum. The policy also proposes to boost domestic manufacturing. Details of these measures will be spelt out later.

The proposal to introduce a separate Spectrum Act has been done away with. Issues related to spectrum pricing and allocation is being dealt with separately by an empwoered Group of Ministers.

India's Jan-Mar qtr GDP growth rate dips to 9-year low of 5.3%

Agencies : Mumbai, Thu May 31 2012, 11:23 hrs

http://www.indianexpress.com/news/indias-janmar-qtr-gdp-growth-rate-dips-to-9year-low-of-5.3/956088/0

India's annual economic growth slumped in the January-March quarter to a nine-year low of 5.3 percent as the manufacturing sector contracted and a fall in the rupee to a record low suggests the economy remains under pressure in the current quarter.

Tell us: How is the economic slowdown impacting your life?

Anubhuti Sahay, an economist at Standard Chartered Bank in Mumbai said the data was shocking.

The growth rate was much lower than expected and was even below the lowest forecast in a poll that had produced a median of 6.1 percent from predictions ranging between 5.5 percent and 7.3 percent.

The data highlights the unusual degree of weakening of the country's economy, likely driven by poor investment and widening trade gap, said Dariusz Kowalczyk, an economist at Credit Agricole CIB in Hong Kong.

The data also poses a dilemma for policymakers, as they have no fiscal room to stimulate growth, while monetary easing scope is very narrow, at least for now, due to rebounding and high inflation.

The growth rate in the final quarter of India's fiscal year was the lowest since 3.6 percent in the January-March quarter of 2003, data shows.

The data showed that the manufacturing sector shrank 0.3 percent in the quarter compared with a year earlier. The farm sector grew 1.7 percent.

Gross domestic product (GDP) rose 6.5 percent in the fiscal year to the end of March 2012, the lowest growth rate since 4.0 percent in 2002/03 and a sharp slowdown from the previous year's 8.5 percent.

The impact of the euro zone debt crisis, a lack of economic reforms and high interest rates dragged on India's growth throughout last year.

Before Thursday's data, private economists had cut forecasts for Asia's third-largest economy to between 6 percent and 6.5 percent for the fiscal year to March 2013. The government forecasts close to 7.5 percent.

The yield on India's benchmark 10-year government bonds are down 11 basis points so far on Thursday.

India's main stock index Sensex extended its declines after the data to 1.3 percent on the day.

A rate cut is a given now, Sahay said.

The rupee fell on Thursday to a record low beyond 56.50 per dollar. Its slide of 14 percent from its 2012 high adds to inflation concerns in the country.

The rupee has fallen in the face of global risk aversion over the euro zone debt crisis. But investors have raised a number of India-specific red flags as well, including a swelling current account, high government spending on subsidies such as oil and a rash of unpredictable regulations and tax as the coalition struggles to push through economic reforms.

Infrastructure output growth rate slows to 2.2%

Reflecting slowdown in the economy, the growth rate of eight infrastructure sectors slowed down to 2.2 per cent in April because of poor performance of crude oil, natural gas, petroleum refinery products and fertilisers.

The eight core sectors that also include coal, electricity, cement and finished steel, and have a weightage of 37.9 per cent in the Index of Industrial Production (IIP), had grown by 4.2 per cent in April 2011.

The cumulative growth rate of infrastructure industries during 2011-12 also slowed down to 4.4 per cent, from 6.6 per cent in 2010-11, according to the data released by the commerce and industry ministry today.

Natural gas and crude oil production contracted by 11.3 per cent and 1.3 per cent respectively during April.

Petroleum refinery products and fertiliser production shrunk 2.8 per cent and 9.3 per cent respectively during the month.

Coal, Steel and cement output grew by 3.8 per cent, 5.8 per cent and 8.6 per cent in April 2012. In the same month last year, coal output had grown 2.7 per cent, steel - 2.9 per cent and cement - 0.1 per cent.

However, electricity generation slowed down by 4.6 per cent, from 6.4 per cent in April 2011.

COMMENTARY:

RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI

This is definitely a very important signal for the government - this is a make or break situation for India and the government has to step on the panic button. What we need now is a clear reforms agenda like the one adopted in 1991 with a clear focus. If the government doesn't step in now, India's sovereign ratings may be jeopardized.

The government has to address on a priority basis the subsidies, fiscal consolidation, the kind of delays that have slowed down the industrial investments, liberalization on FDI, etc. The RBI is unlikely to cut rates as inflation is still high. We are having a kind of stagflationary situation so RBI's rate cuts will not help as it will only spur consumption further by individuals with high disposable income, but do little to address the supply-side pressures that are fuelling inflation.

RADHIKA RAO, ECONOMIST, FORECAST PTE, SINGAPORE

Disappointing number though not entirely surprising in light of the persistently under weather manufacturing sector, weak investment sentiments and sluggish external sector. The authorities meanwhile will be in a bind in the face of mounting growth risks, while there is no leeway for fiscal accommodation at this juncture.

Stagflationary concerns could also return to fore as the recent rupee depreciation adds to inflation worries, even as the negative output gap tempers demand conditions. Faced by the twin challenges, RBI treads a fine balance yet again - we see room for 50 bps more cuts in the year, though a possible firm May inflation number could prod the central hold steady in mid-June after the recent aggressive cut in April.

RAHUL BAJORIA, REGIONAL ECONOMIST, BARCLAYS, SINGAPORE

Incrementally, the growth slowdown will probably take up more space in policy making and we expect RBI to continue with modest easing. I think after this data, market may come to a view of closer to 50-75 basis point rate cut in rest of the fiscal year, which is also our view, from 25 basis points factored in now.

RBI is fighting a multi-faceted battle - managing currency, supporting growth, fighting inflation. I think they will wait for fiscal consolidation before cutting rates further.

This number may be another data to fuel a bit more negativity on India in terms of the rupee movement, but we are not extremely bearish on India and still expect 7 percent growth in 2012/13.

SHUBHADA RAO, CHIEF ECONOMIST, YES BANK, MUMBAI

Clearly a huge negative surprise. Lowest recorded print in the new series. Concerns build up as services have slipped to close to 8 percent. Negative manufacturing was anticipated. This number points to a worrisome trajectory going forward as it is yet to take on board the impact of weaker rupee especially from Q1FY13. It may be difficult for RBI to ignore this number.

DARIUSZ KOWALCZYK, ECONOMIST, CREDIT AGRICOLE CIB, HONG KONG

The data highlight the unusual degree of weakening of the country's economy, likely driven by poor investment and widening trade gap.

The data also poses a dilemma for policy makers, as they have no fiscal room to stimulate growth, while monetary easing scope is very narrow, at least for now, due to rebounding and high inflation.

Further weakening of the INR could help a bit, but the key problem is lack of investment, caused by sub-optimal macroeconomic policy making and discouraging policies towards foreign investment.

We expect the INR to fall further, to fresh record lows, on the data. We also expect a decline in INR OIS, because decelerating growth will, at some point, help curb inflation, enabling some more monetary easing.

ANUBHUTI SAHAY, ECONOMIST, STANDARD CHARTERED BANK, MUMBAI

Shocking numbers as Q4 FY12 GDP growth was even lower than lows witnessed during the financial crisis. A rate cut is a given now. We expect a 25 bps reduction in repo rate on June 18.

SHAKTI SATAPATHY, FIXED INCOME STRATEGIST, A K CAPITAL, MUMBAI

The Q4 data was quite disappointing and reiterates a reflection of sluggish manufacturing data. However, the service output is showing resilience denying a further head down in the economy. Though the weak data and consistent global worries would keep the sentiment negative in the near term, we expect the June 18 (RBI) policy would primarily be a non-event in terms of rate cut.

SUJAN HAJRA, CHIEF ECONOMIST, ANAND RATHI SECURITIES, MUMBAI

Our sense is that growth will be subdued in the first half of the current fiscal year. However, if the government takes some positive steps immediately, we still think growth in 2012/13 will be better than 2011/12.

The Reserve Bank of India has already adopted pro-growth policy. But inflation is not softening, so it cannot do a significant rate cut. We think they will focus more on making liquidity surplus.

MARKET REACTION:

The benchmark BSE index slightly extended losses to 1.2 percent on the day. The 1-year swap rate fell 4 basis points to 7.85 percent from 7.89 percent before the GDP data.

Federal 10-year bond yields fell 10 basis points to 8.42 percent on the day, with bond prices having gained ahead of the data on expectations for a weak number.

The rupee recovered slightly, last at 56.39/40 to the dollar, after hitting a record low at 56.52 before the data.

BACKGROUND:

- India's economy, Asia's third-largest, is largely driven by domestic demand. The government has forecast economic growth at around 6.9 percent in the current fiscal year that started on April 1.

- Industrial output unexpectedly shrank an annual 3.5 percent in March for the first time in five months hit by weak investment, prompting increased pessimism among investors.

- The weak rupee - which has shed nearly 12 percent from its 2012 high - adds to policymakers' headaches by elevating import costs, most notably for crude oil that India buys for 80 percent of its consumption.

- High inflation, stoked in part by the falling rupee, leaves the central bank little room to cut interest rates further.

- The Reserve Bank of India last month delivered a larger-than-expected 50 basis point cut in benchmark rates but warned that it sees limited scope for more reductions.

- Factory growth picked up in April, helped by bulging order books, the HSBC-Markit purchasing managers' index shows, but the sector is not out of the woods yet.