New Delhi, August 3
The deficient monsoon is likely to pull down the economic growth in the current fiscal to about six%, from 6.5% a year ago, the Planning Commission said on Friday.

"If we factor in that agriculture which would not be strong ... (growth) would be closer to 6%. I don't think we have sufficiently strong industrial turn around yet," Planning Commission deputy chairman Montek Singh Ahluwalia told reporters in New Delhi.

In the case of 12th five-year plan (2012-17), he said the annual average economic growth could be around 8.2% as against the earlier estimate of 9% envisaged in the approach paper to the policy document. As regards 2012-13, the Reserve Bank of India has recently lowered the growth projection to 6.5% from 7.3% in the wake of deficient monsoon and global economic problems.

On whether special schemes were needed to tide over the drought like situation, Ahluwalia said, "I don't think you need an incentive. These are all issues that state governments have to tackle. They are usually very keen to take corrective measures".

“India has faced several monsoon failures. There are possibilities that the situation would improve in the coming months”, he added.

"It (Indian Meteorological Department) has actually said that the overall monsoon position in the next two months would be better than the previous two months but the overall would be deficient. There is nothing new in this. We have known that it would be deficient in first two months," he said. He added: “This isn’t the first drought we’ve had. Droughts do create a problem and we know what to do when they happen".

On the impact of drought on price situation, he said, "it is true that inflation has been a problem. It has come down from the double digit but virtually all the government forecast say that it will remain around 7% for sometime and that is not good enough".

Ahluwalia said inflation was under control if it is between 5-6% but "it remains a matter of concern." Headline or WPI-based inflation in June was 7.25%, while at the retail level it was at an alarming 10.02%. — PTI

New Delhi, August 3
The Company Law Board on Friday ordered Telenor's mobile phone joint venture in the country not to proceed with a planned auction of its assets until its next hearing, after the Norwegian mobile carrier's minority partner Unitech Ltd sought to stop the sale.

The board observed the manner in which the auction process was being carried out was "very clever", before directing Uninor and other respondents to file their reply by Monday. The Company Law Board, a quasi-judicial body, is due to hear the case again on August 8, 2012.

In an auction notice on Wednesday, the joint venture, which operates under the Uninor brand, invited potential bidders to express interest by August 6 and said its majority owner, Norway's Telenor, was willing to bid in the auction.

Norway's Telenor and property company Unitech have been at loggerheads after Uninor's operating permits were ordered to be revoked by Supreme Court, which ruled all permits awarded in a scandal-tainted 2008 sale be quashed in September.

Telenor has blamed Unitech for losing the current licences and is seeking to scrap the joint venture. It has said it would either leave India or buy out Unitech and migrate the business to a new entity to buy fresh permits under a new round of licensing.

Unitech has contested Telenor's moves and has said it has veto rights to block any asset transfer. — Reuters

Colombo, August 3
Visiting Indian Commerce & Industry Ministry Anand Sharma declared open a business exhibition in Colombo on Friday as the two countries look to expand trade ties with each other.

He said a special economic zone is planned for Sri Lanka's eastern port city of Trincomalee as part of an effort to double bilateral trade to $10 billion by 2015, adding other investments in Sri Lanka were planned to help reach the goal.

Sharma also launched the India-Sri Lanka CEOs Forum that will significantly contribute to a closer economic relationship between the two countries.

Bilateral trade has expanded between the two countries by a multiple of eight since the free trade agreement was signed and reached approximately US $5 billion in FY12.

Sri Lanka is India's largest trade partner in SAARC; India in turn is Sri Lanka's largest trade partner worldwide. Both countries have undertaken investments in each other and Indian companies have established a strong investment footprint in Sri Lanka with cumulative FDI approvals of over $700 million since 2003.

New Delhi/Mumbai, August 3
A summer drought makes a bad situation worse for an Indian economy already crippled by a sharp slowdown in growth, persistent inflation and a politically hamstrung government.

Late on Thursday, New Delhi confirmed the first drought in three years as monsoon rains are likely to be less than 90 percent of the long-term average, dealing a blow to Asia's third-largest economy, where more than half the farmland lacks irrigation.

"We already have a scenario in which growth is going down and inflation is going up, so it's going to worsen this further," said D.K. Joshi, principal economist at ratings agency Crisil.

Weak rains in the four-month monsoon that started in June will drive up food prices and erode spending power in a country where more than half the population relies on the rural economy, crimping demand for goods from tractors and motorbikes to soap.

The economy grew at 5.3% in the March quarter, its slowest in 9 years, but headline inflation above 7% has prevented the central bank from cutting interest rates at its last two policy reviews. This increases pressure on the government of Prime Minister Manmohan Singh to take steps that will revive investment.

Just over halfway through the season, rains are 20 percent below normal, and the weather office forecast that the El Nino weather pattern should reduce rains again in the second half. The states of Haryana and Rajasthan in the north, Gujarat and Maharashtra in the west, and Karnataka in south India are hardest hit.

The last drought, in 2009, saw rains that were 23% below normal and pushed up food prices that in turn sent headline inflation into double digits and triggered a series of 13 interest rate increases between March 2010 and October 2011.— Reuters

Mumbai, August 3
The BSE Sensex edged lower on Friday to post a second day of losses as worries about the summer drought hit tractor maker Mahindra & Mahindra and lenders with rural exposure, but broader losses were kept in check as defensive stocks rallied.

The 30-share BSE index fell 0.15% to 17,197.93 points, though it gained by 2% for the week, led by the initial optimism that global central banks would act. The 50-share NSE index fell 0.23% to end at 5,215.70 points.

Shares in state-run banks fell on Friday due to concerns a looming drought would increase defaults of farm loans.

The summer drought, confirmed by the government on Thursday, threatens to make a bad situation worse for an Indian economy already crippled by a sharp slowdown in growth, persistent inflation and a politically hamstrung government.

The worries at home come during a cautious waiting period by global investors for more stimulus from the European Central Bank and the US Fed, after both central banks refrained from immediate action this week. — Reuters

Bangalore/Beijing, August 3
The services sectors in emerging powerhouses China and India grew in July at a healthy pace, providing vital support for the two economies as their manufacturing sectors struggle with the global downturn.

China's official purchasing managers' index (PMI) for the services sector fell to 55.6 in July from 56.7 in June, while a similar private-sector survey sponsored by HSBC headed in the opposite direction, rising to 53.1 from a 10-month low in June of 52.3.

India's non-manufacturing PMI from HSBC was little changed, slipping to 54.2 in July from 54.3 in June.

With all the PMIs above 50 — a threshold that divides expansion from contraction -— the surveys are signalling that the services sectors in both China and India are expanding.

In China's case, the fall in the official index was "significant", said Dariusz Kowalcyzk, an economist with Credit Agricole-CIB in Hong Kong.

"However, the 55.6 points level is relatively high, and much better than in the case of manufacturing PMI. It is consistent with solid growth of the services sector, which will put a floor under the whole economy," Kowalcyzk wrote in a client note.

China's fast-growing services industry has so far weathered the global slowdown much better than the country's vast factory sector. The services PMIs have consistently signalled healthy expansion, with the official version hitting a 10-month high in March and the HSBC survey reaching a 19-month high in May.

Two surveys this week on China's manufacturing industry showed PMI readings around 50. Combined, they signalled that growth was stalling or close to stalling for a sector that has been the backbone of China's rise to the world's second biggest economy, after the United States.

HSBC's India manufacturing PMI for July fell to 52.9 from 55.0. It also showed overseas orders for Indian goods fell for the first time in nine months, reflecting the drag on global demand that is hitting all of Asia's exporters.

But even though that index was at its lowest since November, the July number pointed to a relatively healthy pace of growth.

STEADY PACE: Indian government figures on manufacturing are less flattering, suggesting factory activity is barely growing. Factory output rose 2.5 percent in June from a year earlier, but that followed two straight months of falls, Thomson Reuters data shows.

It is India's service sector that clearly is providing some encouragement. "Service sector activity grew at a steady pace in July, with growth in new orders and employment holding up," Leif Eskesen, an economist at HSBC, said of India's services PMI. The Indian survey showed service sector order books grew at the same clip as in June. — Reuters