B U S I N E S S

Economy grows by 7.6 per cent in Q2
New Delhi, November 28
Powered by construction and services, the Indian economy notched a reasonable growth rate of 7.6 per cent in the second quarter of the current fiscal, but analysts said monetary supply should be further eased to prevent the growth from declining in the remaining quarters.

Recession casts shadow on Gurgaon industry
Gurgaon, November 28
The industry of the millennium city, which has been grappling with the global economic meltdown, now apprehends adverse fallout of the recent terror attacks in Mumbai. According to sources, a number of industrial units in the city have been closed down or are up for sale or rent.

LOCKED-OUT: A recently closed industrial unit in Gurgaon. Tribune photo: Sayeed Ahmed

A model poses with a motorcycle named 'JFK' during a press presentation prior to the Essen Motor Show in Essen on Friday. About 550 exhibitors from 19 countries will present their latest developments at the Essen trade fair from November 29 until December 7. — Reuters A woman walks past a relief carved from chocolate at the Salon Du Chocolate food fair in Moscow on Friday. — Reuters China Southern Airlines and Eastern Airlines planes park at the tarmac of the Beijing Capital International airport in Beijing on Friday. Two of China's biggest airlines announced they had received or were seeking hundreds of millions of dollars in state aid, as they struggled amid the global economic crisis, as China Southern Airlines, the nation's largest carrier by fleet size, said the government had paid a three billion yuan ($439 million) subsidy to its parent. — AFP

Indian Hotels drops 17%
Mumbai, November 28
The Tata group's Indian Hotels' shares today plunged as much as 17 per cent, while shares of airlines, including Jet and Kingfisher, dropped up to six per cent, following the terrorist attacks which shook the country's financial capital Mumbai.

Re down 57 paise
Mumbai, November 28
The rupee snapped a two-day gaining streak and today tumbled by 57 paise to 50.07/10 against the American currency after the deadly terror strike on the country's business hub raised fears of increased fund outflows.

Credit curbs hit tractor industry
Chandigarh, November 28
The credit squeeze and curbs on financing by banks and financial institutions has led to a flat growth in the domestic tractor industry. Since this sector is heavily dependent on financing, it has taken a big hit during the current financial turmoil.

UK govt to hold majority stake in RBS
London, November 28
The British government is all set to become a majority stakeholder with 58 per cent shareholding in the Royal Bank of Scotland following a share issue by the banking major to raise fresh capital.

SBI to boost credit to SMEs
Chandigarh, November 28
The State Bank of India has announced a slew of incentives to provide liquidity to the small and medium enterprises (SMEs), which have been hit hard by the global economic slowdown.

BSNL BlackBerry services from December
New Delhi, November 28
State-run telecom company BSNL today said it would start BlackBerry services by next month. "We are well on track to launch our BlackBerry services by next month," BSNL director (finance) S D Saxenatold reporters on the sidelines of a CII conference here.

FDs to fetch lower returns
New Delhi, November 28
Investors who prefer fixed deposit schemes in this bad times of global financial turbulence should be ready now to face the prospects of lower returns from these safe instruments as banks are set to reduce interest rates by up to one per cent beginning next month.

Air passenger traffic falls
New Delhi, November 28
Even as the financial crisis in the aviation sector has taken a heavy toll on the passenger traffic growth rate in India, the global body of airlines IATA has warned that the worst was yet to come.

Economy grows by 7.6 per cent in Q2

New Delhi, November 28
Powered by construction and services, the Indian economy notched a reasonable growth rate of 7.6 per cent in the second quarter of the current fiscal, but analysts said monetary supply should be further eased to prevent the growth from declining in the remaining quarters.

Though quarterly GDP growth was the lowest since the last quarter of 2004, it was better than expected by many analysts, despite poor growth in manufacturing, agriculture and mining.

Compared with the year-ago period, the Indian economy seemed to be slowing as the growth was 9.3 per cent in the second quarter of the previous fiscal, but it was expected to moderate as a consequence of the global financial crisis and other domestic factors.

For the first half of this fiscal, the economy expanded at 7.8 per cent, compared with the 9.3 per cent last fiscal.

This is much in line with official expectations of 7-8 per cent growth for this fiscal, but quite higher than projected by many others.

Construction grew at 9.7 per cent, which is fairly good, even though it is slower than the 11.8 per cent in the corresponding period of the previous year.

All major segments in the services sector recorded high growth, though slower than in the second quarter of the fiscal 2007-08.

However, the number of air passengers has declined by 13.7 per cent and analysts expect it to further come down, also because of the impact of terror strikes in Mumbai.

Production of commercial vehicles also declined by 1.7 per cent.

With expectation of slowdown in the coming quarters, analysts said RBI should signal further cut in interest rates to spur economic growth.

"I expect RBI to cut repo rate and reverse repo rate by 50 basis points. The CRR can also be reduced by 50 basis points," said HDFC Bank chief economist Abheek Barua.

In fact, manufacturing grew by merely five per cent in the second quarter compared with the 9.2 per cent in the year- ago period. It had grown by 5.6 per cent in the first quarter of this fiscal.

Besides, agriculture grew by merely 2.7 per cent in the second quarter, against 4.7 per cent, mining and quarrying by 3.9 per cent against 5.5 per cent and electricity and the related sectors by 3.6 per cent against the 6.9 per cent in the last fiscal.

Among services, trade, hotels, transport, and communication recorded growth of 10.8 per cent against the 11 per cent, financing, insurance, real estate and business services by 9.2 per cent against the 12.4 per cent, and community, social and personal services by 7.6 per cent against the 7.7 per cent in the corresponding period of last financial year.

Construction grew by 9.7 per cent in the second quarter from the 11.8 per cent a year ago.

"Going forward, the services sector is likely to slow down, particularly the hotel construction and transport. So I expect GDP in the second half to slow down and the growth rate for the current fiscal is likely to be between 6.5 and 7 per cent," Crisil principal economist D K Joshi has said.

In absolute terms, size of domestic economy is valued at Rs 7,71,451 crore in the second quarter against Rs 7,16,982 crore a year ago. — PTI

Recession casts shadow on Gurgaon industry
Sunit Dhawan
Tribune News Service

Gurgaon, November 28
The industry of the millennium city, which has been grappling with the global economic meltdown, now apprehends adverse fallout of the recent terror attacks in Mumbai.

According to sources, a number of industrial units in the city have been closed down or are up for sale or rent.

While many local garment exporters have been bearing the brunt of the recession due to cancellation of export orders from the USA and other countries, several automobile units have also felt its heat.

To some extent, the BPO and KPO sectors have also been affected by the global slump with the managements of call centres and allied units cutting the facilities provided to the staff and reducing the staff strength.

“All in all, the small-scale units have been the worst-hit, with the HSIIDC and other government agencies concerned making no efforts to bail these out,” maintains Subhash Singla, president of the Chamber of Industries of Udyog Vihar here.

The industrialists feel that it was high time that the government stepped in to help the local industry, which was passing through a rough patch.

“To begin with, the rates of interest on industrial loans should be cut,” says Krishan Kapoor, general secretary of the Haryana Industries Association. He further asserts that instead of charging power tariff on the existing pattern, the industrial units should be reasonably charged only for the power it consumes.

He points out that several manufacturing units have been forced to close down and/or lay off their workers in recent past.

Kapoor as well as Singla endorse that the local industry has been adversely affected by the global economic recession.

Presenting a somewhat different viewpoint, V.P.Bajaj, president of the Gurgaon Industries Association, opines that the slump has hit only a few industrial units and sectors, while the others are doing well.

He, however, concedes that the recent terror strikes in Mumbai may influence the city industry. Bajaj supports the demand for slashing the interest rates so that the hard-pressed industry may heave a sigh of relief.

‘Terror to impact capital flows’

Mumbai, November 28
Terror attacks in Mumbai will impact capital flows in the short term, ICICI Bank managing director & CEO KV Kamath said here.

"FDI inflows will be affected for a short period, but things will be back to normal soon," Kamath said on the sidelines of a bankers' meet with Reserve Bank of India (RBI) Governor D Subbarao here today.

"Terror attacks on Mumbai city were a sad event. I think the city has got enormous resilience and I am sure it will show in terms of picking up and going about its own business," he said.

Asked about the meeting with Subbarao, he said there was nothing much.

"We exchanged notes on the business climate. We also discussed issues relating to problems faced by SMEs and liquidity," Kamath said.

"We had interaction with the RBI governor about the status of financing SMEs and the export sector and the problems faced by them," Bank of India CMD T.S. Narayanasami said.

The regulator wanted to have a feel on the bankers' perspective on current liquidity conditions. According to the RBI, short-term liquidity is very comfortable and there is no issue on this, he said. — PTI

Indian Hotels drops 17%

Mumbai, November 28
The Tata group's Indian Hotels' shares today plunged as much as 17 per cent, while shares of airlines, including Jet and Kingfisher, dropped up to six per cent, following the terrorist attacks which shook the country's financial capital Mumbai.

Shares of Indian Hotels, the owners of the Taj chain of hotels, today nosedived 17 per cent to its 52-week low of Rs 40 on the Bombay Stock Exchange. Over 26 lakh shares of Indian Hotels changed hands at the bourse today.

"Sentiments are negative for the entire tourism industry, including hotels, as the number of foreign tourist arrivals may take a hit. However, the impact on these scrips is only a short term deviation," SMC Global vice-president Rajesh Jain said.

The sentiments have also impacted scrips of other hotels like Hotel Leelaventure, which ended down three per cent at Rs 17.45 and Orient Hotels that ended down 9 per cent at Rs 152.05 on the BSE. However, shares of EIH recovered to close 5.22 per cent up at Rs 97.75 after dipping as much as 10 per cent to an intra-day low of Rs 83.15 from previous day's close on the BSE.

Besides, shares of airline firms also dropped significantly and analysts believe that travel and tourism industry as a whole would be greatly impacted by the terror attacks.

Jet Airways scrip closed down 6.13 per cent at Rs 129.45, while Kingfisher Airlines and Spicejet dropped 5.66 per cent and 5.05 per cent, respectively. — PTI

Re down 57 paise

Credit curbs hit tractor industry
Ruchika M. Khanna
Tribune News Service

Chandigarh, November 28
The credit squeeze and curbs on financing by banks and financial institutions has led to a flat growth in the domestic tractor industry. Since this sector is heavily dependent on financing, it has taken a big hit during the current financial turmoil.

Though the tractor industry had been growing at a steady seven per cent till September this year, the industry has shown a flat growth in October. This, inspite of the fact that October was the festival season, when companies generally see a spurt in growth. A number of tractor manufacturers, who are participating in Agro Tech 2008, said the robust growth in agriculture this year has helped create a good demand of agricultural machinery, but lack of credit has hampered their offtake.

At present, 95 per cent of tractors in the country are sold on finance. The tractor manufacturers are themselves trying to forge relations with financial institutions so as to keep the growth momentum. “But October has been a month of de-growth, as retail funding has become very slow. Even the export sector, which was growing at a steady 7.9 per cent, is showing a 20 per cent decline because of the recession and rupee volatility,” said Ashok Anantharaman, head, sales and marketing, Agri Machinery Group of Escorts.

He said though Escorts was growing at 13 per cent in the first quarter, the impact of banks clamping down on finance has begun to show now.

As a result of the flat growth, tractor manufacturers have been reducing their inventory size at the dealers end. All expansion plans of the tractor manufacturers, mainly increasing their capacities, have also been stalled. Some companies, which had brought in innovations like CNG and bio-diesel run tractors, have also put on hold the commercial production of these tractors.

Gautam Nagwekar, COO of Mahindra & Mahindra (farm equipment sector), said financing has become a problem, though over 32 per cent of tractors for our company are financed by Mahindra’s own financing arm. “Our interest rates are marginally higher as we do not mortgage land and only the vehicle is the collateral, so farmers find it an attractive option. But the government will have to take pro-active measures by making finance available to farmers to buy farm machinery. A number of irrigation projects have not been completed by the government. When these are complete, it will create more demand for agriculture implements,” he said.

UK govt to hold majority stake in RBS

London, November 28
The British government is all set to become a majority stakeholder with 58 per cent shareholding in the Royal Bank of Scotland following a share issue by the banking major to raise fresh capital.

Shareholders accepted to buy only 0.24 per cent of the new company shares offered and the remaining stocks of about 57.9 per cent would now be owned by the government, RBS today said.

The government owing nearly 58 per cent of the shares is part of the recapitalisation plan for the country's banking system.

The bank received valid acceptances "in respect of 55,977,458 new RBS ordinary shares, representing approximately 0.24 per cent of the total number of new RBS ordinary shares offered to shareholders.

... HM Treasury will take up the remaining 22,853,798,818 new RBS ordinary shares, for which valid acceptances were not received. As a result, HM Treasury will own approximately 57.9 per cent. of the enlarged issued ordinary share capital of RBS," a statement said today.

Meanwhile, the BBC in a report published on its website said the small take-up had been expected as the offer price of 65.5 pence was about 10 pence higher than the price at which the shares were trading.

Recently, shareholders of RBS had given the green signal to raise £20 billion in fresh capital to tide over the worsening financial turmoil. The plan was part of the UK government's rescue initiative for the banking sector.

As per the plan, the government was to inject £5 billion into the bank through purchase of preferential shares. The remaining £15 billion was to be raised from allotting ordinary shares to the shareholders. — PTI

SBI to boost credit to SMEs
Tribune News Service

Chandigarh, November 28
The State Bank of India has announced a slew of incentives to provide liquidity to the small and medium enterprises (SMEs), which have been hit hard by the global economic slowdown. The premier bank has announced relaxations in margin money; removed the cap on credit limits for the ailing sector; and says it is ready to negotiate on the charges levied on the SMEs for availing credit.

This was announced by chief general manager of the bank, Ajay Swaroop, while addressing mediapersons here yesterday. He denied that the bank had refused to come to the aid of the SME sector, adding that the bank’s exposure to this sector had shown a robust growth of 35 per cent. “Our SME portfolio shows exposure of Rs 12,000 crore in the Chandigarh circle, with Rs 1,066 crore as fresh advances in the first two quarters. By the end of this fiscal, this would grow to Rs 3,000 crore,” he said.

Swaroop said the bank had 150 SME-intensive branches and the bank was bullish on extending loans to this sector. “We have over one lakh borrowers in SMEs and the NPA level is also less at 1.8 per cent. We have held meetings with SMEs in the region and have also expressed our willingness to rephrase the terms of advancing loans so that they do not have a liquidity crunch,” he added.

BSNL BlackBerry services from December

New Delhi, November 28
State-run telecom company BSNL today said it would start BlackBerry services by next month.

"We are well on track to launch our BlackBerry services by next month," BSNL director (finance) S D Saxenatold reporters on the sidelines of a CII conference here.

Five mobile service providers — Airtel, Vodafone, BPL, Reliance Communications and Tata Teleservices — are currently offering BlackBerry services in India.

BlackBerry services were introduced in India in October 2004. However, it came under the government's scanner last year when security agencies could not access the data stored in the Blackberry network.

India has earlier asked Research in Motion (RIM), the maker of Blackberry, to route all its calls and e-mails through servers based in India to allow security agencies to read them as it fears its usage by terrorist outfits.

This is because calls and e-mails exchanged within BlackBerry handsets cannot be intercepted as the servers are based in Canada. — PTI

FDs to fetch lower returns

New Delhi, November 28
Investors who prefer fixed deposit schemes in this bad times of global financial turbulence should be ready now to face the prospects of lower returns from these safe instruments as banks are set to reduce interest rates by up to one per cent beginning next month.

Country's largest lender State Bank of India has already announced reduction in interest rates by 50 basis points across maturities from 91 days up to five years effective December 1. For maturities of five years and above, SBI has cut its interest rates by 25 basis points. Meanwhile, the second largest public sector lender Punjab National Bank has also decided to slash peak deposit rate by 100 basis points to 9.5 per cent from earlier level of 10.5 per cent for 1-2 year deposit.

The deposit rates for other maturities too would be cut by 25-75 basis points beginning next week. For term deposit in between 180 days to one year, the rate would come down by 25 basis points to 8.25 per cent while for 2-3 years the new rate will be 9.5 per cent against 10 per cent earlier. — PTI

Air passenger traffic falls