New Delhi, January 16
The Indian economy which has started showing positive indicators since last few days got another set of good news as headline inflation measured by the monthly wholesale price index (WPI) plunged to a two year low and exports grew by 25 per cent.

Headline inflation fell to a two-year low of 7.47 per cent in December 2011 mainly on decline in food items. India’s exports for the month of April- December 2011 have registered a growth of 25.8 per cent, at US $ 217.6 billion.

With food inflation in negative territory and at a six year low, this is good news for the UPA government, especially on the eve of the five state assembly elections in Punjab, Uttar Pradesh, Uttarakhand, Manipur and Goa. Inflation has been a big worry for the past year or so and now seems to be showing signs of moderation.

Inflation is also down on a month-on-month basis compared to November. The jury is still out on what the Reserve Bank of India will do at its meeting next week, but the consensus appears to be veering to a pause approach and the central bank may not cut rates yet.

Relieved at the improvement in macro indicators, Finance Minister Pranab Mukherjee said good industrial production numbers for November, at 5.9 per cent, and a sharp decline in inflation indicated some improvement in overall macroeconomic parameters in the second half of fiscal 2011-12. "This trend is likely to consolidate in the coming months with some policy correctives," he added.

Mukherjee said inflation in manufactured goods was still high and would moderate more gradually than that in primary articles including food. He expects inflation to come down to 6-7% by March-end.

However, Crisil Research is of the view that factors currently driving the decline in inflation appear to be unsustainable. As long as core inflation remains sticky, a sustained decline in overall inflation remains far from certain, it said. Crisil feels the sharp decline in food inflation is temporary and is led by seasonal not structural, factors.

PTI adds: The BSE Sensex erased early losses and ended 35 points up at a 5-week high of 16,189.36 on Monday as inflation logged a sharp dip, although investors remained cautious because of weak global cues due to credit downgrade of nine eurozone countries by ratings agency Standard & Poor’s.

New Delhi, January 16
Top executives from India's major power companies will meet Prime Minister Manmohan Singh on Wednesday to push for swifter action to improve access to coal and make it easier to get funding, acquire land and get environmental clearances.

Lack of progress on such issues has held up projects and threatens India's economic growth.

Tata group chairman Ratan Tata, his deputy Cyrus Mistry, Reliance Power chairman Anil Ambani, Adani Power chairman Gautam Adani and top executives from other private power firms will be part of the delegation, organised by the Association of Power Producers.

The executives will also meet ministers in charge of finance, coal, petroleum and environment on the same day.

"The basic issues in the power sector are not being resolved and are impacting generation programmes. The companies will seek quick redressal," Ashok Khurana, director general at the Association of Power Producers, told Reuters.

Policy gridlock in India, which has resulted in little economic reforms in the past few years, has crimped investment and contributed to a slowing of the economy. Late last year, Singh met top executives from the telecom sector to hear their concerns about regulatory issues.

A shortage of coal and gas and uncertainty over supply have thrown the business plans of the generators into disarray and made lenders reluctant to lend, delaying projects.

Tata Power and Reliance Power, developers of 4-gigawatt plus power plants, are lobbying the government to free them from loss-making power sales contracts and want to be allowed to pass on rising fuel costs to consumers.

Plants that can produce about 20,000 megawatts thermal power are working at sub-optimal capacity, and another 30,000 MW of plants under construction are likely to be affected by fuel shortages, Khurana said. — Reuters

Paris, January 16
Moody's on Monday confirmed France's triple-A credit rating but said it was still reviewing whether it would maintain its "stable" outlook for the debt-laden country.

The announcement came three days after rival agency Standard and Poor's downgraded France's top rating by one notch, dealing a severe blow to President Nicolas Sarkozy's reelection prospects.

Sarkozy made an appeal Sunday for calm in the wake of the downgrade and said he would introduce more reforms to get France back on track.

Fitch, the third major ratings agency, has also kept France at its top level and said it has no plans to change it this year barring a major disaster.

Spain and Italy were hit by double downgrades in the S&P report card, piling pressure on governments and the euro in the run-up to an EU summit on January 30 that is supposed to confirm details of a tough new fiscal pact.

Moody's said in mid-October it would take three months to consider whether France should be downgraded. It warned in November that a rise in borrowing costs on French government bonds and slowing growth could have a negative effect on France's rating.

It said Monday: "We will update the market (on the outlook for France) during the first quarter of 2012 as part of the initiative to revisit the overall architecture of our sovereign ratings in the EU."

The agency warned that "adverse economic or financial market developments would also pressure France's credit rating, including a further deterioration in the European debt crisis."

It said France's commitment to implementing economic and fiscal reform as well as "progress in achieving the targeted sustainability improvements will be important for the stable outlook to be maintained." — AFP

New Delhi, January 16
India's exports growth remained subdued at 6.7 per cent year-on-year in December on account of poor demand in Europe and the US, but the government is hopeful of achieving its $300 billion target for the current fiscal.

Though growth during the month under review was not robust, it was higher than in November, when overseas shipments grew by just 3.8%.

In sharp contrast, imports grew at a faster pace of 19.8% year-on-year to $37.8 billion in December, translating into a trade deficit of $12.8 billion, commerce secretary Rahul Khullar told reporters.

During the April-December period this fiscal, exports aggregated to $217.6 billion, a year-on-year growth of 25.8%, thanks to the surge witnessed in the early months of the fiscal. From a peak of 82% in July, export growth slipped to 44.25% in August, 36.36% in September and 10.8% in October.

"If you get $80 billion exports in the remaining quarter (January-March, 2012), you are looking at close to $300 billion. And imports may touch about $460 billion," Khullar said.

Experts opined India’s exports growth for the entire fiscal will stand at about 20%. During the first three quarters of the current fiscal, imports were up by 30.4% at $ 350.9 billion. — PTI

New Delhi, January 16
India is exploring the possibility of the Abu Dhabi Investment Authority (ADIA), one of the world’s largest sovereign funds to set up a joint venture with an Indian infrastructure institution — IDFC or ILFS — to make big ticket investments in the infrastructure space where the government has plans to invest US $1 trillion over the next five years.

India is also exploring if ADIA can invest directly in the infrastructure sector through a wholly owned subsidiary. The other opportunity being explored is for ADIA to contribute to the DMIC project implementation fund by way of debt or equity which is being set up as a trust. This will ensure nullifying investment risks.

The Gulf countries are diversifying their investments in emerging countries like India and China following economic problems in Europe and the US. The Abu Dhabi team’s visit is part of a series of engagements where the Gulf countries are exploring investments in India.

ADIA has expressed keen interest in investing in India. ADIA managing director Sheikh Hamed bin Zayed al Nahyan met Commerce & Industry Minister Anand Sharma to discuss the opportunities of investment in India. Both sides agreed to finalize a joint working group to expedite the process. “This is an opportunity to enter this huge market,” al Nahyan said.

Sharma said India planned to invest $1 trillion in infrastructure over the next five years and huge opportunities existed, including along the Delhi Mumbai industrial corridor.

Keeping in mind the worsening investment climate in developed nations both sides agreed that UAE and India should engage more. Sharma underlined the need to diversify the investment portfolio and proposed that 3-4 new areas must be identified for closer interaction like pharma, services sector and engineering along with agro processing.

The United Arab Emirates is India’s leading trading partner in the entire West Asia & North Africa (WANA) region, accounting for about 63% of India’s total trade with GCC countries in 2010-11. Bilateral trade has jumped over threefold in the last five years. Total trade in 2010 touched $60.3 billion. Bilateral trade between January to November 2011 was at $66.5 billion. 

New Delhi, January 16
A group of ministers (GoM) is expected to meet on Tuesday to review cash-strapped Air India’s debt recast and turnaround plans and recommend to the cabinet additional equity infusion in the ailing carrier. The group, headed by Finance Minister Pranab Mukherjee, may also discuss a proposal to allow foreign airlines to pick up a stake in Indian carriers.

Sources said deliberations at the first GoM meeting attended by the newly appointed civil aviation minister, Ajit Singh, would revolve around the Reserve Bank of India’s views on the debt restructuring plan as also the programme for acquisition of 27 Boeing 787 Dreamliner planes.

The group will also take into cognizance recommendation by a panel of secretaries to infuse Rs 23,000 crore into the national carrier over the next ten years, of which Rs 6,600 crore could be invested in the current fiscal.

Air India has outstanding loans and dues worth Rs 67,520 crore of which Rs 21,200 is working capital loan, Rs 22,000 crore long-term loan on fleet acquisition and Rs 4,600 vendor dues.

The CBSE had recently frozen Air India's 11 bank accounts for nonpayment of duties worth an estimated Rs 300 crore. At the last meeting in October last year, the GoM had decided to take a call only after the RBI gave its nod to the debt restructuring plan. Since then the RBI has had several rounds of meeting with AI's bankers, who also have met the airline's top brass to finalize the debt recast package.