New Delhi, May 14
Inflation came in higher than expected at 7.23 per cent for April on the back of increase in prices of vegetables and pulses leading to worries over a potentially grim situation in the economy where inflation is rising while growth is weak and almost ruling out any chances of any substantial interest rate cuts by the central bank.

Headline inflation as measured by the Wholesale Price Index (WPI) crossed the 7% mark in April, touching 7.2%, up from 6.9% in March. The Bombay Stock Exchange benchmark Sensex tumbled 77 points to close near a four-month low on the news of the inflation numbers, and the Indian rupee closed at a low of Rs 53.97 to the US dollar.

According to Crisil Research, the surge in inflation was primarily due to food inflation reentering the double-digit zone after a gap of six months. Food inflation could rise further if there is a steep increase in the minimum support prices of foodgrains.

Crisil has revised its average inflation forecast up to 6.5 per cent, from 6.2 per cent due to resurgence in momentum in food inflation, the impact of the impending pass-through of global oil prices as well as rupee depreciation into domestic prices.

In addition, the increase in the indirect tax rates in budget 2012-13, which are likely to be passed on to the consumers will add to inflationary pressures, it added.

Expressing concern over the rise in food inflation, Finance Minister Pranab Mukherjee said Monday prices could be kept under check through institutional reforms in agricultural marketing and he would discuss the issue with states.

According to analysts at Deutsche Bank, the fact that inflation has firmed up while growth is weak is rather alarming, underscoring the supply constrained nature of India’s economy.

Citigroup India in a report said headline inflation edged up to cross the 7% mark in April, with a broadbased upturn in primary articles, manufactured products and the fuel index. However, one silver lining was that core inflation remained relatively benign at 4.8% (not far away from the central bank's comfort zone of 4%).

According to Anand Rathi Research, the Indian economy faces the prospect of a looming stagflation. It says that a waning favorable base, recent hikes in indirect taxes and the likely increase in administered fuel prices are likely to keep WPI inflation around 8% during most of fiscal 2013.

Despite rising growth concerns, the report says the Reserve Bank is unlikely to cut the repo rate further in FY13. Rather, it is likely to take the liquidity route through a 50-100 basis points cut in CRR (cash reserve ratio) and large open market operations to provide support to the slowing economy. 

New Delhi, May 14
Credit ratings agency Moody's Monday downgraded India's three top private sector lenders — ICICI Bank, HDFC Bank and Axis Bank — on growing concerns over the country's sovereign debt ratings.

Moody's lowered the standalone ratings of these top three private sector lenders to the sovereign ratings level of D+ from earlier C-. The lenders' hybrid rating is also lowered a notch to Baa2 from Baa3.

"The downward revision to the three Indian banks' standalone ratings reflects Moody's assessment that their creditworthiness are highly correlated with that of the Indian government's credit strength," Moody's said in a report.

For all three banks, the key drivers for the rating action were: relatively low level of cross-border diversification of their operations; high level of balance-sheet exposure to domestic sovereign debt, compared with their capital bases; franchise resilience and intrinsic strength within the operating environment; and absence of ongoing support from foreign ownership.

"Our review indicated there are little, if any, reasons to believe that these banks would be insulated from a government debt crisis," Moody's said.

Moody's pointed out that all these three lenders have significant direct exposure to the Indian government securities: equivalent to 239% of tier-1 capital at Axis Bank, 226% of tier-1 capital of HDFC Bank, and 143% of tier-1 capital at ICICI Bank. "In addition, these three banks are primarily domestic institutions with similar macroeconomic exposures as the sovereign government," it said. — IANS

Athens/Rome, May 14
With efforts to patch together a Greek government looking doomed, European Union policymakers warned the country it could not remain in the eurozone if it ripped up its bailout programme, and financial markets ratcheted up the pressure on the bloc.

Eight days after inconclusive elections, Greece's political parties have failed to form a coalition and opinion polls show that anti-bailout parties would perform most strongly in a fresh vote which is likely next month.

Last ditch talks led by President Karolos Papoulias on Monday looked unlikely to make headway after the leader of the radical leftist SYRIZA party said he would not attend and another left-wing leader refused to take part in any coalition without him.

Finland's European affairs minister said Greece could not remain in the eurozone if it tears up its bailout deal with the EU and the International Monetary Fund — the central demand of SYRIZA leader Alexis Tsipras, 37. "I think that is an impossible equation and I think in that sense it is an irresponsible statement," Alexander Stubb said.

With Greece set to run out of money as early as next month and no new government in place to negotiate the next aid instalment, investors have begun betting that a chaotic Greek default and euro exit will happen sooner rather than later.

Talk of any member exiting the euro zone used to be a taboo for policymakers. Not any more.

EC WANTS GREECE TO STAY: The European Commission hopes Greece will remain part of the eurozone but Athens must respect its obligations, the European Union's executive Commission said on Monday.

"We don't want Greece to leave the euro, quite the contrary — we’re doing our utmost to support Greece," European Commission spokeswoman Pia Ahrenkilde Hansen told a regular news briefing.

Opinion polls show most Greeks want to stay in the eurozone, but oppose the harsh austerity imposed by the terms of the EU/IMF emergency lending programme. — Reuters

Chandigarh, May 14
Videocon Telecommunications is betting big on Punjab. Having started its operations in the Punjab telecom circle almost two years ago, it is looking at a major expansion of its capacity sites as well as adding new sites to offer wider coverage.

Videocon’s telecom arm plans to pump in Rs 486 crore in the Punjab telecom circle this year. The funds will be spent only on the upgrade of its existing telecom infrastructure as well as adding new infrastructure. During this fiscal, the firm plans to add 922 new sites in this telecom circle alone.

Arvind Bali, the company’s CEO, told The Tribune though the Punjab circle continued to offer big business preposition to all the telecom companies operating here, they were now going full throttle in this circle as it was a “safe bet”. “With fresh auctions of 2G licences in all telecom circles on the cards, we feel our investment in Punjab circle is safe. We’ve a conservative approach with regard to investments in other telecom circles,” he said.

Bali claimed Videocon now has a subscriber base of 1.5 million in the Punjab telecom circle and was adding 150,000 customers each month.

“We’re now present in all the cities and towns. In order to increase our penetration further, we’re eyeing users in rural and semi-urban areas. Most of the new telecom sites that we plan to add this year (almost 60%) will be in these areas”, he said.

Bali added Videocon was also looking at offering high- speed internet services in its wireline network.