New Delhi, June 11
A weakened political will for further reforms, slowdown in growth and vulnerability to economic shocks have been suggested as reasons by global ratings agency Standard & Poor’s (S&P) that could make India the first BRIC (Brazil, Russia, India and China) country to lose investment grade rating.

S&P in a report has said the Indian government's reaction to potentially slower growth and greater vulnerability to economic shocks could largely determine whether the country can maintain an investment-grade rating or become the first "fallen angel" among the BRIC nations. The BBB- long-term sovereign credit rating on India is currently one notch above speculative grade.

Standard & Poor's revised the rating outlook to negative from stable in April 2012 and today’s follow up warning has just come 2 months after the revision. It may be pointed out that in the April revision S&P had mentioned that India faces a downgrade in 24 months if it does not act on reforms but today’s follow up warning has come surprisingly quite fast.

Although it may be mentioned that the interim period has seen a very ugly GDP number of 5.3 per cent for the last quarter of the fiscal and a full year GDP of 6.5 per cent which are way below consensus estimates. This has also led to several analysts lowering their growth targets for the current year. The sovereign ratings of a country by S&P are watched and tracked very closely by global investors and has implications for the economy and financial markets.

The S&P warning had an immediate negative reaction on the stock markets and the rupee. After going up nearly 175 points, the stock markets erased the gains and closed 51 points lower. The rupee also weakened and touched a intra-day low of 55.81 to the US dollar before finally settling at 55.74, down 32 paise.

The S&P report also hints ominously that the government instead of going forward on reforms may even be stepping back due to reduced political will. "The combination of a weakening political context for further reform, along with economic deceleration, raises the risk that the government may take modest steps backward away from economic liberalisation in the event of unexpected economic shocks. Such potential backward steps could reverse India's liberalisation of the external sector and the financial sector," said Standard & Poor's credit analyst Joydeep Mukherji.

Reacting to the report, Finance Minister Pranab Mukherjee said government is fully seized of the current situation and there will be a turnaround in growth prospects in the coming months. He rejected the report’s contention that India will be the first BRIC nation to falter and added that today’s report was not based on any fresh rating action and there had been no adverse events between April and now that would increase the country’s vulnerability.

The S&P report has also made the point that the ruling Congress party is divided on economic policies and there is substantial opposition within the party to any serious liberalisation of the economy.

“The division of roles between a politically powerful Congress party president, who can take credit for the party's two recent national election victories, and an appointed Prime Minister, has weakened the framework for making economic policy, in our view”, the report says.

It also states that local business confidence in India has deteriorated for various reasons, including perceptions of “policy paralysis” within the central government. Government’s failure to implement announced reforms and growing bottlenecks in key sectors has undermined business confidence.

The report says that there is a risk that India will go backwards in its economic policies and undo some of the progress it has made. Populist solutions may be tempting for the government and growing public criticism of the government could lead to backlash against the liberalisation itself.

Chandigarh, June 11
Days of having multiple identities across the financial system will be over soon as the RBI has proposed to introduce a unique identification code for customers of each banks so as to help banks identify a customer and smoothen banking operations for him.

While some of the big banks have already developed the Unique Customer Identification Code (UCIC), there is no unique number to identify a single customer across the organisation in many banks. Some of the large banks already use UCICs for their customers by providing them a relationship number, but most of the banks have not yet initiated this practice.

The latest guidelines issued by RBI in this regard say that all banks introduce unique identifiers for customers across all banks and financial institutions for setting up a centralised Know Your Customer registry. This will help banks not only to identify a customer, but track the facilities availed, monitor financial transactions in various accounts, improve risk profiling and take a holistic view of customer’s profile.

The increasing complexity and volume of financial transactions necessitate that customers do not have multiple identities within the bank or across the financial system. It was keeping this in mind that the government had set up a working group, which has now come up with the idea of setting up a centralised registry.

Officials in the RBI said while setting up a centralised registry may take a lot of time, they have asked all the banks to make an immediate beginning in this regard by having identification codes for all their customers. Banks have been asked to allot the UCIC number to all their customers while entering into any new relationship with all individual customers. The banks have also been directed to allot unique customer identification code to existing customers by the end of April 2013.

New Delhi, June 11
A high-powered delegation of CEOs from Confederation of Indian Industry (CII), led by Adi Godrej, President of CII and Chairman, Godrej Group, will be visiting the US from June 11 coinciding with the third US-India strategic dialogue.

The annual CEOs delegation comes at a time when the strategic dialogue, led by Hillary Clinton, US Secretary of State, and SM Krishna, Minister of External Affairs, will be held on June 13 in Washington.

In recent months, all eyes have turned towards India as economic growth has slowed down and a number of domestic policy measures have caused significant concern among foreign investors, including in the US.

The CEOs delegation will during their visit reaffirm Indian businesses’ commitment to the bilateral economic and strategic partnership. According to a CII statement, the CEOs delegation will seek to revitalise collaboration with the US companies in sectors such as clean energy, defence, healthcare, infrastructure, agriculture cold chain and manufacturing.

In Washington DC, the delegation will participate in the CII-USIBC Economic Summit addressing the role and recommendations of industry in ensuring economic, national, energy and food security.

“US-India bilateral relationship has truly experienced a quantum jump in the past decade. The CEOs delegation will step up this engagement through state-to-state linkages, and reaffirm our commitment to our bilateral economic partnership,” Adi Godrej said. — TNS

New York, June 11
Former Goldman Sachs director Rajat Gupta will not testify in his own defence at his insider trading trial, a decision taken after "substantial reflection and consideration", his lawyer has told a federal court here.

In a one paragraph letter dated June 10 to Judge Jed Rakoff, who is presiding over the case in Manhattan federal court, Gupta's lawyer Gary Naftalis said his team had spent the weekend "reviewing what we believe we need to present in the defence case".

"After substantial reflection and consideration, we have determined that Gupta will not be a witness on his own behalf in the defence case," Naftalis said.

Naftalis had last week told the court it was "highly likely" that Gupta would take the witness stand in his defence on June 12.

The judge had instructed Naftalis to inform the court and the prosecution about whether Gupta would take the witness stand as soon as he had taken a decision in order to give the prosecution time to prepare.

The prosecution has alleged that Gupta, who sat on the boards of Goldman Sachs and Proctor and Gamble, passed on confidential information about Buffett's plan to invest $5 billion in Goldman Sachs during the height of the financial crisis in 2008 to convicted hedge fund founder Raj Rajaratnam. — PTI 

New Delhi, June 11
The slowdown in economic growth and hike in the excise duty in the Budget has had a major impact on the automobile industry with the car sales reporting the slowest growth during the year in May.

Figures released by the industry body Society of Indian Automobile Manufacturers (SIAM) say that the car sales, in fact, grew the slowest in the past seven months at 2.78 per cent in May.

The lack of capacity to manufacture diesel cars, hike in petrol prices and high rate of interest on loans also affected the sales, SIAM said.

The domestic car sales in May stood at 1,63,229 units as against 1,58,809 units in the same month last year.

Speaking to reporters, SIAM Director-General Vishnu Mathur said, "This is the slowest growth since October last year when the car sales witnessed a decline of 23.77 per cent".

He pointed out that the expected softening of interest rates has not materialised and the high prices of petrol have also affected sales. “The overall sentiment in the market is very negative," he added.

Increase in prices of vehicles following the excise duty hike in the Budget also had a major impact, Mathur said, adding that even diesel vehicles, which used to have a lot of demand, had tapered off.

Pointing at the prevailing negative sentiment in the market, Mathur said if at such a time government goes ahead and decides to tax diesel vehicles more, the overall demand will also suffer.

The sales of the country’s largest carmaker Maruti Suzuki India Ltd (MSIL) dipped by 5.94 per cent to 72,309 units.

However, Hyundai Motor India's sales increased by 3.03 per cent to 31,939 units and Tata Motors' sales were up by 6.70 per cent at 17,371 units.

In May, total sales of vehicles across categories registered an increase of 10.52 per cent to 15,13,032 units as against 13,69,070 units in the same month last year.

New Delhi, June 11
Hiring activities slowed down marginally in many sectors during the last month amid challenging economic conditions, according to job portal Monster.com. The Monster Employment Index India - a monthly gauge of hiring trends online - slipped to 128 last month compared to 129 in April. On a monthly basis, the index went up in February, March and April. "The pace of growth in online recruitment activity continues to be moderate," Monster.com (India/ Middle-East/South East Asia) Managing Director Sanjay Modi said today.

BPO/ITES and government/PSU" sectors recorded significant fall in recruitment trends.

"Government/PSU/Defence (down 18 percent) showed steepest annual decline," Monster.com said.

Notwithstanding tough economic conditions, many sectors managed positive growth momentum on an annual basis.

"Shipping/marine (up 12 per cent) continued to exhibit the highest annual growth among sectors," the statement noted. Sectors such as retail, automotive/ancillaries/tyres; telecom/ISP; healthcare, bio-technology and life sciences exhibited positive growth momentum last month, Modi said. — PTI