Mumbai, August 23
The Reserve Bank of India said on Thursday that fighting inflation remained the cornerstone of its monetary policy, and urged the government to cut expenditure, indicating it was unlikely to act soon to ease rates despite slowing growth.

The RBI said poor summer rains had further clouded growth prospects for Asia's third largest economy, but the key was to cut government subsidies and revive capital spending. "Such an action would also provide some space for monetary policy, but, importantly, lower interest rates alone are unlikely to jumpstart the investment cycle," the central bank said in its annual report.

The report, which is released at the end of the central bank's accounting year, is a review of the previous fiscal year's macroeconomic conditions and outlook for the current year.

India's growth skidded to a nine-year low of 5.3% in the March quarter, and many economists have slashed their 2012/13 forecast to around 5.5%, lower than the RBI's downwardly revised projection of 6.5%.

Inflation, which had stayed well above 7 percent for two and half years, has eased, with both the wholesale price index and the consumer price index slowing, although food prices rose.

But the RBI, which left its key repo rate steady at 8 percent last month, said a close vigil on prices would be necessary for the rest of the year to prevent re-emergence of inflationary pressures.

"Persistence of inflation, even as growth is slowing, has emerged as a major policy challenge," the RBI said.

Complicating the picture further, the central bank said, the government's market borrowing could rise during the fiscal year if revenue receipts fall short of target, which would limit room for monetary policy action to support growth.

The government aims to narrow its fiscal gap to 5.1% of GDP in the current fiscal year from 5.76% last year, a target seen by many analysts as optimistic.

Tax revenues are under pressure from the economic slowdown, spending on subsidies is on the rise and the government has struggled for support from within the ruling coalition to raise diesel prices or carry out some economic reforms.

"At the current juncture there is no scope for complacency as fiscal slippage is likely in FY2013 and the current account deficit is likely to stay above sustainable level," the RBI said. — Reuters

Gurgaon, August 23
Japan's Suzuki Motor Chairman Osamu Suzuki today visited two of its India facilities — a two-wheeler manufacturing facility and a car plant in Gurgaon — on his first trip to the country after violence broke out at another plant in Manesar last month.

Suzuki, who arrived in India Wednesday on a week-long visit, surprisingly decided not to visit the Manesar plant and proceeded to meet management representatives of the Gurgaon facility under police protection.

Suzuki was accompanied by Maruti Suzuki India managing director & CEO Shinzo Nakanishi. Maruti Suzuki India is a subsidiary of Japan's Suzuki Motor Corp.

" He didn’t meet union representatives of the Kherka Daula plant but we’ll meet him later this evening and discuss various issues including the sacking of 500 workers at the plant. We’ll also request him to revise our wages.It’s bewildering that rather than heading straight to the Manesar unit he avoided the visit. Some senior officials have told us this was due to a perceived security threat," said Kuldeep Jhangu, general secretary of the Maruti Udyog Kaamgaar Union.

The union of the Gurgaon car plant has been opposing the dismissal of the workers.

While the company officials were tight-lipped about Suzuki's schedule, employee union leaders of Suzuki Motorcycle India Pvt Ltd’s two-wheeler plant at Kherka Daula here, said he only held meetings with the management and did not meet workers and their representatives.

Union leaders of Gurgaon car plant of Maruti Suzuki India said that Suzuki would be meeting them later this evening and they would raise with him the issue of Manesar incident, including the sacking of 500 workers after violence.

On August 21, Maruti Suzuki India reopened its Manesar plant amid heavy security, a month after the lockout was declared following the violence in which one senior company official was killed and 100 others injured. The company has sacked 500 permanent workers, who were allegedly found to be involved in violence inside the plant.

During his India visit, Suzuki is also said to be meeting Haryana Chief Minister Bhupinder Singh Hooda and Gujarat CM Narendra Modi and would attend Maruti Suzuki India’s AGM on August 28.

London/Beijing, August 23
The eurozone is on track for its second recession in three years, China's once booming manufacturing sector is contracting at a faster pace than previously reported, and the United States is widely seen as struggling to keep up its pace of growth.

Business surveys released on Thursday painted a global picture of economic malaise from Beijing to Berlin.

The eurozone economy will shrink around 0.5% in the current quarter as the economic rot is even spreading through Germany, the region's largest and strongest economy, Markit's Purchasing Mangers' Index (PMI) suggested.

It came on the heels of the HSBC Flash China manufacturing PMI falling to 47.8 for August, its lowest level since November and well down from July's final figure of 49.3.

Growth in the United States manufacturing sector is also expected to have slowed in August. US data due at 1258 GMT.

"The indicators taken as a whole indicate a material slowdown in the pace of the world economy," said economist Philip Shaw at Investec.

The eurozone composite Purchasing Mangers' Index, which measures manufacturing and services together, was actually slightly better than a month earlier, nudging up to 46.6 and just pipping forecasts for it to hold steady at July's 46.5. But was still its seventh month in a row below 50, the dividing line between contraction and growth.

"August's flash eurozone PMI does nothing to challenge the notion that the single currency area is now firmly in recession," said Jonathan Loynes, chief European economist at Capital Economics.

More worryingly, the downturn in smaller euro zone economies is clearly taking root in the core. The flash composite PMI for Germany fell to a three-year low, a fourth straight month of contraction.

German economic growth slowed to 0.3% in the second quarter on a sharp drop in investment, adding to evidence that it can no longer be relied on to pull the eurozone out of a deep slump, data showed earlier on Thursday.

"Another reminder that a chronic lack of economic growth in the euro zone will continue to impede efforts to bring the debt crisis to an end," Loynes said.

The eurozone economy shrank by 0.2% in the three months to June, according to official data. Economists polled by Reuters last week predicted a similar outcome for the current quarter, with no growth until the start of next year. — Reuters

Singapore, August 23
A former dealer for the Royal Bank of Scotland Group PLC has provided fresh details on how traders at the British bank tried to influence Libor rates, court documents filed in Singapore show.

Tan Chi Min, who is suing RBS for wrongful dismissal, alleges that the bank's minutes of his disciplinary meeting held in September last year did not accurately reflect what was discussed and omitted details of conversations about how traders at the bank tried to influence RBS's interbank lending rate submissions.

More than a dozen banks are currently under investigation by regulators in the US, Europe and Asia for suspected rigging of the London interbank offered rate (Libor), which is used to price trillions of dollars worth of financial products.

RBS confirmed earlier this month in its half-year results that it was among those banks being investigated. Last month rival lender Barclays Plc was fined $453 million in July by US and UK regulators after its staff reported false interbank rates. — Reuters

New Delhi, August 23
The government has eased norms for raising external commercial borrowings (ECBs) by allowing Small Industries Development Bank of India (SIDBI) to access foreign loans for medium and small enterprises and allowing housing finance companies to avail of this window for low cost housing projects.

The high-level committee on ECBs, which met Wednesday night, took various decisions including permitting SIDBI to access ECB for on-lending to micro, small & medium enterprises (MSMEs) subject to certain conditions which will be finalized in consultation with the Reserve Bank of India.

A finance ministry statement said it had already been decided to allow ECBs for low cost housing projects. It has been further decided that entities like National Housing Board and housing finance companies will be included as eligible borrowers for financing such low cost housing projects.

There is also a push for the infrastructure sector. It has also been decided that refinancing of buyer’s credit for import of capital goods in the infrastructure sector will be placed under automatic route subject to certain conditions. It has also been decided to increase the maturity of such buyer’s credit to a maximum five years.

In June 2012, a new scheme was introduced to allow companies in the infrastructure and manufacturing sector to refinance their existing rupee loans through ECBs subject to the condition that their ECB liabilities are extinguished from their future forex earnings.

It has been decided to enhance the maximum permissible limit for ECBs that can be availed by such companies from 50% to 75% of the average forex earnings realized during the past three financial years or 50% of the highest forex earnings recorded in any of the last three years, whichever is higher.

The committee also decided to include SPVs (special purpose vehicles) of companies that have been in existence for at least one year under the ambit of this scheme. These measures will help to raise foreign loans for the infrastructure sector.

In addition, nonresident entities will be allowed to credit enhance the issue of rupee bonds by all companies. The minimum maturity period of such bonds has also been reduced from seven years to three years. FIIs will be permitted to invest in these bonds up to an equivalent of US $5 billion within the overall corporate bond limit of $45 billion.

The measures come after newly-appointed FM P. Chidambaram has prioritised bringing down borrowing costs for companies and consumers, given the central bank has clearly expressed its reluctance to cut interest rates.

New Delhi, August 23
Religare Health Trust is set to launch an up to $400 million initial public offering in Singapore, a source said, in a move that will allow the backer of the trust, Indian hospitals group Fortis Healthcare, to cut its substantial debt level.

The trust, which will own assets managed by Fortis, plans to begin premarketing of the IPO in early September, said the source who had direct knowledge of the deal.

The IPO will be structured as a business trust and will offer a minimum yield of 8.5 percent to investors, the source said. Listing has been planned for end-September.

This will be the third biggest IPO in Singapore this year after the dual listing of IHH Healthcare in a $2.1 billion deal and Far East Hospitality Trust, which raised $575 million in an IPO last week.

Fortis is India's No. 2 hospitals operator after Apollo Hospitals Enterprise. It had consolidated net debt of Rs 62.37 billion as of end-June.

Fortis is also considering an IPO for its diagnostics business SRL Diagnostics Ltd in India. "They have huge debt. So to improve the leverage ratios they need to do it (IPO) as quickly as possible," said Siddhant Khandekar, analyst at ICICI Direct in Mumbai.—Reuters