New Delhi, February 14
Headline inflation eased to a three-year low of 6.62% in January but items of daily consumption like onion and potato continued to rule high. The WPI-based inflation rate, measured by movement in wholesale prices, moderated for the fourth consecutive month in January mainly on account of lower price rise of manufactured goods.

However, there is a divergence with the consumer price inflation, which is at 10.8%. Food and primary articles posted a higher annual price rise.

The stock markets shrugged off positive cues from easing inflation numbers and the BSE benchmark Sensex today fell 111 points snapping a two-day rally.

Commenting on the figures, the chairman of the Prime Minister’s Economic Advisory Council, C. Rangarajan, said inflation is expected to further decline to 6.5% by March-end. but asked the government to release more foodstocks to ease the price situation.

Indranil Pan, chief economist at Kotak Mahindra Bank, said the softening of the WPI inflation, along with the softer core inflation were positives. “However, going beyond the WPI numbers, the worry continues to be the ever-rising divergence between the WPI and the CPI. This is making the RBI’s task even more difficult in reading through the inflation dynamics. The worry on the food side inflation continues. The comfort from the manufacturing side (core inflation) might turn out to be shortlived as the rupee has once again started to depreciate and the commodity price index has probably found a floor”.

FICCI president, Naina Lal Kidwai said the persistent decline in inflation over the past couple of months had brought some respite but higher food prices continued to remain a cause for concern.

Crisil Research pointed out that inflation had dropped due to nonrevision of coal prices, which have not been revised since January 2012.

The lower headline inflation rate could give policymakers more leeway to revive a slowing economy.

"This shows that finally inflation is easing, and fits with the growth slowdown," said A. Prasanna, economist at ICICI Securities Primary Securities Dealership in Mumbai.

"I think March inflation will be lower than RBI's projection and that should give RBI the comfort to cut rates by 25 basis points in March."

Fuel prices rose 7.06% in January from a year earlier, compared with an annual rise of 9.38% December.

Manufacturing goods inflation dropped to 4.81% from 5.04% in January. Nonfood manufactured inflation — a barometer for demand-driven price pressures — eased to 4.1% during the month from 4.2% in December.

The reading for November was unrevised at 7.24%.

India's 10-year government bond yield fell 3 basis points after the data. The 10-year yield was trading at 7.81% from its 7.84% close on Wednesday.

The one-year OIS swap rate fell 2 basis points to 7.60%.

The RBI had forecast a moderation in headline inflation in the January-March quarter when it cut interest rates by quarter percentage points last month. But, it also warned that inflation would have to ease more than expected, and the current account deficit would have to come down, to enable the bank to make further reductions in rates.

India's current account deficit hit an all-time high of 5.4% of gross domestic product in the July-September quarter and is expected to widen further in the subsequent quarter.

Asia's No. 3 economy has been hamstrung by weak capital investment and flagging consumer demand. A series of government policy U-turns and a slowdown in the rate of implementing key industrial and infrastructure projects have added to investor gloom.

Mumbai, February 14
Hit by falling margins and rising capital expenditure, roaring Jaguar Land Rover (JLR) may be heading for a speed trap.

Rising investment is eating into the luxury carmaker's cash pile and raising the prospect of fresh borrowing, as falling profitability saw parent Tata Motors Ltd post its first drop in profits in five quarters.

Increasing reliance on lower-margin models such as the Land Rover Evoque and Freelander and adverse currency movements saw JLR's profit margin fall, and free cash flow (FCF) at the unit turned negative just months after it paid its weaker parent a maiden dividend.

Negative cash flow will continue in the next financial year, JLR says, as the carmaker that has propped up its Indian owner for the past 18 months starts a 2.75 billion pound a year splurge on its plants and product pipeline.

Tata's net profit for the third quarter of the financial year that ends on March 31 came in far below market estimates at Rs 16.28 billion, down 52 percent year-on-year and the first fall since the three months to September 2011.

Analysts had expected average profit of Rs 28.9 billion, according to Thomson Reuters Starmine.

Much of the fall was down to a slide in JLR's blockbuster operating margins to 14% in the quarter, down from 17% in the year ago period, due in part to a shift towards less profitable models.

"Over the next couple of years, they are unlikely to generate much cash. — Reuters

New Delhi, February 14
After the department of telecom served a notice on Vodafone India demanding additional payment for excess spectrum usage from 2008 onwards, the other two big operators, Bharti Airtel and Reliance Communications, have also been sent notices to pay additional costs running into thousands of crores of rupees.

In a move that could deal a body blow to the already reeling telcos, DoT had on Wednesday slapped a notice for recovering Rs 877 crore from Vodafone India as charges for the additional spectrum used by the operator since 2008.

The demand notice follows a special audit that DoT has been conducting on the books of telecom operators, checking out if there has been any underreporting of gross revenues (AGR) which is the basis for calculating spectrum charges.

Reports said that the country’s largest telecom operator, Bharti Airtel, had been slapped with a similar notice to recover over Rs 1,200 crore.

Reliance Communications has also received a notice for payment of additional charges, but the exact figure is not known. DoT officials said similar notices are being issued to the remaining operators within the next few days.

The four different notices issued to Vodafone say it has to pay up roughly Rs 14.8 crore in spectrum charges, penalties and interest for 2008-09, Rs 12.25 lakh for 2009-10, Rs 731 crore for 2010-11 and Rs 132 crore for 2011-12. Telcos share a certain percentage of their revenues towards spectrum usage charges and the government is of the view that revenue share is applicable on the operator’s AGR. Telcos on the other hand argue this charge is applicable on only on revenues from mobile services.

Apparently the notices were being issued by DoT after the Supreme Court ruled in October 2011 that the government could collect revenue share from non-telecom activities.

Mumbai, February 14
Despite the Indian government raising import duties on gold, demand for the yellow metal is seen to be robust. According to the World Gold Council demand for gold will continue to remain high in both India and China despite efforts to curb down on its imports.

"China and India remain the world's gold powerhouses despite challenging domestic economic conditions. In India, consumer sentiment towards gold remained strong despite measures aimed at curbing demand, reaffirming gold's role in Indian society. In an underdeveloped financial system in India, gold has an important role to play," Marcus Grubb, MD, investment at the WGC, said.

Demand for gold in India, which fell 12% in 2012, saw an upswing in the last quarter, according to the WGC. "....the market performed strongly in the final quarter with total demand at 261.9 tonnes, a 41% rise over the same period last year," it said.

Both jewellery and investment demand peaked for six quarters, the WGC said. Demand for jewellery was up 35% year-on-year, reaching 153 tonnes in the Oct-Dec 2012 quarter, it added.