London/New York, February 23
Britain suffered its first ever sovereign ratings downgrade from a major agency on Friday when Moody's stripped the country of its coveted top-notch triple-A rating, dealing a major blow to Finance Minister George Osborne.

Moody's said weak prospects for British economic growth, which have thrown the government's deficit reduction strategy off course, lay behind its decision to cut the rating by one notch to Aa1 from Aaa.

Austerity has been the watchword for Osborne's fiscal policy since his Conservative-led coalition came to power in 2010 after an election in which he vowed to defend Britain's triple-A rating, which can help keep down borrowing costs.

But a very slow recovery from the financial crisis has pushed back by at least two years the government's goal of largely eliminating the budget deficit by 2015's election. The opposition Labour Party blames the deficit on too much austerity.

Nonetheless, Osborne insisted now was not the time to change course. His annual budget due on March 20 is expected to show a further deterioration in the country's fiscal outlook.

"Tonight we have a stark reminder of the debt problems facing our country and the clearest possible warning to anyone who thinks we can run away from dealing with those problems," he said in a statement. "Far from weakening our resolve to deliver our economic recovery plan, this decision redoubles it."

Sterling fell by almost a cent to around $1.5160 after the downgrade, just off Thursday's fresh 2-1/2-year low, and analysts expected it to weaken further on Monday, even if many had seen a downgrade coming sooner or later.

"It's a pretty big deal," said Kathy Lien, managing director at BK Asset Management in New York. "We didn't see a huge reaction in the pound because it's late in the New York session. But you'll see some more aggressive selling when the markets open (in Asia) on Sunday."

Moody's said the outlook on its rating on Britain was now stable, meaning any further change is unlikely for the next year or so.

Britain joins the United States and France in having lost its triple-A rating from at least one major agency, after holding a top-notch rating from Moody's and Standard & Poor's since 1978, and from Fitch Ratings since 1994.

SLUGGISH GROWTH: Moody's said that despite considerable economic strengths, Britain's growth was likely to be sluggish due to a mix of weaker global economic activity — especially in the euro zone — and a drag "from the ongoing domestic public and private-sector de-leveraging process."

"This period of sluggish growth poses challenges to the government's fiscal consolidation program, which we now assume will extend well into the next parliament," Moody's analyst Sarah Carlson said in a telephone interview with Reuters. — Reuters

Ballabgarh (Haryana), February 23
Being a big wheel in the earth mover business, Vipin Sondhi has a very clear idea why the Indian economy is stuck in the mud and what the government must do to change the mindset of business executives, like himself, who are too wary to invest.

The CEO & managing director of JCB India, the country's largest construction equipment manufacturer, says Prime Minister Manmohan Singh has improved business sentiment with the launch of urgently needed reforms last September.

But that, he says, won't justify fresh investment when his firm, a fully-owned subsidiary of UK-based JC Bamford Excavators, is already running 20% to 25% below capacity that was doubled just over three years ago.

"Has there been a turnaround in construction demand? The answer is no," Sondhi told Reuters at JCB's headquarters at Ballabgarh in Haryana. "The sentiment is changing, but the situation on the ground has not changed."

The latest macroeconomic data provides scant evidence of anything changing fast for the better, with India on course to end the 2012-13 fiscal in March with its slowest growth in a decade at 5.0%.

Industrial output data released on Tuesday added to the gloom. Production unexpectedly shrank for a second straight month in December, weighed down by weak investment and consumer demand, casting doubt on Finance Minister P. Chidambaram's view that Asia's third largest economy is showing signs of recovery.

The index of industrial production (IIP) fell 0.6% annually in December, following a revised 0.8% drop in November. Output has grown in just three of the last nine months.

The output data follows even more chastening preliminary GDP estimates released last Thursday that showed annual growth would probably cool to 4.6% in the six months through March, down from 5.4% in the first half of the fiscal year.

The slowdown has left India a long way off the near double-digit growth it had hoped would become routine, given the need to raise the living standards of hundreds of millions of poor among its 1.2 billion people.

ALL GEARED UP, NO PLACE TO GO: Weak investment, now projected to hit at least a five-year low, lies at the heart of India's economic malaise, with some firms saddled with spare capacity built up in the expectation that the boom years of the early 2000s had further to run. — Reuters

IT dept’s CPC-TDS launched
NEW DELHI: Finance Minister P. Chidambaram said Saturday there was need to move towards a “technology driven” tax administration for tax compliance. He was speaking to reporters after inaugurating the income tax department’s Centralized Processing Cell for Tax Deducted at Source (CPC-TDS). "We’ll have to get each one of the 2.8 million tax deductees (under TDS). The tax amount will be credited to the government and refunds credited to the deductee. And this can be done only if we move to technology. The income tax department is moving towards IT. This will process TDS returns, capture massive data so that government gets revenue and taxpayer gets refund," he stated.