The Tribune, Chandigarh, India

	RBI may sweeten rate cut with lower cash reserve ratio Mumbai/Bangalore, May 1 The Reserve Bank of India may sweeten its expected 25 basis point interest rate cut on Friday with a similar reduction in the cash reserve ratio to ease tight market liquidity conditions as increasingly benign inflation gives it room to manoeuvre. A slowdown in inflation, economic growth languishing at a decade-low 5% and expectations of a lower current account deficit thanks to cooling global commodity prices have also spurred expectations for less hawkish guidance from RBI governor Duvvuri Subbarao. The majority view remains for the central bank to leave the cash reserve ratio unchanged at 4 percent, the lowest since 1976, but some in the market said it may spring a surprise to prod banks to pass along interest rate cuts. Liquidity conditions have still not improved and so the RBI can do a surprise CRR cut to be a bit more forceful on banks to ensure transmission," said Abheek Barua, chief economist at HDFC Bank, who still expects the RBI to keep the CRR on hold. The central bank's monetary transmission — the impact of its rate moves on the economy — has been hamstrung by tight funds in the banking system, which has kept banks' cost of deposits high and prevented them from cutting lending rates. Credit growth at banks touched a more-than three-year low of 13.9% in early April as companies shelved project plans, consumers refrained from big purchases and lenders were wary of rising bad loans in a slowing economic cycle. India's current account deficit touched a record-high 6.7% of GDP in the December quarter, prompting Subbarao to warn in March that there was "quite little" room for further policy easing. However, the current account deficit is likely to ease to about 4.4% in the March quarter on higher exports and easing gold imports, according to a Reuters poll, still well above the long-term average of 1.5% but headed in the right direction. Finance Minister P. Chidambaram defied expectations by cutting the country's fiscal deficit to 5.1% of GDP in the just-ended fiscal year, and aims to lower that to 4.8% in the current year, also giving the RBI room for easing. "The second-order impact of a lower fiscal deficit will create room for more savings, help in bringing down inflation and in turn reduce demand for imported gold and cool off current account deficit. This will give RBI some space to sound neutral to hawkish in its rhetoric," said Rahul Bajoria, regional economist at Barclays Capital. Headline inflation fell to its lowest in more than three years to 5.96% in March, below the RBI's own 6.8% projection, thanks to slow manufacturing inflation. A Reuters poll last week showed that while 37 of 42 economists expect a repo rate cut of 25 basis points to 7.25%, the lowest since 2011, only 12 expected the RBI to cut the CRR. While the RBI cut the repo rate by a combined 100 basis points in the fiscal year that ended in March, most banks have lowered their base lending rates by just 25 basis points, which has exacerbated sluggish growth. — Reuters 0.25% Reduction in LENDING rate likely: RBS The Reserve Bank is likely to reduce the short-term lending rate by 0.25 percentage points in its monetary policy on Friday, as per a survey conducted by RBS. "More than 80% of the respondents expect at least 25 basis points (0.25 per cent) cut in the repo rate in the upcoming policy," RBS India MD & head of markets Gyan Harlalka told reporters on Tuesday. He added some participants even expect a 0.50% reduction in the repo rate in the annual policy and expect the easing cycle to continue in the current year. On a possible reduction in the cash reserve ratio (CRR), the survey pointed out that market participants are evenly split between 25 bps cut in CRR and no cut. However, it noted that CRR is likely to be reduced by 25 basis points by December. On the rupee, the survey said the domestic currency is likely to trade at 53.50 to the dollar by December. "More than 70% of our respondents believe that the rupee will trade in the range of 52-55 to the dollar till December," the survey said. On the 10-year G-secs, the survey said the market expects the benchmark bonds to trade between 6.65% 8% by December with the average at 7.37%. — PTI
	Indonesia pips India as most optimistic market London, May 1 Indonesia overtook India as the most optimistic consumer market globally, according to a survey by global information and insights company Nielsen. Japan, where the central bank has aggressively boosted economic stimulus, reported its highest consumer confidence score since 2006 although Japanese were still very cautious about the outlook. Global consumer confidence rose in the first quarter, with a marked increase in sentiment in the United States, Japan and northern Europe, the survey showed. Consumers in Europe's south, where austerity imposed to tackle the region's debt crisis has helped push unemployment to record levels, remained among the most pessimistic. Confidence improved in 60% of markets globally, compared to only 33% in the fourth quarter of last year. By region, consumers in North America were most upbeat about their spending intentions for the next 12 months, with 42% of respondents there saying they planned to spend on discretionary items during the year. That was much higher than the North American average of 33% over the past three years and compared with 39% in the Asia Pacific region. Canadians were in the top 10 most optimistic consumers in the latest poll but Nielsen was cautious about the outlook for consumers in the United States. "Americans are in phase two of the economic recovery, however for many it just doesn't feel that way," said Nielsen's senior vice president, Global Consumer Insights, James Russo. "Three years of strong gains in the equity market are balanced by five years of declining median household incomes, which highlights the economic divide and precarious state of the recovery." The Nielsen Global Consumer Confidence Index rose 2 points in the first quarter to 93, after dipping 1 point in the previous quarter. A reading below 100 signals consumers are pessimistic about the outlook. Portugal was the most pessimistic market, followed by Greece, although Greece's score improved from a quarter before. "We suspect that fears of the European debt crisis spreading beyond recession-stricken southern European countries may have eased in the first quarter," said Venkatesh Bala, chief economist at The Cambridge Group, a part of Nielsen. Confidence fell in parts of the Middle East and Africa and dipped in Latin America. Egypt's reading plunged 20 points to 74 while in Saudi Arabia it fell by 17 points to 95. The Nielsen survey was conducted between Feb 18 and March 8 and covered more than 29,000 online consumers across 58 markets. — Reuters Indian consumer confidence drops in first quarter: Nielsen Indian consumer confidence dropped in the first quarter of 2013 to become the second after Indonesia due to the "environment around them", according to a survey by market insights and information provider Nielsen. According to the survey, Indian consumer confidence index dropped by one point to 120 in the first quarter of 2013 after topping the global list at 121 in fourth quarter of 2012. "The past year has seen shifting sentiment on confidence, where consumers are feeling good about themselves, but not the environment around them," Nielsen India President Piyush Mathur said in a statement. He said the finding highlighted a contradictory nature of the urban Indian consumer. "On one hand (Indian consumers are) cautious about the state of the economy, and middling company performance, but at the same time (they are) indicating a higher discretionary spending for the year," Mathur added. The Nielsen Global Survey of Consumer Confidence and Spending Intentions measures consumer confidence, major concerns, and spending intentions among more than 29,000 respondents with Internet access in 58 countries. — PTI
	Diesel underrecovery falls sharply Sanjeev Sharma/TNS New Delhi, May 1 The continuing fall in global crude oil prices spells good news for both the government and consumers as the underrecovery on diesel has dropped sharply in the last fortnight. The underrecovery on diesel for the first fortnight of May declined to Rs 3.80 a litre as against Rs 6.42 per litre during the second fortnight of April 2013. This major fall in diesel prices has led to no increase in the proposed monthly increase of 40-50 paisa on diesel. The government which was seeking to bridge the large under-recovery of almost Rs 10 a litre at the end of last year will now save on subsidy without having to raise prices. The fall in prices while helping to ease inflation will also provide relief to the household budgets. Diesel had been an area of big concern as the bulk of the subsidy was going into this account as its consumption is much higher than petrol. Diesel is widely used in public transport, agriculture and industry. While petrol is already market linked, LPG subsidy has already been capped at 9 cylinders per year and bulk sale of diesel to industry and large consumers like defence and railways is now at market prices. It seems now the burgeoning oil subsidy bill will come down this year helping to contain the fiscal deficit. On Tuesday, petrol prices were cut by Rs 3 to pass on the drop in global oil prices. In the case of kerosene and domestic LPG, underrecoveries for the month of May 2013 fall to Rs 27.93 per litre and Rs 378.38 per cylinder respectively. Oil companies are incurring daily underrecovery of about Rs 256 crore on the sale of diesel, kerosene and domestic LPG. This was Rs 348 crore per day for the previous fortnight. However, in the fiscal ended March 2013 the subsidy burden and underrecoveries were very high. Oil companies reported Rs 1.61 lakh crore as gross underrecoveries, significantly more than the under-recovery of Rs 1.38 lakh crore during the previous fiscal.
	Unilever-HUL deal 5th largest inbound M&A on record New Delhi, May 1 Unilever Plc's US $5.4 billion bid for a 23 per cent stake in Hindustan Unilever is the largest Asia Pacific cross border inbound merger and acquisition deal so far this year and is the fifth largest India Inbound M&A transaction on record till date. According to global deal tracking firm Dealogic, Unilever is the the fifth largest India Inbound M&A transaction on record, the largest being, Vodafone's 67 per cent stake acquisition in the Hutchison-Essar Ltd from Hong Kong- based Hutchison Group in 2007. Moreover, the Unilever deal is the second largest Asia (ex-Japan) targeted transaction in 2013, behind CP All plc's $6.6 billion takeover bid for Siam Makro pcl, announced on April 23. On April 30, Anglo-Dutch consumer goods giant Unilever Plc will spend $5.4 billion (over Rs 29,380 crore) to hike stake in its Indian arm Hindustan Unilever to 75 per cent through an open offer. Unilever will pay Rs 600 a share in an open offer to raise its stake in Hindustan Unilever to 75 per cent from the current 52.48 per cent. Some of the major inbound deals — wherein a foreign company or its subsidiary had acquired an Indian entity — in the past, includes BP's $9 billion acquisition of Reliance Industries' oil & gas assets and the acquisition of Cairn India by NRI billionaire Anil Agarwal led-Vedanta Resources for over $8 billion. The United Kingdom has been one of the top acquirers of Indian assets over the years as another most prominent inbound deal also involved a UK entity — Vodafone Group. Other key inbound transactions include Japanese drug major Daiichi Sankyo Company's acquisition of majority stake in Ranbaxy Laboratories Ltd for up to $4.6 billion and US-based Abbott's acquisition of Piramal Healthcare's domestic formulation business for $3.72 billion. — PTI Unilever defies buyback vigilantes Unilever is breaking some of the basic rules of corporate finance. Investors, being keen on financial logic, aren't impressed. The Anglo-Dutch consumer goods giant is offering to pay $5.4 billion for a 22% stake in Hindustan Unilever Ltd, lifting its holding in its Indian subsidiary to 75% The first rule violation is to offer a premium for additional shares in a majority-owned business. But Unilever had no real choice, since Indian stock market rules mandate a minimum price in such situations. The high price exacerbates the second violation — buying expensive shares in another company rather than buying back its own cheaper stock. Unilever trades on a forward price-earnings multiple of 20. Its bid for Hindustan Unilever values the stock at 34 times forecast earnings. The high price exacerbates the second violation - buying expensive shares in another company rather than buying back its own cheaper stock. — Reuters
	Govt cuts subsidy on NPK fertilisers Tribune News Service New Delhi, May 1 The cabinet on Wednesday slashed subsidies on nitrogen, phosphate, potassium (NPK) fertilizers in view of falling global prices. The move is expected to save the government around Rs 5,000 crore and also rein in erring fertilizer firms, which are not passing on the benefits of declining global prices to farmers. However, even though the government insists that, despite reduced subsidy, the MRP of key fertilizers like di-ammonium phosphate (DAP) and muriate of potash (MoP) would still come down by Rs 1,500 and Rs 1,000 per tonne, respectively, farmers have refused to buy the argument. Reiterating their long standing demand for direct subsidy benefits, they have asserted the only beneficiaries would be the companies importing raw materials from outside. The government, however, expects the MRP of DAP and MoP to come down by Rs 1,500 and Rs 1,000 per tonne, respectively, after implementation of the new rates.
	Gold coins to attract tax collected at source Tribune News Service New Delhi, May 1 Gold coins have been brought under the ambit of tax collected at source in the Finance Bill, 2013. Currently, sale in cash of bullion (excluding coin or any other article weighing 10 grams or less) in excess of Rs 200,000 or jewellery in excess of Rs 500,000 is subject to tax collected at source at the rate of one per cent. As coins were neither included in bullion nor in jewellery, therefore, coins, even when amounting to more than Rs 2 lakh in value, were being sold in cash without tax collected at source, according to a finance ministry clarification. The Finance Bill, 2013 proposes to delete exclusion of coins and articles weighing 10 grams or less from bullion. Hence, the sale of bullion (including coins and articles) in cash in excess of Rs 2 lakh and sale of jewellery in cash in excess of Rs 5 lakh shall be subject to tax collected at source. This is not a new levy of taxes but continuation of the old levy except withdrawal of exemption in the case of coins weighing 10 grams or less.
	Trouble brewing at Suzuki bike plant Tribune News Service Gurgaon, May 1 The management and workers of the Suzuki Motorcycle India Pvt Ltd plant in Gurgaon seem to be heading for a showdown in view of the tense situation prevailing at the plant for the past few days. The workers have been demanding the reinstatement of their union general secretary Avinash and another worker who had been suspended by the company management in February. The plant employs nearly 1,200 workers. The workers have boycotted the lunch provided to them on subsidized rates. Apprehending labour trouble, the company’s management has got nearly 50 police personnel deployed at the plant to prevent any untoward incident. The workers’ union president, Anil Kumar, claimed he had also been suspended, but had joined duty recently. “The management wants to suppress the union members and has not reinstated our general secretary and another worker despite repeated requests. They’ve also threatened us with police action and even jail if we don’t bow to their diktat,” he alleged. On the other hand, company vice-president (HR) Anil Munjal asserted the workers, not the management, had been trying to build up pressure to get their demands fulfilled. “We’re constantly trying to persuade the workers to maintain peace and order at the plant, but they are adamant on their stance”, he said.