Download government of india directorate general of supplies

GOVERNMENT OF INDIA
DIRECTORATE GENERAL OF SUPPLIES &DISPOSALS
JEEVAN TARA BUILDING, SANSAD MARG,
NEW DELHI - 110001
SUB: SUMMARY OF ECONOMIC INTELLIGENCE BULLETIN.
Economic Intelligence Bulletin includes abstracts of important economic/commercial/
technical development and reviews as reported in the issues of financial dailies. The
Bulletin pertains to the fortnight ending 15th February, 2015.
1.
PRICE TREND
1.117 PETROL, DIESEL PRICES DROP BY OVER RS. 2/L
Petrol and diesel prices fell again as the rout in the global oil market triggered the tenth
cut in fuel rates since August, pleasing consumers including voters in Delhi, who are
seeing a high-decibel duel between the BJP‟s Kiran Bedi and the Aam Aadmi party‟s
Arvind Kejriwal. Prices fell ironically at a time when global crude oil prices climbed
15% since Thursday to trade close to $57 per barrel after remaining below $50 for many
days. Prices rose as global oil majors such as BP and Chevron have announced cuts in
capital expenditure. However, state oil firms align local rates with the average global fuel
prices in the past fortnight. “International prices of both petrol and diesel have continued
to be on a downtrend and the INR-USD exchange rate has appreciated. The combined
impact of both these factors warrant a decrease in retail selling prices of both petrol and
diesel,” the country‟s top fuel retailer Indian Oil Corporation said in a statement. Petrol
prices fell for the tenth time since August, dropping Rs. 2.42 to Rs. 58.91 per litre in
Delhi, while diesel fell by Rs. 2.21 to Rs. 46.01. Retail prices of auto fuels were last cut
on January 17 by the same margin. The new rates would be effective from Tuesday
midnight. Oil prices have soared since the end of last week, triggering speculation that
the fall in crude prices may have ended and this may be the trend of reversal.
(THE ECONOMIC TIMES 4TH FEB, 2015)
1.118 CRUDE PRICE FALL PULLS DOWN GUAR GUM
Sliding crude oil prices are signalling an end to the guar gum boom, which started a
decade age on the back of a height-ened shale gas exploration drive in the US. Prices of
guar seed spirallled down to nearly Rs. 4,200 a quintal in January, the lowest since
December 2013, against a peak of Rs. 30,000 a quintal in March 2012. In past six
months, the price of guar seed has come down by 30 per cent, from nearly Rs. 6,500 a
quintal. Gum prices have fallen to their lowest since June 2011, to Rs. 10,000 from its
peak in March 2012 of Rs. 90,000 in Jodhpur spot mandi. In 2014, the total production of
guar seed was estimated to be 3.4 million tonnes (mt), or nearly 34 million bags. Of this,
at present, nearly 15 million bags are lying in local warehouses, against seven million last
year at the same time, according to Prajapat. A key reason for the crash in guar gum
prices is the fall in prices of crude oil especially West Texas Intermediate crude, from
around $110 a barrel to close to $50 a barrel in the last seven months, which led to a
petroleum production cut. Guar gum was used as smoothening material in exploration.
(BUSINESS STANDARD 5TH FEB , 2015)
1.119 GOLD DOWN RS. 200 ON GLOBAL CUES, LOW DEMAND
Gold prices fell sharply by Rs. 200 to Rs. 27,630 per 10 gm at the bullion market on
Thursday, extending Wednesday‟s losses, tracking a weak trend overseas and easing
demand from jewellers and retailers. Silver also drifted by Rs. 450 to Rs. 37,650 per kg
on reduced offtake by industrial units and coinmakers. Traders said a weak global trend
where gold fell to almost four-week low on strengthening dollar and prospects for higher
US interest rates reducing its appeal, mainly kept pressure on prices. Globally, gold in
New York fell 1% to $1,218.20 an ounce. Silver slid 0.7% to $16.76 an ounce in
Wednesday‟s trade.
(THE FINANCIAL EXPRESS 13th FEB, 2015)
1.120 INDIA’S GOLD DEMAND DIPS 14% IN 2014 DISPITE RECORD JEWELLERY
SALES
Indian gold demand dropped 14% year-on-year to 842.7 tonnes in 2014 – far worse than
a 4% drop globally – despite a spurt in demand for jewellery volumes to record levels,
mainly due to an unfavourable base, according to the World Gold Council (WGC),
reports fe Bureau in New Delhi. In value term, overall demand touched Rs. 2,08,979.2
crore in 2014; down 19% from a year ago, it said. WGC managing director (India) Somasundaram PR told FE that the slump in demand has been caused primarily by excessive
purchases of bars and coins in 2013. He projected gold demand to rise to anywhere
between 900 and 1,000 tonnes this year. However, buyers who had purchased gold coins
and bars extensively in 2013 and deferred purchases last year are expected to be back in
the market in 2015, he said, adding that gold demand would get a boost from that.
(THE FINANCIAL EXPRESS 13th FEB, 2015)
2
FISCAL POLICY
2.56
FII INFLOWS HIT 6-MONTH HIGH IN JAN
Overseas investors pumped in a staggering Rs. 33,688 crore in capital markets last
month, making it the highest investment in six months owing to easing inflation and a
rate cut by Reserve Bank of India(RBI). Foreign Institutional Investors (Flls) brought
shares worth Rs 12,919 crore ($2.1 billion) in January while they bought debt worth Rs.
20,769 crore ($3.34 billion), taking the total investment to Rs. 33,688 crore ($5.45
billion), latest data with Central Depository Services (CDSL) show. This is the highest
investment since July when overseas investors had poured in Rs.36, 046. Market analysts
attributed the huge inflow to low inflation levels and rate cut by RBI. The central bank on
January 14 surprised market participants with a 25-basis-point rate cut. Besides, foreign
investors are betting on Indian capital markets on expectations of more rate cuts by the
central bank. In 2014, the net investment by overseas investors into the debt markets was
Rs. 1.16 lakh crore, while in equilities it stood at Rs 98,150 crore. Overall, net investors
by foreign investors stood at Rs 2.58 lakh crore in 2014.
(THE FINANCIAL EXPRESS 2ND FEB , 2015)
2.57
FY15 GDP PROJECTIONS PUT STRESS ON FISCAL DEFICIT TARGET
The gross domestic product (GDP) growth projections for 2014-15, based on the gross
value added (GVA) methodology, will put some pressure on Finance Minister Arun
Jaitley‟s already ambitious fiscal deficit target of 4.1 per cent of GDP. Data released by
the Central Statistics Office on Monday projected the economy to grow 7.4 per cent, as
compared with 6.9 per cent in 2013-14, and the 5.5-6 per cent projected for the current
financial year under the old methodology. However, at current prices, the GDP in
absolute terms has been estimated at Rs. 126.54 lakh crore for 2014-15, slightly lower
than Rs. 128.8 lakh-crore that the finance ministry estimated in the last Budget. This
means if the fiscal deficit target of 4.1 per cent of GDP is maintained, in absolute terms,
the gap between total expenses and receipts will be down from Rs. 5.31 lakh-crore to
Rs.5.18 lakh-crore, thus reducing the fiscal breathing room for Jaitley and his team.
(BUSINESS STANDARD 10TH FEB., 2015)
2.58
RBI’S NINE-MONTH MOP-UP OF $29 BN BIGGEST SINCE 2007
Perhaps taking a lesson from past experience, the Reserve Bank of India has mopped up
almost the entire $32-billion net dollar inflow into domestic debt market during AprilDecember, data show. The RBI bought a massive $29.2 billion from the spot exchange
rate market during April-December, and its outstanding position in the forward market
was $6.85 billion. In all, the RBI has bought a whopping $75 billion from the forex
market. The RBI‟s interventions have kept the rupee from appreciating sharply even as
the debt market received huge inflows. The rupee closed at 62.19/$ on Tuesday and has
appreciated just 3.84% so far in FY15. The spot market intervention this time is the
highest dollar purchase during the first nine months of a financial year by the RBI since
2007-2008. The RBI had to face a and are considered “hot money” as investors chasing
yields could quickly reverse their purchases during unflattering circumstances. Through
its aggressively dollar purchases, the RBI has shored up the country‟s forex reserves to an
all-time high of $328 billion as of January end.
(THE FINANCIAL EXPRESS 11th FEB, 2015)
2.59
‘FOREX KITTY HIGH, BUT MAY NOT CUSHION EXTREME VOLATILITY’
The RBI may have shored up the country‟s reserves to an all-time high by aggressively
mopping up dollars, but it is not ready to rest easy, according to deputy governor HR
Khan. “No amount of foreign exchange reserve can cushion when there is extreme
volatility and external shocks,” said Khan during an event on Tuesday. India‟s foreign
exchange reserves touched an all-time high of $328 billion as of January 30 on the back
of dollar purchases by the RBI. The central bank has purchased a massive $75 billion
from the spot and forward market during April-December. The swell in the forex kitty
has dispelled concerns over the country‟s external debt and the low import cover. At
current levels, reserves provide around eight months of import cover. Khan said the
macroeconomic vulnerabilities of the country has reduced considerably given the
improvement in GDP, current account deficit, the fall in inflation and the increase in
reserves.
(THE FINANCIAL EXPRESS 11TH FEB, 2015)
2.60
FIPB TO TAKE UP 36 FDI PROPOSALS ON FEB 17
An inter-ministerial panel on February 17 will take up 36 foreign direct investment (FDI)
proposals, including that of Quikjet Cargo Airlines and Holcim (India). The finance
ministry said the foreign Direct Investment Promotion Board (FIPB), will meet on
Tuesday to take up the proposals. Other proposals on the agenda include that of India
Value Fund IV, O-Zone Networks, INX Music, SNC- Lavalin Mauritius, Thornton
Tomasetti and CLSA India.
(THE FINANCIAL EXPRESS 12TH FEB, 2015)
3
IMPORT AND EXPORT POLICY
3.4
GOVT MAY COSIDER IMPORT DUTY CUT ON GOLD IN BUDGET
With decline in gold imports, the government may consider 2-4% reduction in imports
duty on it in the Budget, a move that could help boost exports and manufacturing of gems
and jewellery, sources said. The industry has already sought reduction in customs duty on
gold to 2%, from 10% now. “Gold imports are declining continuously. Gems and
jewellery sector contributes significantly in total exports. On account of this, we are
expecting a cut in import duty. Cut it is up to the finance ministry to take the final
decision in the Budget,” said a source. The government may consider cutting the duty by
2-4% sources said. Gold imports in December fell sharply to 39 tonne, from 152 tonne in
November. Exports of gems and jewellery too declined by 1.2% year-on-year to $2.66
billion in December. The sector is one of the 25 thrust areas under „Make in
India‟programme. All India gems and Jewellery Federation has suggested customs duty
be reduced to check smuggling.
(THE FINANCIAL EXPRESS 6TH FEB, 2015)
4.
MISCELLANEOUS
4.73
GREEN NOD FOR PROJECTS WORTH RS. 6.31 LAKH CRORE DURING
JUNE-DEC 2014
To fast track industrial activity, the government has granted environmental clearance to
190 projects worth an estimated Rs. 6.31 lakh crore across sectors such as mining and
steel during June-December 2014. The focus on faster clearance follows concerns raised
by the industry that such approvals were hard to come by during the previous UPA rule,
thus creating bottlenecks. A source said the projects that have been granted approvals
belong to both public and private sector companies and the grants are subject to “
mitigation measures”. “Environment clearances have been given for 190-odd projects
worth Rs. 6.31 lakh crore during the June-December period of 2014,”he said. Of the
projects, the environment ministry has cleared 37 non-coal mining projects worth Rs 4.49
lakh crore, 48 infrastructure projects worth Rs 95,000 crore and 69 industrial projects
worth Rs 40,600 crore. That apart, environment clearances have been given to 10 thermal
projects worth Rs 38,000 crore and 23 coal mining projects worth Rs 8,900 crore, one
river valley project worth Rs 238 crore since the government came to power on May 26.
(THE FINANCIAL EXPRESS, 2ND FEB, 2015)
4.74
CORE SECTOR GROWTH SLOWS TO 3-MONTH LOW OF 2.4% IN DEC
Lower production of crude oil, natural gas, fertilizer and steel brought down output
growth in eight crore sector industries to a three-month low of 2.4% in December 2014.
Core industries, which account for more than a third of industrial output, had grown 4%
in December 2013. This sector, which also includes coal, refinery products, cement and
electricity, had recorded 4.4% expansion in the first three quarters of 2014-15, slightly
faster than the 4.1% it recorded in the same period last fiscal. Recent data showed
industrial production growth recording a five-month high of 3.8% in November due to
improvement in manufacturing and mining sectors as well as better offtake of capital
goods. Slower core sector growth in December compares with 6.7% growth in
November. Production of crude oil fell by 1.4% natural gas by 3.5%, fertiliser by 1.6%
and steel by 2.4% in December 2014. Growth in electricity generation was slower at
3.7% last December from 7.6% in December 2013. However, coal production grew by
7.5% refinery products by 6.1% and cement output by 3.8% in the month under review.
(THE FINANCIAL EXPRESS 03RD FEB, 2015)
4.75
FY15 GROWTH ESTIMATE AT 4-YEAR HIGH OF 7.4%
The government on Monday estimated India‟s economic growth this financial year at 7.4
per cent, against 6.9 per cent in 2013-14, as the country changed its definition of gross
domestic product (GDP) and the base year for calculating it. The estimated growth for
2014-15 is the same as China‟s growth for 2014. Earlier, both the International Monetary
Fund and the World Bank had said India‟s growth would exceed China‟s by 2016-17.
According to data released earlier, GDP growth stood at 5.7 per cent in the first quarter of
2014-15 and 5.3 per cent in the second. However, according to the new data, the first
quarter recorded 6.5 per cent growth, the second 8.2 per cent and the third 7.5 per cent
(agricultural output contracted during the third quarter). Had the government not
increased its spending, growth in the third quarter would have been lower, though high
spending would have exerted pressure on the fiscal deficit front. Going by a like-for-like
comparison, the projected growth for 2014-15 stands at a four-year high, growth in 201011 was 10.3 per cent.
( BUSINESS STANDARD 10TH FEB, 2015)
4.76
RUPEE ENDS AT NEARLY 1-MONTH LOW OF 62.17
The rupee slipped past the 62/$ mark to nearly a month low on Monday after offshore
dollar/rupee rates rose on worries of an early tightening of policy by the US Federal
Reserve based on a strong US payroll data. The currency weakened 0.75% to close at
62.17/$ on Monday, down from 61.70/$ on Friday. The US added 257,000 jobs in
January, taking the tally of payroll accretion in November-January to a million, which is
the biggest three month increase in 17 years. The dollar strengthened across currencies
after the jobs data and the one-month dollar/rupee non-deliverable forward rose by about
30 paise in the offshore market to 62.36/$ after the data release late Friday. On Monday,
the NDF rate was trading around 62.30/$. The dollar index, which measures the US
currency‟s strength against major currencies, was trading around 94.40 on Monday. On
Friday, the dollar index had gained 1.2% in New York trade. Currency dealers said that
barring overseas news or data that could indicate tightening by the Fed, the rupee is likely
to gain on the back of strong dollar inflows into debt. However, most market participants
expect the rupee to trade in a narrow band of 61.80-62.40/$ in the coming days as any
large dollar inflow is likely to be absorbed by the Reserve Bank of India. The local
currency has gained 1.35% so far in 2015 on the back of dollar inflows of $7.3 billion
from foreign institutional investors into local bonds and shares.
(THE FINANCIAL EXPRESS 10TH FEB, 2015)
4.77
‘GDP FORECAST NOT IN SYNC WITH TAX COLLECTION, CREDIT
GROWTH’
Raising questions about the new methodology pushing up the GDP forecast to 7.4% for
the current fiscal, economists have said it is not in sync with key parameters such as tax
collections and credit growth. “The (GDP) data released yesterday has only added to the
confusion that already exists‟” said a report by HDFC Bank. Based on the new series, the
Central Statistics Office on Monday projected an economic growth rate of 7.4% for 201415, up from 6.9% a year ago.
(THE FINANCIAL EXPRESS 11TH FEB, 2015)
4.78
RECASTS WORTH RS.51,250 CRORE APPROVED IN FY15 SO FAR
In an indication of the counting stress for corporate India, lenders have approved recast of
46 cases worth Rs. 51,250 crore through the corporate debt restructuring (CDR)
mechanism in the first 10 months of FY15, sources told FE. In January, the number of
restructured cases stood at two with a total loan value of Rs.1,040 crore, probably
because many of the cases are being decided at the Joint Lenders Forum (JLF). The
largest case that was referred to the cell in January was Pipavas Defence and Offshore
Engineering worth Rs.7,600 crore. Meanwhile, bankers have referred 26 cases worth
Rs29,750 crore in April-January period, with two cases worth Rs7,980 crore referred in
January. Though the pace of referred as well as approvals appeared somewhat muted,
lenders said that they expect referrals to pick up this quarter as banks would not be able
to classify restructured assets as standard from FY16. In the nine months to December
2013, the cell had received recast requests for 84 cases amounting to Rs.1.09 lakh crore
and had approved 42 cases worth Rs.60,285 crore. January saw approvals of cases like
Tulsyan NEC (Rs.750 crore) and Tara Health Foods (Rs.300 crore). Meanwhile, loans to
7companies like Pipavav Defence and Offshore Engineering (Rs.7,600 crore) and Varia
Engineering (Rs.380 crore) were referred for recast in January. The number of cases
referred to the CDR cell had fallen since the June quarter (April-June FY15) with only
two cases referred against 28 in the same period last year. Subsequently, the amount of
loan referred in Q2FY15 stood at Rs.13,300 crore compared to Rs.24,859 crore in the
comparable quarter previous year. Owing to guidelines by RBI, JLFs were mandated to
find a corrective action plan (CAP) for a company which has repayment overdues of
more than 60 days.
(THE FINANCIAL EXPRESS 11TH FEB, 2015)
4.79
COTTON OUTPUT AT 397 LAKH BALES IN 2014-15: CAI
Total cotton production is estimated at 397 lakh bales for the ongoing crop seasons -which began on October 1, 2014 – due to a decline in productivity in the central region
the Cotton Association of India (CAI) said on Wednesday. The total cotton production
stood at 407.25 lakh bales (of 170 kg each) during the 2013-14 season, according CAI
data. Total crop in the central region in January is estimated at 219.25 lakh bales
compared to 235.75 lakh bales last year. The central region includes Gujarat, MP and
Maharashtra.
(THE FINANCIAL EXPRESS 12TH FEB, 2015)
4.80
INDUSTRIAL PRODUCTION RISES ONLY 1.7% IN DEC
Despite India‟s economic growth receiving a major boost after a revision in the definition
of gross domestic product (GDP) and the base year for calculating it, concern about
industrial production continues, going by official data released on Thursday. Adding to
worries, Consumer Price Index (CPI)-based inflation rose in January compared to
December, another set of data showed. Industrial growth slowed to 1.7 per cent in
December from 3.9 per cent in November, owing to low consumer durable goods and
mining output, while CPI inflation rose to 5.11 per cent in January from 4.28 per cent in
December. The Reserve Bank of India has set a target of restricting inflation to eight per
cent by January 2015 and six per cent in January 2016. Thursday‟s IIP data might
dampen the euphoria over the 7.4 per cent growth in India‟s GDP for 2014-15, as
projected by advance estimates. As was the case with GDP, the CPI also saw a revision in
base year – from 2010 to 2012. Along with that, the weight of items was also tweaked on
the basis of the consumer expenditure survey for 2011-12, against that for 2004-05 used
so far. According to the previous base year and weight, inflation stood at five per cent in
December. For the Index of Industrial Production (IIP), the base year was maintained at
2004-05. As such, it might be somewhat difficult to ascertain the impact of the index
reading on GDP, though experts say it will impact GDP growth for the December 2014
quarter (7.3 per cent). In the December quarter, industrial production was muted,
increasing only 0.46 per cent, largely because IIP had contracted 4.2 per cent in October.
In the GDP data for 2014-15, industrial growth of 3.85 per cent for the third quarter was
considered. National Statistical Commission Chairman Pronab Sen said, ïts (IIP‟s) impact
on GDP calculations would be a little bit lower.”Data on GDP growth for the December
quarter were released before the IIP numbers were announced, a first.
(BUSINESS STANDARD 13TH FEB, 2015)