Factory PMI rises, input prices jump

India's manufacturing sector expanded at its fastest clip in three months in February as more new orders poured in, but input prices rose at a record pace, a survey showed on Tuesday.
The HSBC Markit Purchasing Managers' Index , based on a survey of around 500 companies, rose to 57.9 in February from 56.8 in January.
This was the 23rd consecutive month the key index of manufacturing in Asia's third largest economy has been above the 50 mark that divides growth from contraction.
"The momentum in India's manufacturing sector strengthened yet again in February, continuing the good start to the year," said Leif Eskesen, chief economist for India & ASEAN at HSBC.
"Output growth is holding up and the inflow of new orders is accelerating, holding promise of a strong momentum in output in the months ahead."
The new orders index rose for the third consecutive month to reach a seven-month high of 62.4 in February compared with 60.7 in the previous month.
However, growth in input prices accelerated at its fastest since data collection began in 2005, with the index rising for the eighth straight month.
"Manufacturers are facing ever steeper increases in input costs reflecting the tightness of labour markets and rising material costs, which will continue to add upward pressures on output prices," Eskesen added.
Even though the Reserve Bank of India (RBI) has raised its policy rates seven times since last March, it said last week that the balance of risks had tilted towards stronger inflation and it was ready to respond again if price pressures increased.
Oil prices rose to 2-½ year highs last week on concerns about supplies from the Middle East after uprisings in Libya slashed exports from North Africa, while food prices have also skyrocketed.
The RBI raised interest rates in late January by 25 basis points, as expected, to clamp down on resurgent inflation, warning higher food prices could become entrenched if steps to boost output are not taken.
The Indian economy grew at a slower-than-expected pace of 8.2 percent from a year earlier in the October-December quarter, compared with 8.9 percent in the previous quarter, government data on Monday showed.
Finance Minister Pranab Mukherjee presented his annual federal budget on Monday, saying the impression of policy drift in the scandal-tainted government was misplaced and that food inflation was still a major concern.
The government boosted spending on hundreds of millions of its poor in a budget gambling on brisk economic growth to cover the cost of appeasing voters angered by corruption scandals and stubbornly high inflation.
JITENDRA KUMAR SINGH
PGDM SEM-2

Income Tax limit raised to Rs 1.8 lakh

NEW DELHI: Finance minister Pranab Mukherjee on Monday proposed to raise the income tax exemption limit for general tax payers to Rs 1.80 lakh per annum from Rs 1.60 lakh at present and introduced a high new tax slab for senior citizens of 80 years and above.

Unveiling the Budget proposals for 2011-12 in the Lok Sabha, he also proposed to reduce the age limit for consideration as senior citizens from 65 years to 60.

Senior citizens will get tax exemption for income up to Rs 2.5 lakh, higher from Rs 2.4 lakh now.

As per the announcement, the increase in the income tax exemption limit for general tax payers (excluding women and senior citizens) to Rs 1.8 lakh per annum would translate into a benefit of Rs 2,000 for all tax payers.

 

NAME-DEEPAK KUMAR JHA

PG/10/06

PGDM(2010-12)

At present, the general tax payers earning more than Rs 1.6 lakhs per annum are required to pay income tax.

Introducing a new tax slab for very senior citizens (80 years and above), Mukherjee said, they will not have to pay any tax for annual income up to Rs 5 lakh.

IOC seeks fuel price hike, politics weighs

Indian Oil Corp, the country's biggest fuel retailer, said on Tuesday there was a need to raise petrol prices, a day after the budget failed to announce any measures to stem revenue losses of state oil firms.
Petrol prices in India are market-linked, but diesel, cooking gas and kerosene rates are set by the government, which partly compensates state oil firms for their losses when global crude oil prices increase.
Raising fuel prices is politically sensitive in India, with the government struggling to balance maintaining growth momentum and reining in inflation, among the highest of major Asian economies.
The ruling coalition also faces crucial state elections over the next year which also make it unattractive to raise fuel prices.
"I hope the (global crude oil) prices will come down," IOC Finance Director S.V. Narasimhan said.
Narasimhan refused to say by when the company could raise petrol prices. IOC has raised petrol prices at least nine times since state control on its pricing was lifted last June. The last hike was on Jan. 16.
IOC's daily revenue loss on fuel sales now stood at 2.16 billion rupees ($47.72 million), Narasimhan said, adding a desired increase in petrol prices would be 3.5-4 rupees a litre.
Petrol currently sells in Delhi for about 58 rupees a litre.
Oil firms had expected Monday's budget to at least cut customs and excise duties to cushion them against rising global oil prices, as continued unrest in the Middle East and North Africa threatens to further reduce crude supplies, despite Saudi Arabia ramping up output.
But the lack of support in the budget for oil firms has also fed speculation that a ministerial panel on fuel pricing will take up the issue of hiking prices soon.
While the oil and finance ministries have appeared to support an increase in prices, a final decision is often a political one that takes into account its impact on the support bases of the ruling Congress party and its government allies.
Gasoline and diesel have weights of 1.09 percent and 4.67 percent, respectively, in the wholesale price index (WPI), India's main inflation measure, and raising fuel prices has a knock-on effect as farmers and manufacturers pass costs along.
Narasimhan said current revenue loss on diesel stood at 11.16 rupees a litre, while on kerosene the loss is 23.55 rupees a liter. The loss on a cylinder of 14.2 kg cooking gas cylinder is 298 rupees.
JITENDRA KUMAR SINGH
PGDM SEM-2

Fiscal deficit target reachable with $100 oil - Ahluwalia

Montek Singh Ahluwalia, deputy chairman of the Planning Commission, said the new budget's target to slash the fiscal deficit to 4.6 percent of GDP, a goal many economists deride as optimistic, is achievable even if oil averages $100 a barrel for the year.
Ahluwalia also said no decision had been made on when to submit diesel prices to market forces, a long-delayed move that would ease government's subsidy burden but add to inflation and anger voters ahead of elections in five states.
On Monday, Finance Minister Pranab Mukherjee said India's economy would grow at about 9 percent in the fiscal year starting in April and the government would cut its fiscal deficit to 4.6 percent of GDP from 5.1 percent in the current year, a figure that was flattered by $23 billion in telecoms licence revenues.
"He has committed himself to a 4.6 percent fiscal deficit. In a way it does not matter how he achieves it. I mean, in the course of the year if things turn out to be different, and there are many things that could turn out to be different, he'll have to do something," Ahluwalia said on Tuesday.
"The nature of fiscal responsibility is not that I carefully calculate everything and give the right number. He just says, look, I am going to manage the economy so that I end the year with 4.6 percent. I think he is well within a reasonable margin of that," he told Reuters in an interview.
Monday's budget was greeted with scepticism by many observers worried about a potentially huge subsidy burden if global oil prices remain elevated and India enacts a costly new food security bill during the year.
Brent crude traded around $112 per barrel on Tuesday, down from close to $120 per barrel last week, its highest in more than two years, largely on fears that political upheaval in Libya would spread in the Middle East.
Some economists, meanwhile, expect India's economic growth to slow from the 8.6 percent it is on track to reach in the current fiscal year that ends on March 31.
"It will be difficult for the deficit targets to be met as expenditures have been under-budgeted and revenues have been over-budgeted," Goldman Sachs economists wrote after the budget.
"The expenditure targets are ambitious, especially on subsidies," they wrote, noting that oil subsidies in the next year's budget are 40 percent lower than the oil subsidies in the current year.
Ahluwalia, who along with Prime Minister Manmohan Singh was a key architect of India's economic liberalistion in 1991, said he expects the unrest in the Middle East to subside in the next month or six weeks, which would take pressure off crude prices.
"I think if oil prices remain at or just below $100 per barrel on average during the year, then I think he had made a fair amount of provision for petroleum subsidies," he said.
Last year, the government freed petrol to market pricing but it still sets prices for the much more widely used diesel, as well as cooking fuels.
A Congress government on the back foot over persistently high inflation and its handling of a spate of corruption scandals has little appetite to take politically unpopular decisions.
"The policy is diesel should also be adjusted. But you know the problem is this is a politically sensitive issue, so I think there's no clarity on that," Ahluwalia said.
"Deliberately, we've not indicated when the adjustment is going to be made. I think if oil prices had not shot up as much as they did, probably the original intention of decontrolling diesel in phases would have been implemented," he said.
JITENDRA KUMAR SINGH
PGDM-2

BSE Sensex extends gains to 3 pct; autos lead

Reuters) - The BSE Sensex extended gains to 3 percent on Tuesday, tracking firmer global markets and as a strong growth outlook for Asia's third-largest economy boosted sentiments.
Auto makers led the gains after top car makers Maruti Suzuki and Tata Motors posted a rise of 15.5 percent and 12 percent, respectively, in February sales.
The government's move to not raise excise duty on cars in the budget on Monday also lifted the sector.
At 1:49 p.m. (0819 GMT), the 30-share BSE index, or Sensex, was trading up 3.1 percent at 18,378.06 points, with all but one of its components advancing.
The 50-share NSE index was up 3.2 percent at 5,502.80 points.
(Reporting by Bharghavi Nagaraju; Editing by Aradhana Arav
JITENDRA KUMAR SINGH
PGDM-2

IMF warns sustained high oil prices would hit growth

International Monetary Fund warned on Monday that global economic growth could suffer if the price of oil stays at its current high level for an extended period.


Oil prices jumped toward $120 a barrel last week for the first time since 2008 as a revolt against Libyan leader Muammar Gaddafi has hit crude exports from the country, which is the world's 12th largest producer.
"I am concerned," said IMF chief Dominique Strauss-Kahn, during a visit to Panama. "The hike to something which is between $110 and $120 a barrel is something which may affect (growth) if it lasts too long."
At the same time, Strauss-Kahn said oil prices were not likely hitting growth yet. "We are not there today," he said.
Oil prices have eased in recent days, partly because top world exporter Saudi Arabia has promised to meet any shortages.
Crude oil shipments from Libya are at a virtual standstill, shipping sources said on Monday.
Gaddafi's forces have been trying for days to push back a revolt that has won over large parts of the military, ended his control over eastern Libya and is holding the government at bay in western cities near Tripoli.
PANAMA CREDIT?
Strauss-Kahn said Panama, seen as a safe bet for sovereign bond investors, could be included in the IMF's safety net for emerging markets, known as the Flexible Credit Line.
The IMF facility aims to be a backstop should investors sour on emerging markets or rush back into safe havens like U.S. Treasuries this year or next.
"There may be a high probability for Panama to qualify," Strauss-Kahn said, reiterating the IMF's policy that the credit is "really strictly limited to our members having the right policy in place."
Mexico qualified for an extension of its credit line from the Washington-based lender in January.
(Writing by Jason Lange and Robin Emmott; Editing by Gary Hill)

Name - Rakesh prasad
PGDM - 2nd sem

Union Budget 2011: Rs. 2,200 cr for boosting agri output

Aiming to control price rise in non-cereal food items, the government announced a budget outlay of Rs. 2,200 crore to boost production of vegetables, pulses, oilseeds, millets and fodder.
The government also decided to continue the existing two schemes -- one for Green Revolution in eastern states with an allocation of Rs. 400 crore and the other to promote pulses' output scheme with an outlay of Rs. 300 crore.
In his 2011-12 Budget speech, Finance Minister Pranab Mukherjee announced Rs. 300 crore each for new schemes to step up production of vegetables, oil palm, nutri-cereals, protein supplements and fodder.
"The recent spurt in food prices was driven by increase in prices of items like fruits and vegetables, milk, meat, poultry and fish, which account for more than 70 per cent of the WPI basket for primary food items.
Removal of production and distribution bottlenecks for these items will be the focus of my attention.

NAME-DEEPAK KUMAR JHA
PG/10/06
PGDM(2010-12)