Friday, October 30, 2009
Tuesday, April 21, 2009
RBI Credit Policy
The Reserve Bank of India (RBI) has cut repo rate and reverse repo rate by 25 basis points. RBI left the cash reserve ratio (CRR) unchanged.
Key Highlights
The LAF Repo changed from 5.00% to 4.75% with immediate effect.
LAF Reverse Repo changed to 3.50% and 3.25% with immediate effect.
The Cash Reserve Ratio maintained at 5.00%.
The Bank Rate too left unchanged at 6.00%.
Real GDP growth target in 2008-09 revised downwards to 6.5-6.7%. FY10 GDP expected at 6%.
Year-end inflation target for FY10 revised to 4.00%
Money supply growth for FY10 revised downwards from FY09 to 17.0%.
Aggregate deposits growth and non-food credit growth down for FY10 compared to last fiscal.
Strong moral suasion for banks to lower lending rate.
Bottomline:
RBI maintains a dovish stance with a significantly low GDP estimate for FY10. This token rate cut of 25 bps is definitely not the last of the rate cut and we expect further rate cuts in coming months as and when required.
RBI strongly feels that ‘there is scope for overall interest rate structure to move down’. The present rate cut is taken to reinforce this process. So, expect both deposit & lending rates to come down. Even though RBI wants to expand flow of credit to productive sectors to boost growth, it also cautions banks on monitoring loan portfolios to maintain asset quality.
RBI is committed to conduct large govt borrowings in a smooth manner through tenure management, OMO and MSS unwinding. For 1H FY10, the OMO purchases and MSS unwinding will add primary liquidity of about Rs.1,20,000 cr that is equivalent to a CRR cut of 3.0%. We expect RBI to assume bigger role. A positive for bond market.
Various new market initiatives (like, STRIPS, Separate Trading for Registered Interest and Principal of Securities, to be launched during the current financial year, new multi-modal settlement mechanism through commercial banks only available for MFs will be extended to insurance companies, pension funds and co-operative banks) will be welcomed by the market.
Friday, April 3, 2009
Sunday, March 29, 2009
Tata AIG Life InvestAssure Apex --- Get Highest NAV Even If Market Comes Down
Key Benefits:
o Guaranteed returns based on Highest NAV (recorded on 100 reset dates)
o Payment term of 3 years and life cover for 10 years
o Flexibility to reduce premiums from 2nd year onwards*
o Choose your coverage amount between 5 times and 60 times the annualized premium.
o Avail tax benefits under section 80 C for premiums paid and under section 10(10D) for maturity
* Subject to minimum premium annualized of Rs. 90,000; from second year onwards
o Guaranteed returns based on Highest NAV (recorded on 100 reset dates)
o Payment term of 3 years and life cover for 10 years
o Flexibility to reduce premiums from 2nd year onwards*
o Choose your coverage amount between 5 times and 60 times the annualized premium.
o Avail tax benefits under section 80 C for premiums paid and under section 10(10D) for maturity
* Subject to minimum premium annualized of Rs. 90,000; from second year onwards
| Age at entry | 18 years to 70 years |
| Maturity Age | 80 years |
| Sum Assured | Between 5 times and 60 times the Annualized premiums |
| Policy term/ Premium Payment Term | 10 years/ 3 years respectively (Annual Premium mode only) |
| Guaranteed Benefits | Highest Net Asset Value (NAV)** recorded upon 100 resets dates |
| Death Payout | Fund Value or Sum Assured net of all deductible*** partial withdrawals, whichever is higher |
| Maturity Benefit | Higher of fund value (at current unit prices) OR Guaranteed Maturity Unit price multiplied by the number of units in the Apex Return Lock in fund. |
| Riders | Tata AIG Life Critical illness (Lumpsum Benefit) rider (UIN: 110C012V01) Tata AIG Life Accidental Death Benefit Rider (UIN: 110C003V01) Tata AIG Life Accidental Death & Dismemberment Benefit (long Scale) Rider (UIN: 110C004V01) |
| Partial Withdrawals | Allowed after 3 years from the date of issuance of policy and until policy is revived in case of lapsed policy. |
| Features | How it works | Benefits |
|---|---|---|
| Guaranteed Maturity Unit Price | On maturity, the highest unit price in the Apex Return Lock-in fund recorded over 100 reset dates# is guaranteed | Gives you the highest possible returns on your investments and stabilizes growth in case of market volatility. |
| Limited Premium Payment Term | The premium payment term is 3 years while the policy provides coverage for a period of 10 years. | Achieve your dreams by paying just for 3 years. |
| Flexible premium payment options | You can choose to decrease the premiums paid in subsequent years, subject to a minimum annualized premium of Rs. 90,000. | Helps in keeping the policy going during contingencies.. |
| Access to your investment | Partial withdrawals are allowed after completion of 3 policy years from the date of issuance of policy or until the policy is revived in case of lapsed policies.. | You have the flexibility to access your investment if you urgently need money.. |
| Name of Fund | Apex Investment Fund | Apex Return Lock-in Fund |
|---|---|---|
| Structure | Can invest in money market & cash instruments (0-100%) and debt instrument (0-100%) | Can invest in money market & cash instruments (0-100%), debt instrument (0-100%) & equity and equity related securities (0-100%). |
| Fund Objective | To provide capital protection with a high level of safety and liquidity through judicious investment in high quality short-term debt. To generate better returns with low level of risk through investment is fixed interest securities having short term maturity profile.. | To use the participation in an actively managed well diversified equity portfolio of large cap companies to generate capital appreciation and use high credit quality debt instruments to lock-in that capital appreciation.. |
| Fund Management Charge | 0.9% (may increase up to 1.5%) per annum. | 1.45% % (may increase up to 2%) per annum.. |
| Net Asset Value (NAV) per unit or Unit Price | As specified in the Fund Valuation provisions.. |
Monday, February 16, 2009
Key Features of Interim Budget 2009-2010
INTRODUCTION
The Gross Domestic Product increased by 7.5 per cent, 9.5 per cent, 9.7 percent
and 9 per cent in the first four years from fiscal year 2004-05 to 2007-08 recording
a sustained growth of over 9 per cent for three consecutive years for the first time.
The growth drivers for the period were agriculture, services, manufacturing along
with trade and construction.
Fiscal deficit down from 4.5 per cent in 2003-04 to 2.7 per cent in 2007-08 and
Revenue deficit from 3.6 per cent to 1.1 per cent in 2007-08.
The domestic investment rate as a proportion of GDP increased from 27.6 per cent
in 2003-04 to 39 per cent in 2007-08. Gross Domestic savings rate shot up from
29.8 per cent to 37.7 per cent during this period.
The Gross capital formation in agriculture as a proportion of agriculture GDP
increased from 11.1 per cent in 2003-04 to 14.2 per cent in 2007-08
The tax to GDP ratio increased from 9.2 per cent in 2003-04 to 12.5 per cent in
2007-08.
Annual growth rate of agriculture rose to 3.7 per cent during 2003-04 to 2007-08.
The foodgrain production recorded an increase of 10 million tonnes each year during
this period and touched an all time high of 230 million tonnes in 2007-08.
While manufacturing sector recorded growth of 9.5 per cent per annum in the
period 2004-05 to 2007-08, communication and construction sectors grew at the
rate of 26 per cent and 13.5 per cent per annum respectively.
Exports grew at an annual average growth rate of 26.4 per cent in US dollar terms
in the period 2004-05 to 2007-08. Foreign trade increased from 23.7 per cent of
GDP in 2003-04 to 35.5 per cent in 2007-08.
OUTLOOK FOR THE YEAR 2008-09
Despite the global financial crisis which began in 2007 impacting most emerging
market economies, 7.1 per cent rate of GDP growth in the current year makes India
the second fastest growing economy in the world.
Fallout of global slowdown on Indian economy were countered with fiscal stimulus
packages announced on December 7, 2008 and January 2, 2009 providing tax relief
to boost demand and increasing expenditure on public projects.
Government accorded approval to 37 infrastructure projects worth Rs.70,000 crore
from August, 2008 to January, 2009 alone.
Under PPP mode, 54 Central Sector infrastructure projects with a project cost of
Rs.67,700 crore given in-principal or final approval and 23 projects amounting to
Rs.27,900 crore approved for viability gap funding in 2008-09.
India Infrastructure Finance Company Ltd. (IIFCL) to refinance upto 60 per cent
of commercial bank loans for PPP projects involving total investment of Rs.1,00,000
crore in infrastructure over the next eighteen months.
In addition to RBI taking number of monetary easing and liquidity enhancing
measures such as reduction in cash reserve ratio, statutory liquidity ratio and key
policy rates, Government has taken specific measures which include extension of
export credit for labour intensive exports, improving pre and post shipment credit
availability, additional allocations for refund of Terminal Excise Duty/CST and
export incentive schemes besides removal of export duty and export ban on certain
items. A Committee of Secretaries set up to address procedural problems faced by
exporters.
Record US$ 32.4 billion FDI received in 2007-08 and notwithstanding financial
uncertainty and slowdown, FDI inflows during April-November, 2008 were US$
23.3 billion recording a growth of 45 per cent over the same period in 2007.
FRBM targets for the current year and for fiscal 2009-10 relaxed to provide
much needed demand boost. However, medium term objective is to revert to
fiscal consolidation at the earliest.
INITIATIVES AND ACHIEVEMENT
Agriculture
Plan allocation for agriculture increased by 300 per cent from 2003-04 to 2008-09.
Rashtriya Krishi Vikas Yojna launched in 2007-08 with an outlay of Rs.25,000
crore to increase growth rate of agriculture and allied sector to 4 per cent per annum during Eleventh Plan period.
Agriculture credit disbursement increased three times from Rs.87,000 crore in
2003-04 to about Rs.2,50,000 crore in 2007-08.
To strengthen short-term cooperative credit structure, revival package in 25 states
involving financial assistance of about Rs.13,500 crore is being implemented.
Interest subvention to be continued in 2009-10 to ensure that farmers get short
term crop loans upto Rs.3 lakh at 7 per cent per annum.
The Agricultural Debt Waiver and Debt Relief Scheme, 2008 was implemented by
June 30, 2008 as scheduled. Debt waiver/debt relief amounting to Rs.65,300 crore
covers 3.6 crore farmers.
Despite higher procurement cost and higher international prices during the last 5
years, the central issue prices under Targeted Public Distribution System (TPDS)
maintained at July, 2000 level in case of Below Poverty Line (BPL) and Antyodaya
Anna Yojana (AAY) categories and at July, 2002 levels for Above Poverty Line
(APL) category.
Minimum Support Price (MSP) for common variety of paddy increased from Rs.550
per quintal in 2003-04 to Rs.900 per quintal for the crop year 2008-09. In case of
wheat, increase was from Rs.630 per quintal in 2003-04 to Rs.1080 per quintal for
the year 2009.
Rural Development
The corpus of Rural Infrastructure Development Fund (RIDF) increased from
Rs.5,500 crore in 2003-04 to Rs.14,000 crore for the year 2008-09. A separate
window for rural roads created with a corpus of Rs.4,000 crore for each of the last
three years.
As against 60 lakh houses to be constructed under Indira Awaas Yojana by
2008-09, 60 lakh twelve thousand houses constructed between 2005-06 to
December, 2008.
Panchayat Empowerment and Accountability Scheme (PEAIS) proposed to be
expanded.
‘Project Arrow’ to provide new technology enabled services through post offices
to common man and support effective implementation of social sector schemes
like NREGS, while promoting financial inclusion.
Education
Major initiatives including a new Centrally Sponsored Scheme launched to
universalize education at secondary stage in the year 2008-09.
Outlay on Higher Education increased 9 fold in the Eleventh Five Year Plan. Ordinance promulgated for establishing 15 Central Universities. In addition to 6 new Indian Institutes of Technology (IITs) in Bihar, Andhra Pradesh, Rajasthan, Orissa, Punjab and Gujrat which started functioning in 2008-09, two more IITs in Madhya Pradesh and Himachal Pradesh are expected to commence their academic session in
2009-10. 5 Indian Institute of Science Education and Research (IISER) announced
earlier have become functional. 2 new schools of Planning and Architecture at
Vijayawada and Bhopal have started functioning. Teaching is expected to commence
from academic year 2009-10 in four out of six new Indian Institute of Management
proposed for the Eleventh Plan in Haryana, Rajasthan, Jharkhand and Tamil Nadu.
Due to revision in Educational Loan Scheme by the Government number of
beneficiaries increased from 3.19 lakh to 14.09 lakh and amount of loan outstanding
increased from Rs.4,500 crore as on March, 31, 2004 to Rs.24,260 crore as on
September 30, 2008.
500 ITIs upgraded into centers of excellence. National Skill Development
Corporation created in July, 2008 with initial corpus of Rs. 1,000 crore.
Social Sector
Authorised capital of National Safai Karamchari Finance and Development
Corporation (NSKFDC) is being raised from Rs.200 crore to Rs.300 crore.
Scope of the pre-metric scholarship for children of those engaged in unclean
occupations expanded and rates of scholarship doubled in 2008-09. Annual
ad-hoc grant increased by about 50 per cent as compared to earlier rates.
Rashtriya Mahila Kosh to be strengthened by enhancing its authorized capital.
‘Priyadarsini Project’ a rural women’s employment and livelihood programme
will be implemented as pilot in the district of Madhubani and Sitamarhi in Bihar
and Shravasti, Bahraich, Rai Bareli and Sultanpur in Uttar Pradesh.
146 lakh persons benefited under Indira Gandhi National Old Age Pension Scheme
in the current financial year.
Two new schemes – ‘Indira Gandhi National Widow Pension Scheme’ to provide
pension of Rs.200 to widows between age groups of 40-64 years and ‘Indira Gandhi
National Disability Pension Scheme’ to provide pension for severely disabled
persons.
Widows in the age group of 18-40 years to be given priority in admission to ITIs,
Women ITIs and National/Regional ITIs for women. Government to bear cost of
their training and provide stipend of Rs.500 per month.
22 States and Union Territories initiated process to implement Rashtriya Swasthya
Bima Yojana for BPL familities in the unorganised sector and 60 lakh thirty two thousand persons covered for death and disability under ‘Aam Admni’ Bima Yojana (AABY). Public Sector Enterprises
Turnover of Central Public Sector Enterprises increased from Rs.5,87,000 crore in
2003-04 to Rs.10,81,000 crore in 2007-08 and profits grew from Rs.53,000 crore
to Rs.91,000 crore. While number of loss making enterprises came down from 73
in 2003-04 to 55 in 2007-08, number of profit making enterprises has gone up
from 143 to 158 during the same period..
Government approved implementation of Guidelines on Corporate Governance in
Central Public Sector Enterprises (CPSEs) in June, 2007.
Corpus of National Investment Fund created out of disinvestment proceeds from
Central PSUs stood at Rs.1,815 crore as on December 31, 2008.
Financial Sector Reforms
NPAs of Public Sector Banks declined from 7.8 per cent on March 31, 2004 to 2.3
per cent on March 31, 2008.
As a result of initiating process of amalgamation and recapitalization of Regional
Rural Banks (RRBs) with negative net worth, 196 RRBs merged into 85 RRBs. The
Government has contributed Rs.652 crore for capitalization of RRBs upto December
31, 2008.
Number of reforms undertaken in the last four years to deepen and widen the
securities markets and strengthen the regulatory mechanisms for these markets.
The Companies Bill, 2008, undertaking comprehensive revision of Companies Act,
1956 to enable adoption of internationally accepted best practices, has been
introduced in the Parliament.
Tax Effort
Comprehensive reforms of tax system both direct and the indirect tax system have
enabled the tax administration to enhance its functional efficiency and provide
better tax payer services leading to increased compliance. Rates of Union Excise
Duties and Service Tax rationalized for eventual shift to the Goods and Service
Tax on 1st April, 2010.
109 marine vessels sanctioned for the Customs Department to prevent movements
of contraband goods across the country’s sea borders.
Administrative Reforms
The enactment of the Right to Information Act at the Centre and in many States
ushering in greater accountability of the public servants.
Recommendations of the Sixth Central Pay Commission approved by the
Government has benefited over 45 lakh Central Government employees including
Defence Forces and Para-Military forces and over 38 lakh pensioners.
REVISED ESTIMATES
The total expenditure at Rs.7,50,884 crore in B.E. 2008-09 revised to Rs.9,00,953
crore in R.E. 2008-09 showing an increase of Rs.1,50,069 crore.
Plan Expenditure gone up from Rs.2,43,386 crore in B.E. 2008-09 to Rs.2,82,957
crore in R.E. 2008-09.
Non-Plan expenditure increased by Rs.1,10,498 crore in R.E. 2008-09 over B.E.
2008-09.
Revised Estimate 2008-09 for Non-Tax Revenues increased from Rs.95,785 crore
in Budget Estimate 2008-09 to Rs.96,203 crore.
Revised Estimates of gross tax collection projected at Rs.6,27,949 crore as against
B.E. 2008-09 of Rs.6,87,715 crore, primarily due to pro-active fiscal measures
initiated to counter the impact of global slowdown on the Indian economy.
Revised Revenue deficit to be at Rs.2,41,273 crore (4.4 per cent of GDP) as against
budgeted figure of Rs.55,184 crore (1 per cent of GDP).
Fiscal deficit to go up from Rs.1,33,287 crore (2.5 per cent of GDP) in B.E.
2008-09 to Rs.3,26,515 crore (6 per cent of GDP).
BUDGET ESTIMATES
Total expenditure for fiscal 2009-10 estimated at Rs.9,53,231 crore. Plan
expenditure estimated at Rs.2,85,149 crore and Non-Plan expenditure at Rs.6,68,082
crore.
Budgetary support in Plan B.E. 2009-10 in comparison to B.E. 2008-09 increased
for Department of Rural Development, Department of Road Transport & Highways,
Railways, Ministry of Power, Department of Industrial Policy and Promotion and
Department of Information Technology to meet the requirements of rural and
infrastructure development along with higher allocation for Ministry of Youth Affairs
& Sports and Ministry of Culture to ensure adequate resources for hosting of the
Commonwealth Games. Allocations to flagship programme which directly impact
‘Aam Aadmi’ fully protected.
Rs.30,100 crore allocated for National Rural Employment Guarantee Scheme for
the year 2009-10. In 2008-09 employment of 138.76 crore person days covering
3.51 crore household already generated.
About 98 per cent habitations covered by primary schools under Sarva Shiksha
Abhiyan. Allocation for this programme increased by 571 per cent between
2003-04 and 2008-09. Allocation of Rs.13,100 crore proposed for 2009-10.
Rs.8,000 crore allocated for Mid-day Meals Scheme for the year 2009-10.
Allocation of Rs.6,705 crore proposed for Integrated Child Development Scheme
(ICDS) for the year 2009-10. New WHO child growth standards adopted for
monitoring growth of children under ICDS.
386 projects amounting to Rs.39,000 crore sanctioned till December 31, 2008 under
Jawaharlal Nehru National Urban Renewal Mission (JNNURM). Allocation of
Rs.11,842 crore proposed for the year 2009-10.
Rs.7,400 crore allocated for Rajiv Gandhi Rural Drinking Water Mission, Rs.1,200
crore for Rural Sanitation Programme, Rs.12,070 crore for National Rural Health
Mission, Rs.40,900 crore allocated for Bharat Nirman for the year 2009-10.
A provision of Rs.100 crore in the Annual Plan 2009-10 made for Unique
Identification Authority of India.
RIDF-XV proposed with a corpus of Rs.14,000 crore. Separate window for rural
roads to continue with a corpus of Rs.4,000 crore.
Interest subvention of 2 per cent on pre and post shipment credit for certain
employment oriented sectors i.e. Textiles (including handlooms & handicrafts),
Carpets, Leather, Gem & Jewellery, Marine products and SMEs extended beyond
March 31, 2009 till September 30, 2009 involving an additional financial outgo of
Rs.500 crore.
Government to recapitalize the public sector banks over the next two years to enable them to maintain Capital to Risk Weighted Assets Ratio (CRAR) of 12 per cent.
Allocation for Defence increased to Rs.1,41,703 crore which includes Rs.54,824
for Capital Expenditure.
Major subsidies including food, fertilizer and petroleum estimated at Rs.95,579
crore.
For the fiscal 2009-10, with Centre’s net tax revenue estimated at Rs.5,00,096
crore and Revenue expenditure at Rs.8,48,085 crore, revenue deficit is estimated
at 4 per cent of GDP and fiscal deficit at 5.5 per cent of GDP.
The Gross Domestic Product increased by 7.5 per cent, 9.5 per cent, 9.7 percent
and 9 per cent in the first four years from fiscal year 2004-05 to 2007-08 recording
a sustained growth of over 9 per cent for three consecutive years for the first time.
The growth drivers for the period were agriculture, services, manufacturing along
with trade and construction.
Fiscal deficit down from 4.5 per cent in 2003-04 to 2.7 per cent in 2007-08 and
Revenue deficit from 3.6 per cent to 1.1 per cent in 2007-08.
The domestic investment rate as a proportion of GDP increased from 27.6 per cent
in 2003-04 to 39 per cent in 2007-08. Gross Domestic savings rate shot up from
29.8 per cent to 37.7 per cent during this period.
The Gross capital formation in agriculture as a proportion of agriculture GDP
increased from 11.1 per cent in 2003-04 to 14.2 per cent in 2007-08
The tax to GDP ratio increased from 9.2 per cent in 2003-04 to 12.5 per cent in
2007-08.
Annual growth rate of agriculture rose to 3.7 per cent during 2003-04 to 2007-08.
The foodgrain production recorded an increase of 10 million tonnes each year during
this period and touched an all time high of 230 million tonnes in 2007-08.
While manufacturing sector recorded growth of 9.5 per cent per annum in the
period 2004-05 to 2007-08, communication and construction sectors grew at the
rate of 26 per cent and 13.5 per cent per annum respectively.
Exports grew at an annual average growth rate of 26.4 per cent in US dollar terms
in the period 2004-05 to 2007-08. Foreign trade increased from 23.7 per cent of
GDP in 2003-04 to 35.5 per cent in 2007-08.
OUTLOOK FOR THE YEAR 2008-09
Despite the global financial crisis which began in 2007 impacting most emerging
market economies, 7.1 per cent rate of GDP growth in the current year makes India
the second fastest growing economy in the world.
Fallout of global slowdown on Indian economy were countered with fiscal stimulus
packages announced on December 7, 2008 and January 2, 2009 providing tax relief
to boost demand and increasing expenditure on public projects.
Government accorded approval to 37 infrastructure projects worth Rs.70,000 crore
from August, 2008 to January, 2009 alone.
Under PPP mode, 54 Central Sector infrastructure projects with a project cost of
Rs.67,700 crore given in-principal or final approval and 23 projects amounting to
Rs.27,900 crore approved for viability gap funding in 2008-09.
India Infrastructure Finance Company Ltd. (IIFCL) to refinance upto 60 per cent
of commercial bank loans for PPP projects involving total investment of Rs.1,00,000
crore in infrastructure over the next eighteen months.
In addition to RBI taking number of monetary easing and liquidity enhancing
measures such as reduction in cash reserve ratio, statutory liquidity ratio and key
policy rates, Government has taken specific measures which include extension of
export credit for labour intensive exports, improving pre and post shipment credit
availability, additional allocations for refund of Terminal Excise Duty/CST and
export incentive schemes besides removal of export duty and export ban on certain
items. A Committee of Secretaries set up to address procedural problems faced by
exporters.
Record US$ 32.4 billion FDI received in 2007-08 and notwithstanding financial
uncertainty and slowdown, FDI inflows during April-November, 2008 were US$
23.3 billion recording a growth of 45 per cent over the same period in 2007.
FRBM targets for the current year and for fiscal 2009-10 relaxed to provide
much needed demand boost. However, medium term objective is to revert to
fiscal consolidation at the earliest.
INITIATIVES AND ACHIEVEMENT
Agriculture
Plan allocation for agriculture increased by 300 per cent from 2003-04 to 2008-09.
Rashtriya Krishi Vikas Yojna launched in 2007-08 with an outlay of Rs.25,000
crore to increase growth rate of agriculture and allied sector to 4 per cent per annum during Eleventh Plan period.
Agriculture credit disbursement increased three times from Rs.87,000 crore in
2003-04 to about Rs.2,50,000 crore in 2007-08.
To strengthen short-term cooperative credit structure, revival package in 25 states
involving financial assistance of about Rs.13,500 crore is being implemented.
Interest subvention to be continued in 2009-10 to ensure that farmers get short
term crop loans upto Rs.3 lakh at 7 per cent per annum.
The Agricultural Debt Waiver and Debt Relief Scheme, 2008 was implemented by
June 30, 2008 as scheduled. Debt waiver/debt relief amounting to Rs.65,300 crore
covers 3.6 crore farmers.
Despite higher procurement cost and higher international prices during the last 5
years, the central issue prices under Targeted Public Distribution System (TPDS)
maintained at July, 2000 level in case of Below Poverty Line (BPL) and Antyodaya
Anna Yojana (AAY) categories and at July, 2002 levels for Above Poverty Line
(APL) category.
Minimum Support Price (MSP) for common variety of paddy increased from Rs.550
per quintal in 2003-04 to Rs.900 per quintal for the crop year 2008-09. In case of
wheat, increase was from Rs.630 per quintal in 2003-04 to Rs.1080 per quintal for
the year 2009.
Rural Development
The corpus of Rural Infrastructure Development Fund (RIDF) increased from
Rs.5,500 crore in 2003-04 to Rs.14,000 crore for the year 2008-09. A separate
window for rural roads created with a corpus of Rs.4,000 crore for each of the last
three years.
As against 60 lakh houses to be constructed under Indira Awaas Yojana by
2008-09, 60 lakh twelve thousand houses constructed between 2005-06 to
December, 2008.
Panchayat Empowerment and Accountability Scheme (PEAIS) proposed to be
expanded.
‘Project Arrow’ to provide new technology enabled services through post offices
to common man and support effective implementation of social sector schemes
like NREGS, while promoting financial inclusion.
Education
Major initiatives including a new Centrally Sponsored Scheme launched to
universalize education at secondary stage in the year 2008-09.
Outlay on Higher Education increased 9 fold in the Eleventh Five Year Plan. Ordinance promulgated for establishing 15 Central Universities. In addition to 6 new Indian Institutes of Technology (IITs) in Bihar, Andhra Pradesh, Rajasthan, Orissa, Punjab and Gujrat which started functioning in 2008-09, two more IITs in Madhya Pradesh and Himachal Pradesh are expected to commence their academic session in
2009-10. 5 Indian Institute of Science Education and Research (IISER) announced
earlier have become functional. 2 new schools of Planning and Architecture at
Vijayawada and Bhopal have started functioning. Teaching is expected to commence
from academic year 2009-10 in four out of six new Indian Institute of Management
proposed for the Eleventh Plan in Haryana, Rajasthan, Jharkhand and Tamil Nadu.
Due to revision in Educational Loan Scheme by the Government number of
beneficiaries increased from 3.19 lakh to 14.09 lakh and amount of loan outstanding
increased from Rs.4,500 crore as on March, 31, 2004 to Rs.24,260 crore as on
September 30, 2008.
500 ITIs upgraded into centers of excellence. National Skill Development
Corporation created in July, 2008 with initial corpus of Rs. 1,000 crore.
Social Sector
Authorised capital of National Safai Karamchari Finance and Development
Corporation (NSKFDC) is being raised from Rs.200 crore to Rs.300 crore.
Scope of the pre-metric scholarship for children of those engaged in unclean
occupations expanded and rates of scholarship doubled in 2008-09. Annual
ad-hoc grant increased by about 50 per cent as compared to earlier rates.
Rashtriya Mahila Kosh to be strengthened by enhancing its authorized capital.
‘Priyadarsini Project’ a rural women’s employment and livelihood programme
will be implemented as pilot in the district of Madhubani and Sitamarhi in Bihar
and Shravasti, Bahraich, Rai Bareli and Sultanpur in Uttar Pradesh.
146 lakh persons benefited under Indira Gandhi National Old Age Pension Scheme
in the current financial year.
Two new schemes – ‘Indira Gandhi National Widow Pension Scheme’ to provide
pension of Rs.200 to widows between age groups of 40-64 years and ‘Indira Gandhi
National Disability Pension Scheme’ to provide pension for severely disabled
persons.
Widows in the age group of 18-40 years to be given priority in admission to ITIs,
Women ITIs and National/Regional ITIs for women. Government to bear cost of
their training and provide stipend of Rs.500 per month.
22 States and Union Territories initiated process to implement Rashtriya Swasthya
Bima Yojana for BPL familities in the unorganised sector and 60 lakh thirty two thousand persons covered for death and disability under ‘Aam Admni’ Bima Yojana (AABY). Public Sector Enterprises
Turnover of Central Public Sector Enterprises increased from Rs.5,87,000 crore in
2003-04 to Rs.10,81,000 crore in 2007-08 and profits grew from Rs.53,000 crore
to Rs.91,000 crore. While number of loss making enterprises came down from 73
in 2003-04 to 55 in 2007-08, number of profit making enterprises has gone up
from 143 to 158 during the same period..
Government approved implementation of Guidelines on Corporate Governance in
Central Public Sector Enterprises (CPSEs) in June, 2007.
Corpus of National Investment Fund created out of disinvestment proceeds from
Central PSUs stood at Rs.1,815 crore as on December 31, 2008.
Financial Sector Reforms
NPAs of Public Sector Banks declined from 7.8 per cent on March 31, 2004 to 2.3
per cent on March 31, 2008.
As a result of initiating process of amalgamation and recapitalization of Regional
Rural Banks (RRBs) with negative net worth, 196 RRBs merged into 85 RRBs. The
Government has contributed Rs.652 crore for capitalization of RRBs upto December
31, 2008.
Number of reforms undertaken in the last four years to deepen and widen the
securities markets and strengthen the regulatory mechanisms for these markets.
The Companies Bill, 2008, undertaking comprehensive revision of Companies Act,
1956 to enable adoption of internationally accepted best practices, has been
introduced in the Parliament.
Tax Effort
Comprehensive reforms of tax system both direct and the indirect tax system have
enabled the tax administration to enhance its functional efficiency and provide
better tax payer services leading to increased compliance. Rates of Union Excise
Duties and Service Tax rationalized for eventual shift to the Goods and Service
Tax on 1st April, 2010.
109 marine vessels sanctioned for the Customs Department to prevent movements
of contraband goods across the country’s sea borders.
Administrative Reforms
The enactment of the Right to Information Act at the Centre and in many States
ushering in greater accountability of the public servants.
Recommendations of the Sixth Central Pay Commission approved by the
Government has benefited over 45 lakh Central Government employees including
Defence Forces and Para-Military forces and over 38 lakh pensioners.
REVISED ESTIMATES
The total expenditure at Rs.7,50,884 crore in B.E. 2008-09 revised to Rs.9,00,953
crore in R.E. 2008-09 showing an increase of Rs.1,50,069 crore.
Plan Expenditure gone up from Rs.2,43,386 crore in B.E. 2008-09 to Rs.2,82,957
crore in R.E. 2008-09.
Non-Plan expenditure increased by Rs.1,10,498 crore in R.E. 2008-09 over B.E.
2008-09.
Revised Estimate 2008-09 for Non-Tax Revenues increased from Rs.95,785 crore
in Budget Estimate 2008-09 to Rs.96,203 crore.
Revised Estimates of gross tax collection projected at Rs.6,27,949 crore as against
B.E. 2008-09 of Rs.6,87,715 crore, primarily due to pro-active fiscal measures
initiated to counter the impact of global slowdown on the Indian economy.
Revised Revenue deficit to be at Rs.2,41,273 crore (4.4 per cent of GDP) as against
budgeted figure of Rs.55,184 crore (1 per cent of GDP).
Fiscal deficit to go up from Rs.1,33,287 crore (2.5 per cent of GDP) in B.E.
2008-09 to Rs.3,26,515 crore (6 per cent of GDP).
BUDGET ESTIMATES
Total expenditure for fiscal 2009-10 estimated at Rs.9,53,231 crore. Plan
expenditure estimated at Rs.2,85,149 crore and Non-Plan expenditure at Rs.6,68,082
crore.
Budgetary support in Plan B.E. 2009-10 in comparison to B.E. 2008-09 increased
for Department of Rural Development, Department of Road Transport & Highways,
Railways, Ministry of Power, Department of Industrial Policy and Promotion and
Department of Information Technology to meet the requirements of rural and
infrastructure development along with higher allocation for Ministry of Youth Affairs
& Sports and Ministry of Culture to ensure adequate resources for hosting of the
Commonwealth Games. Allocations to flagship programme which directly impact
‘Aam Aadmi’ fully protected.
Rs.30,100 crore allocated for National Rural Employment Guarantee Scheme for
the year 2009-10. In 2008-09 employment of 138.76 crore person days covering
3.51 crore household already generated.
About 98 per cent habitations covered by primary schools under Sarva Shiksha
Abhiyan. Allocation for this programme increased by 571 per cent between
2003-04 and 2008-09. Allocation of Rs.13,100 crore proposed for 2009-10.
Rs.8,000 crore allocated for Mid-day Meals Scheme for the year 2009-10.
Allocation of Rs.6,705 crore proposed for Integrated Child Development Scheme
(ICDS) for the year 2009-10. New WHO child growth standards adopted for
monitoring growth of children under ICDS.
386 projects amounting to Rs.39,000 crore sanctioned till December 31, 2008 under
Jawaharlal Nehru National Urban Renewal Mission (JNNURM). Allocation of
Rs.11,842 crore proposed for the year 2009-10.
Rs.7,400 crore allocated for Rajiv Gandhi Rural Drinking Water Mission, Rs.1,200
crore for Rural Sanitation Programme, Rs.12,070 crore for National Rural Health
Mission, Rs.40,900 crore allocated for Bharat Nirman for the year 2009-10.
A provision of Rs.100 crore in the Annual Plan 2009-10 made for Unique
Identification Authority of India.
RIDF-XV proposed with a corpus of Rs.14,000 crore. Separate window for rural
roads to continue with a corpus of Rs.4,000 crore.
Interest subvention of 2 per cent on pre and post shipment credit for certain
employment oriented sectors i.e. Textiles (including handlooms & handicrafts),
Carpets, Leather, Gem & Jewellery, Marine products and SMEs extended beyond
March 31, 2009 till September 30, 2009 involving an additional financial outgo of
Rs.500 crore.
Government to recapitalize the public sector banks over the next two years to enable them to maintain Capital to Risk Weighted Assets Ratio (CRAR) of 12 per cent.
Allocation for Defence increased to Rs.1,41,703 crore which includes Rs.54,824
for Capital Expenditure.
Major subsidies including food, fertilizer and petroleum estimated at Rs.95,579
crore.
For the fiscal 2009-10, with Centre’s net tax revenue estimated at Rs.5,00,096
crore and Revenue expenditure at Rs.8,48,085 crore, revenue deficit is estimated
at 4 per cent of GDP and fiscal deficit at 5.5 per cent of GDP.
Monday, February 9, 2009
CSO Advance Estimate: GDP to grow at 7.1% for FY2009
CSO released the advance estimate of GDP today for FY2009. GDP is expected to growth at 7.1% higher than market expectation of 6.8%.
Historically it is observed that the preliminary estimates can be revised but usually adjustments are modest.
GDP grew at 7.9% and 7.6% in first 2 quarters resulting in GDP growth of 7.8% for 1H FY2009.
With 7.1% growth for FY2009, GDP is expected to grow at 6.4% in 2H FY2009 (see table below). Note that industry growth is assumed at 3.1% in 2H FY2009 while the actual output for Oct-Nov 2008 was only 1%. It is a possibility that GDP will be revised downward in May as incoming data in Jan, Feb show continuous decline
GDP by activity: Slowdown is broad-based across the three main sectors:
Agriculture output growth is estimated to have fallen to 2.6% yoy in FY09 from 4.9% in FY08, the weakest since FY2005. The sector now only accounts for 17% of GDP, although more than 50% of people still rely on it. Excluding agriculture, GDP growth rose a respectable 8.1% in 2008/09, down from 9.9% in 2007/08.
Industry to grow at 4.8% from 8.1%. Within the industry, manufacturing and construction to decelerate significantly to 3% and 2.4% in 2HFY09 from 5.3% and 10.5% in 1HFY09. The growth in electricity, gas and water supply, however, is expected to pick up.
Services to grow at 9.6% from 10.9% driven by double-digit increase in "trade, hotels, transport and communication" as well as a pick up in "community, social and personal services" to 9.3% from 6.8%. The community services will be the strongest since 1999/00 and points to the various fiscal stimulus spending by the government.
Bottomline:
Overall, while the economy is slowing but it is certainly not hard landing like most other Asian economies. We expect slowdown in investment and private consumption, while government consumption will stay strong.
The cyclical low will be reached in the 1Q FY2010. We expect a modest recovery thereafter driven by Govt’s fiscal measures, sharp fall in commodity prices, India’s oil and gas production coming on stream, trade recovery and some impact of earlier monetary easing.
RBI will continue to use its monetary tools to boost the economy.
Historically it is observed that the preliminary estimates can be revised but usually adjustments are modest.
GDP grew at 7.9% and 7.6% in first 2 quarters resulting in GDP growth of 7.8% for 1H FY2009.
With 7.1% growth for FY2009, GDP is expected to grow at 6.4% in 2H FY2009 (see table below). Note that industry growth is assumed at 3.1% in 2H FY2009 while the actual output for Oct-Nov 2008 was only 1%. It is a possibility that GDP will be revised downward in May as incoming data in Jan, Feb show continuous decline
GDP by activity: Slowdown is broad-based across the three main sectors:
Agriculture output growth is estimated to have fallen to 2.6% yoy in FY09 from 4.9% in FY08, the weakest since FY2005. The sector now only accounts for 17% of GDP, although more than 50% of people still rely on it. Excluding agriculture, GDP growth rose a respectable 8.1% in 2008/09, down from 9.9% in 2007/08.
Industry to grow at 4.8% from 8.1%. Within the industry, manufacturing and construction to decelerate significantly to 3% and 2.4% in 2HFY09 from 5.3% and 10.5% in 1HFY09. The growth in electricity, gas and water supply, however, is expected to pick up.
Services to grow at 9.6% from 10.9% driven by double-digit increase in "trade, hotels, transport and communication" as well as a pick up in "community, social and personal services" to 9.3% from 6.8%. The community services will be the strongest since 1999/00 and points to the various fiscal stimulus spending by the government.
Bottomline:
Overall, while the economy is slowing but it is certainly not hard landing like most other Asian economies. We expect slowdown in investment and private consumption, while government consumption will stay strong.
The cyclical low will be reached in the 1Q FY2010. We expect a modest recovery thereafter driven by Govt’s fiscal measures, sharp fall in commodity prices, India’s oil and gas production coming on stream, trade recovery and some impact of earlier monetary easing.
RBI will continue to use its monetary tools to boost the economy.
Saturday, February 7, 2009
Tata Capital —12%p.a NCD offer: Invest
Business Line
M. V. S. Santosh Kumar
The five-year secured non-convertible debentures (NCDs) offered by Tata Capital, a non-banking finance subsidiary of Tata Sons Ltd., may be a good investment option. The NCDs, with interest rates of 11-12 per cent under four options, offer superior returns compared to bank fixed deposits, though they are riskier. Interest rates on five-year bank deposits now range between 8.25 per cent and 10.25 per cent.
Investors should evaluate the NCDs in the light of the fact that they allow locking into an attractive yield of 12 per cent for a five-year period (assuming the put/call options are not exercised), even as returns on most other fixed-income options are set to decline sharply.
The risks linked with the offer stem from the challenges associated with the NBFC business and the relatively short track record of Tata Capital. However, this credit risk is partly mitigated by the security offered (fixed assets and future receivables) and the proposal to create a debenture redemption reserve towards maturity. The offer is rated LAA+ by ICRA, which is among the higher investment grade ratings.
Options: Those who wish to invest in these debentures will have four options to choose from based on the periodicity of payments and the minimum amount they can invest.
Of all the options, the cumulative option appears most attractive, as it allows investors to reinvest the interest proceeds at high coupon rates of 12 per cent. This instrument is shielded from the interest rate and re-investment risks. For Rs 10,000 invested today, a cumulative amount of Rs 17623 pre-tax can be earned at the end of five years.
Investors who expect monthly, quarterly or yearly returns are advised to look at other options.
However, yields will be lower depending on where investors re-invest their interest receipts. Assuming an investor re-invests his interest receipts at 6 per cent (the prevailing risk-free rate), the yields will work out to 10.39 per cent, 10.53 per cent and 10.88 per cent respectively on monthly, quarterly and annual payout options.
Liquidity: Though the cumulative scheme is a lock-in scheme, investors have a put option at the end of 36 months to redeem their investments, without any interest rate penalty.
The NCDs are also proposed to be listed and traded on the NSE and investors may have the option of cashing out earlier, if the bonds witness frequent trading in sufficient volumes. Tax deduction on the NCDs will be on the interest paid and based on the income slab investor is in.
TCL intends 100 per cent allotment for investors who put in less than Rs 1 lakh. Even if the issue gets oversubscribed, preference will be given to the retail investors over other non-institutional investors (HNIs), institutions and QIPs
Business
TCL is a non-deposit-taking NBFC. Along with its subsidiaries (few subsidiaries are yet to start operations), it offers various financial services including infrastructure lending, SME lending, factoring, bill discounting, auto financing, home financing, advisory, broking, investment banking , private equity and wealth management.
As of September 30, 2008, TCL had an advance book size of Rs 6,827 crore. Eighty one per cent of the loans are secured in nature. The advances book is divided into a retail book (40 per cent), small and medium enterprises (30 per cent) and infrastructure financing (30 per cent). In the recent past, much of the growth in advances was contributed by the retail advances.
Though concerns have been raised about the possibility of higher retail delinquencies, Tata Capital’s relatively recent foray into lending may have shielded it from such risks. Its net NPA as a proportion of advances was at 0.5 per cent by September 2008. Though Tata Capital managed a marginal net profit in the first six months ended September 2008, it reported a pre-tax loss of about Rs 18 crore for the nine months ended December, 2008. But with the businesses in a nascent stage, it is too early to comment on the business as most of the costs are start-up costs.
The capital adequacy of the NBFC is 26 per cent (against the stipulated 10 per cent right now and 12 per cent after March 31, 2009) and the debt-equity ratio pre-issue is at a comfortable 2.6 (3.3 post issue if the entire NCD offer of Rs 1500 crore is subscribed). High capital adequacy and low debt-equity leave more room for leveraging
Risks
The company is a relatively new one, set up in May 8, 2007. As the company is a late entrant in the financial sector space and is venturing into various businesses at the same time, it has a limited track record by which to judge its success.
While all the businesses the company has entered into face a slow down, the government’s stimulus package for infrastructure companies and SMEs and the special financing facilities offered to NBFCs may partially benefit the business in the coming quarters. As far as lending is concerned, Tata Capital’s plans to tap into the Tata group’s vendors and distributors (not group companies), may offer a ready client base.
Offer Details
Tata Capital expects to raise a minimum amount of Rs 500 crore under this offer, with the option of retaining an additional Rs 1,000 crore. The issue is already open (was launched on February 02, 2009) and closes on February 24.
However, the issue may be closed earlier if the company manages to raise the maximum amount. Proceeds from this issue will be used for activities such as financing, investments, growth of the operations and to partly retire high-cost funds raised earlier.
The issue will be in de-materialised mode and listed in the NSE corporate bond market. NCD holders can even trade in these debentures in the secondary market; there is liquidity risk for premature encashment as the bond market is relatively illiquid.
TO SUBCRIBE CONTACT VINODKUMAR CFP 9842292339
Subscribe to:
Posts (Atom)
