ECONOMY GROWTH @ 7.3 %

The Indian economy grew at 7.3 per cent in 2014-15 due to improvement in the performance of both services as well as manufacturing sectors. According to the data release by the Central Statistics Office (CSO) today, the economic growth was 6.9 per cent in 2013-14 as per the new series of national accounts with base year of 2011-12. The growth in 2014-15 was lower than the advance estimates of 7.4 per cent released in February. The fourth quarter (January-March) of last fiscal saw the economy grow at 7.5 per cent, better than 6.6 per cent recorded for the previous three months, October-December. The Gross Value Added (GVA), a new concept introduced by CSO to measure the economic activity, rose by 7.2 per cent in 2014-15 compared 6.6 per cent in the previous fiscal. The manufacturing sector GVA rose by 7.1 per cent during the year as against 5.3 per cent in 2013-14. Similarly, the output of electricity, gas, water supply and other utility services rose by 7.9 per cent as against 4.8 per cent a year ago. The construction activity too registered an increase of 4.8 per cent, up from 2.5 per cent a year ago. Financial, real estate and professional services also showed an improvement by registering a growth of 11.5 per cent as against 7.9 per cent in previous fiscal. However, the farm and allied sectors grew by a meagre 0.2 per cent compared to 3.7 per cent a year ago. The output of mining and quarrying sector too slipped to 2.4 per cent from 5.4 per cent a year ago.
he economic growth rate measured in terms of GVA in the January-March quarter improved to 6.1 per cent as against 5.3 per cent a year ago. The manufacturing sector recorded a growth rate of 8.4 per cent during the last quarter of last fiscal, up from 4.4 per cent a year ago. The services sector too witnessed marked improved during the quarter. However, agriculture and mining and quarrying sectors remained laggards in the January-March quarter. The data showed that farm output during the quarter declined by 1.4 per cent as compared to a growth of 4.4 per cent in the corresponding quarter of the previous fiscal. The output of mining and quarrying sector decelerated to 2.3 per cent in the fourth quarter of the last fiscal as compared to a growth of 11.5 per cent during the same period in 2013-14. It further said that per capita income at current prices during 2014-15 rose by 9.2 per cent to Rs 87,748 as against Rs 80,388 in the previous fiscal. It was Rs 64,316 in 2011-12 and Rs 71,593 in 2012-13.

LOT TO BE DONE

On the first anniversary of his government, Prime Minister Narendra Modi today said people's expectations are "high" and there is "much more to be done" as he enlisted the work done over the last one year, ranging from "rejuvenating" the economy to initiatives for the poor. He said his government systematically went about addressing the challenges and its endeavour is to transform the quality of life, infrastructure and services. Presenting the report card of his year-old government in two open letters to the people, Modi mentioned various measures and initiatives taken and said, "This is just the beginning. There is much more to be done and I know your expectations are high." He said he had devoted "every element of my body and spirit" in fulfilling with "fullest sincerity and honesty" the responsibility and honour entrusted by people a year ago in him of serving them as "pradhan sevak" (prime worker). "We assumed office at a time when confidence in India story was waning. Unabated corruption and indecisiveness had paralysed the government. People had been left helpless against ever-climbing inflation and economic insecurity. Urgent and decisive action was needed," Modi said. Talking about his government's work, he said, "Runaway prices were immediately brought under control. The languishing economy was rejuvenated, building on stable and policy-driven proactive governance."
He said the economic growth has been revived and India is among the fastest in the world. "Inflation is substantially down. Fiscal prudence has been restored. Confidence is up. Foreign investments have increased," the Prime Minister said, adding "This positive outlook is endorsed by major rating agencies and international institutions across the world." The government, he said, has implemented the pending "bold reforms" like decontrol of diesel, raising Foreign Direct Investment (FDI) limit on insurance and defence and is moving ahead to roll out the Goods and Services Tax (GST).
He said the Indian economy is expected to grow at over 8 per cent in the current fiscal, up from 7.4 per cent in 2014-15. The fiscal deficit is budgeted to come down to 3.9 per cent of the GDP this fiscal, from 4 per cent a year ago.

The Prime Minister said his government is dedicated to the poor, marginalised and those left behind as it is "guided by the principle of Antyodaya". "We are working towards empowering them to become our soldiers in the war against poverty," he said. He said discretionary allotment of the country's precious natural resources to a "chosen few" was replaced with transparent auction and "firm steps" were taken against black money, from setting up an SIT and passing a stringent black money law, to generating international consensus against the same. "Most importantly, we have been able to restore trust in the government," Modi said, adding "Uncompromising adherence to the principle of purity, in action as well as intent, ensured a corruption-free government." The Prime Minister said "significant changes" have been brought about in the work culture, "nurturing a combination of empathy as well as professionalism, systems as well as breaking of silos."
State governments have been made equal partners in the quest for national development, building the spirit of Team India, he said.
He said "numerous measures and schemes" have been initiated - from making school toilets to setting up IITs, IIMs and AIIMS, from providing vaccination cover to children to initiating a people-driven 'Swacch Bharat' mission, from ensuring a minimum pension to labourers to providing social security to the common man, from enhancing support to farmers hit by natural calamities to defending their interests at WTO. He also mentioned other initiatives like "empowering one and all" with the rule on self-attestation to delivering subsidies directly to people's banks, from universalising the banking system to funding the unfunded small businesses, from irrigating fields to rejuvenating 'Ma Ganga', from moving towards 24x7 power to connecting the nation through road and rail, from building homes for the homeless to setting up smart cities and from connecting the northeast to prioritising development of eastern India. "One year ago, you had entrusted me with the task of building a new India and putting a derailed economy back on track. We have achieved a lot," he said, adding "this is just the beginning. There is much more to be done and I know your expectations are high."
"Bold reforms pending for decades have been implemented," Modi said, stressing that the benefits of growth should reach all sections of society, especially poor, farmers and women.

"Economic growth benefits all Indians. Growth, however, has meaning only if it empowers the poor, farmers, women, as well as middle and neo-middle classes of all communities. To enable us to continue paying remunerative prices to our farmers, we secured a permanent 'peace clause' at the WTO," Modi said. He added that through a financial inclusion drive a record 15 crore plus bank accounts have been opened and deposits of over Rs 15,800 crore mobilised. An affordable social security system including pension, life insurance and accident insurance has already witnessed 6.75 crore enrolments in its first week, he said. MUDRA has been set up with a corpus of Rs 20,000 crore to help small businessmen, who despite being the biggest job creators have historically been starved of credit, he said. The government, Modi said, is focusing on ease of doing business and working through 'Make in India' initiative to create new jobs. The other government initiatives include transferring cooking gas subsidies directly into the bank accounts to ensure that "right amount of subsidy, reaches the right people, at the right time". Besides increasing the FDI limits in insurance, railways and defence production, Modi said, "We have embraced the states as equal partners in national development, working as Team India in the spirit of cooperative and competitive federalism."
Political interference in public sector banking decisions is a thing of the past, he said, adding "transparent coal auctions and allotments have mobilised potential revenues of Rs 3.35 lakh crore to coal-bearing states over the lifespan of mines. And reform in the Mines Act has replaced a discretionary mechanism with a transparent auction process." Modi said nearly Rs 1 lakh crore of public investment has been allocated in this year's budget to improve physical as well as digital connectivity. "Friends, this is just the beginning. Our objective is to transform quality of life, infrastructure and services. Together we shall build the India of your dreams and that of our freedom fighters. In this, I seek your blessings and continued support," he concluded.

ATAL PENSION YOJANA (APY)

The Reserve Bank today asked Urban co-operative banks to appoint nodal officers for implementation of the government's flagship scheme, Atal Pension Yojana (APY), which provides for a minimum pension of Rs 1,000-5,000, depending upon contribution. The APY, launched by Prime Minister Narendra Modi earlier this month, is focused on all citizens in the unorganised sector, who join the National Pension System (NPS), administered by the Pension Fund Regulatory and Development Authority (PFRDA). The minimum age of joining APY is 18 years while the maximum age is 40 years. This means that minimum period of contribution by any subscriber under APY would be 20 years or more. The benefit of fixed minimum pension would be guaranteed by the government. The government would also co-contribute 50 per cent of the total contribution or Rs 1,000 per annum, whichever is lower, to each eligible subscriber account, for a period of 5 years (2015-16 to 2019-20).

WHY MILK PRICES ARE SO HIGH...?

The Maharashtra government has asked milk cooperative societies and distributors to slash milk prices by Rs 2 to Rs 5, dairy development minister Eknath Khadse said today. "I have directed the milk co-operative societies and distributors to slash the market price of milk by Rs 2 to Rs 5 as they have been earning more than double the procurement rates," Khadse told reporters here. "These milk distributors have been procuring milk from farmers at Rs 14 - Rs 16 while their market ranges between Rs 40 to Rs 60," he said. The issue of falling milk prices was raised by leader of opposition in Legislative Council Dhananjay Munde during the budget session of the state legislature in March. Khadse said that the government is also prepared to promulgate an ordinance for providing a fixed rate of Rs 20 per litre to milk-producing farmers who are facing difficult times owing to the steep fall in milk prices. "We will take a strict action against the milk procurement centres which pay the milk producers at less than the prescribed rate. Criminal cases would be filed against the procurement centres which pay less than Rs 20 a litre. It will be non-bailable offence based on Essential Services Maintenance Act (ESMA,)" the minister said. He claimed that the milk distributors have also agreed to reduce market prices. He said the procurement institutions purchase milk at cheap rates from farmers and sell it to consumers at high price.

IS THERE NO CHANGE IN INDIA...?

As the Modi government completes first year in office, though almost all American investors are "overweight" on the country, they also complain that nothing is changing on the ground, says a report by Bank of America -Merrill Lynch. The US-based brokerage expects Reserve Bank Governor Raghuram Rajan to cut policy rates by another 0.25 per cent on June 2 and said that rate cuts and not big-ticket reforms will have tangible impact on growth. In the report titled 'Investorspeak: From hope trade to show-me trade', BofA-ML India economist Indranil Sen Gupta said, "We met equity investors in New York and Boston last week. While almost all are overweight on Indian equities, there are indubitable concerns that nothing is really changing on the ground." On the rate cut, Gupta said, "I expect Rajan to cut (rates by) 25 bps on June 2, pause to allow markets price in the Fed rate hike expected in September, and then cut 50 bps more in early 2016." Stating that rate cuts rather than reforms are key to cyclical recovery, the brokerage retained banks, other rate sensitives and pharma stocks as its favourite picks for the year. "There is greater acceptance of our standing view that the turn in the growth cycle will depend far more on the global economic cycle and lending rate cuts at home rather than reforms," he said, advising investors to focus on reserve money and by extension lending rate cuts, to track the green-shoots. Stating that US Fed hike, earnings and Bihar polls will be the biggest swing factors for the market going forward, Gupta underlined that only RBI can help swing the economy with more rate cuts, and that reforms have not much role to play, negating the argument that investors dumped domestic stocks and debt in the past weeks due to losing steam on the reform front.

Therefore, lending rate cuts can revive demand which in turn will lead to a supply response as low capacity utilisation offers operating leverage. Rising growth visibility will then lead to higher capex, the report said. But for the investors, the larger worry is on implementation front, it added. "Reforms will raise potential growth medium-term and the result will come only in say 5 to 10 years," Gupta said, pointing out that the 1991 reforms lifted potential growth almost 10 years later. Growth is slowly bottoming out on lending rate cuts as the key leading indicators like real cash demand and risk aversion are both turning around as at the base lending rate of 10.25 per cent the real lending rate is the highest since 1996, he said. Stating that who rules New Delhi matters less but the health of the global economy matters more for higher growth here, Gupta said, "The Indian growth cycle depends far more on the global growth cycle rather than who rules in New Delhi." He added that the country will overtake Brazil and Russia in GDP this year to emerge as the second-largest emerging market after China. Gupta also poured cold water on the hope of huge lifting impact of the GST on GDP, saying "at 27 per cent revenue neutral rate, we feel that markets are over-estimating the benefits of GST. "Studies show that it will raise GDP by 1-2 per cent over, say 5 years. In other words, it will push up the growth rate by, say, 20-30 bps a year." On forex reserves, which is ruling at a historic high of over USD 353 billion as of the past week, he estimates that the RBI will need to buy USD 59.3 billion in FY16 to maintain a 10-month import cover by March 2016. Pegging the rupee at 64 to the dollar by September, Gupta said the local unit is over-valued by over 12 per cent against the 36-country REER (real effective exchange rate), which is a better reflection of the value of a currency it is matched against the value of competing units in the export market. Rising oil prices can scupper many a comfort for the economy, Gupta warned, as a USD 10/bbl impacts the current account deficit by 0.4 per cent of GDP.

Govt LAUNCH NITI AAYOG WEBSITE

The government today launched the website of NITI Aayog with a blogs section that will have articles, field reports, work in progress and opinions by the officials. The government had replaced the Planning Commission with NITI Aayog on January 1. Thereafter, the government had archived the website of the Commission in the first week of January. "Dr Arvind Panagariya, Vice Chairman, NITI Aayog, launched the beta version NITI Aayog website here today. The website can be accessed on http://www.niti.gov.in," a NITI Aayog press release said. However, the final website is under construction and will be updated soon, it added. The portal will provide details of the constitution, functions and current activities of the NITI Aayog. The web page will also have reports prepared by the Aayog in its initial stages. The website also has a unique feature -- NITI Blogs, which will incorporate articles, field reports, work in progress, and opinions by NITI officials, it added. Earlier an official had told PTI that the designing of the website took a little longer than usual because it would have a wider target audience as the it would be a platform for states, experts, citizens and stakeholders where they can share their views on different issues and see others' perspectives. The Aayog has been mandated to serve as a policy think-tank for the central as well as state governments and has Prime Minister as its Chairperson.

WPI INFLATION @ RECORD - 2.65 %

Deflationary pressure continued for the sixth month in a row with inflation dropping to a new low of (-)2.65 per cent in April, mainly on account of decline in prices of fuel and manufactured items even as food prices increased.
Inflation, as measured on the Wholesale Price Index (WPI), has been in the negative zone since November, 2014. In April last year, it was 5.55 per cent.
The deflationary trend has bolstered the case for a rate cut by the Reserve Bank, as retail inflation has also eased and industrial production is down, experts said. Industrial output had slowed to 5-month low of 2.1 per cent in March.
Inflation was (-)2.33 per cent in March, (-)2.17 per cent in February, (-)0.95 per cent in January, (-)0.50 per cent in December and (-) 0.17 per cent in November.
In April this year, the manufactured products segment witnessed deflation for the second consecutive month as prices dropped by a record low of (-)0.52 per cent.
Inflation in food articles category stood at 5.73 per cent, from 6.31 per cent in March. For fuel and power, it was (-)13.03 per cent in April.
Potato prices saw the steepest fall of (-)41.14 per cent in April. For vegetables, the decline was (-)1.32 per cent.
However, inflation in pulses was at 15.38 per cent, and for egg, meat and fish at 4.01 per cent during the month.
The February WPI inflation has been revised downwards to (-)2.17 per cent as against the provisional estimate of (-)2.06 per cent.
The Consumer Price Index data, released earlier this week, showed retail inflation fell to a 4-month low of 4.87 per cent in April on account of easing food prices.
ICRA Senior Economist Aditi Nayar said: "The data reinforces our expectation of a high probability of 0.25 per cent rate cut in June 2 RBI policy."

MARKET UNDER SNAKE & LADDER GAME

SENSEX DOWN BY 630 POINTS

WIPES OUT Rs.2 LAKH CRORES WEALTH

After two sessions of rally, the benchmark BSE Sensex today plunged by 630 points to end below the 27,000-mark on across-the-board selling over concerns that key reform bills may get delayed, while weakness in global bond markets also hit sentiment. Foreign investors' worries continue to bog market despite government's move to assuage their taxation issues, traders said. Moreover, rupee falling below the 64-mark against the dollar also too weighed on sentiments, they added. "The recent phase of range-bound correction is led by FIIs, in spite of setting up a high-level committee to decide MAT issue. Factors like increase in Europe bond yield...currency depreciation is impacting global inflows," said Vinod Nair, Head-Fundamental Research at Geojit BNP Paribas Financial Services. Moreover, Goods and Service Tax (GST) amendment bill and the land acquisition bill, which got stuck in Rajya Sabha, raised fears of delay in government's economic reforms. Participants were also cautious ahead of the release of retail inflation data for April and IIP data for March. Globally, volatility in the bond markets weighed on global stocks, adding to investors' anxiety over Greece's finances. Ten-year US Treasury yields hit their highest since early December, while German yields added 8 bps to 0.67 percent. Mixed Asian cues and weak European stocks in morning trade on concerns over Greece's future in the euro zone kept investors on edge. Back home, the 30-share BSE index opened in the negative zone after rallying for the last two days. 

A major sell-off in blue-chips dragged the index below the psychological 27,000-mark to touch a low of 26,837.39. The index finally settled down by 629.82 points or 2.29 per cent at 26,877.48. It had rallied by 908.19 points in the last two session on government's move on MAT issue and hopes of an RBI rate cut. The 50-issue Nifty slipped below the 8,200-level by falling 198.30 points or 2.38 per cent to close at 8,126.95. Intra-day, it moved between 8,326.65 and 8,115.30. 

Meanwhile, total investor wealth today plunged over Rs 2 lakh crore following a crash in BSE barometer. Of 30-Sensex stocks, 28 ended lower, while Dr Reddy's and Hero MotoCorp managed to finish in the green. "Markets corrected steeply after being spooked by fears of Greek’s exit from the euro zone. Greece was seen gaining limited support from the euro zone on Monday for the progress it has made in difficult bailout requirements" said Hiren Dhakan, Associate Fund manager at Bonanza Portfolio.

Rs 2 lakh cr from investor wealth

About Rs 2 lakh crore of investor wealth was wiped off following a crash in the stock market with the BSE benchmark Sensex slumping 630 points over concerns that key reform bills may get delayed.
Tracking severe weakness in the stock market, the total investor wealth of BSE-listed companies plummeted by Rs 2,04,724.62 crore to Rs 99,05,243 crore.
The Sensex fell sharply to slip below 27,000-level. The index finally settled 629.82 points or 2.29 per cent lower at 26,877.48.
The Sensex had rallied 908.19 points in the last two session.
"The Indian stock market has seen exceptional volatility this month. FIIs have remained in the sell mode since mid- April, which has been one of the key reasons for the weakness in Indian equities," said Hitesh Agrawal - Head Research, Reliance Securities.
"Today's weakness can also be attributed to global cues with the Asian and European indices trading weak. Sustained depreciation in rupee coupled with the ongoing weak corporate earnings season have also created nervousness," he added.
Goods and Service Tax (GST) amendment bill and the land acquisition bill got stuck in the Rajya Sabha, raising fears of further delay in government's economic reforms, traders said.
Market participants were also cautious ahead of the release of retail inflation data for April and IIP data for March, they added.
Among the 30-Sensex stocks, 28 ended the day with losses led by Tata Steel and BHEL. The only two gainers were Dr Reddys Lab and Hero MotoCorp.
On the BSE, 1,962 stocks declined, while 746 advanced and 95 remained unchanged.

SENSEX TAREGT 33000...NO CHANGE

American brokerage Bank of America-Merrill Lynch (BofA-ML) today retained its Sensex target at 33,000 by December, but said in the medium term, the Dalal Street will see more volatility. "We continue to maintain our December Sensex target of 33,000 points. But near-term the markets will remain subdued and range bound with a negative bias, as quarterly earnings are low and more earnings downgrades are likely over the medium term," BofA-ML Analyst Jyotivardhan Jaipuria said in note.

"Also, the India versus GEM premium is near all-time at 35 per cent the GE averages," Jaipuria said. The markets are likely to witness another quarter of weak growth in the ongoing earnings season. Mirroring the previous quarter when aggregate Sensex profit fell 1 per cent year-on, profit growth is once again going to be subdued at 1 per cent, he said, adding he sees more earnings downgrades for the next few months before stabilising and earnings upgrades may not start until next year.

On a top-down basis, we expect 2015-16 consensus growth estimates of 18 per cent to get downgraded to 12-13 per cent growth, he added. However, he noted that FIIs have the all-time high overweight on the domestic market. This is on the back of nine consecutive quarters of positive FII inflows. Strong FII inflows have resulted in all-time high foreign ownership for the markets at about 28 per cent. While GEM funds have a 12.8 per cent weight on the country against the index weight of 7.7 per cent, which is a massive 510 bps OW.

Noting that the Sensex has rich valuations, he said post-2014 polls, the markets re-rated and have been trading at 16 times one-year forward PE. And despite the recent bloodbath, the valuations are still a 10 per cent premium to long term averages. Also, in the GEM context it is currently at a 35 per cent premium to GEM, he said.