Reserve Bank of India (RBI) Governor D Subbarao on Thursday said India’s economic recovery will be sharper and swifter than many others, once the world economy starts to recover from the global financial crisis of 2008. Some sectors of the economy have shown incipient signs of recovery, he said.

“In my view, India’s recovery will be faster as we are backed by strong fundamentals and untapped growth potential. Our overarching policy objective is to restore the economy to a high growth path, consistent with price stability and financial stability,” he said.

Addressing a press conference here after holding the central board meeting of RBI, Subbarao clarified that the Indian economy was not constrained by demand, but by supply. Household income in India was substantially higher than in China, as a percentage of the gross domestic product (GDP).

“In my view, demand is there, but we need to invest more in infrastructure, manufacturing and services sectors to achieve rapid recovery,” he said. Further, Subbarao said the pace of decline in certain areas has started to moderate, with some sectors showing tentative signs of recovery. “There are incipient signs of revival of business confidence. But, these signs may have to be more widespread across indicators and more durable to draw any clear inference on the timing and pace of recovery.”

According to him, certain sectors like FMCG, capital goods, cement and steel are doing reasonably well. The two-wheelers and commercial vehicles sector have shown signs of recovery. The sowing of rabi crop has improved by two million hectares in the present season as against a fall of 2.4 million hectares in the kharif season. Port traffic, freight revenues and road transport are showing improvement. And, the provisional results of 954 companies shows the growth in profit after tax in Q4 of 2008-09 is minus 2.1 per cent, as compared to minus 53.4 per cent in the third quarter, he added.

However, he said, there are still some negative indicators. Most notably, the Index of Industrial Production (IIP) is still negative. Rural consumption demand depends on the monsoon and crop prospects and in the next few months, we are hoping that private sector demand and investment will pick up, he stated.

“The balance of assessment at this stage continues to support our earlier assessment of real GDP growth of about 6 per cent for 2009-10. Once the crisis is behind us, managing inflationary expectations and unwinding the present expansionary policies will be our task and challenge.”

“Like all emerging economies, India too has been impacted by the global financial crisis, and by much more than what was expected earlier. Short and medium term outlooks are decidedly mixed.

GDP growth has moderated, reflecting decelerating production, negative export growth, dented corporate margins, slowing credit demand and diminished business confidence,” the governor said.

However, he said, there are some strong positives that point to recovery. Inflation has declined sharply, the banking system remains sound, well-capitalised and prudently regulated. “The comfortable foreign exchange reserves should help us manage any short-term constraints in the balance of payments.

Since there is no discernible “wealth loss effect”, consumption, specially rural consumption, is holding up. Because of India’s mandated priority sector lending, institutional credit for agriculture has remained unaffected,” he said.

Source: Business Standard

A survey undertaken by an industry body has revealed higher percentage of firms reporting positive growth in sales in the three month ended March 2009, compared with the immediately preceding quarter (October-December 2008).

The survey by the Confederation of Indian Industry (CII), a lobby group, said 70 per cent of the firms surveyed reported growth in the January-March 2009 period, compared with 66.67 per cent of companies in the period ended December 2008. This, according to CII, shows signs of marginal recovery with a few sectors moving from negative growth to moderate growth. “While on a yearly basis the manufacturing sector has slowed down, there are some green shoots from a few sectors that have

demonstrated a marginal pickup during the second half of 2008-09 when compared with the first half. These demonstrate a cautious optimism on signs of recovery,” said Chandrajit Banerjee, director general of CII.

In a survey carried out by the CII covering companies and associations that contribute around 65 per cent of the total industry output, high growth (between 10-20 per cent) was reported by 18.75 per cent of the 80 sectors for April-March 2009 as against 30.7 per cent in April-March 2008.

Source: Business Standard

Two out of every five companies in India Inc generated better growth in revenues for the year ended March’09 compared to 2007-08 bucking the overall slowdown in the economy and one in six companies accelerated profit growth, according to an ETIG study. The study, which looked at financials of 1,050 companies, showed as many as 400 firms reported higher growth rate of net sales for FY09. Besides looking at firms who have announced their annual results ended March, the study clubbed together accounts of last four quarters of other companies who follow a different financial calendar to broaden the sample.

The outperformers span diverse sectors such as information technology, auto, sugar, agricultural inputs, cement, FMCG and pharmaceuticals. Some notable firms who reported better revenue growth despite the slowdown in the economy are, Hero Honda, Coromandel Fertilisers, Axis Bank, MRF, Cipla, State Trading Corporation, UltraTech Cement and Infosys. Although a part of the better sales growth could be due to higher inflation pushing up prices of products, which has moderated over the last one quarter, it also shows for many companies demand has not been impacted to any great extent. But the number of firms reporting revenue growth over the previous year declined to 700 compared to 800 firms which recorded revenue growth in FY08 over FY07.

Besides revenues, many firms also improved their earnings performance despite facing cost pressures through raw material prices which peaked last year as well as high interest rates. As many as 180 or one sixth of the sample actually reported better net profit growth compared to the previous year. Firms that managed to accelerate profit growth include IT bellwether Infosys Technologies, the country’s second-largest private bank HDFC Bank, Coromandel Fertilisers the second largest phosphatic fertiliser producer in India and the largest two-wheeler maker Hero Honda.

Siemens, Shree Cement, United Phosphorous, Vardhman Textiles, Uflex, Cipla, Alstom, Nagarjuna Fertiliser are some other companies that have managed to accelerate their profit growth or made a turnaround. A number of banks have also come up with better results on the back of higher interest and treasury income. Around 60 companies came out of the red, 50 firms managed to prune losses and another 35 firms reported lower decline in profits. Out of 1,050 firms in the sample 80% reported profits compared to 90% profit making firms the previous year. One third of the sample recorded growth in profits and a quarter or 250 odd firms clocked double-digit profit growth for the year. Amongst the companies, which moved out of the red to clock profits include Balrampur Chini Mills, Eveready Industries, Dunlop India, Kinetic Motors, Mysore Paper Mills and Escorts.