 "India in numbers: Food inflation at 9%, car sales low")
Food inflation
Food-price inflation in India may accelerate after the government raised prices it pays farmers for food grains and oilseeds, making crops more expensive, according to a Bloomberg report .
The minimum prices for monsoon-sown crops including paddy, soybeans and corn were increased to help boost planting, the farm ministry said in New Delhi on Thursday. The total subsidy bill for 2011-12 is pegged at Rs 1,43,569 crore. The food subsidy bill is estimated at Rs 60,573 crore. The government is also looking to table the Food Security Bill which will soak more money and inflate subsidies.
An index measuring wholesale prices of agricultural products advanced 9.01% in the week ended May 28 from a year earlier, according to the report. Overall inflation in India has been above 8% for 16 months.
[caption id=“attachment_23280” align=“alignleft” width=“380” caption=“TheWorld Bank expects India’s Gross Domestic Product (GDP) to ease to 8% in fiscal 2011-12 from 8.8% in fiscal 2010-11.Reuters.”]
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May 2011 car sales
Domestic auto sales grew at its slowest pace in 20 months preceding May 2011,according to data issued by the Society of Indian Automobile Manufacturers (SIAM).Sales rose 10.6% to 1.37 million units from a year earlier. Car buyers are wary about rising interest rates and fuel costs. The cost of ownership of a car is also up 16% and is likely to go up further if the government raises fuel prices. Car dealers are sitting on a more inventory . Shares of auto companies have underperformed broader indices in anticipation of this slowdown in sales.
GDP to ease to 8%
The World Bank expects India’s Gross Domestic Product (GDP) to ease to 8% in fiscal 2011-12 from 8.8% in fiscal 2010-11. The slowdown stems from a moderation in domestic demand as elevated inflationary pressures cut into household spending, and restrictive monetary conditions contributed to a dampening of investment. “In particular, investment growth decelerated sharply in Q1-2011 to 0.4% from 7.8% in Q4-2010 and 14.1% for 2010 overall (year-on-year),” the bank observes.
At the sectoral level, a recent good harvest buoyed agricultural production, following poor crops on low rainfall with the 2009 monsoon. In contrast, industrial output growth was weak in early-2011, the World Bank release added.
FM admits to slippages in revenue targets
Finance Minister Pranab Mukherjee has said that the government is unlikely to achieve revenue targets as estimated in the budget in February 2011. Mukherjee told chief commissioners and other senior officials of the Central Board of Excise and Customs(CBEC) on Wednesday that the revenue target of Rs 3,92,908 crore for indirect taxes for 2011-12 was challenging and hinted at a mid-course revision.
The minister was over-optimistic on I-T collection and food subsidy targets as well, according to media reports. This is no good news for the stock market that heard ‘fiscal discipline’ as the goal of the budget announcement.
Roads
The Indian government will award contracts for building 11,050 km roads in the current fiscal involving an estimated investment of Rs 70,000 crore, PTI reports. This is according to the target set by the Ministry of Road, Transport and Highways.
Prime Minister Manmohan Singh reviewed road building plans on Wednesday. Of the total work proposed to be awarded this fiscal, 7,300 km would be under the National Highways Development Project, an increase of 44% over 5,095 km in 2010-11. Under this component, investment is earmarked at Rs 57,000 crore. Companies like Sadbhav Engineering, IRB Infrastructure, IL&FS Transportation Network could look forward to bidding for these contracts.