Posts Tagged ‘india’

Soybean oil….. “Prices sail along with the winds over harbor”

Soya bean oil is the second leading vegetable oil traded in the international markets after palm. Palm and Soya bean oils together constitute around 68% global edible oil trade volume, & Soya bean oil alone constitutes of 22.85% of the whole.

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Soybean Oil World Scenario –A SNAP SHOT

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•World Production: U.S. (38%) is the biggest producer of soybeans followed by Brazil (13-18%) and Argentina (27-37%).

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•World Imports: China, Japan, Mexico, Taiwan and South East Asia are major importers of soybeans while India, China, Pakistan, Bangladesh, South & Central American countries (Peru, Venezuela, Bolivia, Dominican Republic) and Africa (Egypt, Morocco) are major buyers of soya oil in world market.

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•World Exports: U.S. is the largest exporter of soybeans while Argentina is the biggest exporter of soy oil followed by Brazil.

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Hot talks………….. China, the world’s biggest user of cooking oils, and Argentina remain in talks about China’s embargo on imports of soybean oil from the South American nation.

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China imports all its soybean oil almost from Argentina and Brazil. India imports nearly 1 million tonnes of soya oil yearly from Argentina, Brazil and US. India imported 192649 tons of Crude Soya oil during June 2010. According to USDA, the country is estimated to import 1.19 million tonnes of soy oil for 2010-11, while China is estimated to import 2.15 million tonnes during the same period.

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China has frozen all Argentine soybean oil imports in retaliation for Buenos Aires decision to restrict imports of Chinese products. The Chinese blocking of Argentine soybean oil threatens a key hard currency earner for the South American nation, estimated at 2 billion US dollars for the current year.

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Domestic scenario: India is the sixth largest producer of soya oil with account of 4% of world production. In India, Madhya Pradesh produces estimated 53% of the country’s soybean followed by Maharashtra (34%) and Rajasthan (8%). It is sown during June-Jul period and harvested by October in India. The domestic production soyabeen is around 1.4 million ton in 2009-10. Almost 70 to 80% of total oilseed production is crushed for oil while the balance quantity goes for food, feed and seed use in the country.

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So total soya oil production is around 0.7-0-8 million ton in 2009-10, While annual consumption is around 2.0-2.2 million ton with a market value of `9000 crore.

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The above chart shows that during January-June 2010, imports of soya oil totalled almost 7.36 lt against 5.99 lt a year ago. According to the Solvent Extractors Association, the increased imports have resulted in inventories building up at the ports.

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Imports getting surge in December 2009 primarily in view of the kharif oilseeds crop hit by the erratic weather and the rupee’s rise against the dollar.

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Kharif production has been estimated at 161 lt against 178 lt last year. Rabi output, however, is seen marginally up at 101.31 lt against 99.11 lt a year ago.

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Spot markets of Indore and Mumbai serve as the ‘reference’ market for Soya oil prices.

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The prices in Indore reflects the domestically crushed soybean oil (refined and solvent extracted) while Mumbai price indicates the imported soy oil price.

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In exchanges….. Futures trading in soya oil essentially serve as the right tool for hedging against market-linked risk by all those in the value chain of the commodity- the soyabean producing farmers, processors, brokers, speculators, soyabean and meal traders, traders of other oilseeds and oils, etc.

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CBOT is the biggest exchange for soybean oil. In India, NCDEX and NBOT are the major exchanges for these commodities. Its contracts are traded with high liquidity. The domestic future prices of soya oil are largely influenced by the international edible price movements (especially Malaysian palm oil and soybean oil at CBOT), soybean availability in domestic markets, demand for meal and other associated supply-demand factors of soybean and its derivatives.

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Current scenario: Refined soyaoil futures is trading up with August and September contracts moving up by 0.45% and 0.54% respectively. August soyoil futures traded at `484.70 while September futures were at `487.50 per 10kg. Crude Soya oil import price is US$ 880 per ton at Mumbai port whereas Crude Palm oil import price is US$ 805 which indicates the difference of less than 10 percent between the two. There is zero import duty on crude soybean oil in India while it is 7.5% for refined oil.

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Weekly Update 12th – 16th July

Stocks in world markets saw huge gains as investors viewed that the recent correction out of fear of double-dip recession in advanced economies has actually overlooked improving outlook for the company’s earnings. Investors sitting on the sidelines bought stocks with the upward revision in earnings estimates for U.S. companies. The gains in markets got a further boost after China said that it will keep a moderately loose policy and South Korea raised interest rates.

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Belief of Asian and Emerging nations will be able to withstand the storm coming from advanced economies rose with the interest rate increases in India, South Korea, Taiwan and Malaysia. The European Central Bank left interest rates unchanged as the sovereign debt crisis are still posing a serious threat to regions recovery.

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The IMF raised its forecast for global growth to 4.6 percent in 2010, the biggest gain since 2007, compared with an April projection of 4.2 percent reflecting a stronger than expected recovery in first half and at the same time giving warning that financial market turmoil has increased the risks to the recovery. However, IMF has not revised the next year growth projections of 4.3 percent. The IMF urged developed economies governments to commit to implementing “credible” plans to lower their deficits over the medium term, including the adoption of binding, multiyear targets and said that they don’t need to start fiscal tightening before 2011. It said that monetary policy in advanced economies can remain “highly accommodative for the foreseeable future,” because inflation is expected to remain “subdued,” helping mitigate the effects of fiscal consolidation on growth. The growth forecast for emerging markets was raised to 6.8 percent, from 6.3 percent in April.

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The fastest growth rate will be China’s 10.5 percent, followed by India’s 9.4 percent and Brazil’s 7.1 percent, the fund said. On the domestic front with the recent improved outlook in the monsoon situation and expectation of strong double digit gain in Index of Industrial production would keep the markets on a upbeat note. The result season that is going to start in the coming week and guidance by the companies for the rest of the year is further expected to set the momentum of the markets.

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Indian stock markets are in a clear uptrend though other world markets which were in a downtrend took a sharp counter rally from lower levels. We will have to wait and watch whether the rally which has started in other markets can sustain or not..

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Nifty has support between 5250-5200 levels and Sensex between 17500-17300 levels.

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Volatility is spreading in entire commodity complex and thus investors are keeping a tight vigil on relative changes to find the best value. Fundamentals of Asian countries are still constructive but it is Euro zone which is still giving red signals. For the time being, commodities should move in a range. Later half of the week is full of event risk as some important data’s from US, UK, Japan etc. can speak about the health of economy, which may provide some much needed direction to the commodities. In NCDEX, volume of July contract is shifting towards August contract, hence some volatility in premium is expected in near term.
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CHILLI

Description

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Chilli is the dried ripe fruit. It is widely distributed in all tropical and sub-tropical countries including India.

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Production in india

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In India, Chilli is a kharif season crop and an important cash crop. It is grown in all parts of India covering about 7,33,800 hectares. The harvesting season starts in January and arrivals peaking in February-April. Sowing is held mainly during August-October. Several varieties of chillies are cultivated in India. Sanam, Bydagi, Wonder, Hot, Jwala and LC334 are the most popular amongst them.

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India is the largest producer and consumer of chilli in the world contributing nearly 50 percent of the global output. So any decline in output would have an immediate impact on prices. Climatic conditions are also the major variables which make chillies hotter.

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In peak season, nearly one billion bags of chillies (a bag contains 35-50 kg) worth Rupees 500 crore arrives in the Guntur market. Other major markets are Khammam and Warangal in Andhra Pradesh and Bellary and Raichur in Karnataka.

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According to the Spices Board, Consumption of chilli is increasing substantially as the branded powder sales growing at a compound annual growth rate of 11%.

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Over 30 percent of chillies produced in India are converted into powder.

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International Scenario

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In chillies, the major producing countries are India, China, Peru, Bangladesh, Hungary and a few others. Production of major countries is growing at a CAGR of 5.2 percent. World trade in chillies is put at 4 lakh tonnes. The Indian share in global production range from 50-60 percent, China and Peru are growing fast and Hungary shows a de-growth. However, India is the only one source for hot chillies.

Export Scenario

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India is a major exporter of chillies with major destinations of West Asia, Far East, USA, Sri Lanka and Bangladesh. India also exports chillies oleoresins in good quantities.

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In the first half of 2009-10, exports to Pakistan were nil as against 22,000 tonnes during the year-ago period. Indian chilli exports fell in the first half of the current financial year as China importing it from the Pakistan market. Chilli exports picked up from October and during January 2010, India exported around 17,500 tonnes valued Rs 120 crore as against 11,500 tonnes valued at Rs 69 crore. In long term, exports are likely to increase as the Chinese production is on the lower side.

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Current scenario

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The total stock position of chilli in Guntur mandi of Andhra Pradesh at 48 lakh bags against 25 lakh bags reported last year in the same period. The total production of chilli in the current year is also likely to be around 1.68 lakh bags against 1.25 lakh bags reported last year due to steady prices of chilli during the sowing period.

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Currently chilli prices are trading in pressure as arrivals increase. But good demand and cold chain facilities developed by affluent farmers are likely to help stabilise the chilli prices. Heavy arrivals also promote more exports on lower prices. The forward month contract is trading in contango (i.e prices of next month contract is higher than the most active traded current month contract.

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The active June contract chilli futures made a low of Rs.4520 per quintal from a high of Rs.5500 per quintal and declining by 21.68 %. Chilli future (June_NCDEX) has seen a drastic fall in regards to volume, from 2000 lots to 400 lots in these days, while the open interest has seen a continuous rise.

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JEERA………THE FLAVORING AGENT

Jeera is a flavoring agent of Indian food as well as commodity market. In India, Jeera is grown during the rabi season. India is largest producer, consumer and exporter of jeera. The country produces around 2 lakh tonnes of jeera. It contributes about 70% in the total world production. Rajasthan and Gujarat contribute more than 90% of the total production.

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Production Scenario in India

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In the current season year 2009-10, Jeera production is expected higher by 10-15% as compared to last year. India, world’s largest jeera producer, is expected to have a production of about 27 lakh bags (of 60 kgs) in the current season year 2009-10. In India, arrival starts in February. The peak arrival season runs from March to April and continues till early May. Currently the daily arrivals are around 24000-27000 bags. So prices are trading with downtrend bias.

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Arrivals Pattern in Unjha Market (Daily average arrivals)

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February to April – 25,000 t o 35,000 bags

May to August – 4,000 to 8,000 bags

September to November – 6,000 to 8,000 bags

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Domestic Scenario

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Despite a bumper yield in the current season year 2009-10, jeera prices are expected to go up by Diwali due to stronger domestic and overseas demand over next few months and lower carryover stocks than last year. Carry-forward stocks are estimated to be around 30000 tonnes. After end of April and early May the arrival would s l o w d o w n .

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H o w e v e r , currently the daily arrival s have fallen from 30,000 bags a week back to 20,000 to 22,000 bags. Currently jeera prices are ruling in the range of Rs 11000-12000 but due to steep fall in the carryover stocks, higher domestic consumption and increased buying by traders for export, which would push prices higher from coming month. Jeera futures are trading in contango. The most active NCDEX April contract Jeera futures on NCDEX are trading in the range 11200-11400 and May futures quoting above Rs 11600.

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International Scenario

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Jeera prices also depend on the crop situation in Turkey, Iran and Syria. After India, Syria is the next biggest producer with an average production of 30, 000 tonnes. These countries influence the world jeera prices significantly. Countries like Turkey and Syria are expected to harvest their crop only by July and export demand would likely to shift to Turkey and Syria due to their competitive lower prices in world market. This may affect the movement of jeera prices at some content.

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Export of Jeera

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India exports about 140 countries including Singapore, Dubai, the US and Brazil. Last year, about five lakh bags were exported. Indian exports of Jeera declining on account of stiff competition from Turkey, Syria and Iran. They are capturing our export market by offering Jeera at lower prices and bulk of their production is reserved for export purpose. Jeera exports are expected to 14% decline to 42500 ton in April-February 2009-10 as compared to 49500 ton in 2008-09. In value term, it is expected to 8 % decline to Rs 47001.25 lacs in April-February 2009-10 as compared to Rs 51356.33 lacs ton in 2008-09.

India World”s 10th Largest Gold-Holding Country :)

The Economic Survey, which was tabled in the Parliament by the Finance Minister today noted that the year 2009-10 witnessed India becoming the world”s 10th largest gold-holding country, from a nation that pledged its bullion two decades ago to pay for imports.

The gold purchase by the government of 200 tonnes from the International Monetary Fund (IMF) took its total reserves to 557.7 tonnes, or about 6 per cent of the total foreign exchange reserves.

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India in 1991 had to pledge its gold to the Bank of England in order to pay for its imports.

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The survey said “Post-purchase, India has become the 10th largest official gold-holding country in the world,”.

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The Reserve Bank of India (RBI) in November last year concluded 200 tonnes of gold purchase from IMF as part of the country”s foreign exchange reserve management operation.

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The purchase, which was executed over two weeks during October, was an official-sector off-market transaction.

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Earlier, Finance Minister Pranab Mukherjee had said that the purchase of gold provided a healing touch to the pride of the nation, which was dented about two decades earlier when the country sold its gold for a few hundred million dollars.

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Meanwhile, the survey sates that IMF”s Executive Board, on September 18, 2009 announced its decision to sell 403.3 metric tonnes of gold as a central element of its New Income Model and in order to increase its resources for lending to low-income countries.

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The IMF also decided that the initial offer of the sale would be directly to official holders, including the central banks. Consequent of this, the RBI concluded the purchase of 200 metric tonnes of gold from IMF, under the IMF”s limited gold sales programme, at the cost of US$ 6.7 billion, in November 2009, as part of its foreign exchange reserves management operation.

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The purchase was an official- sector off-market transaction and was executed over a two-week period during October 19-30, 2009 at market-based prices.

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With this purchase, gold holdings in the country”s foreign exchange reserves have increased to 557.7 tonnes from 357.7 tonnes, which is about 6 per cent of the reserves. Post-purchase, India has become the 10th largest official gold-holding country in the world.

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Stay Tuned for More updates.

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BUDGET PREVIEW 2011 – Final Part :)

Continuing The Final Part Of The Budget Preview 🙂

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We believe that this year Finance Minister will take a gradual move towards fiscal consolidation by increase in Excise duty. Excise duty forms around 40% of Indirect Tax collections. Excise duty collections were down by 13% in April to December period to close to Rs. 70,000 crore comprising around 66% of Budgeted Estimates of Rs. 1,06,477 crore. The factors that contribute to our belief are; 😀

·Though the growth in corporate sales is not astonishing but profitability has improved to due to various cost control efforts which is quite evident by the corporate tax collection that have shown a growth of 44% in December 2009. Cumulatively Net direct tax collections increased by 8.5 per cent during April- December 2009.

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·India being a consumption story has shown healthy growth in sales of consumer durables. For instance Automobile industry’s sales went up by 32 per cent in December over the same month in 2009. It is believed that a gradual hike in duty will get absorbed without affecting medium term prospects of the industry.

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·Partial rollback would also help the finance ministry effect a calibrated integration of excise duty with the services tax by the end of the next financial year, when the proposal for a Goods and Services Tax is likely to be implemented.

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·Finance Minister had indicated that he would like the fiscal deficit for 2010-11 to be around 5.5 per cent of GDP. The proposal to raise excise duty by two hundred basis points is being endorsed also to help the finance ministry raise more revenue and stick to the projected fiscal deficit target.

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Disinvestment would be the key focal point in the Budget. We believe that the Finance Minister would place high targets from the PSU sale proceeds. The factors that contribute to our belief are:

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·In order to bring Fiscal deficit under control that would subsequently ease upward pressure on interest rates.

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·This will help Investment in social sector projects which promote education, health care and employment & will also help in Capital investment.

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On the Corporate Tax front, we believe that the Finance Minster is unlikely to lower tax to 25% from the current 30% as per Industry demands. The rationale behind our belief is:

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·The direct tax code that proposes corporate tax to be 25% will be implemented in fiscal 2011 – 2012 & Industry have to wait till its implementation as it will replace the existing Income Tax act.

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·Already, government is trying to make up more tax revenue & is unlikely to take step in this direction as it may come as an obstacle in order to control fiscal deficit.

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On deregulation of Petroleum sector, we believe that in order to cut down on subsidies government could provide the road map for partial deregulation of the petroleum sector. The road map may provide OMC’s to review the prices of petrol and diesel on a regular basis however, LPG and kerosene could continue to be administered by the government. Factors that complement to our belief:

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·In view of the commitment of the UPA regime to flagship social security programmes that require huge allocations, Mr. Mukherjee has told Mr. Deora that it would not be possible to provide huge subsidies to the OMCs in future.

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·On the External Economy side, we expect that the Finance Minister may continue to provide certain concessions like interest subsidy and extension of other export oriented schemes. The rationale to our belief:

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·In the recent two months i.e. November & December, merchandise exports registered a positive growth of 18.2% & 9.3% respectively. But in the period of April to December 2009, the exports were still negative to the tune of 20% as compared to the corresponding period.

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·The world economic recovery especially in US & Europe is still questionable & the regions constitute approximately 15% & 21% respectively of our merchandise exports, thus directly affecting the trade.

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·Sectors such as engineering goods, jute, carpets, handicrafts and leather goods are continue to be in bad shape, others such as gems & jewelry drugs, plastics and petroleum products are showing improvement.

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·Concluding, the main point is that it may not be a good time to take back the stimulus so soon that may derail the recovery.

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BUDGET PREVIEW 2011 – Part 1 :)

At last the much talked topic “BUDGET” among AAM ADMI, CORPORATES or INVESTORS that comes to INDIA – is approaching. “The million dollar question is that will 2010 budget be another year to cheer the economy by giving some relief in indirect taxes, personal income tax and by implementing various schemes to induce social & infrastructure sector in order to maintain high trajectory growth”.

Generally, it is seen that the incentives which are given in the period of recession or slow down and moreover, when the government in power is about to complete its tenure, are above from expectations. It is seen that budget in two years usually comes good when the Govt. is in the last year of power & in the first year of the rule as a vote of thanks.The mid three years out of the five year term usually remains tight on the policies.

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For the common man, we expect that Finance Minister may raise the exemption limit in personal income tax & investment limit Under Sec.80C. The reason to our belief:

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1. The rocketing prices of food articles like sugar, pulses and vegetables have been cutting the pockets of a middle class.

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2. By coming out with these measures (above mentioned) the government will lower the tax incidence on the common man & will also help it to put the opposition on backfoot.

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By & large everyone is aware of the level of fiscal deficits globally and many of us know that it is essential to minimize deficits & returning to fiscal consolidation is necessary. The main question is why it is so important. Let’s look at the consequences of high fiscal deficit:

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A risk to high government borrowings leads to more debt servicing that cuts expenditure on various social welfare schemes, if TAX revenues do not matchup. In the current financial year, out of the 4 lakh crore borrowing, more than 50% has gone towards interest payments.

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Secondly, the higher government borrowing from market means less availability of funds to private borrowers. In the current Fiscal year, due to dismal credit growth, we haven’t seen pressure on Interest rates. But going forward we foresee normal credit growth in the next financial year. However as the government borrowing is expected to remain at same level in the next fiscal, pressure on interest rate is expected.

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So, this year the theme of Budget would any way be to maintain economic recovery through investment for building infrastructure rather than funding the expenses/consumption. But at the same time focus will be to bring down the fiscal deficit.

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The catch here is bringing down deficit by cutting expenditure means risk to growth & the other alternative is to increase revenues. While the direct tax collections are encouraging, on the indirect taxes front the government is still struggling to get desired revenues. This is because after September 2008, when the global financial system collapsed, the government came out with stimulus packages to keep up the desired growth pace.

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Excise rates since December 2008 had been progressively cut from 16, 12 and 8 per cent to 10, 8 and 4 per cent respectively depending on the product in question. Service tax was also reduced from 12 to 10 per cent.

Farm Production likely to Go Down

Farm Production likely to Go Down

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Due to decline in kharif production on account of drought and floods in several parts of India,the output from agriculture sector is expected to decrease by 0.2% in the current fiscal against 1.6% growth in the previous year stated the Central Statistical Organization (CSO).

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However, late last month, the RBI in its Q3 review of the monetary policy had projected that the agricultural GDP growth in 2009-10 is likely to be near zero.

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Production of foodgrains and oilseeds is likely to decline by 8% and 5% in the 2009-10 crop year compared with the previous year.

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The sugarcane output is likely to dip by 11.8% and that could add up to pressure on the sugar prices.

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Meanwhile, among the horticultural crops, production of fruits and vegetables is expected to increase by 2.5% and 4.8%, respectively, in 2009-10.

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Rice production is estimated to be 71.65 million tonnes in the 2009-10 kharif season as compared to the actual production of 84.58 million tonnes in the previous season.

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On the other hand, production of coarse cereals is also likely to fall to 22.76 million tonnes from the actual production of 28.34 million tonnes in the 2008-09 kharif season.

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🙂

Food Inflation Rose for the Second Week on the Trot

Hello Friends here we come up with the Latest Agri Commodities updates from various parts of the country.

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Food Inflation Rises for the Second Week

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Food inflation rises for the second week

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Annual food inflation rose for the second week on the trot, affirming RBI’s fears of a spill over into other commodities and services and mounting pressure on the government to take more measures to arrest prices.

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Annual inflation in food articles rose to 17.56 per cent for the week ended January 23 from 17.4 per cent in the previous week, partly due to a poor harvest after the worst monsoon in nearly three decades, according to data released by the commerce ministry on Thursday.

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While prices of wheat, pulses and vegetables have increased, cereals and rice have become cheaper.

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Fuel price inflation, in tandem with global oil prices, increased to 5.88 per cent from 5.7 per cent in the previous week, spurred by a spike in light diesel oil and furnace oil prices.

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The wider inflation, as measured by the wholesale price index (WPI), has already risen to 7.31 per cent for December, forcing RBI to raise its forecast to 8.5 per cent for the fiscal year-end.

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In Other major Commodities Update, there is a news of Centre approving the largest quantity of wheat under its open market sale scheme (OMSS) for bulk buyers to consumers in the North zone and India’s corn exports could drop by 60 %in the year.

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Nod for salve of 4.4 Lt wheat in North:

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The Centre has approved the largest quantity of wheat amounting to 4.43 lakh tonne under its open market sale scheme (OMSS) for bulk buyers to consumers in the North zone.

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Sources said, for bulk consumers in South zone around 2,01,000 tonne of wheat has been approved by the government for sale from Food Corporation of India (FCI) godowns till now.

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While for East zone, largely comprising of states like West Bengal, Orrisa and Bihar, around 63,900 tonne of wheat has been approved.

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Almost 1,07,000 tonne of wheat has been approved for sale in West zone of the country and 9,500 tonne has been approved for North-Eastern states.

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Of the 8.4 lakh tonne of wheat, approved in total, almost 77% amounting to around 6.36 lakh tonne has been lifted by bulk consumers till Wednesday.

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Corn exports likely to decline 60% this year:

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India’s corn exports could drop by 60 % in the year to September due to a poor domestic crop, quality issues, lower global prices and good crop prospects overseas, traders and industry officials said on Thursday.

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Likely exports are between 1.0-1.3 million tonne due to late harvests because of the drought and rising domestic demand, Amit Sachdev, India representative of the US Grains Council said.

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🙂

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Indian Economy Set to Become World 3rd Largest in PPP Category

Indian Economy Set to Become World 3rd Largest in PPP Category

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According to a latest report by consultancy firm PricewaterhouseCoopers (PwC), India could move into third place in the individual country GDP ranking in the purchasing power parity (PPP) category ahead of  Japan in 2012.

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This report projections stand against the Goldman Sach’s projection of 2032 in its BRIC’s (Brazil, Russia, India, China) report.

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China, which was projected by BRIC’s report to overtake the US as largest economy by 2041, looks set to achieve this by sometime around 2020, the PwC report said.

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“It seems highly likely that by 2030, China will clearly be the largest economy in the world on this measure (PPP), ending over a century of US economic hegemony,” top official of PwC, said in the report.

It said the credit crisis has accelerated the pace at which the emerging economies will overtake the developed ones.

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The report also projected that India is likely to grow faster than China after 2020.

“This is because of India having a significantly younger and faster growing population than China, and also due to it having more catch-up potential as it started from a lower level of economic development than China,” it said.

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However, the report cautioned that India will only realize this if it continues to pursue growth-friendly economic policies of the last two decades.

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As per the report by 2020, it is projected that seven largest emerging economies, E7 (China, India, Brazil, Russia, Mexico, Indonesia and Turkey) would be overtaking the G7 (US, Japan, Germany, UK, France, Italy and Canada) economies.

This will lead to a tectonic shift in the global economic power.

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