2011 Review : A Year of Change and Righteousness

Indian Core Industries grew by 6.8% in November

Index of Eight Core Industries (Base: 2004-05=100), November 2011

The summarized Index of Eight Core Industries with 2004-05 base is given at the Annexure. The Index of Eight core industries having a combined weight of 37.90 per cent in the Index of Industrial Production (IIP) stood at 141.1 in November 2011 with a growth rate of 6.8% compared to its growth at 3.7% in November 2010. During April-November 2011-12, the cumulative growth rate of the Core industries was 4.6% as against their growth at 5.6% during the corresponding period in 2010-11. Coal: Coal production (weight: 4.38%) registered a growth of 4.9% in November 2011 compared to its growth at 0.7% in November 2010. Coal production grew by (-) 4.0% during April-November 2011-12 compared to its growth at 0.4% during the same period of 2010-11.  Crude Oil: Crude Oil production (weight: 5.22%) registered a growth of (-)5.6% in November 2011 compared to its growth at 17.0% in November 2010. Crude Oil production registered a growth of 2.9% during April-November 2011-12 compared to its growth at 11.5% during the same period of 2010-11. Natural Gas: Natural Gas production (weight: 1.71%) registered a growth of (-) 10.1% in November 2011 compared to its growth at 5.5% in November 2010. Natural Gas production registered a growth of (-) 8.5% during April-November2011-12 compared to its growth at 19.9% during the same period of 2010-11. Petroleum Refinery Products (0.93% of Crude Throughput)*: Petroleum refinery production (weight: 5.94%) had a growth of 11.2% in November 2011 compared to its growth at (-) 3.5% in November 2010.  Petroleum refinery production registered a growth of 4.5% during April-November 2011-12 compared to its 0.8% growth during the same period of 2010-11. Fertilizers: Fertilizer production (weight: 1.25%) registered a growth of (-) 2.4% in November 2011 against its growth at 0.0% in November 2010.Fertilizer production grew by (-)0.1% during April-November 2011-12 compared to its growth at (-) 1.7% during the same period of 2010-11.  Steel (Alloy + Non-Alloy) : Steel production (weight: 6.68%) had a growth rate of 5.1% in November 2011 against its 7.6% growth in November 2010. Steel production grew at a same rate of 8.2% during April-November 2010-11 and 2011-12. Cement: Cement production (weight: 2.41%) registered a growth of 16.6% in November 2011 against its (-) 4.3% growth in November 2010. Cement Production grew by 4.3% during April-November 2011-12 compared to its growth at 5.3% during the same period of 2010-11. Electricity: Electricity generation (weight: 10.32%) had a 14.1% growth in November 2011 compared to its 3.5% growth in November 2010. Electricity generation grew by 9.3% during April-November 2011-12 as against its 4.6% growth during the same period of 2010-11.

PIMCO sees as MINSKY for 2012

 
PIMCO Cyclical Outlook: Deleveraging, Austerity and Europe’s Potential Minsky Moment

• ​As things stand today, it is more likely that the ECB will leap to a rescue only when it is too late. Absent any increase in private or external sources of aggregate demand, the eurozone economy will likely experience a recession in 2012.
• Chinese deleveraging and rebalancing could mean much slower Chinese growth and a smaller impact of Chinese aggregate demand on the global economy.
• We expect the global economy to grow by 1% to 1.5% in 2012. This is significantly slower than the 2.5% growth rate achieved in 2011 and the 4.1% rate achieved in 2010. 

The year ahead will likely be very challenging for the global economy. Growth faces several hurdles that we believe collectively will impose a sense of greater uncertainty and increased volatility on financial markets. These hurdles include the need for accelerated balance sheet deleveraging, slowly creeping but surely rising risks of financial and economic de-globalization, and the constant drum beat of re-regulation, particularly in developed country banking systems.

Global balance sheet deleveraging will play the dominant role in PIMCO's current cyclical economic outlook. Front and center in this regard is the rapidly progressing sovereign debt crisis in the eurozone, the debt deflationary feedback loop associated with it, and the quality and quantity of policy responses applied to contain it. As goes the eurozone deleveraging, so goes the global economy over the next six to 12 months.

 

The eurozone is facing an accelerated reversal of imbalances accumulated over several years after the creation of the euro. These imbalances are the product of differing real trends in productivity, labor flexibility, and national savings and investment rates across the member nations of the eurozone. Prior to the implementation of the single European currency, current members had individual currencies and individual control of their respective money supply, making it relatively easy to absorb real economic differences via relative currency value changes and inflation differentials. Today, however, those countries that adopted the euro do not possess the same degree of flexibility needed to smoothly diffuse frictions along these fault-lines. With one common currency and one common central bank, but individual fiscal agents and differentiated trends in economic performance and governance, the full burden of reversing sovereign deficit and debt imbalances falls onto the shoulders of only the fiscal agents. And as we see it, fiscal agents have one option and one option alone: deleverage the government balance sheet by practicing secular austerity.

 

To judge the impact of eurozone deleveraging on the global economy, we must answer three questions. First, how much austerity will the eurozone impose upon itself to restore the balance between debtors and creditors? Second, will eurozone sovereign haircuts or defaults remain a part of the deleveraging process? And third, what role will the European Central Bank (ECB) play in controlling the depth, breadth and velocity of sovereign debt deleveraging?

 

Stress Testing the Plan
Eurozone governments are about to legislate a plan of significant fiscal austerity over the coming years. By PIMCO estimates, austerity programs across both healthy and unhealthy balance sheet countries in the eurozone will pose a drag on growth to the tune of 1.5 to 2 percentage points over the next 12 to 24 months. This means that, absent any increase in private or external sources of aggregate demand, the eurozone economy will likely experience a recession in 2012. Indeed, PIMCO expects the eurozone economy to shrink by 1% to 1.5% in 2012.

 

Eurozone sovereign haircuts and defaults will likely remain a part of the deleveraging outlook. The acceleration of the European Stability Mechanism (ESM) and the introduction of collective action clauses on newly issued sovereign debt under the ESM mean that future haircuts, write-downs and private-sector subordination are still possible -- and probable. This, in turn, means that eurozone banks -- which have been the chief private-sector financiers of eurozone sovereigns -- will need a substantial amount of new capital to maintain their own balance sheets and provide ongoing credit to the real economy for growth. This new capital will be needed primarily to fill the ex ante equity hole generated by now “risky" sovereign credit exposures. It will also be a necessary condition for maintaining an effective monetary policy transmission mechanism to the eurozone real economy. If eurozone banks remain under-capitalized for much longer, their borrowing costs could climb too high for credit growth, and they would be forced to deleverage private credit commitments at a time when eurozone sovereigns are attempting to do the same with fiscal policy.

 

To be clear: The eurozone economy cannot bear a concomitant deleveraging in sovereign and banking system balance sheets, given an already weak growth outlook.

 

The ECB, therefore, must play the critical role of deleveraging police in the year ahead. Only the ECB has a balance sheet large enough, credible enough, and flexible enough to prevent the eurozone sovereign and banking system deleveraging from turning into an uncontrolled Minsky Moment (referencing economist Hyman Minsky and referring to the inflection point when investors must sell assets to pay off debts, pushing down asset prices across the board). An acceleration of the debt deflationary feedback loop will be the odds-on outcome if the ECB continues to play coy with its own balance sheet. The ECB must, at some juncture in the not so distant future, become a lender of last resort to eurozone sovereigns. And, equally important, it must do so with a transparent and credible plan such that private sector demand for eurozone sovereign debt is crowded back in before it is permanently destroyed. 

 

But what will it take for the ECB to make this leap from a bankers' banker to a sovereigns’ banker? To begin to answer this question, we have to consider the mandate of the ECB and the "game of chicken" being played between European fiscal agent and the ECB.

 

The ECB’s Evolving Mission
First, the ECB has a clear mandate of maintaining price stability and nothing else. In the best traditions of the German Bundesbank, the ECB maintains fierce independence from fiscal policy and financing sovereign deficits and does not believe it is responsible for shaping cyclical real growth outcomes (unlike the U.S. Federal Reserve). A key question, however, is whether the ECB's mandate is symmetrical around low and stable inflation? Will the ECB act aggressively to combat deflation, as it does to combat above-target inflation when the time comes? And if it will, what tools will it be willing to use, especially if policy rates are already at the zero-bound and the transmission mechanism of policy is broken? At this point, the rate of inflation in the eurozone is too high for the ECB's liking and is thus likely to prevent the ECB from taking any dramatic steps to pre-emptively combat the forward deflation risks arising from a deteriorating economic outlook across the eurozone.

 

Second, the ECB is engaged in a dangerous but necessary game of chicken with eurozone fiscal agents, which prevents it from becoming a transparent and credible lender of last resort to eurozone sovereigns. On the one hand, with the credit transmission mechanism broken and bank balance sheets stressed, the ECB recognizes that it must prevent sovereign bond prices from falling too far. On the other hand, the ECB remains fearful of introducing secular moral hazard into the process of enhancing fiscal unity and stability across the eurozone by pre-emptively financing fiscal deficits. This game cannot continue for too much longer. If it does, we believe either the deteriorating economic prospects for the eurozone will accelerate the feedback loop to its Minsky Moment, at which point sovereigns and banks will enter a race to try to out-deleverage the other; or the ECB will take pre-emptive action to become a transparent and credible lender of last resort to sovereigns thereby stabilizing the eurozone banking system and the eurozone economy. As things stand today, it is more likely that the ECB will leap to a rescue only when it is too late. As a result, the odds of a European Minsky Moment are uncomfortably high now.

 

Chinese Growth Levels Off as U.S. Deleveraging Continues
Moving from Europe to Asia, China has joined the U.S., the eurozone, Japan, and the UK in some form of balance sheet deleveraging. However, we expect Chinese deleveraging to be rather benign as long as policymakers use their substantial financial resources to manage the process over time. China for the last two years has engaged in an accelerated program of domestic investment via rapid credit creation in its domestic banking system. This has provided the global economy with a substantial and much-needed boost to aggregate demand at a time when developed economies were all undergoing private sector deleveraging. But this source of global aggregate demand is slowing significantly now. 

 

Due to a combination of issues ranging from excess capacity, rising income inequality and bank capital stresses that will require a slowdown in the rate of credit creation, China is likely to slow future domestic investment in favor of a more balanced and stability focused growth model. China is likely to use its substantial public financial resources to address imbalances between domestic investment and consumption, between capital and labor shares of national income, and to slowly re-capitalize its banking system as non-performing loans crystallize to losses. The major implication for the global economy is that the process of Chinese deleveraging and rebalancing could mean much slower Chinese growth and a smaller impact of Chinese aggregate demand on the global economy. PIMCO expects the Chinese economy to grow by just 7% in 2012, significantly below consensus expectations of 8% to 8.5% real growth.

 

And what of the States? The U.S. economy continues to make steady progress in private sector deleveraging, but little to no progress when public sector balance sheets are included. U.S. households and banks have generally reduced debt either via defaults or orderly recapitalizations, and many companies have benefitted tremendously from a weaker dollar and strong growth in global trade via the emerging market economies. Despite the progress made to date, the process of U.S. deleveraging is not nearly complete. This is especially the case given that the U.S. government continues to run large structural deficits to support private sector aggregate demand, and that demographically driven unfunded liabilities are starting to crystallize onto public balance sheets at a faster rate.

 

Were it not for the brewing crisis in the eurozone, and the expected slowdown in aggregate demand in China (and other emerging economies), the outlook for the U.S. economy might have been relatively sanguine for the year ahead. In 2011, U.S. GDP grew by a modest but decent 1.5% to 1.75%. But with global headwinds gathering -- and U.S. expansionary fiscal policy becoming much more difficult to maintain -- we think the U.S. economy will only manage 0% to 1% growth in 2012. This is substantially below the industry consensus expectation of 2% to 2.5% growth.

 

Turning from deleveraging to de-globalization, we believe the most important component of this creeping process is occurring in global finance. Global imbalances between savings and investment have long been sustained via cross-border intermediation across an integrated global banking system. European banks have played the major role in this process, with American and Asian banks being perhaps a degree less important. We have discussed the potential impact of European bank deleveraging on the eurozone economy, but have not spent much time on how they might impact the global economy in a direct way. The eurozone banking system is 2.5 times as large as the U.S. banking system, in part because it plays an important role in intermediating global savings. At $41 trillion in total balance sheet assets, the impact of a eurozone banking system deleveraging would dwarf the effect of any successful re-leveraging of the U.S. banking system, which is only about $16 trillion in size. The race to higher capital ratios combined with sovereign stresses means that the global banking system will likely turn inward and the process of cross-border savings intermediation could slow substantially in the year ahead. This is yet another hurdle for global growth.

 

A second component of de-globalization is the glacial but observable increase in trade skirmishes between the U.S. and China. There have been a series of tit-for-tat tariff increases lately, and the U.S. political machine has begun to increase calls for a more transparent and open Chinese economy only to be summarily rebuffed by Chinese officials. This glacial trend is an important one to watch, as trade between U.S. and China has been a very important source of strength for large portions of the global economy.

 

Finally, the cyclical outlook would not be complete without a mention of MF Global and the implications thereof on financial re-regulation.  We have long suggested that the developed world financial system has begun a gradual  process of returning to "utility banking,” a boring destination where the financial system largely separates deposit taking and loan making from the riskier endeavors of leveraged finance and asset price speculation. MF Global is likely to spark an acceleration in this process, only because it has shown that the regulatory changes planned (and yet to be fully implemented) after the collapse of Lehman Brothers in 2008 have done little to protect investors from concentrated financial system risks. We expect to see changes in the regulatory architecture of capital markets that may reduce system-wide liquidity, increase financial transaction costs and de-risk balance sheets even further. Think of this as an incremental source of friction to global growth in the year ahead.

 

In sum, we expect the global economy to grow by 1% to 1.5% in 2012. This is significantly slower than the 2.5% growth rate achieved in 2011 and the 4.1% rate achieved in 2010.  The risks to this forecast lay to the downside, which speaks to the question of inflation expectations.  We expect global inflation to slow to 2% in 2012 from 3.1% in 2011.

BHEL, Adani, JP etc Indian Capital goods Industry what to expect..?

NRI's to earn more from Indian Banks

Deregulation of Interest Rates on Non-Resident (External)Rupee (NRE) Deposits and Ordinary Non-Resident (NRO) Accounts

Please refer to paragraph 4 of our circular DBOD.Dir.BC.42/13.03.00/ 2011-12 dated October 25, 2011 on Deregulation of Savings Bank Deposit Interest Rate and paragraph 1 of our circular DBOD.Dir.BC.59/13.03.00/2011-12 dated November 23, 2011 on Interest Rates on Non-Resident (External) Rupee (NRE) Deposits and FCNR (B) Deposits.
2. With a view to providing greater flexibility to banks in mobilising non-resident deposits and also in view of the prevailing market conditions, it has been decided to deregulate interest rates on Non-Resident (External) Rupee (NRE) Deposits and Ordinary Non-Resident (NRO) Accounts (the interest rates on term deposits under Ordinary Non-Resident (NRO) Accounts are already deregulated). Accordingly, banks are free to determine their interest rates on both savings deposits and term deposits of maturity of one year and above under Non-Resident (External) Rupee (NRE) Deposit accounts and savings deposits under Ordinary Non-Resident (NRO) Accounts with immediate effect. However, interest rates offered by banks on NRE and NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.
3. Prior approval of the Board/Asset Liability Management Committee (if powers are delegated by the Board) may be obtained by a bank while fixing interest rates on such deposits. At any point of time, individual banks should offer uniform rates at all their branches.
4. The revised deposit rates will apply only to fresh deposits and on renewal of maturing deposits. Further, banks should closely monitor their external liability arising on account of such deregulation and ensure asset-liability compatibility from systemic risk point of view.
5. An amending directive DBOD.Dir.BC. 63 /13.03.00/2011-12 dated December 16, 2011 is enclosed.
Yours faithfully,
(P. R. Ravi Mohan)Chief General Manager

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DBOD.Dir.BC. 63 /13.03.00/2011-12

December 16, 2011

Deregulation of Interest Rates on Non-Resident (External)Rupee (NRE) Deposits and Ordinary Non-Resident (NRO) Accounts

In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949, and in modification of the directive DBOD. Dir. BC. 41/ 13.03.00/ 2011-12 dated October 25, 2011 on Deregulation of Savings Bank Deposit Interest Rate and DBOD.Dir.BC.58/13.03.00/2011-12 dated November 23, 2011 on Interest Rates on Non-Resident (External) (NRE) Deposits and FCNR(B) Deposits, the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest so to do, hereby directs that banks are free to determine their interest rates on both savings deposits and term deposits of maturity of one year and above under Non-Resident (External) Rupee (NRE) Deposit accounts and savings deposits under Ordinary Non-Resident (NRO) Accounts with immediate effect. However, interest rates offered by banks on NRE and NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.
(B. Mahapatra)Executive Director

RBI feel the Typhoon Swears to not to raise Rates..

Monetary Measures On the basis of the current macroeconomic assessment, it has been decided to: keep the cash reserve ratio (CRR) unchanged at 6 per cent; and keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.5 per cent. Consequently, the reverse repo rate under the LAF will remain unchanged at 7.5 per cent and the marginal standing facility (MSF) rate at 9.5 per cent. Introduction Since the Reserve Bank’s Second Quarter Review (SQR) of October 25, 2011, the global economic outlook has worsened significantly. The recent European Union (EU) summit agreement did not assuage negative market sentiments, thereby increasing the likelihood of persistent financial turbulence as well as a recession in Europe. Both factors pose threats to emerging market economies (EMEs), including India. Significantly, despite these developments, crude oil prices remain elevated. On the domestic front, growth is clearly decelerating. This reflects the combined impact of several factors: the uncertain global environment, the cumulative impact of past monetary policy tightening and domestic policy uncertainties. Both inflation and inflation expectations are currently above the comfort level of the Reserve Bank. However, reassuringly, inflationary pressures are expected to abate in the coming months despite high crude oil prices and rupee depreciation. The growth deceleration is contributing to a decline in inflation momentum, which is also being helped by softening food inflation. Global Economy The global economic situation continues to be fragile with no credible solution as yet to the immediate  euro area sovereign debt problem. At the EU summit on December 8-9, the European leaders agreed on a new fiscal compact, involving stronger coordination of economic policies to strengthen fiscal discipline. While the agreement is necessary for medium and long-term sustainability of the euro area, its ability to resolve short-term funding pressures was questioned by markets.  Q3 euro area growth, at 0.8 per cent, was anaemic and 2012 growth is now expected to be weaker than earlier projected.  Reflecting these projections, the European Central Bank (ECB) cut its policy rate twice in the last two months, and also implemented some non-standard measures. By contrast, growth in the US in Q3 of 2011 was better than in Q2, although still substantially below trend. Growth in EMEs is also moderating on account of sluggish growth in advanced economies and the impact of monetary tightening to contain inflation. In view of the slowing down of their economies, Brazil, Indonesia, Israel and Thailand cut their policy rates, while China cut its reserve requirements. EME currencies have also come under varying degrees of downward pressure as a result of global risk aversion and financial stress emanating from the euro area. Domestic economy Growth GDP growth moderated to 6.9 per cent in Q2 of 2011-12 from 7.7 per cent in Q1 and 8.8 per cent in the corresponding quarter a year ago. The deceleration in economic activity in Q2 was mainly on account of a sharp moderation in industrial growth. On the expenditure side, investment showed a significant  slowdown. Overall, during the first half (April-September) of 2011-12, GDP growth slowed down to 7.3 per cent from 8.6 per cent last year. Industrial performance has further deteriorated as reflected in the decline of the index of industrial production (IIP) by 5.1 per cent, y-o-y, in October 2011. This was mainly due to contraction in manufacturing and mining activities. The contraction was particularly sharp in capital goods with a y-o-y decline of 25.5 per cent, reinforcing the investment decline story emerging from the GDP numbers. Other indicators also suggest a similar tendency, though by no means as dramatic as the IIP. The HSBC purchasing managers' index (PMI) for manufacturing suggested further moderation in growth in November 2011. However, PMI-services index recovered in November from contractionary levels in the preceding two months. Corporate margins in Q2 of 2011-12 moderated significantly as compared with their levels in Q1. The decline in margins was largely on account of higher input and interest costs. Pricing power is evidently declining. On the food front, the progress of sowing under major rabi crops so far has been satisfactory, with area sown under foodgrains and pulses so far being broadly comparable with that of last year. Inflation On a y-o-y basis, headline WPI inflation moderated to 9.1 per cent in November from 9.7 per cent in October, driven largely by decline in  primary food articles inflation. Fuel group inflation went up marginally. Notably, non-food manufactured products inflation remains elevated, actually increasing to 7.9 per cent in November from 7.6 per cent in October, reflecting rising input costs. The new combined (rural and urban) consumer price index (base: 2010=100) rose further to 114.2 in October from 113.1 in September. Inflation in terms of other consumer price indices was in the range of 9.4 to 9.7 per cent in October 2011. Reassuringly, headline momentum indicators, such as the seasonally adjusted month-on-month and 3-month moving average rolling quarterly inflation rate, show continuing signs of moderation. External sector Merchandise exports growth decelerated sharply to an average of 13.6 per cent y-o-y in October-November from an average of 40.6 per cent in the first half of 2011-12.  However, as imports moderated less than exports, the trade deficit widened, putting pressure on the current account. This, combined with rebalancing of global portfolios by foreign institutional investors and the tendency of exporters to defer repatriating their export earnings, has led to significant pressure on the rupee. As on December 15, 2011, the rupee had depreciated by about 17 per cent against the US dollar over its level on August 5, 2011, the day on which the US debt downgrade happened. In the face of this, several measures were taken to attract inflows. Limits on investment in government and corporate debt instruments by foreign investors were increased. The ceilings on interest rates payable on non‐resident deposits were raised. The all‐in‐cost ceiling for external commercial borrowings was increased. Further, a series of administrative measures that discourage speculative behaviour were also initiated. The Reserve Bank is closely monitoring the developments in the external sector and it will respond to the evolving situation as appropriate. Fiscal  Situation The central government’s key deficit indicators worsened during 2011-12 (April-October), primarily on account of a decline in revenue receipts and increase in expenditure, particularly subsidies. The fiscal deficit at 74.4 per cent of the budgeted estimate in the first seven months of 2011-12 was significantly higher than 42.6 per cent in the corresponding period last year (about 61.2 per cent if adjusted for more than budgeted spectrum proceeds received last year). The likely slippage in this year’s fiscal deficit has inflationary implications. Money, Credit and Liquidity Conditions The y-o-y money supply (M3) growth moderated from 17.2 per cent at the beginning of the financial year to 16.3 per cent on December 2, 2011, although still higher than the projected trajectory of 15.5 per cent for the year. Y-o-y non-food credit growth at 17.5 per cent on December 02, 2011, however, was below the indicative projection of 18 per cent. Consistent with the stance of monetary policy, liquidity conditions have remained in deficit during this fiscal year. However, the deficit increased significantly beginning the second week of November 2011. The average borrowings under the daily LAF increased to around ` 89,000 crore during November-December (up to December 15, 2011) from around  `49,000 crore during April-October 2011.  The Reserve Bank conducted open market operations (OMOs) on three occasions in November-December 2011 for an amount aggregating about ` 24,000 crore to ease liquidity conditions. There are currently no significant signs of stress in the money market. The overnight call money rate is stable around the policy repo rate and liquidity facilities such as marginal standing facility (MSF) remain unutilised.  However, in view of the fact  that borrowings from the LAF are persistently above the Reserve Bank's comfort zone, further OMOs will be conducted as and when seen to be appropriate. Outlook Global growth for 2011 and 2012 is now expected to be lower than earlier anticipated. Increased strains in financial markets on the back of growing concerns over euro area sovereign debt, limited monetary and fiscal policy manoeuvrability, high unemployment rates, weak housing markets and elevated oil prices are all contributory factors. These factors have also contributed to moderating growth in the EMEs. As a consequence of all-round slower growth, inflation has also started declining, both in advanced countries and EMEs. On the domestic front, agricultural prospects look promising on the back of expected record kharif output and satisfactory progress on rabi sowing. However, industrial activity is moderating, driven by deceleration in investment, which is a matter of serious concern. Overall, the growth momentum in the economy is clearly moderating. Further, considering the global and domestic macroeconomic situation, the downside risks to the Reserve Bank’s growth projection, as set out in the SQR, have increased significantly. Between the First Quarter Review (FQR) and the SQR, while non-oil commodity prices had declined significantly, the rupee too had depreciated sharply. Consequently, the headline inflation projection at 7 per cent for March 2012, as set out in the FQR, was retained in the SQR. With moderation in food inflation in November 2011 and expected moderation in aggregate demand and hence in non-food manufactured products inflation, the inflation projection for March 2012 is retained at 7 per cent. The Reserve Bank will make a formal numerical assessment of its growth and inflation projections for 2011-12 in the third quarter review of January 2012. Guidance While inflation remains on its projected trajectory, downside risks to growth have clearly increased. The guidance given in the SQR was that, based on the projected inflation trajectory, further rate hikes might not be warranted. In view of the moderating growth momentum and higher downside risks to growth, this guidance is being reiterated. From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth. However, it must be emphasised that inflation risks remain high and inflation could quickly recur as a result of both supply and demand forces. Also, the rupee remains under stress. The timing and magnitude of further actions will depend on a continuing assessment of how these factors shape up in the months ahead. Ajit Prasad Assistant General Manager Press Release : 2011-2012/948

Asset Destruction Markets,,? Dollar Is King ..

The Market Hopes are getting on with unsolicited News from the Euro Central Banks . The falling US Deficit on Monday gave fill up towards $. The FOMC meet yesterday again thwarted the more Dollar flooding the market and Today's OPEC resolution struck the ' Death Nail "  on the Over Priced Commodity Complex. As, Crude Nose Dived from the top of Chart, hurling towards its 200 day SMA. The Precious metal and Gold Lost it's Last Leg. Euro firmly settling under the 1.30 against Dollar showed that market have unwound its 'Commodity flirt.
Albeit, the people are going to kick the can when they see Gold prices in the coming months. The Money Fly has shifted from the Gold and Commodity Complex to the more secure US dollar and US Bonds and US Equity.
The crystal gazing for the 2012 seems to be the optimism for the US stocks and one can reasonably expect a rally there. But, As the Alcoa results approach US equities are going to loose the steam and the Major disappointments are likely to follow one after another.

Indian turmoil is on and from inside and from outside the Indian government is appearing more like a Chaotic and Helpless. The Indian Government with all it's lacuna's and short comings on the Public glare. It's like being Caught napping and Pants Down.!!1

The time for India to retrieve the lost ground will come and but may not be in vary near future. Indian rise now appear to be Mirage.

It seems the cornered Indian government may soon find it self in a very Tight Cusp of Financial Difficulties.

Will this hapless and Hope less scene may attract Investors..?

It seems real long term investors who have kept there Money in Safe may find Indian Silver on the Street..?