Blast in Assam: Army vehicles targeted; one jawan killed, 7 injured

Guwahati: At least one jawan was killed and seven others were injured in a high intensity blast in Assam's Goalpara district today. 

According to sources, an improvised explosive device or an IED exploded under an army truck carrying soldiers from Kokrajhar to Agia in Goalpara at around 10:25 am.  A Tata Sumo car travelling along with the truck was also targeted.

Banned outfit United Liberation Front of Asom or ULFA is said to be behind the blast.

RBI Credit Policy

The Reserve Bank of India's (RBI) macro-economic report has painted a gloomy picture about the Indian economy. It has lowered the FY13 GDP forecast between 6.5 and 7.2% and has noted the upside risk to inflation.

Highlights of macro economic report:

Growth:

The growth picture is pretty dismal. If we did 5.3% in the previous quarter we are likely to do no better in the current quarter. The dangers to growth come even from the global side, which looks pretty bleak now.

Inflation:

The consumer price inflation remains very sticky at double digits. It is not likely to go down because monsoon is questionable at the current juncture. Globally, the harvest is bad and a lot of economies worldwide are stimulating growth through cutting interest rates. Therefore, that could push up commodity prices.

Current account deficit:

The third major factor the report points out is the current account deficit. At the moment, we can't afford 4.2% current account deficit of last year although crude oil prices are falling, service and software exports have fallen.

The RBI has also pointed out that the Nasscom forecast cannot be met. Therefore, in the current year even 2.5% of current account deficit looks difficult to sustain.

No interest rate cut by RBI?

The conclusion one can draw from all this looks like given the inflation expectation and the current account deficit dangers the RBI is unlikely to stimulate demand by cutting interest rate at this juncture.

It believes that the government has to do its bit in the first place by cutting fiscal deficit and using that extra money to stimulate investment so that growth is generated, only then can space be created for monetary policy.

What does the poll indicate?

The CNBC-TV18 poll indicates something very similar although it was taken before the macro economic report. Ninety percent of people who were polled said they don't expect a repo rate cut. Only 10% expect a 25 bps repo rate cut. As far as the CRR is concerned, 90% do not expect a CRR cut; 5% expect 50 bps and another 5% expect a 25 bps.

The more important point that the market will watch out for will be the growth forecast of RBI. The GDP forecast in April was put in at 7.3, 90% of people who were surveyed said that they expect the forecast to be brought down. Of this 90%, 45% said it will be between 6.5 and 7.2.

The other half said it will be below 6.5% that is 6-6.5%. Ten percent people said it will be brought down to between 5.5% and 6%. So, there are people who expect GDP to come at 5 point something in the current year.

A large majority expect RBI’s inflation target to be brought up. Fifty five percent said it will be unchanged, 45% said it can be raised to 6.5% to 7% and few said even above 7%.

Sixty percent expect RBI’s stance to remain unchanged. Fourty percent believe that RBI can adopt a slightly dovish stance in the policy.

RBI expected to keep rates unchanged

The Reserve Bank of India (RBI) is expected to leave interest rates unchanged on Tuesday, seeing high inflation as a bigger danger than the slowest growth in almost a decade and keeping pressure on the government to revive the economy's fortunes.

Weaker-than-normal monsoon rains add to expectations that the RBI will keep its repo rate on hold at 8.00 per cent. High food prices resulting from poor rains may be beyond the reach of monetary policy, but they can add to inflationary expectations and tempt the government into spending more on subsidies.

Of 20 economists polled last week by Reuters, 19 expected the central bank to keep the repo rate unchanged.

After its mid-quarter policy review in June, roughly one-third of respondents had expected a July rate cut. Since then, RBI Governor Duvvuri Subbarao has voiced concern about high inflation, including for consumer prices, reinforcing expectations he will leave rates on hold.

Still, several market participants said the rapid deteriorating in the global economy as the euro zone debt crisis takes its toll suggested that the Indian central bank's decision may still be a close call.

"Over the past 6-8 weeks, the global situation has turned sharply adverse, and downside risks to the GDP growth projection have emerged. Upside risks to inflation seem limited at this juncture," said Hitendra Dave, head of global markets at HSBC in India.

On Monday, the RBI warned about a weakening growth outlook and upside risks to inflation in its quarterly review of the economy.

In June, wholesale price inflation rose to 7.25 per cent, while consumer price inflation hit 10.02 per cent. Wholesale prices are the main inflation gauge in India.

The RBI is also expected to leave the cash reserve ratio, the share of deposits that banks must keep with the RBI, unchanged at 4.75 per cent on Tuesday.

Indian stocks rallied on Monday, partly on hopes for a surprise rate cut, but debt markets remained cautious as benchmark 10-year bond yields rose slightly.

Subbarao has stressed the need for the government to reduce its fiscal deficit and improve the investment climate. He has said the central bank's 13 rate rises between March 2010 and October 2011, as it fought double digit inflation, were not the key reason for the slowdown in the economy, which grew at just 5.3 per cent in the March quarter, its weakest pace in 9 years.

The Indian central bank cut rates by a steeper-than-expected 50 basis points in April but has maintained a hawkish stance since, even in the face of widespread expectations in June it would cut rates again.

A continued hard line would make it an outlier compared with China, Brazil, South Korea and others, which have eased monetary policy in recent weeks to bolster their flagging economies.

The central bank has also been adamant that the government does its bit to boost the once high-flying economy.

It called on the government of Prime Minister Manmohan Singh to rein in spending on subsidies, but expectations that New Delhi may soon raise diesel prices to reduce its spending and borrowing burden and so alleviate pressure on market rates have been pushed back due to opposition from within the ruling coalition.

Singh spoke a month ago of reviving the economy's "animal spirit," but companies are still waiting for government measures, such as allowing foreign direct investment in supermarkets and airlines, to lift sentiment.

A study last week by Indian rating agency Crisil found that capital expenditure by 170 private-sector companies will fall by 35 percent on average in the fiscal year that ends in March.

New York's Plaza Hotel sold to Sahara for USD 570m

Sahara Group has agreed to buy a controlling stake in New York's landmark Plaza Hotel for USD 570 million, Elad Properties, an Israeli-owned real estate company, said on Monday.

The 105-year-old luxury hotel overlooking New York's Central Park, is jointly owned by Elad Properties, an Israeli-owned real estate company, and Saudi-based Kingdom Holdings Co.

Elad, controlled by Israeli businessman Yitzhak Tshuva, said it would receive 1.6 billion shekels for its 60% stake, while Kingdom will receive the rest.

Kingdom, the investment vehicle of Saudi billionaire Prince Alwaleed bin Talal, will hold a 25% stake once the deal is completed, Elad said in a statement.

Elad said Fairmont Hotels & Resorts Inc, which has managed the hotel since 1999 and which is owned by the Saudi prince, will continue to operate the property.

Tshuva bought the hotel eight years ago for USD 675 million.

According to media reports, Elad had sold luxury apartments in the renovated hotel for USD 1.5 billion. The sale of the apartments alone netted Elad Group USD 500 million in profit.

USD 1=4.05 shekels

Heads roll after North India's worst blackout in 11 years

New Delhi:  Action has been taken against power officials in Uttar Pradesh for the massive blackout on Monday. Huge parts of North India spent Sunday night and much of Monday morning without any electricity. A fault near Agra, coupled with overdrawing of power by Uttar Pradesh, led to the blackout, which was the worst failure of the Northern Grid since 2001.

1. Following the massive power outage, over a dozen IAS officers have been transferred in Uttar Pradesh, including Avinash Awasthi, the chairman of the state-run Uttar Pradesh state Power Corporation. However, Mr Awasthi's future has been kept in abeyance; he has not been given a fresh posting. The power grid collapsed because some states apparently drew more power than they were authorised to do to meet the rising demand during the summer, Mr Awasthi had earlier said.
2. The crisis began at 2.30 am on Monday when the Northern power grid collapsed. Seven states including UP, Punjab, Haryana, and all of Delhi were plunged into darkness.  370 million people were affected - that's more than the population of the United States and Canada combined. 
3. By the afternoon, 80 per cent of the power had been restored in Delhi. Power Minister Sushil Kumar Shinde said the last time the grid collapsed, in 2001, it took 16 hours to restore services. This time, he said, most services were back up within six hours. By the evening, the Northern Grid was completely restored.
4. The Northern grid was drawing power from the neighbouring Eastern and Western grids as well as getting hydroelectric power from the neighbouring mountain kingdom of Bhutan.
5. Around 1.5 lakh passengers in 300 trains suffered delays as the power grid failure crippled operations across eight divisions of the northern railway. 200 goods trains were cancelled. Rajdhanis and Shatabdis ran four to five hours late.  In Delhi, the metro could not run during the morning rush hour, causing huge traffic jams as desperate commuters hit the roads instead. By 9 am, metro officials said the services were back to normal. 
6. The Power Minister said a committee with three members will investigate what happened. 
7. The international airport in Delhi was not affected by the power outage. "All our essential services like flight arrival and departure, check-in, baggage handling, aerobridge services were shifted to our back-up system. So all these operations remained normal", an airport spokesperson said. He, however, conceded that non-essential services could be hit. 
8. The power deficit was worsened by a weak monsoon that lowered hydroelectric generation and kept temperatures higher, further increasing electricity usage as people seek to cool off.
9. Shivpal Singh Yadav, the power minister in the state of Uttar Pradesh, home to 200 million people, said that while demand during peak hours hits 11,000 megawatts, the state can only provide 9,000 megawatts.
10. Residents of Delhi are worried about their water supply being hit next. Delhi's six water treatment plants have been shut since power failed. All Delhi Jal Board water-pumping stations were affected. Power companies are giving priority to the Jal Board. Residents should be prepared for an erratic water supply till Tuesday morning.