Shivaji Memorial gets tweaked

The size of the manmade isle for the mid-sea Shivaji memorial has been reduced by 35% by the government while renegotiating the cost of the project with the lowest bidder. This means the memorial will be able to accommodate only up to 3,000 people per hour, and not 6,500 as estimated earlier, bringing down the estimated daily footfall to 10,000 from 25,000.

Similarly, the height of the seawall has also been reduced and the concrete block portion that was to form the base of the seawall has been replaced by a rock bund.

Besides the amphitheatre, entire facade lighting, baggage scanner and automatic fare collection system have deleted from the scope of the lowest bidder. Even installation of a standby transformer has been deferred. Deferring furniture and external landscape for later procurement will lead to cost escalation in future.

Massive modifications have also been planned for the Shivaji statue, pegged to be world’s tallest when it is unveiled in three years. The height of the sword has been increased and that of the actual statue reduced. With the reduction in volume of the statue, the quantity of metal needed for it will also go down. The lowest bidder, L&T, had Rs.976 crore for the civil works and and structure of the statue, which has gone down to Rs.638 crore after negotiations.

As per the original plan, there was supposed to be a 120 bedded staff accommodation on the site, which has been downsized to a facility for 30 people

Besides, the downsizing of the project also violates the government guidelines for tenders. According to central vigilance commission’s guidelines, government can renegotiate the price of a project after the bidding process, but cannot reduce the scope of work .

Many of the elements that were not important have been deferred for the ‘Phase-II’ of the project. The statue is the centre of the project and no changes have been made to that. Everything else has been tweaked to save money.

Passenger Vehicle Sales Skid 5.6% in September

Passenger vehicle sales in India fell for the third consecutive month in September, in part due to a high base and also because of the combined impact of increased fuel prices, interest rates and insurance cost that kept buyers away. Automakers dispatched 292,658 units of cars, utility vehicles and vans in the past month, a 5.61% fall from a year earlier. For the quarter through September, sales declined 3.6%.

In two-wheelers, sales continued to grow, albeit at a low single digit due to disruptions like the floods in Kerala and the West Bengal government’s decision to make driver's licence mandatory for buying two-wheelers. In September, sales rose 4.12% to 2,126,484 units. Industry executive also cited a steep increase in insurance cost — buyers now have to take multi-year third-party insurance cover — for the subdued demand.

Although rural demand for motorcycles grew, scooters posted flat sales in the July-September quarter. Commercial vehicles, however, continued to buck the trend in other vehicle segments, registering strong double-digit growth on the back of robust infrastructure investments. Dispatches of trucks and buses rose 24.14% in September to 95,867 units. Three-wheelers also maintained double-digit growth at 11.65% in September, with sales of 69,066 units.

Cumulative vehicle sales in the first half of the ongoing fiscal year rose 6.88% to 1,744,305 units, slower than the more than 9% growth reported in the April-September period last year. Automakers report dispatches from factories as sales, not the actual sales at dealerships.

The ratings firm is cautiously optimistic as the festive season usually sees pent-up demand. The impact on passenger vehicle sales was not only limited to the domestic market, as automakers in India also reported a fall in exports in the second quarter.

Industrial growth slows

Industrial output growth slowed to a three month low in August as the mining sector contracted and manufacturing remained sluggish, while retail inflation inched up marginally in September, prompting economists to say that the RBI may hold interest rates when it reviews monetary policy in December.

The index of industrial production rose an annual 4.3% in August, slower than previous month’s 6.5% and 4.8% posted in the same month last year. The capital goods sector, a barometer of industrial activity, rose 5% in August as against 7.3% in the same month last year.

Retail inflation rose an annual 3.8%, marginally higher than previous month’s 3.7% growth. This is the second successive month when retail inflation has remained below the central bank’s inflation target. RBI, which was widely expected to raise rates in its October review, did not do so but pointed to the risks for the inflation outlook in months ahead.

Odisha braces for Cyclone Titli

With cyclonic storm ‘Titli’ moving towards Odisha-Andhra Pradesh coast, the Odisha government geared up to face the situation setting a target of “zero casualty”.

The state has put the districts on high alert and asked the authorities to evacuate those living in low-lying areas and in ‘kutchha’ houses along the coast.

During previous cyclones such as Phailin in 2013 and Hudhud in 2014, the government had ensured zero casualty and earned laurels from the United Nations for successful disaster management. The IMD has forecast wind speed to be 100 to 110 kmph with gusting to 125 kmph. The MeT office has also mentioned that the cyclone Titli will further intensify into a severe cyclonic storm.

The cyclone over west-central Bay of Bengal moved west-north westwards at a speed of 10 kmph during the past six hours.

IMF Retains India FY19 Growth Outlook

The International Monetary Fund has retained its India growth forecast for the current year and marginally pared it for next fiscal, citing the drag from higher crude prices and tightening of the global financial situation. But it will remain the fastest-growing major economy, well ahead of China, it said.

In its latest World Economic Outlook, the IMF said India will grow 7.3% in FY19 and 7.4% in FY20.

It had in January forecast FY20 growth at 7.5%. China is forecast to grow 6.6% and 6.2% in 2018 and 2019, respectively. The Indian economy grew 6.7% in FY18.

The forecast for investment growth in FY19 is weaker than in April, despite higher capital spending.

India’s medium-term growth prospects remain strong at 7.75%, benefiting from ongoing structural reform and a favourable demographic dividend, the report said. The economic recovery is supported by domestic demand-led pickup.

In its monetary policy review on Friday, the RBI had retained its FY19 growth forecast at 7.4%.

The IMF expects the current account deficit to worsen to 3% of GDP in the current fiscal year before improving to 2.5% in FY20.

Inflation is projected at 4.7% in FY19 compared with 3.6% in FY18 amid accelerating demand and rising fuel prices. Core inflation, excluding all food and energy items, has risen to about 6% as a result of a narrowing output gap and pass-through effects from higher energy prices and exchange rate depreciation, the IMF said.

It has called for an increase in policy rates by 25–50 basis points given the outlook on inflation. RBI kept the repo rate unchanged at 6.5% in its monetary policy review last week. A basis point is 0.01 percentage point.

In view of the rupee’s depreciation, the IMF has said foreign exchange interventions should be limited to addressing disorderly market conditions while protecting reserve buffers. The rupee has weakened about 13% since the start of 2018.

It recognised important reforms such as GST, the inflation-targeting monetary policy framework, the Insolvency and Bankruptcy Code, and steps to liberalise foreign investment and make it easier to do business. It called for a renewed impetus for reforming labour and land markets, along with further improvements to the business climate.

At the global level, data show weakening in trade, manufacturing, and investment, the IMF said. “Overall, world economic growth is still solid compared with earlier this decade, but it appears to have plateaued,” it said. Global growth is seen 0.2 percentage points lower than the previous forecast in both the years to 3.7% each, same as that in 2017.

China’s growth is seen lower in 2019 because of the latest round of US tariffs on Chinese imports.

Other risks facing the global economy include the possible failure of Brexit negotiations and tightening financial conditions for emerging market and developing economies.

Five States To Go To Polls

The Election Commission announced the assembly election schedule for five states, three of them BJP-ruled, sounding the bugle for the medley of BJP versus Congress contests that would set the tone for the 2019 Lok Sabha polls when an array of opposition parties plan to challenge and oust the Modi-led BJP government.

Elections in Madhya Pradesh, Rajasthan, Chhattisgarh, Telangana and Mizoram will be held between November 12 and December 7. Counting in all the states will be held on December 11.

Chief election commissioner O P Rawat said Chhattisgarh would have two-phase polling on November 12, covering 18 assembly constituencies affected by left-wing extremism, and November 20 (for the remaining 72 seats). Mizoram, Telangana, Madhya Pradesh and Rajasthan will have a single-day poll. While polling in Mizoram and Madhya Pradesh will be held together on November 28, Rajasthan and Telangana will be the last to vote on December 7.

Rawat, flanked by election commissioners Sunil Arora and Ashok Lavasa, also announced bypolls on November 3 to three LS seats—Shimoga, Bellary (ST) and Mandya— as well as two assembly seats of Ramanagaram and Jamkhandi in Karnataka.

The highly anticipated announcement ended the wait among the political class and rang in the model code of conduct during which the political rivals would be pretty much be on an even keel in terms of the advantage of being in power.

But it is who comes to power on December 11 in the five states which would not only determine the fate of those provinces but in many ways the mood that would reign in the general elections.

However, for all the significance attached to them, the victories in end-year elections over 15 years have had a mixed impact on national polls that follow in six months.

RBI Springs a Surprise

The Reserve Bank of India surprised the market by keeping the policy rate unchanged as it lowered inflation forecasts, despite a surge in crude oil prices and the financial markets in panic mode. But it shut the door on any rate reductions in the months ahead by shifting its stance to ‘calibrated tightening’ from ‘neutral’.

It ruled out any special measures to arrest the slide of the rupee, which has plunged to historic lows along with other emerging markets currencies, and reiterated that any intervention would be to avoid excessive volatility rather than targeting a specific level.

While promising sufficient liquidity in the financial markets, the central bank was critical of the asset-liability mismatch at non-banking finance companies and suggested that they raise more equity and long-term funds rather than focusing on profitability with short-term funds that create instability. That follows the turmoil sparked by Infrastructure Leasing & Financial Services defaulting on payments.

Having raised the repo rate, at which the Reserve Bank lends to banks, at the two previous reviews, the central bank left the benchmark unchanged at 6.5%. All other rates were also left undisturbed. The six-member monetary policy committee voted for the status quo on rates and to change the stance by 5-1.

The monetary policy did little to calm market jitters. The benchmark Sensex tumbled 2.25% to 34376.99 points, the rupee lost 0.26% to a new closing low of 73.77 and bonds rallied, with yields falling 13 basis points. Bond prices and yields move in opposite directions. One basis point is one-hundredth of a percentage point.

While the market has been worried about a possible spike in inflation due to the sliding currency and a surge in crude oil prices, the central bank believes benign food prices will help the overall reading to be lower. It cut the inflation projection to 3.9-4.5% for the second half of FY19 and to 4.8% for first quarter of FY20. In its previous forecast, it had said inflation would be 4.8% in the second half of this fiscal and 5% in first quarter of the next fiscal year.

But it admitted to upside risks to its forecasts given the uncertainty over crude prices.

The Reserve Bank of India is mandated to keep retail inflation at 4% with a band of two percentage points on either side. The change in stance means that a rate cut is no longer on the table — RBI can either raise rates or keep them unchanged.

Retail inflation cooled to an 11-month low of 3.69% in August, mainly due to a fall in the prices of food items, including fruit and vegetables.

The rupee has slipped about 5% since the last monetary policy while oil prices have risen 10%, swelling the current account deficit from 2.4% in the June quarter to a projected 2.8% in three months ending March 2019. The financing of deficits will be a challenge with dollars exiting the country.

Foreign portfolio investors have sold securities worth a net ₹61,497 crore this year, according to data from the National Securities Depository. They had invested in excess of ₹2 lakh crore in 2017.

While many emerging markets such as Indonesia and Turkey have raised rates sharply, India has been an outlier as it is believed to be letting the currency depreciate since it has been relatively overvalued in the past two years, stifling exports.

Pami Dua, Ravindra Dholakia, Michael Patra, Viral Acharya and Patel voted in favour of keeping the policy rate unchanged. Chetan Ghate voted for an increase by 25 basis points. Dua, Ghate, Patra, Acharya and Patel voted to move to calibrated tightening, while Dholakia wanted to stick with the neutral stance.

The next MPC meeting is scheduled for December 3-5. The minutes of the October meeting will be published by October 19.