On Friday finance ministry unveiled its bleak mid-year economic review. For one, the review has slashed the country’s growth forecast to a range of 7.25-7.75% this fiscal. That’s a sharp drop from the February projection of 9%.
The mid-year review has also made it clear India faces a significant fiscal challenge. The review says the 4.6% fiscal deficit target has become hard to meet, but adds that the government will try and keep the overshoot to a minimum. The review says higher tax refunds and lesser gains from disinvestment are the main culprits. But finance minister Pranab Mukherjee also admitted the weakening rupee was contributing to the rising fiscal deficit.
Also during the week, India’s biggest reform initiative in recent times was put on hold. On Monday the UPA told opposition parties it had frozen its plans to allow 51% FDI in multi-brand retail. It was a steep price to pay for the UPA, but one advantage was that it got Parliament functioning again on Wednesday. And Pranab Mukherjee used the occasion to tell the Lok Sabha his government would build consensus on the issue before rolling it out. What Mukherjee did not mention was the simultaneous decision to allow 100% FDI in single-brand retail chains. As of now, that particular move appears to still be in effect.
India’s food inflation has fallen to its lowest in more than three years. The food price index dropped to 6.6% in the period to 26 November. In the previous week it stood at 8%.
Airfares could soon go up across the board. Air India increased its ticket prices to domestic destinations. They now usually cost Rs 150 more than comparable tickets from low-cost carriers. The move is likely to prompt other airlines to hike fares as well in their attempt to cope with high fuel costs.
SKS Microfinance says it will limit its return on assets or RoA to a maximum of 3%. Of course, this is higher than the RoA of 1.5-2% the microfinance industry has enjoyed. SKS’s RoA is currently negative.
And finally, BlackBerry maker RIM has a new head for its Indian operations. It new managing director is Sunil Dutt, whose previous job was at Hewlett Packard India. Dutt replaces Frenny Bawa, who left RIM last month.