India&#39;s parliament today passed a landmark tax reform&nbsp;bill&nbsp;that will pave the way for the introduction of a new national sales tax, and create a common market across the country for the first time. 
 
Parliament&#39;s upper house, Rajya Sabha, passed the long-awaited Goods and Services Tax (GST)&nbsp;bill&nbsp;unanimously after Prime Minister Narendra Modi&#39;s government reached a consensus with opposition parties over the new tax regime. The Constitution (122nd Amendment) Bill, 2014 was approved by the upper house with 203 votes in favour and none against, after a seven-hour debate during which a rare bonhomie was witnessed among the ruling and the opposition parties. 
 
The GST will replace a patchwork of central and state levies on goods and services and is one of the right-wing Bharatiya Janata Party government&#39;s biggest reforms since taking power in May 2014.&nbsp;Prime Minister Modi thanked the leaders and members of all the parties in a tweet&nbsp;after the bill received a thumbs up. 
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<blockquote class="twitter-tweet" data-lang="en">
On this truly historic occasion of the passage of the GST Bill in the Rajya Sabha, I thank the leaders and members of all parties.
&mdash; Narendra Modi (@narendramodi) <a href="https://twitter.com/narendramodi/status/760874175766507521">August 3, 2016</a></blockquote>
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<blockquote class="twitter-tweet" data-lang="en">
I would like to add that GST will also be the best example of cooperative federalism. Together we will take India to new heights of progress
&mdash; Narendra Modi (@narendramodi) <a href="https://twitter.com/narendramodi/status/760874652960821249">August 3, 2016</a></blockquote>
<script async src="~/platform.twitter.com/widgets.js" charset="utf-8" type="text/javascript"></script> 
The battle to introduce the economy-boosting GST has been one of the fiercest of Modi&#39;s premiership, with Congress repeatedly blocking the bill for more than a year, before finally agreeing to several amendments. 
 
&quot;It&#39;s the biggest tax reform since independence,&quot; finance minister Arun Jaitley told the NDTV television channel earlier today.&nbsp;&quot;It integrates India into one economic entity India becomes a big market, there will be a seamless transfer of goods and services across the country.&quot; 
 
Investors have billed the GST as a &quot;silver bullet&quot; for India&#39;s economy that would supplant multiple federal and state levies, a chaotic structure that inflates costs for businesses. 
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<blockquote class="twitter-tweet" data-lang="en">
GST Bill passed.India&#39;s enormous market--a caged tiger--will now be unleashed. GoodShowTeam India!
&mdash; anand mahindra (@anandmahindra) <a href="https://twitter.com/anandmahindra/status/760876374634721280">August 3, 2016</a></blockquote>
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<blockquote class="twitter-tweet" data-lang="en">
Passing of the GST Amendment Bill will boost foreign investor sentiment <a href="https://twitter.com/hashtag/GSTBill?src=hash">#GSTBill</a> 
Watch for inflows
&mdash; Mahesh (@invest_mutual) <a href="https://twitter.com/invest_mutual/status/760875005089423360">August 3, 2016</a></blockquote>
<script async src="~/platform.twitter.com/widgets.js" charset="utf-8" type="text/javascript"></script> 
Hailing the passage of the bill as an extremely progressive step, Walmart India today reacted positively. 
 
&quot;Passing of the GST bill today in Rajya Sabha is an extremely progressive step and long awaited one. GST is one of the critical tax reforms which has potential to create one single market in India for goods &amp; services and will boost country&#39;s economy significantly,&quot; Walmart India president and CEO Krish Iyer said in a statement. 
 
Businesses have lobbied hard for the tax, with lobby group the Confederation of Indian Industry (CII) estimating the GST will add 1.5 to 2 percentage points to the annual economic growth rate. 
 
&quot;It is very much in the category of what one would call a big-bang reform,&quot; CII president Naushad Forbes told AFP.&nbsp;&quot;It will be a huge benefit to the ease of doing business, it&#39;s a huge potential efficiency gainer. It&#39;s a very significant potential contribution to the economy in the longer term,&quot; he said. 
 
India&#39;s GDP expanded 7.6 per cent in 2015-16, making it the fastest-growing major economy in the world.&nbsp;The actual tax is still some way off, however, with the government targeting April 2017 for its introduction, a date many experts say is overly optimistic. 
 
The bill that cleared the upper house today simply amends the constitution to grant the government new taxation powers.&nbsp;The bill must also be ratified by at least half of India&#39;s 29 states, before a specific GST bill can be introduced to enshrine the tax in law. 
 
The main rate of GST is still a hot topic for debate, with experts suggesting it is likely to end up at around 18 per cent.&nbsp;While GST may push up inflation in the short term because the price of some goods will rise, economists say it will boost business activity and deter tax evasion. 
 
About 150 countries worldwide have some form of GST or VAT (Value Added Tax), according to the Organisation for Economic Cooperation and Development. 
 
(Agencies)

The passage of the bill was held up for years by political infighting, and its advancement marks a victory for Prime Minister Narendra Modi

India's parliament today passed a landmark tax reform bill that will pave the way for the introduction of a new national sales tax, and create a common market across the country for the first time. Parliament's upper house, Rajya Sabha, passed the long-awaited Goods and Services Tax (GST) bill unanimously after Prime Minister Narendra Modi's government reached a consensus with opposition parties over the new tax regime. The Constitution (122nd Amendment) Bill, 2014 was approved by the upper house with 203 votes in favour and none against, after a seven-hour debate during which a rare bonhomie was witnessed among the ruling and the opposition parties. The GST will replace a patchwork of central and state levies on goods and services and is one of the right-wing Bharatiya Janata Party government's biggest reforms since taking power in May 2014. Prime Minister Modi thanked the leaders and members of all the parties in a tweet after the bill received a thumbs up. On this truly historic occasion of the passage of the GST Bill in the Rajya Sabha, I thank the leaders and members of all parties. — Narendra Modi (@narendramodi) August 3, 2016 I would like to add that GST will also be the best example of cooperative federalism. Together we will take India to new heights of progress — Narendra Modi (@narendramodi) August 3, 2016 The battle to introduce the economy-boosting GST has been one of the fiercest of Modi's premiership, with Congress repeatedly blocking the bill for more than a year, before finally agreeing to several amendments. "It's the biggest tax reform since independence," finance minister Arun Jaitley told the NDTV television channel earlier today. "It integrates India into one economic entity India becomes a big market, there will be a seamless transfer of goods and services across the country." Investors have billed the GST as a "silver bullet" for India's economy that would supplant multiple federal and state levies, a chaotic structure that inflates costs for businesses. GST Bill passed.India's enormous market--a caged tiger--will now be unleashed. GoodShowTeam India! — anand mahindra (@anandmahindra) August 3, 2016 Passing of the GST Amendment Bill will boost foreign investor sentiment #GSTBill Watch for inflows — Mahesh (@invest_mutual) August 3, 2016 Hailing the passage of the bill as an extremely progressive step, Walmart India today reacted positively. "Passing of the GST bill today in Rajya Sabha is an extremely progressive step and long awaited one. GST is one of the critical tax reforms which has potential to create one single market in India for goods & services and will boost country's economy significantly," Walmart India president and CEO Krish Iyer said in a statement. Businesses have lobbied hard for the tax, with lobby group the Confederation of Indian Industry (CII) estimating the GST will add 1.5 to 2 percentage points to the annual economic growth rate. "It is very much in the category of what one would call a big-bang reform," CII president Naushad Forbes told AFP. "It will be a huge benefit to the ease of doing business, it's a huge potential efficiency gainer. It's a very significant potential contribution to the economy in the longer term," he said. India's GDP expanded 7.6 per cent in 2015-16, making it the fastest-growing major economy in the world. The actual tax is still some way off, however, with the government targeting April 2017 for its introduction, a date many experts say is overly optimistic. The bill that cleared the upper house today simply amends the constitution to grant the government new taxation powers. The bill must also be ratified by at least half of India's 29 states, before a specific GST bill can be introduced to enshrine the tax in law. The main rate of GST is still a hot topic for debate, with experts suggesting it is likely to end up at around 18 per cent. While GST may push up inflation in the short term because the price of some goods will rise, economists say it will boost business activity and deter tax evasion. About 150 countries worldwide have some form of GST or VAT (Value Added Tax), according to the Organisation for Economic Cooperation and Development. (Agencies)

Indian parliament's upper house passes landmark tax reform bill

Indian factory activity grew at its fastest pace in four months in July as export orders jumped, but prices remained muted, giving room to the central bank to ease policy further if needed, a private survey showed today. 
 
The Nikkei/Markit Manufacturing Purchasing Managers&#39; Index rose to 51.8 in July from June&#39;s 51.7, marking its seventh month above the 50 level that separates growth from contraction. 
 
&quot;India&#39;s manufacturing economy is reviving at the beginning of the second half of 2016 after the slowdown seen in the April-June quarter, as growth in both production and new orders continued to strengthen in July,&quot; said Pollyanna De Lima, economist at survey compiler Markit. 
 
The output and new orders sub-indexes both rose to their highest since March. 
 
Among new orders, consumer goods saw the strongest pace of expansion, while export orders rose the fastest since January, driven largely by a depreciation in the rupee. 
 
The survey also showed input costs rise at a modest and slower pace, although improving demand meant firms were able to pass on some of that burden. 
 
&quot;With inflation rates remaining lower than their respective long-run averages, it wouldn&#39;t be surprising to see the Reserve Bank of India loosening monetary policy at its August meeting in an effort to encourage investment,&quot; De Lima said. 
 
A majority of economists polled by Reuters last month predicted a rate cut would come sometime between October and December.&nbsp; 
 
That should give the government room to focus on key economic reforms such as the Goods and Services Tax bill, which promises to replace all state and federal levies with a single tax, and is currently pending in parliament. 
 
Consumer inflation in India rose to 5.77 per cent in June, above the RBI&#39;s March 2017 target of 5 per cent, although it could cool if above-average monsoon rains help put a lid on rising food prices. 
 
(Reuters)

Among new orders, consumer goods saw the strongest pace of expansion, while export orders rose the fastest since January

Indian factory activity grew at its fastest pace in four months in July as export orders jumped, but prices remained muted, giving room to the central bank to ease policy further if needed, a private survey showed today. The Nikkei/Markit Manufacturing Purchasing Managers' Index rose to 51.8 in July from June's 51.7, marking its seventh month above the 50 level that separates growth from contraction. "India's manufacturing economy is reviving at the beginning of the second half of 2016 after the slowdown seen in the April-June quarter, as growth in both production and new orders continued to strengthen in July," said Pollyanna De Lima, economist at survey compiler Markit. The output and new orders sub-indexes both rose to their highest since March. Among new orders, consumer goods saw the strongest pace of expansion, while export orders rose the fastest since January, driven largely by a depreciation in the rupee. The survey also showed input costs rise at a modest and slower pace, although improving demand meant firms were able to pass on some of that burden. "With inflation rates remaining lower than their respective long-run averages, it wouldn't be surprising to see the Reserve Bank of India loosening monetary policy at its August meeting in an effort to encourage investment," De Lima said. A majority of economists polled by Reuters last month predicted a rate cut would come sometime between October and December. That should give the government room to focus on key economic reforms such as the Goods and Services Tax bill, which promises to replace all state and federal levies with a single tax, and is currently pending in parliament. Consumer inflation in India rose to 5.77 per cent in June, above the RBI's March 2017 target of 5 per cent, although it could cool if above-average monsoon rains help put a lid on rising food prices. (Reuters)

Indian industry growth at four-month high in July: Survey

India has approved a $318 million loan for Sri Lanka railways to upgrade its communications system and rolling stock in the Tamil-dominated northern region. 
 
Sri Lanka&#39;s spokesman and minister Gayantha Karunathilake said that the money will be used to improve the signal system from Maho to Anuradhapura in the north central province and from Anuradhapura to Omanthai in the north. 
 
It will also be used to buy six power sets with air-conditioned carriages, 10 engines and 160 carriages, 30 wagons with oil tanks and 20 container carrying wagons. 
 
The cabinet had approved a proposal by Sri Lankan Prime Minister Ranil Wickremesinghe to enter into an agreement with Exim Bank of India for the loan. 
 
India has already given loans of about $996 million to develop Sri Lanka&#39;s railway service which were used to improve northern and southern railway lines and buy engines and power sets. 
 
(PTI)

The Sri Lankan cabinet had approved a proposal by Prime Minister Ranil Wickremesinghe to enter into an agreement with Exim Bank of India

India has approved a $318 million loan for Sri Lanka railways to upgrade its communications system and rolling stock in the Tamil-dominated northern region. Sri Lanka's spokesman and minister Gayantha Karunathilake said that the money will be used to improve the signal system from Maho to Anuradhapura in the north central province and from Anuradhapura to Omanthai in the north. It will also be used to buy six power sets with air-conditioned carriages, 10 engines and 160 carriages, 30 wagons with oil tanks and 20 container carrying wagons. The cabinet had approved a proposal by Sri Lankan Prime Minister Ranil Wickremesinghe to enter into an agreement with Exim Bank of India for the loan. India has already given loans of about $996 million to develop Sri Lanka's railway service which were used to improve northern and southern railway lines and buy engines and power sets. (PTI)

India lends $318 million to Sri Lankan railways for communications upgrade

India will inject 229.15 billion Rupees ($3.41 billion) into 13 state-run banks to help shore up the cash-strapped lenders and revive loan growth that has hit a two-decade low. 
 
The capital infusion is part of New Delhi&#39;s plans to invest 700 billion Rupees in state lenders over four years to March 2019. 
 
Finance Minister Arun Jaitley has budgeted 250 billion Rupees for bank recapitalisation this fiscal year, but he has committed to infuse more if required.&nbsp; 
 
Top lender State Bank of India will get 75.75 billion Rupees in capital, the finance ministry said in a statement on Tuesday. Indian Overseas Bank, which has the worst bad-loan ratio, is set to get 31.01 billion Rupees. 
 
A surge in bad loans and the full implementation of global Basel III bank capital rules mean Indian banks need billions of dollars of new capital.&nbsp; 
 
While relatively better balance sheets are expected to make it easier for private lenders tap financial markets, most state-run lenders - struggling with a pile of stressed assets and lower profits - are heavily reliant on the government for funds. 
 
Rating agency Fitch reckons Indian banks would need $90 billion in new capital to meet Basel III requirements, with about two dozen state-run banks accounting for 80 per cent of that figure. 
 
Fourth-biggest state-run lender Punjab National Bank, which reported a record loss in the March quarter, will get 28.16 billion Rupees, the finance ministry said. Bank of India, the third-biggest state-run lender, will get 17.84 billion.&nbsp; 
 
Bank stocks rose after the announcement, with the state-bank index trading 0.4 per cent higher in a Mumbai market that was down 0.1 per cent. 
 
(Reuters)

The capital infusion is part of New Delhi's plans to invest 700 billion Indian Rupees in state lenders over four years

India will inject 229.15 billion Rupees ($3.41 billion) into 13 state-run banks to help shore up the cash-strapped lenders and revive loan growth that has hit a two-decade low. The capital infusion is part of New Delhi's plans to invest 700 billion Rupees in state lenders over four years to March 2019. Finance Minister Arun Jaitley has budgeted 250 billion Rupees for bank recapitalisation this fiscal year, but he has committed to infuse more if required. Top lender State Bank of India will get 75.75 billion Rupees in capital, the finance ministry said in a statement on Tuesday. Indian Overseas Bank, which has the worst bad-loan ratio, is set to get 31.01 billion Rupees. A surge in bad loans and the full implementation of global Basel III bank capital rules mean Indian banks need billions of dollars of new capital. While relatively better balance sheets are expected to make it easier for private lenders tap financial markets, most state-run lenders - struggling with a pile of stressed assets and lower profits - are heavily reliant on the government for funds. Rating agency Fitch reckons Indian banks would need $90 billion in new capital to meet Basel III requirements, with about two dozen state-run banks accounting for 80 per cent of that figure. Fourth-biggest state-run lender Punjab National Bank, which reported a record loss in the March quarter, will get 28.16 billion Rupees, the finance ministry said. Bank of India, the third-biggest state-run lender, will get 17.84 billion. Bank stocks rose after the announcement, with the state-bank index trading 0.4 per cent higher in a Mumbai market that was down 0.1 per cent. (Reuters)

India to push $3.4 billion into economy for credit growth

India&#39;s move to clean up the books of its banks saddled with $120 billion of sour loans will be largely unaffected by the decision of central bank chief Raghuram Rajan to step down, say bankers and government officials. 
 
As banks struggle with record levels of distressed assets, Rajan had set an ambitious March 2017 deadline for them to fully reveal the problem loans and make adequate provisions. 
 
An unprecedented asset quality review of banks ordered by the central bank led to reported bad loans surging more than 70 per cent in the six months to March. 
 
Rajan&#39;s decision to bow out in September has, however, raised questions on the fate of a clean-up seen as crucial to reviving new lending to support a nascent recovery in Asia&#39;s third-largest economy. 
 
Bankers and government officials said Rajan&#39;s successor may be less aggressive in fighting bad loans, but the general direction will remain the same. 
 
&quot;Having worked with eight (RBI) Governors, I have not seen any new incumbent turn an earlier policy, particularly relating to banks, on its head,&quot; said G. Padmanabhan, a former executive director at the RBI who currently chairs the board of third-biggest state-run lender, Bank of India. 
 
&quot;Second, and more important, this was not a one man decision and had the support of government as well,&quot; he said, although there could be some tweaks as the timeline was &quot;aggressive&quot; and banks&#39; capital needs had to be factored in. 
 
Shares in top lender State Bank of India have gained about 16 per cent since it reported March-quarter earnings on May 27, on hopes that the worst was behind it in terms of bad loans. The second biggest state-run bank, Bank of Baroda, is up about 12 per cent during that period. Two dozen lenders majority-owned by the Indian government hold the bulk of the soured loans. 
 
Deputy finance minister Jayant Sinha said recently it was prudent for the Reserve Bank of India to pursue its asset quality review of the banks, signalling government support for the clean-up. 
 
&quot;Investors of course like it. What Rajan and the RBI did was generally good, but I would say they were a bit too harsh,&quot; said one senior public sector banker, who still sees no clarity on how bad loans will be resolved. 
 
Others agree that the mechanics of resolving the issue still need to be clarified. 
 
In the absence of a strong system to buy bad loans from banks, deciding on haircuts and government capital infusion in banks may hobble resolution of the issue, said another senior banker with a state-run bank. 
 
Despite this, most remain confident that the RBI has already gone too far to reverse course. 
 
A senior policymaker who works closely with Rajan said the bank clean up exercise had been &quot;institutionalised&quot; and was on auto-mode, playing down any impact from Rajan&#39;s exit. 
 
&quot;He (Rajan) expedited things, but it was on the RBI&#39;s agenda,&quot; the official said, adding the clean-up was long overdue. 
(Reuters)

Indian banks remain unaffected by the country's central bank chief's sudden exit and focus on fixing sour loans worth $120 billion

India's move to clean up the books of its banks saddled with $120 billion of sour loans will be largely unaffected by the decision of central bank chief Raghuram Rajan to step down, say bankers and government officials. As banks struggle with record levels of distressed assets, Rajan had set an ambitious March 2017 deadline for them to fully reveal the problem loans and make adequate provisions. An unprecedented asset quality review of banks ordered by the central bank led to reported bad loans surging more than 70 per cent in the six months to March. Rajan's decision to bow out in September has, however, raised questions on the fate of a clean-up seen as crucial to reviving new lending to support a nascent recovery in Asia's third-largest economy. Bankers and government officials said Rajan's successor may be less aggressive in fighting bad loans, but the general direction will remain the same. "Having worked with eight (RBI) Governors, I have not seen any new incumbent turn an earlier policy, particularly relating to banks, on its head," said G. Padmanabhan, a former executive director at the RBI who currently chairs the board of third-biggest state-run lender, Bank of India. "Second, and more important, this was not a one man decision and had the support of government as well," he said, although there could be some tweaks as the timeline was "aggressive" and banks' capital needs had to be factored in. Shares in top lender State Bank of India have gained about 16 per cent since it reported March-quarter earnings on May 27, on hopes that the worst was behind it in terms of bad loans. The second biggest state-run bank, Bank of Baroda, is up about 12 per cent during that period. Two dozen lenders majority-owned by the Indian government hold the bulk of the soured loans. Deputy finance minister Jayant Sinha said recently it was prudent for the Reserve Bank of India to pursue its asset quality review of the banks, signalling government support for the clean-up. "Investors of course like it. What Rajan and the RBI did was generally good, but I would say they were a bit too harsh," said one senior public sector banker, who still sees no clarity on how bad loans will be resolved. Others agree that the mechanics of resolving the issue still need to be clarified. In the absence of a strong system to buy bad loans from banks, deciding on haircuts and government capital infusion in banks may hobble resolution of the issue, said another senior banker with a state-run bank. Despite this, most remain confident that the RBI has already gone too far to reverse course. A senior policymaker who works closely with Rajan said the bank clean up exercise had been "institutionalised" and was on auto-mode, playing down any impact from Rajan's exit. "He (Rajan) expedited things, but it was on the RBI's agenda," the official said, adding the clean-up was long overdue. (Reuters)

India seen pressing ahead with bank clean-up despite Rajan's exit

Indian economy, which has enjoyed a &quot;macro-sweet&quot; spot in recent years, is expected to see increasing external and internal uncertainties, says a Deutsche Bank report. 
 
According to the global financial services major, while the medium term outlook of the economy remains constructive, latest data releases are &quot;somewhat disappointing&quot;. 
 
In recent years, the country had witnessed declining inflation, stable Rupee, and improving fiscal and external deficits, while external risks have been high during this period, with weak export demand, concerns about Fed, China, EU, UK referendum and regional geopolitics. 
 
&quot;There clearly won&#39;t be any respite from external risks this year, but we reckon that the some domestic factors are about to turn noisy as well,&quot; the report noted. 
 
Regarding monsoon, it said monsoon rains are 25 per cent below normal as of mid-June. &quot;If the water shortage situation persists, it could hamper growth, push up inflation, and exacerbate the fiscal position,&quot; it added. 
 
Additional risk would be around Reserve bank of India&#39;s governor Raghuram Rajan&#39;s second term renewal. &quot;If Rajan&#39;s term is not renewed or the governor himself decides not to continue, this could affect investor sentiments and lead to volatility in financial markets,&quot; the report noted. 
 
According to Deutsche Bank, rising inflationary pressure, in turn would put Reserve Bank, India central bank, in &quot;a difficult spot&quot;, as any justification for cutting rates to support growth would be negated by the need to hold rates to meet the central bank&#39;s 5 per cent early 2017 Consumer Price Index target. 
 
In its policy review meet on June 7, RBI governor Raghuram Rajan had kept interest rates intact citing rising inflationary pressure, but hinted at a reduction later this year if good monsoon helps ease inflation. 
 
The global brokerage expects WPI inflation to rise to 3.5 to 4.0 per cent by the end of this calendar year. 
 
An additional risk is the potential inflationary impact of pay commission awards, furthermore, global oil prices have bottomed and risen close to $50/bbl currently, it added. 
 
&quot;Monetary policy headroom has clearly reduced post the May inflation data; while inflation trajectory may improve in the coming months due to some course correction in food prices, we see the balance of risks clearly tilted to the upside, which will not allow the central bank to cut the policy rate any further, in our view,&quot; the report noted. 
 
&quot;India is likely to have seen the worst as far as growth is concerned, but the pace of recovery will likely continue to be gradual and uneven, given drags from private investment and global risks,&quot; the report said. 
(PTI)

Water shortage due to low monsoons could hamper growth and push inflation. Domestic factors may become noisy as well, says report

Indian economy, which has enjoyed a "macro-sweet" spot in recent years, is expected to see increasing external and internal uncertainties, says a Deutsche Bank report. According to the global financial services major, while the medium term outlook of the economy remains constructive, latest data releases are "somewhat disappointing". In recent years, the country had witnessed declining inflation, stable Rupee, and improving fiscal and external deficits, while external risks have been high during this period, with weak export demand, concerns about Fed, China, EU, UK referendum and regional geopolitics. "There clearly won't be any respite from external risks this year, but we reckon that the some domestic factors are about to turn noisy as well," the report noted. Regarding monsoon, it said monsoon rains are 25 per cent below normal as of mid-June. "If the water shortage situation persists, it could hamper growth, push up inflation, and exacerbate the fiscal position," it added. Additional risk would be around Reserve bank of India's governor Raghuram Rajan's second term renewal. "If Rajan's term is not renewed or the governor himself decides not to continue, this could affect investor sentiments and lead to volatility in financial markets," the report noted. According to Deutsche Bank, rising inflationary pressure, in turn would put Reserve Bank, India central bank, in "a difficult spot", as any justification for cutting rates to support growth would be negated by the need to hold rates to meet the central bank's 5 per cent early 2017 Consumer Price Index target. In its policy review meet on June 7, RBI governor Raghuram Rajan had kept interest rates intact citing rising inflationary pressure, but hinted at a reduction later this year if good monsoon helps ease inflation. The global brokerage expects WPI inflation to rise to 3.5 to 4.0 per cent by the end of this calendar year. An additional risk is the potential inflationary impact of pay commission awards, furthermore, global oil prices have bottomed and risen close to $50/bbl currently, it added. "Monetary policy headroom has clearly reduced post the May inflation data; while inflation trajectory may improve in the coming months due to some course correction in food prices, we see the balance of risks clearly tilted to the upside, which will not allow the central bank to cut the policy rate any further, in our view," the report noted. "India is likely to have seen the worst as far as growth is concerned, but the pace of recovery will likely continue to be gradual and uneven, given drags from private investment and global risks," the report said. (PTI)

Choppy waters ahead: Indian economy may face external, internal uncertainties, warns Deutsche Bank

<div style="text-align: justify;">India&#39;s industrial output&nbsp;fell in April, facing its first contraction in three months, dragged down by a sharp plunge in production of capital goods and a contraction in consumer wares. 
 
Production at factories, mines and utilities shrank 0.8 per cent from a year earlier, government data revealed. Capital goods output plunged about 25 per cent on year in April. The sector, a proxy for capital investments, has been falling since October.&nbsp;Consumer goods were not spared,&nbsp;hit by a 9.7 per cent annual contraction in production of non-durables items. 
 
The fall comes unexpected if compared with a 0.5 per cent annual rise predicted by economists surveyed by Reuters and a revised 0.3 per cent year-on-year growth in March. 
 
Industrial output figures have paled in significance since last year&nbsp;when New Delhi revamped the method it uses to calculate gross domestic product. 
 
The new method takes into account gross value addition in goods and services, a departure from the old practice that factored in volume-based indicators such as industrial output. 
 
That helps to explain why India&#39;s economy grew 7.6 per cent from a year earlier in the fiscal year to end-March despite the sluggish pace of expansion in industrial production&nbsp;which posted annual growth of 2.4 per cent in 2015/16. 
 
The federal statistics office plans to revise and rebase the industrial production index in the next six months to better capture the changes taking place in the economy.</div>

The fall is unexpected as economists had predicted a 0.5% rise

India's industrial output fell in April, facing its first contraction in three months, dragged down by a sharp plunge in production of capital goods and a contraction in consumer wares. Production at factories, mines and utilities shrank 0.8 per cent from a year earlier, government data revealed. Capital goods output plunged about 25 per cent on year in April. The sector, a proxy for capital investments, has been falling since October. Consumer goods were not spared, hit by a 9.7 per cent annual contraction in production of non-durables items. The fall comes unexpected if compared with a 0.5 per cent annual rise predicted by economists surveyed by Reuters and a revised 0.3 per cent year-on-year growth in March. Industrial output figures have paled in significance since last year when New Delhi revamped the method it uses to calculate gross domestic product. The new method takes into account gross value addition in goods and services, a departure from the old practice that factored in volume-based indicators such as industrial output. That helps to explain why India's economy grew 7.6 per cent from a year earlier in the fiscal year to end-March despite the sluggish pace of expansion in industrial production which posted annual growth of 2.4 per cent in 2015/16. The federal statistics office plans to revise and rebase the industrial production index in the next six months to better capture the changes taking place in the economy.

India's industrial output shrinks

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