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Monday, December 31, 2012

Fiscal cliff deadline looms after weekend of talks fail!Indicators spell gloom but the corporate governance in India banks heavily on digital biometric citizenship to enhance the exclusive economy. The impact of US fiscal cliff looms large on Indian Economy which means more stimulus for the market.

Fiscal cliff deadline looms after weekend of talks fail!Indicators spell gloom but the corporate governance in India banks heavily on digital biometric citizenship to enhance the exclusive economy. The impact of  US fiscal cliff looms large on Indian Economy which means more stimulus for the market.
Indian Holocaust My Fathers` Life and Time, Chapter: Nine Hundred Forty Three

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Fiscal cliff deadline looms after weekend of talks fail!Indicators spell gloom but the corporate governance in India banks heavily on digital biometric ctizenship to enhance the exclusive econmy. The impact of  US fiscal cliff looms large on Indian Economy which means more stimulus for the market.The government will rollout its "game changer" direct cash transfer scheme in 20 districts to 2 lakh beneficiaries from tomorrow but has decided to hold back the "complex" transfer of food, fertiliser and fuel subsidies for the time being.Announcing that the Direct Benefit Transfer (DBT) will be rolled out in a phased manner, Finance Minister P Chidambaram on Monday said benefit of 7 central schemes will be directly credited into the bank accounts of beneficiaries across 20 districts from January 1.Implementations of key reforms, cut in interest rates, overhaul of tax regime and a stable global economy are some of the wishes that Dalal Street expects to come true in the new year.Despite volatile moves, the year 2012 has finally proved to be fruitful for the stock market with about 25 per cent appreciation in benchmark indices, but investors are looking forward to more stable times in 2013.

For the year as a whole, India was the best performing market in Asia. The Nifty and Sensex rallied over 25 percent in 2012.  

With only hours remaining until midnight, can America's political system avert the fiscal cliff of tax hikes and sweeping budget cuts before 2013 is ushered in?

Congress reconvenes this morning after hopes of a deal between the Democratic and Republican leaders in the Senate over the weekend, came to naught. The talks faltered after Republicans threw up a string of objections – leading the Republican Senate minority leader Mitch McConnell to open a new line of dialogue with vice president Joe Biden.

Harry Reid, the Senate majority leader, left the field yesterday evening, telling journalists "Talk to Joe Biden and McConnell" as his farewell remark.

Growth rate of eight core sector industries declined to 1.8 per cent in November, from 7.8 per cent in the same month last year, due to drop in production of coal, natural gas and cement.India's current account deficit widened to a record high of 5.4 percent of GDP in the September quarter as export growth slowed more sharply than imports, with a similar gap expected in the December quarter likely to prolong weakness in the rupee.Nevertheless,the ruling hegemony must celebrate just because the 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE) ranked third in terms of returns after the yields of the 50-scrip Thailand Set Index and Germany's 30-share Deutscher Aktien IndeX.

'Diary cliff' approaches sell-by date

Aside from the fiscal cliff, what about the so-called "diary cliff," the possibility of a sharp hike in the price of milk if a new farm bill isn't passed quickly?

There was some positive movement over the weekend, when leaders in both parties on the House and Senate agriculture committees agreed on a one-year extension of the previous farm bill.

But hold on, what's this? Via AP:

A spokesman for House Speaker John Boehner said Sunday that Republican leaders had not decided how they would proceed on the farm extension, though a vote could come as soon as Monday.

Oh well, so much for that outbreak of bipartisanship. It turns out the House GOP is also considering two other extensions: a one-month extension and an even smaller bill that would merely extends the current policy that expires on 1 January.

Is Obama caving in to the Republicans?

Is President Obama giving away too much? In New York magazine, Jonathan Chait fears that Obama is caving in to the Republicans on taxes, and wants a stiffer backbone:

[Obama] is allowing Republicans to whittle down the sum by essentially threatening to shoot themselves in the head. And this is the most ominous thing about it. The big meta question looming over Obama's term is whether he has learned to grapple with Republican political hostage-taking. Hostage-taking is not simply aggressive or even irrational negotiating. It is the specific tactic of extracting concessions by threatening to withhold support for policies you yourself endorse, simply because your opponent cares more about the damage.

The effects of the budget cuts contained within the fiscal cliff could be felt in short order on the US military, as the Associated Press reports:

A senior defense official said if the sequester were triggered, the Pentagon would soon begin notifying its 800,000 civilian employees that they should expect some furloughs — mandatory unpaid leave, not layoffs. It would then take some time for the furloughs to begin being implemented, said the official, who requested anonymity because the official was not authorized to discuss the internal preparations.

Deal or no deal? Where the two sides differ
So where are the two sides at this point? Based on various reports, here's where things stood at the end of the weekend in talks between Senate republicans, Democrats and the White House.

• Income tax: Senate Republicans propose higher taxes on incomes above $450,000. Democrats propose tax rises on incomes over $360,000

• Estate tax: Republicans want to tax inheritances valued above $5m at 35%. Democrats want to tax inheritances above $3.5m at 45%

• Budget cuts: a "pause" before implementing the across-the-board cuts demanded by the sequester – Democrats in favour, Republicans oppose

• Spending: Proposals to avoid a cut in Medicare payments to doctors and extend benefits for the long-term unemployed – Republicans say they should be paid for through budget cuts elsewhere

• Alternative minimum tax: Democrats want any deal to include a permanent revision to stop the AMT hitting middle class taxpayers

The eight core sector industries had registered eight-month high growth of 6.5 per cent in October 2012.The decline in growth in November, 2012, was due to negative growth witnessed in coal, natural gas and cement sectors and drop in growth rates of electricity, steel and petroleum refinery products, according to the official data released on Monday.

The cumulative expansion of the eight industries - crude oil, natural gas, cement, coal, electricity, steel, petroleum refinery products and fertilisers - was down at 3.5 per cent in April-November 2012 against 4.8 per cent in the same period last year.

Meanwhile at home in India,the eight industries have a weight of 37.9 per cent in the overall Index of Industrial Production (IIP).

Production of natural gas and coal contracted by 15.2 per cent and 4.4 per cent, respectively in November. Cement output too shrunk by 0.2 per cent as against 17 per cent growth in the same month last year.

Steel and electricity production slowed to 6 per cent and 2.3 per cent, respectively. In the same month last year, it was 10.5 per cent and 14.4 per cent in that order.

Petroleum refinery output also slowed down to 6.6 per cent against to 11.2 per cent last year.

However, production of fertiliser and crude oil grew by 5 per cent and 0.8 per cent in November respectively.

"We are proceeding with a great degree of caution... We will look at transferring all subsidies and benefit through this scheme but we have to do it slowly. We are not going to rush into anything and then find that the system cannot cope with it," Chidambaram said.

The minister said that DBT, which will check leakages and corruption in subsidies distribution, will be rolled out in 43 districts of 14 states by March 1 -- 20 districts from January 1; 11 from February 1 and remaining 12 from March 1.

The government had earlier proposed to launch the scheme in 43 districts from January 1.

Chidambaram said the direct cash benefit transfer will be rolled out in whole country by the end of 2013.

"This (DBT) is indeed a game-changer for governance, the manner in which we govern. This is a game-changer in which we account for money. It is game changer in the manner in which the benefit reaches the beneficiary without any intermediation by any human being," he said.

Chidambaram said, however, that at this stage "there is no intention" to transfer the subsidies for food, fertiliser, diesel and kerosene through DBT.

"These are complex issues. They have to be studied carefully and only when we are completely satisfied that they are amenable to transfer through DBT, we will think of that," the minister said, adding that subsidy on LPG too would not be provided through DBT in the first phase.

Information and Broadcasting Minister Manish Tiwari, who too addressed the media, said the first phase starting Tuesday would benefit about two lakh people.

Chidambaram said all the beneficiaries will get the cash transfer in their bank accounts, even if they do not have the Aadhaar-card (UID) numbers.

He said: "Over the next few days or weeks we will aim at 100 percent penetration of Aadhaar beneficiaries... Whether there is Aadhaar card or not money will be credited, money will be withdrawn."

The government intends to link subsidy disbursal with Aadhaar.

The Minister also said all the 7,900 bank branches in 43 district will have ATM facilities.

Chidambaram said banks have floated a tender for 20 lakh Micro-ATMs which will be inter-operable and will have facility for biometric scanning and Aadhaar authentication.

When asked whether the government was changing the tag- line of the scheme 'Apka Paisa Appke Haat', Chidambaram said the slogan is a "valid tag-line that has certain resonance. It conveys the meaning very effectively but in a formal document we think its proper to call it Direct Benefits Transfer."

Responding to queries, he admitted that there could be glitches in operationalising the scheme but assured that the officials overseeing its implementation will resolve them.

Meanwhile, a press statement said that the direct cash transfer scheme will not be a substitute for delivery of public services which would continue to take place as per the normal delivery channels.

The seven schemes which are ready for payout from January 1 include pre and post matric scholarships for SC, STs and OBCs, Indira Gandhi Matrutva Sahayata Yojana, Dhanalakshmi scheme and stipend scheme for SC, ST job seekers.

The statement said banks have also been asked to expand their reach to provide banking services to every 1,000-1,500 households through a Business Correspondent (BC) or Common Services Centre (CSC) scheme.

India's current account deficit widened to a record high of 5.4 percent of GDP in the September quarter as export growth slowed more sharply than imports, with a similar gap expected in the December quarter likely to prolong weakness in the rupee.

The worse-than-expected deficit also adds pressure on the government as it tries to push through long-delayed reforms to stave off a sovereign rating downgrade due to the country's high deficit on both the current and fiscal accounts.

A sharp rise in gold imports, a hefty oil bill and falling exports due to the global slowdown have kept India's current account deficit at persistently high levels.

Even with curbs on gold import, if you have the current account deficit going up, it will be a hit on the country's sentiment as a whole," said Vikas Babu Chittiprolu, a senior foreign exchange dealer with state-run Andhra Bank.

India ran a balance of payments deficit of $158 million for the July-September quarter, against a surplus of $521 million in the previous quarter and compared with a surplus of $276 million a year earlier, the RBI data showed.

The current account deficit was $22.3 billion in the three months through September, or 5.4 percent of GDP, compared with $16.6 billion in the June quarter and $18.9 billion in the September quarter of 2011.

Economists expect the current account gap to remain above 5 percent in the December quarter.

"Current account deficit is going to be as strained in the third quarter (October-December) as it was in the second quarter because of flattish GDP growth," said Shubhada Rao, chief economist at Yes Bank.

India's April-November fiscal deficit rose to 4.13 trillion rupees, or 80.4 percent of the budgeted target for the fiscal year ending in March, casting doubt on the government's pledge to mend its finances following a higher-than-budgeted expenditure bill.

The rupee was the third worst performer in Asia in 2012, even though net inflows into Indian stocks were the highest in the region. The rupee closed 2012 at 55.00.

"In the absence of any positive trigger the rupee could move a tad up to 53-54 in Jan-March due to seasonal dollar inflows," Yes Bank's Rao said.

India's financial account, which includes foreign direct investment, portfolio investment and overseas borrowing by Indian companies, stood at a surplus of $24.2 billion, higher than the $15.7 billion in the June quarter, and compared with $19 billion in the year-earlier period.

Gross domestic product growth for the current fiscal year is expected to be 5.7-5.9 percent, the slowest since 2002/03, and Prime Minister Manmohan Singh said last week that a five-year government plan for 8 percent expansion was "ambitious."

Retail inflation for industrial workers moved up marginally to 9.55 per cent in November on account of surge in the prices of food items, cooking gas, medicines and bus fares. The rate of price rise was 9.34 per cent in the same month last year. The retail inflation measured in terms of Consumer Price Index for industrial workers was 9.6 per cent in October this year, a Labour Ministry statement said.

Food inflation was 10.85 per cent in November as against 7.61 per cent during the same month last year, and 9.91 per cent in October. The largest upward contribution to the change in current index came from food items which increased by 0.86 per cent, contributing 1.01 percentage points to the total change. At item level, largest upward pressure came from rice, wheat flour, goat meat, milk, onion, potato, tea, snack.

The other items like cooking gas, medicine (Allopathic), bus fare, auto rickshaw fare, flowers and tailoring charges, also put upward pressure in total change. The largest downward contribution to the change in current index came from pulses and products with a decline of 0.38 per cent, contributing (-) 0.03 percentage points to the total change.

However, at item level, vegetable & fruit items like cauliflower, radish, palak, brinjal and orange put downward pressure on the index. At centre level, Mysore recorded the largest increase of 7 points followed by Vijaywada (6) and Guntur, Tiruchirapally, Coimbatore and Bengluru (5 points each). Among others, 4 points rise was registered in 7 centres, 3 points in 10 centres, 2 points in 6 centres and 1 point in 20 centres.

However, Nagpur centre reported a decline of 2 points and other 9 centres registered a fall of 1 point each. Rest of the 19 centres' indices remained stationary. The indices of 41 centres are above the All-India Index, while other 36 centres' indices are below the national average. Puducherry's index remained at par with all-India index.

The wish-list includes favourable policy initiatives by the government and regulators like RBI and Sebi, in addition to implementation of already proposed reforms, as also a better corporate earnings performance in 2013 to keep up the momentum, experts say. "RBI's monetary policy looks as the biggest trigger for the Indian stock market in 2013. Going ahead, implementation of the proposed Direct Cash Transfer, if happens on the desired lines, would lift investor sentiment. Also, the much-awaited GST could be a game-changer for the markets," Aditya Trading Solutions Managing Director Vikas Jain said.

Indian investors, craving for rate cuts, would also like to see inflation slowing, he added. The central bank had hiked key policy rates 13 times by 3.75 per cent between March 2010 and October 2011 to tame rising inflation. The RBI has, however, indicated that in view of the likelihood of inflation moderating further, it could go in for a rate cut in its third quarter policy review in January.

Besides, market participants also wish that government continues its reforms' measures and presents a realistic and reformist budget. The gain of over 25 per cent in Sensex in 2012 so far, has infused life back into the markets. However, going ahead, the rally will be driven by corporate earnings, fiscal deficit and inflation-level, Jain said.

According to Vinay Khattar, Head Research (Individual Clients), Edelweiss Financial Services: "The first and foremost wish is from the RBI. Markets are expecting the central bank to cut repo rate in the fourth quarter of FY13. "The second wish is that government must implement the proposed reforms, such as increasing FDI in insurance and allowing foreign play in pension industry, besides clearing the decks for introduction of GST."

If inflation continues its downward trend, RBI may opt for rate cut in January, experts say. On rate cut expectations, Khattar said, although, RBI has refrained from cutting rates for quite a while, it is likely to resume rate cuts in the last quarter of FY13. The timing and size of rate cuts is still debatable given RBI's preference for price control. On the whole, RBI is expected to lower repo rate by 50 basis points in the remainder of FY13, Khattar said.

Marketmen have expressed optimism on the outlook for the Indian market. "We see 13-15 per cent upside in Indian equities. This translates into Sensex target of 22,000-22,500 over the next 12 months," Khattar said. The government's reform agenda has lifted investor sentiment and business confidence, which in turn have driven overseas investment inflow. The bellwether bluechip index Sensex has gained about 25 per cent so far this year. The total foreign fund inflow for 2012 stands at over USD 23 billion.

The biggest reform the government should unleash in 2013 is on the fiscal deficit front, analysts said. "Globally, the biggest risk stems from the US fiscal cliff uncertainty. Some sort of a compromise is expected before the end of 2012. However, as of now there is no clarity," Khattar said. Further, economic indicators need to show improvement on a consistent basis to boost investor confidence in the European markets, experts said.

Investor wealth soared by 27 per cent to around Rs 67.7 lakh crore in 2012 with the stock indices gaining nearly 25 per cent on hefty capital inflows and of late a slew of reform measures even as concerns remain over economic growth and rising fiscal deficit. Indian bourses made a dramatic turnaround after a meltdown in 2011, leaving behind strong optimism about a bullish 2013 in hopes of RBI rate cut, hefty capital inflows, a recovery in global economy and excellent earnings growth in the third quarter of 2012-13.

The smart recovery helped investor wealth to soar by over Rs 14.5 lakh crore to Rs 67,78,609 crore on December 21, 2012 against Rs 53,12,875 crore at the end of last year. The Q3 earnings, which are most likely to beat the market pundits, indications of more reforms by the UPA government and hopes of increase in retail participation in quality IPO/FPO and OFS in the near future expected to augment the bullish fervor in 2013, an analyst said.

The BSE sensitive index Sensex posted impressive gains of 3,787 points, or 24.5 per cent, at 19,242 on December 21, 2012, against preceding year-end's close of 15,454.92 points. The Sensex had lost 5,054 points, or over 24 per cent, during 2011. The National Stock Exchange's Nifty also spurted by 1,223 points or 26.5 per cent to 5,847.70 on December 21, 2012 from previous yearend's close of 4,624.30.

Investors ignored dwindling industrial output, declining exports, ballooning fiscal deficit, overall gloomy economic atmosphere in domestic and international markets amid fear of European debt crisis to spiral over world wide. Foreign institutional investors (FIIs) made the second largest investment in the Indian capital market in the year under review.

As the Sebi data, FIIs pumped in Rs 1,21,652 crore or USD 23.15 billion this year till December 21. Previously, they had made biggest investments of Rs 1,33,266 crore or USD 29.36 billion in equities during 2010. Kishor P Ostwal, CMD of CNI Research Ltd said a few big investors made a large profit in the market as select stocks scored new highs in view of paucity of floating stocks.

However, retail investors were not benefitted either in the secondary market IPO market and were seen selling their holdings, as a result the public ownership in the India Inc came down to 6-7 per cent as against a high of 15 per cent 2007, he said. Though the Sensex could not surpass its all-time peak registered in 2008, the sectoral indices like BSE-FMCG, BSE-HC, BSE-CD and BSE-Auto logged their historical highs during the year on hectic buying by foreign funds.

Analysts said at the beginning of 2012 investors feared of further slide in view of corruption scams. However, the market surprised everyone by rising almost 1,739 points or 11.25 per cent, largest monthly rise in absolute term in the month of January in any calender year, following hectic buying by Foreign funds. It was also the biggest monthly performance since September 2010 when it had gained by 2,098 points or 11.67 per cent.

The rally in the month was driven by strong global cues on hopes of some stabilidation in the Europe and gradual improvement in the US economic data. On domestic front, the government's decision to allow Qualified Foreign Investors (QFI) to invest directly in local equities from January 15, 2012 and signs of more foreign funds inflow also underpinned sentiment.

The Union Budget, which was delayed this year due to the Assembly polls in five states, presented by then Finance Minister Pranab Mukherjee on March 16 failed to enthuse the investors and plans to revive the economy. The market then turned negative and remained dull for the next few months due to slowdown in GDP growth, worries over macroeconomic conditions due to higher global crude oil prices, as India imports two-third of its oil consumption, rising trade deficit, weakening currency and global uncertainty.

Fears that reform process may take back seat after the ruling Congress party suffered a setback in some states in March and cut in China's growth target also weighed on the market sentiment. Revival of monsoon at the fag-end and Moody's retaining stable outlook on India supported the weak stock markets. Moreover, announcement of reform measures such as allowing FDI in multi-brand retail and downsizing the LPG subsidy by the government later pushed the Sensex higher since September.

The Sensex moved in a range of 19,612.18 and 15,358.02 before ending at 19,242.00 on December 21, 2012, displaying a rise or 3,787.08 points or 24.50 per cent. The wide-based S&P CNX Nifty of the NSE also flared up by 1,223.40 points or 26.46 per cent to settle at 5,847.70 on December 21, 2012. On the global front, barring China which ended in the red, rest of the other Asian markets ended firm. European as well as US stocks too exhibited strong trend this year.

31 DEC, 2012, 06.02AM IST, ET BUREAU

From policy paralysis to a rush of reforms: 2012 - a year of two halves for the economy

From Anna's war against corruption to massive protests over gang rape in Delhi, 2012 was a year when politicians faced rising public ire for failing to meet aspirations. But for the economy, it was clearly an year of two halves, despair and hope.

The government swung from policy paralysis to a slew of reforms, catalysed by P Chidambaram's return to thefinance ministry. Though the economy is no better than it was at the beginning of the year, there is hope things could turn better in 2013. The market clearly thinks so.

(Non-govt finance companies, sample size different for each quarter)


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Govt plans to create sovereign wealth fund

The finance ministry is working on the contours of the sovereign wealth fund and there may be an announcement in next year's Budget.

Earlier, it was proposed as a fund with a Budgetary allocation of around Rs 30000 crore, but considering that the finance ministry is fiscally constrained at this point in time it is mulling other alternatives like it being a government-backed fund instead of purely government fund and using reserves of large PSUs as well as raising debt.

The idea of the fund is to allow for acquisition of natural resources abroad especially in the oil and mineral space.

One also needs to check out if the Reserve Bank of India (RBI) comes on board for this and allows for the use of forex reserves for the purpose of acquisition of assets abroad. One needs to see that will it be actually announced in next year Budget.

Big bang FDI reforms likely to spur investments in 2013

The global financial uncertainties forced the government in 2012 to finally show animal spirit in liberalising FDI policy amidst objections from Opposition parties with as many as seven sectors being further opened up during the period.

The government liberalised FDI policy in sectors including multi-brand retail, single-brand retail, commodity exchanges, power exchanges, broadcasting, non-banking financial institutions (NBFCs) and asset reconstruction companies (ARCs).

During the 10-months of this year, foreign direct investment (FDI) contracted by 33 per cent to USD 21 billion as against USD 31 billion in the same period last year.

The government officials, however, expect the country to receive more FDI in 2013 in the wake of several important announcements.

"We expect that 2013 will be good for FDI and India will be able to attract more foreign investments," an official in the Commerce and Industry Ministry said.

Sharing similar views, CrisilBSE 3.76 % Chief Economist D K Joshi said the government will have to push for more reforms in order to get higher investments.

"Year 2012 was not good due to international and domestic matters. But things are likely to improve in 2013," Joshi added.

To revive investors' interest in India in the wake of global financial uncertainties Prime Minister Manmohan Singh in June had said the nation should "reverse the climate of pessimism...Revive the animal spirit in the country's economy".

The government, which was severely criticised by industry for policy paralysis this year, opted for big-bang reforms and allowed politically-risky 51 per cent FDI in multi-brand retail and 49 per cent investment by foreign airlines in the aviation sector.

The slew of reforms included raising FDI cap in broadcasting from 49 per cent to 74 per cent and allowing foreign investment in power exchanges. Besides, it has also increased FDI cap to 74 per cent in the service providers like DTH in broadcasting sector.

Foreign institutional investors (FIIs) were also allowed to invest up to 23 per cent in commodity exchanges without seeking prior approval of the government.

Among the decisions, FDI in multi-brand retail came in limelight as the government hard to strive hard to get the better of opposition in the Parliamentary debate that entailed voting on the issue. This decision will allow global retail giants like WalMart to open stores in India.

FDI ceiling in asset reconstruction companies has been increased to 74 per cent from 49 per cent, a move aimed at bringing more foreign expertise in the segment.

Falling growth, high inflation threats to stability: RBI
Risks to India's macro-economic stability have increased on the back of an economic slowdown, high inflation, and ballooning fiscal and current account deficits, the Reserve Bank of India said in a report on Friday.

A slowdown in both domestic savings and investment demand, as well as a moderation in consumption have also emerged as threats to macroeconomic stability, the central bank said in its financial stability report (FSR).

"The overall macro-economic risks in the financial system seem to have increased since the publication of the previous FSR in June 2012," the RBI wrote in the report.

India's economy is expected to grow 5.7-5.9 per cent for the fiscal year ending in March, the slowest since 2002/03. Growth prospects also remain below the recent trend of double-digits, with Prime Minister Manmohan Singh this week calling the five-year government plan for 8 per cent expansion "ambitious."

The current account deficit also remains a concern as Asia's third largest economy has seen exports fall due to weak demand in key markets like the United States and Europe, while imports of gold and oil have remained high.

On the fiscal side, the government could see a shortfall in tax and non-tax revenue because of the economic slowdown, and is at risk of overshooting its expenditure targets, the RBI said.

The RBI added data from banks showed a significant portion of foreign exchange exposures at companies remained unhedged, posing another risk to macro-economic stability.

"This is especially disquieting given that the exchange rate volatility has been higher in India in comparison to other emerging market currencies as well as those of advanced economies," the central bank wrote in the report.

The RBI also said profitability at banks may come under pressure in coming quarters with gross non-performing assets (NPA) continuing to tread above the credit growth and on the back of rising slippages.

State-run banks saw a high degree of deterioration in asset quality compared with its peers. The gross NPA for all banks rose to 3.6 per cent at the end of September versus 2.9 per cent at the end of March, the RBI said.

The RBI said if the adverse macroeconomic conditions persists, the system level gross NPA could rise from 3.6 per cent at end of September to 4 per cent by end of March 2013 and 4.4 per cent by end of March 2014.

Commmercial borrowings,NRI deposits push up external debt to $365.3bn

The country's external debt stood at USD 365.3 billion as of September, up USD 20 billion over March 2012, due to higher commercial borrowings and NRI deposits.

"This is an increase of about USD 20 billion (5.8 per cent) over the level at end-March 2012. The rise in external debt is largely due to higher NRI deposits, short-term debt and commercial borrowings," the Finance Ministry said in a statement.

The long-term debt stood at USD 280.8 billion at the end of September, showing an increase of 5.1 per cent over the end-March.

Short-term debt, which accounts for 23 per cent of the total external debt, increased by 8.1 per cent to USD 84.5 billion.

Component-wise, the share of commercial borrowings stood highest at 29.8 per cent, followed by NRI deposits at 18.3 per cent and multilateral debt at 13.9 per cent.

Debt denominated in USD dollars remained the highest with a share of 55.7 per cent in total external debt followed by the Indian rupee (22.9 per cent) and Japanese Yen (8.6 per cent).

India's foreign exchange reserves provided a cover of 80.7 per cent to the total external debt stock at September end, against 85.2 per cent at end-March 2012, the statement added.

Direct cash transfer programme: PSBs to open 5,000 ATMs in 51 districts

NEW DELHI: State-run banks are set to ring in the new year by rolling out 5,000 ATMs, following the government's directive to make available this facility in the 51 districts selected for the launch of the direct cash transfer programme.

The Centre's ambitious programme, which aims to provide benefits under 34 welfare schemes directly into beneficiaries' accounts so as to plug leakages and reduce delays in transfer of subsidies, is set to be rolled out on January 1.

"Once the scheme kicks in, there will be a huge load on the banks as beneficiaries will like to withdraw money and also do other transactions. ATMs will facilitate this and lessen the burden on the banks," said a finance ministry official, who did not wish to be named.

State-run banks, which had 34,916 onsite ATMs till September, are also working on providing 2 million point of sale, or POS, terminals across the country to allow customers to carry out small and medium-sized transactions.

"Cash transfer is just one step. We want that all beneficiaries should be able to utilise other banking services. It is a win-win situation as banks will also get low-cost deposits from such account holders," the official said.

In order to facilitate payments, these banks will continue to use the existing payment module, which allows interbank payments. According to a government official, the finance ministry has conveyed to the Prime Minister's Office that the complete switch to the Aadhaarbased payment system can happen later. "Once the Aadhaar numbers reach a significant scale, the technology issues can be worked out to achieve a convergence of the two models," the official said.

The Unique Identification Authority, which issues Aadhaar identity cards, plans to set up 10 million micro-ATMs, each at a cost of about Rs 15,000 while the network will cost about Rs 1,500 crore. Bankers say that the focus should remain on opening more accounts rather than the technology used to provide services. At present, 58.7% Indian households avail banking facilities.

"Unless the UIDAI achieves significant numbers, transferring to a new technology will be a loss-making proposition for us," said an executive director at a public sector bank.

The government has directed banks to have at least one branch or business correspondent agents (BCA) for every village or group of villages with 1,000 to 1,500 households. In addition, the government plans to set up camps in educational institutions and villages to speed up enrolment of beneficiaries under the direct cash transfer scheme.

In areas where there is no functioning BCA or the BCA's performance is less than satisfactory, the common service centres set up under the department of information technology are to be engaged as BCA.
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ET recaps the big events in business, markets, economy, politics for 2012. Your one stop destination for the big ideas for 2013 & beyond.

Check out ten biggest gaffes of 2012

In India, the common man came of age even as a lot of special people faltered, some leaving a smile in the process. Here we take a look at a few.
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Faces that made Headlines

Top 12 newsmakers of 2012

From politics to business to sports, ET shortlists a dozen personalities who grabbed headlines—for good or bad, or both—in the year gone by.

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Looking Forward: Year 2013

NewsmakersSachin Tendulkar

What makes Tendulkar's ODI stint more special is also the 154 wickets against his name, with 97 coming in matches India won.Narendra Modi
An eventful year in Gujarat saw Modi convincingly retaining power.Felix Baumgartner
Austrian daredevil breaks sound barrier in record space jump.

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MarketsDon't expect high returns from gold

Though gold prices will continue to rise in 2013, the pace of increase is likely to come down. However, a weaker dollar could push up returns from gold.Market uptrend to continue in 2013
The spurt in reforms, positive global cues and FII inflows are likely to keep the markets buoyant in 2013. Here's how to make the most of it.Rupee likely to strengthen in 2013
After touching an all-time low in June, the rupee has strengthened against the dollar. Experts see better days ahead for the rupee in the new year.

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Political Landscape Changers of 2012

Career prospects for 2013How to improve your career prospects in 2013

The slowdown took the steam out of hiring in 2012, but HR consultants are hoping the new year will be better for both recruiters and employees.10 hot job profiles or segments for job-seekers
ET picked the minds of the country's biggest HR names to zero in on 10 job profiles or segments in 2013.Net employment would improve for 2013
The study focuses on the employment growth potential, the business outlook and hiring forecasts with relation to the location and company profile.

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Personal FinanceBase investment decisions on requirements not predictions

Most people like to buy at the right time, and this supersedes all other considerations. Disproportionate importance is accorded to the way the market prices will behave in the future.Best to buy online insurance in 2013
Convenience and cost benefit are two compelling reasons for the online channel to grow bigger this year. It will also prevent mis-selling of insurance.Lock money for long term before rates fall
The RBI is expected to cut interest rates as inflation falls. So, it's a good time to lock in at high rates, but consider the tax implications before you invest.

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