Sunday, July 10, 2011

Income gap rises in India

Difference in per capita expenditure between urban and rural consumers is now wider than in 2004-05: NSSO

Despite the much-hyped rural consumption boom and all the social sector programmes of the government, the income inequality between the rural and urban consumer widened to 91% in the first five years of the United Progressive Alliance coming to power in 2004.

According to the 66th round of the household consumption expenditure survey released by the National Sample Survey Office (NSSO) on Friday, the per capita expenditure level of the urban consumer is now 91% higher than his rural counterpart, compared with 80% in the earlier 61st round of the survey conducted in 2004-05.

Though NSSO has declared that it will carry out the consumption survey again in the current fiscal as 2009-10 was a drought year, given that during the five years from the earlier survey the economy grew at an average of 8.64%, the trickle-down effect may not be happening as expected, analysts said.

N.C. Saxena, a member of the National Advisory Council, said this was because both agriculture and rural safety nets are in bad shape.

“Unfortunately, agriculture is in a state of collapse. Per capita food production is going down. Rural infrastructure such as power, road transport facilities are in a poor state,” he said. “All the safety net programmes are not working at all, with rural job scheme and public distribution system performing far below their potential. This has added to the suffering of rural India while market forces are acting in favour of urban India, which is why it is progressing at a faster rate.”

Without an official income survey, India relies on the consumption survey to measure income growth.

Among the major states, Kerala (Rs. 1,835) had the highest rural monthly per capita consumption expenditure (MPCE), followed by Punjab (Rs. 1,649) and Haryana (Rs. 1,510). Maharashtra (Rs. ,437) and Kerala (Rs. 2,413) were the two major states with the highest urban MPCE, followed by Haryana (Rs. 2,321). Urban MPCE was lowest in Bihar (Rs. 1,238).

The average urban MPCE was 28% higher than rural MPCE in Punjab, 31% higher in Kerala, and 41% higher in Rajasthan.

While average MPCE was Rs. 1,054, the median, or mid-point, rural MPCE was Rs. 895, signifying half the rural population belonged to households with consumption expenditure below Rs. 30 per day.

In urban India, where average MPCE was Rs. 1,984, the median MPCE was Rs. 1,502, meaning half the urban population had consumption expenditure below Rs. 50 per day.

Saxena said the government needs to look for imaginative solutions for rural India. “There has been no evaluation of social safety programmes,” he said. “Overall Plan expenditure in agriculture is very low, with most of the bogus schemes not benefiting the farmers.”

However, the survey shows an increase in consumption power across the country. The rural per capita consumption has grown 6% in 2009-10 against 1.2% in 2004-05. Similarly, urban per capita consumption has risen 6.8% compared with 2.9% in the earlier survey.

Indira Rajaraman, professor emeritus at the National Institute of Public Finance and Policy, said the survey data was encouraging. “If the survey shows 50% of rural population lives below Rs. 30 a day, then it is an improvement over the unorganized sector committee report (chaired by Arjun Sengupta), which showed 77% of the Indian population lives below Rs. 20 per day.”

Rajaraman said a growing urban-rural divide was inevitable in the process of development. “If there is absolute improvement in rural income, then rising disparity is not that worrisome. It only shows that though rural India has done well, urban India has only done better,” she said.

The survey shows the share of the food basket in total consumption expenditure is coming down in both rural and urban India. The share of food in consumer expenditure was 57% in rural India and 44.4% in urban India.

The share of food in total consumption has declined since 1987-88 by about 10 percentage points to 53.6% in the rural sector and by about 16 percentage points to 40.7% in the urban sector.

In rural India, people are spending less and less on cereals, edible oil and fruits. They are spending more on pulses, milk, non-vegetarian items and beverages. In urban India, consumption of nearly all food items is either going down or is constant compared with the earlier survey.

In both rural and urban India, consumption of non-food items, which include consumer durables, education and recreation, among others, has gone up as a result of the decline in expenditure on food items.

The five-year survey carried out between July 2009 and June 2010 surveyed 7,428 villages and 5,263 blocks. The survey covered 41,697 samples in urban areas and 59,097 samples in rural areas.

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Sunday, July 10, 2011 by ·


NTPC signs Rs10,000 Cr Loan Pact With SBI

State-owned NTPC Ltd, India’s largest power generation utility, signed a Rs10,000 crore loan agreement with State Bank of India (SBI) on Friday, making it the largest loan extended to any company by the country’s biggest lender.
"The rupee term loan has a door-to-door maturity of 12 years with a drawdown period of four years," NTPC said in a release. 
"The loan shall be utilized for financing the capital expenditure of ongoing and new projects."

NTPC, which has a power generation capacity of 34,584 megawatts (MW), plans to increase its installed capacity to 75,000MW by 2017 and become a 128,000MW utility by 2032.

The company’s deal with the state-owned lender comes as funding for new power projects has been losing steam.

"The number of power project financing deals in India, which had been rapidly increasing up to the early part of 2010, has now begun to slow," rating agency Fitch Inc. said in a report last month. Fitch attributed this to lending constraints on banks by the Reserve Bank of India and heightened risk awareness of power projects.

The nation’s power sector is facing an acute shortage of funds. The 11th Plan (2007-12) targeted an addition of 78,577MW of power generation capacity, requiring an investment of Rs10.31 trillion. The power ministry estimates there will be a shortfall of Rs4.51 trillion. The sector will need investment of $400 billion (Rs17.72 trillion today) during the 12th Plan.

NTPC alone would require an investment of around Rs30,000 crore annually, leading to a capital expenditure of around Rs15 trillion during the 12th Plan. A bulk of this, just over Rs1 trillion, will be raised as debt. NTPC currently has debt of around Rs37,783 crore on its books.
"Historically, the majority of the debt funding for new power projects has come from the domestic commercial bank loan market, plus a handful of specialized financial institutions," Fitch said. "Banks exposure to the power sector increased by 62% from March 2010 to 2011, totalling about Rs2,423 billion."
Indian banks, though, are at an increased risk of default on loans to companies linked to the power sector, as mounting losses of state electricity boards and delays in the execution of new power plants have made recovery difficult.

NTPC reported a net profit of Rs9,102.59 crore on revenue of Rs59,247.84 crore in 2010-11.

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