India inflation cools slightly

India’s year-on-year inflation cooled slightly in April, official data showed Friday, easing pressure on the central bank for a swift hike in interest rates.

Wholesale price inflation, the country’s main cost-of-living measure, slipped to 9.59 percent last month from 9.9 percent in March — broadly in line with market expectations, the commerce ministry said.

The Reserve Bank of India hiked its key interest policy rates by 50 basis points in March and April and has begun unwinding monetary stimulus measures used to shield the country from the global financial downturn.

Earlier this week, the bank said it would take a “calibrated” approach to further rate increases amid uncertainty about the fallout on India from the eurozone debt crisis.

“With the external situation highly uncertain and India’s financial system highly vulnerable to sudden capital outflows, now is not the time to aggressively withdraw liquidity and hike borrowing costs,” Nikhilesh Bhattacharyya, economist at Moody’s Analytics, said in a research note.

Slower-than-expected industrial output growth of 13.5 percent in March as the government withdrew stimulus measures also has reduced pressure on the central bank to raise rates swiftly, economists say.

The central bank is expected to wait for the onset of the monsoon rains that sweep the country from June to September to see whether they bring down food prices before taking any further tightening action.

Last year’s rains, the weakest in nearly four decades which hit agriculture output, sent the cost of food soaring and caused huge hardship for India’s poor masses.

The food price inflation index clocked up a still-strong 16.87 percent year-on-year rise but analysts expect food prices to ease amid hopes of a good harvest.

However, some economists said there could be a move by the central bank to tighten monetary policy before its July 27 policy meeting.

“We expect the Reserve Bank to maintain its tightening stance and we don’t rule out an inter-policy meeting (tightening) action,” Shubhada Rao, chief economist at India’s Yes Bank, told AFP.

The central bank could increase policy rates by a further 150 basis points this financial year to March 31, 2011 if inflation pressures do not ease, economists have forecast.

DU PREPARES UP FOR VOIP SERVICES FROM UAE

Emirates Integrated Telecommunications Company, the UAE telecom operator known as du, said yesterday that it is building a base to offer Voice over Internet Protocol (VoIP) services but has not yet zeroed in on a partner.

The company said net profit before royalty for the first quarter of this year more than quadrupled to Dh194 million, compared to Dh47 million in the first quarter of 2009. Revenue for the period was Dh1.58 billion, a 36 per cent increase over the same period last year and 3 per cent more than the fourth quarter.

"We are very pleased with the results. It shows our continued growth," said Osman Sultan, du's Chief Executive Officer, during a conference call yesterday. "It's a growth that has translated into a record revenue for us," he said.

An increase in the number of subscribers has been the main driver behind the record revenues, Sultan said. The number of active mobile subscribers increased by 262,000 in the first quarter, bringing the total active mobile subscriber base to more than 3.7 million.

Proposition

Du is currently "building a VoIP proposition", but hasn't decided on a partner yet, Sultan said. VoIP telephony allows users to make phone and video calls and send text messages using the internet at costs significantly lower than those charged by traditional network operators. Etisalat recently slashed international call costs to Dh0.50 per minute on landlines.

"We are now exploring different routes," Sultan said. "We will be announcing this year a value proposition for the enterprise and residence markets," Sultan said.

The extraordinary general assembly of shareholders agreed to the proposal to increase the company's capital to Dh4.57 billion by selling 571,428,571 new shares on a rights basis for Dh1.75 each.

The rights shares will be priced at 33 per cent discount to Monday's closing price (Dh2.55) on the Dubai Financial Market and at 38 per cent discount compared the price before the rights issue announcement last month, Sultan said.

The proceeds of the issue, about Dh1 billion, will be used to increase the company's capital in order to position it for future growth.

Capital structure

"This Dh1 billion that the company will be collecting is not needed for deadlines. I think we need to plan for a three- to four-year road map. We need to have a better capital structure," he said.

"The company has the highest growth among all telecom operators in this region and we anticipate remaining on the high end for 2010."

Asked about potential expansion plans outside the UAE, Sultan said there were "no intentions for any acquisition or any plans to go outside the UAE". The company's primary focus is to grow further in the country, he said