Bills fall,but not much Food-price inflation dipped to 0.42 per cent in December,raising hopes that the headline rate would also fall in 2012. But households might not find much respite. High prices in the latter months of 2010 have helped the statistical easing in food prices,which make up 15.04 per cent of the governments Wholesale Price Index. Finance Minister Pranab Mukherjee has said he expects overall inflation,9.11 per cent in November,to drop to no less than 6 per cent by March 2012. But oil prices are a worry. Having plummeted after the fall of investment banker Lehman Brothers in 2008,crude prices remain above $100 a barrel. This adds to input and transportation costs,which businesses typically pass on to consumers. Experts voice If oil prices dont come down sharply,that means inflation cannot come down sharply. (He expects inflation at nearly 7% next year) Ajit Ranade,chief economist of the Adiya Birla Group Lower home loan rates The year gone by was a tough one for floating rate home loan customers,who witnessed a series of rate hikes following increases in the repo rate from 6.25 per cent in January to 8.5 per cent in December. On an average,home loan customers witnessed around 25 per cent hike in their loan rates in 2011. But softer inflation and slower growth may have brought that to an end. The RBI paused rate hikes in December and hinted at reversing the monetary policy. The Union Bank of India went a step further and announced a 10 basis point cut in its base rate on Thursday. Abheek Barua,chief economist at HDFC Bank,expects repo rates to drop between 50 and 100 basis points. He says: RBI will continue to remain cautious over inflation but policy reversal may happen by March-April. There wont be sharp cuts but gentle cuts through the year. There is also problem with credit demand which will also induce cut in lending rates. As you enter 2012,you may expect a cut in your home loan rates and thus a fall in your tenures and EMIs during 2012. Experts voice Interest rates have peaked and with inflation coming down there is no possibility of interest rates going up unless something unexpected happens. The RBI has also indicated that they will focus on growth more and food inflation coming down is a big positive. MV Nair,chairman of Union Bank of India Tricky jobs market Job seekers may find 2012 a mixed bag. Companies exposed to international markets are cutting costs and are likely to lay off some of their staff next year. The formal labour market added 1.4 million jobs in 2011 against a projected 1.6 million as businesses became cautious on taking on more recruits after July,says Balaji E,CEO of head-hunters Ma Foi Randstad. Pharmaceuticals and healthcare providers increased hiring but job growth in banks and financial intermediaries remained sluggish. Hiring is an indicator of companies confidence about the future. When that confidence is low,it hurts the labour market, Balaji says. Market experts say that job creation in 2012 will be more sector-specific and finance and manufacturing sectors are less likely to take on much staff. However,some job growth is expected in information technology,pharma and healthcare. IT is still going strong with TCS and Infosys expected to add a gross of over 100,000 staff in the twelve months to March 31. V Suresh,executive vice-president,Naukri.com,feels that events in the first three months elections,the Budget,inflation,interest rates and the global economy will set the tone. Experts voice IT is showing signs of confidence and pharma sector also looks good. However,job creation may suffer in infrastructure,real estate,construction and manufacturing. I do not think there is a risk of a large scale lay-off V Suresh,executive VP,Naukri.com Salaries stay flat,but not in villages Incomes saw a decent hike in 2011 thanks to better performance by Indian companies in the first half and in the previous year. But that is unlikely to continue in 2012 as the second half of 2011 brought pressures of higher inflation and interest rates,slower investments and growth,a fall in consumer demand and weakening sentiment in the global economy. There are clear indications of slower growth in companies revenues and profits in 2012. Market players are projecting below 10 per cent growth in corporate earnings in 2012,which is likely to force companies to trim their expenses. Balaji says: The overall salary increase in 2011 stood around 12-13 per cent but given the risks of global factors in 2012 and our own domestic issues of inflation,interest rates and growth,income levels are expected to remain flat in 2012. Lower growth in gross domestic product translates unevenly across households. Affluent and upper-middle class families might trim their budgets as companies in the service sector cut wages and jobs. But households with lower incomes might see a different year. The government has considerably increased its transfers to poorer households in the form of welfare programmes like the National Rural Employment Guarantee Act (NREGA). This makes a very big difference because households that qualify for NREGA have no employment to begin with, says Mahesh Vyas,CEO of the Centre for Monitoring the Indian Economy. Bina Agarwal,director of the Institute of Economic Growth,thinks that improvements in their implementation will also make a difference. She says: A s the implementation of NREGA improves within and across states,it will raise the incomes of the poor,including of poor women who constitute an estimated one-third or more of NREGA workers overall. Agarwal expects agriculture to perform as well as in 2011 unless the monsoon fails to bring much rain. Steady growth in farm incomes would bring stability to rural households in spite of unease in the financial markets. Experts voice The overall salary increase in 2011 stood around 12-13% but given the risks of global factors in 2012 and our own domestic issues of inflation,interest rates and growth,income levels are expected to remain flat in 2012. At best,individuals can expect inflation-adjusted growth in their income levels E Balaji,MD & CEO,Ma Foi Randstad Rupee recovers The rupee depreciated by 19 per cent against the dollar in 2011,from 44.7 per dollar to 53.07. This increased expenses on foreign trips,college fees abroad,medical expenses abroad by an equal proportion even as it helped you receive something extra on repatriation. But the rupee is unlikely to remain at these elevated levels for a long time. It is expected to regain its stability when flows of foreign inward investment start entering the Indian markets in search of higher returns amid a weakening European and the US economy. FIIs are also expected to increase their inflows in a bid to take advantage of a depreciated rupee once concerns over domestic growth lose steam. With rupee at historic lows,NRIs are also expected to increase their remittances. All this will help the rupee regain some strength. Experts voice We expect rupee to hit a high of 54 during the year but it is expected to come down between 48 and 50 (by year-end) on the back of FII inflows,NRI remittances,FDI flows. Also the current account deficit will start to narrow down and pressures will ease on that account too Abheek Barua,chief economist,HDFC Bank
