IRFC COVER-final - Indian Railway Finance Corporation Ltd.

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Chairperson's StatementDear Shareholders,It gives me great pleasure to welcome you allto this Twenty Third Annual General Meetingof your Company, Indian Railway FinanceCorporation Ltd. The audited accounts of theCompany for the year ended 31st March, 2010,along with the Directors' Report and its accompanimentsare with you, and with your consent, I would consider themas read. Before I present an account of your Company'sperformance, I would like to dwell upon some of theimportant developments in global and domestic economythat constituted the business environment in which yourCompany transacted its activities during the year.According to the policy announcement of Reserve Bank ofIndia (RBI) in April, 2010, recovery in the global economypicked up momentum in the fourth quarter of 2009, eventhough the pace of recovery remained significantly disparateacross economies. The projections for global output for 2010generally pointed to consolidating recovery, led by theEmerging Market Economies (EMEs). As far as the Indianeconomy is concerned, in the first place, impact of the globalmeltdown was milder because of its character of being largelydriven by domestic demand. However, improvement inglobal macroeconomic conditions was clearly reflected inthe turnaround in India's exports and the return of capitalflows. Despite a lower trade deficit, the current accountdeficit widened during April-December 2009 in comparisonto the corresponding period in the previous year. This wasattributed to a fall in invisibles. During 2009-10, India'sforeign exchange reserves increased by US$ 27.1 billion.However, bulk of the increase in foreign currency assets wason account of valuation. The RBI expected the net capitalinflows to increase further during the current year, reflectingthe prospects of higher growth and larger interest ratedifferentials between India and the advanced economies. Likeother EMEs, however, higher capital inflows were expectedto influence asset prices, domestic liquidity conditions andthe exchange rate, with attendant implications for monetarymanagement.Thanks to efficient management by the RBI, overall liquidityconditions remained at relatively benign levels during theyear. The banking system's credit to the Governmentremained the prime driver of monetary expansion duringthe year. The flow of resources to commercial sectordistinctly improved from both banking as well as nonbankingsources. Going forward, the demand for money mayincrease with acceleration in recovery and elevated level ofinflation.Global financial markets demonstrated significantstabilisation during 2009, despite continued encumbrancefrom the recent financial crisis. However, volatility increasedin the beginning of 2010 due to concerns about unsustainablefiscal positions, as reflected in sovereign risks. Events suchas the Dubai World debt imbroglio and the sovereign debtproblems in Greece and other European pockets posed acredible risk to the stability of financial markets goingforward.Closer home, with market activity returning to the pre-globalcrisis levels, volatility in the domestic financial markets waslower during 2009-10 than in the year before, when the crisiswas at its peak. The Indian economy grew by 7.4 per cent in2009-10. The momentum was particularly pronounced inQ4 of 2009-10 with growth at 8.6 per cent as compared to6.5 per cent in the previous quarter. At constant market prices,the pick-up in Q4 growth was even sharper at 11.2 per cent,reflecting a significant turnaround in indirect tax collections.Despite considerable stability and a measuredcommencement of exit from fiscal stimulus, markets facedconcerns emerging from large government borrowings andupswing in inflation. This affected yields in the governmentbond market. Soothing sentiments, however, surfaced astransmission of lower policy rates to the credit marketsimproved, even if, slowly. With the revival of capital inflows,nominal exchange rate appreciated. Given the high level ofdomestic inflation, appreciation in real terms was evenhigher.The Reserve Bank expects output growth in 2010-11 to behigher than in 2009-10, under the critical assumption of anormal monsoon. Support for sustained momentum in growthcan be expected from all three major components, viz.,agriculture, industry and services. Nevertheless, as a noteof caution, apart from monsoon-related uncertainty, a fewother downside risks have also been flagged. First, privateconsumption demand needs to improve significantly tosupport the growth momentum. Second, global recovery,despite gaining strength, is expected to remain fragile, whichhas implications for exports. Third, the exit from fiscalstimulus and the growth-supportive monetary policy, unless6
calibrated carefully, could impact the growth process. Finally,the domestic saving rate has exhibited some decline, led bysignificant decline in public sector savings. This could haveadverse implications for the potential growth of the economy.While inflation has been a source of concern, the RBI andthe Government expect it to moderate over the next fewmonths from the peak levels seen in recent months. Thereare, however, upside risks to inflation. First, internationalcommodity prices, particularly oil, have starteddemonstrating buoyancy again. Consequently, for severalcommodities, the import option for India to contain domesticinflation becomes limited, because of higher internationalprices. Second, the revival in private consumption demandand the bridging of the output gap will add to inflationarypressures. Finally, it is important to guard against the risk ofhardening of inflation expectations conditioned by neardouble digit headline WPI inflation.With the monetary and fiscal exit measures initiated, recoveryin private demand needs to be stronger to reinforce the growthmomentum. However, the already elevated headline inflationsuggests that the weight of policy balance may have to shiftto containing inflation, since high inflation itself will dampenrecovery in growth. In the emerging macroeconomicscenario, monetary policy management in 2010-11 willinevitably be dominated by the challenge of moderatinginflation and anchoring inflation expectations, whileremaining supportive of growth impulses.Belying the early promise demonstrated and causing concern,the macroeconomic environment and the overall positionchanged significantly when the First Quarter Review for2010-11 was carried out by the Reserve Bank in July, 2010.While the April, 2010 policy announcement was driven by afair level of optimism about the sustainability of the globalrecovery at least in a modest measure, there is now reneweduncertainty about the revival process in the face of the Greeksovereign debt crisis and other visible soft spots in Europeand the US. Happily, though, the recovery on the domesticfront has consolidated and is becoming increasingly broadbased,so much so that there are rising concerns aboutcapacity constraints being reached over a wide range ofsectors. While inflationary pressures have also mounted, theperformance of the monsoon up to the third week of Julyhas been significantly better than during last year. Even asrainfall still remains somewhat below the long period averageat the all-India level, it has been enough to induce asignificant increase in sown area across a range of crops,the high prices of which in recent months have been a sourceof great worry.The double digit growth in the Index of IndustrialProduction (IIP) that began in October, 2009 continuedinto the current financial year. In the first two months ofthis fiscal, April-May, 2010, the IIP recorded a year-onyeargrowth of 14 per cent with as many as fifteen out ofthe seventeen industry groups showing positive growth. Thelead indicators of service sector also suggest increasedeconomic activity. The fact that there was modestdeceleration in May, 2010, and a further dip in June, 2010are hopefully only transient blips,The Reserve Bank's upward revision of the GDP growthprojection for 2010-11 to 8.5 per cent (from 8.0 per centwith an upside bias in April, 2010) indicates that the economyis steadily restoring to its pre-crisis growth trajectory.However, even as this is happening, prospects of a sustainedglobal recovery appear to be increasingly uncertain, withpotentially unfavourable consequences for the EMEs,including India.Besides, despite increase in the policy rates by 75 basis pointscumulatively since March, 2009, real policy rates are stillnot perceived as consistent with the strong growth that theeconomy is now demonstrating. The Reserve Bank believesthat lower policy rates can complicate the inflation outlookand impair inflationary expectations, particularly given theincreased generalisation of inflation. The Bank is thereforecommitted to continue in the direction of normalising thepolicy instruments to a level consistent with the evolvinggrowth and inflation scenario, while taking care not to disruptthe recovery. This would have implications for the cost ofborrowing by your Company.The Reserve Bank's view is that the current market conditionspoint to liquidity pressures easing somewhat, even thoughthe system is likely to remain in deficit mode for sometime.This implies a significant change in the monetary operations,with a direct bearing on the Bank's actions. Against the abovebackdrop, the stance of monetary policy is intended to:♦♦♦Contain inflation and anchor inflationaryexpectations, while being prepared to respond toany further build-up of inflationary pressures.Maintain an interest rate regime consistent withprice, output and financial stability, andActively manage liquidity to ensure that it remainsbroadly in balance so that excess liquidity does notdilute the effectiveness of policy rate actions.7
Page 3: ANNUALREPORT2009 - 10Indian Railway
Page 6 and 7: BOARD OF DIRECTORSSmt. Sowmya Raghv
Page 10 and 11: While the economies the world over
Page 12 and 13: Directors' ReportDear Shareholders,
Page 14 and 15: the Task Force, in the MOU meeting
Page 16 and 17: safeguard its operations against ex
Page 18 and 19: compliant form. A roadmap for trans
Page 20 and 21: Right to Information Act, 2005The C
Page 22 and 23: Attendance at the Meetings of the B
Page 24: Remuneration Committee & Shareholde
Page 27 and 28: Annexure - 'A'Code of Business Cond
Page 29 and 30: ANNUALACCOUNTS2009- 10Indian Railwa
Page 31 and 32: PROFIT AND LOSS ACCOUNTFOR THE YEAR
Page 33 and 34: SCHEDULE-3LOANS(R in Lacs)DESCRIPTI
Page 35 and 36: SCHEDULE-3 Contd...LOANS(R in Lacs)
Page 43: SCHEDULE-7CURRENT ASSETS, LOANS & A
Page 46 and 47: SCHEDULE-11SALARY & OTHER EMPLOYEE
Page 48 and 49: SCHEDULE-13BOND SERVICING EXPENSES(
Page 50 and 51: SCHEDULE-16SIGNIFICANT ACCOUNTING P
Page 52 and 53: 10) Employee BenefitsEmployee Benef
Page 54 and 55: In respect of following External Co
Page 56 and 57: (b)During the year 1999 - 2000, the
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17. Disclosures with respect to Ret
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Amount to be recognised in the Bala
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The reconciliation of weighted numb
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CASH FLOW STATEMENT FOR THE YEAR EN
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ANNEXURE REFERRED TO IN PARAGRAPH 3
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Comments of the C & A of IndiaCOMME
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Outdoor Activities
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INDIAN RAILWAY FINANCE CORPORATION
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IRFC COVER-final - Indian Railway Finance Corporation Ltd.

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