Indian economy not likely to slowdown - Lehman Brothers

Anti-inflationary measures are unlikely to turn India into a slow growing economy, while other Asian nations could face the situation of rising prices and economic stagnation, a latest report says. "We do not believe that India would be affected significantly in a stagflation scenario and growth would remain strong in relative terms...," global research firm Lehman Brothers said in a recent research report.

However, even as the economic growth is projected to remain strong, interest-rate sensitive stocks could be adversely impacted during stagflation situation in Asia. Stagflation refers to a situation when inflation is rising and the economic growth is simultaneously slowing down. The negative impact is likely be felt by interest rate-sensitive stocks or by companies that are not in a position to pass on cost pressures to consumers, Lehman said.

Further, investment spending is unlikely to witness a substantial slowdown primarily on account of significant shortages in key sectors such as steel and power. The report pointed out that risks out of a stagflation scenario would be high for the banking sector, infrastructure, automobile and cement firms. "The risks are significant for part of the banking sector, companies with a high proportion of fixed-price contracts and companies with high energy usage without the ability to pass on increased costs," it said.

Lehman noted that in India inflation would remain on the higher side for some more time due to the base effect -- which relates to the inflation data of the corresponding week in the previous year. Given particular prices in the current week, inflation would turn out to be higher, if it was a small number in the previous year, but would be less, if it was high a year ago. In addition, the report said that inflationary headwinds would lead to increased fiscal deficit and negatively impact the country's expansion plans. "One of the major reasons for India's premium expansion has been the reduction in fiscal deficit, a process which could be derailed in the short term due to inflationary headwinds," it added.

The government has initiated fiscal and monetary measures to lessen the effects of inflation on consumers. However, according to the report, some of these measures does not reflect the "true market economics." "If the inflation period is prolonged, we expect the government to start passing on some of the suppressed price increases (especially those relating to crude oil and fertilisers) in small doses. However, we do not expect this anytime soon, given the proximity of the elections, the report pointed out.

- economic times

Weakening Indian Rupee -and Reason behind it

It has been noticed that indian national rupee(INR) is weakening and it is also clear that US dollar is weakening too!! so why is INR weakening????

This question might be arising in every economist mind and they might not be sure why there is decline in value of indian rupee??

Indian economy grew at nearly 10% last fiscal year but the growth rate of indian economy projected for this fiscal year would never be met and finance minister has to rethink about the growth rate percentage which he kept in mind while making the Union finance budget for year 2008-09 in february this year.

Last year the foreign direct investments(FDI) in India crossed every target and was in huge amounts, US $ was flowing into indian subcontinent as water due to which US $ was wandering at under 40 INR mark till february 2008. this was the time when USA was considering india as a potential country . Since at that time US $ was coming to india itself so the reserve bank of India(RBI) stopped purchasing the US $ to keep $ buffer (every country keeps US $ into it's buffer for controlling the economic conditions of that particular country.


When US companies felt that there were few countries in Asia and Africa which offered better oppurtunities then india so the companies which had invested in india started to take out their money for investing in other countries due to this action of the US companies the US$ inflow into india started declining and Indian rupee started weakening.


Now RBi had to come into action and had to purchase US $ on it's own for maintaining the buffer level of US $ in Indian subcontinent but this action of RBI can never match to the rate when US $ were being invested in Indian subcontinent by US companies directly so the INR started weakening as the reserve US $ in RBI's buffer declined and rupee weakened further.


Now indian rupee can become strong only in case the investment from US companies start pouring into india again at the same rate at which it was in previous fiscal years. Moreover tremendous increase in crude oil prices are also weakening the india rupee further as the oil import bill by indian companies has increased almost 50% and all are incurring losses.


We should also be prepared for huge rise in petrol and diesel retail prices in future , the rise in petrol would have been in order of INR 10/litre for the government if government passed whole burden onto the general population and similar increase would be there in case of prices of diesel. and it is evident that inflation would also increase further in coming future.

So government has increased commision on filling stations by INR 29/Kilolitre for petrol and INR 31/Kilolitre for diesel however retail prices has increased by INR 0.04 / litre so people have been effected to less extent with rise in petrol/diesel prices . However crude oil prices will touch $200 /barrel mark in this year itself so further rise in petrol and diesel prices is on the cards and inflation will rise further in near future.

Economy of India | Indian Economy Developments

A major factor that contributed to the second most-populous nation on the planet achieving this milestone, in April, was the sharp appreciation of the Indian rupee against the U.S. dollar. Whereas Indian currency has been gradually appreciating against the U.S. greenback over the last few years, what took many by surprise was the sudden and sharp appreciation during the months of March and April when the exchange rate came down drastically, from just under Rs 45 to the U.S. dollar to less than Rs 41 to the dollar or a change of roughly 8.5 percent in less than 40 working days.

By way of contrast, the rupee had appreciated by only 2.3 percent vis-a-vis the dollar between Apr. 1, 2006 and Mar. 31, 2007 (the Indian financial year). In this period, the Indian currency gained 2.7 percent against the Japanese yen but depreciated by 6.8 percent against the euro and by 9 percent against the British pound. The appreciation of the rupee has made Indian exports more expensive in markets where transactions are designated in U.S. dollars while making imports relatively inexpensive.

Analysts are of the view that the Reserve Bank of India (RBI), the country's central bank and apex monetary authority, has consciously allowed the rupee to strengthen as part of a package of policies aimed at controlling domestic inflation. In recent months, inflation in India, as measured by the official wholesale price index, had threatened to cross the 7 percent mark and is currently hovering in the region of 6 percent. The Indian economy is currently one of the fastest growing in the world --it has grown by an annual rate of over 9 percent for two successive years and by an average of over 8 percent over the last four years, both for the first time since the country became politically independent 60 years ago.

At the same time, this growth has not been inclusive because it has bypassed large sections of the population and swathes of territory, mainly in the east and the north. One out of four of the 1.1 billion citizens of India live on less than one U.S. dollar a day. "The reason why the RBI is not intervening in the currency markets to depreciate the value of the rupee is because it wishes to cushion the economy from the imported variety of inflation at a time when international prices of crude oil are in the region of 65 dollars a barrel," explains Amitendu Palit, visiting fellow at the Indian Council for Research on International Economic Relations, a New Delhi-based think tank. India currently imports roughly three-fourths of its requirement of crude oil.

Palit told IPS that part of the reason why the rupee has strengthened against the dollar is because the U.S. currency has itself steadily weakened against hard currencies like the yen, the euro and the pound. He said that if the RBI purchased more dollars to keep its price up, it would increase domestic money supply and add to inflationary pressures. Palit is of the view that a strong rupee would have a negative short-term impact on the growth of "price-elastic' exports such as computer software, IT-enabled services (or business process outsourcing), garments and textiles. During financial 2006-07, India's merchandise exports touched 125 billion dollars, implying an annual growth of nearly 23 percent. Imports grew at a faster 25 percent with crude oil accounting for close to one-third of the total value of imports during the year.

Exports have doubled over the last three years. India's share of world trade, however, still remains negligible, growing from 0.76 percent in 2003-04 to over one percent at present. During this period, inflows of foreign direct investment have jumped from 2.2 billion dollars to 16 billion dollars (and this amount excludes retained earnings that have been reinvested). "I expect the rupee to continue to appreciate gradually, not suddenly, over the next year or so and the dollar to go below the level of Rs 40," says Manoj Pant, professor of economics at New Delhi's prestigious Jawaharlal Nehru University. He told IPS in an interview that the government and the RBI wanted to "send a clear message to exporters that they could not expect to continue receiving preferential treatment".

While there is considerable concern among economists that the Indian economy is "over-heating" and that the benefits of economic growth have not been evenly distributed among all sections of the population, others are optimistic about the country's "growth story". A report prepared by Credit Suisse bank pointed out that over a year after their economies crossed the one trillion dollar mark, eight out of ten countries witnessed bullish trends in their stock markets.

The report added that the combined wealth of the estimated 20 million non-resident Indians is currently more than one trillion dollars, which is the gross domestic product of the entire Indian economy. The recent rise in the rate of growth of the Indian economy has been fuelled by a sharp rise in manufacturing output and the services sector. Among the services that have been growing very fast are IT-enabled services and computer software. These are the segments of the economy that are now likely to be adversely impacted by the appreciation of the rupee.

"Companies that were exporting software and IT-enabled services were shocked by the sudden rise in the value of the rupee vis-à-vis the dollar because the bulk of their business was designated in dollars," points out D.K. Joshi, director and principal economist, CRISIL Ltd. (earlier known as Credit Research and Investment Services of India Ltd.). In an interview with IPS, Joshi added that the "profit margins of companies exporting IT services would be squeezed and they would certainly fight back by increasing their billing rates in dollar terms." Even if the rate of growth of computer software and IT services exporting firms slows down, analysts IPS spoke with were reasonably optimistic that the deceleration brought about by the sudden strengthening of the rupee in relation to the dollar would be a passing phenomenon.

India's commerce minister Kamal Nath has set ambitious export targets of 160 billion dollars and 200 billion dollars respectively for the country over the next two years. He told journalists on Apr. 19 that the Indian government had taken into account the likely slowdown in the U.S. economy while setting these targets. India's trade basket, he said, was quite wide, claiming that the expected slowdown in the U.S. economy would not have a major impact on the country's exports.

Crude Price on all time high

Global crude oil prices are on a all time high of US $ 125 per barrel and is adversly effecting the balance sheet of indian economy, probably it is also a reason of depreciating value of indian rupee when compared with US $ .

Crude prices could reach higher levels over the next few months as the winter season in the northern hemisphere gets under way.
Although the price of the basket of crude relevant for India is ruling at a much lower level than $55, the effect of higher crude prices is bound to affect the profitability of a swathe of companies, especially in the manufacturing sector, as costs of energy, fuel and transportation could start to spiral.

Even if the Government decides to limit the price increases by seeking recourse to further cuts in excise and customs duties, and requiring oil companies to bear an even greater part of the burden, profitability and growth rates could be affected as growth rate of the global and the Indian economy slows down. Market sentiment could also be influenced in a negative manner if liquidity in global markets dries up and a flight to safe assets and safer currencies set in.
Investors as such should consider adopting a cautious approach to buying equities, by staggering investments over a period of time, and partial profit booking on deep-in-the-money positions, may be appropriate. This could mitigate any downside risk that could envelop the markets due to the bullish trend in crude prices that is driven by a combination of robust demand and speculative activity.

The positive aspect of the crude prices story is the likely boom in construction activity in the Gulf countries. This could be an opportunity for companies such as Larsen & Toubro and Voltas, which have executed several projects in the region that could serve as a reference point for bagging more orders, and Gujarat Ambuja Cements, which appears well set to capitalise on the sharp spurt in cement prices in export markets.

The latter's earnings numbers for the July-September quarter have been buoyant with a fillip from exports as well as higher domestic prices, and there could be a further scaling up over the next few quarters. There are others that could benefit from the anticipated construction boom.
For now, we prefer the stocks of these companies, which have an established presence, higher efficiency levels that could compensate partially for rise in input costs and limited downside risks as large-cap stocks. Stock-specific recommendations of Business Line, however, will take precedence over this broad-investment strategy.
- Hindu Business line

Economy of India Growth Pattern - Latest Updates

It has been predicted that by 2035 there would be three major economies of world - US economy, Indian Rupee, Chinese Economy. and the growth rate of indian economy for makin this prediction correct has somewhat slowed down in this fiscal year due to global economic woes. Indian economy is a diversified economy with agriculture sector still the greatest job provider.

Indian INC's are making global impact and every second day we can listen news
about indian company's acqisition of some other company. Global Acquisitions by Indian companies are making the impact of indian economy on a global scale.

India's economy is on the fulcrum of an ever increasing growth curve. With positive indicators such as a stable 8-9 per cent annual growth, rising foreign exchange reserves, a booming capital market and a rapidly expanding FDI inflows, India has emerged as the second fastest growing major economy in the world.

The economy has been growing at an average growth rate of 8.8 per cent in the last four fiscal years (2003-04 to 2006-07), with the 2006-07 growth rate of 9.6 per cent being the highest in the last 18 years. Significantly, the industrial and service sectors have been contributing a major part of this growth, suggesting the structural transformation underway in the Indian economy.

For example, industrial and services sectors have logged in a 10.63 and 11.18 per cent growth rate in 2006-07 respectively, against 8.02 per and 11.01 cent in 2005-06. Similarly, manufacturing grew by 8.98 per cent and 12 per cent in 2005-06 and 2006-07 and transport, storage and communication recorded a growth of 14.65 and per cent 16.64 per cent, respectively.

Another significant feature of the growth process has been the consistently increasing savings and investment rate. While the gross saving rate as a proportion of GDP has increased from 23.5 per cent in 2001-02 to 34.8 per cent in 2006-07, the investment rate-reflected as the gross capital formation as a proportion of GDP-has increased from 22.8 per cent in 2001-02 to 35.9 per cent in 2006-07.

The growth pattern for this year has been robust with every sector's growth seen in green colour. some of the details about sectoral growth patterns is as follows :

The process continues in the current fiscal year. On the back of 9.9 per cent growth in the first half of 2006-07, GDP grew by 9.1 per cent during April-September 2007.

* While overall industrial production grew by 9 per cent during April-December 2007, importantly capital goods production rose by 20.2 per cent compared to 18.6 per cent during same period in 2006.
* Services grew by 10.5 per cent in April-September 2007, on the back of 11.6 per cent during the corresponding period in 2006-07.
* Manufacturing grew by 9.6 per cent during April-December 2007, on the back of 12.2 per cent growth during same period in 2006-07.
* Core infrastructure sector continued its growth rate recording 6 per cent growth in April-November 2007.
* While exports grew by 21.76 per cent during April-December 2007, imports increased by 25.97 per cent in the same period.
* Money Supply (M3) has grown by a robust 22.8 per cent growth (year-on-year) as of December 21, 2007 compared to 19.3 per cent last year.
* The annual inflation rate in terms of WPI was 3.5 per cent for the week ended December 29, 2007 as compared to 5.89 per cent a year ago.
* Fiscal and revenue deficit decreased by 11 per cent and 17.2 per cent, respectively, during April-November 2007-08 over corresponding period last year.

With such a robust growth rates, the advance estimates of the Central Statistical Organisation (CSO) expects the economy to grow by 8.7 per cent in 2007-08.

Highlights of Indian economy for present fiscal year are as follows :

Reflecting the favourable prospect of growth rate of Indian economy, the orders received Indian companies have increased by a whopping 68.6 per cent to US$ 32.48 billion during January-October 2007 compared to US$ 19.26 billion in the same period last year.

* India is among the five countries sharing 50 per cent of the world production (or GDP).
* FDI inflows have jumped by almost three times to US$ 15.7 billion in 2006-07 as against US$ 5.5 billion in 2005-06.
* The aggregate income of the top 500 companies rose by 28.4 per cent in 2006-07 to total US$ 469.51 billion.
* India's National Stock Exchange (NSE) ranks first in the stock futures and second in index futures trade in the world.
* Twenty Indian firms have made it to the list of Boston Consulting Group's 100 New Global Challenger Giants list.
* According to a study by the McKinsey Global Institute (MGI), India's consumer market will be the world's fifth largest (from twelfth) in the world by 2025.
* The number of companies incorporated has increased at an annual average of 55,000 companies in the last two years to 865,000, from 712,000 companies at the end of 2005.
* Four Indians and seven Indian microfinance companies make it to the Forbes list of Top10 world's wealthiest CEOs World's Top 50 Microfinance Institutions, respectively.
* India has the most number of private equity (PE) funds operating amongst the BRIC markets.
* Mumbai has been ranked tenth among the world's biggest centres of commerce in terms of the financial flow volumes by a survey compiled by MasterCard Worldwide.

Another significant aspect has been the broad-based nature of the growth process. While new economy industries like Information Technology and biotechnology have been growing around 30 per cent, significantly old economy sectors like steel have also been major contributors in the Indian growth process. For example, India has moved up two places to become the fifth largest steel producer in the world.

And with its manufacturing and service sectors on a searing growth path, Lehman Brothers Asia estimates India to grow by as much as 10 per cent every year in the next decade.

It is seen that the per capita income of india is on a rise the following report sums up the per capita income growth trends:

Along this significant acceleration in the growth rate of Indian economy, India's per capita income has increased at a rapid pace, exceeding an earlier forecast made by Goldman Sachs BRIC report which estimated India's per capita to touch US$ 800 by 2010 and US$ 1149 by 2015.

Per capita income has increased from US$ 460 in 2000-01 to almost double to US$ 797 by the end of 2006-07. In 2007-08, India's per capita income is estimated to be over US$ 825.07, according to the advance estimates of the Central Statistical Organisation (CSO). Further, India's per capita income is expected to increase to US$ 2000 by 2016-17 and US$ 4000 by 2025. This growth rate will, consequently, propel India into the middle-income category.

Global Acquisitions by indian firms puts India firmly on major economies

Tata Motors came into global limelight as an automobile major in early 2007 or even earlier when news of the cheapest world car was out of the tata's stable, Launch of tata nano (the $ 2500 car) turned all heds towards the tata motors and every major auto maker now want to replicate the same model but will never able to make a car even cheaper then the Tata's nano due to the cheapest input cost of nano, and the advantage with tata's is that they can use their own homemade steel for making the chasis of their vehicles which other companies have to purchase from other steel companies.
The launch of Tata Nano was much hyped so that the whole world notices the nano and Tata as a global automobile major with a surprise to come later in the year. the world never knew that the year 2007 was year of Tata Motors's brand acquisitions of the JAGUAR and LAND ROVER the iconic british car brands famous through out the world for their excellent cars in luxury car market.

Some still think that tats'a have played much bigger then they can by acquiring JAGUAR and ROVER car companies which were owned by the ford motor company of United states of America.

It may also be recalled that in 2007 the Toyota Motor Corporation surpassed General Motors to become World's number 1 automobile company. Now every car maker want to replicate the Toyota model to make their car company's revenue much larger and Tata's are no exception.

It took 3 decades for the japanese auto maker to enter into the luxury car market .

Toyota is the gold standard that aspiring auto-makers look to. Synonymous with Japanese quality, Toyota got to its premier position in the world auto stakes by a combination of production efficiency, high quality and delivering unsurpassed value to the customer. Toyota fans call a Honda, “a fake Toyota”, seemingly referring to Honda following in Toyota’s footprints and achieving similar status in terms of quality and value. Similarly while a growing company like Hyundai benchmarks its cars against Toyota competitors, a relatively “old-world” company like Volkswagen re-designed its production process based on inputs from Toyota engineers.

Still Toyota did not move beyond its economy and hence cheap image in the Western world till the introduction of its luxury brand, the Lexus. The strategy was such a success that other Japanese auto makers quickly jumped onto the bandwagon. The Lexus strategy had a curious side-effect on the overall Toyota bouquet of products. Unlike how the European companies built their luxury cars, Toyota continued to use the production line using strict quality control to drive efficiency. As a result the luxury cars did not cost significantly more than the regular line-up. While this revolutionized the luxury car market, it also worked wonders for its non-luxury line-up as the superior styling and finish of the luxury models began to rub-off on the rest of the portfolio.

Tata Motors has only taken baby steps towards becoming a global automaker. But the newly-acquired the availability of true luxury brands within the stable allows the company to learn what it takes to give its cars the aspirational value they need to succeed in the Western markets.

In addition to taking design lessons, Tata Motors can also benefit from the world-class R&D facilities, and an established global marketing network. Also while the Jaguar-Land Rover brand image will work wonders for Tata Motors’ own image, there is a danger that it would dilute the value of the British brands. So if the Tatas make it clear that they will treat the new companies as prized possessions that they will take pains to nourish and grow, while also using them as a huge opportunity to learn, then that should allay fears of brand dilution, while keeping the existing jobs and helping the Tatas as they build up their portfolio of vehicles to fill the gap between the SUVs and the luxury vehicles, in terms of both products and aspirational value.

So keep your fingers crossed and wait 2-3 years to see the technology of jaguar and rover brand embedded into indian made tata cars.

Diversified Indian Economy - Different Sectors of economy of India

A lot have changed in indian economy from the time since it got independence from the colonial rule in 1947. earlier much of the economic activities were controlled by the government itself and no major reforms were introduced in first 45 years of independence. However changes were made in early 90's under the government of Rajiv Gandhi and followed by Late PV narsimha Rao's Finance Minister Manmohan Singh(now Prime minister of India). This was time when liberalisation policies were introduced in indian economy and indian markets were opened for the foreign MNC's. since then there is no looking back for indian economy.

India's economy is diverse, encompassing agriculture, handicrafts, textile, manufacturing, and a multitude of services. Although two-thirds of the Indian workforce still earn their livelihood directly or indirectly through agriculture, services are a growing sector and play an increasingly important role of India's economy.

The advent of the digital age, and the large number of young and educated populace fluent in English, is gradually transforming India as an important 'back office' destination for global outsourcing of customer services and technical support. India is a major exporter of highly-skilled workers in software and financial services, and software engineering. Other sectors like manufacturing, pharmaceuticals, biotechnology, nanotechnology, telecommunication, shipbuilding, aviation , tourism and retailing are showing strong potentials with higher growth rates.

However, since the early 1990s, India has gradually opened up its markets through economic reforms by reducing government controls on foreign trade and investment. The privatisation of publicly owned industries and the opening up of certain sectors to private and foreign interests has proceeded slowly amid political debate.

India faces a fast-growing population and the challenge of reducing economic and social inequality. Poverty remains a serious problem, although it has declined significantly since independence.

Is Govt sucking blood of 5% taxpayers to run whole country of 125 crores??

Finance Minister Mr. P Chitambaram would present the General Union Finance Budget tomorrow in the Parliament House. It would be seventh budget presented by P. Chitambarm as the finance minister . he presented the first budget in year 1997 some 11 years ago.

It is strongly indicated that there would not be any tax rates cut in tomorrow's budget . India's population is 125 crores and it is horrible to know that the total percent of tax payers is still in single digits ~ 5 percent . There can be hike in taxes in order to compensate for this year's budget deficit.

However the policies of government need to be changed rather then such financial reforms. It is not at all good for the country like India which sucks taxes from only 5% of the population in order to subsidise or feed the rest of the population which is a huge number in excess of 100 crores.

Finance Minister has to bring more industries under the tax knife so as the burden which is imposed on 5% of population to feed the other 95% is reduced as government clearly earns from taxes and import duties which are applicable to just 5% of the total population.

Some of the individuals who are into agri business i.e. the farmers, agricultural land owners of excess then 50 acres does not pay any amount of tax to the government however they earn profits in crores which simply becomes black money which these farmers never show to government.

So Mr. P Chitambaram kindly wake up and rather then sucking blood of 5% of populaion increase the domain of tax payers by bringing the rich farmers who own more then 50 acres of cultivable land under the taxable individuals so that there remains unbiased growth of all sectors .

Indian Economy growth target is again pegged at 9% this year which would be however impossible to sustain as the year runs by. because government has stopped thinking about agricultural sector and is concentrating on the services sector which is more governed by the US economy rather then Indian Economy. Its a bitter truth anyways!!

US Economy Slowdown and it's effects on Indian Economy

A string of foreign banks hit by the crisis have started selling down Indian papers in the overseas market at distressed rates. In some cases, banks have refused to honour credit lines they had earlier promised. But even as corporates are reeling under the increased financing costs for their deals, some Indian banks are picking up these papers at distressed rates.One of the assets, which a few foreign banks are in a haste to sell down, is the Hindalco bridge loan, which the company had taken to acquire the Canadian firm Novelis.

Banks, which gave the loan at 61 bps above Libor, are now in the market to sell it at Libor plus 150-180 bps. Banks want to offload papers before December 31 to free their capital. Such loans, primarily for acquisition financing, are given directly by the banks, with an internal understanding that the assets would be palmed off over the next two to three months. However, because of the sub prime crisis, many of these banks were unable to get any buyer for the Indian papers. This has resulted in banks offering to sell these papers at a cheaper price. Banks have country limits and also client limits. Some banks have exceeded these limits and due to the liquidity crunch are finding it difficult to sell down these assets to other foreign banks. This has given a few Indian banks the opportunity to buy these papers.

Significantly, most foreign banks are not adding to their asset book in order to keep capital free. According to sources, a large US bank has stopped issuing letters of credit to Indian customers. It has also stopped disbursing loans to new customers. Bank officials have been told to postpone disbursals till the New Year. The urgency to prune corporate loans emanate from similar capital concerns. A couple of other corporate loans have also been sold off in the past couple of months at 15-25 bps discounts. Recently, in a deal where an Indian chemical firm was taking over an US company, the foreign bank backed out of the financing deal at the last moment. The deal was finally financed by another foreign bank.

A major US bank and a couple of European banks are said to be have been affected by the crisis. According to senior bankers, Indian banks, like ICICI Bank and SBI, have been picking up papers issued by Indian companies. A few Taiwanese and Middle East banks have also been buying these papers. However, ICICI Bank which did large dollar borrowing this year has committed new loans of around $2 billion in the past one month. Corporates are also facing the heat as borrowing costs have doubled in the past few months. Bankers point out that in many transactions, Indian corporates have now started asking Indian banks to be in the deal as they feel that some foreign banks may back out if credit woes deepen.

Source: economic times

General Union Finance Budget 2008-09

General budget for the next financial year is just a month away and already finance minister is busy with meeting all the top corporate houses and would want to make them happy and tax payers would be skeptical about the union budget.
Many questions and obstacles are in the way for continuing with the same growth rate next year.

And it looks like the finance minister is in no mood to cut the tax rates. However more emphasis would still be given to agricultural sector as always which is shattering day by day.

so what do you all feel about the general budget for 2008-09 . post your comments about what you want and what a normal middle class individual want from this budget.

However RBI has not changed any of the interest rates which has dissappointed the banks but finance minister replied to media persons that there is enough liquidity in the market and banks should encourage more loans. However a borrower should prepare himself to pay higher interest rates on the loans they get from bank.

Annual India Economy Update (January 2007-January 2008)

Annual India Economy Update: well all the readers of this post would be surprised about the time duration of this annual India Economy Update as it is not based on Financial year which starts in India in March every year but rather it is based on the US financial year which begins in January and ends in december every year on the new year and is according to the Earth's revolutions around sun.

Economy of India in past 1 year has grown at around 8.7% this year which is very healthy rate but is behind the economy growth rate of China which stands at around 11% for same period.

India Economy's growth rate in 2007 remained lower when compared to the growth rate of the previous year but the stock markets remained in constant bull run through out the year with both sensex and Nifty touching new highs. Bombay Stock Exchange managed to rank itself in top 10 stock markets of world in market capitalisation.

Foreign Investors showed a lot of trust in Indian rupee and hence the foreign direct investments reached a new record this year and the trend would continue for next couple of years too.

Indian rupee grew at around 5% in 2007 and hence a lot of exporters were affected as they did not do proper hedging of dollar for minimising the impact of the deteriorating dollar.

Daily Rupee Updates-Rupee V/S Dollar daily price

India Economy is Growing daily and Indian Rupee has made it's position strong so i thought to publish daily dollar price after conversion to Indian Rupee. So that every one can know about the present trends of Indian Rupee and hence Indian Economy. However it is not possible for me to update the value hourly so the rates would be after the stock market transactions end for te day, later on i can provide you with hourly updates on India Economy. for time being the latest updates would be at around 6:00 pm IST daily.

Day/Date/Conversion Price(1 dollar in INR)/Remarks: (All enteries would be in same sequence respectively):

MONDAY/31-12-07/ 39.29/ up ^ 0.14 (at 6:40 pm IST)

FRIDAY/28-12-07/39.43/ up ^0.14(at 6.58 pm IST)

WEDNESDAY/26-12-07/39.57/down 0.20(at 7:23 pm IST)

TUESDAY/25-12-07/39.37/down 0.01(at 11:00pm IST)

MONDAY/24-12-07/39.36/down 0.02(at 6:00pm IST)

SUNDAY/ 23-12-07/39.34/down 0.06(at 8:59 pm IST)

FRIDAY/ 21-12-07/39.29/ up^0.26 (at 7:04 pm IST)

THURSDAY/ 20-12-07/39.55/ up^0.02

WED/ 19-12-07/ 39.57/ no change

Slowdown in US Economy V/S Boom in India Economy

From past couple of years their has been a gradual slowdown in the economy of US. There are certain reasons for the slowdown of US Economy. With the growth of economies of Asian countries like China and India .Economy of US has a serious threat as these two asian countries have grown at a decent pace in past four to five years while at the same time the economy of US has shown a slowdown. The subprime mortagage crises occuring in US has made several mortagage companies bankrupt and hence looking into the matter the president of US Mr. George W Bush has recently decreased the rate of interest for mortagage facilities available to the people of US. It's now clearly evident that the government of US has started feeling the heat of the slowdown in it's economy. Recently a mortagage services client of indian company Infosys declared itself short of funde i.e bankrupt and had no money to pay to Infosys for the period of time . There were around 250 customer executives working for the mortagage services company in Infosys found there client bankrupt and hence they all had to be shifted to other process hence the subprime crises of US mortagage companies has started affecting the job oppurunities not only in US but also in countries like india where the processes of these banks have been outsourced. hence Slowdown in the economy of US have forced many software companies of US to outsource more and more work outside US in countries like India.

Software jobs in US are also on a decline due to the stagnation in economy. Many US based software companies have all ready opened their development centers in India as carrying business for them in US itself has become less profitable while in India their profit margins are decent and they further can outsource their projects to Indian companies. Boom in Indian Economy has helped India in reducing it's import bills drastically. with the present rate of US dollar equivalent to ~ 39.50 INR and still decreasing further. Time is not far when the economy of Indian would become major Economy of World.

Economists have predicted that if Indian Economy Grows at the Same pace as of today then it would surely surpass the net value of France, Japan by the year 2020, and would become a superpower by year 2025 and India Economy would be third largest economy of world . world would be goverened by three economies of US, China and India, by the year 2035 india economy would surpass the economies of Germany, UK and indian rupee would be used for transactions all over the world.

US market is now dependent on the imports from asian countries like china and India and the volumes of Import from India and China are on a steady rise from the past couple of years. However India economy is still net an importer economy i.e. the imports are still more then the exports but the scenario is soon going to change and India would ultimately become an export economy in coming 10 years. Boom in India Economy is clear from the amount of Foreign Direct Investments being made in India by none other then companies of US since they want higher profits for their further expansions which are not possible while carrying their businesses in US as the profit percentages in US are on a decrease and future looks no better. So these companies have shown their tremandous interest in India and India Economy which is hence on a boom.

India does not have resources of it's own and hence for development it is using the Foreign Direct Investments for it's growth conservatively which is clear as the indian rupee is getting firm day by day . Foreign players have shown tremendous interest in Indian Stock Markets and both of the indian stock exchanges The Bombay Stock Exchange and National Stock Exchange have already crossed the magical mark of 20,000 and 6,000 respectively and are still showing promising signs.

Government of India has also taken promising steps for bringing in more foreign currency to India as investment . The Incredible India campaign is an example and government has many plans to attract foreign tourists on Indian Festivals by providing certain package to the tourists.

Economy of India

Indian Economy is the second fastest growing major economy of the world. In 2007 the value of indian economy is measured to be ~1.10 trilion USD. Indian Economy is majorly dependent on agriculture and about 2/3rd of total indian population is still thriving on agriculture sector which is still not automated and majority of agricultural activities are done manually, growing indian population is a major hurdle in smooth growth of the indian economy.
Earlier there was strict government control over all the economic activities but after the liberalisation of indian economy in 90's during the Congress Rule headed by Late P.V.Narsimha Rao and present prime minister Sardar Manmohan Singh(the then finance minister in Narsimha Rao government). hence indian economy became much free and many major MNC's started to tap the potential Indian Market. It was also the same time when indian companies started making global presence and moved out of the indian subcontinent for new markets hence expanding themselves from regional companies to indian MNC's . It was also time when Reliance Industries headed by Late Mr. Dhirubai Ambani earned huge profits and made his company a global company and indian second largest business house just next to the legacy of TATA's.
Earlier there was strict government control over private companies. but after liberlisation of the indian economy the business houses started expanding on their own and are now giving stiff compitition to similar companies of the west with added advantage of cheap labour. Indian Services industry lead by Tata Consultancy Services, Infosys, Wipro, Satyam etc. are also making their mark globally and finally world has come to know the ppower of indian intellectuals the biggest example is Indra Nooyi becoming CEO of Pepsico USA.

Growing Indian economy however has become now a matter of concern for indian I.T. Industry since Indian I.T. Industry is dependent on the rate of U.S. dollar. In the past one year or so Indian Economy has grown about 10% with respect to the U.S. dollar. Stagnation in economy of United States and at the same time the growth in Indian economy has affected the software services sector and the export sector adversly. many of the small exporters have lost lacs of rupees due to growing indian economy. Since small exporters do not use hedging techniques for minimizing the adversity of the growth in indian economy their business is suffering a lot hence government need to intervene now in order to check the present rate of the U.S. Dollar. thus helping indian exporters. Indian software industry which comprises of Tata Consultancy Services, Infosys, Wipro Technology, Satyam Computer Services, HCL etc need to negotiate their contract rates again with the out sourcing firms so that they can maintain the same growth which was prevelant when dollar was in mid 40's when converted to indian rupee. Due to growing indian economy the share prices of the top five services companies are on a steady decline fromthe last 1 year where as the share prices of similar USA copanies like IBM, Perot Systems have grown in the same period.

If the Indian Economy continues to grow at the same rate of about 9% per year than the day is not far when the booming indian I.T. Industry will have to be relocated outside India on a weaker economy country so that the cost benefit can be a plus for indian services industry.

Reserve Bank of India has taken various steps for controlling the growth in indian economy but these steps help temporarily and not are permanent solution .

Indian rupee as new Global Economy

Hi Everyone!
Post your views about when can you see Indian Rupee as new global economy as powerful as the US dollar which is presently the strongest economy in the world. Indian economy is growing and hence it has very bright future prospects. HOW DO YOU FEEL ABOUT IT????
There are various questions which need to be answered for making indian rupee achieve this feat.
some of them are:

1. What should be done for increasing the growth percent of economy at the same pace as China is growing??

2. What can India learn from the chineese economy and the policies of government there ?

3. Can Indian government policies achieve economy growth of over 11%??

There are several steps that Indian government need to take such as making strict rules as the government of China has made for using the huge man power in right proportion as required by different industry sectors. India is lacking this very ingredient as government is not able to divide the man power required by different industry sectors in right proportion hence there is surplus man power available in one sector but scarcity in another sector. India is boasting of itself majorly on services sector which i think is a superficial sector and is more or less governed by growth of manufacturing sectors so more emphasis should be made on the Hard core manufacturing sectors like automobile,steel, heavy machinary industry etc which determines the right growth of the country.
So basically i want to say is that the man power should be rightly divided in correcr proportion so that the saying "INDIA IS LAND OF 1 BILLION + OPPURTUNITIES" is felt as correct saying.

IF U HAVE SUGGESTIONS FOR THIS TOPIC DO POST YOUR COMMENTS !!

like SHOULD INDIA CHANGE IT'S ECONOMY MODEL SIMILAR TO THAT OF CHINA???
not fully but to some extent as possible.

one thimg is sure that growth of country is governed by growth in manufacturing sector rather than growth in services sector....

so what are you waiting for!!! Start posting your comments and let people know about your views and suggesions about the same!

Thanks,
Himanshu

Growing India Rupee-India Economy

Hi Everyone!
India is second fastest growing economy of the 21st century with annual growth pegged at ~9% for the year 2008. How do you all feel about it ??
Post your comments whether government would be able to take measures in order to sustain same pace of growth for coming years or do you think some immediate steps should be taken in order to carry on the growth rate which is result of economic reforms introduced by the then Finance minister Sardar Manmohan Singh in post 1991 Parliament.
There are several moves which can be encouraged further like:

1. Encouraging more Public Private partnership(ppp) investments.

2. Some concrete steps to control corruption at higher level due to which whole country is affected.

3. Providing management training to the MP's which are elected for first time as in case of Industrial training provided to software freshers by various companies.

Well different brains can give different better ideas so what are you all indians waiting for START POSTING NOW!!!!
This small effort by all true indians may be helpful to our motherland and if implemented we can see a developed India much Early as these Blogs can help in increasing the growth percent of economy to over 10% EVEN MORE THEN CHINA!!!

Your small effort can work wonders for a growing economy like India