Threat of Deflation rises for the world

Developing countries, including China and India, are showing signs of economic cooling on account of the cascading effect of the globaldownturn.

India's industrial growth unexpectedly turning negative in October, shrinking by 0.4 percent after expanding by 12.2 per cent in the same month a year earlier, hint at the worsening conditions for the economy.

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Given the deepening global recession, the threat of deflationary spiral is mounting which may fix the global economy in similar lines of the great depression in 1930s. Even as analysts and economists feel that the governments have managed to rescue the global economy from a deflationary spiral by extending deposit guarantees and recapitalizing banks who suffered losses, attempts to artificially reducing interest rates to support prices are extremely ephemeral measures.

"They may appeal as a quick fix, defending banks from further losses. Artificially supporting prices removes the stimulatory effect that lower prices have on new investment. Instead of a V-shaped bottom followed by a speedy recovery, you may end up with an L-shaped depression," said Bred Jonathan, consulting partner at Kreg and Bordan Economic Advisory.

We often hear economists or analysts refer to the threat of deflation. Deflation is a natural function of the market to correct excesses from a boom. The boom normally ends when the central bank stops new money creation, which was used to synthetically stimulate the economy.

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Source www.economictimes.com - read full article

published under - deflation in world economy, deflation threat, economy of india, global recession updates, indian economy updates, world economy updates

india's economy growth to be among strongest

India's economic growth would be one of the strongest in the world despite the the global meltdown, RBI Deputy Governor Usha Thorat said on Thursday. "Although the International Monetary Fund(IMF) had scaled down growth forecasts of nations, India's growth would be one of the strongest in the world," Thorat said at an interactive session organised by ICC here.

She said that the although incremental growth rate would be lower, the actual growth this fiscal which India would achieve would be nothing to scoff at.

"India had recorded a growth of three per cent for many years. It is only for the last few years the rate had touched nine per cent," she said.

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deflation in world economy, deflation threat, economy of india, global recession updates, indian economy updates, world economy updates

On foreign exchange volatility, she said that India's exchange rate policy had served well and ruled out going back to the fixed exchange rate regime.

She said that the cost of funds would come down, but it would take some time. "It all depends on the inflationary expectations of the bankers."


published under - Indian economy, economy of india, indian economy updates, Indian rupee updates, economy india

Indian Foreign trade policy to continue as same

The five-year foreign trade policy that lays ground rules along with incentives and disincentives for conducting imports and exports has been extended beyond March 2009 to enable the new government to give its policy direction to the country's external engagement.

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The Foreign Trade Policy (FTP), which was unveiled by the UPA government on September 2004, was to expire on March 31, 2009. India's foreign trade has seen a sharp growth in the last five years. Exports during 2007-08 grew by 22.9 per cent from 126 billion dollars in the previous fiscal, while Imports went up from 185.7 billion dollar in 2006-07 to 235.7 billion in the last fiscal.

Indian Economy Updates for december 2008

Indian economy consistes of various sectors including finance sector, Agricultural sector, Policy sector(includes government policy updates), Foreign trade sector, Infrastructure updates. So i have tried to put all of the sectors together under particular date of the month of December in this post.

Following are the main economic updates for indian economy:
(click on the link to read full story)

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December 2008 India Economic Updates :

Govt plans Rs 350-cr export package
PC, PM’s panel favour more interest rate cuts
Vaghela seeks sops for textile industry
Sharad Yadav meets PM, seeks Rs 14,800 crore package for Bihar
Bill to raise capital of LIC to Rs 100 crore introduced in LS
Rise in donations abroad raises fresh questions
Swinging Re adds to woes of slowdown-hit exporters
GCC suspends EU free-trade talks
Textiles exports may fall short of target
Tatas, GMR, L&T in race for 60 NHDP projects
Reliance Infra bags Haryana road projects
Farmers fancy blue berries, to grow fruit here
Foreign trade policy to continue beyond March 2009
WTO chief postpones meeting on global trade deal
Govt approves 21 road projects: Finance Ministry

December 8, 2008 India Economic updates :

Infra cos say more funds needed to boost growth
RBI may further cut repo rate by 150 bps: Goldman
Power gear bidding must be wired to global tenders
Govt announces package including tax cuts to boost economy
RBI rate cuts unlikely to stem slowdown - Citi
Govt's stimulus may not be effective: JPMorgan
Fiscal package positive for market sentiment
WTO releases revised blueprints for Doha free trade talks
Oct tea exports fall 5 pc as demand dips
Rs 2,000-cr boost fails to cheer exporters
Infra cos say more funds needed to boost growth
Proposals to set up industrial units worth Rs 90,480 crore
NHDP's road stretches likely to be built on annuity model
Agricultural scientist stresses need for food security
Govt weighs sops for cotton sector
Spending on agriculture up 80 percent: Government


For knowing previous month's Indian economic updates (click here)

RBI cuts repo rate by 100 bps

The Reserve Bank of India on Saturday cut the repo rate - the rate at which RBI lends to banks - by 100 basis points to 6.5 per cent from 7.5 per cent and reverse repo - the rate at which banks park excess funds with RBI - by 100 basis points to 5 per cent from 6 per cent, effective from December 8.

However it has kept cash reserve ration (CRR) - the proportion of deposits banks must keep with the central bank - unchanged at 5.5 per cent. The 6.5 per cent repo rate is the lowest rate in 2-1/2 years, while the 5 per cent reverse repo rate is its lowest in more than three years.

The RBI has taken the steps to boost growth and shore up investor confidence amid signs of economic slowdown and in the wake of deadly attacks in Mumbai.

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"Industrial activity, particularly in the manufacturing and infrastructure sectors, is decelerating," RBI Governor Duvvuri Subbarao told a news conference.

Subbarao said the central bank would closely monitor developments in global and domestic financial markets and would take swift and effective action as appropriate.

"The Reserve Bank's policy endeavour will be to minimise the negative impact of the crisis and to ensure an orderly adjustment," he said.

Saturday's decision was the first change in the reverse repo rate since July 2006.

The cash reserve ratio, the proportion of deposits banks must keep with the central bank, was left unchanged at 5.5 per cent.

Expectations of rate reductions have mounted ever since last week's attacks in Mumbai in which gunmen brought the business district to a standstill as they holed up in two luxury hotels and a Jewish centre, killing 171 people.

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The benchmark 10-year bond yield fell 8 basis points to 6.76 per cent on Friday ahead of the central bank's decision, which had been well flagged by government officials, and the rupee gained against the dollar.

The government is also expected to announce fiscal measures to give impetus to the economy, which data show may be decelerating more rapidly than anticipated from an annual rate of 9 per cent in the fiscal year which ended last March.

Fiscal deficit set to sharply deteriorate from now on

India’s budget deficit for April-September 2008 may not compare very badly with the same period a year ago, but it threatens to deteriorate in the months ahead as the government may have to step up spending to stimulate the economy even while tax revenue growth is slackening amid slowing corporate activity.

The fiscal deficit for the six months to September 2008 was an estimated 4.1% of the nominal GDP compared to 3.8% at the end of the same period last year. Likewise, revenue deficit for the same period was 3.1% at the end of first half of the current fiscal compared to 2.9%, a year ago. These numbers will likely worsen as the arrears of the Sixth Pay Commission awards due to be paid this year are fully disbursed.

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Already, data made public by the Controller General of Accounts (CGA) on November 28 point to further deterioration of the fiscal position. The fiscal deficit for the seven months to October was higher by 42% compared to a year ago, while it was only 26% higher at the end of September.
read full post (click here)

Economy of India to grow slower this year

"Companies across sectors have begun announcing plant shutdowns and delays in project implementation. The negative factors appear to more than offset the possible lagged impact of aggressive monetary easing and lower commodity
prices," Citi said in a report.

It said reduced domestic investment on the back of tighter credit standards and external weaknesses should slow GDP growth to 6.8 per cent in the current fiscal and 5.5 per cent in the next fiscal.

In its report on Financial Markets prospects in 2009, Citi said its forecasts factor in a further 200 basis point reduction in policy rates by the RBI.

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With inflation down to 8.40 per cent, the Reserve Bank is expected to cut policy rates, repo and reverse repo, along with a fiscal stimulus package by the Government, to spur economic growth.

The Indian economy grew by 7.8 per cent in the first half of the fiscal from 9.3 per cent a year ago, and analysts predict further slowdown in the remaining period of this fiscal.

According to official sources, over 65,000 employees have lost jobs during the three-month period ending October in India on account of the economic slowdown.

"A sample survey of 21 companies found that 65,507 jobs were lost in the country in various sectors between August and October," a source said.

Besides, exporters have lost orders worth Rs 1,792 crore on account of the slowdown in global trade and lack of demand from the US and European markets, the main destinations of Indian products.

Citi further said that due the global recession, India's export growth would slow to 5.9 per cent in the next fiscal.

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However, lower oil prices, coupled with new oil and natural gas discoveries, will likely result in an improvement in the trade and current account deficits in that year, it added.

India's exports declined by over 12 per cent to $12.8 billion in October against $14.5 billion a year ago.

As such, the export target for this year is expected to be cut to USD 175 billion this fiscal against the earlier projection of $200 billion.

- source www.economictimes.com

- posted under economy of india, india economy updates, india economy growth, economy of india 2008-09

RS v/s US $ - December updates - India economy

Indian economy trends are very important for those who are into economic analysis in India, Indian National rupee popularly known as INR in international market is following a downward trend due to global financial turbulance. As volume of US dollars (USD) in international markets is on a decline so the value of US $ is growing up, well indian IT industrycan feel better to some extent and is the only industry which would be getting a plus from current market scenario.

The post would include (US$ v/$ rupee) daily trends the rate shown of Indian rupee would be as displayed at time of stock markets closure(mainly BSE and NSE) you can also see daily Stock market live rates and closing rates.

INR(Indian National rupee) v/s US$ November trends/updates are as follows:

format for display of rs v/s $ would be in following order:

(date | RS v/s $ rate Daily trends updates | Remarks with respect to US $)

31/12/2008 | 48.50 | Up^0.26 | Rupee (INR) grew stronger by 26 paise wrto US $

30/12/2008 | 48.76 | Down(-0.87) | Rupee fell by 87 paise wrto US $

29/12/2008 | 47.89 | Up^1.10 | Rupee (INR) grew stronger by 110 paise wrto US $

17/12/2008 | 47.33 | Up^0.49 | Rupee (INR) grew stronger by 49 paise wrto US $

16/12/2008 | 47.98 | Up^0.58 | Rupee (INR) grew stronger by 58 paise wrto US $

15/12/2008 | 48.52 | Up^0.19 | Rupee (INR) grew stronger by 19 paise wrto US $

12/12/2008 | 48.52 | Up^0.60 | Rupee (INR) grew stronger by 60 paise wrto US $

10/12/2008 | 49.22 | Up^0.47 | Rupee (INR) grew stronger by 47 paise wrto US $

8/12/2008 | 49.69 | Up^0.10 | Rupee (INR) grew stronger by 10 paise wrto US $

6/12/2008 and 7/12/2008 saturday and sunday resp (8/12/2008 rates are wrto 7/12/2008)

5/12/2008 | 49.69 | Up^0.21 | Rupee (INR) grew stronger by 21 paise wrto US $

4/12/2008 | 49.90 | Up^0.62 | Rupee (INR) grew stronger by 62 paise wrto US $

3/12/2008 | 50.52 | Down(-0.43) | Rupee fell by 43 paise wrto US $

Mumbai Terrorist Attack - Do we need more for awakening our government??

It started with Bangalore Terrorist attack, Ahmadabad Terrorist attack, Delhi terrorist attack, Assam terrorist attack and the latest to the list is Mumbai Terrorist attack in which the encounter is still going on at iconic landmarks of Mumbai!! that's ridiculous , the question arises that are Indian intelligence agencies like RAW and other regional intelligence agencies of India sleeping?? the answer in present day context is that they are not sleeping but have died! so many terrorist attacks apart from Jammu and Kashmir (that comes as a default) along with such incidents, all happening in one year actually even less then that, i can say that Indian intelligence agencies have died.

Mumbai witnessed worst ever terrorist attack of the decade and all on major iconic tourist points which represented growing India, Mumbai which is also financial capital of Indian subcontinent witnessed terrorist operations for well over 48 hours (26th November 2008 - 29th morning in TAJ PALACE HOTEL) and government is unable to give any logical explanation for whole episode isn't it ? actually politicians, Cm do not actually know what the CM position, intelligence agencies are all about they are such an illiterate in knowing what does CM actually means , according to major CM's of all india majority knows only money making and giving some stupid condolence message after such episode every time , i have become sick of hearing such messages from PM, CM's of that state this year because i have already heard such nonsense for more then four times this year alone.

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In a country where you don't know whether person standing next to you is from India itself or some illegal immigrant, no id's anything isn't that bullshit on government's face, one thing is worth mentioning is that in any of such terrorist attacks none of the minister has died(either of center government or state government) has died! so is life of stupid common man of no importance to this country, the casualities just becomes statistics for government and then the file is kept in some dark corner of government office and is opened after one year just to recall the episode and give one condolence message again (what a bullshit is it all around) .

So where stupid common man go from here? that's a big question which requires immediate answer from within ourselves because it's only that we'll will suffer the most from such inhuman acts, Taj Mahal palace hotel was considered one of the best hotel in whole world ( i saw it's episode on discovery channel series " Great hotel's of world") and the whole Marine Drive road is high profile road, and terrorist opted for the sea route this time, but how could a boat enter Indian shores laden with Ak 47's, rifles , hand grenades and tonnes of ammunition, other sophisticated arms , the whole operation continued for more then 48 hours with Indian Army, National Security Guards(NSG), Maharashtra police losing their top police brass. It's too ridiculous on part of Indian intelligence agencies and Indian government who had a clue that this time terrorists could use Indian coast line for attacking but didn't want to do anything for safety of common man, they are busy gathering money, bribes and all other stuff Icould write another post on bribe too but that will deviate me from this post.

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I can't take it any more, Government can't repeat dialogues like " It's worst act by terrorists, but Indians will not be affected and will face it like they have shown it many times before and BLAH BLAH BLAH" I have become sick of listening to such dialogues on TV channels after such incident. These sentences have become a habit for government officials in media over and again. One political party said " Time has come to go above politics and their party will play no blame games this time" YUCK!! what a crap! let's see how they go against their this statement in few days, Left parties have always remained against Indian development with their anti US policies as seen in Indian US Nuclear deal which i have already mentioned in one of my previous post ( READ POST NOW) and still their blame game is on, I read in news they were saying "RR patil should resign", according to me they are the worst regional pary of whole india.

I know fight against terrorism will still move at snail's pace even after the whole Mumbai Terorist attack episode, Indian Government simply sucks all politicians are here for making fast bucks and giving condolence messages but not doing any thing to correct the system and make an independent anti terrorist front. After winning in elections the first work which a MP or MLA performs is collecting back the money which He/She has paid for getting ticket in the elections and you think that government does not know this then you are very wrong, Government knows everything but "ghar saaf karne mein haath kaun gande kare".

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My friend who is from Maharashtra itself told to me that Indian Custom's Department in Mumbai has reserved area on Bombay coast which is used only for allowing smuggling of goods, i mean that good's are not checked at all, Making it more clear Indian Custom's Department takes bribe and allows the ship to go to the port on Indian shore and portion of this bribe goes to all the politicians with minister's getting their share, terrorists might have taken advantage of the fact and their ammunition entered Mumbai and what happened after that is in front of all of us.

During whole Mumbai terror operation around 150 people lost their life's (that's government figure actual casualties would be actually double)One militant was captured alive so do you think some thing will come out of his mouth or government will get any clue, actually nothing will happen a case will open and would run for at least 10 years and before that one more such attack and terrorist will demand to free him. and we can expect lot of cases in future.

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So in my opinion and history it is very clear that Indian intelligence agencies whether at national level or at state level have died, they simply sucks and custom's department is busy in filling their pocket's by taking bribe from smuggler's on Mumbai coast, i wonder why don't they kill the terrorists which are inside the indian jails, if they do then Human Rights Activists come after a long sleep, So if we see from government's eyes we can expect such sentences in future too like " PEOPLE OF INDIA WOULD OVERCOME SUCH ATTACKS", "SUCH ATTACKS WOULD NOT CHANGE INDIAN SPIRITS" politicians around the country would never be able to go 2 steps ahead of terrorist activities.

The mob has to do something on their behalf without expecting anything from politicians this anything can be similar to one shown in movie "A WEDNESDAY" awesome movies a must watch for every true Indian, Rang De Basanti showed a very correct image of Indian politicians. One thing is sure that Indian politicians suck and ind India Common man is the m0st foolish of the whole lot.

- Himanshu Sharma
published under - Mumbai terrorist attack 2008, attack on mumbai, Taj palace hotel attack, Indian intelligence failure, Mumbai terror updates