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)

What others are reading now:
-Plan for World Economy Revival
-Indian Economic Summit Updates
-Rs v/s US$ latest updates
-World's Strongest economies list
-Trouble in Indian Forex
-Indian Agricultural Updates
-Effect of Recession on Indian economy

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)