BRIC nations providing stability to world economy

"As the global economy evolves and works its way through the present global financial and economic crisis, BRIC are a factor of stability and growth. This was already evident in our role during the G20 deliberations."

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The two-day conference, in which eminent experts from the four countries are participating, has been organised by the Observer Research Foundation, a New Delhi-headquartered public policy think tank. The preparatory meeting is expected to set the tone for the first BRIC summit to be held in Yekaterinburg next month.

Underlining that the world was on the cusp of a new type of multi-polarity, Menon said it was "becoming clearer and clearer that international decision-making on global economic issues must necessarily be democratised to reflect present realities".

Combined with our growing middle classes and the young populations that most of us enjoy, the BRIC can hope to be a factor of growth and stability in the world economy for decades to come, he said.

BRIC accounts for 40 percent of the world's population, 25.9 percent of its total geographic area, and 40 percent of global GDP. According to Goldman Sachs, BRIC can become collectively bigger than the G7 by 2035.

Menon also stressed on the need for BRIC to make more efforts to add value to their partnership and make their collective voice heard on important international issues. "What we see is a situation where the major powers simultaneously compete and cooperate with each other, each with all the others, to a greater or lesser degree."

Chinese Ambassador to India Zhang Yan and Deputy Chief of Mission of Brazil to India Jose Carlos Fonseca Jr were also present at the inauguration of the conference. "BRIC is a platform for four countries to build consensus and achieve win-win situation. Like any countries, four countries may have differences in their focus, objectives and even interests on various issues," the Chinese envoy said.

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"But interaction within the framework of BRIC can provide the four countries with opportunities to coordinate and cooperate with each other to build synergy between them," he said, while describing BRIC as "guardian of the interests of developing countries".

The Brazilian diplomat stressed on the need for the four countries to strengthen their bilateral relationships that will enable them to be more effectives collectively on the international stage.

source - economictimes.com

Scope for further rate cuts - MS Ahluwalia

With the inflation rate almost halving from the peak levels in August and economic growth slackening, Planning Commission Deputy
Chairman Montek Singh Ahluwalia on Monday said that there is further scope for the RBI to cut lending rates.

"It is clear at the moment that the economy is growing below its potential and inflation is definitely on its way down. And these factors would suggest that there is a scope (for easing monetary policy)," Ahluwalia told reporters here.

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RBI Governor D Subbarao today met Prime Minister Manmohan Singh at his residence, adding to the speculation that RBI might signal further cut in interest rates to boost economic growth which is impacted by the global crisis.

The apex bank had already injected Rs 3,00,000 crore into the system slashing the policy and reserve ratio rates to inject funds into the cash strapped economy.

Responding to the steps taken by the RBI, several banks including the largest lender SBI have cut lending and borrowing rates.

State-owned banks like the Punjab National Bank, Bank of Baroda and Dena Bank today reduced their benchmark lending rates by up to 75 basis points.

The Government, in its Mid-year review of the economy presented in Parliament recently said there was considerable scope for monetary policy easing over the next 6-12 months to offset the global increase in demand for money that is being transmitted to India.

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Ahluwalia said, "We should be watching the situation carefully and we should not hesitate to take further steps. These matters are being discussed...our prospects for inflation justify taking a stronger monetary position."

Inflation which had peaked to 12.91 per cent in August came down to 6.61 per cent in December.

posted under - India Economy, economy of india, indian economy updates, Indian policy updates, economy of india, rising indian economy, 24th indian economic summit, deflation in world economy, econoy of india, growing india economy.
-source - www.economictimes.com

Indian Economic Summit - Updates

Indian Economic summit being held at New Delhi has clearly reflected unease due to current economic crises which all started as mortgage crises in mid of this year when US financial institutions failed and became bankrupt especially Investment banks of USA. However Indian finance minister P. Chitambaram was hopeful for a revival of economic situation prevalent in world and would have more affect on Indian economy in 2009 as told by earlier post (read post now).

the highlights of Indian Economic Summit(24th edition) can be summed as below:

The ill-effects of a recession in the US and an overall global economic downturn weighed heavily in the minds of corporate leaders, even though many felt that India, with its high growth rate, even if slowing, was better equipped than many others to tide over the situation.

“This recession threatens to be a longer and deeper recession affecting most industrialised countries and we in India are experiencing the spill-over effects of what is happening in advanced countries,” Finance Minister said.

“While world output will decline - and to that extent affect our exports, affect some capital inflows, affect external credits - we must be able to quickly substitute or compensate for that by stimulating domestic demand and providing liquidity in the domestic market” Chidambaram said.

“Let us assume that for another month or two there will be further bad news, but even then we will grow at a satisfactory growth rate. Next year we will bounce back to a much better growth rate.”

The Indian economy is predicted by various think tanks and the central bank to grow at between 7-8 percent this year.

But the corporate sector remained apprehensive, having to contend with a demand slowdown, mounting inventories, higher input costs, rising cost of borrowings, depreciating rupee, volatile capital markets, lower profits if not losses, and resisting the unpleasant task of job cuts.

“There is a crisis of confidence,” said K.V. Kamath, president of the event's co-host, the Confederation of Indian Industry, and managing director of ICICI Bank, India's largest in the private sector.

“There is an urgent need to boost public confidence in the fundamentals of the economy for a recovery to take place,” said Kamath, adding: “I am also the first to concede that there is a change of mood to the other end of the spectrum."

Last year, the mood was entirely different. The Indian economy was racing ahead with the nine-percent-plus growth, exports were booming, inflation was moderate, the markets were on an upswing and corporate India was rolling in profits.

As a result, this year's event saw few participants talk about the need for the government to push ahead with reforms, the need to spruce up infrastructure or the need to liberalise foreign direct investment regime further.

Their focus was clear: The US economy was in recession, which had spilled over to some European counties as well, and that Japan, the world's second largest economy, was now adding to the depressing news with a confirmed recession.

Yet, not all participants agreed with the gloom and doom theory being propagated by some stakeholders, especially in the backdrop of a 50-percent-plus fall in a key equity market index and falling corporate profits.

“I'm hearing concern expressed here about six percent growth. In the West, that growth would be considered quite fantastic," said James Quigley, chief executive of the US-based accounting giant Deloitte, among an estimated 700 delegates from 35 countries.

From the managing director of Asian Development Bank Rajat M. Nag to World Economic Forum founder Klaus Schwab, and from Gujarat Chief Minister Narendra Modi to India's Commerce Minister Kamal Nath, all maintained that the Indian economy was resilient enough to tide over the crisis.

And it was this underlying sentiment that Chidambaram sought to highlight while asking India Inc not to panic and assuring that the United Progressive Alliance (UPA) government and the central bank would take all necessary steps to minimise the impact of global crisis on India.

"The classic response to demand slowdown is to cut prices for the short-term," he told participating industrialists, while calling specifically upon airlines, realtors, automobile makers and consumer durables companies to lower prices to stimulate demand.

“All I ask is, there are enough people to spread gloom and doom. Just have your chin up, and in six-nine months, or maybe 12, we will be back to normal growth rates that we are used to.”

- source Economictimes.com