Cheers - Indian economy to be worth $ 2 trillion by fiscal year 2014-15

India will be a $2-trillion economy in the next five years as its GDP growth is likely to average at 12 per cent in nominal terms powered by a huge consumption demand, Enam Securities has said.

"India's GDP is likely to grow at (an) average 12 per cent in nominal terms. Hence, India will be a $2-trillion economy by 2014-15," Enam Securities Head-Research, Nandan Chakraborty, and economist Sachchidanand Shukla said in a report titled 'India Strategy' released today.

This growth will be led by the huge consumption demand in sectors like FMCG, power, auto (small car hub), IT and pharma, it added.

The brokerage firm said insurance companies, financial services and equity markets will flourish as the country's annual savings pool grows to $700 billion from $400 billion at present.

"More than half of this ($700 billion) could flow into financial savings. With favourable demographics and average seven per cent real growth, India can sustain more than 30 per cent savings rate akin to the Asian tigers, or China and Japan. This will transform the domestic financial services space," Enam said.

Life insurance penetration in India, which is already a USD one-trillion economy, is estimated to reach a level of 4.4 per cent over the next two years as insurance companies focus on expanding into rural India, the report said.

source - economictimes

Economy poised for a rebound

The worst is over and the economy looks set for a rebound. This may sound contra-intuitive after dire predictions of a long and deep

slowdown, but economists and investment bankers interviewed by TOI see a revival as early as September, or latest by December. All of them see growth riding on the back of domestic demand rather than overseas business but caution that some sectors such as IT may take a little longer.

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The pace of rebound being projected ranges from an optimistic 8% of GDP to a cautious 6-7% in the last quarter. For the full fiscal, there's consensus on 6.5-7% except a CII forecast that pegged it at 6-6.5%. But a word of caution here will not be out of place. These figures could still go off the mark as the signs may be deceptive. This is just like when the specialists failed to see through the boom to see the bust coming.

"Green shoots of growth are showing in some sectors and we can certainly see a sustainable upward movement by the September-October busy season. Summer is lean period as activities usually slow down before picking up in September... or more in October," Ficci secretary-general Amit Mitra said.

Suresh Tendulkar, chairman of PM's Economic Advisory Council, was more optimistic and said recovery had started. "There have been some pressure on the bottomline and profit growth may not be as high as expected. But the way revenues have grown, it shows revival has started," he said.

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All of them identified infrastructure as the engine, driving demand in steel, cement and other manufactured items. "Infrastructure will spur the drawdown on inventories. That's happened in cement and is starting to happen in steel," said the investment banker.

Mahajan sees agriculture in a support role. "It will prompt rural demand but since there's a rigidity in the sector, it is not like the farm sector will carry the economy as a whole. A good monsoon and a good crop will certainly help the economic revival but that will not be the sole driver. After all, you already have good rural demand."

Mitra said steel and cement signified some turnaround in producer side. "FMCG never suffered. Activities in small housing are coming back. All these can be sustained if interest rates come down... projects become viable, start getting off the ground and (with low interest) propel consumer side interest."

Indian economy to recover from mid-2009 - Macquaire

(29-4-2009 Indian economy updates) - Indian economy will begin to recover from the middle of this year, thanks to the fiscal and monetary measures taken up by the government, but the outcome of the ongoing general election remains a legitimate concern, global research firm Macquarie has said.

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Macquarie said, "Our view remains that the largely domestically-driven Indian economy will begin to recover palpably from mid-year onwards."

The double-cylinder fiscal and monetary response has been aggressive and already paying dividend, the research firm said but added that "political uncertainty over the outcome for the ongoing general election remains a legitimate concern".

The other factors likely to contribute include that India is relatively less dependent on exports, its export profile is not heavily dependent on electronic or automotive shipments and the domestic fiscal and policy response has been aggressive and effective.

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Macquarie further said the Reserve Bank of India appears to be approaching the end of the policy rate-cutting cycle, but banks have more room to cut their lending rates more aggressively, which in turn should boost economic activity.

"Indeed, the broader setting is evolving nicely to position the economy for a better second-half of FY'10. Currently, we forecast a full-year GDP growth of 5.5 per cent for FY'10 following an estimated 6.5 per cent in the last fiscal year," Macquarie said.

posted under - economy of india, indian economy updates, economic crises, india economy, indian economy blog

ग्रोथ ओवर ८ परसेंट सुस्तैनाब्ले - RBI

The Reserve Bank of India expects the economy's growth rate to bounce back above 8 per cent once the current global economic and financial turmoil passes, Deputy Governor Rakesh Mohan said today.

"Our overall assessment is still an 8 per cent-plus growth is sustainable in the medium term. We can expect to come back to 8 per cent-plus growth once this interregnum is over," Mohan told a news conference.

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The government expects the economy to grow about 7 per cent in the fiscal year that ends on March 31, well below rates of 9 per cent or more in the previous three fiscal years.

Mohan said India would be cautious in moving towards fuller capital account convertibility for the rupee currency.

"We have also looked at the fuller capital account convertibility and concluded its desirable, but we need to move with caution," he concluded.

posted under - RBI updates, Indian Economy updates, economy oeconomy, recession and indian economy, economy of india, india economy

Indian Economy - Most Optimistic Economy of World

India has regained top slot in optimism among privately held businesses for 2009. While optimism amongst privately held businesses (PHBs) around
the world slumped by 56% over the last 12 months, pushing the Grant Thornton International optimism/pessimism barometer to a record negative balance of -16% compared to +40%, this time last year.

Despite raging pessimism, the survey found that PHBs from 11 countries remained optimistic about the outlook for their economies, with India leading this group (+83%), and Botswana (+81%) with Brazil (+50%) also emerging on the top. Japan (-85%) and Spain (-65%) were the most pessimistic.

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It is the first time that pessimists have outweighed optimists about the outlook for their economy since the research began in the current form in 2003 but this year's International Business Report
, which surveyed senior executives from over 7,000 PHBs across 36 economies, also shows an overwhelming consensus that falling consumer demand is the biggest threat to PHB businesses.

There are also some startling differences in attitude towards the economic crisis between the mature and emerging economies. Of the four largest trading nations, PHBs in the United States and mainland China, who together contribute over 32% of global GDP1, scored their optimism at -34% in the United States and +30% in Mainland China.

Similarly, Japan and India (collectively contributing over 11% of global GDP) scored their optimism at -85% and +83% respectively.

"These polarised results suggest that despite the current slowdown, there are still pockets of hope in the global marketplace for PHBs," explained Vishesh Chandiok, National Managing Partner – Grant Thornton India.

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"Their macro view of the world economic stage explains the overall slump in optimism but there are still signs of optimism in some economies and also clear signs that PHBs, while preparing for the downturn, are also seeking to leverage on opportunities this could bring," Mr Chandiok added.

When asked to identify the most significant factors causing most concern for their business, PHBs in 33 out of the 36 economies cited a fall in consumer demand, while citing a shortage of business credit as a secondary concern.

posted under - Indian Economy Updates, Economy of India, India, Asian Economies, optimistic economy of world, indian business updates, economy, india economy
source - www.economictimes.com

Indian economy growth predicted at 6 - 7% for next year

Kotak Securities have predicted indian economic growth between 6-7% for year 2009 the reason told is: "The global turmoil has had an impact on the Indian economy
due to the resultant liquidity crunch and fall in demand. This will have an impact on the growth of the corporate sector and this impact may continue in the foreseeable future," Kotak Securities' managing director S A Narayan said.

"We see BSE Sensex moving in the range of 9000 – 12000. Further uptrend can be expected only after further visibility emerges on the global economic growth and the extent of the impact on India," said Mr Narayan, adding, "select stocks in the pharmaceuticals, PSU banks, power, construction and capital goods sectors are expected to perform well.

Large players in infrastructure sector less dependent on raising fresh capital from market will outperform," he added. In a technical outlook report put out by Ambit Capital, the brokerage expects Nifty to start its upmove once consolidation gets completed in the first months of 2009. Ambit Capital has given short-term target of 3800 on the Nifty.

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"Over a medium-term horizon, Nifty looks positive. As per the Elliot Wave Counts, Nifty has completed the price-wise correction and going forward, one can expect time-wise correction. However, in that process also, we expect Nifty to inch upward," the technical outlook report said.

published under - economy of india, dwindling indian economy, India Economy, india economy updates, Indian Economy, india economy updates

Economy requires further monetary action - MS Ahluwalia

The deputy chairman of planning commission, Montek Singh Ahluwalia has indicated further changes in the monetary policy as part of
second stimulus package.

"With economy growing below potential and inflation on its way down, there is a scope for further monetary action," Montek Singh Ahluwalia told reporters at the planning commission.

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Mr Ahluwalia further added that further increasing expenditures may not be a thrust area for the government. "The world economy is expected to get worse next year. We have proposed a stimulus package for this year and next year. Barring this,
we are not proposing any new expenditure for this fiscal."

The second stimulus package is likely to come out in next few days. However, when asked about the date on which the package would be announced, Mr. Ahluwalia declined to specify any particular date but said that the government was continuously watching the situation and it would not hesitate to take any further steps.


source - www.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

Asian Economies to be affected more in 2009

Asia-Pacific economies are in for a tough 2009. The region's fundamentals were solid in the first half of 2008, giving weight to the idea of global decoupling. This belief has been proven wrong, and no economy now seems immune from the US-led downturn.

Growth is expected to decelerate sharply in the first half of 2009, as all engines run out of steam. Those economies already in recession will continue to see harsh conditions through much of the year, warns Moody's Economy.com.

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Recent key indicators show the region has been struck hard by the global financial crisis. Although the turmoil began in mid-2007, much of the region did not begin to feel the pinch until a year later; increasingly complex economic links meant a long lag before the full scope was seen.
"As the US and European economies remain in dire shape, the worst for the Asia-Pacific is still ahead. Based on a forecast that the US will begin to recover in late 2009, the Asia-Pacific slowdown may end shortly after, though a solid rebound is not expected until 2010," said Sherman Chan, economist at Moody's Economy.com.

The global downturn hurts the Asia-Pacific region most immediately via trade. The US and EU directly account for a significant proportion of the region's exports. Meanwhile, still-turbulent credit markets remain a key risk to trade finance; shipments are held back as banks refuse to honor letters of credit.

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The region's manufacturing outlook depends largely on external demand, which is expected to remain subdued for much of 2009. Industrial production across Asia has been on a downward trend since the start of 2008, and began to contract in the final quarter. Economies concentrating in tech production were among the hardest hit, as discretionary items were the first to experience a slump in demand.

Although recent fiscal stimulus measures have focused on infrastructure development, which will support the industrial sectors, benefits will not be realised instantly. Hence, industrial output may further contract in early 2009.

"With the outlook gloomy and a bottom yet to be seen, investment is expected to be subdued through 2009. Business confidence is weak. Access to credit is still a concern, while the outlook of corporate earnings remains downbeat. Firms will continue to hoard capital in coming months. Companies will be extremely cautious with expansion plans, and new startups will likely be put on hold. Foreign direct investment is expected to moderate in 2009, a result of risk aversion and a preference for liquidity. Risk aversion is likely to see portfolio capital outflows continue during the first half of 2009, keeping Asian stock markets depressed," Moody's Economy.com said it a report.

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As the global downturn was triggered by chaos in the financial markets, the financial sector has been most aggressive in reducing headcounts to deal with shrinking balance sheets and a gloomy business outlook. Moreover, it will be difficult, even with fiscal stimulus, to absorb this group of recently unemployed people because of the skills mismatch.

Massive infrastructure projects announced by several governments will support construction work, but offer little help to white-collar workers. In any case, government rescue policies will not take immediate effect, meaning no upside to the overall unemployment situation may be seen before mid-2009.

Nearly all Asia-Pacific governments have announced fiscal stimulus measures. By far the largest was China's 4 trillion yuan package, equivalent to about 16% of GDP. Most of the announced stimulus plans take similar form, with infrastructure development a clear favourite, as it offers long-term economic benefits. With infrastructure needs chronic in emerging economies, countries may now improve their capital stock while supporting economic activity.

All central banks across the region will continue to loosen monetary policy. With growth momentum easing, authorities have attempted to soothe the debt burdens of households and businesses, and also encourage lending.

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read full article
posted under - indian economy updates, asian economies updates, world economy updates, global economy updates, India Economy, economy of india

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 $

India Economy would be hit more in 2009 - thanks to Global crises

The global downturn will pressurise the Indian economy more next year and the government has to speed up reforms and boost investment to sustain high growth rates.

The report jointly prepared by World Economic Forum and Confederation of Indian Industry also said India could see a sharp outflow of capital, and a fall in share and asset prices due to the global financial crises. The report was released ahead of the annual India Economic Summit starting Nov. 16 in New Delhi, where top government officials are expected to interact with heads of global firms.

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"India's dependence on capital flows to finance its current account deficit is a macroeconomic risk and the global crisis could generate a sharp increase in capital outflows and a reduction in the availability of finance,Clearly, the global economic picture will be harsher next year and there will be greater pressures on Indian economy." it said

"It (global crisis) could also weaken the balance sheets of the financial institutions, cause a further fall in share and asset prices, and challenge the macroeconomic situation due to shrinking global growth," WEF said.

Indian policymakers expect a moderation in economic growth to less than 8 percent in the year to March 2009, compared with 9 percent recorded in 2007/08 fiscal year.

Earlier this month, Prime Minister Manmohan Singh cautioned that the global financial crisis could be more severe and prolonged, and the government would take all necessary steps monetary and fiscal to protect growth.

"A tighter environment may also help speed reforms and encourage greater efficiency," WEF said, adding a great deal of political will and dialogue with

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different stakeholders would be required to take reforms forward.

However India economy will be less affected when compared to global economies. The growth of Indian economy would be strong for coming decade that's for sure.

Rupee may return to strength by early to mid 2010

Worried over the sharp depreciation of the rupee? Here's some solace for you. Risk management consultancy major Mecklai Financial has predicted the rupee will begin to rise again by late 2009 and could return to strength by early to mid 2010.

In its latest research report, Mecklai has said that capital flows will take some time to return to 'normal'. However, "we believe that by late 2009, we should see investment flows resume, which should be the trigger for some modest strength in the rupee ...which could return to strength by early to mid 2010."

Even today "the silver lining for India is that the sharp depreciation of the rupee has rendered exports much more competitive. So, too, the dramatic fall in oil will make the trade balance much more manageable," the report says.

Of course, capital flows remain a major negative for the rupee. After having more than quadrupled to $108bn over the previous two years, capital inflows are expected to fall to $31bn in 2008-09. Portfolio flows are forecast to decrease by $10bn, as compared to an increase of $29bn in the previous fiscal, while borrowings are expected to fall from $41bn to $15bn. FDI has been the only bright spot this year, doubling to $10bn for Apr-Aug 2008; despite the crisis, the net figure should easily surpass last year's level of $15bn.

However, with equity prices having fallen 60% this year, as a result of which many, many companies are cheap even compared to their cash assets, and the credit market slowly on its way to normalcy, "we would expect capital flows to begin to show improvement by the second half of 2009," the report says.

The RBI's recent decision to reverse all restrictions it had placed on ECBs, NRI deposits, and FII flows through participatory notes is timely and will boost flows as and when the environment improves. Interestingly, one of the fallouts of this crisis is that "we will have a more liberal external account when the smoke clears."

Of course, the overall balance of payments is expected to be negative in fiscal 2009 and has already resulted in a substantial drawdown of reserves. However, in view of the factors listed above, "we believe fiscal 2010 should see a surplus of around $20bn, which should support a return to a modestly stronger rupee," the report says.

India Economy Updates-November 2008

Agriculture Updates, Infrastructure updates, updates on foreign trade, india economy updates, indian rupee updates all in one post.
India Economy Updates November 2008 are as follows:(just click on the link to read full story) Foreign trade updates, Infrastructure updates, India Agriculture updates, India Economy updates, India Economic Policy updates, Finance sector updates all in a single post now isn't that great post on India Economy updates!!


Latest India Economy, India business news updates:
US recession and effect on India - never told before
Live BSE, NSE, DJIA, NASDAQ rates
World's rchest and strongest economy list


25th-November-2008 India Economy Updates are as follows:
New telecom operators can't sell stakes for three years: Government
Government imposes curbs on import of more steel items
Light Is Right: Reforms to rid corporates of bulky statements
Govt says RBI's bias towards growth may deepen
Russia bundles Imperial buy with SAIL orders
Breakthrough in WTO talks possible this year: US official
Canada and Colombia sign a free trade agreement
Transport sop hits dead end
C&C Constructions bags order worth Rs 635 cr
Agriculture growth likely to stay at 4%: Sharad Pawar


22nd,23rd,24th-November-2008 India Economy Updates are as follows:
Govt readies Rs 50,000 crore for infrastructure projects
Govt may not opt for financial package
Investment firms may get FDI push
Govt says RBI's bias towards growth may deepen
Subbarao to meet bank CEOs
RBI to open Rs 20,000 cr special refinance window for SMEs
Breakthrough in WTO talks possible this year: US official
Canada and Colombia sign a free trade agreement
Logjam in global trade: Ports become parking lots
C&C Constructions bags order worth Rs 635 cr
IVRCL Infra bags orders worth Rs 530 cr
Akzo Nobel to invest Rs 90 cr in new plant in India
Agriculture growth likely to stay at 4%: Sharad Pawar
Agri sector may not create more jobs
Farmers turning entrepreneurs for greener pastures


20th,21st-November-2008 India Economy Updates are as follows:
Eco adviser says reforms needed to sustain growth
Indira Gandhi's vision saved us from current financial crisis: Sonia Gandhi
Will employ all policy tools to fight crisis: PM
Foreign borrowings aplenty for India Inc despite turmoil
Adopt uniform definition for policy lapsation: IRDA
FDI in credit info cos likely to go up to 49%
India Tajikistan ink DTAA
WTO meet to begin next week
Malaysia, India to develop mutual capital market investment
Metro man Sreedharan putting India on fast track
Alternative network for defence to be completed by 2011: DoT


19th,November-2008 India Economy Updates are as follows:
RBI asks banks to seek refinance credit to fund small units
Govt to raise spending on infrastructure
Government changes customs duty on steel, soyoil
Better deal soon for prospective miners
Grim outlook for FDI: OECD
NHB may help construct more roofs for aam aadmi
Malaysia, India to develop mutual capital market investment
UK companies look to India to help offset economic gloom
Shield jobs to get bigger export incentive shield


18th,November-2008 India Economy Updates are as follows:
India sees growth accelerating to 9 pc next year
Govt won't shy away from taking more steps: Montek
Govt imposes 5% import duty on steel
New urea policy loses sheen with sharp fall in global prices
RBI watching economy, to act at right time: Subbarao
RBI may consider fresh liquidity steps to propel growth: Mohan
Cut excise duties, interest rates to drive demand: CII
Financial crisis: Calling for unity in adversity
PM panel reviews export incentive pack
Exporters to UK feel the heat of falling British currency
Cane crushing begins on sour price note
Crisis forces SEZ developers to review plans


17th,November-2008 India Economy Updates are as follows:
PE inflows dip 72 pc amid global credit crisis
RBI allows housing finance cos to raise funds from overseas
RBI committed to maintaining liquidity flow
LIC may get to invest more in corporate debt
Crisis forces SEZ developers to review plans
Shanghai to invest $73 bn on development


15th,November-2008 India Economy Updates are as follows:
Govt feels outsourcing won't be an issue in ties with US
Ahluwalia calls for coordinated fiscal stimulus
Hypothetical tax paid abroad not income: ITAT
Cement, steel included in focus market scheme
Treat Repo, Reverse Repo as borrowed & lent: RBI
Recession in West, Australia reaches out to India
Govt feels outsourcing won't be an issue in ties with US
Edible oil imports jump 19% on lower global price
'Delayed mega infra projects are sub-standard, not NPAs'
PM approves Rs 300 cr special grant for IGCC Vijaywada plant

14th,November-2008 India Economy Updates are as follows:
Oil slips below $58 despite stock rally
D&B expects RBI to cut key rates by 50 bps
Long way for China, India to shield world from downturn
Centre puts brakes on edible oil import for PDS after prices crash in global mkts
GVKPIL to sell 49% in SPV to Macquarie for Rs 465 cr
Seed farming for jatropha may be banned

13th,November-2008 India Economy Updates are as follows:
Oil prices steady after fall to near 50 dollars
Emerging economies more vulnerable to credit crisis: Lamy
Govt likely to clarify stand on KG-D6 gas price tomorrow
Govt should re-impose import duty on steel: Roongta
India to strengthen rural tourism
Banks want to have a LAF as liquidity woes continue
India Inc warms up to Japanese cos
Traders hit as short-term credit rates stay high
GVKPIL to sell 49% in SPV to Macquarie for Rs 465 cr


November 12-2008 India Economy Updates are as follows:
Govt to consider fuel price cut if crude stabilises: Deora
Govt may cut fuel price if crude, currency stabilise
RBI may cut rates again by March: ICICI Securities
EPFO defers plans to withdraw SDS deposits
RBI offers Rs 50,650 crore at special repo
PSUs protest parking 60% fund in PSBs
Traders hit as short-term credit rates stay high
Right policy paradigm for natural assets abroad
Reliance SEZ to be built on Mumbai debris
Financial crisis to hit agricultural production: FAO


November 10,11-2008 India Economy Updates are as follows:
Oil prices tumble under 57 dollars
Government CPSEs to park 60% surplus funds with PSU banks
Govt watching cheap steel imports; decision on import duty soon
FIPB no to treaty shopping clamp on FDI
Govt may ask cos to set up grievance redressal panel
RBI sells state loans for 35.95 bn rupees
Govt asks firms to keep funds with govt-run banks
Pre-paid cards, meal vouchers under RBI lens
Right policy paradigm for natural assets abroad
Exports plunge to five-year low in October
Stainless steel importers oppose import duty; seek FM's help
Maha govt to build 10 lakh houses in two years: Deshmukh
Monmohan Singh seeks infra investments from Qatar
Rs 9521.27 crore paid to farmers for paddy in Punjab
Let wheat export ban stay for now as global prices’re low
Debt-relief package for coffee industry on the anvil



November 8,9-2008 India Economy updates:
Population of employed Asians in US falls
PM confident India will grow between 7-7.5 pc next year
Relax ECB norms for infrastructure NBFCs: Srei
AIAI asks for slashing key rates
Foreign cos' services under brand names to be taxable: ITAT
Govt asks RIL to supply LNG to Dabhol power project
After lifting export ban,Govt extends sops on maize export
Slowdown to keep India's exports 20 pc below target: Study
Govt slashes duty on garment imports from Nepal upto 75%
Karnataka eyeing more IT destinations
Financial turmoil may hit farmers: FAO
Area under wheat cultivation up 5%
September infrastructure output up 5.1 pct year/year
Relax ECB norms for infrastructure NBFCs: Srei

November 7,2008 India Economy updates:
Govt levies 8% export tax on iron ore fines
RBI issues guidelines for pre-paid instruments
Social security agreements help remove dead-cost phenonenon
Govt constitutes experts panel to address financial crisis
RBI offers forex liquidity to Indian banks abroad
RBI cuts interest rates on floating housing loans
US financial crisis may hit India's exports in Q4: Deloitte
September infrastructure output up 5.1 pct year/year
Global reputation will help Indian firms grow: Gates
ArcelorMittal approaches West Bengal govt for land

November 5,2008 India Economy updates:
Oil prices slump before US stockpiles data
US economy has dragged down planet's markets: Medvedev
India cbank offers 507.8 bn rupees at special repo
Global crisis could badly hit textile industry
India Inc bargains hard for more on bulk deposits in crunch time
Global cotton exports may fall by over 6 pc in 2008-09
Govt turns major cotton buyer as polls draw near

November 4,2008 India Economy updates:
PM sets up panel on financial crisis impact
Overseas loans may get costlier next year
PSBs to thaw credit lifeline for NBFCs
Indian firms' profit, margin woes seen continuing
India to ease foreign direct investment rules: Kamal Nath
India to provide Rs 49.17 mn assistance to Nepal
PSU banks agree to cut rates; shares soar

November 3 India economy updates:
Chidambaram assures industry of cheaper bank loans
OPEC oil output falls in Oct: Reuters survey
ICICI Bank to review rates in a few days - CEO
Global crisis impacts India; do everything to push growth:PM
Bharti says no immediate foreign targets
ArcelorMittal approaches West Bengal govt for land
IT SEZs must wait for 100% tax exemption
Foreign firms may get to invest in fertiliser units revival
Bank deposits safe, says Prime Minister
Consumers have to wait for softer interest rates
Manmohan Singh to meet business and corporate leaders
RBI cuts rates to induce Rs 85,000 cr; signals interest cut
RBI cuts CRR, SLR and Repo; lending and deposit rates to fall
Loan waiver could have been handled better: Plan panel member
RBI allows NBFCs to raise up to USD 10 mn in foreign currency
Cabinet clears way for 49% FDI in insurance
WTO ruling on wine duty is a damp squib
Duty cuts to benefit miners, steel companies
IT SEZs must wait for 100% tax exemption
Maharashtra, UP to drag down sugar production
Few takers for FCI wheat tender
Pricey rice to feed on shortage-hit world

India slips in global business climate ranking

India has slipped 13 places to 64th rank in a global list that measured business climate in 121 countries, as inflation and differences between the government and its Left allies dampened investor confidence. India has dropped from 51st place, whereas China is two notches down from last year's ranking at 79 in the Forbes list of 'best countries to do business. The list is topped by Denmark, climbing three spots from the previous year, followed by Ireland and Finland.


"India and China fell in this year's ranking as political instability demonstrated resistance to increasing personal freedoms. Higher inflation from food and other commodity costs, as well as increased burdens on entrepreneurs also held the world's most populous nations back as business destinations," Forbes said in an accompanying report.

Denmark, which rose three slots from last year, Ireland (up 19 places to No 2), Finland (up four to third place), the US (down three to fourth) and UK (up five to fifth). Big movers like Ireland, Estonia (No 10, up 24 spots) and Saudi Arabia (No 47, up 37) have limited bureaucracy standing in the way of entrepreneurs hoping to do business there. However, the world's largest economy United States declined one spot to the fourth place, whereas another economic giant United Kingdom retained its fifth position.

Pointing out that the Indian government has reduced controls on foreign trade and investment, Forbes said tariff spikes in sensitive categories, including agriculture, and incremental progress on economic reforms still hinder foreign access to India's vast and growing market.

"Privatisation of government-owned industries remains stalled and continues to generate political debate; populist pressure from within the UPA government and from its Left Front allies continues to restrain needed initiatives," the report noted. Forbes said that strong growth combined with easy consumer credit and a real estate boom fuelled inflation concerns in 2006 and 2007. This had led to a series of central bank interest rate hikes that have slowed credit growth and eased inflation concerns.


"The huge and growing population is the fundamental social, economic, and environmental problem," it said. Forbes analysed the business climates of countries, focusing on degrees of personal freedoms such as freedom of expression and right to participate in free and fair elections. "Investor protection examines the recourse held by minority shareholders in cases of corporate misdeeds, while corruption looks at the number and frequency of similar misuse of corporate assets for personal gain. Together with economic policies supportive of free trade and low inflation, these key points form a snapshot of countries' suitability for capital investment," the magazine said.


Developed countries like Germany (21st rank) and France saw declines in their respective rankings due to scandals in the banking sector and tougher barriers for entrepreneurs. One of the biggest falls came from Japan, which dropped to 24th rank from 21st position. On Japan, the report said, "... a Council on Economic and Fiscal Policy spelled out problems with the world's second-largest economy earlier this year. Among others, the committee's report cites the nation's 40 per cent corporate tax rate as uncompetitive compared with regional rivals like Hong Kong at 17.5 per cent and South Korea at 25 per cent."

Inflation above 8% mark - government helpless

Inflation touched 8% mark for first time in one year and government has said that it is helpless and inflation is going out of government control.

However inflation has now become a global problem and all the developing as well as developed countries are facing it.

Governments are pretending to respond. In the UK, Mr. Gordon Brown wants to assemble experts to debate solutions. The Indian finance minister says that western nations are diverting land for producing expensive bio-fuels to replace the expensive crude oil. Surely, that is part of the problem. But that does not explain the jump in the price of rice. Rice is not diverted to bio-fuel production.


In India, the response has been to reduce import duties, impose export caps and accuse manufacturers and distributors of collusion and cartel-like behaviour. Different ministers speak in different voices. Together, these pronouncements do not constitute a policy whole.
In simple terms, prices reflect the balance of supply and demand of something. When prices go up, it is a reflection – and not a consequence – of supply going down or of demand going up or both. When it happens for just one or few commodities, it is possible to blame middle-men of hoarding or manufacturers of cartel-like behaviour. When it happens in many commodities, it is futile to blame one industry or a few producers.


Usually, the source lies in some policy measures and their implementation. To make it clear, we are not dismissing the importance of factors like climate change, diversion of land for production of bio-fuels and more importantly, stagnation or even outright decline in agricultural productivity in countries like India and China. Again, they explain inflation in food and agriculture commodities. These factors do not explain inflation in crude oil and copper, for example.


If we have to identify a single or the most important explanation for the recent development in prices of many commodities, the answer lies in examining the behaviour of global central banks.
Of course, in any broad-brush analysis or conclusions, there is the risk that we miss the exceptions who behaved differently and correctly. For example, within the constraints imposed by the political system, Reserve Bank of India has done a very good job of trying to shield the Indian economy from the cycles of boom and bust. Similarly, if the Australian and New Zealand economies still face the risk of boom and bust, it is not because of their central banks but in spite of their best efforts.


The bulk of the blame has to be assigned to the American Federal Reserve and the People’s Bank of China. In the case of China as in the case of India and in many other developing countries, the central bank is not independent. It is subject to political influence. The Federal Reserve Board of America is, in some ways, a similar predicament. It is subject to the oversight and pulls and pressures of the democratically elected Congress members. Further, since it was founded by banks actually, it ends up coming to the rescue of banks sometimes to the detriment of the public.


In 2001-2003, it cut the Federal funds rate to 1.0%. It thus rescued the economy from the collapse of the technology bubble in 2000. Thus, it replaced the stock market bubble with a housing bubble. When the housing bubble appeared to be weakening, it refused to tighten regulations and allowed it to continue. Too many loans were made to people who should not have been lent. That is the root cause of the present problem.


In order to address the resulting loan defaults, stress on banks and their balance sheets, the Federal Reserve has allowed banks to borrow at cheap rates from it. Money is available to banks in the open market but at higher cost. Some of the banks might not have survived. But, that would have also left a lesson for other banks that they would not have forgotten for a long time. Excessive risk-taking would have been curbed. Instead, the cheap money is perhaps being channelled into speculation on commodities prices. After all, banks are not going to create more mortgage loans at least for quite some time.


Somewhat different has been the behaviour of China but it achieves the same result. China has kept its currency cheap. Keeping the currency cheap requires interest rates to remain low, in comparison to other countries but also in relation to economic growth. China has done that. Low interest rates means capital is plenty. So, capital-intensive growth has flourished. That has placed tremendous demand on resources worldwide such as crude oil, coal, steel and other industrial metals. It continues to import rising quantities of iron ore, copper and crude oil. Incidentally, it has also led to China supporting many tyrannical regimes in Africa including that of Zimbabwe. Recently, it sent a shipment of arms to Zimbabwe but faced an avalanche of protest and had to recall that shipment.


Perhaps, it is possible that American banks know that there won’t be any change in China’s demand for commodities in the near future, at least until the end of the Olympics. China may be reluctant to change course fearing unknown and uncertain consequences. If so, it argues for further rise in the price of commodities. Both their behaviour and bets might be feeding off each other. That is not good news for the rest of the world.


After all, we cannot influence the Federal Reserve. So, how should policymakers respond? Unfortunately, the answer is that they should respond differently from what they have done until now. Banning exports of agricultural commodities exposes the hollowness of farmer-friendly policies. Farmers should be allowed, with appropriate guidance, to sell to the highest bidder – local or global – and derive the maximum gains from the global shortage. Such a price signal would also encourage productivity improvement in farmland and hence boost crop production. More land would be brought under cultivation.


At the same time, poor households – rural or urban – could be directly subsidised with cash transfer to be able to pay the higher price.
The same principle can be extended to the price of hydrocarbon products such as petrol, cooking gas, diesel and kerosene. Consumers and producers should receive the price signal. Without that, their respective behaviours would not change and shortages or glut would persist.
At the same time, since supply of food and other commodities would take time to respond to price signals, central banks should be allowed to restrain demand in the short-run with tight monetary policy. That means higher cash reserve ratio or higher interest rates or both. That might be unpopular or politically unacceptable. But, effective medicines never taste sweet. Only placebos do.



The chances of such sound policies being pursued are close to nil particularly as many democratic governments, including India, approach elections soon. Authoritarian governments do not care much for public opinion.
Given such a low chance for sound economic decision-making, prospects for a sustained decline in inflation should be judged remote. That is not good news as it is a stealth tax on the public and erodes their purchasing power. Consequently, it reduces affordability for many assets. As demand drops, inflation affects revenues for companies and squeezes margins through cost pressures. That does not augur well for the stock market.



The stock market in India has performed well in recent times. Many other global markets have staged a similar recovery. That is due to misplaced optimism on the American economy. As discussed above, right policies would be missing and hence the anticipated quick economic turnaround in America would be elusive. Consequently, risky assets globally would retrace their recent gains. Therefore, Indian stocks would fail to build on their recent gains. On the other hand, the likelihood of continued high global and local inflation would result in a resumption of the uptrend in gold price that has been recently disrupted. Therefore, investors who do not expect inflation to recede know exactly what they should be selling and what they should be buying.