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

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.

6th Pay Commission Report has for all - Salary Hikes for everyone

The sixth pay commission report has salary hikes for all the central government employees while hikes are ranging from 23% to 53% depending upon the category in which the employee falls. There has been looking skeptical however because government officials have still not given any details about the hike officially and the employees have to wait for the report to be announced officially.

Since elections are to be held next year therefore it might be a voters benefit report and governemnt is turning no stone upturn to please voters, P Chitambram presented a please all budget on february 29 /2008.

Moreover, the hikes so recommended have been more generous at the higher levels and lower levels in the government hierarchy, but not so at the middle rung — directors, deputy secretaries, etc. While for a section officer, the increase is 41.8% (24.6% at the higher level), for a director it is 31.1% (23% at higher level). For a joint secretary, the proposed hike translates into 58.7% (44.3% at the higher level), for additional secretary, it is 49% (47.4% at lower level). However, if the house rent allowance and children’s education allowance are not taken into account, the hikes are considerably lower.

For a section officer, the hike is 26.2% (12.2% at the higher level), For a director 21.3% (14.3% at the higher level), for a joint secretary it is 48.2% (35% at the higher level), for additional secretary it is 39.4% (38.1% at the higher level).

The department of expenditure, which is examining the recommendations will take the report to the Cabinet for taking note of it shortly before the Parliament session begins after the recess. After that a committee of secretaries would be constituted to oversee the implementation of the report clause by clause.

Even as the Sixth Pay Commission has recommended an overall increase, ranging between 23% and 58% in various categories, it has failed to cut ice with civil servants.