Himanshu Sharma's blog | My views, My space

Friday, November 14, 2008

Cheers!! Inflation down to single digit - November 2008

The inflation rate fell sharply to a near six-month low of 8.98% for the week ended November 1, a drop of almost 4% from its August peak.

The decline is due to less demand in the market for the commodities.The decline, helped by a steep drop in prices of some petroleum products and metals, will provide a welcome relief to the central government reeling under a raft of bad news on the economic front from falling exports and a drop in tax collections. Politically, this could help the government ahead of key state elections later this month.

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Inflation as measured by the wholesale price index (WPI) — the most watched inflation measure — dropped 1.74% from 10.72% in the preceding week, official data from the Office of the Economic Advisor in the ministry of commerce and industry showed. It hit a peak of 12.91% in early August, but still remains more than double the 3.35% inflation seen in the same week last year.

“I was surprised by the quantum of fall in the fuel index. After consolidating around this level for coming weeks, I expect the inflation number to drop to the 8% territory by end-November,” said ICRA economist Saumitra Chaudhari and a member of the prime minister’s economic advisory council.

The fall in fuel prices, especially those which are not government-controlled, is expected to have a positive impact for the manufacturing sector, going forward since fuel is a key input cost for industry. For instance, the cost of jet fuel comprises almost 40% of the operational cost of an airline.

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Food prices inched up marginally during the period, rising 0.1%, but analysts expected the food articles index to move down in coming weeks, given the forecasts for a robust winter harvest.

Crisil principal economist DK Joshi said that the slowdown in the economy meant that both demand-supply side pressures were easing and inflation would not emerge as a major concern until the overall economic growth revived.

We can also get a cut in fuel prices as government is thinking about a fuel price cut. It may be noted that Crude oil prices have come down to US$ 58 level when compared to $ 147 levels few months back. so more drop in inflation is predicted by me in coming future due to possible fuel price cut by indian government.

What others are reading now:
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- with extracts from economictimes.com

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.

Thursday, November 13, 2008

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.

Monday, November 3, 2008

Rs v/s US $ - November 2008 - daily updates

Saturday, November 1, 2008

India Economy Updates-November 2008

Thursday, October 30, 2008

Inflation down at 10.68%

Inflation fell below 11% to 10.68% during the week ended October 18 from 11.07% a week earlier.Earlier, a poll showed that the inflation rate was expected to have eased below 11% in mid-October for the first time in almost five months, thanks to falling commodity prices.

Eleven economists forecast a median 10.82% rise for wholesale price index based inflation rate in the 12 months to October 18, compared with 11.07% a week earlier, the slowest annual rise since late May.

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"Everything has fallen," said Kaushik Das, an economist with Kotak Mahindra Bank. "Oil prices fell sharply, the manufacturing index has come down and even the food and commodity prices which were pushing up inflation have started coming down."

The wholesale price index rose 11.07% in the 12 months to October 11, below the earlier week's annual rise of 11.44%. Inflation for the week ended August 16 was revised up to 12.82% from 12.40%.

In early August, the inflation rate had hit 12.91%, the highest reading since annual numbers in the current data series became available in April 1995. It jumped into double digits after a hike in government-controlled retail fuel prices in June.

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Commenting on the current economic scenario, the finance minister recently said that although inflation was still high, the rate of price rise would moderate further as global commodities and fuel prices continue to soften.

The government will also continue to take steps to moderate inflation and cut wasteful expenditure as it expects its fiscal deficit to swell beyond the 2008/09 target, the finance ministry said.

-source economictimes.indiatimes.com

Wednesday, October 29, 2008

India to face 2.5 M tonne diesal shortage

India is likely to face a shortage of 2.5 million tonne of diesel during the November-March period, which would have to be met either through imports or from Reliance Industries' only-for-exports refinery.

"The companies have told us that they will have a deficit of 2.5 million tonne from now till March," Ministry of Petroleum and Natural Gas Additional Secretary S Sundareshan said here.

State-run Indian Oil, Bharat Petroleum and Hindustan Petroleum have projected a cumulative diesel requirement of 1.05 million tonne for December to March, comprising 2,40,000 tonne of Euro-III diesel and 8,10,000 tonne of Euro-II grade fuel.

If these quantities are not tied up with Reliance, the oil companies would have to turn to imports in order to meet the demand in the country.

However, diesel from Reliance's Jamnagar refinery can be bought only if government does away with double taxation, he said.

Since Jamnagar has turned into an Export-Oriented Unit, any supplies to domestic tariff area was levied with dual basic customs duty and a double levy of special additional excise duty. These duties are over-and-above the normal excise duty payable by any other refinery in the country.

For diesel these work out to Rs 6 a litre more in duties, which the oil companies say they cannot absorb given the fact that they already are losing over Rs 7 a litre on the sale of the fuel.

"The matter is under examination and we hope a decision will be taken (in time)," Sundareshan said.

- source economictimes.indiatimes.com

Monday, October 27, 2008

Rs v/s US $ - Daily updates

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$ October 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)

(October 31,2008) | RS v/s $ | 49.77 | Down(-49.77)

(October 30,2008) | RS v/s $ | 49.67 | Up^0.21

(October 29,2008) | RS v/s $ | 50.09 | Down(-0.14)

(October 27,2008) | RS v/s $ | 49.95 | Down(-0.16)

Friday, October 24, 2008

India chasing 49 countries in Global Competitivenesss

The United States, tops the overall ranking in The Global Competitiveness Report 2008-2009 again, released recently by the World Economic Forum. However Our India is still chasing 49 countries in the race of global competitiveness. We have improved a lot on various aspects like we enjoy advantages not only from its market size (ranked 4th for its domestic market size and 5th for its foreign market size), but also from its strong business sophistication (ranked 27th) and innovation (ranked 32nd), however our overall competitive position is weakened by its macroeconomic instability (109th), with the government running one of the highest deficits in the world (ranked 127th), unsustainable levels of government debt (ranked 113th), and fairly high inflation.

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The list goes as shown below:

Country: US

Rank: 1

Score: 5.74

Country: Switzerland

Rank: 2

Score: 5.61

Country: Denmark

Rank: 3

Score: 5.58

Country: Sweden

Rank: 4

Score: 5.53

Country: Singapore

Rank: 5

Score: 5.53

Country: Finland

Rank: 6

Score: 5.50

Country: Germany

Rank: 7

Score: 5.46

Country: Netherlands

Rank: 8

Score: 5.41

Country: Japan

Rank: 9

Score: 5.38

Country: Canada

Rank: 10

Score: 5.37
.
..
...
....
.....
......
.......
Country: India

Rank: 50

Score: 4.33

Tuesday, October 21, 2008

World Prosperity Index - India 70th

Quality of secondary education, cost of starting a business and the lack of government effectiveness have led India to rally ahead of many South Asian nations ranking at 70 positon among 104 nations on the World Prosperity Index (WPI) 2008.

"India has a relatively entrepreneurial culture. It requires government effectiveness and tackling corruption," Legatum Institute Managing Director Alan McCormick said.

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Increase in capital and education contribute directly to the value of physical and human capital and thus directly increase economic output. Poor governance and excessive bureaucracy impose costs on business and thus restrain growth, the report released last week said.

The Institute also ranks India 10th on its 'Who's Going Places' list, with China on number six.

"These countries have the best context right now within which to create wealth," McCormick said.

Both the economies have recently grown faster than almost any country in the rich world. Being the home of more than two billion people, these improvements in competitiveness have brought about a dramatic lessening of the global wealth gap, a good news for global prosperity, the report said.

"India outstrips many South Asian nations in various aspects of wealth creation. It ranks stronger with reference to other Asian countries in terms of avoiding dependence on commodity exports and foreign aid," McCormick said.

- Source -PTI

Thursday, October 16, 2008

Indian Agriculture Growth pegged at 3 percent

Planning Commission member Abhijit Sen today sounded more optimistic than the PM's Economic Advisory Council with his projection that the agriculture growth would not be less than three per cent this year.

The Prime Minister Economy Advisory Council (PMEAC) has projected a mere two per cent growth in the sector for the current year.

"Considering the first advance agriculture estimates of the current year along with the final estimates of last year, agriculture growth this year should not be less than three per cent," Sen said after releasing a report on food prices compiled by an international agency Oxfam India.

Earlier in August, PMEAC had projected the agriculture production to grow at a lower pace of two per cent in the current year as against 4.5 per cent in 2007-08. The reasons for the slackening projections were higher base and uneven spread of the South-West Monsoon in July.

Noting food production, Sen said as per the first estimates, rice and soybean output is expected to be more, while other cereals lower than last year.

"Overall, agriculture growth during the 11th Plan period would be fairly good at around four per cent," Sen, who is also an agriculture economist, said.

In the last three years, the average agriculture growth has stood at 4.2 per cent and "we will achieve more than the set target of four per cent by the end of the 11th Plan," he noted.

On huge hike in minimum support price (MSP) under UPA government, Sen said MSP was increased at a lower rate by Rs 10 to 20 per quintal by the last government because stocks were high. Whereas now, MSP is increased as stocks are very low.

Source - Agencies

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Monday, October 13, 2008

Govt may relax foreign investment norms in banking, telecom

Government is considering relaxing norms for foreign investment in sectors like banking and telecom by treating portfolio FII investment outside the sectoral cap.

At present, foreign direct investment (FDI) and foreign institutional investments (FII) are added to determine sectoral foreign investment cap in banking, credit information companies, broadcasting, commodity exchanges and telecom.

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But, with RBI allowing FIIs to acquire shares in companies under the Portfolio Investment Scheme (PIS), the government is now likely to mandate that sectoral caps would henceforth be for FDI investment only, official sources said.

In sectors with caps, the balance equity would specifically be beneficially owned by/held with/in the hands of resident Indian citizens and Indian companies, owned and controlled by resident Indian citizens.

FIIs investing under PIS shall not seek a representation on the board of directors and they will have to give a self- declaration whenever they act in concert with any of the companies that they have invested in.

also read - Why Global economy is fluctuating

Sources said investments by registered FIIs under PIS are made under Schedule 2 of the Foreign Exchange Management Regulations and are distinct from FDIs which are made under Schedule 1. FIIs are also permitted to make investments under FDI Scheme under Schedule-1.

PIS cannot cross 24 per cent in any company. At present, banking and telecom have 74 per cent foreign investment cap (FDI plus FII), which would, after the policy is accepted by the Cabinet, be changed to 74 per cent FDI.

also read - Fall of US fnancial Institutions

Similarly, 20 per cent FDI plus FII limit in FM radio would now be 20 per cent FDI cap, while 49 per cent FDI plus FII in cable network, direct-to-home commodity exchange and CIC would be changed accordingly.

Wednesday, October 8, 2008

Indian Government to inject more money into market

Finance minister P Chitambaram said that government of india is ready to inject more money into tumbling share markets as indian stock markets took a blood bath during intraday trading. sensex closed 3.9% down after falling a whopping 9% in intraday trading.

Also read : The hidden story behind US recession

Panic gripped the stock and foreign exchange markets on Wednesday as a global financial turmoil intensified worries of a recession and sent stocks reeling worldwide. India's main BSE share index fell more than 8 percent at one stage to its lowest in two years, but recouped partly to be down 3.8 per cent by 0911 GMT.

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Foreign funds have pulled out a net $9.9 billion from Indian shares this year, after ploughing in a record $17.4 billion in 2007.

"I am hopeful investors will start coming to the market," Chidambaram said. On Monday, the Reserve Bank of India announced a surprise half a percentage point cut in the proportion of deposits that banks must keep with the central bank.

Also read : The hidden story behind US recession

The reduction, which is expected to release Rs 20000 crores ($4.1 billion) into the banking system, was intended to alleviate pressures on local markets due to the global financial crisis, RBI said. The government eased norms for foreign borrowings by companies, while the capital market regulator relaxed rules for indirect investments by foreign institutions in stocks.

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Tuesday, October 7, 2008

Indian and Gulf real estate market is best

According to a survey conducted all over world on real estate market the following results were taken:

The real estate markets in the Middle East will outperform all other regions in the world while India and China will be the key drivers of the sector in the Asia-Pacific region, according to a new survey.

The 'Investor Survey Sentiment', conducted by global real estate consultancy Jones Lang LaSalle in association Cityscape 2008, the real estate exhibition currently under way here, found that while the UAE will offer the best performing real estate market in the next couple of years, Saudi Arabia will be the next best performer.

The results of the survey were arrived at after taking the views of 350 developers, sovereign wealth funds and high net worth investors, Jones Lang LaSalle said in a statement.

Over 50 percent of the respondents believe the real estate markets in the Middle East will see the strongest performance of any region worldwide over the next two years.

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India and China, too, have a strong outlook with 20 percent of the respondents believing these two markets will make the Asia Pacific the best performing market.

"Sentiment is a critical component when considering the health of any market," Blair Hagkull, Jones Lang LaSalle's managing director for the Middle East and North Africa (MENA), said in the statement.

"It is an important barometer, a key assessment criteria for any investor and the ideal gauge for considering future prosperity," he added.

The survey, according to the consultancy, is the most up-to-date as it was conducted after in the aftermath of US investment bank Lehman Brothers' collapse.

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According to the survey, investors in the region are least positive towards west European real estate markets, with only 3 percent expecting this to be the strongest performing region.

Most Middle Eastern investors do not believe the US and European markets will witness a major improvement in performance in the short term.

The Middle East is expected to be one of the regions least affected by current global economic turmoil.

The survey found that though North America would be most affected by the crisis, it could also provide the most opportunities for value purchases over the next two years.

"There is a clear inverse relationship between strongest performing real estate markets and those economies expected to be most impacted by current global economic environment," the Jones Lang LaSalle statement said.

Investors also believe that, apart from MENA, emerging markets like Asia-Pacific and Eastern Europe will also be least affected by economic crisis.

With UAE expected to be the best performing market, investors remain particularly confident of growth in Abu Dhabi.

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Almost a quarter of the respondents said Saudi Arabia would offer the strongest performing real estate markets, driven by a large and rapidly urbanising population and new legislation, which is opening up of real estate market.

Apart from the UAE and Saudi Arabia, Qatar emerges as the best performing market in the Gulf Cooperation Council (GCC) with less investors expecting Bahrain, Kuwait or Oman markets to perform the most strongly.

"The Gulf region offers strong relative international value with active buyers in the region generally looking to transact at 8-8.5 percent yields for prime commercial operating assets and slightly higher for hospitality products," Ian Ohan, head of investment transactions in MENA at Jones Lang LaSalle said in the statement.

"Investors are looking for strong capital growth in Abu Dhabi, the kingdom of Saudi Arabia and Qatar, reflecting their robust economic potential and more nascent stages in the real estate cycle."

He, however, added that though this was consistent with recent market evidence, it was likely to bow to upward pressure as the cost of debt rose.

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According to Ohan, asset pricing in the region is increasingly being underpinned by cash flow valuation, reflecting a shift from development-led to capital-based real estate markets.

"We are anticipating greater transaction activity as sellers' value expectations begin to more closely resemble income valuations as debt markets tighten and speculative exit opportunities decline," he said.

Wednesday, October 1, 2008

India's Forex reserves in trouble - Goldman Sachs

Decline in capital inflows as a result of ongoing global financial turmoil may see India's foreign exchange reserves depleting by $ 39 billion during 2008-09, says a report by global banker Goldman Sachs.

also read : US recession - Why it happened

India's foreign exchange reserves, which were around $ 310 billion in March 2008, have been declining steadily and may go down to $ 271 by the close of current financial years, the report said.

The decline would mainly be on account of rising current account deficit, it said, adding "capital inflows fell to $ 13.2 billion (in Q1 2008-09) from $ 17.3 billion in Q1 of 2007-08 and $ 25.4 billion in the previous quarter (Jan-March)."

As per the latest RBI data, the country's foreign exchange reserves declined to $ 292 billion as on September 19, 2008, which can be attributed to higher trade deficit and declining portfolio investment.

Pointing out that the current account deficit will remain high during the year, the Goldman Sachs report said, "it would be a bigger concern with oil at $ 150 a barrel than at current prices."

also read : US recession - Why it happened

It further added, "with oil prices coming off substantially, one of the biggest threats to the current account deficit has been alleviated."

Even in the event of a sudden stop in capital flows, the report said, country's buffer of forex reserves would be sufficient to fund the current account and external debt payments.

At $ 271 billion in March 2009, the report said, the country would have sufficient reserves to meet 10.3 months of import bill, down from 15 months of imports in March 2008.

also read : US recession - Why it happened

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Himanshu Sharma's blog | My views, My space

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Friday, November 14, 2008

Cheers!! Inflation down to single digit - November 2008

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

Thursday, November 13, 2008

Rupee may return to strength by early to mid 2010

Monday, November 3, 2008

Rs v/s US $ - November 2008 - daily updates

Saturday, November 1, 2008

India Economy Updates-November 2008

Thursday, October 30, 2008

Inflation down at 10.68%

Wednesday, October 29, 2008

India to face 2.5 M tonne diesal shortage

Monday, October 27, 2008

Rs v/s US $ - Daily updates

Friday, October 24, 2008

India chasing 49 countries in Global Competitivenesss

Tuesday, October 21, 2008

World Prosperity Index - India 70th

Thursday, October 16, 2008

Indian Agriculture Growth pegged at 3 percent

Monday, October 13, 2008

Govt may relax foreign investment norms in banking, telecom

Wednesday, October 8, 2008

Indian Government to inject more money into market

Tuesday, October 7, 2008

Indian and Gulf real estate market is best

Wednesday, October 1, 2008

India's Forex reserves in trouble - Goldman Sachs

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