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Economy News

Discussion in 'World Economy' started by Indian_Idol, Jun 2, 2010.

  1. Hembo

    Hembo OLD MOD STAR MEMBER

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    BHEL aims to commission 20,000 MW equipment this fiscal
    Published on Tue, Sep 20, 2011 at 19:51 | Source : PTI

    State-run Bharat Heavy Electricals (BHEL) today said it expects to commission over 20,000 MW equipment, which includes overseas projects, in the current fiscal.

    Addressing shareholders at the annual general meeting here, BHEL Chairman and Managing Director B Prasada Rao said the company's strategy to improve execution capabilities include vendor base expansion, rate contracts and enhanced outsourcing.

    "The company has set an ambitious target of commissioning over 20,000 MW comprising utilities, industrial and overseas projects during 2011-12," he said. In 2010-11, BHEL commissioned 9,442 MW of power equipment. This includes 52 sets of equipment with a combined capacity of 7,667 MW, commissioned within the country and abroad.

    Noting that BHEL is on track to become a 20,000 MW company by March 2012, Rao said the company would continue expanding its offerings in new growth areas such as solar, nuclear, transportation, transmission & distribution and water.

    Further, the state-run major would focus on developing economically viable solar power. "With an order book position of over Rs 1,64,145 crore - the highest-ever both in physical as well as financial terms, at the close of financial year (2010-11), the company expects to achieve robust growth in 2011-12 and beyond," Rao said.

    According to him, the outlook for the company's export markets remains cautious. "Recent developments in the Arab world have also adversely affected business prospects in our traditional markets. "In spite of such challenges, BHEL was able to sustain its exports momentum with a physical export order inflow of Rs 3,738 crore from 24 countries spread over five continents," he added.
    BHEL is also developing Advanced Ultra Supercritical (Adv-USC) technology in association with the Indira Gandhi Centre for Atomic Research (IGCAR) and NTPC.

    In addition, the company is establishing a Centre for Nano Technology (CNT) at its corporate R&D division in Hyderabad. BHEL recorded a profit of Rs 9,006 crore for the 2010-11 financial year and all-time high turnover of Rs 43,337 crore. The company declared a dividend of Rs 1,525 crore.
     
  2. Naren1987

    Naren1987 Captain SENIOR MEMBER

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    Reality punctures India's wishful economic thinking

    To plan based on the best-case scenario is to tempt fate, as India's economic policymakers have learned the hard way.

    A federal budget that assumed economic growth of nearly 9 percent this fiscal year and projected bold deficit cuts was viewed as ambitious when it was released in February. With the benefit of hindsight, it now looks to have been a pipe dream.

    Instead, India's slowdown is poised to worsen as the cumulative impact of 12 interest rate increases in 18 months squeezes demand, with growth set to fall below 7 percent in coming quarters, some economists predict.

    Stubbornly high inflation far exceeding official forecasts has forced the Reserve Bank of India to continue raising rates even as growth slows and developed economies sink deeper into fiscal problems, making India a global outlier and threatening to prolong the duration and depth of its downturn.

    The failure of inflation to respond to the RBI's rate rises exposes the limitations of an economy that, without reforms to stimulate investment in more capacity, is unable to grow at the government's wished-for double-digits without overheating.

    "One of the reasons why India actually requires a period of relatively weak growth is that policy has just been too loose for too long, that the government is trying to achieve the unachievable," said Credit Suisse economist Robert Prior-Wandesforde, who pegs sustainable growth at 7.5 to 8 percent.

    Before the financial crisis, India's growth topped 9 percent for three straight years, fuelling hopes it will someday outpace China, which is on track to grow about 9.5 percent this year.

    Now, the lagged effect of rate rises, combined with worsening global demand that could hurt exports and impede capital inflows, darkens the outlook for Asia's third-largest economy. The recent tumble in the rupee adds to an already heavy oil import bill and is a new source of upward pressure on prices.

    India grew 8.5 percent in the last fiscal year but slowed to 7.8 and 7.7 percent, respectively, in the March and June quarters. Because it can take a year or more for policy rates in India to have a real impact, a tightening cycle that began in March 2010 has only recently begun to eat into demand.

    "Preferably they would have done all this action earlier than they have done, and if they had acted rather earlier the ultimate peak in rates would have been lower than it's going to actually be," said Prior-Wandesforde, who expects growth of just 7.2 percent for this fiscal year and 7.3 percent the year after.

    The International Monetary Fund recently cut its India growth forecast to 7.8 percent in 2011 and 7.5 percent in 2012, from 8.2 percent and 7.8 percent in June, respectively.

    THE PRICE OF HOPE

    While governments everywhere like to put a rosy spin on things, that can be dangerous if it drives policymaking.

    New Delhi's aim to cut the fiscal deficit to 4.6 percent of GDP, set in the run-up to elections in five states, was based on a growth target that looks impossible now.

    "The budget is not only an economic forecast ... it is also a political document. It's also (to) tell the people that there are better things ahead," said D.H. Pai Panandiker, head of New Delhi-based think tank RPG Foundation.

    The RBI's rate tightening, meanwhile, has been based on inflation targets that proved optimistic. The headline wholesale price index hit a 13-month high of 9.78 percent for August.

    New Delhi's budget target for more than $8 billion in state company share sales also looks optimistic, with investors in no mood to buy. A $2.5 billion share sale in Oil and Natural Gas Corp was recently put on hold.

    Halfway through the fiscal year, the divestment program has raised just $250 million, fuelling market expectations that New Delhi will be forced to exceed its bond issuance plan and overshoot its fiscal deficit target.

    While India bit the bullet in June after months of delay to raise diesel prices and ease its subsidy burden, it has not subjected them to market forces the way it has with petrol.

    What could ride to India's rescue is a sustained drop in the global oil price, which would provide relief both on the fiscal and inflationary fronts, although there is nothing Indian policymakers can do to make that happen.

    Despite tax collections that are roughly on target, India is running far behind on its fiscal deficit goal, reaching 55 percent of the budgeted full year total after just four months, compared with about 24 percent at the same point last year.

    Still, officials seem determined somehow to reach or come close to the deficit target, with a finance ministry official saying on Monday that the government maintains the stance that it has no intention of borrowing beyond its goal this year.

    In perhaps the most bearish -- or realistic -- outlook yet from New Delhi during the current economic cycle, Montek Singh Ahluwalia, the influential deputy chairman of the Planning Commission, recently told Reuters that the base case for Indian growth is 7.5-8 percent in the next couple of years.

    UNWANTED AUSTERITY

    While New Delhi spends heavily on rural subsidies that win votes and drive up consumption, it is behind on spending to alleviate pressure on its roads, ports and power supply. India is on track to fall 10-12 percent short of its $500 billion infrastructure investment goal for the five years to March 2012.

    Goldman Sachs expects India's growth potential to fall to 7.6 percent in the next fiscal year, from 8 percent before the financial crisis, due to slowdown in supply side reforms and investment.

    Poor infrastructure adds roughly 2 percentage points to inflation in India, while up to 40 percent of fresh produce rots because of inadequate supply chains. A proposal to allow entry to foreign retailers such as Wal-Mart Stores Inc would ease food inflation but is stalled by political opposition.

    Investment that would add industrial capacity has slowed as costs rise and manufacturers worry about demand. Problems with land acquisition and environmental clearances mean mining firms in coal-rich India spend billions to secure supply overseas, while power projects are delayed for lack of fuel.

    Not known for speed at the best of times, the Indian government under Prime Minister Manmohan Singh has been all-but paralysed by a spate of corruption scandals that have distracted it from its reform agenda and weakened it politically.

    "The problem is not about getting to a bottom," said Sanjay Mathur, economist at Royal Bank of Scotland in Singapore.

    "My worry is that, when you think the bottom, you think that things are going to get better, but no. We've had such sluggish policy momentum, reform momentum, that you could be bumping along for a long period of time," he said.

    LONELY WARRIOR

    With little help from New Delhi, RBI chief Duvvuri Subbarao has been left with the lonely task of increasing interest rates, most recently on Sept. 16, in the face of deteriorating conditions at home and globally.

    Not everyone thinks he made the right decision.

    "The impact of this hike will be felt only after a 2-3 quarter lag, by which time growth and inflation will have slowed considerably, and this may serve to exacerbate the downturn," wrote Goldman Sachs economist Tushar Poddar.

    In the absence of capacity addition, slowdown is exactly what India needs, some argue.

    "I think there's resignation that you have to accept a slower growth rate if you really want inflation to come down," said Jahangir Aziz, chief India economist at JP Morgan.

    "That realisation has come slowly," he said.

    Reality punctures India's wishful economic thinking | Reuters
     
  3. vikas jat

    vikas jat Captain SENIOR MEMBER

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    just make common people life easy we dont want 9% on a map ... ...in today scenerio"S its hard to eat good ..we r struggling to feed our family "s
     
  4. Naren1987

    Naren1987 Captain SENIOR MEMBER

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    Why don't we improve infra and fix the supply chain instead of raising interest rates?
     
  5. jack

    jack FULL MEMBER

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    'Indian tech textile ind may touch Rs 158000cr by 2017'

    The Indian technical textile industry is expected to grow to a value of Rs 1,58,000 crore by 2017, a senior government official said.

    "The technical textiles industry is forecast to grow at Rs 1,58,000 crore by 2016-17, with a projected growth of 20%. The industry has grown to Rs 63,000 crore in 2011-12 from Rs 41,000 crore in 2010-11, which is 11% growth per annum," Textile Commissioner, Ministry of Textiles, AB Joshi said, after inaugurating the third edition of 'Techtextil India 2011'.

    Joshi emphasised on the growing sectors within the technical textiles industry in India namely, Medical (Medtech), Geo-Textiles (Geotech), Protective Textiles (Protech) & Agricultural Textiles (Agrotech).

    In its 12th Five Year plan, the government has allocated funds to the development of Centre's of Excellence (CoE) for the various technical textiles sectors.

    The upcoming CoE's, that have been established very recently, are, for non-wovens & medical in Ichalkaranji, Kolhapur, Maharashtra; for the sports sector in Mumbai; for composites in Ahmedabad, Gujarat and for the Industrial application of textiles in Coimbatore, Tamil Nadu, Joshi said.

    Joshi released the official catalogue of the 3rd Techtextil India at the conference.

    The three-day exhibition and its concurrent two-day symposium will provide comprehensive market intelligence, which will help drive the future of India's technical textile market.

    Apart from four international country, pavilions from Germany, France, Belgium and China, nearly 132 exhibitors across 14 countries - Belgium, China, France, Germany, Holland, India, Italy, Japan, Korea, Sweden, Turkey, USA, Austria and Indonesia are participating in the exhibition.

    Michael Jänecke, Brand Manager-Techtextil, Messe Frankfurt GmbH, in his welcome note, thanked the Union Government and extended support towards Techtextil India 2011.

    He said that globally, India's presence as a global player in the textiles industry has garnered positive feedback as the country is fast gaining respect & influence of many countries, worldwide.

    The exporters urged the government to give service tax and VAT exemption "to encourage textile exports and remain competitive".

    Link:'Indian tech textile ind may touch Rs 158000cr by 2017' - PTI -
     
  6. jack

    jack FULL MEMBER

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    High speed 4G services coming to India from January

    The services will be launched in Madhya Pradesh and Chhattisgarh under the Zoosh brand name. Bhopal will be the first city to get the 4G services.

    The long wait for fast wireless broadband services is finally getting over at east for people of Madhya Pradesh where Augere, a UK based company which provides wireless broadband services, will launch its 4G services using TD LTE services beginning January. Augere had won BWA (broadband wireless access) spectrum for Madhya Pradesh circle last year.

    Bhopal will be the first city in India to get the fourth generation mobile telephony services in January followed by other important cities in the region like Indore, Raipur, Gwalior and Durg in the next three months. Other cities and towns will get the services during the course of the year.

    Augere has selected Ericsson for network roll-out and maintenance. The TD LTE technology is capable of speeds up to 100 Mbps and is backwards compatible with 3G (CDMA as well as GSM) which means that customer will be connected to 3G where 4G network is not available.

    Lars Stork, chief executive officer of Augere Wireless broadband India, said, "We are delighted to be one of the first wireless broadband service providers to announce our plans for the launch of 4G services in Madhya Pradesh and Chhattisgarh. LTE is a new technology that will enable us to offer high speed and a quality customer experience through 4G wireless broadband services".

    Reliance Industries in the only pan India player in this space and will determine what the pricing of the services will be given the sheer that they will have. Other winners include Aircel (8 circles), Tikona Wireless (5 circles), Airtel (4 circles) and Qualcomm (4 Circles).

    Apart from Augere non of the operators have announced their plans for the 4G roll-out so far. However, it is almost certain now that LTE will be the technology that they will use.

    Link:High speed 4G services coming to India from January
     
  7. satz

    satz Captain SENIOR MEMBER

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    India to grow faster than China with 9% economic expansion in 2013: E&Y - The Economic Times

    NEW DELHI: Bolstered by industrialisation, India is projected to grow at a faster clip than neighbouring China with a 9 per cent economic expansion in 2013, says a report by global consultancy firm Ernst & Young.

    It cautioned, however, that India needs to tackle rising inflation and said the country's growth this year would be 7.2 per cent, much lower than 8.2 per cent recorded last year.

    India's growth rate would rise to 8 per cent next year, according to the report released today.

    "The forecast pegs India's real GDP growth rate to be the highest among all the Rapid Growth Markets (RGMs) starting in CY 2013, when the economy is expected to growth 9.5 per cent, followed by China at 9 per cent," it said.

    In 2014, India is expected to see an expansion of 9 per cent while Chinese would see a growth of 8.6 per cent.

    The RGMs Forecast focuses on 25 nations -- including India, China, Brazil and Russia -- that display strong growth potential and are, or could be, strategically important for business.

    India and China's would be able to better withstand a likely slowdown mainly on account of large size of their domestic markets as well as from beneficial effects of lower oil and commodity prices, E&Y said.

    It pointed out that even though the overall outlook for India is positive, the country would need to address rising inflation.

    Headline inflation, which has been hovering above the 9 per cent mark since December 2010, stood at 9.72 per cent in September.

    "... provided India's inflation does start to fall back by the end of this year and the US and EU economies do not slip back into recession, the soft patch for Indian growth should be relatively short-lived," the report noted.

    E&Y said that once inflation is in check and interest rates are no longer rising, consumers would be more willing to spend. This would support a general improvement in business environment, resulting in steady acceleration in growth next year.

    "India enjoys an advantage in its high savings and investment rates, currently a third of the GDP; relatively low GDP per capita on purchasing power parity giving significant potential for growth and continuing industrialisation and urbanisation," the report said.

    E&Y India's Partner & India Markets Leader Farokh Balsara noted that India's consumption-led economy continues to make the country a highly attractive investment destination in the short to medium term.
     
  8. Defcon 1

    Defcon 1 2nd Lieutant FULL MEMBER

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    the present problem of inflation persists due to difference between supply and demand, not because of irregularities in supply chain, the main aim of hiking interest rates is to control demand in market, because if u cant take loans, you can't buy products, which will equalize supply and demand and tame inflation. also, investing in infra is not option, firstly because the government has no money to invest in infra as it has to meet its target of 4.6% deficit by the end of this fiscal, and secondly because further investment will increase consumption in short term which will further fuel inflation.
     
  9. lucifer

    lucifer Lieutenant SENIOR MEMBER

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    [​IMG]

    India is experiencing a wave of protests against the construction of Russian nuclear power plants. Public fears, fuelled by the Fukushima accident and exacerbated by the regional politicians’ populist slogans, may provoke a chain reaction of problems, hampering power generation development and depriving the Indian economy of its critical advantages over China.

    Russian and Indian nuclear experts cannot meet to discuss the launch of Kudankulam NPP’s first unit because of public protests, Alexander Glukhov, the head of the Russian contractor, Atomstroyexport, told the media. This could set back the deadline for the launch of the plant, which is being built with Russia’s assistance.

    Tensions in Tamil Nadu, where the nuclear power plant is being built, started growing early this year and resulted in a public blockade of the construction site by local public activists in the fall. They are protesting for environmental reasons, and their concerns have only grown following the Fukushima tragedy in Japan. Unsure of what would happen next, the Indian regulators are procrastinating with the issue of permits to commission the power plant.

    Delegation of responsibility

    The situation is further complicated by political maneuvers in Indian parliament, which has been amending and augmenting the Civil Liability for Nuclear Damage Bill for years. The current wording includes unusual provisions, in particular on the division of responsibility for the plant’s hypothetical operational accident between the operator and the general contractor. In other words, reactor suppliers will have to pay damages in case of a nuclear or radiation accident even though they have no connection to the causes of the accident.

    This provision has caused great irritation among foreign operators on the Indian nuclear market, including Russia, the United States and French group Areva. The three parties, once bitter rivals on the Indian nuclear market that is too big to be serviced by any one supplier, are now unanimous in their refusal to acknowledge additional expenses.

    The Indian government is advocating a balanced approach to the bill based on respect for international law, but the opposition-led parliament is unlikely to approve amendments beneficial for foreign businesses.

    Indians have been eco-conscious since one of the world's worst industrial accidents at the Union Carbide plant in Bhopal in 1984, when over 3,000 people were killed on the spot and at least 15,000 died from diseases caused by chemical poisoning.

    The Civil Liability for Nuclear Damage Bill may become effective in December 2011.

    The Indian government claims that the bill will not affect nuclear power plant projects, but the international nuclear businesses have hinted broadly that India will have to pay for its decision – construction costs will have to be raised to include payment for potential damage.

    “To a large extent it'll come down to individual companies making individual decisions – to evaluate the risks in this market and whether they want to be in this market or not,” The Wall Street Journal quotes Vijay Sazawal, director of government programs at the U.S. Enrichment Corp. and also a member of the U.S. Civil Nuclear Trade Advisory Committee.

    Selective anti-nuclear panic

    Anti-nuclear sentiments started growing in India in spring 2011, when the world was shocked by reports from the Japanese Fukushima Nuclear Power Plant damaged by a tsunami after a destructive earthquake. At that time, people in Kudankulam elected a new mayor, who promised to stop the construction of the nuclear plant.

    Tensions came to a head in the fall, when protesters barricaded the construction site and local workers started leaving the unfinished plant. This has had a sobering effect, because local residents’ incomes from renting out housing and selling basic necessities to the plant’s workers have plummeted over the past few months.

    It is interesting that public wrath in Tamil Nadu is highly selective: people are barricading the unfinished Kudankulam power plant but feel quite indifferent about the Madras Atomic Power Station (MAPS), which has been in operation in Kalpakkam since the mid-1980s.

    The MAPS has two heavy-water CANDU type reactors that are not as safe as Russia’s AES-92 pressurized light water reactors built for Kudankulam. It appears that people in Kalpakkam have grown used to the benefits of having a nuclear power plant, the taxes it pays to the local budget and its positive influence on the region’s economy.

    Nevertheless, anti-nuclear protests in India have almost provoked a chain reaction. The authorities of West Bengal, which Communists had governed for more than three decades until May 2011, have been fighting against the Russian nuclear project in Haripur since 2009. According to the latest media reports, the West Bengal government has announced that it will not allow the construction of nuclear power plants in the province.

    Everyone will suffer, but to a different degree

    The local authorities, which are using populist slogans to stop the construction of nuclear plants, are depriving municipal governments of potential tax revenues and stunting economic growth in their far from rich provinces.

    Refusal to modernize the nuclear industry could have far-reaching consequences for the whole of India, such as growing system-wide disproportions in the economy due to the hampered development of the power industry.

    The world’s nuclear corporations will lose a prized client. What other country will have enough funds to build several dozen power units? But a much stronger blow will be delivered to India’s interests.

    India has set the goal of priority industrial development, in particular in high-tech sectors, which is impossible without modern power generation, especially amid growing rivalry with China for influence in South Asia and in the global division of labor.
     
  10. lucifer

    lucifer Lieutenant SENIOR MEMBER

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    KOLKATA: Ericsson , the world's largest telecom gear manufacturer, is counting on services it has developed in India for growing its multi-billion dollar managed services business in Europe and Latin America. Details are unknown, but the Swedish telecom equipment manufacturer plans to roll out a spate of engineering support service centres in Romania , Brazil and Mexico which will be modelled along the lines of its India regional technical centres (RTCs).

    These tech hubs will be equipped to remotely optimise the networks of some of Ericsson's top mobile operator clients in these regions. "The RTC concept was developed by Ericsson India to provide proactive engineering support to customers. As a best practice, we've just shared the concept with other regions in Ericsson's global ecosystem to evaluate the RTC process and implement if needed," said Edmilsson Toledo, who heads operations at Ericsson India.

    Ericsson is trying to maximise scale-efficiencies by focussing on activities that can be delivered remotely at its four global service centres (GSCs). Apart from India, the Swedish company runs GSCs in Romania, Mexico and China . If the Indian RTC model is replicated overseas, Ericsson engineers manning these centres will be able to remotely design, plan and optimise mobile phone networks and even handle associated technology operations on a real-time basis .

    They will also be able to remotely do systems integration and consulting of client networks. These potential tech hubs will be able to remotely deliver network engineering support functions by integrating people, tools and processes for optimising diverse mobile networks, be it on the 2G, 3G or BWA platforms. Feedback from Ericsson's overseas markets has been encouraging , although replicating the RTC model will hinge on the telecom infrastructure requirements in markets like Romania, Brazil, Mexico or Costa Rica, said an Ericsson India executive with direct knowledge of the matter.

    "Our clients worldwide are aware that end-to-end engineering services based on the RTC model have given Indian telcos economies of scale and the necessary skill sets to manage their networks. It's a brand new initiative and we hope to shortly roll out the concept in other regions as well," said another company executive who was directly involved in the RTC rollout in India. Currently, Ericsson has a staff of around 5,000 certified for such services at its whollyowned Indian arm, Ericsson India Global Services.

    Role Model

    Swedish co to roll out engineering support service centres in Romania, Brazil, Mexico If co's Indian model is replicated abroad, its engineers manning these centres can remotely design, plan and optimise network [sic]
     
  11. lucifer

    lucifer Lieutenant SENIOR MEMBER

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    * Growth lowest in more than two years, and broad-based

    * Little room seen for short term fiscal fix for economy

    * Pause in rate rises, possibly some form of easing likely

    NEW DELHI, Nov 30 (Reuters) - India's economy grew at its weakest pace in more than two years in the quarter that ended in September, revealing the heavy toll that stubborn inflation, rising interest rates and crisis-hit global capital markets are having on Asia's third-biggest economy.

    Gross domestic product growth fell to 6.9 percent in the second quarter of the financial year, slipping below 8 percent for the third straight quarter.

    Weakness in the second quarter was broad-based. Manufacturing, accounting for 16 percent of GDP, grew at only 2.7 percent and mining contracted 2.9 percent.

    Economists suspected the pace of economic growth may languish at seven percent in the coming quarters, and that even if the central bank isn't willing to cut interest rates, it might feel compelled to ease monetary conditions by other means.

    The economy has been hit by a confluence of factors. Inflation has been persistently high all year, policy inertia has hurt investment and industrial output and, now, capital outflows have pushed the rupee to new lows.

    While investors have called for economic reforms - such as making land acquisition for industry easier and opening up the retail market to foreign firms - there appear few short-term fixes.

    Montek Singh Ahluwalia , deputy head of the planning commission and one of Prime Minister Manmohan Singh's closest advisors, said a stimulus was unlikely, adding that growth in the next quarters may improve.

    "We hope these problems will be overcome in the second half of the year. Plus we hope that investment implementation hurdles will get overcome and that should give a boost to investment especially in the infrastructure sector."

    There is little fiscal room for the government, which has already announced extra spending of around $11 billion and is struggling to meet its fiscal deficit target.

    "It will be tough for the government to provide any fiscal stimulus to revive growth as their finances are already strained and they need to ensure the fiscal deficit doesn't get out of control," said D.K. Joshi, chief economist at Crisil in Mumbai.

    "So they will have to do some tough balancing act."

    Finance Minister Pranab Mukherjee said the global economic situation was depressing growth, and forecast GDP growth for full-year ending in March 2012 dropping to 7.3 percent from an initial prediction of around 9 percent.

    The headline GDP figure was in line with the median forecast in a Reuters poll for an annual rise of 6.9 percent, and compares with 7.7 percent growth in the previous quarter.

    India's benchmark 10-year federal bond yield eased briefly to 8.75 percent at 0525 GMT, down 8 basis points on the day, while stocks reversed early losses and were up 0.2 percent.

    POLITICAL PRESSURE

    The slowing economy will also add to pressure on the ruling Congress party-led coalition, hit by corruption scandals and policy limbo ahead of crucial state polls next year that will pave the way for a 2014 general election.

    Thirteen interest rate increases have failed to arrest inflation, which is close to a double-digit rate, and high food prices have proved one of the biggest issues for voters.

    The Reserve Bank of India (RBI) has indicated the low possibility of another rate increase, and some economists said Wednesday's data would add to the pressure to hold back on any tightening.

    "The GDP data increases chances of monetary easing as it is a sharp drop and the weakest growth since 2009," said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole in Hong Kong.

    Some analysts said that while rates may not be cut, there could be some measures to raise liquidity and help private investment. The RBI could for instance reduce the proportion of their deposits banks have to place at the central bank.

    "There is significant weakness in the economy, and that is what needs to be factored in," said Saugata Bhattacharya, economist at Axis Bank in Mumbai.

    "There will probably be some easing action, I don't know if it will be a rate cut. I think it will come firstly in liquidity, and then a rate cut."

    The Indian economy grew at 8.5 percent in 2010/11. GDP growth has been below 8 percent for the past three quarters. Indian corporates, particularly in the auto and real estate sector, have been hit by rising input costs and a slowdown in demand.

    Farm output has gradually declined. It rose an annual 3.2 percent in the July-September quarter, down from the previous quarter's 3.9 percent growth .

    Growth has been slowing across Asia owing to the slump in demand from stalling developed economies. China's economy slowed down to 9.1 percent in the third quarter, from 9.5 percent in the second quarter, while the OECD cut its forecasts for the global economy to 3.4 percent for 2012.

    The global economic recovery is running out of steam, leaving the euro zone stuck in a mild recession and the United States at risk of following suit, the OECD said on Monday, sharply cutting its forecasts.
     
  12. lucifer

    lucifer Lieutenant SENIOR MEMBER

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    [​IMG]

    (Reuters) - India may face its worst financial crisis in decades if it fails to stem a slide in the rupee, leaving the Reserve Bank of India (RBI) with a difficult choice over how to make best use of its limited reserves to maintain the confidence of foreign investors.

    If the RBI is too timid, it risks adding fuel to the ire of portfolio investors, which India relies on heavily to cover its imports tab.

    Aggressive intervention would leave the central bank open to criticism that it is wasting precious money on problems that are beyond India's control anyhow, noteably Europe's debt crisis.

    Unlike most of its Asian peers, India has recently been running large current account and fiscal deficits. That means it must attract sufficient foreign money -- namely U.S. dollars -- to close the gap, and a weaker home currency makes that costlier.

    This is a perennial problem for India. The current situation is so worrisome because India is grappling with big internal and external economic threats simultaneously. Growth is slowing. Inflation remains high. Political paralysis has stymied domestic reforms.

    The RBI, the last line of defence against a currency meltdown, has cautiously begun to support the rupee, but its firepower may be more limited than its $300 billion in reserves would suggest.

    Beyond India's borders, Europe is the biggest worry. As its banks deleverage, investment money has flooded out of India's markets. If Europe's debt troubles deteriorate, India could be hit with a balance of payments crisis as severe as the one that forced a sharp devaluation in 1991.

    The rupee, which has dropped 16 percent in the past four months, got a reprieve last week after the world's big six central banks banded together to try to ease dollar funding strains, helping it to snap a four-week losing trend.

    But analysts widely expect the rupee, trading on Monday at 51.26 per dollar, to resume its slide.

    "The Indian currency will be the first casualty of a deterioration in the euro zone crisis," said Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai.

    If Europe's crisis deepens, India's trade deficit would widen even more rapidly, and it would have even more trouble attracting foreign capital.

    "Risk appetite will obviously collapse and gradually the currency crisis is likely to take the shape of a balance of payments crisis," Nitsure said.

    Worries about India have spiked in tandem with concern over Europe. UBS hosted a client conference call about India on November 29, which it announced with an email headlined "India explodes." Deutsche Bank sent out a report on November 24 entitled, "India's time of reckoning."

    "Suddenly everything seems to be coming to a head in India," UBS wrote. "Growth is disappearing, the rupee is in disarray, and inflation is stuck at near-record levels. Investor sentiment has gone from cautious to outright scared."

    India's current account deficit swelled to $14.1 billion in its fiscal first quarter, nearly triple the previous quarter's tally. The full-year gap is expected to be around $54 billion.

    Its fiscal deficit hit $58.7 billion in the April-to-October period. The government in February projected a deficit equal to 4.6 percent of gross domestic product for the fiscal year ending in March 2012, although the finance minister said on Friday that it would be difficult to hit that target.

    India relies heavily on portfolio inflows -- foreign purchases of shares and bonds -- as a means of covering its current account gap. Those flows are fickle.

    Foreign portfolio investors have sold a net $50 million worth of equities so far in 2011 , in sharp contrast to the $29 billion they invested in 2010, data from the Securities and Exchange Board of India's website showed. In November alone, foreign funds pulled $661 million out of Indian stocks.

    "The Indian economy is one of the most vulnerable to liquidity shocks in the region, not helped the least by deficits in its key balances," said Radhika Rao, an economist with Forecast PTE in Singapore.

    WHERE IS THE RBI?

    The drop in portfolio inflows and the hefty current account and fiscal deficits have been a key factor behind the rupee's decline.

    The RBI appears to have intervened in mid-November to try to slow the decline. Between October 28 and November 25, reserves dropped by $16 billion to $304 billion, yet the currency still fell by 7 percent over that period.

    Trading in rupee offshore forward contracts show traders are betting on the rupee declining a further 1.7 percent over the next three months, and 4.5 percent in a year.

    Many economists argue the RBI has been too timid, and deserves part of the blame for the rupee's weakness.

    A deputy governor said on Saturday that the central bank would use "all available instruments" to stem a downward spiral.

    Other officials have insisted the RBI should avoid "undue" intervention, especially when the currency depreciation is caused by external forces, a message economist Rajeev Malik says could backfire.

    "The biggest mistake RBI has made is that it has almost given an open invitation to speculators to short the rupee," said Malik, who is with CLSA in Singapore.

    "It is really bizarre for any central bank to openly keep on saying that it will not intervene when there is already pressure on the currency to weaken and globally things are so uncertain."

    Contrast that with Indonesia, which burned through 8 percent of its foreign exchange reserves in a single month in September to defend the rupiah from a global bout of market volatility.

    The rupiah has weakened in recent weeks after Bank Indonesia twice lowered interest rates. RBI, however, has been among the most hawkish central banks in the world, raising rates 13 times since early 2010. Normally, higher interest rates boost currencies, so the rupee's weakness is all the more significant.

    KEEPING POWDER DRY

    If the RBI decides to step in more aggressively, its manoeuvring room is more limited than its reserves tally would suggest.

    After covering the current account deficit, short-term debt and foreign investment flows, there would be less than $20 billion left over.

    J. Moses Harding, head of market and economic research at Indusind Bank in Mumbai, said the RBI's immediate concern would be arresting the spread of currency woes into the money market.

    India's banking system already borrows more than $19 billion from the central bank to meet reserve requirements, so if the RBI moved to prop up the rupee, it would drain more liquidity out of an already tight market.

    Companies make quarterly advance tax payments around mid-December, which puts an added strain on liquidity.

    In addition, a glut of foreign currency convertible bonds, issued when the rupee was much higher, falls due in the first quarter. They include a $1 billion Reliance Communications bond.

    The bonds are too expensive at current levels to be converted into stock and the sharp depreciation of the rupee will leave issuers with a heavy redemption bill.

    The central bank could boost liquidity by cutting the cash reserve ratio, the proportion of deposits banks must set aside with the central bank as cash. Talk of a cut has circulated in Indian markets in recent days, although some economists argue that such a move could stoke already hot inflation.

    "It would be extremely difficult for RBI and the government to arrest simultaneous downward pressures from equity, currency and money markets while struggling to address low growth and high inflation issues," Harding said.

    That argues in favor of RBI keeping its ammunition dry in case conditions worsen. If India is indeed heading for a 1991-style balance of payments crisis, those reserves would be vital.

    Back then, India rapidly depleted its reserves, forcing a currency devaluation.

    But the risk is that RBI will wait too long to act.

    "While it is important for RBI to not shed its FX reserves unnecessarily, the approach of allowing such a massive pace of slide in the rupee could backfire," CLSA's Malik said.
     
  13. lucifer

    lucifer Lieutenant SENIOR MEMBER

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    Economist Tyler Cowen tweeted, "the current economic deterioration of India is the single most important under-reported story these days…".

    We've been tracking India's inflation and stock market woes for some time, so we went digging.
    [​IMG]

    The Bombay Stock Exchange has been one of the world's worst performing stock markets this year. The BSE 30-share index is off 18.06% year-to-date, worse than the stock markets of other BRIC economies.

    Foreign investors have been pulling out of the country all year as India continues to struggle with inflation, and investors continue to pick safe havens.

    The Indian economy which gained 6.9% in the second quarter, is expected to grow 7.5% this year, according to Indian finance minister Pranab Mukherjee, against previous estimates of 9% growth. And the Indian Rupee is off 13.14% year-to-date (YTD) against the U.S. dollar, and 13.72% against the euro. The currency has been declining as inflation remains consistently high, driven up by food costs.

    Inflation and capital flight are two clear factors that have hurt the Indian economy. First, inflation has stayed over 9% since December 2010, and wage inflation is also on the rise. The Reserve Bank of India (RBI), the country's central bank has been hiking interest rates since March 2010 to curb inflation. India's finance ministry released a statement showing that rising interest rates in part caused industrial growth to drop to 5% from April-September in the fiscal year 2011 - 2012, from 8.8% a year ago.

    The higher interest rates have tightened liquidity in the Indian market over the year, and the central bank has now promised to inject liquidity through debt repurchases. Moody's recently cut India's banking sector outlook to negative, from stable:

    "India's economic momentum is slowing because of high inflation, monetary tightening, and rapidly rising interest rates. At the same time, concerns have emerged over the sustainability of the recovery in the US and Europe, and the rise in the borrowing program of the Indian government, which could drain funds away from the private credit market.

    …"With asset quality, given the tightening environment, we anticipate that it will deteriorate over the next 12-18 months, thereby causing an increase in provisioning needs for the banks in FY2012 and FY2013."

    Secondly, capital flight in the wake of the European debt crisis and India's corruption scandals have landed another massive blow to the economy. Foreign investors looking to cut risk have pulled their money out of India which counts on foreign funds to keep its current account gap in check. Foreign investors have only $530 million in Indian equities this year, compared with $28.9 billion a year ago, according to the Securities and Exchange Board of India (SEBI).

    Dr. Subir Gokarn, deputy governor of the RBI explains the impact of the European debt crisis and skittish foreign investors on the Indian economy:

    The impact of this recent global instability on India has been enormous. India is a structurally current account deficit economy. This deficit is, in turn, financed by capital inflows, which over the past several years, had been large and stable enough to more than offset the current account deficit.

    …India has large reserves, of course, over $300 billion, but because we have a current account deficit, the reserves are essentially counterbalanced against our external liability position. In an extreme scenario, if there is a large outflow of capital, the adequacy of reserves will be judged by the economy's ability to finance the current account deficit and, over and above that, meet short‐term claims without any disruption or loss of confidence.

    India runs a trade deficit, and last month it was reported that Indian companies have raised about $30 billion in foreign debt in 2011. This would cost $5.4 billion more to repay because of the weakness in the rupee.

    Unlike export nations like China, Indian exports only account for 10% of GDP. While a global economic slowdown will impact India's growth, the weaker currency-cheaper exports rule shouldn't be a driving factor, rather, the country needs to strengthen the rupee in an effort to make imports cheaper and attract foreign investment.

    The RBI indicated in its last monetary policy review meeting that the likelihood of another rate action was low. And Mukherjee has said that the Indian economy which already focuses on domestic-demand growth, needs to push that strategy more.

    Meanwhile, here is a chart that shows how the BSE has performed against the S&P 500 and the DOW:

    [​IMG]
     
  14. satz

    satz Captain SENIOR MEMBER

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    India's growth prospects aren't bad, but the future needs to be carefully charted


    [​IMG]

    India's GDP growth was down to 6.9% in the second quarter of 2011-12, the lowest growth rate in the last two years. Some analysts see growth for the year as a whole sinking below the decade's low point of 6.8% reached in 2008-09 in the wake of the subprime crisis.

    Just how bad can it get? And can we hope to get back to the high growth path in the near future? That these questions are even being asked says something about the mood that has enveloped the country recently.

    Much of the pessimism rests on the thesis that, in the present environment, investment is being severely impacted, perhaps, as badly as in 2008-09. To take a view on this thesis, let us first take a look at the behaviour of investment in the recent past.

    Growth through the boom years 2003-08 was sustained by high levels of investment. As the accompanying table shows, in 2008-09, investment, denoted by gross fixed capital formation, fell sharply. It recovered somewhat in 2009-10. In those two years, large increases in government spending helped cushion the impact on GDP. In 2010-11 and 2011-12, fiscal correction has been under way, so such a cushion is no longer available.

    Growth in investment in the last two years has been way below that in the boom period. But lower growth in investment did not come in the way of growth of 8.5% last year, thanks to strong growth in exports. For growth to sink below 7%, investment has to be hit pretty hard. What could cause that to happen?

    In 2008-09, investment was impacted by two factors: a drying up of liquidity and enormous uncertainty about the global economic outlook. Today, Indian companies are not faced with a drying up of funds. The external situation is hardly as grim. It could, of course, become very adverse if the eurozone implodes but there is indication yet on that account. The indicators for the US are looking up.

    We are likely to end the year with export growth of over 20% despite global growth slowing down by more than one percentage point. It is hard, therefore, to argue that the external situation should have caused investors to put their plans to hold.

    It is more likely that investment has been impacted by domestic conditions. High interest rates are one factor. Some believe that 'policy paralysis' has dampened investment but, then, they need to explain how the Indian economy grew at 9% in UPA-I or at 8.5% last year.

    Chief statistician T C A Anant has an interesting point to make. He believes that the deceleration in investment has to do with the fact that we are at the end of the last Five-Year Plan period. Once public investment in the next Plan is firmed up, it will have a 'signalling effect' on private investment ( Farm & Factory to Ensure 7.5% Growth for Yr: Anant, ET, December 1).

    What is the evidence so far of a slowdown in investment? Growth in construction in both the two quarters of this year is below that in the previous year. There is also a sharp deceleration in capital goods output. The demand-side figures for the second quarter reinforce these concerns. In the first half of the year, gross fixed capital formation grew by a mere 3.3% over the last year.

    Ref:-India's growth prospects aren't bad, but the future needs to be carefully charted - The Economic Times
     
  15. satz

    satz Captain SENIOR MEMBER

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    Food inflation at 3.5 year low of 6.6%

    NEW DELHI: Food inflation fell sharply to 6.60 per cent for the week ended November 26, reflecting a decline in prices of essential items like vegetables, onions, potatoes and wheat.

    Food inflation, as measured by the Wholesale Price Index ( WPI), stood at 8 per cent in the previous week ended November 19. It was recorded at 8.93 per cent in the corresponding period last year.

    According to data released by the government today, onions became cheaper by 39.20 per cent year-on-year during the week under review, while potato prices were down by 15.75 per cent. Prices of wheat also fell by 4.70 per cent.

    Overall, vegetables became cheaper by 1.25 per cent, a big relief after double-digit inflation in vegetable prices during the months of September and October.

    However, other food products grew more expensive on an annual basis, led by protein-based items.

    Pulses became 13 per cent costlier during the week under review, while milk grew dearer by 11.02 per cent and eggs, meat and fish by 10.04 per cent.

    Fruits also became 10.72 per cent more expensive on an annual basis, while cereal prices were up by 1.68 per cent.

    Inflation in the overall primary articles category stood at 6.92 per cent during the week ended November 26, as against 7.74 per cent in the previous week. Primary articles have over 20 per cent weight in the wholesale price index.

    Inflation in the non-food segment, which includes fibres, oilseeds and minerals, was recorded at 1.37 per cent during the week under review, as against 2.14 per cent in the week ended November 19.

    The rate of price rise in non-food primary articles has fallen sharply during the past couple of months, from over 8 per cent to around 1 per cent, as per the latest numbers.

    Fuel and power inflation stood at 15.53 per cent during the week ended November 26, the same as in the previous week.

    The decline in the rate of price rise in food items is likely to bring some relief to the government and the Reserve Bank, which have been facing flak from all quarters for persistently high prices.

    Speaking in the Lok Sabha yesterday, Finance Minister Pranab Mukherjee said the ideal rate of inflation is around 5-6 per cent.

    Rf:-Food inflation declines sharply to 6.60% for week ended November 26 - The Economic Times
     

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