Indian Economy: News and Discussion (June 8 2008)

amardeep_s · Post by **amardeep_s** » 12 Jan 2009 14:12

the report is of a manager in a NBFC. Mint doesnt give the name of the org. It is Family Life Kolkata ( includes ops of Apeejay). Forumites can throw more light on it. http://www.livemint.com/2009/01/0916265 ... burst.html the 25000 sqft office is at the Technopolis

Suraj · Post by **Suraj** » 15 Jan 2009 04:33

Export orders to plummet after March

Merchandise exporters claim that their order books for the next financial year look dismal as economic recession in many target markets have made buyers postpone purchases.

If the situation continues, it will lead to a drastic reduction in production and layoffs, starting with temporary staff, they say. Industry representatives from engineering, textiles, handicrafts, and gems and jewellery — which make up more than 40 per cent of India’s overseas sales — say they have either half the orders for months after March 2009 or none at all.

Shipments will be low even in the remaining 75 days of the current financial year, they say, adding that this will be reflected in marginal growth or even a dip in exports.

“At present, export orders are down 20 per cent on an average. It takes about three months to execute an order. So export growth will continue to remain muted for the remaining months of 2008-09. For months after March, orders could become lower,” said Ajay Sahai, director general, Federation of Indian Export Organisations (FIEO), a lobby group supported by the government.

Exports dipped for two consecutive months ending November 2008 as demand from recession-hit markets in the United States and Europe dwindled after September. While it is almost certain that India will miss the $200-billion export target for 2008-09, it is expected that cumulative exports during the current financial year could at most touch $175 billion, as against $162 billion in the year ended March 2008.

Exporters belonging to the engineering goods sector say post-March 2009 orders are down 50 per cent compared with the previous year.

Katare · Post by **Katare** » 16 Jan 2009 01:25

5.24% on the base of last year's 4.3% inflation, once the high base kicks in couple of months inflation would comedown close to "zero" percentage

Inflation eases to 5.24%

ramana · Post by **ramana** » 17 Jan 2009 00:24

Suraj, Last night on Sony TV, there is show called Dateline Punjab which had interviews of small business hurting due to total dry-up of export orders. The importers are refusing to pick up the hardware already ordered and mfged. offocurse no money either. The local industry assoc. head was saying that they exports are down by 40 to 50%.
So this global thing is hurting village level in India and will have political impact.

Suraj · Post by **Suraj** » 17 Jan 2009 00:57

What industry was this ? Traditional labour-heavy lower capital driven exporting industries like textiles and gems/jewelry are certainly hurting a lot, but more capital intensive industries like machinery and petrochemicals appear to be better off. Not that this is a good thing, since employment in export industries is quite significant, with a lot more potential to affect SMBs more than megacorps like Reliance.

ramana · Post by **ramana** » 17 Jan 2009 01:36

He was talking about the hand tools industry. The shops had quite a few machine tools and presses. Some 10K crores capital was tied up in the industry. The commentator said a lot of other exports were on the freeze.

Might want to monitor Chandigarh Tribune etc.

svinayak · Post by **svinayak** » 17 Jan 2009 07:43

Some Indian newa paper was quoted by that if things dont improve then 10m jobs will be lost

Akshut · Post by **Akshut** » 17 Jan 2009 21:42

Acharya wrote:Some Indian newa paper was quoted by that if things dont improve then 10m jobs will be lost

I dont think it would have included indirect job losses, with these jobs. I also read in The Tribune today that BPOs are shifting to south-east nations like phillipines because of 'post-Mumbai attacks unsfe businees enviornment'

and poor infrastructure

.

Katare · Post by **Katare** » 18 Jan 2009 01:59

Some of the impact on employment and exports is manufactured to get better bailouts from govt. Although the situation is much worse than what it was last year.

Yogi_G · Post by **Yogi_G** » 18 Jan 2009 06:20

X-Posting, thanks to Kakkaji for the link,

Fake notes real problem

169,000 crores in the market and inflation is still under control...Is this an indicator of Indian economic resilience?

http://en.wikipedia.org/wiki/Counterfei ... on_society

Singha · Post by **Singha** » 18 Jan 2009 23:02

about the only safe haven appears to be Govt and PSU jobs this year.

I visited a few offices in guwahati this week to pay land taxes, municipal taxes and so on. these gents were friendly, helpful, had a light workload and didnt look at all stressed out or even aware of the farm being on fire.

Anabhaya · Post by **Anabhaya** » 19 Jan 2009 02:07

Akshut wrote:
Acharya wrote:Some Indian newa paper was quoted by that if things dont improve then 10m jobs will be lost
I dont think it would have included indirect job losses, with these jobs. I also read in The Tribune today that BPOs are shifting to south-east nations like phillipines because of 'post-Mumbai attacks unsfe businees enviornment' and poor infrastructure .

I'm aware of atleast one Credit Card company that has shifted to Phillipines. Earlier calls from UK were routed to Bangalore now its Phillipines.

John Snow · Post by **John Snow** » 19 Jan 2009 02:18

Akshut wrote:
Acharya wrote:
Some Indian newa paper was quoted by that if things dont improve then 10m jobs will be lost

I dont think it would have included indirect job losses, with these jobs. I also read in The Tribune today that BPOs are shifting to south-east nations like phillipines because of 'post-Mumbai attacks unsfe businees enviornment' and poor infrastructure .

I'm aware of atleast one Credit Card company that has shifted to Phillipines. Earlier calls from UK were routed to Bangalore now its Phillipines.
Akshut wrote: I dont think it would have included indirect job losses, with these jobs. I also read in The Tribune today that BPOs are shifting to south-east nations like phillipines because of 'post-Mumbai attacks unsfe businees enviornment' and poor infrastructure .
I'm aware of atleast one Credit Card company that has shifted to Phillipines. Earlier calls from UK were routed to Bangalore now its Phillipines.

War is expensive did I hear some one say?
This why it is expensive not to wage war!

svinayak · Post by **svinayak** » 19 Jan 2009 13:27

http://economictimes.indiatimes.com/Ind ... 997114.cms

India will have 85-90 mn jobs across sectors: HR experts
18 Jan 2009, 1524 hrs IST, IANS
NEW DELHI: The "India Shining" story may be under stress by the ongoing economic crisis, but some sectors and career options still hold promise
for job seekers this year, according to human resource experts.

Leading advisory Boston Consulting Group says India will have a demand for 85-90 million people across various sectors, and the majority of the demand will come from high-growth industries like IT, outsourcing, banking, retail and healthcare.

Similarly, a survey by HR consultancy Manpower projects hiring to rise steadily by around 18 per cent from this quarter in many sectors, signifying that jobs in India may not be entirely affected by the financial turmoil in rich nations.

"India poses a far more positive outlook as compared to what has been happening across the world," said Cherian Kuruvila, director operations, Manpower India, adding that seven per cent gross domestic product (GDP) growth for the country showed that the economy remained healthy.

"Employers in the mining and construction industries as also services sector are especially looking to scale up," Kuruvila said, but added that new jobs won't be distributed evenly through all regions and industries.

India has a work force of 484 million people, of which 273 million work in rural areas, 61 million in manufacturing and about 150 million in services, says the Boston Consulting Group that recently conducted a study on the country's services sector.

"Going forward, the Indian economy is likely to be overwhelmingly dependent on the growth of services. More than 70 per cent of India's incremental GDP and 60 per cent of new jobs over the next five years are expected to be generated by services."

Also Read
→ Nearly one lakh jobs evaporate in Jan, still counting
→ India Inc improves capital productivity by 36%
→ Post-Satyam, caution rules Job Street
→ Universities offer fat salaries to IIT grads

A survey across the Asia-Pacific region by TNS, a market research and business analysis firm, with Gallup International, a global human resource consulting firm, also threw up interesting findings.

Sixty-two per cent of the Indians polled felt they would be able to hold on to their jobs in 2009 and the 57 per cent who expected unemployment to rise did not not consider they would be the ones affected.

"It seems, despite the slowdowns and reports of downsizing, there is an overall confidence among the employed in India that 'My job is secure! Difficulties, if any, are for others, not me'," said TNS India executive director Chhavi Bhargava.

Experts concede that the present financial meltdown has raised doubts over the performance of some industries and its impact on salaries and perks, but hope Indian businesses will come out of the slump earlier than their counterparts overseas.

"The impact on salary was felt in 2008 and it may continue till some time. The payouts were significantly lower than the 15-200 per cent bonus payouts in 2007," said Absolute HR Services chief executive Kunal Banerji.

"Gone are the days of experimentation with jobs. I would advise employees not to be adventurous checking different jobs. Stability is the mantra," said Confiar Consultants managing director Vivek Ahuja.

Apart from advising employees to keep their jobs this year, HR consultants also feel these are also the times when people will turn to age old values and ethics and play by the book.

"The old adages like no substitute for hard work and no short-cuts to success are back in vogue," Banerji said. "Stay hungry for work or stay hungry is the mantra for corporate India."

Singha · Post by **Singha** » 19 Jan 2009 13:41

as per a small article in The Week mag, the salary expectations this year of iim grads has come down from 60L/pa to 14L/pa.

the 60L/pa imo is probably skewed because far more of grads last year were expecting foreign placement and quoted the dollar value converted to rupees perhaps. I doubt anyone but a tiny minority with 0-4 yrs exp which fits most iim grads gets 60L/pa locally

Dileep · Post by **Dileep** » 19 Jan 2009 15:00

The MBA salary stats could not be represented by none of min, max or avg. The median is the only valid stat.

Vipul · Post by **Vipul** » 19 Jan 2009 22:47

Yogi_G wrote:X-Posting, thanks to Kakkaji for the link,

Fake notes real problem

169,000 crores in the market and inflation is still under control...Is this an indicator of Indian economic resilience?

http://en.wikipedia.org/wiki/Counterfei ... on_society

No way can such a huge amount not cause any disruption.The GOI may have factored in the extent of the fake notes in the system and may have accordingly printed less official ones.

krishnan · Post by **krishnan** » 20 Jan 2009 11:08

For the past few months have been coming across lots of fake notes incidents, all of them 1000 rupee notes.

Satya_anveshi · Post by **Satya_anveshi** » 20 Jan 2009 11:26

krishnan wrote:For the past few months have been coming across lots of fake notes incidents, all of them 1000 rupee notes.

Time to cancel them and introduce new 10,000, which should again be cancelled after an year or two.

The only once that will stay longer course should be 50's, 100's (not even 500's). Even these notes should change colors every couple years so bank employees and people can easily identify (for example, if one sees new and fresh notes but with old models).

Singha · Post by **Singha** » 20 Jan 2009 11:40

has anyone renewed a indian passport recently? is it still a handwritten old thing with no security features bar the UV lamp thing?

amirkhan has embedded a chip inside the cover and the whole fit n finish thing is far superior. lots of countries also machine print their passports and have many security features.

periodically I hear reports of 100s of blank passports being stolen
from RPOs...obviously with inside help...

Nitesh · Post by **Nitesh** » 20 Jan 2009 12:06

India will have 85-90 mn jobs across sectors: HR experts

Sachin · Post by **Sachin** » 20 Jan 2009 12:11

Singha wrote:has anyone renewed a indian passport recently? is it still a handwritten old thing with no security features bar the UV lamp thing?

Renewed in the year 2006. The new passport has all details typed in. Even the photograph seems to have been printed (instead of pasted) onto the front page. I could also see words like P>>>>>FIRSTNAME>>>LASTNAME>> type stuff printed on the front page. It looks very similar to what is printed on a US VISA (in my old passport).

periodically I hear reports of 100s of blank passports being stolen
from RPOs...obviously with inside help...

There was also case when a whole series of passports were stolen from our embassy in a middle east country. Remember notices appearing in papers asking the people who hold such passports to surrender them, and get new one issued. Perhaps this was also a trap to catch trouble-mongers who may have got these passports illegally from the embassy.

BTW, in South I guess "Kasargode Embassy" had the dubious record of issuing the maximum number of fake passports. This small town in Kerala, does not have any "official" embassy but the criminals there make a lot of fake passports. This is then shipped to middle eastern countries where folks use it to come back to India.

Suraj · Post by **Suraj** » 20 Jan 2009 14:06

India May Lift Wheat, Rice Futures Ban on Record Crop

India, the world’s second-largest grower of rice and wheat, may next month lift a two-year ban on futures trading in the cereals as record harvests cool domestic food prices.

The Forward Markets Commission, the market regulator, will write to the federal government seeking an end to the curbs by tomorrow, Chairman B.C. Khatua said in an interview yesterday.

Resuming trading may help the National Commodity & Derivatives Exchange Ltd., partly owned by Goldman Sachs Group Inc., to stem a decline in the turnover of agricultural goods. Prime Minister Manmohan Singh’s government in December lifted a seven-month ban on trading rubber, soybean oil, potatoes and chickpeas after inflation halved from a 16-year high in August.

bharat_r · Post by **bharat_r** » 21 Jan 2009 02:13

The Indian economy is most likely to suffer really badly in this year. As per Arun Nehru, former cabinet minister, it would be a miracle if we were to achieve growth rate of 5%. However, the mainstream media is not questioning the govt about their absurd claim of 6 to 7% growth.

There is no doubt that the pro-congress elements dominate our media and most Indians do not know both side of the picture due to censorship. To counter liberal Indian media, we have started a website

http://www.bharatright.com

This website provides links to nationalist articles published in various newspapers. All the items in website appear as hyperlinks and a summary of article is provided just under the article header. We also pick up liberal opinions and compare with nationalist opinion, so readers can compare both the views and reach their decision. The articles are updated on a daily basis. The headline news stories are updated every 30 minutes.

Suraj · Post by **Suraj** » 21 Jan 2009 02:53

Why does Arun Nehru have particular credibility ? The GDP growth during the first half of this fiscal year was 7.8% . To grow at 5% for the full year, GDP must grow at 2.2% for the second half of the year. Please provide data to back that up - i.e. supportive agricultural, manufacturing and services growth rate estimates for Q3 and Q4 . Despite stagnant exports (which grew in Rupee terms), we have positive domestic industrial growth that is once again increasing on a month to month basis, a robust services sector performance, topped off by a record rabi crop season in agriculture. I would be very interested in seeing how all that adds up to cumulatively just 2.2% GDP growth in the second half of the year! Not saying it can't happen, but it takes something more than 'XYZ said so' to give it any weight.

Suraj · Post by **Suraj** » 21 Jan 2009 03:26

GST structure, rates to be finalised today

The Centre and states have agreed that both will tax all goods and services under the dual GST model, which will have a state GST rate and a central GST rate. The Constitution will be amended to enable states to tax services.

The revenue-neutral rates will be determined after estimating the revenue loss to states in implementing the GST and their additional income from taxing services.

While the tax rates will be the same for goods and services, there could be two slabs both in central and state set-ups. It means there could be one standard rate for general category of goods and services and a lower rate for goods and services (like medicines) which have social importance.

The combined GST rate (state and central) will be around 20 per cent. It is likely that the standard central GST rate could be 11-12 per cent, while the state GST rate could be 8-9 per cent, sources said.

The combined GST rate under the lower slab could be in the range of 6-8 per cent. GST will subsume central excise, service tax, state sales tax and central sales tax with a few exceptions. The basket of petroleum products will be kept outside the GST regime for the time being and a final call on it will be taken later.

Surjit Bhalla asserts the need to lower interest rates. Interesting statements in italics; one reason GoI is loath to reduce interest rates is retirees and other folks dependent on fixed income securities. Bhalla backs up his argument with copious data and past references:
Surjit Bhalla: Lazy banking at its finest

Some years ago, RBI Deputy Governor Rakesh Mohan opined that Indian banks were engaged in “lazy banking”. At that time I disagreed because I felt that banks will do whatever is most profitable and if laziness meant making outsized profits by parking their money in safe deposits of government securities, then they will do so. Today, many years later, the banks are still practising lazy banking, but their behaviour can change if the RBI plays a positive role. If the repo rate is reduced to 3 per cent (as it should), deposit rates can be expected to reach 4.5 per cent. With a healthy 300 basis point spread, lending rates can approach 7.5 per cent, a historical low.

As I have documented in the past, there is a curious aspect to the Indian economic System (defined as commentators, policy makers, and academicians). The System systematically thinks in a skewed fashion, and unlike any other System in the world. In particular, it is trigger happy to bring the economy to a screeching halt by raising interest rates, but asleep at the wheel when the economy is in desperate shape — e.g. confidence at historic lows, industrial growth at zero, and exports diving over a cliff.

With this asymmetry in mind, I want to make two points. First, that with growth and inflation rates far below the RBI’s target and expectations, the time is appropriate to bring monetary policy into sync with reality. Second, the fear of the System that non-policy rates, in particular deposit rates, are sticky downwards appears to have little, if any, empirical foundation.

Some facts: GDP growth has slowed down to somewhere around the 6 per cent range for the October-December 2008 quarter. This is considerably below all estimates of non-inflationary growth. Second, WPI inflation for this fiscal year has averaged just 2.8 per cent on an unadjusted basis, and 2.1 per cent on a seasonally adjusted (SA) basis. For the last 6 months the SA annualised rate of price inflation is minus 4.9 per cent. If the historical relationship between the CPI, WPI and GDP deflator holds, then the GDP deflator should average around minus 3.7 per cent for the last quarter.

But the System, including leading bankers, cries out: Why should the government reduce interest rates, there is already so much liquidity sloshing around. But there are two aspects to “liquidity” — quantity and price. While bankers have liquidity, the same cannot be said of the borrowers. For two reasons — first, given the reluctance of banks to lend, the borrowers are starved of funds at the prevailing (high) price of money. In addition, there is a long queue of borrowers for whom borrowing, and investing, would become more viable if interest rates were to be reduced from the astronomical (real) levels now prevailing in India.

The System counters with its second line of defence. We cannot reduce interest rates because the rupee will be under attack. Possible, but again counter to reality. The level of the rupee is affected by several factors only one of which is the interest rate differential with the US. In any case, the difference in savings deposit rates between the US and India increased markedly in recent months, and at the same time the rupee depreciated by some 20 per cent!

The System, like a leech, never wants to let go. So in recent weeks, it has started arguing that it is of no use to reduce policy rates (the repo and reverse repo) because such reduction will have a near-zero impact on the deposit rate. If the deposit rate cannot be lowered, lending rates cannot be lowered. And why can’t the deposit rate be lowered? Because deposit rates are linked to “small savings” rates in the economy, rates that are politically controlled. With elections looming, it will be suicidal for the government to reduce deposit rates for widows and orphans.

The logic of the System’s argument is that if higher deposit rates are available with small savings deposits (SSD), the public will move their commercial bank deposits en masse to SSD.

There are four realities which need to have occurred in the past in order for the System’s forecast of large movement to be even approximately correct. First, SSD should be a large part of total deposits. Latest estimates suggest that, at Rs 129,000 crore, small savings deposits are less than 15 per cent of total (bank + SSD) deposits. Second, the share of SSD deposits peaked at 26.6 per cent in 1999. Third, rates on commercial bank deposits declined by 400 basis points during 2001 to 2005, a period during which small savings deposits share also declined by 4 percentage points — from 26.2 of the total to 22.9 per cent. Fourth, the segment within small savings that carries the lowest rate of interest (Post Office time deposit rates today are 6.875 per cent) is also the segment with the highest deposits — about 40 per cent of total SSD. Further, this segment has shown a rate of growth of 19 per cent between 2000 and 2008 compared to only a growth of 9 per cent for all small savings deposits. Yeh to ulti ganga beh rahi hai. Where can we expect deposit rates to go if the RBI aligns with reality and reduces the repo rate to 3 per cent? The System has given all kinds of reasons for the deposit rates not going any further down from the elevated levels of 8.25 per cent at present. Yet, three different methods, based on Indian experience over the last decade, suggest that the deposit rate can be expected to go down to 4 per cent with the repo at 3 per cent.

Power sector ties up Rs 2,24,000 cr ($45 billion) financing

The power sector has tied up Rs 2,24,000 crore worth of investments to build power plants with 70,000 Mw aggregate capacity in the next three years at a time the global economy is reeling under liquidity crunch, according to Power Minister Sushil Kumar Shinde.

Shinde told Business Standard that the country had added 12,000 Mw capacity at an investment of Rs 48,000 crore in the 11th Five-Year Plan (2007-12) so far and tied up funds to complete the projects under execution.

“Theoretically, the impact of the downturn will reflect on all sectors. Since the power generation business is booming in the country, we manage to get funds for fresh projects. About 70,000 Mw is under execution now, which will help us achieve the targetted 90,000 Mw capacity addition under the five-year Plan,” Shinde said.

However, Ernst & Young (E&Y), in its January report, said the investment in the power sector, including generation, transmission and distribution, would be half the earlier estimate of $200 billion (approximately Rs 9,83,026 crore). “The government is expected to curtail its investment in the power sector due to the global financial crisis. The investment during the 11th Plan period is now expected to be $100 billion (about Rs 4,91,304 crore),” the report said.

vsudhir · Post by **vsudhir** » 21 Jan 2009 03:29

I agree.

Indian economy should easily clock 5% for the whole year and will likely cross that figure next FY too w/o breaking a sweat.

With global demand collapsing, sector after sector is left holding the can with rampant overcapacity. Cost pressures, shutdowns, write-offs and layoffs will get brutal in the months to come, I fear. Good that we didn't rush into too many FTA type stuff with the likes of ASEAN coz we'd have these worthies trying to export their way out of the crisis by dumnping goods on India. Indian demand should remain healthy, relatively speaking, though.

This is the time to splurge massively on physical and service infrastructure - roads, ports, power, univs, mega-hospitals. At least GOI could get out of the way and let the more progressive states leap fwd.

ramana · Post by **ramana** » 21 Jan 2009 04:56

Suraj, If we take the $ and convert it to rupee and then compare the interest rates how do they fare?

Thanks, ramana

Suraj · Post by **Suraj** » 21 Jan 2009 05:04

Are you referring to deposit rate arbitraging ? NRE or NRO accounts ? Current average US 1-yr CD is ~2.4% . NRE FDs are ~3.75%, while NRO (non repatriable) FDs are ~8.25%.

Vipul · Post by **Vipul** » 21 Jan 2009 20:50

Suraj wrote:GST structure, rates to be finalised today

GST may not exceed 16 per cent.

vsudhir · Post by **vsudhir** » 26 Jan 2009 05:27

Slightly dated (13-jan-09), and tries hard to spin attitude... but worth a quick scan perhaps.

Barron's: Why India won't rebound soon

I love narcissism. Just hard for me to be as bearish on a country where the elite 0.01% have not convinced everyone that regulation is so evil - even when their dogma brings epic bubbles and crashes every 4-6 years now [Dec 28: New York Times - How India Avoided the Crisis] and a place where American corporations are quitely sending more and more jobs, and not just IT anymore folk - we're cutting financial services in NYC but not India [Aug 15: New York Times - Cost Cutting in India but a Boom in India] Shhhh! Don't tell anyone - the same companies who gutted our financial system and are getting American tax dollars by the bucket are moving well paying (read: expensive) US jobs overseas by the thousands - and have been for a few years - shhh; just between you and I. A lot of that Wall Street research is really written by Mr. Patel or Shah now. Just keep repeating the line "it's only IT and call center jobs- nothing to worry about here" and hand over your wallet for more bailouts. Thank you for your cooperation.... oh yes, America will recover first so buy US stocks.

I am curious to see how much India can yin to the other BRIC's yang - going long Russia is effectively going long oil (and hoping the political heads do not get crazy), going long Brazil (commodities) is a proxy play on China, and going long China is ... well obvious. Hence why India will be interesting to see if it can disassociate from the rest - doubtful. HAL9000 trades them all as one country it appears... the broader ETFs for India look like every darn foreign stock - this is what truly stinks about this market - the robots simply make no differentiation from one thing to the next; it is all horde trading. I could put 50 other foreign company stock charts and overlay on these broad market Indian ETFs and they'd all look identical; no matter the individual countries or business metrics.

A more professional and sobered outlook here:

Investing in India in 2009

vsudhir · Post by **vsudhir** » 27 Jan 2009 01:12

RBI admits Indian economy is slowing down

Very confusing report with DDMitis swalloing the difference between the 'real sector' and the 'real estate sector' in the Indian economy. The former IMO refers to the nonfinancial sector of the economy while the latter ==realty.

bharat_r · Post by **bharat_r** » 27 Jan 2009 02:47

And in the serious crisis that we are in, our country is run by our Foreign minister (Pranab M) as caretaker, with additional charge of Finance ministry as well!!!!

We think that MMS was culpable right upfront when he did not appoint someone else for Finance Minister when PC left for Home ministry. We are in middle of a economic and diplomatic crisis and UPA cannot find any other minister to share the load of Pranab M!!!

Worse, the media is keeping quiet about it. If NDA had done this, this would have been the breaking news on all channels.

Please stop advertising your website with each post.
This is your last warning.
Rahul.

vsudhir wrote:RBI admits Indian economy is slowing down

Very confusing report with DDMitis swalloing the difference between the 'real sector' and the 'real estate sector' in the Indian economy. The former IMO refers to the nonfinancial sector of the economy while the latter ==realty.

mnag · Post by **mnag** » 27 Jan 2009 10:37

one main thing which can help or hurt india's economic recovery in 2009 will be the elections. If the PMship falls under third front instead of Congress or BJP which seems most likely, there will be political instability until next elections which may happen in 2-3 years and this can hurt indias recovery.
We'll be shooting ourselves in the foot if we let the economic recovery opportunity due to moderation in inflation/lower commodity/oil prices and lower interest rates pass by and I hope the indian public doesnt let this scenario happen in this election.

vsudhir wrote:Slightly dated (13-jan-09), and tries hard to spin attitude... but worth a quick scan perhaps.

Barron's: Why India won't rebound soon
I love narcissism. Just hard for me to be as bearish on a country where the elite 0.01% have not convinced everyone that regulation is so evil - even when their dogma brings epic bubbles and crashes every 4-6 years now [Dec 28: New York Times - How India Avoided the Crisis] and a place where American corporations are quitely sending more and more jobs, and not just IT anymore folk - we're cutting financial services in NYC but not India [Aug 15: New York Times - Cost Cutting in India but a Boom in India] Shhhh! Don't tell anyone - the same companies who gutted our financial system and are getting American tax dollars by the bucket are moving well paying (read: expensive) US jobs overseas by the thousands - and have been for a few years - shhh; just between you and I. A lot of that Wall Street research is really written by Mr. Patel or Shah now. Just keep repeating the line "it's only IT and call center jobs- nothing to worry about here" and hand over your wallet for more bailouts. Thank you for your cooperation.... oh yes, America will recover first so buy US stocks.

I am curious to see how much India can yin to the other BRIC's yang - going long Russia is effectively going long oil (and hoping the political heads do not get crazy), going long Brazil (commodities) is a proxy play on China, and going long China is ... well obvious. Hence why India will be interesting to see if it can disassociate from the rest - doubtful. HAL9000 trades them all as one country it appears... the broader ETFs for India look like every darn foreign stock - this is what truly stinks about this market - the robots simply make no differentiation from one thing to the next; it is all horde trading. I could put 50 other foreign company stock charts and overlay on these broad market Indian ETFs and they'd all look identical; no matter the individual countries or business metrics.
A more professional and sobered outlook here:

Investing in India in 2009

shaardula · Post by **shaardula** » 27 Jan 2009 11:07

vina saar. noted. will get back later. no mood for geeky stuff right now.

vina · Post by **vina** » 27 Jan 2009 12:04

vsudhir wrote:seriously, Joka has a 'MIT incubated' reputation to live upto and with ISI located int he same city (faculty sometimes shared) the numbers game there can get heady.....

Yup. SHQ has "Pee Yechh Dee" from that place onree. I pull her legs by calling her and her class mates IIM "Jokahs"

.

Of course SHQ retorts that "You couldnt get in there, and that is why you had to go to a Phoren University and is a question of sour grapes..

".

vsudhir · Post by **vsudhir** » 29 Jan 2009 01:35

India Today Economist panel debates where India's headed

Worthwhile read, IMO. Have always liked Debroy's uprightness and Subir Gokarn's insights.

Bibek Debroy: It depends entirely on how you define bad. The trend has been close to 9 per cent and we are talking about less than 7 per cent this year and 6 per cent next year. So, effectively we are down from 9 per cent to 6 per cent and that, I would say, is bad.

Subir Gokarn: The current quarter is actually reflecting the worst possible combination of both global and domestic drivers of slowdown. At the moment, the macro conditions have changed, inflation has come down, and we see influx of liquidity into the system. It is not yet passing into the market but I think it is a matter of time. I certainly see the first half as a very negative scenario and a turnaround after that.

But an interesting snippet from Suma Bery reminded me of a debate in these threads not long ago:

Suman Bery: There are the known knowns and known unknowns. Known and unknown actually operate on the demand side of the economy. There is a lot of stress in the economy, both domestic and external. We see hope in the second half of 2009-10 and growth at around 7 per cent.

Wasn't someone here arguing it is the supply side that remains the bottleneck to India's growth story and that interest rates and policy barriers need to go down much more to help free up capacity expansion across sectors? Now it is demand that turns out to be the bottleneck. Anyways, the bad times are the good ones to invest beforehand while waiting for good times to return.

ANyway, more reknowned personalities and more distilled wisdom...

Ajit Ranade: In the global context, it is not bad. In the context of our expectation and aspiration, it is somewhat grim. We would grow at, say, 6 per cent next year but there are lots of positives. India has a history of being wise in a crisis, so I would like to bet on it. So next year will be okay.

Siddhartha Roy: The first positive we must record is that we have a problem and the policymakers are not indifferent. Certain steps have been taken which will possibly have a delayed impact. I agree with Ajit that next two or three quarters will be difficult but things will look up after that.

Rajiv Kumar: A lot of people are surprised that our worst case forecast for the first half of 2009-10 is 3.9 per cent. When we said 5.9 per cent for 2008-09, a lot of people were sceptical. I am now hearing 6 to 6.5 per cent for this year.

This means GDP growth for the second half of 2008-09 will be around 5 to 5.5 per cent (down from 7.8 for the first half). Ours was a statistical exercise where we factored in the impact of external shocks and figured out that the first half growth would be down to 4 per cent and that is not incompatible with the 5 per cent 2008-09 second half forecasts.

I think a lot of us have failed to figure out the actual impact of the global downturn on the basis that net exports contribute only a negative 3 or 4 per cent to our growth. The fact is that multiplier effect of our exports is very large. There is astimulus package in place but our capacity to deliver is poor as is evidenced in the slow progress of the highways project.

Monetary policies will take six to eight months to show results. Then how bad is global downturn? Everywhere I hear the US could be in recession longer than ever before. Then there is the China factor. If China pushes implodes in a positive way and pushes exports, we would be lucky to have a growth of 5 per cent. And we should be prepared.

Yup. Crisis would be an opportunity simply because it is only crisis that forces old status quos to give way. Without the near bankruptcy we faced in 1990, the '91 reforms may never have happened onlee.

ramana · Post by **ramana** » 29 Jan 2009 02:43

the IMF guys were forecasting 3% global growth next year ie 2009. they said it was 1/2 % last quarter. Will take till 2010 to recover. Meanwhile lie low and be safe.

svinayak · Post by **svinayak** » 29 Jan 2009 04:15

Fed Keeps Rate Near Zero, Prepared to Buy Treasuries (Update4)
http://www.bloomberg.com/apps/news?pid= ... refer=home
By Craig Torres

Jan. 28 (Bloomberg) -- The Federal Reserve left the benchmark interest rate as low as zero, said it’s prepared to purchase Treasury securities to resuscitate lending and warned inflation may recede too quickly.

The Fed is “prepared to purchase longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets,” the Federal Open Market Committee said in a statement after meeting in Washington.

Chairman Ben S. Bernanke, by making emergency credit programs rather than rates the focus of policy, is quelling some of the panic in markets while failing to revive growth. Falling home prices, rising unemployment and more than $1 trillion in losses and writedowns at global financial institutions are deepening the longest recession since the 1980s.

“The focus of the committee’s policy is to support the functioning of financial markets and stimulate the economy through open market operations and other measures that are likely to keep the size of the Federal Reserve’s balance sheet at a high level,” the Fed said in the statement.

Treasury notes declined after the Fed stopped short of announcing it would begin the purchases. The yield on the benchmark 10-year note climbed about 15 basis points to 2.69 percent at 3:08 p.m. in New York. Stocks rose, with the Standard & Poor’s 500 Index increasing 3.1 percent to 872 in New York.

Too Little Inflation

The Fed said there is a risk that inflation could fall too low. “The committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term,” the statement said.

The Fed’s preferred inflation gauge, the personal consumption expenditures price index, excluding food and energy, may rise just 0.78 percent this year, according to Macroeconomic Advisers LLC in St. Louis. That’s about 1 point below the preference range that policy makers signaled in their third-year forecasts in January 2008.

“Deflation is an increased worry,” said William Ford, a former Atlanta Fed chief who’s now at Middle Tennessee State University in Murfreesboro. “They have switched from worrying about inflation to being focused on deflation. It is the first time they have talked about that in a straightforward way.”

Richmond Federal Reserve Bank President Jeffrey Lacker dissented from today’s decision. He preferred to expand the “monetary base at this time by buying Treasuries rather than through targeted credit programs.”

The central bank also said it’s ready to expand the quantity of its purchases of mortgage-backed securities and agency bonds and lengthen the program “as conditions warrant.”

Extending Strategy

The purchase of Treasuries would extend the Fed strategy of using its balance sheet to reduce borrowing costs. The new program may benefit several types of borrowers, because long-term government bond yields influence interest rates on mortgages, corporate bonds and municipal debt.

The Fed would also be lowering federal financing costs as the government ramps up deficit spending. Treasuries declined 1.6 percent this month, the worst monthly return since April, eroding a 14 percent gain in 2008 that was the most in 13 years, Merrill Lynch & Co. indexes show.

Investors are anticipating a large increase in the supply of debt to help finance President Barack Obama’s fiscal stimulus plan, which administration officials estimate at $825 billion.

The risk is that turning government deficits into money can spur an increase in prices.

‘Inflation Risk’

“There is a lot of concern the Fed balance sheet has risen so quickly and so much and it creates an inflation risk down the road,” said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, and a former congressional staff economist.

The Fed clashed with the Treasury in the 1950s by reasserting its independence as an inflation fighter after helping the government finance the costs of World War II.

“The Fed should have an accord by which it has some push- back capacity,” former Richmond Fed policy adviser Marvin Goodfriend said before the announcement.

“It is the exit strategy that you have to worry about to make this policy credible,” said Goodfriend, a professor at the Tepper School of Business at Carnegie Mellon University in Pittsburgh.

The Fed’s assets have grown by $1 trillion over the past year under credit programs ranging from $416 billion in term loans to banks to purchases of $350 billion in commercial paper issued by U.S. corporations. The balance sheet will continue to grow under plans announced by the central bank.

Fed ‘Mission’

“The Fed has pulled out all the stops,” Paul McCulley, a managing director and fund manager at Pacific Investment Management Co. in Newport Beach, California, said in an interview before the announcement. “The Fed’s mission has to be to bring down private-sector borrowing rates.”

Bernanke, a scholar of the Great Depression, criticized the Fed in December for failing to stop bank failures that inflamed panic in financial markets during the 1930s. The former Princeton University economist views financial stability as a prerequisite for an economic recovery.

The Fed Board has supported bailouts of Bank of America Corp. and Citigroup Inc. by offering a layer of protection against losses on troubled assets. The Federal Deposit Insurance Corp. and U.S. Treasury also back the rescues.

“For now, the goal of policy must be to support financial markets and the economy,” Bernanke said at the Dec. 1 speech in Austin, Texas.

Excess Reserves

The Fed announced Nov. 25 that it would buy $600 billion in housing agency bonds and mortgage-backed securities they guarantee. The bond purchases will expand money in the banking system. Excess bank reserves averaged $843 billion in the first two weeks of January, an increase from $1.64 billion for the same month a year earlier.

Next month, the Fed plans to launch the $200 billion Term Asset-Backed Securities Loan Facility, which will buy bonds backed by newly issued consumer and small-business loans. The program can be expanded to include other assets.

There are some signs that the Fed’s action has begun to thaw credit markets. Sales of commercial paper totaled $1.69 trillion last week, up from October’s low of $1.45 trillion, though down from $1.76 trillion in the first week of the year.

The cost of borrowing dollars in London for three months rose to a two-week high this week as confidence in the banking system weakened. The London interbank offered rate, or Libor, for three-month loans slipped 1 basis point to 1.17 percent today, according to British Bankers’ Association data.

Libor Surged

Libor had surged to 4.82 percent on Oct. 10 as credit froze following the bankruptcy of Lehman Brothers Holdings Inc. The TED spread, the difference between what the U.S. government and companies pay for loans for three months, was unchanged at 105 basis points. The spread was 464 basis points on Oct. 10.

U.S. employers slashed 2.6 million jobs last year, the most since 1945, pushing the unemployment rate up to 7.2 percent in December. Home prices in 20 U.S. cities declined by 18.2 percent in November from a year earlier, the fastest drop on record, according to the S&P/Case-Shiller index.

Gross domestic product probably contracted at a 5 percent annual rate from October through December, the biggest drop since 1982, according to the median estimate in a Bloomberg News survey ahead of Commerce Department figures due on Jan. 30.

To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net
Last Updated: January 28, 2009 15:55 EST

SwamyG · Post by **SwamyG** » 29 Jan 2009 04:29

TVS group of companies. Another group that is a chip off the old block. You can trust them with your life's savings. How many folks will you do that with ?

I remember the Sundaram Finance calender hanging on the walls of several houses, when Chit companies were falling crazy in Madras.