Indian Economy: News and Discussion (June 8 2008)

Chandragupta · Post by **Chandragupta** » 23 Dec 2008 15:21

Sometime ago, the media were reporting that Swiss Bank officials had offered to share the details of the accounts to the countries that required them. There was also this talk of $1.4 Trillion stashed away in Swiss Banks by corrupt Indians. Was there any credibility to this news? Also, what needs to be done to get this money back to India, can the judiciary act?

Avinash R · Post by **Avinash R** » 23 Dec 2008 17:41

'Indian economy remains second fastest growing in the world'
Tuesday 23 December, 2008

The Indian economy continues to remain the second-fastest growing economy in the world, a top economist said.

"India's economic fundamentals are quite robust and its economy remains the second-fastest growing one in the world," the Prime Minister's Economic Advisory Council's Chairman Suresh Tendulkar told reporters in Mumbai on Tuesday.

India was not experiencing a recession as other advanced economies and its economy would not be affected to the same extent as some other emerging Asian economies, he said.

On MSMEs, Tendulkar said that the present economic slowdown would test the strength of the sector.

"Rising interest rates in the recent past has further accentuated the credit crunch for MSME entrepreneurs," he added.

According to him, the financial meltdown in advanced economies "has been very serious".

"The depth of recession in advanced countries has been greater than anticipated a few months back," Tendulkar said, adding that export-linked sectors in India "are bound to be affected much more than anticipated earlier owing to the depth of recession in advanced economies".

He described the foreign exchange reserve position in the country as "comfortable" despite FII outflows causing some depletion.

The current account deficit, would be well within limits, but it might be wider than in the earlier years, he said.

Yogi_G · Post by **Yogi_G** » 24 Dec 2008 10:13

The total external debt at ~200 billion $$ is quite close to our foreign resrves of around 230-240 billion $$.....Is this something we should worry about ???

Suraj · Post by **Suraj** » 24 Dec 2008 10:20

Most of the short term hot capital has already exited, so the ratio between external debt and forex reserves isn't necessarily worrisome. The falling crude prices and weak Rupee provides us a good opportunity to achieve a current account surplus that would widen the gap between forex reserves and foreign debt.

Yogi_G · Post by **Yogi_G** » 24 Dec 2008 10:33

Suraj wrote:Most of the short term hot capital has already exited, so the ratio between external debt and forex reserves isn't necessarily worrisome. The falling crude prices and weak Rupee provides us a good opportunity to achieve a current account surplus that would widen the gap between forex reserves and foreign debt.

True but what worries me most is slowdown in industrial growth, if that translates to lower exports then we may still have something to worry about in terms of a current account deficit...

Suraj · Post by **Suraj** » 26 Dec 2008 13:42

Inflation eases further to 6.61%

Wholesale prices increased 6.61 percent in the week to Dec. 13 from a year earlier after gaining 6.84 percent the previous week, the commerce ministry said in New Delhi today. That matched the median estimate of 17 economists surveyed by Bloomberg News.

Inflation in India has fallen below the central bank’s 7 percent fiscal year-end target amid lower fuel costs. Easing prices may allow central bank Governor Duvvuri Subbarao to cut interest rates for the fourth time in two months and implement the “aggressive monetary policy” the finance ministry says the country needs to support growth.

“The declining inflation trend will continue and that gives the Reserve Bank of India enough legroom to cut borrowing costs,” said Prasanna Ananthasubramaniam, an analyst in Mumbai at ICICI Securities Ltd. “A further cut in rates will help minimize the downside risks to growth and restore confidence in the markets.”

Bonds rose after the inflation report. The yield on the 8.24 percent note due April 2018 fell one basis point to 5.55 percent in Mumbai.

Inflation is likely to slow to 5 percent by the end of March, Arvind Virmani, the finance ministry’s top economist, said this week.

Vipul · Post by **Vipul** » 26 Dec 2008 20:20

Forex reserves up $3.6 bn at $254.05 bn.

Yogi_G · Post by **Yogi_G** » 26 Dec 2008 22:29

India may miss $200 bn export target

http://profit.ndtv.com/2008/12/26185314 ... xport.html

Katare · Post by **Katare** » 27 Dec 2008 12:44

VY Reddy and his RBI have again and decisively destroyed the NDA enabled economic take off. It seems RBI learned nothing from previous cycle when it destroyed MMS led take off of early 90s by raising rates and choking money supply to productive sectors.

Suraj and I besides many others have posted several articles from all over the media with our own analysis clearly showing that inflation in India was not due to excess demand but because of supply constraints, global issues and natural causes like draughts etc in several parts of the world. Monetary policy could have done precious little to control or contain this kind of inflation but he didn't listen. Played by the book written in 18th century or felt important terrorizing entire economy.

Interest rates harden almost instantly in response to policy rate increase but rates soften much slower and with significant time leg when policy rates are lowered. I hope new governor would ease money supply faster and bring down the cost of credit before panic sets in (so far he has moved much faster than the old far^t Reddy).

vina · Post by **vina** » 27 Dec 2008 18:39

Dude Katare.. Y V Reddy saved the collective a** of this country. The way the Sensex at 25K boosters were going Rah Rah.. despite ol Vina going wooot wooot here with the alarm call, the entire country would have been caught with their pants down and everyone here would have had their sorry a**es whupped so badly that it would have been a bloody mess of huge welts and hurting so badly that most folks wouldn't have been able to sit on it properly for a long time.

Mind you the boosters were going Rah Rah, even when oil was above $100 a barrel (as of around this time last year.. short memories huh ?.. I remember coz, I was talking about this with my Prof in a meeting in Mumbai in early Jan and was telling him about how economic reforms made such a big difference that no one was even talking about it in the middle of an oil shock, while around a decade and a half ago, in an exactly similar oil shock, the country collapsed economically) and the price increase was not even passed on to the consumer and the govt went for off balance sheet skulduggery.

YV Reddy left to himself would have acted early and the tightening up and easing up would have happened earlier and you would have lot more fiscal room for a stimulus. Because of the tussle with the Rah Rah boosters in the finance ministry and other business monkeys, you still have an "inflation problem", high real interest rates, massive fiscal imbalance and ZERO fiscal maneuver room and NO fiscal stimulus.

Atleast now, the govt is coming out and being honest and saying that the "stimulus" will be in the form of rate cuts..

Translation : The stimulus will be in the form of monetary policies and NOT fiscal policies because we have no capacity to borrow and spend.. We are leveraged to the hilt!

Katare · Post by **Katare** » 28 Dec 2008 03:07

Vina,

Reddy only screwed up stable economic growth exactly like many folks predicted his actions would do. A de ja vu from 1997. Stock market correction or oil/commodity melt down has nothing to do with Indian monetary policies, reasons for these are well understood now. The best he could have done is 'do little' or nothing but he chose otherwise. What has monetary tightening up has achieved? Give me a few examples where monetary tightening helped in any meaningful way. Food inflation came down because of the bumper crops, global commodities market softened because of recession in western economies which helped soften up inflation. Those were the two major component of Indian inflation. What didn't help was Reddy grinding industrial growth to below zero and making most infrastructure projects economically unviable. Now with Q3 advance taxes falling just when 6th pay commission is being implemented you can thank Reddy for, god forbid, "another failed take-off". No wonder he has been eased out of central bank unceremoniously.

You think like 50% drop in stock market is something earth shattering, If you look at dow history you would find that out of 8 down turns stocks drop on an average of ~40%. It is normal course of actions for stock markets, the weaker and shallower hands with little leverage fell off and suffering. Long to mid term investor (5+ year) in Indian sensex is still sitting on at least 300% growth. I don't think anyone should shed tears for speculators and gamblers loosing their shirts in stock markets. And yeah RBI has nothing to do with stock markets, it is meant to regulate Banking sector to find a balance between growth and inflation.

Rishirishi · Post by **Rishirishi** » 28 Dec 2008 03:54

1, 3 trillion Dollars

If Indian money is swiss Banks.

Imagine what that money could have done if inested into infrastructure.

http://economictimes.indiatimes.com/Mar ... 580223.cms

MUMBAI: In view of the unprecedented credit crisis faced by world markets, Reserve Bank of India on Friday further cut the cash reserve ratio by 100
basis points. This is in addition to the 50 bps cut announced on Oct 6. This takes the CRR to 7.5 per cent. The reduction in CRR comes into effect Saturday, Oct 11.

Earlier, the Securities and Exchange Board of India eased norms on participatory notes by scrapping the 40 per cent cap on value of assets held by foreign institutional investors. The move was aimed at redirecting the FII flows back into India.

According to the estimates, 30 per cent of the foreign institutional money coming to India is through P-notes.

But the decision may also attract money deposited by Indians in Swiss banks, according to market players.

Indian markets have corrected about 50 per cent from their all-time highs in January. So, the valuations are looking attractive. Secondly, with the credit crisis affecting European banks it is now uncertain to keep the money with European banks such as Swiss banks.

Recently in April-May, the Swiss government sought to check inflow of any kind of “black money” into its banks. Moreover, the banks themselves monitor stringently the origin of all the money coming to them.

“The question is as to how this black money can come to markets--we are of the view that the money can be routed through P-notes. There are certain procedures and regulation as to how one can invest through P-notes. And it will also take some time if anybody wants to divert funds through P-notes in Indian markets,” said Ankit Sinha, CEO-Spark Advisory.

According to the Swiss Banking Association report of 2006-- India topped the world with $1.45 trillion deposits in Swiss banks. Other countries were Russia $470 billion, UK $390 billion, Ukraine $100 billion and China $96 billion

Suraj · Post by **Suraj** » 28 Dec 2008 04:15

Katare: Reddy was not eased out. His term ended and a replacement was picked in Subbarao. There's nothing remarkable about Reddy not getting a temporary extension - that's not a normal action in normal times either. Overall Subbarao has done a good job so far, and has shown decisiveness in their trying times.

The problem with the interest rate argument is that effective interest rates are not the same as real interest rates - while effective interest rates may have risen, large and medium size corporations had recourse to cheaper ECCBs. Therefore, interest rates did not affect production investment as much as the 1996-97 rate hikes did. They did however affect consumer demand, because private borrowers (retail and realty) were hit by rising consumer loan and home loan rates.

The RBI has specific mandates - handling the impossible trinity being the central one. Effective economic policy is conducted by the ministry of finance in conjunction with the central bank. The latter alone is not responsible, but for the last couple of years, the RBI has been dealt a significant amount of responsibility, and been effectively asked to control the impossible trinity. They can't. The government has long been remiss at implementing the necessary structural reforms that would enable us to increase production faster and handle inflationary conditions. That includes the SEZ problems, labour law, and a host of others.

I would thank the Fed for not bailing out Lehman Brothers. That single action essentially sent the world economy south, and brought down the commodity inflation pressures significantly, and did so without drawing out the situation for months more; Subbarao took charge on Sept.5, a week before the Lehman cataclysm. The rate hikes Reddy effected have an upside - it now gives us a lot of opportunity to cut rates, since inflation has unraveled despite rates failing 250-300bp in the last few months.

Considering that investment in production has not been hit as hard as in 1996-97 and that rapidly falling interest rates will restoke consumer demand, things are not necessarily very negative. One big problem is the loss of employment in the manpower-heavy export industries like gems/jewelry and textiles. However, these two are no longer the biggest export earners, having abdicated the top two positions they held for decades, to engineering goods, refined petroleum products and chemical products - all capital intensive rather than manpower intensive. That's not to say they're not important, but export industries have shown that the fittest survive - e.g. the textile sector simply lacks the scale to compete effectively, and the government lacks the expertise to back it. Hopefully the current circumstances force mergers between the disparate small textile export houses and allow them to compete more effectively.

vsudhir · Post by **vsudhir** » 28 Dec 2008 06:39

Interesting take on YV Reddy's actions and the Indian economy

V Ananta Nageshwaran makes a comment that I found worth reproducing here (not directly related with interest rates, though):

serendipity?!! how easy it is to roll off criticisms or brush aside achievements. then, why should we be surprised when we get the governments and the bureaucrats we deserve.

it will be useful to know if the sceptics here read and understood the steps that RBI took before they hit the keyboards with gusto.

asking banks to bolster the investment fluctuation reserves when interest rates were too low was an act of foresight.

suggesting that the profits of securitization be distributed only when the securitization SPV was wound up was a display of understanding of how investment banks and bankers worked.

Dr. Reddy and the RBI may or may not have understood what was happening in the US mortgage market or mortgage finance market. But, to recognise that excessive credit growth would bring forth asset price booms and busts did not require one to know the failures in the US mortgage market.

Also, to recognise that financial liberalisation was not akin to economic liberalisation and that the theories of perfect competition did not work in finance does not suggest a command and control mindset but clarity of mind a superior intellect.

Rishirishi · Post by **Rishirishi** » 28 Dec 2008 06:52

vsudhir wrote:Interesting take on YV Reddy's actions and the Indian economy

V Ananta Nageshwaran makes a comment that I found worth reproducing here (not directly related with interest rates, though):
serendipity?!! how easy it is to roll off criticisms or brush aside achievements. then, why should we be surprised when we get the governments and the bureaucrats we deserve.

it will be useful to know if the sceptics here read and understood the steps that RBI took before they hit the keyboards with gusto.

asking banks to bolster the investment fluctuation reserves when interest rates were too low was an act of foresight.

suggesting that the profits of securitization be distributed only when the securitization SPV was wound up was a display of understanding of how investment banks and bankers worked.

Dr. Reddy and the RBI may or may not have understood what was happening in the US mortgage market or mortgage finance market. But, to recognise that excessive credit growth would bring forth asset price booms and busts did not require one to know the failures in the US mortgage market.

Also, to recognise that financial liberalisation was not akin to economic liberalisation and that the theories of perfect competition did not work in finance does not suggest a command and control mindset but clarity of mind a superior intellect.

I think it is a Greenspan who made a terrible miscalculation by believeing that "markets will sort it out". All a part of the neo-cons "free market" ideals. Gorge Bush did an Iraq and Greenspan brought the financial system to a colapse. Yet the republicans got almost half the votes. Says a bit about peoples ability to select their leaders.

Reddy should get credit for resisting the preshure to "follow the crowed". And all Indians should be greatful for that. But this hardly makes him a genius.

R Vaidya · Post by **R Vaidya** » 30 Dec 2008 18:53

Six Blind men and no Elephant

Inflation numbers –Reliable?

http://www.dnaindia.com/report.asp?newsid=1217515

R vaidya

vera_k · Post by **vera_k** » 31 Dec 2008 11:43

This acknowledgement that, at times, India's sovereign credit rating has been more about politics than economics caught my eye today.

The 'Market' Isn't So Wise After All

In one anecdote, Mr. Friedman described a visit to India by a team from Moody's Investor Service, a company that carried the awesome task of determining "who is pursuing sound economics and who is not." This was shortly after India had tested its nuclear weapons, and the idea was that such a traditional bid for power counted for little in this globalized age; what mattered was making political choices of which the market approved, with organizations like Moody's sifting out the hearts of nations before its judgment seat. In the end, Moody's "downgraded India's economy," according to Mr. Friedman, because it disapproved of India's politics.

Singha · Post by **Singha** » 31 Dec 2008 11:49

moodys , fitch and S&P are geopolitical arms of UK-US combine.

hit them with shoes and chase them out.

these were the buggers who gave AAA to CDOs.

R Vaidya · Post by **R Vaidya** » 31 Dec 2008 12:56

Six Blind men and no elephant--Part II

http://www.dnaindia.com/report.asp?newsid=1214632

R.Vaidya

pradeepe · Post by **pradeepe** » 31 Dec 2008 13:05

Absolutely. A while ago I used to wonder why the heck would the GOTUS not go after the credit rating agencies which in my mind were the most culpable for the financial mess. They were the facilitators. They were the wardens to speak. "Corruption is far reaching", "how is one entity to blame? etc were all paraded around.

But if one looks at it, its because these agencies serve a much needed purpose and are too valuable to be taken down and be curtailed.

Raj Malhotra · Post by **Raj Malhotra** » 31 Dec 2008 13:11

Can somebody suggest a user friendly website to track/discuss "international"commodity prices?

Div · Post by **Div** » 31 Dec 2008 13:28

Raj Malhotra wrote:Can somebody suggest a user friendly website to track/discuss "international"commodity prices?

What commodities? Try these to track/check prices.

http://www.kitcometals.com/charts/
http://www.cme.com/trading/dta/del/index.html
http://www.nymex.com/index.aspx
http://www.lme.co.uk/

Najunamar · Post by **Najunamar** » 31 Dec 2008 15:49

Raj,

In addition you can also try
www.futuresource.com (great for NG and such Energy related commodities)
www.theplasticsexchange.com (mainly for plastics)

vsudhir · Post by **vsudhir** » 31 Dec 2008 16:25

Indian economy: Winner in global turmoil of 2008

Depends on what you mean by 'winner', I guess.

It is the collectivism of RBI and the Government that possibly helped the government avert the blues of the global financial crisis on the domestic economy at a time when the world economies are falling prey to recession one by one.

However, India is expected to grow between six-seven per cent at the pessimistic and optimistic level for the current financial year, while it would be a tad lower - five-six per cent - in the next financial year.

Singha · Post by **Singha** » 31 Dec 2008 23:18

"you win by not losing"
"you win by staying alive"

Raj Malhotra · Post by **Raj Malhotra** » 01 Jan 2009 02:56

thanx guys for the prompt reponses

vsudhir · Post by **vsudhir** » 01 Jan 2009 03:27

Interest rates on loans finally floating down

Suraj · Post by **Suraj** » 02 Jan 2009 04:14

Inflation recedes further to 6.38%

India’s inflation rate fell to the lowest since early March as demand slowed and oil prices eased, giving the central bank scope to cut interest rates further.

Wholesale prices rose 6.38 percent in the week to Dec. 20 from a year earlier after gaining 6.61 percent the previous week, the commerce ministry said in New Delhi today. Economists expected an increase of 6.41 percent.

Reserve Bank Governor Duvvuri Subbarao may cut interest rates for the fourth time in two months as policy makers step up efforts to counter slowing economic growth. There is “considerable scope” for reducing borrowing costs, the finance ministry said last week, after a drop in commodity prices cooled inflation from a 16-year-high of 12.91 percent in August.

“The decline in inflation gives the Reserve Bank comfort to lower borrowing costs,” said Indranil Pan, chief economist at Mumbai-based Kotak Mahindra Bank Ltd. “The economy needs to be nursed back into good health and, therefore, we need rate cuts.”

Exports fall 9.9% in November

India’s exports fell for the second straight month, adding pressure on the central bank to cut interest rates and support growth in Asia’s third-largest economy.

The Reserve Bank of India, which has reversed four years of monetary tightening in the past three months, has room to slash rates further after a report today showed inflation slowed to a 10-month low.

Lower borrowing costs will spur consumer demand among the nation’s 1.2 billion people and compensate for falling orders from recession-hit U.S. and Europe, India’s biggest markets. India became vulnerable to slowdowns and financial crises in other countries after it started to open its economy in 1991.

“The negative news on the external side intensifies pressure on the Reserve Bank to cut rates to stoke domestic demand,” said Prasanna Ananthasubramaniam, an analyst at ICICI Securities Ltd. in Mumbai.

Overseas shipments dropped 9.9 percent to $11.5 billion from a year earlier after contracting 12.1 percent in October, the first decline in seven years, the government said in New Delhi today.

Demand for made-in-Asia goods has slumped amid the deepening global economic slowdown. China’s exports in November fell 2.2 percent, the first decline in seven years. Singapore’s exports posted the biggest contraction in more than six years in the same month.

Nihat · Post by **Nihat** » 03 Jan 2009 00:35

New Delhi: The Government on Friday announced its second fiscal stimulus package with sector-specific steps to counter the impact of global slowdown on the country's economy, including the doubling of cap on foreign funds to invest in bond markets.

The package came soon after the central bank cut the reverse-repurchase and the repurchase rate by 100 basis points each while reducing the cash reserve ratio (CRR) by 50 basis points, to reduce bring down the cost of borrowings.

The measures, unveiled by Planning Commission Deputy Chairman Montek Singh Ahluwalia, include further access to Rs 30,000-crore worth of tax-free bonds to India Infrastructure Finance Co and accelerated depreciation of 50 per cent to new cars bought till March 31.

Exporters, too, will benefit with an extension of the duty-entitlement passbook (DEPB) scheme and enhanced duty drawback benefits on items like knitted fabrics, bicycles, farm hand tools and some categories of yarn.

The Government also decided to set up a holding company, called special purpose vehicles, to provide liquidity support to non-banking finance companies that are credit-worthy and meet some conditions.

“The scale of liquidity potentially available through this window is Rs.25,000 crore,” said Ahluwalia, who briefed reporters here, after it was approved by Prime Minister Manmohan Singh.

“Credit targets of public sector banks are being revised upward to reflect the needs of the economy in the present difficult situation. Government will closely monitor the provision of sectoral credit by public sector banks.”

The plan panel chief said that in order to give a boost to the corporate bond market, foreign institutional investment limit in rupee-denominated securities would be increased from $6 billion to $15 billion.

This apart, the realty industry can benefit from the permission to use external commercial borrowings if intended for the development of integrated townships, while enhancing the level of credit for micro units.

Apart from the higher depreciation benefit, the automobile industry can benefit from an arrangement that is being worked out with leading public sector banks to provide a line of credit to lending institutions to finance commercial vehicles.

http://ibnlive.in.com/news/second-stimu ... 822-7.html

If we can get through this year with 7% growth , that would be incredible achievement - if anything , we'll come out stronger

Suraj · Post by **Suraj** » 04 Jan 2009 05:54

More on the latest rate cuts and stimulus package:
Bloomberg: India Cuts Rates By 100bp, Unveils Package to Spur Economy

The Reserve Bank of India lowered the repurchase rate by one percentage point to 5.5 percent and the reverse-repurchase rate by the same margin to 4 percent, it said in a statement in Mumbai. The government also more than doubled the amount overseas investors can hold in local bonds and extended capital to the nation's banks.

``There's still scope for rate cuts as the economic picture is quite bleak,'' said K. Ramanathan, who manages the equivalent of $2.2 billion in Indian debt at ING Investment Management in Mumbai. ``The policy response to the unfolding economic slowdown is quite satisfying.''

India's benchmark stock index rose for a second day to a two-week high, in anticipation the government would announce measures to stimulate the economy. The yield on the 10-year benchmark bond fell to the lowest since April 2004. Today's measures were announced after the stock market closed.

Trade represented 35 percent of GDP for the year ended March 31, up from 21 percent in 1997-98, the year of the Asian financial crisis, according to the central bank.

Exporters have cut about 65,500 jobs as recessions in the U.S. and Europe, the nation's biggest markets, damped overseas demand. Industrial production fell 0.4 percent in October, the first decline in 15 years, and exports plunged 9.9 percent in November after falling for the first time in seven years the previous month.

To help develop India's corporate bond markets, giving companies better access to funds, the government today raised the overseas investment limit to $15 billion from $6 billion, according to a statement e-mailed from New Delhi.

State governments will be allowed to raise an additional 300 billion rupees in the year to March 31 to build roads, schools and hospitals.

The government will give 200 billion rupees to boost the capital of state-run banks and provide 250 billion rupees for non-bank finance companies.

Today's measures follow a 200 billion rupee spending plan for roads and ports and cuts in excise duty unveiled last month.

The monetary authority has slashed its overnight lending rate, the repurchase rate, by 3.5 percentage points and its borrowing rate, the reverse repurchase rate, by 2 percentage points since Oct. 20. It cut the proportion of deposits banks must hold in reserve by 4 percentage points to the lowest since 2006.

``The measures announced so far are adequate enough to achieve 7 percent growth'' in the year ending March, Montek Singh Ahluwalia, deputy head of India's Planning Commission told reporters in New Delhi. ``The key is if the ministries can implement and spend what they have been allocated, it would be more than enough to stimulate growth.''

Singha · Post by **Singha** » 04 Jan 2009 13:08

all floating home loan rate takers should see decrease in EMI within the next 3 months because banks adjust it once in three months. for me, it will be march1@ hdfc by 0.50% down to 11.25% if these further RBI moves dont stimulate another downward rate cut.

I figure we will bottom out around 10% but not reach the "easy money" 8% days.

Suraj · Post by **Suraj** » 04 Jan 2009 14:48

The easy money was a result of GoI during the NDA days not having so many spending measures, especially off-budget ones, and pursing the FRBM Act in letter and spirit. The current dispensation has kept its head above the water because revenue growth was strong enough to allow the fiscal decifit to be reduced despite significantly greater expenditures on things like NREGS. But with the economy slowing, the tax revenue tap is running dry.

Right now, just the state governments are planning to borrow upto Rs.30000 crore as bridge financing to cover shortfalls. When the the state and central government crowds everyone out of the money market (especially through the statutory liquidity ratio), interest rates will naturally rise.

Since September, has cut repo rate by 2.5%, cash reserve ratio by 3.5% and statutory liquidity ratio by just 1%. The most recent rate cuts were just repo rate and CRR, not SLR. Anyhow, KV Kamath of ICICI thinks effective interest rates will be down 4-5% by middle of this year

Katare · Post by **Katare** » 05 Jan 2009 05:06

Singha wrote:all floating home loan rate takers should see decrease in EMI within the next 3 months because banks adjust it once in three months. for me, it will be march1@ hdfc by 0.50% down to 11.25% if these further RBI moves dont stimulate another downward rate cut.

I figure we will bottom out around 10% but not reach the "easy money" 8% days.

You may be up for a delightful surprise if Kamath's crystal Gaze is telling the truth. You may still get back to 7.5-8% interest rates.

4.5% Interest Rates and zero Inflation by third quarter of 09 - Kamath

“All I can say is that there will be four-to-five percentage points correction in interest rates from where it is today...This correction, I think, will be by July...This is where the rates are heading in six months from now,” he added.

Rishirishi · Post by **Rishirishi** » 05 Jan 2009 06:34

Katare wrote:
Singha wrote:all floating home loan rate takers should see decrease in EMI within the next 3 months because banks adjust it once in three months. for me, it will be march1@ hdfc by 0.50% down to 11.25% if these further RBI moves dont stimulate another downward rate cut.

I figure we will bottom out around 10% but not reach the "easy money" 8% days.
You may be up for a delightful surprise if Kamath's crystal Gaze is telling the truth. You may still get back to 7.5-8% interest rates.

4.5% Interest Rates and zero Inflation by third quarter of 09 - Kamath

“All I can say is that there will be four-to-five percentage points correction in interest rates from where it is today...This correction, I think, will be by July...This is where the rates are heading in six months from now,” he added.

Let us hope that RBI does not make the same mistake as other central Banks have. When the interest rates were set low, a lot of people took up huge loans (based on the low monthly EMI). This created a housing boom and rise in house prices. When the iterest rates were set up again, a lot of people could not pay their debts.

Suraj · Post by **Suraj** » 05 Jan 2009 07:11

The latest GoI/RBI move has been to set tiered rates for loans based on loaned amount, with smaller loans getting lower rates:

A fortnight back, on the government’s insistence, 26 public sector banks reduced the rate to 8 per cent for loans up to Rs 5 lakh. Loans up to Rs 20 lakh will be charged 9.25 per cent. These rates could be fixed for five years. Also, there will be no processing fees and free insurance on these loans. For home-buyers in this price band, this is certainly good news. However, for loans above Rs 20 lakh, more rate cuts could be on the anvil.

This is a good thing, since it incentivizes construction of cheaper homes, as opposed to luxury ones. The market has already responded, with DLF announcing a large investment. This will hopefully increase affordability rather than make realty a speculative play for those in the 30-50lakh or higher bracket, as it was to quite an extent earlier.

vsudhir · Post by **vsudhir** » 05 Jan 2009 16:45

Trucks go off the road, food shortages feared

vipu · Post by **vipu** » 05 Jan 2009 20:45

Latest about the Blue Eyed Boys...

Salary Increase for Prof's..
http://economictimes.indiatimes.com/Opi ... 961628.cms

RTI needed on this?..

http://economictimes.indiatimes.com/New ... 459645.cms
expect fireworks like the Cut-offs for JEE...

And the Inevitable..... not a slowdown but a decline in 'expectation'.

Suddenly, the idea of landing that dream job with stratospheric salaries at IIMs has
become considerably remote. Students have tempered down their expectations in a troubled financial environment.
And unlike previous years, corporates too are not offering fat paychecks to
woo top talent among management graduates at premier business institutes.

Average salary expectations of students have come down to a more realistic Rs 14 lakh this year,
according to a recent Nielsen Campus Track B-School survey. However, six months ago, during summer placements,
there were no signs of economic downturn at IIM campus recruitments. Average salaries among IIM graduates
were up by a whopping 30%, with offers ranging from Rs 50-70 lakh.
In fact, international placements were in the range of $2,80,000 to $3,60,000.

http://economictimes.indiatimes.com/Slo ... n_showcase

What do you think about a year from now a IIM would earn at 7% Growth rate?. Specialities like HR and Banking?. A glut or more outsourcing from the battered West now that Kamalnath-jee has done a 'volte-face'

at the WTO.

vsudhir · Post by **vsudhir** » 06 Jan 2009 04:17

'Govt to inject Rs 100,000 cr to prevent recession'

'India's growth may fall to 5%'

'Govt unveils 2nd stimulus package'

Nayak · Post by **Nayak** » 06 Jan 2009 08:27

I have worked with these so called IIM passouts. I never saw anything special about them. This whole MBA thingee looks like a scam to me. Drum up positive vibes about a degree, make it exclusive and expensive, public falls for it, there is a rush to join the degree. Sounds like a self-fulfilling prophecy. Very few have the pedigree to demand such type of bandwidth in the salary structure. They need to join the queue for dry bread and infected water like the other common abduls.

Singha · Post by **Singha** » 06 Jan 2009 11:09

Can anyone who knows directly about the situation in germany and japan tell me if the Mba cult
is worshipped there same way as the US-UK-India combine? I read long ago that these countries
have a lot of senior management who were actually engineers for a longish phase in their careers.
maybe it has something to do with the fact these countries are the globe's largest exporters of
engineering goods and services (as opposed to londonistan and its financial 'wizardry'

)

my personal opinion is one should do non-management for atleast 10 years (i.e. in the trenches
doing whatever needs to get done) before going into people manager or marketing/sales roles
and it is at this point, should one decide to change role that a Mba can be helpful.

instead we have people with 2-4 yrs of 'experience' (30% of time spent in non-work tulla activities) armed with an Mba, wearing blue suits and analyzing business plans and 'presenting'
to CxO decision maker types. we have them taking huge risks with other people's hard fought
money in mutual funds and hedge funds as tyro 'managers' . and they are supposed to be
above the blame if things blow up due to their own mistakes and greed.

in no other form of human activity except the military are young people given so much
responsibility and power. and the military is a different beast with its tight checks and balances.

for indians this problem is culturally even worse. compared to amirkhan kids our kids tend to
far less menial work as teenagers and children and many have a real dislike for getting their
hands dirty in "shopfloor jobs" like mechanical or metallurgy as opposed to turnbull and asser
shirts and team lunches with petite brunettes in 5* restaurants.

it dovetails very well in indians' cultural desire to let the "lower elements" do the grunt work
while he/she is a "manager" just guiding/strategizing/managing things from a distance without
getting the hands dirty.

amirkhan is safe because there are still _many of the super bright_ who get into hardcore
engg, medicine, law and _remain there_. and amirkhan continuously absorbs the worlds
brightest in these fields via "black holes" like MiT and stanford which act like giant roving
vacuum cleaners.

amirkhan is safe.

what about us?

till date we lag behind periolously compared to even emerging 1st world types like taiwan
and south korea in so many fields its not even remotely funny. suffice to say if a 100storey
tower were needed in India, the builder would squeal and dial up some consultant in
vienna or turin. let us not even talk of blisks and tri-mode seekers