Indian Economy: News and Discussion (June 8 2008)

neel · Post by **neel** » 09 Sep 2009 06:01

SwamyG wrote:Regarding the commercial vehicle industry:
1) As per some estiamtes, the production and operation of a truck - including servicing, maintenance and insurance - creates job opportunities for 8-9 persons.
2) 1% of growth in overall economy the totatl freight traffic is likely to increase by 1%. So one could read this elasticity the other way around as a leading barometer.
3) CV sales had gone down because of liquidity crisis - so if the sales have gone up it means liquidity is back into this industry. Or that diesel prices have gone down.

Even if diesel prices increase, the fixed asset investment would be driven by the liquidity situation.

svinayak · Post by **svinayak** » 10 Sep 2009 21:17

NRIs treated as Not Required Indians
7 Sep 2009, 0300 hrs IST, Mukesh Patel,
in India in the current FY 2009-10. Enjoying his personal exemption limit of Rs 1.60 lakh and the eligible deduction of Rs 1 lakh u/s 80C, Amin is comfortable paying income tax of Rs 4,000 in the first slab of 10 per cent on his effective taxable income of Rs 40,000.

Flat tax of 20% and 30%

A huge shock awaits Amin and millions of NRIs, in regard to taxation of their interest and investment income and capital gains earned in India, proposed to be treated under the draft Direct Tax Code as "income from special sources."

In 2011-12, on the same interest income of Rs 3 lakh, Amin will be required to pay a hefty tax of Rs 60,000 at the flat rate of 20 per cent, without being eligible to claim any basic exemption or other deduction, as provided under rule three of the First Schedule to the Code.

Moreover, all capital gains earned by a non-resident will attract a flat tax of 30 per cent, irrespective of the amount of capital gains. While a resident Indian will be required to pay tax of Rs 3.84 lakh on his taxable income of Rs 25 lakh, an NRI earning equivalent capital gains will be called upon to pay almost double tax of Rs 7.5 lakh.

Hair-raising drafting

New section 13 (2) provides that such ‘special income’ shall be computed in accordance with the provisions of the Ninth Schedule, the drafting of which is literally hair-raising. It provides that the amount of accrual or receipt shall be computed as the taxable income, and no loss, allowance or deduction shall be allowed, as the same shall be presumed to have been granted. The only exception in this regard, in respect of capital gains arising from the transfer of equity shares or units of equity oriented mutual fund chargeable to STT, is quite amusing, as it stands redundant in view of the proposal to abolish STT (a classic instance of incoherent drafting).

Also Read
→ Home calling: NRI investments in India
→ Swine flu message to NRIs: Do remit, but do not visit
→ NRIs keen on riding the Indian investment wave
→ 'NRIs to contribute to diaspora fund for distressed citizens'
→ New Direct tax code: No more a saving grace
→ Direct Tax Code fails to bring an equitable tax system
→ Direct tax code: Tax liability and you

The draftsman does not seem to have realized the harsh implications. It means that if an NRI sells a capital asset purchased for Rs 10 lakh at Rs 30 lakh, he will be required to pay tax of Rs 9 lakh at 30 per cent on the gross sale consideration of Rs 30 lakh without any deduction even for the cost of acquisition of Rs 10 lakh (not to mention any benefit of indexation on the same).

Determination of residential status

The residential status of an individual under the Code is proposed to be determined as per the current norms. However, the status of "not ordinarily resident" (NOR) is proposed to be eliminated. Despite the above, Clause 24 of the Sixth Schedule has still provided for exemption in respect of interest earned on foreign currency deposits in the case of NOR. Poor drafting indeed!

The Code has proposed to retain the current exemptions availed by a non-resident in case of interest earned on NRE and FCNR deposits with banks.

Suraj · Post by **Suraj** » 11 Sep 2009 06:01

Monsoon Rains Above Average in India for Second Week, Aiding Crop Prospects

India’s monsoon rainfall, the main source of irrigation for the nation’s 235 million farmers, was above average for a second week, improving prospects for bigger crops of winter-sown wheat and oilseeds.

The nation received 56.2 millimeters (2.2 inches) of rain in the week ended Sept. 9, compared with the long-period average of 46.3 millimeters, Surinder Kaur, director at New Delhi-based India Meteorological Department said. The deficit for the June- September season narrowed to 20 percent from 23 percent a week earlier, she said by phone.

The revival in rains may help ease moisture stress among monsoon-sown crops such as rice, sugar cane and soybeans, and aid early planting of wheat and rapeseed crops. The worst start to the monsoon season in at least eight decades caused drought in about half the country.

“The main wheat-growing regions have got good rains and that’s good news for winter crops,” said D. Sivananda Pai, a director at the weather bureau in Pune city. “The revival will help reduce the deficit to some extent and fill reservoirs.”

Farmers use this water from reservoirs to grow wheat and oilseeds sown between October and December. The country’s 81 main reservoirs were 45 percent full on Sept. 3, up from 42 percent a week earlier.

Planting of wheat and other winter-crops will begin early this year to make up for the 10 million tons loss of rice, Farm Minister Sharad Pawar said last month. Wheat may be seeded to a record 28 million hectares this winter, Agriculture Commissioner N.B. Singh told reporters Sept. 4.

The deficit in the northwest region, the country’s grain- bowl and the biggest sugar cane producer, narrowed to 34 percent from 39 percent yesterday. The shortfall in the central states was 15 percent, weather bureau’s Kaur said.

The shortfall in the southern region narrowed to 8 percent from 11 percent a week earlier. The province includes Karnataka, Kerala and Maharashtra states, the biggest growers of sugar cane, peanuts, cotton and coffee. The deficit in the northeastern states, the biggest tea grower, dropped top 23 percent as of yesterday from 26 percent a week ago.

India got 622.5 millimeters of rain in the June 1-Sept. 9 period, compared with the average of 778 millimeters, said Kaur.

Rains were deficient or scanty in 21 of the nation’s 36 weather divisions so far this season, while 22 divisions got excess or normal rains, she said.

India’s northwest and central regions, the main sugar cane and soybean producing regions will receive heavy rains over the next two days, the weather bureau said in a report on its Web site today. The agency forecast Aug. 10 rains will be 90 percent of the average for the month.

ArcelorMittal, Posco To Start Building $32 Billion India Plants

ArcelorMittal, the world’s biggest steelmaker, and South Korea’s Posco may start building $32 billion of factories in India next year as domestic demand defies the global recession, India’s Steel Minister Virbhadra Singh said.

“Posco is very keen and would like to start tomorrow,” Singh said in an interview. “I’m hopeful Posco will begin work next year. ArcelorMittal should also be able to start next year, at least on one of its two plants.”

Posco, ArcelorMittal and Indian rivals such as Tata Steel Ltd. are rushing to build factories in the country as demand increases for cars, roads and bridges. Prime Minister Manmohan Singh’s administration, which returned to power in May, aims to resolve land disputes and delays in allocating mining licenses to mills to help achieve as much as 9 percent economic growth.

“Posco and ArcelorMittal will build their plants once they are guaranteed iron ore assets and problem-free land in the country,” said Rakesh Arora, an analyst at Macquarie Group Ltd. in Mumbai. “The government is trying to simplify mining laws and once this is done, the companies will definitely build the plants here because demand is assured.”

“L.N. Mittal met me a few days ago and put forward the problems,” the steel minister said. “I’m using my good offices to see the state governments expedite the process. ArcelorMittal is looking at how the global market shapes up and wants to synchronize its production with the global situation.”

Posco, South Korea’s biggest mill, rose 2.5 percent to 478,500 won at the close of trading today in Seoul. ArcelorMittal gained as much as 1.3 percent to 26.45 euros and traded at 26.33 euros, up 0.8 percent, as of 10:41 a.m. in Amsterdam.

Pohang-based Posco’s $12 billion, 12 million metric ton plant in eastern Orissa state, potentially the single-biggest overseas investment in India, has been delayed since plans were drawn up in 2005. ArcelorMittal aims to build a mill in Orissa state and another in Jharkhand with a total capacity of 24 million tons and at a cost of $20 billion.

India’s steel demand is set to grow irrespective of global developments, S.K. Roongta, chairman of Steel Authority of India Ltd., said today in New Delhi, after the company’s annual general meeting. Production at Steel Authority, India’s second-largest steelmaker, will rise 10 percent this fiscal year from the previous 12 months, he said.

The company may set up a 10 million ton plant in Jharkhand if it is given assurances of iron-ore supplies, Roongta said.

ArcelorMittal is looking to build its plants “as soon as possible,” Vijay Kumar Bhatnagar, head of the India unit, said in a phone interview yesterday. “Of the two projects, we are slightly ahead in the Jharkhand project as we have secured a mining license in the state,” he said.

Suraj · Post by **Suraj** » 11 Sep 2009 21:47

As I mentioned in the previous page, I estimated Q2 industrial output (IIP) to be in the 6.5-7% range. For the first month of the quarter - July - growth is 6.8%, with preliminary August data suggesting a similar pattern:
India’s Industrial Production Rises for Seventh Month

Output at factories, utilities and mines rose 6.8 percent in July from a year earlier, less than the 7.0 percent median forecast in a Bloomberg News survey of 20 economists. Indian stocks fell today after the statistics agency revised June’s increase to 8.2 percent from 7.8 percent, indicating a bigger than expected slowdown in July.

“Industrial growth will trend higher as the full impact of the various monetary and fiscal stimulus actions come through,” said Robert Prior-Wandesforde, senior Asian economist at HSBC Holdings Plc in Singapore. “Export growth is likely to move higher from here on due to the improving global trade cycle.”

India’s exports fell the least in eight months in August as overseas sales of coal, rice and tobacco picked up, the government said yesterday. Shipments dropped 19.7 percent from a year earlier. Foreign direct investment jumped 56 percent to $3.5 billion in July, according to Trade Minister Anand Sharma.

Manufacturing, accounting for about 80 percent of the production basket, rose 6.8 percent in July from a year earlier, compared with 8.2 percent growth in June, today’s report released in New Delhi showed. Consumer goods production, including cars, refrigerators, air conditioners and others advanced 8.8 percent, compared with a 4.4 percent gain in June.

wig · Post by **wig** » 11 Sep 2009 22:09

Tanaji wrote:Should we have a separate thread on the new proposed Direct Taxes Code Bill 2009 which will radically transform the way we pay our taxes?

Have a question on the way it will work: It proposes a Exempt - Exempt - Tax model for most cases ... currently National Savings Certificates are exempt, but wont be in the new scheme. They will be taxable on maturity as well. Doesn't that mean we will pay twice in taxes? This is just an example, and I am mistaken probably, here is hoping someone can clear this up.

tanaji,
the present mechanism under the income tax act, 1961 is as under:
you effect savings (section 80C) in a variety of insturments, life insurance, nsc, ppf etcetra. when they mature in some cases (ppf, life insurance) the entire proceeds principal plus accruals (bonus, survival benefits are exempt) in nsc the interest is offered for taxation on an accrual basis every year.
now it is propoesed in the Direct Tx Code, 2009 that maturity will be taxable. but the entire scheme will require substantial amendments.
under the present scheme bonus/ survival benefit of life insurance or interest of ppf is exempt under section 10.
the new code will do away with it. but then that will be for fresh investments - i do not see how it will become applicable to the investments made under the previous tax regime. some kind of a phase for old investments to mature will be there. however it might be complex and lead to more taxes - not a very cheerful thought!
but the code has yet to become law. the income Tax ACt 1961 has over the past few decades been amended once at least every year and quite a few times in between.
i feel that that the direct taxes code will undergo considerable changes before it becomes law.

AnimeshP · Post by **AnimeshP** » 15 Sep 2009 22:30

I have a question for the economics guru-log here ...
When the US housing bubble blew up resulting in the current world-wide recession/depression, India's economy took a hit but seems to be bounding back. One of the areas most impacted in the Indian economy was the real estate sector which resulted in some price correction happening in residential market in India.

Now, there is a general consensus amongst the D&G folks (who were right about the US housing bubble) that we are about to witness a similar blow-up of the CRE in the US.

My question here is that what further impact do the guru-log foresee on Indian real estate market with the CRE market in the US blowing up? The reason why I am asking is that I am looking at buying an apartment in India but am not sure if the prices in Indian real estate will go down further or will they rebound? Am looking at gathering some information so that I can make up my mind either ways.

Katare · Post by **Katare** » 16 Sep 2009 01:49

Q2 advance tax collections point to robust recovery

Excise duty mop-up soars 22.5% in August

Suraj · Post by **Suraj** » 16 Sep 2009 02:42

RBI signals no rate hikes for now:
India to Hold Rates Until ‘Sure’ of Economic Recovery

The Reserve Bank of India signaled it will refrain from raising borrowing costs from a record low until it is sure a recovery has taken hold in Asia’s third- biggest economy.

The biggest short-term challenge for the central bank is an exit strategy from “monetary accommodation,” Governor Duvvuri Subbarao said at a conference in New Delhi. Global policy makers need to coordinate measures aimed at reversing the past year’s rate reductions, he said.

India’s central bank wants to keep borrowing costs low to spur investment and spending amid a drought. The $1.2 trillion economy expanded 6.1 percent in the three months to June from a year earlier, accelerating for the first time since 2007, as the RBI cut its benchmark interest rate six times from October 2008 through April.

“The challenge before us is going to be withdrawing the monetary accommodation and supporting the drivers of growth,” Subbarao said. “We will not exit until we are sure the recovery is secure” even as inflationary pressure builds up. Gains in wholesale prices may exceed 5.2 percent by the end of March, he said.

Subbarao said the economic indicators that the central bank would track to consider any revision in rates are the wholesale and consumer prices indexes, capital flows, industrial production and lending growth.

The RBI said in its annual report last month that it may need to reverse its low-rate policy as inflation accelerates. Declines in wholesale prices slowed to 0.12 percent in the final week last month from as much as 1.7 percent in the week ended Aug. 1. The central bank raised its inflation forecast for March to 5 percent in July from an April estimate of 4 percent.

Prasad · Post by **Prasad** » 16 Sep 2009 07:23

Centre plans action against EU customs rules

India is not willing to take the European Commission’s verbal assurances on sorting out the issue of seizure of Indian drugs at

European ports. The government is considering action against EU customs regulations, which, India feels, violates the provisions of the TRIPS agreement — the international regulation on intellectual property.

Earlier this year, there were two incidents where Dutch customs authorities seized consignments being exported from India containing anti-HIV and anti-malaria drugs to Nigeria and Brazil respectively. The medicines, which were generic or off-patent in India, were impounded as European companies holding patents for them in their countries had complained to the Dutch authorities that they were counterfeit.

“The TRIPS agreement clearly lays out that life-saving generics, which have patent holders in other countries, can be sold to third countries. Confiscation of such medicines clearly violates global patent rules,” the official said.

Suraj · Post by **Suraj** » 17 Sep 2009 00:07

FinMin pushes for 10% cut in government non-essential expenditure:
FinMin asks depts to cut expenses in Budget plans for FY11

The Finance Ministry, in the Budget Circular for 2010-11 has said, "The estimates (RE 2009-10) must conform to... instructions, which stipulate a 10 per cent and five per cent cut in non-plan, non-salary expenditure and other economy measures."

For the next fiscal, the circular added, "It is necessary to review the existing expenditure budget... To priorities the activities and schemes, both on the plan and non-plan side and identify those activities and schemes, which can be eliminated or reduced in size or merged with any other scheme."

As part of its economic drive, the Finance Ministry, earlier in the month, advised ministries and departments to cut by 10 per cent expenditure on travel, seminars, exhibitions and other office expenses. In case of other non- plan expenditure, the they were asked to reduce expenses by 5 per cent.

Land acquisition Bill to go to Parliament

Union Rural Development Minister C P Joshi today said the Land Acquisition (Amendment) Bill, certain provisions of which were earlier opposed by Trinamool Congress chief and Railway Minister Mamata Banerjee, was ready to go to Parliament any time. He told reporters here that the Cabinet had already approved the Bill and now the introduction of the Bill in Parliament had to be addressed by the parliamentary affairs ministry.

The Trinamool Congress chief, whose party is the second largest constituent of the United Progressive Alliance (UPA), had almost walked out of a Cabinet meeting raising serious objections to the Bill.

Banerjee had opposed that provision in the Bill which provides for private developers to acquire 70 per cent of land for an industrial project, directly from farmers and land owners. The remaining 30 per cent is to be acquired by the state government concerned. Joshi, did not comment on whether the provisions opposed by Banerjee were part of the Bill approved by the Cabinet.

Interesting move from the heavy CV makers:
Heavy commercial vehicle makers focus on construction equipment

Commercial vehicle (CV) manufacturers are putting their plans to diversify into construction equipment, such as backhoe loaders and excavators, on the fast track. German CV manufacturer MAN AG, for instance, will roll out its first construction equipment for the domestic market in the next four months.

“We will be rolling out our 6x4 and 8x4 tippers this year. We are scouting for dealerships in the country. We find the infrastructure thrust initiated by the government very interesting, since it creates demand for construction equipment,” says Hakan Samuelsson, chairman of MAN.

The growth would primarily come from construction activities in the road sector, residential and office complexes, and large infrastructure projects like ports and dams across the country.

Industry players say construction equipment financing is also expected to grow at a CAGR (compounded annual growth rate) of 20 per cent from around Rs 10,000 crore now. While some of the big players, such as GE capital and ICICI Bank, have moved out of this segment, their places have been taken by non-banking finance institutions such as L&T Finance and Tata Capital, among others.

Vipul · Post by **Vipul** » 17 Sep 2009 02:00

Revised WPI likely by Dec.

The Government is expected to bring out a revised Wholesale Price Index (WPI) by December, the Chief Statistician of India, Dr Pronab Sen, said here on Tuesday.

“Manufacturing data has been holding us up on bringing out a revised WPI. There have been problems with collecting data. We need all the backlog data from 2004-05 till date as well as today’s data. As soon as we have that, it (revised WPI) can come out the next day,” he told reporters on the sidelines of a book launch.

The revised WPI series will have 400 commodity groups compared with 200 at present, he said. It will have 2004-05 as the base year.Mr Sen said the economy would grow at 6.5 per cent this fiscal if the current trend in IIP figures continues.He said the rage of estimates for growth in agriculture is between (-) 2.5 per cent and (-) 6 per cent. The negative demand due to drought would be mitigated but there will be a slump in production.

He said the Government, for the first time, would bring out infrastructure statistics. “The idea is to first define infrastructure.”

Pranav · Post by **Pranav** » 18 Sep 2009 08:37

India security agencies seek Internet telephony ban: http://www.reuters.com/article/rbssTech ... 1420090917

I'm sure the traditional phone companies, being worried about becoming dinosaurs, would find this a delightful idea.

Suraj · Post by **Suraj** » 19 Sep 2009 02:23

Drought-hit India Aims for Near-Record Wheat Crop

India, the world’s second-biggest wheat grower, aims to harvest a near record crop this year as a revival in monsoon over the past month raises water levels in major reservoirs, the farm ministry said.

Output may be 79 million metric tons, compared with last year’s record 80.6 million tons, the ministry said. Production target for the winter-sown rice was set at 14.5 million tons and barley at 1.55 million tons, it said on its Web site.

Almost half of India, the world’s largest producer of rice, wheat and sugar, is reeling from a drought caused by the driest monsoon in at least seven years. Rains have returned in the past month, increasing soil moisture and benefiting early winter crop growth, the farm ministry said.

“Crops are in better condition now than two weeks ago,” Agriculture Commissioner N.B. Singh told reporters in New Delhi. “We’re gearing up” for early sowing of winter crops, he said.

A revival in rains from mid August has replenished water levels in reservoirs. Farmers use this water to grow wheat and oilseeds planted between October and December. The nation’s 81 main reservoirs were 57 percent full on Sept. 16, up from 51 percent a week ago.

Wheat, sowed in October and harvested starting March, makes up for more than 70 percent of India’s winter grain output.

Wheat for December delivery dropped 1.2 percent to $4.6175 a bushel in Chicago yesterday.

Forex reserves rise above $280 billion

India’s foreign exchange reserves grew $3.32 billion in the week up to September 11, 2009, to $280.98 billion on the back of portfolio investments and revaluation of currencies.

“The increase is predominantly due to portfolio investment and capital-raising overseas,” said a treasury head of a public sector bank.

The reserves have grown by $29 billion since the beginning of the current financial year as FIIs have returned to the markets. In the financial year up to September 11, FIIs have pumped in $10.16 billion into the equity markets.

Suppiah · Post by **Suppiah** » 20 Sep 2009 06:36

What a pathetic story ...36 lakh that too all PGs and MBA's applying for 11,000 clerical jobs @ SBI. This is the state of economy and our system. If you cannot help getting looted, join the looters.

You can choose your own working hours, declare strike if there is a good cricket match to watch..salary indexed to inflation, loans for anything and everything at concessional terms..enough free time on hand to start a second business doing real esate broking or insurance agency...a job that is secure from anything short of a nuclear holoucast...why would 36 lakhs not apply? Anyone that is not a billionaire, NIR, illiterate, toddler or 60+, or already a plundering PSU parasite will apply..perhaps that adds up to 36 lakhs

http://timesofindia.indiatimes.com/news ... 032608.cms

csharma · Post by **csharma** » 21 Sep 2009 01:26

Raamdeo Agrawal: A trillion-dollar opportunity

http://www.business-standard.com/india/ ... ty/370632/

India's GDP at $4-trn by 2025 may provide a springboard to discretionary spend

Why does India sell one million motorcycles in a month? Why does the demand for cars in the country grow by 30 per cent and the same for Maggie noodles rise by 25 per cent annually? And, why has India become the fastest-growing cellphone market in the world? This is because India is moving from being a trillion-dollar economy to a two trillion-dollar one in the next six years.

In 1950-51, India’s GDP stood at Rs 10,000 crore, which translated into a per capita income of Rs 285 when distributed among a population of 350 million. For 2008-09, the country’s GDP stood at Rs 54 lakh crore, translating into a per capita income of Rs 48,450, thus resulting in a compounded annual per capita income growth rate of 9.25 per cent during 1951-2009.

India achieved its first trillion-dollar GDP in 2007. It took India 60 long years after Independence to move up to a Rs 42-lakh crore GDP. As per current estimates, we should touch a nominal GDP of Rs 100 lakh crore by 2015, and if the rupee-dollar exchange rate remains stable, the next trillion-dollar economy will be born in seven-eight years.

The journey doesn’t stop here, rather it picks up further momentum. The next doubler comes in after another seven-eight years, thus elevating India’s GDP to $4 trillion (roughly Rs 193 lakh crore) before 2025. The significance of this transition lies in understanding how this linear event will impact businesses.

The structural change that will be witnessed during this journey is that the basic needs of human life will be taken care of by the initial $600-700 of income. At present, with a savings rate of over 35 per cent, the discretionary spending in the economy is $100 per person. However, as India’s per capita income rises to $2,000 and the country moves from the category of ‘low-income’ to ‘middle-income’ nations, the discretionary expenditure in the economy would experience an exponential growth.

For instance, if we analyse the consumption pattern of 70 different economies and segment them into low-income, middle-income and high-income brackets, we will observe that consumer spendings on food, beverages and clothing & footwear account for 47 per cent, 34 per cent and 22 per cent of their total consumer expenditures, respectively. On the contrary, consumer expenditures of the three categories of countries on discretionary items, including cultural and recreational activities, account for 13 per cent, 19 per cent and 28 per cent of their total consumer spends, respectively. This implies that discretionary spending by the Indian consumer will grow manifold in the next five years.

Indian consumption of durable as well as non-durable items has been just a fraction of the consumption average of emerging markets. This is purely an affordability issue. As and when affordability catches up with the prices of consumer goods, the pent-up demand gets released. And, such demand keeps growing for many years. This change can be engineered even by reducing product prices. However, in the absence of product price deflation, affordability will take its own time to increase.

The emergence of the next trillion-dollar economy will dramatically change people’s income level, resulting in steep acceleration in demand for many goods and services. We have seen telecom penetration rising from 4 per cent in 2001 to 40 per cent in 2009. This quantum jump could come about due to increased affordability in wireless telephony.

The corporate sector — automobiles, processed food, fashion clothes, advanced communication, healthcare, transport, entertainment and financial services among others — is not there to provide the basic needs of the economy. It is there to provide value-added goods and services to the people at large.

In fact, financial services will be one of the biggest success stories out of India. The savings rate has climbed to 37 per cent of GDP in 2007-08. In India, credit is not directed towards boosting consumption, but is channelised towards funding government deficits. This has kept the private sector credit-to-GDP ratio in the economy at a lower level of 52 per cent compared to 100 per cent for China, 300 per cent for the US, 200 per cent for the UK, 145 per cent for Europe, 166 per cent for Japan and 140 per cent for Australia (2008 figures).

We are likely to witness many changes in government policies over the foreseeable future. These changes may include encouraging consumption in order to hold the savings rate at not higher than 40 per cent. Even at this rate, India is going to emerge as one of the largest saving nations among the developing countries with a saving of about $1 trillion per annum before 2020. So, the opportunity for savings deployment is going to be gigantic.

At present, physical infrastructure (roads, ports, housing, etc.) deficit is immense. As affordability increases, spends on personal and public infrastructure will boom. Demand for cement, steel, automobiles etcetera will grow at a pace not seen in the last 20-30 years.

The government’s own projection pertaining to infrastructure spending in the 11th Plan period is staggering. The intention is clearly to accelerate infrastructure spend matching with the GDP growth aspiration. There is a lot of gap between the current infrastructure spend and the desired level of expenditure in order to meet the aspirational level of GDP growth. The catch-up game in the next five-six years will mean a 15-20 per cent growth in every aspect of construction activity.

Analysts and economists have been drawing their own conclusions on how consumers and the economy responded when the economy was at half-to-a third of its current GDP size. But how they will respond in the next five-ten years requires a very different kind of thinking by everyone. Politicians should tailor policies keeping this development in mind. And, for investors, it is probably one of the biggest macro-opportunity. A perfect setup for long-term investing.

sanjaykumar · Post by **sanjaykumar** » 21 Sep 2009 04:48

There is a subtlety to economic growth for Chindia that is missed.

India's growth is led by discretionary income-this is not growing at 7% per annum. It is actually growing faster. The demand for cars is a refelection of the middle class and not the overall growth in the economy. The majority of GDP is refective of the majority of the population that is only just getting by. The demand for services, IT, TV, computers, telecom,health, neewspapers, arts, sewage, automobiles is accounted for by about 5%of the population which is growing slowly in relative terms (to total poulation) but enormously in absolute terms. India may be adding a Canada or Australia a year in its demand for quality education, services, infrastructure, space programmes, energy and technology. Great things are to come as economies at this point of the curve are exponential. India will enter this high demand era in the next five years.

Global power dynamics will change irrevocably in the next five years.

SwamyG · Post by **SwamyG** » 21 Sep 2009 22:31

Crisis, what crisis? India sails through

AS FACTORIES across the world slashed production and laid off workers in the dark months that followed the demise of Lehman Brothers, one major economy bucked the trend.

------------snip snip snip------------

Solid demand from China and India, for example, drove a June-quarter rise in coal exports, Australia's biggest export earner.

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India has been Australia's fastest growing major trading partner over the past five years and is now Australia's fourth-largest export market.

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"In short, the big picture shows that Australia will be hugging the panda and riding the elephant for some time yet."

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This relative isolation is reflected in India's exports, which accounted for only 15 per cent of gross domestic product last year, compared with more than 30 per cent in China.

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The banking sector added another layer of insulation. Most of India's banks are still publicly owned and are very conservative investors. India's financial sector therefore had little exposure to the toxic assets that caused so much trouble on international financial markets.

Another unexpected positive came through remittances from the large Indian diaspora; an expected slump in this lucrative source of foreign exchange did not materialise.

Suraj · Post by **Suraj** » 22 Sep 2009 00:13

BSE market cap increases by Rs.25 lakh cr ($520 billion) since April

According to an analysis of the valuations for the period (April 1-September 18), the combined market capitalisation of all the firms listed on the Bombay Stock Exchange increased by Rs 25,02,749 crore or nearly 80 per cent.

Analysts believe the rise in investor wealth has been due to the upbeat market sentiments on indications of economic recovery globally.

"The markets have given a healthy return on the back of positive mood among domestic and international investors," SMC Global's Vice President Rajesh Jain said.

The total market valuation increased to Rs 56,35,835.75 crore ($1.175 trillion) on September 18 from Rs 31,33,086.7 crore on April 1.

ArcelorMittal finalizing $12 billion Jharkhand steel plant site

The world's biggest steel maker is working on modalities to set up Rs 50,000-crore steel mill in the state with a capacity of 12-million tonne per annum and is awaiting various regulatory approvals from the state for the project.

NRI billionaire L N Mittal's ArcelorMittal in Khunti district is facing resistance by villagers at their proposed site at Torpa, Sinha said talking to reporters on the sidelines of ground breaking ceremony for Rs 65.63 crore Adityapur Auto Cluster project.

In view of this, the steel major may shift to Gumla district, he said.

Suraj · Post by **Suraj** » 22 Sep 2009 22:14

India ‘Waking Up’ to Extended Period of High Growth: UBS

“India is about to resume an extended period of high economic growth,” Philip Wyatt, a senior economist at UBS in Hong Kong, said in a report today. The pace of expansion may average about 8.6 percent annually over the next 10 to 15 years.

Faster growth is crucial to Prime Minister Manmohan Singh’s goal of cutting poverty in a nation where three quarters of the population of 1.2 billion live on less than $2 a day. Singh, who won a second five-year term in May, has said that India needs a sustained expansion rate of 9 percent to improve the livelihoods of the poor and create more jobs.

A higher savings rate, helped by a younger population and export-led industrialization are among the main factors that will drive a sustainable step-up in economic growth, UBS said.

“We think the stage is set for rising manufactured exports and industrialization, possibly explosively, over the next 10 to 15 years as India takes some export share away from China’s overarching dominance,” Wyatt said.

Companies including Volkswagen AG, Toyota Motor Corp. and other car manufacturers have announced plans to spend more than $6 billion through 2012 to build factories in India.

A younger population will also drive growth, Wyatt said. “The dependency ratio continues to drop and has at least another 10 years worth of distance to go before flattening out like Japan in the 1960s or Korea in the 1970s,” he said.

India’s per capita income may triple in the next ten years and rise by about 5 times by 2025 to well over $10,000 from the present $3,000, Wyatt wrote. Higher incomes will result in higher consumption for items like steel, cement and oil, he said.

“If we take individual commodities like steel, cement and oil we can observe that India is entering the zone of accelerating consumption per capita,” according to UBS.

India’s $1.2 trillion economy expanded 6.7 percent in the year to March 2009. That compares with an average growth rate of about 8.8 percent in the previous five years.

Indian Companies Pay More Advance Tax, Suggesting Faster Recovery Pace

Advance taxes paid by local companies rose to 440.1 billion rupees ($9.15 billion) in the July-September quarter from 207.2 billion rupees in the previous three months and 14.7 percent more than the same quarter last year, said a finance ministry official who declined to be identified. Companies make advance payments once every three months, based on their estimates of income for the quarter.

Reliance Industries Ltd., India’s most valuable company, paid 11.6 billion rupees in advance taxes in the quarter to Sept. 30, 69 percent more than the April-June period, the finance ministry official told reporters in New Delhi today. State Bank of India paid 18.3 billion rupees, Oil & Natural Gas Corp. provided 17.96 billion rupees and Indian Oil Corporation Ltd. paid 11 billion rupees, he said.

Record-low interest rates and tax cuts are providing stimulus which policy makers estimate are worth more than 12 percent of India’s gross domestic product, reviving demand for cars made by Maruti Suzuki India Ltd. and Hyundai Motor Co. Economic growth may average about 8.6 percent over the next 10 to 15 years, UBS AG economist Philip Wyatt said today.

“The tax numbers indicate that the worst is behind us and all the leading indicators including industrial production suggest that non-farm GDP will gain further ground,” said Sonal Varma, an economist at Nomura Securities Co. in Mumbai. “This is a clear sign that things are improving.”

Increased spending on consumer goods and automobiles has driven tax payments higher, the official said. Advance tax payments declined 3.7 percent in the April-June period, he said.

AnimeshP · Post by **AnimeshP** » 22 Sep 2009 22:36

Suraj wrote:India ‘Waking Up’ to Extended Period of High Growth: UBS

Although I feel very happy everytime I see such reports, I cannot but wonder that the guys who are making these predictions were the same bunch who totally missed seeing the current meltdown coming.
To tell you the truth, I have become really confused over the past couple of years when it comes to different noises with regard to economic news.

Suraj, I know I may be asking too much, but if you could probably add a couple of lines of your own take regarding these kinds of news items(especially regarding Indian economy), I feel our BRF-ites would get a better picture of where we (Indians) are headed.

Suraj · Post by **Suraj** » 22 Sep 2009 23:40

g.kacha: I really only care about the fundamentals, i.e. savings/GDP and investment/GDP, not all the fluff in the article. As long as these remain high (>30%, ideally around 35-40%), we will grow at around 8% as a general consequence. The reason is that high savings/GDP lead to high investment/GDP, indicating high productive investment, which generally implies effective resource utilization, i.e. high efficiency of investment, which in turn means high return on investment i.e., low incremental capital output ratio (ICOR) - the additional investment needed to generate a unit of growth. High investment/GDP and low ICOR means high growth.

Predicting the financial industry meltdown is a whole different matter, and in any case a banking entity like UBS is a leveraged insider in such cases. The meltdown affected us to the extent that external capital inflows shrank, lowering our own domestic investment/GDP, yet it remains at ~32-33% during the last quarter, and the current second quarter should hopefully show a further increase in investment/GDP; forex reserves are also up $30 billion this quarter, indicating robust external capital inflows.

AnimeshP · Post by **AnimeshP** » 23 Sep 2009 06:54

Suraj wrote:g.kacha: I really only care about the fundamentals, i.e. savings/GDP and investment/GDP, not all the fluff in the article. As long as these remain high (>30%, ideally around 35-40%), we will grow at around 8% as a general consequence. The reason is that high savings/GDP lead to high investment/GDP, indicating high productive investment, which generally implies effective resource utilization, i.e. high efficiency of investment, which in turn means high return on investment i.e., low incremental capital output ratio (ICOR) - the additional investment needed to generate a unit of growth. High investment/GDP and low ICOR means high growth.

Predicting the financial industry meltdown is a whole different matter, and in any case a banking entity like UBS is a leveraged insider in such cases. The meltdown affected us to the extent that external capital inflows shrank, lowering our own domestic investment/GDP, yet it remains at ~32-33% during the last quarter, and the current second quarter should hopefully show a further increase in investment/GDP; forex reserves are also up $30 billion this quarter, indicating robust external capital inflows.

Suraj, thank you very much for explaining that. I wasn't aware of the savings/GDP and investment/GDP fundas.

SwamyG · Post by **SwamyG** » 23 Sep 2009 08:23

Suraj:
I can understand high savings/GDP leading to high investment/GDP. But how does this convert to "effective resource utilization"? In that phrase by resource do you mean just "money"? In addition how does this automatically translate to "high efficiency of investment"? Just because we will have high investment, how do we get automatic "high RoI" ?

Can you connect those dots so that I can wrap my head around the fundamentals?

SwamyG · Post by **SwamyG** » 23 Sep 2009 08:54

And Suraj, when I google on savings and investment....I get quite a number of websites that talk about "individual savings" vs "aggregate savings"; and how individual savings does not become investment. And most the websites that hail the virtue of savings and cite investment and economic growth are related to African and Asian counties. What are your thoughts?

Suraj · Post by **Suraj** » 23 Sep 2009 09:10

Very good question - I hoped someone would point that out. In the short term you can certainly have speculative investment. However, sustaining investment requires a reliable RoI. Investment here isn't the more hazy indirect kind of personal finance, but fixed capital formation - transport infrastructure, power, manufacturing base... In terms of official GDP reports investment/GDP is what is reported as gross fixed capital formation (GFCF) along with gross domestic savings.

Regarding household savings vs public and corporate savings, the former adds to bank deposit base. I'd like to see citations regarding the context for 'individual savings are not good'.

SwamyG · Post by **SwamyG** » 23 Sep 2009 18:12

Suraj: Here is a link
http://wfhummel.cnchost.com/savingandinvestment.html

Effect of Increased Individual Saving Suppose an individual decides to increase saving by consuming less. His cutback in spending necessarily means a reduction in income to others. They in turn might cut their consumption to match the loss of income, but then others would lose income. Most people do not reduce consumption equal to the loss of income, so there will usually be a net reduction in saving. Thus the net saving of everybody else may decrease more than the original increase, which would result in a decrease in aggregate saving.

Hari Seldon · Post by **Hari Seldon** » 23 Sep 2009 18:37

^ Aha, the famous paradox of thrift in economics. Britain is 'warning' itas citizens, err subjects, to not consumer less i.e. save more as that will imperil the recovery!

SwamyG · Post by **SwamyG** » 23 Sep 2009 20:59

Thanks log. Keep the gyan flowing.

I also found Andy Mukherjee saying the following @: http://w4.stern.nyu.edu/news/news.cfm?doc_id=5749

India needs about 3.5 units of capital to produce one extra unit of goods and services. So for gross domestic product to expand 10 percent, India would require an investment-to-GDP ratio of 35 percent. According to the latest available statistics, the domestic savings-to-GDP ratio is about 29 percent.

This is inline with Suraj's numbers.

neel · Post by **neel** » 24 Sep 2009 03:28

The concept of savings decreasing aggregate demand is a red herring. When people forgo consumption (decreasing aggregated demand) to save money (unless they take the cash and secret it in a hole in the ground) they place it in a bank (as a demand or time deposit) or the money market (i.e. bonds).

If they place it in a bank, the bank then lends the money (less a fee, which counts as part of aggregate demand) to a consumer (who uses it to make a purchase, which also counts as aggregate demand), business (that uses it to make a purchase of either physical capital or input goods, both of which count as aggregate demand), or government (that uses it to buy votes from voters or pay off cronies, who then use the money to increase aggregate demand as any other consumer or business would).

If they place it in the money market by buying bonds from other bond holders, then nothing has changed from the perspective of aggregate demand, since the seller would then have the cash to either spend on final consumption expenditures (which counts as aggregate demand) or save as described here (which changes nothing in terms of aggregate demand). If they purchase freshly issued bonds, then the funds are loaned out to the issuing business or government and used by the issuer in the same manner as a bank loan. At the end of the day, aggregate demand was left unchanged by the act of saving; the only difference is that now, some of the aggregate demand was transformed from consumer demand for finished goods into business demand for expansion of productive capacity (which enables income to increase in the future). If the money is buried in the ground, if effectively decreases the money supply, and thereby makes each rupee still in circulation more valuable by the exact amount that leaves aggregate demand at real prices unchanged. In no way can the act of saving actually decrease aggregate demand.

It can, however, change the composition of aggregate demand in a way that changes the most efficient allocation of resources in the economy (which hurts the firms that are less efficient recipients of resources and helps, in an equal measure, the firms that are more efficient recipients of resources). So, when savings rate increases, lathe factories become a more efficient allocation of the steel, copper, silicon, workers, management, floor space, etc., while textile factories become a less efficient allocation of the same. While this hurts those who are not well suited for lathe manufacture relative to textile manufacture in the interim, they will eventually either become better suited to lathe manufacture or displace someone engaged in a different occupation who will do so; in the process the productive capacity of the economy will increase, yielding more production and, equivalently, higher incomes than would otherwise have been possible.

Also, it is important to keep in mind that the investment that drives the supply side growth as well as contributing to demand side growth is fixed investment. Financial investment (i.e., the purchase of securities from anyone but the issuer and any derivative transaction thereto) has as much effect on the economy as a casino and an insurance agency (i.e., demand growth and risk mitigation). The 3.5 units of capital is in reference to physical capital, not financial capital. Physical capital is the form that wealth takes when it is devoted to fixed investment (e.g. lathes or tractors).

arnab · Post by **arnab** » 24 Sep 2009 09:46

neel wrote:The concept of savings decreasing aggregate demand is a red herring. When people forgo consumption (decreasing aggregated demand) to save money (unless they take the cash and secret it in a hole in the ground) they place it in a bank (as a demand or time deposit) or the money market (i.e. bonds).

If they place it in a bank, the bank then lends the money (less a fee, which counts as part of aggregate demand) to a consumer (who uses it to make a purchase, which also counts as aggregate demand), business (that uses it to make a purchase of either physical capital or input goods, both of which count as aggregate demand), or government (that uses it to buy votes from voters or pay off cronies, who then use the money to increase aggregate demand as any other consumer or business would).

Forgive me as I try and recall old forgotten macro stuff - If 'aggregate savings' increase (meaning nobody is inclined to consume more). Who would the banks lend to? Banks would react by lowering interest rates making it 'unprofitable' for savers. Especially if the interest on savings is lower than inflation. For example a negative rate of return (like the US treasury bond yields currently) to force banks to lend to people rather than be in the safety of gilt edged securities. What if people are still not convinced? domestic firms will then have to export or reduce their capacity. Am I right?

Neshant · Post by **Neshant** » 24 Sep 2009 22:38

So, to answer your question...too much savings is not good and too much consumption is not good...both have to be in balance to create employment, keep inflation rate at a reasonable rate and to keep the long term interest rates at moderate level. (how much is too much/moderate/reasonable etc varies between countries and central banks).

none of this meddling around with the interest rates or economy as a whole is needed.

Eggheads at central banks don't know what the market price of orange juice should be, why would anyone believe they know what interest rates should be.

The free market should decide what intrest rates are right, not some dude sitting in an office fiddling around with numbers.

neel · Post by **neel** » 25 Sep 2009 00:14

arnab wrote:
neel wrote:The concept of savings decreasing aggregate demand is a red herring. When people forgo consumption (decreasing aggregated demand) to save money (unless they take the cash and secret it in a hole in the ground) they place it in a bank (as a demand or time deposit) or the money market (i.e. bonds).

If they place it in a bank, the bank then lends the money (less a fee, which counts as part of aggregate demand) to a consumer (who uses it to make a purchase, which also counts as aggregate demand), business (that uses it to make a purchase of either physical capital or input goods, both of which count as aggregate demand), or government (that uses it to buy votes from voters or pay off cronies, who then use the money to increase aggregate demand as any other consumer or business would).

Forgive me as I try and recall old forgotten macro stuff - If 'aggregate savings' increase (meaning nobody is inclined to consume more). Who would the banks lend to? Banks would react by lowering interest rates making it 'unprofitable' for savers. Especially if the interest on savings is lower than inflation. For example a negative rate of return (like the US treasury bond yields currently) to force banks to lend to people rather than be in the safety of gilt edged securities. What if people are still not convinced? domestic firms will then have to export or reduce their capacity. Am I right?

A glut of personal savings would result in a fall in interest rates as the supply of loans would have increased. But low interest rates represent a lowered cost of money. Lower cost means higher larger quantity demanded, which manifests as stimulated borrowing, either by people making big ticket purchases, businesses making fixed capital investments, or governments spending borrowed money to buy votes or (less likely) make infrastructure investments (i.e., 100 people saving what they would have otherwise spent on Rs. 5000 bottles of champaign in the bank means that the bank now has Rs. 5 lakh available to loan to either a family buying a new car, a business buying a new delivery van, or a babu providing a man-day of "work" to 5000 people in a moderately large village). Every time someone puts a rupee in the bank, the interest rates fall; every time that bank proceeds lend (i.e., every time that a borrower purchases the lending services from the bank for a loan of) that rupee, the interest rate rises. In a credit market without structural impediments to liquidity, this results in every rupee saved in the bank being lent out by the bank (> 5% of loans are never withdrawn from the banking system as cash, so the CRR constraint has no affect on the liquidity situation). Even if the time scale works out so that the real interest rate is negative for a time (i.e., the banks are so flush with cash that they are paying you to borrow from them), that just induces people to borrow money even faster, so in a monthly average, the money is all lent out (into a more efficient allocation, since businesses got some to fund capital expenditures).

neel · Post by **neel** » 25 Sep 2009 00:38

Neshant wrote:
So, to answer your question...too much savings is not good and too much consumption is not good...both have to be in balance to create employment, keep inflation rate at a reasonable rate and to keep the long term interest rates at moderate level. (how much is too much/moderate/reasonable etc varies between countries and central banks).
none of this meddling around with the interest rates or economy as a whole is needed.

Eggheads at central banks don't know what the market price of orange juice should be, why would anyone believe they know what interest rates should be.

The free market should decide what intrest rates are right, not some dude sitting in an office fiddling around with numbers.

While I agree that such a system would be better than what we have, the sad truth is that, in practice, whenever one gains control of an army, one is inclined to arrogate to oneself the authority to print money whose value is enforced by the power of one's army, that one might be able to pay said army without the requirement of possession of any physical asset against which that money is a claim. In that sense the asset backing the money is the guarantee of non-aggression from that army. As long as the government can issue currency to lower interest rates in the short term while escaping blame for the inflation that increases interest rates in the long term (i.e., as the knowledge of the increase in money supply disseminates and begins to affect inflation expectations), it will continue to asset such authority.

arnab · Post by **arnab** » 25 Sep 2009 07:23

neel wrote: While I agree that such a system would be better than what we have, the sad truth is that, in practice, whenever one gains control of an army, one is inclined to arrogate to oneself the authority to print money whose value is enforced by the power of one's army, that one might be able to pay said army without the requirement of possession of any physical asset against which that money is a claim. In that sense the asset backing the money is the guarantee of non-aggression from that army. As long as the government can issue currency to lower interest rates in the short term while escaping blame for the inflation that increases interest rates in the long term (i.e., as the knowledge of the increase in money supply disseminates and begins to affect inflation expectations), it will continue to asset such authority.

Nah an ‘army’ has nothing to do with it. You have just pointed it out in your previous answer (to me), that the market is neither ‘efficient’, nor ‘free’ and not even a ‘market’ !! As Krugman pointed out to believe in such hypotheses – one would have to believe that the ‘great depression’ was actually the ‘great vacation’. So the rules of the game are as follows – if you expect the Government to follow counter cyclical policies (i.e. spend money like drunken sailors to keep the economy afloat because the public stopped believing in the efficiency of the market), I’m afraid you have to agree that the Government has the most knowledge available to determine the monetary policy settings.

vijayk · Post by **vijayk** » 25 Sep 2009 21:48

http://buttonwood.economist.com/content/gdc

India
Public Debt: $721B
Public Debt as %GDP: 59.6%
China
Public Debt: $872B
Public Debt as %GDP: 17.9%
US
Public Debt: $6.7 T
Public Debt as %GDP: 48.2%
Russia
Public Debt: $163B
Public Debt as %GDP: 12.6%

India is in far worse shape than the USA as far as debt burden is considered with 59% vs 48% and vs China 17.9%?

neel · Post by **neel** » 25 Sep 2009 23:49

vijayk wrote:http://buttonwood.economist.com/content/gdc

India
Public Debt: $721B
Public Debt as %GDP: 59.6%
China
Public Debt: $872B
Public Debt as %GDP: 17.9%
US
Public Debt: $6.7 T
Public Debt as %GDP: 48.2%
Russia
Public Debt: $163B
Public Debt as %GDP: 12.6%

India is in far worse shape than the USA as far as debt burden is considered with 59% vs 48% and vs China 17.9%?

The more dangerous number is external debt:GDP. On that measure, India is much better off.

neel · Post by **neel** » 26 Sep 2009 00:04

arnab wrote:
neel wrote: While I agree that such a system would be better than what we have, the sad truth is that, in practice, whenever one gains control of an army, one is inclined to arrogate to oneself the authority to print money whose value is enforced by the power of one's army, that one might be able to pay said army without the requirement of possession of any physical asset against which that money is a claim. In that sense the asset backing the money is the guarantee of non-aggression from that army. As long as the government can issue currency to lower interest rates in the short term while escaping blame for the inflation that increases interest rates in the long term (i.e., as the knowledge of the increase in money supply disseminates and begins to affect inflation expectations), it will continue to asset such authority.

Nah an ‘army’ has nothing to do with it. You have just pointed it out in your previous answer (to me), that the market is neither ‘efficient’, nor ‘free’ and not even a ‘market’ !! As Krugman pointed out to believe in such hypotheses – one would have to believe that the ‘great depression’ was actually the ‘great vacation’. So the rules of the game are as follows – if you expect the Government to follow counter cyclical policies (i.e. spend money like drunken sailors to keep the economy afloat because the public stopped believing in the efficiency of the market), I’m afraid you have to agree that the Government has the most knowledge available to determine the monetary policy settings.

I do not expect the government to follow counter cyclical policies; in fact, I wish that they would not. In practice, counter cyclical policies only serve to shorten expansionary periods by inflating asset bubbles that produce shocks (a la the housing bubble that precipitated the shock that kicked off this contractionary period). As I said, when the government prints money so they can spend it "like drunken sailors" all that happens is that the real recession (wherein NPAs have come to light and losses are being written off) is papered over by projects that are not practically feasible on their own, and, consequently, become the basis of new loss inducing NPAs after a few years (as the inflation caused by the printing of money sets in).

Where in my argument did I agree with Krugman (who advocated that a housing bubble be inflated to ease the short term repercussions of the dot-com bust)? He is only ever interested in the next 6 months, and consequently disregards the medium term (1-5 year) negative repercussions of things that work well enough in the short term (< 1 year).

Addendum:

Certainly, it can help for a government to schedule purchases so that their orders are filled at the peak of idle capacity (when, absent inflationary pressure from reserve banks dumping money into the economy, prices are correspondingly at their lowest). However, when a government is purchasing things that, in practice, are NPAs, all that they end up doing is increasing the quantity of NPAs in the economy (which cause losses in sufficient quantity to hasten the onset of a contractionary period). Not to mention that governments move so slowly that the soonest that a "stimulus" could be implemented is after the contraction has ended (e.g. in US where 80% of fiscal stimulus has yet to be implemented at the same time as the contraction has already abated).

Katare · Post by **Katare** » 26 Sep 2009 00:54

Six infra sectors expand by 7.1 pc in August

NEW DELHI: Showing a decisive recovery, six key infrastructure industries grew by 7.1 per cent in August against 2.1 per cent in the same month a
year ago.

sugriva · Post by **sugriva** » 29 Sep 2009 10:22

Another stock market bubble?

http://beta.thehindu.com/opinion/op-ed/article19895.ece

Katare · Post by **Katare** » 29 Sep 2009 20:49

Stock market is a leading indicator of economic recovery/cycle. It is one of the most volatile indicator because human sentiments are involved with hard nosed facts. Stocks almost always over react, so when correction happened down to 8K, it was too sharp. Similarly the recovery would be too sharp too. Another correction in next few weeks/months would correct any extra hot air in the market.

Well nothing new, same old story....don't time market, just stay invested and keep investing with good diversification and long term scope. If you try to outsmart market, odds are someone will eat your lunch.