Indian Economy: News and Discussion (June 8 2008)

ramana · Post by **ramana** » 18 Nov 2008 01:58

Can you post the Bloomberg report on Bajaj's suggestions to GOI?

Suraj · Post by **Suraj** » 18 Nov 2008 02:39

If this were any other year, the current YTD export growth performance would suggest we will easily achieve the $200 billion target. However, this year is unlike recent years. The sudden collapse in export demand may present a lot of problems, particularly with heightened Chinese dumping as they seek to manage their far greater exposure to export led growth in the face of falling demand in their primary markets.

Regarding UPA keeping up with FRBM goals, that is indeed the case. However it must be noted that the goals were percentages of GDP and tax revenues, both of which grew at far greater rates than would have been predicted in 2002-03. Further, one aspect that has characterized UPA's revenue collections is the use of cesses. There is a very clear reason for it - cesses are excluded from central:state revenue division according to the Finance Commission. Formal taxation measures have to be divided, but not cesses. That is what I meant by the UPA being more in favour of central primacy in revenue division. During the last Finance Commission there was a focussed push to increase the states' share of revenues, which have been largely unfulfilled. However, thanks to FRBM and robust tax collections, states are no longer facing a fiscal precipice like they were in 1999-00.

vina · Post by **vina** » 18 Nov 2008 06:17

No. No.. The FRBM and this govt's deficit targets are a smoke and mirrors show. There are massive off balance sheet liabilities. The oil subsidy alone is just massive. That they dumped it on the oil marketing companies. Yeah, you might not show it on the budget, but it does get reflected everywhere in terms of higher costs of borrowing.

Point is, the fiscal deficit, if you include the off budget items , will be closer to 10% of GDP.. UPA cut down on key infrastrucuture stuff like the GQ/NHDP (it is stalled and hardly any progress beyond Vajpayee days). Yeah, taxes increased, economy was buoyant. But what did Kangress do ?. Rather than spend the money on investing for the future, Kangress with the backing of JNU Jhollawallas and commie ding dongs like that former Belgian guy from JNU/ISI and the Prabhat Patnaiks, indulged in their wet dream of expanding fiscally, not to create assets but to consume.

Kangress did the typical sterotypical liberal role of tax and consume. Now after consuming the surplus, there is nothing to show for it. No railroads, no express ways, no ports, no power plants (the power situation is now absolutely scary , esp in Karnataka) and of course, I dont even want to go into areas like health care, education and primary education .

What the Kangress/UPA did was play reservation politics and expand the seats in the IITs and IIMs by a few thousand. That is ALL they have to show in real terms for all the bonanza that came their way.

Suraj · Post by **Suraj** » 18 Nov 2008 06:36

I disagree that FRBM and deficit targets are mere smoke and mirrors. That is an exaggeration. Off budget liabilities are a major concern, that the UPA in particular has been guilty of resorting to. But the benefits of the FRBM are very real, and the fact is the UPA did adhere to it, at least sufficiently that the country had years of real growth at a rate it has never seen before. The UPA is going to pay because of the economic downcycle, because they neglected to invest sufficiently for growth when they had the chance to.

vina · Post by **vina** » 18 Nov 2008 09:45

Another reason why I think the UPA "dream team" failed so miserably is in reading the inflation tea leaves. This clearly was a case where politics over rode common sense.

The leading indicators for the inflation triggers were always there. When oil price shot up to $60 or so when Mani Shankar Aiyar was the Oil Minister, the knee jerk was, it was just a "spike" that will go away in a few weeks and hence issue oil bonds and hunker down. Commodity prices were shooting up globally in everything from agriculture to metals to ores.. No sir , this wasnt a simple "spike". That spike held up for nearly a year , maybe a bit longer. Demand destruction happened in the US because the price signals were communicated by the market to the consumer. Here in India on the other hand, demand for diesel shot up!.. The govt was caught in a war with the reserve bank, which rightly was concerned with inflation, the govt resisted letting interest rates go up. The bubble built more than it should have in many sectors like metals, real estate etc in India. We were behind the curve in inflation. Action was finally taken when inflation hit double digits and YV Reddy came on TV and said "Inflation is UNACCEPTABLY HIGH" . That slap /jhappad is what it too for the "dream team" to see reality. By then it was too late.

Lending costs were hiked, then the global credit crunch hit and everything froze. If we had fought inflation earlier, we would have gone into 5 % inflation or so by now rather than the 8% and we could have aggressively cut rates to give a monetary and (if they had been conservative fiscally) to give a fiscal stimulus that is badly needed.

Now , we have high interest rates and no fiscal maneuvering room , especially when we needed it. We were caught flat footed on the way up and also on the way down. This govt team has been reactive and living on flights of fancy and not rooted in reality and facts. I think in the bare minimum, CHIDAMBARAM's PERFORMANCE HAS BEEN POOR.

So how does all this affect us in real life.. IT/VITY types in Bangalore can relate immediately.

Remember the elevated expressway that is getting constructed between Madiwala and Electronics city ? .

Well, it is nearly complete, except for 2 minor stretches and was scheduled to open in January. But it is not going to open in January . Now it is scheduled for Mar, but realistically we are looking at June to August. A six month delay at least.

Wanna know why ? I heard from someone from one major IT/VITY company who was tasked to oversee this and other infrastructure stuff, that IDBI is in a credit freeze and is unable to lend!.. If this is the scene with something as high profile, gold plated and as nearly complete as this, I cant imagine the state with other less in the limelight things.

Shivani · Post by **Shivani** » 18 Nov 2008 16:11

Chidambaram asks auto, realty, airline cos to cut prices

The Hindu Business Line wrote:
NEW DELHI: Calling upon the automobile manufacturers, realty firms and airlines to reduce prices, the Finance Minister, Mr P Chidambaram, on Tuesday promised to consider excise duty cut for the sectors which are facing the heat of global financial meltdown.

“Hotels must cut tariffs; airlines must cut prices; real estate must cut rates of apartments and homes they sell; car makers and two-wheeler makers must cut prices,'' he said, while addressing industrialists at the Indian Economic Summit being organised by the World Economic Forum and the CII here.

The Finance Minister also promised to examine the possibility of excise duty cut if required. “Any sector faces problem, I am open to examining suggestions on cut in excise duty rates,'' Mr Chidambaram said.

India, he said, will record satisfactory growth in the current fiscal and the Gross Domestic Product (GDP) growth rate will bounce back during the next year.

He said there is pressure on rupee but was confident that in a month or two the direction of capital flows will reverse

He maintained that the government will continue to strike a balance between growth and inflation but the bias now is towards stimulating growth. – PTI

Rahul Bajaj was interviewed by a crow of journalists and he was not impressed with these comments. He wants banks/financial institutions to provide cheap and easy loans.

Arya Sumantra · Post by **Arya Sumantra** » 18 Nov 2008 19:03

Govt to consider Tata's proposal in helping domestic companies
NEW DELHI: Minister of State for Industry Ashwani Kumar said the government will consider Tata Group Chairman Ratan Tata's proposal of setting up a special fund in select banks to help domestic companies repay foreign loans.

"The proposal has come and it will definitely be considered," the minister said while addressing the India Economic Summit here today.

He said the government has received the suggestion of the Tata Group chairman for creating a separate fund in a few banks to enable companies to meet global exigencies.

Tata, in a letter to the Prime Minister, has proposed the creation of a fund in select banks to help creditworthy corporations with funds in meeting exigencies.

Besides difficulty in rolling over the existing debt and fresh funds drying up, the depreciation of the rupee against the US dollar has further impacted the domestic companies with the increased cost for servicing overseas loans.

Kumar further said that a few sectors of the economy are in greater need for funds. "In fulfilling their needs, whatever help the government can, it will provide," he said.

The Minister has convened a meeting of industry associations tomorrow to assess their requirements.

"The government at the highest level will work pro-actively with industry so that we can come out (of the financial challenges) as soon as possible," he added.

SwamyG · Post by **SwamyG** » 18 Nov 2008 19:12

Reality is one thing, and one's wishes are another thing. Sometimes they do merge. I wish and consider that the Indian Economy is not terribly affected by the global meltdown. Yes, there is an impact. The urbanites seem to have been affected. The components of Indian Economy integrate differently than the US Economy. There are plenty of kinks in the system, that would curtail any Domino Effect. The issues we have been seeing are related to our surge in the growth. Growth has its pains.

It is my thoughts that India has been affected, but not the way the media hypes about it. How wrong am I in my assessment (read wish) ?

Media hype

joshvajohn · Post by **joshvajohn** » 18 Nov 2008 23:35

comments: The Finance minister and Prime minister have become pro rich fellas by not reducing the prices of the petrol. They have thrown literally the common minimum programme which was not merely established with CPIM and CPI but also with others that is 'reform with human face'. They are destroying the economy by not allowing what they have promised that is the petrol prices will float according the international prices. I have a suspicion that the private petrol companies might have even paid a bill for congress not to reduce the price in India. It is very unfair on their part but at the same time asking the private companies to go for price cut. It is pity that the government of India tends to suffer in the hands of such congressmen - the party which unashamedly stood for freedom and for people once upon a time!

Companies rule out price cut, ask govt to take initiative
http://timesofindia.indiatimes.com/Comp ... 728546.cms
NEW DELHI: Though industry chambers promised lower prices of manufactured goods after a call from finance minister P Chidambaram, individual
companies did not think twice before ruling out such a proposition. ( Watch )

Instead, auto-makers and real estate companies asked the government to make credit available to customers at cheaper rates.

"This (two-wheeler) industry has a margin of about 4-5 per cent only and in the near future we do not see any price cuts," company Chairman Rahul Bajaj said.

"Minimum wages are increasing, fuel price has increased and electricity prices have also increased, so how do we bring down the prices of our products?" asked Brij Mohan Lall Munjal, Chairman of Hero Honda Motors — the country's largest two-wheeler maker.

They also accused public and private sector banks of not lending to potential buyers of two-wheelers. Realty leader DLF's complaint was identical: "There are no takers for housing... Ideally, interest rate should be around 7 percent."

Their reaction was far removed from the industry's. "I am sure you will find a newer set of prices in most product categories," CII president K V Kamath said, after his meeting with Chidambaram, while Assocham Secretary General D S Rawat said: "India Inc will positively respond to the call given by the finance minister."

"Hotels must cut tariffs; airlines must cut prices; real estate must cut rates of apartments and homes they sell; car makers and two-wheeler makers must cut prices," Chidambaram said earlier, adding it was better than allowing inventories to build up, lay off workers and digging a deeper hole.
Finance minister Chidambaram

ramana · Post by **ramana** » 19 Nov 2008 01:17

Govt asking for price cuts isnt that overturning the 1992 economic reforms? What is the dream merchant nightmaring?

ramana · Post by **ramana** » 19 Nov 2008 02:26

So Vina is your contention that GOI doesnt have any funds for a stimulus as they already spent it earlier? And what do you make of Rahul Bajaj and Ratan Tata's pleas?

Suraj · Post by **Suraj** » 19 Nov 2008 02:31

I'll let Vina speak for himself, but I feel that at this point GoI will not spend on a fixed asset investment stimulus plan, because elections are near and they'll instead choose populism as a means of trying to satisfy the need for instant gratification. However, considering the jobs losses and general insecurity that the falling industrial and export performance has resulted in, it remains to be seen how much traction such efforts will have.

Interesting article from Bloomberg on the status of the rural roads project:
India's New Rural Roads May Buffer Economy From World Recession

The 100 kilometers (62 miles) of roads India is adding each day may save Asia's third-largest economy from the worst of a global recession.

New roads built so far under the $27 billion program have brought urban markets within reach of 60 million village dwellers over the past five years, letting them earn money selling fruits, vegetables and milk that would have spoiled otherwise. They are now spending their cash just as the world economy falters.

``Rural demand is keeping the economy kicking along,'' said Shashanka Bhide, chief economist at the privately funded National Council of Applied Economic Research in New Delhi. ``Growth will slow in India, but not as dramatically as the rest of the world.''

Some of India's biggest companies are already benefiting: shares of Hindustan Unilever Ltd., the biggest maker of household products, and Hero Honda Motors Ltd., India's largest motorcycle maker, are up this year while the benchmark stock index has plunged 56 percent. Domestic spending will help cushion India from the worst global meltdown since the Great Depression, according to the Reserve Bank of India.

When the roads program is completed in two years, every village with 1,000 or more inhabitants will have access to all- weather roads, up from 40 percent when construction started in 2003. Spending on the project, run by the National Rural Roads Development Agency, was worth about 5 percent of gross domestic product when it was announced.

Even at its current pace of investment, India still needs to spend more to buoy growth. The South Asian nation requires $100 billion annual investments in its highways, railways, power systems, ports and other infrastructure for the next five years, according to the government. Inadequate capacity shaves two percentage points off the nation's growth each year, the finance ministry estimates.

Rural connectivity is increasing people's income and adding to domestic consumption, which makes up 55 percent of India's economy, compared with 37 percent of gross domestic product in China.

India Considering Industry-Specific Measures to Counter Crunch

``We are looking at sectors which require special attention. I am open to adopt fiscal measures depending upon the need of each sector,'' Finance Minister Palaniappan Chidambaram said at a press conference in New Delhi today. Import taxes on some steel items and crude soybean oil were reimposed today to protect domestic producers.

Companies in industries such as real estate, automobiles and steel have cut output and deferred projects to cope with a drop in demand in the world's second-most populous nation. India has lowered interest rates, relaxed overseas borrowing rules and initiated a process to allow higher foreign ownership of domestic insurers to ease a credit crunch and infuse confidence.

India's economy may slow to 7.5 percent in the year ending March 31, after expanding 9 percent or more annually in the previous three years, according to the central bank.

Both the finance minister and the Reserve Bank of India Governor Duvvuri Subbarao have reiterated that appropriate action will be taken when required.

``We have decided that we'll keep a careful watch on the situation and act speedily and swiftly as the situation evolves,'' Chidambaram said.

The government today reimposed a 5 percent import tax on some steel items, the ministry of finance said. It also reimposed a 20 percent customs levy on crude soybean oil.

Chidambaram Says India Growth to `Bounce Back' to 9%

India's economy will ``bounce back'' to 9 percent growth next year as local demand holds up amid a global recession, Finance Minister Palaniappan Chidambaram said.

``There will be a slowdown in India and steps taken and those that will be taken, to a large extent, will compensate the factors causing the slowdown,'' Chidambaram told the World Economic Forum's India Economic Summit in New Delhi today.

The Harvard-trained minister signaled interest rates will come down in Asia's third-largest economy and said he will examine further excise duty cuts to spur consumer spending. Record crop plantings by India's 400 million farmers will also boost rural incomes, Chidambaram said.

India's economy may slow to 7.5 percent in the year ending March 31, after expanding 9 percent or more annually in the previous three years, according to the central bank. India's government wants to sustain growth rates above 9 percent to cut poverty in the world's most-populous country after China.

``To sustain 9 percent growth, you need international economies to turn around as well,'' said Jai Sinha, partner and co-head, India, at Booz & Co., a global management consulting firm. ``International capital flows into infrastructure and exports must pick up.''

Export makes up about fifth of India's $1.2 trillion economy. Chidambaram said any shortfall in shipments and overseas investment will be ``compensated'' by spurring demand in the local economy.

India's exports have weakened as the U.S., Europe and Japan fell into a recession in the third quarter. That's spooked investors into withdrawing money from emerging markets such as India, where foreign funds have pulled out a record $12.8 billion from the stock market this year.

Singha · Post by **Singha** » 19 Nov 2008 07:09

populism will hardly get them votes because by their nature, they are not cash handouts directly to people but run the gauntlet of a corrupt delivery mechanism with few oversight.

atleast in a road or bridge one can check physically (p.s. one very tall bridge in kashmir
railroad has already collapsed..wonder which korrupt local uber-cat had that contract?)

with foreign and domestic customers all in trouble, industries have no where to sell into
even if you start sending them bags of cash to continue production. even the chipanda
with its 0% margins and stealing from public via wink-wink bank loans is unable to offload.

I think only way out is building of physical infra and large ***domestic*** (not T90) defence & paramil contracts - more trucks, more jeeps, more clothing, more guns, more
ships etc. this is precisely the direction where chipanda will align its bailout package into
while UPA sit on their hands and promote secularism and cats paw attacks via media.

Suraj · Post by **Suraj** » 19 Nov 2008 12:02

More big rate cuts in the pipeline. GoI and RBI are apparently both of the view that inflation is now no longer an issue, and that faltering growth is.
Steep rate cuts likely next week

A meeting chaired by Prime Minister Manmohan Singh at his residence Monday and attended by RBI Governor D Subbarao and Finance Minister P Chidambaram, among others, discussed a 50 to 100 basis point cut in the cash reserve ratio (CRR), the repo rate, the reverse repo rate and the statutory liquidity ratio (SLR).

The rate cuts are expected to infuse Rs 80,000 crore into the banking system.

RBI is also likely to create a special repo window to allow banks to borrow up to 100 basis points of SLR — the percentage of deposits invested in government securities — to make available Rs 40,000 crore for infrastructure like national highway projects. RBI is expected to lend to banks at the repo rate and ask banks to on-lend to companies at lower margins under the facility.

Measures like providing additional liquidity to non-banking finance companies (NBFCs) were also discussed, sources added.

Others attending Monday’s meeting were Commerce Minister Kamal Nath and Planning Commission deputy chairman Montek Singh Ahluwalia.

Officials said the cut in repo (the rate at which RBI lends to banks) and reverse repo rate (the rate at which banks lend short-term money to RBI against government securities) are expected to act as a strong signal to banks to cut interest rates sharply.

These proposals follow a series of measures (see table) by the RBI over the past two months, which included paring CRR, the proportion of cash banks must keep with the RBI, 350 basis points to 5.5 per cent and SLR 100 basis points to 24 per cent and creating a Rs 60,000-crore special window for banks to draw on.

The repo rate has been cut 150 basis points to 7.5 per cent, but the reverse repo rate continues at 6 per cent. Interest rates on non-resident deposits have also been raised in a bid to attract more liquidity.

In response, government-owned banks lowered prime lending rates by up to 75 basis points, but large private lenders like ICICI Bank and HDFC Bank are yet to do so.

paramu · Post by **paramu** » 20 Nov 2008 07:07

Suraj wrote:More big rate cuts in the pipeline. GoI and RBI are apparently both of the view that inflation is now no longer an issue, and that faltering growth is.

You seem to give too much credit to our GoI for this action. For me, it looks like approaching election that makes them cut rate.

Singha · Post by **Singha** » 20 Nov 2008 08:58

DLF has demanded a housing interest rate of 7%

Muppalla · Post by **Muppalla** » 20 Nov 2008 09:15

Singha wrote:DLF has demanded a housing interest rate of 7%

I will not be surprised even if they get it what they want.

ramana · Post by **ramana** » 20 Nov 2008 10:49

Edited. Wrong thread

Raju · Post by **Raju** » 20 Nov 2008 10:57

Entire Kerala coast needs to be converted into major ship & naval building centre. Not only will ancilliary industries promote economic boom in the south but IN will be able to patrol sea lanes in entire Somalian stretch with 300 ships and provide maritime security services wherever necessary for a fee.

vina · Post by **vina** » 20 Nov 2008 11:24

Raju, lets be real. Despite, Cochin Shipyard Limited be ing the 'premier' building yard for decades, Kerala has been able to do diddly squat. Industry in Kerala in general, especially something with a large blue collar component is a non starter.

But yes, huge ship yards are coming up in the west coast and will put India on the map as a major ship building power in the years to come. However, that wont be in kerala, just run your eyes in the map , up along the coast and you will see a place called gujarat where all that is happening.. Heard companies like L&T, ABG, and the rest of them ?. All of them are putting up huge yards there.

Singha · Post by **Singha** » 20 Nov 2008 12:10

if anyone cares to comment - sensex down to 8300 levels today after a vertical drop on open.

Raju · Post by **Raju** » 20 Nov 2008 12:20

Ship yards will generate employment and global downturn will promote change in attitudes. Cochin Shipyard though tagged the 'premier shipyard' in the country just goes to show the poor standards which we accord to the 'premier shipyard'. Kerala as a whole suffers from tremendous neglect by central govt.

vina · Post by **vina** » 20 Nov 2008 12:40

Why blame the "central government". All this talk of central govt and this is and that is a terrible excuse and basically a cop out. Why should some one else come and owe you a living?.

Kerala , thanks to the Commie politics basically committed suicide industrially. Stuff like having the "eminent economist - Prabhat Patnaink" and the rest of his ilk as "Vice Chairman" of the State's 'Planning Commission' , doesnt seem to help much in terms of industrialization.

This "govt will come and feed me and family , educate me and also create prosperity" is a total dead end. Look at how EXACTLY kerala gets ahead and I will show you total individual initiative. Kerala, in large part is driven by migration (gelf and internally within India) and by tourism.

Now how did "gelf" come about ?. Dont tell me that ministry of "overseas" indians and some Paki land like "Manpower Export" ministry that the "Vice Chariman" would suggest is what did the trick. No sir, ordinary mallu Abduls, just picked up their bags and showed up in Gelf and looked for work and got the rest of his folks over as well!. Same with migration to the other parts of India.

And the only industrial "success" in Kerala, the tourism industry is almost entirely private driven and executed. If left to the govt we would have run down, low rent, flea infested rat holes, like the KSTDC hotels and there too, MLAs, Babus and other neta babu types would hog it (like Air India) and anyone who actually pays for that is probably the last in the list of priorities.

Raju · Post by **Raju** » 20 Nov 2008 12:46

Why blame CPI for all acts of omission committed by Central Govt. What prevents them from investing in railway sector.
In Kerala all those travelling by train take tickets by habit unlike other parts of India. What prevents the Central Govt from investing in railways. Even in ship building look at the productivity of Cochin Shipyard and compare it to others in India, I am sure for all the trade-union stuff they still have high productivity.

their ignoring this state is both crass and cruel. It seems Kerala must send MP's that can shout 100 gaalis in the sanctum of the hall and then put on a show of muscle power later to get things done in this cuckoo land.

Sachin · Post by **Sachin** » 20 Nov 2008 12:55

Raju wrote:It seems Kerala must send MP's that can shout 100 gaalis in the sanctum of the hall and then put on a show of muscle power later to get things done in this cuckoo land.

Kerala politicians are good at rabble rousing and putting up a great "intellectual air" (especially the commie budhijeevis). The commies may also be good in attacking Kerala police men etc. etc. But all their guts just vanish when they see the Parliament house in N.Delhi. The oft heard complaint is that Kerala MPs just don't have the pressurising tactics.

We had got one train during the previous NDA rule "Amritha Express". It took O.Rajagopal a Mallu who had to contest from Madhya Pradesh (?) in BJP ticket and become an MP to give Keralites the train

.

Singha · Post by **Singha** » 20 Nov 2008 13:24

imho Kerala has many advantages like sea coast, long traditions of trading and seafaring, mercantile class, easy tourism and big industrial states on all sides.

all that was needed was some better road and rail connectivity into TN, good power
and a business friendly state govt which CPI didnt care much for.

compared to NE states kerala doesnt suffer any of their disadvantages.

and there's no demographic invasion by the bhookadesh next door to NE or by UP/Bihar
to the extent seen in other parts.

Raju · Post by **Raju** » 20 Nov 2008 13:32

>>all that was needed was some better road and rail connectivity into TN, good power
and a business friendly state govt which CPI didnt care much for.

See this is what I am saying, rail connectivity isn't the fault of CPI(M). What little of new rail traffic kerala gets is routed through TN.

Singha · Post by **Singha** » 20 Nov 2008 13:44

so enforced / scared r2i's might still need to buy homes here and prop up the high end
a bit

http://510report.org/2008/11/03/fremont ... on-valley/

amol.p · Post by **amol.p** » 20 Nov 2008 17:11

Large-scale job cuts in India unlikely: Cabinet Secretary

http://economictimes.indiatimes.com/Eco ... 737372.cms

NEW DELHI: India is unlikely to see any large-scale job cuts as it has a strong domestic market to consume what it produces, Cabinet Secretary K M
Chandrasekhar said.

Suraj · Post by **Suraj** » 21 Nov 2008 00:48

Inflation is down from the prevailing 11% to just 8.9% now. Subbarao is going to be running around with scissors to cut rates now:
India Inflation Slows to 5-Month Low of 8.9%

India's inflation unexpectedly slowed to a five-month low, giving the central bank room to reduce borrowing costs to shore up a slowing economy. Bonds rose.

Wholesale prices rose 8.9 percent in the week to Nov. 8 from a year earlier after gaining 8.98 percent in the previous week, the commerce ministry said in New Delhi today. That was less than the median forecast of 9 percent in a Bloomberg News survey of 13 economists. The inflation rate has dropped from a 16-year high of 12.91 percent in the week to Aug. 2.

The Reserve Bank of India has scope to cut borrowing costs further as inflation approaches a level ``we can live with,'' Finance Minister Palaniappan Chidambaram said in a Nov. 18 interview. Growth in India's $1.2 trillion economy is weakening as a simultaneous recession in the U.S., Europe and Japan crimp demand for the nation's exports.

ramana · Post by **ramana** » 21 Nov 2008 04:22

Suraj, Gerard posted the Global trends 2025 report in the geopolitical thread. Please reveiw and give your opinions. Thanks ramana

Singha · Post by **Singha** » 21 Nov 2008 05:59

money.cnn.com

WSJ: Citigroup Plans To Trim 1,000 Workers In India - Source
Dow Jones
November 20, 2008: 12:06 PM EST

MUMBAI -(Dow Jones)- Citigroup Inc.'s (C) sizeable Indian operation lost its chief executive and expects to lay off more than 1,000 employees over the next few months.

Sanjay Nayar, chief executive of Citigroup in India and South Asia, will join Kohlberg Kravis Roberts & Co. early next year, the private-equity firm and Citigroup said Thursday.

The vast majority of the company's Indian job cuts will come from Citifinancial India, its lending arm, where it plans to gradually trim 1,000 workers over the next few months, according to a person familiar with Citigroup's plans.

(This story and related background material will be available on The Wall Street Journal Web site, WSJ.com.)

Citigroup will also cut several dozen additional positions from its investment and corporate banks, the same person said. The layoff plans are still being finalized and most of the people who will lose their jobs have yet to be notified. The expected layoffs are part of Citigroup's recently announced plan to cut about 50,000 jobs worldwide.

"We have mentioned previously that we're in the midst of restructuring Citifinancial to provide a more comprehensive relationship with clients by offering new products such as wealth management and insurance," said Godwin Chellam, head of corporate affairs for Citigroup in South Asia. "As part of the move, some jobs may be made redundant, but it is too early to speculate on numbers."

Citigroup management is trying to find ways to move laid-off employees into other jobs at the bank, the person familiar with the bank's plans said. Many are young people only recently hired, this person said.

Citigroup's India operations currently employ about 7,000 people in retail banking, including consumer and lending services, and about 3,000 in corporate and investment banking.

The company, which recently sold its Indian back-office operations employing 12,000 people, is also looking to unload another part of its business in India, according to another person familiar with the bank's plans. Citigroup is currently in discussions to sell its 2,000-person technology-services outsourcing unit, according to this person.

Nayar, Citigroup's outgoing India CEO, will become chief executive of KKR India, a job he begins early next year. He will be based in Mumbai, where KKR is planning to set up a new office and recruit additional staff. At Citigroup, Nayar was a member of Citigroup Asia's executive operating committee and senior leadership committee.

Citigroup said it has appointed Mark Robinson, a 24-year company veteran, to replace Nayar.

Nayar's KKR appointment comes amid continued interest by private-equity firms in Asia because of the region's relatively strong growth and debt levels that are lower than those in the U.S. or Europe.

"India is now a core part of our growing global private-equity and investment platform," KKR's founding partners Henry Kravis and George Roberts said. "We believe India's compelling demographics, dynamic economy and culture of entrepreneurship will provide superior long-term investment opportunities."

India's vast infrastructure needs have attracted multibillion-dollar funds to finance projects. London-based 3i Group PLC, for example, raised $1.2 billion for its India Infrastructure fund last year.

Other firms that have been eyeing investments in India include Candover Investments PLC, which opened a new office in India earlier this year, as well as Carlyle Group, which hired a Citigroup banker, Devinjit Singh, to bulk up its management in India.

Overall, however, the pace of private-equity investments in India has slowed. According to Venture Intelligence, funds invested about $3 billion in Indian companies through 116 deals between July and September. By comparison, firms invested $4.2 billion through 115 deals in the same period a year earlier.

ramana · Post by **ramana** » 21 Nov 2008 08:31

I guess they didnt hear MMS appeal not to layoff till elections.

Singha · Post by **Singha** » 21 Nov 2008 08:32

its unlikely these people belong to a minority/caste vote bank.

Katare · Post by **Katare** » 22 Nov 2008 00:02

Suraj wrote:I disagree that FRBM and deficit targets are mere smoke and mirrors. That is an exaggeration. Off budget liabilities are a major concern, that the UPA in particular has been guilty of resorting to. But the benefits of the FRBM are very real, and the fact is the UPA did adhere to it, at least sufficiently that the country had years of real growth at a rate it has never seen before. The UPA is going to pay because of the economic downcycle, because they neglected to invest sufficiently for growth when they had the chance to.

I second that.

Although you are right about cess is not required by FC to be shared with state govt but there is another reason why it is prefered. In most cases all of the cess, not just the 30%, gets transfered to states like education cess. The cess mechanism allows federal govt to monitor money and this ensures that state govt can't use this money for populist measures like free electricity or Rs 2/kg rice. Govt also forces reforms and progress linked disbursal mechanism to ensure national goals are achieved. By large cess has worked for India in education(sarv siksha, mid-day meal etc) and Petroleum (NHAI and Rural roads) at least.

Sumeet · Post by **Sumeet** » 22 Nov 2008 01:28

Can any econ guru shed some light on rupee v/s dollar situation for next 3-4 months ? I mean will it remain around 50 (+/-1) or go over 50 or will come down to some sane figure like </= 45 etc ?

Katare · Post by **Katare** » 22 Nov 2008 02:26

Sumeet,

IMO Rs will remain under pressure for next 6-12 months but at around Rs50/1$ up/down potential is limited in short to mid term. We have significantly opened up our economy in last few years to the rest of the world without commensurate improvement in domestic competitiveness. Imports have gone through the roof while domestic competitiveness is constrained due to lack of reforms and politics of land & environment. As infrastructure spending grows and international prices decline we'll be importing a lot more in next few quarters in absence of effective tariff barriers which would put additional pressure on Rupee. A lot of the short term foreign currency commercial debt would not get rolled over, private equity and FCCB would decline due to liquidity crunch in international markets which would limit the availability of foreign currency in open market.

Oil and commodity price decline is the only saving grace but to some degree offset by declining export markets.

One thing is for sure that our financial market/policy is open/matured enough to allow for quick reflections and adjustment as per market realities.

Suraj · Post by **Suraj** » 22 Nov 2008 02:50

I would advise caution trying to bet on the direction of the Rupee at this point. At the very least it is going to be volatile, so making big bets on it means exposing oneself to significant exchange rate risk. I know this is a non-answer, but this is not a subject where definitive claims can be made at this point.

Ramana: I took a look at the NIC 2025 document. It seems heavy on prose and there's not much in terms of economic projections. It seems like an incremental update that essentially restates what has already been said. It just gains greater credence because of the recent financial turmoil and self-introspection in the US.

Sumeet · Post by **Sumeet** » 22 Nov 2008 11:42

Suraj & Katare thanks a lot.

John Snow · Post by **John Snow** » 22 Nov 2008 12:31

It is in the best interest of Indian economy for Rs to slide (even) further. ( I would say between (Rs 53 & Rs 54)

This will offset any protectionist Obama policy of curtailing Out sourcing as its cheaper for MNC to out source than in source (with uS).

This will put natural brakes on the rampant imports (of India) as they will be costly.

NRI repatriation of dollars ( if any in bank will) will be more attaractive.

etc etc much more...

I am betting RBI GOI will allow this happen in a gradual way, like the slip fielder easying the catch into his palm in the motion of the ball,,,