Indian Economy: News and Discussion (June 8 2008)

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Arya Sumantra
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Arya Sumantra »

John Snow wrote: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...
On the flip side, any decrease in oil prices in $ terms will be counter-acted by decrease in Rs value. This would mean no relief on oil. Growing economy needs cheaper oil.

BTW, I was watching the Middle East business report on BBC tonight. The BBC reporter was interviewing a stock trader in Kuwait's exchange. The trader lashed out at the FIIs in Kuwait stock exchange calling them speculators and not investors and justified his government's closure of stock exchange. The BBC reporter desperately tried to get him to condemn the closure of exchange but this trader simply hit back on the FIIs accusing them of hostile takeover of local companies by crashing the stock exchanges in middle east. If one is an investor he needs to trust the country's systems and should not pull out at the speed of a speculator. So true. Wish our GoI implemented some kind of regulations discouraging rapid sell out of stocks. May be they could implement a graded or stepped taxation on stock market gains in relation to speed of sale. The faster an FII sells the stocks the higher the tax. This would slow down their speed giving the aam admi investor some reaction time and also avoid investor panics.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Dileep »

[sorry!] :oops:
ldev
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by ldev »

Arya Sumantra wrote: On the flip side, any decrease in oil prices in $ terms will be counter-acted by decrease in Rs value. This would mean no relief on oil. Growing economy needs cheaper oil.
I dont want to nitpick, but do you have any idea how the price of petroleum products to consumers is arrived at? Will a higher or lower rupee/dollar have any direct impact on the pump price of petrol in India for example?

Suggest you do some reading on administered prices of petroleum.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by John Snow »

cross posting from India IT thread, to buttress my argument of the need to slide INR vs USD
As psoted by Ameet.
***
Infosys Boss: Outsourcing Will Increase
Despite the downturn, CEO Gopalakrishnan sees no need to cut staff—and in fact is hiring to meet future demand

http://www.businessweek.com/globalbiz/c ... l+business

The global meltdown is posing several challenges for IT companies. Apart from worrying about the wild currency fluctuations, IT players have to cope with uncertainties in new contracts, customers cutting back IT investments and an overall sluggish market scenario.

Despite the challenges, Infosys Technologies MD & CEO S Gopalakrishnan believes that there is no need to cut manpower and there are several untapped opportunities that Infosys can look at for future growth. ET caught up with him to discuss the slowdown, Infosys strategy, new areas that Infosys is betting on and more. Excerpts:

What impact are you seeing of the current economic slowdown on outsourcing?
The US bailout of AIG, the Lehman bankruptcy and related developmentshave had an overall negative impact and this will be prolonged before we see any recovery.

In a recent informal survey among our customers, we found there will be an increase in allocation for offshore work in some cases. We are hiring and will do so more, both onsite and offshore. We believe that due to the skills available, India will be a preferred offshore location.

What are the opportunities you're exploring now?
The business which is done under the global delivery model (GDM) is a very small part of the overall IT spending. The overall IT services spending is about $800 billion. Outsourcing is about $250 billion. The exports from India are about $40 billion or 5%. Also, it includes captives so the third-party number is much lower.

So, what we are telling our clients is that they can get much more savings from transitioning to GDM. About 90% of our revenue comes from the US and Europe. Even in Europe, we are present in the UK, Germany, Switzerland, the Netherlands and France. There are places we are not present in. There are sectors we don't do much work in, public sector, government and healthcare. Those are all opportunities where we can look for growth in the future.

Before the current crisis, there was a focus on moving beyond cost-cutting to high-end work. Is the focus is back on cost-cutting?
Actually, consulting is growing very well and that is high-end. We have limited capabilities in consulting but we are seeing increased opportunities. Companies are looking at consultants to tell them how to optimise their costs, increase their revenues, what kind of restructuring should they do. There is a lot of M&A and integration work.

Which are the areas in R&D that you're particularly focussing on?
We are investing in IP solutions. With our own R&D, we are able to do more value-added services. So, we will continue to invest in R&D, even in such times. It's also a good way to utilise the bench. We are investing in R&D in every sector that we are present in, BFSI, manufacturing, retail, telecom.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Najunamar »

[quote="ldev
I dont want to nitpick, but do you have any idea how the price of petroleum products to consumers is arrived at? Will a higher or lower rupee/dollar have any direct impact on the pump price of petrol in India for example?

Suggest you do some reading on administered prices of petroleum.[/quote]

Quick question to the Guru log! What is the outlook for oil and energy prices in India? Will aam admi see any relief at the pump possibly as part of the populist measures prior to the election?
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Singha »

uncommented by our radar, the GOI last week increased the salary of all PSU employees.

I believe the take home is almost doubled now. take home = basic + HRA(30% of basic) + special allowances + DA (x% of basic)....

erections are here and every vote counts!
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Singha »

http://www.nytimes.com/2008/11/23/weeki ... .html?_r=1

The World
India Calling

By ANAND GIRIDHARADAS
Published: November 22, 2008


“WHAT are Papa and I doing here?”

These words, instant-messaged by my mother in a suburb of Washington, D.C., whizzed through the deep-ocean cables and came to me in the village where I’m now living, in the country that she left.

It was five years ago that I left America to come live and work in India. Now, in our family and among our Indian-American friends, other children of immigrants are exploring motherland opportunities. As economies convulse in the West and jobs dry up, the idea is spreading virally in émigré homes.

Which raises a heart-stirring question: If our parents left India and trudged westward for us, if they manufactured from scratch a new life there for us, if they slogged, saved, sacrificed to make our lives lighter than theirs, then what does it mean when we choose to migrate to the place they forsook?

If we are here, what are they doing there?

They came of age in the 1970s, when the “there” seemed paved with possibility and the “here” seemed paved with potholes. As a young trainee, my father felt frustrated in companies that awarded roles based on age, not achievement. He looked at his bosses, 20 years ahead of him in line, and concluded that he didn’t want to spend his life becoming them.

My parents married in India and then embarked to America on a lonely, thrilling adventure. They learned together to drive, shop in malls, paint a house. They decided who and how to be. They kept reinventing themselves, discarding the invention, starting anew. My father became a management consultant, an entrepreneur, a human-resources executive, then a Ph.D. candidate. My mother began as a homemaker, learned ceramics, became a ceramics teacher and then the head of the art department at one of Washington’s best schools.

It was extraordinary, and ordinary: This is what America did to people, what it always has done.

My parents brought us to India every few years as children. I relished time with relatives; but India always felt alien, impenetrable, frozen.

Perhaps it was the survivalism born of scarcity: the fierce pushing to get off the plane, the miserliness even of the rich, the obsession with doctors and engineers and the neglect of all others. Perhaps it was the bureaucracy, the need to know someone to do anything. Or the culture shock of servitude: a child’s horror at reading “Uncle Tom’s Cabin” in an American middle school, then seeing servants slapped and degraded in India.

My firsthand impression of India seemed to confirm the rearview immigrant myth of it: a land of impossibilities. But history bends and swerves, and sometimes swivels fully around.

India, having fruitlessly pursued command economics, tried something new: It liberalized, privatized, globalized. The economy boomed, and hope began to course through towns and villages shackled by fatalism and low expectations.

America, meanwhile, floundered. In a blink of history came 9/11, outsourcing, Afghanistan, Iraq, Katrina, rising economies, rogue nuclear nations, climate change, dwindling oil, a financial crisis.

Pessimism crept into the sunniest nation. A vast majority saw America going astray. Books heralded a “Post-American World.” Even in the wake of a historic presidential election, culminating in a dramatic change in direction, it remained unclear whether the United States could be delivered from its woes any time soon.

“In the U.S., there’s a crisis of confidence,” said Nandan Nilekani, co-chairman of Infosys Technologies, the Indian software giant. “In India,” he added, “for the first time after decades or centuries, there is a sense of optimism about the future, a sense that our children’s futures can be better than ours if we try hard enough.”

My love for the country of my birth has never flickered. But these new times piqued interest in my ancestral land. Many of us, the stepchildren of India, felt its change of spirit, felt the gravitational force of condensed hope. And we came.

Exact data on émigrés working in India or spending more time here are scarce. But this is one indicator: India unveiled an Overseas Citizen of India card in 2006, offering foreign citizens of Indian origin visa-free entry for life and making it easier to work in the country. By this July, more than 280,000 émigrés had signed up, according to The Economic Times, a business daily, including 120,000 from the United States.

At first we felt confused by India’s formalities and hierarchies, by British phraseology even the British had jettisoned, by the ubiquity of acronyms. We wondered what newspapers meant when they said, “INSAT-4CR in orbit, DTH to get a boost.” (Apparently, it meant a satellite would soon beam direct-to-home television signals.)

Working in offices, some of us were perplexed to be invited to “S&M conferences,” only to discover that this denoted sales and marketing. Several found to their chagrin that it is acceptable for another man to touch your inner thigh when you crack a joke in a meeting.
:rotfl: :twisted:

We learned new expressions: “He is on tour” (Means: He is traveling. Doesn’t mean: He has joined U2.); “What is your native place?” (Means: Where did your ancestors live? Doesn’t mean: What hospital delivered you?); “Two minutes” (Means: An hour. Doesn’t mean: Two minutes.). :rotfl:

We tried to reinvent ourselves, as our parents had, but in reverse. Some studied Hindi, others yoga. Some visited the Ganges to find themselves; others tried days-long meditations.

Many of us who shunned Indian clothes in youth began wearing kurtas and chappals, saris and churidars. There was a sad truth in this: We had waited for our heritage to become cool to the world before we draped its colors and textures on our own backs.

We learned how to make friends here, and that it requires befriending families. We learned to love here: Men found fondness for the elusive Indian woman; women surprised themselves in succumbing to chauvinistic, mother-spoiled men. :P

We forged dual-use accents. We spoke in foreign accents by default. But when it came to arguing with accountants or ordering takeout kebabs, we went sing-song Indian.

We gravitated to work specially suited to us. If there is a creative class, in Richard Florida’s phrase, there is also emerging what might be called a fusion class: people positioned to mediate among the multiple societies that claim them.

India’s second-generation returnees have built boutiques that fuse Indian fabrics with Western cuts, founded companies that train a generation to work in Western companies, become dealmakers in investment firms that speak equally to Wall Street and Dalal Street, mixed albums that combine throbbing tabla with Western melodies.

Our parents’ generation helped India from afar. They sent money, advised charities, guided hedge-fund dollars into the Bombay Stock Exchange. But most were too implicated in India to return. Our generation, unscathed by it, was freer to embrace it.

Countries like India once fretted about a “brain drain.” We are learning now that “brain circulation,” as some call it, may be more apt.

India did not export brains; it invested them. It sent millions away. In the freedom of new soil, they flowered. They seeded a new generation that, having blossomed, did what humans have always done: chase the frontier of the future.

Which just happened, for many of us, to be the frontier of our own pasts.
Manu
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Manu »

Link
Sonia Gandhi will have grabbed a few more headlines than she would have liked with her speech at the Hindustan Times summit on Friday. Speaking of India’s resilience in the face of crisis, she mentioned Indira Gandhi’s “much reviled nationalisation of banks” in 1969; describing it as a sign of “prudence”, she went on to say that “public sector financial institutions have given the economy the stability and the resilience we are now witnessing in the face of the economic slowdown.” This claim is a truly worrying perversion of history, and not one that should be allowed to pass into the record unchallenged.

There are many, many ways in which that statement is wrong. Here is one: the public sector banks aren’t really providing the resilience in question. Non-performing assets — bad debts — will obviously be systemically higher at banks which have lending priorities dictated by the government rather than by the market: NPAs are, of course, a prime source of financial contagion and instability. Here’s another: any institution, whether state-owned or not, could provide stability if backed by government policy at a time of crisis, so that state-backed institutions in our case have been state-owned for decades is really quite irrelevant. Here’s a third: the “stability and resilience” being praised is the flip side of just not being grown-up enough, of not having a real financial sector that could keep our economy growing.

And, above all, there is this extraordinary leap of logic: that a decision universally decried as particularly harmful to the Indian economy, one which is believed to have retarded investment and thus growth for 40 years, should be considered prudent — for supposedly slightly moderating a crisis 40 years after it came into force. This is incomprehensible economics, and puzzling politics. The Congress — especially through Prime Minister Manmohan Singh — has, after all, tried to place itself politically as both the technocratic and human face of post-1991 reform. Why wake up the worst beasts of ’70s populism? Let us hope that the reference was nothing more than a particularly egregious error of judgment in choosing an example; because the alternative — that it represents the beginnings of a disastrous shift in values — is completely unacceptable. Gandhi said elsewhere in her speech that there is “no need” to return to the era of state control: there is less than “no need”, it would be calamitous if India even began to try. This is no time for mixed, statist, messages: don’t you know there’s a crisis on?
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Abhijeet »

This is what I've mentioned before about the wrong lessons being learnt in India from the financial crisis, and subsequent results on the pace of reforms. Hopefully statements such as these are treated with the derision they deserve.
Arya Sumantra
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Arya Sumantra »

ldev wrote:
Arya Sumantra wrote: On the flip side, any decrease in oil prices in $ terms will be counter-acted by decrease in Rs value. This would mean no relief on oil. Growing economy needs cheaper oil.
I dont want to nitpick, but do you have any idea how the price of petroleum products to consumers is arrived at? Will a higher or lower rupee/dollar have any direct impact on the pump price of petrol in India for example?

Suggest you do some reading on administered prices of petroleum.
Does it take research to conclude that if the crude prices go up the country takes a hit? whether it is consumer at pump or GoI absorbing the rise(and showing up deficits and raising taxes) eventually it comes down to common man. All I said was that prices of crude in Rs terms can still go up inspite of oil price decrease in $ terms due to Rs devaluation.
ldev
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by ldev »

Arya Sumantra wrote: Does it take research to conclude that if the crude prices go up the country takes a hit? whether it is consumer at pump or GoI absorbing the rise(and showing up deficits and raising taxes) eventually it comes down to common man
Again, I suggest you find out why in the recent gyrations in crude oil prices... up to $140/bbl + and now down to $50/bbl... the price at the pump in India has barely budged. Who has taken the hit for this so far? Is it GOI, the oil companies or the consumer? What would have been the consumption pattern if there had been a straight and transparent passthrough in crude prices to pump prices. What would have been the economic impact and the political impact at the pump? How is the country affected with oil companies being impacted vis a vis the consumer being impacted? Or is is same same in your opinion?
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by joshvajohn »

The PM is sure that he would not be elected again as PM. So he is not bothered about the public who is going to vote. Even the other Ministers Petrolium and others do not bother because they get enough for their generations a bit of share from the private oil sellers to maintain the price. Sonia is worried but ministers including PM, FM or Petrol Min no one is in the mood of listening. So now wait until the state elections are over. Possibly Sonia realised his son is not making a charming impact as Rajiv on the public so why bother? the Ruling parties are in no mood to calculate their chances in the next election by doing something good for the public to turn into votes. May be, Sonia has to bring her daughter as next possible prime ministerial candidate rather than son or she herself has to interfere into reducing the prices of oil and make the people to spend some extra money they get or at least buy low priced shares in the market. There is a good possibility of big losses for Congress and so others because of their anti-poor policy. Though they have done a lot for the farmers and other people in this category due to their last minute economic fixed mindset they would loose this election altogether. It seems that congress themselves do not wish to be elected again which is observable from their recent economic policies and behaviour.




Public sector oilcos may have to follow suit if private players go for price cuts
24 Nov 2008, 0106 hrs IST, Rajeev Jayaswal, ET Bureau

Print EMail Discuss Share Save Comment Text:
NEW DELHI: Public sector oil marketing companies — Indianoil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) — will
be forced to reduce petrol and diesel prices irrespective of political pressure, if their private counterparts, Reliance Industries (RIL), Essar Oil and Shell India, slash prices to grab a large market-share. No oil marketing company (OMC) has, so far, cut auto fuel prices despite gaining a margin of Rs 9.86 per litre on petrol and Rs 0.70 per litre on diesel.

http://economictimes.indiatimes.com/New ... 748943.cms
Last edited by joshvajohn on 24 Nov 2008 05:54, edited 4 times in total.
Katare
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Katare »

joshvajohn wrote:The PM is sure that he would not be elected again as PM. So he is not bothered about the public who is going to vote. Even the other Ministers Petrolium and others do not bother because they get enough for their generations a bit of share from the private oil sellers to maintain the price. Sonia is worried but ministers including PM, FM or Petrol Min no one is in the mood of listening. So now wait until the state elections are over. Possibly Sonia realised his son is not making a charming impact as Rajiv on the public so why bother? the Ruling parties are in no mood to calculate their chances in the next election by doing something good for hte public to turn into votes. May Sonia has to bring her daughter rather than son or she herself has to interfere into reducing the prices of oil and make the people to spend some extra money they get or at least by low priced shares in the market. There is a good possibility of big losses for Congress and so others because of their anti-poor policy. Though they have done a lot for the farmers and other people in this category due to their last minute economic fixed mindset they would loose this election altogether. It seems that congress themselves do not wish to be elected again which is observable from their recent economic policies and behaviour.




Public sector oilcos may have to follow suit if private players go for price cuts
24 Nov 2008, 0106 hrs IST, Rajeev Jayaswal, ET Bureau

Print EMail Discuss Share Save Comment Text:
NEW DELHI: Public sector oil marketing companies — Indianoil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) — will
be forced to reduce petrol and diesel prices irrespective of political pressure, if their private counterparts, Reliance Industries (RIL), Essar Oil and Shell India, slash prices to grab a large market-share. No oil marketing company (OMC) has, so far, cut auto fuel prices despite gaining a margin of Rs 9.86 per litre on petrol and Rs 0.70 per litre on diesel.

http://economictimes.indiatimes.com/New ... 748943.cms
You are so ill informed that its not even funny.
joshvajohn
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by joshvajohn »

It is also not funny to play with millions and millions of middle class and lower middle class people's lives in India who just live (on the edges) with their monthly income paying prices for the risen cost of the commodities in the markets alongside the petrol costs for their two wheelers and so on . Not everyone benefits from the IT boom. The decision that top level people make particularly people like MNS or FM or even any others, directly affect and make the poor and lower middle class so vulnerable to their immediate contexts. If one cannot think of such people when they are in power, I do not know what else people can do when they vote, they not only vote against them but they can never forgive them for forgetting these people with an earning to pay their bills and loans and also for siding with the rich and the richest in the world. What is asked of them is to keep what they have told in public - to keep the price of the petrol according to the international prices - to maintain the common minimum programme that is to maintain reform with human face - if they do not remember those things what else would you do except....
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by svinayak »

joshvajohn wrote:It is also not funny to play with millions and millions of middle class and lower middle class people's lives in India who just live (on the edges) with their monthly income paying prices .
That is what is happening for the last 50 years
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by ramana »

Katare, Please rebut JJ with arguements and not comments.

Thanks, ramana
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by sarabpal.s »

R financial institution really funding in the market.

In my view they are not.They just showing that we are reducing the rate but what use when they don't funding in the market special to SME sector.
Please post your view :roll:
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Katare »

ramana wrote:Katare, Please rebut JJ with arguements and not comments.

Thanks, ramana
What he is discussing is not economics but politics, elections and socialism and family dynasty etc.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Katare »

joshvajohn wrote:The PM is sure that he would not be elected again as PM. So he is not bothered about the public who is going to vote. Even the other Ministers Petrolium and others do not bother because they get enough for their generations a bit of share from the private oil sellers to maintain the price. Sonia is worried but ministers including PM, FM or Petrol Min no one is in the mood of listening. So now wait until the state elections are over. Possibly Sonia realised his son is not making a charming impact as Rajiv on the public so why bother? the Ruling parties are in no mood to calculate their chances in the next election by doing something good for the public to turn into votes. May be, Sonia has to bring her daughter as next possible prime ministerial candidate rather than son or she herself has to interfere into reducing the prices of oil and make the people to spend some extra money they get or at least buy low priced shares in the market. There is a good possibility of big losses for Congress and so others because of their anti-poor policy. Though they have done a lot for the farmers and other people in this category due to their last minute economic fixed mindset they would loose this election altogether. It seems that congress themselves do not wish to be elected again which is observable from their recent economic policies and behaviour.




Public sector oilcos may have to follow suit if private players go for price cuts
24 Nov 2008, 0106 hrs IST, Rajeev Jayaswal, ET Bureau

Print EMail Discuss Share Save Comment Text:
NEW DELHI: Public sector oil marketing companies — Indianoil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) — will
be forced to reduce petrol and diesel prices irrespective of political pressure, if their private counterparts, Reliance Industries (RIL), Essar Oil and Shell India, slash prices to grab a large market-share. No oil marketing company (OMC) has, so far, cut auto fuel prices despite gaining a margin of Rs 9.86 per litre on petrol and Rs 0.70 per litre on diesel.

http://economictimes.indiatimes.com/New ... 748943.cms
JJ,

There is no private oil seller left in India. They were driven out of business of selling oil by pro-poor low-oil politics of Sonia/MMS/Rahul. No one can get bribes from anyone for driving them out of business and sinking their billions of dollar in investment.

What is the purpose and source of you knowing Sonia is worried and her ministers not listening and they are not worried about winning election or her daughter would need to come to politics to make them listen? Do you think your post is inline with the kind of discussion that we are having or allowed at this part of the forum?

What is your basis of claiming that oil prices needs to come down when they didn't go up in first place in line with international prices to provide relief to middle class and economy? This has been clarified by several people on this very thread….

What is your basis of claiming that it'll be pro-poor policy? How many poor/BPL consume petrol or what percentage of their income is spent on commuting/traveling and is their commuting cost dependent on oil prices?

It is bad economics and anti-poor to create national debt by subsidize oil/gas for middle class. Instead they should use that money for capital expenditure to create fixed assets and employments for poor and all. India is struggling to enact a policy of free market pricing for petroleum products for almost a decade.

If you want to finance peoples gas/petroleum purchases by creating debt, how would you pay for that debt when it matures? Do you know how GoI ends up paying for that? By printing more paper money which results in inflation, guess what poor are the ones who suffers most when inflation hits.

There is no limit of what you/voter would want as entitlement from govt but you must know govt has to take it from someone to give it to some one else based on political priorities. More often than not govts end up taking from poor and giving it to rich when they follow these unsound economic policies.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by joshvajohn »

There is no private retailers in selling petrol!! If you note the news quoted earlier from the Economic times that private companies are making a margin of 9 + Rupees which they are ready to cut a bit to get the customers... the Economic times must have been wrong to say that there are considerable private retailers in Petrol.

Here is more news to read about Private retailers...
In 1976, India barred the private sector from participating in fuel retail and nationalised the local businesses of international oil companies. Brands commonly seen at petrol stations elsewhere in the world - Shell, Esso and Caltex - disappeared from the Indian market. Shell, for instance, became Bharat Petroleum and Esso metamorphosed into Hindustan Petroleum.

In 2002, however, the government made a U-turn, allowing multinationals and other private players to re-enter the market. The policy shift sparked a rush of service station openings as both private and public companies positioned themselves to sell to the nation's growing, increasingly mobile middle class.

http://www.shell.com/home/content/about ... 82007.html


Essar restarts operations at mothballed Indian petrol stations

Indian oil refiner and fuel retailer Essar has said that it will be restarting its indefinitely-shutdown petrol stations across India as crude oil prices have dropped below $70 per barrel.

Essar had begun restarting approximately 1,250 petrol bunks in the country in August 2008, and has already made around 300-350 outlets operational, mostly in the southern and western parts of India.

http://www.datamonitor.com/industries/n ... e=NewsWire
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by joshvajohn »

I am assuming that these semi government petrol supplying companies (corporations) wanted to make or maintain a reasonable profit for the government and for the shareholders. I do not think that middle class wanted any subsidiaries from the government. They are the regular and large tax payers not only IT but also buyers of goods and thus pay in many forms taxes. Already there are enough tax regimes including Petrol prices and so increasing prices of commodities make their lives difficult. When the prices went up the government went on increasing the price of petrol saying when it comes down we will certainly bring it down. They refused to listen to a cut of taxes in Petrol prices - state govts wanted the central govts to cut and vice versa.
Now having come down radically in prices more than half (if it is not so no one would have bothered to ask to reduce the prices) the price we are wondering at the logic of the govt of not reducing the prices. Secondly for the central governments' free programmes the middle class through their taxes supported them with generosity then why then reduce a bit of their expense by reducing the oil price and also make them to spend in the market or buy the shares which would help to get out of the present economic problems!!!
I should say I am not economist but I do not think these things need an economist mind to recognise and challenge.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by vina »

Kiyoshi Ito, the mathematician behind much of stochastic calculus , famous for Ito's Lemma, dies , aged 93.

Now what has this got to do with Economy ?. Well, Ito's Lemma and entire stochastic calculus of using martingales and semi martingales are the fundamental math behind derivatives. It describes random events like Brownian Motion perfectly..

So the entire voodoo math behind derivatives and options theory is based on the work of Ito. Now the idiots in Economics and other statistical math applying idiots in social "sciences" cannot think of the fact that while Brownian motion kind of things are inviolate and holds everywhere and everytime, and so a math that describes it perfectly is accurate in itself, when applied to stuff like movement of stocks, where the behavior changes randomly in certain circumstances, the fundamental assumtptions are flawed the the model doesnt hold in most conditions, but in a very small subset of conditions! The Finance guys used to marvel how the differential equation of option pricing is exactly like the "Heat Equation" differential equation. Of course it will morons, because you guys assumed the basic statistic model of heat is the same as that for stocks and so the equivalent equation for stock prices will be the same as that of heat!.

Of course our JNU/DSE /ISI planning commission ding dongs will get a massive kick that they know and mastered Ito's lemmas and martingale measures and feel more proud and all knowing than the dhoti clad yindoo bania in the bazaar, who responds to prices and market movements and doesnt have a clue of Mr Ito and his lemmas... But guess who is the wiser of the two ? The idiot who applies linear regression and stochastic calculus models to devishly complex and perfectly unpredicitable stuff such as human nature and social interactions, where it is close to impossible to have controlled experiments and be a perfect empiricist like in physical sciences like Physics, chemistry and biology !. Oh, the hubris of the entire thing. They are "scientific" , hence "correct" and "infalliable" and have a millenarian Marxist conviction of being "right" ultimately.
The New York Times
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November 24, 2008
Kiyoshi Ito, 93, Mathematician Who Described Random Motion, Dies
By STEVE LOHR

Kiyoshi Ito, a mathematician whose innovative models of random motion are used today in fields as diverse as finance and biology, died Nov. 10 at a hospital in Kyoto, Japan. He was 93.

His death was confirmed by his daughter, Junko Ito.

Mr. Ito is known for his contributions to probability theory, the study of randomness. His work, starting in the 1940s, built on the earlier breakthroughs of Albert Einstein and Norbert Wiener. Mr. Ito’s mathematical framework for describing the evolution of random phenomena came to be known as the Ito Calculus.

“People all over realized that what Ito had done explained things that were unexplainable before,” said Daniel Stroock, a professor of mathematics at the Massachusetts Institute of Technology.

Mr. Ito’s research was theoretical, but his models served as a tool kit for others, notably in finance. Robert C. Merton, a winner of the Nobel in economic science, said he found Mr. Ito’s model “a very useful tool” in his research on the evolution of stock prices in a portfolio and, later, in helping develop a theory for pricing stock options that is used on Wall Street today. Mr. Ito, he said, was “a very eminent mathematician.”

Starting in the 1950s, Mr. Ito spent lengthy stints outside Japan at the Institute for Advanced Study in Princeton, N.J., Aarhus University in Denmark, Cornell and Stanford.

Japan is often said to have an inward-looking culture, Mr. Stroock noted. “But this was a man who was the opposite of insular,” said Mr. Stroock, who occasionally collaborated with Mr. Ito.

Kiyoshi Ito was born Sept. 7, 1915, in a farm town west of Nagoya, Japan. An excellent student, he was accepted to Japan’s elite Tokyo University. After graduating, he spent the war years mainly as a statistician in a government office, worked briefly as an assistant professor at Nagoya University and returned to Tokyo University for his doctorate in 1945.

Mr. Ito learned four foreign languages, Chinese, German, French and English. Yet he mastered them as written languages instead of conversationally. He liked to joke about how his spoken English was impenetrable to many Americans, notably on a car trip to Texas with his youngest daughter, Junko, who ended up doing all the talking with Texans.

Mr. Ito collected many professional honors and awards over the years. He was a foreign member of the national academies of science in the United States and France. He was awarded the Kyoto Prize, the Wolf Foundation Prize of Israel and the Carl Friedrich Gauss Prize of Germany.

Mr. Ito is survived by his three daughters, Keiko Kojima of Otsu, Japan; Kazuko Sorensen of London; and Junko of Santa Cruz, Calif. His wife of 61 years, Shizue, died in 2000.

Mr. Stroock of M.I.T. said Mr. Ito had an intense curiosity, whether focused on math theory or world affairs or shoeing horses. When Mr. Stroock taught at the University of Colorado in the 1970s, he recalled, Mr. Ito stayed with him while they worked on a writing project together. One day, Mr. Stroock told Mr. Ito that he could not work on their book because his horses were being shod that day.

Mr. Ito eagerly trailed along. “He drove the farrier crazy because every time the guy did anything, Ito asked a question,” Mr. Stroock said.

Louise Story contributed reporting.

This article has been revised to reflect the following correction:

Correction: November 25, 2008
An obituary on Monday about the mathematician Kiyoshi Ito misstated the date of his death. It was Nov. 10, not Nov. 17. The obituary also misidentified the country where two of his three daughters were born. All three were born in Japan, not one in Japan, one in Denmark and one in the United States.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by pradeepe »

India GDP at 7-7.5 pct in Q2 - chief statistician

NEW DELHI (Reuters) - India's economy is likely to have grown between 7.0 and 7.5 percent annually in the July-September quarter and that should be roughly the rate of expansion for the current fiscal year as a whole, its chief statistician said.

Pronab Sen, secretary at the ministry of statistics and programme implementation, told Reuters gross domestic product (GDP) expansion may ease below trend expansion of about 7.3-7.4 percent in fiscal 2009/10.

"We could go sub-trend next year," Sen said in an interview as part of the Reuters India Investment Summit.

Asia's third-largest economy has grow at 9 percent or higher in the past three fiscal years.

It grew 7.9 percent in the June quarter from a year earlier, its slowest annual rate in 3-½ years. September quarter data is due on Friday.

Annual inflation, as measured by wholesale prices, has fallen from a peak of nearly 13 percent in August to 8.9 percent in early November, but Sen said it would not hold in single digits on a sustained basis until January.

"After that it should come down pretty rapidly. By March it should be down to 5 percent or less," he said.


The central bank projects inflation at 7 percent by the fiscal year end in March, and is aiming to bring it down to 5 percent as soon as possible.

Since the global credit crunch spilled into India's money markets in September and October, the Reserve Bank of India (RBI) has lowered its key lending rate by 150 basis points to 7.5 percent and slashed banks cash reserve ratio (CRR) by 350 basis points to 5.5 percent.

The CRR is the proportion of deposits banks have to hold the central bank, and Sen said there was scope for it to fall to 3.5 percent.

"Now I recognise that we don't have that much space left available on the CRR, but we still have 200 basis points," he said.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Singha »

TV is reporting GS, Mstanley and one more are letting go around 12-20 ibankers each, targeting those earning > 1 cr. four more cos were named
whose senior staff have been asked to look out for a job.
a placement guy was saying post-dated resignation letters have been taken with the threat that if you dont resign by that end date, they would
let it be known the person was let go for performance reasons.

GS declined to respond to story buy Mstanley said they were in process
of rightsizing.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by ramana »

Edited.ramana
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Suraj »

Agricultural growth should enable us to maintain GDP growth rate this year as well, besides providing better rural incomes that will boost consumer spending:
Farm output likely to surpass target
The first advance estimate for 2008-09, released on September 25 this year, had projected a decline in output of foodgrain, oilseeds, pulses, cotton, maize and coarse cereals, compared to the fourth advance estimate last year.

“Kharif will be much better than the first (advance estimate), as of now,” Agriculture Secretary T Nand Kumar said when asked about the government’s projection of farm output at a function organised by Agricultural and Processed Food Products Export Development Authority. He did not disclose by what margin the output would be higher than earlier estimate.

Commenting on sowing during the ongoing rabi season, Nand Kumar said, “Quite on target. Some very small areas in sugarcane in Uttar Pradesh (have been hit) because of late harvest. But we will catch up. Punjab, Haryana will be higher, therefore, overall acreage will be higher than the last year.”

In an interaction with mediapersons, Abhijit Sen, member of planning commission, said domestic agricultural commodity prices could be impacted next year if the global prices continue to fall.

He added that farmers are expected to respond to ‘price signals’ (referring to falling commodity prices) and this could impact domestic prices adversely in next fiscal. Agricultural commodities like palm oil and soybean oil have declined sharply in the last three months, and this is putting downward pressure on prices of goods that are not administered by the government.
OECD policy paper critiques GoI's fiscal profligancy:
India's fiscal consolidation 'highly relaxed', says OECD
The report notes that official figures on government spending show impressive deficit reductions at both the central and state levels since the introduction of the Fiscal Responsibility and Budget Management Act (FRBMA). However, off-budget spending and unfunded commitments have risen. Pay Commission increases for public sector employees and loan waivers for small farmers introduced in the last budget look set to add an additional 1 per cent of GDP to the fiscal deficit in 2008 and more to the deficits of state governments, according to the OECD. The government has so far only committed to reimburse the banks one-third of the cost of the loan waivers.

In addition, off-budget outlays on food, fertiliser and oil subsidies could amount to an additional 3 per cent of GDP in the current fiscal year, or even more, the report said, citing official estimates. “It would seem that the constraints imposed by FRBMA have led to soaring off-budget expenditure, bringing the consolidated fiscal deficit (including off-budget items) to 10 per cent of GDP in fiscal year 2009,” the report said, noting that the government’s fiscal consolidation efforts have been “highly relaxed”.

India’s current account deficit widened to 2 per cent of GDP in the first half of 2008, against only 0.5 per cent a year earlier, according to the Centre for Monitoring the Indian Economy (CMIE). The only silver lining has been that the inflation seems to have eased thanks to the sharp decline in prices of metals and petroleum. “Going forward, all indicators of inflation are expected to ease, in a context of lower commodity prices and slower growth,” the report said.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Singha »

Ramana, emailed you.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by ramana »

Thanks guys. Will be in touch.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Singha »

http://news.bbc.co.uk/2/hi/south_asia/7749901.stm
Page last updated at 11:59 GMT, Wednesday, 26 November 2008

India in spiritual tourist drive

India is being promoted as a year-round tourist destination

The Indian tourism ministry has come up with some innovative marketing to encourage people to visit the country despite worldwide economic turmoil.

It says that people worried about job losses, home loans and other forms of indebtedness should come to India to find "inner peace".

Tourism Minister Ambika Soni says that in times of crisis, people turn to God.

India has a reputation for being one of the most spiritual and spiritually diverse countries in the world.

'Pilgrimage tourism'

"When things look down... in financial crisis, people turn to God," Ms Soni told a conference of economic editors in Delhi on Tuesday.


She said that her country had an abundance of spiritual destinations for those bogged down by money woes and global economic uncertainty.

Destinations including world famous temples, mosques and churches combined with yoga and ancient healing practices would bring "inner peace", Ms Soni said, leaving them "physically healed, spiritually enriched and mentally rejuvenated".

Just over five million foreign tourists visited India in 2007, a rise of 14.2% from 2006.

But Ms Soni said that maintaining this growth would not be easy.

"It is a challenge but we see no reason to revise our target of 10 million tourists by 2010," she said.

The tourism ministry says that the worldwide economic downturn has meant fewer visitors from the US and the UK - so it is now concentrating its efforts on attracting more tourists from Asia.


"We have vibrant tourism services - from health tourism to rural tourism, pilgrimage tourism to adventure tourism. We have several plans in place to make us overcome the market slowdown and maintain our growth," Ms Soni said.

The ministry says that in 2007, tourism contributed 6.23% to India's gross domestic product and 8.78% of total employment in the country, creating thousands of jobs.

Ms Soni said that India was a "round-the-year" tourist destination which would appeal to everyone, despite what analysts say will be the world's worst financial crisis for 80 years.

A recent UN report said that despite India's vast size, diversity and array of historical monuments, it still ranks at number 42 in the world's holiday destinations - below much smaller countries such as Belgium and Hungary.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by ramana »

That OECD report doesn't it make the same case Vina and GD were making about the profligacy of Chidambaram's un-Joseph style of running the Indian economy?
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Nayak »

In India, Consumers Stop Shopping Because of the Economy

http://www.usnews.com/articles/news/wor ... onomy.html

After boom times, many Indians now worry about big debts for those new cars, TVs, and other purchases
By Anuj Chopra
Posted November 27, 2008

NEW DELHI, INDIA—For years, Jitendra Nikam's father warned him against aping a reckless western habit inexorably invading Indian society: credit card spending.

But the 34-year-old manager at an insurance company sees the world differently than his father, who belongs to an earlier generation that grew up in socialist India and balks at the idea of borrowing money. Nikam didn't worry about being mired in credit card debt. He has known mostly boom times, as India liberalized its economy, spawning millions of new jobs and a burgeoning middle class-a 300 million-strong, conspicuously consuming, earn-and-burn urban populace.

Now, though, he has lost nearly a year's salary—some $12,000—in the stock market's drop and faces the prospect of being laid off amid the economic slowdown. And he has a sizable debt from buying a sleek, 50-inch plasma TV, a portable DVD player, a washing machine—everything his father could only dream of owning in years past.

So, Nikam has put away his seven credit cards, vowing to change his habits. "These are uncertain times," he says. "We need to refrain from spending and save more."

In recent years, India's economic boom has spawned millions of jobs, lifting a massive chunk of India's population out of poverty. A new section of society emerged: a blossoming middle class (described as those earning $4,500 to $22,000 a year), which has a formidable spending power. The growing middle class in so-called emerging market countries such as India has been one of the engines of global economic growth, until the worldwide downturn knocked everyone back on their heels.

And now, many Indians risk jeopardizing their middle-class life.

Even though India hasn't witnessed a U.S.-style wave of layoffs, Indians, for the first time in many years, are forced to deal with a crimp in salaries and employment uncertainties. "As the economy slows down," predicts Rajesh Shukla, a senior fellow at the New Delhi-based National Council of Applied Economic Research, "the popular urban middle class cries of 'spend, spend, spend' will change to 'save, save, save.' "

India's nationalized banks are said to be fairly insulated from the global meltdown, but the financial crisis has virtually paralyzed the country's capital markets. India's stock market has lost half its value this year, a liquidity crisis plagues India's private-sector banks and financial institutions, and the inflation rate is approaching 10 percent. To top it all, the global economic crisis is slamming the brakes on what had been India's fast-growing economy, which was up 9 percent last year.

Shukla, who authored a research project called The Great Indian Middle Class, says that despite government measures, the economic downturn is causing a seismic shift in middle-class attitude from just a few months ago, when the economy was on a roll, Indian salaries were rising at the highest rate in Asia, and Indian consumer confidence was at its peak.

Since the boom began, Indian consumers—unlike consumers in the other emerging Asian behemoth, China—appeared more inclined to spend than save. India's gross national savings rate, a telling indicator of how much people earn over what they spend, rose from 14 percent in the 1960s to the current level of 28 percent. Although less than 30 percent of India's mammoth population of 1.2 billion can be classified as middle class today, the group accounts for three quarters of the consumption of high-end goods, such as cars, air conditioners, TVs, washing machines, and refrigerators.

India has enjoyed a long-term cycle in which rising incomes lead to increasing consumption which, in turn, creates more business opportunities and employment, further fueling economic growth. "Private consumption has already played a key role in India's growth than it has in that of other developing countries," McKinsey India, the international consulting firm said last year.

Some experts doubt that the middle class will tame its consumer aspirations right away. "People are buying less this year," says a sales agent at a glitzy mall in Delhi. "But the boom has spawned a large appetite for gadgets, swanky cars, and expensive kitchen appliances that can't just be wished away."

Better-off Indians won't be embracing an austere lifestyle very soon, says Sudeep Chabbra, the mall manager of Emporio, a luxury mall that opened in New Delhi in August. On three expansive floors, Emporio houses high-end luxury brands like Louis Vuitton, Cartier, Dior, Jimmy Choo, and Chopard. Its glass doors swing open into large oval atriums festooned with crystal chandeliers, fountains, and fittings of burnished wood and brass. Despite the slow down, says Chabbra, "the reception to Emporio has been pretty good."

Malls like Emporio are catering to India's upper middle class segment and a rapidly expanding millionaire base. But for now, the lower segment of its growing middle class is reportedly deferring purchases, and financial companies report a drop in loan applications. The consulting firm KPMG, which tracks spending patterns, reports that sales of products such as cars and consumer electronics—the symbols of Indian middle class aspirations—have dropped more than 15 percent since August.

Inside the swanky Select Citywalk Mall in New Delhi, Sunanda Rao, a 32-year-old opera singer, is spending her evening loading up some holiday gifts for her family. She has her eye on a chestnut-colored corduroy shirt for her husband. After learning the price, though, she hesitates. Her fingers brush past the crisp 500-rupee ($10) notes stacked in her fat wallet. "Maybe next time," she says, looking up at the salesman, and exits the store.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Vipul »

Results for Q4 will be really bad with exports down 12% for the month of October.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Suraj »

Q3 (Oct-Dec) is likely to be a writeoff, pretty much across the world. Where the recessionary circumstances themselves didn't crimp demand, the credit crunch did. One note about the export in October - while they are indeed down in real terms in US dollars, they are still up, but at a lower rate, in Rupees. This does matter, since our GDP is computer in Rupees. So in Rupee terms the fall isn't nearly as bad. See this article:
In dollar terms, exports this October dropped 12.1 per cent to $12.82 billion against a 50.93 per cent jump in the same month last year. Exports stood at $14.58 billion in October 2007.

In rupee terms, however, the depreciation of the Indian currency by 24 per cent (October to October) helped exports grow 8.2 per cent to touch Rs 23,360 crore. Though a fall in the value of local currency makes exports cheaper for consumers, it erodes earnings in dollar terms.
Industrial growth may yet pick up if GoI and RBI aggressively cut interest rates further and increase government spending in infrastructure. Another concern is that the price signals may result in lower rabi cropping, since prices have fallen significantly. The strong kharif crops helped keep the second quarter numbers stronger than expected, giving us 7.8% GDP growth for the first half, which isn't too shabby.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Singha »

BW

India's Moment of Truth
Its response to the terrorist attacks will have a huge effect on its economic future

By Jack and Suzy Welch
BW Exclusives


Of the 200-odd past columns posted on our Web site, few elicit more comments than "Who Will Rule the 21st Century?"—a piece we wrote in 2007 that predicted continued U.S. economic leadership, with India and China coming into parity in a matter of decades. As for which country would offer better chances for investors, we essentially took a pass, saying that the answer hinged on how well India and China capitalized on their huge advantages and handled their complex challenges.

Since that column appeared, a week hasn't gone by without at least a dozen questions continuing to press the matter. Readers often ask where foreign direct investors should place their bets: China, India, or if both, in what measure? Usually, we just set these questions aside. There wasn't much more, we reasoned, that we could say.

Sadly, with the terrorist attacks in Mumbai this week, there now is.

We love India. Its people have insights, creativity, and positive energy to spare; its entrepreneurs possess a rare indomitable spirit. Over the past 20 years, India has proven it can educate managers and front-line workers alike. And while it has struggled with road and energy infrastructure improvements, it has managed to muddle through with real progress.

But today, India is being tested as never before. And in the coming months the world, and in particular the global business community, will be watching for the answer to a crucial question: whether India can overcome its greatest obstacles to advancement, which include both terrorism and India itself.

Look, like too many countries today, India is no stranger to terrorist violence. Its parliament building was infiltrated and a dozen slain in 2001, and countless other attacks have occurred in Delhi, Jaipur, and Assam, leaving thousands dead. Even Mumbai has been struck before; seven synchronized train bombings in 2006 killed 186. Some of these attacks were conducted by homegrown groups. But the country is embroiled in a long-standing conflict with Pakistan (and, as a result, Afghanistan), and no one disputes that many of India's terror incidents have been perpetrated by outsiders.

None of this is news to India's foreign direct investors. What will be news in the months ahead is how the government responds. Because the attack in Mumbai, striking as it did at India's financial heart, showed just how risky doing business in India may become.

If other countries serve as any indication, India's future remains bright. September 11 revealed severe weaknesses in America's homeland security apparatus, just as the Mumbai attacks did with India's, and yet the U.S. swiftly organized a multipronged response. Similarly, Spain and Britain bounced back from brutal attacks in 2004 and 2005, respectively. Their governments redoubled anti-terrorism measures, and their people rallied.

Expect Indians to rally, too. They'll find the will to fight back, but can India's government provide a way? The changes required in homeland security will be massive. The country, for instance, is reported to have only 3,500 intelligence agents for 1.1 billion people. Compare that with the U.S., where the FBI employs 12,000 agents for 300 million residents. Perhaps more daunting is the challenge for India—with 22 official languages, dozens of political parties, and a Byzantine and often corrupt bureaucracy—to make the changes it needs with due speed. The country is led by an honorable man, Prime Minister Manmohan Singh, but his toughness is an issue, and with elections approaching, the opportunities for political mischief will be many.

With such a mixed picture, all foreign companies can do right now is boost security for their people—and wait. Meanwhile, many investors will be thinking about tilting the balance to China. That's understandable. Despite persistent worker protests, the Olympics this summer left little doubt of the country's ability to manage itself.

But China isn't really India's biggest economic challenge right now. India is. How its leaders respond to the Mumbai attacks will tell the business world what it wants and needs to know. Not just whether to pull back from India but how risky pushing forward will be.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Kakkaji »

Those IT-Vity business leaders who asked ABV to pull back from the brink during Parakram have themselves to blame for the loss in business confidence in Indian Economy now due to terrorist attacks.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Vipul »

Forex reserves: Sinking feeling?

The chickens are coming home to roost.

India’s assiduously built foreign exchange reserves of $320 billion have melted down to around $240 billion just a few months – a huge drop of $80 billion and still counting.

It was always a bit of a mirage. The country had a trade deficit thanks to soaring oil prices and rapid non-oil import growth.

This was offset by the phenomenal progress of software and service exports and remittances, which converted the trade deficit into a small current account surplus (although this too has disappeared going by recent data).

But the icing on the cake (if one could call it that) was the massive inflows of foreign capital seeking the outsize returns on portfolio investments in the booming stock market, private equity and real estate, facilitated in no small measure by the welcome mat of Government for such investments through its open door policy and tax exemptions.

‘Hot money’

Predictably, there was a mad rush to take advantage of the super profit opportunities.

About a third or more of the reserve build-up was ‘hot money’, ready to flee the moment near-term profit goals were realised (or things became difficult). But the Government was quick to put a spin of foreign investors’ strong belief in the Indian ‘growth story’.

What do we say now that the very same group exits tens of billions of dollars in weeks? Has the milk turned sour so soon?
Obviously, the investments were opportunistic in the first place and not out of faith in some distant long-term Indian promise.This is not to lay the blame on foreign investors, who are understandably profit seekers pure and simple, but to emphasise that we are the best judge of our best interests.

The noted economist, Mr Jagdish Bhagwati, has long drawn attention to the dangers of uncontrolled foreign capital movements thriving only on arbitraging interest and exchange rates or plucking the low-hanging fruit in stocks, earning, in the process, risk free profits.

No benefit accrues to the host country out of such (mere) financial engineering. On the contrary, it is exposed to sudden capital flight when the scope for arbitrage disappears or risk perceptions change.

Corporate debt

Compounding the present situation is the forex debt of Indian corporates maturing for repayment in the next months. Sold to foreign investors as bonds convertible to equity in a seemingly everlasting stock market boom, they must now be paid back as current stock prices are far below conversion prices.

It is a mess: dollar debt in companies with only rupee incomes (e.g. real estate developers) and for thoughtless foreign acquisitions at the market top in pursuit of marquee brand names and multinational status.Coming, as this timeline does, in trying business and market conditions and dwindling exports, banks must provide the rupee credit and the Reserve Bank of India the dollars for repayment.

Thus, our much-vaunted reserves could easily sink another $100 billion to the region of $150 billion. The rupee? Perhaps on course to Rs 55 against the dollar.
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by putnanja »

Goodbye, Mr Chidambaram
Goodbye, Mr Chidambaram

T. C. A. Srinivasa-Raghavan

Mr P. Chidambaram’s exit from the Finance Ministry was too sudden. There wasn’t even enough time to give him a proper farewell. But here it is, says T. C. A. SRINIVASA-RAGHAVAN.


For the last five years I have deliberately not written about the former Finance Minister, Mr P. Chidambaram. But now that he is gone from the Finance Ministry — forever, perhaps — it seems right that one should make amends, not least because has gone unsung.

Among the many victims that the attack on Mumbai has claimed is Mr Chidambaram. His exit from the Finance Ministry, which should have been accompanied by a sharp coda of trumpets, was an all-too-silent fadeout. No proper farewell, no tearful speeches, no newspaper (or TV) wraps of his long innings — just a melancholy goodbye to all this.

The disappointment showed when he met the Press. My colleague reported what Mr Chidambaram said: “When the Prime Minister conveyed this decision to me, I would be less than honest if I do not say that I was disinclined. But in a situation like the one we find ourselves in, the final call is taken by the Party leader — in my case the Congress President (Ms Sonia Gandhi) and Prime Minister (Dr Manmohan Singh). I, therefore, answered the call of duty and I would move this afternoon to the Ministry of Home Affairs.”

PC, as he is known, was not a popular finance minister. Indeed, he is not popular — period. It is hard to find someone who will say a kind word about him. They will praise his professional skills, his dedication, his mastery of the brief, his comprehension — all that sort of thing.

But as a human being he came across as arrogant. And that is how he will be remembered. While speaking, he often sounded as if he thought he was talking to retards, but that is his manner. Several of his colleagues in the council of ministers have told me that they hated having to deal with him. “Tehzeeb ki kami hai”, one of them said, meaning he didn’t have very good manners. Another admitted that he hated having to meet him. He could be unforgiving, touchy and irritable. A very intrepid and very influential economist once told me she hated his sharpness and proneness to take offence where none was intended.

Loss of lustre

Mr Chidambaram presented eight budgets. Most of them were excellent. He cut taxes, rationalised them, and did what any minister can to tone up the departments that collect taxes. Left to himself he would have balanced the Budget but he served Sonia Gandhi a bit too well and allowed the fiscal deficit to go up to around 10 per cent when you take into account the off-budget tricks he played. Staying on as Finance Minister was more important to him. Perhaps he thought India would be worse off if someone else took over. But how has he left it better off? That depends on whether you think you regard a fiscal deficit of around 10 per cent as manageable or not.

So, one should ask him the question: politics may impose compulsions on a minister but does it also impose compulsions on the soul? Many people have asked this question of Dr Manmohan Singh. It seems fair to ask it of Mr Chidambaram as well. The result has been loss of lustre and credibility, for both men.
Sensex all-important?

Could it be that only the Sensex mattered to Mr Chidambaram? The word in the Finance Ministry was certainly that. Did the Finance Ministry intervene in the markets through the LIC, etc.? So the officials said. Was the RBI a pain in the neck for him? So it seemed to informed observers. Did he tell the public sector banks to fix interest rates as instructed? Of course he did. Was he a micro-manager? Apparently.

Was he impatient with the institutions in the financial sector? Often enough. Did he pack them with IAS men? Of course he did. SEBI, IRDA, RBI, and PFRDA — all have IAS officers at the top.

When people discussed Mr Chidambaram, which was almost continuously, the question often arose as to where he was coming from at issues: as an economist, which he was not; as a politician, which he was; as a lawyer, which also he was; or simply as an upper-class amateur with a strong sense of public duty and fair-play.

My own ranking would be in reverse order of this: upper-class amateur and lawyer primarily, who was not at heart quite a politician but still managed to win elections, and a man who understood little of technical economics. He did surround himself with economists, though. But how often did he heed them?
Good intent

In intent, though, he was always good. Much as he may have been disliked for his manner, in the end India was fortunate to have him rather than someone else.
He will not be missed for some time yet, but when the storms begin to blow after the next general election, everyone will long for that slightly supercilious air of certitude, the patronising manner, the mastery of the brief and the deftness of touch.

Most of all, there were no flunkeys around him. You could see him at airports, standing quietly by himself, briefcase in hand.

Mr Chidambaram served India well in the Finance Ministry. If he didn’t do better — as with the deficit — it wasn’t altogether his fault.
Vipul
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Vipul »

Govt readies Rs 75k cr economy booster dose.

A high-level committee headed by prime minister Manmohan Singh is close to finalizing an economic stimulus package that is likely to be announced by the end of this week. The committee, which includes industry minister Kamal Nath, RBI governor D Subba Rao and planning commission deputy chairman Montek Singh Ahluwalia, met on Tuesday as well as Wednesday.

The package would add up to around Rs 75,000 cr, including use of up to $10 billion of forex reserves for funding infrastructure projects, lines of credit to banks and allowing non-banking financial companies (NBFCs) to access foreign loans, sources told TOI.

Apart from this general stimulus package, separate package are likely to be announced for the textiles and real estate sectors - both badly hit and labour-intensive - according to the sources.

Ahluwalia has for long been pushing the idea of using the RBI's forex reserves to fund infrastructure and that proposal is finally being accepted. Under the proposal now being finalized, RBI will use up to $10 bn from its reserves to buy bonds issued by foreign subsidiaries of the Indian Infrastructure Finance Corporation Ltd (IIFCL). The subsidiary will then bring this money into India and the parent company will use the rupee resources thus generated to lend to infrastructure projects.

The scheme is being seen as serving several purposes apart from giving IIFCL more funds to lend to infrastructure. First, when IIFCL sells the dollars back to RBI, the central bank will end up adding to the supply of rupees in the system, thus easing liquidity. Second, dollars that would otherwise have gone back to the US to buy US treasury bills will remain in India, thereby adding to the supply of the greenback and help in counteracting the depreciation of rupee.

It is proposed that IIFCL will use this money to lend to banks at 9%. Banks will on-lend it to companies executing infrastructure projects at around 11%. However, in this case banks want government to ensure viability of such projects since a two percentage point spread would otherwise not make commercial sense for them.

Apart from this, RBI will be asked to extend a line of credit of Rs 10,000 cr to the Small Industries Development Board of India (SIDBI) to lend to small scale units at 8%. RBI will lend these funds at about 6% to SIDBI.

A similar Rs 10,000 cr line of credit will also be opened by RBI for the National Housing Bank (NHB), which provides refinancing facilities to housing finance companies. NHB will be asked to lend to housing finance companies at rates of around 6-7% so that they can provide home loans to the ultimate consumers at around 9%. This, it is expected, will help revive the demand for housing that has gone down sharply in recent months.

The proposal to allow NBFCs to access external commercial borrowings (ECBs) is also likely to come through. The government believes that some NBFCs have credit lines tied up with foreign lenders and could easily bring in money if they are allowed to do so. The fact that in most such cases the money is being raised for infrastructure projects could have helped in overriding objections that the RBI had to this idea.
Suraj
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Re: Indian Economy: News and Discussion (June 8 2008)

Post by Suraj »

Mumbai attacks fail to derail foreign investors' schedule
India may have temporarily lost its charm of being a hot destination for foreign tourists in the wake of the recent terror attacks on Mumbai, but it still remains an important place for foreign investors by virtue of being a high-demand market.

The conferences and meetings being organised by industry bodies like the Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce and Industry (Ficci) have not seen any cancellation so far. However, the CII is rescheduling four events that were to be organised in the Taj Mahal Hotel, which was attacked by terrorists last week.

“People understand that terror is a global phenomenon and that there has to be an institutionalised administrative mechanism to deal with it,” said Banerjee and added that as long as there were business opportunities and demand, they would keep India going. “Where would they find 7.5 per cent growth with a democratic set-up,” Mitra said.
Securitised market safe and sound: CRISIL
Rating agency Crisil has placed the Indian retail securitisation market ahead of many countries, particularly the US, on the back of a superior profile of assets securitised in the country amid global meltdown. The rating agency said financial instruments created out of securitised assets in India are far less complex than those in developed markets.

With few rating downgrades, the Indian market has shown greater stability and has zeo losses on investor payouts, Crisil said. It, however, added that the size of the Indian market is very small compared with that of the United States.

“From the highest rating of AAA for structured instruments, only about 2 per cent of instruments have been downgraded over a one-year time-frame. This is quite comparable with the behaviour of Crisil’s AAA ratings for other instruments,” said Ajay Dwivedi, director, structured finance ratings, Crisil.

“The most significant factor characterising securitisation in India is the robustness of the underlying retail assets. Unlike in the US, there has been no securitisation of subprime housing loans in India” the agency added. Crisil also said investors in securitised paper in India have no reason to fear crippling losses of the kind that have hit their US counterparts.
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