Indian Economy: News and Discussion (June 8 2008)

[Vipul]

$50-billion debt shadow over rupee.

As much as $50.46 billion of external debt —- equivalent to nearly a quarter of India’s forex reserves —- is due to mature over the next 8 months.That potential outflow could add immense pressure on the already hammered rupee in the short term, experts said.

But the $273.88 billion of foreign exchange reserves could act as a buffer, and the Reserve Bank of India (RBI) could use it to facilitate the process of repayments, they said.(Reserves are already down by 35 Billion $ in the last 5 months)

Data released by RBI in June this year show $43.66 billion of short-term debt maturing by June 2009.
Short-term debt is predominantly trade credit, including buyer’s credit, or guarantees given by foreign banks to their Indian counterparts and used by Indian importers and exporters.Additionally, commercial borrowings (ECBs and foreign currency convertible bonds) worth $6.8 billion will also mature by June next.

Economists said in normal times, a majority of these debts would get rolled over.But these are abnormal times, so there is a risk foreign banks won’t roll over the credit limits and Indian banks will have to pay up.

Noted forex expert A V Rajwade said RBI will have to provide rupee liquidity to banks and also supply dollars to the foreign exchange market over the next few months to facilitate settlements. “The $43.66 billion in short-term debt maturities is understated. RBI will have to provide support worth $70 billion or Rs 300,000 crore,” he told DNA Money.
This would require a massive restructuring of RBI’s overall assets as forex holdings would go down by that amount and there would be a corresponding increase in rupee assets, he said.

To complicate matters, there are also the short-term money market borrowings of Indian banks’ foreign branches.
These liabilities may also have to be refinanced from India in order to prevent defaults, Rajwade said.However, he said the RBI is capable of managing the situation.

An economist with a private sector bank, who did not want to be named, said $23 billion of trade credits will mature in the next six months and because of increasing counterparty risk abroad, these guarantees may not be rolled over.“In that case, Indian importers may have to directly buy dollars from the market. Debt is not available worldwide and line of credits for emerging markets are not being accepted,” he said.

Already, central banks in emerging markets like Korea, Brazil and to some extent, Russia, are extending credit lines to bank to pay that debt.Economists say India is also facing a similar problem and the RBI may also have to use similar “unconventional” measures to tackle this risk.

An economist with a US bank in India, who did not wish to be named, said the freezing of global credit is a problem, but added that RBI’s recent moves suggest the central bank has already taken steps to address them.He said the move in last week’s monetary policy review —- the ceiling for trade credit of less than 3 years was raised to 6-month Libor plus 200 basis points from 6-month Libor plus 100 basis points —- was a case in point.

“These credits are a concern, but RBI has taken steps and has the tools to manage the situation. They are willing to act as the Libor move in the policy showed,” he said. Arvind Sonmale, managing director and CEO, Global Trade Finance, said fears that the debts will not be rolled over are exaggerated because there are still eight months to go for the maturities.

“If at all there will be an issue it will be related to pricing of trade credit. Banks may demand a higher price. India is one of the highest short term rated countries in the world. We have huge reserves, strong growth and a well regulated banking system which will ensure that our obligations are met,” he said.

Economists said there will certainly be pressure on the rupee, but how much the currency falls from the current levels will depend on RBI’s “style and amount of intervention” in the forex market.

Vikas Agarwal, fixed income and forex strategist at JP Morgan, said he is becoming “less bearish” on the rupee over the next six months.

“Lower current account deficit due to cooling of oil prices will boost the rupee. Outflows also will also moderate to a large extent,” he said.

For the next one month, however, the rupee would continue to be under pressure, he said.

[ramana]

So vina, pray to Lakshmi for buddhi with prosperity and not just the latter?

Thanks for the good critique of things. Keeps prespective.

[Arya Sumantra]

The upside,is that it is a once in a lifetime chance to scoop up assets like what your parents and mine could. They could actually buy the shares of best companies at par.. for Rs 10 and that too at different calls (1 , 2 , 3 etc).

Agree. I am not even thinking about FDs. Just look at P-E ratios of some of the bluechips from todays Economic Times.

[RamaY]

$50-billion debt shadow over rupee.

As much as $50.46 billion of external debt —- equivalent to nearly a quarter of India’s forex reserves —- is due to mature over the next 8 months.That potential outflow could add immense pressure on the already hammered rupee in the short term, experts said.

But the $273.88 billion of foreign exchange reserves could act as a buffer, and the Reserve Bank of India (RBI) could use it to facilitate the process of repayments, they said.(Reserves are already down by 35 Billion $ in the last 5 months)

Data released by RBI in June this year show $43.66 billion of short-term debt maturing by June 2009.
Short-term debt is predominantly trade credit, including buyer’s credit, or guarantees given by foreign banks to their Indian counterparts and used by Indian importers and exporters.Additionally, commercial borrowings (ECBs and foreign currency convertible bonds) worth $6.8 billion will also mature by June next.

This is what I collected over the net... isn't it a good thing that we are in a position to pay short-term debt, and infact paying it off?

Table: India's External Debt Sept 2007 Quick Estimate in $M
1. Multilateral.................. 37,067
2. Bilateral...................... 16,659
3. IMF............................ 00,000
4. Export credit................. 8,505
5. Commercial Borrowings.... 51,770
6. NRI Deposits (long-term). 43,643
7. Rupee debt.................... 2,081
8. Long-term debt (1 to 7)..159,725
9. Short-term debt............. 30,791
10. Total debt (8+9)...........190,516

[Manu]

God Knows we need some good cheer. Last two months have been very depressing. Bomb Blasts, Encounters, Kandhamal, Market Tanking, Political Impotence, Radicalized Minorities, Raj/Lallu, Assembly and General Elections. It seems the walls are caving in and our Country is being severely tested.

Let me stick my head out and say that 29th of October will be a Big Rally in India Markets. Gains of more than 5% at the end of the trading day. There will be at least one day of relief.

[vina]

Hmm. The Muharat trading was auspicious , the world markets seem to be showing optimism. However, not yet time to call the turnaround I think. The sellers will sell into any bounce and I do think that the selling is not yet over. Rate cuts aint gonna do the trick. The anecdotes I hear about the US economy are chilling to say the least. BIL visiting from Seattle says that the down town happening areas (restaurants, bars etc) are empty on Fridays. Nearly every retailer is hurting bad. The real economy is hurting deeply and we are still in the early stages of recession, with estimates that the US economy shrank 0.5%. China and other export oriented guys are getting hurting and are seeing the effects after the usual lag. The thundering wildebeest herds of the market will react when they see the "numbers" (useless in my opinion, cos it is look at rear view).

In India, lets face it. Real Estate is dead as nails. No one can buy at these levels. The developers are defaulting, many flirting with bankruptcy, the deleveraging death spiral will kill them. Like one of the gurus said in corp finance the very first day "If you dont have cash, you die" (the definition of bankruptcy). The 'infrastructure' boosters are dead too, along with the "suppliers" like L&T, BHEL etc. Lets face it. You dont have P/E ratios higher than companies growing lot faster and with higher Operating margins in other sectors, than for these areas. There was a bubble in the asset prices of the companies in these sectors. That has fully been stubbed. No way in hell are Unitech (if they survive), DLF etc are going to see anything close to their historic highs. Nor will RIL, Rel Infra, and other things like L&T. Wampum like Rel Power.. yeah.. good luck..

Guys who put money in those bubbles at higher levels., my sincere advice, liquidate and get out , whenever there is a rally. You are sitting on massive long term losses . Cut your losses.

If someone told you about a "V" shaped recovery in the market, forget it. Aint gonna happen. If it did, it will have no legs and will come crashing back. Net net, get out of broad sectoral plays. The recovery will be stock specific and company specific. It is lot harder to do that , than just picking up the index and sector plays. Its back to basics folks and the hard work of stock picking.

[vina]

There was a short squeeze on Volkswagen yesterday and the price rose to some really ridiculous levels (900 euro or something per share I think).. A lot of hedge funds took it in the balls.

The rally world wide would have a lot to do with short covering, me thinks.

[vina]

The lack of a proper corporate bond market in India is nothing short of criminal. The babu monkeys have simply destroyed any hopes of corporate debt market in India and the hope for any corporate to float bonds in India by making it so unattractive. The SLR ratios are a big part of that. Also, it was far easier to raise debt the ECB way and getting exposed to currency risks than raising rupee debt.

Russia and countries like Hungary are down the toilet precisely for similar reasons. they depended on foreign lines of credit and debt markets. Same thing happened in India.

We need a good local debt market ASAP!. If that is one thing the govt must do overnight is to facilitate that. We needed it like yesterday, but that is the immediate need of the hour. The foreign markets are closed or nearly so, time to create and facilitate a good local market. Why the hell should blue chip Indian corportates be foreced to float bonds and converts and other paper overseas and not in local markets ?. Indian investors lose out on a good deal of fixed income opportunities, especially risk averse folks who will want to put money away for retirement.

[sugriva]

http://timesofindia.indiatimes.com/Indi ... 651772.cms

India Inc may cut jobs by 25-30% soon: Assocham

[ldev]

The lack of a proper corporate bond market in India is nothing short of criminal. .....

Russia and countries like Hungary are down the toilet precisely for similar reasons. they depended on foreign lines of credit and debt markets. Same thing happened in India.

We need a good local debt market ASAP!. ......

Totally agree. The lack of effort in developing the local bond market is mystifying. 20 ago when MTNL and NTPC first came out with then "mega" issues of Rs 500 crs each, I thought those were the first nascent steps in developing a local bond market. Unfortunately not.

As regards Russia, inspite of Comrade Philip and Comrade Shankar's repetitive droning in various threads about their fond hopes that Russia will rise from the ashes and teach the big bad US a lesson, the irony is that Russia has got $500 billion plus foreign exchange reserves appropriated by the Russian state and deposited with those big bad Western banks. And the supreme irony is that Russian businesses and oligarchs who are/were among the most leveraged entities in the world had borrowed most of the same money (some say upwards of $300 Billion) back to fund their leveraged bets i.e. the Russian government is lending dollars to Russian businesses/oligarchs using western banks as intermediaries

[vina]

Hmm. Assocham nitwits trying to do the play that Jet Airways did. Threaten the govt with mass layoffs in an election year to cut interest rates.. Threats like cut interest rates by 3%( how did they pull that out of their musharrafs) or I will lay off 25% of my workforce (yeah, use your workforce as pawns..sure) will boomerang on them big time.

If I was on the govts side, I will call their bluff. I will say just one thing. Lay off a SINGLE worker and the govt will announce a take over /nationalization of your company. Oh, before doing that, we will make the banks call in your loans and make you file for bankruptcy. That way we will pick up your companies at firesale prices and also wipe you out. You wont even be able to go to the courts and argue for a "fair " deal , because we could in all fairness argue that we were picking up bankrupt companies to save jobs. Yeah. the Assocham idiots are playing with fire. The govt can in the stroke of a pen , wipe them out and play the populist "saving jobs" card and come smelling of roses. And of course when the market stabilizes, they can sell the companies back in the secondary market or privatize them at fat valuations again in an open bidding. The promoters will be simply wiped out.

Frankly , this was so ill thought out. Disparate sectors like IT, Engineering, Cap goods and steel are not going to see 25% layoffs. Yeah, where there will be real pain will be in real estate. The govt is not bound to keep the fat ridiculous Op Margins and the robber barron prices of the real estate sector rolling in by cheap credit. Macro economic stability is orders of magnitude more important.

DLF and Unitech as per news reports have been meeting the UPA govt for some "relief" . Yeah,the mismanaged their business, indulged in massive speculation, and put the money of people who gave them their life savings in return for a house, all in good faith, to serious risk. Now they want interest rates to be cut to see demand pick up. How long will it take for any govt to say, cut your prices by 40% and you will see demand ? Those real estate jerks are lobbying with the govt to order the banks to cut back the risk allocation for the real estate sector.

No way in hell should the govt oblige the real estate sharks by ordering the banks to override their sector credit scores based on sound business judgement for ridiculous reasons. If interest rates need to be cut, it must be for macro economic reasons based on sound judgement, and not to bail out the real estate specultors.

Bailing out DLF and Unitech and other real estate biggies would be an absolute travesty. Who the fc*k asked Unitech to run into areas like Telecom. They know rat's ass about the business. They have no business being there. That company is showing absolute clear signs of being in financial distress. They played the license permit raj game by bidding for license and tried to cash out at ridiculous valuations from that speculation. Ah..guess what, I think they gave up majority stake for low valuations and I am sure Telenor squeezed their nuts by having the first right of refusal for the remaining stake and would have put in some barrier option type thing triggering an automatic takeover (I would have done so if I was sitting on the table from Telenor's side and seeing how on the mat Unitech is). Ah, and the "investment" by Tata Realty in two parcels sound fishy and a lot like Tata Realty gaining possession of the collateral in exchange for some cash (collateral worth 1700 crore for 700 crore cash ?) and agreeing to keep up pretences in front of the media.

If the govt bails out the real estate sector,It would be a total travesty and I will have no faith at all left in the system. I will go and kiss Karat and Yechury's hands and sign up as a full time member of the CPI-M and be a full time lal jhanda convert looking to overthrow the crony capitalist enterprise.

[Singha]

the way out is force folks like DLF and Unitech to sell their 1000s of
acres of land bank at whatever price the market is offering and raise
cash to pay down their debt to a manageable level.

they are sitting on close to 10K acres each , thats real land with some
real value - let them use that instead of whining for packages.

this will increase land supply and maybe drive down ridiculous valuations
in areas like gurgaon, noida, central mumbai etc.

same applies to all land bankers - the depositors want to withdraw

[vina]

same applies to all land bankers - the depositors want to withdraw

Nice.. But the real estate guys are putting a different spin .

Remember the headlines ? .. " We will beat the slow down by going upmarket" .. Right , 60 lakh apts are not selling ? Build 7 crore worth apts.. . So much for 'strategy' .

Now listen to this gem of wisdom from the Unitech CEO . It is "affordability" that is important, not persqft rate! . So they are reducing the "ticket size".. (ie building warrens and cubby holes) ie 3 bedroom apts at 900 to 1000 sqft , but at the same persqft rate onree, thank you.

The problem with such "brilliant" logic is that it assumes the other guys to be idiots, which I am sure most buyers are not!.

[Suraj]

I wouldn't be surprised if the RBI did take a cue from various business entities and cut rates:
Inflation down below 11%, falls for 5 weeks in a row

The wholesale price index (WPI)-based inflation stood at 10.68 per cent for the week ended October 18, as compared with 11.07 per cent for the previous week. The annual rate of inflation was 3.11 per cent in the corresponding period a year ago.

This is the fifth consecutive week inflation rate has declined after reaching its peak of 12.63 per cent a couple of months back. The three commodity groups — primary articles, fuel and manufactured products — have shown a decline in inflation rate on an annual basis.

The drop in inflation comes after the Reserve Bank of India (RBI) announced a surprise one percentage point cut in repo rate — the rate at which RBI lends to commercial banks. This was seen by economists as a sign of RBI shifting its focus from bringing down inflation to promoting growth.

RBI, in its mid-term review released last week, said it expected inflation to slow down to 7 per cent by the end of this financial year. However, average WPI inflation rate in the current fiscal so far is still high at 10.95 per cent — way above the central bank’s comfortable rate of 5 per cent.

The average inflation rate is still reigning high as headline inflation stayed above 11 per cent for most of the weeks in the current fiscal and also due to higher revision of final inflation numbers. For example, the final figure for the week ended September 5 was 42 basis points higher than the provisional number.

For the week ended October 18, inflation rate for primary articles group declined to 10.92 per cent in the reporting week as against 11.53 per cent a week-ago, because of lower prices of wheat and arhar and urad.

However, the index for food articles rose by 0.2 per cent on for the week ended October 18, because of higher prices of bajra, maize, jowar and fruit and vegetables.

The index for manufactured products, which has more than 63 per cent weight in the WPI, declined by 0.1 per cent in the reported week. Lower prices of imported edible oil, oilcakes, rice bran oil, gingelly oil and groundnut oil contributed to the fall in index number for this group.

[Muppalla]

Hmm. Assocham nitwits trying to do the play that Jet Airways did. Threaten the govt with mass layoffs in an election year to cut interest rates.. Threats like cut interest rates by 3%( how did they pull that out of their musharrafs) or I will lay off 25% of my workforce (yeah, use your workforce as pawns..sure) will boomerang on them big time.

If I was on the govts side, I will call their bluff. I will say just one thing. Lay off a SINGLE worker and the govt will announce a take over /nationalization of your company.

At the start of the current UPA government, the Red brigade did something similar and the stocks made a record downfall. MMS and the outgoing Finance Minister JS has to intervene.

Regarding reality and interest rates, the Govt may cut interest rates to help DLF. DLF is proxy of congress headmistress's son-in- law. If they do not help the industrialists that are thick and thin with them where will they get the funds for fighting elections.

There are too many builders as MPs from AP and AP is the last bastion of Congress even to dream of comeback. I have a gut feeling that UPA will reduce the rates.

[Manu]

God Knows we need some good cheer. Last two months have been very depressing. Bomb Blasts, Encounters, Kandhamal, Market Tanking, Political Impotence, Radicalized Minorities, Raj/Lallu, Assembly and General Elections. It seems the walls are caving in and our Country is being severely tested.

Let me stick my head out and say that 29th of October will be a Big Rally in India Markets. Gains of more than 5% at the end of the trading day. There will be at least one day of relief.

Late by two days...
Link

Mumbai, October 31: : Continuing its rising streak for the third straight session on Friday, the benchmark Sensex moved up by over 665 points in early trade on massive buying by funds and retail investors largely on the back of overnight gains in the US markets.

The 30-share index, which gathered nearly 535 points in the past two sessions, shot up by another 720.52 points, or 8.15 per cent at 9,758.03 on renewed buying in the stocks of banking, metals, Oil and gas and realty sectors.

The wide-based National Stock Exchange's Nifty also rose by 185.50 points, or 6.88 per cent, at 2,882.55 points.

Easing inflation, which dipped below 11 per cent mark for the first time in four months to 10.68 per cent, and appreciating Indian rupee against US currency also buoyed the trading sentiments, marketmen said.

[Suraj]

S&P Maintains India's Investment Grade on Growth Outlook

India's investment-grade credit ratings were maintained by Standard & Poor's on optimism the nation's economic expansion won't be hurt by a global slowdown.

S&P said it affirmed India's BBB- long-term credit rating, the lowest investment category, according to an e-mailed statement. S&P had raised India's long-term rating by one notch in January 2007. Today, it also retained India's short-term rating at A-3.

``The ratings reflect the country's strong economic growth prospects and its deep government debt market, which helps accommodate its weak fiscal position,'' S&P said in the statement. ``India's business environment is likely to improve in the years ahead, notwithstanding the current dislocations in global credit markets.''

India's economy is powered mainly by consumption from its 50-million-strong middle class, insulating it from a decline in overseas demand. The nation's trade as a percentage of gross domestic product is 32.5 percent, about half that of China and the European Union, according to the Asian Development Bank.

``India is better insulated from a global slowdown relative to other Asian countries,'' said Deepak N. Lalwani, director for India at Astaire & Partners Ltd., a London-based stock broking company. ``Exports are a small portion of its economy.''

Indian banks' exposure to toxic western assets is just $1 billion out of their total loan portfolio of $510 billion, according to the central bank. That allows lenders to continue to finance economic activity in the country.

``If there is any major economy that can decouple from a global slowdown, it is India,'' Duvvuri Subbarao, the nation's central bank governor, said Oct. 25. ``India's growth has come from domestic demand and will be much less affected by what is happening in the rest of the world.''

[Nayak]

Motorola is cutting 3000 jobs, how is India affected ? TOI(LET) was reporting that GS India has cut headcount by 300. I know GS India has it's offices in both Mumbai and B'lore.

My buddies in GS are tight-lipped about the situation. But to add to the confusion, beebul in my workplace are putting down their papers and joining GS. Confusion onlee.

In other news, Infy and TCS say there are no changes in recruitment plans and will meet their targets on head-count increase.

[Manu]

S&P Maintains India's Investment Grade on Growth Outlook

India's economy is powered mainly by consumption from its 50-million-strong middle class, insulating it from a decline in overseas demand.

I hope that is a typo....

And Why does Bloomberg Persist in slotting a $1.2 Trillion Economy with a $150 B Bankrupt Beggar Economy

Bloomberg.Com: India & Pakistan

I know Mr. Bloomberg is Republican, but surely he is not getting directions from the State Dept.

[Suraj]

I am not particularly bothered about Bloomberg's == action because:
* It makes the name of the India section wider and easier to click on from under the Regions menu. Earlier (about 1.5 years ago) it used to be just an 'India' section and it was not quite easy to click on - I would frequently click Japan or something else while in a hurry.
* The usual quota of news in the == section is about five detailed Indian economy articles, 1-2 other, usually a Pakistani bomb blast article, Bangla flood article or Sri Lanka LTTE conflict article. If anything it reinforces just what the subcontinent is about - one economic behemoth and multiple basket cases around.

[Prem]

Manu, we should be close to 1.4 Trillion by end of current fiscal ( depending on exchange rate ).

[Paul]

India out of Top 5 in apparel exports












Anil Sasi

New Delhi, Oct. 9 A slowdown in the Chinese textiles juggernaut has sparked off a spill-over of orders into Vietnam and Indonesia, which have effectively pushed India out of the list of top five apparel exporters to the US market in the January-July period in 2008.

Indian apparel exports to the US have suffered a 2.39 per cent dip in order values, amid an overall slowdown in the US imports, even as Vietnam’s exports have surged 23 per cent and Indonesia by 1.37 per cent and Bangladesh by nine per cent till July , data released by the Office of Textiles and Apparel under the US Department of Commerce showed.

According to industry insiders, the depreciation of the rupee against the dollar since July is unlikely to provide any immediate respite to textile and apparel exporters since most big units have already entered into hedging contracts to counter any possible uptrend in the rupee.

There, however, has been an uptick in home textile exports to the US, with the value of India’s exports in this category up 0.55 per cent during this period despite a dip in overall home textile imports by the US.

Exports


Apparel exports are considered more important than home textiles’ since the value addition during the manufacturing stage and the employment generation potential are much higher in the case of apparels. The broad trend in Europe is likely to be similar, experts said.

“There seems to be a clear spill-over from China to South-East Asian countries, with Vietnam emerging the biggest gainer. While Chinese exports to the US have declined nearly 3.5 per cent, much of the gains have gone to Vietnam and Indonesia,” Mr D.K. Nair, Secretary-General, Confederation of Textile Industry, said.

Very interesting, looks like the walmarts and other retailers have started hedging their bets on the chinese economy already. Also means PRC is ready to let these sweatshops go to other countries and have a image makeover.

OTOH, it is not so good for India either. Hopefully the weakening rupee will improve the situation in the short run.

[svinayak]

India Unexpectedly Cut Interest Rates to Spur Growth (Update3)
http://www.bloomberg.com/apps/news?pid= ... refer=home

By Debarati Roy and Cherian Thomas

Nov. 1 (Bloomberg) -- India's central bank unexpectedly cut interest rates for the second time in two weeks and reduced the amount of money lenders need to keep in government bonds and as cash reserves to boost growth amid a global slowdown.

The Reserve Bank of India lowered its repurchase rate to 7.5 percent from 8 percent, reduced the amount of deposits that lenders need to set aside as reserves to 5.5 percent from 6.5 percent, and cut the amount of money lenders are required to keep in government bonds to 24 percent from 25 percent.

The steps signal a U-turn from the Reserve Bank's policy stance just a week ago, when Governor Duvvuri Subbarao said a ``heightened vigil'' was needed to fight inflation. The U.S. Federal Reserve, the Bank of Japan and other central banks also slashed borrowing costs this week in an attempt to prevent a global credit crunch from pushing the world into recession.

``This is a strong message that growth has become the central bank's priority,'' said Sujan Hajra, chief economist at Anand Rathi Securities Ltd. in Mumbai. ``He has room to cut rates because global interest rates are coming down as well, and so the risk of a further weakening of the rupee is limited.''

Subbarao, who until last week placed equal emphasis on growth and inflation, said Oct. 25 he is concerned a weaker rupee may raise import costs and stoke inflation.

India's currency, which has fallen 20 percent since January, climbed 0.4 percent to 49.4575 per dollar from 49.675 on Oct. 29.

Growth `Moderation'

The Bank of Japan yesterday cut its key overnight lending rate by 20 basis points to 0.3 percent after the Fed three days ago lowered its target rate for overnight loans to 1 percent, matching a half-century low. Norway, China, Taiwan and Hong Kong also trimmed their benchmark rates this week.

India's decision to lower borrowing costs was taken ``in view of the ebbing of upside inflation risks and also to address concerns relating to the moderation in the growth momentum,'' the central bank said today.

Lower inflation has given Governor Subbarao, in the job for less than two months, more room to lower borrowing costs to stimulate growth. Inflation in India has dropped below 11 percent for the first time since May.

Wholesale prices rose 10.68 percent in the week to Oct. 18 from a year earlier after gaining 11.07 percent in the previous week. Economists had expected a 10.80 percent increase.

The central bank last week reduced its forecast for growth in Asia's third-largest economy to as low as 7.5 percent from 8 percent in the year to March 31.

Credit Squeeze

``It's a good set of measures that addresses the most pressing need of the hour, which is to ease liquidity constraints in the system'' and support growth, said Arvind Sampath, head of interest-rate trading at Standard Chartered Plc in Mumbai.

India's money-market rates have more than tripled in the past week, in contrast to the rest of Asia where the rates at which banks lend to each other has been declining.

The overnight call rate in India touched 21 percent yesterday. India's 10-year bonds gained, heading for their best month in almost a decade, on speculation policy makers will be forced to step up efforts to boost cash with banks and ease a credit squeeze.

Today's cut in the cash reserve ratio, the fourth in the past month, will infuse 400 billion rupees ($8 billion) into the financial system, the central bank said. Before today, the bank lowered the ratio by 2.5 percentage points in the past month.

The Reserve Bank also reduced for the first time in 11 years the statutory liquidity ratio, the amount of deposits that lenders need to invest in government debt or bonds of state-run companies, by one percentage point.

``This kind of fund injection is required to bring in stability in the financial market,'' said Jayesh Shroff, who helps manage about $6 billion at SBI Asset Management Co. ``The system has been under stress because of liquidity shortfall.''

Cash dried up in India's banking system as overseas investors pulled out $12.7 billion from India's stock markets.

To contact the reporter on this story: Debarati Roy in Mumbai at [email protected]. Cherian Thomas in New Delhi at [email protected]
Last Updated: November 1, 2008 06:02 EDT

When overseas investors pulled out $12.7 billion from India's stock markets the stock market lost total $1.3T in value.
Now there is correlation with the overseas investment. This fast money needs to be checked and kept a lower percentage of the entire portfolio if India needs to protect its market valuation.

[svinayak]

Tata Motors to Rethink Overseas Fund-Raising Plan (Update1)

By Vipin V. Nair

http://www.bloomberg.com/apps/news?pid= ... w8I7SKvfyE

Oct. 31 (Bloomberg) -- Tata Motors Ltd., the Indian automaker that bought luxury vehicle makers Jaguar and Land Rover, said it will reconsider a plan to raise as much as $600 million from overseas markets due to the global credit crisis.

``Looking at today's challenging times, we need to rethink on that program,'' said C. Ramakrishnan, chief financial officer. The company will also reconsider a proposal to list on the Tokyo stock exchange, Ramakrishnan told reporters in Mumbai today.

Tata Motors, down 76 percent this year in Mumbai trading, needs to raise funds by June to replace a $3 billion bridge loan taken to purchase the two U.K.-based units from Ford Motor Co. The worst U.S. financial crisis since the Great Depression in the 1930s has driven stocks lower, forcing companies to cancel acquisitions, stake sales and equity offerings.

Samsung Electronics Co., the world's second-largest chipmaker, this month scrapped a $5.85 billion unsolicited bid for SanDisk Corp., while Huawei Technologies Co. canceled a plan to sell a stake in its handset unit. Hong Kong's PCCW Ltd. also shelved a plan to sell a stake in its main unit because offers fell short of expectations.

Tata Motors on Oct. 20 closed a rights offering of shares to raise more than 41 billion rupees ($829 million) to help fund the purchase of the luxury auto units. The issue was fully subscribed, including 30 billion rupees of investments by the company's promoters, Ramakrishnan said. Underwriters to the issue arranged about 3 billion rupees.

Land Rover, Jaguar

Tata Motors bought Land Rover and Jaguar from Ford in June for $2.4 billion in its biggest overseas acquisition. The purchase enables the Indian company to get access to new technology and overseas markets.

Sales of Jaguar vehicles increased to 17,535 units in the second quarter compared with 14,925 a year earlier, Tata Motors said in a presentation to reporters today. Land Rover sales fell to 43,886 from 54,264, it said.

Tata Motors will also review capital expenditure relating to increasing production capacity due to a slowdown in domestic demand, Managing Director Ravi Kant said.

To contact the reporter on this story: Vipin V. Nair in Mumbai at [email protected].
Last Updated: October 31, 2008 08:27 EDT

[Rishirishi]

India out of Top 5 in apparel exports












Anil Sasi

New Delhi, Oct. 9 A slowdown in the Chinese textiles juggernaut has sparked off a spill-over of orders into Vietnam and Indonesia, which have effectively pushed India out of the list of top five apparel exporters to the US market in the January-July period in 2008.

Indian apparel exports to the US have suffered a 2.39 per cent dip in order values, amid an overall slowdown in the US imports, even as Vietnam’s exports have surged 23 per cent and Indonesia by 1.37 per cent and Bangladesh by nine per cent till July , data released by the Office of Textiles and Apparel under the US Department of Commerce showed.

According to industry insiders, the depreciation of the rupee against the dollar since July is unlikely to provide any immediate respite to textile and apparel exporters since most big units have already entered into hedging contracts to counter any possible uptrend in the rupee.

There, however, has been an uptick in home textile exports to the US, with the value of India’s exports in this category up 0.55 per cent during this period despite a dip in overall home textile imports by the US.

Exports


Apparel exports are considered more important than home textiles’ since the value addition during the manufacturing stage and the employment generation potential are much higher in the case of apparels. The broad trend in Europe is likely to be similar, experts said.

“There seems to be a clear spill-over from China to South-East Asian countries, with Vietnam emerging the biggest gainer. While Chinese exports to the US have declined nearly 3.5 per cent, much of the gains have gone to Vietnam and Indonesia,” Mr D.K. Nair, Secretary-General, Confederation of Textile Industry, said.

Very interesting, looks like the walmarts and other retailers have started hedging their bets on the chinese economy already. Also means PRC is ready to let these sweatshops go to other countries and have a image makeover.

OTOH, it is not so good for India either. Hopefully the weakening rupee will improve the situation in the short run.

I think it is a natural course, as the wages are rising in China. I do not belive it should be Indias ambition to grap larger market share. The Industry is super compatative and the workers hardly make 100 dollars per month.

[svinayak]

India's top banker keeps eye on economic reality

By James Lamont in New Delhi
http://www.ft.com/cms/s/0/22423eb4-a55b ... 07658.html

Published: October 29 2008 02:00 | Last updated: October 29 2008 02:00

When Duvvuri Subbarao was given the job as head of India's central bank, the prime minister offered him advice. He told him simply not to lose touch with reality.

"You have been long a civil servant, but when you get to the Reserve Bank of India there will be a tendency to lose touch with reality. So just remember: whatever you do, always think of the impact it will have on the real economy," Manmohan Singh told him.

Mr Subbarao, only two months into the job, has the hard task of convincing Indians he has not already disposed of the prime minister's precious advice.

His goals are ambitious. He aims to bring inflation down by 1 percentage point every month, to reach 7 per cent by March from a current level of about 11 per cent. He also hopes to keep growth near 8 per cent. Some officials already forecast it is in danger of being only half that.

The political pressure to achieve a swift reduction in inflation and to keep alive the dream of double-digit growth is intense. Elections in India are often won or lost on the price of a basket of shopping and a general election is scheduled before May. The domestic economy and terrorism already top the agenda for state elections next month.

Having just cut the repo rate by 100 basis points to 8 per cent to ease liquidity strains, Mr Subbarao is banking strongly on falling agricultural and commodity prices, most importantly crude oil imports, to help achieve the target.

Crude oil costs have halved since July and the finance ministry has likewise welcomed falling commodity prices as the cure for high headline inflation. "We have acknowledged the uncertainty [of the markets]. Commodity prices may go up. The softening of food prices may not be as much as expected. [But] it is our best judgment at this time that inflation can go down to 7 per cent," Mr Subbarao said.

What the central banker does not rely on is a slowing economy. He and Palaniappan Chidambaram, finance minister, are doing their best to retain India's impressive record as one of the world's fastest-growing economies, almost in reach of double-digit growth.

The global financial crisis has brought volatility to India's markets in the past month. The Sensex index of the Bombay Stock Exchange on Monday broke through 8,000, falling by 11 per cent, and the rupee hit a new low of 50.29 to the dollar ahead of yesterday's Diwali holiday.

India's exports are most at risk. Mr Subbarao singles out the information technology outsourcing industry and the small and medium-sized business sectors as being particularly vulnerable.

"SME sectors are more vulnerable to a downturn, not only because of domestic circumstances or because of the expected recession. The SME sector contributes more than 50 per cent of our exports. If there's a recession and that is deeper and recovery is longer, they are going to be hit more than others."

Many economists are holding faith with the central bank. Omkar Goswami, chairman of the Corporate and Economic Research Group, said while the global economy would see significantly lower growth, India could maintain its growth of about 7.5 per cent this year, dipping to "around the 7 per cent mark" next year.

But some government officials and analysts do not share this optimism. One senior official predicts India's growth will slump to 4 per cent in the year ahead, from previous highs of 9 per cent.

"Signals on the ground suggest that the economy is slowing rapidly, and that the slowdown will be sharp and severe. Capital goods and leveraged consumer sectors are badly hit," said Seema Desai, an analyst with Eurasia Group, the political risk consultancy.

One of those also increasingly worried about the real economy is Mr Singh himself. The prime minister's aides say he returned from last weekend's Asia-Europe meeting in Beijing in a pessimistic mood. He now views the global financial crisis's impact on India as graver than before.

"We are not in complete control. There are bigger players and we are victims of that," he said on his return. "The economy is bound to experience the pain."

Copyright The Financial Times Limited 2008

Indian leadership has not been looking at the global realities. Global realities are harsher and Indian economy trying to integrate with other big economies will feel vulnerable. This is a serious situation

Commodities prices are falling world wide and they have to bring inflation down rapidly in India.

[shyam]

India Unexpectedly Cut Interest Rates to Spur Growth (Update3)
http://www.bloomberg.com/apps/news?pid= ... refer=home

Sakhavu Vina Zindabad!!!

[Muppalla]

UPA will allow to cut more and this is just a start. The builders lobby is what is making Congress to tick at the center and in few pockets of influence that they have inside the country. In Hyderabad the real estate has fallen 50% in just last few months. 90% of builders are supporters of the Congress(some of them are MPs and MLAs) and the next election is dependent on these folks. If there is any dream of coming back to power they need to release the money so that real estate has to start again. They cannot control inflation anyway to the level of what aam admi is looking for. The only option is keep its buddies happy. What a stage for those who came to power on "aam admi" platform.

[vina]

India Unexpectedly Cut Interest Rates to Spur Growth (Update3)
http://www.bloomberg.com/apps/news?pid= ... refer=home

Sakhavu Vina Zindabad!!!

Hmm. By that I hope you mean that you actually stand to make money out of falling interest rates (maybe you moved to bonds /FDs ).

In any case, my dakshina is 10% of your gains, payable as a donation to BRF!!

[wrdos]

I think it is a natural course, as the wages are rising in China. I do not belive it should be Indias ambition to grap larger market share. The Industry is super compatative and the workers hardly make 100 dollars per month.

Hmmm, I think most economists should agree the following point. To developing countries with tens (or hundreds?) of millions of landless peasants, gaining one hundred US$100 jobs is much more important than one US$10,000 job.

To most members of this forum, 100dollars may be nothing. But for all those guys living, betting and scavenging on urban streets...

[Raj Malhotra]

Since the propety boom started in suburbs of Delhi , the interest rate has doubled and property has gone upto 3-20 times raising effective rates to 6-40 times in 4 years. I think there is lot of scope for interest as well as real property rates to fall.

[andy B]

Vina saar,

can I please get your email, need to ask you something.

Cheers.

[Kakkaji]

I think it is a natural course, as the wages are rising in China. I do not belive it should be Indias ambition to grap larger market share. The Industry is super compatative and the workers hardly make 100 dollars per month.

Hmmm, I think most economists should agree the following point. To developing countries with tens (or hundreds?) of millions of landless peasants, gaining one hundred US$100 jobs is much more important than one US$10,000 job.

To most members of this forum, 100dollars may be nothing. But for all those guys living, betting and scavenging on urban streets...

I never thought I would say this, but this one time I agree with wrdos.

For our masses we need all the jobs we can get, and $100 per month in a semi-skilled job is really beneficial to those those who are economically at the bottom rungs of our society.

[svinayak]

Global crisis hits India, be on alert: PM

The global crisis has affected Indian economy. The situation is abnormal and we need to be constantly on alert, Manmohan Singh said.

The first priority to protect Indian financial system from possible loss of confidence, he said, adding that the government will take all necessary monetary and fiscal steps to protect growth rate

[Vipul]

India's trade deficit nears $60 billion in H1 2008-09.

[svinayak]

http://www.bloomberg.com/apps/news?pid= ... efer=india

Subbarao Abandons India `Inflation Vigil,' Cuts Rates (Update1)

By Cherian Thomas
Enlarge Image/Details

Nov. 3 (Bloomberg) -- Indian central bank governor Duvvuri Subbarao has abandoned the ``inflation vigil'' he outlined just 10 days ago in his inaugural monetary policy statement.

For the first time since 1997, the Reserve Bank of India on Nov. 1 deployed all three of its main tools to shore up growth after inter-bank lending rates climbed to 21 percent. Economists at Yes Bank Ltd. and Standard Chartered Bank predict more interest-rate cuts following the weekend reduction.

``India's central bank has no other option but to focus on economic expansion,'' said Shubhada M. Rao, chief economist at Yes Bank Ltd. in Mumbai. ``Global cues have turned against growth and it was surprising to see the hawkish tones on inflation'' last month.

Subbarao, less than two months into the job, has grappled with monetary policy at a time when inflation is double the central bank's target and a global downturn threatens to hit the economy. The central bank's renewed focus on growth aligns with Prime Minister Manmohan Singh's push to buoy the economy ahead of elections due by May.

[ramana]

Link:

http://www.telegraphindia.com/1081104/j ... 034173.jsp

STEERING IN THE STORM
- Chidambaram would make an excellent home minister
WRITING ON THE WALL
ASHOK V. DESAI


We have entered a phase of economic history unlike anything we have seen in 60 years. None of the living generation would remember what India went through in the Great Depression of 1929. That was only the last depression; there were many before it. And they were not local; they emanated from industrial countries, and buffeted India, which then was predominantly an agricultural exporter. A slump in industrial countries reduced India’s export earnings and depressed its agriculture.

The many depressions gave governments experience in dealing with them. Economists worked out theories of the trade cycle, and derived rules on anti-cyclical policies. The oldest of them concerns liquidity. The most devastating impact of trade cycles was that banks could not pay their depositors on demand and a shortage of means of payment ensued. The remedy developed was that there should be a central bank — a lender of last resort — which would lend money to banks on demand so that they could pay off panicking depositors. Soon the depositors would regain confidence; the banks could then repay the money to the central bank. This rule has become a part of central banks’ credo. It has reappeared in the present crisis. The American government has given money to its banks in exchange for equity, and European governments have guaranteed bank deposits.

However, this ancient rule is no longer enough. New financial institutions have emerged besides banks. Lehman Brothers and Bear Stearns were mortgage lenders; AIG was an insurance company; Merrill Lynch was a hybrid financial intermediary. They could not be helped by central banks. When they could not meet their obligations, they looked for companies that could take them over. But rescue acts are difficult to organize because no one would buy institutions whose value has become negative — whose liabilities exceed their assets. For them, bankruptcy is the only option.

Bankruptcy is painful to its victims; but legally it could not be simpler in the United States of America. All that a businessman has to do is to download a form from the net, and file it in a bankruptcy court. A court receiver then sells his business off or sells off the assets piece by piece, and pays off creditors. The bankrupt businessman is freed of all obligations, and can start a new life. Bankruptcies in the US went up from 218,909 in July-September 2007 to 226,413, 245,695 and 276,510 in the next three quarters.

But in India, bankruptcy is impossible. Under an antiquated law, a defaulting firm must file for bankruptcy in a high court. High courts are so overloaded that liquidation proceedings do not even start. Meanwhile, defaulters can merrily default on their debts and carry on.

Debt defaults are extremely damaging to business confidence, but would not stir our government. When the debt is owed to a bank, however, the government gets worked up because it owns the banks. So 10 years ago it bypassed the bankruptcy law, and passed a special law to enable banks to take away assets mortgaged by their defaulting debtors, and special tribunals to rule in the banks’ favour. These debt recovery tribunals too are now clogged; but banks have recovered much of their money.

That was the last cycle; a new one is just beginning. As Western economies sink, our exports to them are falling. Exporters cannot recover their export proceeds. Businessmen in trouble are no longer flying. So airlines are going empty. Those that have borrowed to buy planes cannot service their loans. They are defaulting on their debts to airports and to oil companies. Developers who have taken thousands of acres to build flats for flourishing salarymen find that professionals are losing their jobs, or are feeling so insecure that they are not prepared to buy flats. With flats unsold, builders cannot pay their workmen and suppliers.

This is the classic start of a depression. And it evoked the classic response. The Reserve Bank of India reduced the cash reserve ratio — the cash it requires banks to keep idle. Every time it did so, newspapers screamed: the RBI had released so many thousands of crores into the economy. It had done nothing of that sort. Depositors were withdrawing cash, banks were running short of money, and the RBI allowed them access to their own cash which it had locked up.

So where did this idea of crores being released come from? The idea was that with more cash in hand, banks would be able to lend more. But banks have lent almost up to the limits allowed by the cash reserve ratio. Enterprises are failing to pay, not because banks are not lending them money, but because losses are draining businesses of their cash. In these circumstance, CRR reduction is a futile and ineffectual measure. So is a reduction in the RBI’s interest rates. As Keynes said in his General Theory, monetary policy is ineffective against depressions.

Keynes instead proposed using fiscal balance countercyclically — taxing more and spending less in booms, and taxing less and spending more. Our finance minister did precisely the opposite. He ran massive deficits during the last boom; so he cannot run bigger ones without forcing more government bonds on banks, and in effect taking credit away from businesses. He can do much to improve business sentiment. He only has to reverse the many mistakes he made in his last four budgets. He can also improve incentives to investment, and restructure government expenditure towards productive activities. But that is not what he is up to. He has made numerous statements instead.

In these statements, he gave copious statistics of the economy’s past performance. Many were not relevant; in a sinking economy, past performance is no indicator of the future. He reported on the RBI’s actions — which the RBI was announcing anyway. He tried to cheer up the public, telling it not to be fearful and to take informed decisions — implying that his irrelevant statistics were relevant to decisions about a changing future. And he reiterated his view that the “fundamentals” of the economy were strong and that its problems were related to liquidity, which in his view, the RBI had been pumping into the economy — an ineffectual action if there was one.

This response, from the principal economic policymaker, is misjudged. The finance minister has the quixotic notion that he can talk the economy out of the depression. But his talk cannot offset falling profits and disappearing cash. For this depression we need many policy measures, mostly other than monetary. The finance minister is ill equipped to conceive of them, let alone take them. We need strong, central leadership, backed by economic expertise.

The biggest uncertainty is political; it has made the government indecisive. The first step to reducing uncertainty is to have the general election straightaway and bring in a new government immediately. Failing that, the next best would be for the prime minister to appoint the one economist-politician he trusts — Montek Singh Ahluwalia — as finance minister, to appoint the best Indian monetary economist, Raghuram Rajan, as his adviser, and to let them appoint an advisory council of their choice. P. Chidambaram would make an excellent home minister — that was the ministry in which he made a distinguished debut 25 years ago.

Is the Indian situation that bad? And if the last part is true then truly in toruble.

[Suraj]

That article raises too many red flags in terms of factual accuracy to be used as an unquestioned guide. Also, its conclusion fundamentally does not make sense in relation to its theme, which tends to be too sweeping and alarmist. If you go by everything upto the last paragraph, the stable doors have long since been opened, and all the horses have bolted. Yet the author concludes with the suggestion that a new stablemate would be the solution. Seems more like a hack pushing for the Finance Minister's replacement than a cogent economic summary.

[ramana]

Thanks for the assessment of the aticle. Its from Telegraph which is an INC stalwart paper which is why I wondered.

[Shivani]

This is tragicomic. If the Prime Minister had done his job, he wouldn't have to beg the private sector to not cut jobs. Poor fellow is a bit dim and doesn't realise that business can't run deficits and print their own money.

And how about that wonderful suggestion of "Cut costs, raise productivity". This has never occured to any private business, and there is a huge resistance to these ideas in private sector. The elected representatives and bureaucracy, on the other hand, remain the gold standard of productivity and efficiency.

Since our Prime Minister is the shy sort, I'll do the dirty job and translate his words for you:

"Please don't announce job cuts till the elections are done. Then you are all free to rot."

PM to India Inc: Don’t cut jobs

4 Nov, 2008, 0420 hrs IST, ET Bureau

NEW DELHI: Prime Minister Manmohan Singh on Monday assured business leaders that the government would not hesitate in cutting levies and borrowing costs to prevent the economy from going into a tailspin and urged industry not to resort to large-scale job cuts before the steps already taken and those being planned delivered results.

The Reserve Bank of India (RBI) has already taken the knife to reserve requirements of banks and cut some rates at which it lends money to banks as it looks to bolster the economy from a credit crunch that has roiled global financial markets and economies. Last week, the government cut duties on aviation fuel and steel to give a boost to the aviation and steel sectors.

Meeting captains of industry here, Mr Singh said the government would invest more in infrastructure, speed up social spending and take other steps to maintain growth and stability in the economy. “The government will take all necessary monetary and fiscal policy measures on the domestic front to protect our growth rates,” a government statement issued after the meeting quoted Mr Singh as saying.

The government expects gross domestic product (GDP) growth to slow to 7.5-8% this year. The economy expanded by 9% last year. “We will review projects and programmes in the area of infrastructure development, including both pure public sector projects and public-private partnership projects, to ensure that their implementation is expedited and does not suffer from constraints of funds,” Mr Singh said in the statement. “While every effort needs to be made to cut costs and raise productivity, I hope there will be no knee-jerk reaction such as large-scale lay offs which may lead to a negative spiral.”

The prime minister’s two-hour-long meeting was attended by industry chieftains such as Reliance Industries chairman Mukesh Ambani, ICICI Bank CEO KV Kamath, Essar Group chairman Shashi Ruia, HDFC chairman Deepak Parekh, Mahindra Group managing director Anand Mahindra and ITC chairman YC Deveshwar. Finance minister P Chidambaram, commerce and industry minister Kamal Nath, RBI governor D Subbarao and Planning Commission deputy chairman Montek Singh Ahluwalia represented the government.

Unlike developed economies facing major stresses in their financial systems, Dr Singh said India's banking system and deposits were safe and asked industry to be mindful of its social obligations in coping with the effects of this global crisis. He added that government-run banks had been ordered to ensure that they act “counter-cyclically” to prevent confidence levels in the economy from falling. “We are able to act more boldly because our efforts to contain inflation have begun to be effective. Movements in the WPI (wholesale price index) over the past six weeks suggest a definite abatement of inflationary process,” Dr Singh stated.

The inflation rate eased to 10.68% during the week to October 18, falling below 11% for the first time since May this year. It hit 12.76% in August. The RBI has deployed all three of its main tools to shore up growth after inter-bank lending rates climbed to 21% last week. It has cut its repurchase rate to 7.5% from 8%, reduced the amount of deposits that lenders need to set aside as reserves by one percentage point to 5.5% and cut the amount of money that banks are required to keep invested in government bonds to 24% from 25%.

ICICI Bank CEO KV Kamath said the impact of the recent round of rate cuts was still to be felt. “We will have to wait for some time to see the impact,” said Mr Kamath, adding that the monetary signals from authorities were clear and banks would take a call on cutting interest rates soon.

Cut costs, raise productivity: PM

New Delhi, Nov. 3

Public sector banks have been instructed to “act counter cyclically in the current situation to counter the general erosion of confidence” and minimise the negative impact of the current global crisis on the real economy, the Prime Minister, Dr Manmohan Singh, said here on Monday.

Calling on the industry to make every attempt to cut costs and raise productivity, Dr Singh hoped that they would not take any knee-jerk reaction such as large scale lay-offs to overcome the global economic crisis.

“The industry must bear in mind its societal obligation in coping with the global crisis. The Government and the industry must act in a true spirit of partnership to meet the challenges that lie ahead. I would like to assure each one of you that the Government will take all necessary monetary and fiscal policy measures on the domestic front to sustain our growth rate,” Dr Singh said.

The Prime Minister added the Government is able to act more boldly because efforts to contain inflation have begun to be effective.

“Movements in the wholesale price index over the past six weeks suggest a definite abatement of the inflationary process,” Dr Singh said.

Infrastructure growth

The Government was also closely monitoring the macro economic situation and was fully alive to its responsibility for sustaining the growth momentum at a reasonable level. Pointing out that expanding investment in infrastructure can play an important counter-cyclical role, the Prime Minister said that the Government will review projects and programmes in the area of infrastructure development.

These will include both public sector projects and public-private partnership to ensure that their implementation is expedited and they do not suffer from constraints of funds.

Special cell

Briefing newspersons after the meeting, the Minister for Commerce, Mr Kamal Nath, said that the Prime Minister has assured that a special cell will be set up to look at various issues that would come up from time to time.