Indian Economy

China may impose duties on US cars

2011-12-14T20:37:00.002+05:30

China appears to be planning to impose duties on some cars imported from the United States (US). The move, being interpreted by a tit-for-tat by experts, has come after Barack Obama administration imposed duties on Chinese tires.

The duty war between the US and China is being seen as a big negative for the global automotive industry, which presently depends on China for its growth. If this duty war escalates any further it could serve as fuel to the fire, that the global economy is currently in.

Air India and Kingfisher Airlines in trouble

2011-12-08T21:20:00.001+05:30

11 accounts of Air India and 10 accounts of Kingfisher Airlines were frozen by the Service Tax Department. This was done in view of default on service tax payments.

According to the Commissioner of Service Tax in Mumbai, Air India owes Rs. 150 crore while Kingfisher owes Rs. 70 crore. The commissioner further alleged that both had defaulted in paying in the money that they had already collected in the name of service tax from their customers.

Both companies are already badly debt-ridden.

It is reported that Vijay Mallya the liquor baron and promoter of Kingfisher Airlines, may be trying to sell Kingfisher House to raise funds, whereas the government owned Air India is expecting the Government of India to cough up the funds to enable it to survive.

The debt of Kingfisher is a whopping 12,000 crore, while Air India is sitting on a even bigger debt of 62,000 crore.

Rupee devalues - Stock Market tanks

2011-11-21T22:16:00.001+05:30

The value of the Indian Rupee fell 1.6% today (21-Nov-2011) to close at 52.155 against the US Dollar, and the way things are poised it is likely to breach its all time low of 52.20 that it had touched on 3 March 2009.

This is likely to make imports expensive, and especially impact the oil imports which are already playing havoc with inflation.

Experts believe this has happened due to large scale exiting of the FIIs from the Indian Stock markets.

The stock markets in India tanked -

the Bombay Stock Exchange (BSE) Sensitive Index (SENSEX) witnessed a fall of 425 points (2.6%) to close at 15946, just below the sentimental level of 16000.
the NIFTY index of the National Stock Exchange (NSE) too witnessed a 2.6% fall (127 points) to close at 4778.

Similar, dismal trends were displayed by the European Stock Exchanges, also.

Is Indian Economy crumbling!

2011-11-13T10:24:00.001+05:30

Indian economy has begun to show signs of fatigue. It is failing on growth and it is failing on inflation.

The IIP numbers have fallen to new lows. The growth was on 1.9% for September in contrast to the same period last year when the IIP growth stood at 6.1%. This is the lowest this figure has gone in the last two years. The other negative indicators are the state of our country's private airline companies. All are reporting losses. The crisis at Vijay Mallaya's Kingfisher is the worst among the lot.

Even as industrial growth is falling, inflation has made life difficult for the common man, who in turn has started to mount pressure on the Government. RBI has repeatedly raised its repo and reverse repo rates in a bid to control the beast called inflation - that refuses to be tamed. Each time the "great" economists of our country release statements claiming that inflation will come down, the beast retaliates with an even bigger leap upward.

The signals being received from the overseas are also not very encouraging. The debt crisis that has been brewing in Europe is threatening to bloom into a full fledge recession - double-dip recession as some people prefer to call it. Time alone will tell whether the Union will manage to come out of the crisis or whether there will be no Union left at all.

Leaders are fleeing the scene. After a change in leadership in Greece, Italy's PM Berlusconi has submitted his resignation.

China Currency Bill passed by the US Senate

2011-10-12T22:21:00.002+05:30

US has been voicing its concern for a long time over the way China has been using unfair means and manipulating its currency to the disadvantage of US businesses. It is said that the Chinese businesses have a 30% pricing edge over their US competitors due to the low yuan.

US lawmakers have reacted to this by proposing a bill that will allow them to punish Beijing for the manipulation.

The US Senate voted 63-35 passed the legislation to punish Beijing's currency manipulation that is often blamed in that country for the high rate of unemployment. Those against the bill have voiced their concern that the bill could go against the provisions of World Trade Organization. However, nobody has disputed the fact that the way China keeps its yuan low is unfair.

The bill needs to be passed in the House of Representatives before going to the US President.

Experts believe that if cleared the bill will trigger a large-scale trade war that will have large-scale consequences, especially in the economically troubled US and Europe.

Cabinet clears new mining bill

2011-09-30T22:07:00.000+05:30

The Union Cabinet has today approved a new bill for mining in the country, in which the miners will have to share 26% of their profits.

The new bill which will have be presented in parliament for its approval, proposes that the coal companies must share 26% of their profits with the local folks. Other mining companies will have to share an amount equal to their royalties.

The proposal will help local communities implement ambitious development plans which could change the face of rural India like never done before, that is if the government can come up with an effective anti-corruption bill.

Rupee declines against the US Dollar

2011-09-23T15:43:00.001+05:30

Trading currently at Rs 49.76 per dollar, the rupee has declined significantly over the recent months to its 28 month low.

RBI Governor D. Subbarao has said that the movement of the rupee has nothing to do with fundamentals the Indian economy. He added that the rupee declined due to the fall in confidence in the global markets. He said that the Reserve Bank of India will intervene only there is volatility or potential disruption to macroeconomic situation.

Rural and urban poverty lines - 781 and 965 respectively

2011-09-21T22:02:00.000+05:30

A rural person needs Rs 765 per month while his urban counterpart requires Rs. 965 per month to live.

An affidavit to this effect was filed by Planning Commission in the Supreme Court in which it defined the poverty line at June 2011 price levels. It has said... the poverty line at June 2011 price level can be placed provisionally at Rs 965 per capita per month in urban areas and Rs.781 per capita per month in rural areas.

The affidavit by Planning Commission was filed in response to an order by a division bench of the Supreme Court requiring it to revise the norms of per capita amount looking at the price index of May 2011 or any subsequent dates.

Ban on Onion Export Lifted

2011-09-21T08:28:00.001+05:30

The government of India, on 20-Sept-2011 bowed down before the protesting farmers in Maharashtra and lifted the ban that it had imposed on the export of onions.

The ban had been imposed on 9-Sept-2011 in a move to help curb the soaring prices of onions in the Indian market. The move faced stiff resistance from the farmers in Nashik and neighboring regions of Maharashtra.

The political impact of the roll-back on the already fragile credibility of the UPA-government is another issue, but on the economic front experts believe that the prices of onion could head north-ward in the immediate future, adding to the common man's inflationary worries.

Impact of Credit

2011-09-20T22:26:00.002+05:30

Even as stock markets in India began giving indications of stabilization, IMF has bowled another googly.

IMF has raised an alarm over the debt situation in Europe and lowered growth projections for the 17-nation Eurozone to 1.6% in 2011 and 1.1% in 2012, from its earlier predictions.

The old saying in India - चितनी चादर उतना पैर पसारो (spread your feet depending on the amount of space available), in other words spend only what you can afford. Taking loan to buy luxuries is the sure-shot recipe for disaster. US has experienced it, now the Europe is going through the same experience.

Excessive loan leads to non-repayment - causing either the borrower or the lender to suffer.

We can only hope that the Indian government takes note and exercises caution with its policy of targeting growth on borrowed money.

RBI hikes interest rates - Will it fight corruption

2011-09-16T18:46:00.000+05:30

The "most popular inflation" control mechanism of the Government of India has been deployed once again. The decision of the 12th successive rate hike was announced by RBI on Friday 16-Sept-2011.

In line with common expectation - RBI has announced an interest rate hike of 0.25% (25 basis points). After today's rate hike the repo rate has become 8.25% while the reverse repo rate has become 7.25%.

Lets hope this works, because the government has lost a lot of credibility in recent times on several fronts including - combating corruption, good governance and internal security. If inflation does not come down quickly, it faces the risk of losing public sympathy even on the financial front.

Financial stability of the common has been compromised drastically in the past few months. The government can give as many excuses as it wants, but the common man is seriously and directly effected by inflation and the failure of the government (even if for reasons beyond its control) could easily effect the vote appeal of the ruling coalition in the forthcoming elections.

Fuel for inflation - Petrol becomes dearer

2011-09-16T10:35:00.000+05:30

Adding to the woes of the common people, the price of petrol has been raised by more than Rs. 3 per liter from today - 16-Sept-2011.

The common man is surely in for a big financial beating for the forthcoming festival season, because this increase in fuel cost will ensure that the prices of other commodities also head northward.

Let us see what rest of the day has in store...

RBI is expected to announce a interest rate hike.
eGOM is expected to announce a hike in LPG prices.

Inflation on the rise - is interest hike the proper tool to tackle it

2011-09-14T23:02:00.001+05:30

Inflation in India refuses to let go. The wholesale price index for the month of August rose 9.78% compared 9.22% for the previous month.

The measures taken by the government to curb the rising prices do not seem to be working. Reserve Bank of India (RBI) has raised interest rates 11 times in 18 months and the current rise in inflation is pointing to one more interest hike in the coming days. So much so, Indian Industry has begun to show signs of suffering from the effect of the interest rate hikes.

Some experts argue that the route of interest hike by RBI is not working because possibly liquidity if not the cause of this inflation.

Here are some reasons that have come forward in our discussions...

a rise in the trend of unfair trade practices used to secure disproportionate and unreasonably high levels of profit.
- The issue is more than evident in the pharmaceutical industry where medicines that leave the factory for Rs. 2 to 3 carry the MRP tag of more than Rs. 30-40.
- Simple nuts and bolts for bikes and cars that manufacture for a few paise are sold to the consumers for fabulous prices.
Where are the days when a decent profit of 10% to 15% was considered adequate? Can this not be controlled or should this not be controlled?
improper implementation of government policies and schemes... There is a clear lack of coordination between different government departments and the way the departments work within themselves.
for eg -
- The government announces a ban to export of onion and the agriculture minister goes public that he is not party to the decision.
- Foodgrains are rotting kept in the open - the government does not have enough capacity to store them properly, yet people are hungry - even the Supreme Court has voiced its opinion in this matter.
oversupply leads to inflation - The quantity of medicines that expire is increasing year-on-year, because some of the manufacturers seem to think that they can produce the entire spectrum and conquer the entire market. This is just not possible - so what happens - the medicines expire on the shelves within the distribution chain at the cost of the manufacturer. The manufacturer is forced to compensate for the loss incurred in this by increasing the prices of the regularly selling products - that's inflation.
Crude used to be available in the range of 20-30 dollars for a long time - surely the cost of extracting crude from mother earth has not gone up as much as the price it is selling for - is this much profiteering justified?
Last but not the least - corruption. Corruption has made so much in roads in our day-to-day activities that it has become one of the major contributors to the runaway inflation. An event like the Commonwealth Games should have ideally required a few crores to organize, but thanks to the corrupt organizers have siphoned off thousands of crores of tax-money and probably stashed it off in some Swiss Account. Now the government will have to raise taxes which will in turn send prices north.

There are many such reasons for the inflation that the common man faces, the experts need to examine these and take proper steps before things go out of hand.

Inflation

2011-09-08T17:28:00.000+05:30

Inflation remains a major concern in the Indian economic scenario. The Government has been under constant pressure for its failure to control prices of food and other items.

The Wholesale Price Index (WPI) figures for primary and food articles released today, peg food inflation at 9.55% for the period that ended on 27-Aug-2011, while the inflation of primary articles stands at 13.34%.

Talking to reports in New Delhi, Finance Minister Pranab Mukherjee said that food prices were expected to fluctuate during the forth-coming festive season after which he said there will be a moderating influence.

So, as far as the common man is concerned, the minister has acknowledged that there is no relief round the corner.

RBI raises repo and reverse repo rates.

2010-09-16T20:02:00.000+05:30

Bogged with inflation concerns, RBI has raised its repo rate and reverse repo rates under the liquidity adjustment facility.

Repo rate increased by 25 basis points to 6.0%, and
reverse repo rate increased by 50 basis points to 5.0%

RBI says...

The measures undertaken in this review should:
- contain inflation and anchor inflationary expectations without disrupting growth.
- reduce the volatility in overnight call money rates, thereby strengthening the monetary transmission mechanism.
- continue the process of normalisation of the monetary policy instruments.

The decision was announced by the Reserve Bank of India at the Mid-Quarter Monetary Policy Review, today.

Reacting to the RBI's measures, some bankers have already said that they would have to raise their commercial lending and deposit rates.

Protectionism Round 2 - US passes 2 bills in favour of Made of America

2010-09-16T19:54:00.000+05:30

In order to promote creation of jobs in the US, the House of Representatives has passed 2 bills that require the US Congressmen and Department of Homeland Security to only buy goods Made In America.

It seems, that the very promoters of concept of free-trade and demand-and-supply based economy have had to eat their words and move towards an "inferior" protected economy.

We hope these protectionist measure work and we see a speedy recovery of the world's largest economic power alongwith all countries of the world.

New WPI base prices announces

2010-09-14T20:50:00.000+05:30

Anand Sharma, Union Minister of Commerce and Industry, announced a new serice of Wholesale Price Index (WPI), today.

He announced in New Delhi that the new series has been prepared by shifting the base year from 1993-94 to 2004-05 and added that WPI for the month of August 2010 has been released with base year 2004-05.

The policy makers expect the change in base to improve the accuracy and be more representative of the wholesale price index.

Resistance to outsourcing in the United States

2010-09-14T20:40:00.000+05:30

In a major setback for the Indian IT industry when the US government reacted against outsourcing. The Indian IT industry has been a major provider of outsourcing services for American companies over the last decade.

Earlier in August, Ted Strickland, the Governor of Ohio state set a distrubing trend by passing and executive order to ban outsourcing of government projects and now last week Barack Obama, the President of US has indicated that he too is considering steps against the outsourcing. He said he was going to withdraw tax incentives of companies who outsource work that help create employment overseas (out of the US).

Two Union Ministers Kamalnath and Anand Sharma have reacted strongly to the developments in the field of outsourcing.

Indian Rupee gets new symbol

2010-07-16T11:49:00.000+05:30

The Indian Rupee has got a new symbol. It has a unique and simple design due to which its origin can be attributed to both the Hindi and the English languages

It is the Hindi alphabet r - र - with a horizontal line across the upper part. Incidentally it is also English alphabet R without the stem and two horizontal lines - one at top and one across its round part

The design was submitted by D. Udaya Kumar, as an entry to a competition organized for this purpose. It was approved by the Union Cabinet of India on 15th July 2010.

India to grow by 9.4% - IMF

2010-07-09T09:43:00.000+05:30

IMF - International Monetary Fund - predicts India to grow by 9.4% this fiscal - in a scenario where global economy is expected to grow by 4.5%, with the emerging and developing economies leading.

According to its economic outlook update

World growth is projected at about 4½ percent in 2010 and 4¼ percent in 2011. Relative to the April 2010 World Economic Outlook (WEO), this represents an upward revision of about ½ percentage point in 2010, reflecting stronger activity during the first half of the year. The forecast for 2011 is unchanged.

The projections for China stand at 10.5% for 2010 and 9.6% in 2011, while India is forecasted to grow at 9.4% in 2010 before falling to 8.4% next year. The advanced economies are collectively expected to grow at 2.8% in 2010 before falling to 2.4% next year.

The IMF forecast said Asia’s strong recovery from the global financial crisis continued in the first half of 2010, despite renewed tension in global financial markets. Economic activity in the region has been sustained by continued buoyancy in exports and private domestic demand.

Petrol And Diesel Prices Deregulated

2010-06-25T22:16:00.000+05:30

In what is being seen as a step in the right direction, Government of India has announced partial de-regulation of fuel prices. Petrol and Diesel prices have been been liberated.

... the Government has decided that the pricing of Petrol and Diesel both at the refinery gate and the retail level will be market-determined.

Ministry

This decision coincides with the government's announcement of increasing fuel prices - Petrol +3.5/litre, Diesel +2/litre, Kerosene +3/litre and LPG +35/cylinder.

EGoM has approved the request of the Ministry of Petroleum and Natural Gas after considering it for a long time. In wake of the rampant crude price hike in the international market, the Oil Marketing Companies have under-recovered to the tune of 53000 crores.

Government of India to list profit making Central Public Sector Enterprises

2009-11-05T16:14:00.003+05:30

The Government of India (GOI) has announced its decision, that...

all profitable listed CPSEs should meet the mandatory listing of 10% public ownership; and
all unlisted CPSEs having positive networth, no accumulated losses and having a net profit in the three preceding consecutive years should get listed on the stock exchanges.

The disinvestment proceeds would be channelized into the National Investment Fund (NIF).

The corpus comprising deposits from April 2009 till March 2012 would be available in full for investment as capital expenditure in specific social sector schemes determined by Planning Commission and Department of Expenditure.

The status quo ante of NIF will be restored from April 2012.

RBI Monetary Policy - new norms for Banks

2009-10-28T07:34:00.004+05:30

RBI has recommended that banks to keep the NPA coverage ratio at 70%, including floating provisions. The step was taken in view of the wide disparity on NPA provisioning ratios by different banks.

to advise banks to augment their provisioning cushions consisting of specific provisions against NPAs as well as floating provisions, and ensure that their total provisioning coverage ratio, including floating provisions, is not less than 70 per cent. Banks should achieve this norm not later than end-September 2010.
RBI

The SLR (statutory liquidity ratio) has been hiked by 1% to 25%. SLR is the portion of its deposits that banks are required to invest in government securities. The much expected rise in interest rates has, however, been kept out of the monetary policy announced on 27 Oct 2009.

Wholesale Price Index (WPI) to be released on monthly basis

2009-10-20T09:36:00.003+05:30

The Cabinet Committee on Economic Affairs has approved a proposal to the effect that the Department of Industrial Policy & Promotion will release the current series of Wholesale Price Index (wpi) is calculated on a monthly basis.

Presently WPI is released on a weekly basis.

The compilation of the price index of primary articles and commodities will, however, continue to be a weekly event. This the cabinet believes will allow for better monitoring of the prices of sensitive commodities and products.

WPI is used to calculate inflation - a key monetary policy input.

Divestment in NTPC approved

2009-10-20T09:26:00.002+05:30

Indian Cabinet has approved the disinvestment of 5% of National Thermal Power Corporation Limited (NTPC) and 10% of Satluj Vidyut Nigam Limited.

The Government expects to raise about Rs. 8000 crore through the NTPC stake sale. NTPC is already a listed company with a market capitalization of Rs 1,72,000 crores and after this disinvestment of 5% the government's share in the company will come down to 84.5%.

Satluj Vidyut Nigam is a joint venture hydro-electicity generation ulitity of the Central Government (75%) and the State Government of Himachal Pradesh (25%).

The disinvestment proceedings of these companies will go into making up the budget deficit.