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Economy
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India\'s slowing economy will miss the Reserve Bank of India\'s growth estimate for 2008-09, while inflation may hit 13 per cent soon and will fall to single digits with sustained tight monetary policy, a government panel said on Wednesday.
The 10-year benchmark bond yield jumped 11 basis points to close at the day\'s high of 9.09 per cent as the inflation comments strengthened expectations of further monetary tightening to add to an interest rate rise last month.
In its economic outlook for the 2008-09 financial year, Prime Minister Manmohan Singh\'s Economic Advisory Council said high interest rates triggered by an earlier surge in oil and commodity prices and global market turmoil would moderate growth.
It estimated Asia\'s third-largest economy would grow 7.7 percent in the year to the end of March, below a recent forecast from the central bank of 8 percent. It has grown by an average of 8.8 percent over the past four years.
But the report added that the central bank would have to maintain a tightening bias to trim inflation to 8-9 percent by the end of the fiscal year, from around 12 percent now.
C Rangarajan, the outgoing chairman of the panel, told a news conference that inflation, which has nearly tripled this year due to strong prices of oil and foods, could reach 13 percent soon.
\"The downside risk to our growth expectations in 2008/09 is primarily from a further deterioration in global conditions with its attendant impact on India, be it in the sphere of oil prices or capital markets,\" the panel said in its report.
Adverse global economic conditions were also expected to widen the current account deficit and put pressure on the budget by raising subsidy bills.
A majority of analysts expect growth in India to slow as policymakers struggle to fight rising prices by raising interest rates, tightening liquidity and cutting import duties.
Finance Palaniappan Chidambaram later told reporters he expected the economy to expand close to 8.0 percent in 2008-09. As well as pushing bond yields up, the report helped to send the stock market down 0.8 percent on concerns over growth.
Slowing growth
The panel said coordinated policy action at home, cooling commodity prices and action by other central banks could help to bring India\'s inflation down to 8.0-9.0 percent this fiscal year.
Analysts said the report supported the widely-held view that India\'s scorching pace of growth would cool, but said inflation could be lower than the panel\'s fiscal year-end estimate.
\"The downward revision in the panel\'s GDP growth outlook to 7.7 percent in FY09 is in line with our view that growth will moderate this year,\" said Sonal Varma, economist at Lehman Brothers in Mumbai. \"However, we expect the slowdown to spread from industrial to the services sector and therefore have a lower GDP forecast of 7.3 percent.\"
The Reserve Bank of India (RBI) has raised its benchmark lending rate by 50 basis points to 9.0 percent, its highest in seven years and the third increase in two months. It also increased the proportion of funds banks must keep on deposit to 9.0 percent to tighten liquidity.
The panel said budget deficit targets for 2008/09 would be exceeded and serious fiscal risks were arising from growing off-budget liabilities estimated at 5 percent of GDP.
Hefty fuel subsidies, loan waivers for millions of poor farmers and proposed salary increases for government employees are constraining the country\'s finances.
\"Despite appreciable fiscal consolidation, large and growing off-budget liabilities are however a matter of concern. With these included, the fiscal situation no longer looks stable and sustainable,\" the panel said.
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NEW DELHI: Soaring inflation and global recessionary trends notwithstanding, India has emerged as the most optimistic economy with majority of the privately-held businesses in the country feeling positive about their prospects for the next year, says a report.
According to a recent report prepared by advisory firm Grant Thornton India, the country is the most optimistic along with Philippines. However, the report said India is witnessing a slowdown and projected GDP of 7.9 per cent for this fiscal.
"Despite the global recessionary trends, mounting inflation and prospects of elections in the near future, Privately Held Businesses (PHBs) in India have shown the highest level of optimism about their prospects for next year.
"With an overall optimism/pessimism balance of +95 per cent, the Philippines has joined India at the top for the first time, while Japan has remained at the bottom this year with a balance of -49 per cent," the advisory firm said.
The Country Focus International Business Report 2008 said that India's expected employment growth is pegged at 74 per cent which is higher than global forecast at 33 per cent.
Further, India's optimism for exports this year at 37 per cent, is also above global average of 18 per cent.
"PHBs in India are less optimistic about their revenue prospects in 2008 (+84 per cent) compared to 2007 (+92 per cent). However, their levels of optimism regarding revenue performance are well above the global average of +63 per cent," Grant Thornton India's National Markets Leader Monish Chatrath said.
The report examined the attitudes, plans and trends of 7,800 privately held businesses in 34 economies. For India, the advisory firm looked at key issues that PHBs need to manage to survive the economic downturn.
In terms of advantages, 81 per cent PHBs in India felt that their brand strength is the "greatest source of competitive advantage", which is much higher than the global business average of 58 per cent.
Further, about 75 per cent Indian PHBs find their workforce skills and innovation to be their source of competitive advantage, much higher than the global average of 55 per cent and 46 per cent, respectively.
On economic outlook, Monish Chatrath said, "Economic growth is expected to ease back in the coming quarters and years.
"The economy has been slowing since the middle of 2007/08 and growth will continue to ease as the recent rounds of policy tightening and the impact of recent currency appreciation continues to feed through," he added.
He said, "Domestic demand will continue to drive growth in the short-term, supported by strengthening exports as this sector continues to gain competitiveness, although short term gains may be more moderate owing to the weaker global economy."
ET...
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If Govt. lowers the target for growth this year, then I think selling PSUs is better option....
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Does it mean falure of policies? or is it that bad effect of unncessary CRR hike when it was not at all important & when inflation was about 3.5%?...
In reply to:
PM eco panel cuts FY09 GDP growth estimate to 7.7%
Posted by :
MMB Messenger
The Prime Minister's Economic Panel has cut India's FY09 GDP growth estimate to 7.7%, according to NewsWire18 reports. FY09 fiscal gap including the off-budget liability is seen at 5%, the panel report said. The panel sees the need for a tight monetary stance to tackle price rise. 
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The Prime Minister's Economic Panel has cut India's FY09 GDP growth estimate to 7.7%, according to NewsWire18 reports. FY09 fiscal gap including the off-budget liability is seen at 5%, the panel report said. The panel sees the need for a tight monetary stance to tackle price rise. ...
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Hi,
S and P forecasts double digit inflation in India till February 2009 - ANI
New Delhi, August 12 (ANI): Standard and Poor s, the global rating agency, has forecast that inflation in India is likely to remain in double-digit figure till February 2009....
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Country\'s largest lender State Bank of India on Wednesday said interest rates have almost peaked, which is unlikely to change unless RBI took any further action.
\"It (interest rate) has peaked or near peaked unless there is any further cause of action by external factors or RBI,\" SBI\'s Chairman O P Bhatt said in New Delhi.
Oil prices are softening, monsoons are good, commodity prices especially of steel seem to have peaked and demand pull because of Olympics also seems to be over, he said.
Global economy is slowing down and there seems to be enough reasons that interest rates have peaked or near peaked.
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India\'s economy is expected to grow 7.7 percent in the fiscal year ending March 2009, and a tight monetary stance is necessary to bring down inflation to 8-9 percent by March 2009, a government report said on Wednesday.
The Prime Minister\'s Economic Advisory Council has downgraded GDP growth for year 08-09 to 7.7% and has said that inflation is expected to come down only by March 09 to 8-9%.
The council expects dip in industry and Service growth by about 1% in FY 08-09. As per the EAC agricultural growth is expected to slip to 2% from 4.5% in 07-08, industrial growth could move down to 7.5% in 08=09 from 8.5% in 07-08 and services growth could go down to 9.6% in 08-09 from 10.8%
A majority of forecasts expect expansion in Asia\'s third-largest economy to slow as policymakers struggle to fight rising prices by raising interest rates, tightening liquidity and cutting import duties.
The panel said fiscal deficit targets for 2008/09 would \"overreach\" while revenue deficits would persist. It added that serious fiscal risks were arising from growing off-budget liabilities estimated at 5 percent of GDP.
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Measures taken by Govt. for curbing use of Fertilisers in Chemical industries as Raw Material have failed and thus lot of revenue is lost by way of Excise and subsidy.The Govt.should bring Ntn.that all fertilisers should be brownish in colour and purityshoud vary between 95%-97%...
In reply to:
Govt to pay subsidy on time & in cash: Fert Secy
Posted by : MMB Messenger
Atul Chaturvedi, Secretary of the Fertiliser Department, said the urea price accounts for gas pricing, capital investment cost and rate of return. He said he has reassured fertiliser companies on subsidy payment as budgeted. Government has committed to pay subsidy and it will be paid on time and in cash.
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Atul Chaturvedi, Secretary of the Fertiliser Department, said the urea price accounts for gas pricing, capital investment cost and rate of return. He said he has reassured fertiliser companies on subsidy payment as budgeted. Government has committed to pay subsidy and it will be paid on time and in cash....
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Terming the current global economic crisis as a creation of investment bankers, NRI business tycoon Lord Swraj Paul on Monday said the magnitude of the problem could be far bigger than what meets the eye.
“It is a man-made crisis and the investment bankers are responsible for it,” he said at an interactive session organised by the FICCI Ladies Organisation here.
Major banks across the world have written off over $120 billion in bad debts since last year, connected to the sub-prime crisis in the U.S. Banking sector analysts have predicted close to another $200 billion write-downs.
Lord Paul said bankers have gone overboard by giving loans to people, which were more than their repaying capacity and have resulted in the current crisis. He cautioned that India was not shielded from the global downturn and the country’s soaring inflation should be a matter of concern.
“Some people got into the exuberance of growth that India witnessed but they failed to understand the problem of tackling inflation,” he said, adding that countries such as Britain were more focussed on controlling inflation than achieving growth. He said although India had managed to ‘shine’ far better than it was 50 years ago, it had left a lot to be desired. “...80-85 per cent of the people are being neglected, no country can be proud of such a figure,” he said. Lord Paul said it was a shame that over 300 million people live on an earning of $1 a day and nearly 600 million on $2 a day.
Asking women of India to take up leadership role, he said: “A corporate leader does not have to be a visionary, yet he needs to have a vision. The vision may not always remain the same; it can change or evolve, but he must know where he wants to go at any time and keep going towards it.” — PTI
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I think Indian economy is right on the track. & those IIP numbers are of June where market pessimism was quite higher compared to Jan-March. I think 8% growth is surely to come. Coming months will be seen more growth. July will be again slow but better than June. August will be much better....
In reply to:
June IIP at 5.4%; Experts see FY09 GDP growth at 7.5%
Posted by : MMB Messenger
June industrial growth stand at 5.4% versus 8.9% (YoY), while infrastructure output number stands at 3.4% versus 5.2% (YoY). May industrial growth has been revised to 4.1% versus 3.8% earlier. A CNBC-TV18 poll saw the Index for Industrial Production, or IIP, number at 5.4% for June as against 3.8% for May and 8.9% a year ago.
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Oil prices tumbled to a 14-week low near USD 113 per barrel on signs that the US economic slump will extend into 2009, paring fuel demand. In after hours access trading, crude is at USD 113.95 per barrel.
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How can Indian economy move fast.It takes 2 hours on an average to all workers,executives and ceos to reach their office from home.By the time they reach office they are so damn frustrated and drained physically that they want to rest a while.then in the evening the tension of going back into that traffice mess builds up and I am sure a few minutes are lost there.The no. of man hours lost and people neglecting to do work thinking what a mess they will get into once in the traffic jam is costing this country very dearly.I am surprised how the foreign people like to operate in this country.Even though they don\...
In reply to:
June IIP at 5.4%; Experts see FY09 GDP growth at 7.5%
Posted by : MMB Messenger
June industrial growth stand at 5.4% versus 8.9% (YoY), while infrastructure output number stands at 3.4% versus 5.2% (YoY). May industrial growth has been revised to 4.1% versus 3.8% earlier. A CNBC-TV18 poll saw the Index for Industrial Production, or IIP, number at 5.4% for June as against 3.8% for May and 8.9% a year ago.
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How can Indian economy move fast.It takes 2 hours on an average to all workers,executives and ceos to reach their office from home.By the time they reach office they are so damn frustrated and drained physically that they want to rest a while.then in the evening the tension of going back into that traffice mess builds up and I am sure a few minutes are lost there.The no. of man hours lost and people neglecting to do work thinking what a mess they will get into once in the traffic jam is costing this country very dearly.I am surprised how the foreign people like to operate in this country.Even though they don\...
In reply to:
June IIP at 5.4%; Experts see FY09 GDP growth at 7.5%
Posted by : MMB Messenger
June industrial growth stand at 5.4% versus 8.9% (YoY), while infrastructure output number stands at 3.4% versus 5.2% (YoY). May industrial growth has been revised to 4.1% versus 3.8% earlier. A CNBC-TV18 poll saw the Index for Industrial Production, or IIP, number at 5.4% for June as against 3.8% for May and 8.9% a year ago.
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