1)The Indian economy is the eleventh largest in the world by nominal GDP and the fourth largest by purchasing power parity (PPP).
2)India is poised to achieve 9 per cent economic growth in the current financial year itself, driven by robust performance by the agriculture and industry sectors.
The economy grew by 8.9 per cent in the second quarter of the current fiscal.
3)India has emerged as one of the world's top ten countries in industrial production. The nation's industrial production grew at the fastest pace in three months at 10.8 per cent.
Manufacturing grew 11.3 percent in October after a 4.6 percent gain in September.
4)India is one of the fastest growing automobile markets in the world, expanding at 35 per cent on average in the first four months of the current financial year.
5)The Bombay Stock Exchange has been rated as the world's best performing stock market recently. With a 13 per cent gain, Sensex is among the world's 10 biggest markets, according to data collected by Bloomberg.
6)Indian companies have become bigger and stronger in the last ten years with the average revenue of a company on the Fortune India 500 list standing at Rs 7,632.5 crore (Rs 76.32 billion).
The total revenue of the Fortune India 500 companies stands at Rs 38,16,239.40 crore.
7)India is the world's largest recipient of overseas remittances. The remittances grew from $49.6 billion in 2009 to $55 billion in 2010.
It is also the country with the second largest number of emigrants after Mexico, according to the World Bank.
8)India owns over 18,000 tonnes of above ground gold stocks worth approximately $800 billion and representing at least 11 per cent of global stock, according to estimates of World Gold Council.
India ranks 11th in the world with 557.7 tonnes of gold reserves.
9)India is among the top 10 nations in terms of foreign exchange reserves.
The country's foreign exchange reserves breached the $300-billion mark for the first time since 2008 with an addition of $2.2 billion on the back of a healthy rise in foreign currency. The nation's forex reserves currently stand at $296.40 billion.
10)India's services sector, backed by the IT revolution, remains the biggest contributor to the country's GDP, with a contribution of 58.4 per cent.
The industry sector contributed 24.1 per cent and the agriculture sector contributed 17.5 per cent to the GDP.
11)India's civil aviation sector will be among the top five in the world in the next five years.
Indian domestic air traffic is expected to reach 160-180 million passengers per year, while international traffic will exceed 80 million.
12)India's exports during November jumped by 26.8 per cent to $18.9 billion year-on-year. India's exports during April-September aggregated to $103.65 billion registering a year-on-year growth of 28 per cent.
13)India, China and Brazil are the top three target countries for foreign direct investment until the end of 2012 with the United States, for years number one, now in fourth place, according to the UN trade and development agency UNCTAD.
14)The Indian telecommunications industry is the world's fastest growing telecommunications industry, 723.28 million telephone (landlines and mobile) subscribers and 687.71 million mobile phone connections as of September 30, 2010.
15)The number of Internet users in India is estimated at 81 million. The Telecom Regulatory Authority of India pegs the number of broadband subscribers at 10.08 million in August 2010.
16)The Indian IT-BPO industry is expected to exceed $70 billion in fiscal 2011.
The Indian IT-BPO exports are projected to grow by 13 per cent to 15 per cent while domestic IT-BPO will grow slightly more by 15 per cent to 17 per cent during fiscal 2010-11.
17)India has the largest number of post offices in the world. The world's highest post office, Hikkim is located at 15,500 feet in the Lahaul Spiti district of Himachal Pradesh.
18)The largest employer in India is the Indian Railways, employing over 1.6 million people. Indian Railways started operations on April 16, 1853.
19)ndia ranks second in farm output globally. India is one of the largest producer in the world of milk, cashew nuts, coconuts, tea, ginger, turmeric and black pepper.
20)Tourism is the largest service industry in India, with a contribution of 6.23 per cent to the national GDP. The number of foreign tourists visiting the country during September this year is higher than that of the same month last year.
Around 3.69 lakh (369,000) foreign tourists came to India in September this year as compared to 3.28 lakh (328,000) during the same month in 2009.
Courtecy:www.rediff.com
Showing posts with label Indian economy. Show all posts
Showing posts with label Indian economy. Show all posts
Monday, December 20, 2010
Sunday, July 5, 2009
Indian economy better placed than China’s, says Roach
Stephen S Roach, chairman of Morgan Stanley Asia, expressed his optimism on the prospects for the Indian economy over that of China, saying that India has made a lot of improvement in recent years on the macro developments, especially with an increase in foreign direct investments, higher savings and improvement in infrastructure in the share of India in GDP.
“These improvements reinforce the long-standing accomplishments of India on the micro front—large collection of world-class competitive companies, well educated IT competent workforce, extraordinary entrepreneurs and innovators, well developed capital market, solid financial institutions, rule of law and democracy,” said Roach in a press conference, adding that what has been missing in this interplay between the micro and now the improved macro has been the political impetus to reforms, something it has hobbled your government in the last five years.
“India is a more balanced economy than the rest of export-led Asia,” Roach told reporters in Mumbai on Wednesday. In fact, for the first time, Roach is now more optimistic about prospects for India than China. “China faces major challenges for the first time in 30 years,” Roach said. “It pushed its export-led model too far, leaving it too dependent on the external climate.”
Roach noted that the recent election changes the prospects for reforms going forward and hopes that the new Congress-led government will be more effective in pushing the reforms forward on a number of fronts and will be much less hobbled by the politics of coalition management.
Talking about the growth forecast for the Indian economy, Roach said the growth would remain between 5.5-6.5% for now. Incidentally, Morgan Stanley on May 28 raised India’s growth forecast to 5.8% in the fiscal year to March 31, 2010, from an earlier estimate of 4.4%. The economic growth in the $1.2 trillion economy may turn out to be the real surprise in Asia, Roach said.
“The growth in the Indian economy cannot go beyond 8% in another 2-3 years time,” he said. Roach also noted that disinvestment is important for India to reduce its fiscal deficit.The fiscal deficit of India widened to a seven-year high of 6.2% in the fiscal to March 31 as government borrowed more to fund fiscal stimulus packages.
Source
“These improvements reinforce the long-standing accomplishments of India on the micro front—large collection of world-class competitive companies, well educated IT competent workforce, extraordinary entrepreneurs and innovators, well developed capital market, solid financial institutions, rule of law and democracy,” said Roach in a press conference, adding that what has been missing in this interplay between the micro and now the improved macro has been the political impetus to reforms, something it has hobbled your government in the last five years.
“India is a more balanced economy than the rest of export-led Asia,” Roach told reporters in Mumbai on Wednesday. In fact, for the first time, Roach is now more optimistic about prospects for India than China. “China faces major challenges for the first time in 30 years,” Roach said. “It pushed its export-led model too far, leaving it too dependent on the external climate.”
Roach noted that the recent election changes the prospects for reforms going forward and hopes that the new Congress-led government will be more effective in pushing the reforms forward on a number of fronts and will be much less hobbled by the politics of coalition management.
Talking about the growth forecast for the Indian economy, Roach said the growth would remain between 5.5-6.5% for now. Incidentally, Morgan Stanley on May 28 raised India’s growth forecast to 5.8% in the fiscal year to March 31, 2010, from an earlier estimate of 4.4%. The economic growth in the $1.2 trillion economy may turn out to be the real surprise in Asia, Roach said.
“The growth in the Indian economy cannot go beyond 8% in another 2-3 years time,” he said. Roach also noted that disinvestment is important for India to reduce its fiscal deficit.The fiscal deficit of India widened to a seven-year high of 6.2% in the fiscal to March 31 as government borrowed more to fund fiscal stimulus packages.
Source
Thursday, April 23, 2009
Minting political capital
At first it seems like an idea from the 1970s. From the era of nationalisation. An idea whose time is past, that has become an alibi. Indeed, when L.K. Advani, PM-designate for the NDA, first spoke about it last Sunday, it seemed like a hard weave and dodge to duck the imbroglio involving Varun Gandhi.
By April 1 it was an SMS in demand. It seemed the time was just right for the idea of getting stashed loot back to the country. Suddenly the BJP itself woke up to an idea with all the makings of sound political capital.
The idea itself was born of a political imperative and economic circumstance. The political imperative stems from the need for a differentiator in an era when mandates are jigsaw puzzles and the economic circumstance calls for an idea that works both as rhetoric and a promise of a better life.
After all, the estimated $500 bn stashed abroad is enough stimulus to resurrect growth and alter the face of India's infrastructure. Sure, the first debate on Swiss numbered accounts featured in Parliament in December 1968 and after two decades of probe and litigation on the Bofors case nobody saw any of the bribe money. The circumstance, though, has changed.
Rs 25 lakh crore belonging to Indians is estimated to be stashed away in Swiss Banks.We will do our utmost to bring this wealth back to India.SMS from L.K.Advani to voters
Hope is embedded in the first-of-itskind action seen in the US. Last September the UBS of Switzerland revealed to the US that it held 47,000 secret accounts for Americans but refused to disclose their identity. Last month, however, after being caught soliciting business, UBS agreed to reveal 250-300 clients and paid $780 million in fines.
The plea bargain was driven by desperation to avoid closure and international sanction. Pressure is mounting globally. British Prime Minister Gordon Brown and German Chancellor Angela Merkel have both stated that there was no place for tax havens . The days of bullet-proof confidentiality are clearly over and Advani's promise is based on this premise.
So, what is the quantum of Indian money in the Swiss banks? What is the source of the declaration of between $500 bn and $1,400 bn stashed in Swiss accounts ? First a perspective: $500 bn is India's GDP for six months and $1,400 bn would be India's GDP for a year and three months or five quarters.
Quote unquote
We raised the issue of money in Swiss banks in February and asked the Government to get it back.Advani has only followed it up. Prakash Karat, CPI(M) General Secretary What did they do for six years? Why was he silent as the leader of the Opposition for five years? It is a poll promise as they are short of issues. Kapil Sibal, Union Minister for Science and Technology A country-by-country breakdown of accounts in Die Banken in der Schweiz published by the Swiss National Bank (the Swiss central bank) in 2007 reveals assets belonging to Indian entities were worth only $2.5 bn or CHF2,923 million (Swiss Francs).
Swiss bankers also managed CHF1,383 mn ($1.2 bn) belonging to Indians in a fiduciary capacity. In fact, the total assets of all foreigners in Swiss banks is CHF2,070,437 million (or $1.8 trillion).
Contrast this with the range of $500 bn to $1.4 trillion of just Indian money stashed in Swiss banks as claimed by Team Advani.
Perhaps, money is hidden in custody accounts. By end-2008 the value of securities in these secret accounts of foreigners was CHF2,190 billion ($1.9 trillion). It is a moot point how much of this could be Indian money.
Quantum of money apart there is also the leverage factor. Does India have the kind of leverage US has? And mind you, the US government failed to get the UBS to spill out all the names.
As Kapil Sibal, a top lawyer and Union minister for science and technology, says, getting to the pot of money is a complex exercise as one has to first prove violations . Sibal also questions the timing of this idea. Why didn't they do anything when they were in power for six years? Why didn't Advani raise this issue in the past five years as the leader of the Opposition? If the issue is raised now after 11 years of silence, it is because they are short of poll issues.
There is, of course, no debate that Indians have stashed huge sums in overseas entities. The sources are unlimited from business to corruption to crime. Indians, without doubt, own a substantive stake in the $11-plus trillion stashed across the globe.
One route is overinvoicing of imports. India imported capital goods worth $45 billion last year, and officials believe, at least 10 per cent is siphoned and stashed abroad making India one of the top 10 countries with illicit outflows. This, though, is not the only route. The Satyam saga is validation of software exports being another route.
Over the years the adulterous politician-babu-corporate nexus has worked together to orchestrate the framing and changing of rules to suit end use.
The formula: to send money abroad inflate costs of goods or services sought abroad and to bring money back inflate income. Indeed, it is passe to stash in Swiss banks. Corporates now have legal ways and means to keep money outside India. FIIs, sub accounts and P-Notes are all part of the routing process and Cyprus, Singapore, Dubai, Mauritius are all new destinations.
None of these facts should detain Team Advani or the government of India from pursuing the idea. Hot pursuit of hot money is an idea whose time has come. India must take advantage (as it has indeed in the case of Liechtenstein's LGT Bank) of the emerging consensus across the globe against tax havens. But for rhetoric to translate into outcome it would also have to address issues at home. They would range from ending the abuse of double tax treaties to wiping out the P-Note and sub accounts culture. Very simply, the next political idea must be to dismantle the benami empires whether of dons, politicians
Loot vault
The amount of funds held offshore globally by individuals is about $11.5 trillion with a resulting annual loss of tax revenue of about $250 bn.
Tax Justice Network
Global proceeds from criminal activities, tax evasion and corruption is estimated at between $1 tn and $1.6 tn per year.
UN & amp; World Bank Report, 2007
During 2002-'06, $10 bn to $100 bn have been stolen out of India every year.
Global Financial Integrity Report, 2006
At least $6.2 trillion of wealth is held offshore, depriving developing countries of annual tax receipts of $64-124 bn.
Oxfam Study
India is estimated to have lost $5.2 bn just in taxes due to bilateral trade mispricing with the EU and US in 2005-'07.
Christian Aid
Source
By April 1 it was an SMS in demand. It seemed the time was just right for the idea of getting stashed loot back to the country. Suddenly the BJP itself woke up to an idea with all the makings of sound political capital.
The idea itself was born of a political imperative and economic circumstance. The political imperative stems from the need for a differentiator in an era when mandates are jigsaw puzzles and the economic circumstance calls for an idea that works both as rhetoric and a promise of a better life.
After all, the estimated $500 bn stashed abroad is enough stimulus to resurrect growth and alter the face of India's infrastructure. Sure, the first debate on Swiss numbered accounts featured in Parliament in December 1968 and after two decades of probe and litigation on the Bofors case nobody saw any of the bribe money. The circumstance, though, has changed.
Rs 25 lakh crore belonging to Indians is estimated to be stashed away in Swiss Banks.We will do our utmost to bring this wealth back to India.SMS from L.K.Advani to voters
Hope is embedded in the first-of-itskind action seen in the US. Last September the UBS of Switzerland revealed to the US that it held 47,000 secret accounts for Americans but refused to disclose their identity. Last month, however, after being caught soliciting business, UBS agreed to reveal 250-300 clients and paid $780 million in fines.
The plea bargain was driven by desperation to avoid closure and international sanction. Pressure is mounting globally. British Prime Minister Gordon Brown and German Chancellor Angela Merkel have both stated that there was no place for tax havens . The days of bullet-proof confidentiality are clearly over and Advani's promise is based on this premise.
So, what is the quantum of Indian money in the Swiss banks? What is the source of the declaration of between $500 bn and $1,400 bn stashed in Swiss accounts ? First a perspective: $500 bn is India's GDP for six months and $1,400 bn would be India's GDP for a year and three months or five quarters.
Quote unquote
We raised the issue of money in Swiss banks in February and asked the Government to get it back.Advani has only followed it up. Prakash Karat, CPI(M) General Secretary What did they do for six years? Why was he silent as the leader of the Opposition for five years? It is a poll promise as they are short of issues. Kapil Sibal, Union Minister for Science and Technology A country-by-country breakdown of accounts in Die Banken in der Schweiz published by the Swiss National Bank (the Swiss central bank) in 2007 reveals assets belonging to Indian entities were worth only $2.5 bn or CHF2,923 million (Swiss Francs).
Swiss bankers also managed CHF1,383 mn ($1.2 bn) belonging to Indians in a fiduciary capacity. In fact, the total assets of all foreigners in Swiss banks is CHF2,070,437 million (or $1.8 trillion).
Contrast this with the range of $500 bn to $1.4 trillion of just Indian money stashed in Swiss banks as claimed by Team Advani.
Perhaps, money is hidden in custody accounts. By end-2008 the value of securities in these secret accounts of foreigners was CHF2,190 billion ($1.9 trillion). It is a moot point how much of this could be Indian money.
Quantum of money apart there is also the leverage factor. Does India have the kind of leverage US has? And mind you, the US government failed to get the UBS to spill out all the names.
As Kapil Sibal, a top lawyer and Union minister for science and technology, says, getting to the pot of money is a complex exercise as one has to first prove violations . Sibal also questions the timing of this idea. Why didn't they do anything when they were in power for six years? Why didn't Advani raise this issue in the past five years as the leader of the Opposition? If the issue is raised now after 11 years of silence, it is because they are short of poll issues.
There is, of course, no debate that Indians have stashed huge sums in overseas entities. The sources are unlimited from business to corruption to crime. Indians, without doubt, own a substantive stake in the $11-plus trillion stashed across the globe.
One route is overinvoicing of imports. India imported capital goods worth $45 billion last year, and officials believe, at least 10 per cent is siphoned and stashed abroad making India one of the top 10 countries with illicit outflows. This, though, is not the only route. The Satyam saga is validation of software exports being another route.
Over the years the adulterous politician-babu-corporate nexus has worked together to orchestrate the framing and changing of rules to suit end use.
The formula: to send money abroad inflate costs of goods or services sought abroad and to bring money back inflate income. Indeed, it is passe to stash in Swiss banks. Corporates now have legal ways and means to keep money outside India. FIIs, sub accounts and P-Notes are all part of the routing process and Cyprus, Singapore, Dubai, Mauritius are all new destinations.
None of these facts should detain Team Advani or the government of India from pursuing the idea. Hot pursuit of hot money is an idea whose time has come. India must take advantage (as it has indeed in the case of Liechtenstein's LGT Bank) of the emerging consensus across the globe against tax havens. But for rhetoric to translate into outcome it would also have to address issues at home. They would range from ending the abuse of double tax treaties to wiping out the P-Note and sub accounts culture. Very simply, the next political idea must be to dismantle the benami empires whether of dons, politicians
Loot vault
The amount of funds held offshore globally by individuals is about $11.5 trillion with a resulting annual loss of tax revenue of about $250 bn.
Tax Justice Network
Global proceeds from criminal activities, tax evasion and corruption is estimated at between $1 tn and $1.6 tn per year.
UN & amp; World Bank Report, 2007
During 2002-'06, $10 bn to $100 bn have been stolen out of India every year.
Global Financial Integrity Report, 2006
At least $6.2 trillion of wealth is held offshore, depriving developing countries of annual tax receipts of $64-124 bn.
Oxfam Study
India is estimated to have lost $5.2 bn just in taxes due to bilateral trade mispricing with the EU and US in 2005-'07.
Christian Aid
Source
Friday, February 13, 2009
Confusion amid a crisis
Even as bloggers are busy decoding depression, the real challenge now for India will be to maintain the national savings rate above 35% of GDP.
This is the high season for confusion about the state of the world economy. The pace at which world output is slowing has caught most economists—other than the most pessimistic members of the tribe—unawares.
Even the D-word is now getting an airing. Economics bloggers are busy trying to define what a depression really means. British Prime Minister Gordon Brown used the word to describe the state of the global economy in a speech last week; his media managers quickly moved into overdrive to dismiss his usage as a slip of the tongue. But then the chief of the International Monetary Fund announced on Monday that the rich nations are “already in depression”. This came just a few days after the multilateral lender said that the world economy was already at a standstill. Dominique Strauss-Kahn says that the IMF growth forecast could be cut once again: “The worst cannot be ruled out.”
The semantics and speeches aside, the big issue is whether the world economy is stumbling into a Japan-style decade of zero growth and deflation, and what this will mean for India.
The immediate pain is visible. The first official estimates of Indian economic growth have been pegged at a six-year low of 7.1%. That’s a far cry from the needless bravado earlier this fiscal year, when the then finance minister P. Chidambaram insisted that Indian growth would not be affected by the global crisis.
Most private sector economists expect the economy to perform worse than the government’s statistics office has initially estimated. The 21 professional forecasters polled by the Reserve Bank of India every quarter expect an average growth rate of 6.8% in the current fiscal year, against the 7.7% average estimate made in the previous survey.
The current slowdown—and the prospect that it will worsen—could reopen the old debate: At what rate can India sustainably grow in the medium term?
There have always been contentious debates on what drives economic growth in any country—use of more resources such as labour and capital, or a better use of resources through higher productivity? Barry Bosworth and Susan Collins, in a 2007 research paper on “growth accounting” for India and China, showed that of the output growth per worker in these two countries between 1978 and 2004, roughly half came from capital accumulation and the other half from higher productivity.
Ensuring that India maintains strong economic growth despite the obvious global problems will require coherent strategy from the Indian government—both this one and the next. The current focus seems to be throwing cash at every industry and major project that can make itself heard in the election season. Some of this may be inevitable in a boisterous democracy such as ours, but lobbying and rent seeking also play a part.
Analyses such as the one from Bosworth and Collins suggest that long-term policy should focus on two important issues: maintaining rates of savings and investment so that capital accumulation stays on track; and long-term reforms that will create incentives for Indians to take risks and work harder.
First, let’s consider savings and investments. The splendid boom that began five years ago and is now winding down was driven by both a benign global business climate as well as a huge increase in the national savings rate. The latter has shot up by around 12 percentage points since the beginning of this decade—and higher domestic savings have been able to support the higher investment rate that led to accelerating growth.
The real challenge now will be to maintain the national savings rate above 35% of gross domestic product (GDP). Most of the rise in the savings rate these past few years was because of healthier corporate balance sheets and lower government deficits. Both are likely to deteriorate in the current downturn. It is safe to guess that national savings have peaked for now and will decline as a proportion of national output. Irresponsible fiscal policy could pull it down to levels that make it difficult for India to grow above 6% a year. That is something the Indian government should avoid.
The second big challenge will be to boost productivity, through more open product markets, better infrastructure, a more educated and skilled workforce, and access to capital for both large and small businesses. The march out of poverty is essentially about raising output per worker—and productivity has a big role to play in this.
These are trying times for policymakers. And there is too much confusion right now for a coherent policy to emerge. But even as the government is busy fighting many small fires, it should not take its eyes off the larger issue—that the economy will keep growing rapidly only if investments stay on track and there are reforms to boost productivity per worker.
Source
This is the high season for confusion about the state of the world economy. The pace at which world output is slowing has caught most economists—other than the most pessimistic members of the tribe—unawares.
Even the D-word is now getting an airing. Economics bloggers are busy trying to define what a depression really means. British Prime Minister Gordon Brown used the word to describe the state of the global economy in a speech last week; his media managers quickly moved into overdrive to dismiss his usage as a slip of the tongue. But then the chief of the International Monetary Fund announced on Monday that the rich nations are “already in depression”. This came just a few days after the multilateral lender said that the world economy was already at a standstill. Dominique Strauss-Kahn says that the IMF growth forecast could be cut once again: “The worst cannot be ruled out.”
The semantics and speeches aside, the big issue is whether the world economy is stumbling into a Japan-style decade of zero growth and deflation, and what this will mean for India.
The immediate pain is visible. The first official estimates of Indian economic growth have been pegged at a six-year low of 7.1%. That’s a far cry from the needless bravado earlier this fiscal year, when the then finance minister P. Chidambaram insisted that Indian growth would not be affected by the global crisis.
Most private sector economists expect the economy to perform worse than the government’s statistics office has initially estimated. The 21 professional forecasters polled by the Reserve Bank of India every quarter expect an average growth rate of 6.8% in the current fiscal year, against the 7.7% average estimate made in the previous survey.
The current slowdown—and the prospect that it will worsen—could reopen the old debate: At what rate can India sustainably grow in the medium term?
There have always been contentious debates on what drives economic growth in any country—use of more resources such as labour and capital, or a better use of resources through higher productivity? Barry Bosworth and Susan Collins, in a 2007 research paper on “growth accounting” for India and China, showed that of the output growth per worker in these two countries between 1978 and 2004, roughly half came from capital accumulation and the other half from higher productivity.
Ensuring that India maintains strong economic growth despite the obvious global problems will require coherent strategy from the Indian government—both this one and the next. The current focus seems to be throwing cash at every industry and major project that can make itself heard in the election season. Some of this may be inevitable in a boisterous democracy such as ours, but lobbying and rent seeking also play a part.
Analyses such as the one from Bosworth and Collins suggest that long-term policy should focus on two important issues: maintaining rates of savings and investment so that capital accumulation stays on track; and long-term reforms that will create incentives for Indians to take risks and work harder.
First, let’s consider savings and investments. The splendid boom that began five years ago and is now winding down was driven by both a benign global business climate as well as a huge increase in the national savings rate. The latter has shot up by around 12 percentage points since the beginning of this decade—and higher domestic savings have been able to support the higher investment rate that led to accelerating growth.
The real challenge now will be to maintain the national savings rate above 35% of gross domestic product (GDP). Most of the rise in the savings rate these past few years was because of healthier corporate balance sheets and lower government deficits. Both are likely to deteriorate in the current downturn. It is safe to guess that national savings have peaked for now and will decline as a proportion of national output. Irresponsible fiscal policy could pull it down to levels that make it difficult for India to grow above 6% a year. That is something the Indian government should avoid.
The second big challenge will be to boost productivity, through more open product markets, better infrastructure, a more educated and skilled workforce, and access to capital for both large and small businesses. The march out of poverty is essentially about raising output per worker—and productivity has a big role to play in this.
These are trying times for policymakers. And there is too much confusion right now for a coherent policy to emerge. But even as the government is busy fighting many small fires, it should not take its eyes off the larger issue—that the economy will keep growing rapidly only if investments stay on track and there are reforms to boost productivity per worker.
Source
Wednesday, October 22, 2008
World Prosperity Index: India ranked No 70
The quality of secondary education, the cost of starting a business and the lack of government effectiveness are among the reasons why India has been ranked 70 among 104 nations on the World Prosperity Index 2008.
"India has a relatively entrepreneurial culture. It requires government effectiveness and the tackling of corruption," Alan McCormick, managing director, Legatum Institute, which has brought out the index, told PTI.
The increase in capital and education costs contributes directly to the value of physical and human capital and thus directly increases economic output. Poor governance and excessive bureaucracy impose costs on business and thus restrain growth, said the report, which was released last week.
The Institute also ranks India at No 10 on its 'Who's Going Places' list, with China on No 6. "These countries have the best context right now within which to create wealth," McCormick said. Both economies have recently grown faster than almost any country in the rich world. Since these two giant nations are home to more than two billion people, these improvements in competitiveness are bringing about a dramatic lessening of the global wealth gap and are very good news for global prosperity, the report said.
"India outstrips many South Asian nations in various aspects of wealth creation. It ranks stronger with reference to other Asian countries in terms of avoiding dependence on commodity exports and foreign aid," McCormick said.
The Index, which calculates a country's prosperity on the basis of economic competitiveness and comparative liveability, has been prepared by assessing drivers of prosperity based on 22 key indicators and 44 sub-indicators.
Australia topped the overall Index, Austria earned top scores in education and in health and Finland rated excellent governance, the report said. Every one of the top 29 countries in the overall Prosperity Index score half a standard deviation or more above the global mean on good governance, the report said.
India has an exceptionally weak score in commercialising new ideas via entrepreneurship, a factor which the Index identifies as a major contributor to growth. India's score in terms of entrepreneurship is surprisingly better than Austria at 2 and Canada at 14. It, however, is doing a lot in terms of commercialising innovation.
"One of the measures we use to analyse innovation is the number of patents registered by a country with the World Intellectual Organisation. When a country is issuing lots of patents, it indicates that there is a lot of research and development taking place within the country and, importantly, it is being commercialised. India has increased its patents rapidly over the last few years, most notably in the pharmaceutical sector," McCormick said.
Singapore and Hong Kong have a remarkably high score in commercialising new ideas via economic openness. Neighbouring Sri Lanka, which ranks 60 on the Index, beats India at it by scoring high on commercialising new ideas via education and entrepreneurship and building social support through family and community life.
Australia ranks higher in terms of investing productively via good governance, commercialising new ideas via better education and building social support through community life. India scores low in all these factors.
Germany at number 4, Kuwait at 30, Russia at 57, Mongolia at 77 score comparatively higher than India in terms of commercialising new ideas via education.
This is the second year in succession that the Institute has come up with the Prosperity Index. In 2007, only 50 countries were analysed as compared to 104 this year.
"India was featured in last year's Index and was ranked 46th of the 50 countries analysed. Although comparisons between 2007 and 2008 rankings are not valid due to changes in the methodology of the survey, the drivers and restrainers of India's prosperity are quite similar to last year," Legatum Corporate Communications Hamish Banks said. "They include significant weaknesses in economic openness, entrepreneurship and higher standards of education; health issues remain a problem, but religious belief is a strength."
Almost all of the countries that ranked lower than India last year -- Pakistan, Zimbabwe and Bangladesh -- are again ranked lower in 2008 with the exception of Egypt, which is now ranked very slightly higher than India at 67, he said.
"India has a relatively entrepreneurial culture. It requires government effectiveness and the tackling of corruption," Alan McCormick, managing director, Legatum Institute, which has brought out the index, told PTI.
The increase in capital and education costs contributes directly to the value of physical and human capital and thus directly increases economic output. Poor governance and excessive bureaucracy impose costs on business and thus restrain growth, said the report, which was released last week.
The Institute also ranks India at No 10 on its 'Who's Going Places' list, with China on No 6. "These countries have the best context right now within which to create wealth," McCormick said. Both economies have recently grown faster than almost any country in the rich world. Since these two giant nations are home to more than two billion people, these improvements in competitiveness are bringing about a dramatic lessening of the global wealth gap and are very good news for global prosperity, the report said.
"India outstrips many South Asian nations in various aspects of wealth creation. It ranks stronger with reference to other Asian countries in terms of avoiding dependence on commodity exports and foreign aid," McCormick said.
The Index, which calculates a country's prosperity on the basis of economic competitiveness and comparative liveability, has been prepared by assessing drivers of prosperity based on 22 key indicators and 44 sub-indicators.
Australia topped the overall Index, Austria earned top scores in education and in health and Finland rated excellent governance, the report said. Every one of the top 29 countries in the overall Prosperity Index score half a standard deviation or more above the global mean on good governance, the report said.
India has an exceptionally weak score in commercialising new ideas via entrepreneurship, a factor which the Index identifies as a major contributor to growth. India's score in terms of entrepreneurship is surprisingly better than Austria at 2 and Canada at 14. It, however, is doing a lot in terms of commercialising innovation.
"One of the measures we use to analyse innovation is the number of patents registered by a country with the World Intellectual Organisation. When a country is issuing lots of patents, it indicates that there is a lot of research and development taking place within the country and, importantly, it is being commercialised. India has increased its patents rapidly over the last few years, most notably in the pharmaceutical sector," McCormick said.
Singapore and Hong Kong have a remarkably high score in commercialising new ideas via economic openness. Neighbouring Sri Lanka, which ranks 60 on the Index, beats India at it by scoring high on commercialising new ideas via education and entrepreneurship and building social support through family and community life.
Australia ranks higher in terms of investing productively via good governance, commercialising new ideas via better education and building social support through community life. India scores low in all these factors.
Germany at number 4, Kuwait at 30, Russia at 57, Mongolia at 77 score comparatively higher than India in terms of commercialising new ideas via education.
This is the second year in succession that the Institute has come up with the Prosperity Index. In 2007, only 50 countries were analysed as compared to 104 this year.
"India was featured in last year's Index and was ranked 46th of the 50 countries analysed. Although comparisons between 2007 and 2008 rankings are not valid due to changes in the methodology of the survey, the drivers and restrainers of India's prosperity are quite similar to last year," Legatum Corporate Communications Hamish Banks said. "They include significant weaknesses in economic openness, entrepreneurship and higher standards of education; health issues remain a problem, but religious belief is a strength."
Almost all of the countries that ranked lower than India last year -- Pakistan, Zimbabwe and Bangladesh -- are again ranked lower in 2008 with the exception of Egypt, which is now ranked very slightly higher than India at 67, he said.
Friday, October 3, 2008
How liberalisation has changed you & me
Liberalisation changed our relationship with everything, most of all money. We take a look at how. . .
If age is the criterion of adulthood, India's liberalised economy is now on the brink of coming of age. Almost 18 years after our economy first opened up, there is no denying that it has effected a sweeping transformation of our entire nation. In its impact, it lines up right after Independence. Nothing else has changed our lives so dramatically.
Remember the '80s? We bought second hand Ambassador cars. Some of us had telephones, those heavy black instruments with a round dial and a line that crackled with static. We shopped at modest kirana stores and bought modest provisions to fuel our modest lifestyles. If we had any money left over, we saved it through fixed deposits and post-office accounts. Those with a taste for equities were branded gamblers, no better than those who spent fetid Sundays betting on horses.
And think of us now. Our roads are crammed with cars of all sizes and colours, even school children wield gleaming mobile phones, we shop at mutli-level air conditioned malls and buy organic parsley and buckwheat pasta. And there is no combination of debt and equity that we cannot admirably invest in to create wealth for ourselves.
While the real effects of liberalisation are visual and tangible, there has also been a quieter revolution, that of our psyches. We are defined by when we were born. And, in India, today, that definition is in relation to liberalisation.
As part of Outlook Money's 10th anniversary year, we traced the effects of liberalisation through the stories of the liberalised. We spliced the demographic according to their age and station in life in 1990. We were startled at the profundity of the changes, at how much we take for granted and the disregarded losses that hide behind the glitzy gains.
If age is the criterion of adulthood, India's liberalised economy is now on the brink of coming of age. Almost 18 years after our economy first opened up, there is no denying that it has effected a sweeping transformation of our entire nation. In its impact, it lines up right after Independence. Nothing else has changed our lives so dramatically.
Remember the '80s? We bought second hand Ambassador cars. Some of us had telephones, those heavy black instruments with a round dial and a line that crackled with static. We shopped at modest kirana stores and bought modest provisions to fuel our modest lifestyles. If we had any money left over, we saved it through fixed deposits and post-office accounts. Those with a taste for equities were branded gamblers, no better than those who spent fetid Sundays betting on horses.
And think of us now. Our roads are crammed with cars of all sizes and colours, even school children wield gleaming mobile phones, we shop at mutli-level air conditioned malls and buy organic parsley and buckwheat pasta. And there is no combination of debt and equity that we cannot admirably invest in to create wealth for ourselves.
While the real effects of liberalisation are visual and tangible, there has also been a quieter revolution, that of our psyches. We are defined by when we were born. And, in India, today, that definition is in relation to liberalisation.
As part of Outlook Money's 10th anniversary year, we traced the effects of liberalisation through the stories of the liberalised. We spliced the demographic according to their age and station in life in 1990. We were startled at the profundity of the changes, at how much we take for granted and the disregarded losses that hide behind the glitzy gains.
Generation Confidence
Raised in an environment of plenty, the young of India are confident, aggressive go-getters. This reflects in what they aspire for professionally, how they spend, how they save and how they think
Ruchika Mathur 18, was born into a country that had just been past its darkest economic hour. As a consequence, she thinks and acts differently from those older to her--she sees no need for safety nets, she has no time for self-doubts. Hers is a generation that celebrates today, one that goads you to live it up, shop it up, party it up.
In the last 18 years, India hasn't seen any serious shortages, there haven't been any debilitating wars, nor have there been any serious economic crises. Raised in this milieu is a generation that unabashedly wants it all and is not afraid to ask for it. If refused, they just go ahead and get it done themselves.
A student of political science in Delhi's Lady Shri Ram College, Mathur's present is a typical teenage muddle, but she is amazingly lucid about her future. She asks for several changes in the interview schedule, she wants to make sure she is completely free and focused for it. Then, when the phone rings at the decided hour, she does not answer. She calls back to say her "head was being done in" by the hostel warden for owning a hair dryer. Why is she graduating in political science? Because, being a politician is the only way to solve the larger problems of the country on a large scale. Between the here and now of a confiscated hair dryer and the future dream of a better country lies the child of liberalisation.
"I think about the problems in ensuring things like education for all and realise that only by being in a position where I can make and implement policy decisions will I be able to make the changes that I feel India needs," she says. "If you see one beggar, perhaps you can give him a job somewhere. If you start an NGO, maybe you can help 100 beggars in one place, but if you want to help 5 million beggars of India, you can only do it by getting into politics and effecting changes from that level." And no, she is not worried about dirt and muck in politics because "there are bad people everywhere".
Generation confidence is also one that is largely independent of geography. Pre-liberalisation meant a big difference between city kids and those raised in smaller towns. Our exposures were limited to the geographic boundaries within which we lived. Today, with satellite TV and the Internet, geography is irrelevant. "I spent all my life in Jaipur, and came to Delhi only this year. But my friends here are no different from my friends in Jaipur, we talk about the same things, dress up the same way, listen to the same music."
Mathur is also representative of young Indians who have grown up with and taken for granted things like mobile phones. Their world was not revolutionised by technology, they were born into a technological world. They are also not afraid of spending their money. And despite the constant accusation of consumerism against them, Mathur exemplifies that they do know their limits. "I love shoes and shop a lot. The other day, I saw a pair of designer shoes for Rs 17,000 that I really liked. But I finally decided not to ask my parents for that. I still like the shoes, but I realise that I don't have to have everything I like," she says.
Mathur is not being presumptuous when she says that hers is the generation that will fix India; in her view, that is natural. "My parents' generation was trapped in the post-Independence period. We don't have the nationalistic confusions that they had. We are not bogged down by traditions and superstitions. We have the talent and the skill to help India realise her potential," she says.
Nor are they obsessed with the glamour of the West. "You can only be happy where your roots are," says Mathur. "I want to be happy, if I am also rich, I wouldn't mind that, but it's not a priority." Mathur's only worry is that when she is really old, "like 60", she should not have any regrets.
Indeed, generation confidence could well be the elixir that will keep 60-year-old India young, nimble, alive and active.
Raised in an environment of plenty, the young of India are confident, aggressive go-getters. This reflects in what they aspire for professionally, how they spend, how they save and how they think
Ruchika Mathur 18, was born into a country that had just been past its darkest economic hour. As a consequence, she thinks and acts differently from those older to her--she sees no need for safety nets, she has no time for self-doubts. Hers is a generation that celebrates today, one that goads you to live it up, shop it up, party it up.
In the last 18 years, India hasn't seen any serious shortages, there haven't been any debilitating wars, nor have there been any serious economic crises. Raised in this milieu is a generation that unabashedly wants it all and is not afraid to ask for it. If refused, they just go ahead and get it done themselves.
A student of political science in Delhi's Lady Shri Ram College, Mathur's present is a typical teenage muddle, but she is amazingly lucid about her future. She asks for several changes in the interview schedule, she wants to make sure she is completely free and focused for it. Then, when the phone rings at the decided hour, she does not answer. She calls back to say her "head was being done in" by the hostel warden for owning a hair dryer. Why is she graduating in political science? Because, being a politician is the only way to solve the larger problems of the country on a large scale. Between the here and now of a confiscated hair dryer and the future dream of a better country lies the child of liberalisation.
"I think about the problems in ensuring things like education for all and realise that only by being in a position where I can make and implement policy decisions will I be able to make the changes that I feel India needs," she says. "If you see one beggar, perhaps you can give him a job somewhere. If you start an NGO, maybe you can help 100 beggars in one place, but if you want to help 5 million beggars of India, you can only do it by getting into politics and effecting changes from that level." And no, she is not worried about dirt and muck in politics because "there are bad people everywhere".
Generation confidence is also one that is largely independent of geography. Pre-liberalisation meant a big difference between city kids and those raised in smaller towns. Our exposures were limited to the geographic boundaries within which we lived. Today, with satellite TV and the Internet, geography is irrelevant. "I spent all my life in Jaipur, and came to Delhi only this year. But my friends here are no different from my friends in Jaipur, we talk about the same things, dress up the same way, listen to the same music."
Mathur is also representative of young Indians who have grown up with and taken for granted things like mobile phones. Their world was not revolutionised by technology, they were born into a technological world. They are also not afraid of spending their money. And despite the constant accusation of consumerism against them, Mathur exemplifies that they do know their limits. "I love shoes and shop a lot. The other day, I saw a pair of designer shoes for Rs 17,000 that I really liked. But I finally decided not to ask my parents for that. I still like the shoes, but I realise that I don't have to have everything I like," she says.
Mathur is not being presumptuous when she says that hers is the generation that will fix India; in her view, that is natural. "My parents' generation was trapped in the post-Independence period. We don't have the nationalistic confusions that they had. We are not bogged down by traditions and superstitions. We have the talent and the skill to help India realise her potential," she says.
Nor are they obsessed with the glamour of the West. "You can only be happy where your roots are," says Mathur. "I want to be happy, if I am also rich, I wouldn't mind that, but it's not a priority." Mathur's only worry is that when she is really old, "like 60", she should not have any regrets.
Indeed, generation confidence could well be the elixir that will keep 60-year-old India young, nimble, alive and active.
Saturday, August 30, 2008
India's economic growth slows, GDP drops to 7.9 pc in Q1
New Delhi, August 29: Indian economic growth moderated to 7.9 per cent in the first quarter of current fiscal, against 9.2 per a year ago as rising borrowing costs impacted manufacturing and some other sectors.
However, moderation in the GDP growth was expected as RBI hardened interest rates to control double-digit inflation.
If the first quarter GDP growth continues in the remaining months of this fiscal, the economy would expand at the rate more or less projected by Finance Minister P Chidambaram.
As he projected the economy to grow by close to 8 per cent, compared to 9 per cent in the previous fiscal.
Manufacturing growth almost halved to 5.6 per cent, against 10.9 per cent as rising interest rates impacted their expansion. Even though agriculture grew by lower rate of three per cent, it is quite considerable on the high base of 4.4 per cent.
The other sectors which witnessed considerable decline in growth rate are electricity, gas and water supply, which expanded at the rate of 2.6 per cent against 7.9 per cent.
In the services sector, trade, hotels, transport and communication grew by 11.2 per cent, against 13.1 per cent.
While, financing, insurance, real estate and business services expanded by 9.3 per cent, against 12.6 per cent.
However, community, social and personal services grew by higher rate of 8.4 per cent, against 5.2 per cent.
Construction activities also expanded at higher rate of 11.4 per cent, as compared to 7.7 per cent, while mining and quaring grew by 4.8 per cent, against 1.7 per cent.
In absolute terms, India's GDP stood at Rs 7,82,357 crore in the first quarter of this fiscal, against 7,24,949 crore in the corresponding period of 2007-08.
However, moderation in the GDP growth was expected as RBI hardened interest rates to control double-digit inflation.
If the first quarter GDP growth continues in the remaining months of this fiscal, the economy would expand at the rate more or less projected by Finance Minister P Chidambaram.
As he projected the economy to grow by close to 8 per cent, compared to 9 per cent in the previous fiscal.
Manufacturing growth almost halved to 5.6 per cent, against 10.9 per cent as rising interest rates impacted their expansion. Even though agriculture grew by lower rate of three per cent, it is quite considerable on the high base of 4.4 per cent.
The other sectors which witnessed considerable decline in growth rate are electricity, gas and water supply, which expanded at the rate of 2.6 per cent against 7.9 per cent.
In the services sector, trade, hotels, transport and communication grew by 11.2 per cent, against 13.1 per cent.
While, financing, insurance, real estate and business services expanded by 9.3 per cent, against 12.6 per cent.
However, community, social and personal services grew by higher rate of 8.4 per cent, against 5.2 per cent.
Construction activities also expanded at higher rate of 11.4 per cent, as compared to 7.7 per cent, while mining and quaring grew by 4.8 per cent, against 1.7 per cent.
In absolute terms, India's GDP stood at Rs 7,82,357 crore in the first quarter of this fiscal, against 7,24,949 crore in the corresponding period of 2007-08.
Wednesday, August 27, 2008
India to reclaim Mughal-age economic aura in next 50 yrs
India and China are set to become the world's leading economic and political powers in about 50 years reclaiming the glory of the year 1700 when Mughal India and Qing China each accounted for about one-fourth of world GDP, a leading German bank said on Tuesday.
According to data compiled by economic historian Angus Maddison, as recently as 1700, Qing China and Mughal India each represented a little less than 25 per cent of world GDP, but their respective shares dropped to less than 5 per cent by 1950, the Deutsche Bank said in a report.
However, China and India are poised to reclaim their places as the world's largest economies over the next half century, Deutsche Bank Research said in the report.
Noting that the four BRIC nations Brazil, Russia, India and China are characterised by high economic growth rates, large populations and expanding middle classes, the report said China and India would ‘re-emerge as major economic and political powers over the next fifty years or so and China is projected to replace the United States as the world's largest economy by 2040’.
In his book The World Economy: A Millennial Perspective, economic historian Angus Maddison has noted that during the years 0 to 1000, India figured as the world's pre-eminent economic power, closely followed by China. During 1500-1600 years also, India was only next to China in terms of world GDP share and remained among the top till as late as 17th century.
India was the world's largest economy with a 32.9 per cent share of the worldwide GDP in the first century and 28.9 per cent in the 11th century.
According to data compiled by economic historian Angus Maddison, as recently as 1700, Qing China and Mughal India each represented a little less than 25 per cent of world GDP, but their respective shares dropped to less than 5 per cent by 1950, the Deutsche Bank said in a report.
However, China and India are poised to reclaim their places as the world's largest economies over the next half century, Deutsche Bank Research said in the report.
Noting that the four BRIC nations Brazil, Russia, India and China are characterised by high economic growth rates, large populations and expanding middle classes, the report said China and India would ‘re-emerge as major economic and political powers over the next fifty years or so and China is projected to replace the United States as the world's largest economy by 2040’.
In his book The World Economy: A Millennial Perspective, economic historian Angus Maddison has noted that during the years 0 to 1000, India figured as the world's pre-eminent economic power, closely followed by China. During 1500-1600 years also, India was only next to China in terms of world GDP share and remained among the top till as late as 17th century.
India was the world's largest economy with a 32.9 per cent share of the worldwide GDP in the first century and 28.9 per cent in the 11th century.
Tuesday, August 26, 2008
Indian Economy: High Inflation, Slowing Growth – an Indian Economy of Gloom?
Some Indians believe that India is protected from many of the economic hardships felt by other nations around the world. The country’s strong domestic economy and lack of reliance on Western nations means that it can shield itself from external hardships to a certain extent. That extent may have just been reached, however. With inflation reaching 12.44% in August of 2008, almost triple what it was a year before and the highest in 13 years, India suddenly seems just as susceptible to financial troubles as the rest of the world . Couple inflation with shortages of food and the picture becomes worse. Even with record grain production in the 2007-2008 season, the increased demand means an overall shortage. "Despite the recent upward trend in food grains production, India's food security remains an area of concern," the Prime Minister's Economic Advisory Council (EAC) said in its economic guidance for 2008-2009. This gloomy message was echoed in the EAC’s more recent growth forecast, which was cut from 9.1% to 7.7% for 2009, weak by Indian standards. Developed nations can afford lower growth rates, with fewer people suffering from poverty and higher GDP levels. Much as with China and the other emerging economies, India needs high growth rates so that better conditions can trickle down to the hundreds of millions still living subsistence lives. It could be argued that the need is more pressing in India, however, as democracy tends to amplify unhappiness. Indeed, Indian newspapers recently have been filled with gloomy pronouncements about the economy and the government. Contributing to this negative sentiment are the credit crunch and oil prices. In an effort to protect its citizens, the Indian government has absorbed much of this oil-price-rise, and has taken a hit in its trade, with a widening deficit. India is an import-dependent economy, which means by nature it would have a deficit. It produces almost none of its own oil which can be a major budget worry when energy prices get out of hand. In fact, in early 2007, Prime Minister Singh asked Ali al-Naimi, Saudi Oil Minister, to help stabilize the oil market and to help keep prices at a level developing countries like India could manage. As we all know, that is easier said than done. And with elections coming up soon, the government is dishing out incentives including 21% salary hikes across five million government employees, plus more than $15 billion in aid for struggling farmers. These incentives have a feel-good factor but do nothing to help the country’s economic position. Meanwhile the elections themselves are a massive undertaking, involving more than 670 million people and quite a bit of expense. Put it all together and you have a growing costs, a widening deficit and slowing growth – plenty of cause, many would argue, for a bit of gloom. Nevertheless, a growth of nearly 8% per year, consistently, would mean doubling the economy in just over a decade. And if India could sustain this growth rate until 2015, the Indian economy would surpass those of Italy, France, and the UK by 2015, and those of Germany, Japan and the US by 2050. Only China would be mightier at that point. In fact, when we look at growth rates over the last five years, 7.7% growth would be just over the average of 7,35%:
Year GDP
2003 4.3%
2004 8.3%
2005 6.2%
2006 8.4%
2007 9.2%
2008 7.7%
Although there are plenty of reasons to be gloomy right now, the future continues to hold a lot of promise for India.
Santos de la Raya, EconomyWatch.com
Sunday, August 24, 2008
Inflation: India Inc feels the sting
Rising interest rates are forcing companies, big and small, to either defer projects, go slow on expansions or raise money from alternative sources.
For instance, Mumbai-based steel-maker JSW has reduced the scope of its steel project in Bengal and has decided to implement the project in phases. In the first phase, it will set up a pellet and coal beneficiation plant (in three years by 2011), which will cost Rs 4,000 crore against Rs 15,000 crore for the entire project.
"In the first phase, we will focus on the raw material side, get the coal linkages to produce pellets and sell them in the market,'' said JSW CFO Seshagiri Rao.
Higher interest rates will also pull down margins on all projects as most term loans, like in home loans, are on floating rates.
Infrastructure developers in road, port, power or airport projects are also feeling the heat of rising rates, especially if these projects are on a build-operate-transfer (BOT) basis and the loan is on variable interest rates.
Take BOT road projects, for which the interest risk lies with the developer. Four months ago, banks were charging 11-12 per cent (higher in the case of a fixed rate loan); now the interest rate has gone up to 14 per cent. "With inflation at 13 per cent, I expect interest rates to go up 1-1.5 percentage points more," said Praveen Sood, CFO, HCC Ltd, a Mumbai-based construction firm.
Consider how interest costs will impact HCC's Badarpur elevated flyover project in Delhi it won four weeks back. The project will cost Rs 550 crore, including an engineering procurement construction (EPC) cost of Rs 494 crore and interest during construction (IDC) of Rs 56 crore. With interest rates going up, not only will the IDC go up but HCC will have to bear higher interest rates on servicing the entire debt of, say, Rs 380 crore.
It won't be able to recover the higher interest costs as the toll on the road project is fixed for the concession period. The EPC cost could go up. As a result, HCC will take a hit on its internal rate of return from 16 to 17 per cent to 13 per cent.
Returns will also be squeezed on several power plants and port projects (like Mundra) that are being set up or operated on a merchant basis.
But not all projects and players will be affected. "It will hurt us marginally if we are exposed on the variable interest rates and cannot pass on the interest rates increases in non-regulated part of the businesses,'' said GVK CFO Isaac George.
GVK will be hurt in a few road and power projects (like 464 mW Gautami Power Project) for which the loans carry variable interest rates. In some other projects, it has fixed the rate on loans at a lower rate for five years or in power projects that are on a cost-plus formula, for which higher costs will be absorbed in a pass-through in tariff. In airports too, higher costs will be passed through in aeronautical revenues.
Smaller companies are equally stretched. Take Mumbai-based Ratnaraj Diamonds, a diamond exporter that started selling solitaires through jewellers. Encouraged by its success at home, it was planning to double production capacity in 2008 and ramp up stock levels 10 to 15 times.
Now, it has decided to scale back its plans. It has deferred buying a new laser-cutting machine which costs Rs 40 lakh to Rs 50 lakh and partially cut the planned increase in its stock levels. Shailen Mehta, the firm's CEO, said his cost of funds has gone up by 3 per cent.
In Delhi, Rajat Tuli and Rahul Anand are having a hard time fighting the slowdown in the market. The young promoters of Happily Unmarried, which sells fun lifestyle gifts, had big plans for 2008. They wanted to triple their sales by doubling the number of products and adding 11 more shops this year.
Against that, they could manage to do just add four shops. The promoters have been relying on personal loans, at 14 to 16 per cent, to fund their business and has just started getting some short-term business loans, but at 18 to 19 per cent. "Given these rates, it doesn't make sense to borrow and grow the business. So, we are selling 5 per cent equity to private investors,'' said Tuli.
Bangalore-based Aron Universal, a manufacturer of fluorescent pigments and inks used in products with fluorescent colours, was planning to triple production and corner a third of the Rs 350-crore market for these niche products.
"With interest rates at 14.75 per cent, we are going slow on our expansion and trying to generate the funds from alternate sources like shareholders or private investors," said CEO Shailesh Patel.
The battle against inflation is clearly hurting corporate India; if interest rates go up further, there could more pain.
http://www.rediff.com/money/2008/aug/19infla.htm
For instance, Mumbai-based steel-maker JSW has reduced the scope of its steel project in Bengal and has decided to implement the project in phases. In the first phase, it will set up a pellet and coal beneficiation plant (in three years by 2011), which will cost Rs 4,000 crore against Rs 15,000 crore for the entire project.
"In the first phase, we will focus on the raw material side, get the coal linkages to produce pellets and sell them in the market,'' said JSW CFO Seshagiri Rao.
Higher interest rates will also pull down margins on all projects as most term loans, like in home loans, are on floating rates.
Infrastructure developers in road, port, power or airport projects are also feeling the heat of rising rates, especially if these projects are on a build-operate-transfer (BOT) basis and the loan is on variable interest rates.
Take BOT road projects, for which the interest risk lies with the developer. Four months ago, banks were charging 11-12 per cent (higher in the case of a fixed rate loan); now the interest rate has gone up to 14 per cent. "With inflation at 13 per cent, I expect interest rates to go up 1-1.5 percentage points more," said Praveen Sood, CFO, HCC Ltd, a Mumbai-based construction firm.
Consider how interest costs will impact HCC's Badarpur elevated flyover project in Delhi it won four weeks back. The project will cost Rs 550 crore, including an engineering procurement construction (EPC) cost of Rs 494 crore and interest during construction (IDC) of Rs 56 crore. With interest rates going up, not only will the IDC go up but HCC will have to bear higher interest rates on servicing the entire debt of, say, Rs 380 crore.
It won't be able to recover the higher interest costs as the toll on the road project is fixed for the concession period. The EPC cost could go up. As a result, HCC will take a hit on its internal rate of return from 16 to 17 per cent to 13 per cent.
Returns will also be squeezed on several power plants and port projects (like Mundra) that are being set up or operated on a merchant basis.
But not all projects and players will be affected. "It will hurt us marginally if we are exposed on the variable interest rates and cannot pass on the interest rates increases in non-regulated part of the businesses,'' said GVK CFO Isaac George.
GVK will be hurt in a few road and power projects (like 464 mW Gautami Power Project) for which the loans carry variable interest rates. In some other projects, it has fixed the rate on loans at a lower rate for five years or in power projects that are on a cost-plus formula, for which higher costs will be absorbed in a pass-through in tariff. In airports too, higher costs will be passed through in aeronautical revenues.
Smaller companies are equally stretched. Take Mumbai-based Ratnaraj Diamonds, a diamond exporter that started selling solitaires through jewellers. Encouraged by its success at home, it was planning to double production capacity in 2008 and ramp up stock levels 10 to 15 times.
Now, it has decided to scale back its plans. It has deferred buying a new laser-cutting machine which costs Rs 40 lakh to Rs 50 lakh and partially cut the planned increase in its stock levels. Shailen Mehta, the firm's CEO, said his cost of funds has gone up by 3 per cent.
In Delhi, Rajat Tuli and Rahul Anand are having a hard time fighting the slowdown in the market. The young promoters of Happily Unmarried, which sells fun lifestyle gifts, had big plans for 2008. They wanted to triple their sales by doubling the number of products and adding 11 more shops this year.
Against that, they could manage to do just add four shops. The promoters have been relying on personal loans, at 14 to 16 per cent, to fund their business and has just started getting some short-term business loans, but at 18 to 19 per cent. "Given these rates, it doesn't make sense to borrow and grow the business. So, we are selling 5 per cent equity to private investors,'' said Tuli.
Bangalore-based Aron Universal, a manufacturer of fluorescent pigments and inks used in products with fluorescent colours, was planning to triple production and corner a third of the Rs 350-crore market for these niche products.
"With interest rates at 14.75 per cent, we are going slow on our expansion and trying to generate the funds from alternate sources like shareholders or private investors," said CEO Shailesh Patel.
The battle against inflation is clearly hurting corporate India; if interest rates go up further, there could more pain.
http://www.rediff.com/money/2008/aug/19infla.htm
Tuesday, July 29, 2008
The world's largest economies
India
The Indian economy is the 12th largest in the world. That is, India's gross domestic product stands at $1.171 trillion.
However, in terms of purchasing power parity, India is the world's fourth largest economy. Its GDP in purchasing power parity terms is at $3.092 trillion.
These are the year 2007 figures, recently released by the World Bank.
By definition, purchasing power parity (PPP) is an economic theory that estimates the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to each currency's purchasing power.
India is the one of the world's fastest growing economies, yet its annual per capita income remains quite low at $950, or about Rs 40,000. That puts India in the 160th spot.
Incidentally, World Bank figures show that the world's GDP is at $54.347 trillion. India accounts for just over 2 per cent of global GDP.
1. United States
The American GDP is at $13.812 trillion, making it the world's largest economy. It accounts for more than 25 per cent of the entire world's GDP!
In terms of purchasing power parity too, the United States is the world's leading economy.
However, its per capita income at $46,040, per year, pegs it at the 15th spot in the world.
2. Japan
Japan, with a GDP of $4.377 trillion, is the world's second largest economy.
However, in terms of purchasing power parity, Japan is ranked third by the World Bank. It's GDP in PPP terms is $4.283 trillion.
Japan's per capita income (annual) is $37,670, making it the 25th highest in the world.
3. Germany
Germany is the world's third largest, with its GDP at $3.297 trillion.
But in PPP terms, Germany is the world's fifth largest economy. It's GDP in PPP terms is at $2.752 trillion.
Its per capita income is the 23rd highest in the world, at $38,860.
4. China
China, the Asian giant, is the world's fourth largest economy with a GDP of $3.281 trillion; but in purchasing power parity terms it ranks second at $7.055 trillion.
It is the world's fastest growing major economy and its giant strides have taken the world by a storm. Economists predict that over the next few decades, it could topple the US as the world's largest economy.
China's per capita income, however, is still low at $2,630 per year.
5. United Kingdom
Britain is the world's fifth largest economy. Its GDP is at $2.728 trillion.
In purchasing power parity terms, the United Kingdom's GDP stands at $2.082 trillion making it the seventh largest in the world.
Britain is a rich nation. Its per capita income is at an impressive $42,740. That would rank it in the 19th spot
6. France
The French GDP is at $2.563 trillion, making it the world's sixth largest economy; but in terms of PPP, it is the world's 8th largest (GDP in PPP terms, $2.054 trillion).
The per capita income of the French at $38,500 makes them the 24th richest people in the world.
7. Italy
Italy's GDP in absolute terms is at $2.107 trillion. That makes it the planet's seventh largets economy.
However, in purchasing power parity terms its GDP is at $1.780 trillion and its rank is 10th.
Italians' per capita income is the 30th highest in the world. It is $33,540.
8. Spain
Spain is the eighth largest economy with its GDP at $1.429 trillion. In purchasing power parity, however, it slips to the 11th spot ($1.373 trillion).
With a per capita income of $29,450 per year, its people are the 36th richest in the world.
9. Canada
The Canadian GDP stands at $1.326 trillion, making it the world's ninth largest economy.
In PPP terms, however, it stands 14th in the world. Its GDP in PPP terms is at $1.178 trillion.
Its people enjoy a comfortable life with a per capita income of $39,420, which is 22nd highest in the world.
10. Brazil
The Brazilian economy too has been growing at a scorching pace. It is the world's 10th largest economy with a GDP of $1.314 trillion.
But in terms of purchasing power (GDP - $1.834 trillion), it is better placed at number 9.
Amongst the emerging economies, it has one of the best per capita income figures -- $5,910. This places it in the 85th spot in the world
11. Russian Federation
In absolute GDP terms, Russia -- at $1.291 trillion -- is the world's 11th largest economy., but it jumps to the 6th spot in terms of purchasing power parity ($2.088 trillion).
Its per capita income is at $7,650, the 78th highest in the world.
The Indian economy is the 12th largest in the world. That is, India's gross domestic product stands at $1.171 trillion.
However, in terms of purchasing power parity, India is the world's fourth largest economy. Its GDP in purchasing power parity terms is at $3.092 trillion.
These are the year 2007 figures, recently released by the World Bank.
By definition, purchasing power parity (PPP) is an economic theory that estimates the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to each currency's purchasing power.
India is the one of the world's fastest growing economies, yet its annual per capita income remains quite low at $950, or about Rs 40,000. That puts India in the 160th spot.
Incidentally, World Bank figures show that the world's GDP is at $54.347 trillion. India accounts for just over 2 per cent of global GDP.
1. United States
The American GDP is at $13.812 trillion, making it the world's largest economy. It accounts for more than 25 per cent of the entire world's GDP!
In terms of purchasing power parity too, the United States is the world's leading economy.
However, its per capita income at $46,040, per year, pegs it at the 15th spot in the world.
2. Japan
Japan, with a GDP of $4.377 trillion, is the world's second largest economy.
However, in terms of purchasing power parity, Japan is ranked third by the World Bank. It's GDP in PPP terms is $4.283 trillion.
Japan's per capita income (annual) is $37,670, making it the 25th highest in the world.
3. Germany
Germany is the world's third largest, with its GDP at $3.297 trillion.
But in PPP terms, Germany is the world's fifth largest economy. It's GDP in PPP terms is at $2.752 trillion.
Its per capita income is the 23rd highest in the world, at $38,860.
4. China
China, the Asian giant, is the world's fourth largest economy with a GDP of $3.281 trillion; but in purchasing power parity terms it ranks second at $7.055 trillion.
It is the world's fastest growing major economy and its giant strides have taken the world by a storm. Economists predict that over the next few decades, it could topple the US as the world's largest economy.
China's per capita income, however, is still low at $2,630 per year.
5. United Kingdom
Britain is the world's fifth largest economy. Its GDP is at $2.728 trillion.
In purchasing power parity terms, the United Kingdom's GDP stands at $2.082 trillion making it the seventh largest in the world.
Britain is a rich nation. Its per capita income is at an impressive $42,740. That would rank it in the 19th spot
6. France
The French GDP is at $2.563 trillion, making it the world's sixth largest economy; but in terms of PPP, it is the world's 8th largest (GDP in PPP terms, $2.054 trillion).
The per capita income of the French at $38,500 makes them the 24th richest people in the world.
7. Italy
Italy's GDP in absolute terms is at $2.107 trillion. That makes it the planet's seventh largets economy.
However, in purchasing power parity terms its GDP is at $1.780 trillion and its rank is 10th.
Italians' per capita income is the 30th highest in the world. It is $33,540.
8. Spain
Spain is the eighth largest economy with its GDP at $1.429 trillion. In purchasing power parity, however, it slips to the 11th spot ($1.373 trillion).
With a per capita income of $29,450 per year, its people are the 36th richest in the world.
9. Canada
The Canadian GDP stands at $1.326 trillion, making it the world's ninth largest economy.
In PPP terms, however, it stands 14th in the world. Its GDP in PPP terms is at $1.178 trillion.
Its people enjoy a comfortable life with a per capita income of $39,420, which is 22nd highest in the world.
10. Brazil
The Brazilian economy too has been growing at a scorching pace. It is the world's 10th largest economy with a GDP of $1.314 trillion.
But in terms of purchasing power (GDP - $1.834 trillion), it is better placed at number 9.
Amongst the emerging economies, it has one of the best per capita income figures -- $5,910. This places it in the 85th spot in the world
11. Russian Federation
In absolute GDP terms, Russia -- at $1.291 trillion -- is the world's 11th largest economy., but it jumps to the 6th spot in terms of purchasing power parity ($2.088 trillion).
Its per capita income is at $7,650, the 78th highest in the world.
Wednesday, July 16, 2008
Fitch downgrades Indian currency, who downgrades fitch?
Fitch downgrades Indian currency, who downgrades fitch?
There has been a lot of speculation for many days now that credit rating agencies would downgrade India ratings.
Fitch was the first and it downgraded local currency default rating from Stable to Negative. The overall rating stays the same at BBB-.
The press release says :
The revision to the local currency Outlook is based on a considerable deterioration in the central government’s fiscal position in 2008-09 (FY09), combined with a notable increase in government debt issuance to finance subsidies not captured in the budget,” said James McCormack, Head of Asia Sovereign ratings.
Fitch forecasts the central government deficit may increase from 2.8% of GDP in FY08 to 4.5% of GDP in FY09 based in part on higher on-budget subsidies, interest payments and public wages. The agency expects bonds issued to oil and fertiliser companies to reach at least 2% of GDP this year, implying an underlying central government deficit of 6.5% of GDP or higher.
The markets reacted and fell across all kinds of markets.
The higher fiscal deficit has been one of the weakest links in Indian economy for a long time and there is no surprise. I also calculated the off-balance sheet items and clearly it makes the entire fiscal deficit much larger than reported.
However, what is ironical is Fitch downgrades India but we don’t have any mechanism to downgrade Fitch itself? I am sure Moody’s and S&P will follow as well and we all know their role in the recent sub-prime mess. Should these ratings continue to be so important that they lead to a bloodbath in markets? The markets clearly seem to be valuing them still despite they failing time and again to safeguard the markets.
There has been a lot of speculation for many days now that credit rating agencies would downgrade India ratings.
Fitch was the first and it downgraded local currency default rating from Stable to Negative. The overall rating stays the same at BBB-.
The press release says :
The revision to the local currency Outlook is based on a considerable deterioration in the central government’s fiscal position in 2008-09 (FY09), combined with a notable increase in government debt issuance to finance subsidies not captured in the budget,” said James McCormack, Head of Asia Sovereign ratings.
Fitch forecasts the central government deficit may increase from 2.8% of GDP in FY08 to 4.5% of GDP in FY09 based in part on higher on-budget subsidies, interest payments and public wages. The agency expects bonds issued to oil and fertiliser companies to reach at least 2% of GDP this year, implying an underlying central government deficit of 6.5% of GDP or higher.
The markets reacted and fell across all kinds of markets.
The higher fiscal deficit has been one of the weakest links in Indian economy for a long time and there is no surprise. I also calculated the off-balance sheet items and clearly it makes the entire fiscal deficit much larger than reported.
However, what is ironical is Fitch downgrades India but we don’t have any mechanism to downgrade Fitch itself? I am sure Moody’s and S&P will follow as well and we all know their role in the recent sub-prime mess. Should these ratings continue to be so important that they lead to a bloodbath in markets? The markets clearly seem to be valuing them still despite they failing time and again to safeguard the markets.
Subscribe to:
Posts (Atom)
