The World Trade Organization(WTO) has revised its projection for World trade growth upwards to 13.5 per cent in 2010, following faster than expected recovery in trade flow so far this Year. “The surge in trade flows provides the means to climb out of this painful economic recession and can help put people back to work. It underscores, as well, the wisdom governments have shown in rejecting protectionism”, says the Report. However, WTO in its published report in early March, 2010 had forecast global trade volume to expand 10 % in the current fiscal. Merchandise exports of developed economies are predicted to expand 11.5 per cent in volume terms while the rest of the world including emerging economies and the Commonwealth of Independent States, is expected to inch towards a growth of 16.5 per cent.
The 13.5per cent growth in global trade volume would be the fastest year-on-year expansion recorded since 1950. However, the current expansion is on a low base of the previous year (2009) when the world trade volume was severely depressed. The world exports had plunged 12.2 per cent in 2009-10. The fastest YoY growth so far since 1950 was the 11.8 per cent growth recorded in 1976, one year after the then unprecedented decline of 7.3% in 1975.
The total world trade in 2009-10 was in the region of $ 31.2 trillion, against which China topped the Trade table with $1.2 trillion, Germany came second with $ 1.16 trillion and United States sliding to the third positon with exports at $1.05 trillion. Brazil was ranked (23) with exports worth $ 153 billion, Russia (11 position)($303 billion), India (18th position)($176.5billion). The total export trade realized US $ 12.5 trillion.
World merchandise trade rose sharply in the first two quarters of 2010, boosted by a recovery of GDP in both developed nd developing economies. However, many economists expect output growth to slacken in the Second half with the expiry of fiscal stimulus measures and the winding down of the inventory cycle. The slackening of trade growth in the second half accentuate that an eminent fall in the rate of growth in GDP in developed Countries. While there can be risks of downside, particularly in case an unforeseen financial or microscopic shock triggers another economic downturn, the Report hopes that the upside potentials could trigger better than expected growth in the Second half.
Coincidentally, the Bloomberg quarterly Global Poll forecasts predicts that the United States will lag behind the emerging markets of Brazil, China and India as a preferred destination for investment, having slid from the first position it held during the last Poll conducted three months ago. US economy has been rated as in the fourth place with Brazil and China tied for first, and India in the third Place. The slide in sentiment came as US GDP slid to 1.6% in the Second quarter from 3.7% in the first quarter. Expectations for2011 are down to a median forecast of2.5% from 2.9% in first quarter of 2011-12. The Survey showed that there were dim chances of double dip recession and that United States was slowly on to the path of slow yet steady growth. US people are wary of US budget deficits as a result, crisis of confidence would provoke a dramatic increase in interest rates within two years. The present budget deficit is forecast to be around $ 1.47 trillion for2010 and $1.42 trillion for 2011.
Even though stimulus offered through the various Schemes of the Foreign Trade Policy was evenly balanced, the downsizing of Duty Drawback rates for crucial sectors when it is struggling to find competitive space in the international market show that the policy makers have not become wiser by the bad experiences of the Past. While China’s exports are clocked $1.2 trillion, India has an export figure of just US $ 176.50 billion, the bulk of which comes from textiles and leather segments. As the dollar rate parity with the Rupee is slowly widening, choking inflation is already bleeding the bottom line of Cost of production, Government’s insensitiveness to the export related problems will cost the Country dear in terms of Balance of Trade and BoP, resulting in depletion of Foreign Exchange Reserves. When huge fund outlay is ear-marked for Populist schemes, the export sector becoming cost prohibitive would lead to India loosing advantage in world Trade.
Friday, September 24, 2010
CWG: Don't look with squint eye!
There has been lot of slur to India as a Country which is slated to host the prestigious Commonwealth games. From the take off stage, the games, conduct of the games, Chairman of the Indian Olympic Association have all been mired in one controversy or the other. Added to that, the Ministry of Sports looked the other way at every event connected with the organization of the Commonwealth games. Worst still, India’s former Sports Minister, even predicted that the ‘Commonwealth games shall fail.’
The games are scheduled at the worst of the worst times. The East based monsoon is slated during this period. There is already terrible floods and destruction of crops resulting in losses. As it is, Agriculture industry which is the back-bone of Indian economy is in adverse days due to plethora of reasons. The date(s) of the games coincided with the pronouncing of the Ayodhya verdict regarding a civil land dispute caste. The post law and order situation appears to be grim. Some terrorist groups have threatened to disrupt the games.
In the meantime, our overzealous electronic media does not waste a single space in their telecasts by picturizing one or the other defect; showing the shabby bathrooms, washing closet, collapse of the overhead bridge to the Nehru Stadium, breaking up of Plaster of Paris in the hall meant for weightlifting events, comments by veterans including Politicians. This has already presented the image of India being sullied in the international eyes as Poor organizers, an event steeped in corruption, unhygienic surroundings, mosquito menace, incomplete infrastructure, and many faults here and there.
Prime Minister, it is shown in the media, is seen taking rounds of various stadia where events are to take place. He has also warned Chief Minsiter, Delhi, Sports Minister, GoI, and President of Indian Olympic Association to act in tandem and finish the job instead of out-pouring their wrath openly.
India needs to take advantage of such a massive event for which Crores of Rupees of tax payers money is being spent. There must be accountability between the Organizers and the Government. If a private body like BCCI can conduct a IPL most successfully with its own generated funds, why can’t Government in association with these Sports bodies organize an international event.
Individual members of the different Countries have started withdrawing from the event. Different countries have expressed their inhibitions in participation. We do not know whether they will come.
With all these failings, India which Obama saw as a sparkling booming growth oriented economy, Indian image will suffer. And the contributors to the fallen image will be Indians themselves. Very sad, indeed.
The games are scheduled at the worst of the worst times. The East based monsoon is slated during this period. There is already terrible floods and destruction of crops resulting in losses. As it is, Agriculture industry which is the back-bone of Indian economy is in adverse days due to plethora of reasons. The date(s) of the games coincided with the pronouncing of the Ayodhya verdict regarding a civil land dispute caste. The post law and order situation appears to be grim. Some terrorist groups have threatened to disrupt the games.
In the meantime, our overzealous electronic media does not waste a single space in their telecasts by picturizing one or the other defect; showing the shabby bathrooms, washing closet, collapse of the overhead bridge to the Nehru Stadium, breaking up of Plaster of Paris in the hall meant for weightlifting events, comments by veterans including Politicians. This has already presented the image of India being sullied in the international eyes as Poor organizers, an event steeped in corruption, unhygienic surroundings, mosquito menace, incomplete infrastructure, and many faults here and there.
Prime Minister, it is shown in the media, is seen taking rounds of various stadia where events are to take place. He has also warned Chief Minsiter, Delhi, Sports Minister, GoI, and President of Indian Olympic Association to act in tandem and finish the job instead of out-pouring their wrath openly.
India needs to take advantage of such a massive event for which Crores of Rupees of tax payers money is being spent. There must be accountability between the Organizers and the Government. If a private body like BCCI can conduct a IPL most successfully with its own generated funds, why can’t Government in association with these Sports bodies organize an international event.
Individual members of the different Countries have started withdrawing from the event. Different countries have expressed their inhibitions in participation. We do not know whether they will come.
With all these failings, India which Obama saw as a sparkling booming growth oriented economy, Indian image will suffer. And the contributors to the fallen image will be Indians themselves. Very sad, indeed.
Friday, September 10, 2010
Is Brazil entering the economic trap?
Is Brazil heading into the eye of a storm?
Brazil, the media-darling of the world financial press and the poster child for emerging-markets investing, is heading directly into the eye of the storm. Brazil was a great country to invest. Returns were equivalent of 160%. But, this famous forward looking growing economy faces problems, if immediately not rectified.
Will Brazil remain a favourite of BRIC countries...?
Brazilian government brought in changes in its business approach. The Parliamentary and Presidential election is due soon. Official government spending was budgeted to grow by a moderate 10.7%, and was subject to further trimming to accommodate more spending. Brazil’s state owned Companies, which has been accelerating in recent years (119), is set to increase further by 32%. Brazilian Development Bank’s exposure in lending expected to touch US $ 87billion, while housing lending for the first half grew stealthily by 51% (over the same period of 2009). Government has proposed US $ 886 billion Infrastructure Investment Plan for the next seven years. State lending has increased from 1% of Brazilian GDP to 7%. This would further the deficit in its budget.
Brazilian government passed a Law to wrest control over Oil firms. The increase in oil price fixed by the Government will force Peteroleo Brasilerio to raise $ 65 billion in equity to pay the Government and to finance capital investment needed for exploiting its sub salt Tupi Oil resources. The difference of amount of US $ 42.5 billion received by overcharging is accounted as revenue, but would constitute 2.8% of the GDP. This covers up the fiscal deficit to the extent of 2.8% of GDP.
The lending of money by the state owned banks and Petrobras cash subsidy would make Brazilian deficit postulation at 10-12% of the GDP.
Yet, unlike the U.S. and British economies that have suffered under deficits of this magnitude, the Brazilian economy is in the middle of a roaring boom, with projected GDP growth of 7.8% for this year.
It's not as if Brazil was under-indebted, either; the excessive public debt nearly sent the country into bankruptcy in 2002, and the leeway before debt repeats the process is less than Brazilian commentators seem to think.
The road economic policy will take in Brazil would culminate with the election results which are due in October. If Centrist come to power, a favourable private sector policy without prolifigating public spending will be the central theme of the Economic policy. However, if a Socialist were to be elected to power, they could carry the country to high government spending and income redistribution. The Road map to peruse the current policies has been already set out. Monetary policy would quickly change if an inflationist comes to power.
However, with a true public-sector deficit of 10% of GDP and public spending that's already the highest in Latin America, there isn't much room to expand the state sector before the country runs into big trouble. While commodity prices keep rising, the commodity-dependent Brazil will at least be able to borrow the money it needs.
But if commodity prices falter, a crisis of confidence would be more or less inevitable.
There are positives. Brazil's central bank continues to maintain an admirably sound interest-rate policy, which has kept the short-term rate - currently 10.75% - far above the current inflation level of roughly 5%. That has prevented the inflationary spiral that would otherwise be well underway.
Brazil has had these bursts of growth before, and they have always been ended by a debt crisis followed by a period of forced austerity that has wiped out the previous boom's income gains and worsened the country's huge inequality.
For Brazilian investors and citizens alike, that will certainly be a pity after such a strong run. . But Brazil is currently regarded as one of the world's four great growth economies, and under current policies, that "high fashion" image that has buoyed its economy needed tinkering, if it has to continue to be the ‘Country to Watch tommorrow’
Brazil, the media-darling of the world financial press and the poster child for emerging-markets investing, is heading directly into the eye of the storm. Brazil was a great country to invest. Returns were equivalent of 160%. But, this famous forward looking growing economy faces problems, if immediately not rectified.
Will Brazil remain a favourite of BRIC countries...?
Brazilian government brought in changes in its business approach. The Parliamentary and Presidential election is due soon. Official government spending was budgeted to grow by a moderate 10.7%, and was subject to further trimming to accommodate more spending. Brazil’s state owned Companies, which has been accelerating in recent years (119), is set to increase further by 32%. Brazilian Development Bank’s exposure in lending expected to touch US $ 87billion, while housing lending for the first half grew stealthily by 51% (over the same period of 2009). Government has proposed US $ 886 billion Infrastructure Investment Plan for the next seven years. State lending has increased from 1% of Brazilian GDP to 7%. This would further the deficit in its budget.
Brazilian government passed a Law to wrest control over Oil firms. The increase in oil price fixed by the Government will force Peteroleo Brasilerio to raise $ 65 billion in equity to pay the Government and to finance capital investment needed for exploiting its sub salt Tupi Oil resources. The difference of amount of US $ 42.5 billion received by overcharging is accounted as revenue, but would constitute 2.8% of the GDP. This covers up the fiscal deficit to the extent of 2.8% of GDP.
The lending of money by the state owned banks and Petrobras cash subsidy would make Brazilian deficit postulation at 10-12% of the GDP.
Yet, unlike the U.S. and British economies that have suffered under deficits of this magnitude, the Brazilian economy is in the middle of a roaring boom, with projected GDP growth of 7.8% for this year.
It's not as if Brazil was under-indebted, either; the excessive public debt nearly sent the country into bankruptcy in 2002, and the leeway before debt repeats the process is less than Brazilian commentators seem to think.
The road economic policy will take in Brazil would culminate with the election results which are due in October. If Centrist come to power, a favourable private sector policy without prolifigating public spending will be the central theme of the Economic policy. However, if a Socialist were to be elected to power, they could carry the country to high government spending and income redistribution. The Road map to peruse the current policies has been already set out. Monetary policy would quickly change if an inflationist comes to power.
However, with a true public-sector deficit of 10% of GDP and public spending that's already the highest in Latin America, there isn't much room to expand the state sector before the country runs into big trouble. While commodity prices keep rising, the commodity-dependent Brazil will at least be able to borrow the money it needs.
But if commodity prices falter, a crisis of confidence would be more or less inevitable.
There are positives. Brazil's central bank continues to maintain an admirably sound interest-rate policy, which has kept the short-term rate - currently 10.75% - far above the current inflation level of roughly 5%. That has prevented the inflationary spiral that would otherwise be well underway.
Brazil has had these bursts of growth before, and they have always been ended by a debt crisis followed by a period of forced austerity that has wiped out the previous boom's income gains and worsened the country's huge inequality.
For Brazilian investors and citizens alike, that will certainly be a pity after such a strong run. . But Brazil is currently regarded as one of the world's four great growth economies, and under current policies, that "high fashion" image that has buoyed its economy needed tinkering, if it has to continue to be the ‘Country to Watch tommorrow’
Sunday, September 5, 2010
Bangaluru, the beauty that has faded?
Banagaluru had a salubrious climate throughout the Year, and was a wonder city hailed as the Pensioners’ paradise. Its blooming orchards, greenery, perched trees in full bloom, flame of the forest, mallige, sampigee, and pleasant weather, will make Bangaluru, one of the best holiday locations. The British built a Cantonment, and many towns in Bangaluru East resemble English counties with a number of Churches built in Anglican architectural style, as vestiges of a splendoured Past. Besides the sobriquet of Garden City, parks, gardens, tree-lined streets and quaint buildings make up for Bangalore’s yesterdays, while the other face is that of a cosmopolitan city brimming with multi-national call centers, burgeoning software industry, imposing buildings, hep pubs, cafes, shopping arcades. Bangaluru is a City of Contrasts.
Most of the retireed people made a beeline to this prosperous town with temples, churches, and mosques. Kampagowda Road was well known for its location of cinema halls. The Cubban Park with its plants and flowery gardens was an epitome of a big orchard. Lal Bagh, which was one of the rarest gardens in India, had a historical touch, as it was here that Smt Indira Gandhi broke away from the Congress establishment to form Congress Indira. Its glass house is vivid with history. The Bull temple near here is world famous. Vidhan Soudha, red-sandstone Attara Kacheri, Tipu’s Palace, Ulsoor Lake, Sankey Boat Club, Bull Temple, ISKON Temple, Prasanna Anjaneya Temple, Infant Jesus church are some of Bangaluru’s attractions.. Jalahalli has India’s airforce camps. Banguluru had central investments like HAL, BEML, BHEL, etc. Peenya, Krishna Raja Puram, Yeshwantpur, Tumkur Road accommodated SMEs. The Devanahalli International Airport is built on PPP model. The Metro Rail will soon add another dimension to the City’s CBD.
It was this town, with its hoary past and cool climate, which had grown beyond its size. The Greater Bangalore had grown, and small houses in big compounds have been raced to the ground to make way for concrete jungles, the biggest malls with fancied western manufactured goods are available here, and the latest cars sneeze past one another. The road is chocked with traffic, it takes almost ½ an hour to cross the Indian Institute of Science to Yeshwantpur Road and drive past Metro. The Road from ISKON to Rajajinagar at least takes 40 minutes for you to cross. The traffic on Mysore Road from Vijayanagar to Kalasipalayam Bridge will take not less than 1 hour. In the peak hour traffic, you can always get lost. If you are a pedestrian, you need to cross the court, you will have to patiently wait for many minutes, before your turn comes.
“One half of our Society guzzles aerated beverages while the other has to do with playful of muddled water. On a three way lane of liberalization, privittization and globalization must provide safe pedestrian crossings for empowering India.” This comment may look little harsh, but nevertheless a fact. No state in India can backdate its achievements. It needs to attract capital and Corporates so that it could provide jobs to the vast majority of people. Bangaluru had excellent Colleges, institutes, polytechnics. Today States need to market their states and the Chief Minister must modify himself to a Corporate CEO. The successful State will attract capital through spelling out its cost advantage, through strategic and pointed marketing. At the macro level, the born again Federal covenant is altering the way CEOs of different States are evaluating their investment decisions. As location has an impact on almost every corporate activity, it is the basic cost driver. And since Cost advantages translate into competitiveness, location becomes a powerful tool in the new competitive economy. Location paradigms of businesses in post-liberalization India are adapting to the evolution of a more Federal structure. State’s objective parameters would provide a pointer to the emerging investment climate, especially Foreign Direct investments.
Bangaluru became the Silicon Valley of India. It had both the software czars like Wipro, Infosys, and more than 200 MNCs, who set up establishments in the State. Banguluru was well known destination in the software lexicon. It became the software capital of India. It had software parks, more out of the private initiative rather than through government investment. The state reaped a gold mine. The Services export which galvanized India’s export sector contributed more than US $ 50 billion, more than one-half coming from this place. The biggest software companies, and the renowned hardware companies, have their establishment here. This brought a glow to Bangalore. Urban explosion also saw a booming night life and an emerging pub culture. Concrete jungles took over vacant space. There was a convergence of people from all over the world. It became a cosmopolitan city. From a sleepy city it soon changed to sleepless city.
The book, the Blooming Bangalore by T P Issar, a bureaucrat had flowers in full bloom photographed from different parts of Bangalore. I have walked across roads where there was a rich canopy of trees provided shade to the pedestrians. Today two wheelers, three wheelers, autos, motor cars, buses, crumple for a little space on the roads, making walking along the roads a nightmare. Many of the trees have gone, many ways side parks disappeared, and cute houses with their distinct small orchards have disappeared. Pensioners’ paradise has become a pensioners curse. The mandis which were full of fresh vegetables is always crowded. Their places have been taken by the multiplex malls, and big chain stores that are into retail though remaining wholesale.
Bangaluru has become the Central business district (CBD) defining the city’s business character. Invariably, business houses prefer to have an office here as it adds to the corporate image.
The reign of Shri Ramakrishna Hegde, as Chief Minister was considered as a unique progressive period in the history of Karnataka. Shri S M Krishna laid the foundation stone for modernization of Bangaluru.
When we look at Bangaluru with its fast growing software, hardware, technology based industries which robbed it of its charm, are these software czars responsible for making the pensioner’s paradise into a buzzling town? Has software industry paid a price for robbing Banguluru of its old charm? An old yet famous photographer Shri Kamat, told foreigners when they came to get old Bangaluru photos from him:” Most Bangaloreans do not frequent pubs, do not own computers or do not shop in the commercial district”(His photo of old Sampige st reproduced).
Friday, September 3, 2010
India's paradox wilderliness?
We hear government telling us that the high presence inflation in food has dwarfed economic growth. We also hear government telling us that in view of the perilous production of oil seeds and their conversion into edible oil, we needed to import a high quality to break-even between supply and demand. Our Planning experts are telling us that food grains growth would stabilize once the monsoon hits India. Monsoon did hit India, and very severely that the flood devastated many areas with its fury. Even the national capital was not spared.
The Supreme Court had faulted the government for having amassed food grains more than the stock required and due to clumsy storing, the entire stores got devastated by the rats that ate what was supposed to be given for distribution amongst the poor through Public Distribution System and through Antodya Anna Yojana. The Court ordered their free distribution with a time tag. But our iron clad bureaucracy is sitting tight and is in the process of devising a plan to distribute the food grains. When and how will be the reason that there will be delay?
The Planning Commission is of the view that the total BPL families in India are around 6.25 Cr. However, the States do not agree. They estimate the BPL families at 10.7 Cr. Why a head count was not taken is any body’s guess. As against Antdodya Anna Yojana, the beneficiaries entitled to benefits has been reackoned as 2.5 Cr. However, the State government has been able to enlist 1.82 Cr households, and they have been given Ration cards. While 0.68 Cr needs to be accounted, the subsidy for 2.5 Cr households have been calculated, and the amount budgeted and will be released pro rata. What will happen to the budget relating to 0.68 Cr will lie in the wilderliness.
Government, according to Economic Survey (Page 205, Table 8.29) says that in 2008-9, the production of oil seeds was 281.57 lakh tones of which edible oil was produced to the extent of 85.98 lakh tones, while 67.20 lakh tones was imported of which 83% was accounted by Palm Oil. So the available oil was 153.18 lakh tones when the actual requirement was only 132.80 lakh tones. The imported oil in surplus was 20.38 lakh tones which accounted for 15.34% excess. During 2009-10, 255.09 lakh tones was the production of oil seeds and converted into edible oil was 82 lakh tones. The import figures went staggering to 101 lakh tones. The total available oil was 183 lakh tones against the requirement of 138.18 lakh tonne. The difference was 44.82 lakh tones which accounted for 32.44% in excess of demand. Another factor was these oil were imported at ‘nil’ duty for Crude and 7.5% for Refined against the normal 45% and 52.5% and the loss on this account was in the region of Rs 25,000 Cr. Added to this, government thought it wise to release Rs 15 per Kg on imported oil for release through PDS. The recurring expenditure stand at Rs 1,500 Cr!
The question that comes to the fore is why are we importing in excess of what is required. There will inevitably be a closing stock which will become next year’s opening stock. What happened to that? The excess of import during the next year, what will happen to that? To whom do these reserves sold or given?
During 2008-09 an amount of Rs 43,668.08 Cr was released as agricultural subsidies which grew by a staggering 39.69 % over 2007-8 and upto Dec 29, 2009, Rs 46,906.68 Cr was spent which was in excess of 7.42 % over the full year’s spending of 2008-9. This was the time, the Government announced time and again, food inflation going to double figures and crossing 16%. During the same period, our Planning Commission stood ground with the theory that India’s agricultural growth will be 4% and to reduce it in the last quarter to negative 0.20%. Just to upset them, the agricultural growth turned positive and recorded 0.20% growth.
Our Government talks of austerity. Government is committed to fiscal consolidation. Bringing down the fiscal deficit from 5.5%. Our Planning Commission talks of apparatus to enhance growth through paradigm change growth models. While all these are professed, there is waste, excess expenditure, unexplainable imports, poor support to India’s domestic sector which is in the wilderliness.India, paradox, thy name?
The number inconsistencies, will anybody reveal the correct figures. Where is the accountability vis-a-vis facts,figures, subsidies, necessity, decision makers?
The Supreme Court had faulted the government for having amassed food grains more than the stock required and due to clumsy storing, the entire stores got devastated by the rats that ate what was supposed to be given for distribution amongst the poor through Public Distribution System and through Antodya Anna Yojana. The Court ordered their free distribution with a time tag. But our iron clad bureaucracy is sitting tight and is in the process of devising a plan to distribute the food grains. When and how will be the reason that there will be delay?
The Planning Commission is of the view that the total BPL families in India are around 6.25 Cr. However, the States do not agree. They estimate the BPL families at 10.7 Cr. Why a head count was not taken is any body’s guess. As against Antdodya Anna Yojana, the beneficiaries entitled to benefits has been reackoned as 2.5 Cr. However, the State government has been able to enlist 1.82 Cr households, and they have been given Ration cards. While 0.68 Cr needs to be accounted, the subsidy for 2.5 Cr households have been calculated, and the amount budgeted and will be released pro rata. What will happen to the budget relating to 0.68 Cr will lie in the wilderliness.
Government, according to Economic Survey (Page 205, Table 8.29) says that in 2008-9, the production of oil seeds was 281.57 lakh tones of which edible oil was produced to the extent of 85.98 lakh tones, while 67.20 lakh tones was imported of which 83% was accounted by Palm Oil. So the available oil was 153.18 lakh tones when the actual requirement was only 132.80 lakh tones. The imported oil in surplus was 20.38 lakh tones which accounted for 15.34% excess. During 2009-10, 255.09 lakh tones was the production of oil seeds and converted into edible oil was 82 lakh tones. The import figures went staggering to 101 lakh tones. The total available oil was 183 lakh tones against the requirement of 138.18 lakh tonne. The difference was 44.82 lakh tones which accounted for 32.44% in excess of demand. Another factor was these oil were imported at ‘nil’ duty for Crude and 7.5% for Refined against the normal 45% and 52.5% and the loss on this account was in the region of Rs 25,000 Cr. Added to this, government thought it wise to release Rs 15 per Kg on imported oil for release through PDS. The recurring expenditure stand at Rs 1,500 Cr!
The question that comes to the fore is why are we importing in excess of what is required. There will inevitably be a closing stock which will become next year’s opening stock. What happened to that? The excess of import during the next year, what will happen to that? To whom do these reserves sold or given?
During 2008-09 an amount of Rs 43,668.08 Cr was released as agricultural subsidies which grew by a staggering 39.69 % over 2007-8 and upto Dec 29, 2009, Rs 46,906.68 Cr was spent which was in excess of 7.42 % over the full year’s spending of 2008-9. This was the time, the Government announced time and again, food inflation going to double figures and crossing 16%. During the same period, our Planning Commission stood ground with the theory that India’s agricultural growth will be 4% and to reduce it in the last quarter to negative 0.20%. Just to upset them, the agricultural growth turned positive and recorded 0.20% growth.
Our Government talks of austerity. Government is committed to fiscal consolidation. Bringing down the fiscal deficit from 5.5%. Our Planning Commission talks of apparatus to enhance growth through paradigm change growth models. While all these are professed, there is waste, excess expenditure, unexplainable imports, poor support to India’s domestic sector which is in the wilderliness.India, paradox, thy name?
The number inconsistencies, will anybody reveal the correct figures. Where is the accountability vis-a-vis facts,figures, subsidies, necessity, decision makers?
Thursday, September 2, 2010
America piggyback on world growth?
During a period of increasingly worrisome headlines about the U.S. economy, there is one bright spot. The rest of the world is doing much better than America.
In the long run, that's good news for the United States. Rapid world growth will eventually rekindle the economic fires in the United States, producing a growth that is more balanced than the bubbles of 1995-2008. Still, getting to that point will be a challenge, since - economically speaking - the home fires don't appear to be burning all that brightly.
The U.S. recovery appears to have slowed to a crawl - or perhaps even ground to a halt. The "advance" estimate of U.S. second-quarter growth was reported at 2.4%, indicating a long road to recovery - during which unemployment is likely to soar.
Almost half of the quarter's gross-domestic-product (GDP) growth projected for the second quarter was inventory buildup. Government spending and a temporary housing blip - caused by the homebuyer tax rebate, which expired April 30 - accounted for the rest.
June durable goods orders, reported July 28, were unexpectedly down 1%, suggesting that even manufacturing is currently slowing. Add to that weak consumer confidence numbers for July and house sales well below expectations for both May and June, and it becomes clear that there's cause for grave concern on the domestic front.
While inflation does not seem to be an immediate problem, unemployment remains appallingly high. That's especially true of long-term unemployment, which - at 4.6% of the working population - is at a post-World War II record. The federal budget deficit is hovering at roughly 10% of GDP and interest rates remain close to zero, thanks to polices that are looking increasingly eccentric when compared to the routes that other countries have chosen to pursue.
It looks as if the U.S. economy will be dealing with the "Great Recession" for a long time to come. But most of the world's other major economies are experiencing fairly rapid recoveries, meaning that they are putting the "Great Recession" firmly in the rearview mirror.
The other countries which were in economic throes are slowly recovering. Canada posted first-quarter growth of no less than 6.1%, and its budget is almost in balance. Even sluggish Britain expanded at 4.5% in the second quarter, and its heroic effort to balance its budget will undoubtedly help growth going forward. German industrial production was up 12.4% in the 12 months through May.
In fact, the overall Euro zone is safely into a growth mode - although its overall budget deficit is still dangerously high. The Economist estimates that shortfall it will reach 7% of GDP this year.
Turning to Latin America, Mexico is something of a basket case. But Brazil is expected to grow at 7.8% this year, with Chile not far behind at 5%. Meanwhile, China is projected to grow at 9.9% in 2010, India at 7.9%, and wealthy South Korea at 5.9%. Even sluggish Japan will manage 3.1% growth.
The bottom line: The wise investor will allocate most of his money internationally.
Modest quantities should go into Europe - particularly Germany and Britain, where valuations are reasonable and growth prospects good. Some should go into Canada, China, Brazil and Chile - each of which has natural-resource-based economies. Canada and Chile also will benefit from having thoroughly reliable governments.
A large proportion should go into Asia: A little into Japan, where prospects appear somewhat brighter than they did a few months ago, and a substantial amount into China. Somewhat less should go into India, where valuations are too high and there are signs of inflation. Finally, a substantial chunk should head for South Korea, which boasts good growth, stability and a capable government.
The Indian consumer is slowly growing in importance. The country has a well-educated, young and ambitious work force, rising wages and is heavily focused on domestic consumption, which means it is less susceptible to the ills of Europe and the United States than China. The government is as messed up as anywhere and civic infrastructure is a nightmare, but both of which will improve over time.
It's important to remember that prospects for the U.S. economy are not universally gloomy. The bad news is that the Obama administration and the U.S. Federal Reserve are together following the policies that Japan has followed for the most of its last 20 years, prolonging recession and producing dangerous bouts of deflation. There are, however, two bits of good news. The first is that U.S. policies may change. However, the movement towards budget balancing is gathering strength in both political parties, and it seems likely that fiscal discipline will be restored once the new Congress takes office in January - following the midterm elections. If the budget is brought towards balance, as is happening in Britain, resources are freed up for the private sector and economic growth becomes easier.
The second, bigger piece of good news - not noticed by those who fear a Japanese "Lost Decade" type of future - is that the U.S. position differs from Japan's in one important respect: Whereas Japan has always had a large balance-of-payments surplus, the United States currently has an enormous balance-of-payments deficit.
The United States has a huge advantage when world economic growth is strong, as is currently the case. With export markets growing faster than domestic consumption, exports will tend naturally to increase faster than imports, producing the most pleasant of all economic states - export-led growth.
Japan couldn't grow its way out of its malaise, because its huge international reserves made the yen too strong, intensifying deflation. Furthermore, foreign countries became disquieted by Japan's surpluses and erected hidden trade barriers against Japanese imports.
In the U.S. case, rapid growth in exports would reduce global imbalances, not increase them. The U.S. balance-of-payments deficit would decline, reducing its need for foreign funding. That would make the world economy more stable and increase its intrinsic growth rate. But it wouldn't push up the dollar, because the balance of payments would still be in a deficit.
Stern action has to be taken to rein in the budget deficit, U.S. economic growth would accelerate and unemployment would decline. If the budget deficit remained huge, there wouldn't be so much money coming in from abroad, meaning domestic savers would be forced to buy U.S. Treasuries. That would force up interest rates and restrict the flow of funds to private-sector borrowers.
U.S. investors should be optimistic for 2011 and beyond. Rapid global growth should rectify the U.S. balance-of-payments problem, so that even modest fiscal discipline will produce a quickening of U.S. growth rates, and a full economic recovery.
In the long run, that's good news for the United States. Rapid world growth will eventually rekindle the economic fires in the United States, producing a growth that is more balanced than the bubbles of 1995-2008. Still, getting to that point will be a challenge, since - economically speaking - the home fires don't appear to be burning all that brightly.
The U.S. recovery appears to have slowed to a crawl - or perhaps even ground to a halt. The "advance" estimate of U.S. second-quarter growth was reported at 2.4%, indicating a long road to recovery - during which unemployment is likely to soar.
Almost half of the quarter's gross-domestic-product (GDP) growth projected for the second quarter was inventory buildup. Government spending and a temporary housing blip - caused by the homebuyer tax rebate, which expired April 30 - accounted for the rest.
June durable goods orders, reported July 28, were unexpectedly down 1%, suggesting that even manufacturing is currently slowing. Add to that weak consumer confidence numbers for July and house sales well below expectations for both May and June, and it becomes clear that there's cause for grave concern on the domestic front.
While inflation does not seem to be an immediate problem, unemployment remains appallingly high. That's especially true of long-term unemployment, which - at 4.6% of the working population - is at a post-World War II record. The federal budget deficit is hovering at roughly 10% of GDP and interest rates remain close to zero, thanks to polices that are looking increasingly eccentric when compared to the routes that other countries have chosen to pursue.
It looks as if the U.S. economy will be dealing with the "Great Recession" for a long time to come. But most of the world's other major economies are experiencing fairly rapid recoveries, meaning that they are putting the "Great Recession" firmly in the rearview mirror.
The other countries which were in economic throes are slowly recovering. Canada posted first-quarter growth of no less than 6.1%, and its budget is almost in balance. Even sluggish Britain expanded at 4.5% in the second quarter, and its heroic effort to balance its budget will undoubtedly help growth going forward. German industrial production was up 12.4% in the 12 months through May.
In fact, the overall Euro zone is safely into a growth mode - although its overall budget deficit is still dangerously high. The Economist estimates that shortfall it will reach 7% of GDP this year.
Turning to Latin America, Mexico is something of a basket case. But Brazil is expected to grow at 7.8% this year, with Chile not far behind at 5%. Meanwhile, China is projected to grow at 9.9% in 2010, India at 7.9%, and wealthy South Korea at 5.9%. Even sluggish Japan will manage 3.1% growth.
The bottom line: The wise investor will allocate most of his money internationally.
Modest quantities should go into Europe - particularly Germany and Britain, where valuations are reasonable and growth prospects good. Some should go into Canada, China, Brazil and Chile - each of which has natural-resource-based economies. Canada and Chile also will benefit from having thoroughly reliable governments.
A large proportion should go into Asia: A little into Japan, where prospects appear somewhat brighter than they did a few months ago, and a substantial amount into China. Somewhat less should go into India, where valuations are too high and there are signs of inflation. Finally, a substantial chunk should head for South Korea, which boasts good growth, stability and a capable government.
The Indian consumer is slowly growing in importance. The country has a well-educated, young and ambitious work force, rising wages and is heavily focused on domestic consumption, which means it is less susceptible to the ills of Europe and the United States than China. The government is as messed up as anywhere and civic infrastructure is a nightmare, but both of which will improve over time.
It's important to remember that prospects for the U.S. economy are not universally gloomy. The bad news is that the Obama administration and the U.S. Federal Reserve are together following the policies that Japan has followed for the most of its last 20 years, prolonging recession and producing dangerous bouts of deflation. There are, however, two bits of good news. The first is that U.S. policies may change. However, the movement towards budget balancing is gathering strength in both political parties, and it seems likely that fiscal discipline will be restored once the new Congress takes office in January - following the midterm elections. If the budget is brought towards balance, as is happening in Britain, resources are freed up for the private sector and economic growth becomes easier.
The second, bigger piece of good news - not noticed by those who fear a Japanese "Lost Decade" type of future - is that the U.S. position differs from Japan's in one important respect: Whereas Japan has always had a large balance-of-payments surplus, the United States currently has an enormous balance-of-payments deficit.
The United States has a huge advantage when world economic growth is strong, as is currently the case. With export markets growing faster than domestic consumption, exports will tend naturally to increase faster than imports, producing the most pleasant of all economic states - export-led growth.
Japan couldn't grow its way out of its malaise, because its huge international reserves made the yen too strong, intensifying deflation. Furthermore, foreign countries became disquieted by Japan's surpluses and erected hidden trade barriers against Japanese imports.
In the U.S. case, rapid growth in exports would reduce global imbalances, not increase them. The U.S. balance-of-payments deficit would decline, reducing its need for foreign funding. That would make the world economy more stable and increase its intrinsic growth rate. But it wouldn't push up the dollar, because the balance of payments would still be in a deficit.
Stern action has to be taken to rein in the budget deficit, U.S. economic growth would accelerate and unemployment would decline. If the budget deficit remained huge, there wouldn't be so much money coming in from abroad, meaning domestic savers would be forced to buy U.S. Treasuries. That would force up interest rates and restrict the flow of funds to private-sector borrowers.
U.S. investors should be optimistic for 2011 and beyond. Rapid global growth should rectify the U.S. balance-of-payments problem, so that even modest fiscal discipline will produce a quickening of U.S. growth rates, and a full economic recovery.
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