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Old July 15th, 2008, 08:25 AM   #1101
barrykul
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This doomsday prediction about the US Economy has been going on for sometime. But the US economy is robust. Just to give an idea, the wealthiest individuals in US i.e. < 1% control 90% of wealth to the tune of $27 Trillion. China's bond market holding in the US of $1 T is still a small percentage and with oil prices skyrocketing is probably reduced in value. These bailouts that are in the news are in the billions. Fannie & FredieMac are resellers of existing home mortgage loans to other wealthy investors. The bail out amounts are less than the 0.75 T /yr expenditure that the US has with Iraq troops and other security ops around the world. The US spends 0.8 T / yr importing crude oil. The world GDP is around 50T but the futures market is playing at 500 T, including the oil speculators and other commodities, hedge funds, etc.
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Old July 15th, 2008, 04:27 PM   #1102
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‘Indians expect employment, economic conditions to improve’

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Inflation may be flirting with double-digit figures, but Indians living in metros seem to be an optimistic lot with most of them expecting the employment scenario as well as the economic conditions to improve in the near term.

Knowledge services firm Boston Analytics’ Consumer Sentiment Index (BACSI), a monthly barometer of consumer opinion regarding current state and future expectations of the macro economy, household financial conditions and consumption, has registered a nearly three per cent increase in the level of over all optimism in June.

BACSI for June stood at 96.9, up 2.9 per cent from the previous months reading of 94.2. The rise is attributable primarily to improvement of sentiment related to consumption plans, employment and expectations from the future state of economy. However, sentiment related to inflation remained very low and acted as a significant offset, the survey stated.

The index, based on a monthly survey conducted across metros Delhi, Mumbai, Kolkata and Chennai targets a diverse set of demographics representative of Indian consumers. It addresses macro-level variables reflecting the nation’s economic conditions, including indicators such as employment, inflation, interest rates, and real estate.

The BACSI Employment Sentiment index recorded a marginal increase reflecting the expectation of a positive and robust hiring market.

High job security, combined with consumers’ increased confidence about their ability to create alternative means of employment, led to a marginal increase in the BACSI Employment Sentiment Index compared to last month.

The index, which declined gradually from the beginning of the year until May, increased by 4.9 per cent, from 71.1 in May 2008 to 74.6 in June 2008.
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Old July 15th, 2008, 04:43 PM   #1103
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Economy is not slowing down: CII

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Strongly denying that economy is slowing down, CII President K V Kamath on Monday said, one has to see India Inc's performance in the next two quarters to pass a judgement.

Pointing out that corporates have an investment pipeline of USD 700 billion to USD 750 billion, Kamath, also the Managing Director and CEO of ICICI Bank, said there are reports that order book of companies now is "much higher".

"I am not seeing slowdown," he said at a CII function and later interacting with the media. He wondered how some people were talking about slowdown. "Where slowdown scenario has come?" he added.

Inflation and surging oil and commodity prices are challenges but noted that "what's insulating us is the huge pipeline of investment that's happening" and also the fact that services sector contributes to around 60 per cent of India's GDP, said Kamath.

"Corporate India has an investment pipeline of USD 700 billion to USD 750 billion," Kamath said, adding that there are reports that order book of companies now is "much higher" than it was at the same time last year. "Investment is not going to be a challenge," he said further.
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Old July 15th, 2008, 06:28 PM   #1104
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India ranks 41st in industrial competitiveness: Unido report


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India is ranked 41st in the Industrial Development Scorecard of 100 leading economies in the world, prepared by the United Nations Industrial Development Organisation (Unido).

The scorecard is prepared on the basis of the competitive industrial performance of countries. It is based on two sets of components—industrial development indicators and the competitive industrial performance index. It benchmarks a country in the backdrop of liberalization and globalisation.

Singapore tops in the ranking followed by Ireland, Switzerland, Japan, Belgium, Sweden, Finalnd, Germany, Republic of Korea, Taiwan Province of China, France, USA, Hong Kong SAR, Austria and Slovenia in the top 15. Others in the ranking are: UK (16); Netherlands (17); Malaysia (18); Italy (19); Hungary (20); Denmark (21); Canada (22); Malta (23); Israel (24); Czech Republic (25); China P R (26); Thailand (27); Spain (28); Slovak Republic (29); Mexico (30); Brazil (39); Bangladesh at 67 ; and Sri Lanka at 75. Unido, in a statement said, that the scorecard brings out that there is a persistent pattern of performance over the years among regional groupings of countries, with industrialized countries leading the rankings and transition economies tightly grouped in the middle ranks.

Further, developing countries show a wide variation in their relative positions, with the economies of East Asia and South-East Asia leading Latin America and the Caribbean, South Asia and sub-Saharan Africa.

The scorecard suggests about competitive performance of a country, which is measured in terms of manufacturing value added per capita and manufacturing exports per capita. The scorecard also takes note of industrialization which suggests share of manufacturing value added in GDP and of medium and high technology in manufacturing.
source timesofindia.com
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Old July 16th, 2008, 05:38 AM   #1105
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the massive subsidies doled out during this government's tenure are starting to have their effect.

Fitch Cuts Outlook on India's Debt on Budget Concerns

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India's credit outlook was cut to ``negative'' by Fitch Ratings on concern rising subsidies, interest payments and wages will weaken government finances.

Bonds, the rupee and stocks fell after Fitch reduced its outlook from ``stable'' on India's local-currency debt rating of BBB-, the lowest investment grade and six levels below China and Japan. Standard & Poor's last week said it may cut India's credit rating to junk if the economy deteriorates further.

``The revision to the local currency outlook is based on a considerable deterioration in the central government's fiscal position, combined with a notable increase in government debt issuance to finance subsidies not captured in the budget,'' James McCormack, Fitch's head of Asia sovereign ratings, said in a statement today.

Prime Minister Manmohan Singh is spending more on government salaries, has increased food, fuel and fertilizer subsidies and waived farmers from repaying $17 billion of debt to mitigate the effects of runaway inflation. A rating downgrade may reduce investment coming into the country and make it more expensive for Indian companies to borrow.

India's 10-year bonds declined, pushing yields to near the highest since 2001, after Fitch cut its outlook. The yield on the benchmark 8.24 percent note climbed 9 basis points to 9.47 percent as of 1:58 p.m. in Mumbai. The benchmark stock index fell 4 percent and the rupee dropped as much as 0.7 percent to 42.23 per dollar.

Foreign investors, who bought a record $17.2 billion of Indian stocks last year, are now fleeing Asia's third-largest economy amid the fastest inflation in 13 years and the weakest growth since 2004. Overseas investors have pulled out $6.73 billion since January, contributing to the 37 percent decline in the benchmark stock index this year.

India's budget deficit in the current fiscal year may widen to 4.5 percent of gross domestic product from 2.8 percent in the previous 12 months due to higher interest costs and salaries and rising subsidies, Fitch said today.

Fitch said bonds issued to oil and fertilizer companies by the government will reach at least 2 percent of GDP this fiscal year, implying an underlying deficit of 6.5 percent.

The government plans to give 946 billion rupees ($22 billion) of bonds to oil companies to compensate them for selling fuels below cost, spending that the government doesn't include in its budget.

India's budget position may deteriorate as it plans to raise salaries for about 4 million employees this year. It also cut import duties on crude oil and other oil products in June, sacrificing $5.3 billion of revenue to keep fuel costs low in a nation which relies on imports for 70 percent of its energy needs. The government has lowered import taxes on edible oils, cement and other food items in 2008.

Rising fuel costs have pushed inflation to 11.9 percent. That prompted the central bank to twice raise its benchmark interest rate in June, pushing it to a six-year high of 8.5 percent. It also lifted the cash reserve ratio to 8.75 percent.

The ratings company said India's central bank may further raise borrowing costs as inflation approaches 12 percent. Fitch cut its GDP forecast to 7.7 percent for the current fiscal year from 8 percent.

``Weaker economic growth and higher real interest rates would affect the fiscal outturn and further undermine international capital flows,'' today's statement said.

Still, Fitch said India's external solvency indicators continue to compare favorably with those of its rating peer group and still support a stable outlook on the sovereign foreign-currency rating.
No matter where the votes are, such massive loan writeoffs and subsidies are still bad news for the country in the long run. Whatever the case, I think this government has been totally incapable of managing the economy.
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Old July 16th, 2008, 06:33 AM   #1106
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I have a question. So if there is no loan writeoff and no subsidies will that dramatically improve the Indian economy? Or will it bite the economy in some other way?
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Old July 16th, 2008, 07:04 AM   #1107
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Originally Posted by Suncity View Post
I have a question. So if there is no loan writeoff and no subsidies will that dramatically improve the Indian economy? Or will it bite the economy in some other way?

I think it is not because of that. It is simply because of the oil price and the bloody US policy, which is allowing massive future trading of the oil.
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Old July 16th, 2008, 09:52 AM   #1108
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I have a question. So if there is no loan writeoff and no subsidies will that dramatically improve the Indian economy? Or will it bite the economy in some other way?
Ratings wise,yes... you need cheaper sources of capital to generate positive NPV on your projects. So when deficits increase, ratings are cut and capital becomes expensive. So all loans in country be they for real estate or any other activity will increase and that will make people not do these projects...thus lowering the GDP growth rate...but this will mean deficit as a % of GDP will further increase...and the ratings will be cut further...causing debt to be more dearer. So India will face high energy costs, high capital costs and reduced consumption, meaning local companies will be squeezed. Remember the Government of India borrowing in local markets to finance its deficit causes a squeeze out effect where local companies are unable to borrow competitive capital and this pushes up the capital costs further. Overall deficit is the #1 killer of corporate activity. That is why ratings agencies make such a big deal about it.

MP
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Old July 17th, 2008, 05:42 AM   #1109
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this is an indian economy thread. lets keep it that way. mods please delete the irrelevant posts
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Old July 17th, 2008, 06:07 PM   #1110
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I have a question. So if there is no loan writeoff and no subsidies will that dramatically improve the Indian economy? Or will it bite the economy in some other way?
In the Indian context, subsidies will remain. Every nation resorts to appeasement of some section of their population and they dole out subsidies directly or indirectly. The social upheaval costs are more than the economic ones. The process has to be gradual wherein subsidies are phased out (or better targeted to the deserving ones) as incomes rise and higher paying jobs added. As long as there are people below the poverty line, vote bank politics will continue with the subsidy scheme. Bailout and subsidies are here to stay and happen all over the world.

Just to give a counterpoint to this argument, the entrepreneurs in Tirupur area, have done a fantastic job in bootstrapping their kind. Their exports (knitted cotton) today are around Rs10,000 crores. But for the last few yrs they have faced fluctuation in Rs vs $ vs Euro. In order to protect themselves from the loss, they approached financial planners. The planners advised them to get into currency hedge funds, saying that the system was developed by Nobel Prize winning author etc. The entrepreneurs adopted the hedge fund play. They were initially staring at Rs 3 crore loss in currency fluctuation, but with hedge funds they are now stuck with Rs 300 crore loss. Go figure.
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Old July 17th, 2008, 09:09 PM   #1111
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IMF revises India`s GDP forecast to 8% in 2008
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New Delhi, July 17: Amid various disappointing indicators, India has received some solace with the International Monetary Fund marginally revising its projections for economic growth to 8 per cent in 2008 from its earlier estimates of 7.9 per cent.

IMF in its update of World economic Outlook released today, however, retained its earlier forecast of 8 per cent GDP growth for India during 2009.

Indian economy grew by 9.3 per cent in 2007.

Projections for Indian economy are not too dismal, if one takes IMF views on the world economy. The multi-lateral agency projected the global growth to moderate from five per cent in 2007 to 4.1 per cent in 2008 and 3.9 per cent in 2009
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Old July 18th, 2008, 04:12 PM   #1112
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Report on India’s Foreign Exchange Reserves as at end March 2008

Cheers
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Old July 18th, 2008, 04:49 PM   #1113
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Originally Posted by Naresh View Post


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Old July 18th, 2008, 05:10 PM   #1114
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I have no clue how these things work...so i need an experts opinion on this...

(Just an example)What if India spends about a 100 billion of its forex reserves on a super ambitious plan to setup about 50 world class universities?What are the merits and demerits of this?
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Old July 18th, 2008, 05:37 PM   #1115
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Originally Posted by 2Paise View Post
I have no clue how these things work...so i need an experts opinion on this...

(Just an example)What if India spends about a 100 billion of its forex reserves on a super ambitious plan to setup about 50 world class universities?What are the merits and demerits of this?
should be similar to the experience in setting up massive public sector enterprises in India.

One can spend the money and provide the building and other infrastructure but about the faculty and quality students?

How is the tuition going to compare vis-a-vis other world class universities? Would you be able to attract quality faculty and students at comparable tuition? Can you set up proper environment to conduct research?

Just providing the (world class) physical infrastructure alone is not going to make it world class.
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Old July 18th, 2008, 05:51 PM   #1116
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Originally Posted by Arasu View Post
should be similar to the experience in setting up massive public sector enterprises in India.

One can spend the money and provide the building and other infrastructure but about the faculty and quality students?

How is the tuition going to compare vis-a-vis other world class universities? Would you be able to attract quality faculty and students at comparable tuition? Can you set up proper environment to conduct research?

Just providing the (world class) physical infrastructure alone is not going to make it world class.
Dont you think the difficulty in attracting quality faculty and creating a research atmosphere would be the first things to occur to me?Jeez!...why would you state the obvious?

This is more about how best India can utilize its forex reserves...substitute *universities* with *infrastructure* and answer my question if you know your economics...

All i need are the pros and cons of India spending its forex reserves on anything...

Last edited by 2Paise; July 18th, 2008 at 05:59 PM.
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Old July 18th, 2008, 08:02 PM   #1117
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Originally Posted by 2Paise View Post
Dont you think the difficulty in attracting quality faculty and creating a research atmosphere would be the first things to occur to me?Jeez!...why would you state the obvious?

This is more about how best India can utilize its forex reserves...substitute *universities* with *infrastructure* and answer my question if you know your economics...

All i need are the pros and cons of India spending its forex reserves on anything...
All I was saying was that spending billions alone is not going to make it world class which you have taken for granted. If it were so, there would have been a lot of 'world class' universities in the gulf region where they have more billions to spend on buildings.

To answer this question common sense is more important than knowledge of economics which I have also studied.

Without the faculty and quality students and the research facilities and environment, you are not going to have the 'world class' and there goes the hard earned dollars.

India is already spending billions of dollars in building infrastructure in terms of roads, airports and ports.
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Old July 18th, 2008, 08:17 PM   #1118
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Quote:
Originally Posted by 2Paise;22815152 - July 18th, 2008, 03:49 PM


2 Paise :

I suggest you also post Table 4 from the Report.

In short :

Table 4: International Investment Position of India (US $ billion) - Dec 2007 (P)

A. Total Foreign Assets….....: 331.73

B. Total Foreign Liabilities....: 405.64

Net Foreign Liabilities (B-A) : 073.91


This being the case - to my knowledge not being an Economist - India has a Net Foreign Debt of USD 73.91 Billion.

Thus in my opinion India can only use that amount of Foreign Exchange Reserves that corresponds to Net Foreign Assets.

Please do give me the benefit of your advice.

Cheers
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Old July 18th, 2008, 08:30 PM   #1119
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Originally Posted by Arasu View Post
All I was saying was that spending billions alone is not going to make it world class which you have taken for granted. If it were so, there would have been a lot of 'world class' universities in the gulf region where they have more billions to spend on buildings.

To answer this question common sense is more important than knowledge of economics which I have also studied.

Without the faculty and quality students and the research facilities and environment, you are not going to have the 'world class' and there goes the hard earned dollars.

India is already spending billions of dollars in building infrastructure in terms of roads, airports and ports.
Whether or not to spend a countrys foreign reserves is purely an economics question...this is not about education or infrastructure.

Quote:
All I was saying was that spending billions alone is not going to make it world class which you have taken for granted.
I must be a retard to take that for granted.To me, the only measure of a university's quality is its research output.But that is irrelevant to the question.
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Old July 18th, 2008, 08:36 PM   #1120
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2 Paise :

I suggest you also post Table 4 from the Report.

In short :

Table 4: International Investment Position of India (US $ billion) - Dec 2007 (P)

A. Total Foreign Assets….....: 331.73

B. Total Foreign Liabilities....: 405.64

Net Foreign Liabilities (B-A) : 073.91


This being the case - to my knowledge not being an Economist - India has a Net Foreign Debt of USD 73.91 Billion.

Thus in my opinion India can only use that amount of Foreign Exchange Reserves that corresponds to Net Foreign Assets.

Please do give me the benefit of your advice.

Cheers
Thats what i wanted...I was wondering how much the debt was...it should become positive in a year...

Also, what impact will spending it have on the dollar and rupee?

And what is the minimum amount of reserves advisable to protect the nation in case of an economic crisis?
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