INDIA BUSINESS THIS WEEK (Aug 26 - Sept 1, 2012)

INDIA NEWS

Investments may not revive in the near future. Savings by individuals & investments by companies have not been picking up. The relatively high savings rate which prevailed in the country prior to the 2008 crisis supported the investments; the same is faltering thanks to squeeze on margins of corporate; the inflation is driving individuals to other means of investments like Gold & real estate. The RBI cut, in July, the economic growth estimate to 6.5 % (from 7.3%) and raised its inflation forecast to 7 % (from 6.5%). The inflation, according to the central bank, should be around 5%.  Many, however, feel that a cut in the interest rates can give a boost to the economic activity.

The Indian economy posted a 5.5% annual growth during the first quarter of the current fiscal (Q1 FY13), beating the estimates of most analysts (at 5%). After four consecutive quarters of decline, the latest GDP growth rate would indicate a bottoming-out effect with the worst behind. However issues such as slow growth in fixed assets, lower growth (compared to previous two quarters) in top line of companies in the S&P CNX 500 etc. are matters of concern. The real estate and construction sectors have contributed in a significant way to the current quarter’s growth; the growth in the sectors may be attributed to two key reasons- execution of delayed projects & funneling of investment into real estate which is considered a safe investment in times of economic crisis.   The industry & business continue clamoring for fast-tracking reforms, cutting policy rates & implementing second phase of spending; providing impetus for investment & consumption demand.

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INDIA BUSINESS THIS WEEK (Aug 12 -18,2012)

SUMMARY

The performance of India Inc for the quarter ended June is not too encouraging, but for certain sectors such as FMCG.  Issues such as lack of clarity in government policies & poor monsoon, together with global conditions & cyclical factors, have weakened the outlook for the corporate sector.While there is a need for big ticket reforms the industry clamors for resolution of issues at the consumer side ( such as interest rates) urgently. However, a major section of the economists feel that the fall in inflation is a mirage. RBI also is not likely to take much comfort from the transient fall in WPI inflation & cause any cut in rates.

The slow growth in manufacturing base cause concern about the much needed job creation for the young population of the country

While there is a need for big ticket reforms ,issues at the consumer side ( such as interest rates) are to be urgently resolved.

India has done well in the London Olympic Games with six medals & some heartening performances. The wish is now for 25 medals ,if not more, in 2020. This may not be a distant dream considering the level of participation of Indian athletes meeting world standards in many disciplines; the achievements at the London Games can certainly give fillip for working harder & aiming higher. However, the achievements of the Indian sportsmen in the Olympics in track & field events as well as team games are rather dismal. The systemic deficiencies are to be addressed when the country looks forward to Rio for a still better performance.

The latest report from CAG showing undue gains of Rs 3 lac cr. to private players will be another set-back for the scam-battered UPA government

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INDIA BUSINESS THIS WEEK (Aug 5 -11,2012 )

SUMMARY

India continues to face tough & rather uncertain economic conditions. With poor monsoon, policy paralysis & non-encouraging quarterly results ( with increase in topline in most cases, but with falling margins), the business sentiment is reported to be much worse than reality.  The two powergrid collapses in quick succession last week added fuel to the fire, severely affecting the perception of India’s investment attractiveness.

With concerns over inflation & risks thanks to deficient rainfall, high food prices, weaker rupee, suppressed inflation in fuel, coal & electricity, there has been downward revisions in the growth projections.With stagnating global equity markets, the investment scenario also likely to continue to be adverse. However, with change in guards at critical positions (with new finance minister & chief economic advisor taking positions), one can look ahead with a note of optimism

It is reported that (THE ECONOMIS July 21,2012) that the big emerging economies may never grow as fast as they did after 2003. As per the projections of Goldman Sachs, the average growth for the rest of the decade for BRICS would be 5.2% for Brazil, 5.4% for Russia, 6.3% for India & 6.9% for China, with India China being in a position to dream to fulfill this & Brazil & Russia likely to fall short.