Indian Economy-News & Updates
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Koovie
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Dont mind, there are tough times ahead of us. We already had bigger problems. Anyway, I appreciate the concern for our economy by some Chinese and Pakistani forum members....
kawaraj
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you speak like an official in your gov.
innocent people will get lose huge. Panic happens when it cross 55 level, which already did.
shuttler
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http://uk.reuters.com/article/2012/05/21/uk-india-rupee-idUKBRE84K0KY20120521?type=GCA-ForeignExchange
Its not the end of the fall as all data indicate. indians to hold breath for another nosedive!
russellpeters
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this economic fluctuation,
a) due to the crisis in greece, and a flight of currency to dollars from euros
b) phucked up policy paralysis.
not systemic...sorry for interrupting your wet dreams
shuttler
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Nakki Nair
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shuttler, let us have a constructive discussion here shall we? The Global Economic Net is interconnected. The fall of one economy will affect others as well.
Muacks
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IndoCarib
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Morgan Stanley cuts India's growth forecast to 6.3%
6.3 % is not bad given the present world economic scenario
6.3 % is not bad given the present world economic scenario
Koovie
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Dont mind dude, everything that includes Indian economy with verbs like: drop, decrease, fall etc is a good news for him and thus has to be posted ASAP. I wonder whether this person is doing nothing else in his life than desperately trying to google any bad news about our economy to scare some Indians on PDF
Why UPA-2 has failed: Voodoo politics and economics
by R Jagannathan May 21, 2012
How did UPA-2 pull disillusionment (and potential defeat) from the jaws of thumping victory in 2009? What went wrong? Why didnt anything go right? And why do we think that UPA-1 did better than UPA-2?
As the media gets ready to evaluate UPA-2s performance on the third anniversary of its return to power today (21 May), we shall seek to answer these questions.
At the risk of oversimplifying the analysis, I would say UPA-2 failed by following voodoo politics and voodoo economics, based on voodoo belief that politics and economics can be permanently divorced.
In UPA-2, both the things that ensured cohesion in UPA-1 disappeared. Sonia and Manmohan seemed to be on different planets, and the Big Three were busy trying to undercut one another on the assumption that the top job may be up for grabs as Manmohan Singh seemed to falter.
To make matters worse, the BJP continued to remain in self-destruct mode, with no leader, no policy ideas, and no plan to capture power in 2014. It is this vacuum created by the BJP that enabled the regional parties to fill the opposition space accentuating the voodoo-politics syndrome.
The BJPs failure has facilitated the emergence of voodoo politics, where governance has been given the go-by on the assumption that the First Familys magic and heavy social spending are enough to give the party a win.
This is why when corruption emerged as a major concern among the urban middle-classes the classes that put the Congress on top in 2009 - the Congress tried to brazen it out with the Baba Ramdev and Anna Hazare movements. Luckily for the Congress, both Anna and Baba embraced voodoo ideas like the Jan Lokpal Bill and bringing back black money as some kind of panacea for corruption. Both scored self-goals and became less of a threat to the Congress.
At the core of voodoo politics is the First Familys reluctance to play a political role in UPA-2, with both Sonia and Rahul surfacing in public only when it suited them. Leaving politics to sycophants and trusted retainers like Ahmed Patel or Digvijaya Singh meant that neither Sonia nor Rahul engaged with politics directly except at election time.
Voodoo politics in UPA-2 was aided by voodoo economics where no reforms are ever deemed needed. This was partly the result of UPA-1s undeserved economic success. Thanks to a successful first term where the economy averaged over 8 percent growth, the Congress developed a naïve belief that everything will fall into place due to our demographic advantage or social spending. One merely has to keep redistributing income (to the poor, the rural areas) and things will work out fine.
At the end of UPA-1, the Congress party wrongly assumed that the buoyant economy was the result of its own policies rather than dumb luck. But this is what really happened.
The economic uptick, which came after years of small reforms carried out during the United Front and NDA years, and which was aided by very high global growth during the George W Bush years, started in the last year of the NDA and continued till 2007-08 five solid years.
If the initial buoyancy was pure luck that had nothing to do with the UPAs own policies, what followed in 2008-10 was even more luck. This is how it played out. The UPAs spend-spend-spend policies created rampant inflation and by 2008 (August 2008) the wholesale prices index (WPI) was hitting a 13-year high of 12.44 percent. The Reserve Bank was feverishly pushing up interest rates. If this had continued, UPA would certainly not have won its big mandate in 2009.
This is where dumb luck helped again. When the Lehman crisis broke cover in September 2008, the world economy went into a tailspin and oil prices crashed. Even though GDP growth fell, UPA-1 reaped a huge windfall in the form of a dramatic fall in inflation (despite huge spending) that had nothing to do with any policy effort. By June 2009, inflation, in fact, turned negative (and lets remember, May 2009 was when the UPA won re-election).
The year 2008-09 was the UPAs sweet spot that coincided with election-time. Thanks to fears of recession, the government did what it does best spend mindlessly and several spending or economic giveaway schemes were unleashed: a Rs 1,80,000 crore stimulus package (which was needed, of course), a Rs 70,000 crore farm loan waiver, huge increases in pre-election minimum support prices for farm products, and huge spends on schemes like NREGA. To top it all, UPA-1 also provided urban and rural consumers huge subsidies in petro-products and fertiliser.
If you take the combined effect of oil and fertiliser subsidies so far, the farm loan waiver, the post-Lehman economic stimulus, the big increases in social spending, and the proposed spending on the Food Security Bill in the run-up to 2014, the amount spent would not be less than Rs 10,00,000 crore yes, ten lakh crore since the UPA was first elected in 2004.
No government can spend so much most of it wastefully and still avoid the charge of economic mismanagement. Voodoo economics was rescued from its consequences high deficits and high inflation in 2009 by the global meltdown. But the real impact remains on our account books in the form of huge fiscal and current account deficits.
With a fiscal deficit of 5.9 percent in 2011-12 and a current account deficit estimated at 4 percent of GDP (the highest ever, which is sending our rupee crashing), UPA-2 is reaping the whirlwind on its voodoo economics.
The Indian political-economy follows a dialectical pattern where reform is balanced by redistribution in turn. The late 1980s fiscal crisis resulted in the reforms of 1991. When electoral needs forced Narasimha Rao to shift the focus back to spending, inflation soared and growth slowed down during the UF and NDA years which forced them to push the envelope on reforms.
UPA-1 reaped the benefits of both domestic reforms and global growth. But UPA-2 needed to push reforms at least for the initial two to three years to reap the rewards in 2014. This is why it failed. It said a pass on reforms, and is about to pay the price.
By focusing on 2014 in 2009, and refusing to acknowledge the role of luck in 2004-09 in its economic performance and political rejuvenation, UPA-2 compounded voodoo politics with voodoo economics.
The result is stagflation which we have called Rahul-flation in the past since voodoo economics has been unleashed by the need to elect him PM in 2014.
But without reforms and the abandonment of voodoo political-economics, UPA-2 is likely to bite the dust.
Far from seeing 2009 as a mandate to govern, Sonia Gandhi and Rahul saw 2009 as an incentive to start planning for 2014.AFP
The term voodoo economics was coined by George Bush Sr to attack Ronald Reagans economic policies that prescribed tax cuts as the best solution to the countrys problems. In India, of course, voodoo economics is the reverse it stems from the opposite belief that you can go on spending and taxes will somehow come back to the coffers and rescue the economy.
But what we now have is falling growth, falling rupee, falling UPA credibility, rising inflation, rising government expenditure, and a rising sense of unease about where India is heading.
For UPA, it all began with voodoo politics politics without internal consistency, vision or governance. To understand this, we need to go back to 2009, when the Congress party was celebrating its huge victory. The party increased its Lok Sabha seat-count to 206 the highest tally by a national party since 1991 barely 65-70 seats short of an absolute majority on its own. Thats where voodoo politics began in right earnest.
The 2009 results confirmed two things to the Congress party: that heavy social spending is the way to install Rahul Gandhi in power in 2014; and that the country may soon be ready to give one party complete control of government. What started as a brief dalliance with aam aadmi politics in 2004 (which the Congress unexpectedly won) gathered more steam after 2009.
What remained unchanged after UPA-1 was the belief that the Sonia-Manmohan division of power where the former influences all major political-economic decisions and the latter keeps a semblance of administration going without doing much was good enough to ensure a Rahul Gandhi victory in 2014.
In short, far from seeing 2009 as a mandate to govern, Sonia Gandhi and Rahul saw 2009 as an incentive to start planning for 2014. Stated differently, the political efforts for winning 2014 began as early as 2009. This was how UPA-2 squandered its mandate.
We all know how policy-making turns populist whenever parties see elections round the corner, but Sonia and Rahul smelt it five before 2014.
This is why the National Advisory Council (NAC), which had been disbanded in 2006 after the office-of-profit controversy, was revived in March 2010 to devise pork-barrel entitlement schemes that would pay off politically in 2014. Whether it was the land acquisition bill or the mining bill or the food security bill, the NAC was reactivated to give Sonia the political platform to start planning for 2014 from 2009 itself.
This was also why Rahul Gandhi kept playing compulsive populist at regular intervals turning up suddenly among Orissas tribals to claim he was their soldier in Delhi in August 2010, announcing a Muslim quota before the UP elections. Lessons from the Bihar elections, where the party was trounced by Nitish Kumar and the BJP in 2010, were ignored as aberrations.
The Congress also underestimated the impact of the Lefts bullying in UPA-1 in keeping its own coherence intact. When the Left was seen as the frenemy (a friend and enemy), it gave both Sonia and Manmohan an incentive to back each other up. It also kept the ambitions of the top three in the UPA government Manmohan Singh, Pranab Mukherjee, and P Chidambaram in check.
Why UPA-2 has failed: Voodoo politics and economics | Firstpost
by R Jagannathan May 21, 2012
How did UPA-2 pull disillusionment (and potential defeat) from the jaws of thumping victory in 2009? What went wrong? Why didnt anything go right? And why do we think that UPA-1 did better than UPA-2?
As the media gets ready to evaluate UPA-2s performance on the third anniversary of its return to power today (21 May), we shall seek to answer these questions.
At the risk of oversimplifying the analysis, I would say UPA-2 failed by following voodoo politics and voodoo economics, based on voodoo belief that politics and economics can be permanently divorced.
In UPA-2, both the things that ensured cohesion in UPA-1 disappeared. Sonia and Manmohan seemed to be on different planets, and the Big Three were busy trying to undercut one another on the assumption that the top job may be up for grabs as Manmohan Singh seemed to falter.
To make matters worse, the BJP continued to remain in self-destruct mode, with no leader, no policy ideas, and no plan to capture power in 2014. It is this vacuum created by the BJP that enabled the regional parties to fill the opposition space accentuating the voodoo-politics syndrome.
The BJPs failure has facilitated the emergence of voodoo politics, where governance has been given the go-by on the assumption that the First Familys magic and heavy social spending are enough to give the party a win.
This is why when corruption emerged as a major concern among the urban middle-classes the classes that put the Congress on top in 2009 - the Congress tried to brazen it out with the Baba Ramdev and Anna Hazare movements. Luckily for the Congress, both Anna and Baba embraced voodoo ideas like the Jan Lokpal Bill and bringing back black money as some kind of panacea for corruption. Both scored self-goals and became less of a threat to the Congress.
At the core of voodoo politics is the First Familys reluctance to play a political role in UPA-2, with both Sonia and Rahul surfacing in public only when it suited them. Leaving politics to sycophants and trusted retainers like Ahmed Patel or Digvijaya Singh meant that neither Sonia nor Rahul engaged with politics directly except at election time.
Voodoo politics in UPA-2 was aided by voodoo economics where no reforms are ever deemed needed. This was partly the result of UPA-1s undeserved economic success. Thanks to a successful first term where the economy averaged over 8 percent growth, the Congress developed a naïve belief that everything will fall into place due to our demographic advantage or social spending. One merely has to keep redistributing income (to the poor, the rural areas) and things will work out fine.
At the end of UPA-1, the Congress party wrongly assumed that the buoyant economy was the result of its own policies rather than dumb luck. But this is what really happened.
The economic uptick, which came after years of small reforms carried out during the United Front and NDA years, and which was aided by very high global growth during the George W Bush years, started in the last year of the NDA and continued till 2007-08 five solid years.
If the initial buoyancy was pure luck that had nothing to do with the UPAs own policies, what followed in 2008-10 was even more luck. This is how it played out. The UPAs spend-spend-spend policies created rampant inflation and by 2008 (August 2008) the wholesale prices index (WPI) was hitting a 13-year high of 12.44 percent. The Reserve Bank was feverishly pushing up interest rates. If this had continued, UPA would certainly not have won its big mandate in 2009.
This is where dumb luck helped again. When the Lehman crisis broke cover in September 2008, the world economy went into a tailspin and oil prices crashed. Even though GDP growth fell, UPA-1 reaped a huge windfall in the form of a dramatic fall in inflation (despite huge spending) that had nothing to do with any policy effort. By June 2009, inflation, in fact, turned negative (and lets remember, May 2009 was when the UPA won re-election).
The year 2008-09 was the UPAs sweet spot that coincided with election-time. Thanks to fears of recession, the government did what it does best spend mindlessly and several spending or economic giveaway schemes were unleashed: a Rs 1,80,000 crore stimulus package (which was needed, of course), a Rs 70,000 crore farm loan waiver, huge increases in pre-election minimum support prices for farm products, and huge spends on schemes like NREGA. To top it all, UPA-1 also provided urban and rural consumers huge subsidies in petro-products and fertiliser.
If you take the combined effect of oil and fertiliser subsidies so far, the farm loan waiver, the post-Lehman economic stimulus, the big increases in social spending, and the proposed spending on the Food Security Bill in the run-up to 2014, the amount spent would not be less than Rs 10,00,000 crore yes, ten lakh crore since the UPA was first elected in 2004.
No government can spend so much most of it wastefully and still avoid the charge of economic mismanagement. Voodoo economics was rescued from its consequences high deficits and high inflation in 2009 by the global meltdown. But the real impact remains on our account books in the form of huge fiscal and current account deficits.
With a fiscal deficit of 5.9 percent in 2011-12 and a current account deficit estimated at 4 percent of GDP (the highest ever, which is sending our rupee crashing), UPA-2 is reaping the whirlwind on its voodoo economics.
The Indian political-economy follows a dialectical pattern where reform is balanced by redistribution in turn. The late 1980s fiscal crisis resulted in the reforms of 1991. When electoral needs forced Narasimha Rao to shift the focus back to spending, inflation soared and growth slowed down during the UF and NDA years which forced them to push the envelope on reforms.
UPA-1 reaped the benefits of both domestic reforms and global growth. But UPA-2 needed to push reforms at least for the initial two to three years to reap the rewards in 2014. This is why it failed. It said a pass on reforms, and is about to pay the price.
By focusing on 2014 in 2009, and refusing to acknowledge the role of luck in 2004-09 in its economic performance and political rejuvenation, UPA-2 compounded voodoo politics with voodoo economics.
The result is stagflation which we have called Rahul-flation in the past since voodoo economics has been unleashed by the need to elect him PM in 2014.
But without reforms and the abandonment of voodoo political-economics, UPA-2 is likely to bite the dust.
Far from seeing 2009 as a mandate to govern, Sonia Gandhi and Rahul saw 2009 as an incentive to start planning for 2014.AFP
The term voodoo economics was coined by George Bush Sr to attack Ronald Reagans economic policies that prescribed tax cuts as the best solution to the countrys problems. In India, of course, voodoo economics is the reverse it stems from the opposite belief that you can go on spending and taxes will somehow come back to the coffers and rescue the economy.
But what we now have is falling growth, falling rupee, falling UPA credibility, rising inflation, rising government expenditure, and a rising sense of unease about where India is heading.
For UPA, it all began with voodoo politics politics without internal consistency, vision or governance. To understand this, we need to go back to 2009, when the Congress party was celebrating its huge victory. The party increased its Lok Sabha seat-count to 206 the highest tally by a national party since 1991 barely 65-70 seats short of an absolute majority on its own. Thats where voodoo politics began in right earnest.
The 2009 results confirmed two things to the Congress party: that heavy social spending is the way to install Rahul Gandhi in power in 2014; and that the country may soon be ready to give one party complete control of government. What started as a brief dalliance with aam aadmi politics in 2004 (which the Congress unexpectedly won) gathered more steam after 2009.
What remained unchanged after UPA-1 was the belief that the Sonia-Manmohan division of power where the former influences all major political-economic decisions and the latter keeps a semblance of administration going without doing much was good enough to ensure a Rahul Gandhi victory in 2014.
In short, far from seeing 2009 as a mandate to govern, Sonia Gandhi and Rahul saw 2009 as an incentive to start planning for 2014. Stated differently, the political efforts for winning 2014 began as early as 2009. This was how UPA-2 squandered its mandate.
We all know how policy-making turns populist whenever parties see elections round the corner, but Sonia and Rahul smelt it five before 2014.
This is why the National Advisory Council (NAC), which had been disbanded in 2006 after the office-of-profit controversy, was revived in March 2010 to devise pork-barrel entitlement schemes that would pay off politically in 2014. Whether it was the land acquisition bill or the mining bill or the food security bill, the NAC was reactivated to give Sonia the political platform to start planning for 2014 from 2009 itself.
This was also why Rahul Gandhi kept playing compulsive populist at regular intervals turning up suddenly among Orissas tribals to claim he was their soldier in Delhi in August 2010, announcing a Muslim quota before the UP elections. Lessons from the Bihar elections, where the party was trounced by Nitish Kumar and the BJP in 2010, were ignored as aberrations.
The Congress also underestimated the impact of the Lefts bullying in UPA-1 in keeping its own coherence intact. When the Left was seen as the frenemy (a friend and enemy), it gave both Sonia and Manmohan an incentive to back each other up. It also kept the ambitions of the top three in the UPA government Manmohan Singh, Pranab Mukherjee, and P Chidambaram in check.
Why UPA-2 has failed: Voodoo politics and economics | Firstpost
DMLA
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Meanwhile in other news....
5 auto majors to invest Rs. 5,700 cr in TN
http://www.livemint.com/2012/05/1415...est-Rs-57.html
TVS to invest in Hosur
TVS Motor, Sundaram Clayton to invest Rs 770 cr in Hosur
More Halal from India
To woo Muslims in global markets Indian brands get halal stamp | ummid.com
5 auto majors to invest Rs. 5,700 cr in TN
http://www.livemint.com/2012/05/1415...est-Rs-57.html
TVS to invest in Hosur
TVS Motor, Sundaram Clayton to invest Rs 770 cr in Hosur
More Halal from India
To woo Muslims in global markets Indian brands get halal stamp | ummid.com
laman12345
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India keep up
laman12345
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INDIAN Currency's Greek tragedy continues, Rupee falls to all-time low of 55.02
MUMBAI: The Indian currency's Greek tragedy continued on Tue, as the rupee falls to a new all-time low of 55.02, marking a 23% fallalready this year.
India inflation jumped to 7.23 %
Food prices climbing by over 10 per cent, the commerce ministry said. The disappointing numbers helped push India's currency to a record low of 55.02 rupees to the dollar while the stock market shed half a percentage point to finish at a four-month trough of 16159 points.
MUMBAI: The Indian currency's Greek tragedy continued on Tue, as the rupee falls to a new all-time low of 55.02, marking a 23% fallalready this year.
India inflation jumped to 7.23 %
Food prices climbing by over 10 per cent, the commerce ministry said. The disappointing numbers helped push India's currency to a record low of 55.02 rupees to the dollar while the stock market shed half a percentage point to finish at a four-month trough of 16159 points.
Yeti
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India's economic growth to quicken in 2013 - OECD
PARIS (Reuters)- India's economic growth is likely to rise to more than 7.5 percent in calendar year 2013 but continued government policy uncertainty could erode the country's longer-term growth prospects, the OECD said on Tuesday.
A cyclical upturn in investment, stronger external demand and the effects of recent monetary easing will boost growth, the report said, although it warned that high inflation would dampen the investment climate.
The prediction of higher growth in the Organisation for Economic Cooperation and Development's outlook report should cheer Prime Minister Manmohan Singh's government - which has faced an avalanche of criticism over how it has run Asia's third-largest economy and its scant progress making key reforms.
The upbeat OECD forecast stood in stark contrast to the pessimistic view offered on Monday by Morgan Stanley, which cut its growth forecasts for India, citing a high budget deficit and slowing private investment. It said it now expected the economy to grow by 6.8 percent, instead of 7.5 percent, in 2013.
Standard & Poor's rating agency cut its outlook for India's credit rating to negative from stable in April, reflecting worries about high deficits and political paralysis that has stalled progress on major economic reforms.
India's economic growth slowed to 6.1 percent in the three months to December, the weakest annual pace in almost three years, while the rupee slumped to record lows against the dollar on Tuesday.
"A moderate cyclical pick-up in investment is projected in the near term," the OECD said. "Later this year and into the next, growth is set to pick up to around trend rates, supported by the delayed effects of the recent monetary policy easing."
"However, still high inflation will limit the room for significant further relaxation," it added.
POLICY UNCERTAINTY
India has had rapid economic growth after opening up its economy in 1991. But investors fret that Singh's government is now squandering a chance to tap the country's potential.
The current account deficit is the highest since 1980. Reforms such as opening India's supermarket sector to foreign chains like Wal-Mart (WMT.N) stuttered as the government failed to convince powerful coalition allies. Inflation is the highest among the so-called BRICS group of major developing nations.
Costly subsidies have pushed the fiscal deficit to 5.9 percent from a target of 4.6 percent of GDP in the fiscal year that ended in March 2012. The government must push consolidation to help reduce inflation and the current account deficit, the report said, warning that an expected rise in global oil prices could again force New Delhi to overshoot its spending target.
Continued policy uncertainty and more fiscal slippage "would weaken investment sentiment and result in softer near-term growth and an erosion of longer-run prospects," the OECD said, though adding that India's pace of growth could overtake China's by 2020.
(Reporting by Matthias Williams in NEW DELHI; Editing by Richard Borsuk)
India's economic growth to quicken in 2013 - OECD | Reuters
PARIS (Reuters)- India's economic growth is likely to rise to more than 7.5 percent in calendar year 2013 but continued government policy uncertainty could erode the country's longer-term growth prospects, the OECD said on Tuesday.
A cyclical upturn in investment, stronger external demand and the effects of recent monetary easing will boost growth, the report said, although it warned that high inflation would dampen the investment climate.
The prediction of higher growth in the Organisation for Economic Cooperation and Development's outlook report should cheer Prime Minister Manmohan Singh's government - which has faced an avalanche of criticism over how it has run Asia's third-largest economy and its scant progress making key reforms.
The upbeat OECD forecast stood in stark contrast to the pessimistic view offered on Monday by Morgan Stanley, which cut its growth forecasts for India, citing a high budget deficit and slowing private investment. It said it now expected the economy to grow by 6.8 percent, instead of 7.5 percent, in 2013.
Standard & Poor's rating agency cut its outlook for India's credit rating to negative from stable in April, reflecting worries about high deficits and political paralysis that has stalled progress on major economic reforms.
India's economic growth slowed to 6.1 percent in the three months to December, the weakest annual pace in almost three years, while the rupee slumped to record lows against the dollar on Tuesday.
"A moderate cyclical pick-up in investment is projected in the near term," the OECD said. "Later this year and into the next, growth is set to pick up to around trend rates, supported by the delayed effects of the recent monetary policy easing."
"However, still high inflation will limit the room for significant further relaxation," it added.
POLICY UNCERTAINTY
India has had rapid economic growth after opening up its economy in 1991. But investors fret that Singh's government is now squandering a chance to tap the country's potential.
The current account deficit is the highest since 1980. Reforms such as opening India's supermarket sector to foreign chains like Wal-Mart (WMT.N) stuttered as the government failed to convince powerful coalition allies. Inflation is the highest among the so-called BRICS group of major developing nations.
Costly subsidies have pushed the fiscal deficit to 5.9 percent from a target of 4.6 percent of GDP in the fiscal year that ended in March 2012. The government must push consolidation to help reduce inflation and the current account deficit, the report said, warning that an expected rise in global oil prices could again force New Delhi to overshoot its spending target.
Continued policy uncertainty and more fiscal slippage "would weaken investment sentiment and result in softer near-term growth and an erosion of longer-run prospects," the OECD said, though adding that India's pace of growth could overtake China's by 2020.
(Reporting by Matthias Williams in NEW DELHI; Editing by Richard Borsuk)
India's economic growth to quicken in 2013 - OECD | Reuters
