Indian Economy-News & Updates

[wtf]

The basic problem, they say, is that the Chinese government owns the banks and will continue to control them after the public offerings. The government has always exercised ultimate authority over the banks’ lending decisions and, historically, has forced them to lend to corrupt and inefficient state-owned enterprises. That leaves the banks with a large share of loans that, effectively, default. Despite the recent reforms, that basic interference continues.

Because the government now badly wants to modernize its financial sector and bring it up to Western standards, it has made a clear attempt to clean up the balance sheets of the big banks in preparation for their public offerings. The Industrial and Commercial Bank received a direct infusion of something like $30 billion from the Ministry of Finance and the Chinese central bank. The government also reduced Industrial and Commercial’s ratio of “nonperforming loans” to less than 5 percent from 34 percent in 2000 by taking $35 billion in failed loans off its books and giving them to specially created “asset management

http://faculty.chicagobooth.edu/austan.goolsbee/website/PDFs/escene.06.10.china.pdf

Read this PDF file!!!!
Thanks.

Thanks for the link, but that does not support the statement of "world's highest default rates". And I'd stop criticizing govt. control of banks - US owns 79% of AIG, 60% of Citi, is owed large loans by all other banks and essentially funds day to day operations of major US banks (through the discount window).

India stipulates mandatory agricultural loans, 16% rural branches and no-fully-owned-foreign-banks. It does slow the growth of the sector and economy, but also gives more room for government to intervene in a crisis.

Anyway, expecting Chinese govt. to keep its hands off the banking sector, the lubricant of the economy which it wants to control is pointless. If they mess up, they can always control the currency exchange rates and rescue the banks -its simpler than picking up broken pieces left by a private banking sector.
Of course, if Chinese government can single handedly handle a serious multi-sector crisis is open to question, but that is not the current crisis as far as China is concerned.

 

[PeacefulIndian]

Looks like Obama does not like my place!!

Say no to Bangalore, yes to New York: Obama

Tuesday May 5, 09:10 AM Source: Financial Express

Say no to Bangalore, yes to New York: Obama

'Say no to Bangalore and yes to Buffalo,' seems to be the latest mantra of US President Barack Obama as he struggles to bring the ailing American economy back on track.

Meeting one of his major election promises, Obama announced end to years of tax incentives to those US companies which create jobs overseas in places like Bangalore.

Instead, the incentives would now go to those creating jobs inside the US, in places like the Buffalo city - bordering Canada in upstate New York.

"We will stop letting American companies that create jobs overseas take deductions on their expenses when they do not pay any American taxes on their profits," Obama said at White House announcing the international tax policy reform.

"We will use the savings to give tax cuts to companies that are investing in research and development here at home so that we can jump start job creation, foster innovation, and enhance America's competitiveness," Obama said.

The new tax laws are expected to majorly hit countries like India, China and Philippines, where US companies have been outsourcing their work.

Hitting hard at the current taxation system, to which he had been very critical since his election days and as a Senator, Obama said: "It's a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York."

Reiterating his campaign rhetoric, the US President said: "The way we make our businesses competitive is not to reward American companies operating overseas with a roughly two per cent tax rate on foreign profits; a rate that costs taxpayers tens of billions of dollars a year."

Obama said he wants US companies to remain most competitive in the world. "But the way to make sure that happens is not to reward our companies for moving jobs off our shores or transferring profits to overseas tax havens," he argued.

Announcing a set of proposals to crack down on illegal overseas tax evasion, close loopholes, and make it more profitable for companies to create jobs here in the US, Obama said his series of tax reforms would save USD 210 billion in the next 10 years.

Under new measures, American companies would also have to disclose before the IRS details of the income American citizens are generating in overseas accounts. "For years, we've talked about stopping Americans from illegally hiding their money overseas, and getting tough with the financial institutions that let them get away with it," he said.

 

[sob]

The great American Tamasha starts now. All the big affected companies are going to gather together and will start lobbying.

I can visualise the American Lobbyists rubbing their hands in glee and counting the Dollars that they will be billing.

 

[godsavetheworld]

They should know that America lacks serious technical human resource. Infact their own research had showed, that for ever $1 US companies invest in India, they get $1.2 in return.

However I feel, the effect of this policy will be to an extent, and the huge domestic demand will suffice.

 

[a1b2c145]

and yet for all your achievements, both India and China have the highest number and the second highest number of poor people in the world.

Perhaps, instead of "India>China" or "China>India" BS, we should concentrate on how to improve our Human Development indicators. GDP indicators mean absolutely nothing.

Absolutely! that's ture .
the purpose of our economic growth is to improve people's lives, so we should not argue with each other about who's powerful which is boring ,We fight against terrorists and oppose to Political infighting just wanting to creat a good atmosphere for economy!!!!

besides,some other indian guys can you change your strange women photos which demonize your image

 

[a1b2c145]

A lot of times "India beating China" is exactly as what you said - a rant.

In this case, there is an economic reason. If India beats China in growth rate for a quarter (or even a year), it will get India some publicity as the worlds leading growing economy. The idea is that this will cause a burst of investment, leading to a self-fulfilling prophecy of growth. Wall Street Journal was the first to report his news and speculate that if India grew fast this year, the resulting investment could sustain this growth for a longer term.

Another reason for the public celebration is the relief that India is not tied to global economy as closely as expected. Some 8% of India's GDP is from "services exports" which is mainly IT. Further, IT sector has the young, fast spending, newly-middle-class group which fuels the domestic spending. Hence there was worry that India may be affected badly (like Mexico has been in the past) with global slowdown. The fact that we are growing fast is a relief.

This is not an attempt to put China down or to compare ourselves with China in terms of GDP, just a way to attract more investment to India.

Both countries should make cooperation rather than confrontation which may be trapped by bad western countries

 

[Aragorn2608]

I think..China is growing as a whole ...and india grows only in some areas(non cumulative growth)
So...less growth rate is better if its cumulative... Chinese have significantly improved in Infra,engineering,Manufacturing etc.
India has still some miles to go...But i am optimistic about India.

 

[white_pawn]

Aragorn, i agree with some of your view but not all, china's growth is not over all growth, its gorwing on some part similar to that of India's, which is not good. its simply defined as Developed and Developing countires. Nither India nor China falls in the catagery of Developed Countires. Developed Countires are the counties with high per capital index, that is the growth effects maximum population of the country and Developing countires where growth is seen only certain part of ppls. You would be knowing that.

 

[jeypore]

Thanks for the link, but that does not support the statement of "world's highest default rates". And I'd stop criticizing govt. control of banks - US owns 79% of AIG, 60% of Citi, is owed large loans by all other banks and essentially funds day to day operations of major US banks (through the discount window).

India stipulates mandatory agricultural loans, 16% rural branches and no-fully-owned-foreign-banks. It does slow the growth of the sector and economy, but also gives more room for government to intervene in a crisis.

Anyway, expecting Chinese govt. to keep its hands off the banking sector, the lubricant of the economy which it wants to control is pointless. If they mess up, they can always control the currency exchange rates and rescue the banks -its simpler than picking up broken pieces left by a private banking sector.
Of course, if Chinese government can single handedly handle a serious multi-sector crisis is open to question, but that is not the current crisis as far as China is concerned.

Mr. WTF,

First of all AIG is not a bank, it is a insurance company that US gov't had to bail out (long story). American gov't does not owen any banks in America, they regulate money supply thru Federal Reserve, so I am not getting what your point is.

The chinese gov't owen banks have the highest default rate, close to 35%, then any other banks, it is fact. So what you point of contention I do not understand. Anyways, my theory stands, in order to suppliment these rough banks, china has to generate export dollars. They are desperatly trying reforms these banks, especially 4 large ones, but they have not been successful at it yet.

If they mess up, they can always control the currency exchange rates and rescue the banks -its simpler than picking up broken pieces left by a private banking sector.

I especially do not understand the statement above. Simply producing currency to fix all your problems!!! One word "Inflation!"

And who says that the government has to step in and pick up private banking broken pieces. Just because American administration decided that was a good idea? First of all bailing out the banks in America was a bad idea, and it goes against the ideals of America. By doing so, United States is tipping more towards socialist ideals.

And lastly, Gov't run banks are worse then private run banks. There are numerous examples on this, so it is not simpler to run gov't run banks then to pick private banks pieces.

Thanks

 

[jeypore]

my opinion

the way China did in banks is rather stormy but efficient in past years.they will lend money to 10 corporations,five of them profit,the other 5 lose.but the benefit from 5 Profit-making corporation will exceed the lose from 5 unsuccessful corporation a lot.

I think, you need to understand business before making statement of this sort. Loaning to 10 companies, where 5 compaines profit out weighs the rest is a ludacris idea, it is not a "Pareto effect." To loan money it is a risk that banks take, and the returns are based on the risk taken. Try to understand this first.

 

[jeypore]

and yet for all your achievements, both India and China have the highest number and the second highest number of poor people in the world.

Perhaps, instead of "India>China" or "China>India" BS, we should concentrate on how to improve our Human Development indicators. GDP indicators mean absolutely nothing.

I do not know what world you live in, but GDP means everything. To alleviate the problems of poor it is directly related to the GDP of the country. I would start from reading economic 101 that should help.

 

[gpit]

The basic problem, they say, is that the Chinese government owns the banks and will continue to control them after the public offerings.Chinese Bank World's Largest Lender…

To the contrary of what you believed, major banks controlled but not monopolized or run by government is perhaps an advantage. This is a reason why US government wants take over momentarily Citibank, GS, etc. and then follows up with tighter regulation and monitor. USG doesn't want to be a banker though.

Free landing has been proven detrimental in capitalist countries.

April 14, 2009 · The Industrial and Commercial Bank of China already was the world's biggest bank by market capitalization. It is now the biggest bank by deposits as well. The Financial Times says it shows how Chinese banks have emerged relatively unscathed from the global crisis.

Chinese Bank World's Largest Lender : NPR

 

[Munir]

India cannot even beat something small so let us forget the dragon...
India, Suddenly Starved for Investment
.....India’s phenomenal growth of the last five years was powered in large part by huge injections of cash and investment. Investment accounted for about 39 percent of the country’s gross domestic product in fiscal year 2008, up from 25 percent five years ago. At its peak, more than a third of investment came from abroad, according to Credit Suisse. But in the last three months of last year, foreign loans and direct investment fell by nearly a third, to their lowest level in more than two years.

In a recent report, the International Monetary Fund said Indian companies were among the world’s most vulnerable, after American firms, because they borrowed aggressively during the boom. Using data from Moody’s, the credit rating firm, the I.M.F. estimated in a recent report that defaults among nonfinancial South Asian firms could climb to 20 percent in the coming year, up from an expectation of 4.2 percent a year earlier. (American firms are expected to default on loans at a rate of 23 percent.)

The decline in foreign investment has taken a big toll on sectors like real estate, manufacturing, infrastructure and even art, which was bolstered by demand from globalization’s nouveau riche here and abroad. In the last quarter of 2008, the economy’s growth rate plummeted to about 5.3 percent, the lowest in five years. While consumer demand, particularly in the countryside, has kept the economy growing, the sudden slowing in the flow of foreign funds will make it harder for the country to grow fast enough to pull hundreds of millions of people out of stifling poverty......


Related link: http://www.nytimes.com/2009/05/05/business/global/05rupee.html?ref=asia

 

[gpit]

interesting

can you give the necessary link for this professed free broadband?

Here you are.

NEW DELHI: The government proposes to offer all citizens of India free, high-speed broadband connectivity by 2009, through the state-owned telecom service providers BSNL and MTNL. While consumers would cheer, the move holds the potential to kill the telecom business as we know it. ...

Broadband to go free in 2 yrs - Telecom-News By Industry-News-The Economic Times

Your elected GoI couldn’t be more amusing! And many of you guys believe it.

 

[jeypore]

To the contrary of what you believed, major banks controlled but not monopolized or run by government is perhaps an advantage. This is a reason why US government wants take over momentarily Citibank, GS, etc. and then follows up with tighter regulation and monitor. USG doesn't want to be a banker though.

Free landing has been proven detrimental in capitalist countries.

My Gpit, you did not read further:

The government has always exercised ultimate authority over the banks’ lending decisions and, historically, has forced them to lend to corrupt and inefficient state-owned enterprises. That leaves the banks with a large share of loans that, effectively, default. Despite the recent reforms, that basic interference continues.

It is proven time and time again that gov't control in a free market society is detramental. The gov't agency's do not have the speed or the innovative drive to reform, and there lies the bases of the problem. No matter how the American banks played there game, mainly greed, but I believe they should have suffered for there greed, and not to be bail out, simple. Because in a free market economy there always lies another entrepreneur waiting to take the old banks place.