NEW DELHI: Amid a fall in the stock markets in the wake of economic problems in the US, Finance Minister Pranab Mukherjee on Monday said India's fundamentals are strong and the government is ready to address any concern that may arise, while admitting there could be some impact.
"We would focus on encouraging greater domestic consumption and give impetus to the drivers of domestic growth", Mukherjee said while talking to reporters outside Parliament.
The government, he further said, will fast track the implementation of the pending reforms while keeping an close watch on international developments.
India, Mukherjee said, is in a better position than other nations to meet the challenge posed by the developments in the US and the Eurozone.
The Finance Minister expressed confidence that India could see faster and greater FII inflows unlike after 2008 meltdown, in view of the higher returns that global investors could get here.
"The recent developments in the US and the Eurozone have injected certain uncertainty in global markets. These developments could have some impact on India. But as India's growth story is intact and its fundamentals strong, we are in a better position than many other nations to manage the challenge," he said.
Mukherjee said there could be "some impact" on capital and trade flows "but as India's growth story is strong we could see FIIs viewing India as an attractive investment destination even if there is any temporary outflow".
Mukherjee asserted that India's institutions are strong and "we are prepared to address any concern that may arise on account of the present situation". His statement came as the stock markets plunged by over 500 points before witnessing some recovery.
The finance minister said softening of global commodity prices, especially oil, will help check inflationary pressures.
Monday, August 8, 2011
India's subsidies should not be grabbed by the rich: Jeffrey Sachs
NEW DELHI: India needs subsidies to help its teeming millions reeling under poverty but its welfare policies need to be revamped so that doles are not grabbed by the rich and flow to the deprived, says renowned economist Jeffrey Sachs.
"India has poor people. They need help. So the fundamental point with subsidies is that you need to target them as 'smart' subsidies," Sachs, also called a green evangelist and director of the Earth Institute at Columbia University, told IANS in an interview.
"Across-the-board subsidies mainly grabbed by the higher income groups is the heavy cost India has borne by poorly-designed systems. But subsidies are needed. In a country with continuing extreme poverty you need a lifeline for water, for power, for food," he said.
"You have 17 percent of the world's population but just two-and-a-half percent of land area and water supply. That's the fundamental challenge and that is where India has to crack the puzzle. It cannot simple continue to go on like this."
India has budgeted a total subsidy bill of a whopping Rs.1.43 lakh crore (nearly $32 billion) for this fiscal, mainly toward fuel and food. This is a 100-percent jump over the total subsidy of Rs.70.92 crore given out in 2007-08.
The government has accordingly promised a major re-haul in subsidies by March 2012.
"What to do is clear. Better metering, smart cards, unique identification numbers and how to apply that to subsidies which will make them a lot cheaper and a more efficient and the get the economy to work better," said the Harvard-educated professor.
Some of the proposals suggested by Sachs, who has worked on the Millennium Development Goals as advisor to the UN, are already being implemented in India, like the allocation of unique identification numbers and direct transfer of fuel and food subsidies.
Finance Minister Pranab Mukherjee also spoke of this last week and said there was a case for a differential subsidy regime for diesel, since 15 percent of this was being used as transport fuel in India for powering costly vehicles used by the rich.
"India has poor people. They need help. So the fundamental point with subsidies is that you need to target them as 'smart' subsidies," Sachs, also called a green evangelist and director of the Earth Institute at Columbia University, told IANS in an interview.
"Across-the-board subsidies mainly grabbed by the higher income groups is the heavy cost India has borne by poorly-designed systems. But subsidies are needed. In a country with continuing extreme poverty you need a lifeline for water, for power, for food," he said.
"You have 17 percent of the world's population but just two-and-a-half percent of land area and water supply. That's the fundamental challenge and that is where India has to crack the puzzle. It cannot simple continue to go on like this."
India has budgeted a total subsidy bill of a whopping Rs.1.43 lakh crore (nearly $32 billion) for this fiscal, mainly toward fuel and food. This is a 100-percent jump over the total subsidy of Rs.70.92 crore given out in 2007-08.
The government has accordingly promised a major re-haul in subsidies by March 2012.
"What to do is clear. Better metering, smart cards, unique identification numbers and how to apply that to subsidies which will make them a lot cheaper and a more efficient and the get the economy to work better," said the Harvard-educated professor.
Some of the proposals suggested by Sachs, who has worked on the Millennium Development Goals as advisor to the UN, are already being implemented in India, like the allocation of unique identification numbers and direct transfer of fuel and food subsidies.
Finance Minister Pranab Mukherjee also spoke of this last week and said there was a case for a differential subsidy regime for diesel, since 15 percent of this was being used as transport fuel in India for powering costly vehicles used by the rich.
USA Credit Rating Downgrade
Standard & Poor's had maintained an AAA rating on the US since 1941. But on Friday the US lost its top-tier AAA credit rating. This move is certainly going to affect country's borrowing costs and investor opinion of US assets. Here is what you need to know on US S&P credit rating downgrade..
127 mills employing 41,118 people shutdown in past 3 yrs: Govt
NEW DELHI: Over 125 textile mills providing employment to 41,118 people have been shut down in the past three years on account of restrictions on cotton yarn exports and piling up of huge inventories, Parliament was informed today.
"As on May 31, 2011, 127 cotton/man-made fibre textiles mills (non-small scale units) were closed during the last three years," Minister of State for Textiles Panabaaka Lakshmi said in a written reply to the Lok Sabha.
She said the government has received representations from the industry with regard to a supply and demand mismatch, huge inventories of finished goods piling up, restrictions on the export of cotton yarn and rising input prices.
Lakshmi said out of 127 mills closed, 38 mills were registered with the Board for Industrial and Financial Reconstruction (BIFR) as of March 31, 2010. The BIFR decides on reliefs or concessions to be given to sick units.
To rehabilitate the workers rendered jobless due to closure of these mills, the government has formulated the Textile Workers' Rehabilitation Fund Scheme.
In April last year, the government had restricted cotton yarn exports to 720 million kg, which led to huge inventories accumulating with the mills.
However, the restrictions were removed from April 1 this year after the manufacturers found themselves saddled with massive inventories due to the curbs on exports.
In July, 2011, the government restored the Duty Entitlement Pass Book (DEPB) scheme providing for tax refunds on cotton yarn exports with retrospective effect from April, 2011.
The incentive was withdrawn in April, 2010, due to a surge in prices of the natural fibre.
"As on May 31, 2011, 127 cotton/man-made fibre textiles mills (non-small scale units) were closed during the last three years," Minister of State for Textiles Panabaaka Lakshmi said in a written reply to the Lok Sabha.
She said the government has received representations from the industry with regard to a supply and demand mismatch, huge inventories of finished goods piling up, restrictions on the export of cotton yarn and rising input prices.
Lakshmi said out of 127 mills closed, 38 mills were registered with the Board for Industrial and Financial Reconstruction (BIFR) as of March 31, 2010. The BIFR decides on reliefs or concessions to be given to sick units.
To rehabilitate the workers rendered jobless due to closure of these mills, the government has formulated the Textile Workers' Rehabilitation Fund Scheme.
In April last year, the government had restricted cotton yarn exports to 720 million kg, which led to huge inventories accumulating with the mills.
However, the restrictions were removed from April 1 this year after the manufacturers found themselves saddled with massive inventories due to the curbs on exports.
In July, 2011, the government restored the Duty Entitlement Pass Book (DEPB) scheme providing for tax refunds on cotton yarn exports with retrospective effect from April, 2011.
The incentive was withdrawn in April, 2010, due to a surge in prices of the natural fibre.
S&P: India, Japan & Malaysia may face credit rating downgrade
EW DELHI: Ratings agency Standard & Poor's today cautioned that it could lower the sovereign ratings of countries like India, Japan and Malaysia, which are still to come out of the economic meltdown of 2008.
"The implications for sovereign creditworthiness in the Asia-Pacific would likely be more negative than previously experienced and a larger number of negative rating actions would follow," S&P said in its report on Asia-Pacific Sovereigns.
"Fiscal capacities of Japan, India, Malaysia, Taiwan and New Zealand have shrunk relative to pre-2008 level," it said, adding that these countries continue to bear the scars of the downturn.
The governments, it said, would be required to use their own revenue streams to support their economies and financial sector once again.
It further said that if a renewed slowdown comes, it would create a deeper and more prolonged impact.
At the time of the global financial crisis in 2008, several countries, including India, had rolled out stimulus packages facilitating monetary expansion and lower taxes to mitigate the impact of the slowdown.
(Also check: Sensex may dive to 15k, fears market, says ET poll | US not on the road to recovery: Paul Krugman | 'US still the safest place to invest' | S&P warns US of further downgrade in credit ratings )
At that time, India had provided three fiscal stimulus packages totalling Rs 1.86 lakh crore, which helped the economy clock a growth of 8 per cent in 2009-10, as against 6.8 per cent in 2008-09. Prior to the crisis, the Indian economy had been expanding at a growth rate of over 9 per cent over a three-year period.
Late on Friday, global ratings agency S&P downgraded its US sovereign rating to AA+ from AAA, with a negative outlook.
"The implications for sovereign creditworthiness in the Asia-Pacific would likely be more negative than previously experienced and a larger number of negative rating actions would follow," S&P said in its report on Asia-Pacific Sovereigns.
"Fiscal capacities of Japan, India, Malaysia, Taiwan and New Zealand have shrunk relative to pre-2008 level," it said, adding that these countries continue to bear the scars of the downturn.
The governments, it said, would be required to use their own revenue streams to support their economies and financial sector once again.
It further said that if a renewed slowdown comes, it would create a deeper and more prolonged impact.
At the time of the global financial crisis in 2008, several countries, including India, had rolled out stimulus packages facilitating monetary expansion and lower taxes to mitigate the impact of the slowdown.
(Also check: Sensex may dive to 15k, fears market, says ET poll | US not on the road to recovery: Paul Krugman | 'US still the safest place to invest' | S&P warns US of further downgrade in credit ratings )
At that time, India had provided three fiscal stimulus packages totalling Rs 1.86 lakh crore, which helped the economy clock a growth of 8 per cent in 2009-10, as against 6.8 per cent in 2008-09. Prior to the crisis, the Indian economy had been expanding at a growth rate of over 9 per cent over a three-year period.
Late on Friday, global ratings agency S&P downgraded its US sovereign rating to AA+ from AAA, with a negative outlook.
Share market: Big IT stocks such as Infosys, TCS offer value buys, say analysts
NEW DELHI: Shares of big IT companies fell sharply in trade today after the US credit rating was downgraded by S&P on Friday.
All the three top IT companies, TCS, Wipro and Infosys, witnessed a huge fall in their share prices on the BSE as these companies earn a major chunk of ther revenue from US and Europe.
"One should buy TCS or Infosys because I do not think business will be impacted so much in the short run, while the long tern story remains intact", says Raamdeo Agrawal, Director and Co-Founder, Motilal Oswal Financial Services in an interview with ET Now.
The US and Europe are the two biggest markets for Indian IT firms. TCS, Infosys and Wipro rely on the US and European markets for about 60 per cent of their revenue. Any slowdown there could straight away affect domestic IT companies having their presence globally.
While most IT companies have expressed caution in the past few months post their quarterly results in the wake of ongoing European debt crisis and high unemployment in the US. However they remain confident of being able to maintain their growth momentum
"On evaluation of IT companies and some of the frontline majors, their business prospects, business model and the possibility of getting new business remain robust and I find that fundamentally things have not changed as much", says Deven Choksey, MD, KR Choksey Securities in an interview with ET Now.
"The valuation of these companies have stayed around 20 plus price earning ratio which has started to come down more because the funds which invested into these particular companies are the trading funds or the index funds and they started pulling out money because of the want of money back home", said Deven.
"However, in comparison to other markets and stocks where the valuations has become far too attractive, shares in IT companies are still reasonably priced", says Deven. "Fundamentally things are not looking as negative as it is being feared about with the fall in the prices of IT companies", Deven further added.
Leading players like TCS and HCL Technologies have posted stellar growth numbers in the past few quarters on the back of steady demand for outsourcing services.
At 12.19 PM., the IT index of the BSE was down more than 4 per cent, underperforming the benchmark index, which was down 1.6 per cent. Shares of Infosys Technologies , Tata Consultancy Services and Wipro were down 5-4 per cent.
Weakness was also seen in the stocks of other IT companies such as Patni Computer systems Ltd, Tech Mahindra Ltd and HCL Technologies Ltd losing up to 2-4 per cent. Meanwhile, the BSE benchmark index Sensex was trading 325 points lower at 16,981.
All the three top IT companies, TCS, Wipro and Infosys, witnessed a huge fall in their share prices on the BSE as these companies earn a major chunk of ther revenue from US and Europe.
"One should buy TCS or Infosys because I do not think business will be impacted so much in the short run, while the long tern story remains intact", says Raamdeo Agrawal, Director and Co-Founder, Motilal Oswal Financial Services in an interview with ET Now.
The US and Europe are the two biggest markets for Indian IT firms. TCS, Infosys and Wipro rely on the US and European markets for about 60 per cent of their revenue. Any slowdown there could straight away affect domestic IT companies having their presence globally.
While most IT companies have expressed caution in the past few months post their quarterly results in the wake of ongoing European debt crisis and high unemployment in the US. However they remain confident of being able to maintain their growth momentum
"On evaluation of IT companies and some of the frontline majors, their business prospects, business model and the possibility of getting new business remain robust and I find that fundamentally things have not changed as much", says Deven Choksey, MD, KR Choksey Securities in an interview with ET Now.
"The valuation of these companies have stayed around 20 plus price earning ratio which has started to come down more because the funds which invested into these particular companies are the trading funds or the index funds and they started pulling out money because of the want of money back home", said Deven.
"However, in comparison to other markets and stocks where the valuations has become far too attractive, shares in IT companies are still reasonably priced", says Deven. "Fundamentally things are not looking as negative as it is being feared about with the fall in the prices of IT companies", Deven further added.
Leading players like TCS and HCL Technologies have posted stellar growth numbers in the past few quarters on the back of steady demand for outsourcing services.
At 12.19 PM., the IT index of the BSE was down more than 4 per cent, underperforming the benchmark index, which was down 1.6 per cent. Shares of Infosys Technologies , Tata Consultancy Services and Wipro were down 5-4 per cent.
Weakness was also seen in the stocks of other IT companies such as Patni Computer systems Ltd, Tech Mahindra Ltd and HCL Technologies Ltd losing up to 2-4 per cent. Meanwhile, the BSE benchmark index Sensex was trading 325 points lower at 16,981.
BSE Sensex recover over 300 points on European cues
NEW DELHI: The BSE Sensex has pared morning losses considerably on the back of positive cues from the European markets, and selective buying in index heavyweights. The BSE Sensex recovered over 300 points from the day's low and is now down 210 points at 17,091.
At 02:40 IST, the 50-share Nifty index too pared morning losses and is now trading 62 points lower at 5,148.
Most European shares had begun the day in negative territory with London and Frankfurt both down 1 per cent in opening trade.
However, the FTSE 100 climbed 18.02, or 0.3 per cent, to 5,265.01 at 8.32am, the first gains in seven days while German stocks also rose, with the benchmark DAX Index climbing 0.5 per cent to 6,266.33. The Dublin market was up by1.3 per cent to 2,537.69. The benchmark Stoxx Europe 600 Index rallied 0.5 per cent to 240.04 at 8:25 am, recouping losses of as much as 1.4 per cent.
"Indian equities provide a reasonable valuation vis-a-vis the alternatives which are available in the precious metals and real estate", says Nilesh Shah, President-Corporate Banking, Axis Bank in an interview with ET Now. "So net based on the experience, probably we will not see a panic bottom but just a neutral bottom getting formed over next couple of months", adds Nilesh.
At 02:40 IST, the 50-share Nifty index too pared morning losses and is now trading 62 points lower at 5,148.
Most European shares had begun the day in negative territory with London and Frankfurt both down 1 per cent in opening trade.
However, the FTSE 100 climbed 18.02, or 0.3 per cent, to 5,265.01 at 8.32am, the first gains in seven days while German stocks also rose, with the benchmark DAX Index climbing 0.5 per cent to 6,266.33. The Dublin market was up by1.3 per cent to 2,537.69. The benchmark Stoxx Europe 600 Index rallied 0.5 per cent to 240.04 at 8:25 am, recouping losses of as much as 1.4 per cent.
"Indian equities provide a reasonable valuation vis-a-vis the alternatives which are available in the precious metals and real estate", says Nilesh Shah, President-Corporate Banking, Axis Bank in an interview with ET Now. "So net based on the experience, probably we will not see a panic bottom but just a neutral bottom getting formed over next couple of months", adds Nilesh.
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