Low growth, high inflation likely to persist in India

[Chinese-Dragon]

One, it is any socialist party ethos to do that. Two, their vote base are these rural folks and election is coming.

In any democracy, retaining power is the first and foremost objective.

From my limited following of India's news, the govt recently liberalized many sectors, including retail and defence sectors, to attract investment, aka foreign capital. I guess they are banging on this one to pay for the welfare scheme, while maintain the current debt and deficit until they win the next election.

Well, the only thing that can be said for sure it's that it is not working.

Low growth, high inflation, high unemployment, high fiscal deficit, high trade deficit, massive debt-to-GDP ratio, etc.

I agree Singh is a clever guy and respectable economist, but that means nothing when Sonia is the one calling all the shots.

 

[Truth Finder]

We all know that Indian economy collapsed in 1960s, 1991 and 2002.

 

[Fattyacids]

Well, the only thing that can be said for sure it's that it is not working.

Low growth, high inflation, high unemployment, high fiscal deficit, high trade deficit, massive debt-to-GDP ratio, etc.

I agree Singh is a clever guy and respectable economist, but that means nothing when Sonia is the one calling all the shots.

Structurally India economy has never been sound. In investment, we always talk about benchmarking to industry peers. If you compare India high growth rate of 8% from 2000 to 2007, it was no different from the rest of the major developing countries. A rising tide lifts all boats. I guess there was too much irrational exuberates. And when crisis struck, they are faced with the grim reality like now.

Current India low growth is consistent with the world, India is excused here. High inflation is due to central bank poor management. Fiscal deficit is not as bad as trade deficit, and India is never an export-oriented country. Debt to GDP, according to Rogoff, if it doesn't exceed 80%, it is not dangerous if your current account is strong. E.g. Japan. For India, their structural reform came a little too late.

Even if they did try earlier, a simple policy would have taken 5 to implement due to objections from within the coalition. By then half the battle was lost. The bureaucratic red tape and politicking will ultimately do India in.

I doubt Sonia even understand what is a current account. I think her influence is mainly on the political side of things.

 

[Chanakya's_Chant]

Low growth, high inflation - well that's for sure for this financial year 2013-14; nothing significant is going to happen this financial year atleast as far as India's economic rebound is considered but then too the positive policy decisions taken by the Union Cabinet will leave an effect on the second half of the current fiscal and I expect the overall growth rate to be around 5% and may reach 5.5% as well no matter what IMF says about it....The IMF’s failure to identify certain risks and give clear warnings has demonstrated yet again the weakness of its surveillance framework. It also questions the relevance and usefulness of the IMF exercise with regard to policy settings of member countries, because repeated downward revisions could significantly influence market expectations besides spreading gloom. Would like to quote P Chidambaram on the same whom I found quite reasonable:-

“For example, India’s growth rate, which was projected at 5.6 per cent (at market prices) in the WEO July Update, has now been revised significantly downwards to 3.8 per cent. I would like to ask, respectfully, what is the information that IMF has gathered between July and September, that we do not have, that has impelled the Fund to drastically change the estimate? We do not share this pessimistic outlook. We also believe there is a need for review of the methodology for growth projections as in the past, IMF projections have often been at divergence with final growth numbers,” he remarked.

Here are India's GDP Growth Projection by various multi-lateral agencies and banks for 2013-14:-

IMF really needs to disclose its methodology, facts and figures through which it arrived to such a conclusion....

GDP

India's GDP no doubt, has been falling over the past 5 years. Its annual GDP growth rate has been steadily declining over the past 5 years, going from 9 per cent in 2008 to the latest reading of 4.4 per cent. This itself shows that we are in the midst of a big turnaround.

The Gross Domestic Product (GDP) is the sum of all products and services produced by a country. One of the best ways for India to bolster its GDP is to attract Foreign Direct Investments (FDI's). FDI's, inevitably, are linked to the health of the US economy- the more funds US investors have lying around, the more they invest into emerging economies like India.

Since we have already shown that India's stock market has outperformed the other BRIC countries' markets over the past 5 years, there is no reason why FDI's would hesitate to invest in India. Seeing how it is widely accepted that the US economy is finally recovering from its 5 year recession, FDI inflows will increase in the coming months.

The Indian government has taken an unprecedented number of steps to make it more attractive for foreign investors to invest in India, such as speeding up the implementation of large scale projects and reducing FDI limits and restrictions to make it more attractive for FDI's to invest.

Secondly, India's domestic economy has shown signs of growth. The IT sector, one of the pillars of India's economy that accounts for 25 per cent of India's exports, has surged this year; with the BSE IT Index having appreciated 38 per cent in 2013 so far.

With the US economy improving, it is a sure bet that US firms will once again turn to India for its IT needs. As much as we would like to complain about the rupee's value against the US dollar, a weaker rupee will make it even more attractive for overseas firms to turn to India for its IT needs.

Finally, we need to look no further than the World Bank for affirmation that India's GDP is going to rebound and even the IMF expects this to happen at all cost in 2014-15. In its latest projections, the World predicts India's GDP to climb to 5.7 per cent for 2013-14. If the experts are projecting a GDP rise, why should we as Indians be pessimistic?

Inflation

India's inflation level is at a dangerously high level. The RBI has repeatedly stated that its goal is to keep the Wholesale Price Inflation (WPI) below 5 per cent, yet the latest figures came in at 6.1 per cent. With new RBI Governor Raghuram Rajan having taken over the reins, it looks like the RBI will take all steps necessary to bring down inflation.

The RBI began to attack the inflation problem by raising the repo rate on 20th September from 7.25 per cent to 7.5 per cent, and economists are expecting further repo rate hikes. Interest rate hikes inevitably bring down inflation levels due to the fact that it limits the money supply of rupee available in the market. Needless to say, one issue that all can probably agree on is that inflation levels will likely be brought down in next months.

Current Account Deficit

Last Monday, the Current Account Deficit (CAD) numbers for Q1 (April-June 2013) was released at $21.8 billion, or 4.9 per cent of GDP. India's current account deficit has exploded 1125 per cent since 2007, going from $8 billion to $90 billion; however, the government's goal for this financial year is to bring that number down to $70 billion and to 3.9 per cent of GDP. Since the IMF is expecting India's GDP to rise to 5.6 per cent, we could very well see a CAD of below $70 billion and significantly lower than 3.9 per cent of GDP if the IMF forecasts stay put.

India will not need to worry about the record high current account deficit (CAD) as much since the price that crude oil is imported at will be more predictable. The RBI is confident that India would be able to finance this year's CAD comfortably.

India is in for a big turnaround. It is fundamentally important for us to realize that the Indian economy is highly interlinked to the American economy. When the American economy completely collapsed in 2008, its impact was also seen in Indian economy, just like every other major economy in the world. Despite that, Indian stock markets outperformed India's counterparts.

Now, we have reached a point where the American economy is picking up. All signs are pointing towards a new direction, one in which GDP will be bolstered, inflation will be kept under control, and the rupee will be stabilised. As a result markets would surge and go on a bullish run in the foreseeable future. Take advantage of this unique opportunity and invest wisely.

References:- Indian rupee rises to fresh two-month high, at 61.07 against dollar - Business Today
HSBC raises Indian rupee forecast from 65 to 62 vs US dollar
India's net FDI inflows grew 50% in Q1 FY14 on reforms: PHDCCI
Why Indian economy is primed to boom now - NDTVProfit.com
India's forex reserves jump $1.46 billion to $277.7 billion - Economic Times
Indian economy likely to recover by next year: IMF - Economic Times
Indian exports set to grow 24% in the four months to December: FIEO report - Economic Times
India's trade deficit drops to 30-month low; exports jump - Money - DNA

#At last I have heard alot from the cheerleaders than Indian Economy will collapse, Junk Rating Looms for India and so on....#wet dreams, the worst is over for the Indian economy and the rebound is in process of which the good news has already started coming in may it be the Trade deficit for the month of September reduced to $6.76 billion; a two year low and $70 billion that the government proposed as CAD after calculating it with us seems now imminently reachable and it will be at all cost; a fact which will give comfort to foreign investors as well as global rating agencies.

 

[Fattyacids]

Low growth, high inflation - well that's for sure for this financial year 2013-14; nothing significant is going to happen this financial year atleast as far as India's economic rebound is considered but then too the positive policy decisions taken by the Union Cabinet will leave an effect on the second half of the current fiscal and I expect the overall growth rate to be around 5% and may reach 5.5% as well no matter what IMF says about it....The IMF’s failure to identify certain risks and give clear warnings has demonstrated yet again the weakness of its surveillance framework. It also questions the relevance and usefulness of the IMF exercise with regard to policy settings of member countries, because repeated downward revisions could significantly influence market expectations besides spreading gloom. Would like to quote P Chidambaram on the same whom I found quite reasonable:-



Here are India's GDP Growth Projection by various multi-lateral agencies and banks for 2013-14:-

IMF really needs to disclose its methodology, facts and figures through which it arrived to such a conclusion....

GDP

India's GDP no doubt, has been falling over the past 5 years. Its annual GDP growth rate has been steadily declining over the past 5 years, going from 9 per cent in 2008 to the latest reading of 4.4 per cent. This itself shows that we are in the midst of a big turnaround.

The Gross Domestic Product (GDP) is the sum of all products and services produced by a country. One of the best ways for India to bolster its GDP is to attract Foreign Direct Investments (FDI's). FDI's, inevitably, are linked to the health of the US economy- the more funds US investors have lying around, the more they invest into emerging economies like India.

Since we have already shown that India's stock market has outperformed the other BRIC countries' markets over the past 5 years, there is no reason why FDI's would hesitate to invest in India. Seeing how it is widely accepted that the US economy is finally recovering from its 5 year recession, FDI inflows will increase in the coming months.

The Indian government has taken an unprecedented number of steps to make it more attractive for foreign investors to invest in India, such as speeding up the implementation of large scale projects and reducing FDI limits and restrictions to make it more attractive for FDI's to invest.

Secondly, India's domestic economy has shown signs of growth. The IT sector, one of the pillars of India's economy that accounts for 25 per cent of India's exports, has surged this year; with the BSE IT Index having appreciated 38 per cent in 2013 so far.

With the US economy improving, it is a sure bet that US firms will once again turn to India for its IT needs. As much as we would like to complain about the rupee's value against the US dollar, a weaker rupee will make it even more attractive for overseas firms to turn to India for its IT needs.

Finally, we need to look no further than the World Bank for affirmation that India's GDP is going to rebound and even the IMF expects this to happen at all cost in 2014-15. In its latest projections, the World predicts India's GDP to climb to 5.7 per cent for 2013-14. If the experts are projecting a GDP rise, why should we as Indians be pessimistic?

Inflation

India's inflation level is at a dangerously high level. The RBI has repeatedly stated that its goal is to keep the Wholesale Price Inflation (WPI) below 5 per cent, yet the latest figures came in at 6.1 per cent. With new RBI Governor Raghuram Rajan having taken over the reins, it looks like the RBI will take all steps necessary to bring down inflation.

The RBI began to attack the inflation problem by raising the repo rate on 20th September from 7.25 per cent to 7.5 per cent, and economists are expecting further repo rate hikes. Interest rate hikes inevitably bring down inflation levels due to the fact that it limits the money supply of rupee available in the market. Needless to say, one issue that all can probably agree on is that inflation levels will likely be brought down in next months.

Current Account Deficit

Last Monday, the Current Account Deficit (CAD) numbers for Q1 (April-June 2013) was released at $21.8 billion, or 4.9 per cent of GDP. India's current account deficit has exploded 1125 per cent since 2007, going from $8 billion to $90 billion; however, the government's goal for this financial year is to bring that number down to $70 billion and to 3.9 per cent of GDP. Since the IMF is expecting India's GDP to rise to 5.6 per cent, we could very well see a CAD of below $70 billion and significantly lower than 3.9 per cent of GDP if the IMF forecasts stay put.

India will not need to worry about the record high current account deficit (CAD) as much since the price that crude oil is imported at will be more predictable. The RBI is confident that India would be able to finance this year's CAD comfortably.

India is in for a big turnaround. It is fundamentally important for us to realize that the Indian economy is highly interlinked to the American economy. When the American economy completely collapsed in 2008, its impact was also seen in Indian economy, just like every other major economy in the world. Despite that, Indian stock markets outperformed India's counterparts.

Now, we have reached a point where the American economy is picking up. All signs are pointing towards a new direction, one in which GDP will be bolstered, inflation will be kept under control, and the rupee will be stabilised. As a result markets would surge and go on a bullish run in the foreseeable future. Take advantage of this unique opportunity and invest wisely.

References:- Indian rupee rises to fresh two-month high, at 61.07 against dollar - Business Today
HSBC raises Indian rupee forecast from 65 to 62 vs US dollar
India's net FDI inflows grew 50% in Q1 FY14 on reforms: PHDCCI
Why Indian economy is primed to boom now - NDTVProfit.com
India's forex reserves jump $1.46 billion to $277.7 billion - Economic Times
Indian economy likely to recover by next year: IMF - Economic Times
Indian exports set to grow 24% in the four months to December: FIEO report - Economic Times
India's trade deficit drops to 30-month low; exports jump - Money - DNA

#At last I have heard alot from the cheerleaders than Indian Economy will collapse, Junk Rating Looms for India and so on....#wet dreams, the worst is over for the Indian economy and the rebound is in process of which the good news has already started coming in may it be the Trade deficit for the month of September reduced to $6.76 billion; a two year low and $70 billion that the government proposed as CAD after calculating it with us seems now imminently reachable and it will be at all cost; a fact which will give comfort to foreign investors as well as global rating agencies.

Rupee is at the mercy of the Fed. The good news is the incoming new Fed chairman, Janet Yellen, is a dove. So Rupee is given an extended life line to get more support. But eventually USD will rise as QE is tapered and interest is hiked. A rising USD will bring down crude price and all emerging currency. So USD up, crude down, rupee also down, you're ok in the long run. But crude import is not the only item in CAD, India export has to increase.

I see this new central banker is more hawkish than the previous one. Inflation should come down.

GDP is the most uncertain. What reform is Modi bring to the table? Nobody knows. What if Congress wins.
Nobody is saying India will crash, just trolling LOL.

 

[Chanakya's_Chant]

Rupee is at the mercy of the Fed. The good news is the incoming new Fed chairman, Janet Yellen, is a dove. So Rupee is given an extended life line to get more support. But eventually USD will rise as QE is tapered and interest is hiked. A rising USD will bring down crude price and all emerging currency. So USD up, crude down, rupee also down, you're ok in the long run. But crude import is not the only item in CAD, India export has to increase.

I see this new central banker is more hawkish than the previous one. Inflation should come down.

GDP is the most uncertain. What reform is Modi bring to the table? Nobody knows. What if Congress wins.
Nobody is saying India will crash, just trolling LOL.

Well first of all its a fact that tapering will start. US Fed Chairman Ben Bernanke has recently hinted again that tapering will start so we are preparing ourselves for the same by taking a number of steps to shore up foreign exchange reserves...Some of them are as follows:-

(01) We are in the process of shoring up our foreign exchange reserves, since the FCNRB revised policies were announced, we have had about $7.4 billion coming in.

(02) We have entered into an agreement or we will enter into an agreement with Japan for a $50 billion swap arrangement soon.

(03) Portfolio investment has brought in about $2 billion already, then we are encouraging oil marketing companies (OMCs) to borrow abroad to finance their purchases of oil.

(04) Liberalised External Commercial Borrowings (ECB) norms will also bring in some money, adding investment proposals in the telecom sector too were expected to fetch forex reserves in November and December.

Recently India's foreign exchange reserves surged USD 1.46 billion to USD 277.73 billion in the week ended October 4 on the back of a healthy growth in the key currency assets.

But I think this time Ben Bernanke will be a little more careful , more calibrated and he will perhaps communicate his actions well in advance....

Second about the balance of trade, amid a policy-enabled sharp fall in inward shipments of gold and silver, India's merchandise trade deficit crashed to a 30-month low of $6.76 billion in September. The trade gap is the lowest since March 2011, when it stood at $3.8 billion. Its a fact that exports are rising month by month may it be a rise 12.97% in August or the recent 11.15 percent in September and the remarkable thing is that there has been a rise in the finished goods exports rather than the raw materials specially iron ore exports which dropped about 54%. These stats will help to limit the CAD which is now ultimately under our control...

Measures announced in the revised FTP (foreign trade policy), and rupee fall will yield a positive result.

Outbound shipments of goods are projected to grow nearly 24% in the four months to December, and by about 16% during the entire 2013-14 fiscal, helped by a recovery in developed countries and newfound competitiveness because of nearly 15% rupee depreciation in the current financial year. Infact exports have incresed well - $121 billion in the last four months of the calendar year, versus $97.6 billion in the same period last year

#Exports may actually touch $335 billion, growing at the current pace; 70% of it has already been booked up-till December

Thirdly about Narendra Modi; the structural reforms that he brought in Gujrat will be the same for the entire nation as well - That man can attract huge investments; may it be domestic or foreign and he has done it in Gujrat may it be the Tata's or the Mahindra's- their first choice is Gujrat fopr investments - a thing that the Congress government had never done and this quality will surely avoid that "policy paralysis" which is deemed to be the foremost reason for the current economic slowdown. Modi's first target will be attracting investments by erecting the Infrastructure, labour problems and prevailing corruption as he did the same in Gujrat as that state offers the best infrastructure. Labor problems are zero and there is an abundance of critical drivers.

Modi is also keen on projecting growth with a human touch. This is why he took pains to point out that his focus would be on “spiritual humanism, Gandhian legacies, tolerance, justice and compassion,” which he claimed were the drivers behind his investment efforts.

#The most remarkable thing is that Modi has the knack and ability to cut through a maze of red tape and fast-track projects. Gujarat’s system of single-window clearance for big ticket projects in a stipulated time frame has been able to attract major industries. And these projects are cleared by the Chief Minister personally. And no wonder the "Single Window Clearance" was first started by him only then later many states adopted it....

#In India people used recall gujrat with a phrase that it is "Gandhi's Gujrat" (MK Gandhi was born in Probandar, Gujrat) but now this has changed to "Modi's Gujrat"

And at last those who say "India will Crash"; I am really sorry for them May god bless them

Source(s):- Exports up 11% in September, trade gap at 30-month low
Indian exports set to grow 24% in the four months to December: FIEO report - Economic Times
India, Japan to enhance currency swap arrangement to $50 billion - Economic Times
Indian exports set to grow 24% in the four months to December: FIEO report - Economic Times
India's forex reserves jump $1.46 billion to $277.7 billion - Economic Times
India's iron ore exports drop 54% to 6.8 mn tonne in H1, FY14 | Business Standard