Apr
14
After 2 years of Wal-Mart’s existence in India; it is trying to do to agriculture here what it has done to industries around the globe: changing business models by using its highly efficient practices to improve the productivity and speed the flow of goods.
Everyone is not happy about the company’s presence here. Many Indian activists and policy makers abhor big-box retailing, fearing that it will drive India’s millions of shopkeepers out of business.
Some legislators are suspicious of the company’s motives. The government still does not allow Wal-Mart Stores and other foreign companies to sell directly to consumers in India. But Wal-Mart is persisting because its efforts in India are critical to its global growth strategy. Confronted with saturated markets in the United States and other developed countries, the company needs to establish a bigger presence in emerging markets, like India, where modern stores make up just 5 % of the country’s retail industry.
Though the Wal-Mart is pushing many of its traditional products in India, like clothes, electronics and home goods, perhaps none is as essential as food. Wal-Mart needs high-quality produce at low prices to draw customers in volume. The challenges are significant. Buying and transporting produce are difficult tasks because India has millions of small-scale farmers and an agriculture system riddled with middlemen.
Many Indian companies have abandoned or significantly scaled back efforts to run supermarkets. Some companies grew too quickly and flamed out. But many others were undone by the numerous Gordian knots that hold back Indian agriculture: laws limit who can buy farmers’ crops, 35 % of fruits and vegetables are wasted because of inefficient transportation and farmers earn too little to invest in their marginal farms.
Wal-Mart is also limited by New Delhi’s ban on foreign-owned retail chains that prevent it from selling directly to Indian consumers. “Not having access to our own retail stores through our own investments is a serious impediment,” said Raj Jain, who heads Wal-Mart’s Indian operation.
“How do you pay for that big back end if you are not going to have access to the front end?”
Aug
18
Indian Economy likely to hurt by Drought
Filed Under Indian Economy | 1 Comment
Cautioning that drought could have an adverse impact on the economy, Prime Minister Manmohan Singh assured the nation that people would, however, not be allowed to go hungry and black marketeers and hoarders would be hounded.
After the global meltdown shaved off economic growth, the drought threatens to make it worse by eating into agriculture production. “It is our ardent desire that not even a single citizen of India should ever go hungry.
“We will provide all possible assistance to our farmers to deal with the drought… in view of deficient rainfall we have postponed the date for repayment of bank loans… are also giving additional support for payment of interest,” he said in his address to the nation on its 63rd independence day.
The UPA, which in its previous term wrote off farm loans, also promised to take a slew of measures including increasing capital flows into the country, encouraging exports or increasing public investment and expenditure to put the economy back on high growth trajectory.
“Restoring our growth rate to nine per cent is the greatest challenge we face… we expect that there will be an improvement in the situation by the end of this year, but till that time we will all have to bear with the fallout of the global economic slowdown,” he said in his address from the ramparts of the Mughal-era Red Fort.
He appealed to the business community to fulfill their social obligations by joining the government’s efforts to ensure inclusive growth.
Aug
18
India’s economic growth could slow to around 5.5 per cent in 2009/10 hurt by a poor monsoon, but rates may start rising in early 2010 as inflation expectations increase, Nomura said in a note.
Rainfall was 29 per cent below normal as of Aug. 12, government data shows. This is a concern for agriculture production as only 40 per cent of India’s farmland is irrigated.
Nomura said it was too early to assess how much growth will be affected as it depends on the severity of damage done, farmers’ ability to shift to shorter-duration crops and post-monsoon showers that will determine soil moisture.
It has therefore retained its 2009/10 growth forecast of 6.3 per cent and 2010/11 estimate of 7.5 per cent, said Sonal Varma, economist at Nomura, who authored the report.
Nomura said although agriculture is a drag, signs of global recovery, strong industrial output growth in June could act as tailwinds to growth.
Decline in rural incomes could be partly offset by alternate rural job opportunities under the National Rural Employment Guarantee Act (NREGA), which did not previously exist, it said.
The rural sector will also benefit from government spending on rural infrastructure, last year’s increase of minimum support prices for food grains and diversification into higher-value products such as fruits, vegetables, milk, meat and fish, the note said.
The drought could push inflation to 6.5-7 per cent by end-March 2010 from the current forecast of 5.5 per cent, Nomura said.
Drought-related spending is likely to negate the upside to the central fiscal deficit estimate of 6.8 per cent of gross domestic product that it had expected due to higher revenues, it said.
Nomura expects the central bank to allow the rupee to appreciate to curb inflation and sees it at 44 to the dollar by March 2010 from around 48 currently.
While the Reserve Bank of India (RBI) may postpone its first rate hike by a quarter in the case of a severe drought, it may hike rates at a faster pace as inflation picks up and growth rebounds next year. it said.
Aug
18
Indian Government to Unveil Foreign Trade Policy on August 27th
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The government will announce on Aug. 27 its foreign trade policy for the next five years starting from FY10, Trade Minister Anand Sharma said on Monday.
The policy will address the problems of exporters, particularly the labour-intensive sector, he said, but did not elaborate.
“We will look at market expansion and diversification. It has to ensure we sustain in difficult times and expand particularly labour-intensive sector.” he said.
India’s exports fell an annual 27.7 per cent in June to $12.8 billion, its ninth straight monthly fall, as recession at developed nations continue to slash demand for Indian goods.
Mar
21
RBI to shrink key rates by 50 bps to expand demand in the market
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RBI is likely to cut key policy rates by another 50 basis points in the next few weeks, as it looks to spur demand in the economy which is expected to come under a brief spell of deflation, said officials with the finance ministry and the central bank. A dramatic fall in inflation rate, which stood at 0.44% in the first week of March, has given the central bank enough room to align the policy rates with those prevailing in the world’s largest economies.
However, the officials said the central bank may not bring down key reserve ratios such as cash reserve ratio — part of deposits that banks are required to keep with RBI — and statutory liquidity ratio — part of deposits that the banks are required to invest in specified instruments such as government securities.
The thinking within RBI is that cuts in repo rate and reverse repo rate — the rates at which the central bank lends to and borrows from banks — will encourage banks to lend more at lower rates to spur demand in the slowing economy.
“Inflation is just one of the factors behind RBI decision to cut rates. However, a softening inflation, which is leading to deflation, may prompt RBI to cut policy rates further,” said a finance ministry official who asked not to be named.
Banks are flush with deposits and are parking as much as Rs 20,000 crore of excess deposits with RBI on a daily basis. This shows there is no problem of liquidity with the banks. However, average injection of money through the reverse repo window has come down since March 4 when RBI reduced the reverse repo rate to 3.5%.
“Decision on policy rates is linked to various global and domestic factors, such as commodity prices, inflation numbers and bank rates, while reserve rates are directly linked to the liquidity situation in the banking system. As none of the banks are facing liquidity problem, there is no reason for further cuts in reserve rates,” said a senior official in RBI, requesting anonymity.
Mar
21
Indian economy going to take a year to recover completely
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The year 2009 is set to be more difficult for the Indian economy and despite the government’s stimulus packages, it would take at least a year before it starts recovering.
“I don’t think the stimulus is sufficient to start a recovery. The most it can do is to minimize the magnitude of a further slowdown… India will most likely start to recover in the March quarter (2010),” Moody’s economy.com economist Sherman Chan told PTI from Sydney.
She added this year will be more difficult than last year. “We probably won’t see a solid rebound until early 2010. The US needs to recover first. Then global economic activity will begin to pick up,” Chan added.
The Indian economy grew by 5.3 per cent in the third quarter of this fiscal, its lowest rate in over five years, against a whopping 8.9 per cent a year ago, as agriculture and manufacturing output contracted.
This has ensued debate between the government and the economists. While the government is still confident of achieving close to 7 per cent growth this fiscal, economists at various global financial institutions see a further fall in the figures.
When asked if the ‘worst’ is over for the Indian economy, she said it is difficult to say as the whole year is expected to be extremely tough.
However, the slight improvement can be seen in the October-December 2009, because the US economy will slightly rebound by then, which should help to give global business confidence some support.
In addition to the two stimulus packages, recently, the government announced a Rs 30,000-crore boost to the slowing economy by cutting excise duty and service tax by two per cent each.
The government has also extended a four per cent reduction in excise duty, provided in the first stimulus package, beyond this fiscal-end. It also announced cut in excise duty on bulk cement by 2per cent.
According to Commerce Minister Kamal Nath the worst is over. “I believe the worst is over,” Nath said, adding, the last two months of the current fiscal would be much better in terms of growth.
Feb
12
It’s not all gloom and doom for India. The advance estimates of national income released by the Central Statistical Organization brings much hope for the ailing economy.
The Indian economy will see the second-fastest growth rate of 7.1 per cent for 2008-09, according to the advance estimates of the CSO.
These advance estimates are based on anticipated level of agricultural and industrial production, analysis of budget estimates of government expenditure and performance of key sectors like, railways, transport other than railways, communication, banking and insurance, available so far.
When Union Home Minister P Chidambaram held the finance portfolio, he had pegged India’s growth rate in the current year at between 7 and 8 per cent. He had said that India would continue being the second fastest growing economy in the world despite the global economic slowdown.
Meanwhile, International Monetary Fund had predicted that India would grow at 7.8 per cent in 2008, and 6.3 per cent in 2009.
Jan
3
Highlights of the Economic Package by Finance Minister
Filed Under Economic Growth | Leave a Comment
Following are the highlights of the mega-stimulus package announced by the government to boost the economy:
- Additional plan expenditure of up to Rs 20,000 crore (Rs 200 billion)
- Excise duty reduced across the board by 4 per cent.
- IIFCL authorised to raise Rs 10,000 crore (Rs 100 billion) via tax-free bonds.
- PSU banks to announce package for borrowers of home loans.
- Rs 350 crore (Rs 3.50 billion) additional funds for export incentives.
- Back-up guarantee to ECGC for up to Rs 350 crore.
- 2 per cent interest subvention for labour-intensive exports.
- Rs 1,100 crore (Rs 11 billion) to ensure full refund of Terminal Excise duty.
- Additional Rs 1,400 crore (Rs 14 billion) for textile sector under TUF Scheme.
- The guarantee cover for loans to MSME doubled to Rs 1 crore (Rs 10 million).
- The lock-in period for such collateral-free loans reduced.
- Government departments allowed to take up replacement of vehicles.
- Import duty on naphtha for power sector eliminated.
- Export duty on iron ore fines eliminated.
- The economy will continue to need stimulus in next fiscal.
Jan
3
In an effort to boost the cash- starved realty sector, the government on Friday allowed the developers of integrated townships to borrow funds from overseas and also asked states to release land for low- and middle-income housing schemes.
“GoI will work with state governments to encourage them to release land for low- and middle-income housing schemes,” the government said. The announcement forms part of its second stimulus package to minimise the impact of global financial crisis.
Besides, the government also relaxed norms on external commercial borrowing (ECB) for dealing with the problem of liquidity crunch faced by the developer community. The government said “all-in-cost” ceilings on ECB would be removed by RBI.
“To facilitate access to funds for the housing sector, The ‘development of integrated township’ would be permitted as an eligible end-use of ECB, under the approval route of RBI,” the government said.
Earlier, as part of the first stimulus package announced last month, the public sector banks lowered home loans up to Rs 20 lakh and the government recognised the housing sector as an important employment generating field.
The demand in residential segment has declined in the last six months on account of high interest rates on housing loans and steep rise in property prices in the last 2-3 years.
In recent months, though some realty developers announced housing projects for mid-income section of the society, due to high land costs, many projects could not take off.
Jan
2
Seeking to reverse the recessionary trend, the government on Friday gave the economy a second stimulus by enabling the industry to borrow more from abroad and FIIs to invest more in the country, besides stepping up public spending.
The package, the last for the current financial year and announced in tandem with rate cuts by RBI, aims at providing much higher and cheaper funds in the economy along with additional expenditure by the Centre and the State to push demand in the country.
While allowing states to access market for borrowing about Rs 30,000 crore (Rs 300 billion) to meet additional expenditure, the package provides for liberalisation of External Commercial Borrowing norms and raising FII investment limit in rupee-denominated instruments to $15 billion from $6 billion now.
Focusing on countering the recessionary trends, the package also withdrew exemptions on countervailing duties on cement, TMT bars and structurals that were originally given to contain inflation.
Announcing the package, Deputy Chairman of Planning Commission Montek Singh Ahluwalia said special attention was being paid to housing sector, macro and micro industries and infrastructure sectors through a series of measures including provision for higher credit and greater liquidity for the non-banking financial companies.
With inflation down to manageable limits, the focus has clearly shifted to reviving industrial growth which took a beating under the impact of the credit crunch spawned by the global slowdown.
The government will allow development of integrated townships, access to ECBs with a view to giving a boost to the housing and construction sectors, which are especially facing severe pressure.
As a key measure to revive the economy, the package will facilitate funding of pending highways and port projects of about Rs 25,000 crore (Rs 250 billion).
The India Infrastructure Finance Company Limited (IIFCL) is being enabled to access additional Rs 30,000 crore (Rs 300 billion) by tax-free bonds to finance additional projects worth Rs 75,000 crore (Rs 750 billion) over the next 18 months.
The IIFCL bonds would be issued soon for raising first tranche of funds. Troubled exporters received a reprieve in the form of higher rates for tax refunds and a commitment that the flagship reimbursement DEPB scheme would be extended up to December 2009, the government said.
Specific sectors like knitted fabrics, bicycles, agricultural hand tools and some categories of yarn would get duty draw backs at enhanced rates.
The commercial vehicle manufacturers, who have been hit hard due to decline in sales, are expected to see demand revival with accelerated depreciation of 50 per cent on vehicles purchased between January-March this year.
Non-banking finance companies (NBFCs), which are generally active in funding commercial vehicles would be provided a line of credit by the public sector banks.