Wednesday, December 14, 2011

China may impose duties on US cars

China appears to be planning to impose duties on some cars imported from the United States (US). The move, being interpreted by a tit-for-tat by experts, has come after Barack Obama administration imposed duties on Chinese tires.

The duty war between the US and China is being seen as a big negative for the global automotive industry, which presently depends on China for its growth. If this duty war escalates any further it could serve as fuel to the fire, that the global economy is currently in.

Thursday, December 8, 2011

Air India and Kingfisher Airlines in trouble

11 accounts of Air India and 10 accounts of Kingfisher Airlines were frozen by the Service Tax Department. This was done in view of default on service tax payments.

According to the Commissioner of Service Tax in Mumbai, Air India owes Rs. 150 crore while Kingfisher owes Rs. 70 crore. The commissioner further alleged that both had defaulted in paying in the money that they had already collected in the name of service tax from their customers.

Both companies are already badly debt-ridden.

It is reported that Vijay Mallya the liquor baron and promoter of Kingfisher Airlines, may be trying to sell Kingfisher House to raise funds, whereas the government owned Air India is expecting the Government of India to cough up the funds to enable it to survive.

The debt of Kingfisher is a whopping 12,000 crore, while Air India is sitting on a even bigger debt of 62,000 crore.

Monday, November 21, 2011

Rupee devalues - Stock Market tanks

The value of the Indian Rupee fell 1.6% today (21-Nov-2011) to close at 52.155 against the US Dollar, and the way things are poised it is likely to breach its all time low of 52.20 that it had touched on 3 March 2009.

This is likely to make imports expensive, and especially impact the oil imports which are already playing havoc with inflation.

Experts believe this has happened due to large scale exiting of the FIIs from the Indian Stock markets.

The stock markets in India tanked -

  • the Bombay Stock Exchange (BSE) Sensitive Index (SENSEX) witnessed a fall of 425 points (2.6%) to close at 15946, just below the sentimental level of 16000.
  • the NIFTY index of the National Stock Exchange (NSE) too witnessed a 2.6% fall (127 points) to close at 4778.
Similar, dismal trends were displayed by the European Stock Exchanges, also.

Sunday, November 13, 2011

Is Indian Economy crumbling!

Indian economy has begun to show signs of fatigue. It is failing on growth and it is failing on inflation.

The IIP numbers have fallen to new lows. The growth was on 1.9% for September in contrast to the same period last year when the IIP growth stood at 6.1%. This is the lowest this figure has gone in the last two years. The other negative indicators are the state of our country's private airline companies. All are reporting losses. The crisis at Vijay Mallaya's Kingfisher is  the worst among the lot.

Even as industrial growth is falling, inflation has made life difficult for the common man, who in turn has started to mount pressure on the Government. RBI has repeatedly raised its repo and reverse repo rates in a bid to control the beast called inflation - that refuses to be tamed. Each time the "great" economists of our country release statements claiming that inflation will come down, the beast retaliates with an even bigger leap upward.

The signals being received from the overseas are also not very encouraging. The debt crisis that has been brewing in Europe is threatening to bloom into a full fledge recession - double-dip recession as some people prefer to call it. Time alone will tell whether the Union will manage to come out of the crisis or whether there will be no Union left at all.

Leaders are fleeing the scene. After a change in leadership in Greece, Italy's PM Berlusconi has submitted his resignation.

Wednesday, October 12, 2011

China Currency Bill passed by the US Senate

US has been voicing its concern for a long time over the way China has been using unfair means and manipulating its currency to the disadvantage of US businesses. It is said that the Chinese businesses have a 30% pricing edge over their US competitors due to the low yuan.

US lawmakers have reacted to this by proposing a bill that will allow them to punish Beijing for the manipulation.

The US Senate voted 63-35 passed the legislation to punish Beijing's currency manipulation that is often blamed in that country for the high rate of unemployment. Those against the bill have voiced their concern that the bill could go against the provisions of World Trade Organization. However, nobody has disputed the fact that the way China keeps its yuan low is unfair.

The bill needs to be passed in the House of Representatives before going to the US President.

Experts believe that if cleared the bill will trigger a large-scale trade war that will have large-scale consequences, especially in the economically troubled US and Europe.

Friday, September 30, 2011

Cabinet clears new mining bill

The Union Cabinet has today approved a new bill for mining in the country, in which the miners will have to share 26% of their profits.

The new bill which will have be presented in parliament for its approval, proposes that the coal companies must share 26% of their profits with the local folks. Other mining companies will have to share an amount equal to their royalties.

The proposal will help local communities implement ambitious development plans which could change the face of rural India like never done before, that is if the government can come up with an effective anti-corruption bill.

Friday, September 23, 2011

Rupee declines against the US Dollar

Trading currently at Rs 49.76 per dollar, the rupee has declined significantly over the recent months to its 28 month low.

RBI Governor D. Subbarao has said that the movement of the rupee has nothing to do with fundamentals the Indian economy. He added that the rupee declined due to the fall in confidence in the global markets. He said that the Reserve Bank of India will intervene only there is volatility or potential disruption to macroeconomic situation.

Wednesday, September 21, 2011

Rural and urban poverty lines - 781 and 965 respectively

A rural person needs Rs 765 per month while his urban counterpart requires Rs. 965 per month to live.

An affidavit to this effect was filed by Planning Commission in the Supreme Court in which it defined the poverty line at June 2011 price levels. It has said... the poverty line at June 2011 price level can be placed provisionally at Rs 965 per capita per month in urban areas and Rs.781 per capita per month in rural areas.

The affidavit by Planning Commission was filed in response to an order by a division bench of the Supreme Court requiring it to revise the norms of per capita amount looking at the price index of May 2011 or any subsequent dates.

Ban on Onion Export Lifted

The government of India, on 20-Sept-2011 bowed down before the protesting farmers in Maharashtra and lifted the ban that it had imposed on the export of onions.

The ban had been imposed on 9-Sept-2011 in a move to help curb the soaring prices of onions in the Indian market. The move faced stiff resistance from the farmers in Nashik and neighboring regions of Maharashtra.

The political impact of the roll-back on the already fragile credibility of the UPA-government is another issue, but on the economic front experts believe that the prices of onion could head north-ward in the immediate future, adding to the common man's inflationary worries.

Tuesday, September 20, 2011

Impact of Credit

Even as stock markets in India began giving indications of stabilization, IMF has bowled another googly.

IMF has raised an alarm over the debt situation in Europe and lowered growth projections for the 17-nation Eurozone to 1.6% in 2011 and 1.1% in 2012, from its earlier predictions.

The old saying in India - चितनी चादर उतना पैर पसारो (spread your feet depending on the amount of space available), in other words spend only what you can afford.  Taking loan to buy luxuries is the sure-shot recipe for disaster. US has experienced it, now the Europe is going through the same experience.

Excessive loan leads to non-repayment - causing either the borrower or the lender to suffer.

We can only hope that the Indian government takes note and exercises caution with its policy of targeting growth on borrowed money.

Friday, September 16, 2011

RBI hikes interest rates - Will it fight corruption

The "most popular inflation" control mechanism of the Government of India has been deployed once again. The decision of the 12th successive rate hike was announced by RBI on Friday 16-Sept-2011.

In line with common expectation - RBI has announced an interest rate hike of 0.25% (25 basis points). After today's rate hike the repo rate has become 8.25% while the reverse repo rate has become 7.25%.

Lets hope this works, because the government has lost a lot of credibility in recent times on several fronts including - combating corruption, good governance and internal security. If inflation does not come down quickly, it faces the risk of losing public sympathy even on the financial front.

Financial stability of the common has been compromised drastically in the past few months. The government can give as many excuses as it wants, but the common man is seriously and directly effected by inflation and the failure of the government (even if for reasons beyond its control) could easily effect the vote appeal of the ruling coalition in the forthcoming elections.

Fuel for inflation - Petrol becomes dearer

Adding to the woes of the common people, the price of petrol has been raised by more than Rs. 3 per liter from today - 16-Sept-2011.

The common man is surely in for a big financial beating for the forthcoming festival season, because this increase in fuel cost will ensure that the prices of other commodities also head northward.

Let us see what rest of the day has in store...

RBI is expected to announce a interest rate hike.
eGOM is expected to announce a hike in LPG prices.

Wednesday, September 14, 2011

Inflation on the rise - is interest hike the proper tool to tackle it

Inflation in India refuses to let go. The wholesale price index for the month of August rose 9.78% compared 9.22% for the previous month.

The measures taken by the government to curb the rising prices do not seem to be working. Reserve Bank of India (RBI) has raised interest rates 11 times in 18 months and the current rise in inflation is pointing to one more interest hike in the coming days. So much so, Indian Industry has begun to show signs of suffering from the effect of the interest rate hikes.

Some experts argue that the route of interest hike by RBI is not working because possibly liquidity if not the cause of this inflation.

Here are some  reasons that have come forward in our discussions...
  • a rise in the trend of unfair trade practices used to secure disproportionate and unreasonably high levels of profit.
    • The issue is more than evident in the pharmaceutical industry where medicines that leave the factory for Rs. 2 to 3 carry the MRP tag of more than Rs. 30-40.
    • Simple nuts and bolts for bikes and cars that manufacture for a few paise are sold to the consumers for fabulous prices.
    Where are the days when a decent profit of 10% to 15% was considered adequate? Can this not be controlled or should this not be controlled?
  • improper implementation of government policies and schemes... There is a clear lack of coordination between different government departments and the way the departments work within themselves.
    for eg -
    • The government announces a ban to export of onion and the agriculture minister goes public that he is not party to the decision.
    • Foodgrains are rotting kept in the open - the government does not have enough capacity to store them properly, yet people are hungry - even the Supreme Court has voiced its opinion in this matter.
  • oversupply leads to inflation - The quantity of medicines that expire is increasing year-on-year, because some of the manufacturers seem to think that they can produce the entire spectrum and conquer the entire market. This is just not possible - so what happens - the medicines expire on the shelves within the distribution chain at the cost of the manufacturer. The manufacturer is forced to compensate for the loss incurred in this by increasing the prices of the regularly selling products - that's inflation.
  • Crude used to be available in the range of 20-30 dollars for a long time - surely the cost of extracting crude from mother earth has not gone up as much as the price it is selling for - is this much profiteering justified?
  • Last but not the least - corruption. Corruption has made so much in roads in our day-to-day activities that it has become one of the major contributors to the runaway inflation. An event like the Commonwealth Games should have ideally required a few crores to organize, but thanks to the corrupt organizers have siphoned off thousands of crores of tax-money and probably stashed it off in some Swiss Account. Now the government will have to raise taxes which will in turn send prices north.
There are many such reasons for the inflation that the common man faces, the experts need to examine these and take proper steps before things go out of hand.

Thursday, September 8, 2011


Inflation remains a major concern in the Indian economic scenario. The Government has been under constant pressure for its failure to control prices of food and other items.

The Wholesale Price Index (WPI) figures for primary and food articles released today, peg food inflation at 9.55% for the period that ended on 27-Aug-2011, while the inflation of primary articles stands at 13.34%.

Talking to reports in New Delhi, Finance Minister Pranab Mukherjee said that food prices were expected to fluctuate during the forth-coming festive season after which he said there will be a moderating influence.

So, as far as the common man is concerned, the minister has acknowledged that there is no relief round the corner.