Indian Economy: News and Discussion

nitesh

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Singh’s win will give a new dimension to Indian economy.


By Cherian Thomas and James Rupert

May 18 (Bloomberg) -- Prime Minister Manmohan Singh’s electoral victory, the biggest any Indian politician has scored in two decades, may loosen political shackles that have restrained the country’s economic growth.

Singh’s ruling Congress party will start forming a new government today without needing the support of communist lawmakers who frustrated plans to entice foreign investment and sell state-owned companies in his first five-year term. The ruling Congress party won its most seats since 1991 in the election, which concluded May 16.

“This is an absolute game changer,”
said William Nobrega, the co-author of “Riding The Indian Tiger,’ who advises U.S. companies on investing in the world’s largest democracy. “It will move India at a mighty pace to where it deserves to be in the global economy.”

Political stability will make India a more attractive investment destination as Singh, 76, seeks the funds to stimulate Asia’s third-largest economy. It may also encourage President Barack Obama and his administration to seek greater cooperation in the fight against rising militancy in neighboring Pakistan and Afghanistan.

“This is good for India and good for the world,” said Rahul Bajaj, chairman of Pune-based Bajaj Auto Ltd., India’s second-largest motorcycle manufacturer.

War on Terror:

The U.S. wants Indian help in its fight against Islamic militancy in the region, especially Pakistan. Singh stalled a peace process with India’s nuclear-armed neighbor following terrorist attacks in Mumbai that killed 166 people in November.

“The U.S. recognizes the significance of the election for the people of India,” the White House said in a statement May 16. “President Obama looks forward to continuing to work with the Indian government to enhance the warm partnership between our two countries.”

Stronger Foothold

Wal-Mart Stores Inc. and Prudential Plc are among global companies that stand to gain a stronger foothold in India now the government can function with fewer coalition partners.

“There were so many major initiatives that were sidelined,” Nobrega said. “It will have a phenomenal boost on the Indian economy this year and next.”

The Congress victory margin may also invigorate what is already the nation’s longest stock rally in three years. The Bombay Stock Exchange Sensitive Index, or Sensex, has risen 26 percent this year, lagging behind China’s 45 percent gain.

“The ‘play’ button will be on” now, said Madhabi Puri Buch, Mumbai-based chief executive officer of ICICI Securities Ltd., a unit of India’s second-biggest bank. “If global cues continue to be positive, the ‘play’ could even become a ‘fast forward.”

The incoming government will need to bolster an economy that’s growing at the slowest pace in seven years as the global recession saps demands for Indian goods. Industrial output fell by the most in 16 years in March as exports plunged by a record.

India as a 'veto power'

India, whose international political ambitions include a permanent seat on the United Nations Security Council, wants to maintain annual growth rates in excess of 8 percent for two decades to reduce poverty.

Gross domestic product has risen more than four times since 1991, when Singh, then finance minister, abandoned Soviet-style state planning and introduced free-market measures. He cut red tape, removed state-enforced production caps on steel and cement makers, and allowed overseas companies such as Ford Motor Co. to set up Indian operations.

Choked Roads

India received about $38 billion of foreign direct investments last year, about a fifth of the flows that went to neighboring China, which opened its economy 13 years earlier.

Singh’s first term as prime minister required the backing of communist parties to form a parliamentary majority.

Communist resistance stalled a bill to raise the foreign investment ceiling for insurers to 49 percent from 26 percent. Singh also failed to pass a bill aimed at removing a 10 percent cap on the voting rights of foreign investors in non-state banks. His plan to permit global retailers into India also foundered. But one can rest assured that all those tweaks will take place this time, and India will emerge stronger than ever.

"All in all, one can expect India to sky-rocket ahead under the leadership of the great economist Dr. Manmohan Singh and his 'dream team'. One will see India recover much faster from the global recession than most countries. If global cues favour India, chances are India might aswell touch the 9.5% growth mark once the world recovers from recession.."
 

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A 7 per cent GDP growth rate in the 2nd half of this fiscal, & a US dollar at Rs.44?

HT

Is it for real? Barclays sees 7 per cent growth

Could this be real? A 7 per cent GDP growth rate in the second half of this fiscal, and a US dollar at Rs 44?
The experts seem to have turned gung-ho on India. Financial services provider Barclays Capital, for one, believes growth would accelerate in the second half of 2009.

“The worst is over,” said Sailesh Jha, Director, Asian Economic Research, Barclays Capital. He predicted an overall GDP growth of 7 per cent for 2009-10 and 7.5 per cent in financial year 2010-11.

With reduction in global risk aversion and improving growth, large increase in capital inflows is also expected.
Standard Chartered Bank (SCB) has raised its Rupee rating from ‘Neutral’ to ‘Overweight’. The bank had predicted the rupee would hover around 47 against the US dollar. Barclays has pitched the rupee to hit about 44 per US dollar by March 2010.

Both banks predict improved balance of payments (BoP) position, with Barclays predicting a BoP surplus beginning the second quarter of 2009-10. SCB expects a BoP surplus of Rs 61,933 crore.

The other silver lining for India is the narrowing trade deficit. According to SCB, the trade deficit balance has shrunk for seven straight months, from Rs 66,221 crore to Rs 19,056 crore in March 2009. This is expected to lower the current account deficit to -1.2 per cent of GDP from -2.8 per cent in the financial year 2008-09.

The respected Centre for Monitoring Indian Economy (CMIE) has said the Indian economy is likely to grow at 6.6 per cent in the current fiscal year.
 

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Morgan Stanley on India Trumps Goldman on China

Livemint

India’s stock market almost lost control this week, and it was a great thing for the nation.
So intense was the euphoria over Prime Minister Manmohan Singh’s election triumph that trading had to be halted for the rest of the day for the first time. The record 17% surge in the Sensex index on the Bombay Stock Exchange said it all: India now has a unique opportunity to get its act together.

The question is, will it? The odds are that India will do so now that Singh has a clear mandate free of the small-party bosses who have stymied India’s reform process.

India’s election is notable on many levels relevant to investors. It showed that the country remains an oasis of stability in a reeling global economy. It also indicated that India’s so-called demographic dividend is affecting politics. The role of Rahul Gandhi, 39, in rallying the ruling Congress party to victory marks him as a prime minister-in-waiting.

India also proved it can confound expectations about the trajectory of its $1.2 trillion (Rs57 trillion) economy. Anyone betting last week that China was way ahead in the race to be Asia’s next economic superpower now has reason for pause.

Here, Morgan Stanley’s prediction for India’s economy may prove more reasonable than Goldman Sachs’ on China. Morgan Stanley made headlines this week by boosting its India growth forecast for next year to 5.8% (matching Goldman Sachs’ call), from 4.4% previously. Goldman Sachs did the same last month when it raised its China forecast for next year to 10.9% from 9%.

Global optimists
If the optimists are right and the global recovery is beginning, then China may be safe. Investors haven’t made a lot of money betting against China with its double-digit growth and soaring stocks. That may change if highly export-depen-dent China has to adjust to a world of weak demand and sluggish growth.

Not that India can thrive if many economies embark on a multi-year process of spending less and saving more. India doesn’t have a China-like pile of cash to throw at its economy. India’s reserves are $246 billion, compared with almost $2 trillion in China.
India has a bad-neighbourhood problem, too. It borders Pakistan, Nepal, Myanmar, Bangladesh and, of course, China. Toss Sri Lanka into the mix and India is located in a pretty challenging part of the world. Singh will have his work cut out to keep the peace both economically and diplomatically.

A key difference, though, is that India isn’t the slave to exports that China has become. And William Nobrega, co-author of Riding the Indian Tiger, isn’t exaggerating when he calls India’s election an absolute game changer.

Change coming
Singh, an Oxford-trained economist, is a former central bank governor and mastermind of the 1990s market changes propelling India’s rapid growth. He has made little progress since 2004 in attacking an inefficient and often corrupt administrative system that keeps prosperity from reaching those who most need it.

That may be about to change. Until now, Singh needed to win support from the Communist allies who choked his market-opening efforts. It has been like running a massive and complicated economy with two or three limbs tied behind your back. Now, Singh has two forces in his favour: a mandate for change and a sense of urgency to unshackle an economy with vast potential.

If ever there was a time for India to stand and deliver, it’s now. Good news on India’s macro-economy can only be sustained by major changes to the micro-economy. Improving infrastructure and reducing corruption must be priorities. India ranks behind Albania, Burkina Faso and, perhaps more importantly, China in Transparency International’s latest Corruption Perceptions Index.

Aim high
Singh and Congress party chief Sonia Gandhi should aim high and move India fully beyond junk status. This week, Moody’s Investors Service, which places India two levels below investment grade, indicated that the South Asian nation has a chance to improve its fiscal situation after the election.

Similar noises came from Standard and Poor’s, which assigns India a BBB- long-term credit rating, the lowest investment-grade level. Higher ratings will lower India’s bond yields and free up more money to reduce poverty and improve education.

And while Singh tends to the economy, there are signs that the next generation of Indian leaders is stepping up. Singh is 76 and the opposition party leader he defeated, Lal Krishna Advani, is 81. Here, rising star Rahul Gandhi, son of Sonia Gandhi, marks a generational shift in Indian politics.

Rahul Gandhi personifies India’s future. About 30% of the nation’s 1.2 billion people are younger than 15, while less than 6% are older than 65. Economists call it India’s demographic advantage over China or Japan. The key, of course, is creating enough good jobs to utilize that vast workforce of the future.

Singh’s to-do list is a daunting one and markets shouldn’t necessarily expect a smooth ride. Now that India is free to make tough decisions, the economy is poised to take off.
 

Yusuf

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I hope the dollar goes to 44 in a month. I have an import coming in. Last time dollar betrayed me and went up from 42 to 48 in a couple of months. Net loss of 10%. Hope to recover some this time.
 

Pintu

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^^^ True Yusuf , I expect the US Dollar trading in that region, and the increasing value of Indian Rupee, will be good for lowering the import bill however same way the exporter can face difficulty.

Regards
 

Su-47

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Not just exporters. NRIs sending money to India will also face difficulties. A lot of families in India rely on money send from abroad, especially the Gulf. Strengthening of the rupee will reduce the real income of these households.
 

NikSha

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Not just exporters. NRIs sending money to India will also face difficulties. A lot of families in India rely on money send from abroad, especially the Gulf. Strengthening of the rupee will reduce the real income of these households.
I am sure they will be able to survive. An average Indian living.. IN INDIA however couldn't care less. Indians would rather have cheap imported hardware over NRI families getting few thousand dollars less in the end.

It will hurt exports, in which case we will probably see some intervention from RBI/Government.


PS: I personally don't want lower dollar as well. But, here we are..
 

Rage

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Signs of recovery? Indian job market reports 47% hiring



Saturday, May 23, 2009


New Delhi: Amid uncertainty and global gloom, there is good news round the corner, as the job market in India is showing substantive signs of recovery with the current hiring level soaring to as much as 47 per cent, a study says.

"After a substantial dip in hiring levels at the start of 2009, confidence seems to be returning," global management and professional recruitment services firm Antal International said adding that the professional jobs market in India has made a substantive recovery after a major loss of confidence at the start of 2009.


47% currently hiring in India

"Current hiring levels (for India) are up to 47 per cent from 29 per cent in the last report," Antal International said in its report titled 'Global Snapshot'.

"The period of panic and unilluminated gloom does finally seem to be behind us. Recovery may still be a good way off, but it could be that we are now better prepared to pave the way to it than we have been for quite some time," Antal's CEO Tony Goodwin said.

In India 47 per cent of respondents said that they are currently hiring at managerial or professional level. Around 48 per cent said that they expect to hire at the managerial level in the coming quarter.

Meanwhile, 37 per cent are currently letting people go at managerial level, while, 32 per cent expect to let go people at the professional level in the coming quarter.

Antal International's Global Snapshot is a quarterly survey of hiring and firing trends in some of the world's most important employment markets. The latest survey covered HR managers in 4,217 companies, professional partnerships and financial institutions across 32 countries in April 2009.


Global recovery in pipeline

The global picture is also showing some signs of recovery as 46 per cent respondents said they are currently hiring at managerial level, 44 per cent expect to hire over the coming quarter, while only 33 per cent are currently letting people go at managerial level and 35 per cent expect to let go people in the coming quarter.

The report further said that whilst the percentage of organisations hiring in the 32 countries surveyed has gone down, from 54 per cent to 46 per cent, it has not plummeted in the way that the economic statistics have.

Besides, the percentage of organisations expecting to hire managers or professionals in the coming quarter has actually risen, albeit by a very modest 1 per cent from 43 per cent at the beginning of the year to 44 per cent now.

Remarkable recovery in Asia

The signs of recovery in the job market is remarkably visible in Asia as 46 per cent of businesses said they are currently recruiting, for Pakistan it was as much as 76 per cent, Philippines (49 per cent) and Singapore (52 per cent).

Meanwhile, in Brazil 53 per cent of those surveyed said they are currently recruiting people at the managerial level, in Canada it was 49 per cent and in USA it was 43 per cent.


Source: Business Standard


Signs of recovery? Indian job market reports 47% hiring - National News ? News ? MSN India - News
 

Daredevil

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India Posts 5.8% Quarterly GDP Growth

NEW DELHI -- India's economic slowdown may have paused, with gross domestic product expanding at a faster clip than expected in the three months to March 31 as higher government spending and a robust performance in services offset a slump in manufacturing.

The stabilization of the economy could mean India's central bank, which has eased monetary policy aggressively since October, will refrain from making further interest rate cuts, said analysts.

GDP increased 5.8% in the first quarter of 2009 from the year-earlier period, the Central Statistical Organisation said Friday. Growth for the previous quarter was revised up to 5.8% from a provisional 5.3%.

Economists surveyed by Dow Jones Newswires had expected a median 5.0% expansion in the first quarter.

Growth last financial year ended March 31 slowed to 6.7% from 9.0% the previous year, missing a government forecast for a 7.1% expansion.

The data show that Asia's third largest economy has managed to withstand the global downturn better than most of its regional peers which are either mired in recession or expecting feeble growth this year. Malaysia's government, for example, expects its trade-driven economy to contract by between 4% and 5% this year.

Indian stocks and the rupee rose on the GDP news although government bonds fell as analysts said the Reserve Bank of India's rate cuts may now have come to an end.

"I think interest rates have bottomed out in India," said A. Prasanna, economist at ICICI Securities Primary Dealership.

"Though growth in the first half of the current financial year is likely to be sub-6%, I expect growth to pick up in the financial second half when it may exceed 7%," he said.

India's new Trade Minister Anand Sharma said economic growth will be at least 7% in the current financial year, more than the central bank's estimate of 6%.

He added that the government also plans to take steps to bolster demand in labor intensive sectors such as leather and textiles.

"We will be announcing some new measures and incentives in the budget for exports and industries," Mr. Sharma said at a news conference after taking office as the new trade minister.

Local authorities have already taken a number of steps in recent months to revive the economy, including slashing interest rates, lowering factory levies and more than doubling the limit on foreign investment in corporate bonds.

Finance Minister Pranab Mukherjee Wednesday said boosting the economy will remain the top priority although the government will aim to contain the fiscal deficit to 5.5% of GDP for the current financial year.

Analysts said there was little need for additional fiscal stimulus although the government could look at specific measures for sectors such as infrastructure.

Economic growth in the quarter was led by social spending which rose 12.5% from a year earlier, while financial services and real estate climbed 9.5%.

The farm sector, which provides livelihood to nearly 60% of India's population, grew 2.7% from a year earlier.

Construction activity rose 6.8% although the manufacturing sector continued to lag--falling 1.4% from the previous year-- given falling overseas demand.

India's exports marked a record fall of 33.3% in March, the sixth straight month of on-year declines.

India Posts 5.8% Quarterly GDP Growth - WSJ.com
 

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India’s GDP Growth Beats Estimates Amid Global Slump

India’s GDP Growth Beats Estimates Amid Global Slump


By Cherian Thomas

May 29 (Bloomberg) -- India’s economy grew more than estimated in the last quarter, making it easier for re-elected Prime Minister Manmohan Singh to steer the country through the global recession.

Asia’s third-largest economy expanded 5.8 percent in the three months to March 31, led by government spending and construction, the statistics office said in New Delhi today. Economists were expecting a 5 percent increase.

Stocks and the rupee climbed on investor optimism that interest-rate cuts and fiscal stimulus worth 7 percent of gross domestic product have helped shield India from the worldwide economic slump. Finance Minister Pranab Mukherjee pledged this week to boost outlays on new roads, ports and other infrastructure even further in July’s budget.

“This pace of growth is not enough to create jobs for all,” said Shubhada M. Rao, chief economist at Mumbai-based Yes Bank Ltd. “A lot needs to be done, especially higher spending in the budget. How it gets financed is the key question.”

The yield on benchmark bonds has climbed 28 basis points to 6.7 percent since Singh’s May 16 electoral triumph, on concern the government will borrow more to fund its budget.

The key Sensitive stock index has surged 20 percent in the period on optimism a coalition without communist parties will allow Singh to sell state assets and accept more foreign investments in insurance and banking. Today it advanced 2.6 percent to 14,673.74. The rupee strengthened to 47.39 a dollar immediately after the report, from 47.46 earlier.

‘Worst is Over’

India’s better-than-expected growth in the March quarter, which matched the pace of expansion in the previous three months, is another sign that the worst may be over for the global economy. Japan’s industrial output surged the most in 56 years in April and U.K. consumer confidence this month matched the highest level in almost a year.

“The worst is certainly over for the Indian economy,” said K. Sridharan, chief financial officer at Ashok Leyland Ltd., the country’s second-biggest maker of buses and trucks.

Vehicle sales and the production of cement, electricity and refined petroleum are showing signs of revival. India’s passenger-car sales increased 4.2 percent in April from a year earlier, after a 1 percent gain in March. Cement production jumped 10.1 percent in March and electricity output rose 5.9 percent from a year ago, according to government data.

Asset Sales

In the past week, UBS AG increased its growth forecast for India to 6.2 percent in the year to March 2010, compared with an earlier prediction of 5.2 percent. Standard Chartered Bank economist Anubhuti Sahay said risks to the bank’s 5 percent forecast for the same period were now “to the upside” and Morgan Stanley’s Chetan Ahya raised his estimate to 5.8 percent from 4.4 percent.

For Mukherjee, the sale of stakes in state-run companies such as National Hydroelectric Power Corp. and Oil India Ltd. is vital to finance spending without widening a budget deficit that Moody’s Investors Service says has “deteriorated.”

India’s budget shortfall stood at 6 percent of GDP in the year ended March 31, more than double the government’s target. Moody’s has kept India’s local-currency long-term rating at Ba2, two levels below investment grade, while Standard & Poor’s has a BBB- rating on India, the lowest investment grade.

“The unexpected election outcome provides scope for rationalizing spending, pushing ahead with disinvestments and key reforms,” Moody’s said in its annual report yesterday.

Reduce Poverty

Mukherjee may have to spend more and provide more tax cuts to bolster manufacturing, which fell 1.4 percent last quarter. Mining output growth slowed to 1.6 percent in the three months to March 31 from 4.9 percent in the previous quarter, today’s report showed.

Manufacturing companies are key employers in India, where almost 10 million people join the workforce each year. The International Labour Organization says India needs at least 10 percent economic growth each year to achieve a 1 percent increase in employment.

The 73-year-old Mukherjee returned to the finance ministry after a quarter of a century. As the finance minister in Indira Gandhi’s cabinet from 1982 to 1984, he ran an economy that was almost closed and insulated from the global economy.

Singh, as finance minister between 1991 and 1996, abandoned Soviet-style state planning and introduced free-market policies that have helped the economy quadruple to $1.2 trillion. Mukherjee said this week he will draft the budget with Singh, renewing a relationship that started in the early 1980s when he appointed Singh as the central bank governor.

Foreign Investment

At stake in Singh’s second term are economic changes blocked by the prime minister’s erstwhile communist partners such as a bill to raise the foreign investment ceiling for Prudential Plc and other insurers to 49 percent from 26 percent, and other proposed legislation aimed at removing a 10 percent cap on the voting rights of foreign investors in non-state banks. The government also wants to allow global retailers such as Wal- Mart Stores Inc. into India.

“The future looks promising in India,” said Fumio Ito, president of Kuraray Co., the Tokyo-based chemicals maker, which this week announced the opening of its marketing unit in India. “When our operations expand, we will consider building a production plant in India.”

India?s GDP Growth Beats Estimates Amid Global Slump (Update2) - Bloomberg.com
 

EnlightenedMonk

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I remember when the global economists and neutral rating agencies said that our growth will be between 5% to 5.5% during the period for which figures have now been released...

Sometimes makes you doubt their credibility and neutrality.

They are consistently underestimating India and at every small infraction our investment grades are lowered by Moody's and the like whereas we are one of the best performing economies despite all economic downturns...

Maybe certain vested interests are at play to deliberately keep our markets down to favour certain other countries in the global playing field.
 

Su-47

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I remember when the global economists and neutral rating agencies said that our growth will be between 5% to 5.5% during the period for which figures have now been released...

Sometimes makes you doubt their credibility and neutrality.

They are consistently underestimating India and at every small infraction our investment grades are lowered by Moody's and the like whereas we are one of the best performing economies despite all economic downturns...

Maybe certain vested interests are at play to deliberately keep our markets down to favour certain other countries in the global playing field.
When a country constantly beats the less-than-optimistic predictions of these experts, its their expertise that stand to suffer more.

The increased growth is a clear sign of the brilliance and fortitude of the Indian people, and of the investor confidence in our economy despite onerous predictions.
 

prahladh

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I guess Leehmans predicted that Indian growth would freeze but they did not survive to see that day.
 

thakur_ritesh

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EM,


there is a rule that gets followed in the economists circle and a very simple one at that. what every these leading names/organisations/consultancy houses have to say on the growth rate figures you add any where between 0.5%-1% to the mentioned figure and you will be more or less in tune with the reality. these individuals/organisations always take a conservative estimate on things and this is not limited to india but is a norm all over the place and that is the nature of the business that they are in. reputations get built accordingly and here they are in a business where if they are seen going wrong woefully bad then they run the risk of loosing out on future business since this business is all about reputations. as for as these people being called experts well do not see too far off, just reflect back at the predictions we keep getting by way of exit polls and opinion polls and both these so called experts are no better than each other. you would recall not so long back in the winters of 2007 our so called economic experts were predicting the sensex to close at 28,000 by the winters of 08 and rest is all history. essence of the post, mate least we take all these people too seriousl and no one is really an "expert" as they all claim to be.
 

S.A.T.A

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Hopefully this also indicates a positive turnaround in the Global economy,esp the American market.Most guys here in Bangalore have been hit hard by the depression in US.Lots of techies have taken pay cuts or worse got laid off.Right now its somehow manageable,but if crisis in US doesn't bottom out,hard ahead for us.
 

Daredevil

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These credit rating agencies are a big farce. If they were really good at rating credit worthiness of countries or companies, today, you wouldn't have seen the bubble burst that has happened in western countries.

The 5.8% growth rate is not bad at all given the global recession in the current times. We are poised for good times ahead. Just wait and watch.
 

Rage

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Farmers lose Rs 300 crore as rains play havoc in AP

1 Jun 2009, 1430 hrs IST, PTI


HYDERABAD: Farmers in Andhra Pradesh, particularly paddy growers, are in severe distress, with no buyers for their produce and unseasoned rains playing havoc.

Untimely rains are causing havoc by damaging paddy stocks that are ready for sale. And, in many districts farmers are unable to harvest their crop as there are no buyers for it.

All these have resulted in an estimated loss of over Rs 300 crore to the farmers so far.

Add the damage to mango orchards, banana and papaya, the monetary loss is expected to be over Rs 400 crore, official sources say.

Untimely rains and hailstorms on May 19, 20 and 21 in districts like Krishna, West Godavari, Kadapa, Mahbubnagar, Medak, Warangal and Karimnagar followed by downpour on May 31 have destroyed paddy besides mangoes and vegetables.

"We are currently passing through a situation of plenty as far as paddy is concerned," civil supplies commissioner Sanjay Jaju said.

What is hitting the farmers hard is the lack of storage space in warehouses to stock the paddy purchased from them.

As a result, neither the government agencies nor the rice-millers are procuring paddy, leaving the farmers distraught.


Farmers lose Rs 300 crore as rains play havoc in AP - India - The Times of India
 

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Roach Says India May Outperform Others in Asia-Pacific Region

Roach Says India May Outperform Others in Asia-Pacific Region

By M.C. Govardhana Rangan and Kartik Goyal

June 3 (Bloomberg) -- Stephen Roach, chairman of Morgan Stanley Asia, is more optimistic about economic growth prospects in India than China, saying the country may outperform others in the Asia-Pacific region.

“India is a more balanced economy than the rest of export- led Asia,” Roach told reporters in Mumbai today. “India could actually outperform at the margin the rest of the region.”

The country’s benchmark stock index has climbed 22 percent since the May 16 re-election of Prime Minister Manmohan Singh’s government without the need of support from the Communist parties, who had blocked economic reforms during the previous term. That may embolden Singh to push for higher overseas investment limits in the pension and insurance industries, apart from selling stakes in state-run companies.

“The recent election changes the prospects for reforms,” Roach said. “What has been missing in this interplay between the micro and the macro has been the political impetus to reforms.”

The Indian economy stabilized in the first quarter, maintaining the 5.8 percent pace of expansion recorded in the preceding three months. Growth in China’s gross domestic product slowed to 6.1 percent from 6.8 percent in the same period, owing to the dependence on overseas sales.

“China faces major challenges for the first time in 30 years,” Roach said. “It pushed its export-led model too far, leaving it too dependent on the external climate.”

Growth Forecast

Morgan Stanley on May 28 raised India’s growth forecast to 5.8 percent in the fiscal year to March 31, 2010, from an earlier estimate of 4.4 percent. The economic growth in the $1.2 trillion economy may turn out to be the real surprise in Asia, Roach said.

Six interest-rate cuts in seven months and fiscal stimulus measures are providing the nation with a boost worth almost 7 percent of gross domestic product, according to the central bank.

The central bank forecasts the economy will grow 6 percent in the fiscal year that started April 1, compared with average growth of 8.5 percent in the previous five years. India’s fiscal year runs from April 1 to March 31.

The economy won’t get back to an 8 percent pace of growth for two years, Roach said.

Prime Minister Manmohan Singh secured re-election last month, with his Congress party getting 206 lawmakers of its own. That’s the most since 1991, when Singh as finance minister abandoned Soviet-style state planning and introduced free-market policies that helped India’s economy quadruple in size.

Selling stakes in state-run companies is important for the nation to reduce its fiscal deficit, Roach said. India’s fiscal deficit widened to a seven-year high of 6.2 percent in the fiscal to March 31 as government borrowed more to fund fiscal stimulus packages.

Roach Says India May Outperform Others in Asia-Pacific Region - Bloomberg.com
 

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India Feels Less Vulnerable as Outsourcing Presses On

Finally, realization is dawning upon americans. It is not obama and american laws that will decide outsourcing, it will be the markets and pure business interests that will decide it.

India Feels Less Vulnerable as Outsourcing Presses On

By HEATHER TIMMONS
NOIDA, India — The global downturn has slowed the rapid growth in India’s outsourcing business, but only slowed it. In fact — because of the pressure on companies, and even governments, to reduce costs — many outsourcing businesses are booming. And a mood that was deeply uncertain just six months ago has turned much more optimistic.

Unemployment has risen to 8.9 percent in the United States, a 26-year high, increasing longstanding pressures to “keep jobs in America.” But managers of companies big and small, squeezed between political pressures and the necessity of slimming down to survive, are choosing the bottom line.

J. Brandon Black, president and chief executive of the Encore Capital Group, a debt collection company based in San Diego, said he planned to significantly increase his work force in India in the next few years, in part because of the tough economic times.

“The thing it boils down to is the supply of well-trained educated labor at reasonable prices is just too great to ignore,” said Mr. Black. In India, “we’re hiring college-educated people.” The company is not doing that in the United States, where it would incur greater infrastructure and health care costs.

“Outsourcing is here to stay,” Mr. Black said.

Some of America’s biggest companies continue to invest in India, even as they trim costs at home.

Hewlett-Packard said last month that it would cut an additional 6,400 jobs, on top of the 24,000 it said it was eliminating in September after a merger with Electronic Data Systems. About half of the September cuts are expected to come from the United States. In March, the computer giant said it was opening “HP Software University” in eight cities in India to train software testers.

Last month, Honeywell International, the manufacturing behemoth based in Morristown, N.J., said it would invest $50 million in a new research and development facility in Bangalore that would employ 3,000. The move comes after Honeywell began a reorganization, closing some operations and trimming hundreds of jobs recently in the United States.

The company declined to comment for this article, but when it initially announced its India plans, its chairman and chief executive, David M. Cote, said about half of Honeywell’s employees and half of its business were outside the United States.

“Anything that creates any kind of protectionism, anything that stops the globalization activity, will be harmful,” he said.

Many in India say they believe that demographics are on their side in the long run.

“In most developed economies, the work force is aging,” said Ranjit Tinaikar, a partner with McKinsey, a consulting firm. The health care costs associated with employing those Western workers will continue to increase, he said, creating a “big opportunity” for India.

A decade ago, McKinsey and India’s powerful information technology and outsourcing trade group, Nasscom, predicted that revenue from outsourcing by foreign companies would reach $50 billion in India in 2010. The global economic slowdown has delayed that by three or four quarters — revenue is predicted to reach $47 billion this year.

And in April, Nasscom and McKinsey predicted that by 2020, outsourcing would yield $175 billion in revenue here.

Growth will slow this year at many of India’s biggest outsourcing companies, however, because of the implosion of some of their largest clients: banks, mortgage servicing companies and Wall Street firms. But that does not mean revenue is no longer growing.

“People who have never looked at outsourcing before are saying they have to do it,” said Amitabh Chaudhry, the chief executive of Infosys BPO, the outsourcing arm of one of the largest Indian information technology companies. He expects his unit to grow 25 to 30 percent this year, compared with 40 to 50 percent in the past.

But political pressures are making a difference in how business is done. One growing trend, many outsourcing executives say, is placing more Indian employees in offices in the client’s home country. That way the job, ostensibly, does not move abroad. But over the long term, many are likely to be moved across the globe.

“Our view is we start work onshore, then move it to Poland or Morocco, and then over time to India,” said Sachdev Ramakrishna, director of marketing for Steria, an information technology and outsourcing company. Steria is based in Paris, but one-quarter of its employees are in India, and it has offices in Morocco and Poland. “It’s like opening the tap in bits.”

Since Steria’s clients include public utilities and governments in Europe, getting them comfortable with the idea of moving jobs abroad can take time. “Everyone recognizes that this is a changed world order, and the focus is more on preservation of jobs,” Mr. Ramakrishna said.

And yet, new business is coming from all over: insurance companies with a growing number of elderly clients to monitor; pharmaceutical companies looking for more efficient ways to conduct drug trials and handle customer calls (even emergency inquiries, like overdose concerns); corporate legal teams balking at $350-an-hour fees to outside law firms. Even companies based in once union-friendly countries like France and Germany, as well as once-flush Middle Eastern firms, struggling media companies and companies that have been taken over by private equity firms are looking to outsource.

Indian companies that relied on Wall Street and big banks for much of their business are aggressively learning new skills.

East of New Delhi, on a corporate campus that was once farmland, dozens of Indian doctors, nurses and pharmacists are scheduling checkups for patients in the United States and monitoring clinical trial data for some of the world’s biggest pharmaceutical companies.

Thirty miles to the southwest, in the town of Gurgaon, hundreds of Indian lawyers in a glass high-rise are conducting due diligence on deals, combing through contracts and studying intellectual property rights for Western clients.

In the legal field, “there’s been a sea change in awareness of what’s possible” in the last 12 months, said Daniel Reed, the chief executive of UnitedLex, which has its headquarters in Atlanta but has the bulk of its employees in Gurgaon. More and more sophisticated work is coming to India, he said.

Matthew Fawcett, the general counsel of JDS Uniphase, a fiber optics company in California, started looking at outsourcing some legal work to India two years ago and is now a UnitedLex client.

“When you run a legal department of a publicly traded company,” he said, “you care about cost and overhead.”

Patni Computer Systems, which employs doctors and nurses in Noida, is working with health insurance companies in the United States whose policies provide home care for elderly patients. Patni’s doctors and nurses call the patients regularly for checkups, and if the patient needs a physical examination, they call the insurance company, which dispatches a nurse.

“It’s a proactive measure, rather than reactive” said Sanjiv Kapur, the head of Patni’s outsourcing business, intended to prevent the patient from falling ill and winding up in the hospital. “It’s less costly for the insurance company.”

http://www.nytimes.com/2009/06/03/business/global/03outsource.html?_r=1&em=&pagewanted=print
 

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