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Deep Recession: Indian Economy runs out of steam
Saturday, 13 August 2011 04:25
India faces a loss of revenue from outsourcing because of rising prices in the country. Outsources are alrady look at alternate locations and Call Centers are being moved out of the country. These will be permanent job losses. Analysts predict that the economic deceleration that India is facing could get worse. The OECD predicts that the Indian economy is likely to “lose pace even as China and the US are expected to see good expansion in the coming months”. Much of the inflation in India is a function of higher oil and food prices. The Indian growth story appears headed for pause. Rising prices have forced the government to steadily tighten monetary policy. Interest rates rose for the 10th time in 16 months last week. The slowdown is indeed getting worse. In the past few weeks the government and several research bodies cut their respective growth forecasts. The Reserve Bank of India now sees the economy growing 8% in 2011-12, the PMs economic advisory council is pegging it at 8.2% while investment bankers such as Morgan Stanley say it could slide to 7.2%
The Economic Times of India says “It was the impact of the recession on non-trade financial flows that was doing the most harm to the economy. In the previous year capital inflows had broken all records and reached a staggering 9% of the GDP. This had dwarfed the outflow on the current account of 1.5% of the GDP and caused a sharp appreciation of the rupee. The reversal of these flows after the global financial crisis are the cause of the deeper than expected recession into which India is plunging, for it has compounded the impact of the decline in exports by bringing down share prices and the value of the rupee very sharply. These have strengthened the disinclination to invest and spend just when the economy needed the opposite.”
The reasons for the slowdown are as follows:
1) High Inflation –
2) Slow Reform Movement –
3) Earnings Slowdown –
4) Current Account Deficit –
5) Industrial Growth –
The OECD says that the “The CLIs for Italy, Brazil and India are pointing to slowdowns in economic activity relative to trend.” In March, CLI for India stood at 99.4 as compared to 99.7 in February. CLI for India has been falling since November 2010. Higher interest rates are choking much-needed investment, which was almost flat in the first quarter of this year and grew just 4.1 percent year over year, as overall economic growth slipped to 7.8 percent.
Bharat’s economy showed further signs of slowdown with July factory expansion the weakest in 20 months, a government panel cutting its growth forecasts and Tata, the countries largest car maker posting a steep drop in sales. The country has seen a marked slowdown recently with industrial output growing at a feeble 5.6 percent in May, its slowest in nine months.
Businessweek puts it best “There’s been no reform in key sectors like agriculture (resulting in crop failures, farmer suicides and poor distribution of food), infrastructure (causing blockages in transport, real estate, town planning), education (creating a severe skills shortage) and healthcare (malnutrition and poor health is stunting the physical and mental capacities of young rural Indians). Just at the time the economy needs an extra internal edge to help it ride out this global malaise, India will surely be held back.
However, no one is expecting a change.”
The slowdown has been on the back of rising interest rates there are other factors at work now to make it worse in the coming quarters. Delhi is seeing dangerous inflationary signs – and clear indications that its economy is going back to what was derisively called “the Hindu Growth rate“.
Rising input costs are eating in profits of Indian corporate companies brining about a profit squeeze. Sustained hardening of interest rates, will make companies increasingly shy of new investments and expanding their business. India Inc. grumbles about how dear it is to do business in Bharat – everything is Un-affordible. Talent, Property value, interest rates, even food.
A bad monsoon reduces the chances of a bumper crop are fading. The worsening debt scene in the US and the finances of the India government may lead us to stagfaltion similar to that faced by Japan for two decades. India is dependent on the world economy. The slowdown in the US and the EU, coupled with a tsunami-hit Japan reduces the exports of goods and services from India. The US and Japanese slowdown is choking the flow of investment funds into the country.
The Indian government‘s large fiscal deficit has effectively wiped off the possibility of taking recourse to Keynesian measures. The trouble in the real estate sector is only going to get worse.
source: rupeenews.com
Silver drops on profit-selling, gold also slips
Tuesday, 28 June 2011 23:52
MUMBAI: Silver prices continued its downtrend at the bullion market here today on consistent selling from stockists and speculators influenced by weakening trend in global markets.
Gold too extended the fall owing to subdued local buying interest amidst lower jewellery offtake.
Silver ready (.999 fineness) plunged by Rs 670 per kg to close at Rs 52,265 from last Saturday's closing level of Rs 52,935.
Standard gold (99.5 purity) declined by Rs 45 per 10 grams to finish at Rs 22,020 as against Rs 22,065 previously.
Tajikistan to make gold mining a priority
Last Updated on Tuesday, 31 May 2011 19:06 Tuesday, 31 May 2011 19:02
DUSHANBE – Tajikistan is increasing state control over mining and trading of precious stones and metals in hopes of boosting the economy.
Parliament amended the Law on Precious Metals and Stones May 6 to give the state greater control over the country’s natural wealth and make it a priority in developing the economy.
The law will increase control over the accounting, production, storage and transportation of the country’s precious metals and stones, First Deputy Finance Minister Jamoliddin Nuraliyev told parliament May 6.
Eight companies with foreign investors are mining precious metals and stones nationwide, Nuraliyev said. One gram of Tajik gold is worth 50 TJS (US $10.10) on the domestic market.
“According to our estimates every $1 invested in gold mining in Tajikistan presently yields $3 in profit,” he said.
Rising gold and silver prices make this the right time to develop the industry, Azim Ibrohim, director of the government’s Chief Geological Administration, said. Tajikistan has several gold deposits it might make available to investors, he said.
“For example, the Mosrif ore field in Panjikent District (northern Tajikistan), which consists of as many as five gold deposits, has a total reserve of 75 tonnes of gold,” he said.
China’s Zijin Mining has shown great interest in the ore field and has taken a 75% stake in the Zarafshon joint venture.
High gold prices have meant that the relatively low gold content of Mosrif ore – 1.2g per tonne – is now considered profitable. Formerly, 2.4g per tonne was considered the lower limit of profitability.
“By the end of this year, we intend to open another gold deposit in Sughd,” Ibrohim said.
Many companies are seeking licenses to mine gold in Tajikistan, Bahtiyor Sharipov, director of the Energy and Industry Ministry (EIM)’s Mining and Precious Stones Department, said.
But challenges loom.
“These fields are in geographically difficult locations, and the weather conditions are difficult, making the work seasonal,” he said. “The mined gold is mainly sold abroad.”
Tajikistan has only a small domestic market for gold, with the main buyers being the National Bank, the Treasury and a small number of jewellery makers.
“Our market is oversaturated with jewellery imported from Turkey and the UAE,” he said. “These are cheap products of inferior quality. But the low prices make it difficult for our jewellery manufacturers to compete.”
Ninety-five percent of Tajikistan’s jewellery market is made up of low-quality, imported goods, according to the EIM. The ministry is proposing to increase domestic market share by having parliament repeal the 5% excise tax on domestic jewellery.
 Jeweller Khaidar Latipov waits for customers in Dushanbe May 18. Customers prefer Turkish jewellery because it’s cheaper, he says. [Dilafruz Nabiyeva] |
Tajikistan produced 2,050kg of gold in 2010, the highest production in the past few years and 690kg more than in 2009, according to the EIM.
Of the 2010 gold production, 1,791kg was sold domestically, with the National Bank purchasing 862.3kg; the Treasury, 366.5kg; and domestic jewellers, only 10.6kg.
Tajikistan has five jewellery manufacturers, the largest is state-owned Vostokredmet, which produces gold and silver ingots weighing 100-200g, Sharipov said.
The company works only on commission and charges no more than $1.16 per gram, Jamshed Rasulov, chief engineer of Vostokredmet’s Chkalov Jewellery Plant, said.
“Any gold-mining company in the country can use our services and order 100- and 200g ingots,” he said. “But so far no such orders have been placed.”
Vostokredmet is the country’s leader in underground mining and heap leaching. It processed uranium ore in Soviet times, but lack of raw uranium and of financial support caused it to switch to gold and silver in the early 1990s.
Interest is growing in Tajik low-content gold deposits, but the environment for foreign and domestic investment is complex – the licensing system, tax and customs legislation, the country’s stability and the exchange rate, economist Georgy Koshlakov said.
The gold-mining industry needs government support to help local producers operate without needing foreign investors, Bahtiyor Majidov, director of the Tajik-British joint venture Aprelevka, said.
“Despite the great size of our quarry and the (difficult) form of our ore, last year we made a profit on our own without special assistance from investors,” he said. “If they eased our tax burden, we would be able to lift our industry up to the global level without the support of investors.”
Tajikistan continues to explore new fields. However, the state still relies on foreign investors.
“This year we announced the opening of two gold deposits: the Pakrud deposit in Vahdat, whose reserves total 116.8 tonnes of gold, and the Tabaspin deposit in Gornaya Matcha with reserves of 59 tonnes of gold,” Ibrohim said.
source: centralasiaonline.com
The US monetary system is in serious trouble: It is not Incompetence, it is Policy Manipulation
Last Updated on Friday, 17 September 2010 00:56 Friday, 17 September 2010 00:52
There is no question the US monetary system is in serious trouble and the situation continues to deteriorate. The smug elitist owners of the system are not getting the desired results and there is great consternation among the players. Since 1913 in running US monetary policy the Fed has had one recession after another and two depressions. The second one is the one we are now in. The Fed’s creation was mainly to end recessions and depressions, something obviously they have been quite unsuccessful at. The reason is they never intended to be successful. The fed was created by its owners to bring them staggering profits, but more importantly, to control the nation politically, economically and financially. The owner’s goal has always been to implement world government and the Fed’s control was designed to bring that about.
US unemployment figures expected to rise
Friday, 02 July 2010 20:20
WASHINGTON: The patchy US economic recovery faces a crucial litmus test Friday when fresh unemployment figures are released, but few expect positive results.Most analysts say the ranks of jobless Americans are likely to have swollen to more than 15 million, pushing the unemployment rate from 9.7 percent to 9.8 percent.
That would be bad news for President Barack Obama, who is running out of time to put the economy back on track before Congressional elections in November.
Although the White House has repeatedly warned that unemployment will remain high for the rest of the year, polls show it is still a crucial issue with voters.
The drop would also be bad news for markets, which have been convulsed by worry about a double dip recession in recent weeks.
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