Deep Recession: Indian Economy runs out of steam

Business

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.”

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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

Bin Laden’s ghost’s retribution against Seals who killed him

Current Affairs

Saturday, 13 August 2011 04:20

According to press reports the seals that invaded Pakistan and killed Bin Laden died in a helicopter crash.  Afghan President Hamid Karzai said that the crash killed 31 US special operation troops and 7 Afghan commandos. President Obama’s statement avoided the mention of the names of the dead, and did not confirm the number killed or other details of the crash.

The Guardian says that “participated in the May raid into Pakistan that killed the al-Qaida leader. The downing was a stinging blow to the lauded, tight-knit Seal Team 6, months after its crowning achievement.”

The Miami Herald gives us details of the crash. “The Taliban are so active in the region that they forced the Americans to abandon a base here about two or three months ago because the base was under attack day and night…The Taliban have their regular sentries to prevent American night raids,” he said. “The two helicopters tried to land, but the Taliban fired two rockets at them. The helicopter (that was hit) was downed only about 100 meters from our house. Several small and big explosions were heard inside the helicopter. I think those explosions were due to the ammunition inside.”

The SEALs belong to the same unit as the bin Laden team. The troops from SEAL Team Six were flown by a US Army crew, according to press reports reaching here. The Tangi Valley where the Chinook was shot down is at the southern end of Wardak Province, which borders Kabul, making it a strategic corridor through which Taliban fighters and arms are infiltrated into the capital region.

A senior administration official said the chopper that crashed in eastern Afghanistan was apparently shot down by insurgents in one of the deadliest single incident of the conflict for US forces.

The  level of condolences clearly displays the high value of the loss.

• ”Their deaths are a reminder of the extraordinary sacrifices made by the men and women of our military and their families, including all who have served in Afghanistan,” President Obama.
• Karzai sent his condolences to Obama, according to a statement issued by his office.
• At the Pentagon, Defense Secretary Leon Panetta says he is deeply saddened by the loss, and vowed that the US will stay the course to complete the mission to make the world a safer place.
• Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, says the best way to honor their sacrifice is to keep fighting. He asks for patience as the military works to notify families of their losses.
• The Taliban claimed to have brought the helicopter down with a rocket attack.
• Nato officials in Afghanistan said they were trying to determine the details of what happened, but they acknowledged there was ”enemy activity” in the area.

The toll Saturday surpassed the June 28, 2005 worst single-day loss of life incident for the US-led coalition in Afghanistan since the war began in 2001In 2005 16 Navy SEALs and Army special operations troops were killed when their craft was shot down while they were attempting to rescue four SEALs under attack by the Taliban.

If the Taliban have acquired the technology to shoot down US choppers, this could be a game changer in Afghanistan. The singers helped the Mujihideen drive out the Soviet Union.

source: rupeenews.com

Congress Makes A Pilgrimage to The Holy Land

Current Affairs

Friday, 12 August 2011 02:12

This week's reports that 20 percent of the U.S. Congress will be visiting Israel this month are stunning. Eighty-one members of Congress -- two thirds of them Republicans, 47 of them freshmen -- apparently think it is more important to be visiting Israel than it is to be at home dealing with the worst economic crisis in modern memory. America's economy is in flames and these guys are taking lobbyist-funded trips to what, watch Israelis take to the streets to protest the high-cost of living in that country?

This Jewish, Israel-supporting, foreign policy specialist says, "It's time to come home, ladies and gentlemen." While such visits are important and there is certainly a place for them in the lives of American legislators, now is not the time.

Indeed, I continue to be stupefied that in the midst of market turmoil that is directly associated with political dysfunction in Washington that no one who works in a leadership role in this city has the conscience or the awareness to recognize that this is not an August in which a recess should be taken. These folks should be back at their desks and hard at work. The president ought to take to his podium and demand they return. He ought to say he is going to provide one big new idea a day for helping to get the economy back on its feet until the Congress finally starts to take yes for an answer.

The political objectives behind these Israel trips are clear and they reveal the opportunity costs to the American people associated with campaign season. Every moment spent jumping through a hoop for a potential group of supporters is a moment spent failing to address one of the many urgent issues confronting the United States.

When will these pretenders grow up or make way for serious, committed adults who have the appetite and the spine to grapple with our current challenges? When will American voters demand better, or at least start paying attention?

source: foreignpolicy.com

Who is on the run?

Current Affairs

Friday, 12 August 2011 00:53

Talking to reporters in an off-camera briefing, Pentagon’s spokesman Col Dave Lapan repeated what Defence Secretary Leon Panetta had earlier said that the Taliban were on the run. Analysis of the realities on the ground would prove it otherwise. Not only does it rebut the claim, but also suggests that it is, in fact, the US and NATO forces, which are on the run. Whatever the pretext – the economic crisis that has been building up since long mainly as a result of the astronomical amount of money being spent on prosecuting the war on terror, which is also adversely affecting the Americans’ lifestyle; the public pressure at home to withdraw troops because of the unending flow of body bags; or the fighting forces’ own weariness at pursuing an enemy, which is adept at playing hide and seek in the mountainous hideouts, – the end result is departure of the invading forces. The Taliban (read Pashtuns) constitute the majority ethnic community in Afghanistan, and if Mr Panetta thinks ‘it is only a matter of time before they are eliminated’, he is not living in the real world. Ultimately, the occupying forces would have to leave. The truth is that both, the Secretary and the spokesman, were trying to allay fears voiced by some political analysts that the death of more than 30 Special Forces men, including 22 Navy SEALs, last week might turn out to be watershed of a resurgent resistance.

Another secret CIA-Pentagon report expresses alarm at Pakistan Army officers and soldiers with a religious bent of mind, who it thinks are in majority and could have access to nuclear assets, and maintains that American monitors in the garb of Embassy officials have been sent to Pakistan. The report raises several questions of serious nature. First, it is none of US concern what kind of men comprise Pakistan Army; we have the right to recruit what suits our best interests. Would the defence establishment of the US stand our criticism of its armed forces just because there are a sizeable number of Jewish or Christian fundamentalists? Secondly, Pakistan as well as credible institutions in the world have shown their complete confidence in the safety and security procedures we have adopted to protect our nuclear arsenal. Thirdly, the Pakistan government and security agencies need to explain under what circumstances they let the American monitors come in the country as Embassy officials.
There is no doubt in the report’s assessment that the political setup in power in the country is, unfortunately, ready and willing to bow before the type of policies the Americans choose to adopt. That is a fly in the ointment; otherwise, the entire public, with the exception of a small group of West-leaning people, as well as the armed forces are bitterly opposed to them. Pakistan Army consists of patriotic people and is against US designs in the region and in that it is not merely responding to the sentiments of the people; both are on the same page. And both would love to see the harmful foreign influence to end immediately.

source: nation.com.pk