The flip-side of the Chindian "Loan War"

Its a saying "its better to have a few strong neighbors than to have 100 weaker ones". I think this is the crux of the "LOAN WAR" going on between India & China. We are regularly hearing about the loan war going on between these two emerging giants. This term "loan war" sounds quite familiar to a well-known word "currency war" that's hooking up the "developed vs developing worlds" negotiations & talks.

Loan War has been used in reference to the "constant grants & loans being given to the very slow paced developing nations of Bangladesh, Nepal, Myanmar, etc. by the two fastest growing economies of the World, yes your guess is right, India & China. India's latest move to provide a low-interest rate Loan of $1 billion to Bangladesh in a subsequent move to tackle Beijing's growing influence on these nations is a "go gaga" for these nations. How? The fact is that whenever such a friction happens for winning the "trust, support & backing" of the LDCs(Least Developed Countries), it creates a huge economic pool of resources for the nations receiving these benefits.

The flip-side is that whereas the two nations are having a sort of tug of war to have a greater influence, the receiver nations' are getting better & better opportunity of growing their key infrastructural facilities as this is the major area of financing by Chindia. In such a scenario, we can hope that at least the LDCs would get an opportunity to overcome their growth barriers & expand their internal immune system to an extent that nothing can stop them to grow, at the end of the day its going to benefit all.

Its very much essential that such financial assistance doesn't go waste & is utilized to its best. Hope this fact is appreciated & observed by the receiver nations. Your views are always welcome. Do express it.

From People to Consumers: The Indian Consumption boom

India's unprecedented growth in terms of auto-sales, telecom sector growth(I mean the number of subscribers), technological shifts(from 2G to 3G, BWA, etc.) & many other such areas of boom signify that the "domestic demand" of our consumers is expanding a lot given the fact that poverty & unemployment still exist and a large share of population remains agrarian. Thus, the entire credit shall go to the "middle-class" consumers who are fast turning the Indian Population into actively spending entities, isn't it? Lets take a look at how figures speak this thing for us:

> Indian telecom sector is the fastest growing sector in the world with a growth rate of 45%, with more than 200million subscribers(still counting). A decade ago, having a mobile was itself a cumbersome process, today we find the root-class too, using it for "expanding their business".

> Auto-sales too are progressing quite well, with the sales of passenger cars showing healthy numbers. Domestic sales growth is 12.8%, a very good number indeed. By 2012, India will overtake Germany & Japan in sales volume.

> Telecom sector contributes to around 5-6% of the total GDP of India.

> The I.I.P.(Index of Industrial Production) numbers too are showing up-trends, with the core-sectors growing by an average 14-18%(don't remember the exact numbers).

> Various FMCGs are observing huge spending by consumers thus increasing the size of the economy, not only this, even the rural consumers are now uplifting themselves from poverty through various Government schemes such as the N.R.E.G.A. This means a whole new class of consumer is being formed.

> As C.K. Prahlad had stressed in his book"The Bottom of the Pyramid", the rural genre of consumers in developing nations especially in India & China present a huge market. This seems true at least in India as consumption patterns are improving drastically there too, with the emergence of better facilities(such as banking services, etc.) there too.

I see India transforming herself from a people-filled nation to a consumers-filled nation. Future holds great opportunities for better products & innovations, in order to satisfy the constantly growing numbers of spenders. Do express your views as comments to the post.

IMF's aid to Greece: A move beyond IMF's power?

The International Monetary Fund has decided to give an aid to Greece. Greece, a country that forms a part of the 16 nations Euro-zone is under very debts with paucity of funds to repay those debts. Thus the Euro zone nations have decided to pay a 110 billion Euros($147 billion). But just a minute, a surprising news is that IMF too is going to give a share in this "debt-crisis fund". This is a question of debate as the "article of association" of IMF says that it is an organization that deals only to provide funds to developing nations to undertake various development-oriented projects & schemes.
It also deals & provides aid only in "balance of payment" whereas Greece's problem is a fiscal problem(i.e. incorrect fiscal policies). Here, its as such quite surprising for IMF to lend aid to Greece.
India can surely raise concerns here & question the validity of such a move. The reason for India to raise a concern is that the IMF has funds given by the developing nations too, thus utilizing it for an advanced economy's problem may not be a long-term solution. Still, lets hope it doesn't affect IMF's aids to India & other developing nation.
NOTE: Views here reflect the inputs as published by a leading Economist & a columnist of a daily Eng. newspaper.

RBI's Monetary Policy: Year 2010-2011

Certain important data that needs to put forward here:
Current inflation(Year 2009):
WPI: 11.9%
CPI: 9.63%
Containing the above figures has become a very important necessity for RBI. This particular need has begun to be met in the policy. RBI has raised its key lending rates i.e. CRR(Cash Reserve Ratio), Repo rate & Reverse Repo rate by 25 basis points(bps), thus making current figures at CRR: 6%, Repo rate: 5.25%, Reverse Repo rate: 3.75%.Moreover the rates are lokely to be increased further. RBI's present stance shows that it is now determined to return to "pre-crisis" era & contain the above 10% inflation(WPI inflation). Our economy has now entered the expansion period. Here seems a bigger challenges for Mr. Subbarao as the margin of errors can be quite large here.
Now, increasing the floor & ceiling limit of interest rates(reverse repo & repo rates respectively) means that the excess liquidity flow is to be contained & needs an increase in cost of money(i.e. interest rates). This would ensure that inflation remains at healthy levels & doesn't march towards a running or a galloping one. Good day readers.

Sorry for the long gap

Dearest readers, I sincerely apologize for a long gap in publishing the articles. Lack of regularity also occurred since last 2 months. Due to constant problems going on at my end, I couldn't keep the pace with time & publish articles regularly. But now, all's done & everything's great. Articles on latest issues going on in our Economy & allied issues will be regularly published so that readers can update themselves. New articles will be put EVERY SATURDAY and SUNDAY. Thank you for your warm responses, you are a part of R&E family. Good day.

Decoding the Union Budget 2010-2011: Direct Taxes

The Union Budget for fiscal year 2010-11 has already been presented. In all, it has tried to maintain the key spending as they were with a prime focus on bringing down the FISCAL DEFICIT of a whopping 6.8% of GDP to 5.5% of GDP(for the next fiscal) as said by FM Pranab Mukherjee.
3 main challenges to continue as a key focus:
1. Achieving 9% GDP growth rate & above
2. Inclusive growth
3. Strengthening food security.
Hereby I present a detailed analysis of important changes in our TAX STRUCTURE:

CHANGES IN DIRECT TAXES:
Income tax-
- No tax upto Rs. 1.6L for all, upto Rs. 1.9L for women, upto Rs. 2.4L for senior citizens.
- 10% tax limit Rs. 1.6L to Rs. 5L for all, Rs. 1.9L to Rs. 5L for women, Rs. 2.4L to Rs. 5L for senior citizens.
- 20% tax limit Rs. 5L to Rs. 8L for all including women & senior citizens.
- 30% tax limit on income of Rs. 8L & above for all including women & senior citizens.
Finance Minister estimated that about 60% of tax payers to be benefited. Experts say this slab would save about 4-6% of tax outgo of the "aam aadmi".
Corporate tax:
- Reduced to 7.5% from 10%
MAT(Minimum Alternative Tax) increased from 15% to 18%.
The Corporate sector seems to be quite disheartened as the reduction in Corporate tax is being overpowered by the increase in MAT!