If one observes the comments of Indian Prime Minister Dr Manmohan Singh’s, a doubt arises whether the Indian government is going to show rising inflation as an excuse for inviting foreign private investments in Indian retail sector.
The Vice-President of planning commission Mr Montek Singh Ahluvalia has been telling that supply side bottlenecks have been the major cause for the rising inflation in India. Today, speaking at a conference in New Delhi Prime Minister Manmohan Singh expressed concerns over rising inflation adding that inflation is becoming a major obstacle for the growth prospects of India.
An important aspect of Mr Singh was that what he opined for rise in inflation. He said that the farm supply chains needed to be boosted with organised retail chains. This raises doubt that Indian government is going to give permission for foreign entry into retail sector in the name of organized retail chains.
Article first published as Oil Prices Hit Post-Crisis Peak Levels on Technorati.
Oil prices are at its peak for the first time after the worst financial crisis since the great depression in1930s that erupted in September 2008 worldwide. Peak levels have been reached on both sides of the Atlantic Ocean i.e. in North America and Europe.
In Europe, Brent crude futures hit $91.58 per barrel while West Texas Intermediate in the US touched $89.35 per barrel, both being highest levels since the financial crisis of September 2008. However, these levels are well below the pre-crisis peak levels. Prior to the financial crisis, due to speculative bubble in House building sector, all commodities prices along with crude price were flying high in the sky. Brent Crude price was pushed up to $147.50 per barrel.
Factors of Crude Rally
There are several reasons that drove crude price to its peak level. Primary factors have been:
The relatively rising demand due to global recovery though not equalled with pre-crisis demand: This is a long-term factor assuming that a double dip does not occur. The US spent $1.7 trillion as part of “Quantitative Easing 1” that extended unemployment benefits, reduced tax rates for both corporates and consumers and increased liquidity in the market and absorbed toxic mortgage housing loans that became biggest impediment for post-crisis growth of the economy. In addition to this, the US government announced QE2 programme i.e. second stimulus programme in November to buy treasury bonds thereby releasing more printed dollars into the economy. Reports are coming that the Fed is thinking of increasing QE2 money, originally set at $600 billion. If that happens, prices of all commodities including crude oil will increase further.
Cold weather in Europe: This is a short-term factor, which will last up to the end of winter season. All European countries are shivering with cold weather spread across Europe continent. Cold weather increases the consumption of fuel, which in turn increases fuel prices as demand increases.
Reuters | Tue Nov 9, 2010 | 6:51pm IST
Growth prospects across the rich world have not budged since the Federal Reserve announced a second round of bond purchases worth $600 billion, according to the latest Reuters poll of more than 200 economists. The latest consensus forecasts lend support to critics of the Fed’s hotly-debated policy of further expanding its balance sheet to boost the economy who say it will do more to lift already-soaring asset prices instead.
Polling for the U.S., euro zone and Britain was conducted after the Fed announced last week it planned to resume its quantitative easing (QE) programme. The central bank itself appears split on the merits of more QE, with several Fed policymakers vocally discussing it, on top of numerous emerging market policymakers sniping at the Fed ahead of the G20 summit in Seoul this week.
Still, economists say that more Fed bond purchases provide insurance against the risk that the world’s largest economy suffers another sharp slowdown, and should underpin growth in the rest of the rich world, even with a weaker dollar. "Over the next couple of quarters we still think the growth pace is likely to fall short of the longer-term trend," said Jan Hatzius, chief U.S. economist at Goldman Sachs in New York.
Some economists are becoming a bit more optimistic, coinciding with a return to meaningful private sector payroll growth in the latest month. "But as we move through 2011, the lagged effects of the renewed monetary easing combined with a gradual slowdown in the pace of private deleveraging should result in a substantial pickup in GDP growth," Hatzius said.
The Reuters consensus was for 2.0 percent annualised U.S. GDP growth in the current quarter, picking up to 2.5 percent in the second quarter and 3.0 percent by the end of next year, all unchanged from the October survey. These modest rates of growth stand in contrast with emerging Asian economies like India and China, which analysts said in a poll taken last month would expand more than 8 percent and close to 9 percent in the coming year.
Reuters | Sep 11, 2010 | 3:04pm IST
The Reserve Bank of India (RBI) will take ‘appropriate measures’ to tackle inflation, the finance minister said on Saturday, though he added that India could not go on a "reverse growth path". Pranab Mukherjee was speaking a day after data showed industrial output accelerated much faster than expected in July, strengthening the case for further monetary tightening by the central bank to tame near double-digit inflation. Recent signs of cooling growth in Asia’s third-largest economy, along with a sluggish global economic recovery, had tempered expectations for a rate increase at the central bank’s policy review on Sept. 16.
But economists said the surprisingly strong industrial performance boosted the chances of a rate rise next week. "Inflation is a concern. I am concerned that prices are increasing," Mukherjee said in Kolkata. "RBI will take appropriate measures as and when needed. But at the same time, I cannot go on a reverse growth path." Pranab Mukherjee said India would likely grow between 8.5-8.75 percent in the fiscal year ending next March, therefore possibly exceeding earlier growth estimates of 8.5 percent. Industrial output rose 13.8 percent in July from a year earlier, nearly double analysts’ forecasts for a 7.7 percent rise. It was the fastest growth since April.
Article first published as Indiaâ€™s Q1 GDP Growth Results are Impressive, But Inflation is Still a Concern on Blogcritics.
It is widely believed that the Asian emerging economies are leading the world economy to recover from its worst crisis of 2007, since the ‘Great Depression’ of 1930s. After observing the GDP growth figure of 8.8% in the first quarter of FY 2010-11 (begins from April 2010 and ends in March 2011), it is understood that the expectations on India are not misplaced. The Planning Commission has released the data for Q1 last Tuesday. India’s GDP has grown by 8.8% from 8.6% of its previous quarter i.e. 4th quarter of previous financial year 2009-2010 despite partial withdrawal of stimulus measures. It is the highest growth rate since last quarter of 2006-07. The GDP growth of Asia’s 3rd largest economy after China and Japan is particularly notable because of the slow pace at which the GDPs of the developed economies like the US, Japan and the EU have grown in the same period.
As per the data released the robust GDP growth is driven by equally robust manufacturing sector growth that grew by 12.4 percent against 3.8 percent in the same period of last fiscal year. Agriculture and allied activities also fared well which expanded by 2.8% against 1.9% in Q1 of FY10. India’s Prime Minister Dr. Manmohan Singh has been advocating that agriculture sector has to grow by at least 4% for India’s GDP to grow by double digit figure. The Finance Minister Pranab Mukherjee expressed confidence that Indian GDP growth would register the targeted figure of 8.5%. The Deputy Chairman of the Planning Commission Montek Singh Ahluwalia is even more optimistic of GDP growth rate for the present fiscal surpassing the targeted figure of 8.5%.
The government is trying to strike a balance between farm interests and industry as it faces a series of violent protests against attempts to take over land, a debate that has consequences for investment and internal security.
WHY IS LAND A BIG ISSUE?
For many Indians, land is the only asset or social security that they possess and is a mark of social standing. Nearly 60 percent of India’s 1.2 billion citizens depend on farming for a living and each hectare of farmland supports five people. Most projects require huge amounts of land. South Korea’s POSCO’s proposed steel mill in Orissa will be built on 1,600 hectares. A six-lane highway between the Taj Mahal city of Agra with New Delhi will require 43,000 hectares. Compensation ranges from between $4,300 a hectare, in the case of top steelmaker ArcelorMittal’s proposed plant of over 4,400 hectares in Jharkhand, to $14,600 per hectare, offered to farmers displaced by POSCO’s Orissa mill. Despite the seemingly attractive prices, farmers have few other livelihood options and land taken over for industrialisation has been blamed for displacing hundreds of thousands of people. Protests against land being taken over have become more visible as the economy expands and the rich-poor gap widens.
WHAT DOES THE LAW SAY?
India’s century-old land acquisition law gives the state the right to take over land for public purposes with little compensation. Critics say the government interprets “public” to include private investments and this amounts to land-grabbing. They want private firms to buy the land from the owners at market rates. India is considering a new law which would guarantee market or higher rates.
WHAT IS AT STAKE?
Analysts cite problems in acquiring land as the biggest hindrance to rapid industrialisation of Asia’s third-largest economy, pointing out to several stalled highways, power utilities and factories. Prominent amongst these are multi-billion dollar investments by top steelmakers like ArcelorMittal, South Korea’s POSCO and Tata Steel. Protests over mining on tribal land in Orissa have stalled plans of British-based mining group Vedanta Resources Plc to extract bauxite. Continue reading
Reuters | Fri Jul 30, 2010 | 3:04pm IST
China has overtaken Japan to become the world’s second-largest economy, the fruit of three decades of rapid growth that has lifted hundreds of millions of people out of poverty. Depending on how fast its exchange rate rises, China is on course to overtake the United States and vault into the No.1 spot sometime around 2025, according to projections by the World Bank, Goldman Sachs and others. China came close to surpassing Japan in 2009 and the disclosure by a senior official that it had now done so comes as no surprise. Indeed, Yi Gang, China’s chief currency regulator mentioned the milestone in passing in remarks published on Friday. "China, in fact, is now already the world’s second-largest economy," he said in an interview with China Reform magazine posted on the website (www.safe.gov.cn) of his agency, the State Administration of Foreign Exchange. Cruising past Japan might give China bragging rights, but its per-capita income of about $3,800 a year is a fraction of Japan’s or America’s. "China is still a developing country, and we should be wise enough to know ourselves," Yi said, when asked whether the time was ripe for the yuan to become an international currency.
CAN IT BE SUSTAINED?
China’s economy expanded 11.1 percent in the first half of 2010, from a year earlier, and is likely to log growth of more than 9 percent for the whole year, according to Yi. China has averaged more than 9.5 percent growth annually since it embarked on market reforms in 1978. But that pace was bound to slow over time as a matter of arithmetic, Yi said. If China could chalk up growth this decade of 7-8 percent annually, that would still be a strong performance. The issue was whether the pace could be sustained, Yi said, not least because of the environmental constraints China faces. In an assessment disputed by Beijing, the International Energy Agency said last week that China had surpassed the United States as the world’s largest energy user. If China can keep up a clip of 5-6 percent a year in the 2020s, it will have maintained rapid growth for 50 years, which Yi said would be unprecedented in human history. The uninterrupted economic ascent, which saw China overtake Britain and France in 2005 and then Germany in 2007, is gradually translating into clout on the world stage.
Reuters | Thu Jul 22, 2010 | 10:22am IST
China is expected to maintain strong growth in the rest of this year and there is no need for a second stimulus, government economists said in remarks published on Thursday. The State Information Center, a think tank under the National Development and Reform Commission, forecast economic growth of 9.5 percent this year, which would be close to the average for the past 30 years and reflect China’s reasonable growth potential, the official China Securities Journal reported. Last November, the centre said it expected the Chinese economy to grow 8.5 percent in 2010 and it repeated that forecast in December. Separately, Wang Yiming, deputy head of the Academy of Macroeconomic Research, also under the powerful economic planner, told the official People’s Daily overseas edition that he expected growth of 9.5-10 percent this year and warned against upside risks of consumer inflation in the second half.
A Reuters poll of economists earlier this month produced a median forecast of 10 percent, but the survey was conducted before the release of second quarter GDP and June output data that came at the lower end of forecasts. China’s growth moderated to 10.3 percent in the second quarter from 11.9 percent in the first quarter as Beijing steered monetary and fiscal policy back to normal after a record credit surge to counter the global crisis. Consumer inflation also eased to 2.9 percent in the year to June, from 3.1 percent in the 12 months to May. The slowdown has fuelled market expectations that Beijing might ease off its tightening of policy or even announce new stimulus measures. However, Yi Xianrong, a prominent researcher with the Chinese Academy of Social Sciences, a top government think tank in Beijing, disagreed.
Washington Post | Saturday, May 1, 2010
The slow-motion economic recovery has continued in the early months of 2010, according to new data that both affirm that an expansion is solidly in place and underscore that it is likely to remain sluggish. Gross domestic product, the broadest measure of economic activity, rose at a 3.2 percent annual rate in the first three months of the year, the government said Friday. That was the third straight quarter of increase, driven by a rise in spending by American consumers and increased business investment. The stock market fell sharply on Friday, with the ‘Standard & Poor’s’ 500 index down 1.7 percent on the weaker-than-expected GDP report and continuing uncertainty surrounding a potential bailout for Greece.
The details of the GDP report paint a picture of an economic recovery that is well underway and a nation that is unlikely to slide back into recession in 2010. Personal consumption increased at a pace of 3.6 percent, while investment in business equipment and software rose at a 13.4 percent rate. Those gains bode well in that they show both consumers and corporate America starting to loosen their purse strings. "Put together the rise in consumer spending and what is happening on the corporate side, and we’re starting to make the transition from a government-driven expansion to a private-sector recovery," said Robert Dye, senior economist at PNC Financial Services Group. "That’s a very important transition for us to make over the next few months."
Friday’s data showed the limits of that expansion, however, and gave some reasons to be concerned about its sustainability. A rise in business inventories — companies increased the value of goods on their warehouse and store shelves by $31 billion in the quarter — contributed 1.6 percentage points to growth but is likely to
Reuters | New Delhi | Fri Mar 5, 2010 | 2:00pm IST
India’s winter-sown crop prospects are "very encouraging", but the country needs to pay farmers a good price for their produce to boost output further, Prime Minister Manmohan Singh told parliament on Friday. A good harvest is likely to bring down food inflation, which accelerated to nearly 18 percent in late February from a year ago, and also put pressure on the government to export wheat and rice as official agencies do not have enough storage space.
The government, facing mounting criticism for rising food prices, is struggling to meet conflicting aims of controlling food inflation and trying to please farmers by paying them attractive prices. Singh said the government would take all practical measures to bring down food prices. He also said the economy, Asia’s third largest, would grow by at least 8 percent in the financial year that begins on April 1, after expanding 7.2-7.5 percent in 2009/10.
BBC News | 15:31 GMT | Friday, 26 February 2010
The US economy grew at an annualised rate of 5.9% in the last three months of 2009, revised official figures have shown. The rate is higher than the first estimate of 5.7%. The figures confirm the world’s largest economy is emerging rapidly from recession. According to economists, the rise was down to an increase in manufacturing output rather than stronger consumer spending. In fact, growth in consumer spending was revised down from 2% to 1.7% in the quarter. Manufacturing rose to meet the demand from retailers and businesses who had allowed stock levels to fall. Business spending on equipment and software, for example, saw an 18.2% rise, while exports of US goods rose by 22.4% – the fastest pace in 13 years.
While the swift pace of recovery in the economy has impressed many economists, few expect the rate to be sustained. “[This is] nothing to change our view that GDP growth will maintain a rapid pace in the first half of this year, before slowing sharply in the second,” commented Paul Ashworth, senior US economist at Capital Economics. A recent fall in consumer confidence and a persistently high rate of unemployment are also causes for concern. Consumer confidence slumped to a 10-month low in February, while the rate of unemployment remains close to 10% and is expected to remain high for the rest of the year according to the Federal Reserve. Continue reading
BBC NEWS | 2010/02/08 | 12:00:36 GMT
India has said its economy is set to grow by 7.2% in the year to the end of March, raising the chance that state support could soon be withdrawn. Government stimulus measures helped to maintain strong growth during the global downturn, but attention is now turning towards cooling rising prices. Some now expect the government to raise interest rates earlier than expected. Strong growth in manufacturing in India is helping to compensate for falling agricultural output. “These numbers mean that the government will have to consider exiting from the fiscal stimulus in the budget,” said Rajiv Kumar at Delhi-based think-tank ICRIER. “Even if they don’t do that fully, I expect them to at least announce a roadmap for exit.”
India’s economy is recovering faster than expected – it grew at an annual pace of 7.9% in the three months to the end of September 2009, after growing 6.7% in the year to the end of March 2009. Instead of concerning themselves with securing strong growth, policymakers are now starting to turn their attention to inflation. Last month, India’s central bank increased cash reserve requirements for lenders in a bid to contain rising prices. It also lifted its inflation forecast for the end of the financial year in March to 8.5%. The Reserve Bank has pumped more than $125bn into the Indian economy since September 2008.
Reuters | Mumbai | Fri Jan 15, 2010 | 4:01pm IST
Demand for bank loans in India is coming back to life but because loan growth is sluggish, the central bank will take time to tighten monetary policy in spite of a pick-up in inflation. As growth in Asia’s third-largest economy gathers speed after the downturn, the central bank’s desire to raise interest rates may be limited by how well demand for financing is picking up. Credit growth will be the data to watch and that is why the central bank is likely to raise bank reserves requirements as a first step on Jan. 29, rather than lift interest rates and run the risk of snuffing out what signs of demand there are.
China’s loan growth is believed to have risen sharply in January, pushing authorities to act sooner than expected. The Chinese central bank said on Tuesday it will lift bank reserve requirements for the first time since June 2008 — a move most analysts say will have little impact on growth or earnings. India’s banks are liquid enough to cope with higher reserve requirements and have pledged to keep lending rates on hold for a couple of months regardless of what the central bank does. “The credit side is an important reason why the tightening will not be aggressive,” Continue reading
Reuters | NEW DELHI | Wed Dec 23, 2009 | 1:16pm IST
The economy could grow at a faster pace in 2009/10 compared with the previous year although inflation and high fiscal deficit are major challenges for the government, the finance minister said on Wednesday. Surging food prices and faster industrial growth have pushed up headline inflation, putting pressure on authorities to take steps such as importing food items and raising the cash reserve ratio for banks and interest rates to check inflation. The outlook for economic growth during the December and March quarters looked better than previous quarters, Finance Minister Pranab Mukherjee said, adding the economy could expand around 7.75 percent for the full fiscal year that ends in March 2010.
“It would be more appropriate to say that it (growth) would be around 7.5 to 8 percent,” Mukherjee told an industry conference. A 16-year high fiscal deficit of 6.8 percent of gross domestic product projected for 2009/10 (April-March) increased borrowing needs to a record 4.51 trillion rupees and kept bond yields firm this year. “Some of the important issues and challenges in the short-to-medium Continue reading