The fast growing, globalizing Indian economy is expected to slow down to a pace of 8.7 per cent this year, according to the latest Economic Survey 2007-08. The strong message that it sends out is that maintaining overall growth rate at 9 per cent – that has been the experience of the last two years – is a challenge and raising it further to 10 per cent is a greater one. This deceleration or “some degree of cyclical fluctuation” is occurring against the backdrop of heightened global economic uncertainties, including the prospect of full-blown recession in the US economy. Wire money online to India with Xoom.com for as low as $4.99. The fast globalizing economy has also attracted record inflows· of capital. Portfolio and foreign direct investments have been booming and have resulted in a sharp appreciation of the rupee vis-a-vis the US dollar. This has, in turn, affected the competitiveness of India’s exports, with manufactured exports to the US slowing down this year. Some of this has affected industrial performance that has also moderated this year as in the case of textiles. Consumer durables, too, have been sluggish. Another important factor behind the overall deceleration of the Indian economy has been the slump in agricultural growth to 2.6 per cent when compared to previous year’s 3.8 per cent. Unless this· is stepped up to 4 per cent, this sector will remain a drag on the transition to double-digit growth. What are the challenges of sustaining’ rapid growth? The Survey notes the heightened urgency to augment and upgrade infrastructure like roads, ports and electricity generation that can fast emerge as an obstacle to the growth process. This is not easy as it requires the mobilization of huge amounts of capital, the right policy framework and regulators. The success so far in telecom and aviation ought to indicate the way forward in this regard. The far bigger challenge is reforms that have taken a back seat over the last four years. The Survey includes raising foreign equity in insurance, retail trade, green field private rural-agricultural banks, disinvesting the State’s equity in public sector undertakings, phasing out controls on sugar, fertilisers and drugs, free entry of private and public-private partnerships in rail freight companies, allowing private entry into coal mining, changes in the Factory Act to increase the work week to 60 hours and daily limit to 12 hours to meet seasonal [...]
Archive for March 23rd, 2008
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THE SENSEX
March 23rd, 2008 
Tejinder Being the oldest stock exchange in Asia with a rich heritage, BOMBAY STOCK EXCHANGE, is popularly known as BSE. It was established as “THE NATIVE SHARE & STOCK BROKERS ASSOCIATIONS” in 1875. It was given permanent recognition in 1956 by the GOVERNMENT OF INDIA, the first stock exchange in the country to get this status, under the Securities Contracts (Regulation) Act, 1956. Wire money online to India with Xoom.com for as low as $4.99. The Exchange’s pivotal and pre-eminent role in the development of the Indian capital market is widely recognized and its index, SENSEX, is tracked worldwide. Earlier an Association of Persons (AOP), the Exchange is now a demutualised and corporatised entity incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE (Corporatisation and Demutualisation) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI). The BSE Sensex or Bombay Stock Exchange Sensitive Index is a value-weighted index composed of over 4000 stocks with the base April 1979 = 100. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around one-fifth of the market capitalization of the BSE. The base value of the Sensex is 100 on April 1, 1979 and the base year of BSE-SENSEX is 1978-79. At irregular intervals, the Bombay Stock Exchange (BSE) authorities review and modify its composition to make sure it reflects current market conditions. The abbreviated form “Sensex” was coined by Deepak Mohoni around 1990 while writing market analysis columns for some of the business newspapers and magazines. It gained popularity over the next year or two. The stock market has grown by over ten times from June 1990 to today. Using information from April 1979 onwards, the long-run rate of return on the BSE Sensex can be estimated to be 0.52% per week (continuously compounded) with a standard deviation of 3.67%. This translates to 27% per annum, which translates to roughly 18% per annum after compensating for inflation. Housing related 1. Associated Cement Companies Ltd 2. Gujarat Ambuja Cements Ltd Transport Equipments 3. Bajaj Auto Ltd 4. Hero Honda Motors Ltd 5. Maruti Udyog Ltd 6. Tata Motors Ltd. Capital Goods 7. Bharat Heavy Electricals Ltd 8. Larsen & Toubro Limited Telecom 9. Bharti Airtel Ltd 10. Reliance Communications Limited Healthcare 11. Cipla Ltd 12. Dr Reddy’s Laboratories Ltd [...]
TECHNOLOGICAL COOPERATION IS REQUIRED
March 23rd, 2008 krishna In early February, the US National Academy of Engineering released a report on ‘Grand Challenges for Engineering in the 21st Century’. The goal is to focus attention on the potential of technology to help the world address poverty and environmental threats. The list includes potential breakthroughs such as low-cost solar power, safe disposal of CO2 from power plants, nuclear fusion, new educational technologies, and the control of environmental side effects from nitrogen fertilisers. The report, like the Gates Foundation’s similar list of ‘Grand Challenges’ in global health, highlights a new global priority: promoting advanced technologies for sustainable development. We are used to thinking about global cooperation in fields such as monetary policy, disease control, or nuclear weapons proliferation. We are less accustomed to thinking of global cooperation to promote new technologies, such as clean energy, a malaria vaccine, or drought-resistant crops to help poor African farmers. By and large, we regard new technologies as something to be developed by businesses for the marketplace, not as opportunities for global problem solving. Yet, given the enormous global pressures we face, including vastly unequal incomes, we must find new technological solutions to our problems. There is no way, for example, to continue expanding the global use of energy safely unless we drastically alter how we produce electricity, power automobiles, and heat and cool our buildings. Current reliance on coal, natural gas, and petroleum, without regard for CO2 emissions, is now simply too dangerous, because it is leading to climate changes that will spread diseases, destroy crops, produce more droughts and floods and perhaps dramatically raise sea levels, thereby inundating coastal regions. The National Academy of Engineering identified some possible answers. We can harness safe nuclear energy, lower the cost of solar power, or capture and safely store the CO2 produced from burning fossil fuels. Yet the technologies are not yet ready, and we can’t simply wait for the market to deliver them, because they require complex changes in public policy to ensure that they are safe, reliable and acceptable to the broad public. Moreover, there are no market incentives in place to induce private businesses to invest adequately in developing them. Consider carbon capture and sequestration. The idea is that power plants and other large fossil fuel users should capture the CO2 and pump it into permanent underground storage sites, such as old oil fields. This will cost, say, $30 per [...]
WE NEED A SUSTAINED GROWTH
March 23rd, 2008 krishna The last few years have been momentous for the Indian economy, growing at an average pace of about 8.5%. An important factor directly contributing to this growth momentum is the overdrive of the governments -central as well as the states-in inviting investments, both foreign and domestic. There is no denying that investment remains one of the most important ways to tackle the scourge of unemployment and consequently to take the people out of the crass of poverty. However, a major question that arises is whether capital inflows are sufficient to take a country to the path of all round economic development. A litmus test for economic progress is not the extent of investment that a country can absorb, but whether it has a business environment that nurtures entrepreneurship and is free from heavy handed political and bureaucratic intervention. The prosperity of a nation is reckoned not only by the material well-being of its people but whether there exists elements which ensure the fulfillment of human potential, prevention of avoidable sufferings and assurance of human dignity, justice and opportunity so that every citizen is a fulfilled and productive human being. The greatest challenge, therefore, before the governments is not to chase investments, but pursue strategies that unleash the forces of good governance. I am in no way suggesting that there should be abatement in the zeal to attract investments but my simple contention is that the pursuit of economic development should not and cannot end with investments alone. As Kofi Annan has said, “Good Governance is perhaps the single most important factor in eradicating poverty and promoting development.” Without good governance, no amount of industrial and market growth can bring a qualitative change in the lives of its citizens. A World Bank study has conclusively established that a strong positive causal effect exists between better governance and economic growth. In fact, even the existing investments need to be nestled through the instrument of good governance or it will fly like a migratory bird! The ‘Asian Economic Miracle,’ giving 8- 12% GDP growth during the late 80′s and early 90′s ended in an ‘East Asian Crisis’ of 1997. It is established that the flight of capital was basically due to weak financial governance of these regional economies. As former senior advisor to the US Treasury Hilton Root put it aptly, “Capital does not end up in the country that needs [...]
