Measures announced by European countries to tackle their fiscal woes are helpful steps, IMF chief Dominique Strauss-Kahn said on Thursday, adding that Europe's economy will be back on track soon.
Strauss-Kahn, who spoke after meeting with Peruvian President Alan Garcia, said the International Monetary Fund believes that Greece and Spain are making the right moves to tackle their economic problems, which have rattled global financial markets for weeks.
"Those countries in Europe having a fiscal problem are addressing this problem these days, along the measures that have been announced, and I do believe that they are going in the right direction," the IMF's managing director told a media conference in Lima.
"I think that we've got good reason to believe that everything will come back on track rather rapidly," he added.
Strauss-Kahn also said the U.S. economy should grow about 3 percent this year. Europe may post growth of between 1 percent and 1.5 percent, he said.
He told students at a Peruvian university that Europe faces problems of high debt loads and slow economic growth and mending the global economy depends on continued policy coordination by governments.
He said much of Asia and Latin America were growing well and had largely moved past the crisis, but advanced economies were still lagging a bit.
The French economist also said Peru's economy should expand between 5 and 7 percent this year, a forecast that could make it the fastest growing in Latin America.
But he said hard-charging Latin American economies like those of Peru and Brazil face risks from enormous capital inflows that could cause asset bubbles or overheating.
Doubts remain about a fragile global economic recovery and investors are pouring money into emerging economies as they look for yield outside of traditional markets, he said.
Saturday, May 29, 2010
Monday, May 24, 2010
Investors still hope for India reform after mixed year
Courtesy: Reuters
To its admirers, the ruling coalition led by Congress has had a good year -- sound fiscal policy to stave off a ruinous global credit crisis, fast growth and some tentative steps toward reforms.
Those are likely to be stressed by Prime Minister Manmohan Singh when he gives a news conference on today to mark the coalition's first year in office.
But to its critics, his government has floundered on inflation, struggled ineffectively against a Maoist insurgency, and managed its political allies so badly its substantial parliamentary majority dwindled, hurting its ability to pass pro-market legislation needed to sustain robust growth.
A sense of bullish self-confidence marked the Congress party-led coalition's handsome re-election victory last May, spurring hopes of firm governance and quick policy changes.
A slew of crises then undercut that electoral momentum, emboldened the opposition and weakened Congress's hold on allies.
What may be more important though is that many investors remain optimistic government eventually will take steps to open the insurance, banking and retail sectors to overseas players, and India has too much potential for them to ignore in any case.
Incremental progress on structural reforms is the best they can hope for in a country of more than a billion people and 20 official languages still emerging from a socialist past.
"We do not expect any radical implementation," said Shubhada Rao, chief economist of Yes Bank (YESBANK.NS : 270.4 +5) in Mumbai.
"But we want the government to progressively start thinking about opening up the economy cautiously. The government's reforms agenda is clearly outlined; what is needed is clarity on the road to implementation."
Last May's election gave Prime Minister Singh a freer hand, no longer relying on the communist parties that propped up his first term government.
GOOD MARKS FOR THE ECONOMY
Many investors wanted cuts in subsidies for fuel, fertiliser and food. They expected the government to move fast on removing supply bottlenecks blamed on state-controlled prices as well as poor roads and rail.
Instead, the coalition spent much of the year fighting political fires, from public anger over high prices to criticism over a growing Maoist insurgency and a high-profile ministerial resignation over a cricket funding scandal.
"The government should have been stronger, instead it moved from one bungle to another," said Paranjoy Guha Thakurta, a leading newspaper columnist writing about the country's political economy.
In March, Singh lost some of his key allies as he tried to push through a bill reserving parliamentary seats for women. The thinning majority sent jitters through Congress before it cobbled the numbers to defeat a parliamentary vote on high prices.
While many say the government's response to inflation, now running at an annual rate of nearly 10 percent, was the single biggest failure, its overall handing of the economy has been praised.
Car sales are up 40 percent year-on-year, industrial output grew by 10.4 percent in 2009-10 and consumer durables production surged by 30 percent in the last five months.
Recovering quicker than expected from the global crunch, India's economy is forecast to grow at more than 7 percent this year and nearly 9 percent in 2011.
The government has also moved to sell stakes in some state-run firms, worked on a new tax code and is moving to repair public finances. It has sold spectrum to telecoms firms, which is expected to bring much needed funds for the budget.
SUSTAINING GROWTH?
To sustain grown, investors will be looking to the prime minister to introduce policies to improve the country's dilapidated roads, ports and airports and allow India's large savings to be channelled into productive returns.
Analysts expect Singh to continue to support, but make slow progress on, bills that would liberalise insurance and banking and open up retail, which could resolve supply bottlenecks contributing to high inflation.
Another likely slow mover, given problems with Congress's allies, will be a nuclear liability bill needed to allow entry of U.S. atomic energy firms into India.
"Gradualism punctuated by political compulsions will probably remain the key mantra," Macquarie Research said in a new report that rated the governing United Progressive Aliance performance at an uninspiring six on a scale peaking at 10.
With 42 percent of Indians living on less than the poverty line of $1.25 a day, reforms have always been a political hot potato. Many farmers who receive subsidies for rice and wheat helped Congress win last year's election.
"There is a lack of consensus within the Congress party and it is now increasingly clear the Left was only an excuse for postponing many important decisions needed to accelerate growth," N.K. Singh, former finance secretary wrote in the Mint newspaper.
Despite lack of big-ticket reforms, foreign firms and investors are getting on with business undeterred. India's long-term potential is too compelling to ignore.
"India is a delectable emerging economic story that suffers an unfortunate - but legitimate -- discount because of its government's poor management and implementation," the Macquarie report said.
To its admirers, the ruling coalition led by Congress has had a good year -- sound fiscal policy to stave off a ruinous global credit crisis, fast growth and some tentative steps toward reforms.
Those are likely to be stressed by Prime Minister Manmohan Singh when he gives a news conference on today to mark the coalition's first year in office.
But to its critics, his government has floundered on inflation, struggled ineffectively against a Maoist insurgency, and managed its political allies so badly its substantial parliamentary majority dwindled, hurting its ability to pass pro-market legislation needed to sustain robust growth.
A sense of bullish self-confidence marked the Congress party-led coalition's handsome re-election victory last May, spurring hopes of firm governance and quick policy changes.
A slew of crises then undercut that electoral momentum, emboldened the opposition and weakened Congress's hold on allies.
What may be more important though is that many investors remain optimistic government eventually will take steps to open the insurance, banking and retail sectors to overseas players, and India has too much potential for them to ignore in any case.
Incremental progress on structural reforms is the best they can hope for in a country of more than a billion people and 20 official languages still emerging from a socialist past.
"We do not expect any radical implementation," said Shubhada Rao, chief economist of Yes Bank (YESBANK.NS : 270.4 +5) in Mumbai.
"But we want the government to progressively start thinking about opening up the economy cautiously. The government's reforms agenda is clearly outlined; what is needed is clarity on the road to implementation."
Last May's election gave Prime Minister Singh a freer hand, no longer relying on the communist parties that propped up his first term government.
GOOD MARKS FOR THE ECONOMY
Many investors wanted cuts in subsidies for fuel, fertiliser and food. They expected the government to move fast on removing supply bottlenecks blamed on state-controlled prices as well as poor roads and rail.
Instead, the coalition spent much of the year fighting political fires, from public anger over high prices to criticism over a growing Maoist insurgency and a high-profile ministerial resignation over a cricket funding scandal.
"The government should have been stronger, instead it moved from one bungle to another," said Paranjoy Guha Thakurta, a leading newspaper columnist writing about the country's political economy.
In March, Singh lost some of his key allies as he tried to push through a bill reserving parliamentary seats for women. The thinning majority sent jitters through Congress before it cobbled the numbers to defeat a parliamentary vote on high prices.
While many say the government's response to inflation, now running at an annual rate of nearly 10 percent, was the single biggest failure, its overall handing of the economy has been praised.
Car sales are up 40 percent year-on-year, industrial output grew by 10.4 percent in 2009-10 and consumer durables production surged by 30 percent in the last five months.
Recovering quicker than expected from the global crunch, India's economy is forecast to grow at more than 7 percent this year and nearly 9 percent in 2011.
The government has also moved to sell stakes in some state-run firms, worked on a new tax code and is moving to repair public finances. It has sold spectrum to telecoms firms, which is expected to bring much needed funds for the budget.
SUSTAINING GROWTH?
To sustain grown, investors will be looking to the prime minister to introduce policies to improve the country's dilapidated roads, ports and airports and allow India's large savings to be channelled into productive returns.
Analysts expect Singh to continue to support, but make slow progress on, bills that would liberalise insurance and banking and open up retail, which could resolve supply bottlenecks contributing to high inflation.
Another likely slow mover, given problems with Congress's allies, will be a nuclear liability bill needed to allow entry of U.S. atomic energy firms into India.
"Gradualism punctuated by political compulsions will probably remain the key mantra," Macquarie Research said in a new report that rated the governing United Progressive Aliance performance at an uninspiring six on a scale peaking at 10.
With 42 percent of Indians living on less than the poverty line of $1.25 a day, reforms have always been a political hot potato. Many farmers who receive subsidies for rice and wheat helped Congress win last year's election.
"There is a lack of consensus within the Congress party and it is now increasingly clear the Left was only an excuse for postponing many important decisions needed to accelerate growth," N.K. Singh, former finance secretary wrote in the Mint newspaper.
Despite lack of big-ticket reforms, foreign firms and investors are getting on with business undeterred. India's long-term potential is too compelling to ignore.
"India is a delectable emerging economic story that suffers an unfortunate - but legitimate -- discount because of its government's poor management and implementation," the Macquarie report said.
Sunday, May 16, 2010
Indian economy to grow by 8.5%: CII
Industry chamber CII has projected the Indian economy to expand by up to 8.5 per cent in the current fiscal from estimated 7.2 per cent in 2009-10, but called for greater reforms, particularly in the financial sector, to push growth to double digits.
"CII estimates GDP growth at 8-8.5 per cent in 2010-11 ...A recovery in agriculture is likely in the coming years leading to upside in GDP growth; Industry and services to remain strong as capacity expansion takes place to take advantage of the rising demand," Confederation of Indian Industry President Hari S Bhartia said.
Bhartia further said that the industry is estimated to grow by 8.5 to 9 per cent, services by 9.3 to 9.5 per cent and agriculture by 2 to 3.5 per cent this fiscal.
"CII estimates GDP growth at 8-8.5 per cent in 2010-11 ...A recovery in agriculture is likely in the coming years leading to upside in GDP growth; Industry and services to remain strong as capacity expansion takes place to take advantage of the rising demand," Confederation of Indian Industry President Hari S Bhartia said.
Bhartia further said that the industry is estimated to grow by 8.5 to 9 per cent, services by 9.3 to 9.5 per cent and agriculture by 2 to 3.5 per cent this fiscal.
Thursday, May 13, 2010
Sara Lee selling stake in Godrej Sara Lee JV
The San Francisco based Sara Lee Corp announced yesterday that it would sell its 51 percent stake in Godrej Sara Lee Ltd joint venture, which markets insecticides in India, to Godrej Consumer Products Ltd for 185 million euros. Godrej is one of the largest marketers of consumer soap in India.
The transaction is expected to close by July 3, Sara Lee said in a statement.
The joint venture's revenue was around 7.5 billion Indian rupees ($158 million based on exchange rates in 2009) in fiscal 2009, Sara Lee said.
That business accounts for some 9 percent of the adjusted operating segment income for Sara Lee's International Household and Body Care business, Sara Lee said.
Sara Lee, whose businesses include Hillshire Farm lunchmeats and Sara Lee bread, has been focusing on its main food and beverage businesses as it remakes its portfolio.
It is slated to sell its European body-care business to Unilever and parts of its Ambi Pur air freshener business to Procter & Gamble Co.
The transaction is expected to close by July 3, Sara Lee said in a statement.
The joint venture's revenue was around 7.5 billion Indian rupees ($158 million based on exchange rates in 2009) in fiscal 2009, Sara Lee said.
That business accounts for some 9 percent of the adjusted operating segment income for Sara Lee's International Household and Body Care business, Sara Lee said.
Sara Lee, whose businesses include Hillshire Farm lunchmeats and Sara Lee bread, has been focusing on its main food and beverage businesses as it remakes its portfolio.
It is slated to sell its European body-care business to Unilever and parts of its Ambi Pur air freshener business to Procter & Gamble Co.
Tuesday, May 4, 2010
I have just returned from a week's stay in Alpbach
I have just returned from a week's stay in Alpbach - a lovely village in Tyrol, Austria. I had gone to attend a conference.
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