Archives of “economic advisory council” Tag

Eurozone forecast to grow by 1.3% this year and 1.6% next year

In a marginally improved outlook for the region, the unemployment rate is expected to fall to 12% this year and 11.3% next year. The fiscal deficit for the region is projected to come in at -2.4% in 2014 and -1.6 next year. 

But there are still huge disparities in the region, with many member states in the south facing major challenges as they attempt to restore fiscal rectitude. 

The Euroframe indicator is put together by the ESRI and research institutes from nine other EU countries. 

The 2014 winter economic assessment of the eurozone noted hard data such as retail sales, industrial production, and new orders received, have until very recently, not embarked on a clear upward trend. 

However, industrial production accelerated sharply in November. 

The ECB’s outright monetary transaction programme — which pledges the unlimited purchases of short-term debt for any member state that gets into difficulty in return for implementing structural reforms — has helped stabilise financial markets across the region.  Read More  

C Rangarajan hits out at IMF, WB for slashing India’s GDP growth rate

Rejecting IMF and World Bank’s “unduly” pessimistic projections, Prime Minister’s key economic advisory council chairman C Rangarajan today exuded confidence that the GDP growth would be around 5.5 per cent in the current fiscal.

“These institutions are unduly pessimistic. We think the growth rate will be between 5 and 5.5 per cent. We have projected growth rate of 5 per cent earlier, which I think still holds,” Rangarajan said on the sidelines of Global Conference on Financial Inclusion & Payment System here.

Earlier this month, the World Bank slashed India’s economic growth forecast for the current financial year to 4.7 per cent from an earlier projection of 6.1 per cent.

Meanwhile, International Monetary Fund (IMF), in its World Economic Outlook, projected an average growth rate of about 3.75 per cent, based on market prices, for India in 2013-14, that is expected to pick up to 5.1 per cent next fiscal. Read More  

Too early to celebrate on rupee, current account deficit

The kind of commentary that has greeted the arrival of Raghuram Rajan at the Reserve Bank of India (RBI) betrays the absence of serious thinking in the country. He might have warned of financial sector imbalances in the world but I do not think he would have predicted that India would greet his arrival with commentary that is blatantly sexist. Imagine the reaction that would have awaited male journalists writing about a good-looking lady governor at the central bank. There is far too much of escapism and denial on display. That is why most commentary has jumped from being despondent to euphoric on a fortnight of relief rally in Indian stocks and the currency. Market prices often overshoot on either side before settling down in the middle.

For example, the government reported that the Index of Industrial Production (IIP) rose in July by 2.6% year-on-year and the decline in June was revised down to -1.8% from the previously reported -2.2%. In terms of sectors, manufacturing and electricity output went up in July while mining output contracted. According to use-based classification, capital goods led the output improvement in July with a gain of 15.6%. This was due to a category called “Electrical Machinery and apparatus” that has a weight of about 2% in the overall IIP. It jumped to 573.9 from 312.5 in July last year! One of the products that made a specific contribution to this category is “Insulated Rubber Cables”. The production of this item jumped 336% year-on-year. Production of ayurvedic medicaments and vitamins jumped on an annual basis. Certainly, none of these are signs of sustainable turnaround in industrial production, in areas where they matter. Read More  

Where are the doers?-T N Ninan

I’ve ruminated once before about Lee Kuan Yew’s dismissive comment on the India-China comparison: “Chinese do, Indians talk”. Looking today at the government struggling to get projects off the ground, it is hard to disagree. The prime minister has plenty of advisors, but is desperately short of doers. He has the benefit of wisdom from the National Manufacturing Competitiveness Council, the National Knowledge Commission, the National Skill Development Council, the National Advisory Council, the Prime Minister’s Economic Advisory Council, the National Innovation Council, and the National Security Advisory Board, besides plenty of individual advisors, with and without prefixes. That’s a lot of people giving advice, writing reports and occupying sundry “bhavans” and multi-acre homes in Lutyens’ Delhi. But look for the doers in the system, and they are scarce. The Delhi Metro’s E Sreedharan stands out as a rare exception, perhaps alongside Nandan Nilekani. As for the rest, the less said the better.

Has the National Manufacturing Competitiveness Council delivered a more competitive manufacturing sector? Negative. The rupee has fallen substantially in value against virtually any currency of substance over the last decade, yet the country has a record current account deficit and most Indian companies have a deteriorating balance sheet when it comes to net foreign exchange earned or spent. That means the problem with the current account deficit goes beyond gold, and lies in a competitiveness gap. Read More  

India Lowers Foreign Investor Outlook

India has officially lowered its expectations of investment from foreign stock investors, which could translate into a tepid year for Indian stocks.

A few days after Indian Finance Minister P. Chidambaram returned over the weekend from a trip to the U.S. and Canada to woo investors, the government said Tuesday that it expects fewer dollars coming into Indian stocks this year.

C. Rangarajan, chairman of the Indian Prime Minister’s Economic Advisory Council told reporters on Tuesday that India expects foreign institutional investors to invest around $18 billion in the country for the financial year that started April 1. This would be 25% lower than their investments in the previous year that ended March 31.

Foreign institutional investors are a key driver of the Indian stock market.

Last year, overseas investors poured $24 billion into Indian stocks, sending the benchmark Sensex 26% higher and making Indian stocks one of the top five performers globally.

The Prime Minister’s Economic Advisory Council didn’t specify why it expects foreign inflows to cool, but we can make an educated guess.

India’s economy is growing at its slowest pace in nearly a decade – an expected 5% for the year through to March 31. The government hopes growth to accelerate to 6.4% for the year ending March 31, 2014.

Meanwhile, there is political uncertainty given the national elections which must happen before May 2014. This makes investors wary.

In addition, global investors have lately been finding better investment options elsewhere. Japan, for example, has become an investor favorite because a recent devaluation of its currency is expected to help boost the country’s export-driven economy, according to a  Deutsche Bank report earlier this week.

India is aware that it has its task cut out even to meet its target of getting $18 billion from foreign stock investors. “Maintaining this level will be mostly dependent on domestic policy stance and growth conditions,” the Prime Minister’s Economic Council said in its report Tuesday.