FROM MY DEAR FRIEND AMBASSADOR GAJENDRA SINGH
India shining: Exuberant Indian markets gloss over economic reality
Economic Times 8 Feb2012
NEW DELHI: Surging capital inflows, booming stock markets and a fast-appreciating currency suggest the India story is again shining after a dismal 2011.
Dig a little deeper, and problems afflicting Asia's third-largest economy remain largely unabated and unaddressed. Inflationary risks remain and a political logjam continues to hem in reforms, clouding the economic outlook.
"Nothing has happened on the policy front to justify this mood," said Andrew Kenningham, an economist atCapital Economics in London. "Growth prospects are not looking good by historical standards."
New Delhi on Tuesday cut the growth estimate for the current fiscal year that ends in March to 6.9 percent from a revised forecast of around 7.5 percent issued in December, sharply below the 8.4 percent growth of the last fiscal year.
Still, the benchmark stock index is up nearly 15 percent this year while the rupee has risen about 8 percent from its 2011 close, with both clocking the sharpest gains in more than a decade.
An improved global funding environment, relatively attractive valuations of Indian equities and hopes for rate cuts by the central bank have lured foreign institutions. They are net buyers of $3.2 billion Indian equities this year after having sold $357 million last year.
"The rally at this stage may be more a reflection of foreign portfolio flows and an appreciation of the rupee," said Sanjay Sinha, a veteran fund manager who founded Citrus Advisors, an investment advisory firm.
"This in itself may be in an anticipation that the twin factors of a rate cut from April and bold economic policies may actually herald the resurgence of the economy. Therefore, data may follow but the markets may have rallied ahead of them."
Valuations at the end of 2011 were 12-13 times estimated earnings for the fiscal year that ends in March 2013, compared with a 10-year average of 15, said Rakesh Arora, managing director at Macquarie Equities Research in Mumbai.
The Reserve Bank of India (RBI) has signalled that it is finished raising interest rates after 13 increases between March 2010 and October 2011, to the relief of companies and banks. A rate cut is widely expected by the end of June, if not sooner.
The rupee's recovery has been fuelled in part by measures the central bank took to stabilize the exchange rate.
"It is a feel-good rally," said Jagannadham Thunuguntla, head of research at SMC Investments and Advisors Ltd.
Macroeconomic indicators are recently looking better. Industrial output has recovered from a record slump and the manufacturing and services sectors continue to pick up pace. Inflation slipped below 8 percent for the first time in two years in December and is on track to fall to the central bank's 7 percent target by the end of the fiscal year.
PREMATURE
Many India-watchers warn the euphoria is premature. Inflation is indeed down smartly, falling to a two-year low of 7.47 percent, but that is due almost entirely to a drop in food inflation that is widely seen as unsustainable.
Non-food manufactured inflation eased by just 0.2 percentage points from 7.9 percent in November to 7.7 percent in December.
All of this means that the RBI may not be in a hurry to slash interest rates.
"We don't expect the RBI to be aggressive in easing rates as inflation worries are still not completely mitigated. We expect it to be cautious in easing interest rates," said Siddhartha Sanyal, an economist at Barclays Capital in Mumbai.
Meanwhile, the policy environment in New Delhi remains muddled, with the Congress party government of Prime Minister Manmohan Singh weakened by corruption scandals and facing a tough election in Uttar Pradesh, India's most populous state.
A negative outcome for Congress next month in the election could further weaken it and exacerbate political gridlock that has already stalled reforms including a goods and services tax (GST) and foreign direct investment in multi-brand retail.
Before the global financial crisis of 2008, India's growth capacity was estimated at around 8.5 percent. Sluggish capital investment since then means India can now sustain just 7 or 7.5 percent growth without overheating, economists say.
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TWO NATO TIGRESSES (ATTACK HELICOPTER PILOTS) FROM AUSTRALIA AND NETHERLANDS WHO HAVE PLAYED HELL WITH URUZGAN AND KANDAHAR
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THE ANTI US FORCES HAVE NO SAM CAPABILITY.HA HA HA THEY HAD ONCE WHEN THEY FOUGHTY FOR DIRTY US AND SAUDI DOLLARS AGAINST AFGHANISTANS OWN LEFTIST GOVERNMENT,HA HA HA LATER THEY SOLD BACK THE USA THE STINGERS AGAIN FOR US DOLLARS,AND NOW THESE TIGRESSES ARE PLAYING HELL WITH THEM,HISTORY IS REALLY VERY STRANGE,NOW THE AMERICANS ALSO MUST BE THINKING THAT THE OLD USSR WAS A BETTER OPTION THAN THESE DIRTY BEARDED CLOWNS HA HA HA AT LEAST THEY WERE ENLIGHTENED CULTURED PEOPLE
SYCOPHANCY PAR EXCELLENCE PAKISTAN STYLE-HE SOLD HIS SOUL FOR DOLLARS
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This map from the US FM was reproduced in every revised publication with the same accompanying description from 1950s to 1992.
; Karl MarxOwners of capital will induce the working class to buy expensive goods, pushing them to take more and more debt, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism. (paraphrased from: Das Kapital, 1867)website http://www.scribd.com/doc/268365/Marx-Das-Kapital
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