New Delhi: The fear of an economic slowdown has turned to be a real one, as for the first time in recent months, India's industrial economy has actually shrunk, which may lead to job cuts, high inflation and more bearish stock markets.
In fact, the Confederation of Indian Industry (CII) has warned of job losses and appealed for urgent measures to tackle the slowdown after the Index of Industrial Production fallen to minus 5.1 per cent in October.
The CII further said a lack of investments can act as a drag on growth and that a continued decline in the mining sector can have consequences on livelihoods. Economic experts say the manufacturing sector is likely to see job losses and warned that inflation will continue to stay high even as the stock markets may continue to be in bear grip.
The industrial output was 1.9 per cent in the month of September and the fall comes after a sustained slowdown over the past few months, led by a steep fall in production of almost sectors, particularly manufacturing, mining and capital goods.
The biggest fall has come in the capital goods as well as in the manufacturing sector and mining. The capital goods growth is at minus 25 per cent while manufacturing activity has declined to minus 6 per cent from 2.1 per cent a month ago.
Factory output, as measured by the Index of Industrial Production (IIP), had grown by 11.3 per cent in October 2010.
The negative growth in factory output pulled down the BSE Sensex by 343 points or 1.12 per cent on Monday to below the 16,000 level after two weeks.
The Sensex, which had lost 664 points in the past two trading sessions, fell further by 343.11 points to end the day at 15,870.35, closing below the 16k level after November 25.
The BSE 30-share benchmark has lost over 1,000 points in the last three sessions, eroding investor wealth by nearly Rs 3 lakh crore.
The broad-based National Stock Exchange index Nifty has also lost 102.10 points or 2.10 per cent to 4,764.60 on Monday.
Though, Prime Minister's Economic Advisory Council Advisor C Rangarajan hoped that the GDP growth will still be between 7-7.5 per cent, it looks hard to achieve due to lack of corrective measures on the part of the UPA Government.
With the headline inflation remained above the 9 per cent-mark since December 2010, the Reserve Bank has hiked interest rates 13 times since March, 2010, to tame inflation.
India Inc had attributed the slowdown to rising interest rates, which have led to an increase in the cost of borrowing, thus hindering fresh investment.
But for long, the political turmoil has prevented the scam-hit UPA Government from taking any major policy decisions.
Some leading industrialists at the annual Indian summit of World Economic Forum has already alleged that the Central Government has been suffering from policy paralysis.
Moreover, a combined attack by the Opposition and some its own allies forced the Government to hold back its decision on allowing FDI in retail sector, which put a big question mark on the ability of the Government to go for any further economic reforms.
As a result, it seems the crisis-hit UPA Government is in no position to infuse the confidence that needed to boost the falling economy, which is already facing turbulence due to gloomy global economic scenario.
Monday, December 12, 2011
Thursday, December 8, 2011
Special project for Naxal areas to be extended to 18 more districts
NEW DELHI: Government has decided to expand its ambitious Integrated Action Plan (IAP) being implemented in 60 selected tribal and backward Maoist-affected districts to 18 more districts.
The Union Cabinet has cleared the home ministry's proposal of expanding the project under which the government is carrying out various development schemes like construction of roads, bridges, school building, provide drinking water to rural population, sanitation and electric works.
Of the 18 additional districts which will be covered in the 12th five year plan beginning next fiscal, six are in Andhra Pradesh, three each in Orissa and Jharkhand and two each in West Bengal, Bihar and Uttar Pradesh.
Under the focused development of 60 tribal and backward Maoist districts in nine states, government sanctioned Rs 25 crore in 2010-11 and Rs 30 crore in 2011-12 through which 63,416 projects were sanctioned and 26,593 projects completed, incurring an expenditure of Rs 1,391 crore till November.
The funds for the project are placed at the disposal of a Committee headed by the District Collector which oversees its implementation.
Among the projects undertaken under IAP scheme, drinking water, sanitation and electric lighting together account for nearly 30 per cent of the projects, school infrastructure 16 per cent and anganwadi centres 13.5 per cent.
The first phase of 60 selected districts are: 15 in Orissa, 14 in Jharkhand, 10 in Chhattisgarh, eight in Madhya Pradesh, seven in Bihar, two in Andhra Pradesh, two in Maharashtra and one each in Uttar Pradesh and West Bengal.
Naxal violence has been reported in areas falling under 270 police stations in 64 districts in eight states.
The Union Cabinet has cleared the home ministry's proposal of expanding the project under which the government is carrying out various development schemes like construction of roads, bridges, school building, provide drinking water to rural population, sanitation and electric works.
Of the 18 additional districts which will be covered in the 12th five year plan beginning next fiscal, six are in Andhra Pradesh, three each in Orissa and Jharkhand and two each in West Bengal, Bihar and Uttar Pradesh.
Under the focused development of 60 tribal and backward Maoist districts in nine states, government sanctioned Rs 25 crore in 2010-11 and Rs 30 crore in 2011-12 through which 63,416 projects were sanctioned and 26,593 projects completed, incurring an expenditure of Rs 1,391 crore till November.
The funds for the project are placed at the disposal of a Committee headed by the District Collector which oversees its implementation.
Among the projects undertaken under IAP scheme, drinking water, sanitation and electric lighting together account for nearly 30 per cent of the projects, school infrastructure 16 per cent and anganwadi centres 13.5 per cent.
The first phase of 60 selected districts are: 15 in Orissa, 14 in Jharkhand, 10 in Chhattisgarh, eight in Madhya Pradesh, seven in Bihar, two in Andhra Pradesh, two in Maharashtra and one each in Uttar Pradesh and West Bengal.
Naxal violence has been reported in areas falling under 270 police stations in 64 districts in eight states.
Wednesday, December 7, 2011
Indian Govt bows before people's mandate, suspends FDI in retail
New Delhi: The reforms in retail that were meant to signal the end of the government's policy paralysis, have been suspended. The Finance Minister shared this decision with all political parties today and got in return the truce the government desperately needed - Parliament will now get back to work.
That's essential for the government because important legislation is pending. Headlining that list is the Lokpal Bill, intended to combat corruption. Anna Hazare and his team of activists have warned of massive protests, a new hunger strike by the 74-year-old activist, and a campaign against the Congress in five states headed to elections. To prevent this, the government has to deliver a Lokpal Bill that Anna finds acceptable before this Parliament session concludes on December 21.
At a meeting of all political parties, that lasted less than half an hour, Finance Minister Pranab Mukherjee read out a short statement -"The decision to permit 51% FDI in retail trade is suspended till a consensus is developed through consultations among various stakeholders." Mr Mukherjee then formally shared the same resolution in the Lok Sabha at 11 am. He stressed that the "stakeholders" he referred to include Chief Ministers and political parties. Without the involvement of state governments, he said, the new FDI policy cannot be implemented.
The opposition accepted the government's stand. The BJP's Sushma Swaraj said it is a victory of democracy that has forced the government to bow before the "will of the people."
The Left says that the government's announcement amounts to a "virtual rollback" - a rollback was the pre-requisite declared by the BJP and the Left for parliament to start functioning again. Members of the UPA coalition, however, say the reforms have been paused, not cancelled. Rajiv Shukla, junior minister for parliamentary affairs, said, "They asked for a few clarifications. It has been decided that the Parliament will function from today. The government's decision is that till the time a consensus is reached, the FDI would be suspended."
Taking full credit for the end to the logjam is UPA ally Trinamool Congress, which effectively arm-twisted the government into its climbdown on the reforms move. Looking pleased after the all-party meeting, the Trinamool's Sudip Bandhopadhyay said, "This had already been discussed between Pranab and Mamata earlier, it was just presented to all parties today." Parliament would now function he said, "this is Mukherjee and Banerjee's game."
Mamata Banerjee, the government's biggest ally, indeed owns responsibility for forcing the U-turn on FDI in retail. First, the Trinamool chief made it clear that her party will not support FDI. Then she announced on the weekend that Mr Mukherjee had phoned her to share that the policy would not be implemented for now. Ms Banerjee has the muscle of 18 Lok Sabha MPs. The opposition said that if the government did not rollback its decision, a vote was needed in parliament. With Ms Banerjee making it clear that she would not vote for the government, the math was precarious for the UPA. It would skid through a vote, with a serious dent to its moral authority.
The government had initially said that it would neither defer nor rethink its FDI policy - while stressing the right of the Executive to mandate policy, ministers said that in deference to Ms Banerjee, who is the Chief Minister of West Bengal, states had the right to reject the reforms being introduced. However, there were other states that were keen on FDI, Commerce minister Anand Sharma pointed out. The Prime Minister went public with the assertion that FDI in retail would benefit the country and that it was here, and here to stay. The U-turn is being looked at as a serious dent in the PM's authority.
Now that they have been suspended, sources in the government say the reforms in retail , which will allow the entry of global super-chains like Tesco and Wal-Mart, will be erased from the government's to-do list till after the UP elections, expected within the next few months. There was subtle opposition to the move even within the Congress, partly because of the elections in UP, a key state.
India Inc has made it clear that a suspension of the reforms announced will have disastrous economic consequences. "It's a disappointing, regressive step," said Harsh Mariwala, President, Federation of Indian Chambers of Commerce and Industry (FICCI). Earlier, FICCI Secretary General Rajiv Kumar had warned that market sentiment would "weakened, decimated.
That's essential for the government because important legislation is pending. Headlining that list is the Lokpal Bill, intended to combat corruption. Anna Hazare and his team of activists have warned of massive protests, a new hunger strike by the 74-year-old activist, and a campaign against the Congress in five states headed to elections. To prevent this, the government has to deliver a Lokpal Bill that Anna finds acceptable before this Parliament session concludes on December 21.
At a meeting of all political parties, that lasted less than half an hour, Finance Minister Pranab Mukherjee read out a short statement -"The decision to permit 51% FDI in retail trade is suspended till a consensus is developed through consultations among various stakeholders." Mr Mukherjee then formally shared the same resolution in the Lok Sabha at 11 am. He stressed that the "stakeholders" he referred to include Chief Ministers and political parties. Without the involvement of state governments, he said, the new FDI policy cannot be implemented.
The opposition accepted the government's stand. The BJP's Sushma Swaraj said it is a victory of democracy that has forced the government to bow before the "will of the people."
The Left says that the government's announcement amounts to a "virtual rollback" - a rollback was the pre-requisite declared by the BJP and the Left for parliament to start functioning again. Members of the UPA coalition, however, say the reforms have been paused, not cancelled. Rajiv Shukla, junior minister for parliamentary affairs, said, "They asked for a few clarifications. It has been decided that the Parliament will function from today. The government's decision is that till the time a consensus is reached, the FDI would be suspended."
Taking full credit for the end to the logjam is UPA ally Trinamool Congress, which effectively arm-twisted the government into its climbdown on the reforms move. Looking pleased after the all-party meeting, the Trinamool's Sudip Bandhopadhyay said, "This had already been discussed between Pranab and Mamata earlier, it was just presented to all parties today." Parliament would now function he said, "this is Mukherjee and Banerjee's game."
Mamata Banerjee, the government's biggest ally, indeed owns responsibility for forcing the U-turn on FDI in retail. First, the Trinamool chief made it clear that her party will not support FDI. Then she announced on the weekend that Mr Mukherjee had phoned her to share that the policy would not be implemented for now. Ms Banerjee has the muscle of 18 Lok Sabha MPs. The opposition said that if the government did not rollback its decision, a vote was needed in parliament. With Ms Banerjee making it clear that she would not vote for the government, the math was precarious for the UPA. It would skid through a vote, with a serious dent to its moral authority.
The government had initially said that it would neither defer nor rethink its FDI policy - while stressing the right of the Executive to mandate policy, ministers said that in deference to Ms Banerjee, who is the Chief Minister of West Bengal, states had the right to reject the reforms being introduced. However, there were other states that were keen on FDI, Commerce minister Anand Sharma pointed out. The Prime Minister went public with the assertion that FDI in retail would benefit the country and that it was here, and here to stay. The U-turn is being looked at as a serious dent in the PM's authority.
Now that they have been suspended, sources in the government say the reforms in retail , which will allow the entry of global super-chains like Tesco and Wal-Mart, will be erased from the government's to-do list till after the UP elections, expected within the next few months. There was subtle opposition to the move even within the Congress, partly because of the elections in UP, a key state.
India Inc has made it clear that a suspension of the reforms announced will have disastrous economic consequences. "It's a disappointing, regressive step," said Harsh Mariwala, President, Federation of Indian Chambers of Commerce and Industry (FICCI). Earlier, FICCI Secretary General Rajiv Kumar had warned that market sentiment would "weakened, decimated.
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