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Indian Economy: Growth -2

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Indian Economy: Growth -2
http://news.yahoo.com/s/ap/20070228/ap_on_...uVFL0YBNyNv24cA
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Feb. 27, 2007
<b>Most Asian markets plunge </b>
By HANS GREIMEL, Associated Press Writer

Chinese stocks bounced back Wednesday after their biggest drop in a decade, but stock markets across Asia plunged amid jitters about possible slowdowns in the Chinese and U.S. economies.

Shares in Japan, Hong Kong, Singapore, Malaysia, India, Australia, Indonesia and the Philippines all tumbled more than 3 percent in morning trading following dismal losses Tuesday on <b>Wall Street, which suffered its worst day since the Sept. 11, 2001, terrorist attacks.</b>

While several Asian markets erased some losses by afternoon, nervous investors were still wary of whether the slump marks the beginning of a downward spiral or just a one-time jolt to cool overheating markets.

"We don't need to worry about a big reduction from here, but this correction could continue for the next couple months," said Shinichi Ichikawa, an equity strategist with Credit Suisse First Boston in Tokyo.

In China, the Shanghai Composite Index rebounded 3.9 percent to 2,881.07, recovering from its 8.8 percent plunge Tuesday, its largest decline since Feb. 18, 1997.

But investors in other Asian markets dumped shares Wednesday, with Japan's Nikkei 225 stock index falling 515.80 points, or 2.85 percent, to finish at 17,604.12.

Philippine stocks plunged 7.9 percent, their worst drop since 1997, at the height of the Asian financial crisis. Malaysian shares dropped 6 percent and Indonesian shares were down 5.2 percent. Australian stocks closed down 2.7 percent after falling as much as 3.5 percent.

The trouble began in China Tuesday — just one day after the Shanghai index hit a record — as investors unloaded stocks shares to lock in profits amid speculation about a fresh round of austerity measures from Beijing to slow the nation's sizzling economy.

As jitters spread around the globe, main European stock indexes fell about 3 percent, while in New York, the Dow Jones Industrial Average slid 416 points, or 3.3 percent, to 12,216.24.

Investors were also spooked by comments Monday from former U.S. Federal Reserve Chairman Alan Greenspan, who said a recession in the U.S. was "possible" later this year.

Equity analysts said the market's volatility could trigger more selloffs.

"A lot of that exuberance about just buying anything at all cost just starts to evaporate if the market has big falls like this," said David Halliday, associate director at Macquarie Equities. "I think the important thing to note is that this hasn't been triggered by an economic, financial or political crisis."

Japan's Chief Cabinet Secretary Yasuhisa Shiozaki echoed that sentiment, trying to quell concerns about the Tokyo market by stressing that overall fundamentals in Japan were still strong.

"On a broad perspective the corporate sector continues to perform well," Shiozaki said. "A long-term economic recovery is continuing."

But many market players said shares had gained too much, too fast.

Tokyo's Topix, which includes all shares on the exchange's first section, has climbed 18 percent in the last three months, only to lose 3.23 percent Wednesday. Vietnam's booming stock market, up more than 50 percent this year, fell 2.5 percent.

On Wednesday, Australian Treasurer Peter Costello predicted the plunge in China's share market would trigger "volatility on equity markets for some time."

But his overall assessment of China's economy was positive, telling reporters the Asian giant would continue to grow, albeit "in fits and starts."

Some regional brokers said they saw an element of panic selling among retail investors but that more experienced investors were sitting it out. Other market players were on the look out for bargain hunters to emerge.

"If your target is gains by the end of 2007, this is a good chance to buy," said Credit Suisse's Ichikawa. "But if it's the end of March, I can't say that."

Australian brokers said they were confident the fall was a correction, not the start of a bear market.

"I'd put a number of say 3-5 percent on it today," said AMP chief economist Shane Oliver, adding that the drops could extend to 10 percent in the next few weeks. "I don't see it having major economic implications and therefore I'm pretty confident it's just a correction."<!--QuoteEnd--><!--QuoteEEnd-->
<b>Now BJP will speak out for aam aadmi</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->He also ridiculed Chidamabaram's proposals to slash prices of pet food. "At a time today when aam admi finds dal costly, the Finance Minister exults over the fact that he is reducing prices of food for pets like dogs and cats."<!--QuoteEnd--><!--QuoteEEnd-->
I just can't believe it, country where huge humanity struggle for food, Finance Minister is worried about food for pets.
<!--QuoteBegin-gangajal+Feb 27 2007, 05:00 PM-->QUOTE(gangajal @ Feb 27 2007, 05:00 PM)<!--QuoteEBegin--><!--QuoteBegin-rajesh_g+Feb 28 2007, 01:03 AM--><div class='quotetop'>QUOTE(rajesh_g @ Feb 28 2007, 01:03 AM)<!--QuoteEBegin-->As aam-aadmi all i will say is sure it is supply-side but i think it might be because of money-supply and I do think that GoI has to acknowledge the problem and face it head-on.

http://www.rediff.com/money/2007/feb/27bud10.htm

<!--QuoteBegin--><div class='quotetop'>QUOTE<!--QuoteEBegin-->It squarely blamed the supply side shortages for the inflationary pressures, for which there were no immediate solutions, and said: "Poor agriculture performance, as the current year has demonstrated, can complicate maintenance of price stability with supply side problems in essential commodities of day to day consumption."<!--QuoteEnd--><!--QuoteEEnd-->
[right][snapback]65061[/snapback][/right]
<!--QuoteEnd--></div><!--QuoteEEnd-->

Not easy to face the problem head on. A squeeze of the money supply may also trigger a recession which will be like jumping from the frying pan to fire.
[right][snapback]65073[/snapback][/right]
<!--QuoteEnd--></div><!--QuoteEEnd-->

Gangajalji

I didnt say it was an easy problem to fix - infact I have expressed my inability to understand hyper-growth environments. The fact is however that cheap money supply is definitely hurting people and has led to putting real-estate (for eg) totally out of reach for the aam-aadmi. My dad used to have a small business which had a few employees. The salary about 3-3.5 years ago (around 2003) for this particular employee was around 1800 rupees. I think it might have gone up to 2100 rupees now. The real-estate prices in the meantime has gone up 2.5-3 times in ahmedabad. Whatever hopes he had of owning his own place is totally out of question unless solution can be found for inflation. An economy-inside-economy where the benefits trickle down will work eventually but in a society like India this will lead to unbelievable pressures (jealousy is a b1tch) on the social fabric.

Bottomline is, even if problems are difficult they have to be acknowledged as such before a solution can be thought out. Coming up with silly claims like PC is definitely not the solution.

<!--QuoteBegin-rajesh_g+Mar 1 2007, 12:01 AM-->QUOTE(rajesh_g @ Mar 1 2007, 12:01 AM)<!--QuoteEBegin--><!--QuoteBegin-gangajal+Feb 27 2007, 05:00 PM--><div class='quotetop'>QUOTE(gangajal @ Feb 27 2007, 05:00 PM)<!--QuoteEBegin--><!--QuoteBegin-rajesh_g+Feb 28 2007, 01:03 AM--><div class='quotetop'>QUOTE(rajesh_g @ Feb 28 2007, 01:03 AM)<!--QuoteEBegin-->As aam-aadmi all i will say is sure it is supply-side but i think it might be because of money-supply and I do think that GoI has to acknowledge the problem and face it head-on.

http://www.rediff.com/money/2007/feb/27bud10.htm

<!--QuoteBegin--><div class='quotetop'>QUOTE<!--QuoteEBegin-->It squarely blamed the supply side shortages for the inflationary pressures, for which there were no immediate solutions, and said: "Poor agriculture performance, as the current year has demonstrated, can complicate maintenance of price stability with supply side problems in essential commodities of day to day consumption."<!--QuoteEnd--><!--QuoteEEnd-->
[right][snapback]65061[/snapback][/right]
<!--QuoteEnd--></div><!--QuoteEEnd-->

Not easy to face the problem head on. A squeeze of the money supply may also trigger a recession which will be like jumping from the frying pan to fire.
[right][snapback]65073[/snapback][/right]
<!--QuoteEnd--></div><!--QuoteEEnd-->

Gangajalji

I didnt say it was an easy problem to fix - infact I have expressed my inability to understand hyper-growth environments. The fact is however that cheap money supply is definitely hurting people and has led to putting real-estate (for eg) totally out of reach for the aam-aadmi. My dad used to have a small business which had a few employees. The salary about 3-3.5 years ago (around 2003) for this particular employee was around 1800 rupees. I think it might have gone up to 2100 rupees now. The real-estate prices in the meantime has gone up 2.5-3 times in ahmedabad. Whatever hopes he had of owning his own place is totally out of question unless solution can be found for inflation. An economy-inside-economy where the benefits trickle down will work eventually but in a society like India this will lead to unbelievable pressures (jealousy is a b1tch) on the social fabric.

Bottomline is, even if problems are difficult they have to be acknowledged as such before a solution can be thought out. Coming up with silly claims like PC is definitely not the solution.
[right][snapback]65105[/snapback][/right]
<!--QuoteEnd--></div><!--QuoteEEnd-->


Rajesh,
PC's present budget is an election mode budget. So we can not expect him to take the hard decisions.

However, even if he wanted to it is not easy to bring down the inflation. Real estate price is high because of land ceiling laws. Given the political situation it will be hard to change these laws. More towns need to be built in India to bring down urban land costs. India needs to build at least 7000 towns to relieve the shortage of housing. Such a strategy will impact on farm land and will create tensions. Just look at the tensions in Singur, Nandigram, Kalinga nagar.

Food prices are rising because there is genuine supply side constraint. Only additional food will bring prices down. Food prices will not necessarily go down if money is made dearer.

Yes, cheap money is certainly one reason behind inflation. However, if Reserve Bank makes money dearer then that will affect future investments and slow the economy down. A slow growing economy will not help the poor people either.

Given this situation, PC has opted for the easy route. He has dumped the entire responsibility of fighting inflation on the shoulders of RBI.

Gangajal
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>What Budget 2007-08 proposes:</b>
Allocation for education up by 34.2%
Allocation for health and family welfare up 21.9%
Allocation for defence increased to Rs 96,000 crore
Addl education cess of 1% on taxes
No change in personal, corporate, service tax rates
Threshold limit for income tax exemption increased by only Rs 10,000 for all assesses
For women, threshold exemption raised to Rs 145,000 from Rs 135,000
Exemption for senior citizens raised to Rs 195,000
PAN to be made sole identification number for all participants in securities market
Service tax net widened
New services: Renting of immovable property use in commerce and business; Outsourced mining of mineral, oil or gas;
Development, supply of content for use in telcos, advertising purpose; Design services and those in execution of work contracts
Dividend distribution tax rate raised to 15% vs 12.5%
Employee Stock Options brought under Fringe Benefit Tax
Specific duty on cigarettes increased by 5%
Specific duty on beedis raised from Rs 7 to 11 per thousand for non-machine made and from Rs 17 to 24 per thousand for machine made
Excise duty cut from Rs 400 to Rs 350 per ton on cement sold in retail at not more than Rs 190 per bag
Cement bags having higher MRP to attract Rs 600 per ton Excise duty
Customs duty reduced on pet food from 30 to 20%; on watch dials, and umbrella parts from 12.5 to 5%
<!--QuoteEnd--><!--QuoteEEnd-->
<!--emo&Tongue--><img src='style_emoticons/<#EMO_DIR#>/tongue.gif' border='0' style='vertical-align:middle' alt='tongue.gif' /><!--endemo--> some reactions:
<span style='font-size:21pt;line-height:100%'><span style='font-family:Courier'>Critics have lambasted as elitist the cut in import duty on pet food from 30% to 20% - a kutta-billi budget, they say. Some liken Mr Chidambaram to Marie Antoinette - if they don't have atta, let them eat pet food. Other wags say that pet food is what is served at meetings of the Congress Working Committee by Sonia Gandhi. </span></span><!--emo&Big Grin--><img src='style_emoticons/<#EMO_DIR#>/biggrin.gif' border='0' style='vertical-align:middle' alt='biggrin.gif' /><!--endemo-->


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