04-04-2007, 12:16 AM
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>Manic Monday </b>
The Pioneer Edit Desk
Government slaughters the economy
The sharpest sting to the 617 point fall in the Sensex on Monday comes in the fact that nobody - not the beleaguered retail investor, not the suddenly-quiet news channel analyst, not the investment banker - can confidently proclaim that the market has bottomed out. A precipitous decline from even the 12,400-point level the market has hit would seem on the cards, with a deflated business mood and possible electoral reverses for the Congress playing their part. The fall in stock prices has been the strongest for the banking and automobile sectors. Real estate is just about holding on but can expect to give way shortly. Small and mid-cap stocks, representing companies that cannot easily borrow overseas and need to turn to domestic banks for loans, are also under pressure. Common to all of these is the impact of the rise in interest rates, the latest coming this past Friday when the Reserve Bank of India moved up the overnight lending rate by a quarter of a percentage point to 7.75 per cent. This was the sixth interest rate rise in 14 months. It is expected to curb inflation - or so a desperate UPA Government hopes - by squeezing out as much as Rs 15,000 crore of liquidity from the market. More dangerously, it can kill growth. Home loans are today priced at 12.5 per cent, the highest level in six years and a far cry from the seven per cent deals being offered in 2004. For middle class buyers, automobile loans will also become dearer. For smaller companies, the interest burden on the capital needed for new projects or business expansion has risen rapidly over the past year.
It is important to recognise what the RBI and the Union Finance Ministry have done. India's economic boom that ran from, roughly, 2003-04 to 2006-07, was built on a cheapening of consumer credit and a spurt in consumer demand. More Indians came to buy homes and cars than ever before in history. This pushed up profit margins - and wages and employment - in a host of commodity industries, from aluminium to cement, which contribute inputs to construction or to car manufacture. Simultaneously, companies saw the low-cost borrowing option as attractive enough to retire older, expensive loans and go on a capacity enhancement binge. The underlying idea was that, with a low interest regime here to stay, demand was going to be healthy for years to come and the enhanced capacities would cater to this. With interest rates about 70 per cent above what they were three years ago - if housing loans are an indicator - that cosy equation is now history. <span style='font-size:14pt;line-height:100%'>The Congress has truly squandered the strong economic fundamentals it inherited from the NDA regime. In retrospect, India was indeed shining when the NDA was voted out; it is gathering gloom that we face today. Economic mismanagement is a mild expression. It is unlikely to satisfy the 30 million Indians - and their families - who pay EMIs on a variety of consumer loans every month and find the UPA Government, headed by a clueless Prime Minister who continues to be feted in certain quarters as an 'economist', has trapped them in a debt cycle.</span> Urban India's protest vote can be safely foretold. The Congress can expect the bad news to intensify, beginning perhaps with this week's municipal election in Delhi.
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Now you know why I named not clueless but "Moron Singh". Moron Singh is good for World Bank Babu job who can work on files and just look for TA, DA and good retirement benefits and ofcourse Bend up and down in front of Queen and other Videshi masters.
The Pioneer Edit Desk
Government slaughters the economy
The sharpest sting to the 617 point fall in the Sensex on Monday comes in the fact that nobody - not the beleaguered retail investor, not the suddenly-quiet news channel analyst, not the investment banker - can confidently proclaim that the market has bottomed out. A precipitous decline from even the 12,400-point level the market has hit would seem on the cards, with a deflated business mood and possible electoral reverses for the Congress playing their part. The fall in stock prices has been the strongest for the banking and automobile sectors. Real estate is just about holding on but can expect to give way shortly. Small and mid-cap stocks, representing companies that cannot easily borrow overseas and need to turn to domestic banks for loans, are also under pressure. Common to all of these is the impact of the rise in interest rates, the latest coming this past Friday when the Reserve Bank of India moved up the overnight lending rate by a quarter of a percentage point to 7.75 per cent. This was the sixth interest rate rise in 14 months. It is expected to curb inflation - or so a desperate UPA Government hopes - by squeezing out as much as Rs 15,000 crore of liquidity from the market. More dangerously, it can kill growth. Home loans are today priced at 12.5 per cent, the highest level in six years and a far cry from the seven per cent deals being offered in 2004. For middle class buyers, automobile loans will also become dearer. For smaller companies, the interest burden on the capital needed for new projects or business expansion has risen rapidly over the past year.
It is important to recognise what the RBI and the Union Finance Ministry have done. India's economic boom that ran from, roughly, 2003-04 to 2006-07, was built on a cheapening of consumer credit and a spurt in consumer demand. More Indians came to buy homes and cars than ever before in history. This pushed up profit margins - and wages and employment - in a host of commodity industries, from aluminium to cement, which contribute inputs to construction or to car manufacture. Simultaneously, companies saw the low-cost borrowing option as attractive enough to retire older, expensive loans and go on a capacity enhancement binge. The underlying idea was that, with a low interest regime here to stay, demand was going to be healthy for years to come and the enhanced capacities would cater to this. With interest rates about 70 per cent above what they were three years ago - if housing loans are an indicator - that cosy equation is now history. <span style='font-size:14pt;line-height:100%'>The Congress has truly squandered the strong economic fundamentals it inherited from the NDA regime. In retrospect, India was indeed shining when the NDA was voted out; it is gathering gloom that we face today. Economic mismanagement is a mild expression. It is unlikely to satisfy the 30 million Indians - and their families - who pay EMIs on a variety of consumer loans every month and find the UPA Government, headed by a clueless Prime Minister who continues to be feted in certain quarters as an 'economist', has trapped them in a debt cycle.</span> Urban India's protest vote can be safely foretold. The Congress can expect the bad news to intensify, beginning perhaps with this week's municipal election in Delhi.
<!--QuoteEnd--><!--QuoteEEnd-->
Now you know why I named not clueless but "Moron Singh". Moron Singh is good for World Bank Babu job who can work on files and just look for TA, DA and good retirement benefits and ofcourse Bend up and down in front of Queen and other Videshi masters.