Thursday, December 20, 2007

India's growth will dip to 8.3 percent

Even as Prime Minister Manmohan Singh feels India can push its economic growth rate to 10 percent, global consultancy Goldman Sachs says cyclical headwinds will moderate it to 8 percent next year.

'India's economic growth is set to moderate in 2008 due to cyclical headwinds of high interest rates, rapid currency appreciation, weakening global demand and high oil prices,' the consultancy said in a report released Wednesday.

'The economy reached its cyclical peak in the first half of 2007, growing by 9.2 percent and we believe will moderate to trend over the next two years,' said the report titled 'India: Cyclical headwinds to structural growth story'.

'Our forecasts for gross domestic product growth are 8 percent in fiscal year 2009 and 8.3 percent in fiscal year 2010. Consensus for fiscal year 2009 stands at 8.2 percent,' the report said.

'The economy, however, remains structurally strong and fears of a hard landing are greatly exaggerated.'

The report forecasts core inflation to be contained within the Reserve Bank of India's (RBI) target of 4-5 percent, but adds upside risks include liquidity, high oil and commodity prices, fiscal expansion and currency appreciation.

On the external side, the report expects capital inflows to remain strong due to the 'India growth story' as also because of its strong earnings growth and its own appetite for $475 billion to finance infrastructure upgrades.

'The key downside risks to our growth forecasts are a significant deterioration in the political or external environment, while upside risks stem from higher-than-expected inflows or looser fiscal and monetary policy,' it said.

'On the political front, 2008 is unlikely to be a quiet year. Elections in the critical state of Gujarat will kick off what could be a volatile year with mid-2008 elections a strong possibility.'

The report also said that the region as a whole is not exactly tranquil because of the political instability in Pakistan, Sri Lanka and Nepal, and army rule in Bangladesh.

'Risks of a large negative shock in one of the neighbours leading to some spill over onto India have increased. However, India's limited economic ties with the rest of South Asia suggest the fall-out on the domestic economy may be limited.'


Source: http://www.indiaenews.com/business/20071219/87147.htm


Forget yourself for others, and others will never forget you.

1 comment:

Krishnaraj said...

Sadly, market bulls and investors see only half of the picture -- the monetary side.

While one feels great about the India Growth Story, there is a hidden tragedy -- a sort of India Death Story, unreported by the media. It is a story of social and environmental costs being quietly passed on by manufacturers, and frankly, society and environment are getting saturated.

An important social principle is violated by many manufacturing activities: While engaged in a profit-making activity, one must not leave a mess behind for the rest of society to clean up.

This principle can easily be understood as common decency. If I come to your house as a salesman in order to market something, I must clean up any mess that I make while selling my product.

But this principle is continually breached by manufacturers and marketers on a large scale in our country, and nobody even thinks of objecting!

Have you ever pondered how mineral water and soft-drink manufacturers who sell their product to you in a PET bottle take no further responsibility what happens to their non-biodegradable bottle? Most often, it ends up as litter in the environment, because the consumer simply does not know what to do with the bottle, other than tossing it away.
This is not how it should be. At the time of conceptualizing and designing the product, the manufacturer has the responsibility of thinking what will happen to the discarded packaging, or, in the case of non-consumables, to the product itself after its use. He must take the responsibility to create a safe avenue for its disposal or recycling.

This requires a mechanism to collect the empty container or used product. So he must set up that mechanism. For instance, the grocery shopkeeper may incentivate the consumer to return PET bopttles to him by initially charging a coupl;e of rupees as deposit for the bottle, which he returns when the consumer returns the bottle to him. These bottles can then be sent back to the company’s recycling facility. (This is how soft-drink bottles made of glass were returned to manufacturers until very recently, remember? We, the consumers, were OK with this system. So why the sudden urge to package everything in discardable materials?)

We should mobilize citizens to demand legislation that every manufacturer must repurchase/collect and recycle as many tonnes of raw material as he uses on a week-by-week basis. For example, if a mineral-water manufacturer uses ten tonnes of plastics per week to manufacture bottles, he MUST buy back ten tonnes of plastic scrap and safely recycle it.

Now think for a moment about used automobiles. Used cars and scooters in India are sold as second-hand vehicles, and then third-hand, fourth-hand. A second-hand vehicle may go from a metropolis to a small town or village. It keeps going further and further into the interiors as it ages, as its condition deteriorates and its market price dwindles. And then?

And then it is sometimes sold to a garage at a throwaway price, and this garage may salvage spare parts from it. ut what remains of this vehicle, including worn-out tyres, may lie around rusting and gathering dust for years and years on some deserted road. The tyres, when they are often burnt in winter for warmth, releasing black, acrid smoke and carcinogenic chemicals into the atmosphere.

Or it lies as a rusting eyesore in some building compound for many years as the last owner loses all motivation to either repair it or sell it.

Thus, every automobile manufacturer sells a product that turns into many hundred tonnes of junk — assorted metal, plastic, glass and rubber junk — after 6-8 years. They end up littering the beautiful countryside with this junk. Is this socially acceptable behaviour?

If one looks for solutions, they are not difficult to find. Legislation and regulations are the answer.

Automobile manufacturers must be required by law to buy back that many tonnes of metals, plastics, glass etc every week, and find ways to recycle them. The cost may be met by raising the market price of their product… but the responsibility to make the recycling activity happen MUST be fixed on the manufacturer of every product.

The same applies to tyres, batteries, plastic goods, newspapers, textiles, chemicals, auto-lubricant oils, etc. The list is long.

It is possible that this will make some manufacturing and marketing processes unviable. If so, this would mean that these economic activities were unviable in the first place, and were sustainable only by passing on hidden costs to the environment, to society and to consumers! Such activities must necessarily come to an end.

Many industrial activities are environmentally and socially subsidized to keep them economically profitable. Let us lobby governments to knock off that subsidy and see how many activities remain sustainable!

I propose peaceful demonstrations to compel industries to self-regulate, and legislators to pass laws:

Small groups of citizens shall collect the branded packaging material of various manufacturers from the environment, and delivering them in large bundles every week to their corporate offices. It belongs to them, right? So let them have it back!

A peaceful demonstration like this, sustained over some weeks, would make a powerful statement. I think this will make a powerful media impact as well… and thereby, an impact on the consciousness of people.

This would be the first step to making changes happen. Citizens, industry and government must first be made to acknowledge that there is a problem; then viable solutions will begin to emerge.

What say, fellow-citizens? I would appreciate your detailed responses to this idea.

Those who wish to join me in peaceful social action (as described) are urged to email me at friendlyghost.kk@gmail.com

Warmly,
Krish

http://friendlyghost.rediffiland.com
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