Favorable Economic Winds Help India’s Economy Surge

Of the BRIC economies, Brazil is struggling as commodity prices fall, Russia is headed toward recession due to weak oil revenues and sanctions from Western nations, while China is slowing down. However, in India the stock market and rupee are surging; multinational companies are looking to start new operations or expand their current ones; foreign investment rules have been relaxed for insurers, military contractors, and real estate companies; and a broad tax overhaul is underway. Whether India’s momentum is sustainable or short-lived depends on whether Prime Minister Modi can push through deeper reforms.

The New York Times quotes Shailesh V. Haribhakti, the chairman of MentorCap Management, a boutique investment bank in Mumbai as saying, “All the circumstances have come together to make manufacturing and growth happen.”

With prices of crude halved, fuel costs have dropped and along with it, transport expenses and inflation. The country’s chronic budget deficits are narrowing. “We’ve got essentially a $50 billion gift for the economy,” said Raghuram G. Rajan, the governor of the Reserve Bank of India.

Modi has many economic issues on his plate that he needs to attend to: expanding the private sector’s role in coal mining, a government-dominated industry; accelerating infrastructure projects; replacing state taxes on goods that cross state borders with a national tax; and acting on bills introducing longer term reforms.

Jayant Sinha, the minister of state for finance said that the government had begun making significant changes and that “there are a lot of inherited, legacy issues” they have had to work through such as budget deficits and persistent inflation. “You have to give us a little bit of time for every business to feel the difference,” he said.

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February 19, 2015   No Comments

India’s Economy is Now Growing Faster than China’s

Last year, economists at the World Bank, the International Monetary Fund, and Goldman Sachs  suggested that within a year or two, India’s economy might be growing more quickly than China’s.  But official statistics published on February 9th revealed that India’s GDP rose by 7.5% in 2014, a shade faster than China’s economy managed over the same period (see chart).

India and China GDP Comparision

India and China GDP Comparison

India’s statistics were “re-based” a week ago and the base year for calculation of GDP was revised from 2004-05 to 2011-12, and partly as a result, GDP growth for 2013-14 was also revised from 5.1% to 6.9%. Economists agree that the economy is doing better now than it was in 2013 and that India has been a rare bright spot among emerging markets.

The economy is likely to pick up further since the recent falls in commodity prices are a godsend for India which imports 80% of the oil it consumes; Indians are happy that the double-digit inflation in the country has decreased for this trend has prompted India’s central bank to reduce interest rates in January, from 8% to 7.75%.

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February 17, 2015   No Comments

India’s Billionaire Count Crosses Russia and the U.K.

According to the  Hurun Global Rich List, India leapfrogged Russia and the United Kingdom to third place with 97 billionaires living in the country, 27 more than 2014. Manufacturing, pharma and TMT (technology, media, and telecom) are the preferred sectors. The combined wealth of Indian billionaires, mostly headquartered in Mumbai, is $266 billion. Mukesh Ambani  of Reliance Industries ($20bn, rank 41) continue to be the richest Indian.

The U.S. stands first with 537 billionaires, followed by China with 430. In all, Hurun counted 2,089 of the world’s richest people to publish its annual list of dollar billionaires for 2015 reports Quartz.

Where the World's Top 5 Billionaires Are

Where the World’s Top 5 Billionaires Are

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February 12, 2015   No Comments

What costs less in India than in China?

CNN Money says: India’s airline industry is a mess. Taxes are sky-high, infrastructure is poor and profit margins are razor thin. A string of carriers have gone out of business, and many others are struggling to stay afloat.  For now, howevery, India has the least expensive  flights on the earth.

In India, airlines charge an average $10.20 to travel 62miles, according to a survey by GoEuro. Air travelers in China pay twice for the same distance, and Brazilians pay four times more. Even India’s railways charge a higher price per mile.

The airlines in India compete with each other to capture market share to the extent that sometimes they operate flights at a loss. Price-conscious consumers are the ultimate winners as well as the airline that can survive the price wars. Kingfisher Airlines went out of business; Spice Jet was bailed out, and the national carrier Indian Airlines has reported a cumulative debt of $16 billion. However, funds from foreign investors have provided a boost, and analysts hope that Prime Minister Narendra Modi will push through meaningful reforms. The potential for growth is huge since India’s rapidly growing middle-class has the means to spend on luxuries like air travel.

“There are 25 to 30 million people that use airplanes in India, whereas there are nearly 300 million that can actually afford to travel but don’t because of unavailability of flights or the lack of airports,” says Anurag Bhatia, Executive Director of Bird Group, a provider of aviation services to India’s biggest airports. The Modi-led government has pledged to build 200 low-cost airports in tier-II and tier-III cities across the country over the next 20 years to boost regional connectivity.

 

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January 27, 2015   No Comments

Level of Stress in 74 Countries Ranked, India is #14

Bloomberg has ranked the incidence of stress in the lives of people in 74 countries of the world. Seven equally weighted variables were considered in the rankings: annual homicide rates, GDP per capita on a purchasing-power-parity basis, income inequality, corruption perception, unemployment, urban air pollution, and life expectancy.

Life is most stressful in Nigeria which was ranked #1, Pakistan was at #7, India at #14, China at #29 and the U.S. at #54. The least stressed country was Norway at #74.  Only countries with data available for all seven variables were included. Find your country in the graphic below:

Stress Rankings of Countries

Stress Rankings of Countries

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January 26, 2015   No Comments