Author: Golden Horde
Date: 04-25-12 20:03
Indian economic growth for the 2012-13 financial year would be 5.3%, far lower than the government's projection of 7.6%. Indonesian economic growth will be 6,5 % or more for the same financial year that mean Indonesian economic growth will overtake India this year.
Standard and Poor's warns India on credit rating
BBC News, 25 April 2012
Ratings agency Standard and Poor's has warned that India's worsening deficits and diminishing growth prospects could lead to a downgrade of its economy.
The agency retained the rating at BBB-, but said it was changing its outlook from stable to negative.
It said economic growth for the 2012-13 financial year would be 5.3%, which is far lower than the government's projection of 7.6%.
Finance Minister Pranab Mukherjee said there was no cause for panic.
"I am confident that the economy will grow at around 7%," Mr Mukherjee said.
"We will be able to pursue fiscal deficit and it will be around 5.1% of the GDP."
Standard and Poor's credit analyst Takahira Ogawa said in a statement on Wednesday that India's investment and economic growth prospects had slowed and its current account deficit had also widened, "resulting in a weaker medium-term credit outlook".
"We are revising the outlook on the long-term ratings on India to negative," he said.
In February, government statistics showed that India's economic growth was likely to dip below 7% for 2011-12.
Officials said the downward revision reflected the slowdown in the mining, agriculture and manufacturing sectors.
Analysts say industry has been hit by frequent interest rate rises, designed to curb soaring inflation.
They point to global market uncertainty, particularly in the eurozone, and apparent policy paralysis in the Indian government as contributing to the slowdown.
Inflation has proved a persistent problem. Interest rates have been raised 13 times since March 2010 in an effort to slow price increases.
Despite the growth downgrade, the main Sensex stock exchange has continued to perform well - up nearly 15% this year - while the under-fire rupee has risen 8% on its 2011 close.
<a href="http://www.asiawind.com/forums/profile.php?f=11&id=16965">Martin Su</a> wrote:
> In a nutshell, the Indian government is spending too much
> with money that it doesn't have. The Indian deficit and debt
> are skyrocketing. Also, the Indian balance of trade is in
> shambles with a large trade deficit. These factors are
> putting severe downward pressure on the Indian rupee.
> Basically, these are the same problems that afflicted Greece.
> However, India has a few tricks it can use to temporarily
> stave off a financial collapse. Firstly, India can use the
> hard currency from migrant remittances to prop up the rupee.
> Secondly, India can sell off national assets to garner more
> hard currency. Thirdly, India can open up its retail sector
> to attract a large inflow of hard currency. Fourthly, India
> can dip into its foreign exchange reserves to prop up the
> Anyway, India has a limited number of tricks to artificially
> support the rupee before an inevitable decline. The only
> long-term solution is to bring Indian spending under control,
> such as reducing the $40 billion military budget. Don't hold
> your breath though. Indian politicians (just like the Greeks)
> are notorious for avoiding hard choices.
> Occasionally, I'll post deathwatch updates on the Indian
> rupee. The citation below shows the Indian rupee has fallen
> back to 52.52 rupees per U.S. dollar.
> "Indian rupee posts biggest fall in almost a month
> April 24, 2012
> RECORDER REPORT
> The rupee ended at 52.52 to the dollar, down sharply from
> Friday's close of 52.07/08, and making this the currency's
> biggest one-day fall since March 29, according to Thomson
> Reuters data."
> Interestingly, you will notice India's nominal GDP is
> shrinking fast. India's 2011 GDP was 78.8 trillion rupees
> 78.8 trillion Rupees / 52.52 Rupees per U.S. dollar = $1.50
> trillion U.S. dollars (current Indian 2011 GDP in U.S.
> dollars), which will keep falling if the Rupee keeps falling
> against the U.S. dollar.
> You will notice the current market rate Indian GDP of $1.50
> trillion is substantially less than the IMF's "official"
> outdated 2011 GDP of $1.67 trillion for India (see
> Martin Su