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Another stimulus package coming? - Views on News from Equitymaster
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  • Jan 2, 2009

    Another stimulus package coming?

    As per a leading business daily, the Indian government plans to announce another stimulus package with an impact of Rs 1,000 bn. It will focus on investments in the infrastructure sector over the next two years. A private sector firm can begin an infrastructure project with a 15% contribution to the capital with the balance coming from the public sector.

    The Infrastructure Investment Finance Company Ltd. (IIFCL) will accumulate Rs 400 bn for this purpose. It has already raised Rs 100 bn in tax free bonds and will raise another Rs 300 bn from the same. An investment of Rs 400 bn will stimulate further activity of Rs 600 bn taking the total impact to Rs 1,000 bn.

    It may be noted that investments from the private sector has come down to a trickle. Hence, these steps are definitely welcome. Infrastructure building stimulates the core industries like steel, cement and engineering, which then trickles down to other industries. However, as it is so often in India, the key is not how good the plan sounds. It lies in how efficiently it is actually implemented.

    Forbes loves Anil Ambani
    In the last annual ranking, Forbes had pegged Anil Ambani for adding the maximum wealth. Now, the magazine has given him the top spot for having lost the maximum wealth in a list of 'Billionaire Blowups of 2008'. But he is not alone in the list. Fellow Indians - Lakshmi Mittal, Mukesh Ambani and KP Singh - join him at the top of the list.

    Of course, one should not get too carried away with market caps. Just because stock quotes are precise numbers, they do not necessarily measure the worth of a company or its promoter. With India gradually adopting more free market methods, the country's entrepreneurial energy is finally finding expression. Although the liquidity bubble mistakenly attached ridiculous market caps to this story, we believe it will be an equal mistake to write off India's businessmen.

    Inflation falls further
    Inflation rate is now at its 10-month low. For the week ended December 20, the figure came in at 6.38% as compared to 6.61% in the previous week. The decline is on the back of declining prices in all the three constituents of the wholesale price index (WPI) - primary articles, fuel and manufactured products. Fuel contributed the most on the back of lower jet fuel and light diesel oil prices. With inflation coming under control, all eyes are now on the Reserve Bank of India (RBI) to bring down interest rates further.



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