United we stand, says China to India - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

United we stand, says China to India

Mar 5, 2009

India-China unite against protectionism
Although China may choose to disagree with India on most of the latter's foreign policies, it has chosen to unite with India on an issue that is impacting it as much - protectionism by developed economies. It may be recalled that US President Obama in his maiden budget speech had said that his administration would do away with tax breaks for firms outsourcing jobs to overseas destinations, including India. Nearly 1,000 US firms, which have shipped their jobs overseas, are expected to be affected by the proposed elimination of tax incentives.India has been opposing the protectionist policy citing that during the time of economic crisis developed economies must ensure that there is no hindrance in the flow of investments to developing countries. China itself has witnessed considerable drop in its exports to the US and nearly 670,000 small-scale export oriented enterprises have been shut down in the economy leading to loss of 6.7 m jobs.

Probably the unison of the two fastest growing economies, at a time when most the world is facing recession, may cause a change of mind in the developed world.

Fifth rate cut in as many months
Having exhausted almost all means of fiscal stimulus and encouraged by the drop in inflation (measured in terms of WPI), the RBI has made a final attempt at reviving the economy with another monetary stimulus. The central bank cut the benchmark interest rates - repo and reverse repo rates - for the fifth time yesterday since October 2008 after economic growth slowed to a five-year low. While the repo rate (at which banks borrow from the RBI) was dropped to a record low of 5% from 5.5%, the reverse repo rate (at which banks park their funds with the RBI) was lowered to 3.5% from 4%.

Despite the RBI's attempts at lowering the cost of funds for banks, concerns over rising credit risk together with the slowing of economic activity have moderated credit growth in recent months. Even as some public sector and private sector banks have cut lending rates in response to the RBI's monetary policy stance, according to the latest data, non-food bank credit has decelerated further to 19.7% YoY in February 2009 as compared to 22.7% YoY in February 2008.

India's burgeoning government debt which is nearly equivalent to 80% of GDP has been a matter of considerable concern in recent months. The government expects its borrowings next year to increase to a record Rs 3.6 trillion (US$ 72 bn). Citing this concern, global rating agency Standard & Poor's has even downgraded the nation's sovereign rating outlook to negative from stable. Yields on India's benchmark 10-year government bonds have also risen by 1.2% (to 6.4%) in the last two months because of the deteriorating government finances.

India's vulnerability to economic crisis
In what may offer some comfort amidst the distress, the International Monetary Fund (IMF) in its latest report on global economic crisis has categorised India as 'moderately vulnerable'. The global economic body, has however, warned that the crisis has shifted to the world's poorest nations and 22 countries may need as much as US$ 25 bn in additional funding in 2009 to cope with the downturn. Under current IMF projections, the total balance-of-payments shock in 38 developing countries could amount to around US$ 165 bn and increase to as much as US$ 216 bn under a worst case scenario.

Developing economies have been particularly affected by the falling demand for exports and a dramatic slowing in remittances from overseas workers as the US and European economies witness severe contraction. Further, according to the IMF, about half of all low-income countries are expected to witness a sharp drop in foreign direct investment (FDI).

Equitymaster requests your view! Post a comment on "United we stand, says China to India". Click here!

  

More Views on News

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

ONGC to NMDC: Here are 5 Stocks Value Investors Should Closely Track (Views On News)

Nov 26, 2021

Before investing in value stocks, research the company and gain insight into why the market is discounting it.

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

Dollar Index (DXY) Headed to 100 (Fast Profits Daily)

Nov 30, 2021

This is why I think the dollar is about to get stronger.

How to Pick the Best Growth Stocks in FY22 podcast (Views On News)

Nov 30, 2021

If growth investing interests you, here's what you need to know.

More Views on News

Most Popular

All You Need to Know About Primary and Secondary Markets

A look at the various types of primary and secondary markets and the key differences between them.

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

How to Find Your Next 10-Bagger in this Market (Profit Hunter)

Nov 19, 2021

The #1 make or break factor in your portfolio you shouldn't ignore.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Nov 30, 2021 (Close)

MARKET STATS