More room for stimulus - 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?  

More room for stimulus

Mar 23, 2009

As governments across the developed world contemplate on printing currencies to evade a prolonged recessionary cycle, we are probably better off. That is because we have more headroom to cut interest rates and take recourse through monetary policy measures even as fiscal measures stand deferred until the elections. The Planning Commission deputy chairman Mr. Montek Singh Ahluwalia has indicated that while the new government will almost certainly continue the fiscal stimulus policies, the Reserve Bank of India (RBI) will in the meanwhile drive policy rates to levels required to revive investment and spur consumption in Asia's third-largest economy. It must, however, be understood that be it by way of printing currencies or lowering interest rates, the impact that these liquidity pumping measures will have on the economy will be similar. If the fact that the headline inflation level (measured in terms of WPI in India) is heading towards zero is the rationale behind Mr. Ahluwalia's indication, excessive liquidity may fail to relieve the inflationary pressure at the consumers' level (measured in terms of CPI) which is still in double digits.

Indian IT majors vie for US$ 6 bn government projects
Its 'home sweet home' for the big boys of Indian IT. While there is a slump in demand from cash-strapped global customers for new technology services, the domestic market is increasingly looking good for these IT players. Particularly, with several big deals from the government up for grabs, with contract sizes matching the ones available overseas.

The government departments, now taking the nascent steps to become technologically equipped, have plans to spend as much as US$ 6 bn on IT projects. This number is only set to increase with the central and several state governments planning to introduce e-governance and digitise everything from land records to tax filing. Companies such as TCS, HCL Tech and Wipro have already won significant government business in recent months, while Infosys has recently bid for a railway project related to creating a Locomotive Management System and ERP implementation.

But what may dampen the spirits of the IT companies looking for a share of the pie is the long time frame for government project approvals. As per Nasscom, three years is the typical time frame for such projects. Case in point being the Rs 10 bn project for digitising passport records, which took the ministry of external affairs almost three years to conclude and was finally awarded to TCS.

Empty shop floors bring back memories of Great Depression
If the financial turmoil was not enough, the rapid decline in manufacturing activity the world over has spread global anxiety with regard to the longevity of the economic slump. The depth and speed of the plunge in manufacturing activity is bringing back memories of Great Depression for several economists.

As per the International Herald Tribune, in Europe where manufacturing accounts for nearly 20% of GDP, industrial production is down 12% YoY from a year ago. Even in China, which is called the workshop of the world, production growth has slowed and exports have fallen by nearly 25% resulting in millions of factory workers being laid off. India's manufacturing sector, which accounts for 16% of her GDP, recently recorded its first quarterly production decline in more than a decade.

Since April 2008, despite tax cuts and a US$ 64 m stimulus package, Indian textile makers have slashed half a million jobs. Although the US is perceived to be relatively less dependant on its manufacturing activities, the same still contributes two-thirds of US exports. Lesser production of defense equipments, locomotives, medical devices, pharmaceuticals and some high-tech products are expected to hurt US' growth prospects.

Equitymaster requests your view! Post a comment on "More room for stimulus". 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.

Top 5 Stocks FIIs Bought and Sold Recently (Views On News)

Nov 25, 2021

FIIs have largely stayed on sidelines for the past few months, withdrawing money across emerging markets.

Everything to Know About the Upcoming Tega Industries IPO (Views On News)

Nov 27, 2021

Are you looking to apply for the Tega Industries IPO? You must ensure that you know specific details.

3 Charts on Why the Indian Bull Looks Tired podcast (Views On News)

Nov 27, 2021

Rahul Shah explains the key reasons behind his pessimistic outlook on the stock market.

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.

How to Hit Rs 100 Crore Wealth in Your Lifetime (Equitymaster Wealth)

Nov 15, 2021

This is how you can achieve the ambitious goal of a net worth of Rs 100 crore.

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.

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 26, 2021 (Close)

MARKET STATS