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Stimulus, the Chinese way - Views on News from Equitymaster
 
 
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  • Nov 10, 2008

    Stimulus, the Chinese way

    The Chinese join in, what about India?
    After the US and Europe, the Chinese have also got into the act now. The act of rescuing their domestic economy and in the process stalling the global slowdown. According to the International Herald Tribune (IHT), China has announced a stimulus package to the tune of US$ 586 bn spread over the next two years. That's nearly 15% of the dragon nationís GDP. China will take certain monetary and fiscal measures like its western counterparts. However, the main focus will be on public spending. It will carry out infrastructure and social welfare projects such as railroads, subways, airports and rebuilding earthquake hit areas.

    The move is not surprising as the Chinese economy, which registered growth in excess of 10% for 5 years, is feared to slow down to below 6% in the fourth quarter this fiscal. However, the timing of the announcement is noteworthy. It comes days before the Chinese President travels to the US for the G-20 meet. Since India will be part of the meeting as well, it will be interesting to see if New Delhi makes any announcements soon.

    It may be noted that the Indian commerce minister has said that the country will spend a little under US$ 5 bn on infrastructure projects like power and roads in the next 6 months. We wonder if that's enough!

    Is TV slowdown proof?
    A leading business daily carries two contrasting stories on the Indian electronic media today. One points out how advertisers plan to cut down nearly 20% to 24% of their budget for sports in FY09. These advertisers include firms from the auto, insurance, telecom, real estate and FMCG spaces. The other story mentions how most direct to home (DTH) operators are in the process of introducing the high-end personal-video-recorder service in India.

    We find the contrast interesting because immediate ad spends reflect a slow down in the economy and the margin pressures being felt by India Inc. However, the intense competition in the DTH space and new product launches clearly signifies that the India growth story and that of its bulging middle-class will outlast any slowdown effects we might see in the immediate future.

     

     

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