Trade deficit is being coolly ignored
Oh, alright! This time we’ll not beat abo
ut the bush with smart words to make this article an easy read. We’ll bite the bullet right away. India’s trade deficit reached a worrisome $56.74 billion figure for FY 2006-07, widening a killing 40.5%! But what’s got our goat is that not many seem to be making any bones about it! Of course, a growing economy has its own ill-effects (or side effects, as government supporters would love to portray), but even if the 30.3% increase in the oil import bill can be termed as transitory, considering oil prices to become moderate or even to fall, the same would not hold true for the non-oil import bill, which has seen a dramatic rise for past some time now, growing by 24.74% over the last fiscal. “Th e trend is likely to persist as demand manifest through non-oil remains strong. We expect this component to grow at around 22%,” opines Sachchidanand Shukla, Economist, Enam. Truly, while exports are likely to be sluggish due to expected slow-down in the US economy, imports are likely to grow above 22% due to continued non-oil imports. Even in March 2007, while exports grew y-o-y by only 8.84%, imports grew by 14.45%. Worse, non-oil imports are contributing less to import bill than oil imports. Apr- Nov 2006 figures show that non-oil imports made up 67% of the total imports, compared to 70% last year. As Shukla further states, “The situation is going to deteriorate further.”
However, as long as non-oil imports largely comprise capital goods, which have a positive impact on the economy by augmenting the productive capability, there is less cause of worry. Creditably, capital goods, which formed 21% of non-oil imports in the period Apr-Nov 2005, increased to 22.69% in the same period in 2006. But still, as the May ‘07 Asia Markets Research report by JP Morgan shows, the RBI and Ministry of Finance act at loggerheads on capital flow policies, thus exacerbating the issue. Will they change? We hope they at least start discussing the problem of deficit!
Oh, alright! This time we’ll not beat abo
ut the bush with smart words to make this article an easy read. We’ll bite the bullet right away. India’s trade deficit reached a worrisome $56.74 billion figure for FY 2006-07, widening a killing 40.5%! But what’s got our goat is that not many seem to be making any bones about it! Of course, a growing economy has its own ill-effects (or side effects, as government supporters would love to portray), but even if the 30.3% increase in the oil import bill can be termed as transitory, considering oil prices to become moderate or even to fall, the same would not hold true for the non-oil import bill, which has seen a dramatic rise for past some time now, growing by 24.74% over the last fiscal. “Th e trend is likely to persist as demand manifest through non-oil remains strong. We expect this component to grow at around 22%,” opines Sachchidanand Shukla, Economist, Enam. Truly, while exports are likely to be sluggish due to expected slow-down in the US economy, imports are likely to grow above 22% due to continued non-oil imports. Even in March 2007, while exports grew y-o-y by only 8.84%, imports grew by 14.45%. Worse, non-oil imports are contributing less to import bill than oil imports. Apr- Nov 2006 figures show that non-oil imports made up 67% of the total imports, compared to 70% last year. As Shukla further states, “The situation is going to deteriorate further.”However, as long as non-oil imports largely comprise capital goods, which have a positive impact on the economy by augmenting the productive capability, there is less cause of worry. Creditably, capital goods, which formed 21% of non-oil imports in the period Apr-Nov 2005, increased to 22.69% in the same period in 2006. But still, as the May ‘07 Asia Markets Research report by JP Morgan shows, the RBI and Ministry of Finance act at loggerheads on capital flow policies, thus exacerbating the issue. Will they change? We hope they at least start discussing the problem of deficit!
Source : IIPM Editorial, 2007
Pro-reactive!
A new defi nition for SEBI’s moves
You may ask, why the term ‘pro-reactive’? On one hand, while the recent
moves of SEBI seem quite sincere in attempting to regulate the market (proactive, we should say), on the other hand, their response to various recent scams have been straightforward knee-jerk jumps (reactive, we should mention again). And ergo, the term ‘pro-reactive’. First the good news. In a bid to rewrite the rule-book that regulates the capital market, SEBI has roped in two national law schools, a law firm and two legal experts to implement the changes, and has decided to convert all existing circulars, including guidelines (as these do not have statutory backing) issued by it, into regulations. That this perhaps is SEBI’s biggest policy restructuring exercise is a mammoth understatement. Should this be lauded? Of course, and with encouraging argumentative support.
At the same time, without taking away their most deserving credit, the fact also is that SEBI has failed time and again to forecast structural faults right within the system. A major case to point being the recent IPO pricing scam involving promoters, which came up in the wake of alleged price manipulation in the shares of newly listed companies (e.g. MindTree Consulting). Of course, SEBI has barred the perpetrators from any further trading. Further, the market regulator – apart from mandatory grading of IPOs to stricter disclosure norms – now plans to fix a first-day price band for stocks after their IPO to check any irregular movements in the scrips. “Price is determined by grey market scenarios... It may not be of much use... In any case, the first day price band is (again) a cautious approach adopted by the market regulator,” complains R. K. Gupta, MD, Taurus Mutual Fund.
Well, without an iota of doubt, good intentions and reasonably robust systems are backing SEBI’s latest drives. However, despite various analysts and experts berating SEBI’s lackadaisical approach in shooting the target before it moves, SEBI still remains at the mercy of market happenings, rather than the same being vice versa. And all it requires to correct this is not a mammoth restructuring exercise, but just a change of philosophy... from pro-reactive to, we said it, reactive!
For Complete IIPM Article, Click on IIPM Article
A new defi nition for SEBI’s moves
You may ask, why the term ‘pro-reactive’? On one hand, while the recent
moves of SEBI seem quite sincere in attempting to regulate the market (proactive, we should say), on the other hand, their response to various recent scams have been straightforward knee-jerk jumps (reactive, we should mention again). And ergo, the term ‘pro-reactive’. First the good news. In a bid to rewrite the rule-book that regulates the capital market, SEBI has roped in two national law schools, a law firm and two legal experts to implement the changes, and has decided to convert all existing circulars, including guidelines (as these do not have statutory backing) issued by it, into regulations. That this perhaps is SEBI’s biggest policy restructuring exercise is a mammoth understatement. Should this be lauded? Of course, and with encouraging argumentative support.At the same time, without taking away their most deserving credit, the fact also is that SEBI has failed time and again to forecast structural faults right within the system. A major case to point being the recent IPO pricing scam involving promoters, which came up in the wake of alleged price manipulation in the shares of newly listed companies (e.g. MindTree Consulting). Of course, SEBI has barred the perpetrators from any further trading. Further, the market regulator – apart from mandatory grading of IPOs to stricter disclosure norms – now plans to fix a first-day price band for stocks after their IPO to check any irregular movements in the scrips. “Price is determined by grey market scenarios... It may not be of much use... In any case, the first day price band is (again) a cautious approach adopted by the market regulator,” complains R. K. Gupta, MD, Taurus Mutual Fund.
Well, without an iota of doubt, good intentions and reasonably robust systems are backing SEBI’s latest drives. However, despite various analysts and experts berating SEBI’s lackadaisical approach in shooting the target before it moves, SEBI still remains at the mercy of market happenings, rather than the same being vice versa. And all it requires to correct this is not a mammoth restructuring exercise, but just a change of philosophy... from pro-reactive to, we said it, reactive!
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2007
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative
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