Slowest growth for India in 4 years
August 30, 2008
India’s economy in big trouble due to inflation and slowing growth caused by higher oil and food prices.An article written by Cherian Thomas publidhed in Shanghai Daily takes a look at India’s economic outlook :
INDIA’S economy grew at the slowest pace last quarter since 2004 as the fastest inflation in a decade and increased borrowing costs damped consumer spending.
Asia’s third-largest economy expanded 7.9 percent in the three months to June 30 from a year earlier, following an 8.8 percent gain in the previous quarter, the Central Statistical Organisation said in a statement in New Delhi yesterday. Analysts expected gross domestic product to increase 8 percent.
Inflation has almost tripled this year to 12.4 percent amid higher fuel and food prices, forcing the central bank to raise interest rates three times since June.
While growth is almost double, the average pace since India’s independence in 1947, it is slowing along with the other so-called BRIC economies of Russia, Brazil and China.
“We don’t expect India’s slowdown to be too dramatic,” said Philip Wyatt, a senior economist at UBS AG in Hong Kong. “There will be a gradual slowdown in GDP growth throughout this year – the industrial side of GDP is already slowing.”
India’s benchmark sensitive index, which has declined by a third this year, rose 3.7 percent to 14564.53 yesterday in the Bombay Stock Exchange. The rupee gained 0.4 percent to 43.935 against the US dollar. Finance Minister Palaniappan Chidambaram said yesterday that growth for the year to March 31, 2009, will be close to 8 percent.
India risks being overtaken by Russia as the world’s fastest expanding major economy after China this year. Russia’s economy may grow 7.1 percent in 2008, surpassing India’s 7-percent expansion this year, according to World Bank estimates.
Industry concerns
“High inflation and interest rates are issues that are bothering the industry as they have an impact on consumer demand and hurt corporate profitability,” said KV Kamath, chief executive officer at ICICI Bank Ltd, India’s second-largest lender. “Until we see inflation easing, it would be unrealistic to expect an easing of monetary policy.”
Services including banking, transportation and hotels grew 10 percent in the second quarter from a year earlier, slowing from an 11.2-percent gain in the previous three months, according to yesterday’s report. Agriculture increased 3 percent from an earlier advance of 2.9 percent.
Inflation can win or lose elections in India, where about 456 million people live below the World Bank’s poverty line of US$1.25 a day. Prime Minister Manmohan Singh’s Congress Party lost ground in nine of 11 state elections since January 2007 because of rising prices. General elections are scheduled to be held before May.
Singh said this month he doesn’t want growth to suffer in the battle against inflation.
In February, Singh wrote off US$17 billion of farm loans and this month increased salaries of about 5 million government employees by 21 percent to spur consumer demand.
The central bank’s forecast of 8-percent economic growth in the year to March 31 will be weakest expansion since 2003 and comes after Singh presided over record average annual growth of 8.9 percent since 2004.
The June-September monsoon, which accounts for four-fifths of the nation’s annual rainfall, was 39 percent below average in the week ended August 27, according to the weather office. A normal monsoon will help the country’s 234 million farmers harvest a bigger crop and boost rural incomes.
“Agriculture will hold the key for both industry and overall growth,” said Tushar Poddar, a Mumbai-based economist at Goldman Sachs.
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Iron ore handling charges rise by 11pct
August 30, 2008
RIZHAO Port Co, China’s biggest iron ore port, said it will raise handling charges by 11 percent for the steel making mineral, as stockpiles remain high.
From September 1, the handling fee will be raised to 30.50 yuan (US$4.46) a ton from 27.50 yuan, for imported iron ore at its port, the Shandong Province-based company told the Shanghai Stock Exchange yesterday.
China’s iron ore imports rose 22 percent in the first seven months to 269.6 million tons, according to customs figures. [Read more]
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Wind power boost
August 30, 2008
CHINA Power Investment Corporation, one of the country’s five power giants, said yesterday it was investing 2.8 billion yuan (US$410 million) in building a wind power plant, the largest of its kind in the northeastern Liaoning Province. Upon completion, the plant will have an installed capacity of 300,000 kilowatts, generating more than 700 million kilowatt-hours of power annually.
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China’s Baosteel Lowering Prices
August 30, 2008
Baosteel Group Corp. (SSX:600019), China’s largest steelmaker by output, has cut prices in response to low off-season sales in July and August and a cooling economy that has dented demand.
The cuts would apply to October and perhaps the entire fourth quarter, depending on demand. Steel prices cuts aren’t unusual in China at that time of year, however, and the reductions might only be temporary.
As the industry leader, the Shanghai-based company often sets price trends for the sector. It said the move was its first price reduction this year. It raised prices in each of the previous three quarters.
Price cut amounts and percentages vary by the type of steel, but cold rolled steel prices were cut by 300 yuan ($43US.81) per tonne, according to a price report released by the company on Tuesday.
The price of 1mm by 1,250 mm steel on Tuesday was 7,350 yuan per tonne. [Read more]
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China slowdown in auto, appliance demand to pressure flat steel prices
August 30, 2008
BEIJING (XFN-ASIA) – Prices for some flat steel products in China are likely to fall soon on slowing demand from auto manufacturers, appliance makers and other end-users, said Sun Jianliang, managing director of metals trading firm Shanghai J. Sun Trading Consultants Ltd.
“There is growing pressure to cut CRC (cold-rolled coil) prices due to slower demand from some plants, and some smaller mills probably have already begun reducing prices for some products,” Sun told XFN-Asia.
Sun was responding to reports that Baosteel would cut prices for cold-rolled steel products in the fourth quarter by 300 yuan. He added that he had not heard of any such plans by Baosteel.
Sun said domestic prices for long products remain buoyant on continued demand from the construction sector.
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