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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Yuan falls against U.S. dollar for 11 straight days
August 12, 2008
– China’s currency on Tuesday dropped against the strengthening U.S. dollar for the 11th consecutive day, the longest continuous fall since it was unpegged from the dollar in July 2005.
The central parity rate of the yuan, or Renminbi (RMB), was 6.8659 to the dollar, according to the China Foreign Exchange Trading System. The reference rate was down 21 basis points from the previous trading day. [Read more]
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Recent Economic Facts on China’s Economy
August 7, 2008
Beijing, the capital of China — one of the world’s fastest growing economies — is hosting the Olympics Games from Aug.8 to 24 and the Paralympic Games from Sept.6 to 17.
Some facts about the economy:
GDP: gross domestic product(GDP) totalled 13.0619 trillion yuan (1.9062 trillion U.S.dollars) in the first half of 2008, a 10.4 percent increase year on year.
GDP was 24.6619 trillion yuan in 2007, ranking fourth in the world.
FOREIGN TRADE: Over 230 countries and regions trade with China. Foreign trade was 1.2342 trillion U.S.dollars in the first six months of 2008, up 25.7 percent year on year. 2007′s total was 2.1738 trillion dollars.
Export volume was 1.2180 trillion U.S. dollars, and import volume was 955.8 billion dollars in 2007.
FOREIGN EXCHANGE RESERVE: 1.8088 trillion U.S.dollars by the end of July 2008.
PEOPLE’S INCOME: China’s urban per capita disposable income was 8065 yuan in the first half of 2008, up 14.4 percent year on year; that of rural residents 2528 yuan, up 19.8 percent year on year.
2007′s urban per capita disposable income was 13786 yuan in 2007, and of rural residents 4140 yuan.
FISCAL REVENUE: totaled 5.13 trillion yuan in 2007, growing about 32.4 percent year on year.
ECONOMIC STRUCTURE: manufacturing and tertiary industry are the driving force behind economic growth.
Tertiary industry is the new fast-growing sector of the economy and is playing a leading role in creating jobs.
DOMESTIC TRADE: retail sales of consumer goods totaled 8.921 trillion yuan in 2007, growing 16.8 percent year on year. Urban retail sales were 6.0411 trillion yuan, up 17.2 percent; rural sales were 2.8799 trillion yuan, up 15.8 percent.
CONSTRUCTION INDUSTRY: increased 1.4014 trillion yuan in 2007, up 12.6 percent year on year.
Fixed asset investment in 2007 was 13.7239 trillion yuan, a year-on-year increase of 24.8 percent. Urban investment was up 25.8 percent to 11.7414 trillion yuan; rural investment 1.9825 trillion yuan, up 19.2 percent.
TAX REVENUE: 49.449 trillion yuan (7.2719 trillion U.S.dollars) in 2007, up 11.813 trillion yuan, or 31.4 percent year on year.
GRAIN OUTPUT: China’s grain output in 2007 totaled 501.5 million tonnes, growing about 3.5 million tonnes compared with last year, up 0.7 percent. Summer grain output was 115.34 million ton, up 1.3 percent; autumn grain 354.2 million tonnes, up 0.6 percent.
TOURISM: China is the world’s fourth largest country for inbound tourism. The number of oversea tourists was 131.87 million in 2007. Foreign exchange income was 41.9 billion U.S. dollars, the world’s sixth in 2007. The number of domestic tourists totaled 1.61 billion, with a total income of 777.1 billion yuan.
According to the World Tourism Organization, in 2020, China will become the largest tourist country and the fourth largest for overseas travel.
Source: Xinhua
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Chinese economy expected to maintain stable, fast growth
August 3, 2008
BEIJING, July 27 (Xinhua) — The Chinese economy was likely to maintain stable and fast growth this year, despite being beset with problems and uncertainties, as fundamentals of the economy remained unchanged, Yao Jingyuan, National Bureau of Statistics chief economist, said on Sunday.
He made the remark at a forum held here on energy conservation and emissions reduction and corporate social responsibilities. The forum was jointly sponsored by the international cooperation center of the National Development and Reform Commission and China Association of Resources Comprehensive Utilization.
According to Yao, the fundamental forces shoring up the Chinese economy — industrialization, urbanization, market-oriented drive and internationalization — had undergone no big changes and would continue to function as major drivers of the economy.
Yao said China was at in the middle stages of industrialization and there was still a long way to go before the nation entered the post-industrialization era. In quite a long period of time ahead, industrialization would continue to be a major driving force for the Chinese economy, he added.
He used the automotive sector as an example.
In 1992 China produced 1 million motor vehicles. The annual auto output doubled and reached 7.27 million units in 2006 and 8.8million the following year. The production was expected to top 10 million units this year.
Over the past 30 years, China’s urban population expanded from 170 million to 570 million. But the urbanization ratio, measured by the number of urbanites against total population in a city, stood at 44 percent at present, still far behind the 70 percent to90 percent of developed nations.
The multitudes of migrants coming to cities would create a huge demand for housing and consumption goods, such as home electrical appliances, so urbanization would continue to drive the national economy forward, Yao said.
He believed the most outstanding challenges China faced were an unbalanced economic structure and big inflationary pressure.
He noted the Chinese economy now relied heavily on investment, exports and manufacturing, with agriculture remaining weak and the service sector, which could provide a large amount of jobs, claiming a small share.
Last year, the service sector accounted for only 40.1 percent of the country’s gross domestic product (GDP), much lower than the world average of 70 percent and even lower than the developing nations’ 51 percent average.
As for the inflationary pressure, Yao said he was confident about the price movements in China in the second half. The government had put macro economic control, particularly inflation curbs, at the top of its development agenda, and was making numerous measures, including agriculture boosting policies, Yao added.
Source: Chinaview.cn
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US economy grows faster than expected in Q1
June 30, 2008
The US economy grew at an annual rate of 1 percent in the first quarter of this year, faster than the 0.9 percent pace estimated a month ago, the Commerce Department reported Thursday.The first-quarter growth rate for gross domestic product or GDP followed growth paces of 0.6 percent in the final three months of 2007 and 4.9 percent in the third quarter of last year.
“The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE) for services, exports of goods and services, and federal government spending that were partly offset by negative contributions from residential fixed investment and PCE for durable goods,” said the department when releasing the report.
In the January-to-March period, consumer spending, which accounts for two thirds of overall economic activity, rose at an annual rate of 1.1 percent, down from a 2.3 percent growth rate in the previous quarter.
Spending on housing projects plunged 24.6 percent, marking the ninth consecutive quarterly decline. The plunge, however, was not as sharp as previously estimated.
Businesses’ spending on equipment and software declined 0.6 percent, reversing a 3.1 percent gain in the prior quarter.
Exports of goods and services increased 5.4 percent after having gained 6.5 percent, while imports of goods and services decreased 0.7 percent after having declined 1.4 percent in the fourth quarter of last year.
Meanwhile, federal government spending in the first quarter rose at a rate of 4.3 percent, much stronger than the 0.5 percent growth pace in the previous quarter.
“Core” prices, which exclude volatile energy and food and are an inflation gauge closely watched by the Federal Reserve, rose at a rate of 2.3 percent in the first quarter. That was down from a 2.5 percent pace in the prior quarter.
GDP measures the value of all goods and services produced within the United States. The first-quarter GDP data will be revised once more by the department.
Source: Shanghai Daily
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