India is the second fastest growing major economy in the world ,when measured in terms of USD exchange rate, is the twelfth largest economy in the world, with a GDP of US $1.25 trillion (2008) and the third largest in Asia behind Japan and China--with total GDP of around $797 billion.Indian GDP rose by around 8% from 2002 to 2006 and 9.4% in 2007. It is the third largest in terms of purchasing power parity. India has been considered as most favorable destination as far as foreign investments are concerned because of more visibility, lower costs and access funds available for investment.
India has been ranked 64th in a global list of best countries to do business as against 51st place last year.A recent survey conducted by the Japan Bank for International Cooperation (JBIC) shows that India has become the most-favored destination for long-term Japanese investment. Survey Indicates nearly 70% of Japanese manufacturers regard India as the most attractive country to do business over the next 10 years
During 2007, Indian firm Anchor Electrical was sold out to Osaka-based Matsushita while Lumax industries were acquired by Japan’s Stanley Electric world leader in illumination products. In 2006, the Poonawala Group sold its stake in Eagle Seals and Systems to Japan’s Eagle Industry. The automobile sector has been the area where the Japanese presence is the most noticeable in addition to the sectors like machine tools, electronics and IT. Finance sector also seems to be one of the attractive sectors being explored by Japanese companies. While Shinsei Bank has set up its investment arm in India, Nomura Holdings, Japan’s largest securities firm, has already expressed its intent to venture into Indian markets. According to India Brand Equity Foundation, Japan ranks fifth in terms of cumulative FDI equity inflow into India. Japan’s FDI in India is projected to be around $5.5 billion over 5 years from 2006 to 2010.
According to a data released by U.S. Commerce Department its Cumulative investment in the Asia-Pacific region increased by $48.5 billion to $453.9 billion in the year 2007.Investments in the rising economic giant surged 48 percent to $13.6 billion in 2007 from a year earlier while its Investments in Asia’s giant china witnessed a surge of 21 percent to $28.2 billion. However, In Thailand US Investments soared 37 percent to $14.9 billion largely because of investments in petroleum refining, banking and mining while investments in Malaysia jumped 25 percent to $15.5 billion.
Indian investment environment is considered better than rest of the countries due to availability of trained investment professionals, establishment of legal and financial system, and internationalization of service industries.This provides a favorable investment eco-system for foreign investors. India established 23 stock exchange markets and formed a multi-layer capital market system.
Friday, August 01, 2008
India's Inflation Accelerates to Fastest Since 1995
India's inflation accelerated to the fastest pace since 1995, vindicating the central bank's decision to raise borrowing costs for the third time in two months.
Wholesale prices rose 11.98 percent in the week to July 19, after gaining 11.89 percent in the previous week, the commerce ministry said in New Delhi today. Economists had expected a 12.03 percent increase.
Governor Yaga Venugopal Reddy this week raised the central bank's repurchase rate by a half-percentage point to 9 percent, sacrificing growth to tame runaway inflation. The Reserve Bank of India may increase the benchmark rate again in the next three months, according to economists in a Bloomberg News survey.
``The message is clear that inflation will dominate over growth,'' said Sonal Varma, a Mumbai-based economist at Lehman Brothers Inc. ``We expect growth to slow to 7.3 percent this fiscal year due to rising headwinds from sharp rate increases, rising commodity prices and slackening foreign demand.''
Reddy, due to retire in September, this week also raised the cash reserve ratio to 9 percent from 8.75 percent and said the bank had ``headroom'' to further tighten monetary policy.
Higher energy and commodity prices are fuelling inflation across Asia, prompting central banks to raise borrowing costs. Pakistan's central bank on July 29 raised its key rate for the third time this year to tame inflation running at the fastest pace in three decades. Indonesia, Thailand and the Philippines have all increased interest rates in the past month.
Inflation Stable
``Inflation, on a week-on-week basis, has continued to remain stable,'' the finance ministry said in a statement today.
Inflation in the week accelerated because of an increase in the prices of pulses, fruits, spices and sugar. The manufactured price inflation rose 10.82 percent in the week ended July 19, compared with a 10.72 percent gain in the previous week, today's report showed.
India's central bank raised its year-end inflation forecast to 7 percent from 5.5 percent and lowered its growth estimate for the year ending March 2009 to 8 percent from an earlier prediction of 8 percent to 8.5 percent.
Economists expect inflation to remain at elevated levels in the coming months.
``We expect double-digit inflation to continue,'' said Rohini Malkani, an economist at Citigroup Inc. in Mumbai ``We expect the Reserve Bank to maintain its tightening stance using a combination of the repurchase rate and the cash-reserve ratio.''
Interest Rates
Rising interest rates have led to increased monthly loan payments for borrowers, resulting in defaults, and are hurting profits at lenders including State Bank of India Ltd. and ICICI Bank Ltd.
State Bank this week reported the slowest profit growth since 2006 and net income at ICICI Bank dropped 6 percent.
Faster inflation and record-high borrowing costs are also affecting vehicle sales. Purchases of two-wheelers, cars and trucks grew 6.6 percent in June, slower than the 8.1 percent increase in May, according to the Society of Indian Automobile Manufacturers.
The government may revise today's preliminary wholesale- price estimate in two months after receiving additional data. The commerce ministry today raised its inflation estimate for the week ended May 24 to 8.9 percent from 8.24 percent.
Wholesale prices rose 11.98 percent in the week to July 19, after gaining 11.89 percent in the previous week, the commerce ministry said in New Delhi today. Economists had expected a 12.03 percent increase.
Governor Yaga Venugopal Reddy this week raised the central bank's repurchase rate by a half-percentage point to 9 percent, sacrificing growth to tame runaway inflation. The Reserve Bank of India may increase the benchmark rate again in the next three months, according to economists in a Bloomberg News survey.
``The message is clear that inflation will dominate over growth,'' said Sonal Varma, a Mumbai-based economist at Lehman Brothers Inc. ``We expect growth to slow to 7.3 percent this fiscal year due to rising headwinds from sharp rate increases, rising commodity prices and slackening foreign demand.''
Reddy, due to retire in September, this week also raised the cash reserve ratio to 9 percent from 8.75 percent and said the bank had ``headroom'' to further tighten monetary policy.
Higher energy and commodity prices are fuelling inflation across Asia, prompting central banks to raise borrowing costs. Pakistan's central bank on July 29 raised its key rate for the third time this year to tame inflation running at the fastest pace in three decades. Indonesia, Thailand and the Philippines have all increased interest rates in the past month.
Inflation Stable
``Inflation, on a week-on-week basis, has continued to remain stable,'' the finance ministry said in a statement today.
Inflation in the week accelerated because of an increase in the prices of pulses, fruits, spices and sugar. The manufactured price inflation rose 10.82 percent in the week ended July 19, compared with a 10.72 percent gain in the previous week, today's report showed.
India's central bank raised its year-end inflation forecast to 7 percent from 5.5 percent and lowered its growth estimate for the year ending March 2009 to 8 percent from an earlier prediction of 8 percent to 8.5 percent.
Economists expect inflation to remain at elevated levels in the coming months.
``We expect double-digit inflation to continue,'' said Rohini Malkani, an economist at Citigroup Inc. in Mumbai ``We expect the Reserve Bank to maintain its tightening stance using a combination of the repurchase rate and the cash-reserve ratio.''
Interest Rates
Rising interest rates have led to increased monthly loan payments for borrowers, resulting in defaults, and are hurting profits at lenders including State Bank of India Ltd. and ICICI Bank Ltd.
State Bank this week reported the slowest profit growth since 2006 and net income at ICICI Bank dropped 6 percent.
Faster inflation and record-high borrowing costs are also affecting vehicle sales. Purchases of two-wheelers, cars and trucks grew 6.6 percent in June, slower than the 8.1 percent increase in May, according to the Society of Indian Automobile Manufacturers.
The government may revise today's preliminary wholesale- price estimate in two months after receiving additional data. The commerce ministry today raised its inflation estimate for the week ended May 24 to 8.9 percent from 8.24 percent.
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