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basant
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   Topic: Why is there a need for FDI?
Posted: 25/Jul/2006 at 11:21pm |
Of late there has been a lot of chatter as to how India's current account deficit is going out of hand. Foreign Portfolio Investments is being used to tide over the temporary problems and the fear among the investing community is that any movement of capital away from the country could start a cascade of flows leading to a South East Asian Crisis. My sens eis that India's domestic savings rate is at 24% and if take an Incremental capital output ratio of 4 this could lead us to 6% of GDP growth without any foreign capital.
If the Govt. is targetting a 8% GDP growth then with an ICOR of 4 we would need to increase the rate of Investment to 32% of GDP (32/4=8). Given that we are already doing 24% of GDP through domestic means that leaves us with a shortfall of 8% which can be made up by FDI/FII.
8% of Rs 30,00,000 (approx GDP) comes to Rs 2,40,000 crores. Where on earth is India going to get all that money from?
Either the domestic savings rate has to go up or externel assistance called for without that there is noway for us to achioeve more then 6% growth on a consistent basis. One year of 8% growth is possible but without any of the two measures listed above the secular 8%+ growth will remain a distant dream.
If the the Govt. does not introduce FDI in Retail nor increases the FDI limit on other sector we would fall back to the 6% growth rate regime. The writing on the wall is clear.
Any ideas or suggestions?
Edited by basant - 25/Jul/2006 at 11:22pm
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prashantmohta
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Posted: 01/Aug/2006 at 11:34pm |
The organised retail sector is expected to grow stronger than GDP growth in the next five years driven by changing lifestyles, strong income growth and favourable demographic patterns.structure of retailing is developing rapidly with shopping malls becoming increasingly common in large cities, and development plans being projected at 150 new shopping malls by 2008.Rated the fifth most attractive emerging retail market, India is being seen as a potential goldmine. It has been ranked second in a Global Retail Development Index of 30 developing countries drawn up by AT Kearney.
PRASHANT
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basant
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Posted: 01/Aug/2006 at 11:37pm |
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Great news. Do you think FDI in retail will help the listed players???
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prashantmohta
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Posted: 01/Aug/2006 at 11:42pm |
PANTALOON,TRENT,SHOPPERS STOP COULD BE MULTIBAGGERS FROM HERE.
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basant
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Posted: 01/Aug/2006 at 11:45pm |
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Yes but I doubt it Ambani will resist FDI while Sunil Mittal will try and go for it. AMbani creates businesses that his sons can run Mittal will sell it one day and get into something else.There are huge noises as to which way things would roll out but if FDI comes surely there would be suitors for eligible companies.
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PKB2000
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Posted: 14/Sep/2006 at 10:10pm |
I sometime idly go one news line of UBS
Frankly today I find something written on India
This goes like this
India: Strong industry in July (September 13, 2006, 11:41 AM)
Industrial production growth rose to 12.4%yoy in July after 9.6% in June and represents the fastest pace of industry expansion for more than 10 years. The growth is broad-based with most goods categories accelerating
I do not know how that makes any sense to our SENSEX!
Also there are some forecast may be helpful for MBAs
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UBS Homepage > UBS in Switzerland > Wealth Management > Research > Global Economic Forecasts
Growth
The US grew only by 2.5% annualized in the second quarter of 2006. This was lower than expected and, we emphasize, lower than growth rates elsewhere. While the degree of weakness surprised us, and especially the weak investment in equipment, it underpins our scenario for sub-trend growth in the US, which we think will continue into 2007. Europe, on the other hand, surprised positively, with non-annualized second- quarter growth of 0.9% for Germany and the whole EU-12. Given this strong momentum, we had to revise our European growth forecasts for 2006 substantially upward. We also made some adjustments for 2007, though our central scenario— substantial growth erosion due to the German VAT increase—remains intact. China, with double-digit growth in 2006, should only marginally soften in 2007 and our scenario here is for domestic demand to largely compensate for the weaker external demand.
Inflation
Oil prices have retreated from their 80-USD/barrel threshold, but with the prevailing geopolitical tensions and the onset of the US hurricane season, oil prices can always spike again. Nevertheless, we stand by our scenario for retreating headline inflation next year on the back of slightly lower oil prices. (We forecast 65 USD/barrel on average in 2007 versus 72 USD/barrel on average in 2006.) We also expect US core inflation to peak in the coming months due to the expected softening of the business cycle. In sum, we think inflation rates in 2007 will be similar to or slightly lower than those of 2006. One exception is Germany, where the VAT increase will push inflation higher.
Short-term Interest Rates
The anemic second-quarter growth figures from the US, which seem to be confirmed by a stream of soft highfrequency data in the third quarter, strengthen our view that the Fed tightening cycle is over. In fact, we might even see a first rate cut by the Fed within the next six months. The ECB is expected to tighten by 25 bps again in October and once more in December, and we think the Bank of Japan will likely pause before increasing interest rates three times in 2007 starting in January. We expect the Swiss National Bank to hike in September and December; and, after the recent surprise hike of the Bank of England, we expect another hike in November in the UK.
Bond Yields
Given a weakening of the US economy, an increase in interest rates at the long end of the curve seems unlikely. In fact, we expect bond yields to stay below 5% in the US going forward. For the other countries under review, we don’t see large yield pick-ups. While JGB (Japanese government bond) yields might finally head back towards “normal” levels with the return of inflation in Japan, both European and Swiss yields should, in our view, move sideways in the next 6 to 12 months.
| Growth and Inflation Forecasts |
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in % |
GDP Growth |
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Inflation |
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'05 |
'06 F2 |
'07 F2 |
'05 |
'06 F2 |
'07 F2 |
|
OECD |
2.5 |
2.8 |
2.1 |
2.4 |
2.5 |
2.2 |
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USA |
3.2 |
3.2 |
2.0 |
3.4 |
3.4 |
2.7 |
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Canada |
2.9 |
3.3 |
2.5 |
2.2 |
2.3 |
1.8 |
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Japan |
2.6 |
2.8 |
2.0 |
-0.3 |
0.6 |
0.5 |
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Euro-Zone |
1.4 |
2.3 |
1.7 |
2.2 |
2.3 |
2.2 |
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Germany |
1.0 |
2.1 |
1.0 |
2.0 |
1.9 |
2.4 |
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France |
1.2 |
2.3 |
1.8 |
1.7 |
2.0 |
1.7 |
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Italy |
0.0 |
1.6 |
1.1 |
2.0 |
2.1 |
2.0 |
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Spain |
3.4 |
3.4 |
2.6 |
3.4 |
3.8 |
3.3 |
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UK |
1.9 |
2.7 |
2.3 |
2.1 |
2.2 |
2.0 |
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Switzerland |
1.8 |
3.0 |
1.4 |
1.2 |
1.2 |
1.1 |
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China |
9.9 |
10.2 |
9.1 |
1.8 |
2.3 |
2.0 |
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Asia / Pacific1 |
7.5 |
7.6 |
6.9 |
3.1 |
3.5 |
2.7 |
1Excluding China & Japan, 2Eastern Europe, Middle East and Africa; 3E: estimate, F: forecast: Source: UBS WMR
| Interest Rate and Exchange Rate Forecasts |
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in % |
Short rates (3m) in |
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Bond yields (10y) in |
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USD rate1 in |
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6 m |
12 m |
6 m |
12 m |
6 m |
12 m |
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USA |
4.90 |
4.50 |
4.80 |
4.70 |
1.00 |
1.00 |
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Canada |
4.50 |
4.20 |
4.50 |
4.50 |
1.09 |
1.16 |
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Japan |
0.70 |
0.90 |
2.10 |
2.10 |
107 |
104 |
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Euro-Zone |
3.70 |
3.70 |
4.00 |
4.00 |
1.34 |
1.28 |
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UK |
5.10 |
5.10 |
4.80 |
4.80 |
0.53 |
0.54 |
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Switzerland |
2.00 |
2.00 |
2.90 |
2.80 |
1.16 | |
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I am always doing that which I cannot do, in order that I may learn how to do it. ~Pablo Picasso
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BubbleVision
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Posted: 15/Sep/2006 at 11:43am |
Here is an exiting article from the Economist About Emerging Economies
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You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer!
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basant
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Location: India
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Posts: 18403
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Posted: 16/Sep/2006 at 12:03pm |
Great stuff. What I find interesting is that the GDP percentage on Exchange rate basis of emerging economies is 50% more then that of their stock market capitalisation.
That means that emerging economies are valued at less then those of the developed nations. Maybe it could be because emerging economies have a greater proportion of commodities and cyclicals (Brazil, Russia etc) while the developed ecconomies have a greater share of services income (USA).
Services have traditionally been valued at more then their commodity counterparts but who knows things could change very fast!.
Edited by basant - 16/Sep/2006 at 12:05pm
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'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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