Byapaar.com – The Indian Business Blog

In the midst of warning by the International Monetary Fund (IMF) of developing economies being toppled in the ongoing financial crisis, guardians of the Indian economy are working overtime to ensure India did not suffer much due to the global phenomenon. There is already signs from everywhere about an imminent slowdown of economies all over the world including the USA which reported a contraction of .1 percent of its economy last week.

It is really heartening to see that the Government of India is doing its best and working with leaders of the industry to see off the crisis. Last week the Prime Minister of India, Dr. Manmohan Singh held a meeting with business leaders like Anil Ambani, Sunil Mittal and others to hear their views on tackling the problem. According to the captains of the industry, the government must relax the credit policy without worrying too much about inflation so as to pump in money in the cash strapped financial sector. They opined that there is already signs of slowdown and if liquidity crunch is not addressed immediately, the economy would suffer more. They urged the government to lower interest rates and release more cash in the market to shore up the already nervous financial sector and thus bring the much needed confidence back in the market.

It seems it is lucky last few weeks in the office for the Manmohan Singh led NDA government as inflation dipped below 11 percent last week for the first time for 5 months and as a result the Reserve Bank of India announced a cut in CRR (Cash Reserve Ration) rate by one percentage point to 5.5 and REPO rate by 50 point basis to 7.5. This will release Rs. 700 billion in the market. Both the government and industry hope that the latest action is a step in the positive direction and it will boos liquidity in the system, stimulate growth and stabilize the financial market. The governor of RBI while announcing the news hoped that the credit requirements would be met through this action and effect the industry positively by picking up growth momentum.

But as always, while welcoming the move, industry leaders hoped the government and the Apex Bank would take more measures to tide over the global financial crisis.  They are asking more reforms in sectors including government debt market to tap new class of buyers and thus bring in more money in the market.

The stock market has responded positively to all these steps as it has been gaining continuously for last 4 trading days. The BSE Sensex has gained a credible 293.44 points today and have crossed the psychological barrier of 10,000 for the first time after it sank few weeks back.

What a shame! We are long into 21st century and information and networking super highway. Today, virtually each and everything is being done through digital media and mechanism. But for so long, auctioning of tea in India was being held in the age old method of manual outcry system. This resulted in many problems that come along with the old method like incoherent price increments at different centers, different lot sizes, price discovery and audit trail and so on. So a Tea Board commission was constituted and it recommended overhauling the old system and standardizing the auctioning process across auction centers.
Subsequently, the Tea Board sought help from the National Stock Exchange (NSE). The Information Technology (IT) arm of NSE started developing customized software for e-auctioning. Finally, the Tea Board of India has announced on 30th August that auctioning of tea in the country will go online in coming November. Actually, it was supposed to go operational in October, but the launch had to be delayed due to Puja (festival) Vacation. Executives of the board expects the IT solution will bring in a common platform for all auction centers which are now situated in Siliguri, Guwahat, Kochi and Jalpaiguri. The software is also expected to smoothen and expedite the process of future trading of tea besides new price discoveries, better transparency, standard contract descriptor, common and inform lot size, market timings, uniform price increments and automatic matching and audit trail. The stakeholders in public auctions will now be able to do their business in much easier and organized manners through this e-auctioning system. But the program is still under beta and as Ms. Roshni Sen, Tea Board deputy chairperson said

“Things are going on well. We will be carrying out software and system testing by September. And the –e-auctioning of tea will commence from November.”

For the record India is one of the largest tea producing countries in the world and total production for the year 2008 is expected to touch 962 million kilograms.

It has been six long years since India and South East Asian trade block known as ASEAN started negotiations on free trade in goods (TIG). Finally it has concluded in a meeting of economic ministers held in Singapore. The deal is up for final sign in a summit to be held in next December in Bangkok, Thailand.
Indian industry minister Kamal Nath has described the conclusion of the TIG deal as a “key regional milestone” that will create a European Union like open market for goods. It has even bigger prospect than the EU with booming markets and an estimated 1.5 billion people waiting to be conquered by consumerism.
Kamal Nath says,

“It took six years for India to understand the sensibilities of Asean, and for the Asean to understand the sensitivities of Indian.”

Actually, the deal was supposed to be concluded last year but due to differences on the list of products to be excluded, it took one more year. Now that it has been finalized, both parties will remove import duties on 71 percent of products by December, 2012 and additional nine percent by 2015. The ten percent which have been kept under sensitive list will also see duties brought down to five percent. The deal also has provisions for fast track reduction of import duties on five products which are so vital in trade relations. These goods are coffee, tea, crude and refined palm oil and pepper. Currently, trade volume between India and Asean is to the tune of $38 billion which is to go up to $50 billion by 2010. At present India holds seventh position in Asean’s overall trade and the group holds 9.8 percent of India’s global trade volume.
According to a joint press release, both parties also resolved to negotiation on similar agreements in services and investments sector.

“So the potential for enhanced economic engagement between Asean and India is profound.”

Mr Nath says. The question is can this new economic block create same impact as that of EU? It certainly has potentials with fast growing economies and an ever increasing group of middle class flush with disposable income. But my personal opinion is it still has long way to go. First, China must be included in the group so as to have a major global impact. Secondly, unlike the EU, the group does not have a single monetary system. Still, both the parties will benefit hugely with this pact and more so if they could do the same in other sectors too.

Coupled with continued bull run in the Indian stock market, another problem is lurking that might hamper the country’s resolution to achieve higher economic growth with price stability. Inflation rate has just crossed the 5 percent mark for the first time in last 10 months. Week ending on 23rd February pegged the Wholesale Price index at 5.02 percent. Rising food price and increase in cost for manufacturing good are some reasons for the inflation to shoot up.

the apex bank in India is a bit worried about the recent spur in inflationary pressure. Mr YV Reddy, the Governor of Reserve Bank of India expressed his concern in a symposium held in Paris on “Globalization, Inflation and Monetary Policy” . According to him

“In the Indian context, considerable weight is currently accorded by the RBI to price and financial stability while recognizing it twin objectives of growth and stability”.

The Indian government is looking to control the the inflationary pressure below 5 percent and targeting to keep it around 4-5 percent. But still consumers are feeling the heat.