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Global financial recovery could be sooner than expected - Experts

24
Aug '09
Global economic recovery will be faster than what was expected on account of two clearly visible and diametrically opposite trends, viz. higher spending by Japan and China, which have a higher saving culture and more savings by the US, which is traditionally characterized by conspicuous consumption.

The CFO Summit organized by Birla Institute of Management Technology (BIMTECH) recently in Delhi inviting financial experts, policy makers and media was unanimous in observing that the positive changes in current account deficit (considerably reduced since the meltdown) of the US would act as a trigger for checking global economic imbalances. Higher expenditure being undertaken by countries like China and Japan has already set the ground for increased investment of these countries both domestically and abroad.

Mr. G A Tadas, MD and CEO, IDBI Gilts observed that poor quality of lending was a major reason for global meltdown. Prudential norms have to be followed in letter and spirit to steer clear of the repeat of such mass scale systemic failure. He said that India cannot be totally de-coupled from the shock and yet, it was by and large insulated from the severe vagaries of the slowdown. But there are confusing signals such as increase in the current account deficit on account of the sustained fall in exports. Inflation, though hovering in the negative space on account of the fall in WPI, consumer price index, more reliable barometer for measuring inflation is pegged at over 11 per cent. The growth estimates are also varying and on an approximation, it would come down to slightly over six per cent, much below the 9 per cent clocked in the previous year.

Mr.Nayan Marphatia, Finace Controller, South Asia, DHL Express said that Americans expect that their income to grow by minus 2 per cent since the spending has come down drastically. Commodity prices like oil and metals are experiencing an upward pressure, which might lead to cost push inflation. Equally significant is the growing protectionist policies of the developed countries to keep their currencies in tact.

From the Indian perspective, combined fiscal deficit (Centre and States) is ruling high on account of the stimulus. Adverse effect of the drought conditions have to be mapped properly so that the extent of decline in the rural consumption has to be estimated properly. He wanted fiscal stimulus to reach more and more rural areas to enhance their spending, a key to economic revival. Another area that has to be addressed is the increasing transaction cost in India, which is estimated to be ruling high at 14 per cent vis a vis the international average of 8-9 per cent.

Alok Goyal, CFO, Hughes communications observed that. telecom industry could sustain the growth. Tele density in India is lower as compared to China and that segment has investment potential since some of the large corporations are wanting to relocate from Southeastern countries to India. Backward and forward linkages of the telecom industry can generate millions of gainful employment in the country.


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