LOWERED GDP GROWTH:
Morgan Stanley cuts its forecast for India's economic growth in the fiscal year starting April to 5.7 percent from 6.5 percent due to high cost of capital, falling consumer loan growth and reduced demand. Asia's third-largest economy grew an annual average of 8.8 percent in the past five years and Morgan Stanley said the economy accelerated much faster than the potential growth rate in the period due to large capital inflows.
Goldman Sachs on Monday cuts its growth projection for the 2009/10 to 5.8 percent from 7.0 percent on concerns negative global financial stocks will continue to slow activities across the board.
GOVERNMENT REVENUES DECLINES BY 8.7%:
In what is possibly the clearest indicator so far of an industrial crisis staring India in the face, government revenues from central excise in October this year are 8.7% lower than in October 2007.
This is for the second consecutive month that revenues from excise — the tax
Levied on manufacturing — have been lower than in the corresponding month last year. The September collection figures showed a 3.8% fall from September 2007.
INDUSTRY MAY SLOW DOWN FURTHER:
The advance tax collections had the sharpest falls. Even September figures for central excise, a pointer to the health of the domestic industry, showed a negative growth of 4%. ‘‘While the fall in growth figures between September 2007 and September 2008 is not alarming — from 6% to 5% — the fall is steeper if one compares the April-September period of 2007 and 2008. The core sector growth fell steeply, which is alarming,’’ FICCI secretary general Amit Mitra said.
INDIA HAS LITTLE ROOM FOR CHINA-STYLE STIMULUS:
India has little scope for a big bang fiscal stimulus package like China's $586 billion plan and will hope instead populist spending plans outlined earlier this year can help it ride out the global financial storm.
India's federal and state fiscal deficit is likely to top 7 percent of gross domestic product, one of the highest in the world, and the federal deficit is already projected to blow its 2.5 percent target, leaving the emerging giant with little leeway to ramp up spending, analysts said.
MF REDEMPTIONS HIT RECORD IN OCT ALONG WITH FIIS:
Investors in mutual funds (MFs) have taken the course of their counterparts in the stock market. With the markets hitting new lows, MF redemptions have turned into a flood. In September and October redemptions (outflows) of Rs 45,655 crore and Rs 46,793 crore respectively, data shows.
GRIM ECONOMIC DATA MIRRORED BY CORPORATE GLOOM:
Evidence of a weakening Chinese economy, poor data from Japan and Britain and a grim corporate outlook reinforced fears of a prolonged recession fostered by the worst financial crisis in 80 years. China's inflation fell to a 17-month low while it posted a record trade surplus last month, a sharp fall in import growth showed domestic demand was flagging.
In Japan, exports fell nearly 10 percent in the first 20 days of October, corporate bankruptcies jumped 13.4 percent year-on-year and sentiment in its service sector hit an all-time low, all signs the world's second biggest economy was teetering on the brink of recession.
British retail sales fell for a fifth straight month in October and by the biggest amount in more than three years, and a housing industry survey showed home sales slumped to their lowest level in at least 30 years.
CRISIS DEALS UNDER PRESSURE, NO LET UP FOR ECONOMIES:
A number of deals designed to cure the global financial crisis were in danger of unraveling, with losses mounting at banks and economies deteriorating. The International Monetary Fund withheld official backing for a $6 billion bailout plan for Iceland, the Financial Times reported, putting loans to the North Atlantic island nation at threat.
Some of British banking giant Barclays' biggest shareholders have threatened to vote against a planned 7 billion pound ($10.83 billion) capital raising unless it improves the terms of the deal, British newspapers said.
Aides to U.S. President-elect Barack Obama, meanwhile, were playing down reports of tension with the Bush administration over help for the stricken car industry.
Questions are also beginning to be asked about just how much help governments can give.
"The U.S.' financial resources are already stretched and a flood of news demands may overwhelm a government already staring down at a record budget deficit next year," UBS economists said in a note.
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