India Falls But FDI

Could be over but FDI sanction today looks to be an exclusive effort to bring up the GDP gowth of the country which has struggle through out these years recently.But India has never been a country that even ponder upon sustainable and distributive (welfare ) kind of growth forget striving for it , and for sure it will not do that in near future too.
Though if we look at the macro data closely Eurozone crisis only effects the exports part to the country. But the slow activity , poor supply,policy paralysis and inflation looks to hurt it the most. I have always said in recent times that Indonesia, Malay are the better option to put your bets and you willnot regret it. But the intial question was...
Is India heading towards the end of its much-touted growth story? A report by global credit rating agency Standard and Poor’s (S&P) released on June 11 seems to suggest so. Titled “Will India be the first BRIC fallen angel,” the report cautions that India may become the first so-called “BRIC” (Brazil, Russia, India and China) country to lose its investment grade rating.
According to the report, slowing growth and political road-blocks in policy making could lead to Indian paper being relegated to junk bond status. The report notes that “the division of roles between a politically powerful Congress president who can take credit for the party’s two recent national election victories, and an appointed Prime Minister has weakened the framework for making economic policy.” It further warns that “setbacks or reversals in India’s path towards a more liberal economy could hurt its long-term growth prospects and, therefore, its credit quality.”
S&P’s latest statement on India is in line with its earlier move a few weeks ago. In April, the agency had lowered India’s rating outlook from stable to negative and warned that further action would follow if India did not get its act together. India’s sovereign rating by S&P is BBB-, which is the lowest investment grade rating among the BRIC countries. It is also the only BRIC country with a negative outlook. S&P’s rating for China is AA- with a stable outlook. For Russia and Brazil, it is BBB with a stable outlook.

How much of this is bravado — and what measures the government will take to get back on track — will be clear in the coming weeks and months. For now, there is not much to cheer about. India’s GDP growth for the January–March quarter at 5.3% was the lowest in nine years. For the year 2012-2013, growth estimates now are at around 6% — way below the 7.6% the government had projected at the beginning of the year. The country is also facing fiscal and current account deficits.

But i dont see deficit as a problem our deficit is a good one.

According to Rajesh Chakrabarti, assistant professor of finance at the Indian School of Business, the possibility of a downgrade by S&P is not surprising, since the India brand has been taking a hit on many fronts for the past several months. However, he is not convinced by the reasoning offered by the agency. “While there is indeed a slowdown on policy initiatives and growth has slowed down, the fact that a country [could lose] its rating because some of the anticipated things did not happen is a rather strange argument. Normally, a downgrade would happen because of adverse events rather than non-happening of positive events.” He adds that growth slowing down per se is not a risk factor. “While [slower growth] may reduce the prospects of future gains, it does not make the country more risky.”
At the same time, Chakrabarti believes that the move by the rating agency could be a timely warning for the government. “If the government wakes up [as a result of S&P’s warning] it will be great for the country and the economy. But of course to what extent the government reacts to it remains to be seen.”
Others, too, believe that S&P’s move could have an upside. “I see it as a positive development for the economy and the market. This will push the government to move faster on reforms, with the RBI (Reserve Bank of India) helping through rate cuts,” said Dharmesh Mehta, managing director – institutional equity at Enam Securities, talking to the daily newspaper Times of India. Samiran Chakraborty, chief economist and head of research at Standard Chartered Bank, told business daily Business Standard: “Getting growth on track assumes more importance than ever, and a pro-growth policy stance will be critical.”

The Cabinet’s decision came as a major surprise and immediately sparked new optimism that a government plagued by scandal was finally breaking out of the political paralysis that had stifled reforms for months.
The Cabinet decided to allow foreign firms to own a majority stake in multi-brand retailers here for the first time. However, individual states would have the right to decide whether to allow the retailers to operate from their territory, according to government officials.
U.S.-based Wal-Mart, British-based Tesco PLC, French-based retailer Carrefour and others have been interested in entering India, a country of 1.2 billion people where retail is the second-biggest industry behind agriculture.

The government had agreed on the same proposal last year but then withdrew that decision because of protests from coalition partners, a capitulation that badly damaged its credibility with international investors.
Since then, economic growth has fallen, with business leaders and analysts blaming the government’s inability to make needed reforms.
The Cabinet also agreed to allow foreign investment in airlines and to sell stakes in state-owned companies. On Thursday, the government decided to reduce fuel subsidies and allow the price of diesel to rise, a move hailed by the business community but criticized by political allies and opponents.
D. Raja, a Communist Party lawmaker, said opening the door to international supermarket chains would hurt poor farmers and small shop owners.
“(It) will lead to job losses for millions of our people,” he told the NDTV news channel.
The main opposition Bharatiya Janata Party also criticized the surprise decisions.
“These things are being done in the most hurried manner,” BJP spokesman Ravi Shankar Prasad told NDTV.

 I told you they are looking here to up the ante by opening up the sectors and kicking the economy again 

The sensex ( a fake barometer ) was looking happy today gaining 450 points