Expert Zone

Straight from the Specialists

Investment boost needed to break India’s vicious cycle

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(Any opinions expressed here are those of the author and not necessarily of Reuters)

The current account balance reported last month hammered in the fact that India is spending more than it saves. While it had been stubbornly in the red for all but a couple of years in the last two decades, reaching a record deficit in both absolute terms and in relation to the gross domestic product was sobering.

In practical terms, a current account deficit even at its current level is not bad in itself. However, it does imply that foreigners must be willing to finance the gap. And if the fund flows dry up, it could create economic imbalances including a weakening currency.

For the most part, these fund flows come in the form of either portfolio investments that can be moved freely, like in the stock market or direct investments that are more long term. While foreign direct investment is still flowing and has allowed the rupee to stabilize since the start of the year, a deeper look into its composition raises some concern.

The battle for patent protection

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(Any opinions expressed here are those of the author and not necessarily of Reuters)

The Supreme Court verdict on Glivec brought to an end the battle by Swiss drugmaker Novartis to exclusively market the cancer medicine. In doing so, the bench enunciated a principle to justify a patent only by its intrinsic worth of innovation.

Word and deed must match in Xi Jinping’s Boao speech

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(Any opinions expressed here are those of the author and not necessarily of Reuters)

Chinese President Xi Jinping’s maiden speech at the Boao forum is to be welcomed – but cautiously. The vision he has outlined of harmonious co-operation and co-existence among members of the global community has echoes of the 1954 Sino-Indian panchsheel (five principles of peaceful coexistence) agreement. History reminds us that the two Asian giants engaged in a brief border war in October 1962.

India’s privy purses and the Cyprus deal

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(Rajan Ghotgalkar is Managing Director of Principal Pnb Asset Management Company. The views expressed in this column are his own and do not represent those of either Principal Pnb or Reuters)

When the Indian republic took shape, the erstwhile maharajas and princes were granted privy purses. These were allowances which varied based on the size of their state and the revenue it generated.

Third-party motor insurance premiums fixed for new financial year

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(Any opinions expressed here are those of the author and not of Reuters)

A motor insurance policy consists broadly of two parts — third-party cover, which is regulated; and an ‘own damage’ cover, the premium for which is left to market dynamics.

The premium for ‘own damage’ cover, which forms the larger chunk of the insurance premium, is based on risk and competitive pressures.

Low-key outcome as Singh meets Xi on BRICS sidelines

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

The BRICS summit in Durban last week, which brought the leaders of Brazil, Russia, India, China and South Africa together, is best recalled for the rich visual imagery that Russian President Vladimir Putin invoked. Putin suggested that the five countries were like the lion, elephant, buffalo, leopard and rhinoceros. Notwithstanding the normative vision for the developing world that was outlined by the leaders, the subtext is a logical extension of this animal metaphor.

India’s IP growing pains

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(Any opinions expressed here are those of the author and not of Reuters)

As it celebrates its 65th year as an independent country, India seems poised for an economic take-off. Already, this south Asian country is the world’s largest democracy, has about the same number of middle-class citizens as the United States, and has the planet’s tenth largest economy.

But India still has a long way to go. An average citizen lives on less than $10 a day and its per-capita gross domestic product is less than half that of the other Asian giant, China. For India, moving to the next level is going to require a potentially painful but absolutely necessary engagement with the global economy.

The stock market’s delayed response to Budget 2013

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(Any opinions expressed here are those of the author and not of Reuters)

Finance Minister P. Chidambaram tried to humour the market in his budget by cutting the Securities Transaction Tax (STT) which had been one of its sore points. But the market was not amused. The Sensex continued to slide, indifferent to the budget which was presented with a lot of expectations.

This appears to be rather strange because the budget was well received by the industry, in spite of the increase in surcharge from 5 to 10 percent. It was possibly the realization that the finance minister lived up to his promise of cutting fiscal deficit to 4.8 percent which created an infectious confidence in growth revival.

India Markets Weekahead: Beware the Ides of March

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(Any opinions expressed here are those of the author and not of Reuters)

Markets ended budget week below support levels of 5800/5840 and just when the six-month rally seemed over for good, it made a spirited V-shaped recovery to close at 5946 on Friday, with gains of 3.95 percent. The Street is divided with some expecting this to be the beginning of a new rally with the market scaling highs that it missed in February; others see it as a strong pullback which will fizzle out soon.

The government seems to be responding faster to allay investor fears. It was quick to respond to FII worries over proposed changes in tax residency certificates. Finance Minister P. Chidambaram has been assuring investors of continued policy measures, including the Direct Taxes Code (DTC) bill being introduced in the current parliament session.

Budget 2013: Political strategy, not economic blueprint

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(Any opinions expressed here are those of the author and not of Reuters)

With the dust settling after Budget 2013, the picture is getting a bit clearer. Opinions on the budget have ranged from praise to outright criticism. The true position lies somewhere in between — depending on one’s political inclination, views on the finance minister and one’s financial interests.

Most agree there is considerable misalignment between diagnosis and prescriptions in the budget. The three biggest problems identified by P. Chidambaram are:
- rising fiscal deficit that needs to be controlled
- high current account deficit and
- declining economic growth rate.

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