The India's "Purchased" media tries to do damage control for the UPA, as the FIIs pump out money from the Indian markets to negate the new found "Nehruvian Socialism":
[My addition: The Indian media who might have been paid heavily the UPA bosses to write goodies like it did in the last 5 years, is trying hard to save the face of UPA. One such news is presented below where there was an attempt to create an impression as if FIIs were willing to invest in this new found “Nehuruvian Socialist Economy”. The news which ought to have the headline as: "FIIs only pump Rs.3, 500 Cr in the equities since
budget, as mass exodus continues", has been presented in such a way as if FIIs are waiting with basket full of cash to be poured in the Indian Bourses. On the contrary the FIIs could be looking for newer pastures, elsewhere, especially in other emerging economies, where is no threat of a so called “aam admi” budget. FIIs might have feared that this kind of non-reform oriented budget might lead to a situation, where there would be “aam”, but no “aadmi” to sell “aam”— the dreaded word “Recession”.
All the goodies created by the 5 (five) year of the NDA rule has been wasted, by the UPA in their earlier stint, and now the ills that started to form a pile has now turned into a mountain and is looking unmanageable by the incumbent FM of the UPA. Now they have no option but to shovel the dirt accumulated over 5 years; and the smell is coming out, which his just natural.
The FM has scrapped the Commodity Transaction Tax (CTT) in the Union Budget for 2009-10. While presenting the budget, FM said, “The decision is in step with the recommendation of the Prime Minister's Economic Advisory Council.” So now we learn that PM Economic Advisory Coucil also gives wrong advices. Also, though, FMC Chairman B C Khatua and spokespersons of NCDEX and MCX hailed the decision, but it I think it was a wrong decision. Because such tax could have stopped a bit of speculation of the commodities market. But then if FM is desperately trying to increase the price of commodities, I do not understand why he says it is an “aam admi” budget—quite strange!!. The FM increased the MAT, which will only increase the problem for the corporate world who are already struggling to tide over the financial bottlenecks. The companies would come up with less Net Profit leading to the decrease in the EPS of the Sensex and Nifty.
The result: Sensex may not touch 18, 000--19, 000 at the end of CY09, as was predictedearlier. So we the "Poor Scapegoats" (investors) of the Indian markets now have to witness double kicks on our bottoms: First from the exodus of the FIIs and the 2nd from the latter.
The FM has tried to deliver huge amounts (Rs.39, 000) to a bottomless pit called NREGS. This money like the previous year would only fill the pockets of “Netas and Babus”. In order to provide growth the total expenditure rose to 36% over FY09, which essentially means the UPA Government has to borrow around Rs.6 lakhs crore, which raises heart beat. In other words though the UPA tried to project this budget as pro poor and good, but I feel that it is another “Lost Opportunity” for the UPA Government to give a direction to the investing community. There is a sanskrit saying, "Rinong Kritya Ghritong Pibet" (Eat Ghee taking loan from money lenders)--so the UPA wants to do infrastructure expansion by opening "loans melas".
The FM says, 6.8% fiscal deficit (excess of government expenditure over its income) is nothing compared to US----"Hey Bhagwan" now our economy is being compared with the chequered economy of the US???????!!!!!!!!!!!!!!! Moreover, on including off-budget items such as fertiliser and oil bonds, the deficit figure will stand at about 12% of GDP. Also, did the FM consider the fiscal deficit of the states also......Now calculate the combined fiscal deficit of this great country.....Isn't it look scary??!! If M K Gandhi were there, he would have said, "Hey Ram"...
The Finance Minister's 'no comments' in the recent budget on how he will be lowering India's fiscal deficit in the years to come has made rating agency S&P quite concerned over the country's outlook. "We continue to believe that such high levels of government deficits are unsustainable in the medium term, although we weren't surprised by the number itself," said S&P in a statement. Currently, the agency has given a rating of BBB- which is one step away from the 'junk' status. Any downward revision on this rating could lower India's appeal with foreign investors.
Now if FM wants to kill the capital market, like the Left wanted to do in the last few years when they had their umbilical chord tied with the UPA, then it will be a grave mistake. It is because if there is no vibrant capital market, then from where will the corporates raise funds for expansion??!! Will they have to knock the doors of banks/NBFCs every time they need funds??!! This is another example of “Marxist Utopia”.
The FM in the midst of budget speech suddenly talked of the Nationalisation of Banks---that gave a very bad signal to the FIIs, who wants government to be out of business of business.
In light of this, while the government's focus on restoring India's growth to 9% of GDP may be laudable, the million dollar question is - will the fiscal deficit really allow India to grow the way it had done in the past? Readers would do well to recall that during the last two years when India had been logging in growth rates of 9% plus, the fiscal deficit situation had been under control at a little above 3%. Hence, for India to replicate its growth story, the fiscal deficit will have to be brought down.
Surprisingly, no measures were announced by the FM in terms of how the government was planning to bring this down.
With not much being done in terms of reducing subsidies and the credit crunch keeping interest rates high, the non-plan expenditure is only set to gallop. This has left little room to focus on infrastructure development, education and healthcare even though the FM has emphasized the importance of the same.
Printing more money is not an option as that will only fuel higher inflation going forward. The FM's silence on the FDI front also does not bode well given that the same can play a significant role in enhancing the performance of the economy in the long term. India's rising deficit means that the possibility of its rating being downgraded cannot be entirely ruled out. If this happens, borrowings will have to be done at higher interest rates, which will further exert pressure on government finances.
FM should note that killing the golden goose called the “FII Investments” with the “Nehruvian Socialism” will only be called myopic. The sooner the UPA learns this lesson, the better will be for the Indian economy. The Congress in its new “Socialist” avatar will get little cheer from the FII benches and from the stock market participants].
FIIs invest Rs.3,500 Cr in equities since Budget
[Wrong headline]
New Delhi: Foreign institutional investors (FIIs) have made a net investment of Rs3,500 crore in the Indian stock markets since the presentation of the Budget in Parliament on 6 July, even as the benchmark index Sensex lost over 9% in the same period.
An analysis of FIIs activity in the domestic markets shows that overseas investors were the net purchaser of Indian stocks worth Rs3,499.5 crore during the last week.
FIIs were the gross buyer of shares worth Rs17,092.1 crore during the week, while they sold equities valued at Rs13,592.6 crore, resulting in a net inflow of Rs3,499.5 crore, as per the data available with the Securities and Exchange Board of India (Sebi).
Significantly, during the past week, the Bombay Stock Exchange’s benchmark index Sensex - composed of 30 bluechip stocks - dropped 9.44% to end at 13,584.22 points.
On the Budget day, FIIs booked profit and sold shares worth Rs351.3 crore, dragging the benchmark indices in the negative zone. The Sebi compiles the trade data one day late.
On 6 July, the day finance minister Pranab Mukherjee presented general Budget in the lower house of Parliament, Sensex suffered the biggest fall on any Budget day and in the year too by plunging over 870 points on concerns of high fiscal deficit.
Mukherjee said the fiscal deficit may rise to 6.8% of gross domestic product in the year 2009-10, the highest since 1994.
In five trading sessions from 6 July to 10 July, FIIs were the net seller for three sessions, while, for other days they remained net purchaser.
During the week, the foreign investors also put in money worth Rs2,984.9 crore in the debt market segment, while so far this year, FIIs are the net seller of Rs1,356.10 crore in debt instruments. [From Internet]
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