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November 22, 2010

Need of the Hour in India - Corporate Structure of a Limited Liability Company (LLC)

I was just going through the popularity of LLP's (Limited Liability Partnerships) in India. LLP Act, 2008 in India was notified on March 31, 2009 and the rules were notified on April 1, 2009. The first LLP was registered on April 2, 2009 and 2780 LLP's were registered until November 12, 2010.  This shows that LLP's allow businesses to run with flexibility which young and innovative entrepreneurs find attractive as the act provides flexibility to devise incorporation agreements as per their choice.

In light of this encouraging statistic, if one compares legal corporate structures in India and western countries, one will find scope for incorporation of a one more such form of corporate structure in India - Limited Liability Company (LLC).

LLC: Need of the hour

Limited Liability Company is a type of corporate structure which is very popular with small to midsized entrepreneurs in USA and UK.


What India currently requires is a legal corporate structure for small and medium enterprises that provides the advantage of limited liability, simple registration, minimum legal and compliance requirements and filings access to capital and most importantly avoidance of double taxation - at the corporate and personal level.


Surely, this type of structure can help in ushering transparency (as most of small and medium businesses/enterprises run as proprietary businesses in India and notorious for evading taxes and shoddy book keeping) and a vibrant corporate culture.


Thus, introduction of LLC in India will revolutionize the corporate structure as people will be interested in running small to midsized businesses that are currently running as proprietary businesses.

What is LLC?

A Limited Liability Company (LLC) is a flexible enterprise that has the essence of both a partnership and a corporate structure. It is a legal form of company that provides limited liability to its owners. LLC's can represent non-profit organizations as well.

Advantages of LLC:

• Going concern - the entity does not runs the risk of liquidation in event of death of any Directors and other unforeseen circumstances


• Limited personal liability for business debts and obligations


• More capital raising options as compared to a proprietary business as it is a legal entity.


• Simplified registration and record-keeping (annual meetings and minutes are not required)


• Tax Flexibility: Similar to sole proprietorship or partnership, an LLC enjoys pass-through taxation. This implies that owners (also known as "members") report their share of profits or losses in the company on their individual tax returns. The Internal Revenue Service (IRS) does not assess taxes on the company itself. This prevents "double taxation".


• Owners/members are not required to be citizens of the country or permanent residents
Today India is one of the fastest growing economies in the world. At this juncture of time, adopting LLC's and similar concepts will provide the much needed corporate structures for small and medium enterprises that constitute the backbone of the Indian economy. This will also provide legal status to proprietary businesses that are hereto out of the purview of white economy and hence starved for capital. Hence it is high time that Government of India brings in legislation to facilitate corporate structure of LLC.

References:
1. Ministry of Corporate Affairs, Government of India: www.llp.gov.in/
2. http://en.wikipedia.org/wiki/Limited_liability_company 

Posted by Sumeet Kumar at 12:45 PM | | Comments (1) | TrackBacks (0)

August 17, 2010

Baby Boomers Economic Bloopers

Unfettered consumerism that the US economy embarked on with the baby boomer generation seems to be getting shackled as the recession of the century, engendered by the crisis in the financial economy, engulfed the real economy.

This is the generation that learned to live beyond means. Much beyond, infact, as their debt to disposable personal income peaked at 130%. So much so that income ceased to be the criteria for consumption pattern. Wealth did. As cheap credit fuelled strong growth resulting in increased consumption demand leading to further growth, asset prices continued to defy gravity. MEW (Mortgage Equity Withdrawal for the unintiated) became the buzz word. As economic logic took leave of their senses, the boomers felt that they reached their el dorado. The insatiable (nay uncontrollable) urge to splurge led them to devastate their wealth with the foolish notion that the wealth would rebuild itself, as the prices will continue to rise. Little did they realise that Murphy's law will catch up with them.

Something had to go wrong and it did. Unfortunately for them, conducive economic environment meant that things soured much later than they should have. And when it did, it appeared like a tsunami.

Result? 3 out of every 5 baby boomers do not have enough to save, as per an article by Wall Street Journal. It is expected that the return people can hope to earn on their assets has fallen, particularly for those who switch into bonds or annuities to guarantee a fixed income. The average yield on U.S. government, corporate and mortgage bonds stands at about 2.4%, while stock-market valuations suggest a long-term return of about 6%. At those levels of return, some 59% of people aged 56 to 62 will be at risk of not having enough money to cover basic living and health-care costs in retirement, estimates Mr. Van Derhei. If market returns are higher--8.9% for stocks and 6.3% for bonds--the picture isn't a lot better: The percentage at risk falls to about 47%.

In effect, the baby boomers are shattered and consumption is likely to remain muted for times to come. They are spending less and, looking at the pathetic state of their retirement fund, they are more likely to consume less and save more going forward.

My feeling is that this is going to spawn a generation of thrifty consumers, a generation that has seen the devastation wrought by their ancestors, a generation that is experiencing a hard to get job situation. As the unemployment data shows, unemployment among the youth is high. Very high in fact. In such circumstances, it is very difficult to expect another generation of reckless consumption. While this is good for the economy in the longer term, the pain that will be felt during the transition from recklessness to a more responsible behaviour will be immense. There can be no penance without pain.

Posted by Kunal Kumar Kundu at 10:15 AM | | Comments (0) | TrackBacks (0)

August 5, 2010

India's Public Debt is Manageable

There has been a lot of discussion about high fiscal deficit that India is experiencing right now especially with respect to the current debt crises in Europe and America. Here are my thoughts:

Composition of Public Debt:
Currently India's Central Government debt is 54.35% of GDP which looks relatively high especially given India's high fiscal deficit.
Central Government's public debt is largely internal. Out of the total public debt, only about 8.5% is external debt (about $250 Billion). Out of the total external debt, only about 20% represents short term debt. (See Source: 1 below) 
Keeping external debt at manageable levels has been a conscious policy of the GOI, especially after the 1991 crises.

However, India is in a different league all together.
India's tax regime will go through a paradigm shift in next few years. There are other factors, apart from GDP growth that'll lead to a sustained northward movement of tax to GDP ratio.
Here's how:

GST and Direct Tax Code:

Implementation of GST and direct tax code, by all indications should happen from April  2011.
Direct tax code will simplify the indirect tax regime and procedure. This is expected to bring in more direct tax due to increase in compliance. Ditto with GST. GST will simplify the indirect tax structure and India will truly become a single market.

Inflation:

India's WPI inflation for past decade has averaged 5.2%. (See Source: 2 below)  There is no reason to believe that the there will be any substantial downward movement in the trend in medium term. This high inflation will also lead to higher tax collection in nominal terms, everything else being equal.

UID Project:

Enrolling for Unique ID Project (UID) will start in FY12. This initiative will go a long way in ushering in transparency. This initiative will also simplify governance and bring in capabilities to the government that they have only dreamed of. Transparency will (hopefully) reduce the black market activities, tax leakage and should lead to tax buoyancy apart from the benefit of sharply targeted subsidies.

Demographic Dividend:

India starts getting demographic dividend now. Demographic dividend causes economic boom as the proportion of working population to total population peaks.

The combined effect of all the above, over a period of time is substantial movement of TAX-GDP ratio northwards.


Source 1. Govt. of India
Source 2. Reserve Bank of India

Posted by Tushar Anand Jiwane at 3:26 PM | | Comments (0) | TrackBacks (0)

May 17, 2010

Inflation conundrum - the Chinese way

The global economy is now facing the twin headwind of sovereign crisis in Europe and a slowing Chinese economy. With the Chinese CPI touching 2.8% and close to the 3% rate which is supposed to trigger emergency measures like rate hike.

Question though is, in a highly overheated economy, is the Chinese inflation really as low? Despite having several control mechanisms and administered pricing regime, Chinese inflation is spiraling and the people are unwilling to accept the official data.

While the Chinese CPI is below 3%, the PPI numbers are more than double.

image001.png

Source: National Bureau of Statistics, China 

But, even that might not explain. If we use the difference between the growth rate of nominal GDP and the growth rate of real GDP, one can arrive at some proxy for inflation and the numbers look interesting. With the Q1'10 number released recently, the differential stood at a whopping 12.2%. Any views?

 

image002.gif 

Source: National Bureau of Statistics, China 

 

Posted by Kunal Kumar Kundu at 2:39 PM | | Comments (0) | TrackBacks (0)

May 3, 2010

Temporary uptick in US consumer spending?

The March income and spending data showed a jump of 0.3% and 0.6% respectively. With rising spending, the US Savings Rate fell to 2.7% from 3%, which is now at an 18 month low. This, apparently, is an indication of rising consumer confidence. As consumers started buying (read it as base effect), aided by tax refunds, savings dipped. Whether this is sustainable, only time will tell. More so, because the home buyer credit finally ended on 30th April, after enjoying an extended run. Clearly, the run up is being pumped by steroids like tax refund, ultra low interest rates, purchase benefits etc. 

Problem is, employment growth is hardly visible and, as a result, income growth remains muted. While the issues mentioned above are contributing to falling savings, the impact will be disastrous for the over-leveraged US consumers in the long run, although the short term impact might be seen as positive.

Lets point to the housing market for the time being. According to the Northwestern University researchers, 31% of all U.S. foreclosures last month were initiated by homeowners who were is a mess but nonetheless could keep with their payments. That compares with 22% the same month last year. According to First American Corelogic, their House Price Index or HPI forecast turned less optimistic in the latest update, showing a softer recovery than in previous forecasts. Their forecasts for the inventory of homes for sale have risen as interest rates are expected to rise, tax credits expire, and slower than expected sales over the winter due to the weather. Collectively these effects act to contract demand (put downward pressure on prices).

If indeed house prices soften as expected and over enthusiastic equity prices start to adjust, another blow to consumer spending is expected, unless there is a dramatic increase in employment. To me, this is not going to happen. It would make sense to consider the current spurt as an aberration.

Posted by Kunal Kumar Kundu at 3:14 PM | | Comments (0) | TrackBacks (0)

April 29, 2010

Europe - from junk to junk

The Greek junk it seems is influencing others. Atleast the rating agencies. Portugal has been slapped with double reduction, with possibly more to come. S(pain) journey has just started. UK is also a big threat. Outside of this, a country not in the limelight but possibly on the threshhold, is Italy. A budget deficit of 5% (much above the Maastricht requirement of 3%, debt to GDP ratio of nearly 124% and maturing debt to be due for repayment this year amounting to close to 17% of 2009 GDP is a disaster in the making.

Europe is now not only on the throes of sovereign rating disaster, but the European banking system is also in for one. This is revealed by the exposure that the banking sector of Germany, France and UK has in the PIGS (Portugal, Italy, Greece and Spain). 

image001.png

Source: BIS

Clearly the drama in Europe is just starting to unfold.

Posted by Kunal Kumar Kundu at 11:02 AM | | Comments (0) | TrackBacks (0)

April 22, 2010

Is the Indian central bank falling behind the curve?

The recent decision by the Reserve Bank of India, through the monetary policy announcement, to increase the interest rate by a mere 25 basis points makes me wonder about their intent.

It seems that growth concern has over-ridden inflationary concern. Unlike the US which does not have any inflationary concern at this point in time, for India inflation is a big issue and that should have been kept in mind. It seems that the RBI is now too much dependent on good monsoon (and subsequent arrival of bumper crops) which, it hopes, will keep the inflation down. Clearly they are mistaken.

As I have mentioned in my recent article (published by the Financial Times), non-core inflation is unlikely to create as much problem as core inflation and there is now every indication that core inflation will go up.

By keeping interest rate low (read high negative real rate), RBI continues to encourage excessively leveraged consumer demand. Given that everybody knows that interest rates are going to go up further, lower rates lead to generation of excessive demand, which is essentially a preponement of future demand. Subsequently, I believe that RBI would need to move too fast at a later stage and then this can back-fire.

Ideally, proper expectation setting through higher rate increase should have taken place. Fact is, given the supply constraints that the Indian economy faces, an average 7.5 to 8% growth is a much more desirable option. Any effort to jack up the rate by following too much accommodative policy would lead to high inflation and asset bubbles that can temporarily derail the growth process. In fact, the post policy announcement reaction of the realty stocks, confirm my feeling. Off late, real estate prices have started moving up way too fast. While the basic problems of the sector are yet to be tackled, low interest rate was interpreted as positive for the sector as more demand is expected to be generated because of accommodative policies, which again can lead to bubbles.

While short term picture looks hunky dory, the big picture is concerning. I would prefer to advise investors to be cautious and not go for momentum buying, expecting prices to rise continually.

Posted by Kunal Kumar Kundu at 8:42 AM | | Comments (1) | TrackBacks (0)

April 6, 2010

Indian economy: second half of 2010-11 likely to be tough

With final revenue numbers likely to be even lower than revised estimate (thereby leading to higher deficit), governmental fiscal constraint will weigh heavily on the growth prospects. A lot will depend on the success of the disinvestment of PSUs as well as the 3G spectrum auction. What will also be important is the timeline of exit from stimulus. In India’s case, exit has already started on both the fiscal and monetary front, what with roll back of duty cuts and increase in reserve requirements. There is every likelihood of rate increase in the forthcoming monetary policy meeting. 

Continue reading "Indian economy: second half of 2010-11 likely to be tough" »

Posted by Kunal Kumar Kundu at 12:22 PM | | Comments (0) | TrackBacks (0)

April 5, 2010

Indian economy: Double digit growth rate – a pipe dream

This article (written by me) was published by Financial Times, London on the 1st of April. The gist is as below:

 

The Indian economy has weathered the recessionary storm well, quite well I must say. During the current financial year (Apr’09-Mar’10), I expect the Indian economy to grow by about 7%. This indeed is great going in the midst of economic hubris all around, on the wake of the worst recession the world have ever faced, post the great depression. We are now talking of a double digit growth.

 

To me, this gives a sense of déjà vu. Even in 2006 the same assertion was made. To me, however, these are over optimistic statements being made during heights of euphoria. The euphoria during 2006 was a result of India being in the midst of a golden period when the average GDP growth was about 9%. The euphoria of 2010 is born out of relief for having weathered the storm, including a deficient rainfall and growing at a very decent rate.

Continue reading "Indian economy: Double digit growth rate – a pipe dream" »

Posted by Kunal Kumar Kundu at 7:23 AM | | Comments (1) | TrackBacks (0)

February 24, 2010

Euro – a Greek tragedy

Dubai, as I said when the specter of default loomed large, was symptomatic of a bigger global problem of a sovereign debt crisis. Greece is symptomatic of the problem that the Eurozone (and, by default the Euro) currently faces. Success of Eurozone depended on strict internal discipline by the members. Problem was the different stages of economic growth in different countries. Fact is, many of those nations who aspired to be a member of the much avowed group of countries, did not really care for the discipline expected out of them. The problem was exacerbated by the fact that there was a uniform monetary policy across members as was the uniform deficit target. Sure France and Germany sent out wrong message by violating the deficit targets without inviting sanctions, thanks to the clout they enjoyed. The smaller economies thought that they would continue to enjoy the benefits of being a member without being disciplined. The credit fuelled growth enjoyed by them without the adequate checks and balances meant that, when the global environment turned around for the worst, they paid a heavy price for their lack of discipline. And they did not have ammunition to fight given the centralized policies.

Continue reading "Euro – a Greek tragedy" »

Posted by Kunal Kumar Kundu at 1:16 PM | | Comments (1) | TrackBacks (0)

February 17, 2010

Euro and beyond

The fact that Greece has bluffed its way (namely fudging data to show strong balance sheet) to join the Eurozone is well known. However, as new skeletons tumbled out of the cupboard, it seemed that Goldman Sachs was its partner in crime. It helped Greece raise $1 billion of off-balance-sheet funding in 2002 through swap deals, something that the European Union regulators claim that they were absolutely unaware of. While corruption in the Greek public sector is well known (which, we Indians, can fully understand), their messy financial situation landed them in even greater trouble being part of the Eurozone, given the lack of independence of their monetary and, to a great extent, their fiscal policy.

Continue reading "Euro and beyond" »

Posted by Kunal Kumar Kundu at 1:03 PM | | Comments (0) | TrackBacks (0)

February 5, 2010

US unemployment – lower rate is a chimera

Picking up from where I left yesterday, the malaise seems to be deeper than what the bulls of the Q4’10 GDP number might want us to believe. First things first. Employers cut as much as 20,000 jobs, when the median market expectation was some positive job creation. It is also important to note that while the gain in November employment was revised up from 4,000 to 64,000, the revised December number showed the job loss plummeting from 85,000 to as much as 150,000 – more than erasing the gains in the previous month.

Continue reading "US unemployment – lower rate is a chimera" »

Posted by Kunal Kumar Kundu at 7:02 AM | | Comments (0) | TrackBacks (0)

February 4, 2010

US initial jobless claims – economy on a sticky wicket

The US economy is in a very sticky wicket indeed, notwithstanding the above expected growth recorded during Q4’09. The recovery is mainly technical as inventory draw down is coming to a close and the inventories have gone to such levels that some restocking is essential. Question is, will the inventory stocking finally lead to production cranking up and economy starting to move up? No, because the consumer sentiments are terribly scythed.

Continue reading "US initial jobless claims – economy on a sticky wicket" »

Posted by Kunal Kumar Kundu at 4:39 PM | | Comments (0) | TrackBacks (0)

February 1, 2010

Indian credit policy and stock market

As I have been mentioning over the last few months, the Indian stock markets were highly overvalued and not supported by economic fundamentals. It was quite clear that the run up was mainly driven by the deluge of external funds flowing into India. The events of the last few days, when the stocks took real beating as the fund flow dried up and even reversed (on the back of some stringent measures that the  US regulators are contemplating), finally exposed the fragile nature of the run up.

Continue reading "Indian credit policy and stock market" »

Posted by Kunal Kumar Kundu at 2:05 PM | | Comments (0) | TrackBacks (0)

January 21, 2010

US economy - the last decade was a lost decade

As the 1st decade of the new millennium came to an end, the US has technically come out of one of the worst recessions since the great depression. At a relative level, this maybe one of the worst recessions ever recorded. The uniqueness of this recession lies in the fact that unlike the previous recessions, which mostly saw the inventory led boom bust cycle playing out, this recession saw the US financial system plunging to its nadir. And, being a system whose tentacles are spread all over the world, it pulled others into the vortex as well. For this, however, while a majority of the blame goes to the financial whizkids (a euphemism for thugs on the loose), the regulators also need to take a lot of blame for failing to take appropriate action at the opportune moment. Despite clear faults in the system, the runaway assets prices backed by the obscene expansion of the opaque derivative products, were used by the regulators to justify that as a success story of their own policy acumen. And, when the bubble burst, asset prices collapsed.

Continue reading "US economy - the last decade was a lost decade" »

Posted by Kunal Kumar Kundu at 2:32 PM | | Comments (0) | TrackBacks (0)

January 13, 2010

Indian GDP outlook improves for the current year

The IIP (Index of Industrial Production) numbers for November released yesterday was indeed a cause for much rejoice. It turned out to be another positive (nay pleasant surprise). I was expecting the manufacturing activity to taper off post the conclusion of the festival period. To my surprise, however, that did not turn out to be the case.

Continue reading "Indian GDP outlook improves for the current year" »

Posted by Kunal Kumar Kundu at 1:43 PM | | Comments (0) | TrackBacks (0)

January 8, 2010

Uncle Sam's labour pain

The December 2009 unemployment rate for the US was stood at 10%. What, however, was shocking was the 85,000 jobs were lost, while the general expectation was there would be no job loss. The euphoric expectation was on the back of a mere 11,000 job loss reported in November’09. While the November number was revised upward to plus 4,000 (implying a creation of 15,000 jobs, which though is more of a statistical effect, since the October job loss was revised upward by 16,000) the December numbers poured water on whatever positive expectation that was there on the ground.

Clearly, whatever the spin doctors are saying, the US is far from being out of the woods. The mean duration of unemployment continued to rise and has crossed 29 weeks (29.1 weeks to be precise).

Continue reading "Uncle Sam's labour pain" »

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December 30, 2009

Rating bias

In some of my earlier posts, I talked about how the big banks and institutions continue with their old business practice, royally oblivious of the fallouts of their devious business practices. Why banks, even the rating agencies have also failed to learn the lessons as much. Or maybe they are simply turning a blind eye on the likely impact of the recession and dollops of bailout packages on government finances. Since Greece is passé, here I will discuss about two countries, Spain and Ireland which still enjoy very high rating despite their economy being in shambles.

Continue reading "Rating bias" »

Posted by Kunal Kumar Kundu at 2:26 PM | | Comments (0) | TrackBacks (0)

December 23, 2009

Indian GDP - difficult to put 2 and 2 together

India's Q2 FY'10 GDP number released some time back surprised me on the upside. However, I was not quite convinced about the data.

Firstly, the government appeared to be too optimistic about the agricultural sector,  strangely assuming that the agriculture growth rate in the quarter will be about 0.9%. However, in a year when the monsoon deficit has been 23%, the highest since 1972, and when drought has been declared in 299 districts during the monsoon itself (a record by itself), there seems to be an anomaly. Let’s look at what history has to say with regard to how the foodgrain production in particular and the agriculture sector in general was affected when monsoon played truant with India.

Continue reading "Indian GDP - difficult to put 2 and 2 together" »

Posted by Kunal Kumar Kundu at 1:34 PM | | Comments (0) | TrackBacks (0)

December 21, 2009

After Dubai – where next?

Try Austria.

 

Immediately after the Dubai incident, I mentioned in my blog that while the incident in itself is not as important, it does reflect the deeper malaise afflicting the global financial market and is merely a tip of the iceberg. Immediately thereafter, Greece and Portugal were put under rating watch due to severe financial strain and Greece was downgraded, for the second time during the year by S&P, from A- (which incidentally was a downgrade from A in January 2009) to BBB+. Even the new rating can be downgraded further.  

 

With forecast for fiscal deficit being doubled from 6% (as given the previous government) to 12.7% of of the GDP, and a debt to GDP ratio expected to hit 126% by 2010, the downgrade is a no brainer. Not surprisingly, it’s Credit Default Swap (CDS) spread increased from a low of 100.27 basis points (BPs) to 267.72 BPs. What is even more disturbing is that their banking sector has huge exposure to Eastern Europe, which is a highly vulnerable region. The Greek banks have close to USD 57bn exposure this region out of total exposure of USD 101 bn (source: BIS). Not surprisingly, the ratings of their major banks have also been downgraded.

Continue reading "After Dubai – where next?" »

Posted by Kunal Kumar Kundu at 11:53 AM | | Comments (0) | TrackBacks (0)

December 9, 2009

A not so happy new year awaits us

Savour these:

1) In the third quarter of 2009, delinquencies hit 6.25% of mortgages in the US – about three times the historical norm

2) A recent study McKinsey research found that the recession has changed the US consumer behaviour as more and more of them are opting for cheaper products

3) Retail sales for November actually fell from the month before, according to the International Council of Shopping Centers. The drop of 0.3% is a far cry from the minimum 5% growth the experts expected. Four out of five retailers missed their forecasts, including Macy’s (down 6%), Abercrombie & Fitch (17%) and Saks (26%)

4) Last weekend, another six US banks failed. This brings the yearly total to 130. This will cost another USD 2.3 billion to FDIC’s - a coffer that’s been empty for months now

3) Bernanke has put a spanner of all hopes of a strong economic recovery by stating that despite the recently released better unemployment numbers, the recovery would be painfully slow and he does not foresee any change in their interest rate stance

4) Given the experience of earlier recessions, the unemployment rate in US is unlikely to have peaked (refer to refer to my recently published article in Dalal Street Journal). It might take several months before it peaks and then start to decline as jobs start getting created. Not surprisingly, Bernanke said the U.S. economy still faced headwinds and unemployment could stay high for some time, playing down the impact of last Friday's stronger-than-expected jobs report

5) The global economic and financial crises may be close to an end but the fiscal crisis in a number of top-rated countries could last for "several years," ratings agency Moody's Investors Service said today. Moody’s Investors Service said its top debt ratings on the U.S. and the U.K. may “test the Aaa boundaries” because their public finances are worsening in the wake of the global financial crisis

6) Fitch Ratings cut Greece's debt rating to BBB+ from A- with a negative outlook, the first time in 10 years a major ratings agency has put Greece below an A grade, citing fiscal deterioration in the euro zone's weakest member. The cut followed a Standard & Poor's report that Greek banks faced the highest risks in Western Europe

7) Recently, S&P's has decided to put both Greece and Portugal on negative watch. Coming in the backdrop of the Dubai crisis, this lends credence to the belief that the crisis is far from being over and has the potential to implode elsewhere in the globe

Reads like some sequel of exorcist, eh?

Posted by Kunal Kumar Kundu at 9:33 AM | | Comments (0) | TrackBacks (0)

November 12, 2009

Indian stocks face power shortage

The link to my article discussing the likely resons for sobering corporate performance and the likely impact of the exit strategy is pasted below:

http://atimes.com/atimes/South_Asia/KK13Df02.html

Posted by Kunal Kumar Kundu at 10:39 AM | | Comments (1) | TrackBacks (0)

November 11, 2009

Indian corporate performance to moderate

The corporate sector performance in India, in terms of bottomline growth has been quite strong in the last couple of quarters. An analysis of the performance of a large number of non-financial and non-oil companies by the Economic Times showed that, while their topline has hardly moved, the bottomline has, on an average, increased by more than 20%. This has enthused the market no end, and save for a few corrections (due to both global and domestic cues), the undertone remains quite bullish.

Continue reading "Indian corporate performance to moderate" »

Posted by Kunal Kumar Kundu at 11:10 AM | | Comments (0) | TrackBacks (0)

November 6, 2009

The US unemployment whammy

All talks about US economic recovery has been thrown to the wind with the latest release of the unemployment numbers today. The unemployment rate jumped by as much as 40 basis points in one month, up from 9.8% to 10.2%, while the general expectation was a level 9.9%.

Continue reading "The US unemployment whammy" »

Posted by Kunal Kumar Kundu at 2:54 PM | | Comments (0) | TrackBacks (0)

November 5, 2009

India's fiscal deficit to shoot up

Irrespective of what some experts might want us to believe, India’s economic growth this year is unlikely to breach the 6 per cent mark in real terms. An analysis of the GDP growth number during the previous two quarters viz the last quarter of 2008-09 and the first quarter of 2009-10 clearly revealed that with domestic demand stagnating, it was the high level of government expenditure that saved India the blushes. Added to that was the decent performance by the agricultural sector.

Continue reading "India's fiscal deficit to shoot up" »

Posted by Kunal Kumar Kundu at 10:06 AM | | Comments (5) | TrackBacks (0)

November 2, 2009

US bank failure and TBTF phenomenon

As the US stock market went gaga last Thursday (29th October) over the 2009 Q3 GDP data and many analysts upped their growth expectation for the year, the next day was a chilling reminder of the frost that engulfed the economy. According to Reuters, the US authorities seized nine failed banks on Friday (30th October), the most in a single day since financial crisis began. As a result, total bank failures in 2009 jumped to 115, the highest annual level since 1992.

Continue reading "US bank failure and TBTF phenomenon" »

Posted by Kunal Kumar Kundu at 10:26 AM | | Comments (0) | TrackBacks (0)

October 30, 2009

Q3 GDP data – the devil in the details

The US stock markets were in a celebratory mode yesterday as the Q3 2009 GDP grew by 3.5% in real terms, better than what the economists were expecting.

 

First, the details. As per the US Bureau of Economic Analysis (BEA), the GDP grew by 3.5% after contracting for four consecutive quarters. This, in fact, has been the longest and deepest recession in the post-war period.

Continue reading "Q3 GDP data – the devil in the details" »

Posted by Kunal Kumar Kundu at 2:16 PM | | Comments (1) | TrackBacks (0)

October 29, 2009

RBI - Barking up the wrong tree

As expected, the RBI kept the interest rates unchanged during the Monetary Policy review announced on Tuesday. At this point in time, the RBI is faced with two divergent concerns – growth and inflation.

Continue reading "RBI - Barking up the wrong tree" »

Posted by Kunal Kumar Kundu at 1:21 PM | | Comments (4) | TrackBacks (0)

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