Emerging Financial Scenario

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Emerging Financial Scenerio - By Kumar bijoy

Emerging Financial Scenerio - By Kumar bijoy

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  • 1. Emerging Financial Scenario Kumar Bijoy Financial Consultant [email_address] 09810452266
  • 2. Perspective…
    • Liberal: no licensing
    • Integral: Cross product & Global integration
    • Innovative: new tools & techniques
    • Flexible: adjustable & dynamic
    • Transparent: highly system based
    • Speed: fast settlement
    • Advanced: quantitative
    • Rational: objective oriented
  • 3. Background…
    • GDP growth projection 8.5% (2007-08)
    • CRR: 7%
    • BR: 6%
    • Repo: 7.75%
    • Reverse Repo: 6%
    • Inflation: 5% (2007-08)
    • M3 expansion:17-17.50% (2007-08)
    • Deposits projected to increase by Rs 490KCr
    • Forex Reserve: $199.2b (March31,2007)
    • In 2006-07 INR appreciated by 2.3% against US$ and 2.7% against JPY but depreciated by 6.8% against Euro and 9% against GBP
  • 4. Global Scenario…
    • World economy expanded strongly in 2006 and achieved a four year run of sustained growth that began in 2003.
    • As per World Economic Outlook of IMF, Global real GDP growth on a PPP basis, is expected to decelerate from 5.4% in 2006 to 4.9% in 2007 and 2008
    • Monetary policy authorities the world over are vigilant about threats to inflation, excessive volatility in asset prices, disorderly conditions in currency markets.
  • 5. Monetary authorities…
    • The banks who paused their policy cycle
      • The Federal Reserves of US
      • The Bank of Canada
      • Bank Negara Malaysia
      • The Banco de Mexico
    • The banks who cut back their policy
      • Bank Indonesia
      • The Banco Central do Brasil
      • The Banco Central de Chile
      • The Bank of Thailand
  • 6. Monetary authorities…
    • The Banks who tightened their policy rates
      • The ECB
      • The Bank of England
      • The Bank of Japan
      • The Reserve Bank of Australia
      • The Reserve Bank of New Zealand
      • The People’s Bank of China
      • The Bank of Korea
      • The Reserve Bank of India
  • 7. Savings in India…
    • The average saving rate in India:
      • 10 per cent in the 1950s,
      • 17.5 per cent in the 1970s
      • 23.4 per cent in the 1990s.
      • 32.4 per cent in 2005-06.
      • The strengthening of economic activity in the recent years has been supported by persistent increase in gross domestic investment rates from 22.9 per cent of GDP in 2001-02 to 33.8 per cent in 2005-06.
      • It may also be noted that over 95 per cent of investment in the country during this period was financed by the domestic savings.
  • 8. The inflation rate…
    • The inflation rate accelerated steadily from an annual average of
      • 1.7 per cent during the 1950s
      • 6.4 percent during the 1960s
      • 9.0 per cent in the 1970s
      • 8.0 per cent in the 1980s.
      • 11.0 per cent during 1990-95
      • 5.3 per cent during the second half of the 1990s (1995-2000)
      • 4.9 per cent during 2003-07.
      • 4.1 per cent at the end of March 2006
      • 6.7 per cent at end-January 2007
      • 4.0 per cent June 16, 2007,
  • 9. Prospects of Indian Economy
    • the real GDP growth in 2007-08: 8.5 %
    • inflation in the range of 4.0–4.5 %
    • As on June 8, 2007, the growth in money supply on year on year basis was 21.0 % (18.5 % a year ago).
    • On May 29, 2007, Prime Minister announced a major scheme to double the growth rate of agriculture to 4.0 % over the 11th Plan period.
    • The Government would provide rupees 250 billion for new farm initiatives launched by States.
    • A time-bound Food Security Mission was also announced to counter rising prices of food products and to ensure visible changes in their availability over three years.
    • If these objectives are achieved, the percentage of people in poverty could be reduced by 10 percentage points by the end of the Plan period
  • 10. Current challenges
    • The critical task before the public policy is to strengthen the structural factors in the economy but determinedly moderate the cyclical and excessively volatile elements of the economy.
    • It is necessary to remain guarded in matters relating to economic growth and stability of an emerging market economy in the current global environment of high output-growth, notable inflation pressures, persisting global imbalances, incipient signs of re-pricing of risks, and perceived volatility of capital flows
  • 11.
    • Twin deficits – current and fiscal;
    • Higher component of more volatile portfolio flows on capital account, and severe policy challenges in managing capital flows.
    • Since it is generally accepted that financial and external sectors in India are reasonably strong and resilient, high priority is being accorded for further reforms in fiscal sector, agriculture, physical infrastructure, especially in power and urban areas, and delivery of public services such as water, health and education.
    • Progress in these sectors will help, over the medium term, enhance competitiveness and accelerated reforms in financial and external sectors, in a harmonious and non-disruptive manner, thus, reinforcing self -accelerating growth with assured stability.