Finance & Economy
- See how quickly perceptions change!
- Till today we were fed on the unstoppable growth story in India. But today's ET headlines are screaming about growth missing target. Look at the first few sentences of the lead story:
- Lower-than-expected loan growth for the second straight year, slowing industrial output, and rising interest costs may dampen hopes of achieving an 8.5%- plus economic growth this fiscal.
- Companies are holding back full-throttle capacity expansion as they wait to see the persistence of demand while individuals are reducing consumption as soaring prices eat into incomes.
- The Reserve Bank of India (RBI) may not pause on rate hikes, as expected some weeks ago, but will continue raising interest rates to curb price rise.
- Loans in the first half of the fiscal year grew 5.5%, compared with the 20% target set by the central bank.
- SEBI grapples with takeover norms
- The Securities and Exchange Board of India, or Sebi, is set to unveil new rules on takeover of public listed firms based on the recommendations of a committee headed by C Achuthan, but may stop short of implementing a key proposal that envisages a mandatory open offer for 100% of the equity of a company by an acquirer.
- The committee had recommended a 100% open offer as it felt that it would provide all minority shareholders an equal opportunity to exit. But this proposal, if implemented, could be in conflict with a government rule that makes it mandatory for all companies to have a minimum public shareholding of 25%. Further it also puts takeover bids by locals at a disadvantageous position vis a vis foreigners. This is because Indian corporates cannot access bank funds for buying out a company as RBI does not permit banks to fund such an activity. In contrast, many foreign companies do not face such restrictions and that makes it easier for them to make an aggressive bid for controlling local firms.
- The committee's suggestions, if implemented, will replace an archaic takeover rule that was amended 23 times in 13 years and created more confusion than clarifying the regulatory position. But the recommendations could deter some takeovers, dragging the overall merger activity.
- Average annual takeovers rose to 99 between 2006 and 2009, from an average of 69 a year between 1997 and 2005.
- How much do you know about the concept of quantitative easing?
- Here is a good ET in the Classroom column that educates us about it. Well worth a read. Very good one.
- Managing excessive foreign currency inflows
- Why is India not feeling the heat of raising inflows, while Brazil is crying fowl? Why do increasing foreign currency inflows hurt Brazil more, than what they do to India? Are non tariff barriers better than tariff barriers in fighting / managing excessive inflows?
- Today's ET editorial offers excellent anwers to all such questions. Very good one. A must read.
- In the process we also learn about a new term -- super carry trade. Borrowing cheap in one currency to invest in another at high interest rates is called the carry trade. But borrowing in the US and investing in Brazil can be done without currency risk, a super-carry trade.
- dandy: Adjective
- Very good
- Noun: A man who is much concerned with his dress and appearance; A sailing vessel with two masts; a small mizzen is aft of the rudderpost
- eg: He did a dandy job.
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