Posted by: qmaxim | February 19, 2009

stimulus package.. continued

While some commentators have been saying that economies of India and China will (hopefully should) be the beacons which would pull the shrinking world economies out of the present doldrums.
Though the Indian economy is expected to clock 7% growth, I am inclined to be more skeptical.
Consider these:

++ Reserve bank of India (RBI) has been easing up on liquidity with the result banks and other financial institutions have plenty of cash. But,they would not like to lend to people with dubious credit rating and most of the people who have income to make large purchases are not inclined to borrow in view of prevailing uncertainty.
++ Also, banks are insisting on much higher percentage contribution from borrowers to prevent them from simply returning the property when the prices decline which seem to be the case in many projects.
++ Most of the real estate projects were for higher end properties which have very few takers now a days. Many of the companies are scrambling to reconfigure so that medium/low income people could buy them- but this will take some time to fruity.
++ Inflation reached record low – in a developing economy like India it is alarming in my view if sinks further.It indicates that people are not buying / spending money rather they are saving money and also there is decline in demand.
++ Most of the infrastructural projects are proceeding at snail’s pace
++ Finally, UPA regime has been on a spending binge without utilizing the money for creating productuve assets. This is also pushing the deficit to record levels.

Please comment……

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