By Arvind Padmanabhan
No other year in recent times saw such wild mood swings in the Indian economy than 2008, which started on a strong note but ended on a weak wicket in the wake of a general global slowdown and severe recession in some of the richest countries like the US and Japan.
From economic expansion to performance of equity markets, and from export growth to industrial production, all indicators had the same story to tell: The year had started with a strong economic performance, but the momentum was lost as the months passed, as India faced the ripple effects of the gloom in the global economy.
The indicator that captured the trend best was the 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE), often seen as a barometer not only for investor mood but also the overall performance of the Indian economy and its corporate sector.
On Jan 10 this year, the Sensex was ruling at an all-time intra-day high of 21,206.77 points. But as the year is drawing to a close, it is languishing at around the 9,000-point mark - a fall of over 50 percent in the year. Last year, the index had gained nearly 50 percent.
The Sensex apart, exports fell in October for the first time in seven years. Indirect tax mop up was down eight percent in October. Industrial production, which was among the main drivers of the economy, fell 0.4 percent. The rupee fell below 50 to a dollar in November to an all-time low. And, as per the government's own admission, some 65,000 jobs were lost between August and October.
The high cost of crude oil, which jumped from under $40 per barrel a year ago to nearly $150 per barrel in August, added to the country's woes in terms of higher import bill and accentuated the losses of state-run fuel retailers, which had to bear the burden of having to sell hydrocarbon products below cost.
As a result, the United Progressive Alliance (UPA) government, led by Prime Minister Manmohan Singh, which at the beginning of the year said the Indian economy would continue to grow at over nine percent this fiscal, had to tone down its target sharply, hoping to achieve an overall increase of 7-7.5 percent in gross domestic product (GDP).
"Two key sectors, agriculture and industry, were unable to maintain the pace due to the global economic slowdown. This will have a serious effect on our overall growth," said Dalip Kumar, head of projects at the National Council of Applied Economics Research, an economic think-tank.
The only notable saving grace was on the price front, where the annual rate of inflation fell from a 16-year high of 12.63 percent for the week ended Aug 9 to 6.84 percent for the week ended Dec 6 - but not without taking a toll on industrial growth on account of the tight monetary policy of the central bank during the months before.
"Inflation is not a concern any more. If the Indian government does not think in terms of long- term measures to contain the slowdown, the medium-term growth projection of 8-9 percent will be difficult to achieve," said Biswa N. Bhattacharyay, Tokyo-based special adviser with the Asian Development Bank (ADB).
As India Inc. cried hoarse, saying the credit squeeze due to the policies of the central bank was affecting its day-to-day business, policymakers appeared to be in a denial mode initially, with the prime minister maintaining that India remained largely insulated from the goings-on in the world economy.
But that was not the case. As official data on a host of areas started confirming the worst worries articulated by India Inc., Manmohan Singh had to himself intervene and unveil a Rs.30,000-crore (Rs.300-billion/$6-billion) package in December to bail out the corporate sector.
There is a fear now that the major pump priming of the economy by the government, the large-scale spending on infrastructure and the relaxation of the monetary policy by the central bank to open the purse strings for the corporate sector may threaten the country's fiscal deficit, which was kept at a moderate level during the past five-six fiscals.
The year, nevertheless, did not pass without some high points.
India Inc. came under the global media glare when the Tata group, the country's largest industrial house with annual turnover of $62.5 billion, showcased its little car 'Nano' in January, that would cost all of $2,500 at factory gates. Time magazine named it the most important car of the century since Ford's revolutionary Model T.
It was a different matter that the industrial house had to shift the production site for the small car from Communist-ruled West Bengal to Gujarat following violent protests by a section of farmers that claimed their land was acquired forcibly without adequate compensation.
The same Tata group announced a few months later the acquisition of two iconic British automobile brands, Jaguar and Land Rover, from Ford Motor Co for $2.3 billion in what was yet another high-notch buyout by a globally ambitious Indian group.
The international investor community also continued to bet on the Indian market. Norway-based Telenor, the world's seventh largest telecom operator, bought a new-generation telecom company Unitech Wireless by paying $1.29 billion for a 60 percent stake.
Similarly, another start-up, Swan Telecom, which did not have a single subscriber, sold a 45-percent stake to the UAE's Etisalat for $900 million, taking the company's book value to $2 billion.
In fact, the inflow of foreign direct investment between April and September amounted to $17.21 billion, representing a growth of 137 percent over $7.25 billion in the like period last fiscal. The services sector attracted the maximum foreign investment, followed by construction, including roads and highways, housing and real estate, and computer hardware and software.
The year also saw a record number of seven Indian firms make it to the list of Fortune 500 companies - two from the private sector, namely, Reliance Industries and Tata Steel, and the rest from the public sector.
This apart, the Indian telecom industry also witnessed unprecedented growth and started adding 8-10 million new mobile phone users each month to make the country's subscriber base of more than 300 million, the largest after China's, displacing the US. The stage is now set for the launch of 3G, or third generation services.
Looking ahead, economists and industry experts alike predict some tough times for the Indian economy, at least during the next two-three quarters. But they also maintain that India stands on a much better wicket compared with many other countries to weather the storm, particularly because of the strong push from some key drivers of growth, like savings and investment.
As Reserve Bank of India Governor D. Subbarao remarked recently: "A period of painful adjustment is inevitable. But once the crisis is behind us and calm and confidence are restored in the global markets, economic activity in India will recover sharply."
Key Business and Economic Milestones for India in 2008
Following are some key economic, business and financial milestones in India during 2008:
Jan 10: Tata Motors unveil Nano, the jelly-bean shaped small car touted as the world's cheapest, costing all of $2,500 at factory gates.
Jan 10: Sensitive index (Sensex) of the Bombay Stock Exchanges touches all-time, intra-day high of 21,206.77 points.
Jan 16: Supreme Court paves way for Reliance Power's initial public offering.
Jan 21: Investors lose $170 billion as Sensex crashes over 2,000 points to register steepest ever intra-day fall.
Feb 20: Report says Indian companies have invested $10 billion in US, creating 30,000 jobs.
Feb 20: Anil Ambani's Reliance Communications acquires Ugandan telecom firm.
Feb 23: PepsiCo's Indian-born chief executive Indra Nooyi among Forbes' list of 10 best women CEOs.
Feb 26: Railway Minister Lalu Prasad announces across-the-board cut in fares and projects record profits in his first fifth rail budget.
Feb 29: Finance Minister P. Chidambaram presents national budget with most ambitious loan-waiver scheme amounting to Rs.600 billion (Rs.60,000 crore) to benefit 40 million farmers.
March 2: Richard Branson's Virgin Mobile enters Indian telecom market.
March 11: A fresh graduate of the Indian Institute of Management in Ahmedabad offered record pay packet of Rs.14.4 million.
March 31: India's external debt rises to $201 billion.
April 1: International Monetary Fund warns of spiraling inflation and cooling of Indian economy.
April 11: Official data says India has second largest telecom subscriber base of over 300 million, ahead of the US and behind China.
April 29: India imposes export tax, bans overseas sales of some commodities like steel and cement to calm prices.
May 6: Bharti Airtel and South Africa's mobile phone giant enter consolidation talks.
May 11: Ratan Tata named by Time magazine among 73 biggest brains in business for conceiving small car Nano.
May 24: Bharti Airtel and MTN call off consolidation talks.
May 26: Reliance Communications and MTN say they have started talks for possible consolidation.
May 30: India's economic growth rate for 2007-08 revised upward to nine percent against provisional estimate of 8.9 percent.
June 2: Tata Motors formally takes over two iconic British automobile brands Jaguar and Land Rover from Ford Motors.
June 4: As crude prices spiral, India allows Rs.5 a liter increase in prices of petrol and Rs.3 on diesel.
June 11: Japan's Daiichi Sankyo says it is buying majority stake in India's largest pharmaceuticals company Ranbaxy for $4.6 billion.
June 20: India's annual rate of inflation scales the double digit level and touches 11.05 percent.
June: Heightened protests by farmers against Tatas' Nano project at Singur in West Bengal who claim their land was forcibly acquired.
July 11: International crude prices touch all-time high of $147.27 a barrel on the New York Mercantile Exchange.
July 12: Vodafone and Airtel say they will launch Apple's 3G iPhone in India.
July 13: Anil Ambani's wife Tina Ambani and L.N. Mittal's spouse Usha Mittal named by Forbes among top 10 billionaires' wives.
July 16: Hindustan Computers Ltd acquires British outsourcing firm for undisclosed amount.
July 17: Survey says revenues of top 20 Indian IT firms fell 24 percent in 2007-08 due to global slowdown.
July 18: Air India announces 15 percent cut in airfares to Gulf.
July 19: Reliance Communications stops consolidation talks with MTN.
July 29: India's central bank tightens monetary policy to tame inflation by hiking key lending rate and cash reserve ratio.
Aug 12: India's industrial growth halves to 5.2 percent in first quarter of current fiscal.
Aug 18: India's telecom regulator permits computer-to-computer voice calls.
Aug 21: India's annual rate of inflation spirals to 16-year high of 12.63 percent.
Aug 26: Overseas arm of Oil and Natural Gas Corp says it is acquiring British firm for $1.4 billion.
Aug 29: Government approves new Companies Bill, 2008, to fine-tune legislation to reflect developments in and requirements of present-day corporate world.
Sep 1: Finance Secretary Duvvuri Subbarao named next governor of the Reserve Bank.
Sep 7: Department of Telecommunications starts auction of frequencies for 3G telephony.
Sep 11: Government eases norms for FM broadcast to push growth.
Sep 17: US Food and Drug Administration blocks import of 30 generic drugs made by Ranbaxy.
Sep 18: India's cabinet clears proposal for foreign news magazines to start Indian editions.
Sep 20: Anil Ambani group and Steven Spielberg to set up $1.5 billion Hollywood studio.
Sep 23: Abu Dhabi-based Etisalat says it will acquire 45 percent stake in India's Swan Telecom for $900 million.
Oct 1: UN report says India is sixth largest investor in Britain.
Oct 3: Tatas say they are pulling the "Nano" project out of West Bengal despite investing Rs.15 billion.
Oct 7: Gujarat is chosen as new home for launch of Nano.
Oct 8: Indian rupee crashes to six-year low of Rs.48 to a dollar.
Oct 9: International Monetary Fund predicts seven percent growth for India in 2009.
Oct 9: Report says India Inc. finalized overseas mergers and acquisition deals worth $26 billion in first half of current fiscal.
Oct 10: Reserve Bank eases monetary policy, cuts cash reserve ratio by 150 basis points.
Oct 10: India's industrial production logs just 1.3 percent growth in August, says report.
Oct 15: Government says Indian civil aviation industry is $300 billion investment opportunity.
Oct 15: Central bank takes steps to inject Rs.650 billion into system to increase liquidity.
Oct 15: Jet Airways, Kingfisher announce pact to reduce costs, synergize operations and improve services.
Oct 15: Jet Airways says it is sacking 1,900 employees (but withdraws steps a day later).
Oct 15: US president-elect Barack Obama tells IANS India will be top priority during his tenure.
Oct 27: Sensex crashes to 7,697.39 points, lowest level since November 2005.
Oct 29: Norway-based Telenor, the world's seventh largest telecom operator, says it is buying 60 percent stake in Indian telecom start-up Unitech Wireless for $1.29 billion.
Nov 10: Satyam acquires Motorola's software unit in Malaysia.
Nov 10: International Monetary Fund lowers India growth projection for 2009 to 6.3 percent.
Nov 12: Japan's DoCoMo says it will acquire 26 percent stake in Tata Teleservices.
Nov 13: Forbes rich list says Mukesh Ambani has ousted L.N. Mittal as richest Indian.
Nov 19: Rupee falls to its lowest-ever level, below 50 to a dollar.
Dec 1: Data on foreign trade says India's merchandise exports fell 12.1 percent in October.
Dec 8: Government unveils Rs.30,000-crore (Rs.300-billion/$6-billion) package to pump prime economy.
Dec 12: Fresh data on industrial production says index fell 0.3 percent in October.
Dec 16: Satyam Computer Services says it is acquiring two infrastructure firms run by founder's sons for $1.6 billion, but withdraws move a day later following investor outrage.
Dec 19: Chanda Kochhar named ICICI Bank chief executive with effect from next May 1.
Dec 23: Wipro says it is acquiring Citigroup's Indian outsourcing arm for $127 million.
Monday, December 29, 2008
Boom to Gloom: Indian Economy Saw it All in 2008
By Arvind Padmanabhan
No other year in recent times saw such wild mood swings in the Indian economy than 2008, which started on a strong note but ended on a weak wicket in the wake of a general global slowdown and severe recession in some of the richest countries like the US and Japan.
From economic expansion to performance of equity markets, and from export growth to industrial production, all indicators had the same story to tell: The year had started with a strong economic performance, but the momentum was lost as the months passed, as India faced the ripple effects of the gloom in the global economy.
The indicator that captured the trend best was the 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE), often seen as a barometer not only for investor mood but also the overall performance of the Indian economy and its corporate sector.
On Jan 10 this year, the Sensex was ruling at an all-time intra-day high of 21,206.77 points. But as the year is drawing to a close, it is languishing at around the 9,000-point mark - a fall of over 50 percent in the year. Last year, the index had gained nearly 50 percent.
The Sensex apart, exports fell in October for the first time in seven years. Indirect tax mop up was down eight percent in October. Industrial production, which was among the main drivers of the economy, fell 0.4 percent. The rupee fell below 50 to a dollar in November to an all-time low. And, as per the government's own admission, some 65,000 jobs were lost between August and October.
The high cost of crude oil, which jumped from under $40 per barrel a year ago to nearly $150 per barrel in August, added to the country's woes in terms of higher import bill and accentuated the losses of state-run fuel retailers, which had to bear the burden of having to sell hydrocarbon products below cost.
As a result, the United Progressive Alliance (UPA) government, led by Prime Minister Manmohan Singh, which at the beginning of the year said the Indian economy would continue to grow at over nine percent this fiscal, had to tone down its target sharply, hoping to achieve an overall increase of 7-7.5 percent in gross domestic product (GDP).
"Two key sectors, agriculture and industry, were unable to maintain the pace due to the global economic slowdown. This will have a serious effect on our overall growth," said Dalip Kumar, head of projects at the National Council of Applied Economics Research, an economic think-tank.
The only notable saving grace was on the price front, where the annual rate of inflation fell from a 16-year high of 12.63 percent for the week ended Aug 9 to 6.84 percent for the week ended Dec 6 - but not without taking a toll on industrial growth on account of the tight monetary policy of the central bank during the months before.
"Inflation is not a concern any more. If the Indian government does not think in terms of long- term measures to contain the slowdown, the medium-term growth projection of 8-9 percent will be difficult to achieve," said Biswa N. Bhattacharyay, Tokyo-based special adviser with the Asian Development Bank (ADB).
As India Inc. cried hoarse, saying the credit squeeze due to the policies of the central bank was affecting its day-to-day business, policymakers appeared to be in a denial mode initially, with the prime minister maintaining that India remained largely insulated from the goings-on in the world economy.
But that was not the case. As official data on a host of areas started confirming the worst worries articulated by India Inc., Manmohan Singh had to himself intervene and unveil a Rs.30,000-crore (Rs.300-billion/$6-billion) package in December to bail out the corporate sector.
There is a fear now that the major pump priming of the economy by the government, the large-scale spending on infrastructure and the relaxation of the monetary policy by the central bank to open the purse strings for the corporate sector may threaten the country's fiscal deficit, which was kept at a moderate level during the past five-six fiscals.
The year, nevertheless, did not pass without some high points.
India Inc. came under the global media glare when the Tata group, the country's largest industrial house with annual turnover of $62.5 billion, showcased its little car 'Nano' in January, that would cost all of $2,500 at factory gates. Time magazine named it the most important car of the century since Ford's revolutionary Model T.
It was a different matter that the industrial house had to shift the production site for the small car from Communist-ruled West Bengal to Gujarat following violent protests by a section of farmers that claimed their land was acquired forcibly without adequate compensation.
The same Tata group announced a few months later the acquisition of two iconic British automobile brands, Jaguar and Land Rover, from Ford Motor Co for $2.3 billion in what was yet another high-notch buyout by a globally ambitious Indian group.
The international investor community also continued to bet on the Indian market. Norway-based Telenor, the world's seventh largest telecom operator, bought a new-generation telecom company Unitech Wireless by paying $1.29 billion for a 60 percent stake.
Similarly, another start-up, Swan Telecom, which did not have a single subscriber, sold a 45-percent stake to the UAE's Etisalat for $900 million, taking the company's book value to $2 billion.
In fact, the inflow of foreign direct investment between April and September amounted to $17.21 billion, representing a growth of 137 percent over $7.25 billion in the like period last fiscal. The services sector attracted the maximum foreign investment, followed by construction, including roads and highways, housing and real estate, and computer hardware and software.
The year also saw a record number of seven Indian firms make it to the list of Fortune 500 companies - two from the private sector, namely, Reliance Industries and Tata Steel, and the rest from the public sector.
This apart, the Indian telecom industry also witnessed unprecedented growth and started adding 8-10 million new mobile phone users each month to make the country's subscriber base of more than 300 million, the largest after China's, displacing the US. The stage is now set for the launch of 3G, or third generation services.
Looking ahead, economists and industry experts alike predict some tough times for the Indian economy, at least during the next two-three quarters. But they also maintain that India stands on a much better wicket compared with many other countries to weather the storm, particularly because of the strong push from some key drivers of growth, like savings and investment.
As Reserve Bank of India Governor D. Subbarao remarked recently: "A period of painful adjustment is inevitable. But once the crisis is behind us and calm and confidence are restored in the global markets, economic activity in India will recover sharply."
Key Business and Economic Milestones for India in 2008
Following are some key economic, business and financial milestones in India during 2008:
Jan 10: Tata Motors unveil Nano, the jelly-bean shaped small car touted as the world's cheapest, costing all of $2,500 at factory gates.
Jan 10: Sensitive index (Sensex) of the Bombay Stock Exchanges touches all-time, intra-day high of 21,206.77 points.
Jan 16: Supreme Court paves way for Reliance Power's initial public offering.
Jan 21: Investors lose $170 billion as Sensex crashes over 2,000 points to register steepest ever intra-day fall.
Feb 20: Report says Indian companies have invested $10 billion in US, creating 30,000 jobs.
Feb 20: Anil Ambani's Reliance Communications acquires Ugandan telecom firm.
Feb 23: PepsiCo's Indian-born chief executive Indra Nooyi among Forbes' list of 10 best women CEOs.
Feb 26: Railway Minister Lalu Prasad announces across-the-board cut in fares and projects record profits in his first fifth rail budget.
Feb 29: Finance Minister P. Chidambaram presents national budget with most ambitious loan-waiver scheme amounting to Rs.600 billion (Rs.60,000 crore) to benefit 40 million farmers.
March 2: Richard Branson's Virgin Mobile enters Indian telecom market.
March 11: A fresh graduate of the Indian Institute of Management in Ahmedabad offered record pay packet of Rs.14.4 million.
March 31: India's external debt rises to $201 billion.
April 1: International Monetary Fund warns of spiraling inflation and cooling of Indian economy.
April 11: Official data says India has second largest telecom subscriber base of over 300 million, ahead of the US and behind China.
April 29: India imposes export tax, bans overseas sales of some commodities like steel and cement to calm prices.
May 6: Bharti Airtel and South Africa's mobile phone giant enter consolidation talks.
May 11: Ratan Tata named by Time magazine among 73 biggest brains in business for conceiving small car Nano.
May 24: Bharti Airtel and MTN call off consolidation talks.
May 26: Reliance Communications and MTN say they have started talks for possible consolidation.
May 30: India's economic growth rate for 2007-08 revised upward to nine percent against provisional estimate of 8.9 percent.
June 2: Tata Motors formally takes over two iconic British automobile brands Jaguar and Land Rover from Ford Motors.
June 4: As crude prices spiral, India allows Rs.5 a liter increase in prices of petrol and Rs.3 on diesel.
June 11: Japan's Daiichi Sankyo says it is buying majority stake in India's largest pharmaceuticals company Ranbaxy for $4.6 billion.
June 20: India's annual rate of inflation scales the double digit level and touches 11.05 percent.
June: Heightened protests by farmers against Tatas' Nano project at Singur in West Bengal who claim their land was forcibly acquired.
July 11: International crude prices touch all-time high of $147.27 a barrel on the New York Mercantile Exchange.
July 12: Vodafone and Airtel say they will launch Apple's 3G iPhone in India.
July 13: Anil Ambani's wife Tina Ambani and L.N. Mittal's spouse Usha Mittal named by Forbes among top 10 billionaires' wives.
July 16: Hindustan Computers Ltd acquires British outsourcing firm for undisclosed amount.
July 17: Survey says revenues of top 20 Indian IT firms fell 24 percent in 2007-08 due to global slowdown.
July 18: Air India announces 15 percent cut in airfares to Gulf.
July 19: Reliance Communications stops consolidation talks with MTN.
July 29: India's central bank tightens monetary policy to tame inflation by hiking key lending rate and cash reserve ratio.
Aug 12: India's industrial growth halves to 5.2 percent in first quarter of current fiscal.
Aug 18: India's telecom regulator permits computer-to-computer voice calls.
Aug 21: India's annual rate of inflation spirals to 16-year high of 12.63 percent.
Aug 26: Overseas arm of Oil and Natural Gas Corp says it is acquiring British firm for $1.4 billion.
Aug 29: Government approves new Companies Bill, 2008, to fine-tune legislation to reflect developments in and requirements of present-day corporate world.
Sep 1: Finance Secretary Duvvuri Subbarao named next governor of the Reserve Bank.
Sep 7: Department of Telecommunications starts auction of frequencies for 3G telephony.
Sep 11: Government eases norms for FM broadcast to push growth.
Sep 17: US Food and Drug Administration blocks import of 30 generic drugs made by Ranbaxy.
Sep 18: India's cabinet clears proposal for foreign news magazines to start Indian editions.
Sep 20: Anil Ambani group and Steven Spielberg to set up $1.5 billion Hollywood studio.
Sep 23: Abu Dhabi-based Etisalat says it will acquire 45 percent stake in India's Swan Telecom for $900 million.
Oct 1: UN report says India is sixth largest investor in Britain.
Oct 3: Tatas say they are pulling the "Nano" project out of West Bengal despite investing Rs.15 billion.
Oct 7: Gujarat is chosen as new home for launch of Nano.
Oct 8: Indian rupee crashes to six-year low of Rs.48 to a dollar.
Oct 9: International Monetary Fund predicts seven percent growth for India in 2009.
Oct 9: Report says India Inc. finalized overseas mergers and acquisition deals worth $26 billion in first half of current fiscal.
Oct 10: Reserve Bank eases monetary policy, cuts cash reserve ratio by 150 basis points.
Oct 10: India's industrial production logs just 1.3 percent growth in August, says report.
Oct 15: Government says Indian civil aviation industry is $300 billion investment opportunity.
Oct 15: Central bank takes steps to inject Rs.650 billion into system to increase liquidity.
Oct 15: Jet Airways, Kingfisher announce pact to reduce costs, synergize operations and improve services.
Oct 15: Jet Airways says it is sacking 1,900 employees (but withdraws steps a day later).
Oct 15: US president-elect Barack Obama tells IANS India will be top priority during his tenure.
Oct 27: Sensex crashes to 7,697.39 points, lowest level since November 2005.
Oct 29: Norway-based Telenor, the world's seventh largest telecom operator, says it is buying 60 percent stake in Indian telecom start-up Unitech Wireless for $1.29 billion.
Nov 10: Satyam acquires Motorola's software unit in Malaysia.
Nov 10: International Monetary Fund lowers India growth projection for 2009 to 6.3 percent.
Nov 12: Japan's DoCoMo says it will acquire 26 percent stake in Tata Teleservices.
Nov 13: Forbes rich list says Mukesh Ambani has ousted L.N. Mittal as richest Indian.
Nov 19: Rupee falls to its lowest-ever level, below 50 to a dollar.
Dec 1: Data on foreign trade says India's merchandise exports fell 12.1 percent in October.
Dec 8: Government unveils Rs.30,000-crore (Rs.300-billion/$6-billion) package to pump prime economy.
Dec 12: Fresh data on industrial production says index fell 0.3 percent in October.
Dec 16: Satyam Computer Services says it is acquiring two infrastructure firms run by founder's sons for $1.6 billion, but withdraws move a day later following investor outrage.
Dec 19: Chanda Kochhar named ICICI Bank chief executive with effect from next May 1.
Dec 23: Wipro says it is acquiring Citigroup's Indian outsourcing arm for $127 million.
No other year in recent times saw such wild mood swings in the Indian economy than 2008, which started on a strong note but ended on a weak wicket in the wake of a general global slowdown and severe recession in some of the richest countries like the US and Japan.
From economic expansion to performance of equity markets, and from export growth to industrial production, all indicators had the same story to tell: The year had started with a strong economic performance, but the momentum was lost as the months passed, as India faced the ripple effects of the gloom in the global economy.
The indicator that captured the trend best was the 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE), often seen as a barometer not only for investor mood but also the overall performance of the Indian economy and its corporate sector.
On Jan 10 this year, the Sensex was ruling at an all-time intra-day high of 21,206.77 points. But as the year is drawing to a close, it is languishing at around the 9,000-point mark - a fall of over 50 percent in the year. Last year, the index had gained nearly 50 percent.
The Sensex apart, exports fell in October for the first time in seven years. Indirect tax mop up was down eight percent in October. Industrial production, which was among the main drivers of the economy, fell 0.4 percent. The rupee fell below 50 to a dollar in November to an all-time low. And, as per the government's own admission, some 65,000 jobs were lost between August and October.
The high cost of crude oil, which jumped from under $40 per barrel a year ago to nearly $150 per barrel in August, added to the country's woes in terms of higher import bill and accentuated the losses of state-run fuel retailers, which had to bear the burden of having to sell hydrocarbon products below cost.
As a result, the United Progressive Alliance (UPA) government, led by Prime Minister Manmohan Singh, which at the beginning of the year said the Indian economy would continue to grow at over nine percent this fiscal, had to tone down its target sharply, hoping to achieve an overall increase of 7-7.5 percent in gross domestic product (GDP).
"Two key sectors, agriculture and industry, were unable to maintain the pace due to the global economic slowdown. This will have a serious effect on our overall growth," said Dalip Kumar, head of projects at the National Council of Applied Economics Research, an economic think-tank.
The only notable saving grace was on the price front, where the annual rate of inflation fell from a 16-year high of 12.63 percent for the week ended Aug 9 to 6.84 percent for the week ended Dec 6 - but not without taking a toll on industrial growth on account of the tight monetary policy of the central bank during the months before.
"Inflation is not a concern any more. If the Indian government does not think in terms of long- term measures to contain the slowdown, the medium-term growth projection of 8-9 percent will be difficult to achieve," said Biswa N. Bhattacharyay, Tokyo-based special adviser with the Asian Development Bank (ADB).
As India Inc. cried hoarse, saying the credit squeeze due to the policies of the central bank was affecting its day-to-day business, policymakers appeared to be in a denial mode initially, with the prime minister maintaining that India remained largely insulated from the goings-on in the world economy.
But that was not the case. As official data on a host of areas started confirming the worst worries articulated by India Inc., Manmohan Singh had to himself intervene and unveil a Rs.30,000-crore (Rs.300-billion/$6-billion) package in December to bail out the corporate sector.
There is a fear now that the major pump priming of the economy by the government, the large-scale spending on infrastructure and the relaxation of the monetary policy by the central bank to open the purse strings for the corporate sector may threaten the country's fiscal deficit, which was kept at a moderate level during the past five-six fiscals.
The year, nevertheless, did not pass without some high points.
India Inc. came under the global media glare when the Tata group, the country's largest industrial house with annual turnover of $62.5 billion, showcased its little car 'Nano' in January, that would cost all of $2,500 at factory gates. Time magazine named it the most important car of the century since Ford's revolutionary Model T.
It was a different matter that the industrial house had to shift the production site for the small car from Communist-ruled West Bengal to Gujarat following violent protests by a section of farmers that claimed their land was acquired forcibly without adequate compensation.
The same Tata group announced a few months later the acquisition of two iconic British automobile brands, Jaguar and Land Rover, from Ford Motor Co for $2.3 billion in what was yet another high-notch buyout by a globally ambitious Indian group.
The international investor community also continued to bet on the Indian market. Norway-based Telenor, the world's seventh largest telecom operator, bought a new-generation telecom company Unitech Wireless by paying $1.29 billion for a 60 percent stake.
Similarly, another start-up, Swan Telecom, which did not have a single subscriber, sold a 45-percent stake to the UAE's Etisalat for $900 million, taking the company's book value to $2 billion.
In fact, the inflow of foreign direct investment between April and September amounted to $17.21 billion, representing a growth of 137 percent over $7.25 billion in the like period last fiscal. The services sector attracted the maximum foreign investment, followed by construction, including roads and highways, housing and real estate, and computer hardware and software.
The year also saw a record number of seven Indian firms make it to the list of Fortune 500 companies - two from the private sector, namely, Reliance Industries and Tata Steel, and the rest from the public sector.
This apart, the Indian telecom industry also witnessed unprecedented growth and started adding 8-10 million new mobile phone users each month to make the country's subscriber base of more than 300 million, the largest after China's, displacing the US. The stage is now set for the launch of 3G, or third generation services.
Looking ahead, economists and industry experts alike predict some tough times for the Indian economy, at least during the next two-three quarters. But they also maintain that India stands on a much better wicket compared with many other countries to weather the storm, particularly because of the strong push from some key drivers of growth, like savings and investment.
As Reserve Bank of India Governor D. Subbarao remarked recently: "A period of painful adjustment is inevitable. But once the crisis is behind us and calm and confidence are restored in the global markets, economic activity in India will recover sharply."
Key Business and Economic Milestones for India in 2008
Following are some key economic, business and financial milestones in India during 2008:
Jan 10: Tata Motors unveil Nano, the jelly-bean shaped small car touted as the world's cheapest, costing all of $2,500 at factory gates.
Jan 10: Sensitive index (Sensex) of the Bombay Stock Exchanges touches all-time, intra-day high of 21,206.77 points.
Jan 16: Supreme Court paves way for Reliance Power's initial public offering.
Jan 21: Investors lose $170 billion as Sensex crashes over 2,000 points to register steepest ever intra-day fall.
Feb 20: Report says Indian companies have invested $10 billion in US, creating 30,000 jobs.
Feb 20: Anil Ambani's Reliance Communications acquires Ugandan telecom firm.
Feb 23: PepsiCo's Indian-born chief executive Indra Nooyi among Forbes' list of 10 best women CEOs.
Feb 26: Railway Minister Lalu Prasad announces across-the-board cut in fares and projects record profits in his first fifth rail budget.
Feb 29: Finance Minister P. Chidambaram presents national budget with most ambitious loan-waiver scheme amounting to Rs.600 billion (Rs.60,000 crore) to benefit 40 million farmers.
March 2: Richard Branson's Virgin Mobile enters Indian telecom market.
March 11: A fresh graduate of the Indian Institute of Management in Ahmedabad offered record pay packet of Rs.14.4 million.
March 31: India's external debt rises to $201 billion.
April 1: International Monetary Fund warns of spiraling inflation and cooling of Indian economy.
April 11: Official data says India has second largest telecom subscriber base of over 300 million, ahead of the US and behind China.
April 29: India imposes export tax, bans overseas sales of some commodities like steel and cement to calm prices.
May 6: Bharti Airtel and South Africa's mobile phone giant enter consolidation talks.
May 11: Ratan Tata named by Time magazine among 73 biggest brains in business for conceiving small car Nano.
May 24: Bharti Airtel and MTN call off consolidation talks.
May 26: Reliance Communications and MTN say they have started talks for possible consolidation.
May 30: India's economic growth rate for 2007-08 revised upward to nine percent against provisional estimate of 8.9 percent.
June 2: Tata Motors formally takes over two iconic British automobile brands Jaguar and Land Rover from Ford Motors.
June 4: As crude prices spiral, India allows Rs.5 a liter increase in prices of petrol and Rs.3 on diesel.
June 11: Japan's Daiichi Sankyo says it is buying majority stake in India's largest pharmaceuticals company Ranbaxy for $4.6 billion.
June 20: India's annual rate of inflation scales the double digit level and touches 11.05 percent.
June: Heightened protests by farmers against Tatas' Nano project at Singur in West Bengal who claim their land was forcibly acquired.
July 11: International crude prices touch all-time high of $147.27 a barrel on the New York Mercantile Exchange.
July 12: Vodafone and Airtel say they will launch Apple's 3G iPhone in India.
July 13: Anil Ambani's wife Tina Ambani and L.N. Mittal's spouse Usha Mittal named by Forbes among top 10 billionaires' wives.
July 16: Hindustan Computers Ltd acquires British outsourcing firm for undisclosed amount.
July 17: Survey says revenues of top 20 Indian IT firms fell 24 percent in 2007-08 due to global slowdown.
July 18: Air India announces 15 percent cut in airfares to Gulf.
July 19: Reliance Communications stops consolidation talks with MTN.
July 29: India's central bank tightens monetary policy to tame inflation by hiking key lending rate and cash reserve ratio.
Aug 12: India's industrial growth halves to 5.2 percent in first quarter of current fiscal.
Aug 18: India's telecom regulator permits computer-to-computer voice calls.
Aug 21: India's annual rate of inflation spirals to 16-year high of 12.63 percent.
Aug 26: Overseas arm of Oil and Natural Gas Corp says it is acquiring British firm for $1.4 billion.
Aug 29: Government approves new Companies Bill, 2008, to fine-tune legislation to reflect developments in and requirements of present-day corporate world.
Sep 1: Finance Secretary Duvvuri Subbarao named next governor of the Reserve Bank.
Sep 7: Department of Telecommunications starts auction of frequencies for 3G telephony.
Sep 11: Government eases norms for FM broadcast to push growth.
Sep 17: US Food and Drug Administration blocks import of 30 generic drugs made by Ranbaxy.
Sep 18: India's cabinet clears proposal for foreign news magazines to start Indian editions.
Sep 20: Anil Ambani group and Steven Spielberg to set up $1.5 billion Hollywood studio.
Sep 23: Abu Dhabi-based Etisalat says it will acquire 45 percent stake in India's Swan Telecom for $900 million.
Oct 1: UN report says India is sixth largest investor in Britain.
Oct 3: Tatas say they are pulling the "Nano" project out of West Bengal despite investing Rs.15 billion.
Oct 7: Gujarat is chosen as new home for launch of Nano.
Oct 8: Indian rupee crashes to six-year low of Rs.48 to a dollar.
Oct 9: International Monetary Fund predicts seven percent growth for India in 2009.
Oct 9: Report says India Inc. finalized overseas mergers and acquisition deals worth $26 billion in first half of current fiscal.
Oct 10: Reserve Bank eases monetary policy, cuts cash reserve ratio by 150 basis points.
Oct 10: India's industrial production logs just 1.3 percent growth in August, says report.
Oct 15: Government says Indian civil aviation industry is $300 billion investment opportunity.
Oct 15: Central bank takes steps to inject Rs.650 billion into system to increase liquidity.
Oct 15: Jet Airways, Kingfisher announce pact to reduce costs, synergize operations and improve services.
Oct 15: Jet Airways says it is sacking 1,900 employees (but withdraws steps a day later).
Oct 15: US president-elect Barack Obama tells IANS India will be top priority during his tenure.
Oct 27: Sensex crashes to 7,697.39 points, lowest level since November 2005.
Oct 29: Norway-based Telenor, the world's seventh largest telecom operator, says it is buying 60 percent stake in Indian telecom start-up Unitech Wireless for $1.29 billion.
Nov 10: Satyam acquires Motorola's software unit in Malaysia.
Nov 10: International Monetary Fund lowers India growth projection for 2009 to 6.3 percent.
Nov 12: Japan's DoCoMo says it will acquire 26 percent stake in Tata Teleservices.
Nov 13: Forbes rich list says Mukesh Ambani has ousted L.N. Mittal as richest Indian.
Nov 19: Rupee falls to its lowest-ever level, below 50 to a dollar.
Dec 1: Data on foreign trade says India's merchandise exports fell 12.1 percent in October.
Dec 8: Government unveils Rs.30,000-crore (Rs.300-billion/$6-billion) package to pump prime economy.
Dec 12: Fresh data on industrial production says index fell 0.3 percent in October.
Dec 16: Satyam Computer Services says it is acquiring two infrastructure firms run by founder's sons for $1.6 billion, but withdraws move a day later following investor outrage.
Dec 19: Chanda Kochhar named ICICI Bank chief executive with effect from next May 1.
Dec 23: Wipro says it is acquiring Citigroup's Indian outsourcing arm for $127 million.
Boom to Gloom: Indian Economy Saw it All in 2008
By Arvind Padmanabhan
No other year in recent times saw such wild mood swings in the Indian economy than 2008, which started on a strong note but ended on a weak wicket in the wake of a general global slowdown and severe recession in some of the richest countries like the US and Japan.
From economic expansion to performance of equity markets, and from export growth to industrial production, all indicators had the same story to tell: The year had started with a strong economic performance, but the momentum was lost as the months passed, as India faced the ripple effects of the gloom in the global economy.
The indicator that captured the trend best was the 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE), often seen as a barometer not only for investor mood but also the overall performance of the Indian economy and its corporate sector.
On Jan 10 this year, the Sensex was ruling at an all-time intra-day high of 21,206.77 points. But as the year is drawing to a close, it is languishing at around the 9,000-point mark - a fall of over 50 percent in the year. Last year, the index had gained nearly 50 percent.
The Sensex apart, exports fell in October for the first time in seven years. Indirect tax mop up was down eight percent in October. Industrial production, which was among the main drivers of the economy, fell 0.4 percent. The rupee fell below 50 to a dollar in November to an all-time low. And, as per the government's own admission, some 65,000 jobs were lost between August and October.
The high cost of crude oil, which jumped from under $40 per barrel a year ago to nearly $150 per barrel in August, added to the country's woes in terms of higher import bill and accentuated the losses of state-run fuel retailers, which had to bear the burden of having to sell hydrocarbon products below cost.
As a result, the United Progressive Alliance (UPA) government, led by Prime Minister Manmohan Singh, which at the beginning of the year said the Indian economy would continue to grow at over nine percent this fiscal, had to tone down its target sharply, hoping to achieve an overall increase of 7-7.5 percent in gross domestic product (GDP).
"Two key sectors, agriculture and industry, were unable to maintain the pace due to the global economic slowdown. This will have a serious effect on our overall growth," said Dalip Kumar, head of projects at the National Council of Applied Economics Research, an economic think-tank.
The only notable saving grace was on the price front, where the annual rate of inflation fell from a 16-year high of 12.63 percent for the week ended Aug 9 to 6.84 percent for the week ended Dec 6 - but not without taking a toll on industrial growth on account of the tight monetary policy of the central bank during the months before.
"Inflation is not a concern any more. If the Indian government does not think in terms of long- term measures to contain the slowdown, the medium-term growth projection of 8-9 percent will be difficult to achieve," said Biswa N. Bhattacharyay, Tokyo-based special adviser with the Asian Development Bank (ADB).
As India Inc. cried hoarse, saying the credit squeeze due to the policies of the central bank was affecting its day-to-day business, policymakers appeared to be in a denial mode initially, with the prime minister maintaining that India remained largely insulated from the goings-on in the world economy.
But that was not the case. As official data on a host of areas started confirming the worst worries articulated by India Inc., Manmohan Singh had to himself intervene and unveil a Rs.30,000-crore (Rs.300-billion/$6-billion) package in December to bail out the corporate sector.
There is a fear now that the major pump priming of the economy by the government, the large-scale spending on infrastructure and the relaxation of the monetary policy by the central bank to open the purse strings for the corporate sector may threaten the country's fiscal deficit, which was kept at a moderate level during the past five-six fiscals.
The year, nevertheless, did not pass without some high points.
India Inc. came under the global media glare when the Tata group, the country's largest industrial house with annual turnover of $62.5 billion, showcased its little car 'Nano' in January, that would cost all of $2,500 at factory gates. Time magazine named it the most important car of the century since Ford's revolutionary Model T.
It was a different matter that the industrial house had to shift the production site for the small car from Communist-ruled West Bengal to Gujarat following violent protests by a section of farmers that claimed their land was acquired forcibly without adequate compensation.
The same Tata group announced a few months later the acquisition of two iconic British automobile brands, Jaguar and Land Rover, from Ford Motor Co for $2.3 billion in what was yet another high-notch buyout by a globally ambitious Indian group.
The international investor community also continued to bet on the Indian market. Norway-based Telenor, the world's seventh largest telecom operator, bought a new-generation telecom company Unitech Wireless by paying $1.29 billion for a 60 percent stake.
Similarly, another start-up, Swan Telecom, which did not have a single subscriber, sold a 45-percent stake to the UAE's Etisalat for $900 million, taking the company's book value to $2 billion.
In fact, the inflow of foreign direct investment between April and September amounted to $17.21 billion, representing a growth of 137 percent over $7.25 billion in the like period last fiscal. The services sector attracted the maximum foreign investment, followed by construction, including roads and highways, housing and real estate, and computer hardware and software.
The year also saw a record number of seven Indian firms make it to the list of Fortune 500 companies - two from the private sector, namely, Reliance Industries and Tata Steel, and the rest from the public sector.
This apart, the Indian telecom industry also witnessed unprecedented growth and started adding 8-10 million new mobile phone users each month to make the country's subscriber base of more than 300 million, the largest after China's, displacing the US. The stage is now set for the launch of 3G, or third generation services.
Looking ahead, economists and industry experts alike predict some tough times for the Indian economy, at least during the next two-three quarters. But they also maintain that India stands on a much better wicket compared with many other countries to weather the storm, particularly because of the strong push from some key drivers of growth, like savings and investment.
As Reserve Bank of India Governor D. Subbarao remarked recently: "A period of painful adjustment is inevitable. But once the crisis is behind us and calm and confidence are restored in the global markets, economic activity in India will recover sharply."
Key Business and Economic Milestones for India in 2008
Following are some key economic, business and financial milestones in India during 2008:
Jan 10: Tata Motors unveil Nano, the jelly-bean shaped small car touted as the world's cheapest, costing all of $2,500 at factory gates.
Jan 10: Sensitive index (Sensex) of the Bombay Stock Exchanges touches all-time, intra-day high of 21,206.77 points.
Jan 16: Supreme Court paves way for Reliance Power's initial public offering.
Jan 21: Investors lose $170 billion as Sensex crashes over 2,000 points to register steepest ever intra-day fall.
Feb 20: Report says Indian companies have invested $10 billion in US, creating 30,000 jobs.
Feb 20: Anil Ambani's Reliance Communications acquires Ugandan telecom firm.
Feb 23: PepsiCo's Indian-born chief executive Indra Nooyi among Forbes' list of 10 best women CEOs.
Feb 26: Railway Minister Lalu Prasad announces across-the-board cut in fares and projects record profits in his first fifth rail budget.
Feb 29: Finance Minister P. Chidambaram presents national budget with most ambitious loan-waiver scheme amounting to Rs.600 billion (Rs.60,000 crore) to benefit 40 million farmers.
March 2: Richard Branson's Virgin Mobile enters Indian telecom market.
March 11: A fresh graduate of the Indian Institute of Management in Ahmedabad offered record pay packet of Rs.14.4 million.
March 31: India's external debt rises to $201 billion.
April 1: International Monetary Fund warns of spiraling inflation and cooling of Indian economy.
April 11: Official data says India has second largest telecom subscriber base of over 300 million, ahead of the US and behind China.
April 29: India imposes export tax, bans overseas sales of some commodities like steel and cement to calm prices.
May 6: Bharti Airtel and South Africa's mobile phone giant enter consolidation talks.
May 11: Ratan Tata named by Time magazine among 73 biggest brains in business for conceiving small car Nano.
May 24: Bharti Airtel and MTN call off consolidation talks.
May 26: Reliance Communications and MTN say they have started talks for possible consolidation.
May 30: India's economic growth rate for 2007-08 revised upward to nine percent against provisional estimate of 8.9 percent.
June 2: Tata Motors formally takes over two iconic British automobile brands Jaguar and Land Rover from Ford Motors.
June 4: As crude prices spiral, India allows Rs.5 a liter increase in prices of petrol and Rs.3 on diesel.
June 11: Japan's Daiichi Sankyo says it is buying majority stake in India's largest pharmaceuticals company Ranbaxy for $4.6 billion.
June 20: India's annual rate of inflation scales the double digit level and touches 11.05 percent.
June: Heightened protests by farmers against Tatas' Nano project at Singur in West Bengal who claim their land was forcibly acquired.
July 11: International crude prices touch all-time high of $147.27 a barrel on the New York Mercantile Exchange.
July 12: Vodafone and Airtel say they will launch Apple's 3G iPhone in India.
July 13: Anil Ambani's wife Tina Ambani and L.N. Mittal's spouse Usha Mittal named by Forbes among top 10 billionaires' wives.
July 16: Hindustan Computers Ltd acquires British outsourcing firm for undisclosed amount.
July 17: Survey says revenues of top 20 Indian IT firms fell 24 percent in 2007-08 due to global slowdown.
July 18: Air India announces 15 percent cut in airfares to Gulf.
July 19: Reliance Communications stops consolidation talks with MTN.
July 29: India's central bank tightens monetary policy to tame inflation by hiking key lending rate and cash reserve ratio.
Aug 12: India's industrial growth halves to 5.2 percent in first quarter of current fiscal.
Aug 18: India's telecom regulator permits computer-to-computer voice calls.
Aug 21: India's annual rate of inflation spirals to 16-year high of 12.63 percent.
Aug 26: Overseas arm of Oil and Natural Gas Corp says it is acquiring British firm for $1.4 billion.
Aug 29: Government approves new Companies Bill, 2008, to fine-tune legislation to reflect developments in and requirements of present-day corporate world.
Sep 1: Finance Secretary Duvvuri Subbarao named next governor of the Reserve Bank.
Sep 7: Department of Telecommunications starts auction of frequencies for 3G telephony.
Sep 11: Government eases norms for FM broadcast to push growth.
Sep 17: US Food and Drug Administration blocks import of 30 generic drugs made by Ranbaxy.
Sep 18: India's cabinet clears proposal for foreign news magazines to start Indian editions.
Sep 20: Anil Ambani group and Steven Spielberg to set up $1.5 billion Hollywood studio.
Sep 23: Abu Dhabi-based Etisalat says it will acquire 45 percent stake in India's Swan Telecom for $900 million.
Oct 1: UN report says India is sixth largest investor in Britain.
Oct 3: Tatas say they are pulling the "Nano" project out of West Bengal despite investing Rs.15 billion.
Oct 7: Gujarat is chosen as new home for launch of Nano.
Oct 8: Indian rupee crashes to six-year low of Rs.48 to a dollar.
Oct 9: International Monetary Fund predicts seven percent growth for India in 2009.
Oct 9: Report says India Inc. finalized overseas mergers and acquisition deals worth $26 billion in first half of current fiscal.
Oct 10: Reserve Bank eases monetary policy, cuts cash reserve ratio by 150 basis points.
Oct 10: India's industrial production logs just 1.3 percent growth in August, says report.
Oct 15: Government says Indian civil aviation industry is $300 billion investment opportunity.
Oct 15: Central bank takes steps to inject Rs.650 billion into system to increase liquidity.
Oct 15: Jet Airways, Kingfisher announce pact to reduce costs, synergize operations and improve services.
Oct 15: Jet Airways says it is sacking 1,900 employees (but withdraws steps a day later).
Oct 15: US president-elect Barack Obama tells IANS India will be top priority during his tenure.
Oct 27: Sensex crashes to 7,697.39 points, lowest level since November 2005.
Oct 29: Norway-based Telenor, the world's seventh largest telecom operator, says it is buying 60 percent stake in Indian telecom start-up Unitech Wireless for $1.29 billion.
Nov 10: Satyam acquires Motorola's software unit in Malaysia.
Nov 10: International Monetary Fund lowers India growth projection for 2009 to 6.3 percent.
Nov 12: Japan's DoCoMo says it will acquire 26 percent stake in Tata Teleservices.
Nov 13: Forbes rich list says Mukesh Ambani has ousted L.N. Mittal as richest Indian.
Nov 19: Rupee falls to its lowest-ever level, below 50 to a dollar.
Dec 1: Data on foreign trade says India's merchandise exports fell 12.1 percent in October.
Dec 8: Government unveils Rs.30,000-crore (Rs.300-billion/$6-billion) package to pump prime economy.
Dec 12: Fresh data on industrial production says index fell 0.3 percent in October.
Dec 16: Satyam Computer Services says it is acquiring two infrastructure firms run by founder's sons for $1.6 billion, but withdraws move a day later following investor outrage.
Dec 19: Chanda Kochhar named ICICI Bank chief executive with effect from next May 1.
Dec 23: Wipro says it is acquiring Citigroup's Indian outsourcing arm for $127 million.
No other year in recent times saw such wild mood swings in the Indian economy than 2008, which started on a strong note but ended on a weak wicket in the wake of a general global slowdown and severe recession in some of the richest countries like the US and Japan.
From economic expansion to performance of equity markets, and from export growth to industrial production, all indicators had the same story to tell: The year had started with a strong economic performance, but the momentum was lost as the months passed, as India faced the ripple effects of the gloom in the global economy.
The indicator that captured the trend best was the 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE), often seen as a barometer not only for investor mood but also the overall performance of the Indian economy and its corporate sector.
On Jan 10 this year, the Sensex was ruling at an all-time intra-day high of 21,206.77 points. But as the year is drawing to a close, it is languishing at around the 9,000-point mark - a fall of over 50 percent in the year. Last year, the index had gained nearly 50 percent.
The Sensex apart, exports fell in October for the first time in seven years. Indirect tax mop up was down eight percent in October. Industrial production, which was among the main drivers of the economy, fell 0.4 percent. The rupee fell below 50 to a dollar in November to an all-time low. And, as per the government's own admission, some 65,000 jobs were lost between August and October.
The high cost of crude oil, which jumped from under $40 per barrel a year ago to nearly $150 per barrel in August, added to the country's woes in terms of higher import bill and accentuated the losses of state-run fuel retailers, which had to bear the burden of having to sell hydrocarbon products below cost.
As a result, the United Progressive Alliance (UPA) government, led by Prime Minister Manmohan Singh, which at the beginning of the year said the Indian economy would continue to grow at over nine percent this fiscal, had to tone down its target sharply, hoping to achieve an overall increase of 7-7.5 percent in gross domestic product (GDP).
"Two key sectors, agriculture and industry, were unable to maintain the pace due to the global economic slowdown. This will have a serious effect on our overall growth," said Dalip Kumar, head of projects at the National Council of Applied Economics Research, an economic think-tank.
The only notable saving grace was on the price front, where the annual rate of inflation fell from a 16-year high of 12.63 percent for the week ended Aug 9 to 6.84 percent for the week ended Dec 6 - but not without taking a toll on industrial growth on account of the tight monetary policy of the central bank during the months before.
"Inflation is not a concern any more. If the Indian government does not think in terms of long- term measures to contain the slowdown, the medium-term growth projection of 8-9 percent will be difficult to achieve," said Biswa N. Bhattacharyay, Tokyo-based special adviser with the Asian Development Bank (ADB).
As India Inc. cried hoarse, saying the credit squeeze due to the policies of the central bank was affecting its day-to-day business, policymakers appeared to be in a denial mode initially, with the prime minister maintaining that India remained largely insulated from the goings-on in the world economy.
But that was not the case. As official data on a host of areas started confirming the worst worries articulated by India Inc., Manmohan Singh had to himself intervene and unveil a Rs.30,000-crore (Rs.300-billion/$6-billion) package in December to bail out the corporate sector.
There is a fear now that the major pump priming of the economy by the government, the large-scale spending on infrastructure and the relaxation of the monetary policy by the central bank to open the purse strings for the corporate sector may threaten the country's fiscal deficit, which was kept at a moderate level during the past five-six fiscals.
The year, nevertheless, did not pass without some high points.
India Inc. came under the global media glare when the Tata group, the country's largest industrial house with annual turnover of $62.5 billion, showcased its little car 'Nano' in January, that would cost all of $2,500 at factory gates. Time magazine named it the most important car of the century since Ford's revolutionary Model T.
It was a different matter that the industrial house had to shift the production site for the small car from Communist-ruled West Bengal to Gujarat following violent protests by a section of farmers that claimed their land was acquired forcibly without adequate compensation.
The same Tata group announced a few months later the acquisition of two iconic British automobile brands, Jaguar and Land Rover, from Ford Motor Co for $2.3 billion in what was yet another high-notch buyout by a globally ambitious Indian group.
The international investor community also continued to bet on the Indian market. Norway-based Telenor, the world's seventh largest telecom operator, bought a new-generation telecom company Unitech Wireless by paying $1.29 billion for a 60 percent stake.
Similarly, another start-up, Swan Telecom, which did not have a single subscriber, sold a 45-percent stake to the UAE's Etisalat for $900 million, taking the company's book value to $2 billion.
In fact, the inflow of foreign direct investment between April and September amounted to $17.21 billion, representing a growth of 137 percent over $7.25 billion in the like period last fiscal. The services sector attracted the maximum foreign investment, followed by construction, including roads and highways, housing and real estate, and computer hardware and software.
The year also saw a record number of seven Indian firms make it to the list of Fortune 500 companies - two from the private sector, namely, Reliance Industries and Tata Steel, and the rest from the public sector.
This apart, the Indian telecom industry also witnessed unprecedented growth and started adding 8-10 million new mobile phone users each month to make the country's subscriber base of more than 300 million, the largest after China's, displacing the US. The stage is now set for the launch of 3G, or third generation services.
Looking ahead, economists and industry experts alike predict some tough times for the Indian economy, at least during the next two-three quarters. But they also maintain that India stands on a much better wicket compared with many other countries to weather the storm, particularly because of the strong push from some key drivers of growth, like savings and investment.
As Reserve Bank of India Governor D. Subbarao remarked recently: "A period of painful adjustment is inevitable. But once the crisis is behind us and calm and confidence are restored in the global markets, economic activity in India will recover sharply."
Key Business and Economic Milestones for India in 2008
Following are some key economic, business and financial milestones in India during 2008:
Jan 10: Tata Motors unveil Nano, the jelly-bean shaped small car touted as the world's cheapest, costing all of $2,500 at factory gates.
Jan 10: Sensitive index (Sensex) of the Bombay Stock Exchanges touches all-time, intra-day high of 21,206.77 points.
Jan 16: Supreme Court paves way for Reliance Power's initial public offering.
Jan 21: Investors lose $170 billion as Sensex crashes over 2,000 points to register steepest ever intra-day fall.
Feb 20: Report says Indian companies have invested $10 billion in US, creating 30,000 jobs.
Feb 20: Anil Ambani's Reliance Communications acquires Ugandan telecom firm.
Feb 23: PepsiCo's Indian-born chief executive Indra Nooyi among Forbes' list of 10 best women CEOs.
Feb 26: Railway Minister Lalu Prasad announces across-the-board cut in fares and projects record profits in his first fifth rail budget.
Feb 29: Finance Minister P. Chidambaram presents national budget with most ambitious loan-waiver scheme amounting to Rs.600 billion (Rs.60,000 crore) to benefit 40 million farmers.
March 2: Richard Branson's Virgin Mobile enters Indian telecom market.
March 11: A fresh graduate of the Indian Institute of Management in Ahmedabad offered record pay packet of Rs.14.4 million.
March 31: India's external debt rises to $201 billion.
April 1: International Monetary Fund warns of spiraling inflation and cooling of Indian economy.
April 11: Official data says India has second largest telecom subscriber base of over 300 million, ahead of the US and behind China.
April 29: India imposes export tax, bans overseas sales of some commodities like steel and cement to calm prices.
May 6: Bharti Airtel and South Africa's mobile phone giant enter consolidation talks.
May 11: Ratan Tata named by Time magazine among 73 biggest brains in business for conceiving small car Nano.
May 24: Bharti Airtel and MTN call off consolidation talks.
May 26: Reliance Communications and MTN say they have started talks for possible consolidation.
May 30: India's economic growth rate for 2007-08 revised upward to nine percent against provisional estimate of 8.9 percent.
June 2: Tata Motors formally takes over two iconic British automobile brands Jaguar and Land Rover from Ford Motors.
June 4: As crude prices spiral, India allows Rs.5 a liter increase in prices of petrol and Rs.3 on diesel.
June 11: Japan's Daiichi Sankyo says it is buying majority stake in India's largest pharmaceuticals company Ranbaxy for $4.6 billion.
June 20: India's annual rate of inflation scales the double digit level and touches 11.05 percent.
June: Heightened protests by farmers against Tatas' Nano project at Singur in West Bengal who claim their land was forcibly acquired.
July 11: International crude prices touch all-time high of $147.27 a barrel on the New York Mercantile Exchange.
July 12: Vodafone and Airtel say they will launch Apple's 3G iPhone in India.
July 13: Anil Ambani's wife Tina Ambani and L.N. Mittal's spouse Usha Mittal named by Forbes among top 10 billionaires' wives.
July 16: Hindustan Computers Ltd acquires British outsourcing firm for undisclosed amount.
July 17: Survey says revenues of top 20 Indian IT firms fell 24 percent in 2007-08 due to global slowdown.
July 18: Air India announces 15 percent cut in airfares to Gulf.
July 19: Reliance Communications stops consolidation talks with MTN.
July 29: India's central bank tightens monetary policy to tame inflation by hiking key lending rate and cash reserve ratio.
Aug 12: India's industrial growth halves to 5.2 percent in first quarter of current fiscal.
Aug 18: India's telecom regulator permits computer-to-computer voice calls.
Aug 21: India's annual rate of inflation spirals to 16-year high of 12.63 percent.
Aug 26: Overseas arm of Oil and Natural Gas Corp says it is acquiring British firm for $1.4 billion.
Aug 29: Government approves new Companies Bill, 2008, to fine-tune legislation to reflect developments in and requirements of present-day corporate world.
Sep 1: Finance Secretary Duvvuri Subbarao named next governor of the Reserve Bank.
Sep 7: Department of Telecommunications starts auction of frequencies for 3G telephony.
Sep 11: Government eases norms for FM broadcast to push growth.
Sep 17: US Food and Drug Administration blocks import of 30 generic drugs made by Ranbaxy.
Sep 18: India's cabinet clears proposal for foreign news magazines to start Indian editions.
Sep 20: Anil Ambani group and Steven Spielberg to set up $1.5 billion Hollywood studio.
Sep 23: Abu Dhabi-based Etisalat says it will acquire 45 percent stake in India's Swan Telecom for $900 million.
Oct 1: UN report says India is sixth largest investor in Britain.
Oct 3: Tatas say they are pulling the "Nano" project out of West Bengal despite investing Rs.15 billion.
Oct 7: Gujarat is chosen as new home for launch of Nano.
Oct 8: Indian rupee crashes to six-year low of Rs.48 to a dollar.
Oct 9: International Monetary Fund predicts seven percent growth for India in 2009.
Oct 9: Report says India Inc. finalized overseas mergers and acquisition deals worth $26 billion in first half of current fiscal.
Oct 10: Reserve Bank eases monetary policy, cuts cash reserve ratio by 150 basis points.
Oct 10: India's industrial production logs just 1.3 percent growth in August, says report.
Oct 15: Government says Indian civil aviation industry is $300 billion investment opportunity.
Oct 15: Central bank takes steps to inject Rs.650 billion into system to increase liquidity.
Oct 15: Jet Airways, Kingfisher announce pact to reduce costs, synergize operations and improve services.
Oct 15: Jet Airways says it is sacking 1,900 employees (but withdraws steps a day later).
Oct 15: US president-elect Barack Obama tells IANS India will be top priority during his tenure.
Oct 27: Sensex crashes to 7,697.39 points, lowest level since November 2005.
Oct 29: Norway-based Telenor, the world's seventh largest telecom operator, says it is buying 60 percent stake in Indian telecom start-up Unitech Wireless for $1.29 billion.
Nov 10: Satyam acquires Motorola's software unit in Malaysia.
Nov 10: International Monetary Fund lowers India growth projection for 2009 to 6.3 percent.
Nov 12: Japan's DoCoMo says it will acquire 26 percent stake in Tata Teleservices.
Nov 13: Forbes rich list says Mukesh Ambani has ousted L.N. Mittal as richest Indian.
Nov 19: Rupee falls to its lowest-ever level, below 50 to a dollar.
Dec 1: Data on foreign trade says India's merchandise exports fell 12.1 percent in October.
Dec 8: Government unveils Rs.30,000-crore (Rs.300-billion/$6-billion) package to pump prime economy.
Dec 12: Fresh data on industrial production says index fell 0.3 percent in October.
Dec 16: Satyam Computer Services says it is acquiring two infrastructure firms run by founder's sons for $1.6 billion, but withdraws move a day later following investor outrage.
Dec 19: Chanda Kochhar named ICICI Bank chief executive with effect from next May 1.
Dec 23: Wipro says it is acquiring Citigroup's Indian outsourcing arm for $127 million.
Hollowness Of India’s Anti-Terrorism Cooperation Agreements with Major Countries and Pakistan Exposed
By Subhash Raja
Mumbai's 9/11 in the last one month has in its wake spawned an intense debate on the failure of the Congress Government to effectively manage India’s internal security threats emanating from Pakistan, the failure of intelligence agencies and the utter lack of an effective governmental crisis response mechanism. Indian Government severely deserves the blame and culpability that is attendant on lack of effective counter-terrorism responses. What has not surfaced in public debate is the hollowness of India’s anti-terrorism cooperation agreements with major countries and not forgetting the infamous Havana Agreement on a Joint Anti-Terrorism Mechanism signed in 2006 by India’s Prime Minister, Dr Manmohan Singh with General Musharraf of Pakistan.
Readers would be well advised to surf the Google website and discover the number of countries with which India has signed anti-terrorism cooperation agreements over the last couple of years. If these agreements were worth the cost of the papers on which they were written then India should have received at least some iota of an inkling that something like Mumbai's 9/11 was on the cards from Pakistan’s ISI sponsored terrorist organizations.
Only two thoughts come to one’s mind. The first is that the Indian Government did receive some inputs, maybe not precise, but yet providing some leads, that could have been followed, and that they were not followed to their ultimate culmination due to the recurrent malaise that afflicts our Governmental machinery.
The second thought that then comes to one’s mind is that no inputs were received from even a single country out of the innumerable countries with which India has signed anti-terrorism cooperation agreements. If that be so then should the Indian Government not review this entire process where it had become fashionable for the Indian Government to sign such agreements for forms sake after 9/11 for want of something better to agree upon.
The United States has a formidable intelligence presence in Pakistan and more so in areas known to be the hotbeds of Islamist terrorist organizations which operate under the control and directions of Pakistan’s ISI. With such an elaborate presence something should have come their way portending Mumbai's 9/11. Some media reports indicated that the United States had passed some inputs on this account two months prior to Mumbai's 9/11. If that be so then why did the Indian Government not follow it up?
If no such reports were received then what steps has the Government taken to take up the matter with the United States? Similarly, it is time that India takes up this aspect with other countries too with which India has signed such agreements.
Finally, it also needs to be examined and questioned as to what impelled our Prime Minister to sign the Havana Agreement with the Pakistani military dictator on a Indo-Pak Joint Anti-Terror Mechanism? Was our honest Dr Manmohan Singh so unaware and naïve that he was going to sign a formal Agreement with a Pakistani military regime whose main pre-occupation has been to indulge unceasingly in proxy war and state-sponsored terrorism against India.
Also answerable on this account are the National Security Adviser, the Foreign Secretary and others forming part of India’s policy establishment or was their advice ignored for reasons best known to the Prime Minister.
Mumbai's 9/11 should now at the very least prompt the Indian Prime Minister to abrogate this infamous Havana Agreement as a mark of respect to those two hundred innocent lives lost due to the negligence of their Government.
Mumbai's 9/11 in the last one month has in its wake spawned an intense debate on the failure of the Congress Government to effectively manage India’s internal security threats emanating from Pakistan, the failure of intelligence agencies and the utter lack of an effective governmental crisis response mechanism. Indian Government severely deserves the blame and culpability that is attendant on lack of effective counter-terrorism responses. What has not surfaced in public debate is the hollowness of India’s anti-terrorism cooperation agreements with major countries and not forgetting the infamous Havana Agreement on a Joint Anti-Terrorism Mechanism signed in 2006 by India’s Prime Minister, Dr Manmohan Singh with General Musharraf of Pakistan.
Readers would be well advised to surf the Google website and discover the number of countries with which India has signed anti-terrorism cooperation agreements over the last couple of years. If these agreements were worth the cost of the papers on which they were written then India should have received at least some iota of an inkling that something like Mumbai's 9/11 was on the cards from Pakistan’s ISI sponsored terrorist organizations.
Only two thoughts come to one’s mind. The first is that the Indian Government did receive some inputs, maybe not precise, but yet providing some leads, that could have been followed, and that they were not followed to their ultimate culmination due to the recurrent malaise that afflicts our Governmental machinery.
The second thought that then comes to one’s mind is that no inputs were received from even a single country out of the innumerable countries with which India has signed anti-terrorism cooperation agreements. If that be so then should the Indian Government not review this entire process where it had become fashionable for the Indian Government to sign such agreements for forms sake after 9/11 for want of something better to agree upon.
The United States has a formidable intelligence presence in Pakistan and more so in areas known to be the hotbeds of Islamist terrorist organizations which operate under the control and directions of Pakistan’s ISI. With such an elaborate presence something should have come their way portending Mumbai's 9/11. Some media reports indicated that the United States had passed some inputs on this account two months prior to Mumbai's 9/11. If that be so then why did the Indian Government not follow it up?
If no such reports were received then what steps has the Government taken to take up the matter with the United States? Similarly, it is time that India takes up this aspect with other countries too with which India has signed such agreements.
Finally, it also needs to be examined and questioned as to what impelled our Prime Minister to sign the Havana Agreement with the Pakistani military dictator on a Indo-Pak Joint Anti-Terror Mechanism? Was our honest Dr Manmohan Singh so unaware and naïve that he was going to sign a formal Agreement with a Pakistani military regime whose main pre-occupation has been to indulge unceasingly in proxy war and state-sponsored terrorism against India.
Also answerable on this account are the National Security Adviser, the Foreign Secretary and others forming part of India’s policy establishment or was their advice ignored for reasons best known to the Prime Minister.
Mumbai's 9/11 should now at the very least prompt the Indian Prime Minister to abrogate this infamous Havana Agreement as a mark of respect to those two hundred innocent lives lost due to the negligence of their Government.
Ten Issues India Inc Has to Contend With in 2009
By M H Ahssan
What lies ahead for the Indian economy in 2009? This is the question looming large in corridors of the country's corporate world, as India Inc hopes the economy will transition from annus horribilis that 2008 was to annus mirabilis, which it hopes the New Year will be. A look at 10 major issues which the country's corporate sector has to contend with in 2009:
Demand Slowdown: This is the first critical problem and it is hitting all sectors of the economy. The slowing demand has filtered down to the retail space with shops finding fewer buyers even in the normally robust festive season from October to December. One of the main reasons for this has been the impact of the global financial crisis. Export growth has come to a halt after many months of double-digit expansion. This has had a cascading effect on many other sectors of the economy, leading to stagnation in both industrial output and infrastructure development.
The good news, however, is that the ensuing harvest season, or the rabi crop, is expected to be bountiful and the outlook is positive for higher rural demand within the next three-four months. With farm output still accounting for a large chunk of the country's economic pie, the rise in rural demand is likely to translate into a greater sense of all-round well being.
Job Losses: The aviation industry tried to bite the bullet when Jet Airways chief Naresh Goyal issued pink slips to nearly 1,000 employees and said similar sack orders were in the offing for 800 more. But he had to quickly back down and reverse the decision. Yet, jobs are going in many sectors, especially in export-oriented industries like textiles, handicraft and gems and jewellery. The fallout of employment losses in the diamond trade has snowballed into a political issue in Gujarat and the crisis may be mirrored in other states over the next few months. Job losses will increasingly become politicized in the run up to the general elections early next year. But industry may have little choice but to cut flab unless demand picks up significantly later in the year.
Public Issues: Number three on the list is how the corporate sector can raise money from the public when stock markets are not particularly buoyant. In January, the sensitive index (Sensex) of the Bombay stock Exchange (BSE) was at an all-time high, but now rules at 50 percent lower. Indications, nevertheless, are that the market has now bottomed out with the Sensex having finally moved to the vicinity 10,000-point mark. But most companies that had planned public issues for 2009 are going to hold their fire till the situation comes back to a much more even keel.
Consolidation: The fourth issue India Inc will have to face is the prospect of a shakeout in key industries. The aviation sector, for instance, is already in the throes of buyouts and mergers. The unlikely alliance between Jet Airways and Kingfisher Airlines to avoid competition on flight schedules is unprecedented in India and based on falling demand. Similarly the numerous TV channels are also expected to see a shakeout. A recently launched English news channel is reported to be looking for a buyer and other media houses have begun retrenchments though this has not been reported widely in the press.
Inflation: True, the annual rate of inflation based on wholesale prices has come down sharply from over 12 percent a few months ago to a little over 6.5 percent now. But the rise to double-digit inflation during 2008 had pushed up prices of raw materials and components sharply. Industry will be watching the price index closely to see its impact on production costs. The Reserve Bank of India (RBI) will also have to continue monitoring the price index to ensure that it declines to the targeted level of 4 percent by the end of the current fiscal. This will be crucial for easing its monetary policy so that India Inc can get credit at competitive rates.
Energy Security: The cost of energy is the sixth problem the corporate sector will have to face in the ensuing year. Global oil prices may have fallen now, but this is not expected to be a long-term trend. Prices are expected to rise as soon as demand picks up in the emerging economies like China and India. This will continue to be a worrying feature of the country's economy since more than 70 percent of our crude oil requirements are met from abroad.
Services: Another key issue would be the fate of the information technology and outsourcing sectors. The IT industry is linked to demand for services in the global economy. With this demand having diminished, the ever-rising graph of this sunrise industry may now slow down. Fortunately, IT majors have so far weathered the storm well, but much will depend on the extent to which they are able to bag more contracts in the future. The outsourcing industry has provided a large number of jobs within the country. Here again, it is integrally linked to multinationals facing the impact of the global meltdown - and do we see an opportunity here? This is the question that will determine this industry's fate in 2009.
Credit: Linked somewhat to the need to raise funds through public issues, finding cash to run enterprises will be another crucial issue in 2009. India Inc has been crying hoarse that liquidity is not the only problem when it comes to accessing funds from banks. They also want interest rates to be cut. The government is doing its bit by pump priming the economy. Eyes, therefore, are on the Reserve Bank and commercial lending institutions for desirable rate cuts.
Entrepreneurship: The prospect of declining entrepreneurship is also looming large, primarily because two sources of funding are drying up - venture capital and private equity. This factor may force further consolidations.
Tourism: The 10th major issue would be the need to prop up the tourism industry as it has its implications on a host of related sectors - from hospitality to aviation. The tourism industry was getting a major boost with the "Incredible India" campaign but there now appears to be a question mark following the Mumbai terror attacks. A fall in tourism will also lead to a drop in dollar receipts - also called invisibles earnings.
These imponderables - much of it linked to the external economy, the political situation within the country and the strategic security scenario with neighbors like Pakistan - will ultimately determine whether 2009 becomes a year of miracles or horror. Yet, few expect India's growth rate to fall below six-seven percent. And if that is achieved, the country may again end up being one of the fastest growing economies in the world.
What lies ahead for the Indian economy in 2009? This is the question looming large in corridors of the country's corporate world, as India Inc hopes the economy will transition from annus horribilis that 2008 was to annus mirabilis, which it hopes the New Year will be. A look at 10 major issues which the country's corporate sector has to contend with in 2009:
Demand Slowdown: This is the first critical problem and it is hitting all sectors of the economy. The slowing demand has filtered down to the retail space with shops finding fewer buyers even in the normally robust festive season from October to December. One of the main reasons for this has been the impact of the global financial crisis. Export growth has come to a halt after many months of double-digit expansion. This has had a cascading effect on many other sectors of the economy, leading to stagnation in both industrial output and infrastructure development.
The good news, however, is that the ensuing harvest season, or the rabi crop, is expected to be bountiful and the outlook is positive for higher rural demand within the next three-four months. With farm output still accounting for a large chunk of the country's economic pie, the rise in rural demand is likely to translate into a greater sense of all-round well being.
Job Losses: The aviation industry tried to bite the bullet when Jet Airways chief Naresh Goyal issued pink slips to nearly 1,000 employees and said similar sack orders were in the offing for 800 more. But he had to quickly back down and reverse the decision. Yet, jobs are going in many sectors, especially in export-oriented industries like textiles, handicraft and gems and jewellery. The fallout of employment losses in the diamond trade has snowballed into a political issue in Gujarat and the crisis may be mirrored in other states over the next few months. Job losses will increasingly become politicized in the run up to the general elections early next year. But industry may have little choice but to cut flab unless demand picks up significantly later in the year.
Public Issues: Number three on the list is how the corporate sector can raise money from the public when stock markets are not particularly buoyant. In January, the sensitive index (Sensex) of the Bombay stock Exchange (BSE) was at an all-time high, but now rules at 50 percent lower. Indications, nevertheless, are that the market has now bottomed out with the Sensex having finally moved to the vicinity 10,000-point mark. But most companies that had planned public issues for 2009 are going to hold their fire till the situation comes back to a much more even keel.
Consolidation: The fourth issue India Inc will have to face is the prospect of a shakeout in key industries. The aviation sector, for instance, is already in the throes of buyouts and mergers. The unlikely alliance between Jet Airways and Kingfisher Airlines to avoid competition on flight schedules is unprecedented in India and based on falling demand. Similarly the numerous TV channels are also expected to see a shakeout. A recently launched English news channel is reported to be looking for a buyer and other media houses have begun retrenchments though this has not been reported widely in the press.
Inflation: True, the annual rate of inflation based on wholesale prices has come down sharply from over 12 percent a few months ago to a little over 6.5 percent now. But the rise to double-digit inflation during 2008 had pushed up prices of raw materials and components sharply. Industry will be watching the price index closely to see its impact on production costs. The Reserve Bank of India (RBI) will also have to continue monitoring the price index to ensure that it declines to the targeted level of 4 percent by the end of the current fiscal. This will be crucial for easing its monetary policy so that India Inc can get credit at competitive rates.
Energy Security: The cost of energy is the sixth problem the corporate sector will have to face in the ensuing year. Global oil prices may have fallen now, but this is not expected to be a long-term trend. Prices are expected to rise as soon as demand picks up in the emerging economies like China and India. This will continue to be a worrying feature of the country's economy since more than 70 percent of our crude oil requirements are met from abroad.
Services: Another key issue would be the fate of the information technology and outsourcing sectors. The IT industry is linked to demand for services in the global economy. With this demand having diminished, the ever-rising graph of this sunrise industry may now slow down. Fortunately, IT majors have so far weathered the storm well, but much will depend on the extent to which they are able to bag more contracts in the future. The outsourcing industry has provided a large number of jobs within the country. Here again, it is integrally linked to multinationals facing the impact of the global meltdown - and do we see an opportunity here? This is the question that will determine this industry's fate in 2009.
Credit: Linked somewhat to the need to raise funds through public issues, finding cash to run enterprises will be another crucial issue in 2009. India Inc has been crying hoarse that liquidity is not the only problem when it comes to accessing funds from banks. They also want interest rates to be cut. The government is doing its bit by pump priming the economy. Eyes, therefore, are on the Reserve Bank and commercial lending institutions for desirable rate cuts.
Entrepreneurship: The prospect of declining entrepreneurship is also looming large, primarily because two sources of funding are drying up - venture capital and private equity. This factor may force further consolidations.
Tourism: The 10th major issue would be the need to prop up the tourism industry as it has its implications on a host of related sectors - from hospitality to aviation. The tourism industry was getting a major boost with the "Incredible India" campaign but there now appears to be a question mark following the Mumbai terror attacks. A fall in tourism will also lead to a drop in dollar receipts - also called invisibles earnings.
These imponderables - much of it linked to the external economy, the political situation within the country and the strategic security scenario with neighbors like Pakistan - will ultimately determine whether 2009 becomes a year of miracles or horror. Yet, few expect India's growth rate to fall below six-seven percent. And if that is achieved, the country may again end up being one of the fastest growing economies in the world.
Ten Issues India Inc Has to Contend With in 2009
By M H Ahssan
What lies ahead for the Indian economy in 2009? This is the question looming large in corridors of the country's corporate world, as India Inc hopes the economy will transition from annus horribilis that 2008 was to annus mirabilis, which it hopes the New Year will be. A look at 10 major issues which the country's corporate sector has to contend with in 2009:
Demand Slowdown: This is the first critical problem and it is hitting all sectors of the economy. The slowing demand has filtered down to the retail space with shops finding fewer buyers even in the normally robust festive season from October to December. One of the main reasons for this has been the impact of the global financial crisis. Export growth has come to a halt after many months of double-digit expansion. This has had a cascading effect on many other sectors of the economy, leading to stagnation in both industrial output and infrastructure development.
The good news, however, is that the ensuing harvest season, or the rabi crop, is expected to be bountiful and the outlook is positive for higher rural demand within the next three-four months. With farm output still accounting for a large chunk of the country's economic pie, the rise in rural demand is likely to translate into a greater sense of all-round well being.
Job Losses: The aviation industry tried to bite the bullet when Jet Airways chief Naresh Goyal issued pink slips to nearly 1,000 employees and said similar sack orders were in the offing for 800 more. But he had to quickly back down and reverse the decision. Yet, jobs are going in many sectors, especially in export-oriented industries like textiles, handicraft and gems and jewellery. The fallout of employment losses in the diamond trade has snowballed into a political issue in Gujarat and the crisis may be mirrored in other states over the next few months. Job losses will increasingly become politicized in the run up to the general elections early next year. But industry may have little choice but to cut flab unless demand picks up significantly later in the year.
Public Issues: Number three on the list is how the corporate sector can raise money from the public when stock markets are not particularly buoyant. In January, the sensitive index (Sensex) of the Bombay stock Exchange (BSE) was at an all-time high, but now rules at 50 percent lower. Indications, nevertheless, are that the market has now bottomed out with the Sensex having finally moved to the vicinity 10,000-point mark. But most companies that had planned public issues for 2009 are going to hold their fire till the situation comes back to a much more even keel.
Consolidation: The fourth issue India Inc will have to face is the prospect of a shakeout in key industries. The aviation sector, for instance, is already in the throes of buyouts and mergers. The unlikely alliance between Jet Airways and Kingfisher Airlines to avoid competition on flight schedules is unprecedented in India and based on falling demand. Similarly the numerous TV channels are also expected to see a shakeout. A recently launched English news channel is reported to be looking for a buyer and other media houses have begun retrenchments though this has not been reported widely in the press.
Inflation: True, the annual rate of inflation based on wholesale prices has come down sharply from over 12 percent a few months ago to a little over 6.5 percent now. But the rise to double-digit inflation during 2008 had pushed up prices of raw materials and components sharply. Industry will be watching the price index closely to see its impact on production costs. The Reserve Bank of India (RBI) will also have to continue monitoring the price index to ensure that it declines to the targeted level of 4 percent by the end of the current fiscal. This will be crucial for easing its monetary policy so that India Inc can get credit at competitive rates.
Energy Security: The cost of energy is the sixth problem the corporate sector will have to face in the ensuing year. Global oil prices may have fallen now, but this is not expected to be a long-term trend. Prices are expected to rise as soon as demand picks up in the emerging economies like China and India. This will continue to be a worrying feature of the country's economy since more than 70 percent of our crude oil requirements are met from abroad.
Services: Another key issue would be the fate of the information technology and outsourcing sectors. The IT industry is linked to demand for services in the global economy. With this demand having diminished, the ever-rising graph of this sunrise industry may now slow down. Fortunately, IT majors have so far weathered the storm well, but much will depend on the extent to which they are able to bag more contracts in the future. The outsourcing industry has provided a large number of jobs within the country. Here again, it is integrally linked to multinationals facing the impact of the global meltdown - and do we see an opportunity here? This is the question that will determine this industry's fate in 2009.
Credit: Linked somewhat to the need to raise funds through public issues, finding cash to run enterprises will be another crucial issue in 2009. India Inc has been crying hoarse that liquidity is not the only problem when it comes to accessing funds from banks. They also want interest rates to be cut. The government is doing its bit by pump priming the economy. Eyes, therefore, are on the Reserve Bank and commercial lending institutions for desirable rate cuts.
Entrepreneurship: The prospect of declining entrepreneurship is also looming large, primarily because two sources of funding are drying up - venture capital and private equity. This factor may force further consolidations.
Tourism: The 10th major issue would be the need to prop up the tourism industry as it has its implications on a host of related sectors - from hospitality to aviation. The tourism industry was getting a major boost with the "Incredible India" campaign but there now appears to be a question mark following the Mumbai terror attacks. A fall in tourism will also lead to a drop in dollar receipts - also called invisibles earnings.
These imponderables - much of it linked to the external economy, the political situation within the country and the strategic security scenario with neighbors like Pakistan - will ultimately determine whether 2009 becomes a year of miracles or horror. Yet, few expect India's growth rate to fall below six-seven percent. And if that is achieved, the country may again end up being one of the fastest growing economies in the world.
What lies ahead for the Indian economy in 2009? This is the question looming large in corridors of the country's corporate world, as India Inc hopes the economy will transition from annus horribilis that 2008 was to annus mirabilis, which it hopes the New Year will be. A look at 10 major issues which the country's corporate sector has to contend with in 2009:
Demand Slowdown: This is the first critical problem and it is hitting all sectors of the economy. The slowing demand has filtered down to the retail space with shops finding fewer buyers even in the normally robust festive season from October to December. One of the main reasons for this has been the impact of the global financial crisis. Export growth has come to a halt after many months of double-digit expansion. This has had a cascading effect on many other sectors of the economy, leading to stagnation in both industrial output and infrastructure development.
The good news, however, is that the ensuing harvest season, or the rabi crop, is expected to be bountiful and the outlook is positive for higher rural demand within the next three-four months. With farm output still accounting for a large chunk of the country's economic pie, the rise in rural demand is likely to translate into a greater sense of all-round well being.
Job Losses: The aviation industry tried to bite the bullet when Jet Airways chief Naresh Goyal issued pink slips to nearly 1,000 employees and said similar sack orders were in the offing for 800 more. But he had to quickly back down and reverse the decision. Yet, jobs are going in many sectors, especially in export-oriented industries like textiles, handicraft and gems and jewellery. The fallout of employment losses in the diamond trade has snowballed into a political issue in Gujarat and the crisis may be mirrored in other states over the next few months. Job losses will increasingly become politicized in the run up to the general elections early next year. But industry may have little choice but to cut flab unless demand picks up significantly later in the year.
Public Issues: Number three on the list is how the corporate sector can raise money from the public when stock markets are not particularly buoyant. In January, the sensitive index (Sensex) of the Bombay stock Exchange (BSE) was at an all-time high, but now rules at 50 percent lower. Indications, nevertheless, are that the market has now bottomed out with the Sensex having finally moved to the vicinity 10,000-point mark. But most companies that had planned public issues for 2009 are going to hold their fire till the situation comes back to a much more even keel.
Consolidation: The fourth issue India Inc will have to face is the prospect of a shakeout in key industries. The aviation sector, for instance, is already in the throes of buyouts and mergers. The unlikely alliance between Jet Airways and Kingfisher Airlines to avoid competition on flight schedules is unprecedented in India and based on falling demand. Similarly the numerous TV channels are also expected to see a shakeout. A recently launched English news channel is reported to be looking for a buyer and other media houses have begun retrenchments though this has not been reported widely in the press.
Inflation: True, the annual rate of inflation based on wholesale prices has come down sharply from over 12 percent a few months ago to a little over 6.5 percent now. But the rise to double-digit inflation during 2008 had pushed up prices of raw materials and components sharply. Industry will be watching the price index closely to see its impact on production costs. The Reserve Bank of India (RBI) will also have to continue monitoring the price index to ensure that it declines to the targeted level of 4 percent by the end of the current fiscal. This will be crucial for easing its monetary policy so that India Inc can get credit at competitive rates.
Energy Security: The cost of energy is the sixth problem the corporate sector will have to face in the ensuing year. Global oil prices may have fallen now, but this is not expected to be a long-term trend. Prices are expected to rise as soon as demand picks up in the emerging economies like China and India. This will continue to be a worrying feature of the country's economy since more than 70 percent of our crude oil requirements are met from abroad.
Services: Another key issue would be the fate of the information technology and outsourcing sectors. The IT industry is linked to demand for services in the global economy. With this demand having diminished, the ever-rising graph of this sunrise industry may now slow down. Fortunately, IT majors have so far weathered the storm well, but much will depend on the extent to which they are able to bag more contracts in the future. The outsourcing industry has provided a large number of jobs within the country. Here again, it is integrally linked to multinationals facing the impact of the global meltdown - and do we see an opportunity here? This is the question that will determine this industry's fate in 2009.
Credit: Linked somewhat to the need to raise funds through public issues, finding cash to run enterprises will be another crucial issue in 2009. India Inc has been crying hoarse that liquidity is not the only problem when it comes to accessing funds from banks. They also want interest rates to be cut. The government is doing its bit by pump priming the economy. Eyes, therefore, are on the Reserve Bank and commercial lending institutions for desirable rate cuts.
Entrepreneurship: The prospect of declining entrepreneurship is also looming large, primarily because two sources of funding are drying up - venture capital and private equity. This factor may force further consolidations.
Tourism: The 10th major issue would be the need to prop up the tourism industry as it has its implications on a host of related sectors - from hospitality to aviation. The tourism industry was getting a major boost with the "Incredible India" campaign but there now appears to be a question mark following the Mumbai terror attacks. A fall in tourism will also lead to a drop in dollar receipts - also called invisibles earnings.
These imponderables - much of it linked to the external economy, the political situation within the country and the strategic security scenario with neighbors like Pakistan - will ultimately determine whether 2009 becomes a year of miracles or horror. Yet, few expect India's growth rate to fall below six-seven percent. And if that is achieved, the country may again end up being one of the fastest growing economies in the world.
Ten Issues India Inc Has to Contend With in 2009
By M H Ahssan
What lies ahead for the Indian economy in 2009? This is the question looming large in corridors of the country's corporate world, as India Inc hopes the economy will transition from annus horribilis that 2008 was to annus mirabilis, which it hopes the New Year will be. A look at 10 major issues which the country's corporate sector has to contend with in 2009:
Demand Slowdown: This is the first critical problem and it is hitting all sectors of the economy. The slowing demand has filtered down to the retail space with shops finding fewer buyers even in the normally robust festive season from October to December. One of the main reasons for this has been the impact of the global financial crisis. Export growth has come to a halt after many months of double-digit expansion. This has had a cascading effect on many other sectors of the economy, leading to stagnation in both industrial output and infrastructure development.
The good news, however, is that the ensuing harvest season, or the rabi crop, is expected to be bountiful and the outlook is positive for higher rural demand within the next three-four months. With farm output still accounting for a large chunk of the country's economic pie, the rise in rural demand is likely to translate into a greater sense of all-round well being.
Job Losses: The aviation industry tried to bite the bullet when Jet Airways chief Naresh Goyal issued pink slips to nearly 1,000 employees and said similar sack orders were in the offing for 800 more. But he had to quickly back down and reverse the decision. Yet, jobs are going in many sectors, especially in export-oriented industries like textiles, handicraft and gems and jewellery. The fallout of employment losses in the diamond trade has snowballed into a political issue in Gujarat and the crisis may be mirrored in other states over the next few months. Job losses will increasingly become politicized in the run up to the general elections early next year. But industry may have little choice but to cut flab unless demand picks up significantly later in the year.
Public Issues: Number three on the list is how the corporate sector can raise money from the public when stock markets are not particularly buoyant. In January, the sensitive index (Sensex) of the Bombay stock Exchange (BSE) was at an all-time high, but now rules at 50 percent lower. Indications, nevertheless, are that the market has now bottomed out with the Sensex having finally moved to the vicinity 10,000-point mark. But most companies that had planned public issues for 2009 are going to hold their fire till the situation comes back to a much more even keel.
Consolidation: The fourth issue India Inc will have to face is the prospect of a shakeout in key industries. The aviation sector, for instance, is already in the throes of buyouts and mergers. The unlikely alliance between Jet Airways and Kingfisher Airlines to avoid competition on flight schedules is unprecedented in India and based on falling demand. Similarly the numerous TV channels are also expected to see a shakeout. A recently launched English news channel is reported to be looking for a buyer and other media houses have begun retrenchments though this has not been reported widely in the press.
Inflation: True, the annual rate of inflation based on wholesale prices has come down sharply from over 12 percent a few months ago to a little over 6.5 percent now. But the rise to double-digit inflation during 2008 had pushed up prices of raw materials and components sharply. Industry will be watching the price index closely to see its impact on production costs. The Reserve Bank of India (RBI) will also have to continue monitoring the price index to ensure that it declines to the targeted level of 4 percent by the end of the current fiscal. This will be crucial for easing its monetary policy so that India Inc can get credit at competitive rates.
Energy Security: The cost of energy is the sixth problem the corporate sector will have to face in the ensuing year. Global oil prices may have fallen now, but this is not expected to be a long-term trend. Prices are expected to rise as soon as demand picks up in the emerging economies like China and India. This will continue to be a worrying feature of the country's economy since more than 70 percent of our crude oil requirements are met from abroad.
Services: Another key issue would be the fate of the information technology and outsourcing sectors. The IT industry is linked to demand for services in the global economy. With this demand having diminished, the ever-rising graph of this sunrise industry may now slow down. Fortunately, IT majors have so far weathered the storm well, but much will depend on the extent to which they are able to bag more contracts in the future. The outsourcing industry has provided a large number of jobs within the country. Here again, it is integrally linked to multinationals facing the impact of the global meltdown - and do we see an opportunity here? This is the question that will determine this industry's fate in 2009.
Credit: Linked somewhat to the need to raise funds through public issues, finding cash to run enterprises will be another crucial issue in 2009. India Inc has been crying hoarse that liquidity is not the only problem when it comes to accessing funds from banks. They also want interest rates to be cut. The government is doing its bit by pump priming the economy. Eyes, therefore, are on the Reserve Bank and commercial lending institutions for desirable rate cuts.
Entrepreneurship: The prospect of declining entrepreneurship is also looming large, primarily because two sources of funding are drying up - venture capital and private equity. This factor may force further consolidations.
Tourism: The 10th major issue would be the need to prop up the tourism industry as it has its implications on a host of related sectors - from hospitality to aviation. The tourism industry was getting a major boost with the "Incredible India" campaign but there now appears to be a question mark following the Mumbai terror attacks. A fall in tourism will also lead to a drop in dollar receipts - also called invisibles earnings.
These imponderables - much of it linked to the external economy, the political situation within the country and the strategic security scenario with neighbors like Pakistan - will ultimately determine whether 2009 becomes a year of miracles or horror. Yet, few expect India's growth rate to fall below six-seven percent. And if that is achieved, the country may again end up being one of the fastest growing economies in the world.
What lies ahead for the Indian economy in 2009? This is the question looming large in corridors of the country's corporate world, as India Inc hopes the economy will transition from annus horribilis that 2008 was to annus mirabilis, which it hopes the New Year will be. A look at 10 major issues which the country's corporate sector has to contend with in 2009:
Demand Slowdown: This is the first critical problem and it is hitting all sectors of the economy. The slowing demand has filtered down to the retail space with shops finding fewer buyers even in the normally robust festive season from October to December. One of the main reasons for this has been the impact of the global financial crisis. Export growth has come to a halt after many months of double-digit expansion. This has had a cascading effect on many other sectors of the economy, leading to stagnation in both industrial output and infrastructure development.
The good news, however, is that the ensuing harvest season, or the rabi crop, is expected to be bountiful and the outlook is positive for higher rural demand within the next three-four months. With farm output still accounting for a large chunk of the country's economic pie, the rise in rural demand is likely to translate into a greater sense of all-round well being.
Job Losses: The aviation industry tried to bite the bullet when Jet Airways chief Naresh Goyal issued pink slips to nearly 1,000 employees and said similar sack orders were in the offing for 800 more. But he had to quickly back down and reverse the decision. Yet, jobs are going in many sectors, especially in export-oriented industries like textiles, handicraft and gems and jewellery. The fallout of employment losses in the diamond trade has snowballed into a political issue in Gujarat and the crisis may be mirrored in other states over the next few months. Job losses will increasingly become politicized in the run up to the general elections early next year. But industry may have little choice but to cut flab unless demand picks up significantly later in the year.
Public Issues: Number three on the list is how the corporate sector can raise money from the public when stock markets are not particularly buoyant. In January, the sensitive index (Sensex) of the Bombay stock Exchange (BSE) was at an all-time high, but now rules at 50 percent lower. Indications, nevertheless, are that the market has now bottomed out with the Sensex having finally moved to the vicinity 10,000-point mark. But most companies that had planned public issues for 2009 are going to hold their fire till the situation comes back to a much more even keel.
Consolidation: The fourth issue India Inc will have to face is the prospect of a shakeout in key industries. The aviation sector, for instance, is already in the throes of buyouts and mergers. The unlikely alliance between Jet Airways and Kingfisher Airlines to avoid competition on flight schedules is unprecedented in India and based on falling demand. Similarly the numerous TV channels are also expected to see a shakeout. A recently launched English news channel is reported to be looking for a buyer and other media houses have begun retrenchments though this has not been reported widely in the press.
Inflation: True, the annual rate of inflation based on wholesale prices has come down sharply from over 12 percent a few months ago to a little over 6.5 percent now. But the rise to double-digit inflation during 2008 had pushed up prices of raw materials and components sharply. Industry will be watching the price index closely to see its impact on production costs. The Reserve Bank of India (RBI) will also have to continue monitoring the price index to ensure that it declines to the targeted level of 4 percent by the end of the current fiscal. This will be crucial for easing its monetary policy so that India Inc can get credit at competitive rates.
Energy Security: The cost of energy is the sixth problem the corporate sector will have to face in the ensuing year. Global oil prices may have fallen now, but this is not expected to be a long-term trend. Prices are expected to rise as soon as demand picks up in the emerging economies like China and India. This will continue to be a worrying feature of the country's economy since more than 70 percent of our crude oil requirements are met from abroad.
Services: Another key issue would be the fate of the information technology and outsourcing sectors. The IT industry is linked to demand for services in the global economy. With this demand having diminished, the ever-rising graph of this sunrise industry may now slow down. Fortunately, IT majors have so far weathered the storm well, but much will depend on the extent to which they are able to bag more contracts in the future. The outsourcing industry has provided a large number of jobs within the country. Here again, it is integrally linked to multinationals facing the impact of the global meltdown - and do we see an opportunity here? This is the question that will determine this industry's fate in 2009.
Credit: Linked somewhat to the need to raise funds through public issues, finding cash to run enterprises will be another crucial issue in 2009. India Inc has been crying hoarse that liquidity is not the only problem when it comes to accessing funds from banks. They also want interest rates to be cut. The government is doing its bit by pump priming the economy. Eyes, therefore, are on the Reserve Bank and commercial lending institutions for desirable rate cuts.
Entrepreneurship: The prospect of declining entrepreneurship is also looming large, primarily because two sources of funding are drying up - venture capital and private equity. This factor may force further consolidations.
Tourism: The 10th major issue would be the need to prop up the tourism industry as it has its implications on a host of related sectors - from hospitality to aviation. The tourism industry was getting a major boost with the "Incredible India" campaign but there now appears to be a question mark following the Mumbai terror attacks. A fall in tourism will also lead to a drop in dollar receipts - also called invisibles earnings.
These imponderables - much of it linked to the external economy, the political situation within the country and the strategic security scenario with neighbors like Pakistan - will ultimately determine whether 2009 becomes a year of miracles or horror. Yet, few expect India's growth rate to fall below six-seven percent. And if that is achieved, the country may again end up being one of the fastest growing economies in the world.
Saudi Success in Combating - Terror Relevant to India
By Javid Hassan
In a major development that should be of interest to India, an expert committee set up by the Saudi government is vetting a draft law to punish those who threaten the national security of other countries.
The new law, which also deals with organized crimes and terrorism-related offences, will carry the maximum sentence of capital punishment for the convict, according to the Saudi media, which have quoted Interior Minister Prince Naif bin Abdulaziz, as saying. He described such crimes as “haraba,” a Qur’anic term meaning “sowing corruption and chaos on earth.”
Since both India and Saudi Arabia have been victims of terrorism, now is the time to share information on how they could combat this menace in their mutual interest. There are two broad areas of cooperation from India’s point of view. One is a Saudi proposal mooted by Custodian of the Two Holy Mosques King Abdullah for establishing an international centre on combating terrorism
The other one is the launch of an institute for training imams and khatibs (those who lead prayers in mosques or deliver sermons before the start of Friday prayers). Both these developments are significant, since there many poorly educated preachers who misinterpret Islamic teachings, emphasizing certain aspects and playing down others. They represent a growing trend that has seen preachers well versed in their own field but woefully lacking even basic knowledge of science.
On the issue of combating terrorism, King Abdullah had proposed the setting up of an international center during a major conference three years ago. The proposal met with a lukewarm response despite attempts to take it forward. Subsequent events since 9/11 have warranted the need for reviving this initiative with all the seriousness that it deserves.
The leaders of both countries, together with their experts, could work out the modalities of fine-tuning the proposal from the conceptual to the operational stage. The starting point of the exercise should be to arrive at a global definition of terrorism and the root cause of this phenomenon that has cost the international community trillions of dollars in cumulative damage with no end in sight.
What is important is to identify the various terrorist outfits, their modus operandi and how they indoctrinate the recruits. This is where the Saudi government’s strategy seeks to prevent extremist ideas from infecting immature minds. To this end, the government has drawn up a plan that will bring together religious scholars and social scientists on a common platform to explain the true teachings of Islam as a religion of peace and moderation. They will also explore the problem from a socio-economic perspective to get an overall picture.
In the Saudi context, which is equally relevant to India’s, terrorists draft recruits from the unemployed youth who are lured by monetary incentives. In fact, Prince Naif has urged all Saudi universities to fight terrorism at the academic level by conducting research on why and how some young Saudis fell into the trap.
The Interior Ministry recently launched a campaign in Hafr Al-Batin, a conservative stronghold in northeastern Saudi Arabia, where preachers and experts are working towards reforming individuals arrested on terror charges. They counter the influence of extremist teachings by emphasizing the sanctity of life in Islam, its stress on kindness, compassion, accountability for one’s acts of omission and commission on the Day of Judgment, etc.
At another level, imams and Friday preachers in the Kingdom’s mosques are instructed to be careful in their sermons. “A preacher should know that it is his religious duty to speak out against terror and misguided ideologies as he is aware of what the Shariah (Islamic law) says on the matter,” Minister of Islamic Affairs, Endowments, Call and Guidance Saleh Al-Ashaikh said during an address at the Islamic University of Medina recently.
To this end, a Higher Institute for Imams and Khatibs has been set up at Taiba University, near Jeddah. The institute will graduate preachers who will be skilled not only in modern methods of communication but also moderate in their outlook. It will also strive to erase warped ideas among traditional preachers. Some 55 imams and preachers, besides several members from the Commission for the Promotion of Virtue and the Prevention of Vice (religious police) attended the course.
The need for such educated and moderate Imams could go a long way in weaning the Muslim youth away from the path of extremism. Many of these preachers, even if well-versed in Islamic teachings, lack even elementary knowledge of science. In one of Bangalore’s mosques, a preacher, who was extolling the spiritual and health benefits of zamzam water that pilgrims normally bring with them after performing Haj, explained how rich it is in ‘vitamins’ (sic)..
A nephew of mine, who has just landed a job in the UAE, narrated the case of a Pakistani expatriate working there. The latter, who happens to be his acquaintance, insists that this youth should attend all religious congregations, which should take precedence over everything else, including job. How can Muslims progress with such a mindset?
In a major development that should be of interest to India, an expert committee set up by the Saudi government is vetting a draft law to punish those who threaten the national security of other countries.
The new law, which also deals with organized crimes and terrorism-related offences, will carry the maximum sentence of capital punishment for the convict, according to the Saudi media, which have quoted Interior Minister Prince Naif bin Abdulaziz, as saying. He described such crimes as “haraba,” a Qur’anic term meaning “sowing corruption and chaos on earth.”
Since both India and Saudi Arabia have been victims of terrorism, now is the time to share information on how they could combat this menace in their mutual interest. There are two broad areas of cooperation from India’s point of view. One is a Saudi proposal mooted by Custodian of the Two Holy Mosques King Abdullah for establishing an international centre on combating terrorism
The other one is the launch of an institute for training imams and khatibs (those who lead prayers in mosques or deliver sermons before the start of Friday prayers). Both these developments are significant, since there many poorly educated preachers who misinterpret Islamic teachings, emphasizing certain aspects and playing down others. They represent a growing trend that has seen preachers well versed in their own field but woefully lacking even basic knowledge of science.
On the issue of combating terrorism, King Abdullah had proposed the setting up of an international center during a major conference three years ago. The proposal met with a lukewarm response despite attempts to take it forward. Subsequent events since 9/11 have warranted the need for reviving this initiative with all the seriousness that it deserves.
The leaders of both countries, together with their experts, could work out the modalities of fine-tuning the proposal from the conceptual to the operational stage. The starting point of the exercise should be to arrive at a global definition of terrorism and the root cause of this phenomenon that has cost the international community trillions of dollars in cumulative damage with no end in sight.
What is important is to identify the various terrorist outfits, their modus operandi and how they indoctrinate the recruits. This is where the Saudi government’s strategy seeks to prevent extremist ideas from infecting immature minds. To this end, the government has drawn up a plan that will bring together religious scholars and social scientists on a common platform to explain the true teachings of Islam as a religion of peace and moderation. They will also explore the problem from a socio-economic perspective to get an overall picture.
In the Saudi context, which is equally relevant to India’s, terrorists draft recruits from the unemployed youth who are lured by monetary incentives. In fact, Prince Naif has urged all Saudi universities to fight terrorism at the academic level by conducting research on why and how some young Saudis fell into the trap.
The Interior Ministry recently launched a campaign in Hafr Al-Batin, a conservative stronghold in northeastern Saudi Arabia, where preachers and experts are working towards reforming individuals arrested on terror charges. They counter the influence of extremist teachings by emphasizing the sanctity of life in Islam, its stress on kindness, compassion, accountability for one’s acts of omission and commission on the Day of Judgment, etc.
At another level, imams and Friday preachers in the Kingdom’s mosques are instructed to be careful in their sermons. “A preacher should know that it is his religious duty to speak out against terror and misguided ideologies as he is aware of what the Shariah (Islamic law) says on the matter,” Minister of Islamic Affairs, Endowments, Call and Guidance Saleh Al-Ashaikh said during an address at the Islamic University of Medina recently.
To this end, a Higher Institute for Imams and Khatibs has been set up at Taiba University, near Jeddah. The institute will graduate preachers who will be skilled not only in modern methods of communication but also moderate in their outlook. It will also strive to erase warped ideas among traditional preachers. Some 55 imams and preachers, besides several members from the Commission for the Promotion of Virtue and the Prevention of Vice (religious police) attended the course.
The need for such educated and moderate Imams could go a long way in weaning the Muslim youth away from the path of extremism. Many of these preachers, even if well-versed in Islamic teachings, lack even elementary knowledge of science. In one of Bangalore’s mosques, a preacher, who was extolling the spiritual and health benefits of zamzam water that pilgrims normally bring with them after performing Haj, explained how rich it is in ‘vitamins’ (sic)..
A nephew of mine, who has just landed a job in the UAE, narrated the case of a Pakistani expatriate working there. The latter, who happens to be his acquaintance, insists that this youth should attend all religious congregations, which should take precedence over everything else, including job. How can Muslims progress with such a mindset?
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