Economy

The unabated hike in food and oil prices has accelerated this week’s inflation from 11.05 per cent to 11.42 per cent, which is again a 13-year high. The rise has been mainly on account of higher prices of food items like tea, milk and cereals.

While food articles and textiles were up 0.7 per cent, primary articles rose by 0.2 per cent, and fuel, power and energy were up by 0.1 per cent. A steep rise of 3.6 per cent was recorded in minerals, while tea was up by 3 per cent. Non-food articles, however, were down by 0.5 per cent.

Indian Economy is headed for a slow down. The inflation data published today shows that it has soared to a seven year high of 8.75 per cent for the week ended May 31 compared to a 8.24 percent in the previous week. Rising food and vegetable prices including cereals, milk, spices and manufactured goods have contributed to 0.51 percent increase.

8.75 per cent .. thats the highest inflation ever touched by the indian economy in the past 7 years. Instead of finding ways to fix this governments seems to be leaving the job to the Rain gods and other natural events.

While Montek Singh Ahluwalia agreed that inflation is on the rise and that it has turned into a major challenge for the government, he expressed hope that a good monsoon will help control the prices of commodities that are out of control.

India's forex reserves moved up to a record 315 billion dollars for the week ended june 6th. Foreign currency assets stood at 305 billion and include the appreciation or depreciation of the Non-US Dollar currencies such as Yen, Pound and Euro.

Gold reserves and Special Drawing Rights, during the week, stood static at USD 9.202 billion and USD 11 million respectively, it said.

The country's reserve position in the International Monetary Fund, during the seven-day period, stood at USD 527 million as against USD 526 million in the previous week.

The deal in which Ranbaxy Laboratories Ltd India’s largest pharmaceutical company was sold off to a Japanese-based Daiichi Sankyo Co. has been appreciated by experts.

ChrysCapital Managing Director Sanjiv Kaul, an ex-Ranbaxy executive and a sector analyst said, “Commercially, it is an awesome deal. However, Ranbaxy was the all-conquering Indian hero and should have been the last man standing instead of being the first to capitulate. A huge positive for Ranbaxy but a negative for Indian pharma.”

Oil Public Sector Units of India continue to bleed and be in a precarious situation as government defers its decision to raise prices of petrol, diesel and domestic LPG atleast until next week. The UPA government is fearful of the negative political impact of a raise in Oil and other prices considering the inflation of india continues to rise inspite of subsidized oil.

A marketplace for small farmers in India may soon be a reality with NSEL [ National Spot Exchange Limited ] being accorded the necessary licenses in 3 states of India including Gujrat, Maharashtra and Karnataka.

According to NSEL, they have received the licenses to launch an electronic platform that would allow them to launch a spot exchange where farmers can sell as low as one quintal of product without having to deal with too many middlemen. This level of openness in the market will allow farmers to reap much larger benefits than they have access to in today's Indian trading markets.

Export credit is credit extended to the purchaser of an export. The credit may be provided by the firm that is selling the export (essentially by shipping the product before receiving payment for it) or it may be offered as a loan by a bank of a government agency in the company that is exporting the goods. By setting a low interest rate on export credit, a country can essentially subsidize an export—without providing a direct subsidy.

An expenditure tax is often also called a consumption tax; it is any tax levied on the money people spend instead of what they earn. An expenditure tax might include sales tax and tariffs.

The exchange rate defines the rate at which one nation’s currency may be exchanged for another currency. For example, if the U.S. exchange rate for the Canadian dollar is $1.11, that means that one U.S. dollar may be exchanged for 1.11 Canadian dollars.

Equity has several related meanings in economics. The basic accounting meaning of equity is the value of a property, over and above any claims, liens, or mortgages. The most familiar use of the term is in real estate. Say you buy a property worth $100,000, making a $35,000 down payment and taking a $65,000 mortgage. Before you make your first mortgage payment, your equity in that property is $35,000. With each mortgage payment, your equity increases by the amount of the mortgage you have paid off.

Equilibrium refers to a state of balance in any system. In economics, equilibrium is an important part of various economic models, notably that of supply and demand. A market is said to be at equilibrium when a price is found at which the demand for a product on the part of buyers is equal to the amount of the product supplied by producers.

Elasticity measures the degree to which one variable in an economic model is responsive to changes in another variable. This concept can be applied to analysis of many economic models, but is especially useful in analysis of supply and demand. For example, demand for gasoline can be expected to decrease in relationship to increased cost. Elasticity refers to the degree to which that change in demand is related to changes in price.

According to the efficient market hypothesis, financial markets take account of new information about traded commodities so rapidly that it is not possible to make profit by “outsmarting the market.” In other words, if a trader attempts to outperform the market by buying or selling stock based on information about the company or commodity, it is already too late. If I learn that the corn crop in Argentina is in trouble because of unfavorable weather during the growing season and so I buy U.S.

Economies of scale are those advantages a firm obtains by expanding. Becoming larger can result in savings in a number of ways. Large businesses can save money by purchasing in bulk, by sharing highly trained managers, by being able to borrow at lower interest rates and by having access to a wider range of financial tools, by saving on marketing and advertising, and in other ways. Economy of scale is determined by measuring the cost of production per unit; if the cost per unit decreases after expansion, then economies of scale are said to have been realized.

Economic sanctions are penalties inflicted by one country or group of countries on another, including embargoes, tariffs, trade barriers, and quotas on imports or exports. Economic sanctions may be protectionist in nature (as when the U.S. placed tariffs on imported steel in an effort to protect U.S. steel producers) or they may be primarily political, as when in 1998 the U.S. and Japan imposed economic sanctions on India in response to nuclear testing on that country’s part. The United Nations may impose economic sanctions in response to non-compliance with international law and U.N.

Economic policy refers to the actions a government takes to try to manage its nation’s economic health. Economic policy includes three major areas. Fiscal policy includes the government’s management of its deficit, including taxation in order to raise revenue and government spending. Monetary policy includes the issuance of currency, interest rates, and other efforts to control the amount of money in circulation and to control inflation. Trade policy includes those actions a government takes to regulate international trade, including tariffs and tax agreements.

Econometrics is the science of applying statistical and quantitative methods to the analysis and explanation of economics. Econometricians develop mathematical models that predict the behavior of economic factors and test those models against observational data to refine those models and help economists determine how those models can be applied to analysis of economic events and factors.

Just as it sounds, double taxation refers to taxing the same money twice. Specifically, though, double taxation normally refers to taxation of the same funds at two different levels. Most commonly, double taxation occurs when corporate earnings might be taxed once at the corporate level and again when paid as dividends to stockholders. The reason double taxation is possible is that corporations are considered separate legal entities from their stockholders.

Discounted cash flow (DCF) refers to a method of analyzing the potential value of an investment opportunity. Calculating requires estimating future cash flows resulting from a potential investment in order to determine whether the return on the investment will be acceptable. The reason it’s called “discounted” cash flow is that these calculations are performed while taking into consideration that time affects the value of money, so the cash flows are discounted to take into account the effect of time.