Archive for September 2011
India’s overall growth of gross domestic product (GDP) at factor cost at constant prices, as per advance estimates was 8.5 per cent in 2010-11, representing an increase from the revised growth of 8 per cent during 2009-10, according to the monthly economic report released for the month of July 2011 by the Ministry of Finance. The index of industrial production (IIP) rose to 8.8 per cent in June 2011, year-on-year, on back of manufacturing and within that, the capital goods sub-segment. During April-June 2011-12, the IIP growth was registered at 6.8 per cent as compared to 9.6 per cent during 2010-11.
India has entered the club of top 20 exporters of goods and reclaimed its position among top 10 services exporters in 2010. India’s goods exports rose by 31 per cent in 2010, helping it to improve its world ranking moving up two places to 20 from 22 in 2009.
India’s FDI gathered momentum with the inflows growing by 310 per cent in June 2011 to touch US$ 5.65 billion. It is the highest monthly inflow during the last 11 years. The total FDI stood at US$ 16.83 billion during January-June 2011, nearly 57 per cent higher than the US$ 10.74 billion received during the same period last year.
The eight core infrastructure industries grew by 5.2 per cent in June 2011 as compared to the growth of 4.4 per cent in June 2010. In addition, exports in terms of US dollar, increased by 46.4 per cent during June 2011. On the back of such facts, India’s GDP is projected to continue to grow at a brisk pace of 8.8 per cent in 2011-12.
India has been ranked at the second place in global foreign direct investments (FDI) in 2010 and is expected to remain among the top five attractive destinations for international investors during 2010-12,
Non-resident Indian (NRI) inflows in the first quarter of 2011-12 has witnessed a rise of 38 per cent as compared to the same period in 2010-11. NRIs invested US$ 1.54 billion in various NRI deposit schemes during April-June 2011.
India’s foreign exchange (Forex) reserves have increased by US$ 1.6 billion to register US$ 318 billion during the week ended August 19, 2011, according to data released by the Reserve Bank of India (RBI). The increase in Forex is largely attributed due to valuation changes.
The Government has approved fund raising worth Rs 60,950 crore (US$ 13.24 billion) by companies through external commercial borrowings (ECB) or foreign currency convertible bonds (FCCB) for infrastructure projects in the financial years 2009-2011.
India’s merchandise exports have registered an increase of nearly 82 per cent during July 2011 from a year ago to touch US$ 29.3 billion, according to a release by the Ministry of Commerce and Industry. Exports during April-July 2011 reached US$ 108.3 billion, up 54 per cent over the same period a year ago.
The Indian automobile industry, the seventh largest in the world, has currently estimated to have a turnover of US$ 73 billion, accounting for 6 per cent of its GDP, and is expected to record a turnover of US$ 145 billion by 2016. India’s automobile industry is expected to grow by 11 to 13 per cent in the fiscal year ending March 2012, according to Pawan Goenka, President, SIAM. The Indian automakers sold 143,370 cars in June 2011, added SIAM.
Demand for two-wheelers has increased by 16 per cent in June 2011 to over 880,000 units, as compared to 761,000 units in June 2010, according to data released by six of the eight domestic two-wheelers manufacturers.
The growth of Indian agriculture and allied sector was a top agenda in Budget 2011-12 presented by Mr Pranab Mukherjee, the Union Finance Minister. He has estimated that the agriculture and allied sector would grow by 6 per cent in 2011-12.
Software as a Service (SaaS) is estimated to grow by 20.7 per cent in 2011 amounting close to Rs 538 crore (US$ 116.85 million) as compared to 2010 where it was close to Rs 445 crore (US$ 966.60 million), according to IT advisory firm Gartner Inc.Approximately 75 per cent of SaaS delivery can be regarded as cloud services as per Gartner, which is on its way to exceed 90 per cent by 2015. Customer relationship management (CRM) is the largest market for SaaS, which is expected to reach Rs168.83 crore (US$ 36.67 million) in 2011 to represent 32 per cent of the total CRM market.
Growth Potential Story
India’s consumption growth story is expected to maintain its course of about 14 per cent growth over the next three years driven by three factors-inclusiveness, mix changes and specific consumption categories, as per senior analysts Vijay Chugh, Ashvin Shetty and Shariq Merchant in the report ‘The Indian Consumer: a robust operator in an uncertain world’.
India will emerge as the second largest steel producer by 2013 with an installed capacity of 120 million tonnes (MT), riding on high levels of growth, construction, housing, real estate, automobiles and agriculture, according to Mr Beni Prasad Verma, Steel Minister. The demand for steel in the country is growing at an average of 10 per cent, which may even exceed to 12 per cent in the near future.
The number of millionaire households in India will grow from 2,86,000 to 6,94,000 between 2011-2020, at a growth rate of 143 per cent, as per a study by the Deloitte Center for Financial Services. Among emerging markets, India is likely to have the highest per capita wealth among millionaires with US$ 4.25 million — placing it ahead of the US. In comparison to other BRIC (Brazil, Russia, India and China) nations, India is likely to experience the largest growth at 405 per cent in total wealth held by the millionaires.
The International Accounting Standards Board decided not to extend the relief from restatement of comparative figures currently provided by IFRS 9, which allows an entity not to restate comparative figures if it decides to adopt the standard before 2012.The International Accounting Standards Board has proposed in its Exposure Draft Mandatory Effective Date of IFRS 9 to move the mandatory effective date of IFRS Financial Instruments to annual periods beginning on or after 1 January 2015.
Earlier application would continue to be permitted. The ED does not address other specific transition issues for IFRS 9, including the prohibition against applying IFRS 9 to items that have already been de-recognized at the date of initial application, which the IASB had indicated it may reconsider. The ED does not discuss how the effective date of IFRS 9 should relate to the effective dates of other projects but confirms the importance of the timing of the insurance project (IFRS 4 Phase II) when setting an effective date.
The ED poses questions for public comment on the proposed date of 1 January 2015 and the IASB’s tentative decision not to change the current requirement in IFRS 9 on comparative figures. The comment period of the exposure draft closes on 21 October 2011.
The IASB has published an ED proposing to defer the mandatory effective date of IFRS 9 to annual periods beginning on or after 1January 2015, with earlier application permitted. The comment period of the ED closes on 21 October 2011. The IASB recently extended its time line for IFRS 4 Phase II and has not yet set a publication date for the insurance standard.
The IASB recently extended its IFRS 4 Phase II timetable and now plans to make a decision on whether to re-expose or move to a review draft of the standard by the end of 2011, or during the course of 2012. It will set a publication date for a final IFRS 4 Phase II standard in due course. The deliberations on the insurance project are ongoing and the IASB has not yet made a decision on the effective date for the future IFRS 4 Phase II standard.
Extension of relief from the requirement to restate comparative figures until the mandatory effective date of IFRS A single effective date for all the phases of IFRS 9, as well as the revised IFRSs on insurance contracts, revenue recognition, and leasing. Many insurers asked the IASB to delay IFRS 9 to achieve alignment with IFRS 4 Phase II.
First of all, the delay of the IFRS 9 effective date gives insurers more time to prepare for IFRS 9. Additionally, allowing insurers sufficient time to make the necessary system changes and to prepare adequately for transition. Considering that the IASB does not expect to issue an IFRS 4 Phase II standard in 2011, it would be impossible to fully align both standards for adoption under the effective date currently in IFRS 9 (1 January 2013)
Silver has taken over gold as the most rare precious metal, read on and discover why we should buy silver in this current uncertain economy.
Silver mining demand aren’t enough to meet the current demands. Silver is often a by-product of mining copper, lead, zinc and gold. Getting silver is a bonus for mining companies.
Worldwide economic growth mainly in China & India, results in more goods being produced. Silver is the indispensable metal in most electronic goods as it is the most electrically conductive, thermally conductive and reflective.
The declining Dollar With confidence dwindling in fiat currencies such as US dollars and Euros, people and investors are turning to real money which have withstood centuries, such as gold and silver.
A further intriguing fact related to this topic is the rising tide in investing demand – Gold and silver, are also known as commodities. Recently, there have been an increase in commodities demand. Gold is peaking now, and silver, the more neglected real money with gold, will gain investor‘s demand as people realise the gold prices are too high.
Gold/Silver Price Ratio – Gold and silver price ratio have always been 1:16. The current ratio is 1:69. Apparently, there is potential for silver prices to move closer to that of gold’s as silver is becoming more rare compared to gold in the current era.
Demand for gold has bounced back after the downgrade in Italy’s long-term credit rating by the Standard and Poor’s to A from A-plus, indicating a weak economic scenario in the Euro region. Any indication for further monetary stimulus would be seen as bullish for the Precious Metals.
Silver also closed in the green as prices took support from rising gold prices but sharp gains were capped as being an industrial metal it also took cues from movement in the base metals pack. Investment demand for the white metal saw redemption in holdings yesterday by 34.83 tonnes from the iShares Silver trust.
The International Copper Study Group said the world copper market was in deficit by 130,000 tons during the first six months of the year. Supply fell short of demand by 286,000 tons during the same period in 2010. Copper prices came under pressure on Tuesday declined by more than 1 percent on the LME as macroeconomic concerns dominated market sentiments. Prices on the LME touched a 9 – ½ month low as poor global economic prospects led to worries over future demand for the metal.
Signs of Recovery
The world is near the bottom of a global recession that is causing widespread business contraction, increases in unemployment, and shrinking government revenues. Although recent data indicate the large industrialized economies may have reached bottom and are beginning to recover, for the most part, unemployment is still rising. Numerous small banks and households still face huge problems in restoring their balance sheets, and unemployment has combined with sub-prime loans to keep home foreclosures at a high rate. Nearly all industrialized countries and many emerging and developing nations have announced economic stimulus and/or financial sector rescue packages. Several countries have resorted to borrowing from the International Monetary Fund as a last resort.
The Weakness of Financial Systems Worldwide
The crisis has exposed fundamental weaknesses in financial systems worldwide, demonstrated how interconnected and interdependent economies are today, and has posed vexing policy dilemmas. The process for coping with the crisis by countries across the globe has been manifest in three basic phases.
The first has been intervention to contain the contagion and restore confidence in the system. This has required extraordinary measures both in scope, cost, and extent o government reach.
The second has been coping with the secondary effects of the crisis, particularly the global recession and flight of capital from countries in emerging markets and elsewhere that have been affected by the crisis.
The third phase of this process is to make changes in the financial system to reduce risk and prevent future crises. In order to give these proposals political backing, world leaders have called for international meetings to address changes in policy, regulations, oversight, and enforcement.
U S Crisis Trickles Down to all Nations
According to the Economist Intelligence Unit, the aggressive measures that governments have taken to counter the financial crisis have not only helped to prevent a more severe downturn but are now setting the stage for a recovery, albeit a weak one. However, the world economy could weaken again once the stimulus wears off, mainly because government debt has increased dramatically in many countries—eliciting rising concerns about the solvency of the state. This has made current levels of stimulus through government spending not quiet sustainable.
The global financial crisis has brought home an important point: the United States is still a major center of the financial world. Regional financial crises (such as the Asian financial crisis, Japan’s banking crisis, or the Latin American debt crisis) can occur without seriously infecting the rest of the global financial system. But when the U.S. financial system stumbles, it may bring major parts of the rest of the world down with it.6 The reason is that the United States is the main guarantor of the international financial system, the provider of dollars widely used as currency reserves and as an international medium of exchange, and a contributor to much of the financial capital that sloshes around the world seeking higher yields. The rest of the world may not appreciate it, but a financial crisis in the United States often takes on a global hue.
Countries around the world have accepted the importance of converging accounting standards and are well on their way towards implementing them. Most countries have adopted IFRS standards and are in various stages of adoption at the end of this financial year.
The Implications of IFRS Convergence for Indian Companies
Investments in India are valued at lower of the cost of fair trade value under Indian accounting standard – one of the divergences from IFRS. After implementing IFRS, only fair value will be calculated. The differences of our Indian accounting Standard with IFRS are minor with respect to IAS – 2 inventories, IAS – 7 cash flow statements, IAS – 20 accounting for government grants and disclosure of government assistance, AS – 33 earnings per share, AS 36 impairment of assets, AS – 38 intangible assets etc, therefore the transition to IFRS for Indian companies is certainly easier.
Benefits of IFRS for Indian Companies
Ease of Investments
Overseas investors will choose economies with IFRS compliant financial statements.
Higher Confidence Levels
Organizations will operate with the confidence of having a common accounting system perceived as stable and transparent.
IFRS will eliminate barriers to cross border listings and will be beneficial for investors who ascribe a risk premium if the underlying financial information is not prepared in accordance with international standards.
Mergers & Acquisitions Made Easier
Trans border acquisitions and mergers will be easier for both parties in as far as redrawing of documents is concerned.
Companies have adopted IFRS from FY10 to make available comparative figures in the annual report. Successful transition requires a planned procedure well in advance. Several large listed companies have moved to the new standards and those in transition are actively incorporating the changes, in the beginning of the new financial year.