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Worst yet to come for Indian economy: Moody’s

The Indian economy is unlikely to grow more than five per cent in 2009 as "the worst of the global economic crisis is yet to come", according to the research arm of the global rating agency Moody's.

“The positive sentiment is expected to be short-lived, as India essentially only started feeling the pinch of the global downturn in the December quarter and the worst is yet to come,” Moody’s economy.com said in a research report. The industrial production growth slipped into negative territory for the third time in the current fiscal by 0.5% in January while exports also dropped by 15.9% on a year on year (yoy) basis in the month.

However, expectations of further monetary easing measures by the Reserve Bank increased after inflation fell to 0.44% for the first week of March against 2.43% a week ago.Since October, RBI has infused over Rs4,00,000 crore in the system by cutting ratios and signalling interest rate cut. There is also some positive news from Dalal Street as the Bombay Stock Exchange benchmark index Sensex surged 245 points in this week.

Moody’s added that the Indian economy is likely to grow by 6.3% with some downward risk in the current fiscal against government estimate of 7.1%. For the year 2009, India’s growth rate is unlikely to exceed 5%, but a recovery in the opening quarter of 2010 due to expected rebound of the US economy in the December quarter, should lift annual expansion to about 5% for fiscal 2009-2010, it said. It further added that the market sentiment is still unstable in India and so far in 2009 there has been a net outflow from the Indian stock market. Even businesses in India continue to be troubled by liquidity concerns and tight access to credit.

“As the current focus of many firms is to refinance debt and survive the financial turmoil, investment is expected to be subdued this year,” the report added. Moody’s expects long-term investors to continue to value India’s underlying growth potential, but speculators who are facing liquidity constraints, are likely to stay clear of emerging markets on signs of turbulence. “As the current focus of many firms is to refinance debt and survive the financial turmoil, investment is expected to be subdued this year,” it added.

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Warren Buffet's maxims for 2009

We begin this New Year with dampened enthusiasm and dented optimism. Our happiness is diluted and our peace is threatened by the financial illness that has infected our families, organizations and nations. Everyone is desperate to find a remedy that will cure their financial illness and help them recover their financial health. They expect the financial experts to provide them with remedies, forgetting the fact that it is these experts who created this financial mess.

Every new year, I adopt a couple of old maxims as my beacons to guide my future. This self-prescribed therapy has ensured that with each passing year, I grow wiser and not older. This year, I invite you to tap into the financial wisdom of our elders along with me, and become financially wiser.

• Hard work: All hard work bring a profit, but mere talk leads only to poverty.
• Laziness: A sleeping lobster is carried away by the water current.
• Earnings: Never depend on a single source of income.. [At least make your Investments get you second earning]
• Spending: If you buy things you don't need, you'll soon sell things you need.
• Savings: Don't save what is left after spending; Spend what is left after saving.
• Borrowings: The borrower becomes the lender's slave..
• Accounting: It's no use carrying an umbrella, if your shoes are leaking.
• Auditing: Beware of little expenses; A small leak can sink a large ship.
• Risk-taking: Never test the depth of the river with both feet. [Have an alternate plan ready]
• Investment: Don't put all your eggs in one basket.

I'm certain that those who have already been practicing these principles remain financially healthy. I'm equally confident that those who resolve to start practicing these principles will quickly regain their financial health.

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