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					IMC - ECONOMIC RESEARCH & TRAINING FOUNDATION
                                                                                                                16th September 2008

                                     Asian growth to ease to 7.5 pct: ADB

  Business                           Asian Development Bank: Growth across developing Asia will slow to 7.5% in 2008
                                     from 9% in 2007 in the face of rising inflation, turbulent financial markets and weakening

     &                               world demand. Inflation is expected to climb to 7.8% this year from 4.3% in 2007.
                                     Downturns in US and Europe, who are buyers of vast amounts of Asian-made goods, will
                                     only aggravate the situation. The forecast comes amid turmoil in financial markets, with
                                     Asian stocks plunging on news about the bankruptcy filing of US investment bank

  Economy                            Lehman Brothers and that Bank of American is buying Merrill Lynch.


Expert Views                       Inflation may dip to 10% by        Rupee falls to its             Mkts plunge, Sensex sheds
                                   Dec: Rangarajan                    lowest since Aug 2006
                                                                                                     over 400 pts
David Wyss, Chief Economist,       Rajya Sabha member and             Indian rupee fell to
Standard and Poor’s, “While        Former Head of the PM’s            its weakest level
the pain in the US market is       Economic           Panel       C   against the dollar since
not over yet, the problems in      Rangarajan         said    that,   August 2006 at Rs
Japan and the UK could             “Inflation may come down to        46.05;     rupee      has
probably be worse. The losses      10% by December from over          depreciated by around          Sensex continued its losing
from the sub-prime crisis          12% at present.” Inflation last    8.5% over the past one         streak for the six straight
appear to be increasing.”          year was moderate towards          month alone. Due to                             th
                                                                                                     sessions on 16 Sep’08 and lost
Corporate Snippets                 the end of December, so            concerns about capital         480 points in early trade due an
                                   base effect will heighten          outflows following by an       all-round selling by foreign funds
                                   inflation in the current year.     collapse of Lehman             after the collapse of US
~ Reliance Capital (R-Cap) is      The base effect relates to the     Brothers and the bailout       investment       bank      Lehman
raising $1 billion (over Rs        impact on inflation because        of    investment     bank      Brothers led to turmoil in global
4,600 crore) from foreign          of its level in a year-ago         Merrill Lynch by Bank of       stock    markets     along     with
investors for its foray into the   period. If inflation is low in a   America       and heavy        depreciating rupee. The 30-share
private equity business. The       year-ago        period,      the   dollar demand from oil         index, which had lost nearly
fund will be invested in the       comparative inflation in the       firms and foreign banks.       1,415 points in the last five
Indian equity market after         current year would look                                           sessions, tumbled by 479.54
concluding the capital raising     higher.                            Global crude price             points to 13,051.73 after most of
plan by December 2008.                                                seen      falling to           the heavy-weight stocks suffered
~ TPG India Investments has        Indian                 contract    $90/barrel                     sharp losses. Similarly, the
made an open offer for 20%         manufacturing market to                                           National Stock Exchange's index
stake in Shriram City Union        touch $2.46 bn                     International crude oil        Nifty fell by 153.55 points to
Finance (SCUFL) at Rs 400 a        Consulting Firm KPMG said          prices have fallen over        3,919.35.
share.                             in its latest report that,         33% from their recent
~ Personal care products           “Indian                 contract   record highs and are           Leading insurer AIG close to
maker Emami nearly doubled         manufacturing market is            projected to fall further      bankruptcy
its open offer to acquire 20%      expected to touch $2.46            towards $90 per barrel         In continuing the meltdown in US
in country's oldest Ayurvedic      billion by 2010 with an            with      the      second      financial market, World's largest
Pharma         firm,      Zandu    annual growth rate of 41.7%,       hurricane in the Gulf of       insurer, American International
Pharmaceutical Works. The          from $869 million in 2007.”        Mexico not causing as          Group (AIG) was downgraded by
offer was raised to Rs 15,000      Winning outsourcing deals          much loss of production        credit rating agencies and was
a share from the earlier Rs        signify that Indian firms have     as       was       initially   racing against time to find a multi
7,315.                             been able to win the trust         estimated.        Analysts     billion dollar infusion to stay
~ Crompton Greaves acquired        and        confidence         of   expect oil prices to           afloat. Federal Reserve officials
US-based        MSE      Group,    multinational      companies.      decline further in the         and two leading banks, JP
engineering, procurement and       Indian     corporates      have    next couple of months          Morgan Chase and Goldman
construction (EPC) contractor      strengthened their presence        as production remains          Sachs, were negotiating to put
for $ 16 million (about Rs 72      in the market by acquiring         robust and demand for          together USD 75 billion package
crore).                            better     technology       and    oil and oil products falls,    to save the insurance giant to
                                   developing expertise in niche      especially      in      big    stave off crisis. AIG has sought
                                   segments that offer higher         consumers such as the          USD 40 billion in bridge loan to
                                   margins and have higher            US, China and Europe,          stave off the crisis. But unless
                                   entry barriers. They have          in the face of global          the funds are forthcoming AIG
                                   grown inorganically, too, by       economic slowdown.             too    might     follow   Lehman
                                   acquiring units worldwide,                                        Brothers in declaring bankruptcy
                                   leading them closer to their                                      which could add to the meltdown
                                   global clients.                                                   of the markets.


From Mrs. Kiran Nanda & Ms. Shobha Chettiar – IMC-ERTF
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