A perceived slowdown in government decision-making, failure to implement announced reform, and growing bottlenecks in key sectors has undermined business confidence in India, says the ratings agency
Ratings agency Standard & Poor’s (S&P) said Indian government’s reaction to potentially slower growth and greater vulnerability to economic shocks could largely determine whether the country can maintain an investment grade rating or become the first “fallen angel” among the BRIC nations that also comprise Brazil, Russia, and China.
“The combination of a weakening political context for further reform, along with economic deceleration, raises the risk that the government may take modest steps backward away from economic liberalization in the event of unexpected economic shocks. Such potential backward steps could reverse India’s liberalization of the external sector and the financial sector,” said Standard & Poor’s credit analyst Joydeep Mukerji.
In a report titled “Will India Be The First BRIC Fallen Angel?” the ratings agency said slowing gross domestic product (GDP) growth and political roadblocks to economic policymaking are just some of the factors pushing up the risk that India could lose its investment-grade rating.
“Setbacks or reversals in India’s path toward a more liberal economy could hurt its long-term growth prospects and, therefore, its credit quality,” Mr Mukerji said.
Earlier in April 2012, S&P revised India’s outlook to negative from stable due to the country’s lower GDP growth prospects and the risk of erosion of its external liquidity and fiscal flexibility. “The negative outlook also reflects the risk that Indian authorities may be unable to react to economic shocks quickly and decisively enough to maintain the country's current creditworthiness,” the ratings agency had said.
India’s GDP growth fell to an estimated 5.3% year-over-year in the first quarter of calendar 2012, from 6.1% in the previous quarter. The biggest contributors to growth in the last fiscal year were sectors such as real estate and financial and government services, with manufacturing, infrastructure, and agriculture showing lower growth. The Indian rupee has declined about 20% against the US dollar over the past year.
According to the ratings agency, local business confidence in India has deteriorated for various reasons including perceptions of “policy paralysis” within the central government. India was able to boost public and private investment in infrastructure in recent years, sustaining high GDP growth of around 8%-9% during the three years leading up to the recent global slowdown in 2008.
However, a perceived slowdown in government decision-making, failure to implement announced reforms, and growing bottlenecks in key sectors, including lack of reforms to archaic land acquisition laws that hinder investment, has undermined business confidence. And infrastructure problems, combined with growing shortfalls in the production of coal and other fuels, have dampened investment prospects, the report added.
For example, various regulatory and other obstacles have delayed a proposed $12 billion investment in the steel sector by Korean steelmaker POSCO—potentially the biggest foreign investment project in Indian history—by more than seven years. Other steel projects have also faced extensive delays because of land acquisition hurdles and other issues.
S&P said, recent setbacks in economic policy have also hurt investor sentiment. Strong opposition from within the Congress party-led ruling coalition, as well as from opposition parties, recently forced the government to reverse its decision to raise the cap on foreign direct investment (FDI) in multi-brand retail to 49% of total ownership from 26%.
Similarly, pressure from a coalition ally of the governing Congress party caused the government to roll back a 10% hike in passenger train fares and forced the railway minister to quit. Passenger fares have been flat for many years despite substantial growth in personal income and high inflation.
In addition, recent announcements by the government on taxation matters, such as the retrospective implementation of taxation on the offshore transaction of assets in India, have raised concerns among foreign portfolio and direct investors. Finance minister Pranab Mukherjee later clarified his statements and announced that some of the measures against tax avoidance would not take effect until the next fiscal year, starting in April 2013. Such incidents have raised the perception of risk among both foreign and domestic investors and could reduce India's growth prospects in the coming years, the report from S&P added.
S&P said, "The crux of the current political problem for economic liberalization is, in our view, the nature of leadership within the central government, not obstreperous allies or an unhelpful opposition. The Congress party is divided on economic policies. There is substantial opposition within the party to any serious liberalization of the economy. Moreover, paramount political power rests with the leader of the Congress party, Sonia Gandhi, who holds no Cabinet position, while the government is led by an unelected prime minister, Manmohan Singh, who lacks a political base of his own."
"The division of roles between a politically powerful Congress party president,who can take credit for the party's two recent national election victories, and an appointed prime minister, has weakened the framework for making economic policy, in our view. Manmohan Singh did not run for office in 2009 and, according to many political analysts, appears to have less in fluence within the Cabinet than previous prime ministers. Infact, the Cabinet is appointed largely by Sonia Gandhi and leaders of the allied parties, who choose their own candidates for the Cabinet posts allocated to them within the coalition. Hence, the prime minister often appears to have limited ability to influence his cabinet colleagues and proceed with the liberalization policies he favors (and constantly advocates in his public speeches. For example,Singh has been unable to liberalize the heavily controlled coal sector despite publicly advocating it for many years," the ratings agency added.
One cannot blame the doctors; they are also tempted. Unfortunately, the black sheep outnumber the good ones. But the bigger issue is the spurious basis of so-called modern medicine
"I have not observed men's honesty to increase with their riches"-Thomas Jefferson
The problem of corruption in the medical world is too gigantic to tackle on Sunday morning television. The show Satyamev Jayate is right in its conclusion that there is lot of corruption in modern medicine, as in any other field in India, including cinema. Let us admit that there are good, bad and ugly doctors just as there are people in every other field, including the media and the judiciary. Politicians are a class apart and have reached the Everest of corruption in India. Man, in the palace or pad; castle or cottage, is governed by the same passions and emotions, was Shakespeare's opinion. One should also not be naïve to believe that stricter rules and tighter controls by watchdog bodies will set things right. Only change of heart among the concerned people will change the system and not rules, regulations and policing.
Building corporate hospitals and insurance covers are also not the answer. In fact, a recent study covering14 industrialized countries showed that where there were more doctors, more specialists and more hospitals, death and disability rates were very high compared to countries like Japan where there are fewer doctors per capita and very few specialists. Health indices and longevity were also inversely proportionate to the number of doctors and specialists. We need family doctors as in Japan to "cure rarely, comfort mostly, but to console always". (JAMA 2000; 284: 483) Healing is basically to humour the patient long enough to help nature to heal the sickness. Medical insurance has been a curse in the USA and it is making its way into India in a big way!
In several places like Bogota in Columbia, Saskatchewan in Canada, Israel, and Los Angeles County in the US, etc, when doctors went on strike for various reasons, death and disability rates in society plummeted to very low levels only to go back to the original levels when they came back to work. Human health depends on clean drinking water, a roof on top in place of the star-lit sky for the poor, three meals a day, and a job to do with adequate sanitary facilities and not by hi-tech modern medicine. A humane, compassionate and empathetic family doctor will add to these basic needs.
Modern medicine is based on the reductionist western science, which has become a dangerous fanatical religion trying to proselytize the whole world for the sake of making money even at the cost of human life! Modern reductionist medical science is completely faulty. Audits in their own backyard have shown the medical establishment to be the leading cause of death and disability even in the US but the government there could not control the medical establishment mafia there. Michael Moore, in his film SICKO shows members of the US Congress walking in with labels attached to their chests giving details of the millions that they had clandestinely received from the pharma lobby, starting from the then President Bush to the very last Congressman.
What we probably need is for someone with Aamir's charisma to make people see the truth and deschool society's thinking about medicine and healing from its current obsession with a pill for every ill. The truth, there is an ill following every pill! Medical research is flawed too and has become a dangerous enterprise again running after money. "The attitude of the American Medical Association (AMA) towards lay practitioners is as rigid as the attitude of the church was towards the lay interpreters-and has the blessing of the law," writes Paul Feyerabend in his book Against Method.
AMA was started fifty years ago after some MDs in the US got together to start the Homeopathic Association as the methods of blood letting and hot iron applications in modern medicine practiced those days were inhuman. Mr McWilliams, one of the presidents of the AMA, once admitted that "we did not fight the homeopaths on any scientific principles. They came to our domain and took away our practice; so we banished them!" In this game, many doctors themselves get trained under a system, fully believe in what is taught at medical school, and are the dark about its faulty science base.
The doctor is also a pawn in the hands of the pharmaceutical mafia which influences medical textbooks to include doctored research and sexed up remedies all to amass huge profits through drugs and devices which in the long run are of little benefit to the suffering humanity.
When people get better it is PURELY due to their firm faith in the system which provokes (proven now) powerful drugs in the human brain that cure the illness, the Expectation Effect of physics. Reductionist chemical drugs that we use in modern medicine are the leaders in the cause of human death through adverse drug reactions (ADRs). However, the establishment tries to kill all other alternate, simple but effective methods of sickness care one by one-the latest under the guillotine is homeopathy, a very useful and scientific method of healing. There are many others, not to speak of the mother of all medical wisdoms-Indian Ayurveda. Emergency surgery and corrective surgery with emergency resuscitation methods are a boon in modern medicine.
Alternate effective systems were finished off using what is now famous-the Flexner report of 1910 in the USA. Up until 1899 the most popular systems were chiropractic, homeopathy, radio aesthesia, herbal medicine and many other healing methods along with a tottering chemical drug using modern medicine. With one stroke of the pen they were all banished as unscientific after the Flexner report. Curiously Mr Flexner was only a retired headmaster of a school, run by Andrew Carnegie. Today's prohibitively expensive cancer treatments were developed by destroying all alternate systems and by suppressing the famous Fitzgerald report of 1953 (a secret document till very recently). The Fitzgerald report is now in the public domain due to the Right to Information (RTI) movement and is available on the Internet. It shows how useful and inexpensive methods of treatment were banished.
Even today, government scientists in India conduct reductionist research based on holistic herbal drugs using western medical science. I would like Amir Khan to read the great classic, AGAINST METHOD, by Paul Feyerabend to understand how the fallacious western science in general and medical science in particular are converting every medical student into toeing their line of thought. In my opinion this book is an all time great and exposes how money runs and control science research today: many ace researchers are only working to get more funds, thicker CVs and an occasional Nobel Prize. They do not work for human good. My own book, What Doctors Don't Get to Study in Medical School also discusses these issues. Many stars of Indian medical research are funded by get lots of money from pharma lobby for doing so called research and the latest trend is that they get 'Big' western medical degrees free if they are with the pharma giants!
Occasionally genuine scholars also get those degrees Honoris Causa also. Unfortunately, the black sheep outnumber the good ones.
When we got political independence we should have followed the Chinese model of encouraging traditional Indian wisdom in healing which flourished for centuries. The Chinese did that very effectively and did not import westerns science and medicine whole-heartedly. Chinese medicine is doing well even in the west today. Unfortunately, China too has begun embracing western science!
Amir Khan would do a favour to mankind if he joins us as our brand ambassador in our efforts to push genuine health care to our masses through the Wellness Concept. This is about assisting the body's immune system to keep one healthy as long one lives. It is the essence of Ayurveda-swasthashya Swaastha rakshitham-preserve the health of the well segment. The idea has to be sold against the modern medical claptrap of regular check ups, drugs for every minor alteration in the human physiology and disease mongering efforts of the establishment called the health scare system. The concept is simple and could help people of all ages. Its three salient features are tranquillity of mind, change of mode of living from an unhealthy to healthy lifestyle and regular moderate exercise. In addition, consumption of sathvik food in moderation, with no tobacco and alcohol, also help.
I do not blame the doctors; I blame the system and corrupt environment in general in the country for the mountain of corruption in the medical fraternity. Making money is our religion today and money is our God. Unfortunately, society also respects only those that make it big in any field, whatever might be the means to get rich. So doctors too are also tempted. Authenticity and merit have turned into weaknesses in India.
In a beautiful study "Failure of scientific medicine-the Innu community study" in Canada, the authors showed that up until money came into their lives, Innus, the aboriginal race off the coats of Saskatchewan, had a happy sustenance economy and were healthy. With money, diseases and unhappiness came into their lives.
Sathyam in the medical field is not corruption but the faulty science and its system. That satyam eva jayate. Who wants sathya? In India the slogan is Anritam eva jayate-Na satyam.
"Every kind of peaceful cooperation among men is primarily based on mutual trust and only secondarily on institutions such as courts of justice and police"- Albert Einstein
(Professor Dr BM Hegde, a Padma Bhushan awardee in 2010, is an MD, PhD, FRCP (London, Edinburgh, Glasgow & Dublin), FACC and FAMS. He is also editor-in-chief of the Journal of the Science of Healing Outcomes, chairman of the State Health Society's Expert Committee, Govt of Bihar, Patna. He is former Vice Chancellor of Manipal University at Mangalore and former professor for Cardiology of the Middlesex Hospital Medical School, University of London. Prof Dr Hegde can be contacted at [email protected])
More than a day’s correction may be needed to get back to a positive trend
The market, which was in the positive till noon trade, was hurtled into the red following remarks by S&P that India would be the first among BRIC nations to lose its investment grade rating. We had mentioned in our Friday’s closing report that Nifty may find its first resistance at 5,100, after which there may be a minor correction. Today the index crossed this level after which it slipped into the red during the last hour of trade. We may see the correction extending tomorrow, as well. However, if the negative move continues for more than a day, the downward trend may set in. Today the National Stock Exchange (NSE) saw a higher volume of 71.82 crore shares.
The market opened in the positive on news that the European Union, on Saturday, agreed to led up to 100 billion euros to Spain to help its beleaguered banks. The news also boosted the Asian markets in morning trade. The Nifty opened 29 points higher at 5,097 and the Sensex resumed trade at 16,805, up 86 points over its previous close.
The early gains were supported by banking, metal, power, auto and capital goods sectors which witnessed good buying interest. The upmove enabled the benchmarks hit their intraday highs in the first half hour itself with the Nifty going up to 5,124 and the Sensex rising to 16,894.
Meanwhile, the rupee rose by 32 paise to trade at 55.10 against the dollar in early trade as the greenback weakened against euro overseas. The Indian unit had lost 48 paise to close at 55.42 against the dollar in the last session.
The market remained range-bound till the noon session after which strong selling pressure was the benchmarks pare all their gains and venture into the negative territory. The decline followed a warning from ratings agency Standard & Poor’s (S&P) that India might be the first among BRIC nations (Brazil, Russia, India and China) to lose its investment grade rating.
The news also saw the benchmarks fall to their day’s lows towards the end of trade. At this point, the Nifty dropped to 5,041 and the Sensex went back to 16,627.
The market ended the trading session marginally off the lows, snapping its five-day winning streak. At the close, the Nifty settled 14 points down at 5,054 and the Sensex lost 51 points to finish at 16,668.
The advance-decline ratio on the NSE was 802:739.
The broader markets closed on a mixed note. The BSE Mid-cap index dipped 0.20% while the BSE Small-cap index rose 0.21%.
BSE Consumer Durables (up 0.99%) and BSE Fast Moving Consumer Goods (up 0.19%) settled higher while all other sectoral indices ended in the red. They were led by BSE Capital Goods (down 1.64%); BSE Healthcare (down 1.34%); BSE Realty (down 1.02%); BSE Oil & Gas (down 0.75%) and BSE Auto (down 0.56%).
Tata Power (up 2.18%); Bajaj Auto (up 1.85%); Hindustan Unilever (up 1.58%); GAIL India (up 1.55%) and Coal India (up 1.44%) were the top gainers on the Sensex. The main losers were Cipla (down 2.25%); BHEL (down 2.21%); Larsen & Toubro (down 1.99%); Jindal Steel (down 1.93%) and Tata Motors (down 1.40%).
Tata Power (up 2.23%); Bajaj Auto (up 2.07%); Grasim Industries (up 1.55%); HUL (up 1.40%) and Siemens up 1.32%) were the key gainers on the Nifty. The main laggards were HCL Technologies (down 3.46%); BHEL (down 2.83%); Cipla (down 2.62%); Sesa Goa (down 2.52%) and L&T (down 2.40%).
Markets in Asia settled in the green on easing of banking concerns in Spain after EU leaders agreed to lend 100 billion euro to help Spanish banks deal with their liquidity issues. Positive economic data from China also supported the gains.
The Shanghai Composite climbed 1.07%; the Hang Seng surged 2.44%; the Jakarta Composite advanced 1.07%; the KLSE Composite rose 0.50%: the Nikkei 225 gained 1.96%; The Straits Times jumped 1.82%; the KOSPI Composite surged 1.71% and the Taiwan Weighted settled 1.72% higher.
At the time of writing, the key European indices were trading with gains of 0.97% to 1.95% and the US stock futures were in the positive.
Back home, foreign institutional investors were net buyers of shares totalling Rs202.01 crore on Friday while domestic institutional investors were net sellers of equities amounting to Rs81.48 crore.
Hinduja Group flagship firm Ashok Leyland today said it has supplied 100 ‘Falcon’ buses to Ghana for $7.6 million (about Rs42 crore). The vehicles have been inducted to the fleet of a transport company—Metro Mass Transit—in which the Government of Ghana has 45% stake. The buses will ply on 360 routes throughout Ghana, both inter and intra-city. The stock closed at Rs26.70 on the NSE, up 0.38% over its previous close.
Metkore Alloys & Industries is set to build a world-class 1,65,000 tonnes per annum capacity ferro chrome smelter project in Oman with an envisaged investment of $80 million. The company is negotiating with a local firm for a joint venture agreement, but no agreement has been signed so far. The stock surged 2.86% to close at Rs14.40 on the NSE.
The Dhampur Sugar Mills today said its board has approved the merger of JK Sugar with the company and shareholders of the latter will get 275 shares for every 1,000 shares they hold. The proposed merger is subject to regulatory and other approvals, the company added. Dhampur Sugar settled 1.35% higher at Rs45.20 on the NSE.