report on india
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Report on India. Angus Wong Fei Que Kibwe Prosper Ammar Gohir Adam Khan . Introduction. Enormous growth potential in a fast growing emerging economy, showcased by the India’s GDP which has been rapidly climbing since 2003. - PowerPoint PPT PresentationTRANSCRIPT
Report on IndiaAngus Wong
Fei Que Kibwe Prosper Ammar Gohir
Adam Khan
Enormous growth potential in a fast growing emerging economy, showcased by the India’s GDP which has been rapidly climbing since 2003.
Significant slowdown this year in India’s economy, but India still retains strong growth comparatively to global markets.
Introduction
This slowdown is attributed to several key reasons which can be seen by analyzing India’s Currency, GDP, Government Expenditure, Foreign relations, and Government Policy.
Introduction
The Indian Rupee has been on a steady decline for the past year, losing approximately a quarter of its value.
The most evident reason for this is overall global economic weakness.
A weaker currency should boost exports and gradually balance out the value of the currency, but a weak global market has caused a reduction of exports.
India’s Currency – The Rupee
The Indian Rupee
India’s GDP peaked at 10.4% in 2010 Current GDP down to 5.3% Indian Currency (Rupees) Down 25.5% from 2010
against US dollar 237.1bn in External Debt and potential threat of future
default Rising Gas Prices have taken a toll on Import and
Exports (Freight) Shortage of electricity causing Manufacturing and
Industrial shutdowns lasting 8hrs or more daily
Factors Contributing to India’s Worsening Economics
Decreasing Global Demand Leading to Slowdown of Economy
Heavy Inflation Since 2008
Greek C
risis
USA
Because of current state of the economy, stock markets in India have declined of over the past year
It was announced recently that S&P would downgrade the investment grade for India (BBB- to BB+)
Due to poor economic conditions, we conclude that right now the stocks markets in India are bearish
State of Indian stock markets
Bombay Stock Exchange Sensitive Index
National stock exchange of India
From 1994 to 2012, India ran a trade surplus for 3 quarters in total◦ Deficit of US $134.9b
2011-2012 Major trade partners
are UAE and Iran Import totals US
$379.4b, crude oil takes up 36.7% (US $139b)
Foreign Relations
Revenue Expenditure◦ Consists of year-to-year payments such as
defense spending, government grants and subsidies, and interest payments
◦ Major gross increases in revenue expenditure◦ By percentage of GDP, revenue expenditures
remain stable◦ By percentage of total revenue expenditures,
defense spending is on a decline while grants and subsidies to corporations and individuals are on the increase
Government Expenditure
Revenue Expenditure
Capital Expenditure◦ Consists of expenditure utilized in the growth of
India, mainly long-term infrastructure projects◦ Over the recent years, growth of capital
expenditures have increased at a much higher rate than revenue expenditures, 202% as compared to 232%
◦ Government showing increased focus on India’s infrastructure as opposed to current payments
Government Expenditure
Overall forecast – Pending Recession◦ Constant negative Balance of Trade, affected
more by the decline of the Rupee◦ Increasing trade deficit due to loss of European
importers in their own rampaging recession◦ Increase in subsidies and grants to individuals and
corporations, which still doesn’t cover the whole population even with GDP growth
◦ Power grid does not cover all of India, and is inefficient to what it can reach
Forecast
Recession is bound to occur unless the government takes action in◦ Major infrastructure investments◦ Focus on restoring trade deficits through indirect
incentives to boost its domestic economy
Forecast
Position: Short Tracked by EGshares for
a sample of 75 small cap companies in India
Economic indicators point to GDP slowdown in India
Heavy weights in sectors believed to have slowdowns for a downturn in the economy
ETF #1: Emerging Global Shares Indxx India Small Cap ETF (NYSEARCA:SCIN)
India Small Cap ETF: SCIN
Position: Long Tracked by EG shares
on the 30 leading companies dealing with infrastructure
The Indian government must invest heavily in infrastructure in India to promote future growth and avoid the pending recession
ETF #2: EGShares India Infrastructure ETF (NYSEARCA:INXX)
India Infrastructure ETF: INXX
India is headed in an ambiguous direction, depending on government action
Government will most likely bolster the economy with improvements to infrastructure and balancing trade deficits
Government reform will take place due to massive shortfalls in subsidies, grants, infrastructure, and expenditure deficits
Conclusion
Our ETF choices reflect in what the government is most likely to do to save the economy
Small cap companies in India are most likely to face a low period due to consumers focusing on necessities, especially since many in India already face poverty
Infrastructure companies are bound to grow due to India’s necessity to improve conditions to its people and businesses
Conclusion – ETF Choices