Top Business Headlines

Top Headlines

Top 10 open ended funds
3G auction to be over by Sept 30: DoT
Wall Street hit by weak data
BHEL gets contract worth $264 mln
Tata Steel consolidated Q1 profit up 60.5 pc

Tata Steel Global eyes $1 bln PE deal
Market discounts GDP slowdown; indices up over 2%
RIL gets nod to transfer KG assets to four arms
India kicks off FX futures trade, front-months lead

Cabinet approves changes to Companies Bill 2008
FinMin confident of close to 8% economic growth this fiscal
Revised draft for NSG ready
July crude oil import up 9% as production dips
Private insurers slash term cover premia by 10-40%
Sensex rallies 516pts; financial, realty stocks lead

Source:ET, BS, BL etc

Inflation falls marginally to 12.40 percent

Inflation down to 12.40% Vs 12.63%
Inflation falls marginally to 12.40%
28 Aug, 2008, 1800 hrs IST, ECONOMICTIMES.COM
Inflation slipped marginally to 12.40% for the week ended August 16 from 12.63%.

Giving a little respite to the hapless consumers, inflation slipped marginally to 12.40 per cent for the week ended August 16 from 12.63 per cent a week before. Earlier Lehman Brothers expected inflation to increase to 12.82 per cent y-o-y from 12.63 per cent in the previous week, due to higher prices of food articles, rubber, sugar, paper products, oilseeds, textiles & rubber and plastic products.

"We expect the final WPI inflation to peak in Oct/Nov at around 13.5-14.0 per cent, but to stay in double-digit territory until February 2009. Based on our forecast of slower GDP growth of 7.3 per cent in FY09, our energy team's forecast of the price of oil falling sharply to $90/bbl in Q1 2009, plus favorable base effects, our forecast is that WPI inflation will start turning down decisively in January 2009," it said in a report.

It is the 27th consecutive week the inflation rate has been above 5.5 per cent, the RBI's original target for inflation at the end of the fiscal year in March 2009. At a policy review in late July, the RBI raised its key lending rate by 50 basis points to 9 per cent and also increased banks' reserve requirements, and said it was now aiming to bring inflation down to 7 per cent by the end of March. The government has said the inflation rate would hit 13 per cent and thereafter start moderating from December, before settling at 8.0-9.0 per cent by the end of the fiscal year in March.

A slide in prices of oil, India's biggest import, to around $117 a barrel from a record high above $147 in mid-July, is expected to ease the pressure on inflation. However, analysts said pressure from primary articles and strong demand despite the several rounds of policy tightening would most likely propel inflation higher for some months.


Other Top stories:
Sensex ends down 248pts; Reliance weighs / Sensex ends 248 pts down as
Cash based selling widens September premium, rollovers low
Bears rule on inflation jitters, crude prices
Market ends sharply lower; RIL down over 3%
US stocks open higher on GDP data

Forbes' Top 25 powerful women in pics
Mayawati enters Forbes' power women list; Sonia slips in rank
Forbes' Top 25 powerful women in pics
Aditya Birla Nuvo to buy 56% in Apollo Sindhoori


Source: ET,BS etc

Tata Steel Q1 cons PAT at Rs 3901 cr

Tata Steel Q1 cons PAT at Rs 3901 cr
Tata Steel Ltd has announced the following...
Tata Steel Group Earnings Beat Estimate on Prices (Update2)
Tata Steel Profit, Including Corus, Climbs

By Debarati Roy and Paresh Jatakia
Aug. 28 (Bloomberg) -- Tata Steel Ltd., India's largest producer, reported a better-than-expected 60 percent gain in first-quarter profit, including unit Corus Group Plc, on increased prices and output of high-grade products.

Net income rose to 39 billion rupees ($891 million) in the quarter ended June 30 from 24.3 billion rupees a year earlier, the Mumbai-based company said in a statement today. Five analysts in a Bloomberg survey estimated a median profit of 19.7 billion rupees. Sales climbed 39 percent to 435.6 billion rupees.

Steelmakers including ArcelorMittal and Posco raised prices this year after a threefold increase in coking coal rates and a near-doubling of iron-ore costs. Tata, which has held prices in India because of a government directive, faces the challenge of battling record raw-material costs, Chairman Ratan Tata said at a shareholders meeting in Mumbai today.

``Cost pressures will start kicking in in the coming quarters and that'll have a moderating impact on profits,'' said Sanjay Jain, an analyst at Motilal Oswal Securities Ltd. in Mumbai. The brokerage has a ``buy'' rating on the stock.

Global prices of hot-rolled coils, a benchmark product, are poised for their first monthly drop in a year, according to Steel Business Briefing. That may leave Indian producers little choice but to lower rates after keeping them unchanged since May.
``If international market prices come down, they will have to cut,'' Steel Secretary Pramod Rastogi told reporters Aug. 22.
A government order kept domestic prices as much as 15,000 rupees ($342) a metric ton below global levels, according to S.K. Roongta, chairman of Steel Authority of India Ltd., the nation's second-biggest producer.
Discount Narrows
A fall in global prices and cheaper imports from Southeast Asian countries has reduced this discount to $100 a ton, Mumbai- based India Infoline Ltd. said in a note dated Aug. 26.
``Domestic prices can come under pressure if international prices soften by $100-150 a ton,'' Bijal Shah and Sumit Pathak, analysts at the brokerage, said. ``Demand is weakening in Europe, U.S. and China and there are concerns on the global outlook.''
Tata Steel shares fell 1.6 percent to 571.95 rupees at the close of trading in Mumbai, before the earnings were announced. The stock has lost 39 percent of its value this year, compared with a 31 percent decline in the benchmark Sensitive Index.
The shares trade at about 8 times forecast profit, according to data on the Bloomberg. Falling prices may keep valuations for Indian steelmakers depressed, said Shah and Pathak.
Tata Steel is the worst-performer on the benchmark Sensitive stock index in the past three months, according to Bloomberg data.
`Buy' Ratings
Still, as many as 22 of 28 analysts tracking Tata Steel have a ``buy'' recommendation on its shares, with an average one-year price target of 932 rupees, according to Bloomberg data.
The company last month reported a 22 percent jump in first- quarter profit to 14.22 billion rupees from its Indian mills.
Tata Steel and Corus sell more than two-thirds of their production in Europe. While Tata imports a third of the coal needed for its Indian plants and mines its own iron ore, Corus buys both the raw materials.
The company is looking at forming iron-ore and coal ventures in Mozambique and scouting for limestone ventures in Oman, to secure raw material supplies, Tata told shareholders today.
Pension Assets
Meantime, the value of the pension funds of Corus, worth 14 billion euro ($21 billion) -- more than twice Tata Steel's market value -- eroded by 648 million euro in the period. The reduction has been accounted in the balance sheet, instead of profit and loss account, Tata Steel said in the statement.
Pretax profit would have been lower by 53.52 billion rupees had the previous practice of reflecting the value of pension fund assets in earnings been followed, Tata said.
``Given the size of the pension assets, it is a good idea to route it through the balance sheet to avoid huge fluctuations in earnings from quarter to quarter,'' said Giriraj Daga, an analyst at Khandwala Securities Ltd. in Mumbai. ``The losses are mark-to- market and can change. It's not a negative.''
-----------------------------------------
Tata Steel has declared its consolidated results for the quarter ended June 2008 (Q1). The company's net profit was at Rs 3914.6 crore (including Corus) versus Rs 2409.12 crore.
Its net sales were at Rs 43,508 crore (including Corus) versus Rs 31,162 crore.

Highlights
Margins at 16.1% vs 15.4% (YoY)
Margins at 16.1% vs 12.3% QoQ
Forex loss of Rs 303 cr vs loss of Rs 537 cr
Increase in stock in trade at Rs 1607 cr vs Rs 336 cr
Actuarial gains/ losses not shown in P&L in accordance with IFRS principles and permitted in AS21
Had it been accounted then Q1 profits would have been lower by Rs 5352 crore resulting in loss of Rs 1438 crore
----------------------------------------------
Other MC stories:
RIL can assign 80% in D6 to its affiliates
Marksans buys UK co for Rs100cr
Aditya Birla Nuvo eyes 56% in ASCIL
Tatas may miss Oct deadline on Nano

Tata Steel Q1 cons PAT at Rs 3901 cr
RNRL shifts stance, ready to trade gas for 3 yrs

Source:MC, Bloomberg

Reliance may transfer 80% in KG D-6 to four affiliates

Reliance may transfer 80% in KG D-6 to four affiliates

Reliance Industries (RIL) is planning to transfer 80% of its participatory interest (PI) in the famous D6 block in the Krishna Godavari (KG) basin to four unlisted subsidiaries. Valued at nearly $50 billion with 14 trillion cubic feet of gas reserves, this is the arguably the most valuable asset held by the company. These four entities — Reliance KG Exploration and Development, Reliance KG D6 E&P, Reliance KG Basin and Reliance E&P KG — have recently become majority-owned subsidiaries of RIL. RIL has sought the petroleum ministry’s approval for this.

The ministry, in turn, has asked the upstream regulator, the Directorate General of Hydrocarbons (DGH), to furnish a list of similar cases where more than 50% of PI in blocks have been transferred to affiliates. A source familiar with this development told ET: “This is a usual practice in the global oil and gas business. It will provide greater financial flexibility to these subsidiaries for raising funds.” However, Director General of Hydrocarbons VK Sibal declined to comment, saying he has not seen any such request from the company. The RIL spokesperson too declined to comment on the issue. An email sent to Niko Resources, which holds 10% stake in the block, failed to elicit any response.

RIL holds 90% participating interest in the block. The exact value or structure of the transaction by which RIL would transfer its stake to the four subsidiaries could not be ascertained. However, it is learnt that RIL will continue to be operator of the block with at least a 10% stake, post the transaction. An analyst with an international research firm said: “The four affiliates will have strong balance-sheets, with a part of the KG basin assets. This will help them bid for global oil and gas assets. It also means that these companies may raise funds, if required, for their overseas bidding without stretching the RIL balance-sheet.” The analyst cautioned that there may be a perception that the interest of RIL shareholders may be affected by transferring this asset to the subsidiaries if it does not hold very large equity in them after the transaction. RIL’s exact shareholding in these four unlisted firms could be not ascertained.

What is known is that these firms are subsidiaries of RIL, meaning RIL’s shareholding may vary from 51-100%. However, the source quoted earlier said there would be no impact whatsoever on RIL’s shareholders as the subsidiaries were majority-owned and controlled by RIL.

Last week, in the course of his arguments, the government counsel TS Doabia had said in the Bombay High Court that RIL cannot transfer or assign its participating interest in favour of any other company without government approval, under the provisions of the production sharing contract. Mr Doabia made this comments in response to RNRL’s counsel Ram Jethmalani. Mr Jethmalani had asked for the transfer of RIL’s participating interest in the KG basin to RNRL so that the latter can sell the gas till its proposed 7,800 mega watts (MW) power plant at Dadri comes up. “RNRL will sell the gas in line with the government policy as is the case with RIL.

The government counsel’s submission that Mukesh only can sell gas but Anil cannot is biased. If needed, the court can direct transfer of PI in PSC to RNRL to enable RNRL to sell the gas. RNRL is prepared to share RIL’s investment for the development of the KG basin proportionately,” said Jethmalani in his submission to the court last week. He also said that RNRL is ready to invest Rs 25,000 crore for this. Production from the KG basin is likely to commence in the December quarter.

The company will initially produce up to 40 million metric standard cubic meters per day (mmscmd) of gas, which would be scaled up to 80 mmscmd by 2010. The sale of gas from the initial production is disputed and the Bombay High Court has restrained the company from selling gas to any third party besides NTPC and RNRL. RIL is embroiled in separate legal battles with NTPC and RNRL. On the BSE, RIL shares declined by a marginal 0.65% or Rs 14.7 to close at Rs 2230.95 on Monday. The stock has gained 0.27% over the past one week and 3.89% in the last one month.

----------------------------------------
Other Stories:
Chidambaram confident of 8-9 per cent growth
TCS gets Singapore Airlines Cargo contract
ONGC makes four oil & gas discoveries
Mixed views on Infosys-Axon deal
Rupee slips to fresh 17-month lows

Imperial Energy says ONGC makes $2.6 b approach
Tata and Ambanis among bidders for Worli-Haji Ali sealink
Emami in talks with Zandu Pharma over management sharing
Falling oil bolsters short covering
Not just gas, Ambani brothers have at least a dozen issues to resolve

OVL to buy Imperial for 1.4 bn pounds
Reliance aims to transfer 80 pc stake in gas block
Cairn to produce 16 pc more oil from Rajasthan fields


Source:ET,SIfy.

Sensex stages a smart recovery, ends 32 pts up : Sify

Sensex stages a smart recovery, ends 32 pts up

After opening on a weak note this morning and remaining in the red for a long time, the market staged a smart recovery in late afternoon trade to end on a positive note today thanks to heavy buying in auto, bank and IT stocks. Reports of a near normal monsoon aided the sentiment to an extent.

While the 30 share BSE sensitive index Sensex ended the day with a gain of 31.87 points or 0.22% at 14,482.22, the broader 50 stock Nifty index of the National Stock Exchange settled with a small gain of 2.15 points at 4337.50. Earlier, after opening at 14,338.27, the Sensex had tumbled to 14,286.38 in morning trade.

A weak close on Wall Street, a negative trend on the Asian bourses and a jump in oil prices had triggered heavy selling in morning trade today. Information technology stocks surged higher following Infosys Technologies making the biggest ever overseas acquisition by the Indian IT sector.

Though the bellwether stock remained subdued for a better part of the session - in fact it ended with a loss of 0.3% today - other IT majors Satyam Computer Services (3.25%), Wipro (2.15%) and Tata Consultancy Services (1.8%) signed off on a firm note.

But it was bank stock HDFC Bank, which topped the list of gainers from the Sensex today. The private sector bank major ended stronger by nearly 4%. BHEL gained nearly 2%. Mahindra & Mahindra also ended with a gain of close to 2%.

Reliance Infrastructure, ICICI Bank, Hindustan Unilever, Ranbaxy Laboratories, Maruti Suzuki, ITC, State Bank of India and Hindalco gained 1% - 1.75%. ACC, Tata Power, NTPC, DLF, Larsen & Toubro and ONGC ended with modest gains.

Reliance Industries (down 2.3%) remained weak right through the session today. Jaiprakash Associates lost 1.85%. Tata Steel declined by 1.35%. HDFC, Reliance Communications, Sterlite Industries and Bharti Airtel lost 0.4% - 0.8%. Tata Motors and Grasim Industries posted marginal losses.

Suzlon Energy (down 4.25%) was the most prominent loser in the Nifty index. Zee Entertainment, Dr Reddy's Laboratories, ABB and Idea Cellular also declined sharply.
HCL Technologies, Punjab National Bank, Sun Pharmaceuticals, Cipla, GAIL India, Reliance Petroleum and Siemens ended with sharp to moderate gains.

Bosch vaulted 13.65% on a share buy-back proposal. Max India jumped nearly 7%. Phoenix Mills gained 5.7%. Piramal Healthcare, KSK Energy, IFCI, Punjab Lloyd, IRB Infrastructure, Bajaj Holdings, REI Agro, Bank of Baroda, Tech Mahindra, Kotak Bank, Reliance Capital, UCO Bank and Crompton Greaves gained in strength.

Among midcap stocks, FSL zoomed nearly 23%. Motherson Sumi ended with a hefty gain of 9.8%. Sun Pharma Advanced Research, Apollo Tyre, IndusInd Bank, BF Utilities, Zee News, Torrent Pharma, KEC International, 3i Infotech, NIIT, Provogue and Shristi Infrastructure also ended on a firm note.

As the focus was on large cap stocks today, not many stocks from midcap and smallcap segments made it to the positive territory. The market breadth was negative. Out of 2692 stocks traded on BSE, 1199 stocks closed with gains. 1389 stocks posted losses and 104 stocks ended flat.

Source:Sify India.

Investor's Guide: ET

Investor's Guide

Top stories
Bargain hunting helps indices close higher25 Aug, 2008, 0513 hrs IST, DEEPAK MOHONI
The market declined for the second successive week, with the Sensex finishing 2.19% or 323 points lower, the Nifty losing 2.33% and the CNX Midcap falling 2.71%.

Global stock indices mirror each other 25 Aug, 2008, 0502 hrs IST, Shakti Shankar Patra
Though the harbingers of globalisation may not have envisioned it, the interdependence of world economies and the free flow of capital have made global stock indices mirror each other.

BoI's stock a good bet for long term investors
25 Aug, 2008, 0452 hrs IST, Karan Sehgal & Diana Montei Ro
Bank of India’s cheap valuations belie its strong performance across key parameters. The stock is an interesting bet for long-term investors.

Piramal stock outperformed the Sensex 25 Aug, 2008, 0433 hrs IST, Kiran Kabtta
Piramal Healthcare’s stock has outperformed the Sensex since the start of this year. There’s still significant upside left in the stock and long-term investors can accumulate it at the current price.

Analysts'Picks: Tata steel, Idea cellular, Tata chemicals, Lupin, ONGC
25 Aug, 2008, 0424 hrs IST
Tata steel, Idea cellular, Tata chemicals, Lupin, ONGC are good for investment.
Analysts'Picks: ONGC Govt had indicated that subsidy-sharing in FY09 will be fixed at Rs 45,000 crore for upstream cos Rs 20,000 crore for OMCs and oil bonds issuance at Rs 94,600 crore.
Analysts'Picks: Lupin Lupin has entered into multiyear agreement with Forest to promote the latter’s VHC product AeroChamber Plus to paediatricians.
Analysts'Picks: Tata chemicals Goldman sachs initiates ‘buy’ recommendation on Tata Chemicals with a target price of Rs 435, implying 29% potential upside.
Analysts'Picks: Idea Idea launched its mobile services in Mumbai last week.
Analysts'Picks: Tata steel CLSA maintains ‘outperform’ rating on Tata Steel, but lowers its target price to Rs 745.

Stock market may undergo correction in short term 25 Aug, 2008, 0418 hrs IST
With FY09 valuations looking fair, the stock market may undergo a correction in the short term before seeking a trend.

KEL stable growth is good bet for investors 25 Aug, 2008, 0415 hrs IST, Ramkrishna Kashelkar
Kabra Extrusiontechnik’s stable growth prospects, low valuations and healthy dividend yield make it a good bet for long-term investors.

Investors can scale operations with Unitech and DLF
25 Aug, 2008, 0349 hrs IST, Supriya Verma Mishra
Investors who want to take advantage of growth in the domestic real estate sector can draw strength from DLF’s impeccable delivery record and scale of operations, while the bravehearts can go for Unitech.

LIC is on shopping spree! 25 Aug, 2008, 0331 hrs IST, Krishna Kant
Not Everybody is selling while it’s demoralising for investors to hear about the exodus of deep-pocketed FIIs, they can take heart from the fact that LIC, the big daddy of the Indian equity market, is on a shopping spree.

IT sector grapples with fluctuating rupee
25 Aug, 2008, 0325 hrs IST, Santanu Mishra & Ranjit Shinde
The IT sector is grappling with problems, but all’s not over yet. There are still some value picks for investors who are willing to be patient.


Source:ET

VC,PE updates

Articles from VCcircle.com

Balaji Telefilms, Star Group To Terminate Shareholding, JV Agreement
Sapat International Eyes British Tea Brands
UTV Software Acquires US-Based Online Gaming Startup True Games
M&M Acquires 51% Stake in Chinese Firm For $26 Million

News Roundup: Aditya Birla To Build $10bn Financial Biz
News Roundup: Taxman May Knock At Your Door If Received Rs 50 Lakh
Baer Capital Launches India Long/Short Hedge Fund
There Are Still Brave People In IPO Market

IFC Invests $18M In Indian Mortgage Guarantee Co
Swiss-German Fund MPC Synergy Invests $296 million In Phoenix Mills
Equitas Gets $12.5M Fund Infusion From Three Funds
Dawnay Day Sells Its Stake In India Venture To New Silk Route

Seventymm Raises $12 Million In Third Round From NEA Indo US Ventures
Ojas Venture Partners Invests In Mobile Tech Firm Mango
Matrix Partners Invests $7 Million In Mumbai Play School Tree House
Basiz Fund Services Gets $2 Million From NEA Indo US Ventures

Job Listings
Sr. Associate at Singhi Advisors Ltd
Assistant General Counsel at Top US Bank
Associate Vice President - Corporate Finance ...... View All

-------------------------------------------
IndiaPE.com

Flawless Diamonds to acquire distribution company in Dubai
California Software to buy UK firm for $60 m
NMCE may sell equity stake to Singapore Commodity Exchange
Future Group to pick stake in Blue Foods

Star may buy stake in Asianet
SRL Ranbaxy mulls merger with Fortis Health
PE funds join hands to put money in firms
3i, Kotak, NSR eye stake in Balaji

Kirloskar set to buy Germany's LDW
Dawnay Day sold to New Silk Route
VC Investment in India Jumps 120% to $238 Million in 2Q08
Anil Ambani eyes stake in Balaji

German fund buys stake in Phoenix SPVs for Rs 1,300 crore
Merrill Lynch picks up 50% in Salarpuria's hotel project
Seventymm raises Rs 50 cr in Series C funding

Source: Above sites.

Stock Analysis:BL

TECHNICAL ANALYSIS: Index OutlookIt was an irresolute trading week on the Indian bourses. There were no positive triggers to enthuse the market participants. On the other hand, the plethora of negatives that have been analysed thread-bare, do not appear to have the power to ...

STOCKS: Dabur India: BuyA large repertoire of FMCG (fast moving consumer goods) brands, a healthy pace of new launches and ability to manage margins amid volatile input costs make Dabur India a good addition to any long-term investor’s portfolio. ...

VENTURE CAPITAL: Clinching VC fundingHaving ambitions of becoming an entrepreneur? Do you have a commercial idea that you think is viable? Venture Capitalists (VCs), who provide money for nascent businesses, are the people you should get in touch with. ...

CEMENT: Cement: Lower valuations trigger M&AWith a volume growth of over 9 per cent per annum in the last three years, the Indian cement industry has drawn the attention of many foreign bigwigs over the years. The stimulus for entry into the Indian cement sector is getting stronger with ...

TECHNICAL ANALYSIS:
Reliance Infra (August 24, 2008)
Unitech (August 24, 2008)
Infosys (August 24, 2008)
Tata Steel (August 24, 2008)
Reliance Ind (August 24, 2008)
SBI (August 24, 2008)
Index Outlook (August 24, 2008)

Query Corner: What the charts say

STOCKS: Tata Steel: BuyInvestors can consider buying the Tata Steel stock trading at Rs 594, which is a price-earnings multiple of eight times its standalone earnings and about five times its likely consolidated earnings for FY-09 . The company’s integrated ...

STOCKS: Elecon Engineering: HoldInvestments can be retained in the stock of Elecon Engineering, an established player in both material handling equipment (MHE) and industrial gears business. At the current market price of Rs 112, the stock trades at about 11 times its likely ...

STOCKS: Motherson Sumi: BuyInvestors with a long-term perspective can consider exposure to the Motherson Sumi stock. At the current market price of Rs 80, the stock trades at a price-earnings multiple of about 15 (estimated FY-10 earnings). Though this valuation may ...

DERIVATIVES MARKETS: Derivative strategies: Using puts for discount buysTraders extensively use limit-orders to buy a stock at a discount to the market price. The present market structure does not allow traders to use Good Till Cancelled (GTC) order to buy or sell a stock at a certain price. Everyday, a trader has ...

INVESTMENTS: Go for gold‘Gold’, as an investment option, has been in the news in recent times. Suddenly every analyst is suggesting that gold should form part of every portfolio. And they are right. ...

DERIVATIVES MARKETS: Nifty future may drift further downThe Nifty August future lost another 2.5 per cent over the week to close at 4324.1 points against its previous week’s close of 4434.9. With just four days left for the settlement, Nifty August future is yet again under siege of ...

STOCK MARKETS: Baskets of XE-mail your guess before Tuesday to:

STOCK MARKETS: Bull's EyeE-mail your response by Tuesday to


For more: http://www.thehindubusinessline.com/iw/index.htm


Source: BusinessLine.

Growth: Can India catch up with China?

Growth: Can India catch up with China?



Can China and India sustain their current growth rates?

A traditional answer to this question is conditional: yes, provided they continue to implement policy reforms. But historical experience allows a less guarded answer.

There are few examples of countries that have grown as strongly and for such long periods as India and China have - 6 per cent and 10 per cent, respectively, for nearly three decades - and then suffered a sharp slowdown or collapse.

If history is a reliable guide, then barring major upheavals, economic growth looks likely to continue in both countries until some threshold level of prosperity is attained.
But why does growth beget more growth? One mechanism is simply that growth signals the fact of profitable economic opportunities, which encourages investors to rush in, first in response to these opportunities but then in response to each other - this is growth as a confidence trick - creating a virtuous circle.


If countries are relatively poor, if their markets are large, and if their policy framework is basically sensible - all of which are true of China and India - the chances of the growth-begetting-growth dynamic taking hold are high.

But in addition to the signalling effect, growth may itself cause changes which have in turn a growth-reinforcing effect - a kind of positive feedback loop. A good example is education.
For long, development economists bemoaned the poor levels of educational attainment in India, directing their critique at the government's failure to supply better education. But economic growth changed the education picture dramatically.


It increased the returns to, and hence the demand for, education. And if government supply remained weak, consumers simply turned to the private sector to meet their demand for education.


Improvements in educational attainment over the last 15 years are attributable in part to more rapid growth..



For more: http://specials.rediff.com/money/2008/aug/21slide2.htm



-------------------------------------

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