Its Cement Now
The number of sectors now under direct intervention of the Govt. has just increased and included cement which is in a structural up-cycle phase. Direct intervention of the government is in Oil & Gas, Fertilizer, Sugar and now Cement. Of course it has other regulatory bodies like the TRAI which keep a watch on the Telecom sector.
All the measures are to pacify the inflation concerns which have moved beyond the RBI target rate of 4.5%-5.5%. Last inflation numbers are in the range of 6.5-7%. However, if you ask the lay man buying groceries, the number you would get is close to 25-30% on an average.
Government has taken many measures and all of them in quick succession. There is a lag effect from the time the measures are taken to the time it shows on the data. The effects are beginning to show. ICICI Bank has already indicated that credit rate has de-accelerated to 20% form the 30% plus levels. This could be indicative of slowing down of capex plans of the corporate India due to the high interest rate scenario.
The government is of course conscious of the impending UP Elections which is a barometer of political sentiment in the country .... its the Hindi Heartland. Moreover, the left parties which support the government are vary of inflation worries. Increasingly, Mrs. Sonia Gandhi has evoked more communists sentiments than capitalist ones.
The market sentiment is surely go damp. Investors are willing to deal with market risks but when political interventions comes in, theres no way you can model for it!
However, there are no dangers of recession although the growth rate is expected to come down to 7-7.5% levels. We will still remain one of the fastest growing economies of the world, apart from China.
Following is an interview on CNBC on the cement price control issue. Its one of the boldest interviews I have ever seen. Have a look.
Part I
Part 2
All the measures are to pacify the inflation concerns which have moved beyond the RBI target rate of 4.5%-5.5%. Last inflation numbers are in the range of 6.5-7%. However, if you ask the lay man buying groceries, the number you would get is close to 25-30% on an average.
Government has taken many measures and all of them in quick succession. There is a lag effect from the time the measures are taken to the time it shows on the data. The effects are beginning to show. ICICI Bank has already indicated that credit rate has de-accelerated to 20% form the 30% plus levels. This could be indicative of slowing down of capex plans of the corporate India due to the high interest rate scenario.
The government is of course conscious of the impending UP Elections which is a barometer of political sentiment in the country .... its the Hindi Heartland. Moreover, the left parties which support the government are vary of inflation worries. Increasingly, Mrs. Sonia Gandhi has evoked more communists sentiments than capitalist ones.
The market sentiment is surely go damp. Investors are willing to deal with market risks but when political interventions comes in, theres no way you can model for it!
However, there are no dangers of recession although the growth rate is expected to come down to 7-7.5% levels. We will still remain one of the fastest growing economies of the world, apart from China.
Following is an interview on CNBC on the cement price control issue. Its one of the boldest interviews I have ever seen. Have a look.
Part I
Part 2
posted by AJ at 12:47 AM
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