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Indian Economy Slowdown; Government Policies and Euro Crisis

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BSE Sensex, Mumbai
It is a general feeling in India that bad time has almost arrived for their expanding economy. The problem arrived on the Indian shores as the global economy is wobbling once again. Once the land of opportunity, Unites States is facing the problem of increasing rate of unemployment, The rising giant in the neighbourhood, China is facing hampering exports and a downturn in real estate industry. Other rising economies like Brazil and Russia are experiencing their economies enervated as well. Among all this Europe is considered to be experiencing  worst time. The continent is battling with a sovereign debt crisis which if not dealt correctly could damage the continent’s economic and political union.
Recently petrol prices were increased in India, making it to the league of few countries with one of the most expensive petrol prices. Massive price rise of commodities of daily use and food in past eight years has tightened the purchasing power of the Indians. Plunging stocks and weakening Rupee has added to the worry as well.
In this globalized world, it is normal to see the economies of various countries or regions getting affected due to problems in the other. India which had done relatively well in 2008 recession survived many external shocks and continued moving on its growth path. 
However, the situation this time is different in the country. The current downturn in Indian economy could have been avoided or could have been brought down to minor level, since it is not solely dependent on the European crisis but also on some wrong government policy changes as well as internal political turmoil. 
As many senior leaders of the ruling party are coming into picture for various scams and corruption charges, the current government has adopted a defensive stance. Everyday protests against the government policies and differences among the coalition government has made the government busy in making policies to save itself.
India is viewed as a rising global powerhouse and is considered as one of the countries which can assume a major role in driving the world’s economy. Recently Indian officials were predicting growth rates of 9 percent or higher. It was a big opportunity for India to make itself more attractive for foreign investors who were hesitating in putting money into declining advanced industrial economies in the west. However, the government made mistakes and missed opportunities to better position India as the global economic landscape shifts, accepts Kaushik Basu, the government’s chief economic adviser.
Just for an instance, the finance minister Pranab Mukherjee, struggling with the pressures to raise revenues and to check the rising fiscal deficit, released a budget that proposed new taxes on foreign entities in India in March, including levies on past deals that the Indian Supreme Court had ruled were non-taxable in the country earlier. Foreign investors were stunned, and they began to pull out their money from Indian stocks, this mass outflow of capital is one reason why the rupee has slipped down by 13 percent since the end of February.

Not just this, the very next month of Pranab Mukherjee announced the changes in the budget, S&P lowered India’s credit rating to negative (BBB-) from stable (BBB+). S&P credit analyst Takahira Ogawa said: “The outlook revision reflects our view of at least a one-in-three likelihood of a downgrade if the external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political setting.” the S&P also lowered the rating outlook of the country’s 10 top banks which includes the State Bank of India (SBI), ICICI Bank and HDFC Bank.

“We are fed up and our investors are not keen to even talk about India,” said a senior executive at an American bank in Mumbai, asking not to be identified so he could speak bluntly. “They are sick and tired.” 
Another major problem lies in the age old bureaucracy in the Indian system, long procedures for official approval and acquiring licenses has enervated the enthusiasm of many foreign investors. Industries like pharmaceuticals, Information technology and consumer goods are prospering in India as it doesn’t require much official approvals and licenses, however in case of manufacturing, mining, infrastructure development India is lagging behind. And manufacturing and mining are those sectors which will ensure the growth even in the tough times.
Long procedures for gaining approval and licenses are not the only barrier, if the investor has a small bad luck and falls in some legal dispute then it is very difficult to come out quickly as Indian courts take equally long time in processing. Thus, not only foreign investors, but also Indian corporations are eyeing projects outside to invest.
According to a report by NDTV Profit, foreign investment in Indian stocks and bonds was only $16 billion in 2011-12, compared with $30 billion in 2010-11. The trend is continuing even with a faster pace since March 2012, when the Finance Ministry, trying to stem a rising budget deficit, proposed a raft of new taxes on foreign institutions doing business in India.
Fake currency being pumped inside India from neighbouring countries sponsored by ISI is also one of the reason of depreciating Rupee. ISI aims to make Indian economy hollow by pumping fake currency in the system. Almost every month Army and Police ceases fake currency, but no one knows how much has already been pumped and how much is being pumped inside Indian economy. As counterfeited currency makers have advance technology and ink that can replicate Indian currency notes with 99% accuracy.
Although it is true that Indian economy is experiencing a low, it would be wrong to say that it is the end of Indian growth story. While some of the strongest European economies are falling, Indian economy growth rate has just slowed down from 9%-10% to 6%-7%. It is expected that Indian economy will be pulled back to its track latest by 2013.

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Sanskar Shrivastava is the founder of international students' journal, The World Reporter. Passionate about dynamic occurrence in geopolitics, Sanskar has been studying and analyzing geopolitcal events from early life. At present, Sanskar is a student at the Russian Centre of Science and Culture and will be moving to Duke University.

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Economy

How to Trade Shares for Beginners

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Although expectations had been modest for 2019, the stock markets around the world had been active in 2019 and the positive returns seen so far have exceeded even the most optimistic expectations. Supported by easy monetary policies around the world, as well as by positive economic expectations for 2020, stocks continue to move, which makes a significant number of people deciding to start investing. Since stock trading is much harder than most of them think, let’s see some of the most important things beginners must consider in order to accelerate their learning curve.

Stick with the most liquid shares

Finding “the next big thing” is one of the illusions that seduces most of the beginners. They spend a significant amount of time looking for those companies that will have huge returns over the next months of years. Not even the most-skilled stock traders are able to do that, so why do you think you will?

Instead of looking for those shares, stick with the companies that already have a leading position in the industry. Google, Facebook, Microsoft, Apple, and Boeing are just some of the names that are popular at the time of writing, and looking at their performance in the long run, so far, they’ve managed to impress.

Study educational materials

Beginners fail to understand that share trading is a skill-based endeavor and study is one of the most important parts of the process. Study as many educational materials as you can and gain as much knowledge as possible because you’ll definitely need it. This guide and other similar ones will introduce you to share trading and help you understand the basic concepts. Remember this axiom: “Around 90% of the traders lose 90% of their capital in their first 90 days of trading”. Education is one of the main factors why beginners stumble into the same mistakes over and over again. You don’t want to be in the same position as most of the people who don’t learn and spend time to sharpen their skills.

Build a portfolio

Closely linked to our first tip, building a portfolio of uncorrelated assets is one of the most important things to consider, if you want to limit the damages of your mistakes. No matter how good you are, in trading, you won’t make money all the time. Diversification will help you minimize the effects of some losing trades. Don’t concentrate all the risk in a single stock and instead pick at least three or four names that might perform positively in the near-term.

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Economy

Saudi Arabia halves oil production: How long will it last, and will it affect oil prices?

Saudi Arabia announces it will halt 50% of its oil production. This Vestle news article will explore the possible financial impact.

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saudi halves oil production

Since recent drone airstrikes crippled Saudi Arabia’s Aramco oil processing facility in mid-September, the country – the world’s No. 1 exporter of oil* – has been forced to close half the plant while reconstruction takes place. While no casualties resulted from the attack, the real harm is finally coming to light, as the impact on Saudi Arabia’s oil industry is becoming clearer. This Vestle news article explores this important topic.

Aramco estimates that the closure will affect almost 5.7 million barrels of crude oil per day, which amounts to roughly 5% of the world’s daily oil production. To help you put that into perspective, consider that Saudi Arabia produced 9.85 million barrels a day in August 2019. And it’s not just oil production that will suffer. Saudi Energy Minister Abdulaziz bin Salman also indicated that the closure has forced a temporary halt in gas production, limiting the supply of ethane and natural gas by 50% as well.

One particular detail that those with an eye on the financial markets might find interesting is that the attacks took place at a time when Saudi Arabia continues to progress toward taking Saudi Aramco public – a first for the kingdom’s global-reach energy sector. How much money are we talking? As the world’s most profitable oil company, it’s estimated to be valued at around $1.5 trillion.**

Will this affect oil prices?

The short answer, according to some people, is probably yes. With Saudi oil output expected to dip below 50%, the outages present “an extreme risk situation for oil,” according to Paul Sankey, managing director for Mizuho Securities. However, measures have already been put into place. Depending on how long it takes for Saudi Arabia to recover the damaged facility, OPEC (the Organization of Petroleum Exporting Countries) is aiming to suspend production cuts to help temper the impact of the ongoing crisis. On the trading side, the International Energy Agency is expected to release strategic oil stocks, and US President Donald Trump has already authorized the release of oil from the US petroleum reserve.***

In the weeks just after the drone strikes, the price of WTI Oil on the Vestle platform showed a 13% increase, followed by a 12% decrease over the following two weeks. Also during that time, Bloomberg reported that the spread between WTI and Brent widened to 37%, which could be an indication that the oil spike might affect global prices more than other oil giants, such as the United States. Furthermore, a representative from Goldman Sachs estimates that the global benchmark for Brent Oil could rise above $75 a barrel if the plant shutdown lasts for more than six weeks.****

Will it get any worse?

Some people fear the Aramco incident represents the potential for a broader regional conflict that could escalate to the point that it affects Gulf oil production as a whole. CFRA Research oil analyst Steward Glickman said, “Oil prices are now likely to bake in a much higher geopolitical risk premium than had been absent in much of 2019.” With the recent bombing in June of oil tankers in the Gulf of Hormuz not so distant, it’s no wonder some analysts like Glickman like are raising their eyebrows. ***

Considering all the different factors that play into this situation—the global, financial and geopolitical—there’s no telling what kind of turns it will take. The only thing to do is keep an eye on the news for the political side of it, and financial sites like Vestle to see what kind of ripples such an event is making in the financial markets.

Oil prices and the financial markets

Volatility such as that recently experienced by both WTI Oil and Brent Oil can present both opportunities and risks for informed traders, such as those who invest in Contracts for Difference or CFDs, which essentially means trading on the price movement of a particular instrument without owning the underlying asset. At Vestle, you’ll find hundreds of tradable CFD instruments, from commodities like oil and natural gas to popular stocks, indices, ETFs and crypto. And thanks to a selection of trading signals, market indicators and our economic calendar, access to important financial info for global situations like this is right at your fingertips.

 Sources

*https://edition.cnn.com/2019/09/12/investing/us-oil-exports-saudi-arabia/index.html

**https://www.cnbc.com/2019/09/14/saudi-arabia-is-shutting-down-half-of-its-oil-production-after-drone-attack-wsj-says.html

***https://eu.usatoday.com/story/money/2019/09/16/saudi-arabia-oil-attack/2341141001/

****https://www.bloomberg.com/news/articles/2019-09-15/oil-prices-jump-19-after-attack-cuts-saudi-arabian-supplies

Vestle (formerly known as ‘iFOREX’) is the trading name of iCFD Limited, licensed and regulated by the Cyprus Securities and Exchange Commission (CySEC) under license # 143/11. The materials contained on this document have been created in cooperation with Vestle and should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.7% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results. Full disclaimer: https://www.vestle.com/legal/analysis-disclaimer.html

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Economy

Fears of a 2019 European Economic Slowdown Loom

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Although the spotlight is on the trade war between the United States and China, one aspect that is currently ignored by the media is represented by signs of weakness in the European continent.

Germany slows down

After posting a -0.3% GDP contraction in the third quarter of 2018, the economic indicators released from Germany in 2019 cannot support a positive economic picture. The manufacturing sectors continue to show signs of weakening, with the Markit PMI Composite now at 51.6, down from 52.3.

Industrial Production had been contraction by 1.9% in November, and both imports and exports had been down by 1.6% and 0.4%, respectively. DAX trading had also suggested there is growing concerns among investors and the main German stock index peaked out in July 2018, being now down by 15%.

Germany relies mostly on exports, being the third exporter in the world, only surpassed by the United States and China. That is why the weakness we see in Germany is actually a symptom of what’s happening in other European countries as well.

Italy and France not too encouraging

The new populist government in Italy, formed by La Lega and The Five Star Movement faced a serious challenge to get the EU’s approval for the 2019 budget, as the already high debt-to-GDP ratio (currently at 131.8%) raises concerns on whether the country will be able to meet its debt obligations in the future.

There are also serious concerns about the banking sector, which despite mergers and acquisitions, and huge capital available from the ECB, were unable to solve their problems which emerged after the 2008 financial crisis. The future of Italy is very uncertain, and analysts predict that the new government will not be able to meet their economic promises, given that we are at the end of a business cycle.

Speaking of France, the problems are social at the present time. President Macron was unable to stop the “Yellow Vests” protests, despite promises to increase the minimum wage and the overall standard of living for the very poor. France’s debt-to-GDP ratio currently stands at 97%, but given the latest promises, there are concerns whether the country will manage to keep the budget deficit below 3% in 2019, as the European treaties demand.

Although there’s a single currency in Europe, in terms of fiscal policy things were very fragmented, which is why the economic recovery had been very slow and the reason why investors predict Europe will face the greatest challenges to solve its economic, political, and social problems.

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