Unhealthy Report Card of Corporate India

With the outburst of satyam saga, New Year also started with quarter 3 results of corporate India for FY 2008-09. With global meltdown riding on peaks, doleful results of major companies all over the world were predicted and result of Indian companies are no exception.

Global financial markets from past few quarters have been posting unhealthy performance. Despite of various fiscal bailout packages announced by economies, there impact on combating this ongoing recession is yet to be seen.

Coming back to India, the 3 quarter earning season was gloomy for the economy, as all major companies showed losses in their balance sheets. On the basis of sectoral performance, the major hit sectors are the export oriented, gems and jewellery and textiles. Battling with low demand, slowdown hitted real estate and infrastructure have passed on their negative fortunes to also cement and steel industry. These two segments have shown dejected performance on account falls in prices of finished goods and low demand from key user segments.

Also interest rate sensitive sectors like automobile are facing bad times. A leading two-wheeler company has not only posted a decline of 17% in net sales but also a whopping 25% decline in net profit for the Q3 FY09. Major commercial vehicles players have also shown dismal performance for the quarter. Moreover, the numbers released Society of Indian Automobile Manufacturers , on production and sales gives a gloomy picture of this sector.

Though IT companies have posted good results in Q3 FY09, it can be partly attributed to the rupee depreciation. Going ahead, the weak guidance given by IT companies indicates a rough ride in global markets. Though banking sector have posted positive results but surging NPA’s can prove out to be trouble in coming quarters.

Oil marketing companies benefited through artificially propped up petro product prices, while pharma and FMCG companies continued with their standard 5%–15% growth pattern.
Despite of the measures taken via monetary and fiscal policy, slowdown is evident in all the sectors, and deteriorating job scenario in 2009 is painting a picture of slowdown in quarters to come.

Inflation at 5.07% on Jan 24

IInflation for the week ended Jan 24 slipped to 5.07% from 5.64% as prices of food items eased after rising for two consecutive weeks.

This was lower than a forecast 5.21 per cent in the wholesale price index in the 12 months to Jan. 24, compared with 5.64 per cent in the previous week. It would be the slowest annual rise since Feb 9 last year when inflation was at 4.98 per cent. Inflation had fallen to an 11-month low of 5.24 per cent on Jan. 3, but it rose in the next two weeks following an eight-day nationwide truckers' strike that pushed up food prices.

source: Economic Times

The classical school

Classical economics is a school of economic thought whose major developers were William Petty, Adam Smith, David Ricardo and John Stuart Mill. Classical economists attempted to explain growth and development. During the time when capitalism was emerging from past feudal society these great economists came with their theories which marked the era of industrial revolution and bringing about major changes in society. Classical economists reoriented economics away from an analysis of the ruler's personal interests to a class-based interest.

Publishing of book wealth of nations by Adam Smith gave birth to modern economics in 1776. The book identified land, labor and capital as three factors of production and major contributors to nation’s wealth. Smith for e.g. identified the wealth of a nation with the yearly national income, instead of the king's treasury. Smith saw this income as produced by labor applied to land and capital equipment. Once land and capital equipment are appropriated by individuals, the national income is divided up between laborers, landlords, and capitalists in the form of wages, rent, and profits. Wealth of nations highlighted a disproportionate number of ideas about the organizations and markets that survive today –nearly 300 years later, and an economic revolution or two after publications. Adam Smith was regarded as “Father of Modern Economics”.

The centeral thesis of welath of nations is that capital is best employed for the production and distribution of wealth under conditions of governmental non-interference , or laissez-faire, and free trade. In Smith's view, the production and exchange of goods can be stimulated, and a consequent rise in the general standard of living attained, only through the efficient operations of private industrial and commercial entrepreneurs acting with a minimum of regulation and control by the governments.in order to prove this ,he came out with a theory of invisible hand, which highlighted that market system appears to organize itself and even after an unexpected economic crash returning to pre-disastrous state with no intervention by greater body or so.
In today’s time book can be a difficult read for modern economists. Much of what is discussed in the book makes very little sense in a modern context - but still, the concept of an equilibrium market, where various negative forces may be applied, generally from interventionism and negative economic situations, holds strong to this day.

Evolution of Economics

The word “economics” is derived from oikonomikos, which means skilled in household management. As the western world began its transition from agrarian to industrial economy, modern economic thought came into being. Before modern economics which came into being around 1th century there existed number of economic thought particularly European Mercantilism, and French Physiocraticism. Of which, neither fall in to the classification of formal economics, and both lack the structural and systematic processes required for formal knowledge creation.

Mercantilists’
This was the economic philosophy adopted by merchants and statesman during the pre-classical era started after 1500. Mercantilists’ believed that nation wealth came primarily from accumulating gold and silver. Their philosophy can be summed up in following manner:
1. All available land should be employed for agriculture, manufacturing and mining.
2.Exports of monetary items such as gold and silver should be banned, such that mechanisms of trade stay within the country.
3. Imports should be grossly frowned up and when need arises should be traded in exchange for other goods.
Mercantilism introduced the concept of double entry accounting, which is a primary form of bookkeeping in today’s time. This system represented the pinnacle of commercial interest to level of national policy.

Physiocrats
Idea of economy as a circular flow of income and output was developed by group of French philosophers in 18th century known as physiocrats. They believed that only process that yield net result is agriculture. According to them agriculture is sole source of wealth in an economy. In an opposition against mercantilist trade theory, the physiocrats propounded a policy of laissez-faire, which meant minimal government interference in the economy.

Introduction

We have always known economics as a subject which exists in our school or college syllabus. Definitely for me it is one of the very interesting subject and one of my passions to explore the subject from start to finish.
A thought recently clicked my mind that we all know economics as a subject that exist as part of our course in schools and college , but we hardly know how this subject came into being. As a matter of fact the origin of this subject lies in western world where it came into existence around 17th & 18th centuries.
Therefore in this part of my blog I’ll be sharing with you how economics came into being and ill share with you works of various economists whose names are somehow being forgotten by us:
This part of my blog is for those, who really have liking and passion for this subject. Hope you guys like this part of blog also.