London, November 25
The United States and Europe prepared fresh measures on Tuesday to tackle sharp economic downturn.

The US economy contracted by 0.5 per cent in the third quarter, revised data showed, and authorities announced an $800 billion life-support scheme for the US financial system.

A further deterioration is expected this quarter, putting the world's largest economy into recession stretching into 2009.

The US consumers cut spending at the steepest rate in 28 years, according to a commerce department report underlining how rapidly activity was slowing.

China, the world's biggest consumer of many metals, this month unveiled a 4 trillion yuan ($586 billion) spending package to prop up its economy, but growth would still likely slow to around 7.5 per cent in 2009, the World Bank said.

That would be China's slowest growth rate since 1990. Official data confirmed Germany is in recession for the first time in five years.

And falling consumer and business morale in Italy and France pointed to a continent heading for a prolonged recession, with a surprise tick up in consumer sentiment in Germany seen as an isolated and temporary blip.

After Britain announced on Monday a £20 billion fiscal boost, including a 2.5 points cut in value-added tax, the United States and European Union put their shoulders to the wheel.

The US Federal Reserve announced a $600 billion programme to buy mortgage-related debt and securities and a $200 billion facility to back consumer loans, including student, auto, and credit card loans.

"This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved financial conditions more generally," a Fed statement said.

What started more than a year ago as a meltdown in the US market for high-risk mortgages has engulfed the world, freezing access to credit, sparking bank collapses and requiring the financial bailout of entire countries.

US stock futures shot higher in response to the plan. European shares reversed earlier losses.

The European Commission will propose on Wednesday measures to stimulate the recession-hit European economy including VAT cuts and a call for lower European Central Bank rates.

The draft proposal, obtained by Reuters, did not specify the size of the stimulus plan, which Germany said last week could be worth some 1 per cent of European Union gross domestic product.

The French government will launch its own "quite massive" stimulus in the next 10 days, President Nicolas Sarkozy said.

"In less than 10 days we will announce a revival plan to save the car industry ... and strengthen the building sector," Sarkozy said during round table discussions in northern France.

Washington, November 25
In its first intervention in Asia since the beginning of the current financial crisis, the IMF has approved a $7.6 billion rescue fund for Pakistan that will support the country's economic stabilisation programme.

Upon the approval of the IMF's executive board, an amount equivalent to $3.1
billion becomes immediately available to Pakistan, and the remaining amount will be phased in, subject to quarterly reviews in a 23-month stand-by arrangement under which the total amount of resources made available equal 500 per cent of the country's quota.

The arrangement was approved by the board under the Fund's fast-track Emergency Financing Mechanism procedures.

The IMF-supported programme aims to achieve the key objectives of restoring macroeconomic stability and confidence through a tightening of macroeconomic policies and to ensure social stability and adequate support for the poor and vulnerable in Pakistan, the Fund said in a statement.

"The programme targets a significant reduction in fiscal deficit, aimed at eliminating State Bank of Pakistan financing of the government and reducing the external current account deficit, while allowing for increased social and development spending," Takatoshi Kato, deputy managing director and acting chairman, said following the executive board discussion.

The reduction, he said, will be achieved primarily by phasing out energy subsidies, better prioritising development spending, and implementing tax policy and tax administration reforms. — PTI

Hong Kong, November 25
Asian shares rallied and bonds fell after the US government rescued banking giant Citigroup in a bid to prevent further damage to the ailing global financial system.

But European shares were set for a tepid start, with Britain's FTSE 100 seen between down 4 points to up 3 points.

The yen edged up from sharp falls a day earlier and gained against major currencies, but some traders said the Japanese currency could stall in the near term if investors continued to return to battered equity markets and other riskier assets from so-called safe havens such as bonds.

Oil prices retreated below $54 after surging more than 9 per cent in the previous session, a rally that was big enough to send regional commodity-related stocks such as BHP Billiton sharply higher.

China's growth could well slow to its weakest pace in almost two decades next year, the World Bank said, the latest grim prognosis for a global economy buckling despite the concerted efforts of policymakers.

The MSCI index of Asia-Pacific stocks excluding Japan rose 3.8 per cent as of 0700 GMT, heading towards a third consecutive daily gain. Japan's Nikkei average jumped 5.2 per cent, resuming trade after a public holiday on Monday.

The rally in global markets was also helped after US President-elect Barack Obama promised to jolt the faltering US economy with a stimulus package, raising the outlook for beleaguered exporters worldwide who depend heavily on US consumer demand.

Shares in Australia and Hong Kong rallied 4-5 per cent each, while markets in Taiwan, Singapore rose over 2 per cent. South Korea's KOSPI index advanced 1.4 per cent, but Shanghai's index fell 0.4 per cent.

Gains in Asia were led in part by banks such as South Korea's KB Financial Group and Commonwealth Bank of Australia, which recovered from steep falls on Monday as worries about slowing economic growth and rising bad debts weighed on the battered financial sector.

Meanwhile, the World Bank also cut on Tuesday its 2009 growth forecast for China, which along with the United States, is a key export market for Asia. — Reuters

Washington, November 25
With the effects of the financial crisis now engulfing emerging markets of India and China too, growth in Asia is expected to slow sharply in 2009, the International Monetary Fund (IMF) says in its latest forecast.

"Growth in Asia is expected to slow substantially along with the rest of the world, as exports weaken and spillovers from the global financial turmoil weigh on domestic activity," according to the IMF's Regional Economic Outlook for Asia and Pacific released here Monday.

On an annual average basis, growth in Asia is projected to slow from 7.6 per cent in 2007 to 6 percent this year and 4.9 per cent in 2009, it said urging decisive actions to maintain financial stability and support growth in the region even as the global economy enters a major downturn.

"Emerging Asia" comprising China, India, Hong Kong, South Korea, Singapore,
Taiwan, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam is projected
to slow down from 9.5 per cent in 2007 to 7.7 per cent this year and 6.5 per
cent in 2009.

But if China, which is projected to slow from 11.9 per cent in 2007 to 9.7 per cent this year and 8.5 per cent in 2009 is excluded, the group's growth comes down from 7.3 percent to 5.9 per cent to 4.4 per cent during the corresponding period.

And if China and India, which is projected to slow from 9.3 per cent in 2007 to 7.8 percent this year and 6.3 percent in 2009, both are excluded, emerging Asia's growth would further go down from 5.9 per cent to 4.6 per cent to 3.1 per cent during the same time span.

"With the recent intensification of the global financial turmoil, any hopes that Asia would escape the crisis unscathed have evaporated," said Jerald Schiff, a senior adviser in the IMF's Asia and Pacific Department at a media briefing.

"Despite its strong fundamentals - notably a substantial cushion in external reserves and robust corporate and banking sectors — the region is being buffeted by large external shocks," he added.

Slowing economic growth and lower commodity prices are already contributing to moderating inflation, and the report expects a continued decline over the course of 2009, with headline consumer price inflation for the region falling from 6 per cent this year to just over 3 per cent in 2009. — IANS

New Delhi, November 25
The Union cabinet is likely to take up at its next meeting the government’s proposal to bring aviation turbine fuel (ATF) under the declared goods category.

Finance minister P. Chidambaram on Monday had said the government intended to introduce a Bill during the forthcoming session to grant jet fuel the declared goods status by amending the Central Sales Tax Act.

At present, some states levy more than 30 per cent sales tax and the average rate works out around 21 per cent across the country.

However, once the declared goods status is accorded to ATF, it will attract a uniform sales tax of four per cent across the country, bringing huge relief to the aviation industry that is reeling under pressure of high costs.

The decision has evoked positive response from private airlines. Vijay Mallya-led Kingfisher Airlines said the airlines would reduce air fares across the board as soon as the declared goods classification was approved for the jet fuel.

Mallaya also promised to introduce flights to towns in rural India where there was no air connectivity at present despite airport infrastructure being available after ATF was brought under declared goods category besides ensuring that there was no job cut despite a downturn.

Mallya recently said the relief granted so far was not enough for cutting fares, explaining that airlines' dollar denomination cost on factors like aircraft leases and maintenance had shot up following the rupee's fall. Putting ATF in declared goods category could lead to cut in fares, he had said.

Experts say after the Bill is passed by the Parliament, airlines' operating cost could reduce by a 20 per cent, making fare cuts of 10 to 15 per cent become imminent. State-run Air India is already working on plan to cut fare by 12-15 per cent from next month.

Meanwhile, reports suggested that to prune costs, Jet Airways was likely to terminate contracts of around 35 foreign pilots. Indian pilots had been demanding that if the airline had to prune costs, it should first do away with expat pilots.

Sources said contracts of expat pilot would be terminated over the next six months as per terms and conditions in the contracts.

Kolkata, November 25
Even as all efforts by state labour minister Mrinal Banerjee for resolving the Dunlop’s crisis failed today, different unions decided to launch massive agitation by organising sit-in demonstrations in front of the company’s Sahaganj factory, and also at various places from Friday.

The Congress, Trinamool Congress, RSP, Forward Bloc, SUCI and other unions will participate in the proposed dharna and agitation. The CITU, however, will not join them though they supported their stand.

CITU leader Madan Ghose said they wanted the government to take steps for settling the issue with the company and they had already requested Chief Minister Buddhadeb Bhattacharjee in this regard.

Dunlop, once the world’s premier tyre company, which industrialist Pawan Ruia took over in 2006, is facing the financial crunch and the management decided to temporarily shut down the factory on November 16.

However, the company agreed to sanction Rs 2,000 every month to all 3,200 workers till the present crisis is over and the factory restarts its normal production.

The workers initially agreed but later refused since they apprehended that the factory would not be re-opened in the near future.

Ruia said he had asked for Rs 115-crore loan from the WBIDC and several banks and financial institutions. He hoped that within next two-three months he could restart production at the factory.

He said the company still had orders worth Rs 20 crore and told the workers that the present crisis was temporary because of the recession and the poor financial market condition.

The state labour minister also met the unions and the management separately more than once during the past two days.

Today also, he met Ruia and representatives of various unions, but there was no sign of settlement.

New Delhi, November 25
In a boost to ONGC Videsh Ltd’s (OVL) bid to buyout Imperial Energy Corp Plc, Russia today said it will not set any pre-condition like a stake for its state-run firms in exchange of giving approval to the acquisition.

"Actually our approach towards this deal is quiet liberal and if the Indian company would like to acquire Imperial Energy, we are not going to put forward any demands," visiting Russian Energy Minister Sergey Shmatko told reporters here.

OVL, the overseas arm of state-run ONGC, was expecting that it may have to give 25-40 per cent stake to a Russian company like Rosneft in lieu of the regulatory approvals Kremlin gave for its acquisition of UK-listed firm.

ONGC chairman and managing director R.S. Sharma said the company had the time till June 2009 to complete the deal but it will close it much before the deadline. Acquisition of Imperial will cost OVL about £1.4 billion or $2.1 billion at current exchange rates. — PTI

New Delhi, November 25
Finance minister P Chidambaram has said private sector banks will be forced to cut lending rates sooner than later due to competition from public sector counterparts.

"Public sector banks have reduced their prime lending rates by 75 basis points and extended it to all kinds of loans, like home loans and personal loans. Private sector banks at a meeting with finance secretary had said they will also follow the suit. But they have not," Chidambaram told a press conference organised by Delhi Pradesh Congress Committee.

It may be recalled that in response to the measures taken by the Reserve Bank to ease liquidity situation, PSU banks slashed their prime lending rates by 75 basis points, but the private sector banks are yet to make a move in this regard.

The finance minister added, "They have their own reasons. I am not commenting on those reasons, but I have no doubt in my mind that competition from public sector banks will force private sector banks to reduce their lending rates sooner than later...it will happen sooner than later."

Taking a dig at BJP ahead of the assembly elections in Delhi on November 29, he criticised their proposal during the NDA rule to bring down government equity in public sector banks from 51 per cent to 33 per cent. He wondered as to what would have happened had that proposal been implemented.

While maintaining that "our banks are 100 per cent safe", he said, "Even though
flow of foreign capital into India has slowed down, it will eventually reverse and
rupee will find its true level as India remains the most attractive investment
destination." — PTI

Chandigarh, November 25
Haryana has remained the top investment destination in northern region during the first six months of 2008, attracting capex announcements worth Rs 50,917 crore. This was revealed by industry chamber Assocham, while releasing a report here.

Punjab remained the third favourite destination for investments in the region, by attracting investments worth Rs 19,418 crore, out of a total investment of Rs 123,905 crore lined up by the corporate sector during January to June 2008. The Chandigarh Region alone attracted Rs 667 crore, mainly in the hospitality and education sectors.

D.S. Rawat, secretary general, Assocham, said owing to the development-oriented government policies, favourable business conditions and rising income levels of middle class, Haryana and Punjab enjoy maximum investor confidence in North India.

“Haryana is set to become a significant centre for services sector activity in northern region, as evident by the sectoral profile of investments announced by India Inc. for the state. Even real estate developers have announced the investment of Rs 40,500 crore in housing projects,” he said.