G-20 says government spending can help ease crisis

Economic officials from 20 leading nations have called for increased government spending to boost the troubled global economy and said developing countries deserve a prominent role in talks to overhaul the world financial system.

Finance ministers and central bank presidents from the Group of 20, which includes wealthy and developing nations, agreed on Sunday that the world must work together to address

the current crisis.



But they approved no specific plans ahead of a meeting of G-20 heads of state set for Washington next week.



Ministers urged governments to increase spending or cut taxes as they can to help reverse an economic downturn that is expected reduce global trade next year for the first time since 1982.



Each country will have to design its own stimulus package to meet its specific needs, said David McCormick, the US Treasury's undersecretary for international affairs.



The G-20 also backed a call to bolster developing nations' voting power in key groups including the International Monetary Fund and the World Bank, following decades of complaints that

their voices have been stifled.



"Institutions must be comprehensively reformed so that they can more adequately reflect changing economic weights in the world economy and be more responsive to future challenges," the ministers' declaration said.



Yet the statement failed to address a French proposal that large emerging economies including Brazil, Russia, China and India be added to the powerful Group of Eight industrial nations, which has huge influence over global economic policy

Goldman cuts India's FY09 growth forecast to 6.7 pc

Goldman Sachs cut its growth forecast for India citing "larger-than-expected shock" to the financial sector over the last couple of months, and its knock-on effects on both domestic and external demand.

The brokerage lowered its GDP growth numbers for FY09 to 6.7 percent from 7.5 percent and for FY10 to 5.8 percent from 7 percent, Goldman said in a research note on Monday.

"We believe there is little fiscal room for additional stimulus in FY10. We expect growth to trough at a quarterly pace of 5.0 per cent in the April-June quarter of FY10, before recovering to 6.6 per cent by end-FY10. The slowdown, in our view, is very much cyclical in nature," the brokerage said.

Goldman Sachs said the gathering financial crisis over the past several weeks has affected India's financial sector significantly, with both domestic and external liquidity drying up.



This has impacted the financing for corporates, loans for households, and trade credit for exporters.

"The real economy is already beginning to feel the effects of the liquidity crunch despite the Reserve Bank of India (RBI) and the government's massive liquidity infusion efforts," the research note said.

Goldman believes the large global and domestic financial sector shock will continue to slow activity across the board, in capex plans, exports growth, and consumption demand.

According to the note, corporates will be hurt.



This will in turn impact investment and external demands, and slow down consumption. On the production side, a significant slowdown in construction and real estate, and in industry is expected.

However, the brokerage sees a silver lining.



"A large monetary policy stimulus, prospects of a good agricultural crop supporting rural demand, lower commodity prices, and ongoing infrastructure spending would limit further downside to growth," it said.

India signs defence, security agreements with Qatar

Giving a strategic depth to their bilateral ties, India and Qatar signed agreements on defence and security addressing maritime security and sharing of intelligence to prevent terrorist activities.

The defence cooperation agreement includes issues of maritime security, while the pact on security and law enforcement would cover issues like common threat perceptions and sharing of data.



The agreements were signed as Prime Minister Manmohan Singh arrived in Doha from Muscat on a two-day visit to this energy rich Gulf country.



Singh met Qatar's Prime Minister Sheikh Hamad bin Jassem bin Jabr al Thani for talks on enhancing trade, defence and energy cooperation.



Singh would call on Qatar's Emir Sheikh Hamad bin Khalifa al Thani on Monday, who is also hosting a private lunch for the Prime Minister and his wife Gursharan Kaur.



Earlier, Singh, accompanied by a high-level delegation, held wide-ranging discussions with the Omanese leadership on enhancing trade, economic and energy ties.



In Doha, the Prime Minister was received by Qatar's Minister of State for Foreign Affairs Ahmad Bin Abdullah

Al-Mahmoud and the Council of Ministers. He was also presented a guard of honour.



An additional 2.5 million tonnes would be shipped under the same contract from January, but Petronet LNG Ltd, which imports LNG from Qatar, needs to tie up a similar quantity to fill the gap after the capacity of its Dahej import terminal in Gujarat is doubled to 10 million tonnes by March next year.

State-run gas utility GAIL India's proposal to set up a mega petrochemical plant in joint venture with Reliance Industries also figured during the discussion.

The GAIL-Reliance joint venture had earlier this year sought rich gas from Qatar, which holds world's third-largest gas reserves, for the petrochemical plant, but Doha had made no commitments, saying all its current production was tied up.

Singh would call on the Emir of Qatar Sheikh Harmed bin Khalifa al Thani, who is also hosting a private lunch for the Prime Minister and his wife Gursharan Kaur on Monday afternoon.



PM for cooperation with Gulf nations to ensure stability



Concerned over criminal and terrorist activities in India and the oil-rich Gulf, Prime Minister Manmohan Singh has said the two sides should work closely to ensure "a stable and prosperous region".



"Piracy, criminal activities and terrorism on our seas and land threaten the Gulf countries and India as well," Singh, on his maiden visit to the region, said addressing the Indian expat community in Muscat on the second day of his three-day visit to Oman and Qatar.



The Gulf region is part of India's "extended neighbourhood," and the largest source of the country's energy supplies, Singh said.



"The Gulf region is an area of great importance to India. It is part of our extended neighbourhood, and home to five million Indians. It is the largest source of our energy supplies," he said.



The Prime Minister, whose first stop on the visit was Oman, on Saturday evening held delegation level talks with Deputy Prime Minister Sayyid Fahd Mahmoud Al Said. He met the nation's Sultan Qaboos bin Said on Sunday afternoon.



He said "there are many reasons for us to work closely together with Oman to ensure a stable and prosperous region."



Lauding the contribution of the Indian expat community, Singh said annual remittances from Oman to India were more than USD 780 million.

"This is a reflection of your ties with the motherland and your confidence in India," Singh said.

The Government, he said, was alive to the welfare of the non-resident Indian community citing the memorandum of understanding with Oman on labour mobility, protection and welfare of workers signed on Saturday.

The Ministry of Overseas Indian Affairs is in the process of establishing Overseas Indian Community Welfare Funds in all Indian Missions in the Gulf, besides the Overseas Workers Resource Centre, a toll free helpline, has been established for Indian workers in the Gulf, Singh said.

An Overseas Indian Facilitation Centre provides opportunities for expats to invest in India.

The Prime Minister said destinies of the Gulf countries and India are closely interlinked, with large number of Indian expats based in the region acting as a "bridge between us".

"We have had a tradition of trade and civilisation contracts through the sea over many centuries. The large Indian community in Oman (numbering over 550,000) serves as a bridge between us, contributing to wealth and prosperity for both Oman and India," Singh said.

India, he said, was undergoing a major transformation. "Our economy is expanding rapidly. New opportunities for our youth are emerging every day. Our Government has embarked on the largest education, social welfare, skill development and employment generation programmes in the history of our country."

India's total non-oil trade with Oman, which was less than USD 200 million in 2000, has gone up seven fold to around USD 1.4 billion this year and Singh projected it to go up to USD 2 billion in near future.(AM-10/11)

India gold futures up on global cues

ndia gold futures opened higher on Monday tracking foreign markets, where the yellow metal gained due to a weak dollar and firm crude, but a strong rupee may cap gains, analysts said.

"The precious metals space is supported by the strong overseas leads but a strong rupee might cap the gains in gold and silver," said Harish Galipelli, head of research, Karvy Comtrade Ltd.

India imports most of its gold and pays for it in U.S. dollars and so the exchange rate plays an important role in determining local prices.

The rupee edged higher on Monday as a strong opening in the local stock market raised expectations of renewed capital inflows, with steps by the central bank to boost market liquidity also helping.

December gold is likely to trade in the range of 11,467- 11,770 rupees, said Pradeep Unni, senior research analyst, Richcomm Global Services DMCC.

December silver may be confined to 16,728 and 17,392 rupees, Unni added.

Open interest for December gold on MCX was at 8,912 lots, up from 8,842 a day earlier. Volume on Saturday was 1.81 kg.

World oil prices move $2 higher

World oil prices were higher in Asian trade today after OPEC refused to rule out further output cuts and China announced a massive stimulus package aimed at boosting domestic spending.

New York's main contract, light sweet crude for December delivery, advanced $2.13 to $63.17 a barrel. Brent North Sea crude for December delivery rose $2.14 to $59.49 a barrel.

China's four-trillion-yuan (€450 billion) stimulus package aimed at boosting its economy will mean increased demand for commodities including oil, dealers said.

The giant Asian nation is a major buyer of commodities and its thirst for oil imports to fuel its runaway economic growth in recent years was a key factor behind the surge in crude prices to record levels above $147 in July.

Meanwhile, OPEC president Chakib Khelil indicated over the weekend another round of production cuts may occur if oil prices remained below the cartel's preferred range of $70-90 a barrel.

The Organisation of the Petroleum Exporting Countries (OPEC), which pumps more than 40% of the world's crude, announced in October that its daily output will be cut by 1.5 million barrels to 27.3 million barrels from November.

The production cuts were aimed at shoring up prices which had fallen sharply from July's highs on fears energy demand would be hit by slowing economic growth.

OPEC's next meeting is scheduled to take place in Oran, Algeria, on December 17. Before that, OPEC's Arab members will meet in Cairo on November 29, said Khelil.

HSBC's US write-downs hit $4.3bn

Losses at Europe's biggest bank, HSBC, relating to the US housing market crisis reached $4.3bn (£2.7bn) in the third quarter.

The unprecedented turbulence in financial markets continued to present "enormous challenges", the bank added.

HSBC said it was still unclear whether there were "further risks to be uncovered" in the financial sector.

The bank recently announced it was cutting 1,100 jobs worldwide because of the current financial turmoil.

HSBC said its US losses reflected the continuing weak housing market and rising level of unemployment.

Elsewhere its battered investment banking business took a $600m hit due to credit crunch losses.

In a trading statment, HSBC said its profit for the third quarter was higher than during the equivalent period in 2007, without giving precise figures.

For the nine months ended 30 September 2008, pre-tax profit was lower than in the equivalent period in 2007, it added.

The bank said that its asset sales and growth in Asia helped offset the worsening US economy.

Stocks surge after China stimulus

Asian markets have risen sharply, a day after China announced a huge investment plan to kick-start its slowing economy.

Stocks leapt in Japan, China and Hong Kong, buoyed by China's efforts to sustain its growth rates, on which many Asian economies depend.

About $586bn (£370bn) is to go into housing, infrastructure and post-earthquake reconstruction in China over the next two years.

Correspondents say the package is a response to falling growth and exports.

There will also be significant cuts in company tax, while banks will be allowed to lend more to projects involving rural development and technical innovation.

The government also promised a shift to a "moderately easy" monetary policy.

"The investment expansion should be done swiftly and forcefully," a State Council meeting chaired by Premier Wen Jiabao concluded.

"It's a huge package," Dominique Strauss-Kahn, managing director of the International Monetary Fund, was quoted as saying by the Reuters news agency after a meeting of the Group of 20 finance officials in Sao Paulo, Brazil.

"It will have an influence not only on the world economy in supporting demand but also a lot of influence on the Chinese economy itself, and I think it is good news for correcting imbalances."

Market bounce

Chinese stocks rose sharply, with the Shanghai Composite Index ending 7.3% higher at 1,874.80. Tokyo's Nikkei 225 stock average closed up 5.8% to 9,081.43, helped by the weaker yen, while Hong Kong's Hang Seng Index was up 3.39% at 14,726.59.

Companies likely to benefit most from the government's investment plans did best, including banking, steel and construction firms.

Factory closures across the border in southern China have badly depressed China's manufacturing sector.