The Indian government hinted at winding up fiscal stimulus initiatives and cutting back on loose monetary policies, writes Arun Prabhudesai for Track.in. Demand has been on the rebound and the benchmark inflation index has also risen. (Why India is moving up).

Prime Minister Manmohan Singh believes that stimulus efforts will be eased because of very clear signs of recovery in the Indian economy. The Royal Bank of India governor has also opined it appropriate for the Central Bank to incrementally reduce the monetary stimulus.

India’s entrepreneurial momentum is continuing to grow, with a large, under-30 populace that is low on experience but eager to take risks, comments Sramana Mitra for Forbes. For instance, Sridhar Vembu, CEO of Zoho, built a $60 million company that has become competitive in the worldwide arena and he did it with no outside financing. (Possible India small-cap ETF).

For more information on India, visit our India category.

• PowerShares India (NYSEArca: PIN): up 73.6% year-to-date

• WisdomTree India Earnings (NYSEArca: EPI): up 90.4% year-to-date

Max Chen contributed to this article.

Van Eck has registered with the Securities and Exchange Commission (SEC) for a new India small-cap ETF, reports Cinthia Murphy for IndexUniverse. The Market Vectors India Small-Cap ETF will seek to reflect the performance of the Market Vectors India Small-Cap Index. Potential investors should note that the fund will invest in the more volatile aspects of an already volatile equities market.

There are currently three ways to gain exposure to India’s economy: WisdomTree India Earnings Fund (NYSEArca: EPI), PowerShares India (NYSEArca: PIN) and iPath MSCI India Index (NYSEArca: INP). PIN and INP have exposure to large-caps; EPI has 20% weighted in mid-caps and the rest of its exposure is in large-caps.

India’s Finance Minister Pranab Mukherjee stated that the economy is recovery, albeit a slow one, according to RTTNews. The Prime Minister is for a rational interest rate policy moving along with fiscal measures to nurture the economy.

The Reserve Bank of India has adopted a soft monetary policy, issuing banking sector funds to aid the economy.

SBI Chairman O P Bhatt expects a 7% expansion in fiscal 2010, while RBI Professional forecasters revised their forecast downward to 6%, according to Outlook India. (Why India is moving up).

On the upside:

• Companies will likely ask banks for working capital loans as the IPO market picks up, which would help revive the economy
• The auto and infrastructure industries are seeing more demand
• Industrial production is up
• Business confidence is on the optimistic side
• Stock markets are strong

On the downside:

• Private consumption demand is slowing
• The first quarter showed a decline in corporate sales
• A weak monsoon season has hurt agricultural output
• Credit growth is low
• Exports have dipped

• PowerShares India (NYSEArca: PIN): up 64.2% year-to-date

• WisdomTree India Earnings (NYSEArca: EPI): up 78.7% year-to-date

Max Chen contributed to this article.

• The Indian Prime Minister’s Economic Advisory Council expects the GDP to expand 6.5% to 6.75% in 2009-10. This is despite a potential decline in agricultural output, which may diminish 2% because of a short rainy season.
• Inflationary concerns may be met by tighter monetary and fiscal policies in the coming months, according to The Economic Times. Finance Minister Pranab Mukherjee believes reducing the government stimulus, however, may be premature. Wholesale price inflation may reach 6% by March of 2010 from the current rate of about 1%. The projected consolidated fiscal deficit is 10.09% for 2009-10.
• One factor contributing to the new forecast include a strong industrial sector, growing at its fastest pace in 22 months in August.

Chakravarthy Rangarajan, a top aide to the Prime Minister, says the monetary policy should remain “accommodative” and interest rates should be left unchanged to ease the economic recovery, report Kartik Goyal and Cherian Thomas for Bloomberg. Early signs of inflation could force India to act early on interest rate changes.

For more information on India, visit our India category.

• PowerShares India (NYSEArca: PIN): up 75.7% year-to-date

• WisdomTree India Earnings (NYSEArca: EPI): up 90.7% year-to-date

Max Chen contributed to this article.

India remains an attractive investment location despite slow economic growth this year. Factors such as capital flows, domestic demand, portfolio flows and a strong savings rate have India in a good position to continue moving forward, reports Abhrajit Gangopadhyay for The Wall Street Journal.

India’s economy grew 6.1% from a year earlier in the April-June quarter, higher than a 5.8% expansion in the preceding quarter, thanks to government efforts. The Asian Development Bank has revised its growth projection for India up to 6% from an earlier 1%-5% for 2009. The revision is based on the fact that public spending has gone up, industrial production is rising and there are signs of better business confidence, reports The Economic Times.

• PowerShares India (NYSEArca: PIN): up 69.8% year-to-date

• WisdomTree India Earnings (NYSEArca: EPI): up 83.8% year-to-date

For more stories about India, visit our India category.

Right after last year’s financial collapse, India’s growth was around 5.8%, which was the average growth for about 25 years before India saw fast-paced growth, remarks T N Ninan for rediff Business. Now, India is expected to report 6% growth for the year despite suffering a drought on top of a industrial recession.

According to Tony Sagami at Uncommon Wisdom, India is growing the most in these areas:

• Electricity consumption is up 6.2%
• Manufacturing is up 3.4%
• Mining and financial services are up 7.9% and 8.1%, respectively
• Government spending rose to 9.9% of GDP (up from 9.6% in the same period last year)

Once India rebounds from a poor crop year and resumes normal economic growth, the economy might see an average 8.5% growth per year. The Planning Commission is projecting an 8.5% growth for at least the next year and for the year after.

As the impact of fiscal stimulus comes to fruition, 80% of India’s companies are becoming more optimistic about recovery and growth  performances in the coming months, according to rediff Business. But a majority of participants feel that high fiscal deficit and massive borrowing could result in higher interest rates.

• WisdomTree India Earnings (NYSEArca: EPI): up 75.8% year-to-date

• PowerShares India (NYSEArca: PIN): up 63.4% year-to-date

For more information on India, visit our India category.

Max Chen contributed to this article.

India’s Meteorological Department has estimated rainfall during the monsoon season this year will be substantially below the long-term average. This is going to  damage existing crops and reduce future plantings. The government has stepped in, however, and will rely upon imported food to even out the supply and demand equation, report Mukesh Jagota and Abhrajit Gangopadhyay for The Wall Street Journal.

Rainfall is around 26% below average, and the full impact of this won’t be known until the harvesting starts. In turn, rising food costs have surfaced, and the possibility of huge government borrowing may crowd out long-term investment, which poses major challenges for India’s economic rebound.

Kartik Goyal and Cherian Thomas for Bloomberg reports that India this month signed a free-trade accord with South Korea and the 10-member Association of Southeast Asian Nations as it attempts to reduce dependence on the recession-hit U.S. and Europe. India depends on these countries for about 40% of merchandise exports.

New markets in Africa and Latin America are being explored, as India is also extending a tax refund to exporters.

• PowerShares India (PIN): up 57.2% year-to-date



• WisdomTree India Earnings (EPI): up 68.4% year-to-date

For more stories about India, visit our India category.

India’s OFDI until recently outpaced that of other emerging markets, but it hit a roadblock when the global financial crisis began.

India’s OFDI recovery will rely upon the revival of global and domestic growth, improvements in corporate profitability and easing of financing from banks and equity markets, writes Jaya Prakash Pradhan for Business 24-7. Before 2008, Indian OFDI was driven by global growth, business opportunities and increased competition.

The factors that have impeded OFDI include:

• The global and domestic slowdown has led to diminished business confidence, reduced consumption and sluggish investments, which has halted overseas and domestic expansion of Indian companies.
• India adopted a cautious lending policy during the credit crunch, which led to postponements in domestic and overseas projects.
• The global downturn had a negative impact on Indian equity, money and foreign-exchange markets. The depreciation of the Indian rupee against the U.S. dollar last year led to losses in export-oriented Indian companies that had long-term forex derivatives.
• A slump in export earnings affected companies in software, gems and jewelry, leather, textiles, auto parts, pharmaceuticals and food processing.

Overseas acquisition trends in January-June 2009 compared to same period last year has declined by 65%, or from $8 billion to under $3 billion. The drop in Indian investment is widespread among recipients. In host regions, the decline in Indian brownfield investment was most notable in the developing world.

India’s overseas investments began with information technology and related service sectors. It then spread to areas of manufacturing and finance, India One Stop reports.

• WisdomTree India Earnings (EPI): up 56.2% year-to-date

• PowerShares India (PIN): up 50.4% year-to-date

For more information on India, visit our India category.

Max Chen contributed to this article.

Already experiencing the driest June in 83 years, India will receive 13%-15% less rain this year, which could result in high food prices and dampen GDP growth, reports Annant Vijay Kala for The Wall Street Journal.

Food inflation will put pressure on rain-fed crops, states ratings agency Crisil, but sufficient reserves could buoy rice prices. Agriculture Minister Sharad Pawar has stated that there may be a shortfall in rice production. Lower area and poorer yields could also lead to a diminished kharif paddy crop of as much as 30%, according to Rediff Business News.

India’s monsoon season lasts from June-September.

The Reserve Bank of India projects a 6% growth for India’s economy for the fiscal year ending March 2010. The government is shooting for a 4% growth in agriculture this year. Principal economist D.K. Joshi for rating agency Crisil estimates economic growth to be around 6.5% and farm growth at 3.5%, both with a high probability of downward revision.

• PowerShares India (PIN): up 52.5% year-to-date

• WisdomTree India Earnings (EPI): up 66.4% year-to-date

For more information on India, visit our India category. For more information about other BRIC countries, take a look at our special BRIC report.

Max Chen contributed to this article.

The government is expecting between 6.25% and 7.75% growth this year. That’s in line with the Reserve Bank of India, which upgrading its overall view. One concern is a growing fiscal deficit, which will make it challenging for the government to do much more to jump-start the economy.

A slump in agriculture and a weak monsoon season may create more inflationary pressure, especially for food, reports Elffie Chew for The Wall Street Journal. A drop-off in the agriculture sector would put even more pressure on the government to step in with a fiscal stimulus measures.

The Central Bank of India left rates unchanged this week, as expected. Ashok Sharma for BusinessWeek reports that the bank kept the repo rate for short-term loans to commercial banks unchanged at 4.75 % and the reverse repo rate — the rate it pays to banks when absorbing funds from the financial system — unchanged at 3.25%.

Business confidence in India is up, as signs of life are stirring in the Indian economy.

• WisdomTree India Earnings (EPI): up 63.7% year-to-date

For more stories about India, visit our India category.

Objective

EPI eeks to track the performance of the WisdomTree India Earnings Index.

How It Works

EPI was the first of two India-focused ETFs (the other being PowerShares India (PIN)) to launch within a few weeks of one another. The fund measures the performance of companies incorporated and traded in India. Components have to be profitable and eligible for purchase by foreign investors.

The top sectors in the fund include energy (24.6%), materials (13.7%) and software and services (13.5%). The majority of companies are large-cap, with a 52% weighting. Mid-caps have a 29.8% weighting, while small-caps are 17.9%.

The Latest News

• India’s recovery is likely to be aided by favorable external factors such as a pickup in trade and resumption of capital flow into the stock market.
• A revival in exports and the  effects of previous fiscal and monetary policies will also help the nation’s economy to expand.
• The most recent decline in commodities prices, most notably crude oil, will shrink oil import bills reducing the nation’s trade gap.
• The cut in factory levies and increase of employee salaries by the federal government will aid in the health of India’s economy.
• India’s Finance Minister Pranab Mukherjee believes the economy is on track for a 9% growth rate in 2009, writes P. Vijian for Bernama. The government will be promoting inclusive growth and reforms will be aimed toward the rural sector.
• Mukherjee discussed plans for the poor, including rural employment and overhauling fertilizer subsidies to favor farmers, which would cost $8.1 billion for the fiscal year, report Vikas Bajaj and Heather Timmons for The New York Times. He also plans on reducing the population in severe poverty by half within five years. In 2005, an estimated 27.5% were reported to suffer from poverty.