Saturday, 1 November 2008

No job cuts in IT industry, says Narayana Murthy

The global economic meltdown and the financial crisis looming large over the Indian economy will not result in any downsizing or job cuts in the IT industry,

Work experience is important
says N R Narayana Murthy, founder of Infosys Technologies, one of India's most reputed companies in the sector.

"There are no job cuts. The growth has certainly slowed down but it is not making any significant impact on us," Murthy, who was in the national capital Saturday to announce the finalists for Rhodes scholarships, said.

He also hinted that the net rate of growth of employment in his sector will stay in the green. "Despite reports of companies laying off some staff as a cost cutting measure, they have been advertising for new employees at the same time."

According to him, the key challenges facing the Indian industry in these turbulent times were inflation and the psychological impact of the US crisis, leading some companies to hit the panic button.

He also said that the weakening of the rupee was just an offshoot of the global economic meltdown and was proving to be beneficial for the IT industry.

"The foreign exchange rates are helping us and in some way, they mean higher revenue for my industry," Murthy said, and added that a weaker rupee was making exports of Indian IT industry competitive vis a vis other countries.

Source: EconomicTimes

Evidence of US recession piles higher with new data

Evidence of a recession piled ever higher on Friday, with new figures showing Americans are spending less and gloomy about the economy

, while the government signaled it won't buy stock in the financing arms of auto companies to prop them up. The Commerce Department reported consumer spending dropped a sharp 0.3 per cent in September while their incomes, the fuel for future spending, managed only a small 0.2 per cent gain.

That followed a report a day earlier that the US economy shrank by 0.3 per cent in the third quarter. The accepted definition of a recession is two straight quarters of a shrinking economy.

Closing out the worst October in 21 years but one of the best weeks ever, investors did some bargain shopping on Wall Street, snapping up stocks that have plunged in value. The Dow Jones industrial average gained nearly 145 points.

Meanwhile, the outgoing Bush administration sent signals to automakers and other industries hoping for government purchases of their stock that they probably won't qualify for the program.

Administration officials, who spoke on condition of anonymity because the program is still being put together, said it was unlikely the auto companies would be able to qualify for direct government purchases of stock in their auto-financing arms as part of the $250 billion stock purchase program.

They could still be eligible for government purchases of bad assets, such as auto loans, under a separate program that is expected to spend $100 billion initially. The government plans to buy stock in banks and lift bad assets on their books as part of the financial system bailout.

The wrangling over the broader rescue program continued, with Democrats stressing Congress wants the package to be used to pump new loans into the economy, not diverted to stockholders or executives or to buy other banks.

"I am deeply disappointed that a number of financial institutions are distorting the legislation that Congress passed," said House Financial Services Committee Chairman Barney Frank, D-Mass. He announced hearings on the rescue package Nov. 12 and 18.

The Treasury Department said it would extend a Nov. 15 deadline for banks that do not have publicly traded stock to apply for the government stock-purchasing plan — a plan that could extend to 6,000 banks.

The bank rescue is intended to shore up financial companies and get lending, the lifeblood of the economy, going again.

Meanwhile, Federal Reserve Chairman Ben Bernanke said in a speech that whatever system is constructed following the government takeover of mortgage giants Fannie Mae and Freddie Mac must have better safeguards to make sure it can work during times of stress.

Source: EconomicTimes

Liquidity shot: RBI cuts repo, CRR, SLR

The Reserve Bank of India, or RBI, has cut the repo rate by 50 basis points to 7.5% with effect November 3.

It has also cut CRR, or cash reserve ratio, by 100 bps in two stages to 5.5%. The first stage of CRR cut would be with effect October 25 and the second stage would come into effect November 8. The 100-bps CRR cut will infuse Rs 40,000 crore into the system, the RBI said.

The central bank will also cut SLR to 24% by 100 bps from November 8 onwards. It has allowed refinance to banks up to 1% of NDTL, or net demand and time liabilities, for 90 days.

In a statement on its website, the RBI said, “The Reserve Bank has reviewed the current and evolving macroeconomic situation and liquidity conditions in the global and domestic financial markets.”

The release stated, “On the growth front, it is important to ensure that credit requirements for productive purposes are adequately met so as to support the growth momentum of the economy. Domestic financial markets have been functioning normally. Prudent regulatory surveillance and effective supervision have ensured that our financial sector has been and continues to be robust. However, the global financial turmoil has had knock-on effects on our financial markets; this has reinforced the importance of focusing on preserving financial stability.”

The Reserve Bank, the release said, will continue to closely monitor the developments in the global and domestic financial markets and will take swift and effective action as appropriate.

The move comes close on the heels of the US Federal Reserve cutting its benchmark interest rates by 0.5% to 1% on October 30 (Read: Fed move). Experts anticipated similar rate cuts across the globe. The next day, Bank of Japan cut interest rates from 0.5% to 0.3%. (Read: BoJ follows suit)

Ever since liquidity in the system tightened, RBI has cut CRR at regular intervals to inject funds. Since October, the central bank cut CRR on four different instances totalling 350 bps, from 9% to 5.5% now.

Source: Moneycontrol

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