Econ 214 Wall Street Journal Project

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Econ 214

Liberty U

WSJ probject

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EU Jobless Rate Hits High

Alex Brittain. July 31, 2012. Retrieved From

http://online.wsj.com/article/SB10000872396390444226904577560393199067880.html?mod=WSJASIA_hpp_MIDDLEThirdNews

UNEMPLOYMENT

The purpose of Alex Brittain’s article was to highlight the serious issue of unemployment in 17 countries that make up the EU. The author has highlighted the seriousness of the issue by stating that number of the unemployed people has reached highest level ever since 1995. Moreover, the author’s purpose is to pressurize the governing council of European Central Bank to take immediate action to prevent further weakening of the customer expenditure.

The author mentions in the article that 11.2% of workforce is without jobs. This represents the highest unemployment rate up to this point. High unemployment as well as weakening markets are worsening debt crisis since they are shortening the tax incomes of the government, increasing the expenses on the unemployed aids as well as irritating electors. Spain has reported that economic output is consistently shrinking from April to June. It has been speculated by investors that this country is likely to become fifth in the country which would need sovereign bailout. In Spain well as Greece, the retail sales have sharply gone down annually. Also, in France which is second-largest economy, consumer spending has fallen. The GDP of France has also gone down.

The author has highlighted various consequences of this rising unemployment. The author mentions that this joblessness is having contrary concerns for the ordinary people as well as wider economy. In order to stem the debt levels, government is cutting its expenditures and is raising taxes. This has undermined consumer as well as business confidence leading to economic slowdown throughout the bloc. Several nations of the euro-zone such as Spain, Greece as well as Portugal are in recession.

ICICI Bank Profit Jumps 36%

Nupur Acharya. July 27, 2012. Retrieved From

http://online.wsj.com/article/SB10000872396390443477104577552293520515180.html

BANKING

The purpose of Nupur Acharya’s article was to highlight the excellent performance of the banking sector in India. The purpose of the article is to highlight the fact that ICICI Bank Ltd. of India has beaten advertise prospects through a jump in its profits of 36%. The article draws attention to the fact that ICICI’s net profit has soared from 13.32 billion rupees to 18.15 billion rupees in the period of April-June. This has been achieved through phenomenal growth in the core income coming from loans.

The article emphasizes that ICICI has been able to realize such success in spite of the slow economic growth. The bank has focused its attention to protect the net interest margin. The wide margins were achieved due to improvement in the international margins, focusing on the low-cost deposits and the writing of high-yielding businesses as stated by Chanda Kochhar who is the Chief Executive of ICICI Bank. The bad loans of the bank decreased from 4.36% of its total advances to just 3.54%. This appears to be a great achievement.

There are several positive consequences of such a success for ICICI Bank. The bank aims to expand its retail loans such as vehicle loans as well as mortgages by 15%. Moreover, it aims to achieve corporate growth by intensifying employed capital loans as well as loans to the obtainable projects. However, there are some sources of concern such as repaying the $1.7 billion bonds that would mature in October. Although the bank has a comfortable liquidity, there might be a possibility of plummeting its international assets for repaying the bonds because market conditions are tough to raise funds.

RBI Holds Rates to Fight Inflation

Sudeep Jain & Nupur Acharya. July 31, 2012. Retrieved from

http://online.wsj.com/article/SB10000872396390444405804577560182928857056.html?KEYWORDS=INFLATION

INFLATION

The purpose of the article by Sudeep Jain and Nupur Acharya is to bring to light the need to control inflation for safeguarding the medium-term growth of India. The author aims at highlighting that the central bank of India would soon follow an expansionary monetary policy for countering sharp slowdown of the third-largest economy of India.

The gist of the article is about RBI holding its rates. This has put the bank out of the step with the peers in Brazil, Philippines, South Korea and China. Deutsche Bank has seen “renewed resolve” of the price rises aggressive method of RBI. The RBI’s rate decision has put burden on government for restoring the growth through reduction of the fiscal deficit as well as clearing the supply-side bottlenecks, especially in arrangement and the power zones. The article further references that RBI has put guilt on improved management expenses, specifically on the fuel as well as fertilizer subsidies, in crowding out the private investment. This has stoked inflation and has artificially kept consumption demand high.

There are some consequences of the monetary policy followed by India. The monetary policy is not seeking to address the food inflation. Food inflation is due to the inadequate supply as opposed to the excess demand. But according to RBI, deficient and the uneven monsoon would have the potential for provoking the price rises and the inflationary anticipations. Sharad Parwar who is the Farm Minister is of the view that there could be impact on output of the food grains because of weak rains.

China Spends on Infrastructure to Boost Economy

Rose Yu and Sarah Chen. July 31, 2012. Retrieved from

http://online.wsj.com/article/SB10000872396390444226904577560470940599572.html?KEYWORDS=economic+growth+articles

ECONOMIC GROWTH

The purpose of this article by Rose Yu and Sarah Chen is to explain how and why China aims to increase monetary development during second half of 2012. The authors have compiled various facts and figures in order to focus the situations predominant in first half of the year and how the government has prearranged to increase its expenditure on groundwork with the aim of engendering greater financial growth in later part of the year.

The gist of the article focuses on how the higher electricity consumption and railway investment would enable China to stimulate the economic growth in the country. The railway expansion plans were slowed down due to the fatal train crash last July. However, this year the railway ministry anticipates to spend $73 billion, which is an upsurge of 16%, on the organization speculation. This spending is seen as a key element for boosting economic growth which went down from 8.1% to 7.6% in second quarter of 2012. The economic growth rate has been slowest in more than 3 years. Additionally, the electricity consumption of China is seen as a yardstick of the country’s growth. The power consumption in second half of the year is expected to increase by 6%-8% as compared to 5.5% growth, witnessed in the first half.

The positive consequence of this infrastructure investment is that banks had been reluctant in lending to the railway ministry ever since the occurrence of rail accident last year. Thus, increasing the budget for investment in the railway infrastructure will help to provide the much needed funds and consequently boost the nation’s economic growth.

India Takes More Steps to Tackle Drought

Biman Mukherji. July 31, 2012. Retrieved from

http://online.wsj.com/article/SB10000872396390444860104577560874042079942.html

FEDERAL GOVERNMENT SPENDING

The purpose of Biman Mukherji’s article is to highlight how the Indian administration is taking steps in order to deal with the near-drought situation in the country arising as a result of weak monsoon. This involves setting aside the government funds for provision of various subsidies to its farmers in the affected regions in order to encourage them to keep up with the supply of essential food crops.

The article focuses on the steps taken by the Indian federal government such as provision of diesel-price funding to the farmers and increasing subsidies on the seed materials in order to avoid a fall in agricultural construction. The scanty monsoon rainfalls in the country have led to a significant decline in the planting zones of lentils, coarse cereals and rice. The government publicized a 50% diesel-price funding for the drought-hit farmers the total expenditure is expected to be Re. 12.6 billion ($226.21 million) that will be equally shared by federal as well as relevant state administrations. With the main focus of country’s monetary policy being still on combating inflation, a weak monsoon season has further resulted in reducing options for the central bank to accelerate growth.

The negative consequences highlighted in the article include prospect of full-blown drought that would result in a fall in agricultural produce, rural incomes and subsequently serious negative consequences for the whole Indian economy. The subsidies granted by the government will help to tackle the situation to some extent.