US may get into deep recession
New York - The terrorist attacks in the US have pushed the world economy into a tailspin and the greatest fears are that the US economy may trip into a full-blown recession. The International Monetary Fundsdownward revision of growth rate to 2.7 per cent from 3.2 per cent earlier this year confirmed that the world economy is headed towards slower growth in the current year, as well as the next one.

However, the Centre for Monitoring the Indian Economy has not revised its forecast of world economic growth of 3.2 per cent for 2001 and 3.9 per cent for 2002. Most of the earlier forecasts were predicated on lower oil prices, easier interest rates and continuing promise of technological advances. These positive factors are now under a cloud, and the Organisation of Petroleum Exporting Countries looks all set to raise oil prices.

The present slowdown is more widespread than in the past. In the 1991 recession, the US economy slumped but Japan and Germany did well enough to keep the world economy on an even keel. Japans economy has now gone into a recession tank and its unlikely to look up soon. Standard & Poors has downgraded Japans long-term credit rating to negative from stable. Even the East Asian miracle economies are in a downward loop and there is bad news for Latin America too. Germany, Europes largest economy, has seen a downward revision in its growth rate from 1.7 per cent in early June to 1.1 per cent of late. The trends in major economies around the world show that the world economy is unlikely to look up in the near future.
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Insurance companies to get ripped
New DelhiWith the US blasts causing the worst ever damages in insurance history, large projects in India depending heavily on international reinsurance companies for coverage, will have to cough up a higher premium.

The reinsurance market has been already hardening and losses following the attacks would accelerate the trend, said industry sources. Reinsurance rates are determined by the capacity of the reinsurance market to underwrite risks.

Swiss Re, the worlds second largest reinsurance group, tried to put up a brave face, saying that it has adequate reserves to cover any claims related to Tuesdays terrorist attacks.

However industry sources said that the companys balance sheet would definitely be hit considering that investment income would also fall on account of the downturn in the markets this year.

Rating agency Moodys said that insurance claims arising out of the US attacks could range from $10-15 bn on account of property and liability covers only. Among man-made losses, the losses will definitely be the worst so far much higher than the $ 2.9bn claims arising out of explosion on offshore platform Piper Alpha off UK.

The US insurers will face claims for the complete destruction of the two World Trade Center towers, which cost $750 million to build in the early 1970s. Insurers will also pick up damages to surrounding buildings and cars, plus the costs of firms relocating and making up their lost income.

US insurer Chubb, which specialises in offering corporate property insurance, said it has "significant property exposure" at the World Trade Center in New York, but reinsurance should limit its pre-tax losses to $100 million to $200 million.

Shares of insurance companies across the world, in Japan, UK, and other European countries fell sharply as investors expected their finances to be hit as a result of the US attack claims.
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Tough times ahead; PM
New Delhi--The Cabinet Committee on Security (CCS) attended by four top leadersprime minister Atal Bihari Vajpayee, union home minister L K Advani, defence and external affairs minister Jaswant Singh and finance minister Yashwant Sinhahas resolved that the government would have to prepare India for tougher times ahead.
There was consensus on one issue that the nation was ready to pay the price for crushing terrorism, now more than ever before.

There was agreement on the fact that India now will have no option but to tighten its belt in the face of a worldwide slowdown bound to follow recent events in America. The people of India would have to be prepared to tolerate some tough and unpalatable decisions that the government will have to take.

An oil price hike, measures to improve tax compliance, especially personal income tax; greater and demonstrable austerity in government and imposition of state-level user charges are some of the measures that will be seriously discussed in the days to come.

The leaders discussed the possibility of oil price hike and felt that it would be proper to create an appropriate atmosphere in the country before taking recourse to such a step.
It was decided that Mr. Vajpayee address the nation on Friday on national TV and highlight the grim economic scenario that the country is facing.
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Exports to be hit for the short run says DGFT
New DelhiExports may be affected in the immediate future due to closure of commodity and financial markets in US following the terrorist attacks, a senior foreign trade official N L Lakhanpal from the director general of foreign trade said today.

He said trade essentially by definition means a movement of goods and whenever that is disrupted there will be an impact. The impact (the disruption in the market due to the attacks) will be quite substantial in the immediate period, he said. He added that the extent of the impact on Indias exports will depend on the time taken by the US markets to recover.
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Rupee continues to fall against dollar
MumbaiContinuing its free fall against the dollar the rupee broke the 47.50 per dollar barrier to settle at a historic-low of Rs 47.56/57 a dollar. This was following a dollar buying spree on the inter-bank foreign exchange market on Thursday.

The rupee had breached the 47.50 level on Wednesday but later recovered sharply after the government made a statement that the worst terrorist attack in the US would not have any immediate impact on the Indian currency.

After ruling at the level of 47.14 per dollar for quiet a long time on sustained dollar selling, the rupee has been hitting new lows since September 6.

The rupee opened marginally weak at Rs 47.4350/4450 per dollar but came under pressure immediately thereafter and went into a tailspin ending at Rs 47.56/57 as against its Wednesday's close of Rs 47.42/44.

The rupee faced tremendous pressure when foreign banks as well as public sector banks started heavy dollar purchases to meet ever-increasing demand from corporates and importers panicking after the rupee crossed 47.50 a dollar mark during the trading.
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India to partner with US in new order
New DelhiThere is likely to be a speedy emergence of a bloc of democracies committed to combat terrorism and India is expected to be an active member of this bloc.

When after the terrorist attacks, president George Bush appealed to democracies to form an anti-terrorism alliance prime minister A B Vajpayee promptly pledged Indias support to the move.

In a letter to Bush he said: "The dark hour is a stark and terrible reminder of the power and reach of terrorists to destroy innocent lives and challenge the civilised order in this world. It sends a strong message to democracies to redouble our efforts to defeat this great threat to our people, our values and our way of life."

Other Western nations, which have, unlike Britain, not been very consistent in supporting the foreign policy orientation of the US, have also signaled their willingness to come aboard. And not just through strong condemnations of the carnage, but also through the Natos resolve to fight terrorism.

The outrage may soon result in the strongest-ever collective stand against terrorism. If the stand translates into action, it could be the beginning of the end of terrorism.
The US, which had so far differentiated one brand of terrorism from another, could now go along with Indias view.

The differentiation between brands of terrorism - a handiwork of liberals and multi-culturalists - was one of the main reasons behind the US ambivalence. The slaughter of thousands of innocents, however, may help tip the scales of the debate in the US in favour of the realists who, taking an unsentimental view of terrorism, favour a muscular and pragmatic approach.
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Hotel industry: something to cheer about
New DelhiDespite the global gloom bought about by the unprecedented terrorist attacks on the US, the hotel industry may have something to cheer about. The recent finance ministrys move to scrap hotel expenditure tax is sure to make a big impact on the sectors morale.

Earlier the tourism department made a strong plea for removing the levy and the finance ministry has agreed to do so, government sources said.

The Centre collects about Rs 300 crore per annum from hotel expenditure tax and scrapping of this tax would fulfill a long-standing demand of the hospitality industry.
Hotel expenditure tax is imposed on all hotel room sales if the tariff is higher than Rs 2,000 for a single room. The hospitality industry had argued that state governments levy luxury tax similar to this.

Moreover, the Centre imposes 5 per cent service tax on hotels while states charge sales tax of up to 20 per cent. Thus multiple taxes have been affecting the tourism industry. The Centre had earlier exempted hotels located in hilly regions, rural areas and pilgrim centres from expenditure tax.

However, it is not clear when the tax would be abolished.
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