Why Oil Price Must Rise for the Stability & Growth of Global Economy

The Global economy is goingtowards downwards spiral. Russia, China, Japan, EU, Brazil all are struggling to revive their economy . Regarding Middle East countries they are worst hit area. The real culprit is drastic fall of oil which dented many countries such as EU, Whole Middle East, Venezuela, Russian economy. Most of the developed countries gets big orders from Oil generating countries as well as other product line. The fall in oil price prompted these countries to halt any further upgrade and went into current account deficit.

In my point of view, the competition between OPEC controlled countries attitude to keep the Shale gas producer out of the business impacted the initiator dearly. OPEC countries also refused to reduce the production quota in a fear of losing market share to non OPEC oil producing countries. In my point of view, both OPEC and Non OPEC Oil producing countries should sit together to create an strategy to stabilize the Oil price around $65 to $70 per barrel so that these countries start making some money and get some free cash flow which they can reinvest in their economy. In the current scenario, it wont be far when Oil producing countries with huge pile of cash burns most of their cash in order to maintain their countries social security. The new order from these countries will reignite the cascaded order process which will lead to new employment and revival of the organization.

Economic Slowdown in Russia, China, Middle East, Europe - Boom for Indian Equity Market

Global economy is going from bad to worst. Many diplomatic to economic trigger is impacting global economy in such a bad manner that it will not be far when some of the countries will go bankrupt. Exactly four years back, Greece, Portugal, Spain triggered the recessional nose pin in European Union economy which in turn forced International Monetary Fund to jump in to safeguard some of the countries to get defaulted on their debt servicing to repayment. The government led social welfare cut an increase in taxes impacted the citizen buying power as well as increased the price point. The self inflicted financial tornado started gripping whole European Union and its member countries since then poured inBillions of Euro to support financial weak countries. It crippled the industrial growth.

At the same time, Wide spread conflict in Middle East and Africa impacted many countries ability to kickstart new projects. To add the fire further, the main source of their earning from Oil dipped down by 60% and they started supporting their countries through their foreign reserve to win the heart of local citizen. New investment dried down.

Latin America based countries like Brazil, Venezuela and battery of other counties are struggling to maintain their economy. Given the size vs population; those countries are not that big that they generate local demand.

We all know Japan few days back announced stimulus package to kickstart their economy whereas China economy isslowing down faster than expected. China being the center point of major commodity to energy buyer started slowing down their activities and many indirectly government supported companies who took huge debt in order to invest overseas as well as locally is on the verge of collapse.

On a contrary; Indian Central Bank, RBI government took very conservative and cautious channel to protect India from any direct or indirect impact of global financial turbulence and steered India to  stage where growth started picking up. I must admit that government also took proactive approach to protect local industries from dumping. The recent reforms on bankruptcy, Land reform and many others offered great deal of confidence to International investor community to start investing in India. The major beneficiary of such investments is Indian Mid cap companies who is catering Indian consumer more than International one. Their equity price is going up like wild fire as their financial performance is better than large Cap companies.

With recent indication from government released data, it is expected that Q3, FY 17 result from corporate India will be fabulous. The good earnings report of Q1,FY17 is the clear indication of the same. Its the right time to invest your hard earned money and leave that money as pension fund and enjoy the return in 2 to 3 years horizon as it is guaranteed that Foreign Institutional Investors will be major buyer of Indian equity in coming weeks, months and years

Disclaimer Consult your advisor before investing. Above is author personal view

US Economic Strategy- Collaborate with India to fill the Economic fallout with Latin America, Russia, China & Middle East

The US economy is on the verge of coming out of multiyear downturn. The recent job and other reports are encouraging and it is expected the Fed will increase the interest rate again in coming months. In order to maintain its growth especially in election year, US government is trying hard to ensure that corporate win International contract. In US there are lots of resentment within the locals that Foreign companies are taking out local job and it impacted the government image as they failed to control that which they promised during last presidential election.

At the same time; US is alsofacing tough situation in their bilateral relationship with Russia, China andMiddle East. The US initiated initiative to impose International sanction against Russia is hurting more the US based companies compared to Russian establishment given their strong relationship with third world countries.

With China, US is at loggerhead due to South China Sea issue. Blame game is at the peak. Chinese got very cautious about US movement in South China Sea and it is turning into flash point and ofcourse in due course it will start to show the impact on US economy as US government will slow down their dependency on China to procure low cost product and now focusing hard to re-established their own manufacturing hub.

In my point of view, US main trading partners are based out of Middle East region and their US is bleeding their taxpayer $ to safeguard countries with their interest. Saudi Arabia economy is in shamble due to their engagement in Yemen, low oil price and higher cost on social welfare scheme. It impacted Saudi Arabia government to go for the free hand based new technology to other infrastructure upgrade. At the same time; major unrest in Iraq and Syria impacted the neighboring countries will to spend more on new initiatives.

Most of the counties in LatinAmerica is struggling with their depreciating currencies to major slowdown in economy along with political unrest in some of the countries.

Given the above environment, US wasted no time to extend its arm towards India with clear approach of tapping Indian marketplace as well as rebalance its strategic positioning in Asia Subcontinent. Once the reluctant US while offering India any warfare system to any other technology is now changed their approach while dealing with India. Post Honorable Prime minister of India initiative of "Make in India"; US companies through their government diplomatic channel is offering to setup manufacturing hub in India that include the technology transfer covering all sector to grab the much needed business in India. 

Indian government recent decision to modernize infrastructure to Smart cities to Railways to Defence itself is more than $300 Bn business opportunity for next 8 to 10 years. In the mean time; China proximity with Pakistan also prompted US to come closer to India to neutralize China growing clout. Given the above circumstances, Indian Honorable Prime minister with his master strategic move wasted no time and attracted the leaders of most of the countries on the discussion table and trying hard to bring in investment which India needed the most at this point of time.

China Policy of State Support to Companies May lead to Major Financial Crisis

Once the booming economy and the backbone of worldwide manufacturing is now reeling under tremendous pressure from all corners. China current generation of youngster never understood the meaning of economic downturn and always went from one step of growth to another. Chinese government did fabulous job in opening the their economic in a very controlled environment without losing the control of economy for the last 30 years and now giving direct competition to world power like USA, Russia and Japan.

Chinese government realized that if they want to get powerful in all front then they should be good in infrastructure as well as very strong export. For export Chinese government offered packages to local SME and SMB to start the manufacturing center and hire low cost of resource to keep the cost of the product low and then played around with their currency to maintain the trade surplus with most of the countries they did business.

The overheating of economy coupled with Global economic slowdown especially in Middle East impacted china hard. Most of the government funded companies started falling apart as well as private companies who took loans from banks start facing servicing their debt.

The stock market crashed and government were forced to jumped in and also devalued their currency to keep themselves competitive in the marketplace. It is correct that China is having sufficient foreign reserve to sustain the downturn but also having sprawling economy and population to support.

you take any industry and they are sitting on over capacity and dumping it to other countries which is creating lots of resentment about Chinese companies trade practices. The way India impost MIP (Minimum Import Price) to protect its Steel sector, I am sure other EU countries especially UK will be doing so soon. It wont be too far when the action by partner countries will impact the job market which will lead to mass layout in their core sector which will lead to more financial problem. I strongly believe that China government must be working on formula to reduce the capacity to ensure that their companies dont get the dent in any form