42% workers are now ‘middle-class’: ILO report

The middle class is rising in a big way, especially in developing countries. About 42 per cent of workers, or nearly 1.1 billion, are now ‘middle-class’, living with families on over Rs 225 ($4-13) per person per day, says a new ILO report.

By 2017, the developing world could see the addition of 390 million more workers in the middle class, the International Labour Organisation (ILO) report says.

“Over time, this emerging middle-class could give a much needed push to more balanced global growth by boosting consumption, particularly in poorer parts of the developing world,” said Steven Kapsos, one of the authors of the Global Employment Trends 2013.

Employment growth

However, the report raises a red flag for employment growth in 2013-14, even if there is a moderate pick-up in output growth.

It estimates that the number of unemployed worldwide may rise by 5.1 million to more than 202 million in 2013 and by another 3 million in 2014, half-a-million of which will be youth.

“The indecision of policy-makers in several countries has led to uncertainty about future conditions and reinforced corporate tendencies to increase cash holdings or pay dividends rather than expand capacity and hire new workers,” says the report.

GDP growth

The ILO report noted that in India, growth in investment contributed 1.5 percentage points to the overall GDP growth over the past year, down from 1.8 percentage points in 2011, while the contribution from consumption declined to 2.8 per cent versus 3.2 per cent the previous year.

Job creation, labour productivity

For countries such as India, the report called for focus on both employment creation and labour productivity.

It noted that in India, even where jobs were created, a large number of workers remained in agriculture (51.1 per cent), in the urban informal sector or in unprotected jobs (contract) in the formal sector.

The share of workers in manufacturing was just 11 per cent in 2009-10, no higher than a decade earlier.

Like many regions, growth has failed to deliver a significant number of better jobs in the formal economy.

Formal employment

Most notably in India, the share of formal employment has declined from around 9 per cent in 1999-2000 to 7 per cent in 2009-10, in spite of record growth rates, it said quoting a study.

Using a comparable definition for the latest year available, the report said the share of workers in informal employment in the non-agricultural sector stood at 83.6 per cent in India (2009-10), 78.4 per cent in Pakistan (2009-10) and 62.1 per cent in Sri Lanka (2009).

Significantly, the report noted that unemployment rates increased rapidly for high-skilled workers, especially women.

“Indians with a diploma suffer particularly, with unemployment rates reaching 34.5 per cent for women and 18.9 per cent for men during 2009-2010,” it added.

RBI hikes FII limit in Govt securities, corporate bonds by $5 billion

The Reserve Bank today hiked FII investment limits in Government securities and corporate bonds by $5 billion each, taking the total cap in domestic debt to $75 billion, with a view to bridging the current account deficit.

Further liberalising the norms, the three-year lock-in period for foreign institutional investors (FIIs) purchasing Government securities (G-Secs) for the first time has been done away with, RBI said.

The sub-limit of $10 billion for investment by FIIs and long-term investors in G-Secs stands enhanced by $5 billion, it said.

The limit in corporate debt, other than infrastructure sector, stands enhanced from $20 billion to $25 billion, RBI said.

With an increase of $5 billion in each of the two categories, FIIs and long-term investors can now invest $25 billion in G-Secs and $50 billion in corporate debt instruments, taking the total to $75 billion.

The earlier FII investment limit in G-Secs was $20 billion and for corporate debt it was $45 billion, including a sub-limit of $25 billion for infra bonds.

RBI further said: “Residual maturity condition shall not be applicable for the entire sub-limit (in G-Secs) of $15 billion but such investments will not be allowed in short-term paper like Treasury Bills, as hitherto”.

The overall FII limit of domestic debt is distributed through a host of categories across Government, corporate and infrastructure debt.

Long-term investors include sovereign wealth funds, multilateral agencies, pension funds and foreign central banks.

Government, which is battling a high current account deficit (CAD) — the gap between inflows and outflows of foreign funds — is trying to attract more foreign funds into the country.

The CAD touched a record high of 5.4 per cent in the July-September quarter of the current fiscal.

In order to check the outflow of foreign currency, the Government recently hiked the import duty on gold and also took steps to encourage mutual funds to park their gold in deposit schemes offered by banks.

As a measure of further relaxation, the RBI added that it had dispensed with the one-year lock-in period on holding infrastructure bonds.

Developing nations top global FDI index for first time in 2012: UN

Developing countries overtook their traditionally wealthier counterparts in attracting foreign direct investment for the first time last year, as industrialised nations bore the brunt of an 18 per cent plunge in FDI flows, the UN’s trade and investment think tank Unctad has said.

Last year, global foreign direct investments — when a company in one country invests for instance in production facilities or buys a business in another country — came in at $1.3 trillion, down from $1.6 trillion in 2011, Unctad’s Global Investment Trend Monitor showed.

In a dramatic shift on the global investment scale, developing countries reaped $680 billion of that, or 52 per cent of the total.

“For the first time in history, developing countries have attracted more investment than developed countries,” James Zhan, who heads UNCTAD’s investment and enterprise division, told reporters in Geneva.

The shift was largely prompted by evaporating investments in crisis-hit developed economies like the United States, European nations and Japan, which accounted for 90 per cent of the $300 billion-decline in global FDI last year, Zahn said.

“We thought we were on the way to a steady recovery, (but) the recovery has derailed,” added Zahn, who pointed out that global investment figures had turned upwards in 2010 and 2011. But amid growing market uncertainty, they fell last year to near the historic low of $1.2 trillion which came during the worst of the global financial crisis in 2009.

The US, which remains the world’s largest recipient of foreign direct investment, saw its FDI inflows slip more than 35 per cent to $147 billion, while Germany saw its net investment level plunge from $40 billion in 2011 to just $1.3 billion last year, mainly due to large divestments there.

“Developing countries also suffered from the global decline,” Zhan said, “but the decline was much more moderate.”

Asia, which raked in 59 per cent of all FDI to developing countries, saw its inflows dip 9.5 per cent, with China, the world’s second-largest recipient of such investments, registering a 3.4-per cent drop in 2012 to $120 billion.

South America and Africa meanwhile registered positive growth in FDI flows last year.

Last year’s overall drop in investments came despite the fact that the global economy grew 2.3 per cent in 2012, while worldwide trade was up 3.2 per cent.

Going forward, Unctad expects FDI flows to rise to just $1.4 trillion this year and to $1.6 trillion in 2014 — still far below the 2007 pre-crisis level of some $2.0 trillion in investments.

IMF: World Economic Growth Rate would be 3.5 percent in 2013

nternational Monetary Fund (IMF) in at update to World Economic Outlook (WEO) on 23 January 2013, projected that the global economic growth rate would be 3.5 percent in 2013. The update mentioned that the global economic growth would strengthen gradually as the limitations of the economic activities have seen a positive note with the start of the year.

Some of the major projections of IMF are

•    Global growth would reach 3.5 percent in 2013, from 3.2 percent in 2012
•    Crisis risks would narrow down but the downside risks will remain crucial
•    Main sources of growth would be the emerging markets, developing countries and the United States

Reasons that may be beneficial in betterment of the economic growth

•    The actions taken in policy making have been responsible in reducing the risk of the acute crisis situation faced in the area and the United States.
•    Actions in terms of plans taken by Japan would also be beneficial in pulling it out from a short-lived recession kind of condition.
•    The policies made by the emerging economies of the world in terms of policy making is has also shown positive outcomes with a good start in the year

The report also described that if the risks of crisis doesn’t materialize, then the expected targets of growth may be crossed and can be stronger then that is projected.

Thing that can show an impact, the growth or result into the downfall

•    Fiscal tightening, if crosses an excessive limit in United States it may have an adverse impact on the economic growth
•    Long-term stagnation of the euro-area would also have an adverse impact

Situations that hinted towards improvement in economic conditions

The economic conditions of the world had shown a positive movement in the third quarter of the 2012 and this was change brought by the performance displayed on the economic front by the emerging economies of the world as well as United States. The borrowing cost of the countries in Euro Zone was marginally better than expected but it also identified some of the weaknesses in the core Euro area. Japan was under the effect of recession in the second half of 2012, which had shown positive signs of improvement in the running year.

Forecasts and the Expected Changes

•    In terms of Euro Zone, IMF managed to downgrade its forecast as this economic situation of the region may contract a bit n 2013.
•    The report also observed slight improvement in the financial conditions of the banks and governments of the Periphery economies, occurred due to the policy actions undertaken by them but these economies has yet not improved in terms of the borrowing conditions in private sector.
•    In terms of United States, the forecast remained broadly unchanged to that of the of October 2012 WEO to 2 percent, but predicted that the support offered to the financial market would support the growth in consumption in the country
•    In terms of Japan, the near-term outlook has also remained unchanged regardless of the recession witnessed by the country in recent past and it’s expected that the monetary easing and incentive package would boost the growth in the country
•    The report projected that the developing economies and the emerging market of the world would grow by 5.5 percent in 2013 and it will remain almost same as it was predicted in October 2012 WEO.
•    In case of China, the IMF has forecasted a growth rate of 7.8 percent, 8.2 percent and 8.5 percent in 2012, 2013 and 2014 respectively. In 2011, it witnessed a growth rate of 9.3 percent.

Findings of the report and threats

•    Following the findings of the report in detail, it’s projected that the Euro Area is one of the biggest threat to the Global Economic Outlook as it poses a downside risk to the economy. If the momentum of reforms is not maintained in the Euro Area than the risk of prolonged stagnation would increase
•   To move ahead of the risk factor, adjustment programs from the periphery countries should continue and be supported by the firewall developments for prevention of the contagion and take steps towards banking union and fiscal integration, the report stated.
•   In case of United States, excessive fiscal consolidation in short term should be avoided and it should raise the debt ceiling and should move ahead to identify a credible medium-term fiscal consolidation plan, that focuses towards entitlement and tax reform.
•    In context of Japan, the report identified that it should find out a medium-term fiscal strategy as lack of such an strategy can bring risks to the stimulus package to it
•  The developing nations and emerging economies need to make fine policies to tackle the of rising domestic imbalances

The overall decrease in the forecast for the global economic growth rate is the result of the economic slowdown witnessed by the world due to the Euro Zone Crisis in existence. The Euro Zone crisis had an adverse impact on the export and import of the world, leading to great set-backs to the emerging economies of the world as well as the developed economies. Before, Euro Crisis the world also suffered from the recession that hit the United States of America in 2009. Japan also witnessed an economic slowdown after the Tsunami that hit the country in 2011 and affected the Fukushima nuclear Plant.

IMF forecasted Indian Economic Growth Rate to be 5.9 percent in 2013

The International Monetary Fund (IMF) on 23 January 2013 projected that the economic growth rate of India in 2013 would be 5.9 percent. The IMF also projected an increased growth rate of 6.4 percent for 2014 looking forward towards the gradual strengthening of the global expansion in India’s context.

In its update at the World Economic Forum (WEO), the IMF also forecasted that the global economic growth rate would be 3.5 percent, little higher than the 3.2 percent estimated earlier. As per the report of IMF, uncertainty in policy making and supply bottlenecks were one of the most visible causes that hampered the growth aspects of the economies like India and Brazil. It also stated that the scopes of easing the policy to any further extent have also gone down in these countries.

About International Monetary Fund (IMF)  

The International Monetary Fund (IMF) is an organization of 188 countries that works for fostering the global monetary cooperation, promote high employment and sustainable economic growth, facilitate international trade, secure financial stability and reduce poverty around the world. Since the end of World War II, the IMF had been playing a major role in shaping the global economy. The IMF has played a part in shaping the global economy.

Inventory Control Methods

There are many methodologies used for inventory control, here are those methods, along with their benefits and limitations:

Min-Max System: In this method, after a careful examination of you inventory needs, you set two lines – one at the top and one at the bottom of how much of each product you must keep on hand. When you reach the bottom line, you order enough of that product so you won’t go above the top line. As long as you’re somewhere in the middle, you’re okay.

Benefit: This method is simple and it makes the task of balancing inventory fairly straightforward.

Limitation: Its simplicity could lead to trouble because you might order too many products or run out before they arrive.

Two-Bin System: In this system, you have a main bin and a backup bin of products. You normally use the main bin, but once you run out and need to reorder, you use the backup bin to fill orders until the new products are received.

Benefit: You’ve always got spare products for emergencies and sudden rises in demand.

Limitation: The products in the backup bin could spoil or become obsolete unless they are cycled into the main bin every now and then. Also, you need to keep an eye on your carrying costs.

ABC Analysis: Separate your products into three groups: A, B and C. Expensive items go into A, less-expensive items go into B, and small parts and other inexpensive items go into C. This way, you can organize your data and know how long it will take to order different parts and products, based on which group they’re in.

Benefit: Now this is more like it. This system doesn’t set rigid standards on how many products to keep on hand; it simply tells you how long it will take to order those products. You can do the rest with the help of inventory control software.

Limitation: It still requires a lot of work to maintain healthy inventory levels.

Order-Cycling System: Forget constantly checking your inventory. This system lets you do inventory checks at set intervals (e.g. 30 days) and reorder products that are likely to run out by the next check.

Benefit: If you’re REALLY good at inventory management, you might be able to pull this off. It certainly doesn’t require as much time as other methods.

Limitation: This system is risky and costly! Doing a physical inventory check every 30 days or so will get expensive quickly. And there’s no margin for error on ordering the right amount of products at each check.

There you go! Now you can decide which of these inventory control methods will work best for your organization, depending on your size, products and needs.

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