This from Money Morning:

In a surprise to many, India’s central bank has cut its base-lending rate four times since October, going from 9% to its current rate of 5.5%. After all, isn’t India’s economy growing nearly as fast as China’s? And isn’t that growth already being fueled by an unprecedented level of middle-class spending?

The answer to both questions is a resounding “yes.”

But there’s a pesky asterisk here – and that’s the global financial crisis, the cash drought that has sapped nearly every country directly through their banking systems, or indirectly through fluctuations in exchange rates and gyrations in revenue received from key trading partners.

And the Reserve Bank of India’s rate cut proved two things:

First, its new governor, Duvvuri Subbarao, is less afraid of inflation than he is a global slowdown.

“A 100-basis-point cut is an indirect admission that not all is ‘hunky dory’ with the India growth story,” Nandkumar Surti, chief financial officer at JPMorgan Asset Management India Pvt. Bank in Mumbai (JPM), told Bloomberg News. “One way to look at it is that the global problem has begun to affect us.”

For years, India doggedly raised rates to keep widespread inflation in check. It even went as far as subsidizing food and forcing the state-owned oil companies to sell gasoline to domestic consumers below cost.

And second, Subbarao believes India should taper its economic growth outlook for 2009.

This installment of “Outlook 2009,” report will chart India’s growth next year – its headwinds, tailwinds and possible factors that could turn the direction of either.

It will also reveal the two best ways investors can ride along with India’s economic growth, and take home profits from India’s bullet-proof industries – and in the process, perhaps even offset some of the losses they’ve incurred here in the U.S. market.

India’s Headwinds

India’s economy logged an annual growth rate of 7.6% for the quarter ended Sept. 30 – its slowest rate of growth in nearly four years.

India’s farm sector employs about 60% of India’s 1.14 billion people. That was great during last year’s run-up in commodity prices, but those prices have subsequently fallen, and so has the ag sector’s rate of growth – 2.7% in the quarter ended Sept. 30, which is well below the 4.7% pace of a year ago, according to The Wall Street Journal.

Manufacturing – also a powerful economic engine – has also stopped chugging as hard. That sector advanced 5.0% in the last year, a significant drop from the 9.2% growth from the same period the year before.

The global deceleration bears much of the blame for those drop-offs, as the United States far and away, remains India’s top trading partner.

But India is now dealing with a major share of homegrown problems – issues that have become ever more glaring as India’s economy grows in size.

The biggest problem of all: India’s domestic infrastructure is sorely deficient.

The country’s roads and highway systems are a mess, and its power grid is grossly insufficient for an economy of India’s size and rate of growth. That’s an observation that Money Morning guest columnist and well-known India-investment expert Karim Rahemtulla observed firsthand in India last year, when he lead an investor’s field trip around the country.

And while India has a prosperous and growing middle class, more than 200 million people living there are living in poverty. The government has taken many measures in the past decade to reduce poverty, but Rahemtulla says that the nation’s poor are “mostly against reform because they see little benefit from it.”

In a way, that, too, is an infrastructure issue. India’s poor don’t feel any kind of real connection to the country’s financial system. Indeed, many work day-by-day in the thousands of farming villages. A wave of government reform won’t affect them because they are living at such a far distance – physically, socially and culturally – from the parts of India that would benefit from any changes, new programs, or financial-stimulus efforts.

Even with those obstacles, the World Economic Forum (WEF) and Confederation of Indian Industry predict India will grow 7.4% to 7.8% in the 2008-2009 fiscal year.

But not everyone agrees with that assessment.

“Not going to happen,” Rahemtulla said. “There will be positive growth because India will reduce rates and devalue the rupee in order to stave off economic contraction which it can ill afford.”

But Rahemtulla was just as quick to credit the Reserve Bank of India for taking action as the global financial crisis spread across the world.

“They have explicitly stated they will aggressively promote fiscal and monetary stimulus to promote growth,” Rahemtulla said.

India’s Tailwinds

No question, the global financial crisis has crippled economic growth around the world. But the malaise – combined with the significantly reduced inflation that’s resulted from the downturn – has opened up a straightaway into which India can shift its cautionary policies, refuel its economic engine, and ultimately re-accelerate growth.

“Taking note of the downturn in the inflation rate, RBI has lowered the policy rate as well as the reserve requirements. RBI’s policy is now biased towards stimulating growth,” India’s former finance minister, Palaniappan Chidambaram, said in reference to the steps taken by the Reserve Bank of India.

“If the rate of inflation continues to decline, the policy rates may also moderate and the bias in favor of growth may deepen,” he told economic editors during a meeting late last year, Reuters reported.

India’s annual inflation fell near a 10-year low of 6.38% in December, a dramatic drop from the 13% growth rate in August. The trend is expected to continue, with inflation slowing to 5% or less by March, Pronab Sen, secretary at the ministry of statistics and program implementation, told Reuters.

That could open a door for the Reserve Bank of India to cut interest rates further, encouraging banks to lend money. And though lower rates may weaken the rupee, Rahemtulla says that will make India’s exports more appealing – especially as countries around the world tighten their belts amid the global financial crisis.

Low inflation isn’t the only tailwind that’ll rebound India’s economy back to its high speed.

India’s overall economy sputtered, but a pair of critical sectors posted promising numbers: Construction is up 9.7% from a year earlier, while India’s service sector has advanced at a robust 10.8% in that same span.

Credit goes to India’s middle class, which, like China’s, is growing in both numbers and overall strength.

Also very promising: Only $1 billion of the Reserve Bank of India’s $510 billion loan portfolio is in toxic Western assets.

That explains why – at a time when the global turmoil has claimed several major U.S. banks – none of India’s banks have gone bust.

India is unmistakably frugal. And its monetary policy proves that it is willing to accept a reputation for being a stifler of growth – instead of being known as being clumsy, overzealous and even reckless, as many U.S. banks are now accused of being.

Two Ways to Play India… for Cheap

Like every major economy, India is falling short of previous economic forecasts in large part because of the global financial crisis.

But make no mistake: Next to China, India’s economy will grow four-to-five times faster than most of the world’s other major economies – many of which are stuck in recession.

For now, investors should target the companies in India that are internationally competitive and are active exporters. That’s because any budget or inflationary difficulties will probably be reflected in a weakening of the rupee, which will help countries exporting from India.

Infosys Technologies Ltd. (ADR:INFY) is India’s premier exporter of software. The company carries almost no debt, and its shares are trading at a current Price/Earnings (P/E) ratio of 12.6, with a dividend yield of 1.48%. That P/E is quite low for a company in a high-growth market such as software.

Dr. Reddy’s Laboratories Ltd. (ADR:RDY) is India’s premier manufacturer of generic pharmaceuticals, and is positioned to benefit in the 2008-2012 period as many popular drugs lose their patent protection and are opened to international competition. In the near term, too, as household and corporate budgets tighten around the world, people will more likely opt for generic prescription drugs, instead of high-price name brands.

Dr. Reddy’s has moderate debt (about 50% of equity), and is trading at 19 times forward earnings – not at all pricey, given the high promise of the generic-drug sector. The stock also features a modest dividend yield of right around 1.0%.

Both stocks are down nearly 50% from their 52-week highs, suggesting value.

This is the eleventh installment of Money Morning’s”Outlook 2009” series, which looks at the global investing outlook for the New Year.

Source: India’s Economy Standing Firm Amid the Growing Global Financial Crisis

This from Today’s Financial News:

Wish you had a time machine? I just might be able to help you out with that!

Back in the early 1980s, International Living recommended buying real estate in northern Costa Rica. Readers who took this advice reaped big rewards.

This part of Costa Rica became the No. 1 destination among foreign retirees and investors who wanted to buy land that would increase dramatically in value. These buyers made very wise decisions, as the prices for beachfront property along the Pacific coast increased six-, eight-, tenfold, and beyond throughout the ’90s.

Your chance may have passed in this part of Costa Rica, but I can tell you where to find another pocket of opportunity… a place where prices have stayed low. Why? The area I’m talking about has been difficult to get to. That’s set to change — giving you the opportunity to position yourself ahead of the Path of Progress.

Some of the most amazing scenery in Costa Rica is in an area that runs south of Quepos on the border with Panama. Landscapes here in Costa Rica’s southern zone are dramatic: panoramic ocean views… lush tropical rainforest… and jungle-clad slopes rising sharply away from pristine stretches of sandy beach.

In a country with an established real estate market like Costa Rica, this sounds like just the type of place that would attract a lot of fervent investors. Difficulty getting there has kept it under the radar in terms of development and kept prices far lower than areas to the north.

The Costanera Highway is unpaved between Quepos and Dominical and the airports are small, local affairs. The airport in Palmar Sur is a one-woman show — she issues tickets, checks baggage, and answers queries, while you sit on a wooden bench overlooking the small strip, alongside your co-passengers… all 11 of them. No duty-free shop or airport food here.

These are exactly the kind conditions I look for when scouting for a good real estate opportunity… especially when plans to improve the infrastructure are in place.

For now, pricing here is among the lowest in Costa Rica. I found 1.25-acre lots close to Ojochal for as little as $65,000. Construction costs are roughly $90 per square foot.

So for $245,000, you can own your own piece of this tranquil setting in a custom-built, 2,000-square-foot house on a large lot.

That really is a good-value buy, considering that in Manuel Antonio, near Quepos a 2,200-square-foot condo averages $595,000 and a 1.25-acre lot is listed at $325,000.

The important news for investors is that road improvements on the Costanera Highway are underway and scheduled for completion next year. This should cut the 90-minute trip from Quepos to Dominical to 25 minutes.

An international airport is planned for Palmar Norte. Due to be completed in 2010 (the government has already allocated funds), the airport is planned to open in stages; the first, in 2010, will allow international flights with a maximum capacity of 50 passengers.

Eventually, the plan is to have a runway capable of accommodating even the world’s largest passenger plane, the Airbus A-380. An airport of this scale needs to be close to a hospital and one opened last year in Cortes, just 10 minutes from the airport.

I have been bullish about the opportunity in Costa Rica’s southern zone for the past six months. Today I got word of a government policy decision that makes this opportunity even more exciting.

The Costa Rican authorities have tightened up the regulations for developing land in this area. They are committed to controlling the pace of change, and prevent destruction of primal rainforest. This limits the number of future projects, and sets out to preserve the raw beauty of the landscape.

That all points to one thing if you get into this market today… the value, like northern Costa Rica in the ’90s, will soar in value.

Source: Another Chance to Make Big Profits in Costa Rica… But You Must Act Now

This from Today’s Financial News:

If you think the situation is bleak here in the United States, you would wet your pants if you took an in-depth look at Russia’s economy.

Its stock market seems to be closed more than it is open. Its currency is plunging. And its government is running out of options and money to fix the situation. Russia makes America look like we are sitting atop a booming economy.

Putin’s downturn could lead to some easy profit potential. But more on that in a minute.

For nearly all of the last decade, Russia’s economy has been based on the country’s ability to sell its natural resources to Europe and countries all around the world at a steep premium. Its Urals blend crude is not the best oil on the market, but it is all over the place in Russia and buyers once lined up to get their hands on it.

But now that the line has all but vanished and Urals blend is worth less than $53 per barrel, the Russian government has seen its revenues slashed in half. The country’s 2009 budget depended on its oil selling for $95 per barrel. But as of today, the country was forced to revise its estimate to $50 for 2009 and $55 for 2010. That leaves a significant hole in the Putin’s financial plans.

Running out of rubles

To make up for the deficit, Russia is forced to tap its rainy-day fund, consisting of billions of dollars of tax revenues from the oil industry. It is a serious blow to a country that was finally started to regain some of its global superiority.

Even worse than the country’s budget problems is the severe drop in its currency. Even with key central bank interest rates at 12%, the value of the ruble continues to fall. For foreign investors measuring their portfolios in rubles, the losses are stacking up quick.

Investors cannot pull their money out of the Russian markets fast enough and have created a run on the Russia markets. It is creating a whirlpool of problems for the country, forcing it to consistently close trading on its major exchanges.

Unless Russia makes dramatic political moves to drive up the price of its natural resources, it is in serious financial trouble.

This is where your profit potential comes in.

We already know President-elect Obama is widely expected to be tested during the first few weeks of his term. The worse Russia’s economy gets, the more likely it is we will see trouble from Moscow.

Just a day into Obama’s transition Putin and Medvedev promised to move its short-range missile armory into an offensive position if America’s missile defense system in Poland is not dismantled. It is a sure sign of political pressure to come.

And now, Medvedev is calling to extend presidential terms to six years. Do you think that has anything to do with his goals of getting Putin and his offensive goals back in power?

I have been working overtime to find ways to profit from this Russian hostility and desperation. I found some surefire winners. I am putting the finishing touches on my full report, right now. I should have it online within a few days.

Source: Russia’s financial desperation will lead to trouble