Indian Economy: News and Discussion (Apr 1 2011)

gakakkad · Post by **gakakkad** » 23 May 2012 19:44

my condolences.. INR 7.5 is the steepest single increase till date..

Consumption will AoA moderate ... and the depreciating pressure on INR would be relieved ... The best outcome of this is that CON party will be further thrashed... This is one of the reasons why Dollar can never reach 90 INR level..

Singha · Post by **Singha** » 23 May 2012 19:50

Subject: FWC: Rupee falls to all-time low, but FM says no need to panic
Date: Wed, 16 May 2012 10:42:09 -0700
From: Jas Jain

FWC: Rupee falls to all-time low, but FM says no need to panic
RBI is intervening to keep the rupee (INR) from falling. India is not Switzerland and rupee is no Swissie. SNB intervened because Swissie was grossly overvalued and bringing it down became a necessity for the economy. INR is overvalued and needs to fall. Once the global depression begins (could happen at any time without much advance notice) the foreign capital that is leaving leisurely now would flee like a herd getting out of a narrow gate and trampling one another. Only stupid people would keep their capital in INR. Indian govt's ability to manage the economy during the depression is next-to-nil. Crooks would manage their own interests with hired goondas while the govt looks the other way and politicians blaming one another. Bhagavan pe bhrosa hai. What a system!

Jas

gakakkad · Post by **gakakkad** » 23 May 2012 19:56

INR is not over valued unlike the swiss Franc ... The Guy Jas intends to scare investors from India...

Only stupid people would keep their capital in INR.

Au contraire this is a good time to repatriate money...

Once the global depression begins (could happen at any time without much advance notice)

Doomsday wallah I pelieve...

That CON party was forced to increase fuel price shows that they can't defy economics ... They can't get through the food security bill...And will have to rationalise subsidies.. Favorable Electoral outcome can no longer be achieved by commie tactics .. And Yuvraj will never become PM...Unless MMS is made to abdicate , which I sincerely hope... Baba would mess so big that CON would not get re-elected in 100 years...

Theo_Fidel · Post by **Theo_Fidel** » 23 May 2012 20:07

Big Mac index says that Rupee is vastly undervalued. Real value is on the order Rs15-20 to the dollar IIRC. We simply import too much compared to size of GDP. $450 Billion for a $2 Trillion economy. Approaching 25% of GDP. We are not used to this much trade.

If GOI would roll 'invisibles' & remittances into Current account like the rest of the world the CAD would look a lot more realistic.

Gold prices are falling as that bubble is being pricked. There is 1000's of tonnes sitting in warehouse around the world due to speculator activity. As Gold declines that number should moderate. Still think the key long term problem is POL imports. But it has been so since I was a Nanha munna. Best we can do is find a way to replace say 30%-40% with ethanol/biodiesel so the POL price increase doesn't crush us this way each time.

Suraj · Post by **Suraj** » 23 May 2012 20:23

The petrol price hike is a signal that exchange rate management is getting more priority than inflation rate management now, and/or that the expectations for the latter remain muted. Already put in one remittance order and another going through.

vera_k · Post by **vera_k** » 23 May 2012 20:55

Inder wrote:Do any of you read Jas Jain's posts ? What do you think about the "stock" of India (Rupee) falling so rapidly in the past 6 months ?

Jas Jain says Re will go to 90-100 to the dollar. I'm perturbed because he has a knack for calling macro events years in advance.

What are the timeline and reasons for that devaluation? The last 10 years since 2002 have been unusual in that the USD has steadily depreciated. If it recovers due to Euro weakness, that should cause the INR-USD rate to move by that much (30-35%) against the INR.

vina · Post by **vina** » 23 May 2012 21:10

Toldja something will get done. However, the petrol price hike is just a easy powder puff. The real enchilada is the diesel hike and LPG hikes that must be done. If it aint, the imbalance away from petrol, towards diesel will grow and nothing will happen at all to the overall deficit.

I was expecting something over the weekend, but I guess the Rupee free fall forced the Govt's hand. Now they have no choice. Like as always, India does things only in a crisis.

I had warned this about UPA's budgets, right from the UPA-II days of Pranab Mukherjee. It was an all ducks must line up to work budget. They got lucky initially, but then things simply fell apart, and the NAC jokers "already" spent the future growth in anticipation!!

and that too on dig a hole and cover a hole kind of schemes.

vina · Post by **vina** » 23 May 2012 21:22

gakakkad wrote:@Vina saar , it is highly unlikely that right to food would ever be rolled out ... We just don't have the fiscal depth for that.. 200b worth of loan is due for repayment next year..inflation will not be controlled ...By 2014 there will be massive takleef on the economic front , if at all the gober-mint survives...there is nothing they can do now...CON party is between the devil and deep blue see

I do think that there is a chance to cover atleast the poorest 15% of the population in some kind of scheme. What cannot happen is the NAC wet dream of having a Scandinavian style welfare state with such a narrow tax bases in India that covers 75% of India's population. To have such a welfare state , you need everyone to pay taxes and at 60%! Cant work in India. The govt has to choose where to put it's money. It cant have it all. That is the kind of leadership which Rahul Gandhi should come out provide and bat for the role of the govt where only the govt can provide the service (social goods like support to the poorest, public education and health) and withdraw from this trying to run PSUs and whole parts of the economy very shabbily (like SAIL and Coal India for instance).

The best thing that can happen to India is for commodity prices to crash. That will save the day for India. Whether that is Eurozone breaking up or China hitting the wall ( I wish the latter happens, the former seems more probable, the latter less so, though the ripple on China could well be so) or whatever factor it is. We are structurally like Japan / SO Ko, in that we import our energy to a large extent and a lot of raw materials . We dont have a similar export engine like Japan /So Ko , thanks to the "Export Pessimism" of the planning commission / DSE/St Stephens/Oxbridge/JNU ding dong geniuses of yesteryears who ran the economic policies of this country until 91.

Hmm. Just saw on Bloomberg that oil fell below $90 a barrel in NY for the first time since November. The govt could get very lucky if they pass on the increase the rupee price , and oil goes to 70 or so, the fiscal deficit will start to look very good indeed in 9 months or so, setting the state for the NAC jokers to do their usual "spend baby spend" cycle all over again.

vina · Post by **vina** » 23 May 2012 21:28

gakakkad wrote:my condolences.. INR 7.5 is the steepest single increase till date....

Actually, that is misleading. In my memory , the single biggest hike was in the mid 90s , was it 95? when Chidamabaram was in the Finance ministry as part of Deve Gowda or someone's ministry. Petrol went up from Rs 25 a liter to Rs 30 a liter. A rupees 5 hike, but on a Rs 25 base a whopping 25% increase.

This 7.5 on a much higher base will work out to be proportionally smaller.

gakakkad · Post by **gakakkad** » 23 May 2012 21:59

fall in commodity prices would only provide symptomatic relief..In fact it would worsen the disease process ,, it would be like a painkillers to a patient of cancer , masking the pain but causing him to ignore the cancer..

If commodity prices fall , CON party would take credit for it and continue to dole out socialist schemes , causing things to rot further..things may seem better in the short term ,but in a few months time we ll be back to square one ..aam aadmi does not follow economics with the keenness brfites do..they ll actually believe that CON party caused the fall in commodity prices. ..

High takleef now would be for the greater future tomorrow....so I actually hope things get worse for the time being... eventually the crony socialists would have to be ousted...

if inflation rises to say 15-20% than people will be on streets ...someone will have to be the bali ka bakra... I believe it will be the people who got us to this mess...

putnanja · Post by **putnanja** » 23 May 2012 23:36

I think the Rs 7.50 hike is to test waters. There is bound to be protests, and they will "roll it back" to around Rs 5-6, which is what I believe they would like for now

member_20283 · Post by **member_20283** » 24 May 2012 06:10

vera_k wrote:
Inder wrote:Do any of you read Jas Jain's posts ? What do you think about the "stock" of India (Rupee) falling so rapidly in the past 6 months ?

Jas Jain says Re will go to 90-100 to the dollar. I'm perturbed because he has a knack for calling macro events years in advance.
What are the timeline and reasons for that devaluation? The last 10 years since 2002 have been unusual in that the USD has steadily depreciated. If it recovers due to Euro weakness, that should cause the INR-USD rate to move by that much (30-35%) against the INR.

Timeline is 2012-2014. His calls on US Dollar and US Treasuries have bee spot on. And he sees further spike in dollar and treasuries. The Euro crisis is not helping the dollar fall either. There is a blog with his dated posts. Jasjain dot blogspot dot com. He writes on safehaven dot org also.

He has even called for political disintegration of India by 2016. He made this call in 2006.

Maybe a pinch of salt ?

Look at his dollar predictions. Everyone was speculating the dollar would weaken and he called for the opposite.

Philip · Post by **Philip** » 24 May 2012 06:52

"No need to panic",says the purser of IMS Titanic,
The captain's all at sea with the Indian economy.
Into a perfect financial storm,is the skipper's norm,
While the purser makes whoopee at the drowning rupee!
The firang passenger's have abandoned ship,taking to the boats and giving the slip,
They've even stolen the ship's silver and the casino's chips!

The purser's chief occupation is plotting presidential ambition,
While below decks,the Italian owner cashes in her fat cheques!
The passengers are all screaming while the skipper keeps dreaming,
"Rescue is always at hand from the (US of A) promised land",
Not for those in steerage but for only those with leverage,
Who've been given lifejackets to survive the sinking stock markets!

Amidst the gloom,the ship speeds to her doom,
While the officers play the game,"who's to blame
"Not I" says the skipper,a habitual gipper,
"Not I" said the purser,I'm only the bean counter"
"Not I" said the owner,knowing well the ship's a goner,
"Don't worry about the lost lives,as long as the dynasty survives"!

vera_k · Post by **vera_k** » 24 May 2012 07:33

Most of the media focuses on the USD-INR exchange rate. But the INR has been steadily against the EUR. Over the last decade, it lost 60% of its value against the EUR (from 45 to 71).

If the EUR-USD move reverses, then a USD-INR exchange rate of between 70-75 rupees to the USD is baked in just due to a strenghtening dollar. Anything beyond that would depend on other factors.

EUR vs. USD

USD vs. INR

EUR vs. INR

vina · Post by **vina** » 24 May 2012 10:08

gakakkad wrote:If commodity prices fall , CON party would take credit for it and continue to dole out socialist schemes , causing things to rot further..

Oh well, I am all for the Congress to come back to power and Yuvraj to be anointed the Prime Minister. I hope he just kicks out the absolutely revolting cronies and creeps like Digvijay Singh that somehow seem to infest the Congress. There was noise recently about some action for the UP debacle. I do hope the Digivijay Singh kinds get canned. The "old style" of Arjun Singh mold creeps and the tired old handing out dole and socialist rhetoric and the mai-baap kind of culture is what does congress in.

Time to clean out the cobwebs, get the focus clearly on what the govt should do and shouldn't do, have a key set of missions where it is only the govt and absolutely no one else can do the job , especially in universal primary education, basic public health and of course food and economic security for the vulnerable , focus the govt on that, shrink it's role in other areas.. Yeah, that will make for a wonderful set of policies , that actually can be realize if executed well and make a massive difference to the country very positively. Yuvraj can take all the credit for that, just like the MNREGA which set the floor price for wages around the country.

After all, a Congress shorn of it's socialist and mai baap excesses and surfeit of creepy retainers , is any day far better than the BJP in my book, and as far as I am concerned, Commies dont belong here, but in PRC and Soviet Russia. The BJP is okay if there was a Vajpayee, unfortunately, there is no one like him around, with either his charisma and bigheartedness and ability to be inclusive.

Sri · Post by **Sri** » 24 May 2012 10:25

Inder wrote:
Timeline is 2012-2014. His calls on US Dollar and US Treasuries have bee spot on. And he sees further spike in dollar and treasuries. The Euro crisis is not helping the dollar fall either. There is a blog with his dated posts. Jasjain dot blogspot dot com. He writes on safehaven dot org also.

He has even called for political disintegration of India by 2016. He made this call in 2006.

Maybe a pinch of salt ?

Look at his dollar predictions. Everyone was speculating the dollar would weaken and he called for the opposite.

Are you Jas Jain???

Aditya_V · Post by **Aditya_V** » 24 May 2012 11:32

vina wrote:
gakakkad wrote:my condolences.. INR 7.5 is the steepest single increase till date....
Actually, that is misleading. In my memory , the single biggest hike was in the mid 90s , was it 95? when Chidamabaram was in the Finance ministry as part of Deve Gowda or someone's ministry. Petrol went up from Rs 25 a liter to Rs 30 a liter. A rupees 5 hike, but on a Rs 25 base a whopping 25% increase.

This 7.5 on a much higher base will work out to be proportionally smaller.

The increase was from INR 20 to INR 25 and the year was 1996- CHidambaram's dream Budget as part of #rd Front Deve Gowda Govt. I know since I turned 18 and got my Gass Gazzling High on pick up 2 stroke bike 2 weeks before that Hike.

One reason INC can never change and do without NAC, it is the fig leaf of such spending to cover the Loot(everbody is corrupt but there are varying degrees and INC greed as shown in Commwealth, 2g, Coal Scam, GAS related scams have reached unmanageble propotions). Rather Jean Dreaze and co alone cannot be blamed, the wholesale loot in 2004-10 period is equally responsible for the mess we are in today. Ifand they are addicted to it. If things work out for them in 2014 like in 2009 best of luck to them. But with All weather friends in SP and BSP, UPA III is a virtual certainity.

Singha · Post by **Singha** » 24 May 2012 12:48

I hope he just kicks out the absolutely revolting cronies and creeps like Digvijay Singh that somehow seem to infest the Congress. There was noise recently about some action for the UP debacle. I do hope the Digivijay Singh kinds get canned.

thats not going to happen. he is the Drona to Yuvraj being a kaurava prince. very close confidante and mentor. he isnt going anywhere. will get a big ministry if Yuvraj is coronated. is kept in the 'dog'house outside any govt role right now prolly because powerful current ministers dont like him.

there is no need or trigger in the INC for internal reform of the type you prescribe. when the motivations of the 'Gods' themselves are such, why blame the followers.

vijayk · Post by **vijayk** » 24 May 2012 17:54

vina wrote:
gakakkad wrote:If commodity prices fall , CON party would take credit for it and continue to dole out socialist schemes , causing things to rot further..
Oh well, I am all for the Congress to come back to power and Yuvraj to be anointed the Prime Minister. I hope he just kicks out the absolutely revolting cronies and creeps like Digvijay Singh that somehow seem to infest the Congress. There was noise recently about some action for the UP debacle. I do hope the Digivijay Singh kinds get canned. The "old style" of Arjun Singh mold creeps and the tired old handing out dole and socialist rhetoric and the mai-baap kind of culture is what does congress in.

Time to clean out the cobwebs, get the focus clearly on what the govt should do and shouldn't do, have a key set of missions where it is only the govt and absolutely no one else can do the job , especially in universal primary education, basic public health and of course food and economic security for the vulnerable , focus the govt on that, shrink it's role in other areas.. Yeah, that will make for a wonderful set of policies , that actually can be realize if executed well and make a massive difference to the country very positively. Yuvraj can take all the credit for that, just like the MNREGA which set the floor price for wages around the country.

After all, a Congress shorn of it's socialist and mai baap excesses and surfeit of creepy retainers , is any day far better than the BJP in my book, and as far as I am concerned, Commies dont belong here, but in PRC and Soviet Russia. The BJP is okay if there was a Vajpayee, unfortunately, there is no one like him around, with either his charisma and bigheartedness and ability to be inclusive.

Haha ... You must be living in la la land.

The cronies are the fronts for the 2Gs. They attack, divide and communalize any situation for the benefit of the dynasty. Look at CWG scam. All the loot went to dynasty. So the press corners their chmachas who went to jail for them and now that public forgot it, Kalmadi is back and dynasty is safe.

If you are all for yuvraj or dreaming of CON party without socialist policies, you are probably out of mind. No facts or evidence or logic will repair that mind. CON party lives on communal divisions, passions, riots, caste divisions, reckless spending. They have to show that it is all their generosity to perpetuate their dynasty. If you haven't gotten it by now, you will never get it.

vijayk · Post by **vijayk** » 24 May 2012 18:10

vina wrote:
Singha wrote:do people think interest rates will be lowered further as a prelude to 2014 elections to keep the middle class and small businesses pacified and under control?
No. Not now. Will depend on how the commodity prices and global growth plays out and what the so far all bark and no bite "we need to bite the bullet" and "need to take some tough decisions on both revenue and expenditure" pan out. This is the UPA's absolute chance to get the fiscal and financial scene back in order and get growth going and inflation back under control.

If they blow it now, it is curtains to Yuvraj running 2014 on a "Bojitiv Newj" campaign. So I guess, somethings will get done. If things work out REALLY well, expect the long expected big bang "Right to Food" stuff rolled out in earnest in Jan 1st week of 2014, some 6 months before the election . It is an extended version of NTR's Re 2 rice scheme, which I think Didi in West Bengal has adopted wholeheartedly and that along with MNREGA handouts and other devil's thoughts cooked up by the National Advisory Council , might what bring Yuvraj in triumphantly to the throne in Dilli.

The 2Gs brains are empty when it comes to economic or any issue. Their only strength is Indians are incapable of understanding any issue. They obsess about religion and caste. The minority communalism, leftist hatred of hinduism helped them to build a solid foundation to weaken Indian society with the help of media.

I think this is the time for BJP to launch a high decibel campaign against mulyam, laloo, maya, and even manta holding them responsible for price rise, inflation, economy, corruption fr supporting CON alliance. Someone needs to make that link of these rank opportunists to CON party and scare them of their association. The idiots in BJP should spend more time on this project than destroying state leaders with the help of CON SONIA and CBI.

If after 10 years of seeing the buffoons, you have not realized that these are scheming idiots who work to divide Indian society on communal/caste line, destroy institutions such as CBI, courts, EC, Parliament, CAG, PAC and use the public money as if it is their treasury, you have not learned any thing.

Theo_Fidel · Post by **Theo_Fidel** » 24 May 2012 18:22

http://online.wsj.com/article/SB1000142 ... lenews_wsj

Monsoon rains arrived over India's Andaman Sea Wednesday, after a delay of about three days, according to the India Meteorological Department.

gakakkad · Post by **gakakkad** » 24 May 2012 18:41

@ Vina al hair birdee , Me shaaked....

If due to fall in commodity prices INR gains value against the USD than we ll be backs to commie policies...there might be a X billion dollar of loan waiver etc...And you are way over rating rahul baba...the guy has not demonstrated sufficient intelligence to tighten his belt should to prevent his trousers from falling ...Imagining him as a PM is beyond preposterous...

Barring PVNR no one in CON party demonstrated any form of economic sensibility ...or any other form of sensibility for that matter...

UPA 1 sailed through by the sensible policy of its predecessor and sheer good luck because of high global growth... When luck ran out last year things became painfully apparent ...

The BJP is okay if there was a Vajpayee, unfortunately, there is no one like him around, with either his charisma and bigheartedness and ability to be inclusive.

There is a certain Narendra Modi who governs an industrial/agricultural powerhouse ... than we have a Sushil Modi who is doing a good job in Bihar...etc...NDA ruled states have grown far better than UPA ruled ones...

Maha is the only UPA ruled state that has done well.. for it it should get no credit ...because Maha growth is mainly due to Mumbai which accounts for nearly half its GSDP ... Mumbai was the financial capital since independence and perhaps even before that...And is still the most important population centre economically...

NDA had far more sensible economic policies...the growth rate acceleration had begain in 2002 itself ...and it has lasted this long...

Point me one sensible policy measure implemented by the UPA ? there is none...

And compare it with the NDA ....They did a far better job...Look at the efficiency at which NHDP was executed....and other measures...

Oh well, I am all for the Congress to come back to power and Yuvraj to be anointed the Prime Minister. I hope he just kicks out the absolutely revolting cronies and creeps like Digvijay Singh that somehow seem to infest the Congress. There was noise recently about some action for the UP debacle. I do hope the Digivijay Singh kinds get canned. The "old style" of Arjun Singh mold creeps and the tired old handing out dole and socialist rhetoric and the mai-baap kind of culture is what does congress in.

point me out one non commie in con party ? someone who has apparently sensible economics in him ?

vijayk · Post by **vijayk** » 24 May 2012 20:21

http://www.thehindu.com/opinion/editori ... 449557.ece

CON press is trying its best to put a positive spin on the worsening situation to help the CON dynasty.

Words no longer count

Unfortunately, the list of what could have been is longer than the list of what is. Compared to UPA-I, which saw the implementation of the National Rural Employment Guarantee Scheme, the passing of the Forest Rights Act, the waiver of farm loans, and the implementation of the Right to Information Act, the second edition has been lacklustre.

The Right to Education Act would surely have counted as a big positive if only its stated aims were close to fulfilment more than two years after its passage in Parliament.

Indeed the Act typifies the working of the UPA: big on promise, tardy in implementation.

At the same time, there have been positives, especially on the foreign policy front. Prime Minister Manmohan Singh showed uncharacteristic drive in getting past establishment hawks to push for talks with Pakistan.

Sadly for the Congress, the 2014 election is unlikely to revolve around these successes. UPA II surely needs a course correction in its domestic policies.

Congress president Sonia Gandhi, who seems more clued in than Prime Minister Singh about India's need for social democratic initiatives, showed a readiness to give the government a welfarist direction when she spoke at Tuesday's function to mark its third year in office. Without it, the UPA will surely drift and lose way in the next two years.

So... Chindu wants more welfare and more dynasty. Good for us..

gakakkad · Post by **gakakkad** » 24 May 2012 20:28

so this pappi jhappi ,ration card on arrival to poaq-roaches is counted as a positive step ?

vijayk · Post by **vijayk** » 24 May 2012 20:45

gakakkad wrote:so this pappi jhappi ,ration card on arrival to poaq-roaches is counted as a positive step ?

yes. indeed. any Chinese, Paki leverage on India, any terrorism perpetrated by them on India is positive and welcome to them.

Theo_Fidel · Post by **Theo_Fidel** » 24 May 2012 21:01

This is getting quite OT and out of control. Please cut out the language. Its not funny.
-----------------------------------------------

I have said this before, but without full social reform we will hit a wall. There needs to be an appreciation for the dignity of work.

http://www.nytimes.com/2012/05/24/world ... ter24.html

There are good reasons why the voters, despite all their grousing, trust the political class more than the middle class and businessmen. For too long, they have been exploited by those above them and treated very poorly. Many of them have been tricked into selling their land cheaply. So now they stand united, ready to break into violence at any moment, making land acquisition for industries and infrastructure complex, expensive and unpredictable.

Those who migrate from the villages to work in the cities see no redeeming qualities in the educated middle class. Household helpers are made to work long shifts, with no days off (except the drivers, who get Sundays) for monthly wages that are no higher than the price of two 5-star meals. Even in the most luxurious houses, domestic workers are given terrible accommodations, as if in contempt for their position.

The politicians, on the other hand, have been far more useful. They have delivered free or cheap grain, inexpensive kerosene and diesel fuel, guaranteed employment for at least 100 days a year, increasingly efficient health care for poor families’ children, who are surviving longer and longer, and free hospitals that don’t look fancy but do save lives. In this miserly country, the greatest philanthropist is indisputably the government.

vina · Post by **vina** » 24 May 2012 21:19

I have said this before, but without full social reform we will hit a wall. There needs to be an appreciation for the dignity of work.

It will take another 20 years before we get out of this "dole" and entitlement politics. That will happen when the middle class is a substantial size , that is enough to vote out the "distribution" welfarists. They after all, get next to nothing for the taxes they pay!

It is already sort of happening. As cities are growing, the electoral redistricting happens giving more seats to urban areas , like what happened in karnataka, that will in the long run influence the politics and the nature of the political economy as well.

Until then, there is a logic, however perverse to all this dole shole /welfare business. The problem is, there is essentially a 2 speed country. The dynamic south and west and a very Bimaar Bimaru states with a Thieving New Delhi and Dilli wallas that steals from everyone and everywhere.

I think we should start recognizing that reality and not have a one size fits all policy for all india. For eg, railways. Given better trains, and charge more in the south and west (dilli will suck blood as always and not pay), run the old stock, full depreciated rakes in Bimaru and Bengal!

vina · Post by **vina** » 24 May 2012 21:34

gakakkad wrote:Imagining him as a PM is beyond preposterous...

Barring PVNR no one in CON party demonstrated any form of economic sensibility ...or any other form of sensibility for that matter...

That is simply not true and you know it. There are plenty of talented people. Jayaram Ramesh, Nandan Nilekani (who I think will be invited in a future Cong govt in a pretty senior position definitely) , Sam Pitroda, just to name a few.. all those kind of faces will get more prominence and positions of responsibility, rather than the tired old aya ram, gaya ram and Arjun Singh kind of manipulative old style power brokers of the Congress in a future govt. That is for sure.

UPA 1 sailed through by the sensible policy of its predecessor and sheer good luck because of high global growth... When luck ran out last year things became painfully apparent ...

True. Don't dispute that. The problem was that the commies were in the govt in UPA-1 and prevented any reform and took credit for that publicly. Manmohan did a great thing in the nuke deal, he ditched the commies, got it done against great odds and proved that when the chips are down and when it comes to national interest, the Congress can and will act decisively.

Narendra Modi, Sushil Modi .

Too divisive and polarizing. Will has a strong "anti" vote against him nationally, not enough "pro" votes. Latter, no one has heard of him. Sushil who ?

And compare it with the NDA ....They did a far better job...Look at the efficiency at which NHDP was executed....and other measures...

Yes of course. Congress would not have built something like an NHDP for a 100 years and all of us would still be driving on two lane roads all over the country. The NDA regime under Vajpayee was good. It is a pity he didn't get the 2nd term he deserved, largely due to the rout in Andhra under CBN. But then CBN was blindsided to the underlying rural distress. YSR /Congress benefitted from NREGA in Andhra , atleast in the 2nd term.

vera_k · Post by **vera_k** » 24 May 2012 22:09

For that matter, Manmohan Singh is pretty talented. But if the talented people in government had any ability to impact economic decisions, we wouldn't be having this discussion.

Theo_Fidel · Post by **Theo_Fidel** » 24 May 2012 22:50

It is oil that is causing our problems if there is one. Esp. I suspect the loss of Cheap Iranian oil. There is a price to everything.

Way back when people were declaring the demise of the dollar I pointed out that at times of uncertainty the dollar is everyones refuge. Now it is Rupee doom doom doom...

http://india.blogs.nytimes.com/2012/05/ ... s-falling/

So while Mr. Acharya and Mr. Prasad are right to point to burgeoning fiscal and current account deficits as likely proximate causes for the rupee’s fall, an equally important cause, over which the government has no control, is rising commodity prices, principally of oil, on world markets. As a rule of thumb, currencies of oil importers fare poorly when the oil price is high or expected to rise, and the reverse is true for oil exporters.

For instance, Canada’s exchange rate with the U.S. dollar, which has fluctuated wildly over the past decade between a low of about 66 cents and a high above parity, can largely be explained by the vicissitudes of the price of oil. It’s therefore no surprise that India, which is heavily reliant on foreign oil, will see a drop in the value of its currency when oil and other commodity prices are high and expected to remain so.

A second and equally important factor beyond the Indian government’s control is the precarious state of the European economies and the very real possibility of the breakup of the euro zone, with an almost certain default by Greece looming in the near future, and possible fiscal ruin in Spain and Italy likely not too far behind. In times of crisis – and this is certainly one for the global economy – there is a flight to a safe haven, which for the last half-century or more has been the U.S. dollar.

Thus, the Indian rupee’s weakness, the flip side of which is the strength of the U.S. dollar, is as much about investors’ desire to park their assets in dollars, and shun volatile emerging market currencies, while the global economy is in turmoil.

It’s true that the rupee has fared worse than other important Asian currencies in recent months, which suggests that idiosyncratic, India-specific factors may be at work. But this argument misses out on the lessons of modern economic theory: the idea that a “strong” currency is a necessary correlate to a strong economy is an old discredited mercantilist idea, but with an unshakeable intuitive appeal to the layperson and a surprising resilience even among sophisticated economists. That’s why there were “parity parties” in Canada when the dollar breached 1:1 with the U.S. dollar a few years ago.

Popular the idea may be, but it’s still wrong. Rather, the “right” value of a currency is determined in foreign exchange markets, and there’s nothing inherently good or bad about a currency going up or down, any more than it would be good or bad for the price of oil, or bananas, or anything else to go up or down in response to market conditions.

Sometimes, in their zeal to see a fact as evidence in support of their favored policies, analysts forget the most basic lesson of all that economics has to teach: often, it’s as simple as supply and demand.

vijayk · Post by **vijayk** » 24 May 2012 23:21

vera_k wrote:For that matter, Manmohan Singh is pretty talented. But if the talented people in government had any ability to impact economic decisions, we wouldn't be having this discussion.

Bingo! The same ManMohan did magic because PVNR asked him to take care of the country. PVNR was a patriot and he took a hit for doing what is necessary to save the country in a crisis. Sonia used MMS's credibility/honesty with middle class and destroyed the trust middle class had in him and along with it economy. Now that she and her cronies presided the destruction of the economy, looted lakhs of crores, he is being blamed.

Suraj · Post by **Suraj** » 24 May 2012 23:23

vina, I don't agree with you on the 'clean up the sycophants and INC will thrive' line of thinking. Let me state my point of view - the fundamental identifier of the INC is not the Nehru-Gandhi dynasty. It is 'the machine' - the vast network of top down patronage and a level of sophistication in the art of politics that no other power bloc in the country can match. These so called sycophants run the machine. Neither SG nor RG will get rid of it. Even an iron lady like IG did not; in fact she was the one who created this in the first place. The machine can and will topple even a charismatic Nehru/Gandhi leader, like it did to Rajiv, who squandered the greatest mandate in Indian political history ever, in under 5 years thanks to his naivete at dealing with the machine. UPA-2 is basically following the same lines. Contrary to general perception, I do not feel SG runs the party top down; she's dependent on the inputs from the machine.

Further, I disagree with the extent of Modi's polarization. That's a very urban English language view of him. I would argue that vernacular perception is nowhere near as negative, and I'm not even referring to Guj alone. It must be remembered that in 1996 the NDA were effectively a 'wild eyed mosque destroying fringe' (not my opinion, but characterization for dramatic effect) and that did not stop them from winning a mandate. Yes they had ABV, but they also had the kar sevaks and LKA. Same for the current NDA - they have Modi, but also a collection of acceptable compatriots at the top level.

However, the NDA are singularly politically inexperienced. They've learned little from 2004, based on their actions today. The INC will run rings around them at this. The NDA would make better central administrators simply because they lack the vast network of patronage to satisfy. However, they're not as good as INC at winning elections. The next general elections are the NDA's to lose, and based on their current level of political maturity, they will likely lose it. I don't expect RG to clean house at the INC - he'll be just the most visible cog of the machine with some sprayed on charisma; he has as much political sophistication as his father, which is to say not much.

Having said this, the topic is increasingly about politics and not the economy. As much as latitude has been provided to discuss this, the moment the discussion gets polarized or personal, this thread will get its long delayed lock and the next one will be moderated more strongly.

nachiket · Post by **nachiket** » 25 May 2012 02:28

Theo_Fidel wrote:It is oil that is causing our problems if there is one. Esp. I suspect the loss of Cheap Iranian oil. There is a price to everything.

..<snip>..

I don't really buy this. Oil prices are hovering near $100 a barrel right now and even went down a bit in the last few days. They were much higher in 2008 right before the recession caused them to crash. The rupee was in the low 40's during this period and in fact nosedived after the recession hit when oil prices were incredibly low.

To a layman at least, it appears that macroeconomic factors like the burgeoning fiscal deficit and poor investor interest seem to have a much bigger impact on the rupee. Blaming oil prices is a convenient cop-out for the government which broke our economy.

ldev · Post by **ldev** » 25 May 2012 05:02

Suraj wrote:The petrol price hike is a signal that exchange rate management is getting more priority than inflation rate management now, and/or that the expectations for the latter remain muted. Already put in one remittance order and another going through.

I think it tries to address credit rating agencies primarily. The underrecoveries by the oil companies I believe are financed by GOI via oilbonds which are not part of the budget but add to overall GOI debt and the rating agencies probably add back that amount in calculating the overall fiscal deficit. Given there is full recovery on petrol, the latest hike is probably because of an even more skewed distribution towards diesel, kerosene and LPG.

vina · Post by **vina** » 25 May 2012 05:22

I think it tries to address credit rating agencies primarily. The underrecoveries by the oil companies I believe are financed by GOI via oilbonds which are not part of the budget but add to overall GOI debt and the rating agencies probably add back that amount in calculating the overall fiscal deficit. Given there is full recovery on petrol, the latest hike is probably because of an even more skewed distribution towards diesel, kerosene and LPG.

Not true. The oil bonds are now part of the Govt's deficit and have been accounted for in the budget deficit , since the last 2 budgets of Pranab Mukherjee IIRC, the last one definitely. It is not an off the books shenanigan like what was done earlier in the mid 90s and mid 2000s.

That much of accounting is lot cleaner. The proof of the Govt's real will be seen if they can hike diesel and LPG prices. That is crucial. I do think we should pay attention to what Pranab Mukherjee said in the budget. The Level of subsidies is capped at 2% of GDP and beyond that the Central Govt wont bear it, but pass it on , so we are moving from an unlimited subsidy regime to a fixed /capped subsidy regime.

vina · Post by **vina** » 25 May 2012 05:28

Suraj wrote:It is 'the machine' - the vast network of top down patronage and a level of sophistication in the art of politics that no other power bloc in the country can match. These so called sycophants run the machine. Neither SG nor RG will get rid of it. Even an iron lady like IG did not; in fact she was the one who created this in the first place.

The Congress machine was always there, infact, it was most powerful, before, during and after independence , with it's zenith under Nehru. The huge machine operators like Tandon in UP (the Congress boss there) were the kind of people who ensured the lock on Congress in Indian politics for like 40 years. It was IG who broke the "syndicate" and in some ways destroyed the Congress machine to get into power. It really is the loss of the machine in UP that is hurting the congress badly.

Having said this, the topic is increasingly about politics and not the economy. As much as latitude has been provided to discuss this, the moment the discussion gets polarized or personal, this thread will get its long delayed lock and the next one will be moderated more strongly.

Well, I am sure you would realize that the current trouble with the Indian economy is all due to the impact of the POLITICAL economy on the structure and nature of the real economy! You cant have a discussion on that point without the underlying political economy. Or else, it will be a Panda like "watching the paint drying on the wall " and going Rah-Rah about growth rates or R&D about fall if any of some parameter.

ldev · Post by **ldev** » 25 May 2012 06:18

vina wrote:
Not true. The oil bonds are now part of the Govt's deficit and have been accounted for in the budget deficit , since the last 2 budgets of Pranab Mukherjee IIRC, the last one definitely. It is not an off the books shenanigan like what was done earlier in the mid 90s and mid 2000s.

That much of accounting is lot cleaner. The proof of the Govt's real will be seen if they can hike diesel and LPG prices. That is crucial. I do think we should pay attention to what Pranab Mukherjee said in the budget. The Level of subsidies is capped at 2% of GDP and beyond that the Central Govt wont bear it, but pass it on , so we are moving from an unlimited subsidy regime to a fixed /capped subsidy regime.

Thanks for that clarification. I am glad that they have moved to a more transparent regime and the oilbonds are no longer off the books. Regardless I think this move is designed to placate the rating agencies. After S&P's April 25 change to negative watch and Fitch's refusal to budge, GOI is on notice that tough action is called for on the fiscal front.

member_20283 · Post by **member_20283** » 25 May 2012 06:27

Sri asked if I'm Jas Jain. Nope.

TheoFidel talked about purchasing power and the rupee. Is there some weight given to earning power ? A person working at a chain fast food joint can easily make 1500-2000$ if they work 50-60 hours a week. Will blue collar jobs pay an equivalent amount of rupees ? I think that saying Indian Re is undervalued solely based on purchasing power is not right. I guess my view is simplistic since I'm no economist

Pranav · Post by **Pranav** » 25 May 2012 07:54

vina wrote: Oh well, I am all for the Congress to come back to power and Yuvraj to be anointed the Prime Minister.

Rare is the person who can support the Mainos with a straight face (other than folks on the take).

Other than being kicked out of Harvard for brainlessness, and being arrested in Boston carrying loot in cash, we don't see what other claim to fame Raul Baba has.

Well maybe pearls of wisdom such as "Hindoo terrorists are the greatest threat", as he likes to tell Amreekis.

Austin · Post by **Austin** » 25 May 2012 09:18

Six reasons why India's rupee is in freefall