Indian Economy - News & Discussion 27 May 2012

[vina]

So Currency Swap is for Intra Trading currency between two trading countries , With China it will work as they are our 2nd largest trading partner after US.

With Russia you can trade for LNG with Rupee

Ofcourse assuming these nations were willing to do a currency swap , With Rupee falling and not sure how deep the fall might be even friendlier country would be cautious.

Better to do a Brazil like thing they allocated $60 Billion to support their currency for a year , Since we have Forex reserves of $280 billion we may do the same.

Austin Powers, time to get out of the Sankuesque head in the sand and a** in the air and Rodina worship chanting mantra. That kind of thing is best left to the Armor thread where one can indulge in fantasises of putting smoothbore guns everywhere. But this is reality. Today it is far too serious . So time to pull the head out of the sand, get some fresh air, and a strong filter coffee and clear the cobwebs in the mind.

We trade NEXT TO NOTHING with Russia. They buy nothing from us and we too buy nothing from them outside weaponry. The problem is we have a shortage of dollars to fund our trade and Maharaj says we should increase ruble supply with a partner we practically have no trade. Why you can do a currency swap with Pakistan instead!

And , in the earlier Rupee_Ruble swap the Russians shafted us royally, using India's reserves to access the western economy which they couldn't with their rubles and this continued until long after the Soviet Union fell and gave us arms and worthless rubles instead.

[vina]

RBI has opened a currency swap window for the Oil Marketing companies to take the oil demand out of the market on a daily basis. Basically taking the demand out of the market is a throw back to the pre liberalization days and dual rate mechanisms . Wonder how the RBI is going to fund it, unless it buys from the markets on their behalf. Or is it that they are going to use the reserves for that ?

[Muppalla]

There was a time when we say a lot more made in India goods here in USA. Now we rarely find even in GAP stores. The story was made upside down with a lot of cost increases to small scale industries, less power availability and licence-raj back in the game. The difference between the past 80s and now is that there is too much of FDI with no level playing field for local small scale sector.

Utterly bad financial management led to rich Indian industries holding onto cash with no movement of investing. Hence this rupee devaluation is not going to kick start any investment or jobs even if there is inflation.

In any other country where people has atleast pus if not blood in veins would have revolted and kicked everyone to gulliotone. In India the people are still debating.

[disha]

Heard here first.,

I was fearing StagFlation for India., I was wrong and that is not the worst of the fears.

I am now fearing HyperInflation in India. Yes, HyperInflation. This is going to be the inflation that is seen in failed states and failed economies. India is getting there all right, even if it *mortgages* its gold reserves.

The reason is simple, there is no faith in the Indian Government doing the right thing. Nobody wants to put dollar into the Indian Economy - not even for its "Great" middle class - reason is simple, you will be taxed to fund pie-in-the-sky programs that will be leaking at the seams.

The Government is clueless and the people do not even know what hit them already and what is going to hit them.

[Suraj]

What distinguishes stagflation from hyperinflation, according to you ? I agree with stagflationary conditions - they are already present. But hyperinflation ? That takes a very particular form of breakdown of society to happen - natural disasters, wars, or similar calamity. Fear-mongering about it is not particularly meaningful rhetoric.

[disha]

From firstpost article http://www.firstpost.com/economy/rupee- ... 68317.html:

Bring on more Sickularism

That India Inc’s tallest leaders too have all but given up hope on any possibility of reform is also borne out by Ratan Tata’s statements, where he said India had “lost the confidence of the world” and that vested interests had led policy to be “changed, delayed and manipulated.” Strong words those, coming from someone held in high esteem by corporate India and the government.

Bring on more entitlements

Food Security Bill was, perhaps, the biggest blow to have come to any hopes of reform or a curtailing of the ballooning fiscal deficit. With elections clearly the immediate target, the Congress-led UPA managed to push through the Bill and thereby dashed whatever hopes remained of a return to fiscal prudence.

Sometimes it is difficult to explain the pain and anguish seeing the UPA government in saddle and the mis-management they will bring. And it is even more painful that for their own short-term selfish interests, people - incl. BRF posters continue to support the UPA, in the name of Sickularism and Equality (entitlement).

Point is, the "market" has lost trust in the Government itself. You lose trust in Government, you lose trust in the economy - you are staring at a banana republic.

in these days of heightened uncertainty, these statements amount to nothing. The reality is that the cracks are showing everywhere in the UPA edifice.

So now what is the way out? At what time the confidence in Indian economy will be restored and before Indian economy heads into a tailspin and crash.

For the first thing to happen is that this UPA govt. needs to go. Second, anti-entitlement mindset needs to set in - for that even the third front kind of government should not happen. The third is a economic right-of-centre Govt. should form in.

It is a very tall order and least unlikely. Hence the further morass markets are going into.

No there is no bottom. The Rs. may stabilize around 75/- for a while before starting to plumb further depths.

How does it effect you? The avg. desi living in a metro in India?

1. Anything that relies remotely on oil (includes pharmaceuticals, plastics etc)., will shoot up in price. Net, medicines and medical accessories will become costly. Inflation sets in.

2. Input costs to farming goes up, farming sector will come crashing down. Less farm output, higher input costs, higher prices. Inflation feeds in.

3. Input costs to move goods and services goes up., prices will go up - feeding into inflation.

In effect maintaining your current living standard becomes costly. Go figure., what it means to you living.

In a telling note, Morgan Stanley has pointed out that the manner in which the rupee has been falling – down 20 percent since May – has shown that though other emerging market economies have also been hit by this contagion (a fact repeatedly referred to by Chidambaram and his colleagues at North Block), India is “arguably most vulnerable” due to its huge fiscal deficit and CAD.

The door for mortgaging Gold has closed, it was factored in yesterday.

The economy is teetering on the edge: The CAD has ballooned to $88 billion, FDI is falling and Indian companies are struggling with their overseas debt as the rupee crashes to new lows. Ratings major Standard & Poor’s (S&P), too, says the road for India (and Indonesia) will be “rocky” since they are the largest-deficit countries, though S&P does add that this situation is not like the 1997 Asian crisis.

It is worse than the 1997 Asian Crisis.

[Austin]

We trade NEXT TO NOTHING with Russia. They buy nothing from us and we too buy nothing from them outside weaponry.

Are you sure about that we trade next to nothing other than arms ?

Check this and it is still 2010 report

http://indrus.in/articles/2010/08/10/tr ... 04592.html

[habal]

actually govt is taking a lot of blame, some of it necessary and much of it unnecessary. A lot of private vested interests have been subverting the govt's bills and policies and watering down essence of passing such laws anyways. Only an unfortunate few are left to bear the brunt.

because the earlier legislations didn't work nor had a desired impact on pruning deficit nor increasing revenues, the govt was forced to introduce more legislations which ultimately led to killing of rest of healthy manufacturing economy. Which is what Mupalla has mentioned in his post. Many things that were manufactured in India before are now shifted wholesale to China.

He also said the government has “swayed” under the influence of vested interests in private sector and policies have been “changed, delayed and manipulated”.

http://www.thehindu.com/business/Econom ... 068063.ece

About the present crisis, I have this nagging feeling that Mota bhai, and Khota bhai are playing on behalf of vada bhai.

[habal]

Any govt that works in India, needs to start on premise that India is a den of thieves wearing various masks. Unless laws are implemented equally, they will not work to benefit the country. Manipulating laws started with Dhirubhai during Indira's era. It has just escalated many times during UPA Part-2. UPA Part-1 had the commies as allies, now however bad the commies be to the states of Kerala and W.B., in matter of national politics these are people with some level of integrity and ideology only matched in some measure by organisation like RSS. At least they had a restraining hand on many policies, but after they left, it became a free-for-all for private vested interests.

But in times of crises, such as this one, will the 'private vested interest' take any part of the blame. Hell no !

he will be first amongst those who stand in a row with fingers pointed towards UPA sarkaar blaming them for crises.

[disha]

What distinguishes stagflation from hyperinflation, according to you ? I agree with stagflationary conditions - they are already present. But hyperinflation ? That takes a very particular form of breakdown of society to happen - natural disasters, wars, or similar calamity. Fear-mongering about it is not particularly meaningful rhetoric.

I am not fear mongering., but market has panicked - why? What is spooking the market? Neither do I want the Indian economy to be in stagflationary or hyper-inflationary condition. But calling out what spooking the market which will lead to the next bad situation is not "fear mongering". The "fear" has already been "mongered" into the markets. Yesterdays' slump may be followed today by a calm., but if there is already fear of Rs. plumbing 75/- to a dollar.

And I did call out that we are entering into stagflationary conditions several months back. And I am calling out that "HyperInflation" is a real and present danger.

And I am neither a PChaddi in eCONomics neither I took a degree in any of its subject. Only thing I can do and not to very well is add, subtract, divide and multiply. So here is my #pappu logic:

Now, coming to the question is why I think "HyperInflation" will set in., it is just that India does not have enough forex reserves to fund itself out of stagnancy. Basically with no growth, there is simple not much of goods produced in India that it can sell to buy stuff to produce more goods and consume some more.

For eg. if you are expending energy to produce a good (food, medicine, consumable like a refrigerator part)., you have to fund the purchase of that energy. The output (goods) should cover for the purchase of that energy plus earn some more to be ploughed back in to purchase more goods. That is a virtuous cycle. If you are coming out even, you are stagnant - it does not hurt - but as the demand for more of such goods goes up (people wanting more food or medicine) - inflation sets in.

Now imagine a situation where you are not even producing more of that good - the demand is highest and the supply is non-existent - logic tells hyperinflation will set in.

Again HyperInflation setting in say "choice" goods is not a problem. For example if the LED TV prices keep on shooting up and up and up, people will just stop buying LED tvs and settle on CRT and navigate from there. In this case LED TV is a "choice" that can be foregone.

But HyperInflation setting in food, medicine, clothing & housing - that is a problem. You cannot avoid any of that. For housing you may move from Metro to B-Town or back to village - if you can., but to get the goods there you need infrastructure. But if you do not have infrastructure, the same goods is now going to cost more (why do you think poor Indians move from villages to towns and cities? if the goods/services do not come to them - they go to goods and services)

Input costs to food is directly dependent upon the oil price (fertilizer etc)., and if you subsidize the input costs, your deficit balloons - which means you will have to fund the deficit somehow - by further borrowing which will shoot up your interest, which in turn will shoot up your inflation.

Medicines and plastics are directly dependent upon the oil price (all modern pharmaceuticals can be traced back to the oil barrel).

That leaves clothing and housing. Taking out artificial fibers, you are still left with producing the cotton to yarn to textiles - which are dependent again on your input cost. Housing the less said the better - the prices are sky high already in B'gluru and Chennai and B'bay and Delhi and Gurgaon, so much so that even B-Towns are now seeing higher price rises. Partly people are speculating and putting money in housing and if not into Gold.

Note, to me the collapse of industries are visible signs of HyperInflation, they follow the HI, but not precede it. Yes certain things can trigger HI (Chinese incursion, Baki Terrorism)., but it is like an oil keg waiting to be lighted - only the spark is needed.

If growth is high, low inflation (goldilocks economy)
If growth is high, high inflation (growing but inefficient economy)
If growth is low/zero, high inflation (stagflation)
If growth is negative and persistent inflation (low or med or high), what do you call? What will consistent negative growth lead to? Depression (low inflation)? Hyper inflation (negative growth high inflation?)

[Patni]

The current GoI indulged in failed socialistic policies with a vengeance and most all investment has walked out of India. What has happened in last month IMO, is the pace of flight of money, from Indian markets, has accelerated to a point where its no longer possible for GoI to hide the fact from public. It is an accelerating downward spiral and India will be in self inflicted recession within a quarter. The Tax collection is going to stagnate, if not already. Things will have to get lot worse to a point where INC can not blame any one else and cant hide its failure on all fronts, never mind VSB/FSB etc. IMHO in next 9 month Indian economy will jolt to halt and go in to recession which will last a year or two, with series of ineffective pack of jokers coalition governments at center ensuring speedy race to bottom on all front of governance. The new India will then emerge from the ashes once all the deadwood and rot in system is cleansed.

[disha]

Any govt that works in India, needs to start on premise that India is a den of thieves wearing various masks. Unless laws are implemented equally, they will not work to benefit the country. Manipulating laws started with Dhirubhai during Indira's era. It has just escalated many times during UPA Part-2. UPA Part-1 had the commies as allies, now however bad the commies be to the states of Kerala and W.B., in matter of national politics these are people with some level of integrity and ideology only matched in some measure by organisation like RSS. At least they had a restraining hand on many policies, but after they left, it became a free-for-all for private vested interests.

But in times of crises, such as this one, will the 'private vested interest' take any part of the blame. Hell no !

he will be first amongst those who stand in a row with fingers pointed towards UPA sarkaar blaming them for crises.

There - the businessmen is bad - hang them high. Can you please define and give an example of "Private vested interest"? And if there is a beast called "Private vested interest" eating up Indian economy - then there should be a beast called "Public vested interest"? Right?

[Suraj]

Sorry, but such situations don't necessarily cause stagflation to extend to hyperinflation. Energy costs may rise in the form of an oil price shock, but that has already been experienced in the west and India before. While it drove stagflation, it did not result in hyperinflation. While there's no one definition of hyperinflation, based on the common description, you're claiming the inflation rate will increase approximately 50% per month. Seriously ? You really want to stand by that ?

Oil and energy price shocks are self correcting - their price is tied to marginal demand, and a steep fall in demand from more than one of the world's largest economies will send down the price of oil as well. Such a self correcting system may drive stagflation, but not hyperinflation. The latter takes a much more complete breakdown of the economy and supply chains to happen - typically in the form of a huge natural disaster or war.

Please stop suggesting we're on the verge of hyperinflation; we may be running a chronically high inflation of 6-10% a year, but thats LONG way from 50% per month inflation rate. This kind of alarmism is not conducive to discussing current economic problems.

[vina]

Are you sure about that we trade next to nothing other than arms ?

Check this and it is still 2010 report

http://indrus.in/articles/2010/08/10/tr ... 04592.html

Well, this is 2013 and you can check the 2012-13 figures Ministry of commerce that the total India-Russia trade is a pitiable $7.9B, with India running a $2b deficit with them (we export $2.25B to Russia and import $4.25B) . This is simply peanuts.

Russia is not even among India's top 15 trading partners ! You can see the list Here - India's Trading Partners .

In fact we trade a lot more with Indonesia (all the coal imports thanks to the coal scam and Coal India's inefficiency) than Russia!

[Javee]

A recent hyperinflation example is Zimbabwe, we are no where close to what they are.

[Arjun]

The current GoI indulged in failed socialistic policies with a vengeance and most all investment has walked out of India.

Its not just investment that will walk out of India if the Dynasty returns - its also a lot of its professional and entrepreneurial talent (assuming they can afford it after the disaster that the rupee has become).

Cross-posting from the Modi thread...

Will leave India if Narendra Modi becomes PM: Kamaal R Khan

Kamaal Khan will leave India if Modi becomes PM...I am sure many of his ilk feel the same way. On the other hand, there are very many more professionals and entrepreneurs, NRI or otherwise, who will leave India if the Dynasty returns.

We start to get a sense of the kind of folks who will leave and stay depending on the outcome of the elections.

Fairly solid evidence for the link between pseudo-secularism and reduced national IQ, I should think...

[habal]

There - the businessmen is bad - hang them high. Can you please define and give an example of "Private vested interest"? And if there is a beast called "Private vested interest" eating up Indian economy - then there should be a beast called "Public vested interest"? Right?

the name of the beast starts like M and ends with I.

[vina]

Oil and energy price shocks are self correcting - their price is tied to marginal demand, and a steep fall in demand from more than one of the world's largest economies will send down the price of oil as well..

They are , only if those are pass throughs. In India, they are not and hence the demand is highly inelastic. On the contrary, the perverse incentives lead to more subsidies (think of all the diesel cars bought instead of petrol and the generators running on diesel).

The trouble really is this. I was watching Arvind Panagriya's interview yesterday and also Chidambaram's 10 point speech in the Lok Sabha. Both said, that the past policy of accumulating reserves when the rupee appreciated was given up since 2009/10 and we have less reserves than what we should ideally have to deal with panics we are having now.

I was wondering why would a sound policy like that given up. The reason is that if you go back, all the noise back then was "Imported inflation" because of high crude prices etc. What the govt therefore tried to do was fight inflation (which only a part of was imported, the huge bulk of it being the govt's MSP driven increase in food prices and the fiscal profligacy as we all know) via HIGH REAL EXCHANGE RATES . This had the consequence of making imports cheaper and hence a flood of imports and a record current account deficit and the destrcution of Indian manufacturing (stories of made in China Ganeshas are a consequence of this). The rupee was really massively overvalued and it has corrected viciously now that there is a change in the flows back towards US,.

Now with the dollars flowing out the chickens have come home to roost. The root cause of all this is the Fiscal Profligacy and the attendant runaway inflation , all as a consequence of breaching the FRBM act by Chidambaram and then disastrously by Mukherjee.

[disha]

the name of the beast starts like M and ends with I.

MI?

[Suraj]

Oil and energy price shocks are self correcting - their price is tied to marginal demand, and a steep fall in demand from more than one of the world's largest economies will send down the price of oil as well..

They are , only if those are pass throughs. In India, they are not and hence the demand is highly inelastic. On the contrary, the perverse incentives lead to more subsidies (think of all the diesel cars bought instead of petrol and the generators running on diesel).

True, but on the other hand we aren't as mechanized an economy as western nations are, either. A rising CAD will break the back of GoI's subsidy and expenditure budget before it leads to any sort of hyperinflation in the popular context. One of the 'benefits' of an unorganized economy is that the inefficient supply chain itself acts as a barrier keeping inflation from being transmitted as fast - the inefficiency itself adds so many costs that oil price is just one of the components.

[disha]

A recent hyperinflation example is Zimbabwe, we are no where close to what they are.

I lost a post due to session timeout. Okay, will not call it "hyperinflation". How about "Huge Inflation"?

See the link: http://www.businessweek.com/news/2013-0 ... rate-india

“The whole economy will suffer dramatically” due to the rupee’s drop, said Adi Godrej, chairman of Godrej Consumer Products Ltd. “There will be huge inflation, which will lead to high interest costs and a whole vicious cycle will be created.”

[disha]

True, but on the other hand we aren't as mechanized an economy as western nations are, either. A rising CAD will break the back of GoI's subsidy and expenditure budget before it leads to any sort of hyperinflation in the popular context. One of the 'benefits' of an unorganized economy is that the inefficient supply chain itself acts as a barrier keeping inflation from being transmitted as fast - the inefficiency itself adds so many costs that oil price is just one of the components.

You do have a point and India's internal economy itself is large and diversified. As long as GOI does not raise barriers within free movement of goods and services within India, it will not suffer and infact the crisis can be beneficial if that is the path taken.

However nobody trusts the current GOI., the way they put a kibosh on infrastructure development and more restrictive trade and policies. FDI is necessary to fund India's energy sector., but beyond that India can and must strive to be "self-reliant".

Even for energy sector, if GOI brings in say a 10000 MW of nuclear energy online in say next 2 years and continues till 100,000 MW over next 8 years, that itself will put a big dent in energy imports.

[Arjun]

PM, Chidambaram responsible for economic crisis: Arvind Panagariya

Economist Arvind Panagariya held Prime Minister Manmohan Singh, Finance Minister P Chidambaram, Deputy Chairman of Planning Commission Montek Singh Ahluwalia and President Pranab Mukherjee responsible for the country's economic crisis.

All very well - but why leave out the welfarist bimbette who has perfected the art of power without responsibility ?

[Austin]

Rupee is recovering for now atleast

Rupee recovers to 66.85 as RBI moves on oil imports

The rupee rebounded on Thursday from a record low after the Reserve Bank of India's move to provide dollars directly to oil companies provided relief to the currency, while a recovery in emerging market currencies also helped offer support.

The RBI decision is aimed at removing a major source of dollar demand from the spot market - worth $400 million to $500 million daily - and so reduce downward pressure on the Indian currency.

The rupee rose as high as 66.85 per dollar shortly after the open, up sharply from a record low of 68.85 per dollar on Wednesday when the currency posted its biggest single-day percentage fall since October 1995.

The Reserve Bank of India (RBI) said it was providing a special window with immediate effect to sell dollars to Indian Oil Corp Ltd, Hindustan Petroleum Corp, and Bharat Petroleum Corp Ltd. Oil represents India's biggest import item.

However, analysts said the RBI measures alone would not lead to a sustained rupee recovery unless the government can pass measures that can convince markets of its willingness to tackle India's fiscal and current account deficits and slowing growth.

"The measure is unlikely to arrest the decline in the INR with the authorities increasingly trying to find new means to stem the rout in the currency," Mitul Kotecha, head of global markets research for Asia at Credit Agricole in Hong Kong, said in an email to clients.

[Austin]

Moody's fires warning shot at govt over Food Bill

Despite Finance Minister P. Chidambaram's assertion that the government will be able to meet the cost for implementing the Food Bill without breaching the fiscal deficit target, Moody's has warned that the food security programme will exacerbate the government's weak finances.

"The measure [Food Bill] is credit negative for the Indian government (Baa3 stable) because it will raise government spending on food subsidies to about 1.2% of GDP per year from an estimated 0.8% currently," the rating agency said in report.

Because the bill will take effect only in the last few months of the fiscal year that ends March 2014, it will not significantly affect the fiscal 2014 budget. However, it will raise future subsidy expenditure commitments, hindering the government's ability to consolidate its finances," the report said.

[Austin]

Well, this is 2013 and you can check the 2012-13 figures Ministry of commerce that the total India-Russia trade is a pitiable $7.9B, with India running a $2b deficit with them (we export $2.25B to Russia and import $4.25B) . This is simply peanuts.

Russia is not even among India's top 15 trading partners ! You can see the list Here - India's Trading Partners .

In fact we trade a lot more with Indonesia (all the coal imports thanks to the coal scam and Coal India's inefficiency) than Russia!

Good Point , But isnt the idea here to trade with your own currency and bypass dollar , in that case the country with which we are trading should be willing to accept a payment other then USD and Rupee Payment for trade.

So even though China may be our biggest partner but they should agree to such a swap to bypass USD. With the state of Rupee it is today with so much of uncertainty it may be a difficult proposition to sell such a deal.

It would boil down to country who are willing to do such a trade with India rather then who is our biggest trading partner.

[Patni]

What has happened is failed socialistic NAC crowd that cant understand a simple fact that a society needs a growth engine and that government cant be that engine!! All this talk of inclusive growth which just meant not allowing anyone to prosper and keep everyone wallowing in the poverty. I suppose the true aim of NAC cabal is to ensure new generation of Indians will not aspire to better governance and they can carry on with their poverty ***** and keep India too weak for another century or so. The Indian economic train has been effectively wrecked by current GoI, IMHO its good that real state of affair is coming out clearly before next general election and society at large will sit up and take notice of mismanagement and hoping that it will become that much more difficult for next government to indulge in populist vote buying schemes.

[vina]

Good Point , But isnt the idea here to trade with your own currency and bypass dollar , in that case the country with which we are trading should be willing to accept a payment other then USD and Rupee Payment for trade.

See, the way it works is like this. India and Russia can have roughly $2b in Rupee_Ruble swap (with base rates indexed to dollars), so that you dont have to exchage a total of $7b, but pay only the $2b you run as deficit in dollars.

Same you can do with China and UAE etc. So a UAE company importing from India will pay in Rupees and an Indian company importing from UAE will pay in Dirhams , as both will tap the Dirham-Rupee swap window.

What in effect this does is reduce demand for USD-INR in the markets and reduces the volume of trading and ability of large demand (and supply) fluctuations to move the market in a big way like what would happen otherwise.

[member_20317]

All the noise! PC ji ke kaan baj rahe honge. Had PC ji not been Desh ka Griha Mantri at the time he would have been culpable for not listening.

Coincidently for the 'disease of not listening' - Iska ilaaj ayurveda mein Sushrut Maharishi ji ne diya hai. Kaan ke nichye ek jor se dhar dijiye alternatively Alopathy mein bhi ilaj hai .... ki pichey, ek jor se dhar dijiye.

So vina ji, what you in effect are saying is that in 09-10 when the crude was higher they did not go for diversifying the import basket. They didnt go for reducing local taxes on petroleum products. They did not go for kickstarting the import of efficiency building equipment. They did not go for exploration. They did not go for fast pacing the UMPP.

They instead went for manipulating the rupee by giving up the only right thing UPA was still continuing from NDA years.

[member_20317]

The bigger problem though is that the GOI seems bent on tokenism, when we are so dependent on foreign firms (and consequently imports) for everything from heavy engineering items, to telecom equipment and even industrial grade IT hardware.

Oh, the situation is much worse. We got quotes for modular furniture for our newly opened Software center in India and we finally settled on a quote that is importing Chinese maal. Almost all quotes are with Chinese imports. Are there no Indian manufacturers of even such a low-tech stuff? What use is all that gold if it can't get jobs - mind you I am not talking about high-tech ones - for literate young people in low to medium level manufacturing?

matrimc ji, gold is like an overhead water tank. The municipality ka null is important and so is the overhead tank

With all due respect, Shooting oneself in the ass is not an alternative to shooting oneself in the head.

The whole world without regard to jurisdictional/soverginity concerns, treats gold as liquid tradeable assets, a notch above and more believable then the Dollar. And mind you dollar is a currency ostensibly supported by the largest majma/jamavada/rave party, of the most intelligent people ever in history. This rave party also treats gold as numerou uno.

[Adrija]

Can we please stop the rona-dhona about the USD:INR rate- it is long overdue, a GOOD thing, and finally, there are waaaay more things to browbeat about

its good as it finally corrects the massive overvaluation the rupee was suffering from (given India's lack of competitiveness and inflation differential with our major trading partners- US, Euro, China, UAE etc). My view is that the rupee should settle anywhere between 67-72 (take your pick, it's as good as anyone else's), which would ideally allow manufacturing to start breathing again- subject, sadly, to below, which is really what we should be doing the rona-dhona about

The catch is that the UPA-II has systematically worsened the overall business regulatory and infrastructure environment, so not sure if even the recent rupee correction is sufficient to revive mfg, given that the elusive beast which makes us invest (i.e. sentiment) has been completely and totally destroyed by Soniajeee, MaunSingh, Montek, and PC combine..........will stop here as Suraj does not like anyone calling out the real reasons driving the economy to the ground in the Economy thread

[vina]

So vina ji, what you in effect are saying is that in 09-10 when the crude was higher they did not go for diversifying the import basket. They didnt go for reducing local taxes on petroleum products. They did not go for kickstarting the import of efficiency building equipment. They did not go for exploration. They did not go for fast pacing the UMP

Most importantly, what they DIDN'T do is pass on the fuel price increases on to the consumer (epsecially, diesel and LPG). Diesel and Kerosene must be deregulated right NOW. That is the only salvation possible now. Fertilizer subsidies cannot be open ended as well , as is current. That must be capped.

I had warned on this here, that the UPA govt was leaving no fiscal space for any shock and presented an "All Ducks Must Line Up Perfectly Every Time" budget TWICE under Mukherjee. Well, that didn't work and now we have a shock (dollar tide going out and a possible oil shock with Syria) and the govt is floundering.

[Adrija]

For a rare change I agree with Vina- energy prices are the SINGLE biggest threat facing the country right now. It promotes unsustainable consumption, harms the environment, and discourages investment in the overall energy space threatening our short term fisc as well as long term energy security

The ideal would have been to completely free the whole shibboleth when petroleum prices were low (in the NDA regime), which did not happen. To be fair, it is also difficult to have a completely market based regime especially in the short run (and perhaps even long term) without some form of subsidy regime (ideally a well targeted one) in place in any country globally. The UID was supposed to be that but has not happened for whatever reasons..........I am not sure if any government can do anything different actually especially given the round of elections which is due

In short, be prepared for much worse on the rupee front

[member_20317]

Yes vina ji,

I have read you say that. And I agreed at that time too. That is why I feel the NDA was right. They used to allow small incremental upward changes and once in a while a reduction too would come our way. If I did not vociferously support you it was only because I knew this day could come and then it would be factor that is not the differentiating factor. You see we can live like cricket or we can live like ants. Both ways we have to bear the burden of carrying this economy. We got choosen for us a cricket's life. The sad part is we are still exactly on that track.

For a rational man, a dhaka/push is a point of realization. He develops an understanding at that point. He discovers his inner religion . Our country OTOH is still to do that. And that saddens me.

[Vikas]

The only good thing about this crisis is that more and more people are willing to kick out Queen bee and her minions and Modi Bhai looks the best option.

[Arjun]

The only good thing about this crisis is that more and more people are willing to kick out Queen bee and her minions and Modi Bhai looks the best option.

True, but to paraphrase the King Khan himself - "Don't underestimate the retardation of the common burkhawala Indian."

[habal]

Why have the speculators given a break to the Rupee for a day ? Now 'shock & awe' to begin next week or on Friday ?

maybe this is the 'players' taking a 'strategic time-out' !

[James B]

Tomorrow growth figures will come out

BNP Paribas cuts India's GDP forecast to 3.7 percent

http://reut.rs/18jYKc3

[James B]

India is currently importing $15 billion coal despite having world's 3rd largest coal reserves. Reason - Coalgate Scam.

The moment we increase our coal production, our CAD can be controlled.

[member_20317]

@habal,

Apparently the State oil companies need dollars during month end. They would have pushed INR down further so RBI put up a separate window for them. This intervention was signaled on August 26th and by second half of 28th the stock markets had gained confidence in this. A big chunk of the intervention was done on second half yesterday and first half today. Also the Spot Gold market in Mumbai, had held back from 27th.

I read it as the initiative being with the GoI. Stocks and Gold are merely following and that too after confirmation of the intervention by RBI. Ergo Stocks ke aage been bajane se kichhu noi hobe. Currency intervention may help but only in the shorter run.

The Dharm sankat is that private economy which will last for much more then just this month end gets no respite. The primary dollar demand would still come from FIIs and they will not stop till they know best. If I remember correct, NSE used to give Net FII closing position in the cash market.