India may face its worst financial crisis in decades as rupee retreats

[beijingwalker]

Also it is called depreciation not retreat.Probably your CCP master who provided you with memo to post on Internet was an low IQ indentured labourer who has no understanding of economics.

you tiny brain must've told you that "Reuters"was a CCP newspaper.

 

[beijingwalker]

India's economy at a turning point

The world's largest democracy is in trouble, with an anarchic Parliament and absence of real leadership
by James Lamont
04:45 AM Dec 05, 2011


Addressing 8,000 young party activists in a north Delhi park on a misty winter's afternoon this week, Mr Manmohan Singh gave a glimpse of the future.

Big foreign retailers with their box stores and refrigerated lorries would bring down prices for consumers, rescue the 40 per cent of farm produce that rots on the way to market and create millions of jobs. No longer would Indians be condemned to scarcity and tiers of greedy middlemen.

That is, the country's 79-year-old Prime Minister said meekly, if the Opposition allowed him to do his job.

Political opponents and even some allies took no time to rip into Mr Singh. He was, they said, bringing back a loathsome past, opening the door to the predatory East India Company of colonial days in the new guise of Walmart, Tesco and Carrefour to suck India's poor people dry.

This was no mere clash of shopping trolleys but rather a symptom of a malaise that many fear is eviscerating India in its quest to find a shared vision and greater prosperity for its 1.2 billion people.

The world's largest democracy is in trouble. Parliament is in turmoil, its members at each other's throats and 31 Bills stacked up awaiting approval, just as the economy is cooling fast. No one talks any more of matching China's double-digit progress; growth has fallen beneath 7 per cent.

The rupee is 13 per cent weaker than when the year began, as direct investment slows and foreign money leaves the stock market. Many analysts now say India has missed a golden opportunity to build up a domestically driven economy that had been little damaged by the 2008 global financial crisis - and put substance behind a claim to be a global power.



DISTRACTED BY THEATRICS

For a year, Parliament has been an anarchy that would make Jawaharlal Nehru, the country's first Prime Minister, weep. The squabbling has exposed India as a nation of parts, not a sum of its whole.

Mr Mani Shankar Aiyar, an Upper House member of ruling Congress Party, says bluntly that the "citadel of democracy is being destroyed" in a "criminal assault" by a destructive opposition Bharatiya Janata Party. An array of jostling Opposition leaders retort that Mr Singh presides over the most corrupt Cabinet in India's history and is too weak to control his allies.

The "monsoon session" that ended in September was wrecked by protests over high prices as well as corruption. The current winter session never got started, brought to an immediate standstill by the dispute over allowing foreign retailers into the country.

Commentators such as Mr Pratap Bhanu Mehta, president of the Delhi-based Centre for Policy Research, complain of "ungovernability" and a growing resistance to the state whether over land, energy or macroeconomic policy. "Politics is increasingly distracted by its own theatrics," he warns. "India is at a great historical moment. But the most disquieting sign of ungovernability is that there is little political discussion of what this moment means, or the urgency it should represent."

Business leaders look on in disbelief. They are aghast at the lack of decision-making that is laying waste to the image of India as a shining emerging market that they helped create.

Mr Sunil Bharti Mittal, the chairman of Bharti Airtel, the country's largest mobile phone operator, appeals for politicians to quit their feuding and urgently rise to the national interest. A "serious negative perception ... is now being created for India on the global stage", he says. "The concern among investors, both FDI and in the stock markets, is palpable and being widely discussed."



OUT OF TOUCH WITH POOR

Mr Mukesh Ambani, the Reliance Industries chairman who is the country's richest man, complains that India's prized democracy is too often an excuse for inaction. He calls for a "dramatic shift in governance", warning of a calamitous mismatch between outdated thinking and the need for a 21st-century "delivery model" to lift living standards for the poor.

The forbidding global outlook apart, the financial markets scent a domestic political crisis. The rupee and the Sensex, the benchmark index on the Bombay Stock Exchange, are Asia's worst performers over the past year. India considerably trails its fellow BRICs in attracting foreign investment.

Should this be Belgium, a divided and bickering polity might not matter too much. But 800 million in India scratch a living from about US$2 (S$2.60) a day or less, highly vulnerable to economic shocks, food shortages and a heavy dependence on imported oil.

Political leadership coupled with high growth rates was supposed to be transformational for the world's largest concentration of poor people. But instead, an absence of leadership - among elder statesmen of both national parties and a timid, often US-schooled younger generation - risks cutting it short. The fracas in Delhi unmasks a political elite that, if nothing else, is out of touch with the needs of lower-income India.

In the thick of the pandemonium, Mr Singh last week made a last-ditch effort to relaunch reforms. His Cabinet took the bold executive decision to allow greater foreign direct investment in what has long been a highly protected retail sector.

If successful, the move would bring the supermarket to India, several decades after it changed the retail landscape in most other parts of the world. No longer would the new urban middle class have to traipse daily around market stalls and dusty corner shops to stock up on food. A supportive Federation of Indian Chambers of Industry and Commerce predicts the shift would double the size of India's US$450 billion retail market over 10 years.



PM SINGH MAKES A STAND

A respected development economist, Mr Singh senses the peril of slacking growth momentum amid a weakening global economy. He understands better than most what is necessary to sustain progress and unlock foreign investment.

"He is making a stand," says Mr Sanjaya Baru, a former Singh adviser now at the London-based International Institute for Strategic Studies. "The rupee is at Rs 52 to the dollar, more money is going out than coming in and there's a lack of business confidence in the economy. India is going down the scale" in world terms, he says. "The measures being taken are to respond. It's a signal to the outside world."

Mr Singh's reputation rests on reform. He served as Central Bank Governor and Finance Minister before being appointed by Mrs Sonia Gandhi, the Congress president, in her stead as Prime Minister in 2004. He is credited with implementing a 1991 overhaul that freed the economy from the "licence raj" that strangled entrepreneurial dynamism in red tape.

Mr Singh's reforms, which a BJP government took further, are largely responsible for India becoming the fastest growing large economy after China. But since Congress was re-elected in 2009 with a surprisingly strong mandate, Mr Singh's reputation has come into question.

His government was halted in its tracks by a slew of scandals. The worst, estimated to have lost the Treasury as much as US$39 billion, hit the telecommunications sector and highlighted the dark side of a fast-growing economy. Opponents see the stores move as an attempt to deflect attention from the scandals

Mr Singh's administration has also been unable to tame near double-digit inflation - repeated promises to bring price rises back down to 7 per cent have proved hollow. The government has, meanwhile, persisted with ambitious public spending, often to roll out welfare schemes championed by Mrs Gandhi for the rural poor.

A reform agenda that held so much hope for his first 100 days of a second term is limping. It has not helped that many senior Congress leaders are convinced India is a bullock cart unsuited to a superhighway and that its people are not ready to be exposed to the global economy.



WILL GOVERNMENT'S NERVE HOLD?

But a few successes could right the listing ship and give direction to a rudderless drift towards the next elections in 2014. Much, therefore, rides on the government holding its nerve on retail liberalisation and moving on to introduce a goods and services tax, undertake land reform and deepen debt markets to help fund badly needed infrastructure.

The retail shake-up, which would let foreign groups hold 51 per cent of multi-brand operations and own single-brand chains outright, promises to build some of the supply chains and linkages with farmers and small business that big Indian commerce has not. It could also help curb inflation by cutting out tiers of intermediaries between farmers and consumers.

Yet even if they pass, the changes will not live up to the potential. Given opposition across half the country, modern retail will come to only 20 out of the 50 cities that it could benefit, says Mr Montek Singh Ahluwalia, Mr Singh's closest aide.

The argument has opened up a well of xenophobia, reminiscent of when India was a closed economy in the shadow of the Soviet Union. MPs are calling for a vote. "Reverse the decision and you are inviting disaster," warns Mr Baru. "Then we'll see the rupee at Rs 60 to the dollar."

So inward-looking is the country's overall economic debate that it risks turning a beneficial delinkage from a turbulent world economy into an impoverished isolation.

"The signal it sends out to the world is that it's selectively complicated to do business in India," says Ms Anita Marangoly George, who heads one of the International Finance Corporation's investments snared in indecision. "If you look into the politics, there are lots of issues other than those you see on the surface." The Financial Times

James Lamont is the FT's South Asia bureau chief.

 

[Rocky25]

India doesnt have enough foreign reserve to defend its local currency,China holds over one third of world's totall foreign reserve,and Hongkong also holds considerable reserve.so even China can't save Europe,at least China can save herself,and the case in India is a different story.

world foreign reserve ranking:

This is the sixth time I am seeing this same post which you keep on posting again and again when you get chance and tell Hong kong has better foreign reserve.

India is NOT china... The exports of India is not as huge as Chinese export, Yes it is a difficult time.... But that does not mean India will collapse due to this... We have see worse than this.

 

[lamlap]

Indian Rupee is off 13.14% year-to-date , Hence the net impact will be greatly negative
Indian Rupee is off 13.14% year-to-date , Hence the net impact will be greatly negative
Indian Rupee is off 13.14% year-to-date , Hence the net impact will be greatly negative


Unlike export nations like China, India imports more than exports. Indian exports only account for 10% of GDP. While a global economic slowdown will impact India's growth , The currency has been declining as inflation remains consistently high, driven up by food costs.

 

[IndoCarib]

Indian Rupee is off 13.14% year-to-date , Hence the net impact will be greatly negative
Indian Rupee is off 13.14% year-to-date , Hence the net impact will be greatly negative
Indian Rupee is off 13.14% year-to-date , Hence the net impact will be greatly negative


Unlike export nations like China, India imports more than exports. Indian exports only account for 10% of GDP. While a global economic slowdown will impact India's growth , The currency has been declining as inflation remains consistently high, driven up by food costs.

India's exports account for 20 % of GDP. And currency has begun to look up , while inflation is easing.

 

[Aramsogo]

India's exports account for 20 % of GDP. And currency has begun to look up , while inflation is easing.

You actually believe tiny U.A.E. is India's biggest export market?? If I said China has $500 billion in exports to the island of Fiji, would you believe me???

 

[Mytime]

A good economist can play around with same set of facts and figures to either paint the story positive or negative , In This case we see an article that has painted the story "negative" with the facts .... hope the Chinese members here get the point !

 

[Tshering22]

You actually believe tiny U.A.E. is India's biggest export market?? If I said China has $500 billion in exports to the island of Fiji, would you believe me???

You should really not go on size after seeing the amount of trade Hong Kong has with you lot or Singapore has with the world. They are tiny too but still they have massive trade.

Check the latest news. Rupee started climbing back from the second day it fell.

 

[ajpirzada]

well everything in the article makes sense except:

After covering the current account deficit, short-term debt and foreign investment flows, there would be less than $20 billion left over.

its not the end of the world that u have to clear everything in the ongoing year. there r many other tools to give u leverage for atleast one or two years.

But yes, tough times. No doubt!

 

[IndoCarib]

You actually believe tiny U.A.E. is India's biggest export market?? If I said China has $500 billion in exports to the island of Fiji, would you believe me???

Your post has nothing to do with my post. Give trumpet blowing some rest .

I dont believe the highlighted part

 

[sachin@india]

Congress is taking down india

India most disappointing among BRIC nations: Jim O'Neill - The Times of India

 

[SQ8]

Well if things dont improve.. the BJP can do the next best thing.. start a war and make sure they buy a lot of weapons from DRDo.
That way they boost the economy and create a lot of jobs.

 

[karan.1970]

Well if things dont improve.. the BJP can do the next best thing.. start a war and make sure they buy a lot of weapons from DRDo.
That way they boost the economy and create a lot of jobs.

Sir, you are on a roll these days.. Must be the new car

As I said, its good to be the king ...

 

[sachin@india]

Well if things dont improve.. the BJP can do the next best thing.. start a war and make sure they buy a lot of weapons from DRDo.
That way they boost the economy and create a lot of jobs.

Fundamentals are strong... but there is a lack of decision making power. It is not that we are falling apart but we are not meeting the potential that we have.

and lol when india started a war

 

[WAQAS119]

Growth is slowing. Inflation remains high. Political paralysis has stymied domestic reforms,
reserves dropped by $16 billion to $304 billion,
The rupee, which has dropped 16 percent in the past four months

It must have a major impact on defence deals particularly MMRCA, increasing gap with China and reduction of gap of capabilities with Pakistan. And if MMRCA (including other deals) went through, economy will get a big jolt. Lose-lose situation India is in.