INR @ 58 to a US Dollar

The INR touched never before seen levels against the U.S. Dollar. It touched levels of 58 today. Also there is no dearth of analysts predicting further gloom for the INR. The reasons are the same which have been repeated time and again, High CAD & Fiscal Deficit coupled with policy inaction. Also sometimes there is a talk about the worldwide recession.

These factors have been present for some time now. But has the Indian Govt. thought about it seriously. Or is everyone too busy struggling to keep their powers/posts intact, which is now evident from a recent spat in one the political party for the top spot.

Whatever the finance ministry or the RBI claim about the health of Indian Economy, the way INR has tumbled against U.S. Dollar today (close to 1.5% down in a single day)

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GDP Data - May 2013

Today’s GDP data of 4.8% hasn’t come as a shocker and is in line with what was expected. Our Prime minister’s dream must have shattered after he announced yesterday that the days of 8% GDP aren’t far away, during his Japan trip.

Today’s GDP data has made history as now FY13 will go down as the year the country clocked its slowest growth in a decade. Even after all this the government hasn’t learnt much. It is gripped with policy paralysis not to mention the corruption cases coming out in multitudes on a routine basis.

Inflation - Too early to flutter with it

The recent inflation data both CPI & WPI have come in the comfortable range of RBI, but there is need to exercise caution.

The basic cause of inflation in India is supply chain bottlenecks. The constraints that are in supply chain from farm to fork still persist. Though RBI has been able to claw down inflation by increasing interest rates at various occasions, but it has also curbed consumption. Consumption theory was the only USP, which was being showcased to the world that India had. To reduce inflation by reducing consumption is not the way to go forward. It shows RBI’s, the Finance Ministry’s and on the whole Indian Government’s short sightedness to tackle the issue.

BRICS – such a passé

BRICS (Brazil Russia India China & now South Africa) have been the center of attention for many years now, at times also viewed as an alternative which can turn the current worldwide recession. The “Analysts” had pegged high hopes on these nations as the next big thing and had forecasted that these nations will impel the world economy back to the growth trajectory. But it is unrealistic to expect the group can challenge the US hegemony.

One look at these nations and it’s easy to perceive that these economies, the developing economies, are the net suppliers to the world’s developed nations aka economic giants. BRICS are net providers of materials/goods to the big European nations and also to the US. E.g. Brazil provides raw material, China manufactured goods and India is seen for outsourcing hub for IT and ITES. There are only two big cities in Russia, Moscow & Saint Petersburg, which have been much publicized and showcased as symbols from developing nation. One close look and it is apparent that the entire growth in Russia is limited to the perimeters of these two cites.