India shouldn’t worry about Re fall: Mr Yen

Discussion in 'Economy & Infrastructure' started by Mad Indian, Jun 27, 2012.

  1. Mad Indian

    Mad Indian Proud Bigot Veteran Member Senior Member

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    India shouldn’t worry about Re fall: Mr Yen - The Times of India

    MUMBAI: Eisuke Sakakibara, a former Japanese minister of finance and economist, known as 'Mr Yen' because of his ability to move currency markets during the '90s, advises the Indian government to take advantage of the falling rupee by boosting exports and not to fret about it. The currency depreciation is a worldwide phenomenon caused by "simultaneous recession" in global economy, he tells TOI on a visit after becoming a board member at investment bank Avendus Capital.


    You are here in the midst of what some people call an Indian currency crisis. What are your views on rupee's steepest fall ever in recent months?

    What is happening right now is repatriation. Funds are now returning from emerging economies to US because of simultaneous recession worldwide. There's a flow from equities to bonds. It's a worldwide phenomenon triggered by the euro crisis. India is running a current account deficit and capital inflows supported the currency so far. So as long as capital continues to flow out, this depreciation will continue. How long...is uncertain. If I were the Indian government, I would tell the Indian people, 'Don't worry because it is to do with repatriation and not because of any weakness in the Indian economy' and try to take advantage of the situation by increasing exports.


    Do you think the euro will survive as a single currency? How do you see the future of the Eurozone?

    Germany and France forged European integration in the post-War era. But it's beginning to disintegrate because of the Greek crisis and the
    US crisis. I think the problem is structure. The Greek crisis has been temporarily suspended but it's spreading to Spain and perhaps Italy. So the integration is at risk and this is a structural problem and I don't see any immediate way out of the European crisis. The crisis will continue and eventually hit European banks. Because bonds of south European countries are plummeting, the balance sheet of banks are deteriorating. I think it is a possibility that some French, German or Italian banks may have a problem and the fiscal crisis may eventually become a financial crisis. I would not be surprised if a major financial institution in Europe goes bankrupt.


    A lot has been said about Japan's debt that's running at about 200% of its GDP...

    It's true that debt is high but Japan is not in a financial crisis. While the debt is 180% of the GDP, the accumulated assets of the Japanese households is almost 240% of the GDP, which more than covers up the debt. And most of that debt is owned by Japanese
    institutions unlike in the
    case of US, where more than 70% of its debts are in the hands of foreigners.


    There's rising interest of Japanese corporates in India. How do you see the Indo-Japanese deal corridor shaping up?

    Yen has been strong and I see it that way for a while, giving the Japanese companies enough comfort to pursue international acquisitions. They have gone into China in a big way, but are now talking about China Plus One strategy. That's bringing lot of focus on the Indian market where they see better longer-term growth. India's younger population will sustain longer growth, possibly even 20 or 30 years after China peaks off. Japanese conglomerates, aided by low cost of capital, normally look at the long horizon.

    ________________________________________________________

    Interesting Article :hmm:
     
    Sridhar and Singh like this.
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  3. Payeng

    Payeng Daku Mongol Singh

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    Export increase and import decrease sounds good but in reality acts otherwise.
     
  4. Ray

    Ray The Chairman Defence Professionals Moderator

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    Make Hay while the Sun Shines?

    But the Hay must be dry so as to be able to sell!
     
  5. Yusuf

    Yusuf GUARDIAN Administrator

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    there has be worthwhile exports.. we cannot just raw material.
     
  6. Payeng

    Payeng Daku Mongol Singh

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    ^^ we can export brains :dude:
     
  7. Yusuf

    Yusuf GUARDIAN Administrator

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    we already have done that..its hurting us... all the best brains of india are in the US, UK etc
    '
     
  8. SLASH

    SLASH Senior Member Senior Member

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    Short term devaluation of rupee will not help. Unless it is the government policy to keep the currency at this level it is too risky to get into export contracts. It is predicted that by August everything should come back to normal. Lets see
     
  9. no smoking

    no smoking Senior Member Senior Member

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    Generally, devaluation could benefit you in half year. beyond that date, the increase cost of your importation would offset your benefit in exportation. This devaluation of indian currency is not gov policy. It is simply the market response to india accumulated trading deficit. So, unless india can increase its exportation significantly or bring the foreign money inflow to a higher level, the things will become worse.
     
  10. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    My sense is, Rs. has possibly seen the lows it had to, at least for now, and Rs. should start to appreciate from now on.

    More policy measures are on the way, and Kaushik Basu is again looking a little upbeat, and he is again making reference to certain key reforms, provided the political will on part of the coalition is there, the key word again remains, coalition.

    Wait for the change to set in from the second half of the fiscal (Oct onwards, that is what he is hinting at).

    If indeed it is so, Rs.50 to a dollar should be more like it that we should sustain in times to come, provided manufacturing is given the much needed push.

    There is one thing which is doing good, the exports. The growth is hovering around 20% or so, and again they are expecting a similar growth, so this hasn't been a disappointing area. More important is our manufacturing needs to be well taken care of, exports will do well.
     
  11. sob

    sob Moderator Moderator

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    MMS taking over the reins of the Finanace Ministry and has made all the right noises to sooth the nerves.

    The result is there for all to see BSE Sensex is nearly 400 points up , 1US$= Rs. 55.95

    The sheer cussedness of Pranab Da and the lack of faith in him was a big drag on the Indian economy. due to global scenario, Crude and Gold prices are tumbling down and this bodes well for India, as these two account for a large chunk of our import bill. This will also reduce the pressure on Rs.

    MMS has nothing to loose. The Indian economy needs a roadmap to work on and not impediments like the former finance minister and the earlier Environment Minister, Jairam Ramesh.
     
  12. Yusuf

    Yusuf GUARDIAN Administrator

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    Fvcking fvcking bitch of a dollar. Rupee has gone up by 1.50 and I have made a total of $50,000 transfers after waiting for it to drop and it only went higher. Damn the fvcking shit.
     
  13. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    WIth Pranab Mukherjee on his way out, you should have waited a little longer!
     
  14. Yusuf

    Yusuf GUARDIAN Administrator

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    I waited till as long as I could. Then I had to as the shipment was getting delayed too long. Actually made a bigger loss. I ended up paying 2lacs as penalty for not taking delivery at port.

    Total loss overall.
     
  15. skumar7777

    skumar7777 Regular Member

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    Hope you will make up for it in profit on your shipments.

    If the government and the RBI clearly outline how the arrangement of oil importers getting minimum 50% of foreign currency from SBI or other banks will function, it will take some demand off the forex market. Some announcements of foreign investment coming in (Walmart and Coco Cola) have also helped.

    A diesel price hike will help some more though it will also pinch pockets.

    Overall, the net exporters of the world are awash with dollars and as they slowly begin buying tangibles in the net importers, the value of the dollar has to fall. Also arrangements between trading nations to use their own currencies, bypassing the dollar, should help reduce demand for the dollar.
     
  16. no smoking

    no smoking Senior Member Senior Member

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    Yes, it will help your manufacturing in certain period. But please keep that in mind: india is a country with huge trade deficit! That means your importation will be punched heavily due to the increase of cost! Certainly, after a certain period, this cost growth will pass to your manufacturing!
     
  17. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    Absolutely.

    What a significant push to manufacturing will also do is off-set the imports of finished goods to quite an extent, and it gets all the more important because with a bulging middle-class, and increase in their aspirations, its better most of such aspirations get fed to from within.

    A good amount of our import bill is due to petroleum products, important for the country is to look for alternatives to our energy needs wherever possible. Then address the trade imbalance with which ever country we have.

    Difficult, not easy, but the focus ought to be there of our polity. The good thing that has happened is, our prime minister has taken over the finance ministry, and things for a change are looking up. He still has 2 years to do all that.
     
  18. afako

    afako Regular Member

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    Infact the Stupid Government should see that the Rupee stays below 60 INR. The recent Commitments by IKEA($1.5Billion), Coco-Cola($5 Billion) is because of the Rupee Depreciation. Rupee did not see a quick Fix like last July.

    This is the best thing to happen to the country in a Long Long Time. Exports become Competitive. We have invested a Trillion Dollar in Infrastructure in the Last 10 Years. So We do have a Decent Base to Support Manufacturing. The time is right.

    After small cars, global auto companies like Nissan and Toyota start exporting sedans & SUVs from India - Economic Times

    Nissan to make India export hub - Economic Times
     
  19. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    no smoking,

    Something very interesting I found.

    In fiscal 07-08 (April'07-March'08) India's exports were to the tune of 123b usd (Exports 2007 country ranks)

    Last fiscal, '11-'12, the exports grew to 303b usd

    I take this as an example because in 2007-08 the Rs. had appreciated to Rs.39 to a dollar (Monthly Exchange Rate Average (Indian Rupee, American Dollar) 2007 - x-rates), and then it touched 51-52 in '09. So the growth has happened irrespective of the fluctuations.

    Infact, back in '07 India was ranked 29th in terms of exports, and now India is ranked 19th.

    Another interesting observation, during the said period (2007-11), India's exports have grown 150%, which is the highest for any country ranked top 30 exporting countries in 2007, and then comes Australia and the PRC.

    Now, I am not trying to draw any parallels here, since what the PRC exports in 2 months we do it in a fiscal, also the base effect, which is very low in our case, but the idea is to bring to focus that Indian exports have done well without a focused manufacturing policy and with a seriously fluctuating currency.

    I am one of those who do believe, come 2020 and India's exports should definitely touch a trillion dollars, and then India will be considered in the big league of exporting countries. Here, India's exports in 2004 were at 57b usd (http://www.photius.com/rankings/economy/exports_2004_0.html), and it has multiplied by more than 5 times since, and from now till 2020, we have similar time line as we had since 2004.
     
  20. no smoking

    no smoking Senior Member Senior Member

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    It is not difficult, it is damn hard. Building up a manufacutring base is a decades work. From 1980 to 1996, CCP leaders were haunted by the current account balance EVERYDAY until they finally start hundreds thousands sweatshops which they condemned since 1921. There is one saying in China: today's manufacturing is built on Chinese tear, blood and bodies! The question is: Is india society ready to face the great suffering resulted by this procedure.
     
  21. no smoking

    no smoking Senior Member Senior Member

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    I would rather say that india has done well in the easy part of the industrilization. You haven't touch the mine field yet!

    Indeed, india's exportation growth is fast. But india's importation is growing even faster! So you have to focus on how to reduce your importation: finding alternative energy or building manufcaturing, either of them would take more than 10 years to complish. What is india going to do before that?
     

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