India's looming BOP crisis

[sehwag1830]

Read here the Rbi quarterly report
Reserve Bank of India

India needs 52 billion $ annual just to make sure net outflow=0

From where will we bring this money ?

And here is a govt. who is hell bent on wasting the limited resource on NREGA, FSB, Farm loan waiver.

Within 2 years we will default , with rupee going to 1 USD =70 level and GDP tanking by 20%.

And most of our Congress appointed mods will publish how we will overtake China in 2150,2250 or 2350.

 

[ejazr]

Legitimate point, but you can make it without name calling.

By the way , here is a graph of BoP. As you can see, for the past three years we had a positive BoP, but 2011 has been bad and getting worse.

 

[sob]

If you see the past three years where we had a +ve BOP the stock market was it's peak and FIIs were investing in India by the bucketful. This is all hot money. We need FDI and strong exports to maintain a +ve BOP. This shows the shortcomings of the current Govt. because the moment the FIIs withdrew money our economy starts going Southwards. This is not a good position for our economy.

 

[sob]

Read here the Rbi quarterly report
Reserve Bank of India

India needs 52 billion $ annual just to make sure net outflow=0

From where will we bring this money ?

And here is a govt. who is hell bent on wasting the limited resource on NREGA, FSB, Farm loan waiver.

Within 2 years we will default , with rupee going to 1 USD =70 level and GDP tanking by 20%.

And most of our Congress appointed mods will publish how we will overtake China in 2150,2250 or 2350.

A weakening Rupee makes our oil import bill balloon further weakening our position. This is the basics of economics which our learned Pranab Da has missed. But then for a FM who has been only fudging figures what more can we expect.

 

[parijataka]

Which is why we need to vote in a right wing party alternating with centrist/left of center party. Right wing parties generally run a tight ship and bring the spending under control while the left wing tend to spend on welfare. In our own TN state we have DMK that blows up on freebies and Madam JJ comes in to clean up [and lose some popularity in the process], not that she does not offer freebies but generally she is generally more conservative fiscally.

 

[ejazr]

What we should be doing is cutting our imports of Oil (~$90 Billion) and Gold (~$45 Billion). Both of these take the lions share of our external payments Almost 45% for last FY.

What is required is proper deregulation of petrol, diesel and related products so that consumers become conscious of what they have to pay for as well as incentivese people to buy less consumer gold and invest in fixed income assets. The deregulation of Rupee NRE accounts was a good move in this regard to encourage NRIs to deposit money in high interest accounts.

Banks see surge in non-resident deposits - Money Matters - livemint.com

 

[Iamanidiot]

If diesel gets deregularised we will be having galloping inflation

 

[Rahul92]

Legitimate point, but you can make it without name calling.

By the way , here is a graph of BoP. As you can see, for the past three years we had a positive BoP, but 2011 has been bad and getting worse.

Are we in a recession

 

[ejazr]

Are we in a recession

Recession is consecutive quarters of negative growth, we haven't been in any recession with our lowest quaterly growth rates at around 6.1%

 

[sob]

What we should be doing is cutting our imports of Oil (~$90 Billion) and Gold (~$45 Billion). Both of these take the lions share of our external payments Almost 45% for last FY.

What is required is proper deregulation of petrol, diesel and related products so that consumers become conscious of what they have to pay for as well as incentivese people to buy less consumer gold and invest in fixed income assets. The deregulation of Rupee NRE accounts was a good move in this regard to encourage NRIs to deposit money in high interest accounts.

Banks see surge in non-resident deposits - Money Matters - livemint.com

This is hot money. If Rs. Continues to fall against dollar then the high interest rates would be of no use to the NRIs. The money will start vanishing fast in that case.

 

[sob]

If diesel gets deregularised we will be having galloping inflation

State Govs. Need to reduce VAT like Goa has done for petrol. Prices of fuel are already very high.

 

[ejazr]

This is hot money. If Rs. Continues to fall against dollar then the high interest rates would be of no use to the NRIs. The money will start vanishing fast in that case.

True, but long term, India being a high growth country will have higher inflation and hence higher interest rates than most developed countries.

Other than that, improved stock market performance for 2012 and allowing private foriegn investers into Indian stock markets also will improve the situation. Ofcourse, good economic environment will also mean for FIIs. And most importantly, we need to balance our exports and imports as much as possible by increasing our exports and rationalising imports.