To make matters worse, Rajan has been appointed the head of the Central Bank of India. An authority on the subject known to many of you says to expect a wave of privatization.
On Sun, Sep 1, 2013 at 11:04 PM, Patrick Bond <[email protected]> wrote: > (This writer is often shrill, but often has interesting insights amidst > strange rightwing politics.) > > > India pushes 'shock and awe' currency plan to save BRICs > > Submitted by cpowell on 07:58AM ET Sunday, September 1, 2013. Section: > Daily Dispatches > > By Ambrose Evans-Pritchard > The Telegraph, London > Sunday, September 1, 2013 > > http://www.telegraph.co.uk/finance/currency/10277392/India-pushes-shock-. > .. > > India is pushing for joint "shock and awe" intervention by key > developing states to halt capital flight and shore up currencies in a > move that risks backfiring and triggering a vicious spiral. > > "It is going to happen in a matter of days rather than weeks. Brazil and > India can start the move," said Dipak Dasgupta, a top Indian official. > > Mr Dasgputa told Reuters that China, Brazil, India, Turkey, Russia, and > South Africa have all been squeezed as the US Federal Reserve prepares > to tighten monetary policy. Joint action would give emerging markets > greater firepower, allowing them to deploy their combined $8.7 trillion > of reserves and crush "speculators" rather than being picked off one by > one. > > ... Dispatch continues below ... > > > > However, it is unclear whether such action would serve any useful > purpose if the real problem is exhaustion of catchup growth models in > these countries and boom-bust credit cycles. "This could backfire," said > Ian Stannard, of Morgan Stanley. "If they did this, they would have to > sell US and European bonds and that would push up yields. It was rising > yields that started this process in the first place." > > The side-effect of such intervention would be monetary tightening, > pushing countries into deeper trouble. India's growth fell to 4.4 > percent in the second quarter, the lowest since the post-Lehman crisis > in 2009. This is eroding tax revenues and pushing the budget deficit > back over 5pc of GDP, with a ratings downgrade looming. > > "We are no doubt faced with important challenges," said Indian premier > Manmohan Singh. The rupee is in freefall, crashing 25 percent over the > past four months to a record low of 68.84 against the dollar. > > "Populist fiscal policies have come back to haunt India," said Kunal > Kundu from Societe Generale. Food and fuel subsidies are gobbling up > much of the budget, while investment atrophies. India has been living > beyond its means, with a current account deficit of 4.8 percent of GDP > last year. Mr Kundu said India needs large inflows of capital just to > cover its short-term external debt, yet hot money is leaving. > > Officials have floated plans to use India's gold reserves as collateral > for loans from the International Monetary Fund, but the IMF would demand > deep reforms and cuts in subsidies. > > "The Indian authorities have made a complete mess of policy," said Lars > Christensen from Danske Bank. "They are trying to defend a quasi-peg for > the rupee instead of letting the currency reflect fundamentals." > > It remains to be seen whether other countries will join forces with > India. South Africa has signalled support, but Brazil's central bank > said it was unaware of any plans. Peter Attard Montalto from Nomura > dismissed the rumours of joint action as "noise" from politicians > clutching at straws. "We are very sceptical," he said. > > > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > -- Michael Perelman Economics Department California State University Chico, CA 95929 530 898 5321 fax 530 898 5901 http://michaelperelman.wordpress.com
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