Thought for the day
"From the solemn gloom of the temple children run out to sit
in the dust, God watches them play and forgets the priest."
-
Rabindranath Tagore (Indian, 1861-1941)
Word for the day
Kickshaw (n)
A tidbit or delicacy, especially one served as an appetizer
or hors d'oeuvre.
(Source:
Dictionary.com)
Teaser for the day
Just imagine Congress Party wins the
Delhi assembly elections!
Many stalwarts, who have nothing to
do, and cannot even enter Rajya Sabha, are in a tussle to become Chief
Minister.
Poor Mr. Lovely who fought really
hard to win the election is left alone to live another day.
Something is amiss
The results of recently concluded US congressional elections
appear to have surprised many. The global media is witnessing intense
discussion as to reasons and implications of the popular verdict that may see
President Barack Obama reduced to a lame duck during rest of his tenure.
As the data would suggest US economy seems to be doing pretty
well. Energy cost has fallen materially. Unemployment level has fallen to pre-crisis
level. Fiscal condition has improved. Economic is back on its feet as stimulus
stands withdrawn and growth is picking up. Foot soldiers are back from
battlefields in Iraq and Afghanistan. Opponents like Russia, Libya, Cuba, Iran,
Syria etc are weak in their knees.
Why the popular sentiment is so much against the President and
his Democrat colleagues?
The answer perhaps lies in the Fed Chairman Janet Yellen's
recent remarks about rising socio-economic inequalities in the US. “It is no
secret that the past few decades of widening inequality can be summed up as
significant income and wealth gains for those at the very top and stagnant
living standards for the majority,” said Yellen during an Oct. 17 speech at the Federal Reserve Bank of Boston. “I
think it is appropriate to ask whether this trend is compatible with values
rooted in our nation’s history, among them the high value Americans have
traditionally placed on equality of opportunity.”
This also has a lesson for the incumbent government in India.
Any effort to achieve 8% growth would be meaningless if it is achieved without
participation of the bottom 50% of the population. Focusing too much on the top
5% is perilous - both economically and politically. A deeper study of the 2004
loss of NDA-I and TDP, despite huge popularity of Atal Bihari Vajpayee and N.
Chandrababu Naidu respectively, would provide useful clues.
Back home, the financial markets are suggesting a serious
conundrum for the government and RBI.
RBI has conducted large reverse repo deals of Rs600bn and OMO
selling of Rs100bn. Despite that benchmark 10yr yields have fallen below 8.2%.
This large liquidity in the traditionally busy season when seen with the
consistently weak PMI, IIP and services sector growth data is worrisome. The
2QFY15 corporate numbers are also suggesting lack of demand across sectors,
regions and sections.
Under these circumstances lower inflation may not be a good sign,
as it highlights the total lack of pricing power in the economy. In my view, it
is too early to assume sustainability of low energy prices over a longer
period. Hence, any hasty monetary policy decision based on lower inflation and
lower energy prices may prove to be ineffective or even counterproductive.
Populism aside, given the material fall in most competing
currencies and slowing demand in traditional export markets, there might be a
need to maintain USD/INR at current or even slightly weaker levels to keep our
exports competitive. Expected rise in flow post BoJ stimulus would not make
things easier either.
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