"I'm nobody, who are
you?"
—Emily Dickinson (American,
1830-1886)
Word for the day
Serotinal (adj)
Pertaining to or occurring
in late summer.
Malice towards none
Few of us would believe that
Pakistan can mend its ways and become a responsible nation.
So, what you think is the
meaning of all this censuring by global powers.
First random thought this morning
My personal assessment is that not more than a few million Indians
out of 1.3billion would have heard about Gauri Lankesh before she was brutally
killed. Still the country appears divided in condemning this cowardly act.
Unfortunately, the people apologizing for the killers are in
overwhelming majority, while those strongly condemning it are mostly from her
own fraternity. But this is not the point here.
My point is that 'We vs. They" syndrome that is dividing
Indian society on almost every issue now a days could bring disaster of
unfathomable proportions, if not tackled on priority basis.
Red flags - 4
India's balance of payment situation has seen marked improvement
in past four years. Consequently, India's external sector resilience has
improved materially since FY13. As at end of FY17, RBI's India External Sector
Resilience Score stood at 1.89 from 1.54 as at end of FY13.
However, this score continues to be materially poorer than 3.68
recorded in September 2008, just before the Lehman Bros collapse triggered the
global financial crisis. For example, the bottoming out of international prices
of major commodities in 2016 have already eroded gains in India’s terms of
trade vis-à-vis the preceding two years. Also, the current account is
being negatively impacted by the lower order of net receipts from services and
remittances as well as higher outgo on income payments during 2016-17.
In the RBI assessment,
"If terms of trade gains turn unfavourable in tandem
with projected higher international commodity prices and the global demand
conditions do not improve enough to support export volumes, CAD could increase
due to a widening of the merchandise trade deficit. In fact, based on data for
1980-2016, it is estimated that a one per cent positive shock in terms of trade
reduces India’s CAD by 0.03 per cent of GDP. Secondly, India’s software exports
– a major source of fi nancing merchandise trade defi cit, face heightened
uncertainty from protectionist policies being envisaged in advanced economies,
especially with regard to H1B visa in the US, which may stress the current balance
of payment (BoP). Thirdly, the short-term outlook for remittances fl ows to
India largely depends on income conditions in source countries, especially the
Gulf region which is facing low growth and undergoing fiscal consolidation,
even though the assessment of the World Bank (2017) is more optimistic on this
count. Finally, robust FDI infl ows which were at the forefront in fi nancing
CAD in the previous three years, entail servicing through higher income
payments which could have implications for CAD."
As per a recent UBS report, While external debt increased US$62bn
between FY13-FY17, FX reserves rose US$78bn during the same period, indicating
that external buffers are being created. FX reserves cover 78% of external debt
as of FY17, up from 71% in FY13 but down from 138% as of FY08 (before the
credit crisis). Import cover for reserves stood at 11 months as of FY17, much
better than the 7 months in FY13 but still below the peak of 14.4 months in
FY08.
Indubitably, the capital flows has been strong conditions for FDI
flows have improved materially in recent years. Nonetheless, a reversal in
loose monetary policies by the central bankers in advanced countries and
consequent rise in bond yields could reverse some of portfolio flows.
The global oil markets have remained stable for many months. The consensus
is now in favor of global crude oil prices stabilizing at levels above the
current levels. A sharper spike though could impact India's current account
materially.
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