RBI curbs on Forex outflows_Does it prove liberalization has failed?

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hi
being an NRI....just i visited my mother country....country can do better for FOREX inflows.....the political will power is required...

customer oriented services required...here in USA ...the APR for CDs are less than 1%..but the services are the best in the world....

the economy of the country is basically a political compulsion and vote bank politics.....service/oil industries more liberlised....

export oriented services to be encouraged....i heard that dollar value is going to Rs 70/= very shortly...the crazy of gold to be

curtailed...wait and watch....

 

[vgane]

In one of my conversations I learnt that lots of our politicians have parked their money in foreign shores....To fight the next elections which is about 6 months away they need money and the depreciation of Rupee will come in handy to them

So when they bring back this money they get a a handsome appreciation of their money which will come handy for the elections...Post the elections the Rupee will appreciate..This happened in 2009-09...Let us see if this story repeats in 2014

 

[vgane]

The external events are not conducive for the Rupee...The build up of war clouds in Syria does not portend well for the Rupee..The oil prices will harden on account of this conflict which will impact us adversely

We need to have taken lot of long term measures like investment in Shale gas, increasing output in KG 6 Basin, investment in ports, roads (wonder what happened to Golden Quadrilateral project), electricity etc..I think the Government is adding burden to the Rupee through the food subsidy bill which will increase the fiscal deficit...The financial impact of the food subsidy will be an elephantine Rs 1.3 lac crores (USD 20 Billion)..I think our politicians are thinking only short term..Just to win elections, they will pledge our motherland

 

[sangom]

In one of my conversations I learnt that lots of our politicians have parked their money in foreign shores....To fight the next elections which is about 6 months away they need money and the depreciation of Rupee will come in handy to them

So when they bring back this money they get a a handsome appreciation of their money which will come handy for the elections...Post the elections the Rupee will appreciate..This happened in 2009-09...Let us see if this story repeats in 2014

This is the real reason and that is probably why PC advises people to be patient !!
But international developments may take even our blackmoneywallahs by surprise; man proposes, fate disposes

 

[vgane]

The Rupee has depreciated by a massive 256 paise against the greenback today to slip to Rs 68.80...There are hardly any dollars available in the market & traders are forecasting Rupee to settle at Rs 70-72 in the next few days

In 1947 1 USD=1 INR ...This shows the real state of our economy

The Gulf returnees of 2008-09 at the height of the Gulf crisis are ruing their return to India...Not only has their net savings got eroded but are also facing the impact of inflation..It is a double whammy of sorts

Had these returnees stayed back in Gulf & had a same salary today as they earned in 2008 their worth would have been far higher only on the strength of the Gulf currencies

 

[sangom]

The Rupee has depreciated by a massive 256 paise against the greenback today to slip to Rs 68.80...There are hardly any dollars available in the market & traders are forecasting Rupee to settle at Rs 70-72 in the next few days

In 1947 1 USD=1 INR ...This shows the real state of our economy

The Gulf returnees of 2008-09 at the height of the Gulf crisis are ruing their return to India...Not only has their net savings got eroded but are also facing the impact of inflation..It is a double whammy of sorts

Had these returnees stayed back in Gulf & had a same salary today as they earned in 2008 their worth would have been far higher only on the strength of the Gulf currencies

With an attack on Syria appearing very possible now, we are heading for a world war like scenario. In fact MMS & PC will cherish this; they can blame everything then on the war!!

India and its so-called liberalization is going to the dogs.

 

[prasad1]

With an attack on Syria appearing very possible now, we are heading for a world war like scenario. In fact MMS & PC will cherish this; they can blame everything then on the war!!

India and its so-called liberalization is going to the dogs.

That is what you have been predicting, so now you can say "I said so", nothing new there.

the three state-owned oil marketing companies needing about $8.5 billion every month to meet their daily foreign exchange requirement.

According to Paul Krugman a noted economist:

It’s a variant on the same old story: Investors loved these economies not wisely but too well, and have now turned on the objects of their former affection. A couple of years back, Western investors - discouraged by low returns both in the US and in the crisis nations of Europe - began pouring large sums into emerging markets. Now they’ve reversed course. As a result, India’s rupee and Brazil’s real are plunging, along with Indonesia’s rupiah, the South African rand, the Turkish lira and more. Does this reversal of fortune pose a major threat to the world economy? I don’t think so. It’s true that investor loss of confidence and the resulting currency plunges caused severe economic crises in much of Asia back in 1997-98.
Cross-border flows of hot money were at the heart of the Asian crisis of 1997-98 and the crisis now erupting in emerging markets - and were central to the ongoing crisis in Europe, too.


In short, the main lesson of this age of bubbles - a lesson that India, Brazil, and others are learning once again - is that when the financial industry is set loose to do its thing, it lurches from crisis to crisis.

 

[Vaagmi]

My thoughts:

FDI creates jobs and directly contributes to the GDP. The funds brought into the country are long term funds, they stay here as long as the return they get is attractive. The return in this country on funds is attractive when compared to what it gets in US or Europe. So FDI is attractive from the POV of India.

FII is hot money and it moves pretty fast across the continents. The Fund Managers who manage these funds are looking for quick opportunities in the short term because they are given a large corpus with few checks and balances and a tight goal. The money is largely invested in money market and share markets. It does play a productive role only by adding value to investor's funds in Companies and by offering attractive liquidity to the investments. It in a way help unlock entrepreneurs' funds for investment in new ventures which will add to the growth of GDP and creation of wealth and jobs. The FIIs can suck away the wealth of individual investors and take it away very quickly outside the country. So FII is obnoxious from the POV of India. But every evil can be managed to our advantage only if we have the will. If the policy makers in India had looked at FDI and FII together always and had set for themselves a kind of prudential ratio between the two it might have been helpful. In bad situations, when FIIs withdraw quickly and vanish from the scene, India could still have managed to remain afloat and sail on. But this was not to be and we have a situation similar to the one in which the roaring tigers of South East Asia found themselves a few years back. In those countries they frittered away the capital in real estate instead of capacity building in industry which burst as a bubble when the hot money balloon moved over. We have been using the capital in inflating balloons-most of the shares of enterprises in this country are at an artificially jacked up value compared to its intrinsic value-which get punctured frequently and come down crashing on us. We do not seem to have learnt any lessons.

Sometimes I get a doubt as to whether we have real talent managing the country's economy at all. I am looking for an answer. Hope I get it. Thanks.

 

[vgane]

The second part of Gurumurthy's article is here...Look at the quantum of imports from China..In effect we are funding the Chinese defence budget..After reading this article I understood the enormity of the problem...In a way we are funding China's incursions along the LOC esp Arunachal Pradesh and supplying Pakistan military arsenal and missiles and providing technology for nuclear armaments

UPA policies weakening India and enriching China - The New Indian Express

 

[sangom]

That is what you have been predicting, so now you can say "I said so", nothing new there.

But someone said that PC and MMs are only 'tweaking' their brand of liberalization economics and what is wrong with that! Tweaking has now given this screeching halt

the three state-owned oil marketing companies needing about $8.5 billion every month to meet their daily foreign exchange requirement.

According to Paul Krugman a noted economist:

The MMS-PC brand of economics (perhaps this also can be put under the 'sonionomics') was to dance to the tunes of any and every foreign entity which said it had a few million $ to 'invest' in India, forgetting the fact that if the investor is not a rank fool he would have calculated how quickly he would repatriate an equal amount by way of profits. Perhaps many pockets were 'lined' also and we had all brands of foreign cars coming in. Now the country has to pay through its nose to import oil. And soon the automobile market will be asking for all kinds of subsidies for it to survive. This is an example (there are many more) how UPA government has invited financial disaster.

 

[vgane]

Hard times require drastic actions...But for politicians this is anathema during election time

Did you notice the slug fest with our President Pranabda entering the ring & asking the Government the details of steps that are being taken to stem the tide...Good questioning

 

[sangom]

Hard times require drastic actions...But for politicians this is anathema during election time

Did you notice the slug fest with our President Pranabda entering the ring & asking the Government the details of steps that are being taken to stem the tide...Good questioning

Shri gane,

I think the rupee will gradually improve (against the $) now. This is because those who stashed their black moneys abroad (in USD mostly) must have sold it @ Rs.70 or around that value and these same entities will convert this rupee funds to USD @ around Rs.67. This means 4.5% yield (interest or profit) in a day or two and that works out to about 800% interest!!

The same drama is likely to repeat just before the next elections even if there is no international development. Let us wait and see.

This is how this country's wealth is being systematically taken away abroad, surreptitiously for those who do not know the dynamics of this operation.

The only good thing is that Sonia probably got very concerned about her country's bad state of affairs, took two days to recover from her illness and has now come back to see an appreciating rupee. If this is not patriotism what else can be?

 

[sangom]

Hard times require drastic actions...But for politicians this is anathema during election time

Did you notice the slug fest with our President Pranabda entering the ring & asking the Government the details of steps that are being taken to stem the tide...Good questioning

Pranabda had ideas which probably did not suit the FIIs. He wanted to fine vodafone with retrospective effect, for example. That was why he was kicked up.

 

[Vaagmi]

Pranabda had ideas which probably did not suit the FIIs. He wanted to fine vodafone with retrospective effect, for example. That was why he was kicked up.

Pranabda is the tail of the "Family". Tails do not wag.