“The fiscal deficit and sovereign debt in the US is high, but the real problem is of political decision-making.” Dr Rakesh Mohan, Former RBI Dy Governor
The Good News...
- Unlike 2008, liquidity is not a cause for worry in India
- Inflation to ease if global prices of commodities, crude oil dip
- This should boost domestic demand, stall interest rate hikes
- May hasten reforms process as UPA strives to prop up growth
- Post-2008, India banking more on emerging markets for growth
...And The Not-So-Good
- Uncertainty on how US, EU are going to handle present crisis
- Sluggish growth in Western markets will hit exports
- Bid to fight joblessness may lead to restrictions on IT outsourcing
- Banks, institutions in EU less likely to fund projects overseas
- Uncertain scenario may make investors risk-averse; gold may gain.
There’s one major difference between the scenario now and three years back. Rakesh Mohan, former Reserve Bank of India (RBI) Deputy Governor, points out that in the US, “while the fiscal deficit and sovereign debt is high, it is the breakdown in the political decision-making that is the problem”. There’s no option, really: as in the past, the US government will step in to try solve matters. Generally, there is hope of the US being able to solve its problem in the medium term. With an aging population and social rigidity, Europe is a tougher call. As such, emerging markets cannot depend on demand growth from European markets, or look to EU banks and institutions for funding. Future government initiatives to significantly reduce subsidies for fertilisers, foods, and fuels would be a positive factor,” states Takahira Ogawa, Standard & Poor’s sovereign analyst based in Singapore. Rakesh Mohan sees the government push for a new land acquisition bill as a major positive signal for reforms. Some clearly feel the 2011 crisis could jolt the UPA out of reforms complacency. As they say, that would be a positive outcome.
The Outlook
No comments:
Post a Comment