Sehwag1830 Posted May 25, 2012 Posted May 25, 2012 OK i am massively worried with free fall in Indian rupee. I just checked USD vs Bangladeshi taka, USD vs Pakistani rupee,USD vs Yuan. And all these currency are stable in last 3 months . Only Indian rupee has fallen so much. And due to fall in Indian rupee, our nomimal gdp has been reduced by 300 billion $ . We should have been 2-2.1 trillion $ now. But will be only 1.7-1.8 trillion $. So what is the reason ? Please don't tell me Bangladesh , Pakistan are economic power house.
bangladeshifan Posted May 25, 2012 Posted May 25, 2012 USD itself is falling. now if rupee is falling against USD then its real bad
punjabi_khota Posted May 25, 2012 Posted May 25, 2012 Its 56 right now :omg: Time to send home some $ and earn free goodwill :desiman:
Desi Cartman Posted May 25, 2012 Posted May 25, 2012 meri to full lagg gayi... AUD has fallen 10% in last one year and I havent moved my money from Aus :facepalm: from 1.05 it was even money when I moved here and now its .94
Clarke Posted May 25, 2012 Posted May 25, 2012 My guess: Demand vs Supply of currency. We have bigger import bills with our growing economy (oil, gold, crapple products etc) while our exports haven't increased anywhere as much. Besides that, foreign investors are moving away due to corruption & policy paralysis from our mango people oriented UPA sarkar.
Ram Posted May 25, 2012 Posted May 25, 2012 The value of a currency is very closely tied to the bond market. Just like the stock market, there's a equally humongous international bond market out there where bonds issued by the central banks of various nations are bought and sold. All countries issue bond (or debt) to finance their budget/development plans. The yield from investment in bonds is much lesser than say other forms of investments like stocks/commodities, but it is considered to be one of the safest investment options out there as, to put it simply, the central bank of a nation has the capacity to print how much ever money they want. (of course, it is not as simple as that) Just like the value of a stock rises and falls based on how many people sell versus how many people buy, the value of a currency also fluctuates based on the activity in the bond market. During the 2008 financial crisis of 2008, investors from all over the rushed to sell their USD bonds and move into other currencies and the value of the USD plummeted. Now, we are seeing the opposite effect as the crisis in Greece and the Eurozone in general is forcing investors to come back to the $US, making the dollar gain in value. And because oil is traded in $USD, we have to pay more rupees for the same amount of oil than we did before, forcing prices back home to rise. Of course, there's also the question of the actual oil price itself. Every time there's instability in the middle east, the prices go up. There has been a lot of speculation about Israel launching a pre-emptive strike against Iran's nuclear facilities. If that happens, it will be one of the biggest security crises in a long time.
Clarke Posted May 25, 2012 Posted May 25, 2012 Some tough prospects: http://www.reuters.com/article/2012/05/22/us-india-devaluation-idUSBRE84L0N920120522
kabira Posted May 25, 2012 Posted May 25, 2012 we are getting royally screwed by inaction of our government something is got to give now..
Ram Posted May 25, 2012 Posted May 25, 2012 Cant help but chuckle at people who think the recent developments are due to the (in)action of the central govt. Our govt. can do very little to control what is happening. All they can do is modulate the interest rates and hope to control inflation, that is pretty much it. The great US of A could not stop a dangerous run on the USD in Nov 2008. What chance does the puny Indian rupee stand? And as a citizen of a world and a representative of a third world country, I cannot believe that under-privileged people all over the world have to sacrifice and suffer to the whims and fancies of the oil market. Oil is a essential resource, it should not be considered a for-profit commodity. Nobody benefits from sky-high oil prices apart from oil producers and speculators. While they rake in record profits, billions of people all over the suffer in silent agony.
kabira Posted May 26, 2012 Posted May 26, 2012 >Cant help but chuckle at people who think the recent developments are due to the (in)action of the central govt. Our govt. can do very little to control what is happening. All they can do is modulate the interest rates and hope to control inflation, that is pretty much it. The great US of A could not stop a dangerous run on the USD in Nov 2008. What chance does the puny Indian rupee stand? You are totally wrong comparing USA with India.. Government still regulates all the banks. We have massive market. We cna pretty much manufacture lot of things. The inaction I am refering is on the business front. They have not taken any major decision to boost exports or business. Our corporations are busy investing in other 3rd world countries for better returns. I firmly believe we have enough man power and resources to fight any global slowdown. We can sustain ourselves. The problem is management or lack of it. The politics of vote bank is hurting us big time. They could have hiked the price like 3 months ago..but they did not because of elections. Our PM goes on the record and advises to earn more/spend less, inflation is inevitable etc..Yes einstein, we all know thats economics 101. Even after taxing Petrol (I heard almost 50% is taxes), Government keeps saying they are losing money. LOL I can never understand that. Mind you Manmohan Singh was our best FM under Narsimha Rao, played huge role is getting out of soup in 90s. But after becoming PM, he has no control over anything. If I were him, I would have resigned from PM long back. He is running one of worst Government. I am not even talking about Scams, leave them aside. The government in terms of "inaction". The Bureaucrats are worried that if they take decisions, and anything goes wrong, they will be fall guy. Ministers are not willing to act, they fear backlash etc... So yes, there was lot of things Government could have done to get us prepared for all this. I am positive guy and I was really glad that recession in 07-08 did not hit us that badly, was kind of proud about it. But here we come after 4 years we are *****ed.
achilles Posted May 26, 2012 Posted May 26, 2012 The value of a currency is very closely tied to the bond market. Just like the stock market, there's a equally humongous international bond market out there where bonds issued by the central banks of various nations are bought and sold. All countries issue bond (or debt) to finance their budget/development plans. The yield from investment in bonds is much lesser than say other forms of investments like stocks/commodities, but it is considered to be one of the safest investment options out there as, to put it simply, the central bank of a nation has the capacity to print how much ever money they want. (of course, it is not as simple as that) Just like the value of a stock rises and falls based on how many people sell versus how many people buy, the value of a currency also fluctuates based on the activity in the bond market. During the 2008 financial crisis of 2008, investors from all over the rushed to sell their USD bonds and move into other currencies and the value of the USD plummeted. Now, we are seeing the opposite effect as the crisis in Greece and the Eurozone in general is forcing investors to come back to the , making the dollar gain in value. And because oil is traded in , we have to pay more rupees for the same amount of oil than we did before, forcing prices back home to rise. Of course, there's also the question of the actual oil price itself. Every time there's instability in the middle east, the prices go up. There has been a lot of speculation about Israel launching a pre-emptive strike against Iran's nuclear facilities. If that happens, it will be one of the biggest security crises in a long time. Top post. Everything explained.
velu Posted May 26, 2012 Posted May 26, 2012 Rupee is going down because of EUROs weakness. We import more and mostly we pay in USD , so we have inverse realtion with the value of $. When EURO goes down , USD goes up and INR goes down. Even the korean Won depreciated from 1120 a week b4 to 1190 now ( korea is an export oriented country ).
Stuge Posted May 26, 2012 Posted May 26, 2012 The value of a currency is very closely tied to the bond market. Just like the stock market, there's a equally humongous international bond market out there where bonds issued by the central banks of various nations are bought and sold. All countries issue bond (or debt) to finance their budget/development plans. The yield from investment in bonds is much lesser than say other forms of investments like stocks/commodities, but it is considered to be one of the safest investment options out there as, to put it simply, the central bank of a nation has the capacity to print how much ever money they want. (of course, it is not as simple as that) Just like the value of a stock rises and falls based on how many people sell versus how many people buy, the value of a currency also fluctuates based on the activity in the bond market. During the 2008 financial crisis of 2008, investors from all over the rushed to sell their USD bonds and move into other currencies and the value of the USD plummeted. Now, we are seeing the opposite effect as the crisis in Greece and the Eurozone in general is forcing investors to come back to the , making the dollar gain in value. And because oil is traded in , we have to pay more rupees for the same amount of oil than we did before, forcing prices back home to rise. Of course, there's also the question of the actual oil price itself. Every time there's instability in the middle east, the prices go up. There has been a lot of speculation about Israel launching a pre-emptive strike against Iran's nuclear facilities. If that happens, it will be one of the biggest security crises in a long time. Are these bonds similar to postal bonds ? where a person buy a bond for this many years and invest in them and after few years he /she gets the money back with N amount of interest ? My knowledge of economics is weak I'm not good with it .So please bear with me even if my queries seem dumb . Rupee is going down because of EUROs weakness. We import more and all mostly we pay in USD , so when have inverse realtion with the value of $. When EURO goes down , USD goes up and INR goes down. Even the korean Won depreciated from 1120 a week b4 to 1190 now ( korea is an export oriented country ). Thats what I though too .Greece economic downfall has a part to play in INR fall against US$.
Crookbond Posted May 26, 2012 Posted May 26, 2012 ^ Same here. Just need a simple explanation. Probably it is that complicated. :dontknow:
punjabi_khota Posted May 26, 2012 Posted May 26, 2012 Economics is 'science' only in hindsight. You can probably cook up 5 different explanations and they can all be plausible.
Sachin=GOD Posted May 26, 2012 Posted May 26, 2012 IMO some of the reasons are: Fluctuating Oil prices. Eurozone crisis. Policy paralysis in the Govt. Foreign investors losing confidence. Disinvestment targets not being met.
Sachin=GOD Posted May 26, 2012 Posted May 26, 2012 Cant help but chuckle at people who think the recent developments are due to the (in)action of the central govt. Our govt. can do very little to control what is happening. All they can do is modulate the interest rates and hope to control inflation, that is pretty much it. The great US of A could not stop a dangerous run on the USD in Nov 2008. What chance does the puny Indian rupee stand? And as a citizen of a world and a representative of a third world country, I cannot believe that under-privileged people all over the world have to sacrifice and suffer to the whims and fancies of the oil market. Oil is a essential resource, it should not be considered a for-profit commodity. Nobody benefits from sky-high oil prices apart from oil producers and speculators. While they rake in record profits, billions of people all over the suffer in silent agony. Actually they could have done a few things but either they chose not to take those steps or were forced by coalition compulsions. Many of the Govt policies are stuck, big companies are having trouble in getting their projects passed, FDI in retail had to be withdrawn because the Kangress had not done its homework and even its "allies" were against it, corruption is rampant and the Govt is not doing anything to control it - all this put together is hurting investors confidence and that is a big factor in the fall of the rupee.
Ram Posted May 26, 2012 Posted May 26, 2012 You are totally wrong comparing USA with India.. Government still regulates all the banks. We have massive market. We cna pretty much manufacture lot of things. The inaction I am refering is on the business front. They have not taken any major decision to boost exports or business. Our corporations are busy investing in other 3rd world countries for better returns. I firmly believe we have enough man power and resources to fight any global slowdown. We can sustain ourselves. The problem is management or lack of it. The politics of vote bank is hurting us big time. They could have hiked the price like 3 months ago..but they did not because of elections. Our PM goes on the record and advises to earn more/spend less, inflation is inevitable etc..Yes einstein, we all know thats economics 101. Even after taxing Petrol (I heard almost 50% is taxes), Government keeps saying they are losing money. LOL I can never understand that. Mind you Manmohan Singh was our best FM under Narsimha Rao, played huge role is getting out of soup in 90s. But after becoming PM, he has no control over anything. If I were him, I would have resigned from PM long back. He is running one of worst Government. I am not even talking about Scams, leave them aside. The government in terms of "inaction". The Bureaucrats are worried that if they take decisions, and anything goes wrong, they will be fall guy. Ministers are not willing to act, they fear backlash etc... So yes, there was lot of things Government could have done to get us prepared for all this. I am positive guy and I was really glad that recession in 07-08 did not hit us that badly, was kind of proud about it. But here we come after 4 years we are *****ed. I am not interested in the usual Congressi/BJP nonsense.. Quite frankly, any govt of ours is completely defunct, so i wouldnt single one over the other. All I know for a fact that India is a very small player when it comes to world economics. Sure, our name comes up often in world news for things like the moon mission/Agni V and blah blah, but when it comes to hard economics, we are still subject to the whims and fancies of the world market. Our per Capita is still appalling low, so we need a vibrant global market to sustain economic growth. You talked about how govt. could do more to encourage business and boost exports and things like that. I agree with that, but the changes required to promote business needs massive investment in infrastructure, that we totally miss. Building infrastructure takes decades. So even if any govt. chooses to build infrastructure now, it will take a couple of decades for you to see changes. And If i can draw an analogy for India's crisis outside, it would probably be Iceland. We all know Iceland as one of the best run countries in the world (occupies the top strata in every living indicator), but do you know that because of the crsis in 2008, Iceland nearly became bankrupt and defaulted. Now would you blame the Icelandic govt. for inaction on that? Of course not. There many countries in the world (including many in Europe, Asia, India), whose economic prosperity is directly tied to the global economic growth. If the world grows, we boom. If the world slows, we suffer. There's very little our govts. can do to change that. With regards to gas prices in India - Just wanted to give some basic bath. One barrel of oil roughly gives around 150 litres of gas. Thats about $.6/litre of oil. Thats just basic raw material cost. If you add to that the shipping cost, refining cost, storage cost, labor cost, logistical costs etc, you would have at least double that, which would mean every litre of petrol in India costs around $1.2 to produce (And I have not even factored in the profits for distributors, dealers etc), or in rupee terms, around 65-70 rupees. The cost of 1 litre of petrol in India is around 65 rupees. So yes, the govt. is correct in saying that the petrol is still subsidized in India and they are still losing money.
Ram Posted May 26, 2012 Posted May 26, 2012 Are these bonds similar to postal bonds ? where a person buy a bond for this many years and invest in them and after few years he /she gets the money back with N amount of interest ? Yes, currency bonds are quite similar. You can buy 10, 20 year old dollar bonds that pays you a fixed interest for that period and the principle at the end of that period. So say if the US govt sells you a 10 year, $10,000 bond with an interest rate of around 4%(i just made that number), you will get interest for 10 years. The govt will use that money to invest, make profits and use that to pay off your interest/principal.
Ram Posted May 26, 2012 Posted May 26, 2012 Actually they could have done a few things but either they chose not to take those steps or were forced by coalition compulsions. Many of the Govt policies are stuck, big companies are having trouble in getting their projects passed, FDI in retail had to be withdrawn because the Kangress had not done its homework and even its "allies" were against it, corruption is rampant and the Govt is not doing anything to control it - all this put together is hurting investors confidence and that is a big factor in the fall of the rupee. FDI is over-rated. It creates a very limited economic impact for a specific group of people. What we need as a country is organic growth from within. And that can only come if we have 1)great infrastructure 2) corruption free govt and 3)talented and educated professional research institutions. We have none of those. As long as we fail to replace external demand by helping our own people to grow and replace that, we will continue to suffer at the hands of the global economy.
Recommended Posts