Ram 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. It is true, world economy is driven largely by speculation. Once you get human psychology into the mix, it is hard to predict what will happen next.
Alchemist Posted May 26, 2012 Posted May 26, 2012 Some very good discussion here. Need to move money to India !!!
Sachin=GOD Posted May 27, 2012 Posted May 27, 2012 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. I was talking about FDI as one of the many factors (within the control of the Govt) which combined together are affecting India's image as a market and this is a reason for the fall of the rupee. Out of the 3 factors you mentioned, I agree that it will take a few decades to have great infrastructure and it would be wrong to blame one particular Govt for that but as for the other 2 factors (corruption free Govt & research) this Govt surely could have done a lot but hasn't - they are making all the efforts to make sure that the weakest possible version of the Lokpal Bill is passed. In research also I don't recall any initiatives taken in the last few years.
Crookbond Posted May 27, 2012 Posted May 27, 2012 Economics is 'science' only in hindsight. You can probably cook up 5 different explanations and they can all be plausible. The best way I've seen someone put it. :nice:
ravishingravi Posted May 27, 2012 Posted May 27, 2012 As someone who has had the privilege ( or lack of it ) to deal with currency fluctuation at its worst in last 8 months or so, I can safely say Indian ruppee is overvalued. Maybe not at 56, but the equilibrium price is around 52-54. While, lot of it is sentiments, India's fundamentals are screwed up and the incompetence and inaction of this govt. has absolutely destroyed any perception of India story that investors had. Another thing, Greece will go down and maybe Japan later. But it might not be such a bad thing
Sachin=GOD Posted May 27, 2012 Posted May 27, 2012 As someone who has had the privilege ( or lack of it ) to deal with currency fluctuation at its worst in last 8 months or so, I can safely say Indian ruppee is overvalued. Maybe not at 56, but the equilibrium price is around 52-54. While, lot of it is sentiments, India's fundamentals are screwed up and the incompetence and inaction of this govt. has absolutely destroyed any perception of India story that investors had. Another thing, Greece will go down and maybe Japan later. But it might not be such a bad thing whether it is a bad thing or not will depend on how Greece goes down - a well managed exit may not be that harmful but a messy exit will cost Europe (and the rest of the world) a lot of money which it doesn't have.
Precambrian Posted May 27, 2012 Posted May 27, 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. Good post. Do u have any data on FII activity on debt to support this? Needless to say the ccy mov in growth mkts like BRL n MEX have echoed INR.... I'd like to think of it as Dollar undergoing a much needed correction.... and establishing itself rightly as the base ccy of the world...
Precambrian Posted May 27, 2012 Posted May 27, 2012 Some very good discussion here. Need to move money to India !!! You, sir, are forgetting inflation... such a drastic depn has immediate effect on prices cuz of good old oil.... Move ur money and buy land asap... or gold... land is the best of two....
Alchemist Posted May 27, 2012 Posted May 27, 2012 You, sir, are forgetting inflation... such a drastic depn has immediate effect on prices cuz of good old oil.... Move ur money and buy land asap... or gold... land is the best of two.... Most of the money I move is for me when I go there to spend on vacation. So a little bit inflation does not matter. But the Land Idea is good.
Precambrian Posted May 27, 2012 Posted May 27, 2012 Most of the money I move is for me when I go there to spend on vacation. So a little bit inflation does not matter. But the Land Idea is good. Good!!! Making best of what u have comes first.. but I was merely talking with my silly investment glasses on... Land, daylight, gold, daylight everything else... thats the motto in India today... unless of course u don't care a **** about savin up for ur kids, like me :D
Sachin=GOD Posted May 27, 2012 Posted May 27, 2012 Good!!! Making best of what u have comes first.. but I was merely talking with my silly investment glasses on... Land, daylight, gold, daylight everything else... thats the motto in India today... unless of course u don't care a **** about savin up for ur kids, like me :D Absolutely spot on.
achilles Posted June 22, 2012 Posted June 22, 2012 Seriously, what is wrong with our country :facepalm:
Desi Cartman Posted June 22, 2012 Posted June 22, 2012 Here is what is also happening at another level: Property prices are so inflated in India that its more expensive to buy a house in gurgaon than in bay area. There are 2 ways for this to correct, one is price crash and other is devaluation of rupee Btw lol at all my friends who were asking me to move my savings to India and invest in those dodgy icici schemes
CG Posted June 22, 2012 Posted June 22, 2012 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. Unless You get good governance nothing will happen,We have defunt land ,police laws whose reforms are stalled for generations . FDI is important ,whatever we have managed has been with out fdi ,india gets minimal fdi and we need to change that as we need money to fund projects which are needed for infrastucture as We have fiscal deficit of 5.9% gdp .With huge fdi projects like posco stalled .why would any invester invest in india and not in indonesia or somewhere else.IIp data was 0.01 this month and negative last month when industry does not grow you cannot have more jobs,secondly core inflation is around 4.8 % and the middle men profit yet we have bumper harvest and grains rot as we cannot store them and we oppose fdi in retail ,yes european crisis has helped in rupee falling but internal factors have also contributed.
CG Posted June 22, 2012 Posted June 22, 2012 Here is what is also happening at another level: Property prices are so inflated in India that its more expensive to buy a house in gurgaon than in bay area. There are 2 ways for this to correct, one is price crash and other is devaluation of rupee Btw lol at all my friends who were asking me to move my savings to India and invest in those dodgy icici schemes Compared to developed and some developing countries property is still cheap in india.
Crookbond Posted June 22, 2012 Posted June 22, 2012 Some would blame the IPL for this. :dontmentionit:
rkt.india Posted June 26, 2012 Posted June 26, 2012 I 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. They are not losing money on petrol, but on diesel and Kerosine. Petrol actual value is around 40 rs plus 30-35 rupees odd taxes and commissions.
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