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Pastimes : Ask Mohan about the Market
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To: Rational who wrote (17843)9/24/1999 10:18:00 AM
From: Cynic 2005  Read Replies (1) of 18056
 
S, the simple answer is - I don't know. External debt is about 90 billion and the forex reserves are a tad over 30 bil. A lot of cities have taken-up on foreign aid for big infrastructure projects lately (18 Flyovers in Hyderbad and some about 3 dozen in Madras) Not one of them generate any revenue (none of them are toll facilities!) How are they going to pay for these? Another problem is, not only thse Govts are spending beyond their means, but are also committed to so many populistic schemes (like in AP and TN) that sooner or later there will be implosion in INdia. For all you know, an implosion in US stock market might cause some problems in INdia as flow of capital (which is added to Govt Forex reserves) is stopped.

However, the saving grace for India is capital controls and hence the situation may not be as bad as, say, in Malaysia. Also, the private sector foreign debt is negligible - that is another positive. That said, I do not know if Rupee will get whacked or strengthened against the dollar. Most likely, it will not crash but grind down to the 50-55 level. ALL IMO, of course!

Even if a sharp-drop in US and European stock markets causes a further contraction in India, I think it will recover much faster than other Asean economies.
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