To all, I gathered some information on the Indian economy, stock market and the politics and such. Now that the fate of South Korean economy, the 11th largest in the world, is seen in such a day-light one wonders what's up with India, the 12th largest.
1. Pilitical uncertainity: The viability of IK Gujral Govt is in serious jeopardy. One of the parties of the ruling coalition has had links to LTTE, which allegedly ordered the assasination of Rajiv Gandhi. Consequently, the Cogress party is threatening to withdraw support for IKG Govt. As usual, this non-congress Govt. too appears to be headed for a collapse increasing the possibility of mid-term elections.
2. Ruppee dive is continuing. It closed around 37.73 on Friday. RBI, for some reason, stopped supporting Rupee lately. However, one should realize that Rupee is fully convertible in trade and current accounts only (whatever that means) and relatively immune from speculative attack. But, that doesn't preclude from the RBI to devalue the currency for appropriate reasons.
3. Government's ambitious privatization plan aimed at raising Rs. 70 bil ($1.9 bil) has stalled due to many domestic problems as well as international economic turmoil. The Govt. has just indifinetly postponed the $700 mil issue of Gas Authority of India Limited (GAIL) GDRs. FYI, GAIL is one of the few profitable public sector companies in India.
4. Big businesses have cut back on expansion plans. The markets have lost faith in the Government's ability to contain a looming financial crisis. After all, the Govt. can not even address it's own instability! The markets (BSE down over 3% today) have officially entered a bear phase! I hear that there is more turbulance ahead.
-Mohan |
