Dutch disease?!?!?

RBI succumbs to dollar deluge...

“The rupee appreciation against the dollar has helped to tame inflation, but it also has complicated monetary policy,” said C Rangarajan, Chairman of the Prime Minister’s Economic Advisory Council. The appreciation of rupee against the US dollar is definitely not a welcome sign as far as the exporters are concerned. The rupee against dollar has appreciated from Rs.46 in July 2006 to Rs. 40.63 (as on June 14, 2007), an increase of more than 11%. The plight of the top IT companies and some of the leading pharmaceutical companies is all the more severe with more than 60% of the invoices in US dollars. It is argued that a 1% change in the value of rupee hits the operating margin of the IT industry by 30 to 50 basis points. The textile sector is no better off . A survey conducted by FICCI reports that as a result of higher interest rates the profit margin of leading export sectors has eroded by approximately 11%. Minister of Commerce & Industry Kamal Nath, while agreeing to the exporters view was forced to set up a committee to assess job losses and loss of export order due to the appreciation of rupee. Along with it he also announced a package of wide ranging measures to counter the negative impact of rupee appreciation. According to the calculations of Abheek Barua, Chief Economist, ABN Amro Bank losses arising out of appreciation is at a whopping $12 billion in the last one year.

The Central Bank on its part has in a way allowed the rupee to appreciate in a bid to curb inflation. Though inflation has cooled off, but so has Indian exports. It’s no surprise that India recorded the highest ever trade deficit in May 2007 (the highest ever monthly deficit in the last 15 years). In a bid to counter inflation, robbing exports make no sense at all. A more logical way to tackle massive capital inflows – the reason as to why rupee is at 9-year high, would have been to sell bonds in open markets. It is time RBI wakes up from its slumber and prevents any further appreciation of rupee.

Well, the symptom RBI is showing is that of Dutch disease & the patient happens to be Indian economy.

B&E research: Gyanendra Kashyap

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Source : IIPM Editorial, 2007

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Think about a US loved by all & think of it sans Bush

Al Gore is a mortal, most deserving to become President of the US. But does he want to be one?

Al Gore is earnestly talking about the long-term implications of the energy and climate crises, and how the Arctic ice cap is receding much faster than computer models had predicted, and how difficult and delicate a task it will be to try and set things straight in Iraq.

You look at him and you can’t help thinking how bizarre it is that this particular political figure, perhaps the most qualified person in the country to be the President, is sitting in a wing chair in a hotel room in Manhattan rather than in the White House. He’s pushing his book “The Assault on Reason.” I find myself speculating on what might have been if the man who got the most votes in 2000 had actually become President. It’s like imagining an alternate universe!!!

The war in Iraq would never have occurred. Support and respect for the US around the globe would not have plummeted to levels that are both embarrassing and dangerous. The surpluses of the Clinton years would not have been squandered like casino chips in the hands of a compulsive gambler on a monumental losing streak.

Gore takes a blowtorch to the Bush administration in his book. He argues that the free and open democratic processes that have made the US such a special place have been undermined by the administration’s cynicism and excessive secrecy and by its shameless & relentless exploitation of the public’s fear of terror.

The Bush crowd, he said, has jettisoned logic, reason and reflective thought in favour of wishful thinking in the service of an extreme political ideology. It has turned its back on reality, with tragic results. So where does that leave Gore? If the Republic is in such deep trouble and the former VP knows what to do about it, why doesn’t he have an obligation to run for President? I asked him if he didn’t owe that to his fellow citizens. He seemed taken aback. “Well, I respect the logic behind that question,” he said. “I also am under no illusion that there is any position that even approaches that of President in terms of an inherent ability to affect the course of events.”

But while leaving the door to a possible run carefully ajar, he candidly mentioned a couple of personal reasons why he is disinclined to seek the presidency again.

“You know,” he said, “I don’t really think I’m that good at politics, to tell the truth.” He smiled. “Some people find out important things about themselves early in life. Others take a long time.” He burst into a loud laughter as he added, “I think I’m breaking through my denial.”

I noted that he had at least been good enough to attract more votes than George W. Bush. “Well, there was that,” he said, laughing again. “But what politics has become requires a level of tolerance for triviality and artifice and nonsense that I find I have in short supply.”

Gore is passionate about the issues he is focused on – global warming, the decline of rational discourse in American public life, the damage done to the nation over the past several years. And he has contempt for the notion that such important and complex matters can be seriously addressed in sound-bite sentences or 30-second television ads, which is how presidential campaigns are conducted. He pressed this point when he talked about Iraq.

“One of the hallmarks of a strategic catastrophe,” he said, “is that it creates a cul-de-sac from which there are no good avenues of easy departure. Taking charge of the war policy & extricating our troops quickly without making a horrible situation worse is a little like grabbing a steering wheel in the middle of a skid.”

There is no quick and easy formula, he said. A new leader implementing a new policy on Iraq would have to get a feel for the overall situation. The objective, however, should be clear: “To get our troops out of there as soon as possible while simultaneously observing the moral duty that all of us share to remove our troops in a way that doesn’t do further avoidable damage to the people who live there.”

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Source : IIPM Editorial, 2007

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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