India on the brink of its own financial crisis

UKPakistani

Chief Minister (5k+ posts)
India on the brink of its own financial crisis


In a reprise of the 1997-98 Asian crisis, India's stock market is plunging, bond yields are nudging 10% and capital is flooding out of the country


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The Reserve Bank of India (RBI) in Mumbai. The country is facing its own financial crisis. Photograph: Vivek Prakash/REUTERS​


India's financial woes are rapidly approaching the critical stage. The rupee has depreciated by 44% in the past two years and hit a record low against the US dollar on Monday. The stock market is plunging, bond yields are nudging 10% and capital is flooding out of the country.

In a sense, this is a classic case of deja vu, a revisiting of the Asian crisis of 1997-98 that acted as an unheeded warning sign of what was in store for the global economy a decade later. An emerging economy exhibiting strong growth attracts the attention of foreign investors. Inward investment comes in together with hot money flows that circumvent capital controls. Capital inflows push up the exchange rate, making imports cheaper and exports dearer. The trade deficit balloons, growth slows, deep-seated structural flaws become more prominent and the hot money leaves.

The trigger for the run on the rupee has been the news from Washington that the Federal Reserve is considering scaling back - "tapering" - its bond-buying stimulus programme from next month. This has consequences for all emerging market economies: firstly, there is the fear that a reduced stimulus will mean weaker growth in the US, with a knock-on impact on exports from the developing world. Secondly, high-yielding currencies such as the rupee have benefited from a search for yield on the part of global investors. If policy is going to be tightened in the US, then the dollar becomes more attractive and the rupee less so.

But while the Indonesian rupee and the South African rand are also feeling the heat, it is India – with its large trade and budget deficits – that looks like the accident most likely to happen. On past form, emerging market crises go through three stages: in stage one, policymakers do nothing in the hope that the problem goes away. In stage two, they cobble together some panic measures, normally involving half-baked capital controls and selling of dollars in an attempt to underpin their currencies. In stage three, they either come up with a workable plan themselves or call in the IMF. India is on the cusp of stage three.

 
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Believer12

Chief Minister (5k+ posts)
انڈیا پاکستان سے کئ گنا بڑا ملک ھے انکی معیشت ھم سے کئ گنا بڑی ھے انڈیا کی ایکسپورٹ بھت زیادھ ھے اس کے باوجود ان پر قرضے پاکستان کے مقابلے میں آدھے ھیں۔انڈیا کے مقابلے پر ھمارے ھاں کرپشن ساٹھ فیصد زیادھ اور سوئس اکاونٹس میں حرام کی کمای بھی ان کے مقابلے مین پاکستانیوں کی زیادھ ھے اس لیے اگر پاکستان کی اکانومی ابھی تک ڈیفالٹ کی حد تک نھیں گئ تو انڈیا کی اکانومی کو بھی کچھ نھیں ھوگا۔
 

ammadk

Minister (2k+ posts)
انڈیا پاکستان سے کئ گنا بڑا ملک ھے انکی معیشت ھم سے کئ گنا بڑی ھے انڈیا کی ایکسپورٹ بھت زیادھ ھے اس کے باوجود ان پر قرضے پاکستان کے مقابلے میں آدھے ھیں۔انڈیا کے مقابلے پر ھمارے ھاں کرپشن ساٹھ فیصد زیادھ اور سوئس اکاونٹس میں حرام کی کمای بھی ان کے مقابلے مین پاکستانیوں کی زیادھ ھے اس لیے اگر پاکستان کی اکانومی ابھی تک ڈیفالٹ کی حد تک نھیں گئ تو انڈیا کی اکانومی کو بھی کچھ نھیں ھوگا۔
pakistani economy default nai kry gi kiun k is ko kahen na kahen ce aid or loans milty rehty hain to lenders bi dai daity hain ta k is geographical location mai apna asar o rasukh rakh sakain...Indian Rs. 60s main hai or wo IMF k pas jany k plans rakhty hain....Indian economy k downfall ki aik waja yeh b hai k jitna paisa wo Afg main kharch kr raha hai agar wo apni economy pay kharach kry to us ki economy uthay gi...laikn developing countries The Great Game main hath dalain ge to economies giran ge Jaisy Pakistan ki..sambhal nai pa rahe
 

Believer12

Chief Minister (5k+ posts)
pakistani economy default nai kry gi kiun k is ko kahen na kahen ce aid or loans milty rehty hain to lenders bi dai daity hain ta k is geographical location mai apna asar o rasukh rakh sakain...Indian Rs. 60s main hai or wo IMF k pas jany k plans rakhty hain....Indian economy k downfall ki aik waja yeh b hai k jitna paisa wo Afg main kharch kr raha hai agar wo apni economy pay kharach kry to us ki economy uthay gi...laikn developing countries The Great Game main hath dalain ge to economies giran ge Jaisy Pakistan ki..sambhal nai pa rahe
پاکستان کی اکانومی کو کچھ نھیں ھوگا
کیونکہ ھمارے ھمدرد حکمران اسے بچانے کیلیے ھر سطح پر جا کر کوششیں کر سکتے ھیں۔اور انڈیا کے پاس ایسے مخلص لوگ کھاں
 

Rizwan2009

Chief Minister (5k+ posts)
پاکستان کو بچاليا جائے گا مگر کيسے اور کب يہ سب قدرت کے رموز ہيں
 

Fatema

Chief Minister (5k+ posts)
In sab k peeche bhi Pakista ka haath hey. . . .[hilar] [hilar] [hilar]. . Keepinformed waiting for your dislike. . do the honors now. . (bigsmile)
 

miafridi

Prime Minister (20k+ posts)
Pakistan is already on stage 3. But i guess higher population countries like China, India are tend to fail more quickly if their policies aren't up to date and correct. China has been using its population wisely and its exports are higher than any country which is the reason of its success but the rule applies to other countries whose imports is higher than its exports.

Also Pakistan cannot fail because it has natural reserves more than its needs for 100's of years, the only thing they need to do is find a way to extract it. According to many analyst Pakistan can become the richest country(more richer than the arabs) if only it utilizes its natural resources with honesty.
 

Petrolhead

Minister (2k+ posts)
Indian rupee falls further amid Fed stimulus concerns - Following Pakistani rupee's footsteps

1000-indian-rupee-note-front.jpg


Indian rupee falls further amid Fed stimulus concerns

US Dollar v Indian Rupee
LAST UPDATED AT 20 AUG 2013, 15:40
$1 buyschange%
63.2450+0.11+0.17

The Indian rupee has fallen to a new all-time low against the US dollar, amid concerns the Federal Reserve will soon scale back its stimulus measures.

It dropped to 64.13 against the US dollar in early trade on Tuesday.

Foreign investors have been pulling money out of India, as the economy has slowed and the cost of borrowing in dollars has risen.

The Reserve Bank of India (RBI) is rumoured to have intervened to stem the slide in the currency. The Indian rupee has declined by nearly 16% against the US dollar since May and is Asia's worst performing currency so far this year.

Its further decline on Tuesday was mirrored by falls in markets across other developing markets, particularly in Asia. On Tuesday, Japan's Nikkei 225 index fell by 2.6%, Hong Kong's Hang Seng was down 2.2% and South Korea's Kospi dropped by 1.6%.

The Indonesian stock market fell 4.9% on Tuesday, pushing it into a formal bear market - meaning it has fallen by more than 20% since its last peak. Minutes from the the Federal Reserve's latest meeting are due to be published on Wednesday, and may set out more details about the rollback of its "quantitative easing" stimulus programme.

The Fed is expected to start slowing the rate of its purchases of government debts with newly-created money from next month.

A weak currency won't necessarily lead to a crisis. But, if it makes it harder to pay for a deficit that is owed to overseas creditors, that's when it could become a problem.

'Further currency weakness'
Another source of concern in India is the country's widening current account deficit.
The current account deficit is a broader measure than the trade deficit, and includes cross-border income flows on investments.

As well as weakening the currency, the deficit can also act as a drain on the central bank's foreign currency reserves, and suggests that the Indian economy as a whole needs to borrow more money from abroad.
Meanwhile, the Indian government has been attempting to stem the tide of investor money leaving the country by imposing capital controls.

The combination of all these factors has sparked comparisons to the financial crisis that India faced in 1991. In July that year, the rupee eventually fell by more than 32% against the US dollar after foreign exchange reserves were depleted.

On that occasion, the country had to be rescued by the International Monetary Fund.

"Weakness concentrated in the Brazilian real and Indian rupee makes sense, as these are current account deficit economies with limited ability to defend their currencies," said Bank of Singapore's chief economist Richard Jerram.
"India is in worse shape than Brazil, with few viable policy responses.

"Capital controls in India are not likely to have much impact and there is the risk that a [credit] ratings agency downgrade leads to further currency weakness."

'No comparison'
Over the weekend, Prime Minister Manmohan Singh tried to calm fears that India was facing another currency crisis.

Mr Singh said that back in 1991, the country only had enough foreign currency reserves to cover the country's borrowing needs for 15 days, while currently it has reserves equivalent to six to seven months. "So there is no comparison. And no question of going back to [the] 1991 crisis," Mr Singh told the Press Trust of India.

International investors have withdrawn $11.58bn (7.4bn) in shares and debt from India's markets since the beginning of June, according to official data,
India, which is Asia's third-largest economy, grew at an annual rate of 5% in the 2012-13 financial year, the slowest pace in 10 years.

http://www.bbc.co.uk/news/business-23766267
 
Re: Indian rupee falls further amid Fed stimulus concerns - Following Pakistani rupee's footsteps

ایک دفعہ 80 روپے تک آجائے تو دھڑن تختہ ہو جائے گا۔
مہنگائی کا سیلاب انڈیا کے روس کی طرح ٹکڑے ٹکڑے کردے گا۔

 

Petrolhead

Minister (2k+ posts)
Re: Indian rupee falls further amid Fed stimulus concerns - Following Pakistani rupee's footsteps

ایک دفعہ 80 روپے تک آجائے تو دھڑن تختہ ہو جائے گا۔
مہنگائی کا سیلاب انڈیا کے روس کی طرح ٹکڑے ٹکڑے کردے گا۔


Why India is so different from Pakistan in this respect? Not criticising, just want to understand.
 

TONIC

Chief Minister (5k+ posts)
Re: Indian rupee falls further amid Fed stimulus concerns - Following Pakistani rupee's footsteps

People are talking about Indian Rupee....in 90 days we have lost 5 Rs against USD.....it's really bad sign as our debt has increased in Pakistani Rupees without any actual increase....Govt should be very vigilant...I think if this course will continue you will find USD to be of 120 rupees by end of this year....

Govt has totally failed in giving a good budget and fiscal measures are not in alignment with financial problem which we have in hand and monetary policy won't solve these crisis.
 

Sirphira

Minister (2k+ posts)
Re: Indian rupee falls further amid Fed stimulus concerns - Following Pakistani rupee's footsteps

ایک دفعہ 80 روپے تک آجائے تو دھڑن تختہ ہو جائے گا۔
مہنگائی کا سیلاب انڈیا کے روس کی طرح ٹکڑے ٹکڑے کردے گا۔


دشمن کی توپوں میں کیڑ ے پڑیں۔۔۔۔
 
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Re: Indian rupee falls further amid Fed stimulus concerns - Following Pakistani rupee's footsteps


Why India is so different from Pakistan in this respect? Not criticising, just want to understand.

آبادی۔
۔70 فیصد تین وقت کی روٹی تک لئے جیتے ہیں۔
دفائی اخراجات ہی سب کچھ ہڑپ کرجائیں گے۔
مہنگائی کا طوفان ہر گھر سے اٹھے گا۔
زرا اندازہ لگاو۔ جہاں 70 فیصد آبادی صرف روٹی کی محتاج ہو۔
اسے یا تو کھلاو، یا مار دو، یا آزاد کردو۔

لوگوں کا ریلا سب کچھ بہا کر لے جاتا ہے ۔