Wednesday 28 August 2013

Downgrade not far off

Dear Mr.Manmohan,

With the currency falling like nine pins and stock market in a downward spiral the next stop is going to be a downward revision of the credit rating of India. One does not know when it is coming but it seems like a certainty now more so if the run on the rupee is not stopped and reversed.

The Government might have woken up from a slumber and have given the green signal for large projects. But that may not be enough to stop the downgrade. Now with Rs 70 for the dollar not far off panic selling is the norm at the Indian stock market. With this being the norm India is staring at junk status in credit rating.
Manmohan is in no mood to bite the bullet, more so as parliament is in session. Moreover the hike in Diesel is likely to be not more than Rs 5 per litre. This is very small increase compared to the increase needed to cover the cost of Crude.

This brings us to the question as to whether we are in 1991-92 status or like ASEAN in the late 1990s? If the Federal Reserve reverses(by September) the stimulus then we are in 1991-92 situation. If it reverses the stimulus by December then Mr.Manmohan has some time to tackle the problem on hand.

With the Food security bill likely to impact the finances of the Government there is a lot Mr.Manmohan and Mr.Chidmabaram have to do. Even though Mr. Chidambaram says that every thing has been factored in this year’s fiscal. Not many are willing to buy that argument . With the imminent strike of Syria also looming large on the Crude oil price there is a lot the Government need to take care about.


Mr.Chidambaram, Mr.Manmohan and Ex-Finance minister (Current President) Mr. Pranab are equally responsible for this mess the economy is in!

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