Mr.Chidambaram it is not just the FEDERAL RESERVE but it is also the internal factors

Finance Minister gave an interview at around 5 PM on Thursday

Mr.Chidambaram said communication is the one that will revive the economy( at least he meant that). He said the policy needs to be communicated properly.  Communication is best when actions speak for you.

1.      1.  Mr.Chidambaram is a very good communicator but FIIs feel action speaks louder than words. That’s the reason they have withdrawn from the Indian market this month. When Mr.Chidambaram partly reversed the outflow limit for individuals they were seeing capital controls coming again they withdrew.

2. Finance Minister(FM) has made his stand clear that gold is something he doesn’t like. But the entire Indian fraternity loves it. That’s the problem FM if you increase the duty the smuggling with have a thriving business. You need to play by the rules not change the rules to suit you.

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3... The FM said coal imports were taking place due to the decisions made by the Courts. You knew ahead that the decision could come one way or the other. So you had not planned for the eventuality. Bad planning and not communication is the culprit.

4.       Another point is that the actual value of the rupee is higher than what it is now. FM if you know how the exchange rate is fixed it is more perception of the participants and stake holders and not the actual value of the currency.

5.       If the FEDERAL RESERVE is the only culprit then why should the rupee fall also against the Pound sterling? The assessment that the internal factors are not responsible for the value of the rupee is wrong.

6.       The summary is that the investors’ confidence is lost and the FM needs to act to assuage them. We need action that speak not empty words.

7.       Why is the dollar gaining in strength -  One reason is FEDERAL RESERVE is likely to withdraw the stimulus. I have dealt with it in another paragraph.

8.       The rupee has fallen to the lowest (below 65) and RBI is likely to have intervened to bail out the currency. Does the RBI have the resources to intervene every time the rupee falls. I guess no.

9.       Finally policy matters a lot. You have not brought the labour reforms, infrastructure and land reforms which will bring in FDI. But why are you rushing the food bill now? Do you have the resources with you to see it through ? – I guess no.

The FEDERAL RESERVE’s decision on when to withdraw the stimulus – it gives conflicting signals

Regarding the FEDERAL RESERVE’s decision to roll back the stimulus there seems to be some caution because of some members (of FEDERAL RESERVE) were not confident of the numbers that are likely to come soon(read before September). Thus FEDERAL RESERVE did not indicate clearly when the withdrawal of the stimulus will be ( mid-september or Mid –December). Thus FEDERAL RESERVE’s decision also keeps the emerging markets in uncertainity. If the FEDERAL RESERVE withdraws the stimulus in September the emerging markets i.e India has some time before they can tackle the rupee valuation problem. If the action to withdraw stimulus takes place in December then time is not with Mr.Chidambaram because elections are in May 2014.

http://www.nytimes.com/2013/08/22/business/economy/fed-closer-to-easing-back-stimulus-but-still-no-consensus-on-timing.html?_r=0&adxnnl=1&adxnnlx=1377190933-BbioH0fXWpg42YdXL0Snog

The New York times article on Federal Reserve is above.