Dear Mr.Manmohan Singh,
Both India and Indonesia have seen a steep fall in the value
their currencies this month. But between Indonesia and India many Banks like
HSBC have advised investors to stay away from India while they feel Indonesia
will recover fast. The New York Times carried an article about Asian economies
being in trouble.
Although it did not predict the 1997(Asean) like situation
in India, they have given a better rating for Indonesia. The reason being
Indonesia has increased the Gas prices this June in an effort to bridge their
deficits. They expect it (deficit) to be shrinking soon for Indonesia but that is not the
case for India. While the article says China and Japan are reasonably safe
meaning it is the smaller economies like India and Indonesia are likely to be
in trouble – more so India.
Meanwhile emerging Economies like Turkey are also facing the
heat like India. It looks like a real estate bubble is (about to burst) in
Turkey and it is sponsored by the cheap dollar loans from USA.
The above article in New York times also makes interesting
reading. It talks how Turkey is next in line like India and Indonesia.
In the above article Krugman says India and Brazil are
learning from the bubble like the ones earlier in USA and Europe. We cant but
nod in approval to his hypothesis.
Now we are looking at two scenarios – India has to bite the
bullet and increase the price of diesel and kerosene or else pray so that the
Federal Reserve does not roll back the stimulus before May 2014. Mr.Manmohan
the Economist would prefer the former but Mr.Manmohan the politician will
prefer the latter.
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