Thanks for your insight.
Yes....very genuine doubt about execution skills & will power of our political clout. Being an agri based economy for more then 50 yrs, though govt. has not taken major steps towards irrigation problem.... Why ? No clue man... !!
Govt. is reporting that shortage of rice this year could be around 10 million ton. http://www.indianexpress.com/news/246-districts-in-10-states-droughthit-pawar/503906/1
If this event going to happen ( with probab. of 0.8 ) .. Certainly govt. will take steps, that you suggested in your comment. But those schemes & measure ( drought too ) will hit fiscal health of our country. Trade deficiet will widen, inflation will go up ( It's already up ) .. Demand for steel, cement.. etc will go down. Tata steel is already suffering with 40% price cut in steel and demand slump. As inflation is not gonna come down in near future there is very less chance to rate cut by banks. The type of inflation we are facing here is cost push ( due to less production of food ). Our WPI index is highly skewed towards manufactured goods. I have doubts, it reflects inflation in true way... you can find it yourself. Hence in my view govt. will not take any steps to restore the economy by increasing the demand or we can say by increasing consumption in the economy.
Now, question is how the govt. will tackle this situation.. ofcourse priority will be towards poor people and being a welfare state, certainly our country will take care of them. I think the schemes like NAREGA & all is actually helping our rural economy in a big way bcoz money is going to needy one diectly. That's why our labour class is still surviving...
Point is what we see in future.... the only way ( ofcourse it's my personal view ) singh & company can steer economy by govt. expenditure... Remembering the GDP equation.!!! Now putting probab. of 0.75 that govt. will go this way.. We can bet on infrastructure companies (on dip ).... those are capable to grab govt. contracts.... And whatever through which govt. can spend... ( take education, or universal id project, power..etc ).
As I have written in the last post about fiscal deficiet ... or tarde deficiet that will put pressure on our currency but the good thing is US economy is in greater pain then the our's. That's why we are not seeing much depreciation in our currency..... Bcoz as rupee is coming down so the dollar too.. And intresting point to mark that foreign money is not coming to india only due to fundamentals ... they are betting on dollar will deprecitae more rapidly then rupee..and will take the advantage of currency exchange rate when they will pull out from india.... Why not, there is trillions $ hole in american balance sheet....
And, in last what's the probability that this phenomenon will not repeated in next year.... these are fat tail events..probably we are seeing in our life time first time....So difficult to predict but disastourus........
1 comment:
Couldn't agree more. I know ur focus is on the effect of these things on certain stocks. Pardon me if I took u to a diff track.
If u read Sunday Times today, Swami Aiyar is saying the same thing. He emphasizes on the importance of employment guarantee schemes that directly put money in the hands of needy. He specifically talks about Maharashtra model. He also talks abt efficient food distribution mechanism.
On a diff note, how diff it is to manage three inter-dependent variables at the same time, which are interest rate, inflation and exchange rate!
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