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India added 20% of Pakistan GDP in 2 days to her economy.

Discussion in 'World Economy' started by HariPrasad, Mar 15, 2017.

  1. HariPrasad

    HariPrasad Lieutenant FULL MEMBER

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    Of course. Actually this was a big event in economy but nobody noticed and I did not find anything written on It so I decided to take a call and analyze it myself.
     
  2. HariPrasad

    HariPrasad Lieutenant FULL MEMBER

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    To be a 10 bn USD economy in 10 years, we need a comprehensive rise of 14.86% in economy in USD term. 8 to 9% may come from growth and we may rise @ 5% to 6% in currency value per annum. This may look difficult but not impossible. Even if we achieve 50% of real value of our INR in 10 years our economy will rise 2 fold. We may grow 2 fold in 10 years and that will make our economy a 10 TR USD economy in 10 years.
     
    Last edited: Mar 16, 2017
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  3. PARIKRAMA

    PARIKRAMA Angel or Devil? Staff Member ADMINISTRATOR

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    Three factors contributed.

    1. Last week risk off from oil and gold and risk on in USD. Saudi Arabia had announced that post June 30 this cut off oil prices regime cannot be continued.. this kind of triggered the Asian markets today morning..
    2. BJP and PM modi win in elections in states.. a firm government and expectation of a solid decision making strengthened the rupee
    3. Today FOMC - federal open market committee announcement is due after 2 day meeting on future of interest rate regime which started on tuesday. It's expected a rate hike will be announced..
    Janet Ellen announcement will trigger a hardening of Dollar and will contribute more towards the exchange rate depreciation..

    Edited to correct the term
     
    Last edited: Mar 15, 2017
  4. PARIKRAMA

    PARIKRAMA Angel or Devil? Staff Member ADMINISTRATOR

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    Expect 3 or maximum 4 rate hikes.. in USD.. thats the bull run expectation for USD..

    Euro crisis should also happen to act as trigger as Theresa may will start the exit plan for UK

    Today already RBI intervened and bought dollars via 2 public sector banks..

    This will IN should be back to 66.5 and will touch 67 again in coming times..

    By the way CPI is slowly rearing head.. rising inflation and with limited credit growth from banks who are sitting with deposits will mean most of the capex plans of the industry will be on hold.. it will also mean investment cycle revival plan will be slower than before..

    the opex focus would be on
    1. Cost optimization
    2. Betterment of supply chain
    3. Debtor realisation which were stuck and delayed due to demonetization
    4. Trying to get easier financing done as all numbers in financial side will look stretched..
    I believe 67 and even 68 should come..
     
  5. PARIKRAMA

    PARIKRAMA Angel or Devil? Staff Member ADMINISTRATOR

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    Btw all these hikes are like speed breakers..
    Bcz the hikes will make many investments exit from Indian markets..

    India if continues to grow at 7% and above will still like to steam ahead..

    Thus ultimately what you will see is a narrow zone of 3-5% in either side of 63-64 at outer periphery versus 67-68-69 max at other end.. In General it should be well within 3% with RBI intervention.. beyond that will be more of a government and RBI joint decision..

    So this will be a short term yo yo with every rate hike and other data coming out of India..
     
  6. Naagraj

    Naagraj 2nd Lieutant FULL MEMBER

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    Appreciation of rupee in such short period is not a very good thing for economy. Appreciation lead to complications and price rise for Indian product abroad. Thus less export. At times when we are in need to diversify our export and increase it, appreciation act as a hit back. Most advance economy who are exporting goods want their currency to be undervalued rather than over valued.
    Currency need to be stable. So that the people show their confidence in indian currency and invest here, appreciation of currency also pose problem for foreign investors in india or those who bring dollar here.
    Rupee will mellow down once tge celebrations are over.


    Moreover why do we keep on citing pakistan or their economy, they are nothing but petty economy compared to india.
     
  7. HariPrasad

    HariPrasad Lieutenant FULL MEMBER

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    Pakistan mention was purposefully selected to draw attention of readers and give them a rough idea of rise in economy size.
     
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  8. Pundrick

    Pundrick 2nd Lieutant FULL MEMBER

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    We are not export oriented country, so the analysis is not flawed. We export $ 270-280 billion and import is around 300-310 billion. So this situation is helpful in short term.

    But this affect IT sector the most.
     
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  9. Naagraj

    Naagraj 2nd Lieutant FULL MEMBER

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    We are not export oriented nation but we are trying hard to be one...
    With a CAD of 120-150 billion dollars, is it a good thing or bad thing.
    Why do you think we have such low forex reserve, while small nation like Taiwan has more than us.
     
    Last edited: Mar 15, 2017
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  10. HariPrasad

    HariPrasad Lieutenant FULL MEMBER

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    IT sector shall not be affected except some low skill BPO sort of Job. Nobody can give the quality we give. Infosys had done a study of how its customers will react if they rise price of their services by 30%. They concluded that 85% of the customers will ot switch to other service provider.
     
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  11. BlackOpsIndia

    BlackOpsIndia Developers Guild Developers -IT and R&D

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    Our currency is already overvalued, it must be around 70 as per metrics of RBI. Many times RBI intervene when things go south but I guess Modi want stronger Ruppe which is not very good for export. I personally felt the heat of this strong appreciation :(
     
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  12. Ghanta

    Ghanta FULL MEMBER

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    India in and itself is not and export oriented country. It is primarily an imports based country. Depreciation would only make things costlier for the middle class in the longer run. But if rupee appreciates to say 35-40Rs over next 5 years and the benefits of the same are passed on to the citizens then I would say it would be benefit the country in regards to debt holdings and import prices too. But on the other hand, if the benefits of the same are not passed to the citizens then there will be rise in inflation and the day to day items/grocery will get costly and also our exporters would be hit very hard. So not a win-win situation.

    Personally I would prefer a gradual appreciation of rupee all the while the government passes the benefits and keeps inflation on the lower side.
     
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  13. bharathp

    bharathp Developers Guild Developers -IT and R&D

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    Exchange rates are quite finicky and fickle. what we need to do during those times is to follow what is called "Dollar cost Averaging" which means - keep buying in Dollars with Rupee (in the RBI) every 15 days or so. which will make sure we ride out the spikes and on the overall average, we get a better rate overall. since most payments for weapons are in $, it will help when we replenish our dollar reserves when the Dollar price goes down - just like how we have our strategic Petroleum reserves added when the Crude costs are low.
     
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  14. randomradio

    randomradio Mod Staff Member MODERATOR

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    If currency depreciates, our exporters get richer and importers get poorer.

    But the govt cannot allow uncontrolled depreciation because we have a lot of poor people who depend on our highest import, fuel. Plus, a strong currency reduces the cost of subsidies. So we need a marginally strong currency in order to keep fuel prices in check.

    We can't do what the Russians did and devalue our currency by 2 times in just 1 year. You can imagine the chaos on the streets if fuel prices double in such a short period. Our entire logistics chain will start to collapse. All because we are import dependent for fuel.

    The best way to strengthen the economy is to switch to electric vehicles and solar power.

    This is where petroleum is going.
    http://pib.nic.in/newsite/PrintRelease.aspx?relid=102799
    70% of Diesel, 99.6 % of Petrol consumed by Transport Sector

    And this is the remedy.
    http://economictimes.indiatimes.com...by-2030-piyush-goyal/articleshow/51551706.cms
    The government is working on a scheme to provide electric cars on zero down payment for which people can pay out of their savings on expensive fossil fuels, for becoming 100 per cent electric vehicle nation by 2030.

    http://www.livemint.com/Politics/Bn...cated-road-corridors-for-electric-trucks.html
    In what may be a game changer for India’s transportation, environment and energy security needs, these trucks won’t be battery operated but powered by electricity from overhead cables on a dedicated lane. To start with, the ministry of road transport and highways is planning a pilot project for running 50-tonne electric trucks between Delhi and Mumbai, aimed at halving the cost of transportation between the nation’s capital and the business hub.

    A lot of companies are planning to introduce battery operated trucks also.

    http://www.thehindu.com/business/Industry/ABB-to-electrify-Indian-buses/article15894344.ece
    India has plans to convert around 1.5 lakh diesel buses run by state transport corporations into electric buses in a bid to reduce its Rs.8 lakh crore annual crude oil import bill and check pollution, Union Road Transport and Highways Minister Nitin Gadkari had said last year.

    Imagine a supercapacitor operated battle tank which can top up in 5 seconds. I'm sure you can see the advantage there, and apply that to our civilian logistics.
    http://inhabitat.com/elon-musk-implies-supercharger-v3-could-charge-teslas-in-mere-seconds/

    The govt has to guarantee surplus electric power ever year while reducing their dependency on fossil fuel.

    Achieving this will add significantly to growth. Only then can we start thinking of weakening our currency to boost exports.
     
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  15. HariPrasad

    HariPrasad Lieutenant FULL MEMBER

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    Can you explain How? Our nominal GDP is 2.4 TR USD while our GDP in PPP is 9.5 TR USD.
     
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