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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. layman

    layman Aurignacian STAR MEMBER

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    Well your optimistic view point is very much appreciated.
    But RBI has been intervening a lot in the past decade to keep the currency from degrading further. So these appreciations will give RBI a chance to shore up their reserves back.
     
  2. Nilgiri

    Nilgiri Lieutenant IDF NewBie

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    We can only see what effect "too much" appreciation/depreciation has on the Indian economy in hindsight and over the long term.

    Indian exports may now be getting more competitive due to improvement of logistics/infra kicking in from 2014 onwards:

    http://lpi.worldbank.org/international/global

    This may be prompting some of the appreciation now along with greater investment flows into India. Both of these spur greater demand for the INR on the world market, and thus the currency would appreciate.

    All of this may be further sustained by upcoming GST, greater formalisation of the Indian economy and continued reforms (in labour, capital, tax etc).

    How much of a long term phenomenon it is, and what the validity of this possibility remains to be seen.
     
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  3. layman

    layman Aurignacian STAR MEMBER

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    That is my whole point, GST is going to drag the economy further initially for 6 months, before it starts picking up.

    And as History suggests for decades we can be pretty close to say what is too much to appreciate or depreciate. We are not RBI's stalwarts who have been doing this for decades to predict that it is going to appreciate more or depreciate more.

    What is the prime value of the currency which can sustain growth and development. A 1.4 trillion $ question.
     
    Last edited: Mar 27, 2017
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  4. HariPrasad

    HariPrasad Lieutenant FULL MEMBER

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    It is 65.07 right now
     
  5. HariPrasad

    HariPrasad Lieutenant FULL MEMBER

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    Baba kalyani very rightly said that India's strength lies in competitive high tech goods and not low cost goods. Crook chidu allowed free import of capital goods which we ourselves make. Capital goods import soar 70 bn USD per year from 10 bn USD per year and that hurt our economy very badly from the vajpayee's time. We saved from disaster because of remittance from NRIs. Indian companies imported sub standard chinese power plants in lust of generous credit line Ignoring quality stuff from BHEL. This increased trade deficit like anything and Rupee depreciated. It hit employment generation very badly. We need to have some protective mechanism particularly against the low tech capital goods.
     
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