An excellent article
in
The Economist , discusses the impact of the global crisis on
India. This was forwarded to me by Shashank Mohan of the
Rhodium Group, and
it highlights how India could actually benefit from the crisis in
the longer run.
While the point on investor wealth and confidence is in complete consonance with Varun's comment on my previous blog post, I am a little confused by their point on how the continually depreciating rupee implies that the RBI should intervene in forex markets. Is this not a conscious policy choice, with vigorous proponents towards both a free float and a managed regime? Indeed, critics of the RBI have often brought into light its exchange rate policy as its largest fault, and indeed, in this situation (as the Economist points out), intervention comes at the cost of credit liquidity, supplementing the liquidity costs of rate hikes.
An interesting point on the sombre IIP numbers, however. CMIE, one of India's largest statistical forecastors, have pointed out a number of good reasons why IIP is not a good indicator of India's industrial production, harking back to an earlier blog post about bad measurement of data in India. In fact, they predict no slowdown as insinuated by the latest IIP numbers.
While the point on investor wealth and confidence is in complete consonance with Varun's comment on my previous blog post, I am a little confused by their point on how the continually depreciating rupee implies that the RBI should intervene in forex markets. Is this not a conscious policy choice, with vigorous proponents towards both a free float and a managed regime? Indeed, critics of the RBI have often brought into light its exchange rate policy as its largest fault, and indeed, in this situation (as the Economist points out), intervention comes at the cost of credit liquidity, supplementing the liquidity costs of rate hikes.
An interesting point on the sombre IIP numbers, however. CMIE, one of India's largest statistical forecastors, have pointed out a number of good reasons why IIP is not a good indicator of India's industrial production, harking back to an earlier blog post about bad measurement of data in India. In fact, they predict no slowdown as insinuated by the latest IIP numbers.
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