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from Expert Zone:

Bear market a golden opportunity to shore up coffers

(Any opinions expressed here are those of the author and not of Thomson Reuters)

The recent run of the gold bears in financial markets has been positive for India's current account balance. If this continues along with the persistent softness of oil prices, as many expect at least for the short term, it just might give the government the opportunity it needs to implement certain measures that have so far run against popular sentiment.

The plunge in the gold price since the start of the year, triggered by speculation and hints that the U.S. Federal Reserve may trim its bond-buying program sooner than markets had assumed, has helped the rupee hold up well against the dollar. This is good for India's fiscal house, where the trade and current account deficits are more or less permanent fixtures.

Because gold accounts for just over 10 percent of India's import bill -- the second-largest import item after oil, which accounts for a little over 30 percent -- a meaningful drop in the gold price, such as recently, eases the trade deficit. This is assuming the cheaper price does not trigger Indians to buy more gold. In the last two years, the steady rise of the already high gold price pared down local demand by roughly 10 percent a year in volume terms.

A lower trade deficit improves a country's trade balance, and if it is achieved through lower imports, it also supports its currency and ultimately its current account balance. For India, this implies that it gets to keep more funds to finance domestic investments. However, commodity prices can be fickle, and gold is no exception. In fact, UBS expects the gold price to modestly recover in three to six months.

from Expert Zone:

Investment boost needed to break India’s vicious cycle

(Any opinions expressed here are those of the author and not necessarily of Reuters)

The current account balance reported last month hammered in the fact that India is spending more than it saves. While it had been stubbornly in the red for all but a couple of years in the last two decades, reaching a record deficit in both absolute terms and in relation to the gross domestic product was sobering.

from Expert Zone:

Budget 2013: India has no room for a populist budget

(Any opinions expressed here are those of the author and not of Reuters)

It is still a good year into the next general elections, yet India's two main political parties have already set the stage for a showdown. The opposition Bharatiya Janata Party is closing in on the Congress party, according to opinion polls. Even though it is still early days, this puts even more pressure on the ruling party.

Last autumn, the Congress had a change of heart with its policy priorities, having realized that dithering on industry reforms would be a safer way of losing votes than pushing ahead with unpopular measures. It ploughed through opposition to liberalize foreign direct investment, and it mainly succeeded, although progress on fiscal housekeeping, such as raising power tariffs and cutting diesel subsidies, has come at a much slower pace. Other potential measures did not happen at all. Nonetheless, the party has raised hopes and expectations that it can get India's act together.

from Expert Zone:

Time for real reforms, but low-hanging fruits remain

(The views expressed in this column are the author's own and do not represent those of Reuters)

What seemed to be a lost cause merely three months ago has staged a remarkable comeback: the Indian government's zeal for reform. After many months of dithering, the ruling Congress party remembered that it had the spine to stand up to fierce opposition from various state governments, finally getting its way on certain measures.

from Expert Zone:

Weighing the Obama-Romney calculus

(The views expressed in this column are the author’s own and do not represent those of Reuters)

Much is at stake in the United States presidential elections this year, perhaps more in terms of policy than in the past few election cycles. The presidency of Barack Obama has been fraught with battles in a deeply divided Congress, leading to paralyses on some major agenda such as government debt, and significant compromises on others such as healthcare reform.

from Expert Zone:

Not so easy for India to come out of the dark

(The views expressed in this column are the author’s own and do not represent those of Reuters)

Many words have been used to describe the power outages that put half of India in the dark this week: embarrassing, catastrophic, the worst the world has seen. While all of these may be true, the blackout also embodied the dire situation the country could be headed to without the necessary reforms to modernise its economic infrastructure. To be sure, it is not a lack of vision that would lead India to similar potential disasters in the future, but a lack of political will.

from Expert Zone:

What if Greece exits the euro zone

(The views expressed in this column are the author's own and do not represent those of Reuters)

While the idea of a Greek exit from the euro zone has long been rejected by politicians and deemed nothing more than a "tail risk" by most investors, there has been a clear shift in opinion after the Greek election in early May failed to form a new government. The repeat election on June 17 is therefore critical to the country's future in the euro zone and to financial markets worldwide. If Greece fails to form a new government, or forms one that rejects its bailout plan with official creditors, the probability of an exit would rise significantly.

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