Expert Zone

Straight from the Specialists

Consequences of an export squeeze

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

In June, exports shrank more than five percent to $25 billion largely due to recessionary conditions in major importing countries such as the U.S. and the EU. Although exports are not as critical to us as they are to Singapore or China, they do count for a lot.

The slowdown in the U.S. and EU has affected exports of most countries and pulled down growth. South Korea, which is dependent on exports to the extent of 50 percent of GDP, slowed down in the second quarter of 2012 to 0.5 percent due to a fall in exports by 0.6 percent. Our exports are 22 percent of GDP and as such the 5 percent fall would significantly damage the economy.

The U.S. economy has not stopped growing but its imports have declined $5 billion in three months since March. Apparently, a protectionist stance may have been responsible. There is not much decline in EU imports though imports from India dropped 10 percent and from China 3 percent with a step-up in imports from the U.S. and Russia.

Opting for lean and mean armies

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

The British army is being cut to size, or perhaps, being stripped to its bones. The British defence secretary has announced a 20 percent cut, reducing its strength to 82,000 combatants by the end of the decade.

Get set for an action-packed week

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

Markets continued to display weakness during the week except for a spirited, though limited, rally on July 18 after the UPA convinced belligerent ally Mamata Banerjee to fall in line for the presidential elections. The Nifty lost 0.4 pct to close the week at 5205 on political worries after the NCP, another government ally, expressed dissatisfaction with its functioning.

The growth versus inflation dilemma

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

The RBI is concerned about inflation; the finance ministry has growth as its priority. That, as RBI Governor D. Subbarao mentioned, makes the two almost look like adversaries.

Decoding political risk no mean feat

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

Politics is playing a dominant role in financial markets today — and generally speaking, investors do not like it. Political risk is an additional layer of uncertainty that has to be factored in while making investment decisions. Because political risk is intimately linked with the uncertainties of human behaviour, the impact of political risk can at times seem to be almost random. After over two decades as a professional economist, I can assert that forecasting economies is tough. Trying to forecast what politicians are going to do is even worse.

Markets await rollout of policy action

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

We saw some tiredness in the markets with subdued optimism as compared to the previous 4-5 weeks as the bouncebacks were not as sharp and strong. The Nifty tended to close at the lower end of the band at 5227, a fall of about 80 points. A major disappointment during the week was the below-expectation result from IT bellwether Infosys followed by a lower annual guidance.

The enigma of diesel prices

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

Budget considerations make it necessary to raise prices of diesel; political exigencies make that difficult. No wonder Chief Economic Adviser Kaushik Basu was cautious enough to suggest ‘partial decontrol’. But the present is the time to do more than that.

Is inequality inhibiting growth?

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By Raghuram Rajan
The opinions expressed are his own

To understand how to achieve a sustained recovery from the Great Recession, we need to understand its causes. And identifying causes means starting with the evidence.

Two facts stand out. First, overall demand for goods and services is much weaker, both in Europe and the United States, than it was in the go-go years before the recession. Second, most of the economic gains in the U.S. in recent years have gone to the rich, while the middle class has fallen behind in relative terms.

What’s right with India

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

Whenever I pick up a newspaper or a magazine — especially The Economist — I keep reading pieces about what’s wrong with India. Corruption is rampant, the infrastructure, what there is of it, is falling to bits, the government is senile and feeble and the economy is flagging — and so on. All of which may be true — but it rather depends on your perspective.

FDI in insurance — to hike or not to hike?

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

FDI in insurance might just be increased to 49 pct. This sounds way too familiar and has been the situation for quite a long time now. Or we could do some scenario building and even see it being delayed by a few more years.

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