Expert Zone
Straight from the Specialists
An Indian pivot in Afghanistan after troop drawdown
(Any opinions expressed here are those of the author and not of Thomson Reuters)
Notwithstanding Afghan President Hamid Karzai’s disinclination to participate in talks, the Taliban retain the ability to calibrate violence levels in large parts of the country. But even if an understanding is reached with the Taliban, it does not hold the promise of lasting peace. Breakaway factions will find support and funding to continue bloodletting.
It is necessary to take stock of Kabul’s problems and find strong regional partners as anchors in unison with the depleted NATO/American establishment after the International Security Assistance Force (ISAF) drawdown. Kabul’s foremost problem is fielding well-trained forces. The ISAF has apparently reached the numbers it had set as its target but the forces fail to inspire confidence. Continued intensive training is required.
The inherent infirmities of the Afghan National Security Forces are also major hurdles. Desertion, drug abuse and literacy levels, even among the officer corps, inhibits trainability.
Over 90 percent of Afghanistan’s budget is funded by other nations. The government in Kabul can survive only if the flow of aid is ensured. The collapse of Mohammad Najibullah’s government in 1992 was a direct fallout of Russian aid dwindling. Connected issues include drugs and the rampant corruption that Karzai has not been able to stem, and Kabul may find it even more difficult tomorrow with local leaders trying to extract a price for continued support.
India Markets Weekahead: A spirited rally may be a distant dream
(Any opinions expressed here are those of the author and not of Thomson Reuters)
The week began with the Reserve Bank of India (RBI) maintaining status quo on rates as expected at its mid-quarter monetary policy review. The trade deficit widened to $20.14 billion, a seven-month high and up 13.18 percent over the previous month. Gold seems to be the culprit again and government restrictions don’t seem to deter Indians from buying gold.
The markets held on to hopes that U.S. Federal Reserve chief Ben Bernanke could bring cheer but the indication of a roadmap for a QE3 pullback saw the dollar rally against most currencies. The rupee was among the worst performers, falling close to 60 against the dollar.
Making the most of a mini-crisis
(Any opinions expressed here are those of the author and not of Thomson Reuters)
It all looked promising at the beginning of the year: the Indian rupee, like other Asia ex-Japan currencies, was appreciating against the dollar, to an extent on par with the Chinese yuan and just behind the Thai baht and Malaysian ringgit. Then came chatter in early May that the Federal Reserve was near gradually ending its money-printing program. The selloff in the rupee was rapid, and the currency lost more value than most of its Asian peers.
On Wednesday, Federal Reserve Chairman Ben Bernanke said the central bank will begin slowing the pace of its bond-buying stimulus later this year, triggering a global selloff that sent the rupee crashing to a record low on Thursday morning.
Indian insurers can now go international
(Any opinions expressed here are those of the author and not of Thomson Reuters)
Global insurers have been participating in the Indian insurance market for nearly 12 years. We may soon see the trend reversing.
The Insurance Regulatory and Development Authority (IRDA), the country’s insurance regulator, has laid down rules for Indian companies to start overseas operations. The criteria being: net worth of 5 billion rupees for life insurance companies, 2.5 billion rupees for general insurance companies and 7.5 billion rupees for re-insurance companies. In addition, the companies should have made a profit in at least three of the last five years.
Hard currency status a wishful dream for the rupee
(Any opinions expressed here are those of the author and not of Thomson Reuters)
A hard currency is one that is globally accepted as an exchange currency for trade. It is also expected to remain less volatile in the short term and indicate long-term stability through its purchasing power. The perceived strength and confidence in a currency is also a function of its country’s political milieu, fiscal and trade balances, the policy of its central bank and future economic outlook.
Let us look at all these parameters in the context of the Indian rupee and see where it stands on its journey towards acceptance as a hard currency.
India Markets Weekahead – Volatility seen as RBI policy review in focus
(Any opinions expressed here are those of the author and not of Thomson Reuters)
Volatility is here to stay and trying to predict the markets on a daily basis is a futile exercise. It’s no better than tossing a coin.
Monsoon rains are early and heavier then normal, raising the hopes of green shoots in the next few months. Macro numbers were showing signs of bottoming out but the rupee slide has thrown calculations awry. A feeble request by the finance minister urging people to shun gold won’t do much good in a country enamoured by gold.
Why the RBI should cut rates again
(Any opinions expressed here are those of the author and not of Thomson Reuters)
In May, the Reserve Bank of India (RBI) had hesitatingly cut the repo rate by 0.25 percent, which made no impression on the stock market or commercial banks. That was because both expected the cut to be more substantial. But the RBI had not obliged.
Perhaps the monsoon, which arrived on the dot and is progressing satisfactorily, may make some difference to the RBI’s expectations of food inflation – which had been its principal reason for hesitancy. While it’s too early to predict monsoon behaviour for the rest of the season and the likely improvement in agricultural production, it does appear the improvement should be significant and inflation dampened perceptibly. Reduction in inflation, however, is not the only reason why the interest rate should have been cut.
The road to smart technology
(Any opinions expressed here are those of the author and not of Thomson Reuters)
The Sixties witnessed the world’s first major technology wave with the rise of the mainframe, which had a dramatic impact on business processes and continues to do so even now. The second wave was the rise of the mini-computer, which had ease of use and was affordable. The third has been the PC, which needs no introduction, and the Internet is the fourth.
The Internet has changed the way business is conducted across the world and has had an impact on how we work, shop, socialise and interact. And now smart mobile technology really does look set to be the fifth major technology wave. What is of even greater interest is that we may be looking at a technology growing faster than any other in history. It took landlines nearly 100 years to reach saturation. Mobile technology reached saturation within 20 years and smartphones are set to do so in less than 10.
Will the rupee fall further?
(Any opinions expressed here are those of the author and not of Thomson Reuters)
On May 31, the rupee fell to an 11-month low of 56.51 to the dollar. It wasn’t the only currency to suffer a loss. Most currencies depreciated during the month; some more than the others.
The appreciation of the dollar reflects an improvement in the performance of the U.S. economy and partly the related possibility of the phasing out of quantitative easing (QE) by the U.S. Federal Reserve. The latter would make the dollar even scarcer.
The threat of a junk rating
(Any opinions expressed here are those of the author and not of Thomson Reuters)
Credit ratings by agencies are never very objective and their long-term outlook is also seldom accurate. Sovereign ratings, in particular those which are not solicited, are generally unreliable and often biased. But rating agencies do draw attention to critical issues that should not be ignored.
Standard & Poor’s announced on Friday that it had maintained India’s rating at BBB- with a long-term negative outlook. This assessment is based on three major considerations. The budget deficit, government debt and the current account deficit (CAD) are too high.
