Expert Zone

Straight from the Specialists

Yet another infructuous parliament session?

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

The last session of parliament was a washout. The present one looks to be no different going by its chaotic start.

The government had announced a number of policy reforms in the intervening period between the two sessions. To resume reforms and pull the sagging economy up, the government had opened domestic retail business to foreign multi-brand supermarkets and also expressed its commitment to foreign investment in airlines, insurance and pension funds.

That was good economics and would bring the economy back to high speed growth so necessary to generate employment and increase incomes. But good economics is not always good politics. Mamata Banerjee-led  TMC walked out of the UPA and even sought to introduce a no-confidence motion against the government, although it failed due to lack of support from other parties.

Higher growth can help lower deficit

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

India’s bloating budget deficit has been a matter of concern. It means more borrowing by the government which results in overcrowding of the debt market and consequently, a higher rate of interest for the private sector. It also raises the rate on borrowings from abroad due to the downgrading by rating agencies which is bound to follow.

Economic consequences of deadlock in Parliament

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

The monsoon session of Parliament has been a washout without any important business being transacted. This has been made out to be a political strategy on the part of the Bharatiya Janata Party (BJP) to force early elections. Obviously, the Congress-led coalition is unlikely to oblige. The unintended victim is the economy which has been stopped from getting back to growth.

Why the RBI preferred an SLR cut

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

The first quarter review of monetary policy did not create any ripples. The stock market remained flat and investors and consumers showed little interest. That was because RBI Governor Duvvuri Subbarao had made enough noise earlier that the time was not right and conditions were not suitable for a rate cut.

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 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.

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.

No silver lining in this monsoon cloud

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

India’s monsoon rains have been delayed and were already 30 percent deficient by the end of June. There are doubts whether rains will pick up during the rest of the season. August and September are likely to be dry which will damage crops and reduce farm incomes.

Foreign borrowing or foreign investment?

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

The market’s response to the currency measures announced on Monday was a dip in the Sensex. Much was expected after the announcement made over the weekend by the finance minister. What has been actually initiated cannot make much difference either to the rupee or to growth.

RBI needs to take bold steps

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

Expectations of a rate cut were legitimate. But the RBI preferred to pause, not quite convinced that inflation is under control. That has been its singular target though it is dressed up to look more appealing as growth-inflation dynamics.

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