balanced & comfortable
I was not sure of where we were heading with stock market index zooming past 20,000, INR showing strength at 38, the 10-year paper close to 7%, inflation below 4%, IIP at levels over 10% and the GDP at levels moving closer to double digits.
With the current levels of the above economic parameters (index at decent 16500, INR 41, 10-yr paper 8+%, inflation 8%, IIP 8%, GDP 8%) one gets the feeling that economy is still healthy and will progress without any early fatigue as has been recently witnessed. Breakneck speeds of all of these parameters (simultaneously) always instilled some sort of uneasy surprise in me and my friends and underlying reasons for the pace were not assuring enough. We were not sure if all this was for real.
You can label us pessimist/bearish but we continue to believe that though India is the cynosure in BRIC economies, it does not have the required strong support from other quarters to sustain this pace of economic boom. The other quarters being the socio-political set up in the country. Isn’t is strange that while index of the companies zooms past ecstatic levels of 20,000, India still ranks way below the ladder in ease of starting a business? The distribution system of almost all commodities shouts for reforms and smooth infrastructure. Labor and land reforms are in a perpetual limbo. More than a quarter of Indian population still goes to bed hungry. Bureaucracy is mired in corruption. Legal system is a long drawn battle (DRTs give zero confidence to banks).
I might be sounding as a harbinger of doomsday but the point am trying to make is that there were no tangible and convincing reasons for the overly optimism shown by markets. Given the current level of these and many other socio-political sub-environs in India, the current economic parameters reflect the Indian state pretty well and near authentic.
I dont want to sound inhospitable to our FII friends but I get a (weak) feeling that this exuberance was a result of their quick money making strategies aided by our very own punters & operators (KGN and Sylph kind of operators).
I am back at being comfortable with the current economic parameters though inflation seems to be threatening and I still believe that it is the job of RBI and it should be allowed to play a proactive role in managing inflation rather than ministers of state trying to force down measures on the industry. RBI has many more tools at hand apart from CRR viz. exchange rate (which is pretty potent given the huge reserves that our nation has acquired).
Well lets celebrate a little with another of my fav songs:
