Here are 10 reasons why Rupee is falling http://www.indiatimes.com/news/more...-rupee-is-sinking-each-passing-day-96898.html I am not an economist so would not know which of the 10 reasons to hit the hardest.
Would really appreciate inputs and corrections by Real Economists in the forum on the views below: To solve the current account deficit nations need to export more. India is importing lots of oil, so like Brazil it needs to focus on corn based ethanol oil production. It is said 36% of the imports are oil alone. This translates to 3.71M barrels a day x $109 = Roughly $404M a day. Annually $180 Billion spent up in importing oil. Total annual imports are $489 Billion. This will in one year (depending on crop and production cycle) help the low forex reserves. Will also boost the economic growth by boosting employment in farming sector and thus overall consumption. Economic growth will bring more foreign investment which will solve low forex reserves problem and strengthen the rupee. The Indian government runs good 5% of fiscal deficit. How is this deficit financed? most probably by printing money which further devalues the currency. Government needs to find other sources of inducing growth in the economy rather than overspending. Why overspending is occurring......because of corruption by large government sector employees, tax evasion by rich business houses which reduces the government revenues, inefficiencies in implementing systems and processes etc.
Interesting link. Anyway, here is how they are going to try to work around the oil problem: http://www.zerohedge.com/news/2013-...ollapse-fallout-gives-usd-oil-companies-every
It is very surprising that despite of Brazil's success in corn oil production, India has done nothing to get some control over it's oil needs which comprise 36% of the imports. The labor rates in Brazil are far high than India so wonder why did not any cost vrs benefit type studies point to the right direction. Inaction on major problems is a big characteristic of the Indian government.
The timing of sharp moves down in emerging market currencies seems to correlate a little with US taper talk. India, Brazil, Turkey, Indonesia. These stock markets and currencies are making headlines. Of course each has its own issues besides US monetary policy but I read that it is a factor. Opinions aside this is another tell that taper is going to happen. I had to google "carry trade unwind". Emerging markets are a disaster right now and bombing Syria doesnt sound like a good idea here IMO. I cant see that helping.
When the US rates reach intolerable levels, then an external factor comes and compress them back. War and crisis of the emerging countries are just two examples.
Low inflation and falling producer prices. The market is starting to bet on a more expansionary central bank
Within the next 5 years there are two major major major threats to Chinese economy 1) Robotics which will negate the cheap labor. 2) Mega threat of 3D Printing. Infact this technology will cancel out needs for warehousing, supply chain management, minimum orders and many many more industrial variables. Infact it is said that 3D printing might be a BIGGER innovation than internet. Something on the scale of steam engine in that 18th century. Chinese model of low labor costs is done that way. Only thing that will keep them going is the internal demand as a result of massive growth in last 30 years and $3 Trillion of currency reserves that can fuel further growth as a result of investment into the economy. By 2025 we might even see another round of the "American Century" already gained momentum.