Intellectual Thoughts by Sanjay Panda: Economies are faltering

Economies are faltering

A slowing down in growth rate, A record high current-account deficit. A weakening currency.  A spike in inflation.  A fall in the stock market, An increase in  job losses (right sizing or is it down sizing ) in  all most all the sectors. This is  a  phenomena happening in India”s  current economic scenario.  The economy is  worsening  day by day.

The same recipe that is creating India’s worst economic crisis in decades is now afflicting  few other  economies as well.   Indonesia  Consumer prices jumped 8.6 percent last month, the current-account deficit had hit  4.4 percent of Indonesian GDP.  Thailand  GDP contracted 0.3 percent in the second quarter compared with the first three months of the year. That’s the second quarterly contraction in a row for Thailand, which  confirms that Thailand is now   falling into recession.

A fierce selloff in many  economies ( Emerging /RDE) currencies shows no sign of abating as the expected withdrawal of US monetary stimulus prompts investors to shun markets seen as riskier because of funding deficits, slowing economies and  rising inflation. A decline in the Fed's bond purchases will push government debt yields higher, which should raise the attractiveness of the dollar and dollar-denominated assets. In many of these economies,  it has been hammered by doubts over the efficacy of policy actions to stem the rout.

In India, the rupee's sell-off threatens to drive Asia's third-largest economy towards a full-blown crisis. While the Indian government and central bank have unveiled measures ( though not enough) to support the rupee, investors are unimpressed. Bolder structural reforms, including greater fuel price liberalization, land acquisition reforms, and higher foreign investment limits in  retail, insurance,  and  few other industry are crucial to regain investor confidence and shore up the rupee else we are slowly approaching the early 1990’s.