Is The Indian Economy Heading For Its Finest Hour?
"For what it’s worth, a key conclusion from the IMF’s new World Economic Outlook is that recessions caused by financial crisis typically end with export booms, with the trade balance improving,on average, by more than 3 percent of GDP. I find this a disturbing result: we’re now suffering from a global financial crisis, which means that the usual driver of recovery will only be available if we can find another planet to export to."
Paul Krugman
With results still coming in, projections show the United Progressive Alliance is likely to win about 250 seats, making it a shoo-in to form the next government and provide continuity, a stable administration and progress on key economic and corporate reforms.
Wall Street Journal, May 16 2009
Prime Minister Manmohan Singh’s electoral victory, the biggest any Indian politician has scored in two decades, may loosen political shackles that have restrained the country’s economic growth as it struggles to free half a billion people from poverty.....Political stability will make India a more attractive investment destination as Singh, 76, seeks the funds to stimulate Asia’s third largest economy.
Bloomberg, May 18 2009
Many are called, but few are chosen, as the saying goes. But could it just be that this time around, and on a one-off, never to be repeated basis, India might find itself right there in the midst of things, with a 50-50 opportunity to add its name to that select and noble band, the chosen few. After all, someone has to lead the next global charge? The majority of the developed economies are either bogged down in the substantial quantities of debt that they desperately need to pay off, or weighted down by those elderly populations who are weakening consumption growth and leading to export dependence (Germany, Japan...). And as Krugman humorously points out, someone will have to add the extra demand which will allow global trade to start to grow again, so why should India not supply a significant part of this new demand, after all we are more likely to find consumers in India than we are on Mars.
In fact, I may not be the only person around who believes this, since India's Sensitive stock index, or Sensex, surged 2,099.21 points to 14,272.63 first thing this (Monday) morning, posting a record 17 percent gain in a brief period of trading following the news of the election outcome, before the surge prompted exchanges to halt trading at 9:55 am, Mumbai time. Markets closed initially for 2 hours but the decision was then extended to include the rest of the trading day, the first time ever that this has happened to the Sensex. The stock index had previously climbed 23 percent so far this year while the Nifty Index was up by 24 percent. climbed 47 percent In fact since hitting "bottom" and closing at a three-year low on March 9, the Sensex had already risen by 47 percent while the rupee was up 4.4 percent in the same period.
The rupee also powered up again toady, and jumped the most in two decades while bonds also rose. The reason for the surge is not a feeling of deep-seated admiration for the Singh government itself, but rather a sense of optimisim that it will give India the continuity and stability it needs to grasp the challenge before it with both hands.
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