Here is an excellent must see interview by Cnbc with a very eminent economist Dr. Shankar Acharya.
Essentially he is not saying anything new, as these facts are out in the open for a long time now but he is very candid in explaining the mess and the indecision by the UPA and Cabinet over the last 4 yrs in not increasing prices.
With inflation at 10%, cpi inflation march data at 17.9% , the current figure could be above 21%, and worse real inflation could just be a lot lot more my estimate around 50% . The interest rates are at 9.5% pa – so one is getting a negative yield on investment and ur sb interest , fd interest bonds etc are all giving negative returns.
Interest rates better move up, well above 10% or people will start thinking of alternative avenues to invest, the Fiis are the smartest and have been withdrawing money from India consistently since May.
The state govts borrowing program, and the India posts finances might go for a toss if the interest rates on Postal Deposits, NSC and MIS stay at 8% , as 80c lollipop is seldom useful to the non taxpayer who is the target audience of the postal bank.
Oil is still inching up and so are commodity prices and here is a 1 yr chart of the Nymex crude.
If it continues its upward march, and if the govt doesn’t act due to the coercive Karot threat, things can be a lot worse.. Deficits will mount while the consumption of subsidized fuel will also grow, thanks to price control. But being an optimist, and expecting some kind of intervention, lets hope for the best.
The Chinese have intervened with a raise in fuel prices at the pump , and sure it helps, the Nymex is down 4 $ but lets see if this is a short term solution, and how long the disastrous Indian subsidy policy will continue.
Ps though my neck is really suffering stress this post is a guilty pleasure 😉