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Old 22nd August 2013, 21:15   #31
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Default Re: The Falling Indian Rupee

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So the question for me is why do we then import crude oil to those levels that would actually de-value the rupee so drastically?
What is the alternative to importing crude oil if we use that much crude oil?
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Old 22nd August 2013, 21:18   #32
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Default Re: The Falling Indian Rupee

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Has this got something to do with the oil import? If we compare the exchanges rates for the last couple of years and map that against the oil imports, whenever the oil import came down, the exchange rates came down as well and vice versa. So the question for me is why do we then import crude oil to those levels that would actually de-value the rupee so drastically?
oil is the biggest drainer of our foreign exchange. We dont have oil on our own.We can just supply less than 20% of the required oil from our fields. Rest is import. That is why the fuel subsidy is killing us.
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Old 22nd August 2013, 23:06   #33
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Default Re: The Falling Indian Rupee

The reckless and uncontrolled imports have played havoc. The balance of payments position on the negative for us, with many countries is burgeoning. We import more than we export to a host of countries, who are all on our major trading partner list.

We are focusing on oil imports as the villain, which is entailing a massive outflow of foreign exchange at much more than Rs 100,000 crores annually.

There is another such import bill that entails an outflow of nearly an equal amount in foreign exchange, annually.
Any Guesses?

Its the import cost for potash and phosphate fertilisers, the fertilisers normally used by agriculturists. There are virtually no natural resources in India for potash fertilisers and its almost a 100 % import.

We have very limited phosphate fertiliser reserves as phosphorite and we are mining only a miniscule percentage of our requirements, every year.

To top it all, these fertilisers are imported through licensed agencies and have to be compulsorily subsidised for consumption by farmers. Nobody dares to touch this import and subsidy bill, as it may be deemed as anti farmer. No doubt, we have compulsions and taxing farmers may make farm produce prices shoot up through the roof tops.
The subsidy bill for fertilisers was officially budgeted in 2012-13 at around Rs 58,000 crores in the Finance Bill, whereas it actually shot up to breach the Rs 100,000 crore mark. We may also be horrified to look at the later year figures.

A very relevant,recent interview here by Jim Rogers

http://www.livemint.com/Companies/pqNgQUDoOPsQCli4EgZLMM/Jim-Rogers-Why-Im-shorting-India.html

Last edited by anjan_c2007 : 22nd August 2013 at 23:15.
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Old 22nd August 2013, 23:09   #34
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Default Re: The Falling Indian Rupee

The kind of trend we saw in the dollar in past weeks, It'll fall down more and will stabilize at around 68-67 mark. The main reason behind this is that our balance of trade ( BOT ) is very bad, Our imports are hell lot then our exports.

The crude oil being one of the major drainer of our foreign exchange. To get out of this mess, Our government have to take some serious decisions now. The only way i to get out of this is to increase the exports as much as they can, Only this thing can stabilize the dollar, but this is long term measure.

For short term, Our government should try to attract foreign investors to invest in our country etc. measures like this can help dollar stabilizing for short term, but for long term increasing the exports in the only measure to make INR stronger.
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Old 22nd August 2013, 23:19   #35
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Default Re: The Falling Indian Rupee

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Originally Posted by hellmet View Post
Infrastructure building should bring a lot of cash into the nation as builders scramble to build and profit from toll (build and transfer scheme), generate lakhs of jobs, save many thousands of liters of fuel wasted in bad roads and unnecessary driving due to lack of space on trains, move goods efficiently by rail so we can move away from our aging trucking infrastructure, and more.
That's what everbody thought, but infra companies are showing little interest in these BOT projects. Reason is most of the corridors which have heavy density of vehicles are completed and the remaining ones will not be profitable because of low vehicle density and hence less toll collected. There are no takers for 80% of the projects that were supposed to have taken off this year.
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Old 22nd August 2013, 23:56   #36
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Default Re: The Falling Indian Rupee

India is an Independent nation still so heavily dependent on foreign countries. The fertilizer imports is news to me. We already know most cotton produced in India, the seeds are licensed to a Monsanto.

Where as, farmers from India are going abroad to lecture on Organic farming and conducting workshops out there.

Fuel subsidy is another huge racket fleecing the common man. The taxes collected are much higher than the subsidy payouts. Still the govt. cries of no money in exchequer.

The commoner, even the poor is taxed heavily (indirectly) for products they buy. Tax collection starts from the source to sales. The Govt. makes more tax money than the profit made by the business itself.
Still we pay infrastructure cess to build a metro or flyovers in the state.
Just imagine the property tax itself that's paid out to state.

All this money can be used to subsidize exports.
Here is an old article but good one: The great fuel subsidy hoax

India is becoming heavily dependent on foreign know how, patent royalty and imports.

Heavily tax the imports specially those that are locally produced. Necessity is the mother of invention, when people get things easily no one thinks out of box to invent new stuffs or find an alternate answer.

Otherwise, why should domestic prices fluctuate with the dollar.
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Old 22nd August 2013, 23:59   #37
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Default Re: The Falling Indian Rupee

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Here is my 2 cents.
The policies that are in place is to improve exports. Someone gave the example of retail. What was the government demanding? They wanted any company coming into India have local manufacturing as well. Not just import stuff from around the world and sell it here.
They have changed that.

Quote:
The Cabinet headed by Prime Minister Manmohan Singh diluted the mandatory 30% local sourcing norms for multi-brand retailers and permitted states to include cities with population less than 1 million for allowing multi-brand retailing.
Link : http://www.dnaindia.com/india/186871...aises-fdi-caps

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Originally Posted by patil View Post
I think that we all can do our bit to improve the situation. We need to at least temporarily stop buying things that are to be bought by the supplier by paying dollars, for example imports from America. We need to put a check on luxury goods and services that are imported by paying in dollars. We need to switch to products which are made in India or at least from other countries such as Japan, Korea etc.

We should permanently stop using product of American companies such as colgate, pepsodent, coke, lays, mc donalds, subway, dove, lifebuoy, imported cigarettes, etc., etc., etc., which are the products of American companies as all these companies will take away their profits in dollars and not in rupees.
1. These companies also pay Taxes in India just like their Indian counterparts.

2. If you start boycotting the companies and their products, they will fail in our country and will shut operations. Then no Foreign Player will dare to venture in our country and we will have no FDI inflows and the Rupee will depreciate further as Supply of Dollars will reduce further. Please remember, The World doesn't need us, We need the World.

Last edited by Turbo_Charger : 23rd August 2013 at 00:01.
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Old 23rd August 2013, 00:04   #38
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Very interesting question and also very interesting answers. Its fascinating to see how people have such solid reasons for the rupee devaluation, but pray, tell me how come no one predicted this scenario a few months ago. Prior to the US Fed announcing the tapering off of easy money, everyone including the economists saw indian interest rates declining and inflation going down.

To quote some names, with no malice intended, since they simply cannot predict the future.

"In the current scenario, you can invest in government securities with two-five year maturity periods for risk-adjusted returns. You can use income funds for benefiting from falling interest rates," says Rahul Goswami, chief investment officer (fixed income), ICICI Prudential AMC." April 2013

Not one of these pundits, who now predict doomsday due to India's current account deficit, caused due to huge demand for oil, gold, and low exports, could forsee this scenario just a few months ago. And yet, now we seek advice from them on how the future will unfold?

Yes, there were a few who sounded the alarm bells, even way back in 2012, but they went unheeded.

RBI hawkish in annual report, urges government to cut subsidies. Aug 2012
http://www.firstpost.com/economy/rbi...es-427999.html

Citi/CLSA cuts India's growth rate to 5.4% (Ironically this was at the same time that the government predicted 8-8.5%)
http://www.firstpost.com/economy/now...-4-411126.html

CII wanted RBI to cut interest rates to retore growth rates of 8.5%
http://businesstoday.intoday.in/stor.../1/197528.html

Our dear FM wanted RBI to look beyond price stability and promote growth, ofcourse conveniently overlooking the fiscal deficit problem - July 29, 2013.
http://businesstoday.intoday.in/stor.../1/197301.html

They even changed the RBI governor, in an attempt to spur growth, and we're seeing how thats made such a huge difference.

To sum it up, we've overspent, and now that the FII's are pulling out, we're caught in a bit of a bind. After hearing all the brouhaha about CAD, I tried to get the latest figures, and am thoroughly confused.

One report, dated Aug 22nd, 2013 says our FM says it will be less than 70billion USD.
http://in.reuters.com/article/2013/0...0GN00Q20130822

Yet, another says, its 21 billion USD, and another forecasts 32 billion USD.
http://www.tradingeconomics.com/india/current-account

I really would like to believe our FM, but he does'nt really inspire much confidence.

Another interesting theory I heard was that this depreciation is so that our dearest political masters can re-route their foreign cash stash to India in time for the 2014 general elections, and post that momentous occasion, the rupee will appreciate dramatically once again.
http://www.newslaundry.com/2013/08/hawala-logic/

Although I don't buy it, I really hope so, because I don't like the scenario of having such a dramatically reduced purchasing power in this global economy.

Last edited by Lalvaz : 23rd August 2013 at 00:15.
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Old 23rd August 2013, 00:14   #39
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Just because Walmart decided not to play by the rules of Indian govt, there was no need for our Economist PM Ji to go by their rules. Its a country playing over to one corporate. Thats insane.

And we want to call our selves a budding super power?

While the same Walmart plays by the stringent norms of the Chinese govt in that country.

If Walmart cannot procure even 30% of what they want to sell, what difference does it make from the tax money it pays out here. The diesel they spent for transportation and power? (the one we import and heavily subsidize?)
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Old 23rd August 2013, 00:55   #40
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Default Re: The Falling Indian Rupee

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Please don't make it a political discussion but rather lets stick to the economics of the whole thing.
That kind of negates the whole point. The crisis has its root in the Governance which has a Puppet as its head. But if root cause is not to be discussed and only if surface has to be scraped for generating words then I am quiet.
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Old 23rd August 2013, 02:02   #41
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Default Re: The Falling Indian Rupee

We all know that the real reason for the state of economy is political rather than economical and I'm not sure if discussing politics here is allowed. Had to remove a lot of content from my previous post because didn't want to be on the wrong side of rules.

Personally, am not against any foreign company per se, but I also don't support bending backward for some companies or rolling out the red carpet for anyone. The laws or rules should be same for everyone and there should be a level playing field. Also if we have taken a position on something or have brought about some rule then we should stick with it for some time instead of changing it on our whim. The real problem in my humble opinion is of Trust and the government of the day certainly has a Trust Deficit.

The real irony is that we are begging for FDI while our own Domestic Companies have put fresh domestic investments on hold or are going slow and are investing overseas. If our people don't have trust in our Economy and Government, how can a Foreign Company show trust in them ? The kind of situation we are in, don't expect anything to improve by 2014.
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Old 23rd August 2013, 08:09   #42
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Default Re: The Falling Indian Rupee

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Originally Posted by download2live View Post
That kind of negates the whole point. The crisis has its root in the Governance which has a Puppet as its head. But if root cause is not to be discussed and only if surface has to be scraped for generating words then I am quiet.
The puppet theory is just a theory still and cannot be proved right? Such meltdowns have been seen before in our country and even worldwide across various nations. And there was no puppet involved there. Anyways the reason for staying away from politics is due to the forum rules.
You can blame the government I guess including the puppet theory. Just dont glorify the rest of the political parties so that we can stay away from this party vs that party debate. I think that should be fine by the Forum rules.
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Old 23rd August 2013, 09:33   #43
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Default Re: The Falling Indian Rupee

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Originally Posted by drmohitg View Post
The puppet theory is just a theory still and cannot be proved right?
There is more circumstantial evidence that supports this 'theory' than otherwise.

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Originally Posted by drmohitg View Post
Such meltdowns have been seen before in our country and even worldwide across various nations. And there was no puppet involved there.
Really? Have they?
http://articles.economictimes.indiat...-market-indore
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Old 23rd August 2013, 09:49   #44
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Default Re: The Falling Indian Rupee

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Originally Posted by joe1980 View Post
Has this got something to do with the oil import? If we compare the exchanges rates for the last couple of years and map that against the oil imports, whenever the oil import came down, the exchange rates came down as well and vice versa. So the question for me is why do we then import crude oil to those levels that would actually de-value the rupee so drastically?
While it would indeed be related as higher consumption leads to higher deficits, beyond a point, I raise you this:
http://flowingdata.com/2013/01/25/in...rer-causation/

(i.e no point bothering with too much correlation without understanding the macro picture as pointed out before)

The other thing we should remember is that up until now we had hope - of late that has been slipping away as well, else this correction would have been more gradual over the years.

Now we have the reverse - fear psychosis operating!

The quote to keep in mind? "Markets can remain irrational a lot longer than you and I can remain solvent" (JM Keynes).

Last edited by phamilyman : 23rd August 2013 at 09:52.
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Old 23rd August 2013, 10:12   #45
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Default Re: The Falling Indian Rupee

Simple ways in which we can save rupee:

1. Reduce fuel usage: I feel bad to take a long ride or drive for pleasure in the current scenario.

2. Try commuting during non-peak hours or use public transport/ car pooling: I feel bad thinking about the fuel/ time wasted in traffic jams in Bangalore. Govt improving road infrastructure will help the country in many ways - enhance commerce, widen cities, rural development, improve investor confidence, save fuel/ time, reduce stress etc.

3. Stop/ reduce buying gold for consumption: For an Indian family, gold is a necessity from a consumption point of view with usage in marriages and other important functions. It is sad to see an average middle class family taking debt to buy gold to marry off their daughter, not to mention the amount of gold displayed by the guests in the marriage.

4. Invest in Stocks/ Mutual funds: Stocks provide better returns than gold/ FDs in the long term if you know what you are doing - otherwise use good mutual funds. It's sad to see that the huge saving available within India is stacked in gold, debt and FDs. Gold is after all a piece of metal which has some arbitrary value based on supply and demand. Some asset allocation is required on gold to spread risk, but the fascination that Indians have on gold is alarming. A good article - https://scripbox.com/blog/the-myth-a...ity-investing/

5. Buy based on value, not brand image: Don't just buy foreign goods based on advertisements/ brand image. Most of our perception of quality is based on the brand image created, not the actual experience or quality of the product.

Last edited by PatienceWins : 23rd August 2013 at 10:27.
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