Wednesday, April 10, 2013

Perennial Europe’s Contagion: What’s in it for India?

Past 24 months have been really challenging for the currency (European) union’s survival. Country after country the contagious economic situation is hampering the revival of union out of this debt trap. It all began with the Greece’s catastrophic economic conundrum followed by Italy’s banking difficulties lined up next by Spain’s complex debt phenomenon, to join the queue was Cyprus reeling under the same tough balancing act between the austerity plan (though thought of trying something new with taxing the depositors) and the bail-out package and now Portugal is feeling the same old debt trapped situation. And I personally feel that this situation will prevail until a decisive political stance between the troika (EU,ECB and IMF) is not reached soon! (Financial union is sustainable)

Now as the European Union week after week highlights its vulnerable economic position it becomes imperative for the growing economy like India to use this (slowing world economy) event strategically and make our domestic market more potent. Though we are globally connected but the cascading effect of the world’s economic problems can be minimized if we cater our domestic burgeoning market effectively and efficiently. Country with 1.3 billion people is a huge market (literally BIG) and with growing interests of international brands to this opportunity coupled with making our domestic industries more capable to cater this humungous demand driven economy is a tough and complex task but this is the sole panacea. To make this task little simpler for the industries it is important for the Government to make the policies simpler although robust yet operational in a speedy manner. Although it sounds theoretical but until the private sector and the Govt. authorities wont function in tandem the desired results cannot be achieved.

The present situation of Indian capital markets where the FIIs have been the net sellers in the last four trading session, on economic background our current account deficit has reached an unprecedented level of 6.7% of GDP, INR hovering around 54 – 55/$ range and with inflation (CPI) still at unsustainable levels the government intervention through right policies is need of the hour. The nearing Lok-Sabha polls which are scheduled next year in May should not hamper the economic mobility of the country as the investors’ sentiments may turn bearish with the slow recovery of American economy on papers.

Be it the two protagonist in Modi versus Rahul (in real terms aam aadmi’s Hand vs the Lotus) for the next 12 months but the economic cycle for the progressive India should be on the move and for this the government has to take some unpopular and tough stance (FDI policies on retail, insurance and pension) keeping in view the sustainability of these measures too.

Until we are internally robust the external sentiments cannot be improved so introspection with not just rhetoric but implementation is the priority for the progressive movement ahead. 

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