Goldman Sachs downgrades India, says rupee can hit 65 to dollar

[BigDaddyWatch]

Developing countries are in a catch 22 situation. In order to prevent their currencies from falling they will have to tighten monetary policy. But by tightening monetary policy they will reduce growth and with reduced growth hot money outflows will excellerate. And their currencies will continue to fall. This is the spot where India and many other countries are in now.

 

[vishalkamble]

The RBI did the right thing by tightening the monetary policy, below are the few steps takes by RBI which was appreciated even by the Indian industry.

In a move to temper speculation-led volatility, the central bank took two measures.
1)First, it curbed trading in rupee forwards. “Exporters were booking a forwards contract, cancelling it and then rebooking at a better rate, which was contributing to the free fall of the rupee,”
2)the RBI reduced the amount of open positions dealers can maintain overnight. At present, a company’s board is permitted to fix suitable limits for various treasury functions with net overnight open exchange positions and aggregate gap limits. Dealers said the impact of lowering the trading limits would be huge because banks would not be able to keep speculative positions open for a long time.

Experts feel that these steps should have been taken much earlier.

Industrialist says RBI's move will provide some relief and arrest further decline in the rupee in the next few days. But, these measures alone cannot prevent rupee depreciation in the medium term,

So lets wait and watch.

 

[Snowden]

Indian economy is in full collapse now. Their currency collapse is the ultimate sign. The Indian economy is a complete facade.

 

[idune]

little weird .. when rupee depreciated to RS 65 against 1 USD (from RS 56 probably), taka appreciated to Taka 77 against 1 USD (from around Taka 82).

Offcourse you have no clue why. There is no parallel or relation in what is going on in Indian economy with Bangladesh. Bangladeshi taka appreciation is purely driven by Awami League regime contractionary monetary policy which driven investment out of economy, import went down unprecedented level that even central bank buying dollars in tune of $4 billion could not be compared to contarctionary destruction Awami League regime caused to investment and demand for dollars.

 

[Hellraiser007]

Indian economy is in full collapse now. Their currency collapse is the ultimate sign. The Indian economy is a complete facade.

Says who?

Chinese bubble is about to burst and there are jobs cuts in the offing in China, we do not have that kind of situation here. India's GDP is doing better than last year. Where are Chinese do not know the correct stats and credit and are in the mess right now.
They are going the Japanese way, rapid growth of GDP and after that a stagnant economy.

Indian GDP rate is based on domestic consumption always and envy for CCP.India will grow steady.

 

[BigDaddyWatch]

India is in that path and is about to enter manufacturing sector , India's manufacturing policy and trade corridor through ASEAN, coupled with Japanese and other countries investments point to that.

There are huge trade corridors which are planned.

Excuse me of being skeptical we have been hearing this about India for the umptieth time for the past 10 years. That India is about to turn the corner on industry this or that. I will believe it when i see it. So far there is no evidence of that and it seems that the lower end manufactures leaving China is heading for countries like Vietnam, Philipinnes, Cambodia and even Bangladesh but very few goes to India. It looks like that India will miss the boat again. And with the coming crisis for most of the developed economies the export led model of growth is nearing its end. That's the problem that China is facing right now as their foreign customers are scaling back on consumption factories are getting less and less orders. And India is going to start a manufacturing revolution now ? Who are you going to sell to ? Who is going to come and invest ?

India's current economic model is a model based on services and consumption very much the same as in the US and UK. The problem is that a model like that leads to massive trade and current account deficits that will eventually lead to a economic and currency crisis. India during the good times have been borrowing a lot in foreign currencies primarily in USD and is now facing massive debt repayments. India's foreign debt since 2011 has increased about 30% nominally as the result of the INR's fall. India is a disaster waiting to happen. Very much the same as with the ASEAN nations during the 1990's. In the coming period India's economy will continue to slow as a result of the tightning monetary policies of the RBI.

 

[Hellraiser007]

Excuse me of being skeptical we have been hearing this about India for the umptieth time for the past 10 years. That India is about to turn the corner on industry this or that. I will believe it when i see it. So far there is no evidence of that and it seems that the lower end manufactures leaving China is heading for countries like Vietnam, Philipinnes, Cambodia and even Bangladesh but very few goes to India. It looks like that India will miss the boat again. And with the coming crisis for most of the developed economies the export led model of growth is nearing its end. That's the problem that China is facing right now as their foreign customers are scaling back on consumption factories are getting less and less orders. And India is going to start a manufacturing revolution now ? Who are you going to sell to ? Who is going to come and invest ?

India's current economic model is a model based on services and consumption very much the same as in the US and UK. The problem is that a model like that leads to massive trade and current account deficits that will eventually lead to a economic and currency crisis. India during the good times have been borrowing a lot in foreign currencies primarily in USD and is now facing massive debt repayments. India's foreign debt since 2011 has increased about 30% nominally as the result of the INR's fall. India is a disaster waiting to happen. Very much the same as with the ASEAN nations during the 1990's. In the coming period India's economy will continue to slow as a result of the tightning monetary policies of the RBI.

Domestic consumption based economy is a good model. India is not tightening the monetary funds right now, India is doing the reverse of what Chinese did, we have well established consumer base and we are going for self reliance in manufacturing, and we have the potential to export also.

 

[A1Kaid]

The fact that India is already losing steam already is a troubling sign for the Indian economy as a whole, they haven't even been able to complete a decade of strong economic growth, but were close to doing so. Indian economy is currently in stagflation mode which really harms economic growth in by reducing GDP, increasing unemployment, bolstering inflation, currency depreciation, and many other ways. There are still hundreds of millions of citizens India needs to bring into the low middle class, but considering the direction their economy is projected to head many of them will be left stranded in poverty.

 

[idune]

To indian members, what is the situation in realestate market in major cities and in car sales figure?

 

[Truth Finder]

Global investment bank Goldman Sachs has downgraded India to "underweight" saying growth recovery remains elusive.

"Recent activity data in the second quarter of 2013 has been sluggish with no signs of a pick-up in investment demand... Against a backdrop of lower growth, tighter liquidity and rising macro vulnerabilities, we downgrade India to underweight," Goldman Sachs said in a statement.

The investment bank had earlier revised its GDP forecasts for India down to 6 per cent from 6.4 per cent for the current fiscal year citing challenging external funding environment and a weaker-than-expected pick up in the investment cycle.

Goldman said a high current account deficit is a key vulnerability for India. India's CAD has risen from 1 per cent of GDP in FY07 to 4.8 per cent in FY13. The primary driver of the current account deficit is oil imports and, given their demand inelasticity, the level of the current account may not change significantly in coming years, Goldman said.

Rising CAD has put sharp pressure on the Indian rupee, which is trading near a record low hit on July 8.

Goldman said the pressure on the rupee will likely continue, if US rates continue to move higher and capital flows dry-up or potentially reverse thereby putting pressure on the current account.

"Our forecast for the dollar-rupee remains at 60 for the year but we expect continued weakness to 65 through 2016. The rupee remains inexpensive relative to our fair value estimate of dollar-rupee 65 which also suggests the currency can continue to weaken," the investment bank said.

Rates may rise:

The Reserve Bank may keep liquidity tighter for longer to stabilize the currency, Goldman said. The RBI has also recently announced a number of measures to tighten rupee liquidity in order to curb rupee weakness. These measures, in effect, constitute a shift in monetary stance from pause to tightening, Goldman said.

"We even think that there is a greater probability of the RBI keeping liquidity tight even beyond 6 months, and hiking policy rates as well, rather than cutting them," the investment bank said.

Goldman Sachs downgrades India, says rupee can hit 65 to dollar - NDTVProfit.com

Report incorrect. India is not downgraded but Indian private companies.

India is the second fastest growing trillion dollar economy.

 

[East Asia United]

Yes India definitely will, it just got doubled its GDP from 1 Trillion to 2 Trillion in a span of 5 years and is about to grow more than last year.
Some people take pride on other countries achievements and ignore their own ......



GOI is increasing the FDI cap from 21% to 49%. In the long term this devaluation will benefit India. India wants to take advantage of its human resources.




China's advantage is producing goods cheaply, the moment some other country produces cheaper than china you people will loose that advantage. This scenario will happen this decade.

India's GDP is $1.824 trillion as of 2012. It was $1.152 trillion in 2007.

This is a 58% increase, not a 100% one. Nice try though.

Also, it would be good for you to know that India's GDP may actually decrease in 2013.

Report incorrect. India is not downgraded but Indian private companies.

India is the second fastest growing trillion dollar economy.

Really? Indian GDP won't even increase in 2013. The IMF is estimating a decrease of $20 billion.

 

[Truth Finder]

No worries, India will quintuple GDP twice by 2030 to have the largest economy in the world (actually if India has a GDP 18x larger in 2030 it wouldn't even be close to the 2nd largest economy, let alone the 3rd but you get my point).

Isn't this what we have been told since 2006?

Yes. Understand economic fundamentals. In 2006, Indian GDP was $800 billion. What's now?? It's nothing less than a miracle. Our age has't even started now.

 

[Hellraiser007]

India's GDP is $1.824 trillion as of 2012. It was $1.152 trillion in 2007.

This is a 58% increase, not a 100% one. Nice try though.

Also, it would be good for you to know that India's GDP may actually decrease in 2013.



Really? Indian GDP won't even increase in 2013. The IMF is estimating a decrease of $20 billion.

As I said earlier rupee depreciation against dollar may decrease the GDP but the Manufacturing base and trade corridors we are getting will benefit us and in the longterm will boost our economy.

Form where you are getting these stats and dubious claims .....

Yes. Understand economic fundamentals. In 2006, Indian GDP was $800 billion. What's now?? It's nothing less than a miracle. Our age has't even started now.

That guy do not know anything except comparing China which is not his country with India. Leave that soul.

 

[Truth Finder]

India's GDP is $1.824 trillion as of 2012. It was $1.152 trillion in 2007.

This is a 58% increase, not a 100% one. Nice try though.

Also, it would be good for you to know that India's GDP may actually decrease in 2013.

You are counting $gdp on every day basis. Then I will take the exchange rate of march'12, April'13 etc. It's actually counted on long term average basis. India's INR gdp is 114 trillion+. And it's average exchange rate is less than 57@$. Hence, $2 trillion.

Should we now start talking about China's economic outlook and present economic mayhem??

 

[Truth Finder]

That guy do not know anything except comparing China which is not his country with India. Leave that soul.

Then I will compare China and Japan's GDP of 1995.
Japan= $5 trillion. China=$300 billion.
Ignorant chinese trolls.