Political
turmoil in India coupled with alarming rise in oil prices, FIIs selling along with the decrease in other
asian
currencies has led to the rupee fall against the
dollar which is a three year
low of Rs 46.75 to the dollar. The stock market is very volatile. Sensex is
going low by some 250 points and Nifty is also low. All the indexes are low,
whether it is infotech, automobile industry or any other sector.
Suddenly
the Foreign Institutional Investors have become the sellers and in this process
they have started keeping a portion of the rupee proceeds for future purchases
which has lead to this depreciation. The
rupee has depreciated by 5% against the dollar and by 11%against Euro and hence
Indian inflation is higher than US or European inflation.
Even
the world crude prices also record a high of USD 75.40 a barrel in New York
on Thursday leading to some tensions going over North
Korea and Iran. Flaring up the crude oil prices have allowed
the government to ask the domestic co. to
again revise their oil prices. Private players such as Reliance and
Essar have suspended their for now. But the rising up of the prices will lead
to more market borrowings, misallocating the scarce
resources, increase
interest rates and and choke the growth.
Indian
markets needs to mature up which will lead to competitive prices, increased
efficiency, good use of scarce resources and improved productivity. Indian
economy needs to be geared up especially in terms of cutting bureaucracy and
allowing privatisation otherwise it would be very difficult to sustain the
economic growth.