Every investor looks grim now as the Sensex started its free fall on Friday. Sensex was down by almost 280 points when writing this article on Monday too. It has lost 1000 points in two days, all out of the panic from foreign investors about India's state of economy. The rupee also touched its all-time low reaching just under 62. There are various factors that could be said as reasons for this fear among investors including slower growth, inflation, corruption, falling rupee, widening current account deficit, etc.
So the investors are looking for safe havens like gold or the developed economies (e.g US) to better put their money rather in a slow growth, muddled state of economy.
Sectors like mining and manufacturing are also not gaining much from the depreciating currency as they are not performing well. It could have been a little relief for the whole economic scenario here if these sectors are doing better. Also, as India imports oil and computers in dollar dominated trade, the prices of these goods went up around 40% in last couple of years, in turn, pushing the prices essential goods across the board, ending up in higher inflation.
Raising interest rates by the RBI also didn't help much in containing the free fall of the rupee as it is considered as a 'late move'.
Meeting the current account deficit (exports-imports in negative) is also seems to be a humongous task in front of the government now, coupled with the slow growth in the range of 5%. Waning investors' confidence and falling currency should certainly be the top priority for the government to think about now. Experts think that it would be tough to contain if this situation falls into a vicious cycle.
Hope our economy will be back with a bang soon and our best wishes will always be there!
So the investors are looking for safe havens like gold or the developed economies (e.g US) to better put their money rather in a slow growth, muddled state of economy.
Sectors like mining and manufacturing are also not gaining much from the depreciating currency as they are not performing well. It could have been a little relief for the whole economic scenario here if these sectors are doing better. Also, as India imports oil and computers in dollar dominated trade, the prices of these goods went up around 40% in last couple of years, in turn, pushing the prices essential goods across the board, ending up in higher inflation.
Raising interest rates by the RBI also didn't help much in containing the free fall of the rupee as it is considered as a 'late move'.
Meeting the current account deficit (exports-imports in negative) is also seems to be a humongous task in front of the government now, coupled with the slow growth in the range of 5%. Waning investors' confidence and falling currency should certainly be the top priority for the government to think about now. Experts think that it would be tough to contain if this situation falls into a vicious cycle.
Hope our economy will be back with a bang soon and our best wishes will always be there!
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