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Thursday, 3 December 2015


If I had a magic wand, I would have rescheduled ECB meet by a few days. Why? Our CPI inflation estimate for November will come by then. Definitely, it would be higher than 5%. So whatever increase 0.25% or 0.50%, we can just export it equally to both US and Europe (serious deserving candidates among so many contenders).  We will not have inflation and they will have it….. no stimulus, no interest rate hikes and then we can have our rate cuts. So growth growth everywhere……   really funny…. Wishful thinking can sometimes ease off the pressure.  

The Fed meet is regarded as a historic event scheduled to happen in the next 12 days. There is still no complete surety that US economy is back on track because of mixed signals. But they are sure of one thing. This spoon feeding has to stop. The sooner the better. If only the US regulators had put their house in order 10-12 years ago and tightened their financial system, this mess could have been avoided.  As regards EU, problems started the day they didn’t follow their own charter and admitted members not fulfilling the laid out eligibility criteria.

For us life will go on…  we already have green shoots. By the same time next year we will have flowers on them. Now flowers can be of two types. One real flowers and their fragrance reach even the rating agencies and they upgrade us. In other words we are on solid ground with fiscal deficit & CAD still in control, steady IIP and core sector growth and of course banking sector in better shape. Now the other scenario is, if crude prices take the upward trajectory, we will have higher CAD & fiscal deficit, high inflation, raw material input prices will increase affecting corporate profits and industrial growth and we have simulated or hybrid flowers spreading obscurity and uncertainty.

So in short, instead of thinking about the FED and ECB, we should be worried about the OPEC meet on Friday. WTI crude oil has fallen below $ 40 yesterday and if the OPEC members decide that they have had enough and cut production. We are in real trouble as crude oil constitutes 70-80% of our import bill.  So wishful thinking will not work here as crude prices will go up sooner or later and we should brace ourselves to face this eventuality. Alas! Americans are in better position, they have oil to their heart’s content and no inflation. 

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