Comments on: The Foolishness of the Indian Finance Ministry http://www.metlin.org/2007/10/03/the-foolishness-of-the-indian-finance-ministry/ Would you like fries with that? Sat, 04 Sep 2010 04:44:38 -0700 http://wordpress.org/?v=abc hourly 1 By: metlin http://www.metlin.org/2007/10/03/the-foolishness-of-the-indian-finance-ministry/comment-page-1/#comment-11362 metlin Thu, 04 Oct 2007 03:43:51 +0000 http://www.metlin.org/2007/10/03/the-foolishness-of-the-indian-finance-ministry/#comment-11362 You're right in that FIIs are probably aware of the political posturing in India. And for all that the left threaten, they have more bark than bite. Not that I ever recall them having anything more. They aren't that doing that good even in states that they once had a good amount of clout (West Bengal, Kerala). You are right about the stock market indices, but I am worried about the fact that a lot of money is being pumped into retail and that people may be heading towards a bubble in that area. Secondly, while Indian stock market indices may be going up, there is also a good amount of percentage growth (i.e. the rate at which is growing, not just in terms of, "Ooh! 18,000 points"). Now, what about those FIIs who are in it for the short haul? I am more worried that when these guys pull out (once the USD stabilizes), it will affect the stock market badly. So, my take is that we need to pump these investments towards building infrastructures (like you said, construction etc) and improving our manufacturing facilities, rather than in paying back the World Bank etc. right now. This is temporary investment that's a function of the US market's liquidity and needs to be treated as such. You’re right in that FIIs are probably aware of the political posturing in India. And for all that the left threaten, they have more bark than bite. Not that I ever recall them having anything more. They aren’t that doing that good even in states that they once had a good amount of clout (West Bengal, Kerala).

You are right about the stock market indices, but I am worried about the fact that a lot of money is being pumped into retail and that people may be heading towards a bubble in that area. Secondly, while Indian stock market indices may be going up, there is also a good amount of percentage growth (i.e. the rate at which is growing, not just in terms of, “Ooh! 18,000 points”).

Now, what about those FIIs who are in it for the short haul? I am more worried that when these guys pull out (once the USD stabilizes), it will affect the stock market badly.

So, my take is that we need to pump these investments towards building infrastructures (like you said, construction etc) and improving our manufacturing facilities, rather than in paying back the World Bank etc. right now. This is temporary investment that’s a function of the US market’s liquidity and needs to be treated as such.

]]> By: PD http://www.metlin.org/2007/10/03/the-foolishness-of-the-indian-finance-ministry/comment-page-1/#comment-11360 PD Thu, 04 Oct 2007 01:25:18 +0000 http://www.metlin.org/2007/10/03/the-foolishness-of-the-indian-finance-ministry/#comment-11360 I think FIIs have wised up to the fact that while there is a lot of political posturing in India, neither the BJP nor the UPA will move away from reforms, even if they don't happen as fast as they'd like (the Left Front, you'll notice, is anti-reform when it's NOT in power -- and they're never going to come to power in New Delhi). Besides, I'd say those opinion pieces put too much weight on the stock market indices. IMHO indices are useful indicators but can also be products of what Greenspan famously called 'irrational exuberance', e.g. pre-dot com crash. In fact, the underlying growth in India's manufacturing, it's construction boom and nascent growth in retail and supply-chain would be what would make FIIs stay -- at least the ones who are in it for the long haul. I think FIIs have wised up to the fact that while there is a lot of political posturing in India, neither the BJP nor the UPA will move away from reforms, even if they don’t happen as fast as they’d like (the Left Front, you’ll notice, is anti-reform when it’s NOT in power — and they’re never going to come to power in New Delhi).

Besides, I’d say those opinion pieces put too much weight on the stock market indices. IMHO indices are useful indicators but can also be products of what Greenspan famously called ‘irrational exuberance’, e.g. pre-dot com crash. In fact, the underlying growth in India’s manufacturing, it’s construction boom and nascent growth in retail and supply-chain would be what would make FIIs stay — at least the ones who are in it for the long haul.

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