-- Posted Thursday, 3 March 2011 | | Source: GoldSeek.com
There is nothing much to comment on the budget. The man on the street is only concerned over rising food prices and rising rentals in cities. Tax proposals are fine. I am only concerned over the government expenses. We have the general elections in two years time in 2013. The Congress governments have in the past given free loans to farmer before the elections. These free loans in fact never reach the needy farmer and instead are pocketed away by rich farmers and middle men. Why do farmers commit suicide in India. It’s an apathy. My sense is that current UPA government will once again announce some loan waiver scheme and other voter friendly but neo nation policies over the next two years. As a result the budget deficit will not be controlled and/or rise.
Global crude oil prices will be the key for India. Petrol prices have been continuously been rising. Diesel has been untouched. Middle East tensions are not yet over.
PETROL PRICE HIKES SINCE DE CONTROL |
| Rs.paisa |
26TH JUNE 2010 | 3.50 |
21ST SEPTEMBER 2010 | 0.27 |
17TH OCTOBER, 2010 | 0.72 |
9TH NOVEMBER 2010 | 0.32 |
16TH DECEMBER 2010 | 2.96 |
15TH JANUARY 2011 | 2.52 |
It remains to be seen how long will diesel and kerosene not be raised. RBI’s dilemma will be growth versus inflation. If key prices of key essential commodities rise then one can expect another half a percent further interest rate hike this year. Sustained global crude oil prices (if any) this year will be negative for global growth and Indian exports.
EFFECT ON RUPEE
Crude oil prices will be the key for the rupee. The budget has done enough to ensure continued foreign inflows (direct as portfolio flows) into the country. We expect the rupee to appreciate to Rs.41.00 by March 2011 against the US dollar. The only risk to my bullish view is sustained crude oil prices over $120 which can result in the rupee weakening to Rs.47.00 and Rs.51.00 for a short term before the next move lower to Rs.41.0.
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-- Posted Thursday, 3 March 2011 | Digg This Article
| Source: GoldSeek.com
