India’s Forex Reserves Are All BORROWED Unlike China Which Are EARNED

Sanjay Reddy an Economist at the New School for Social Research, New York writes on a very important which is not often analyzed… India’s dependence on external financial confidence makes it fundamentally unlike China, as well as Korea, Taiwan, Singapore and other successful economies of east and southeast Asia. It makes it more akin to countries such as Brazil, Indonesia, South Africa or Turkey (collectively dubbed, with India, as the “Fragile Five” some years ago). China and other countries like it have pursued a policy that is export-oriented and manufacturing-centered, thereby generally covering their import bill and building up reserves over time  In contrast, the fragile countries depend on the bets placed by foreign investors on their futures because they have failed to develop into successful exporting countries, at least on the required scale(that’s why our foreign exchange reserves can drain more quickly .Countries in this situation may grow but face continuous threats that a downturn in foreign confidence will halt their progress.

Get Our Activist Investing Case Study!

Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to read anywhere! Sign up below!

We respect your email privacy

Q2 hedge fund letters, conference, scoops etc

Glavo / Pixabay

Efforts to please foreign investors with friendly policies, and robust economic growth based on domestic economic confidence can keep funds flowing in as long as the tide is favorable. Yet, these are not enough when the tide turns as a result of global factors. The most important such factor at present is the expected end of the “quantitative easing” policies that have caused cheap money to slosh around the globe, and financed much lending to and investment in the fast-growing emerging countries (of course, rising oil prices and other factors, including fears of increasing protectionism in the United States, also play a role). The export-oriented formula, “Make in India,” offers a correct prescription for India, as did Raghuram Rajan’s compatible import-substituting variant, “Make for India”. But the inadequate realization of India’s productive potential is the ultimate basis of the ongoing vulnerability.

Conclusion

India's failure to become a broad-based manufacturing exporter owes less to prices than to everything else that successful countries such as China do well and that India does not—adequate infrastructure, reliable and inexpensive power, an adequately healthy and educated workforce and many others. India’s remarkable success in global services exports masks this more basic failure of economic capabilities and social inclusion. Advice to the RBI and to the government to do nothing and allow the Rupee to slide confuses coping and cure. No one can predict if or when the fall of the Rupee will continue. What is clear is that it is the symptom and not the disease, and this must be not merely diagnosed but adequately treated.

Article by Ritesh Jain, World Out Of Whack

LEAVE A COMMENT


Saved Articles
X
TextTExtLInkTextTExtLInk

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Congrats! Are you a smart person?

We have an exclusive targeted for being a sophisticated and loyal reader.

Sign up for ValueWalkPremium today and get our exclusive content for 35% off.

Use coupon code vip19 or click on the button below

Limited time offer only ENDS 12/31/2019 or after next 25 subscribers take advantage whichever comes first – please do not share this discount with others

 

0