GURUNOMICS

With the announcement of increased repo and reverse repo rate and expected average inflation rate from 5.5 % p.a. to around 7.5 % ,RBI have taken a short term major to check the mounting pressure of inflation on Indian economy. The situation is going to be much more difficult in ensuing economical year. As far as inflation is concern it is about to stabilise itself in double digit growth i.e. 12-15 %.
Yes it will create havoc in economy of India. This is just the beginning of the melodrama. Let me explain one by one. With possible delay of Monsoon ,entire Kharip crop is in danger. Means it will affect directly at least 70% of Indian population. Mine prediction of possible late arrival of Monsoon is based on the common sense. As last year have received shower up to the month of November, leading to the destruction of Rabi crops, such as Onion, Grapes. The current inflation is the outcome of recent past. Again to add the worries of common man, unlikely movement of deregulation of fuel prices will create disaster indirectly. As crude oil prices will most likely to shoot up beyond 110$/barrel, the increased import bill will create hole in to the pocket of govt oil companies. Which as a routine practice Govt will pay this bill but from whom and how is the real question.
As annual budgetary allocation for defence will increase by 10%, allocation for other nationally important programs such as ADHAR, and other routine expenses of Govt, there is little scope to expect any good news in upcoming budget. Govt. may increase the budgetary allocation for developmental programmes. With several IPO's of PSU's in pipeline, Govt will get some kitty in pocket but it will fall short of the need.Most expected IPO of BSNL is likely to postpone due to current issue of 2G scam. Govt. will prefer to go slow. In addition to PSU's there are several other organisations which will make their IPO this year. These IPO's are also going to suck the money from Indian market. (Yes it will get money from FII as well, but they will take it out very soon for lucrative returns.) Which may tumble the stock market ones again.( What happened after the IPO of Rel. Power ). So Stock market may remain stable around 22000 mark.
After taking due care Indian budget is always a deficit budget. So next year too that will be the case. So here is the real danger lies. As current situation of Indian banking is quite different. At one hand they will have to buy the Govt. securities in order to follow the RBI guidelines, and in other case they are facing shortage of funds, to meet the demand of advances (loans given to borrowers). With the proportion of advances the liabilities of the Indian bank are too short. So in this case they have acquire more and more fund from the customer too keep the current pace. That's why current increase in FD rates is likely to continue in next year as well. And investor may cherish the interest rate of 12 % as well. But on other side he will have to pay more interest on loans. So to handle the pressure of local & international market is a tough task. As Couple of Europian union's member countries can engulf in economical crises, leading to global slowdown at one hand and on the other the growing 'DESI' economy, will squiz the national economy. So get ready to drink 'cutting Chaay' at Rs.12 next year.