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Address investment deficit

The rupee, too, saw a significant fall, though it has fallen much more earlier.
A heady mix of foreign institutional investors relentlessly selling stocks (Rs 474.88 crore) on Monday and the collapse of the Chinese market by over seven per cent sent the Indian markets into a tailspin. The rupee, too, saw a significant fall, though it has fallen much more earlier. This is expected every time the Chinese market collapses as the FIIs are the first to scurry out of the emerging markets. However, they are expected to return sooner than later. Whilst there is no need to fret too much, it is necessary to note that India fared worse than her Asian peers because of weak domestic indices. The Nikkei India Manufacturing Purchase Managers’ Index contracted the sharpest in seven years at 49.1 in December compared to 50.3 in November. The IIP figures released earlier also showed a downward trend and new investments by the private sector were down 74 per cent in the October-December quarter.
The government has till now been unable to break this syndrome of negligible private sector investment, credit growth minus personal loans not picking up, infrastructure projects yet to take off, and banks burdened with non-performing assets. Exports have been falling for several quarters, endangering the future health of the current account deficit (CAD). The falling rupee, in line with the falling yuan, will help Indian exports compete with China. The government needs to take advantage of the global fall in oil and gas prices, commodities, etc. Unless it acts fast to tackle micro-level weaknesses they could become a drag on hitherto strong macro fundamentals like robust foreign exchange reserves, falling inflation and the CAD.
( Source : deccan chronicle )
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