Do we need silver lining when we like Gold?

Silver lining gave dark clouds and no rain?

Rupee on the downhill:

When the Banker’s bank in India assiduously avoided a cut in its CRR rates, playing over caution, Rupee made bold to venture into new lows (falling around 1.5% against the dollar) and plummeting to 58.77/78 against the Dollar. Another danger await us: tinkering with US monetary stimulus by Federal Reserve, would cascade into further erosion in dollar value. Appreciating Yen has further weakened Rupees strength. Rupee also might become q victim of carry trade unwind, as Rupee has become a pain in the neck for investors. It is not surprising that Rs 750 Cr moved out of India in the last two days.

Though there were inflows of around $ 3.6 billion during FY 2013-14, the pull out by FII was $ 3.5 billion. This has put tremendous pressure of the Rupee.  The cascading effect was dampening of sentiment in BSE, NIFTY.

Current a/c deficit:

The experts argue that the widening was due to concerns of high Current A/c deficit, widening trade deficit, which has already impacted the Rupee. India’s exports were $ 48.67 billion against India’s import of US $ 86.6 billlion.India’s reckless import of Crude Oil ($15.6 billion), non crude oil ($ 29.62 billion). This has created trade deficit. For the month of May alone, the deficit was $ 20.1 billion while it was $ 17.8 billion in April, 2013. The gap was $ 16.9 billion in the corresponding month of the previous year. Input imports, and machinery import has come down considerably as export units are not working to 60% of their capacities leaving an idle capacity of more than 40%.

Son-in-law status for Gold import:

Government treated Gem and Jewellery industry as a key growth oriented industry. The votaries of Gold import saw a gold lining. But it remained only as clouds fleeting away because of the strong wind!  This has resulted in massive availability of Gold with prices running above Rs 20,000/a sovereign. Gold import stood at a high of 89.7% to import figure of $ 8.4 billion. Many firms in the SEZ were importing gold and there are many instances when the gold imported instead of export found itself in the DTA. With abundant supply, and Rupee reeling and prices of land falling correspondingly, Gold prices rose steadily; this did not hurt the gold shops, as there were enough buyers as they felt Gold was the best asset to appreciate.  Purchasers thought we need to preserve wealth. Gold was the best option because of lavish appreciation. This logic was spread by the Gold merchants and government did nothing to dispel the impression.

The import of gold drained the Foreign Exchange Reserves. Only belatedly, the Government has woken from its slumber to declare that Gold imported should have a minimum 3% value addition and 5% value addition in gold and precious stone studded jewellery.

Reckless import; no balancing act:

Thanks to our policy of importing crude edible oil valued Rs 65,000 Cr, we have helped the South East Asian economies to substantially increase their exports. They have become large scale proucers of edible oil, and their economic growth of 40% comes from this oil sales. When the GoI distributes imported Palm oil through the Public distribution system by offering 25% subsidy to benefit 1 million stakeholders, are we not helping Philippines, Malaysia, Indonesia, god sent opportunity to revive their economic growth while putting down India’s domestic India, which receives rather ‘nil’ support from the Planning Commission to increase output of edible seed growth, enhance the area of edible sees sowing, getting better productivity.

Planning Rethinking:

 From 15% in the First Plan, we have descended to provide 5.4% in the 12^th Plan for the entire agriculture. The efficiency in the rationalizing of such actions need to be put to test by asking s simple question- have we forgot our foundations? The bench mark of our growth will lie in giving excessive importance to agriculture. We talk about Food Security, while we destroy the foundation of Agriculture that would provide Food. Farmers are as important as consumers, because without the farm output consumption will reach a zero end.