M.K Venu had precisely identified the the devil hidden in the relaxed liquidity conditions offered by the Federal Reserve. Monetary policy of the Federal Reserve System is based partially on the theory that it is best overall to expand or contract the money supply as economic conditions change. Thus the easy liquidity conditions will get reversed any time entailing repayment of dollar debts at the monumental depreciated rate will be a herculean task which will dismantle our economy’s all endeavours for resurgence into the accelerated global trade regime. We have to bring more products to the export outlet, enhance manufacturing for exports, promote value addition in all sectors for export production wherein we have compete with all most all Asian nations in thrust areas like Apparels, Leather shoes and Garments etc Handicrafts, etc. Sometime export production entails import of plant and machinery for which we have to shell out foreign exchange. Import of materials for value addition and export is viable only if we reap a high level of export proceeds to offset the foreign exchange used up. Indian economy is really sailing through troubled water upon entangling into an eternal debt wherein USD 172 billion is becoming due for repayment by the 2013-14 fiscal. It is evidently clear that the economy is unable to contain the rising balance of trade which is mainly correlated to the ascending level of foreign indebtedness, repayment of loans , both interest and principal. Of course foreign direct investment and portfolio investment also escalate our foreign debt. Ultimately cad gets just filed up with investment from overseas, without any push for growth, it is actually widening this deficit. During 2011-12 Overseas repatriated USD 26 billion by way of interest, royalty or dividend despite the amount of FDI inflow was only to the tune of USD 22 billion!! Pls see this as comments in Online edition of THE HINDU.....
Posted on: Sat, 29 Jun 2013 07:48:59 +0000
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