So the rupee’s crashed, the markets have wilted, bonds are down, andgold is back as an investment class – at least back home. But no one is willing to name the elephant in the room that’s caused all this ruin. Everybody is keen to mention the proximate causes for the collapse of confidence in the Indian economy – the panic measures announced byManmohan Singh, P Chidambaram and RBI Governor D Subbarao, among them – but not the real reason for it all: Sonianomics and the resultant Rahul-flation (inflation fuelled by mindless government spending that boost inflation). Confidence in an economy does not collapse due to bad economics alone; it is usually the result of wrong choices made by politicians over a prolonged period of time. A combo of disastrous political economy choices is the reason why India is staring down an abyss and the root cause is Sonia Gandhi. It is not the PM or the FM, for everyone knows they are not their own masters. The only thing one can blame them for is doing things they don’t really believe in. Yesterday’s twin crashes of the rupee and the markets were the result of the market’s final realisation that Sonianomics will dominate economic thinking over the next nine months before the next government is born. No sensible investor will wait till then to figure out whether we are going to get a bonny baby or Quasimodo after this incubation of political suspense. Foreign investors can head for the exits, but Indians can show their displeasure only by buying gold. That’s why gold breached Rs 31,000 per 10 gm, when it is ruling weak all over the world.
Posted on: Thu, 22 Aug 2013 02:20:44 +0000
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