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How`s Business (Sep 3 - Sep 10)
By M K Venu, Business Editor, Zee News
Good luck, Mr Prime Minister
In these economically depressing times the media is desperately looking for silver linings that do not exist. The Cabinet reshuffle last weekend by Atal Behari Vajpayee was billed as an event to behold, especially after an utterly listless and scandal prone period for the NDA since March this year. The media almost made out that Vajpayee, infused with some political Viagra, would turn the economy around, send a strong message in favour of economic reforms and reward ministers who were competent and carry forward the spirit of reforms. Others, who did not perform, would be punished.
Finally Vajpayee, they said, had begun to assert himself.
The actual Cabinet reshuffle and expansion, however, did not inspire much anyway.
The irony of it all was that Minister for Disinvestment, Arun Shourie, was elevated to the Cabinet rank for "good work done on public sector privatisation". And that too on a day when Singapore Airlines formally wrote to him that they were walking out of the only bid received for the sale of management stake in Air India! The other bad news on the day of the much awaited Cabinet make-over was that exports in the first quarter had registered a negative growth of 2 per cent. The Commerce ministry`s modest target for the year is 12 per cent growth in dollar terms!
So, Vajpayee hopes to revive the economy and push through reforms by simply shuffling a few jokers in the pack. Good luck, Mr Prime Minister. The Dollar Dread
The US Dollar, which seemed so invincible until six months ago, is suddenly showing signs of continuing weakness. Economists and forex experts argue that the dollar has had too good a run for a long time and even future productivity gains the US economy might make relative to other developed economies like Europe and Japan has been more than factored into the Dollar`s rise so far.
So, this implies the dollar will only move southward. There is a lot of nervousness over the manner in which the correction takes place in the Dollar`s value vis-a-vis other currencies. If the correction is smooth, then it is good for the world economy. However, any dramatic fall in the Dollar`s value could shave off global wealth substantially. This is mainly because foreign investors, including governments of most developed and developing economies, have invested $42,000 billion in US market instruments, mainly treasury bills. A precipitate fall in the Dollar’s value could trigger an outflow of capital from the US and cause a crisis of gigantic proportions for the rest of the world.
Some US economists have already come out with Cassandra like predictions about how the first great depression the United States came in circumstances that were similar.
The two common parameters being cited are high current account deficit and virtually zero savings rate. Even prior to the great depression the savings rate had plunged to near zero.
The only silver lining so far is that even if the US economy does badly in terms of productivity we have other developed economies like Japan and EU doing even worse. That perhaps should lend some stability to the dollar.
New look PMO?
In what appears to be more than a mere coincidence, the new man in the PMO to politically drive contentious economic reform measures will be Minister of State for Planning, Vijay Goel, a fierce Vajpayee loyalist from old Delhi.
What is indeed interesting is that Vijay Goel will coordinate his effort at the bureaucratic level with none other than the phoenix-from-ashes Mr. N K Singh. N K Singh lost his job post tehelka and the stock scam, which left the PMO bruised beyond recognition.
Of late, N.K.Singh has become pro active again and has been holding meetings with economists on how to revive the ailing economy. He apparently has an implicit mandate from the PMO. After all, the Prime Minister is also the Chairman of the Planning Commission. So watch out for N.K.Singh’s next move! Air India Blues
After Singapore Airlines has withdrawn from its partnership with the Tatas to bid for a controlling stake in Air India, the government has sent word to Ratan Tata that he should not lose heart and continue with the bidding process.
But the Tatas are aware of their shortcoming. They just don’t have the cash to pump into Air India on their own, what with some of their flagship companies like Telco in the red already. So the Tatas are trying to sound out other partners like Air France. But it is not clear whether the Tatas can change partners mid stream.
The disinvestment guidelines are apparently silent on this issue. But technically the original bid put in was by Tata-SIA combine. Is it possible that the Tatas buy off the company and later bring in a partner as per the guidelines? Arun Shourie’s legal mind should figure this out soon!
Author`s e-mail ID is venumk@zeenetwork.com
Illustrations by Sharad Sharma
Good luck, Mr Prime Minister
In these economically depressing times the media is desperately looking for silver linings that do not exist. The Cabinet reshuffle last weekend by Atal Behari Vajpayee was billed as an event to behold, especially after an utterly listless and scandal prone period for the NDA since March this year. The media almost made out that Vajpayee, infused with some political Viagra, would turn the economy around, send a strong message in favour of economic reforms and reward ministers who were competent and carry forward the spirit of reforms. Others, who did not perform, would be punished.
Finally Vajpayee, they said, had begun to assert himself.
The actual Cabinet reshuffle and expansion, however, did not inspire much anyway.
The irony of it all was that Minister for Disinvestment, Arun Shourie, was elevated to the Cabinet rank for "good work done on public sector privatisation". And that too on a day when Singapore Airlines formally wrote to him that they were walking out of the only bid received for the sale of management stake in Air India! The other bad news on the day of the much awaited Cabinet make-over was that exports in the first quarter had registered a negative growth of 2 per cent. The Commerce ministry`s modest target for the year is 12 per cent growth in dollar terms!
So, Vajpayee hopes to revive the economy and push through reforms by simply shuffling a few jokers in the pack. Good luck, Mr Prime Minister. The Dollar Dread
The US Dollar, which seemed so invincible until six months ago, is suddenly showing signs of continuing weakness. Economists and forex experts argue that the dollar has had too good a run for a long time and even future productivity gains the US economy might make relative to other developed economies like Europe and Japan has been more than factored into the Dollar`s rise so far.
So, this implies the dollar will only move southward. There is a lot of nervousness over the manner in which the correction takes place in the Dollar`s value vis-a-vis other currencies. If the correction is smooth, then it is good for the world economy. However, any dramatic fall in the Dollar`s value could shave off global wealth substantially. This is mainly because foreign investors, including governments of most developed and developing economies, have invested $42,000 billion in US market instruments, mainly treasury bills. A precipitate fall in the Dollar’s value could trigger an outflow of capital from the US and cause a crisis of gigantic proportions for the rest of the world.
Some US economists have already come out with Cassandra like predictions about how the first great depression the United States came in circumstances that were similar.
The two common parameters being cited are high current account deficit and virtually zero savings rate. Even prior to the great depression the savings rate had plunged to near zero.
The only silver lining so far is that even if the US economy does badly in terms of productivity we have other developed economies like Japan and EU doing even worse. That perhaps should lend some stability to the dollar.
New look PMO?
In what appears to be more than a mere coincidence, the new man in the PMO to politically drive contentious economic reform measures will be Minister of State for Planning, Vijay Goel, a fierce Vajpayee loyalist from old Delhi.
What is indeed interesting is that Vijay Goel will coordinate his effort at the bureaucratic level with none other than the phoenix-from-ashes Mr. N K Singh. N K Singh lost his job post tehelka and the stock scam, which left the PMO bruised beyond recognition.
Of late, N.K.Singh has become pro active again and has been holding meetings with economists on how to revive the ailing economy. He apparently has an implicit mandate from the PMO. After all, the Prime Minister is also the Chairman of the Planning Commission. So watch out for N.K.Singh’s next move! Air India Blues
After Singapore Airlines has withdrawn from its partnership with the Tatas to bid for a controlling stake in Air India, the government has sent word to Ratan Tata that he should not lose heart and continue with the bidding process.
But the Tatas are aware of their shortcoming. They just don’t have the cash to pump into Air India on their own, what with some of their flagship companies like Telco in the red already. So the Tatas are trying to sound out other partners like Air France. But it is not clear whether the Tatas can change partners mid stream.
The disinvestment guidelines are apparently silent on this issue. But technically the original bid put in was by Tata-SIA combine. Is it possible that the Tatas buy off the company and later bring in a partner as per the guidelines? Arun Shourie’s legal mind should figure this out soon!
Author`s e-mail ID is venumk@zeenetwork.com
Illustrations by Sharad Sharma