The Indian govt is trying to build a large war chest of foreign exchange in order to counter the expected taper of the US Federal Reserve's Quantitative Easing program:
http://economictimes.indiatimes.com/markets/forex/India-to-build-300-billion-forex-chest-to-counter-a-slimmer-QE-figure/articleshow/24558424.cms
Defend the borders? Who cares - there's no votes in that. Stop terrorism? Who cares - there's no votes in that. Oh, but the exchange rate value of the rupee affects bread-and-butter things like the price of fuel and inflation in general. So of course the UPA govt will put maximum priority on defending the rupee, in order to defend itself. When it comes to defending their own political turf, the UPA will show a maximalist aggressive policy on market intervention.
Can it really work? In a sustained bear market, successive aggressive interventions by the govt will eventually erode that war chest. Furthermore, it remains to be seen whether foreign buyers would be stupid enough to be suckered into putting their money into buying bonds from a non-performing govt only interested in its own self-preservation.
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