Analysts used to say
that market was bit expensive therefore the current crash might be an opportunity
to invest more in equities. The market today in INDIA has shown a similar trend
by recovering 400 points, the next-day of the crash. The rout in China might
make INDIA a beneficiary in terms of receiving capital because it is the
fastest growing economy with sound fiscal and monetary conditions. Capital flight
from one country to the other also takes time. Capital will flow in. The same
trend also supports the above point that INDIA will be at the capital receiving
end. In the same line the expected delay in increase in US rates due to below
target inflation and the slowdown in China will also save INDIA from capital
flight. We might expect it to be the major recipient of capital of the current
global slowdown US, Europe, Japan and now China. INDIA’s story is based on the
domestic consumption, insulated from slowdown in exports; therefore we can
expect it to be relatively stable. The
whole argument between Keynes and Pigou was about the self-correction feature
of the market-mechanism. Keynes said deviation from full-employment might be corrected
by government expenditure. However, Pigou said lower prices will help the
economy achieve demand and full-employment, again. In China both monetary and
fiscal policy is under the communist regime. Attempt to restore growth might
work against the market-mechanism. More money and wage inflation may erode
economy’s competitiveness...
No comments:
Post a Comment