Politicians have mismanaged Indian economy for the last 50 years: Marc Faber
NEW DELHI: India has pursued poor economic policies and the politicians have mismanaged economy for the last 50 years, said Swiss investor and editor of the ‘Gloom Boom & Doom’ report Marc Faber to ET Now. “You cannot blame the Reserve Bank of India entirely for the current situation,” he said. “I doubt if India has the political will to face the music,” he added.
According to Faber, India needs to take some tough decisions to pull itself out of the slowdown. “India is underperforming significantly in dollar terms,” he said. While attacks on Syria could lead to higher crude oil prices, Faber said that the pain of higher oil prices is magnified by rupee weakness in India.
Asked about the Indian stock markets, Faber said, “The bearish trend in Indian equities may last longer.” Indian stocks have fallen because of rupee weakness, he added. Faber is of the opinion that one is ‘approaching a buying range for Indian equities’.
On the idea of investing in gold, Faber said that he does not advise investors to get into the precious metal. “Gold isn’t a very good investment option for a long period of time,” he told ET Now.
Commenting on the emerging market economies, Faber said that they are showing widely diverging performances. While he doesn’t expect the US Federal Reserve to go in for any meaningful taper of the Quantitative Easing, Faber said that US bond markets will rally substantially if it happens.
Over 6 per cent slide in the value of the S&P BSE Sensex so far in 2013, as per data till September 3, is making analysts speculate the base case – or what is called the fundamental value of the index.
So far in the year, the index was largely weighed by a host of factors including uncertain macro-economic environment, depreciating rupee, concerns over US Federal Reserve’s winding down of its $85-billion bond-buying program and geo-political concerns.
Estimates on Sensex are mixed and analysts expect the benchmark index to move in a 5000-point range, from 18000 up to 23000. Morgan Stanley is of the view that earnings growth of Sensex companies is likely to take a hit in FY14 and FY15.Meanwhile, while acknowledging that the country faces challenges, Raghuram Rajan, RBI Governor on Wednesday assured that Indian economy remains fundamentally strong. Addressing the media soon after taking charge at RBI, Rajan said, “This is not an easy time to take charge as RBI Governor.”
Rajan said that while the primary objective of the central bank remains monetary stability, inclusive growth & development and financial stability also form part of RBI’s role. “The financial markets are volatile, there is domestic uncertainty,” he said. “The central bank should never say never,” he added.
Several foreign brokerages including CLSA, Nomura, JP Morgan, and HSBC have cut growth estimates for India by up to 2% due to tightening financial conditions, slowing industrial production and increasing economic uncertainty.
Most of the brokerages now expect the country’s gross domestic product Indian economy to grow at 3.7% to 4.2% in the financial year 2013-14, a slash from earlier forecasts between 5% and 5.5%, after the country’s GDP grew at a four-year low of 4.4% in the first quarter, down from 4.8% in the January-March quarter. This is the third time several top brokerages are downgrading their GDP estimates this year.
Analysts feel GDP growth in second quarter slowed more than expected and things are likely to get worse in the third quarter when government spending, which maintained a blistering pace, will probably slow down as concerns about fiscal slippage increase. They say the benefits of good monsoon are likely to be more than offset by the sharp depreciation of the rupee.
