Inflation high, foreign reserves dipping and Manmohan Singh moots private sector job reservations?
To a question on the contentious issue of reservations in the private sector, Singh indicated that a more far-reaching Mandalisation process may be in the offing. â€˜â€˜We do feel that opportunities for the scheduled castes, scheduled tribes, OBCs and similarly placed disadvantaged groups in the private sector has to be enlarged.â€™â€™[IE]
Inflation has shot up to over 8%. Foreign exchange reserves have fallen for the first time in several years. The rupee is sliding against the dollar for all the wrong reasons.
India’s foreign exchange reserves fell $1.37 billion to $117.52 billion in the week to August 27 as the central bank intervened to support a shaky rupee on the back of thinning foreign capital inflows and a rising dollar.
Data from the central bank on Saturday showed foreign exchange reserves fell for the third straight week and analysts say it could drop further as the Reserve Bank of India digs deeper to bolster the rupee and cushion the economy from the high prices of crude oil, India’s biggest import.
Foreign exchange reserves hit a record $121.1 billion in mid-July, but have shrunk steadily as the central bank stepped in to support the local currency, which is partially convertible.
The rupee, has lost 6 percent since a 51-month high in early April, hit by rising U.S.interest rates, spiralling oil prices and the election victory of a communist-backed, Congress-led coalition in May.
The shock election outcome spooked foreign investors, who had pumped a record of nearly $8 billion into Indian assets in 2003. But foreign capital inflows have dwindled since May, weighing on the rupee as investors fret over India’s growth prospects due to insufficient rainfall. [Reuters]
Amid signs such as this, one would expect India’s economist Prime Minister to get serious about tackling the potential woes ahead. Instead of calming the nerves of the industry, the good economist just defended the lunatic policy of job quotas that his non-economist colleagues are attempting to foist on the Indian economy.
Even without responsible-looking economists in charge, India’s foreign reserves and economic growth rates were happily rising even during the stand-off with Pakistan. One line of reasoning held that peace with Pakistan (at any cost) was essential for India’s prosperity. Yet in the absence of travel advisories, doomsday headlines and frequent visits by Richard Armitage, it took such things as the loony Left’s pronouncements, truckers’ strikes, failed monsoons, and rising oil prices for economic indicators to register negatives. Quite obviously, Manmohan Singh has to to tackle these growth inhibitors head on. If he allows the political steamroller of job-reservations to gain momentum instead, he risks taking the Indian economy back to the place he himself rescued from once. Come to think of it, that seems like a long while ago.