Cautiously Optimistic - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 22 September 2012
Cautiously Optimistic A  A  A

- By Asad Dossani, Author, The Lucrative Derivative Report

Asad Dossani
For months on end, we have talked about policy paralysis that was hurting the Indian economy. In fact, the vast majority of the problems facing the Indian economy have been attributed to the government that does not do anything. Ask anyone today why inflation is high, why our growth rate is falling, and they will blame the government.

Last week, the government announced a series of economic reforms designed to boost investment and growth. One of the key elements was the opening up of the retail sector to foreign investors. This one is controversial too, due to the negative impact on small shopkeepers. The last time the government announced such a measure; they were forced to quickly backtrack due to political opposition.


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The new set of reforms has been cheered by equity markets, by investors, and by economists. Many analysts claim that this will help to restore our growth. The markets especially had an extremely positive reaction, as the stock market soared and the rupee rose.

Though these reforms are a step in the right direction, there is still much to be done to on the policy front. Many additional economic reforms need to take place before we can really say that the government is doing all it can to improve the economy. Part of the reason we are so positively surprised by these reforms is that we were expecting no reforms at all. It is easy to look good when expectations are at an all time low.

The real test of the government's ability to push through reforms is yet to come. There will be opposition to these reforms and a real temptation to backtrack as they did last time. Until there is actually a foreign retailer physically present in India, there is every possibility that these reforms can be revoked.

Despite the fact that there is a possibility of backtracking, and despite that the fact that many more reforms are needed, the reforms announced last week are still good news. They will have a positive impact on the economy. And so we should applaud these efforts. For now, let's be cautiously optimistic. At least until the next set of reforms, or until the next backtrack.

is a financial analyst and columnist. He actively trades his own and others' funds, investing primarily in currency, commodity, and stock index derivative products. Prior to this, he worked at Deutsche Bank as an analyst in the FX derivatives team. He is a graduate of the London School of Economics. Asad is a keen observer of macroeconomic trends and their effects on global financial markets. He is deeply passionate about educating investors, and encouraging individuals to take part in and profit from financial markets. To put it colloquially, he wishes to take Wall Street products and turn them into Main Street profits!

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