Government borrowing under control - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Government borrowing under control

Sep 30, 2009

Interest rate sensitive sectors can breathe easy for now. The Indian government has indicated that its borrowing calendar for FY10 is unlikely to change a great deal. This was disclosed by a few finance ministry officials ahead of their meeting with the RBI to finalise the borrowing plans for the second half of the year. With rain gods playing truant till about the month of September, it was being feared that lower farm output might increase government borrowings, thus leading to further crowding out of private investments and also a possibility of rise in interest rates. But a late surge in monsoons has led to that fear abating significantly. Moreover, with domestic stock markets on a strong upward path, the government's divestment plans have received a big boost and this is further easing pressure on its borrowing program and consequently, the fiscal deficit. Nonetheless, we are still likely to end the fiscal with a deficit of 6.8% of GDP, one of the highest in recent years.

US dollar on the path of volatility
Continuing with the theme of record fiscal deficits, situation in the US is even worse than India. In fact, a weakening US dollar on account of the reckless money printing by the US Government and the record low interest rates is making the dollar an ideal currency to borrow and invest in other higher-yielding assets. In other words, the dollar is challenging the Yen's status of becoming the carry-trade currency of choice.

However, there is one fundamental difference here. Unlike the Yen, which is a much stronger currency on account of Japan running a trade surplus, the US dollar is fundamentally very weak and hence, could continue to fall sharply. This could lead to more people playing the dollar carry-trade and ultimately a point will be reached, where dollars would be absorbed faster than they are being created, thus leading to temporary reversal in the exchange rate. It looks like volatility is going to be the order of the day for the global reserve currency of choice.

Equitymaster requests your view! Post a comment on "Government borrowing under control". Click here!

  

More Views on News

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

ONGC to NMDC: Here are 5 Stocks Value Investors Should Closely Track (Views On News)

Nov 26, 2021

Before investing in value stocks, research the company and gain insight into why the market is discounting it.

Top 5 Stocks FIIs Bought and Sold Recently (Views On News)

Nov 25, 2021

FIIs have largely stayed on sidelines for the past few months, withdrawing money across emerging markets.

Everything to Know About the Upcoming Tega Industries IPO (Views On News)

Nov 27, 2021

Are you looking to apply for the Tega Industries IPO? You must ensure that you know specific details.

3 Charts on Why the Indian Bull Looks Tired podcast (Views On News)

Nov 27, 2021

Rahul Shah explains the key reasons behind his pessimistic outlook on the stock market.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

How to Hit Rs 100 Crore Wealth in Your Lifetime (Equitymaster Wealth)

Nov 15, 2021

This is how you can achieve the ambitious goal of a net worth of Rs 100 crore.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Nov 26, 2021 (Close)

MARKET STATS