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

MEMBER'S LOGIN

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

The 'new normal' for India
Wed, 6 Apr Pre-Open

The term 'new normal' is credited to renowned technology investor Roger McNamee. The man who has the reputation of being the sounding board for the likes of Bill Gates and Marc Zuckerberg. It thus goes without saying that the man coined the term to denote path breaking changes. Ones that would not be a fad but could linger for a very long time.

Later many economists, analysts and even policymakers have used the term to envision the future. However, the least expected was the Indian central banker calling higher inflation a new normal. Trends of price rises have been as cyclical as is the monsoon in India. Every four to five years the country has witnessed steep rises in price levels accompanied by monetary tightening. The quantum of rises and falls, however, has been dependant on global demand and supply. Especially, after the opening up of the economy.

The latest inflationary trend, nevertheless, has been one of the most long lasting one. Chances are that it is here to stay. At least that is what the RBI predicts. Sustained rise in commodity prices are expected due to the consumption patterns of emerging and populous economies like India and China. The RBI's interest rate hikes have had no impact whatsoever in the past 18 months. It may continue to remain unsuccessful in reining price rises though monetary measures unless the developed markets stop printing money. Which means that for a reasonable period the Indian economy will have to confront higher costs. What is more with negative real interest rates that scope for savings and investment will also deteriorate.

What the RBI is most worried about is that the inflation trend is no more restricted to food prices. In fact rise in input costs has been witnessed across sectors. Thus while companies raise prices to retain profitability, consumers may find it increasingly difficult to enhance their spending power. There can be nothing more lethal for a developing economy like runaway inflation.

Thus the RBI terming high inflation as the 'new normal' is a serious concern for those betting on high growth for the economy. The policymakers who prefer to cite higher GDP growth rates in the future to camouflage current failures would do well to take note of this.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "The 'new normal' for India". Click here!

  
ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
TRENDING TOPICS
FREE NEWSLETTERS
EQUITYMASTER SUPPORTS
  • HelpYourNGO
  • You Tube
  • Linkedin
  • Twitter
  • Telegram
  • Google Play

Copyright © Equitymaster Agora Research Private Limited.

Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap

Phone +91-9136015013

Equitymaster Agora Research Private Limited (Research Analyst)
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Email: info@equitymaster.com. Website: www.equitymaster.com.
CIN:U74999MH2007PTC175407

Name of the Compliance & Grievance Officer: Ms Sonal Ramachandran
Telephone: +91-22-61434003 | Email: compliance@equitymaster.com

LEGAL DISCLAIMER:
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.