DOES ECONOMICS DO NOT HOLD GOOD IN INDIA??

I am Ranjan Sardana from Delhi. I have done B.com(h), LL.B. and i am persuing C.A. Final.

Since past few weeks a very big question hits my mind badly, that DOES ECONOMICS DO NOT HOLD GOOD IN INDIA??

I am confused regarding this situation because things are talked about as if everything is at ease. But by talking to people working in industry it reveals as if situations are very tight and contingent in the market.

I shall make myself more clear in this regard.

1.I agree that this time politically our economy is in sound situation. Its a very honoured, respected and very intelligent PM is in the chair. But anyone can controll only those situations which are under their control.

Lets take up BPO sector for example. if parent country somehow force its companies to retain this work in the country itself then what can be the situation in India, we cannot even imagine.

2. Today the situation of our trilion dollar economy is that we are into big fiscal deficit in real terms. which means either:-

a. more currency printing, or

b. more debt trap for govt.

Our previous govt has already done part "a" in the last tenure and now only option left is part "b".

Applying part "b" means more charge over our income. That is less income is available for disposal of both planned and unplanned expenditure. In oher words declining our real income.

3. Exports consisted of approximately 35% of our economy, the major demand was from USA, which now is in no state/ position of creating further demand. So it will definately effect the Exports and hence our Real Economy.

But Import bills are not likely to reduce that much, ultimately leading to huge unbalance in balance of trade. ain leading to adversely effecting Real money supply for disposal. effecting in two ways by:

(i) reduced exports, and

(ii) increased unbalanced balance of trade.

4. Many stimulous packages like tax rate cuts were offered again reducing Income.

5. reffering to points 2,3 and 4 above it can be said that real Trillion Dollar economy will bereduced to half. hence dragging India 5 years back.

6. The increase in prices in the last 2 years were due to "upward shift in Demand curve" so that inflation was about to happen, in order to control that unavoidable inflation our govt took many measures which made many projects in pipeline unviable to to be grounded. it hurted the economy in a serious way.

Is it that easy to re-start such projects, again incurring pre start up costs like feasibility reports etc..?

Is it that easy to revive the sentiments?

If its at all, then can all it be done in a matter of a few weeks or months?

Can everything in the economy be revived by way of giving stimulous?

How can NPAs be reduce in a economic scenario where people are loosing their jobs or thr incomes are decreasing?

7. (a) Today itself(25/05/2009) i was listening to a programme on CNBC Awaz, relating to is it being right time to buy a home..!!

By listening to it picture seems to be so rosy that as if nothing has happend.

There wer experts from industry, analysts etc. Their views were like property market is going to get stable for next 6 months and then again it'll experience a bull run.

(b)I am looking at the surprise move in the stock markets. Till two months back BSE was at 8000 mark and every analyst was saying that there is still downside.

Now only with "hopes" markets have recovered so much and things look as if its a new Bull run.

What i knew from study of economics is that share markets have a cycle of 3-5 years and property markets have this cycle of 8-10 years.. so obviously a time comes when both property and share markets see a Bull run togethet, and 2005-2008 was that period only.

Everything was very hot but now this engine needs to get cool down. Biggest economy (USA) gots Eits hands burn in it.

So is it a real situation that things will run again or its just as eyewash???

I would like to qouoe one more important thing, that i am a small investor, who entered markets in the Jan 2008 after the Big fall. I have burnt my hands in this markets since then twice. But i will not take it as my defeat. I'll again come back to these markets but this time to earn. But for that i need to know that should i go for rumours and unexpected things or should i go theories of Economics which talks of Cycle of economy, consumption, savings and investments, trades, fiscal deficits, effects of note printing, gestation periods, heavy sunk costs leading to eroding of capital etc.

I have many more questions, but the above mentioned are a few of them.

Till u read this i'll write other articles...!!!