As the Indian government's energies are absorbed in the debate over India-US Nuclear agreement (123 agreement), the country's economy is showing serious strains. India's economy is now faced with trio challenges -- rising oil prices, worrisome inflation, and depreciation of Indian rupee.
This is not good news for the country, and not for the ruling coalition of parties who have to face the electorate in the next 8-10 months.
Just look at some of the data. Inflation is at an alarming 10-11 percent annual rate corroding the purchasing power of all the citizens. Food and energy prices are skyrocketing. India is seeking a consensus for a regulated bandwidth of price for oil.
The Indian currency -- Rupee -- is depreciating because of the inflationary pressures. The trade deficit is growing.
For example, on Monday, June 30th, the market capitalization of the Indian financial markets was about one trillion dollars. So was the size of the Indian economy. But on Tuesday, July 1st that was not the case.
Bombay Stock Exchange closed on June 30th with a market capitalization of about $1.02 trillion. On Tuesday, a fall of 500 points in the Sensex and a gain of 32 Indian paise (100 paise = 1 Indian rupee) for the dollar against the rupee saw that figure drop to $970 billion.
Similarly, India's Gross Domestic Product for 2007-08, valued at Indian rupees (Rs) 43,02,654 crore, translated into just over $1 trillion as valued at exchange rate on June 30th. With the dollar appreciating against the Indian rupees and crossing the Rs 43 bench mark on July 1st, the India economy was down to $995billion.
High oil prices have seen India’s oil import bill rise to $16.5billion for April-May this year, up 49 percent from the figure for the same months of 2007. As a result, the overall import bill has risen by 32% to $48.8b. Despite the fact that exports have grown at 22%, the trade deficit has risen to $20.6 billion -- up about 48 percent.
The widening trade deficit has added to the demand for dollars as against Indian rupees. So while the U.S. dollar has been generally depreciating against most currencies, it has been appreciating against the Indian rupee. The exchange rate is over 43 Indian rupees.
Related Articles
World Food Crisis, Peak Oil, Stagflation and Other Disasters
By: Dennis Meizys | 06/05/2008 | Environment
The sky is falling again, and so many crises are occurring simultaneously! News polls ask you what worries you the most: high gas prices, losing your job, credit crunch, real estate market crash?
What is we could find one scapegoat to blame for all of these problems? And no, it's not President Bush this time. Well, ok, he's involved too.
It's The Best Time To Do Business Online!
By: Tatiana Escalada | 24/04/2006 | Business Opportunities
A brief view of the opportunities offer on the net and how it has changed many lives as well as an opinion of what its future could be.
Understand How the U.s. Economy Works
By: Laura Adams | 02/12/2007 | Business
Do you understand how the U.S. economy works? Discover the 3 most important variables, the definition of Recession, and much more in simple language.
The Falling Us$
By: Ernie Fitzpatrick | 16/04/2008 | Economics
There's a reason we're paying $3.50 a gallon for gasoline. And the reason is the Fed, which we're about to give more power to, as though they are good at handling money, keeps printing money like it has no consequences.
Is Everything Ok With Rise in Exports?
By: Bikky Khosla | 09/10/2007 | Business
Despite the fact that exports in August rose by 18.9 percent in comparison to last year’s figures, I feel the exporters are still under pressure from the hardening of the rupee.
India on the Way to Attain Energy Security
By: Seema Sharma | 24/09/2007 | Environment
The global scenario has undergone a drastic change in the recent times as the economies are striving to attain high economic growth rates by strengthening their resource base and securing energy supplies. It is apparent that a situation like this could breed resource wars amongst the countries. The Asian region has specially witnessed the increased competition for imports with the increasing reliance on energy resources. Natural gas is rapidly growing as the primary energy source all over the world and in Asia. The Asian countries are increasingly relying on the Middle East as the major supplier of energy.
Oil Spikes- Again!
By: Ernie Fitzpatrick | 21/04/2008 | Economics
Did you know that you can get too much of a good thing? Well, it seems that OPEC doesn't understand that. Maybe they and all of us must learn the hard way.
Economic Analysis for the Layman
By: Phillip Mabry | 13/08/2008 | Economics
Learn the basics of economic analysis in this multi-part series.
Got a Question? Ask.
Ask the community a question about this article:
Frequently Asked Questions
Repatriation of funds held in NRO Account
By: cj | 16-08-2008
question: Mr.X ,NRI has put some borrowed moneys into his NRO Account. Can he now transmit this amount outside India for his family maintenance?
Researching genealogy. Have found someone listed ...
By: Gerry | 15-08-2008
Researching genealogy. Have found someone listed on a death certificate as having been born in East India Isle. Where is or was East India Isle? Gerry Hannan Seilergerrysthings@aol.com orAJSEILER@AOL.COM
FDI in export trading
By: guru | 11-08-2008
Now FDI is allowed 100% under automatic route for Export trading. Is there any conditions for repatriation like real estate sector
Will my master of arts in english literature ...
By: cheryl | 08-08-2008
Will my master of arts in english literature (India) be recognised in australia?
Nri can start joint ac with resident of india
By: vibin | 07-08-2008
iam a nri in dubai can i open a joint ac with my mother in india she is resident of india
Why oil price rising?
By: YURI | 05-08-2008
Why are oil prices rising in 2008?
Q&A Powered by:
Latest Economics Articles
Vancouver’s Diverse Economy
By: Justin Mongiardo | 03/09/2008
Vancouver has one of Canada’s most diverse and thriving economies. Its location and population make it an ideal spot for an array of productive industries. From its centuries-old shipping industry to modern film production, Vancouver can host it all. This means more jobs and a more stable monetary flow both for the city itself and for Canada as a whole.
Crime and the Moral Vacuum in South Africa
By: Duncan Kelly | 03/09/2008
There is an underlying moral problem in the South African crime scourge that could easily be fixed with the right leadership.
Chevy Volt- Zero Gasoline
By: Ernie Fitzpatrick | 02/09/2008
We can't get cars to market fast enough that use no gasoline but Chevy is doing all it can to make that happen.
Oakie From Penokee Success Story
By: melvin polatnick | 01/09/2008
This is the story of a people that never asked for government help and survived with dignity.
The Gentrification of America: What Role Does the Working Class and the Poor Play?
By: Dr. Mario Barrett | 31/08/2008
Gentrification is occuring all across America, but why? What is really going on?
A Bankers' Economy
By: John Kozy | 25/08/2008
Banking has always been an elaborate confidence game, and the history of central banking provides ample evidence that his claim is true. Six decades ago, the U.S. Treasury wanted to shut down the Bank for International Settlements, saying it helped finance the Nazis. Today, Jean-Claude Trichet and Ben S. Bernanke are transforming the organization into one of the world's most powerful networking clubs.
What Affect Oil Price?
By: ariesto | 24/08/2008
what drive oil price to record high and what affects oil price
is it because of pure supply and demand factors?
The Criminalization of Good Intentions When
By: Anthony Tharpe | 24/08/2008
Anthony Tharpe spent most of his adult life working in his own small way to change lives in a positive way while supporting any worth while measure or policy or even program developed by others that would help to raise the standard of living of people all over the world.
More from Gurumurthy Kalyanaram
Has There Been a Slippage in Barack Obama's Support in the Month of July?
By: Gurumurthy Kalyanaram | 19/07/2008 | Politics
There has been speculation -- reasonable and based on some empirics -- that Barack Obama may have slipped some in the match-up against John McCain in the presidential preference measurement. This slippage appears to have occurred since about July 4th weekend. For example, the fivethirtyeight.com model shows some downturn, and Michael Barone also appears to think so. The tracking polls by Rasmussen and Gall Up show the race to be with in 1-2 points.
Three Policy Elements of the India-us Nuclear and the 123 Agreements
By: Gurumurthy Kalyanaram | 19/07/2008 | Politics
As India debates and will vote for the India-US Nuclear agreement through its members of parliament (it is a proxy vote in that the members of parliament will be voting whether the parliament trusts the current government or not), and as individual members of parliament are being tugged in different directions including their own conscience, there are three policy questions they should consider.
The Winners and Losers in the Indian Debate of the India-us Nuclear Agreement
By: Gurumurthy Kalyanaram | 06/07/2008 | Politics
There is ferocious finger-pointing and heated rhetoric in the Indian debate. Without considering the substance or merit of the agreement, I rate as follows the winners and losers of this debate. I rate on a 1-10 scale, 1 being a perfect loser, 10 being a perfect winner and 5 being no-loss and no-gain.
The Probability of Victory is Higher for Senator Obama Than for Senator Mccain
By: Gurumurthy Kalyanaram | 24/06/2008 | Politics
The probability of Obama winning the Presidential elections in November appears to be pretty robust.
Off-shore Drilling: the Case by and for Mccain
By: Gurumurthy Kalyanaram | 24/06/2008 | Politics
McCain has reversed his stance against off-shore drilling, and now advocates it. Obama continues to oppose this. The U.S. Congress currently has a statutory ban on off-shore drilling. What are the pros and cons?
Is the Financial Advantage for Senator Obama Too Huge?
By: Gurumurthy Kalyanaram | 24/06/2008 | Politics
Senator Barack Obama has opted out of the public financing system in his contest for the U.S Presidency, and John McCain has decided to stay in the system. It appears that Obama may have about $250 million to invest in the months of September and October, and McCain may have only about $85 million. Should McCain be afraid? No and Yes.
The Politics of India-us Nuclear Agreement
By: Gurumurthy Kalyanaram | 24/06/2008 | Politics
The India-US Nuclear agreement is the subject of hope and debate, yet again, in India. Apart from the substance of the pact, the politics (and timing) of the negotiations is mystifying.
Mugabe Should Go Now, and the World Should Insist on This
By: Gurumurthy Kalyanaram | 24/06/2008 | Politics
It is time for ZImbabwe's Mugabe to go. Under 28 years of uninterrupted Robert Mugabe's brutal rule, the country has become a basket case -- inflation is staggering, the unemployment is at 80 percent level, poverty is grinding, violence has become routine and hopelessness is rising.
News and Society 
