Here are some dashboard points that I expect after the clean up of the old currency what we can expect on the Indian economic scenario :
A huge amount of around 15-20 lakhs crore of black money would be identified
We will see a bump of 8 to 10% in deposit with banks
Out of the money identified 15 to 20 lakh would be withdrawn over a period of two to three months
Substantial amount of money around 2.5 to 3.5 lakh cr would still remain in system
There would be a wealth destruction of around 3-4 lakhs crores
30% of money will not reach back to RBI
Next 2 to 3 months property prices and land prices can drop till 30 to 35%
Since there is a surge of deposit huge demand for Govt bonds would be there Continue reading
We are all forecasters. When we think about changing jobs, getting married, buying a home, making an investment, launching a product or retiring, we decide based on how we expect the future will unfold.
Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $1000 and go to Las Vegas.” This is such a profound statement from Paul Samuelson, who was the first American economist to win the Nobel Prize in Economics.
Predicting or forecasting the market is likes rains forecast by the met department. Continue reading
This is a very basic post for the kids and for the people to explain the banking terminologies. Here is a conversation between Dad and Son explaining how the bank operates,
What are the implications of CRR, SLR, Repo Rate, Reverse Repo Rate and their impact on deposit rate, loan interest rate and on inflation?
Son: I have heard recently that Mr. Rajan has reduced Repo Rate by 50 basis points and everyone is saying that this is good for the market. Loan EMI may also come down. What is this rate cut means actually? I want to understand this.
Dad: To understand this you first need to know, how does a bank function. Continue reading
The Media analyst, Financial analyst all have been keenly waiting for today’s RBI policy. The question is will the RBI reduce rates or keep them as Status quo . Well I do not know the answer just sharing the observations there might be a pressure from finance minister to reduce the rates but RBI might not as the inflation is still not in the comfortable zone of RBI.
Well let the various analysts predict the policy, I would prefer sharing some basic definition of money from RBI, Continue reading
From the last Monetary policy RBI has started publishing Post Policy Conference Call with Researchers and Analysts providing transparency.
There are a lot of questions on the interest rates including MSF, LAF and OMOs.
You can read the full edited script on RBI Website
With reference to the above lets focus on The “term structure” of interest rates refers to the relationship between bonds of different terms. When interest rates of bonds are plotted against their terms, this is called the “yield curve”. Economists and investors believe that the shape of the yield curve reflects the market’s future expectation for interest rates and the conditions for monetary policy.
Usually, longer term interest rates are higher than shorter term interest rates. This is called a “normal yield curve” and is thought to reflect the higher “inflation-risk premium” that investors demand for longer term bonds. Continue reading