Rupee's prospects do not look bright. With deepening fault lines in the economy, mainly due to mounting fiscal deficit, backed by an insipid budget, Rupee continues to slide and is expected to touch Rs 53 to US Dollar soon. While this is good news for NRIs like me, and for exporters, it is bound to increase the inflationary pressure.
Another major cause for concern is the mounting Non Performing Assets with Indian Banks. With interest rates rising, most of the Banks are seeing an alarming rise in their NPA. This is bound to have serious implications. The credit rating agencies have already started downgrading Indian Banks, making it dearer for them to get credit in the open market. With hardly any takers for loans, due to high interest rates, the play-cautious attitude of the Banks towards new loans, which is likely under the current scenario, will further slowdown investment in the economy. What is alarming is the total ineffectiveness of the Banks to initiate recovery proceedings against the defaulting Industrial Houses.
In the near term the interest rates will continue to rule high, banks will lend less and money supply will be curtailed. We are almost nearing the economic crisis point of the late 1980s. And that is a sober thought.
