Mamata L3 P2 Fed Tapering
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Transcript of Mamata L3 P2 Fed Tapering
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Quantitative Easing
Fed Tapering[GS2] Effect of policies and politics of developed a
developing countries on Indias interests, Indian
diaspora.
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Dollar
SupplyFDI-FII
Exchange
Rate
Import
Export
Sub Prime
Crisis
Quant.
Easing
Fed
Tapering
Impact on India
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Prime Borrower
Sub Prime Borrower
Sub- Prime Crisis
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PRIME BORROWERS
Securitization=>
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SUBPRIME
BORROWERS
SUBPRIM
BORROW
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SUBPRIME
BORROWERS
SUBPRIM
BORROW
TOXIC Assets TO
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Impact on India
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Dollar
SupplyFDI-FII
Exchange
Rate
Import
Export
Sub Prime
CrisisLow Out
Rupee
strong (39)down
Quant.
Easing
Fed
Tapering
Impact on India
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Repo. Rate / Fed. Funding Rat
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Toxic Assets
Sub-Prime Borrowers
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Quantitative Easing (Toxic Assets + T-Bo
(Electronic)
Dollar supplyincreased
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Dollar
SupplyFDI-FII
Exchange
Rate
Import
Export
Sub Prime
CrisisLow Out
Rupee
strong (39)Down
Quant.
EasingHIGH
Increase
HOT
money
Strong
09=50
10=44
Down
subprime
Greece/E
Fed
Tapering
Impact on India
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December 2012
When to stop QE?
Inflation >2.5%
Unemployment
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F d T i
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mechanical term= Continuous reduction of width.
Fed Tapering
85 7565 55
Dec 13 Jan 14 Feb 14 March 14
BILLION USD
I t I di
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Dollar
SupplyFDI-FII
Exchange
RateExport
Sub Prime
CrisisLow Out
Rupee
strong (39)Down
Quant.
EasingHIGH
Increase
HOT
money
Strong
09=50
10=44
Down
subprime
Greece/E
Fed
TaperingMed. Decline
Rupee
weak (60)
(Good for
Export)
May
increase
Impact on India
FT I t I di t
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1. FII run away =>Sharemarket crash (fof capital)
2. Dollar supply decrease=> rupee wea
3. Good for export, bad for import & E
4. No boost in export from USA, EU
5. BoP crisis (high CAD, low capital)
FT Impact on India: worst case scen
Wh B P i i i 1991 92?
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Why BoP crisis in 1991-92?
1991 (Apr-Sep) Million $$
Current -6000Capital +4000
Overall Balance -2000
IMF loan +2300 GOLD pledg65 tonnes
St t k t t t i t F
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BRICS Bank
- Decision to setup $100 bn
- Help member nation in crisis- Limitation: will operate from
2015
China
Russia
India
Brazil
SouthAfrica
total Bn
Steps taken to protect against F
Steps taken to protect against FT (20
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NRI FCNR: interest rate hiked +swap. (+35 bn$) =Capital inflowincrease
Steps taken to protect against FT (20
Steps taken to protect against FT (20
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Dollar swap for Oil Marketing Co.
buy $$ from RBI instead of
Market repay dollars at later date (Feb-
April 2014]
= Volatility decline
managed float exchange
regime
Steps taken to protect against FT (20
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Steps taken to protect against FT (20
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Inflation => Real interest ratenegative => gold / real-estate.
If RBI starts Inflation targeting=>more investment in banks andsecurities by locals.
FDI, FII, ECB= less dependence.
Steps taken to protect against FT (20
Mock Question
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The fears about the negative impact of Fed tapering on Indeconomy, are unfounded. Do you agree? Justify your stand200 words | 7 minutes)
Mock Question
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Mock Question
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Why fears unfounded?
1. Fed tapering = US economy back on track = boost i
by US firms =good news for Indian IT firms.2. BRICS bank.
3. RBIs side:FCNR reform, dollar swap for OMC, currswap with Japan
4.Governments side
: FDI reform, fast tracking projeAs a result (1) forex reserves are good enough to withpressure (2) economy resilient and attractive for capitinflows.
Mock Question