13 Jun 2012

[Headline: S&P Threatens India]

Q. (a). Will India's rating be downgraded to junk status anytime soon as per Standard & Poor's threat?
(b). Will The Indian currency continue to weaken, and for how long?

(a). S&P's threat

Although, at the moment, the threat of a downgrade to junk status by S&P looks genuine and ominous, India's response will be to junk the threat itself. India will instead focus, for its own benefit, on how to wriggle out of this embarassing situation.

Nobody accepts the rationale for the revision, but the threat has woken up the people who matter. They will do everything in their power to prevent the downgrade from becoming a reality. What has happened, has happened, so they will focus on the path ahead.

It will be a real uphill task, but hard work and this timely warning will pay off eventually. There seems to be buoyancy, jobs and prosperity ahead. Help will be forthcoming from banks and business houses.

India will maintain its stable investment outlook. 

(b). Will the Rupee continue to slide lower?

Right now it may seem that the Rupee is in a free fall. It has jolted the government and officials into action. Hard to believe, but it appears that they are seriously thinking about what needs to be done to create balanced conditions for business and prosperity. They will probably adopt a conservative or tried-and tested approach. It will take at least 2 months for the Rupee to stabilise.

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