 "Vitamin G")
The rupee's almost daily fresh lows added to this terror, as clients, who were unable (or unwilling) to buy forward at 56 and 57, remain frozen and shell-shocked at 60 and 61. The media's hysteria did its bit as well, to where I found myself more than half believing the end-of-the-India-story stories that many strikingly articulate people are making.
But then, last weekend, I went to see The Lone Ranger, with Johnny Depp playing Tonto. It was fantastic - I came out of the theatre on a white horse, which whinnied and reared up on its hind legs before galloping through Nariman Point to my home.
The movie was, of course, about good versus evil and showed - yet again - that, however horrible the circumstances, all you need is a silver bullet, used judiciously, which can set the stage for a reasonable future.
Coming back afresh, there are several positive signs for the world economy, the loudest of which is the weakening yen. With the currency having depreciated by 30 per cent since last September, Japan's economy has come back to life. Citi research reports that business confidence has improved sharply, with private capex plans (excluding land purchases and including software) up 5.3 per cent year on year in June compared to a 0.7 per cent year on year drop in March for companies across all industries and all size groups. Clearly, Japan - long written off, but at one time the primary driver of the global economy - is coming back strong.
Across the Pacific, the US economy is also doing quite well, thank you. June non-farm payrolls came in at +195,000, above expectations and, unsurprisingly, roiled bond markets all over again. US 10-year yields shot higher and are perilously close to a long-term resistance (at 2.80 per cent). But, while bond markets are in a funk, the news on the ground from America - anecdotal as well as analytic - is that America is quickly getting back to being America.
Rupee image via Shutterstock
And that ain't all. Economic recovery in Europe, of course, remains tenuous, but if the euro were to continue on its expected path - that is, down against the dollar - we could well see some light there by, say, the end of the year. That's another $12 trillion of GDP coming to life.
And then, there are commodity prices. With the exception of oil, all major commodities have fallen nicely, and, even if most of the speculation has been squeezed out of the market and they don't fall much further, these levels are quite good for sustainable growth. Gold, of course, will continue to be soft - there are now a large number of $1,000-wallahs all over the place.
For us, though, the big problem is the frighteningly volatile and weakening rupee. My mother was asking me about it the other day and I told her that when there's a god-awful storm outside - it was pouring when we spoke - there's not a whole lot you can do. You can't control the weather (or the US Federal Reserve) and you can't instantly improve the structure you already have (poorly constructed buildings or, heaven forbid, environmentally unsound development as at Kedernath). The only thing you can do is to eat your vitamins and get stronger. Whenever the storm abates, the strong person will still be standing, even if the buildings around him have collapsed; the weakling may not survive.
In other words, there's nothing substantive the government or the Reserve Bank of India (RBI) can do about the rupee. It is currently (July 8) resting on a pivotal support and may take a breather, perhaps even recovering a (very) little bit of ground. But with global markets seemingly stuck in perma-hurricane season, any respite would likely be short-lived.
What they can - and should - do is infuse some strong vitamins into the country's economy. Vitamin S (for sentiment) is critical but, with credibility extremely low, stocks are near zero - the good news is that Vitamin S quickly regenerates itself once it finds the right trigger.
The only other treatment - the silver bullet - is Vitamin G (for growth). The RBI should immediately cut interest rates by one per cent, with perhaps a booster dose in a few weeks.
C'mon Kemo Sabay!
jamal@mecklai.com