A News-heavy Week

The Fed Chairman Ben Bernanke kicked off a news-heavy week by springing a pleasant surprise for world markets, including currency markets and stock markets of India and EMs, by deciding to withhold QE tapering. It was widely expected that a light tapering would begin in September and markets around the world were factoring in a 10 billion dollar tapering to start with. The best case scenario was a light 5 billion dollar roll back in bond purchases by the US Fed. However it was a complete surprise when the Fed announced no QE withdrawal just yet, and a dovish stance which indicated that QE tapering could be pushed to December or even further. Another good news was the withdrawal of Larry Summers’ nomination for the Fed Chairman’s post earlier in the week. Summers was known to have an aggressively hawkish stance regarding ending the QE3. These two news put together resulted in catapulting the Indian currency and stock markets to new highs on 19^th Sept.

Following this was the first policy meet of the new Governor of RBI.

At the time of going to press the RBI policy meet had yet to take place but I am sure Dr. Rajan would use the opportunity given by the Fed to at least partially relax tight short term rates for banks to begin functioning normally.

Moving away from financial markets is the disturbing news that the PM would sign a deal with Westinghouse of USA for a nuclear power plant in Gujarat, committing India to a huge capital expenditure of Rs.90,000 crore  in a hurried manner (when there is no urgency), without a viability and safety study, just to please the Americans before he meets Obama a final time in September, prior to the next elections.

Nuclear Energy as it is, is not a viable option for India, and, post-Fukushima, safety costs and concerns have gripped the entire developed world including Japan, which only last week decided to shut down all nuclear power plants in face of stiff opposition from its people. Now Japan has very little energy resources and yet it has done so.

Similarly France and US are also not setting up new power plants while they are trying to sell us the same. Even China is having second thoughts about nuclear power. An Indian nuclear scientist, A. Gopalakrishnan is a permanent invitee by the Chinese Government on their panel evaluating this energy source, and they are also not too keen on it. India happens to be the only buyer in the world for nuclear plants, and that too because of Manmohan Singh’s personal assurance to the US, disregarding national interest. This is extremely dangerous for the nation and needs to be opposed at all levels – economic, political and above all human safety.