Titanic Fall of Indian Rupee


 

The Titanic Disaster of Indian Rupee
So what if the economy is as bad as Shraddha Kapoor’s acting, there is always hope… for the economy—not for Shraddha though, sorry doll. But right now it’s all going downhill, Rupee has fallen farther than SRK’s movie scripts, Rupee has fallen further than Akshay Kumar’s comedy, Rupee has fallen to the point where it has all of us worried whether the ‘Idli Wada Sambar’ will get more expensive and we’ll have to eat cheaper items like ‘Mice and worms’.
Although I did hear that last week the Rupee had some fluctuations. The rise and fall of rupee last week could be compared to Pamela Anderson’s…err…career.
As usual the government is doing all it can to stop this snow ball from rolling down hill. In fact just the other day they did something unimaginable! They made Dr. Manmohan Singh….Speak!!!! (gasp!). You know these are drastic times, when our PM actually gets to speak about something. He mentioned to the country that the economy is bad, which is like saying that a volcano eruption is just Mother Nature sneezing. The speech had an unusual ending though, because it didn’t end it with the usual “thik hai?”
  This rupee problem has us middle class people worried, the beggars however are very happy. I bet they all sit in the night together huddled over a warm fire made by burning newspapers and middle-class people tax money, and discuss, “saala, chaar rupaye aur milte toh ek Ameriki dollar ban jata”.
 It turns out that even the rich have a problem with the dollar price increase, they are not pleased with the way government is handling the issue. Now thanks to the difference between Rupee and Dollar, the rich class has to pay an extra two-three hundred rupees to get a diamond studded; platinum plated, sapphire glass covered IPhone 5! And don’t even get me started on the price of accessories for the phone!This drastic fall of the rupee can only be classified as a catastrophe.  And of course as it is with all natural disasters and calamities there are always these random “experts” spawning like Frogs in rainy season, and coincidentally they also make the same amount of noise.
    Apparently there are  12 year old kids on Facebook who have more knowledge than our Finance Minister. They post information of how the economy can be saved and force us to share the post like it’s a mandir ka prasad. I fail to comprehend how a boy, who thinks Manforce is a company that creates vehicles, decides he’s smart enough to post about the economy of India. But it turns out that this issue is not limited to this, there are people who have no freaking clue about the issue but are out there writing full length articles about it, just like I am right now.
    The economy is slow, the government is about to keep all the gold as mortgage, Poonam Pandey has signed a new film…yes, I know things seem bad. But, I think, I have a solution. If we send enough Indians abroad to get jobs they could earn in dollars and send them back here, thus increasing foreign currency in India and in turn closing the gap between Rupee and Dollar. But this is only my expert opinion, you guys can think of anything ranging from Credit Card Fraud to Email scams to earn money for the country.
   Let’s face it; we are desperate crew members trapped on the Titanic! We all know the ship is sinking, we all know that we don’t have much hope, we all know that our Lux Cozi Wool sweaters will not save us from the cold icy water. So save it, all your expert advice isn’t worth crap unless you are Superman or Bill Gates. You are not experts; you are just people on Social Media who have no life, no friends, and no other way to pass the time.
    The government must be doing all it can to change the situation, because eventually all their scams will start to pay very little. Ten thousand rupees would transfer as ten dollars, and it would be a huge loss for those hard working termites gnawing away at the nation’s financial condition, popularly known as ‘politicians’. So don’t worry, they will get their act together and the country’s situation will be proper once again, because if there is no Batman, who will the Joker play with?
    In the mean time, all you people on Facebook should probably start to save up your Farmville Cash! Because if rupee falls any further, who knows, they just might decide to make it our local currency. But this is only my expert opinion, because knowing the government, they’d even settle for Monopoly money since its plastic and fake—just like them!
See you fellow crew members; we’ll probably meet in the cold abyss as we freeze to death near this sinking Titanic! But excuse me, in the mean time, I must find myself a ‘Rose’.

Enter the Dragon- Chinese Economic growth


 

This article, though aimed at a US audience, gives a scary insight into China’s growing economic power.

 
A Little Known Reality.
June 8, 2013. Source: Michael Snyder, Guest Post
In future China will employ millions of American workers and dominate thousands of small communities all over the United States. Chinese acquisition of U.S. businesses set a new all-time record last year, and it is on pace to shatter that record this year.

The Smithfield Foods acquisition is an example.  Smithfield Foods is the largest pork producer and processor in the world.  It has facilities in 26 U.S. states and it employs tens of thousands of Americans.  It directly owns  460 farms and has contracts with approximately 2,100 others.  But now a Chinese company has bought it for $ 4.7 billion, and that means that the Chinese will now be the most important employer in dozens of rural communities all over America.  

Thanks in part to our massively bloated trade deficit with China, the Chinese have trillions of dollars to spend. They are only just starting to exercise their economic muscle.

It is important to keep in mind that there is often not much of a difference between “the Chinese government” and “Chinese corporations”.  In 2011, 43 percent of all profits in China were produced by companies where the Chinese government had a controlling interest in.  


Last year a Chinese company spent $2.6 billion to purchase AMC entertainment – one of the largest movie theater chains in the United States.  Now that Chinese company controls more movie ticket sales than anyone else in the world.  

But China is not just relying on acquisitions to expand its economic power.  “Economic beachheads” are being established all over America.  For example, Golden Dragon Precise Copper Tube Group, Inc. recently broke ground on a $100 million plant in Thomasville, Alabama.  Many of the residents of Thomasville, Alabama will be glad to have jobs, but it will also become yet another community that will now be heavily dependent on communist China.

And guess where else Chinese companies are putting down roots? Detroit. Chinese-owned companies are investing in American businesses and new vehicle technology, selling everything from seat belts to shock absorbers in retail stores, and hiring experienced engineers and designers in an effort to soak up the talent and expertise of domestic automakers and their suppliers. If you recently purchased an “American-made” vehicle, there is a really good chance that it has a number of Chinese parts in it. Industry analysts are hard-pressed to put a number on the Chinese suppliers operating in the United States.

China seems particularly interested in acquiring energy resources in the United States.  For example,  China is actually mining for coal in the mountains of Tennessee.  Guizhou Gouchuang Energy Holdings Group spent 616 million dollars to acquire Triple H Coal Co. in Jacksboro, Tennessee.  At the time, that acquisition really didn’t make much news, but now a group of conservatives in Tennessee is trying to stop the Chinese from blowing up their mountains and taking their coal.  

And pretty soon China may want to build entire cities in the United States just like they have been doing in other countries. Right now China is actually building a city larger than Manhattan just outside Minsk, the capital of Belarus.
Are you starting to get the picture? China is on the rise. If you doubt this, just read the following:
# When you total up all imports and exports, China is now the number one trading nation on the entire planet.
# Overall, the U.S. has run a trade deficit with China over the past decade that comes to more than 2.3 trillion dollars.
# China has more foreign currency reserves than anyone else on the planet.
# China now has the largest new car market in the entire world.
# China now produces more than twice as many automobiles as the United States does. After being bailed out by U.S. taxpayers, GM is involved in 11 joint ventures with Chinese companies.
# China is the number one gold producer in the world.
# The uniforms for the U.S. Olympic team were made in China.
# 85% of all artificial Christmas trees the world over are made in China.
# The new World Trade Center tower in New York is going to include glass imported from China.
# China now consumes more energy than the United States does.
# China is now in aggregate the leading manufacturer of goods in the entire world.
# China uses more cement than the rest of the world combined.
# China is now the number one producer of wind and solar power on the entire globe.
# China produces 3 times as much coal and 11 times as much steel as the United States does.
# China produces more than 90 percent of the global supply of rare earth elements.
# China is now the number one supplier of components that are critical to the operation of any national defense system.
# In published scientific research articles China is expected to become number one in the world very shortly.
 

And what we have seen so far may just be the tip of the iceberg. For now, I will just leave you with one piece of advice – learn to speak Chinese.  You are going to need it 

 

 

 

HOW TO REVIVE INDIAN ECONOMY WITHIN 3 MONTHS?????


 

How to lift the Rupee from its dumps..
Every news channel, every newspaper, every economist worth his/her salt has a panacea to stop the rupee tailspin and bring back some sanity. All, either shooting in the dark or vague, wishy-washy solutions – the TOI, the “world’s largest paper”, so the high priest of journalism grandly recently wrote the country needs ‘structural changes” without pinpointing what they are.
Amidst all these cacophony, only HT’s Chanakya (Sunday, 25/8/13) gives concrete steps that, to one, seem to work…
“This situation calls for a change in script. What we need are big bang measure that take effect immediately – as opposed to stpes that will begin to bear fruit six months later – to lift sentiment. Traditional monetary measures have failed and incremental steps to stop dollar outflows have proved counter-productive.
First, ban gold and silver imports (for, say, six to nine months). This will tell the world that India is serious about addressing its current account deficit problem. (Me: Gold import now attracts custom duty at about 30%. This won’t work, given an average Indian’s appetite for gold regardless of its price. By banning imports, the price in the country may further escalate.So what? Let the Indians be ready pay for it)
Raise petrol and diesel prices by Rs.4-5 per litre to help the government to pare its deficit.
Set aside $25-30 billion from India’s foreign exchange reserves to defend the rupee against speculators. (Me: This is a suggestion put forward by Montek Ahluwalia, the Dy. Planning Commission Chairman).
Settle the Vodafone tax case to signal to the world that their investments here will not be subject to whimsical and politically-motivated policy changes. (Me: absolutely spot-on. The proposal to tax Vodafone billions of dollars on their acquisition of the then cellphone brand, Hutch, from the Hongkong-based company was the single most important factor that stopped MNCs in their tracks from making further investments in the country. Our policy makers and/or the tax sleuths are singularly myopic)
Force real estate companies to cut prices to make housing affordable. This sector has linkages with more than 200 industries. And if it revives, it will set off a virtuous cycle by generating demand in hundreds of feeder industries. (Me: the real-estate companies have been exceedingly greedy and been jacking up prices every two months so much so flats have become unaffordable to middle-class buyers.)

Forget all above suggestions:

Now read few suggestions from me
 
1. Declare Economic Emergency
2. close all virtual markets trading in commodities, currencies. forex markets with immediate effect. No trading to be allowed for at least six months. Forex to be released to only genuine requirements.
3. Seal all foreign accounts of all the politicians and businessmen and declare the same as National property.
4. Declare death penalty for economic offences.
 

it would be much simpler than that if India brings back all the money stashed outside by politicians and businessman from foreign countries making Indian Rupee dearer and hard for them to save their own currencies. Will Mr PC or our great economist PM Shri MMS do it?

 

We are not Responsible


 

 

We are not responsible!

EQUITYMASTER HOMEPAGE 24th Aug 2013

The UPA Government has earned itself the dubious distinction of involvement in several large corruption scandals. Each time various Government functionaries absolve themselves of all responsibility. Perhaps it should admit being anirresponsible Government, which it is. 

The latest is the scam at the National Spot Exchange Limited (NSEL). When a group of investors, with an aggregateRs 5,500 crores stuck in the exchange, complained to Arvind Mayaram in the Ministry of Finance, the expected answer was that his Ministry was not responsible. It was the Ministry of Consumer Affairs that was, under whose jurisdiction the regulator, Forward Markets Commission (FMC) was supposed to be responsible for regulating the exchange. But FMC Chairman claims he is not responsible, as he was appointed regulator but without power! The question, raised by these columns earlier, and unanswered is, who permitted the NSEL to start operations, without first authorising a regulator to regulate its operations?
Imagine the chaos that would ensue if each regulator took a similar stance. 
What if the RBI shirked responsibility of a banking fraud and claimed it was not responsible? What if SEBI maintained that it was powerless against a company who, e.g. had raised money through an IPO and misused it? Is it any wonder, then, that individuals repose their faith in gold and not in paper assets? If the Government is genuine, it has to protect investors, else it will incur their wrath prior to a general election. 
Echoing the sentiment, the 
NSEL says it is not responsible. The top management has been sacked, which is a gesture by the promoters of the Exchange to shirk responsibility for the actions of a management they appointed.
Let’s look at other examples of shirking of responsibility.
The Finance Minister says that 
it is not responsible for the state of the economy, which is in dire straits. It is not responsible for the high fiscal deficit or for the unsustainably high current account deficit. For the latter, it is the citizen, with his penchant for gold, explained above, who is responsible! For the poor GDP growth it is the companies who are responsible, for going slow on investment, and not the Government, which has blocked several permissions required for the investment. The National Highways Authority of India has had to cancel 6 road projects because of not being able to get land acquisition clearance. But, of course, the Government is never responsible.

Consider the depreciating rupee. In 1947, when India became independent, the Rupee was equal to the US $. It is now Rs 65/$. So in 66 years, the currency has depreciated 65 times. The value of the currency is related to productivity of the country. This means that India has, since independence, sharply declined in productivity. The Congress partyhas been in power for over 75% of the time during these 65 years. But, of course, it is not responsible! 

The falling rupee will, obviously, lead to inflation. Crude oil, as well as gas, translated to INR, would be more expensive. This would mean that all petro products, petrol, diesel, LPG, kerosene, would cost more, and so will power from gas based plants. So the subsidies on the petro products and power will shoot up, and, in a bid to contain them, the Government will raise prices, with the velvet glove admonition to ‘kindly bear with us’. Corporate profits will be hit by the hike in costs, combined with the higher interest rates which are the consequence of a badly managed economy. Of course, the Government is not responsible. 
This is a 
criminal misallocation of resources. The national productivity rises when children are given a proper education and training and when laws and regulation are conducive to economic acitivity and growth. Not when subsidies are given for people to drive cars in. Annual sale of cars is under 4 m., or 0.08% of our population. The Government subsidises them instead of spending money on better education.
Only a few countries are teaching their children how to think. These include Finland, Poland, Japan, South Korea and Canada, who consistently score high on the PISA test. India scores poorly. Children become smart, and, later, productive, when they are challenged to think for themselves. In India the Government has cleared the way for all to be promoted. This does not challenge them to think. They are not as productive as they can be. 
Without productivity, the nation slips.The currency weakens. Other countries race ahead. But the Government is not responsible. 
So tyrannical are the rules and laws in India, and so subjective, that 
we destroy our own industries and encourage the brightest to go abroad. 
The sugar industry, one of the most controlled industries, is being killed. Prices for sugar cane are fixed by both the Centre and the States, both competing with each other to increase prices, never mind the viability of the sugar factories. They set high prices to get farmer votes; the cost is borne by the mills. The mills are going bankrupt. 
Bad politics drives away good economics. But the Governments are not responsible. 
Another example is that of iron ore exports. These were banned after cases of illegal iron ore mining (corruption, again, in various states like Karnataka and AP) were discovered. It is easy to ban, or destroy. It is not easy to rebuild. 
The drop in iron ore exports is a contributory factor to the Current Account Deficit. It has led to a loss of jobs. And to a fall in production of steel. Is anybody reviewing the export ban? Or is nobody responsible?
Well, companies like Tata Steel have, in partnership with a Canadian company, set up an iron ore project in Canada, and has already got permission. (South Korean Posco, after an 8 year wait in Odisha, has not). If a large FDI proposal such as Posco comes in it eases pressure on the rupee. But there is no thinking in Government. As this article in the Economist points out, economic activity is being shifted out of India.
America is anticipating an economic boom, predicated largely on a boom in output of shale gas, using a technology called hydraulic fracking. Now it is not the availability of technology that is preventing the search for shale gas in India. Technologies can be bought, or obtained, or developed. Rather, it is ownership rights. In the US, the land owner has the right to everything on, or under, his land. In India it is the Government. As a result, the prospectors for oil and gas, can deal with land owners and sign contracts for exploiting the gas below their lands. And finds a lot of it, lowering gas prices and incentivizing producers of energy dependent steel, fertilisers, metals, etc, to relocate to the US and create jobs and growth.
In India, the Government claims right to any resource under the ground of property belonging to any individual. It auctions the right to hunt for oil/gas, creates a huge mess in the pricing of it. Production drops and prices rise. 
The fall in production leads to higher imports, a higher current account deficit and a falling currency.
So, what is important to the Government? Is it the ownership of resources under individual land or is it the possibility of larger oil/gas finds and an easing of economic problems? A responsible Government would know the right answer.
There is something strange happening in the gold market, as per this blog. Export of gold from London (where it is not mined, but, rather, held as a backing for gold ETFs) has zoomed, to Switzerland. In 2012 exports were a mere 92 tonnes. In the first half of 2013 it is 797 tonnes. It appears that this gold is being melted to smaller sizes for export to Asia. Presumably most of it is smuggled into India, as import duties have been myopically hiked.
There is another interesting article titled ‘Hawala Logic’ by Anand Ranganathan, which points to the sharp fall in the rupee versus the US $ in the months preceding a general election, presumable to fetch more rupees when the $s stashed abroad are brought back. The only exception was when the BJP was in power in 2004 and the rupee appreciated.
It is possible that the Government may announce another amnesty scheme, in which those with funds stashed in Swiss banks and other offshore centres (which the Supreme Court is insisting on taking action against) can be brought back with a smallish penalty. 
The fall in the rupee more than pays for the penalty. Then the Government will take credit for the strengthening of the rupee. The stock market, where the money will be invested after the recent fall, could bounce back, and everyone will sing happy days are here again. This is just a hypothesis.
Last week the BSE-Sensex lost 79 points to close at 18,519, and the NSE-Nifty dropped 36 to end at 5,471.
International factors are ominous. As per this blog ‘What Happened in 1987’ the current rally since 2012 in US markets is driven entirely by valuations, and not by earnings. The US Fed is likely to taper off its bond buying programme from September, and is to have a new boss who may be more hawkish. On the flip side, should PC come out with a disclosure scheme that would lead to funds stashed abroad coming back, it could lead to a rally. If not for that, the economy, the currency and the stock market would continue to slide. Of course, the Government is not responsible.

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J Mulraj is a stock market columnist and observer of long-standing. His weekly column on stock markets has run for over 25 years. An MBA from IIM Calcutta, he has been a member of the BSE. He is now India Representative for Institutional Investor. A keen observer of events and trends, he writes in a lucid yet readable style and takes up issues on behalf of the individual investor. Nothing pleases him more than a reader who confesses having no interest in stock markets yet being a reader of his columns. His other interests include reading, both fiction and non fiction, bridge, snooker and chess.


Why Gold Prices are rising?



The reason why the gold prices are galloping

By Dr Bharat Jhunjhunwala

 

The global investors are today looking for an alternative storehouse to keep their wealth. They want to exit the Dollar, Euro and Yen. This alternative storehouse they are finding in Gold. Thus, the price of gold is likely to increase more in the near future.

 

It will be plainly understood by the reader that the value of the paper, on which a 1,000-rupeenote is printed or the paper on which a cheque of Rs. 1 crore is written, is scarcely 1 paisa. Or, the value of the paper, on which a property valued at Rs. 10 crore is registered, may only be a few lakh rupees. The value of these papers arises from the backing of the matter written thereon. The 1,000-rupee note is valuable because the Reserve Bank of India guarantees to redeemit. A cheque is valuable because the bank is ready to honour it. The document of a property is valuable because the police are committed to restore possession of the owner. It will be clear from the foregoing that value of a currency arises from the ability of the central bank to back it with real assets.

The American dollar was backed by the US government in this manner after the Second World War.The American Federal Reserve Bank guaranteed that it would provide an ounce of gold for $35 to anyone who demanded this. In this situation it was profitable for people to keep their wealth in form of dollars instead of in gold. They could deposit the dollars in a bank and earn interest on it. They could withdraw the dollars from the bank and convert them into gold whenever they wanted. Keeping wealth in form of gold did not earn interest. This was the reason that the dollar acquired the status of the “world currency”.

The situation changed dramatically in 1971. Oil-producing countries of West Asia formed a cartel by the name of OPEC and raised the price of oil overnight from about $1-2 a barrel to $11. Subsequently, they raised it to about $21 a barrel. The American economy started feeling the pressure of expensive oil. People were worried whether the Federal Reserve Bank would be able to honour its guarantee of exchanging $35 into an ounce of gold. There was a run on the dollar. This forced the Federal Reserve Bank to withdraw the guarantee. The gold standard was abandoned. The dollar was no longer freely convertible into gold. This was the beginning of the end of dollar supremacy. The writ of the dollar continued, however, because the United States accounted for more than one-third of the global economy at that time.

The US economy began to crumble in the nineties in large measure due to the wars in Iraq and Afghanistan. The American government did not have the money to wage these wars. American people also did not have the income to consume goods produced by rest of the world. America adopted Charvaka’s dictum: “Borrow and Drink Ghee”. The Federal Reserve Bank sold US Treasury Bonds in large quantities to raise moneys for the wars and for consumption by the American people.

Coincidentally, China was seeking modern technologies at the same time. China invited American multinationals to come with frontline technologies and establish manufacturing facilities in China to produce goods for exports to their home countryChina provided these multinationals with cheap labour having virtually no protection of labour laws andcheap electricity and minerals. The multinationals exploited these cheap resources and exported goods to America. The problem was that America did not have the money to pay for these imported goods. China stepped in and started buying US Treasury Bonds. China provided the money to America to buy Chinese goods much like automobile companies provide loans to buyers. America sold US Government Treasury Bonds and bought goods from China and waged wars on Iraq and Afghanistan. In the last decade, this led to China accumulating US Treasuries to the tune of$1,400 billion. This accumulation of US Treasuries was okay as long as the US economy was strong.

There were limits to this policy of borrowing for consumption, however. Last two years have seen this truth dawning upon global investors including China that the US was living beyond its means. Most expect the dollar to decline further. Investors stopped investing in dollar-denominated assets. The extent of decline of the US economy can be gauged from the fact that the price of Gold has increased from $35 to $1,000 an ounce between 1971 and 2009.

This decline of the US economy is not clearly visible today. The dollar has risen against the rupee, for example. Four years ago, the price of a dollar was Rs. 40 as against Rs. 48 today. But this is deceptive for two reasons. One, the Indian rupee has decline parallel to the dollar because the Indian government has been as profligate as the American government. Both are declining as two persons holding each other drown in the river together. Secondly, American companies have brought back investments made by them in foreign countries after the crisis has struck at home. This inflow of dollars is temporarily pushing up the value of dollar against other currencies. The rise in dollar against the rupee, therefore, does not cancel the long-term decline in the dollar, which is plainly visible in the steep increase in the price of gold since 1971.

The decline of the dollar has removed the only ‘safe’ storehouse of wealth. The dollar was considered safe in the last 60 years after the Second World War. The value was reduced to one-half upon abandonment of the gold standard in 1971. The American economy continued to dominate the world, however, because it was the largest and technologically most advanced. The remaining value of the dollar has declined in the last two decades, in part, because of the wars launched by that country. The global investors are reluctant to invest their money in dollar-denominated assets like US Treasury Bonds, property in Manhattan or shares of US companies because the future of the US economy and value of the dollar are no longer stable. My assessment is that the world economy will face another crisis, perhaps worse than the present one, in the coming two-three years. The US Dollar, European Euro and Japanese Yen will all crumble because the high wages of these economies are no longer sustainable against the high-technology low-wage combination wielded by India and China.

The global investors are today looking for an alternative storehouse to keep their wealth. They want to exit the dollareuro and yenThis alternative storehouse they are finding in GOLD. Thus, the price of gold is likely to increase more in the near future. There may be a temporary decline for a year or so as the Western economies grow on the back of the stimulus packages. But this facade will collapse as soon as the time comes to pay for the stimulus packages. Therefore,GOLD is likely to shine in the times to come.

From Wikipedia, the free encyclopedia

Dr. Bharat Jhunjhunwala

Born 1950
Education University of Florida, Kanpur University
Occupation Columnist and consultant

Dr. Bharat Jhunjhunwala acquired his Bachelor’s Degree in Science (Physics, Chemistry and Mathematics) from Kanpur University and doctorate in Food and Resource Economics from University of Florida in 1973 at the age of 23. He has published academic papers inThe American Economist and the Southern Economic Journal.

He was Assistant Professor of Economics at the Indian Institute of Management, Bangalore. He has been a freelance columnist and consultant to donors and NGOs since 1993.


— 

US Economy


 
So long as the US Dollar is considered as a world currency, the US can continue to live on the borrowed money. The US cannot sustain US$16 trillion debt for a long time. Once Euro or Yuan get accepted as trading currencies, the Japanese, Chinese and other creditors will shift their funds from the US. The US will also face the same problem that Greece, Spain, Italy and other European countries with very high level of debt are facing today once its debt/GDP ratio reaches these nations. The common economic sense demands that like individuals/families, every country has to live within its own means. The Japan’s problem is basically its high internal debt but it has a very large foreign exchange reserves and favorable trade balance and therefore Japan will not collapse.
India’s economic problems have nothing to do with its rate of savings. It is the corrupt and criminal politicians who have messed up the Indian economy. India has a huge internal demand which gets constrained by lack of  the supply side, viz. essential commodities like food etc. More than 50% of people live below the poverty line and the money poured into different government welfare schemes is eaten up by the corrupt and criminal politicians and bureaucrats instead of reaching the poor & hungry people. Besides, a lot of subsidies are given by GOI because it is politically popular and which brings in votes for the ruling party. This has resulted in a large internal deficit leading to high inflation and slowing the economy.