Very interesting discussion. I was actually thinking as to why the heck is rupee falling when US is trying to be protectionist. Thanks to you, I have recognised that it is the elephant which is ensuring rupee depreciates and inadvertently promoting inefficiency and lack of innovation in our country. Great insights with regard to NDF and LRS as well. Thanks a ton.
That's not a fight. In fight both parties know they're fighting and trying to defeat each other. Dollar doesn't even know something called Rupee even exists.
International finance question: Imagine. India and Sri Lanka have a very similar exchange rate. India feels that because it's a vishwaguru, the exchange rate should be 100 indian rupees gets you 110 Sri Lankan rupees. Across the straits, Sri Lanka feels the opposite. "We're a neat little country. Surely we are better? We will give 110 Indian rupees for every 100 Sri Lankan rupees" Now there's an enterprising young man, Swami, who lives on the edge of the strait. He has relatives on both sides, so he really doesn't know if he's indian or sri lankan. One morning, finding himself on the Indian side, he borrows INR 100 from his uncle, goes to the bank in the village and changes it to LKR 110. Then he borrows his cousin's boat and rows over to the Sri Lankan side. There, he changes LKR 100 into INR 110, and with the LKR 10 left over, buys a beer. Then he rows over to the Indian side and returns the INR 100 to his uncle (and the boat to his cousin) and with the INR 10 left over, has a beer. The question is, who paid for the beers?
It would be helpful to put charts regarding price changes in India based on core inflation and food inflation from 2012 to 2024. Some people say there might be divergence from time to time but over a long period of time they converge.
India will remember 2 finance ministers for a very long time. One was Dr. Manmohan Singh. And the other one is Nirmala Sitharaman. Both because of their work and what they did to the economy. 😂
I don't know why this much hate for FM. Indeed, taxes needs to be reduced. But, people forgotten how she and RBI guv controlled in Covid times. I believe she is the best FM India ever had.
Awesome! Well articulated What’s your worldview on an uber common currency framework? Currency exchange is arbitrary and mainly benefits brokers & dealers. How would it play out?
There is no point of a common currency. Each country must at least expand its currency to the extent of productivity gains. What we want is more bilateral trade with the rupee as a potential long term trading currency
Hey @CapitalMind, I absolutely love the content you guys create! 🙌 Would it be possible to create a new channel, maybe something like "CapitalMind Shorts"? It could focus on clear, concise videos under 15 minutes. That way, we can enjoy quick, to-the-point content for those of us who prefer shorter formats. 😊 Keep up the great work! 👍
@@lionellawrence5798 Just because you dont agree with him you label him something and categorize him? It's you who is showing Bhakt like mentality. Get well soon.
@@sudarshanonkar123The NEER/REER that Deepak says is flawed is one of the key metrics the RBI uses. He is advocating for adding services when calculating the weight of the country. This is already there (FEER) but nobody takes it seriously. The NEER or REER is used and taken seriously because they make sense in relation to India. Goods trade-based weights as used in REER/NEER are most suitable to see the overvaluation or undervaluation of currency because of two reasons: a) Suppose Indonesia and India both are producing something that they trade with the rest of the world with the same efficiency. Now if the INR appreciates vs. IDR, the world will start buying from Indonesia because our export prices are higher. This shift will happen because goods are commodities and there is no customer experience involved. This does not happen so quickly in services because there is customer experience involved. For a 3% change in currency, nobody will change their plans from Bali to Goa. Hence, traded goods are the ones used. b) In the services sector(IT exports), India is not competing with other emerging markets but with the US and the developed world, where the cost advantage is huge. On the other hand, we want to improve manufacturing. INR appreciation will hardly affect services exports (apart from salaries going down and profit margins decreasing) but will kill India's manufacturing sector. Hence, the RBI does not want the Rupee to appreciate and uses trade-based weights to check the fair value of the Rupee. A counter argument is: why not make the INR depreciate? Unfortunately, India imports a large part of its oil and virtually all of its gold (so-called financial assets). INR depreciation will affect oil prices in India, and everything will become expensive. There are proper models maintained by the RBI estimating INR depreciation's effect on inflation (based on VAR), and it is regularly published in their bulletin. So, what is the best course of action by the RBI? Gradual depreciation of the INR. It can help exports and limit the inflation effect. Second is: why not keep lower reserves? 350 billion, as suggested by Deepak, is marginally more than what we had in 2013 (approx six month of import cover). In 2013, the yields of US Treasury bonds surged , after Federal reserve announcement of a possible tapering of its policy of quantitative easing. There were massive outflows of capital, and the INR started depreciating quickly. Additionally India's twin deficit ( current account and fiscal deficit ) was branded bad and relatively low import cover made India a part of ' Fragile Five's economy. There was assymetrically large effect on the Indian currency when capital outflow happens compared to less financialized economies like Vietnam. INR fell as much as 15% in between May and September 2013. Since the US was doing well economically, crude prices were high (100 dollars plus), and so was India's inflation. The RBI should have defended the INR against this, but they could not, as their import cover was lower, and they did not have the power to lower volatility. So, they did what they could: They jack up interest rates in an attempt to stop inflation and stem the fall of the INR. In this process, they slowed the economy considerably, and its effect was seen in the next general election. This happened even when the Federal Reserve did not tighten liquidity. Just words were enough. Lesson learned: the RBI increased their reserves to at least 10 months of import cover. Next: Why not treat gold held by the public as a financial asset, as suggested in the podcast? Because Indian households do not sell it when their economy is weak. For Indian households, it's the asset of last resort. India has not been a net exporter of gold in a long time. This is in contrast with other countries where households accumulate gold and sell when the economy is weak. For example, Thailand. Gold is important to Thai culture, and it is highly esteemed as an investment asset and a store of value. Next to cash, Thai people perceive gold as a highly liquid asset. It's an important part of their religious ceremonies, but unlike Indians, Thai people sold their assets in local shops when the economy was in distress ( as in 2019), which made way to international markets, and Thailand became one of the top 10 exporter of gold despite not producing any of it. On the other hand, the RBI actually treats gold as a financial asset and trade as it finds suitable and hence it makes sense for them to treat it as an asset. Now let's see his suggestion of an NDF market. But before that, let's see how India got the GIFT Nifty here. They had an agreement with the owner of SGX Nifty, and GIFT exchange bought it. Boom, SGX Nifty turns to GIFT Nifty. But FX is different. There is not one big broker that controls this market. In the morning, trade happens in Japan, Singapore, and Hong Kong. Action then shifts to Mumbai, and as Europe rises, it shifts to London and late at night in the US. Unlike a stock future where there is a cost for maintenance, every Tom, Dick, and Harry can trade the INR and its forwards. So there is effectively no one SGX Nifty to target. In fact, globally, the FX market turnover is over 5 trillion dollars each day, and only a person out of his depth will compare it to equity trades let alone Nifty futures. Guess what! a large part of EUR USD trade happens in London. This contribute to overall liquidity of the FX pair. Let's bring INR NDF trades in India brigade just look foolish once one understands dynamics of FX market. For historical reasons, London is one of the biggest FX trading markets, and a large amount of forwards are traded there. Forward markets are already there in India. It's just a third or even lower as a percentage of the global INR NDF market. I can go on and point out other things here, but here is the end of my rant.
Very interesting discussion. I was actually thinking as to why the heck is rupee falling when US is trying to be protectionist. Thanks to you, I have recognised that it is the elephant which is ensuring rupee depreciates and inadvertently promoting inefficiency and lack of innovation in our country. Great insights with regard to NDF and LRS as well. Thanks a ton.
Amazing and great points. Thank you for this. And great questions, was very engaging and informative
That's not a fight. In fight both parties know they're fighting and trying to defeat each other.
Dollar doesn't even know something called Rupee even exists.
Please start time stamping your videos. Great stuff!
International finance question:
Imagine.
India and Sri Lanka have a very similar exchange rate. India feels that because it's a vishwaguru, the exchange rate should be 100 indian rupees gets you 110 Sri Lankan rupees.
Across the straits, Sri Lanka feels the opposite. "We're a neat little country. Surely we are better? We will give 110 Indian rupees for every 100 Sri Lankan rupees"
Now there's an enterprising young man, Swami, who lives on the edge of the strait. He has relatives on both sides, so he really doesn't know if he's indian or sri lankan.
One morning, finding himself on the Indian side, he borrows INR 100 from his uncle, goes to the bank in the village and changes it to LKR 110. Then he borrows his cousin's boat and rows over to the Sri Lankan side. There, he changes LKR 100 into INR 110, and with the LKR 10 left over, buys a beer.
Then he rows over to the Indian side and returns the INR 100 to his uncle (and the boat to his cousin) and with the INR 10 left over, has a beer.
The question is, who paid for the beers?
This is common in Indian folklore and known as our-beer-traj after Mr Thangamay Raj who invested it. But it was needlessly anglicised into arbitrage.
@@DeepakShenoy hahaha!
Terrific interview! Enjoyed every minute, and learned a LOT
Danke! Deeply honoured and looking forward to Naren is typing... :)
@DeepakShenoy :D
It would be helpful to put charts regarding price changes in India based on core inflation and food inflation from 2012 to 2024. Some people say there might be divergence from time to time but over a long period of time they converge.
India will remember 2 finance ministers for a very long time. One was Dr. Manmohan Singh. And the other one is Nirmala Sitharaman. Both because of their work and what they did to the economy. 😂
Deep very deep.
Probably no one realised her importance in Covid times. Yes, tax needs to be reduced. But, I believe she is one of Best fm India ever had.
I don't know why this much hate for FM. Indeed, taxes needs to be reduced. But, people forgotten how she and RBI guv controlled in Covid times. I believe she is the best FM India ever had.
Sorry this fall is Global currency issue....not just with Rupees....
lol check what happened to the Indian rupee at the end of MMS’s tenure. It was an absolute shitshow
While we love thepisodes.. how to get the transcripts?
Thank you so much 🙏
Really enlightening 👌👌👌
Awesome! Well articulated
What’s your worldview on an uber common currency framework? Currency exchange is arbitrary and mainly benefits brokers & dealers. How would it play out?
There is no point of a common currency. Each country must at least expand its currency to the extent of productivity gains. What we want is more bilateral trade with the rupee as a potential long term trading currency
Every time you up the ante, Deepak sir. But, 'Dabba trading in suits', gotta be the best.
Couldn't think of a politer version :)
Thanks Sir.
Simple issue made too complicated. Could have been explained in a much simpler way.
There is PPP
👌👌👌👌
Hey @CapitalMind, I absolutely love the content you guys create! 🙌 Would it be possible to create a new channel, maybe something like "CapitalMind Shorts"? It could focus on clear, concise videos under 15 minutes. That way, we can enjoy quick, to-the-point content for those of us who prefer shorter formats. 😊 Keep up the great work! 👍
ADHD kid alert.
Aree... Kehna kya chahte ho???
This is easily the most un-informed capitalmind podcast. Maybe they were toying with something which they hardly understand.
Please elaborate and counter with facts and don't make arbitrary statements... Infact this is most informative podcast
@@sudarshanonkar123he should be a bhakt
@@lionellawrence5798 Just because you dont agree with him you label him something and categorize him? It's you who is showing Bhakt like mentality. Get well soon.
Some one, deleted my comment when I say why FM is one of the best India till has. Lol.
@@sudarshanonkar123The NEER/REER that Deepak says is flawed is one of the key metrics the RBI uses. He is advocating for adding services when calculating the weight of the country. This is already there (FEER) but nobody takes it seriously. The NEER or REER is used and taken seriously because they make sense in relation to India. Goods trade-based weights as used in REER/NEER are most suitable to see the overvaluation or undervaluation of currency because of two reasons:
a) Suppose Indonesia and India both are producing something that they trade with the rest of the world with the same efficiency. Now if the INR appreciates vs. IDR, the world will start buying from Indonesia because our export prices are higher. This shift will happen because goods are commodities and there is no customer experience involved. This does not happen so quickly in services because there is customer experience involved. For a 3% change in currency, nobody will change their plans from Bali to Goa. Hence, traded goods are the ones used.
b) In the services sector(IT exports), India is not competing with other emerging markets but with the US and the developed world, where the cost advantage is huge. On the other hand, we want to improve manufacturing. INR appreciation will hardly affect services exports (apart from salaries going down and profit margins decreasing) but will kill India's manufacturing sector.
Hence, the RBI does not want the Rupee to appreciate and uses trade-based weights to check the fair value of the Rupee. A counter argument is: why not make the INR depreciate? Unfortunately, India imports a large part of its oil and virtually all of its gold (so-called financial assets). INR depreciation will affect oil prices in India, and everything will become expensive. There are proper models maintained by the RBI estimating INR depreciation's effect on inflation (based on VAR), and it is regularly published in their bulletin. So, what is the best course of action by the RBI? Gradual depreciation of the INR. It can help exports and limit the inflation effect.
Second is: why not keep lower reserves? 350 billion, as suggested by Deepak, is marginally more than what we had in 2013 (approx six month of import cover). In 2013, the yields of US Treasury bonds surged , after Federal reserve announcement of a possible tapering of its policy of quantitative easing. There were massive outflows of capital, and the INR started depreciating quickly. Additionally India's twin deficit ( current account and fiscal deficit ) was branded bad and relatively low import cover made India a part of ' Fragile Five's economy. There was assymetrically large effect on the Indian currency when capital outflow happens compared to less financialized economies like Vietnam. INR fell as much as 15% in between May and September 2013. Since the US was doing well economically, crude prices were high (100 dollars plus), and so was India's inflation. The RBI should have defended the INR against this, but they could not, as their import cover was lower, and they did not have the power to lower volatility. So, they did what they could: They jack up interest rates in an attempt to stop inflation and stem the fall of the INR. In this process, they slowed the economy considerably, and its effect was seen in the next general election. This happened even when the Federal Reserve did not tighten liquidity. Just words were enough. Lesson learned: the RBI increased their reserves to at least 10 months of import cover.
Next: Why not treat gold held by the public as a financial asset, as suggested in the podcast? Because Indian households do not sell it when their economy is weak. For Indian households, it's the asset of last resort. India has not been a net exporter of gold in a long time. This is in contrast with other countries where households accumulate gold and sell when the economy is weak. For example, Thailand. Gold is important to Thai culture, and it is highly esteemed as an investment asset and a store of value. Next to cash, Thai people perceive gold as a highly liquid asset. It's an important part of their religious ceremonies, but unlike Indians, Thai people sold their assets in local shops when the economy was in distress ( as in 2019), which made way to international markets, and Thailand became one of the top 10 exporter of gold despite not producing any of it. On the other hand, the RBI actually treats gold as a financial asset and trade as it finds suitable and hence it makes sense for them to treat it as an asset.
Now let's see his suggestion of an NDF market. But before that, let's see how India got the GIFT Nifty here. They had an agreement with the owner of SGX Nifty, and GIFT exchange bought it. Boom, SGX Nifty turns to GIFT Nifty. But FX is different. There is not one big broker that controls this market. In the morning, trade happens in Japan, Singapore, and Hong Kong. Action then shifts to Mumbai, and as Europe rises, it shifts to London and late at night in the US. Unlike a stock future where there is a cost for maintenance, every Tom, Dick, and Harry can trade the INR and its forwards. So there is effectively no one SGX Nifty to target. In fact, globally, the FX market turnover is over 5 trillion dollars each day, and only a person out of his depth will compare it to equity trades let alone Nifty futures. Guess what! a large part of EUR USD trade happens in London. This contribute to overall liquidity of the FX pair. Let's bring INR NDF trades in India brigade just look foolish once one understands dynamics of FX market. For historical reasons, London is one of the biggest FX trading markets, and a large amount of forwards are traded there. Forward markets are already there in India. It's just a third or even lower as a percentage of the global INR NDF market.
I can go on and point out other things here, but here is the end of my rant.
So Shray does not know who Tina Turner is. Blasphemy!
rising unemployment, runaway inflation,rupee going down every year,i growth just population and pollution
ur hollywood stories are nice we are living in real life if we allow more to go out politicians will sell country lol 🤣
Dude $250k per person is alot! You think an average indian had $2.3 cr just sitting in the bank account
Sab bakwas... Old topics and older views