Friday, March 06, 2009

The consequences of a 15% compound growth rate are stupendous

[Miraculous effects of a rising rupee So, should anybody believe that India is about to take off? I would advise caution. Yet, one thing has changed so dramatically that it could indeed mean take-off. The rupee has started rising, and looks like keeping on strengthening. If that continues, India will indeed become an economic superpower even with no improvement at all in GDP growth... A more revolutionary change may be in the offing. The rupee has strengthened from Rs 49 to Rs 45.30 to the dollar over the last year, and forex reserves have crossed $90 billion. Exports of goods and services are booming, and dollars from both NRIs and foreign investors are cascading in. If GDP rises 5.8 per cent and the rupee appreciates 2 per cent annually, that will represent a growth of 7.8 per cent in dollar terms. What looks like a neo-Hindu growth rate will actually be a miracle-economy rate. Besides, annual population growth has fallen from its historic 2 per cent to 1.6 per cent, and will drop over the next three decades gradually to zero. This factor alone will push up per capita growth by 2 percentage points compared with the 1980s. Thus an economic miracle may emerge from India’s bedrooms, no less than board rooms. Is this realistic? Can India really sustain 5.8 per cent growth with a rising rupee? I am far from sure. But for the first time I will say that it no longer looks implausible.
Miraculous effects of a rising rupee
times of india 2 Nov 2003, 0001 hrs IST, SWAMINOMICS/

[It's a bull run, not a bubble Yet for those willing to ride the roller-coaster, I would say that the current Sensex level of around 6000 is a reasonable time to buy.... Now, the consequences of a 15% compound growth rate are stupendous. If share prices keep pace with sales and profits, a 15% growth implies that share prices will double every five years. That is, the Sensex could touch 12,000 by the end of 2008, and rise further to 15,000 by 2010. Even if profits and share prices average no more than 10% growth, the Sensex will touch 12,000 by 2010. Those levels looks outrageously high today, and some readers might wonder if I have taken leave of my senses. Let me hasten to say that I am not predicting that the Sensex will in fact hit 12,000 in five years. I am merely saying this is the level implied by annual growth of 15% per year. It's a bull run, not a bubble
If India is good enough to fear, it is good enough to invest in
The Economic Times WEDNESDAY, JANUARY 07, 2004 1:30 PM]

[If I pay by paper notes, I should politely ask the dealer, “Will you accept this debt for 10,000 rupees signed by the governor of the RBI?” If our language is exact, then so is our understanding. When I use this language, I mean that I am NOT paying money: further, that the money is to be paid by the issuer of the paper.We would all understand then that the RBI is not honouring its debts. We would understand that, in our markets, we are just passing meaningless debts around. We would be able to easily identify the criminal: Our The State. When the RBI gives its figures of “money supply,” we would all laugh. And we would laugh at all the “economists” too. The Mystery Of Banking - 5
from ANTIDOTE by Sauvik]

[When growth accelerates and creates opportunities, brain drain ceases to be an issue. Growth may not the complete answer to poverty but it is certainly an answer to brain drain. Return of the prodigal
from The Big Picture by T T Ram Mohan]

While the Sensex can be said to have grown reasonably during the last five years, the sharp fall of rupee fails explanation. [TNM]

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