'FII inflows, falling dollar fuel optimism'
By siliconindia   |   Tuesday, 21 October 2003, 19:30 IST
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MUMBAI: The sources for the feel good factor prevalent in the economy are two external parameters — rise in stock indices driven by FII inflows and uniform depreciation of the dollar against major currencies, feels S Narayan, economic advisor to the Prime Minister. At a meeting hosted by Indian Merchants Chambers (IMC) here today, he said, “If one looks around, the stock markets in all Asian economies including India have risen by 16% to 72% during the March-October period. In India , the rise was 57%.” “The drivers (for the rise in stock markets) are the same as in India . The FIIs see value addition in these markets. That is because they see less value addition in New York or London . The opportunities in these markets are more,” he said. “The second issue to see is the dollar’s depreciation against major currencies. The euro is strengthening (against the dollar) and Japanese yen is forced to strengthen. The pressure is also on Chinese remimbi,” Narayan said. Narayan said the cause of the dollar’s depreciation could be traced to the US fiscal deficit. “The US deficit is growing at $1 million a minute. This is a huge percentage of GDP,” he said. “The dollar’s depreciation can be linked to imbalances in alternate currencies,” he added. Narayan felt if the economy wanted real growth, it should focus on topline growth. “In the gross profits of companies, we see that growth is coming from bottomlines. Only 5-6% is due to topline growth,” Narayan said. (source: Economic Times)