The Times: “Festival season is fast approaching in India, with a feeling in some ways equivalent to the run-up to Christmas in the West, and, right on cue, a would-be Scrooge has stepped forward.
Palaniappan Chidambaram may have little option, of course. The country’s embattled Finance Minister is struggling to shore up a collapsing rupee and revive a moribund economy, all with less than nine months to go before national elections.
So last week, as the rupee sank to fresh, record lows against the dollar — and with Diwali, the Hindu festival of lights looming in November — a panicking Mr Chidambaram wheeled out his latest package of measures designed to bolster the currency.
In a move that many Indians viewed as being distinctly short on seasonal good cheer, he slapped a ban on imports of gold medallions and coins, extending an attempt to curb the nation’s voracious appetite for the metal. Other measures included a reduction in the amount of cash that Indians and companies may remit overseas from $200,000 to $75,000 a year, a rule that Mr Chidambaram argued unconvincingly did “not amount to capital controls”.
Yet if the latter measure will not endear him to the millions of Indians with friends and relatives studying overseas, it is the gold ban that could prove a bigger issue. India’s lust for gold is undimmed and trying to temper it before the polls next spring — and before the wedding season that peaks around Diwali — could be catastrophic for the ruling Congress party.
The markets, certainly, were unimpressed by the minister’s efforts, sending the rupee crashing to new lows within hours of the announcement. The sell-off continued yesterday.
With the sliding rupee already forcing up the price of goods from petrol to food, Congress is desperately searching for new ways to head off a full-blown financial crisis as Indians prepare to vote. And while there is only so much that can be done to curb the nation’s demand for imported crude oil, the single biggest strain on India’s current account deficit, reining in India’s gold addiction may seem the next best alternative.
If his latest measures don’t work, and with that election due, it looks increasingly as if Mr Chidambaram’s days as Finance Minister may be numbered, one way or another.
As if policymakers didn’t have enough on their plates, India is in the grip of a new crisis. Last week, ministers held emergency talks to address a 36 per cent surge in the wholesale price of onions over a single weekend.
Onions are a key ingredient in virtually every Indian dish, so are viewed as almost as much of a staple crop as rice. Thus a fall in onion production prompted by poor harvests in the nation’s south has proved politically explosive. Shoppers have staged angry protests.
Yet there may be a welcome extra dish to this sorry tale. One option being considered by ministers is a loosening of trade restrictions with Pakistan, arch-foe and nuclear-armed rival, to start emergency onion imports.”
via Bombay mix: Party pooper’s move takes golden glow off festival of lights | The Times.
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