ON Wednesday, August 12, the rupee sank to a record low of 43.35 against the dollar. The 30-share BSE Sensitive Index dropped to a years low of 2924.24. Matters evidently went a little out of hand because the Reserve Bank of India felt it necessary to break a self-imposed silence of three months and intervene to pull the rupee back. With the Japanese yen weakening and the Chinese yuan teetering at the edge of devaluation, Indias financial markets seemed quite set on a rolldown last week. Add to this the depressed economic sentiment inside the country and one quite understands the earnest efforts of the VHP to put the legend "In God we trust" on every currency note.
Despite the much-awaited turnaround proving a mirage time and again, finance minister Yashwant Sinha is a fiercely optimistic man. Said he in a recent interview: "We dont have to wait long. I think by September or October the present mood of gloom in a section of our trade and industry will be replaced by hope...Investor confidence will return. Both domestic and foreign investment will pick up and the present blues will soon be forgotten."
Can we believe this man? After a slowdown that has lasted close to three years contrary to all expectations, are we about to turn the corner? Will economic sentiments, which have of late touched the rock-bottom of despondency, at last bounce back? Is the economy finally waking up from a long, lethargic inertia?
Few are willing to bet on it. Says a cagey Amit Mitra, FICCI secretary-general: "Its risky to make any prediction now. The downtrend has lasted longer than we expected. We still hope that revival is round the corner, at least by the end of the fiscal year." Adds economist and director with Rajiv Gandhi Foundation Bibek Debroy: "I dont see any signs of the gloom lifting in the coming months. All the government has done so far is to make a lot of noise about its intents. But you need some definitive action." Explains Shubhashis Gangopadhyay, professor, Indian Statistical Institute: "Information available with us doesnt indicate the gloom lifting in the immediate future. Perhaps the government is hopeful on the basis of the latest economic data." But there are optimists too. Says economist Surjit S. Bhalla: "I tend to agree with Mr Sinha, though not for the same reasons. Im quite bullish about the future because I think the worst is definitely over."