The month of June has witnessed some major financial events that are likely to shape the future of economic development globally. The fear of a dramatic Grexit that kept the world on edge has finally subsided for some time after Greece election results. The emergence of pro-Europe parties in the Greece’s election should relax fears that a country will leave the euro for the first time and unleash global financial turmoil. However, the slim majority won by pro-bailout parties in Greece elections and worries about the Spain’s fiscal and banking problems kept tensions high.
Another major event this month has been the meeting of the G20 members in Las Cabos, Mexico. The dangers that Europe’s escalating debt crisis would drive the global economy back into recession for the second time in less than four years dominated the summit of G20 leaders of industrialized and developing nations, which represent over 80 per cent of world output. European countries showed at the Group of 20 summit that they were considering major steps to integrate their banking sectors so as to break the cycle of highly indebted countries and rescue their banks, which only pushes governments ever deeper into debt.
This year’s meeting of United Nations Conference on Sustainable Development dubbed Rio+20 aimed at setting an agenda for policymakers to act in the coming decades, and promote cuts in fossil-fuel subsidies, support for the use of renewable energy and measures to protect oceans. However, as any agreement will have no force as a treaty, the Rio+20 ended with a whimper rather than a bang compared to the legacy of its predecessor, the 1992 Rio Earth Summit, which led to major conventions on climate change and biodiversity.
In India, RBI kept policy rates unchanged in its mid-quarter monetary policy review because of high headline inflation. The market indices reacted negatively to the news. In spite of a sharper than expected rate cut of 50 basis points in April, slowdown in activity, particularly in investment, showed that the role of interest rates is relatively small and a further rate cut could exacerbate inflationary pressures rather than spur growth. The RBI stance had another adverse impact causing rupee to depreciate to 55.83/84 to a dollar on the day of the review and to its all-time low of 57.12 against the dollar days later.
In another major development, Standard & Poor’s warned that India could become the first BRIC economy to lose its investment-grade credit rating. In a similar move, Fitch added further insult to injury by revising India’s outlook from stable to negative at BBB-.
This issue brings to you some more interesting and insightful reads. The cover story this month focuses on financial woes of solar power in India. The issue also features articles on regulations in Insider Trading in India, company valuations and implications of regulating propriety trading of financial institutions. The Classroom this month explains the nuances of Leveraged Buyout.
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