2011 was bad but 2012 will be worst

2011 was the year in which equity markets were almost flat and volatile in small range. The prices of gold and silver plumbed almost 20% in 2011. This rise in price of precious metals shows that it is better to invest in safe heaven, being the best hedge against inflation.


The last quarter of 2011 was even more worse where the inflation remained high at 9.8% and also the interest rates rose. This shows a negative sign of the economy where even the IIP numbers were on a sharp decline -5%.
RBI in its monetary review on 16th Dec 2011 needs to look in this issue and find some measures to cut on rates. As firms which are capital intensive tend to borrow less and so produce less in times of rising interest rates and hovering inflation. This affects the growth of overall economy. Considering the current situation where there is financial crises in Europe the demand for products is less so exports are declining. Over which the depreciation in Rupee 53.65 vs a dollar is another concern affecting the exporters and has also increased government expenditure and lead to fiscal deficit.


So what I conclude is all problems are carried forward in preceding year (2012) missing to look for solutions of problems of 2011. Which are the depreciation in rupee, out flow seen by foreign investors, fiscal deficit, rising government expenditure, rising interest rates, rising inflation, political instability, pending corruption charges etc. Affecting the sentiments of foreign investors.  All old problems are carried away and new problems shall arise out of these issues making 2012 more worse than 2011. Experts predict that current financial crises is far more worse than The Lehman crises. Our government claims that India has a shield against global financial crises but the domestic issues mentioned above are also the hampering factors affecting growth of our nation. All we need is efficient and effective governing bodies who can resolve this issues.

KHP