dEC 2014
Russia is dependent on revenues from oil and contributes around half of the revenues of the government and makes up for two-thirds of the exports. A study puts the break-even cost of the Russian budget at an oil price of $105 per barrel. Foreign investors are selling their investments in roubles and buying dollars, leading to an increase in demand for dollars vis a vis roubles and the crash of the rouble .The Russian central bank recently estimated that capital flight could touch $130 billion this year.
The immediate lesson for us is to go slow on easing key rates as the returns on government debt are on the higher side vis a vis other countries and lower rates would kindle outward flow of external investments. And that would not be good news on the rupee front.The FM would do well to be patient on key rates and let RBI use its judgement .
Russia is dependent on revenues from oil and contributes around half of the revenues of the government and makes up for two-thirds of the exports. A study puts the break-even cost of the Russian budget at an oil price of $105 per barrel. Foreign investors are selling their investments in roubles and buying dollars, leading to an increase in demand for dollars vis a vis roubles and the crash of the rouble .The Russian central bank recently estimated that capital flight could touch $130 billion this year.
The immediate lesson for us is to go slow on easing key rates as the returns on government debt are on the higher side vis a vis other countries and lower rates would kindle outward flow of external investments. And that would not be good news on the rupee front.The FM would do well to be patient on key rates and let RBI use its judgement .
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