The Hindu Business Line : Perpetual optimism is a force multiplier

REDDY has spoken once again. Almost 15,000 words making up one lakh of characters, where there is no lack of his characteristic optimism. Such as, "Prospects for sustained growth in industrial output have improved in an environment of rising investment and export demand, strong corporate profitability and buoyant business confidence." And "Exports of manufactured goods and services remain buoyant and the international business environment and investor confidence in India continue to remain positive." But there are anxious questions...

Any more happy tidings?

If you are ready to digest more of good news, the banker of bankers has more to offer: `Domestic production and imports of capital goods have risen strongly in tandem, indicative of ongoing capacity expansion'; and `with continued business expansion and lower interest costs, corporate profitability is high.' Also, `there is an expansion in internal resources available for investment,' all showing in the `upbeat sentiments and a brightened investment climate.' Just look around!

Overly optimistic, can we say?

Norman Cousins counsels, "Optimism doesn't wait on facts. It deals with prospects. Pessimism is a waste of time." However, Reddy offers a lot of facts. For instance: "excess or normal rainfall was observed in 32 of the 36 meteorological subdivisions"; and "outstanding credit-deposit ratio increased to 65.8 per cent from 58.4 per cent a year ago, and the incremental non-food credit-deposit ratio declined to 75.2 per cent as compared with 92.9 per cent." If numbers frighten you, remember what Oscar Wilde said: "The basis of optimism is sheer terror."

No bad news at all?

Unfortunately, the statement speaks of a few not-so-good things too that drag down the otherwise good mood. But fortunately, there are factors to compensate and pull up the economy that the Guv serves alongside. For example, "The elevated level of international crude prices imparts downside risks to overall GDP growth." Yet, to reduce your downside, the Master of Mint Street points out, "At the same time, the robust industrial and service sector growth and buoyant exports are likely to have some positive impact on growth."

My crude belief is that we're all safe when the Guv fights for all of us, right?

Be warned, though, that shocks can be rude. Because: "The full effects of the pass-through of the increase in international oil prices have so far been dulled and the underlying inflationary pressures have been contained. Crude prices continue to remain the most critical factor in the outlook on domestic inflation. In the remaining part of the year, inflation conditions will warrant continuous vigil in view of the heightened uncertainties surrounding international crude prices and the eventual pressures for fuller pass-through into domestic inflation." In short, be ready for fuel price hikes! When a significant part of what may be considered as permanent component of oil price increase is yet to be passed on, there is a need to consider two factors, cautions the Guv: "First, the advisability of treating the oil price increase as a shock rather than a permanent shift in relative prices may need to be questioned; and, second, the inevitability of second order effects on inflation needs to be taken on board." Are you with me?

Psst... who is Mr Repo? Suna that he's gone back, I mean, reversed?

Repo is "an agreement in which one party sells a security to another party and agrees to repurchase it on a specified date for a specified price," as www.moneyglossary.com defines. Reverse repo is a repurchase agreement, explains www.bloomberg.com. Repo is short for repossess, informs Encarta. A statement that can shake you from repose and make you reverse is: "Notwithstanding the MSS operations, surplus liquidity conditions resulted in the reverse repo volumes tendered under the LAF increasing... Up to July, the absorption of liquidity through the MSS was offset by decreasing reverse repo levels."

Perpetual optimism is a force multiplier, encourages Colin Powell. But Krzysztof Kieslowski may feel queasy about that, because to him optimism is two lovers walking into the sunset arm in arm. "Or maybe into the sunrise - whatever appeals to you," he adds, as if to please you.

SayCheek@TheHindu.co.in

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Perpetual optimism is a force multiplier