Houdini Rajan.

Verily, the new Governor of the Reserve Bank is a magician. With one wave of his wand he has brought ecstasy to our markets. The rupee has strengthened from 68 to 64 to the dollar, the Sensex is up nearly 2000 points and the pundits have reemerged from their burrows to predict that the from now on the economy will start booming and the rupee becoming stronger because the old " fundamentals " have been injected with a huge shot of testosterone by " big bang reforms ". You wonder if it was so easy what the devil were they waiting for? The Food Security Bill will add another trillion or so rupees to the government expenditure and increase fiscal deficit. The Land Acquisition Bill mandates that you have to pay 4 times the market value for rural land and twice the market value for urban land. Also there are stringent rules for environmental and other clearances. Already manufacturing is contracting in India, this will bring it to a standstill. The only gainers are builders who are sitting on " land banks ", because the price of land will rise even higher and the Leader's Son-in-law because he has Rs 4 billion worth of properties. Since the only route for investing black money is in properties builders will be hoping for very fat gains. The Pension Bill allows 26% holding for foreign investors which is to bring in more dollars. Earlier it was hoped that foreign investors will be rushing in with suitcases full of dollars to invest in retail stores and airlines but not one penny has come in so far. Meanwhile India has fallen to 60 in the Global Competitiveness Index, published by the World Economic Forum, from 56 in 2011-12 and 59 a year ago. We rank 137 in women in the labor force, 130 in the inflation rate, 128 in tax rate and 128 in trade tariffs sub-indices. Livemint, 4 September. At the G20 summit our most revered Prime Minister agreed a $50 billion currency swap with Japan and a $100 billion BRICS Bank on the lines of the World Bank. Or course the money is yet to be raised. On top of that Mr Rajan has instituted dollar swaps with oil companies and committed the RBI to hedging Foreign Currency Non Resident deposits in banks at the rate of 3.5%. Earlier rates were higher. Since these are effectively dollar loans why it is producing such euphoria is hard to understand. Santa Banta economics with a dash of Rajan magic. Who can resist?