Sahara’s incarcerated “managing worker” Subrata Roy — who is in a scrap with regulators over $4bn worth of convertible bonds sold, oft to impoverished farmers, in 2008 — is after a dealroom at Delhi’s Tihar jail.
Can you blame him?
If you were sitting in jail waiting for a (roughly) $1.6bn bail to be posted while being given some 6hrs leave a day to negotiate the sale of of three trophy hotels, including the Grosvenor in London, the proceeds of which would go towards meeting that bail… wouldn’t you try to hunt down a little extra calm and negotiating space? Read more
Some numbers to understand the Sahara group, India’s hotel-to-banks conglomerate:
Rs 10,000 crore (roughly $1.6bn): the amount Subrata Roy, he of the “empire built on the poor“, must pay in bail if he is to be let out of Delhi’s Tihar jail after a five month stay.
Roughly $1.6bn: the combined estimated values of Mayfair’s Grosvenor House Hotel and the Plaza and Dreams Downtown Hotels in New York, all owned by Sahara.
Six hours: the amount of time per day Roy will be let out of jail to negotiate sales of the group’s hotels once a concrete offer is made. Read more
You’ll remember this from last year, we’re sure:
Our main finding is that, on average, [rural Indian] households earn negative returns on their investments in cows and buffaloes if labor is valued at market wages: we estimate average returns of negative 64% and negative 39% for cows and buffaloes respectively. If we value the household’s own labor at zero, estimated average returns increase, to negative 6% for cows and positive 13% for buffaloes… if cows and buffaloes earn such low, even negative, economic returns, why would rural Indian households continue to invest in them?
That, from Anagol, Etang and Karlan, led to a host of speculation about various economic and cultural factors which might explain India’s ability to slide past the “central tenets of capitalism”… h/t’s to the Onion all round. Read more
Want to know why Modi is so focused on energy reform?
From Goldman’s Tushar Poddar and team: Read more
UK Financial Investments Limited as a role model? An institution that’s supposedly become “subjugated to politics”?
We suppose it depends on your starting position. And if your starting position is in front of India’s state-backed banks, well…
When your bet is on policy certainty in India, maybe it’s time to reevaluate that bet…. From BofAML:
Ignoring the risk-love silliness, we think this means a whole load of policy certainty has been priced into Indian markets ahead of the Modi-led BJP’s presumed victory in the just finished elections. From BofAML again: Read more
Compare, from Nomura:
We’d like to preface this by stating that exit polls have had a patchy record in calling election results correctly in the previous two elections. Exit polls in 2004 and 2009 were proven wrong. However, we note that even if NDA achieves a 15% lower seat count than the average prediction of 285 seats, it would still place it in a comfortable position to form the government.
Contrast, from Eurasia Group:
In the last Lok Sabha election, in 2009, for example, exit polls overestimated the performance of the BJP and its allies by 4-25% while underestimating the Congress’s tally by 22-42%. Similarly, 2004 exit polls were off by a range of 22-53% for the BJP and allies’ total and missed the mark for Congress’s performance by 8-40%.
Hmmm. Read more
If we come, will they build it? Here’s the Indian economy charted, by Citi:
If you’re short the rupee* the past few months have been uncomfortable.
Not only have (somewhat dodgy) Indian polling data pointed consistently to a stable BJP government being formed after elections which started this week, but India has also managed to get its macro house into some sort of order.
From Goldman, for example: Read more
Giant Assamese hat or controversial new RSS uniform? Either way we doubt it’ll distract from the opposition BJP’s failure to publish its manifesto on Thursday. Voting starts on April 7, btw. Read more
“If you do a Volcker, you kill the supply side, and then you are in a bad situation,” Mr Rajan said during an interview in November. Erm…
If inflation truly is public enemy number one, then Indians at last have someone who may be up to the task. Step forward Raghuram Rajan, a few months into the role of central bank governor and India’s could-be Paul Volcker.
Awkward. But it’s his own fault. Read more
Worrying imagery aside, the comparisons between Narendra Modi and either Thatcher or Reagan stand up to at least some scrutiny. And, as we mentioned in a previous post, the intellectual ballast of India’s potential next leader may well be provided by two of India’s more ‘pro-growth’ sons — Jagdish Bhagwati and Arvind Panagariya. Read more
Or — watch the rate of stressed asset growth in the industry:
Turkey-like policy action is hypothetical, I would not venture there.
- Raghuram Rajan, RBI governor, Jan 29th. We’re assuming he meant he wouldn’t touch the hypothetical…
Anyway, this is how Citi’s David Lubin explains the rupee’s recent fortitude
already battered position and, perhaps, Rajan’s aggresive attitude to the Fed’s tapering: Read more
And on silent feet they… moved towards price stability with CPI inflation as the new nominal anchor.
The RBI’s report on how to revise and strengthen its monetary policy framework to make it more “transparent and predictable” may play a very large role in the regime change underway at the Reserve Bank of India. Admittedly, the report isn’t out until later in the month but considering the useful Stanley Fischer news hook, it seems rude not to mention Rajan’s potential to also labour to reduce the powers of the ofﬁce he holds, for the institution’s sake. Particularly when the institution and the country it resides in still lack a whole lot of maturity. Read more
Compare, commerce & industry minister Anand Sharma on Nov 8:
Goldman’s latest report on Indian economy and its eagerness to push the case of a particular political leader and his party exposes two things—Goldman is parading its ignorance about the basic facts of Indian economy; and it also exposes its eagerness to mess around with India’s domestic politics. It only makes Goldman’s credibility and motives highly suspect.
A few charts and some commentary plucked from a rather bullish note on India from Goldman’s Asia Pacific team:
“I still find it difficult to imagine a father presenting his favourite daughter with a certificate for a gold-linked exchange traded fund on her big day,” says one senior policy maker.
That’s from a long Diwali read on India’s gold obsession by Avantika Chilkoti and James Crabtree which is well worth your time and to which we might add a cheeky few thoughts — it seems the RBI’s attempts to offer alternative to India’s gold-lust says more than a little about the limitations facing the central bank and Rajan. Read more
The Indian government’s efforts to support the rupee seem, for now, to have worked:
Can you call this a shakedown? Probably not.
To be added to the growing collection of central bank educational tools… Frankly, this isn’t a patch on the ECB’s Top Floor or the BoE’s Monetary Policy Balloon (and I won’t even bother comparing it to Inflation Island, a giant of the genre) but, tbf, the RBI probably has less resources to throw at its gaming division.
If India continues its current path it will face a catastrophic shortage of jobs, creating a young and angry population, and with it conditions for social unrest and economic disaster. Whether India exploits or is undermined by its demographics will likely be determined by the policy choices over the next two administrations. It simply cannot afford a repeat of the last five years.
That’s from a recent Espirito Santo note that makes for refreshing reading compared with the usual demographic dividend stories that cruise through our inboxes every few days. Read more
Our word for capital famously comes from the French for livestock, cheptel. And people are generally bullish about milking investments, and finding cash cows. Still, watch out for herd mentality (herd in Latin, pecus, giving us pecuniary).
Sadly none of those puns made it into a Gates Foundation-backed NBER paper released on Monday (H/T Modeled Behavior):
CONTINUED EXISTENCE OF COWS DISPROVES CENTRAL TENETS OF CAPITALISM?
(Update: which refers to… this)
But no matter. The paper has found something astonishing about cattle as an investment in rural India, with implications for financial liberalisation across the developing world: Read more
Nobody sees anything coming these days.
New RBI governor Raghuram Rajan followed the Fed’s decision to not taper with his own unexpected move — the RBI raised its key interest rate by 25 basis points, citing the threat of rising inflation. It also rolled back on some of its liquidity tightening but at least a few people got that one right. Read more
Or, the line between a pretty standard EM problem and those of a uniquely enormous democracy heading into an election which happens to suffer from many of those standard EM issues.
First, the negative loopiness from Goldman’s Tushar Poddar: Read more
*Use interesting onion stat to highlight Indian inflation problem ahead of Rajan’s first rate decision where the expectation is for a hold, but language and liquidity steps are in the spotlight*
*Attempt weak onion+tears metaphor*
*Delete because too weak/awful* Read more
From a SocGen note earlier last week:
ETF disinvestment more than accounted for the net change in jewellery+investment demand. When all the elements of supply and demand are taken together, the gold market registered a surplus of 217 tonnes in H1 2013 against a small surplus of just 37 tonnes in H1 2012. Read more