Once you’ve had a luddite at the Reserve Bank of India it’s hard to go back…
Amongst other things Rajan stabilised the rupee, brought inflation under some sort of control (with some outside help) which has allowed him to cut rates, overseen institutional changes at the RBI, has started to get a grip on India’s problem loans, and was a big part of convincing Delhi to crack down on willful defaulters and others who used to have avenues of political appeal when their loans were being questioned.
He also managed to thoroughly woo much of Mumbai’s financial community while doing so.
And now he might be off. As in, when his current term ends. Read more
It’s an unorthodox move.
It all stems from that fact that India (following the WHO) wants to increase the size of the pictorial warnings on cigarette packets to 85 per cent from a current 20 per cent.
The cigarette companies do not want that to happen, obviously. But it is happening — admittedly in a somewhat confusing fashion — and said companies have noped out of manufacturing anymore cigarettes until, well, hmmm. That’s the tricky bit.
Here’s ITC, the largest cigarette manufacturer by far in India and one which is part owned by British American Tobacco: Read more
Patanjali Ayurved ” is disrupting India’s consumer space” according to my inbox.
Patanjali Ayurved is also an ayurvedic health foods and medicine brand that’s fronted by India’s Swami “Baba” Ramdev. He’s a yogi who says that he has no economic stake in what he also says is not a profit-oriented company.
From the FT last week:
Instead, he says, it is part of a mission to boost India’s economic self-reliance, akin to Mahatma Gandhi’s appeals for Indians to renounce foreign wares during the anti-colonial struggle.
“This is not a business,” the yoga guru says, as the heavily armed government commandos serving as his bodyguards look on.
Competitive federalism in India has had some weird effects. For one it has led to slogans like this becoming apparently acceptable:
Happening Haryana? Really? Not that the drive to get India’s states to compete with each other to attract business is a bad thing and not that Haryana isn’t a nice place but, again, “Happening Haryana”? We’d like to see what focus group got that one over the line. Read more
Who could have seen this coming? From the FT’s Amy Kazmin:
Diageo, the world’s largest spirits company, has agreed to pay $75m to Vijay Mallya to step down as chairman of United Spirits, the Indian drinks business he sold to Diageo in 2012.
Diageo, which paid roughly £1.8bn for a 55 per cent stake in United Spirits, has been locked in a bitter boardroom stand-off with Mr Mallya, the former controlling shareholder, since April, when he refused a request from United Spirits’ board to resign.
It’s not like a clash of cultures between ‘wilful defaulting’, high flying, risqué calendar pioneering, Enrique Iglesias loving, Mallya and the ironically sober Diageo was pretty obvious to anyone who even glanced at the situation now was it? Read more
India’s more than two dozen state-backed banks (aka PSUs) that make up 65-70 per cent of the overall banking system are still struggling, weighed down by a mountain of bad loans. A mountain of bad loans that they have very probably failed to fully recognise.
The Indian government really wants to help, because fixing that problem would help India’s growth rate, but it’s hamstrung by — amongst other things — awkward fiscal math.
What to do?
Well, put the recap below the line, obviously. Read more
Do click to enlarge, any complaints to UBS, where credit also resides:
It may have been a slip of the keyboard, but Marc Andreessen’s pro-colonialism Tweet on Wednesday (later retracted) arguably told us more about the mindset of Silicon Valley insiders than anything ever uttered at a TechCrunch disruptor conference.
Nor should it strike any of us as surprising. The parallels between unicorn imperialist ambition and the British Empire run deep. (And no, we won’t dwell on the shared fondness for unicorn insignia.)
The co-founding Zoman* — Deepinder Goyal, that is — took time for a chat with us last week about the change going on in India’s start-up world, a change that has involved hyperbole by many and an utterance of mea culpa by a few. Online food portal Zomato is included in the latter category. Read more
This is more art than science but we’re going to mark it anyway.
That’s India’s benchmark Sensex index closing below 24,ooo points – at 23,962.21 to be exact — its lowest close since May 15, 2014 according to Reuters.
Funnily enough, May 16 was when one Narendra Modi got his first official nod to go sit on India’s most ministerial seat. The Sensex closed that day at 24,121.74. Read more
We previously wrote about Facebook’s battle with Indian regulators over its “Free Basics” product, which is a stripped down version of the internet designed to
ensure Facebook’s global dominance help bring the world’s poor online.
Trai, the Indian telecoms regulator, had launched a consultation in December about differential pricing for data services: effectively whether or not it’s ok to let telecoms companies charge different amounts for different parts of the internet. Readers in the US and Europe may know this debate by the term “net neutrality”. Read more
There’s an old notion that companies exist for one purpose above all else: to make money for their shareholders. It seems to be an uncool idea in Silicon Valley, where startups like to style themselves as charitably-minded enterprises that are simply trying to make everyone’s lives better and more “connected” or some other buzzword.
Which one is Facebook?
Look no further than this opinion piece Mark Zuckerberg wrote for the Times of India just after Christmas. He accuses his Indian critics of lying about “Free Basics”, the emaciated version of the internet that Zuckerberg has been pushing since 2013 to ensure that his social network is the first thing people in emerging markets see when they come online: Read more
India is a large place. It is made up of many states. Moving goods between those states is a freaking nightmare.
That’s where the loooong awaited GST — India’s promised goods and services tax, which has been debated for ten years — comes in. The idea is to unify all indirect taxes in India, simplifying the system and lubricating domestic trade. Estimates of the boost to GDP a GST could bring differ (more on that at the bottom) but there is little doubt it would be of benefit, even if you restrain yourself to just discussing its impact on the blood pressure of lawyers and anyone moving goods across state borders.
But it just keeps on not getting introduced.
Here’s Cap Econ’s Shilan Shah on why: Read more
Want to know a big difference between Chinese and Indian GDP stats?
Well, we don’t think many Indian officials would say things like this, via China Daily:
Several local officials in China’s Northeast region sought to explain dramatic economic drops in their areas by admitting they had faked economic data in the past few years to show highgrowth when the real numbers were much lower, Xinhua News Agency reported on Friday.
“If the past data had not been inflated, the current growth figures would not show such a precipitous fall,” one official was quoted as saying.
The report cited several officials in the region who acknowledged they had significantlyoverstated data ranging from fiscal revenue and household income to GDP.
Irony thy name is fudged Chinese data.
And it’s not, we hasten to add, that Indian GDP stats don’t have their own problems — they do — it’s just that the lack of really strong centre out (and back in) incentives make us think the problem isn’t systemic so much as statistical. Read more
INDIA CLOCKS IN AT 7.4 PER CENT REAL GDP GROWTH AND IS NOW THE WORLD’S FASTEST GROWING BRIC ECONOMY!
Sorry. Got carried away by charts like this one from BofAML:
Compare, contrast and then draw your own conclusions about India’s newly born Gold Deposit scheme, its plan to lure gold out of temples, vaults and jewellery boxes with the promise of (hopefully but not apparently yet) lovely enough interest rates.
First… from Reuters last last week on its rather stuttering start:
A gold deposit scheme launched amid fanfare by Indian Prime Minister Narendra Modi two weeks ago has so far attracted only 400 grammes, an industry official said on Thursday, out of a national hoard estimated at 20,000 tonnes…
The scene, as we went to pixel, outside the Reserve Bank of India in Mumbai — from where Rajan stares across the city — on the day 17,000 of its staff decided to up sticks in protest about interference from India’s government in its workings and, one suspects more pressingly, pensions:
Observe the… absolutely nothing unusual happening. Read more
While reading up on Indian FDI we stumbled across this little fact from Capital Econ’s Shilan Shah as he attempted to downplay seemingly impressive India-Africa FDI stats…
With our emphasis
Prime Minister Modi stated that “India has emerged as a major investor from the developing world in Africa… surpassing even China”. In a strict sense this is true. According to UNCTAD, India’s total stock of FDI in Africa stood at US$50bn in 2014, compared to China’s stock of US$26bn.
But digging a little deeper, this claim quickly unravels. Nearly 95% of Indian FDI to Africa flows into just one economy – Mauritius. Admittedly, Mauritius does have a significant Indian diaspora and once had a large textiles industry. But in reality, the nature of the FDI inflows has more to do with the favourable tax terms that investors receive through the two countries’ Double Taxation Avoidance Agreement.
UBS looks at the fundamentals of India’s new gold monetisation schemes on Thursday and in the process comes up with one of the best summations we’ve ever seen on why gold investing in and of itself is stoopid — especially when done en masse by a relatively poor economy.
Indians directly or indirectly hold an estimated 22,000 tonnes of gold worth USD 800bn or 39% of Indian GDP (banking system credit is c50% of GDP). Gold thus held is problematic to some because unlike most capital goods it derives its expected value not from its ability to produce (directly or indirectly) goods or services that will meet the material demands of consumers. Instead it derives its value from investors’ collective perception of what it is worth.
Indeed. Read more
At pixel the wannabe Netflix of India, Eros International, is getting no love in Mumbai, off 20 per cent:
Of course, it’s the NY open (where it’s also listed and suffered on Friday) to watch now but the trigger for the fresh fall appears to be a Wells Fargo note (and attendant gossiping) out on Friday which cast doubt on the company’s receivables and user numbers. Or, at least, professed a lack of understanding which appears to have resonated considering there were already questions about a recent spike in revenue booked in the UAE weighing on the stock. Read more
I don’t know what you want to call me. Santa Claus is what, eh, [journalist x] called me earlier. You want to call me a hawk.. I don’t know. I don’t go by these things. My name is Raghuram Rajan and I do what I do.
- The RBI governor, 29 September
And yes, that’s certainly A reason for why he cut the policy rate 50bps to 6.75 per cent on Tuesday, twice what had been expected.
Here’s another one, via Credit Suisse’s Neelkanth Mishra: Read more
We don’t mean to keep banging on about it. But the bad loans in India’s banking system are both a significant barrier to a new, and badly needed, investment cycle getting properly underway — and a source of some hilarious numbers.
From Credit Suisse’s Ashish Gupta on the Reserve Bank of India (the regulator here): Read more
Have a hypothetical on this joyous Ganesh Chaturthi…
Let’s pretend you’re an Indian public sector banker. You and your ilk control about three-quarters of the country’s lending.
You know that stressed loans are an issue: Read more
Here’s a paper from Dan Bogart at the University of Irvine about the East Indian Monopoly and why it was deemed justifiable to the British sovereign to grant all this power to a private company.
As the following extracts from the paper note, the rationale was largely as follows (emphasis ours): Read more
Yes, as you can probably tell this is the news that India’s government wants to get the masses of idle gold lying dormant in vaults and households throughout the country out into the open.
To put that in Zerohedge-ese it’s the The Start Of India’s Gold Confiscation.
Or, to put it more simply… it’s a reasonable (if poorly executed) attempt to cut India’s crazy large (CA hurting) gold import bill by tapping into the estimated 22,000 MT of gold knocking around its temples etc. Read more
Is this unique?
We rather doubt it.
From JP Morgan on India’s private sector start-up darlings and their publicly listed, markedly less-loved, counterparts (emphasis, theirs, ours and yours if you ask nicely): Read more
There are lots of people in India. Nobody argues about that.
What’s also true is not many of them care about equities.
Of course, there are exceptions. In absolute terms, rather large exceptions. The Bombay Stock Exchange (founded in 1875 as the “The Native Share & Stock Brokers Association”) is Asia’s oldest and ever since Reliance founder Dhirubhai Ambani — the ‘guru of the equity cult’ as Hamish McDonald put it — tapped into India’s small investor to fund his company, they have been in the mix. Read more
One really has to begin any talk of India’s stumbling stock market with a bucketload of context. After all, the Sensex is well up from Modi’s election almost exactly a year ago and the recent fall is from a record peak of just under 30,000 points in January.
As to why Indian markets are struggling this year, down 7 per cent from that peak… Read more
Evidence of a potentially large change in India’s banking system from Credit Suisse and Neelkanth Mishra’s India markets team:
Even within bank loans, which are losing share to bonds in corporate borrowing, [public sector, or PSU, banks] are losing share to private banks, being short of capital. In this environment, by allocating just Rs80 bn for PSU bank recapitalisation in the FY16E budget (half that of the previous year, and the lowest after FY10), the government has shown willingness to let PSU banks fall in relevance, and not perpetuate moral hazard by bailing out weak banks. This is a remarkable and unexpected change in stance, given the potential advantages in micro-managing three-fourths of the bank lending space in India.
And lo did the wails of certain politicians rent the sky. Read more