Courtesy of Nomura’s Sonal Varma:
© The Financial Times Ltd 2016 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
Courtesy of Nomura’s Sonal Varma:
It has been a difficult Monday morning for India’s bankers, economists and analysts. Not only has the Rajan-era come to an unexpected close but the monsoon has thumped into the country. Now, where once certainty and clean pants existed, a world of confusion and splashed trouser legs sits soddenly.
The usual notes are coming through into our inbox too, most expressing said confusion and near-term worry, even though markets are shrugging a bit so far. Here’s a one month view of the INR and the Sensex: Read more
“India’s economic growth accelerated to 7.9 per cent in the first quarter, widening its lead over China and confirming the country’s status as the world’s fastest expanding large economy and the most dynamic emerging market.”
Well, qualified, confusing good news, as Goldman note with our emphasis:
Data from the expenditure side shows that the improvement in GDP growth in Q1 was largely driven by higher private consumption and relatively lower drag from net exports. Fixed investment declined for the first time since March 2014. However, a significant fraction of headline GDP growth is unexplained as ‘discrepancies ‘ amount to 4ppt of GDP vs 2.1ppt in the previous quarter (the discrepancy is the difference with the industry GDP data, which are used as the control).
Before we begin, how about a very, very quick quiz?
Question: What percentage of Indians paid income tax in the 2013 fiscal year? Read more
Well things just got (more) interesting.
This is only a draft bill — to “regulate the acquisition, dissemination, publication and distribution of geospatial information of India which is likely to affect the security, sovereignty and integrity of India” — and it’s mostly aimed at licensing internet companies like Google, but check out this bit:
15. Penalty for wrong depiction of map of India etc.-Whoever depicts, disseminates, publishes or distributes any wrong or false topographic information of India including international boundaries in contravention of section 6, shall be punished with a fine ranging from Rupees ten lac to Rupees one hundred crore and/or imprisonment for a period up to seven years.
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.
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, 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.
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
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
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