If we come, will they build it? Here’s the Indian economy charted, by Citi:
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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
The Institute for Conflict Management has reported that total deaths in terrorism-related violence – including civilians, security personnel and terrorists – have fallen to 885 in 2013 from 5839 in 2001 (Chart 9). Not surprisingly, higher growth is cooling violence. Fatalities are also falling in each of India’s three key theaters of conflict: cross-border terrorism, Maoist rebellion and insurgency in the North East (Chart 10).
“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…
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.
From Morgan Stanley:
Before we delve into the details of the potential rebalancing impact from India’s entry in GBI-EM Global, it is worth clarifying the rules involving index inclusion.
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).
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
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
FT Alphaville readers are well versed on the potential downsides of collateral scarcity in western markets.
But consider how a collateral scarcity problem might unfold in an emerging market in which the most valued form of collateral isn’t national debt denominated in your own debt but rather a commodity like gold, whose supply is dictated by externalities outside of a government’s control? Read more
The Indian rupee’s plunge continues.
As the FT reported on Wednesday, consensus opinion is that the weakness is connected to India’s growing current account deficit and unimpressive attempts thus far to bring it back to reasonable levels.
Right, we’ve had a few looks at India over the last while — at its crumbling rupee, widely reported deficits and stumbling, ineffective political system. Heck, Standards & Poor’s even got in on the act and prompted us to ask if the Brics are about to become the Brcs.
Slowing GDP growth and political roadblocks to economic policymaking could put India at risk of losing its investment-grade rating.
That’s the Standard & Poor’s latest warning on India, coming just two months after it revised the country’s BBB- rating (one notch above junk) from stable to negative as GDP growth fell to 5.1 per cent in the first quarter. Are the Brics about to become the Brcs? Read more
“Bas! Bas!” is surely a familiar cry in the Reserve Bank of India right now as India’s rupee continues to plummet. So far, it has dropped 15 per cent against the US dollar since the start of February, hitting multiple new record lows on its way.
The central bank has attempted to get inventive in response but nothing seems to be stopping the slide (metaphorically speaking, in the chart, the higher it gets the weaker the rupee): Read more