India Morning Report: Rajan appoints committees for everything, Rupee to discover under 66 levels at open?

The change in Monetary and Fiscal policy stance is fairly well obscured by the need for consensus but with Overseas Direct Investments retained at 400% of Net Worth and removal of hedging restrictions by allowing rebooking for both Exporters (50%) and Importers (25%) or Dollar Swaps at 100bp better rates with the Central Bank for FCNR deposits till November in existing schemes could just be a sign of old policy pieces being consigned to vestigial life, though such reform reaams have come and passed India Inc by for almost millenia, and at last 67 years f independent India. However, these limit relaxations typically let th Rupee sales accelerate into a new orbit usually and that is definitely unlikely

as predicated last week, S&P, Moody’s have been watching these developments only as a fallout of their prognostications of India’s twin deficit weakness and are much reiterating their last assessment when S&P had recommended a negative outlook based on a 1 in 3 chance of downgrade which USA had barely avoided. the Ratings firms are likely to be under pressure to change their ways and the step difference between Asia, Europe and probably from office to office of the agencies which reflects a woefully inaccurate picture in ratings , that are still catching up with munis and structured products n US and Europe and illiquid CDS in Europe and Asia

IMF Economic Counselor and Research Department...
IMF Economic Counselor and Research Department Director Raghuram Rajan briefs the press on the World Economic Outlook on April 13, 2005 at the International Monetary Fund Headquarters (IMF), Washington, D.C. (Photo credit: Wikipedia)

The Land and Food Bills have passed both houses seemingly without riposte and the Pension and Insurance Bills are next. However, back on Rajan’s first day, some other welcome proposals include allowing NBFC Prepaid cards for payments, starting national Gyro payment services (Nachiket Mor -Inclusion)and Rajan himself sitting on the committee to decide stringer  norms for NPAs and concerns on restructuring yielding more NPAs than normal accounts. Banks will be investing lesser in Gilts and SLR rates going down could be still a long drawn process while Branching being freed may be some incentive for Foreign banks also to execute subsidiaries. Most of these proposals will be overseen by various Deputy Directors an ex Governor Jalan will head the committee on  new licenses due soon after Jan 2014 when Anand Sinha leaves.

Markets otherwise keep responding to new signs from metals after a record comeback month in July/August and the banks will show their hands on the policy through their price movements the remaining two days of the week. Liquidity restrictions are still on and India is fighting the worst currency crisis of the last six generations

Indices again moved the entire range crossing 2% from 5340 to 5450 levels by the close and Wall Street enjoyed one of its best jumps overnight n Auto sales data. European PMI cements the days of crises as past though growth is yet patchy and China is the pod the global investors still look to, despite their repeated equity failures in the market


India Currency Report: Rupee catches the leg back up for Asia

Korean Won’s early lead in the currency scores in 2013 was blockaded by reports of a failed GDP revival in the Economy last week, while seemingly Asian currencies have kept the sell down of dollar more widesread than the Yen. While European banks do not have large operationsin ‘Asia anymore, many of their important clients and Global Transaction business originate in Asia.

The buoyancy in Asian currencies therefore is likely here to stay putting Asian exportes in a bind but Export volumes, already at all time lows with shutdowns in China ( for commodity exporters) and Europe ( for Consumer goods and more price sensitive exports) in 2011 and 2012 are unlikely to fall through from here and may be able to sustain on the rising currency.

Indian Rupee is likely to stick around its neww range between 53 -55 and if it does use this opportunity to break from 53 on up, it would be because Oil is tracking down in the Global markets.

After having factored America’s Oil independence in a falling through till late 2012, Oil prices have recovered, Brent as of npow keeping its “transport cost spread” from the West Texas WTI Crude rates Thai and Malay economies are already worried about rising currencies while Singapore is likely benefitted by the rising Sing Dollar and looks to reap some benefits from the post crisis Change agenda.

The main agenda item supporting a high recovery in Asian currencies is of course the reopening of trade wwith China as it helps other consumer Economies from both North and South Europe and developed Pacific nations including Australia to revive imports as they plod towards a non recession 2013 with GDP contraction decimated by the brilliant move up in Germany’ s Services PMI last week though the currency market’s deccisions to discount growth in the UK look to shoot the Asian moves in the foot as any such speculative recovery will have to support a stronger Pound also and not just the Euro which is stable at 1.345. The Pound fell to 1.5800 levels Friday but should be looking to come back to 1.62 in the course of the year and the Dollar index likely to remain above 80 with the Yen crossing into the 100 s vs the Dollar.

In local reasons, India’s rupee was helped by the global inflows caused by optimistic readings of recovery as Diesel was decontroled with a pledge to increase prices by 20% for retail in the next 15-20 months ( To reach bulk levels of 56 per liter as for bulk buyers)

India Morning Report: The Fiscal cliff unbuild, bright eyed investees and a chirruping economy without auto sales

Exporting planning cards
Exporting planning cards (Photo credit: plantoo47)


POSTEROUS server shennanigans and untrained hands could not factorise this autopost in time last weeek and have been packeting it into wrong dates and times. Hiya, have pity on them folks and try aand understand their motivations. let me know too


Post festive season Automobile sales are still not taking off though the monthly sales data for December is unavailable. Indian Auto Sales have stayed on a neww 220K cars per month plateau for well over three years and we do expect the new plateau to be 260k cars per month or even 300k per month by 2015 if not in 2013 itself that can last another 2-3 years. Meanwhile Motorcycle sales across the Top three is likely to reach 900000, 500000 and 500000 in the same period and Export markets are likely to add volumes

Global macro has improved just in time for a happy end to 2012 with good Economic grip and Corporate results also likely to report a fat crop after the dim prognostication of Q3. Europe is likely to move into positive territory into the second half of 2013 as Greece loses concerns about being left out and gets upgraded at S&P to B+

European markets in trade exports are likely to be replaced by new markets in Asia, Middle East and Latin America especially if longer term negotiations are completed instead of trial batches for the likely two wheeler and 4 wheeler exporters. Trade Exports are unlikely to rise above the current holding levels in India till Second half of 2013

Indian businesses continue to be driven into a bigger future and as was mentioned on the TV18 morning preopen as well, Healthcare is likely to be a mainstay for investors riding the indian currency.

The Fiscal cliff negotiations will hopefully be really completed before Christmas and those investing into the depreciation of the Dollar may like to spread it to only the weak yen through the Euro JPY trade in addition to USD JPY which remains headed to unthought of levels as Japan gets locked into a new export strategy and the Risk on trade in Equities keeps Dollar weakness a primary profitmaking failsafe for global investors going into the new year and Euro responds to its new hope, leaving the Indian Rupee safe from Crude manipulations




India Trade Report (Flash October 2012) : Deficit Climbs

Trade and Monthly IIP. international Trade is currently 1/5 of India GDP

The October monthly deficit climbed to a $20.96B in India even as larger trade behemoths with monthly export volumes of $160-180 B in China and US returned higher surpluses ($32.5B) and lower deficits ($41.9B) spurred by jumps in Exports.

Indian data is ofcourse skewed by both the rush for Oil purchases and a downtick in imports not just in Europe but in US and most other India customers. While the European contraction is worrisome on an aggregate basis most global trade volume has been replaced by other categories for other customers. However Capital Goods trade remains one of the most severely affected led by downtick in such Exports from Europe (Germany) and Japan

Indian Imports rose $7.5 B for the month and the Rupee as expected inched towards the 55 levels. Indian IIP has been trending at lower levesl since the Global trade contraction picked up force in mid 2011

India Trade and Revenue Deficit Data – May 2012

Exports continue to consolidate at May figures above $25.5 B. imports are consistent with this year’s degrowth at $ 41.9B and the trade deficit at $16B may mean more weakness for the rupee though policy measures are in place

Jewelery exports are hardly down 9%, ready made garments hit by lack of demand in Europe, and petroleum products 26% apart from the known lack of traction in engineering goods. However imports are down too and the $16.9 B deficit is a relief.

Indirect Tax collections were up 16% till April with Service tax collections for the month up 45% on the year to the new target of 1T

Fixed income Report: O India! Is that how it will beeee…!

Indian yields settled down to 8.5% comfortably after a run on the Indian bonds brought them back above 8.5%

Does it have an hackney licence? Parked outsid...
Does it have an hackney licence? Parked outside Rolts Garden Centre, Clacton Road, Elmstead Market, this is a Bajaj RE three wheeled passenger carrier. Back in its native India, they are used as taxis. (Photo credit: Wikipedia)

when the Dollar ran up a big 1% wall and kept the Euro from crashing in Indian trades. The recovery in rate sensitives may now have a stronger reason to yield to Export heavy businesses like Bajaj Auto and Infosys but whatever be your sectoral poison, the Indian markets will accept all inflows and the inflows will keep getting stronnger from these levels in the equities market.

And though no one would bet on the Rupee’s recovery, the RBI would come in only once and thus that currency equation remains weak for us under

Bajaj auto rickshaws in Adama, Ethiopia.
Bajaj auto rickshaws in Adama, Ethiopia. (Photo credit: Wikipedia)

pressure from hot money as always. Asia leads global recovery and in the Asian recovery, India leads from the front followed by China and its ASEAN friends with Chinese investment

The Euro unfortunately complicates india’s still effectively Dollar pegged currency as it wants to protect the interest of Exporters dependent on Price for European demand for indian goods for reasons best known to India’s specific non Capex led dependence on Exports.

The import basket continues to offer super deals to aid the india inflation story and that has definitely eased the pressure on policy planners. But trading whipsaws keep India inc busy rather than new business paradigms. Facebook’s $104 bln IPO or Piramal’s INR 35 bln purchase of Decision Resources Grp become easier to appreciate for predominantly consumption Economies in the USA than for the Indian palate. 

India vs China : ( A likes comparison) Chinese inflation ticks down to 3.4%


China Premier Wen Jiabao deliver the Report on...
China Premier Wen Jiabao deliver the Report on the Work of the Government at the Third Session of the Eleventh National People’s Congress on March 5, 2010 (Photo credit: Wikipedia)


While Indian inflation is likely to step out of the sub 7% mark on the wholesale levels to more than 8% following the retail index, Chinese inflation ticked up to 3.4% leading to a reaction in the morning’s Asian opening. Chinese imports were up only 3% like for India at $37.9 bln with not just Oil but in India’s case two thirds of the Diamonds and Gems trade shutdown and Gold and Silver imports are down by a third from a government increase in import duties. The tradedeficit thus comes to below $160 bln at the cost of over $100 bln in Exports according to the trends explained by the Govt official,  after the first month of the Fiscal at Data release yesterday

Chinese inflation easing further may not be a good thing as it also follows a drastic fall in demand consumption, the bulwark china is relying on to stimulate growth though outgoing Premier Wen Jiabao has been vocal in the last few months against the culture of imported consumption items in China. We felt more comfortable for China at the 3.6% mark for inflation in March as it was within the 4% mark and Banks though restricted by opportunity on Lending had still managed healthy Q1 profits

Asian Economies of India and China’s leadership in growth is a required element for the continued recovery in Western markets and limiting of European troubles though European trade continues to favor banana policies and non South Asian economies for trade and investment hopes. India on the other hand reported new FDI of $ 8 bln in March but the Exxport slowdown and the increasing inflation from the 21% depreciation in the Rupee  int he last six months will hurt growth and consumption with Automobiles sales in April already down to 4% growth or 235,000 units for April including Exports. Ford, Nissan and others would be increasing exports from the added capacity in their indian plants from this year

India is hoping to get a further $1 Tln in Infrastructure funding from private funds to quasi SWF structures sponsored by banks and government

Related articles

Cardamom could be India Gold

Three cardamom cookies - these are SO good!
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While India’s Tea and newly woven rice exports may not last the mile with areage(acreage) and value of crop ransom to food subsidy calls and lost markets int he case of Tea, Cardamom could be a growing export from the large nation. Volatile trade in cardamom last year had volumes dropping below 1200 tonnes ( in this years prices, Rs 500k per tonne) or just INR 60 crores or $10 mln, the number has doubled this year to $20 mln with 25000 tonnes booked by December and another 1000 tonnes could easily be attributed to the same fisc.

Here also supply bottlnecks with bad quality Guatemalan cardamom being the immediate reason for the demand, and disrupted auctions due to the Tamil Kerala warlike standoff over Mullaperiyar dam not ensuring steady prices that dropped 25% just on disruption

According to the ET report, daily supplies in India are 100 tonnes this year, twice of last year

English: cardamom
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September the dull month for IIP

With credit picking up in end September, the IIP figures for September trolled to an unimaginable 1.9% with consumer non durables reporting a -1.5% contraction(growth) and mining reported contraction of -5.5% The base effect and nature of bulk orders etc played truant with Capital Goods at -6.8% down over 1020 basis points from 3.8% growth in August Exports in October grew 36% only but will not limit bounce in IIP next month(October)

MarkiT HSBC had reported a good tracon in the PMI figures at 5 wqith even services PMI falling but staying above 50. The August IIP was 4.1% but observers had expected a jump in tilities / even manufacturing numbers to a 4% IIP rate as per PMI indications and leading indicators tracked. Exports growth has slowed in october but remains a large $320 bln run rate to March while the trade deficit governed by the jump in Oil imports to a deficit of $19.y bln for the month

Infra output reported growth at 2.3%in the month September manufacturing PMI was India’s lowest at 50.3 PMI growth in October points to IIP recovering again in October wi a good jump again in Capital goods..(no one likes the Capital goods series anymrore. one wonders if another redesign is planned)

India’s Grand Design? or just a Maha – myth

Brasília - O presidente da Rússia, Dmitri Medv...
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There’s a brilliant analysis by  Gayatri Nayak, in the Economic Times today. Brilliant because that is something in plain data and in plain sight what every Corporate indian and even every Indian citizen otherwise or any other species observing India on the World stage wonders. We are the I in BRIC like the I in Team, we are the I in interest rates when the world is reducing them with alacrity to avoid a depression. Our oil still costs a $110 a barrel, 2 of the BRIC nations almost get it virtually free from their own energy resources, the third and the first citizen in every economic miracle now is China.  even if everything in the Local Infrastructure run for China collapses, the 25% LGFV default will just reduce its growth to 0 when it is going through its slowest phase in manufacturing. nary a hope of a recession. And there the similarity with India ends, but with others it has much more in terms of dependence on commodities, energy, and hot money flow magnitudes that just do not compare with the rupee trading at its lowest.

Read the ET article here:

The foremost problem is the speed at which the prices are rising — from assets to commodities to manufacturing to services. This could deal a long-term blow to businesses, making them unviable. Prices have been gaining more than 8% for more than a year now. The main reason for the fall in profitability at companies is rising input prices and not finance charges as it is made out to be.

“India is less integrated with the global economy” was the argument then. While it may still be true when compared with many Asian emerging economies, this advantage has narrowed down over the years. While the overseas debt has gone up to $306 billion at the end of March 2011 from $221 billion at the end of March 2008, the cushion of foreign exchange reserves went down to $305 billion from $310 billion over the same period.

As far as decoupling is concerned, the bottom is the same for everyone but thence everyone of the global economies from the G7 to the G20 to even Mongolia would have decoupled on the way up . The great contrast in each competitive resource advantage and each strategy in Brazil, China, USA and Europe will determine very different trajectories of growth seen and supported in the Financial markets.

At stake is the order of magnitude of investment and infrastructure which others have harnessed earlier than India. But while the others may be volatile in responding to global stresses, India just becomes a sub standard risk to carry without the heat of a growth running up that order of magnitude. Others have much more command and control mechanisms as witnessed in Turkey and China, to ensure transmission of policy do’s and don’ts. If we do, it stays confined to one single Corporate group or region The regional imbalances are much greater in China and Russia, even Brazil and the smaller economies are exclusively better risks for the global investor because they are entirely dependent on that investment and deliver  a bang for the buck like Coal in indonesia and iron ore in Mongolia, but smehow that focus continues to deliver a faster sustainable growth while our discussion of imbalances makes evryone a victim in the end?

We could very easily be at the same stage as China if we had better transmission of policy cash and of policy mechanism to channel the growth. We may still be doing much more for our poor than China which has apparently been focussed on just the coastal “districts” ( urban conglomerates) that were already trading with Hongkong and the rest orf the world. But what we miss is the global demand or investor interest which cannot be just delivered to those shouting from the rooftops or those taking to the streets by fast and by suicides.

An administered rate of exchange with 10 rupees to the Dollar can bring it though. It will bring into focus our strategic decisions and investment in growth to a direct returns comparision with global investments. It is also the rate at which PPP trades for India to the Dollar. And it is probably the singular reason  why no one bothers to hear us on the table or give us preference or deference in trade.

Probably why we are so happy at rupee depreciation so we can get more value for our immediate quarter from IT exports when export growth in cotton, tea and even coffee and oil could mean so much more to us. In non It exports we will still remain satisfied with 2 – 3 million tonnes of Rice, wheat, Onion and some other crops but we remain the top 4 producers of those and falling behind every year.

Probably our priorities for infrastructure investment also need that push to file up behind the Exports doing the best and easily sustainable as in agri-commodities and gems and Jewelry

but that is the cliched argument no one has acitoned for the last 60 years. never.

Gross domestic product growth in the advanced ...
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Trade Deficit. Another scary 2011 ride!

The Sea Phoenix moves between lock chambers of...
Image via Wikipedia

India’s trade deficit was $9 bln in April last year. This year almost $9 bln of gold imported in the month of May is itself almost half of our annual requirement of gold. Thus with Indians actively hedging with gold and stocks down for time to come, the larger trade deficit could continue for another couple of months. With the import bill at $40.9 billion for the month, our deficit is running at an average almost equal to our exports just two years ago at $15 bln for May 11.

Exports are good but still not up for a monthly comparison as Mar 2011 was exceptionally high coming in a good year for exports. However Exports at $26 bln grew 56% year on year. Imports also rose more than 50% at $41 bln with Oil only growing 12%

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