Indian Economy - News & Discussion 27 May 2012

[disha]

It's the maturity of IC technology that permits it to be built into both $2K and $2M cars, and yet for the fuel and its distribution to be so cheap as to subsidize the technology that can replace it. You may be discussing the technology. I'm not. I'm discussing the economics of it - this is the economics thread after all. It's not a mature technology until it can support itself.

If you choose to instead see the previous post as 'chee, Tesla bad! IC cars good!', you clearly missed the point. I'm not making a value judgement, either against the technology or your choice of car, which you're implying I am doing, with the suggestion of 'FUD'.

No I did not take it as a value judgement point from you. Maybe the word "FUD" was distractive in the conversation., and let us keep that part aside.

Yes IC is far better than electric batteries.
&
Electric cars are better than IC based cars (I drive both!).

However electric batteries are now here and to stay and will only improve further. There is a critical mass building and at one stage, opting for a EV will be a easier choice then opting for an IC.

On top of it IC has become a low margin produce., how much cash you will really get if you are 20% profitable on say a 15k car and 15% profitable on say a 75k car. The difference in cash flow is some 4x. Now say if the margin on 75k cars go from 15% to 20%., what is your cash flow?

In other words for the same amount of investment* I have to sell 4x cars if I am a low-end IC manufacturer.

There is a reason why Fiskars had to shutter down while Tesla stock soared., it is difficult to explain until one experiences it self.

*The capital cost of setting up a new car factory are very high. In fact IC based car factories have shuttered down. There is a reason to all this, just because you manufacture car does not mean it will sell. Sales/Distribution/Service centers have to be opened up. Support services have to be trained etc.

[RamaY]

They're not. They're very pertinent examples of *current* cutting edge technologies that are extraordinarily hard to master. They're not even future frontier technologies. Even on the base of existing expertise and technology, it's the mastery over the cutting edge materials technology and engineering that makes the difference between being able to design a barely adequate design and a competitor to what's the current state of the art.

Converting new technologies into 'nuts and bolts mass produced items' takes a level of capital investment, risk tolerance and technological support that we don't necessarily have, across the board. I absolutely agree that some projects can be better funded. I'd much rather we avoid defence imports even at the cost of developing a prototype domestically, but fund it much better, and stick with it. It may crash, people will die, and there'll be negative publicity, but that's the cost of just getting to 90s or early 2000s state of the art, not even the present day, much less the future.

We are talking about two different things here.

One is using current technology efficiently. Another is developing future technology.

Both have different risk profiles, investment/infra/skill/resource needs. Similarly each one will have different paymasters. The example of ADA and GTRE fall in two second category where as 90% of economic activity happens in first category.

Given the fact that Indian economy is $2T strong and is importing $00Bs of capital goods, one can safely assume that there is enough market capital in this area. One key way to facilitate the process of this market capital reaching the local industries is thru proper/efficient economic policies (financial institutions/instruments, trade policies, industrial infra development, tax policy etc.,).

Given the fact that GoI's tax revenues are in the range of $200B-300B, one can also say that GoI can be a more effective and efficient funding source for the 2nd kind of industrial R&D".

There always existed Capital, technical know-how and resource pool. The question is are we using it move on to the next phase or the phase after that.

[disha]

Suraj et al,

I find it amusing when one says that there is not enough capital in India to fund projects.

How did the money for the 2G licenses came? How was the capital raised? How is Suzlon energy able to become a leading wind power solutions provider? How did Reliance become a petrochem giant. In fact Reliance raised capital from the broader "public" market.

There is no dearth of capital within India and coming into India from outside.

There is a reason why people invest in Gold/RE in India., because of dearth of opportunities. Why?

Here is an another example: 90% of Indian manufacturing industrial units is SME based contributing to say 40% of the Industrial output and 35% of the exports (in essence the large manufacturing units cater to only domestic demand!!). When did any GOI or GOI official stand up and acknowledged the hurdles an SME runs into and what they are going to do about it?

BTW, even a rice/dal/papad packaging unit is an SME. Or say diamond/jewellery.

The biggest issue this SMEs face are the following:

1. Infrastructure (bijli, sadak, pani)
2. Raw material
3. Machinery
4. Skills (including skilled and reliable labour)
5. Marketing/Branding resources.

Capital is not a constraint for them! If you bring in some good credentials - one can raise 10-15 crs. easily. Enough to start a SME in any place in India.

More about this later.

[RamaY]

Thanks Dishaji.

When the investment environment (which is a Govt responsibility)is good, capital flows there.

The situation in India currently is that Indian Capital is flowing outwards for Gold and Capital+Luxury goods while Govt is making policy to attract barely meaningful FDI.

Instead of making the environment better for internal capital, the policy is being manufactured to force it out. This is resulting in Rupee devaluation.

Other than energy resources (even this could have been managed better with little foresight), minerals and industrial equipment, all other imports (90%+) are indications of internal capital capacity availability and wastage.

[Prem]

http://zeenews.india.com/business/news/ ... 83825.html
Industrial production grows 2.6% in July

ew Delhi: Showing a small light of hope amidst a bleak Indian economy, industrial production in July jumped by an unexpected 2.6 percent, the first rise in four months, government data showed on Thursday.The surprise jump comes amidst efforts by the government to improve the economic condition of the country.The industrial output was led by manufacturing, which constitutes 75 percent of the output, growing 3.0 percent during the July period.Factory output measured in terms of the Index of Industrial Production (IIP) had contracted by 1.1 percent during the April-June period this year.Industrial outputs had contracted by 2.2 percent in June, 1.1 percent in May which was the lowest in 11 months and 2.3 percent in April.Earlier during the day, Sensex slumped by 215.57 points, the first loss in six sessions, as investors adopted a cautious stance ahead of IIP data. The rupee also weakened by 12 paise to close at 63.50 against the dollar.

[RamaY]

Cabinet approves buying $4.3 billion World Bank bonds

NEW DELHI: The union cabinet on Thursday approved a proposal to invest $4.3 billion in bonds of International Bank for Reconstruction and Development (IBRD), an arm of the World Bank, which will make India eligible for higher borrowing from the multilateral lender.

Under the arrangement, the Reserve Bank of India will subscribe to special private placement of bonds by the IBRD, a lending arm of the World Bank.

"The IBRD would be able to lend to India $4.3 billion above the Single Borrower Limit of $17.5 billion, i.e. up to $ 21.8 billion," the government said in a statement after the cabinet meeting, The bonds would be of various tenures and the RBI would get return on investment.

The investment == increase in line of credit. Then what is the benefit???

[Theo_Fidel]

So how to get through this. The beepul of Bengluru Kerala have a suggestion. Anyone translate the Kannada.
The corrupt folks and the rich are requested to form an orderly line and not simply race to the front like last time. Wait, something went wrong....

[Singha]

banning import of gold and electronic goods into kerala

it would be easier to ban import of rice and water into kerala

[Suraj]

How did the money for the 2G licenses came? How was the capital raised? How is Suzlon energy able to become a leading wind power solutions provider? How did Reliance become a petrochem giant. In fact Reliance raised capital from the broader "public" market.

All of these are examples of efficiently deploying our limited capital into existing mature technologies, which is exactly what I advocated we should be doing. Doing so lets us cheaply build our capital base. To take each example individually:
* The 2G technology was GSM or CDMA standard. Not one we defined ourselves (e.g. PRC's TD-SCDMA or TD-LTE). Pretty much all the equipment was originally imported, with some indigenization following later. Innovating independently would imply among other things creating our own wireless standard and investing in translating that into carrier basebands cost-effectively and/or armtwisting western manufacturers and foundries to license our technology and built chips and radios for phones.
* Suzlon is working its way up the technology scale when it comes to building wind turbines. It purchased RePower some years ago, but is still behind the Spaniards and other Europeans as far as turbine efficiency goes. They did the right thing by just take something good enough, making it cheaply and deploying it successfully.
* Jamnagar Refinery was built by Bechtel. Once again, this was just the deployment of proven capabilities from outside cheaply using local labour support.

[Theo_Fidel]

Here we go again, this time with domestic demand....

http://www.business-standard.com/articl ... 048_1.html

Govt paves way for Rs 50k-cr projects to set up chip fabs

[Singha]

https://fbcdn-sphotos-h-a.akamaihd.net/ ... 5024_n.jpg

another strong square jawed IIT-IIM-Ivy flop show being readied for congressi deployment

[vic]

Here we go again, this time with domestic demand....

http://www.business-standard.com/articl ... 048_1.html

Govt paves way for Rs 50k-cr projects to set up chip fabs

It is very odd that they could only interest/select a Real Estate Company from whole of Indian Pvt Sector for this technological enterprise.

[Singha]

incase you hadnt noticed, there is no big domestic maker of electronic or electrical goods (fans, AC, heater) type goods left.
videocon , bajaj somehow plod along but I guess just rebadging cheen goods.

someone pls correct me if wrong.

[krishnan]

there are lots of indian companies into those...they probably use chinese stuff, but most of what goes in are indian made

[krishnan]

if you visit lot of local houses where i live, they have these tubelights made from some local brand, 100% made in india

[Singha]

but such cos can they run a electronic manufacturing op on foxconn or intel scale?

[Theo_Fidel]

If you notice the technology partner is IBM. But yes that is an odd team.

Still I don’t think they are looking to manufacture cutting edge chips.
Just the base 555 Timer chip would be useful.
There’s billions of them made every year and India imports everyone it uses AFAIK.
It would have been better to rope in Samsung or One of the Japanese companies.
The second one is a PSU so we could write that off right away

BTW what happened to SEMIndia.

[Suraj]

PM's advisor council estimates current FY growth at 5.3%

Prime Minister's Economic Advisory Council (PMEAC) has pegged India's Gross Domestic Product (GDP) growth at 5.3% for the current financial year.

This is way down from their earlier estimates of 6.4% but higher than sub-5% growth projected by various brokerage firms and independent economists.

C Rangarajan, Chairman of PMEAC said in a press conference that containing the fiscal deficit within the budgeted target of 4.8% of GDP could be a challenge.

In order to achieve the 4.8% fiscal deficit target, action will have to be taken during the year particularly in the case of subsidies.

Talking about the food security Bill's burden on the fiscal deficit, Rangarajan said, "As far as current year goes, the burden will not be heavy because implementation will take time."

He added that there should be a cap on the total subsidies.

"If food subsidy is paramount then other subsidies should be brought down consequently", Rangarajan said.

I'm all for a cap on subsidies, driven by other revenues and expenditure. If GoI wants to spend more on a program, they should curtail their own expenses to pay for it.
Gold imports estimated to fall to $38-40 billion

Gold imports are likely to be around $38 billion to $40 billion in the current fiscal year to March 31, 2014, C Rangarajan, the economic adviser to the Prime Minister, said on Friday.

That would be down from last fiscal year's $53.8 billion in imports, which helped push India's current account deficit to a record 4.8% of gross domestic product.

In its report on the economy, the prime minister's economic advisory council, headed by Rangarajan, has projected gold and silver imports at $40 billion in the current fiscal year, of which gold imports alone would account for $38 billion.

July IIP up 2.6%, retail inflation down to 9.5%

In what could lend some credence to the government’s optimism that the economy would begin to show signs of revival from the second quarter of this financial year, the country’s industrial production grew at a four-month-high rate of 2.6 per cent in July, according to official data released on Thursday. However, much of the expansion was on account of the capital goods sector, boosted to the extent of 1.6 per cent by high growth seen in electrical equipment.

The numbers come as a relief also because this expansion has been after two straight months of contraction. The country’s gross domestic product growth had slipped to a four-year low of 4.4 per cent in the first quarter of 2013-14.

Meanwhile, the Consumer Price Index (CPI) -based inflation rate eased to 9.52 per cent in August, against 9.64 per cent in the previous month.

Within the Index of Industrial Production (IIP), mining continued to suffer, with output declining for a tenth straight month in July — by 2.3 per cent. It had fallen 3.5 per cent in the same month last year.

Manufacturing, which accounts for over 75 per cent of IIP, expanded by a four-month-high rate of three per cent, compared with a stagnation (no growth) in July last year. Electricity generation grew at the steepest pace — of 5.2 per cent —against 2.8 per cent in the same month last year.

There had been no output growth in electricity the previous month.

With a significant improvement in July, the overall contraction in industrial production in the April-July period this year has come down to 0.2 per cent, the same level as that in the corresponding period last year. Economists, however, say it might still be too early to conclude that the upturn in July means a recovery for industries.

[krishnan]

what the phuck ... i was thinking they gonna reduce petrol price .... they increased it by 1.63 ........

[Prem]

http://www.moneycontrol.com/news/econom ... 49211.html
Reliance on imported energy threat to long-term recovery

India's biggest underlying financial problem, according to business leaders and economists, is not the imminent change in US monetary policy that triggered an investor exodus from India and other emerging markets last month. Rather, it is India's own heavy and growing dependence on imported energy . The figures are stark. More than half of India's USD 191 billion trade deficit in the financial year to March - USD 109 billion - was made up of oil, with India importing 82 percent of its oil needs, mostly from the Gulf. Those imports contribute to the current account deficit that worries investors and that the government of Manmohan Singh has pledged to reduce. They also leave India highly vulnerable to price spikes prompted by the Syrian civil war or other events in the Middle East. Official attempts to curb the deficit, led by Palaniappan Chidambaram, the finance minister, and Raghuram Rajan, the new central bank governor, assume an Indian imported oil price of $104 a barrel, but the price of the "Indian basket" recently peaked above $114 and was this week at USD 110. Every one-dollar increase in the price over a year adds USD 1 billion to the net import bill.The whole mess in the current account deficit is due to the imports of both coal and oil," says Vivek Pandit, senior director for energy and the Federation of Indian Chambers of Commerce and Industry. Deepak Mahurkar, oil and gas specialist at PwC in India, says the trend is not new but is brutally exposed when foreign direct and institutional investors become reluctant to continue financing the current account deficit, forcing India to draw down its foreign reserves, as it has since March. "Then you start feeling the pinch of it," he says. Nor is there much hope that India will be able to decrease its reliance on imported energy. Oil import dependency, for example, is forecast to grow another 10 percentage points to exceed 90 percent by 2031. . Indian business leaders have proposed four longer-term solutions to India's deepening energy crisis: encourage domestic exploration for oil and gas; abolish fuel subsidies, which increase Indian oil demand and worsen the budget deficit; promote alternative energy; and continue diversifying India's suppliers by having the country's oil companies buy stakes in African and other non-Gulf oil and gas assets. . Increasing exploration and domestic production of oil and gas, however, would produce significant benefits to India within a decade, not only helping to contain the cost of imports but also creating millions of jobs and boosting gross domestic product, according to PwC. "The only the way the hydrocarbon deficit can be reduced is by domestically producing the crude oil," says Mr Mahurkar. International oil companies have mostly shied away from India in recent years, citing unfavourable taxes, regulations and domestic price controls. The country's coal mines are also producing far below their potential amid a political row over allegations of corruption in the awarding of coal blocks to power companies and other licensees. BP did pay USD 7.2 billion in 2011 for a 30 percent stake in a Reliance Industries offshore gas block, but output there has been hit by production problems and regulatory delays, even if a new discovery in the block announced in May has raised hopes of a turnround. "India is under-explored about 60-70 percent," says Mr Pandit of Ficci. "We need to explore our own national basins - oil and gas reserves - and incentivise our own domestic production." In the end, he says, future Indian governments will have no choice but to support exploration and cut consumption subsidies to avert an energy-based financial crisis. "It's a Hobson's Choice. You've got to bite the bullet either today, or tomorrow or the day after tomorrow," he says. "Nobody's looking at long-term energy security."

( Basically Fuddu Rules and Ruler Run economy with no long term vision)

[habal]

Can budget deficit be bridged entirely by raising petrol prices every fortnight on excuse of 'fortnightly revision' .. lol

"India is under-explored about 60-70 percent," says Mr Pandit of Ficci. "We need to explore our own national basins - oil and gas reserves - and incentivise our own domestic production." In the end, he says, future Indian governments will have no choice but to support exploration and cut consumption subsidies to avert an energy-based financial crisis. "It's a Hobson's Choice. You've got to bite the bullet either today, or tomorrow or the day after tomorrow," he says. "Nobody's looking at long-term energy security."

Give more concessions to mota bhai, and give in to his one-man import lobby, he will then play on his profits abroad and devalue rupee further as a mark of gratitude. Folks will also call it Indra shakti.

[sanjaykumar]

"India is under-explored about 60-70 percent," says Mr Pandit of Ficci. "We need to explore our own national basins - oil and gas reserves - and incentivise our own domestic production."

Absolutely brilliant governance of and by Indians. It is 2013 and they have made this prescient statement. No wonder India is a mess.

[Arjun]

Dalal Street bulls back Narendra Modi in hope of revival

BJP's prime ministerial candidate Narendra Modi has found support on Dalal Street. After five years of policy paralysis and corruption scandals during the tenure of UPA-II, the sensex is ranged around the 19k mark amid a slowing economy. With investors mostly out of the money in all but a handful of stocks, D-Street bulls have decided to support the man credited with bringing prosperity to Gujarat, a state from where most of the brokers come from.

"Most brokers and traders come from Gujarat and the neighbouring Rajasthan. They have seen prosperity first hand. They are also the ones who are willing to take more risks than people from other states. So even if supporting Modi seems like a risky proposition, they are willing to do that," said a veteran of the Street.

According to Deven Choksey, MD, K R Choksey Shares & Securities, the market has been more or less in a dry spell in the last five years as the economy has slowed because of the incorrect policies of the government. "Manufacturing, agriculture, services... all the sectors badly want growth. With Modi promising to bring in the Gujarat model, I think he has a good chance," Choksey said.

So what is it that has prompted investors to support Modi? "There are three reasons why Dalal Street wants Modi to become the PM," said Arun Kejriwal, director, KRIS. "First, he has been able to instill faith among people about his ability to lead with speed. Second, people believe that he can give us a clean administration with the ability to implement plans. And they believe in Modi's vision."

Being a Gujarati, Modi can speak the language brokers and traders associate with. According to the head of a retail broking house, recently Modi was the chief guest at a function in Ahmedabad where top market analysts were awarded. "During his speech, the connect between him and us was instant... And the best thing that struck me was this man can execute his plan and also talk about it in a way that can sway people's minds," the broking house head said.

Even foreign fund managers support Modi, but with a hint of caution. "Secretly... quietly a lot of FIIs are hoping that Modi becomes the PM," said a top official with an India-targeted FII. "The reasons for this are Modi is focused, business friendly, brings clarity to the table and has a track record to back all the three traits. Investors love such people," the official said.

[SaiK]

^i can agree to moditva.. but i don't understand that traders only know gujarati or is it gujarati the trading language?

[Arjun]

More here: NaMo, Ram the new mantra on Dalal Street!

"Narendra Modi has not become PM yet. There is a nine-month waiting period before the elections happen. But, this is the first time after 1984 that people are rallying around one person. It is now upto the BJP to convert that into votes. If BJP can get people to then it has a very good chances of forming the next government. As far as North India is concerned, the numbers will surprise. If BJP forms the government and Narendra Modi becomes the prime minister, it will be huge positive for the economy and if it is a huge positive for the economy, it is going to be positive for the equity market as well," says Vijai Mantri, MD & CEO, Pramerica Mutual Fund.

In fact, last month Chris Wood of CLSA, in his weekly GREED & fear, said: "Ihe Indian stock market's greatest hope is the emergence of Gujarat Chief Minister Narendra Modi as the BJP's prime ministerial candidate."

Also, noted economist Jim O'Neill in his blog said: "He's good on economics, and that's one of the things India desperately needs in a leader."

[ramana]

Looks like Ranbaxy Pharma is in trouble. US FDA has banned 11 drugs made by RP for bad quality control.

[Suraj]

I don't understand why people refer to Ranbaxy independently, as if its an Indian company doing something egregious. They were acquired by Daiichi Sankyo for $4.6 billion more than half a decade ago. They're a division of a Japanese company now, yet I seldom see any reference to that.

[gakakkad]

^^ the company is still based in India... however the USFDA action is most probably driven by the interest of American pharma giants...

[vina]

Hmm. Bengal seems to be an absolute basket case. Thoroughly dysfunctional and broke . Case it point. Some 65 kids were administered Hepatitis B vaccine orally instead of oral polio vaccine and 65 kids in hospital.

Some kid kills herself for ragging in school and all hell breaks loose and a marauding mob (all choreographed on TV, with cameras filming, TMC calls them CPI-M folks) goes berserk.

In the middle of all this Mamata meets Pranab Mukherjee twice to "discuss" the financial situation the state. Stories of dozens of children dropping dead in BC Roy pediatric hospital . Nothing about Bengal seeks to shock anymore.

At the end of this, we have the same broken vinyl record of sloganeering, broken and miserably failed leftist shibboleths , a thoroughly incompetent and failed state , a more holier than thou and patronizing preachiness and of course a self righteous claim to alms and aid from others as if beggary is a "right".

Shame.

[Pratyush]

This just goes to show, that every thing is politics.

[Pratyush]

Dr Rajan, your next crisis is coming up in banking

A longish piece and paints a gloomy picture of the Indian banking sector.

[Pratyush]

Question are being raised on the economic data being published by the GOi. Not only by the investors but also by the RBI. The fear is that by painting a rosy picture they can get the RBI to relax its tight monitory policy. This data also cannot be relied upon to formulate accurate policies.

Inflation conundrum: Is govt fudging data to trick RBI?

[James B]

Dr Rajan, your next crisis is coming up in banking

A longish piece and paints a gloomy picture of the Indian banking sector.

Nice article on the 'ponzi scheme' pulled by the government & Indian banking system. RBI is playing its role to sustain this ponzi scheme.

[krishnan]

Dr Rajan, your next crisis is coming up in banking

A longish piece and paints a gloomy picture of the Indian banking sector.

The government, in effect, is bribing the people with the people’s own money.

Read more at: http://www.firstpost.com/business/dr-ra ... ef_article

[Pratyush]

'Funding for lending' scheme in works to make home & auto loans cheaper: ET Now

Can a scheme like this work & can this pull the Indian economy out of the doldrums.

[Austin]

Iran's new government scraps oil and gas connections to India

The new government in Iran has withdrawn all crucial oil and gas concessions that had been promised to India by its predecessor.

Oil minister Bijan N Zangeneh, it is learnt, told Indian ambassador D P Srivastava on September 1 that Tehran would not accept the entire payment for crude oil imported by India in rupees as agreed in July.

India was banking on 100 per cent rupee payment for Iranian crude to cut its forex outflow. Petroleum Minister M Veerappa Moily had assured Prime Minister Manmohan Singh last month that an additional 11 million tonnes would be imported from Iran in 2013-14 to save $ 8.47 billion.

[James B]

'Funding for lending' scheme in works to make home & auto loans cheaper: ET Now

Can a scheme like this work & can this pull the Indian economy out of the doldrums.

Its akin to sub-prime crisis creation. Read this article by R Jagannathan on this issue

http://www.firstpost.com/business/cheap ... 16799.html

[Sachin]

At the end of this, we have the same broken vinyl record of sloganeering, broken and miserably failed leftist shibboleths , a thoroughly incompetent and failed state , a more holier than thou and patronizing preachiness and of course a self righteous claim to alms and aid from others as if beggary is a "right".

Another commie heaven is now providing their commie brothers from WB some good job opportunities - the 100% literate state. But it would be better if the multi-crore worth asset holding party divert some of their funds to their poor downtrodden oppressed comrades.

[Prem]

Hot money’ stays sticky in India as rupee crisis looks over http://www.ft.com/cms/s/0/7fc7bbf2-1f92 ... z2fHD4rZUt

The rupee has rebounded in recent weeks, after Raghuram Rajan, the new central bank governor, promised financial sector reforms. That feeling of relief is almost certainly premature. But even as panic ebbs, it is worth dwelling on what has not happened during the recent period of trauma – international equity investors did not pull their money out of India, or at least not much of it. Instead, they kept faith with favoured businesses.This matters because India relies on international capital more than most emerging markets. Foreigners own 22 per cent of its $1tn stock market, according to broker CLSA, and nearly half of the shares that are traded freely. If a good portion of this money suddenly dashed for the exits, the consequences would be disastrous.
The fact that it has not, so far at least, suggests an oddity. Short-term portfolio flows have been blamed for previous periods of emerging market turbulence, notably in the Asian crisis of the late 1990s, when rootless “hot money” seemed to rush out at will. In India, by contrast, the hot money is surprisingly sticky.
There is no charity in this loyalty, but there is what might be called a form of theology – namely a deep belief in the fundamentals of India’s future growth held by managers of many “long-only” foreign funds, such as Aberdeen Asset Management and First State.- Their faith is manifested in large holdings of a few dozen stocks in sectors such as IT outsourcing, pharmaceuticals, consumer goods and financial services. The investors like these top performers, such as Tata Consultancy Services, Sun Pharmaceuticals or HDFC Bank, and are convinced they will prove resistant to any downturn. “There are plenty of businesses here we like, which are high quality, high growth and with good governance,” says an investor at one of the largest India-focused funds. “You don’t always find that in other Asian countries.”There are other less positive reasons for sticking around, notably difficulties finding buyers in India’s thinly traded markets. “They say this is the Hotel California of emerging economies,” as one senior executive at a global bank put its. “Just like the song, you can enter, but you can’t leave.”Yet there is typically an underlying long-term confidence, too, one that is rooted in basic factors: India remains a relatively poor country with plenty of room to grow; it also has favourable demographics and a potentially huge internal market.The problem now is that, while recent market tremors seem not to have undermined this long-term faith, a sustained period of lower growth just might, which is exactly what India now faces.The continued loyalty of foreign investors rests on faith that growth will soon return to its previously heady levels. At present this looks unlikelyHSBC recently cut its gross domestic product forecast for this financial year to only 4 per cent, less than half the level three years previously. Even well-managed companies can’t escape the gravity of such a sharp slowdown forever. The odds of a long-awaited upturn in corporate earnings look slim.Meanwhile, the golden group of sectors preferred by foreign investors is growing smaller, too. Once-favoured private sector bank stocks were hit by central bank measures to curb liquidity, while slower macroeconomic growth will eventually dent sales for consumer goods companies.All of this only makes it more urgent that the government quickly introduces new steps to revive the economy through tax and labour market reforms among others. The continued loyalty of foreign investors rests on faith that growth will soon return to its previously heady levels. At present this looks unlikely. And the longer investors’ faith is tested, the more likely it is that, come the next moment of crisis, an exodus will indeed occur.

[Suraj]

With the US Fed backing down from plans to taper the rupee should rise to sub 60/$ soon.