Indian Economy - News & Discussion 27 May 2012

[Sri]

Its better if RBI stop supporting rupee and let the reach a level where it finds its own equilibrium based on current economic scenario the country is facing. Till yesterday RBI was pumping in dollar so that Rupee does not fall below the pyscological barrier of 60 and only to find out after half an hour it crossed it.

Atleast this way RBI can stop wasting its Forex Reserves on something they cant control for long.

I feel Chidu is just being made a scapegoat to magically manage the economy that has been badly managed for couple of years and that too in election year where any FM is under pressure to spend . NREGA is also not the cause of it. PM should take the blame for it.

Quite right Austin Ji.

PC is doing what he can in the current scenario. All this is because of UPA 1.

[Austin]

Atleast the NRI's would be Happy I suppose coz the Rupee is Falling

Rupee at 60: Ten ways how it impacts you

[prahaar]

The problem of converting non-INR savings to INR is that unless it is done in real-estate/equity/Gold it loses value very quickly (FD/other such schemes). I foresee a huge bubble bloating the already bloated real estate market - which will squeeze out the "genuine" buyers (genuine - refers to buying real estate for personal use and not as an investment). Genuine buyers who need a home to live for themselves are having to lift the burden of falling INR as well as rising interest rates.

[Abhijeet]

USD-INR chart since 2009. For the last two years USD looks like a growth stock -- buy buy buy!



Hard to believe that INR can get back into its typical (for the last 10+ years) range of 40-50 any time soon.

[Patni]

The real retail inflation in India has been consistently in double digits (~ 14 to 15%) over last 10 years. The food inflation may be ever higher. The large real negative intrest rate on saving ensured only way ppl can protect saving was to buy RE or Gold. Due to near zero intrest easy money avilable due to QE flowed in to India and kept INR at 45-50 to one US$ level. Now the hot money is being pulled out and INR tumbling fast. IMHO ppl. got spooked by "stop buying gold" pleas of FM and pull out from India accelerated since last month or so. I think it INR slide will go on till it reaches 63-64 level in coming 3 months.

[Patni]

India's external debt up 13% at $390 bn in FY13

India's external debt rose by nearly 13 per cent to $390 billion in 2012-13, mainly due to rise in short-term trade credit and external commercial borrowings (ECBs) in the back of high current account deficit, the Reserve Bank said on Thursday.

"The high current account deficit witnessed during 2012-13 and it's financing increasingly through debt flows particularly by trade credit resulted in significant rise in India's external debt during 2012-13," RBI said in a release.

The increase in the debt during 2012-13 was primarily on account of rise in short-term trade credit. There has been sizeable rise in ECBs and rupee denominated Non-resident Indian deposits as well, it said.

"However, magnitude of increase in external debt was offset to some extent due to valuation change (gain) resulting from appreciation of US dollar against Indian rupee and other international currencies," the RBI added.

The total external debt was about $345.5 billion at end-March 2012.

RBI further said that excluding the valuation change due to the movement of US dollar against major international currencies and rupee, the external debt as at end-March 2013 would have increased by $55.8 billion. However, the actual increase was lower at $44.6 billion.

As per the data, share of ECBs ($120.9 billion) continued to be highest at 31 per cent of the total debt, followed by short term debt (24.8 per cent) and NRI deposits (18.2 per cent).

Trade credit components of external debt (both long-term and short-term) showed an increase of $20.3 billion during the period.

NRI deposits increased by $12.2 billion to $70.8 billion as at end-March 2013 primarily on account of increase in rupee denominated NRI deposits reflecting the impact of deregulation of interest rates on these deposits in December 2011, RBI added.

As far as the currency composition of the debt is concerned, the US dollar denominated debt continued to be the largest component with a share of 57.2 per cent, followed by rupee (24 per cent), SDR (7.5 per cent), Japanese yen (6.3 per cent) and euro (3.5 per cent).

The ratio of foreign exchange reserves to external debt as at end-March 2013 at 74.9 per cent was lower than the level of end-March 2012 (85.2 per cent).

[vera_k]

Rupee still 17.6 per cent overvalued: Nomura

Nomura sees the weak currency as a negative for India's growth, as it increases imported cost inflation and exposes the corporate sector with unhedged overseas loans.

[Theo_Fidel]

The problem of converting non-INR savings to INR is that unless it is done in real-estate/equity/Gold it loses value very quickly (FD/other such schemes). I foresee a huge bubble bloating the already bloated real estate market - which will squeeze out the "genuine" buyers (genuine - refers to buying real estate for personal use and not as an investment). Genuine buyers who need a home to live for themselves are having to lift the burden of falling INR as well as rising interest rates.

The only reason there are ‘real’ vs ‘fake’ buyers of property in India is because the system is so demented. Ideally people would buy property and tenant it out, as supply increases the rent would fall and yield on capital would decline. Proper property tax would then squeeze the ‘hoarders’ and everyone would benefit from the flood of investment.

My advice is focus on fixing the system rather that attack folks who are investing in India in good times and bad.

[Vamsee]

A good article on Real Estate

Some claim that India has a large population and there is a shortage of land. A little arithmetic shows this is not the case. If you place 1.2 billion people in four-person homes of 1000 square feet each, and two workers of the family into office/factory space of 400 square feet, this requires roughly 1% of India's land area assuming an FSI of 1. There is absolutely no shortage of land to house the great Indian population.

One more article expanding the same theme

If you don’t believe me, ask yourself: what stops city municipal corporations from raising the floor space index (FSI)? Urban land may be limited, but construction can surely be vertical. In Singapore, they construct not only upwards but downwards: they build several stories underground and not just overground. If the normal FSI is one, raising it to two would double the available land. If we raise it to five or 10, as in parts of New York, the land available in urban areas would rise five-fold or 10-fold, and prices would drop like a stone.

Indian property is a bubble waiting to burst, and the only reason why it has not burst already is the artificial constriction on its supply by the politician-builder-criminal nexus.
Prices are high not because of genuine demand, but because our netas and babus and businessmen do not want to let the supply of cheap land rise for fear of destroying the value of their own benami assets.

[ramana]

Atleast the NRI's would be Happy I suppose coz the Rupee is Falling

Rupee at 60: Ten ways how it impacts you

Why this pot shot Austin?

[Bade]

So the Nomura projection is close to what I got by simple scaling of inflation in land value. If gold can be a benchmark, why cannot land value also be. There is only a fixed amount of land surface available, so understanding value of other products in this framework for normalization might make sense ?

[Austin]

Atleast the NRI's would be Happy I suppose coz the Rupee is Falling

Rupee at 60: Ten ways how it impacts you

Why this pot shot Austin?

Nothing specific to any one but end of day its fact of life , When Rupee was strong some months/years back the same friend of mine was complaining but today he is a happy man....cant blame any one here.

[Austin]

Gas price hike: 10 must-know facts

[prahaar]

The problem of converting non-INR savings to INR is that unless it is done in real-estate/equity/Gold it loses value very quickly (FD/other such schemes). I foresee a huge bubble bloating the already bloated real estate market - which will squeeze out the "genuine" buyers (genuine - refers to buying real estate for personal use and not as an investment). Genuine buyers who need a home to live for themselves are having to lift the burden of falling INR as well as rising interest rates.

The only reason there are ‘real’ vs ‘fake’ buyers of property in India is because the system is so demented. Ideally people would buy property and tenant it out, as supply increases the rent would fall and yield on capital would decline. Proper property tax would then squeeze the ‘hoarders’ and everyone would benefit from the flood of investment.

My advice is focus on fixing the system rather that attack folks who are investing in India in good times and bad.

I am not attacking the folks who are investing in real-estate in India. I could have used words "Type A" and "Type B" buyers. I am showing the situation as seen on the ground (in Pune). Property tax will be unfair in India since the money paid by that tax does not get spent in the same locality, there is not enough decentralization.

[habal]

Gas price hike: 10 must-know facts

Don't look like convincing 'facts'.

Only fact that needs consideration is that Mota bhai's gas is going online. And sarkari cronies are dancing to his tune after due pockets have been lined.

what a miserable state this country has come to ?

Price of urea will further increase by 60% ?

It is already at obscenely insanely high levels now. There is a conspiracy against farming in this country. Especially small-scale farming.

[ramana]

Austin, So your one friend represents all NRIs?

[Austin]

ramana may be not but there is no false in my statement that they would be gaining from rupee falling , Its simple fact. Its not that they are responsible for it. The Indian public would take the hit.

I wonder how much home loan EMI will go up .......bad times for many Indians specially the Lower Middle Class and Poor.

[Austin]

PM seeks Rs. 1.15 lakh crore investment in infrastructure, targets 60 new airports

[Manish_Sharma]

Map explaining how sonia, rahul are making re. drop by subramaniam swamy:

https://www.facebook.com/photo.php?fbid ... e=1&ref=nf

The simple way of converting black
money to white in India:

1. Black money is taken to Tax
Havens through Hawala which, as far
as India is concerned, is controlled
by the underworld and the Pakistani
ISI (which is why pakistan freely
assaults our soldiers and we do
Nothing!).

2. Foreign Financial Institutions take
this money and issue a Participatory
Note. It contains no details of
depositor-only the amount
deposited.No details disclosed.

3. Participatory Notes are accepted by
RBI (because chidambaram made a
law for it), cashed and invested in
Stock Market and inflate the stock
market.

4. Subsequently, Profit booking is
done by these investors and Market
falls sharply. Common man (You sir,
yes you) loses money.

6. RBI has to pay back in $$$ ,
making money devaluate sharply.
watch this video for more details :
http://www.youtube.com/watch?
v=mdMxTSoVKtI


at least its making 'resident non-indians' happy.

[Austin]

Most certainly most politician even at the lowest level as local MLC has black money in crores , forget about MP's who have in multiple crores then there are Business Class , Builders/Mafia ( they are both same in many cases , A Mafia who later becomes a business man i.e Builder or Politician ) , similar category people either invest in Property Market in India or route it outside through Hawala channels and then reinvest it in India.

These people are worst enemies of our country who thrive in our "Democratic System" more worse then these ISI or Terrorist as they hollow the system from within. The clan of such people have just grown in past 2 decades as they reinvent themself.

They also deprive the ordinary hard working Indians in this country of their honest money by inflating prices of every thing you can think of.

There is also a theory that the Rupee is allowed to fall as this would help to get back Black Money $$$ inside India and convert to Rupees to fund the upcoming elections. Very Safe and Reliable way to get in money legally and get most bang per $

Subu can be any where between Reliable Fact to CT so take him accordingly

[Austin]

India not willing to play by the rules: US lawmakers

"When you look at India's industrial policy, trade barriers, the rampant piracy, the tax discrimination and what appears to be an absolute disregard for our intellectual property rights, you realize that India is a country that is not willing to play by the rules right now," Congresswoman Marsha Blackburn said at a Congressional hearing.

"What's worse is that they're trying to gloss over this. And here's an example. Last week, the Indian ambassador sent a letter to my office defending their abusive practices that are killing jobs of millions of hardworking Americans," Blackburn said in reference to the letter sent by ambassador Nirupma Rao.

"India's principles set a disappointing example to the rest of the world. No country that calls itself a friend of the US would celebrate isolationism the way that India is doing," Blackburn said.

"We have overwhelming bipartisan agreement in Congress that India's government must reverse course or risk seriously threatening our bilateral relationship," said the Congresswoman from Tennessee during the Congressional hearing on "A Tangle of Trade Barriers: How India's Industrial Policy is Hurting US Companies".

The hearing was convened by the Commerce, Manufacturing, and Trade Subcommittee of the House Energy and Commerce Committee.

The letter written by the Indian Ambassador to Congressmen was also made part of the record of the Congressional hearing as part of India's position on the issues.

Expressing deep concern over the Indian policies related to the intellectual property rights, Congressman Leonard Lance from New Jersey said the United States must exhibit leadership in the area of protecting IP rights.

"Emerging companies that adopt the Indian model of intellectual property policymaking also pose a risk to United States companies. We must make it clear to all trading partners that these policies set a bad precedent and undermine our mutually beneficial trade agreements," he said.

Congressman Peter Olson from Texas expressed his anger over the recent Indian policies, which he said is badly hurting American companies and called for taking actions against New Delhi.

"Like all of you all, my blood boils when I hear that India is revoking and denying patents and granting compulsory licenses for cancer treatments or adopting local content requirements," he said.

"As a nation, we should handle India like my dad did when I was growing up and I made his blood boil: He put his arm around me and or pulled me where he would go, to make sure his fingers were resting firmly on my shoulder just to inflict some pain if I diverted from the course we would go down. That's what we should do with their government," Olson said.

[Austin]

India has to repay $172 billion debt by March 2014

India’s short-term debt maturing within a year stood at $172 billion end-March 2013. This means the country will have to pay back $172 billion by March 31, 2014. The corresponding figure in March 2008 — before the global financial meltdown that year — was just $54.7 billion. India has accumulated a huge short-term debt with residual maturity of one year after 2008. The figure has gone up over three times largely because this period also coincided with the unprecedented widening of the current account deficit from roughly 2.5 percent in 2008-09 to nearly 5 per cent in 2012-13. Much of this expanded CAD has been funded by debt flows.

This may turn into a vicious cycle.

More pertinently, short-term debt maturing within a year is now nearly 60 per cent of India’s total foreign exchange reserves. In March 2008, it was only 17 per cent of total forex reserves. This shows the actual increase in the country’s repayment vulnerability since 2008.

Theoretically, if capital flows were to dry up due to some unforeseen events and NRIs stopped renewing their deposits with India, then 60 per cent of the country’s forex reserves may have to be deployed to pay back foreign borrowings due within a year.

A lot of the surge in external debt maturing within the next year is on account of big borrowings by Indian corporates during the boom years after 2004. Corporates became quite heady from their initial growth success and stocked up on huge external debts of 5- to 7-years maturity. The repayment clock is ticking for many of them now.

External commercial borrowings are now 31 per cent of the country’s total external debt of $390 billion as of 31 March 2013. Short-term debt with one year maturity is 25 per cent of total external debt. However, total short term debt to be paid back by the end of this fiscal, which includes a lot of corporate borrowings payable by end March 2014, is 44 per cent of the country’s external debt or $172 billion.

Corporates have managed to roll over their foreign borrowings over the past year because of the easy liquidity conditions kept by the U.S. Federal Reserve. But if the Fed’s easy liquidity stance were to reverse, there is no knowing how Indian corporates will pay back their foreign debt at a depreciated exchange rate of the rupee.

In any case, besides meeting its debt repayment obligation of $172 billion by 31 March 2014, India needs another $90 billion of net capital flows to meet its current account deficit projected at 4.7 per cent of GDP by the Prime Minister’s Economic Advisory Council (PMEAC) for the coming fiscal.

The chairman of the PMEAC, C. Rangarajan, told The Hindu that an otherwise manageable CAD may create a perception of vulnerability in the backdrop of the Fed’s latest stance.

The $172 billion that has to be paid back by March 31, 2014, will no doubt add to this growing sense of unease.

[member_20292]

austin saar. kudos for posting all the clippings that you do, in this website. well done. pranaam.

[Austin]

mahadevbhu pranaam

Rupee depreciation may boost NRI investments in realty sector

"If the rupee maintains its current levels, developers could see more interest from NRI buyers as long as the capital value levels are also maintained and do not see a big hike during the period," company's executive director (residential) Shveta Jain said in a statement.

At current rupee levels and sluggish market conditions in many markets that are expected to remain that way for the next few months, NRIs could possibly benefit substantially from some attractive options available in the markets, she said.

However, she felt investments in the sector may not happen immediately.

"Though it is commonly felt that with each depreciation cycle, NRIs will find it cheaper to invest in the sector, this does not happen immediately," Jain said.

The primary reason is that there are logistical constraints such as identifying the right property, negotiating a deal, being able to repatriate large sums of money in outright purchases and completing all the necessary documentation and formalities during the transaction life-cycle, she said.

"A typical purchase transaction may take a NRI buyer a period of a month to 3 months. During this period, the rupee may strengthen and the notional advantages that could accrue due to the rupee's depreciation could be lost," she informed.

[Austin]

The downside of NRI investing in Property Market something not highlighted by media is it raises the over all property prices and Indians of Lower/Middle income group end up paying many times more for the property , inflating prices and making it unaffordable.

The builders also rip off NRI's since they know they can afford to pay more than what the actual price should be.

The net gainers are builders and politician whose black money are invested in property they would be laughing all the way to the bank

[Bade]

NRIs are a minute segment of the property market, except in some states where they dominate. In the metros it is hardly NRIs who do multiple purchases in short spans of 3-5 years. It is all locals with huge amounts of black money. This is the sole source which is inflating property prices.

[Austin]

NRIs are a minute segment of the property market, except in some states where they dominate. In the metros it is hardly NRIs who do multiple purchases in short spans of 3-5 years. It is all locals with huge amounts of black money. This is the sole source which is inflating property prices.

I am aware of NRI who pump in money and buy multiple properties since for some time I was associated with a known property agency in Mumbai , they not only buy directly but also buy in name of relatives and close friends, they buy it and rent it out in many cases as it gives handsome returns or just hold it and sell it at a later date.

There are two categories here one type of NRI are the genuine one who would like to buy a property with their hard earned money another type who buys multiple property in either their name , families or friends to make a handsome return from property market , it is the latter category that is real problem.

Locals dont have black money not the general public atleast , the key source of Black Money is Politician ,Businessmen who fund their black money to builders who then can afford to hold on to property and keep the rates high since they are not on loan from bank they can afford to hold on.

[Austin]

Of Reliance, by Reliance, for Reliance

[Gus]

politicians hold mind boggling levels of property. there is no comparison to a few nri types buying a few plots or apartments. the lowest level is a councilor and they have acres...and it goes exponential as you go up the chain.

[Austin]

The kind of Property politicians hold are mostly stolen/bought from governments at dirt cheap prices and then by hook/crook it gets converted for construction purpose commercial/homes , finally you have to sell those property and this is where the rich buyer comes into the picture they are NRI , Businessmen ...an average Indian these days cannot buy decent flat without going for a huge loan.

The rich buyer namely NRI , Businessmen ensure that the prices stay high always by paying what the builder demands since they have deep pockets , Politicam channel their black money to builder ensuring they have the staying power to hold on in turn they make their money white and get good returns ..its a mix of these factors that are keeping prices high these days ..making home an expensive buy for most Indians.

[James B]

Growth of 8 core sector industries slows down to 2.3 per cent in May compared 7.2 per cent in the same month last year. -PTI

[Yogi_G]

Is the per capita income of Delhi higher than rest of country due to high concentration of politicians there? No, seriously, apart from all that black money what else does Delhi have (industries, mines, IT etc) that seems to rake in the moolah? Tourism onleee?

[shaardula]

this has nothing to do with indian economics. only posting here coz a lot of economists of brf post here.

A Simple Math Formula Is Basically Responsible For All Of Modern Civilization
http://www.businessinsider.com/compound ... z2XoTjOCsY

edited.

[svinayak]

Superfund sees gold at $3000-$5000 levels in the long term (6:40)
June 25 - Johann Santer, global COO of Superfund tells ET NOW, gold can fall to $1000 per ounce in the short-term and could go up to $3000-5000 per ounce in another 5 to 10 years. He is bullish on base metals and believes their performance will be consistent with the economic growth in emerging markets.

[Manish_Sharma]

_

[svinayak]

Which email did you send

[Manish_Sharma]

_

[svinayak]

yahoo

gmail .

[Manish_Sharma]

ok

[Bade]

Austin, What is the sum total of the NRI population ? The middle east population is likely of the order of 1 to 10 million max. These are the ones most likely to buy property or invest in India. Probably less than 10% of this sample invest in more than one house or flat. Non-middle east crowd makes a tinier segment 1-2 million max and a large segment of this sample are wage earners, and even if they make 6 figure salaries, cannot save enough to buy multiple properties. The IT Vity sample in my circle who have bought 2-3 units are the ones, who did so in the 90s or very early 2000's. I am yet to come across anyone who invested post 2005 in multiple units on a fixed salary, after paying for a house to live in the US. Same must be true of NRIs from the other western countries.

It is probably the businessmen NRIs who invest in multiple properties, even they are small in number as a percentage.