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http://www.bloomberg.com/news/2013-08-14/india-restricts-foreign-exchange-outflows.html

India increased efforts to stem the rupee’s plunge and stop capital outflows that are pushing the economy toward its biggest crisis in more than two decades.

The Reserve Bank of India, whose Governor Duvvuri Subbarao steps down next month, cut the amount local companies can invest overseas without seeking approval to 100 percent of their net worth, from 400 percent, according to a statement late yesterday. Residents can remit $75,000 a year versus the previous $200,000 limit. Rupee forwards rose for the first time this week.

Policy makers’ moves since July to tighten cash supply, restrict currency derivatives and curb gold imports have failed to arrest the rupee’s slump to record lows as they struggle to attract capital to fund a record current account deficit. The rupee has weakened 28 percent in the past two years, the biggest tumble since the government pledged gold reserves in exchange for loans from the International Monetary Fund in 1991.

“I don’t think this fixes India’s problem, at best it restricts about $5 billion of flows annually, which doesn’t make a dent,” Bhanu Baweja, the global head of emerging market cross asset strategy at UBS AG, said in a phone interview from London yesterday. “The minute you restrict outflows, people will start legitimately speaking in terms of capital controls, although these are only on locals and not on foreign investors.”

Is there a growing economic crisis in India? Not really read much about in the press about the Indian economy.

Could a crisis in India trigger a wider global crisis?

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There was an item about onion prices on Fivelive a few nights ago. Apparnetly the price has tripled recently.

Onions are apparently the staple diet of Indians - more so than rice. Most Indian dishes contain onions and apparently onions and a bit of bread is the main diet for millions of Indians each day.

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There was an item about onion prices on Fivelive a few nights ago. Apparnetly the price has tripled recently.

Onions are apparently the staple diet of Indians - more so than rice. Most Indian dishes contain onions and apparently onions and a bit of bread is the main diet for millions of Indians each day.

Yeh the onions are very finely chopped and form the basis of many Indian sauces. Not an expert, but Rick Steins recent Indian food special was fascinating.

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Overheard a local fruit and veg wholesaler remarking how oniion prices were going bonkers.

1874807.jpg

A BJP activist sheds mock tears over the soaring onion price near Chief Minister Sheila Dikshit's residence on Wednesday. - DNA

BJP workers took out the protest march from the party national headquarters on Ashoka Road to Dikshit’s residence on Janpath. Holding placards and chanting slogans against Dikshit for not curbing the rise in onion prices, the protesters demanded her resignation.

Equipped with water cannon and riot gear, the police barricaded the entire Janpath leading to the Chief Minister’s house and also imposed section 144. The protest, however, concluded peacefully.

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Stupid question of the day:

Can't they just grow more? Crisis over within 6 months with weather like they have there.

I tried growing onions and garlic before with some sucess, I know that you do need a reasonable amount of nitrogen fertilizer (oil).

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Stupid question of the day:

Can't they just grow more? Crisis over within 6 months with weather like they have there.

I tried growing onions and garlic before with some sucess, I know that you do need a reasonable amount of nitrogen fertilizer (oil).

Probably Goldmans or JPM have a warehouse somewhere stuffed with onions? Do they keep? :lol:

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http://www.zerohedge.com/node/477636

Not satisfied with raising import tariffs on gold and putting in place jarring new FX flow capital controls, it seems the war on a weakening Rupee continues. We previously discussed the unintended consequence of such actions - including the rise of the gold smuggler - but the latest total ban on the importation of gold coins and medallions is edging India closer and closer to the Argentinian edge of Cristina Fernandez totalitarianism (after the initial ban on sales in June). In an effort to "moderate outflows" of Rupee, the Indian central bank slashed the amount of money families can send out of the country per year to $75k (from $200k) and limited overseas investment to 100% of net worth (from 400%). "We will leave no stone unturned" to control the current account deficit and stabilize the rupee, the finance minister warned; which of course removes any hope that monetary easing to revive growth will occur anytime soon.

Since the Fed began discussing Taper - the Rupee has weakened almost 15% (3 months)...

http://uk.reuters.com/article/2013/08/16/uk-markets-global-idUKBRE87514J20130816

The rupee fell to a record low of 62.03 to the dollar on concerns that central bank measures to curb capital outflows would prove insufficient as worries grew about the impact on funds of any rollback of U.S. stimulus.

Has Bernanke triggered a currency crisis?

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India is going through a bit of a rough patch,but longer term rough patches in India lead to high growth.It tends to make them roll back laws that stop foreign investment.

Looking at demographics going forward India has the best and really kicking in arounf 2018 or roughly 30 years.Probably will have a soft currency all that time but worse than sterling?.Who knows.Iv started investing there lately and will continue to do so and though any falls.

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India is going through a bit of a rough patch,but longer term rough patches in India lead to high growth.It tends to make them roll back laws that stop foreign investment.

Looking at demographics going forward India has the best and really kicking in arounf 2018 or roughly 30 years.Probably will have a soft currency all that time but worse than sterling?.Who knows.Iv started investing there lately and will continue to do so and though any falls.

Isn't that how boom / bust works?

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India's main problem seems to be energy. Despite many seeing India as another China, they have a huge trade deficit unlike china, and have to import vast amounts of fuel. They have apparently the worlds no1 reserve of accessible thorium, so maybe if they go that route that problem would be curtailed.

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Reuters 16/8/13

'Concerns that policymakers were losing control over the currency spread to India's stock market .NSEI, which dropped 4 percent, its biggest one-day decline in nearly two years.'

Edited by Sancho Panza

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I've got a wad of rupees in the draw from the mid 2000's when I was operating in India.

I tried to change em up a few times but the bank would have none of it. Same with the Brazillian as well.

Where can I change up a load of grubby notes ?

re the energy situation, they are improving the exploration. Is it Cairn that are doing some big ops over there ?

One of the big problems in doing anything there is infrastructure. The power grid is not reliable. You're not going to set up a big factory in a place if the power is going off all the time. Whether it is due to shortages or distribution I don't know.

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re the energy situation, they are improving the exploration. Is it Cairn that are doing some big ops over there ?

One of the big problems in doing anything there is infrastructure. The power grid is not reliable. You're not going to set up a big factory in a place if the power is going off all the time. Whether it is due to shortages or distribution I don't know.

On the energy front could it also be down to the large numbers taking electricity from the grid and not paying?

http://online.wsj.com/article/SB124885874162589595.html#slide/1

Power theft by rich and poor customers as well as businesses has plagued India for decades, as many Indians have come to view free electricity as a right.

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The biggest problem India faces is it's middle classes addiction to 'western' lifestyles - and by that, I mean credit.

I say this as someone with family over there - the middle class people are some of the most status oriented fashion slaves you would ever have the dubious pleasure to meet. They have literally no social conscience towards the poorer members and worship at the alter of money and celebrity. Whenever I've been over there, the poverty and the apathy towards it is in the single most striking thing.

My mum has always said India makes the mistakes of the UK/America about five years later, and refuses to learn anything from the past. Nothing I have seen or heard from my visits over there contradicts that. It is another consumer credit bubble in the making - the bankers must absolutely love them. I'm extremely fortunate to come from two parents who utterly eschew such behaviour.

There's quite a lot of stereotyping in what I've written, but in my very limited experience by comparison, the Chinese middle classes are rather different, and a lot more prudent.

The only thing affluent Indians have going for them is an addiction to gold - though that may or may not work out well for them ;)

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On the energy front could it also be down to the large numbers taking electricity from the grid and not paying?

http://online.wsj.com/article/SB124885874162589595.html#slide/1

:lol:

I lived with a guy from Delhi at university for a while. He mentioned that whenever there was a power cut they'd always bundle in their cars, crank the air con up and sleep in there, such was the heat. Probably does wonders for the air quality, millions of middle class indians running their cars overnight, just to get some sleep.

I guess they slept before air-con...doubt I could if I had to endure that sort of heat...do the posh hotels have their own generators to keep the air-con on for demanding western guests?

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Reuters 19/8/13

'(Reuters) - The Indian rupee fell to a record low on Monday and looked poised for further losses, with a series of measures unveiled last week failing to stall its decline.

The currency fell as far as 62.46 to the dollar in early trade, breaching the previous low of 62.03 hit on Friday.'

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Reuters 19/8/13

'(Reuters) - The Indian rupee fell to a record low on Monday and looked poised for further losses, with a series of measures unveiled last week failing to stall its decline.

The currency fell as far as 62.46 to the dollar in early trade, breaching the previous low of 62.03 hit on Friday.'

Currency crisis looming?

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Currency crisis looming?

Looks that way. Exacerbated by all the taper talk.

In 1991 the Reserve Bank of India had to airlift 67 tons of gold to the BoE and UBS to secure a $2.2bn loan from the IMF. I doubt if the BoE would be entrusted with the collateral this time round. :D

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Currency crisis looming?

Future tense?

'Everyone can always afford a Roti and an onion.'

Or may be not.

Live Mint 16/8/13

'The latest wholesale price index (WPI) numbers released on Wednesday show that onion prices rose 144% in July over the year-ago.'

Edit to add.Link courtesy Mish.

'I agree there is "No Question" of Economic Crisis. When a country implements capital controls and bans gold imports, the country is clearly in a state of economic crisis, no question about it.'

Edited by Sancho Panza

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On the energy front could it also be down to the large numbers taking electricity from the grid and not paying?

That practice is by no means confined to India.

In December 2009, the electricity supply to my mother's entire street (in south London) suddenly went out. When it was reconnected, the entire street went back on apart from Mother's neighbour. Upon investigation, it was established that when the affected house had been split from one dwelling into two, the BTL-er who did it (unofficially and without telling the council) installed an illegal spur himself (or rather, one of his do-as-you-likey friends who actually carried out the work for cash in hand did it) from the mains distribution point out in the street. When the engineers came to investigate the fault, they discovered a connection that didn't appear on their blueprint, thought that it must be something redundant and left over from the past, and disconnected it. It turned out to be a home's power supply. The BTL-er who let the place out advertised it on the basis of the electricity price being included in the rent, and the tenant had no idea that they were using an illegal power supply. This guy was caught, but I wonder how many other such arrangements are operating undetected...

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http://www.bloomberg.com/news/2013-08-20/rupee-drops-to-record-on-concern-fed-tapering-to-spur-outflows.html

India’s rupee plummeted past 64 per dollar for the first time on concern foreign outflows will accelerate as the Federal Reserve prepares to trim monetary stimulus. Stocks and government bonds fell.

Overseas funds have pulled about $12 billion from local debt and equities since May 22 when Fed Chairman Ben S. Bernanke first signaled the central bank may pare its $85 billion monthly bond-buying program. The Fed may start tapering in September, according to 65 percent of analysts surveyed by Bloomberg this month. U.S. home sales are forecast to climb to a three-year high, according to a survey before data due tomorrow.

The rupee depreciated 1 percent to 63.7537 per dollar at 10:47 a.m. in Mumbai, according to prices from local banks compiled by Bloomberg. It touched an unprecedented 64.12 earlier. The currency sank 2.3 percent yesterday, the biggest decline since September 2011. The yield on 10-year government bonds climbed to the highest level since at least 2008.

“Financial markets have developed something of an obsession with the Federal Reserve’s likely tapering,”

Is that because the Fed is the market???

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