The Big Bollywood India Thread?

[interestrateripoff]

Bernanke's an expert on the Great Depression, don't you know? That must be why he's always trying to recreate it.

He's fed up reading about it and wants to live in it?

[interestrateripoff]

http://www.bloomberg.com/news/2013-08-20/india-eases-cash-supply-curbs-as-surging-yields-imperil-growth.html

India’s central bank said it will buy long-dated government debt after cash-supply curbs to support the rupee prompted a surge in yields. Bonds and shares of lenders jumped the most in four years.

The Reserve Bank of India will conduct open-market debt purchases of 80 billion rupees ($1.3 billion) on Aug. 23 and “thereafter calibrate them both in terms of quantum and frequency” based on market conditions, it said in a statement yesterday. The earlier liquidity-tightening steps must not “harden longer term yields sharply” and hurt lending, it said.

So the central bank is going for market manipulation to solve the problem.

[interestrateripoff]

http://www.bloomberg.com/news/2013-08-21/asia-s-biggest-yield-jump-threatens-singh-goals-india-credit.html

A surge in Indian sovereign debt costs to a 12-year high this week is threatening Prime Minister Manmohan Singh’s plan to cut the budget deficit and fueling the fastest surge in credit risk since 2008.

Ten-year (GIND10YR) yields rose 72 basis points this month through yesterday to 8.92 percent, the most among 14 regional markets tracked by Bloomberg, touched the highest level since 2001 of 9.48 percent. They plunged 57 basis points today after the Reserve Bank of India said late yesterday it will buy long-dated notes via open-market auctions. Government debt in Indonesia added 68 basis points to 8.39 percent.

The crisis bubbling along nicely?

[Executive Sadman]

http://www.bloomberg.com/news/2013-08-20/india-eases-cash-supply-curbs-as-surging-yields-imperil-growth.html

So the central bank is going for market manipulation to solve the problem.

Presumably they have stuff they can sell to do this (british bonds, gulp), they arent in the position where they just have to print, like basket-case UK yet (i doubt)

[interestrateripoff]

http://www.theguardian.com/business/2013/aug/21/india-rupee-record-low-us-dollar

India's rupee hit another record low against the dollar on Wednesday, despite policymakers taking fresh measures to try to put a floor under the sliding currency and stave off a full-blown financial crisis.

Until recently, India was constantly bracketed with China as an inexorably rising economic power; but with growth slowing sharply, the country is now among the hardest-hit of a string of developing countries that look dangerously exposed to violent swings in global markets.

When central bankers embarked on the drastic policy of quantitative easing – untested on such a large scale – they always knew it was extremely risky but judged that the price of a prolonged slump across the rich world was greater than the threat of inflating unsustainable bubbles in the world's financial markets. That judgment is about to be put to the test.

The Federal Reserve's $85bn (£54.2bn)-a-month bond-buying spree unleashed a global tidal wave of cheap money, which flooded into emerging markets.

Another day another record low.

Bernanke appears to have undermined quite a few global economies. He appears to like spreading depressions.

[interestrateripoff]

http://www.zerohedge.com/news/2013-08-28/india-central-bank-scrambles-currency-collapse-fallout-gives-usd-oil-companies-every

The aftermath of the biggest crash in the Indian rupee in history is becoming clear: business are scrambling to refine budgets, import and export activity is disappearing as there is zero clarity what the actual transaction prices net of FX are, purchases of hard assets are exploding as people are desperate to protect what little purchasing power they have left, capital controls are being instituted virtually everywhere, and the overall economy - at least that part that is reliant on foreign trade flows - is grinding to a halt. In fact, it got so bad, that moments ago the 1 month USDINR forward hit a ridiculous 70.

However, what is scariest is that so far the Indian Central Bank, the RBI has failed to reassure markets that it has anything up its sleeve. At least until moments ago, when the RBI finally announced its first band aid solution in the form of this: "RBI introduces Forex Swap Window for Public Sector Oil Marketing Companies"

On the basis of assessment of current market conditions, Reserve Bank of India has decided to open a forex swap window to meet the entire daily dollar requirements of three public sector oil marketing companies (Indian Oil Corp., Hindustan Petroleum Corp. and Bharat Petroleum Corp). Under the swap facility, Reserve Bank will undertake sell/buy USD-INR forex swaps for fixed tenor with the oil marketing companies through a designated bank. The swap facility gets operationalized with immediate effect and will remain in place until further notice.

Translation: instead of doing a shotgun liquidity injection targeting everyone (ala Fed, ECB, BOE and BOJ), and be sure the USD shortage is everywhere not just at these three oil companies - the RBI will instead proceed with surgical USD liquidity injections based on its perceived importance of the dollar recipients. In this case, the companies most exposed to the vagaries of the petrodollar system, because last we checked a barrel of Brent can be bought only for USD, not for INR.

However, what is more troubling is that while the RBI may have just bailed out its critical oil industry, if only for a few days or weeks, it means everyone else is left hung out to dry and the exodus of all INR positions into USD will only accelerate to a point where the USDINR may surge well over 70 when it reopens for trading, leading to an ever deteriorating currency collapse toxic loop (and one which most likely will inevitably result with the RBI leasing out its several hundreds tons of gold to those in greater need for physical).

The stresses on the global economy building nicely....

[interestrateripoff]

http://www.zerohedge.com/news/2013-08-28/indian-rupee-collapses-most-over-20-years

From a weak open, the Indian Rupee has now plunged a stunning 3.88% today. This is the largest single-day drop in the Rupee's value since March 1993. The Indian people have lost 30% of their global purchasing power since March 2013 (though those who swapped their paper wealth to gold have seen their purchasing power rise 6% in Rupee terms). With Gold in Rupees having broken to a new all-time high, it would seem the government has little choice but to lease its gold (no matter how vehemntly they deny the fact).

The Rupee's largest single-day drop since March 1993...

Still more market manipulation will help fix it.

[interestrateripoff]

http://uk.reuters.com/article/2013/08/29/uk-india-economy-gold-idUKBRE97S08O20130829

India's trade minister said on Thursday the central bank should look into suggestions that it monetise its gold reserves to reduce imports and dollar outflows that have hammered the rupee, but emphasised it was for the bank to decide.

India has 557.7 tonnes of gold in its reserves, making it the eleventh biggest holder, according to the World Gold Council. India consumer's appetite for gold has been a drag on the rupee, the worst performing major currency since May.

That shiny stuff pops up again.

[fluffy666]

That shiny stuff pops up again.

The problem is, it's quite hard to build an economy when a large chunk of savings/surplus income goes straight into buying gold and burying it in the back garden. Of course, for an individual faced with high levels of corruption and/or unreliable banks, it's a perfectly rational thing to do..

[interestrateripoff]

http://www.bloomberg.com/news/2013-08-28/rbi-to-sell-dollars-to-oil-firms-as-rupee-drops-most-in-20-years.html

India’s rupee surged the most since 2009, rebounding from a record low, on speculation a central bank plan to supply dollars to top oil importers will cool demand for foreign exchange. Bonds and stocks rallied.

The Reserve Bank of India will provide foreign currency to state-run Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp., which the authority will repurchase after a specified period, according to a statement on its website late yesterday. The rupee plunged the most in 20 years yesterday on concern a surge in oil prices amid political tension over Syria will worsen India’s current account and push the economy toward its biggest crisis since 1991.

Seems that the rupee has made a bit of a recovery on the news the central bank is going to start giving money to the currency speculators.

[durhamborn]

Iv started buying the Sensex through an India fund.Iv split down to 6 and will go in every month for 6 months.It will be sitting in there for around 20 years.

India can never get any reform done until there is a crisis.Then it seems to push through the needed reforms and growth returns.Its a hell of a ride but for long term money I like it.

The rupee will be a soft currency due to the nature of India for a long time.It might not be softer then sterling though over the long term.

If the emerging markets (including China) start selling US assets to try to shore up their own currency we will see those interest rates keep going up in the west.

[FreeTrader]

Exclusive: India might buy gold from citizens to ease rupee crisis

India is considering a radical plan to direct commercial banks to buy gold from ordinary citizens and divert it to precious metal refiners in an attempt to curb imports and take some heat off the plunging currency.

A pilot project will be launched soon, a source familiar with the Reserve Bank of India (RBI) plans told Reuters. India has the world's third-largest current account deficit, which is approaching nearly $90 billion, driven in a large part by appetite for gold imports in the world's biggest consumer of the metal.

With 31,000 tonnes of commercially available gold in the country - worth $1.4 trillion at current prices - diverting even a fraction of that to refiners would sate domestic demand for the metal. India imported 860 tonnes of gold in 2012.

"We will start a pilot project among some banks where we will allow them to buy back gold from individual households," the source, an official familiar with the central bank's gold policymaking, said. "This will start soon, we have discussed (it) with banks."

Reuters

[interestrateripoff]

http://uk.reuters.com/article/2013/08/30/uk-india-economy-rupee-idUKBRE97T05V20130830

The rupee slid back towards a record low on Friday, with investors braced for a statement on the state of economy from Prime Minister Manmohan Singh and the release of data that was expected to show India in the grip of a protracted slowdown.

Weak economic growth, a record high current account deficit and concerns about the government's finances are proving a toxic mix for the rupee, which hit a record low of 68.85 on Wednesday after falling around 20 percent since May.

Clearly India's central bank needs to intervene more to prop up the currency.

[zugzwang]

At this rate we'll be able to buy Jaguar/Land Rover back for the price of a new Jag!

[interestrateripoff]

http://www.bbc.co.uk/news/business-23894907

The falling value of the Indian rupee is "a matter of concern", Indian Prime Minister Manmohan Singh has told parliament.

The rupee hit a record low against the dollar on Wednesday and has fallen more than 20% this year.

That fall is damaging for the economy, as India imports large amounts of fuel and foodstuffs and the weak rupee makes those imports more expensive.

Also on Friday, India releases the latest report on economic growth.

Figures for the April-to-June quarter are expected to show an annualised growth rate of 4.7%.

That would be a slight slowdown on the previous quarter and less than last year's growth rate of 5%, which was the slowest pace in a decade.

So the Indian economy appears to be slowing based on GDP figures and coming just when it's facing a currency crisis.

[happy_renting]

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

As I understand it, that attitude is closely tied to the Hindu concept of karma, and the caste system. People who live in poverty, or are of a lower caste, are being punished for what they did in past lives. The corrolary is that wealth is a reward for a previous good life.

To some extent, it means that those in poverty are not only resigned to it, but actually assume they deserve it. Same with the opposite; wealth.

[Eddie_George]

At this rate we'll be able to buy Jaguar/Land Rover back for the price of a new Jag!

But, but, but... devaluing your currency is good, it will help exporters and begin the recovereh!

[zugzwang]

Indian real estate next in line to collapse.

http://www.business-standard.com/article/economy-policy/is-real-estate-next-in-line-to-collapse-113082800322_1.html

While the spotlight so far has been on the rupee and the equity markets, real estate prices have started to bear the impact as well. A Business Standard report points out that of the 26 cities surveyed by the National Housing Bank (NHB), as many as 22 including Delhi, Mumbai, Pune, Bangalore and Chennai saw a drop in property prices during the April-June quarter, compared to the first quarter of this calendar year. An all-round squeeze in liquidity and dearth of buyers have led to a fall in prices across the country.

Developers who were holding on to their prices despite sluggishness in demand have blinked first. Yet the NHB chairman and managing director RV Verma feels that there is more to come.

A report by Manish Bhandari of Vallum Capital says that the endgame of speculation in Indian real estate has begun. Bhandari says that a multitude of factors are converging after a decade, setting the stage for a deep correction in real estate. The story in India has all the ingredients of a making of a bubble a la Mississippi Scheme, the South Sea Bubble or the Tulip Mania.

Real estate prices in India are among the highest when compared on a per capita basis. Rent yield in India, which can be used to compare returns within real estate across countries as well as to compare across asset class, is one of the lowest in the world. Indian real estate earns a rent yield of only 2.7 per cent compared to 4.7 per cent in the US and 4.5 per cent in Japan.

Within emerging markets, Indonesia has a yield of 9.3 per cent while Philippines real estate investment earn a rent yield of 8.6 per cent. The only other country which has a 2.7 per cent yield is China which is already facing a bank-fuelled bubble like scenario in its real estate sector, which its government is desperately trying to control.

RBI is sucking out liquidity like a sponge and the sector that will be the worst affected is real estate. Bhandari says that the fall in property prices is likely to start from the deleveraging cycle by Indian banking sector which is running a multi-decade investment to deposit ratio of 108 per cent. Balance sheets are expected to be deleveraged over the next three-four years. The previous deleveraging cycle in 1997-2003 saw real estate prices correct by 50 per cent in Mumbai Metro Region.

Adding to the liquidity crisis is the likely exit of private equity (PE) players from the market. Average life of private equity in real estate is seven-eight years. Year 2013 marks the beginning of private equity returning back to shores. Manish says that PE players entered India at an exchange rate of 45; they will now be exiting at around 70 levels a loss of nearly 50 per cent in currency conversion itself. The exit of PE funds will create a distress sale situation in the real estate market, shortly leading to depressing price situation for the next 18 months.

Bhandari feels that unless the government deflates the housing bubble in an orderly manner, the collapse by market mechanism will surprise generations on how a nation on its way to prosperity by speculating on a piece of land eventually lost a fortune.

[Ash4781]

Real estate prices in India are among the highest when compared on a per capita basis. Rent yield in India, which can be used to compare returns within real estate across countries as well as to compare across asset class, is one of the lowest in the world. Indian real estate earns a rent yield of only 2.7 per cent compared to 4.7 per cent in the US and 4.5 per cent in Japan

Blimey 2.7% is not much. As an aside I remember seeing some Indian banks at the top of the best buy tables for savings a while back.

[interestrateripoff]

http://www.bbc.co.uk/news/business-23894907

India's economy continues to slowdown according to the latest government figures.

For the April-to-June quarter, it grew at a rate of 4.4%, compared with the same period in the previous year.

http://www.bbc.co.uk/news/business-23925199

India is considering a proposal to shut fuel pumps at night as it looks at ways to cut its oil import bill, its oil minister Veerappa Moily has said.

Mr Moily said the idea was one of many options the government was considering.

India's oil imports are one of the biggest contributors to its widening current account deficit - a key area of concern for policymakers.

Mr Moily said his ministry would also launch a conservation drive later this month to try to cut fuel demand by 3%.

Has Monty Python taken over?

[interestrateripoff]

http://uk.reuters.com/article/2013/09/01/uk-india-economy-chidambaram-insight-idUKBRE9800HL20130901

Late last month, with their doors shut to the mounting market panic outside as investors fled the country, India's cabinet ministers gathered to give final approval to a cheap food scheme for the poor.

It was hardly a difficult decision for a government that needs to shore up its sagging popularity before elections due by next May. But officials familiar with the discussion say there was one dissenting voice over what is now destined to become one of the world's largest welfare programmes.

Finance Minister P. Chidambaram, already struggling to convince doubters that he will keep the country's hefty fiscal deficit under control, made a last-minute attempt to trim the huge cost of the plan, estimated at about $20 billion a year.

Chidambaram's ultimate failure to win colleagues around - despite his famed eloquence - is emblematic of the predicament he faces: he must stop investors heading for the hills as economic growth skids to its slowest pace in a decade, but he is surrounded by politicians who haven't grasped that there is a crisis at hand and want to spend their way to the ballot box.

In many ways, Chidambaram has been grappling virtually alone with India's economic emergency since he became finance minister for a third time 13 months ago.

Keeping a huge population like India fed is going to be very tricky if India is engulfed in a major economic crisis.

Starving people can be difficult to control.

[billybong]

http://

globaleconomicanalysis.blogspot.co.uk/2013/09/india-in-trouble-and-gold-at-heart-of-it.html

About the reports that India wants to sell it's store of gold and use part of the money to buy gold from its own people.

A scheme that seems to be on a par with many that the UK's being currently subjected to. Who knows but they might even be advising the UK on how to run the UK economy - or maybe it's vice versa.

Edited September 2, 2013 by billybong

[Traktion]

About the reports that India wants to sell it's store of gold and use part of the money to buy confiscate gold from its own people.

A scheme that seems to be on a par with many that the UK's being currently subjected to. Who knows but they might even be advising the UK on how to run the UK economy - or maybe it's vice versa.

Fixed it for you there. If it was good for the US during the Great Depression, I suspect it will be good enough for the Indian state too.

[MarkG]

Fixed it for you there. If it was good for the US during the Great Depression, I suspect it will be good enough for the Indian state too.

Indians aren't just going to hand over their gold to their government the way Americans did. Attempting to confiscate it would lead to civil war.

They like gold precisely because they don't trust their government.

[billybong]

Fixed it for you there. If it was good for the US during the Great Depression, I suspect it will be good enough for the Indian state too.

Strictly speaking the "fix" is incorrect as I was reporting the content of the article not expressing an opinion on the subject - in that sentence .

However I agree that confiscation is possibly the only way they could get their hands on the people's gold or maybe compulsory purchase at a price set below market price which would effectively be confiscation with partial compensation - but confiscation wasn't mentioned in the article.

It does seem a bit daft if the government were going to effectively sell "government" gold at market price but then effectively use that money to buy their people's gold at the same market price.

As the article also said

Pater Tenebrarum at the Acting Man blog pinged me with this comment

"The Indian government is instituting one stop-gap measure after another. Buying gold from its citizens? For rupees? Don't make me laugh...Indians buy gold to get out of the rupee"

It sounds like they're in a lot of trouble so they're floating ideas around and it's all a bit of a jumble. A bit like policy making for the UK economy.

Edited September 3, 2013 by billybong