Debt Crisis in India-Will Chinese Banks Bail Out More Indian Companies?

[Tshering22]

So, Finally you are caught Red-Handed False-Flag. So you are not a Chinese but a Pakistani. So, you are ashamed to show your real nationality.


You can take a girl out of Village but not the village out of Her. Same way how much Angrez you become you can't leave your local traits of writing English with native words.

Interestingly you've just started my friend.

 

[Aramsogo]

Do I really have to explain this? Debt and Foreign Aid to finance the current account deficit?? It is not an economic metric. It is a financial metric. The capital account does not reflect economic activity but hot money. That's why no economist uses it to assess economic risk/health. We all know the Indian economy is kept afloat by remittances from the legions of workers in the desert building modern pyramids for Arab Pharaohs or the lowly h1b.

Spin it any way you want, but big trouble in little delhi.

I will take that as a compliment.



Since we are talking about Balance of Payment,why limit discussion to current account only.After all balance of payment consist of two parts current account and capital account.
Current account consist of merchandise(Export and Import) and Invisibles(services,income and transfers) while capital account consist of Investment,loans and banking capital.

The breakup of latest data on balance of payment is as followed

I.Current account

1.Exports = $110518million
2.Imports = $177457million
3.Trade balance= $-66934million
4.Invisible(net)=$39058million
A.Non factor services $19510million
B.Income=$-6509million
5.Transfers = $26057million
6.Goods and services balance= $-47429million
7.Current account Balance = $-27881million

II.Capital Account

1. External assistance = $2993million
2. External commercial borrowing =$5974million
3. Short termdebt = $ 6749million
4. Banking capital = $834million
5. NRI deposits=$2163million
6. Foreign Investment = $23797million
A.FDI=$5340million
B.Portfolio Investment=$23797million
7.Other flows=$-9026 million

Capital Account Balance = $36661 million

III Errors and omissions= $-1750million

IV Overall Balance = $7030 million

http://indiabudget.nic.in/es2010-11/estat1.pdf

BoP has contrasting ramifications for economy.Decline in exports of Goods and Services in response to weak global demand dampens overall GDP growth but higher current account deficit lead to stronger absorption of foreign capital ie. higher investment activity financed by foreign capital which partly contributes to GDP growth.

While a high level of current account deficit could create problems but certain amount of Current account deficit is not only tolerable but desirable also as it indicate investment for future growth which always fetch higher return than lended money.Countries which produce Current Account Surplus end up in a situation in which they have to park their profits in low yielding bonds which produces real time -ve returns compared to investment.

I would be worried only when BoP(Current + Capital account) turns -ve not just Current Account.

 

[AADHAAR]

Do I really have to explain this? Debt and Foreign Aid to finance the current account deficit?? It is not an economic metric. It is a financial metric. The capital account does not reflect economic activity but hot money. That's why no economist uses it to assess economic risk/health. We all know the Indian economy is kept afloat by remittances from the legions of workers in the desert building modern pyramids for Arab Pharaohs or the lowly h1b.

Spin it any way you want, but big trouble in little delhi.

Hehe .. chinese are getting restless.

No use .. all this won't hide china's decline. You've too much sh*t under the carpet. It's smelling.

 

[seethru]

Do I really have to explain this? Debt and Foreign Aid to finance the current account deficit?? It is not an economic metric. It is a financial metric. The capital account does not reflect economic activity but hot money. That's why no economist uses it to assess economic risk/health. We all know the Indian economy is kept afloat by remittances from the legions of workers in the desert building modern pyramids for Arab Pharaohs or the lowly h1b.

Spin it any way you want, but big trouble in little delhi.

Labourers in the UAE are facing rising competition from an influx of Chinese workers as the country’s construction firms carve out a slice of the Gulf market, analysts said.

Chinese labour is a cheap, abundant alternative to the Gulf’s South Asian workforce with fewer political risks, said Christopher Davidson, professor of Middle East politics at the UK’s Durham University.

“The political advantage of Chinese workers, in that the majority of them don’t speak Arabic and the majority are not Muslim,” he told Construction Week’s sister title Arabian Business. “They don’t represent the same kind of liability to the Gulf states, or the UAE in particular, as having a large number of Muslim Pakistanis would, if you see my point.”

You Chinese are competing for the same work you condescendingly called "desert building modern pyramids for Arab Pharaohs"

Typical of Chinese.

 

[KRAIT]

India's economy seen growing faster in FY13 - Kaushik Basu | Reuters

 

[Aramsogo]

When the Chinese build anything in Africa or Middle East, they work for Chinese construction firms with the full backing of the Chinese government and the Chinese Exim bank. Take the evacuation of 30,000 Chinese nationals from Libya for example, while Indians nationals were stuck there. They also don't get their passport confiscated. They are paid wages 3 times back home and have full video conferencing with family back home. This is hardly the slaves I'm talking about.

Labourers in the UAE are facing rising competition from an influx of Chinese workers as the country’s construction firms carve out a slice of the Gulf market, analysts said.

Chinese labour is a cheap, abundant alternative to the Gulf’s South Asian workforce with fewer political risks, said Christopher Davidson, professor of Middle East politics at the UK’s Durham University.

“The political advantage of Chinese workers, in that the majority of them don’t speak Arabic and the majority are not Muslim,” he told Construction Week’s sister title Arabian Business. “They don’t represent the same kind of liability to the Gulf states, or the UAE in particular, as having a large number of Muslim Pakistanis would, if you see my point.”

You Chinese are competing for the same work you condescendingly called "desert building modern pyramids for Arab Pharaohs"

Typical of Chinese.

 

[nalandapride]

Chinese please bailout your Bankrupt China Railway, we don't need your money. China Railway a junk with good glittering Packing outside.

 

[anonymus]

Do I really have to explain this? Debt and Foreign Aid to finance the current account deficit?? It is not an economic metric. It is a financial metric. The capital account does not reflect economic activity but hot money. That's why no economist uses it to assess economic risk/health. We all know the Indian economy is kept afloat by remittances from the legions of workers in the desert building modern pyramids for Arab Pharaohs or the lowly h1b.

Spin it any way you want, but big trouble in little delhi.

The difference between surplus generated by current account surplus countries and current account deficit countries is only that of quantum of self insurance.Your argument is based on the flawed premise that current account deficit is only run when exports>imports.It is also ran when investments>savings.Though high and persistant current account deficit is ruinious for BoP of any country,low level current account is not an evil and even desirable in most conditions.

What explaination could be better than the one from Horse's own mouth.

A quarterly magazine of the IMF December 2006, Volume 43, Number 4

Back to Basics

Do Current Account Deficits Matter?

Atish Ghosh and Uma Ramakrishnan

THE CURRENT account balance may seem to be an abstruse economic concept. But in countries that are spending a lot more abroad than they are taking in, the current account is the point at which international economics collides with political reality. When countries run large deficits, businesses, trade unions, and parliamentarians are often quick to point accusing fingers at trading partners and make charges about unfair practices. Tension between the United States and China about which country is primarily responsible for the trade imbalance between the two has thrown the spotlight on the broader consequences for the international financial system when some countries run large and persistent current account deficits and others accumulate big surpluses.

The IMF, whose mandate includes promoting and maintaining an open international trade and payments system, has recently started multilateral consultations on global imbalances with the major players: China, the euro area, Japan, Saudi Arabia, and the United States. Back to Basics tries to remove the emotion from the issue and examine whether current account surpluses and deficits even matter.

Measuring the current account

A good starting point is to ask what a current account deficit or surplus really means and to draw insights from the many ways that a current account balance is measured. First, it can be expressed as the difference between the value of exports of goods and services and the value of imports of goods and services. A deficit then means that the country is importing more goods and services than it is exporting—although the current account also includes net income (such as interest and dividends) and transfers from abroad (such as foreign aid), which are usually a small fraction of the total. Expressed this way, a current account deficit often raises the hackles of protectionists, who—apparently forgetting that a main reason to export is to be able to import—think that exports are "good" and imports are "bad."

Second, the current account can be expressed as the difference between national (both public and private) savings and investment. A current account deficit may therefore reflect a low level of national savings relative to investment or a high rate of investment—or both. For capital-poor developing countries, which have more investment opportunities than they can afford to undertake with low levels of domestic savings, a current account deficit may be natural. A deficit potentially spurs faster output growth and economic development—although recent research does not indicate that developing countries that run current account deficits grow faster (perhaps because their less developed domestic financial systems cannot allocate foreign capital efficiently). Moreover, in practice, private capital often flows from developing to advanced economies. The advanced economies, such as the United States, run current account deficits (see chart), whereas developing countries and emerging market economies often run surpluses or near surpluses. Very poor countries typically run large current account deficits, in proportion to their GDP, that are financed by official grants and loans.



One point that the savings-investment balance approach underscores is that protectionist policies are unlikely to be of much use in improving the current account balance because there is no obvious connection between protectionism and savings or investment.

Third, the current account can be viewed in terms of the timing of trade. We are used to intratemporal trade—exchanging cloth for wine today. But we can also think of intertemporal trade—importing goods today (running a current account deficit) and, in return, exporting goods in the future (running a current account surplus then). Just as a country may import one good and export another under intratemporal trade, there is no reason why a country should not import goods of today and export goods of tomorrow.

Intertemporal theories of the current account also stress the consumption-smoothing role that current account deficits and surpluses can play. For instance, if a country is struck by a shock—perhaps a natural disaster—that temporarily depresses its ability to access productive capacity, then rather than take the full brunt of the shock immediately, it can spread out the pain over time by running a current account deficit. Conversely, research also suggests that countries that are subject to large shocks should, on average, run current account surpluses as a form of precautionary savings.

When persistent is too persistent

Does it matter how long a country runs a current account deficit? When a country runs a current account deficit, it is building up liabilities to the rest of the world that are financed by flows in the financial account. Eventually, these need to be paid back. Common sense suggests that if a country fritters away its borrowed foreign funds in spending that yields no long-term productive gains, then its ability to repay—its basic solvency—might come into question. This is because solvency requires that the country be willing and able to (eventually) generate sufficient current account surpluses to repay what it has borrowed. Therefore, whether a country should run a current account deficit (borrow more) depends on the extent of its foreign liabilities (its external debt) and on whether the borrowing will be financing investment that has a higher marginal product than the interest rate (or rate of return) the country has to pay on its foreign liabilities.

But even if the country is intertemporally solvent—meaning that current liabilities will be covered by future revenues—its current account deficit may become unsustainable if it is unable to secure the necessary financing. While some countries (such as Australia and New Zealand) have been able to maintain current account deficits averaging about 4½ to 5 percent of GDP for several decades, others (such as Mexico in 1995 and Thailand in 1997) experienced sharp reversals of their current account deficits after private financing withdrew in the midst of financial crises. Such reversals can be highly disruptive because private consumption, investment, and government expenditure must be curtailed abruptly when foreign financing is no longer available and, indeed, a country is forced to run large surpluses to repay in short order its past borrowings. This suggests that—regardless of why the country has a current account deficit (and even if the deficit reflects desirable underlying trends)—caution is required in running large and persistent deficits, lest the country experience an abrupt and painful reversal of financing.

What determines whether a country experiences such a reversal? Empirical research suggests that an overvalued real exchange rate, inadequate foreign exchange reserves, excessively fast domestic credit growth, unfavorable terms of trade shocks, low growth in partner countries, and higher interest rates in industrial countries influence the occurrence of reversals. More recent literature has also focused on the importance of balance sheet vulnerabilities in the run-up to a crisis, such as the extent of liability dollarization and maturity mismatches. It has also underscored the importance of the composition of capital inflows—for example, the relative stability of foreign direct investment versus portfolio and other types of short-term investment flows. Moreover, weak financial sectors often lead to higher vulnerability to a reversal as banks borrow money from abroad and make risky domestic loans. Conversely, a flexible exchange rate regime, higher degree of openness, export diversification, financial sector development, and coherent fiscal and monetary policies are some factors that make a country with persistent deficits less vulnerable to a reversal.

So, are deficits bad?

A common complaint about economics is that the answer to any question is, "It all depends." It is true that economic theory tells us that whether a deficit is good or bad depends on the factors giving rise to that deficit, but economic theory also tells us what to look for in assessing the desirability of a deficit.

If the deficit reflects an excess of imports over exports, it may be indicative of competitiveness problems, but because the current account deficit also implies an excess of investment over savings, it could equally be pointing to a highly productive, growing economy. If the deficit reflects low savings rather than high investment, it could be caused by reckless fiscal policy or a consumption binge. Or it could reflect perfectly sensible intertemporal trade, perhaps because of a temporary shock or shifting demographics. Without knowing which of these is at play, it makes little sense to talk of a deficit being "good" or "bad": deficits reflect underlying economic trends, which may be desirable or undesirable for a country at a particular point in time.

Back to Basics - Do Current Account Deficits Matter? - Finance & Development - December 2006

Didn't you "PISA topper" chinese knew that current account deficit could be good for Economics or is it similar to super chinese economics which was not able to differentiate between Real GDP growth and Nominal GDP growth on another thread bashing indian economy.

 

[conworldus]

It is kind of weird to name yourself Tom Brady...

They better get their sh*t together. India is needed in order for United States to contain Asia. Hopefully this is just a minor blip that will not harm India too much. I have high hopes in the Indian economy and I have a strong feeling they will come out stronger than ever.

 

[rcrmj]

Chinese please bailout your Bankrupt China Railway, we don't need your money. China Railway a junk with good glittering Packing outside.

no matter how humiliated you feel the fact of your pathetic debt driven economy where the society is still at the primitive stage, and need China's money to save, you have to prepare more of these humiliations coming.. because India is only 'shining' and 'incredible' in Indians vvetdreams

 

[conworldus]

Labourers in the UAE are facing rising competition from an influx of Chinese workers as the country’s construction firms carve out a slice of the Gulf market, analysts said.

Chinese labour is a cheap, abundant alternative to the Gulf’s South Asian workforce with fewer political risks, said Christopher Davidson, professor of Middle East politics at the UK’s Durham University.

“The political advantage of Chinese workers, in that the majority of them don’t speak Arabic and the majority are not Muslim,” he told Construction Week’s sister title Arabian Business. “They don’t represent the same kind of liability to the Gulf states, or the UAE in particular, as having a large number of Muslim Pakistanis would, if you see my point.”

You Chinese are competing for the same work you condescendingly called "desert building modern pyramids for Arab Pharaohs"

Typical of Chinese.

True, Chinese workers are not highly paid, but still several times what Indian workers make.

 

[seethru]

True, Chinese workers are not highly paid, but still several times what Indian workers make.

How can they be competitive and cheap then?

 

[seethru]

It is kind of weird to name yourself Tom Brady...

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They better get their sh*t together. India is needed in order for United States to contain Asia. Hopefully this is just a minor blip that will not harm India too much. I have high hopes in the Indian economy and I have a strong feeling they will come out stronger than ever.
Original Post By tombrady
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Just the 50 cent brigade false flagging here. There are one or two others like him. Trying to create "perceptions"

 

[nalandapride]

no matter how humiliated you feel the fact of your pathetic debt driven economy where the society is still at the primitive stage, and need China's money to save, you have to prepare more of these humiliations coming.. because India is only 'shining' and 'incredible' in Indians vvetdreams

Please go and bail out your Bankrupt China Railways which need $307 Billion bailout and causing debt of 5% of Chinese Economy alone, instead of ranting here. Superpower China has largest Superslum of 174 Million people. I don't know how many dark facts about your country, you guys have kept hidden from the world.

We know what is going on with Indian economy but we need no help from SuperSlum China.

 

[rcrmj]

Please go and bail out your Bankrupt China Railways which need $307 Billion bailout and causing debt of 5% of Chinese Economy alone, instead of ranting here. Superpower China has largest Superslum of 174 Million people. I don't know how many dark facts about your country, you guys have kept hidden from the world.

We know what is going on with Indian economy but we need no help from SuperSlum China.

lol.. an extremely denial India in his very pain, I am sorry you have to be born like this with no pride, dignity but dreams.

and if the '174' million 'superslum' china has is true then we are more than qualified to help 700 million superslum India