Economic crisis in India 2013 | ALL Updates & News

[AfsarHamesha]

Basic Law of everything, be it love, hate, money, health, economy or anything else you can think of...what goes up must come down

That must be true for America, it sees the Great Depression in the 1930's and bounced back so well after World War and Baby Boom years. Then there was a mild depression during Jimmy Carter era but everything got hunky dory with the onset of Ronald Reagan.

India I'm not so sure. According to Prof. Amartya Sen, the fundamentals of the Indian economy are very weak because it scores less on HDI parameters. Unless the problem is solved at its root there would be no bounce back for a long time.

My prediction is India will struggle like badly run economies such as Mexico, Spain, Turkey.

 

[by78]

India's Currency Is Falling Fast and Its Central Bank Doesn't Know What to Do - Matt Phillips - The Atlantic

India's Currency Is Falling Fast and Its Central Bank Doesn't Know What to Do

It's another bad day for the rupee, which dropped another 1.4% to yet another all-time low against the US dollar. Here's a long-term look at the recent weakness in the currency.

The decline came as the Reserve Bank of India announced a plan to try to keep yields on long-term Indian government bonds from spiking much further, amid a recent sell-off of the nation's sovereign debt. (When bond prices fall, bond yields rise, and vice versa.)

The RBI announced Tuesday it would spend 80 billion rupees (about $1.3 billion) to buy long-term government bonds, which form an important part of the capital foundation of Indian banks. Rising long-term bond yields erode the bedrock of the banking system, which makes banks leery of lending and hurts growth. Some Indian bank shares have fallen sharply over the last month.

But propping up the banking system with that type of cash injection seems to be reversing the RBI's very recent efforts to strengthen the rupee by sucking rupees out of the system. The FT (paywall) cites a note from a frustrated analyst:

"Over in India, flip-flops by policy makers continue," Rajeev Malik, senior Asia-Pacific economist at brokerage CLSA, wrote in a note. "The latest moves by the RBI are aimed at cleaning up the unintended mess in the bond market from their convoluted and ineffective currency defence. But they still appear unsure of what [growth, rupee, bonds] they want to eventually save."
A leadership shift in the RBI looms amid all this floundering. University of Chicago finance professor Raghuram Rajan is set to take over as head of the central bank in early September. That should provide an opportunity for some sort of policy reset. But straightening out the current melange of RBI policies won't be easy.

 

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India gripped by mood of crisis as rupee falls again - FT.com

India gripped by mood of crisis as rupee falls again

©AFP
The Indian rupee fell to a new low against the dollar on Wednesday and stocks declined after a central bank promise to inject liquidity into the country’s financial markets provided only temporary relief from a deepening sense of crisis.

Bank shares and bond prices had jumped in the morning after the Reserve Bank of India’s latest intervention, but the euphoria quickly evaporated.

At one point the rupee was down over 2 per cent and hit a record low of Rs64.55 to the dollar amid investor scepticism about the policies of the RBI and the Indian government. The Sensex stock index fell nearly 2 per cent to close at 17,905.91, the lowest in nearly a year.

On Tuesday night the RBI announced that it would purchase Rs80bn ($1.2bn) of long-dated government bonds and take other steps to ease pressures on Indian banks, whose valuations have been badly hit by a series of measures introduced to protect the rupee over the past month.

The latest moves partially reversed previous monetary tightening measures and led to accusations from analysts of Indian policy “flip-flops” just as the governorship of the RBI is passing from Duvvuri Subbarao to Raghuram Rajan, the former International Monetary Fund chief economist who takes over on September 5.

Indian officials and central bankers say their economy is only one of several emerging markets that are suffering from the flight of investors back towards the US, where the prospect of an end to the Federal Reserve’s ultra-easy monetary policies has made dollar assets more attractive.

“It is important to address the risks to macroeconomic stability,” the RBI said in an explanation of its latest move. “At the same time, it is also important to ensure that the liquidity tightening does not harden longer term yields sharply and adversely impact the flow of credit to the productive sectors of the economy.”

Credibility and predictability are precious commodities in the world of central banking – not least when a financial crisis is raging. Right now, the RBI conspicuously lacks both
- Nicholas Spiro, Spiro Sovereign Strategy

The government and the RBI have issued a series of edicts in recent days designed to reduce the current account deficit and bolster the rupee, including increases in the import duty on gold, the end of duty exemptions for flatscreen televisions brought in by airline passengers and restrictions on outward direct investment by Indian companies and individuals.

Far from reassuring investors, however, the hotch-potch of measures has created the impression that the Indian authorities are flailing around for stopgap solutions rather than devising any long-term strategies for economic recovery.

“India’s central bank is adding to its woes by appearing to change its policy goals almost from one day to the next,” said Nicholas Spiro of London-based Spiro Sovereign Strategy, arguing that the RBI was now sending a “dangerous signal” that it did not have the stomach to defend the rupee if the flight from emerging markets worsened.


While the RBI’s aims of promoting growth and preventing rupee depreciation were inherently contradictory, he said, “credibility and predictability are precious commodities in the world of central banking – not least when a financial crisis is raging. Right now, the RBI conspicuously lacks both.”

Rajeev Malik, senior Asia-Pacific economist at brokerage CLSA, wrote in a note that “flip-flops” by Indian policy makers were continuing.

“The latest moves by the RBI are aimed at cleaning up the unintended mess in the bond market from their convoluted and ineffective currency defence,” he said. “But they still appear unsure of what [growth, rupee, bonds] they want to eventually save.”

Other analysts said the measures were likely to be at least partially successful in correcting the unintended consequences of previous tightening measures.

“They have been trying to walk a careful balance, with measures aiming to stabilise the currency, but they never really intended it to spill over to long-term yields, which have been shooting up,” says Leif Eskesen, chief economist for India at HSBC.

“And so they are now trying to ensure that they don’t do anything to hurt growth and curb credit growth ... and this should to some extent help to contain yields, although there is still a difficult backdrop.”

 

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The dithering state is at the heart of India’s problems - FT.com

The dithering state is at the heart of India’s problems


Not long ago it became fashionable to liken India to a tortoise, poised, by virtue of its democratic institutions and favourable demographics, to overtake the Chinese hare. Now there is a better comparison. More and more, it resembles a deer caught in the headlights.

To be fair, the headlights are dazzling and the deer has few places to run. Like emerging market economies everywhere, India is suffering from the prospect of a gradual withdrawal of stimulus by the US Federal Reserve and a rise in American interest rates. That has produced a giant sucking sound as risk capital retreats. The hot money outflow, though, is just the start of India’s problems. Growth has almost halved from a few years ago to 5 per cent, unacceptably low for a country with such potential and so much poverty. The current account and budget deficits are troublingly wide and the rupee has been dropping like a stone. Sotto voce, officials have been mouthing three of the scariest words known to humanity: International Monetary Fund.

For weeks the government has been piling on measure after measure to stop the rot. The rot is unimpressed. India has three times raised tariffs on the import of gold. It has imposed capital controls on Indian individuals and companies wishing to send money abroad. On Wednesday, the Reserve Bank of India injected liquidity into financial markets, partially reversing previous tightening. Rather than soothing the nerves, these stop-start measures have had the whiff of panic. Investors have pulled out funds and the rupee has continued its slide. It is now heading towards a record low of Rs65 to the dollar, down 17 per cent since May. The only good news has come from July trade figures, which seemed to show that a weakening rupee was boosting exports and discouraging imports.

The hope is that the sliding rupee will help reduce the current account deficit and eventually bring India’s economy back into equilibrium. It is a slim hope. That is partly because the effects of depreciation are not universally benign. The weakening currency has jolted confidence. India, with its stunted manufacturing sector, is not a big exporter. Because it is a big importer of oil and coal, a falling rupee will add to energy costs. It will also make fuel subsidies more costly, putting further strain on a budget deficit already at 5 per cent of gross domestic product. Finally, a falling rupee is bad for inflation, already running dangerously close to 10 per cent.

Kaushik Basu, chief economist of the World Bank and, until July last year, chief economic adviser to India’s government, says the panic is overdone. Unlike in 1991, when foreign exchange reserves fell to the equivalent of just three weeks of imports, today’s reserves provide a more healthy buffer of seven months. India has only limited foreign currency debt.

That is fine, so far as it goes. But crises rarely present themselves twice in the same guise. One possible conduit for trouble is the heavily leveraged corporate sector, which has significant exposure to foreign currency-denominated debt. Corporate woes could quickly spread to state-backed banks, where non-performing loans and more murkily defined restructured loans are already approaching 10 per cent of total assets.

India, then, has a short-term and a long-term task. The short-term one is to bring stability. Raghuram Rajan, who takes over as central bank governor on September 5, can play his part. He is well placed to show grim resolve by raising interest rates until capital outflows are stemmed and the currency stops falling. That, though, could very well hobble growth, pushing it down towards a once unthinkable 4 per cent. Still, Mr Rajan may feel he has no choice. When you are stuck between a rock and a hard place, sometimes you have to choose the hard place. The government will also need to control spending. That could have significant social consequences – not to mention electoral ones, so close to a national poll due by May next year.

If the short-term problems are difficult to tackle, the long-term ones are more intractable still. The present crisis is the culmination of a long slide. After years of dithering and policy reversals, India has dealt a severe blow to foreign investors’ confidence. Last year it attracted less than $20bn of foreign direct investment, less than a tenth of that pulled in by a slowing China.

If anything, domestic supply constraints are even more serious. The construction of infrastructure has proceeded at the pace of a Mumbai traffic jam. Productive investment in mining and manufacturing has been hobbled for years. Take the crippling clashes over coal and iron ore. The role of the state and the judicial system is to act as an arbiter, setting and implementing laws that balance competing claims over the use of land and resources. Which should take priority? Development or the environment? Drinking water or water for industry? Tribal or farming land rights, or the land interests of mining companies?

The ability of the state to resolve such issues is critical for growth prospects. Lack of trust in that state lies at the heart of India’s economic failure. Restoring faith in the currency may be the easy part.

david.pilling@ft.com

 

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Rupee has crashed through 65. Now trading at 65.15!

US Dollar / Indian Rupee FX Spot Rate - INR= - Stock Quotes

 

[by78]

India's richest man loses $6b as rupee dives

India's richest man loses $6b as rupee dives

Mukesh Ambani, India’s richest man, is the biggest loser among the country’s billionaires as the rupee’s slump to record lows erased 24 per cent of his fortune.

The chairman of Reliance Industries, operator of the world’s biggest oil refinery complex, has lost $US5.6 billion ($6.2 billion) of his wealth since May 1, as the rupee’s plunge accelerated. The 56-year-old is still left with a net worth of $US17.5 billion, according to the Bloomberg Billionaires Index.

The Indian rupee is the worst-performing major currency in the world in the past month, coming under pressure as international investors sold emerging-market assets amid concern the US will pare its $US85 billion monthly stimulus.

The value of holdings by India’s billionaires are worth less in dollars as the rupee declined and foreign investors sold shares in large-cap companies, said Munesh Khanna, a senior partner at Grant Thornton LLP in Mumbai. ‘‘There is irrationality; the rupee is weak and will go down further,’’ Mr Khanna said.

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‘‘Foreign institutional investors are invested in the larger-cap companies and are pulling out money from India. That is putting a lot of pressure on those companies.’’

International investors have sold a net $US3 billion of Indian stocks since June 3, according to the nation’s Securities & Exchange Board.

The S&P BSE Sensex index declined 1.9 per cent to 17,905.91 yesterday, extending its four-day drop to 7.6 per cent, the most since July 2009.

The index was flat in late morning trade today, while the rupee extended its slide, touching an all-time low of 65.13 per US dollar.

Anil Ambani, the younger brother of Mukesh, has lost 17 per cent, or $US1.3 billion, of his net worth since May. Anil Ambani, 54, has a fortune of $US6.3 billion and is the country’s eighth-richest man.

The majority of his wealth is derived from stakes in publicly traded companies, including Reliance Communications, India’s third-largest mobile-phone company by market value.

Reliance Communications reported earlier this month first- quarter profit that missed analysts’ estimates after finance costs increased because of the rupee’s weakness against the US dollar.

‘‘Companies with large foreign-currency debt will feel the pressure and their valuations will come down,’’ Mr Khanna said.

Shares of Reliance Industries, Mukesh Ambani’s most valuable asset, declined about 15 per cent from its 2013 peak on July 19 through yesterday.

The Bloomberg Billionaires Index is a dynamic measure of the world’s wealthy based on changes in markets, the economy and Bloomberg reporting. Each net worth figure is updated every business day at 5.30pm in New York.

Stakes in publicly traded companies are valued using the share’s most recent closing price. Valuations are converted to US dollars at current exchange rates.

Bloomberg

 

[cirr]

65.50.。。here we come

 

[Tshering22]

Well then it is difficult to say that this government will finish off its term.

Mid way polls might be called if dollar keeps rising.

 

[by78]

Live: Govt, RBI fail; rupee breaches 65, Sensex volatile - Firstpost

 

[Star Wars]

Time for early elections, bring Modi in

 

[TopCat]

Well then it is difficult to say that this government will finish off its term.

Mid way polls might be called if dollar keeps rising.

Ordinary Indian seldom visit PDF to know about dollar price. They are more concerned about end meal and will vote for MMS next time as well.

 

[TopCat]

I am anticipating 70-75 level for Rupee to stabilize..

 

[by78]

I am anticipating 70-75 level for Rupee to stabilize..

The economy would collapse before the Rupee gets to 75. At this point, it's difficult to see how India can avoid another IMF bailout.

 

[Lightningbolt]

OMG.

The Indian Rupee is falling like crazy.

I seriously think India could experience a Zimbabwe style currency collapse and have hyperinflation.

This is just incredible to see. I'm checking the Rupee every few hours and its getting weaker by the hour.

India is done. This is the end of India.

 

[BDforever]

Rupee continues to struggle, hits life low of 65.56 vs dollar - The Times of India