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Economic crisis in India 2013 | ALL Updates & News

by78 said:
RBI has intervened again and stabilized it for now. If India keeps propping up the Rupee, there will be little Forex reserves left in another month.

An IMF bailout is inevitable at this point.
Click to expand...

How would the bail out benefit Indian rupee in the long run? It would be a temporary boost at best.
 
Sedqal said:
How would the bail out benefit Indian rupee in the long run? It would be a temporary boost at best.
Click to expand...

An IMF bailout will have two components: 1) a credit facility to ensure that India has the funds to function, and 2) a reform package which always includes austerity measures aimed to trim CAD and structural reforms.

In other words, the IMF will be forcing economic reforms on India in exchange for the credit facility. I'd imagine the IMF will require India to scale back the various social programs and schemes to close the budget deficit. Congress Party will not like these reforms, but it won't have a choice.
 
Chinese-Dragon said:
India's inflation rate is already high. The fall of the Rupee is going to push inflation up even further, and the average Indian will certainly feel that.

BBC News - Indian media: Falling rupee sparks inflation fears
Click to expand...

Runaway inflation is now likely. Savings will be wiped out. Money supply will run low, and the RBI will print money to compensate and set off an inflationary spiral.

What happens after that? To find out, I recommend that our Indian forumers read into Argentina's economic collapse of 1989.

By the way, Argentina never recovered from that crisis.
 
by78 said:
RBI has intervened again and stabilized it for now. If India keeps propping up the Rupee, there will be little Forex reserves left in another month.

The RBI an the government should be announcing structural policy reforms, which are the only way to stave off an economic collapse. India is rapidly running out of time.
Click to expand...

Time for announcing any reform is over at least not going to stop the flight of the capital. Now Indian government should work on soft landing and allow rupee to fall.

There will be a lot of companies to close and there will be unemployment widespread. The biggest reform would be to not look for foreign capital rather look for new small entrepreneur who will use Indian domestic resource to produce stuffs for the world market. Thats the only way for a country of 1.3 billion people. India is no Singapore, it needed a deep economic policy not a policy which will make it rich overnight.
 
August 22, 2013

India rupee breaches 65 to a dollar

Indian currency continues its sharp slide among emerging market currencies

The Indian rupee fell past 65 to the dollar to a record low on Thursday, after Federal Reserve minutes hinted that the US was on course to begin tapering stimulus as early as next month and as foreign investors become sellers of Indian stocks.

In an ominous sign for Asia's worst-performing currency this year, overseas investors who had been net buyers of Indian stocks so far in 2013 headed for the exits this week, selling a net $500 million worth of shares in the four sessions through Wednesday.

Foreigners have also sold a net $1.3 billion of Indian government and corporate bonds so far this month.

"Unless growth signals emerge in the next few quarters, FIIs (foreign institutional investors) will continue to pare down Indian equities, which will weigh on the rupee," said Deven Choksey, managing director of KR Choksey Securities.

The rupee fell as much as 2.2 per cent to 65.52, heading for a sixth straight session of declines, and is down/s16 per cent so far this year despite efforts by policymakers to prop it up.

Currencies in Indonesia, Malaysia and Thailand all hit multi-year lows on Thursday on concerns that the Fed's scaling back of stimulus would lead to further capital outflows from emerging markets, which have benefited for the last two years from waves of cheap money printed by Western central banks.

Rupee buyers in the forex market seemed to be drying up, with the central bank suspected to have intervened in the last several sessions to support the currency, although dealers said its dollar selling was not substantial enough to stop the decline.

Meanwhile, some strategists made increasingly bearish calls on the rupee, with Credit Agricole saying that unless capital flows returned, it did not see the fundamental value for the rupee below 70 to the dollar and would not recommend buying it for fundamental reasons below 75. Deutsche Bank said on Wednesday the rupee could fall to 70 in a month or so.

The 1-month offshore non-deliverable forward contract was quoted at 65.83 compared to the onshore one-month forward of 65.49, suggesting offshore players are betting against the rupee.

The Mumbai stock index fell 0.2 per cent, and has lost some 12 per cent of its value over the last month.

The Reserve Bank of India's efforts to support the currency have failed to do so but have sent bond yields surging, pushing up borrowing costs and undermining an economy that grew at its weakest in a decade in the last fiscal year to March 2013.

Meanwhile, a weak coalition government facing national elections by May has been unable to push through structural reforms that would bring in more long-term foreign investment, with the current parliamentary session all-but paralysed by political bickering.

"Barring a galvanising economic crisis, pending tax, land acquisition and insurance reforms will likely be delayed for several years, providing no respite for India's faltering economy," Eurasia Group analyst Anjalika Bardalai wrote.

In what was seen as a partial roll-back that some market participants say sent a mixed message, the RBI late on Tuesday took steps to support a bond market which has been bludgeoned by its rupee defence steps.

Some analysts said the move was similar to the Fed's "Operation Twist" begun in 2011 to buy long-end bonds.

"Policymaking is essentially in a quandary, as the framework comprises of multiple and often conflicting objectives," said Radhika Rao, economist at DBS Bank in Singapore.

"To this end, a single-minded focus on correcting the currency's course entails collateral damage - dampens equity and bond markets and carries risks to growth," she added.

After tumbling on Wednesday, bond yields rose on Thursday, with the benchmark 10-year yield up 14 bps at 8.55 per cent. India's benchmark share index was flat after earlier marking its lowest intraday level in almost a year.

India rupee breaches 65 to a dollar | GulfNews.com
 
How nice, they are having this academic debate NOW? They should have had this 20 years ago, not when the economy is crashing all around them.

This is simply infuriating.


http://www.nytimes.com/2013/08/22/world/asia/rival-economists-in-public-battle-over-cure-for-indias-poverty.html?pagewanted=all&_r=0&pagewanted=print



August 21, 2013
Rival Economists in Public Battle Over Cure for India’s Poverty
By GARDINER HARRIS
NEW DELHI — She is 7 years old, covered in dirt and spends her days asking for food from pedestrians and drivers in one of this city’s central business districts.

Her name is Rohini, and other than pleading for bread, she had little to say when asked about her life. Instead, she threaded her way through thick traffic to her mother, Kamlesh, who on a recent rainy day was carrying one of Rohini’s sisters, a toddler with a cloudy eye and a disturbingly quiet demeanor.

“We don’t have the money to send the kids to school,” Kamlesh said simply.

India’s inability to pull Kamlesh and hundreds of millions of others out of desperate poverty despite decades of robust economic growth has been one of history’s great governance failures and economic mysteries.

Does India simply need more time for growth to work its magic, or is there something fundamentally wrong with its formula? Do improvements in health and literacy create growth or simply derive from it? And would India’s people have better lives if the government focused on improving workers’ skills or on bettering investors’ opportunities?

Those are some of the questions behind an unusually nasty fight between two of this nation’s greatest economists. It is a fight that has echoes in poor countries across the globe.

The battle between Amartya Sen, a Nobel Prize winner and Harvard professor, and Jagdish Bhagwati, an eminent professor at Columbia University, has broken out just as India’s economy seems to be coming undone. The rupee has plunged to historical lows against the dollar, and extraordinary efforts by the government to stem the slide, including limits on investments abroad by Indian companies, appear to be having little effect. Growth has fallen to 5 percent annually, and Prime Minister Manmohan Singh recently admitted that it was unlikely to snap back soon. Foreign investors are turning away, and the nation’s stock market has recently swooned.

Into this combustible mix came Mr. Sen and Mr. Bhagwati.

A courtly man with a cackling laugh, Mr. Sen, 79, is one of India’s greatest living intellectuals. His speeches are thronged, his pronouncements make news and college students give him the kind of rock-star adulation that economists in the United States may never know.

Mr. Sen returned to India this summer to promote his new book, “An Uncertain Glory,” co-written with Jean Drèze. In an interview, he said that he had no idea that his book tour would make national political news or that he would be forced to defend himself against his old rival, Mr. Bhagwati.

After Mr. Sen made critical comments about an opposition politician, he was denounced by Hindu nationalists. But in an interview, he said that those who view him as sympathetic to the governing Indian National Congress Party have probably not read his book, which is a searing indictment of India’s present government and every previous one.

In the book, Mr. Sen argues that India, almost alone among emerging Asian nations, has failed to invest substantially in the health and welfare of its people. This failure could doom its economy and people, he says, because a country’s future growth depends just as much on its social infrastructure as its physical state.

India’s economy grew nearly 8 percent annually in the past 10 years, second only to China among major economies. This improved incomes for hundreds of millions and created a growing middle class that in recent years has thronged Delhi’s streets in protests about corruption and gang rapes. Meeting the growing expectations of this middle class has become a potent political issue.

But Mr. Sen argues that India’s growth has failed to translate into substantially better lives for hundreds of millions of others. He points out that countries like Bangladesh, which have grown far more slowly and have much lower income levels, have performed better on key indicators like life expectancy.

“Living conditions in the poorer half of India are not much better, if at all, than in the poorer half of Africa,” Mr. Sen wrote.

Indeed, nearly a third of all newborn deaths occur in India. One in three malnourished children are Indian, and rates of malnutrition are higher in India than in sub-Saharan Africa. Such facts serve as the core of Mr. Sen’s book, and they are the kind of realities that much of India’s elite have trouble even discussing, he wrote.

“Rapid economic growth has not achieved much on its own during the last 20 years or so to reduce India’s horrendous levels of child undernourishment or to enhance child immunization rates,” he wrote.

These problems are hardly addressed — some say even worsened — by miserable government nutrition, education and health care systems, but Mr. Sen’s prescription is to expand these compromised programs.

“There has been a kind of write-off of public institutions by this administration, and they think the only thing that works is business, so they think the more we put in the hands of business the better,” he said. “That’s a disastrous position to take.”

This argument is one that Mr. Bhagwati and his co-author on “Why Growth Matters,” Arvind Panagariya, denounce as not only mistaken but dangerous, since they view money spent on government programs as largely wasted.

Mr. Bhagwati, who is also 79, is one of the world’s great trade economists, but he has lived in the shadow of Mr. Sen’s Nobel for much of his professional life, and it clearly irks him. If his written criticism of Mr. Sen’s work is shrill, his verbal criticism is downright nasty.

“My impatience with him is that he is obfuscating things constantly,” Mr. Bhagwati said in one of his less incendiary descriptions.

To Mr. Bhagwati, India’s myriad problems have less to do with poor health and literacy than a poor investment climate. Give people jobs and money and they will invest in their own education and health, he said.

Mr. Bhagwati’s embrace of the private sector is widely shared in India. Only the poorest send their children to government schools and hospitals, and the central government now promotes public-private partnerships.

Some economists in India resolve the debate by saying that both have good ideas but go too far with them.

“Both guys are at the extremes of the spectrum,” said Ajay Shah, a professor at the National Institute of Public Finance and Policy in New Delhi. “We need to reinvest in some government programs and end others altogether.”

Hari Kumar contributed reporting.



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The heady old days, when everything was just rosy... Then everything went downhill.

India unveils new rupee symbol | World news | theguardian.com

India unveils new rupee symbol


Udaya Kumar with his winning design for the Indian rupee symbol. Photograph: Strdel/AFP/Getty Images
It may look like a melted British Rail sign but it's hoped that a new symbol for the Indian rupee will signal India's growing economic strength ‑ and it will be coming soon to a keyboard near you.

The winning design was selected by the Indian cabinet yesterday from a shortlist of five following a national competition.

Measures are already afoot to have the rupee sign declared a computer standard, meaning it could join currencies such as the pound, dollar, euro and yen on keyboards within two years.

"The distinct symbol denotes the robustness of the Indian economy," India's information minister, Ambika Soni, said.

References to sums in rupees currently involve spelling out the word (as is the case in the Guardian's style guide) or giving it the abbreviation Rs or INRs to distinguish it from other Asian countries that use rupees or variations thereof.

"Once accepted, it will stand clear from the clutter of currencies that call themselves rupee or the rupiah," India's Telegraph reported.

The winning symbol was the work of Udaya Kumar, a lecture in design at the Indian Institute of Technology in Mumbai. Speaking to the Indian news website Rediff.com he said: "My design is based on the tricolour, with two lines at the top and white space in between. I wanted the symbol for the rupee to represent the Indian flag. It is a perfect blend of Indian and Roman letters: a capital 'R' and Devanagari 'ra' which represents rupiya, to appeal to international audiences and Indian audiences."

Michael Johnson, a director at the award-winning London-based design consultancy johnson banks, said the new symbol fitted with other currency signs but lacked imagination.

"I think it's a B or B plus. Most currency symbols follow an established route now ‑ E for euro, Y for yen, now R for rupee. You could argue that a dynamic emerging economy could have gone for something more unusual and got away with it ‑ I think in the end conservative voices prevailed."

=====================================================

http://www.livemint.com/Leisure/LCRbGIjOZ0ZIPQgYtK1U7H/The-joke-is-on-the-rupee.html

The joke is on the rupee - Livemint

Updated: Thu, Aug 22 2013. 02 15 PM IST
Mumbai: Since January, the rupee has depreciated by 15%, the most among Asian currencies. Jokes about the currency have appreciated at a faster pace.

Social network users are trading jokes about the state of the rupee with the dedicated regularity of business channels rolling out doom-and-gloom headlines on the economy.

“The dollar is on an escalator and the rupee is on a ventilator” goes one witticism.

“I heard the rupee is falling, please tell me where I can collect it?”, one network user wants to know.

“Finally it has happened…After decades, beer is now cheaper than petrol! There will be a new slogan: Just Drink, Don’t Drive!” and “A kg of onions can now be bought at the Dollar Store.”

Faking News, a local takeoff on the satirical American website The Onion, had the headline: “India is ready to talk to dollar to strengthen rupee-dollar relationship.”

Everybody has something to say about the falling rupee and rising prices of petrol and onions, from stand-up comedians on Twitter (Tanmay Bhat: I think if the Chinese knew how bad the rupee was doing, they’d leave Arunachal Pradesh alone). Jokes using Hindi movie and song references flooded Facebook accounts and mailboxes, such as a fake news item about the third part of the Hindi movie Race, saying, “Race 3: Who will reach hundred first, dollar, petrol or onion?”

Cartoonist Hemant Morparia, who has done a series of cartoons in the tabloid Mumbai Mirror on the economic crisis, said humour thrives in crisis situations. “One of the cartoons I did was on the rupee heading into a dustbin in which there is also Manmohan Singh’s PhD in Economics,” he said. “All non-lethal yet stressful situations that are life-threatening lend themselves to humour. Amateur comics yet to be discovered are producing a lot of the jokes, such as the one about the dollar being on an escalator and the rupee on a ventilator. The more, the merrier.”

From policy paralysis to political unwillingness to push reforms, experts have a range of reasons for the rupee’s alarming decline. One of the most interesting theories put out is that it is the symbol of rupee which is responsible for the bloodbath. According to a report published on Washingtonpost.com, Vaastu shastra experts in the country say that the rupee symbol debuted on an inauspicious day and the horizontal line across the symbol appears to “slit the throat” of the currency.
Celebrity astrologer Bejan Daruwalla disagreed that the problems lay with the rupee’s design. He said, in all seriousness, the bloodletting would cease from November. “From November, the position of Jupiter, the planet of good luck and fat money comes in the chart of India very strongly,” he said over the phone. “The rupee will improve against the dollar and so will the share market. There is nothing to panic. The prime minister, whom I like very much, is under the influence of Saturn and Saturn itself means slow growth, delay, scams coming out and rupee getting weaker day by day against the US dollar. Even the PM’s stars will improve from November.”

Meanwhile, the man who designed the rupee symbol, Udaya Kumar Dharmalingam, was unperturbed. “Things were different at the time I designed the rupee symbol and things are different now,” he said in a phone interview. “I don’t think I’m the right person to comment on economic affairs—I’m a designer. If you ask me about the design, I can tell you,” said Kumar, who teaches visual communications at the Indian Institute of Technology (IIT) in Guwahati. He added, “I do hope things change for the better.”

With inputs from Nandini Ramnath and Geetika Rustagi.

Here’s a quick compilation of the more interesting social media takes on the rupee:

Twitter and Facebook

‘@rahul_vedant : Dollar on escalator.. Rupee on ventilator... Nation on ICU... We are in coma... Sonia in honeymoon... Onion in showroom... God bless India.’

‘@sidin: Hard Truth: If we had not invented zero then 1 rupee would be equal to 1 pound sterling right now.’

‘‏@fakingnews: Total number of missing files related to coalgate is 60. Rupee is still ahead.’

‘@RantingIndian : Rupee is now below Poverty Line! “ #Rupee to soon get a job under NREGA ‘

‘@papacj: Disneyland is opening a new ride in which you free fall a great height in just a few seconds. They’re calling the ride ‘The Indian Rupee’!’

‘@dhume: At [insert number] Indian rupee hits record low. #recyclabletweet’

‘@vikasagarwalll: @SrBachchan The only way to save the Rupee is to have it tie a Rakhi to the Dollar and say “Meri raksha karna ! :D’

‘@thetanmay: I think if the Chinese knew how bad the rupee was doing they’d leave Arunachal Pradesh alone.’

‘@scaryhairyman: Since Rupee is falling down, let’s start using rupee in normal conversations like a verb. I tripped and rupeed.’

‘@shakti_shetty: Indian Rupee has become more down-to-earth than necessary.’

‘@coolfunnytshirt: Agle janam mohe dollar he kijjo – Rupee’

Vivek Raj: 64 Rupees = 1 Dollar, 100 Rupees = 1 GBP, #Rupee Making kids learn squares of numbers better than teachers since 2013!

Gaurav Chopra: If Newton ws alive today.. he’d hav redefined gravity based on d falling #Rupee n we’d hav a new value... Apples fall slower...

Roopalee Parswani: What should be the surname of #Rupee ? “Girpade”

Achint Jain: It has been announced that the concept of free falling in physics will be explained using Indian #rupee as an example.

Ravish Kumar: Sun raha hai tuu #Dollar, Ro raha hu maiii #Rupee

Santosh Nalamothu: #Money can’t buy happiness especially if it’s #Rupee and invested in Sensex.

Rohan Hegde: Dollar is faster than a Temple Runner

Ramesh Srivats on Twitter: Everyday a new record. Truly the Sergei Bubka of currencies.
 
This is insane....

India at 65 with a 100.2 trillion INS economy would give them a GDP of $1.54 trillion

India will drop below Canada for sure in 2013, and could very well drop under Australia as well.
 
Guynextdoor2 said:
We have done that in the past the right way. No 'reform' is truly a reform till it has consensus. Plus, several tricky issues- especially land acquisition and labor laws- really need that consensus to work. You guys did I with executive fiat- look at the kind of consequences you have to deal with.
Click to expand...

Here's the consensus: you are BANNED.
 
India’s 10-year bonds post biggest weekly advance since 2008​

rupee2--621x414.jpg


Mumbai: India’s 10-year government bonds completed their best week since 2008 as a central bank plan to purchase long-dated debt buoyed demand.

The Reserve Bank of India (RBI) bought Rs.6,232 crore worth of bonds at an open-market auction on Friday, compared with a targeted Rs.8,000 crore, according to a statement minutes before trading closed. It had announced the purchase plan on 20 August after a cash squeeze created to support the rupee pushed 10-year yields to a 12-year high, threatening the economy.

The yield on the 7.16% bonds due May 2023 slumped 63 basis points, or 0.63 percentage point, this week to 8.27%, according to prices from the central bank’s trading system. That’s the biggest weekly drop in benchmark 10-year rates since December 2008, data compiled by Bloomberg show. The yield rose four basis points in Mumbai on Friday.

“The RBI’s announcement, especially the dovish tone that accompanied it, has cheered the bond markets,” Srinivasa Raghavan, Mumbai-based executive vice-president of treasury at Dhanlaxmi Bank Ltd, said by phone. “The rupee situation, however, remains precarious.”
The rupee completed a second week of losses on Friday after falling to a record 65.56 per dollar on Thursday. Primary dealers bought Rs.1,729 croe of the Rs.15,000 crore of government bonds auctioned on Friday, the RBI said in a statement.

The yield on Indian debt due May 2023 has climbed seven basis points this month after July’s 75-basis point surge, which was the biggest since March 2009. The rate touched 9.48% on 20 August, the highest since 2001, data compiled by Bloomberg show. Bonds had slumped after the central bank raised two interest rates and tightened cash in the banking system in an effort to stem the currency’s slide.

‘Objective achieved’​

A review of the measures since mid-July suggests the immediate objective of raising the short-term interest rates has substantially been achieved, the RBI said 20 August. It also allowed lenders to move a larger portion of their government bond holdings to the so-called held-to-maturity category so they won’t have to show losses when prices of the securities fall.
RBI’s move marks the start of a gradual reversal of the liquidity tightening since mid-July, Barclays Plc analysts led by Siddhartha Sanyal in Mumbai wrote in a report this week. We think the tightening measures triggered in multiple stages since July 15 were unduly harsh on market liquidity and the interest rate spectrum, without generating any commensurate support for the rupee.

The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, slumped 51 basis points this week to 9.47%, according to data compiled by Bloomberg.

Source:- India’s 10-year bonds post biggest weekly advance since 2008 - Livemint
 

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