Rupee at all-time low: What is pushing it down? HSBC India answers

[Quibbler]

Complete electrification of all tracks to enable switching from diesel to electric. Charging spots for enabling electric vehicles and vehicles in the first place. This is not going to happen in 40 year horizon.

I believe 20 years is a very realistic timeline for this. Track electrification is targeted to complete within the next decade. And the private ecosystem in automotive industry has proved it can quickly scale up infra as it did with petrol pumps in the past. Moreover we are generating more capital with every comming year.

By 2025 we will have twice the capital to invest and so on. I believe the only bottleneck that will remain is the economic viability of electric cars.

 

[AyanRay]

Yup you are spot on about the scale of the logistics commitment to diesel.

Hi, do you have any idea about the credit downgrade mentioned in the headline? AFAIK it was upgraded few months back, while it was downgraded for China and Pakistan.

 

[Shamsher1990]

I believe 20 years is a very realistic timeline for this. Track electrification is targeted to complete within the next decade. And the private ecosystem in automotive industry has proved it can quickly scale up infra as it did with petrol pumps in the past. Moreover we are generating more capital with every comming year.

By 2025 we will have twice the capital to invest and so on. I believe the only bottleneck that will remain is the economic viability of electric cars.

By 2025 you will have twice the number of diesel powered trucks and locomotives. Any country that grows needs logistics to support movement of goods.

Hi, do you have any idea about the credit downgrade mentioned in the headline? AFAIK it was upgraded few months back, while it was downgraded for China and Pakistan.

I searched S&P's site for India specific news in past week, it was not there.

 

[anant_s]

Is it worrisome?

No it ain't.
Right now the 2 biggest problem we are facing are:

1. Banking system in real mess owing to a lot of bad loans and defaults coupled with frauds. This has put banking system under tremendous pressure more after central bank came out with real strict guidelines to disclose bad loans (or Non Performing Assets). As a result we are seeing a lot of skeletons tumbling out of closet but good part is we have now realized that unless the problem is corrected, economy cannot move to higher orbit. Credit agencies have duly noted the same.
2. Global situation especially US Iran issue. Global crude prices can really upset any planners work especially when you are in India as our biggest import bill is Crude. This also puts a lot of inflationary pressure on commodities and hence retail inflation. Our Central Bank has been very aggressive in last 5 years fighting inflation and their principle weapon is increase in borrowing rates (& thereby removing liquidity from markets). However this puts businesses and money they require to run under pressure and slows down economy.

Now the good things:

1. GST has now started to show its positive effects and in next 3-4 years revenue collection will really boom as more and more unreported activities are now under transparent tax bracket.
2. Major Infra projects especially those of Railways are going great guns. This has vitalized a lot of ancillary support sector too. These perhaps are most exciting times in recent memory if you are in railway business in India.
3. Bad loan dealing mechanism has now started to take shape and banks have slowly started to recover something even in situation where every hope of recovery was lost. This perhaps is single biggest fundamental corrective step taken in almost 25 years.
4. Manufacturing is slowly picking pace. This may not seem much but given how things moved in last 4-5 years, its is a heartening development.

On your post of Indian Rupee declining, most people in Indian markets believe that if we can tackle crude problem, a level of 68-70 per US Dollar is a very good value especially for sectors like IT and Gems where most billing is in US$.
Next years general elections will off course decide which way economy will move and a stable government will really be a great push.
@Nilgiri

 

[El Sidd]

India will Not survive the coming Recession.

El Sidd

 

[Didact]

No it ain't.
Right now the 2 biggest problem we are facing are:

1. Banking system in real mess owing to a lot of bad loans and defaults coupled with frauds. This has put banking system under tremendous pressure more after central bank came out with real strict guidelines to disclose bad loans (or Non Performing Assets). As a result we are seeing a lot of skeletons tumbling out of closet but good part is we have now realized that unless the problem is corrected, economy cannot move to higher orbit. Credit agencies have duly noted the same.
2. Global situation especially US Iran issue. Global crude prices can really upset any planners work especially when you are in India as our biggest import bill is Crude. This also puts a lot of inflationary pressure on commodities and hence retail inflation. Our Central Bank has been very aggressive in last 5 years fighting inflation and their principle weapon is increase in borrowing rates (& thereby removing liquidity from markets). However this puts businesses and money they require to run under pressure and slows down economy.

Now the good things:

1. GST has now started to show its positive effects and in next 3-4 years revenue collection will really boom as more and more unreported activities are now under transparent tax bracket.
2. Major Infra projects especially those of Railways are going great guns. This has vitalized a lot of ancillary support sector too. These perhaps are most exciting times in recent memory if you are in railway business in India.
3. Bad loan dealing mechanism has now started to take shape and banks have slowly started to recover something even in situation where every hope of recovery was lost. This perhaps is single biggest fundamental corrective step taken in almost 25 years.
4. Manufacturing is slowly picking pace. This may not seem much but given how things moved in last 4-5 years, its is a heartening development.

On your post of Indian Rupee declining, most people in Indian markets believe that if we can tackle crude problem, a level of 68-70 per US Dollar is a very good value especially for sectors like IT and Gems where most billing is in US$.
Next years general elections will off course decide which way economy will move and a stable government will really be a great push.
@Nilgiri

The two issues tying down the Indian economy from what we expected would be a decisive breakout post GST are:
1. Gross capital formation due to the enormous pressure on PSB balance sheets courtsey the bad loans.
2. The inability to raise savings and investment rate to ~40% of Income.

Nearly all economics professors at my campus are firmly of the opinion that unless the savings rate can be pushed beyond the ~35-40% of income level, Sustained 9% and higher GDP growth would be a distant pipedream. And this comes from a panel of professors at the Finance Campus of India, inclusive of individuals who have been seated at the highest policy advisory panels in India.

Unfortunately we seem to have regressed wrt savings levels in India over the past 7 years, and this is being reflected directly in the rather subdued growth in India, especially among vital leading indicators like industrial capacity expansion and job expansion.

 

[Nilgiri]

Hi, do you have any idea about the credit downgrade mentioned in the headline? AFAIK it was upgraded few months back, while it was downgraded for China and Pakistan.

Not that I know of, S&P has kept the credit rating outlook as stable for India for quite some time now.

You are talking about Moody's...yeah India got a bump on that one some months back in level from Baa3 to Baa2 and the outlook from stable to positive. Moody's also downgraded the outlook for Pakistan earlier from stable to negative...but kept the level the same (B3). I am not sure what they did regarding China tbh, because China has enough surplus forex stock pile and huge ongoing Current account surplus which are way more dominant factors imo for defacto credit situation.

 

[ghameed]

India will Not survive the coming Recession.

El Sidd

India is one of the most insulated large economies of the world( insulated from global events ) . She has a mind of her own ...so if India doesn't survive , no country will ...

 

[AyanRay]

Not that I know of, S&P has kept the credit rating outlook as stable for India for quite some time now.

You are talking about Moody's...yeah India got a bump on that one some months back in level from Baa3 to Baa2 and the outlook from stable to positive. Moody's also downgraded the outlook for Pakistan earlier from stable to negative...but kept the level the same (B3). I am not sure what they did regarding China tbh, because China has enough surplus forex stock pile and huge ongoing Current account surplus which are way more dominant factors imo for defacto credit situation.

This is what I was referring to.

https://www.google.co.in/amp/s/www....ina-s-rating-to-a-from-aa-says-outlook-stable

 

[Quibbler]

By 2025 you will have twice the number of diesel powered trucks and locomotives. Any country that grows needs logistics to support movement of goods.


I searched S&P's site for India specific news in past week, it was not there.

At least twice. But after that growth of oil consumption will be capped and will start reducing as a percent of gdp. hence easing a lot of pressure on the ruppee.

 

[Shamsher1990]

At least twice. But after that growth of oil consumption will be capped and will start reducing as a percent of gdp. hence easing a lot of pressure on the ruppee.

I doubt you want to reduce GDP growth beyond 2025.
Here is why :
To attain a middle income status, you need atleast 15K-20K USD per person productivity. That in itself amounts to 20-26 trillion dollars economy assuming that the population has not grown any further. Not possible before 2050-60.

You are not taking your foot off the accelerator for quite sometime.

 

[Nilgiri]

This is what I was referring to.

https://www.google.co.in/amp/s/www....ina-s-rating-to-a-from-aa-says-outlook-stable

Thanks, but as you can see the credit downgrade in China's case was at already good level because of its CA surplus trends.

 

[Quibbler]

I doubt you want to reduce GDP growth beyond 2025.
Here is why :
To attain a middle income status, you need atleast 15K-20K USD per person productivity. That in itself amounts to 20-26 trillion dollars economy assuming that the population has not grown any further. Not possible before 2050-60.

You are not taking your foot off the accelerator for quite sometime.

i talked about capping oil consumption growth not gdp growth

 

[Shamsher1990]

i talked about capping oil consumption growth not gdp growth

You are aware that GDP is actually calculated from two directions and both are supposed to meet, right? Production side and Consumption side. They don't for various reason, but without consumption you won't have production growth or economic growth. And if you have consumption growth overall, you will have oil consumption growth as well, unless ofcourse you find a new way to generate energy for your economy. I doubt that happening anytime soon. @Nilgiri