Expert Zone

Straight from the Specialists

Asian financial crisis and lessons for India

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Several economists have gone to great lengths to say that India in 2013 is not facing a repeat of the 1991 balance-of-payments crisis or the Asian financial crisis in 1997. Clearly, the crisis India faces now is unique – as most economic crises usually are.

That does not mean there is nothing to be learnt from past crises. We believe there are several similarities between the Asian one and India’s situation today.

There are many reasons and theories attributed to the cause of the Asian crisis. Some of the common factors in the affected countries, in varying degrees, were – high current account deficits, semi-fixed exchange rates, extremely high dependence on foreign capital inflows & borrowings, inefficient asset creation, crony capitalism and undercapitalized banks.

When panic struck, the central banks in the region tried desperately to defend their currencies from depreciating in the face of capital flight. The defence was ultimately unsuccessful and the currencies depreciated between 50 and 80 percent in a few months, busting many large corporates and banks that had direct or indirect foreign exchange liabilities.

The rupee on a crash course

(Any opinions expressed here are those of the author and not of Thomson Reuters)

Given the kind of volatility in financial products and asset classes that we have seen in India and some emerging markets over the last few weeks, it’s likely to be a long winter for the Indian economy.

The rupee is at an all-time low against the dollar, FIIs are big sellers in Indian debt and equity markets, the Sensex is falling and bond yields have risen. Adding to India’s misery, there’s no sign of inflation easing or interest rates coming down in a hurry. The twin deficits – fiscal and current account – are at levels that could expose the economy to a potential rating downgrade.

No quick fixes to India’s growth problems

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Over the past year, the government has silenced its critics with several pro-reform policy initiatives including the relaxation of FDI norms, freeing FII debt investment limits and a calibrated deregulation of petroleum prices. These reforms were cheered by the markets by way of increased FII inflows.

India’s widening twin deficits – fiscal and trade – appeared to have been reined in. But in the first few months of the fiscal year 2013-14, everything seems to have come undone for India – be it the potential end of the U.S. Federal Reserve’s quantitative easing policy or the dollar’s appreciation against emerging market currencies.

When will the rupee stabilize?

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The rupee hit a series of record lows in August, rattling the stock market and forcing policymakers to step in. But the fall was necessary to correct India’s past mistakes and improve the dynamics of the economy. Stock markets were jolted because the rupee’s slide was sudden. But then that is how markets behave.

International markets, be it for currencies or commodities, are sensitive and therefore volatile due to underlying speculation that is difficult to control. Eventually, however, a stable point is reached at which point they settle down.

How to rescue the falling rupee

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

I can’t predict where the rupee will eventually land and I don’t think anyone else can either.

Of course, we are not the only country at the mercy of the dollar because almost every emerging market is suffering. But surely, that shouldn’t be any consolation.

A look at the proposed new Companies Act

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

With its overhaul of the 1956 Companies Act, the government aims to simplify its provisions, keep pace with global trends and make it easier to do business in the country.

But the proposed law’s implementation would depend on its integration with existing statutes and laws such as the Foreign Exchange Management Act (FEMA) and the Income Tax Act. More clarity is needed on certain issues.

Tying up loose ends after filing your income tax returns

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

There was a record increase in tax returns filed electronically this year after new rules made it mandatory for taxpayers with a taxable income of more than 500,000 rupees to file returns online. This change added to the last-minute rush, with the government extending the deadline by five days to Aug. 5.

Tax filing season can be painful and the last-minute rush has been known to cause a few errors. Here’s how you can make the process more efficient.

The BMW 1 Series is coming to India

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

When BMW sold Rover in 2000, the British car brand was working on Project R30. There were rumours that BMW would use badge engineering to introduce the R30 as its 1 Series but that wasn’t to be.

The R30 may have been an inspiration but the BMW 1 Series was designed from the ground up. When American Chris Chapman worked on the 1 Series, he was led by Chris Bangle – a designer known for his peculiar styling – which explains the eccentricities of its design.

Focus should be inflation, not just stemming rupee’s fall

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Indian stocks have been battered over the past few sessions. The market condition is not unexpected, thanks to over-action by policymakers and over-reaction by stock investors.

The apparent anxiety on the part of the government was that even if the fall of the rupee was inevitable, left entirely to the market, speculative activity would push the economy into a crisis. Presumably, the rupee at 60 to the dollar was the benchmark for intervention.

India Market Weekahead – Volatility to continue in the run-up to general elections

(Any opinions expressed here are those of the author and not of Thomson Reuters)

Investors pressed the panic button on Friday with the Nifty diving 4 percent, its biggest single-day fall in two years, to end at 5508.

Measures taken by the Reserve Bank of India (RBI) on the eve of the Independence Day holiday to prop up the rupee were among the triggers for the fall. The rupee didn’t do all that well either, falling to an all-time low of 62.03 to the dollar early on Friday.

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