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May 16, 2012

India has chance to get a good finance minister

By Jeff Glekin

MUMBAI (Reuters Breakingviews) – India has a fantastic opportunity to get a good finance minister. The incumbent, Pranab Mukherjee, has been an abject failure: the rupee’s record low is just the latest example of the economy’s problems. Now Mukherjee wants to move to the ceremonial role of president. Sonia Gandhi, the leader of the governing Congress Party, should bite his hand off.

Mukherjee’s political skills are top notch. But he has allowed the fiscal deficit to balloon to 5.9 percent of GDP; he hasn’t tackled subsidies for fuel, fertiliser and food; nor has he embarked on any major economic reforms, for example in banking, insurance or pensions. Meanwhile, India’s growth rate has slumped to around 7 percent. A big worry is the decline in investment. Foreigners have been put off by the government’s retrospective tax grab against Vodafone (VOD.L: Quote, Profile, Research); and domestic investors have been deterred by the lack of vision, pork barrel politics and general sense that the economy is in decline.

May 10, 2012

BREAKINGVIEWS: RBI’s draconian FX grab won’t help weak rupee

By Jeff Glekin

MUMBAI (Reuters Breakingviews) – What’s worse than a policy which scares off much needed foreign investors? A scary policy that’s also ineffective. A new Indian rule requiring exporters to repatriate half their foreign currency manages to be both.

If the fear of a fast falling rupee had led Indian exporters to hoard large sums of cash in hard currencies, then the Reserve Bank of India’s (RBI) move might make practical sense. But by the RBI’s own estimate, this change will only bring back between $2.5 to $3 billion of capital. That’s loose change in comparison with India’s $185 billion annual trade deficit. To be fair to the RBI, the change will prevent exporters from building up even larger stashes of cash. Seen in that light it may be more prevention than cure.

May 10, 2012

India’s draconian FX grab won’t help weak rupee

By Jeff Glekin

MUMBAI, May 10 (Reuters Breakingviews) – Forcing exporters
to convert half their foreign currency will net less than $3
billion – not enough to make much difference to the weak rupee.
Heavy-handed intervention may also scare away the foreign
investors India needs to fund its ballooning trade deficit.

Full view will be published shortly.

CONTEXT NEWS

- In a move designed to stem the decline of the Indian
rupee, the Reserve Bank of India (RBI) announced that exporters
will be required to sell half the foreign currency in their
accounts on May 10.

May 8, 2012

India offers only half-hearted tax retreat

By Jeff Glekin

MUMBAI, May 8 (Reuters Breakingviews) – Fund managers have
welcomed an announcement by India’s finance minister of a delay
in the introduction of punitive new tax rules. But retrospective
changes remain intact and a year’s postponement of
implementation will ultimately increase investor anxiety.

Full view will be published shortly.

CONTEXT NEWS

- India’s finance minister announced in parliament on May 7
that he intends to delay by a year the roll-out of measures to
crack down on tax evasion.

May 7, 2012

India and U.S. try for uneasy alliance over Iran

By Jeff Glekin

MUMBAI, May 7 (Reuters Breakingviews) – A visit from Hillary
Clinton on the same day as a trade mission from Tehran
highlights the diplomatic tightrope that New Delhi is on. While
good U.S. relations are important, India’s trade deficit makes
Iran’s cheap oil too attractive to pass up. A compromise looks
likely.

Full view will be published shortly.

CONTEXT NEWS

- U.S. Secretary of State Hillary Clinton said she hoped
India would do “even more” to cut its purchases of oil from
sanctions-hit Iran as there was adequate supply available from
other countries such as Saudi Arabia.

May 2, 2012

India’s bullish consumers need investors to match

(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own)

By Jeff Glekin

MUMBAI, May 2 (Reuters Breakingviews) – India’s consumers
are feeling bullish. In fact the Indian consumer is still the
most optimistic in the world, a Nielsen survey said. But booming
consumption is only a real strength if investment can keep up,
which at the moment isn’t happening. Otherwise the result will
be more inflation.

Apr 30, 2012
via Breakingviews

The rupee looks vulnerable

Photo

By Jeff Glekin
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

India’s ballooning trade deficit means it has to run just to stand still. Without steady capital inflows, the currency will collapse. But without a steady currency, it is hard to attract foreign capital. The rupee’s 19 percent fall against the dollar over the past year is worrying.

During most of the last decade, the current account deficit has been funded without great difficulty. Foreign direct investment, portfolio investments and about $60 billion a year of remittances have usually exceeded the shortfall in trade. India has accumulated around $300 billion of foreign currency reserves, equivalent to 17 percent of GDP.

Apr 30, 2012

BREAKINGVIEWS: The rupee looks vulnerable

By Jeff Glekin

MUMBAI (Reuters Breakingviews) – India’s ballooning trade deficit means it has to run just to stand still. Without steady capital inflows, the currency will collapse. But without a steady currency, it is hard to attract foreign capital. The rupee’s 19 percent fall against the dollar over the past year is worrying.

During most of the last decade, the current account deficit has been funded without great difficulty. Foreign direct investment, portfolio investments and about $60 billion a year of remittances have usually exceeded the shortfall in trade. India has accumulated around $300 billion of foreign currency reserves, equivalent to 17 percent of GDP.

Apr 24, 2012

BREAKINGVIEWS: Fund managers are losing patience with India

By Jeff Glekin

MUMBAI (Reuters Breakingviews) – When it comes to India, fund managers are sitting on their hands. Foreign flows into the country’s equity market have trickled to a halt this month. Ambiguity over tax rules is a major reason why investors are holding back. India’s fragile economy can’t risk an exodus. But it still has time for a re-think.

Overseas investors have only invested $172 million in Indian equities so far this month. That compares with an average of around $3 billion a month which was invested in the first quarter of this calendar year, according to the Securities and Exchange Board of India. The benchmark Sensex is down around 8 percent from its pre-budget high on February 21. The rupee hit a three-month low on April 24.

Apr 24, 2012

Fund managers are losing patience with India

By Jeff Glekin

MUMBAI, April 24 (Reuters Breakingviews) – Foreign
investment in the country’s equity market has slowed to a
trickle. Ambiguity over tax changes is a major reason investors
are holding back. India’s fragile economy can’t risk an exodus.
But the rules haven’t yet come into law. The government still
has time for a re-think.

Full view will be published shortly.

CONTEXT NEWS

- Overseas investors have invested just $172 million in the
Indian equity market so far this month. That compares with $1.7
billion in March, $5.1 billion in February and $2 billion in
January, according to data taken from the Securities and
Exchange Board of India’s website on April 24.

    • About Jeff

      "Jeff Glekin is the India columnist for Breakingviews. Jeff is a former diplomat. He spent four years in Mumbai as the Deputy Head of Mission and First Secretary Financial and Economic at the British Deputy High Commission. Before joining the diplomatic service he spent four years with HM Treasury in London. He has a BA in Philosophy, Politics and Economics from Mansfield College, Oxford University."
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