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“India Shining”? Or the Greece of Asia?

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“India Shining”? Or the Greece of Asia?
“India Shining”? Or the Greece of Asia? | Via Meadia

“What ails India?” So asked the FT‘s Mumbai bureau chief of a Western investor recently. The answer? Everything. “On every indicator we look at, there is a red flag,” the investor said. “This country is close to becoming the Greece of Asia.”

Growth has stalled. Inflation, thought to be under control, jumped up again on Monday. Data last week showed industrial output declining and the trade deficit growing. This week the rupee fell to its lowest rate ever against the dollar.

There are a number of reasons why India, once Asia’s most promising economy, is slipping. One is the decline of the License Raj, the long accepted patronage network of businessmen and politicians, the system of permissions, licences, and investment that kept India’s economic machine churning at a high rate. Recently, the Raj has come under attack—from a zesty media and active public who want more transparency, from foreign investors who want an easier way to get a piece of the pie, from an empowered Supreme Court and government auditors.

As India’s economy continues to modernize, there will be inevitably be times of slow growth, inflation, corruption scandals, and skittish investors. Prime Minister Manmohan Singh, who championed the wildly successful economic reforms of the 1990s, has not had that kind of success in the next round of reforms. His government may be cracking down on corruption, but partly as a consequence of the complicated politics of Indian coalition-building, vital decisions have been deferred and even the low hanging fruit has been left hanging on the tree.

Singh’s government will pay a steep price if the economic climate does not change by the time elections roll around in 2014. His Congress Party was battered in provincial elections a few months ago. One frontrunner to replace him, Narendra Modi, is a divisive figure and, due to widely credited reports of his personal responsibility for massacres of Muslims, he is not beloved by the international community. His party, the BJP, is usually identified with Hindu nationalism, and elements of that party have been labeled fascist.

But Modi is a champion of business in his home state of Gujarat. Gujarat has consistently been one of the great success stories in the Indian economy, and Via Meadia can envision Modi pushing that line with some success during national elections. If Singh’s government can’t prove its current policies will brighten things up once again and continue India’s great success story (“India shining”), then we may well see Narendra Modi waltzing triumphantly into Delhi in the near future. If so, the world will have to hope that Modi the prime minister will live up to the best elements of his mixed record.

The rise of great powers is complicated; look at the way that Andrew Jackson, one of the great American advocates of popular democracy, was also a slaveholder. India’s story is going to be at least as complicated and as difficult — for itself, and for countries whose strategic interests are closely bound up in its fate.



India isn't shining
India isn't shining

Saying ‘forget fundamentals, it’s all about the flows’ worked well in Q1, with $8 bn flowing into Indian equities. But already the last few weeks have looked more uncertain, as concerns on Spain have re-appeared, and fears on China’s outlook have grown. Meanwhile, US growth expectations are already high, so there is less scope to surprise on the upside. This implies that, at best, we’re in for a phase of consolidation, with less of a clear direction in the global macro data. That suggests a more discerning market and more focus on India’s fundamentals. So, how bad do they look?

The big events of March all ended up being neutral to disappointing: the Reserve Bank of India (RBI) left the repo rate unchanged; UP elections were disappointing for Congress and the Budget was relatively safe and neutral.

The combination of elections, ‘coalgate’, GAAR confusion and retrospective tax amendments have once again triggered negative foreign investor perceptions about India. Yet, the government seems to assume that despite policy paralysis, overreaching executive actions and now retrospective tax amendments, foreign investors will just keep on coming.

In the run-up to 2008, a lot of the foreign investment into India was chasing ‘India shining’, seeing the world’s second fastest growing major economy, a model of high growth, fiscal consolidation and macroeconomic improvement. That picture is quite different today. Yes, growth is still high, relative to almost every other global economy. And, yes, that economic potential remains remarkable. But, there are lots of issues that need to be worked through before one can unambiguously become bullish about India macro. Be bullish on India micro; on states, sectors, themes and stocks, but to get more bullish on India macro is going to take some time.

There is a struggling coalition government. A lack of balance in economic policy, with a fiscal deficit that doubled from 2008 to now, and overemphasis on monetary policy to combat structurally high inflation, resulting in overly aggressive rate hikes, discouraging investment and impairing growth. There is then the unhelpful issue of oil running at an all-time high in rupee terms. Every 10 per cent increase in global crude prices could have a direct impact of 0.5 per cent increase on WPI inflation, as well as dragging down growth.

We think RBI will cut the repo rate in April, but that it will be unable to cut rates aggressively or decisively in FY13. So, whilst the picture should slowly improve, for now, I’m cautious.
 
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India isn't shining but Greece of Asia...well that's a stretch.:drag:
 
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Well, it's bad and it doesn't seem to be improving in the near future not unless the GoI does something about it other issuing empty statements.

BTW, just for you guys:

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Source: PM Manmohan Singh's twitter account.
 
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yaar why we are worry to make others down? KER BHAALA HO BHALA NHI SUNA KABHI? if you do good for others god will wrrite good for you . our words can't change situation of indian economy but hurt humans so next time it will be more worse for us as we are in worse already .
 
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^^Was waiting for CD to come and copy paste these same links that you are pasting the whole day in every thread. :lol:

I just find it so ironic, that Indians love to constantly predict the collapse of China's economy... but it ended up with India itself being downgraded instead. :D

What goes around, comes around. You spent so much time mocking us, and hoping for us to collapse... but you forgot to take care of your own economy.
 
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I just find it so ironic, that Indians love to constantly predict the collapse of China's economy... but it ended up with India itself being downgraded. :D

What goes around, comes around. You spent so much time mocking us, you forgot to look at your own economy.

When Indian "predicted" the collapse of China's economy they did not know that they actually predicted the collapse of their own country's economy.
 
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When Indian "predicted" the collapse of China's economy they did not know that they actually predicted the collapse of their own country's economy.

:lol: Pakistanis growing at -10% (historically fudged numbers) talking about collapse of Indian economy that still grew at over 6% in 2011-2012
 
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:lol: Pakistanis growing at -10% (historically fudged numbers) talking about collapse of Indian economy that still grew at over 6% in 2011-2012

Why do you guys have to quote the trolls? Negates the very purpose of putting them on ignore list.

:lol: Pakistanis growing at -10% (historically fudged numbers) talking about collapse of Indian economy that still grew at over 6% in 2011-2012

Why do you guys have to quote the trolls? Negates the very purpose of putting them on ignore list.
 
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People seem to be purposefully ignoring the facts that most economists have commented on the negative side but have pretty much all said this is a short term issue and the long term future of the Indian economy still looks very bright.
 
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People seem to be purposefully ignoring the facts that most economists have commented on the negative side but have pretty much all said this is a short term issue and the long term future of the Indian economy still looks very bright.

Is that why the Indian Rupee is taking a free fall down to the Ocean ?
 
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People seem to be purposefully ignoring the facts that most economists have commented on the negative side but have pretty much all said this is a short term issue and the long term future of the Indian economy still looks very bright.

When u want to bash only focus on negative aspect.
 
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I just find it so ironic, that Indians love to constantly predict the collapse of China's economy... but it ended up with India itself being downgraded instead. :D

What goes around, comes around. You spent so much time mocking us, and hoping for us to collapse... but you forgot to take care of your own economy.

China’s Manufacturing to Collapse by 2015, Says Economist



Chinese workers test the circuit boards at a factory in Mianyang, southwest China's Sichuan province on April 30, 2012 (STR/AFP/Getty Images)
A Hong Kong economist accustomed to making shocking pronouncements has predicted that China’s manufacturing industry will “completely collapse” by 2015 and that the economy will soon follow it.*
Larry Lang made his latest remarks at a lecture in Kunming City, in Southwest China’s Yunnan Province on May 19.
“China’s economy is facing two distinct phenomena that are exactly opposite to each other. The real estate and stock market has cooled down. However, the market for luxury goods, such as high end vehicles and collectors’ items, has heated up,” he said, according to Shanghai Securities News.*
He added that China’s economy is “sick,” and this sickness is the crisis the manufacturing sector is facing.
China’s manufacturing sector is “suffering from two illnesses,” he said, i.e., worsening of investment and management environment and excessive production capacity; consequently money originally meant for investing in the real economy has been diverted to luxury cars and goods.
The three main segments of the manufacturing sector—R&D, logistics channels, and key component parts—are controlled by European and American companies. China, therefore, has lost control of product pricing, which, inevitably, has created crises, Lang said in the lecture.



According to Lang’s analysis, the investment and management environments for manufacturing industries in China continue to deteriorate, causing excessive production capacity.
Heavy taxation and fees, as well as a broken capital chain have lowered the margins of manufacturing industries and exacerbated the investment and management environment as a whole.
Lang said China is actually facing four imminent crises: wasting of resources, excessive production capacity, debt crisis, and inadequate consumption. The crisis of wasting of resource and excessive production will explode first, he predicted.
“So many industries with overcapacity inevitably would lead to a long-term depression in China’s economy,” he said.
The excessive production in various industries adds up to “21 percent in steel, 12 percent in automobile, 28 percent in cement, 60 percent in stainless steel, 60 percent in pesticides, 95 percent in photovoltaic, and 93 percent in glass,” Lang said, quoting a report by eastday.com.
The banking sector is also straining under the weight of heavy debts, and 50 industries, led by the real estate industry, are also threatened by crisis due to tightening measures, Lang said.*
He mentioned that in the near future, local government debt in China will be listed alongside U.S. debt and European debt as part of the three major crises in the world. “This is horrifying. All Chinese people will pay a painful price for it,” he said.
He blogged*on May 7 that China’s economy is on the brink of greatest danger, and that “it is definitely not an alarmist talk.”*
“I want to tell those Chinese people and officials, who are only concerned about saving face rather than resolving internal issues, how dangerous and terrible today’s economy is.”
Lang also wrote that having crises is not frightening, “what is horrible is that we turn a blind eye to crisis and try to cover it up. What is even more frightening is to adopt a stopgap approach and therefore create an even bigger crisis.”

“China’s economic problem today cannot be resolved by the current economic system and means, we should look for other ways,” he added.
In October last year, Lang said the regime was on the brink of bankruptcy. One reason, he noted, is that the regime’s officially published GDP of 9 percent is fabricated. According to Lang’s data, China’s GDP has decreased 10 percent.*
 
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