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Gold Smuggling and the Decline in the CAD
INDIA · In Brief · 06 Dec 2013

When India brought back restrictions against legal gold imports earlier this year, there was a surge of capital and labour devoted to criminal organisations. The decline of official gold imports, from $16.5B in the June quarter to $3.5B in the September quarter, most likely went with a surge in b...

Glimmers of Recovery
INDIA · Forecast · 02 Dec 2013

Executive SummaryWe see signs of recovery after the downturn that started in 2010. Q3 data signaled improvements in output, investment and business confidence. Conditions may improve further in Q4, as the damage to Q3 growth caused by defense of the rupee recedes, and as the expansionary impact o...

Quarterly Report, October 2013
INDIA · Forecast · 27 Nov 2013

Output Growth Slips Further Figure: GDP growth Source: National Accounts Statistics and authors’ calculations GDP growth in India slowed to 4.4% in April-June 2013. The slowdown is more pronounced if we exclude agriculture and government expenditure. GDP excluding agriculture and government captu...

The Cleaning of Downturns
INDIA · In Brief · 09 Oct 2013

There is universal gloom in India today about economic conditions. This perspective is flawed in two ways.First, every market economy experiences business cycle fluctuations. Trend growth is roughly 7%. When we get 10% growth in an expansion, we should not conclude that trend growth has gone up t...

Normalisation of Monetary Policy Continuing
INDIA · In Brief · 07 Oct 2013

RBI had embarked on a messy interest rate defence of the rupee where the 91-day rate moved up by as much as 400 bps. After Raghuram Rajan took charge as Governor, some small steps were taken in normalisation.Today, the next step in normalisation took place. RBI cut the marginal standing facility ...

Interpreting the Monetary Policy Announcement
INDIA · Report · 23 Sep 2013

In his maiden monetary policy announcement RBI Governor Raghuram Rajan tried to unveil a complicated mix of easing and tightening. He raised the policy “repo” rate to bring down inflationary expectations, while at the same time reducing the MSF rate, the effective rate at which banks borrow, whic...

RBI Statement Failed to Reduce Uncertainty
INDIA · Report · 20 Sep 2013

Today RBI said they will: reduce the marginal standing facility (MSF) rate by 75 basis points from 10.25 per cent to 9.5 per cent with immediate effect;reduce the minimum daily maintenance of the cash reserve ratio (CRR) from 99 per cent of the requirement to 95 per cent effective from the fortni...

RBI Announcement on 20th is Unusually Important
INDIA · In Brief · 18 Sep 2013

It will be the first policy statement by Raghuram Rajan, the new RBI Governor. The date was deftly chosen to give him a little more time, and to take place after the FOMC announcement.RBI monetary policy statements are like nothing you see with central banks elsewhere in the world. They are wordy...

Emergence of Rupee Denominated Bonds as a Globally Investable Asset Class
INDIA · Report · 13 Sep 2013

Executive SummaryInvestment into rupee denominated debt in India has faced a cumbersome auction mechanism, in which a foreign investor must first buy the right to buy government bonds. This auction mechanism was eliminated on September 13 for government bonds. It had been eliminated for corporate...

Policy Environment Shifting For The Better
INDIA · Report · 04 Sep 2013

In recent months, a series of special reports have sketched the failures of economic policy formulation including at the Ministry of Finance and RBI. These failures have been particularly disappointing given that when P. Chidambaram returned to MoF, a sharp increase in competence was expected. Wi...

Extreme Measures in Defense of the Rupee
INDIA · Report · 15 Aug 2013

Executive Summary The pain associated with the defense of the rupee is rising rapidly. Fundamental questions about trend GDP growth are now being raised by the actions of the government, which have rolled back economic reforms in key areas. To the extent that the microeconomic foundations of Indi...

An Unnecessary Mess
INDIA · Report · 31 Jul 2013

Executive Summary The government’s defense of the rupee is turning a difficult situation into a mess. This damages the outlook for the rupee, for the Nifty and for the economy. In addition, an unregulated commodity spot exchange (“NSEL”) has suspended trading and promises delayed payments on outs...

Growth Outlook Bleak
INDIA · Forecast · 29 Jul 2013

Executive SummaryProduction continues to slow: GDP grew at 4.8% y/y in Q4 (Jan-Mar) of 2012-2013, and non-agricultural GDP grew 5.3%. Industrial production has likewise slipped, contracting 1.6% y/y in May. A task force has been set up to track stalled projects in key power, coal, mines and road ...

The Rupee: Trends and Predictions
INDIA · Report · 17 Jul 2013

Executive Summary Foreign institutional investors withdrew $7.17 billion from Indian markets in June. While this was influenced by Fed chairman Ben Bernanke’s statements on May 21 and 22, the major reasons for their exit appear to lie elsewhere. India needs to receive about Rs.20 billion daily in...

Strategy For Financial Reform Is Becoming Visible
INDIA · Report · 11 Jun 2013

Executive SummaryFor the last decade, financial reforms in India have floundered. The game plan that now seems to be clearly visible comprises of a long term strategy and a two-pronged short term strategy. The long-term strategy is to enact some version of the draft Indian Financial Code, a new l...

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