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COUNTRY INSIGHTS

The Indian economy: Taking stock and looking forward
INDIA · Report · 20 Apr 2020 · 1 response

The early evidence about the impact of Covid-19 upon the economy is now visible. The leading indicator of business cycle conditions dropped from -2.2% in Oct-Dec 2019 to -39.9% in Jan-Mar 2020. The employment rate dropped from 40% to 27% in the lockdown. Indexes of consumer sentiment show an unpr...

Covid-19 and India
INDIA · Report · 27 Mar 2020

In this report, we focus on how India is different from the trajectory of Covid 19 as seen in (say) the US. We start on this problem in the context of a weak economy and financial system. There is low state capacity, including in the field of public health. The data shows 24,254 persons tested...

YES Bank unfolding
INDIA · In Brief · 16 Mar 2020

As was emphasised by us earlier, the announcements about Yes Bank do not add up to a tidy completed resolution. More information has now come out about what will happen.The (delayed) financial statement of the bank for the quarter ended 31 December 2019 was released. Conditions have deteriorated ...

Can India use macro policy in responding to the pandemic?
INDIA · In Brief · 11 Mar 2020

In many countries, macro policy is responding to the pandemic. In some ways, the situation is reminiscent of the 2008 crisis. It is important to point out one key difference. Most countries started out with a strong fiscal situation, and relatively high policy rates, in 2007/2008. This gave room ...

The end game for Yes Bank
INDIA · Report · 10 Mar 2020

It was known for a while that Yes Bank had difficulties. There is no institutional arrangement for the resolution of financial firms in India. Each resolution is cobbled together, on the fly, by the Ministry of Finance with support from various financial agencies. However, in the past, when th...

Recent difficulties India faces
INDIA · In Brief · 06 Mar 2020

In 2020, the Indian government has been grappling with four challenges:The political conflict associated with the citizenship question,The financial crisis, where Yes Bank has particularly been under stress,The problems of telecom, where Vodafone has particularly been under stress,Covid-19.In thi...

Review of the inflation targeting framework
INDIA · Report · 25 Feb 2020

Inflation targeting began in India in February 2015. It was the first time in India’s history that the central bank had an objective: prior to this, it followed a “multiple objectives, multiple indicators, multiple instruments” approach that constituted all discretion and no rules. The first f...

Business cycle conditions in Oct-Nov-Dec 2019
INDIA · Report · 20 Jan 2020 · 1 response

The first information about macroeconomic conditions in the Oct-Nov-Dec 2019 quarter is now available. The leading indicator has improved significantly, to a value of 2.64 per cent below the long-term trend. A key indicator that improved greatly was new projects, which may be a slight aberration ...

Turbulence for Vodafone Idea next week
INDIA · In Brief · 19 Jan 2020

Vodafone Idea is a large telecom company. For 2018-19, their consolidated revenue was Rs.0.42 trillion and their balance sheet size was Rs.2.48 trillion. Their profit after tax has been negative for the three latest years (2016-17, 2017-18 and 2018-19). In the latest year, the profit after tax wa...

A gap has opened up between the performance of listed and unlisted companies
INDIA · Report · 08 Jan 2020

Listed firms in India experienced buoyant growth from 1999 until about 2006, but their growth in the following period has been disappointing. In this note, we find that until 2012, listed and unlisted firms fared similarly. But since 2012, a significant gap has opened up between the two groups. U...

Business cycle conditions in Jul-Aug-Sep 2019
INDIA · Report · 01 Nov 2019

The best measure of business cycle conditions in India is the coincident indicator, which is a linear combination of well measured underlying indicators. The coincident indicator deteriorated in Jul-Aug-Sep 2019, to 3.78 per cent below trend. The leading indicator gives us a sense of how the c...

Macroeconomic conditions and update on the current financial stress situation
INDIA · Report · 22 Oct 2019

Values of +10% for the coincident indicator indicate a big boom in activity. The latest value, for Apr-Jun 2019, shows -1.93%. The leading indicator has deteriorated sharply. The latest value, for Jul-Sep 2019, shows -14%. (The units are not comparable with those of the coincident indicator). ...

Credit stress in large private firms
INDIA · Report · 08 Oct 2019

Credit stress in large private firms is one of the most important features of the Indian macroeconomy. In the class of listed companies with a balance sheet size of above Rs.0.5 trillion, we compute the "Distance to Default" (DtD) using the Merton/KMV model. A useful rule of thumb under Indian co...

Grappling with the slowdown by means of a corporate tax rate cut
INDIA · Report · 23 Sep 2019 · 1 response

The central challenge in Indian macroeconomics consists of the reduced investment rate of private persons. Corporate investment is now down to levels seen in previous slumps. There has been a sharp increase in the dividend payout rate. This shows firms paying out their cash, instead of investing ...

Continuing stress in the automobile industry
INDIA · Report · 17 Sep 2019

We revisit the comparison we made in our report of August 15, 2019, between the stress of 2008 and 2018 as seen in three components of the automobile industry – HCV's (heavy commercial vehicles), passenger cars and two-wheelers. In all three cases, we work with seasonally adjusted levels, and exp...

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