India economy

By Rajeev Malik of CLSA

The general drift in the financial trenches is that Governor Raghuram Rajan of the Reserve Bank of India (RBI) will stay on hold at the bank’s April 7 policy meeting. After all, he just cut rates – in a second consecutive out-of-meeting action – in early March. What’s more, consumer price inflation moved up in February; this will constrain the RBI from easing. Finally, following the surprise rate cut in January, the RBI had stayed on hold at its February policy meeting; it will repeat this behaviour next month.

For these reasons, hardly anyone expects a rate cut next week. However, valid as these arguments are, they are overshadowed by factors that make a stronger case for another cut. Read more

Gulzar Ahmed is one small link in the human bridge between Dharavi, one of India’s largest shanty towns, and the fashion boutiques of Milan.

The master tailor in a small workshop run by Italian designer Viola Parrocchetti, Ahmed is one of thousands of skilled craftsmen that live and work in Dharavi, providing tailoring and embroidering services to India’s thriving fashion industry, much of it destined for export. Read more

Narendra Modi, India’s pro-business prime minister, swept to power last year offering a new efficient form of government and a crackdown on the high-level corruption that has weighed on growth for decades.

But in a new report, analysts at Ambit Capital, a Mumbai-based brokerage, suggest that this otherwise positive shift may be negative for India’s rural economy – if only in the short-term. Read more

By Sanjeev Prasad, Kotak Institutional Equities

The Indian government’s annual budget – to be announced on Saturday – will be intensely scrutinised for clues about the evolving policy priorities of Narendra Modi, the prime minister.

But while many will be focused on expenditure and revenue plans, Indian business will be looking in a somewhat different direction. It is hoping that the budget will further reforms to bring about a lower ‘visible’ role of the government in the economy, under which it relinquishes or reduces its multiple roles of financier, manager, owner, policy-maker and regulator.

The budget is an ideal opportunity for the government to re-evaluate its role in the economy at a time when the private sector, states and local governments are playing an increasingly larger role in economic and social development. A greater ‘invisible’ role of the government simply as a facilitator of private sector investment is required. Read more

By Bibhas Saha, Durham University Business School

When Narendra Modi, the India prime minister, assumed office in May 2014 everybody knew big changes were coming, but very few could foresee that labour reform would be one of them. Modi knows that if India wants to export more it has to take China on at its own game by creating a more flexible labour market and upgrading skills in a vast pool of potential labour supply.

India is far behind on both, with low literacy and complex labour laws. The laws are archaic (one dating back to 1926) and among the most rigid in the world. Of particular concern is the job security law, which was first introduced in 1976 and then further stiffened in 1982. At that time the objective was to improve job security in private sector firms so they were in line with the public sector. Read more

As global oil prices have crashed, central bankers around the world have had to deal with new disinflationary pressures. For some, like Thailand and Korea, this may be bad news but for Raghuram Rajan, the governor of the Reserve Bank of India (RBI) who has been battling with spiraling inflation, the recent trends are a welcome relief.

Rajan began loosening policy in the new year – but is there any risk, beyond rebounding oil prices, that inflation could pick up pace again in India? Read more

The Bric countries – minus India – embellished their growing reputation as laggards in the emerging market (EM) universe in January as manufacturing activity in Russia and China declined and Brazil turned in another subdued performance, data published on Tuesday shows.

The result is that, as a bloc, the Bric countries (Brazil, Russia, India and China) are diverging from the rest of the EM universe in manufacturing output and the trajectory of GDP growth. Other EM countries, meanwhile, are reaping the benefit of positive global demand and assuming a role as the key engines of developing world growth. Read more

Maruti Suzuki led a two-track recovery in India’s car industry last year, dragging up overall sales while local competitors such as Tata Motors floundered. But new figures out on Tuesday have disappointed analysts in the festive period.

The 32 year-old brand, with a reputation for churning out reliable and affordable cars, posted net profits of Rs8.02bn ($131m) in the quarter ended December, up 18 per cent year-on-year. That’s well below an average forecast for profits of Rs9.06bn in a poll by Thomson Reuters. Read more

By Vikas Pota, Varkey Foundation

By 2030, the economies of India and China together may contribute 65 per cent of global GDP and be home to the majority of the world’s working age population. India alone will possess the world’s biggest pool of potential employees.

But the giddy predictions of future growth seem more fragile when it is considered that this potential labour force is dependent on education systems that often fail to teach basic skills.

India has the largest number of illiterate adults of any country globally. Teacher absenteeism is the third highest in the world, and many teachers lack basic training. Some 12.8m young Indians enter the work force each year and, without adequate skills, will often struggle to find employment. Shanghai leads the rankings done by Pisa, the Programme for International Student Assessment, and has become a poster-child for education ministries around the word. But in rural China, many students still do not finish secondary school. Read more

By Frederic Neumann, HSBC

Things in China look a bit soggy. True, growth a touch above 7 per cent is nothing to sneer at. But it’s down sharply from days past. And as the Mainland matures, those double-digit growth rates seem even less likely to return. Where, then, to look for the next story of hyper-charged growth?

Plenty of promising places around: Sri Lanka will probably grow faster than China this year, and so could the Philippines, Vietnam and Bangladesh at some point. But, from a global perspective, these will hardly make a dent; certainly, commodity markets will not get terribly excited about accelerating demand from these markets. Read more

Last year in India was remarkable not only for the resurgence in economic dynamism that followed the election of Narendra Modi, the prime minister. New data shows it was also a banner year for mergers and acquisitions.

In the calendar year to December 30, India saw deals worth $48.4bn, according to Dealogic, marking the highest value since 2010. Inbound deals were valued at $16.5bn, their highest level since 2011. Read more

By Saurabh Mukherjea of Ambit Capital

As I finish my two-week year-end trip to meet our western clients (around 40 of them), it is obvious that enthusiasm regarding investing in India is at record highs. Over the past fortnight, I have met at least 10 western-hemisphere-based funds that have either just started investing in India or have applied to the Indian securities regulator for Foreign Portfolio Investor (FPI) status (which allows them to access the Indian stockmarket directly). Even more interestingly, half a dozen of the clients I met have moved to larger, better-appointed offices in money centres like London, New York, Zurich and San Francisco. Read more

By Shumita Sharma Deveshwar of Trusted Sources

The Indian government’s sale of a 5 per cent stake in the Steel Authority of India Ltd (SAIL) was meant to serve as a gauge of investor sentiment towards public sector stocks before the bigger sell-offs of shares in Coal India and the ONGC oil & gas group. But it has left some doubts about the potential success of the record disinvestment programme and the consequent reduction of the fiscal deficit. Read more

By Amit Bhandari, Gateway House

Petroleum prices touched a new four -year low of $72.5 per barrel after the Organization of Petroleum Exporting Countries (OPEC) decided last week against reducing production . The 35 per cent price drop is a huge relief for India, where petroleum products comprise a third of the import bill. Cheaper oil means narrower current account and fiscal deficits, and reduced prices at the pump for consumers shopping for food-grains, vegetables, cement and steel.

Can this happy situation last? Will 2015 be the year in which high oil prices do not disadvantage India? Judging by history, it may be.

Before oil prices began to rise in 2003, a 20-year run of price stability fuelled global growth. But cheap oil killed off investments in exploration and production. OPEC gained market share, from 30 per cent of global production in 1983 to over 40 per cent by the end of 1990s. Read more

Economists and investors have turned optimistic about the Indian economy since Prime Minister Narendra Modi took over in New Delhi this May.

Sweeping to victory with a strong majority, the new Bharatiya Janata Party (BJP) administration is expected to roll out a series of policy reforms that will kick start growth in Asia’s third largest economy. But has this triggered a boom in the Indian consumer sector too? Read more

“We are waiting for you!” Finance Minister Arun Jaitley told potential investors this week at the India Economic Summit in New Delhi. But the response among delegates in the conference hall may not have been the one he was hoping for.

“We are waiting for him too,” said one foreign investor, who declined to be identified, expressing impatience with the pace of reforms to make India more business-friendly. Some local industrialists struck a similar note: Anand Mahindra, chairman of Mahindra & Mahindra, one of the largest industrial groups in India, couldn’t hide his anticipation: “The pressure is on [the government] to walk the talk, and see the talk become action.” Read more

International air travelers will recognise the tag line from the HSBC campaign in airports worldwide: “In the future, South-South trade will become norm, not novelty”. If it depends on the Mahindra group and other Indian conglomerates, that tag line could become reality with regards to Africa and India.

Taking optimism to a new level, a collection of African leaders and Indian industrialists dared to dream big during a closed session of the WEF India Economic Summit in Delhi, agreeing to an informal ambition of $500bn Indo-African trade by 2020. Read more

The FT flagged recent concerns around the Indian car industry. Sales had picked up for four consecutive months after the new pro-business government came to power this May – but that run of growth is now ending.

Beyond domestic sales, the recent drop in exports from India is another key trend in the Indian automotive industry and the reasons for the fall are often misunderstood. Read more

By Freha Amjad

If you are looking to ride a career helicopter into the rarefied echelons of those who earn more than $250,000 a year – then consider becoming an expat working in Asia.

Such a course is suggested by the findings of the latest HSBC Expat Explorer report, which is based on a YouGov survey of 9,288 expats worldwide. Asia is home to the highest earning expats, who are almost three times more likely to earn over $250,000 a year than their counterparts in Europe. Read more