India: new options for dealmakers
After overturning his predecessor’s decision on the Vodafone case on Wednesday, India’s new Law Minister, Kapil Sibal, has brought about another change that might reassure foreign investors.
Indian companies will now be able to use put and call options in M&A and private equity transactions, adding flexibility and clarity to the deal-making process. Continue reading »
India’s Akshaya Tritiya spurs gold buying on religious, not financial, grounds
Monday marked the Hindu festival of Akshaya Tritiya, considered as an auspicious day to buy precious metals. And with last month’s sharp drop in the price of gold, demand in India is higher than ever.
But what does this mean for an economy where the current account deficit is weighed down by mammoth gold imports? And what does it mean for Indian households, quick to act on a price drop, buying the commodity on religious rather than financial grounds? Continue reading »
[brief] India cuts interest rate 25bp
The Reserve Bank of India cut its repo lending rate by 25 basis points on Tuesday to 7.5 per cent a year, meeting analyst expectations.
The cut follows a 25 basis point reduction in the rate in January, the first since April 2012. Though analysts have been forecasting further cuts in the coming months, the RBI has said there is limited room for further action. Continue reading »
India inflation ticks back up
Indian inflation increased unexpectedly in February – bad news for the Indian government after a general strike was called last month partly in protest against price increases.
The Wholesale Price Index, India’s main measure of prices, was up 6.84 per cent year-on-year in the month of February, where the average forecast in a Reuters poll of analysts was for an increase of 6.54 per cent. It doesn’t leave much room for manouvre on rates. Continue reading »
India offers new banking licences in bid to spread financial services
Photo: Bloomberg
Some 40 per cent of India’s 1.2bn people have no access to banking services so you might expect newcomers to be crowding into an untapped market. But in the past twenty years, barely a dozen private-sector banks have been licensed in the country. And with stringent capital requirements, existing players aren’t finding it easy to expand their loan books, either.
In an attempt to improve financial inclusion, the Reserve Bank of India has issued guidelines for a fresh round of banks to be licensed – and the path is clear for India’s big corporate houses to apply. Continue reading »
India: Tuesday rate cut on the cards
The Reserve Bank of India is widely expected to cut interest rates on Tuesday.
But by how much, nobody knows. Will the rate be reduced by 25 or 50 basis points? And contrarian analysts are even wondering whether loosening monetary policy is a good idea right now. Continue reading »
India rates: RBI holds, Chidambaram waits
Palaniappan Chidambaram, the Indian finance minister, will continue what he sees as his lonely battle to promote much-needed economic growth after the Reserve Bank of India left interest rates unchanged in its latest decision on Tuesday.
The central bank said in its mid-quarter policy review that it was leaving the policy repo rate unchanged at 8.0 per cent. Nor was there any change to the 4.25 per cent cash reserve ratio for banks. Continue reading »
India WPI inflation: reasons to be happy – and cautious
There are fewer sights that central bankers like more than inflation coming down, but that might not be enough for the Reserve Bank of India to cut rates.
While India’s WPI inflation figure eased beyond most economists’ expectations (of 7.6 per cent) to 7.2 per cent for November, down from October’s 7.5 per cent, analysts are sticking to the prediction for a hold in rates next week. Continue reading »
RBI: not taking hints from anyone
Since April, when the Reserve Bank of India made a surprise 50 basis points cut interest rates, before every monthly policy review meeting the markets speculate that another cut is coming – despite the fact that inflation remains sticky and high.
But the RBI seems immune to hints and suggestions. Continue reading »
Inflation fears trump reform promises for RBI
A last minute effort by the finance minister to convince the Reserve Bank of India to cut interest rates failed to bear fruit on Tuesday as the central bank held rates at 8 per cent.
P Chidambaram had said on Monday that the government would effectively halve the fiscal deficit by 2017, adding pressure on the bank to ease. Instead, the RBI cut the cash reserve ratio for banks by 25bps to 4.25 per cent. Continue reading »
India industry reluctant to spend
If any further evidence were needed that the Indian economy is struggling mightily, the Reserve Bank of India’s September bulletin provided it. On Wednesday, the RBI said Indian companies had dramatically curtailed their plans to raise funds, and are more wary to invest now than they have been in the recent past.
The RBI found 668 projects amounting to Rs2.1tn ($38bn) in the fiscal year ended in March. That’s nearly half as much as the the Rs3.9tn spent on 710 projects the previous year. The projects are sanctioned by foreign institutional investors or banks. Continue reading »
India: RBI holds rates with eye on inflation
The Reserve Bank of India kept benchmark interest rates on hold on Tuesday, in a widely expected bid to contain persistently high inflation, while leaving the growth revival agenda in the hands of the government.
India’s central bank kept the repo rate – the rate at which it lends to commercial banks – at 8 per cent even as markets hoped for a much-needed cut to stimulate borrowing and get growth back on track after a recent nosedive to its lowest level in nine years. Continue reading »
Indian rupee: what’s the backup plan?
The rupee’s troubles are plain for all to see: shunned by global risk aversion, investors seeking safe haven in dollars (they’re also running from other EM currencies), and battered by a weak domestic economy and ineffectual policymakers, it’s spent the past two weeks hitting all-time low after all time low.
At 5:06pm IST on Wednesday, it stood at Rs56.1850 against the dollar – not an all-time low, but not far off. So what can be done? Anything, anyone? Continue reading »
India and RBI: reality bites
Call it a challenge to the Indian government, or, at least, a passive aggressive push in the right direction.
In the policy statement accompanying its surprisingly aggressive 50bps interest rate cut on Tuesday, the Reserve Bank of India made one thing abundantly clear: no more rate cuts unless the government gets its fiscal house in order. Continue reading »
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