Apollo Tyres’ $2.5 bln takeover is piling up risks 17 Sep 2013 The Indian firm may need an agreement with U.S. unions for its takeover of rival Cooper to proceed. The setback follows months of opposition from workers in China. If the solution raises costs, Apollo will have less room for error when it comes to servicing the deal’s hefty debt.
India in depth: Losing growth marathon to China 17 Sep 2013 A middle-income country needs both stamina and speed to get rich. While demography sets the tempo, institutions, infrastructure and fiscal policy determine endurance. After growing faster in the last decade than China did in the 1990s, India must rebuild atrophied muscles.
Not all Asian countries need to fear the Fed 5 Sep 2013 Plunging currencies have raised contagion concerns. But not all nations are equally vulnerable to receding tides of dollar liquidity. A Breakingviews interactive map shows that while no Asian economy is entirely immune, none is as badly exposed as India.
Rajan’s call to diaspora can’t stem rupee rout 5 Sep 2013 India’s new monetary czar can lure some funds from overseas Indians with a cheap dollar-rupee swap. The clever and relatively cheap ploy may buy some time, but the former IMF chief economist will only succeed as a central banker if he can break the country’s painful stagflation.
Emerging economies need to change to compete 5 Sep 2013 -The World Economic Forum’s annual competitiveness rankings hold little succour for some countries that are feeling market pressure. Brazil and India are deteriorating, Venezuela and Argentina plunging. Some Asian countries fare better but reforms are vital almost everywhere.
Emerging market currency rescue is a pipe dream 2 Sep 2013 India’s idea of group-selling dollars to prop up emerging market exchange rates would be a tough sell. Participants would be asked to spend their reserves to help others, and probably lose money in the process. The best thing India can do is to revive sputtering growth.
Asia sell-off will expose weak corporate defences 26 Aug 2013 Market turbulence invites comparisons with Asia’s last financial crisis. Though most economies are in better shape this time, corporate leverage has risen. Higher interest rates, slower growth, and falling currencies will lay bare companies that failed to learn past lessons.
India in depth: Let rupee sink to save the economy 21 Aug 2013 Allowing investors to drive down the currency is the least bad of all options. Trying to stem the slide with capital controls and higher interest rates will badly backfire. Abandoning the defence of the rupee will allow India to shift focus to boosting exports with tax cuts.
Indian banks teeter on asset-quality abyss 13 Aug 2013 Bad loans at the country’s 10 largest state-controlled banks have doubled in two years. Now rising short-term bond yields are crimping earnings, making it harder to write off credit losses. The solution is to recapitalize the banking system, but New Delhi doesn’t have the money.
India’s rupee rescue is more prayer than plan 8 Aug 2013 The defence of the falling currency is three-pronged: reluctantly shore up interest rates, squeeze gold imports and score some quick export gains. But officials are clutching at straws. There is no easy way to finance India’s large trade gap, nor a painless way to lower it.
How Raghuram Rajan can end India’s mini-crisis 7 Aug 2013 The former IMF chief economist warned of the credit bubble in 2005. Now he must show he can manage crises as well as he can predict them. The current strategy for ending the rupee’s free fall will choke growth. As India’s next central bank chief, Rajan will need to switch gears.
Fed could do with "Luddite" like India’s Rajan 6 Aug 2013 Larry Summers said a 2005 paper by Raghuram Rajan, then chief IMF economist, was based on a “slightly Luddite” premise: new-style finance increased the risk of crisis. Rajan may actually be more qualified than Summers to run the U.S. central bank. But he’ll do the job for India.
India seeks diaspora bailout without strings 26 Jul 2013 For the fourth time in 22 years, India may ask its expats in other countries for a rescue loan. The practice has its uses. Jewish emigrants have been a cheaper source of financing for Israel than global bond markets. And lenders won’t demand IMF-type fiscal austerity.
India new FDI rules show welcome long-termism 17 Jul 2013 Letting foreigners own more of local industries like telecoms won’t kick off a rush to invest. But it suggests a desire to court longer-term inflows, and replace an unhealthy reliance on hot money. The new policies may help stem the rupee’s slide too.
India in depth: Time to treat savers fairly 16 Jul 2013 One of the lowest real costs of capital in Asia didn’t prevent an investment slump, but it did put off savers. The economy wouldn’t rely so much on hot money if local households weren’t short-changed. The outmoded state-built apparatus of financial repression needs to be junked.
Asian capital flight risk goes beyond hot money 15 Jul 2013 Reversal of foreign investment flows isn’t the only threat for policymakers. Domestic households too could whip out their cash as rising US interest rates make it more attractive to take money abroad. For some countries the savings arbitrage could prove damaging.
India grain subsidy may only outsource hunger 10 Jul 2013 A plan to guarantee cheap grains to 800 million citizens will threaten more than the shaky state budget. With the government as a forced buyer, prices in the thinly traded world rice market may spike whenever drought threatens India’s crop, pushing the pain on to poor countries.
India’s aspiring banking moguls fail to impress 2 Jul 2013 A few strong contenders aside, the 26 applicants for a handful of new banking licenses are local finance companies. Giving these shadow lenders access to retail deposits while saddling them with harsh licensing rules could backfire. India needs more banks, but not more weak ones.
India should take U.S. pharma complaints seriously 25 Jun 2013 After a series of legal setbacks, U.S. drug giants are again pushing for stronger patent protection in India. The industry’s main concern is protecting emerging market profit. But in the long term, India’s domestic drug makers would also benefit from a more supportive system.
India in depth: Diaspora’s yield hunt gone wrong 18 Jun 2013 Indians living overseas thought rupee deposits paying 9 percent were a great deal. Not anymore. Alarmed by a falling currency, the diaspora may unwind its $47 billion carry trade, causing a deposit crunch at Indian banks and complicating the financing of the nation’s trade gap.