India’s banks stuck in a monetary trap 20 Mar 2013 A quarter-point rate cut, designed to spur lending, has little chance of reaching borrowers. Banks need all the income they can get to attract depositors and lay aside provisions for bad debt. Only when inflation is tamed, and banks recapitalised, can credit flow efficiently.
India in depth: Gold is not the villain 19 Mar 2013 The finance minister’s claim that a “passion” for imported gold widens the trade deficit misses the point. Demand for the yellow metal is a symptom of fears the government will print money to finance deficits. A broader tax base would ease Indians’ demand for an inflation hedge.
Stern budget will help India shrug off bad past 28 Feb 2013 Finance Minister Chidambaram has eschewed pre-poll populism. The government plans to control borrowing. That should reduce the competition for savings - and lower interest rates. Private investments will revive and a smaller fiscal deficit will steady the current account.
India in depth: Budget must ease credit crunch 19 Feb 2013 Bad loans and poorly capitalised banks are prolonging the slowdown in credit, now in its fifth year. Fixing it will require tapping global banks, India’s private sector, and taxpayers. Finance minister Chidambaram’s budget speech is an opportunity to start tackling the shortfall.
Finmeccanica woes show need for radical overhaul 12 Feb 2013 The arrest of Italian defence company chief Giuseppe Orsi for bribery could derail the group’s restructuring and debt-reduction plans. Political intrigue shouldn’t distract the next government from selling down its stake in Italy’s second-biggest employer.
Rate cuts won’t revive India’s stalled growth 29 Jan 2013 The latest reduction in interest rates will be as futile as the previous one nine months ago. GDP growth will pick up when New Delhi curbs its own profligacy and improves the investment climate. The February budget may be the current government’s last chance to do both.
India in depth: Crying out for corporate bonds 15 Jan 2013 Using the country’s bank-dominated financial system to fund a $1 trillion infrastructure plan will be risky. Corporate bonds could be a good alternative, and might help cushion the current investment slump. But India’s authorities are stifling the market.
India’s plan to shield IPO investors has merit 11 Jan 2013 A proposal to allow small shareholders in flopped IPOs to claim a refund smacks of regulatory overkill. But the plan might help restore faith in markets. And unless company owners face consequences for ultra-aggressive pricing, they won’t stop abusing their information advantage.
India’s corporate governance cleanup is welcome 7 Jan 2013 A new law seeks to make it difficult for the same person to be both CEO and chairman. The regulator also wants to ensure listed companies have truly independent directors. The changes, which are tougher than some more advanced countries, will narrow India’s governance discount.
India braces for last year of political stability 2 Jan 2013 A 13-year period in which one of the two main national parties led a stable coalition in New Delhi will come to an end in 2013. A third-front alliance of opportunistic regional parties will rise to power. Their populism will wreck public finances and delay an investment revival.
Modi’s Gujarat win doesn’t mean he will rule India 21 Dec 2012 The right-wing leader’s third electoral win in his home state has boosted his stature. But Narendra Modi’s chequered past and autocratic personality could prevent him from becoming prime minister. Investors betting on Modi to provide effective governance could be in for a shock.
India in depth: Consumption bets will outperform 18 Dec 2012 In 2013, the economy will plod through its fifth year of deficit-fuelled, bad-quality GDP growth. A stock-picking strategy tilted toward consumption will yield greater rewards than premature bets on an investment recovery, which is still some distance away.
India’s Jet a better bet than Kingfisher for Etihad 14 Dec 2012 The Abu Dhabi airline is spoilt for choice in India. It can rescue and run grounded Kingfisher, or buy a smaller stake in better-managed Jet Airways. The latter offers a better fit. Besides, a low-key and passive entry into a market that is just opening up makes more sense.
Aston Martin’s Casino Royale is a long way off 29 Nov 2012 Life’s hard for niche automakers, even if James Bond’s a fan. Supercar demand has wilted. Starved of funds, vehicles can grow as stale as Brosnan-era 007. A potential $400 mln injection from a new investor would boost Aston Martin. Just don’t expect decent returns any time soon.
India in depth: Economy unmoved by shock therapy 20 Nov 2012 The government’s high-decibel reform campaign hasn’t brought much succour to the listless economy. The stock market rally is losing steam, and the rupee is weakening. The slowdown in bank credit, which is critical for an investment revival, may continue into next year.
Diageo’s India splash won’t get Kingfisher flying 12 Nov 2012 The British group’s cash brings relief to India’s largest liquor company and its chairman Vijay Mallya. The hope is the tycoon will use some of his booty to revive grounded Kingfisher Airlines. But without a strong partner and the promise of debt restructuring, that won’t happen.
Diageo pays heady price for Indian spirits 9 Nov 2012 The UK drinks group will get up to 53.4 pct of United Spirits for $2 bln. Despite a weakened seller, that’s 20 times historic EBITDA with few synergies. But the long-term logic adds up if it helps CEO Paul Walsh position Diageo as the leader in giving emerging markets a buzz.
India’s interminable wait for its next Gandhi 29 Oct 2012 Rahul Gandhi has forfeited his chance to build a track record in government before 2014 polls. The ruling party will now have to rely solely on the 42-year-old’s famous last name to project him as a prime ministerial hopeful. Investors will continue to find him hard to assess.
India in depth: Too soon for central bank rewards 22 Oct 2012 Galloping rural wages and a loose fiscal policy are keeping inflation high even as the nation relies on hot money to fill a large trade deficit. An interest-rate cut now could be risky. The government must pursue more reforms before it can expect a reward from the central bank.
How do India’s markets spell relief? Chidambaram 8 Oct 2012 Stocks have soared since word broke that the urbane Harvard man might take a third turn as finance chief. His return has been an antidote to predecessor Mukherjee’s errors, and has revived foreign buying. But the rally will only last if reform manages to boost flagging growth.