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Indian budget announcement
INDIA · Report · 29 Feb 2016

Three important problems framed yesterday's budget speech. The first was the deepening recession. The second was the banking crisis. The third was the political difficulties that have increasingly beset the BJP. The outcome we got yesterday perhaps reflect a mix of these compulsions. While the...

The problems in banking
INDIA · Report · 23 Feb 2016

A very approximate calculation suggests that perhaps Rs.5.5 trillion are required to bring Indian banking back to the state of health found in February 2008. This is considerably larger than the existing plan at the Ministry of Finance, to infuse Rs.0.7 trillion into public sector banks. We have ...

Business cycle conditions
INDIA · Report · 18 Feb 2016

The recession that began in 2012 has not ended. The best measures of business cycle conditions are constructed using data for non-financial non-oil listed firms, and by several measures, these indicate softness in the economy. Furthermore, balance sheet problems are reflected in the mismatch betw...

Developments in Politics
INDIA · Report · 17 Feb 2016

The BJP's honeymoon period lasted 1.48 years. It ended when the results of the Bihar elections were announced on November 8, 2015. Yet there is little evidence of a change in course in response to these election results. A recent fracas at the Jawaharlal Nehru University, and more broadly, cultur...

A balance sheet recession?
INDIA · Report · 15 Dec 2015

A remarkable collapse in nominal GDP growth has been taking place. There are concerns about the GDP deflator that has been used, which is possibly overstating real GDP growth. Low nominal GDP growth, coupled with high interest rates, is resulting in difficult conditions for the debt dynamics of t...

Business cycle conditions
INDIA · Report · 14 Dec 2015

Conditions in the economy remain difficult. The net sales growth of firms, expressed in real terms, is quite slow. The credit stress of firms is worsening, as interest payments are growing faster than operating profit. We are increasingly morphing from a conventional recession into a balance shee...

What is at Stake in the Bihar Elections
INDIA · Report · 05 Nov 2015

The state of Bihar has a population of 100 million, and is important in and of itself. However, the elections in Bihar have come to represent something more. If the BJP wins, this will reinforce the power of the prime minister, it will reaffirm the usefulness of religious polarization as an el...

Has investment revived?
INDIA · Report · 05 Oct 2015

Micro data about investment is reliable and is released immediately after the end of a quarter. Hence, on October 5 we are able to observe the Jul-Sep 2015 quarter. This is the first macro data release for the Jul-Sep 2015 quarter. The attempts by the government at solving the institutional bo...

Business cycle conditions
INDIA · Report · 25 Sep 2015

While many people expected conditions to change under the new government, the business cycle downturn that began in Q1 2012 has not ended. The engine of earnings growth in large firms has not revived. There are concerns about credit stress in large firms, with growing interest payments and declin...

Monetary policy – developments on tactics and strategy
INDIA · Report · 21 Aug 2015

Executive Summary A dramatic decline in inflation took place, from late 2013 onwards. Headline inflation is now at the inflation target. From 2013 onwards, monetary policy did not see this coming. This feeds into an interesting current debate about shifting the power to set rates from the Governo...

Part III: Has the recession ended? Equity market valuation
INDIA · Report · 01 Jul 2015

Executive Summary Equity market valuation is all about two things: projected earnings growth and the discount rate required by the market. In the past, Indian equities have obtained high valuations on the strength of the high growth rate of earnings. For a long time, there has been a nice set of ...

Part II: Has the recession ended? Balance sheet problems of banks and borrowers
INDIA · Report · 30 Jun 2015

Executive Summary While the official GDP numbers are showing an optimistic picture, trusted firm databases suggest that the recession which began in Q1 2012 has not ended. In the second part of our discussion of the recent GDP figures and business cycle conditions, we look at the current balance ...

What Can We Learn From the Currency Defense of 2013
INDIA · Report · 23 Jun 2015

Executive Summary In 2013, at the time of Ben Bernanke’s “Taper Talk”, India mounted a currency defense to combat currency depreciation. It is useful to look back at this episode, in order to obtain insights into the workings of a currency defense. The authorities appeared to throw everything the...

Part I: Has the recession which began in 2012 ended?
INDIA · Report · 22 Jun 2015

Executive Summary Changes in GDP estimation methodology have taken place, and the new GDP data shows a very rosy picture. However, we believe that the recession which began in Q1 2012 has not yet ended. The methodological documents associated with the new GDP data show many improvements in method...

Big Facts about the US Macroeconomic Environment and Implications for India
INDIA · Report · 26 May 2015

Using very long time series in the US, three important facts are: (a) an inflation target of 2%, which is successfully delivered by the US Fed; (b) bond returns of 2.7% and (c) equity premium of 3 percentage points.In the US, there is a fair understanding about these three numbers and confidence ...

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