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Leading indicator report for Apr-Jun 2019
INDIA · Report · 15 Jul 2019

Using the data now available, we are able to calculate the leading indicator for Apr-Jun 2019, but not the coincident indicator for this same quarter. We see a turning point in business cycle conditions in Q1 2018. The leading indicator gives us a sense of what will happen to the coincident i...

Analyzing the Budget announcement of July 5, 2019
INDIA · Report · 07 Jul 2019

The July budget speech, of the NDA-3, is the first of a five-year period. It is expected to establish the priorities and the work program of the coming five years. It takes place at a time when there is significant financial and economic stress. On about July 18, we will release our business cycl...

The difficulties of signalling, old and new
INDIA · Report · 25 Jun 2019

The NBFC (non-banking financial company) industry is in the midst of a stress test. Some firms such as HDFC are widely trusted by lenders, while others are not. The key puzzle for each healthy firm is about signalling to lenders that it is of high quality. Lenders have relied on three key sign...

Dewan Housing default
INDIA · In Brief · 25 Jun 2019

An important stressed firm in India today is Dewan Housing (DHFL). They are a balance sheet of about Rs.1 trillion. They seem to have stock market returns correlations with a few other important firms (Yes Bank, Indiabulls Housing), and the cluster adds up to about a Rs.5 trillion balance sheet.U...

Update on the financial stress
INDIA · Report · 17 Jun 2019 · 1 response

We compute distance to default for large private firms using data as of June 10, 2019. With financial firms, there is a focus on eight firms which add up to a balance sheet size of about Rs.10 trillion. Three firms (Axis Bank, ICICI Bank and Federal Bank) have seen no deterioration in the dist...

Concerns about GDP measurement
INDIA · Report · 12 Jun 2019

​The previous "Chief Economic Advisor" to the Ministry of Finance, Arvind Subramaniam (who now lives in the US), has released a paper suggesting that GDP growth was overstated from 2011 to 2017. We have long known that the methodology change, which came into effect for the series starting from 20...

Update on the financial stress – the deeper problem in real estate
INDIA · Report · 12 Jun 2019

Dewan Housing ("DHFL"), which has a balance sheet of about Rs.1.3 trillion, has defaulted. By September 2018, this firm was on the shortlist of stressed financial firms, and now we have the default. This will be a difficult default to address, as India does not have a resolution process for finan...

Firm data in Jan-Mar 2019
INDIA · Report · 04 Jun 2019

After a long wait, we have four quarters of relatively good performance by the large listed companies, for the period ended Jan-Mar 2019. The four quarters had nominal net sales growth and nominal operating profit growth of about 10% or more. Net profit has bounced back from the abysmal performan...

What follows the remarkable election outcome
INDIA · Report · 24 May 2019

Narendra Modi has scored a historic win. It is hard to recall a moment in Indian history when the outcome of an election has been so decisive. India is now in that rare situation, of a leadership endowed with electoral legitimacy, that has a five-year horizon. Last time, in 2014, the BJP launc...

Recent troubles and downgrades
INDIA · In Brief · 22 May 2019

In previous reports, we have been watching the distance-to-default (DtD) of large private financial firms. Using data for 10 May, we had found that there were 3 large private banks (Federal Bank, IDFC First Bank, Yes Bank) and 6 large private NBFCs (Shriram Transport Finance, Edelweiss Financial,...

Weak business cycle conditions in the Indian economy
INDIA · In Brief · 14 May 2019

For a few years, there has been a tension between two views of the Indian economy. One view was grounded in the GDP data, and saw high GDP growth rates. Another view was grounded in the firm data, and saw weak performance of firms. Our work on building a `coincident indicator' is a valuable path ...

Business cycle conditions, Jan-Mar 2019
INDIA · Report · 13 May 2019

The best measure of business cycle conditions in India is the coincident indicator, which is a linear combination of well-measured underlying indicators. The coincident indicator deteriorated slightly in Jan-Mar 2019, to +0.8% above trend. The leading indicator gives us a sense of how the coin...

Financial stress – feedback loops
INDIA · Report · 08 May 2019

Ordinarily, economic systems find equilibrium. There is a shock, the problem heals as gaps between supply and demand are closed, and the system finds a new equilibrium. However, when positive feedback loops are present, such benign outcomes may not arise. A system can rapidly move away from th...

Positive feedback loops
INDIA · In Brief · 28 Apr 2019

The key thing to watch for in the financial stress is the positive feedback loops. Here are six pieces that we see today.1. It is believed that one of the chunks of cash that ADAG group hopes to obtain in coming weeks is Rs.20 billion from Zee group, which has itself defaulted on some payments. T...

Credit stress in ADAG group
INDIA · In Brief · 27 Apr 2019

In the last year of Indian financial stress, we have seen defaults by IL&FS, Zee Group, Supertech, etc.The biggest business house facing difficulties, though, is Anil Dhirubai Ambani Group ("ADAG"). This group comprises the following firms: Reliance Communications, Reliance Capital, Reliance Infr...

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