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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...

Peering into the parliamentary election
INDIA · Report · 24 Apr 2019

In this report, we sketch our views on the main questions surrounding the elections. What are the factors at work shaping the minds of voters? What are the polls saying? How precise are these forecasts? What will change in terms of policy in the next five years? What changes if a coalition govern...

Developments in financial stress
INDIA · Report · 22 Apr 2019

The defining problem of the Indian economy is the lack of private investment. A stressed financial system is one factor hampering private investment. In this note, we review the stress in a few components of the financial system. About 35% of the non-financial firms' balance sheet is under str...

Investment data for Jan-Mar 2019
INDIA · Report · 05 Apr 2019

One of the most important elements of business cycle conditions in India is investment. The official GDP data yields poor estimates of investment demand. We construct aggregates using micro data about individual projects. Overall investment under implementation grew by about 10% in the last five ...

Business cycle conditions
INDIA · Report · 11 Mar 2019

The conventional GDP data shows a recovery in late 2017. However, the Indian GDP data became less reliable with the methodology change in 2015, which applies to the series from 2012 onwards. We assess business cycle conditions through three pathways. We have constructed a “coincident indicator...

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