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Outlook for India: Cautiously Optimistic

Posted by Arun Uday on November 14, 2008

At the outset, I have to say that this post is not motivated by any patriotic fervor. In fact, I have been extremely skeptical about the exaggerated claims of India’s emergence as an economic superpower. On many parameters, (share of world trade or per capita GDP for instance) we remain an economic minnow. However, like a prominent PE investor remarked in a conference that I recently attended – for India, God seems to be planning in lieu of the government (in his words, how else can you explain the fact that China and India both launched their family planning programs at the same time. They got it right, we got it wrong and we are left with one of the best demographic profiles in the world). Its in this context that I am inclined to say that the current global economic malaise may actually be a blessing in disguise for India.
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Sub prime ruminations (Part 2)

Posted by Arun Uday on January 15, 2008

Discovered how hard it is to get back to writing after a long break. Hence, the second part of the post on this topic comes after a while. However, developments in the past week have provided the ideal backdrop for this piece. Tata’s launch of the “world’s cheapest car”, Nano and Citigroup and Merrill Lynch hinting at taking larger subprime writeoffs and selling stakes to Middle Eastern and Chinese investors to bail them out of their crises are in my view, not just one off phenomena, but a pointer to a larger reality that is currently unfolding, which is – the shift in the world’s epicenter of economic activity away from the US. Read the rest of this entry »

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Sub prime ruminations (Part 1)

Posted by Arun Uday on November 27, 2007

For the past few days, I have been mulling over the fallouts and developments post the sub prime crisis in the US, and there are two strong thoughts that emerge – a)Have the global financial markets become too complex for their own good? and b)Is the US on the verge of losing its position of pre-eminence in the global economy?
As you will see, the two are kind of related, but intend to restrict this post to (a). But, before I delve in, let me take a small philosphical digression and try to connect that with the theme here.

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Imminent slowdown?

Posted by Arun Uday on November 22, 2007

I’m in Hong Kong for a few weeks on work and things don’t seem very bright here (I mean on the business front).  The Hang Seng Index has had the second largest fall this year and all the pink papers and business channels don’t seem too optimistic either. Nobody’s uttering the “R” word yet, but with oil in kissing distance from $100, the writedowns from subprime crisis showing little signs of ending soon and the dollar on a free fall, all macro economic parameters don’t seem that healthy. Goldman Sachs too has predicted a $2 trillion crunch consequent to the intertia on the part of big banks to lend aggressively following the crises they are going through. As a result, PE buyouts are also witnessing a huge slowdown from a record $400 billion in Q2 CY07 to $130 billion in Q3CY07. It sure looks like a long cold winter ahead.


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RBI tightrope

Posted by Arun Uday on May 8, 2007

I guess there would be few who would envy Mr YV Reddy’s job these days, given the various forces and counterforces he needs to balance. Ever since the inflation rate started its climb upwards, RBI has been tightening the liquidity screws to contain the rising prices. Bear in mind that inflation not only has serious economic implications, but with elections not too far away, there are also other political ramifications which put serious pressures on policy making. Raising interest rates was the easiest thing to do to contain inflation, for, debates raged on what kind of impact this increase in interest rates would have on our economic growth. With capital becoming increasingly expensive, it was feared that corporates would find it difficult to pursue aggressive CAPEX plans, which would hinder growth. Also, beyond a point, such increase in interest rates would also start becoming counter productive since it would have a negative impact on supply of goods resulting in scarcity, and hence price increase. Further, this and other factors have resulted in an appreciating rupee, which is scaling newer heights by the day. Its now the turn of exporters (IT cos amongst many others) to cry wolf, for whom a stronger rupee is a turn off, which led the RBI to again intervene and suck out some dollars from the system. Now, I read another article by yet another noted economist that since India is running a large current account deficit and is a net importer of goods, an appreciating rupee may not be such bad news after all. Geez, whats Mr Reddy to do now?? Of course, if I knew the answer I’d be the one hogging air time on TV channels versus Abhi-Ash who seem to be outdoing me when it comes to gaining television coverage these days.

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