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Five-point Plan To Stabilise the Indian Economy, US Consumer Sentiment Jumps Up et al.

Professor of Financial Economics and Part-time Value Investor, Transfin.
Sep 15, 2018 12:46 PM 3 min read
Editorial

Good evening readers, 

 

The Finance Minister disrupted our Friday evening with his televised address on the Economy (we kid ourselves...we don't have Friday plans). On agenda was a five point to-do list, focused around boosting external commercial borrowings, bond issuances, and FPIs.

 

While being fairly specific on moves to check the Rupee spiral, he made a generic comment on reducing "non-essential" imports to balance the trade deficit. Generic always makes one nervous. What is "non-essential", "What is not"? Who decides?  

 

No mention yet of adjusting fuel taxes or bringing forex swap windows for oil companies to reduce pressure on INR, like done in 2013. However, more details may trickle down during the weekend, hence this stays TBD.

  
Meanwhile, presenting today's top 6 Business stories through our End Of Day Wrap Up
 
 
INDIA
 
 
FM announces five measures to control Current Account Deficit, for Rupee stabilization. Push for more Dollars, Masala and Corporate Bonds. 
 
PM led Economic Review ongoing. Key measures announced to-date include 1) review/reduction of hedging requirements for infrastructure loans raised from foreign financial institutions 2) shorter duration of foreign loans to manufacturing companies 3) allowing foreign portfolio investors to take bigger exposures to corporate bond issuers 4) removal of withholding tax on Rupee-denominated overseas-issued Masala Bonds 5) allowing Indian banks to underwrite Masala Bonds via foreign branches rather than using foreign underwriters. Lastly, the FM mentioned there will be some controls/curbs on "non essential" imports, which experts believe may include gold and electronic goods.
 
 
India ranks 130 of 189 countries in latest Human Development Index report by UN. Report notes rampant inequalities. 
 
Marginally improves HDI score from 0.636 to 0.64 to rise by one position yoy. India categorized as a "Medium Human Development" country, but with widespread inequalities. Score drops by 26.8% to 0.468 when adjusted for inequality, significantly more than the global average of 20%. 
 
 
India reportedly may get some waiver with respect to continued economic relations with Iran post November sanctions.
 
US and India officials undergoing discussions, including Secretary of State Mike Pompeo and National Security Advisor Ajit Doval. Indian refiners to reduce their crude oil purchases by half for the months of September and October.
 
 
Financially troubled IL&FS likely to receive INR4,000cr from LIC. 
 
State-run life insurer likely to subscribe to non-convertible debentures (NCD) and provide temporary relief to IL&FS. Forms part of a larger INR9,000cr NCD programme for current fiscal year. Board meeting to confirm action today. LIC likely to subscribe to INR4,500cr rights issue scheduled to be launched later as well. 
 
 
US/INTERNATIONAL
 
 
US Consumer sentiment jumps to 2nd highest level since 2004.
 
Retail sales up 0.1% in August vs prior month. Retail spending up 6.6% yoy. WSJ poll reveal 78.4% of surveyed economists feel the ongoing tariff war won't have a major impact on the US economy.
 
 
Turkish President Erdogan may rethink existing investment plans considering ongoing Economic turmoil.
 
Mentioned the government would complete projects that were almost built but refrain from "new investments" in light of ongoing financial turmoil in Turkey which led to its Central Bank raising interest rates to 24%. A 3-year economic programme to be announced on coming Wednesday. Austerity measures may be on the cards.
 
 
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