Recently, Indian GDP for June 2020 Quarter printed -23.9% growth. Interestingly, just a few weeks before this print, RBI MPC announced that it was holding rates steady because CPI inflation was at 6.93%, outside the target range of 2% to 6%. Is it appropriate to hold rates steady, when we have strong degrowth and supply disrupted (and […]
In December of 1930 Bank of United States (BOUS), based primarily in the city of New York failed. It was the first bank failure in New York during the great depression which started in Oct 1929. The main reason for the failure of the bank was that although ostensibly the bank had sufficient equity capital, in reality, […]
In recent months there has been a spate of news of stress in Indian businesses, both financial and non-financial businesses. Commentators are assigning various causes for the same. However, in our view, the main cause of this stress is the unbearable burden of astronomically high real interest rates charged by the Indian banking industry, especially private sector […]
Recently, in the month of May 2019, India has been in the news for conducting the largest democratic election in the world in which more than 600 million votes were cast. The Indian people reposed faith in the leadership of outgoing prime minister, Mr. Narendra Modi, giving him an even bigger mandate than what he got in […]
In this blog, I attempt to read the mind of MPC (Monetary Policy Committee) of RBI to guess if the assessment of RBI regarding required real rate of return has changed to keep the Indian financial system stable. The table below gives, for last six financial years starting on 1st April of respective years, what was the […]
At the current juncture, mainly due to geopolitical reasons and artificial supply constraints, the international crude oil prices are near four-year highs at mid $70s per barrel, in spite of rising shale oil production in the USA. Correspondingly, the RBOB Gasoline (gasoline) near term futures are at $2.08 per gallon in international markets. In India, Indian Oil […]
The Indian GDP growth rate came significantly below expectation at 5.7% in the Q1FY18 (Apr-June 2017). The table below shows the contribution to the GDP growth by type of expenditure. Table 1: Expenditure Analysis of GDP Q1FY18 Growth Source: Decimal Point Analytics The above table shows that 3.6% of 5.7% growth was accounted by increase in private […]
We estimate Central Fiscal Deficit for April-June 2017 quarter for India to be at approximately 10.75% of the GDP of that quarter. This is because of planned increase in capital expenditure by the central government in that quarter. To maintain the preannounced target of 3.20% of GDP for fiscal deficit for the year April 2017 till March […]
The low inflation print in recent months has raised some important methodological questions. RBI relies heavily on the internal models that it has developed for its inflation forecast and hence for making interest rate decisions. The table below shows some of the recent long-range forecast envelops and the actual inflation prints at the end of the forecast […]
In one of my previous write ups, I sketched the most likely scenario of India facing deflation pretty soon. In this write up, I will describe various responses that RBI should have to have for this emerging black swan event. (Black Swan as far as markets and policy makers are concerned.) Strategic Response: Narrower, Lower, Forever inflation […]