India’s Indexed File Markings
As rater S&P gave one in three odds of imminent investment grade revocation, Indian inflation-indexed debt was revived on GDP growth at a paltry 5 percent the past fiscal year which helped bring WPI under that level. About $3 billion in 10-year instruments will be auctioned over the coming months which protect coupon payments unlike the previous late 1990s design. The innovation follows a withholding tax cut to 5 percent from the former 20 percent to sustain foreign inflows which have also been strong into equities which are positive through May despite countervailing domestic investor flight and a crackdown on high-speed algorithmic trading. The regulator will audit these firms biannually and they must report software problems immediately or face suspension. On a sector basis, infrastructure has again grabbed headlines as widespread power outages recur and banking has been prominent with a spike in nonperforming loans among big state players as private conglomerates apply for licenses to enter the field under recent liberalization. The India-born ex-chief executive of Citigroup has joined a local team for the prize, and the big listed family groups like Reliance and Tata are also in line. After the telecoms payoff scandal which nearly toppled the government the Finance Minister promises a corruption-free transparent process for final awards expected in 2014 just before the next election round. The ruling coalition has launched an ad campaign in advance touting anti-poverty and income strides, as the opposition BJP remains fractured and unpopular as evidenced by poor showings in provincial polls. Prime Minister Singh after winning a second term has been broadly criticized for lack of leadership at home and a visit by his Chinese counterpart in May failed to yield diplomatic breakthroughs. India runs a large bilateral trade deficit and mainland cross-border investment pledges have come to less than $1 billion on perennial delays and disputes. However with commerce due to reach $100 billion by 2015, several Indian banks have opened Chinese branches after mutual supervisory approvals. After passing legislation on retail joint ventures and insurance dozens of bills are still stuck in parliament to otherwise overhaul FDI, which is regularly subject to retroactive tax claims as in the $2.5 billion Vodafone case.
With the lackluster economic growth figure commentators have urged technocrats in charge to devise a fresh model to avoid backsliding to the crisis-riddled “Hindu rate” two decades ago. The search extends to other regions notably with Brazil’s struggle for a post-Lula path as a senior finance official recently resigned in protest over interventionist policies. QI GDP was up only 0.5 percent and above-target inflation prompted a 50 basis point benchmark rate hike on investment still under 20 percent of output despite massive infrastructure building needs. In the period oil giant Petrobras managed to borrow over $10 billion abroad but that tab’s color code has been flashing.
