India’s Diet Choice Chicanery
Indian stocks firmed their 25 percent advance as domestic mutual fund joined foreign institutional investor inflows ahead of Prime Minister Modi’s inaugural state visit to the US after successful summits with the Japanese and Chinese leaders. On business and government visits to New York and Washington he will fast in honor of a Hindu festival in carrying a message of religious tolerance and economic reform which has provoked doubts already in his early tenure. Top officials have come from the BJP’s nationalist wing and business has lamented the absence of “big bang” changes beyond better administration, with lingering FDI barriers listed by the US Chamber of Commerce prior to his scheduled speech there. Allocation will jump one-third from 2013 to around $30 billion but continue to shun infrastructure and power despite faster project approval. The Asian Development Bank raised 2015’s GDP growth forecast to over 6 percent and the sovereign ratings outlook went to stable, but the fiscal deficit is stuck at 4 percent of GDP and inflation in high single digits. Small stakes will be divested in government enterprises through the Mumbai exchange but tax disputes hang over previous international participation as coal leases offered at the end of the preceding term were overturned by the courts on corruption suspicions. The trade deficit is down on lower energy and gold imports, but manufacturing and services exports have disappointed. The central bank has been on hold but will grant new private licenses and conducted a sweep to root out “bad apples” resulting in the arrest of Syndicate Bank’s chief executive for alleged bribery. HFDC and other lenders have responded to the Prime Minister’s call to serve the rural population but they are coping with non-performing assets expected to reach 10 percent under tougher classification standards. Corporate debt has doubled the past decade to 50 percent of output with family conglomerates also borrowing heavily abroad to finance acquisitions and operations to accumulate a $100 billion load. International funds have been wary of long-term rupee and bond bets as they anticipate public and private sector deleveraging, which could again be accompanied by access and exit controls should the historic crisis pattern persist. Business community defenders of Modi’s record to date point out that expectations were exaggerated in light of bureaucratic and political inertia and that judgment should be postponed pending several months in office and passage of critical provincial level elections which could aid his national position.
They add that on the diplomatic stage departures are already evident with a reported “pivot” to Japan to offset China, which responded with a $20 billion bilateral investment pledge. Outreach to Pakistan and Nepal with recent troubled relations has also featured and in Fiji elections were held with India’s assistance restoring civilian power. In the Maldives islands Indian and Sri Lankan firms have increased their environment and tourism presence as they threaten to sink in a global warming nightmare without a regional low-carbon diet shift.
