China's Hard Landing To Trigger Meltdown In India: "We Will See Another Crisis"
In late September, India “surprised” 51 out of 52 economists by cutting rates a larger than expected 50 bps.
Despite RBI Governor Raghuram Rajan’s penchant for catching markets off guard and despite the fact that exports had fallen for eight consecutive months, economists still failed to predict that anything more than 25 bps was in the cards.
“The weakness in India’s exports is striking, not only in terms of past trend, but also from a cross country perspective,” Deutsche Bank wrote at the time. “Indeed, India’s exports performance has been the weakest in the region in 2015.”
In short: in a world gone Keynesian crazy, you live and die by your willingness to engage in competitive easing and with China having just a month earlier moved to devalue the yuan, India had little choice but to cut lest the export picture should darken further.
Since then the malaise has deepened.
Exports have now fallen for 12 straight months and although some of the decline is probably attributable to slumping prices (as opposed to lower volumes), it’s worrisome nevertheless.
“India’s external trade likely fell for second consecutive year in FY16E, with both exports and imports contracting by 18.5%YoY and 17.2%YoY in the period Apr-Nov’15,” Citi notes, adding that “the meltdown in India’s exports and imports was even sharper than the global trade which contracted by 12- 13%YoY.”
On Friday, in the wake of China's continued devaluation of the yuan, Indian Trade Minister Nirmala Sitharaman expressed concern about the effect a sharply weaker RMB will have on her country's trade deficit with Beijing. "It's worrying," she said. "My deficit with China will widen."
India is now looking at ways to prevent a flood of cheap imports from hitting domestic producers. "India steel companies such as JSW Ltd have asked the government to set a minimum import price to stop cheap imports undercutting them," Reuters writes. "A similar measure was adopted in 1999."
And cheap Chinese imports aren't the only thing domestic corporates have to be concerned about. If the Chinese economy continues to land hard (so to speak) a sharper devaluation is a virtual certainty. That could weigh on the rupee and imperil Indian corporates that have borrowed in dollars.
“If China keeps getting hit like this, the yuan has to devalue, and we will see another crisis in India,” Vishal Kampani, managing director at JM Financial said in a January 8 interview with Bloomberg. "A devaluation of the yuan could weaken the rupee, creating 'huge problems' for Indian companies that have to pay back dollar loans, Kampani said." Here's more:
China is India’s largest trade partner and third-largest export market, so a slowdown there could prolong a record slump in the South Asian nation’s overseas shipments, which declined 12 straight months through November.
A China-led rout in Indian markets also risks damping private investment, already hurt by credit lines choked by bad debt and a legislative gridlock that’s blocked economic bills. That would boost pressure on Prime Minister Narendra Modi to sustain public spending even at the risk of worsening Asia’s widest budget deficit.
As a reminder, the country's fiscal situation is a bit precarious or, as Citi puts it, Modi has "good intentions in a challenging environment." "We believe that the government is committed to a fiscal consolidation path, but balancing the credibility of its deficit compression promise and presenting a realistic budget which does not give a negative growth shock is going to be tricky," Citi wrote, in a note out Monday.
Yes, it's "going to be tricky" because as we've seen in countless other countries over the past five or so years, fiscal retrenchment and booming growth aren't compatible.
So ultimately, the spillover from China may well force India to choose between shoring up the deficit and keeping the economy going with fiscal stimulus as private investors close their wallets. Meanwhile, a sharp drop in the rupee is going to put tremendous pressure on Indian corporates who have borrowed in dollars and are "less [hedged] than we would wish", to quote Rajan.
Why should you care about this, you ask?
Because as we showed back in November, the fate of global growth hangs on just three countries and if you believe Goldman, India will be the strongest performer:
(8 votes)
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2008 does not look that bad now.
2008 is childs play compared to what's coming...
"World economy" sounds good till you find out it means everybody gets fucked at once. The great depression spread to all the major economies, and the weren't nearly as tightly bound as we are now.......
https://www.superstation95.com/index.php/world/753
Here is an exerpt from the story "The way it's being done, however, is a "useful guise" for the Chinese to prevent the collapse from taking place too early and leaving them stuck with trillions in useless US dollars."
Shit is getting really ugly out there! When in Rome!
Take that info with a shaker's worth of salt grains. Consider the source of the story.
Goldman's chart looks like BS to me.
UK economy is 4x the size of Turkey or Indonesia and 2x the size of Mexico.
Anyone remember that old Zerohedge article about the US tax payer being on the Hook for banks derivatives if they go south. Citi banks suggestions for the bill that congress passed was almost identical the actual bill. Looks like the Banksters knew exactly what was and will be coming.
"India's exports are down, Y-O-Y, 12 months in a row."
Wake me up when they have 35 (soon to be 36?) down months like Caterpillar.
To be perfectly honest, for the millions and millions of people subsiding on a dollar a day...this won't really change much. They'll still eat dal and chapatis just like every other day.
Great Depression will be a cake walk compared to whats coming too.
Great Depression will be a cake walk compared to whats coming too.
Australia is going to feel it too. More than the little chart shows.
They already feel it, but the real pain is starting to arrive.......
Bad? I can't wait for the collapse. Anyone in the market deserves to lose their wealth. Also it might increase people questioning the system, which is what we need. We need this system overthrown and soon.
Replace it with what? For a regime to topple we must have a replacement (I say go back to the real constitution and not this hybrid facist version) otherwise its gonna be worse than it is. At least history says that...
That's why I'm hoping for a total collapse. One where no one wants to sieze power. One which we go back to small communities where we can speak face to face with someone in charge. I'm being wishful but that's what I want.
Replace it with something other than a debt oligarchy where every economic decision needs to have the blessing of fractional reserve banking
Replace it with a protection-only service known as "government".
Twelve Visions Party will serve as America's safety net when the bottom falls out from underneath this economy.
Bring an end to initatory force-backed governments. End the ruling-class parasitical elites.
tvpnc.org
replace it with a smouldering crater.
Well, 08 was never allowed to fully play out as the marks and asset revaluation was prevented/accounting suspended much like Japan's asian crisis. Private loans were pulled onto the sov. balance sheets, and the 14-17 unwind is just the second leg down which should have happened in 09 in much the same way the excess of the 1960's and 1820's required 2 market cycles to reprice conglomerate/gogo fiscal stimlus discounts.
India has always (and always will be) an "emerging economy" for cultural reasons. The entire economy knows only labor arbritrage and remains a corrupt oligarchy with little hope of reform. Modi proved this to be the case 2 years into his first term which is probably why he gets along so well with Abe. Birds of a feather & all that.
The 08 can was kicked down the road. Welcome to down the road
India ..land of 14 million slaves .. mostly children, that make our clothes.
http://www.newsweek.com/india-tops-global-slavery-index-over-14-million-...
Some of them are very nice: they keep calling me to help me with a "security" problem on my computer. I can hear a whole roomful of other helpers talking in the background. Sweet people getting together like that to help others. Brings a tear to my eye.
What you and all the do-gooders don't realize is that those jobs children have making clothing are considered fantastic jobs locally.
Remember when all the clothing manufacturers bowed to public pressure to make sure their clothing wasn't being made by "children"? What was never reported was that the aid agencies on the ground in those countries begged the manufacturers not to do that and let the kids contiue working.
People in the west ASSUMED that those children would then be able to go to school, and have a "normal" (playful) childhood. NOPE. Those kids were kicked out to the street and made their living picking garbage and making gravel by breaking rocks. (I have seen it personally).
and what those kids are making for pennies the corporations are selling for tens of dollars. I'm sure those are great jobs locally. What people have an issue with is the markup in between. Either the price needs to come down or, as many of us desire, the pay should go up to match the profit on the item
A repeal of the laws of supply and demand will cure that problem.
The laws of supply and demand (price of labor, price a willing buyer will pay) have nothing to do with the amount gouged by the middleman (capitalist) who grabs everything he can carve out of either side. This is one reason why the ability of the internet to directly connect producers and consumers is revolutionary when taken to its full natural conclusion.
Supply and demand? You mean like when the market is supplying thousands of percent markup demand creates competitors to shrink that markup? I wonder why it isn't happening in this case? Special deals maybe? Protectionism? Corrupt trade deals? Favoritism? Something is skewing market forces there if you ask me
Not that I approve of the differential between what said companies charge for their products and what they pay the child labourers, but manufacturing always seems to be associated with workhouses. That is Western Europe's history also, people seem to forget.
AC/DC meltdown - https://www.youtube.com/watch?v=vKDLot2P_A0
led zeplin
https://www.youtube.com/watch?v=CCxbtesXDwI
LOL I played that song loud when Katrina happened. Building a city under sea level, amazing.
https://www.youtube.com/watch?v=TGl8O9bJEes
This is the song I listened to.
Blaming China won't help, Mr Rajan!
And that Kampani should keep his trap shut!
Decline of Indian exports, scams on a monthly basis, reduction of spending on education, healthcare, women's development etc by the new Govt won't help.
Recently, the Federal govt also said that they will break their federal deficit target by overspending, none of the banks are in good shape nor able to lend in order to make the country grow...foreign owned companies are leaving in droves from Nokia to Goldman AMC, JPM AMC, Deutsche AMC, MS and Pinebridge AMC, Societe Generale, ABN AMRO, Esprit, to just name a few....20 global corporations that any country would die to get into their country are embroiled in 'retrospective' taxation since 1962 started by the previous Govt in 2012.....
Nokia came to India in 2006, opened it's largest manufacturing plant in the world that peaked at 14,000 employees in 2010 and by Feb 2015, it was actually shut down and did not make it into the purchase of Nokia by Microsoft....about 100 CEO's wrote a letter to PM Modi to remove retrospetive taxation and make bsiness conducive but no change yet....Ikea promised to come to India over a year ago and no sign of Ikea but Vedanta closed 3 massive plants in Sept 2015....
15,000 farmers commit suicide in India pa, over 10 years, it becomes 150,000 and what does Indian Govt do? Reduce, farmer spending....NO LOL
https://www.rt.com/shortcode/n623nk/
Modi Government Cuts Budget Of Crucial Sectors: Social Pensions, Education, Health And More
So why the China blame game?
long rupees are we Dubai luvver
we blame China because they are the USSofA circa 2008
near every word u wrote denigrating India u cud substitute China and
add missing billionaires, missing Press/writers/artists, human organ harvesting, falun gong torture, Uighur unrest, land/sea grabs, port "explosions" need i continue?
Can you name one country whose Govt does not kill people?
I do not think you have any idea how many Chinese have been out of poverty over the last 30 years, do you?
Do you know that China's GDP per capita growth has been fastest in history from USD 220 per capita in 1980 to USD 4,000 per capita in 2010 which is 18X?
Billionaires go missing, bankrupt, dead everywhere because of corruption, fraud, deceit. China is having anti corruption drive. What's your problem with that?
You dont read much Western news about how did the journo covering Diana or investigating any of the frauds in US got killed? You think Western Govts dont kill?
What does CIA do all day long? Carry rosary beads in hand and have coffee all day long?
Do you know of any country in this world who could manage 1.4 billion as peacefully as China does? Imagine if 1.4 billion were there in the US? There would be more jails than houses in the US!
Grow up! Will ya?
China's official policy is that Chinese citizens are property of the State. I don't want to be the property of a man or a fictitious entity.
Ask Hugh Hefner how the property thing works.....
Ask any bimbo in the US or anywhere whether she prefers to be a property of someone or live in this world on her own?
Each one of us is a born slave,.....some black, some Muslim, some Tibetans or minorities, some as servants, some in a 9 to 5 job, some married, some working just for the sake of children or parents etc, some sick and lying in hospitals under care and mercy of the healthcare system, some in jails, some under fear of drug lords or Boko Haram or ISIS terrorists, others under the biggest slavery of them all: debt......
Please stay independent because you are just a few hundred in this world, not several billion! :)
Please also understand that a benevolent dictaorship under a socialist system that works is better than most others.
Capitalism has certainly killed more people than socialism ever will!
Hey DB can you do me a favor ? You commented on one of the zh article describing how Japan and China economies are different and how it's foolish to equate them. You wrote 5-6 points but i went through your comments and unforutnately zh isn't showing your older comments. If possible, can you go through your comments and share the particular article or those points again ? Thanks
And can i contact you anywhere else apart from this forum, your own blog or facebook page or any group , mail id etc ?
Regards
Isn't that the case of every government that levies income taxes?
"China's Hard Landing To Trigger Meltdown In India"
Wow! That is good news...looks like only India will be effected!
So we here in the USSA get to dodge that bullet!
Now get back to Buying that fucking dip!
Tell that to those happy customers paying $1.50 for regular gas. They know NOTHING! to paraphrase jim Cramer
Tell that to those happy customers paying $1.50 for regular gas. They know NOTHING! to paraphrase jim Cramer
goof..
it is John Snow that knows nothing... Cramer knows LESS than nothing.
In a few months people will not have the money to pay 1 dollar a gallon.
2008 was a warning for those with eyes to see and ears to hear.
The coming tsunami will sweep away millions hunched over their keyborads trying to close out their positions before heading for the hills.
Ah, yes. The ascendency of the BRCI that was going to rule the world. hahahaha
India has quite a bit of potential, but the corruption there is really something to behold. I don't think they'll ever be able to overcome it.
Not to mention that in India, your relatives are revered.
Well, chimps aren't specifically, but langurs are, and they are some badass monkeys.