Indian Economy

[nwoodman]

MS released their Indian Macro Indicators Chartbook

 

Key points:

1. GDP growth remains resilient, with GDP growth of 7.8% year-over-year in Q1 FY2025 (April-June 2024). The report forecasts GDP growth of 6.8% for FY2025 and 6.5% for FY2026.

2. Inflation has moderated, with headline CPI inflation at 3.5% year-over-year in July 2024, a 5-year low. Core inflation edged up slightly to 3.4%.

3. The trade deficit widened to $23.5 billion in July 2024. The current account deficit is expected to remain benign at around 1% of GDP in FY2025.

4. Domestic demand indicators show some softening but remain generally positive. Manufacturing and services PMIs remain in expansion territory.

5. The fiscal deficit has narrowed to 4.4% of GDP on a 12-month trailing basis as of June 2024. 

6. Monetary policy remains steady, with the repo rate unchanged at 6.5%. The report expects rates to remain on hold through FY2025-26.

7. Key risks stem from external factors, but the overall outlook remains constructive on India's economic growth prospects.

 

INDIA_20240821_2300.pdf

[ICUMD]

Rise of the New Indian Elite

 

 

[Saluki]

On 6/9/2024 at 2:04 PM, Munger_Disciple said:

Why would anyone want to renounce US citizenship? You can live practically anywhere in the world while still being a US citizen and perhaps acquire permanent residency status where you live. Many countries like Portugal offer incentives for digital nomads these days.

 

The US is one of the only countries in the world that taxes people on worldwide income.  That's why a lot of wealthy Chinese chose Canada instead of the US.  Let's say that you are a dual citizen of the UK and US and you live in the UK and earn US$500k a year.  You are taxed at both the UK and US, but the UK rate is higher and you get to deduct those UK taxes from your US taxes, so you pay nothing in the US. What if you are offered a job at a bank in Dubai for $500k.  If you were only a UK citizen, that would all be tax free money because Dubai doesn't have an income tax and you aren't taxed while living abroad.  The US would tax you though.  In the US you wouldn't pay tax on the first $120k, but the rest is all taxed as US income tax even though you don't live there.  

 

If you got to live in Portugal and eventually got citizenship, an EU passport is probably as good as a US one, and better if you want to live in another european country. 

 

 

[Munger_Disciple]

On 8/30/2024 at 6:22 AM, Saluki said:

 

The US is one of the only countries in the world that taxes people on worldwide income.  That's why a lot of wealthy Chinese chose Canada instead of the US.  Let's say that you are a dual citizen of the UK and US and you live in the UK and earn US$500k a year.  You are taxed at both the UK and US, but the UK rate is higher and you get to deduct those UK taxes from your US taxes, so you pay nothing in the US. What if you are offered a job at a bank in Dubai for $500k.  If you were only a UK citizen, that would all be tax free money because Dubai doesn't have an income tax and you aren't taxed while living abroad.  The US would tax you though.  In the US you wouldn't pay tax on the first $120k, but the rest is all taxed as US income tax even though you don't live there.  

 

If you got to live in Portugal and eventually got citizenship, an EU passport is probably as good as a US one, and better if you want to live in another european country. 

 

 

 

You misunderstand the point I was trying to make. If you are already a US citizen, it doesn't make much sense to renounce your citizenship unless you have very little net worth because there is an exit tax which is levied on all the assets you own (so it is more like a wealth tax on all you wealth including unrealized capital gains) when you renounce your US citizenship. So you are better off biting the bullet, keep your US citizenship and pay taxes on worldwide income even if you work and live abroad.

Edited August 31, 2024 by Munger_Disciple

[Saluki]

1 hour ago, Munger_Disciple said:

 

You misunderstand the point I was trying to make. If you are already a US citizen, it doesn't make much sense to renounce your citizenship unless you have very little net worth because there is an exit tax which is levied on all the assets you own (so it is more like a wealth tax on all you wealth including unrealized capital gains) when you renounce your US citizenship. So you are better off biting the bullet, keep your US citizenship and pay taxes on worldwide income even if you work and live abroad.

 

Yes, I misunderstood.  I agree, for people in the middle it makes no sense, but might be worth it for the people on the low end, as you mentioned, or even the high end.  One of the Facebook co-founders, Eduardo Saverin, renounced his citizenship because it was a one time hit and he knew his future earnings would dwarf that hit. 

 

Also, baby boomers are now dying off and leaving large inheritances to their heirs.  If you renounce before your parent dies, those assets are not included in your net worth because your entitlement to them doesn't vest until the parent dies, since they can change their minds and disinherit you. An irrevocable trust is a different story though.  

[dartmonkey]

2 hours ago, TB said:

India stock market is sizzling - more than 150 IPOs in 2024 by end of July compared to 129 in the US

I’ve gotta ask, how is it that FIH’s investments have managed to avoid all this sizzling?

[Dipesh Patel]

[UK]

24 minutes ago, Dipesh Patel said:

 

So maybe this idea to put big chunk of capital into IDBI is not that bad after all:)?

[nwoodman]

Global Money Is Chasing Indian Stocks Again as Bull Run Extends

- Foreign investors have poured about $20 billion into Indian stocks this year, the largest inflow since 2020.

- The MSCI India index has risen nearly 11% this year, outperforming other emerging market indices.

 

[nwoodman]

Just scrap booking, probably needs inflation adjustments, currency devaluation etc. but even a 75% haircut would still tell the story
 

Edited September 21, 2024 by nwoodman

[nwoodman]

Gautam Adani Charged by US Over Alleged $250 Million Bribe Plot

 

US prosecutors charged Gautam Adani, one of the world’s richest people, with participating in a scheme that involved promising to pay more than $250 million in bribes to Indian government officials to secure solar energy contracts.

 

https://www.bloomberg.com/news/articles/2024-11-20/us-prosecutors-indict-gautam-adani-on-bribery-charges?embedded-checkout=true

 

“Gautam Adani can be indicted in the USA because the alleged fraud and bribery scheme involved misleading American investors and financial institutions. U.S. prosecutors claim that Adani and his associates provided false information to secure investments from U.S. and international sources while engaging in bribery to obtain contracts in India. The U.S. legal system has jurisdiction over cases involving fraud that affects American investors, even if the primary activities occurred outside the country.”

 

 

The Guardian article has a bit more color

 

https://www.theguardian.com/business/2024/nov/20/gautam-adani-charged-alleged-bribes

 

Prosecutors charged the chair of Indian conglomerate Adani Group and two other executives of a renewable energy company with securities fraud and conspiring to commit securities and wire fraud.

The US attorney’s office in Brooklyn accused the executives of agreeing to pay hundreds of millions of dollars’ worth of bribes to Indian government officials between 2020 and 2024, in a bid to obtain solar energy supply contracts expected to yield $2bn in profits over 20 years.

Separately, the Securities and Exchange Commission (SEC), the US’s top markets watchdog, charged Adani, 62, and two other executives over conduct it said had arisen out of a “massive bribery scheme”……

 

Prosecutors alleged that, on several occasions, Adani personally met with an Indian government official to advance the bribery scheme.

The executives are accused of having frequently discussed efforts to further the scheme, including via a messaging app. One of the defendants, Sagar R Adani, tracked “specific details of the bribes offered and promised to government officials” on his phone, according to prosecutors.

 

DOJ

https://www.justice.gov/usao-edny/pr/billionaire-chairman-conglomerate-and-seven-other-senior-business-executives-indicted

 

By way of reference to the Canadian institutional investor:

“Also named in the indictment were Ranjit Gupta and Rupesh Agarwal, former executives of Azure Power, and Cyril Cabanes, Saurabh Agarwal, and Deepak Malhotra, former employees of Canadian institutional investor Caisse de Depot et Placement du Quebec.”

 

1. Indian Renewable Energy Company:

• Adani Green Energy Limited (AGEL): A subsidiary of the Adani Group, AGEL is a prominent player in India’s renewable energy sector, focusing on solar and wind power projects. The company has been involved in large-scale solar energy initiatives and has raised substantial capital through international loans and bond offerings.

 

2. NYSE-Listed Renewable Energy Company:

• Azure Power Global Limited: An independent solar power producer that was listed on the New York Stock Exchange (NYSE). Azure Power has developed and operated solar projects across India and has engaged in capital-raising activities through U.S. financial markets.

 

3. Canadian Institutional Investor:

• Caisse de dépôt et placement du Québec (CDPQ): A Canadian institutional investor managing funds primarily for public and parapublic pension and insurance plans. CDPQ has invested in various infrastructure projects globally, including renewable energy ventures in India.

 

Key Individuals and Their Affiliations:

• Gautam S. Adani: Chairman of the Adani Group, which includes AGEL. He is a central figure in the conglomerate’s expansion into renewable energy.

• Sagar R. Adani: An executive within the Adani Group, closely associated with AGEL’s operations.

• Vneet S. Jaain: CEO of AGEL, overseeing the company’s renewable energy projects and strategic initiatives.

• Ranjit Gupta: Former CEO of Azure Power Global Limited, responsible for leading the company’s solar power projects and expansion efforts.

• Rupesh Agarwal: Former CFO of Azure Power Global Limited, involved in the company’s financial operations and capital-raising activities.

• Cyril Cabanes: Former Managing Director of Infrastructure, Asia-Pacific at CDPQ, overseeing infrastructure investments, including renewable energy projects in the region.

• Saurabh Agarwal: Former Managing Director of CDPQ India and Managing Director, Infrastructure for South Asia, involved in CDPQ’s investment strategies in the Indian market.

• Deepak Malhotra: Former Director, Infrastructure for South Asia at CDPQ, contributing to the firm’s infrastructure investment decisions in the region.

Edited November 21, 2024 by nwoodman

[nwoodman]

 

[Hektor]

It's a grand jury indictment, if I am not wrong.

[nwoodman]

4 hours ago, Hektor said:

It's a grand jury indictment, if I am not wrong.

 

“1. Sealed Indictment:

• The indictment was initially sealed and later unsealed, which is common in grand jury proceedings to protect the investigation’s integrity.

2. Federal Jurisdiction:

• The involvement of federal crimes like securities fraud, wire fraud, and violations of the Foreign Corrupt Practices Act (FCPA) typically necessitates a grand jury indictment.

3. Mention of the Grand Jury:

• The DOJ notes obstruction of the “grand jury” investigation as part of the charges, reinforcing that a grand jury was integral to the process.”

[nwoodman]

Gautam Adani: US summons & a new twist in India intensify billionaire's troubles

 

Article Summary

 

1. US SEC Summons: Both Gautam Adani and his nephew, Sagar Adani, were summoned by the SEC over bribery and securities fraud charges. They are required to respond within 21 days to avoid default judgments.

2. Indian Legal Challenges: A new application in India’s Supreme Court seeks to incorporate US indictment documents into an ongoing case alleging stock manipulation. The Securities and Exchange Board of India (SEBI) is also probing non-disclosure of these investigations to Indian exchanges.

3. Global Financial Fallout: Several global banks are reconsidering extending credit to the Adani Group. Ratings agencies, including S&P Global and Moody’s, have downgraded the outlook for key Adani Group companies.

4. International Deals Canceled: Kenya terminated two major deals with the Adani Group following the bribery allegations, further impacting the conglomerate’s global operations.

[nwoodman]

Sensex down 3,000 points in 9 days. Is it just the beginning of bear market?

 

Quite the blow off in Indian markets.

 

On the updside, IDBI is down 30% since its peak in July 24.  At the current market capitalization of INR 775 billion, the 60.72% stake being put up for sale is worth approximately $5.42 billion USD.

 

[nwoodman]

MS with a positive spin (see attached)

 

“The broad market is drawing down rapidly as the bid has faded

despite improving fundamentals. While catching the bottom is

difficult, we think buying Indian equities could prove rewarding.”

INDIA_20250217_1001.pdf

[TwoCitiesCapital]

So I was curious and tried looking at a number of Indian names on IB and am realizing IB doens't give me direct access to the Indian markets. 

 

I know at one point you had to register as a foreign investor if you had like $50 million in AUM, but is there still no other way to access the market as a non-resident/non-citizen? 

 

I'm not one to argue for premium valuations on CEFs, but if access can be had by certain parties, perhaps it DOES garner a premium for Fairfax India. At least no discount for the fees it charges since you're essentially buying admission to the markets you can't get otherwise. 

[nwoodman]

MS released a note fessing up to missing the double tightening (fiscal and monetary).  They see light at the end of tunnel, government capex (note attached).
 

 Government capex can kick start economic activity but you need a confident private sector to follow.  To that end the current Tariff craziness is a stick in the spokes IMHO.  It’s a balance between growing domestic consumption and the potential for a reduction in manufacturing investment by MNC’s. MS are pretty confident that a trade deal gets done, again I am not so sure but I hope so.

 

Summary
 

1. India’s Growth Slowdown and Recovery

• The slowdown was unexpected and attributed to double tightening of fiscal and monetary policy, even though macro stability indicators weren’t alarming.

• Government spending contracted due to elections but is now recovering, especially capital expenditure.

• Monetary policy was tightened via policy rates, liquidity conditions, and regulatory measures but is now easing.

 

2. Drivers of India’s Recovery

• Government capex growth: The central government has increased capital expenditure.

• Triple monetary policy easing: Policy rates, liquidity injection, and regulatory easing.

• Lower food inflation: Boosting real household incomes and supporting consumption.

• Services exports growth: India’s services exports have nearly doubled since 2020, helping sustain economic momentum.

 

3. Broader Consumption Recovery

• Tax cuts for lower-income households to support urban consumption.

• Lower inflation improving real incomes.

• Job creation rebounding, supported by strong services exports.

• NBFC regulatory easing to enhance credit flow.

 

4. Capital Expenditure (Capex) Outlook

• Government capex is rising, with a focus on state government investments.

• Private capex is lagging, affected by global uncertainty and weak goods exports.

 

5. Trade and Tariff Risks

• India has low goods exports to GDP, making it less exposed to a global trade slowdown.

• However, India faces direct tariff risks, especially on pharmaceutical exports to the U.S..

• A U.S.-India trade deal is expected by late 2025, but in the meantime, tariff uncertainties may impact investment sentiment.

 

Conclusion

 

India’s recovery is driven by domestic demand, strong services exports, and government policy support. Despite trade risks, India is less reliant on goods exports than other Asian economies, making it a potential outperformer in the region.

ASIA_20250310_1915.pdf

[thowed]

Thanks for this.  I believe in India for the long-term, but it did get a bit ahead of itself.  Hopefully things are turning again - I bought a bit more of my favourite fund today.

[villainx]

I was checking chat history with my friends for when we last discussed India, must have been a while ago because we were more or less saying India (stock market) was in good/promising shape.  My India exposure has primarily been in Fairfax main and Fairfax's side hustle fund, so haven't really been keenly following India market overall.

 

[nwoodman]

3 hours ago, thowed said:

Thanks for this.  I believe in India for the long-term, but it did get a bit ahead of itself.  Hopefully things are turning again - I bought a bit more of my favourite fund today.

Yep long term its a high probability play structural tailwinds (demographics, digitalization, industrial expansion) should offset cyclical headwinds (monetary policy, global trade, geopolitical risks).  

 

It might play out something like this:

 

Short Term (1-2 Years)→ Cautious Optimism (Recovery underway but external risks remain)

Medium-Term (2-5 Years)→ Growth Acceleration (Domestic consumption + industrialization take hold)

Long-Term (5-15 Years)→ Potential Superpower (If reforms, manufacturing, and global positioning succeed)

 

Its a large part of my Fairfax thesis and  I look forward to cringing as they are referred to as “the Berkshire of India” one day

[Whensthepaintdry?]

 

[nwoodman]

MS have released their India Economics – Macro Indicators (24-mar-25) worth a flip thru prior to the FIH AGM

 

Summary:

 

1. Growth Outlook – Gradual Recovery

• High-frequency indicators (GST collections, power demand, credit growth) show marginal improvement.

• Air passenger traffic and consumer sentiment are holding up, though auto sales declined.

• GDP for March quarter is tracking at ~6.7% YoY, with FY2025 expected at 6.3%, and 6.5% for FY2026–27.

 

2. Inflation – Softer CPI, Stable Core

• Headline CPI fell to 3.6% YoY in Feb 2025 from 4.3% in Jan.

• Core CPI (ex-food/fuel) rose to 4.0% YoY.

• Inflation risks include weather events (monsoon) and commodity prices.

 

3. External Sector – Strengthening Services Offset Weak Goods Trade

• Services exports surged: +23.6% YoY in Feb.

• Goods exports declined: –10.9% YoY.

• Goods trade deficit narrowed to $14.1bn, lowest since Sep 2021.

• Net services balance hit an all-time high of 5.7% of GDP (annualized).

 

4. Policy and Liquidity – Easing Stance

• RBI cut rates by 25 bps in Feb; Morgan Stanley expects two more 25 bps cuts (April and June), bringing terminal rate to 5.75%.

• Liquidity is still in deficit but is expected to improve after FY-end.

 

5. Fiscal Performance – In Line with Targets

• FYTD fiscal deficit is ~4.4% of GDP, aligning with revised FY25 target of 4.8%.

• Spending remains skewed towards capital expenditure.

 

6. Employment – Mixed Signs

• Naukri Job Index improving modestly.

• EPFO payroll additions stable.

• Rural wages steady at ~6% YoY.

• NREGA demand for jobs has softened from FY2024 levels.

 

7. Investment Indicators – Uneven

• Private projects have picked up slightly, public ones are stable.

• Capacity utilization is above long-term average (71.9%).

• Real estate: New sales and launches are rising.

 

8. FX and Trade

• India’s FX reserves are healthy at ~$654bn, with ~11 months of import cover.

• CAD expected to remain around 1% of GDP.

• REER (Real Effective Exchange Rate) is below long-term mean, offering export competitiveness.

 

Looks like the economy has bottomed out after the mid 24 trough. Air Travel and Air Cargo still looking strong

 

 

INDIA_20250324_0020.pdf

[nwoodman]

A possible relaxing of foreign bank ownership laws may be on the cards.  From Reuters:

https://www.reuters.com/world/india/india-considers-easing-bank-ownership-rules-foreign-interest-grows-2025-06-03/

 

 

- India is reviewing bank ownership rules to attract more long-term foreign capital amid growing interest from global financial institutions.

 

- Current rules cap foreign strategic ownership at 15% and voting rights at 26%, limiting foreign influence despite equity holdings.

 

- The Reserve Bank of India (RBI) is considering easing these limits on a case-by-case basis for well-regulated foreign financial institutions.

 

- Sumitomo Mitsui Banking Corp (SMBC) was recently allowed to acquire a 20% stake in Yes Bank, setting a new precedent.

 

- Foreign investors like Fairfax Financial and Emirates NBD are reportedly bidding for a 60% stake in IDBI Bank, reflecting rising interest.

 

- Changes to the voting rights cap would require legislative amendments, indicating a potential coordinated push between the RBI and finance ministry.

 

- The move reflects India’s ambition to boost capital inflows and expand its underpenetrated banking market amid sustained economic growth.