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[h=2]As rupee falls, what about SG investments in India?[/h]
September 5th, 2013 |
Author: Editorial
Since 2010, the Indian rupee (INR) has fallen some 60% relative to the Singapore dollar (SGD) from 1 SGD to 33 INR to the current 1 SGD to 53 INR.
In fact, in just the past 3 months this year, the Indian rupee has lost some 20% of its value. It certainly is one of the world’s worst-performing currencies in 2013.
The main reason for the rupee’s deep fall is India’s record current-account deficit. In other words, India is importing more than it is exporting by the biggest margin ever. India’s current-account deficit widened to a record 4.8% of GDP in the year ended 31 March 2013. The rupee has taken a beating as investors are losing confidence in the Indian government’s ability to turn around the slowing economy and boost the country’s dwindling current account.
The slowdown in India’s growth rate which has hit its lowest level in a decade has also rocked investors’ confidence.
The Indians themselves think the rupee is under speculative attack.
In any case, analysts think the rupee will fall further.
With the rupee falling against SGD, one must ask about Singapore taxpayers’ money invested in India.
According to a 2010 Temasek Holdings report [Link], at least S$520 million were invested in India then:
Assuming the S$520 million is still invested in India, in order to break even, Temasek Holdings must make a capital gain of at least 60% out of the S$520 million to offset currency losses.
Of course, one could argue that Temasek Holdings is a long-term investor and can ride out the currency storm. And in the long term, it can still recover its money when the rupee rises again.
However, the famous economist, John Maynard Keynes, said, “In the long run, we are all dead.”
Since 2010, the Indian rupee (INR) has fallen some 60% relative to the Singapore dollar (SGD) from 1 SGD to 33 INR to the current 1 SGD to 53 INR.
In fact, in just the past 3 months this year, the Indian rupee has lost some 20% of its value. It certainly is one of the world’s worst-performing currencies in 2013.
The main reason for the rupee’s deep fall is India’s record current-account deficit. In other words, India is importing more than it is exporting by the biggest margin ever. India’s current-account deficit widened to a record 4.8% of GDP in the year ended 31 March 2013. The rupee has taken a beating as investors are losing confidence in the Indian government’s ability to turn around the slowing economy and boost the country’s dwindling current account.
The slowdown in India’s growth rate which has hit its lowest level in a decade has also rocked investors’ confidence.
The Indians themselves think the rupee is under speculative attack.
In any case, analysts think the rupee will fall further.
With the rupee falling against SGD, one must ask about Singapore taxpayers’ money invested in India.
According to a 2010 Temasek Holdings report [Link], at least S$520 million were invested in India then:
“In India, we invested S$241 million in the National Stock Exchange of India in May 2010. We also added to our exposure in the infrastructure space with a S$280 million investment in GMR Energy Limited in June 2010, a leading Indian power utility company with existing generating capacity of 808 MW and planned additions of 6,000 MW in various stages of development. Other investments include Sobha Developers in February 2010, a leading developer in South India, and in Essar Energy in April 2010.”
It is unclear if Temasek Holdings has hedged against the rupee’s fall or if it has gotten out of its investments in India prior to the rupee’s plummet.
Assuming the S$520 million is still invested in India, in order to break even, Temasek Holdings must make a capital gain of at least 60% out of the S$520 million to offset currency losses.
Of course, one could argue that Temasek Holdings is a long-term investor and can ride out the currency storm. And in the long term, it can still recover its money when the rupee rises again.
However, the famous economist, John Maynard Keynes, said, “In the long run, we are all dead.”
