Serious Indian Economy Might Collapse - Another Buy High Sell Low for Ms Ho?

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Demonetisation effect: Singaporean DBS warned of Indian economy crash in FY-2017
November 22, 20160

MUMBAI: Singaporean brokerage DBS has warned of major downside risks to growth due to the demonetisation exercise, and has estimated that the gross value added can come down by up to 0.80 per cent lower than its 7.6 per cent target.



“There are downside risks to the tune of 0.40-0.80 per cent to our gross-value added estimate of 7.6 per cent,” it said in a note today, nearly a fortnight after the government demonetised the Rs 500 and Rs 1,000 banknotes.

This projection, however, is very meagre as many brokerages have already projected even a 50 per cent dip in GDP growth, with Ambit Capital being the steepest at 3.6 per cent.

The brokerage said there will be an impact on consumer goods and discretionary spending for at least two quarters, which will impact growth till March 2017.



Cash dependent businesses will be hit the most during this period and rural demand, especially from the unbanked sections, may also moderate, it added.

It, however, said there will be some pent-up demand which can give an upside to growth starting the first quarter of the next fiscal.

By acting on the demand side, the demonetisation move can help reduce inflation by up to 0.20 per cent over the next few months and make the case for a 0.25 per cent rate cut from RBI in first half of 2017 stronger, the brokerage said, adding there will not be a rate cut in the December 6 policy announcement.

On the fiscal side, there will be “windfall gains” if the move results in unearthing unaccountable money from the system and will help to increase the proportion of direct tax revenues over indirect collections, it said. But it did not quantify the fiscal gains.

The brokerage was, however, quick to add that the estimates on blackmoney vary widely and there is a risk of overestimation in this assumption.

It also said a slowdown in the passage of other key reforms including the goods and services tax in the ongoing Winter session is being hampered by the banknote reforms.

On November 8, Prime Minister Narendra Modi had announced to discontinue Rs 500 and Rs 1,000 notes.

 

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Stranded trucks, unpaid workers: India Inc counts cost of cash crunch
Sunday, 20 Nov 2016 | 11:02 PM ET
Reuters
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India faces cash crunch amid demonetization drive
Monday, 21 Nov 2016 | 7:29 AM ET | 00:37
Like millions of Indians fed up with corruption and counterfeiting, Vimal Somani cheered Prime Minister Narendra Modi's shock move to replace all high-value banknotes. Two weeks on, his business is being hammered by the ensuing cash crunch.

Sales at Somani's aluminum foil maker, Rockdude Impex, have fallen by roughly a quarter in the past week, and the cash shortage that followed the "demonetization" drive has left his supply chain in tatters: his trucks are stranded with no money for fuel, workers won't load goods for free, and distributors can't pay up.

Modi's move on Nov. 8 was aimed at cracking down on corruption and flushing out funds stashed away in India's "black economy". But the cancellation of 500 and 1,000 rupee notes ($7.30 and $14.70), more than 80 percent of currency in circulation, threatens to push Asia's third-largest economy into a liquidity crisis.

Consumer spending makes up 56 percent of India's $2 trillion economy. But with just the small stock of smaller denomination notes available and a struggle to get hold of new bills, consumers are holding back.

The government has acknowledged that the disruption would last weeks because of delays in note printing and technical problems with ATM machines, but Modi has made a plea for patience until Dec. 30. The government said it could not have printed new notes or recalibrated cash machines in advance for fear of the move leaking out.

Meanwhile, supply chains at small, medium and even larger companies are breaking down, underlining just how much corporate India - not just the shadow economy - relies on hard cash.

"The entire supply chain has broken," said Somani, who employs 150 people across India from his base outside Mumbai.

India replacing banknotes to fight conterfeits India replacing banknotes to fight conterfeits
Wednesday, 9 Nov 2016 | 6:40 AM ET | 00:37
Problems at Rockdude go from its network of suppliers to its 1,500 distributors and 150 stockists. Its sales team, spread from Delhi to Nagaland in the east and all the way to the south, is rapidly running short of cash to promote a planned new product, even for the rickshaw rides they use to travel.

Revenues have frozen, Somani says, but fixed costs continue, including wages. These are paid online, but his staff cannot get access without being given time off to queue at the bank.

"We are cutting production," he added. "If this goes on for two more months, then it will hit us very badly."

An executive at a mid-sized hair oil manufacturer, a beauty staple in India, said sales had crumpled as consumers simply stopped buying shampoos and lotions. Wholesale markets, which operate in cash, are shut. Distributors have no cash.

"We are planning to extend some discounts to the distributors so that they at least replenish the amount of stocks they are selling, instead of not buying from us at all," he said.

"We are cutting production every day," he added.

Like many of the businessmen interviewed by Reuters, he declined to be named, given the sensitivity of the issue.

Cash crunched

In the year to March 2017, the cash crunch is estimated to pull down India's gross domestic product (GDP) growth from last year's 7.6 percent by as much as 4.1 percentage points. Brokerage Ambit Capital says it does not rule out a contraction in the October-December quarter.

Corporate operating profits are tipped to fall by as much as 40 percent in the current quarter.

People ranging from taxi drivers and street hawkers to big consumer goods firms have seen their earnings plummet by as much as 80 percent in the first week of the swap alone, according to some analysts' estimates.

Those relying on informal, cash-based channels are, unsurprisingly, worst hit. Greengrocer Ranveer Singh, who regularly borrows money to run his shop in New Delhi, sold vegetables on credit to regular customers in the first two days after the cash crackdown, but has been forced to shut up shop.

"I don't have cash to refill stocks," said Singh, who used to make about $15 a day before the crackdown began.

"If it remains like this for two more weeks, my family might have to go without food."

But even for more sophisticated firms, paying employees is a major challenge, and not just in the construction and building materials sectors, which still pay contractors in cash.

Senior citizens waiting in queue to exchange their old currency notes of the denominations of 500 and 1000 in Mumbai, India.
Arijit Sen | Hindustan Times | Getty Images
Senior citizens waiting in queue to exchange their old currency notes of the denominations of 500 and 1000 in Mumbai, India.
As most Indians do not have bank accounts, most are paid in cash, though reliable statistics are hard to come by.

With the government changing rules for currency withdrawals and exchange almost every day, Somani and others are struggling.

Chandubhai Kothia, head of chemicals company Shree Ganesh Chemicals in Gujarat, with an annual turnover of 1 billion rupees, said a newly imposed 50,000 rupee cash withdrawal limit per week for some businesses that came in as part of the measures was simply not enough.

"The payment of wages to workers and transport are a problem," he said.

While Modi has promised the cash situation would become normal by year-end, Saumitra Chaudhuri, a former economic adviser to the government, estimates it will take six months to replace the stock of canceled bills.

Earnings crushed

Some analysts are already reviewing their estimate of company earnings for the rest of the year.

Brokerage Motilal Oswal warned this week that its forecast of a revival in corporate earnings in the second half of the fiscal year 2016/17 was now in jeopardy, with autos, retail, consumer goods, cement, telecom and non-banking financial companies likely to see downgrades.

India's vast services sector, which accounts for two-thirds of GDP, is worst hit.

Credit Suisse estimates more than 90 percent of consumer purchases are made in cash as few Indians have bank cards and infrastructure for online transactions is poor.

In Gurgaon's Cyber Hub, a corporate leisure center, several eateries reported a crash in their card swiping machines, compelling them to decline customers who didn't have sufficient smaller denomination bills.

In rural areas, where cash is totally dominant, the situation is worse.

In the wheat-growing states, sales of seeds and fertilizer have plunged halfway through the sowing season as farmers told Reuters they had run out of cash.

As the crunch continues, more are beginning to ask whether the government could have done more to ease the impact.

"The Prime Minister to my mind has done an income tax raid in every house in the country," said Abhishek Saraf, joint managing director of SquareFoot, a flooring-maker in Mumbai.

 

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The Guardian view on India’s demonetisation: Modi has brought havoc to India
Editorial
Trump’s svengali, Steve Bannon, saw Hindu nationalism as part of a ‘great revolt’. The way things are going, the resistance might begin at home

Indians queueing to deposit and exchange discontinued Indian currency notes at the Reserve Bank of India in Ahmadabad. ‘The rich will not suffer but the poor will lose out. For them, getting to a bank and queueing for hours will cost money and time they don’t have.’ Photograph: Ajit Solanki/AP
Thursday 17 November 2016 19.22 GMT Last modified on Thursday 17 November 2016 22.00 GMT

On the night Donald Trump was elected the next US president, one of his fellow nationalist populist politicians chose to implement chaos in a land not famed for order. In a surprise TV address Narendra Modi, the Indian prime minister, announced that all 500- and 1,000-rupee notes would be withdrawn immediately from circulation. At a stroke Mr Modi rendered 86% of currency worthless outside a bank branch. Old notes would have to be exchanged for limited supplies of new currency. It was justified as a move designed to fight corruption and target people who have been dodging taxes by holding stockpiles of cash, known in India as “black money”.

Many initially saw the withdrawal of banknotes as a price worth paying to eliminate graft. The short-term impact of “demonetisation” has been dramatic: the $2 trillion Indian economy will shrink. The rich will not suffer, as corruptly acquired fortunes have almost all been converted to shares, gold and real estate. But the poor, who make up the bulk of the nation’s 1.3 billion people, will lose out. They don’t generally have bank accounts and are often paid in cash. For them, getting to a bank and queueing for hours will cost money and time they don’t have. In less than a week the policy has reportedly claimed more than a dozen lives. The government says that it will take weeks to sort out the problems.

Demonitisation is not new in India, which last tried it in a smaller way in 1978. The result then was higher bank deposits and a bump in the tax take. Yet the scale and speed of Mr Modi’s scheme has more in common with the failed experiments of dictatorships which led to runaway inflation, currency collapse and mass protests. While Mr Modi campaigned to end corruption, it would have been better if the government had updated its antiquated tax system to realise such a task.

But slower, incremental reforms do not make headlines. They do not instantly hit the war chests of political rivals in upcoming state polls. Mr Modi, a Hindu nationalist, was for a decade an international pariah over his alleged role in the mass murder of Muslims in a region he once administered. He wants to be known for something else. President-elect Trump offers an opportunity to recast himself. Two years ago Mr Trump’s svengali, Steve Bannon, described Mr Modi’s victory as part of a “global revolt”. But a looming cash crunch and an administrative crisis makes it look like the revolt might start at home.

 

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Re: Indian Economy Might Collapsed - Another Buy High Sell Low for Ms Ho?

Housing prices to drop up to 30%, wiping Rs 8 lakh crore in value
PTI|Updated: Nov 25, 2016, 10.22 AM IST

According to PropEquity research, residential real estate valuation in the top 42 cities in India, will take a tumble and fall up to 30%.
NEW DELHI: Housing prices in 42 major cities across India could drop by up to 30 per cent over 6-12 months after the demonetisation of high-value notes, wiping out over Rs 8 lakh crore worth market value of residential properties sold and unsold by developers since 2008.

"In the aftermath of demonetisation impact on Indian real estate sector, market value of residential property of Rs 802,874 crore is expected to be wiped off in the next 6-12 months," PropEquity said in a statement.

PE Analytics owns and operates PropEquity which is an online subscription based real estate data and analytics platform covering over 83,650 projects of 22,202 developers across over 42 cities in India.

"According to PropEquity research, residential real estate valuation in the top 42 cities in India, sold and unsold, will take a tumble and fall up to 30 per cent from Rs 39,55,044 crore by approx Rs 8,02,874 crore to Rs 31,52,170 crore," it added.

The market value is of 49,42,637 units, which are built-up ready, under construction and currently launched properties, available and sold since 2008 for 42 cities.

Maximum fall on total market valuation will be in Mumbai Rs 2,00,330 crore followed by Bangalore by Rs 99,983 crore and Gurgaon Rs 79,059.

"Indian realty is now bracing for sub-prime level crisis, which is expected to deeply impact the core of unorganised real estate and black money," PropEquity said.

"We expect lot of secondary market transactions (resales) coming down in volume. For every five buyers out there, there is only one buyer willing to pay all-cheque. And usually, people want to take at least 20 to 30 percent of the amount in cash, but this will now go away for the time being," Samir Jasuja, CEO and Founder of PropEquity said.

"There will be almost a complete stop in resales in the coming weeks as this move will take sometime for real estate sector to absorb," he added.

PropEquity also said that there have been unprecedented transactions in last 15 days with lot of people trying to convert their unaccounted money into real estate.

"But this will also mean that we can expect more formal and organised developers to weather this storm and will relatively be in a better position in the next 9-12 months," it said.

"In our view, there will be acute pain in the short-term but in the mid to long run it will be hugely beneficial for Indian realty as it will create lot of transparency," PropEquity said.

 

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Re: Indian Economy Might Collapsed - Another Buy High Sell Low for Ms Ho?

weddings are very important in india, so gov backtracks on rupee withdrawal for families planning to have their kids going through marriage ceremonies - now can withdraw up to 250,000 rupees if you show invoices and receipts for planned wedding events. as a result, a new underground economy is developing to produce fake invoices and receipts of wedding events to fool the banks. everybody in india is now getting married, again and again. :p

india is, has been, and will be a fucking joke when it cums to policy and planning. they must hire jiakliaobees from pap. at least pap can only do 69% of the damage.