Betting On India

Still, at the appropriate time, bet on India. India should weather this current storm as they have a consumption based economy which should benefit from the fall of oil prices. The element to watch is the dollar to rupee exchange rate. If the Indian central bank (RBI) can keep the rupee pretty much in line at current levels with the dollar, India will attract significantly more dollar based investment.

Other Economic News this Week:

The Econintersect Economic Index for January 2015 is showing our index is midrange in a tight growth range for almost a year. Although there are no warning flags in the data which is used to compile our forecast, there also is no signs that the rate of economic growth will improve. Additionally there are no warning signs in other leading indices that the economy is stalling - EXCEPT ECRI's Weekly Leading Index which is slightly below the zero growth line. There have been some soft data point which caused our index to decline this month - but none of them are currently show the 3 month rolling averages declining.

The ECRI WLI growth index value crossed slightly into negative territory which implies the economy will not have grown six months from today.

Current ECRI WLI Growth Index

The market was expecting the weekly initial unemployment claims at 280,000 to 297,000 (consensus 290,000) vs the 294,000 reported. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 290,750 (reported last week as 290,750) to 290,500. Rolling averages under 300,000 are excellent.

Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line), 2014 (orange line)

 

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Comments

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Jay J. Nair 5 years ago Member's comment

I don't fully agree with Mr. Kulkarni's assessment of Mr. Rajan. lot of people looking at India from an investment perspective seem to think he has been overly aggressive. In my opinion they are all looking at it on a short term basis. The Indian infrastructure is woefully inadequate as you have pointed out that any increase in demand cannot be matched with supply in a short period of time. This means that reducing rates that causes an increase in demand will almost certainly increase inflation. With the currency already sitting at historic lows vis-a-vis the dollar and the foreign reserves still not at a very high level, any regulator worth his salt would pause twice before adding another cylinder to the economy. Mr. Rajan has been repeatedly saying that the government needs to give him confidence that they are eliminating the bottlenecks before he reduces rates. It is not for a lack of trying.

Global Economic Intersection 5 years ago Contributor's comment
I am a foreigner who lives in India about 6 months a year. there is a theory that a ship runs smoother if all rowers are rowing in the same direction - even if it is wrong. At this point Rajan is the rower trying to move the ship in the opposite direction. It is significantly easier to slow an economy down than speed it up - in fact, i see no evidence from anywhere in the world that monetary policy can be used to accelerate an economy. Rajan's policies are a brake on the indian economy.