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India unnerved… 
       ‐      Amar Ranu 1                                                                             Jan 01, 2009 

It is said that tsunami devastates everything in its path. Ditto, post sub‐prime crisis, the financial tsunami 
cut  swathe  through  all  over  the  world  which  led  to  the  situation  where  some  countries  have  already 
announced recession or the worst phase of their country. The financial sumo USA is running at almost 
zero interest rates vis‐à‐vis Japan after a series of rate cuts to boost the economy (Now we can expect 
the carry‐trade with Re‐$ as prevalent in Japanese Yen and other currencies). Even the Troubled Assets 
Relief  Program  (TARP)  announced  by  USA,  to  the  tune  of  $  700  billion  as  bail  out  package  could  not 
revive the economy. The global catastrophe created a panic among investors and the confidence went 
to dismal low. Following it, many countries such as UK, France, Germany, China, India et al announced 
their economic package to stimulate the economy.  

All  the  bourses  have  tasted  their  low  which  is  really  unnerving.  It  all  started  with  the  fall  of  Lehman 
Brothers which resulted in a chain reaction and galloped one after other major financial institutions or 
had to be bailed out by their respective governments. Some of them are Washington Mutual, Wachovia 
Bank,  RBS  et  al.  But  the  best  hope  to  keep  the  global  economy  on  revival  comes  from  BRICs.  The 
consumers  in  Brazil,  Russia,  India  and  China  may  be  the  saviors  of  the  global  economy.  The  four  BRIC 
nations  hold  41  percent  of  total  global  foreign  exchange  reserves  as  of  early  November.  The  banking 
systems are stronger and international trade has expanded. 

Still among all of them, India stands undeterred. Its financial system, albeit, has touched its 2 year low, it 
is still standing with no financial casualties. Its banking system is full‐proof and the current indications as 
shown  by  their  corporate  tax  filing  show  their  buoyant  mood.  Where  on  the  global  front  all  the 
institutions are laying off their employees at an exorbitant rate, Indian banks and other institutions have 
indicated a huge recruitment drive in months to come.  Though to some extent, the aggressive Indian 
Mutual Fund Industry got into trouble due to the liquidity crisis and portfolios disclosure issue in FMP 
which  got  regulated  with  some  measures.  But  the  liquidity  immobilization  in  October  and  November 
was a structural problem which is implausible to happen again.  

Among all classes, Indian debt funds performed well because of interest rate plummeting down. Interest 
rate movements are always cyclical; its volatility is a double‐edged sword. Any indication of bubbling up 
of inflation and GDP growth beyond the comfortable level would lead to reversal of interest rates. In the 
current low interest rate scenario, yields on government bonds have fallen to a four‐and‐a‐half year low 
touching below 5.5%. Inflation too has fallen vis‐à‐vis interest rates.  Days ahead one may witness year 
2004 scenario when floating‐rate loans and fixed‐rate loans were trading at 7‐7.5%.  




                                                            
1
     An independent columnist and writes for different websites and magazines on financial domain. He can be
contacted on amarranu@yahoo.com. 



                                                                        
 
In the era of global coupling where the foreign institutions’ fund in emerging economy started flocking 
to their origin country and has caused a jinx in  the availability of overseas fund, it is a matter of time 
before money starts flowing into emerging markets again. 

2009  seems  bright  for  interest  rates  which  could  see  further  rate  cuts  given  the  continuous  fall  in 
inflation and there is a scope for a reduction in deposit and lending rates. 




                                                          
 

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India Unnerved

  • 1. India unnerved…  ‐ Amar Ranu 1                   Jan 01, 2009  It is said that tsunami devastates everything in its path. Ditto, post sub‐prime crisis, the financial tsunami  cut  swathe  through  all  over  the  world  which  led  to  the  situation  where  some  countries  have  already  announced recession or the worst phase of their country. The financial sumo USA is running at almost  zero interest rates vis‐à‐vis Japan after a series of rate cuts to boost the economy (Now we can expect  the carry‐trade with Re‐$ as prevalent in Japanese Yen and other currencies). Even the Troubled Assets  Relief  Program  (TARP)  announced  by  USA,  to  the  tune  of  $  700  billion  as  bail  out  package  could  not  revive the economy. The global catastrophe created a panic among investors and the confidence went  to dismal low. Following it, many countries such as UK, France, Germany, China, India et al announced  their economic package to stimulate the economy.   All  the  bourses  have  tasted  their  low  which  is  really  unnerving.  It  all  started  with  the  fall  of  Lehman  Brothers which resulted in a chain reaction and galloped one after other major financial institutions or  had to be bailed out by their respective governments. Some of them are Washington Mutual, Wachovia  Bank,  RBS  et  al.  But  the  best  hope  to  keep  the  global  economy  on  revival  comes  from  BRICs.  The  consumers  in  Brazil,  Russia,  India  and  China  may  be  the  saviors  of  the  global  economy.  The  four  BRIC  nations  hold  41  percent  of  total  global  foreign  exchange  reserves  as  of  early  November.  The  banking  systems are stronger and international trade has expanded.  Still among all of them, India stands undeterred. Its financial system, albeit, has touched its 2 year low, it  is still standing with no financial casualties. Its banking system is full‐proof and the current indications as  shown  by  their  corporate  tax  filing  show  their  buoyant  mood.  Where  on  the  global  front  all  the  institutions are laying off their employees at an exorbitant rate, Indian banks and other institutions have  indicated a huge recruitment drive in months to come.  Though to some extent, the aggressive Indian  Mutual Fund Industry got into trouble due to the liquidity crisis and portfolios disclosure issue in FMP  which  got  regulated  with  some  measures.  But  the  liquidity  immobilization  in  October  and  November  was a structural problem which is implausible to happen again.   Among all classes, Indian debt funds performed well because of interest rate plummeting down. Interest  rate movements are always cyclical; its volatility is a double‐edged sword. Any indication of bubbling up  of inflation and GDP growth beyond the comfortable level would lead to reversal of interest rates. In the  current low interest rate scenario, yields on government bonds have fallen to a four‐and‐a‐half year low  touching below 5.5%. Inflation too has fallen vis‐à‐vis interest rates.  Days ahead one may witness year  2004 scenario when floating‐rate loans and fixed‐rate loans were trading at 7‐7.5%.                                                                1  An independent columnist and writes for different websites and magazines on financial domain. He can be contacted on amarranu@yahoo.com.       
  • 2. In the era of global coupling where the foreign institutions’ fund in emerging economy started flocking  to their origin country and has caused a jinx in  the availability of overseas fund, it is a matter of time  before money starts flowing into emerging markets again.  2009  seems  bright  for  interest  rates  which  could  see  further  rate  cuts  given  the  continuous  fall  in  inflation and there is a scope for a reduction in deposit and lending rates.