Your Smile Makes The Whole World More Beautiful

Wishing A Wishful Weekend Ahead

 

Best Regards

Arbind

 

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Macro-Economic News 06 Feb 2021

 

In a landmark reform, RBI allowed the direct retail participation in the government securities markets – the third nation after the United States and Brazil.

 

In the long term, this will change the way banking and payment systems function, and for sure, it would result in a positive net return (bond return higher than inflation) to the savers. There has been a long-awaited need to channelize the domestic savings that are nearly 30 percent of GDP of more than $2.8 trillion (Rs 200 trillion) per year. A simple calculation converts the govt borrowing target of Rs 12 trillion is just 20% of Indian savers of only one year and less than 10 percent demand and time liability in the Indian banks. This window will further accelerate efforts for reducing statutory capital requirement - in line with the international modern monetary practices.

 

On the contrary, retail participants, being less adroit in precise calculation and nuances of G-Sec markets, need more prudent hand-holding at this adolescent stage. Additionally, it would deepen the bond market along with a deep sense of public participation in nation-building. The natural residual effect of such noble efforts would bring vibrancy to the corporate bond market and better pricing benchmarks (a reliable yield curve). 

 

RBI has given the world a-new-hope and directionality in circumstances where the global ‘inequality virus’ is affecting every country and is creating the widest ever rifts between rich and poor. To quote ‘oxfam’ study, “billionaire fortunes returned to their pre-pandemic highs in just nine months, while recovery for the world’s poorest people could take over a decade”.  

 

Citing the dreadful divide IMF has also warned that the U.S. is facing the risk of bankruptcies and unemployment if fiscal support is not maintained while low-income countries of "lost generation" if they don't get more help. 

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One More Smile This Friday

Wishing An Extra Happiness Ahead

 

Best Regards

Arbind

 

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Macro-Economic News 05 Feb 2021

 

Debt GDP ratio – discussed more often these days, especially on the global risk context – is nothing but persistent illusion; to quote Einstein, “The distinction between the past, present and future is only a stubbornly persistent illusion.” Obviously, the numerator (Debt) is a forward-looking (wishful) number while the denominator is the outcome of past action of hopes. The submissive best ratio may need adjustment of ‘Conversion lag’ often gets blurry with various intentional and structural frictions in the capital formation process. A significant group of economists is vouching for debt unwinding; while others say it’s too early to discuss tapering. Although the structure of Debt and the usefulness of the GDP as a measure of economic activities require a separate deeper insight. 

 

At least Central banks – as of now – opine that it is still premature to start a debate on scaling back its massive bond-buying program. In the line of FED keeping its interest rates unchanged near zero last week, other central banks also seem to rely heavily on the fiscal stimulus until “substantial progress” is made. The Australian economy has also improved but its central bank expects to keep interest rates will low for “quite a while yet” despite inflation if it arises. The RBA expects not to raise interest rates until at least 2024 with employment and inflation remaining well short of the target, although at a little elevated level.

 

The US – alongwith other economies – targets to go back to the pre-pandemic level with low joblessness boosted prosperity without overheating the economy and igniting inflation. The quickness of reaching back is the essence of the time as persistent unemployment irritates everyone – people to policymakers. 

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 Experience The Joy Within Conferring The Pleasure Out There. 

Wishing A Delightful Day Ahead.

 

Best Regards

Arbind

 

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Macro-Economic News 04 Feb 2021

The cost of doing anything, even being probabilistically wrong, is lesser than the cost of not doing anything. The consequences may be significant if the target is Inflation or unemployment. The Council of Economic Advisers and others in the White House are ramping up its multi-trillion dollar efforts to rescue the economy – including raising the minimum wage to $15, sending $1,400 cheques to select groups of individuals, among other measures. This quick helping people survive financially is expected to avert the risk of persistent unemployment.

India certainly walks the Growth path with a Smile. Its January services PMI expands for a fourth straight month while Indian corporate external borrowing is down by 40% in the Apr-Dec 2020. With an emphasis on spending for reviving growth – comfort for the central bank, the RBI monetary policy will have more room in support. With the expansionary budget already in place, the central bank may keep its policy rate unchanged and keep monetary-tools reserved in its quiver.

The Eurozone Inflation has leaped up the quickest in a decade following the uncertainty about the extra stimulus measures by the ECB. Former ECB chief accepts the task of reviving Italy – on the line of his nickname ‘Super Mario’ – by forming the government as a savior. On the other side, Chinese firms have defaulted on either interest or principal on their offshore bonds that is nearly 33% of the 2020s and 70% of 2019's total; the trend appears to continue this year.

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 Optimistic Is The Nature, Everywhere. 

Wishing A Cheerful Day Ahead.

 

Best Regards

Arbind

 

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Macro-Economic News 03 Feb 2021

 

‘Investor Charter’ is likely to find a place in the framework of investment regulatory bodies like SEBI, IRDAI, etc. Following the investment booster of India, the Finance Commission has recommended framing laws to free up farms for leasing. Fitch finds India's near-term fiscal deficit target higher than expected while Fitch and S&P flag high fiscal deficit. Govt may announce some more steps while RBI is expected to keep an accommodative stance at least till the first half of FY22 as Indian GDP is predicted for a 7.7% contraction.

Eurozone economy drops into double-dip contraction but shrank less than expected at the end of 2020. The eurozone’s economy is diverging sharply from the U.S. and China however the U.S. Economy is expected to reach its pre-pandemic peak by Mid-2021. Yellen, IMF chief discusses the need for multilateral solutions on debt. 

Japan declares a state of emergency for the Tokyo area as COVID-19 cases surge that has also hit business deepening of Japan's service sector slump. New Zealand unemployment unexpectedly dropped last quarter. China central bank withdraws $12 Billion from the banking system staring down another liquidity test just days after fending off its worst cash crunch since 2015. Thailand is likely to hold its key interest rates steady allowing its fiscal policy to take the lead. Meantime, it is also considering to fully reopen to vaccinated visitors.

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 Boost the Investment In Yourself. 

Wishing A Buoyant Day Ahead.

 

Best Regards

Arbind

 

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Macro-Economic News 02 Feb 2021

 

India turns on the spending taps with a gross market borrowing of ₹12.05-lakh crore, emphasizing infra spending as well as capacity building along. One-person companies, boost to the start-up ecosystem, measures for MSME, and ease of business are some of the forwarding measures announced by FM, although fiscal deficit pegged at 9.5% with a target of 6.8% for FY22. The government intended to continue on its path of fiscal consolidation to reach a fiscal deficit of below 4.5% of gross domestic product (GDP) by 2025-2026. India’s massive borrowing compels the central bank to conquer yields.

Pockets of inflation are flickering across parts of Asia and fading in others, impacting central banks’ scope to further support economies. South Korea inflation speeds up. Italy’s export-dependent factories thrive but Spain lags behind while The US and UK chart different courses on worker rights. Fed policymakers, like lawmakers, split on the need for more fiscal aid. The Congressional Budget Office forecasts that the U.S. economy will grow faster this year than projected earlier.

The cycle of credit expansion and contraction that typically happens at approximately 60-70 years typically collides with the generational cycle of approximately 70-80 years in the economic history of major economies often leads to nation-changing social, political, and economic upheaval. India has a lot of similarities in the current scenario and the scenario in the decade following the world-war II.

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Cheers with The Treasure of Nature. 

Wishing A Cherishing Week Ahead.

 

Best Regards

Arbind

 

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Macro-Economic News 01 Feb 2021

 

A never before budget is expected to bring long-term prosperity and directionality to Indian financial health by raising the expenditure and taking measures on easing out economic activities with a focus on domestic capital formation. With a very comfortable tax collection in January, India is expected to add more muscles for Atmnirbhar Bharat with a special focus on healthcare, technology-focused rural development, agriculture, and defense. Financial market and capital flows may get some alternations that market may take some time to digest.

 

The US is negotiating to downsize the Covid relief plan of nearly $2 trillion while China factory recovery slows down. South Korea exports expand for a third month in January, beating forecasts. Australia, which has also started its quantitative-easing program, is expected to keep its key interest rate in line with its peers central banks. 

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