The Core Report episode #903 discusses the return of foreign capital to India, with global funds buying Indian bonds at a record pace due to easing macro signals and the Iran-US peace deal. It also covers India's shifting trade matrix, a potential problem of plenty with NRI deposits, and the steel industry's view of India as a major growth opportunity.
Summarized by Podsumo
Global funds bought over $1.5 billion of index-eligible Indian bonds on Monday, the biggest ever one-day purchase, linked to easing crude oil prices from the Iran-US peace deal.
India's exports to countries other than the US rose 37% in May vs. pre-tariff period, while exports to the US fell 13%, showing accelerated trade diversification.
India could face a 'problem of plenty' with NRI deposits due to RBI's subsidy on FCNR deposits, potentially driving $100 billion inflows, but with risks of moral hazard and round-tripping.
Steel giants BHP and Rio Tinto see India as the next big growth engine, with India targeting 500 million tons of steel production by 2047, more than triple current output.
Only 25% of Indian users rate banking experience as good, with key gaps in empathy, service consistency, and digital personalization, per an EY India report.
"When the central bank bears hedging costs, it affects Reserve Bank's balance sheet and thus the public exchequer. In effect, the taxpayer provides rupee depreciation insurance to a small set of Forex depositors, banks, or public sector borrowers."
"BHP's group sales and marketing officer said: 'I was in India recently and all their customers are doubling capacity. It's happening and it's real.'"
"If the Indian crude basket remains below $90 per barrel, under recoveries are unlikely to increase materially from current levels, said Crystal ratings."