India: A Magnet For Global Capital

Below is a research note from Bank Credit Analyst:

In the case of India, we remain relatively constructive as credit flows into the country appear to have largely been utilized in a productive way. As a result,the ongoing liquidity squash should not evolve into a solvency crisis on a massive scale.

Not massive, but Realty is a serious concern. Has this been productive?

Given the under invested nature of India’s economy, the return on capital is very high, not only relative to the G7 but also in comparison to other emerging markets. This, along with a lack of major imbalances in the economy should keep India a magnet for global capital.

Currency risk. Net foreign liabilities are just 2% of banking assets, although it is higher for some private sector banks, such as ICICI bank. On the whole, however, net currency exposure is not significant.

As I have said previously, do not blow the FX reserves in defence of the currency.  We will need it later.

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