Sun, 25th June 2017

Anirudh Sethi Report


Archives of “developing country” Tag

India ranks 131 on Human Development Index, Norway No.1

India’s human development index (HDI) ranking for 2015 puts Asia’s third largest economy among a group of countries classed as “medium” in the list, as opposed to “low” in the 1990s, thanks to factors such as an increase in life expectancy and mean years of schooling in the past 25 years.

But the bad news from the report released on Tuesday in Stockholm is that regional disparities in education, health and living standards within India—or inequality in human development—shave off 27 % from India’s HDI score.

As it stands, India is ranked 131 out of 188 countries in a list that is topped by Norway.

Yuri Afanasiev, UN resident coordinator for India, noted India’s progress in its HDI score between 1990 and 2015. “The success of national development programmes like Skill India, Digital India, Make in India and Beti Bachao Beti Padhao, aimed at bridging gaps in human development, will be crucial in ensuring the success of Agenda 2030,” Afanasiev said, referring to the UN’s Sustainable Development Goals unveiled in 2015.

“These programmes, and the long-running affirmative action measures, illustrate the government’s commitment to identifying and mapping human development deficits, as well as taking action to achieve the Sustainable Development Goals,” he said.

World Bank issues bond aimed at highlighting sustainable development

The World Bank is hoping to draw attention to the United Nations’ sustainable development goals with a sale of unusual bonds.

Payouts on the securities, which are relatively small, will be linked to the stock market performance of 50 companies considered to be making a significant contribution to the goals, including Nestle and Danone.

The World Bank has been making concerted efforts to promote global sustainability within financial markets and has previously sold green bonds and a sustainable development bond denominated in Chinese renminbi.

Sustainable development goals were created in the mould of the UN’s earlier Millennium Development Goal and encompass economic, social and environmental objectives such as gender equality and combating climate change.

World Bank latest reports says global growth to accelerate slightly

World Bank’s latest Global Economic Prospects report … headlines:

  • Forecasts global real GDP growth at 2.7% in 2017 vs 2.3% in 2016
  • Forecasts advanced economies’ growth at 1.8% in 2017 (vs 1.6% in 2016)
  • Emerging/developing economies’ growth at 4.2% in 2017 (3.4% in 2016)
  • Forecasts US growth at 2.2% in 2017 (vs 1.6% in 2016) … they say their forecast excludes effects of any policy proposals from trump administration


  • Challenges for emerging market commodity exporters are receding, while domestic demand solid in emerging market commodity importers
  • Fiscal stimulus in US could generate faster domestic and global growth, but extended uncertainty over policy could keep global investment growth slow
  • Forecasts China’s growth slowing to 6.5% in 2017 (from 6.7% in 2016)
(Headlines via Reuters)
The World Bank looking at the recovering oil and commodity prices, noting this eases the pressures on emerging-market commodity exporters. Expects the recessions in Brazil and Russia to end.
As always the Bank notes uncertainties in its forecasts (all forecasters should), with upside uncertainty (in the short term at least) on US potential increased fiscal stimulus, tax cuts, infrastructure spending.  Looking further out, though, a surge in debt load, higher interest rates & tighter financial conditions would have adverse effects.
Also downside potential on a more protectionist trade stance.

BIS Warns OF Bouts Of Extreme Volatility, As Market Undergoes “Paradigm Shift”

The Bank of International Settlements is particularly good at two things in its periodic quarterly review update: i) stating the obvious, especially when it comes to summarizing the trader and market participants concerns at any given moment, and ii) having its constituent central bank members – after all the BIS is the “central banks’ central bank” – ignore all of its warnings.

In its just released, latest report, the BIS continues to excel in both, when it lays out what it dubs a “paradigm shift in markets” and points out that unlike previous VaR shock episodes, most notably the 2013 Taper Tantrum, financial markets have been remarkably resilient to rising bond yields and sudden shift in outlook following last month’s shock U.S. election result.

Indian wealth falls 0.8% to $3 trillion in 2016: Credit Suisse

Hit by adverse currency movements, India’s household wealth has fallen by $26 billion to $3 trillion in the current year, shows the latest report by global financial services major Credit Suisse.

According to the ‘Global Wealth Report’ compiled by Credit Suisse Research Institute, wealth in the country in dollar terms went down by 0.8% ($26 billion) to $3.099 trillion in 2016 compared to last year. The report noted that while wealth has been rising in India, not everyone has shared in this growth.

“There is still considerable wealth poverty, reflected in the fact that 96% of the adult population has wealth below $10,000,” the report said. “At the other extreme, a small fraction of the population (0.3% of adults) has a net worth over $1,00,000,” it added, noting that due to India’s large population, this translates into 2.4 million people.

As per the report, the country has 2,48,000 adults in the top 1% of global wealth holders, a 0.5% share. “By our estimates, 2,260 adults have wealth over $50 million, and 1,040 have more than $100 million,” it added. Overall, the Asia Pacific region in 2016 saw wealth increase by 4.5% to nearly $80 trillion. “China and India were hit by adverse currency movements and as a result, their household wealth fell by 2.8% and 0.8% to $23 trillion and $3 trillion, respectively,” the report noted.

Among other major economies in the region, wealth in Australia remained largely unchanged (decline of 0.2%) and South Korea saw an increase of 1%. Globally, the wealth stood at $256 trillion— a rise of 1.4% from a year ago. The report noted that rise in global wealth is in line with the increase in the world’s adult population with average wealth per adult remaining constant at $52,800.

According to Credit Suisse, while developing economies are likely to outpace the developed world in terms of wealth growth, they will still only account for just under a third of growth over the next five years. “They (developing nations) currently account for around 18% of global household wealth, against just 12% in 2000,” it added.

The IMF Sounds An Alarm As Global Debt Hits A Record $152 Trillion Or 225% Of World GDP

Another record for the history books.

In addition to reporting on the dangers facing global banks as a result of declining profits in the current low rate environment, today the IMF also released its latest Fiscal Monitor report which sounded a loud alarm when it revealed something disturbing: at 225 percent of world GDP, the global debt of the nonfinancial sector, comprising the general government, households, and nonfinancial firms, is currently at an all-time high of $152 trillion.

Add financial debt and you will need a far bigger chart.

IMF lowers growth forecast for US and other advanced economies

The International Monetary Fund has lowered its growth forecasts for the US and other advanced economies, warning that the UK’s decision to leave the EU, the US presidential elections and rising protectionism are dragging on a world economy where politics now present the biggest risks.

Updating its semi-annual forecasts for the global economy on Tuesday, the IMF sharply lowered its 2016 growth forecast for the US to 1.6 per cent from the 2.2 per cent it predicted in July, and for advanced economies as a whole to 1.6 per cent

However, it said a rebound in emerging and developing economies, which the IMF now expects to grow by 4.2 per cent this year as group, would offset that figure, resulting in its forecast for global growth remaining steady at 3.1 per cent this year.

Maurice Obstfeld, the IMF’s chief economist, said the move “sideways” for the global economy hid what were still significant risks fed by a “cocktail of interacting legacies” from the 2008 global financial crisis. These included high debt overhangs, bad loans on banks’ books and moribund investment, which were continuing to depress the global economy’s potential output, he said.

Moreover, he said, low growth and a slow recovery from the 2008 crisis in advanced economies had fuelled “political tensions have now made advanced economies a major locus of policy uncertainty”.

Global economic growth ‘sliding back into the morass’

The global economy is faltering again with growth rates “sliding back into the morass [they have] been stuck in for some time”, according to the Brookings Institution-Financial Times tracking index.

In a publication ahead of this week’s annual meetings of the International Monetary Fund and World Bank, the results will reinforce fears that many countries have become caught in a vicious circle of low growth, popular discontent and a backlash against trade and openness, resulting in more economic weakness.

The annual meetings will encourage policymakers to pursue inclusive and faster global growth as international organisations, finance ministers and central bank governors seek to reassure the public they can co-operate and that they have the necessary tools to break five years of economic disappointments.

Hanging over the meetings is the fear that the failure to improve living standards in advanced and emerging economies was important in the UK’s vote to leave the EU, may propel Donald Trump to the US presidency and will strengthen the hands of populists such as Marine Le Pen in France.

Putin: Joint Share of BRICS in IMF Capital ‘Step Away From Blocking Threshold’

The visit of Russian President Vladimir Putin to China. Second dayThe joint share of the BRICS emerging economies in the International Monetary Fund’s capital has almost reached 15 percent, Russian President Vladimir Putin said Sunday at an informal meeting of BRICS leaders on the sidelines of the G20 summit in Hangzhou, China.

“The BRICS countries saw its joint share in the Fund’s capital to increase to 14.89 percent, a step away from 15-percent blocking threshold. Without a doubt, we have to move forward to carry out an IMF reform,” Putin said. BRICS is an association of five developing economies (Brazil, Russia, India, China, South Africa), which comprises over one third of the world’s population. The five nations have a combined nominal GDP equivalent to approximately 20 percent of gross world product. BRICS Contingent Reserve Arrangement, New Development Bank Should Work on Full Scale The work of BRICS Contingent Reserve Arrangement and New Development Bank should be brought to a full-fledged scale, Putin.   “It is necessary to bring to a full-scale work the Contingent Reserve Arrangement and New Development Bank established by BRICS,” Putin said at the informal meeting of the leaders of BRICS member states.

The Russian leader pointed out the need to adopt the bank’s strategy and ” to provide loans in national currencies,” as well as to “move on to the financing of specific projects.”

Brazil, Russia, India, China and South Africa signed an agreement on setting up the BRICS Bank at the summit in Fortaleza, Brazil in July 2014.

The bank will become a major development institution with a statutory capital of $100 billion. BRICS countries have also agreed on the BRICS Contingent Reserve Arrangement (CRA), to which China contributed $41 billion, Brazil — $18 billion, Russia – $18 billion, India – $18 billion, South Africa – $5 billion. The reserve pool is to serve as a monetary backup in times of economic slowdown.

India less vulnerable to banking distress risks than China: BIS

India is better placed than neighbouring China and Brazil in terms of banking distress risks, says a report prepared by the Bank for International Settlements (BIS), which also flagged that high corporate debt levels have caused overheating in some emerging economies.

The observations are part of the report submitted to the G20 International financial architecture working group and it comes at a time when there are concerns about the rise of bad loans in the banking system in India, which is also a key member of the G20 grouping.

Based on certain indicators, BIS noted that they suggest “heightened risk of banking distress in a number of emerging market economies”. “This is in particular the case for Brazil, China and Turkey where the credit-to-GDP gaps are close to or above 10%. In the past, two-thirds of banking crises were preceded by credit-to-GDP gaps breaching this thresholds during the three years before the event,” it said.

Further, the report observed that debt-to-service ratio based indicators paint a similar picture. India’s credit-to-GDP gap has been estimated at (-3.2) whereas that of China was 29.7 and Brazil 8.5. Among other economies, the figure for Turkey was 11.8, Korea (3.9) and Mexico (7.7).

Debt service ratio of India was 1.8 compared to 5.5 for China and 7.4 for Brazil, as per the report. In a scenario where interest rates rise by 250 basis points, the report showed that India’s debt service ratio would be 2.9.