01, foreign capital is fleeing
Indian officials have released data. As of the end of November this year, overseas investment institutions have sold more than 2,000 billion rupees in the Indian stock market. This means that a large number of foreign capital is withdrawing from India's financial market.
Looking at past historical records, when the subprime mortgage crisis occurred in 2008, there was also a large-scale withdrawal of foreign capital, but the scale of withdrawal this year is 250% of that year.
At the same time, figures released by the Bank of India also show that India's foreign exchange reserves have dropped to 547.3 billion US dollars by mid-November this year, a significant drop of nearly 15% compared with the same period last year. At the same time, this is also the lowest level since 2019.
Now more and more international economists are worried that India, which has achieved very good GDP growth this year, may only be superficially prosperous. Under the influence of the United States' continuous interest rate hikes and balance sheet shrinkage, it has lost financial support and India's asset bubble may burst.
02, accelerated balance sheet reduction
As we all know, the United States began to raise interest rates in March this year, and has raised interest rates by a total of 425 basis points so far.
However, many investors have ignored that the United States began shrinking its balance sheet in June. According to the plan, the monthly balance sheet reduction will be 47.5 billion from June to August, and the monthly balance sheet reduction will be 95 billion starting from September. The reason why investors did not pay attention to this information is because the Federal Reserve did not shrink its balance sheet in full in the past few months. From June to August this year, the cumulative amount of balance sheet reduction was 63.6 billion, with an average monthly balance of only 20 billion, which was only half of the plan.
html The original plan was to reduce the balance sheet to 95 billion in September, but the actual completion was only 56.3 billion, which was only slightly more than half. However, according to the latest data from the Federal Reserve, we found that the balance sheet reduction was completed by 92.294 billion in November, which shows that the Fed's balance sheet reduction has suddenly accelerated.
In the past few years, India's economic development has relied heavily on the excessive currency issued by the United States. Now the Federal Reserve's drastic reduction in its balance sheet means that funds will continue to flow back. The 2,000 billion rupees sold off mentioned above and the continuous outflow of foreign capital can already be seen.
believes that more funds will flow out of India in the future.
03, exchange rate major depreciation
India relies on the United States' over-issuance of currency, which can also be reflected from another aspect, that is, India's increasing national debt.
International rating agency predicts India's debt will reach 86% of GDP next year, compared with only 70% when the new crown epidemic first broke out.
As India's debt-to-GDP ratio is getting higher and higher, various rating agencies are likely to further lower India's sovereign rating. This will be a major blow to India's need to continue financing or repay debt in the future.
Affected by this, the Indian rupee has experienced an accelerated decline recently.
From the annual chart of the Indian rupee against the US dollar above, we can see that So far this year, the Indian rupee has fallen by more than 10% against the US dollar.
Although the rupee has depreciated against the US dollar in most years over the past few years, this year's depreciation has set a record. The last time
depreciated significantly was back in 2018, when the depreciation reached 8.24%.
On a monthly basis, the exchange rate of the Indian rupee has fallen in 10 of the first 11 months of this year. only rose slightly by 1.66% in November this year, but this increase has been completely wiped out this month.
The exchange rate continues to fall, foreign capital is fleeing at an accelerated pace, and it is facing increasing debt pressure after the appreciation of the US dollar. India's development prospects are cast a shadow.
PS: It takes 2-3 hours to write an article and only 2-3 minutes to read.
Now that you have seen this, please take 2-3 seconds to "like" this article!
