How does the interest rate hike in the US affect Indian economy?

Actually its not the Indian economy that alone will be affected. World over all the economies will be affected. Only the degree will differ depending on the individual economies.  

Let me analyze how the Indian economy will get affected.

When US increases interest rates, investors evaluate the whole set of things. They dispose off risky asset classes and repay. This process will set off a selling spree in the asset classes. Sudden outflows cause temporary mismatches in currency positions, causes currency depreciation,  aggregates selling across asset classes. 

Worldwide there is always a universal demand for US dollars. When interest rates are increased in US, this causes liquidity of  dollars to dry or diminish. The external commercial borrowings of corporate in India will face pressures for repayment of principal and interest payments.  

What would be the real impact is that it affects the currency more than the economy.

Some of foreign money has to come to India because they do not earn attractive returns there. If that situation is going to change, and as the interest rate spread benefit reduces, some foreign investors may want to pull out from India to invest in their own country. That will put a pressure on rupee. But it may not affect Indian economy severely though a weakening currency will have some impact.

Industrial output to 5 year high..a positive growth....

With 17 of the 22 industry groups in the manufacturing sector showing a positive growth, the industrial output in October recorded a five-year high of 9.8 per cent year-on-year.

The higher growth was on account of a favourable base.The industrial output in September 2015 was 3.6 per cent.

Though manufacturing registered a high growth in October, the low base in major sectors like capital goods and consumer durables has contributed significantly to this high growth. Nonetheless, the outlook for growth remains positive and can be strengthened in coming months if pace of reforms continues.

The global slowdown continues to impact trade and affect India’s exports adversely thus impacting manufacturing growth especially when the domestic demand is also sluggish.

What we can infer from this is that it is a positive growth. After five years, for the first time industrial growth is 9.8 percent . It is a welcome note. Environment for industrial growth is cordial in India now. It may slowly increase step by step due to the actions of central government. Foreign direct investments are flowing into the country because of efforts of PM Narendra Modi through Make in India and other initiatives like Indo-Japan relations. Inflation is 5.5 percent. If the production increases in many sectors, essential commodities rates will come down and be beneficial to the people.

Why HSBC bank announced closure from Indian private banking business

The HSBC bank announced the closure of its private banking business in India.

Unlike mass banking, private banking is the dedicated banking services for high net worth individuals (HNIs). So what could be the reasons for shutting shop when India is the only bright spot in the world???

 The following might be the reasons that led to the closure:

The Environment Of Stress: The Indian economy is  yet to see a big pick up despite being in the bright spot as India is more consumption-oriented than other emerging markets such as China or Brazil.

Competition:The private banking space is hugely competitive. Few decades ago, foreign banks had an edge in the private banking space because of quality service, global investment tools and an untapped market. 

·     Falling Returns: Look at the investment class from commodities, gold, equity,  to real estate. They are  already instances of HNIs losing big money because of bets going wrong. There is no hope of a major recovery in many of the asset classes. Take for instance, India despite being on bright spot is now witnessing any major moves in its stock market. In fact, the stock market has plunged from a high 30,000 in March this year to 26,000 levels.

Will rupee also make its way to special drawing right like yuan??

The International Monetary Fund’s decision to include China’s yuan in its currency unit and considering it as the weighted average of several convertible currencies, known as the special drawing right, or SDR is indeed an approval of China's economy. China was the world’ largest exporter, and second-largest importer, in 2014. 

                   To be in the SDR basket, a currency needs to also be “widely used” to make payments for international transactions and “widely traded” in the principal exchange markets.Chinese currency accounts for 15% of global output and qualifies on this count too, says the IMF. But that’s a big minus. Capital controls will have to go before the yuan becomes a major global currency.The immediate gain for China would be to have more of its trade settled in yuan, perhaps even before next October, when the yuan will officially be part of the SDR.

 Now the question is will rupee too be in the SDR basket soon???

                   As India continues to register strong growth, even as the rest of the world either shrinks, its share in world output cannot but rise. Unlike in the case of China, India’s financial sector is far more transparent. Sure, the country is nowhere close to full rupee convertibility, and we are not in  a hurry either. What we need urgently is a fully developed financial market and later lets see whether rupee will make it to the SDR.

Are the CEOs really not confident about India’s growth?

              While going through the survey of KPMG Global Confidence survey, it was very interesting to find that inspite India being the fastest growing economies in the world, the Indian CEOs are not sure about the growth India will have in 3 years.

             A global survey conducted by KPMG International shows Indian CEOs rank fourth in terms of their confidence level in India's economic growth over the next three years. Their confidence level stands at 85 per cent in comparison to China's 95 per cent, Spain's 90 per cent and Italy's 89 per cent.

             There is something to ponder upon on the results of this survey.

It is because the CEOs have lost confidence in the growth of economy inspite of all the initiatives taken by Modi government and rate of growth India is now at.

             Is it because of the uncertain global growth or because of the regulated environment of India??.  Anyways  its upto the CEOs again to come up with new strategies and ideas and tools to bring out the growth in India and build up their confidence level. Also 56 per cent of global CEOs reveal they don't have developed processes for innovations in their respective organizations. That’s quite surprising in this era of innovation. So CEOs should come out with innovations to make the economy grow in this tough environment.

Will Make in India work or will it be just a campaign?

                      Make in India is  for investors to come and invest in Indian growth.
Instead of naming it Made in India, it is make in India. It focuses mainly to make in India in the present rather than “made” which is past. 

                     The manufacturing sector has faced a creeping rut over the past decade in India. Anyone who wishes to enter Indian market may contemplate many problems like government clearances, land acquisition and skill gap between workers. But when our Prime Minister Mr. Narendra Modi unveiled the Make in India program on 25^th September, he  tried to assure the foreign investors that the problems that they face in doing business will not be there.

                      Indeed the Make in India has been fairly successful at its inception, if we analyze the buzz that it has created not only in India but throughout the world too.
Here are some numbers.

                               But there is lot to be done for it to actually work in India. The skill set of people must be improved, speedy approvals of different documents, a corruption free environment , flexible labor laws and a lot more.

How well Modi ji is going to implement the ‘sayings’ into actions and how fast it is going to happen,  is only for us to wait and see. But the initial buzz gives way for hope.