Why the euro-dollar parity is important

In a year that has seen many economic fireworks go off - exceptionally high inflation, aggressive rate hikes, contracting economies - it is tough for yet another one to stand out. Yet, recently it did. 

The euro has now depreciated against the US dollar enough that each euro equals a dollar, also known as the euro-dollar parity. It could fall even further. 

Why is it important? 

This is the first time it has happened in almost 20 years, which is essentially the entire time period since the euro was first introduced. This means that the euro is the weakest it has ever been. Which in turn has a host of implications for investments and, of course, the economy. 

The good news

For EU investors who have put in money in the US financial markets, returns just got bigger. This is probably a positive even for investors elsewhere, who hold euro denominated international financial assets. And going by forecasts of an even weaker euro, things for this segment can look even sweeter going forward. 

Exporters in the EU have also become more competitive. How China used a weak currency to become the factory for the world is history. There can be significant power in a falling exchange rate to boost the economy, particularly right now. 

India’s investment cycle is going nowhere

Yesterday’s Financial Times carried an interesting data chart comparing the proportion of gross capital formation to GDP. China, unsurprisingly, was top of the chart with ~45% capital formation to GDP ratio. India came next as a standalone country, a proportion of over 30%. While the focus of the data commentary was on the fact that UK lags behind the European average (though, both the UK and Europe have sub-20% proportions) and emerging economies were a reference point only; the question on how far India can the still maintain robust capital formation to GDP ratio is an important one for India watchers.

In Q1, 2011-12 (the start period of the new national accounts data series for India) GCF/GDP ratio stood at 40.3%, and by Q3, 2016-17 (the latest data point available), the ratio has declined to 32.4% i.e a decline of almost 8 percentage points. While part of this decline can be explained in terms of faster growth in consumption expenditure, which grew by a particularly strong 11.4% as per the latest data, that is hardly the only explanation. Capital formation shrunk in 8 of the 19 quarters for which data is available, indicating that the slack in India’s investment cycle is for real.

Planning for a family? Take charge of your finances now!

While there is still a raging debate out there on whether women can really have it all, it is important to acknowledge that women do have to often make career and finance related sacrifices when they start a family. Often it can happen, that post starting a family, women’s earnings and careers remain in the slow lane till the kids are grown up and they are able to get back to work in full swing. Women either take leave from work, move to job profiles that are less demanding on time and energy or take up part-time work. 

Indian companies remain diffident about investments

Long-term foreign investors are showing strong faith in the Indian economy – as evident from the record high in FDI inflows achieved in 2015-16. However, Indian companies are still quite diffident. Not only do business loans’ offtake domestically continue to remain quite tepid, Indian companies foreign borrowings are becoming increasingly disappointing as well.

External borrowings, defined as external commercial borrowings plus foreign currency convertible bonds, came in at USD 0.3bn in April 2016, down by 58% from the USD 0.7bn levels witnessed in April 2015. The monthly number tends to be a volatile one, with a range of USD 0.3bn to USD 7bn seen in the same over the past 7 years.

All the single ladies.. some money management tips for you

Times are changing, and they are changing fast! Women today, have the luxury to determine their lifelike never before in history, and many are grasping the opportunity with both hands and leading unique lives. A central decision in our lives is the role of the significant other. While many women still choose to get married (though increasingly in less traditional ways than was seen earlier), others choose to live with their partners while still others simply remain single. Either way, the choice you make will have a determining impact on your finances and how you should plan them.

India's FDI inflows cross the USD 50bn mark in 2015-16, as forecast by Orbis Economics

India received a record FDI inflow of USD 55.5bn in 2015-16 as per numbers released recently by the DIPP. This is a significant 18.4% jump over the previous high of USD 46.9bn seen in 2011-12. India was off to a strong start on the FDI numbers in the first quarter of 2015-16 itself. 

Based on this, and other factors such as greater political and policy stability, efforts to reach out to the world and relatively better performance by India compared with emerging economy peers, we at Orbis Economics had correctly forecast that this will be a year when FDI inflows will cross USD 50bn (Orbis Economics Special Report: India's foreign direct investments set to cross USD 50bn in 2015-16; October 3, 2015). Further, based on evolving trends, our forecasts indicated that FDI inflows could also be closer to USD 60bn. While the mark was not quite reached, inflows did reach the halfway mark between the initial and revised forecasts.

India Economy Outlook for 2013-14: 5 key takeaways

The Economic Advisory Council to the PM recently released the document on the ‘Economic Outlook for 2013-14’, essentially for the remaining 2^nd half of the current financial year. Some of India’s near term challenges include slowing growth, fiscal deficit concerns and moderation in capital flows. The report does, however point out to positives as well – like softening in inflation pressures and potential curbing of the current account deficit.