Parallel Universe: India Edition

More signs of parallel universes or divergences between the real economy and the financial markets

From the Voice of America September 10 report 

As a plunging currency and a slowdown in consumption hamper India’s once vibrant economy, many industries are facing the prospect of plummeting profits.

Usually at this time of the year, consumer companies look ahead to windfall profits. Starting in September, consumption increases because it is considered auspicious to buy new products such as cars and televisions for the main Hindu festival, Diwali, to be celebrated in November.   

But this year the mood in most corporate headquarters is pessimistic. The reason: the plunging rupee. India’s currency has lost nearly 20 percent of its value in recent months, pushing up costs for companies that rely on imports of raw materials. That is a large number ranging from electronics to automobiles.

Nope. Untrue. Not from the way India’s stock market has recently behaved where the BSE index is seem as just a breathe away from the this year’s highs. 

This world has been full of surprises. In just about two weeks India has undergone a dramatic transformation coming from a brink of a crisis to a state of euphoria-nirvana.

And these have been one major reason why people have seen markets as having only one direction: up up and away! Risks have all vanished!

The rallying Indian rupee or USDINR (yahoo)

Yields of India’s 10 year bonds seem as hardly receptive to the stock market and the rupee. 

[Bloomberg’s chart has not been updated to include yesterday’s close so I put on my “update” via the red line.]

Has the transformation been real? Has the newly installed Rajan led central bank delivered the miracle?

Well the jury is out whether all these are sustainable or if they are mirage.

India Crisis Watch: Is it Panic Time?

Have the average Indians been in a panic?

Sovereign Man’s Simon Black says current indicators point to a yes:

For the last 24-hours, banker and fund manager friends of mine have been telling me stories about oil refinery deals in North Korea, their crazy investments in Myanmar, and the utter exodus of global wealth that is finding its way to Singapore.

My colleagues reported that in the last few weeks they’ve begun seeing two new groups moving serious money into Singapore– customers from Japan and India.

Both are very clear-cut cases of people who need to get their money out of dodge ASAP.

In Japan, the government has indebted itself to the tune of 230% of GDP… a total exceeding ONE QUADRILLION yen. That’s a “1″ with 15 zerooooooooooooooos after it.

And according to the Japanese government’s own figures, they spent a mind-boggling 24.3% of their entire national tax revenue just to pay interest on the debt last year!

Apparently somewhere between this untenable fiscal position and the radiation leak at Fukishima, a few Japanese people realized that their confidence in the system was misguided.

So they came to Singapore. Or at least, they sent some funds here.

Now, if the government defaults on its debts or ignites a currency crisis (both likely scenarios given the raw numbers), then those folks will at least preserve a portion of their savings in-tact.

But if nothing happens and Japan limps along, they won’t be worse off for having some cash in a strong, stable, well-capitalized banking jurisdiction like Singapore.

India, however, is an entirely different story. It’s already melting down.

My colleagues tell me that Indian nationals are coming here by the planeful trying to move their money to Singapore.

Over the last three months, markets in India have gone haywire, and the currency (rupee) has dropped 20%. This is an astounding move for a currency, especially for such a large economy.

As a result, the government in India has imposed severe capital controls. They’ve locked people’s funds down, restricted foreign accounts, and curbed gold imports.

People are panicking. They’ve already lost confidence in the system… and as the rupee plummets, they’re taking whatever they can to Singapore.

As one of my bankers put it, “They’re getting killed on the exchange rates. But even with the rupee as low as it is, they’re still changing their money and bringing it here.”

Many of them are taking serious risks to do so. I’ve been told that some wealthy Indians are trying to smuggle in diamonds… anything they can do to skirt the controls.

(This doesn’t exactly please the regulators here who have been trying to put a more compliant face on Singapore’s once-cowboy banking system…)

The contrast is very interesting. From Japan, people who see the writing on the wall just want to be prepared with a sensible solution. They’re taking action before anything happens.

From India, though, people are in a panicked frenzy. They waited until AFTER the crisis began to start taking any of these steps. As a result, they’re suffering heavy losses and taking substantial risks.

Indian’s financial markets have been in a terrible mess.

The rupee has been taking it to the chin down by 21.6% year to date and counting.

Yields of the Indian government’s 10 year bonds has touched US crisis 2007 highs but has retraced. 

If the panic in the rupee escalates, India’s bonds will take more damage.

India’s equity markets the Sensex has been under pressure but has not encroached into the bear market yet, unlike ASEAN peers

The run in the rupee comes amidst India’s huge forex reserves. Another proof that reserves alone are not enough to prevent a run.

The reason for the rupee’s fall, desperate government unwilling to undertake reforms but has instead turned the tables on the private sector via gold sales prohibition and expanded capital controls. Thus the panic.

With free market champion Raghu Rajan assuming office only in September 4th, media has been optimistic that the new governor will be able to institute reforms. One of the early reforms which will supposedly be undertaken by Mr. Rajan has reportedly been to allow trade settlement in rupees. But mainstream media repeatedly calls for “expansionary policies” which ironically has been one of the main causes of India’s predicament.

Mr. Rajan will be faced with a huge stumbling block as I previously noted.

While it may be true that Mr. Rajan has a magnificent track record of understanding central banks and the entwined interests of the banking system coming from the free market perspective, in my view, it is one thing to operate as an ‘outsider’, and another thing to operate as a political ‘insider’ in command of power.

Mr. Rajan will be dealing, not only conflicting interests of deeply entrenched political groups, but any potential radical free market reforms are likely to run in deep contradiction with the existing statutes or legal framework from which promotes the interests of the former.

The other source of media optimism has been in reports that the BRIC will forge a $100 billion currency swap pool. All these arrangements will be futile and only symbolical unless the real sources of India’s economic malaise are dealt with.

But if the panic in rupee will spread and incite major damages in the domestic banking system, where loans from the banking system represents 75% exposure on the economy, a crisis may be in the offing

And considering what appears as skyrocketing bond yields globally led by the US, time may be running out. 

No wonder the legendary investor Jim Rogers has been short India.

Yet if the rupee meltdown persist and worsen, such will compound on the gloomy environment for Asia. 

Caveat emptor.

More Signs of the End of Easy Money: Following Brazil, the Indian Government Raises Interest Rates

The return of the bond vigilantes has prompted the Brazilian government to  set the trend of hiking interest rates, now it seems as India’s turn.

From Businessweek-Bloomberg:

India stepped up efforts to help the rupee after its plunge to a record low, raising two interest rates in a move that escalates a tightening in liquidity across most of the biggest emerging markets.

The central bank announced the decision late yesterday after Governor Duvvuri Subbarao earlier in the day canceled a speech to meet the finance minister. The RBI raised two money-market rates by 2 percentage points and plans to drain 120 billion rupees ($2 billion) through bond purchases.

Indian rupee forwards jumped the most in 10 months, and the RBI’s move yesterday left Russia as the only BRIC economy to not have reined in funds in its financial system. Brazil has raised its benchmark rates three times this year and a cash squeeze in China sent interbank borrowing costs soaring to records last month.

Media recently cheered on the one month contraction from record trade deficits largely due to gold import and trade curbs.

Yet if the rupee-US dollar exchange ratio continues to decline or if the USD-rupee persist to ascend as shown above, then statistical data may not reflect on the real state of affairs.

Gold restriction mandates have only been diverting India’s gold trade underground. Gold smuggling has massively risen, partly channeled through Nepal. 

Decline in India’s rupee has equally been reflected on consumer price inflation which increased to a three month high.

A curious mind would ask why, given India’s relatively low inflation and interest rate levels, has these been prompting alarm on Indian authorities for them to act to tighten?

Well, the obvious answer is that today’s systemic debt have reached epic proportions as shown by domestic credit % to the economy.

It’s not just domestic debt but also India's external debt has sharply risen to record highs.

All these has made India’s economy and financial system highly vulnerable to interest rate increases. (above charts from tradingeconomics.com)

But these governments sees the risks in the currency spectrum as potential tinderboxes for a crisis, and thus opt for the interest rate medium to effect policy changes.

As I have been pointing out, one cannot just compare with past data in analyzing economic events, that’s because, there are multitude of changes happening real time. 

So what may seem as relatively “low” interest rates and “low” consumer price inflation today, may be “high” relative to the changes in the debt position.

Nonetheless, theoretically the bigger the debt, the more sensitive debt conditions are to interest rate increases, which likewise implies of the amplification of credit risks.

So far India’s stock market, represented by the BSE 30, after falling 9% in reaction to “tapering” fears, from the May’s peak, appears to be challenging the record highs. Dr. Bernanke’s "put" has put an oomph to the latest rally. 

In contrast, stock markets of Brazil, China and Russia continues to flounder.

Also I pointed out that Turkey's officials previously announced measures to use record foreign currency reserves to combat the bond vigilantes, they seem to have a change of heart, after the initial forex measures, as predicted, have apparently failed to stanch the decline of the lira. 

Now, Turkish monetary officials are contemplating to likewise tighten via the interest rate channel.

Brazil and India’s tightening, brought about by the return of the bond vigilantes, which will likely to be a trend for many more emerging markets as Turkey and Indonesia and possibly too on developed economies, are deepening signs of the transition from easy money to the tight money. 

It would be reckless to ignore the risks of disorderly market adjustments should bond vigilantes continue to run berserk.

Why the Indian Government’s War on Gold will Fail

Prime Minister’s Economic Advisory Council (PMEAC) Chief C Rangarajan has declared that India’s love affair with must be contained. Gold imports must be substantially reduced from 1,000 tonnes a year to 700 tonnes.

The imperative to contain gold import has become urgent. The recent surge in gold demand is however creating some distortions and need to be rolled back to boost growth by reversing the trend of declining financial savings and keeping CAD* within prudent limit by contain gold demand.

*CAD-Current Account Deficit

India’s government has essentially placed the burden of the Indian economy on gold. And in doing so, they justify the reinforced holistic campaign against the precious metal.

Coincidentally, India’s stepped up war on gold comes amidst the ongoing Wall Street incited crash.

The Mineweb’s Shivom Seth wonderfully explains how the campaign against gold by India’s government is being orchestrated through various fronts. 

First India’s government proposes to provide an inflation hedge alternative: government inflation indexed bonds (bold mine)

It could have posed as a model scheme to curtail gold imports. In order to stifle India’s appetite for gold, the government has introduced inflation index bonds. The first tranche amounting to around $364 million (R20 billion) is to be introduced on June 4.

Inflation Indexed Bonds (IIBs) are a new category of debt instruments to be introduced in India, where the coupon and principal amount would be linked to the rate of wholesale price inflation with a lag of four months. The authorities have said the objective of introducing such bonds is to channelise savings into productive sources of instruments from unproductive ones like gold.

Slowly but surely, there seems to be an anti-gold campaign that is at play in India. The concerted effort by the Indian government to discredit gold by imposing several curbs, and channelise consumers away from the precious metal, indicates a desperation that has not gone unnoticed by savvy investors.

“The government is making it too expensive for retailers to sell gold, especially when prices have hit new all-time lows. Retailers are forced to apply hefty mark-up given the new curbs,” said Manohar Kedia, of Kedia Jewellery House.

Government inflation indexed bonds are being forced upon the average Indians, as the Indian government’s onslaught to curb the gold trade has intensified. 

India’s war on gold now covers higher taxes or tariffs and import bans and limits.

Knowing fully well that Indians cannot keep away from gold for long, the Reserve Bank of India first hauled up banks for selling gold coins, then came down hard on gold retailers and bullion houses. Now, they have turned their attention on investors, urging them to invest in debt instruments.

Further, in order to moderate the demand for gold for domestic use, the government has also restricted the import of gold on a consignment basis. A major bullion retailer in Mumbai said this would prove to be a major hurdle for exporters.

For, only those exporting gold jewellery will first have to impose on banks for each consignment, given that banks will henceforth be allowed to import gold only to meet the genuine needs of exporters of gold jewellery.

The Indian government's genuine but unstated objective have been to capture or corral people’s savings, by diverting them into the government regulated or controlled banking system, and use such savings to finance a chronically insatiable and profligate government.

India's "declining financial savings" has hardly been because of gold but because of rapacious government spending.

India’s government has more than doubled the rate of spending over the past 9 years. Such spending binge has exploded the the government’s budget deficits since 2009. (charts from tradingeconomics.com)

The intensive growth in food subsidies has been part of the such spending spree, as shown by the chart above from the Reuters. Food subsidies are expected to swell by about 40% in 2014.

The Indian government has been subsidizing many industries. Subsidies according to Wikipedia accounts for 14% of the the Indian economy in 2015 (note: not government budget). 

Yet subsidies has led to huge losses: as much as 39% of subsidized kerosene has been  stolen, and as I pointed out last year, politicians looted food subsidies to the tune of $14.5 billion!

Aside from food subsidies, the Indian government has joined the global bandwagon of stimulating the economy nearly a year ago or in June 2012, with various forms of fiscal spending mostly in infrastructure. Thus the spending ratios should be more today

Such lavish spending has resulted to expanding the debt.

Even as debt to GDP has been shrinking, the Indian government’s external debt has massively ballooned over the same period. 

This only means that the accrued government spending has been funded by debt acquired from external sources.

Again the debt to gdp metric is hardly a reliable statistical indicator because the denominator (GDP) can be driven by a credit boom and not by real growth. This is currently the case with India. India’s domestic credit to private sector has reached the highest level ever at 50.6% in 2011. India has an ongoing bubble.

While India’s foreign reserves remain near record highs, exploding fiscal deficits and ballooning external debt has led to sustained weakness in her currency, the Indian rupee.

In short, the frantic Indian government has been passing the blame on gold on what truly has been a problem of political greed via fiscal intemperance.

Importantly, the Indian government’s attack on gold represents a duplicitous move. 

While the government wants access on the private sector’s savings via the banking system (which aside from funding governments will incur various taxes and fees), the desire to reduce the public’s gold holdings by holding paper money, the rupee, means governments would also impose “the inflation tax”. 

So bank depositors will be hit by low interest rate, inflation tax, various fees and will be forced to hold and finance government debt, in favor of the government (who may default).  

One can’t rely on statistical inflation figures to accurately represent real conditions. Statistics are likely to be manipulated for the purposes of financial repression or government plunder of private sector resources. Thus, much of the average Indians will unlikely fall for such 'inflation indexed bonds' subterfuge.

So like anywhere else, governments have been resorting to direct and indirect confiscations with increasing frequency and intensity. 

Signs of boom days eh?

More entwined reasons why India’s war on gold will fail.

Gold has both cultural and monetary essence to the average Indians.

As the Deccan Gold Mines enunciates: (bold mine)

Over centuries and millennia, gold has become an inseparable part of the Indian society and fused into the psyche of the Indian. Having passed through fire in its process of evolution it is seen as a symbol of purity, the seed of Agni, the God of fire. Perhaps this is why it is a must at every religious function in India. Gold has acted as the common medium of exchange or the store of value across different dynasties in India spanning thousands of years and countless wars. Thus wealth could be preserved inspite of wars and political turbulence. For centuries, gold has been a prime means of saving in rural India.

Next as related to the cultural-religious context, India’s history has been littered with economic crises and even currency problems

To account for a recent history here is Wikipedia

Since 1950, India ran into trade deficits that increased in magnitude in the 1960s. The Government of India had a budget deficit problem and therefore could not borrow money from abroad or from the private sector, which itself had a negative savings rate. As a result, the government issued bonds to the RBI, which increased the money supply, leading to inflation. In 1966, foreign aid, which was hitherto a key factor in preventing devaluation of the rupee was finally cut off and India was told it had to liberalise its restrictions on trade before foreign aid would again materialise. The response was the politically unpopular step of devaluation accompanied by liberalisation. The Indo-Pakistani War of 1965 led the US and other countries friendly towards Pakistan to withdraw foreign aid to India, which further necessitated devaluation. Defence spending in 1965/1966 was 24.06% of total expenditure, the highest in the period from 1965 to 1989. This, accompanied by the drought of 1965/1966, led to a severe devaluation of the rupee. Current GDP per capita grew 33% in the Sixties reaching a peak growth of 142% in the Seventies, decelerating sharply back to 41% in the Eighties and 20% in the Nineties.

Aside from the rupee chart above, the following table shows how the rupee slumped relative to the US dollar from a conversion rate of 4.79 rupee/US in 1950 to 45.83 rupee/US in 2010.

One would also notice that from a base point of zero in 1975, inflation surged to 126 in 2010. And despite the plummeting rupee, through 1975 per capita income as % of the US has gyrated from 1.5% to 2.18%. This means that whatever growth India has posted over the years has failed to keep at the rate of the growth in the US. 

In short, devaluation has not solved what has been a problem of politicized economy.

This brings to fore the lessons from the great Austrian economist Ludwig von Mises

The economic backwardness of such countries as India consists precisely in the fact that their policies hinder both the accumulation of domestic capital and the investment of foreign capital. As the capital required is lacking, the Indian enterprises are prevented from employing sufficient quantities of modem equipment, are therefore producing much less per man-hour, and can only afford to pay wage rates which, compared with American wage rates, appear as shockingly low.

There is only one way that leads to an improvement of the standard of living for the wage-earning masses — the increase in the amount of capital invested. All other methods, however popular they may be, are not only futile, but are actually detrimental to the well-being of those they allegedly want to benefit.

What India requires is not to regulate or prohibit gold but to further liberalize or depoliticize the economy. 

Unfortunately politics is about smoke and mirrors rather than the upliftment of the general welfare

Another huge reason such campaign will fail is due to the informal economy. 

The informal economy means low banking penetration levels.

From DNB.com.in

With regard to financial access and penetration, India ranks low when compared with the OECD countries. India offered 6.33 branches per 100,000 persons whereas OECD countries provided for 23-45 branches per 100,000 people in 2009. For India, the number of branches and ATMs per 100,000 persons has increased to 7.13 and 5.07 in 2010.

In India, the penetration of banking services is very low. Merely, 57% of population has access to a bank account (savings) and 13% of population has debit cards and 2% has credit cards. This represents the unmet demand and the scope for expansion for the banks in India.

And prohibition of gold and offering inflation indexed bonds as alternative will hardly improve on banking penetration levels hobbled by overregulation.

And because of intensive politicization of the Indian economy, a significant segment of India’s growth has been in the informal economy

From Businessworld/Bloomberg: (bold mine)

The size of India’s “informal” economy, meanwhile, handicaps efforts to track the number of Indians who are gainfully employed. Four out of five urban workers—who collectively produce an estimated three-quarters of the country’s output—are informally employed. That means their work does not show up in official figures on productivity, innovation, social mobility and other standard metrics of progress. It’s possible to debunk some of the myths about India’s work force—three-quarters of self-employed workers in urban areas, for example, are in single-person businesses or family enterprises without hired labor, rather than upwardly mobile entrepreneurs—but a clear picture of exactly how many Indians are working, and where, remains elusive.

The informal economy, hence, represents political or government failure from which India's government has taken gold as the 'fall guy'.

Finally, gold fits to a tee the informal economy

From the Economist (bold mine) 

Pune’s wide boys aside, the traditional gold consumers are southern peasants buying jewellery. They have no access to formal finance; gold requires no paperwork, incurs no tax and is liquid. But over the past decade the mania has spread. By weight consumption has doubled, for several reasons: a surge in money earned on the black market; investors chasing the gold price; and the dismal returns savers get from deposit accounts. Real interest rates are low, reflecting high inflation and a repressed financial system that is geared to helping the state finance itself.

Another significant factor why the war on gold will fail is political insanity: doing things over and over again and expecting different results. 

Attacking gold as part of financial repression measures has previously failed, it shouldn't be different this time

From the same Economist article:

India has tried coercion. Between 1947 and 1966 it banned gold imports. After that it used a licensing system. Neither worked. Smuggling soared and policymakers were reduced to tinkering with airport-baggage allowances. By 1997 trade was liberalised.

All these political pretenses which are really intended as confiscations of private savings whether through gold, cash transactions, bank deposits or bitcoins (cryptocurrencies) will eventually be exposed for the fraud they are.

India's war on gold will only intensify the growth of smuggling and the informal economy.  

India's war on gold signifies also an expression of growing desperation by the Indian political class over their hold on power whose economy has partly been buoyed by credit bubbles.

India's war on gold could likewise be a part of the grand design of the cabal of political institutions or the banking system, central banks and welfare warfare states led by Wall Street in working to preserve the current unsustainable system by spreading disinformation and by the manipulation of the markets in order to dissuade the public on currency alternative options as gold or bitcoins.

Massive Earth Hour (Blackouts) in India

Massive power outages in India has affected more than half of the population.

From the Bloomberg, (bold highlights mine)

India’s electricity grid collapsed for the second time in as many days, cutting off more than half the country’s 1.2 billion population in the nation’s worst power crisis on record.

Commuter trains in the capital stopped running, forcing the operator, Delhi Metro Rail Corp., to evacuate passengers, spokesman Anuj Dayal said. NTPC Ltd. (NTPC), the biggest generator, shut down 36 percent of its capacity as a precaution, Chairman Arup Roy Choudhury said by telephone. More than 100 inter-city trains were stranded, Northern Railway spokesman Neeraj Sharma said, as the blackout engulfed states in the north and east.

So what went wrong?

From the same article…

State-owned Power Grid Corp. of India Ltd., which operates the world’s largest transmission networks, manages power lines including in the northern and eastern regions. NTPC and billionaire Anil Ambani-controlled Reliance Power Ltd. (RPWR) operate power stations in north India that feed electricity into the national grid. The northern and eastern grids together account for about 40 percent of India’s total electricity generating capacity, according to the Central Electricity Authority.

The grids in the east, north, west and the northeast are interconnected, making them vulnerable, said Jayant Deo, managing director of the Indian Energy Exchange Ltd. The outage has also spread to seven additional states in the northeast, NDTV television channel reported.

“Without a definitive plan by the government to gradually bring the grids back online, this problem could absolutely get worse,” Deo said.

Singh is seeking to secure $400 billion of investment in the power industry in the next five years as he targets an additional 76,000 megawatts in generation by 2017. India has missed every annual target to add electricity production capacity since 1951.

Well in reality, the root of the problem hasn’t been about ‘definite plans’ by the Indian government, but rather largely due to India’s statist political economy.

Again from the same article…

Improving infrastructure, which the World Economic Forum says is a major obstacle to doing business in India, is among the toughest challenges facing Singh as he bids to revive expansion in Asia’s third-largest economy that slid to a nine- year low of 5.3 percent in the first quarter.

Tussles over policy making with allies in the ruling coalition, corruption allegations and defeats in regional elections have weakened Singh’s government since late 2010.

Must I forget, artificial electricity demand has partly been boosted by India’s central bank, the Reserve Bank of India (RBI), who passes the blame on others.

Again from the same article

The Reserve Bank of India, which has blamed infrastructure bottlenecks among others for contributing to the nation’s price pressures, today refrained from cutting interest rates even as growth in the $1.8 trillion economy cooled to a nine-year low in the first quarter.

Indian consumer-price inflation was 10.02 percent in June, the fastest among the Group of 20 major economies, while the benchmark wholesale-price measure is more than 7 percent.

The last time the northern grid collapsed was in 2001, leaving homes and businesses without electricity for 12 hours. The Confederation of Indian Industry, the country’s largest association of companies, estimated that blackout cost companies $107.5 million.

Chart above from global-rates.com and tradingeconomics.com

India’s bubble ‘easy money’ (upper window) policies in 2009-2010 fueled a stock market recovery (below window) in 2010.

On the other hand, the then negative interest rate regime also stoked local inflation (pane below policy interest rates).

This has prompted the Reserve Bank of India to repeatedly raise policy rates or tightened monetary policy. The result has been to put a brake on India’s economy and the stock market rebound.

Part of the Indian government’s attack on her twin deficits, which has been blamed for inflation through the decline of the currency, the rupee, has been to turn the heat on gold imports and bank gold sales.

Aside from demand from the monetary policies, electricity subsidies has also been a culprit. Farmers have been provided with subsidized electricity. Such subsidy has not only increased demand for power but also put pressure on water supplies.

Environmentalists would likely cheer this development as ‘Earth Hour’ environment conservation.

Yet India’s widespread blackouts are evidences and symptoms of government failure.

Rampant rolling blackouts extrapolate to severe economic dislocations which not only to means inconveniences but importantly prolonged economic hardship.

India's Surging Markets Lures Companies From The Government and The Private Sector To Raise Financing

Surging financial markets in India have lined up companies from the private sector and government to raise financing.

From the trough, India's BSE 30 is up about 84% and is 26% shy from its 2008 peak.

The Indian rupee has also rallied furiously since the simultaneous trough in the stock and currency markets.

According to the Wall Street Journal, ``So far this year, issues of new shares have been scarce. But with the Bombay Stock Exchange's benchmark index at a 10-month high, many companies have plans to raise capital to bolster balance sheets and fund growth, bankers say.

``The new government's budget, scheduled for release in early July, also could usher in new sales of stakes in public companies. The frenzy may be welcome news to investors looking to ride a rapid rise in India's stock market over the past few months...

``Data provider Thomson Reuters expects $50 billion of new shares to be issued in India this year. So far, there has been just $1 billion.

The newly elected government is also in a rush to join the financing bandwagon.

Again from the same article, ``On the IPO front, state-owned hydro-power outfit NHPC Ltd. and oil-exploration company Oil India Ltd. are expected to issue shares. On Monday, Rahul Khullar, the outgoing top bureaucrat in the department in charge of state company disinvestment, said the government is likely to sell stakes in NHPC and Oil India by September, followed by six to seven other companies before March 31, 2010.

``The government's budget could offer further divestment plans amid the need to stimulate the economy without severely worsening the fiscal deficit.

``Air India, India's national airline, and state-run telecommunications company Bharat Sanchar Nigam Ltd., or BSNL, are likely to sell some shares, market watchers say."

The phenomenal activities in India are likely to be replicated in major Emerging Markets and in Asia.