Today's chart of the day highlights the rebalancing act that the banks of the developed world are

trying to undertake. It should be noted that in the year 2009, banks in the developed world gave out in loans, a whopping US$ 2 trillion more than what they received in the form of deposits. Needless to say, they filled this gap up with capital market borrowings. The developing world on the other hand, has deposits in excess of the loans that they have made. While this is certainly pointing towards the soundness of the banking system of the emerging markets, it could also be due to the under penetration of credit, a reality at least in India. It would certainly be interesting to see how this ratio shapes up a few years from now when credit penetration in the country would have gone up to pretty significant levels.

Source: The Economist

As China and India shoulder the responsibility of being the engines of global growth, there are a couple of factors that could hold them back. Most important of them being inflation. As seen in today's chart, The Economist predicts both India and China to have a lingering problem of inflation in excess of 4% over the next 4 to 5 years. Unless the respective central banks continue to remain proactive, the price rises could easily take the economies into a bubble territory.

Data source: The Economist

India markets closed the week with a moderate gain of 1.3% while China was the lowest gainer in Asia with gains of just 0.3%. The week began with a bang for markets across the world. The reason was a huge attempt by the European policymakers to prevent the collapse of Greece and the aftershocks thereon. European policymakers unveiled a gargantuan loan package worth US$ 1 trillion. As a result, after last week's bloodbath, Europe saw the highest gains this week. Germany was the biggest gainer of the week (up 6%) globally while France and the UK came close on its heels with gains of 4.9% and 2.7% respectively. The US markets too closed with gains of 2.3%. Oil prices tumbled this week due to high US crude stockpiles, stubborn Eurozone economic concerns and a strong dollar.

Source: Yahoo finance, Kitco, cnnfn

Today's chart of the day is one of the reasons why India's central bank has set its eyes firmly on long-term capital inflows. As the chart highlights, the movement of the Indian rupee against the US dollar has been extremely volatile in the past, driven mainly by short term capital flows. Not only have these flows led to volatile prices of assets such as stocks and real estate, it has also caused significant problems to the people engaged in external trade and services in India. One way out for the RBI would be to resort to greater intervention in the market. However, given India's limited trade surpluses, even this operation cannot be conducted in the manner so desired.

Source: LiveMint

India recently posted its highest ever car sales figure in the decade. China, the world's largest automotive market, increased its car sales by a third. Yet, both these economies fall abysmally short in terms of comparison of vehicle ownership per 1,000 people. As today's chart shows, the fastest growing economies like India and China are way behind their Western peers in terms of vehicle penetration. No wonder the carmakers world over are enticed by the opportunity that these markets present.

Data source: SIAM, UN World Statistics

There has always been disparity as far as the inflation numbers in India are concerned. The difference primarily has been on account of the weightage given to food items in both the WPI and the CPI. And this gap became more pronounced in FY10. In that fiscal, the consumer inflation (CPI) zoomed to 11.7% on account of rise in food prices as monsoons played truant. The fall in wholesale inflation (WPI) was on account of overall meltdown in commodity prices in wake of the global financial crisis. But today's chart of the day shows, that this gap is expected to considerably narrow down in FY11. This is because food prices are expected to cool down as supplies increase.

Data Source: CMIE

Today's chart of the day shows the movement of the Baltic Dry Index (BDI), a shipping index that tracks the price of moving dry materials such as coal, iron ore, and grains by sea. This index is a favourite among the economists as it is considered a lead indicator for economic activity. This is because the cost of moving these goods provides a good indication of economic expansion or contraction.

After recovering some ground post the 2008 crash, the BDI has remained choppy (since June 2009). This clearly indicates that global trade is still not out of the woods.

Data Source: GE Shipping

The past week was a negative for the world markets as all key global indices closed in the red. Europe was the worst hit because of mounting concerns that Greek debt crisis would spread to Portugal and Spain. France was the biggest loser of the week globally while UK and Germany fell by 7.7% and 6.9% respectively. US markets closed with a fall of 5.7%. Today's chart of the day shows the movement of the Baltic Dry Index (BDI), a shipping index that tracks the price of moving dry materials such as coal, iron ore, and grains by sea. This index is a favourite among the economists as it is considered a lead indicator for economic activity. This is because the cost of moving these goods provides a good indication of economic expansion or contraction. After recovering some ground post the 2008 crash, the BDI has remained choppy (since June 2009). This clearly indicates that global trade is still not out of the woods.

Data Source: GE Shipping

In Asia, India closed the week with a decline of 4.5% while China fell by 1.2%. Singapore and Hong Kong markets fell by 5.2% and 5.6% respectively. The biggest loser in Asia was Japan with a fall of 6.3%. Brazil ended the week down 6.9%. Gold was the only asset class that stood tall amidst the ruins, edging higher by 2.4% during the week.

Source: Yahoo finance, Kitco, cnnfn

Source: PTI

For a growing economy like India, fossil fuels are vitally important. But also problematic. India is heavily dependent on imports for them. They also damage the environment. That brings alternate sources of energy into focus. Forms like nuclear, solar and wind energy. But we lack any great sense of urgency about them. As the chart of the day shows, nuclear power generation in India has not gone by much during the last decade. True, it can be attributed to the lack of domestic supplies of nuclear fuel in India and the global isolation India faced post the Pokhran blasts. Let us hope that with progress on the nuclear treaty, India makes rapid strides in this important source of alternate energy. India needs all the power that it can get.

If in 2009, it was all about the BRICs, then 2010 so far has belonged to the developed economies. We are talking about the stock market performance of various countries as indicated in today's chart of the day. No doubt the US has emerged as the best performer and is the only stock market that has put in a positive performance; but the question is for

how long. It is a well known fact that the US economy is on huge steroids of fiscal and monetary stimuli right now and once these are removed, it will become very difficult for the stock markets to sustain their superior performance vis--vis other emerging nations. The emerging nations on the other hand have a lot of factors going for them and over the foreseeable future should be able to outperform the developed world, such temporary bouts of underperformance notwithstanding.

Source: Yahoo finance *Stock market data for the year ended May 5, 2010

The RBI's maiden attempt to check the stability of Indian banks threw up some interesting statistics. While it did paint a reasonably good picture of the asset quality and provision coverage in the system, there was something that drew our concern. The RBI's flexibility and banks' willingness to restructure assets in the recent quarters. While we agree that such measures are necessary in times of economic distress, these could also be a potential hazard in the long run. As today's chart shows, the restructured assets were nearly 3% of the total bank loans at the end of December 2009. If these were to become delinquent, the proportion of NPAs in the banking sector would almost double. These are therefore riskier than the NPAs, which are atleast known evils.

Data source: RBI Financial Stability report

In all other economic matters, there is probably not much to differentiate one BRIC nation from the other. But when it comes to foreign reserves, there is only one BRIC country which towers the rest. As today's chart of the day shows, China is way ahead of Russia, India and Brazil when it comes to foreign reserves in its kitty. Not only has the dragon nation

grown at a scorching rate in the past led by exports, but the pegging of the Yuan to the US dollar has also swelled reserves.

*Foreign reserves at the end of FY10 excluding gold, except in the case of China Data Source: The Economist

Today's chart of the day compares Buffett's performance with the US stockmarkets over a long term period of 45 years (1964-2009). Ironically, there isn't any comparison between the two. During this period, the S&P 500 multiplied by around 54 times. Against this, Buffet's company Berkshire's book value multiplied 4,340 times!

Source: Berkshire annual report

Ever since S&P downgraded Greece, its bonds have taken a beating. So much so that yield on 10-year Greek government bonds has spiked so much that in order to hold it, investors now demand a risk premium of nearly 7 full percentage points over the relatively safe German bonds. While Portugal and Ireland, other of the so called PIIGS group of nations have also seen their risk premiums go up, the damage has not been as severe on the remainder of the PIIGS viz. Italy and Spain. Investors seem to be waiting for their downgrades by the ratings agencies as well before they decide to sell their bonds enmasse.

Source: Economist *Figures have been rounded off to nearest digits

Source: Economic survey 2010

Infrastructure is perhaps the Indian economy's most pressing need. It is the government's job to provide it. But it makes sense to rope in the private sector in whenever possible. They are able to bring in capital, expertise and cost reducing technology. But such public private partnerships (PPP) are not easy to stitch together. As the chart of the day shows, southern and western Indian states have done a better job at attracting PPP projects. Large states like Uttar Pradesh (value of PPP contracts Rs 21 bn) and Madhya Pradesh (Rs 78 bn) pale in comparison. In our view, India's heartland must help their economic cause. And it begins with infrastructure. As skeletons keep tumbling out of the debt ridden economies in Europe, it is necessary to gauge the risk that they pose to other economies as well. Most importantly, to the foreign banks having exposure to their assets. As today's chart shows, economies like that of Germany and France have much to fear from a possible default by Greece. German banks alone have a fifth of the total exposure of US$ 1.8 trillion towards Greece, Portugal and Spain.

Data source: Economist Note: Countries are representative of their respective domestic banks. Assuming 1 Pound = 1.522 US$

The global financial crisis had a huge impact on the flow of capital around the world. So much so that even remittances by migrants were impacted. Having said that, remittances were more resilient last year as compared to private capital flows, which declined steeply. Infact, as today's chart of the day shows, India led the pack in 2009 with remittances totaling US$ 49 bn. What is more, as long as Indians migrate to the US, Middle East and Europe, the likelihood of these inflows waning seems remote.

Data Source: Mint

Today's chart compares the share of gold in India's forex reserves over the past sixty years. And as it suggests, the share is now almost at its lowest - just marginally higher than in 1980. This is despite the RBI buying a huge chunk - 200 tons - of the yellow metal from the IMF recently. The worrisome part is that India holds a majority of its reserves in US dollar denominated assets (bonds etc.). With the dollar tottering at its hind legs, keeping most of the eggs in greenback might turn out to be a bad proposition. So, should India raise its gold reserves further? Probably yes!

Data Source: SEBI Handbook

The past week was a mixed one for the global markets as the western markets ended on a positive note, while their Asian peers recorded losses. Selling pressure in China was witnessed on account of various reasons varying from worries related to the Greece debt crisis, the Chinese government taking measures to cool the rising property rates as well as the suit against Goldman Sachs. However, the Indian markets were the sole gainers amongst Asia this week, with the country's benchmark index, the BSE-Sensex ending higher by 0.6%. Amongst the key global markets, US led the pack of gainers this week with the Dow closing higher by about 2%. Germany followed suit with gains of about 1%. Brazil ended marginally higher, while UK ended marginally lower. China led the pack of losers with losses of about 5%, followed by Hong Kong, which closed down by about 3%. Japan and France ended lower by about 2% and 1% respectively.

Data Source: Yahoo Finance, Kitco

India's already overworked cities are going to get further overworked. That is if you believe in today's chart of the day. It highlights the fact that India is likely to add another 250 m people to its urban cities. A leading business daily estimates that this calls for a massive expansion in urban infrastructure and Indian cities would need a whopping US$ 1.2 trillion dollars to cope with the situation. Or else, the Indian cities risk lowering the quality of life further. Not that it is too great currently! Clearly, infrastructure is proving to be India's biggest bottleneck.

Source: LiveMint

Source: IMF

The International Monetary Fund (IMF) has come out with a revised outlook for GDP growth this year and next. It is now more optimistic than before about the world economy. As the chart of the day shows, the IMF expects the emerging world to greatly outperform the developed world. No surprises in that. What is notable is that India has received the highest upward revision of 1.1% for FY10. In contrast, China has not been revised at all. The US FY10 forecast has been revised upwards by 0.4%. Everyone, from the RBI to the IMF seems to be gung ho about India's GDP growth. Today's chart of the day highlights trade balance of the BRIC nations for the year 2009. It should be noted that with the exception of India, all the other countries have a positive merchandise trade balance. In other words, these countries export more than they import and hence, are able to have a positive impact on their GDP. Although India has a negative trade balance, the size of the same is small, thus minimizing the need for the country to depend a lot on capital inflows to fund its trade balance. Heartening to know that the Government is keen on having the exports pie grow at a rapid pace so that it starts contributing a couple of percentage points to India's GDP growth and thus, take it on a higher growth path much faster.

Source: WTO

Today's chart shows the rise in the number of FIIs registered with the SEBI. FIIs, or foreign institutional investors, have been the major movers of Indian markets in the past. And they continue to wield a heavy influence on Indian stock prices even today. One way we can reduce this dependence is by way of strengthening the domestic institutional and retail investor base. While reforms have been suggested for this to happen over the next few years, we still see a lot of time to pass before something meaningful is seen on ground.

Data Source: SEBI

India's services industry may have grown at a scorching pace over the past many years. But when it comes to its contribution to the world's services market, it is pretty miniscule at 2.6%. As today's chart of the day shows, the US was way ahead of its peers in the services sector as it accounted for 14.2% of the world share in 2009. China, despite being the world's leading merchandise exporter, still has a long way to go before it becomes a force to reckon with in the services arena.

Data Source: The Economist

When Japanese workers have a grievance, they overproduce. True or not, it is a clich often used to highlight India's long history of strikes and lockouts. As the chart of the day shows, India lost about 17 m man days of work to agitations in 2008. Gujarat, Andhra Pradesh, Kerala and Rajasthan are among the worst affected states. In terms of industries, the financial sector records the maximum number of strikes and lockouts. Thankfully, the situation is getting better. The trend, especially for lockouts, is downwards. In fact, the numbers for 2009 are expected to be substantially lower. In our view, while such agitations often get the attention of managements, they come at a considerable cost to the nation.

Source: Labour Bureau, Shimla

Note: GDP per capita as corrected by purchasing power parity Source: World Bank

As the chart of the day shows, India steadily improved its rank among 109 nations for which data of income per head, adjusted for purchasing power is available. In 1975, India was the 90th poorest nation. By 2004, it was the 75th poorest nation. The one nation that outdoes India's performance - no prizes for guessing - is China. It has moved up from 108th rank to 58th during the period, crossing over India somewhere between 1984 and 1994. Surely, both India and China can be expected to move further up in the ranking in the coming years. There are controversies galore on the Chinese currency. But all that has still not changed one thing. And that is its continued dominance on the exports front. As today's chart of the day highlights, the dragon nation has emerged as the largest merchandise exporter in 2009. Also important to note that at US$ 155 bn, India's exports are but a very pale shadow of China's. Little wonder the dragon nation has amassed foreign exchange to the tune of US$ 2 trillion whereas India's reserves keep moving in the range of US$ 250 bn to 300 bn. Clearly, if India has to move people out of poverty faster, it will have to make a bigger splash on the exports front.

Source: The World Trade Organisation

01:05

Chart of the day

It is often said that you either take the destiny in your hands or be prepared to face its uncertain nature. The latter usually holds true for India's agriculture sector. Only 40% of

India's farms are irrigated. Hence, not depending on monsoon rains is virtually out of the question. The end result? India's huge agricultural sector continues to be at the mercy of its uncertain monsoons. And this impacts not only Indian citizens but also dictates how prices of food grains move globally. Sadly, even the track record of India's Meteorological Department (IMD) falls woefully short here. Today's chart of the day highlights this in ample measure. Projections by the IMD have differed significantly from how the monsoons actually played out in the past. And as per the Department's own admission, rain predictions are likely to remain a challenging task in the future as well. Thus, there remains a huge question mark over India's projected GDP growth of around 9%-10% in FY11. If only the powers that be take the destiny in their own hands. And make Indian farms more irrigable.

Data source: Reuters

01:10

Chart of the day

Emerging markets have recorded strong growth in the past few quarter. What is more, this healthy trend has been replicated in manufacturing as well. As todays chart of the day shows, Brazil and India led the pack in terms of highest manufacturing growth reported in February 2010. The developed world (notably the US), however, does not have much to boast about.

Data Source: The Economist

00:00

Chart of the day

Warren Buffett calls this ratio as probably the best single measure of where valuations stand at any given moment'. His disregard for macroeconomics is legendary. But even he is willing to relax his otherwise strict stance on the subject just for this one ratio. It is the ratio of a country's stockmarkets' total market capitalisation to its economic size or GDP. Call it the market cap to GDP ratio'. Over the years, this ratio has done a very good job of determining long-term returns that an investor can expect from the stock markets. As the chart below suggests, for India, the average market cap to GDP number over the past 2 decades has been 52%. Indian markets were trading near this ratio in March 2009 (when this rally started). And as we stand currently, the markets are back at almost their 2008 peak!

Data Source: SEBI

As per Buffett, a 70-80% range on this ratio indicates that markets are somewhere between moderate valuation and fair valuation. If the ratio exceeds 115% (we are almost there!), the markets are in the overvalued zone where odds of investing are not in the favor of investor. This ratio is definitely sending some warning signals for the short term. Isn't it?
00:49

India has done pretty well when it comes to the improvement in the quality of life of its citizens. As today's chart of the day shows, the quality of life of Indian citizens has undergone a healthy change since 1990. What is more, in comparison to its BRIC peers, India is way ahead of Brazil and Russia. And even though it has come second to China, the difference between the two is hardly much to choose from.

* Life expectancy, adult literacy, education enrollment & GDP per person Data Source: The Economist

Source: World Bank, Doing Business 2010

India continues to be notoriously bureaucratic. Not only does that harass the common man, it acts as a roadblock for business. As the chart of the day shows, it takes much longer to enforce a contract in India than most nations. Surely, it is not the complexity of business contracts which makes them so difficult to enforce. Rather it is the multiplicity of enforcing agencies, slow judicial process and just the bureaucratic mindset. In our view, the state simply takes on too much work. Rules are inherited from the colonial times and have been added with layers of even more rules. Clearly, the need is to reform the system. Indian investors have been subjected to a flood of primary market issues in recent months. Not just the private sector but the public sector also took advantage of the buoyancy prevailing in the Indian stock markets and rolled out one issue after another in quick succession. Little wonder, the year turned out to be one of the biggest in recent times in terms of total amount mopped up by the companies. It did not manage to beat FY08 for the simple reason being that the markets started turning buoyant only during the latter half of the year and hence, the first few months of the year were lost. Rest assured, if the current trends persist, the record of FY08 could well be broken in the current fiscal (FY11). What more, this could also mean increased competition in terms of liquidity for the companies that are already listed.

Source: LiveMint

Chart of the day Today's chart draws a comparison in price changes for some key industrial commodities over the last year. And as it shows, copper and rubber have by far outperformed most other commodities during the comparison period. Steel prices are in fact down by around 23% YoY.
01:01

India's economy may be growing nicely at present but when it comes to the state of its trade balances it leaves a lot to be desired. As today's chart of the day shows, India has a trade account deficit nearly close to that of Britain. In stark contrast, its BRIC peers are way ahead on this front as all three have maintained trade account surpluses.

* 12-months ended January 2010, Data Source: The Economist

Today's chart shows how bank credit as a percentage of GDP has risen in India over the past 30 years. The spike, as the chart shows, has come since the start of this century i.e., the year 2000. In FY09, the ratio stood at 52%.

Data Source: RBI

As today's chart of the day shows, 2010 marks the first time in the history of mankind when more people in the world will live in modern cities rather than in rural areas. This trend has been very pronounced globally since the 1950s, and is expected to continue well into the future. While most of this urbanisation in the past has come from the developed western world, we expect most of this incremental urbanisation in the future decades to come from developing countries like India and China. It is a well established fact that in general, the level of consumption is much higher in an urban population when compared to rural folk. Thus the good news for our own companies back here in India is that as more and more people living in India's vast hinterland move towards a more modern lifestyle over the long term, we can surely expect a huge expansion of not only consumption but also of corporate India's customer base, and consequently its earnings.

Data Source: Earth Policy Institute

Chart of the day Deals like Tata -Corus, Hindalco-Novelis and the recent Bharti - Zain may seem to be taking Indian companies places. However, the underlying facts prove otherwise. Although these large deals have taken India Inc to the global map of foreign investments, the cumulative FDI of Indian companies are dwarfed by their foreign counterparts. As today's chart shows, Indian companies had invested US$ 77 bn in the form of FDI until December 2009. This was a third of the FDI by Chinese companies. And a paltry 2% of the FDI by American companies.
01:12

Data source: CIA

If today's chart of the day is any indication, India's banking sector does look to be in extremely safe hands. We say so because inspite of the varied economic conditions that the Indian economy was subjected to, the ROE of the sector has remained well within acceptable limits. What more, the small contraction that happened in FY08 was a consequence of the equity base of the banks growing at a higher rate than other assets. This is a matter of great comfort as it strengthens the shock absorbing capacity of the banks and does indeed augur well for the future of the sector.

Source: RBI

Data source: CIA

Economic power may not remain at a particular destination forever. It could move from richer nations and individuals to the relatively poorer ones over a period of time. The economically deprived strive to achieve their financial goals. While those already doing well in monetary terms, tend to get a little complacent and in the bargain, gradually lose their economic superiority. We have more than 200-years history to prove this point. Economies like India and China lost their supremacy in global economy since the early part of the 18th century. Whereas the share of US economy went up from 2% in 1800's to 27% in 1950s. Since the 1980s however, the Amercians have got complacent with their growth. And what we are lately witnessing in the US economy was referred to by Bill Bonner at the Equitymaster Investment Summit 2010 as The Great Correction. As today's chart shows, economic power is now slowly but surely moving from the West to the East.
01:22 Chart of the day While banks in India continue to complain about a very slow offtake of credit, there is something they are missing out on. The trend of growth in retail housing credit. The demand for home loans from retail customers which had lagged the overall demand for credit since mid-2007 is showing signs of resurgence. This is certainly a good indicator of inclusive growth in the economy, as loans to builders and real estate companies do not form part of this. Also, as per the biggest home loan providers, a third of incremental home loans

are given to first time buyers. We believe this is the most encouraging sign for a growing economy, unless the retail buyers are overleveraging.

Data source: RBI Financial Stability Report

01:03

Chart of the day

Source: The Economist

Despite all the progress human civilization has made, a sizeable chunk of it lives in appalling conditions. And some of the most appalling living conditions tend to be in urban slums. Thankfully, the share of the world's urban population living in slums has fallen from nearly 40% a decade ago to less than 33% today. As the chart of the day shows, India is among the countries where the proportion of urban slum dwellers has reduced over time. In fact, China and India have together lifted 125m people out of slums in the recent years. Unfortunately, the absolute number of slum dwellers is only growing. Hence, there is still a huge scope of improvement. The Q4 2009 GDP numbers have a familiar story to tell. As today's chart of the day shows, China and India seem to have left the global crisis far behind what with their economies growing strongly. In India's case, strong growth in manufacturing and services more than made up for the poor growth in agriculture. China's growth was driven by various stimulus measures injected by the Chinese government and considerable rise in lending by banks. But now fears of a bubble bursting in China have begun to emanate. Although growth in the US was flat, it was nevertheless better than its European peers. The latter especially

reported a decline in GDP during the quarter with some European nations in danger of committing sovereign defaults.

Data Source: The Economist

The US may be worried over its citizens and corporate having got into the habit of borrowing too much and saving too little. However, we in India have a completely different story to tell. As per the RBI, the per capita deposits in Indian banking system is nearly 1.4 times the per capita loans. While this certainly affirms the theory that Indians are good savers, it does raise some concerns. Prime amongst them being the tendency of India Inc to borrow abroad at cheaper rates. So while Indians may be having a healthy saving rate in banks, are we relying too much on non bank funding for loans?

Data source: RBI bulletin, CMIE

What sort of money is good for India? FII or FDI? We believe it is the latter type of money that is better for India. As the year FY09 has amply demonstrated, FII money tends to be really volatile and could lead to huge asset price shocks when things turn bad. On the other hand, they also tend to fuel inflation and create asset bubbles when the going is good. The FDI money on the contrary, tends to be more long term in nature and helps in nation building by creating real on the ground assets. It is not as if the FII money does not achieve the same objective. However, in India, a greater part of the FII inflows, especially in equities are speculative in nature and hence, not that useful to the real economy. Thus, the increase in FDI inflows into India in the near future is indeed heartening. While the FII inflow is also expected to remain buoyant, we just hope that most of it is also long-term in nature. Otherwise, be prepared for a volatile ride.

Source: LiveMint

If the proportion of women in a country's parliament is any indication of their rising stature in the society, Indian women have a long way to go. This is considering that only 11% of India's parliamentarians are women. As compared to this, 20% of Chinese parliamentarians are women. The recent passage of the women's reservation bill is thus seen by many as a way to empower more women to reach the pinnacle of Indian politics.

Source: Nationmaster.com, CNN; Note: 2010 data for India, 2006 for other countries