India: Land Lock? The Key is Economics and Equality

- Land: Could rising Tension accelerate Reform? — "In the recent past, developments on Vedanta and the Yamuna Expressway have highlighted development vis-à-vis EEE, Economics/Environment/Equality trade-off. This makes reform imperative on (i) land acquisition related issues and (ii) viable resettlement and re-habilitation policies. To this end, the recent political focus and proposed amendments in land acquisition/mining bills (annuity and royalty/profit sharing) – if implemented could unlock development value that’s currently trapped in land."
- Development Yes, but Likely at a Higher Price — "As India moves to a higher growth trajectory, industrialization and urbanization will necessitate the continuing need for land acquisition. There will constantly be issues that will warrant an effective balancing act between development and the EEE. There could be delays and at times politics may prevail over economics. However, if land reforms do come through, it should speed up economic development but will most surely come at a higher financial cost for business and be supported by higher socio-economic pay-off."
- Macro: Maintain 8.4% Growth Estimates but Revise Current Account Deficit — "India’s monthly trade deficit which was in the US$8-9 bn range in the 1H10 has now widened to US$13bn largely due to the rise in non-oil imports. Consequently, we have revised our trade deficit estimates from US$128bn in FY11 to US$144bn. With estimates on invisibles (software + remittances) unchanged, we now expect the current account deficit (CAD) to widen to US$49bn or 3.1% of GDP from US$35.1bn or 2.2% expected earlier."
- Financial Markets — "On the rupee, taking into account global factors – yen intervention and the run up in CNY, we are maintaining our March 11 and March 12 estimates of Rs45.5/US$ and Rs43.5/US$ due to the rise in the trade deficit. On rates, given that inflation remains significantly above trends, we expect one or possibly two more hikes in the next 6 months. This should take repo and reverse/repo rates to 6.50% and 5.50% respectively vs. our earlier expectations of repo/reverse repo rate at 7% and 6% by Dec 11"


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