South Asia Investor Review

In a television speech to the nation, Indian Prime Minister Narendra Modi urged his people to make sacrifices by spending less on fuel, fertilizer, and travel. He also asked them not to buy gold for a year. “To save foreign exchange, we must accept the challenge of patriotism,” he said. It appears that India's problems do not just stem from the effects of the US-Iran war; India's problems started well before that. Flight of foreign capital has put the Indian currency under tremendous pressure, with the Indian rupee falling nearly 10% in recent months. Many analysts believe that the Indian IT services exports could fall significantly as the artificial intelligence (AI) models begin to replace the IT workers. It could create a balance of payments crisis that could force India to seek the IMF bailout in the not too distant future.  Already, the Indian economy has slipped to the sixth-largest economy by nominal GDP , dropping from previous projections that had it at fourth. Indian ...

After decades of failed attempts, the Government of Pakistan has finally privatized the Pakistan International Airline (PIA) under intense pressure from the International Monetary Fund ( IMF ). Nonetheless, it is a deal that will give the national airline not only a chance to survive but to thrive in the long run. As part of structuring the sale for Rs. 135 billion, the government has assumed Rs. 654 billion in debt and pension obligations. The government gets only Rs. 10 billion in cash but it gives the new owners a clean balance sheet in return for a commitment to invest Rs. 125 billion of the Rs. 135 billion sale price in the carrier.  PIA Privatization Deal Structure. Source: Standard Capital Securities Pvt Ltd. Pakistani politicians have used state-owned enterprises like the PIA as a vehicle for doling out  political patronage . They have given jobs, including top jobs, to political cronies who have neither the experience nor the inclination to run these PSUs like busines...

The Indian government reported faster-than-expected GDP growth of 8.2% for the September quarter. It came as a surprise to many economists who were expecting a slowdown based on the recent high-frequency indicators such as consumer goods sales and durable goods production, as well as two-wheeler sales. At the same time, The International Monetary Fund expressed doubts about the Indian government's GDP data.  The IMF has recently expressed doubts about Prime Minister Narendra Modi's BJP government's GDP data. It has particularly questioned the government's statistical methodologies, inflation measurement, and the estimates of the informal economy used in reporting the country's gross domestic product. Professor Arun Kumar of Jawaharlal Nehru University believes the IMF's concerns are valid. He thinks the real size of India's economy is only half of what is officially claimed.  “The economy is almost 50% wrong – when the government says it’s $3.8 trillion, my...

Most countries in the world today borrow money from various sources to finance their budget deficits. So do India and Pakistan. So why is it that only Pakistan's borrowing money gets labeled "begging"? Is it not begging when India borrows a lot more money than does Pakistan? Or is it that only borrowing money from the IMF qualifies as "begging"? Let's look into this double standard.  Currently, India's public debt to GDP ratio is 80% while Pakistan's is about 74%. India's private debt to GDP ratio is 17%, twice that of Pakistan. Do these figures mean that India is a bigger beggar than Pakistan?  Debt-to-GDP Ratios Around the World. Source: Visual Capitalist India is consistently among the largest borrowers from International Financial Institutions (IFIs), particularly the World Bank and the Asian Development Bank (ADB). It has been the top debtor to the World Bank for several years and a major borrower from the ADB.  India’s outstanding loan bala...

Pakistan's KSE-100 index soared 86% in 2024, making it the second best among major indexes, according to  Bloomberg  News. The 2024 performance of KSE-100 represents its best year since 2002 when it shot up 112% . The top 3 performing stock markets in 2024 were Argentina (114%), Pakistan (88%) and Kenya (79%), according to Topline Securities. The US markets posted double digit gains with the AI-driven tech-heavy NASDAQ-100 up 27.6%. Small and medium US companies performed well with the Russell 2000 Index edging out India's Sensex with an 8.9% return.   Pakistan Among Top Performing Stock Markets in 2024. Source: Bloomberg Clearly, the $7 billion IMF program helped restore some investor confidence in Pakistan's economy in 2024. It was also boosted by remittances from  overseas Pakistanis  in  July-October 2024 which soared nearly 35% YoY to $11.8 billion as compared to $8.8 billion in July-Oct 2023. The fact that the KSE100 shares valuations relative to...

Pakistan's benchmark KSE-100 index hit an all-time high after the announcement of the $7 billion IMF bailout deal today. Economic indicators such as inflation, exports and remittances are also showing significant improvement as well. Speaking to reporters after the IMF deal,  the Fund Managing Director  Kristalina Georgieva acknowledged progress made by Pakistan. She said  "The economy is on the sound path. Growth is up and inflation is down". The  KSE-100 index rose in early trade to a record high of 82,905.73 points, before giving up those gains later in the day to close 0.7% down at 81,657. It still represents an annual gain of nearly 100%.  Pakistani Stock Market Outperforms Asian Peers. Source: Bloomberg Pakistan rupee has remained essentially stable at around Rs. 277 to a US dollar over the last year. Inflation has come down from 37% last year to less than 10% this year.  Exports have climbed 10.54% ($2.921 billion) to $30.645 billion during the fisc...

Pakistan's KSE-100 shares index topped 80,000 points on Wednesday as stocks climbed more than 600 points, making it the world's best performing stock market. The benchmark KSE-100 index has posted an annual return of 89% during FY24 (July 2023-June 2024) in PKR terms while in US dollar terms, the return was 94%, as the Pakistani rupee appreciated against the US dollar, according to  Pakistani media  reports.  This outstanding market performance is generally being seen as a consequence of a series of unpopular decisions  by the military-backed government of Prime Minister Shahbaz Sharif to carry out economic reforms to win the IMF support.  Pakistani Stock Market Outperforms Asian Peers. Source: Bloomberg Specifically, some analysts attribute the record increase in Pakistani share prices to multiple factors, ranging from the government's investor-friendly budget to the expectation of closing a longer term  IMF deal . Others believe the relatively low price-e...

Shaikh Hasina has won a 5th term in yet another sham election which saw a mere  40%  voter turnout. Bangladesh Nationalist Party (BNP), the main opposition party, boycotted the election. Months leading up to the elections saw protests in the country suffering from economic slowdown, human rights violations and a crackdown on the opposition parties. Her longevity in office is believed to be largely orchestrated by  India . Her own Foreign Minister Abdul Momen acknowledged this fact when he made a trip to New Delhi in 2022 and said,  "I've requested Modi government to do whatever is necessary to sustain Sheikh Hasina's government".  Bangladesh PM Shaikh Hasina (L) with Indian PM Narendra Modi Upon her return from India in 2022, Sheikh Hasina  told the news media  in Dhaka, "They (India) have shown much sincerity and I have not returned empty handed". It has long been an open secret that Indian intelligence agency  RAW  helped install Shaikh Has...

With a new 330 MW mine-mouth coal-fired power plant in Tharparkar, Pakistan has now reached 990 MW of power fueled by the local lignite. Thar coal production is being expanded and plans are in place to convert three more imported anthracite coal fired plants to burn domestic lignite as soon as its production is expanded and a rail link is completed to transport the fuel to the rest of the country. Plans call for using Thar coal in three coal-fired plants currently burning imported coal: Sahiwal Coal Power, China Hub Coal Power and Port Qasim Coal, each of 1,320MW installed capacity. These power plants may require some limited equipment changes to burn domestic lignite. It is worth noting that Pakistan contributes less than 1% of the global greenhouse-gas emissions. Using the higher polluting domestic Thar lignite is crucial to Pakistan's desperate need for cheap energy to spur industrialization for economic growth without running into recurring  balance of payments  crises....

Pakistan's technology export growth is continuing to accelerate with a 51% jump in November 2020 over the same month in 2019. The country's tech exports rose 39% in the first 5 months (July-Nov) of fiscal year 2021 over the same period last year. This came on top of a 21% increase in FY 2020 over FY 2019.  Pakistan Technology Services Growth Pakistan exported $763 million worth of services related telecommunications, computers and information technology from July to November 2020 period. This represented a 39% increase from the same period in 2019. In November 2020, the country exported IT services amounting to $168 million, a 51% jump from tech exports November 2019.  Pakistan Trade Data Currently, Pakistan relies heavily on three categories of products for exports which are often derided as 3 Cs: chadar ( textiles ), chamra (leather) and chawal (rice). Lately, the country has begun to diversify to higher-value added exports like  technology services and pharmaceuticals ...

Pakistan's  economy  has grown at a compounded annual growth rate (CAGR) of about  5% since the 1960s . While Pakistan's average 5% annual economic growth rate is faster than the global average, it falls significantly short of its peer group in Asia. The key reason is that, unlike Pakistan's, the East Asian nation's growth has been fueled by rapid rise in exports. History shows that Pakistan has run into balance of payments (BOP) crises whenever its growth has accelerated above 5%. These crises have forced Pakistan to seek  IMF bailouts 13 times  in its 73 year history. Pakistan's current account deficits would be a lot worse without  23X growth in remittances  from overseas Pakistanis since year 2000.  What Pakistan has experienced is BOP-constrained growth as explained in 1979 by Thirlwall Law, a law of economics named after British economist Anthony Philip Thirlwall.  Another reason why Pakistan has lagged its Asian peers in terms of econo...