Ghosts

The Government of India will borrow $1 billion in Treasury bills and $20 billion in ten year bonds by Friday. GOI needs to add $50 billion to the till by February to keep the lights on in addition to the $50 billion borrowed already.

Borrowing is up because tax revenue is down no matter that Government statisticians claim that the economy grew at 7.9% in the second quarter of this year. The tax guys have still put less in the sack than expected so either they are collecting more and reporting less, friendly assessments, or the statisticians need to goose their models.

Government bond yields before the GDP data was released were at 7.19% for the 10 year and jumped to 7.29%, not because of the GDP numbers but because of the coming supply. The interest rate futures curve in India, yes, there is one, implies interest rates of 8.33% by March 2010.

This growth, or expected growth, comes with a price. The rains in India were less than expected so crop supplies are down and prices are up. India may import essential commodities this fiscal year, and, in the meantime, the 50-100% increase in agricultural line items may run inflation into the double digits so 7% growth is underwater with inflation over 8%.

How bad is it?

The realty fraternity has approached public markets to issue $3 billion in shares, again. They claim that $1 billion of it will be used to repay lenders, $1.3 billion will be used in buying properties that they only partially own, if at all, and the remaining $700 million, well, it is not precisely clear though important to note that Rolls Royce just launched the Ghost in India with a baseline price tag of half a million dollars.

Sounds like about 1400 units sold.