India buys US debts worth $38.2 bn in just one year

[LETHALFORCE]

India buys US debts worth $38.2 bn in just one year- Finance-Economy-News-The Economic Times

India buys US debts worth $38.2 bn in just one year
24 May 2009, 1334 hrs IST, PTI

NEW YORK: As the recession-hit US economy is groping in the dark over uncertain financial position, India has increased its exposure to American

debt securities by over three-fold to $ 38.2 billion till March compared to the year-ago period.

The emerging nation's investment in the US debt stood at $ 11.8 billion in March 2008.

According to the data from the US Treasury Department, India has bought American debt instruments worth $ 38.2 billion till March 2009.

Interestingly, India's exposure to US debt has surged by about $ 20 billion since October 2008, when the ongoing financial turmoil turned for the worse. The world's largest economy was rattled by the then-famed Lehman Brothers filing for bankruptcy in mid-September.

Considered to be one of the safest investment bets, India had invested $ 18.3 billion in October 2008 in the American securities, which soared to $ 38.2 billion in March.

Among the foreign countries, neighbouring China has the highest investment of $ 767.9 billion.

Japan, the world's second largest economy has invested $ 686.7 billion in US debts till March 2009.

The American economy officially entered into recession in December 2007 and has contracted at a rapid pace in the previous two quarters.

In the first three months of this year, the US GDP shrank 6.1 per cent, whereas it had declined 6.5 per cent in the December quarter.

Though corporates, banks and other financial institutions can purchase the bonds, in the case of India, the Reserve Bank accounts for large part of the lending.

On the other hand, the number of bank failures in the US are rising almost every week, reflecting the weak financial situation. More than 46 banks have been closed since September 2008 and a majority of them are small and regional lenders.

The US authorities has come up with many measures, including the $ 700 billion rescue package and plans to mop up toxic assets worth nearly $ 1 trillion from the financial system, to revive the economy.

 

[Yusuf]

India getting sucked too into this?

 

[Pintu]

India's share in the US debt market are of 4.9% that of China and 5.5% of Japan respectively, but if the debt market falls further, can this mean the money invested can not be recoverable?

As I am not a student of economics, however, I have no idea about its effect on Indian economy, please any of the respected forum members shade some light on this.

Regards

 

[thakur_ritesh]

frankly speaking i do not see any thing bad in this, there is all the talk of US economy reviving in a year's time, and if the so called experts are going to prove their predictions right then i can see these investments yielding some very handsome returns and from the looks of it at least at this moment it seems the US economy has bottomed out and has seen the worst and hopefully the worst is in the past. india has reposed faith in the US economy and i have the confidence in the decision because the indian govt and indian central bank were the very few who could sense the disaster of global melt down coming our way some time in mid 2007 and by the time the world was hit by the tsunami we had counter measures in place which have helped us from being in complete doldrums as has been the case with most economics world wide, an initiative india has been repeatedly appreciated for. there was a lot of talk in 2007 that india should go the prc way in buying these debts but this talk fizzled out since then it was felt the best use of the forex reserves would be by investing a part of it in the infra sector but as was to be the case, people away from news headlines were busy buying these debts when most wanted to get out of these terrible investments as per them, they say timing is the key and it seems we have got the timing right. this further reaffirms the fact that there was never any real flight of capital from india as had been projected, on the contrary there were some very good inward investments a fact that got overlooked by our ever sensationalized media. a simple fact that the forex reserves remaining stead fast at 250b usd even with the rupee falling from 39 to 50 to a dollar tells a great story with these investments in the back drop.