How India’s $32 Billion Bank Rescue Is Expected to Play Out
- Economists see little impact on the headline budget deficit
- Any revival in lending will probably need some more time
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Prime Minister Narendra Modi’s administration will inject an unprecedented 2.11 trillion rupees ($32 billion) into struggling state-run banks over the next two years, his biggest attempt to revive growth.
This includes 1.35 trillion rupees through recapitalization bonds and 760 billion rupees via "budgetary support" and from the market, the government announced late Tuesday. Morgan Stanley is calling this India’s TARP -- a reference to the U.S. Troubled Asset Relief Program implemented in the throes of the financial crisis -- and Indian stock markets welcomed the decision but bond investors were more circumspect.