India on financial brink; Summer of troubles dents India's confidence; Age can be a curse in Silicon Valley

1 India on financial brink (The Guardian) India’s financial woes are rapidly approaching the critical stage. The rupee has depreciated by 44% in the past two years and hit a record low against the US dollar on Monday. The stock market is plunging, bond yields are nudging 10% and capital is flooding out of the country.

In a sense, this is a classic case of deja vu, a revisiting of the Asian crisis of 1997-98 that acted as an unheeded warning sign of what was in store for the global economy a decade later. An emerging economy exhibiting strong growth attracts the attention of foreign investors. Inward investment comes in together with hot money flows that circumvent capital controls. Capital inflows push up the exchange rate, making imports cheaper and exports dearer. The trade deficit balloons, growth slows, deep-seated structural flaws become more prominent and the hot money leaves.

While the Indonesian rupee and the South African rand are also feeling the heat, it is India – with its large trade and budget deficits – that looks like the accident most likely to happen. On past form, emerging market crises go through three stages: in stage one, policymakers do nothing in the hope that the problem goes away. In stage two, they cobble together some panic measures, normally involving half-baked capital controls and selling of dollars in an attempt to underpin their currencies. In stage three, they either come up with a workable plan themselves or call in the IMF. India is on the cusp of stage three.

2 Summer of troubles dents India’s confidence (Gardiner Harris & Bettina Wassener in The New York Times) A summer of difficulties has dented India’s confidence, and a growing chorus of critics is starting to ask whether India’s rise may take years, and perhaps decades, longer than many had hoped. “There is a growing sense of desperation out there, particularly among the young,” said Ramachandra Guha, one of India’s leading historians.

Three events last week crystallized those new worries. On Wednesday, one of India’s most advanced submarines, the Sindhurakshak, exploded and sank at its berth in Mumbai, almost certainly killing 18 of the 21 sailors on its night watch. On Friday, a top Indian general announced that India had killed 28 people in recent weeks in and around the Line of Control in Kashmir as part of the worst fighting between India and Pakistan since a 2003 cease-fire. 

Also Friday, the Sensex, the Indian stock index, plunged nearly 4 percent, while the value of the rupee continued to fall, reaching just under 62 rupees per dollar, a record low. The rupee and stocks fell again on Monday.  Each event was unrelated to the others, but together they paint a picture of a country that is rapidly losing its swagger. India’s growing economic worries are perhaps its most challenging. 

“India is now the sick man of Asia,” said Rajiv Biswas, Asia-Pacific chief economist at the financial information provider IHS Global Insight. “They are in a crisis.” In part, the problems are age-old: stifling red tape, creaky infrastructure and a seeming inability to push through much-needed changes and investment decisions. For years, investors largely overlooked those problems because of the promise of a market of 1.2 billion people. But after more than a decade of largely futile efforts not only to tap into India’s domestic market but also to use the country’s vast employee base to manufacture exports for the rest of Asia, many major foreign companies are beginning to lose patience. And just as they are starting to lose heart, a reviving American economy has led investors to shift funds from emerging-market economies back to the United States. 

India has fewer than 100 ships, compared with China’s 260. India is the world’s largest weapons importer, but with its economy under stress and foreign currency reserves increasingly precious, that level of purchases will be increasingly hard to sustain. The country’s efforts to build its own weapons have largely been disastrous, and a growing number of corruption scandals have tainted its foreign purchases, including a recent deal to buy helicopters from Italy. Unable to build or buy, India is becoming dangerously short of vital defense equipment, analysts say. 

3 Age can be a curse in Silicon Valley (Andrew S Ross in San Francisco Chronicle) In 2012, three high-tech companies in Silicon Valley announced they were laying off a combined 48,000 employees. Layoffs continue this year, including last week's announcement that profitable Cisco Systems was letting 4,000 people go. At the same time, the total number of jobs in the valley and in San Francisco's tech hub is on the rise.

But if demand is outstripping supply, how come so many skilled IT professionals in the Bay Area are out of work? In a nutshell, job experience in the tech industry matters far less than it once did. In fact, it can work against you.

"It's been quite a shock, coming out of my last job, which I had for 11 years," said Robert Honma, 49, of Sunnyvale, his resume filled with senior tech positions in multinational companies and small startups. He's been out of work for 10 months. "The Facebooks, the Googles are driven by the young." Mark Zuckerberg agrees. "I want to stress the importance of being young and technical," Facebook's CEO (now 28) said in 2007. "Young people are just smarter. Why are most chess masters under 30? I don't know. Young people just have simpler lives. We may not own a car. We may not have family. Simplicity in life allows you to focus on what's important."