China’s glut, India’s drought; two faces of liquidity

LENDERS in the world’s two most-populous nations are having very different problems with monetary and fiscal taps. In China, creditors are drowning in cheap central-bank cash, but loan demand is muted. In India, banks are in the middle of their fastest expansion in a decade, but they are parched for liquidity.

While the Chinese authorities’ struggle to stimulate the economy with three trillion yuan (S$561.6 billion) in long-term cash injections has the world’s attention, the Indian deficit – the widest since 2010 – is also beginning to worry investors.

Barely a few months before the next general election, Prime Minister Narendra Modi’s administration has cut back on spending. That is hurting lenders. The funds that left bank accounts as advance tax payments by companies in December would only return as deposits as New Delhi starts writing cheques to contractors working on government projects. But with the fiscal year approaching its Mar 31 end, there is no sign of a last-minute acceleration.