India's Modi gambles on demonetisation

(28 November 2016) Short term pain, long term gain.  That is what India's PM Narendra Modi is hoping for following his bold move to remove 86% of the currency in circulation after his unprecedented 8th of November televised address to the nation.  Modi's courageous announcement to remove all 500 and 1000 rupee notes ($7 and $14 USD) from circulation is intended to rein in corruption, tax avoidance and the outsized role of "black money" in the Indian economy. 

This has created huge disruption verging on economic chaos in India where over 90% of all transactions are conducted in cash.  Economic activity is down for the simple reason that there isn't enough cash to pay for goods and services.  For now, most of the Indian people support Modi's noble effort as the government tries to force more people into the modern banking system.  But how long will the goodwill last?

Modi's demonetisation plan has been plagued with setbacks since its announcement.  ATMs were not adapted beforehand to dispense the new 2000 Rs notes.  There also weren't enough of the new 500 Rs notes to replace the old ones taken out of circulation.  And the government has been changing the rules and exemptions to the new law on an almost daily basis thus creating more confusion and consternation. 

By all accounts, the roll-out of demonetisation has been botched and Modi has been forced to appear on national television to plead for patience.  Modi remains enormously popular and so far most of the people are still behind him and quite willing to give him the benefit of the doubt in the effort to reduce corruption and to enhance the state's ability to fund infrastructure improvements. But despite its rosy long term outlook, India's economic future now contains an added measure of uncertainty after this policy shock. 

Sad to say, the stars do not favour a quick or easy return to normal in India's economy.  While Mr. Modi's announcement should be commended for its willingness to tackle endemic problems, the planetary alignments look troubled for much of 2017 in the relevant charts.  To be sure, these troubles may not necessarily directly stem from demonetisation, but there is an overlap in the key horoscopes that makes me think that demonetisation will be a drag on the economy for longer than the government is projecting.  The fallout may be such that government will lose a lot of support and Modi himself will come under intense criticism and stress.

There are four charts worth consulting in this regard.  1) the Indian national horoscope 2) Narendra Modi's individual horoscope 3) PM Modi's swearing-in chart and 4) the horoscope of the 8th November demonetisation announcement itself.  Let's take a brief look at each.

The 1947 Indian independence chart shows the problem clearly: on 8th November, Saturn formed a near-exact 120 degree alignment between Saturn at 21 Scorpio (loss, disruption) and Venus at 22 Cancer (money, happiness).  While this isn't a full strength Vedic aspect of Saturn, it is nonetheless exact and hence has sufficient power to inflict damage on the economy.  We can also see the shocking effect of the announcement through the near-exact opposition exact of Mars (5 Capricorn) to the Moon (4 Cancer).  The Moon represents the people as a whole as well as the emotions of the country. 



The uncertain future is seen through the transits of Saturn and the Lunar nodes, Rahu and Ketu.  Saturn will continue to move forward into early Sagittarius (the 8th house) early in 2017 until March and April.  The difficulty here is that Saturn will oppose the 2nd house of wealth and assets and will come very close to an exact opposition aspect to Uranus (instability, sudden events) and Mars (conflict, violence).  This aspect would appear to be antithetical to a quick return to strong economic growth in Q1.   And then Ketu will conjoin the 10th house cusp (leaders, government) in April while Rahu conjoins the 4th house cusp.  The Nodes are often destabilizing and suggest more political uncertainty in Q1 and Q2 2017.  I wonder if there will be a loss of confidence in the ruling BJP-led coalition.  It's possible.

Even more troubling is that transiting Saturn will turn retrograde and will align with the Sun almost exactly in July and August at 27 Scorpio.  The Sun (28 Cancer) represents government and leaders and this Saturn transit may reflect intense stress on Mr. Modi himself.  The government's popularity is likely to suffer by this time.  It is difficult to predict what may transpire here.  Modi may be forced to retreat on some of this plans or the government may come under formal censure for some reason.   As an added planetary burden, transiting Rahu will conjoin the Sun in this summer period.  Changes in government are likely, either in terms of actual policy content or in terms of  personnel or coalition partners.

Modi's chart also looks very afflicted in 2017.  He was born with a rare conjunction of Saturn (discipline, focus), Sun (self, ego), Mercury (intellect, communication), and Ketu (innovation, iconclasm).  While this has helped him rise to great heights in his life, it will come under the affliction of the Saturn square transit next year.  Saturn will align closely with all of these planets throughout the year within just a few degrees.  It is likely to coincide with major new obstacles and an increase in stress beyond what he is already feeling now. 



Modi's swearing-in chart also looks troubled next year.  Again, the problem is the Saturn transit of early Sagittarius.  The April retrograde station at 3 Sagittarius will exactly oppose Mercury, the planet of commerce.  This is a very bad indication for the economy.   Moreover, Saturn will also align with the Venus-Ketu conjunction at 3-4 Aries.  It is possible this Saturn transit may not reflect the ongoing problems of demonetisation but rather economic hardship in general.  However, given the central role of Saturn here, there is a good chance that Modi's policies will come under criticism. Also note that Saturn will transit back into Scorpio during the summer and will station near the equal 2nd house cusp (29 Scorpio) in August.  The 2nd house represents wealth, assets and the economy as a whole.




Finally, the horoscope for demonetisation (8 Nov 2016, 8.15 pm IST ) itself offers a challenging picture.  This is perhaps the most intriguing chart of all.  The prominent and favourable placement of the Moon (the people) and Venus (happiness, wealth) near the 9th and 7th house cusps, respectively, supports the likelihood of the ultimate success of Modi's plan.  And yet the chart is mixed at best given the difficult placement of Lagnesh, Mercury, in the last degree of Libra. 

By transit, we can see that Saturn will afflict both the Moon and Venus in 2017.  The Saturn-Venus conjunction may be felt as soon as December and will last for most of 2017.  This is an indication of the significant economic drag of demonetisation.  I would think that the pessimistic forecast of a 2% reduction of GDP from this policy may be closer to the mark given this transit.  But Saturn will also cast its full strength 3rd house aspect onto the Moon for most of 2017.  This could manifest as a loss of Modi's popularity and suffering of the people.  It is a very difficult double affliction in that regard. 



In summary, I think Prime Minister Modi is going to need all the help he can get.  The planets suggest the overall economic situation may well get worse before it gets better.  We may have to wait until 2018 before the disruptive effects of demonetisation are finally over and done with.  Jupiter's entry into Libra late in 2017 may bring about some improvement although it is the conjunction with the natal Mercury (29 Libra) in March 2018 which could finally signal relief and a definite path forward for the economy.


Weekly Market Forecast

Meanwhile, Indian stocks bounced off technical support last week as bargain hunters moved in.  The Sensex moved back above 26,000 and was mostly unchanged in Monday trading.  US stocks extended their Trump rally for a third week as the prospect of higher interest rates did not dampen sentiment.  The Dow hit new all-time highs above 19,000 and is slightly lower in early Monday trading. 

In last week's market forecast, I thought there was a risk of some downside on the midweek Mercury-Saturn conjunction.  However, the negative effect was limited to emerging markets as the US Dollar continued its ascent thus providing an alternative destination for "hot money".   My caution notwithstanding, the US election has yet to manifest any negative effects in the stock market although I should note that a recount is now underway in Wisconsin.  It seems extremely unlikely to change the final result but I still believe there is good reason to think that there is yet another chapter to be written on this historic election.  Betting markets now have Hillary Clinton up to a 20-1 chance of winning the presidency.  This is up from 100-1 on the day after the election.  In recent days, Clinton's odds have even been as a high as 8-1.  I think the odds will continue to improve in the days ahead.  So far, financial markets have not priced in the possibility of any further surprises on this front.  This may change soon enough.

This week would appear to hint at some downside.  There is a multi-planet alignment of Jupiter, Saturn, Pluto and Mars.  Multi-planet alignments are tricky to predict since they are often positive by nature regardless of what planets are involved.  At the same time, they can correlate with changes in trend.  This week Jupiter aspects Mars late in the week which may be bullish but at the same time bearish Saturn also closely aspects Mars.  These aspects may well cancel each other out, but I think markets are looking vulnerable here, especially in the US and Europe. December's Saturn-Uranus alignment looks too unstable even for Santa Claus and his seasonal rally.

For more details and analysis on market trends for this week, this month and this year, please check out my weekly MVA Investor Newsletter.  The newsletter is published every Saturday and includes extended discussion of US and Indian stock markets, as well as gold, oil and major currencies.







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