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One of the reasons people are pulling out of India is this phenomenon:

Rising input costs (partially due to the falling currency and partially due to, well, high prices for raw materials) are hurting profitability in Indian companies and the overall inflation is hurting economic growth.

Moody's downgraded HDB and its fellow private banks earlier this week on the fear that India's gov't will have troubles meeting its debt obligations. I think this is a little over the top, but a devaluation of the rupee is a very real possibility.

Of course that would make inflation even worse in the near-term.

When faced with these issues, the apparent inability of India's gov't to execute changes is striking fear into the hearts of investors.
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