India is back. This is fast becoming the favorite market for emerging market investors. It’s definitely the best of the BRIC countries, with the Wisdom Tree India (EPI) exchange traded fund up by more than 30%. Apparently, there is more room for this baby to grow.
Moreover, economic sentiment continues to improve following the May landslide victory of the Bharatiya Janata Party and its newly minted Prime Minister, Narendra Modi.
Manmohan Singhia Exchange rate makes hellua of lot diminishing Difference.Suraj wrote:Official CSO/MOSPI Press Release on Q1 GDP Data
Notes
* Q1 GDP was Rs.2842596 cr, or about $490 billion. Q
* Therefore the change is mostly in industrial output and construction, which indicates the start of a new business cycle.
Not at all Saar. I did read up on the partners of RangDe. Most of them are multinationals and predominantly in the financial sector. Interestingly, I also found a long lost friend while doing the research on RangDe.Picklu wrote:^^ I regularly use RangDe.org to fund small scale businesses in rural areas. Havn't heard anything bad about it so far. In fact I came to know about it in BRF itself and starting giving as social contribution. Should I be worried that my contributions are being misused?
Not so knowledgeable perspectivearchan wrote:Can someone knowledgeable put the numbers in perspective plz?
archan wrote:Yes, but it is not gift, it is investment. What are the likely sectors, what are the possibilities, expectations..
Is this too little or as per expectations..?
Build, then operate it for a few years and then transfer it to a local company who pays them a price. BOT. It was very effectively harnessed during SS-BJP govt. in MH. Gadkari saheb was the one who brought this about.archan wrote:Yes, but it is not gift, it is investment. What are the likely sectors, what are the possibilities, expectations..
Is this too little or as per expectations..?
Government on Monday told the Supreme Court that it “wants re-auction of all 218 coal blocks” declared as illegal allocation but sought its indulgence to “exempt” 40 of them which are functional and ready for the end use power plants.''
...
However, the Attorney General said the 40 mines for which requisite clearances have been on board and are operational must not be treated with “one brush” and “can be exempted” from cancellation and re-auction, provided they meet the condition of compensating the loss of Rs 295 per tonne caused to the government and enter into a power purchase agreement at Rs 95 per tonne to make up the loss.
He said there was a need for saving 40 coal blocks from “guillotine of cancellation” as uncertainity of coal availability would affect the plants, when the country is facing acute shortage of power supply.
...
While asking the Centre to file an affidavit on its stand, the bench said, “Union is very clear that auction should take place. They are very clear that all the 218 coal blocks be put under auction”.
Old numbers say you can create 15,000 permanent jobs for every Rs 1,000 crore investment. Let's assume Japanese investment creates only 5,000 jobs for every 1,000 cr investment for they will be in hi-tech & public utility industries (for comparison, an ITVity will have ~20k employees for every $B/Rs6KCr revenue).archan wrote:Can someone knowledgeable put the numbers in perspective plz?
EW DELHI: India's Current Account Deficit narrowed sharply to 1.7 per cent of GDP in the April-June quarter of this fiscal mainly on account of reduction in trade deficit, and a steep decline in gold imports. "The lower CAD was primarily on account of a contraction in the trade deficit contributed by both a rise in exports and a decline in imports," RBI said in a statement. CAD narrowed sharply to USD 7.8 billion (1.7 per cent of GDP) in the first quarter of the 2014-15 fiscal, from USD 21.8 billion (4.8 per cent of GDP) in the year-ago period. However, it was higher than USD 1.2 billion (0.2 per cent of GDP) in the fourth (January-March) quarter of the previous fiscal, 2013-14. Decline in imports was primarily led by a steep 57.2 per cent fall in gold imports, which amounted to USD 7 billion - significantly lower than USD 16.5 billion in the April-June quarter of 2013-14, RBI said. Trade deficit contracted by about 31.4 per cent to USD 34.6 billion in Q1 2014-15, from USD 50.5 billion in Q1, 2013-14. Exports increased by 10.6 per cent in the first quarter of 2014-15 to USD 81.7 billion. Imports moderated by 6.5 per cent to USD 116.4 billion. The CAD, which is the difference between the inflow and outflow of foreign currency, had touched a record high of USD 87.8 billion (4.8 per cent) in 2012-13 fiscal mainly on account of steep increase in gold imports. It had narrowed to USD 32.4 billion (1.7 per cent) for the entire 2013-14 fiscal after government imposed import restrictions on the precious metal.
Yup and I stand by it by what I've been told. Modi has probably done a lot to rectify the problem behind the scenes but the extent of the damage is severe. We've lost a significant portion of our thorium reserves.Supratik wrote:The thorium is supposed to be removed but RoyG posted reports of it being widely flouted.
Real GDP and manufacturing growthAccording to a new investment report from Deutsche Bank research, new Indian Prime Minister Nahandra Modi is clearly trying to move the East Indian giant away from a service-oriented economy towards an export and manufacturing-focused economy. Deutsche Bank analysts Sanjeev Sanyal and colleagues point out Modi’s new strategy will require keeping the Rupee weak and dramatically expanding the financial system. International experience shows that the model can generate growth and jobs, but sustaining such rapid financial expansion is not without risks.
Sanyal et al. point out that the critical ingredient in this export-driven growth model is the ability of the domestic financial sector to sustain a rapid economic expansion. They note: “While the banking system is likely to remain the key driver, attention should be paid to expanding the wider ecosystem of bond markets, insurance companies, mutual funds and so on. The government will also have to seriously think about injecting capital into the public sector banks. We feel that the government will eventually dilute its stake in public sector banks to ~51% and perhaps even lower.”
Dramatic improvement in major public infrastructure, including transportation networks and power generation, will also be required if India is going to successfully transition to a manufactured goods export model. The DB report highlights transportation networks as a key bottleneck to Indian industrial expansion. Sanyal and colleagues argue that India must significantly improve transport connectivity as well as immediately begin to address the skewed transport mode mix that is biased towards roads (more rail needed).
As China looks to wean its economy off a heavy dependence on investment and exports, India is embarking on the very same growth model that could see the South Asia nation assuming the role of the world's factory floor within the next decade.
Prime Minister Narendra Modi has articulated in recent speeches and through policy actions that Asia's third largest economy is in need of a growth model which centers on export-oriented manufacturing, heavy infrastructure building and urbanization.
"This suggests a shift from India's current services-driven growth trajectory to an East Asian growth model based on the mass deployment of labor and capital," Sanjeev Sanyal, global strategist at Deustche Bank wrote in a report.
If India succeeds, it has the potential to become the factory of the world, Sanyal said in an interview with CNBC, a role assumed by China in the past decade.
"As China gets off the model, it creates space for a country like India, with cheaper labor, to become a manufacturing hub," he said.
The East Asian growth model is a well-trodden path by countries from Japan to China to generate and sustain rapid economic expansion.The paradigm, however, has eluded India, which leaped from an agriculture-focused to a service-dominated economy, by passing a manufacturing-led growth phase.
Manufacturing accounts for 15 percent of India's gross domestic product (GDP), while the services sector contributes about 60 percent.
"It's all good to have the software industry and Bollywood, but it doesn't generate enough jobs. You have this peculiar situation where 60 percent of the economy is generated by services, but it only employs 28 percent of the workforce. Agriculture, which is 14 percent of the economy, accounts for 50 percent of employment," he said.
"This has led to the feeling that the services-led economic boom has disproportionately benefited the old 'English-speaking' middle class but not those aspiring to join the middle-class through hard work and education," he added.
India is in urgent need of generating employment due to its expanding working age population. Between 2015 and 2020, the working age population will rise from 804 million to 856 million. This requires 10 million additional jobs per year till the next elections to keep up with demographic expansion.
To be sure, the transition to the East Asian growth model won't be an easy one.
Mobilizing and deploying a large pool of capital will be a key aspect of the new growth model. This will require a rapid expansion of the financial and banking system.
Modi has put in place a target of opening 75 million new bank accounts by January 2015. While the primary purpose of this is to enable direct transfers of subsidy payments to the poor, it could play a big role in mobilizing savings in the long run, Sanyal said.
In addition to the vast amount of capital, the East Asian model requires a mass deployment of labor. This could prove to be challenging given the rigid labor laws and the fact that cities are not prepared to absorb the millions of industrial workers needed to feed the growth machine, Sanyal noted.
But should the model take off, the bank says it would prove to be a "major turning point in the lives of 1.2 billion people and would have very significant ramifications for the world economy."
After a sharp upswing in July, India’s manufacturing sector activity declined marginally in August owing to a fall in output and new domestic orders, an HSBC survey said today.
The HSBC India Manufacturing Purchasing Managers’ Index (PMI), a measure of factory production, eased to 52.4 in August from 53 in July, registering a moderation in manufacturing activity, though remaining “solid”.
This is the 10th consecutive monthly improvement in operating conditions in August. A PMI reading above 50 indicates growth while a lower reading means contraction.
“Manufacturing activity moderated following a spurt in the previous month. Output and new orders slowed slightly in August, but remained robust relative to their 12-month history,” HSBC Co-Head of Asian Economic Research Frederic Neumann said.
The slowdown during August looked to be domestically -driven since new export orders (54.5 as against 54.3 in July) registered a marginal rise.
“New export orders rose in August, extending the current sequence of growth to 11 months. Surveyed firms pointed to strengthening demand from key export clients as the main reason behind expansions in foreign business,” HSBC said.
Details within the survey suggest that growth in August was driven mainly by consumer goods, whereas capital goods production suffered during the month.
Conversely, workforce numbers declined for a second successive month in August, albeit at a fractional rate, as the vast majority of survey respondents left recruitment levels unchanged.
On inflation, HSBC said that price pressures remained elevated despite the slight deceleration seen in input prices.
Kelkar Panel recommends steps to reduce $40 billion from annual oil billFertiliser subsidy paid to the companies during the April-July period of the current fiscal declined by around 41% to about Rs 21,300 crore.
The total subsidy paid in the corresponding period of the previous financial year stood at around Rs 36,000 crore.
The government had increased the total fertiliser subsidy in the July budget at Rs 72,970.30 crore for the entire 2014-15 fiscal from Rs 67,970 crore proposed in the interim budget.
The Economic Survey 2013-14 pointed out that the government and farmers are together "wastefully" spending over Rs 8,500 crore on urea, as it is highly subsidised soil nutrient and therefore used instead of P&K fertilisers.
The panel on the petroleum sector reforms says its recommendations could save up to $40 billion of India’s $155-billion annual crude oil import bill in the medium term.
The panel is chaired by Vijay Kelkar, former finance secretary.
This is possible by implementing market-linked pricing of natural gas after the end of the current Plan period, March 2017. “The committee has identified various policy actions that can be implemented immediately," it has said in a consultation paper to the petroleum ministry, ahead of its final report on curbing import dependence.
"The fair price for gas can only be the best price a gas molecule commands or the price that is market-determined in a transparent way, on an arm's length basis. As the present generation is borrowing this finite resource from grandchildren, equity requires the generation be fairly compensated," Kelkar told Business Standard.
He said the panel’s recommendations on gas pricing were limited to producer prices and did not apply to consumer ones.
Suraj, I am confused. Modi has advertised the Diamond Quadrilateral and has billions of dollars of investment in it lined up from the Japanese. So more need for rail seems to be well addressed? Issues that I haven't thought of?Suraj wrote: <snip>
Dramatic improvement in major public infrastructure, including transportation networks and power generation, will also be required if India is going to successfully transition to a manufactured goods export model. The DB report highlights transportation networks as a key bottleneck to Indian industrial expansion. Sanyal and colleagues argue that India must significantly improve transport connectivity as well as immediately begin to address the skewed transport mode mix that is biased towards roads (more rail needed).
Real GDP and manufacturing growth
ICOR doubles, showing efficiency of investment has halved
Private sector investment and capital goods investments keep falling
Forex reserves
Project completion rate falls off a cliff, and value of pending work accumulates
Railway routes are alarmingly overutilized with DFCC delayed
ICOR needs to fall for growth to revive
Ports need more investment to boost exports
Road transport too bottlenecked
Investors in India are banking on big picture reforms to provide economic growth for many years to come. For them, India is the new China. But hold on a second here, warns Reserve Bank of India governor Raghuram Rajan. The longer term infrastructure needs — from better roads to more electric power plants — will not happen overnight.In a speech in Chicago on Friday at the Council on Global Affairs, Rajan said the longer term needs would require more time to be met. In the meantime, the new government of prime minister Narendra Modi is doing what needs to be done to lay the groundwork for companies counting on better business and investment climates.Companies and portfolio managers alike have been bullish on India since Rajan took over as the country’s 23rd central bank governor in early Sept. The Bombay Stock Exchange quickly rallied by more than 25% over a three month period. Then starting in January, investors looked forward to the months-long general election, which concluded there in May on a sweeping victory by Modi and his BJP party.
Modi, the former leader of Gujarat state in West India on the Arabian Sea, is considered to be a reformer and a developmentalist. His claim to fame comes from rebuilding the state after a 7.7 magnitude earthquake in January 2001 killed over 12,000 people and leveled millions of buildings, including schools and hospitals.
Investors are hoping Modi can bring some of that mojo to India, which has been mired in political paralysis for more than three years. Corruption scandals in the government, coupled with stubbornly high inflation, are just two of the many issues that irked both the man on the street and those in corporate boardrooms in Mumbai.“We have an overweight on India now. It’s one of our favorite markets because with Modi you have a good infrastructure story playing out long term, and you still have great consumer demographics,” said Marc Tommasi, a portfolio manager for the Manning & Napier MN -2.1% International Series mutual fund run out of Rochester, New York.In his speech, Rajan mentioned major government financed infrastructure projects and compared them to what China has done over the last decade. In particular, he referenced the Delhi-Mumbai Industrial Corridor and the Eastern Freight Corridor, saying they would “raise India’s infrastructure to a whole new level and create opportunities to expand manufacturing.”“Are things fine? No. There are lots of places where we can do better. Some of the fiscal correction has come just from cutting spending. Typically you want to cut the bad kind and keep the good kind like infrastructure and so on. Inflation has come down, though last month we had a blip up because of food inflation. This reflects better eating habits among the population, but the government is trying to bring food prices under control.”
I already conceded that our rail freight is a current problem, but more that I'm confident that there is money and a good plan to solve the problem in place. Modi's track record on infrastructure is good.Suraj wrote:The article quotes current (over)utilization figures, not data with additional DFCC capacity assumed.
As for forex reserves, it's always best to look at them in terms of how much of imports and the external debt they cover.
It's nice to read about planned investments, but under the UPA, the project completion rate was abysmal, especially in the core sector. Remember POSCO and Mittal steel projects ? The UMPPs ? NSEW corridor ? How many of those are complete ? None. In fact some have not even started, yet.
I'm not really concerned about proposals and plans. I want to see rapid execution rate. Despite all infrastructure development, we're still nowhere near building the infrastructure reasonable ahead of the demand, in any field. Everywhere, it's an effort to keep up, but still well behind, demand.
I want to take that money and sink it into infrastructure. We have the Contingency Reserve Agreement, so we don't need these huge reserves to forestall a repeat of the IMF crisis of 1997.We find that India is foregoing as much as 2% of its GDP by accumulating excess reserves instead of
employing resources in alternative uses
Yes he has a past track record, but I want to see him perform as a PM on this front first, not because I don't think he can do it, but because his performance level as a PM, and the rate of execution of projects at the national level , has not been quantified yet.Rien wrote:I'm confident that there is money and a good plan to solve the problem in place. Modi's track record on infrastructure is good.
This is nothing new. The topic was discussed at length here on this thread several years ago. If you look it up online, most, if not all, of the material on the topic came about in the mid 2000s. None of them came to a common conclusion. Here's a contrarian one:Rien wrote:I think there is a huge opportunity cost faced by us and the other Asian countries in having these huge reserves.
http://www.igidr.ac.in/money/mfc-13/OPT ... 0INDIA.pdf
http://demo.ncaer.org/downloads/IPF2008/paper2.pdfI want to take that money and sink it into infrastructure. We have the Contingency Reserve Agreement, so we don't need these huge reserves to forestall a repeat of the IMF crisis of 1997.We find that India is foregoing as much as 2% of its GDP by accumulating excess reserves instead of
employing resources in alternative uses
Using forex in infrastructure is an interesting idea, but fraught with risks. For one, it takes on exchange rate risk. India's record at managing a stable exchange rate is poor. Check CNY-USD vs INR-USD. It's a matter of what the central bank's authority is. PBoC treats exchange rate stability as an important goal. RBI does not. The dynamic of interaction between the Chinese govt and PBoC is different from what RBI has with FinMin. the PBoC even has authority to issue sterilization bonds, which RBI does not. For these reasons, as well as the qualitative nature of our forex reserves as opposed to that of the current account surplus East Asian nations, the idea is not likely to gain any policy traction in India today. Maybe after a few years of maintaining a trade surplus, but not now.However, neither the capital inflow to India nor the size of FER is significantly large when compared with some other countries in the region. The sources of accretion to FER are mainly CSSE, IRWA, and portfolio investments - not FDI (which is more stable) as in the cases of China and Singapore. Therefore, India, which is accumulating FER for precautionary and safety motives, especially after the embarrassing experience of June 1991, should avoid utilizing reserves to finance infrastructure. Infrastructure projects in India yield low or negative returns due to some difficulties – political and economic – especially in adjusting the tariff structure, introducing labor reforms and upgrading technology. The use of FER to finance infrastructure may lead to more economic difficulties, including problems in monetary management.
That's an oversimplification. The more specific issue is that we don't have financial entities capable of lending money in one go, at a cheap enough rate. Our banks are small. Even SBI is a pygmy by global standards. When banks have a small capital base, they cannot lend much capital out cheaply. In fact, the central concern stated by the Deutsche Bank report above is the inadequate capital base of Indian banks, which means any big project requires independent negotiation with several banks, all of which individually offer a high rate of interest that a fewer number of large banks can. Export driven growth requires cheap access to capital, sufficient support infrastructure, and a capable labour pool.Rien wrote:There are also risks in building too much infrastructure far ahead of projected need. Look at China's fast rail. Will those investments ever pay off? But yes, obviously we need far more infrastructure than we have now. But money is an issue.
There is a solution to this. Move gold from current account to capital account. But that will invite IMF sanctions according to their clause 2. We will be barred from seeking bail out by IMF. Moving gold to capital account will reduce CAD overnight increasing financial debt rating which currently is junk. Also it will increase the price of gold making our reserves more valuable and increasing the capital base substantially.Suraj wrote:The more specific issue is that we don't have financial entities capable of lending money in one go, at a cheap enough rate. Our banks are small. Even SBI is a pygmy by global standards. When banks have a small capital base, they cannot lend much capital out cheaply. In fact, the central concern stated by the Deutsche Bank report above is the inadequate capital base of Indian banks, which means any big project requires independent negotiation with several banks, all of which individually offer a high rate of interest that a fewer number of large banks can. Export driven growth requires cheap access to capital, sufficient support infrastructure, and a capable labour pool.
By the Time Modi finishes his first term, Sensex will catch up with Shan-ghai , both competing for number 4 space.
I remember Suraj garu mentioning about this“We plan to release GDP data based on the 2011-12 base year by early next year, that could theoretically revise up the growth estimates,’’ the official said, requesting anonymity as he was not authorised to speak to media.The Ministry now takes 2004-05 as the base.
