Indian Economy - News & Discussion Oct 12 2013

[Suraj]

Public spending is front loaded with disbursements made at the beginning of the fiscal year, while revenues to government are primarily paid towards year end. So fiscal deficit will not grow linearly through the year.

Regarding core industries, electricity output was a major cause for the sustenance of the core sector output. This is being hampered by the coal output issues, worsened by the SC order stricking down all the coal block allocations. The new government ordinance should improve this situation soon. In the meantime, electricity plants were running at high capacity utilization without downtime, due to short coal inventories. In September, the situation was somewhat reversed, with utilization down to catch up on maintenance, and coal inventories rising. I'm not sure what explains the fall in cement output, though.

Electricity generation, which has been propping up industrial data, grew 3.8 per cent in September, less than a third of the 12.6 per cent in August. Cement production grew 3.2 per cent in September, against 10.3 per cent in the previous month, while the output of steel grew four per cent, against 9.1 per cent. Growth in coal production was a respectable 7.2 per cent but even this was lower than the 13.4 per cent in August.

[Uttam]

Public spending is front loaded with disbursements made at the beginning of the fiscal year, while revenues to government are primarily paid towards year end. So fiscal deficit will not grow linearly through the year.

Agreed, but the 83% of total deficit for this fiscal year compared with 76%last year is still a worrying sign. If the disinvestment are successful then this figure would have been 79%. Still a lot of room for improvement on this front. this is even more worrisome considering the crude prices helped oil subsidies.

[member_28714]

Mounting forex reserves will put pressure on Rupee to appreciate.

Which is why my target for the rupee in 2019 is 40 to a dollar.

[member_28714]

The RBI buys dollars, rather than sells it, to keep the Rupee weak. It does this using the market sterilisation scheme, which is a fund maintained for the purposes of buying up dollars. When it does this, it swaps dollars with Rupees. The shortage of dollars in the market correspondingly weakens the Rupee. But too much of this can fuel inflation because there are too many Rupees circulating in the open. So it buys back the Rupees and offers market sterilization bonds. Of course, this has a cost - they have to pay an interest rate on the bonds. They get a much lower interest rate on the dollars held, especially if it's stored someplace like NYC.

Personally, the absolute exchange rate is not as important as the movement, or lack of it. A stable weakish exchange rate is an important component of export promotion. The focus on export led growth will continuously push the Rupee upwards against the dollar, and the fall in the crude bill and inward investment inflows only accelerate it.

The collapse of currencies vs USD during the 2008 crisis is the familiar 'flight to safety' that occurs in any crisis - dollars exit the market rapidly, weakening the currency, which causes the import bill to shoot up and feeds inflation. RBI stabilized it by releasing dollars; forex reserves fell from a $320 billion peak in 2007 to $245 billion or so. Now they're back past that old peak.

Such exchange rate moves are particularly crippling when the economic structure is unbalanced due to raw material exports and finished product imports. Input costs fall faster during crashes than finished good prices. so that we pay a larger import premium than we gain an export premium from, due to weaker currency combined with softer growth outside, since weaker growth outside means lower demand for our intermediate/raw material exports, and lower supply of finished goods.

So beautifully put.

And very accurate inference concerning raw material costs falling faster than finished goods cost. But I dont see this as a bad thing long term as this forces the manufacturing push further. At the end of the day I dont think we need a trade surplus ever and we should not model our economy to be reliant on a trade surplus. If we can consume 80% of our produce and fund our import bill with the remaining 20%, it will be perfect as that results in a automatic insulation from pathetically governed countries going bankrupt.

[Prem]

I think RBI wants to build at least Half a Trillion +$ war chest over next few years then let Rupee finds it value in open market. Rokra will be very important for geopolitical upheavals coming up after 2017-2018 when centre of gravity actually shifts to Asia.

[Suraj]

And very accurate inference concerning raw material costs falling faster than finished goods cost. But I dont see this as a bad thing long term as this forces the manufacturing push further. At the end of the day I dont think we need a trade surplus ever and we should not model our economy to be reliant on a trade surplus. If we can consume 80% of our produce and fund our import bill with the remaining 20%, it will be perfect as that results in a automatic insulation from pathetically governed countries going bankrupt.

Thanks, but I have to disagree on the suggestion that we should not run trade surpluses. We should be doing so with gusto. We were a mercantile trading power for >2000 years. That's how we accumulated ~30000 tons of gold in this country over the course of history, despite not being a major gold producer. Please read this article: All the world's gold. Historically, India was a vigorous trading nation. We exported so many products that the world desired, while they could not export much of interest to us, that we got paid in gold and silver, which is why India, despite being a poor developing country, still sits on the largest private gold holding on the planet. The ancient Greeks and Romans lamented the loss of gold to India. The early expeditions to the new world sought gold to pay for European imports.

As Jhujar said, it would be better to build a large forex warchest and also seek preference for payment in gold rather than fiat currencies, where possible. The latter is unlikely to be pursued vigorously, but the former - say a $500-750 billion reserve - is achievable within a single term of effective government policy, combined with soft crude prices and the pursuit of trade surpluses and investment inflows.

[Arjun]

All countries that have historically made the transition to emerging as dominant economies followed mercantilist policies for a considerable time period - including Britain, the US, China, S. Korea....Here's a good paper detailing mercantilism as state policy :

Mercantilism and Economic Development

[Rahul Mehta]

All countries that have historically made the transition to emerging as dominant economies followed mercantilist policies for a considerable time period - including Britain, the US, China, S. Korea....Here's a good paper detailing mercantilism as state policy :

Mercantilism and Economic Development

Old knowledge may or may not apply in new times.

SK is classic example that mercantilism only enabled US-corporates and US Missionaries to take over SK. In SK (from people who have visited SK , no links) that average Buddist is much much poorer and far less educated compared to an average Christian !! IOW, mercantilism failed in SoKo.

Mercantilism wrt to present India will backfire. It will only enable US corporates and Chrianistists etc to enter into India and strengthen their stronghold. eg coal sector may all go soon.

[Arjun]

SK is classic example that mercantilism only enabled US-corporates and US Missionaries to take over SK. In SK (from people who have visited SK , no links) that average Buddist is much much poorer and far less educated compared to an average Christian !! IOW, mercantilism failed in SoKo.

SK also grew rich in the interim due to its mercantilist, manufacturing & trade surplus-focused policies.

Sales of the Top 10 chaebols, all South Korean names such as Samsung and Hyundai, now account for as much of 80% of the country's GDP. Its the chaebols that dominate the economy - not MNCs, or US corporates.

Missionaries are a problem - but that is not linked in any way to economic policies.

[Theo_Fidel]

Japan, SoKo & China all emerged after tying their coat tails completely to the American economic system. We can not bring ourselves to do so and hence languish without the capital necessary, esp the 0%-2% type capital necessary. The other place countries can hitch their wagon to is EU, esp. Germany, France, UK, etc as the newly successful group like Spain, Italy, and historically Switzerland have done. Kinda hard for us to do that.

I don't know how we get the capital we need to build up India at present. I'm talking 20-30-50 Trillion $.

[Rahul Mehta]

I don't know how we get the capital we need to build up India at present. I'm talking 20-30-50 Trillion $.

We dont need that much capital.

Whatever we need, we can raise by wealth tax. Wealth tax brings down cost of land, rents, wages labor expect etc. and so requirement of capital decreases with wealth tax.

===

Arjun,

Since this is economy thread, I will reply in Global Christianity thread. But many SoKo corp are now under US companies . eg Daiwoo. And most corporate heads of SoKo are protestents. The so called mercantilism enables US MNC-owners to grow inside country and thus enables them to push their protestent missionries deep inside the country. You buy a bigger car, it comes with higher expected cost of fuel. Some things come in packages.

UK grew without any internal mercantism and USA grew without any internal mercantiism for decades. They practices mercantilism OUTSIDE , not inside. And thats the way to grow. Practicing mercantilism inside country is only feeding cronies at the cost of real productive factory owners who cant network with neta-babu-judges.

[sanjaykumar]

India needs to get capital by generating it not by importing it.

Wealth creation will not happen and major capital inflows will not take place as long as one to two trillion dollars are each in foreign accounts, by grace of corruption, as well as domestic gold sinks. That is capital that is quite dead. If Indians have no faith in their own economic management, it is foolish to expect others to invest their capital.

Is Modi going to change this? We shall see.

[Vipul]

New GDP data with 2011-12 as base year in January 2015.

Seeking to present a more realistic picture of the economy, the government will release a new series of national accounts with 2011-12 as base year for computing the economic growth rate.

The Gross Domestic Product (GDP) data based on the new series will be released for three consecutive years from 2011-12 in January next year.At present, the GDP is computed on 2004-05 base year.

"The new series will better reflect the economy as it would include more sectors. However, it would be difficult to say whether there would be any significant change in growth rates for the previous years," National Statistical Commission Chairman Pronab Sen, who was associated with formulation of the new series, said.

He further said that it may take about one year to ascertain about the change in growth rates of different sectors and economy as a whole based on the new series during the previous years."As per the revision policy of the national accounts, the estimates for the year 2011-12, 2012-13 and 2013-14, due for release in January 2015, would have been the third revised estimates, second revised and first revised estimates, respectively," as official statement said.Since these estimates have been compiled afresh, these would be referred to as "New Series" Estimates, it added.

The government will also be revising the base year for consumer price index (CPI), wholesale price index (WPI) and index of industrial production (IIP).The new series of IIP and WPI are likely to be released by March 2016. The growth in the new series of IIP and WPI would be incorporated in the provisional estimates of 2014-15, to be released in May 2016.

The National Statistical Commission has suggested that the base year for computing national account should be revised every five years.The base year of the national accounts is changed periodically to take into account the structural changes which take place in the economy and to depict a true picture of the economy through macro aggregates.

The first official estimates of national income were prepared by the Central Statistical Organisation (CSO) with base year 1948-49 for the estimates at constant prices.These estimates at constant (1948-49) prices along with the corresponding estimates at current prices and the accounts of the Public Authorities were published in the publication, 'Estimates of National Income' in 1956.

With the gradual improvement in the availability of basic data over the years, a comprehensive review of methodology for national accounts statistics has constantly been undertaken with a view to updating the data base and shifting the base year to a more recent year.

The base years of the National Accounts Statistics series have been shifted from 1948-49 to 1960-61 in August 1967; from 1960-61 to 1970-71 in January 1978; from 1970-71 to 1980-81 in February 1988; and from 1980-81 to 1993-94 in February 1999. Thereafter it was changed to 2004-05 in 2006.

[kmkraoind]

Power sector looks at saving Rs 6,000 crore in coal transportation

NEW DELHI: The power sector is heading for a $1 billion, or Rs 6,000 crore, saving in coal transportation cost and earnings of another Rs 3,600 crore by additional generation as the government plans to tweak fuel supply arrangements to ensure that coal from each mine or port is shipped to closest plant.
..........
Further, many power companies get fuel from a mine far away even if coal is produced much closer to the plant. The proposed changes would affect nearly half of India's total power generation capacity. In some cases two plants will simply swap the coal suppliers, while in other cases the supply adjustments would involve many plants.
..........
Power, Coal and Renewable Energy Minister Piyush Goyal has said in the past that the fact that different companies supplying coal are subsidiaries of Coal India, would help restructure the supply pacts, and this was a reason why the state-run giant was not being split.

The KPMG report, submitted to the power ministry, said that the exercise will also decongest the railway network as the average distance travelled by coal will come down to 429 km per tonne from 589 km per tonne and hedge coastal power projects against any interruptions in supply in future.

Another low hanging fruit has been plucked (minimum conman sense, not a big bang reform) and resultant savings are 6000 crores.

[Pratyush]

Why do we need to import the capital from overseas?? Why can it not be printed at home, don't we control the printing press.

As I understand, the value of money is = to the value of goods and services produced in the economy.

As long as the goods are being procured from domestic sources. All that need be done is to print money. As long as the demand and supply match, the inflationary pressures can be kept at bay.

Or have I lost it totally & completely.

[member_28714]

And very accurate inference concerning raw material costs falling faster than finished goods cost. But I dont see this as a bad thing long term as this forces the manufacturing push further. At the end of the day I dont think we need a trade surplus ever and we should not model our economy to be reliant on a trade surplus. If we can consume 80% of our produce and fund our import bill with the remaining 20%, it will be perfect as that results in a automatic insulation from pathetically governed countries going bankrupt.

Thanks, but I have to disagree on the suggestion that we should not run trade surpluses. We should be doing so with gusto. We were a mercantile trading power for >2000 years. That's how we accumulated ~30000 tons of gold in this country over the course of history, despite not being a major gold producer. Please read this article: All the world's gold. Historically, India was a vigorous trading nation. We exported so many products that the world desired, while they could not export much of interest to us, that we got paid in gold and silver, which is why India, despite being a poor developing country, still sits on the largest private gold holding on the planet. The ancient Greeks and Romans lamented the loss of gold to India. The early expeditions to the new world sought gold to pay for European imports.

As Jhujar said, it would be better to build a large forex warchest and also seek preference for payment in gold rather than fiat currencies, where possible. The latter is unlikely to be pursued vigorously, but the former - say a $500-750 billion reserve - is achievable within a single term of effective government policy, combined with soft crude prices and the pursuit of trade surpluses and investment inflows.

I disagree, as the only way to store forex today is in American bonds and those are not worth the paper they are printed on. When I say we dont need a trade surplus, what I mean is that any surplus be converted into some commodity or be reinvested in public infrastructure or social programs. There is no point in holding hordes of USD in the coming years. It will get us nowhere. There is such a thing as too much savings. If we can maintain an (FII+FDI) to Forex Reserves of 1.5:1, that would be more than adequate.

Tell me, what can China do with its 3 trillion kitty? Unless of course they are prepared to go to war with the US?

[Rahul Mehta]

.... If we can maintain an (FII+FDI) to Forex Reserves of 1.5:1, that would be more than adequate ?

( FII + FDI ) : Forex Reserves = 1.5 : 1 ?

OR

( FII + FDI + Short Term Debt ) : Forex Reserves = 1.5 : 1 ?

OR

( FII + FDI + Total Debt) : Forex Reserves = 1.5 : 1 ?

[pankajs]

Why do we need to import the capital from overseas?? Why can it not be printed at home, don't we control the printing press.

As I understand, the value of money is = to the value of goods and services produced in the economy.

As long as the goods are being procured from domestic sources. All that need be done is to print money. As long as the demand and supply match, the inflationary pressures can be kept at bay.

Or have I lost it totally & completely.

Assume value of all good and services (G&S) produced in the economy, say 100 units = 100 currency units.
So, 1 unit of G&S can be had for 1 currency unit.
Or, 1 unit of currency can buy 1 unit of G&S.

Gov. decides to print 10 extra currency units i.e there are 110 currency units in circulation. The supply of currency has to match the supply of G&S we now have total 110 currency units chasing 100 unit of G&S.

So, 1 unit of G&S can be had for 110/100 = 1.1 currency unit.
Or, 1 unit of currency can buy 100/110 = 0.91 unit of G&S.

The currency buying power is reduced so 1 currency unit buys 0.91 units of G&S compared to 1 unit when no excess printing. In reverse, we can say there is inflation so 1 unit of G&S costs 1.1 currency unit compared to 1 unit when no excess printing.

How much is the expected inflation? 10% extra printing should result in 10% inflation in theory. I am no economist but I think when looking at the dynamics we need to keep in mind the following
1. The inflation will not be equal across all G&S.
2. Inflationary impact of excess printing is not immediate but takes time to cycle through the economy.
3. There are other factors that will complicate this simplistic linear picture.

Excess money printing (> 2-3 % of real GDP)
1. Is inflationary
2. An indirect tax of the mango folks
3. Hits the poor the hardest
4. Prolonged high inflation leads to loss of confidence in the currency

[member_28714]

.... If we can maintain an (FII+FDI) to Forex Reserves of 1.5:1, that would be more than adequate ?

( FII + FDI ) : Forex Reserves = 1.5 : 1 ?

OR

( FII + FDI + Short Term Debt ) : Forex Reserves = 1.5 : 1 ?

OR

( FII + FDI + Total Debt) : Forex Reserves = 1.5 : 1 ?

Most good debt is secure debt. And bad debt is negligible for a mature ecosystem. Thats why we have ratings which denote the repayment power of an entity. Forex Reserves do not need to cover debt, though at least psychologically people tend to do that. A classic example is Japan where debt is about equal to held reserves. But that does not mean Japan can use its reserves to service debt. Debt is a promissory note, guaranteeing future productivity, issued in good faith or against collateral assets, nothing more. Forex may help balance debt psychologically, but cant be used from a practical perspective unless you are talking of the government going broke. Forex is nothing more than a country's instant buying power in the international market and there is not enough stuff you can buy with trillions.

Right now we have a Forex ratio of 7.5% compared with PPP GDP. China's reserve ratio is like 33%. Thats how you make sure that your national savings sit and rot. They tried using it to buy out oil fields, now looks what happenned. Oil is trading at a 25% discount to the prices they bought at. How else are they going to spend that moeny? They can retire their debt. Why arent they. Their debt is more expensive than the piddly 3% they get on US bonds. So financially it makes sense for them to retire that debt right? No. Wrong.

[pankajs]

USA TODAY ‏@USATODAY 31m31 minutes ago

#BREAKING Oil prices fall 2.5% to under $77 a barrel, lowest in 3 years http://usat.ly/1qnsDlJ

[Uttam]

USA TODAY ‏@USATODAY 31m31 minutes ago

#BREAKING Oil prices fall 2.5% to under $77 a barrel, lowest in 3 years http://usat.ly/1qnsDlJ

So now it seems clearer than ever that it is the Saudi's who control the prices of crude. They lowered the price they charge US probably to hurt shale producers really hard. I hope this short-term gain does not lead to a very long term pain.

[Gus]

not only US domestic, but also their geo-political enemies iran. iran needs it at 100? to balance budget? now iran has to scale back their assad support etc.

[putnanja]

USA TODAY ‏@USATODAY 31m31 minutes ago

#BREAKING Oil prices fall 2.5% to under $77 a barrel, lowest in 3 years http://usat.ly/1qnsDlJ

So now it seems clearer than ever that it is the Saudi's who control the prices of crude. They lowered the price they charge US probably to hurt shale producers really hard. I hope this short-term gain does not lead to a very long term pain.

According to other reports, shale producers break-even at around $60 per barrel. So lots of ways to go. What Saudi is doing is to preserve its market share. It will hurt other producers like Iran, venezuela, Russia etc more. The cost of oil for them to balance their budgets is around $80-90 per barrel. It is every man for himself in the OPEC world now

[Prem]

The fly in Saudi game plan will be Russia, China, India, Iran cooperation by trading oil in local currency. Saudis have to accept Yuan, Rupee etc to keep their market share. Tubb Aayega Maza ( TAM). soon oil shall remain strategic commod-ity no more for barbarians to shit on civilizations.
The thickest layer of Shale in NE of India will be another Nya Danda on ME head.

[member_28722]

Which is why my target for the rupee in 2019 is 40 to a dollar.

Good, provided real estate values and non essential commodities cost also reduce by the same margin, else this will cause major hurt to IT services and ability to Offshore effectively.

[Pratyush]

Pankaj, you have explained the theory behind the point I was trying to make. So if the 2 elements can be kept in balance, then there is no harm in increasing the money supply in the economy. If we can make sure that the production of goods & services also keeps up with the increasing money supply.

I guess, this is what Making In India is trying to address.

OTOH, if we increase the money supply without a corresponding increase in the available goods & services. We will be in deep trouble.

[pankajs]

The RBI keeps the money supply in line with the expected growth in GDP. Now forecasting is an imperfect science so they generally would print 1-2 % over the expected growth if they are conservative.

The money available for investment will come from the savings portion of the GDP for a particular year. Assumption here is that all the previous savings are tied up one way of the other. Given that India is running a fiscal deficit a portion of the savings will go towards plugging the gap in the government finances. That reduces the money available for investment even further.

Given the massive investments required in infrastructure, etc and India's limited finance we will depend on massive infusion of capital from outside.

[deejay]

According to other reports, shale producers break-even at around $60 per barrel. So lots of ways to go. What Saudi is doing is to preserve its market share. It will hurt other producers like Iran, venezuela, Russia etc more. The cost of oil for them to balance their budgets is around $80-90 per barrel. It is every man for himself in the OPEC world now

A question: Isn't production cost directly linked to the Oil rate per barrel? Won't the production costs come down with a slight time lag as the crude oil prices fall globally?

On another note: On a recent trip to Upper Assam noticed a Gas Cracking Plant started in recent past. Also some tea gardens have been recently acquired partially for fresh Oil Explorations near Digboi but not at Digboi.

[Suraj]

I disagree, as the only way to store forex today is in American bonds and those are not worth the paper they are printed on. When I say we dont need a trade surplus, what I mean is that any surplus be converted into some commodity or be reinvested in public infrastructure or social programs. There is no point in holding hordes of USD in the coming years. It will get us nowhere. There is such a thing as too much savings. If we can maintain an (FII+FDI) to Forex Reserves of 1.5:1, that would be more than adequate.

There's no real science or proven track record behind specific ratios between inflows to forex reserves. My basic requirements are these:
* The fastest sustainable growth
* The fastest rate of job creation and fixed asset buildout possible

Given those two requirements, give me the best model that will achieve it. We have a very small gap before our demographic dividend becomes an unmanageable burden. I don't care about perfection, but I do care about track record. I want a model that accelerates growth quickly, for a couple of decades at minimum. The export driven model of Japan, Korea, SE Asia and China have a proven record of success in this regard.

Whether China chooses to go well beyond and accumulate a $3-4 trillion forex horde does not change the fact that their country is unrecognizable from what the generation prior grew up in. I want that fast growth for India, not merely because it's cool, but we're at a critical demographic point. That's a model that works. It's not perfect. I don't care for perfection. No model is perfect. Debating 1.5:1, 2:1 etc are just debate sidebars.

[member_28714]

I disagree, as the only way to store forex today is in American bonds and those are not worth the paper they are printed on. When I say we dont need a trade surplus, what I mean is that any surplus be converted into some commodity or be reinvested in public infrastructure or social programs. There is no point in holding hordes of USD in the coming years. It will get us nowhere. There is such a thing as too much savings. If we can maintain an (FII+FDI) to Forex Reserves of 1.5:1, that would be more than adequate.

There's no real science or proven track record behind specific ratios between inflows to forex reserves. My basic requirements are these:
* The fastest sustainable growth
* The fastest rate of job creation and fixed asset buildout possible

Given those two requirements, give me the best model that will achieve it. We have a very small gap before our demographic dividend becomes an unmanageable burden. I don't care about perfection, but I do care about track record. I want a model that accelerates growth quickly, for a couple of decades at minimum. The export driven model of Japan, Korea, SE Asia and China have a proven record of success in this regard.

Whether China chooses to go well beyond and accumulate a $3-4 trillion forex horde does not change the fact that their country is unrecognizable from what the generation prior grew up in. I want that fast growth for India, not merely because it's cool, but we're at a critical demographic point. That's a model that works. It's not perfect. I don't care for perfection. No model is perfect. Debating 1.5:1, 2:1 etc are just debate sidebars.

China's model of growth has nothing to do with their stupid leadership hoarding forex. If they were smart that money would have been with the people of China in the form of land and asset ownership. Instead what they have is an 'I Owe you' slip from the US.

Export as much as you want. Just stop hoarding the surplus. Spend it, use it, dont keep buying worthless US paper.

[Suraj]

That's exactly what I said when I wrote "Whether China chooses to go well beyond and accumulate a $3-4 trillion forex horde does not change the fact that... the model works". I did not mention anything about forex reserve hoarding or holding USD in my earlier post asserting we should run a trade surplus.

[member_28722]

China's model of growth has nothing to do with their stupid leadership hoarding forex. If they were smart that money would have been with the people of China in the form of land and asset ownership. Instead what they have is an 'I Owe you' slip from the US.

+1

Export as much as you want. Just stop hoarding the surplus. Spend it, use it, dont keep buying worthless US paper.

Why not spend it on acquiring gold reserves.

[gakakkad]

Hoarding forex reserve is one thing..and having a trade surplus is a different issue altogether.. I don't understand the cause for confusion...Since it ll take a while for the rupee to be the reserve currency of the world , we can't keep having massive current account deficits...and we can't do without importing coal/oil + gold and even electronics ( ) .

reason we need to hoard a forex reserve at all is because we hold a current account deficit... we need an insurance against external shocks... that if someday europe collapses ,plummeting our exports , we ll have the currency to buy oil..

Scenario 1 : (present scenario) .imagine a scenario when ISIS acquires nukes , crude goes 200 a barrel and eurozone economy collapses ...what would happen if we maintain forex reserves of less than 50b ? how do we get our oil ?

Scenario 2 : India becomes an manufacturing powerhouse ... every second home in Brazil owns an (Indian made) videocon tv and Indian made cell phones ... we run a trade surplus of 20 billion every month... isis acquires nooks... eurozone collapses... but we still have south american customers..and vietnamese ...and australians...and russians.... we still have a guarantee of a trade surplus of 15 billion in any worst case scenario .. (except a world war or a massive asteroid hitting the earth ) ... in this case even if we don't hoard forex reserves we have are insured against big shocks...because we know that every month we ll have a current account surplus to rely upon...and that will help us get the piece of paper we need to buy oil...

China got several things right...some of them are an emphasis on manufacturing and infrastructure and getting a current account surplus..I don't know whether there hoarding of 3 trillion of forex was the right thing or not.. I don't know the reason why they did that...

[Arjun]

As Modi focuses attention on massive expansion of labour-intensive manufacturing in India - am hoping there is no loss of focus on the R&D & capital intensive sectors which have traditionally constituted India's blind spot.

Whether manufacturing, services or agriculture - there are 3 tiers across which the global economy operates:

1. Capital & R&D Intensive Tier
2. Labour & Skill Intensive Tier
3. Unskilled Labour Intensive Tier

India has traditionally been the world leader in Tier (2). Its no wonder that India leads the world in IT Services & pharma generics and was the predominant global player in textiles until 1750. But it is Tier (1) that has and will always play the role of disruptor that can alter the dynamics of world trade. The Industrial Revolution in Britain was an investment in Tier (1) that completely wiped out India's predominance in Tier (2) in textiles. Similarly, for all of India's vaunted dominance in IT Services (Tier 2); Tier (1) software firms such as Google & Alibaba can singlehandedly create higher valuation than perhaps the entire Indian software sector.

Tier (1) has not been the success story so far in India - NOT due to lack of capable entrepreneurs. The reasons primarily have been lack of capital backing the entrepreneurs, lack of domestic consumer base & lack of effective government policies.

India has now reached a stage where the first two reasons are fast becoming history. Hopefully the government is also now far-sighted enough that we would have all elements in place to enable India to take a lead in R&D / capital intensive sectors of the future.

[nawabs]

Govt notifies standards for mobile phones, 14 other electronic items

http://www.business-standard.com/articl ... 134_1.html

The government has notified mandatory standards for 15 electronic products, including mobile phones, power banks, LED lamps, to curb flow of low quality items in the country.

The Department of Electronics and Information Technology notified standards for products on November 7 and companies selling these products will have six months to comply with the norms.

Apart from mobile phones, the list also includes power adaptor (or chargers) for IT products, audio, video and other similar electronic products, Uninterruptible Power Supply (UPS), alkaline batteries or other non-acid portable batteries, cash registers, copying machines, smart card readers, passport reader, point of sales machines etc.

"Within a fortnight of noticing industry's concern, my ministry has notified standards for electronic products including mobile phones. This is a message to the world on how quickly new government responds to their concerns," Telecom Minister Ravi Shankar Prasad told PTI.

"This notification helps government in curbing poor quality products as well as ensure safety for public," Prasad said.

In October last year, DEITY had made it mandatory for 15 products including video games, laptop, notebook, tablet PC, Plasma/LCD/LED televisions, microwave ovens, printers and scanners, telephone answering machines, electronic musical systems etc to comply with standards notified by it.

"Indian standards notified by DEITY are in in line with global standards. Companies have six month time to tune their product as per the notified standard," DEITY Joint Secretary Ajay Kumar said.

The Indian Cellular Association said that these standards were long-awaited and will help in boosting the organised sector business. "The only thing we want is that the compliance should be largely voluntarily in nature," the association said.

[Hari Seldon]

Land Acquisition Act to be amended even without Opposition’s support: Arun Jaitley

http://t.co/sqrwVNS8Vw

[nawabs]

LPG prices will be freed after Delhi polls in Feb; you could get cash upto Rs 6,800 p.a. By R Jagannathan

http://firstbiz.firstpost.com/economy/l ... 07748.html

LPG will get a fixed subsidy and actual prices to consumers will vary depending on global crude prices from March or April 2015. Just as diesel deregulation happened after the Maharashtra and Haryana assembly elections, the LPG one will follow the Delhi elections.

According to The Indian Express, the Modi government has decided to fix Rs 568 per cylinder as the subsidy ceiling on each cylinder with the burden being shared 50:50 between the government and the upstream oil and gas producers (ONGC, Gail, and Oil India). Consumers are entitled to 12 subsidised cylinders a year, and at this level, this means the government is willing to put upto Rs 6,800 rupees per consumer in bank accounts annually.

What is significant about this subsidy limit is that it is way above the current level of under-recoveries by the oil marketing companies (Indian Oil, etc), which is around Rs 410-420 per cylinder.

This does not mean that the prices of cylinders will be lowered further – it can’t be done anyway as the election code of conduct is now in place – but the Modi government is apparently keeping a sufficiently high margin for the future in case oil prices move up significantly this winter.

The high proposed subsidy limit has two implications.

Firstly,the old loss-sharing regime, where subsidies payable by government are shared with ONGC and upstream companies, will continue even under the NDA. This means ONGC will get a lower valuation when its shares are disinvested this year. As long as the government’s subsidy obligations are shifted partly to public sector oil companies, their valuations will remain under-par, more so when global prices are weak.

ONGC can make higher investments in domestic oil and gas exploration only when its net realisation on crude is $65 a barrel or higher, but with the current subsidy sharing formula, it barely gets $41-42.

But, clearly, ONGC’s own pleas for higher crude price realisations have fallen on deaf ears even in the new dispensation.

The second implication of the government’s decision on LPG subsidies is that the real savings will come not from deregulation, but from a shift to direct cash transfers. Under this arrangement, the subsidy component will be paid into the accounts of LPG consumers, who will then have to pay the full price to LPG distributors using this money. The subsidy payments will be done by linking consumers’ bank accounts to Aadhaar or other identifications, and the scheme is being rolled out in 15 districts by 15 November. The intention, says the Express report, is to cover the whole country by 1 January 2015.

Whether this target of shifting the entire consumer base to direct cash payments will be achievable so quickly is anyone’s guess.

Estimates of the number of gas connections vary from nine crore to 16 crore – which is indicative of the high level of benami connections that may be in existence. Direct cash transfers will cut this gap and bring down the actual number of people entitled to subsidies.

However, the Supreme Court has said that even those without an Aadhaar number cannot be denied LPG subsidies. The government will either have to seek a waiver from the court on its stay, or implement the scheme even without Aadhaar.

It may have found a way. The core requirement is only a bank account, and so direct cash transfers can be made as long as the consumer has an account. This is where the Jan Dhan Yojana of inclusive banking serves as an indirect inducement for people to get an Aadhaar. Once they get a bank account, the scheme can be implemented even without contravening the court’s stay on making Aadhaar optional for the payment of subsidies.

[chetak]

Land Acquisition Act to be amended even without Opposition’s support: Arun Jaitley

http://t.co/sqrwVNS8Vw

bravado, loose and brash talk by the CGI will certainly not help this case...

Chief Justice of India’s out of court comments on Land Acquisition worrying

Nov 10, 2014

Kartikeya Tanna

Is it appropriate for a sitting Chief Judge of the country’s highest court to comment on policy matters that do not touch or concern any violation or unconstitutionality of a law?

Land acquisition is one of the most sensitive areas of governance in any developing nation, particularly in India. On one hand, land-owners often find themselves at the unfair end of the bargain when their lands are acquired by the state. At times, however, resentment is stoked by vested interests – particularly NGOs – both domestic and international – who find themselves on the radar of intelligence agencies.

How to go about setting a system for acquisition of private land for Governmental use or further allocation by the Government for various purposes (charitable or commercial) is, by its very nature, an exercise at policy formation and periodic evaluation. Being a democracy, each region chooses its elected representatives at various levels who are responsible for taking concerns of landowners to policymakers.

If these laws and policies fall foul of the Constitution, or if public authorities exercise them in violation of the law, courts constitute a forum – an exclusive one – to redress such grievances. There is, therefore, a fairly clear demarcation of the respective responsibilities of the legislature, the executive and the judiciary.

What happens when those manning the highest echelons of our judiciary offer views outside the courts on how the policymakers must go about doing their job?

On Saturday last week, the Chief Justice of India HL Dattu spoke on land acquisition aspects at a conference held at a university in Ahmedabad titled: ‘Strengthening Climate Justice Initiatives: Livelihood Challenges at Local Level with a Focus on Farmers’. This Indian Express report quotes him as saying two significant things:


First, that if the agricultural land being acquired by State Governments for the purpose of handing over to the corporate sector is minimised, it could help the agricultural community to a large extent.

There is nothing wrong per se in what the CJI said. Many States have realised the adverse impact that follows allocation of fertile agricultural land for corporate purposes and have adopted corrective action. Gujarat, the place where the CJI addressed the audience, is a classic example – in the 1980s and early 1990s, the then state governments allotted several tracts of land in the immensely fertile lands of South Gujarat.

However, since the last decade or so, care has generally been taken to predominantly allot kharaaba land (wasteland) in remote parts of Gujarat for industrial purposes. Allotment of fertile agricultural land has usually been done when there is a pressing need for an industry to have contiguous land between two tracts of wasteland (say, for meeting requirements under SEZ laws).

That said, the question is whether it is appropriate for a sitting chief judge of our country’s highest court to comment on policy matters that do not touch or concern any violation or unconstitutionality of a law.

Second, and this is more worrying, the CJI said that when the sovereign state takes land, give the farmer “not just compensation, but something more than compensation”.

What is “something more than compensation”? Is it a premium? And, what’s the quantum for that “something more”? And wouldn’t such statements (of course, if accurately reported by the Indian Express) result in a flood of litigation in which litigants hope and aspire for that “something more than compensation” since the CJI has publicly suggested so to the authorities?

The CJI then goes on to say that when State Governments appeal orders passed by HCs enhancing compensation for acquiring lands, he has “the habit of looking into the eyes of such lawyers who appear for the state”. After asking the state counsels why the state is being “so finicky in giving compensation” fixed by the HC, CJI then said “He looks at me, I look at him, and say enough is enough”.

He concluded this point by stating that he wants to tell the Minister for Agriculture, GoG, who was present at the conference, to “pass it on to his higher-ups”.

There is a definite problem with such statements. Even if the stand of the State counsels is ultimately rejected by the SC, they have a legal right to appeal. That is also a critical aspect of the rule of law. Quite often, several judgements and orders of the high courts are overturned by the SC.

It isn’t as if State Governments choose to appeal out of fun or to make the land-owner suffer (although the latter does end up being a consequence due to the laggard pace of our court proceedings). The choice of appealing is dictated with the intention to get finality under law.

If the HC increases compensation in one case and if the State Government chooses not to appeal to the SC for that HC order to attain finality under law, there may likely be a tsunami of litigations in previous cases where land has been acquired by the State.

In that sense, when the CJI has publicly stated his “look into the eye” approach in dealing with State Government counsels appealing HC verdicts, what confidence does it give such counsels (or anyone, for that matter) to be assured of getting a patient hearing on appeal?

These utterances by the CJI (at the cost of repetition, if accurately reported by IE) are indicative of a worrying trend of late where sitting judges offer gratuitous comments which are as seriously taken by the public as written orders having the force of law.

[ManuJ]

The Indian justice system is out of control, helped along by successive weak, corrupt and ineffective governments.
Honorable judges have long ago crossed the line of keeping their role restricted to ruling on the constitutionality of the laws.
They have become used to being an alternative power center with no accountability - what an ideal combination!
What we are seeing now is a power struggle as Modi's govt. tries to re-establish equilibrium and the judiciary resists all such attempts.

[member_28797]

Is the "honorable" judge a product of JNU or similar university? His lahori logic sounds quite similar to the ones uttered by JNU clowns