Indian Economy - News & Discussion Oct 12 2013

alexis · Post by **alexis** » 11 Jul 2014 14:51

Ok budget. Jingos expected more; so not very happy.

19% increase in revenue is not going to happen; hence fiscal deficit can be managed only by reduction in budgeted expenses.

Austin · Post by **Austin** » 11 Jul 2014 15:02

Curbs on Gold Import Can Go After Situation Improves: Arun Jaitley

Picklu · Post by **Picklu** » 11 Jul 2014 23:29

Supratik wrote:Disappointed with JNNURM being discontinued. One of the few good projects of UPA. Otherwise decent budget. Also there is some confusion whether fiscal deficit is 4.1% (set by PC) or 4.5% of GDP.

The name killed it. Expect it to be launched with a new name next year.

Suraj · Post by **Suraj** » 11 Jul 2014 23:37

I don't think the expectation of 18-20% increase in revenues is unrealistic. Even a historically low growth year generated double digit increase in revenues. Growth for this fiscal has already been estimated upwards from 4.5% to ~6% , and the corresponding increase in activity generates more tax revenues. Low base affect also plays a role.

I do not think JNNURM has been killed in its intent, just in its name. The smart cities initiative has been well funded, and will probably be one of several urban development initiatives. Strictly speaking urban development is not a central funding mandate. It requires instead an active effort at the state level, supported by state and local fiscal independence. The central government funding urban development directly as in JNNURM is somewhat clumsy. It's not very scalable, nor does it provide the level of spending actually needed (Shanghai has probably had a few hundreds of billions of dollars invested in its public works). Urban development and public policy is far too complex an item to be addressed within a single centrally funded program.

Theo_Fidel · Post by **Theo_Fidel** » 12 Jul 2014 02:14

If the program is to be replaced with something else that is good to hear. We will have to wait for the new one and the funding levels, hopefully next budget. Well run cities like Chennai benefited enormously from JNNURM. It was a very efficient program.

The smart cities program is very different as taking Ponneri as example, it is well outside the city and completely green field. Not sure what Rs 100 crore will achieve way out there.

disha · Post by **disha** » 12 Jul 2014 04:22

This thread is coming back to life again!!!!

I thought this was the Indian Dukhonomy thread, so moribund that it was about to be put to pasture and now is back in action. I am really worried about the other threads in the GDF!!

Suraj · Post by **Suraj** » 12 Jul 2014 04:41

So, hours after my previous post on devolution of fiscal powers to states, firstpost has this article about a tremendous change in central/state fiscal relationship that just happened:
Budget 2014: Narendra Modi gives biggest push to fiscal federalism

Amidst all the hullabaloo over multiple suboptimal Rs 100 crore outlays and the perceived lack of radical reforms in the first Modi budget unveiled by Arun Jaitley yesterday (10 July), many members of the commentariat missed the biggest bang political reform of them all: a strong shift to fiscal federalism.

At one stroke, the NDA government has shifted huge outlays to states by transferring large chunks of central plan outlays, including the flagship UPA scheme – the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). Suddenly, state plans financed by the Centre have moved up from 26 percent of the total plan expenditure to 59 percent.

This is a massive transfer of fiscal implementation power to states in just one year. In P Chidambaram’s last fiscal year (2013-14), states got Rs 1,19,039 crore out of the Rs 4,75,532 crore plan outlays; this year (2014-15), they get a huge Rs 3,38,408 crore from the total plan kitty of Rs 5,75,000 crore.

In terms of magnitude, it means resources equal to nearly 1.6 percent of GDP have been shifted from centre to states. In 2013-14, central assistance to state plans was 1 percent of GDP; this year it is 2.6 percent.

There are three major implications from this new federalism push even though the money is still coming from the centre.

One, states get greater freedom to use the money coming from the centre for implementing the latter’s schemes. Since the Planning Commision's role is also being whittled down, the states need not deal with any intermediary in dealing with such central fund devolutions.

Two, with a little wink and a nod, big central schemes like MGNREGA can now be refashioned at the state level to dovetail into their own plans and priorities.

Third, if this can be done with the Food Security Act, too, states can refashion the scheme like they think fit. It is foolish to believe that 1.25 billion people spread over 29 states and many Union territories all need the same kind of scheme.

The one-cap-fits-all approach of the UPA years, dictated by dynastic and centralising feudal considerations, is now being whittled down by a former state chief minister who is now prime minister.

In his budget speech, Jaitley made only a generic reference to MGNREGA, the 100-days job guarantee scheme, which is one of the schemes shifted this year to state plans. He said: “The government is committed to providing wage and self-employment opportunities in rural areas. However, wage employment would be provided under MGNREGA through works that are more productive, asset creating and substantially linked to agriculture and allied activities.”

What he did not say, and which could be discovered only by looking at the detailed expenditure statements of the budget, was that a substantial chunk of the central plan had also gone to states. Surjit Bhalla gives this measure a score of 10/10 in his Indian Express column today (11 July).

According to a Business Standard report, effectively the number of centrally-sponsored schemes has been whittled down from 126 to 66 by Jaitley. Though the move was initiated during the UPA regime, it has been implemented now because the federal push under Modi is stronger.

A Business Line report notes that, with the shift of MGNREGA to the state plans head, states which want to tweak the scheme to suit their preferences may now be able to do so. Madhya Pradesh, which has been unhappy with the central scheme that provided rigid rules on how much of the funds can be used for wages and how much for material and other resources, will now be able to reshape it.

Since the focus of MGNREGA has now been changed from merely providing boondoggle jobs to real asset creation, the federal funding shift will “allow state governments to implement the scheme in a flexible manner to suit their specific local conditions. States can use the MGNREGA funds to dovetail it with their own schemes for rural development,” notes BusinessLine.

The tendency to centralise schemes meant for implementation by states was accelerated under the UPA, where the Dynasty felt the need to take credit for such schemes. In the name of being pro-poor, huge outlays under MGNREGA, Food Security and other schemes were made central in nature even though only states had the responsibility to implement them. No state was actually consulted while drafting these schemes. The UPA effectively de-federalised a federalising trend that had begun earlier in the last decade.

Narendra Modi has clearly reversed this trend. It offers hope that many rigid laws and schemes of the past — including labour, land acquisition and rigid social welfare schemes — can now be amended at state level to create momentum for reform and change. Way to go.

Here's Surjit Bhalla's report mentioned above:
From hope to reality: Surjit Bhalla

The difference between Jaitley’s budget and the UPA budgets is not in the presentation (bad in both), but in content. The BJP budget talks about investment, and how the investments necessary for enhanced growth will be financed, how the cost of this financing has to be, and will be, substantially reduced, for example, no CRR and SLR requirements for infrastructure investments. The UPA budgets, in contrast, talked about how, by giving rights to all, of all kinds, including happiness, they would end up by delivering everyone misery. That is the difference between Modi-Jaitley and Sonia Gamdhi-UPA — and vive la différence!

On fiscal consolidation, there is only a promise to overhaul the inherited, bad subsidy regime. The FM said: “I also propose to overhaul the subsidy regime, including food and petroleum subsidies, and make it more targeted while providing full protection to the marginalised, poor and SC/ STs. A new urea policy would also be formulated.” If the comments on NREGA are taken in conjunction with the above comment (that is, “wage employment would be provided under MGNREGA through works that are more productive, asset-creating and substantially linked to agriculture and allied activities”), there is a distinct message here — the old subsidy regime will go, replaced by more targeted (read Aadhaar) allocations. Score: 7/10.

On social programmes, no Indian budget has talked so much about clean water, rivers, sanitation and toilets. In addition, there is considerable emphasis on the empowerment of women, enhancement of girl-child programmes, concern about the sex ratio (killing of the girl child), and safety of women. The concern is well founded and expressed, and strong intent of policy is discernible. No hesitation in concluding that on this much-neglected social sector, the government needs to act much more, and likely will. Score: 8/10.

On capital markets, investment and growth, one of the strongest components of Budget 2014-15. There is 49 per cent FDI in insurance and defence, and increased incentives for investment in real estate and infrastructure. And there is concern and budget provision for the recapitalisation of banks. Oh yes — and Indians can now manage foreign portfolio investments based in India. Such a combination of policies for growth was rarely (strike that — never) seen in the UPA budgets of the last 10 years. Score: 9/10.

On decentralisation and power to the states, Modi, during his campaign speeches as well as his time as chief minister of Gujarat, constantly reiterated the importance of decentralisation, that is, power to the states. While the budget speech is silent on this point, a perusal of the budget expenditure figures show that for the large plan expenditure component (approximately 5 per cent of GDP), there has been a complete reversal of trend. In 2013-14, state plans constituted 25 per cent of this total; in 2014-15, states will handle nearly 60 per cent of the total! Score: 10/10.

Finally, the fiscal deficit. Oops, I almost forgot. Somewhat surprisingly, the FM has stuck to the target of 4.1 per cent of GDP for 2014-15, rather than the widely expected 4.5 per cent. As readers of No Proof Required know, I am not a big fan of the lazy economist’s approach to macro-economics — previously it used to be “Look at the rate of growth of Money Supply”, and now it is “What size is your fiscal deficit?” Thankfully, Jaitley substitutes thinking for blind regurgitation and solves his low growth, drought-infested 2014-15 deficit problem by selling government assets; for the future, there is the “roadmap for fiscal consolidation is a fiscal deficit of 3.6 per cent for 2015-16 and 3 per cent for 2016-17”. The lower deficits will come about through (finally) the implementation of the GST, and higher growth. Score: 10/10.

Jaitley gives States more freedom in MGNREGA implementation

In a major rejig of the UPA’s flagship Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), the BJP-led Government has converted the programme from being a Central to a State Plan scheme. This change, however, did not find explicit mention in Finance Minister Arun Jaitley’s Budget speech.

In the previous Government’s 2013-14 Budget, a total amount of ₹33,000 crore had been provided towards MGNREGA as a Central scheme. The current Budget has increased the allocation marginally to ₹33,353 crore but shifted it entirely under the head of State Plan schemes.

This is being seen by many as a move to allow State Governments to implement the scheme in a flexible manner to suit their specific local conditions.

States can use the MGNREGA funds to dovetail it with their own schemes for rural development. Some States, such as Madhya Pradesh, have, in fact, already been doing this.

It uses 60 per cent of MGNREGA funds to pay workers and spends the remaining 40 per cent from the State Budget on procuring building material and for hiring capital equipment for building village roads, schools, panchayat offices etc.

Allocating MGNREGA funds totally under State Plan schemes will further increase the possibilities for States to deploy this money more imaginatively. “If we now do not have to keep worrying about the money coming from the Centre and also can decide on the type of work to be taken up on a decentralised basis, so long as it is compliant with the Act, we welcome this move, ” said Aruna Sharma, Additional Chief Secretary, Panchayat and Rural Development, Madhya Pradesh Government.

Rajasthan’s Chief Minister Vasundhara Raje Scindia had recently sought for employment generated through departmental works to be counted as employment for MGNREGA purposes, while also giving the “State Employment Guarantee Council complete flexibility to include any kind of work as per local needs”.

Devolution to states: States get more room

The Budget support for central plans stood at an estimate of Rs 2.36 lakh crore in 2014-15 as against the RE of Rs 3.56 lakh crore in 2013-14. The central assistance for states and Union Territories plans has gone up from the RE of Rs 1.19 lakh crore in 2013-14 to Rs 3.38 lakh crore in 2014-15, a steep rise by 184 per cent.

For instance, the central plan outlay for the ministry of human resource development was slashed threefold from the RE of Rs 61,862 crore in 2013-14 to Rs 17,672 crore in 2014-15. However, under the state plan outlay, the same ministry has been allocated Rs 50,694 crore in this financial year. Earlier, no funds were allocated to states through the HRD ministry.

The restructuring of CSS was approved by the Union Cabinet under the UPA government in 2013, as recommended by a committee headed by Planning Commission member B K Chaturvedi.

“The intent of the decision is greater synergy in programme implementation and more focused monitoring of implementation by administrative ministries/departments. This will also prevent thin-spreading of resources…This will infuse greater ownership of Plan schemes with the respective state/UT government,” the Budget document noted.

This budget marks a major turning point in the fiscal relationship between center and states. It should not be viewed in terms of what is being dished out by the center. Instead, see it for how much it hands over to the states, instead of imposing a one size fits all solution from New Delhi, which obviously does not work considering that each state is different.

Further, the center shifts its role from being the source of funding, to the source of legislation that ensures that funding and implementation can be performed with more ease at the state level. We talk about lack of democracy and fiscal independence at the state and local level. The budget marks a major move towards enabling that. This also dovetails in with the progressive effort to wind down the Planning Commission - now the center lets the states plan and execute, rather than driving the effort from Yojana Bhavan.

Christopher Sidor · Post by **Christopher Sidor** » 12 Jul 2014 10:07

Singha wrote:JNURM was instrumental in helping blr get its showpiece and calling card over other metros - the network of Volvo buses. blr has a lot more volvos than marcopolo or tata/AL buses. perhaps the only city in india with so many comfortable high end public buses.

Not only that, for the past few weeks I have had the pleasure of travelling in a Chinese built, i.e. BYD, built totally electric bus in Bangalore. It is eerily silent and very good as it has the possibility of freeing us from the tyranny of Hydrocarbon based fuels. My only grouse, it was not a Indian company which made these buses.

ShauryaT · Post by **ShauryaT** » 12 Jul 2014 17:02

A critique of the budget and Modi's approaches.

Building half-bridges

The Union budget is a deep disappointment. It displays India’s weakness as a nation in full measure: articulate lofty goals, give a lot of promissory notes and then design pitiable instruments. Or, if you prefer a numerical metaphor, it is a trillion-dollar economy with a hundred crore mindset (of course, no pun intended).

When Narendra Modi took office, even some of his supporters conceded that his strength was thinking in terms of projects, not policy. The government would be more comfortable thinking about hardware not software. This budget reflects that, except that most projects are half-baked. The government’s growth theory was converting India into a giant construction arena, except now it is hoping that PPPs will miraculously achieve this. The government’s diagnosis, fuelled by a feckless corporate sector, was that a slowdown in decision-making was the economy’s biggest problem. Well, it was not just decision-making, it was the lack of modern institutions upto the task of managing the legal, epistemic, regulatory and political demands of a modern state. This budget is a cross between bad elements of UPA 2 and NDA 1; there is no new Modi 1 in sight yet. The budget has no poetry and uncertain plumbing.

Supratik · Post by **Supratik** » 12 Jul 2014 17:38

PBM is not a very neutral person. Even then his criticism is generic. I didn't find any specific thing that he finds disagreeable or suggestions on what would have been better.

SanjayC · Post by **SanjayC** » 12 Jul 2014 18:21

Supratik wrote:PBM is not a very neutral person. Even then his criticism is generic. I didn't find any specific thing that he finds disagreeable or suggestions on what would have been better.

The guy has babbled a lot in the article without saying anything, and I still don't understand what is in the Budget that so pissed him off. Better to ignore these armchair smart alecs who sit in judgement over Modi's work.

Arjun · Post by **Arjun** » 12 Jul 2014 18:59

PB Mehta's article does not make any sense as an objective commentary on the budget. As long as the long-term objectives on growth, fiscal roadmap & infrastructure creation have been clearly defined, what earthly rationale would there be for the FM to get into the details of how exactly he proposes to achieve these objectives (which seems to be Mehta's primary contention) ? Why relinquish the leeway and flexibility of on-tap mid-year reforms and perforce announce all possible details only during the budget speech ? Which constituency does he need to market to - certainly not the financial markets, which are already at an all-time high ?

Overall - a fairly idiotic article. Having said that, the only way the article makes some sense is more as a pressure tactic to ensure that the FM does get around to addressing all the reforms during the course of the year.

Suraj · Post by **Suraj** » 12 Jul 2014 21:36

The failure of PBM's article, which is also something a mindset a lot of us retain due to it being the way the Congress system ran, is to expect national economic policy to be entirely clarified in the budget speech. This is a rather anachronistic idea, more suited to a unitary state run out of New Delhi, than a federal one, where actual implementation is more in the hands of states and local bodies, and the onus is on freeing them up to implement projects.

Instead, the task of the center is not to announce a fixed policy for every state, and to announce funding for it. There is no shortage of yojanas - just a dearth of outcomes. The center's task is to give states flexibility to implement these projects on the basis of individual states' needs.

A lot of things that 'could have been announced in the budget' are not the business of the budget. A new export promotion policy ? That's within the realm of Commerce Ministry. A manufacturing policy ? Again within the realm of department of industrial policy and promotion, commerce ministry.

The budget is a statement of finances. It should be reduced back to being nothing more than that, not an annual public performance where all economic policy is outlined. That was how the top down system of the past worked, where single size solutions and money were handed down from the capital, based on what they deemed necessary.

Kakkaji · Post by **Kakkaji** » 13 Jul 2014 05:43

Suraj Saheb:

One problem I foresee in sending all the money to the states to implement development schemes is that people like Mulayam/ Akhilesh/ Azam will just steal these funds and not do any development in states like UP which badly need development.

krisna · Post by **krisna** » 13 Jul 2014 06:18

Kakkaji wrote:Suraj Saheb:

One problem I foresee in sending all the money to the states to implement development schemes is that people like Mulayam/ Akhilesh/ Azam will just steal these funds and not do any development in states like UP which badly need development.

could be detrimental to these politicians during election times. comparison will be made about money given to states and how some states improved etc.

with enlightened electorate (also in UP Bihar region) in coming future, expect some chnages in the thinking of the politicians.

Suraj · Post by **Suraj** » 13 Jul 2014 06:31

Exactly. Those who misuse it will misuse it. The goal of fiscal devolution is to help the BJP strengthen at the state level, and build a cadre of CMs and state leaders who can then move to New Delhi and broaden the pool of capable leaders at the national level. So far, the UPA tried to constrain state BJP governments by controlling access to money and by constraining their freedom to reinterpret laws and projects locally, but that has changed now, e.g. the Rajasthan labour law update, and new freedom to implement MNREGA as they need.

Those like Mulayam and Laloo will not change, but the ability of the BJP to mount a challenge at state level will improve, especially if the disbursal of funds to states is tied to outcomes, something I think Modi will try to do, not just because it's good politics but because it's good economics.

Prasad · Post by **Prasad** » 13 Jul 2014 15:07

For example, the statements by weavers in up that people in and moving to gujarat were prospering and that they wanted modi to help them get to that state too

ShauryaT · Post by **ShauryaT** » 13 Jul 2014 19:12

A discussion on the budget. Watch: Rebooting India's Economy - The Road Ahead

Theo_Fidel · Post by **Theo_Fidel** » 13 Jul 2014 21:06

Suraj wrote:....new freedom to implement MNREGA as they need.

While I'd be the last person to support MNREGA, the reason it was structured the way it was, was to get the money directly into the hand of manual labor. State governments were strongly constrained to prevent the money being 're-directed' en route. Really it was a form of conditional cash transfer, where instead of asking for education, healthcare, social change, etc people were asked to slog in the hot sun for pay. For sometime now greater flexibility has been allowed under the MNREGA without measurably improving outcomes beyond the mean. With the removal of constraints the risk remains that we will be back to the status quo... ..or further back...

Instead of doing all this futtsing around, create a real program that helps people at the state level. Replace the MNREGA with something that actually helps peoples aspirations, Schooling, Healthcare, Social reforms, etc.

For instance there is no evidence that MNREGA flexibility has changed or will change outcomes on the ground in places like MP or RJ or CG. One can go and look at social & economic indicators over the past 10-15 years and as one can see the record is extremely uneven. The entire thing should be terminated and replaced with something with better outcomes. Instead of squandering money over a program with very poor outcomes. Even the UPA understood this.

Instead we have had JNNURM terminated, with a thought to bringing something in the next budget.

http://planningcommission.nic.in/data/d ... %20167.pdf
http://planningcommission.nic.in/data/d ... %20174.pdf
http://planningcommission.nic.in/data/d ... %20185.pdf

Compare the drop out rates for the different states. This chart should be framed in every mantriji's cabin while they talk their big talks. Right there, every story of a states future is available to read.
http://planningcommission.nic.in/data/d ... %20239.pdf

Even in UP there must be programs that are succeeding, else you won't have a 71% literacy rate. It shouldn't be that hard to fan out, find these projects/programs, strengthen them with cash, manpower and bring some real change.

The problem in India has always been these sorts of searches for magic bullets and shortcuts instead of linking programs to outcomes. If devolution by itself is a be all & end all how can one explain how some states developed very well and others withered under the same un-devolved regime. Good programs with good outcomes should be maintained and bad programs should be terminated. It is hard to believe we have yet to learn this lesson. The cycle of determining this should be increased. The center has a clear responsibility here. Abdication to the states is not always a good idea. What is the point of the big mandate if we let the successful become more successful and allow the weak to wither, till presumably things get so bad a BJP government enters the state, at which point presumably everything changes 180 degrees. The data shows this is not necessarily true and is borderline anarchist thinking.

Again, the real problems lie in the heartland region, 2/3 of our population, MP, UP, CG, RJ, BH, JH & OD. None of these states has broken free or is even showing signs of breaking free of the mean yet. The main problem being the lack of links to a modern economy. Only the center can do this as a whole. Without blanketing this area with programs that change outcomes and drag this area into a modern economy, we ain't going no where. Devolution or no devolution.

Suraj · Post by **Suraj** » 13 Jul 2014 22:27

Theo, MNREGA was originally created from a set of NDA rural infrastructure and socio-economic development programs, that were repackaged into a cash dole program. This happened over the course of 2 years. The budget essentially does the task of making it back into what it was under the previous NDA. Further, unlike the original NDA, this one attempts to back up this funding with legislative support giving states independent freedom to define labour laws etc.

Just because the program is still called MNREGA does not mean it is the same thing as before. Even the old NDA programs retained their name for a while before the name MNREGA was announced. The same will probably be the case here. This is an interim budget announced within a short time of being elected. Perhaps the UPA knew the MNREGA program was a waste, but what it is today is not the same as what it was until May 15.

Devolution helps by handing greater fiscal independence and power to effect policy, to states. It ensures better outcomes by enabling those states with the administrative will to accomplish it, rather than attempt to do things using a policy set from New Delhi that may or may not suit the state's needs, and may or may not involve meaningful financial support, and more importantly, independent ability to generate financing.

Since you complain that the current action will not work, I suggest you propose an alternative to be critiqued. It's easy enough to criticize a policy action a few days later claiming it won't work, despite the fact that within such a short time, there's absolutely no way to prove such a thing. Modi's actions are easily understandable - he ran a state well and faced problems, and the budget offers solutions to problems he encountered as a state CM. He has the authority and experience of dealing with the problem in a manner none of us do, so I don't see how such premature criticism is warranted.

The argument is that it won't prevent bad states from wasting money. I've already indicated that nothing can stop them from doing that. A badly run state, by its very definition, will be badly run regardless of how well the center supports it. The only solution is comparative development in other states that forces change of regime during election. By supporting greater economic power to the states, the BJP enables more states to come under its own control. It has already demonstrated its ability to find effective state level leaders, e.g. in UK, GJ (now elevated to New Delhi), Goa, MP, CG etc.

Theo_Fidel · Post by **Theo_Fidel** » 14 Jul 2014 03:58

Where do we differ on this MNREGA origin. I don't care how it came about or that the stupid NAC and Jean Dreze cooked it up on a whim. There was a time you had posted in support of MNREGA as a accumulator of other programs, back when I could see on the ground that it was a nonsense program. I said as much back then too but deferred to outcomes. The negatives of this program far far outweigh the positives. We should stop wasting money and time on it. BJP or Congress

Devolution of MNREGA will not help at all. You go back thru pages of BRF analysis of this program, never once was it pointed out that devolution of MNREGA will fix this program. To suddenly come in at the back end and say we devolve power to states on MNREGA, give them Rs 34,000 crore and bang everything is fixed and if they don't thrive they need to become BJP states is wrong headed. What if they don't become BJP states and what if the present BJP states become non BJP states, have you considered that possibility. Then what? How about proposing some new programs to replace this boon doogle and stop wasting tax payer money right now.

Suraj wrote:By supporting greater economic power to the states, the BJP enables more states to come under its own control.

Well say that then. So much for focus on infrastructure. I thought this was about ruling India and actually bringing about some development. Yup! Rs 34,000 crore down the drain this year to get more BJP states.

http://timesofindia.indiatimes.com/city ... 155205.cms

There is no great miracle on what works. For you to now come and say that I'm complaining about the MNREGA and what is being done with it is disappointing to say the least. How can you say it is premature, after the darn program has been running for 6 years+ now. In quite a few BJP states as well, including GJ with little to show for outcomes. I think we knew in the first 2 years that it was a failure and we needed to move on.

The success of the Brazilian program suggests that a conditional direct cash transfer program requiring folks to send their children to school, delay age of marriage for girls, pay mother to have children in hospitals, pay mothers for every immunization shot, pay families to build toilets, use family planning, etc, will prove far more successful than any devolved MNREGA. Rs 34,000 crore will go a long way towards this. And the focus of this money too should be the heartland zone not states like GJ or TN, etc. Direct transfer bypasses the states completely and gives the folks some monetary stability while improving their lives. Is it perfect, No, but it much better than the present situation.

Suraj · Post by **Suraj** » 14 Jul 2014 06:43

The Brazilian direct cash transfer scheme bypassing states and handing money directly to people sounds sounds closest to what MNREGA was for the last 10 years. I don't see how you can claim to have opposed it and stated it would not work, and then propose an alternative that amounts to being functionally closer to what it was before - when it didn't work - than what it has been made into now.

subhamoy.das · Post by **subhamoy.das** » 14 Jul 2014 14:08

The allocations for the big ticket items, such as AIIMS, smart city etc, are only for one year and to kick start of these programmes and will probably be spent on detailed plan etc. The allocation for their actual build will come in subsequent years and by 5-10 year time frame a large number ( may not be 100 ) of smart cities and IIMs and IITs etc will come online thus easing the supply side. NDA2 is committed to improving the supply side and they are taking a step by step approach of the big picture!

Theo_Fidel · Post by **Theo_Fidel** » 14 Jul 2014 20:06

Meanwhile inflation has declined a little, to 5.4%.

http://www.washingtonpost.com/business/ ... story.html

And the monsoon seems to be winding up for some nice rains. Erasing some of the deficit will help the famers produce more food and control some of the inflation.

http://www.thehindubusinessline.com/new ... yndication

Singha · Post by **Singha** » 16 Jul 2014 09:58

http://ibnlive.in.com/news/brics-to-set ... 229-2.html

BRICs bank aggreement is sealed.

ramana · Post by **ramana** » 17 Jul 2014 04:10

How are the rains so far?

Vamsee · Post by **Vamsee** » 17 Jul 2014 07:15

ramana,

Things are getting better but we need more rainfall.

Heavy showers narrow monsoon deficit by 36 per cent, accelerates crop planting

Arjun · Post by **Arjun** » 17 Jul 2014 08:08

A month of Modi dispels years of economic gloom

Theo_Fidel · Post by **Theo_Fidel** » 17 Jul 2014 20:23

^^^
This is lifafa puffery and pretty pointless as these things go.
------------------------

Meanwhile the GOI & PMO get down to the brass tacks of things that actually count. Namely breaking up the PSU monopolies and getting out of the business of running business. Need some bravery however in reducing stakes in PSU to under 49%. This is the time to strike while the iron is hot and markets are up.

http://www.ft.com/intl/cms/s/0/2ab91808 ... z37jvRgkuW

India’s Prime Minister Narendra Modi has initiated a renewed push to offload government assets, outlining plans to raise $2.9bn through the sale of a stake in state-backed energy explorer Oil and Natural Gas Corporation. The move will be the first big test of Mr Modi’s ability to meet a pledge in last week’s budget to hold India’s fiscal deficit at 4.1 per cent of gross domestic product by March 2015 – a target that many economists have described as unrealistic.

Some analysts and international investors had hoped that Mr Modi would use his election mandate to break up public monopolies and substantially privatise state-backed industrial groups. However, neither last week’s budget nor Mr Modi’s public remarks have suggested that such a programme was likely, in a country where full-scale privatisation remains unpopular with parliamentarians and trade unionists alike.

Earlier this week, a senior official at India’s finance ministry also dashed hopes for more radical reforms to the country’s state-dominated financial system, saying that the government had no plans to selldown below 50 per cent its stakes in India’s numerous public sector banks. Yet while such divestments raise substantial sums, the companies involved remain majority government-owned and critics suggest the sales do little to improve the performance of inefficient and poorly managed state businesses.

Arjun · Post by **Arjun** » 17 Jul 2014 21:51

Theo_Fidel wrote:This is lifafa puffery and pretty pointless as these things go.

Business Confidence can hardly be termed a pointless measure. It's THE fundamental basis around which the economy hinges.

Businesses invest when they know there are visible opportunities AND a solid, no-nonsense decision-maker at the helm - not some brain-dead economist intellectual masturbator who inspires yawns.

The cycle for recovery of the economy has already been initiated - check out the mood in boardrooms all across the country.

Suraj · Post by **Suraj** » 17 Jul 2014 23:16

Indeed. Those are actually very meaningful early metrics on the change of sentiment. Businesses invest when they think the government will provide a supportive environment to invest. There's no puffery in 3 back to back months of strong export growth during what is typically lean season in our traditional export destinations, on the back of two years of breakeven export performance. That the business cycle started looking up in May suggests everyone made up their minds Modi was coming to power and got started accordingly.

nawabs · Post by **nawabs** » 17 Jul 2014 23:25

Vibrant Gujarat man is India Inc's PMO pointsman

http://www.business-standard.com/articl ... 132_1.html

anupmisra · Post by **anupmisra** » 18 Jul 2014 22:24

Modi’s India is suddenly the darling of money managers, Bloomberg poll shows

hanumadu · Post by **hanumadu** » 20 Jul 2014 04:26

Concerns mount over India's stance on global trade pact

India stockpiles food for its poor, putting it at risk of breaking current WTO rules. In Bali, WTO members agreed to give India a pass until 2017, while negotiating a permanent solution.

What sort of an agreement prohibits countries from stockpiling food? How does not stock piling help the global economy?

Three officials involved in the negotiations, speaking under the condition of anonymity in order to speak frankly, expressed exasperation with what they described as a history of erratic behavior on the part of the Indian trade team that made it difficult to trust.

Its erratic if we do not toe their line.

The Indian demands appear to have shaken confidence in the new government of Narendra Modi, who came to power earlier this year with a pro-business agenda but now appears set to derail what several officials called the most significant global trade pact in two decades.

Pro business agenda within India for Indian economy. Not a free for all at the cost of Indian interests.

Australian Trade Minister Andrew Robb said assurances had been given to all of the signatories to the treaty that their concerns would be met and expressed optimism that it would be resolved before the deadline.

"There was strong resolution around the table that India’s issues to do with food security would and should and will be addressed as decided previously and I think there will be discussions about how to satisfy the Indians and they won’t be left behind," Robb told reporters.

Western assurances mean nothing. Let them address our concerns first and then we will see.

nawabs · Post by **nawabs** » 21 Jul 2014 12:15

Govt's labour-intensive push faces a tariff barrier

http://www.financialexpress.com/news/go ... er/1271937

Companies in the employment-intensive sectors have to pay taxes at far higher effective rates than those in the capital intensive sectors, as per Indian tax rules.A disaggregated study of all companies in India done by the Income Tax department has thrown up this data.

The reasons are obvious. Income tax exemptions are given mostly against investments made in capital or in some cases are given for setting up the units in say, backward areas.This works against labour-intensive companies like security agencies, retailers, hotels or banks. They can show little capital investment to get any tax set-offs. Many of them like security agencies or electronics agencies would need to be located in urban areas to tap either clients or skilled labour and are therefore even more hamstrung.Even as the government is trying to push job creation through various ministries it is obvious that tax set-offs are creating negative incentives. This year’s Budget provisions further push the same line.

The chart alongside is an illustrative list but demonstrates the huge tax differentials clearly. The data covers all companies that have filed tax returns till March 31, 2014 and published as statement of revenue foregone by the finance ministry as part of its Budget documents.

LABOUR-INTENSIVE SECTORS
Sector/Effective tax rate (%)
Agro processing: 25.29
Electronics including computer hardware: 28.32
Retailers: 27.79
Hotels: 25.49
Banking companies: 30.54
Share and sub brokers: 29.24
Security agencies: 35.62

CAPITAL-INTENSIVE SECTORS
Sector/Effective tax rate (%)
Cement: 16.58
Drugs and pharma : 18.69
Sugar manufacture: 9.98
Fertilisers and chemicals: 14.08
Mining contractors: 6.98

ramana · Post by **ramana** » 22 Jul 2014 02:26

H, the food producing countries can jack up prices in times of shortage claiming demand and supply side economics. If there is buffer they cant do that quickly.

Both US and Australia are food surplus countries.
They dont want stockpiles in importing countries so they can play games.

Prem · Post by **Prem** » 22 Jul 2014 06:54

Nomura Forecasts India Growth at 6 Per Cent in FY15
Glad Tiding, Rejoice on This Khwaish, MMS Kiss of Economic Death Wiped out

New Delhi: India is set to be Asia's biggest turnaround story and the country's GDP growth is expected to rise to over 6 per cent in FY15 and over 7 per cent in FY16, Japanese brokerage Nomura has said in a report.According to Nomura, 2014 would mark an inflection point and 2016 will be a watershed year as Indian economy will start outpacing China."We believe India is at an inflection point. Under Prime Minister Narendra Modi's new reform-minded government, the medium-term outlook is much improved," Nomura said in a research note."We expect real GDP growth to rise from an average of 4.7 per cent in 2013-14 to 6.3 per cent in 2015, 7.1 per cent in 2016 and 7.7 per cent in 2017," Nomura said.The Reserve Bank of India's inflation fight is likely to go 'hand-in-hand' with the proactive, business-oriented Narendra Modi government's strong mandate to cut red tape and jump-start supply-side reforms, it added.
"It is not an exaggeration to expect India to stand out as the biggest emerging market turnaround story in the next five years."A proactive business oriented government can not only reverse the debilitating policy paralysis that has thwarted the ease of doing business, it can also help - by way of much needed supply side reforms - to debottleneck investment projects that are either underway or are in the pipeline, it said.In the base case, reforms are expected to revitalise real investment growth to 10 per cent per annum, lifting potential output growth to around 7 per cent in the next five years and if reforms are fast tracked, real investment could hit 15 per cent per annum, raising potential growth to above 8 per cent, Nomura said.Moreover, the Indian economy is starting to turn around as inflation is abating, the current account deficit is narrowing, forex reserves are accumulating and growth is just starting to rise.

Vikas · Post by **Vikas** » 22 Jul 2014 11:53

ramana wrote:H, the food producing countries can jack up prices in times of shortage claiming demand and supply side economics. If there is buffer they cant do that quickly.

Both US and Australia are food surplus countries.
They dont want stockpiles in importing countries so they can play games.

I wonder which idiotic govt would even consider such an agreement or would honor it even if some previous govt would have signed it and what could be the publicly stated logic behind prohibiting nations from stockpiling food stock..
The food safety of the nation comes first. Never again should Indians be at the mercy of western nations. We haven't forgotten famines of Bengal as induced by Churchill..

Suraj · Post by **Suraj** » 22 Jul 2014 22:10

The UPA did oppose the cap on subsidies and food stockpiling, and in fact, their push for the food security bill was a major contributor to them opposing the US/Australia in the WTO, a position the Modi government appears to continue to carry forward in spirit. Article from Nov 2013:
India warns US over food stockpiling as WTO deal goes down to wire

In a letter to U.S. Trade Representative Michael Froman, India's Commerce Minister Anand Sharma emphasised the "social significance" of allowing a change in the WTO rules to let poor countries stockpile subsidised food.

"As I had explained to you, Food Security is crucial for large developing countries like India with hundreds of millions of people subsisting below the poverty line," Sharma wrote, according to excerpts made available to Reuters.

"It must also be juxtaposed with the fact that the agrarian economy of India is driven by subsistence and marginal farmers unlike the large contract farmers in the developed world. You will appreciate that protecting the interests of farmers and vulnerable sections of society is a key political imperative for a country like India."

India led 46 developing countries in proposing the reform a year ago, suggesting that poorer countries should be exempt from limits on subsidies when they stockpile food to support low-income or resource-poor farmers.

The proposal has been one of the main sticking points in a package of trade reforms that the WTO wants its 159 member countries to agree on at a summit in Bali next month.

The issue is primarily US/Aus driven. They want a cap on subsidies and stockpiling combined with elimination on import restrictions so that they can serve as exporters. The whole thing is misguided in both spirit and intent. Treaties should serve nations as opposed to the other way around. This issue serves the breadbasket west's subsidized farmers, at the cost of developing nations' food security. It's unlikely Modi will budge on this matter.

Paul · Post by **Paul** » 23 Jul 2014 10:12

WHy is no other country opposing this?