Indian Economy - News & Discussion 27 May 2012

habal · Post by **habal** » 20 Aug 2013 16:55

Economies don't work where avg income is Rs. 500/day and Rs. 100 is spent on a litre of petrol and Rs. 75 on a kg of onion. Even if Food Subsidy Bill is implemented by raising petrol prices, it means absolutely nothing. You are just inflating another bill to reduce another one. Means nothing for anybody. Problem in India is that the political leadership is very keen on taking care of needs of cartels.

Oil import cartel, Reliance cartel, Onion cartel, Stock & Currency speculators cartel, MNC cartel, Judiciary cartel. In catering to all these cartels, the country lies somewhere by the roadside.

JohnTitor · Post by **JohnTitor** » 20 Aug 2013 17:09

vishvak wrote:Chinese have manufacturing, USA has cutting edge tech and innovation, Russia has oil too, we have imported a lot more than we should have without realizing constraints like import lobbies. These threats must be factored in - import lobby tax for lack of RnD and infra development in Oil and Natural gas sector.

India has corruption and secularism

Christopher Sidor · Post by **Christopher Sidor** » 20 Aug 2013 17:10

^^^^
How true

JohnTitor · Post by **JohnTitor** » 20 Aug 2013 17:21

shyamd wrote:This panic is overdone. In effect forcing all the Emerging market countries to close their current account deficit will mean that global economy will grind to a halt. The main reason these countries were running deficits were because they were buying from developed markets. Now who's gonna buy from the developed markets? They are shooting themselves in the foot.

The current situation poses huge opportunities for NRI's, assets in India are now a lot cheaper

I think you continue to be delusional. Most of the developed economies trade is with other developed economies and China. See what india exports. It is mostly raw materials and agricultural goods. There is no innovation - name a product or program that is global such as the iPhone or Windows or Skype. Indian IT is nothing more than one huge back office. Indian service industry has been in slow decline. All of this is because of leaders who have had no interest in promoting education and development but only interested in self monetary development and vote bank politics. If you need an example read this. Guess why this "report" was published.

I work in the financial sector and can tell you that the prognosis is bleak. Patriotism is good but that doesn't mean one should be delusional and not introspect. Otherwise one is no different to the Pakistanis.

Corruption has eaten away all the growth from within and everything done by the NDA has been undone. Indian obsession with secularism has meant that traitors have been running the country for a decade in addition to the 50 years before that.

Mark my words. In fact bookmark this post. Software/IT in India is on it's last legs. India is getting ready to pick up the begging bowl and go to the IMF. Only way to have a chance to forestall this is if modi wins.

NRI will do as you say and buy land in India and further push up prices there. Indians living there will see the cost of living rise as a result. This is in addition to the rising inflation.

Sachin · Post by **Sachin** » 20 Aug 2013 17:36

Kerala govt gets RBI nod for Islamic banking
Okay, so RBI has allowed the Kerala Government to go "uber secular" and start an non-banking finance company based on Shariah law. How ever there seems to be a stream of thought that this sort of banking/financing is just using the word "Islamic/Shariah" etc., but may not be really harmful. They say they do not charge interests, but do make profit in another way. Can the financial gurus throw light on the below aspects?
1. For a person taking a loan, there is no visible interest charged. But I understand the bank actually buys the product (house/car) and then makes the loan taker a partner in the deal. First his share would be limited, but month on month he pays an installment and his shares proportionately increases. Finally one day, he gets all the shares on the product. The bank when it purchased the product would have got a lower price, and finally it gets bought by the borrower at a higher price. The difference is the bank's profit. So the bank is making a profit out there.
2. Now what benefit is there for a person to invest funds in such a bank? Because these banks also do NOT give interest on Savings through the bank. Or is there a profit sharing mechanism as well?
3. Read a comment some where that Shariah states that 10% is the profit which can be made.

Counting on the state's traditional Gulf links, the previous government had hoped to raise Rs 40,000 crore. The Sharia-compliant CFSL will launch road shows in various cities of India and the Gulf countries from next month

Chances of hawala money getting in is always there. Especially with Muslim League etc. calling the shots in Kerala. But I am worried about is large scale purchase of property and assets in Kerala and by out-side agencies/people etc. This was always a problem in Kerala when people with dubious sources of income heavily invested in land. Will this Shariah based financial institution help in making this all seemingly less dubious?

JohnTitor · Post by **JohnTitor** » 20 Aug 2013 19:30

habal wrote:Economies don't work where avg income is Rs. 500/day and Rs. 100 is spent on a litre of petrol and Rs. 75 on a kg of onion. Even if Food Subsidy Bill is implemented by raising petrol prices, it means absolutely nothing. You are just inflating another bill to reduce another one. Means nothing for anybody. Problem in India is that the political leadership is very keen on taking care of needs of cartels.

Oil import cartel, Reliance cartel, Onion cartel, Stock & Currency speculators cartel, MNC cartel, Judiciary cartel. In catering to all these cartels, the country lies somewhere by the roadside.

+1 exactly !

svinayak · Post by **svinayak** » 20 Aug 2013 20:21

Shonu wrote: Patriotism is good but that doesn't mean one should be delusional and not introspect. Otherwise one is no different to the Pakistanis.

India is getting ready to pick up the begging bowl and go to the IMF. Only way to have a chance to forestall this is if modi wins.
.

Modi India is patriotism. Fixing things and correcting the policies (after introspection) and removing corruption is patriotism

Patriotism is not delusional. Only in India there is a problem in discussing patriotism. All other countries they make sure that citizens only buy their own country products and build their brands

svinayak · Post by **svinayak** » 20 Aug 2013 20:28

Arjun wrote: Not talking of quarterly ups and downs out there.....No other country has an innovation sector as value-creating as the one in the US. And there is a realization that the theme of perennial rise of China and India need to be tempered with that reality.

At least until either India / China or any others actually get to create an equally robust innovation sector.

It is all about markets now. For commodity products the market is the king.
US has decades of fixing work and lot of innovation needs the market to sustain. There will be innovation but in other sectors

India and china needs decades of experience and learning about the markets in the world before innovation happens

shyamd · Post by **shyamd** » 21 Aug 2013 01:37

Shonu wrote: I think you continue to be delusional. Most of the developed economies trade is with other developed economies and China.

Its an interconnected world my friend. It has knock on effects. China is a developing country.

See what india exports. It is mostly raw materials and agricultural goods. There is no innovation - name a product or program that is global such as the iPhone or Windows or Skype. Indian IT is nothing more than one huge back office. Indian service industry has been in slow decline. All of this is because of leaders who have had no interest in promoting education and development but only interested in self monetary development and vote bank politics.

Can you provide any figures to back that up? You know services exports were up in FY 14.

Also I'll say that stock market, FX movements don't always follow logic - they just find a reason to support the movement one way or another. Ask any trader.

James B · Post by **James B** » 21 Aug 2013 02:14

An excellent programme analyzing the shambles of an Economy called Indian Economy by Ruchir Sharma & Arun Shourie. They talk about why Indian Economy is in dumps today and who is responsible.

http://www.ndtv.com/video/player/ndtv-s ... eststories

vera_k · Post by **vera_k** » 21 Aug 2013 02:38

Let the rupee sink

Sums up the present market action. Enlightening to read that some people are betting that the rupee will fall to 100 to the US$. Wonder what they know to make that bet.

vera_k · Post by **vera_k** » 21 Aug 2013 02:48

shyamd wrote:This panic is overdone. In effect forcing all the Emerging market countries to close their current account deficit will mean that global economy will grind to a halt.

They don't have to close the current account deficit. But to the extent that they need $s, through FDI or asset sales, the rates of return offered to $ denominated investors has to be higher. This is because better returns are available in the developed markets for $ denominated investors. One way of assuring better returns is through efficiency improvements, another is via lowering the purchase price. We're seeing the latter since the first did not come through.

Cosmo_R · Post by **Cosmo_R** » 21 Aug 2013 04:04

This will explain the problem a little better:

http://www.nytimes.com/2013/08/21/busin ... ml?hp&_r=0

On the percentage of the current account deficit vs GDP--the ratio is meaningless in a subsidized economy like India: the bigger merchandise trade deficit, the bigger the subsidy bill in INR for things like petroleum and oil seeds (palm oil for example). The INR budget deficit grows perhaps faster than the current account deficit and the percentage falls. So the the CAD/GDP is not a good indicator of anything.

Indian corporates who borrowed in FX for domestic projects @INR 42/USD are screwed: their payments just went up 50% and their revenues are in INR.

Still, India is not as as badly off as Turkey which is a perennial basket case. Since the 1970s this has been serial lipsticks on a pig.

Brazil (the country of the future and always will be) is also screwed again. I spent most of the mid 1970s and early 1980s raising and restructuring funds for these guys and must say if there is one country that falls shorter of its promise than India, it is Brazil.

September is going to be a bloodbath unless the Fed keeps the cheap USD heroin going.

member_27444 · Post by **member_27444** » 21 Aug 2013 04:17

wong wrote:
vera_k wrote:Think the BRIS were really just a balancing act against the C.

USD vs Chinese Yuan

The Chinese netizens have been complaining for years that BRIC was just stupid and that 'B', 'R' & especially 'I' were just riding China's coattails.

you all totally wong

abhishek_sharma · Post by **abhishek_sharma** » 21 Aug 2013 06:48

Paul Krugman on Rupee

Muppalla · Post by **Muppalla** » 21 Aug 2013 06:54

James B wrote:Import duty on Gold to be hiked further from current 8%.

Not just gold, they have to resort to increasing import duties on most of the stuff. They have to get back to 80s as a short trip to stop the forex flight.

Chidu's request to stop buying Gold did not yield results. There seems to be case of desperation. They need to take bold decisions at the cost of losing popularity with poor. That will be last jahppad they cannot afford. Even in such a situation, if they have any shred of national interest, they should plot an election win by going for an early election so that after coming back they can take bold decisions.

vina · Post by **vina** » 21 Aug 2013 08:37

A bunch of Geriatric dinosaurs from the 70s and 80s managed have done an encore of what they did back then (in any civilized society they would have been canned and flushed, but in India under Congress, abysmal failures rise further!).

Who are they ? 1) Pranab Mukherjee 2) Manmohan Singh , an entire Phalanx of Congress party blowhards.. Diggy Singh, and other ossified acolytes of Rahul Baba who pushed a political calendar and agenda that basically stalled every reform and of course rank nutcases in the NAC like Aruna Roy and Jean Dreaze with their spend like there is no tomorrow by doling out "welfare" fetish.

Between toxic combination of the Geriatric Dinosaurs of the 70s and the NAC nutcases, they managed to torpedo the economy with devastating consequences.

I pray that those jokers are kicked out forever in the upcoming election. As a country we deserve what we got. We DIDN'T give a second term to the two best Governments India ever had in living memory the first was Congress under Narasimha Rao and NDA under Vajpayee . If either of those had been given a second term we could have done much better. But no, we gave a 2nd term to Manmohan Singh, who simply lost the plot in the 2nd term and stumbled from one disaster to another.

habal · Post by **habal** » 21 Aug 2013 08:41

It's very clear:

First growth is pegged to FII "hot money" and FDI investment. Most FII is also desi black money coming back via Mauritius route and not exactly foreign investment. Since most desi punters also think of themselves as something 'Phoren'.

Second you do not satisfy those who supply the "hot money" and FDI and fail to complete various projects and stick to timelines without significant cost-overruns. It's bad management all through.

member_20317 · Post by **member_20317** » 21 Aug 2013 09:30

shyamd wrote:This panic is overdone. In effect forcing all the Emerging market countries to close their current account deficit will mean that global economy will grind to a halt. The main reason these countries were running deficits were because they were buying from developed markets. Now who's gonna buy from the developed markets? They are shooting themselves in the foot.

The current situation poses huge opportunities for NRI's, assets in India are now a lot cheaper

Saar would you like to run that by chola ji et al. Or does this come from your sources.

.....................

vina ji welcome to the club.

I hit my 20s in 95. And getting a job was herculean, despite 6-7 years of libralisation. And my skills were for the services sector in a generic vertical unlike you engineers. I turned for good around 7 years back when I understood the Kongi game. I knew this party of the sychophants would not miss a beat when they risk the working lives of one whole generation.

This time do not confuse people with emotional blackmailing (non inclusive etc.) & off course I do hope you do not forget to vote. Keep using your ability with numbers to educate people around you.

Gus · Post by **Gus** » 21 Aug 2013 09:43

seems like those who borrowed in dollar are in for big trouble in payback.

Arjun · Post by **Arjun** » 21 Aug 2013 10:40

vina wrote:Who are they ? 1) Pranab Mukherjee 2) Manmohan Singh , an entire Phalanx of Congress party blowhards.. Diggy Singh, and other ossified acolytes of Rahul Baba who pushed a political calendar and agenda that basically stalled every reform and of course rank nutcases in the NAC like Aruna Roy and Jean Dreaze with their spend like there is no tomorrow by doling out "welfare" fetish

Vina, Leave alone the unwashed masses - even some on a forum such as this have not exhibited enough IQ to add their voice to the only rational stance visible. So your realization that a win for the Congress is setting India up for failure, is a very welcome addition to the side of logic and rationalism.

But your insight remains incomplete in your refusal to attribute blame to the source of the problems. I hope you realize that Sonianomics and the Dynasty NEED to be held accountable - and not the puppets you keep bringing up in your posts.

There are enough idiots in India who are clueless enough to remain silent through every crisis, whatever be the magnitude of disaster. The only hope is that the last 2 decades of liberalization has provoked a more activist citizenry with the ability to articulate both the problem and the solution.

Singha · Post by **Singha** » 21 Aug 2013 10:47

in a recent survey they worrying part is of 20,000 people around 37% found baba to be the best PM candidate and 45% found Namo. a gap of only 10% that imo pales before the Congress strength to sew together alliance with third parties.

people still havent got the memo that their children's future is in dire danger and std of living is going to drop back to early 1980s for the middle class - as in spending cycles on getting LPG, lining infront of ration shop for 5kg of sugar, running after the kerosene cart with a jerrican to get 3 ltrs of the precious fuel....

in BLR, 26 lakh new ration card applications have been filed, as people are in a mad scramble to load up on the freebies like Rs 1/kg rice...reminds me of a guy having a party while cancer eats his organs from the inside.

subhamoy.das · Post by **subhamoy.das** » 21 Aug 2013 11:12

http://economictimes.indiatimes.com/new ... 945824.cms

This is the crux of the reason of capital flight taking off and not capital fligts landing in the Indian FDI or FII airports where the landing lights have gone out 10 years ago!

JohnTitor · Post by **JohnTitor** » 21 Aug 2013 14:09

shyamd wrote: Can you provide any figures to back that up? You know services exports were up in FY 14.

Also I'll say that stock market, FX movements don't always follow logic - they just find a reason to support the movement one way or another. Ask any trader.

largest trade partners of the US - India's exports are a tenth of that of China.

Partners of the UK - again India is nowhere.

Go through this list and check the import lists of those countries. You will see that india does not figure in the top 10.

As far as the forex and stock markets are concerned you are right in that it need not reflect the wider economy. However the fact is that the markets can destroy the economy if things go wrong.

The only way an economy can be independent is if it self sufficient or if it can produce innovative technology. India is neither. The only reason companies choose to export jobs to India is because of the large cheap English speaking labour force.

Similarly China is attractive because of the cheap manufacturing base. Both these countries need to reorient their economies.

India has the potential but it needs education and non corrupt infrastructure. This can be proved by the way Indians become innovative outside india.

Unfortunately india is stuck in a vicious circle. Poor uneducated people vote in a corrupt government. The corrupt government ensures that these people remain poor and uneducated. Allowing them to become educated will mean they lose the vote bank.

JohnTitor · Post by **JohnTitor** » 21 Aug 2013 14:20

shyamd wrote:Its an interconnected world my friend. It has knock on effects. China is a developing country.

I know China is a developing country. That's why I said "other developed economies AND China".

But China is farther ahead of development than India.

shyamd · Post by **shyamd** » 21 Aug 2013 14:21

I was talking about ALL EM countries - not just India.

JohnTitor · Post by **JohnTitor** » 21 Aug 2013 14:50

If you read my post it would be clear that I was talking about india alone. I am not too bothered about other countries. This delusion that I see in papers of india being a great country has led to complacency. The corruption has definitely not helped. Having potential is not the same as being.

JohnTitor · Post by **JohnTitor** » 21 Aug 2013 14:55

Muppalla wrote:Chidu's request to stop buying Gold did not yield results. There seems to be case of desperation. They need to take bold decisions at the cost of losing popularity with poor. That will be last jahppad they cannot afford. Even in such a situation, if they have any shred of national interest, they should plot an election win by going for an early election so that after coming back they can take bold decisions.

They will not do anything. Just watch. They will dig deeper and leave a crater before being voted out. When the next government makes bold decisions they will cry foul and win the election after. This happened before and history will repeat itself.

It is better if UPA wins again so that they completely screw themselves.

satya · Post by **satya** » 21 Aug 2013 15:29

A minor tidbit : MoF never wanted people to stop buying gold . All PCjee & co. wanted is for people to buy gold via non-official chanels . In simple words GoI wants to push Gold imports ( as much as possible) from its 'official trade book' to non-official one . 10-15% import duty was put after due deliberations , consulations & past history of gold imports in India ( old timers do remember the difference in gold price in india and our middle east territory of dubai was 500 or so rupees when it all started ) . So its a typical INC masterstroke. Next step would be for bollywood to go back to 80s and start making ilaka , haftavasooli type ityadi movies to show rise of smuggler- gangster- bhai- jihadi-all in one new hero . He will be the new angry face of India .

As for UPA-3 , its very much on track . People who vote are doing disco on tunes of INC . So why worry . Meanwhile make a small contribution to PCjee & remit money via ICICI . It will help him sleep better in night .

Muppalla · Post by **Muppalla** » 21 Aug 2013 15:42

satya wrote: As for UPA-3 , its very much on track . People who vote are doing disco on tunes of INC . So why worry . Meanwhile make a small contribution to PCjee & remit money via ICICI . It will help him sleep better in night .

At the end of UPA-1/Obama's first term win, I wrote in the context of US-Pak-India-China (I believe someone put them in good posts thread) relations. The best bet for the world's cartels is the model of 1980s. The thing that happened to the world and India specifically after 1990 is unacceptable. It challenged the movers and shakers of the world's system. India's open Nukedom, consumerism based India economy and emergence of Indian multinationals with open legal money etc are a no-no. Global terror is a big no-no. 1980s with Robin Rafel giving lectures to Indians about Cashmere, Palestine adjustments via Israel's left and pure-white collar economy in West while most of the Oil consumption is restricted to west while the abdul's across the east go in bullock carts. It worked magic for the ruling mafias and economic engines' drivers.

satya · Post by **satya** » 21 Aug 2013 18:31

Mupallajee

Most Dilli Billis long for simpler times of 80s . They have nostalgic memories & given chance they would love to bring it back .

Supratik · Post by **Supratik** » 21 Aug 2013 21:03

M, why blame others when the "house idiots" did it. Meanwhile, the Commies of NAC under Madam have gone silent as has Prof. Sen. Hope the currency run doesn't become contagious and spread to other sectors of the economy. If rupee goes beyond 70 fuel prices need to double. If they don't increase fuel prices deficit is going to baloon further and if they do inflation will double. Looks similar to east Asian currency crisis. I don't see an alternative to full capital controls to stop the currency from becoming junk.

Singha · Post by **Singha** » 21 Aug 2013 21:32

the hedge funds betting on Rs100==1$ are not doing in thin air ....

Supratik · Post by **Supratik** » 21 Aug 2013 21:54

Singha wrote:the hedge funds betting on Rs100==1$ are not doing in thin air ....

Yes, thats true. God help India if it becomes a reality. All the gains of the first decade of 2000 boom wiped out.

hanumadu · Post by **hanumadu** » 21 Aug 2013 22:02

vina wrote: As a country we deserve what we got. We DIDN'T give a second term to the two best Governments India ever had in living memory the first was Congress under Narasimha Rao and NDA under Vajpayee .

Narasimha Rao did the low hanging reforms and stopped further reforms after the first 3 years. Congress was in poll mode after that. To be fair, he was a weak PM and weak within his own party. There used to be reports that he tried to undermine the dynasty as much possible and if he got a second term, he probably would have put paid to the dynasty. I remember he shunted out Arjun Singh and NDTiwari. Unfortunately, after Congress lost, PVN was blamed for the loss and the old sycophants made their way back. Now their kids are carrying the glorious traditions of their fathers.

NDA was the best government India ever had.

Supratik · Post by **Supratik** » 21 Aug 2013 22:52

Back of the envelope calculations suggest 40% depreciation of the rupee (at 65), which means in dollar terms GDP has gone from 1.8-1.9 trillion to 1 trillion, per capita income has gone below $1000 - same as Bangladesh and we have moved from low middle income economy to low income economy. Just to give you an idea of the enormity of the debacle.

svinayak · Post by **svinayak** » 21 Aug 2013 23:04

Supratik wrote:
Singha wrote:the hedge funds betting on Rs100==1$ are not doing in thin air ....

Yes, thats true. God help India if it becomes a reality. All the gains of the first decade of 2000 boom wiped out.

God will force India to be a exporting country and will give stiff competition to PRC merchandise.
Many external entities such as global bankers/G8 have the same goal to make sure PRC does not have a monopoly on global trade.

Supratik · Post by **Supratik** » 21 Aug 2013 23:10

The lack of competitiveness of Indian products has very little to do with the currency and more to do with systemic issues. Since governance in India doesn't seem to improve we will have to rely on God for making India an export-driven economy. See above post to understand the enormity of a collapsing currency.

rgosain · Post by **rgosain** » 21 Aug 2013 23:29

Supratik, Acharya these are very valid points you guys make and I would take that calculation as being in the lower bound because we can't put a figure on opportunity costs. In 1997-98, South East Asian nations such as South Korea were able to rebound from the Asian crisis because of their formidable industrial export sector which was based on engineering and high-technology. The same goes for Brazil which has a combination of mineral wealth and aero-space champions such as Embraer.
As someone pointed out, India has secularism and sonianomics, both of which were designed to cripple any progress and development. There should be legal recourse to punish those who pedal this kind of economic quackery.

KJo · Post by **KJo** » 21 Aug 2013 23:32

I think India is paying the price for being a 1 trick pony. Coolie labor can take you only so far and has no barriers to entry. There was talk even back as 2004 that Indian companies like INFY/Wipro should come up with products for the local market and many on different fora laughed at it with the argument that things were going well in this no risk business, why change? People began consuming like there was no tomorrow (US style) and people even went against traditional Indian norms by taking on huge loans so they could buy cars, TVs and other luxuries. This was supposedly the "new" way of doing things. I don't think the Government can be blamed for this, though they had their own part to play. This was just a bubble that has burst. People who live in India are lucky that it lasted for as long as it did. The world is flat, so those rules apply.