Indian Economy News & Discussion - Aug 26 2015

[A_Gupta]

Remember, the absolute GDP number hasnt changed much between the two methodologies, only the growth rates have.

The old and new methods match for FY 2014, as pointed out previously.
http://www.financialexpress.com/article ... eal/64686/

[Theo_Fidel]

With regard to smart city infrastructure. Of course you need a good fibre broadband network for backhaul. But in the front end that is communication from device to the network, what is more important is ubiquitous and rock solid connectivity rather than the sheer speed of connectivity.

No, I'm talking about fiber at the front end to the end user. Let the user then decide how the wireless portion works.

[somnath]

Q1 GDP growth numbers came in at 7%, sharply lower than previous quarter at 7.5%.

This is of course the new series data, in TC Anant's words, 7 could be 5!

Instead of pleading for rate cuts, which will come anyways, the govt needs to get down to real reforms.

[vina]

Instead of pleading for rate cuts, which will come anyways, the govt needs to get down to real reforms.

Whew! Finally something I can comprehend as well and agree with wholeheartedly ji!

[amit]

With regard to smart city infrastructure. Of course you need a good fibre broadband network for backhaul. But in the front end that is communication from device to the network, what is more important is ubiquitous and rock solid connectivity rather than the sheer speed of connectivity.

No, I'm talking about fiber at the front end to the end user. Let the user then decide how the wireless portion works.

From a cost perspective last mile fibre is not yet feasible in India. What would be more effective is good quality 4G service with a combination of base towers and small cells antenna

[Suraj]

Much as we (at least the "optimists") would like to attribute a new found penchant for state-level talent hunts, the rationale are rather more quotidian.

Both Shivraj Chauhan as well as VAsundhara Raje are state leaders with political clout of their own - they can split the BJP state unit if they were shoved out (we saw what happened to BJP in Karnataka with Yeddyyurappa's exit, or in UP with Kalyan Singh). ....

Net net, political conpulsions drive this, not a systemic change of sorts.

It does not matter if the cat is black or white as long as it catches mice. You seek economic purity in the motive, which is naivete. Modi rose exactly for the same reason that SSC and VR did - because he mastered the management of the political economy in Gujarat. That is a required skill set, not a negative. It ensures that the BJP builds a cadre of central leaders who also have intimate knowledge over how to win the states they ran, as opposed to Delhi insiders parachuted in at election time to conduct parleys.

Therefore, it is very much a systemic change - politicians who master their state level political economy, and use that to assert their chance to prosper in national politics. No one has done that before, until Modi. And no PM has ever used state leadership to groom candidates for national level. It has always been the case that state leadership handles states, and the Delhi inside circle handles the center.

Likewise, Jiang Zemin and Zhu Rongji were not elevated to the Politburo Standing Committee merely because they said 'sir yes sir!' and focused on building Shanghai. There's a much more insidious reason - they were hardliners like Deng, and strongly supported quashing the Tiananmen protests. With that, they demonstrated that they shared Deng's hardline vision of economic progress without political compromise, and got ahead, while the likes of Zhao Ziyang fell by the wayside.

Point is that no party believed in systemic devolution of powers downwards.

A very naive concept. Let's say some imaginary party X 'believes in it'. So they vigorously assert strengthening the city, and focus on mayoral success. How do you think they're going to win, and keep winning ? They won't, and can't, because the state level politics will easily overwhelm them with the money power. It's great to talk about 'believing in it'... but those are empty words that do not address matters of political economy.

The process of change begins at the center, and requires strong consolidation of state/center politics before the constitution can be amended to delegate fiscal and administrative powers to the city level. That is exactly what is happening with the BJP now. For the first time in decades, we've a strong central leadership, building upon several strong state level leaderships by the same party, as opposed to a national political party working with a patchwork of regional state parties. If you're ever going to see any of the delegation of fiscal powers to cities, it's going to happen on the back of what the BJP is doing today.

[Suraj]

Q1 GDP growth numbers came in at 7%, sharply lower than previous quarter at 7.5%.

GDP data is reported on a y-o-y basis. Q1 GDP typically comes in lower than prior fiscal Q4 data. It's higher than the 6.7% in Q1 last fiscal year, which is a fairly high base. 7% in Q1 on top of 6.7% in the prior Q1, in the middle of a parliamentary logjam and a drought situation in early summer is quite a strong performance. The Q4 vs sequential Q1 data is a result of companies closing their books at the end of the year and therefore trying to complete everything pending on time. If you look back at GDP data during the 2000s, there were several instances where Q1 data was 2-3% lower than the sequentially prior Q4 data. If anything, a 0.5% difference suggests economic activity is less cyclical in nature now, compared to before when the bulk of the output growth came in Q3 and Q4, while Q1 was historically the 'quiet period' before the monsoon-derived economic data was available starting Q2.

Instead of pleading for rate cuts, which will come anyways, the govt needs to get down to real reforms.

Define real reforms as you see them, and please be specific. Rajiv Gandhi banana republic comments 'humko yeh banana hai, humko woh banana hai' do not count

[Suraj]

This is the official CSO/MOSPI data for the first quarter:
ESTIMATES OF GROSS DOMESTIC PRODUCT FOR THE FIRST QUARTER (APRIL-JUNE) 2015-16

Petrol price cut by Rs 2/ltr; diesel by Rs 0.50

The Oil Marketing Companies (OMCs) have announced Rs 2 per liter cut in the price of petrol along with a 50 paisa per liter reduction in diesel prices with effect from midnight in order to align domestic rates with global price benchmarks.

Post the price revision, petrol will be charged at Rs 61.20 per liter including state taxes in Delhi while diesel will be priced at Rs 44.45 per liter in Delhi. The prices of both the automobile fuels were last revised on 15 August when petrol prices were cut by Rs 1.27 and diesel rates were slashed by Rs 1.17 per liter.

"Since the last price change, there has been a decrease in international prices of both petrol and diesel. However, the Rupee-Dollar exchange rate has depreciated during this period. The impact of both these factors warrants a downward revision in prices, the impact of which is being passed on to the consumers with this price decrease," Indian Oil Corp (IOC), the nation's largest fuel retailer said in a statement.

[arshyam]

Isn't GDP growth reported YoY, i.e. compare current quarter to the same quarter in the previous year, so as to account for seasonal changes? Why are all the reports stressing QoQ growth rate declined with no mention of the YoY comparison?

GDP growth slows to 7% in first quarter - Line Mint

India’s economic growth slowed to 7% in the fiscal first quarter ended 30 June from 7.5% in the preceding three months.

A Reuters poll of economists had estimated first quarter gross domestic product (GDP) growth at 7.4%.

Agriculture grew 1.9% during the June quarter, while manufacturing growth was pegged at 7.2%. Trade, hotel, transport and communication was the only sector to grow in double digits at 12.8%. The job-generating construction sector grew at 6.9% while the financial services sector grew at 8.9% during the quarter.

During the April-June quarter, while China claimed its economy grew at 7% amidst scepticism by most analysts, the US economy grew at an unexpected 3.7% during the same period.

International credit assessor Moody’s Investors Service cut its India growth forecast by half a percentage point from the 7.5% it estimated earlier to 7% due to below-normal monsoon rain and the resultant impact on rural demand. The government expects GDP to expand at a minimum 8.1% in 2015-16. The International Monetary Fund and the Asian Development Bank have forecast growth of 7.5% and 7.8%, respectively.

So far, the rainfall deficit in east and northeast India is 13% and central India 9%. South peninsular India has a rainfall deficit of 20% and north-west a surplus of 1%.

The country will receive only 84% of the 50-year average rainfall in the second half of the June-September monsoon season this year, the weather forecaster said.

Monsoon rainfall is a crucial element of economic growth in India, where more than half the farmland is rain-fed. In 2014-15, deficit rain during the kharif (monsoon crop) season and unseasonal showers ahead of the winter harvest led to a drop in foodgrain production, but the fourth advanced estimates released by the agriculture ministry earlier this month showed that the impact of deficit monsoon was less than earlier estimates.

The government of Prime Minister Narendra Modi has been striving to quicken growth in Asia’s third-largest economy since it took office in May last year, promising a spending boost and moving to clear up a regulatory logjam that has held up large infrastructure projects.

In its annual report released last week, the Reserve Bank of India said the growth outlook for the Indian economy is improving gradually as business confidence remains robust, even as it reiterated its GDP growth forecast of 7.6% in 2015-16, up from 7.2% reported in 2014-15. The central bank, however, looks at gross value added at basic prices for measuring the economic growth against the internationally comparable measure of GDP at market prices.

Data separately released by the Controller General of Accounts showed the government exhausted 69.3% of its fiscal deficit target for the current fiscal within the first four months (April-July) against 61.2% during the same period a year ago.

While non-plan expenditure jumped to 33.8% of the allocation during April-July period, from 30.5% during the same period a year ago, growth in plan expenditure was substantial, at 33.9% of target, against 23% during the same period last year, signalling more focus on spending that creates durable assets.

[Suraj]

Isn't GDP growth reported YoY, i.e. compare current quarter to the same quarter in the previous year, so as to account for seasonal changes? Why are all the reports stressing QoQ growth rate declined with no mention of the YoY comparison?

In the past, the news reports usually reported Y-o-Y data and provided commentary on that basis, with Q-o-Q data being mentioned as a secondary item. This time, they've been reversed. It appears to be a result of the financial press confusing itself between how data is reported by different countries. Considering we report data Y-o-Y, it makes more statistical sense to look at that basis rather an attempt an artificial Q-o-Q comparison between two figures that do not share a numerical relationship. We do not report GDP growth on a sequential quarterly basis, as say, the US or Japan does.

[somnath]

GDP data is reported on a y-o-y basis. Q1 GDP typically comes in lower than prior fiscal Q4 data. It's higher than the 6.7% in Q1 last fiscal year, which is a fairly high base. 7% on top of 6.7% in the middle of a parliamentary logjam and a drought situation in early summer is quite a strong performance. The Q4 vs sequential Q1 data is a result of companies closing their books at the end of the year and therefore trying to complete everything pending on time. If you look back at GDP data during the 2000s, there were several instances where Q1 data was 2-3% lower than the sequentially prior Q4 data. If anything, a 0.5% difference suggests economic activity is less cyclical in nature now, compared to before when the bulk of the output growth came in Q3 and Q4, while Q1 was historically the 'quiet period' before the monsoon-derived economic data was available starting Q2.

There is nothing "typical" about any such phenomenon. There were as many cases of an "increase" in Q1 compared to Q4, especially in periods where we saw acceleration. The "base" of income doesnt matter in any case, we are talking about the delta.
https://stats.oecd.org/index.aspx?queryid=350#
(Q1 in this series is our Q4, and Q2 is our Q1).

In any case, the reported number today was 0.4-0.5% below analyst consensus. Add to it the fact that this is the new series (ie, "7 is the same as 5" ), the trend is disappointing. Rest of it, well, if you want to think this is a jolly good show, well,, "dil ko bahlane ke liye ghalib, khayal accha hai"!

Define real reforms as you see them, and please be specific.

Actually they should always be "specific", not in the realm of "India will regain past glory"

The list is long
1. GST
2. Labour law reform
3. Financial sector reform, starting with FSLRC, going on to PSU banks
4. A viable plan for tackling NPAs on bank books
5. Clarity on tax policis across the board - especially retro tax

The above 5 (even GST in its current moth eaten version) would be a start.

[somnath]

Isn't GDP growth reported YoY, i.e. compare current quarter to the same quarter in the previous year, so as to account for seasonal changes? Why are all the reports stressing QoQ growth rate declined with no mention of the YoY comparison?

While I am not a great fan of the mass media, they arent reporting QoQ numbers at all. they are reporting the YoY growth released by CSO, and comparing against the YoY growth for the previous quarter. This is an apt analysis - high frequency data is largely used to map trends. So comparing the growth rate in Q1 2015 makes sense against the previous quarter, rather than Q1 2014, which happened a full year back and doesnt depict as much by the way of a trend as the near term (Q4 2014) data.

Therefore, it is very much a systemic change - politicians who master their state level political economy, and use that to assert their chance to prosper in national politics.

Thats simply not true - VP Singh, Laloo, Mulayam are all instances. Not as successful as Modi, but many have used a political base in the states to create national roles for themselves.

But the point wasnt that. It was about politicians not being willing to devolve power to cities. Unless we have legislative sanction to devolve powers, the top talent in parties will aspire for the CMs post, not the mayor's. Incumbent CMs have no incentive to have high profile Mayors, especially in large states (Mah, WB, Karnataka) - as these guys could overshadow them in terms of profile and future progression. Hence the change has to start with legislative devolution.

The process of change begins at the center, and requires strong consolidation of state/center politics before the constitution can be amended to delegate fiscal and administrative powers to the city level. That is exactly what is happening with the BJP now. For the first time in decades, we've a strong central leadership, building upon several strong state level leaderships by the same party, as opposed to a national political party working with a patchwork of regional state parties. If you're ever going to see any of the delegation of fiscal powers to cities, it's going to happen on the back of what the BJP is doing today.

Again, this isnt unique. Congress for long periods have had very strong and secure centre. They have also had very strong regional satraps - from Kamaraj to VEerendra Patil to Sharad Pawar to YSR to Gogoi. They never devolved powers to cities. BJP shows no such inclnation either.

[Suraj]

There is nothing "typical" about any such phenomenon. There were as many cases of an "increase" in Q1 compared to Q4, especially in periods where we saw acceleration. The "base" of income doesnt matter in any case, we are talking about the delta.

There's no statistically meaningful delta here; Q-o-Q comparisons made on Y-o-Y data depend on two sets of independent data series for Q4 and Q1. Q4->Q1 sequential output is almost always negative, usually by a very big margin because Q1 is typically the lowest output quarter and Q3 or Q4 is the biggest, in absolute terms.

https://stats.oecd.org/index.aspx?queryid=350#
(Q1 in this series is our Q4, and Q2 is our Q1).

Irrelevant. The news you quoted is the CSO/MOSPI data, not calendar year figures from OECD, with whatever other details they assume.

In any case, the reported number today was 0.4-0.5% below analyst consensus. Add to it the fact that this is the new series (ie, "7 is the same as 5" ), the trend is disappointing. Rest of it, well, if you want to think this is a jolly good show, well,, "dil ko bahlane ke liye ghalib, khayal accha hai"!

I think we've firmly established that you're the one man negative nellie brigade while I'm the 'bhakt' Remember, that characterization will stick to you regardless of what you think of the fairness of it.

The list is long
1. GST
2. Labour law reform
3. Financial sector reform, starting with FSLRC, going on to PSU banks
4. A viable plan for tackling NPAs on bank books
5. Clarity on tax policis across the board - especially retro tax

The above 5 (even GST in its current moth eaten version) would be a start.

And what are the parameters of success ? Lets see:
* GST. Never tabled before in Parliament. Tabled in the current Lok Sabha. Affected by filibustering.
* Labour law isn't even something best dealt with at central level but at state level, just as LAB is. In fact, that's something you yourself asserted. There *have* been substantial labour law reforms in Rajasthan. It's for other states to come up with their own laws if they wish to be competitive.
* FSLRC is NOT a committee that the government is obligated to listen to. It is not a constitutional body, but a very recent ad hoc creation of the last government near its end. It's headed not even by an economist, but by a former supreme court judge. Accepting the FSLRC report is not a barometer of reform, but one of institutionalizing an ad hoc body of questionable validity.
* Define viable plan. Such open-ended statements are far too convenient for your debating position where you simply say 'this is not good enough' to any progress. Far more reasonable to hold you to specific goals you define, rather than expect us to humor you, because that's a waste of our time, right ?
* Define clarity. If they announce something but you don't like it, is that still clarity ? E.g. GoI decides foreign investors who hitherto asserted the loophole in the tax regime to avoid taxes in India on the basis of how their Mauritian entity is structured, does not qualify for those tax benefits, is that clarity or not ? In fact, that's exactly what GoI did - asserted that that shell companies in Mauritius don't qualify as a foreign parent, and that substantial presence in India requires them to pay tax. Do you or not agree that the Indian legislature and executive has supreme authority to make such a decision, even if it goes against prior administrations turning a blind eye to the loophole for any reason ?

[Suraj]

Thats simply not true - VP Singh, Laloo, Mulayam are all instances. Not as successful as Modi, but many have used a political base in the states to create national roles for themselves.

False. Lalloo and Mulayam were creatures of coalition quota accommodation, not state leadership groomed by the same central party. They owe their presence at the centre at one time, entirely to the calculus of an election, and not to any attempt to groom them up at all. The present bears it out - they've both gone back to being state level satraps.

VP Singh has never won an election at state level as CM, never mind winning multiple elections, like Raje or SSC or Modi. He was appointed by IG for a 2 year period. He was an MP before he became CM. In other words, very much a Delhi insider parachuted in, just like other PMs-who-were-once-CMs like Charan Singh, IIRC.

But the point wasnt that. It was about politicians not being willing to devolve power to cities. Unless we have legislative sanction to devolve powers, the top talent in parties will aspire for the CMs post, not the mayor's. Incumbent CMs have no incentive to have high profile Mayors, especially in large states (Mah, WB, Karnataka) - as these guys could overshadow them in terms of profile and future progression. Hence the change has to start with legislative devolution.

Fiscal power devolution to cities can only come about if the centre and state are led by parties with common synergy, ideally the same party, whose leadership sees value in increasing urban fiscal autonomy, and has the legislative means to do so via constitutional amendment.

Again, this isnt unique. Congress for long periods have had very strong and secure centre.

... which was before maybe 90% of BRF was born. The last time they could claim that was the 1970s. Despite the 1985 result, they didn't even complete that term at the centre, which isn't a demonstration of strong anything.

They have also had very strong regional satraps - from Kamaraj to VEerendra Patil to Sharad Pawar to YSR to Gogoi. They never devolved powers to cities. BJP shows no such inclnation either.

You're providing examples from across ~50 years. I mean right now. How many strong leaders do they have ? Three of your 5 examples are very much dead, and one of them has been dead since well before I was born, and I'm not quite a spring chicken... What's more, Kamaraj is a very good example of NOT making it up the party - he was the head of the Syndicate during the split.

Congress has never groomed state leaders for national leadership. To be a national leader, you had to have a certain surname, and that's that. At best you could hope for a secondary level appointment at the behest of the leadership and your own clout. That has never changed, except during power vacuums such as post 1991.

The best chance for urban fiscal autonomy lies with the BJP. Their voting base is much more urban than that of the Congress, and therefore they're much more likely to effect policymaking benefiting urban fiscal autonomy.

[Theo_Fidel]

From a cost perspective last mile fibre is not yet feasible in India. What would be more effective is good quality 4G service with a combination of base towers and small cells antenna

How do you know that? Seems a shame if we don't do it for even our smart city. Doesn't seem very VFM is you ask me. The private sector is doing 4G etc anyway why does the government have to get involved with everything. Do things the private sector can not do.

[somnath]

I think we've firmly established that you're the one man negative nellie brigade while I'm the 'bhakt' Remember, that characterization will stick to you regardless of what you think of the fairness of it.

Not at all, its completely fair - by choice and profession, I am (like most professionals in this area) sceptical by nature. "Bhakts" on the other hand, ummm, well are bhakts. Which is why they say such stuff:

Irrelevant. The news you quoted is the CSO/MOSPI data, not calendar year figures from OECD, with whatever other details they assume.

Did you see the data? Do you handle/study this data, even as a hobby? Do you know what OECD does (is it a source of past stats)? the India data on the OECD site has one source - CSO, India. The data given is exactly what the CSO publishes every quarter - OECD presents them in calendar year form, ie, the Jan-Mar qtr is depicted as Q1, and not Q4 - to be consistent across all economies.

There's no statistically meaningful delta here; Q-o-Q comparisons made on Y-o-Y data depend on two sets of independent data series for Q4 and Q1. Q4->Q1 sequential output is almost always negative, usually by a very big margin because Q1 is typically the lowest output quarter and Q3 or Q4 is the biggest, in absolute terms.

One, that is logically/mathematically wrong. We are comparing growth rates, not aboslute GDP values from one qtr to another.
But two, it isnt supported by any data - which is why I referenced a source that gives the data.

Obviously, you neither know the data at the tip of your fingers (as someone dealing with Indian econ would), nor did you have the curiousity to go through the data (as an enthusiast would).

the issue is, as Kaushik Basu said - clash of ideas has become rather wholesale!

Now on to "reforms".

* GST. Never tabled before in Parliament. Tabled in the current Lok Sabha. Affected by filibustering.
* Labour law isn't even something best dealt with at central level but at state level, just as LAB is. In fact, that's something you yourself asserted. There *have* been substantial labour law reforms in Rajasthan. It's for other states to come up with their own laws if they wish to be competitive.

It is up to the govt to find ways of getting legislations through. Whether through PArliament (GST), or through states (where BJP rules some of the most industrialised states now). Political issues are as much, in fact maybe less, of an inexcusable excuse for them as they were for UPA.

* FSLRC is NOT a committee that the government is obligated to listen to. It is not a constitutional body, but a very recent ad hoc creation of the last government near its end. It's headed not even by an economist, but by a former supreme court judge. Accepting the FSLRC report is not a barometer of reform, but one of institutionalizing an ad hoc body of questionable validity.

the question isnt who is heading a committee (this govt's tax committe is headed by an ex judge as well). The issue is do the recos make sense? In terms of bringing regulatory clarity, simplifying approvals and bringing in clearer rules on consumer protection - many of the recos are very sound. It is a roadmap of financial sector reforms -if the govt thinks not, they should lay out an alternative one dealing with the same issues!

Define viable plan. Such open-ended statements are far too convenient for your debating position where you simply say 'this is not good enough' to any progress.

I have mentioned this many times earlier. One, capitalisaiotn - they have provided for less than 20% of the requirement yet. Autonomy in operations - zero movement there. Getting a HoldCo structure for all PSBs to raise more capital - no movement in that either.

Define clarity.

Very simple. Take a call, and then formalise it by law. If the govt is against retrospective taxation, they should go ahead and repeal it, not do the cop out ("we will not do it in the future") that PC did, without changing the law. If they think MAT is applicable on FPIs, they should say it and codify it. Not say it, then suspend it, then appoint a committee that would tell the govt to repeal it.

[Suraj]

Not at all, its completely fair - by choice and profession, I am (like most professionals in this area) sceptical by nature. "Bhakts" on the other hand, ummm, well are bhakts. Which is why they say such stuff:

No, that's far too convenient for you. I'll let ad hominems and snark as a posting style pass, provided you therefore become the diametric opposite construct - the negative nellie. You don't get to conveniently portray yourself as the voice of critical reason while simultaneously indulging in snark. That would make you a troll, and you're well versed with the location of the forum exit in that case. Either you take it on the chin just as you dish it out, or you accept never to use such language. Your choice.

Obviously, you neither know the data at the tip of your fingers (as someone dealing with Indian econ would), nor did you have the curiousity to go through the data (as an enthusiast would).

You're way out of line making such a demand of anyone posting on this forum. The next time you even imply any such thing, you'll be summarily banned. It's really quite simple - we'll simply apply your logic upon you, because you're posting about something that's not what you do in real life. Your presence here is a privilege. You either post in an independent capacity as an individual without judging anyone else, including me, or you can see yourself out. Again, your choice.

It is up to the govt to find ways of getting legislations through. Whether through PArliament (GST), or through states (where BJP rules some of the most industrialised states now). Political issues are as much, in fact maybe less, of an inexcusable excuse for them as they were for UPA.

It's to be expected considering your negative position that you'll not even see the fact that a bill was even finally agreed upon and introduced, as an accomplishment. This was done within a year, something three separate administrations couldn't get done over the course of 15 years. "I don't care about the past, if it hasn't happened to perfection as I deem it to be, then it's a failure" is simply the reverse of bhakt - the the one who will only post the negative.

the question isnt who is heading a committee (this govt's tax committe is headed by an ex judge as well). The issue is do the recos make sense? In terms of bringing regulatory clarity, simplifying approvals and bringing in clearer rules on consumer protection - many of the recos are very sound. It is a roadmap of financial sector reforms -if the govt thinks not, they should lay out an alternative one dealing with the same issues!

A partial acceptance of the recommendations is exactly what the government did. What basis do you have to claim otherwise ?

[ShauryaT]

On LAB, just like Labour reforms, the govt should quickly pass the buck on to the states. Let the states customise the law the way they want it.

States cannot "customize" the law the way they want it. The provisions of the central law will prevail and override any state law. The 2013 law is the standing law to govern article 31. I think - AGAIN - our penchant to treat ALL of India as a unitary, where one law could work for all is a major flaw. The 2013 law should be scrapped and replaced by a mechanism to address redressal and justice issues - without undue encumbrances on the states right to acquire land. The govt by backing out has sent a real negative signal, regardless of how they spin it. The damage is done. The 2013 bill stays!

[Suraj]

Are you saying that GoI cannot follow the approach where it wanted to let states develop their own LABs, by reverting to the 2013 law ? What aspect of that act explicitly denies states the ability to implement modified versions of a LAB and what stops the center from acknowledging those local laws as applicable over the central law ? According to Jaitley GoI is simply following a different tactic here - rather than attempt to amend the 2013 LAB, they modified the central national highways and railway acts to provide more suitable benefits, while simultaneously enabling states to write their own bills, promising assent. There's been no reference to any argument that states 'cannot' do this. Sure, the center could block them from gaining presidential assent, but if the center promises to accept them, then that is moot. I don't think they've given up on LAB, they're simply pursing a divide and rule strategy that lets them do via separate non-amendment bills, what they couldn't pass in a single LAB.

[ShauryaT]

As long as a the state has a cooperative center in place, the state can walk away with murder. The point is the 2013 bill will override any state law created. The acceptance of the state law by the center is a political decision and not a legislative one. Wherever the state law is in conflict with the provisions of the 2013 bill, the 2013 bill overrides. The acceptance of the state law would last the political term of the cooperative center. IOW: Not an institutionalized setup.

As it is land is the most prone to legal hurdles and on top of this, who would want to risk capital around uncertain governmental devices, a reason why the proclamation did not have the desired effect.

My personal preference would have been for the government to fight this battle out and not succumb to propaganda - yet at the same time address the real issues around land, one of speedy justice!

[Suraj]

That depends on whether the particular item that's in the state law is in the State List/List II or concurrent list/List III, right ? A perusal of the two suggests plenty of scope for state governments to act:
State List / List II

Falling under exclusive domain of the individual State Governments and Union territories, and from which the Central Government is specifically excluded.

Concurrent List / List III

Subjects falling under the domain of both the Central as well as the State Governments and about which each can independently promulgate laws and lay down rules.

For example, the following are entirely states list:

Land, that is to say, rights in or over land, land tenures including the relation of landlord and tenant, and the collection of rents; transfer and alienation of agricultural land; land improvement and agricultural loans; colonization.

Land revenue, including the assessment and collection of revenue, the maintenance of land records, survey for revenue purposes and records of rights, and alienation of revenues.

On the other hand, highways, railways etc are in the Union List. This means that even if there was some sort of national law, states can obstruct eminent domain by claiming primacy on rights over land. It also suggests states themselves are best to implement any sort of LAB, rather than the center. The center can more effectively obstruct acquisition, than facilitate it. States are better positioned to facilitate acquisition.

[A_Gupta]

So comparing the growth rate in Q1 2015 makes sense against the previous quarter, rather than Q1 2014, which happened a full year back and doesnt depict as much by the way of a trend as the near term (Q4 2014) data.

Not clear what you mean, let's see if this is it?

Q-o-Q comparison of rainfall means India goes through periodic gigantic shortfalls and surpluses of rainfall. To know where rainfall is going, you have to compare Q1 2014 with Q1 2015; Q2 2014 with Q2 2015, and so on.

The case of doing that with the economy is a little weaker that with rainfall, but nevertheless the argument still holds. E.g., you can look at US state & local taxes by quarter and the gross pattern immediately stands out, 2nd and 4th quarter collections are larger than 1st and 3rd quarter; and 3rd quarter is lower than 1st quarter, 4th quarter is always highest. If you did Q-o-Q US state & local taxes growth, the economy would seem exceedingly volatile.

I think this link works for the US data:
http://www.census.gov/econ/currentdata/ ... t=GET+DATA

What you may do is compare 1Q 2015 with 1Q 2014 and get a 1Q Y-o-Y growth rate, and similarly compare 2Q 2015 with 2Q 2014, and get a 2Q Y-o-Y growth rate. You may then ask whether the 2Q Y-o-Y growth rate is as good as the 1Q Y-o-Y growth rate; and if not, what's going on in the economy. But it may not tell you much except that the economy tends to grow more in certain quarters than others.

PS: an extreme example of the fallacy of e.g., comparing a 1Q Y-o-Y growth rate with a 2Q Y-o-Y growth rate, is this hypothetical - you're measuring the size of the labor market in a society where virtually everyone is educated; people leave the work force via death or retirement pretty much uniformly through the year; but entrance into the labor market is concentrated in the quarter after the school year completes.

[Suraj]

Actually it's not just raw data being compared Q-o-Q, as opposed to Y-o-Y basis, as rainfall or tax revenue data might be compared in your example . It's growth rates reported on a Y-o-Y basis being compared on Q-o-Q. A Q-o-Q comparison doesn't tell you growth has slowed from Q4 to Q1. It tells you literally that Q4-on-Q4 growth was marginally higher than Q1-on-Q1, nothing more. For a better explanation, all 4 pieces of GDP growth data are needed:
Q4 2013-14 : 4.6%
Q1 2014-15 : 6.7%
Q4 2014-15 : 7.5%
Q1 2015-16 : 7.0%
In other words:
* Q1 growth rate of 7.0% this fiscal came on the back of 6.7% in the year prior quarter.
* Q4 2014-15 growth rate of 7.5% came on top of 4.6% growth rate in the year prior quarter.

Technically, the Q4 2014-15 data was substantially affected by low base effect, while Q1 2015-16 data is not, and therefore Q1 performance is qualitatively superior, rather than inferior, as an artificial Q-o-Q comparison of the growth rates suggest.

[A_Gupta]

^^^ One can compute the growth rates in the US tax numbers I linked to, and that makes the point as well. I won't bore you all with the numbers.

I believe my hypothetical example of the growth of labor market which is concentrated in the quarter after the school year ends also illustrates the point. In that example, the growth in the labor market is essentially concentrated in one quarter of the year, and so comparison of y-o-y growth of neighboring quarters is utterly meaningless.

[amit]

From a cost perspective last mile fibre is not yet feasible in India. What would be more effective is good quality 4G service with a combination of base towers and small cells antenna

How do you know that? Seems a shame if we don't do it for even our smart city. Doesn't seem very VFM is you ask me. The private sector is doing 4G etc anyway why does the government have to get involved with everything. Do things the private sector can not do.

Boss do you have any idea how much it costs to instal last mile fibre to the home? It ranges anything from $35-$50 per five meters. That is discounting the cost the has to go into building the fibre broadband network by a NetCo which in a city like Delhi or Mumbai would cost several billion dollars. It will eventually happen but which Indian household or rather how many Indian households would be willing to fork out anything in the region of $500-$600 dollars to get the fibre to their homes from the nearest landing point?

It's far easier to build out a robust LTE network plus a combination of small cell and WiFi. Besides by 2020 the technology for 5G, which would guarantee speeds of 1 Gbps over the air would be firmed up. I think Indian cities need to leapfrog to 5G, from a cost benefit POV that's the way to go. Certainly build out fibre, because enterprises would want it as would some small percentage of homes but that can't be the only go to market as far as bringing connectivity to the masses.

[amit]

This fight over economic data is turning into a wrestling competition in the mud. And its pointless and I think Somnath needs to realise this. Any economic data that this current government is churning out is directly affected by the directionless economic management over the past five years. The current government's policies have not had time to show up in economic data. And this is not even taking into consideration the obscurantist position taken by the Congress and other opposition parties with regard to policy reform in the Rajya Sabha where they have a majority.

Somnath has said many times that he agrees that the previous government has left the economy in a mess with an NGO driven agenda of governance. So if he was not grandstanding with those comments he needs to cut the current government some slack.

In economic crystal ball gazing one important intangible factor that needs to be taken into consideration is sentiment. There can be no denying that the sentiment, whether it's of external investors or local business is far better today than it was two years ago. Too much excel sheet analysis and crunching of econometric data can result in forgetting that doing is only a means to an end not an end in itself. One needs to remember that economics at the end of the day is considered a social science for a reason.

[KrishnaK]

Charting a course for the Indian economy

Karthik Muralidharan (Associate Professor of Economics, University of California, San Diego) speaks with Arvind Subramanian (Chief Economic Adviser, Government of India) on a broad set of issues ranging from the uniqueness of the Indian development model, the political economy of reforms, reducing factor misallocation in the economy, enhancing State capacity, financing India's infrastructure needs, to the implications of the Fourteenth Finance Commission, improving the design of social welfare programmes, and climate change.

Hopefully this hasn't been posted before.

[A_Gupta]

^^^ Thanks, KrishnaK, if it was posted before, I missed it.

Very relevant to this thread:

But this glass half empty, glass half full all depends upon your standard really - before after, compared to the best, compared to someone else, compared to the neighbour; there are so many different ways of making these comparisons, it’s a tricky business.

[Hari Seldon]

Quick query for dhaga regulars...

Was the auction mechanism for the Coalblocks and 2G spectrum a one-off thing or is institutionalized as THE way to proceed when it comes to allocating national resources for private development?

TIA.

[Singha]

I think fiber to the home is a non-starter for cost reasons mentioned.

what should be done is push the much cheaper 100mbps ethernet to the homes and apartments. the technology and wire would be much cheaper and robust compared to the delicate wires of the fiber.

my apt has that system - ethernet to the home and switches in some closet somewhere, going to a router which has optical fiber probably 1 or 10 gbps link to providers network. these devices have power backup, so it works for upto 4 hrs even when grid is down.
my connection costs 1500 per month for 75 Gb and 50 mbps. 100 Mbps is around 1800.

its way faster and more reliable than DSL which due to poor quality of our phone network wiring seldom exceeds 8mbps best case. and its overpriced to boot.

[Singha]

wireless techs that work fine in low rise areas may not work so great in india with dense clusters of haphazard buildings, but ethernet wires surely do. 3-5G can be supplement for mobile use.

[ShauryaT]

That depends on whether the particular item that's in the state law is in the State List/List II or concurrent list/List III, right ?

Although the management of land is with the state and so is most acquisition in practice, the bill is largely about acquisition by the holder of eminent domain, i.e the center, who has this exclusive domain rights. All such rights and limitations in its execution by the state would be governed by the laws of the center. Any state law shall not contravene the central provisions. To elaborate on some of the key impeding aspects of the 2013 law and something the States cannot contravene.

• The law puts limitations by way of definition of what does or does not constitute as public infrastructure so things like hospitals, schools, housing, industry and even defense preparation like bases or production are excluded for such purposes.
  
  The law makes a prior consent requirement of 70-80% from the owners of the lands in question - making a mockery of eminent domain
  
  The law requires a social impact assessment
  
  The law bars irrigated multi-crop land from being acquired, with some "dire" exceptions
  
  Mandates four times the price as fair compensation
  
  plus a myriad other largely stupid things.

The state government cannot but follow these clauses and can do NOTHING to change them. The 2013 land bill is the law governing the operative part of Article 31, that governs eminent domain, an exclusive preserve of the center. IOW: It becomes virtually impossible to acquire land under the law for public use to be delivered by private bodies. This is the start of a new type of license raj to keep the people poor and the politicians fat, relevant and powerful. What flows from here in the scheme of things is for more government bodies to be formed to deliver these "public" services to save from the evil private industry. Lord Ram save us.

[Arjun]

Not at all, its completely fair - by choice and profession, I am (like most professionals in this area) sceptical by nature. "Bhakts" on the other hand, ummm, well are bhakts.

As most of us who have seen both of your avatars can attest - you were a 'bhakt' of the earlier government in your previous avatar, now transformed into a 'professional sceptic' of the current one. It would be facile to pretend that the change of government in between had nothing to do with this magical transformation.

[somnath]

The 2013 land bill is the law governing the operative part of Article 31, that governs eminent domain, an exclusive preserve of the center. IOW: It becomes virtually impossible to acquire land under the law for public use to be delivered by private bodies.

You are largely correct. But this is India, a lot can happen "despite" the law. One, there are exclusions refined where "eminent domain" will prevail even under the current law. Two, state governments can frame rules on that can be overarching, eg, take an exclusion (say, irrigation project) and expand the ambit to include development along the project as part of the original irrigation project itself.

It isnt the best solution, but given that the govt has pretty much given up anyways, moving the onus to the state govt to frame adequate rules is the only game in town, by essentially winking at any expansion of scope. Somwhat like what these guys have done on retro tax, saying "we shalt not impose retro tax", without actually changing the law.

^^^ Thanks, KrishnaK, if it was posted before, I missed it.

Very relevant to this thread:

But this glass half empty, glass half full all depends upon your standard really - before after, compared to the best, compared to someone else, compared to the neighbour; there are so many different ways of making these comparisons, it’s a tricky business.

The good professor is saying something thats ad oculos! Economics is largely a study of developements at the margin.

Not to belabour upon the point on YoY/QoQ, in actual econometric analyses, both are used. Globally, people have moved to a QoQ measurement standard, adjusted for seasonalities. In India, we have moved to sequential growth metric for some data points (like inflation), while some others (like GDP) are on YoY. Honestly, it doesnt matter so much as long as the data is largely accurate. What people look at are trends, and not absolute numbers. Which is why you will find analysts tracking stocks obsessing over "sequential growth". And the trend represented somewhat of a weakening in the current quarterly data that got released. Markets are saying the same thing!

Importatnly, the other data that got released yesterday was the core sector growth - @ 1.1%, it represents a 3 month low.
http://economictimes.indiatimes.com/new ... 751285.cms
The point is simple - in actual analysis, we would take in a bunch of various numbers and analyse the trends. The trends coming in currently represent a weakness at the margin, that is all.

Any economic data that this current government is churning out is directly affected by the directionless economic management over the past five years. The current government's policies have not had time to show up in economic data. And this is not even taking into consideration the obscurantist position taken by the Congress and other opposition parties with regard to policy reform in the Rajya Sabha where they have a majority.

One, either the data is "strong", with "reduced cyclicality" etc - in which case there is nothing to beat up the Congress for, and more importantly (from a markets standpoint), there is no reason for a continuous public pleading for rate cuts.
Two, alternatively the data shows weakness, thanks to Congress policies, and a whole lot needs to be done. In which case, the govt needs to be held to task for all the specific checkboxes on "reforms". Then, the excuse of opposition obscurantism doesnt fly, as much as it didnt fly for the UPA too (which suffered the same obscurantism in Parliament!).

The point again is simple - politics (and debates on political economy) have become wholesale, as Kaushik Basu said recently. Just because someone is pro-Modi, he needs to support every single measure, and if he is anti-Modi he needs to oppose every single measure. Markets fortunately are not "wholesale" in their orientation, they are rather more discerning and retail!

Quick query for dhaga regulars...

Was the auction mechanism for the Coalblocks and 2G spectrum a one-off thing or is institutionalized as THE way to proceed when it comes to allocating national resources for private development?

TIA.

As of now, for Coal, auction is the only way - it was dictated by the Supreme Court in an order. For telecom licenses, after the 2 G licenses were cancelled by the court (with lots of gratuitous comments by it on how auctions are the best way to allocate natural resources etc), the then govt decided on the current mode of auctions.

Legally, the govt can legislate otherwise - allocation of resources is an executive domain, and auctions cannot be the only way to do it. Imagine if tomorrow someone asked for the same principle to be applied to water! I for instance feel that spectrum should be made available freely without any license fees, open to anyone who can tap into it on a FCFS basis.

[nachiket]

As most of us who have seen both of your avatars can attest - you were a 'bhakt' of the earlier government in your previous avatar, now transformed into a 'professional sceptic' of the current one. It would be facile to pretend that the change of government in between had nothing to do with this magical transformation.

The previous government's disastrous regressive policies like MNREGA et al. which left us broke were vociferously defended back then. Now the current govt. is derided for apparently doing "more of the same" (which isn't true) and not doing enough on the ease of business and other reforms front (things which were never even attempted by the previous govt., nor were on any stated long term agenda). It is quite hilarious to be honest.

[somnath]

As most of us who have seen both of your avatars can attest - you were a 'bhakt' of the earlier government in your previous avatar, now transformed into a 'professional sceptic' of the current one. It would be facile to pretend that the change of government in between had nothing to do with this magical transformation.

I didnt think that the overall policies of the previous govt were as bad as the popular press would have us to believe (in the last 3 years), and I dont think that the current govt is as miraculous as its "cheerleaders" would have us believe either.

Funnily enough, pretty much all the hotly debated "controversial" policies of the previous govt, for good or bad, were either agreed to by the BJP then, or have been agreed to by them now when they are in govt!

1. NREGA - passed with bipartisan consensus, Kalyan Singh chaired the Select Committee. No change in either allocation levels or shape (yes, data doesnt show ANY change of the programme to anyhing other than what it was) of the programme with the current govt.

2. Indo-US nuclear deal - opposed vociferously in opposition by BJP. Now in govt, it is described as a "centrepiece" of Indo-US relations!

3. Land acquisition - passed with bipartisan consensus, Sushma Swaraj led the BJP team in "praising" the bill!

4. Insurance FDI - opposed while in opposition, passed in govt.

One can also talk of non-economic issues like Bangladesh border agreement, Sec 66 and RTI responses on Netaji - the point is when in govt, attitudes converge towards the mean!

Therefore, any "wholesale" praise of any dispensation is rather silly - it should be "retail" analysis of policies.

[somnath]

The previous government's disastrous regressive policies like MNREGA et al. which left us broke were vociferously defended back then.

The BJP supported NREGA when it was passed in Parliament. And the current govt has maintained (in fact increased) allocations to NREGA, and in fact has been at pains to clarify that they are "retaining and improving" upon the programme.

[nachiket]

The BJP supported NREGA when it was passed in Parliament. And the current govt has maintained (in fact increased) allocations to NREGA, and in fact has been at pains to clarify that they are "retaining and improving" upon the programme.

I had already commented on this canard earlier http://forums.bharat-rakshak.com/viewto ... 4#p1891364

...along with your even more amusing comments about the benefits of corruption.

[Suraj]

there is no reason for a continuous public pleading for rate cuts.

Why on earth not ? It's the government's business to demand them, and the RBI's business to decide when and whether to make them. It's no different from asking for a pay hike every chance you can make a legitimate claim. If the global economic situation, benign inflationary conditions and a chance to refinance billions in loans through a rate cut presents itself, GoI can and should demand it day in and day out. It's Rajan's business to decide whether or not to do so. This isn't a question of waiting until mealtime to ask for food.

in which case there is nothing to beat up the Congress for

They very much deserved their crushing defeat, and then some.
* Complete squandering of what was at the time the most clearest electoral mandate since 1991, by not implementing any meaningful reforms
* Corruption scandals galore.
* Blowing billions on a dole program that did nothing more than drive systemic inflation, and has since been wound down, even if the name remains upon something with a completely different focus.
* Running a parallel government through the NAC and damaging federal institutions in the process.
* Finally, failing to build up cyclical economic momentum post 2008 global crisis.

In fact, essentially all of the current banking and infrastructure debt issues are from investments made between 2009-12 in the hope of a strong economic cycle that didn't bear out. That leaves the current government with a massive debt overhang to deal with, with professional whiners like you constantly nitpicking the rate at which the problem is being fixed, or isn't. A problem that wouldn't have happened at all had the previous government not screwed up so badly.

[vina]

It's the government's business to demand them, and the RBI's business to decide when and whether to make them. It's no different from get a pay hike

How cute! I suppose it is also the govt's business to gerrymander a majority for the whole thing by setting up a committee with four rubber stamping baboons flexing their biceps rather than their grey cells to do by stealth what they cannot do by fiat!

Also, try stuffing the compensation and accounts committee with 4 rubber stamping baboons representing the "workers" in any corporate!