Indian Economy News & Discussion - Aug 26 2015

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Suraj » 01 Sep 2015 10:34

somnath wrote:If the govt believes growth is strong, there is no need to plead for rate cuts. The fact is that the govt itself believes growth is anaemic, and is pleading (like PC did) for rate cuts as a policy boost. The latest plea from the FM comes on a day core sector growth slowed to a 3 month low!

You're arguing that topline GDP data is the only reason to demand or not demand a rate cut. At best, that's myopic. The government has plenty of cause to demand rate cuts despite 7% Q1 growth. For one, every rate cut helps them refinance loans, and push banks to cut rates rather than continue to hang on to the arbitrage between benchmark rates and their lending rates to shore up their bottomline. Even Naina Lal Kidwai stated the other day that in her opinion rates will be cut another 25-50bps by year end, i.e. it's far from some quixotic pursuit as you imagine it.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby vina » 01 Sep 2015 10:44

somnath wrote:Most central banks dont leave policy rates to the discretion of the governer, there is a committee system everywhere. Rajan too is in favour of that. After all, seven brains are better than one!

:rotfl: Four rubber stamping baboons and three brains does not a committee make.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Singha » 01 Sep 2015 10:52

>>Mr Super Comprehension man

if this is the remnant of some old mudfight you boys had, atleast leave it be and dont use such names now.

you know his handle name, pls use it.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby vina » 01 Sep 2015 11:21

somnath wrote:Two, banks have no arbitrage opportunity between repo and lending rates. When banks borrow from RBI under the repo window, it has to be fully collateralised by govt bonds furnished by the bank. Banks lend money out of deposits collected from the public. As long as repo rates are close to short term money market/OIS rates (which they are), there is no residual arb.
Last, of course Naina K thinks there will be a rate cut, the entire street is pleading for one (actually many). Thats because that is a policy booster to boost growth, which everyone thinks is anaemic!

Banks will love a interest rate cut because.

1. Their vast G Sec bond portfolio (SLR and other bond investments,esp of PSU types) will see an immediate boost (more so if they are long duration bonds) on their MTM values which will immediately flow to bottom line. Profitability looks very nice indeed by doing nothing
2. Same with Ms Kidwai et al. They held on to the wide spread between deposit and lending rates and repaired their balance sheet with the "Free" money . Credit growth has been rubbish to say the least and banks loaded up on GSecs (especially when the yields moved up despite the drop in interest rates), beyond their SLR and other requirements and all banks want treasury income . It is only today as we speak and that too only HDFC Bank has started the lending war by passing through the full 75bps cut that has happened so far.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby somnath » 01 Sep 2015 11:24

Suraj wrote:Not government bonds. The debt overhang of the private and retail sector, infra companies in particular. Volatile exchange rates mean their ECB offtake is low. A lower rate is good politics and economics for the government, in the near total absense of any inflationary concerns.

The corporate stressed debt overhang has got nothing to do with rates. Its not as if Amtek, or Essar, or GVK are struggling because they have to incur 50 or 75 basis points more on their loans. They are struggling with fundamental issues of over-leverage, inability of the banking system to foreclose loans (because of structural issues) and broken business models.

The street is asking for lower rates so that it can boost consumption, gets banks some SLR treasury gains to boost their income and hopefully induce new guys to invest - pretty much in that order. #1 and 3 are because growth is slow, and #2 is to help banks make some money.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby vina » 01 Sep 2015 11:42

The corporate stressed debt overhang has got nothing to do with rates.


NOW we are talking. So what is needed for THAT is reforms of bankruptcy laws. We need to import Chapter 11 and it's associated ecosystem of case laws and jurisprudence whole scale without our Baboons putting their flea picking hands in it and trying to make it "Chapter 11 with Indian Characteristics" or it will be a guaranteed dead on arrival case .

Today, that entire part of turnaround/distressed debt investing is so fraught that no one will touch them and it is so difficult to eject bad managements and/or repair bad business models. Even the ARCIL part is a mai baap stuff with full protection for promoters. That is something Rajan talked about and we say the promoters via their politico attack dogs baying for him.

A specific case where Modi Sarkar has nothing to offer in terms of reforms and nothing in the pipeline either.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby somnath » 01 Sep 2015 12:05

amit wrote:The narrative that's being parroted is that the government is putting pressure on the RBI Guv to reduce rates because the economic growth rate numbers are an "accounting fudge" and the Guv is heroically resisting this effort.

Incorrect. First no one's said that GDP numbers are a "fudge". The point is that they dont match up to high frequency numbers, and hence economic growth is not what is depicted by "7% GDP growth" number. (As TC Anant said, "7 now may be 5 of old"!).

Two, everyone's clamouring for rate cuts - banks, govt, corporates - because they want a boost to bottomlines, macro, topline, in that order. Basically, everyone is feeling the pinch of a weak macro, despite what headline GDP numbers are indicating.

Three, the guv has been resisting (like his predecessors) premature rate cuts so that he doesnt lose a handle on inflation and inflationary expectations. In other words, he needs to be convinced that the latter is in check before he does rate cuts.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby amit » 01 Sep 2015 12:49

somnath wrote:Incorrect. First no one's said that GDP numbers are a "fudge". The point is that they dont match up to high frequency numbers, and hence economic growth is not what is depicted by "7% GDP growth" number. (As TC Anant said, "7 now may be 5 of old"!).


Neat trick. :D

You take what TC Anant said in April and keep repeating that but you studiously ignore what National Statistical Commission (NSC) chairman Pronab Sen said on August 10, which has also been posted on this dhaga in response to a post by you.

To jog your memory, this is what he said:

"We have looked at the calculations of the new GDP, and they are perfectly fine. The methodology used is also perfect, given that the ministry of corporate affairs (MCA) data used in the revised series is certainly the most complete database we can use," a key source privy to the report said.

However, he pointed out that an inherent issue with the GDP numbers arising out of under-coverage of ASI remained unaddressed, resulting in the underestimation of manufacturing growth and hence, the national accounts numbers. This means that GDP numbers were, in fact, understated whereas the criticism was that these overestimated the economic growth. {This is where 7 is the new 5 comes from!}

As many as 70,000 manufacturing companies registered under the Companies Act have not been captured under the ASI because these establishments aren't registered under the Factories Act. The ASI tracks only the companies listed under the Factories Act.

"The discrepancy was discovered after we compared the two lists. Clearly, the registration process is faulty. It implies the entire ASI list is faulty. There would be serious discrepancies in the number of proprietorship and partnership firms as well," said the source.


somnath wrote:Two, everyone's clamouring for rate cuts - banks, govt, corporates - because they want a boost to bottomlines, macro, topline, in that order. Basically, everyone is feeling the pinch of a weak macro, despite what headline GDP numbers are indicating.

Three, the guv has been resisting (like his predecessors) premature rate cuts so that he doesnt lose a handle on inflation and inflationary expectations. In other words, he needs to be convinced that the latter is in check before he does rate cuts.


Funny the RBI Guv does not seem to share your views on what he is thinking. This is what he said on Aug 26

An all-round improvement in macroeconomic fundamentals since then has made India almost bullet-proof against the vagaries of financial markets and the biggest differentiator from two years ago is the confidence this had engendered.

"There is confidence that we are actually quite healthy," Rajan told ET in an interview ahead of his departure for the annual global economists conclave at Jackson Hole in the US.


And

"Last time you did not have the confidence, that is the big difference this time. We know this will pass and at some point the market will wake up and at that point start differentiating."


Here's the operative part of his interview wrt inflation:

"There is some penalty to being seen as attractive. You attract substantial capital flows and that tends to cause some currency appreciation which tends to make production domestically somewhat less competitive," Rajan said.

"Ultimately, in the long run, we need to immunise our system from being overly responsive to fluctuations in exchange rates. Unnatural movements in other currencies do certainly impinge on us and we would not want to take the route of making ourselves a less attractive destination for investments which would be one quick and sure way of depreciating our own exchange rate. I would rather say that let us focus on making our economy more flexible so that we can absorb some of these changes."

Given the slump in commodity prices, this would be a great opportunity to win the battle on prices, he suggested. That may be read as a signal on interest rates.

"There is no better time to bring it down — you have got everything working towards lower inflation," Rajan said. "If people's expectations get settled at this level, we will have won a victory for a long time." RBI's next monetary policy announcement is scheduled for Sept 29, although there have been calls for a rate cut before then on account of slowing inflation amid uncertainty about growth.


I think Rajen didn't get the memo on what he's supposed to think with respect to the rate cuts.

PS: I suggest you go back and read that report on T C Anant one more time. The gist of what he is saying is not that 7=5 or whatever. What he is saying is that better accounting methodology is capturing more data accurately than before which is why numbers are going up.

"From 2011-12, we were able to capture 85% of the companies which file returns on this database," Anant said. Another shift was in corporate manufacturing data. The figures were taken into account using enterprise-based coverage against an establishment-based approach in the earlier series. "Earlier establishment-based data was better captured in ASI than enterprise- based, which was relatively a small sample. Now, with corporate database, our coverage for enterprise is almost universal," Anant said. In the establishment approach, calculation of production was done plant by plant.

Moreover, data on value added is now available for part of the government sector and the corporate sector. Until the new series, neither of these two segments was captured entirely "The big change that we made was that local bodies, which we were capturing on a sample basis, are now being captured on complete account basis for almost 60-70%. The work is in progress to extend it to close to 100%. This was a big change, for our government accounting improved enormously," he said.


The gist of what Anant and Sen are saying is that better data capture is giving a far more complete picture of the economy. The big corporates data was always captured, what was missing was the SMEs and small enterprises. That data is now in and that data has counteracted the weak headline numbers that the large corporates have been showing us. Why is that so difficult to understand? The SME sector is far bigger than the large enterprise sector, even though it usually falls under the radar of analysts.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby somnath » 01 Sep 2015 13:47

amit wrote:Funny the RBI Guv does not seem to share your views on what he is thinking.

I am not saying anything else. What Rajan is referring to is India's relative immunity today to external shocks, compared to what happened during Q4 2013. With crashing oil and other intermediates prices and better capital flows, our external account is indeed stronger.

That is not the same thing as saying that macro growth is "strong".

To quote the paras you quoted, Rajan's focus is inflation.
Given the slump in commodity prices, this would be a great opportunity to win the battle on prices, he suggested. That may be read as a signal on interest rates.

So here is the story in a nutshell.
1. Govt/corporate Inc want a rate cut to boost growth. If they felt growth was adequate they wouldnt have made so much noise. Especially the govt during a volatile global fianncial scenario (where a higher ccy swap rate is a better defence than a lower one, ab initio).

2. The RBI says that lower rates will follow a handle on lower inflation.

#2 will happen, if not the next policy but the subsequent one. Primarily because of lower inflation.

amit wrote:The big corporates data was always captured, what was missing was the SMEs and small enterprises. That data is now in and that data has counteracted the weak headline numbers that the large corporates have been showing us. Why is that so difficult to understand? The SME sector is far bigger than the large enterprise sector, even though it usually falls under the radar of analysts.

SME enterprises indeed are a bigger pie, and if that data is being captured better, more power to the new series. However, and I said this before, if the SME sector is so grandly outperforming the large corporates, how is is that core sector growth dropped to 1% last month (lowest in 3 months)? This rip roaring SME sector isnt guzzling steel, power, oil in line with their blockbuster growth? Why is that Hero Motorcorp is facing topline growth issues? The fast growing SMEs arent paying enough to their promoters/employees to buy 2 wheelers at the same pace? And so on...I am sure you get the point...

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby somnath » 01 Sep 2015 15:05

Here is an optimistic view on the quarterly GDP data.

http://www.business-standard.com/articl ... 031_1.html

SAjid Chinoy is a serious economist, not a random journo masquerading as economist - so he should be taken seriously.

Given these issues, we believe the dynamics of gross value added (GVA) are a better representation of economic activity on the ground. And GVA accelerated smartly from 6.1 per cent in 4Q15 to 7.1 per cent in 1Q16. To be sure, much of the acceleration was driven by stronger agriculture and public administration growth in April-June. Net of those sectors, "private industry and services" growth slowed a tad to 8.8 per cent from 9.1 per cent last quarter - but this is still much stronger than the 7.1 per cent growth from two quarters ago. In effect, if one smoothens the noise from quarterly data, private industry and services growth has been steadily rising over the last few quarters, which is consistent with the high frequency data available (auto sales, consumer durables, corporate profits).

This is a good, positive spin on the numbers - we will know more as we have more GVA data points over the next few quarters. The last sentence is a bit dodgy though - headline growth on most consumer discretioanries has been rather muted, profits have grown but that is on account of sharply lower input costs.

Lastly,
But the question is can this growth sustain? In a world where China is slowing and there are downside risks to global growth, can Indian growth continue to accelerate? It is not inconceivable. Growth is bound to suffer from a big exports drag. But remember, India is benefiting from a huge terms of trade shock on the back of oil and commodity prices that are the lowest in five years. This is pushing down inflation, boosting purchasing power and bolstering firm margins. So think of current global dynamics as inducing a rebalancing of India's growth: exports will be under pressure but domestic demand is likely to benefit from a huge terms of trade shock. That said, this is growth that is being helped substantially by global benevolence. Policy makers have to keep chipping away at structural reform so that when the commodity cycle turns, our growth and inflation gains don't suddenly evaporate.

Structural reforms - where are they?

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Virupaksha » 01 Sep 2015 15:54

Nice spin, I hereby declare myself as the greatest ekhonomist and declare gross of total domestic value produced + net of national value domestic added as the truest measure of declaring a country's growth.

PS: The book which declares it is priced at $ 1 trillion and is available for sale at a discount of 0.01% onleee.

This whole discussion of bringing in some random new name and then saying this new name is onlee and trulee the greatest on earth :rotfl:, which explains the universe - without having any number :roll:

PS 2: One press of the "display this post" in my ignore list, truly shows why my decision of ignoring Somnath remains true. and as of till date, the list is a glorious size of 1. Have to avoid any page in which he puts his super comprehensions in.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby A_Gupta » 01 Sep 2015 16:44

^^^ Why does someone here keep mentioning "high frequency data" that doesn't match top-line GDP growth (which may well be true) and then in September, quoting economists from April? What is the value of current "high frequency data" coupled with analyses from April? Inquiring minds want to know.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby A_Gupta » 01 Sep 2015 16:50

Here's what the RBI Governor's Overview says:
https://www.rbi.org.in/scripts/AnnualRe ... px?Id=1144
The move by the Government to add to the recapitalisation fund for banks is also welcome, as is the proposal to allocate it taking into account the progress in cleaning up balance sheets and generating healthy growth. RBI will welcome progress in the coming year on the creation of the institutions necessary for resolution such as the new Bankruptcy Code and the Company Law Tribunals that will administer it and the Financial Resolution Authority (for resolving financial institution distress)


So, where are the
1. new Bankruptcy Code
2. the Company Law Tribunals that will administer the Bankruptcy Code, and
3. the Financial Resolution Authority?

Is the RBI Governor making these up out of thin air, or is there something planned for the next Parliament session?

PS: the best I find is e.g., May 15th:
http://www.globalpolicywatch.com/2015/0 ... t-problem/
There’s no doubt that the Indian government recognizes that bad debt can impair the country’s long term growth. What remains to be seen is whether the Modi administration will undertake initiatives to create an organized bankruptcy code, one that does not fall victim to India’s judicial backlog. The signs are encouraging. The Bankruptcy Law Reform Committee, a committee recently constituted by the Finance Ministry, released a report recommending drastic changes to current laws and laying out a clear roadmap for implementation. The report uses definitive language to describe the limitations and inconsistencies of the current bankruptcy framework, and its recommendations borrow heavily from best practices in the US, Sweden, and the UK. The report’s proposals, if implemented, could herald a new era in how India’s economy resolves bad debts.


PPS: (PDF) Interim report of the BLRC: http://finmin.nic.in/reports/Interim_Report_BLRC.pdf

Comments please. You guys who are discussing it so heatedly surely understand this stuff.

PPPS: The BLRC report contains this:
Recent experience and research have shown that financial institutions require a special insolvency regime that is faster than any traditional insolvency procedure, where rights of the creditors and the shareholders can be overridden in the interest of the financial system and the economy.The Financial Sector Legislative Reforms Commission (“FSLRC”) constituted by the Government of India has already recommended a separate resolution mechanism for financial institutions.


PPPPS: Looks like FSLRC work was completed during the previous government, reports are here:
http://finmin.nic.in/fslrc/fslrc_index.asp

Please, those who understand this stuff, read, summarize, explain. Those who follow the legislative calendar - are any of these reforms on the horizon?

PPPPPS: This from March 2015

The first real change has come with the budget speech of Finance Minister Arun Jaitley. Paragraph 36 says, “Bankruptcy law reform, that brings about legal certainty and speed, has been identified as a key priority for improving the ease of doing business. Sica… and [the] BIFR… have failed in achieving these objectives. We will bring a comprehensive bankruptcy code in fiscal 2015-16, that will meet global standards and provide necessary judicial capacity.” - See more at: http://indianexpress.com/article/opinio ... KmCRE.dpuf


It is now fiscal 2015-16. Where is the legislation?

PPPPPPPS: This from August 27th:
http://www.livemint.com/Companies/lB61Z ... tober.html

New Delhi: A draft law that will allow for the faster closure of troubled businesses and give investors an easy exit is likely to be ready by mid-October, bringing India closer to putting in place a bankruptcy law.

Once promulgated, the bankruptcy law will also considerably improve the ease of doing business in India—a key focus of the National Democratic Alliance (NDA) government.

An information database storing all information about a company and its debtors to help in early detection of deteriorating financial health and creation of a new class of insolvency professionals to assist in the turnaround of a sick company will be among the key features of the proposed law.

A committee headed by former law secretary T.K. Viswanathan was set up last year and tasked with formulating a bankruptcy code. It submitted an interim report earlier this year.

“We have agreed on the broad framework and the drafting process is on. We should be able to give the draft legislation to the finance minister by middle of October,” said Viswanathan.


So it will be mid-October? How contentious is this bill going to be, how likely is it to be passed?

(I think I learned more in half-hour of Google search than from reading this thread. Usually the BRF thread provides a good framework, but this thread is degenerating.)

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby nawabs » 01 Sep 2015 19:36

El Nino dries up the monsoon, could have impact next year too

http://indianexpress.com/article/india/ ... -year-too/

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Suraj » 01 Sep 2015 20:12

A_Gupta wrote:So it will be mid-October? How contentious is this bill going to be, how likely is it to be passed?

We'll have to wait for the bill. It's not as much a money bill as a law bill. Labour laws will be particularly contentious. If it's written such that it's purely a financial restructuring reform measure, it just needs to pass LS, which it can do easily.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Virupaksha » 01 Sep 2015 22:58

Suraj wrote:
A_Gupta wrote:So it will be mid-October? How contentious is this bill going to be, how likely is it to be passed?

We'll have to wait for the bill. It's not as much a money bill as a law bill. Labour laws will be particularly contentious. If it's written such that it's purely a financial restructuring reform measure, it just needs to pass LS, which it can do easily.

it needs to pass RS as well. However a simple majority in joint sitting can be used.

Only money bills have that flexibility. Money bills have to by definition deal with Government expenditure or taxes.

http://indiankanoon.org/doc/1694744/

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Suraj » 01 Sep 2015 23:41

Non amendment bills only require a simple majority of the present and voting base of RS. Should make things easier.

Added: this interview with Jaitley indicates more about how states can implement their own LAB:
Jaitley says Centre would permit state govts to amend 2013 Land Act
Finance Minister Arun Jaitley said all that state governments now needed to do was to bring legislations to amend the central law and seek presidential assent for it. He said the Centre would permit the state governments to make state-specific amendments in the 2013 Land Act.

Jaitley said acquisition of property was a list III entry 42 in the concurrent list of the Constitution. He said the provisions of Article 254 (2) clearly provide that a state government can bring legislation on a concurrent list subject even if it conflicts with the central legislation, provided that presidential assent is given to such legislations. “The states are thus, fully empowered to amend the 2013 land law and seek presidential assent before the amendment can be effected. This has been precisely agreed to in the meeting convened by the NITI Aayog. One state has already brought the amendments and some others are likely to follow,” he said. The states can provide for alternative mechanism which balances the interests of farmers and also provides for land required for acquisition, the finance minister stated in an article The Land Ordinance — The Obvious Reasons.

“The 2013 Act occupies the field. The Bill remains for consideration of the Standing Committee and, if some consensus suggestions are made, the same would be implemented. That if any state wishes to make some amendments in the central law, the same would be permitted by the Central Government,” he said, explaining the current situation.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Viv S » 02 Sep 2015 03:14

Economy is much stronger than the GDP numbers

The latest data shows economy slowed to 7 per cent in Q1 of FY16 from 7.5 per cent in previous year, but below the headline, the disaggregated numbers show a much better story. Smart pick up in GVA shows strengthening real economy, investments picking up, consumption recovery and industry looking up. ET looks at numbers closely

Image

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Suraj » 02 Sep 2015 05:00

Considering there were demands that GoI clarify this, very recently:
Govt sides with Shah panel; MAT on FIIs history
The finance ministry on Tuesday formally accepted the recommendations of a committee on retrospective cases of Minimum Alternate Tax (MAT), headed by Law Commission chairman A P Shah. With this, the government will withdraw all past cases of MAT on foreign institutional investors (FIIs).

The move came on a day when jittery investors offloaded shares, leading to a fall of about two per cent in the BSE Sensex.

The government would modify a contentious provision of the Income Tax Act to make it more transparent and move amendments in this regard in the winter session of Parliament, Finance Minister Arun Jaitley said. “I have accepted the A P Shah panel report submitted on Aug 25, 2015 … It said MAT would not be leviable on FIIs … a necessary amendment in provisions in section 115 JB of the I-T Act would be required and hopefully, we will bring that out in the winter session, or whenever the next Parliament session is held,” he said.

“We will issue instructions to field formations till the I-T Act is amended. The amended I-T Act will be more transparent,” Jaitley added.

A report by the Shah panel had suggested the government move towards certainty and predictability in the tax regime. “FIIs are mostly open-ended investment funds, which permit their investors to enter and exit daily, based on the NAV (net asset value) of the fund, unanticipated tax liability (or the fear thereof) relating to previous years, which would have to be borne by the current investors, maybe a sufficient trigger for the investors to exit,” it said.

In the 19 years since MAT was introduced (1996), it had never been levied on FIIs and foreign portfolio investors (FPIs). Instead, these entities were governed by the beneficial tax scheme under section 115AD.

The Shah committee said having an ‘established place of business’ was different from merely carrying on a business in India.

On Tuesday, Shah said the finance ministry’s move to accept the panel’s recommendations would send a positive signal to investors abroad. “There is commitment towards certainty in taxation. The fact that the government appointed this committee indicates it is committed to bringing clarity and certainty in the tax regime, and the report has now been accepted,” he said.

“This development will definitely cheer the investor community and help promote India as a favourable investment destination,” said Suresh Swamy, partner (tax & regulatory practice), PwC India.

Rajesh H Gandhi, partner, Deloitte Haskins & Sells, said the decision would help further the government’s position that it discouraged tax terrorism and welcomed foreign investment in India.

Earlier, the income tax department had sent notices to 68 FIIs, demandingRs 602 crore as MAT dues for past years. The issue relates to cases prior to April 1 this year. In Budget 2015-16, the government provided relief to FPIs prospectively, from this financial year.

Initially, the finance ministry was firm on retrospective MAT notices, saying India wasn’t a tax haven. However, in April, the government diluted MAT provisions, saying those coming from countries with which India had double-taxation avoidance agreements would be spared such notices. As the government persisted with other notices, five FIIs, including, BNP Paribas and London-based National Westminster Bank, moved the Bombay High Court against these notices in May. About 95 per cent of FIIs who received MAT notices from the income tax department approached the dispute resolution panel for relief.

On Tuesday, Jaitley said the legal recourse by certain FIIs would have been time-consuming. “We are of the considered opinion that the alternative course suggested by the Shah panel, that a necessary amendment in the Income Tax Act would be required ... (would be pursued),” he said.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby RamaY » 02 Sep 2015 05:27

There is a Bloomberg debate yesterday from which India can learn few lessons.

Trade is good but China proved that over dependence on external trade (as a %GDP) is not good. Stable economies are those where majority of industry consumption & activity stays within the system.

I know it's a function of many variable but India should tread its own path!

G20 nations and their trade as % GDP: https://www.quandl.com/collections/econ ... by-country

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Singha » 02 Sep 2015 07:44

govt is pouring money into digital india initiatives per a iim prof my wife met (he consults on some aspects with the goi)

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby RoyG » 02 Sep 2015 07:52

RamaY wrote:There is a Bloomberg debate yesterday from which India can learn few lessons.

Trade is good but China proved that over dependence on external trade (as a %GDP) is not good. Stable economies are those where majority of industry consumption & activity stays within the system.

I know it's a function of many variable but India should tread its own path!

G20 nations and their trade as % GDP: https://www.quandl.com/collections/econ ... by-country


You're right. We are well placed but we need to industrialize to make it happen. The hindu housewife has the savings and is ready to give the economy a jump start.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby somnath » 02 Sep 2015 08:34

amit wrote:^^^^^
That's because a whole series of circular arguments are being regurgitated page after page. Sigh. I expected better.

Apologies, for my contribution to that! :wink: Data analysis is an interesting, intricate conversation - but can get irrelevant and boring for those not interested. :wink:

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Gus » 02 Sep 2015 08:52

vina wrote:Don't ignore. He actually makes a lot of pretty good points.


like what. i get nothing. zero zip nada ...oru mannangattiyum illa...

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Yagnasri » 02 Sep 2015 09:44

So 15 Cr workers are on agitation path and Bharat is bandh. The only thing i see in Mumbai is taxi bandh since yesterday. Weak union power is both good and may be a bit bad. A little bit.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby deejay » 02 Sep 2015 10:54

somnath wrote:...
I wasnt debating the merits of NREGA, I was calling you out on a rank incorrect, fallacious and intellectually hollow assertion you made, ie, "NREGA causes systemic inflation" - nothing more, nothing less. In response, all you have done is to reference a bunch of reports on the efficacy of NREGA.
...


somnath, from a fellow poster, a request - please reconsider your constant usage of "intellectual" and harping on intellectual prowess of those who support your claim and lack of it for those who do not support your claim.

You keep veering from topic and shift goal posts and accuse others of intellectual hollowness. It is those who keep claiming "intellectual talent" that are in need to bend down and relearn for their knowledge is so shallow that they have to declare assumed superiority over others.

Here's an intellectual quote for you...
Human beings have become so enamored of their intellectual prowess that they forgot to look to the Earth as a teacher. This is hubris, my friends!


In the economics of today, the last 10 yrs created a set of problems and the present dispensation must solve them among other things. Unfortunately for you, Einstein (an intellectual) said this:

Albert Einstein
The significant problems we face cannot be solved by the same level of thinking that created them.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Yagnasri » 02 Sep 2015 11:35

http://www.firstpost.com/business/trade ... 17652.html

Interesting take on today's bandh which seem to have failed in most of the parts of the nation.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby vina » 02 Sep 2015 11:48

On inflation under UPA the prime causes were

1. Oil price shock and inability to pass that through to consumers.
a . The idiotic political economy of absorbing the shock and not passing it on distorted price signals and made matters worse, for e.g., switching from petrol to diesel in a large scale worsened subsidy impact , drove out private fuel retailers and any rationality in pricing and transmission of price signals to customers and prevented demand destruction for diesel and active investments in substitutes and fuel efficiency

2. Massive corruption in resource allocation and policy failures driven by idiotic activists which sabotaged supply of key industrial inputs (coal, iron ore,etc etc), leading India to get hit on iron ore exports and a mind bogglingly large coal import in a country with one of the largest coal reserves in the world.

3. Inability to overhaul the massive subsidiy regime . The fertlizer and power subsidy (both went through the roof ,especially when that needed to be imported or based on imported inputs like gas) saw fiscal deficits rise and current account deficit widen to unsustainable levels.

4.. Trying to "right" terms of trade for agriculture saw huge administered price inputs for food and other agricultural output

5. MNREGA put in a floor on wages (I think this was good) and rural labor saw wage rise, but this coupled with the massive price increases in farm output fed into inflation expectations.
6. Fundamentally, the inability to pass through price shock and clean up the failed subsidy regime especially , coupled with the "NAC spend like there is no tomorrow" ding dong giri basically led to an unsustainable situation
7. Once inflationary expectations hardened and proved to be not very responsive to small interest rate increases, Gold became the only real hedge against inflation and true store of value available for most folks and that further broke the current account deficit.
8. Taper tantrum from the Fed, saw the Rupee go to 70..

The last part was the straw that broke the camel's back and folks voted against the incompetent UPA govt with a vengeance. But the root cause lies not with MMS, but rather at Mani Shankar Aiyer's term as Petroleum Minister, when instead of passing through price shock ,they issued wampum bonds and did off balance sheet accounting (hid the true extent of the deficit).

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby somnath » 02 Sep 2015 12:09

^^^There were 3 main factors:

One, high MSPs - many analysts believe that this was the single most important factor - especially given the high weightage of food/assicated articles in the CPI index.

Two, high global commodity prices. Whether not passing through the impact caused more inflation (through enhanced fiscal deficit) is a slightly tricky question. But clearly, global commodity prices.

Three, anchoring of inflationary expectations at high levels. This is linked to the above two, PLUS the general labour market. Till 2012-13, the economy was doing quite well, and the labour market was tight.

A cursory glance through the index, the components that drive the same - give the same answers.

vina wrote:Mani Shankar Aiyer's term as Petroleum Minister, when instead of passing through price shock ,they issued wampum bonds and did off balance sheet accounting (hid the true extent of the deficit).

Ironically, MSA carried on from Ram Naik, who started this pernicious habit (post dismantling of the oil pool account) of not passing on global oil price increases into retail pump prices.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Arjun » 02 Sep 2015 13:26

Jim Rogers exits India

This China-loving moron has been exiting India like forever.....I wish he would do it once and for all and spare us all the unnecessary talk.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby amit » 02 Sep 2015 14:36

Arjun wrote:Jim Rogers exits India

This China-loving moron has been exiting India like forever.....I wish he would do it once and for all and spare us all the unnecessary talk.


Have no fear the guy will be back. I think he's in the "batten down hatches" mode as the China situation explodes and leaves a mayhem in the global stock markets. He's withdrawing money from stocks and going for safe harbor investments.

But one quote from the interview caught my eye.

Jim Rogers wrote: India has very high debt-to-GDP (gross domestic product) ratio—it is higher than many countries. Studies have shown that when countries have a high debt-to-GDP ratio, it is difficult to grow at a reasonable rate.


At one level you can't complain with that statement. But I did a quick search and I came across two very interesting charts.

India
Image

China
Image

The 10-year trend for both countries is interesting isn't it? Inquiring minds wonder if Roger bhaiya is withdrawing from China as well?
:rotfl: :rotfl:

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby SaraLax » 02 Sep 2015 15:13

Yagnasri wrote:http://www.firstpost.com/business/trade-unions-are-signing-their-own-death-warrants-with-todays-strike-2417652.html

Interesting take on today's bandh which seem to have failed in most of the parts of the nation.


Very True in case of Chennai atleast - Taxis & autos plying, State buses running, local electric & long distance trains running, all schools & colleges open , shops open and usual traffic on roads .... Banks - I heard that PSU banks like SBI & IOB are working today !!. HDFC Bank in my area is for sure working and even otherwise if you have ATM/Debit cards or internet banking factility - common man is almost unaffected by single day bank strikes (but for cheque & DD handling shops, MSMEs & SSIs). TN has seen cases of sitting/former CMs getting thrown into Jail all of a sudden but normalcy hasn't been affected in any big way. Some entities i have seen working even during times of high uncertainty ..like Hospitals, Medical Shops, ATMs & last but not least TASMAC shops - local state government run wine shops (They were open even when the CM 'Amma' was jailed all of a sudden last year !!!).

Whatever the situation (unless you are weak due to illness or your family requires your need for the important events in one's life) - it is a great attitude to have - if people get themselves ready and unfailingly go to their workplace or educational places and do their expected duties with the faith that they can somehow handle their hardships at job/studies (with help or without help from others) and eventually grow to the next stage of life.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby somnath » 02 Sep 2015 15:29

amit wrote:At one level you can't complain with that statement. But I did a quick search and I came across two very interesting charts.

Jim Rogers is more talk than actual investment. He is taken more serioulsy in the lecture circuit than in the investment circuits.

Debt-to-GDP for India has become progressively better, even during the "profligate years" of UPA. In fact the pace of decline in the ratio has accelerated in the last few years. Reason is simple - inflation! One of the best ways of devaluing debt (and thereby improving debt to GDP ratios) is high inflation. Which is what Europe is desparately trying to do, without much success, yet.

China's numbers on debt-to-GDP are suspect, like many of their other numbers. A lot of debt is saddled with SOEs, which is not counted as sovereign debt.

the above is true for India as well, but public sector debt is relatively low outside of the banking system.

However, China also has a redeeming feature - it has a 3 trillion dollar sovereign wealth fund (most of its forex reserves are non-liability generating money, unlike India where all of it is liability generating). It can potentially use parts of that wealth to clean up public sector balance sheets.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby A_Gupta » 02 Sep 2015 15:36

^^^ Debt- to -GDP, not government-debt-to-GDP.
China : http://www.bloomberg.com/news/articles/ ... ecord-high

Outstanding loans for companies and households stood at a record 207 percent of gross domestic product at the end of June, up from 125 percent in 2008, data compiled by Bloomberg show.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby A_Gupta » 02 Sep 2015 15:43

India, China, total debt-to-GDP
http://www.thehindubusinessline.com/opi ... 952073.ece


One of the countries in which total debt has grown very rapidly in the six years since the Great Recession is China.

Its total debt in absolute terms went up four times, and the debt-GDP ratio nearly doubled between 2007 and 2014, as Chart 1 indicates. At around 282 per cent of GDP, this makes debt in China larger than in the US in relative terms.

The biggest increase was in corporate debt, which is now as much as 125 per cent of China’s GDP, but debt held by households has also gone up nearly threefold to a hefty 65 per cent of GDP.


By contrast, levels of debt in India appear to be low and even comfortable in comparison (Chart 2).

Government debt has actually fallen as a share of GDP, as has household debt. However, corporate debt has increased and is now as much as 45 per cent of GDP, while debt of financial institutions has also increased in the past seven years. As a result, total debt now accounts for as much as 135 per cent of GDP.

This seems relatively low compared to the very high levels in some other Asian countries (not just China but South Korea and Singapore as well) but it is still quite high given historical patterns and the low financial intermediation in the economy.

And the critical question is the extent to which the debt is sustainable in the medium term, such that corporations and financial institutions while not find repayment to be a problem.

In addition, the macroeconomic context and ability of the economy as a whole to withstand such financial shocks are obviously important.


As far as foreign reserves are concerned:
viewtopic.php?f=2&t=7018&start=240#p1891455

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby amit » 02 Sep 2015 19:01

A_Gupta wrote:^^^ Debt- to -GDP, not government-debt-to-GDP.
China : http://www.bloomberg.com/news/articles/ ... ecord-high

Outstanding loans for companies and households stood at a record 207 percent of gross domestic product at the end of June, up from 125 percent in 2008, data compiled by Bloomberg show.


One interesting data point. Greece's debt is around 180 per cent of GDP and it is considered a basket case.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby amit » 02 Sep 2015 19:05

somnath wrote:
amit wrote:At one level you can't complain with that statement. But I did a quick search and I came across two very interesting charts.

Jim Rogers is more talk than actual investment. He is taken more serioulsy in the lecture circuit than in the investment circuits.

Debt-to-GDP for India has become progressively better, even during the "profligate years" of UPA. In fact the pace of decline in the ratio has accelerated in the last few years. Reason is simple - inflation! One of the best ways of devaluing debt (and thereby improving debt to GDP ratios) is high inflation. Which is what Europe is desparately trying to do, without much success, yet.

China's numbers on debt-to-GDP are suspect, like many of their other numbers. A lot of debt is saddled with SOEs, which is not counted as sovereign debt.

the above is true for India as well, but public sector debt is relatively low outside of the banking system.

However, China also has a redeeming feature - it has a 3 trillion dollar sovereign wealth fund (most of its forex reserves are non-liability generating money, unlike India where all of it is liability generating). It can potentially use parts of that wealth to clean up public sector balance sheets.


Somnath,
You are grossly mistaken if you think China's Forex reserves will save it if things really go southward. As to why just read the link s Gupta ji posted. Can't give any more details now as I'm in the road.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Austin » 02 Sep 2015 19:48

amit wrote:
Arjun wrote:Jim Rogers exits India

This China-loving moron has been exiting India like forever.....I wish he would do it once and for all and spare us all the unnecessary talk.


Have no fear the guy will be back. I think he's in the "batten down hatches" mode as the China situation explodes and leaves a mayhem in the global stock markets. He's withdrawing money from stocks and going for safe harbor investments.

But one quote from the interview caught my eye.

Jim Rogers wrote: India has very high debt-to-GDP (gross domestic product) ratio—it is higher than many countries. Studies have shown that when countries have a high debt-to-GDP ratio, it is difficult to grow at a reasonable rate.


At one level you can't complain with that statement. But I did a quick search and I came across two very interesting charts.

India
Image

China
Image

The 10-year trend for both countries is interesting isn't it? Inquiring minds wonder if Roger bhaiya is withdrawing from China as well?
:rotfl: :rotfl:


One way to look at that chart is that as China Economy grew its debt to grew , it could generate wealth internally like the economy of US and Europe except that it has low debt compared to both.

In absolute term if we compare the GDP of both nation China is a $10 trillion dollah economy and India at $2.2 trillion so low debt percentage wise should not be bad for china and for India too as its economy is growing much faster then china

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Austin » 02 Sep 2015 19:53

Video: Interview with Raghuram Rajan

http://www.bbc.com/news/world-asia-3405 ... n_outbrain

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Suraj » 02 Sep 2015 20:49

Mod Note

The political discussions here have been moved to the politics thread. This thread is not a gilded cage to post politics couched in economics while avoiding the politics thread. Please continue in the politics thread. Posting politics here will lead to action against the poster.


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