Indian Economy News & Discussion - Aug 26 2015

[Suraj]

Now is probably the best time to create one. The bank situation is clearer at home, making the creation of such a TARP bank easier. It's also clear that the Chinese and various EU countries like Italy will report huge losses in the near future. That will create pressure on the banking system worldwide, and it's better to be prepared in advance.

[vishvak]

Actually, the situation may not be that bad at all.
See this link
So there may be ways, one or many.

However, the stocks of the country’s second-largest lender defied the loss after the management said that all non-performing assets were accounted for and it could return to profitability next fiscal. Its newly inducted managing director and chief executive P S Jayakumar said through the clean-up and reorganisation exercise, the bank is confident of posting “reasonable level” of profit next fiscal year.
..
Shares of other banks also rose after finance minister Arun Jaitley said on Sunday, during the Make in India event in Mumbai, that the government will soon announce several banking sector reforms. “We will be announcing a series of banking reforms in the days to come,” Jaitley said at the CNN Asia Business Forum 2016 at the Make In India Week.

[Suraj]

The process of a bank run or loan default is not a linear one. The failure is a sudden cascading process where multiple loans go bad upon one another. While it doesn't look bad now, it could quickly cascade. Therefore, right now is about the best time to set up a bad bank and move NPAs off the books of regular banks. With the NPAs better defined (as opposed to just restructure and push into future, hoping they get better) and the domestic economy still stable, there's no better time to do this. I hope FinMin goes ahead with it in the budget. RBI and Rajan, after not having done enough about this in the last three years, sounds like Baghdad Bob for now claiming that all is well.

[Kakkaji]

Budget 2016: Unlike predecessors, Prime Minister Narendra Modi actively involved in Budget-making exercise

Indian prime ministers generally set a broad direction for the Budget, leaving finance ministers to work out the details. Modi has shown through his tenure and even before that that he isn't such a leader, being as focused on the nitty gritty as he is on the big picture. During his three terms as chief minister of Gujarat, he was as closely involved in policy-making. One bureaucrat recalled how the PM sat through a three-hour presentation, reflecting his keen interest in policy-making.

Those who know him well aren't surprised at Modi's ability to absorb details that others may consider tedious, given the kind of engagement the PM has with secretaries and how hands-on he is-.Besides, there are many significant decisions that require his input, such as the fiscal deficit, for one. Should the government relax its fiscal consolidation targets to keep public expenditure high or stay the course for more long-term gains? Other queries are more political in nature, such as the rationalisation of subsidies or a package to address rural stress. ET had reported on February 15 that the government is working on a twin-pronged Budget that will push structural reform to lift growth and address rural stress through broader social security measures and changes in agricultural policy.

[Kakkaji]

Govt approves Rs 34,000-cr road projects in Feb; Rs 6k-cr today

Government today approved eight highway projects worth Rs 6,000 crore for six states – Punjab, Jharkhand, Madhya Pradesh, Rajasthan, Himachal Pradesh and Odisha.

With today’s approval, the number of projects cleared by Road Transport and Highways Ministry this month so far has swelled to 37, entailing a total investment of about Rs 34,000 crore.

[hanumadu]

The process of a bank run or loan default is not a linear one. The failure is a sudden cascading process where multiple loans go bad upon one another. While it doesn't look bad now, it could quickly cascade. Therefore, right now is about the best time to set up a bad bank and move NPAs off the books of regular banks. With the NPAs better defined (as opposed to just restructure and push into future, hoping they get better) and the domestic economy still stable, there's no better time to do this. I hope FinMin goes ahead with it in the budget. RBI and Rajan, after not having done enough about this in the last three years, sounds like Baghdad Bob for now claiming that all is well.

But that would have created a panic if SBI had declared a loss of 200000 crore in a single quarter without already having made any provisions for covering such a loss or tens of thousands of crores in case of smaller banks. I think GOI did well to avoid panic and I think it also did well in not printing the 700000 crore that it probably would have had to if all NPA's were declared a few years ago. Even now, there will be mayhem when the bad bank is created and the true extent of the NPAs come out and they are officially declared as losses on the income statements.

[Suraj]

The true extent of NPAs is no longer a surprise waiting to happen, in my opinion. The PSU banks were already hit hard when they restated earnings recently on account of NPAs being declared more openly. Despite the short term pain, it's better to rip the band aid off and create the bad bank.

[hanumadu]

I am not sure all NPAs have been accounted for in just one quarter. There are 7-7.5 lakh NPAs, restructured loans. Assuming 3% is a normal and acceptable rate, there should be at least another 5 lakh crore loans that have to be declared as NPAs and taken off the balance sheet. Did all the 5 lakh crores appear as losses on the banks' income statements? The only way they can be transferred to a bad bank without they showing up as losses on the banks' earning reports is by the govt paying the banks the full loan amount before transferring them to a bad bank. Kinda like how AIG was left holding the bag after the sub prime crisis.

[hanumadu]

http://www.hindustantimes.com/punjab/fi ... 4efJK.html

The first unit of the 540-megawatt (MW) Goindwal Sahib thermal plant, owned by GVK Power Limited, is set to start operating by January 31.

Had the project not become operational by March this year, it would have turned into a non-performing asset (NPA), the source added.

Yaay, thats about 3000 cr or 0.5% of NPAs turning into good loans.

[Suraj]

I am not sure all NPAs have been accounted for in just one quarter. There are 7-7.5 lakh NPAs, restructured loans. Assuming 3% is a normal and acceptable rate, there should be at least another 5 lakh crore loans that have to be declared as NPAs and taken off the balance sheet. Did all the 5 lakh crores appear as losses on the banks' income statements? The only way they can be transferred to a bad bank without they showing up as losses on the banks' earning reports is by the govt paying the banks the full loan amount before transferring them to a bad bank. Kinda like how AIG was left holding the bag after the sub prime crisis.

No, it's not that all NPAs are declared. It's that banks are willing to say that they have NPAs, rather than continue the 4 years long charade of extend and pretend. They're willing to take the hit on their equity values, as pretty much every major Indian bank has. Take a look at the 1-year charts of any major Indian bank you can think of - they're all down a lot. This is a necessary corrective process that's taking place. It's not a binary thing where one day NPAs are not declared, and the next day they are. There's an extended process of accounting for them and stating them. What's important is that the banks do so relatively more openly, and that is happening now.

[hanumadu]

If all the NPAs were declared all at once, the ~170 rupee fall in the stock price from about 330 to 160 would have been abrupt. So its a gradual letting down of the banks without causing panic. The provisions and contingencies or Exceptional items for SBI are

Code: Select all

2016 - ~16,360 (3 qtrs only)
2015 - 19,599.54
2014 - 15,935.35
2013 - 11,130.83 
2012 - 13,090.23
2011 - 10,381.34
2010 - 4,394.83
2009 - 3,734.57
2008 - 2,668.65

See how they jumped from from 4,394 cr to 10,381 cr from 2010 to 2011 and kept going higher. If all these NPAs were declared 3 years ago in 2013, SBI would have had to declare a loss of 52,000 cr or may be even 100000 cr or more that were not provisioned for in one go. Not sure how the public would have reacted.

My guess is even if a bad bank was created now all the NPAs wont be transferred to it at once. Each quarter, some portion of them would be transferred cutting into the profits until all of them have finally been taken off. Rajan said by end financial year 2017, all NPAs would be taken off the banks. So its 5 quarters more of depressed earnings for the public sector banks.

[chetak]

Is Selling PSBs to Foreigners Rajan's Agenda?

Is Selling PSBs to Foreigners Rajan's Agenda?
By S Gurumurthy Published: 20th February 2016 06:00 AM Last Updated: 20th February 2016

If news reports are to be believed, the Finance Ministry seems to be caving in to the RBI strategy to sell Public Sector Banks and is raising the limits of FDI in banks to 49% — thus virtually paving the way for handing the PSBs, which are at the heart of the national economy, to global financial interests. If the RBI Governor succeeds, it will be a disaster for India.

PSBs, the core

An obvious truth, but, that hardly figures in public discourse, is that Indian financial economy is bank-driven — more precisely, it is Public Sector Bank (PSB) centric. Economic thinkers and policy makers seem to regard the PSBs as a problem, rather than as the most valuable financial asset of Indian economy. It is undeniable that banking in India almost means PSBs, which hold 80% of the deposits of commercial banks. As the Indian economic establishment looks at only the Anglo-Saxon economies, which are market-driven — read equity market — they do not seem to be conscious that the world’s most efficient economy, Germany, too is largely bank-led. Yet another equally efficient economy, Japan, is also equally dominantly bank-led. In both Germany and Japan, unlike in the US or England, stock markets do not have primacy — either to mobilise capital or to distribute it.

>>Related: Indian Economy for Dummies - I

Look at India’s financial structure. Nine-tenths of Indian savings is in safe investment models. More than half of it in banks. The deposits in PSBs amount to over 50% of the GDP. Besides mobilising four-fifths of deposits, PSBs are involved in building financial architecture for formalising the economy on a phenomenal scale, which the private banks cannot even think of. For example, PSBs have opened some 78% of the 20.7 crore accounts under the Prime Minister’s Jan Dhan Yojana (PMJDY).

With Regional Rural Banks accounting for 19% of the PMJDY accounts, private banks contributed just 3% of the accounts. The PSBs’ share of Mudra loans for micro businesses is 60%. Even though bank deposits yield just half as the stocks do, 40% of the Indian household savings move into banks. The celebrated stock market, which offers double the return as the banks, hardly attracts 2% of the nation’s savings. While the public prefer to put their savings in banks, they seem to have enduring trust in PSBs. The Indian economy is not just bank-led, it is PSBs-led. Yet, there is not a word about what good work the PSBs do or about their successes in the economic discourse.

>>Related: Indian Economy for Dummies - II

Worse, the PSBs which are at the heart of the national economy are ceaselessly trivialised, derided and demeaned in the nation’s economic discourse. Their failings are highlighted and their merits suppressed. The dislike for PSBs appears more ideological — and less logical. The main objection to the PSBs is that they are state-owned.

The ideology is that if the PSB ownership is turned private, they will become efficient — because efficient market theory abhors public ownership. It needs no seer to say that the private global banks regarded as the biggest and the best in US had all but declared bankruptcy in 2008. They had to be rescued by government. Private ownership, while it may promote efficiency, does not assure solvency. In fact, their super efficiency itself led to bankruptcy.

Global banking complexity

Recently (Feb 16, 2016), Bloomberg wrote a chilling analytical story titled, “The European Banks face a frightening future”. They are all celebrated global banks — Royal Bank of Scotland, Barclays, UBS, Credit Suisse, Deutsche Bank, UniCredit and Standard Chartered.

But they had laid off close to 75,000 employees since 2008. In 2008, the experts said that the crisis happened because of lack of regulation. According to Bloomberg, now the banks say that, “regulation has made the world more dangerous”. The chairman of the Eurogroup, made up of Euro area’s finance ministers, countered, “Don’t say we have over regulated the banks” adding that it is the opposite, as what is impeding economic recovery are “the effects of a financial crisis” which was “not caused by over regulation”.

The truth is that the banking industry in the West has become complex. The truth again is that they are struggling over how to become simple again! Say Bloomberg analysts: “In the end, the banking industry troubles can be traced to one thing — the cost of complexity. From the moment the banks went global in the late 1990s, skeptics decried these behemoths are too big to manage, let alone too big to fail. But the institutions thrived on the very creation of complexity in their products and in the markets.”

Former Deutsche Bank CEO Josef Achermann said, “There’s once again a flight to simplicity. That is what the regulators are demanding… The unbundling of banking services is undoubtedly complicated and perhaps even fraught with unseen dangers. And it is really all about getting back to basics.” There is a message for India in the Bloomberg report. What is the problem of these banks? They are not banks as the Indian economy or people or law understand. Indian law defines banking as “accepting for the purpose of lending or investment of deposits of money from the public”. This is simple banking. If these global giants, who had complicated the idea of banking and messed up themselves, their and world economy, bought out the PSBs, would they manage them better? Or mess them up as they have messed up themselves?

Sledge hammer approach

The RBI is applying the Basel banking norms developed for the complex banking business of the West on the Indian banking system which is simple but highly regulated. Applying Western banking norms for provisioning for Non-Performing Assets (NPAs) in Indian banks is to apply the rules of the rogue Western game of Rugby for the simple local game of Kabaddi. One simple differential is sufficient to show how inappropriate are the provisioning rules of Western banking to Indian banks. The provisioning rules are intended to ensure that depositors and investors are protected.

The Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR) together absorb and protect 27.5% of bank deposits. Actually, Indian banks’ investment is almost close to 30% in government securities. Therefore, over 35% of the bank deposits are protected by government securities. Nowhere in the world such actual security cover is available to depositors. Again, the Indian banks protect and de-risk themselves by personal guarantees and collaterals. None of these realities are reckoned by the RBI in devising its “sledge hammer approach”, as a leading banker described Raghuram Rajan’s fiat to banks — particularly PSBs — to provide for stressed assets or get lost.

RBI looks to West

What is the extent of NPAs which is making the RBI governor restless? A report in the Forbes magazine (Feb 16, 2016) says, quoting Credit Suisse, that the NPA levels of Indian banks would move to 6.6% by March. The Indian banks have reported much higher NPA levels in the past. NPAs remained around 8-9% from 2003 to 2011. Thereafter, it began declining — to 6.5% in 2012, 4.5% in 2013 and 4.9% in 2014. When the economy was doing very well between 2003 and 2011, the NPA levels have been far higher.

The sledge hammer approach should have been adopted then, when the banks and the economy could well have absorbed it. Nations pass through such phases. The NPAs in Japanese banks ranged from 8% to 9% in the 1990s till 2001 and it was 7.5% in 2002 (BIS paper No 46 May 2009) and only thereafter, it began to fall. Despite the NPAs exceeding a $ trillion, the Bank of Japan did not take the sledge hammer in hand, like Rajan is doing.

The Japanese banks, which were all private, were not writing off bad loans because of inadequate capital — like the PSBs. Yet, the banks were not compelled to provide for bad loans, because that would have caused imminent crisis of confidence in the banking system. The government stepped in to support the banks with public funds to the extent of 30 trillion yen. Whenever private banks face crisis, the government becomes the ultimate saviour. This was true of the Japanese banking crisis of 1990s and of the US financial crisis of 2008. When the State steps in, confidence gets restored in private banking. That is not the case here. There are three critical differentials which are the protective walls of the Indian financial system and Indian economy.

First, there is no capital account convertibility which will expose Indian banking to global finance. Next, India has rightly not opened the banking system to foreign investment. Third, PSBs are state-owned. These three basic facts ensure that PSBs face no imminent threat. Threat to banks from NPAs is imminent when they are privately owned; they are open to foreign ownership and the currency is full convertible. Disregarding the basic strengths of the PSBs, Rajan appears to turn a prudential issue into a banking crisis. Would Rajan have taken the sledge hammer if the PSBs were privately owned? He would never have because that would have set off a banking crisis. Is he then doing it only because the PSBs are state-owned banks?

Design to sell PSBs to foreigners?

The RBI’s NPA policy appears to be more the outcome of an ideological accountant’s mindset than the product of a practical banker’s wisdom. When the world over, central banks are buying stressed assets and junk bonds held by banks to de-stress the banks and make them carry on their business, Rajan is doing precisely the opposite. He is coercing the banks to provide for NPAs, when he knows that they do not have the surplus to absorb the loss.

It means the banks will need to be recapitalised to the extent of losses. Here Rajan goes one step further and virtually makes it impossible for the government to recapitalise. He is morally coercing the government to meet the fiscal targets. That is not his domain. That is the sovereign business and Parliament’s function. He knows that if the government were to cut fiscal deficit, it cannot recapitalise the PSBs. Is he then compelling the government to privatise the PSBs? That is, forcing the government to sell them to foreign banks as the scale of capital needed to buy the PSBs is not available with private corporates in India.

If news reports are to be believed, the finance ministry seems to be caving in to the RBI strategy to sell PSBs and is raising the limits of FDI into banks to 49% — thus virtually paving the way for handing the PSBs to global financial interests. If Rajan succeeds, it will be a disaster for India. But it is bound to do good for Rajan, as the world of free market will idolise him for privatising and globalising the hardcore of Indian financial system — the PSBs. His CV will become the most sought after when he retires in the coming winter. Why then should he bother about what happens to India? But surely, the Modi government should be bothered about India. Isn’t it?

The author is a well-known commentator on economic and political affairs. E-mail: guru@gurumurthy.net

[vina]

Well, was watching Uday S. Kotak, talking to Latha Venkatesh in CNBC/TV18 today this morning and what Kotak said is the essentially problem in India and the industry is absolutely spot on. The gist of it is like this.

1. India's marcos are absolutely fine, the best they have been EVER and a dream situation if someone had asked some 10 years ago on how it should look, he would have pointed to today's numbers.

2. India's problems are all micro. And that is something that will take a lot of time and effort to get done.

3. India Inc's business model is fundamentally broken. THAT is the essential problem. So what IS India Inc's business model
a. That business model is basically an arbitrage play on resources (either spectrum, coal mines, land , licenses) etc, and grab it on the cheap and then arbitrage that out in a few years vs . real economic value
b. India inc's business model is NOT based on productivity and skills, r&d or any competitive advantage
c. With resources now getting and out on transparent basis, this arbitrage play (i.e., grabbing resources by means, foul or fair) is dead. And that IS the problem.
d. The value destruction that has accompanied this business model crash has compounded the problem.

4. Recovery of earnings might happen at best in 2nd half FY17.

And now, I just hope that this ossified stuck with some dead end sloganeering and stuck in a closed reverberation chamber of the the Cow+Marx ideology folks of the RSS (like Gurumurthy esp) call it quits. While the Marx alone guys in the left drove the country into the ground, the Cow+Marx guys are going to grind it to dust. Those fools will simply compound the misery of this country.

I read Gurumurthy's earlier article about how he would tax derivative's and stocks on some volume/turnover basis , since those where supposedly "speculative" anyway (and so what even if it was "speculative') and it would supposedly be the magic bullet to fix all the deficit woes (the forever bountiful "Kamadhenu" if that is the kind of metaphor that would register with these Cow + Marx types) and it struck me how deluded and absolutely ignorant his entire premise was and the absolute disaster to the economy (real and financial) such a harebrained rubbish if implemented would be for the economy.

[vina]

Also the former SBI CMD, Mr Chaudry came on CNBC and advised a very simple solution to the NPA problem. Just remove the CRR (which again is an ossified leftover with no economic rationale, the CRR is never fiddled with and imposed in the US or major economies) and allow CRR value to be invested in RBI /GOI bonds... The RBI sits pat on Chaudry's well reasoned arguments and insists on the CRR which don't earn interest at all and the RBI munches it up..

I do hope that when someone interviews the RBI (maybe Latha herself) should ask the RBI Governor, why in this day and age is the CRR necessary at all, what is the economic rationale for that, and why does he stand in the way of scrapping it and releasing capital ?

[Supratik]

Privatizing PSU banks at this stage is not advisable. India is not ready for it at this time. There are other ways of making them work. Rather sell off AI when it turns green if not black. Use the money saved to buy strategic airlift capability.

[Hari Seldon]

1. There is no danger of PSB privatization anytime soon. Modi sarkar is yet to privatize anything worthwhile, from what i can see. Heck, even AI continues to swallow good money after bad.
And this when AI unions are pygmies compared to the PSBs' trade and officer unions. I don't this GoI privatizing banks, no sir.

2. Much of 'investment' in fresh business ideas and ops is happening via the venture cap route into the red hot startup sector in India, which in itself may be a bubble. No harm done this time, unlike in the dotcom era when very many retail investors lost their shirts and depressed demand for years.

This time, let 'em fat-cats eat the losses. They can very well afford to without breaking sweat ... or wind.

3. I continue to look for telltale signs of the micro-foundational changes Modi sarkar has endeavoured to bring in - JDY, MUDRA, Crop insurance, atal pension yojana, micro irrigation and water-conservation, solar power, river-linking, waterway use for freight and what not ... having real, tangible impact on people's lives enough to give Modi sarkar a second chance by 2019. Evidence so far is scant, anecdotal and mixed.

[hanumadu]

The govt in fact asked the PSUs to use some 68000 crores cash with them for share buy back instead of paying it to the govt. Perhaps, he is planning to buy low and sell high. Or the govt is not facing a fund crunch.

[vera_k]

I read Gurumurthy's earlier article about how he would tax derivative's and stocks on some volume/turnover basis , since those where supposedly "speculative" anyway (and so what even if it was "speculative') and it would supposedly be the magic bullet to fix all the deficit woes (the forever bountiful "Kamadhenu" if that is the kind of metaphor that would register with these Cow + Marx types) and it struck me how deluded and absolutely ignorant his entire premise was and the absolute disaster to the economy (real and financial) such a harebrained rubbish if implemented would be for the economy.

This is what Chidambaram has implemented using the STT isn't it? Agree it is a bad idea since it lets the rich avoid capital gains taxes and therefore lead to income inequality.

[vina]

This is what Chidambaram has implemented using the STT isn't it? Agree it is a bad idea since it lets the rich avoid capital gains taxes and therefore lead to income inequality.

Yes and no. Chidambaram initially had same rates on derivatives as in the cash market and then immediately cut it down to some reasonable rates. The taxation business is complex. It is like this. The big guys (i.e. the FIIs and the Mutual Funds) pay ZERO tax on derivatives whether short term or long term capital gains or any classification. The way that works is, you come in via a DTAA country such as Singapore, Netherlands or Mauritius and then elect to pay taxes in a zero tax jurisdiction.

That is the only way you can attract foreign funds into your domestic capital markets (try taxing those at Max Marginal rates or whatever) and you will get no inflows and same story with domestic mutual funds. Trouble is, when you say want to tax derivatives where per the headlines the "Volumes" are order of magnitude more than the cash segment, what are they talking about ? They are talking about the notional value. So you apply some STT on the notional value, it is nonsensical , when the you pay Rs55 (the current premium) for an at the money Nifty Call option (Rs 7200 strike near month) per my terminal as I am typing ... Now if you tax it on the notional, it makes no sense ! And if you tax it on the premium, your expected revenue numbers look small.

What this kind of taxation at max marginal rates for local guys and tax free for foreign guys has done is that it has given the entire F&O markets over to the FIIs . If the ultra nationalist Gurumurthy types want to do more of that, sure, please keep going down that route. And if you tax the derivatives like you do in the cash segment, good luck when the FM announces that in the budget and watch in real time what happens.

[Suraj]

Centre finalising gold policy reforms, Budget rollout likely

The Centre has called a meeting on Monday to finalise a proposal to set up a National Bullion Board, an umbrella body to implement gold policies and reforms, as well as a gold spot exchange.

Industry stakeholders, representatives from the Indian Institute of Management Ahmedabad (IIM-A)'s India Gold Policy Centre and officials from the commerce and finance ministry will attend the meeting, which comes a week ahead of the Union Budget for 2016-17. According to sources, finance minister Arun Jaitley will announce several measures in the meeting, intended to reform the gold trade.

Apart from these two major issues, the finance ministry will also consider duty on dore (unrefined gold) imports, in view of some cases of misuse of concessions in import duty by some refineries in excise-free zones. The move is aimed at ending a one per cent arbitrage by way of lower duty to refineries in excise-free zones.

According to sources, the ministry is also considering a proposal to relax the Gold Monetisation Scheme (GMS) to ensure a better response. The Central Board of Direct Taxes had clarified that during raids by the income tax department, gold up to 500g cannot be seized. The finance ministry might allow such gold to be monetised under GMS without producing evidence of purchase.

Ficci calls for reforms through executive action

With the Budget session set to start from February 23 and the Opposition not agreeing with the government on major issues, the Federation of Indian Chambers of Commerce and Industry (Ficci) has suggested a slew of urgent reforms across sectors, which will not require legislative action.


The proposed reforms are spread across exports, taxation, and crucial sectors such as small scale, labour and infrastructure. According to Ficci, most of these reforms can be addressed by executive action by the respective ministries.

To boost India's lagging merchandise exports, which went down for the 14th consecutive month in January, Ficci has suggested simplifying the process by which exporters can claim incentive benefits. While the government has sought to incentivise exports through interest subvention and the merchandise exports from India scheme (MEIS), exporters have claimed several procedural and implementation difficulties to have made it unusuable.


The suggested reforms include increasing the time period allowed to exporters to claim MEIS benefits as well as for manually submitting the shipping bill. Allowing exporters to self-certify the origin of various goods, which usually take a considerable time, has also been mentioned.

In labour laws, Ficci has proposed a uniform period of five years across states after which factory licences are required to be renewed. Currently, the period ranges from one to five years.

It has also recommended fixing a three-year time limit to decide pending cases by the Board for Industrial and Financial Reconstruction under the Sick Industrial Companies Act, 1985, which has pending cases stretching back to 15 years.

Under the Employees Provident Fund and Employees State Insurance Acts, it has suggested placing a cap on the time duration of records summoned by the inspector for inspection for up to three years before.

It also urged the government to divest its stake holding in central public sector undertakings, especially mentioning Specified

Undertaking of the Unit Trust of India, where it said the Centre holds equity to the tune of Rs 52,000 crore or 0.4 per cent of the GDP.

To secure urgent infrastructure growth, the setting up of a one-stop shop for handling projects coming up under the public-private partnership mode has been recommended. While the government had announced setting up of an institution called '3P India' in 2014, the body has still not been set up.

Ficci has also called for introducing binding statutory timelines for adjudication of matters relating to indirect taxes. It said the uncertainty in such cases make doing business difficult especially for small and medium enterprises. Currently, the Customs Act states tax officials shall have to determine the amount of such duty within one year from the date of notice.

Govt nod likely for $8 billion toll road projects sale to pension funds

The transport ministry is hopeful of receiving the Cabinet approval soon on the proposal to sell over 100 operational toll road projects to sovereign and pension funds that will garner at least $7.7 billion.

The road transport and highways ministry has lined up as many as 104 toll road projects to be sold to pension and sovereign funds for operations and maintenance for a fixed long-term period against an upfront value.

“We are hopeful of the Cabinet approval soon on the proposal to sell these 104 operational toll road projects to pension and sovereign funds," a top Road Transport and Highways official told PTI.

Bihar to join UDAY scheme tomorrow

Bihar will become the sixth state tomorrow to formally join the UDAY scheme meant for revival of debt-ridden power distribution utilities.

According to a statement by the Power Ministry, the tripartite Memorandum of Understanding (MoU) for joining the scheme will be signed by Power Secretary of Bihar, representatives of discoms and the ministry here in the capital.

Jharkhand, Chhattisgarh, Rajasthan, Uttar Pradesh and Gujarat have already inked the memorandum of understandings (MoUs) for joining the scheme.

Discoms across the country have an accumulated debt of over Rs 4.37 lakh crore.

The Ujwal Discom Assurance Yojana (UDAY) has been launched to improve financial and operational efficiencies of power distribution companies (discoms).

Hit by $16 bn pay panel hike, FM Jaitley may cut capex in Budget 2016

A $16-billion pay rise for India’s public servants and costly food and farm programmes could force the country's finance minister to cut capital spending in its annual Budget, officials and economists say.

The spending pressure on finance minister Arun Jaitley threatens to worsen imbalances in India's $2 trillion economy as consumption outpaces investment, undermining Prime Minister Narendra Modi's promise of better jobs for its 1.3 billion people.

A populist budget, ahead of assembly elections in four states this year, could stoke inflation even as structural measures such as Modi's proposed tax and labour reforms look less likely.

It could also eat into capital spending needed for railways, roads, ports and power projects, seen as vital to India's integration into the global economy.

"It is not going to be a revolutionary or inspirational (budget) ... given the spending pressures," said Shilan Shah at Capital Economics. "It is most likely to lead to a sell-off in the bond market if the salary increase is implemented."

Jaitley presents his third budget on February 29 and is expected to implement the recommendations of a government commission to raise pay for 10 million federal government workers and pensioners by 23.5%.

[NRao]

The Chinese threat to Indian embroidery

China is a threat to everyone.

[NRao]

How 'black money' saved the Indian economy

[Aditya_V]

Black money saved the British Banks than India

[ShauryaT]

Banking Sector
Reforms in India

While the public sector banks could be criticised for their relatively lower productivity and
profitability, they are a strong factor for providing much needed stability in the financial system.
Private bank dominated systems have seen banking sector crisis with monotonous and costly
regularity.

The cost of recapitalising PSBs, estimated at 0.025% of the GDP is far lower that 1-3%
of GDP that it has cost to bail out the banking systems after each of the 110 crisis in 80 countries..
 Cleaning up of the bank balance sheets is essential and urgent to boost growth in coming years.
High NPAs will squeeze the lending capacity of the banking sector and economic growth would
be hampered.

A system should be put in place where a fund manager, appointed by the government, will be
mandated to actively manage the PSB stocks held by the government. The fund manager can sell
limited stocks from time to time that can be used for recapitalisation of these banks. This will
lower pressure on the exchequer and eliminate the use of taxpayers’ money to bail out banks.

 There should be some kind of incentive that prevents misuse by the recaptialised banks of fresh
capital infused by the Government.

 List of large wilful defaulters should be announced. Exemplary punishment to a few large
defaulters is necessary to drive home the point that nobody can flout the rules for self-benefit.

 As legislative changes are not easy at this stage, so productivity of PSBs needs to be improved
under the current statutory structure. Steps must be taken to empower PSB boards, give more
autonomy in recruitment process, allow hiring of external talents, separate board and
management, customise HR, IT schemes, and most importantly reduce government interference.
 Within the PSB universe, State Bank of India (SBI) has been outperforming its peers in the PSBs
and its performance is almost comparable to new private sector banks. The best practises of SBI
can be replicated in other nationalised banks.

 The presence of RBI directors in PSB boards should be discontinued. Regulators should not be
members of commercial bank boards

 Appointment process of regulators should be revamped and made more transparent. Instead of
just appointing retired government officials, emphasis should be on selecting someone with
appropriate domain knowledge.

 In order to increase the reach of banks, there is an urgent need to enable “on tap” applications for
banking license and also a need for transparent mechanism with high standards. As we are
desperately short of banks, a limited window to hand out licenses is not a good policy and is poor
economics. The RBI Governor has himself acknowledged the need to move to a rolling acceptance
of applications. Moreover, RBI's rejection of bank applications without any hearing and without
stating any reasons is both non-transparent and against the rule of law, as no recourse is left for a
person to file a review of such a decision which has big implications not just for the bank
applicants but for the economy in general. A clear standard, backed by a transparent and open
decision ought to take its place.

[Suraj]

Investment proposals in reverse gear

During the year, proposed investment in the industrial sector was Rs 3.11 lakh crore, down 23 per cent from Rs 4.05 lakh crore the previous year (2014). In 2010, it was Rs 17.36 lakh crore, according to data from the Department of Industrial Policy & Promotion (DIPP).

While the number of proposals inched up by eight per cent to 1,990 in 2015, from 1,843 the previous year, it was the second lowest in more than 10 years - suggesting lack of investor confidence among investors in taking up large, high-value projects.

Actual investments were down one per cent to Rs 77,972 crore in 2015, from Rs 78,747 crore the previous year.

Maharashtra got the highest actual investments, worth Rs 18,854 crore, followed by Madhya Pradesh (Rs 17,277 crore) and Karnataka (Rs 13,780 crore).

In Gujarat, actual investments were down to Rs 5,991 crore, about a third of Rs 15,478 crore in 2014.

A senior DIPP official told Business Standard actual investments being more or less stagnant over the past two years could be attributed to persistent deflation.

At the Make in India Week in Mumbai last week, investment commitments worth Rs 15.2 lakh crore were secured, with host state Maharashtra alone accounting for Rs 8 lakh crore.

Domestic investments data, however, painted a contrasting - and glum - picture, even as the government is trying to increase the share of manufacturing to 25 per cent of gross domestic product by 2022. At present, it is 17 per cent.

Gujarat accounted for the highest share of industrial investment proposals in value terms, up 20 per cent from last year's nine per cent. It got investment intentions worth Rs 64,733 crore in 2015.

Chhattisgarh, Maharashtra and Karnataka follow with shares of 11.7 per cent, 10.7 per cent and 10.1 per cent, respectively. Maharashtra got the highest number of proposals at 349. Proposed investments are based on the Industrial Entrepreneurs' Memorandum (IEM), filed by investors, and industrial licences and letters of intent issued by DIPP.

GoI brings power to 5537 villages so far this fiscal year

The government said Monday 5,537 villages have been electrified in the current fiscal till date under the Deen Dayal Upadhyaya Gram Jyoti Yojna (DDUGJY).

"258 villages have been electrified across the country during previous week (February 15-21, 2016) under the Deen Dayal Upadhyaya Gram Jyoti Yojna (DDUGJY)," the Ministry of Power said in a statement.

Out of these electrified villages, 120 belong to Odisha, 64 Jharkhand, 41 Assam, 19 Madhya Pradesh, 8 Rajasthan, and 6 Chhattisgarh, it said.

"In 2015-16, 5,537 villages have been electrified till date. Out of the remaining 12,915 villages, 9,026 are to be electrified through grid and 3,381 through off-grid where grid solutions are out of reach due to geographical barriers, (among others)," it said.

In view of Prime Minister Narendra Modi's address to the nation on Independence Day last year, the government had decided to electrify 18,452 villages within 1,000 days i.E. By May 1, 2018.

[SwamyG]

How black money saved India
BRF thought about this too a few years ago.

Blast from the past: http://forums.bharat-rakshak.com/viewto ... 63#p998563

[Austin]

India's Fiscal Metrics to Remain Weaker Than Peers: Moody's

http://profit.ndtv.com/news/budget/arti ... ome-latest

[Suraj]

It would be very interesting to see the list of countries whom they consider peers, because everyone from China to Brazil to Russia has their own significant frailties right now - arguably much greater than ours.

[Hari Seldon]

>> All India Radio News ‏@airnewsalerts 1h1 hour ago
Cabinet approves removal of surcharge, service charge, convenience fee on card and digital payments.

Interesting. Does this apply to Rupay alone or also to the visa/mastercard types?

[Prasad]

Would this now affect the "minimum purchase of rs 200 beku saar"?

[SaiK]

http://swarajyamag.com/economy/india-mu ... -just-fine

India Must Not Chase A Mirage Called Tax-GDP Ratio. The Ratio Is Just Fine

ok?

[Kakkaji]

Well, what do you know?

Land acquisition pace up after enhanced compensation: Nitin Gadkari

"People are queuing up to offer their land for highway projects after enhanced compensation. In fact enhanced compensation in the RFCTLARR Act has proved a boon in disguise," Road Transport, Highways and Shipping Minister Gadkari said at a TV programme here.

Gadkari said in rural areas the farmers were getting four times of the earlier compensation while in urban areas it was twice of the previous fixed compensation.

The move will lead to rolling out projects worth crore of rupees embroiled in about 2,000 cases.

The minister said of the 9.8 lakh crore of NPAs of the banks, 3.8 lakh crore belonged to the road sector but a series of meetings led to rolling out of these stuck projects.

He said the government could slightly miss the target of building 30 km of road a day this fiscal but was trying hard to achieve it.

The present road building pace is 18 km a day. He said the target to award projects for 10,000 km will be achieved.

[SaiK]

here, a good article although appears half-cocked
http://swarajyamag.com/economy/how-modi ... him-growth

[Virupaksha]

Would this now affect the "minimum purchase of rs 200 beku saar"?

short answer: no because it doesnt affect transaction costs.

that is not because of taxes but because of the ~1-3% cut of mastercard/visa and the banks. For small transactions, if you include the notional transactional costs (time taken by the shop keeper to service, tallying etc etc) - it becomes a loss. So shop keepers ask for minimum purchases.

On the other hand, it violates their contracts with mastercard/visa/banks. The long license form which all these shop keepers sign include a clause prohibiting them to put minimum purchases. Infact these mastercards/visas ask for higher percentages at lower levels (they have transaction costs as well eg:database,insurance etc ).

[Virupaksha]

Well, what do you know?

Land acquisition pace up after enhanced compensation: Nitin Gadkari

"People are queuing up to offer their land for highway projects after enhanced compensation. In fact enhanced compensation in the RFCTLARR Act has proved a boon in disguise," Road Transport, Highways and Shipping Minister Gadkari said at a TV programme here.

there is a trick here. though price applies the procedural blocks do not apply to roads/railways etc because they are straight line projects.

[Supratik]

Correct. This is a infra project and hence not covered by other provisions of the new LA act.

[hanumadu]

Correct. This is a infra project and hence not covered by other provisions of the new LA act.

I think it is more about public or private projects than infra or not. Infra and irrigation projects that are private projects will still need the 80% approval and Social Impact Analysis.

[Hari Seldon]

^Didn't NDA govt agree to accept state-wise changes and customizations to the LAB? That blunts much of the damage in the immediate term, at least.

[Supratik]

I haven't seen news of any progress on that by the states. Not sure what is happening on that front.

[JohnTitor]

Would this now affect the "minimum purchase of rs 200 beku saar"?

card payments system in the west works on the following principal:

merchant ->acquirer -> scheme -> issuer (who authorises payment) then the process goes the other way round and payment is made to the merchant. Each agent in that list (other than the merchant) charges a commission. In the UK, the total commission adds up to 2% on average i.e. if you paid 100 to the merchant, he only gets 98. However, the total amount is dependent on various things. Including merchant turnover, acquirer turnover etc

RuPay/Visa etc are all schemes. So while Rupay may not charge their bit, I'm pretty sure other acquirers & issuers will continue to do so. At the end of the day, from a merchant's perspective, they make more money. They are unlikely to pass this on to the consumer.

Also, acquirers generally charge a higher % on credit cards than on debit cards (usually fixed at a few paise irrespective of transaction amount).

In conclusion, "minimum rs 200 beku saar" will continue.