Indian Economy News & Discussion - Aug 26 2015

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Singha
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Singha »

NDTV

MUMBAI: In perhaps the biggest pan-India sale of land, over 4,700 acres held by the Sahara Group across 14 states have been put on the block by HDFC Realty and SBI Capital Markets. The sale is expected to fetch around Rs 6,500 crore.
Sahara claims it has a total land bank of 33,633 acres. Of this, Aamby Valley City near Lonavala accounts for 10,600 acres. About 1,000 acres is spread across towns and cities of Uttar Pradesh (the company is headquartered in Lucknow).
Early this month, the Supreme Court released Sahara chief Subrata Roy and group director Ashok Roy Choudhary on parole for four weeks. Roy has been in Tihar jail since March 2014 after Sebi dragged the group to court. The court said Sahara could sell its properties to raise Rs 5,000 crore as a bank guarantee and another Rs 5,000 crore to get bail.
Market regulator Securities and Exchange Board of India (Sebi) has given HDFC Realty and SBI Capital Markets the mandate to auction 60 properties across the country following a directive from the Supreme Court.
The auctioneers are hopeful of receiving over Rs 6,500 crore from the 60 properties. However, market sources pointed out that large chunks of the land are agricultural and are located in rural areas, which could affect the amount eventually raised.
Neela
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Neela »

Can some explain why the new insolvency laws make doing business easier.
JTull
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by JTull »

Neela wrote:Can some explain why the new insolvency laws make doing business easier.
Here are the first two results from google:

http://blogs.wsj.com/briefly/2016/05/12 ... rt-answer/
http://indianexpress.com/article/india/ ... t-markets/
Hari Seldon
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Hari Seldon »

Something wrong with this image. So PRC's 2030 urban consumption spans $10 trn among working age + retired segments but ...

... even by 2030, India's (South asia's, actually) urban consumption is < $2 trn? Really?

Image
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Neela »

JTull wrote:
Neela wrote:Can some explain why the new insolvency laws make doing business easier.
Here are the first two results from google:

http://blogs.wsj.com/briefly/2016/05/12 ... rt-answer/
http://indianexpress.com/article/india/ ... t-markets/
thanks.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Suraj »

End of May means Jan-Mar GDP data is out. Growth was above estimates for the quarter and full year, and over 1% higher than PRC at 7.9% vs 6.7%:
GDP growth at 7.9% in Q4FY16, full 2015-16 GDP growth at 7.6%, above forecasts
India's economic growth accelerated to 7.9% in the three months through March from a revised 7.2% in the previous quarter, government data showed on Tuesday.

Analysts polled by Reuters had forecast annual growth of 7.5 percent in the quarter.

For the 2015/16 fiscal year ending in March, growth came in at 7.6%, in line with the official estimate. Growth was 7.2% in 2014/15.

Economy finally grew 7.5% in the first quarter of 2015-16, as against 7.6% projected in advance estimates, while the second quarter saw the growth again falling to 7.6% as compared to 7.7%, and the third quarter at 7.2% as against 7.3%.

"Momentum is building up faster than anticipated, and there is demand pick-up in the horizon. This definitely spells out a positive story that there will soon be a recovery in private sector capex," said Shubhada Rao, chief economist, YES Bank.

India's upbeat outlook contrasts with neighbouring China, where growth slipped to 6.7% in the first quarter - the slowest posted by the world's second largest economy in seven years.
Spending measures are frontloaded - expenditures announced at start of year, revenue collected over whole year:
At Rs 1.37 lakh crore, April fiscal deficit crosses 25% mark
Fiscal deficit in April came in at Rs 1.37 lakh crore, which is 25.7% of the Budget estimate for 2016-17.

By definition, the fiscal deficit is the gap between expenditure and revenue, which for the whole fiscal has been pegged at Rs 5.33 lakh crore.

The deficit in April last fiscal was 23% of the Budget estimate.

For 2016-17, the government has set a fiscal deficit target of 3.5%.

According to data released by the Controller and Accounts General, total expenditure of the government in April read Rs 1.61 lakh crore, or 8.2% of the full-year estimate.
Govt bullish on farm sector growth on hopes of good monsoon
India will "definitely" see higher foodgrain output and overall growth in the agriculture sector in case the IMD prediction of a good monsoon "comes true", Agriculture Minister Radha Mohan Singh said on Tuesday.

Due to two consecutive drought years, the country's agriculture growth remained at 1.2% in 2015-16, while it was negative at 0.25% in the previous fiscal.

India Meteorological Department (IMD) has forecast above normal south west monsoon rains for this year, which will boost planting of kharif crops like paddy from next month. IMD has also said arrival of monsoon will be delayed by a week.
Core sector growth accelerates to 8.5% in April
Growth in the eight core sectors jumped to 8.5% in April due to sharp pick-up in refinery products and a commensurate rise in electricity generation. The index had grown by 6.4% in the previous month of March.

According to the data released by the Ministry of Commerce and Industry on Tuesday, growth in the eight core industries - coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity - comprising nearly 38% of India's total industrial production had fallen by a marginal 0.2% in the same period of the previous year.

Refinery products, which have steadily grown since December, 2015, witnessed a jump in production in April, rising by 17.9%. It had grown by 10.8% in March.

The same trend has been seen for electricity generation, which continued to rise for the fifth straight month, rising 14.7%. In March, it had also risen by 11.3%.

In March this year, fertiliser production jumped by 22.9% followed by cement at 11.9%.

However natural gas continued to fall by the highest margin at 6.8% followed by crude oil at 2.3%. The same sectors had also dipped last month.

Growth in cement and fertilizers have however slowed down considerably. While fertiliser generation rose by 7.8% in April, after posting a major growth of 22.9% in March, cement production also fell from 11.9% to 4.4%.
India's per capita income rises 7.4% to Rs 93,293 in FY16
The country's per capital income increased 7.4 per cent to Rs 93,293 in 2015-16 from Rs 86,879 in the previous financial year, official data showed on Tuesday.

"The per capita income at current prices during 2015-16 is estimated to have attained a level of Rs 93,293, compared with the First Revised Estimate for the year 2014-15 of Rs 86,879 showing a rise of 7.4 per cent," the official statement said.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Santosh »

Per Wiki, India's nominal GDP at the end of FY 2015-16 is $2.40 trillion. During FY 2015, France's GDP per Wiki was $2.42 trillion. Next year, India will likely surge ahead of France as the world's sixth largest economy and may overtake UQ's $2.8 trillion by 2020 to become the fifth largesy economy. I can't wait.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Suraj »

We will probably overtake UK this year if exchange rates remain stable. The growth rate differential is that high.

Meanwhile, this Bloomberg article demonstrates how the partiality towards Rajan is driven by western bond funds, though they are split on his importance. PIMCO suggests that growth momentum is strong enough for RRs presence or absence to be irrelevant, while WAM indicates a preference for his presence.
Pimco Says India Growth to Lure Investors as Rajan Fate in Limbo
Pacific Investment Management Co. says the growth trajectory and financial health of India’s economy will support rupee bonds regardless of who helms the central bank.

While Reserve Bank of India Governor Raghuram Rajan has had a “notable” influence in stabilizing the rupee, there’s also been a broader improvement in the nation’s finances, according to Luke Spajic, head of portfolio management for emerging Asia at Pimco, which oversees about $1.5 trillion in assets globally. Speculation around Rajan’s future has amplified since a member of Prime Minister Narendra Modi’s ruling party called for him to be dismissed when his three-year term ends early September.

“Currency stability and country performance are really based on better economic fundamentals,” Singapore-based Spajic said in a phone interview. How any change at the RBI’s helm will impact the rupee is a “very difficult assessment to make,” he said.

Global funds including Western Asset Management Co. aren’t comfortable with the prospect of losing Rajan, who boosted India’s foreign-exchange reserves to all-time highs and helped cut rupee swings by more than half since taking office. Even so, Modi’s government has been instrumental in narrowing the current-account deficit by curbing gold imports, while seeking to reduce bureaucracy, accelerate infrastructure construction and limit the budget shortfall to nine-year low.
Image
The reason they support Rajan is that he significantly expanded a program where foreign funds acquired Rupee-denominated government and corporate bonds:
Indian bonds, rupee gain on hike of foreign debt investment limits
India's 10-year benchmark bond and the rupee gained on Wednesday after the central bank said it would allow foreign investors to buy up to 275 billion rupees ($4.14 billion) in additional sovereign debt next month as part of its plan to gradually raise debt investment limits.

Gains also tracked higher regional markets following comments from Federal Reserve chair Janet Yellen calling for caution in raising U.S. interest rates.
The reason Rajan has external support is that there's a lot of foreign money tied up in *rupee-denominated* bonds, and for their own reasons they see him as an effective steward of interest and inflation rates to manage those holdings, i.e. benign inflation and stable or falling rates. Bonds get killed when rates rise sharply.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Singha »

Santosh wrote:Per Wiki, India's nominal GDP at the end of FY 2015-16 is $2.40 trillion. During FY 2015, France's GDP per Wiki was $2.42 trillion. Next year, India will likely surge ahead of France as the world's sixth largest economy and may overtake UQ's $2.8 trillion by 2020 to become the fifth largesy economy. I can't wait.
I have been waiting patiently for that day since the day I joined BRF around 1998! have seen my share of false dawns when Re devaluated heavily against the euro. need to not just cross them but open a 500b gap to take care of rate fluctuations and any bad years.

then it will be time to take care of the germans. jawohl herr oberst :mrgreen:
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by schinnas »

If Rupee appreciates (or atleast stop depreciating at 8% per annum to USD) we will overtake UK comfortably before 2020 and be a > $3 Trillion economy by that time.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by habal »

Can someone tell me why rupee depreciates with clockwork precision every year ?

China can manage 10 times the trade volumes with USA @ 12Yuan/$ but India needs to peg somewhere near 67 to make eke out a slight advantage in trade with USA. Are Indian fundamentals so weak that we need to slant the playing field so steep that some desi companies can make a proposition to do successful trade with US. As with everything else, real info is hard to come by.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by JTull »

habal wrote:Can someone tell me why rupee depreciates with clockwork precision every year ?

China can manage 10 times the trade volumes with USA @ 12Yuan/$ but India needs to peg somewhere near 67 to make eke out a slight advantage in trade with USA. Are Indian fundamentals so weak that we need to slant the playing field so steep that some desi companies can make a proposition to do successful trade with US. As with everything else, real info is hard to come by.
There are several contributing factors, few of which are here:
1. Inflation in India is higher than $ (the currency against which all other currencies are quoted). So, value of a Re 1 will depreciate versus $.
2. India is a net-importer (China is a net-exporter). This implies we need to sell Rs and buy $ to be able to purchase the goods from overseas. This has a negative effect on Re versus $. Situation is better with Crude oil prices lower than before.
3. Although long-term capital flows (FDI and NRI repatriations - excludes portfolio investments such as in the Indian debt and equity markets which will be repatriated quickly) are not sufficient to overcome the deficit as above.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Suraj »

The rupee weakens progressively because of multiple factors. The main ones:
* We have run a chronic current account deficit for ages. This means we import more than we export. We have to pay for the excess imports by attracting capital through various channels, i.e. foreign investment and remittances. In order to invest, foreigners must find things cheap and profitable enough. The equilibrium here is a progressively weakening rupee since each year the balance of imports-exports needs to be made up by attracting capital and a weakening Rupee enables that. China on the other hand, runs record surpluses; their exports far exceed imports.
* Chronic high inflation. Erodes purchasing power. More and more rupees in circulation compared to the amount of dollars transacting with the rupee. This leads to several more things, including higher interest rates. High inflation means governments issuing debt have to provide high coupon rate, otherwise those bonds won't find takers. Higher interest rates can theoretically draw in more capital, but this in turn can lead to inflation because it is not backed by sufficient productive activity, and simply gets translated to more and more rupees circulating.

Essentially the first step in fixing this situation is to reverse the current account deficit. For this, an industrial base needs to generate enough excess production such that exports can exceed imports. The Make In India push deals with this, in addition to generating greater employment in the process.
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Re: Indian Economy News & Discussion - Aug 26 2015

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RBI chief Raghuram Rajan wins over PM Modi despite broad mistrust
NEW DELHI: In late 2014, the knives were out for RBI governor Raghuram Rajan.

Finance ministry officials were frustrated by his reluctance to cut interest rates to stimulate growth, and moves were afoot to ease him out of the job. Some were airing their reservations about Rajan's hawkish stance in the media.

Prime Minister Narendra Modi convened a meeting of senior finance ministry staff that December to hear their complaints, said a person who was present.
At the end, the leader delivered a stern message: do not indulge in a public spat with the central bank.

The moment marked a turning point in ties between the heads of the newly installed government and the Reserve Bank of India. Since then, Modi and Rajan have developed a close working rapport, government officials and people close to the governor say, and that could be crucial to the $2 trillion economy.

With Modi's patronage, it is more likely the government will reappoint Rajan, whose three-year term expires in September, should he wish to stay on, the sources said.
That would allow him to try to revive India's banking sector that has been smothered by distressed debt, which, in turn, is choking off economic recovery.

"Rajan will get another term and he will accept it," said Arvind Mayaram, former finance secretary who Rajan worked with closely first as the government's chief economic adviser and then as RBI governor. "He is well entrenched in India's political economy."

A top government official said the decision rests with Modi and the leader has not yet said what he wants to do. Modi recently told The Wall Street Journal that Rajan's reappointment would come up only in September.

The official, speaking anonymously because he was not authorised to discuss the matter with the press, added that the Prime Minister was "proud" of the RBI governor and that a campaign against Rajan would not affect Modi's decision.

The Prime Minister's office and finance ministry did not respond to requests for comment. Rajan, former chief economist at the International Monetary Fund, has not disclosed his plans, and did not respond to requests for comment for this article.

Modi's support is key

Modi's support would be important if the 53-year-old RBI chief is to get the big state banking sector to complete a cleanup of massive debts and force defaulters to pay up.
Banks making provisions for bad debt are reluctant to issue new loans, leading to criticism within the sector and complaints from smaller businesses and politicians.

Patronage from above will also help shield Rajan from lingering opposition within the ruling Bharatiya Janata Party (BJP) to a man known for his straight talking and willingness to question government policy and achievements.

As the personal understanding between Rajan and Modi appears to grow, some officials still resent him.

The fact that Rajan was appointed by the previous Congress government did not help him win friends in Modi's BJP, and the former University of Chicago professor has been viewed by some with suspicion as a product of the West, not India.

BJP parliamentarian and economist Subramanian Swamy, one of those leading a campaign to remove Rajan, recently accused him of "wilfully and deliberately wrecking the Indian economy."

The governor's penchant for blunt commentary raises hackles.

Rajan's appeal for tolerance late last year was perceived to be a veiled criticism of the government for appealing to the Hindu majority at the expense of minority communities, prompting Swamy to rebuke him for speaking like a "grandfather".

Rajan recently compared India's fast-growing economy to a "one-eyed king in the land of the blind". Trade minister Nirmala Sitharaman publicly censured his comments.

Bonhomie

The first signs of growing bonhomie between Modi and Rajan came early last year, when Modi called Rajan the "best teacher" for explaining complex economic issues to him.
Days later, the governor returned the compliment, saying the teaching went both ways.

The Prime Minister backed Rajan in the monetary policy panel's composition and blocking moves to strip the RBI's authority to regulate government bonds and manage public debt.
Modi's office also directed the finance ministry to pursue only those policies where there was agreement with the central bank, a former finance ministry official said.

The governor frequently visits New Delhi to meet Modi, a government official with direct knowledge said. But their meetings are mostly kept away from the public gaze.

Modi's office declined a request to disclose the number and details of the meetings, saying the information relates to "economic interest of the state".

Rajan had help from junior finance minister Jayant Sinha, a college friend and one of the more influential economic voices in the Modi government.

At the December meeting, Sinha told the attendees that the clashes were undermining the government's credibility, the person present said.

A government source said that Sinha also facilitated meetings between Rajan and Modi to broker a compromise on thorny issues such as the composition of the new monetary panel. Sinha did not respond to a request for comment.

Learning on the job

Rajan may prove a more effective governor second time around if he gets the chance, say some RBI insiders and economists.

Although he fended off a market attack on the rupee early in his tenure, bankers, economists and his former colleagues said he was relatively slow to grasp how liquidity flows through the economy and how to fine tune it to meet his primary policy goal of taming inflation.

Under Rajan, the RBI forced banks to source limited short-term funds from cash-for-bond auctions rather than getting unlimited funds from the central bank at a fixed rate.

Banks complained the new system was forcing up costs and hampering the transmission of rate cuts to the real economy, said several bankers privy to the discussions with the RBI.

At first, Rajan publicly dismissed their concerns as "nonsense". It was only after 16 months of pleading by banks that he finally revamped the RBI's liquidity management in April, the bankers said.

A second stint is likely to see a more accomplished operator as the RBI tackles bank debt, tries to develop the bond market as a viable source of funding for companies and switches to a Western-style approach to decision making.

A new monetary policy panel will be formed later this year to set interest rates, something Rajan favoured to make the RBI more independent and introduce transparency to the process.

In a key victory for Rajan, draft legislation from the finance ministry that would have allowed the government to appoint more than half of the panel's members was amended to split it evenly between government and RBI nominees.

Rajan will get the casting vote in the case of a 3-3 split.

Those who have worked with Rajan said his people skills and powers of persuasion will give him a big say on setting rates.

"Why rock the boat?"

Rajan continues to be lionised by foreign investors whose funds are needed to keep the economy motoring ahead.

That was key in convincing Modi to defend him, while two off-cycle interest rate cuts in January and March last year also acted as a balm, a senior minister in the federal cabinet said.

The country has been ravaged by drought in the last two years and not enough jobs are being created to accommodate its rapidly expanding workforce, but India is the world's fastest growing major economy and inflation is half what it was in 2013.

"The combination of Modi, (Finance minister Arun) Jaitley and Rajan are delivering on the macro front," said Gita Gopinath, an economics professor at Harvard University who knows Rajan well. "I really don't see any reason to rock the boat."
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Yagnasri »

Media drama on this issue will continue till August. My gut feeling is R3 will not get fresh term. In fact, this kind of media drama by his supporters will only end up harming his case for a fresh term.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by JTull »

@habal, @Suraj

The biggest problem India faces in expanding it's investment in infrastructure is high interest rates. These high costs of borrowing could force India govt to run high deficit which is unsustainable. That's why private sources of investment are needed. By taming inflation, India can reduce the interest rates. While in the short-term savers would complain, but country would be able to borrow more. Rajan's CPI linked rate target is crucial to India's growth. For example, in last 3 years 10 year yield on Indian govt bonds has gone down from 9.24% to 7.48%. That's almost 20% reduction in interest servicing requirements from our budget (on any freshly issued bonds).
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by habal »

If much of this import is due to capital expenditure, (expenditure on capital a/c with respect to machinery, plants) then it would be net positive. But I feel that is not the case, I think much of this imports ($ outflow) is due to funds borrowing by Indian corporates from foreign funds and their interest outflow. Indian pvt sector did get into a lot of poor habits by second half of UPA regime. Hopefully they will not land up India in a Greece type of situation.

Also India's cheap fuel import source of Iran has been shut down, Iran now charges global prices. This probably adds to deficit.

>> high cost of borrowing .. aka high interest rates .. imagine a lot of Indians will go pauper overnight if their interest rates (on deposits) are taken away. I predict a future where Indian interest rates will hover around 2% (a full 1% higher than US) and cost of petroleum will be highest in the world despite being next door to Middle East. This will be the completely enlightened, and 'liberalised' India. Policies by themselves are not going to uplift India to EU level, we need some game-changing stuff to happen here.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Yagnasri »

From all the reports NM is not someone who is proud of anyone. Yet UPA time babu Mayaram speaks like this.
http://indiatoday.intoday.in/story/modi ... 82381.html
There is no first-hand information as to the present opinion of NM on R3. In fact, there are not many who knows what NM thinks of anyone. Rupee fell ( GOK for that reason) as R3 does not want it even though NM wants it as per ABP ( Con Mafia mouthpiece)
http://www.bloomberg.com/news/articles/ ... -estimates
Pappu is becoming the BOSS.
http://www.india.com/news/india/rahul-g ... e-1152777/
http://www.india.com/news/india/will-co ... t-1228311/
http://blogs.tribune.com.pk/story/34852 ... ks-vision/
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Patni »

habal wrote:Can someone tell me why rupee depreciates with clockwork precision every year ?

China can manage 10 times the trade volumes with USA @ 12Yuan/$ but India needs to peg somewhere near 67 to make eke out a slight advantage in trade with USA. Are Indian fundamentals so weak that we need to slant the playing field so steep that some desi companies can make a proposition to do successful trade with US. As with everything else, real info is hard to come by.
I will take a stab at trying to answer, The relative strength or weakness of a currency is based on its external trade balance and also its spot demand. If India export more then it imports or attracts lot of FDI in $$ then yes it will start to appreciate, but RBI will issue bonds to wrap up excess demand for INR when that happens and thus prevents too quick appreciation if a particular is net inflow positive. Historically till late 80's INR pegging managed at about 7 to 8 INR to one USD by strict control over who is allowed to buy $$. We never produced any goods or service that was in demand elsewhere other then organic produces mostly. All that is starting to change in last few decades but we always had huge current account deficit and hence need for heavy borrowing that devalues INR. RBI is mandated with keeping a check on wild gyrating of currency rate and slow and steady devaluation is done in step with our external debt and balance of payment needs.

Disclaimer: Not an economist or even in finance sector so guru's can correct me if i am wrong.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by jagga »

India's current account deficit may swing to surplus in Q1 2016: Nomura
India's current account deficit (CAD) is likely to swing to surplus in the January-March period of this year amid lower oil and gold imports, says a Nomura report.
The current account balance is expected to record a surplus of around $3 billion (0.6 per cent of GDP) in January-March period of 2016 from a deficit of $7.1 billion (1.3 per cent of GDP) in the October-December quarter of 2015.

"This is largely seasonal in nature, but is also helped by lower oil and gold imports," Nomura said in a research report, adding if this materialises, it would be the first quarterly surplus in nine years.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by hanumadu »

This must be the surest indication that the govt and industry think India has good growth prospects for the next couple of decades. But how are we going to produce steel at a lower cost than China to stop the imports? Also, the steel should be high quality and high end steel to give domestic steel producers protection against cheap steel from elsewhere and room to adjust the prices and yet be profitable.

We are talking about Chinese rate of construction with that kind of steel.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by arshyam »

Can we block China from dumping steel in our markets? I understand there are WTO provisions against protectionism, but surely there are others for dumping? China will be looking to dump a lot of many commodities due to its enormous overcapacities - cement, steel, etc. We need to protect our industries from their nefarious activities as also to not widen the trade deficit.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by JTull »

arshyam wrote:Can we block China from dumping steel in our markets? I understand there are WTO provisions against protectionism, but surely there are others for dumping? China will be looking to dump a lot of many commodities due to its enormous overcapacities - cement, steel, etc. We need to protect our industries from their nefarious activities as also to not widen the trade deficit.
China is not a WTO member, so anti-dumping duties can be imposed without being referred to WTO.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Suraj »

habal wrote:If much of this import is due to capital expenditure, (expenditure on capital a/c with respect to machinery, plants) then it would be net positive.
It doesn't matter. If you run a CAD (almost) every year, all else being the same, your currency will be under pressure to keep declining. Sure, importing capital goods like machinery is better than importing finished goods, but if we need to attract investment to bridge the trade deficit, it happens by weakening the currency to make investment attractive.

Last two quarters, we're running almost breakeven or a surplus because the oil basket is much cheaper right now. I would really like to see the day when we run a merchandise trade surplus. We run a constant services trade surplus of ~$60 billion, but that surplus is less than the merchandise trade deficit of ~$100 billion, so there's a net trade deficit of ~$40 billion.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Suraj »

JTull wrote:@habal, @Suraj

The biggest problem India faces in expanding it's investment in infrastructure is high interest rates. These high costs of borrowing could force India govt to run high deficit which is unsustainable. That's why private sources of investment are needed. By taming inflation, India can reduce the interest rates. While in the short-term savers would complain, but country would be able to borrow more. Rajan's CPI linked rate target is crucial to India's growth. For example, in last 3 years 10 year yield on Indian govt bonds has gone down from 9.24% to 7.48%. That's almost 20% reduction in interest servicing requirements from our budget (on any freshly issued bonds).
The cost of capital is a reflection of consistently poor fiscal management. GoI runs a budget deficit, which it funds by issuing debt. It requires banks to explicitly hold a fraction of their deposits in govt debt, i.e. the statutory liquidity ratio (SLR) which is around 22-25% . In other words banks have to hold a quarter of the deposit base in govt bonds. The rest of the base is available to lend out. The result of this crowding out is that interest rates remain high. The high deficit leads GoI to print more money to pay down its debts using inflation. Anyone remember the lower end paise coins anymore ? Do they even exist in regular use ?

Lowering the fiscal deficit is therefore an important goal towards lowering long term interest rates and preventing GoI from crowding others out of the banking sector. One of the recent thrusts has been foreign ownership of GoI debt. It might surprise many, but in the last year or so, foreign ownership of Rupee-denominated government and corporate debt has increased. There are RBI caps on how much can be held by foreign entities, and it has been repeatedly breached as more and more FII money goes into bonds rather than into Dalal St:
Global funds turns to Indian corporate bonds as sovereign cap reached
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Suraj
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Suraj »

JTull wrote:
arshyam wrote:Can we block China from dumping steel in our markets? I understand there are WTO provisions against protectionism, but surely there are others for dumping? China will be looking to dump a lot of many commodities due to its enormous overcapacities - cement, steel, etc. We need to protect our industries from their nefarious activities as also to not widen the trade deficit.
China is not a WTO member, so anti-dumping duties can be imposed without being referred to WTO.
China has been a WTO member since 2001. Everyone is imposing steel dumping duties on them, including the US.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Gyan »

JTull wrote:
arshyam wrote:Can we block China from dumping steel in our markets? I understand there are WTO provisions against protectionism, but surely there are others for dumping? China will be looking to dump a lot of many commodities due to its enormous overcapacities - cement, steel, etc. We need to protect our industries from their nefarious activities as also to not widen the trade deficit.
China is not a WTO member, so anti-dumping duties can be imposed without being referred to WTO.
Bill Clinton inducted China into WTO in exchange for services of Ms Lin
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by hanumadu »

arshyam wrote:Can we block China from dumping steel in our markets? I understand there are WTO provisions against protectionism, but surely there are others for dumping? China will be looking to dump a lot of many commodities due to its enormous overcapacities - cement, steel, etc. We need to protect our industries from their nefarious activities as also to not widen the trade deficit.
China can fight it out in WTO. It depends on India being able to prove its selling its steel below cost or being subsidized by its govt. India should be able to match China's cost. We have lower labor cost and domestic iron ore. Electricity and transportation costs may be more than the Chinese'. Its the high end and high technology steel that we should add to the mix to fight the price war.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Gyan »

I think that Sanctions can be imposed due to security considerations like USA and EU did against Russia on the pretext of Ukraine Crisis. We can also do so, on the basis of disputed border assuming there is any political will.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Supratik »

I am wondering whether the PAN card requirement and sales tax has sucked the black money out of gold leading to a fall in imports. If so good for India.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Ameet »

Can anyone shed some light on what these "discrepancies" are?


‘Discrepancies’ drive GDP growth
What would the growth rate be if the ‘discrepancies’ are left out of the GDP data? A mere 3.9, at constant prices

http://www.livemint.com/Opinion/kvvDHfb ... rowth.html
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Suraj »

CSO/MOSPI should come up with a press statement about this sometime in the near future. In the past, most of the 'these numbers don't make sense' dissipated after CSO, RBI or FinMin provided a clearer explanation of what they represent. There's a month old article that summarizes the conclusion of a long previous debate:
Revisiting the GDP debate: RBI data puts controversies to rest
With the Reserve Bank of India (RBI) finally publishing estimates of gross value added (GVA) derived from the MCA database, it is now possible to examine whether the criticism levied against the new gross domestic product (GDP) series is justified or not. Of particular interest is the rather contentious issue of just what has been driving GDP growth?

Both T C A Anant, chief statistician of India and Pronab Sen, former chairman, National Statistical Commission have argued that during this period, growth was driven largely by small and medium-sized companies. But their claims have been vehemently contested by economists.

The data released by the RBI can now finally put this controversy to rest as they clearly show smaller companies have fared better than their larger counterparts during the past few years. But doubts remain about the manner in which these estimates have been blown up to arrive at consolidated GVA estimates of non-government non-financial corporate sector.
The new GDP calculation significantly expands the scope of industries and activities tracked, and several of these have a large lag factor before clear data is available. My guess would be that 'discrepancies' are simply components that were previously underestimated until sufficient data was available, and then added to the final numbers, generating 'growth'. If this guess is right, then yes, this is not real growth, but an accounting update, and a one time boost.

However, such corrections are necessary to keep up the long term data series. CSO usually does not do a good job of explaining 'ok, so a bunch of stuff was not previously accounted for because we didn't get back the raw data about these business, but now we have them, so we just added it this quarter.' This doesn't truly constitute growth, but the overall GDP number is still accurate, or rather more accurate than before.

This is not unusual in a developing economy. Unlike a developed economy, many new business activities are coming onstream that simply did not exist before, or was tracked well before. For example, a decade ago there was hardly any of the pervasive cellphone support business that exists today. One can argue that 'the same things didn't grow 7.9%', but that's missing the point - a rapidly developing economy cannot easily make an apples to apples comparison where so many new business activities take off that didn't exist quite recently. The fact that Discrepancies has been higher in the new series means it's trying to capture a lot more activity than earlier.

For example, there was a time in the mid 2000s when Russia and China got a major GDP boost when they decided to start adding estimates of their informal economy into official GDP stats. We don't even do that yet. We could decide to do that tomorrow in order to reports stats more like them, and all of a sudden our GDP will 'grow' 30-80%, depending on whose estimate of the size of the informal and black economy you choose to believe.

Separately, Business Standard discusses why the GDP details suggest that there's still work to be done, and why the headline growth number is deceptively good:
Why India's latest GDP numbers may not be as good as they look
A matter of slight concern is the fall in industry growth and the change in trend of services sector growth. Industry has grown at a rate of 7.9% as compared to 8.6% in the previous quarter. The services sector reversed the rising trend of the previous three quarters by posting a growth of 8.7%, down from 9.1% in December quarter.

In industry, the main culprit was the sharp decline in steel production which fell by 14%, likely due to a drop in global demand and prices. But cement at 11% and power at 8.8% helped in giving some respectability to the numbers.

A key takeaway from the numbers is the growth in private consumption. Private consumption growth stood at 7.4%, despite headwinds of low employment rates and poor monsoon. Consumption in the fourth quarter improved to 7.6%, up from 7.4% in the previous quarter.

Gross value added (GVA) which is being tracked more closely than GDP by analysts has also shown marked improvement. GVA grew at 7.4%, the fastest in last six quarters. According to a Motilal Oswal report the GVA was entirely driven by agriculture sector.

GDP number has a higher than normal level of allocation to ‘Discrepancies’ which is preventing analysts from getting a fix on where the growth is coming from.

Another interesting data point is that real consumption has grown faster than real investments (except valuables), which has resulted in savings falling below the psychological 30% mark. According to the Motilal Oswal report, savings are at 29.8%).
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by gakakkad »

important thing is that Indian gdp figures were never so deeply analyzed in the past...
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Suraj »

More on the GDP 'discrepancies' line item, pretty much confirming my guess about paucity of prior data before new items were added this quarter:
The curious case of GDP discrepancies
The problem with this criticism is that it doesn't take into account the manner in which GDP is estimated in India.

"To begin with, estimates of gross value added (GVA) are arrived from the production side," says Pronab Sen, former chairman, National Statistical Commission. This implies the estimates of GVA added by agriculture, industry and services are used to arrive at consolidated estimates of GVA at the aggregate level. To these estimates, net indirect taxes - that is basically indirect taxes less subsidies - are added to arrive at consolidated estimates of GDP. There is paucity of data on a quarterly basis on the expenditure side. Relatively reliable and timely data is available only on three items, namely "government final consumption expenditure, gross fixed capital formation (GFCF) and net exports, basically exports minus imports", says Sen. Of these three items, government consumption expenditure is also not a precise estimate, as information at the state government level is not readily available.
Pretty much confirms my guess earlier. Ideally they'd restate prior quarters to account for this data, since it's not new activity as much as much as newly accounted for activity, but they can't do that effectively either, because there's no older data to begin with, so any revisions to older numbers would be guesses. IMHO, the growth rate figures are hard to compare on any QoQ or YoY basis because of new data being added in this manner, so they should be taken with some NaCl . However, the gross GDP figure is increasingly better representative of actual aggregate economic activity.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Kakkaji »

X-posting

With eyes set on next elections, Narendra Modi government steps up rural development work
NEW DELHI: With eyes set on the next general elections, the Narendra Modi government has advanced the deadlines of its rural development schemes for housing and roads from 2022 to 2019, by when it wants to connect 65,000 rural habitations through the PM Gram Sadak Yojana and construct 1 crore houses under the Pradhan Mantri Awaas Yojana — Gramin.

The rural development ministry is now tasked with constructing 2.23 lakh km of roads by 2019, funds for which have been assured by the Centre, it is learnt. The allocation for the PM Gram Sadak Yojana has been upped from Rs 14,200 crore in 2014-15 to Rs 18,291 crore in 2015-16 and Rs 19,000 crore for the current financial year. Between 2014 and 2016, 18,488 habitations were connected after construction of 72,835 km of rural roads.

For the Awaas Yojana though the challenge extends beyond financial resources to limited labour and material availability. In order to double the pace of construction of houses, the government is talking to the states to use local material, technology to meet any shortage

In 2015-16, a total of 18.27 lakh houses were constructed under the rural housing scheme. The government will have to construct around 35 lakh houses a year to meet its 2019 target. The socio economic and caste census has been used to identify close to 3 crore beneficiaries under the scheme.

The rural development ministry has already transferred Rs 23,000 crore out of the total allocation of Rs 38,500 crore to states under the National Employment Guarantee Scheme.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Yagnasri »

As per my info-
GOI has taken steps to stop steel duping by China. I think the minimum price for imports is fixed at 440$ per ton and it helped a lot. March Steel output is the largest in the history and we have over taken Japan and are now the 3rd largest steel maker.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Suraj »

We overtook US for the #3 position last year. Japan are far ahead at #2, still. See this post from a few weeks ago.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Kashi »

I have been trying to search for this but have not come across any meaningful links on this.

Did Tata's acquisition of Corus actually lead to the inflow of any high-end technology associated steel production into India? I would imagine that the erstwhile British Steel would have some know how on how to produce high tensile steel for railway tracks (as we have seen DFCC has been using extra long rails), commercial and military ship building among others. Did TATA transfer such know how into their India operations?
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Austin »

Indian Economy To More Than Double To $5 Trillion In Few Years: Jaitley

http://profit.ndtv.com/news/economy/art ... ey-1414869
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Austin »

At current pace of growth of 7-8% by which year will we reach $5 trillion GDP
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