Indian Economy News & Discussion - Aug 26 2015

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

Postby chetak » 15 Sep 2017 00:18

Katare wrote:
chetak wrote:
His CV is now worthless. He couldn't hack it and so was fired.

his professional reputation has taken a hit and folks will be asking WTF did you do in India??

He is the first RBI guv since independence not to have gotten an extension.


Chetak garu,
He is doing fine and would do great things in the future. I really don't see anything that i can hold against him. Contrary to many folk's opinin at BRF, to me he appears to be a truly patriotic son of mother India. He did great things at RBI with both the govt and we'll reap the benefits of his hard work and skills for years to come.


I'd rather wait and watch, saar.

There's something about this smug creep that just doesn't sit right.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Atish » 15 Sep 2017 02:07

RRR wanted an 8 month extension only to protect his tenure. It would have been tough to appoint him.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Karan M » 15 Sep 2017 02:23

Modi May Have Repackaged 23 UPA Schemes, But Most Are Working Better Now

https://thewire.in/176724/modi-may-repa ... etter-now/

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby vina » 15 Sep 2017 10:37

Hmm. Watched Arun Jaitley's rant on TV yesterday on when he was asked the simple question.

Petrol was Rs 80 when oil was $110 a barrel. Today Petrol is Rs 80 when oil is $53 a barrel . WHAT GIVES ?


The rant was on the lines of.

1. It is a temporary "blip" because product prices globally jumped up due to hurricane Irma in the US.
2. Taxation is "good". The govt doesn't "pocket" the taxes, but spends it on "the people" . Long list of Rural roads, sanitation, water this that etc. etc.

The TimeNow anchor didn't have the brains/cojones (that is charitable, but this was a fixed game of giving "soft balls" to Jaitley to hit out of the park), to ask the follow up questions.

1. WHY the F**k is India's product prices linked to global "product" prices, on a landed import cost basis (i.e. including freight, insurance etc), WHEN this country is a LEADING product refiner and indeed is a NET exporter. The massive reliance plant (and also essar) are totally export focused. Why are you getting the PSU refiners get a fat margin that is unearned, and WHY are you shielding them from competition . Why are you not allowing a full free market in product marketing to operate

2. Why are you doing a cost plus - import parity pricing to pad up the margins of the PSU refiners and WHY are you giving them an assured cost plus return on their investment in refining capacity ?

3. Taxation is good eh ? How so , when the Govt runs a primary deficit (i.e., it takes in less than it spends) and the huge overhead is the Govt's own running costs. What did you do to 1) Retrench whole useless sections of the govt that runs out of Delhi and does things like "Culture Ministry" , "Hindi Vibhaag" and this and that . 2) What did you do to cut costs and increase profitability of huge govt black holes like Air Parasite, BSNL , a whole list of sick Govt companies and PSU and other undertakings. 3) WHY did you give the useless Baboons with a Massive pay increase in the 7th pay commission , when you didn't retrench and cut costs and refocus the govt.

4) The taxation is being used to fill the govt's black hole /bottomless pit /bakasur like appetite of the beast. It is NOT being used to build anything. I haven't seen anything being built out of all the taxes (though I agree that the Railways have got cleaner, there are visible improvements in the stations).Vajpayee, we SAW the golden quadrilateral and the PMGSY. What has the Modi govt done visibly with all the "infra" spending. Do we have world class, protected access expressways with clover leaf interchanges and exit ramps and proper zoning ? How many kilometres of that exist in this country ? I think the Vajpayee Govt did far better with infra spend that was visible (just my own opinion from what I can see).

The much ballyhooed gold bond scheme is a non starter (it has collected less than 5000 cr when I last looked , I bought roughly 15L worth of it , and am sitting on profits, thank you, but it is all paper I can't monetise thanks to idiotic product design) thanks to rigidities in the product design and baboon oriented policy making , and I know right, the world works according to My King Canute ordering back the waves kind of logic. The "Gold scheme" is dead. All it did was to take gold from temples and gave temples pieces of paper. Few if any private citizen will trust his gold with a bumbling govt that is bent on random appropriation . I had warned on the failure of this the day it was launched.

Face it, between the gold scheme launched at the urgings of the Cow + Marx types and between that gold scheme launched by PayTM, the latter is orders more successful (considering the effort and backing etc by each) , though PayTM is literally facing daggers from the Banks and other players here because they encroached into their own "Gold coin" offerings, but no, you can't recognise that because it will be egg on your faces and a searing indictment that an entrepreneurial oriented org did better and is far more successful than the command and control , top down, directed by Dilli with "superior wisdom" and "govt imprimatur" by the Cow + Marx types.


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Re: Indian Economy News & Discussion - Aug 26 2015

Postby nash » 15 Sep 2017 12:12

Petrol prices may come down from Rs 70 to Rs 38 under GST. Will government do it?
http://indiatoday.intoday.in/story/petr ... 48063.html

GST on petrol and diesel
http://timesofindia.indiatimes.com/busi ... 511273.cms

Petrol, diesel should come under GST, says Pradhan
http://www.thehindu.com/business/Indust ... 679291.ece

Saying that many States had drastically increased value-added tax, he said, “It is high time that the GST Council considered bringing the petroleum products in the ambit of GST.”


What Would Petrol and Diesel Prices be if they were Taxed Under GST?
http://www.news18.com/news/business/wha ... 18079.html

Both Jaitley and Pradhan said to include P & D under GST, how viable would it be and will it really bring down prices that much?

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Aditya_V » 15 Sep 2017 12:18

That is BS, it is just a counter, the truth is GST like any system being implemented has hick ups and it will take Oct- nov 17 before the actual systems stabilizes and the Government collections are up. Plus investments are required for BS- VI fuel. Expect Fuel prices to come down from Oct 15 if there is no cradh in Rupee DOllar value or world crude prices are stable.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby nash » 15 Sep 2017 12:25

If it is counter then it is good one because no State will go for it. But even then some time in future these things will be under GST.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby disha » 15 Sep 2017 12:29

nash wrote:Petrol prices may come down from Rs 70 to Rs 38 under GST. Will government do it?
http://indiatoday.intoday.in/story/petr ... 48063.html


^That is something government *must* not do. Petrol/Diesel prices must reflect the cost of building and maintaining the road network.

And a decade from now the passenger car market will shift to electric cars., which are 1/2 to 1/3rd cheaper in terms of "energy consumption per km".

P & D can come under GST., but there should be a devolution back to the state to improve the road infrastructure.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Supratik » 15 Sep 2017 21:39

Reserves top 400 billion. Post half a trillion they should reconsider a sovereign wealth fund.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Suraj » 15 Sep 2017 22:32


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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Suraj » 15 Sep 2017 23:04

Through DBT, govt removed middlemen and saved Rs 57,000 cr: Prasad
The government saved Rs 57,000 crore, "pocketed" earlier by middlemen, through the use of Direct Benefit Transfer (DBT) in various public schemes, IT Minister Ravi Shankar Prasad said today.

Scores of schemes like MGNREGA have been linked to DBT, under which the receivables are transferred directly to the beneficiary's bank accounts, he said.

GST hits exporters' order book hard; 15% drop till October: FIEO
Two months after the roll out of the goods and services tax (GST) regime in July, the order books of exporters are said to have taken a hit with estimates pegging the impact to up to 15 per cent across industries and product categories.

According to an assessment by the exporters' body Federation of Indian Export Organizations (FIEO), the large drop was for export orders that were meant to be delivered until October.

The dip, registered over a period of two months since July, was largely on account of exporters foregoing orders due to lack of credit, said Ajay Sahai, director-general at FIEO. The liquidity crunch had forced many to use available resources to manage existing business operations rather than fulfilling orders from abroad, he added.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby A_Gupta » 16 Sep 2017 18:57

^^^ If the banks are flush with funds from demonetization, and the exporters have orders in hand, why is credit lacking, why should there be a liquidity crunch? Isn't a loan to a business to fulfill an export order one of the lower risk business credits that banks could extend? (I don't know, maybe gurus here can explain.)

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Viv S » 16 Sep 2017 19:29

Supratik wrote:Reserves top 400 billion. Post half a trillion they should reconsider a sovereign wealth fund.

Its not sovereign wealth. Sovereign wealth funds are created by commodity-exporters running net surpluses to hold down the exchange rate and cushion against future shocks. Our reserves have been built up through FDI, FII, debt & remittances. Most of the money held in the form of reserves is owned by the general public & domestic/foreign corporations. And its held against our net foreign debt (~$450bn at the end of the last fiscal). What we could have done was exchange some of the FX for gilt-edged govt securities but with global interest rates still slumped over, not much point.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Suresh S » 16 Sep 2017 20:55

RR is no son of India. Traitor that he is . Put in place by chitambaran , the crook. Economic progress in a country like India is not going to be achieved by Harvard types who talk bs whole day about so and so inflation and x percentage growth per yr. It is the Modi style decision making , who understand India at it,s core which is taking India forward. Whether it is gst, bank accounts, demonetization or endless efforts every week in some foreign land to advance our interest which is taking India forward. Gold buying may have failed due to our century old distrust of govt but it was worth trying. Agree with a chetak completely.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby vina » 17 Sep 2017 06:56

Suresh S wrote:RR is no son of India. Traitor that he is . Put in place by chitambaran , the crook. Economic progress in a country like India is not going to be achieved by Harvard types who talk bs whole day about so and so inflation and x percentage growth per yr. It is the Modi style decision making , who understand India at it,s core which is taking India forward. Whether it is gst, bank accounts, demonetization or endless efforts every week in some foreign land to advance our interest which is taking India forward. Gold buying may have failed due to our century old distrust of govt but it was worth trying. Agree with a chetak completely.


:shock: :shock: :rotfl: :rotfl:

There guys, you heard it. India will extinguish poverty and elevate itself economically and otherwise via DeMo by MoDi and other similar policies. The word "Mitron" has entered the English Language dictionary , a singular contribution of MoDi and DeMo . Yeah. India's salvation is by more "Mitron" type policies.

What about DFC ? No idea and not a word. Between the Bullet Train (I am scratching my head on what you hope to achieve by spending $17b on a train line between Bombay and Ahmedabad and why not a low cost airline and reach there faster and cheaper), and DFC , the latter has orders more magnitude in terms of returns, spin offs and larger economic effect by decongesting the IR lines, hugely taking traffic away from roads onto more efficient rail (thereby increasing the overall efficiency of the Indian economy). But, the Bullet Train is "Mitron" policy, while the DFC was put together by MMS as a policy (but so was Mangalyaan, how convenient for MoDi to jump in just as it was entering Martian orbit and claim it in full, without a word whatsoever about MMS.. but yeah , Mitron, that is how it works).

That said, this thread seems to be taken over by unhinged trolls of the Chinese 50 centre types of the BJP's IT Cell / Social Media trolls. But yeah, Mitron, par for the course.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Suresh S » 17 Sep 2017 07:16

your continuous nonsensical talk is what is called unhinged trolling . I barely ever write on this thread . hardly taking over the thread. May be we should bring back chidambaram and mms and RR and gandhis and that will bring Indias,s salvation , we saw what it did for last 50 yrs of their rule.

No sensible person here is BJP or any other party,s troll, we are all for India,s progress and whoever does it we support them . going by the record of congress they are lucky that India is a peaceful country or these crooks would have landed in a place from where there is no return.
Lot of people on this site are professionals who are doing good and important work in their respective fields, therefore before characters like u use foul language first analyse it in your brain before posting. Tx

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby disha » 17 Sep 2017 07:42

vina wrote: Between the Bullet Train (I am scratching my head on what you hope to achieve by spending $17b on a train line between Bombay and Ahmedabad and why not a low cost airline and reach there faster and cheaper)


^^ An example of an addled brain due to politics & ideology of a person clouding the gray matter leads to spilling non-sense over in economics thread.

The above statements should be kept in posterity for all posteriors who let their brains addled by their political viewpoints.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby vina » 17 Sep 2017 10:33

Dosa Economics , as explained by "traitor" , "not son of India" (as labeled by random fools here) . A very simple concept , that can be explained to the level of village idiots , who keep whining , "oh I am getting only 6% interest rate" , what will I do, Ayyo , nonsense.

And oh, India's economy is underperforming , NOT because of interest rates have not been cut to 0.25% or zero or negative or whatever many in the govt and other rah-rah types wanted, but because, the banks are dealing with huge NPA, the problem was left hanging, the govt didn't address that as the first priority when it came to power, but rather believed that all it needed was "Keynsian Pump Priming" (i.e. borrow and spend and huge bonanza in commodity price fall) and "cleaning clogged projects" and abracadabra , things will be fine, and it will be back to normal.

Nope. The US - the first major economy to recover after the 2008 devastation , did so, precisely because the US system economy is so well oiled, that it flushed down the toxins in very quick time (think Lehman and Bear and the huge bankruptcies), the resorts happen seamlessly, balance sheets fixed and interest rate transmissions happen seamlessly (if interest rate drops, you refinance everything seamlessly, right from mortgages to borrowings), but in India, thanks to the command and control and huge rigidities, those transmissions don't happen seamlessly (for e.g., home loans and other loans cannot be refinanced seamlessly here without switching costs), balance sheets cannot be reorganised (until the bankruptcy code was finally passed recently), the banks are govt controlled and taking haircuts are a politically fraught initiative and will expose the banker and govt to claims of sell out. Asset reconstruction is a "fixed game" and throwing out existing managements don't happen.

But also vitally, you needed massive restructuring . But MoDi does not believe in restructuring (Air Parasite is a bleated recognition ), but rather more into tinkering in the margins and indeed a firm believer in command and control. Throw in to this the huge distraction and dislocation of hare brained "Mitron" initiative of DeMo by MoDi on the urging of the Marx + Cow types and the necessary GST (which was held up solely due to Modi earlier as Guj CM- there.. 10 years lost, and massive GDP & output shortfall due to that against his name) finally getting done, one can see the root causes of it.

So, the fix for all this is
a) Reforms, restructuring and indeed privatisation of the "command and control" govt and PSU companies that are into all sorts of areas and refocusing govt spend into health ,eduction and public goods (pollution control, governance, police etc..etc) indeed more of DBT, Pahal, Oil decontrol (i commend the govt fully on doing this), Aadhaar (mercifully they continued with it, instead of first instinct to can it as it was a congress initiative) , reforms in factor markets (including land), forcing escrow into all real estate transactions, national registry of all land and property etc
b) Or, More hare brained "Mitron" policies like DeMo and random platitudes to justify it by trolls (both paid and otherwise)

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Kashi » 17 Sep 2017 10:54

disha wrote:
vina wrote: Between the Bullet Train (I am scratching my head on what you hope to achieve by spending $17b on a train line between Bombay and Ahmedabad and why not a low cost airline and reach there faster and cheaper)


^^ An example of an addled brain due to politics & ideology of a person clouding the gray matter leads to spilling non-sense over in economics thread.

The above statements should be kept in posterity for all posteriors who let their brains addled by their political viewpoints.


It was the bit about DFC vs Shinkansen where I lost it... :rotfl: :rotfl:

Addled is right..

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Vidur » 17 Sep 2017 11:31

vina wrote:Dosa Economics ,

So, the fix for all this is
a) Reforms, restructuring and indeed privatisation of the "command and control" govt and PSU companies that are into all sorts of areas and refocusing govt spend into health ,eduction and public goods (pollution control, governance, police etc..etc) indeed more of DBT, Pahal, Oil decontrol (i commend the govt fully on doing this), Aadhaar (mercifully they continued with it, instead of first instinct to can it as it was a congress initiative) , reforms in factor markets (including land), forcing escrow into all real estate transactions, national registry of all land and property etc
b) Or, More hare brained "Mitron" policies like DeMo and random platitudes to justify it by trolls (both paid and otherwise)


a) Mostly correct
b) Wrong

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Vidur » 17 Sep 2017 11:34


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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Vidur » 17 Sep 2017 12:03

I think we are very quick to criticise good work in India.

While I genuinely don't have political leanings and believe our whole system has a problem, I will say that things are changing at the centre. Work ethic has improved and some kind of accountability is slowly coming in. That is why IAS and IPS officers are making a beeline for the states. The trend in India is usually opposite. IAS/IPS whether corrupt or not often ask for a central deputation because some politician in state government has been troubling them (tate governments have been terrible after the start of coalition politics in the 90s.)

But more drastic reform of the administration and judiciary is needed. It is the most difficult part and India is not a dictatorship (though it certainly needs danda). But let us not belittle the efforts that have already been made on the economic front.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby chetak » 17 Sep 2017 12:49

A_Gupta wrote:^^^ If the banks are flush with funds from demonetization, and the exporters have orders in hand, why is credit lacking, why should there be a liquidity crunch? Isn't a loan to a business to fulfill an export order one of the lower risk business credits that banks could extend? (I don't know, maybe gurus here can explain.)


no industry loan is ever given without kickbacks and the gravy train usually extends right upto the very top of the concerned ministries.

With the current watchful climate and fewer chances of cutting deals with the investigating agencies, the bankers and industrialists are not willing to take chances.

that's why various industry talking heads on tv channels are pushing hard for "no penalties" for a loan going sour, claiming that loans do go sour in the normal course of business.

no loan taker is willing to furnish credible sureties or tangible collateral for the loans, preferring, as usual, to tank bank loans and share the spoils as was being done in ALL previous governments.

the shady returns in the "loan" rackets have diminished and become very risky and the consequences of legal action have increased in the case of a tanked loan.

The govt has also clamped down on black money so the chances of a "high interest investor" especially shady diamond merchants and big jewellery store owners, havala types and politicians coming in to loan funds have all but evaporated.

The rats are being starved, snakes are being hunted and the population of mongoose has increased tremendously. That's why pappu is in the US, looking for money, especially after the IT raids in KAR has sent the snakes deep into the ground.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby nam » 17 Sep 2017 15:53

Some of the biggest NPA is thermal plants, where loans were taken for building one and no Coal supplies were provided.

And now with Solar being cheaper.. it is the end of the tunnel. Ofcourse most of these NPA were also given to cronies for a cut.

The PSU may be saddled with big NPA, but what about private banks? Is anyone stopping industry from getting a loans from them? Or capital from the market, given that the share prices are soaring. Or international banks, which have cheap interest rates.

There is no dearth of funding if a project is viable. People like Mallya were showing growth using money from the PSU. No sensible business man would have continued with such a loss making airline. However he was sure of a GOI bailout.A Ponzi scheme.
Just like HAL used to show the interest gained on order down payment from GOI as "profits". Sahara used people's money. Sky high real estate prices.

So fundamentally a bubble was created with PSU bank money with no underling demand. Very high interest rates was then applied to control the resultant inflation. Ofcourse the cronies did not have to pay the interest, as they were already NPA. EMI paying house owner were hit with high interest rates on their over-expensive houses.

Till 2008 our growth was feed by money from international source. our banks escaped this crisis and after 2008 they feed the "growth".

NPA is the Indian version of 2008 crisis.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby A_Gupta » 17 Sep 2017 19:11

chetak wrote:no loan taker is willing to furnish credible sureties or tangible collateral for the loans, preferring, as usual, to tank bank loans and share the spoils as was being done in ALL previous governments.

the shady returns in the "loan" rackets have diminished and become very risky and the consequences of legal action have increased in the case of a tanked loan.


i.e., the Indian economy is in the uneasy state of transition from crony capitalism to a more open-market system where credit is extended based on the merits. There appears to have been a significant blow against crony capitalism, but it looks like few know how to operate outside that framework; or perhaps they are not willing to operate outside that framework.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby chetak » 17 Sep 2017 19:40

A_Gupta wrote:
chetak wrote:no loan taker is willing to furnish credible sureties or tangible collateral for the loans, preferring, as usual, to tank bank loans and share the spoils as was being done in ALL previous governments.

the shady returns in the "loan" rackets have diminished and become very risky and the consequences of legal action have increased in the case of a tanked loan.


i.e., the Indian economy is in the uneasy state of transition from crony capitalism to a more open-market system where credit is extended based on the merits. There appears to have been a significant blow against crony capitalism, but it looks like few know how to operate outside that framework; or perhaps they are not willing to operate outside that framework.


They are not willing to operate outside that framework for now.

That's why 2019 is so crucial for us.

There are a lot of guys desperately banking on the BJP going away and hoping that the sun shines again, for them!!!

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby chetak » 17 Sep 2017 19:46

nam wrote:Some of the biggest NPA is thermal plants, where loans were taken for building one and no Coal supplies were provided.

And now with Solar being cheaper.. it is the end of the tunnel. Ofcourse most of these NPA were also given to cronies for a cut.

The PSU may be saddled with big NPA, but what about private banks? Is anyone stopping industry from getting a loans from them? Or capital from the market, given that the share prices are soaring. Or international banks, which have cheap interest rates.

There is no dearth of funding if a project is viable. People like Mallya were showing growth using money from the PSU. No sensible business man would have continued with such a loss making airline. However he was sure of a GOI bailout.A Ponzi scheme.
Just like HAL used to show the interest gained on order down payment from GOI as "profits". Sahara used people's money. Sky high real estate prices.

So fundamentally a bubble was created with PSU bank money with no underling demand. Very high interest rates was then applied to control the resultant inflation. Ofcourse the cronies did not have to pay the interest, as they were already NPA. EMI paying house owner were hit with high interest rates on their over-expensive houses.

Till 2008 our growth was feed by money from international source. our banks escaped this crisis and after 2008 they feed the "growth".

NPA is the Indian version of 2008 crisis.


private banks are more nimble but they also demand cuts. Their decisions are faster, more transparent and also they are risk averse in a way that protects their bottom lines.

Non performance in the private sector leads to less/no bonus and slowed promotions and no pay increases.

Failure usually means immediate termination depending on the amounts involved.

In the PSU, because of unions and "seniority", all of the above is not applicable. The PSU guys have an 'iron rice bowl", entirely at our cost and a protected career progression path, albeit in some small town branch, if they are involved in a major eff up and that too, if they are without a mai baap to protect them.

with Modi, the game has changed with the bosses' neck directly on the line.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Suraj » 17 Sep 2017 22:04

Mod Note:

This thread is the ECONOMICS thread. Whether or not you hate some political characters, DO NOT use your preferred pet names for political characters or people of RBI. Keep such excitable language to the politics thread, not here. Continued behavior will see posts disappearing, along with your forum access gone for some duration of time. This applies to those posting above on both sides of the political spectrum, not just one person.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Supratik » 17 Sep 2017 22:04


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Re: Indian Economy News & Discussion - Aug 26 2015

Postby hanumadu » 18 Sep 2017 05:47

Supratik wrote:Crony capitalists now have to exit.

https://blogs.timesofindia.indiatimes.c ... s-welcome/


Will old owners regain control at bargain prices via benami companies in tax havens?
...
The Essar Group ran up huge debts to expand its empire, among allegations of inflated capital costs.


Probably all these borrowers inflated capital costs and stashed the excess amount abroad.



Ousting promoters is not an end in itself. Many promoters were unlucky, including those hit by land acquisition delays, and those who built power plants but could not get fuel from Coal India. “Resolution” in banking terminology means a deal where the lenders and owners (and sometimes trade unions) all agree to take a hit so that the enterprise becomes viable again. Resolution is the simplest and most preferred outcome. But it is feasible only when company assets are still substantial and the business is fundamentally viable. Resolution will not work for run-down companies with worthless assets.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby chetak » 18 Sep 2017 08:20

Received by email.


New Indian Express carried a two-part series of articles on Demonetisation by S Gurumurthy.


These are the extracts of the Part-1.



Return of 99% of de-legalized currency into the banking system is cited as the sole test of failure of de-mon by the opposition, experts and media. It is less than a fair assessment. In fact, de-mon is essentially a multidimensional project. Their assessment is a bluff and to call it a bluff, we need a surgical analysis, which unfortunately missing in debates then and even now.



We need to understand the situation prevailing when de-mon was announced in November 2016. This will make us understand why the government resorted to de-mon. The background for de-mon was the unprecedented rise in the high value notes - rose from 1.5 lakhs crores in 2004 to almost 15.5 lakhs crores when de-mon was announced.



So what? Read on. The RBI informed the government that a third of this amount, about 6 lakhs crore moved out of banking system and never came back into the system. It means that this huge unmonitored cash was financing and building a massive black economy. The result - steep rise in gold, stock and land prices by almost 10 times in 6 years since 2004. This asset price rise was not matching with real growth.



So this hyper GDP growth was just wealth-led growth that yielded neither jobs nor gave external or internal comfort to the economy. Therefore, the reason for this spurious growth clearly was the high asset prices, which were fuelled only by an unprecedented rise in high de-mon notes. Unfortunately, the debates that followed de-mon then and now have not considered these critical facts and was reduced to single point issue. The debates were more of political, casting economics aside. De-mon was such an India-specific issue that it had no parallel elsewhere in the world. Foreign experts, who have no knowledge on India-specific issues lambasted de-mon as a disaster. The Indian experts and politicians piggybacked these foreign experts. How can Modi explain this background to the people who are not aware of all these and wouldn't understand also? So he has to defend the de-mon in the language they understand - to detect and eliminate black money. If the government would have left the situation as it is, that would have been a threat to the economy with an unimaginable future crisis.


So the de-mon was intended as a multi-dimensional correction to the economy. There was primarily 13 objectives of de-mon and the list is not exhaustive. (Note: please see the list and judge for yourself how far these objectives have been met).


(1) to catch black money

(2) to prevent its growth

(3) to expand taxpayers base

(4) to arrest and deflate cash - stoked asset prices

(5) to bring down villainous high-denomination notes;

(6) to suck out the excess cash with people which are building a parallel economy to the banking system;

(7) to enable banks to multiply additional deposits as lendable deposits;

(8) to bring down the interest rates;

(9) to increase the financial savings in households;

(10) to crash the land prices to make housing affordable;

(11) to organize the unorganized sector;

(12) to facilitate the growth of the real economy - growth with jobs; and

(13) to eliminate fake currency and curb terror funding.


Against the background stated, none of these objectives could have been met without resorting to de-mon. So reading the objectives once again, we can say Modi's de-mon project has been a huge success. Unfortunately, the media and experts, by not looking at multi-dimensional impact, have taken the position from the word go that de-mon is a failure.


99% of de-legalized notes have come into the banking system. It doesn't mean that black cash deposited in the banks go undetected. The tax authorities will scrutinize the deposits and collect taxes which takes time. Already about 2.9 lakh crores is under scrutiny.


Now three categories of black money -

(1) undisclosed income in de-legalized notes of 29000 crores; (2) old notes not deposited 16000 crores; and

(3) deposits of 2.90 lakh crores under tax probe - together constitute 3.35 lakh crores. This could be achieved because of de-mon. Even if half the potential black cash is eventually taxed, that would mean detection of some 1.5 lakh crores of black money, most of which would be recovered as tax and penalty. None of the voluntary disclosure schemes attempted earlier was a success.


The other positives of demon are - expanded the individual income tax base (57 lakh more assessees have filed returns); advance tax collections rose by 42%, and self-assessment tax rose by 34%.


Ignoring such vital facts, concluding that de-mon is a failure is not proper. By all counts, the black money agenda of de-mon is a success, not a failure by any standard.


The conclusion of Part-1.



This is Part-2 on Demonetization by S Gurumurthy in the New Indian Express.


Anti-Modi bandwagon conveniently missed an important element – huge crisis which the note ban barricaded and averted. To know what India escaped, one must look at what the US got into. The fake asset prices that drove high growth in the US from 2001 to 2008 deceived the US and the world into believing it to be real and finally landed the whole world in the unprecedented financial and monetary crisis of 2008. The emergency measures to handle the crisis – nil to negative interest rates and printing money – are still on. But what is the relevance of what happened in the US prior to 2008 to the de-mon discourse in India in 2016? Read on.


Asset prices in India – stocks, gold, and land - rose by ten times in those six years as compared to the earlier five years. We celebrated this mirror wealth as real from 2004. But what was the cause of the asset price rise? The answer lies in one word: cash — in particular, the unprecedented rise in high-value notes, a third of which, per RBI, was circulating outside banks. What reckless bank lending did to the US till 2008, reckless printing of high-value notes did to India. This could have dynamited the nation’s financial order. De-mon became inevitable to avert the huge unmonitored cash-led crisis in the offing, to force the economy flooded by cash into a less-cash economy and to drive the excess cash circulating outside into banks. This extremely critical aspect was completely ignored in the irrationally noisy de-mon debate.

Contrary to the widespread view, de-mon has been a success in bringing into tax account the unmonitored roaming cash amounting to some Rs 3.35 lakh crore — a large part of which is under a tax probe. De-mon has raised the individual tax base by 20 percent, advance tax collections for 2017-18 by 42 percent and self-assessment tax (paid now for last year) by 34 percent. Both in bringing substantial black money of the past into account and in ensuring better tax compliance, de-mon has been a success. An incredible achievement of de-mon is the reduction in the total cash stock and the cash stock with the public. Because of de-mon, as the cash with the public came down dramatically, the people’s deposits in the banks went up equally dramatically. The reduction of cash with the public and the rise in deposits with the banks will produce a dramatically opposite macroeconomic impact. Cash with the public fuels and funds the black economy. Deposits in banks will fund the formal and organized sector. Moreover, by the fractional reserve model, money moving in and out of the banks multiplies as advances, by some six times. The flow of de-mon cash into banks — including black money — has already led to a cut in interest rates and a huge rise in lendable money, relieving banks that were stressed by illiquidity. The impact of drawing money from the public and quarantining it in banks has crashed land prices in different parts of the country. The impact of this is clearly visible in the realty and housing sector, where asset price rise in the land had stagnated the housing sector since at least 2012.


It is self-evident that when a huge volume of cash is withdrawn from the economy, growth will suffer. But this bitter pill was inevitable to course-correct the economy. See how it worked in the property market, the quality of growth in which is regarded as the index of real growth. A study by Liases Foras, an independent research company, showed that the gap between the index of housing affordability and prices which was equal at 100 in January 2005 began rising and reached a peak with the price index at 529 in March 2014 and affordability at 173 — showing a gap of almost three times. Liases Foras said the gap between affordability and price was entirely due to speculation through the cash component which dominated the land market and the secondary housing market that accounted for almost two-thirds of housing buys.

The study said, “the perfectly timed” de-mon would cut land prices by 30 percent due to a reduced cash component, adding that making housing hit by speculative land prices affordable appears to have been achieved as the outcome showed a rise in demand for affordable housing. The Confederation of Real Estate Developers’ Associations of India (CREDAI) said that in the long run de-mon would help organized developers procure land at more appropriate rates as such land will not be competing with buyers who were channeling their black money into land buying and holding. CREDAI said: “This will help in the construction of more affordable houses and achieve the Housing for All objective by 2022.” The housing market has recovered despite disruption by the new real estate law and GST. This huge correction in the realty sector too has gone virtually unnoticed as the debate got reduced to merely the number of notes returned.


But wrong follow-up and irresponsible NPA norms could derail what de-mon has achieved. De-mon is a huge investment at current cost for future returns. Its hard-won advantages should not be frittered away. There was, of course, a costly miss in the conception of de-mon. The voluntary income disclosure scheme announced ahead of the de-mon project should have been clubbed with it so that those who had black cash would have disclosed it rather than risk depositing it in benami names, making tax collections time-consuming. This also would have avoided equating the success of the de-mon project to the quantum of de-legalized notes not deposited back and made the collection of tax on black money as the real test.


On the post-de-mon follow-up, two caveats. One, de-mon has sucked the entire cash stock into banks and it has also reduced the ratio of cash to GDP back from 13 percent to less than 10 percent of GDP. But this hit the informal sector which is funded almost entirely by black money. Closing the tap of black money that was funding the informal sector, which contributes to 50 percent of the GDP and 90 percent of non-farming jobs, has caused a dip in the growth rate and jobs. Had the Mudra finance scheme been implemented as originally conceived ahead of de-mon, this could have been avoided. But it did not happen then. And it has not happened even now. There is no follow-up of de-mon to relieve micro and small businesses of their distress. This is telling on growth and jobs.


Two, PSU banks, which control 70 percent of bank deposits, are paralyzed because of the artificial NPA rules unsuitable to India, borrowed from Basel norms. The RBI is clearly responsible for the virtual stoppage of lending by PSU banks which has hit even medium and large industries. India needs a lending model based on future viability based on Indian conditions and not on the Basel rules of liquidity which is appropriate for countries which have capital account convertibility and which have opened the banking sector to foreign ownership. Neither is the case in India and in addition, state-owned banks control 70 percent of bank assets. And yet RBI is virtually destroying Indian business by applying the Basel norms. And the government is just a mute spectator to this sad spectacle. Additionally, the forcible reference of the NPA cases of units viable for restructuring under the bankruptcy law is a disastrous way of dealing with NPAs.

The government and RBI must forensically distinguish NPAs caused by financial dishonesty from policy- and market-forced NPAs and punish the former and restructure the latter if they are viable.


To end, unless Mudra is implemented forthwith as originally proposed, PSU banks begin lending again, and RBI frames restructured policies disregarding the Basel norms, the economy will slide into deep difficulties in the coming months and years. Are RBI and the Modi government listening?

(Concluded)

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby vina » 18 Sep 2017 12:00

Awrighty. Let me take a few stabs at this.
Their assessment is a bluff and to call it a bluff, we need a surgical analysis, which unfortunately missing in debates then and even now.

Indeed. So let us "surgically analyse" the surgical analysis.

The RBI informed the government that a third of this amount, about 6 lakhs crore moved out of banking system and never came back into the system. It means that this huge unmonitored cash was financing and building a massive black economy. The result - steep rise in gold, stock and land prices by almost 10 times in 6 years since 2004. This asset price rise was not matching with real growth.

Well, let type NYSEARCA:GLD in finance.google.com and you can see the numbers yourself (this is the SPDR Gold Trust ETF), which was $44 on Dec 31,2004 and on Dec 31,2010 , it was 133.58 , i.e., rose 3.04 times in dollar terms, (reaching a peak of $183, or 4 times ) some 6 months after that.

In rupee terms one can see from here Gold Price India , between 2004 and 2010 , Gold Prices in India rose just 2.65 times. Indeed the 10 year price chart as of Sep 17, 2017 , shows that gold prices rose less than 3X from 2010. Looking at the 15 year chart, the peak rise is from roughly 2002 to Sep 2012, a rise of 6.21X .

As for land, I would like to see where it appreciated 10X in from 2004 to 2010 (or even the last 10 years). Even in Jayanagar, where the going rate is roughly 10,000 per sq.ft , I would wager 2004, it was above Rs 1000 per soft.Surely didn't increase 10X .

So definitely for gold, 1) S. Gurumurthy is factually wrong and 2). His inference (";The result") is wrong is as well, . Gold indeed spiked along with the super commodity cycle from 2002 onwards , but that has more to do with the Fed pumping in liquidity and thereby inflating global asset prices ,more so after 2008! Here his causation analysis is plain wrong.

So this hyper GDP growth was just wealth-led growth that yielded neither jobs nor gave external or internal comfort to the economy. Therefore, the reason for this spurious growth clearly was the high asset prices, which were fuelled only by an unprecedented rise in high de-mon notes
.
1) No one knows what this "wealth led growth" is. He should write up a paper on this and get this new discovery published. Yes, there is wealth effect on spending, which can increase spending and lift the economy . This is quickly jumping all over the place by attributing this to "high denomination notes" , as if only if you hold high denomination notes you feel wealthy (and not by the value of real assets such as gold, land etc or simply by rising salaries that followed high growth). Again, causality and facts plain wrong.

Unfortunately, the debates that followed de-mon then and now have not considered these critical facts and was reduced to single point issue.

What facts ? His "facts" are wrong !

The debates were more of political, casting economics aside. De-mon was such an India-specific issue that it had no parallel elsewhere in the world.

Huh ?

How can Modi explain this background to the people who are not aware of all these and wouldn't understand also? So he has to defend the de-mon in the language they understand - to detect and eliminate black money.

I see, so MoDi did DeMo, not to eliminate black money, but to prick asset bubbles created by the Fed and other Central Banks (EU, Japan). The people of India are too dumb to understand this, so he had to say to detect and eliminate black money .

If the government would have left the situation as it is, that would have been a threat to the economy with an unimaginable future crisis.


Why does this sound very similar to "Islam Khatre Main Hai" kind of scare mongering ?

So the de-mon was intended as a multi-dimensional correction to the economy. There was primarily 13 objectives of de-mon and the list is not exhaustive. (Note: please see the list and judge for yourself how far these objectives have been met).

Okay, let us go through the objectives.


(1) to catch black money
Failed. A paltry sum of black money has been recovered. In fact, even if we 100% of the 2.5L cr in that the govt has flagged is fully considered hypothetically as unaccounted, if you offset the 2L crore, output loss, the net result has been close to zero
(2) to prevent its growth
How. You have fully remonetized back to nearly full previous levels , with an EVEN higher denomination 2000 note ! - FAIL
(3) to expand taxpayers base
Very minimal success. The growth rate in tax base pre and post denomination hasn't been a huge step change, but a secular trend. And how much of the small step increase if denomination related vs, other measures like Adhaar etc is debatable
(4) to arrest and deflate cash - stoked asset prices
Fail. There has been NO asset price deflation. Stock market is at all time high, real estate prices have not crashed and neither has gold price. Goes on to prove that the original hypothesis about asset prices being high due to high denomination notes was FUNDAMENTALLY wrong
(5) to bring down villainous high-denomination notes;
What is so "villainous" about Rs 1000 and Rs 500 notes of old, while new 2000 and 500 notes are "angelic"
(6) to suck out the excess cash with people which are building a parallel economy to the banking system;
But you have fully re monetised the economy. So what "excess" cash did you such out ? On a broad M1/M2 basis, the cash base is pretty much the same
(7) to enable banks to multiply additional deposits as lendable deposits;
Err. The banks are flush with cash, lending rates are going down. So didn't happen. A fail.
(8) to bring down the interest rates;
Okay. Didn't happen.The banks were already flush with excess cash. All it did was increase the bank's costs and the RBI's costs. because they had to pay interest on the account balances
(9) to increase the financial savings in households;
How ? Will savings increase , just because you hold 10*100 Re notes instead of a 1*1000 rupee note ? What does DeMo have to do with it ?
(10) to crash the land prices to make housing affordable;
Hasn't happened anywhere - A big fail
(11) to organize the unorganized sector;
Err. How does DeMo do that ? GST , yes, I can understand ? But DeMo ? All it did was "eliminate" the unorganised sector. Sure, if that is what is meant by the statement, I would say yes. So a Success finally
(12) to facilitate the growth of the real economy - growth with jobs; and
Huh ? The growth rate has dropped since DeMo . So fail ?
(13) to eliminate fake currency and curb terror funding.
Hasn't happened. In fact there are fake 2000 rupee notes, and the terrorist incidents So another fail[/color]

Against the background stated, none of these objectives could have been met without resorting to de-mon
.
So what objectives were met by this De-Mon. I count 12 FAILs and 1 success (point 11) .

So reading the objectives once again, we can say Modi's de-mon project has been a huge success.

Well, I read them again, and out of his 13, 12 were failures, one a "success" . I don't see this as a "huge success"

Anti-Modi bandwagon conveniently missed an important element – huge crisis which the note ban barricaded and averted. To know what India escaped, one must look at what the US got into. The fake asset prices that drove high growth in the US from 2001 to 2008 deceived the US and the world into believing it to be real and finally landed the whole world in the unprecedented financial and monetary crisis of 2008. The emergency measures to handle the crisis – nil to negative interest rates and printing money – are still on. But what is the relevance of what happened in the US prior to 2008 to the de-mon discourse in India in 2016? Read on.


Ah, but WE escaped the 2008 crisis (which was a credit and consumer led crisis , normally recessions are investment led), thanks to the RBI. So does it follow that we didn't have any asset bubble before 2008 ? But his entire analysis was based on an "asset price inflation between 2004 to 2010 ! So again, facts , analysis and causality - plain wrong ?

Asset prices in India – stocks, gold, and land - rose by ten times in those six years as compared to the earlier five years
.
They didn't. Anyone can check them out by themselves. They gold prices didn't rise 10 times, the stock price rise between 2001/2002 to the peak before crash of 2008 is less than 6 times. So again PLAIN wrong.

We celebrated this mirror wealth as real from 2004. But what was the cause of the asset price rise? The answer lies in one word: cash — in particular, the unprecedented rise in high-value notes, a third of which, per RBI, was circulating outside banks.

Again , facts are wrong. And in addition, how does he attribute the asset price rise to "cash" and that too in "one word" , without any causality analysis. Okay, that is just as good as saying, it is so, because S. Gurumurthy says so !

What reckless bank lending did to the US till 2008, reckless printing of high-value notes did to India. This could have dynamited the nation’s financial order. De-mon became inevitable to avert the huge unmonitored cash-led crisis in the offing, to force the economy flooded by cash into a less-cash economy and to drive the excess cash circulating outside into banks. This extremely critical aspect was completely ignored in the irrationally noisy de-mon debate.


Okay, we have to accept the "irrationality" based on make believe "Facts" as "rational" and explanations such as India's economy expanded roughly 2X in the same period and a higher monetary base was needed given a largely cash based economy is to be termed "irrational" . Why does this sound like Kellyanne Conway's "Alternative Facts" (she was The Donald's spokeswoman)

An incredible achievement of de-mon is the reduction in the total cash stock and the cash stock with the public. Because of de-mon, as the cash with the public came down dramatically, the people’s deposits in the banks went up equally dramatically. The reduction of cash with the public and the rise in deposits with the banks will produce a dramatically opposite macroeconomic impact. Cash with the public fuels and funds the black economy.

Obviously confused between CASH and black money. Cash NOT = black money. Unaccounted Cash == Black Money.

Deposits in banks will fund the formal and organized sector. Moreover, by the fractional reserve model, money moving in and out of the banks multiplies as advances, by some six times
.
1) Hasn't happened. 2) Reserve ratio is FAR north of 20 % in India. So even at a 20% reserve ratio, the Multiplier is only 5. So again WRONG numbers.There is no way you can lend 6 times the deposits on the economy.

The flow of de-mon cash into banks — including black money — has already led to a cut in interest rates and a huge rise in lendable money, relieving banks that were stressed by illiquidity.
T
It didn't. RBI cut interest rates, when inflation fell. In fact, they RBI mandatorily increased the CRR for the deposits post 11th Nov, as a "temporary" measure to suck up excess liquidity. Any increase in CRR hits bank profitability and guess what, the bond yield moved UP!

he impact of drawing money from the public and quarantining it in banks has crashed land prices in different parts of the country.

News to me . Please tell me where it has happened. I will rush to buy land. Okay, transactions stopped. But there was no "price crash" anywhere (yet)

The study said, “the perfectly timed” de-mon would cut land prices by 30 percent due to a reduced cash component, adding that making housing hit by speculative land prices affordable appears to have been achieved as the outcome showed a rise in demand for affordable housing.

1. Hasn't happened. I don't see any price correction by 30% anywhere.
2. Is DeMo the way to do it. How about making mandatory Escrow and Land record requirements for ANY land or RE transaction ? DeMo was equivalent to trying to swat a fly with a hammer and well, you missed as was bound to happen.

There was, of course, a costly miss in the conception of de-mon. The voluntary income disclosure scheme announced ahead of the de-mon project should have been clubbed with it so that those who had black cash would have disclosed it rather than risk depositing it in benami names, making tax collections time-consuming. This also would have avoided equating the success of the de-mon project to the quantum of de-legalized notes not deposited back and made the collection of tax on black money as the real test
.
Aww. But it massively failed the other "13" tests as well.


On the post-de-mon follow-up, two caveats. One, de-mon has sucked the entire cash stock into banks and it has also reduced the ratio of cash to GDP back from 13 percent to less than 10 percent of GDP. But this hit the informal sector

But. This was the "success" of DeMo in your 13 point agenda ! So you aren't happy?
.
Now back to the fallacy.. Informal NOT = BLACK . Cash NOT = Black. If YOU buy a dozen mangoes from a Push Cart vendor it is NOT black. . It is UNORGANIZED, sure, but NOT Black. It becomes black ONLY if the telawala is taxable and he cheats.

Closing the tap of black money that was funding the informal sector, which contributes to 50 percent of the GDP and 90 percent of non-farming jobs, has caused a dip in the growth rate and jobs

Ah, but wasn't that the "success" . I am now very confused. You want everything "formal" , so wiped out the "informal" . So why shed a tear now ?

Had the Mudra finance scheme been implemented as originally conceived ahead of de-mon, this could have been avoided

Yeah. Right. Sounds like if only "Real Communism/Islam/Hindusim/WhateverIsm" had been implemented rubbish. So this "Mudra" whatever was the magic bullet that would have solved everything , both known and unknown to mankind.

Two, PSU banks, which control 70 percent of bank deposits, are paralyzed because of the artificial NPA rules unsuitable to India, borrowed from Basel norms. The RBI is clearly responsible for the virtual stoppage of lending by PSU banks which has hit even medium and large industries

Ah yes. You create a cash crunch and then blame the PSU banks for the problems YOU created. How sweet. And also, the lending is not happening because of "artificial " NPA rules . Indeed. So they should continue lending to all the massive NPAs in power, energy, infra, etc etc, because that is "real", even when those guys cannot hope to pay back the principal and interest already lent EVER (like Air Parasite).

And yet RBI is virtually destroying Indian business by applying the Basel norms. And the government is just a mute spectator to this sad spectacle. Additionally, the forcible reference of the NPA cases of units viable for restructuring under the bankruptcy law is a disastrous way of dealing with NPAs.

Ah yeah. RBI has "stopped" lending because the calculate reserve requirement per Basel III rules. If they only calculated that using "Chennai III" rules, all the stressed industries and companies will pay the money past due and the NPAs will disappear.

Again fundamentally wrong. The banks are FLUSH with cash , but are UNABLE to lend leading to lower credit growth. A less than Basel III tier 1 capital requirement will NOT lead to more lending, but instead, will leave the banks seriously undercapitalised and unable to withstand shocks.

If this is a "clever" way of saying, okay. Let the banks suck up the NPA losses against their capital and don't need to capitalise (by applying some hokey Chennai III norms), it is very clever by half, and not really clever I should say.

And yet RBI is virtually destroying Indian business by applying the Basel norms. And the government is just a mute spectator to this sad spectacle. Additionally, the forcible reference of the NPA cases of units viable for restructuring under the bankruptcy law is a disastrous way of dealing with NPAs.


Ah, the problem IS a city called Basel in Switzerland. You SHOULD NOT throw out bad management, bring in turnaround specialists /re-org specialists (No Jay Alix Parnters, No Alveraz and Marsal.. oh... Do they eat beef? ) on the lines of US Chapter 10 (the most well functioning restructuring system I should say ), you should NOT try to recover money, why because that is "disastrous"

However, the "right" way to do it is like Air Parasite, which is raising Rs 3000 crore (as we speak) under Govt Sovereign Guarantee and why , to finance the loans already due. ie. borrowing more money to service the existing loan ! Isn't that exactly called the Debt Trap ? And throwing good money after bad is "sound banking"?

The government and RBI must forensically distinguish NPAs caused by financial dishonesty from policy- and market-forced NPAs and punish the former and restructure the latter if they are viable.


How cute. Now Mallya rightfully claimed that Kingfisher policy was due to "policy" (he is absolutely right on that), Air Parasite due to "policy" (right again), BSNL due to "policy" (right again). So are you going to start lending again to them ? In addition, this will set up a long list of lobbying and open the door for corruption and politicking to have YOUR dues labeled as due to "policy and market forces" and ask for a bailout!

To end, unless Mudra is implemented forthwith as originally proposed, PSU banks begin lending again, and RBI frames restructured policies disregarding the Basel norms

Ah yes.
1. "Mudra" (whatever that is) will save the world.
2. PSU banks should throw more money down the bottomless pit.
3. RBI should make the banking system fragile , and avoid using "phoren -Basel III" , but use " Chennai III" , so that you don't have to capitalise the banks
to be able to take shocks, even while you do 2) and keep throwing more money into a bottomless pit.

the economy will slide into deep difficulties in the coming months and years

True. But that was caused more YOUR ilk and the hare brained DeMo that you talked the Govt into
Are RBI and the Modi government listening?

I SURE AS HELL HOPE NOT and I wish they NEVER again listen to the WhackJobs who led them into the DeMo and some other fool's errands (which while futile were not damaging like DeMo).
The Govt needs to listen to sane counsel (like the Chief Economic Advisor - Arvind Subramaniam and former RBI Guv - YV Reddy , Subba Rao and others for instance) even if cannot countenance taking advice from Raghuram Rajan.
The SJM and other Cow + Marx types must be put out to pasture and masticate there in content. They have caused near irreparable damage already. And if any of these whack job stuff as proposed is considered as anything other than a source of mirth in the govt, India is in for another 50 years of disaster like was inflicted by the Marx - Cow types.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby yensoy » 18 Sep 2017 14:03

^^^^ Land prices have not "crashed" because sellers are unwilling to realize a loss and buyers are unwilling to buy at earlier inflated prices. There is no market to speak of now, it has stalled. Over time sellers will start capitulating one by one and we will start seeing a reset of prices.

The problem in India (unlike the US) is that property taxes are not high so it doesn't take much for landlords to hold on to their property. With all the new liquidity in the system, banks are flush with cash and interest rates have fallen which takes the bite out of any cash flow issues these landlords might have had. End result is the stalling of the market.

It's entirely likely that market exists in this choked state for a long period of time (say 5-10 years) over which inflation compounds in a manner that makes the prices normal. In other words, if a seller wishes to sell land at 1Cr and buyer is only willing to pay 50l today, in 10 years from now assuming a 7% rupee denominated annual inflation in land prices same buyer will be willing to pay the 1Cr the seller wanted.

This is particularly so for a rental income generating property where seller can continue to benefit from holding the house/commercial space while waiting out the market reset.

So I am still hopeful that demonetization has let the air out of the asset price bubble.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby tandav » 18 Sep 2017 14:53

Real Estate buying and selling has reached its last legs... no one will buy property when they can easily rent the same property at 1/3 to 1/4th EMIs required to buy the asset. The freed up cash flow can be deployed profitably in stocks and equity with better returns... And best yet incase you need a bigger place you can easily rent one and if you need a smaller space say when your kids move out then you can downsize.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby vish_mulay » 18 Sep 2017 15:05

http://www.dailypioneer.com/sunday-edit ... onomy.html
As a matter of fact, demonetisation has won the battle resoundingly on a whole host of fronts. Those who accuse the Government of shifting goalposts, reek of mala fide ignorance because economies and economic goalposts have always been fluid, dynamic and ever changing in contemporary times

It is pertinent to note that the marginal cost of funds-based lending rate (MCLR) for most banks has come down from 9.15 per cent to eight per cent. A 50bps fall in interest rate on one crore rupees home loan for 20 years could lead to a savings of eight lakhs rupees over the tenure of the loan and a 100bps fall, a savings of a whopping Rs 16 lakh over the loan tenure!
Again, between November 2016 and March 2017, deposits with the banks went up by Rs 3.5 lakh crore, aiding overall margins. Deposits in Pradhan Mantri Jan-Dhan Yojana accounts alone rose to more than Rs 6,4000 crore with 18 million new Jan Dhan accounts  being added during this period

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

Postby Austin » 18 Sep 2017 18:21

'Jugaad' Will Be Used For Black Money, Raghuram Rajan Tells NDTV


Karthik S
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Karthik S » 18 Sep 2017 18:59

Image

Rishi Bagree @rishibagree 2m2 minutes ago
More
Massive scope to scale up

India's per capita spending & GDP at china in mid 2000s.

Excellent presentation by @himanshuvyapak today

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

Postby Chandragupta » 18 Sep 2017 19:59

I want to understand something from the gurus here. It is a valid argument that India needs a larger formal sector (specially manufacturing) to generate more jobs, improve labour productivity & skill development. With the informal sector taking a larger chunk of the workforce, we will always be in this vicious cycle of low productivity & low skill labour. Somebody also posted an article arguing this in the GDF.

So the focus must be on small & mid level formal sector so that they can be supported in their growth. But I see no real effort in financing this growth. The flagship Mudra scheme, the way it is implemented now, imo will not help. Out of 32 odd million borrowers, 30 odd million are in the Shishu Category which is less than 50,000. These are your small time one person businesses. What kind of employment will these people create? And is this money not going again in the informal sector?

Here is what Amit Shah says regarding Mudra-


BJP President Amit Shah today said that more than 7.45 crore entrepreneurs have been given bank loans under Pradhan Mantri Mudra Yojana.
He further said that as part of government's effort to fund the unfunded, easy loans have been provided to small businesses like barber shop owners, cobblers and cycle mechanics etc under Mudra Yojana.


Conflicting numbers of borrowers on different websites but majority of loans dispersed are definitely <50k category. My question is how does this help the economy in the long run? Is it not better to have the same corpus dispersed, with collateral but low interest rates for small to medium enterprises? Sums of 20 lakh to 2.5 crore. Will that not go a long way in capitalizing the lower & middle formal sector, build capacity, skill & real formal jobs instead of the unskilled, daily wage based work that these barber shops, cobblers etc generate?

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

Postby Supratik » 18 Sep 2017 22:53

Mudra is for the lowest rung and first time entrepreneurs with no capital. SME/MME can avail regular bank loans with due process. The banks and govt are taking a big risk with Mudra. So it is better to have small loans for larger numbers than larger loans for smaller numbers to spread risk.


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