Indian Economy News & Discussion - Aug 26 2015

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

Post by deejay »

^^^What Now? What will the nay sayers like to say?
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Austin »

Obsession with fiscal deficit is affecting long-term growth

http://www.dnaindia.com/analysis/column ... th-2492096
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Aditya_V »

No it was the looting and running huge Fiscal deficits which has robbed us of Growth. When a Govt. runs Fiscal deficit it is spending tomorrow's Taxes and Fees today. The Out of control 6% Fiscal Deficits UPA without into capacity utilization but enriching thier personal pockets sealed India's growth. It will take 5 years to turn the economy around just like Vajpayee did. 2019-2025 will be amazing growth for the Indian economy whoever coems to power in 2019-2025 will be lucky like MMS did in his first term.

Fiscal Defecit should be build capacity to earn tomorrow not for scams to enrich Politicians. Just 2 scams are said to cost 7 Lac , with 10 years interest it is worth 14 Lakh crore plus 8 lakh crore NPA's. This had bankrupted India. Hope another mistake is not done in 2019.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by alexis »

Spurring rural demand seems to be the solution as per Pronab Sen
http://www.livemint.com/Politics/bzfrqg ... wrong.html
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Manish_Sharma »

vina wrote:Hmm. Now people are coming around to ol' Vina's view that the economy is indeed in trouble and it is not going to get going on "auto mode" (oh, temporary blip due to DeMo, GST Network will be fixed and things will be hunky dory!)......
vish_mulay wrote:http://economictimes.indiatimes.com/mar ... 788681.cms
I don't respond to quarterly numbers, India is growing faster than any other country: Jamie Dimon, JP Morgan Chase
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by kapilrdave »

nandakumar wrote:That said I am not sure ESI hospitals are geared to do liver transplants either.
They sponsor only sarkari aspataal which is part of the problem.
The bigger problem is that less than 30% get the genuine benefit from what I've seen. Rest is all milking the govt who gets paid by the businesses doing their business in white :roll: .
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by vina »

Hmm. Market took a beating today (other markets were sort of okay , despite the Trump-King Jong Un juvenilia) , market spooked on talk of impending stimulus and deterioration of fiscal numbers.

Rupee has fallen to close to 6 month low, Bond yields have risen, and today the stock market gave back the recent past few day's gains rather sharply.

People are bracing for another "Mitron" type announcement over the next few days - probably weekend /monday. If there is any 3 rd shock due to some random "Mitron" stuff, the country will sink to it's knees.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Philip »

A lesson to India from the Sri Lankans. We too are similarly squandering our forex on imports,esp. from China to the detriment of the local industries,esp. small/med. industries which have all been decimated.The "demon" catastrophe and GST has seen a massive fall in GDP,and the media is full of reports of the GOI wanting to "stimulate" the economy.The govt. should use its forex reserves wisely to import key critical eqpt//tech to build up the infrastructure of the country primarily,while assisting local agriculture to flourish as much as poss. If Indian villages are healthy and wealthy,then the cities will also benefit.Right now the dole handed out to rural folk has destroyed their willingness to work for a living,instead preferring to survive on handouts and freebies .This is financed by squeezing the middle class massively and the asinine pricing of petrol and diesel has resulted in a seething furious MC,waiting for revenge. Regrettably,there are elements in the GOI living in a fool's paradise,making promouncemnts from their ivory thrones. One was told recently that babus are also feeding the GOI with bogus stats. since they're being asked to speed up decision-making (alien to their nature) and their political bosses,many of whom are not expert in their ministries are being taken for a ride. 2019 is not going to be a walkover as many predict,and woe betide the nation if the robber barons of the UPA in any form,coalition even,return to power!

http://www.island.lk/index.php?page_cat ... tle=172067
Pre-1977 closed economy – Some benefits
September 21, 2017, 9:58 pm

The recent correspondence on the above appearing in the Sunday Island of 17th and 10th of September prompted me to pen this piece. The recollection of the past emphasizing its negative aspects is fine, lest people forget this era of events which the younger generation is not even aware of. However, there is a positive aspect of it, too. It appears that the Sirimavo Bandaranaike regime’s decision to adopt such a harsh policy towards external expenditure was the result of the refusal of multi-lateral financial agencies to extend financial assistance to Sri Lanka to balance its budget for reasons best known to them. Hence, the government was compelled to take this decision to preserve whatever foreign exchange it had at its disposal, as it did not have any other option.

While the import of even essential goods such as food and medicine were highly restricted, all items considered non-essential and luxury were totally banned. These included motor vehicles for personal use, electrical and electronic items, computers, milk powder, clothing, and cameras etc. These restrictions caused a severe shortage of these items which were in demand among the people. The only way of acquiring such items at that time was to purchase them from people returning from abroad who brought them as personal belongings. It was a common sight in print media, then to see advertisements for them described as "just unpacked".

Those who had the financial means saw an opportunity in this situation, which resulted in many of them, particularly the textile traders in Pettah, venturing into manufacture or assembly of such items as electrical fans, radio receivers, cables, refrigerators, electric lamps, bicycles and electrical accessories etc., which were in high demand. But they had to surmount enormous difficulties in getting the necessary permits to import raw material and machinery, which were issued by committees manned by government bureaucrats. It was a case of imposing barriers and hurdles at every point rather than helping the nascent industries who were trying to get themselves established. Despite these barriers, some of them were successful in getting quality products into the market and a few still remain.The closed economy gave an impetus for the development of the local industry and it was indeed one its benefits.

Then came the 1977 government change, and under its policy of open economy, all restrictions on imports were removed. The market was flooded with all imported consumer goods, and with the Sri Lankan mentality of preferring imported items over the locally produced, it did not take too long for most local industries to vanish from the scene, except for a very few. Today, whatever foreign exchange earned through the exports of our produce, supplemented by remittances by our workforce in the Middle East is all spent on importing all kinds of consumer goods unrestricted. Motor vehicles of all makes and sizes, and most of them with full options, flooded the market as anyone having money could import them, not necessarily through a sole agent.
*(cheapo Chinese imports have similarly flooded India)

Travelling around the city in a SUV intended for off-road running and costing over 10 times that of an average motor car, is a symbol of affluence which our politicians love to show. Recently, a politician was heard over the electronic media saying that unless they have a SUV they cannot visit their electorates in the hill country. Anyone travelling around the city suburbs and even away from them can see thousands of unregistered vehicles displayed in vehicle sales centres awaiting buyers. Isn’t this an unwanted waste of foreign exchange?

The government, instead of making an attempt to manage the meagre foreign reserves wisely, itself goes on a buying spree importing fleets of most luxury vehicles for politicians, with no regard to the absence of money in the till. It is shameful of them to run around in luxury vehicles bought with borrowed money. The government can carry on with the policy of unrestricted expenditure because of the support given by foreign "friendly" governments and multilateral financial institutions, who readily advance loans to the government. When the government could not repay the capital and interests with the earnings, it is compelled to take more and more loans, finally ending up in such cases as the bond scam.

Had the post-1977 government, instead of swinging the economy from one extreme of a total closed system to the other extreme of a totally open economy, adopted a middle path, this predicament would not have arisen. The closed economy helped in establishing many import-substituting industries meeting the needs of the society. These industries were carrying on with great difficulty because of the restrictions imposed on the import of raw material and machinery. If these restrictions on raw materials and machinery were lifted altogether, while limiting the import of finished goods, especially those goods being manufactured locally, Sri Lanka’s economy would have been much different today.

Such a middle path policy would have helped in developing the local industry, bringing economic benefits to the country, provide more employment to people and create a new class of entrepreneurs. These industries could have been assisted to acquire modern technologies, upgrade their products and even look for export markets. But nothing of that sort happened because of the short-sighted policies of the government. Not only the politicians, but also the policy makers at the helm – Treasury, Finance Ministry and the Central Bank - who advice the politicians are equally responsible for this sad situation.

The open economy also resulted in the closure of several industries that the previous regime commenced with heavy investments using foreign loans. These include the ceramics, textiles, hardware, paper, plywood, fertilizer and paddy processing plants, where even the buildings were razed to the ground in some of them. Their machinery was sold for scrap or removed by politicians as happened with the paper factory at Embilipitiya. It is indeed a pity that these industries which commenced with great hope in the sixties and seventies had to face such a cruel fate. Political interference and mismanagement were also partly responsible for this situation.

It is not too late, even now, for the Government to rethink whether to keep the economy fully open, or keep it half open, leaving room for the local industries to develop. One need not return to the Bandaranaike era by choice, but a continuation of the present fully open economy policy, and extravagant expenditure, will certainly lead the country one day back to that era through necessity.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by guru.shetty »

Fiscal stimulus with spending on rural population may win an election and will likely help fmcg companies and bike manufacturers. But unlikely to help export oriented industries.

A fundamental issue is high borrowing costs. An established blue chip company like cisco has a net profit margin of only 19% and borrowing costs of 3%. Indian companies simply can't compete with just its borrowing costs in mid teens. Labor arbitrage can't help anymore when in many industries the difference it can make is only 6-9%. A better fiscal stimulus in my opinion is to reduce borrowing costs artificially. And all companies should be allowed to refinance their debt.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by disha »

Interesting that in a Indian economy news and discussion we bring in SL., which is tiny. Not to hurt feelings but it is like saying that US can learn lessons from the economy of Singapore.

There are certain similarities and dissimilarities. There is nothing wrong in importing items which are cheap., actually with the shift to service and knowledge economy - importing material is the right way to go.

India's biggest imports are Oil and Gold., basically energy and rare metals. India is a continental sized nation with a unified market., so a glass factory in Bengal can "export" glasses to Gujarat for cotton textiles. Point is once India becomes "energy independent"., the only reason it will need to export will be to sustain its import of lucre. That historically has been the case and will remain so while the Indian-ocean states will come into its economic orbit.

Hence to say that India's growth should be export led is to look in the rear view mirror while driving forward.

===

On the eCONomic times article on exporter's woes., this is the nugget one must not miss:
In the previous indirect tax regime, exporters enjoyed upfront tax exemption on goods to be exported. But under GST, exporters are procuring goods and services on payment of GST. This credit of GST, which is available with exporters is supposed to be claimed as refund.
Basically what is hurting them is going from no-tax regime to complete-tax regime. Their "tax arbitrage" is gone and hence the rona-dhona.

===

Excellent post Uttam'ji. However I disagree with it on some counts:

1) High real interest rate.

Agree & Disagree., the banks need to lower interest rates. However they are also saddled with NPAs and need to recover all their losses. One cannot by fiat ask them to lower interest rate. Further, a high interest rate will ensure that the scope of bubbles is less.

2) Strong Rupee

Disagree. Exporters cannot rely on rupee devaluation to sustain their exports., that is a race to bottom. Instead they need to move up the value chain. Innovation needs to be forced on them.

3) Demonetization a shock to the payment system :

Disagree. Demo punctured the hyper-inflated RE market. It brought RE to a standstill. The rest of the economy is just moving fine.

4) GST :

Disagree. The shock if at all is to the "tax arbitrage" and to dog biscuits industry.

Both Demo/GST put halt to the "dog biscuits" industry and hence the most howls.

5) NPA at banks :

Agree. But this is what UPA-II wanted., gut the economy.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by chetak »

disha wrote:Interesting that in a Indian economy news and discussion we bring in SL., which is tiny. Not to hurt feelings but it is like saying that US can learn lessons from the economy of Singapore.

There are certain similarities and dissimilarities. There is nothing wrong in importing items which are cheap., actually with the shift to service and knowledge economy - importing material is the right way to go.

India's biggest imports are Oil and Gold., basically energy and rare metals. India is a continental sized nation with a unified market., so a glass factory in Bengal can "export" glasses to Gujarat for cotton textiles. Point is once India becomes "energy independent"., the only reason it will need to export will be to sustain its import of lucre. That historically has been the case and will remain so while the Indian-ocean states will come into its economic orbit.

Hence to say that India's growth should be export led is to look in the rear view mirror while driving forward.

===

On the eCONomic times article on exporter's woes., this is the nugget one must not miss:
In the previous indirect tax regime, exporters enjoyed upfront tax exemption on goods to be exported. But under GST, exporters are procuring goods and services on payment of GST. This credit of GST, which is available with exporters is supposed to be claimed as refund.
Basically what is hurting them is going from no-tax regime to complete-tax regime. Their "tax arbitrage" is gone and hence the rona-dhona.

===

Excellent post Uttam'ji. However I disagree with it on some counts:

1) High real interest rate.

Agree & Disagree., the banks need to lower interest rates. However they are also saddled with NPAs and need to recover all their losses. One cannot by fiat ask them to lower interest rate. Further, a high interest rate will ensure that the scope of bubbles is less.

2) Strong Rupee

Disagree. Exporters cannot rely on rupee devaluation to sustain their exports., that is a race to bottom. Instead they need to move up the value chain. Innovation needs to be forced on them.

3) Demonetization a shock to the payment system :

Disagree. Demo punctured the hyper-inflated RE market. It brought RE to a standstill. The rest of the economy is just moving fine.

4) GST :

Disagree. The shock if at all is to the "tax arbitrage" and to dog biscuits industry.

Both Demo/GST put halt to the "dog biscuits" industry and hence the most howls.

5) NPA at banks :

Agree. But this is what UPA-II wanted., gut the economy.
scorched earth withdrawal. :twisted: they mined the economic landscape when they were sure that they were going to be left out in the cold.

Their stalling tactics in and out of parliament shows that they are working to a set plan. They have just lost that parliamentary advantage, though.

pappu scouting abroad for money is a hastily drawn up plan B.

The crippling IT raids in KAR is just one solid example of the new empire striking back. Todays IT raids on SM krishna'a son in law, the coffee day guy, has left bangalore perplexed. In a few days it should become clear as to why it happened.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Vidur »

These are cries of lawless people being made law abiding by danda. It would be worrying if they didn't scream.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by KrishnaK »

The distress is real. It does not look to be due to GST/Demonetization alone. From Indian economy in a tailspin: What went wrong
Pronab Sen, former chief statistician of India and someone who has worked in the government for the last 25 years, said the problem started with the reversal of rural growth, which remained high during the 2004-2012 period, propelling overall economic growth. “While farm output was growing at 3%, farm income was increasing by 7.5%. Income of the poorest was growing rapidly (and) that drove growth as well as inflation,” he said.

The problem began in 2013-14 when things started to reverse. Global food prices came down while the Reserve Bank of India (RBI) still maintained a restrictive monetary policy. Growth in the minimum support price (MSP) of selected farm products slowed dramatically to 3.5% per year from an average of around 8% earlier.

After 2014, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which assures 100 days of manual work a year to at least one member of every village household, became resource-driven rather than demand-driven.

Less focus on MGNREGS, especially during the two consecutive droughts years of 2014-15 and 2015-16, aggravated the rural demand situation and dampened rural growth. While growth was slowing, two back-to-back structural changes, the withdrawal of high-value banknotes and implementation of GST gave a body blow to the unorganized and organized sectors respectively.
People here were attributing the boost in numbers due to change in the methodology to rural growth and savings accrued from DBT. Rural growth has been in the doldrums for a while now.
The share of working capital loans in total lending has fallen from 76% in 2002 to 48% at present; lending for housing and fixed capital rose from 24% of total lending to 52% without a resolution mechanism such as the current insolvency and bankruptcy law in place. Sen says such a law should have been in place seven-eight years ago and blames the UPA for the mess in the banking system.

NPAs, or bad loans, in state-owned banks touched Rs6.41 trillion by 31 March 2017 from Rs1.56 trillion on 31 March 2013. This excludes restructured loans.

Sen said restrictions on cattle trading have further aggravated the situation in the rural economy. “Animals act as an insurance at time of crisis in rural India as they can be easily sold for meeting daily needs. The restrictions on selling cattle is one of the reasons growth in animal husbandry came down in the June quarter of 2017-18, thus affecting agricultural growth,” he added.

....

“Think small, not big and begin now” is the one line prescription by Sen. “No bullet trains, no eight-lane highways. Focus on rural housing, rural roads, minor irrigation projects where results can be delivered quickly,” he said.
Surprisingly close to what vina says.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Suraj »

I don't think 'rural distress' is a cyclical factor that's just showing up since 2014-15. Rather, it's a chronic structural issue that cannot be fixed without moving hundreds of millions of people out of rural agrarian economy to urban secondary and tertiary employment. The only reason there was rural income growth that was >2x of rural agricultural output was the cross subsidization of rural people through the MNREGA program. That's not really real income growth, because as Sen mention, it was accompanied by inflation as well.

Sen's prescriptions are also entirely about moving rural people out of agriculture:
“Think small, not big and begin now” is the one line prescription by Sen. “No bullet trains, no eight-lane highways. Focus on rural housing, rural roads, minor irrigation projects where results can be delivered quickly,” he said.
That basically says "they're not making anywhere enough from agrarian economic activity. Spend on rural infrastructure and employ them in other ways." In other words, this is a chronic structural issue. I don't really support his argument much though. Why build rural infrastructure when people have no desire to live there long term ? MNREGA already proved that building small bits of cheap rural infrastructure has poor ROI. Invest in building entire towns and cities. Make the rural poor build it. And then they live in it.

GoI's best approach here would be a new National Urbanization Program. Bonds can be issued, including through transfer of benami properties and other black wealth into government hands in exchange for bond notes (less a penalty). Infrastructure companies get tax benefits for investing in building these new cities.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by A_Gupta »

This is from July 2017. Have things changed so much by September?
https://www.bloomberg.com/news/articles ... m-cash-ban
“Macro indicators have improved” in rural India, HSBC economists Pranjul Bhandari, Aayushi Chaudhury, and Dhiraj Nim said in their July 10 note. The plunge in inflation has helped boost annual real income growth to just under 4 percent from contracting levels a year ago while rural unemployment has sunk from about 9 percent last September to around 4 percent, according to HSBC.

Normal rains so far in 2017 and a bumper crop in 2016 after a two-year drought have generated more jobs for rural Indians who work the land -- some 70 percent of rural households who are “landless, according to HSBC.

That’s help pushed up two-wheeler sales and the production of consumer non-durables in this segment, according to the HSBC report. Shares of companies with substantial rural customer bases are experiencing steady growth.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by A_Gupta »

http://economictimes.indiatimes.com/ind ... 520017.cms

Sep 15, 2017
Consumption of groceries and daily essentials picked up sharply in July, helped by pent-up demand from traders after orders had been slashed in June and blunted competition from unbranded products that struggled to reach retail shelves due to difficulties in goods and services tax (GST) compliance, especially in rural markets.

Fast-moving consumer goods (FMCG) sales by volume — or an actual number of products sold — rose 6 per cent in July, faster than 2 per cent a year ago, according to the latest data by Kantar Worldpanel, the consumer insights arm of WPP. This was mainly driven by 12 per cent growth in rural areas and a 7 per cent rise in the food and beverages category that has a significant chunk of unbranded players. A year ago, both segments grew 2 per cent each.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by A_Gupta »

http://www.livemint.com/Opinion/cqnUta4 ... uzzle.html
The state of India’s rural economy is puzzling. There is enough evidence to support two opposing statements: one, that the rural economy has improved; and, two, that the rural economy is in the doldrums.

On the one hand, some indicators are positive. The unemployment rate has been falling while rural wages have been rising. On the other hand, instances of rural distress are rife and rural consumer sentiment has weakened.
It helps to solve the puzzle if we note that the rural economy consists of two distinct parts, “landless” and “landed”. We define landless as those owning less than a hectare of land, and landed as those owning more than a hectare. The landless, by our definition, make up about 70% of rural households and the landed the rest.

This distinction illuminates three other things. One, we find that the landless rural population has a negative income-consumption gap, which basically means that its income is hardly enough to cover its consumption requirements. On the other hand, the landed have a positive income-consumption gap. Two, it is the landed who are more indebted as a group than the landless. They also use more formal sector sources of credit than the landless. Finally, we find that a majority of the income for the landless comes from wages while that of the landed from cultivation.

Putting all this together, we can build a compelling narrative. After a two-year drought, the good monsoon rains in 2016 increased the demand for labour. As a result, real wages have risen gradually and the unemployment rate has fallen in tandem. This has largely benefited the landless, given that the majority of their income is from wages.

In contrast, the landed, who pay these wages and depend more directly on income from cultivation, have borne the brunt of falling food prices, as what they have received from selling farm produce has been lower than expected.

Prajakta Patil/Mint
Also read this:
http://www.livemint.com/Politics/8TaCsc ... repor.html
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by A_Gupta »

Suraj wrote:I don't think 'rural distress' is a cyclical factor that's just showing up since 2014-15. Rather, it's a chronic structural issue that cannot be fixed without moving hundreds of millions of people out of rural agrarian economy to urban secondary and tertiary employment. The only reason there was rural income growth that was >2x of rural agricultural output was the cross subsidization of rural people through the MNREGA program. That's not really real income growth, because as Sen mention, it was accompanied by inflation as well.
If you believe the articles I posted above (and it would be good to have the hard data, not just the various economists' opinions) then the immediate issue is not with the wage-earners but with those whose earnings are from the land, who suffer from falling food prices.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Prem »

Reserves touching 403 Bilion. Almost 10 Billion added in Month.
https://www.rbi.org.in/Scripts/BS_ViewW ... x?id=41742
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Suraj »

A_Gupta wrote:If you believe the articles I posted above (and it would be good to have the hard data, not just the various economists' opinions) then the immediate issue is not with the wage-earners but with those whose earnings are from the land, who suffer from falling food prices.
Probably on account of the lull between rabi harvest and kharif harvest seasons . Agricultural income is cyclical in nature . But without reducting the absolute number of people involved in it by consistently tens of millions , it is hard to break out of the rut . Building small scale rural infrastructure doesn’t have a lot of bang for the buck. Of course basic utilities, road and power is necessary , but beyond that, we cannot provide for the needs of a 70% rural agrarian population from the efforts of the 30% in cities. Those 70% don’t produce enough economic output to be self sustaining . They only gain income growth through programs like NREGA funded by urban tax income (farm income isn’t taxed...)
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by A_Gupta »

Suraj wrote: Probably on account of the lull between rabi harvest and kharif harvest seasons . Agricultural income is cyclical in nature . But without reducting the absolute number of people involved in it by consistently tens of millions , it is hard to break out of the rut . Building small scale rural infrastructure doesn’t have a lot of bang for the buck. Of course basic utilities, road and power is necessary , but beyond that, we cannot provide for the needs of a 70% rural agrarian population from the efforts of the 30% in cities. Those 70% don’t produce enough economic output to be self sustaining . They only gain income growth through programs like NREGA funded by urban tax income (farm income isn’t taxed...)
Yes, in the longer term totally agree; but the next two years are critical. :wink:
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by atamjeetsingh »

Rural economy is cyclic in nature based Kharif and rabi crops cycle. Kharif crop will be harvested in couple weeks to month and reach mandis. Farmers will have cash in their pocket and with festival season coming economic activity will pick up in rural areas. Govt has taken a prudent step in not increasing minimum support price for grains and cereals which were helpful in controlling food inflation but net result is less residual cash left with farmer for spending. We have to acknowledge there is rural distress there is no denying about it.Now we have to realize the main culprit for rural distress or destroyer of rural economy is MNREGA. What MNREGA has done is took out labour from rural market.Thereis a pool of unskilled labour which was earlier helping hand on the farm is simply not ready to work anymore as there basic needs are met with MNREGA money.Now the farmer has to get the labour from outside so they not only has to pay them labour but also bear lodging and food cost. The other ill effect is Bangladeshi workers are reaching the remote villages. The main requirement for labour is during harvesting season which last 5-6 weeks twice a year.To make rural economy viable there is need for structural as well as policy reform. Its not that govt is not aware of labour crunch, they are and there was a talk to link MNREGA to farm work during harvesting season. The plan was if there is Rs350 a day labour charge govt will pay rs200 from MNREGA and RS150 will be paid by farmer as employer. More needs to be done with regards to education in rural areas.There is need of opening more ITIs and also Trades should be taught from high school. We need to create a pool of skilled labour in villages. Again govt is aware of what needs to be done but I dont see any implementation of trades school from HR ministry.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Austin »

Indian Public Debt In BRICS and World Context

Image

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

Post by Austin »

Seems Brazil is worst among BRICS followed by India , China & Russia when it comes to Public Debt to GDP Ratio .....Japan takes the crown along with with EU countries and Canada

I wonder why Debt is counted in context of Nominal GDP and not PPP GDP ?
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by A_Gupta »

Austin wrote:Seems Brazil is worst among BRICS followed by India , China & Russia when it comes to Public Debt to GDP Ratio .....Japan takes the crown along with with EU countries and Canada

I wonder why Debt is counted in context of Nominal GDP and not PPP GDP ?
Debts are repaid with nominal GDP dollars, not PPP dollars.

What that chart does not show is the trend of debt to gdp ratio.
From June 1, 2017:
On Thursday, Moody’s said that while the general government debt level declined to 67.5 percent of gross domestic product in 2016 from 84.7 percent in 2003, it remains a “key credit constraint.”
https://www.bloomberg.com/news/articles ... ody-s-says
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by A_Gupta »

Bloomberg reports:
https://www.bloomberg.com/news/articles ... ro-picture
Foreign funds have sold a net $761.6 million of Indian stocks in September, after pulling out $1.73 billion last month, which made for the biggest withdrawal since November.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Manish_Sharma »

http://www.thehindu.com/news/cities/che ... 740432.ece

Economy has hit rock bottom, can only revive from here, says Gurumurthy
Gurumurthy said on Friday that the economy needed urgent governmental intervention.

“I have a feeling we are hitting the bottom now. There is no way this situation can continue. Because the government has to take a decision whether to have this whole lot of NPA regulations, the Mudra decision; if these 2-3 decisions are taken in the coming six months, the economy is poised to take off.

I have faith that given the right policy input, the economy will pick up immediately,” he said.

Mr. Gurumurthy’s analysis comes less than a week after BJP leader Subramanian Swamy told the CNN-News18 channel in an interview that the economy was in a “tailspin,” warning that it could be moving towards a depression.
Mr. Gurumurthy was speaking on ‘Demonetisation – Its role, Impact and Follow-up,’ at an event organised by the Chennai International Centre at the Madras School of Economics.

“Too many disruptions, too soon. This is one of the things which a government in urgency is doing. Demonetisation, NPA rules, bankruptcy law, GST, thrust against black money — everything at one stretch; commerce cannot absorb all this,” he said.

Mr. Gurumurthy, who said, “I have not come here to defend the government,” opined that despite its many benefits, demonetisation was implemented badly.

He claimed that due to a communication error between the Finance Ministry and a confidential cell, black money holders escaped the demonetisation dragnet.

Mr. Gurumurthy said the withdrawal of cash crippled the informal sector, which generated 90% of jobs and satisfied 95% of its capital requirements from outside the banking system.

As a result, he said, “Aggregate consumption and generation of jobs have stagnated. The informal sector now borrows at 360-480% interest. It is already dealing a big blow to our growth and will continue to do so.”

RBI blamed
Mr. Gurumurthy, though, declined to directly criticise the political leadership and blamed the RBI for the subsequent failure.

“The government grievously failed to implement the Mudra first. Then only they should have come for demonetisation. That was the original strategy. The Mudra Bank was stopped by the Reserve Bank, which did not want to give up monetary control,” he said.

Mr. Gurumurthy said political pressures on the government had reduced the many objectives of demonetisation to one: of ending the circulation of black money. “The demonetisation scheme had a big hole. It was because there was no coordination within the government.

The advice the government of India received was that demonetisation and the income disclosure scheme should be announced simultaneously. Because of the communication gap within the system, income disclosure was announced first and demonetisation, later.

“Demonetisation became a gas chamber. That was the first major strategic fault,” he said. This has meant that, “Instead of collecting the tax in advance, the government is now chasing the black money to collect taxes.”

Economic commentator and Editor of Thuglak magazine S. Gurumurthy said on Friday that the economy needed urgent governmental intervention.

“I have a feeling we are hitting the bottom now. There is no way this situation can continue. Because the government has to take a decision whether to have this whole lot of NPA regulations, the Mudra decision; if these 2-3 decisions are taken in the coming six months, the economy is poised to take off. I have faith that given the right policy input, the economy will pick up immediately,” he said.

Mr. Gurumurthy’s analysis comes less than a week after BJP leader Subramanian Swamy told the CNN-News18 channel in an interview that the economy was in a “tailspin,” warning that it could be moving towards a depression.
Mr. Gurumurthy was speaking on ‘Demonetisation – Its role, Impact and Follow-up,’ at an event organised by the Chennai International Centre at the Madras School of Economics.

“Too many disruptions, too soon. This is one of the things which a government in urgency is doing. Demonetisation, NPA rules, bankruptcy law, GST, thrust against black money — everything at one stretch; commerce cannot absorb all this,” he said.

Mr. Gurumurthy, who said, “I have not come here to defend the government,” opined that despite its many benefits, demonetisation was implemented badly. He claimed that due to a communication error between the Finance Ministry and a confidential cell, black money holders escaped the demonetisation dragnet.

Mr. Gurumurthy said the withdrawal of cash crippled the informal sector, which generated 90% of jobs and satisfied 95% of its capital requirements from outside the banking system. As a result, he said, “Aggregate consumption and generation of jobs have stagnated. The informal sector now borrows at 360-480% interest. It is already dealing a big blow to our growth and will continue to do so.”

RBI blamed
Mr. Gurumurthy, though, declined to directly criticise the political leadership and blamed the RBI for the subsequent failure.

“The government grievously failed to implement the Mudra first. Then only they should have come for demonetisation. That was the original strategy. The Mudra Bank was stopped by the Reserve Bank, which did not want to give up monetary control,” he said.

Mr. Gurumurthy said political pressures on the government had reduced the many objectives of demonetisation to one: of ending the circulation of black money.

“The demonetisation scheme had a big hole. It was because there was no coordination within the government. The advice the government of India received was that demonetisation and the income disclosure scheme should be announced simultaneously. Because of the communication gap within the system, income disclosure was announced first and demonetisation, later.

“Demonetisation became a gas chamber. That was the first major strategic fault,” he said. This has meant that, “Instead of collecting the tax in advance, the government is now chasing the black money to collect taxes.”

“GST is a welcome measure, but it is too ambitious. It wants to formalise the Indian economy in one go. It’s not possible. It has to be a calibrated formalisation of the Indian economy.

The media is failing, economic thinktanks are not doing original work for India because they are still on a one-size-fit-all model,” he said.

While he did not blame the Prime Minister, Mr. Gurumurthy blamed the Supreme Court for its interventions during demonetisation.

“The media wanted riots, the Supreme Court wanted riots. The people did not riot. It goes to prove the psychology of India as a peaceful nation,” he said.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by nam »

This is my naïve understanding of economy.

"Growth" is national government printing money.

Countries which are able to invest this money or give it to people doing worthwhile stuff, like US will see growth and advancement. US does not maintain a dole system or socialism, means most of the it prints is given to private enterprises. Hence it can go on having major debt like 21T and still not sink. The products produced and funded by US gov or Japan interests the world and they continue to survive.

On the other side, when government gives out money to people to sit on their backside like in Greece..countries sink. A dole system, where nothing is produced and just inflation.

The Chinese used the concept of funding their enterprises to beat the competition in cost. Even if the Chinese gov, increase their debt, it will continue to function fine as long as the Chinese are producing something worthwhile.


Unfortunately for us, we have our legs in two boats. The GoI funds a large "socialist ecosystem", where people are paid to produce nothing worthwhile. On the other boat is the private ecosystem. This ecosystem hold the private ecosystem hostage. If GoI funds large contract to private enterprise who can use this to gain technology and make them competitive against is the way forward.

An example is bullet train. The Indian vendor is BHEL. Does anyone think that BHEL is going to absorb the tech and try to sell it to the world?


Compare that to IT. The tech was easier to master, done by private companies, was considered not mass market by GoI. And we dominate the market.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Yagnasri »

There was a proposal to start several "small bank" with 20 Lakhs as the maximum amount of loan they can give. RBI did almost nothing to make it happen. It could have been very helpful by this time to have such banks. A lot of small business people would have been helped with that.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Austin »

nam wrote:This is my naïve understanding of economy.

"Growth" is national government printing money.

Countries which are able to invest this money or give it to people doing worthwhile stuff, like US will see growth and advancement. US does not maintain a dole system or socialism, means most of the it prints is given to private enterprises. Hence it can go on having major debt like 21T and still not sink. The products produced and funded by US gov or Japan interests the world and they continue to survive.

On the other side, when government gives out money to people to sit on their backside like in Greece..countries sink. A dole system, where nothing is produced and just inf.

Oh US is the largest system that gives doles to public , the largest budget spending is social exp, US money printing has made their economic problem far more worse then it was in 2008
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by hanumadu »

https://blogs.timesofindia.indiatimes.c ... te-action/

By Arvind Panagariya
Read it all.
The government must especially resist the temptation to go on a spending spree pre-emptively. It has taken three years of determined effort to achieve fiscal consolidation. This achievement cannot be sacrificed without compelling evidence justifying it.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Gus »

How the hell can we even compare fiscal policy of US with any country. Dollar can be printed without inflation like what other currencies have to suffer - because it is backed by oil. What US does and gets away with cannot be used a basis for what other countries can do.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Yagnasri »

Basically, this fellow is suggesting do not do anything and lose public support and elections. From where we are getting these kinds of idiots as our advisors.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Karthik S »

Good points mentioned here.
Why India Needs An Entrepreneurial Development Bank

The backdrop of India’s 70th year of Independence and the inspiring speech by Prime Minister Narendra Modi provide a perspective on why it’s important for India to develop faster than ever before. It is imperative that if the idea of vikas (development) was to be implemented on the ground, at the scale being promised, it is important that India needs to look at the idea of a ‘start bank’ from a policy perspective. Employment generation is a key part of the Modi government’s strategy and this article tries to look at the background of development banks, why India needs them, and more importantly, how it will help the country’s broader developmental goals.

The idea of an entrepreneurial development bank (EDB) in India would serve multiple purposes. First, it could serve as a one-stop-shop for startup developmental funding across industries and governmental organisations. Even though there have been small pockets of startup initiatives undertaken by government’s premier think tank NITI Aayog, the scalability of a centralised EDB is very important for its success as a good lending partner to prospective entrepreneurs. For example, Indian companies generated only about $1.5 billion in startup funding in 2016. This is much smaller compared to the scale at which investment is needed.

In addition, most of this investment, since it is not driven by a central authority, lacks consistent funding over a longer period of time. This has further accentuated the plight of some startups that have folded up due to lack of funding or have been acquired by bigger players. This potential to scale the bank provides it with substantial capital provided by the government and other donors. It will help address one of the main concerns of the startup community and provide a stream of credit, which is reliable and consistent.

Second, the bank would integrate or streamline a wide array of financing schemes, which are run to promote startups in the country. The issue with these governmental schemes and policies is that they are too cumbersome, convoluted and add more to the regulatory burden for the entrepreneurs. Not only would this streamline these services into one unit, it would also serve as a cumulative force to drive home the concerns of startup owners.

Third, it could be a boon for the small and medium enterprises due to a consistent credit supply provided at affordable rates. The availability of credit through such a specialised and centralised organisation is a blessing for rural entrepreneurs. Almost 80 per cent of the informal sector (which is more than 70 per cent of the economy) access credit through informal financial institutions at exorbitant rates. This creates a debt spiral among entrepreneurs, and causes them to shrink, and in some cases even close their businesses. This is where the EDB can prove to be of great value with strong credit supply at affordable rates over a longer period of time.

In addition, the EDB can also help to drive key government schemes such as the MUDRA initiative through a far more focused campaign rather than being part of a behemoth like the Reserve Bank of India, which is involved in way too many things to focus on such schemes.

So, are there such precedents globally for such schemes? Starting such a bank is the need of the hour for our economic progress. India needs it and hence it needs to be incorporated. However, other countries have also tried these policies and have benefitted immensely. For example, the Netherlands has an entrepreneurs development bank, which is a public-private partnership with the government holding a majority stake. It has pioneered the emergence of startups in the country and was recently called the high-tech startup capital of the world due to such favourable credit enhancing mechanisms such as the FMO mentioned here. In France, the state investment bank has become the highest investor in startups including the private sector after the pro-entrepreneurial policies of President Emmanuel Macron and his government since being elected a few months ago.

It would be imperative for India to learn from these models and evolve an EDB that would benefit the entrepreneurs in the country. A public-private partnership model would be wise with a seed capital of more than Rs 1,000 crores to start with. All the states in the country need to be made stakeholders and participants so that there is a federal engagement with the bank. In addition, it would also enable to tap into the vast single market that India’s states can provide for entrepreneurs to explore and grow with. Not only will this provide a credit access platform for entrepreneurs, it would also enable an employment boom in the country pioneered by common businessmen, who are eager to challenge the world in their respective fields.

In short, the potential of India’s youth can only be leveraged when they are provided with opportunities to nourish their entrepreneurial talent. The access to credit, the feasibility of business loans and the continuous support of financial schemes and mechanisms are very important to achieve development goals. One of the innovative yet simple ways is to create an entrepreneurial development bank that can benefit everyone. It could be the masterstroke that can benefit both politically and economically for the Modi government in the years ahead.
https://swarajyamag.com/business/why-in ... opmentbank
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Yagnasri »

Instead of creating a new thing. Make banks already there to lend greenfield units. As posted before me, we need to take forward the creation of small banks which only lend small amounts to borrowers. They help small units and businesses which at present borrow at very high rates from private lenders.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Karthik S »

Yes, concept is the same, setup institutions exclusively for lending to startups and SMEs.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by nam »

Austin wrote:
Oh US is the largest system that gives doles to public , the largest budget spending is social exp, US money printing has made their economic problem far more worse then it was in 2008
Social Security is possible because US produced stuff, which people want. 50% of US revenue is Income tax, which means the population is productive. As long the population is productive (and debt interest is bearable) US can go on having debt.

Same with Japan, large debt but cutting edge innovation.

Compare this to Greece where income tax collection is low and people retire early. Moreover they produce nothing worthwhile. They are down the sink.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by nam »

Unfortunately we don't produce anything that is world class. Our "demand" is driven by remittance and IT exports( to some extend other exports).

GOI needs to fund enterprises to take risk & produce cutting edge stuff. We are rolling out Metros in every city in the country. How much of the tech do we own now?

The Chinese would have by now got the tech, producing trains and start selling them.

Until we produce something worthwhile, there is no scope to growth. We have huge scope in defense production, ship building. Even a simple thing like toys. There is no harm in GOI funding a 1 billion dollar subsidy to companies producing toys and undercut the Chinese.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by Virupaksha »

All the banks have such departments (MSME) - most of them have high NPAs.
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Re: Indian Economy News & Discussion - Aug 26 2015

Post by nam »

Virupaksha wrote:All the banks have such departments (MSME) - most of them have high NPAs.
MSME cannot be the driver, they can only be the ecosystem that feeds a venture.There will be loses, it is given. Hence it is only GOI which can fund it.

GOI needs to fund ventures with a eye on building large ecosystem.

Chinese probably are not making money on their Bullet train venture. However they have now the tech and scale to seriously compete in international RFPs. The ecosystem would have tremendously helped the Chinese industry grow.


ATAGS is a perfect example of how things should be done. GOI is funding research, backed with a large order, done by two private entity. This now allows two Indian company to compete in international artillery market. The scale of 2000 guns gives them cost advantage. GOI get revenue in terms of taxes & IP from these ventures. Product support will be provided by private entities without the "chalta hai" attitude of PSUs.

GOI should encourage & fund Indian companies to buy IPs indirectly in terms of loan or orders. The objective should be to provide Indian companies tech and cost advantage.
Last edited by nam on 25 Sep 2017 15:59, edited 1 time in total.
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