Indian Economy News & Discussion - Nov 27 2017

[Uttam]

Privatisation of CPSEs during recession time a horrible idea: Sen

Privatisation of central public sector enterprises (CPSEs) in a recession time is a "horrible idea" as legitimate requirement of the financial sector to meet current requirement is further eroded, former chief statistician Pronab Sen said on Wednesday.

No it is not . Privatization has nothing to do with the state of the economy and everything to do with the availability of capital. In fact, during recessions, interest rates are extremely low and capital is very widely available. If anything, there are not enough good investment opportunities and that is what causes recessions. This current recession is probably the best time to sell assets (privatize). Central banks will keep pumping money at least till the end of the calendar year 2021. Indian govt. should take advantage of this increased liquidity and divest as much as possible.

[Suraj]

The production linked incentive program offers an interesting contrast on how much government policy can do a diametric about turn.

Production Linked Incentive
- Offers monetary reward for incremental production over 2019-20 base year production.
- Rewards are of the order of 4-6% of incremental production, not total production.
- Offered for specific targeted products, for a four year period. These areas have a committed PLI amount. Once all companies increasing production have claimed the incentive, there is no more available for that product.
- Incentives for greater production volume and for high value production.
- Investing companies must invest in plant and machinery, technology and R&D. It is not sufficient to simply expand existing facility utilization.

The goal here is seemingly straightforward - pay a small reward for incremental production. Incentivizes immediate investment and production. Incentivizes first mover. Incentivizes permanent capacity expansion and machinery investment. Potentially billions in incentives for largest producers. By tying incentives to value and volume, GoI gets back the incentives within the same timeframe in the form of GST.

License Raj
- Written permission to manufacture product, and in an allowed volume
- Production of reserved items require license. Production increase above 25% requires license.
- MRTP Act used to ensure no company gained outsized market share.

This couldn't be more different from PLI. Pretty much everything is the opposite motivation - control, constrain, prevent. Amazing that the economy was subjected to and survived four decades of that.

[disha]

License Raj
- Written permission to manufacture product, and in an allowed volume
- Production of reserved items require license. Production increase above 25% requires license.
- MRTP Act used to ensure no company gained outsized market share.

This couldn't be more different from PLI. Pretty much everything is the opposite motivation - control, constrain, prevent. Amazing that the economy was subjected to and survived four decades of that.

I do not think Indian economy survived four decades of license raj. License Raj resulted in pledging gold to raise money. It destroyed several dreams. Many a dream just died. It led to severe brain drain and brain in the drain. It led to broken families and life time of depression. It was murder of soul and rape of hope. It is still a cancer on the initiatives of the current and future generation. It cast a long, deep and dark shadow on the psyche of the nation.

License raj was a holocaust on the joy, dreams and aspirations of almost all Indians leave a very select few. It is possibly the civilizational karma that is helping us rise as a Garuda over the 'license raj' serpent of death and decay.

PS: Looking back the entire episodes of 70s, 80s and 90s just makes me bitter. Here we had an excellent demographic dividend in 70s which was frittered away under commanding heights of the economy. The demographic dividends of the 2000s were frittered away in the stagflation years of the economist prime minister actively aided by the rearguard action from the license raj. Think about it, an idea of unified Indian market was fructified only in last couple of years!

[Ambar]

Inflation is getting into a healthy range:

WPI inflation rises to 2.03 pc in Jan on costlier manufactured items, food prices ease

What is "healthy inflation" ? That term unfortunately has no meaning but only pain for the consumers . Today petrol prices touched the magic 3 digit mark for the first time ever in India. The government could have justified the 7th hike this year had they reduced the prices when international prices were dropping last year which they never did. This is not just terrible economics but also terrible politics when so many states go into elections in the next 6 to 12 months. Even the most ardent supporters of this government are struggling to defend a whooping 258% rise in excise duty on fuel in the last 6 years. Ofcourse, the cascading effect of fuel price hikes is already beginning to surface.

https://www.thehindu.com/news/cities/ba ... 833051.ece

The lorry yards at most APMC yards in the State have been witness to bargains and in some cases boycotts by transporters demanding a hike in the trip rates to accommodate diesel price rise. “At most yards, transporters are demanding a hike of ₹50 per quintal of foodgrains on every trip. As of Friday, we have negotiated it down to ₹20 per quintal of foodgrains being transported. That is already a hike of ₹0.20 per kg in the wholesale market,” said Ramesh Chandra Lahoti, chairman, APMC Committee, Federation of Karnataka Chamber of Commerce and Industry (FKCCI).

The price rise in the retail market will only add on to the hike in the wholesale market. “The fuel price hike has increased the cost price of commodities for us as the transport cost has gone up, over which we will have to accommodate our retail margin,” said Raju Sundaram, a retailer from Vidyaranyapura. Thus, the fuel price hike has already led to cost escalation at both wholesale and retail markets, which will eventually be passed on to consumers. “If there is a further hike in diesel price, transport costs will further go up, leading to inflation,” Mr. Lahoti said.

[Suraj]

GDP to return to growth in December quarter

After two consecutive quarters of contraction, India’s GDP is set to revert to the growth territory in the October-December 2020 period compared to the year-ago period, according to a report.

Private consumption and government spending will help the economy post a turnaround during the December quarter and the GDP will grow 0.7 per cent, Icra Ratings said in a report on Tuesday.

January export growth hits 22 month high

Merchandise exports rose 6.2% in January from a year before, the highest since March 2019, and 0.1% higher than December, showed the data released by the commerce ministry on Monday. It also beats the ministry’s preliminary estimate of a 5.4% increase in exports for January, signalling a nascent recovery following the Covid-related disruptions.

Imports, too, recorded a second successive month of growth (2% year-on-year) in January but the pace of rise slowed from 7.6% in December 2020. Trade deficit narrowed to $14.54 billion in January from $15.44 billion in the previous month.

Petrol, diesel price hike: Centre seen raking in Rs 1.9 lakh crore extra from fuel taxes in FY21

The Centre will earn Rs 1.87 lakh crore in FY21 from the Rs 13-16/litre additional cess and surcharges imposed on auto fuels in March 2020 and later in the month of May of the same year. Going by the projection of 8% rise in fuel demand in FY22, the Centre’s incremental income from the two auto fuels could be over Rs 2 lakh crore, if it chooses not to reduce the tax rates.

On Tuesday, retail petrol price in Delhi touched an all-time high of Rs 89.29/litre, rising by Rs 4.69/litre since the same day a month ago, as OMCs gradually increased the base-price of the products amid rising international crude prices.

[Kaivalya]

Few years ago real estate that was too frothy as lenders were relying on increase in property value and starting new projects more than completing them. Real estate was also collateral damage after demonitization...

Now frozen credit stuck in real estate incomplete projects hopefully is slowly going to be freed up ...

https://www.bloomberg.com/news/articles/2021-02-18/india-s-3-5-billion-zombie-home-experiment-starts-to-pay-off

[Suraj]

Apple negotiating to increase the PLI outlay to move iPad production to India:
Apple reportedly negotiating to build iPads in India

Apple is said to be lobbying the Indian government in a move that could see the company manufacture iPads in the country for the first time. Reuters reports that the government is planning to launch an incentive scheme designed to boost India’s computer exports, and Apple wants in — but is angling for a better deal.

The initiative will have a budget of up to Rs. 70 billion ($964 million) over five years, according to Reuters, but Apple is reportedly asking for that to be almost tripled to Rs. 200 billion. The reason is said to be partly that India’s supply chain doesn’t yet have the scale to meet Apple’s demands.

Two people that spoke to Reuters said it was likely that iPads would be assembled in India by one of its current contractors “as early as this year.” Apple’s partners in India currently include Foxconn, Pegatron, and Wistron.

I don’t think it’s such a bad idea to meet Apple in the middle on this. $2-2.5 billion in incentives over 5 years is small compared to the potential value of production that could be in the tens of billions a year. GoI should negotiate a corresponding volume and value commitment from Apple, which would gain it back the incentive outlay in the form of GST.

[vimal]

Apple negotiating to increase the PLI outlay to move iPad production to India:
Apple reportedly negotiating to build iPads in India

but Apple is reportedly asking for that to be almost tripled to Rs. 200 billion. The reason is said to be partly that India’s supply chain doesn’t yet have the scale to meet Apple’s demands.

Two people that spoke to Reuters said it was likely that iPads would be assembled in India by one of its current contractors “as early as this year.” Apple’s partners in India currently include Foxconn, Pegatron, and Wistron.

I don’t think it’s such a bad idea to meet Apple in the middle on this. $2-2.5 billion in incentives over 5 years is small compared to the potential value of production that could be in the tens of billions a year. GoI should negotiate a corresponding volume and value commitment from Apple, which would gain it back the incentive outlay in the form of GST.

^^ GoI should jump on this. This can jumpstart our MSME like nothing else will.

[Suraj]

Record 12 million find jobs in January: CMIE

In January 2021 India recorded a significant fall in the unemployment rate and an equally impressive increase in the employment rate. The unemployment rate fell to 6.5 per cent from 9.1 per cent in December 2020 and the employment rate rose to 37.9 per cent from 36.9 per cent. These are big positive changes.

The number of people employed increased from 388.8 million in December 2020 to 400.7 million in January 2021. This is a big increase. Nearly 12 million additional people found employment during January. This is big because month-over-month variations in employment rarely crossed the 5 million mark before the lockdown. The increase in January was twice this max variation. Also, after the initial months of sharp fall and rise in employment during the lockdown, the recovery process had slowed down and then stalled even before the recovery was complete. Employment declined in each of the three months October through December 2020. The recovery in January 2021 is therefore a welcome relief.

[Ambar]

Fuel price hike: It's a vexatious issue, says FM Nirmala Sitharaman
9
Feb 20, 2021, 05:29PM ISTSource: Times Now
Finance minister Nirmala Sitharaman said that steep rise in fuel prices is a vexatious issue for which there is no answer, except for reducing it. FM said, 'I am treading on an area where whatever I may say to being reality into picture will sound like I am avoiding the answer or shifting the blame. Fuel price rise is an issue in which no answer except for reducing the price would convince anyone. The OMCs decide whether to reduce or hike oil prices depending upon the cost incurred in importing the crude, refining it, distribution and logistics.'

The BJP govt in KAR has spoken to the center and conveyed its concerns about rising fuel prices and the public anger. The finance minister is shifting the responsibility on OMCs while ignoring the 258% increase in excise tax over the last 6 yrs on fuel.

[Suraj]

They’re not ‘ignoring it’ . On the contrary this has been deliberate policy since the beginning of this administrations first term. This policy objective has been discussed in detail on this thread around 2016. They have continuously used periods of very low oil prices to keep or increase excise duty levels to transparently fund non-tax revenue sources. They twice increased excise tax rates when crude prices collapsed last summer, while correspondingly accumulating crude into the strategic reserves.

The government doesn’t after allow a free float of the prices. Brent is up 50% since last summer, but prices in India are not up 50% since then. The flip side is that it considers this approach a suitable one in the context of its larger policy objectives. Of course middle class customers will be hurt, but that is part of the governments trade off here - they cannot always keep everyone happy and have chosen this path.

Everyone demands such trade offs. For example , as you’ve yourself argued, you want to eliminate MSP and you want petrol prices to be fixed. This is not an accusation of hypocrisy on either your or the governments part. It simply demonstrates that each entity looks at what maximizes its interests.

[Ambar]

Isn't the international benchmark against future contracts ? I wouldn't bet against prices increasing 50% compared to last year, it is already up over 30% in most places compared to this time last year. Trouble with increasing taxes when international prices drop and increasing the cess when international prices rise is a double whammy for the consumers. The problem with taxing fuel to fund other expenditures is this - a farmer may benefit from DBT for MSP funded by fuel cess in Punjab but everyone else suffers by inflation brought upon by rising fuel prices. The government was elected by overwhelming support of the middleclass, very high inflation, near hyperinflation levels in food prices and currency devaluations were some of the primary reasons for UPA's loss in 2014, sadly those lessons seem to have been forgotten.

Earlier this week Modi blamed the UPA government for OMC bonds and linked it to the rise in fuel prices, but what is the interest payment on those bonds ? Isnt 2.4 lakh crores/year in fuel excise more than enough to cover those interests ? While i agree no government can keep everyone happy it does seem like the government has decided that its best to keep the middleclass permanently unhappy. They need to cut expenditure or think of alternative sources of revenue to plug the huge fiscal deficit, it makes for very poor optics when people from border states cross into Nepal to fill up because it is 20 Rs cheaper/litre, the same Nepal which imports refined petroleum from India exports retail petrol back to India !

[vinamr_s]

How less regressive wrt to income is India’s GST because of the 5 different tax brackets (0%, 5%, 12%, 18% and 28%)?

Putting household necessities in the lower slab of 5% would have made it less regressive; however, additional cess on top of 28% tax on tobacco would have made it more regressive, i guess. Can anyone point me to any survey which has been conducted to actually estimate its regressiveness wrt income, because it isn’t possible to estimate otherwise.

[Vips]

FASTags drive toll collections to 1-day record of Rs 102 crores.

The toll fee collections through FASTags across the National Highway network have jumped by 23% in the past four days and the amount touched Rs102 crore on Friday, the highest ever toll collection in the NHAI’s history.

Sources said the total toll collection via FASTags was around Rs 85 crore before the NHAI designated all toll lanes as FASTag lanes. Officials said that while cash transactions have fallen below 10% during this week, another reason for good revenue is plugging of leakages.

“It takes a couple of days to collate all details of cash transactions. We are hopeful of record collection of user fee as now there is no avenue for anyone to under-report the actual toll collection,” said an official. Sources said the government has also stepped up monitoring of toll plazas to see that commuters are not caught in queue even with valid FASTags.

Actual reporting of tolls and plugging leakages is important as GOI is planning to leverage the toll collections to raise finance for additional infra building.

[V_Raman]

I think the govt is playing this to bring fuel under GST - which will immediately reduce the price...

[Suraj]

Trouble with increasing taxes when international prices drop and increasing the cess when international prices rise is a double whammy for the consumers.

I don’t think anyone’s unaware of this but as I stated, the government has deliberately chosen this policy for 6 years now. One can debate the electoral consequences if they want, but please use the politics thread for that.

In economic terms one needs to understand what this government has been dealing with. It faced a scorched earth situation in 2014. Normally high capex vs subsidy expenditure ensures growth continues. However this administration started out with a situation where capex was collapsing, subsidies were high with lots of wastage, banks were heavily stressed and needing recapitalization, construction companies were on the verge of bankruptcy, and multiple major companies were insolvent. There is a pithy image about this:

One cannot turn this around overnight because there’s no capex generating returns to reinvest, and subsidies once in place can be very sticky. This budget tho tries to address that and bring capex back to 5% of GDP:

this article has some great charts:
Story of Budget 2021-22 in 9 charts

Yes fuel taxation burdens consumers but the last few years have also shown one reality - the private sector cannot drive back the animal spirits of growth, and government cannot merely be the investor of last resort. The government has to invest in capex from the front and then the momentum will drive private sector investment .

This means the government needs the financial ammunition to invest at the bottom of the cycle and their choice is to tax fuel for that. They have chosen this approach continuously since 2014. It may hurt consumers but there’s no point in repeatedly stating that here - it is quite obvious but it’s the trade off they’ve chosen whether you like it or not.

However they have been prudent in this choice by also pushing RE electrification options, pushing for complete electrification of IR before the mid 2020s (which reduces demand and thus prices) and have started formulating an EV policy plan now.

[vinamr_s]

--- deleted ---

[Ambar]

I am sorry but i have to ask, as much as i dislike Su Swamy he made a point after the budget that India's falling growth from 2016 onwards isnt a supply side issue but a demand side problem. How will we return to 2000 to 2010 levels of growth if the demand is hamstrung by inflation ? India's domestic consumption accounts for near 55% of the GDP, we cannot ignore it if we want to see sustained growth.

21Q3 and Q4 is when we will have a clearer picture on the economy provided there isn't a second wave of covid. The pent up demand of 2020 has led to a surge in both private and government spending in the last two quarters somewhat distorting the true picture.

[vijayk]

I am sorry but i have to ask, as much as i dislike Su Swamy he made a point after the budget that India's falling growth from 2016 onwards isnt a supply side issue but a demand side problem. How will we return to 2000 to 2010 levels of growth if the demand is hamstrung by inflation ? India's domestic consumption accounts for near 55% of the GDP, we cannot ignore it if we want to see sustained growth.

21Q3 and Q4 is when we will have a clearer picture on the economy provided there isn't a second wave of covid. The pent up demand of 2020 has led to a surge in both private and government spending in the last two quarters somewhat distorting the true picture.

Is my following assessment right?

2000-2008 growth was because we had a booming real estate industry and money pumped into developed world ( credit default swaps and huge liquidity) allowed huge money flow into India which helped the demand side. After 2008 financial crisis, things started slowing down and result was slow growth after 2010. MMS Govt. did not use the money flowing in properly. They just did not invest in any growth. It was subsidies via different routes like MNREGA. Once the investments slowed after 2008, their revenues dipped too resulting in economic slide.

This Govt. has been investing in infrastructure and now manufacturing. If all the liquidity being pushed into western economies find its way into India and we take advantage of it by building infra/manufacturing, may be we will stronger instead of just investing in real estate bubble which we always did.

[Suraj]

Please keep all Su Swamy discussions to politics thread.

[Suraj]

Continuing my efforts to keep with the Jal Jeevan Mission every month:
21 Feb 2021


35.5% coverage now, up 2% from a month ago. Over doubled from the 16.9% coverage in August 2019 when the program began. UP is starting to make real progress, almost 10% coverage now. UP has 26 million households but then Bihar has 19.5 million and they're further ahead.

Here is the live dashboard. Click on the toggle button to see change since inception of the program.

Prior statuses:
15 Jan 2021
18 Dec 2020
15 Nov 2020
October 15 2020
September 20 2020
August 15 2020

[Ambar]

Is my following assessment right?

2000-2008 growth was because we had a booming real estate industry and money pumped into developed world ( credit default swaps and huge liquidity) allowed huge money flow into India which helped the demand side. After 2008 financial crisis, things started slowing down and result was slow growth after 2010. MMS Govt. did not use the money flowing in properly. They just did not invest in any growth. It was subsidies via different routes like MNREGA. Once the investments slowed after 2008, their revenues dipped too resulting in economic slide.

This Govt. has been investing in infrastructure and now manufacturing. If all the liquidity being pushed into western economies find its way into India and we take advantage of it by building infra/manufacturing, may be we will stronger instead of just investing in real estate bubble which we always did.

Your assessment is quite right, the growth between 2000-2009 was due to a combination of hot money rushing into developing economies and some prudent economic policies. After 2004 the current account deficit and fiscal deficit both started rising, infact post independence there have been only 3 instances when we ran current account surplus , once in the late 70s and then between 2002-03 and 2003-04, the very next year this turned into a deficit which continued to grow larger. However between 2004 and 2009 manufacturing too picked up as did investment on infrastructure but everything reversed from 2009 onwards. The current account deficit and the fiscal deficit started widening alarmingly, the government was heavily borrowing short term debt (if you remember on this very thread back then we were discussing how the bond curve had inverted ) to fund capital goods and consumer goods purchases . This kept weakening the rupee which sank from Rs 38 / USD in 2008 to Rs 69 / USD in 2013. We also had chronic high inflation in this period, you may recall the price of rice and lentils tripling in 2 years which led to protests in many places. By the end of 2013 the current account deficit had hit above 5% multiple quarters and fiscal deficit remained stubbornly high at around 5% average thanks to populist policies such as subsidies , MNREGA etc. All this took place in a period of low growth and low productivity pushing money into unproductive sectors like real estate. This is the economy the current government inherited (a point Suraj has made in the previous post) and tried to first stabilize the economy and then grow it.

The surplus liquidity in the west is once again gushing in. The stockmarket has been boosted by near 20 billion $ in FII money in just 3 months. Luckily the FDI has also improved it is up 13% yoy . Hopefully this will result in some meaningful development in infrastructure and manufacturing while keeping the inflation low to boost consumer confidence.

[vijayk]

Continuing my efforts to keep with the Jal Jeevan Mission every month:
21 Feb 2021


35.5% coverage now, up 2% from a month ago. Over doubled from the 16.9% coverage in August 2019 when the program began. UP is starting to make real progress, almost 10% coverage now. UP has 26 million households but then Bihar has 19.5 million and they're further ahead.

Here is the live dashboard. Click on the toggle button to see change since inception of the program.

Prior statuses:
15 Jan 2021
18 Dec 2020
15 Nov 2020
October 15 2020
September 20 2020
August 15 2020

Thanks ...

[rajkumar]

In these Haryana villages, PM Modi’s Nal Se Jal has ended a painful daily chore for women...

https://theprint.in/india/in-these-hary ... en/589055/

[Suraj]

Interesting estimates on PLI outgo vs returns in the form of GST mentioned a few posts earlier:

[Uttam]

Interesting estimates on PLI outgo vs returns in the form of GST mentioned a few posts earlier:

I believe there is a lot more financial gain for the government than just GST. What about income tax from people employed in such establishments? Also, the GST from the increase in consumption by these people. All the stamp revenue to states from buying and selling properties by employees as well as employers. Excise tax on the increased use of fuel. Electric duty levied by state govts. If all these taxes are plowed back for improving infrastructure then these schemes will have a true multiplier effect.

[Suraj]

Yes of course, such externalities are hard to quantify exactly , and the image is really simply in offering just the math of the GST return on actual production and export value. The aggregate gain will be much more, due to economic multiplier of activity.

[Vamsee]

I find that image interesting. 25% value addition? Simple assembly will be something like 5-7% value addition. So, 25% means a lot of domestic component manufacturing as well! Which is excellent. Even after these many years, China still has around 40-50% domestic value addition I think.

Unless big ticket items like camera modules, screen, silicon chips/memory, PCBs are indigenized, it wont happen.

Samsung will be making screens in their noida facility shortly. For PCB, I think they hiked the import duty recently to to nudge companies to make it in India instead of importing.

So the big missing piece is Chip manufacturing facility.

[Suraj]

PLI provisions target both volume and high value add. In other words, there's an extra incentive bonus for a higher value add. At least that's the way it is set up. So far it's attracted so much attention that clearly they've done something right. It remains to be seen how well the math holds up in reality.

For entities like Apple, clearly PLI is a great encouragement to move production to India - given that in several categories their 2019-20 production is 0, they stand to gain immediately since PLI offers incentives on incremental production and not gross production.

Given that any major Apple production would have both volume and value, GoI should probably negotiate a higher PLI allowance, but in exchange require higher volumes, to allow them to recoup that on schedule.

[Suraj]

Multiple sources are now projecting that full year GDP growth this year will be better than -7%. Arvind Virmani and Karan Bhasin have a working paper on this: Growth Implications of Pandemic: Indian Economy
https://twitter.com/karanbhasin95/statu ... 7784117248

DBS also projects the same now:
Q3 GDP growth may turn positive, full year drop -6.8%

Projecting that the gross domestic product (GDP) may have returned to the black in the last quarter of the calendar year 2020, DBS Bank in the report said the full-year growth in real terms may be at a negative 6.8 per cent.

India’s GDP may turn positive at 1.3 per cent in the third quarter of 2020-21, having witnessed contraction in the previous two quarters due to the coronavirus pandemic, as the number of cases is falling and public spending has started rising, according to a report.

The government will release the GDP numbers for the October-December quarter of the current fiscal on Friday. Projecting that the gross domestic product (GDP) may have returned to the black in the last quarter of the calendar year 2020, DBS Bank in the report said the full-year growth in real terms may be at a negative 6.8 per cent.

DBS Group Research economist Radhika Rao said sharp improvement in the COVID-19 situation and rising public spending are the two factors that bode well for December 2020 quarter. India posted de-growth of 24 per cent and 7.5 per cent in GDP in first and second quarters ended June and September 2020, respectively.

The unlocking saw domestic demand benefit from festive tailwinds, pent-up consumption and pick-up in capacity utilisation alongside resumption in sectoral activities, DBS Research said.

The Economic Survey 2020-21 has projected the economy to grow 11 per cent in the next fiscal beginning April 1, a shade higher than the RBI’s projection of 10.5 per cent. However, the International Monetary Fund (IMF) expects India to grow at 11.5 per cent in 2021.

DIPP are yet to update their quarterly FDI data, but some news indicates huge gains in the Oct-Dec quarter:
FDI grew 81% to $10.5 billion in November, $58.3 billion in first 8 months

[Mollick.R]

Hats off to the Big Bull for such clarity of thoughts......
He sounds much much convincing and have rationale then many E-con-mists & think tankers.........
A must read........

India will overtake China in the next 25 years: Rakesh Jhunjhunwala
ET Now Last Updated: Feb 24, 2021, 12:33 PM IST

The common contention is our figures are fudged. But 27 state governments are giving these figures, not the central government. It can’t be that all the 27 states have come together to fudge the figures. We have little faith in ourselves.
.........
What makes societies is skills and democracy. We are among the most skilled people in the world and we have seen a lot of changes in the last 8-10 years and the government has made promise of further reforms. There is no question that this is going to be India’s decade and may be the start of India’s manifold decades.
.
.
People talk of socialism and capitalism. I talk of realism and the realism is that the more you open the economy, the more prosperous we get. When Mr Agarwal bought Hindustan Zinc NSE 0.62 %, its profit was not even Rs 200 crore. Today the profit is Rs 7,000 crore.

Which is the one policy you are excited about?

The only way to eliminate poverty today is growth. People think that the poor have not benefited. My help at home now has got an identity thanks to the Aadhaar Card. I could get a passport for him. For 11 months, he works for me and one month, he goes to his children. Ten years earlier, he could not even talk to his children. Today, everyday he has video calls with them. So the quality of life has improved for the people who are underprivileged. I personally feel we are going to have growth with social justice. The constant efficiency that the government is bringing and the disbursement of food grain or electricity subsidy is unbelievable. Once the electricity reforms go through as proposed by the government, what a kicker to the economy it would be!

The Covid crisis is unfortunate but it has also changed things radically. The government introduced aatmanirbhar programme, PLI schemes and are now able to spend not caring about the rating agencies?

I do not think these changes came because of Covid. Modiji is a very careful man. These changes were going to come Covid or no Covid. I have described Mr Modi as a distilled socialist. A socialist who wants a larger part of the cake for everybody. The distilled socialist also wants that but first you have to increase the size of the cake. Mr Modi realises that without economic reforms, we cannot increase the size of the cake. I have no doubt that the reforms will be implemented and will come in spite of the Covid. Many on BRF is saying same for NAMO for years


Every 10-15 years, the order changes. It was Japan, then came to America, then China. It was dominated by America for the last 10 years. Is this going to be that year when we will surprise everybody?
Not this decade, many decades. A lot of the countries are export oriented. Export-led growth can last for a time. It comes fast. But for it to sustain over a period of time is not easy. Countries which grow on their home consumption have got a much safer way to reach lasting growth.

Markets and earnings have made a comeback. Demand has also made a comeback. What has surprised you more – the market comeback or the demand comeback?
Well the market comeback would not have been possible without the demand comeback. The market is an amalgamation of so many factors.


Read Full Article from Here// ET Link
https://economictimes.indiatimes.com/markets/expert-view/india-will-overtake-china-in-the-next-25-years-rakesh-jhunjhunwala/articleshow/81186441.cms

[Mollick.R]

India’s trade deficit with China narrows to $45.9 billion in 2020
By Kirtika Suneja, ET Bureau Last Updated: Feb 24, 2021, 06:57 AM IST

India’s trade deficit with China narrowed last calendar year as exports rose 16.15% to $20.25 billion, led by iron and steel, aluminium and copper, while imports shrunk 10.87% to $66.78 billion. The country’s trade deficit with China fell to $45.91 billion from $56.95 billion in 2019, officials said.




Read Full Article from ET//
https://economictimes.indiatimes.com/news/economy/foreign-trade/indias-trade-deficit-with-china-narrows-to-45-9-billion-in-2020/articleshow/81178022.cms?utm_source=ETTopNews&utm_medium=HP&utm_campaign=TN&utm_content=23

[Mollick.R]

Scoop: Amazon-ICICI Bank-Axis Bank ready with NUE plan to rival UPI
By Ashwin Manikandan & Saloni Shukla, ET Bureau Last Updated: Feb 24, 2021, 08:07 AM IST

Mumbai: Amazon is set to partner ICICI Bank NSE 1.08 %, Axis Bank NSE 1.89 % and Visa to create a national payments network to capitalise on India’s fast-growing digital payment ecosystem that’s dominated by the National Payments Corp of India (NPCI), said people familiar with the matter.

Fintech unicorns Pine Labs and BillDesk are also part of the consortium to set up a ‘New Umbrella Entity’ (NUE) that will build a unified payments interface (UPI)-like settlement system for small and medium enterprises, merchants and consumers, said the people cited above.
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“Our attempt is to create a world-class payments network which can reduce settlement time for small businesses and merchants,” a person directly involved in the plan said.
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.The RBI had last August issued guidelines for creating for profit NUEs with an aim to foster competition and “derisk” India’s burgeoning digital payments ecosystem where much of the settlement burden has fallen on the non-profit NPCI over recent years.
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The NUE framework allows any new consortium to launch an instant payment network that runs parallel to UPI. Banks and payment players have for long expressed concerns about UPI’s ability to scale up. By NPCI’s own admission, the government’s move to waive merchant discount rates (MDR) on UPI and RuPay in 2019 resulted in a Rs 2,000 crore loss to the industry.
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“The waiver of MDR on UPI meant that banks and payment companies could no longer make profits from core payments business. The RBI has provided flexibility to NUEs to create their own business models which has appealed to several players who already have skin in the game,” said a source.

Consortiums led by Reliance Jio Infocomm and Tata Group are also learnt to be applying for NUE licences. A fintech industry grouping led by Infibeam Avenue and Yes Bank has also announced its intentions to apply. But the plan of State Bank of India to partner with HDFC appears to have been nixed by the finance ministry which doesn’t want state-owned banks to compete with NPCI.
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Read Full Article from Here// ET Link
https://economictimes.indiatimes.com/tech/tech-bytes/amazon-icici-bank-axis-bank-ready-with-nue-plan-to-rival-npci-upi/articleshow/81181363.cms

[Uttam]

The Union Cabinet on Wednesday (24 February) approved Production Linked Incentive (PLI) schemes for IT and pharma sectors.

The Production Linked Incentive Scheme for Pharmaceuticals is expected to promote the production of high value products in the country and increase the value addition in exports. Total incremental sales of Rs 2,94,000 crore and total incremental exports of Rs 1,96,000 crore are estimated during six years from 2022-23 to 2027-28.

The total quantum of incentive under the scheme is about Rs 15,000 crore.

If these schemes produce even half of the promised results, they will launch India into the next growth cycle. With an abundant youth workforce, supporting legal and regulatory framework, it will be a dream come true for me.

[Uttam]

Yessss!!!!

PM Modi: We have targetted to monetise 100 govt-owned assets with mantra of monetise and modernise

Underscoring the concept of minimum government and maximum governance, Prime Minister Narendra Modi on Wednesday said that the government has targetted to monetise 100 public sector enterprises (PSEs) across sectors barring four strategic sectors under the National Asset Monetisation Pipeline proposed by the Finance Minister in her budget speech. “Today there are many under-utilised and unutilized assets under government control. With this thought, we had announced the National Asset Monetisation Pipeline and have targeted to monetise such 100 assets with chances for investment opportunities worth Rs 2.5 trillion,” PM Modi said.

No more are the days of apologetic policy statements. I love the way PM Modi has come out openly to say why asset monetization is needed. All the previous disinvestments were cast as selling the family silver. No there is no family silver. If these PSEs are family silver then these have been really tarnished by babu-led management. Privatize (disinvest, monetise, pick your word of choice) and put a new shine on this silver.

[Suraj]

The Union Cabinet on Wednesday (24 February) approved Production Linked Incentive (PLI) schemes for IT and pharma sectors.

The Production Linked Incentive Scheme for Pharmaceuticals is expected to promote the production of high value products in the country and increase the value addition in exports. Total incremental sales of Rs 2,94,000 crore and total incremental exports of Rs 1,96,000 crore are estimated during six years from 2022-23 to 2027-28.

The total quantum of incentive under the scheme is about Rs 15,000 crore.

If these schemes produce even half of the promised results, they will launch India into the next growth cycle. With an abundant youth workforce, supporting legal and regulatory framework, it will be a dream come true for me.

PLI is indeed a very interesting scheme - it has garnered so much interest that suddenly the government finds it has a winning bet and is doing what it logically should do - bet bigger on it. The scheme is designed smartly - new investment, hiring, R&D, value add and volume are all given incentives. The ROI is also time bound in the form of GST and other indirect revenue sources like income tax from the broader pool. It could also entirely reverse the merchandise trade balance by generating tens of billions of dollars in additional exports from India. This in turn would lower cost of capital driving further growth.

[Uttam]

As much as I appreciate the need for tax revenue to spend on infrastructure, health care, etc., the fuel tax needs a serious relook. India is now at a significant competitive disadvantage due to high transportation fuel prices. Here is some data as of Feb 24th 2021:

Country Petrol price in INR
India 93
Thailand. 81
Bangladesh 76
China 77
Nepal 69
Sri Lanka 60
USA 56
Vietnam 55
Indonesia 47
Malaysia 36

For Indian manufacturers, service providers as well as farmers, this is a significant cost. All else equal, it will raise the cost of production of all goods and services and thus leading to a competitive disadvantage. Replacing petrol and diesel with CNG or electric vehicles will take a long time. I don't know the politics behind not covering fuel in GST, but this needs a change.

[dsreedhar]

That is good info for comparison. Thanks for the data link.
Agree govt has to give some relief in gas prices both for economic and political purposes.

[nam]

Which revenue item should be increased to cover the reduction in oil prices? IT? GST? Another cess?

Pay cut for gov employees? reduction in infra spend?

When was the last time anything got reduced due to fall in oil prices? Did the taxi, auto, bus, train,groceries prices got reduced when the oil prices fell?

Increase in oil prices are used as excuse to increase prices of certain service dependent on it. Like transport. They are never reduced when the oil falls.

[Suraj]

India thrice did mini stimuluses/budgets last year due to Covid. For example, it announced a wide-ranging food supply program last spring when economic activity essentially collapsed that quarter (GDP growth in Q1 was -23%):
India to Pay $22 Billion to Feed Poor Affected by Coronavirus
This has been frequently called the free food program, but of course there's no such thing as a free lunch. Guess what paid for it ? Fuel tax increase. That program was continued in June. And then replaced progressively with capex spending beginning in October when the government focused on a V shaped recovery.

The point here is not to defend the tax. Yes it's high. Almost 70% of fuel price now is taxes. While that's not absurd (many countries have fuel taxes between 60-70%), the reality is that the government has made certain decisions to address the economic crisis driven by Covid, and central to their efforts was using a fuel tax to pay for crisis spending , as opposed to turning to deficit spending.

I'm sure they're aware that fuel taxes this high are counterproductive to policies that are focused on driving up growth, and I'm guessing sometime in the near future as the budgetary situation looks more clearly forecastable, they'll dial down the taxes as well. They had choices to make. They could have issued bonds that would have pressured yields in future and affected growth, or they could have just taxed something that has a minimal impact while economic activity was fairly low due to Covid. In this case I think they picked wisely - but it's almost time to pull back this lever now that growth is due to return.