Indian Economy - News & Discussion Oct 12 2013

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby pankajs » 18 Oct 2014 12:13

http://timesofindia.indiatimes.com/busi ... 864614.cms

Cement makers to quote lower bids as govt gives boost to infra, road projects
NEW DELHI: Top cement companies are committing to quote lower prices for cement bags as the NDA government focuses on building concrete roads and funding infrastructure projects which will see use of cement in a big way.

...
Sources said while welcoming the manufacturers and presenting how its move to build more cement concrete roads would bring them more business, Gadkari said that the manufacturers must not end up creating cartels to push up prices.

The minister has already warned the manufacturers of scrapping the plan of more use of cement in building roads if he found that companies are getting involved in such activities to blackmail the government.

Soon after taking charge of the ministry, Gadkari had proposed long-term contracts with cement majors across the country to purchase the construction material at a lower cost and shift to concrete roads, which are seen to be more durable.

"Though upfront investment in case of cement concrete roads is 15-20% higher than bitumen roads, if the price of cement bags can be brought down it would be a better proposition," said a ministry official.

The ministry has now invited bids asking manufacturers to quote the lowest price ex-factory price that they can offer to road developers. This will help the ministry arrive at the cheapest possible price for procuring the raw material. Then it will inform the private contractors about cement companies which are ready to offer the cheapest rate for a particular period. This information will also be shared with developers and contractors of other government projects like housing.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Vamsee » 18 Oct 2014 19:47

Diesel prices are deregulated!

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby SwamyG » 20 Oct 2014 09:31

X-post

SwamyG wrote:37% of GDP now in states under BJP control: what this means for economics, politics

Image

The Bharatiya Janata Party’s control of Maharashtra and Haryana, in addition to Gujarat, Rajasthan and Madhya Pradesh, where it is already in power, will ensure that the BJP-led Central government can push through second-generation reforms, largely under the purview of states, with much more ease.

To start with, these states geographically make a large contiguous belt, now accounting for almost 37 per cent of India’s GDP, the country’s powerhouse of investment activity and growth. For investors, the fact that political control in these states is firmly vested with a party that is also ruling at the Centre — and that, too, in a majority — will make a significant difference when it comes to deciding where to put up their next factory.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby pankajs » 20 Oct 2014 14:54

sukumar ranganathan ‏@mint_ed 47m47 minutes ago

Lots of buzz about possible coal reforms (including denationalisation of mining) and announcement of disinvestment programme

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Supratik » 20 Oct 2014 20:10

Haven't followed the gas pricing issue. Hope they got it right or else it is going to spiral into a big issue.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby nawabs » 21 Oct 2014 13:04

Just for its comedy value:

Trade unions want 'Amma' mobile made in Nokia plant

http://timesofindia.indiatimes.com/city ... 893891.cms

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby pankajs » 21 Oct 2014 13:51

http://economictimes.indiatimes.com/new ... 896290.cms

88 infrastructure and industrial projects worth Rs 3 lakh crore go on stream
NEW DELHI: Eighty-eight infrastructure and industrial projects, involving investment of nearly Rs 3 lakh crore - which is more than the Centre's budgeted income tax collections for the current financial year - have become operational over the past few months. This will help in adding jobs and easing pressure on banks, which had lent to the projects that got stuck due to lack of government clearances.

...
Power sector saw the maximum number of projects cleared. While PMG was constituted in July 2013, a majority of the projects started getting completed around June this year and the remaining are going to be ready over the next few months.

A dozen projects, involving investment of over Rs 47,500 crore, are expected to be up and running by December-end. Another nine with investment of close to Rs 33,000 crore will be ready in 90 days and another 11 worth close to Rs 67,000 crore will be working in 120 days, the sources said.

...
Operational infrastructure facilities will reduce shortage of electricity and add capacity at several ports and airports. In addition, it will create jobs, especially on the shop floor.

For a number of business groups, it also means better finances as the companies had deployed capital and borrowed from banks to build plants or road projects but were unable to repay the loans in the absence of any cash flow. It had also piled up pressure on banks. With the projects getting commissioned, some companies may tap the buoyant stock markets to raise resources and retire debt accessed from banks and financial institutions.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby kmkraoind » 22 Oct 2014 09:32

Doing business in India to get easy, registration in just a day

Among the focus areas are reforms of the tax system. It has been suggested that the number of taxes be reduced and online payment of taxes allowed. Education and higher education cess, dividend and withholding taxes can be incorporated under corporation tax to simplify the process, officials said. The Minimum Alternate Tax (MAT) for developers of special economic zones (SEZs) and units in SEZs is proposed to be abolished. There is emphasis to expeditiously implement the Direct Tax Code and goods and service tax (GST).

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Supratik » 22 Oct 2014 11:45

MAT abolition will spur SEZs.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 24 Oct 2014 02:46

Gujarat set to get biggest piece of 'Make in India' pie
Prime Minister Narendra Modi’s clarion call to ‘Make in India’ seems to have got an enthusiastic response from India Inc. Call it timing: In less than a month of Modi launching the campaign, a slew of big-ticket investments in manufacturing have been announced, mostly in Modi’s home state of Gujarat.

In fact, a number of plants were inaugurated recently, and a few others are in the pipeline, it is learnt.

For instance, American drug maker Abbott commissioned its first greenfield factory in Jhagadia (Gujarat) to make in India nutritional products, which the company was importing from Singapore and Europe so far. The plant entails an investment of Rs 450 crore and employs over 400 people.

“We love the prime minister’s ‘Make in India’ concept and we want to participate in the campaign. It is an opportunity for us to be closer to our customer,” said John Landgraf, executive vice-president, Abbott’s global nutrition.

German major BASF inaugurated its chemical manufacturing plant in Dahej with an investment of Rs 1,000 crore, representing the company’s single largest investment in India.

Meanwhile next door in MP:
Still a long journey to transform MP from agrarian to industrial economy
Agriculture and allied activities constituted 37 per cent of the net state domestic product in 2011-12, while industry had a share of just over 17 per cent.

According to official figures, expression of interest on making investment to the tune of almost Rs 6.8 lakh crore was received during the three-day meet, of which big companies committed to pump in around Rs 100,000 crore. (MANY MILES TO COVER)

About Rs 70,000 crore, constituting 9.8 per cent of the total promised, is to come in food processing. Much of the investments are promised in the non-farm sector.

A robust food processing sector is critical for shifting an agrarian economy to an industrialised one, as it helps in effective absorption of farm surplus and also rural jobs.

Investments are committed to come in various fields such as power, cement, telecom, gas, semi-conductor fab, steel, iron ore, fertiliser and petroleum.

Data sourced from the Planning Commission showed agriculture and allied activities in the state have been recording a high double-digit growth rate since 2011-12 and clocked a high of 23 per cent in 2013-14, the highest in the country and much more than the national average, which hovers around four per cent per annum.

This growth has come in a short span of three-four years. Moreover, it has been primarily driven by cereals, particularly wheat, though horticulture also had its contribution.

Agriculture production in the state has increased from 24.75 million tonnes in 2009-10 to 37.66 million tonnes in 2012-13. Production of horticultural crops during the same period increased from 6.53 million tonnes to 18.10 million tonnes.

In contrast, industrial growth dipped from 5.05 per cent in 2011-12 to 2.15 per cent in 2013-14. Particularly bad was manufacturing, which fell from a growth of 3.89 per cent in 2011-12 to a contraction of 0.13 per cent. Overall, GDP growth during the same period in the state moved up from 9.69 per cent in 2011-12 to 11.08 per cent in 2013-14, the data showed.

To absorb the farm surplus, logic says industrial growth should be faster, as farming employs much more labour than industries.

"Historical evidence shows that whenever any predominantly agrarian economy wants to shift towards a manufacturing one, it needs to absorb two kinds of surplus: The surplus generated through farming and excess labour. It is still unclear as to how the state wishes to address these," said Jaya Mehta, eminent economist and social scientist, associated with the Joshi-Adhikari Institute of Social Sciences.

She said though the state government has claimed to generate around 170,000 jobs through its investment initiatives in the near future, it is not clear as to what kind of jobs will be created, what is the nature of skills these jobs require and whether the workforce currently available in the state possess those skill sets.

On the topic of infrastructure debt funds:
Banks’ lending to infra projects still dwarfs that of specialised debt funds
Stiff regulatory norms and lack of suitable projects have curtailed infrastructure debt funds’ (IDF) investment to just about R1,500 crore so far, a tiny fraction of the total funds infrastructure companies have invested.

Five funds have been set up over the last two years and these funds have taken an exposure to just a dozen projects. In contrast, banks’ incremental exposure to the infrastructure sector has risen by R2.16 lakh crore in two years, to R8.7 lakh crore as at the end of August.

IDFs under the mutual fund route have more liberty while making investments as the Securities and Exchange Board of India has allowed them to invest even in greenfield projects. However, even these IDFs are cautious to put in too much money. “We have taken some exposure to projects in power and roads. Since we are specialised in infrastructure as a company, our IDF is able to take on riskier projects,” said Ramesh Bawa, managing director and chief executive officer at IL&FS. LF&FS is perhaps the only IDF that has been relatively successful in raising R1,500 crore and deploying nearly R800 crore into projects by buying bonds issued by infra firms.

IDFs were introduced with the objective of freeing up bank capital stuck in long-term infrastructure projects and were seen to emerge as a stable long-term funding source eventually. “There is a big gap between what IDFs have mobilised and what they have disbursed,” said R Venkatraman, director at India Ratings that monitors and rates IDFs. “In some cases, IDFs have not been able to mobilise funds,” he added.

IDFs are allowed under two structures, as non-banking financial company and as mutual funds. Pawan Agrawal, senior director at CRISIL Ratings, believes that NBFC-IDFs will find it tough to scale up going ahead as the competition to raise funds through the bond market increases given that banks have now been allowed to issue infrastructure bonds themselves.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Shankk » 24 Oct 2014 08:57

Initially I thought just a feel good article but certainly more substance than just hot air. Check out the "BRIC GDP growth rates (2011-13) and projections (2014-15)" table in the article.

India Is Eclipsing China's Economy As Brightest BRIC Star

It seems altogether fitting that on the occasion of Diwali – the Hindu “festival of lights” – India should emerge as the brightest star in the BRIC firmament, threatening to eclipse perpetual economic luminary China. While the planet’s largest democracy has long toiled in the shadow of the world’s second-largest economy, India is finally stepping into the limelight thanks to the election of a pro-business government in mid-2014, even as growth slows perceptibly in China. Will Diwali of 2014 usher in a new age of prosperity for the Indian economy?


A brief economic history of India: 1947 – 1991
India’s economic history since it attained independence can be divided into two distinct phases – the 45-year period to 1991 when it was largely a closed economy, and the period after 1991 when economic reforms led to revitalization and rapid growth.


The post-1991 period
Although India had made some perfunctory attempts to open up its insular economy in the late 1980s, these efforts attained the utmost urgency from 1990 onwards, as a balance of payments crisis took the country to the brink of bankruptcy. The collapse of the Soviet Union eliminated a major supplier of cheap oil to India, and as oil prices skyrocketed due to the Gulf War, India’s foreign exchange reserves were depleted to less than $1 billion by mid-1991, only enough to cover two weeks of imports.


The second wave
However, the landslide victory of the Bharatiya Janata Party (BJP) in India’s general elections in May 2014 handed the party and its pro-business leader, Prime Minister Narendra Modi, an unequivocal mandate. Investors were confident that Modi would be able to replicate the success he enjoyed as chief minister of the western Indian state of Gujarat, where annual growth from 2003 to 2012 averaged 10.3% with Modi at the helm, a faster pace than India’s 7.9% GDP growth rate over the same period. There was also unprecedented optimism that Modi would be able to expedite decisions on critical projects worth almost a quarter-trillion dollars that had been stalled by infighting between the previous government and its coalition partners.


Contrasting outlooks
The long-term outlook for the Indian economy is getting brighter just as that of its BRIC counterparts is getting murkier.

The IMF projected in its October 2014 World Economic Outlook report that the Indian economy would accelerate from a 5.6% pace in 2014 to 6.4% in 2015 (see Table), propelled by rising exports and investment. In contrast, China’s growth is projected to moderate to a more sustainable pace, from 7.4% in 2014 to 7.1% in 2015, as decelerating credit growth slows investment and real estate activity continues to ease. While China continues to grow at a faster pace than India, the performance differential is shrinking, and for the first time in years, the growth trajectories are moving in opposite directions.

The outlook for Brazil and Russia is much less positive. The Brazilian economy contracted in the first half of 2014, and is forecast to grow only 0.3% in 2014, hindered by political uncertainty, low business confidence and tighter financial conditions. The IMF forecasts growth to rebound modestly to 1.4% in 2015. Russia is forecast to post the slowest growth of the BRIC nations in 2014 and 2015, as economic sanctions in the wake of the Ukraine conflict take their toll on the economy.


The Bottom Line
The IMF forecasts that India will become a $2-trillion economy in 2014 – the tenth biggest in the world – and will cross the $3-trillion threshold in 2019, which would make it the world’s seventh biggest economy. But while the long-term outlook is very positive, the 26% increase so far in 2014 in the BSE Sensex index – which reached a record level of 27,354 in September 2014 – has made valuations among the most expensive in the emerging market space. Nevertheless, for investors who are comfortable with the risks inherent in emerging markets, India represents an alluring investment choice on a pullback, which could well occur if Modi is unable to proceed with reforms as rapidly as investors expect.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Arjun » 24 Oct 2014 09:51

^^FY 2015-16 will be when we get to see the proof of the pudding. Psychology of the market and India Inc relative to China WILL decisively turn next year if India meets its projected growth rate. This is precisely why continuing the reform momentum that has started with diesel deregulation, will be paramount over next few months.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby RoyG » 25 Oct 2014 04:48

Jaitely now wants an interest rate cut! When our fiscal deficit is high and we haven't reformed our entitlement programs, he want's to spur growth in the housing sector. Sound familiar? What is this guy thinking?

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Austin » 25 Oct 2014 14:52

Shankk wrote:The IMF forecasts that India will become a $2-trillion economy in 2014 – the tenth biggest in the world – and will cross the $3-trillion threshold in 2019, which would make it the world’s seventh biggest economy. But while the long-term outlook is very positive, the 26% increase so far in 2014 in the BSE Sensex index – which reached a record level of 27,354 in September 2014 – has made valuations among the most expensive in the emerging market space. Nevertheless, for investors who are comfortable with the risks inherent in emerging markets, India represents an alluring investment choice on a pullback, which could well occur if Modi is unable to proceed with reforms as rapidly as investors expect.


But isnt $3 Trillion a low figure for us when at same time China projected figure at same time is around $19 Trillion ?

http://www.economist.com/blogs/graphicd ... -forecasts

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby M Joshi » 25 Oct 2014 20:43

$19 trillion is in PPP terms for China, not real GDP. Our PPP GDP will be probably 7-9 trillion by then.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby sudarshan » 25 Oct 2014 21:05

Yep, these news articles keep referring to China as the world's second largest (now even largest) economy. This is in PPP terms. The same sites in other articles refer to India as the world's tenth largest economy, or Asia's third largest economy. This is real GDP. Talk about apples to oranges comparisons.

In PPP terms, India is the world's third largest economy (after USA and China, in whatever order - they're kind of neck and neck now) and Asia's second largest. Just some kind of attempt to intellectually short-change India.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Austin » 25 Oct 2014 22:09

M Joshi wrote:$19 trillion is in PPP terms for China, not real GDP. Our PPP GDP will be probably 7-9 trillion by then.


If you compare Nominal GDP then as per IMF Projection by 2019

http://en.wikipedia.org/wiki/List_of_IM ... 019_by_IMF

China: 15,518
India: 3181

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby pankajs » 25 Oct 2014 22:38

/OT but FYI
S Gurumurthy ‏@sgurumurthy 2h2 hours ago

"@pravchak:"Goodbye Washington Consensus,Hello Washington Confusion" How IMF reforms wreaked havoc https://www.aeaweb.org/articles.php?doi ... l.44.4.973 …" thanks Praveen.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Prem » 26 Oct 2014 06:26

Bloomberg had article yesterday on Black economy in India. The estimate was close to 1.4 Trillion or 70% of declared economy.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby pankajs » 26 Oct 2014 14:59

All India Radio News ‏@airnewsalerts 2h2 hours ago

#Swiss gold exports to India so far this year reaches a record high level of about 70000 crore rupees.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby member_28714 » 26 Oct 2014 17:36

Austin wrote:
M Joshi wrote:$19 trillion is in PPP terms for China, not real GDP. Our PPP GDP will be probably 7-9 trillion by then.


If you compare Nominal GDP then as per IMF Projection by 2019

http://en.wikipedia.org/wiki/List_of_IM ... 019_by_IMF

China: 15,518
India: 3181


These numbers are assuming a 60 rupee to the dollar exchange rate. It will more likely be 40 to a dollar by then. Expect India nominal GDP to be much closer to PPP than it is today. Hence more likely to be 7 billion nominal GDP by 2020.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby pankajs » 27 Oct 2014 08:54

EconomicTimes ‏@EconomicTimes 2h2 hours ago

Govt plans to fuel up 91K MW of stuck power projects - The Economic Times http://ow.ly/DmQ9t
EconomicTimes ‏@EconomicTimes 2h2 hours ago

Government mulling to set up coal regulator; to come up with strategy to auction coal blocks - The Economic Times http://ow.ly/DmTeA

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby member_28756 » 27 Oct 2014 15:25

George wrote:
Austin wrote:
If you compare Nominal GDP then as per IMF Projection by 2019

http://en.wikipedia.org/wiki/List_of_IM ... 019_by_IMF

China: 15,518
India: 3181


These numbers are assuming a 60 rupee to the dollar exchange rate. It will more likely be 40 to a dollar by then. Expect India nominal GDP to be much closer to PPP than it is today. Hence more likely to be 7 billion nominal GDP by 2020.

That's quite an appreciation...its now trading around 61.3 to the dollar lets hope you are right.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby member_28714 » 27 Oct 2014 15:56

MANNY K wrote:
George wrote:
These numbers are assuming a 60 rupee to the dollar exchange rate. It will more likely be 40 to a dollar by then. Expect India nominal GDP to be much closer to PPP than it is today. Hence more likely to be 7 billion nominal GDP by 2020.

That's quite an appreciation...its now trading around 61.3 to the dollar lets hope you are right.


Well just 24 months back it was 50 rupees to a dollar and in Dec 2007 it was 40 rupees to a dollar. 2020 is about 7 years from now, rupee should comfortably be at 40 levels if there are no outside shocks and namo does whats required.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby member_28756 » 27 Oct 2014 16:18

George wrote:
MANNY K wrote:That's quite an appreciation...its now trading around 61.3 to the dollar lets hope you are right.


Well just 24 months back it was 50 rupees to a dollar and in Dec 2007 it was 40 rupees to a dollar. 2020 is about 7 years from now, rupee should comfortably be at 40 levels if there are no outside shocks and namo does whats required.

The long term trend going for the Rupees was down since independence .....but predicting where it will be in seven years and get it right is quite a challenge for anyone given many different factors that could happen.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby pankajs » 27 Oct 2014 18:02

Reuters India ‏@ReutersIndia 4h4 hours ago

India considers raising import taxes on crude, refined vegetable oils - government sources

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby member_28714 » 27 Oct 2014 18:17

MANNY K wrote:
George wrote:
Well just 24 months back it was 50 rupees to a dollar and in Dec 2007 it was 40 rupees to a dollar. 2020 is about 7 years from now, rupee should comfortably be at 40 levels if there are no outside shocks and namo does whats required.

The long term trend going for the Rupees was down since independence .....but predicting where it will be in seven years and get it right is quite a challenge for anyone given many different factors that could happen.



To be honest, I am bearish about 40 as well. If we move from a 30% trade deficit to a even a 5% trade surplus nation, then rupee could even be at sub 30 levels by 2020. Manufacturing competitiveness of other countries vis a vis India will fall sharply if rupee does not appreciate with increasing Indian exports.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby member_28714 » 27 Oct 2014 18:19

pankajs wrote:
Reuters India ‏@ReutersIndia 4h4 hours ago

India considers raising import taxes on crude, refined vegetable oils - government sources



Hopefully the extra monies collected will be routed to low interest loans to Renewables manufacturers in India. The only way to fully enjoy the 20 dollar a barrel saving right now is to invest in an offset energy source that is cheap and where capex is 90% upfront.

Just to put it in perspective. 1 dollar a barrel is roughly 1 billion a year for India. Oil dropping from 100 to 80 and staying there for a year is 20 billion saved.

at the same time capex for every GW of solar/wind is about a billion dollars. So thats 20 GW of renewables we could add in 12 months with the money saved (if oil stays where it is or goes down further). This installed capacity will be our energy offset when/if crude starts misbehaving again.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby member_28397 » 27 Oct 2014 18:30

George wrote:To be honest, I am bearish about 40 as well. If we move from a 30% trade deficit to a even a 5% trade surplus nation, then rupee could even be at sub 30 levels by 2020. Manufacturing competitiveness of other countries vis a vis India will fall sharply if rupee does not appreciate with increasing Indian exports.


not possible in real world, rupee will be around 65 by 2020 if NaMo does what is required. An export economy requires the rupee to remain undervalued till economy moves up to innovation type economy.
I foresee economy touching 4 trillion $ when NaMo will be taking oath again in 2019.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby member_28714 » 27 Oct 2014 18:47

MaharathiArjun wrote:
George wrote:To be honest, I am bearish about 40 as well. If we move from a 30% trade deficit to a even a 5% trade surplus nation, then rupee could even be at sub 30 levels by 2020. Manufacturing competitiveness of other countries vis a vis India will fall sharply if rupee does not appreciate with increasing Indian exports.


not possible in real world, rupee will be around 65 by 2020 if NaMo does what is required. An export economy requires the rupee to remain undervalued till economy moves up to innovation type economy.
I foresee economy touching 4 trillion $ when NaMo will be taking oath again in 2019.



The valuation of the rupee is determined by the market. We are not China to manipulate the exchange rate. Hence if we gain in strength as an exporter, the obvious fallout will be a stronger rupee.

Please dont start a sentence with "not possible in the real world" man. It gives an impression that you and only you know how the real world works. No offence, but debates have to be clean, not condescending, even if your opponent is dumb as a donkey.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Supratik » 27 Oct 2014 19:39

The rupee going upto 40 may not necessarily be beneficial for India. It will depend on whether Indian industry is globally competitive at that level. There are no short-cuts to becoming rich. Without creating infrastructure and opportunities it will not mean much. My educated guess is that they will try to maintain it around 60 - maybe in mid-50s and the economy is going to be around $4 trillion by 2019-20.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby member_28714 » 27 Oct 2014 19:46

Supratik wrote:The rupee going upto 40 may not necessarily be beneficial for India. It will depend on whether Indian industry is globally competitive at that level. There are no short-cuts to becoming rich. Without creating infrastructure and opportunities it will not mean much. My educated guess is that they will try to maintain it around 60 - maybe in mid-50s and the economy is going to be around $4 trillion by 2019-20.


I am not saying rupee appreciation is beneficial. Only that we have to take rupee exchange rate movement into consideration when projecting GDP. In 2006, India's GDP was projected to reach 2 trillion by 2011. Then the rupee crashed to 70. Today we are at 60 and now it is predicted that we will reach 2 trillion by 2014. The reverse is likely if we are governed well. btw, this is precisely the reason why PPP exists. The rupee exchange rate changing only brings nominal and ppp closer. it does not mean india is richer or poorer, rather that our currency is stronger than what it used to be earlier.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Prem » 28 Oct 2014 00:52

As per RBI, Foreign reserves now exceed 325 Billion as of 24 oct. Addition of 55 Billions since Modi Sarkar took over and accumulation Process going to accelerate only with crude prices falling by day.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 28 Oct 2014 02:21

Mounting forex reserves will put pressure on Rupee to appreciate.

Prem
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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Prem » 28 Oct 2014 02:33

Suraj wrote:Mounting forex reserves will put pressure on Rupee to appreciate.

Actually gains have been 85 Billion plus since MMS ji left the scene.RBI has been buying $ to manipulate the rupee value.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 28 Oct 2014 02:41

The RBI buys dollars, rather than sells it, to keep the Rupee weak. It does this using the market sterilisation scheme, which is a fund maintained for the purposes of buying up dollars. When it does this, it swaps dollars with Rupees. The shortage of dollars in the market correspondingly weakens the Rupee. But too much of this can fuel inflation because there are too many Rupees circulating in the open. So it buys back the Rupees and offers market sterilization bonds. Of course, this has a cost - they have to pay an interest rate on the bonds. They get a much lower interest rate on the dollars held, especially if it's stored someplace like NYC.

Personally, the absolute exchange rate is not as important as the movement, or lack of it. A stable weakish exchange rate is an important component of export promotion. The focus on export led growth will continuously push the Rupee upwards against the dollar, and the fall in the crude bill and inward investment inflows only accelerate it.

The collapse of currencies vs USD during the 2008 crisis is the familiar 'flight to safety' that occurs in any crisis - dollars exit the market rapidly, weakening the currency, which causes the import bill to shoot up and feeds inflation. RBI stabilized it by releasing dollars; forex reserves fell from a $320 billion peak in 2007 to $245 billion or so. Now they're back past that old peak.

Such exchange rate moves are particularly crippling when the economic structure is unbalanced due to raw material exports and finished product imports. Input costs fall faster during crashes than finished good prices. so that we pay a larger import premium than we gain an export premium from, due to weaker currency combined with softer growth outside, since weaker growth outside means lower demand for our intermediate/raw material exports, and lower supply of finished goods.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby nachiket » 28 Oct 2014 02:58

Suraj wrote:The collapse of currencies vs USD during the 2008 crisis is the familiar 'flight to safety' that occurs in any crisis - dollars exit the market rapidly, weakening the currency, which causes the import bill to shoot up and feeds inflation. RBI stabilized it by releasing dollars; forex reserves fell from a $320 billion peak in 2007 to $245 billion or so. Now they're back past that old peak.

I realize that forex reserves are only a part of the picture when it comes to exchange rates, but why hasn't this increase to >300b caused the rupee to appreciate below 60 again? Or was the appreciation from Chidambaram era 68 to current 61-62 because of the increase in forex reserves?

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 28 Oct 2014 03:04

It takes a lot more to move the Rupee so much as compared to back then. There's a lot more Rupees in the market and much larger nominal economy. With the CPI and WPI both at 5 years lows, RBI may choose to let the Rupee appreciate to the mid 50s now. It may happen after festival season, as depressed gold prices are feeding gold imports and keeping the Rupee weak quietly dampens imports a little.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Prem » 01 Nov 2014 00:28

Recovery of black money can increase India's forex reserves by $35 billion: Bank of America-Merrill Lynch
http://www.dnaindia.com/india/report-re ... ch-2030286

he ongoing efforts to bring back black money could help in shoring up foreign exchange reserves by a whopping US $30 billion to US $35 billion, a brokerage report said on Wednesday.The government placed a list with the names of 627 Indian account holders in HSBC Bank, Geneva before the Supreme Court on Wednesday, in a sealed envelope, after the apex court had lashed out at the government on Tuesday and ordered disclosure of all the names of black money holders abroad."The government can add US $30 billion to US $35 billion to forex reserves, over time, if it is able to unearth some of Indians' black money abroad," Bank of America-Merrill Lynch

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Uttam » 01 Nov 2014 00:39

Worrying signs for Indian Economy.

Core industries' growth slows to 1.9% in Sept; lowest in 8 months

Fiscal deficit in H1 almost 83% of full-year target
A 25% fall in oil prices since June helped Modi govt contain oil and fertiliser subsidies, but revenue growth has been slow


I hope the stock market euphoria doesn't pop because the real sector is still rather weak.


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