Indian Economy - News & Discussion Oct 12 2013

[nawabs]

October IIP tanks 4.2% while November CPI moderates to 4.38%

http://www.business-standard.com/articl ... 873_1.html

Contrary to expectations the Index of Industrial Production (IIP) contracted by 4.2% in the month of October. Manufacturing which accounts for over 75% of the index contracted by staggering 7.6% while the mining and electricity sectors grew at 5.2% and 13.3% respectively.

One possible explanation for the collapse in manufacturing could be the closure of Nokia’s plant in Chennai. The cumulative growth in the three sectors during April-October 2014-15 over the corresponding period in the previous year stands at 2.4%, 0.7% and 10.7% respectively.

The industry group ‘Radio, TV and communication equipment & apparatus’ saw the largest decline of 70.2%, followed by the ‘Office, accounting & computing machinery’ category, which contracted by 31.6%.

Rajan punches holes in Modi's 'Make in India' programme

"I am...Cautioning against picking a particular sector such as manufacturing for encouragement, simply because it has worked well for China. India is different, and developing at a different time, and we should be agnostic about what will work," Rajan said while speaking at the Bharat Ram Memorial Lecture in Ficci.

He further said there is "danger when we discuss Make in India" as something which is focused on manufacturing, "an attempt to follow the export-led growth path that China followed. I don't think such a specific focus is intended".

Modi had announced the ambitious 'Make in India' programme at his first Independence day speech from ramparts of Red Fort to attract overseas investments and make the country a global manufacturing hub.

He said when India pushes manufacturing exports, it will have China to contend with and an export-led growth will not be as easy as it was for the Asian economies who took that path before India.

"...I am counselling against an export led strategy that involves subsidising exporters with cheap inputs as well as an undervalued exchange rate, simply because it is unlikely to be as effective at this juncture," he added.

Further, he also said it may not be proper to see 'Make in India' as a strategy of import substitution through tariff barriers.

"This strategy has been tried and it has not worked because it ended up reducing domestic competition, making producers inefficient, and increasing costs to consumers," Rajan said.

He also said that India should also focus on domestic demand and create a unified market with a view to reduce transactions cost.

"If external demand growth is likely to be muted, we have to produce for the internal market. This means we have to work on creating the strongest sustainable unified market we can, which requires a reduction in the transactions costs of buying and selling throughout the country.

"Improvements in the physical transportation network... will help...A well designed GST bill, by reducing state border taxes, will have the important consequence of creating a truly national market for goods and services, which will be critical for our growth in years to come," he added.

[saip]

Now that oil has gone below $60 ($58.35, W. Texas Intermediary) are there any negative effects on Indian economy?

[Suraj]

October IIP tanks 4.2% while November CPI moderates to 4.38%

http://www.business-standard.com/articl ... 873_1.html

Contrary to expectations the Index of Industrial Production (IIP) contracted by 4.2% in the month of October. Manufacturing which accounts for over 75% of the index contracted by staggering 7.6% while the mining and electricity sectors grew at 5.2% and 13.3% respectively.

One possible explanation for the collapse in manufacturing could be the closure of Nokia’s plant in Chennai. The cumulative growth in the three sectors during April-October 2014-15 over the corresponding period in the previous year stands at 2.4%, 0.7% and 10.7% respectively.

The industry group ‘Radio, TV and communication equipment & apparatus’ saw the largest decline of 70.2%, followed by the ‘Office, accounting & computing machinery’ category, which contracted by 31.6%.

Something is broken with the IIP if the shut down of one plant changes numbers that much. It wasn't even running at capacity in last year or so.

[James B]

Something is broken with the IIP if the shut down of one plant changes numbers that much. It wasn't even running at capacity in last year or so.

Some one from Goldman Sachs or JP Morgan pontificating that drop in October IIP figures due to many holidays in the month - Gandhi Jayant, Dusshera, Diwali, Bakrid, Muharram plus elections in Maharashtra & Haryana.

[Rishirishi]

Now that oil has gone below $60 ($58.35, W. Texas Intermediary) are there any negative effects on Indian economy?

India imports 2,4 million barrels per day. Hence for each dollar the price goes down the country reduces the import bill by 2,4 million dollars per day, that is 876 million dollars saved per year.

The drop from 140 dollars to 60 dollars saves a whopping 80 Billion dollars per year. Sufficient to build 12 000 KM or 4 lane super highway of highest quality. Or 8000 KM or Highspeed rail.

Only negaitve could be that the country starts using more oil and becomes very dependant for the next price rise.

[Suraj]

Something is broken with the IIP if the shut down of one plant changes numbers that much. It wasn't even running at capacity in last year or so.

Some one from Goldman Sachs or JP Morgan pontificating that drop in October IIP figures due to many holidays in the month - Gandhi Jayant, Dusshera, Diwali, Bakrid, Muharram plus elections in Maharashtra & Haryana.

Thanks. That makes a lot more sense.

[Gus]

the only negative impact would have been for folks who speculated and bought oil at higher prices for delivery now.

[Suraj]

Swift action by GoI to fix the coal block deallocation issue:
Lok Sabha passes Coal Mines Bill

BREAKING IT DOWN
The Coal Mines Bill opens sector for commercial mining
It will also set the ball rolling for re-allocation of 204 cancelled coal blocks through a transparent e-auction process
In first phase, 42 producing and 32 about-to-produce mines will be put up for bidding for end use in power, steel & cement sectors
The bidding process has two-phases — technical & financial
Cap on rates will keep electricity prices in check for mines allotted to the power sector
Bid price and methodology of e-auction will be tabled for Cabinet approval
Sale of RfP will be completed by December 22-24
Govt hopes to conclude e-auction process by March 11

The IIP data is quite odd. On one hand, mining and electricity grew very strongly, at 5.5% and 13% respectively. On the other hand, manufacturing shows -7% . In other words, core sector is unaffected even as actual production is not yet ramping up. As long as core sector performance remains robust, it's still quite likely that as manufacturing facilities under development are ready, manufacturing output will also surge. 7% decline after 1% decline in October is a strange piece of data.
Industrial output shrinks 4.2% in Oct

For the April-October period, cumulative rise in industrial production stood at 1.9 per cent, compared with 0.2 per cent in the corresponding period last year, according to data released by the Ministry of Statistics and Programme Implementation.

Production in the mining and electricity segments rose significantly in October. In October, output in the mining sector rose 5.2 per cent, compared with 0.7 per cent in the previous month. Production in the sector had fallen 2.9 per cent in October 2013.

Electricity generation rose 13.3 per cent in October, against 3.9 per cent in September. It had increased 1.3 per cent in October last year.

“The fall in manufacturing output wiped out gains from higher production in mining. Mining will gain further traction next year, when new (coal block) auctions start. And, some amount of activity is happening there. The electricity segment remains positive, though household consumption is not doing well,” said D K Joshi, chief economist, CRISIL.

Electricity output is up 10% for the year so far, but household consumption hasn't risen much, which means double digit increase in electricity consumption by non-household users. That suggests a lot of construction activity, which shows up in services basket right now. My guess is manufacturing will rise strongly starting early 2015.

[Hari Seldon]

No space for another export-led China: Raghuram Rajan

http://www.financialexpress.com/article ... ocialMedia

[Gyan]

Rughu Ram is doing everything to screw India by High Interest Rates & tight liquidity against Indian entrepreneurs while allowing inflow of Cheap foreign/US money to buy everything in sight in India which will be sold back to Indians at super high rates after extracting around 20-50% IRR in US Dollar terms.

[vishvak]

Rughu Ram is doing everything to screw India by High Interest Rates & tight liquidity against Indian entrepreneurs while allowing inflow of Cheap foreign/US money to buy everything in sight in India which will be sold back to Indians at super high rates after extracting around 20-50% IRR in US Dollar terms.

I wonder why the govt is not stopping MNCs to buy off Indian companies, in the first place. The stockmarket has already gained 30% this year alone, so why wait for anything. link ; why should any other countries make the most of investments done from all over the world.

[member_28714]

October IIP tanks 4.2% while November CPI moderates to 4.38%

http://www.business-standard.com/articl ... 873_1.html

Contrary to expectations the Index of Industrial Production (IIP) contracted by 4.2% in the month of October. Manufacturing which accounts for over 75% of the index contracted by staggering 7.6% while the mining and electricity sectors grew at 5.2% and 13.3% respectively.

One possible explanation for the collapse in manufacturing could be the closure of Nokia’s plant in Chennai. The cumulative growth in the three sectors during April-October 2014-15 over the corresponding period in the previous year stands at 2.4%, 0.7% and 10.7% respectively.

The industry group ‘Radio, TV and communication equipment & apparatus’ saw the largest decline of 70.2%, followed by the ‘Office, accounting & computing machinery’ category, which contracted by 31.6%.

Rajan punches holes in Modi's 'Make in India' programme

"I am...Cautioning against picking a particular sector such as manufacturing for encouragement, simply because it has worked well for China. India is different, and developing at a different time, and we should be agnostic about what will work," Rajan said while speaking at the Bharat Ram Memorial Lecture in Ficci.

He further said there is "danger when we discuss Make in India" as something which is focused on manufacturing, "an attempt to follow the export-led growth path that China followed. I don't think such a specific focus is intended".

Modi had announced the ambitious 'Make in India' programme at his first Independence day speech from ramparts of Red Fort to attract overseas investments and make the country a global manufacturing hub.

He said when India pushes manufacturing exports, it will have China to contend with and an export-led growth will not be as easy as it was for the Asian economies who took that path before India.

"...I am counselling against an export led strategy that involves subsidising exporters with cheap inputs as well as an undervalued exchange rate, simply because it is unlikely to be as effective at this juncture," he added.

Further, he also said it may not be proper to see 'Make in India' as a strategy of import substitution through tariff barriers.

"This strategy has been tried and it has not worked because it ended up reducing domestic competition, making producers inefficient, and increasing costs to consumers," Rajan said.

He also said that India should also focus on domestic demand and create a unified market with a view to reduce transactions cost.

"If external demand growth is likely to be muted, we have to produce for the internal market. This means we have to work on creating the strongest sustainable unified market we can, which requires a reduction in the transactions costs of buying and selling throughout the country.

"Improvements in the physical transportation network... will help...A well designed GST bill, by reducing state border taxes, will have the important consequence of creating a truly national market for goods and services, which will be critical for our growth in years to come," he added.

More proof that this jackass must go. Modi said Make in India, primarily to meet our needs and stop forex bleeding. Make in India is not an export initiative, it is a self sufficiency drive. Of course, that does not mean dont export surplus.

Maybe RR's model of economics requires us to spend 200 billion a year on silicon based imports, the raw materials for which is sand and plastic. Total duffer.

[Suraj]

The RBI governor doesn't dictate economic policy. The government does. I think it's poor taste on Rajan's part to speak of future economic policy, as opposed to restricting himself to current monetary policy imperatives within his domain as RBI head. However, GoI is neither compelled to pay any heed to him, nor is he in any position to do anything about them ignoring him.

[Supratik]

I agree. It is not RR's business to dictate economic policies.

[nandakumar]

The Modi Government's Make in India policy has been wrongly construed as 'Make in India for consumption in rest of the World'. It is essentially a call to the global business community to invest in full scale (complete value chain) manufacturing infrastructure if they believe in the Indian market. Additionally Modi is implying that he believes that the Indian market is large enough for it to be worth their while. RBI Governor's speech on Friday at the FICCI seminar cautioning against the Chinese model of growth or poor wisdom of high tariff walls, therefore, is wholly unwarranted.

[Paul]

Right-wing Leftist Modi Set to Make Marx, Markets Irrelevant in Creating New India

Posted on Dec 14, 2014 in Columns
Prabhu Chawla

Since India Inc seems to be turning into a vociferous foe of PM Narendra Modi, he doesn’t need friends and followers anymore. The masses will rally behind him to fight avaricious tycoons and their loquacious megaphones. For the past few weeks, a whispering campaign has been launched against the Modi government for its supposed failure to deliver on promises. In South Mumbai and Lutyens’ Delhi, the me-and-myself types are gathering in well-appointed drawing rooms or clubs of five-star hotels to grouch about Modi’s excessively centralised establishment. After schmoozing with ministers and party officials for over six months, the pinstriped class has realised that the PM cares little about the coalition of the rich and famous, whose only aim is to get policy tailored as per their interests. If the tone and tenor of corporate discourse is any indication, Modi has to arm himself with instruments to counter the crusade soon to be launched by a section of the business world.

For him, there could be no better news than this. Historically, politicians who are favoured by forums like CII, FICCI etc. have never won the popular mandate the second time. What has surprised the PMO is India Inc’s inability to respond to the positive initiatives taken by the government. If manufacturing has hit a new low, it is not because of government inaction but due to the failure of Indian industry to start new ventures or complete the ones begun ages ago.

If press reports are to be trusted, vocal, well-connected, media-savvy corporate leaders feel Modi’s personal charisma is on the wane because he hasn’t come through on economic reforms. Their idea of reform is low interest rates, cheap land for new business ventures, less import duties and liberal concessions on personal and corporate tax. They believe good economics means a government of them, by them and for them. After interactions with the new establishment, they realise Modi may like to be seen rubbing shoulders with oligarchs, celebrities and the chatterati, but when it comes to economics, he is more of a Left-of-Centre leader than a blind promoter of free (for all) market. He has been pushing an indigenous agenda for governance. His slogan ‘Make in India’ has ruffled many feathers as it prevents foreigners from converting the country into a market and not a manufacturing hub. His decision to allow FDI in defence and realty sector is aimed at encouraging MNCs to create productive assets in India. He has introduced a few labour reforms, but is unwilling to give unfettered powers to employers to adopt whimsical hire and fire policies. The PM expects industry to move towards a Digital India, but by creating more jobs. For the past four decades, while investment in industry has risen enormously, the job opportunities created have been minimal, leading to increased unemployment. Even economic growth is skewed. Currently, 65 per cent of India’s GDP comes from the urban population while 65 per cent of Indians live in villages. Indian industry has failed to provide enough employment channels for rural youth.

The PMO is much peeved over the lobbying by business tycoons to change the Land Acquisition Act in a manner that would allow pliable state governments to hand over land to corporations at bargain basement rates. It is not a coincidence that a few ‘liberal’ ministers who have little to do with the Land Bill have advocated diluting its provisions. But both the PM and minister concerned have chosen to keep mum because they feel the Act has enough clauses enabling land acquisition for public utilities and not for mere corporate promotion. Over raising FDI cap in insurance, Modi has adopted an arm’s length distance. Since the bill is being touted as a major economic reform, Modi has let his ministers bargain with other parties to bring the matter to its logical conclusion, even at the cost of diluting the intent of the original draft. In education too, his ministers other than Smriti Irani spoke about reforms, but Modi let his minister carry forward her agenda of Indianising education.

NaMo isn’t impressed with the 35 per cent spurt in Sensex during the past six months, which he feels is just hot money meant to promote certain shares instead of benefiting the economy. In fact, there seems to be a conflict between Modi’s economic model and the wish list of entrepreneurs. Modi is in favour of demand-led growth, while industry is pushing for supply side economics. It desires capacity expansion so that companies can borrow liberally from public sector banks, import more by over-invoicing and provide high-cost final products for maximum profit. It is surprising that excessive supply hasn’t led to drop in prices. Inflation has eased mostly because of the fall in prices of consumer items. Real estate has collapsed not because flats are being sold at lower prices, but due to the reluctance of consumers to pay. There is no indication of decline in the FMCG and automobile sectors. The PM wishes to propel policies that will put more money in the hands of the consumer for both spending and saving.

Modi abhors excessive control on business and has spoken out against coercive retrospective taxation. His government’s decision to not appeal the high court’s verdict in the Vodafone retro-tax case reflects the PM’s will to provide a level-playing field to MNCs. But Indian industry has a ‘dil’ which always ‘maange more’. Modi is unlikely to offer any elixir to quench their thirst. He doesn’t mind meeting honchos from abroad and conveying his concept of good economics. After all, he is the only PM, who had earlier as a CM proved to the world that good politics leads to good economics. Modi’s Gujarat Model was based on the welfare state principle. He chose the social sector, women’s empowerment, education and an efficient bureaucracy to expedite decision-making.

There is a feeling in certain quarters of the power circle that industry is mounting pressure on the government to tweak the next budget in their favour. But the PM is determined to unfold his own economic roadmap, which will force big business to turn ‘Make in India’ into the fulcrum of his dream to create a New India. Behind his chic look hides an undiluted and uncompromising Swayamsewak as Swadeshi Modi. His demeanour and the sheer authority of his personality is enough to stymie the most articulate honchos who graduated summa cum laude from Harvard, Wharton and Oxford. They could browbeat Manmohan Singh. But the Right-wing Leftist Modi is determined to make both Marx and markets irrelevant in creating a Modiscape of empowered India.

Prabhuchawla@newindianexpress.com

Follow him on Twitter @PrabhuChawla

[Austin]

RR is a monetarist and he would say what ever pleases IMF and one thing the IMF and its puppet master in US wouldnt like to see is India turn into Manufacturing base .....they already regret doing the same for China after watching the consequences, cant afford to see India grow in manuf and commit the same mistake twice.

[Gyan]

Rughu Ram is doing everything to screw India by High Interest Rates & tight liquidity against Indian entrepreneurs while allowing inflow of Cheap foreign/US money to buy everything in sight in India which will be sold back to Indians at super high rates after extracting around 20-50% IRR in US Dollar terms.

I wonder why the govt is not stopping MNCs to buy off Indian companies, in the first place. The stockmarket has already gained 30% this year alone, so why wait for anything. link ; why should any other countries make the most of investments done from all over the world.

We have been conditioned to think what the gora press propagates. In fact, nowdays, there are also idiotic articles as to how low crude oil prices are bad for India. Sell your mom, sis and property to gora for green useless paper dollar is the economic policy of RBI.

Why are we getting high interest cost US green dollars and parking them in low income US bonds while it would be much simpler to hike fiscal deficit and create long term infrastructure assets. Both methods lead to inflation, atleast in second method we keep the ownership.

[Gyan]

RR is a monetarist and he would say what ever pleases IMF and one thing the IMF and its puppet master in US wouldnt like to see is India turn into Manufacturing base .....they already regret doing the same for China after watching the consequences, cant afford to see India grow in manuf and commit the same mistake twice.

+1

[nawabs]

Rajan sings a different tune, pitches for 'Make for India'

http://www.business-standard.com/articl ... 455_1.html

Amid the slowing of the world economy, Rajan on Friday cautioned the government against too much focus on merchandise export-led growth through this campaign and advised to supplement it with ‘Make for India’.

However, since domestic demand tends to get overstimulated, the government will have to frame suitable fiscal policies and RBI itself will have to ensure inflation remains low, Rajan said in his Bharat Ram Memorial Lecture here.

He said the path of disinflation may not be as steep in India as in industrialised nations and disclosed that RBI will talk to the government on the timeline beyond 2016 to keep inflation at four per cent, plus-minus two per cent.

To finance domestic demand responsibly, he advised that it be financed primarily through internal sources and suggested some more budgetary benefits for savings in this regard.

“The world is unlikely to be able to accommodate another export-led China,” Rajan said in his address, organised by industry body Ficci, in New Delhi on Friday.

Clarifying he was not suggesting pessimism for exports, he said, “I am counselling against an export-led strategy that involves subsidising exporters with cheap inputs, as well as an undervalued exchange rate, simply because it is unlikely to be very effective at this juncture.”

Rajan, formerl chief economic advisor in the finance ministry, said India would have to compete with China, which still has some surplus agricultural labour to draw on, when it decided to push manufacturing exports. “Export-led growth will not be as easy as it was for the Asian economies that took that path before us.”

Besides, industrial countries had themselves been improving capital-intensive flexible manufacturing, so much so that some manufacturing activity was being “re-shored”, he said. “Any emerging market wanting to export manufacturing goods will have to contend with this new phenomenon.”

If external demand growth is likely to be muted, India has to produce for the internal market. “This means we have to work on creating the strongest sustainable unified market we can which requires a reduction in transaction costs of buying and selling across the country,” the governor said.

Improvements in the physical transportation network would help but so would fewer, but more efficient and competitive intermediaries in the supply chain from the producer to consumer, he said.

At a time when the Centre is struggling to evolve a consensus with states on the issue of a national goods & services tax (GST), Rajan said: “A well designed GST Bill, by reducing state border taxes, will have the important consequence of creating a truly national market for goods and services, which will be critical for our growth in years to come.”

He also said the government would have to frame suitable fiscal policies and RBI itself would have to ensure inflation remained low, since domestic demand tends to get overstimulated.

He further pointed out that the path of disinflation might not be as steep in India as in developed nations and the glide path as advocated by the Urjit Patel committee suited the country.

He said RBI would consult the government on the timeline beyond 2016 to keep inflation at 4% (plus or minus 2%), and suggested domestic demand had to be financed responsibly, as far as possible through domestic savings.

“Our banking system is undergoing some stress. Our banks have to learn from past mistakes in project evaluation and structuring, as they finance the immense needs of the economy,” he advised. They (banks) would also have to improve their efficiency as they compete with new players like the recently licensed universal banks, as well as the soon-to-be licensed payment and small finance banks.

“At the same time, we should not make their task harder by creating impediments in the process of turning around, or recovering, stressed assets. RBI, the government, as well as courts have considerable work to do here,” Rajan said, pitching for financial inclusion and some Budget sops to boost savings.

“The income tax benefits for an individual to save were largely fixed in nominal terms until the recent Budget; this means the real value of the benefits has eroded. Some budgetary incentives for household savings could help ensure the country’s investment is largely financed from domestic savings,” he said.

Rajan said it was worth debating whether India needed more institutions to ensure deficits stayed within control and the quality of Budgets remained high.

“A number of countries have independent Budget offices and committees that opine on Budgets. These offices are especially important in scoring budgetary estimates, including unfunded long-term liabilities that industrial countries have shown are so easy to contract in times of growth, and hard to actually deliver.”

In addition to inflation, he said, a central bank had to pay attention to financial stability. This was a secondary objective but might become central if the economy entered a low-inflation credit and asset-price boom. “Financial stability sometimes means regulators, including the central bank, have to go against popular sentiment.”

The role of regulators was not to boost the Sensex but to ensure the underlying fundamentals of the economy and its financial system were sound enough for sustainable growth, he said. “Any positive consequences to the Sensex are welcome but are only a collateral benefit, not the objective.”

While emphasising on policies to attract foreign direct investment to fund the country’s current account deficit, Rajan said policies should not compromise India’s interests.

In this regard, Rajan said, the requirements to patent a medicine in India were perfectly reasonable, no matter what international drug companies said. He also said policies should not focus only on FDI but promote young entrepreneurs, arguing “if we make it easier for young Indian companies to do business, we will also make it easier for foreign companies to invest, for both are outsiders to the system”.

This meant a transparent and quick legal process to deal with contractual disputes, and a proper system of bankruptcy to deal with distress — both issues the government had taken on, he said.

Noting that India did not belong to any power bloc, Rajan advised it, besides other emerging countries, to not only ensure quota reforms in the International Monetary Fund and the World Bank but inject new agenda, new ideas and new thinking into the global arena. “No longer will it suffice for India to simply object to industrial countries’ proposals; it will have to put some of its own on the table.”

[member_28714]

^^

It was only this moron who misconstrued Make in India as change India into the worlds factory. Im sure he was put in his place. What a dork. Indian industry is running on fumes and instead of cutting rates and making them more competitive against the Chinese, he thinks he needs to give his general gyan.

India is targeting 100 GW or wind and 100 GW of solar. Thats another 200 billion dollars of equipment we have to import because we still dont make bearings and silicon ingots. Does this moron think everything our country needs will forever be supplied by the rest of the world?

[Yagnasri]

I felt from the start that RR is has some unknown agenda. I don't think his "inflation hawk" actions are just is ideological thing. Soon there will be active sabotage of NM growth efforts from outside and paid gangs inside. I have a very bad feeling the RR will be part of that.

[JE Menon]

Guys, there is a whine thread... Not everyone who does or says something that forum members don't like is a traitor of some kind. Careful with language.

[member_28714]

I felt from the start that RR is has some unknown agenda. I don't think his "inflation hawk" actions are just is ideological thing. Soon there will be active sabotage of NM growth efforts from outside and paid gangs inside. I have a very bad feeling the RR will be part of that.

RR's agenda is to keep rates high for long enough to ensure bank NPA's start rolling over a few creating panic in the economy.

What inflation is it exactly that he is fighting? I run a house, I keep a tab of groceries, essential items etc. There is hardly any consumer inflation in food and essential items and oil is dropping like a stone. The rupee is fine despite other currencies falling.

The only threat is the weakness of our banks and they are weakening by the day due to companies going bust because they cant pay 20% interest on their loans and hope to compete against cheap capital everywhere else. There is no other top 10 economy in the world with rates half as high as India.

And this is a time when capital is cheap everywhere!!!

[vina]

More proof that this jackass must go. Modi said Make in India, primarily to meet our needs and stop forex bleeding. Make in India is not an export initiative, it is a self sufficiency drive. Of course, that does not mean dont export surplus.

Maybe RR's model of economics requires us to spend 200 billion a year on silicon based imports, the raw materials for which is sand and plastic. Total duffer.

. So Raghuram Rajan says things as they are and the frothing in the mouth Modi bakhts can't take it ? Fact is, Raghu is right. There is absolutely no way at this point in time to replicate the east asian model in India.

1) It is politically not feasible (he said that India and China are different)
2) You cannot subsidise the factor inputs of the producers like the Cheabols like the S. Koreans did or the Chinese did. S. Korea is a country with some 5 large Cheabols and then nothing . Wont work in India
3) Import substitution is a perverse disaster. That is the underpinnign of the Congress failed economic model and gives rise to monstrosities like Hindustan Ambassador Mark 1, 2, 3 etc, with no changes except the grille, the last one being not even a change in grille, just change in numbers. That is the license permit raj that enriches promoters and rent seeking politicos and keeps everyone else poor
4) Yes. The way out is to increase the competitive intensity of the indian economy, get economies of scale,unify markets and allow free movement of goods and create a large market. The "Indian Market" as it exists today is a myth. What you have is a KA market, a TN market , a GJ Market, a MH market and hundreds of local mandies and other markets with each vested interest and entry barriers.
5) Something like a taxi aggregator service sets the cats among the pigeons in a auto market like BLR. I am just waiting for it it happen in Chennai when the thuggish auto mafia (owned and controlled by local politicos and police) is broken for good.
6) If you made bad business decisions and loaded up on debt and speculated in land and license permit stuff and are deep in the hock, well, you should be history. Don't whine for bailouts and cheap money. Aint gonna happen.

[vina]

. There is no other top 10 economy in the world with rates half as high as India.

And this is a time when capital is cheap everywhere!!!

Well, there is no other top 10 economy that had an inflation problem (10% + headline rates for over 6 years) like India! Even today, which of the top 10 has the highest inflation ?

Cost of capital is related to inflation. Break inflation's back, you get lower nominal interest rates. For that you need the fiscal deficit in check. It will take time. But that is the way to go.

The moment, interest rates drop, the rupee will drop as well (basic inflation differential arbitrage, that is how the exchange rates are determined). The US is going to raise rates sooner than later. So, with uncontrolled inflation, if the US raise rates and you drop it here, there will be a giant sucking sound of capital migrating out (the bond markets will be hit first, and then migrate to equities), the rupee drops to Rs70 and beyond, inflation picks up again. You absolutely need structural reform. Modi Maamu unfortunately has delivered zero on it until now , other than trying to clear out the past silt and accumulated muck. Yes, that will help, but that alone will not suffice.

So quit whining and ranting.

[Theo_Fidel]

Vina saar,

During their high growth phases both Japan & SoKo ran extremely high inflation rates. Even China had 25%+ inflation in the 1990's, but neither slowed their investment rate on that account. It is hard to see us avoiding this phase. Without a period of extreme capital investment along with inflation we will remain stuck in this trap.

In any case we are not going anywhere until the heartland area of India can industrialize. This is about 2/3 of India by population from Bihar to Western UP to Rajasthan to Odisha.

1) It is politically not feasible (he said that India and China are different)

BTW I beg to differ it can be done. Witness the Foxconn/Nokia factory in Chennai which was world level. Workers earned China level wages and performed China level widget work sitting at benches. Hire/Fire and all that. The thing is, there are only 2-3 places in India such work structure can be done at present. With such a small pool it is a non-starter, esp. when the CG then decides to mess around with state level enterprises. Witness again how Foxconn/Nokia got shut down proving once more the incompetence of the Dilli-Billi admin types.....

[vina]

Without a period of extreme capital investment along with inflation we will remain stuck in this trap.

East Asian countries printed cash and invested in hard assets and made capital investments and subsidized exports.

Our money printing was towards consumption and doles of the MNREGA kind or free electricity and loan waiver kind. That is a big difference.

[Theo_Fidel]

I don't disagree, but we can change direction at any point right.
That is what this entire regime change was about. Less MNREGA more coal production....

[Arjun]

. So Raghuram Rajan says things as they are and the frothing in the mouth Modi bakhts can't take it ? Fact is, Raghu is right. There is absolutely no way at this point in time to replicate the east asian model in India.

1) It is politically not feasible (he said that India and China are different)
2) You cannot subsidise the factor inputs of the producers like the Cheabols like the S. Koreans did or the Chinese did. S. Korea is a country with some 5 large Cheabols and then nothing . Wont work in India
3) Import substitution is a perverse disaster. That is the underpinnign of the Congress failed economic model and gives rise to monstrosities like Hindustan Ambassador Mark 1, 2, 3 etc, with no changes except the grille, the last one being not even a change in grille, just change in numbers. That is the license permit raj that enriches promoters and rent seeking politicos and keeps everyone else poor
4) Yes. The way out is to increase the competitive intensity of the indian economy, get economies of scale,unify markets and allow free movement of goods and create a large market. The "Indian Market" as it exists today is a myth. What you have is a KA market, a TN market , a GJ Market, a MH market and hundreds of local mandies and other markets with each vested interest and entry barriers.
5) Something like a taxi aggregator service sets the cats among the pigeons in a auto market like BLR. I am just waiting for it it happen in Chennai when the thuggish auto mafia (owned and controlled by local politicos and police) is broken for good.
6) If you made bad business decisions and loaded up on debt and speculated in land and license permit stuff and are deep in the hock, well, you should be history. Don't whine for bailouts and cheap money. Aint gonna happen.

Something about Raghuram Rajan has never smelled right. I remember an article of his way back before he became RBI governor (on India's 'crony capitalists') that I thought was one of the most vacuous and idiotic articles to have ever come out of a supposed academic. I remember an argument I had on this issue, with another bigtime socialist poster called Somnath who used to be a supporter of Rajan.

Raghuram Rajan loves to talk about 'crony capitalists' and on 'saving capitalism from capitalists'....The former is something he raised only a couple of months back - is he demented to be bringing this up when we have a government whose single biggest concrete achievement so far is that we get to escape the crony capitalism of the UPA regime ??

I haven't found a single logical argument in RR's case against "Make in India". The fact is that the world is getting more and more integrated with every passing year. India's international trade is bound to zoom up over the next decade - and unless we take measures like "Make in India" this zooming up will be through a gigantic trade deficit which only a country with a reserve currency like the US can sustain. Lowering the trade deficit and converting to surplus HAVE to be key objectives for India. Ignore the rantings from Rajan.

I know where you are coming from Vina - but do keep in mind that TamBrams span a very large quality range from CV Raman at one end, all the way down to Mani Shankar Aiyar at the other.

[Gyan]

With Real Inflation of 4% to 8%, USA has interest rate of zero percent while UK is running real budget deficit of 10% of GDP while Raghu Baby is keeping India on leash. And QE is free money to business while WTO & GATT be damned. On same score Indian prime interest rates should be 4% instead of 14% and we should have extra USD 100 -200 Billion to invest in infra. Huge no. of infra projects are stuck due to last mile fianacing hurdles. Most of land speculation is due to hot foreign FDI money which Raghu preacher has no problem with. Problem is that even Jaitely is not an original thinker and is completely Maculised though having best of intentions.

[member_28714]

@vina. you obviously know everything from rocket science to economics! very creative indeed is the bs you post. you should take a break and realize that not everyone online is a patzer.

Inflation fight indeed!! Name one commodity that has not lost at least 10% value in the last 6 months and i will leave this forum without even replying. or point to one essential food commodity that is seeing inflationary pressure. if you cannot, get your facts right.

I am yet to stop laughing about your slosh explanation regarding liquid fule in the gslv. but reading both these separate threads, i get exactly what you are suffering from. enjoy your online machismo.

@mods: the last bit of personalizing the message was a subtle rejoinder to vina's modi bhakt reference. I am a modi bhakt if you want to call me one, but thats because both me and modiji are right

[Gyan]

China was suffering from super high inflation but still keeping interest rates low. Western nations have hidden inflation numbers in financial jugglery while keeping interest rates at zero. RBI is the only Central Bank in the world tasked with destroying national entrepreneurs while welcoming hot inflation creating money from bankrupt nations. In Delhi NCR due to FDI even with super low demand and super high prices the apartment costs have gone up by ten times in ten years.

[vina]

China was suffering from super high inflation but still keeping interest rates low.

Brilliant! Why is China's interest rate low ? Not because they are struggling with deflationary tendency now and lack of domestic demand, but rather because they had super high inflation earlier (when was that ? in 1980s ?) . So much for "Gyan" .Thanks.

In Delhi NCR due to FDI even with super low demand and super high prices the apartment costs have gone up by ten times in ten years.

Well, a sq ft in Mumbai will be many order of magnitude more than in Meerut and the price rise will be higher as well. So that is due to "FDI" or is it a mismatched demand and supply ?

And pray, by dropping interest rates as you demand, will the prices of apartment go up or will it go down ? At least before ranting , do ask what is it you want.

[vina]

Inflation fight indeed!! Name one commodity that has not lost at least 10% value in the last 6 months and i will leave this forum without even replying. or point to one essential food commodity that is seeing inflationary pressure. if you cannot, get your facts right.

Here. {deleted}

[member_28714]

China was suffering from super high inflation but still keeping interest rates low. Western nations have hidden inflation numbers in financial jugglery while keeping interest rates at zero. RBI is the only Central Bank in the world tasked with destroying national entrepreneurs while welcoming hot inflation creating money from bankrupt nations. In Delhi NCR due to FDI even with super low demand and super high prices the apartment costs have gone up by ten times in ten years.

finally someone that gets it. our industry networth is degrading by the day due to debt. our ceo's are begging for money from countries like the US that just sit and print dollars because our banks are too scared that companies wont be able to pay 15-20% as interest. keeping the status quo seems to be RR's agenda. basically make sure indian industrialization continues to stall for as long as possible.

what is RR doing, just paying a shitload of rupees for worthless dollars. and proclaiming look at the FDI and FII!! I want to invest, in what do I invest when the market is full of overpriced heavily debted companies?

Infrastructure? India does not have a single infra EPC company barring L&T that is not dying. HCC, NCC, JP Group, Lanco Group. You name it, they are on their death bed. Even L&T is struggling but survives because of the engineering division. Even engineering the Chinese are killing us by selling below MRP.

Power? We will need to import 70% of turbines for the plannedd increase in thermal power by 200GW. We will need to import practically every component of wind power, save the blades. We will need to import every panel for the 100GW solar expansion planned (our domestic capacity is a paltry 2 MW and that too made from sourced ingots)

Railways? pliss to welcome china and japan because we dont make the tracks or engines or cabins as good. for all the DMRC bs, what % was actually made in india?

Shipbuilding? pliss to welcome samsung because we dont make diesel engines or gas turbine engines.

fk this shit. vina is right.

[member_28714]

^^ from vina's link

price change since may 14

australian coking coal: -15%

Brent: -28%

Natural Gas: -11%

Iron Ore (we dont import this anyway, still since it impacts cost of end products that we do import): -30%

Copper: -4% (because copper had already lost 20% last year)

Gold and Silver: -10%

Agri commodity Index: -5%

Now pliss do tell me, what exactly is driving inflation if all base commodities and food has lost so much? Its end products like electronics and engineering. has your average flat screen prices dropped. no in fact they are at all time highs. same for laptops, phones, planes, cars, ships, power plants. all of which we import. probably 80% of just this short list by total spend is imported.

really what does it take to solve this issue? keeping rates up and denying the opportunity for society to be able to afford it and for local industry to produce it here? or helping local industry make it locally and hence make it affordable to all?

[Suraj]

vina, George: Play nice. Next personal flame exchange gets you both a one month ban. Thanks.

All your post reports have been closed. They're useless when you're flaming someone and posting reports at once.

[member_28714]

another big LOL

November WPI at 0%. Raghuram Rajan is fighting an imaginary inflation.

@vina, your comments please

edit: I did not report anything. I am trying to debate only.

[kumarn]

Just on TV: November WPI is 0.00%.

please please raghu bhaiyya, cut rate, at least for my student loan emi sakes