Indian Economy - News & Discussion Oct 12 2013

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby VKumar » 10 Feb 2015 20:11

I think RBI must be having a nightmare managing the Rupee v/s US$. Waiting to see how long they will shore up the Rupee and accumulate dollars. With lower demand for dollars for oil, better economy performance attracting more FDI, Rupee is bound to rise. I can see Rs. 55 to a dollar within a year if the oil prices remain where they are. With more MAKE IN INDIA, imports are RELATIVELY going to reduce somewhat too, so another reason for a stronger Rupee.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Vamsee » 10 Feb 2015 21:10

I am surprised that a large number of people, some well meaning and some not so well meaning are deriding new GDP calculations/methodology. It seems that people are upset that SDRE Yindoos are doing better than SYRE Chinese. The current methodology (Calculating GDP at market prices) will allow us to do an apples to apples comparison with rest of the world.

--Vamsee

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby csaurabh » 10 Feb 2015 21:34

Vamsee wrote:I am surprised that a large number of people, some well meaning and some not so well meaning are deriding new GDP calculations/methodology. It seems that people are upset that SDRE Yindoos are doing better than SYRE Chinese. The current methodology (Calculating GDP at market prices) will allow us to do an apples to apples comparison with rest of the world.

--Vamsee


GDP is just a number. It has no relevance to the common man.

The real problems have to be solved through economic reforms. It is still massively difficult to do any business in India.

socialism and license raj need to be kicked out, with that corruption will come down too.

second biggest reform needed is Indian education system, which is currently prepares no one to work for the economy.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Picklu » 10 Feb 2015 22:05

Suffola Gold used to be approx Rs 600 till Dec 2014 but now it is Rs 725 in total as well as bigbasket. Things that matters to me rather than some numbers.

A solid order for Arjun mk2 AND LCA mk1 over the photo op on Vikad or Akash induction.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 10 Feb 2015 22:11

There's no point in coming to the economics thread and saying GDP is not important. It's like going to the LCA thread and saying planes are not important, but that roti-kapda-makan is. There's a very direct relationship between rapid GDP growth and the condition of this much thought of common man improving.

Picklu: local distribution shortage perhaps ? A google search reports prices of Rs. 630 in naturebasket and Rs.725 in bigbasket, which is a pretty huge gap. Hard to call that inflation. Such distortions will exist as long as supply chain management in food products remains underinvested in or just immature, leading to one retailer having very little stock, and the other a lot. This is also something GoI has been working hard to fix. Besides improving regulations, companies also have to make greater investment in storage and distribution, which means investing in transport, warehousing and more.

The lack of uniform GST system also causes this, because companies attempt to maintain local warehousing to prevent interstate duty burdens. As a result, they have to actively manage several sets of procurement and inventory for many metros, leading to some places being overstocked and others understocked. I think such price distortions will fall as interstate commerce improves once GST comes into effect in April 2016.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Picklu » 10 Feb 2015 22:21

Suraj, GDP is important, no doubt about that. However the direct relationship of GDP vs improvement of quality of life has to be visible on the ground. So far, the improved condition is not that much clear to common folks despite the crash in global oil price. That is causing all the Khujli (Pun intended).

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 10 Feb 2015 22:24

Yes, the public is VERY impatient. We all know that. There's a very big visibility on the ground in the form of oil prices falling more than 15% . Has all that been passed on to the consumer ? Maybe not, because companies will try to shore up their balance sheet first and then only pass on the benefits to the consumer. In that regard, there's greater visibility of that price cut to the middle class than to the lower classes.

Modi is going to take a lot of hits simply because he was put in charge of a ship that had taken on so much water, that the fact that the course corrections being made by that ship is not visible in the midst of all the buckets of water being thrown overboard, so to speak. No one likes to be told to be patient, but this is the economics thread and the political implications of lack of patience can be discussed in the politics thread.

Here, I'll just say, be patient, because from an economic perspective there's change on the ground. Even NDA-1 spent 3 YEARS fixing the economy before the change was visible for the next 5-6 years, well into UPA-1. Once again, the political comparisons and ramifications are best discussed in the politics thread...

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Picklu » 10 Feb 2015 22:32

Oh, filling up tank in the car has been a pleasure lately :)

However the price of other items has not come down. So, it is obvious to the common folks that, not just GOI or OIL companies but lot others are adding up in their balance sheet for sure.

To some extent I think NaMo is a bit unlucky despite the fall of oil. Looks like the world is going through a supply glut on almost everything that is required by mass. So, difficult to attract manufacturing or for that matter even services (IT-VITY folks can vouch for it). GDP Growth will only come via productivity gain which will directly or indirectly impact people if the redundant people are not employed elsewhere.

And point taken on the politics part of it even though it was on politics of economy. My last post on this.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 10 Feb 2015 22:42

I don't think Make In India came at a bad time. There's a serious lack of investment in domestic productive capabilities in an extraordinary number of things. As much as the thrust sounds autarkic, there's a huge amount of benefit by starting out with an import substitution goal . A large number of things get imported not because they're cutting edge, but because they're simply volume products that could not be effectively produced in scale in India, because India makes it ridiculously hard to run a lean and efficient labour-intensive manufacturing business. That's also why growth comes out of productivity gains - we're trying to do what the Japanese or Germans are compelled to do when we can instead absorb more labour into the workforce if only we implemented the right policies to get it done. That's been Modi's focus, because he 'solved' that problem in Gujarat and wants to do the same nationwide.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Theo_Fidel » 10 Feb 2015 23:50

Suraj wrote: India makes it ridiculously hard to run a lean and efficient labour-intensive manufacturing business.... ....That's been Modi's focus, because he 'solved' that problem in Gujarat and wants to do the same nationwide.


I don't think solved is the word to use. GJ is not a world mass manufacturing hub. Yes it does export a few bulk products like petroleum or chemicals . Yes it is big for jewellery, gems, diamonds, trade etc, but not for mass manufacturing. Even in cars it is not a export hub as such.

The only mass manufacturing success India had was NOKIA in Chennai. IIRC at one point 10% + of world conventional cell phones came from that one factory. There is nothing else that is even close to that in GJ or TN or anywhere else in desh for that matter. To my mind Modi did not understand how important it was to retain that eco-system. I don’t think he still understands what was lost and for that matter neither does JJ. Yes the UPA started the problem but it finished on NM/JJ’s watch….

There is no indication that what works in GJ will work elsewhere in India. Every state is its own little experiment and a different approach will be needed for every problem. For instance there has been Zero forward movement on POSCO in Odisha. It is clear by now no solutions/ideas are coming from Delhi, certainly you can not apply GJ tactics here...

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 11 Feb 2015 00:38

In my previous post I used 'solved' specifically in the context of absorbing labour employment, and that's a metric where GJ does stand much better than its industrialized state peers. Data is available in the Union Budget economic survey. See Table 13.8, section 5. It is condensed into a more easily readable table here. Gujarat ranks at the bottom of the unemployment chart among that list of major states. It's only peer is a fellow BJP run state with active labour law development - Rajasthan. TN ranks much closer to WB than to GJ in this regard.

Gujarat has a strong secondary sector, contributing close to 40% of GSDP, with services contributing <50%, and agriculture making up the rest. That's quite 'distorted' compared to all India average, where services account for ~60% of GDP and industry accounts for ~25% . Gujarat has a GSDP profile more similar to a Chinese province, with an outsized industrial sector and very low unemployment, than to an Indian industrialized state. Gujarat has a very low unemployment rate of ~26/1000 that's half that of TN and all-India average (~50/1000). TN has substantial industrialization no doubt, but also mechanization intensive industrialization that doesn't absorb their labour pool as well as GJ does. This also shows up in the ancillary metric of % of households availing banking services - 58% for GJ vs 52% for TN, despite the latter doing better in several socio-economics metrics.

I think Modi does understand the need for a local manufacturing ecosystem. Arguing otherwise runs contradictory to the very thrust of Make In India. Unforunately he cannot compel our companies to buy the plant and keep the ecosystem alive. Further, MSFT announced the closure of that plant around the time he was elected, providing very little lead time. Further, why should the 'blame' lie with Modi ? Isn't that TN's most well known manufacturing ecosystem ? States want fiscal autonomy and flexibility; they also get the responsibility of attracting and retaining investment. GoTN should have attempted to line up a consortium of investors the moment it became apparent that MSFT would shed the Nokia plant. It isn't too late to revive the plant, but really it is GoTN that needs to lead the way here.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby disha » 11 Feb 2015 02:18

csaurabh wrote:GDP is just a number. It has no relevance to the common man.

The real problems have to be solved through economic reforms. It is still massively difficult to do any business in India.

socialism and license raj need to be kicked out, with that corruption will come down too.

second biggest reform needed is education system, which is currently prepares no one to work for the economy.


Just a point to note. Umrika also has similar problems!!!

Theo_Fidel

Re: Indian Economy - News & Discussion Oct 12 2013

Postby Theo_Fidel » 11 Feb 2015 03:43

Suraj,

GJ’s unemployment rate is indeed stellar. I read the charts with interest but it does not seem clear to me that the source of the low GJ unemployment is mass manufacturing or for that matter NM. I wonder what absorption is going on other than keeping up with population growth.

For instance I went back in the time series to the 55th NSS round 1999-2000. Table 7.3.1.
http://mospi.nic.in/rept%20_%20pubn/458_part1_final.pdf

GJ Rural unemployment M/F = 8/3 (TN=30/12)
GJ Urban unemployment M/F = 21/26 (TN=39/58)

GJ always had stellar low unemployment relative to India. NM did well by not squandering the situation but it is hard to imagine how his experience will translate to say Bihar.
Also comparing TN/GJ unemployment is not really valid without understanding the context of the 2 states. TN for instance has a Female WFPR a good 10% higher than GJ.

WRT the near term NSS survey I could only find the 68th round from 2011-2012 available online.
http://www.indianstatistics.org/nssoreports.html

From that you can see the distribution of employment by sector. Table 5.11.1 Male+Female. Rural+Urban. I looked at the key areas between GJ & TN.
GJ/TN. Of 10,000 employed.
Sector A(Primary Agriculture etc) : 4878/3516
Sector C(Manufacturing) : 1967/1995
Sector F(Construction) : 480/1267
Sector P(Education) : 217/260

From what I can see the data says 48% of Gujaratis are employed in Agriculture and related activities. The GDP distribution does not match with employment, as it would not, based on my observation that there isn't much mass manufacturing in GJ, only bulk industrial product which does not generate as much employment. The big deal in GJ employment is agriculture. This is something other folks here have pointed out before. The manufacturing employment is actually quite weak per the data. Oddly enough WB, which you mentioned earlier, has more % of workers in manufacturing compared to GJ. 22% for WB vs 19% for GJ/TN. Now that should set the cat amongst the pigeons. :)

Also comparing TN/GJ unemployment is not really valid without understanding the context of the 2 states. TN for instance has a Female WFPR a good 10% higher than GJ. Table 5.1.1
------------------------------------------------------------

Yes, NM understands the need for manufacturing, I just think he does not understand the needs of ‘mass’ manufacturing. For about 2 months after NOKIA shut down, the ecosystem of sub-contractors held on, hoping that other contracts would arrive and the factory would be revived. This is the moment when governments from China to SoKo to Japan to even Vietnam step in and fight tooth and nail to keep the system in place. Sooner or later another company can be attracted to replace the bankrupt one and restart/retrain the workforce. This is what happens around the world, yet it did not happen in India. In fact few even on BRF understood the magnitude of what was happening. True one can blame the usual distraction of JJ in 3rd year but NM cannot completely avoid blame. With a thumping majority he could easily have stepped in and at least tried. The fact that he did not even try says a lot IMHO. FWIW finding a buyer for such a factory is the job of government. Around the world governments are instruments to match buyer to assets, esp. at that scale. Has any such effort been made by GOI? AFAIK not a lot.

BTW at NOKIA all the equipment has been auctioned off and sold already. There will be no revival.

IMHO The time to act is right now. The car manufacturers are crying hoarse that they are losing money due to uneconomic infrastructure. A key project that must be revived is the Chennai port to Maduravoyil project. I think it is within NM's power to act. Take over the project unilaterally and forcibly complete it, similar to Delhi metro. There are 100 other projects that similar ruthless action can be acted on. The DFCIL rail project is still not showing signs of acceleration. Step in, finish 100 km, in 3 months by hook or crook, the rest will sort itself out.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Vayutuvan » 11 Feb 2015 04:38

Suraj wrote:Most of the listed balances are chickenfeed.There's no reason any wealthy person cannot have accumulated the few million listed there over the course of their lives, especially since they're all business folks.


While I agree with the chickenfeed part, the real question is whether due taxes were paid in India. Also please consider

1) that this could be the tip of the proverbial ice berg and all that
2) While smaller million or two are chickenfeed, $800 million is certainly not. There could be a 10x bigger story behind that or 1000x bigger story behind other chickenfeed deposits.

Just to put things in perspective, the then President Clinton was lambasted for issuing a pardon for one tax scofflaw who avoided taxes on $300 million.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby ramana » 11 Feb 2015 04:58

matrimc, More than that it could be loot, corruption in addition to tax evasion and avoidance.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 11 Feb 2015 05:32

Theo: thanks for the additional data. Gujarat benefited a lot historically from the existence of co-operatives like AMUL, Lijjat etc. The vast network of milk collection folks and others involved in similar commercial activities meant that they've maintained very low unemployment for a long time. However, the trend at the milk unions has moved towards larger dairy farms and mechanization, rather than small owners with 1-2 milch cows. From from GJ can probably write more about this. The result is a churn in the workforce, which needs to be employed elsewhere in order to keep the unemployment data as low as it is.

As for employment vs GSDP breakdown, that's also the case with the Indian rural economy overall. The largest contributor to rural GDP is no longer agriculture but services (which has been the case since the mid 2000s), but the largest share of employment is still in agriculture and not yet in services. On the other hand, all those people in milk production, collection and processing get classified as primary sector, even though most are involved in the processing rather than pure primary production activity.

Modi understanding what it takes to support mass manufacturing is quite different from actually being in a position to do anything about it, within a federal system. One can simply wave hands and say 'that's all just noise' or actually accept that he's not in a position to work at odds with a state government. The primary responsibility for TN's investments lie with GoTN. If GoTN begged the center to help and got nothing, one can make a case. Even in the case of China, the frontline investment efforts are province-driven and not pushed by Beijing. Every leading province has a showpiece city, and a government apparatus focused on luring investors to their state. Beijing in turn, actively promotes competition between provinces and enables soft funding to them. Local governments get to issue bonds for infrastructure development.

Both countries are simply too large for either New Delhi or Beijing to push things. Even in China, it's the provinces that lead the effort to attract investment, not the center. The state governments in India themselves need to actively hold regular investor gala meetings, provide them support with infrastructure and facilities, while the center does its bit when it comes to reducing customs procedures and other items within their domain. The center has been actively delegating responsibilities or enabling states. They've been issued a carte blanche to modify labour laws to a much greater extent that before, with the center promising they will not interfere. TN's loss of the Nokia plant is first TN's failure to try their utmost to keep that ecosystem alive.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby disha » 11 Feb 2015 08:28

Theo have you been to Gujarat? Is your case that there is no mass production in Gujarat? Have you been to Surat, Ahmedabad and Baroda and of course Chennai and Coimbatore? If not all your statistics are shanghai statistics because you are quoting numbers without understanding it fully.

Coming to mass production, if you do not think textile yarns and textile itself is not mass produced then there is no further discussion.

For Gem and Gemstone polishing, it is a high input, low output, higher margin industry. The value addition of a polished diamond is immense. It is an industry akin to software industry (yeah, with this comparison you may get your IT knickers in a twist) - requires lot of human touch right from purchase to polish to "settings" and at each stage the value addition is immense. To give you an idea - no such industry at the scale and breadth of it exists out of Gujarat. And it directly employs about 700k people (and indirectly about a million). So much so that "Surat" diamond industry has footprint all the way into Nandurbar. (hint: it is not in Gujarat).

Diamond industry is a mass manufacturing industry. And it employs a significant number of women (@80k).

So your contention that Gujarat does not have mass manufacturing industry is baseless.

[Added later: I will leave Bharuch/Ankleshwar/Baroda/Rajkot out of equation for now]

[Added later: Nobody has to rely on the above statement of mine. They are welcome to go through reports of GJEPC (Gem and Jewellery Export Council).
Check out its report for 2015]

Theo, can you tell us the implications of this? And also to the aam-admi?

By hosting the World Diamond Conference in New Delhi, India effectively brought the global diamond industry under one roof to address challenges that were looming over the diamond business. Narendra Modi’s announcement of the government’s decision to establish a ‘Special Notified Zone’ (SNZ) that will help miners bring roughs on consignment basis display and book orders from local buyers, was received with great enthusiasm by the industry. Industry leaders rightfully focused deliberations on future business prospects for the industry, as well as finding solutions on core issues like rough shortage, generic marketing and the trust factor, which were long overdue.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Singha » 11 Feb 2015 09:36

since Theo keeps bringing up the Nokia ecosystem case, let me ask if it was a case of warehousing stuff made abroad or genuinely manufacturing the parts that went into nokia phones using local suppliers?

- are there
- any domestic makers of SDHC cards?
- any domestic makers of RAM memory used in phones?
- any domestic makers of the CPU complex and its integrated sensors like gps and bluetooth?
- any domestic makers of the feature phone screen or touch phone screens?
- any domestic makers of the camera module?
- any domestic makers of the phone batteries?
- any domestic makers of the wave soldering type machines or any other manufacture and test eqpt used to put together the phone from parts?

did nokia develop any domestic maker for the above or just get its global suppliers like Elcoteq to open warehouses nearby and import all these from taiwan, china, malaysia?

to my knowledge these would make up 95% of the BOM cost of any phone and rest 5% would be keys, plastic case, screws, buttons, charging and usb port receptacle, cables, charger and packaging. was nokia only using local parts for these?

if it was just the second case, our automobile majors support the domestic ecosystem far far more. and folks like ford are exporting from india also

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Yogi_G » 11 Feb 2015 10:38

With the inflation basket fixed some time back and now a better mechanism for GDP calculation I just wish if there was something in terms of a mechanism that would give us an idea on the amount of black money out there and somewhat understandable by economy n00bs like me. India is easily a 3-3.5 trillion $ economy.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 11 Feb 2015 11:17

By definition, the informal or 'black' economy cannot be measured because it runs outside of the formal economy. The topic of criminalizing the matter, is primarily a political exercise. Pretty much every one of us has generated black money, many many times. Example ? If you bought provisions from the local grocer as a cash transaction, you converted your white to black money. If you have a dhobi who comes and washes or presses clothes, ditto, your money went into the informal economy. Did you hire and pay a maid ? Once again, same thing.

Black money is not something big businessmen, politicians and builders parley in. Pretty much every last person in the country is part of the black economy one way or the other. Criminalizing some, but not others, on the basis of the size of transactions, will quickly descend into a political witchhunt and/or class struggle.

The message from the elections is getting distorted. Modi stated his desire to bring back money stashed abroad. He did not, and really cannot, make the black economy go away anytime soon, because all of us in India feed it every single day.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby gakakkad » 11 Feb 2015 12:01

agree with suraj guru...i think the correct term would be unorganized sector...black economy is a horrific term for it , as black implies illegitimacy ..what black money means in political sense is tax evasion and money laundering , both of which are offenses ..IMHO informal economy may be more important than unaccounted wealth due to tax evasion or laundering...because if informal economy becomes organized that it would improve profitability and quality of service... a dhobi might be better of starting a chain of laundromats...javed habib is a babrber in organized sector...but one can still get decent heir cuts in traditional road side "Hajaams" or "nai's" in semi-urban or rural areas...if that becomes a part of organized economy , it is better for the hygeine of the customer and bottom-line of the barber..

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 11 Feb 2015 12:15

Unorganized or informal are both better words. But my point of using black was to convey the message that all of us are part of this . The term 'black money' needs specific definition. Technically any transaction where you transact an exchange of goods or services that are not officially tracked or taxed, constitutes laundering, tax evasion and fostering of black money. I would not be surprised if at least one person vehemently complained about the matter in person or online, then went out to the local kirana and bought some, say milk and bananas, the shop owner never declaring most of his turnover and therefore the money going into the informal economy.

It's better to use the following definitions:
* Does person X have an account abroad that is undeclared in Indian tax forms ?
* Does reported FOB/CIF values of the goods being imported/exported match inspected estimates ?

Both the former and the latter are receiving attention from GoI. The former just saw the HSBC account revelations. The latter has seen continuous streamlining in recent months. Those asking 'why hasn't the government done anything about black money ?' are really asking 'why hasn't {insert person they hate} been caught with an undeclared foreign account or other benami activity yet ?' That is purely a political question.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Dilbu » 11 Feb 2015 12:49

Singhaji in Sriperumbudur Nokia had all its furrin suppliers open a warehouse nearby their factory and let them supply from there. There was only facilities management kind of outsourcing locally IIRC.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Yogi_G » 11 Feb 2015 13:50

You are right, informal or unorganized may be a better term than the black economy. The labour organization has some means to denote which percent of the workforce is organized and which one isn't. I was looking at something like that to be able to get a better idea of the true size of the economy. Maybe there is an inherent interest in not bringing out this true size for it may impact the rate at which we get loans from world bank/IMF etc.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Singha » 11 Feb 2015 16:07

per my reading the foreign suppliers brought in the parts and the nokia plant had machines where workers stood in a assembly line and used these parts to make the phones. salary was around 15-20k which is big + benefits like subsidized food, transport, medical etc. its a grevious loss to the local economy no doubt as they supported shops, rentals, transports also in the area.

however we do not have a pearl river valley kind of ecosystem in electronics products anywhere in india hence there was no ecosystem to destroy.

we need vertically integrated cos like samsung who can make all of the stuff I listed.

Theo_Fidel

Re: Indian Economy - News & Discussion Oct 12 2013

Postby Theo_Fidel » 11 Feb 2015 19:15

Singha,

The global supply chain is one of value add at at different hubs. There is no one spot that makes everything.Even the pearl delta imports much of its components. To give you an idea of the Value add, Nokia Chennai resulted in $2 Billion in cellphone export income annually. Not including the savings to the domestic market. There is nothing else like it anywhere in India.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Singha » 11 Feb 2015 20:26

from the employment perspective I have no disagreement. the final assembly and testing is where most of the workers are needed.
stuff like memory cards, screens and cpu's will be made in some highly automated plants.

we need jobs at all cost.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby ramana » 11 Feb 2015 22:14

No. There is black money and there is informal economy.
Black Money: Tax evasion, Tax avoidance, loot and corruption aka bribes Some criminal activity
Informal Economy: Cash transactions economy. This is ~3 x the formal economy.

R Vaidyanathan has written a book Indian UnINC detailing the informal economy. Latter has no criminal links. The book costs ~450 rupees. Please read and get informed.

Theo_Fidel

Re: Indian Economy - News & Discussion Oct 12 2013

Postby Theo_Fidel » 11 Feb 2015 22:32

So when one goes to sell a flat and the fellow offers 40% black money and 60% white, is this informal money or black money? How is one to know?

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 11 Feb 2015 22:32

There is no comparison between the Pearl Delta and Chennai. The former has a two decade long history in the component electronics business, fed by low value add mass manufacture of everything from PCBs to circuit components, displays, and other devices. Chennai on the other hand, had to import everything, or line up suppliers to create a local production facility. For example, Nokia convinced Aspocomp , a PCB maker, to open shop in Chennai:
Oct 5 2006: Aspocomp to set up PCB plant in Nokia SEZ
Aspocomp, a Finland-based company engaged in manufacturing high-density interconnection printed circuit board (HDI-PCB), plans to set up a printed circuit board plant in the Nokia Telecom Park.

The plant will be India's first high-density interconnection printed circuit board facility and will be set up with an investment of $100 million in the first phase, according to Maija-Liisa Friman, Chief Executive Officer, Aspocomp.

Addressing a press conference here on Wednesday, Ms. Friman said the initial investment would be $100 million and the company would infuse another $100 million in the second phase. She said the bhoomi pooja for the company was done earlier in the day. The project would be financed with long-term loans raised by the parent company and the Indian subsidiary. The unit was planned to become operational during the second half of 2007 and go on full stream in 2008.

Essentially, when Nokia Chennai started out, it imported even the PCBs. With Aspocomp, they were procured locally. As far as I'm aware, there's no Indian company who tried to duplicate what Aspocomp did, and outdo them - something the Chinese diligently do in everything - get hold of the technology and then dominate the market with a local company.

In China, provinces like Guangdong, Zhejiang, Jiangsu etc have extremely active provincial leaders who build convention centers and infrastructure, and travel abroad to attract investment. They compete not just with other countries, but their fellow provinces. They all have their own kind of Vibrant Gujarat events, used to attract investment. They do not depend on current revenue to fund infrastructure; they issue debt, which forces them to implement things effectively and on time, or they have to offer a higher coupon rate to mitigate risk.

In India, very little happens on this front, through state development loans, which carry a coupon rate ranging from 8-10%, and guidelines restricting borrowing limit to ~4% of GSDP. The cumulative SDLs raised was around Rs.1.7 lakh crore ($28 billion), which is a fairly tiny sum comparable to the GSDP of Jharkhand.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 11 Feb 2015 22:35

ramana wrote:No. There is black money and there is informal economy.
Black Money: Tax evasion, Tax avoidance, loot and corruption aka bribes Some criminal activity
Informal Economy: Cash transactions economy. This is ~3 x the formal economy.

R Vaidyanathan has written a book Indian UnINC detailing the informal economy. Latter has no criminal links. The book costs ~450 rupees. Please read and get informed.

Same difference. Informal economy takes the money out of the purview of the formal economy and therefore taxation. They are one and the same. The negative connotations arise because of the scale of the hoarding. A kirana shop owner who doesn't file taxes and disclose his actual turnover, is transacting in black money just as, say, Vadra is.

It is better that people are actually aware that what the call 'informal economy' for their daily activity is the same as 'black economy' for the big wigs. Any person of means will simply use legal means to point out the moral hazard in prosecuting him for what everyone - even the judge sitting - does day to day, just on a much larger scale.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby sivab » 11 Feb 2015 23:13

Didn't see this news posted...

GoI made this important decision on Delhi election counting day and it got lost.

http://timesofindia.indiatimes.com/indi ... 188576.cms

Government frees non-PDS kerosene from regulatory control

NEW DELHI: With a view to ease the availability of market-priced kerosene, the government has freed sale of non-PDS kerosene from regulatory control.

The government has amended the Kerosene (Restriction on Use and Fixation of Ceiling Price) Order, 1993, to free all activities of storage, transportation and sale of white kerosene (market-priced kerosene or non-PDS kerosene) from regulatory control, an official statement said here.

Subsidised kerosene sold through public distribution system (PDS) is blue in colour while the market priced fuel is colourless.

"It is expected that this will reduce demand for diverted PDS kerosene by improving availability of non-PDS kerosene in the open market and will thus meet the demand of kerosene for various legitimate end uses for the industry and for individual consumption by those who can afford it at market price," the statement said.

While PDS kerosene is priced at Rs 15.14 per litre, the non-subsidised or market-priced fuel comes for Rs 27.68 a litre.

"In this regard, the Kerosene (Restriction on Use and Fixation of Ceiling Price) Amendment Order, 2015 has been published in the Gazette of India vide GSR.41 (E) dated January 19, 2015," it added.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby arshyam » 12 Feb 2015 00:11

TFS sivab saar, I have x-posted in the achievements thread.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby sivab » 12 Feb 2015 00:38

arshyamji, one more important article that got lost in Delhi election din

http://m.timesofindia.com/india/Govt-to ... 180794.cms

Govt to net Rs 10,000 crore from Swiss bank accounts by March-end: SIT

NEW DELHI: The Supreme Court-appointed Special Investigation Team (SIT) on black money expects the income tax department to recover Rs 10,000 crore by March 31 as tax and penalty for tax evasion from 300-odd Indians who held illegal accounts in Swiss banks.

"Under the supervision of the SIT, the I-T department has already recovered around Rs 3,500 crore from some of the account holders. As these are old accounts, the assessment proceedings have to be complete by March 31 and we expect the I-T department to net another Rs 6,500 crore by that time," SIT vice-chairman Justice Arijit Pasayat told TOI.

He agreed that what was unearthed till now, from the data given by the French government, was only a miniscule portion of the number of foreign accounts held by Indians abroad for the purpose of parking illegal money.

"That is why we have gone public seeking information from all sources about Indians holding accounts abroad to stash black money. Half of the 628 Swiss bank accounts, information about which was given to India by France, was held either by Non-Resident Indians or were legitimate accounts. Rs 10,000 crore is expected to be recovered from the rest on completion of assessment proceedings," Justice Pasayat said.


This is the reason why the SIT had recommended making tax evasion a prosecutable offence, which means tax evaders could face jail term if it is proved that they deliberately evaded payment of taxes.

"We cannot have a simple offence like cheating a prosecutable offence under Section 420 of Indian Penal Code, but allow tax evaders to go scot free if they agree to pay up after being caught," Justice Pasayat said.

The SIT, in its report to the Supreme Court, had expressed serious concern about false invoicing in the export-import business and said it was the major route for generating black money in the country.

Commencement of strict scrutiny of invoices and comparing them with other export-import documents has led a few businessmen to come out voluntarily and pay up Rs 500 crore as penalty.

"Under the supervision of SIT, the customs and excise department has initiated proceedings for recovery of Rs 15,000 crore in tax evasion just from mis-invoicing. These adjudication proceedings will be completed within a fixed time frame and we can expect the money to come within a year," Justice Pasayat said.


The SIT had also recommended that the government set up a dedicated unit along the lines of Trade Transparency Unit set up by the US to examine mismatch between India's export-import data with import-export data of other countries.

Implementation of such a measure would ensure that the government has a fair idea of the quantum of black money that is being siphoned off outside the country through false invoicing of imports and exports through trade-based money laundering, it had said.

The SIT vice-chairman said under its guidance, the Enforcement Directorate has attached property worth Rs 4,000 crore from persons who generated ill-gotten money through bogus chit funds and offences under Prevention of Corruption Act in West Bengal, Odisha and Andhra Pradesh.

"Practically, we expect government agencies to net around Rs 30,000 crore within a year," he said.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 12 Feb 2015 03:54

FinMin MoS pushes for information exchange on black money
Jayant Sinha, the minister of state for finance, has “strongly advocated” full and fast implementation of automatic exchange of tax information among nations, to better track illegal money in foreign banks.

At a recent meeting of G20 grouping finance ministers and central bank governors, where he said this, a communiqué stated the nations concerned had pledged to strengthen transparency in this regard, to prevent cross-border tax evasion.

“We will finalise the (BEPS) deliverables by year-end,” the communiqué stated. BEPS, or base erosion and profit shifting, is used to describe tax planning strategies by multinational corporations that rely on mismatches and gaps between tax rules of different jurisdictions.

A BEPS Action Plan approved by the G20 seeks to identify, over a period to December 2015, ways of providing more standardised international tax rules. The communique issued at the end of the two-day meeting late on Tuesday also underlined the need for International Monetary Fund quota reforms, for giving greater representation to emerging economies. India was represented by Sinha and Reserve Bank governor Raghuram Rajan at the meeting.

New retail inflation series to be released tomorrow
In order to present a better picture of the price situation in the country, government will tomorrow release a new series of Consumer Price Index (CPI) with 2012 as base year for computing retail inflation rate.

The first series (revised) has been compiled for January which will be released on February 12.

The Central Statistics Office (CSO) has recently revised the base year and methodology for computing national account which provides a picture of the economy.

From January 2016 onwards, inflation rates would be compiled using the actual CPI of the revised series, according to an official statement.

CSO has been releasing Consumer Price Indices (CPI) for Rural, Urban and Combined, at state/UTs and all India level, since January 2011.

"Now the CSO is in the process of revising the Base Year from 2010=100 to 2012=100," the statement had said adding that with this (base) revision, the gap between Price Reference Year (Base Year) and the Weight Reference Year has been minimised.

Apart from base revision, a number of methodological improvements have been introduced in the revised series.

Prices of Antyodaya Anna Yojanna (AAY) have also been included in addition to Above Poverty Line (APL) & Below Poverty Line (BPL) prices being taken in the existing series.

The weight of food and beverages would be 45.86 in the new 2012 series compared to 47.58 in 2010 series for national index.

The weight of fuel and light segment would be 6.84 in the new series as against 9.49 in the 2010 series.

The weight of clothing and footware segment would be increased to 6.53 from 4.73 while that of housing will be 10.07 from 9.77.

The weight of pan, tobacco and intoxicants will be increased to 2.38 from 2.13. Similarly the weight of miscellaneous will also be increased to 28.32 from 26.31 in the new series.

The number of priced items has been changed from 437 to 448 in rural and from 450 to 460 in urban at all India level.

In the revised series, 11 new priced items have been added, without dropping any item, in rural sector at all India level. In case of urban, 7 priced items have been dropped and 17 new priced items have been added.

Chattisgarh state government proactively addressing food security:
Food security blanket soon for all Chhattisgarh district headquarters
The Chhattisgarh government has launched a plan to implement its core public distribution system (PDS) — Meri Marzi — in all 27 district headquarters within the next year-and-a-half.

Launched in state capital Raipur, the scheme is in line with the portability principle in PDS. The beneficiary can collect food grain from any shop.

Chief Minister Raman Singh told Business Standard, “The government has already covered 6.5 million families under the first phase of the food security scheme, where the government distributes 35 kg rice at Rs 1, 2 kg salt for free and also chana (chickpea) to the Tribal population.

“In the second phase, the government intends to cover urban areas. The Meri Marzi scheme allow the beneficiary the facility to draw money anywhere, just like an automated teller machine (ATM). They can procure food from any shop. The details of rations supplied to every beneficiary is made available online, to ensure transparency in the working of fair price shops.”

The chief minister said the food security scheme does not only provide sustenance but also nutrition. The government’s annual outgo on the scheme was Rs 2,000 crore.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby RoyG » 12 Feb 2015 04:45

Gold tax is set to come down substantially. This is going to impact the hold market. I wonder if the PMO, RBI, and finance ministry have a plan to quietly stockpile some of the metal by using agents/traders to store it in multiple vaults around the country. This is imperative.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Singha » 12 Feb 2015 06:52

folks like france, netherland and germany are moving their gold back from NYC storage as fast as they can without the big boss coming down hard on them...like 100 tons every year...the original gold was nowhere to be found, so to cover it up with a fig leaf, most of the gold is being remelted and recast under the claim of not being compliant to the latest purity std. this gets rid of their old original markings.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Prem » 12 Feb 2015 09:10

Indians can invest up to $2,50,000 overseas annually
http://www.rediff.com/business/report/i ... 150203.htm

Encouraged by foreign exchange reserves touching record levels, the Reserve Bank on Tuesday doubled the annual overseas investment ceiling for individuals to $2,50,000."On a review of the external sector outlook and as a further exercise in macro-prudential management, it has been decided to enhance the limit under the Liberalised Remittance Scheme (LRS) to $2,50,000 per person per year," the RBI said in its Bi-Monthly Monetary Policy Statement.In view of the worsening current account deficit and a volatile rupee, the RBI had in August 2013 reduced the ceiling from $200,000 to $75,000 per person in a year under the LRS. Consequently, with improvement in forex situation, it was raised to $1,25,000 in June 2014.The LRS allows residents to acquire and hold shares, debt nstruments or other assets outside India without prior approval of the RBI.In mid-January, India's foreign exchange reserves touched a new life-time high at $322.135 billion, driven by higher foreign fund inflows and lower forex outgo on the back of a massive fall in global crude prices.In 2014, FIIs pumped in $16.15 billion into Indian equities while they have exhausted the cap of $30 billion in government securities. They have parked $32.5 billion in corporate bonds, which is 64 per cent of their cap of $51 billion.Foreign direct investments (FDI) in the country rose by 22 per cent to $18.88 billion during the eight months of the current fiscal. The amount was $15.45 billion in the April-November period of 2013-14.India's current account deficit narrowed to 1.9 per cent of GDP in the first half of current fiscal from 3.1 per cent of GDP in in the corresponding period of 2013-14.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Prasad » 12 Feb 2015 10:16

http://www.thehindu.com/todays-paper/tp ... 884335.ece
This isn't good.
Pause on decisions on urea, LPG cylinders and kerosene

The Modi government is putting on hold its plans for some key economic reforms Union Finance Minister Arun Jaitley had announced in his maiden Budget last July.

These include decontrol of urea prices, fewer subsidised cylinders a year and withdrawal of kerosene from the public distribution system (PDS).

Fertilizer Minister Ananth Kumar told The Hindu that the administered price controls for urea would stay. “We are committed to keeping the policy pro-farmer,” he said.

Fear of a political backlash based on inputs from party leaders — now established by the rout in the Delhi Assembly elections — has forced the hands of the government.

Asked if the government’s unpopular reform proposals were behind the victory of the Aam Aadmi Party in Delhi, Mr. Kumar said: “Narendrabhai Modi was and always will be pro-farmers.”

“The Finance Minister has already put on hold an order dated November 24 that directed us to withdraw kerosene as a general PDS item and direct it only to un-electrified households,” said an Oil Ministry official. “PDS kerosene will continue for now.”

The fine print of the July Budget said: “… there is need to cap the [number of] subsidised cylinders at a more realistic level.” The Oil Ministry source said that after the AAP victory in Delhi, the Modi government was likely to keep the number of subsidised cylinders at the existing 12 a connection annually. “The Oil Minister is not in favour of reducing the number.” When contacted, Oil Minister Dharmendra Pradhan’s office said he was not available for comment as he was out of the country.

The fine print of the July Budget said: “What is now urgently required are certain pricing reforms in the urea sector with an immediate price correction for urea … This is not only essential from the viewpoint of the size of the subsidy bill but also from the viewpoint of balanced use of N, P & K [Nitrogen, Phosphate & Potassium] nutrients.”

Protecting and even expanding the PDS and keeping fertilizer prices low were part of the election promises that the Aam Aadmi Party (AAP) made in Delhi.

Urea is the only fertilizer under statutory price control for which the maximum retail price is fixed by the Centre. The difference between production cost incurred by a manufacturer and the administered concessional price is reimbursed as subsidy. For the purpose of the calculation of the subsidy element, the Fertilizer Ministry, in consultation with manufacturers, determines the production cost for every urea plant separately. As a result, the manufacturers’ lobby is opposed to reform.

The other fertilizers were shifted to a subsidy regime by the Manmohan Singh government under which subsidy is no longer paid to manufacturers on the basis of production cost. Instead, the quantity sold is taken into account.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby sooraj » 12 Feb 2015 11:46



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