Indian Economy - News & Discussion Oct 12 2013

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Peregrine
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Indian Economy - News & Discussion Oct 12 2013

Postby Peregrine » 20 Feb 2015 01:15

From the Economist - A subscription site.

India’s Economy

A chance to fly

India has a rare opportunity to become the world’s most dynamic big economy

EMERGING markets used to be a beacon of hope in the world economy, but now they are more often a source of gloom. China’s economy is slowing. Brazil is mired in stagflation. Russia is in recession, battered by Western sanctions and the slump in the oil price; South Africa is plagued by inefficiency and corruption. Amid the disappointment one big emerging market stands out: India.

If India could only take wing it would become the global economy’s high-flyer—but to do so it must shed the legacy of counter-productive policy. That task falls to Arun Jaitley, the finance minister, who on February 28th will present the first full budget of a government elected with a mandate to slash red tape and boost growth. In July 1991 a landmark budget opened the economy to trade, foreign capital and competition. India today needs something equally momentous.

Strap on the engines

India possesses untold promise. Its people are entrepreneurial and roughly half of the 1.25 billion population is under 25 years old. It is poor, so has lots of scope for catch-up growth: GDP per person (at purchasing-power parity) was $5,500 in 2013, compared with $11,900 in China and $15,000 in Brazil. The economy has been balkanised by local taxes levied at state borders, but cross-party support for a national goods-and-services tax could create a true common market. The potential is there; the question has always been whether it can be unleashed.

Optimists point out that GDP grew by 7.5% year on year in the fourth quarter of 2014, outpacing even China. But a single number that plenty think fishy is the least of the reasons to get excited. Far more important is that the economy seems to be on an increasingly stable footing (see article). Inflation has fallen by half after floating above 10% for years. The current-account deficit has shrunk; the rupee is firm; the stockmarket has boomed; and the slump in commodity prices is a blessing for a country that imports four-fifths of its oil. When the IMF cut its forecasts for the world economy, it largely spared India.

The real reason for hope is the prospect of more reforms. Last May Narendra Modi’s Bharatiya Janata Party won a huge election victory on a promise of a better-run economy. His government spent its early months putting a rocket up a sluggish civil service and on other useful groundwork. But the true test of its reformist credentials will be Mr Jaitley’s budget.

The easy part will be to lock in India’s good fortune, with fiscal and monetary discipline. In addition India’s public-sector banks need capital and, since the state cannot put up the money, the minister must persuade potential shareholders that they will be run at arm’s length from politicians.

If India is to thrive, it needs bold reforms and political courage to match. The tried-and-tested development strategy is to move people from penurious farm jobs to more productive work with better pay. China’s rise was built on export-led manufacturing. The scope to follow that model is limited. Supply-chain trade growth has slowed, and manufacturing is becoming less labour-intensive as a result of technology. Yet India could manage better than it does now. It has a world-class IT-services industry, which remains too skill-intensive and too small to absorb the 90m-115m often ill-educated youngsters entering the job market in the next decade. The country’s best hope is a mixed approach, expanding its participation in global markets in both industry and services. To achieve this Mr Jaitley must focus on three inputs: land, power and labour.

Jumbo on the runway

All are politically sensitive and none more so than land purchases. In China the state would just requisition the land, and let farmers go hang. But India has veered too far the other way. A long-standing plan to build a second international airport in Mumbai is on ice. An act passed in the dying months of the previous government made things worse by calling for rich compensation to landowners, a social-impact study for biggish projects and the approval of at least 70% of landholders before a purchase can go ahead. Mr Modi has used his executive powers to do away with the consent clause for vital investments. It is a temporary fix; Mr Modi needs to make it permanent and to win that political battle he needs to show that prime locations do not go to cronies, but to projects that create jobs.

Power, or rather the shortage of it, also stops India soaring. According to one survey half of all manufacturers suffered power cuts lasting five hours each week. Inefficiency is rampant throughout the power network, stretching from Coal India, a state monopoly, to electricity distributors. The first auctions of coal-mining licences to power, steel and cement companies, which began this week, are a step forward. More effort will be needed to open distribution to competition. Regulators are cowed by politicians into capping electricity prices below the cost of supply—though people will pay up and leave the politicians alone if they know that the supply is reliable.

The third big area ripe for reform is India’s baffling array of state and national labour laws. Compliance is a nightmare. Many of the laws date to the 1940s: one provides for the type and number of spittoons in a factory. Another says an enterprise with more than 100 workers needs government permission to scale back or close. Many Indian businesses stay small in order to remain beyond the reach of the laws. Big firms use temporary workers to avoid them. Less than 15% of Indian workers have legal job security. Mr Jaitley can sidestep the difficult politics of curbing privileges by establishing a new, simpler labour contract that gives basic protection to workers but makes lay-offs less costly to firms. It would apply only to new hires; the small proportion of existing workers with gold-star protections would keep them.

Adversity has in the past been the spur to radical change in India. The 1991 budget was in response to a balance-of-payments crisis. The danger is that, with inflation falling and India enjoying a boost from cheaper energy, the country’s leaders duck the tough reforms needed for lasting success. That would be a huge mistake. Mr Modi and Mr Jaitley have a rare chance to turbocharge an Indian take-off. They must not waste it.

Cheers Image

Theo_Fidel

Re: Indian Economy - News & Discussion Oct 12 2013

Postby Theo_Fidel » 20 Feb 2015 01:25

Suraj wrote:The corporates, on account of having spent >$100 billion between them, need a ROI.


Have they actually paid this to GOI. As far as I can see it is per ton bid. So this money is only paid out after production begins. GOI/States don’t get anything upfront.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 20 Feb 2015 02:22

An initial bid payment must be paid upfront by the winning winner. Whether or not their produce from the block is their own problem. See the news below - it estimates Rs.3000 crore in income this fiscal, i.e. when the auction happens. They based it on Rs.4 lakh crore total estimate in January, which has since been increased to more than Rs.7 lakh crore. Therefore the initial payout too increases to ~Rs.6000 crore this fiscal
Coal block auctions will wipe out state fiscal deficit: Report
The forthcoming auctions of coal blocks are likely to reduce fiscal deficits of the states with coal mines, as about Rs 3,000 crore will flow into their coffers from the process this fiscal, a report has said.

Out of 24 coal blocks being put on auctions, Chhattisgarh will be the biggest beneficiary with minable reserves of 567.77 million tonne, followed by Jharkhand (348.42 mt) and Madhya Pradesh (293.02 mt), the report by SBI Research said.

The other states which will benefit are Bengal (137 mt), Maharashtra (39.02 mt) and Orissa (33.84 mt). These states together have a minable reserves of 1,419 million tonne.

"The coal block auction will result in a windfall gain for state governments. In the current fiscal, about Rs 3,000 crore will flow into state coffers.

"Over the years, the expected revenue from coal block auctions is expected to even wipe-out the states' fiscal deficit significantly," a State Bank of India internal report Ecowrap said.

It said as per the estimates, total payment to the states in next 30 years would be more than Rs 4 lakh crore for 204 blocks that have been cancelled by the Supreme Court.

In addition to this, an equal amount will also flow to the states' treasuries by way of royalty, it added.

So all the states stand to benefit to the tune of around about Rs 4 lakh crore over 30 years.

"These are initial estimates and the amount may go well beyond this with an increase in coal extraction and auction price," it pointed out.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby disha » 20 Feb 2015 02:36

Theo,

You come across as a person completely thunderstruck and clutching at the straws with your "But ... But .... But... " statements. I can understand that you are shocked and awe'd and completely dumbstruck and hence responding incoherently. Yes CONgoons looted India for the last 10 years. And Maunmohan was watching the loot patiently.

I will make some statements., and it is your homework to find out their sources.

1. Companies will mine. They will not sit idle. If they sit idle for speculation - they will loose their mines.

2. GOI/States will be paid "license/royalty/bid" fees (@5%) upfront and this fiscal year (2015-16) itself and the rest is paid out per production schedule.

3. The Companies cannot over mine. They cannot under mine or idle.

Suraj Sir,

You have underestimated the uptake cost of ton of coal for a company. The worldwide production cost may be around $30-$50 per ton of coal depending on grade - however for an Indian company the uptake cost is from $70 (for power) to $130 (for steel) per ton of coal. This is due to Coal India not able to keep with the demand and hence the consumers have to go for imports. There they also have to deal with short term fluctuations and supply vagaries. For example, over a 30 year period - one can easily bake in at least two - 3 year global events where commodity demand may outstrip supplies. Basically, with import dependence one cannot have a long term outlook.

Given that, companies would rather have a mine in its pocket and they can mine enough to fuel their current capacity PLUS 50% expansion. With India itself poised for infrastructure growth - demand within India for Cement (Coal is required), Steel (coal is required), Power (Coal is required), Chemicals (Coal+Oil is required) is going to outstrip supply. How will this companies fuel their growth? A mine in the pocket comes in handy.

In that sense, for an iron/steel company - paying up to 3000 Rs. per ton of quality grade over a 30 year period for its iron/steel generation comes at a cheap price!

There was a reason GOI estimated 7 lakh crore rupees. It will easily surpass that and my prediction is that it will be @12 lakh crore rupees.

And this means states like W.Bengal, Chattisgarh, Jharkhand, AP does not have to depend upon additional Central government budget to fuel their growth. This also means that the GOI will be able to more than meets its fiscal deficit targets (since they do not have Mamatas begging at their door).

Added later: Modi and his cabinet should get 1% of the auction as bonus to spend money on their pet projects.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 20 Feb 2015 03:26

disha: I didn't underestimate the price. The Appalachian index is ~$53 now and I simply used that as a reference figure for explanation. I know that Australian coal is much more expensive. On the other hand, previous block allocations lay idle because Coal India was the only entity permitted to mine them, following the coal mine nationalization in 1973. Since Coal India could not satisfy demand for various reasons, private cement, steel and power producers chose to import. The current ordinance just undermines the coal mine nationalization and allows the new bidders to mine and utilize the coal, which means that they will now be able to extract the coal much without impediment.

This coal block allocation process is not only large in scale and scope, but it has massive externalities towards feeding cement, steel and power generation, pushing up the IIP core sector output, and therefore manufacturing. The coal shortage has been exacerbated by the ~10% annual growth in power generation capacity, and this should help a lot. Ditto for steel and cement. I agree that the final bid totals will exceed Rs.7 lakh crore and 10-15 lakh crore sounds possible considering just 12 of 204 blocks have netted Rs.80,000 crore worth of bids.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby hanumadu » 20 Feb 2015 05:00

The payments are over a period of 15 years. So 7 lakh crore would be 50000 crores per anum which is distributed to the states in which the mines are present.

Theo_Fidel

Re: Indian Economy - News & Discussion Oct 12 2013

Postby Theo_Fidel » 20 Feb 2015 05:09

Suraj wrote:An initial bid payment must be paid upfront by the winning winner. Whether or not their produce from the block is their own problem. See the news below - it estimates Rs.3000 crore in income this fiscal, i.e. when the auction happens. They based it on Rs.4 lakh crore total estimate in January, which has since been increased to more than Rs.7 lakh crore. Therefore the initial payout too increases to ~Rs.6000 crore this fiscal


That's good to hear. Hopefully we can cut down some of the imported coal expense with this. Assuming the court doesn't mess with the process.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby disha » 20 Feb 2015 06:09

Theo_Fidel wrote:
That's good to hear. Hopefully we can cut down some of the imported coal expense with this. Assuming the court doesn't mess with the process.


I am surprised that you had to come here to get the good news instead of doing some homework (it would have taken at most of 10 mins. of googling).

Sir, I have a simple request. A request to look at your own political leanings and not let it cloud by your religious leanings. For the political leanings, you must realize that supporting the CONgIs at this stage is supporting anti-nationals. The amount of loot they have done in past 10 years is immense. Even for keeping quiet when the loot was going on - Manmohan, his cabinet, all the ministers and all the CONgI MPs should be in jail - for failing to perform their duties and allowing anti-national forces to gain strength.

People should not cloud economic vision with religious glasses.

Now the question is stark, do you want to be anti-national? Any support for CONgIs is an anti-national support.

[PS: I am actually upset - the past 10 years, if the CONgI government had gotten at least the coal auction right and the infrastructure momentum right, India would have been a $4T economy. Imagine the loss of opportunities for a 25 year old coming into employment market in 2005 and finding that his 10 years are wasted and the person is now 35 year old with even lesser opportunities!!!]
Last edited by Rahul M on 21 Feb 2015 21:54, edited 1 time in total.
Reason: personal attack. banned for 3 days.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Prem » 20 Feb 2015 06:10

A chance to fly
http://www.economist.com/news/leaders/2 ... chance-fly

EMERGING markets used to be a beacon of hope in the world economy, but now they are more often a source of gloom. China’s economy is slowing. Brazil is mired in stagflation. Russia is in recession, battered by Western sanctions and the slump in the oil price; South Africa is plagued by inefficiency and corruption. Amid the disappointment one big emerging market stands out: India.
If India could only take wing it would become the global economy’s high-flyer—but to do so it must shed the legacy of counter-productive policy. That task falls to Arun Jaitley, the finance minister, who on February 28th will present the first full budget of a government elected with a mandate to slash red tape and boost growth. In July 1991 a landmark budget opened the economy to trade, foreign capital and competition. India today needs something equally momentous.India possesses untold promise. Its people are entrepreneurial and roughly half of the 1.25 billion population is under 25 years old. It is poor, so has lots of scope for catch-up growth: GDP per person (at purchasing-power parity) was $5,500 in 2013, compared with $11,900 in China and $15,000 in Brazil. The economy has been balkanised by local taxes levied at state borders, but cross-party support for a national goods-and-services tax could create a true common market. The potential is there; the question has always been whether it can be unleashed.Optimists point out that GDP grew by 7.5% year on year in the fourth quarter of 2014, outpacing even China. But a single number that plenty think fishy is the least of the reasons to get excited. Far more important is that the economy seems to be on an increasingly stable footing (see article). Inflation has fallen by half after floating above 10% for years. The current-account deficit has shrunk; the rupee is firm; the stockmarket has boomed; and the slump in commodity prices is a blessing for a country that imports four-fifths of its oil. When the IMF cut its forecasts for the world economy, it largely spared India.
The easy part will be to lock in India’s good fortune, with fiscal and monetary discipline. In addition India’s public-sector banks need capital and, since the state cannot put up the money, the minister must persuade potential shareholders that they will be run at arm’s length from politicians.If India is to thrive, it needs bold reforms and political courage to match. The tried-and-tested development strategy is to move people from penurious farm jobs to more productive work with better pay. China’s rise was built on export-led manufacturing. The scope to follow that model is limited. Supply-chain trade growth has slowed, and manufacturing is becoming less labour-intensive as a result of technology. Yet India could manage better than it does now. It has a world-class IT-services industry, which remains too skill-intensive and too small to absorb the 90m-115m often ill-educated youngsters entering the job market in the next decade. The country’s best hope is a mixed approach, expanding its participation in global markets in both industry and services. To achieve this Mr Jaitley must focus on three inputs: land, power and labour.All are politically sensitive and none more so than land purchases. In China the state would just requisition the land, and let farmers go hang. But India has veered too far the other way. A long-standing plan to build a second international airport in Mumbai is on ice. An act passed in the dying months of the previous government made things worse by calling for rich compensation to landowners, a social-impact study for biggish projects and the approval of at least 70% of landholders before a purchase can go ahead. Mr Modi has used his executive powers to do away with the consent clause for vital investments. It is a temporary fix; Mr Modi needs to make it permanent and to win that political battle he needs to show that prime locations do not go to cronies, but to projects that create jobs.Power, or rather the shortage of it, also stops India soaring. According to one survey half of all manufacturers suffered power cuts lasting five hours each week. Inefficiency is rampant throughout the power network, stretching from Coal India, a state monopoly, to electricity distributors. The first auctions of coal-mining licences to power, steel and cement companies, which began this week, are a step forward. More effort will be needed to open distribution to competition. Regulators are cowed by politicians into capping electricity prices below the cost of supply—though people will pay up and leave the politicians alone if they know that the supply is reliable.The third big area ripe for reform is India’s baffling array of state and national labour laws. Compliance is a nightmare. Many of the laws date to the 1940s: one provides for the type and number of spittoons in a factory. Another says an enterprise with more than 100 workers needs government permission to scale back or close. Many Indian businesses stay small in order to remain beyond the reach of the laws. Big firms use temporary workers to avoid them. Less than 15% of Indian workers have legal job security. Mr Jaitley can sidestep the difficult politics of curbing privileges by establishing a new, simpler labour contract that gives basic protection to workers but makes lay-offs less costly to firms. It would apply only to new hires; the small proportion of existing workers with gold-star protections would keep them.Adversity has in the past been the spur to radical change in India. The 1991 budget was in response to a balance-of-payments crisis. The danger is that, with inflation falling and India enjoying a boost from cheaper energy, the country’s leaders duck the tough reforms needed for lasting success. That would be a huge mistake. Mr Modi and Mr Jaitley have a rare chance to turbocharge an Indian take-off. They must not waste it.
Last edited by Prem on 20 Feb 2015 09:05, edited 1 time in total.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby disha » 20 Feb 2015 06:18

Suraj wrote:disha: I didn't underestimate the price. The Appalachian index is ~$53 now and I simply used that as a reference figure for explanation. I know that Australian coal is much more expensive. On the other hand, previous block allocations lay idle because Coal India was the only entity permitted to mine them, following the coal mine nationalization in 1973. Since Coal India could not satisfy demand for various reasons, private cement, steel and power producers chose to import. The current ordinance just undermines the coal mine nationalization and allows the new bidders to mine and utilize the coal, which means that they will now be able to extract the coal much without impediment.


I agree with all of the above., my point is from the POV of a cement or steel company. As a company exec, obtaining a mine at Rs. 3000 per ton (for the right grade) is still a bargain.

Here is some latest news:

The Bicharpur coal mine in Madhya Pradesh was bagged by Ultratech Cement bidding Rs 3,003 per tonne, official sources said.

The estimated Rs 8,744.7 crore mine, meant for non-power sector, has extractable reserves of 29.12 MT. Ultratech beat the likes of ACC, Hindalco Industries, Hindustan Zinc, Jaypee Cement Corp, Monnet Ispat & Energy and OCL India.


And

Aditya Birla Group flagship Hindalco Industries won the Gare Palma IV-5 block for an estimated Rs 14,858.9 crore. Its winning bid was Rs 3,502 per tonne. The mine has estimated extractable reserves of 42.43 MT. It beat firms including Ambuja Cements, BALCO, Hindalco and Monnet Ispat & Energy.

A senior Coal Ministry official said: "Gare Palma IV/5 mine was won by Hindalco Industries at Rs 3,502 per tonne today. The mine was put on offer yesterday and the bidding for the block lasted for over 12 hours."


I think for some mines., do not get surprised if the companies into Cement/Metal bid all the way till Rs. 4500 per MT (given the grade is right).

[And the companies still will be profitable even at the above rate!]

Read more at: http://economictimes.indiatimes.com/industry/indl-goods/svs/metals-mining/auction-hindalco-ultratech-jindal-bag-coal-mines-on-6th-day/articleshow/46304668.cms

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby disha » 20 Feb 2015 06:41

Home work -> http://www.coal.nic.in/sites/upload_files/coal/files/coalupload/171214c.pdf

The above explains the bid process. Also it was open to public comments. And it was available to all, including general public to comment.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby a_bharat » 20 Feb 2015 06:56

disha wrote:
Theo_Fidel wrote:That's good to hear. Hopefully we can cut down some of the imported coal expense with this. Assuming the court doesn't mess with the process.

...
A request to look at your own political leanings and not let it cloud by your religious leanings. For the political leanings, you must realize that supporting the CONgIs at this stage is supporting anti-nationals.
...
People should not cloud economic vision with religious glasses.
...
Now the question is stark, do you want to be anti-national? Any support for CONgIs is an anti-national support.

Chill out sir/madam. Don't jump to characterize someone as anti-national because he/she belongs to another religion. BRF should welcome all who have India's interests at heart, even if they don't support your favorite political party. No need to wear patriotism on the sleeve.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Singha » 20 Feb 2015 09:34

>> Imagine the loss of opportunities for a 25 year old coming into employment market in 2005 and finding that his 10 years are wasted and the person is >> now 35 year old with even lesser opportunities!!!]

I had ranted about this once as well. the UPA's lost decade has condemned tens of millions of people to another generation in poor/MLMC(marginally lower middle class) before they can jump into MMC(middle middle class). it has also eroded the savings and lifestyle of the all but the black money rich also.

so they may be gone, hopefully for good, but the tailing effects of their misrule will endure for 20-30 yrs.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby disha » 20 Feb 2015 12:05

a_bharat wrote:Chill out sir/madam. Don't jump to characterize someone as anti-national because he/she belongs to another religion. BRF should welcome all who have India's interests at heart, even if they don't support your favorite political party. No need to wear patriotism on the sleeve.


a_bharat'ji - Pls. do not jump to conclusions as well :-). OT for this thread., you are welcome to take me up for the above in the GDF thread!

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby disha » 20 Feb 2015 12:31

Singha wrote:... but the tailing effects of their misrule will endure for 20-30 yrs.


+1. One has to see people putting of life changing decisions like marriage or kids to understand what 10 years of misrule entailed for an entire generation.

Coming to Coalgate., MaunMohan had directly attributed that allocations were done by Ahmed Patel and at the behest of Sonia Gandhi. I think somebody should file a case against MaunMohan, Ahmed Patel and Sonia Gandhi and ask details about the coal allocations (several pages were missing about the coal allocations itself!). Sonia-Ahmed directly stood to gain and had their hand in the till. MaunMohan just watched the proceedings.

Coming back to coal allocations:

1. Arun Jaitley did mention that Center will *not* get any revenue from the coal auction. All the revenue is accrued to the state.

2. For central agencies like NTPC (and certain state agencies) some coal blocks will be allocated. CIL will mine those coal blocks for the central agencies. Basically Center has some mining requirements which will be fulfilled by the CIL and center has allocated itself some coal blocks for its central/state agencies.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 20 Feb 2015 12:39

Please keep this thread to discussing economic matters. There's a very active thread to address the politics. Further discussion on politics will result in posts magically disappearing without notice.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby disha » 20 Feb 2015 22:00

The steps for the coal e-auction is sum'ed up here: http://www.coal.nic.in/sites/upload_files/coal/files/coalupload/171214c.pdf

Further, the site is a treasure trove of information. For eg.

1. From July, 2014 - all monthly summaries to the cabinet [regarding coal] is avl. here http://www.coal.nic.in/content/monthly-summary-cabinet. It details for example CILs target vs. actual production.

2. Is Tadicherla mine in Telangana will be auctioned and for what purpose? Look at the ordinances and gazettes here: http://www.coal.nic.in/content/coal-mines-special-provisions-ordinance-2014

3. And here are all the documents http://www.coal.nic.in/content/coal-mines-special-provisions-ordinance-2014

I find it puzzling that media (even economic times) does not go to the above sites and write an article over a weekend for consumption by Monday!

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby panduranghari » 21 Feb 2015 01:26

disha wrote:


Who the hell is Jim Rogers? The quantum fund guy in partnership with George Soros and allegedly funded by Rothschild? That guy also stated that in 30-40 years India as we know will cease to exist. So an investment banker is an expert on Indian macro-economy!

I have learned after losing a million dollar that getting economic advice from investment banker types is the wrong thing. Get investment advice from investment banking types. Get economic advice from economists. But not vice versa. Never.

BTW, I am putting Rakesh Jhunjhunwala into "suspect column" as well (now).


Disha saar,

You are getting unnecessarily riled by Jim Rogers or jhunjunwalla speak. Let's get this thing understood. It may help you reposition your thought process when you see these guys stating such things.

Generally speaking, in any economic cycle or in ones life time, one makes money by producing things which add value. In the later stages, the same people live off the fruits of their hard work. People also make money in later stages of an economic cycle by financial using their initial investment- selling it or renting it out. There is still some value to this process. Financial industry in the early phases is nothing but a personal service.

In the later stages of the economic cycle, the financialisation becomes pervasive. In earlier stages the bankers give small volume loans of high denomination to enable value addition. In the later stages, the financial industry acts like middle men- pure and simple. There is no value addition happening. The financial industry lives to make money for the sake of making money. The movement of capital in the early stages is vertical I.e. Every financial exchange culminates in value addition. In the later stages, the movement of capital is predominantly lateral. No value is added at any stage. Of course, the financial industry has smartened up and the consumer has become a bit dumber.

Coming back to Rogers opinion on Modi- here is my take.

MODI is giving value addition to the life of every man, woman, child of India. It's a long game, after 67 years of intentional neglect. He is expected to produce miracleS in 9 months. Only miracle that can happen within 9 months is a new addition to a family.

Have you seen any common man ask for a miracle in 9 months. Modi said give him 60 months and common man has given him that. They expect results at the end of 60 months. The logic is simple. We waited for 67 years, waiting for another 4 is not going to make any difference.

Now look at this from Jim Rogers ( or Soros or Rorhschild or Jhunjunwalla or assorted traders/speculators/investors) perspective. He is a trader running a multi million dollar hedge fund. His job is to produce a return. His fees are 2%, with minimum 10 million dollars investment. His past track record has given his fund 20% return. He has reputation on Wall Street. He starts a fund, money pours in. He does not need to sweat to Get funds. His job is to produce returns for those rich enough to speculate. The only way he can generate high returns is via stock market. But then he is already into it. Then what is he angling for?

I can't claim to read his mind. But I can use conjecture. Are you aware what vulture funds are? They pick on Caracass of dying capitalist system. They come in with deep pockets And buy assets on cheap. Just like a few Russians got very rich when soviet Russia collapsed and they bought assets very cheap. Rogers, who was satya sai baba Bhakta, may be interested in buying indian PSU assets on cheap. For him time is of the essence. He may be seeking inside information which he may not be getting or someone is keeping a gun on his shoulder and shooting. He cannot wait for 5 years.

Inherently, most of us are savers. Those with means are investors. We have been falsely made to believe we are investors because fiat money looses value by inflation- which is the nature of fiat currency. If money was more honest, you would rarely bother attempt wasting your precious time seeking a return on money by investing/speculating in stock market or pay someone like Jim Rogers to speculate/invest for you.

Ask yourself what would you do in the spare time that you would gain if you did not need to worry about the return on the money.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 21 Feb 2015 04:24

RBI's forex reserves climb to all-time high of $ 333.17 bn
The Reserve Bank of India (RBI)’s foreign exchange reserves hit an all-time high of $333.17 billion for a consecutive week, show data released on Friday.

For the week ended February 13, the rise was $2.96 billion.

Foreign currency assets, a key component, rose by $2.3 billion to $307.26 billion. The reserves have been rising because the central bank has been mopping dollar flows through state-run banks.

The reserves had touched a high of $322.14 billion in the week ending January 16. In the following week, these had dropped. Friday’s is the third weekly rise in a row.

During the week gold reserves remained unchanged at $ 20.18 billion.

For the week under review, the Special Drawing Rights (SDRs) fell by $ 5.1 million to $ 4.09 billion, while India's reserve position with the International Monetary Fund (IMF) was up $ 661.9 million to $ 1.64 billion.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby a_bharat » 21 Feb 2015 06:34

Reaching the levels of 2008. The reserves grew 6x in the period 2002-2008 (50B to 300+B) and stagnated.
Chinese reserves grew 10x between 2002-2008 (from 200B to 2T) and 2x between 2008-2014 (2T to 4T).

Image

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 21 Feb 2015 07:01

It's hard to build forex reserves that fast without running a current account surplus. We generally run a CAD, except for brief periods like right now when oil prices enable a surplus.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Supratik » 21 Feb 2015 08:41

I don't see any significant benefits in running up trillion dollar reserves like China unless we create a sovereign fund for investments. It is probably better to let the rupee rise slowly as we are not really an export driven economy and our exports are largely value driven.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Hari Seldon » 21 Feb 2015 10:48

^+1. A manged rise for the rupee (say 0.50 or 1 rupee against the dollah a month) won't hurt. But may clash at some level with 'em grandiose 'make in India' plans and import reduction efforts.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Theo_Fidel » 21 Feb 2015 12:13

I don't think we have the internal market yet to break free of exports. Maybe one day but not right now. We need to continue targeting exports even it means squeezing internal economy meaning weak rupee. What we need above all is to sell widgets abroad so we can then invest that capital internally.

Reserves ~ to 12 months imports seems to calm the markets and prevent loss of confidence, etc. That's the level I suspect RBI is shooting for. ~ $500 Billion, bulking up slowly.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 21 Feb 2015 12:24

Yes, it's been quoted in several places that RBI is trying to build up a forex base of around $500 billion, a value commensurate with the current size of our economy and the external debt load. A large enough reserve serves as a measure of confidence for the capital markets, allowing greater policymaking freedom.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby James B » 21 Feb 2015 12:47

I had respect for this fellow but now he turns out to be a good for nothing fellow. Should be kicked out ASAP. Too many insinuations against the government far too often despite govt. giving his own space.

Citing Hitler, RBI Governor Raghuram Rajan warns: A strong govt doesn’t move always in right direction

While stating that a strong government should be led by those who have expertise, motivation and integrity and can provide the needed public goods, Rajan warned that “strong governments, may not, however, move in the right direction”.
“Hitler provided Germany with an extremely effective administration — the trains ran on time, as did the trains during our own Emergency in 1975-77.

“His was a strong government, but Hitler took Germany efficiently and determinedly on a path to ruin, overriding the rule of law and dispensing with elections.

“It is not sufficient that the trains run on time, they have to go in the right direction at the desired time,” the RBI Governor said.

http://www.financialexpress.com/article ... ion/45530/

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby nawabs » 21 Feb 2015 13:08

^^ Finally crossed the line. Speaks too much. This is when the gov. is being fiscally responsible and dealing properly with the issue of supply side constraints.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 21 Feb 2015 13:15

Deplorable behaviour from the Governor of the RBI. Bankers, especially central bankers, are supposed to speak in extremely measured and careful language and stick to the business of managing monetary policy. Rajan is grossly exceeding his brief here, and needs to be firmly told to stick to his job role, find himself eased out.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby panduranghari » 21 Feb 2015 13:17

Financial express has spun in and built it on the foundations of 'maut ka saudagar', 'hitler' analogies given by Congturd party. If there is a pliant media, it could be spun as - the earlier congturd government was not interested in enhancing lives of Indians.

RR said - Realizing the importance of strong government, developing countries constantly request multilateral institutions for help in enhancing their governance capacity.

By not engaging the other nations ( like Modi has engaged Japan, China, Australia, US, EU, SAARC he has done more in 9 months) cong turds did not help India. Maun Singh kept running to USA to solve national problems, instead of going to 'multilateral institutes' as recommended by a Christian Theologian - Francis Fukuyama, whom RR is quoting.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby panduranghari » 21 Feb 2015 13:19

http://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=941

here is the talk. Stop reacting to the news reports. Read directly from RBI.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby James B » 21 Feb 2015 14:29

panduranghari wrote:http://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=941

here is the talk. Stop reacting to the news reports. Read directly from RBI.


You may be a fan of his but the insinuations by him are well directed against the current govt.. Have a look at this from your link, not much different from what news traders talk about

But why do we need both rule of law and democratic accountability to keep strong government on the right path? Would democratic accountability not be enough to constrain a dictatorial government? Perhaps not! Hitler was elected to power, and until Germany started suffering shortages and reversals in World War II, enjoyed the support of the majority of the people. The rule of law is needed to prevent the tyranny of the majority that can arise in a democracy, as well as to ensure that basic “rules of the game” are preserved over time so that the environment is predictable, no matter which government comes to power. By ensuring that all citizens have inalienable rights and protections, the rule of law constrains the majority’s behaviour towards the minorities. And by maintaining a predictable economic environment against populist democratic instincts, the rule of law ensures that businesses can invest securely today for the future.


Either he should stick to his job of being an RBI governor or resign & go on a lecture tour of democracy, majoritarianism & politics.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Singha » 21 Feb 2015 16:29

his speech has convinced me he is nothing but a congi sympathizer and mole.

time to be eased out. so far I was a neutral about him.

maybe the process already started and he is taking parting shots.....one would expect a warm invite from many tv channels followed by a special interview if he be deposed from the house of lannister throne.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby JE Menon » 21 Feb 2015 17:37

This is the full quote in context:

"Strong governments may not, however, move in the right direction. Hitler provided Germany with extremely effective administration – the trains ran on time, as did the trains during our own Emergency in 1975-77. His was a strong government, but Hitler took Germany efficiently and determinedly on a path to ruin, overriding the rule of law and dispensing with elections. It is not sufficient that the trains run on time, they have to go in the right direction at the desired time. The physical rail network guiding the trains could be thought of as analogous to rule of law, while the process by which consensus is built around the train schedule could be thought of as democratic accountability.

But why do we need both rule of law and democratic accountability to keep strong government on the right path? Would democratic accountability not be enough to constrain a dictatorial government? Perhaps not! Hitler was elected to power, and until Germany started suffering shortages and reversals in World War II, enjoyed the support of the majority of the people. The rule of law is needed to prevent the tyranny of the majority that can arise in a democracy, as well as to ensure that basic “rules of the game” are preserved over time so that the environment is predictable, no matter which government comes to power. By ensuring that all citizens have inalienable rights and protections, the rule of law constrains the majority’s behaviour towards the minorities. And by maintaining a predictable economic environment against populist democratic instincts, the rule of law ensures that businesses can invest securely today for the future."

Speech by Dr. Raghuram Rajan, Governor, Reserve Bank of India, at the D.D. Kosambi Ideas Festival held on February 20, 2015 in Goa

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby gakakkad » 21 Feb 2015 17:56

He is way overstepping his bounds. As a governor he has to keep his political beliefs to himself. He has to be cautious about speaking anything in public. Even if he was not talking about the present goi, it was a pretty stupid thing to say. And factually incorrect too. Hitler was not elected. That is a common misconcept. He has no bloody business talking about anything but monetary policy. Even if he has a disagreement with any one in the government he has no business making the fact known To the presS. I would not consider hiring this chap even as a entry level management position.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 21 Feb 2015 19:02

panduranghari wrote:http://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=941

here is the talk. Stop reacting to the news reports. Read directly from RBI.

It's not a good idea for a central banker to make a speech that can be misinterpreted politically. RR seems to position himself as an extra-constitutional voice here. It's really not his place to do that. He has a well defined role, and part of that role is maintaining a studied silence on matters involving politics. This isn't because of a forced gag order, but because such language is parsed by markets as friction between the central bank and the government, which has real implications on the behavior of incoming and outgoing capital. "It's just a talk" is not an acceptable reason; for the sake of propriety, it's important that the central bank leader not put himself in such a position at all, where his words could be misinterpreted at all.

The capital markets may interpret it as "Rajan not interacting well with Finance Ministry, may not cut rates even if circumstaces favour it, because he feels {insert assumption} about GoI". That leads to very real financial consequences for the economy. Like it or not, the central banker's words are keenly parsed by the street for signs about monetary policy in future, specifically the movement of the benchmark rates. At a time when the street favours a rate cut and the RBI Govs stated reasons for keeping rates unchanged sounds have been interpreted different ways, his words here add further noise.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby SwamyG » 21 Feb 2015 21:34

Two lectures by S.Gurumurthy at IIT, Bombay; as part of the course "Indian Financial and Business Model".

2.5 hours of good lectures on India in general from the economics perspective. Obviously, knowing S.Gurumurthy you can expect his ideology and biases to seep in, after all it is his lecture. Lots of points have been discussed in BRF too. Fully kommunal and nationalistic onlee.

Gives all round big picture to tie it with Indian business. If you cannot watch the entire thing, then watch the last 20mins of the second video.


Last edited by SwamyG on 21 Feb 2015 23:03, edited 1 time in total.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby disha » 21 Feb 2015 21:46

Rajan should go. Period. In effect he called Modi a Hitler. There is no two way about this statement. He should apologize and resign. If he has any shame left. BTW, when does his term end?

R. Rajan - another IITeee/IIM wonder. He is just another disaster from UPeeA-CONgoon regime.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Singha » 21 Feb 2015 22:59

The hitler thing will not go unnoticed in Delhi.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby sooraj » 21 Feb 2015 23:42

Image

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby vishvak » 22 Feb 2015 00:59

Calling someone Hitler without referring to the Holocaust of Jews is common now. May be that is part of secularism now. It is like how when people ignore Kashmiri Pandit community while chattering about Kashmir.


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