Indian Economy - News & Discussion Oct 12 2013

[chetak]

ChetakJi :http://www.reuters.com/article/2015/05/ ... JI20150506

"I would highlight that equity market valuations at this point generally are quite high," Yellen said. "There are potential dangers there."

many thanks

[member_23365]

Yes, it's not my dispute that land revenue is a major source of revenue to HR. My question is, why would land revenue being within the ambit of SGST be a problem to HR ? Either way they get to tax it since it is within their own state.[/quote]

If I am understanding your question correctly, Land and Revenue is a separate dept while Excise and Sales Tax is separate. The functioning and responsibilities of both departments is totally different. As far as I understand Land and Revenue deals with immovable property. In agrarian economy Land & Revenue dept roles also includes girdawari( For eg crops destroyed by nonseasonal rain and hailstorm, the assessment of damage is done by Land and Revenue team). It is also responsible for maintaining land records.
Now if state levy GST on top of stamp duty for transaction pertaining to selling or purchasing property that will be double taxation. Land is in state subject list as per constitution so why would states let it go.

[Supratik]

@ShauryaT

Per my understanding GST is meant to be revenue neutral for states. Use some common sense. How does it matter which entity collects the tax as long as it is revenue neutral for the states? The benefits have already been mentioned in my posts.

Your other arguments are veering towards loose confederation or autonomy for the states. That is OT.

[ShauryaT]

@ShauryaT

Per my understanding GST is meant to be revenue neutral for states. Use some common sense. How does it matter which entity collects the tax as long as it is revenue neutral for the states? The benefits have already been mentioned in my posts.

Your other arguments are veering towards loose confederation or autonomy for the states. That is OT.

You are right. it is not "common" sense to understand how does it matter which entity has what powers. The field of governance is actually a highly specialized discipline of study that many top brains at top universities spend a life time to understand modes and principles of governance and produce top practitioners in the art, who shape our future.

Principles and modes of governance have a long history of how they evolve and the degree to which they are in sync with the population and land being governed. Since, this topic is veering to OT territory, I will stop here having made my limited point.

[RamaY]

@ShauryaT

Per my understanding GST is meant to be revenue neutral for states. Use some common sense. How does it matter which entity collects the tax as long as it is revenue neutral for the states? The benefits have already been mentioned in my posts.

Your other arguments are veering towards loose confederation or autonomy for the states. That is OT.

You are right. it is not "common" sense to understand how does it matter which entity has what powers. The field of governance is actually a highly specialized discipline of study that many top brains at top universities spend a life time to understand modes and principles of governance and produce top practitioners in the art, who shape our future.

Principles and modes of governance have a long history of how they evolve and the degree to which they are in sync with the population and land being governed. Since, this topic is veering to OT territory, I will stop here having made my limited point.

ShauryaT garu,

This "constitutional" BS can be discussed in Politics thread where it belongs. I already posted a question for you there if you are interested.

[Supratik]

Say you are into exporting steel products. The iron ore is mined in OR, prepared in JH, converted to steel in KT, turned into product in AP, exported in TN. Imagine the variety of taxation that product has to go through if you have multiple entities taxing different taxes. Imagine the efficiency if one entity taxed it using an uniform formula. Per my understanding that is the simple point.

[ShauryaT]

Two, is a single rate good enough ? Here, I think SGSTs should have a range, within with state finance ministers can raise or lower rates to suit the state economy.

The latter part, if retained, would have preserved the state's powers even under a new mechanism. In addition, it would have been far better if states were asked to put in the institutional mechanisms to collect this tax, instead of the center.

[Supratik]

Please see my post. Multiple entities taxing brings in inefficiency. Rather we should argue whether like advanced countries we should have states and local govts i.e. cities and towns taxing direct taxes. The local entities are poorly funded and this among others (e.g. municipal bonds) will enhance their fiscal situation and a lot of work can be done locally.

[Suraj]

Now if state levy GST on top of stamp duty for transaction pertaining to selling or purchasing property that will be double taxation. Land is in state subject list as per constitution so why would states let it go.

But you need to confirm this, right ? The 'if' part makes the whole argument theoretical, not fact. Since you have a source, you can ask that.

In practice, GST subsumes existing taxes where it is implemented. It's not a second tax. Either the state has to apply GST on something, or it can retain the previous duty mechanism using an exclusion granted to it. There's no plan to apply both GST and an existing duty on something, as far as I'm aware. I'd be very surprised if land taxation in HR is treated that way. If that were true, I would have expected HR govt to whine very loudy for a long time, but I have not heard a sound from them.

The latter part, if retained, would have preserved the state's powers even under a new mechanism. In addition, it would have been far better if states were asked to put in the institutional mechanisms to collect this tax, instead of the center.

The specification of the rate is under the gamut of the GST Council, which is led by the Union FM and every state FM is a member. The specification of the rate is NOT part of the constitutional amendment bill. Instead it is part of the associated money bill, which can be updated without needing to touch the constitutonal amendment once that is passed.

Let's stick to the economic result here, not federalism theory. From the economics perspective, it doesn't matter if the cat is black, white or some shade of grey as long as it effectively catches mice.

[member_23365]

^^^^
HR excise and taxation dept collects taxes like VAT, CST(Central Sales Tax, Centers sales tax portion is also collected by HR E&T Dept except on gold and opium), PGT(passengers and goods tax), Entertainment Tax, Luxury tax, Excise tax. All these taxes will be put under GST now and will have uniform tax rates all over India. Collection will be still done by HR E&T dept, but rules will be simplified.
My Dad retired now so he don't have full information on changes but he says collection will be done by HR E&T dept. HR E&T collects the central portion of excise tax right now too.

Registration and stamp duty were never with E&T Dept and they will remain domain of Land and Revenue Dept.

[Suraj]

^^^^
HR excise and taxation dept collects taxes like VAT, CST(Central Sales Tax, Centers sales tax portion is also collected by HR E&T Dept except on gold and opium), PGT(passengers and goods tax), Entertainment Tax, Luxury tax, Excise tax. All these taxes will be put under GST now and will have uniform tax rates all over India.

The uniform rate part is not confirmed. I don't support it either, and probably do the states. Different states have different localized economic priorities that may require them to raise or lower the effective SGST rate (they've no control over CGST rate). So I think it will be in a band, within which states can set their individual SGST rate.

If you are referring to the finance commission recommendations, then that is all they are recommendations and executing upon them is at the discretion of the government of the day and not vested in law.

That is not correct.
PM Narendra Modi accepts Finance Commission's recommendation of record hike in states' share in central taxes

In a letter to all chief ministers, Modi said: "We have wholeheartedly accepted the recommendations of the 14th Finance Commission, although it puts a tremendous strain on the Centre's finances."

"The 14th Finance Commission has recommended a record increase of 10 per cent in the devolution of the divisible pool of resources to states," he said, according to a release from the prime minister's office.

As per the increased devolution suggested in the report of the 14th Finance Commission, the states will get Rs 348,000 crore in 2014-15 and Rs 526,000 crore in 2015-16.

"There is a shift from scheme- and grant-based support from the central government to a devolution-based support. Hence, the devolution of 42 per cent of divisible resources," the PMO said.

"The total devolution to states in 2015-16 will be significantly higher than in 2014-15. This naturally leaves far less money with the central government," it added.

"Beyond this 42 per cent and the grants to states for strengthening gram panchayats and municipal bodies, an additional amount has been allocated for 11 states that will still be revenue deficit after devolution," Finance Minister Arun Jaitley told reporters in New Delhi.

"The big among these deficit states have been identified as Andhra Pradesh after division, Assam, Jammu and Kashmir, Himachal Pradesh and West Bengal while the smaller ones include some northeastern states like Manipur and Nagaland," he added.

After assessing the revenue and expenditure of the states for the period 2015-20, the commission has recommended a grant of Rs.1.94 crore (Rs.19.4 million) to meet the deficit of these 11 states.

"The higher tax devolution will allow states greater autonomy in financing and designing of schemes as per their needs and requirements," the report said.

"The consequence of this much greater devolution to the states is that the fiscal space for the centre will reduce in the same proportion," it added.

"States cannot become dependent on the Centre, while the command and control system of the past cannot work. It is this spirit of cooperative federalism that has underpinned the constitution of the NITI Aayog," Jaitley said.

"In the past, when Finance Commissions have recommended an increase, it has been in the range of 1-2 percent," he added.

The government has also accepted the recommendations of the commission on devolution of higher resources to the local bodies.

The total grant to the local bodies including panchayats and municipalities for the five-year period ending March 31, 2020 works out to Rs.288,000 crore.

The previous figure was 32%, and it has been effectively increased to over 50% now: 42% to states and the rest to local bodies and deficit bridging grants.

Modi has a vested interest in backing this, because he repeatedly pointed out how he detested the Planning Commission determining how much money goes to states. The 14th Finance Commission recommendations were tabled on 24 Feb 2015 and approved within a day, on 25 Feb 2015 .

[ShauryaT]

^^What part of my statement is not correct? I am not debating the actions or intent of a single government.

[ShauryaT]

The specification of the rate is under the gamut of the GST Council, which is led by the Union FM and every state FM is a member. The specification of the rate is NOT part of the constitutional amendment bill. Instead it is part of the associated money bill, which can be updated without needing to touch the constitutonal amendment once that is passed.

Let's stick to the economic result here, not federalism theory. From the economics perspective, it doesn't matter if the cat is black, white or some shade of grey as long as it effectively catches mice.

But it matters to Maharashtra to discourage say lumber by increasing its taxes or to Himachal to do the opposite. It matters to Chattisgarh as now it cannot easily offer a tax holiday for certain types of industries, it may want to offer in certain areas of the state. You know the point, so I will not belabor it or post lengthy articles.

As earlier stated, states have a "say" in the council and it should be no surprise that any such council would heavily favor the center with an effective veto. Centre can veto any measure under proposed GST legislation
A minimum of 12 states can also block proposal, with all 30 participating

@ atamjeetsingh - What I have read is there will be some type of merger between the tax administrations on the collection front - another nightmare scenario. Try merging bureaucracies, it will be like our CDS redux all over where no one will agree to let go of their turf, only 10 times over in the civilian world. The bill also says the ability to "collect" is the preserve of the center.

Suraj: Your desire to keep narrowly clean to economic issues only is understood, however this is a constitutional amendment we are talking of. The economic impact theories can be argued multiple ways. Today only states like Gujrat, Maharashtra care about the extra 1% cess on production tomorrow W. Bengal may care for it. My point is you can gauge the economic impact at a certain point of time only and not for all conditions at various points in time. However, this amendment will change the very nature of our federation as what is at stake are economic "rights" of the states. We both know at the council political equations will rule to the disadvantage of regional parties and their regions on matters when the "spirit" is no long "cooperative" but highly partisan.

[gakakkad]

^ An important aspect of the gst legislation is that any future change would not require a constitutional amendment. the gst council can do it themselves..

[Suraj]

^^What part of my statement is not correct? I am not debating the actions or intent of a single government.

You questioned whether the high minded recommendations of the Finance Commission would be accepted. In general, yes, it is 'upto the government of the data to accept them'. I just pointed out that they've most enthusiastically done so already. In other words, this government is very much in favour of devolution of economic powers to states. It is also in favour of a common market through the implementation of a GST, which was first championed by Vajpayee, pushed further by UPA and now almost at culmination thanks to this administration.

Like I said, keep the constitutionality and other aspects of political economy out of this thread. Look at the basic question: have the states done well enough with the rights they have now ? Most would say no. Road blocks. Corruption. Promotion of vice as an easy revenue source. The works. Ultimately for the purpose of this thread it does not matter whether it is a unitary vs federal model. I don't care even to debate the minutae of what form of federalism it is. All that matters is, is the system economically efficient for the whole country ?

It does not matter for the purposes of this thread whether states rights are arguably diminished by some economic policy framework; the question is, can or do they grow faster in the process ? Whether or not states rights are impacted, and whether or not that's an issue, is a subject for the politics thread, not this one.

But it matters to Maharashtra to discourage say lumber by increasing its taxes or to Himachal to do the opposite. It matters to Chattisgarh as now it cannot easily offer a tax holiday for certain types of industries, it may want to offer in certain areas of the state. You know the point, so I will not belabor it or post lengthy articles.

The GST constitutional amendment does NOT set a fixed rate. It has not even been established what the rate is, if the SGST rate can be set within a band by individual states, etc. And none of these are within the purview of the constitutional amendment, but that of the GST council. What's more, none of this will stop anyone from logging or mining sand. Do you think the sand mafia would promptly stop digging up sand because the tax rate changed ? No, that's really a question of enforcement and not tax rate.

[Suraj]

Pretty spectacular gains in a major bellweather of consumer sentiment:
Domestic car sales up 18.1%, commercial vehicles up 6.5%, bikes down 2.7% in April

Domestic passenger car sales grew 18.14% to 1,59,548 units in April this year compared with 1,35,054 in the same month of 2014.

According to the data released by the Society of Indian Automobile Manufacturers (SIAM), motorcycle sales last month were down 2.77% at 8,81,751 units from 9,06,909 in the same month of the previous year.

Total two-wheeler sales in April 2015 slumped 0.16% to 12,87,064 units from 12,89,183 in the year-ago period.

Total sales of commercial vehicles, however, jumped 6.48% to 45,872 units from 43,080 a year ago, SIAM said.

In 2014, car sales were up a mere 2.5%. So far this year:
January: +3%
February: +6.9%
March: 2.6%
April: 18.1%
National Industrial Corridor Development Authority on anvil

The Narendra Modi government is giving shape to a National Industrial Corridor Development Authority (NICDA), to consolidate the financing and to expedite the massive work on the economic corridors. A proposal to this effect will be moved to the Cabinet for approval by the end of this month.

The body will have a financial corpus of Rs 19,000 crore and it will be headed by a CEO. It will also be entrusted with the work of planning and designing of the corridors.

The government has so far conceptualised five economic corridors: Delhi-Mumbai Industrial Corridor (DMIC), Bengaluru- Mumbai Economic Corridor (BMEC), Chennai-Bengaluru Industrial Corridor (CBIC), Visakhapatnam-Chennai Industrial Corridor (VCIC) and Amritsar-Kolkata Industrial Corridor (AKIC).

According to the plan, out of the Rs 19,000-crore corpus, around Rs 2,000 crore will be allowed for four industrial corridors and the rest will be set aside for DMIC.

Work on DMIC got delayed and it has now reached the take-off stage, said the official cited above.

[Supratik]

@ShauryaT,

Why do you want states to introduce market distortions in a country which is still one? It will benefit states that are not industrialized as taxation will be a level playing field. Now the competition will be on who can provide the best infra for industries. Coastal states like TN and GJ which were initially opposed to GST will continue to draw industries as it is easier for them to export and import through ports.

[ShauryaT]

@ShauryaT,

Why do you want states to introduce market distortions in a country which is still one? It will benefit states that are not industrialized as taxation will be a level playing field. Now the competition will be on who can provide the best infra for industries. Coastal states like TN and GJ which were initially opposed to GST will continue to draw industries as it is easier for them to export and import through ports.

Nothing against trying to achieve free movement of goods in the country, GST is not the only way to do so. The following article is dated and some specifics may have changed but this GST idea is now 10 years old but the gist of the message still applies.

The debate over the goods and services tax (GST) conflates two objectives. Firstly, rationalizing and merging various indirect taxes to have internal borderless travel of goods and services so that better economies of scale can be realized. And secondly, to then have a uniform tax rate in all the states—which is ostensibly crucial to integrate the market.

But an integrated market—with no border delays and octroi—can be fully achieved with better use of information technology and better state-Centre coordination, and does not require a uniform tax rate in all the states.

Instead, we should have a Central GST and a state GST—with the states free to have different rates on the latter so that we can preserve and enhance inter-state fiscal competition. This is because if state leaders cannot politically benefit from cutting taxes, then why will they forgo the political benefits of increased spending? State politicians would then present the Centre with the fait accompli of huge budget deficits. When this is replicated throughout the country, a uniform GST rate would have to be increased again and again, greatly harming the economy.

But some sceptics of tax competition say a “race to the bottom” could take place, with states drastically cutting spending to cut taxes. This makes as much sense as saying that a price war in the electronics market would destroy quality. Taxpayers, like consumers, operate on two variables—cost and quality. Tax competition makes state spending more efficient and does not necessarily decrease it: A state could choose to have great infrastructure and social insurance, and firms might be ready to pay higher taxes to locate there. Such policy experimentation in the states—the “laboratories of democracy”—is useful because the successful policies are then copied by other states.

Dual, differentiated GST

[Hari Seldon]

>> India Today ‏@IndiaToday 7m7 minutes ago
Sebi asks firms to disclose securities held by promoters, directors http://ow.ly/MNUOy #latest

[Theo_Fidel]

Personally I want to see this entire CST end permanently. I think it is an anachronism that the central government levies a sales tax on localities.

The real issue is the deep reluctance of GOI to tax agriculture, meaning a large chunk of income escapes all taxation. So CST becomes a means to obliquely tax agriculture without saying so. Except it then becomes a major drag on the economy making everything else unnecessarily expensive.

Sales tax is meant to be a local tax that varies as needed across the country to develop local infrastructure. It is a deeply silly distortion that the Center levies this tax. The center should satisfy itself with income based taxes. Which are a progressive tax. Maybe on certain commodities like Petrol/Irrigation/ where the needs to common investment across the nation are important. States absolutely need to have a sales tax mechanism to pay for their local expenditures. Sales tax is a regressive tax and should be used more sparingly and used locally. If anything should not be more than 5%. As it is right now the poor in richer states will end up funding the rich in poorer states which is not acceptable.

[Supratik]

@ShauryaT,

I didn't find any strong arguments against GST in that article. As I have mentioned states will now compete on infra and efficiency instead of tax distortions.

[Suraj]

Nothing against trying to achieve free movement of goods in the country, GST is not the only way to do so. The following article is dated and some specifics may have changed but this GST idea is now 10 years old but the gist of the message still applies.

How is this a logical argument ? GST may not be the only way to do so. It may not be perfect. So what ? It's the option we took. For someone who kept wishing to address the political side of the problem, you're simultaneously wishing away 15 years of political history across 4 different elected governments, painstakingly building up the effort to implement GST upto this point.

The article makes two strange arguments. One, that GST means uniform tax rates across all states. In fact, such a thing has not been concluded, and yet it is the most popular argument. Further, the central GST + state GST is exactly what we ARE implementing. Generally, an argument that states a red herring is a giveaway that the author is either not competent, or is motivated.

As an exercise in establishing what kind of rates different states set, would you mind picking some prominent products and find out what different states tax them at ? Despite the talk of theoretical freedom to tax things as states wish, I think for most products, states all tax them at a fairly similar level.

[Austin]

Bond Market Uncertainties Seen Pushing India's Borrowing Costs Higher
http://profit.ndtv.com/news/market/arti ... ome-latest

"Old school views are; never to dabble much in bonds when a currency is under turmoil. Stay away until the currency stabilises, otherwise you will burn your fingers," said Anoop Verma, vice president, fixed income at DCB Bank.

The government, however, has less room to delay the launch of a new issue.

To meet its fiscal deficit target, the government aims to raise a gross Rs 6 lakh crore ($93.84 billion) in bond sales in the fiscal year ending in March 2016.

"The uptick in debt yields will impact government borrowing costs," said Kumar Rachapudi, a fixed income strategist with ANZ Bank in Singapore. "If the fiscal deficit was lower, then supply would not have been an issue."

[Suraj]

India’s CPI Eases as Output Slows, Boosting Rate-Cut Chances

India’s inflation eased and factory output slowed, boosting the odds that central bank Governor Raghuram Rajan will cut interest rates for a third time this year.

Consumer prices rose 4.87 percent in April from a year earlier after a revised 5.25 percent increase in March, the Statistics Ministry said in a statement in New Delhi Tuesday. The median of 36 estimates in a Bloomberg survey of economists had predicted a 4.9 percent gain. Industrial production grew 2.1 percent compared with an estimated 3 percent rise.

Rajan refrained from lowering borrowing costs at a scheduled review last month and said the next move would depend on data showing the balance of risks to inflation. A rebound in oil prices and a drop in the rupee had raised concern about whether the Reserve Bank of India will meet its target of keeping price pressures within 6 percent.

“This allays some of the concerns that had built up around the space for further monetary easing,” said Jyotinder Kaur, an economist at HDFC Bank Ltd. in Gurgaon, near New Delhi. She predicts Rajan will cut the benchmark repurchase rate by a quarter percentage point when he reviews policy on June 2.

The rupee extended losses overseas soon after the data, falling as low as 64.77 per dollar. Local markets had shut before the release. India’s consumer food-price index rose 5.11 percent in April from a year earlier after March’s 5.17 percent increase, data showed on Tuesday.

Indirect tax collections jumped 46.2% in April

Led by over two-fold surge in excise duty collections, indirect tax revenue jumped 46.2 per cent to Rs 47,747 crore in April this year compared to the same month last year.

Indirect tax collections, that include revenue from excise duty, service tax and customs duty, were at Rs 32,661 crore in April 2014.

Industrial survey fails to capture complete manufacturing data, as many as 70,000 cos not on list

In what could raise more doubts about the country's income statistics, the National Statistical Commission (NSC) has discovered that data from a substantial number of manufacturing companies don't get captured in the annual survey of industries (ASI), which is used for computing gross domestic product.

As many as 70,000 manufacturing companies registered under the Companies Act have not been captured in the ASI, because these establishments aren't registered under the Factories Act. This accounted for close to 15% of the manufacturing sector GDP for 2011-12. The ASI tracks only the companies listed under the Factories Act. The discrepancy was discovered after the NSC, which audits statistical activities, compared the two lists. About half the companies which were registered under the Companies Act weren't on the ASI list, NSC Chairman Pronab Sen said. "Clearly, the registration process is faulty. We knew that the ASI had under-coverage which came out from economic census and the national sample surveys, but did not know that the situation was this dire," he said.

The finding will not have any major implications on GDP data now, because the government currently uses a larger database from the corporate affairs ministry for company numbers after the base year for GDP was recently revised to 2011-12. It now relies on the ASI only for data on partnership and proprietorship firms. However, the error will impact manufacturing data captured prior to the shift in the base year and also raise doubts over other data captured by the industry survey.

The ASI was previously the primary source of data for the manufacturing sector in GDP. Sen said the finding raised serious doubts on the quality of the ASI list. "It implies that the entire ASI list is faulty. There would be serious discrepancies in the number of proprietorship and partnership firms as well," he said.

The ASI covers units registered under the Factories Act. To register, these companies need 10 or more workers on any day of the previous year if the manufacturing is carried out using a power source of some kind. If no power is used, the minimum number of employees should be 20.

From the uncovered set, smaller units are found to be not registering under the Factories Act. "There must be a dialogue between the MCA and the chief inspector of factories," Sen said. "It is a serious administrative matter. They have to sort it out."

The NSC audit is aimed at ensuring quality and integrity of data. It evolves measures to improving public trust in official statistics.

On earlier occasions, doubts were raised over disconnect between the Index of Industrial Production and ASI numbers. ASI data come with a lag of two years and were regarded more reliable compared with the IIP. In fact, the government was also planning a similar exercise for services sector, called the annual survey of services.

With the revision in the base year, the Central Statistics Office has started using the MCA21 database of 5.2 lakh companies to compute manufacturing growth, in addition to using the annual survey of industries data.

This led to a sharp revision in manufacturing growth to 5.3% for 2013-14 from a 0.7% contraction estimated under the earlier series.

The share of manufacturing in the overall economy also went up to 17.3% in 2013-14 from 12.9% in the older series.

India to grow 7.5% in FY16, highest in G20: Moody’s

India growth story received an impetus today when rating agency Moody’s said it will grow at a strong pace of 7.5 per cent in 2015-16, the highest among G20 economies, helped by the reforms drive and lower oil prices.

“We forecast strong growth in India… at 7.5 per cent in 2015-16, the highest among the G20 economies. Lower oil prices will reinforce gradual growth-enhancing reforms to support robust economic activity over the forecast period,” Moody’s Investors Service said, in a report.

At a time of shifting global investment flows, India benefits from reduced external imbalances, it said.

“We expect a broadly balanced current account, for the first time in 10 years, thanks to lower energy import bill and restrictions in gold imports,” Moody’s said.

It said India would be a major beneficiary of softer oil prices among the G20 economies as the country is a major crude importer.

G20 is a group of 20 developing and industrialised economies, which accounts for 85 per cent of the world’s economic output.

[kmkraoind]

De-Reservation of remaining 20 items reserved for Micro and Small Enterprises Sector

An Advisory Committee constituted under Section 29B(2C) of the Industries (Development & Regulation) Act, 1951 on de-reservation periodically evaluates products /items reserved for exclusive production by Micro and Small Enterprises. India has opened up its economy since 1991 through a forward looking Policy which led to de-licensing of items. Over the years list of items reserved for manufacture by MSE Sector has been reduced from over 800 to 20. The Advisory Committee in its meeting, held on 20.10.2014, noted that with the import liberalization, all remaining items are allowed for imports. Thus, there is no prima facie justification for continuation of reservation of manufacturing in the MSE Sector since such reservation may inhibit the possibilities based on technologies, economy of scale, etc. vis-à-vis the imported items.

On the recommendation of Advisory Committee, Government of India vide Notification S.O. 998 (E) dated 10.04.2015 have decided to deserve remaining 20 (Twenty) items presently reserved for exclusive manufacture by MSE Sector. Accordingly following items are de-reserved:-

(i)Pickles and Chutneys, (ii) Bread, (iii) Mustard Oil (except solvent extracted), (iv) Ground Nut Oil (except solvent extracted), (v) Wooden furniture and Fixtures, (vi) Exercise Books and Registers, (vii) Wax Candles, (viii) Laundry Soap, (ix) Safety Matches, (x) Fire works, (xi) Agarbatties, (xii) Glass Bangles, (xiii) Steel Almirah, (xiv) Rolling shutters, (xv) Steel chairs – all types, (xvi) Steel tables – all other types, (xvii) Steel Furniture – all other types, (xviii) Padlocks, (xix) Stainless steel utensils, (xx) Domestic utensils – Aluminium.

The above policy initiatives have been taken to encourage greater investment, including the existing MSME units, to incorporate better Technologies, Standard and Branch Building to enhance Competition in Indian and Global markets for these products.

Posting in full. Its time to give tough competition to Chinese Fire Works.

[pankajs]

Bloomberg TV India ‏@BloombergTVInd 3h3 hours ago

Coal secretary @swarup58: India will need Rs. 1.5 bn tn coal by 2020 if economy grows at 8%.

Bloomberg TV India ‏@BloombergTVInd 3h3 hours ago

Coal secretary @swarup58: Aims more than 500 mn tn output from non-coal India; Land acquisition holding up India's coal output targets.

[csaurabh]

De-Reservation of remaining 20 items reserved for Micro and Small Enterprises Sector

An Advisory Committee constituted under Section 29B(2C) of the Industries (Development & Regulation) Act, 1951 on de-reservation periodically evaluates products /items reserved for exclusive production by Micro and Small Enterprises. India has opened up its economy since 1991 through a forward looking Policy which led to de-licensing of items. Over the years list of items reserved for manufacture by MSE Sector has been reduced from over 800 to 20. The Advisory Committee in its meeting, held on 20.10.2014, noted that with the import liberalization, all remaining items are allowed for imports. Thus, there is no prima facie justification for continuation of reservation of manufacturing in the MSE Sector since such reservation may inhibit the possibilities based on technologies, economy of scale, etc. vis-à-vis the imported items.

On the recommendation of Advisory Committee, Government of India vide Notification S.O. 998 (E) dated 10.04.2015 have decided to deserve remaining 20 (Twenty) items presently reserved for exclusive manufacture by MSE Sector. Accordingly following items are de-reserved:-

(i)Pickles and Chutneys, (ii) Bread, (iii) Mustard Oil (except solvent extracted), (iv) Ground Nut Oil (except solvent extracted), (v) Wooden furniture and Fixtures, (vi) Exercise Books and Registers, (vii) Wax Candles, (viii) Laundry Soap, (ix) Safety Matches, (x) Fire works, (xi) Agarbatties, (xii) Glass Bangles, (xiii) Steel Almirah, (xiv) Rolling shutters, (xv) Steel chairs – all types, (xvi) Steel tables – all other types, (xvii) Steel Furniture – all other types, (xviii) Padlocks, (xix) Stainless steel utensils, (xx) Domestic utensils – Aluminium.

The above policy initiatives have been taken to encourage greater investment, including the existing MSME units, to incorporate better Technologies, Standard and Branch Building to enhance Competition in Indian and Global markets for these products.

Posting in full. Its time to give tough competition to Chinese Fire Works.

?? Explain please? What is this reservation for MSME thing?

[kmkraoind]

During 2nd colonial times (i.e. Nehru dynasty periods), they prepared 2 lists and they barred big industries in one list, because the thinking is that, if any big industrialists venture into them, they will annihilate small and micro units, so they deserved a huge industries for MSME sector.

The Congress never want to lift that ban, even though we have started importing those reserved items from China where humungous factories manufactured them. Now, the NDA govt has unreserved all (now they are just 20 items) items from MSME reservation.

I hope real economic gurus might explain it better.

[Austin]

Why does Narendra Modi government want GOLD from Hindu Temples?

[RoyG]

Modi wants gold for the same reason China and Russia want it. With dollar trade decreasing at 1% a year and oil transactions slowly moving away from the dollar, the world will eventually need a new standard by which to peg currency.

[Suraj]

During 2nd colonial times (i.e. Nehru dynasty periods), they prepared 2 lists and they barred big industries in one list, because the thinking is that, if any big industrialists venture into them, they will annihilate small and micro units, so they deserved a huge industries for MSME sector.

The Congress never want to lift that ban, even though we have started importing those reserved items from China where humungous factories manufactured them. Now, the NDA govt has unreserved all (now they are just 20 items) items from MSME reservation.

I hope real economic gurus might explain it better.

You're more or less correct. the MSME/SSI reservation was essentially perpetuating poverty because it didn't just reserve areas to small scale industries - it functionally ensured industries in those areas remained small and could never really grow into big entities. Low access to capital, stifling but supposedly worker friendly rules, all ensured that.

[ramana]

X-posting...

heard on radio interview today from mohandas pai. more indication that blr has leap frogged chennai

- 3rd highest GDP after delhi and mumbai though almost no PSU except HAL books its revenues here, they are all HQ'ed in mumbai and delhi
- 4th biggest lending market
- highest per capita income (I thought the conventional claim was chandigarh but maybe it changed)
- 12L people in IT among a working pop of 40L in official sector (largest itvity workforce among world cities)
- $45b itvity revenues booked in itivity alone...
- highest number of workforce phds among any city in yindia
- largest number of people in semicon design among world cities
- 400 of the fortune500 have ops here
- some 5000 automobile engineers and 2000 aerospace
then he talked about his conversations with politicians incl the CM
- BBMP is broke - it has 8000cr debt and 3000cr of unpaid bills
- BBMP has lot of corruption
- all political parties have their snout in the feeding trough here
- other than splitting it up, he was not clear what the CM has in mind to clean the mess


--
to add to that , I would say most of the ITI diploma trained manufacturing workers in the industrial estates around the town tend to be from the 4 southern states only, almost none from the vast mass of people in UP, Bihar and eastern states. these states are exporting manpower to the south and west in security guards, retail assistants, cooking only. even in smaller places like kerala and goa. unless they pull socks up , train people for manufacturing and higher skill trades...they would not even be able to make an entry in the basic stuff like clothes, shoes, plastics that Bangladesh and Vietnam are dominating now.

We are seeing the rise of a new giant city economy.

[Suraj]

WPI contracts 2.65% in April

The wholesale price index (WPI) fell to a new low of 2.65 per cent for the month of April, 2015, after declining to 2.33 per cent in the previous month, government data showed on Thursday. This is the sixth straight decline in wholesale prices, a clear indication that inflationary pressures in the economy remain muted.

In primary articles, the index food articles rose by 5.73 per cent, as opposed to 6.31 per cent in March and 8.74 per cent in the previous year. While food inflation may be edging downwards, given the uncertainty over the monsoons, it is difficult to estimate with certainty the direction of food prices going forward.

Growth projections for the current year range from 7-8.5%:
India to grow at 8.1% in 2015-16: UN Report

Indian economy is likely to clock 8.1 per cent growth in the current financial year, spurred by strong consumer spending amid low inflation, infrastructure projects and government's reform measures, says a UN report.

Investment is also expected to rebound, although unevenly, given the still low capacity-utilisation rate at about 70 per cent, it said.

"Growth is forecast to accelerate to 8.1 per cent in 2015 and 8.2 per cent in 2016, benefiting from the acceleration of infrastructure projects, strong consumer spending due to lower inflation and monetary easing and gradual improvements in market sentiments," said the UN ESCAP report titled, 'Economic and Social Survey of Asia and the Pacific 2015.

[Suraj]

The new foreign trade policy framework cannot come into effect soon enough:
April exports fall for fifth straight month to $22 bn

The country's merchandise exports contracted 13.96 percent in April, for the fifth straight month, dragged down by a slump in global demand, government data showed on Friday.

Trade deficit narrowed to $10.99 billion in April helped by a 42 percent year-on-year fall in oil imports, data released by the Ministry of Commerce and Industry showed.

Imports fell 7.48 percent from a year earlier to $33.05 billion last month, while exports stood at $22.05 billion, the data showed.

India to invest $ 25 billion to reach 1 billion tonne of coal output

In its endeavor to reduce dependency on imported coal, Coal India Limited (CIL) will invest around $ 20-25 billion in the next five years in order to achieve an output of 1 billion tonnes by 2019-20.

According to Piyush Goyal, minister of state for Coal, Power and Renewable Energy this will help the country to cut down import of coal substantially. "The level at which are our production is increasing, the country will be able to produce enough coal so as to substitute imports of thermal coal in next two- two and half years. But we will continue to import high grade coking coal, mainly used for steel production," Goyal said.

CIL recorded an output of 494.23 million tones in 2014-15 which was 3% lower than the production target of 507 million tones. But it was an increase of 32 million tones than 462.53 million tones produced by the company in FY 2013-14. "We have achieved a production growth of 32 million tonne in 2014-2015, against a production growth of 31 million tonne in a cumulative 4 years period between 2011 and 2014 and our growth has been 11.1 percent in 43 days of the current year," the minister said.

Goyal, said that the money will be invested in improving technology and upgrading existing facilities in coal mines. A part of the investment will be deployed for equity funding in infrastructure projects being developed for coal evacuation. "We have already identified the big picture and now we have done mine by mine planning to reach the target of 1 billion tonne by 2019-20," hel said. Analysts had earlier expressed their reservation over the ambitious target set by CIL saying that the infrastructure shortage of extracting coal is a huge impediment in achieving the target.

[ShauryaT]

Posting some review articles here, with some trepidation as do not know, which article Suraj may not like and deem to be political, seriously the lines are no longer clear to me, so if you do not like it let me know and I will take it off.
One year of Narendra Modi govt: Expectations were unrealistically high

Jokes sometimes have a way of capturing truth more effectively than analysis. The measure of the present government is captured by this one going around: What is the difference between the UPA and the NDA? In the UPA we had a government and no prime minister; in the NDA we have a prime minister and no government. This has an element of cruel exaggeration. But it highlights the central tension of one year of Narendra Modi’s government.

[RamaY]

^ The Bad and the Ugly aren't really that bad or ugly if we dig in...

1. Senses went up from 24K to 27K a growth of 12.5% (risk free interest rate is 8%)
2. FIIs graph is misleading. The trend shows a reasonable growth. Another factor could be slowdown of fast/corrupt money?
3. Exports don't raise because one key export petroleum products prices are down. The falling CAD is a better indicator than exports at this point.
4. Employment growth hasn't slowed down but it's following the cycle (can be seen in the graph) and it's much better than 2013-14 period.
5. Core sector has been discussed in previous pages.
6. Credit growth slowdown is due to two factors - (1) NPAs of private sector and (2) stalled projects. One can see the flat rate of deposits. I suspect it has to do with banks trying to maintain healthy balances.
7. India Inc profits - the graph gives now reason why they should be at 20Yr low (why are they pulling 20yr period when they should be comparing past 1-2 yrs). On top of it given their NPAs & corrupt practices, India Inc doesn't get any sympathy.
8. Rail freight- my gut feeling says it can be due to stoppage of illegal mining. I could be wrong.

[Suraj]

The article is fine, and RamaY addresses it in the right context by focusing on the economics rather than any politics. Always good to dig further into the bad and ugly cases to understand why the data is what it is.

[Austin]

24 Agreements Signed Between India and China During PM Modi's Visit

[Austin]

India’s skill base is not as bleak as painted in the Human Capital Index report

[asgkhan]

Niti Aayog approach will make more Indians poor - and it's a good thing

http://www.firstpost.com/business/niti- ... 47696.html

The Niti Aayog, Narendra Modi’s replacement for the Planning Commission, is set to break new ground under Arvind Panagariya by moving away from an expenditure-based determination of the poverty line. According to The Economic Times, a panel headed by Panagariya himself will probably suggest that 40 percent of India’s population should be considered poor based on 2011 data from the National Sample Survey Organisation (NSSO).


Politically, this is an ace, as the jholawallas will be thrilled that there are now 484 million poor people on whose behalf they can vent their spleen as opposed to just 363 million under the Rangarajan committee’s poverty line. (The UPA, though, never adopted that poverty line, as it was voted out before it could do so). A drop in the numbers of the poor is always highly upsetting for the Left and jholawalla NGOs as robs them of their core reason for existence.

There are political benefits for Narendra Modi too; he can claim that the UPA left more people poor for him to lift out of poverty than the numbers they inherited in 2004.

First, poverty can never be an absolute number. It is always relative.

Second, once you know 40 percent of the people is where you must focus your anti-poverty efforts, it is sensible for the government to concentrate its available resources on them.

Third, it follows that the burden of poverty alleviation must shift away from product-specific subsidies to cash in most cases – especially when these subsidies relate to food, fertiliser or fuel.

Fourth, Niti Aayog should also consider whether a one-size-fits-all 40 percent cutoff should be adopted nationally or state-wise.

Fifth, abject poverty can ultimately be defeated only by growth, improved labour skills, and job creating investment.

Arvind Panagariya is on the right track – a revolutionary one. To make his new poverty definition work, the government must also move its resources and income support to the regions that are home to most of India’s poor. This is the right road to “sabka saath, sabka vikas.”