Indian Economy - News & Discussion Oct 12 2013

Singha · Post by **Singha** » 10 Jul 2015 13:56

it helps that both the main political formations there are strong enough to repel delhi sultanate diktats AND business friendly (while taking some for themselves) .... both are equally ruthless in execution (Amma more so) and in protecting their vital interests.

in areas where the sultanate is strong like KA or ideological aberrations like the commies in KL , things are tougher...as the entire discourse of politics changes from pro-growth to pro-sops.

I have always maintained that TN GDP will cross TSP at one point and its the nearest thing we have to china in ruthless execution.

JE Menon · Post by **JE Menon** » 10 Jul 2015 14:19

>>TN had a lot of very honest, very hard-working, extremely competent guvrmand officials.

Many many of these IAS wallahs are spread through the country now. Truly amazing bureaucrats are churned out by the thousands in TN/KL/AP... pity that only now they are getting the sort of national government they can work unfettered under.

Sanjay · Post by **Sanjay** » 10 Jul 2015 14:31

How accurate are poverty rate calculations in India ? I mean Surjit Bhalla has argued that given that the NSSO studies to not capture more than 47% of income earned per household, the poverty estimates are over-stated. Could it be that the new method of examining "deprivation" rather than just income poverty is more realistic ?

Singha · Post by **Singha** » 10 Jul 2015 15:18

maybe but the relative ratios between the states will likely match the patterns above.

even in moffusil towns in south the govt officials like bus conductors seem to be honest and not looking to pocket a quick buck. ticket inspectors are fierce and regular in their roving patrols in buses and trains. you use it, you pay for it.

vina · Post by **vina** » 10 Jul 2015 16:16

Look at this story line from Al-Hundi dated 2004 Kumbakonam Bypass vs the sorry state of affairs for bypasses in Mandya and Ramnagara et al in the ultra heavy Bangalore Mysore corridor. The KA politicos are simply morons.

Supratik · Post by **Supratik** » 10 Jul 2015 17:20

@Theo,

I don't want to go back to the KL vs GJ model debate as we have discussed it many times before. In general socialist/communist countries have delivered well on HDI. That is probably their only achievement. However, that is not the case in WB. The consensus in WB amongst the non-leftist population is that the Commies had an adverse impact on education. Remember that Bengalies were one of the first people to get modern education in the subcontinent due to early British rule. Most of the babus across eastern India were Bengalies. That advantage could not be converted into a lead due to as many feel Commie rule. Keralites would better know if high HDI in KL is due to Commie rule which BTW has been intermittent. Coming back to the models, KL model closely follow the socialist/communist model i.e. high HDI without improved economic activity. If KL did not have Gulf jobs or was not part of India it would be under severe economic stress. Since I am not a Communist I feel a balanced approach is better where your HDI and economic activity improve hand in hand. And I feel GJ has exactly done that and hence IMO is a better model.

vina · Post by **vina** » 10 Jul 2015 17:49

However, that is not the case in WB

True. WB commies sucked big time. They left piss poor HDI numbers despite all the noise, a devastated economy and basically deindustrialised the state and destroyed it's work culture by their ideological idiocy. This is probably due to their uninterrupted 25 years rule.

The Kerala commies because they got thrown out frequently probably couldn't wield the wrecking ball as thoroughly , but did contribute their mite in driving out industry out of Kerala. But then, they did contribute much more in the social reform side and in public education and healthcare. That instinct they shared with the Congress and the Maharajas of Travancore (who were reformist).

And the social movements precede commie rule in Kerala. The Vaikom temple entry movement was pre independence and had Mahatma Gandhi and others including EV Ramaswamy Naicker (Periyar) in it from outside the state. Vaikom is a great place would urge everyone to visit is.

And yes, the Ambalapuzha Krishanan temple , along with the pink coloured payasam, which is heavenly as always. Can vouch for it .. It would have been a shame to keep anyone seeking refuge in them to be prevented from doing so.

Supratik · Post by **Supratik** » 10 Jul 2015 18:11

I would like to add if you look at it grossly southern states particularly TN - except KL have followed a similar model as GJ. So although we are calling it GJ model it is actually more widespread. There are some differences if you look at the fine print but they have taken the route of improving HDI in "conjunction" with economic activity. This is where KL failed. And I suspect Commies had a role in it. The northern gangetic belt have been extremely pathetic when it comes to governance. They have done poorly irrespective of who was in governance (including BJP till the arrival of people like SSC or RS, etc). MH has followed a similar model as GJ/TN but it had the advantage of industrial pioneers basing themselves there and the Congress CG preferring to locate industry there during the socialist era. So it is basically a Southern-Western model that has worked.

But the data suggests that the majority of the country will be out of the woods in the next 20 yrs e.g. I am pleasantly surprised to see some of the improvements in eastern UP and BH - regions with extreme backwardness. It is not going to take generations. There will be some pockets of "work-to-do" that will remain.

Theo_Fidel · Post by **Theo_Fidel** » 10 Jul 2015 19:04

vina wrote:Wow! Where did you get this table from ? And if this table is accurate, the fall in poverty rates from 1983 to 2009in TN has been astounding.

It is RBI data and is common knowledge in govt. circles. It is the reason TN gets an outsized say in what goes in in India, from noon meal scheme to women's programs and GOI tends to stay hands off these days. The one state that came all the way from Bihar levels of poverty based on pure hard work and changing social attitudes. Also the reason TN folk largely ignore the generally awful advice we have gotten over the years from folks in other states.

The RBI chart is incredibly hard to condense and post so I posted that link instead. But the RBI link is below and goes back to 1973. When TN was even poorer.

http://dbie.rbi.org.in/DBIE/dbie.rbi?site=statistics

BTW I wouldn't get too carried away by the absolute numbers. Poverty line in India is quite low and has been revised frequently. I only use it to compare the state models and what is happening to the different states, pace of change, etc.

There is also no time to rest on the achievements of the past, the future beckons... ..right now in TN, the aim is 100% high school education for all, no matter what it takes.

Supratik · Post by **Supratik** » 10 Jul 2015 19:16

Three states to watch out for are HP, UK and TP wrt HDI.

svenkat · Post by **svenkat** » 10 Jul 2015 19:20

http://www.theigc.org/wp-content/uploads/2014/03/modi-table-5.png

The International Growth Centre (IGC) aims to promote sustainable growth in developing countries by providing demand-led policy advice based on frontier research.

Established in 2008 with funding by the UK government’s Department for International Development (DFID), the International Growth Centre (IGC) aims to promote sustainable growth in developing countries...

Based in the London School of Economics and Political Science in partnership with the University of Oxford, the IGC directs a global network of over 1,000 world-leading researchers and 15 in-country teams in 14 states throughout Africa and South Asia.

yvijay · Post by **yvijay** » 10 Jul 2015 19:22

I'm even more surprised by the AP stats. I thought TN and AP would have same level of poverty even in 1983 but AP had half less than TN. Even in 2009 it has less poverty than TN considering the poverty levels in Telangana and Rayalseema.

Theo_Fidel · Post by **Theo_Fidel** » 10 Jul 2015 19:23

Supratik wrote:@Theo,

I don't want to go back to the KL vs GJ model debate as we have discussed it many times before. In general socialist/communist countries have delivered well on HDI. That is probably their only achievement. However, that is not the case in WB. The consensus in WB amongst the non-leftist population is that the Commies had an adverse impact on education. Remember that Bengalies were one of the first people to get modern education in the subcontinent due to early British rule. Most of the babus across eastern India were Bengalies. That advantage could not be converted into a lead due to as many feel Commie rule. Keralites would better know if high HDI in KL is due to Commie rule which BTW has been intermittent. Coming back to the models, KL model closely follow the socialist/communist model i.e. high HDI without improved economic activity. If KL did not have Gulf jobs or was not part of India it would be under severe economic stress. Since I am not a Communist I feel a balanced approach is better where your HDI and economic activity improve hand in hand. And I feel GJ has exactly done that and hence IMO is a better model.

I don't disagree with most of your statement but there can not be any perfect model. I have never understood the criticism of the KL model. My view is KL would have done better outside India. More like a SL without the raging civil war. Like our own version of Switzerland. KL would have been able to control its borders for instance.

Back when TN began reform it was roundly panned for its policies, even though now most of the nation attempts to copy parts of it. Why even within TN, the noon meal scheme was roundly panned and opposed. Recently all kinds of silly comments were made about the free TV, Cheap meals, free iodised salt, free mixie/grinder, etc. These vital household items that reduce labor and improve productivity and release people to work long days. And by and large people have resorted to working harder. The links are clear and undeniable. When the state cares for the people, the people care more about the state.

In any case every states needs to find its own way and TN is not all perfection. There are many criticisms that can be leveled, the exclusion of certain communities for one...

WRT Heartland my heart dearly wants to believe you are right, but then my head intervenes with its first hand information and tells me they are regrettably moving very slow and not always in the best direction...

Supratik · Post by **Supratik** » 10 Jul 2015 19:44

I disagree. Kerala outside the Indian Union and without Gulf jobs would have economically collapsed and given its demographic change would have led to civil war and eventual expulsion of the non-Muslim population.

Bade · Post by **Bade** » 10 Jul 2015 20:25

^^ Hardly any Keralite will agree with this view except the the radical right perhaps. Frankly even the Muslims are doing roaring business in all spheres. Wishing away gulf and saying it would have failed otherwise, is like saying if IT was not such a leveler, (read Blur and Hyd) would still just be a retired folks capitals.

If we export brain-power and count it as productive, which by the way includes body-shopping via short-term visas, how is it any different from lower end service job-takers being exported to bring revenue to the state, if not in income taxes, definitely in sales taxes.

Bengal's problem from my limited 4 yr exposure during univ days is rampant politics, much more rabid and violent than in KL. Huge numbers of students would just vanish off into the rural areas working for the upliftment of the poor.

WB in the 70-80s was dysfunctional to say the least. KL rural areas were poor from my experience, but never so ideological like in WB. Making money still counted even back then.

Suraj · Post by **Suraj** » 10 Jul 2015 20:35

May IIP proves a dampener, grows 2.7%

India’s industrial output for the month of May 2015 grew a disappointing 2.7% year-over-year, compared with 4.1% in April, primarily on back of weakening growth in the manufacturing sector, data released by the Ministry of Statistics and Programme Implementation showed on Friday.

For May 2014, the index of industrial production (IIP) grew 5.6%. Cumulative industrial output growth for the first two months of fiscal 2015-16 was 3% compared with 4.6% for the same period last year.

In May, the rate of manufacturing grew just 2.2% year-over-year, compared with 5.1% in April, and 5.9% a year earlier. Among the bright spots, electricity generation showed major improvement as it grew at 6% year-over-year compared with a contraction of 0.5% in April. Mining grew 2.8% in May, compared with a growth of just 0.6% a month earlier.

In the used-based sub groups of manufacturing, all the items showed deterioration when compared with May 2014. Capital goods grew 1.8% versus 4.2% a year earlier, basic goods grew at 6.4% against 7.5% in May last fiscal, while intermediate goods grew at 1.2% versus 3.5%.

Consumer goods contracted 1.6% compared with growth 4.6% in May 2014, consumer durables output shrank a whopping 3.9% against a 3.6% growth, while consumer non-durables growth was almost flat compared with 5.2% for the same period last year.

Core sector data, which was released on July 1, showed a growth of 4.4%, leading to an expectation among economists of a booster in terms of May IIP numbers. The numbers released today then, are likely to be seen as disappointing,

Typically, Q1 (April-June) is a soft period economically. Even during the mid 2000 boom years, Q1 reported far slower growth than Q2-Q4. April was a good month, so sequential May data looks weak. It would be interesting to see how savings/GDP data looks when CSO releases Q1 GDP data at the end of August.

Supratik · Post by **Supratik** » 10 Jul 2015 20:42

My scenario is based on a situation where Kerala is isolated and continues to practice socialist policies and continues to have demographic changes. Expatriates and their remittances are the lid that releases the internal pressure from exploding. Similar is the case with WB and AS. The non-performing parts of the country are shielded by the performing parts. As for the last part we have seen how Punjabiyat, Bangaliana and Kashmiriyat worked in 1947. If one believes nothing will happen in an isolated KL undergoing demographic change with the NDF as the only militia running around one is living in a cocoon that is about to burst. It is not a right-wing imagination.

Bade · Post by **Bade** » 10 Jul 2015 20:57

Supratik, I have to disagree, as there is hardly any stats out there which supports this imaginary scenario, till then it is rightly dismissed as extreme right wing imagination. There are plenty of ills in KL, but what you list is not the major ones which can bring the state to a quagmire like in J&K. Don't go by what Hindu Munnani writes, if that is your source.

My biggest peeve against KL folks, is their lack of investment for higher education, both the govt itself and the people in general. No long term view on such things, among the educated. It is all about quick money and a comfortable life. No deeper curiosity, maybe it is a cultural trait born out of agrarian life of plenty....a bit zamidari outlook even among the not so rich. But I am glad they are largely willing to vote with their foot before they hit the unproductive years of life, to make something of their existence elsewhere. I still have great hopes as a result. I see that now with the generation who are in their 20s now, more into higher education before 'settling down'.

Supratik · Post by **Supratik** » 10 Jul 2015 21:08

Bade, my scenario is hypothetical in answer to Theo saying Kerala would have done better if it had closed borders and followed the KL model - based on my own judgements (nothing to do with Hindu Munnani). As for communal relations I don't think Islam in KL is going to be any different from Islam in other regions once it gains demographic or military advantage inspite of protestations to the contrary. That has been the worldwide trend. There is nothing communal in stating a harsh reality.

Coming back to the data I disagree with the view that it will take multiple generations to bring our HDI to world standards.

Bade · Post by **Bade** » 10 Jul 2015 21:35

OK, no issues then as you were replying to Theo's comment. I think he was referring to state of Travancore which initially wanted to be separate, but most of KL was already part of the Madras state so by default part of India. I am pretty sure the mango man wanted to remain in India.

KL is in direct competition with TN to attract any sort of industry presence there, with no higher edu products to support such an enterprise, hardly the kind of flat open land in the coastal areas with no significant population already like in TN. More than demography, geography is against it. Look at the entire coastal belt in KA and MH where one hears little about in terms of a modern economy, other than Goa or Mangalore perhaps. So one has to ask what does KL provide that TN does not. Even people from KL are willing to relocate to TN and work there, as it was since British times. Madras had a long lead over KL and it is spilling over to rest of TN slowly over the past 5 decades. IMO, KL lost the battle a long time ago to setup all manner of large scale industries. What is left was the new IT cluster, but then having neglected higher education it remains an also-ran even there. That is the plain truth.

Theo_Fidel · Post by **Theo_Fidel** » 10 Jul 2015 21:38

Supratik wrote:Coming back to the data I disagree with the view that it will take multiple generations to bring our HDI to world standards.

Suprantik,

You are heading of on several tangents and making stuff up now.

I never said it will take generations to bring India HDI to world standards. What I said was it will take generations for the Heartland to catch up with KL. Please read carefully before getting all heated up. As far as the politics You know a lot more about politics than I do. As far as World HDI vs India HDI I will let you speculate on that one.
----------------------------

Bade saar,

Personally I don't worry about KL. The problem it has is that at India's present development, namely industrial catch up it does not have a lot to offer. But in the longer run it will attract more and more wealthy people and industries like Finance, Casino's, Vacationing, Cruise industry, etc. As India moves beyond the daily grind, KL will attract a disproportionate amount of capital as it already does.

This is how States like Switzerland, Florida or Caymans run. And they do very well. Not a steel mill amongst them.

Bade · Post by **Bade** » 10 Jul 2015 22:04

Theo, you are right in a sense, it is now left to attract all the sinners

and bacchanalian types to keep up with the Joneses next door. I really do not believe every state should have all kinds of industries in equal measure to begin with. This is not true even in the USA. So one can live with that.

Since we are into gendaken experiments with no data to support, here is mine. If we wind back many decades to the turn of last century and exchange the population of TN with KL, but keep all the other social attributes the same in the population. Fast forward to the present, the TN on the west coast will have the same issues as present day KL, and KL on the east coast would be thriving despite its socialistic leanings. There is a reason perhaps why the Brits chose Madras as their center and not any other place on the west coast.

The counter to this is then why so in WB, it had Calcutta isn't it ? As I said earlier WB was radicalized beyond retrieval and the double wound of a partition. Bombay and Madras was spared that and hence prospered.

Theo_Fidel · Post by **Theo_Fidel** » 10 Jul 2015 22:34

Bade wrote:I think he was referring to state of Travancore which initially wanted to be separate, but most of KL was already part of the Madras state so by default part of India.

Not to mention it was the commie's and a couple of other communities that successfully executed violent rioting that finally forced the Travancore Diwan to accede to India. No police action required. Talk about forgetting your history.

Bade · Post by **Bade** » 10 Jul 2015 22:47

Travancore is less than 30% of present day KL. Rest of KL wins hands down against Travancore to decide the fate ! Too bad for the Diwan. I am not even sure except for the elites in power anyone even in Travancore wanted to be separate.

Prem · Post by **Prem** » 11 Jul 2015 02:50

MODI’S MAKE IN INDIA : IPHONE TO SET UP 10 MANUFACTURING PLANTS BY 2020, CREATE 1 MILLION JOBS

NEW DELHI: Foxconn Technology Group, the world’s largest contract manufacturer, is aiming to create at least a million jobs by setting up 10-12 manufacturing facilities across the country by 2020, its chairman said.Terry Gou, head of the maker of iPhones and iPads for Apple and Kindles for Amazon, told reporters Friday on a short trip to India that Foxconn would look to set up the manufacturing plants, initially in five states including Andhra Pradesh, Gujarat, and Maharashtra and expand to other states across the country by 2020.It also plans to set up including data centers and incubators in cities like Delhi, Mumbai, Bengaluru, and Hyderabad. The company is also looking to invest in Indian internet start-ups, small-medium enterprises and handset makers.
He however pointed out that electricity supply, water, logistics, manpower and different tax regulations are some of the hurdles that the government needs to take care of for Foxconn to establish its factories in the country.Gou though added that the current government is far more supportive of manufacturing in India than the government 10 years back when it set up a manufacturing plant in Chennai. Foxconn has had to shut the plant due to continuing labour unrest. The component-making plant was a key supplier to Nokia, which shut operations last year.
Gou said that Foxconn would look at making India as a manufacturing hub to not just produce products for the consumption of domestic market but to cater to other markets as well.“We will help local companies and help them design, and manufacture components and devices locally, enabling them to start export,” Gou said.ET, in its June 24 edition, had reported that Foxconn will soon start assembling smartphones for Chinese brand Xiaomi in a plant located in Sri City in Chennai, and that it plans to set up 10-12 manufacturing plants with an initial investment of some $2 billion (Rs12,800 crore). It has already been in talks with a number of Indian, Chinese and multinational handset brands for the production of smartphone in India. Gionee recently confirmed its talks with Foxconn for contract manufacturing in India.He said that Foxconn has expertise in content, information processing, cloud, and bandwidth, besides hardware. “We will partner with Indian companies to deliver this,” he said.Foxconn’s expansion plan ties in with the India push of Japanese telecom and Internet giant Soft-Bank. Recently, it tied up with SoftBank and Bharti Enterprises to launch a joint venture with in renewable energy that will invest $20 billion over 10 years.SoftBank Chairman and CEO Masayoshi Son recently said that his group and Foxconn are in talks to form a joint venture for electronics manufacturing in India. The Taiwanese company will lead the venture with SoftBank playing supporting role. There is speculation that Bharti Enterprises may also join them.

Kakkaji · Post by **Kakkaji** » 11 Jul 2015 04:53

One million consumers say no to LPG subsidy

Vayutuvan · Post by **Vayutuvan** » 11 Jul 2015 05:29

yvijay wrote:I'm even more surprised by the AP stats. I thought TN and AP would have same level of poverty even in 1983 but AP had half less than TN. Even in 2009 it has less poverty than TN considering the poverty levels in Telangana and Rayalseema.

I think the situation would be different after separation. TS will have more poverty than TN. Naturally AP will have lesser poverty as TS would have contributed higher than average share to the combined state poverty.

I was also surprised that AP beat TN. I was always under the impression that TN was lot more developed than all 4 deccan platue (sic) states (leaving out vidarbha of MH, southern parts of MP, CG and Odisha for now).

Kakkaji · Post by **Kakkaji** » 11 Jul 2015 05:34

Are those RBI poverty percentages based upon the Montek Singh Ahluwalia/ Raj Babbar measurements of poverty?

Kakkaji · Post by **Kakkaji** » 11 Jul 2015 06:35

My bet is on Jharkhand and Maharashtra for dramatically improving their HDI indexes over the next 5 years. They both have dynamic CMs now that are vigorously following the Modi model of all-round development.

Maharashtra is considered developed, but rural and tribal areas are in distress. Jharkhand of course is part of the original BIMARU.

Rahul M · Post by **Rahul M** » 11 Jul 2015 09:24

kakkaji, those numbers are based on the assumption that the poor avail the facilities of subsidised food from PDS and as such, are not really all that improbable.

pankajs · Post by **pankajs** » 11 Jul 2015 09:47

arvind subramanian ‏@arvindsubraman 53m53 minutes ago

1/2. @PMOIndia @FinMinIndia @PIB_India. First quarter (apr-june) indirect tax collections increased by robust 37.5% over same period 2014.

arvind subramanian ‏@arvindsubraman 47m47 minutes ago

2/2.@PMOIndia @FinMinIndia @PIB_India W/o new measures, collections increased 14.5% over 2014: So tax base growth (nominal GDP) very healthy

Prem · Post by **Prem** » 11 Jul 2015 10:00

Hannover, PM Narendra Modi to pitch his ‘Digital India’ campaign in Silicon
Valley
http://economictimes.indiatimes.com/art ... aign=cppst

NEW DELHI: Prime Minister Narendra Modi is heading back to the US. A year after he
wowed the audience at New York's Madison Square Garden, Modi will try to recreate that magic in Silicon Valley. Modi is slated to visit the US at the end of September to address a special session of the United Nations to mark the 70th year of its foundation, after which he is likely to fly to the west coast to woo IT and digital industry leaders in Silicon Valley, sources said.Modi will pitch his 'Digital India' campaign in the home of hundreds of tech and startup companies as he seeks to fulfill his vision of empowering India's citizens with access to digital services, knowledge and information. This
follows his 'Make in India' crusade at the Hannover Messe in Germany in April. Additionally, continuing his practice of wooing the Indian diaspora, Modi is likely to address a special community event in San Francisco on the lines of his Madison Square ..However, given Modi's goal of improving governance and focus on attracting investments in electronic manufacturing in the country, sources said the prime
minister's key agenda will be to engage with industry leaders and investors during a closed-group meeting with them in Silicon Valley. Modi is expected to land in New York on September 24 evening and will address the UN the next day. A series of bilateral meetings is also being worked out for him by the ministry of external ..

Supratik · Post by **Supratik** » 11 Jul 2015 13:44

@Bade,

KL actually has a great opportunity. It has an educated work force. It should focus on a human resource dependent economy i.e. IT-related industries and high-tech manufacturing. It cannot compete on the basis of regular manufacturing industries as it is not located close to resources. It has a coast close to shipping lanes. So port-based economic activity should be leveraged. SEZ based manufacturing feeding the ports for exports would be ideal. I am a regular reader of SSC. These ideas are there but the execution is poor due to the socio-political ethos. That is the impression I get from reading the forums.

@Theo,

It all depends on governance. We can get back to the nos 20 yrs hence and IMO we may be surprised.

Sanjay · Post by **Sanjay** » 11 Jul 2015 16:46

On the question of poverty levels - some articles which I am sure you've all seen:

Note the NSSO surveys capture only 43-47% of consumption which is not helpful in calculating levels of poverty:

http://swaminomics.org/indias-statistic ... or-policy/

http://swaminomics.org/why-the-poor-wan ... -on-paper/

http://www.india-seminar.com/2001/497/4 ... bhalla.htm

http://www.business-standard.com/articl ... 080_1.html

http://www.im4change.org.previewdns.com ... 14402.html

http://archive.indianexpress.com/news/c ... /1152247/0

http://blogs.timesofindia.indiatimes.co ... g-poverty/

http://blogs.timesofindia.indiatimes.co ... meal-cost/

It would be interesting if the poverty debate would be based on sound analysis and not by the "poverty industry" experts who seem to thrive on showing poverty as rising.

Suraj · Post by **Suraj** » 12 Jul 2015 01:24

An interesting piece of news: while IIP data remains subdued in Q1, excise revenues have grown 37% YoY for Q1. This indicates a rising divergence between the older IIP series data and the new value added GDP system, showing up in the buoyant revenue growth, even as production stats look more subdued. This suggests that Q1 GDP growth will be strong, even though IIP data doesn't indicate it, because the new GDP reporting mechanism is a gross value add estimation.
Indirect tax revenue rises 37% in June qtr
Growth in excise duty collections not in sync with dismal IIP data

The Centre collected Rs 57,357 crore from indirect taxes in June this year, up 33.3 per cent compared to Rs 43,025 crore a year earlier. This was aided by a 67.4 per cent increase in excise duty collections. The mop-up, particularly on the excise duty front, fuelled a 37 per cent rise in indirect tax collection during the quarter ended June at Rs 1.54 lakh crore, compared with Rs 1.12 lakh crore during the year-ago period.

The data, however, aren’t in sync with the subdued industrial growth of 2.7 per cent in May.

Various additional measures played a role in the rise in indirect tax collection — an increase in excise duty on petroleum products between November 2014 and January 2015, the withdrawal of excise duty exemption on auto and other consumer durables, and an increase in service tax from 12.36 per cent to 14 per cent (effective June).

Supratik · Post by **Supratik** » 12 Jul 2015 10:14

Does this mean that the IIP is not catching industrial activity reflected in the new GDP calculation format and needs revision?

Suraj · Post by **Suraj** » 12 Jul 2015 10:45

Supratik wrote:Does this mean that the IIP is not catching industrial activity reflected in the new GDP calculation format and needs revision?

Right. IIP will keep trending lower than reported tax revenues (as a proxy for value addition) and reported GDP data, until it's fixed. So it's hard to say 'industrial growth is subdued' entirely based on IIP. If IIP was high and tax revenues were weak, that would suggest growth is poor, because you can't fake revenue growth and the corresponding tax revenue growth, whereas IIP can be distorted if it's not measured properly.

A_Gupta · Post by **A_Gupta** » 12 Jul 2015 22:53

^^^ Suraj, thanks, from your cited article:

Besides, experts said IIP was volume growth and didn’t give data in value terms. Therefore, one doesn’t know whether high-value production items are rising or those of low value. For instance, doubling of dispatches of Alto car models would lead to the same rise in the IIP as those of sports utility vehicles or sedans. Excise duty collections will be on the value of production and, therefore, cannot be gauged correctly from IIP.

This reminds me of something from the old Soviet Union days. The anecdote goes that to fulfill its target, a factory for door knobs, if measured by value, would gold-plate some of the door knobs; if measured by weight, would fill them with lead; if measured by number, would manufacture large numbers of flimsy door knobs, etc., etc. The Index of Industrial Production needs somehow to be marked to market - in some sane way so that market fluctuations don't provide a wrong signal.

Sanjay · Post by **Sanjay** » 13 Jul 2015 00:04

Suraj and other experts on this forum, would anyone care to comment on the views put forward by SA Aiyar and Surjit Bhalla in regard to income poverty in India as detailed in the articles above ?

Your insight is always excellent and your views will be much appreciated.

Suraj · Post by **Suraj** » 13 Jul 2015 00:07

Sanjay wrote:Suraj and other experts on this forum, would anyone care to comment on the views put forward by SA Aiyar and Surjit Bhalla in regard to income poverty in India as detailed in the articles above ?

Your insight is always excellent and your views will be much appreciated.

Please quote the articles here.