Indian Economy - News & Discussion Oct 12 2013

[Suraj]

India says to inject $1.1 billion into nine state-run banks

India will inject 69.90 billion rupees ($1.13 billion) into nine state-run banks including State Bank of India in the financial year 2015, the finance ministry said on Saturday.

In a statement, it said the plan aimed to reward the banks' efficient use of assets and shareholder funds.

The move marks a change in the government's usual practice of injecting capital into banks which have suffered difficulties.

Other lenders due to receive government funds include Bank of Baroda, Punjab National Bank, Canara Bank and Syndicate Bank.

[sunilUpa]

HSBC Swiss Bank account holder info made public. Partial list in the link below.

http://indianexpress.com/article/india/ ... -how-much/

[sunilUpa]

Link to ICIJ data files for India below;

http://www.icij.org/project/swiss-leaks ... leaks-data

Total amount in Indian owned account - $4.1 billion
Total accounts - 1403
Maximum amount in a single account - $ 800 million

[Suraj]

Most of the listed balances are chickenfeed.There's no reason any wealthy person cannot have accumulated the few million listed there over the course of their lives, especially since they're all business folks. Would it be nice if it was deposited in India, adding to the Indian banking system's own credit base? Yes, but not depositing it here doesn't by itself prove anything. Anyone with means attempts to defend their assets, including against inflation.

[sunilUpa]

More than 50% of these accounts are legit. Let's see how this unfolds. GoI should milk this as much as possible.

[Suraj]

The topic of black money suffers from a lack of clarity as to what exactly people are looking for. The existence of money abroad is not proof that the money is black. Anyone who lives in a place with an eroding currency and high inflation will seek to hold their savings outside the country in a currency that's stable, if they have the means to accomplish it. That's smart personal financial sense, not corruption. There's also a massive number of ways to laundry wealth from black to white in opaque ways, such that no proof can be provided, only claims made. If any of those accounts has already been previously accounted for in Indian tax forms by those individuals, that's the end of the trail as far as those people are concerned, because the money is legit. Turning the black money topic into an 'eat the rich!' class fight would be counterproductive and helps no one, not even those politically motivated to spout it.

[sunilUpa]

Very true, however very few understand it that way. Most of the black money of India in in India.

I an =y case I think this was selective leak by HSBC to shield some prominent and powerful individuals, globally.

[Suraj]

Probably for the first time ever, an Indian PM chairs a meeting with state leaders to kickstart the investment cycle again and generate growth. As far as I know, no one has ever held a meeting such a the specific goal:
Modi seeks states' hand in reviving investment cycle

In a step towards "cooperative federalism", Prime Minister Narendra Modi on Sunday chaired the first meeting of the National Institution for Transforming India (NITI) Aayog's governing council, and sought states' cooperation in reviving the investment cycle to bring the economy back on a high-growth path. Promising states more funds and greater power to run schemes, he asked them to expedite implementation of projects.

Addressing the governing council, which includes chief ministers and members of the Aayog, Modi, also the chairperson of the NITI Aayog, dropped hints that the 'one-size-fits-all' model would end, even as several states asked for more untied funds ahead of the Budget for 2015-16.

The prime minister, keen to revive investments, asked the chief ministers to personally monitor the factors that were affecting project execution, and suggested each state identify an officer to help resolve pending issues.

West Bengal Chief Minister Mamata Banerjee skipped Sunday's meeting but Bihar Chief Minister Jitan Ram Manjhi, who is facing political turmoil back home, was present.

Among others who attended were Uttar Pradesh Chief Minister Akhilesh Yadav, Assam's Tarun Gogoi, Punjab's Parkash Singh Badal, Tamil Nadu's O Panneerselvam, Kerala's Oommen Chandy and Himachal Pradesh's Virbhadra Singh, besides chief ministers of all states ruled by the Bharatiya Janata Party.




The interaction during the governing council meeting was coordinated by Finance Minister Arun Jaitley, while opening remarks were made by NITI Aayog Vice-Chairman Arvind Panagariya.

Investment cycle in the country is facing hurdles due to over-indebtedness of companies. It was for this reason that the finance ministry's 'Mid-Year Economic Analysis' spoke of increasing public investment. Modi urged the chief ministers to get over all differences and work together to perk up investments.

"Forgetting all our differences, let us focus on the cycle of investment, growth, job creation and prosperity," he said at the meeting, attended by chief ministers and representatives of 31 states and Union territories, whom he addressed as 'Team India'.

He announced setting up of three sub-groups of chief ministers - one to decide on the future of the Centrally sponsored schemes (CSS), another to foster skill development, and a third to push his pet project, the 'Swachh Bharat Abhiyan.'

Alongside, two task forces will be set up in each state by the local government - one on poverty alleviation and the economic model needed to achieve this, and the other to address the specific agriculture-related needs of the state.

These task forces and sub-groups will be constituted under the overall supervision of the NITI Aayog.

The sub-group on CSS would decide whether the number of such schemes should be brought down from the current 66, or should those be completely abolished, or should some be transferred to state governments, Jaitley told reporters after the meeting.

Modi said: "We will move away from the 'one size fits all' schemes and forge a better match between the schemes and the states' needs."

Jaitley said the sub-groups were expected to give their reports within the next month and a half. The sub-group on 'Swachh Bharat Abhiyan,' would explore institutional mechanism and technical know-how to push the programme.

The Centre's assistance to states for the 66 CSSes in 2014-15 has been Rs 338,562 crore, more than double the Rs 136,254 crore the previous financial year.

In the 11th Plan period, the total provision for CSSes stood at Rs 6.6 lakh-crore. At one point, there were as many as 360 such schemes but their number has come down over a period of time - last year, it was reduced from 147 to 66.

Officials said the government had plans to reduce the number of CSSes to 10, so that states could get more flexibility to spend on development works, in line with their requirements, and not according to the schemes designed by the Centre.

Some of the flagship central schemes include the Mahatma Gandhi National Rural Employment Guarantee Scheme, Bharat Nirman, Sarva Shiksha Abhiyan and Pradhan Mantri Grameen Sadak Yojana.

Niti Aayog meet: States want more money, flexibility

The governments of Tamil Nadu and Uttar Pradesh want extra funds and greater flexibility in operating welfare schemes.

They said so at the first governing council meeting of the new NITI Aayog, the successor body to the Planning Commission. Prime Minister Narendra Modi presided.

Uttar Pradesh Chief Minister Akhilesh Yadav sought 90 per cent grants for central schemes. He said the tough conditions imposed by the Centre in many of its schemes made it difficult for most states to benefit from these. He also urged Prime Minister Narendra Modi to make the process of allocation of funds more transparent. (STATESPEAK)

He said he agreed with the idea of long-term plans, of a 10-15 years' duration.

On the government's 'sabka saath, sabka vikas' (Development for all) slogan, Yadav said, "It is not possible without provision of adequate resources to economically weaker states." At present, transfers to states as Plan assistance account for 15 per cent of central expenditure.

Tamil Nadu's O Panneerselvam said the views of states need to be heard at different levels in the hierarchy of the Aayog. He pitched for a higher flow of funds from the Centre and flexibility in the design of programmes, limiting the state's share to 25 per cent for such schemes.

He said the vertical devolution of share to the states should be at least half the aggregate resources with the Centre.

"We believe that the non-transparent, discretionary and uncertain fashion in which funds were allocated and disbursed to states by the erstwhile Planning Commission and by different central ministries under various centrally sponsored schemes must be comprehensively overhauled," he said.

Kerala's Oommen Chandy asked the PM to re-allocate funding meant for programmes like the Beti Bachao Abhiyan and Jan Dhan Yojana to schemes focussed on develop ing his state's agricultural productivity. He suggested the new body should decide on state quotas in the same manner the erstwhile Planning Commission used to do.

Supporting the concept of cooperative federalism, Yadav said NITI Aayog should have 'permanent working groups' on all major sectors, with state representatives on board. "The priorities of every state are different," he said.

Assam Chief Minister Tarun Gogoi said Modi's stress on shifting from a plan to a market economy will benefit big industrial states such as Gujarat but harm small and backward ones like Assam. Unemployment problems would grow manifold.

Gogoi said it was imperative that relatively backward states be first brought up to match the level of the comparatively developed ones. "Our development agenda should give a special thrust on those which require special focus and attention," he said.

Bihar Chief Minister Jitan Manjhi, facing political turmoil back home, also asked for more central funds to states for social development programmes.

He demanded special category status for his state.

Andhra Pradesh's Chandrababu Naidu demanded higher allocation, saying his state had suffered due to its bifurcation. Complaining that central assistance was disproportionate to the population, Naidu demanded that AP be provided a special status category and a special package.

Recently, the finance ministry announced Rs 850 crore of special funds to Andhra Pradesh and some tax breaks. More concessions are being worked out.

Himachal Pradesh's Virbhadra Singh advocated the need for setting up a hill division for all hilly states, the NITI Aayog acting as a permanent secretariat for this. He said hill and special category states should be provided a package of incentives to attract industries, so that the 'Make in India' programme does not remain confined to a few industrially advanced states.

He also urged for liberal funding to protect the handicrafts sector.

West Bengal's Mamata Banerjee chose to skip the meet.

[Singha]

my IKEA link a few posts above should show how a traditional but relatively backward industry like Bardoi carpet making in UP is delivering international level of product with the help of ikea type sourcing agencies.
it is creating real employment and improving incomes by Nx that counts, not these "special packages" which are just like bailouts these states clamour for.

[csaurabh]

An example of reforms needed - textile industry.

http://www.niticentral.com/2015/02/09/b ... 00152.html

[a_bharat]

Anyone who lives in a place with an eroding currency and high inflation will seek to hold their savings outside the country in a currency that's stable, if they have the means to accomplish it. That's smart personal financial sense, not corruption.

If they didn't declare the foreign accounts in their IT returns, it is tax-fraud at the minimum.

[johneeG]

It seems to me that Jan dhan was about saving banks. I think the main concern of modi was saving banks. It seems to me that temple gold and Jan dhan is being used to prop up the banks.

link

So, temple gold seems to be used to save public sector banks. Jan dhan seems to be used to create more accounts and then fractional banking will take over. Similarly, limits on cash holding also maybe put to prop up the banks

[Melwyn]

Cutting unnecessary red-tape seems to be one of the main priorities of Modi government.

How Modi government is working on a three-pronged strategy to improve ease of doing business rank

Narendra Modi-led government has already stipulated the introduction of risk-based inspection in export-import, something that he had witnessed in Shenzhen, as one of its many targets for creating a businessfriendly milieu and clinching a decent rank in the World Bank's Ease of Doing Business report, 2016.

According to the Bank's 2015 report, for which data up to June 1, 2014, was considered, India's ease of doing business rank is abysmally low at 142 out of 189 nations.

"India's ranking in the 2016 World Bank report should significantly improve and we are confident that our rank will be within the top 50 in the 2017 report," says an official involved in the ease of doing business exercise.

[Suraj]

Anyone who lives in a place with an eroding currency and high inflation will seek to hold their savings outside the country in a currency that's stable, if they have the means to accomplish it. That's smart personal financial sense, not corruption.

If they didn't declare the foreign accounts in their IT returns, it is tax-fraud at the minimum.

The rest of my post adds: "If any of those accounts has already been previously accounted for in Indian tax forms by those individuals, that's the end of the trail as far as those people are concerned, because the money is legit."

I'd venture to say that most of them already report it in their IT forms. The sums themselves are not large enough to look like it's worth so much subterfuge. If we're talking quarter of a million or more per person, then that sounds excessive. $200K-$20M is not a lot for the kind of businessmen listed .

[a_bharat]

The rest of my post adds: "If any of those accounts has already been previously accounted for in Indian tax forms by those individuals, that's the end of the trail as far as those people are concerned, because the money is legit."

Yes, sorry, I missed it.

[Suraj]

Bloomberb title has typical tabloid tone but some interesting data in the article:
BRIC Becomes I With India Set to Outperform First Time Since ’99

As Brazil, Russia and China hit hurdles, it’s the poorest member of Goldman Sachs Group Inc.’s emerging-market group that’s proving a darling of global investors. The International Monetary Fund is predicting India will next year grow faster than each of its BRIC counterparts for the first time since 1999.

So far this year, more than $7 billion has poured into the country’s stocks and bonds, on top of last year’s $42 billion of inflows. The country’s benchmark equity index reached a record at the end of last month. Falling oil prices are helping the government reduce its budget deficit and giving room to the central bank to lower interest rates.

Adding luster are Prime Minister Narendra Modi’s pledges to make it easier for businesses to invest in India, and the determination by the central bank, helmed by former IMF chief economist Raghuram Rajan, to keep inflation contained.

Since taking office in May, Modi has started cutting red tape, implored manufacturers to move factories to his nation and used executive orders to pressure parliament to approve bills that would spur investment in insurance and coal.

Over at the Reserve Bank of India, Rajan successfully shored up the rupee after it fell to a record low in 2013. He then held off on cutting interest rates until last month, when evidence showed inflation was heading below his target.

When the IMF last month revised its economic forecasts, it barely changed its outlook for India while slashing those for this year and next in Brazil, Russia and China. It predicts growth of 6.5 percent next year, compared with China’s 6.3 percent.

Brazil has been pounded by the collapse in commodity prices as its policy makers face a looming recession and run up record budget deficits. The biggest drought in decades is adding to the pressure, and the real dropped 18 percent against the dollar in the past six months.

In a sign of the times, onetime darling state-run oil giant Petroleo Brasileiro SA is mired in a corruption scandal that last week cost its chief executive officer her job. It has fallen short of growth targets and is now worth a fraction of its $310 billion 2008 market-peak.

As for Russia, its incursion into Ukraine has left it a pariah in financial markets, and a cocktail of sanctions, plunging oil prices and capital flight is propelling it toward recession. Inflation is running at the fastest pace since 2008, amid the worst currency crisis since the nation defaulted in 1998.

While China is faring better, its leaders are contending with capital outflows, depreciation pressure on the yuan and the risks of a property crash and deflation. The world’s second largest economy is steadily decelerating, with last year recording the slowest pace of growth since 1990.

Thanks to the GDP base year revision and the significant change in growth rate numbers from it, no one seems to know what to estimate for the quarterly and annual GDP estimates that will be announced in an hour or so:
WSJ: India Economists’ Embarrassing Confession - They Don’t Know What The GDP Is

India’s radically revised gross domestic product data have apparently left economists dazed and confused because they are uncharacteristically silent about what growth was last quarter.

India is scheduled to announce GDP figures for the quarter ended Dec. 31 on Monday but instead of the regular rush of forecasts, economists seem to have created a cartel of silence, choosing not to make predictions using India’s new methodology.

Last week India surprised all the experts by recalculating GDP growth for the fiscal year ended March. Using a new calculation method, India’s economy expanded 6.9% that year, well above the 4.7% growth the country had announced earlier.

“The revision was massive,” said Siddhartha Sanyal, India economist at Barclays. “We don’t know what the GDP was in the previous quarter, so how do we estimate what is going to happen?”

The change happened because the government brought forward the base year used in GDP calculations by seven years to fiscal 2012. It also switched from using production costs to market prices.

While the headline growth figure shot up with the new calculations, the absolute GDP figure was basically the same as it was before, making it hard for economists to figure out exactly where the new-found growth came from. Meanwhile, the government didn’t give the revised quarterly data or new calculations for this year.

“We are completely blind at the moment,” said Saugata Bhattacharya, chief economist at Axis Bank.

While the new numbers suggest that last year the economy was rebounding strongly, some economists are still skeptical. Most other indicators that year suggested growth was sputtering, they said.

“I am not convinced that there is (such) good news,” said Glenn Levine, an economist at Moody’s Analytics. “If it’s true that the economy is growing close to 7%, then that suggests there isn’t much slack in the economy.”

That’s something economists are finding hard to digest given other indicators such as industrial production have pointed to weakness.

With a lot of questions about the new data still remaining unanswered, economists are only estimating growth for last quarter based on the old method even though the government won’t be announcing those numbers anymore.

Forecasts of eight economists surveyed by The Wall Street Journal using the now-outdated method range between 5.0% and 5.5%, compared with the 5.3% expansion in the September quarter.

A closer look at what makes up the new GDP numbers
PDF

[vipins]

JanDhan Yojna is the first step in removing middle men culture and reaching directly to needy.
Next step is to link Aadhar to these accounts which also have RuPay debit cards and few banks are also going for Mobile banking(IMPS etc).Whole thing is being fine tuned as part of Pahal (DBTL) where gas agencies,banks are working together to get proper details.Soon ,there will be more DBT schemes like for fertilizers,PDS,Agri-Porducts etc.
Also schemes would be linked to Aadhar/PAN like if someone is in a particular tax bracket then no. of subsidised cyclinders may be reduced or even 0 subsidised cylinders.There are already options for voluntarily opting out of LPG subsidy.
Connectivity(Bank to Customer) will get a huge boost once postal dept gets bank status.

[Gyan]

RBI governor’s prescription: Indians deserve the whip

http://www.sunday-guardian.com/analysis ... e-the-whip

His repeated pushing up of interest rates has converted much of domestic private industry

It was Manmohan's favourite Rangarajan, who as RBI Governor put the brakes on the takeoff of the Indian economy which greeted the relaxation of controls by the Industry Ministry. While the ubiquity of Manmohan Singh's spin doctors in the party circuit has resulted in all the credit for the 1992 liberalisation going to the then Finance Minister, it needs to be remembered that for Dr Singh then — as now — the only good policy was (is) one that favours foreign companies over domestic industry.

Modi effect, not RBI, tames food inflation (Sunday Guardian)

http://nalapatarchive.blogspot.in/2014/ ... -food.html

Even as RBI Governor Raghuram Rajan continued to effectively downsize the manufacturing base of India by a policy of super-high interest rates.

The ten years when Manmohan Singh was Prime Minister, have been days of darkness for the common man, but "bahut acche din" for speculators and the international financial institutions assisting them. It needs repeating that where the UK and the US have collectively imposed fines of nearly $20 billion on such institutions for doing precisely the sort of trades and transactions commonplace in India, thus far the only response of the RBI has been to give such entities privileged access to its highest levels.

Reserve Bank of India kills India growth story:

https://janamejayaneconomics.wordpress. ... d-nalapat/

Despite increasing protests from industrial groups in India, who began losing out in international markets because of the high bank interest rates and the drying up of credit, the RBI continued its suicidal policy. Clearly, the approach of the central bank met with approval from the Chairperson of the United Progressive Alliance government, Sonia Gandhi, despite the fact that it gave an unfair advantage to European (and Chinese) companies competing in the Indian market. It is noteworthy that Sonia Gandhi is very popular in both China and the EU, being the subject of frequent and flattering media reports in both locations.

Raghuram Rajan is the best hope for UPA

http://www.sunday-guardian.com/analysis ... pe-for-upa

Uptick in economic growth has been because of Prime Minister Narendra Modi's fast-tracking of decisions, and has taken place despite RBI Governor Raghuram Rajan's obsessive focus on dampening economic performance by an elevated interest rate regime. Although numerous reasons have been brought forward to explain the BJP's poor performance in the just-concluded Assembly bypolls in Karnataka, MP, Punjab and Bihar, a simmering discontent over the economic situation is not among the causes mentioned. However, the fact is that jobless growth has persisted into the NDA's period in office, and this has combined with a perception that the NDA has thus far not differed very much from the UPA in matters of economic policy.

The RBI Governor, who was the personal choice in 2012 of both Wall Street as well as (then) Prime Minister Manmohan Singh for his present job, has ignored the imperative of growth and concentrated only on inflation-targeting. In this, he has rigged the game by ensuring that the Wholesale Price Index (WPI) gets replaced by the Consumer Price Index (CPI), which is always higher. Rajan's determination to keep interest rates high was clear by his first saying that a bountiful harvest would cause inflation and so rates needed to be high, and very soon changing that to claim that a bad harvest would boost prices, so interest rates needed to remain elevated. Either way, the Indian consumer and businessperson lose. Buying a car or a house becomes unaffordable for millions, thereby constricting demand. And domestic companies, who pay double digit interest rates for their capital requirements, are made to compete against foreign companies who get loans at derisory rates of bank interest. Acchhe din, all right, but only for FIIs and those making FDI, not for Indians. The manner in which hot money is being chased since the time when Palaniappan Chidambaram was Finance Minister of India, has resulted in those with foreign passports taking loans from banks in the United States or in Europe and investing that money in Indian banks, thereby gaining several points in interest. Rather than go through such a high-cost route, it would have been better for the state to have itself borrowed such funds from banks abroad!

Raghuram Rajan, who seems to be looking at the Managing Directorship of the IMF as his next job, claims that inflation hurts the poor. Indeed it does, but not as harshly as unemployment.

Raghuram Rajan’s tandava spells death for economy

http://www.sunday-guardian.com/analysis ... or-economy

When Subbarao was RBI Governor, and followed Yaga Reddy's policy of seeking to emulate Jawaharlal Nehru in destroying domestic industry in India, then Finance Minister Pranab Mukherjee sought to knock some sense into the Central banker. However, because of backing from Prime Minister Manmohan Singh, who has been as dismissive of the travails of domestic industry as he is solicitous of foreign commercial interests, Subbarao refused Pranab Babu's request. Raghuram Rajan too has the backing of the individual who chose him for his current job, Manmohan Singh, which is why he is on his present destructive course. For any rational mind, growth and employment are as important as inflation targeting, which is why it is inexplicable why three successive RBI Governors have focused only on inflation, that too by adopting measures that have near-zero effect on curbing prices.

{deleted}

[Gyan]

How the issue of high interest rates not pertinent to India economy? I have posted extracts of articles of well respected author to support my point of view, without adding any comments at all. Also to be noted that I made only one aforesaid post in 4 days, that is hardly thread derailment.

[Singha]

on another note, myntra might phase out its webpage by year end and go with just a mobile app.
they are noticing a big skew in favour of mobile shopping in their case.

since they sell mostly clothes, I guess groups of girls access it together and shop.

flipkart is splitting its learship into 3. the senior bansal will look at new projects, junior will look after day to day coo role, the myntra founder (another bansal!) will look after supply chain and try to diversity off WS retail which they were forced to sell off for forex rule reasons and some of their close associates run the show in WS retail...

[Yagnasri]

There are ways to curtail inflation other than interest rate cuts. Take for example cash transactions. While there is no direct relation to inflation, cash transactions if not restricted lead to huge black economy, which is responsible for price increase in may sectors like property prices etc. Serious steps to stop cash transactions are not being undertaken till now. Use of electronic transfers, debt cards, mobile banking will ensure low cost deposits increase exponentially in banks etc there by reduce the cost of funds and result in reduction of interest rates. However RBI is going at snail pace in this aspect.

Huge amount of black money kept in 1000 and 500 rupee notes. The actual circulation of these notes is limited. Just withdraw these notes immediately with a day or two notice and ask anyone who want to change the note to come and deposit the amount in his/her account and keep the records of such accounts. With this I am sure most of the currency will vanish from the market and serious loss will be caused to black money hoarders.

Introducing a second currency ( very very radical suggestion which I am sure no one will agree with me) fully back by gold and only in digital form is also going bring in lot of money into the system and help in investement of the same in infra and other projects. It will also curtain the role of the central bankers whose unelected, unaccountable actions make or brake the nation.

[Singha]

500 rupee notes are in heavy circulation. its the stock note for ATM handouts except the last 500 which comes as 5x100.

banks like hdfc and citibank also have the nasty habit to save their transport cost and give 1000 notes from ATMs though that is a bit curbed now.

[Yagnasri]

Why we need ATM that mush if every one is forced to used debit card. Charge Rs.50 per thousand cash withdrawal. Make debit cards usage and mobile banking wide spread - say in 3 to 6 months. Then lower the boom on 1000/500 notes. As per my information, they alone constitute 80% of the currency in circulation ( that is printed). I am sure most of the black money hoard is in these two denominations only. So with one stroke - most of the cash saved as black money is gone. End of story.

[Gyan]

I will say that hardly 1% of black money may be in Cash, rest is round tripped back into Banking/Financial world.

[VinodTK]

GDP expected to grow 7.4% in 2014-15 based on new formula

The government on Monday forecast annual economic growth to accelerate to 7.4% in the fiscal year ending in March 2015 after the economy grew 7.5% in the quarter to end-December.

The latest estimate compares with a revised 6.9% growth a year earlier and is based on the new formula the statistics department has started using to measure the economy.

Government now measures GDP by market prices instead of factor costs, to take into account gross value addition in goods and services as well as indirect taxes. Besides, the base year has been shifted to 2011/12 from 2004/05 earlier.

It also sharply revised up growth for the first half of fiscal 2014/15 to about 7.4% from 5.5% reported earlier under the old method.

[member_28911]

Surat could soon be just 20 minutes away

The plan is part of regional air connectivity which their airline started recently between small cities in Gujarat with non-scheduled flights operating between Surat, Bhavnagar and Rajkot, which its operators claim is getting passenger occupancy of around 82 per cent. The airline management is now in the process of seeking approval from Directorate General of Civil Aviation (DGCA) and Airport Authority of India (AAI) to connect Mumbai with the diamond hub of Surat. A meeting in this regard was held here on Tuesday.

Non-scheduled flights between Mumbai and Surat ...a much more realizable (also far cheaper) plan compared to bullet train?

[Suraj]

How the issue of high interest rates not pertinent to India economy? I have posted extracts of articles of well respected author to support my point of view, without adding any comments at all. Also to be noted that I made only one aforesaid post in 4 days, that is hardly thread derailment.

You weren't warned for posting about interest rates. You were warned for your personal attacks on the RBI head. Those parts of your post were deleted as well. You were cautioned for it previously and you ignored it. Your next post about it will earn a ban, because you're not posting about economics anymore, just about your hatred for one man.

[Vamsee]

Q3 GDP growth at 7.5%; FY15 growth seen at 7.4%

1) *If* we grow by 7.4% for FY'15 it means we will beat China in terms of GDP growth rate. I always knew that we would do it during Modi's current term, but I did not expect it to start from the very first year.
2) A lot of skepticism was raised about the new GDP calculations. It was asked why BSE/NSE companies were not showing profits when GDP is showing above 7% growth. The reply given by ISI guy(forgot name - Pranab Sen?) is that it is because of higher "value addition". We are extracting more returns per every rupee invested. He is confident that it will show up in Taxes paid by corporates during the last quarter of this year.

AccheDin are here

--Vamsee

[Suraj]

So the Advance Estimate on GDP for this year is out: 7.4% growth using 2011-12 base year
India's FY15 GDP estimated to soar 7.4% under new methodology

The government on Monday estimated India’s economic growth this financial year at 7.4%, against 6.9% in 2013-14, as the country changed its definition of gross domestic product (GDP), as well as the base year for calculating it.

The estimated growth for 2014-15 is the same as China’s growth for 2014. Earlier, both the International Monetary Fund and the World Bank had said India’s growth would exceed China’s by 2016-17.

According to data released earlier, GDP growth stood at 5.7% in the first quarter of 2014-15 and 5.3% in the second. However, according to the new data, the first quarter recorded 6.5% growth, the second 8.2% and the third 7.5% (agriculture output contracted during the third quarter). Had the government not increased its spending, growth in the third quarter would have been lower, but that would pressure fiscal deficit. Besides, gross fixed capital formation, a proxy for investment, and private final consumption expenditure, which reflects demand in the economy, witnessed a slow down in growth as interest rates remained high.

Following the change, the second quarter of 2014-15 recorded higher growth compared to the first, contrary to results thrown up by the previous methodology.

Growth for the first 3 quarters of the current fiscal year (Apr-Jun 14, Jul-Sep 14, Oct-Dec 14) have all been raised, to 6.5%, 8.2% and 7.5% respectively. The overall growth has been estimated at 7.4% for the full year.

[Vamsee]

Per capita income this year seen up 10% at Rs 7,378 a month

The per capita net national income during 2014-15 is estimated to be Rs 88,538, showing a rise of 10.1 per cent as compared to Rs 80,388 during 2013-14 with the growth rate of 12.3 per cent

[Suraj]

Overall growth rates on an annual basis have also been revised:

Code: Select all

FiscalYear BaseYear GDPgrowth
2005-06   2004-05   9.3
2006-07   2004-05   9.3
2007-08   2004-05   9.8
2008-09   2004-05   3.7
2009-10   2004-05   8.5
2010-11   2004-05   10.3
2011-12   2004-05   6.6
2012-13   2011-12   5.1
2013-14   2011-12   6.9
2014-15   2011-12   7.4

We grew at double digits in 2010-11, and came close to that for 4 years between 2004 and 2008 .

Regarding the questions about the GDP numbers, here's my take on it: they seem to have improved their data collection policies to capture the rate of growth of the overall economy. However, they haven't really formalized what the actual size of the economy is, fully. For this year, the current GDP estimate should put our GDP at approximately $2.25 trillion based on current calculations.

[Austin]

How many countries in BRICS use the new methodology for growth rates ?

[Suraj]

All of them, except us, until now.

Mumbai math beats Shanghai statistics:
Methodology change sees Indian economy grow faster than China's

Taken at face value, India on Monday became the fastest growing major economy in the world after its statisticians changed the way they measure Asia's third-largest economy and showed it clocked faster growth than China in the December quarter.

It marks a dramatic turnaround for an economy that a fortnight ago was assumed to be struggling to gain momentum under Prime Minister Narendra Modi's reform-minded government. Prior to Modi's election last May, the economy had endured its weakest phase of growth since the 1980s.

The statistical recovery is in large measure due to changes both in the way authorities calculate gross domestic product (GDP) and the base year.

Under the new method, the economy expanded 7.5 percent year-on-year during the last quarter, higher than 7.3 percent growth recorded by China in the latest quarter.

New Delhi also revised up growth for the first half of fiscal 2014/15 to 7.4 percent from the 5.5 percent reported earlier and forecast the full-year GDP growth to accelerate to 7.4 percent from a revised 6.9 percent a year earlier.

The new estimate is sharply higher than the Reserve Bank of India's (RBI) growth projection of around 5.5 percent for the year under the old method.

The reading has left economists confounded as it is at odds with other indicators such as industrial production, trade and tax collection figures, which suggest the economy is still suffering from slack.

"The government has itself been saying that tax collections are slow due to a slowdown in the economy, but the other wing of the government is saying that GDP growth has been good," said A. Prasanna, economist at ICICI Securities Primary Dealership Ltd.

"That means either one part of the economy is not taxed or there is an issue with the data."

India now measures GDP by market prices instead of factor costs, to take into account gross value addition in goods and services as well as indirect taxes. The base year has been shifted to 2011/12 from 2004/05 earlier.

The government's statistics department says the new method is more in line with global practices and gives a better picture of economic activity.

But the statistical fog makes it harder for policymakers to assess the size of the fiscal and monetary aid required to help spur even faster growth needed to generate jobs for millions of young Indians entering the labour force.

POLICY CONUNDRUM

Monday's data is key for Finance Minister Arun Jaitley as he drafts the annual budget.

Presenting the 2015/16 blueprint on Feb. 28, Jaitley is widely expected to boost capital spending and offer tax breaks to an under-performing manufacturing sector.

But with GDP data showing the economy suddenly motoring again, the fiscal stimulus could stoke inflation.

RBI Governor Raghuram Rajan, who switched the monetary policy to a new easing cycle in January with the first interest rate cut in 20 months, faces a similar dilemma; whether to lower interest rates again.

"After this number, the RBI will need to understand the dynamics of the high GDP numbers," said Saugata Bhattacharya, chief economist at Axis Bank.

"This pushes back the timeline for rate cuts. Any hope of an off-cycle rate cut in March, even if the budget is consistent with low inflation-driven fiscal policy, does not exist now."

[Suraj]

Someone asked why the capital inflows are not causing Rupee to appreciate or forex reserves to rise. That's not true. Reserves are rising:
RBI Forex data
Jan 30 2015: $328 billion
Jan 23 2015: $322 billion
On a week to week basis either we see a 1% increase in currency, or billions adding to forex reserves.

[Vamsee]

Inflation puzzle in new GDP data

The new method of calculating gross domestic product (GDP) has thrown up confusing growth trends: the sharp increase in growth rates does not fit well with other data such as the expansion in industrial output, imports, bank credit and corporate profits. One possible explanation for the sharp increase in value added by industry despite stagnant volumes, as calculated by the index of industrial production, is based on good news: companies are creating more value with the same output. In other words, there has been a wave of productivity growth that everyone seems to have missed

[Vamsee]

Citi is now predicting 8.1% GDP growth in FY'16

Link

[Supratik]

It looks good but seems that the higher growth is due to productivity gains. Modi's re-election will depend more on a huge surge in employment rather than this kind of gdp growth.

[Singha]

The recent surge in oil prices is just a "head-fake," and oil as cheap as $20 a barrel may soon be on the way, Citigroup said in a report on Monday as it lowered its forecast for crude.

Despite global declines in spending that have driven up oil prices in recent weeks, oil production in the U.S. is still rising, wrote Edward Morse, Citigroup's global head of commodity research. Brazil and Russia are pumping oil at record levels, and Saudi Arabia, Iraq and Iran have been fighting to maintain their market share by cutting prices to Asia. The market is oversupplied, and storage tanks are topping out.

A pullback in production isn't likely until the third quarter, Morse said. In the meantime, West Texas Intermediate Crude, which currently trades at around $52 a barrel, could fall to the $20 range "for a while," according to the report. The U.S. shale-oil revolution has broken OPEC's ability to manipulate prices and maximize profits for oil-producing countries.

"It looks exceedingly unlikely for OPEC to return to its old way of doing business," Morse wrote. "While many analysts have seen in past market crises 'the end of OPEC,' this time around might well be different," Morse said.

[Hari Seldon]

Someone asked why the capital inflows are not causing Rupee to appreciate or forex reserves to rise. That's not true. Reserves are rising:
RBI Forex data
Jan 30 2015: $328 billion
Jan 23 2015: $322 billion
On a week to week basis either we see a 1% increase in currency, or billions adding to forex reserves.

A managed rupee rise, say 10-20 paise per week over the next few months shouldn't hurt.

[Austin]

New GDP calculation puts India growing faster than China