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Indian Economy News & Discussion - Aug 26 2015

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vish_mulay
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby vish_mulay » 19 Sep 2017 04:41

I had not so warm experience with Mudra in rural MH. I did Mudra paperwork for someone for the farm tool repair shop expansion (wanted to buy new welding machine and few other tools). Helped him with preparing a very basic business and revenue model and all the paperwork required as per the Mudra website. The SBI did not grant him 75 K loan under Mudra citing ridiculously long list of things they need to approve the loan. Overall impression was that they were actively discouraging people to take Mudra. Finally I gave him collateral for a regular bank loan and hope he will not let me down. My understanding was that Mudra was micro-finance model like the Gramin bank in BD, however it is not. Also I am not so sure about the employment numbers are right. Many Mudra loans are for existing ventures who are not looking to hire new man power.

vina
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby vina » 19 Sep 2017 05:53

AND NOW you know why taxes on fuels have been increased surreptitiously , under guise of "IRMA" or what have you.

The Govt's revenues are under pressure.India Eyes Spending Cuts as glitches in GST Hit Revenue


Aiming to boost growth, Finance Minister Arun Jaitley increased budgetary allocations for the railways by one-fifth to 550 billion rupees and by 24 percent for highways development to 649 billion rupees this fiscal year from a year ago.

Complicating the finance ministry’s budget arithmetic further, the Reserve Bank of India announced last month that its annual surplus, a dividend transferred by the central bank to the government each year, would be only $4.9 billion, less than half the initial estimate, largely due to costs of Modi’s shock “demonetisation” initiative last year.

“This is an abnormal year. A shortfall in tax and non-tax revenue could give a shock,” said N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a Delhi-based think-tank funded by the finance ministry.


Well boyz, DeMo by MoDi and the GST seem to have delivered a one two sucker punch on the economy. The Govt finances are under strain as is the fiscal deficit target of 3.2% . If they need to cut govt spending, the already lower trending GDP growth numbers will go EVEN lower.

The GST effect will wait until the October to December quarter until this normalises.GST is necessary (and indeed if not for MoDi as Gujarat CM, should have happened some 10 years ago). DeMo was basically shooting yourself in the foot big time.

Basic point is this. The MoDi govt has underperformed hugely economically . While it has done well in power , railways and roads and a host of infra areas, it has done below average in getting growth going, restructuring the economy and structural reforms on the industrial side (other than GST) , and gone for "headline management" rather than anything of actual consequence. Private investment is therefore DEAD, growth is down, the commodity bonanza is SPENT and now thanks to shooting yourself in the foot (thanks to the Cow + Marx types), you are backed to a stressed financial situation again and are resorting to increase in indirect taxation.

MoDi and the rest of us BETTER start praying that oil prices tend lower from here. It aint going to look good if there is a oil price spike globally for any reason.

The shock buffers in the system are gone. We are back to the beginning of UPA-II folks.

Yagnasri
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Yagnasri » 19 Sep 2017 06:03

I fear I may have to agree with this. From what I have been seeing, there is hardly any new product line coming up and hardly any expansion of the production capacity in existing units. Many of the units are under insolvency as they are all scam units funded by incompetent bankers. Banking is not growing now which means there are no borrowings.

We need some serious efforts to kickstart the economy. Unfortunately, we are not seeing.

Gus
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Gus » 19 Sep 2017 06:24

vish_mulay wrote:I had not so warm experience with Mudra in rural MH. I did Mudra paperwork for someone for the farm tool repair shop expansion (wanted to buy new welding machine and few other tools). Helped him with preparing a very basic business and revenue model and all the paperwork required as per the Mudra website. The SBI did not grant him 75 K loan under Mudra citing ridiculously long list of things they need to approve the loan. Overall impression was that they were actively discouraging people to take Mudra. Finally I gave him collateral for a regular bank loan and hope he will not let me down. My understanding was that Mudra was micro-finance model like the Gramin bank in BD, however it is not. Also I am not so sure about the employment numbers are right. Many Mudra loans are for existing ventures who are not looking to hire new man power.


Yes - although the rules say different, the banks still control to whom loans are given and its all YMMV stuff and in discretion of the dispensing authority.

despite that, a lot of funds HAVE been disbursed...

shaun
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby shaun » 19 Sep 2017 06:25

^^^ well against GST , every one in the opposition opposed , it's not modi in particular and comparing with UPA 2 :shock: it was an era of scandals and policy black outs. I will love to hear you lecture on the new bankruptcy law (code) though.

kittigadu
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby kittigadu » 19 Sep 2017 08:46

vina wrote:AND NOW you know why taxes on fuels have been increased surreptitiously , under guise of "IRMA" or what have you.

The Govt's revenues are under pressure.India Eyes Spending Cuts as glitches in GST Hit Revenue


Aiming to boost growth, Finance Minister Arun Jaitley increased budgetary allocations for the railways by one-fifth to 550 billion rupees and by 24 percent for highways development to 649 billion rupees this fiscal year from a year ago.

Complicating the finance ministry’s budget arithmetic further, the Reserve Bank of India announced last month that its annual surplus, a dividend transferred by the central bank to the government each year, would be only $4.9 billion, less than half the initial estimate, largely due to costs of Modi’s shock “demonetisation” initiative last year.

“This is an abnormal year. A shortfall in tax and non-tax revenue could give a shock,” said N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a Delhi-based think-tank funded by the finance ministry.


Well boyz, DeMo by MoDi and the GST seem to have delivered a one two sucker punch on the economy. The Govt finances are under strain as is the fiscal deficit target of 3.2% . If they need to cut govt spending, the already lower trending GDP growth numbers will go EVEN lower.

The GST effect will wait until the October to December quarter until this normalises.GST is necessary (and indeed if not for MoDi as Gujarat CM, should have happened some 10 years ago). DeMo was basically shooting yourself in the foot big time.

Basic point is this. The MoDi govt has underperformed hugely economically . While it has done well in power , railways and roads and a host of infra areas, it has done below average in getting growth going, restructuring the economy and structural reforms on the industrial side (other than GST) , and gone for "headline management" rather than anything of actual consequence. Private investment is therefore DEAD, growth is down, the commodity bonanza is SPENT and now thanks to shooting yourself in the foot (thanks to the Cow + Marx types), you are backed to a stressed financial situation again and are resorting to increase in indirect taxation.

MoDi and the rest of us BETTER start praying that oil prices tend lower from here. It aint going to look good if there is a oil price spike globally for any reason.

The shock buffers in the system are gone. We are back to the beginning of UPA-II folks.


This is cherry picking to suit your theories. The report is based on "sources", and the shortfall in revenue is supposedly due to a glitch in the GST. These are teething troubles, and they will be fixed. GST has nothing to do with "cow+Marx".

Everybody knows that the current downturn is due to crony capitalism, rampant political interference in bank lending, and corruption, during the Economic regime led by Servant Singh and rootless Rajan. Every two bit politician took massive loans and pilfered them as personal assets, properties and for leading a lifestyle of kings and queens.

I will give you an example. The head of LANCÔ infratch, which Is in the list of top ten loan defaulters is a former MP from Andhra. A rascal of the first order, he has pilfered all the moneys as personal assets. Do you know that he has outsourced the daily running of his household to a five star hotel ! Have you heard of anything like that anywhere. All this while Lanco stock has gone down 20x, and has billions of dollars in loan default ?

Do you really want such bandicoots to thrive again ?

What steps did Rajan take to reduce NPAs in the 2013 timeframe, or was he part of the gravy train ?

shaun
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby shaun » 19 Sep 2017 09:30

What Rajan really did is by forcing banks to declare their NPA whose cascading affect is the several measures GOI had to take to curb it . Correct me if I am wrong. A person critical to GoI doesn't make him untouchable. The most he could have avoided is making political statement. Now that he is no more a Govt servent he is into freelancing but his intentions will be questioned if found canvassing for corrupt wisdoms that prevailed before.

hanumadu
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby hanumadu » 19 Sep 2017 10:30

vina wrote:Private investment is therefore DEAD, growth is down, the commodity bonanza is SPENT and now thanks to shooting yourself in the foot (thanks to the Cow + Marx types), you are backed to a stressed financial situation again and are resorting to increase in indirect taxation.


Tell me of any new taxes that were added after Demo or GST, supposedly after which govt finances took a hit. BTW, GST collections for july exceeded estimates.

Philip
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Philip » 19 Sep 2017 12:47

Drinking water ,water for farming has become a raging issue in many dev. nations including India,where MNCs like Coke,etc., have been ruining ground water sources for their bottling plants,rendering swathes of farmland,etc. redundant.Here is another example from Mexico of Coke's nefarious activities.India too should close down such plants which have been found to be depleting or polluting ground water vital for our rural folk's very survival.


http://www.independent.co.uk/news/world ... 53026.html
Coca-Cola sucking wells dry in indigenous Mexican town - forcing residents to buy bottled water
Bottling plant 'consumes more than a million litres of water a day'

jamwal
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby jamwal » 19 Sep 2017 18:59

Image

Suraj
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Suraj » 19 Sep 2017 23:18

Economic slowdown is real, not just technical: SBI Research
Noting that the economy has been on a downslide since September 2016, SBI Research today said the slowdown is real and not technical and called for more public spending to arrest the slide.

“We certainly believe that we are in a slowdown mode since September 2016 and a slowdown that has been prolonged to Q1 of this fiscal year is technically not short-term in nature or even transient,” SBI Research said in a report.

The report advocated upping of spends by the government as a solution to the problem at hand. “Need of the hour is to spend to grow more,” it said.

“We believe the government should consciously expand spending and fiscal deficit, without disturbing the borrowing maths,” the report said.

It can be noted that in the past, such moves by the government were termed as “fiscal profligacy” by rating agencies, which had also threatened to downgrade the country’s rating to junk if the Centre continued with such policies.

The report admitted that after the 2008 global credit crisis, there was a surge in spending, but was unequivocal in not paying much heed to the rating agencies.

“Let’s not chase the rating upgrade mirage. India has had a solitary net rating upgrade in the last 25 years. The economy is in urgent need of a fiscal push now to shore up growth,” the report said.

The government can use a clause in the Fiscal Responsibility and Budget Management Act that provides for a 0.5 per cent slip in fiscal deficit targets, it said.

Elaborating on how to keep the net borrowings in check, like the way the government has done in the current fiscal at Rs 3.4 trillion, it recommended the government to do more buybacks and switches in G-secs.

NPA-laden PSBs crimp advance tax mop-up at 10.6%
A steep fall in advance tax payouts by bad loan-saddled state-run banks has led to a muted 10.6 per cent growth in overall revenue mop-up from large corporates in the megapolis in the September quarter.

The overall mop-up at Rs. 69,000 crore, up 10.64 per cent, is tepid even though other sectors like steel and even private sector lenders have done comparatively well, income tax department sources said today.

Unsatisfied with the collection, the department has asked its officials to keep a close vigil on the forthcoming quarterly results by large corporates.

Advance tax collections from the Mumbai zone, which is home to 45 of the top 100 corporates and is responsible for one-third of the total direct tax collections, grew only 10.64 per cent to Rs. 69,000 crore as of September 15. The zone had collected Rs. 62,370 crore in the year-ago period.

State-run banks have not done well this time. In contrast, private sector banks have been okay when it comes to advance tax payment, sources said, adding however, other sectors like steel have done comparatively well in the September quarter.

While the country’s largest lender State Bank paid a whopping 37 per cent less, foreign lender Citigroup also paid 34 per cent less.

In contrast, oil major HPCL and steel major Tata Steel saw their outgo jumping 70 per cent each, while mortgage major HDFC paid 10.47 per cent more.

Foodgrain output will top last year’s record kharif production
The total food crops output during the current kharif season will exceed last season’s record production, the government said here on Tuesday.

The cumulative output of foodgrains and oilseeds during kharif 2017 is projected to be 162.40 million tonnes (mt), against 160.92 mt in the previous season, the government told a national conference on agriculture where State officials were present.

“The production during the current kharif season is expected to be match last year’s record output,” Union Agriculture Secretary Shobhana K Pattanayak told mediapersons on the sidelines of the meeting which set off rabi campaign for the year. While the target for 2017 kharif rice is to be 94.50 mt, marginally less than the 96.39 mt estimated by the fourth advance estimates, the government expected a 13 per cent increase in oilseeds production, even though there was a substantial reduction in the area under oilseeds cultivation.

nash
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby nash » 20 Sep 2017 13:08

India’s economy: dark clouds and silver linings
India may see a small cyclical recovery in the months ahead. However, a sustainable recovery will depend on investment activity
http://www.livemint.com/Opinion/hYYFZAY ... nings.html

Very balanced article about the current state of Indian Economy.

A_Gupta
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby A_Gupta » 20 Sep 2017 17:18

Gross fixed capital formation in India:
https://tradingeconomics.com/india/gros ... -formation
Look at the forecast on this chart.
Not outstanding, but not dismal either in absolute terms.

But as a fraction of GDP, which is probably what counts, ouch!
https://tradingeconomics.com/india/gros ... -data.html

Also see this article:
https://www.cogitasia.com/indias-declin ... r-concern/
The release of the Central Statistical Office’s (CSO) quarterly report on the Indian economy sparked much concern over slower-than-expected growth in the fourth quarter of the 2016-17 financial year. But the report also contained sobering news on the decline of Gross Fixed Capital Formation (GFCF) as a percentage of India’s gross domestic product (GDP). A measure of the importance of fixed assets rather than consumption within a nation’s economic growth, a high GFCF means that a country is laying the foundation for future high rates of development. India’s GFCF of 25.5 percent of GDP in the last quarter is thus troubling; it is closer to the expected rate for a developed country than in a rapidly growing country like India. A closer look at investment patterns suggests that this stagnation is set to continue and that its primary impact will be on the growth (or lack thereof) of manufacturing jobs.

While demonetization may have dragged GFCF downward at the end of the last financial year, the downward trend is longstanding. The CSO’s report shows nearly eight straight quarters of decline, bringing the rate from 30.4 percent in the first quarter of 2015-16 to 27 percent in the third quarter of 2016-17. According to World Bank data, GFCF reached its peak at 35.6 percent of GDP in 2007 and has been dropping ever since. This is not just because India’s GDP overall is growing faster than investment; the Annual Survey of Industries for 2014-15 (the most recent available) found that GFCF in the industrial sector peaked in 2012-13 at $654 billion billion in 2017 dollars and had fallen to $536 billion by 2014-15.

These somewhat esoteric figures are reflected in worrying trends in the Indian economy. Using data on investment intentions from the Department of Industrial Policy and Promotion, we can track what low GFCF looks like on the ground. The decline in GFCF as a proportion of GDP tracks neatly with the number of Industrial Entrepreneur’s Memoranda (IEMs) submitted by businesses intending to make a substantial new investment.


... industrial investment registered with DIPP grew sharply between 2011 ($2.85 billion in today’s dollars) and 2012 ($16.5 billion). In the following years, India has more or less managed to maintain this new level of investment but not to surpass it; total investment in 2016 was $15.9 billion. When measured in real terms, 25 of the 37 specific industries tracked by DIPP experienced either a drop or no change in investment between 2012 and 2016—nine of them saw investment fall by at least $155 million. Only two industries—sugar and textiles—saw investment grow by more than $100 million.

kapilrdave
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby kapilrdave » 20 Sep 2017 20:24

Guys, ignore vina. He was outraging why still no GST before it was forced in. Now that GST is here, it is a bad move. Ditto with black money before DeMo. tenu kongi chashma jachda hai... jachda hai gore mukhde pe... 8) 8) :mrgreen:

vish_mulay wrote:I had not so warm experience with Mudra in rural MH. I did Mudra paperwork for someone for the farm tool repair shop expansion (wanted to buy new welding machine and few other tools). Helped him with preparing a very basic business and revenue model and all the paperwork required as per the Mudra website. The SBI did not grant him 75 K loan under Mudra citing ridiculously long list of things they need to approve the loan. Overall impression was that they were actively discouraging people to take Mudra. Finally I gave him collateral for a regular bank loan and hope he will not let me down. My understanding was that Mudra was micro-finance model like the Gramin bank in BD, however it is not. Also I am not so sure about the employment numbers are right. Many Mudra loans are for existing ventures who are not looking to hire new man power.

Unfortunately in India, nothing works without the help of unions/organizations. You should have taken the help of the organizations like Laghu Udyog Bharti . I had similar experience with consumer forum. Finally had to become a member of CSIR to get the things done.

Now the most horrible example of my life.... One of our employee had a liver failure. His family could not bear the cost of replacement. However, the company dutifully paid its due ESIC regularly throughout his tenure. So he was eligible for all the expenses from govt. We tried our very very best to get the money from govt. Put multiple people just to waste their chappals on ESCI office floor for months. They kept asking this and that, brought in silly technical issues and so on. Ultimately the guy had to die by the time we could arrange an alternative.

During our chappal wasting, we learned that labor class gets regular benefits from ESIC mostly ingenuinely. A daily wager who did not get a days work will file the illness and get the refund easily :eek: . How? Because they had the support of labor unions. The baboons of ESIC could say zilch against labor unions. Unfortunately, our employee was no labor and have no related union.

Now the worst part. We checked with govt if it is ok if we provide mediclaim of same or higher premium as ESIC's without complying for the ESIC. The answer was plain no :evil: . So essentially, govt is telling us that you have to die if you don't belong to a union or rot in the stinky govt hospital if you are part of a union. There is no third option. Meanwhile, govt will keep extorting the company.

Supratik
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Supratik » 20 Sep 2017 22:23

Jaggi's take on slowdown - price of lower corruption.

https://swarajyamag.com/economy/slowdow ... imate-cash

A_Gupta
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby A_Gupta » 21 Sep 2017 01:21

Supratik wrote:Jaggi's take on slowdown - price of lower corruption.

https://swarajyamag.com/economy/slowdow ... imate-cash


In what sense was the growth generated by corruption real growth?

Two big examples quoted by the Kotak report (2010-11) related to exports of metals and metal products. This figure more than doubled from $13 billion to $ 29 billion – a rise of $16 billion. But actual results for 22 large companies in the BSE 500 showed a growth of less than $1 billion.

Then there was the example of “copper articles”, where exports zoomed four times. And this is a metal India is not known to export too much of.

We need not speculate how much of the money came in through over-invoiced exports, but rest assured, this used to happen.


Not only are corporations deleveraging, they are also forced to generate profits from existing legitimate investments, and can’t bring in illegal funds from other sources.


India Inc is still to adjust to this new normal, especially since they can’t anymore count on friendly bankers and political influence to gold-plate projects and generate their own equity contributions from this capital cushion.

Suraj
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Suraj » 21 Sep 2017 01:56

In my opinion, this slowdown is the painful side effect of forcing capital to follow only white money channels. During previous slowdowns, businesses responded by bringing back their idle black money abroad though overinvoicing of exports. There's a detailed analysis of this from the 2010-11 timeframe:

This is by Jaggi in 2014, referring to events from 2010-11:
Scam 2.0: How $40 bn of exports and FII flows may be fiction
How substantial? The official export data shows 79 percent year-on-year export growth in 2010-11. Exports by engineering companies in the BSE 500 (the cream of India Inc) show just 11 percent growth. If you want to know the difference in dollars, the engineering export jump accounts for $30 bn (up from $38 billion to $68 bn). The figures for the BSE 500 show a jump of just Rs 61 billion (rupees, not dollars). Converted at the rate of $ 1= Rs 44, this is just $1.38 bn.

"Some reports have alleged that some individuals may have been compelled to bring back funds through the official route by simply overinvoicing exports or even resorting to fraudulent exports thanks to (1) increased international scrutiny of unaccounted funds in bank accounts in Switzerland and other financial centres, and (2) heightened debate in India about action against unaccounted overseas wealth."

The Kotak report offers two "egregious" examples as exhibits A and B in its effort to show that something's clearly wrong. In 2010-11, exports of metals and metal products soared from $13 bn to $ 29 bn. But figures for 22 such companies in the BSE 500 show a growth of just Rs 37 bn (yes, rupees again, not dollars). This growth is less than $1 bn. So how did overall exports of metal and metal products rise $16 bn?

Egregious example B relates to "copper articles" whose exports grew by a whopping four times or more from Rs 8,500 crore to Rs 36,700 crore. How did this miracle happen in a metal India is not known to export normally? China apparently bought a whole lot of it.

The second route used by the black moneymongers is possibly the foreign institutional investment (FII) route. The Three Kotak Musketeers have smelt a rat here, too.

According to them, 2010-11 foreign investor flows added up to $22 billion, according to official figures. But a cross-check with international sources like exchange-traded funds and EPFR Global (which tracks $ 15 trillion in global investment flows) shows that not more than $4.5 billion came to India. Though it is obvious that EPFR data is not 100 percent foolproof, since its sometimes excludes sovereign and private equity funds, the gap of $17.5 billion is simple too huge to be explained by normal data omissions.

As things stand, the crackdown on illicit cash has resulted in these avenues becoming dormant. There's quite a bit of capital that are a liability to disclose. Demonetization only addressed the case component. The base of wealth locked up in other sources - real estate, goods, gold, and other mediums that are now hard to trade without disclosing this wealth, translates to 'slowdown' .

This is the flip side of the argument that 'demonetization only took on cash - all the bigwigs own property, gold etc' . This is true. On the other hand, all this has become difficult to transact easily. When movement of capital slows down, so does economic activity.

What are potential solutions ? Aggressively pursuing the Benami Property Act to unlock dormant properties into the market is one option.

Prem
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Prem » 21 Sep 2017 09:32

Suraj wrote:In my opinion, this slowdown is the painful side effect of forcing capital to follow only white money channels. During previous slowdowns, businesses responded by bringing back their idle black money abroad though overinvoicing of exports. There's a detailed analysis of this from the 2010-11 timeframe:
What are potential solutions ? Aggressively pursuing the Benami Property Act to unlock dormant properties into the market is one option.


No Buyer out there so no activity is happening or will happen. Lack of liquidity will keep Real estate depressed for next 5-6 years .

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Prasad » 21 Sep 2017 14:50

We don't have a quick solution to turn around the falling growth rates but can do things that will turn it around and let the economy bounce back and surge up -
http://www.livemint.com/Opinion/Z6VQ4iO ... later.html

Fiscal push is needed now, not later
The GDP decline cannot be explained only by temporary disruptive factors like demonetization or destocking prior to the roll-out of the goods and services tax
Ajit Ranade

vina
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Re: Indian Economy News & Discussion - Aug 26 2015

Postby vina » 21 Sep 2017 16:15

Hmm. Now people are coming around to ol' Vina's view that the economy is indeed in trouble and it is not going to get going on "auto mode" (oh, temporary blip due to DeMo, GST Network will be fixed and things will be hunky dory!).

Face it. It will probably need some pretty serious restructuring and clean up of balance sheets and stressed asset reconstruction from here to get investment going again. No one is going to invest, unless the current profitability is strong enough to invest further in future. Currently a) Profitability is down and 2) Capacity slack exists in industry .. The economy is indeed performing BELOW potential.

From a "macro" perspective, what India is GOING to need 1) Rupee Depreciation and 2) Higher inflation and 3) Close to zero (or better - negative) real interest rates.

Trouble with Rajan and the current dispensation is that they were very successful in "fire fighting " the macro economic meltdown of the Kangress /UPA II. Problem is , the "state" we are in should be the one AFTER the balance sheet problems are fixed.

There really is NOTHING like inflation and negative real interest rates for borrowers to get rid of debt obligations . In both cases , the following is happening. You are shafting lenders by 1) Paying back in Wampum (gosh, I haven't used that since my posts in 2008 days where I predicted the fall of the 2 large US mortgage "specialists" , Lehmann and Bear Stearns , right here in BRF) and 2) Effectively transferring wealth from savers to borrowers .. All while doing the "Lord's" work I suppose.

But not to worry. We are a country of Village Idiots. We will see nominal bank deposit rates back above 8% (our savers will be happy.. Aaah. We are getting 8% interest in our deposits, they will ignore the 8% + nominal inflation , they don't understand Dr Rajan's "Dosa Economics" and will sing - Modi Is Great, hosannas).

Well, this IS the "Kangress" solution of old. But in any case, calls that we are seeing now asking RBI to cut interest rates, and depreciate the rupee and also possibly ask for a 0.5% GDP relaxation in deficit as per FRBM act point firmly in this direction.

Don't worry. Rupee closer to 70 to USD, inflation (nominal) close to 8% , deficit closer to 3.75% of GDP seems around the corner. But the trouble is if you are a bond investor, you are going to take it in the Gonads (that anyway is the whole idea). A whole load of Furriners pumped in like what ($30B into the bond market?) enthused by the Govt's promise of fiscal rectitude ? Serves them right.. Ha..Ha..

Someone mentioned long ago, that India is like Hotel California (a roach motel). You can only enter but never leave again. How are they going to leave now huh , with the bonds taking a beating and becoming more like Wampum ? Hell, with Fed rates rising, and the RBI being instructed to cut (I wonder what the MPC committee will think of it, will they show the Gubmint the Birdie?) I guess the only way for the rupee is DOWN.

JMT and all the usual disclaimers of course.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Austin » 21 Sep 2017 16:24

vina ,Negitive Interest Rates will kill the savers infact you will have to pay money to banks to keep your money ......Wont happen in India and we are not EU

Alan Greenspan says historically for many centuries 4-5 % interest rate is good for savers and lenders

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby vina » 21 Sep 2017 16:41

Austin wrote:vina ,Negitive Interest Rates will kill the savers infact you will have to pay money to banks to keep your money ......Wont happen in India and we are not EU

You didn't read carefully enough. There is a very small four letter word I wrote in the part about interest rate. Google for it if you dont know what it is and means. Not something a lay person will know ordinarily.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Supratik » 21 Sep 2017 17:30

Massive building of infrastructure helped by fast clearances is one way to bring back growth till businessmen learn to do things in white.

@gupta
If you buy an apartment with BM, it will count in the real growth rate although the source of money is not legit. So suddenly forcing a country used to massive corruption to go white will have effect on GDP growth. Indians do legit businesses pretty well where rule of law is strong. So I expect after the initial hurdles growth will pick-up as they will figure out things to do legit as much as possible.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby TKiran » 21 Sep 2017 17:50

Supratik wrote:Massive building of infrastructure helped by fast clearances is one way to bring back growth till businessmen learn to do things in white.

@gupta
If you buy an apartment with BM, it will count in the real growth rate although the source of money is not legit. So suddenly forcing a country used to massive corruption to go white will have effect on GDP growth. Indians do legit businesses pretty well where rule of law is strong. So I expect after the initial hurdles growth will pick-up as they will figure out things to do legit as much as possible.

oh, temporary blip due to DeMo, GST Network will be fixed and things will be hunky dory!

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby srin » 21 Sep 2017 18:24

I'm skeptical about growth slowdown unless I see current quarter results. There was this huge blip called GST when manufacturing paused, inventories cleared (couple of my friends bought cars at a crazy discount) ...

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby vina » 21 Sep 2017 19:09

Okay. This interview with Jehangir Aziz of JP Morgan really lays out what the "problems" are (in fact you should watch the full interview on Bloomberg TV) Make In India - FOR India .

If folks recall here, this is EXACTLY what Rajan said when he was the RBI Governor as well, saying that growth can't be export led , given the overall trade slowdown, protectionism rising in global markets and excess capacity (and that we basically missed the Asian export led manufacturing growth window that was available until 2010 , thanks to our historical idiocy of the ISI/DSE/Planning Commission ding dongs and their export pessimism) . So I do think that Jehangir Aziz is right in saying that EVERY emerging economy is basically trying to tinker around with fiscal deficits, and exchange rates etc and hoping that "Global Trade" will rescue them and the EXCEPTION is China , which is rebalancing it's economy internally.

As for "I think this DeMo and GST are blips etc", the data is very clear. All emerging markets since 1st quarter 2016 have seen growth surprises on the back of pick up in Global Trade, EXCEPT India, which has seen growth taper off. Korea indeed has been spectacular (though it is a developed economy)

The infernernce is VERY clear. India's trade basket with the major global economies is NOT very competitive /and or seeing pick up in demand. We are NOT benefiting from the growth in trade, in fact, we have LOST share in global trade.

We have pressing areas. Health , Education , Infra and other public goods. We need internal demand in India, and we need refocus of the govt away from random stuff and toward this.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby disha » 21 Sep 2017 19:59

Lot of BS is spouted around. A single quarter result is taken as a flag waving exercise where GDP is considered down & in dumps and economy is doomed and lets bring back the BM and the underground economy calls are being made by the eCONomists!

And of course "gas is costly".

If the economy is down, there is no demand then why is "gas is costly"? Particularly *after* the decontrol? Interestingly it is blamed on "hurricanes in the US"., while India itself has a very large refining capacity. Gas is "costly" without "demand" and hence economy is in doldrums minus the rise in prices in input stocks *while* advocating that supply/demand are linked by prices is what an eCONomist will say.

There is real deflation in RE going on. The RE bubble is burst and of course people who have multiple flats are feeling the pinch. And for them of course the "economy is down".

As for the food inflation., it is well low and in control.

Of course overlooking the above and talking about exports while making "cliche statements" like below:

"We have pressing areas. Health , Education , Infra and other public goods. We need internal demand in India, and we need refocus of the govt away from random stuff and toward this."

will sound intellectual.

It will sound more intellectual when after the above cliche is made., one comes and says:

"India does not need infrastructure spending on bullet trains".

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby A_Gupta » 21 Sep 2017 20:03

vina wrote:All emerging markets since 1st quarter 2016 have seen growth surprises on the back of pick up in Global Trade, EXCEPT India, which has seen growth taper off. Korea indeed has been spectacular (though it is a developed economy)


IMF:
http://www.imf.org/external/pubs/ft/weo/2017/update/01/

Global output growth is estimated at about 3 percent (at an annualized rate) for the third quarter of 2016—broadly unchanged relative to the first two quarters of the year. This stable average growth rate, however, masks divergent developments in different country groups. There has been a stronger-than-expected pickup in growth in advanced economies, due mostly to a reduced drag from inventories and some recovery in manufacturing output. In contrast, it is matched by an unexpected slowdown in some emerging market economies, mostly reflecting idiosyncratic factors.


The picture for emerging market and developing economies (EMDEs) remains much more diverse. The growth rate in China was a bit stronger than expected, supported by continued policy stimulus. But activity was weaker than expected in some Latin American countries currently in recession, such as Argentina and Brazil, as well as in Turkey, which faced a sharp contraction in tourism revenues. Activity in Russia was slightly better than expected, in part reflecting firmer oil prices.
Last edited by A_Gupta on 21 Sep 2017 20:09, edited 1 time in total.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby disha » 21 Sep 2017 20:09

Suraj wrote:What are potential solutions ? Aggressively pursuing the Benami Property Act to unlock dormant properties into the market is one option.


That is one of the options.

Spending behind infrastructure for example high speed railways., better sanitation and better roads and bridges and "smarter" cities is a better option. Of course continuous growth in energy while bringing down total burden of energy (cost) per capita must be pursued aggressively.

In a nutshell, the cost of supplying goods and services cheaper while making energy cheaper and cleaner with clean and livable (water/air) spaces should be the first priority., followed by education and health infrastructure. The rest of it will take care of itself.

https://www.bloomberg.com/news/articles/2017-09-18/india-four-month-cement-slump-seen-ending-on-roads-houses-spend

Cement prices are expected to recover as the government’s ‘Housing for All’ plan gathers pace along with promised spending of 3.96 trillion rupees ($62 billion) on railways, airports and roads.

“Demand is expected to see a meaningful improvement due to the low base, good monsoon aiding a pick-up in rural activities and the government’s push in infrastructure and housing segments,” said Mumbai-based Binod Modi, a research analyst at Reliance Securities.


And this:

Cement prices have already started improving in some parts of the country and the gains should continue with the end of the annual monsoon season and the start of a string of festivals, said Madhusudan Shah, president of the Cement Stockists and Dealers Association of Bombay. Wholesale prices in the Mumbai region have increased by 25 rupees to 30 rupees a bag in September, he said.


People who have watched Chameli ki Shaadi will know the impact of cement on people's aspirations.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby A_Gupta » 21 Sep 2017 20:24

vina wrote:We are NOT benefiting from the growth in trade, in fact, we have LOST share in global trade.


1. Agreed India is not benefiting from growth in trade.
2. "We have lost share in global trade" ?????

Dang WTO, it actually provides tangible numbers.

WTO
2015: https://www.wto.org/english/res_e/books ... es16_e.pdf (PDF file)
2016: http://stat.wto.org/CountryProfile/WSDB ... Language=F

India's share in total world merchandise exports:
2015: 1.62%
2016: 1.65%

India's share in total world merchandise imports:
2015: 2.34%
2016: 2.21%

India's share in total world commercial services exports:
2015: 3.27%
2016: 3.35%

India's share in total world commercial services imports:
2015: 2.65%
2016: 2.83%

India's loss in share in global trade is a loss only in merchandise imports - which is a good thing, no?
I think at least one Indian can engage in a high-quality BS export business, won't have much competition.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby A_Gupta » 21 Sep 2017 20:43

This Jahangir Aziz of JP Morgan appears to be not very right.
http://www.moneycontrol.com/news/busine ... 93491.html
Interview with him:
Q: The million dollar question which even Sunil Garg referred to, when do you think growth is ticking up, gross domestic product (GDP) first and then earnings?

A: It is a much more complicated issue than we are making it out to be. Let us look at first the global background. We had emerging market countries from around 2012-2013 onwards relentlessly slowing down. At that point in time, India was recovering from the 2013 taper tantrum. We did reasonably well till about the end of 2015.

Q: But then they took off?

A: That is the point, the point is that then they took off and we have been going on the other direction. Now there are two parts to it, obviously there are domestic factors, but I think there is another bigger factor which is that India has not managed to get on to that boat where the tide is lifting all boats and India is being left out and the question is why is India being left out in this surge, essentially in exports.

With global trade recovering, I think that is a far bigger question than we are giving credence to and we are looking much more and saying okay fine there these domestic issues, the demonetisation, Goods and Services Tax (GST) which I don’t believe the GST was a cause, and we are sort of saying that, that is the reason and therefore the recovery is going to turn around.


Now look at the EMDE (Emerging Markets Developing Economies) curve here:
http://blogs.worldbank.org/developmentt ... -june-2017

Even with the EMDE pick-up and the Indian slow-down, India is growing faster than the EMDE average.

So let's look into Jahangir Aziz a bit more deeply.
Seems to have some political affiliation?
https://www.linkedin.com/in/jahangir-aziz-261a371a/

Advisor
Company Name: Ministry of Finance, Government of India
Dates: Employed Apr 2008 – Nov 2008 Employment Duration 8 mos


Now, there is no doubt that India's slowdown is matter of concern. We can hope it is temporary, but GOI needs to work as though it is longer-term, and take it very seriously.

But the data doesn't support the specific assertions made; and I assume Vina's assertions in the post above are based on Jahangir Aziz's Bloomberg TV stuff??? (I don't like wasting time on BSers, so one more is likely to go into my enemies file on BRF so I can happily ignore them.)

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Suraj » 21 Sep 2017 20:49

disha wrote:
Suraj wrote:What are potential solutions ? Aggressively pursuing the Benami Property Act to unlock dormant properties into the market is one option.


That is one of the options.

Spending behind infrastructure for example high speed railways., better sanitation and better roads and bridges and "smarter" cities is a better option. Of course continuous growth in energy while bringing down total burden of energy (cost) per capita must be pursued aggressively.

Those are technically not solutions but alternatives, since you're advocating public spending to make up for lack of private investment. Advocating public spending is exactly what the SBI Research paper also suggests. But to solve the problem of private investment involves somehow making that dormant wealth liquid, without giving those with unaccounted wealth a free pass...

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Uttam » 22 Sep 2017 01:26

So what is causing a slowdown in India. Here is my list of whats going on:

1) High real interest rate. The monthly CPI has averaged about 2.7% whereas the REPO rate has been above 6% during this period. What makes it worse is that the difference between commercial loans and inflation is even higher, probably 9-12%. A real interest rate of 9-12% will make many traditional businesses unviable, thus limiting investments

2) Strong Rupee: INR has appreciated against USD by about 5% over the last 1 year and it is up by about 8% from it's bottom. Now this is not independent of the (1) above but it making exports non-competitive. It is also making imported commodities cheaper and thus slowing down production in India

3) Demonetization a shock to the payment system : Without going into the merits of demonetization, one thing we can agree upon that demonetization was a shock to the payment system. There was a considerable period of about 3 month when people didn't have cash to make purchases. The shift to digital payment has been massive but not enough to overcome demonetization.

4) GST : Again not going into the merits or demerits of GST, it certainly shocked the business as usual. Of course, with time, people will adapt to this more efficient and transparent system but in the mean time it has reduced the demand.

5) NPA at banks : This is definitely a legacy issue. The businesses didn't go bankrupt overnight (i mean over last 2 years). Banks were just not reporting bad loans. Now that they have stated reporting bad loans, which is the right thing to do, their capital adequacy ratios have fallen, preventing them from making new loans.

6) Anti-corruption drive: Again, it is necessary but has short-term pain. People with black money are going to more hesitant in spending the black money for fear of getting caught.

There are probably a few more reasons, but the one above are probably the major ones. In due time there would be correction. For example, INR will fall, inflation may rise reducing the real interest rates, bank's balance sheets will be cleaner and they will be able to make loans, people will become more adapt with digital payment, the rough edges of GST will be smoothed out. How long it will take is just about anybody's guess. Hopefully, an economic stimulus at this point will be of great help!

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Suraj » 22 Sep 2017 07:44

Good post, Uttam.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby arvin » 22 Sep 2017 07:56

Thanks Uttam for the points based explanation. Much better than dosa type analogies.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Uttam » 22 Sep 2017 08:11

Thank you! Please help add more stats to it.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Prasad » 22 Sep 2017 08:13

On exporters finding things difficult under GST -
http://economictimes.indiatimes.com/new ... s?from=mdr

From what is reported, it appears that as usual our systems are not up to scratch from the get-go. Lots of dekha jayega, we'll figure it out when we go live type nonsense. Jetli's "please don't all of y'll file at the last minute" nonsense on top of it. Why would anyone have any confidence in govt function if they do such a shoddy job.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby Prasad » 22 Sep 2017 08:19

Looks like we might end up shifting fiscal deficit to 3.7% http://in.reuters.com/article/india-eco ... NKCN1BW1LH

India eyes extra $7.7 billion spending to halt economic slowdown: government sources


If govt doesn't do this to keep fiscal deficit under 3.2% or whatever, what else can it do to mitigate the slowdown in the short term? You can't expect bank balance sheets to cleanup in 1-2 years. Fixing GST and selling off assets might help, AI in particular. But are they big enough? Systemic cleanup, ease of business type things? A lot of gst-working capital related slow-down is going on right now, as mentioned in the article in the prev post. If that stops, we might see better export numbers. A deliberate weakening of the rupee perhaps? Gyanis?

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby nandakumar » 22 Sep 2017 09:43

Kapildave's point about the monopoly status of the ESI Corporation is a very important one. We need a model similar to that Govt sponsored provident fund. Under the PF scheme employers are entitled to set up their own private PF scheme as long as the benefits under the scheme are similar to that of the govt sponsored scheme. In other words interest on the corpus cannot be lower than what the govt scheme earns. Allowi g employers to Set up their own healthcare trust and purchase health insurance from third party providers is the logical way forward. Also converting ESI corporation into a company and a stake sale or even ppp model for specific hospital assets wouldn't hurt either. That said I am not sure ESI hospitals are geared to do liver transplants either.

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Re: Indian Economy News & Discussion - Aug 26 2015

Postby vish_mulay » 22 Sep 2017 10:43

http://economictimes.indiatimes.com/mar ... 788681.cms
I don't respond to quarterly numbers, India is growing faster than any other country: Jamie Dimon, JP Morgan Chase

Read more at:
http://economictimes.indiatimes.com/art ... aign=cppst


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