Indian Economy News & Discussion - Nov 27 2017

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 05 Jun 2019 18:38

https://www.business-standard.com/artic ... 222_1.html
Service sector growth sustained in May 2019: Nikkei India Services PMI
Nikkei India Services Business Activity Index declines to 50.2 in May from 51.0 in April
Indian services activity increased to a weaker extent in May, as disruptions arising from the elections in the earlier part of the month hampered growth of new work intakes. However, there were signs that the slowdown may prove temporary as companies stepped up hiring and became more confident about future prospects. Firms were also helped by a lack of inflationary pressures in the sector.

The seasonally adjusted Nikkei India Services Business Activity Index fell to 50.2 in May, from 51.0 in April. The latest figure highlighted the slowest growth rate in the current 12-month stretch of expansion. Some firms suggested that output rose in tandem with ongoing sales growth, while competitive pressures and the elections reportedly curbed the upturn.

A resilient manufacturing industry acted to offset service sector weakness, as faster production growth meant that the upturn in private sector output steadied.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 05 Jun 2019 20:33

I recall a similar slight moderation in May 2014 . The elections get in the way of business as usual . PMI data is better as 3 month rolling averages, as far as plotting trends go .

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 05 Jun 2019 21:42

Brent crude prices have fallen below $60 for the first time since start of 2019. A positive for the economy.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Uttam » 05 Jun 2019 22:39

Suraj wrote:Brent crude prices have fallen below $60 for the first time since start of 2019. A positive for the economy.


Yes, that is positive. However, it also indicates a general slowdown in the world economy, which is not a great news for India. Exports (goods+services)/GDP for India was about 19% in 2017.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 05 Jun 2019 22:48

Uttam wrote:
Suraj wrote:Brent crude prices have fallen below $60 for the first time since start of 2019. A positive for the economy.


Yes, that is positive. However, it also indicates a general slowdown in the world economy, which is not a great news for India. Exports (goods+services)/GDP for India was about 19% in 2017.

Net net it will help us in managing our deficit, while we migrate to renewables and nooklear more..we are a net importer, though we do export through our refineries, but it would be a good time to boost/fill our oil buffers and not play in hand of opposition.
#naseebwala

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 05 Jun 2019 23:56

PM Modi sets up two cabinet committees to address growth, employment concerns
Prime Narendra Modi on Wednesday constituted two cabinet committees to address the growth needs of the economy amid reports indicating an economic slowdown. The five-member cabinet committee on growth and investment led by the Prime Minister will have home minister Amit Shah, finance minister Nirmala Sitharaman, railway minister Piyush Goyal and transport and highways minister Nitin Gadkari as members.

Modi will head another committee on skill development and employment. The members of the 10-member committee are Amit Shah, Nirmala Sitharaman, Piyush Goyal, human resource development minister Ramesh Pokhriyal ‘Nishank’, petroleum and natural gas minister Dharmendra Pradhan, minister for agriculture and rural development Narendra Singh Tomar, skill and entrepreneurship minister Mahendra Nath Pandey and ministers of state Santosh Kumar Gangwar (Labour) and Hardeep Singh Puri (Housing and Urban Affairs).

Sagging economic growth is a major concern for the Narendra Modi government. The GDP growth for the January-March quarter was 5.8 percent, the lowest in the five years of the NDA government. The GDP growth for 2018-19 was 6.8 percent, against the target of 7.2 percent set by the government.

FDI boom: Foreign investment in Indian services sector surges 37% in FY19
Foreign direct investment in services sector grew 36.5 per cent to USD 9.15 billion in 2018-19, according to the Department for Promotion of Industry and Internal Trade (DPIIT). The sector attracted FDI worth USD 6.7 billion in 2017-18. Services sector includes finance, banking, insurance, outsourcing, R&D, courier, tech testing and analysis. The government has taken several measures like fixing timeliness for approvals and streamlining procedures to improve ease of doing business in the country and attract foreign investments.

Increasing FDI inflows in services sector is vital as it contributes over 60 per cent to the gross domestic product. The sector accounts for about 18 per cent of the total FDI India received between April 2000 and March 2019. Other sectors that recorded healthy growth in FDI inflows include computer software and hardware, trading, automobile industry, and chemicals.

The overall FDI inflows declined for the first time in the last six years in 2018-19, falling 1 per cent to USD 44.37 billion as foreign investments fell significantly in telecommunication and pharmaceutical sectors, official data showed.

World Bank retains India’s growth rate for FY19-20 at 7.5 per cent
India’s economy is projected to grow at 7.5 per cent in the next three years, supported by robust investment and private consumption, the World Bank has forecast, in some good news to the new Indian government.

The bank in its Global Economic Prospects released Tuesday said that India is estimated to have grown 7.2 per cent in fiscal year 2018/19, which ended March 31. A slowdown in government consumption was offset by solid investment, which benefitted from public infrastructure spending.

As against a growth rate of 6.6 per cent in 2018, China’s growth rate in 2019 is projected to be dropped to 6.2 per cent and then subsequently to 6.1 per cent in 2020 and 6 per cent in 2021, the World Bank said.

With this, India will continue to retain the position of being the fastest growing emerging economy. And by 2021, its growth rate is projected to be 1.5 per cent more than China’s 6 per cent.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 06 Jun 2019 03:04

xposting from pol strat thread, focusing on general economy questions:

An article The Atlantic that is surprisingly balanced (by Western globalist media standards) regarding Modi. Ironically it is by a Bangladeshi-American Muslim, Reihan Salam.

The reason I'm posting here (in full) is that he seems to be championing certain policy proposals by a think-tank called IDFC, pushing what they call an agenda of "urbanization".

https://www.theatlantic.com/ideas/archi ... ia/590506/

Modi's New Challenge Is Embracing Urbanization

His expansion of welfare benefits has won him votes from rural citizens—but if he wants to build a “new India,” he must focus on cities.
May 30, 2019



When Narendra Modi led his Bharatiya Janata Party (BJP) to an outright parliamentary majority in 2014—a feat no party had been able to achieve in the previous 25 years of Indian politics—the hopes and expectations for his first term were straightforward, if lofty. Modi promised to build a “new India” that would curb corruption, spur economic growth, and advance the interests of the growing “neo–middle class” of erstwhile villagers striving to reinvent themselves as consumers.

Five years later, the BJP has secured a new electoral mandate even more impressive than the last, a testament to Modi’s unmatched political prowess. Yet it has done so despite an economic record that can be described only as underwhelming. If Modi hopes to do more than simply stay in power, if he still aspires to bring his new India to life, he’d do well to heed the advice of a small clique of economists who’ve been calling on his government to more fully embrace urbanization.

Why is it that Modi’s premiership failed to deliver robust growth? During his tenure as chief minister of Gujarat, one of India’s more prosperous and industrialized states, Modi envisioned India as a manufacturing powerhouse in the making. But that was not to be. To his credit, on his ascension to national office, Modi was clear-eyed enough to recognize that his preferred development strategy—cultivating a labor-intensive manufacturing sector that could sell its wares overseas, as China had done with such great success—was ill-suited to emerging global economic trends.

Modi and his advisers quickly came to understand that a combination of depressed demand in the mature market democracies and robust competition from other low-wage countries had essentially foreclosed the export-driven model of development, as Amy Kazmin and Lionel Barber report in the Financial Times. Instead, Modi reached for a grab bag of reforms and public investment, an approach one of his advisers described as “light many fires at once—to see if any of them would catch.” Modi’s policy mix has indeed succeeded in lighting many fires, though not all of them are burning quite as he might have wished.

It must be said that Modi has achieved some modest successes. His move to overhaul the tax code is a step in the right direction. The previous tax system vested too much power in the state and local levels, such that India’s domestic market was littered with internal trade barriers. The newly instituted VAT promises to facilitate more interstate trade and, hopefully, raise some badly needed revenue for India’s chronically under-resourced central government. In just two years, India’s tax base has increased by 50 percent.

The creation of a streamlined bankruptcy process is another long-overdue reform. An IMF report cited by the Financial Times found that under the old regime, creditors who turned to the courts to settle bankruptcy disputes could expect a process that would take four years to resolve itself and would, on average, end with them writing off three-quarters of the debts they were owed. Though far from perfect, Modi’s new bankruptcy code appears to have leveled the playing field for creditors, which should, in time, make Indian firms more attractive to investors at home and abroad.

The stimulus from these important reforms, however, has been dulled by a simultaneous liquidity contraction provoked by an ill-conceived policy of demonetization. Modi attempted to smoke out nefarious actors who were hoarding their wealth in hard-to-track cash, but instead produced a complicated and protracted financial crisis.

In November 2016, in characteristically secretive and dramatic style, Modi announced that following a 50-day grace period, the country’s high-denomination bills would be worthless. What happened next was a short-term cash crunch as people took money out from under their proverbial (and sometimes literal) mattresses and poured it into bank deposits and mutual funds. Much of this $220 billion liquidity surge found its way into the hands of shadow banks, which in turn sparked a series of financial ructions that I won’t pretend to fully understand.
Fair criticism? Someone more knowledgeable can illuminate.

On balance, though, Modi has failed to deliver on his promise of faster growth. Under his government, India’s GDP has grown at about 7 percent a year, which looks more like the growth produced by the preceding government than it does the 10 percent average growth China maintained from 1990 to 2010. Moreover, the failure to jump-start manufacturing employment has left the country with an unemployment rate of 7 percent, driven in large part by a 20 percent jobless rate for urban men under 30, a slice of the population not known for its quiescence.

Perhaps the most high-profile undertaking of the Modi government has been its war against graft and corruption. Lest voters miss the point, Modi updated his Twitter handle to include the prefix Chowkidar, or “watchman.” Here too, it is unclear that Modi’s successes outnumber his failures. During the campaign, Modi’s opponents played off his own self-branding, telling voters “chowkidar choi hai” or “the watchman is the thief.” His success at the polls notwithstanding, 42 percent of Indian voters felt as if corruption had grown worse under Modi, compared with 36 percent who thought it had improved.

Interestingly, Kazmin and Barber of the Financial Times suggest Modi’s anti-corruption fervor has deepened his country’s credit crunch. They point to the case of Jet Airways, India’s oldest private airline, which went bankrupt because no state bank was willing to extend it credit, despite the fact that these same banks had taken managing control of the company and had been shopping around for a buyer. Kazmin and Barber present the view of an anonymous businessman who thinks this curious series of decisions can be attributed to fear of prosecution: “There is a subtle difference between being anti-corruption and anti-business. If I feel I am going to be persecuted, I’m going to be very careful in how I take my investment decisions.”

Given that Modi failed to deliver rip-roaring economic growth, how do we account for Modi’s irrefutable political success? Those who attribute Modi’s success exclusively to his willingness to indulge and promote Hindu chauvinism, :roll: the Atlantic's editorial board must have stuck this in to claim their lifafa a sentiment not uncommon among English-language interpreters of Indian political life, Nice to have this acknowledged!miss an equally important, if more prosaic, explanation: the efficient delivery of generous welfare benefits, particularly to rural citizens.[

Writing in Foreign Policy, Srinivas Thiruvadanthai of the Jerome Levy Forecasting Center argued that Modi deserved more credit for his effective administration of the welfare state, which is exceedingly important when you consider that more than 70 million Indian citizens live on less than $1.90 a day. One particularly impactful policy provided bank accounts to 300 million previously unbanked citizens. Though the program is still in its infancy, preliminary research has shown that areas with high exposure to the program saw upticks in health-related borrowing. Separately, in an effort to cut down on pollution and improve sanitation, the government has built 81 million household toilets and provided financing for more than 60 million cylinders of Liquid Petroleum Gas, which is a much cleaner home-cooking fuel than the cheap alternatives of firewood and kerosene.

While latrine building and small-dollar banking are not the most glamorous subjects for foreign correspondents to take up, they mean an awful lot to the citizens who no longer have to relieve themselves in fields or rely exclusively on informal networks for credit. Presumably, it was these tangible, bread-and-butter outcomes that allowed Modi to fare so well in left-leaning regions—such as West Bengal, which had long been a Marxist redoubt—and, more striking still, among Muslim women.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 06 Jun 2019 04:05

Much of this $220 billion liquidity surge found its way into the hands of shadow banks, which in turn sparked a series of financial ructions that I won’t pretend to fully understand.
Fair criticism? Someone more knowledgeable can illuminate.

Sort of. By definition NBFCs cannot hold bank deposits because that's what they are - non banking financial companies. However, they stepped into the void created by demonetization to lend to entities who previously utilized more informal sources. NBFCs like IL&FS give out long term loans and fund it with short term debt that's repeatedly rolled over. IL&FS collapsed due to years of growing debt pressures on infrastructure companies overburdened with debt from an investment cycle in the early 2010s that petered out.

Why wasn't this 'fixed quickly' ? There's no quick fix. Banks themselves rolled over the debt hoping for an economic recovery that would ensure their NPAs would be solvent. Lack of adequate bankruptcy laws (since addressed) made them careful about pushing for insolvency proceedings that could take years.

A more straightforward explanation is that the government pushed for formalization of economic activity on a rules based system, and not a patronage based one. With IBC providing a clear rules based insolvency and bankruptcy process, things eased up. Could the government have implemented IBC faster ? Arguably, no. It was introduced in late 2015 after a year of planning. It became an Act in 2016. For something of such consequence, it was pretty fast. GST in comparison, took 20+ years to finally get off the ground, counting from the days of CENVAT.
Writing in Foreign Policy, Srinivas Thiruvadanthai of the Jerome Levy Forecasting Center argued that Modi deserved more credit for his effective administration of the welfare state, which is exceedingly important when you consider that more than 70 million Indian citizens live on less than $1.90 a day.

The figure is from 2017-18. It's under 50 million now. Seems like a big number, but then in 2010 we had 410 million Indians living on under $1.25 a day. By another measure by World Bank, it was 21.2% of of population in 2011. In 2014, it was ~15%:
Image
Nigeria now takes the top spot with 86 million people (out of 200 million) classified as extremely poor. India on this chart is at ~50 million now:
Image
Source: Brookings / World Poverty Clock

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby pankajs » 06 Jun 2019 20:47

https://www.thehindubusinessline.com/sp ... 428804.ece
GST on the Highway

Hopping on to a truck carrying consumer durables from Sriperumbudur to Bhiwandi, N Madhavan discovers how GST, despite hiccups, has transformed goods movement on India’s southern highways

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby pankajs » 06 Jun 2019 20:49

https://timesofindia.indiatimes.com/bus ... 673075.cms
RBI removes charges on NEFT, RTGS transactions

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 06 Jun 2019 22:20

Repo rate is also cut. Important point.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 06 Jun 2019 22:25

Shantikanta Das is working much better with the GoI and FinMin than his predecessors.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vimal » 06 Jun 2019 22:40

pankajs wrote:https://timesofindia.indiatimes.com/business/india-business/rbi-decides-not-to-levy-charges-on-neft-rtgs-transactions/articleshow/69673075.cms
RBI removes charges on NEFT, RTGS transactions


This sounds great but the charges were very low to begin with. IMHO Government should charge for the facilities it is provides at no-profit no-loss basis to prevent degradation of service quality.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rudradev » 07 Jun 2019 02:48

Suraj wrote:
Much of this $220 billion liquidity surge found its way into the hands of shadow banks, which in turn sparked a series of financial ructions that I won’t pretend to fully understand.
Fair criticism? Someone more knowledgeable can illuminate.

Sort of. By definition NBFCs cannot hold bank deposits because that's what they are - non banking financial companies. However, they stepped into the void created by demonetization to lend to entities who previously utilized more informal sources. NBFCs like IL&FS give out long term loans and fund it with short term debt that's repeatedly rolled over. IL&FS collapsed due to years of growing debt pressures on infrastructure companies overburdened with debt from an investment cycle in the early 2010s that petered out.

...


Thanks Suraj. Very informative as always (on the Srinivas Thiruvadanthai analysis as well).

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby M_Joshi » 08 Jun 2019 01:53

The bank in its Global Economic Prospects released Tuesday said that India is estimated to have grown 7.2 per cent in fiscal year 2018/19, which ended March 31. A slowdown in government consumption was offset by solid investment, which benefitted from public infrastructure spending.

As against a growth rate of 6.6 per cent in 2018, China’s growth rate in 2019 is projected to be dropped to 6.2 per cent and then subsequently to 6.1 per cent in 2020 and 6 per cent in 2021, the World Bank said.

With this, India will continue to retain the position of being the fastest growing emerging economy. And by 2021, its growth rate is projected to be 1.5 per cent more than China’s 6 per cent.


What could be the reason that despite Modi Govt's efforts for the last 5 years have not helped yield >8% GDP growth over a full FY? I understand he inherited a fractured banking system & low confidence among investors 5 years back but things must have improved by now. Despite this our GDP growth has remained in 6-8% in the last 20 quarters. I was expecting it to go higher every next year but then again projections for FY 20 are 7.5%. DeMo is one reason & the General Elections could be small bumps on the road to GDP growth, but still it seems despite all the efforts double digits remain aloof, despite Jaitley claiming throughout that India has potential to grow at double digits. If we look at China it doubled its GDP from $3T to $6T within 5 years in mid 2000s. Its growth was approx. 11-12%/annum. At 7.5% growth/annum it will take us 9-10 years to go from $3T to $6T, ignoring inflation & currency valuations. What policy decisions do learned people here think will take us beyond 10%?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vimal » 08 Jun 2019 03:19

I've always been pessimistic about India's growth once congress came back to power in 2004 and then 2009.

I pen my very unscientific analysis here:

1. UPA & UPA2 : 10 years of scorched earth policy, scams, total break and even reversing of infra development projects. Framing of various laws to prohibit growth and make business hard. Laws that make land acquisition impossible, archaic labour laws, retrospective taxation all contribute to business unfriendly environment. India missed the bus during these 10 years and I'm not sure if we will ever be able to catch it again.
2. Automation/AI : With the rise of Skynet, low skilled manufacturing jobs that generated tons of jobs in pas decades are headed for a certain doom. We are already seeing this countries like BD where computer controlled sewing machines are replacing human labour.
3. Global slowdown: Growth across the globe is slowing down.
4. Rise of protectionism/anti-globalization: With the rise of Trump, trade barriers are rising and exports becoming difficult. This might favour India in the short term but I'm not sure how this will fare out in the mid/long term. I guess this won't be great for anyone.
Last edited by vimal on 08 Jun 2019 07:24, edited 3 times in total.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby jpremnath » 08 Jun 2019 04:55

M_Joshi wrote:
What could be the reason that despite Modi Govt's efforts for the last 5 years have not helped yield >8% GDP growth over a full FY? I understand he inherited a fractured banking system & low confidence among investors 5 years back but things must have improved by now. Despite this our GDP growth has remained in 6-8% in the last 20 quarters. I was expecting it to go higher every next year but then again projections for FY 20 are 7.5%. DeMo is one reason & the General Elections could be small bumps on the road to GDP growth, but still it seems despite all the efforts double digits remain aloof, despite Jaitley claiming throughout that India has potential to grow at double digits. If we look at China it doubled its GDP from $3T to $6T within 5 years in mid 2000s. Its growth was approx. 11-12%/annum. At 7.5% growth/annum it will take us 9-10 years to go from $3T to $6T, ignoring inflation & currency valuations. What policy decisions do learned people here think will take us beyond 10%?


We need to look at the 2002-2010 period of super growth years as an exception. The whole world was growing on steroids (cheap credit and commodity boom) during that period...we rode the wave and had a weak base to measure against...plus the massive inflation which came because of the profligacy of UPA boosted the economic expansion even more at least on paper...everyone saw their assets doubling or tripling in value...

During the NDA2, the world was in deep gloom..our export market was flat. The IT exports hit a plateau. We lost the competitiveness for textile exports to BD and Vietnam..our inefficient labour laws meant no SME owner wants to scale his business. The whole improvement in 'ease of doing business' was a farce..we fudged the numbers here and there to meet some criteria. The average entrepreneur still needs to cross hoops of fire to run his small business..Plus the NPA blowout meant there is less credit in the system and to top it with the high interest rates, our industries are gasping for breath...It is a miracle we even grew above 6%.

There needs to be a rapid buildup of our soft and hard infrastructure if we ever want to catch up on the 7%+ growth. The DFCs should have been completed on war footing. It is still nowhere near completion. Without it, for someone in Mumbai, it is cheaper to ship steel from Rotterdam than from Jamshedpur. Yeah logistics as a share of the product cost is one of the highest in the world. This makes our products expensive. The license raj is still alive... GST was pathbreaking, but we still need more of such unshackling.. One of our industry leader said a few years back that its much cheaper and more profitable to invest in a factory in Thailand and import the products here than making a factory in India.

Our labour laws and financial laws need to be upgraded.Right now, anyone who has more than 100 employees should get special permissions to lay off people. Let the Govt raise it to 1000 or so...Also there should be some system where economic and commercial cases gets fastracked.. maybe even a separate judicial wing for this. Even the much touted IBC got stuck in our archaic legal system.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 08 Jun 2019 07:20

From 2016: 10-reasons-why-india-wont-grow-at-8-pc-plus
https://www.rediff.com/business/column/ ... 160616.htm

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 08 Jun 2019 07:23

2008 paper from goldman sachs on what it would take for Indian economy to grow 40-fold by 2050:
https://www.goldmansachs.com/insights/a ... -india.pdf

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vimal » 08 Jun 2019 07:30

A_Gupta wrote:From 2016: 10-reasons-why-india-wont-grow-at-8-pc-plus
https://www.rediff.com/business/column/ ... 160616.htm


Very good read. A lot of points match my very unscientific analysis.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 08 Jun 2019 16:58

A proposal to unlock the wealth in the slums:
https://theprint.in/opinion/missing-cap ... it/245857/

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby gakakkad » 09 Jun 2019 17:08

vimal wrote:
A_Gupta wrote:From 2016: 10-reasons-why-india-wont-grow-at-8-pc-plus
https://www.rediff.com/business/column/ ... 160616.htm


Very good read. A lot of points match my very unscientific analysis.


I remember in early 90s when people use to say , "10 reasons why India cannot grow at 5.5%" . The rest is history. The article is unsubstantiated in terms of the assumptions made on labor force , urbanization and capacity for unskilled manufacturing . The 40% malnutrition rate is from a propaganda piece and not on real data . The rate of urbanization is unprecedented and India is likely to be a >50% urban nation by 2030 end. And if someone thinks that unskilled manufacturing is not going to pick up ,data that ll come out in a few years is going to surprise them pleasantly (or unpleasantly) .

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vimal » 09 Jun 2019 22:04

gakakkad wrote:
vimal wrote:
Very good read. A lot of points match my very unscientific analysis.


I remember in early 90s when people use to say , "10 reasons why India cannot grow at 5.5%" . The rest is history. The article is unsubstantiated in terms of the assumptions made on labor force , urbanization and capacity for unskilled manufacturing . The 40% malnutrition rate is from a propaganda piece and not on real data . The rate of urbanization is unprecedented and India is likely to be a >50% urban nation by 2030 end. And if someone thinks that unskilled manufacturing is not going to pick up ,data that ll come out in a few years is going to surprise them pleasantly (or unpleasantly) .


World is a much different place now compared to 90s. Networking and computing power is cheap and easily available making automation and AI easy.
Our urban development is more in the lines of creating concrete slums, lacking even basic infra (look at luru for example). Compare with China which has managed to build entirely new cities by tearing down the old ones. Impossible to do that in India.

There is also a study that Rajeev Malhotra is doing about the pathetic state of India's basic education. Simply stated, we are not competitive in the world stage and will not be for a long time.

There are just too many structural bottlenecks that need to be resolved for India. All this is hinged on Modi getting re-elected for the next 50 years.

I will stop here as I feel I'm ranting too much.
Last edited by vimal on 10 Jun 2019 03:01, edited 1 time in total.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 09 Jun 2019 22:15

A_Gupta wrote:From 2016: 10-reasons-why-india-wont-grow-at-8-pc-plus
https://www.rediff.com/business/column/ ... 160616.htm

Nothing in this article proves the conclusion made in the title. The reason is that the explanation is FAR too generic. There is no underlying maths to argue a mathematical result.

Real GDP growth is a mathematical consequence of investment/GDP translating to growth at a particular rate of efficiency at translating investment to growth, like how personal savings and a particular level of equity performance translates to real growth in net worth. Unless the numbers are provided for a specific argument, the article is useless.

Would you hire a financial advisor who says he cannot get you X% growth because a) his ayah is always late b) the road he took to work is potholed etc ? He may be talking about economy-related things, but the bottomline is that as in this example, the article lacks rigour.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 10 Jun 2019 04:51

Well, what exactly will unlock a sustained additional 3% to the current growth rate is a bit of mystery. Likely there is no "silver bullet" but rather a lot of things which add up to more than one would think.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby tandav » 10 Jun 2019 07:56

One major stumbling block to faster growth is the inability to flip Real Estate Assets. Every time anyone wants to sell or buy real estate they have to pay 5% of deal value as Stamp Duty to Govt. I do not understand why this massive chunk has to be paid. Make people pay property tax only. Stamp duty should be 0.5% or less

As a consequence no body wants to show actual value of property and buy and selling houses is discouraged. Remove stamp duty and we can easily add 2% growth (lots of RE will be bought and sold and reflect in GDP numbers)

https://www.benhams.com/news/landlords/stamp-duty-around-the-world/

Tried to find some data and it appears from link above that there are complexities.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rishi_Tri » 10 Jun 2019 08:17

Why have we not hit 10% growth rate? An inquisitive observer's viewpoint:

Reset of the Economy to Significantly Formal Economy - Indian Economy has gone from significant contribution from informal / black sector to relatively less significant informal sector contribution. Money that would otherwise flow into every kind of economic activity under the table has stopped. This shall have its impact and that is what showed up. Real Estate was the prime casualty.

Real Estate Sector in Deep Trouble - But for few such as Tata Housing, L&T Realty, Godrej, Shobha, Brigade, almost everyone has gone under or exited the residential real estate sector. North India, West India has been particularly hard hit. Almost every real estate developer of any note particularly in North India is either under investigation, projects delayed by up to 10 years, or their directors in jail. Downstream implications are huge as it is highly labor intensive, impacts cements / steel / building materials industries and what not.

IT Sector Slowdown - Almost every firm of note would grow at 20-25% creating massive employment in process till up to early 2010s. For reasons very well known - increased automation / international protectionism / lack of emergence of Desi FBs / Googles etc - IT sector has ceased to be the large new employment generator and that trend shall continue. Consequently Contribution of IT to new growth has ceased to be what it was.

Given these scenarios that we were able to come to up to 8% growth speaks volumes about the economy and could have been higher had RBI not raised rates in 2017 / 2018. That was very ill timed. We are at 2% inflation and just about 6% growth. Even US does not want its inflation to go down below 2%.

Can growth rates be at 10%? I am totally convinced that it can be and some points on how:

Bring Real Estate Sector to Life - Modiji is going to spend lacs of crores on housing with aim of housing for all by 2022. That should help. Additionally GOI should take over stressed real estate projects that have no hope of completion. NBCC is close to taking over JP, Amrapali projects among others. It shall allow the locked up capital to be used in whatever forms the owners want. It shall give people confidence that residential projects shall be completed and thus start investing again. And the downstream impact shall be manifold.

Aviation, Aviation, Aviation - India is country of 130 and we have what 100 airports that may be classified as relatively functional!! We need to build at least 500 airports. There are umpteen cities in India with population more than 10,00,000 but no airport. In fact in many such cities you shall find airstrips of British vintage from World War II. I can name many from North India. Muzaffarpur and Sitamarhi in Bihar are two of those. Sitamarhi airstrip is almost 5000 ft long. As to Sitamarhi itself - it is birth place of Devi Sita, so immense tourism potential. Mumbai is getting new airport. Another airport is planned for Delhi besides expansion of current airport. Bengaluru is expanding. Hyderabad should expand. Chennai needs brand new airport!! As to Kolkata, well!! Aviation is again labor intensive, be it setting up infra or providing the service itself.

Tourism and Hotels - Tourism is gold mine with a spot every few KMs with almost 2000 year history. Identify 10,000 such spots across the country and rejuvenate them. Introduce tax holiday for next 20 years for private individuals / 10 year for hotel corporations to build hotels in such spots. Mass train local guides. Provide electric charging stations / electric public vehicles in those locations. Tourism is again labor intensive.

Railways - Pick up any movie from 1970s and you shall find actors talking about Rajdhanis going at 120 kmph. Today we are at what - 150kmph in some sections? Interconnect Ahmedabad, Amritsar, Bengaluru, Bhopal, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Kolkata, Mumbai, Nagpur, Prayagraj, Patna with 175+kmph tracks. Again labor intensive with massive impact on steel, cement, and so on.

Defense - Well everyone on here knows what Defense can do and it again is labor intensive being core manufacturing driven. We should not allow single rupee to flow out of the country. Just imagine what $50 billion - Rs 350,000 crores - spent on Swadeshi buys over next five years could achieve?

We can make apt policy frameworks for Tech, High Tech sectors but real growth shall come from labor intensive sectors. Opportunities are ample. Ours to take them.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby williams » 10 Jun 2019 09:49

A large national economy like India cannot be driven by govt policies alone there has to be a bustling trend of private entrepreneurship and innovation. For that, we need a major overall in education. Too much content is pushed in schools and I think kids simply don't have time to think on their own. There is also a trend to learn advanced concepts without understanding the fundamentals. There is also a huge gap in practical training. All this makes our society not to innovate.

Our banking and legal sector provides little room for risk-taking in small and medium enterprises. It is 30 years since the Indian IT sector started making inroads and still, 90% of business revenue comes either from staffing or BPO type operation. All that engineering talent is wasted on software written for American and European companies. Banks are sick and are not ready to fund innovation, instead, they are funding all the thugs who mess up even the existing private enterprises. It is a miracle Modi Govt managed 7% growth last 5 years.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby yensoy » 10 Jun 2019 10:05

williams wrote:A large national economy like India cannot be driven by govt policies alone there has to be a bustling trend of private entrepreneurship and innovation...It is a miracle Modi Govt managed 7% growth last 5 years.


Very well said! A good amount of growth is coming just from reversion to the norm, which is that if we are reasonably self-sufficient in agriculture, have reasonable governance, and a reasonably ok private sector we should already be looking at a per-capita of around $4000/yr. The ride up to that level will be easy. And then we will get caught in a lower middle income trap unless we hugely push for skills development in particular "building stuff", provide real education (not rote learning) at all levels, have an innovation focused culture that tries to grow the top-line instead of optimizing the bottom line only, and invest in ourselves with the best of resources going towards our own government and public institutions including defence and internal law & order. Also given that we are a highly populated country, take care of our environment (water, forest, wildlife conservation; handling waste & pollution) with a religious zeal.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby hanumadu » 10 Jun 2019 10:44

tandav wrote:One major stumbling block to faster growth is the inability to flip Real Estate Assets. Every time anyone wants to sell or buy real estate they have to pay 5% of deal value as Stamp Duty to Govt. I do not understand why this massive chunk has to be paid. Make people pay property tax only. Stamp duty should be 0.5% or less

As a consequence no body wants to show actual value of property and buy and selling houses is discouraged. Remove stamp duty and we can easily add 2% growth (lots of RE will be bought and sold and reflect in GDP numbers)

https://www.benhams.com/news/landlords/stamp-duty-around-the-world/

Tried to find some data and it appears from link above that there are complexities.


If there is a property tax, no body will buy property that is not earning them rent. Eventually, in a few years, the property tax paid will far exceed the stamp duty. It might not be bad thing though, at least people will stop accumulating empty land in some god forsaken suburb because a high way is coming up or an airport is coming up and sit on it for decades without any productive use for it.

But there should be no property tax on primary residence and perhaps one more additional residence or built up property like how there is none now. A family which builds a house with its hard earned money should not be made to spend a recurring amount every year on that house. It's hard as it is to pay for food, utilities, health, transportation etc.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vimal » 10 Jun 2019 10:52

hanumadu wrote:
tandav wrote:One major stumbling block to faster growth is the inability to flip Real Estate Assets. Every time anyone wants to sell or buy real estate they have to pay 5% of deal value as Stamp Duty to Govt. I do not understand why this massive chunk has to be paid. Make people pay property tax only. Stamp duty should be 0.5% or less

As a consequence no body wants to show actual value of property and buy and selling houses is discouraged. Remove stamp duty and we can easily add 2% growth (lots of RE will be bought and sold and reflect in GDP numbers)

https://www.benhams.com/news/landlords/stamp-duty-around-the-world/

Tried to find some data and it appears from link above that there are complexities.


...

But there should be no property tax on primary residence and perhaps one more additional residence or built up property like how there is none now. A family which builds a house with its hard earned money should not be made to spend a recurring amount every year on that house. It's hard as it is to pay for food, utilities, health, transportation etc.


Property tax is levied to pay for various civic amenities like sewage, roads, lighting etc that is common for all the properties. Without property tax there is no way a city can pay for these in any sustainable manner.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby tandav » 10 Jun 2019 11:19

All Land has to be taxed via property tax... nowadays people are keeping massive amounts of land unused (and as benami property) on the other hand Stamp duty is very high 5% which prevents fast flipping of Land based assets. Low property tax and high Stamp duty is artificially increasing the cost of land by decreasing availability.

I think stamp duty should be abolished since every transaction it eats 5% and only property tax should be assessed at 0.5% of property value/year for agricultural land, 1% for Residential Land, 1.5% for Commercial/Industrial Land. This way we can unlock huge potential and people will start to monetize land instead of keeping it idle... and Govt can take over those who default on property tax.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 10 Jun 2019 23:19

A_Gupta wrote:Well, what exactly will unlock a sustained additional 3% to the current growth rate is a bit of mystery. Likely there is no "silver bullet" but rather a lot of things which add up to more than one would think.

No it's not, in mathematical terms. Growth is just return on investment. At the very least, an economy needs to invest enough to generate growth. One cannot have high growth without high investment.

Gross fixed capital formation (GFCF) data as a percentage of GDP at current prices is an excellent barometer of basic level of investment. This data is readily accessible in the annual FinMin Economic Survey that accompanies the Union Budget. Here's the investment data, all the way from 1950-51 to 2015-16:
Gross Domestic Saving and Gross Capital Formation
Scan over column 8 - the GFCF figure - from 1950 onwards, and there's something clearly noticeable:
* Until mid 1980s, out GFCF was in the teens or lower
* From the start to end of NDA-1, GFCF grew 8 percentage points to cross 30% by 2005. It rose further to 32-33% in 2010-12 and then back down to <30% as the economic growth faltered. It has only just returned to >30% in 2018-19.

Assuming it takes Rs.4 to generate Rs.1 of growth, investing 30% of GDP means 7.5% growth rate. Higher growth can be achieved by increasing investment to GDP, and by increasing capital efficiency. Rs.3-4 per Rs.1 of growth is about as good as it gets, so assuming Rs.3.75 per rupee of growth, thats 37.5% GFCF required.

High investment GDP plus efficient execution = high, double digit growth.

Another look at the data shows some more insights:
* Public sector investment stepped in for drop in private investment in the aftermath of 2007-08 crash
* The private sector overinvested early on in UPA-2 expecting a high growth cycle, which never came about, and the effects of the NPAs of that investment binge still persist.
* The private sector remains heavily stressed (col 7) from the overhang of past NPAs.

CV sales are a great early barometer of industrial and commercial activity. Companies expand CV purchases when they expect a growth cycle to resume. It took 6 years from the high of 2012 for Indian domestic CV sales to reach the same level again, crossing 1 million in 2018-19.

There's no reason to assume we cannot grow at 10% . It's possible, and purely on quantitative terms, it requires private sector contribution to GFCF to rise from the current 22% level to 28% , which would increase investment/GDP to 36-38% , which by mathematical consequence would generate ~10% growth. That already happened in the late 2000s when rising investment/GDP peaked and growth hit 9.5-10% for 2-3 years in a row.

It takes several years of prior effort to build up investment levels to the point where growth hits that sustained level. We're on the path towards getting back up to 30% investment/GDP now, and next two years should focus on getting it up to close to 35% - high growth will follow as a consequence.

Another piece of data: Annual Growth Rates of Gross National Income and Net National Income
Scan over Cols 1 and 2. The former is nominal annual growth in GNI, the latter is in real terms after accounting for inflation.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Prasad » 10 Jun 2019 23:27

Car sales have fallen drastically over the last few months. Given that rural demand propped it up when it was going up, wonder what has happened for the current state to come about.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 10 Jun 2019 23:47

Prasad wrote:Car sales have fallen drastically over the last few months. Given that rural demand propped it up when it was going up, wonder what has happened for the current state to come about.

Please post reference figures for better analysis.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahul M » 11 Jun 2019 00:39

https://www.bloomberg.com/opinion/artic ... rprise-you

India, the World's Model Central Bank? Just Maybe

The RBI has acted swiftly to address slowing growth and offers a clear, consistent message. That’s a lesson to its global peers.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 11 Jun 2019 01:55

Suraj wrote:
A_Gupta wrote:Well, what exactly will unlock a sustained additional 3% to the current growth rate is a bit of mystery. Likely there is no "silver bullet" but rather a lot of things which add up to more than one would think.

No it's not, in mathematical terms. Growth is just return on investment. At the very least, an economy needs to invest enough to generate growth. One cannot have high growth without high investment.


Mathematical terms don't help, because it doesn't tell you why the economy isn't investing more.

Nobody can say with any confidence that "such and such set of policies will increase the sustainable economic growth rate by 3%". Saying that increasing the investment by Y% will increase the growth by X%, mathematically, simply changes the problem to "why isn't the investment increasing by Y%?". All we can do is address each of the things that mathematics says is an issue, and maybe investment will rise enough to produce the growth.

E.g., people may not invest because

- opportunity seems too risky for the expected return-on-investment

There is a whole bunch of regulatory and legal risk (e.g, with labor, with acquired land, etc.) that policy changes can mitigate. Or taxes that are making the market not work properly as some people here are suggesting is the case with Real Estate, or that was the case pre-GST can be fixed.

- lack of opportunity or resources

E.g., market within India is too small or fragmented, need an export market to be opened up. E.g., the required biotech workers are simply not available at any wage level


- lack of sufficient talent - the people with the ability to take investments and obtain the expected ROI

What the government can do is some of this and some of that, but whether it will cause investment to go up to the needed level, no one can say. Hence, mystery.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 11 Jun 2019 02:06

Mathematical terms are absolutely required, because this is a discussion about a specific numerical threshold. It is entirely pointless to waste time handwaving about possible reasons with no quantitative backing, even if there's no specific numerical goal to serve as contextual basis.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby yensoy » 11 Jun 2019 06:19

Prasad wrote:Car sales have fallen drastically over the last few months. Given that rural demand propped it up when it was going up, wonder what has happened for the current state to come about.


Same phenomenon happening in China. First car purchases are done, pretty much everyone who can afford and needs a car has purchased one. Replacement car purchases are only a fraction because among other reasons replacements are spread out over time.

This statistic doesn't mean anything ominous about the state of the economy.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahul M » 11 Jun 2019 08:35

NPAs falling faster than RBI's estimate: Crisil
Mumbai: The system-wide non-performing assets stock has declined massively to 9.3 percent in March 2019, much faster than the Reserve Bank's estimate and steeply down from 11.5 percent the year before, says a report.

The CrisilNSE 1.24 % report comes at a time when most banks are at the cusp of an end of the NPA pains after a prolonged period, and are concentrating on the resolution now.

"System-wide NPAs have declined in fiscal 2019 to 9.3 percent as of March 2019 after tripling to 11.5 percent in the four fiscals till March 2018," it said in a note Monday.In its half-yearly financial stability report in December, the Reserve Bank of India had estimated that the gross non- performing assets ratio might improve to 10.3 percent by March 2019 from 10.8 percent in September 2018.

Read more at:
https://economictimes.indiatimes.com/ma ... arebuttons


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