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Indian Economy News & Discussion - Nov 27 2017

The Technology & Economic Forum is a venue to discuss issues pertaining to Technological and Economic developments in India. We request members to kindly stay within the mandate of this forum and keep their exchanges of views, on a civilised level, however vehemently any disagreement may be felt. All feedback regarding forum usage may be sent to the moderators using the Feedback Form or by clicking the Report Post Icon in any objectionable post for proper action. Please note that the views expressed by the Members and Moderators on these discussion boards are that of the individuals only and do not reflect the official policy or view of the Bharat-Rakshak.com Website. Copyright Violation is strictly prohibited and may result in revocation of your posting rights - please read the FAQ for full details. Users must also abide by the Forum Guidelines at all times.
Suraj
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 07 Dec 2017 01:47

Population alone lacks context. The age group histogram is a much better piece of information . A large worker : dependent ratio is good , since it means more productive workers per dependent . Even otherwise , a large youth bulge but stabilizing population growth means a temporary need to educate and train them, but then we have a growing number of workers as the young educated and trained people enter the workforce .

Avtar Singh
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Avtar Singh » 07 Dec 2017 03:29

Without getting too racist..
I have every confidence in the human capital of India making rapid progress,
irrespective of how backward and uneducated they may seem at the starting point.
Yes even ahead of the chinese or whatever race you may care to mention, in minimalist time.

Of course the key is providing access to education and training..

I have been meaning to write a blog post about this or even a discussion thread in the hope it would be discussed or picked up.

DIGITAL CURRENCY for EDUCTAION and TRAINING,
one could call it an Indian Digital Coin for Education

Now that block chain and aadhaar is here.

Those seeking training and education would have access to funds via their id cards.
Those providing education and training would receive said funds through their ids.

I saw a bbc program where an Indian lady was providing education in her home via tablet and an Indian education app.

The providers would have to register with an exchange (CME type), where they could then exchange said IDCE for INR at 1 for 1.
No involvement of the current banking system completely separate from current education system.

Thanks to blockchain trail and use of an exchange not banks the whole trail would be open and
could be checked at any time to avoid abuse.
Anyone could look at it to see who is charging/paying for what services.

For example, if your an older person who has never had education and does not know
how to use current digital banking technology you would simply need to find someone
capable enough to teach you and pay via your id card.Just bypass current systems and let people get on with it.

The funds would always be there for whatever education or training/re-training a person needs throughout their lifetime.
There would be less angst about driver-less tech knowing that said drivers could go and learn something else.

It would be akin to the endless money printing the western central bankers have been
doing to help out their failed rich buddies...
But in India it would be QE for the peoples education and training.

It would not be like throwing confetti into the system thanks to the chain and any going astray could be clawed back....
convertible only on the exchange, not at any bank

I have more to write and have not started a thread because I do not log on enough to husband it,
but since people were discussing human capital I thought I would put the idea out there.
I may add to it on my blog when I have time;

https://ahinducountry.wordpress.com/


PS, to whoever posted;
Restoration of Split Milk by AVM Chaudhary, thanks.. a great book.....

One realizes there is a sizeable group who dont want all and sundry to have education and training
since the poor/slave workers servicing the higher classes would disappear off to schools!!!

see the grief this old Nepalese man gets for going back to school;

https://rtd.rt.com/films/the-long-road-to-school/

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chetak » 07 Dec 2017 15:29

Centre May Allow Banks To Use Your Hard-Earned Deposits In Case It Collapses. Scary Bail-in clause in FRDI Bill cleared by the Union Cabinet in June 2017 allows banks to finance themselves using depositors money.


07 DECEMBER 2017

Preparing For Cyprus Moment: Centre May Allow Banks To Use Your Hard-Earned Deposits In Case It Collapses. Scary Bail-in clause in FRDI Bill cleared by the Union Cabinet in June 2017 allows banks to finance themselves using depositors money.

KUMAR SHANKAR ROY

Preparing For Cyprus Moment: Centre May Allow Banks To Use Your Hard-Earned Deposits In Case It Collapses

Priding themselves for being 'cash-less' post demonetization last year, some Indians may come face to face with a horrific post-apocalyptic future where they could be deposit-less too. Yes, this could be a reality unless the government of the day removes the unholy 'bail-in' clause that theoretically allows beleaguered banks and financial institutions to legally usurp depositors' money in a desperate bid to stop going bust. What will happen if one day you find your hard-earned money just disappear forever? We live in times when bank deposits are the gold standard of safety, but that sheen can quickly fade away.

Recently, the Indian government gave the banking system a $32 billion shot in the arm. The massive recapitalization scheme was required because some state-run banks are loaded with mountains of dodgy loans. Estimates show 10-12% of all loans made in India have turned bad, or as they say in banking parlance, have become 'non-performing'. What will happen if another crisis hits the banking system? The answer to this question depends on The Financial Resolution and Deposit Insurance (FRDI) Bill, 2017. If this bill goes through in its current form, some of you as depositors may end up financing the next multi-billion shot in the arm the Indian banks would require the next time, and the next time, and the next time.

The FRDI Bill was cleared by the Union Cabinet cleared in June 2017. Last heard, the bill was under the consideration of a parliamentary committee. While the bill when it becomes a law will lead to the birth of a Resolution Corporation which will exercise control over banks, insurance companies, and other financial institutions, it contains the hair-raising 'bail-in' clause that has serious consequences for even common depositors. You may have heard about 'bail-out', where an individual, entity or the government gives money to a failing business to prevent it from going kaput. A 'bail-in' is exactly the opposite, which involves rescuing a financial institution on the brink of failure by making its creditors and depositors take a loss on their holdings. In banking terms, depositors are considered unsecured creditors since no depositor seeks security from banks to keep the money.

While a bail-out involves money of external parties, a bail-in signifies funds taken from internal stakeholders. In the Indian context, a bail-in could see depositors losing the control of their deposits in case a bank’s financial situation deteriorates so much. Though it's hard for people to believe any government anywhere would ever let that happen, it's happened before. In 2013, bank depositors in the small European country of Cyprus lost millions as their savings were seized to cover bank losses. In the last 2-3 years, different countries have implemented legislation that would allow them to first freeze bank assets during the next crisis. These moves are all about stopping people from moving their capital into actual physical cash. But a 'bail-in' takes this to a different level altogether.

Trade unions, banking experts, and political parties have opposed this clause. Against this backdrop, Finance Minister Arun Jaitley has sought to allay fears about the 'bail-in' clause in the FRDI Bill, but the bigger question is why was such a clause inserted in the first place. Are depositors to blame for the non-performing loan mess Indian banks find themselves mired in with amazing regularity? The unequivocal answer is no. Without depositors, banks could never have lent in the first place. The mess is because of the bank and the borrowers. Depositors are sacred, and so is their trust.

This provision in the FRDI Bill is with an aim on resolving bankruptcy scenarios among too-big-to-fail financial entities. Just because something is too big to fail, doesn't mean it can take away the rights of everybody else. As it is, all deposits of all depositors are not 100% insured. The sordid truth is all our deposits in banks are not 100% safe, even though instances of commercial banks going belly-up are rare. In India, less than a third of bank deposits in value terms are insured by the Deposit Insurance and Credit Guarantee Corporation of India (DICGC). If a bank goes bust, the DICGC will pay back the insured amount to the depositor but that is restricted to just Rs 1 lakh per depositor per bank. The FRDI Bill is reportedly silent on the extent of deposits to be guaranteed and that remains a key source of concern

Though many would like to say that the 'bail-in' clause is just meant as a last measure or emergency capital for banks, the surreptitious sneaking in of a measure to execute hair-cuts on depositors' money. The bail-in clause in its current form gives the power to convert any securities from one class to another, including the creation of a new security in the modification of an existing security. This may mean that deposits may be converted to shares. This means your deposits can be converted into equity in order to recapitalize and bail out banks that are facing bankruptcy. Even depositors, who had to undertake hardships to lay their hands on their own money during the 2016 bank-note demonetization, will find it is incredible that the government wants to appropriate their hard-earned savings to bail out useless banks.

This 'robbing Peter to pay Paul' is wrong on so many levels. Any such sly move hits and takes away the indirect safety and guarantee of deposits that we Indians come to associate with banks. No government in its right mind should dare to do this unless they actually want depositors to move away from bank FDs!

(The writer is a journalist covering personal finance)

nam
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nam » 07 Dec 2017 16:01

This is typical nonsense our journalist write as part of their propaganda. The report does not even pass a common sense test.

No government in this world would allow banks to short sell savers. Moreover the current NPA is people's "hard earned money" given out as loans. So banks are already using people's money.

How many of people lost money due to PSU NPA? Why would GoI even take money from savers, when it can indirectly use tax payer's money, which is what generally happens?

The banking system works because of government underwriting in case of run on the banks. In 2008/09 US gov bailed out American banks, UK gov provided protection of 50K pounds, when there was run on the banks. A reason why Goldman is now a "bank"

So government bailing out banks is a world wide phenomena.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chetak » 07 Dec 2017 16:19

nam wrote:This is typical nonsense our journalist write as part of their propaganda. The report does not even pass a common sense test.

No government in this world would allow banks to short sell savers. Moreover the current NPA is people's "hard earned money" given out as loans. So banks are already using people's money.

How many of people lost money due to PSU NPA? Why would GoI even take money from savers, when it can indirectly use tax payer's money, which is what generally happens?

The banking system works because of government underwriting in case of run on the banks. In 2008/09 US gov bailed out American banks, UK gov provided protection of 50K pounds, when there was run on the banks. A reason why Goldman is now a "bank"

So government bailing out banks is a world wide phenomena.


let us just wait and see.

jetli and his baboo(n)s are quite capable of a caper like this.

nam
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nam » 07 Dec 2017 16:35

That is true. But this one would be career finishing move if there was such an intention. But jaitley is very smart fellow.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 07 Dec 2017 18:58

Selling China assets to retire debt and focus on India, the gas cylinder maker Everest Kanto.
https://www.bloomberg.com/news/articles ... nder-maker

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ManishC » 07 Dec 2017 20:15

The Uninsured part of the Demand Deposits in a Bank account are always at risk if the bank goes belly-up. There might be a case to increase the amount limit from 100k though.
The function of the Resolution committee would be an orderly winding up of the Bank if found nonviable and take care of the liabilities while doing so in order of debt seniority.
The unsecured Lenders (Deposit holders) would take a (large) haircut if such resolution/intervention is too late in a sudden catastrophic dissolution of a bank, whether the law allows for it or not explicitly. Any restitution to depositors after the fact would be a political decision and likely happen for too big to fail bank.

Sky is falling DDM as usual creating FUD.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 08 Dec 2017 01:39

Freight traffic by road and rail, as well as commercial vehicle sales, are a barometer of underlying strengthening of a business cycle:
Railways record 5% jump in freight, passenger traffic in last 8 months
The Indian Railways has registered a rise in both its freight and passenger business during April-November as compared to the same period last year, according to a data with the national transporter.

The freight traffic, which essentially serves the revenue of the railways, recorded an almost 5 per cent jump in loading during April 1-November 30, 2017, as compared to 2016.

Amongst the commodities which contributed to this performance in the freight traffic include iron ore, which registered a 5.16 per cent growth in loading, cement which grew by 10.14 per cent, steel by 16.23 per cent, container traffic by 12.71 per cent and coal by 2.23 per cent.

"In fact, freight loading has seen a 0.79 per cent growth which is more than what our target was for these months," a senior official of the railway ministry said.

Overall freight loading saw a growth of 747.70 million tonne in these eight months of this year, which is 32.02 million tonne more than last year.

"In the passenger sector, we have grown by 5.22 per cent during April 1-November 20 over the same period last year and added around 50.33 million more passengers. This shows that railways continues to be the preferred mode of transportation for the people," Member (Traffic) Mohd Jamshed said.

GoI continues to actively fine tune the bankruptcy code:
Insolvency resolution: Top 5 steel firms need to pay Rs 29,000 cr to bid
Promoters of five steel majors undergoing insolvency resolution will have to cough up a total of at least Rs 29,000 crore to be eligible to submit bids and retain their companies. Some other companies trying to resolve their bad loans under the Insolvency and Bankruptcy Code (IBC) are seeking details from lenders about the principal and interest they have to pay for being able to bid for their own assets.

The recent amendments to the IBC practically barred promoters from re-acquiring their own assets, leaving only a small window to convert their non- performing assets into standard assets by paying the overdues. According to steel companies, which have had discussions on this issue with lenders, the overdue includes the principal in default along with interest which has not been paid unless the lenders have recalled the entire loan.

Image
Stressed asset buyers may get relief from competition law, MAT
Buyers of stressed assets might soon get an exemption from paying the minimum alternate tax (MAT), and the need for getting approval from fair-trade watchdog the Competition Commission of India (CCI).

A government-appointed committee is planning to recommend amendments to the Insolvency and Bankruptcy Code (IBC) to make this happen. This is being done keeping in mind the urgency of these transactions, and it would help the ongoing insolvency cases, including the 12 accounts referred by the Reserve Bank of India (RBI) to banks. These accounts include Monnet Ispat, Essar Steel, Bhushan Steel, and Electrosteel Steels.

Every merger and acquisition in India requires the CCI’s approval. This is essential to ensure companies do not abuse their dominant position in a sector.

The government is planning these amendments at a time when the big 12 companies referred to the National Company Law Tribunal (NCLT) under the new insolvency code are nearing resolution. Starting January, insolvency resolution professionals will present plans for these companies to the NCLT for approvals.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby periaswamy » 08 Dec 2017 02:14

Promoters of five steel majors undergoing insolvency resolution will have to cough up a total of at least Rs 29,000 crore to be eligible to submit bids and retain their companies.


and

Buyers of stressed assets might soon get an exemption from paying the minimum alternate tax (MAT), and the need for getting approval from fair-trade watchdog the Competition Commission of India (CCI).


Don't these two together, undo the recent bankruptcy code? The same businessmen who were messing with the system, get to participate again after paying a small penalty, it seems like. Or is this to encourage merging of steel companies?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 08 Dec 2017 02:56

See:
The recent amendments to the IBC practically barred promoters from re-acquiring their own assets, leaving only a small window to convert their non- performing assets into standard assets by paying the overdues. According to steel companies, which have had discussions on this issue with lenders, the overdue includes the principal in default along with interest which has not been paid unless the lenders have recalled the entire loan

These are just applicants within the window before promoters were barred from submitting bids through the recent ordinance, if I understand this right.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 08 Dec 2017 04:31

^ I think it is the other way around. If I am a promoter and if I have means to pay back the principal of the loan and the primary interest on it (and if the bank has agreed to waive off the fines on say late payment and interest on interest) then I should be able to re-acquire the asset without raising another loan.

The above clause is important., it allows for some nuance in the total barring of promoters. And further, the bank is able to recover significant NPA without going through the rigmarole of asset sale.

For example, if I am a steel producer and I got a big contract to sell steel to a car producer and took a loan to expand capacity., but the car producer is now going belly up (or has become a loan defaulter) - then my first instinct is to declare the loan as a NPA and stop bleeding money to the bank. Steel plant is now up for sale from Bank perspective as NPA and the bank issues a loan recall. The entire loan again may not be recalled (maybe the loan was for expansion of capacity to supply steel for both cars and scooters and I am still say making part payments)., I can still raise money (maybe I have a coal plant) and if I pay off the loan (or overdues) then I can convert it back to standard assets by paying off the part recalled loan.

This nuance is both necessary and important. Since this distinguishes between a willful defaulter (Malya) vs. say a genuine steel producer like say shuBhan Steel.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby srin » 08 Dec 2017 08:42

I'm a bit confused about the whole debt thingy.

Maybe because of my experience in working in tech startups, I keep wondering why did the companies take on debt and not equity (or rather - why did banks provide loan and not take equity) ? Was it because banks are forbidden from taking equity ? That can't really be true because the promoters pledged shares in some cases. Of course, promoters wouldn't like the dilution and having someone else on their boards, but then it is they who need the money ?

Secondly, these assets that are going for sale are a gold mine of PE firms (assuming that the business is solid and not run to ground). Yet I don't hear about desi PE firms (that includes LIC :D ) involved in this so far. Do we have good PE firms ?

Excuse my naive questions - these have been bugging me for sometime now.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 08 Dec 2017 20:13

srin wrote:I'm a bit confused about the whole debt thingy.

Maybe because of my experience in working in tech startups, I keep wondering why did the companies take on debt and not equity (or rather - why did banks provide loan and not take equity) ? Was it because banks are forbidden from taking equity ? That can't really be true because the promoters pledged shares in some cases. Of course, promoters wouldn't like the dilution and having someone else on their boards, but then it is they who need the money ?


It boils down to the more successful a company is, the less a loan costs it compared to equity in the long run. (Equity is forever, loan is over once it is paid off.) You offer equity only when you have to, like with asset-poor-so-no-collateral startups.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 08 Dec 2017 20:52

Deleted
Last edited by Suraj on 08 Dec 2017 21:26, edited 1 time in total.
Reason: We don't have GDF because we don't want politics discussions here, not because we want that talk on other threads here.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Dipanker » 09 Dec 2017 04:20

Katare wrote:Dipankar,
Do you have any data to show that percapita of India was higher in 1950 than what it is today? Never heard this before.


I used the inflation data (1958 - 2016) from this source, couple of data points look little off and probably should be cross checked from another source.

http://www.inflation.eu/inflation-rates ... india.aspx

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 09 Dec 2017 04:41

What does that inflation data have to do with per capita income in 1950 ?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rudradev » 09 Dec 2017 05:07

Suraj,

Any comments on the FRDI bill and bail-in clause? The scaremongering hit-piece ("Banks will take all your money", etc.) is getting a LOT of traction on SM, WhatsApp, etc. Your pithy, well-informed summaries were a terrific source of ammunition during the demonetization information wars. It would be great to have some talking points on this subject. I'm not nearly enough of an economics student to come up with hard-hitting ones.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Dipanker » 09 Dec 2017 05:22

If we were to compare the per capita GDP in 1958 to per capita GDP in 2017, we would need to convert them to same base year, inflation data comes handy for doing just that.

If we use the inflation data from the cited source, 1 unit of money in 1958 is roughly equivalent to ~72 unit today. Divide the current per capita GDP by 72 ( or multiply the 1958 per capita GDP by 72) and now we can compare per capita GDP of 2017 with per capita GDP of 1958! Right ?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 09 Dec 2017 05:51

Dipanker wrote:If we were to compare the per capita GDP in 1958 to per capita GDP in 2017, we would need to convert them to same base year, inflation data comes handy for doing just that.

If we use the inflation data from the cited source, 1 unit of money in 1958 is roughly equivalent to ~72 unit today. Divide the current per capita GDP by 72 ( or multiply the 1958 per capita GDP by 72) and now we can compare per capita GDP of 2017 with per capita GDP of 1958! Right ?

You're WAY off the mark. You cannot mathematically have real GDP growth > real population growth through almost every year in that period and have the calculation add up as you imagine. In fact, for your claim to reconcile, per capita GDP growth has to be 0 or negative on a compounded basis through the entire period in question. Here's per capita GDP growth btw:
India per capital real and nominal GDP growth 1951-52 to 2011-12

Suraj
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 09 Dec 2017 06:09

Rudradev wrote:Suraj,

Any comments on the FRDI bill and bail-in clause? The scaremongering hit-piece ("Banks will take all your money", etc.) is getting a LOT of traction on SM, WhatsApp, etc. Your pithy, well-informed summaries were a terrific source of ammunition during the demonetization information wars. It would be great to have some talking points on this subject. I'm not nearly enough of an economics student to come up with hard-hitting ones.

I didn't bother because it's political handwaving and not economics. The bill itself is ok. But some of the provisions of *other* things it uses are not good enough in the contemporary sense. The controversy is really about "OMG, we haven't fixed this other stuff in decades!"

The basic issues here are
a) what is the deposit insurance upper limit and
b) what is the order of priority of discharging debts in case of liquidation.

The deposit insurance (like FDIC insurance on deposits in US banks) is handled in India by the Deposit Insurance and Credit Guarantee Corporation. Deposits in banks are insured upto Rs.1 lakh. In other words, in case of bank failure, you lose any deposits in excess of Rs.1 lakh. This has nothing to do with FRDI bill itself. This is a separate financial act. The problem is that Rs.1 lakh is quite low for the modern age. A lot of people suddenly realize that their large bank deposits are at risk from a bank failure. This is the fear being played upon by the controversy. The Rs.1 lakh limit was set in 1993 (!!) and not updated since. It may have been plenty in 1993, but not now. It should be raised, to maybe 25 lakh or more.

Order of discharge. This is codified in the FRDI bill. It's very clear:
The FRDI Bill: Bail-In provisions explained
Image
In other words, deposit insurance is the first priority, even above govt dues and most other things.

The FRDI bill is fine. The problem is that the deposit insurance limit is too low, and the FRDI bill just made it a topic people sat up and noticed.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 09 Dec 2017 08:41

Just now my brother on whatsapp is spreading this

http://m.indiatoday.in/story/frdi-bill- ... 03422.html

Modi government's FRDI bill may take away all your hard-earned money
Here's how the Financial Resolution and Deposit Insurance Bill may help the banks take away all your hard-earned money. Without your consent!

No one reads the last line

Update: Finance Minister Arun Jaitley reiterates government's stance on the FRDI Bill saying it is still pending before the standing committee and that government's objective is to fully protect the interest of the financial institutions and depositors.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 09 Dec 2017 08:54

Deleted
Last edited by Suraj on 09 Dec 2017 09:09, edited 1 time in total.
Reason: Poster warned for constant thread disruption with politics .

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 09 Dec 2017 23:47

Direct tax collections rise 14% to Rs 4.8 lakh cr in Apr-Nov: CBDT
Direct tax collections increased by 14.4 per cent to Rs 4.8 lakh crore during April-November this financial year.

"The provisional figures of Direct Tax collections up to November, 2017 show that net collections are at Rs 4.8 lakh crore, which is 14.4 per cent higher than the net collections for the corresponding period of last year," Central Board of Direct Taxes said in statement.

According to the statement, the net direct tax collections represent 49 per cent of the total Budget Estimates of direct taxes for 2017-18 (Rs 9.8 lakh crore).

The gross collections (before adjusting for refunds) have increased by 10.7 per cent to Rs 5.82 lakh crore during April-November, 2017.

24 cos, Rs 60k-cr investment & 150,000 jobs: Gadkari reveals mega JNPT port plan
Union Shipping and Ports Minister Nitin Gadkari on Saturday said 24 companies have offered to invest over Rs 60,000 crore in a special economic zone adjoining the country's largest container port JNPT.

This will entail an investment of Rs 60,000 crore and create employment for 1.25-1.50 lakh people, he said.

Prime Minister Narendra Modi had laid the foundation for the facility months after being sworn-in in May 2014 and the government was targeting to create 1.50 lakh jobs in the facility.

A very important piece of news indicating a buildup of the business cycle:
Capital goods, infra order book doubles in December quarter
The order inflow trend for capital goods and infrastructure companies in the country has shown significant improvement, with the order value having more than doubled on a year-on-year basis in the December quarter so far.

Between October 1 and December 6, various infrastructure, construction and capital goods companies announced orders worth Rs 55,814 crore as new order wins. In the third quarter of 2016-17, this number stood at Rs 27,324 crore.

Two major orders — Bharat Heavy Electricals’ win of Rs 20,400 crore power project in Telangana and Larsen & Toubro bagging the Rs 8,650-crore order for the Mumbai trans-harbour link — helped the overall order book growth.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Kakkaji » 10 Dec 2017 06:09

How young professionals are revitalising policy-making in India

"In the past two years, my mind has been rewired and I see things differently. If I come across a new policy, I first think, what is its impact on society, business and in job creation," says Maini, one of 40 young professionals or YPs, currently working with the government think-tank, NITI Aayog. Another 38 are to join soon.

Maini, attached to the Office of CEO, NITI Aayog, works on policy research and analysis to statistical modelling. "I am presently working on a project related to transformation of backward districts as well as the creation of a national level knowledge portal to document best practices in governance."

Suraj
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 10 Dec 2017 06:29

Forex reserves up to $402 billion
India's foreign exchange reserves increased by USD 1.2 billion to touch USD 401.942 billion in the week to December 1, according to the RBI data.

The surge in reserves was aided by an increase in foreign currency assets, a major component of the overall reserves.

The reserves once again crossed USD 400 billion mark in the previous week, after they rose by USD 1.208 billion to USD 400.741 billion.

The foreign currency reserves increased by USD 1.151 billion to USD 377.456 billion for the reporting week, the RBI said today.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Karthik S » 10 Dec 2017 08:21

Can we invest some percentage of FE reserves in stock market, like EPFO.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 10 Dec 2017 10:22

Karthik S wrote:Can we invest some percentage of FE reserves in stock market, like EPFO.

That's not how forex reserves work. They're foreign currency. It's not legal tender in India...

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Karthik S » 10 Dec 2017 10:42

Suraj wrote:
Karthik S wrote:Can we invest some percentage of FE reserves in stock market, like EPFO.

That's not how forex reserves work. They're foreign currency. It's not legal tender in India...


Yeah, but they can be invested in the country whose currency we hold, dollars mostly. There are some metrics regarding holding particular amount as reserves such as 6 months worth of import or covering current account deficit. The excess reserve amount could be invested.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 10 Dec 2017 11:24

Karthik S wrote:
Suraj wrote:That's not how forex reserves work. They're foreign currency. It's not legal tender in India...

Yeah, but they can be invested in the country whose currency we hold, dollars mostly. There are some metrics regarding holding particular amount as reserves such as 6 months worth of import or covering current account deficit. The excess reserve amount could be invested.

Maybe, but they also cover our external debt, not merely imports. For example, when you hold money as an NRI in FCNR or NRE accounts, you add to forex reserves AND to external debt, because technically that money may be withdrawn and the account holder has to be paid back in dollars.

This isn't really 'free money' to play with. If it were earnings from a trade surplus (e.g. PRC) or from commodity exports (e.g. KSA/Russia), maybe. But when it's money that comes with the potential that it could be withdrawn, it's different.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Karthik S » 10 Dec 2017 11:45

OK, makes sense regarding external dept being part of our reserves. Thanks Suraj.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Prasad » 11 Dec 2017 15:05

Are there green shoots of a capex revival?


http://www.thehindubusinessline.com/opi ... 988387.ece?
For the first time in six years Srivats Ram, MD of Wheels India, a TVS group company, has begun worrying about capacity constraint. In fact, he has begun de-bottlenecking his operations to meet the demand from customers across the commercial vehicle, passenger car, bus, tractor and construction equipment sectors. Tractor-maker Escorts is looking at expanding its capacity from lakh units to 1.6 lakh units. A decision is likely next year even as tractor sales, in FY18, are set to touch a record 6.45 lakh units.

Ramco Cements is already investing ₹1,200 crore to expand two of its grinding units in West Bengal and Andhra Pradesh apart from setting up a new one in Orissa. While this is strictly not a capacity expansion (clinker is shipped from existing facilities to the grinding unit to be crushed and converted into cement), the investment, however, increases its capacity in the eastern market where the off-take is strong.

These are just some indicative examples. Media reports suggest that companies across the country have started talking about possible capacity expansion.

After an extended lull, signs of a possible revival in capital expenditure (capex) are becoming visible. That is good news for the anaemic Indian economy which has been suffering from a long drought of private investment and consequent capex spending.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Yagnasri » 11 Dec 2017 15:51

No major increases in borrowings as far as I know during Sep 2017. Normally Sep months revival of limits is made by banks. Maybe they are all waiting during that quarter. We need to see this quarter.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chetak » 11 Dec 2017 16:02

Suraj wrote:
Karthik S wrote:Yeah, but they can be invested in the country whose currency we hold, dollars mostly. There are some metrics regarding holding particular amount as reserves such as 6 months worth of import or covering current account deficit. The excess reserve amount could be invested.

Maybe, but they also cover our external debt, not merely imports. For example, when you hold money as an NRI in FCNR or NRE accounts, you add to forex reserves AND to external debt, because technically that money may be withdrawn and the account holder has to be paid back in dollars.

This isn't really 'free money' to play with. If it were earnings from a trade surplus (e.g. PRC) or from commodity exports (e.g. KSA/Russia), maybe. But when it's money that comes with the potential that it could be withdrawn, it's different.


aren't our forex reserves already held in amreki treasury bills??

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby JohnTitor » 11 Dec 2017 17:19

Rudradev wrote:Suraj,

Any comments on the FRDI bill and bail-in clause? The scaremongering hit-piece ("Banks will take all your money", etc.) is getting a LOT of traction on SM, WhatsApp, etc. Your pithy, well-informed summaries were a terrific source of ammunition during the demonetization information wars. It would be great to have some talking points on this subject. I'm not nearly enough of an economics student to come up with hard-hitting ones.


This should answer your question

https://www.thetruepicture.in/myths-frdi-bill/

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 11 Dec 2017 19:45

chetak wrote:aren't our forex reserves already held in amreki treasury bills??

Just some of it .

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 12 Dec 2017 01:45

https://economictimes.indiatimes.com/ma ... 974853.cms

Mark Mobius still thinks 10% growth is on cards and he is bullish on PSU banks

Visiting Mumbai, to attend the Barclays India Forum, EM Guru, Dr Mark Mobius of Franklin Templeton , sat down with ET NOW's Tanvir Gill to discuss his outlook for India & the world in the coming year. Mobius says he is overweight on PSBs because they are the biggest and the most liquid.

Edited excerpts:

Do you think that 13,000 definitely would be a reality for the Nifty building on gains that we have made this year into 2018 as well?

Definitely, and there is no question there. We are going to continue this trajectory and that is true not only of India but emerging markets generally, because if you look at the emerging markets index, the global index we are still below the 2007 high. I believe we will probably go beyond the 2007 number by about 20%. That is my calculation.

I recall that conversation primarily because you said a couple of factors would push India high from here which would get captured in the Indian markets, that is the full implementation of GST and pick up in earnings because of that. Where are we in terms of what you have seen as far as GST implementation goes and what do you make of the earnings cycle?

There is no question that GST implementation has been very complex. It is great that they put it in place and now they have to fix it, they have to get it implemented and there is no question that there is a lot of complications particularly in the services sector.


But when do you see the transition to GST and its full implementation resulting in earnings because I remember you had mentioned that by FY19 you see earnings picking up to 18% to 20%. Right now there is a big lag there. We are still struggling with breaking past 10%. Every year. we start off with 15-16% on earnings projections and then we scale it back and the reality turns out to be an 8% to 9% kind of range.

That is the average thus remember there will be laggards but the good companies are growing at least 20% and may be more and I believe that is what you got to look at, you got to look at those companies that are really leading the economy and growing at the pace of they should be going which is given the fact that the economy is going at this pace the companies should be doing at least double and even triple that range.

No, but the average base line, do you still keep your view that FY19 will capture the full effect of GST and that will reflect in earnings growing at 18% to 20%. Do you still hold on to that range?

Yes, I do but again as I have mentioned there will be lot of laggards so that the average may be pulled down. Let us put it this way, if you did the average based on market capitalisation, you would probably get closer to 15%, 16%, 17%, 18% level.

Let us talk about India's growth potential. We have seen the numbers hit a bottom at 5.7%. The last print had come in at 6.3%. What kind of sustainable growth trend do you expect from India?

You are going to see the accelerating trend and we are already beginning to see that as a result of the reforms that have taken place. So 10% growth is in the cards, there is no question that this will be achieved going forward.
I think a lot of the impact of the urbanisation of the economy will push this number forward. In other words, you are going to see this acceleration in the economy. I believe if the government is able to implement a programme which is meaningful and aggressive, in other words, if you look particularly at the infrastructure sector, more and more privatisation railways, power, roads, bridges etc. etc, this has to be done very aggressively because that will push forward the economic growth of the country and more importantly will draw in capita. It will mobilise capital at a faster pace than we are seeing now.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Vips » 12 Dec 2017 01:55

A simple guide to how money circulates in the Indian economy.

When money is released by the RBI (Reserve Bank of India) into the economy, it goes into circulation through transactions. The government may pay the people it employs, buy goods and services, give subsidies, and so on. Part of this money is kept by the recipients and the rest goes back into bank accounts. A government servant who receives a salary keeps a fraction of it at home and puts the rest in his bank account to earn some interest. The businessmen who sell their goods or services to the government and get money in their bank accounts use only a part of that to carry on their business, while the rest stays in the bank.

One can see that most of the money released into the economy keeps going in and out of the commercial banking system where businesses and households maintain their accounts. The banks have to pay the depositors some interest for keeping their money with them. They too now need to earn some income to pay this interest. They do so by lending the money they get to those who need it for various purposes. I may be setting up a plant to produce some item and may need long-term capital. I may need to set up an office to provide services. I may need capital to pay wages to my workers and also to buy raw material. A part of the profit earned by my business is paid to the banks as interest for the loan I have taken. What this means is that a bank does not have the money that its depositors deposited with it. If all the depositors come to a bank and want to withdraw their deposits, the bank would not be able to pay them. This is called a “run” on a bank, and such a bank fails. This is where the RBI plays the role of a banker to the banks, giving money to the banks.

Each bank is required to deposit a certain amount of its deposits with the RBI. This is called the cash reserve ratio (CRR). If a bank gets Rs100 in deposits and the CRR is 10%, then it has to deposit Rs10 with the RBI. It now has Rs90 to lend. This Rs90 is then given to a borrower, who pays it to someone else who puts it in their bank. That bank then has to deposit Rs9 with the RBI and can now lend Rs81. This amount may be lent and may make its way to a third bank, which then has to deposit Rs8.1 with the RBI.

This chain can continue, now looping in another bank which has to pay the RBI Rs7.29. The banks get Rs100+90+81+72.9…and the RBI gets Rs10+9+8.1+7.29+…What the banks are getting is also going out to the public and is being used as money. As the chain of deposits and withdrawals is completed over time, the Rs100 deposit leads to the system getting Rs1,000 and the RBI Rs100. You can see that the banking system, along with the RBI, has created 10 times the money that the RBI released to begin with. This is called the money multiplier.

The advantage of this system is that if a bank is in trouble and does not have the funds to return to its depositors, it can borrow from the RBI. So, the RBI is a guarantor of the banking system. For performing this role, the RBI is also a regulator of the banks and tries to make sure that no bank goes too much out of line with the prudential norms. When would a bank be in trouble? When it has lent out money to insolvent borrowers who are not paying back the interest on the loans they have taken and are not in a position to return the capital they have borrowed. This becomes a bad debt for the bank. If this debt is large in relation to the total lending of the bank, then the bank is in trouble since it does not have the money to pay interest to its depositors or return their deposits. In India, this problem has manifested itself recently as the problem of NPAs (non-performing assets) in banks. The RBI has been trying to deal with this situation.
Different forms of money, liquidity

What has been said above also illustrates that it is not just the cash that the RBI releases into the system that constitutes money, but also the bank deposits that are used as a means of carrying on transactions. In the simplified example above, there was only one form of bank deposit, but there are many kinds of bank deposits, with varying functions. There are current accounts, largely maintained by businesses, which can be used to make payments. There are savings accounts with households, whose members can write cheques to make payments. Then there are the fixed deposits, which cannot be used to make immediate payments but can be used with some delay to make payments. In India, there are also post office accounts that can be used to make payments. All these instruments constitute different forms of money. This brings in the concept of liquidity. Cash is the most liquid form of money, followed by the current account. The least liquid is the fixed deposit. Correspondingly, there are different forms of money that the experts talk of cash, M0, M3, and so on. Each of these measures of money has different significance for different sections of society. If people have no access to banks, then cash is relevant, and not M1 (see explanation below). There is another complication. The cash issued by the RBI is called ‘base money’ or ‘reserve money’ (M0). A part of this comes back to the RBI as CRR. Therefore the entire amount of cash released by the RBI is not available outside. That portion of the cash which is outside the RBI is the “currency in circulation.”

The banks themselves hold some money in their ATMs and vaults for their daily requirements, and this money is not with the public. So, the “currency with the public’” is the currency in circulation minus the currency that is held by the banks. The public can also use its savings accounts and current accounts to make payments, and this is another measure of money available to the public, called M1. This is the sum of the currency with the public and the deposits of the public in banks. The public also has deposits with the post offices, and if that is added to M1, one gets M2. If to M1 the time deposits (fixed deposits of tenure longer than one year) with the banks are added, we get M3. And if to M3 the total post office deposits (fixed deposits) are added, then we get M4.

To sum it up:
1. Currency with public = currency in circulation – cash on hand with banks

2. M0 (reserve money) = currency with public + cash on hand with banks + “other” deposits with RBI + bankers’ deposits with RBI

3. M1 (high-powered money) = currency with public + deposit money of public; where, deposit money of public = demand deposits with banks + “other” deposits with Reserve Bank

4. M2 = M1 + post office savings deposits

5. M3 = M1 + time deposits with banks

6. M4 = M3 + total post office deposits

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 12 Dec 2017 08:36

Image

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 12 Dec 2017 12:18

^ I like the fact that China is now being equated to Bakistan!


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