Indian Economy News & Discussion - Nov 27 2017

Suraj · Post by **Suraj** » 19 Sep 2018 09:51

kiranA wrote:THe chart I showed is for delhi which charges around 27% - their are plenty of states which are in 20s including populous ones like UP that means they all are pretty much lower than centers. And those in 30s may just match about centers and only in very few states it might exceed centers . Even on Sep 4th 2018 State share in delhi is significantly less than center. Refer here :
https://www.mycarhelpline.com/index.php ... &Itemid=10

Remember the word you used in your previous post is "lions share" is states. Thats absolutely not the case. Majority share is unambiguously centers for much of the population of the country.

And while you are correct the states share is a percentage and will go up as prices raise. Note that converse is also true . When prices were significantly less as they were in previous years centers share of taxes as proportion are even higher.

The crux of the matter is very clear and unambiguous. The centers tax which used be around 9 in 2013 went up to a staggering 19 now - more than a 100% increase. And dont forget Center was enjoying staggering Rs 21 in july 2017 after which there was a Rs 2 cut. State taxes also increased but significantly lesser and while states increased their taxes to protect fall in revenue as oil prices were decreasing (as they tax as percentage) the center has no such reason as it taxes in absolute numbers. The only reason for centers is to collect more money from the citizen.

Center pocketing a bulk of this money is also true and certainly not absurd. Of the Rs19 or so center imposes Rs8 is basically "road and infrastructure cess " which goes directly to center supervision where center bureacrats where and to whom to spend the money. Another component is additional excise duty which again goes directly to centers pocket. The only portion that out of which center shares 42% (with all of the states by the way not the state from which tax was collected - more money goes to populous and poor states like Bihar and less goes to say states like kerala) is the basic cenvat which is about 6-7 rupees only.

Refer here : http://www.jamewils.com/2017/09/decodin ... ax_21.html. This is slightly behind times as center reduced taxes by Rs 2 and rejigged some in to road and infrastructre cess after this article was published.

I agree with you that the term "lion's share" is imprecise.

The rest of what you claim though, is factually off the mark. You have an axe to grind here, and that blinds you from finding any reference to your claims, it seems. The current period encompasses the 14th Finance Commission, Each Finance Commission proposes a formula for fiscal devolution of revenues to states. Where a state needs resources in excess of what the formula provides for, they get additional grants in aid. It's a federal system that's been in operation since 1950.

If you have a problem with the way it's done, please make the effort to actually analyze the manner in which the Finance Commissions are implemented and then propose what you think is a better solution. Don't waste time here using terms like 'pockets the money', which ironically is an even worse error than my usage of lion's share - a term which can indeed be true if oil prices rise, because the central figure is a fixed rupee amount, but the state figure is not.

Between 2008 and approximately 2014, petrol prices were MUCH cheaper than the prevailing cost per barrel of crude. Do you know what happened to that shortfall ? That was the current government's job to fix. All the "excess taxation" of petrol the last three years, was used to pay off the accumulated debt of tens of billions of dollars by the PSU oil companies who could not pass on the price increases to the consumer. In graphical form:

The difference between blue and orange bars in the first image is a debt the oil companies were running for YEARS, financed through oil bonds. How do you think that was paid down ? Would you rather the government just ignore it, so that the burden is passed onto our children and grandchildren instead ? Or would you rather the government do what it did, and actually pay down all that debt, despite Rs.70,000 crore (>$10 billion) just in interest on those bonds that GoI had to pay ?

yensoy · Post by **yensoy** » 19 Sep 2018 13:42

^^^^ huh, you are comparing $/barrel with Rs/litre in the same graph without making a note of the units? may I remind you of two fruits, apples and oranges...

Suraj · Post by **Suraj** » 19 Sep 2018 17:49

I can’t find a better graph than that . I didn’t create it . You’re more than welcome to find one that lists the two separate sets of Y axes correctly. By all means , find a better one, and you’ll find that the argument remains valid...

.. My point is that for a period of several years, oil companies were not able to pass on the full price of crude to customers. At $120+ a barrel, petrol ‘should have cost’ far more than it did at the pump - north of Rs.100 perhaps .

That underrecovery did not magically go away by accounting sleight . Bonds were issued and those bonds had to be repaid . The current government has been paying down that debt for its entire term now - by more than doubling cenvat on petrol while crude prices were weak .

The other poster glibly accuses the government of ‘pocketing money’ by massively increasing cenvat. I simply offered some history on why the government was compelled to do this .

vijayk · Post by **vijayk** » 19 Sep 2018 19:54

kiranA wrote:
Suraj wrote:I'll point this out again - the center's tax is a fixed rupee amount per liter - Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. With the current price of petrol, the center's share is still Rs.19.48 - the rest is the remaining three variables.

The center's share does not change when prices fluctuate. It's the state's share that does - the states charge a percentage, and therefore their Rupee share of taxes go up and down depending on spot prices.

The Center is also responsible for compensating states for loss in revenue on account of GST being implemented. That money comes out of this pool of revenues. Claims of center "pocketing money" are absurd. They are the backstop here.

The center could cut their share by say Rs.2-4. But there's no guarantee prices will fall, simply because states set their own rates autonomously - when their receipts from center fall as a result, they will simply increase their rates to compensate. The only way around is a nationally agreed upon GST rate. "Center should cut their rate and prices will go down" is much too simplistic here.
THe chart I showed is for delhi which charges around 27% - their are plenty of states which are in 20s including populous ones like UP that means they all are pretty much lower than centers. And those in 30s may just match about centers and only in very few states it might exceed centers . Even on Sep 4th 2018 State share in delhi is significantly less than center. Refer here :
https://www.mycarhelpline.com/index.php ... &Itemid=10

Remember the word you used in your previous post is "lions share" is states. Thats absolutely not the case. Majority share is unambiguously centers for much of the population of the country.

And while you are correct the states share is a percentage and will go up as prices raise. Note that converse is also true . When prices were significantly less as they were in previous years centers share of taxes as proportion are even higher.

The crux of the matter is very clear and unambiguous. The centers tax which used be around 9 in 2013 went up to a staggering 19 now - more than a 100% increase. And dont forget Center was enjoying staggering Rs 21 in july 2017 after which there was a Rs 2 cut. State taxes also increased but significantly lesser and while states increased their taxes to protect fall in revenue as oil prices were decreasing (as they tax as percentage) the center has no such reason as it taxes in absolute numbers. The only reason for centers is to collect more money from the citizen.

Center pocketing a bulk of this money is also true and certainly not absurd. Of the Rs19 or so center imposes Rs8 is basically "road and infrastructure cess " which goes directly to center supervision where center bureacrats where and to whom to spend the money. Another component is additional excise duty which again goes directly to centers pocket. The only portion that out of which center shares 42% (with all of the states by the way not the state from which tax was collected - more money goes to populous and poor states like Bihar and less goes to say states like kerala) is the basic cenvat which is about 6-7 rupees only.

Refer here : http://www.jamewils.com/2017/09/decodin ... ax_21.html. This is slightly behind times as center reduced taxes by Rs 2 and rejigged some in to road and infrastructre cess after this article was published.

Money doesn't grow on tree! Yeah! MMS said that.

Then he raised 1,30,000 crores of bonds to reduce oil prices. With interest it is 2,00,000 crores.

Money didn't grow on trees and you have to repay the bonds ...

A wise Govt. decided to collect higher taxes when Oil prices went down and repaid it.

If Modi decided to bring sell another bond of 2,00,000 crores and pay off old debt and leave 3 lakh crores to year 2023 and cut oil prices, would we have been better off? NO

Center didn't pocket it. Center reduced debt of future generations. Who cares?

pankajs · Post by **pankajs** » 19 Sep 2018 22:07

Leaving aside the politics around the Fuel prices there is no reason to cut prices with inflation on a downward march.

https://www.livemint.com/Politics/h4QAe ... -at-6.html
India August inflation falls below RBI target despite rupee slide

New Delhi: India’s retail inflation fell below the Reserve Bank of India’s (RBI) medium-term target in August, increasing the likelihood it will keep interest rates on hold in October after raising them at its past two meetings. Consumer price inflation (CPI) rose 3.69% from a year earlier, down from July’s 4.17%, the statistics ministry said on Wednesday. August was the first month in 10 in which retail inflation was below RBI’s medium-term target of 4%.

The median forecast of economists polled by Reuters for August was 3.86%, with three-quarters of those polled predicting inflation would be below the RBI’s target. Forecasts ranged from 3.55% to 5.40%.

“While weakness in the rupee adds to the upside risk, factors such as still sanguine domestic food prices and moderation in global commodity prices (excluding oil) are likely to provide some relief,” said Garima Kapoor, an economist at Elara Capital in Mumbai.

Slowing inflation in food prices, which make up nearly half of CPI, cancelled out price rises in imported goods stemming from the weakening rupee currency. Food inflation slowed to 0.29% from a year earlier, against 1.37% in July.

Softening inflation could give Prime Minister Narendra Modi a boost as he faces Lok Sabha elections next year.

disha · Post by **disha** » 19 Sep 2018 22:08

vijayk wrote: A wise Govt. decided to collect higher taxes when Oil prices went down and repaid it.

If Modi decided to bring sell another bond of 2,00,000 crores and pay off old debt and leave 3 lakh crores to year 2023 and cut oil prices, would we have been better off? NO

Center didn't pocket it. Center reduced debt of future generations. Who cares?

Nonsense rhetoric when one runs out of cogent arguments.

I care. Any sane finance person cares. Most Indian homemakers care. Most parents care. There are several more million people who care compared to a single you (check on how many hits websites that deal with reducing or paying off home mortgage get all over the world. Basically it is reducing debt from future including passing down a debt free asset to their children. So yes you are completely wrong.)

High debt leads to inflation and lack of growth. In the best of circumstances, it leads to stagflation - which we saw in 2010-2014 time frame. Currently Bakistan is going through it. Worst case it leads to Venezuela. There is other part where there is zero growth and zero inflation, that is what PIIGS are going through. However with growing population India cannot be at PIIGS stage, it will rapidly lead to venezuela stage if the stagflation is not contained due to high debt.

Of course if we want India to go the venezuela or Bakistan way, then yes we must remove all taxes on oil/petrol/diesel. Who cares?

Here is India's gross fiscal deficit in relation with GDP

https://www.statista.com/statistics/802 ... on-to-gdp/

Here is from western shill https://www.forbes.com/sites/salvatoreb ... 678dabab62

pankajs · Post by **pankajs** » 19 Sep 2018 22:11

https://www.thehindubusinessline.com/ec ... 979922.ece
Lowering inflation is a major structural reform in India: IMF official

One major structural reform the Indian economy has witnessed over the last few years is lower inflation. For an economy where “higher than optimum level” inflation rates were a norm, current numbers tend to be closer to the Reserve Bank of India’s estimates, according to Andreas Bauer, Senior Representative – India, Nepal & Bhutan, International Monetary Fund (IMF).

The change is as important a reform as the roll-out of the Goods and Services Tax or bringing in the Insolvency and Bankruptcy Code (IBC) framework, he said. Data released by the Central Statistics Office showed that retail inflation hit a 10-month low in August at 3.69 per cent, compared to 4.17 per cent in July. The RBI’s medium-term target for consumer price index is 4 per cent within a band of +/- 2 per cent.

“The move towards flexible inflation target with a defined framework for implementation is a big step forward. And you can already see a convergence towards the target that the RBI has set. I think it is a big structural reform,” he told BusinessLine. Bauer was in Kolkata to attend the India Economic Forum 2018 organised by the Merchants’ Chamber of Commerce and Industry.

Pointing out that fundamentals of the Indian economy were strong, Bauer said the current account deficit (CAD) was widening partly because of oil imports. However, the deficitis “still at a moderate level”.

India’s CAD stood at 2.4 per cent of GDP in the April-June quarter.

“In terms of magnitude, it (CAD) is much better than what it was five years ago. So I think it is time for prudent policies. In general, we do feel that the fundamentals of the Indian economy are strong. This level of current account (deficit) is more or less what we expect for a country like India,” he said.

The real effective exchange rate (REER) — the weighted average of a currency against a basket of other currencies adjusted for inflation — is broadly within the fundamentals and fluctuations are “in line”.

souravB · Post by **souravB** » 19 Sep 2018 23:26

Deleted. This is the economics thread, NOT the politics thread.

Trikaal · Post by **Trikaal** » 20 Sep 2018 00:22

As of now, I don't see the centre reducing tax on crude. It's all well and good to say that India should follow the approach of other countries that tax fuel at a fixed 50-60% but that would reduce tax collections drastically. We need to remember that India is still a predominantly Indirect taxation country and untill a significant majority enters the direct taxation bracket, we have no other choice but to put up with high indirect taxation.

saip · Post by **saip** » 20 Sep 2018 00:34

yensoy wrote:^^^^ huh, you are comparing $/barrel with Rs/litre in the same graph without making a note of the units? may I remind you of two fruits, apples and oranges...

It is common thing to do that. Everyone knows the crude is in dollars and gas is in Rupees. This is what I have always argued with people when they complain about gas prices. They never complained when the crude price was $111 and the government subsidized the gas price but now that the government is rightfully passing on the increase in crude price they complain. That is the way people behave. How long can a country run if it gives subsidies or waives farm loans or keep the quota system for jobs?

vijayk · Post by **vijayk** » 20 Sep 2018 01:30

https://www.livemint.com/Industry/RsMpx ... -July.html

India logs 6.6% growth in industrial production in July

India’s industrial production grew at 6.6% in July on the back of good performance by the manufacturing sector (7%) and higher offtake of capital goods (3%) and consumer durables (14.4%)

The manufacturing sector recorded 7% growth in July as against a contraction of 0.1% in the same month a year ago. The consumer durables sector recorded an impressive 14.4% growth in July against a dip of 2.4% a year ago. Capital goods production grew by 3% in July as against decline of 1.1% a year ago.

The IIP growth in April-July period was 5.4% compared to 1.7% year ago.

In terms of industries, 22 out of 23 industry groups in the manufacturing sector showed positive growth during July 2018. The industry group “manufacture of furniture” has shown the highest positive growth of 42.7% followed by 30.8% in “manufacture of computer, electronics and optical products” and 28.4% in “manufacture of tobacco products”.

“Manufacture of paper and paper products” and “printing and reproduction of recorded media” have shown the highest negative growth of -2.7% followed by -0.9% in “manufacture of machinery and equipment”.

Suraj · Post by **Suraj** » 20 Sep 2018 01:40

Services trade continues to remain robust for the first 4 months of data reported this FY.
July 2018
Exports: $17.5 billion
Imports: $10.8 billion

Apr-July 2018:
Exports: $68.2 billion
Imports: $42.3 billion
Surplus: $25.9 billion

vijayk · Post by **vijayk** » 20 Sep 2018 13:53

https://www.bloombergquint.com/global-e ... gs.eqG3JRQ

New Sectors Are Contributing To Indian Economy: JPMorgan’s Nicolas Aguzin

India’s world-beating GDP growth numbers are riding the wave of an “unlocking” of efficiency due to contribution from sectors that weren’t easy to track in the past, said Nicolas Aguzin, chairman and chief executive officer, JPMorgan Asia Pacific.

“India’s growth over eight percent with relatively low inflation merits attention,” Aguzin said in an interaction with BloombergQuint. “Newer sectors that weren’t easy to track in the past are being considered. We don’t account for those efficiencies.”

He said that Asia’s third-largest economy tends to overestimate the impact of inflation and underestimate growth.

Key highlights from the conversation:
Impact Of U.S.-China Trade War

Trade activity, growth rates fairly strong despite all the noise around trade, exchange rates and rout of emerging markets.
Underlying structure of economies still seems to be solid.
Headlines around trade, Federal rates yet to have full impact.

Recession 2.0 On Cards?

Lot of indicators normal, but care needed on investor sentiment and appetite.
Need dialogue between U.S. and China over resetting current environment.

Intra-Asia Trade Activity

Surprisingly, there’s a lot of activity from Japanese corporations trying to leverage growth in the pan-Asian region.
North Korea softening its stand on nuclear bases will positively help in overcoming risks around Asia.

India's Headline GDP Numbers

India overestimates the impact of inflation and underestimates growth.
Indian business and investor community tends to be conservative. In reality, numbers end up working out pretty well.
GDP numbers translating into meaningful investments: Walmart acquiring Flipkart and UPL buying Arysta are significant transactions.

Effects Of Trade Deficit, Rupee Slide

Factors played a role in investors turning more cautious.
Rupee devaluation caused by investors reallocating their portfolio away from domestic bonds.

Dilbu · Post by **Dilbu** » 20 Sep 2018 16:30

Is there any other news or link where it is confirmed that oil bonds worth 2 lakhs have been paid off in full? I saw the news about petroleum minister stating it. Some people on facebook have raised an argument that the bonds are only being serviced and have not been paid off in full before their maturity.

Supratik · Post by **Supratik** » 20 Sep 2018 19:16

Entire oil debt taken by UPA2 including interest has been repaid.

https://timesofindia.indiatimes.com/bus ... 751068.cms

Suraj · Post by **Suraj** » 20 Sep 2018 19:25

Dilbu wrote:Is there any other news or link where it is confirmed that oil bonds worth 2 lakhs have been paid off in full? I saw the news about petroleum minister stating it. Some people on facebook have raised an argument that the bonds are only being serviced and have not been paid off in full before their maturity.

Please don't quote FB/Twitter/WA as sources of argument here.

Supratik · Post by **Supratik** » 21 Sep 2018 18:35

More shell companies struck down.

https://economictimes.indiatimes.com/ne ... 900893.cms

vijayk · Post by **vijayk** » 21 Sep 2018 19:24

https://economictimes.indiatimes.com/ne ... content=26

Fitch Ratings Friday upped India's growth forecast for the current fiscal to 7.8 per cent, from 7.4 per cent earlier, but flagged rising oil bill and higher interest rates as key concerns.

Fitch, in its Global Economic Outlook, said it expects inflation to rise to the upper end of the central bank's target band (4 per cent, plus-minus 2 per cent) on relatively high demand-pull pressures and rupee depreciation.

vijayk · Post by **vijayk** » 21 Sep 2018 19:25

https://economictimes.indiatimes.com/ne ... 891926.cms
Easier tax refund regime for exporters in the works

The government is examining the tax refund mechanism for exporters under goods and services tax (GST) and may announce some measures over the next few days to streamline the process and speed up repayments. “Some measures are being looked at…,” a senior official told ET, adding that these could be unveiled by the weekend.

Exporters say delay in refund under GST impacts business and raises working capital cost. Last week, Finance Minister Arun Jaitley had said the government would take s ..

Supratik · Post by **Supratik** » 21 Sep 2018 19:44

Some thoughts on cutting petroleum taxes going on.

https://www.businesstoday.in/current/ec ... 82673.html

Suraj · Post by **Suraj** » 21 Sep 2018 22:04

Over 270 mn people in India moved out of poverty between 2005-16: UN Report

Over 270 million people in India moved out of poverty in the decade since 2005-06 and the poverty rate in the country nearly halved over the 10-year period, a promising sign that poverty is being tackled globally, according to latest estimates released Thursday.

The 2018 global Multidimensional Poverty Index (MPI) released here by the United Nations Development Programme (UNDP) and the Oxford Poverty and Human Development Initiative (OPHI) said that about 1.3 billion people live in multidimensional poverty globally.

The Index noted that in India, 271 million people moved out of poverty between 2005/06 and 2015/16. The poverty rate in the country has nearly halved, falling from 55 per cent to 28 per cent over the ten-year period.

India is the first country for which progress over time has been estimated.

"Although the level of poverty particularly in children is staggering so is the progress that can be made in tackling it. In India alone some 271 million have escaped multidimensional poverty in just ten years," UNDP Administrator Achim Steiner said.

Fitch raises India's GDP forecast to 7.8% from 7.4% for FY19 (current fiscal)

Fitch Ratings Friday upped India's growth forecast for the current fiscal to 7.8 per cent, from 7.4 per cent projected earlier.

"We have revised up our forecast for FY2018-2019 growth to 7.8 per cent from 7.4 per cent on the back of the better-than-expected 2Q18 outturn. India's growth likely peaked in 2Q18 (April-June) though," Fitch said.

The upward revision in growth forecast comes in the backdrop of GDP expanding 8.2 per cent in April-June quarter, higher than Fitch's expectation of 7.7 per cent.
"This robust performance was partly attributable to a powerful base effect, with GDP growth dampened in 2Q17 (April-June) by companies de-stocking ahead of the rollout of the goods and services tax," Fitch said.

It has cut the growth forecasts for FY 2019-2020 and FY 2020-2021 growth by 0.2 percentage points to 7.3 per cent.

Borrowings by states drop 3% in April-August FY19 to Rs 1.32 trillion

Borrowings by state governments slid three per cent during April-August of this financial year. By way of state development loans (SDLs), the states availed of Rs 1.32 trillion in this period compared with Rs 1.37 trillion in the corresponding period of FY18.

For states, the borrowing costs scaled two-year highs in the period under review though the cost dipped by 0.01 per cent in August. The weighted average of SDLs have risen by 0.57 per cent since April this year.

Data compiled by the Reserve Bank of India (RBI) showed Rajasthan topping states in borrowings as it availed of Rs 35 billion in August by way of SDLs. The cost of borrowing was the highest for Jammu & Kashmir at 8.52 per cent and the least for Odisha (8.37 per cent) in August 2018.

Total borrowings by the central government, too, reflect a downtrend -- it was down 21 per cent in April-August. Overall borrowings fell from Rs 3.09 trillion to Rs 2.44 trillion in the period. For the month of August alone, the central government borrowings aggregated to Rs 600 billion.

ramana · Post by **ramana** » 22 Sep 2018 04:41

Rathin Roy interview.

https://indianexpress.com/article/busin ... ssion=true

Supratik · Post by **Supratik** » 22 Sep 2018 21:11

Tata steel to acquire Usha Martin steel business.

https://economictimes.indiatimes.com/in ... 913885.cms

krisna · Post by **krisna** » 23 Sep 2018 00:26

https://health.economictimes.indiatimes ... d/65913517

Ayushman Bharat worlds largest healthcare programme costing ~3500 crores. likley will go up enormously.

Billed as the world's largest government healthcare programme, it will be funded with 60 per cent contribution coming from the central government and the remaining from the states.

"We have received applications from 15,000 hospitals for being empanelled ... Out of this half, that means 7,500 applications for empanelment are private hospitals," Paul said, adding in some states the process for empanelment is yet to start.

Asked about the cost to the exchequer in the current fiscal, he said, "Around Rs 3,500 crore has been budgeted by the central government for the scheme this year."

He said Rs 2,000 crore had been provided in the budget for 2018-19 as token money for the scheme.

"We are six months into this fiscal and we also know that only 27 states will go immediately into operations. Therefore full uptake is still be building up. Accordingly, Rs 1,500 crore more has been sought, so we now have Rs 3,500 crore as the central government budget," he said.

Supratik · Post by **Supratik** » 23 Sep 2018 18:27

Rural banks to be consolidated.

https://economictimes.indiatimes.com/in ... 922429.cms

Supratik · Post by **Supratik** » 24 Sep 2018 19:53

Surjit Bhalla on how improved sanitation helped improve inclusive growth.

https://indianexpress.com/article/opini ... y-5369105/

Supratik · Post by **Supratik** » 24 Sep 2018 21:29

Ayushman Bharat or Modicare, one of the largest health care schemes in the world has been launched. To target 50 crore people.

Trikaal · Post by **Trikaal** » 24 Sep 2018 22:28

https://indianexpress.com/article/busin ... 8900/lite/

Most states have preferred to settle insurance claims on their own through trusts. Is this wise? Is there potential for massive scams here?

Ayushman Bharat: Insurance companies fail to get govt’s health cover pie

Insurance companies have failed to get any significant share of the Ayushman Bharat-National Health Protection Mission (AB-NHPM), the ambitious health insurance plan of the government, with most state governments bypassing insurers and forming trusts to execute the mission. Prime Minister Narendra Modi unveiled the scheme on Wednesday which would be offering Rs 5 lakh health cover to the poor and vulnerable families in the country for free.

Insurance companies are disappointed over the way bidding and the model being selected by various states for the scheme which envisages a premium outlay of over Rs 10,000 crore in the first year. “It is now clear NHPM, which was expected to be a big business for the domestic general insurance industry, is turning out to be a damp squib for them as governments are preferring the trust model,’’ said the senior official of an insurance company.

According to sources, of the 26 states which signed memorandums of understanding (MoUs) with the government to participate in the scheme, only 4 states — Jharkhand, Nagaland, Manipur and West Bengal — have the normal insurance model. In the current scheme of things, in a trust-based model, each individual state will form its own trust to manage the scheme and claims will be disbursed from a corpus created from Central and state government contributions at a ratio of 60:40. The claims will be settled through the help Third Party Administrators (TPAs). In the pure insurance model, insurance companies handle the entire cover including claims while hybrid is a mix of both insurance and trust models. Gujarat and Chhattisgarh have opted for the hybrid model — a mix of Trust and pure insurance models — after completing the competitive bidding. Earlier, Nagaland had opted for the hybrid model. Uttar Pradesh, the largest state, and some smaller states like Uttarakhand, Himachal Pradesh and Tripura have decided to opt for a Trust model instead of the insurance model.

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Ayushman Bharat: Insurance companies fail to get govt’s health cover pie
Prime Minister Narendra Modi unveiled the scheme on Wednesday which would be offering Rs 5 lakh health cover to the poor and vulnerable families in the country for free.
Written By George Mathew | Mumbai |
Updated: August 16, 2018 12:12:41 am
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Most state govts bypassing insurers and forming trusts to execute the mission.
Insurance companies have failed to get any significant share of the Ayushman Bharat-National Health Protection Mission (AB-NHPM), the ambitious health insurance plan of the government, with most state governments bypassing insurers and forming trusts to execute the mission. Prime Minister Narendra Modi unveiled the scheme on Wednesday which would be offering Rs 5 lakh health cover to the poor and vulnerable families in the country for free.

Insurance companies are disappointed over the way bidding and the model being selected by various states for the scheme which envisages a premium outlay of over Rs 10,000 crore in the first year. “It is now clear NHPM, which was expected to be a big business for the domestic general insurance industry, is turning out to be a damp squib for them as governments are preferring the trust model,’’ said the senior official of an insurance company.

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According to sources, of the 26 states which signed memorandums of understanding (MoUs) with the government to participate in the scheme, only 4 states — Jharkhand, Nagaland, Manipur and West Bengal — have the normal insurance model. In the current scheme of things, in a trust-based model, each individual state will form its own trust to manage the scheme and claims will be disbursed from a corpus created from Central and state government contributions at a ratio of 60:40. The claims will be settled through the help Third Party Administrators (TPAs). In the pure insurance model, insurance companies handle the entire cover including claims while hybrid is a mix of both insurance and trust models. Gujarat and Chhattisgarh have opted for the hybrid model — a mix of Trust and pure insurance models — after completing the competitive bidding. Earlier, Nagaland had opted for the hybrid model. Uttar Pradesh, the largest state, and some smaller states like Uttarakhand, Himachal Pradesh and Tripura have decided to opt for a Trust model instead of the insurance model.

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Oriental Insurance Company (OIC) has successfully bid for the state of Gujarat at Rs 361 for providing cover up to Rs 50,000 per family. Similarly, stand-alone health insurance company, Religare Health Insurance bagged the mandate from the state of Chhattisgarh by offering a rate of Rs 1,100 for providing a cover up to Rs 50,000 per family. Meanwhile, Debasish Panda, Additional Secretary, Insurance, Ministry of Finance, held a meeting with the general managers of all the four state-owned general insurance companies (New India Assurance, OIC, National Insurance Company and United India Insurance) in New Delhi on July 30 to ascertain their views on the tender document for the NHPM.

In March 2018, the Union Cabinet approved the organisational architecture of the AB-NHPM that will provide health insurance to 10.74 crore families, and the continuation of the National Health Mission till March 31, 2020, with budgetary support of Rs 85,217 crore. While the NHPM was announced in the Union Budget this year and aims to provide Rs 5 lakh annual health cover, the NHM was the flagship UPA government programme and will be the principal vehicle for universal health coverage.

Suraj · Post by **Suraj** » 26 Sep 2018 03:02

NPAs: Whopping Rs 1.8 lakh crore debt recovery expected in FY19 from IBC and non-IBC route, says FM Jaitley

The Narendra Modi government on Tuesday said that the debt recovery in the financial year 2018-19 is expected to be Rs 1.8 lakh crore from both Insolvency and Bankruptcy Code (IBC) and non-IBC route. Addressing a press conference after the annual review meeting of the Public Sector Banks (PSBs), Finance Minister Arun Jaitley said that the country is on the right track for overcoming the “legacy issue” of the non-performing assets (NPAs).

The finance minister reiterated that many defaulters are paying up their dues in order to escape the IBC process and losing control over their companies. Arun Jaitley said that as recoveries picked in last few months, it resulted in some PSBs posting profit. He said the in the last several years had been challenging for public sector banks as a large amount of lending was held up in NPAs.

But after the Insolvency and Bankruptcy Code (IBC) came into force, which calls for an auction of assets of loan defaulting entities, recoveries have picked up. Recoveries are better, the lending ability of banks is much better and to top it all credit growth has significantly moved upwards, he said.

hanumadu · Post by **hanumadu** » 26 Sep 2018 05:47

Does that mean 1.8 lakh crore worth of loans will be actually repaid or will just the pending interest and premium for those loans be paid either by the new owners or through new financing? The existing lenders will get their money back but there would be new lenders in the second case. Either way, the promoters will take the hair cut, some of them deservedly and some of them because of poor policy support.

JayS · Post by **JayS** » 26 Sep 2018 09:42

hanumadu wrote:Does that mean 1.8 lakh crore worth of loans will be actually repaid or will just the pending interest and premium for those loans be paid either by the new owners or through new financing? The existing lenders will get their money back but there would be new lenders in the second case. Either way, the promoters will take the hair cut, some of them deservedly and some of them because of poor policy support.

I think its the money that the banks actually get back in their accounts, and its mix of Principle and interest due. While auctions, the banks get their money from the action money and the accounts are closed, there must be many small and mid sized account who were willful defaulters, but started servicing the loans now due to the IBC and cracked deals with lenders for restructuring. Some might have even paid in full and closed down the account. IIRC last year banks recovered some 88000Cr from many mid and small size accounts which were not paying otherwise. This is largely non-IBC recovery I believe because first in line for IBC were 5000+Cr accounts.

I think its reasonable to expect 50% of all NPAs to be recovered. Since total NPA are expected to reach 12L Cr, thats about 6L Cr.

Also in Q1 of this yr the recovery has seen 49% increase Y-o-Y. So the process is picking up speed. Many big accounts will be closed in coming 1-2yrs.

yensoy · Post by **yensoy** » 26 Sep 2018 11:37

JayS wrote:Also in Q1 of this yr the recovery has seen 49% increase Y-o-Y. So the process is picking up speed. Many big accounts will be closed in coming 1-2yrs.

The main problem with tightening the screw on NPAs is the threat of chain defaults which could take down even nominally healthy accounts with it. So while the popular voice would clamour for shutting down non-performing crony corporations, one needs to exercise some caution in shutting them down.

hanumadu · Post by **hanumadu** » 26 Sep 2018 11:58

https://www.financialexpress.com/indust ... h/1221734/

The NPAs are expected to further rise this year. Don't know if this is taking into account the IBC resolutions or inspite of it.
Why are the NPAs rising inspite of good GDP growth? When will the power industry NPAs be resolved? Is there a solution to it other than taking a big haircut?

India's lost decade is fast becoming decade and half.

A_Gupta · Post by **A_Gupta** » 26 Sep 2018 19:03

hanumadu wrote:https://www.financialexpress.com/indust ... h/1221734/

The NPAs are expected to further rise this year. Don't know if this is taking into account the IBC resolutions or inspite of it.
Why are the NPAs rising inspite of good GDP growth? When will the power industry NPAs be resolved? Is there a solution to it other than taking a big haircut?

India's lost decade is fast becoming decade and half.

Was looking for the RBI original for the above, and didn't notice that the news-item is from June.

The relevant page is here: https://rbi.org.in/Scripts/PublicationR ... ge=&ID=906

A_Gupta · Post by **A_Gupta** » 26 Sep 2018 19:12

hanumadu · Post by **hanumadu** » 26 Sep 2018 19:36

Thanks A_Gupta. How can a quarter of industry be stressed after 4 years of 7+ growth? And GNPAs are rising at a faster rate in the last two quarters and perhaps into the next year too.

Telecom Industry is not included in the last graph. Perhaps its under Engineering? It's one more industry on the brink, but at least the users are getting much cheaper call and data rates.

At this rate, I don't see profitability in the industry for close to another decade. Banks will continue to face losses for many years to come.

A_Gupta · Post by **A_Gupta** » 26 Sep 2018 21:32

^^^ How big is the Indian "junk bonds" industry? Perhaps risky financing is coming from banks when it ought to come from the market?

Supratik · Post by **Supratik** » 26 Sep 2018 21:39

It means the govt has given a free hand to declare NPAs. Plus insolvency code has given banks a process to recover some percentage of the loan. Previously the norm was write-off or kicking the can down the road by restructuring all of which leads to losses followed by recapitalization with tax payers money. From this the extent of the "phone banking" mess or scam can be gauged. Another benefit - once declared defaulter the company will go into insolvency. So many defaulters are paying up as reported so that they do not loose the company. Overall cost to economy will probably be 1-3% that is GDP growth rate would have been 9-10% without the mess.

Suraj · Post by **Suraj** » 27 Sep 2018 00:40

hanumadu wrote:Thanks A_Gupta. How can a quarter of industry be stressed after 4 years of 7+ growth? And GNPAs are rising at a faster rate in the last two quarters and perhaps into the next year too.

Telecom Industry is not included in the last graph. Perhaps its under Engineering? It's one more industry on the brink, but at least the users are getting much cheaper call and data rates.

At this rate, I don't see profitability in the industry for close to another decade. Banks will continue to face losses for many years to come.

Over those four years, the norms for declaring stressed assets and NPAs has evolved. Where one could previously kick the can down the road, they can't. In other words, it's not a case of a problem getting worse, as much as the scope of the problem being properly acknowledged. What's happening now is the right thing to do.

There are quite a few article references on this topic in this thread, but I'm short on time to look for them. There are RBI circulars and stories from 2015-16 on this matter , and the subsequent rapid increase in declared quarterly bank losses . Banks now have an incentive to declare the losses because they cannot pursue willful defaulter actions under the Insolvency and Bankruptcy Code without actually declaring their losses properly.

vijayk · Post by **vijayk** » 27 Sep 2018 00:53

https://swarajyamag.com/insta/manufactu ... 9-per-cent
Manufacturing ‘Pays’: Wages Record Highest Growth In Three Years As Median Gross Salary Grows 9 Per Cent

According to reports, the median gross salary in the manufacturing sector witnessed a 9 per cent jump which is indicative of a pick up in local manufacturing activity especially in sectors such as steel, auto, chemicals and energy.

As per the Monster Salary Index (MSI), manufacturing was the second highest earning sector in the country with the Information Technology field retaining its numero uno position as it pays a median wage of Rs. 317.6 per hour. However, the IT sector’s wage increase was 17 per cent lower than the previous year resulting in a majority (51 per cent) expressing dissatisfaction with their jobs.

Expressing bullishness over the manufacturing prospects of the country, an official from Monster.com said “as Industry 4.0 continues to gain acceptance and reshapes the manufacturing industry, India is well positioned to become one of the largest manufacturing economies in the world. The momentum is mirrored by the increased median gross hourly wage recorded for the manufacturing sector in the Monster Salary Index”.