Indian Economy News & Discussion - Nov 27 2017

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

Post by Ambar »

The author makes the conclusion that inflation targeting is the reason for drop in India's GDP growth and he arrives at this conclusion by comparing inflation, monetary and fiscal policies of advanced economies and superimposes them on India, my disagreement is with the evidences he chose to support his theory.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Suraj »

Ambar wrote:The author makes the conclusion that inflation targeting is the reason for drop in India's GDP growth and he arrives at this conclusion by comparing inflation, monetary and fiscal policies of advanced economies and superimposes them on India, my disagreement is with the evidences he chose to support his theory.
Your argument is based on the quote:
Truth is India's GDP growth rate has been declining since 2011 much before the IT adaptation. It began increasing from 2013 onwards only to decline once again from 2016. This also coincides with the drop in investment as a % of GDP and consumer spending negatively impacted by inflation, so if anything repo rate increase is not the cause for drop in GDP but the net effect.
IT began in 2016. Pg 38 describes its impact on GDP growth:
Image
The authors further state that the IT framework by RBI does not satisfy its basic goals, i.e. ability to forecast inflation and anchor expectations, raise real rates when inflation was high and lower it when it was low (because the CES data did not enable proper capture of inflation data, and more.

When real rates are too high, it drives down investment/GDP because cost of capital is too high to drive an investment cycle. Due to IT, the rates were too high:
Image

The reason for the publication is that the inflation targeting was announced in 2016 with a five year experiment. It is up for review this year. The authors are offering evidence of its failure in order to convince policymakers to junk the approach.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by VinodTK »

India Raises FDI Ceiling in Insurance to Spur Investment

(Bloomberg) -- India on Monday further opened up its insurance sector to foreigners, as the nation seeks to spur investments to give a fillip to an economy battered by the pandemic.

Lawmakers approved a legislation increasing the limit on foreign direct investment in insurance companies to 74% from the present 49%, a limit that was set in March 2015. The decision, passed by both houses of Parliament, sees through a budget proposal aimed at attracting new capital.
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Uttam
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Uttam »

Average daily FASTag collection crosses Rs 100 crore-mark

This is over from 1st March 2021 to 16th March 2021 period.

Just a back of the envelope calculation:

Annual toll collection = 356 * 100 = 35,600 crores.

The current India's Govt. Bonds yield (30-year maturity) = 6.842%

The Monetized Value of all highways collecting at a discount rate of 8.842% (assuming a risk premium of 2% (not an informed choice)), for a 30-year period.
= Rs. 370,000 crores.

This is the amount NHAI can get if it monetizes all its toll-collecting highways (assuming none of its existing highways are already monetized, which is not true).

Think of how many infrastructure projects can be immediately financed if the highway monetization is done quickly and efficiently.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by disha »

Suraj wrote:Surjit Bhalla, Karan Bhasin and co have done a great research study into the RBI's inflation targeting (IT) policy that began in 2016 under Rajan. The report effectively debunks the argument in favor of IT, stating that there is no causal relationship between the two. Specifically, Indian inflation is MSP inflation driven:

No country for inflation targeting
Research report

I also posted about it on twitter: https://twitter.com/surajbrf/status/137 ... 28328?s=20
The above is a very important paper. I have been reading it, re-reading it and thinking about it since a week and lot of data points from 1970s (including socio-cultural datapoints!) fall into place.

I will try to pool my thoughts together and put out some updates and thoughts.

---

Uttam'ji, thanks for the back of envelope calculations. From what I understand, if properly utilized the toll collection itself can provide some 3 lakh crore every 10 years towards infrastructure maintenance and creation.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Vips »

Uttam wrote:Average daily FASTag collection crosses Rs 100 crore-mark

This is over from 1st March 2021 to 16th March 2021 period.

Just a back of the envelope calculation:

Annual toll collection = 356 * 100 = 35,600 crores.

The current India's Govt. Bonds yield (30-year maturity) = 6.842%

The Monetized Value of all highways collecting at a discount rate of 8.842% (assuming a risk premium of 2% (not an informed choice)), for a 30-year period.
= Rs. 370,000 crores.

This is the amount NHAI can get if it monetizes all its toll-collecting highways (assuming none of its existing highways are already monetized, which is not true).

Think of how many infrastructure projects can be immediately financed if the highway monetization is done quickly and efficiently.
How else do you think the 22 new express ways and the other numerous new highways are going to be developed? Nitin Gadkari has already said that GOI is going to leverage the daily toll collections to build new highways and expressways in an interview with Prabhu Chawla.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by chetak »

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

Post by Suraj »

Very good statement by the SC. The job of the judiciary is to interpret the law, not to define policy. Anyone arguing that a policy as implemented by the legislature and executive (which includes the RBI in this context) is not "good enough", does not have a legal case for its redressal. That's not how things work - one doesn't get to go to court for this.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Uttam »

I hope they make every judge in the nation understand this. There have been too many judgements by hyperactive judges on policy matters, which have gummed up the system. I remember there were a lot of judges trying to throw spanners in the initial days of Insolvency and Bankruptcy Code, 2016 implementation. Even then, it was the supreme court that restrained them.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Uttam »

Talking about gumming up the system, here is another example where PILs at SC have the potential to bring the economic engine to a complete halt:

Centre seeks early Supreme Court ruling on Hindustan Zinc stake sale
evoked a sharp response from a bench headed by CJI S A Bobde, who asked, “What is the hurry?”
Solicitor General Mehta said, “There is urgency. The economy needs an infusion of money. But the decision to disinvest government equity in HZL has been unnecessarily stalled.” He requested the court to hear the matter this week. However, the bench agreed to post the PIL for hearing after the Holi break.
The real unfortunate part is that the unelected judges ask "what is the hurry?" They have no realization that precious opportunities lost when you don't "hurry."
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Ambar »

Uttam wrote:Average daily FASTag collection crosses Rs 100 crore-mark

This is over from 1st March 2021 to 16th March 2021 period.

Just a back of the envelope calculation:

Annual toll collection = 356 * 100 = 35,600 crores.
They are planning to completely eliminate tolls in the next year or two and make it fully automated. It will be interesting to see how it will playout since defaulters will have to be ticketed and collecting fines is a different ball of wax all together. In Bangalore city limits alone citizens owe over 360 crores in unpaid traffic fines.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by vijayk »

https://www.freepressjournal.in/india/r ... sitharaman
Ready to discuss bringing petrol, diesel under GST at Council meet: Nirmala Sitharaman
For instance, taxes make up for 60% of the present retail price of petrol of Rs91.17 a litre in Delhi. Excise duty constitutes 36% of the retail price. Over 53% of the retail selling price of Rs81.47 a litre for diesel in Delhi is made up of taxes.

As much as 39% of the retail price comprises central excise. Replying to the debate on Finance Bill 2021 in the Lok Sabha, Sitharaman said both the Centre and state govts levy taxes on petrol and diesel. However, the Centre shares its collection on the fuel with states.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by vijayk »

g.sarkar
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by g.sarkar »

https://finance.yahoo.com/news/rising-u ... 52572.html
Rising US treasury bond yields could threaten India’s economic recovery
Prathamesh Mulye, March 23, 2021

India’s foreign exchange reserves are at a record high, but there are reasons the country should continue to worry about its currency and economy.
Economists believe international investors could start pulling out money from India if they get higher returns on US treasury yield. Last week, the benchmark 10-year US treasury bond yields hit a 13-month high. There are expectations that the trend of higher bond yields will continue. If global investors sell the rupee to shift investments to the US, the Indian currency will face deterioration in value, which will make it harder for the country’s economy to recover.
“If markets price a policy mistake and US real yields surge higher, risks of a ‘taper tantrum’ rise, with India and (the) Philippines most exposed,” said a rating agency S&P Global’s report dated March 17. “Taper tantrum” is an economic term where “taper” stands for the tapering of bond-buying by the US central bank, the Federal Reserve, and “tantrum” stands for investors’ reaction by leaving emerging markets such as India.
India’s forex reserves
India’s central bank has been on a dollar buying spree to shield against a sudden outflow of funds. Last week, the country overtook Russia to become the fourth largest country in terms of forex reserves. India currently holds $580.3 billion (Rs42.36 lakh crore) in forex reserves. But in the current economic scenario, just hoarding forex won’t be enough. India is witnessing high inflation due to a spike in oil and food prices. At the same time, policy rates in the country are at an all-time low to provide a boost to the Covid-hit economy. Meanwhile, returns on Indian bonds are low and the stock markets are overvalued. In such a scenario, “capital may be quicker to leave (India) and the central banks may have to respond by raising policy rates,” S&P Global said.
......
Gautam
Suraj
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Suraj »

Too much alarmism. Rising US yields are going to hurt the US before and a lot more, before it hurts India.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Kakkaji »

Modi’s Nal Se Jal brings tap water to 4 crore households since launch, 3 states achieve 100% target
Prime Minister Narendra Modi’s flagship ‘Har Ghar Nal Se Jal’ scheme has so far provided tap water connections to nearly 4 crore households — over 20% of its target — since its launch in 2019. The scheme aims to provide a functional household tap connection (FHTC) to every rural household by 2024. To date, Andaman and Nicobar Islands, Goa, and Telangana have already achieved this feat successfully, according to the data provided by the Ministry of Jal Sakti. With the scheme, PM Modi looks to provide citizens of the country with water supply connectivity.

There are 19.19 crore households in the country, 37% of which, or 7.17 crore, have tap water connections as of today. The number of households with a functional tap water connection was at a mere 3.23 crore in August 2019 — before the scheme was launched by the Prime Minister. With Telangana, Goa, and Andaman and Nicobar Islands connecting all households with tap water connections, India now has a total of 55 districts, 43,404 panchayats, and 84,565 villages with tap water connections at every house. However, the scheme is still short of its target.

One of the largest states in the country, Uttar Pradesh has 2.63 crore households, of which only 10% have tap water connections. Poll-bound West Bengal is the worst-performing large state with only 8.75% of its 1.63 crore households having tap water connection. Meanwhile, Bihar and Maharashtra fare far better with 68.69% and 63.36% of their 1.96 crore and 1.42 crore households having tap water supply. Bihar and Maharashtra have the highest proportion of households with tap water supply across the country.

Looking at the progress made after the launch of the scheme, Telangana has the best record with water supply reaching 38.37 lakh houses or 70.99% of its target, followed by Bihar with 1.32 crore houses or 67% of its target.
Table in the article with state-wise details. I don't know how to copy and paste the table though. Can someone more tech-savvy do it for me please?

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

Post by Vips »

2020-21: Net tax receipts seen up by Rs 1.2 lakh crore over revised estimate.

The Centre may rake in additional net tax receipts of around Rs 90,000 crore in FY21 over the revised estimate (RE) of Rs 13.4 lakh crore, due to higher mop-ups from corporate and personal-income taxes. It may also get an additional Rs 30,000 crore from ‘Union excise duties’ net of transfers to the states.

According to an FE analysis, gross (pre-devolution) corporate tax receipts in the current financial year could be as high as Rs 5.75 lakh crore, as against RE of Rs 4.46 lakh crore. The estimate is based on revenues gathered in April-January period and assumptions of likely revenues in the last two months of the fiscal based on historical patterns.

Modi’s Nal Se Jal brings tap water to 4 crore households since launch, 3 states achieve 100% targetGST collection: Nearly half of full-year target achieved; Govt sets eyes on next year revenues

Similarly, gross receipts of personal income tax (PIT) could turn out to be Rs 4.84 lakh crore against RE of `4.59 lakh crore. So gross direct tax receipts in the current financial year could be a neat Rs 1.5 lakh crore higher than the respective RE at Rs 10.55 lakh crore. The Centre nets 58% of the gross receipts from these taxes after mandatory transfers to states.

As far as ‘Union excise duties’ are concerned, only a measly 4% is shareable with the states, so the additional Rs 30,000 crore would go almost solely to the Centre’s coffers.

According to the second advance estimate released by the National Statistics Office (NSO) recently, nominal GDP on which key budget numbers are benchmarked, is estimated to contract by 3.8% in FY21, against a 4.2% fall estimated earlier. While this will reduce FY21 fiscal deficit marginally from 9.5% (RE) of GDP to 9.4%, net tax receipts being higher than RE by Rs 1.2 lakh crore from the three heads mentioned above could lower the deficit by another 60 basis points points to 8.8% of the GDP, at the RE level of expenditure and other revenue items.

Thanks to the comfort on the tax revenue front, the government has already cancelled the planned Rs 20,000 crore borrowing which was scheduled for Friday.

Image

Customs collections are seen on target. Since a lot of accounting flexibility is available for the Centre on the GST front due to the floating I-GST account, an estimate of Central GST mop-up at this stage is prone to corrections. Of course, there is no shortfall seen on this account.

As per the Budget FY22, the RE on revenue from ‘Union Excise Duties’ for FY21 is set at Rs 3.61 lakh crore, as against Rs 2.67 lakh crore collected in FY20. As per data put out by the Controller General of Accounts (CGA), `2.75 lakh crore was collected from these levies in April-January period. Another Rs 1.17 lakh crore could be garnered in February-March, going by historical trend; this would take the total mop-up to Rs 3.9 lakh crore. Nearly 100% of the ‘Union Excise Duties’ receipts are on account of assorted levies on petrol and diesel.

FE computed the likely gross tax receipts for FY21 as follows: as per the CGA data, gross corporate tax receipts in April-January period was Rs 3.34 lakh crore; in the months when the advance tax payments are not scheduled, the collections have been Rs 25,000 crore or thereabouts recently, so February mop-up could be Rs 25,000 crore; In December, when the third installment of advance taxes were paid by Corporate India, the collections were Rs 1.26 lakh crore; going by the trend in recent years, collections in March, the final month of a fiscal year, typically tend to be 70% higher than in December and so it could be Rs 2.16 lakh crore this year. That means in February-March period, the gross corporate tax mop-up could be Rs 2.4 lakh crore. If this is added to the `3.34 lakh crore collected in April-January, the total receipts in the year would be Rs 5.75 lakh crore. PIT and Excise collections for the year have also been similarly estimated.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by KL Dubey »

According to the IMF, India will become a $10T economy sometime this year:

https://en.wikipedia.org/wiki/List_of_c ... _GDP_(PPP)

This does not seem to include estimates of informal economy.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by chetak »

while our guys are focussed on building personal fortunes and growing their family wealth, this happens because very little attention is paid to data protection and data safety

This is because there are no commercial/legal consequences to the breach of trust and the company will weasel out of its responsibility to its clients


Data of 10 crore customers stored with Mobikwik leaked and available for sale on the dark web

It is the biggest data leak in Indian history


Data of 10 crore Mobikwik users for sale on dark web, say cybersecurity experts
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by VinodTK »

Exclusive: A billion for every chip-maker who 'makes in India,' sources say
NEW DELHI (Reuters) - India is offering more than $1 billion in cash to each semiconductor company that sets up manufacturing units in the country as it seeks to build on its smartphone assembly industry and strengthen its electronics supply chain, two officials said.

Prime Minister Narendra Modi's 'Make in India' drive has helped to turn India into the world's second-biggest mobile manufacturer after China. New Delhi believes it is time for chip companies to set up in the country.

"The government will give cash incentives of more than $1 billion to each company which will set up chip fabrication units," a senior government official told Reuters, declining to be named as he was not authorised to speak with media.
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Uttam
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Uttam »

PPF hits 46 year low of 6.4% as govt cuts interest rates of small savings schemes

This is great news. Given the yields on G-sec securities are down, there is no reason for Govt. to keep paying such high interest rates on these small saving schemes. High interest rates in the small saving schemes have a "crowding-out" effect on private investment because most small savers have little incentive to invest in riskier non-govt. firms. These reductions in interest rates will propel a lot of Rupees towards the stock market and therefore help startups and corporates raise capital. InvITs will also become lucrative.

Among various reasons for the drop in interest rates like global yields, etc., one reason is that the central government is able to reduce its fiscal deficits by more efficient tax collection. GST will become even more efficient in the coming years as more of its kinks are fixed.

Are EPF rates similar to those of PPFs?
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Zynda »

^^For many middle class people, monthly interests provide sort of a safe, passive and supplementary income. Not many of the middle class folks are savvy enough or have time to research stock market to make wise investments.

Last year, around this time, there was another reduction in interest rates. Is the lending by banks so down that they don't need investments via deposits? My guess is that GoI has to do heavy lifting when it comes to spending to keep the economy churning and for some reason I cannot explain, this reduction in bps will probably lead to many banks keeping their cash at RBI or GoI, which GoI can use to fund their expenses.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Uttam »

The middle class is not savvy enough or has time to research stocks anywhere in the world. That's why we need a robust system based upon mutual fund / Exchange Traded Funds. In the US the cheapest funds nowadays have management fees of less than 0.1%. What are the cheapest ETFs/Mutual Funds in India based on management fees?

Financial investments follow a risk-reward relationship. Anytime the govt. promises a return greater than what it should for the given level of risk, the markets get distorted. This is one of the main reasons why businesses big/small/startups do not get capital at reasonable rates. If India wants to have a robust private sector that creates millions of jobs and wealth then reducing guaranteed rates is a very important step.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Ambar »

Even today 2/3rd of our great population lives in subsistence economy. For not just the poor but even for the middle class and upper middleclass fixed income investment is the preferred avenue for savings . By continuously cutting the savings rate we are not only encouraging the poor and the middle class to choose riskier investments (many of who do not have the skills or knowledge or tools to gamble in stocks, ETFs, mutual funds etc) but we are also doing immense harm to the most vulnerable sections of our society, namely the elderly and the very poor through expropriation of wealth through inflation. In an ideal world your interest rate should be at or above real inflation, but through government distortion of vastly under reporting inflation and monetization of debt we have managed to keep the interest rates artificially low.

Imagine if you are a 65 yr old who was unfortunate enough to have worked in a job where there was no opportunity of amassing assets , your only fall back is your savings which you want to protect to live out the remainder of your life. Stock markets and the funds linked to equities are very volatile, we've seen markets tank 30% or 40% on the turn of a dime, so many prefer safer avenues like fixed deposits and LIC bonds. The last 40 yrs has been fantastic if one is lucky enough to accumulate significant capital earlier in life or have enough capital to build assets, but if you were not than the steady drop in interest rates on fixed investments has been devastating for savers. So think in terms of people like above where their basic sustenance is going up at an annualized rate of 25% to 35% p.a (example food, shelter, hospital costs over the last 20 yrs) but their savings rate continues to drop. The only beneficiaries in such an environment are the government, corporates and the wealthy with enough cushion to soak the risk shock of the market.

Do you really want to make it easier for private sector ? Then anyone who has dabbled in business and burnt themselves including myself will tell you that its the 10000 different laws, corruption, draconian labor laws but most important the near absence of money market is what drives our small to medium businesses towards bankruptcy and businessmen towards suicide. You fix that and businesses will thrive. India's period of prosperity from late 90s to late 2000s was at a time when our household savings rate was one of the highest in the world and our economy has been limping ever since that rate started to fall and inflation routinely set new records. So, no, PPF hitting 40 yr low and govt cutting interest on SSS is nothing to cheer about.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Suraj »

This is a complex topic with multiple parts. Historically, PPF/EPF were the main savings mechanisms in a simple economy where individuals did not have much recourse to advanced savings and investment tools. The rates were set and then the government worried about how to ensure it met those rates. Of course this showed up in the form of chronic high inflation, high cost of capital and crowding out effects.

Traditional rate based EPFs are defined benefit plans. The government sets the rate regularly and that is the guaranteed or defined return. These are being supplanted by defined contribution plans where the government defines a (typically higher) defined contribution level and the rate of return depends on what you invest your savings in. Typically these are big ETFs or some other , or a combination based on personal risk appetite.

Switching from defined benefit to defined contribution is not easy. The loss of guaranteed predictable income scares people, as we are generally averse to the unknown. However, this change is required. The government cannot be in a position to define a fixed rate of return . Many factors beyond its control will affect such an ability.

Sometime in the late 2000s (my memory may be wrong), EPF started switching over from defined benefit to defined contribution. There was litigation around it, but fundamentally this difficult change needed to be made. The government is tasked with several things at once here - keep up an old system of fixed returns to what would be a dwindling pool of pensioners, build a large corpus of investments from defined contribution funding by younger workers, balance the needs of the two, enable modern investment vehicles to operate on the new investment corpus and generate good returns consistently so that the population is comfortable with this, and more.

EPF interest rate history:
Image
PPF vs infation:
Image

The US did a similar move from pension plans to 401Ks starting in the mid 1980s, and it was not an easy process either. The Chinese also did something similar starting in the late 90s, not long before us. The sanest approach is to let those who contributed on the basis of a defined benefit plan to accrue the same. Those who started midway though the switch from defined benefit to defined contribution systems can gain from both on a prorata basis. The youngest lot will work within a defined contribution system. This means the change will not be overnight - it might take a generation to fully transition.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Uttam »

There are two sides to this debate.
1) Welfare of small savers, especially retirees.
2) Need to rapidly develop the industry through the private sector to provide jobs to a large population entering the economy.

Here is India's population pyramid:
Image

As one can see a very large population of Indians is about to hit the labor market compared to the number of retirees. This large population needs jobs and the govt. is no position to provide so many jobs. Therefore, the need to develop the private industry. To develop private industry, we need much more simplified regulatory environment, better educated workforce, very efficient logistics, and low cost of capital.
This is where the interest rates of small savings play such a crucial role.
* Banks are not willing to reduce rates on their deposits because they have to compete against small saving schemes.
* This in term forces banks to keep lending at higher interest rates.
* This keep cost of capital high for business.
* Because of that a lot of otherwise marginally profitable become unprofitable and therefore never get started or close down.

Now, as much as the changing interest rates sound like pitting the two population groups (retiree versus young) against each other, it is not.

When the industry develops, the inflation rates are subdued, decreasing the need for high interest rates for retirees. A higher earning workforce provides savings that the govt. can use to start welfare schemes like guaranteed pensions for vulnerable, medical schemes, small life insurance schemes, etc.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Ambar »

Suraj wrote:This is a complex topic with multiple parts. Historically, PPF/EPF were the main savings mechanisms in a simple economy where individuals did not have much recourse to advanced savings and investment tools. The rates were set and then the government worried about how to ensure it met those rates. Of course this showed up in the form of chronic high inflation, high cost of capital and crowding out effects.

Traditional rate based EPFs are defined benefit plans. The government sets the rate regularly and that is the guaranteed or defined return. These are being supplanted by defined contribution plans where the government defines a (typically higher) defined contribution level and the rate of return depends on what you invest your savings in. Typically these are big ETFs or some other , or a combination based on personal risk appetite.

Switching from defined benefit to defined contribution is not easy. The loss of guaranteed predictable income scares people, as we are generally averse to the unknown. However, this change is required. The government cannot be in a position to define a fixed rate of return . Many factors beyond its control will affect such an ability.

Sometime in the late 2000s (my memory may be wrong), EPF started switching over from defined benefit to defined contribution. There was litigation around it, but fundamentally this difficult change needed to be made. The government is tasked with several things at once here - keep up an old system of fixed returns to what would be a dwindling pool of pensioners, build a large corpus of investments from defined contribution funding by younger workers, balance the needs of the two, enable modern investment vehicles to operate on the new investment corpus and generate good returns consistently so that the population is comfortable with this, and more.
The US did a similar move from pension plans to 401Ks starting in the mid 1980s, and it was not an easy process either. The Chinese also did something similar starting in the late 90s, not long before us. The sanest approach is to let those who contributed on the basis of a defined benefit plan to accrue the same. Those who started midway though the switch from defined benefit to defined contribution systems can gain from both on a prorata basis. The youngest lot will work within a defined contribution system. This means the change will not be overnight - it might take a generation to fully transition.
What does the Y-axis on the right hand side of the 2nd graph represent ?

EPF is not a fully defined contribution fund. The government still guarantees 8.5% return on EPF, the contribution towards the corpus is split into 2 parts - EPF and EPS , the later is capped at Rs 15000 based on which the pension is calculated, and from the former 85% goes towards G-secs and 15% goes towards equities. However at the time of redemption as it stands today the government guarantees a return of 8.5%, out of a while a <0.5% is variable due to the uncertainty in the ETFs.

We cannot compare India to advanced economies like the US or Europe. Unlike Eur or the US, in India a retirement fund like the EPF which pays a decent guaranteed rate of return is only available for companies that has 20 or more employees on the book and are registered with EPFO. Most small businesses in India do not show more than 20 employees on the books, so most workers even in EPFO registered businesses do not benefit from the provident fund. Secondly, 80% or 4 out 5 workers in India are employed in the unorganized sector, so they won't even come close to benefiting from funds that promote financial security such as EPF. Lastly, along with retirement programs, the advanced economies also have time tested social programs which India does not, so you either have a savings of your own or you die of hunger, there is no social net to even provide basic food income let alone a social security check to cover a portion of your housing, healthcare, energy and food expenses.

Despite crushing poverty, lack of opportunities, near hyper-inflation situation the only reason families in post-independence India were able to educate, access some basic healthcare and housing is because of the household savings. Savings funds like PPF and NSC went a long way in providing millions of Indians with some financial security to educate their children, treat the sick and have a shelter. When 68% of our population lives in subsistence economy, even suggesting them they should invest in mutual funds or ETFs is preposterous. We have a responsibility towards 80% of our population to provide them with safe and secure investments with guaranteed returns that is near or just above the real cost of living (and not the CPI ). In the 2nd graph above, the average inflation crosses double digit for a brief period between 2011-2013, thanks to the internet and old articles on increase in food , housing, healthcare, education costs, we know how ridiculously disconnected the government CPI numbers is from the real cost of living by comparing it with prices today. Mansinghji with all his defense of farmers protests was right about one thing, many of these basic components of daily life like food or healthcare are inelastic, i.e. once the prices goes up it rarely if ever comes down.

Uttamji, the high interest rates on capital is not the only problem businesses face, especially small and medium businesses without political patronage . In the Indian banking system most small and medium businesses cannot get non-collateralized loan, and when collateralized just the underlying collateral is not sufficient, they ask for extra security on loans such as land , property records, additional guarantors etc without which the loan is not approved. Getting the initial capital is the easy part, getting access to working capital through money market is the biggest pain point for businesses along with dealing with daily corruption and draconian laws. Accessing working capital in India is near impossible unless you have connections, so that's why so many small to medium businesses run pillar to post the day before the pay day to borrow short term loans by pawning land, jewelry etc. They will happily pay that extra 2% if you reduce corruption and make working capital easily available. As for big businesses , the high interest rates is not and has never been a problem , ex Reliance, Tatas, Bajajs etc. have thrived in high and low interest times equally.

Yes, we need to promote investment in industries to generate growth and provide employment to our ever increasing young population, but that growth needs to be balanced between all sections of the society. We cannot continuously pull the safety net for 80% our population with a promise that there will be a better tomorrow without making alternative arrangements to take care of them today.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by V_Raman »

Withdrawn due to oversight?!?! Really ?!?!
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Aditya_V »

V_Raman wrote:Withdrawn due to oversight?!?! Really ?!?!
More likely a Cong, UPA pasand Baboon pushed this and now NDA is doing damage control.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by arshyam »

^^ Yep, exactly. Isn't the timing suspicious to begin with?
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Adrija »

Meanwhile, economic recovery continues apace...March GST collections at highest ever at INR1.24 lakh crores...

https://www.business-standard.com/artic ... 720_1.html
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by arvin »

arshyam wrote:^^ Yep, exactly. Isn't the timing suspicious to begin with?
Yes. And another data point is PPF interest credit timing. Every year it gets credited on 31 March.
This time it was 1st April afternoon.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by kvraghav »

While we are discussing about market rates for EPF and PPF and also suggesting how doing this will help reduce lending rates for private sector, we should also remember that the only social security spending that the govt does for the middle class is this extra 1-2% interest. The western nations have un employment and old age pensions with good old age care homes. We have zilch in these aspects. So I think we should remember it is not the job of the salaried middle class to keep feeding the govt and private sector extravaganzas. You keep pumping more money into the private sector lending and govt spending's by squeezing salaried class, the less money they have in hand and spend, the less demand it creates.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Yagnasri »

There is no social security of any kind in Bharat for most of the people working in private organized or unorganized sector. No medical facilities for old people of any government hospitals etc, no pension of anything worth mentioning. At the same time Government employees have all these things. So the low rate of interest argument may not be so practical or even politically easy thing to do.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by kvraghav »

B/W learnt something new yesterday. The BMTC (Bangalore Bus transport) was in loss due to pandemic and requested assistance from the govt. What did Yedyurappa do? Instead of giving free money, they introduced free bus passes for unorganized sector construction employees like carpenters, painters and laborer's. Most of these people are from northern Karnataka and they are all very happy with these since this is one of the biggest component for their expenses. This also means they need not sleep in the makeshift shanties near the sites. Love him or hate him, Yeddi is still the master. The carpenter who visited my house was all praises and shifted to bus from his bike.
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by vijayk »

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

Post by Suraj »

Monthly merchandise exports hit all time high of $34 billion in March
India’s merchandise exports in March 2021 were USD 34.0 billionas compared to USD 21.49 billion in March 2020, anincrease of 58.23%;

Value of non-petroleum and non-gems and jewellery exports in March 2021 was USD 27.25 billion as compared to USD 16.95 billion in March 2020, a positive growth of 60.72%;

Non-oil, non-GJ (gold, silver & Precious metals) imports were USD 27.01 billion in March 2021 as compared to non-oil and non-GJ imports of USD 18.70 billion in March 2020, also apositive growth of 44.45%;

Top 5 commodity groups of export which recorded positive growth during March 2021 vis-à-vis March 2020 are: Other Cereals (323.65%), Oil Meals (228.4%), Iron Ore (194.98%), Jute Manufacturing Including Floor Covering(105.19%), and Carpet(89.86%);

Top 5 commodity groups of import showing a fall in March 2021vis-à-vis March 2020 are: Silver (-90.22%), Newsprint (-50.66%), Transport equipment (-32.73%), Project goods (-32.56%), and Pulses (-13.88%).
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Re: Indian Economy News & Discussion - Nov 27 2017

Post by Vamsee »

^^^
1. Last year, in March we had a lockdown starting March-23rd. So if re-adjust last year's exports to say $28B (if we had no lockdowns), then YoY growth will be ~18-20%. Excellent growth.
2. If we can maintain ~34B Merchandise exports per month, we will export more than $400B this Fiscal!
3. Our services exports up to Feb '21 are down 7% YoY. Surprisingly our Merchandise exports are also down just 7.4% YoY because of blockbuster March.

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

Post by Ambar »

Vamsee wrote:^^^
1. Last year, in March we had a lockdown starting March-23rd. So if re-adjust last year's exports to say $28B (if we had no lockdowns), then YoY growth will be ~18-20%. Excellent growth.
2. If we can maintain ~34B Merchandise exports per month, we will export more than $400B this Fiscal!
3. Our services exports up to Feb '21 are down 7% YoY. Surprisingly our Merchandise exports are also down just 7.4% YoY because of blockbuster March.

--Vamsee
Good comparison would be the same month in 2019, India's merchandise exports was 33 billion USD in Mar 2019. That said given how robust the recovery in retail and manufacturing has been across the globe ( US manufacturing ISM index hit a 38 yr high ), we should easily cross 350 billion to 360 billion for the 2021-22 year.
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