Indian Economy News & Discussion - Nov 27 2017

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

Postby Rahulsidhu » 19 Jun 2018 00:53

I guess I need to clarify a few points:

1) I did not imply FX is the only factor that matters in export competitiveness. But I did say that it does matter, and much more so than people seem to believe here.
If you are skeptical of this, imagine yourself as the owner of an export business. Would FX movements impact your profit margins? Would it affect your ability to expand marketshare, invest in design and development and so on?
Especially if you are in a manufacturing operation (capital intensive), a small change in margins can make or break your business.

2) For people saying "just make great products and FX won't matter", who are you addressing? If it is as simple and viable a proposition, why hasn't it been done already? What is preventing it?
If your answer is that infrastructure bottlenecks, regulation etc., please see point 1.

3) Why didn't past devaluations boost exports? Well that is exactly the point! Sudden devaluations resulting from crises do not do us any good. Businesses need stable, but competitive, exchange rates so they can plan, expand, upgrade.
An artificially inflated exchange rate due to capital inflows will lead to a crisis and sudden devaluation. We have seen this in 2011 and 2013.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 19 Jun 2018 00:57

nam wrote:US with the strong dollar does a export of 1 trillion dollars! The biggest exporter to India is.... Switerzland!


Doesn't sound right. It is China, by a large margin. (data for 2017-18 from commerce ministry)


Code: Select all

Rank        Country                        Exports    Imports    Total Trade    Trade Balance
1            China                           16.34    68.06         84.4                  -51.72
2            United States                     48.6    25.7          74.3                    22.9
3            United Arab Emirates             30.29    19.45         49.74                   10.84
4            Saudi Arabia                      6.39    20.32         26.72                  -13.93
5            Switzerland                      0.98    19.30         20.28                  -18.32
Last edited by Rahul M on 19 Jun 2018 07:25, edited 1 time in total.
Reason: formatted for better readability.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 19 Jun 2018 05:41

Vehicle makers to spend ₹58,000-cr ($8.75 billion) capex over the next two years: Crisil
The manufacturers of commercial vehicles, passenger vehicles and two-wheelers are expected to incur a total capex of about ₹58,000 crore over the next two fiscals – 2018-19 and 2019-2020.

This capex will be 30 per cent higher when compared with the preceding two fiscals.

The higher capex for the next two years is driven mainly by healthy demand prospects and regulations, according to a report of rating agency Crisil.

Govt estimates double-digit GDP growth by Q4: Piyush Goyal
The Government expects double-digit growth by the fourth quarter (January -March) of the current fiscal 2018-19, interim Finance Minister Piyush Goyal said here today.

He also said that Goods and Services Tax (GST) Council may discuss bringing petrol and diesel at its next meeting.

"GST Council has to take a call on bringing petroleum products under GST. May be in next meeting a discussion could take place," Goyal said while addressing the Growth Net 6.0 conference organised here by industry body CII.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nam » 19 Jun 2018 17:26

Rahulsidhu wrote:
nam wrote:US with the strong dollar does a export of 1 trillion dollars! The biggest exporter to India is.... Switerzland!


Doesn't sound right. It is China, by a large margin. (data for 2017-18 from commerce ministry)


Yeah, my data was bit dated. I should have worded it more better as well, as one of the largest. I think around 2015-16, Swizterland exports(in value) to India was more than US.

Ofcourse lately the Chinis have been sweeping the floor. However the objective was indicate that despite it's high valued currency and expensive manufacturing, Switerland a tiny country is one of the largest exporter to India.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Trikaal » 19 Jun 2018 19:02

nam wrote:Yeah, my data was bit dated. I should have worded it more better as well, as one of the largest. I think around 2015-16, Swizterland exports(in value) to India was more than US.

Ofcourse lately the Chinis have been sweeping the floor. However the objective was indicate that despite it's high valued currency and expensive manufacturing, Switerland a tiny country is one of the largest exporter to India.

Holy shit! I was surprised to see that we import so much from Switzerland. Apparently, we import a lot of gold and pearls from them. Swiss don't have gold mines, but most of the world's raw gold is processed and thwn sold from there. Switzerland has 4 of the biggest gold refineries in the world.
Here's an article about India's trade with Swiss if anyone is interested.

http://www.onemint.com/2012/01/20/what- ... itzerland/

Swiss have a stranglehold on gold refining in the world. Countries have no choice but to import from them.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 19 Jun 2018 20:18

Rahul, competitive exporters look for currency stability while those that are uncompetitive would look for sops like currency devaluation. If currency devaluation was that important then Venezuela which is now a basket case would be the export King. Think why China with 1 dollar to 6-7 yuan is more competitive than India with 1 dollar to 70 rupees. What makes you think that is going to change just by making 1 dollar to 100 rupees. Learn to think logically.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 19 Jun 2018 21:35

FDI inflows in 2017-18 up to $62 billion
Foreign direct investment in India increased to USD 61.96 billion in 2017-18, DIPP Secretary Ramesh Abhishek said today.

FDI inflows stood at USD 60 billion in the previous fiscal.

He also said during the four years of the Modi government, foreign inflows jumped to USD 222.75 billion from USD 152 billion in the previous four-year period.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Karthik S » 19 Jun 2018 21:52

IIRC, every $50B FDI adds 1% growth to GDP, with all other economic policies, we should soon touch double digit growth in coming years.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 19 Jun 2018 22:47

Supratik wrote:Rahul, competitive exporters look for currency stability while those that are uncompetitive would look for sops like currency devaluation. If currency devaluation was that important then Venezuela which is now a basket case would be the export King. Think why China with 1 dollar to 6-7 yuan is more competitive than India with 1 dollar to 70 rupees. What makes you think that is going to change just by making 1 dollar to 100 rupees. Learn to think logically.


Thank you sir, I will try my best.

OT, but your comment reminds me of a story a friend told me a long time ago. This friend was a stock analyst for a hedge fund in Singapore and focused on distressed companies. He once noticed that a lot of unsophisticated (usually older) investors were buying a lot of penny stocks. He was interested and somehow managed to interview one such investor.
"Why are you buying this stock?"
"well, because its better of course"
"better how?"
"its so cheap! you can get so many for just $100!"

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 19 Jun 2018 22:50

There was a UNCTAD report recently where the FDI numbers reported were different from GoI's. To nip in the bud any argument about who's right, it needs to be mentioned that the data use different methodologies.

GoI data reports ALL FDI, including equity capital of unincorporated bodies, reinvested earnings and other sources. UNCTAD doesn't, because I'm guessing they only have visibility into cross border flows and not intra-country reinvested earnings data.

In effect, GoI data = UNCTAD data + extras . RBI reports all these in quite a bit of detail, e.g.
RBI FDI data for two fiscal years prior (2016-17)

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 20 Jun 2018 03:03

Rule of law takes over:
Liquor baron Vijay Mallya first person to be prosecuted under Fugitive Economic Offenders law
Liquor baron Vijay Mallya will soon become the first person to be tried under India’s recently implemented Fugitive Economic Offenders Ordinance. The Enforcement Directorate (ED), the agency responsible for economic crimes in the country, plans to seize around ₹124 billion of his assets under the law, which was approved in April 2018. It will file a case in a special court for the same.

Mallya, who is currently contesting extradition proceedings from the UK, owes a group of 17 banks - most of which are state-owned - nearly ₹100 billion. He and two of his companies, the now-defunct Kingfisher Airlines and United Breweries, were declared ‘wilful defaulters’ in November 2015 by the State Bank of India and were accused of misappropriation of funds and of defaulting on payments to creditors.

Mallya left India and moved to the UK in early 2016 after the banks filed a case against him with the Debt Recovery Tribunal.

The Fugitive Economic Offenders Ordinance applies to individuals who have defaulted on payments over ₹1 billion. The ordinance defines a ‘fugitive economic offender’ as a person against whom an arrest warrant has been issued for a money-related crime, and has left the country so as to avoid a criminal trial or refuses to return to face the music.

Once the ED files the case against Mallya in court, he has six weeks to present himself at a trial in a pre-specified location, where he will be tried under the Prevention of Money Laundering Act.

If he does not show up, he will be declared a “fugitive economic offender”, which in turn will allow the ED to seize his domestic and international assets, even without being convicted in a trial, in order to pay back his creditors. These assets include Mallya’s shares in United Breweries as well as real estate properties in Alibaug and Bengaluru.

If the case leads to successful resolution of Mallya’s unpaid dues, it will establish an important precedent in India’s legal landscape. The next case filed under the Fugitive Economic Offenders Ordinance could very well be against a famous diamond merchant.

The main difference between FEO ordinance and the previous legal framework is that previously, properties could only be attached after the conclusion of trial and conviction. Now, the FEO ordinance permits the properties to be attached if the accused is absconding and refuses to present himself for trial within India. Further, they can chase these people abroad and convince authorities abroad to also attach foreign assets to repay creditors (who may include international entities). All in all, this kneecaps the whole run-away-and-claim-persecution-asylum tactic because it strips them to penury.
Vijay Mallya First Person to be Booked Under Fugitive Economic Offenders Ordinance
Liquor baron Vijay Mallya will be the first person to be prosecuted under the recently implemented Fugitive Economic Offenders Ordinance. It is an important development as the Ordinance gives more teeth to authorities to confiscate properties of economic offenders, such as Nirav Modi and Lalit Modi, who left the country to avoid facing criminal prosecution.

The application was filed against Mallya before a special court under Prevention of Money Laundering Act (PMLA) by the Enforcement Directorate (ED). The special court will now start its proceedings to declare him as the fugitive economic offender.

The Fugitive Economic Offenders Ordinance, 2018 was promulgated on April 21, 2018 by the President Ramnath Kovind. A fugitive economic offender includes a person against whom an arrest warrant has been issued for committing an offence and the value of the offence is at least Rs 100 crore. It can charge sheet a person who has left the country to avoid facing prosecution, or refuses to return to face prosecution. Some of the offences for which the person can be charged under the Act, includes counterfeiting government stamps or currency, cheque dishonour, money laundering, and transactions defrauding creditors.

Kingfisher Airlines took a loan of Rs 6,027 crore from the consortium of 17 banks led by State Bank of India. After taking an interest income into account the sum has grown to a whopping sum of Rs 9,990 crore as on May 15. The loan was given on personal guarantee of Mallya, the corporate guarantee of UB Holdings and inflated brand guarantee of Kingfisher Airlines.

“The SBI, which is the consortium leader, has calculated the amount (of the loan) to the tune of Rs 9,990.07 crore (including applied interest) as on May 15, 2018,” the agency said in the charge sheet.


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Re: Indian Economy News & Discussion - Nov 27 2017

Postby JohnTitor » 20 Jun 2018 11:34

Excellent news Suraj. It would have been better if the amount required to be prosecuted under that law were 100 million rupees instead. All these theives need to be stripped clean, just like they have collectively done to the taxpayer

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Karthik S » 20 Jun 2018 14:33

Business Standard Verified account @bsindia

Breaking: CEA @arvindsubraman relinquishes his post as Chief Economic Advisor to the Narendra Modi govt. FM @arunjaitley announces in a Facebook post


If you go by SuSwamy, it should be a good news. Hopefully someone like D Subbarao (ex RBI Gov) can take up such positions.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby siva509 » 20 Jun 2018 19:24

nachiket wrote: We cannot hope to become magically competitive just by devaluing the rupee. Especially considering we import >80% of our oil and gas and what impact the devaluation will have on that.

While thinking about the oil import, One thing came to my mind is the transportation of coal. Why not go for Pit Head based power generation, giving my ideas below?

Current Site Suitability Index (SSI) Guidelines for building new power plants near mines are decades old, needs updating urgently, which do not consider the following advancements:
Advancement in Dry cooling - water consumption reduced by more than 50%, so many more coal mines would be eligible
Advancement in Seawater desalination plant for water - Unique advantage for India since most of the coal mines are near East Coast.
HVDC to evacuate the power - Power Transmission losses are less than 10% (China Builds it in masses due to this advantage)
GST - uniform Tax removes the constraints in setting up the manufacturing near power plants
Removes the load on railways, and gives more options to use the freed capacity. Also expanding the rail capacity(Tripling/Quadrupling) takes ages and costs much higher than building power transmission lines.
Saves precious foreign exchange on Oil with reduced coal transportation(At least 2000 goods train/day out of 7000 trains can be relieved)
Rs1.50/Kw - The difference between Load centre based Power and pit head based power can be used for new building the HVDC lines. The RoI is very high and can breakeven within 7-8 years.

Couple of disadvantages
10% more Co2 emission from Dry Cooling based power generation, 7-8% less efficient than wet cooling based power.If water is available then this is not an issue.

But the cost benefit is swinging more towards Pit head based power than load centre based power.
Glad to hear others opinions.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby SBajwa » 20 Jun 2018 19:35

http://www.tribuneindia.com/news/nation ... 08167.html

Shiv Kumar

Tribune News Service

Mumbai, June 20

The Economic Offences Wing of the Pune Police on Wednesday arrested Ravindra Marathe, CEO and Managing Director, Bank of Maharashtra, and his predecessor Sushil Muhnot for allegedly colluding with builder D S Kulkarni in fraud case involving more than Rs 2,000 crore.

According to police sources, Marathe was arrested from Pune while Muhnot was held in Jaipur. Several others, including Rajendra Gupta, Executive Director, Bank of Maharashtra, Nityanand Deshpande, Zonal Manager Bank of Maharashtra, have also been arrested. Officials from Kulkarni’s DSK Developers Ltd, including its chartered accountant Sunil Ghatpande and vice-president, engineering Rajiv Newaskar, have also been arrested, police said.

All have been charged with criminal conspiracy, cheating and corruption under various laws, police said.

The builder D S Kulkarni and his wife Hemanti are already under arrest and lodged at Pune’s Yerwada Jail. Kulkarni’s son Shirish from his first wife and other relatives have also been arrested for
defrauding home buyers who had booked flats in several projects of the company.

As per the initial information available from the EOW, the bank officials are suspected of illegally sanctioning loans worth crores of rupees to DS Kulkarni Developers Ltd.

The arrests came after a local RTI activist, Vijay Kumbhar, sought details of the loans sanctioned to the developer. Kumbhar told reporters in Pune that Bank of Maharashtra officials had sanctioned
loans to the builder without adequate documentation.

As per the chargesheet submitted by the EOW in a Pune court, the DSK group may have defrauded home buyers and investors to the tune of Rs 2043 crores.

Police sources say, that verification of various collateral submitted by the DSK group to obtain bank loans has resulted in the detection of the bank fraud. Fresh cases are likely to be filed against the Kulkarni family and the bankers, police sources said.

More than 12,000 home buyers, investors and depositors have been duped by the company. Police say, as many as 8,000 senior citizens may have lost their life-savings after investing in DSK’s fixed deposit.


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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 21 Jun 2018 20:42


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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 22 Jun 2018 09:03

https://swarajyamag.com/economy/how-ins ... e-npa-mess
How Insolvency And Bankruptcy Reforms Are Helping Clean Up The NPA Mess

The Modi government’s landmark Insolvency and Bankruptcy Code is straightening out crooked corporates who have conned banks so far without compunction.

The saga of woes for banks in the form of non-performing assets (NPA) has been long and never ending. Many wilful defaulters, a good number of whom are well known corporate houses, have skilfully used the legal loopholes and avoided repayment of loans to the banks. Becoming sick, unviable and declaring insolvency has been a fancy way to default and the borrower-friendly insolvency legal framework compelled banks to accept whatever terms and conditions imposed upon them by the borrowers. The lenders have been at the receiving end of crony capitalists patronised by the Congress regime. Multiple laws in place have led to contradictory orders in respect of the same entity.

The insolvency of corporations was guided by diverse laws such as the Recovery of Debts due to Banks and Financial Institutions Act, 1993, the Companies Act, 1956, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Sick Industrial Companies (Special Provisions) Act, 1985, whereas individual bankruptcy was covered by the Provincial Insolvency Act, 1920 and by the Presidency Towns Insolvency Act, 1909. The process of recovery, debt restructuring and liquidation remained extremely susceptible to dilatory tactics. Debt restructuring and liquidation process took almost five years.

The Sick Industrial Companies Act prohibited claims against sick companies. Many corporate debtors misused this provision to avoid recovery proceedings indefinitely. The spirit and main object of this act to revive sick companies was never realised. Outdated banking mechanisms, ever-changing government stances and feeble steps by the Reserve Bank of India (RBI) have failed to break this vicious cycle.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby JayS » 22 Jun 2018 15:36

Very heartening to read that the big fishes also need to payback now a day at least to some extent compared to them literally owning the system previously.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 22 Jun 2018 17:13

I am still looking for news source but it seems Indian trade (goods plus services) over the last 12 months has crossed the $1 trillion mark. Don't know if it is a first.


Meanwhile, how GST is transforming the logistics sector.

https://www.thehindubusinessline.com/ne ... 222950.ece

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby JayS » 22 Jun 2018 17:53

Supratik wrote:I am still looking for news source but it seems Indian trade (goods plus services) over the last 12 months has crossed the $1 trillion mark. Don't know if it is a first.

In this ref, India's foreign Trade for April –March 2017-18
http://pib.nic.in/newsite/PrintRelease. ... lid=178671

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 22 Jun 2018 18:53


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

Postby Suraj » 22 Jun 2018 21:01

JayS wrote:
Supratik wrote:I am still looking for news source but it seems Indian trade (goods plus services) over the last 12 months has crossed the $1 trillion mark. Don't know if it is a first.

In this ref, India's foreign Trade for April –March 2017-18
http://pib.nic.in/newsite/PrintRelease. ... lid=178671

Oh wow. That is a great source. The growth in services exports to $175 billion is pleasantly unexpected. I haven't tracked that number in a while, and the last time I looked, it was in the $125 billion range. What's more, the $175 billion figure is just April-Feb, so the final number ought to be north of $190 billion.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 22 Jun 2018 23:37

What I have been saying earlier. Tax base in India is small primarily because there are not enough people with taxable income.

https://www.thehindubusinessline.com/op ... 222142.ece

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 22 Jun 2018 23:52

UPI reaches 10 million transactions per day.

https://www.moneycontrol.com/news/busin ... 21321.html

Modinomics at four by Arvind Panagariya. (You will have to register)

https://www.foreignaffairs.com/articles ... omics-four

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahul M » 23 Jun 2018 00:10

Modinomics at Four
Why India Is on the Path to Long-Term Prosperity
By Arvind Panagariya

When Prime Minister Narendra Modi took office in May 2014, India faced major economic challenges. Growth had plummeted to 5.9 percent during the last two years of the outgoing government, down from a nine-year average of 8.2 percent. During the same two years, inflation had averaged 9.7 percent. Meanwhile, the government was in the grip of paralysis, unable to rein in corruption or complete large projects and in need of key structural reforms.

Four years later, the Modi government has largely succeeded in addressing these problems. On average, inflation has come down to 4.3 percent and growth has climbed to 7.3 percent over the last four years. Bold steps such as the demonetization program in November 2016 have been effective in curbing corruption. And the government has introduced numerous efficiency-enhancing initiatives, such as the replacement of a complex set of central- and state-level taxes with a single goods and services tax (GST). Taken together, these policies put India on the path to long-term growth and prosperity.

BOOSTING EFFICIENCY

One of Modi’s main points of focus since taking office has been improving governance and efficiency. The last two years of the outgoing government under Prime Minister Manmohan Singh had been characterized by deep paralysis. Large projects had been stalled due to a lack of coordination among different ministries and inordinate delays in environmental clearance. Upon taking office, Modi directly intervened to speed up clearances and decision-making. He instituted a process whereby he himself regularly presides over meetings of senior staff members of ministries relevant to making decisions on specific projects and policy issues.

Early in its tenure, the government also made a major effort at the level of the states to simplify and digitize various clearances for businesses. That effort led to the unprecedented jump in India’s position in the World Bank Ease of Doing Business rankings from 140to 100 between 2014 and 2018. In parallel, the government has also taken steps to simplify citizens’ lives. In the past, job and school applicants had to go through a cumbersome process of getting diploma copies certified by senior officials or judges. The government has replaced this decades-long practice by a self-certification policy bringing relief to all, especially rural residents. Citizens can also store digital copies of their diplomas using a free service provided by the state, and numerous government services can now be accessed online. The government has also provided 40 million poor rural households with stoves that use liquid petroleum gas instead of the black carbon generated by wood- and coal-burning stoves.

India under Modi has also taken up the fight against corruption. Its most daring measure on this front has been demonetization, which ended legal tender status of 500 and 1,000 rupee notes overnight on November 8, 2016. The move temporarily wiped out 86 percent of the nation’s currency in circulation. Holders of these notes were required to deposit them in bank accounts to eventually receive new legal tender currency notes in return. The government had hoped that those holding unaccounted wealth in these notes would not deposit them for the fear of being caught. That turned out not to be the case, with most holders finding ways to work around the program. Many of them sold the notes at a discount to those who could game the system to account for more wealth than they actually held. Nevertheless, subsequent analysis of the bank accounts has led to the detection and closure of hundreds of thousands of fake shell companies and disqualification of a similarly large number of company directors to serve as directors in the future. Demonetization also led to a 25 percent decline in the value of real estate, thereby eroding a substantial amount of black wealth held in buildings and structures. Finally, demonetization has sent a strong signal of the government’s resolve to combat corruption, leading to a jump in the number of income-tax payers and placing those transacting illegally on notice.

Modi also greatly improved government efficiency by replacing the erstwhile Planning Commission with the National Institution for Transforming India (NITI). A bipartisan consensus had evolved over time that with India having moved toward a market economy since the 1991 reforms, the Planning Commission had lost its relevance. Yet no past government did anything to replace it with a more contemporary, market-friendly institution. Launched in 2015, the NITI has emerged as an active promoter of the reform agenda of the Prime Minister. It has also forged a more equitable relationship between the center and the states. On the one hand it offers policy advice to states while on the other it seeks their advice in the formulation of central government policies.

SPECIAL PROJECTS

Until now, an important difference between China and India has been the ability of the former to complete projects on scale and at speed. Under Modi, India has finally seen at least some progress in this direction. Three specific examples are worthy of mention: the spread of biometric identity cards, the opening of Jan Dhan bank accounts, and the building of toilets under the Swacch Bharat Mission (SBM).

First is the issuance of a biometric identity card to all residents of the country. Begun under the previous government in 2010, the Aadhaar project, as it is known, has today distributed 1.2 billion such cards, and nearly all Indian residents except those in a few states on the border are in possession of one. The government issued 8.65 million cards in August 2017 alone.

As a part of its effort to increase financial inclusion, the government launched the Jan Dhan bank account program and opened 18 million bank accounts for citizens in just one week in August 2014, a feat that qualified for inclusion in the Guinness Book of World Records. Today, the total number of Jan Dhan bank accounts stands at 316 million.

Finally, under SBM, the percentage of rural households with toilets has risen from barely 38 percent to 84.2 percent. The number of states with no open defecation has risen from none when Modi took office to 17 currently. Modi is now within striking distance of achieving his declared objective: an open-defecation-free India by Mahatma Gandhi’s 150th birthday on October 2, 2019.

STRUCTURAL REFORMS

When Modi came to office, momentum for structural reforms had been lost, and little progress had been made during the preceding five years. During his tenure, substantial progress has been made in a large number of areas. Although the full list is too long to be fully covered, some key reforms are worthy of note: deregulation of gasoline and diesel prices, further opening to foreign direct investment (FDI), greater labor-market flexibility, the shift to Direct Benefit Transfers (DBT), the Goods and Services Tax (GST), and the Insolvency and Bankruptcy Code (IBC).

Under Modi, India has deregulated gasoline and diesel prices. For too long, state subsidies held down the prices paid by consumers, thereby encouraging wasteful consumption of the products and adding to the fiscal deficit. These subsidies have now been fully eliminated. During the recent rise in crude prices, which led to large increases in retail gasoline and diesel prices, voices were raised from nearly all quarters to lower the prices but the government has refrained from restoring subsidies. During the last four years, the subsidy on liquid petroleum gas, used in cooking, has also been considerably reduced.

Indian Prime Minister Narendra Modi speaks during the inauguration of hydro power and infrastructure projects in the state of Jammu and Kashmir, May 2018.
Mukesh Gupta / REUTERS

Indian Prime Minister Narendra Modi speaks during the inauguration of hydro power and infrastructure projects in the state of Jammu and Kashmir, May 2018.

Modi has also opened India up to greater levels of foreign direct investment (FDI). At the time he came to office, foreign investors considered a relaxation of the FDI cap in the insurance market from 26 percent to 49 percent as a litmus test of his resolve to place India back on the path of reforms. The Modi government has not only delivered on this reform but gone further by opening up defense to FDI. It has also permitted 100 percent FDI in marketing of food products produced in India; high-tech and capital-intensive activities in the railways; manufacturing of medical devices; and the e-commerce marketplace. The last of these items has led to the entry of Amazon and Walmart in India’s e-commerce space. Total FDI flow, which averaged $35 billion during the last two fiscal years of the outgoing government, has risen to $60 billion in the fiscal year ending in March 2017 and $48 billion during the nine-month period of April-December 2017.

According to one of the labor laws, a manufacturing firm with 100 or more workers cannot terminate workers for any reason without permission from the relevant regulatory authority, which is almost never granted in practice. Consequently, firms in India have tended to stay small, especially in labor-intensive sectors where margins per worker are small. To alleviate this problem, the government has now introduced fixed-term employment in all sectors, whereby firms will be able to hire workers for a specified term, after which they will have no claim to staying on. This will give the firms greater flexibility in hiring than in the past.

To improve the efficiency of distribution of benefits under social programs, and curb waste, fraud, and abuse, the government has been channeling more and more of its benefits through the Direct Benefit Transfer (DBT) mechanism, which requires beneficiaries to produce their biometric Aadhaar identity cards. A vast number of benefits, including such major ones as the subsidy on cooking-gas cylinders, the sale of food grain at subsidized prices, and the payment of wages for employment under the National Rural Employment Guarantee Act, are now being implemented through the DBT mechanism. This has allowed the elimination of tens of millions of ghost beneficiaries. Savings attributable to the DBT mechanism cumulatively exceed $10 billion.

The GST, meanwhile, had been a reform in the making for over a decade. The government has finally successfully completed this complex reform, requiring consensus across 29 states, a constitutional amendment, and multiple legislations. Although the reform has been criticized for maintaining as many as four different tax rates and for poor implementation, its principal benefit is the replacement of numerous central and state level indirect taxes by a single tax on each product nationwide. Already, a major logistics company, Rivigo, reports that with the GST leading to the removal of checkpoints at state borders, travel time for trucks on highways has decreased on average by 15 percent.

For all the Modi government’s economic accomplishments, there is one important area in which it has fallen short: international trade.

Despite the passage of nearly 70 years since independence, India still lacked an effective bankruptcy law when Modi took power, leaving creditors, including banks, at the mercy of borrowers. Large borrowers have traditionally exploited this situation by forcing lenders to renegotiate the terms of loans. There have also been repeated episodes of large accumulations of non-performing assets (NPAs) by banks, requiring the government to recapitalize the banks using taxpayer money. At long last, in May 2016, the government enacted the IBC, which introduces a time-bound bankruptcy process in case of default. The Reserve Bank of India is now successfully deploying this law to systematically clear the existing NPAs. Using the IBC, it has also laid down strict rules of repayment of loans, thereby cutting the scope for banks to accumulate a large volume of NPAs in the future.

THE FUTURE OF THE INDIAN ECONOMY

For all the Modi government’s economic accomplishments, there is one important area in which it has fallen short: international trade. A process of concerted reduction in trade barriers beginning in 1991 had brought the top industrial tariff (with some exceptions, such as textiles, apparel, and auto) down from 355 percent to 10 percent by 2007. The average industrial tariff had correspondingly fallen from 113 percent to 12 percent. But recently, the government has returned to the discredited policy of import-substitution industrialization, which promotes industrialization by replacing imports by domestic production and raised tariffs on a large number of products.

Currently, approximately 45 percent of India’s workforce remains in agriculture, which produces just 15 percent of GDP. Economic transformation requires the creation of well-paid jobs in industry and services so that a significant proportion of the current agricultural workforce may migrate out of its current low-productivity employment. If this migration is to take place speedily, India must achieve substantial expansion in its share of global exports, especially in the labor-intensive products. With China withdrawing from these products due to its high wages, this is a feasible proposition, but only if India’s own policies favor outward orientation over the inward-looking policy of import substitution.

Over the past four years, the Modi government has made great progress in reforming the economy to deliver greater growth and prosperity. Although many of its policies have already had a marked effect, most will yield their full impact only in the longer run, so unless the next government turns populist, prospects for further acceleration in growth and prosperity are excellent.

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

Postby Suraj » 23 Jun 2018 00:14

A look at the data posted earlier, on the import front shows (Feb 2018 monthly import data) the following (all figures in USD billions)

Petroleum $11 billion
Coal $2.5 billion
Gems $3 billion
Electronics $5 billion
Chemicals $2 billion
Resins/plastics $1.4 billion
Nonferrous metals $1.2 billion
Machinery $3.4 billion
Transport equipment $1.8 billion
Gold $2.4 billion

TOTAL $41 billion

Exports are ~$30 billion a month, comprising:
Jewelry $3.5 billion
Drugs $1.8 billion
Chemicals $2 billion
Yarn $1 billion
Textiles $1.5 billion
Petroleum $3.3 billion
Engineered goods $8 billion
TOTAL $29 billion

A quick summary:
* Oil bill accounts for ~$8-12 billion a month
* NET oil bill of $6-9 billion, since we export about $3 billion of refined petroleum.
* Chemicals are a wash - ~$2B each way
* Jewelry exports only slightly exceed gems imports, and gems+gold imports are $2 billion in net imports.
* Electronics are $5 billion/month or $60 billion a year. Something we can and should substantially cut.
* Transport equipment is another huge header - almost $2 billion a month, lets say $25 billion a year.
* Yarn and textiles are still surprisingly puny. Engineering goods exports are several times more.

There's potential to cut about $5-8 billion from the import bill quite quickly while simultaneously boosting the export earnings here.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby JayS » 23 Jun 2018 00:19

Suraj wrote:
JayS wrote:In this ref, India's foreign Trade for April –March 2017-18
http://pib.nic.in/newsite/PrintRelease. ... lid=178671

Oh wow. That is a great source. The growth in services exports to $175 billion is pleasantly unexpected. I haven't tracked that number in a while, and the last time I looked, it was in the $125 billion range. What's more, the $175 billion figure is just April-Feb, so the final number ought to be north of $190 billion.


Looks like its published every month.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 23 Jun 2018 00:30

Never seen it before :oops: I only looked at the usual suspects - RBI, CSO, FinMin/DIPP etc. The PIB data accumulates RBI figures though.

The differentials in growth rates are interesting:
Merchandise exports: 10%
Merchandise imports: 20%
Services exports: 18%
Services imports: 20%

Current fiscal year should see services exports exceeding $200 billion. That's a stunningly large figure, that'll double to an even more eye popping $400 billion by 2023-24 @ 15% growth rate.

The newest data I have for major services exporting countries is 2016 data, OECD data:

Code: Select all

Rank Country Exports($billion)
1 USA      $752B
2 UK       $341B
3 Germany  $281B
4 France   $235B
5 China    $208B
6 Japan    $174B
7 India    $162B


One year later we're at an estimated $191B last year, probably having overtaken Japan already, and closing in on China. Chinese data is quite interesting. They run a $230 billion services trade deficit, while we run a $70 billion services trade surplus. We should be one of the top 5 services exporters before the decade is out - 15% growth on last years >$190 billion exports is $220 billion.

Chinese services exports grew 10% in 2017. If we maintain a 7-8% greater differential growth rate, we'll catch up in ~4 years.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nam » 23 Jun 2018 00:42

Suraj wrote:A look at the data posted earlier, on the import front shows (Feb 2018 monthly import data) the following (all figures in USD billions)

Petroleum $11 billion
Coal $2.5 billion
Gems $3 billion
Electronics $5 billion
Chemicals $2 billion
Resins/plastics $1.4 billion
Nonferrous metals $1.2 billion
Machinery $3.4 billion
Transport equipment $1.8 billion
Gold $2.4 billion


The Coal Import is most interesting part. We need to push towards Renewables and Nuclear to cut down the coal import. 2.5 billion per month is huge.

Pretty sure most of this is going to the Aussies. Fundamentally out energy needs (Petrol + Coal) consumes 13.5 billion per month.

I wonder what is under Transport Equipment. Metro train coaches? Motor Engines? imported luxury cars? Aeroplanes?. It cannot be trucks or buses.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 23 Jun 2018 00:47

Please also add Tourism in the economic growth story. It is a virtuous component. Infrastructure helps tourism which helps infrastructure (or the need of it). Tourism brings in both FDI as well as "Service Export" component. Almost 1 million tourists per month arrive in India. And is already expected to be $400 Billion for 2018.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nam » 23 Jun 2018 00:52

Another aspect is Remittance. 60-70 billion per year. More than FDIs and permanent !

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 23 Jun 2018 00:57

It seems RBI has already published March 2018 services trade data: $16.8 billion in exports . So full 2017-18 services exports were 175 + 16.8 , or ~$192 billion . Holy crap.

Current fiscal has also started off strongly, with $17.5 billion, an all time high and the first time we've had services exports >$17B a month. Data for April 2017 was $12.9 billion, or close to 40% increase YoY.
Services exports surge 36.1% in April

Monthly gross exports ($30 billion merchandise + $18B services) is close to $50 billion now. When I joined this site, our ANNUAL exports were that much...

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Prem » 23 Jun 2018 01:52

Service industry/ export from Y2K era to now almost 200 times !

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby hanumadu » 23 Jun 2018 07:56

nam wrote:
Suraj wrote:A look at the data posted earlier, on the import front shows (Feb 2018 monthly import data) the following (all figures in USD billions)

Petroleum $11 billion
Coal $2.5 billion
Gems $3 billion
Electronics $5 billion
Chemicals $2 billion
Resins/plastics $1.4 billion
Nonferrous metals $1.2 billion
Machinery $3.4 billion
Transport equipment $1.8 billion
Gold $2.4 billion


The Coal Import is most interesting part. We need to push towards Renewables and Nuclear to cut down the coal import. 2.5 billion per month is huge.

Pretty sure most of this is going to the Aussies. Fundamentally out energy needs (Petrol + Coal) consumes 13.5 billion per month.

I wonder what is under Transport Equipment. Metro train coaches? Motor Engines? imported luxury cars? Aeroplanes?. It cannot be trucks or buses.


Coal could be metallurgical coke too. We will continue to import it as our domestic reserves are low.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Katare » 23 Jun 2018 08:46

For coastal power
Plants sometimes it is cheaper to get higher quality imported coal than hauling high adh indian coal from interiors.

But $2.5 billion/month or $30billion a year in coal imports while we have reserves for mext 100 years is an insanely criminal neglect by GoI.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby pankajs » 23 Jun 2018 09:51

Part of the Coal imports would be for Steel plants that need good quality/low ash coal for minimizing impurities and increasing efficiency during blast furnace operations. Now what part of the import is coal for steel vs power I am not sure.

https://economictimes.indiatimes.com/in ... 384617.cms
Coking coal import increases to 43.53 million tonne
KOLKATA: The country's coking coal import increased to 43.53 million tonne (mt) from 38.83 mt during the period April 2017 – February 2018, a jump of 12.10% over same period last year, according to mjunction, a leading e-commerce company.

The trend highlights India’s dependence on imported coking coal that has been the concern for steel and power sectors. These sectors essentially depend on low ash content coal, which is not abundant in India. Low ash coal, which is used in blast furnaces and Basic oxygen furnaces of steel plants is thus largely imported from Indonesia, Australia and South Africa.


https://www.mjunction.in/show/content/J ... -outlook_1
Taking stock: India’s met coal, coke outlook
Jharia Coal fields in Jharkhand, which hold the major share of quality coking coal reserves continue to witness raging fires despite the best efforts being put in over the decade.

With meagre reserves and production combined with inferior quality of coking coal that is available in the domestic market, the expansion of steel industry in India has seen increasing import of coking coal. Currently about 80% of coking coal consumption is being imported.

As per National Steel Policy (NSP) 2017 objectives, domestic availability of washed coking coal has to be increased so as to reduce import dependence on coking coal from 85% to 65% by 2030-31.

In 2015-16, of the total demand of 62.75 million tons of coking coal, 44 million tons was imported. If domestic supply remains at the present level, coking coal imports may go up to about 75 million tons by 2020-21.

The import dependency is expected to reach 160 million tons a year if the steel ministry’s target of 300 million tons of crude steel is to be achieved.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby jpremnath » 23 Jun 2018 12:59

nam wrote:Another aspect is Remittance. 60-70 billion per year. More than FDIs and permanent !

Dont count remittances as permanent...A major chunk is from GCC countries as earnings are tax free..All these countries are cutting down on expat labour and made it as a government policy...Another 10 years, we might be getting only half of what we have now...US , UK might be more stable...

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 23 Jun 2018 15:10

Logistics sector can be huge job creator.

https://www.financialexpress.com/econom ... s/1216850/


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