Indian Economy News & Discussion - Nov 27 2017

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

Postby jpremnath » 10 Sep 2018 15:03

Noob q...With the rout in rupee value, will our economy size go down by the end of the year?..Will we go back being the 7th biggest economy? How does the GDP size and Rupee Dollar relation work?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nam » 10 Sep 2018 15:12

jpremnath wrote:Noob q...With the rout in rupee value, will our economy size go down by the end of the year?..Will we go back being the 7th biggest economy? How does the GDP size and Rupee Dollar relation work?


That would dependent on the performance of Euro & Pound (France & UK). Indian rupee is falling against the dollar, not Euro/Pound. So if Indian GDP falls a bit, so would UK/France.

In 2019 we will be quite clear ahead.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Singha » 10 Sep 2018 17:45


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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 10 Sep 2018 21:25


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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 11 Sep 2018 00:01

Foreign investors withdraw $601 million from bonds this month
https://www.bloomberg.com/news/articles ... -year-high
Global funds sold $601 million of India’s bonds this month, more than the combined $459 million that they bought in July and August. Concerns over an oversupply of sovereign bonds had contributed to the selldown earlier this year, and there are little signs of relief.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chetak » 11 Sep 2018 00:09

VKumar wrote:
vera_k wrote:How government can cut taxes on fuel without taking a hit in revenues

Nice graphics showing why fuel prices on the street are higher today, although crude oil prices are lower than 5 years back. The suggestion to move away from having taxes added on as a percentage (ad valorem) of the raw fuel price is common sense.


Customs duty rate on many items has remained the same or higher for at least past 16 years. Meanwhile the USD has doubled or more against the indian Rupee. This means that, even if volume of imports was constant, the duty collected would be double or higher.

This is sorely affecting the consumer and surely affecting industry.

Government must think carefully about either moving to specific duty or reducing the duty rate.

Government should not blatantly profit from its citizens.



Your petrol price is high because UPA left 2 lakh crore of oil debt for Modi


Image

When global oil prices rose in 2012, 2013 and 2014, the UPA’s reputation, along with India’s economy, was already collapsing. If public anger had been stoked any further by surging oil prices, the Congress might have been reduced to single digits in 2014. The ruling dispensation had already scammed pretty much everything available on land, air, sea and even in space. There was only one thing left to do. They could scam us out of our future earnings.

So how did the UPA lower oil prices? Instead of paying Oil Manufacturing Companies (OMCs) in cash, the government started ‘paying’ them in ‘oil bonds’. An ‘oil bond’ is not money, it’s just a promise that the government will pay them in the future, preferably under a different ruling party that will be left to bear the brunt.

Think of it as the UPA paying for oil with a post-dated check. Only worse, because when you issue a bond, you also have to pay interest on it. So it is more like a credit card.

By the time Modi Sarkar came to power, the UPA had already swiped its credit card to borrow a whopping Rs 1.3 lakh crore worth of oil. In the last four years, the Modi government has had to pay back UPA’s debt in full along with Rs 70,000 crore in interest.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 11 Sep 2018 01:05

^^ Good to know
Sent it to every one I know on whatsapp/FB
Interest thing is ... Other than a mininiter giving this statement, no one in the Govt. systematically spreading the info and countering the narrative.

People have a right to know:

Can someone confirm this news?

Year / Oil Subsidy
2009/46,000 cr
2010/78190 cr
2011/1,38, 541 cr
2012/1,61,029 cr
2013/1,43,738 cr

2014/76,285 cr
2015/27,571 cr
2016/22,733 cr
2017/7,069 c r
2018/NA

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 11 Sep 2018 01:51

I maybe a dunce, but when a Union Minister of Petrol states that, that *is* government. And when the PM himself re-iterates it, that again is "government". Union Minister & PM are the visible faces of the government!

And when both the Union Minister and the PM himself state that again and several of the party spokies put it out in different media, how is that not 'systematic followup'?

In democracy, it is the citizen's duty to be informed. Instead of the 4th pillar of democracy, the media nowadays have become the first, the second, third, fourth & fifth pillar of agenda driven mis-information.

Of course if one has to read news only from selective media channels who spin with their own subjective biases, then truth is the first casualty.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 11 Sep 2018 08:51

https://www.quora.com/Why-is-Modi-not-r ... srid=u5KfC

Why is Modi not ready to reduce the petrol price in India in 2018?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chetak » 11 Sep 2018 10:06

Image

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Philip » 11 Sep 2018 16:20

Deleted
Last edited by Suraj on 11 Sep 2018 20:13, edited 1 time in total.
Reason: No politics

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby pankajs » 11 Sep 2018 17:02

https://www.business-standard.com/artic ... 425_1.html
ICICI Bank to offer MSMEs loans up to Rs 10 mn based on their GST returns

Firms availing loans needn't submit several other financial statements, the bank says the move will reduce paperwork, cut lead time between application and sanction

Smart move! Many birds with one stone at least that is how it appears to me. How do others view this development?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 11 Sep 2018 17:05

Philip wrote:Sadly the GOI is playing the well-trodden blame game 4 years on in its innings.We threw outt the Cong./ UPA both for corruption and the economy.This NDA regime is not showing enough compassion upon the plight of the ordinary citizen.Fuel prices rise daily, the market has started tanking daily along with the rupee.An argument is being put out that we're not doing so badly with other currencies- then dump the almighty $ for the Euro, whatever!

The NDA spin-doctors show very little sympathy for the state of affairs and either blame the previous regime or justify the same blaming firang factors.That's not good enough.This govt. was voted in to govern, not to pass the buck .The people want their pain relieved and crisis
measures taken.

The fuel issue is simple.The taxation on it is just far too much.We need ay least a Re.10/- reduction in petrol and diesel.Fuel is not a luxury item but an essential commodity which affects commuting costs,
comestible costs thanks to higher transportation expenses, industrial production costs with higher energy costs and farmers' costs for their stand-by power sets when power cuts take place.Thid has a snowballing effect on the rconomy across the board.The market is also in free- fall for the 3rd syraight day after losing 1000 +points overall The GOI will ignore this crisos at its peril.


Agree on that. Facts have to come out but the lack of brains to understand how it impacts growth/jobs/common man costs is unbelievable. They raised excise tax % when oil prices went down, why not reverse it when they are going up? Or why not switch from % excise tax to constant tax to stay revenue neutral? They will pay the price for acting clueless.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Atish » 11 Sep 2018 17:11

By cutting taxes we encourage oil consumption making economy less oil efficient in long term. In constant fear of being squeezed by Arabs and Russians. Deal with it take bitter medicine.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby pankajs » 11 Sep 2018 17:16

https://www.globalpetrolprices.com/gasoline_prices/
In the drop down, change the currency to "Indian Rupee" and note where the Indian rates fall in the range of global prices. You don't even have to count. Just eyeballing would assure you we are near the middle of the range.

Folks want government investment in infrastructure, welfare, military, defense, research, yada, yada. The money has to come from some place or should we cut the defense budget. Lets cancel the Rafale, it anyways has become too controversial. Lets junk the S-400 deal. That should allow us to lower the petrol prices. No.. then lets junk the Atry orders or cancel the Agni-5 and the Nuke Subs. Perhaps those too are critical so how about sacrificing ISRO's budget or Railways or pull the plug on DRDO? How about cutting funding for mid-day meals or any/many such social projects?

Perhaps such defense and social projects can't be touched. How about stopping road/port/power/irrigation/other infra projects? Will that support growth and jobs or dent our current and future growth? Growth does not occur in a vacuum. It needs sustained investment in infrastructure.

Perhaps a temporary budget cut is acceptable and can somehow be managed but what happens if the oil prices refuse to go down but stay elevated?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 11 Sep 2018 21:48

^Or what happens if Oil prices go up?

[A long rambling post follows]

Here is the deal on petrol and diesel taxes:

The State VAT on petrol is at least 25% in 20 states with the highest in Mumbai at 39.78%. The State VAT on diesel is more than 20% in 12 states and highest of 28.47% in Andhra Pradesh.

https://factly.in/taxes-on-petrol-and-diesel/


If India moves towards GST on Petrol+Diesel, all the revenue accrued to states from VAT will be wiped out. Hence there is a good reason where the states want to eliminate the central tax component but want to retain their own tax component and present it as low prices on petrol+diesel. And of course definitely not move to GST on petrol+diesel.

As long as the taxes are used to develop and maintain infrastructure first and foremost and health care and education then the taxes on petrol+diesel is valid. I posit that investment in infrastructure + health care + education + legal are good growth drivers for any economy.

---

To me economy is basically a means for efficient distribution of scarce resources. From that perspective, all it boils down is how efficient is the distribution of scarce resources. Outcomes like growth or inflation or recession is basically the result of how the resources are allocated (or distributed).

Petrol+Diesel is one form of input resource, it is the energy resource component of an economy. Coming down from abstraction: High gas prices actually acts as a break on inflation and a dampener on growth. Too high a cost of energy, it curtails growth and in some cases pushes economy into 'recession' till a new base is established.

The oil bonds issued in 2005-2006 kept the petrol+diesel+kerosene prices low and added as a growth driver. However concomitant to growth there was inflation. Government in a way borrowed from oil companies and returned the cash back to the consumer. This led to higher consumer spending and it started showing up as inflation rapidly.

The above is a good solution for developed economies but not developing economies like India. India has severe shortage in infrastructure. Consumer spending is not going to improve transport infrastructure. Consumer spending is not going to improve health care or education infrastructure and definitely not the legal infrastructure. In a developed economy like US, it is the consumer spending which is generally considered more efficient than government spending for general infrastructure, health care or education.

With the oil bonds in 2005-2006, the government started to stoke inflation by consumer spending. At the same time government lost the revenue coming from the petrol+diesel tax and was deficit in investing it in infrastructure that removed any supply side bottle necks. This led to stagflation of 2009-2014. The real economic growth during 2009-2014 was hollow.

--- part 1 ---

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 11 Sep 2018 22:24

Good post but a caveat. High taxes on fuel except kerosene is a legacy of the socialist phase in India where driving a car or flying in an aeroplane was considered a luxury e.g. we have one of the highest aviation fuel taxes in the world. This was compensated for the ordinary man by giving various misdirected subsidies. The result was a lopsided fuel sector where no one was basically happy. Taxes should come down to a reasonable level commensurate with the current state of the economy.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 11 Sep 2018 22:38

To add. The socialist govts were robbing Paul to pay Peter. High taxes made petrol-diesel costly for people which was compensated for by giving subsidies. Which means govt was taking taxes from you with the left hand and giving subsidies to you with the right hand. Now that petrol-diesel prices are market driven it means anyone buying fuel is paying market price with no subsidies. It is the responsibility of the person to determine whether he or she can afford it. But these taxes are easy money for lazy state and central govts where they have to do less work in order to actually generate enough wealth where petrol-diesel becomes affordable to common man. That socialist era has to change. No subsidies have been enacted. Lower taxes should follow.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 12 Sep 2018 00:38

Atish wrote:By cutting taxes we encourage oil consumption making economy less oil efficient in long term. In constant fear of being squeezed by Arabs and Russians. Deal with it take bitter medicine.


When Oil prices went down, they were super fast in raising excise tax rate. I think that was a wise move.

Now when the oil prices went down, how about cutting excise tax rate?

This lackadaisical approach is very perturbing.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Prasad » 12 Sep 2018 14:02

Politics. Elections are far away. If they give up the $$ they make on the taxes now and oil prices continue to remain high, inflation will go up and govt will be out of buffer room to cut before elections. Now, no matter how much people and opposition jump up and down, they have no incentive to drop prices. Otoh, Rajasthan dropped its prices :) And if oil prices fall before the election, public wont care even if opposition cries that the mudi robbed them.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nam » 12 Sep 2018 14:57

Let me put some numbers on this fuel debate.Read some where Rs.15 goes to Central. let me assume Rs.20.

Even if a "fleeced by the government" middle class family, spends 100 ltrs per month and Central decides to do away the tax of Rs.20.

That is saving of Rs.2000 per month. I take the "stressed" middle class has no issue spending similar amount in the weekend at their favorite restaurant or for a Khan movie in multiplex?

So i want to understand the extreme pain given to the middle class by levying Rs.20 on fuel. If the argument is high fuel tax makes public transport expensive, this is a fallacy. No public transport has ever reduced cost, because the fuel price have gone down. But the expectation government should reduce taxes all the time.

Having said that, the government needs to be criticized for not having a policy on a energy source which has a very violate price fluctuation. Instead of pushing hard for electric vehicle and alternate fuel source, they fall in the fuel price cycle trap every time.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Mukesh.Kumar » 12 Sep 2018 15:24

Prasad wrote:Politics. Elections are far away. If they give up the $$ they make on the taxes now and oil prices continue to remain high, inflation will go up and govt will be out of buffer room to cut before elections. Now, no matter how much people and opposition jump up and down, they have no incentive to drop prices. Otoh, Rajasthan dropped its prices :) And if oil prices fall before the election, public wont care even if opposition cries that the mudi robbed them.



I would say it depends. When it is done, how much, and how vociferous is the opposition (who may claim credit for a victory also). Unfortunately the petro products question has not seen objective public debate.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 12 Sep 2018 16:41

https://www.firstpost.com/business/ragh ... 68561.html

Rajan letter is a clear-cut condemnation of the UPA-era mistakes that created one of the biggest bad loan mess in the country, when, in Rajan’s own words, banks chased promoters “waving cheque books, asking him to name the amount he wanted”. That’s where the problem began, slowly evolved to an accepted systemic ill that no one (including regulators) dared to question for long. The very concept of professional accountability was laughed at and the problem finally returned to haunt the very banks with hellish might.

As Rajan said, the seeds of the present bad loan crisis were planted between 2006-08, when the UPA functioning led to increased NPAs in India's banking structure. In fact, the analogy Modi used once, 'phone banking' is apt to describe this era. It was not uncommon in those days for banks to get calls from North Block and the aides of other political bosses -- be it big or small, directing banks to give loans to a specific promoter or group.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Prasad » 12 Sep 2018 17:23

Like I said, govt needs buffer to enter when $hit hits the fan. And they're projecting $100/barrel https://www.reuters.com/article/us-glob ... SKCN1LS02Y?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby arshyam » 12 Sep 2018 17:39

Mukesh.Kumar wrote:
Prasad wrote:Politics. Elections are far away. If they give up the $$ they make on the taxes now and oil prices continue to remain high, inflation will go up and govt will be out of buffer room to cut before elections. Now, no matter how much people and opposition jump up and down, they have no incentive to drop prices. Otoh, Rajasthan dropped its prices :) And if oil prices fall before the election, public wont care even if opposition cries that the mudi robbed them.



I would say it depends. When it is done, how much, and how vociferous is the opposition (who may claim credit for a victory also). Unfortunately the petro products question has not seen objective public debate.
This.

No politician will act on something when his opponents are asking for it. It will always get spun as "see I pressured the govt to do my bidding" and will be a shot in the arm for the opponent and his party.

The govt will wait this out and then reduce a bit either by Deepavali, or better still, in January. Ideally, it needs to be close enough to the general election that people feel good about it when going to vote, or long enough away that inflation does not rise a lot. Do it too early, the +ve feeling around reduced tax burden will vanish without a trace. This is why I think anytime in the near future (like Deepavali above) is unlikely. Even then, for the prices to make a true difference at the pump, the states will have to pitch in with corresponding cuts, which they are (and will continue to be) loathe to do. So grin and bear it for the moment, I suppose.

I think another reason the govt will resist cutting taxes is that the crude oil price hasn't found a ceiling yet. Around $70 per barrel is not really that high; we had seen $110 a few years back. So the govt will want to leave itself some wiggle room in case the Iran sanctions put another round of upward pressure. Cut taxes now, there won't be much left to cut later.

Anyway, this is all OT beyond a point, so back to my cave before Suraj-san comes with the danda :mrgreen:

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 12 Sep 2018 17:46

Prasad, oil prices go through up and down cycles. So you cannot cut or raise taxes going by that logic as govt would like to have stable finances. A better way is to reduce taxes in general. Nam, from google what I am getting is cumulative taxes is more than 100% which is crazily similar to the income and indirect taxes we had pre-liberalization during Indira and Rajiv Gandhi period. It should come down to 50-60% which is the highest that is charged in developed economies. In that case petrol-diesel will be around Rs 50+. But as I said our govts are addicted to the easy money they get from petrol-diesel taxes similar to alchohol and tobacco.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby arshyam » 12 Sep 2018 17:50

What are people's thoughts about this?

MUDRA loans is another crisis in the making, says Raghuram Rajan - The Hindu

Former RBI Governor Raghuram Rajan has cautioned that the next crisis in India’s banking sector could come from loans given to the unorganised micro and small businesses, called MUDRA loans, and credit extended through the Kisan credit card.

MUDRA loans are offered under the Prime Minister Mudra Yojana or PMMY, launched in 2015 by the NDA government.

A total of ₹6.37 lakh crore has been disbursed under the scheme by public and private sector banks, regional rural banks and micro-finance institutions till date, as per data from the Micro Units Development and Refinance Agency (MUDRA) website.

In a note on bank non-performing assets (NPAs) prepared at the request of Murli Manohar Joshi, Chairman of the Parliament Estimates Committee, Dr. Rajan said the government should refrain from setting ambitious credit targets or from waiving loans.

“Both MUDRA loans as well as the Kisan Credit Card, while popular, have to be examined more closely for potential credit risk,” Dr. Rajan wrote in his 17-page note.

He also flagged the Credit Guarantee Scheme for MSMEs, run by the Small Industries Development Bank of India, calling it “a growing contingent liability” that needs to be examined with urgency. Dr. Rajan urged political parties to agree on not waiving farm loans

He pointed out that most of the bad loans were created during 2006-08, a period that coincides with the first term of the UPA. “A large number of bad loans originated in the period 2006-2008 when economic growth was strong... it is at such times that banks make mistakes,” he wrote.
‘Small loans is another crisis in the making’

“I’m not aware of progress on this front. This is a matter that should be addressed with urgency,” he said in the note.

Dr. Rajan urged political parties to agree on not waiving farm loans as such waivers vitiate the credit culture and eventually reduce the flow of credit. He defended the RBI against accusations that it created the NPA mess. “The truth is bankers, promoters, and circumstances create the bad loan problem...The RBI is primarily a referee, not a player in the process of commercial lending,” he pointed out.

Similarly, he came out all guns firing on whether forced NPA recognition caused a slowdown in credit and the economy. “Simply eye-balling the evidence suggest the claim is ludicrous, and made by people who have not done their homework,” he wrote.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 12 Sep 2018 18:01

Also it is not a matter of spending Rs 2000 in a restaurant. High diesel taxes make the entire transportation industry less competitive which in turn makes manufacturing and some services less competitive. No wonder we have one of the highest transportation costs in the world.

Yes, Mudra and farming loans are risky but with wide distribution it is somewhat mitigated. Compare an industrialist getting Rs 10000 crore and his company tanking to the same loan being given to 50000 people of which 2000 are tanking. Then it is less risky. I believe the repayment on Mudra is good and stable. As for farming it is generally money down the drain as farming in India will remain uncompetitive till the 40% labor force in farming is reduced to less than 10%. Until then govts will give them money to get votes irrespective of which political party.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby arshyam » 12 Sep 2018 18:05

Supratik wrote:Yes, Mudra and farming loans are risky but with wide distribution it is somewhat mitigated. Compare an industrialist getting Rs 10000 crore and his company tanking to the same loan being given to 50000 people of which 2000 are tanking. Then it is less risky. I believe the repayment on Mudra is good and stable.

This was my understanding as well, so was a bit surprised to see Rajan flag this. But RBI was not in favour of this scheme when he was the governor, so maybe he is coming from that PoV.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 12 Sep 2018 18:17

No he is right. With nearly Rs 7 lakh crore given out it will be a huge financial mess if not handled properly and kept an eye on. Remember it cannot go under something like NCLT. If the scheme tanks it is taxpayers money which will have to bail out. Till now the NPA in Mudra is around 3% I believe which is at par.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Trikaal » 12 Sep 2018 18:31

QUESTION-
If the US shale producers have been increasing production (as reported many times over the last year) then why are crude prices rising? I kbow OPEC and Russia have been reducing production to push the prices up, but is the US shale not able to fulfill the shortage?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby jpremnath » 12 Sep 2018 18:34

Supratik wrote:No he is right. With nearly Rs 7 lakh crore given out it will be a huge financial mess if not handled properly and kept an eye on. Remember it cannot go under something like NCLT. If the scheme tanks it is taxpayers money which will have to bail out. Till now the NPA in Mudra is around 3% I believe which is at par.


Already the farmers are used to a system where their loans will be written off every now and then.Add to it the murky affairs with political meddling. Lots of politicians get loans through benami and take the tax payer for a ride.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 12 Sep 2018 19:26

https://www.firstpost.com/business/reta ... 71801.html
Retail inflation cools to 10-month low of 3.69% in August; IIP grows at 6.6% in July as manufacturing, capital goods shine

Retail inflation cooled to a 10-month low of 3.69 percent in August mainly due to a fall in prices of kitchen items, including fruits and vegetables, official data showed Wednesday.

The inflation based on Consumer Price Index (CPI) stood at 4.17 percent in July and 3.28 percent in August 2017.

CPI inflation was at 3.58 percent in October 2017 and has remained above RBI's targeted rate of 4 percent since then.

The Reserve Bank of India (RBI) will be considering this set of data for formulating its next bi-monthly monetary policy on 5 October.

The central bank has been mandated to keep retail inflation at 4 percent level (with a margin of 2 percent on either side).


Industrial production grew at 6.6 percent in July on the back of good performance by the manufacturing sector and higher offtake of capital goods and consumer durables.

Factory output measured in terms of the Index of Industrial Production had expanded by just 1 percent in July last year, according to the data released by Central Statistics Office (CSO).


The manufacturing sector recorded a 7 percent growth in July as against a contraction of 0.1 percent in the same month year ago.

The consumer durables sector recorded an impressive growth of 14.4 percent in July against a dip of 2.4 percent year ago. Capital goods production grew by 3 percent in July as against decline of 1.1 percent year ago.

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

In terms of industries, 22 out of 23 industry groups in the manufacturing sector showed positive growth during July 2018.

The industry group ‘manufacture of furniture' has shown the highest positive growth of 42.7 percent followed by 30.8 percent in ‘manufacture of computer, electronics and optical products' and 28.4 percent in ‘manufacture of tobacco products'.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vera_k » 12 Sep 2018 20:11

Trikaal wrote:QUESTION-
If the US shale producers have been increasing production (as reported many times over the last year) then why are crude prices rising? I kbow OPEC and Russia have been reducing production to push the prices up, but is the US shale not able to fulfill the shortage?


Oil 2018

Demand is starting to catch up with supply. I suspect we will see oil prices peaking in the next 5 years again. Much of the demand growth is coming from China and India.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Prasad » 12 Sep 2018 20:55

IF Trump plays ball on Iran, oil will come down. Maybe not to $46 but certainly to where people will stop complaining.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 12 Sep 2018 21:28

https://www.livemint.com/Industry/RsMpx ... -July.html
India logs 6.6% growth in industrial production in July
India’s industrial production grew at 6.6% in July on the back of good performance by the manufacturing sector (7%) and higher offtake of capital goods (3%) and consumer durables (14.4%)

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Trikaal » 12 Sep 2018 22:56

vera_k wrote:
Oil 2018

Demand is starting to catch up with supply. I suspect we will see oil prices peaking in the next 5 years again. Much of the demand growth is coming from China and India.


So can't US increase output even more and cause prices to crash? I think an oil price crash will be in US interest because as long as oil prices stay high, no amount of sanctions will trouble Russia in the least.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby jpremnath » 12 Sep 2018 23:05

I think it is not as simple as that. Everyone thought the Shale producers will rush in to fill any drop in supply from regular producers. But we keep forgetting that high prices are in their interest too.. And there are other logistical issues within US that most of the refineries cant process the shale output. I am not sure about the wider implications and data regarding this, someone who knows about this can correct me. Plus we are talking about a commodity price which has always been speculative...Iran sanctions, Russian sanctions, anything can force speculators to drive up prices..The oil loby is pretty strong in the US. All these sanctions are actually helping them to reap dividends from high oil prices...Dont think unless there is a big EM recession, prices are going down anytime soon..

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Katare » 13 Sep 2018 00:13

The oil price reduction is linked with CAD situation. When crude prices go up by 40%, suddenly GoI needs 40% more dollars to buy same amount of oil. If prices are reduced (or not allowed to increase) demand would increase requiring more dollars. This will push the CAD to unsustainable levels, which in turn would rout the Rupee which would again make the oil expensive. So you get to the same spot right way or bad way.

There is no other way but to pay a market price and use only as much as we earn in dollars. Except US and oil exporting countries, every country that depends on import of oil, taxes it heavily to ensure demand stays with in its forex budget. India has extreme oil import dependence of 87%, Modi in this case is being a true desh bhakt. It is easy to issue oil bond to create future liability than to teach the public to live with the market fluctuations.

If Govt reduces tax on oil it'll have to get that money from some where else that means debt or new taxes. Any political party would love to reduce the oil prices by 30% and win the election but it simply is not possible.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Katare » 13 Sep 2018 00:27

Just to put some numbers (from memory) - India's oil import bill will be well north of $100 Billion. It increased by 20-25% last year and another 25-30% is expected this year. This additional dollar would go into CAD which would be paid by future earnings.


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