Indian Economy News & Discussion - Nov 27 2017

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

Postby Vips » 03 Nov 2018 18:54

India to have 1 billion debit cards soon, from just 84m 10 years ago.

India is set to touch 1 billion in debit cards. It was a mere 84 million a decade back. Even four years ago, it was less than half of what it is today. This phenomenal growth is because of governments' consistent push towards rural financial inclusion, with schemes such as MNREGA, opening of Jan Dhan accounts, and direct benefit transfers (DBT).

The RuPay cards, which come with all Jan Dhan accounts and increasingly with other accounts too, have played a singular role in the debit card surge. Sources told TOI there are now 560 million RuPay cards (Real reason of MasterCard's grouse against India). These cards were introduced in 2012, but there's been a surge in them in recent years. Two years ago, the number was less than half at 230 million.

Even usage of debit cards has surged. Both the volume and value of transactions have increased by 100% over the past five years. In August, debit cards were used for 1.16 billion transactions worth Rs 3.24 trillion, compared to 579 million transactions worth Rs 1.6 billion in August 2013.

Bankers say Jan Dhan account holders are savvy. A K Sahu, GM - debit cards, Canara Bank, says customers come to their office demanding their benefits under various bank account schemes.

"They know they must keep their ATM PIN a secret. They know the account comes with pension plan, personal accident insurance of Rs 30,000, life insurance of Rs 1 lakh, and overdraft facility. The formalisation of the economy, and government schemes have ensured that most citizens are comfortable with debit card usage," he says.

Increasingly, the debit cards are being used not just for cash withdrawal from ATMs, but also for merchant transactions. Five years ago, ATM transactions formed 90% of debit card usage in volume and 95% in value. Today, PoS (point-of-sale) and e-commerce form 31% of total transactions, and 15% of the value of transactions.

"We've seen our rural customers do e-commerce transactions to take advantage of festival offers on Flipkart, Amazon," says RA Sankara Narayanan, MD, Vijaya Bank.

Changing DBT disbursal patterns are also encouraging debit card usage. Where earlier a bank's business correspondent (BCs) would go in person to a village to disburse the Rs 2,000 monthly pension for senior citizens, widows and the disabled, today many beneficiaries of state and Central government schemes are seeing direct account transfer.

Bankers say that in urban areas, the government decision to waive MDR (merchant discount rate) charges for debit card purchases below Rs 2,000 has really helped debit card usage in shopping. "Earlier, supermarkets and clothing stores did not like to swipe debit cards for purchases below Rs 200. They would warn the customer they'd charge an extra 2-3%. Now, with the MDR waived, we are seeing a surge in small-ticket purchases with debit cards," says Sanjeev Moghe, head, cards and merchant acquiring business, Axis Bank.

Urban India also values convenience. "A majority of our customers pay their utility bills, mobile or DTH bills using their debit card. Of the total number of non-ATM debit card transactions, I'd say about 50% today goes towards online payments, including e-commerce, and 50% towards PoS machines at stores," says Moghe.

Another strong pull for debit card is the range of cashbacks, discounts and special offers that come with its usage for activities like dining, shopping, and booking flight tickets. Proving particularly popular is the EMI option during check-out for purchase of high-end electronics on e-commerce sites.

"The consumption story in the country has been aided by the fact that today customers are also able to make big ticket item purchases through offers even on debit cards. Availability of finance for say durables purchase through EMI on debit cards is a big driver," says Parag Rao, country head - cards and merchant acquiring business, HDFC Bank.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A Nandy » 03 Nov 2018 19:40

MSME support system being put in place:

1 Crore in 59 mins

Need a business loan but are deterred by the daunting process? Forget making rounds of your bank branch for weeks, dealing with staff that is less than cooperative, and all that cumbersome paperwork. And forget the collateral too!

https://economictimes.indiatimes.com/sm ... cf486ccb93


Government readies loan, social security plan for MSMEs

https://economictimes.indiatimes.com/ne ... 477326.cms


Hope they can access proper management advice and growth strategies for their businesses too. We need to backflood the Chinese market with our goods and fill the vacated niches in the global supply chain for various items :)

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Viv S » 05 Nov 2018 12:17

Pressure mounts on India over tariffs on ICT items
Geneva: The US and China, among others, are expected to object at the World Trade Organization (WTO) to New Delhi’s customs duties on information and communications technology (ICT) products, particularly mobile phones and other gadgets, on the grounds that India is not adhering to its bound tariff commitments.

In a 2 November announcement, the US, European Union (EU), China, Japan, Canada, and Norway indicated their intention to raise concern about India’s “customs duties on ICT (information and communications technology) products” at the WTO.

The six countries are expected to challenge India to clarify on 12 November whether it is adhering to its bound/scheduled tariff commitments on ICT products, according to the agenda reviewed by Mint.

The increase in customs duties up to 20% from 15% on high-end mobile phones and other items, including smart watches which will attract duties up to 20% from 10% last year, and subsequent restrictive measures imposed on ICT products following the sudden spike in trade and current account deficits are said to be inconsistent with India’s scheduled commitments in the Information Technology Agreement (ITA) that came into force on 1 July 1997, said a trade diplomat from a major IT exporting country, who asked not to be named.

India, which is a signatory to the ITA in 1996, is required to eliminate tariffs on a range of products, including mobile phones. But the imposition of tariffs on IT products, including mobile telephones, during the recent Union budget has come under intense scrutiny at WTO’s committee on trade in goods and the committee on ITA.
In the past, the EU had said that India is bound by a zero percent duty in its GATT (General Agreement on Tariffs and Trade) commitments. The EU had alleged that India’s tariff on two additional ICT products—digital still video cameras, and other electronic integrated circuits (EICs)— were not in conformity with its scheduled commitments for zero percent tariff.

The US had also pointed out apparent inconsistencies in India’s tariff structure on IT products. Washington sought to know how India can increase import duties on mobile phones against its scheduled binding trade commitments. Japan had questioned India’s justification that the purported items were not covered in the ITA saying India’s measures were inconsistent with tariff classification.

In response, India had explained that the IT goods in question do not fall under ITA. It had all along maintained that IT and telecom technologies have evolved with new applications and equipment which were neither existent nor even conceived at the time of signing the ITA-I in December 1996, at the WTO’s first trade ministerial meeting in Singapore.

Therefore, India argued, the new IT products including the latest Apple phones and other IT products do not strictly fall under the scope of ITA-I agreement. India maintained it is not undertaking any fresh commitments under ITA-2 agreement that came into force more than two years ago.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 05 Nov 2018 12:58

IMO, India is not being sufficiently retaliatory in filing counter suits against developed countries for lack of freedom of labour. They keep demanding freedom of movement of goods and capital, but restrict labour mobility. India should learn to say no. What are they going to do ? Pull out of the market ?

Services PMI climbs to 52.2 in Oct, sees quickest growth since July
The country's services sector in October expanded at the quickest pace since July, driven by significant increase in new business orders, which in turn led to robust workforce expansion, a monthly survey said Monday.

The seasonally adjusted Nikkei India Services Business Activity Index rose to 52.2 in October, from 50.9 in September.

On the job front, Indian service providers continued to add to their payrolls and the sector witnessed the second-strongest increase in employment since March 2011.

Meanwhile, the Nikkei India Composite PMI Output Index, that maps both the manufacturing as well as the services sector, improved from 51.6 in September to 53 in October; and highlighted the strongest expansion in private sector activity since July.

The PMI surveys brought positive news of stronger economic growth at the start of the third quarter of FY 2018/19, together indicating a welcome rebound in private sector expansion from September's four-month low," said Pollyanna De Lima, Principal Economist at IHS Markit, and author of the report.

On the prices front, cost-inflationary pressures eased, resulting in a softer increase in selling prices.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Prasad » 05 Nov 2018 13:22

We fail at the ICT duties thing and you can kiss the nascent manufacturing buildup goodbye. We signed ITA-1. These western buggers want to include current electronic products under ITA-2 as an extension to ITA-1 as 'free trade' balderdash while trumpanzee and oiros go about clamping down on visas for us as well as meaningful investments or let idiots like mastercard cry about 'mudi ij nashunalijm to push rupay and distorting market fields onlee'. Danda works, nothing else. We cannot give up the work we're doing with bringing more manufacturing into the country to satisfy 'trade ij global onlee, everything is global supply chain onlee, india haj to plug into it onlee' stuff that nobody is buying. Sorry for the rant.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 05 Nov 2018 22:10

This is an attempt to kill an emerging hi-tech manufacturing competitor. Negotiate ITA-2 with proper quid pro quo or else no market access.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Trikaal » 06 Nov 2018 12:06

Reharding RBI-Govt standoff:

Govt wants rollback of PCA to allow public sector banks to lend more. But RBI is against this coz of the huge NPA pile with these banks. I feel the crux of the issue is that RBI regulatory authority over the public sector banks is limited, which allows public sector banks to raise more NPAs without the adverse effects a private bank faces. Woukd like to hear the views of more knowledgeable members on this.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Singha » 06 Nov 2018 14:48


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

Postby vijayk » 06 Nov 2018 20:22

Duplicate
Last edited by vijayk on 06 Nov 2018 20:29, edited 1 time in total.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 06 Nov 2018 20:23

vijayk wrote:
Trikaal wrote:Reharding RBI-Govt standoff:

Govt wants rollback of PCA to allow public sector banks to lend more. But RBI is against this coz of the huge NPA pile with these banks. I feel the crux of the issue is that RBI regulatory authority over the public sector banks is limited, which allows public sector banks to raise more NPAs without the adverse effects a private bank faces. Woukd like to hear the views of more knowledgeable members on this.


https://www.financialexpress.com/econom ... o/1374238/

For the financial year ended on June 2018, the RBI had total reserves of Rs 9.59 lakh crore, which comprised mainly currency and gold revaluation account (Rs 6.91 lakh crore) and contingency fund (Rs 2.32 lakh crore).

At present, the RBI does its risk analysis and sets out a part of its surplus profits to be transferred to the government. Sources told the paper that another area where the two differ is the government’s proposal that the central bank should transfer the entire surplus from the financial year 2017-18 to the government, after taking into account its capital requirement. RBI believes that tapping the reserves of the central bank will create no new government revenue.



It may be noted that in the financial year 2017-18, the RBI had made a surplus transfer of Rs 50,000 crore to the government (which comprised an interim transfer of Rs 10,000 crore). It was quite higher from Rs 30,659 crore in the previous financial year 2016-17, but lower than in the previous three years.


The government argues that existing economic capital framework that governs the central bank’s capital requirements and terms for the transfer of its reserves to the government is a very “conservative” assessment of risk by the RBI.

The current economic capital framework was adopted by the central bank in July 2017. The finance ministry said that it was “unilaterally” adopted by the banking regulator and the government nominees on the board were not present in the meeting. Therefore, the government has been seeking to discuss this with the central bank since then as it did not accede to this framework.

One of the other objections raised by the government is one of the RBI’s staggered surplus distribution policy (SSDP), under which the surplus is transferred to the government. The government believes that the central bank been “conservative” and at times “arbitrary,” particularly when it came to the transfer of the interim surplus, the newspaper said.

Now, the government also thinks that the central bank has over-estimated its capital reserves requirements, which has led to an excess capital of Rs 3.6 lakh crore, and it can be used for several purposes, including recapitalisation of public sector banks, help them augment their loan book and come out of the Prompt Corrective Action framework, among other

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 06 Nov 2018 20:28

https://www.bloombergquint.com/opinion/ ... ss-capital

RBI’s Regular Income Or ‘Seigniorage’
Without having any commercial intent, RBI has an enviable model of regular income. It takes cheap money from the government, banks and especially us (every currency note we carry is a zero-interest loan to the RBI) and deploys it largely in interest-bearing foreign currency and rupee assets. As a result, for the fiscal year July 2017 – June 2018, RBI earned a net interest of Rs 73,871 crore.

After accounting for expenses and provisions, RBI transfers this income to the government as dividend. One of the provisions is to the Contingency Fund, which is in the nature of retained earnings.

Revaluation Gains And Losses
Besides interest income, the foreign currency assets and rupee bonds that RBI holds are subject to revaluation gains and losses. As the rupee depreciates over time, the rupee equivalent of foreign currency assets increases.

Such gains from revaluation do not pass through RBI’s income statement – they are taken directly to the balance sheet under revaluation reserves.

As of June 2018, the cumulative currency and gold revaluation reserves alone was a whopping Rs 6.9 lakh crore (see table above), which includes Rs 1.6 lakh crore added in this fiscal year. Clearly, the rupee has depreciated significantly in relation to RBI’s effective acquisition cost of foreign currency.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby yensoy » 06 Nov 2018 21:46

vijayk wrote:https://www.bloombergquint.com/opinion/understanding-rbis-balance-sheet-is-it-sitting-on-excess-capital

RBI’s Regular Income Or ‘Seigniorage’
Without having any commercial intent, RBI has an enviable model of regular income. It takes cheap money from the government, banks and especially us (every currency note we carry is a zero-interest loan to the RBI) and deploys it largely in interest-bearing foreign currency and rupee assets...


Is it possible that the one reason the RBI (guv) was against demonetization was the possibility that there would be less cache sloshing around, and thereby less gains to the RBI as virtual interest? And by the very act of moving a sizeable portion of hard cash funds into banking, the banks would now have to pay out (nominal) interest on the deposits?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Nihat » 06 Nov 2018 22:53

This feud between government and RBI seems very bad the government from an optics perspective. They really need to play this out behind closed doors, especially at this point of time

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 07 Nov 2018 00:01

{Deleted. Please don't post hearsay followed by commentary. Post reference or don't post at all. }

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 07 Nov 2018 02:14

Releax! It is not hearsay ... There is reference to it everywhere

https://www.msn.com/en-in/news/india/go ... li=AAggbRN

Sources have confirmed to The Indian Express that the RBI views this attempt by the Government to dip into its reserves can adversely impact macro-economic stability. And so the RBI has not accepted the proposed changes, sources said.


For its part, the Finance Ministry argues that the current framework was “unilaterally” adopted by the RBI in July 2017 because both the government nominees on the Board were not present during the meeting. The government did not accede to this framework and has since then been constantly seeking discussions with the RBI.


The government is of the view that RBI has over-estimated its capital reserves requirements resulting in excess capital of Rs 3.6 lakh crore.


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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 07 Nov 2018 02:36

vijayk: the point I'm trying to make is that you are a disruptive presence here, often derailing this thread with emotions and politics, unable to follow the thread ethos without repeated prodding, and with several of your posts having been deleted without notice for disruption.

We know who you are and what your past ID was, and the behavior has remained unchanged in quite some time, despite past warnings and bans.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A Nandy » 07 Nov 2018 12:35

Yet another attempt to break the mandi-poly

https://www.livemint.com/Opinion/MdPnXr ... newsletter

Over a quarter of a century after the liberalization process was launched, the sector that employs the largest labour force remains perversely untouched. The Maharashtra government’s recent amendment of the Maharashtra Agricultural Produce Marketing (Development and Regulation) Act, 1963, aims to bring the state’s agricultural economy up to speed. It is a valuable experiment at a time when various states are attempting, if in desultory fashion, to incorporate the changes proposed by the Centre’s model Agricultural Produce Market Committee (APMC) Act. However, it won’t be an easy one.


In 2016, the Devendra Fadnavis government delisted horticultural produce like fruits and vegetables from the purview of APMCs. It has now taken the next step, allowing farmers to trade in the open market for all produce and livestock. APMCs’ authority to regulate sales and levy a cess, which had earlier covered all activity in the talukas, has now been restricted to “principal market yard, sub-market yard and market sub-yard”.


sub-market yard and market sub-yard, wtf only!! :lol:

This combination of factors leads, unsurprisingly, to farmers demanding higher minimum support prices (MSPs), degrading the fisc and enriching traders who are able to mop up most of the gains from higher MSPs.


Needs political will to throw out the middlemen so they can be better employed somewhere else than robbing, along with proper grading systems and cold storage.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Hari Seldon » 07 Nov 2018 14:07

^ More on freeing the agri sector:

Agriculture ministry gears up to start trade via e-NAM among seven states (ET)

NEW DELHI: The agriculture ministry will, in the next two months, run a pilot project for interstate mandi trade through the electronic National Agriculture Market (e-NAM). This will enable a trader with a unified licence from one state to bid online for and procure commodities from another state, government officials said.

Currently, seven states — Uttar Pradesh, Madhya Pradesh, Maharashtra, Gujarat, Andhra Pradesh, Telangana and Uttarakhand — are working on the modalities to establish interstate trade.

“Plans are afoot to enable trade among states’ agriculture markets to enhance transparency in the sale and purchase of agricultural output. It enhances competition among the trade and leads to better prices for farmers,” said Sumanta Chaudhuri, managing director of the Small Farmers’ Agriculture Consortium, the implementation agency for the e-NAM project.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 07 Nov 2018 17:05

Deleted. Poster doesn't know how to behave.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nandakumar » 08 Nov 2018 11:37

On the Govt Vs RBI controversy this is what I think.
The RBI has parked 8,22,000 crore of its surplus under two heads: Foreign Currency and Gold Revaluation Account and Contingency Fund Account. Of this the former comes to Rs6,90,000 crore and the latter, the 2,32,000 crore. There is another small element amounting to Rs 13,000 crore which represents surplus in the value of RBI portfolio of Rupee securities on account of variation in the coupon rate of securities in its portfolio and the current rate of interest on GSecs. The value has gone done steeply in 2017-18 over the previous year as interest rates have hardened since June 2017. Then there is another Rs 23,000 crore parked under Asset Development Fund meant for buying new computers, furniture and putting up additional quarters for its staff and so on.
The RBI did an accounting sleight of hand by masking these appropriations under the Head 'Current Liabilities and Provisions' instead of showing under a more appropriate grouping of 'Reserves and Surpluses'. But that aside, the larger question is this: Do they represent surpluses that legitimately represent surpluses that Govt can legitimately lay claim to? Let us look at Contingency Fund. What exactly is it meant for? The RBI says it is meant for as yet unknown contingencies for which it needs a war chest. By conventional accounting yardstick this is 'surplus' pure and simple. Then there is another dimension. RBI says it needs a 'Contingency Fund' of 12% of its total value of its assets. Now why 12% ? Expert Committees in the past which had gone into the question have said so is the RBI answer. Now who are these experts? Former RBI officers such as Usha Thorat and Subrahmanyam! This was later endorsed in later years by another RBI appointed expert committee headed by Malegam. Even this committee did not have any nominee of the Finance Ministry. Another interesting aspect is that this question of 'Contingency Fund' issue was couched under a theme of how to present the future balance sheets of RBI! In other words an important question of deciding the disposition of future surpluses of the RBI was dismissed as an arcane aspect of debits and credits of financial transactions of RBI.. So much for the nitty gritty of RBI surplus under the head 'Contingency Fund'.
Now on the question of Foreign Currency and Gold Revaluation surpluses, it is common knowledge we were practically pauper around 1991. The foreign echange surplus on which we have a valuation surplus of Rs 6,90,000 crore as on date were the direct result of accumulation of gold and foreign currency by the RBI over the years. That in turn was the result of intervention by RBI in the forex market. It is worth recalling that as early as 1993 we had switched over to market related rates for foreign currency. In other words common citizens and corporations had suffered a higher exchange rate on their imports on account of RBI intervention. In other words the general public had suffered an indirect form of taxation on their import transactions on a net basis over the years. So the Government wanting to lay a claim on amounts that came out of taxes paid by the public can not be faulted. What happens when rupee strengthens against the dollar in the future and the Government has blown away all the valuation surplues? The Government can simply impose an additional customs duty to ensure that the rupee cost of import is still sustained at the same level as before when rupee was at a higher exchange rate relative to the dollar. Mind you the odds on the rupee being traded at 1993 levels or even at rates that prevailed in 2000 would truly be a 'black swan' event of the more positive kind.
So, should the Govt account be now credited with an additional sum of Rs 8,22,000 crore for it to be spent on whatever it takes a fancy to? Now that is a public finance question.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Gus » 08 Nov 2018 12:18

Increasing transparency in the chain, removing middle-men and artificial barriers in agri products moving from farm to market - will greatly reduce the 'bull-whip effect'.

https://en.wikipedia.org/wiki/Bullwhip_effect

The bullwhip effect is a distribution channel phenomenon in which forecasts yield supply chain inefficiencies. It refers to increasing swings in inventory in response to shifts in customer demand as one moves further up the supply chain. The concept first appeared in Jay Forrester's Industrial Dynamics (1961)[1] and thus it is also known as the Forrester effect. The bullwhip effect was named for the way the amplitude of a whip increases down its length. The further from the originating signal, the greater the distortion of the wave pattern. In a similar manner, forecast accuracy decreases as one moves upstream along the supply chain.


because of this, a slight demand of tomatoes, for ex, is exaggerate down the line and all farmers plant tomatoes...and then prices crash and farmers suffer. big farmers mix and match, and can survive low prices, ..but small farmers have to take exorbitant loans to make it to next harvest...

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A Nandy » 08 Nov 2018 13:51

My naive guess, but make small farmers big then? Get private players to merge the smaller guys. Aside from tackling the supply chain of course, but that will still leave the smaller guys vulnerable.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Gus » 08 Nov 2018 14:23

small farmers are doomed. their kids have already fled to the cities. the ones in distress get gobbled up by nearby big farmers or benamis of politicians.

my solution is forming a co-op and benefit from economies of scale and risk-pooling and better collective bargaining..

but unfortunately, these farmers don't get along with neighbors and are too short-sighted / egoistic etc to see benefits of getting together.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby jpremnath » 08 Nov 2018 15:40

nandakumar wrote:On the Govt Vs RBI controversy this is what I think.
The RBI has parked 8,22,000 crore of its surplus under two heads: Foreign Currency and Gold Revaluation Account and Contingency Fund Account. Of this the former comes to Rs6,90,000 crore and the latter, the 2,32,000 crore. There is another small element amounting to Rs 13,000 crore which represents surplus in the value of RBI portfolio of Rupee securities on account of variation in the coupon rate of securities in its portfolio and the current rate of interest on GSecs. The value has gone done steeply in 2017-18 over the previous year as interest rates have hardened since June 2017. Then there is another Rs 23,000 crore parked under Asset Development Fund meant for buying new computers, furniture and putting up additional quarters for its staff and so on.
The RBI did an accounting sleight of hand by masking these appropriations under the Head 'Current Liabilities and Provisions' instead of showing under a more appropriate grouping of 'Reserves and Surpluses'. But that aside, the larger question is this: Do they represent surpluses that legitimately represent surpluses that Govt can legitimately lay claim to? Let us look at Contingency Fund. What exactly is it meant for? The RBI says it is meant for as yet unknown contingencies for which it needs a war chest. By conventional accounting yardstick this is 'surplus' pure and simple. Then there is another dimension. RBI says it needs a 'Contingency Fund' of 12% of its total value of its assets. Now why 12% ? Expert Committees in the past which had gone into the question have said so is the RBI answer. Now who are these experts? Former RBI officers such as Usha Thorat and Subrahmanyam! This was later endorsed in later years by another RBI appointed expert committee headed by Malegam. Even this committee did not have any nominee of the Finance Ministry. Another interesting aspect is that this question of 'Contingency Fund' issue was couched under a theme of how to present the future balance sheets of RBI! In other words an important question of deciding the disposition of future surpluses of the RBI was dismissed as an arcane aspect of debits and credits of financial transactions of RBI.. So much for the nitty gritty of RBI surplus under the head 'Contingency Fund'.
Now on the question of Foreign Currency and Gold Revaluation surpluses, it is common knowledge we were practically pauper around 1991. The foreign echange surplus on which we have a valuation surplus of Rs 6,90,000 crore as on date were the direct result of accumulation of gold and foreign currency by the RBI over the years. That in turn was the result of intervention by RBI in the forex market. It is worth recalling that as early as 1993 we had switched over to market related rates for foreign currency. In other words common citizens and corporations had suffered a higher exchange rate on their imports on account of RBI intervention. In other words the general public had suffered an indirect form of taxation on their import transactions on a net basis over the years. So the Government wanting to lay a claim on amounts that came out of taxes paid by the public can not be faulted. What happens when rupee strengthens against the dollar in the future and the Government has blown away all the valuation surplues? The Government can simply impose an additional customs duty to ensure that the rupee cost of import is still sustained at the same level as before when rupee was at a higher exchange rate relative to the dollar. Mind you the odds on the rupee being traded at 1993 levels or even at rates that prevailed in 2000 would truly be a 'black swan' event of the more positive kind.
So, should the Govt account be now credited with an additional sum of Rs 8,22,000 crore for it to be spent on whatever it takes a fancy to? Now that is a public finance question.


But what's bothering me is why govt wants to break the nation's piggy bank now?..What's the emergency?...The GDP is up, the tax collections are at an all time high, there are more tax payers than ever before..probably double the number of UPA times..Then the mega bonanza of fuel taxes..Something close to 10rs a liter which helped them mop up billions of additional revenue..What out of budget schemes have come up now which needed multi billion dollar expenditure. ?...
My guess is Adhiya and his fellow baboons messed up big time with revenue forecasts...And add to that Jaitley is not the brightest one in North block history...so they are now scrambling to cover their asses...

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 08 Nov 2018 16:20

jpremnath wrote:But what's bothering me is why govt wants to break the nation's piggy bank now?


Would like to make a general point about economics/fiat money systems that's often not understood since it is VERY counter-intuitive. If I were to frame it in physics like terms,

At a household level (i.e for you and I), there is no conservation law for wealth but there IS a conservation law for money. i.e. you can create wealth and earn money for it but you cannot create money at will.

For the national economy as a whole, there is neither a law of conservation of wealth nor for money. The country (via the CB) can 'print' money. Printing money (what the current discussion is really about, at its core) is sometimes, but not always bad.

If you create excess money when the real rate of wealth creation is low, then you end up with high inflation and a possible loss of confidence in the currency, which can lead to disastrous consequences. We have all heard about hyperinflationary periods.

On the other hand, if you create too little extra money when there is a high rate of wealth creation, you are constraining growth via a shortage of money. In a poor country like India, in my personal view this is also a disaster as it robs a lot of people of their potential increase in income/living standards. The analogy 'breaking the piggy bank' is rather misleading.

Coming to the current debate, (I admit I haven't followed too closely), I see nothing wrong with transferring capital reserves of the CB to the govt. coffers. If the RBI is worried about inflationary impact of the extra govt spending, they have their tools -- repo rates and OMOs.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ragupta » 08 Nov 2018 21:41

Excerpt
---
So, should the Govt account be now credited with an additional sum of Rs 8,22,000 crore for it to be spent on whatever it takes a fancy to? Now that is a public finance question.
---

This much amount can create a multiplier effect in the economy, what is the point of holding on to this much cash, this can be deployed in econmy, retire loans, reducing financial burden and fiscal deficit.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby sgopal » 08 Nov 2018 21:56

ragupta wrote:Excerpt
---

This much amount can create a multiplier effect in the economy, what is the point of holding on to this much cash, this can be deployed in econmy, retire loans, reducing financial burden and fiscal deficit.

Or give it to MOD :)

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 08 Nov 2018 22:34

IMO this is a turf battle between babus in the MOF and RBI. Will cool down in a few days.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nam » 08 Nov 2018 22:43

RBI is not nation's piggy bank. The piggy bank is called GoI. And RBI is GoI.

And there is nothing called RBI's money. It is GoI.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 08 Nov 2018 22:58

jpremnath wrote:But what's bothering me is why govt wants to break the nation's piggy bank now?..What's the emergency?...The GDP is up, the tax collections are at an all time high, there are more tax payers than ever before..probably double the number of UPA times..Then the mega bonanza of fuel taxes..Something close to 10rs a liter which helped them mop up billions of additional revenue..What out of budget schemes have come up now which needed multi billion dollar expenditure. ?...
My guess is Adhiya and his fellow baboons messed up big time with revenue forecasts...And add to that Jaitley is not the brightest one in North block history...so they are now scrambling to cover their asses...

Please don't post unfounded allegations like this, again. Last warning.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby jpremnath » 09 Nov 2018 01:44

Alright, I retract the last line...But can you answer the first part?..why is the govt insisting on transferring capital reserves now?..They didnt do that in the last 4 years and neither did any of the previous governments...I dont see any impending emergency situation which requires such a step. This can also set a precedent in future...If spending reserves is good economics, why arent other countries doing the same?..

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 09 Nov 2018 04:02

Mudra loan NPAs ease to 4.83 per cent from 6.15% a year ago
The share of gross non-performing assets (NPAs) in outstanding Mudra loans eased to 4.83% at the end of FY18 from 6.15% a year ago, according to data with Micro Units Development & Refinance Agency (Mudra).

The value of outstanding Mudra loans as on March 31, 2018 was Rs 2.02 lakh crore, of which loans worth Rs 9,770 crore were classified as NPAs. On March 30, 2017, the value of outstanding Mudra loans stood at Rs 1.38 lakh crore, of which loans worth Rs 8,502 crore had turned bad, Mudra, a subsidiary of Small Industries Development Bank of India (Sidbi) said in response to a right to information (RTI) query.

Loans worth Rs 5.72 lakh crore had been disbursed between the launch of the Pradhan Mantri Mudra Yojana (PMMY) in April 2015 and March 2018. In a bid to further push disbursements under the scheme, the finance ministry in May tied up with 40 entities, including Flipkart, Swiggy, Patanjali and Amul, for extending loans to small entrepreneurs under the Mudra scheme.

According to the ministry, 74% of Mudra scheme beneficiaries are women, while people from the Scheduled Castes/ Scheduled Tribes (SC/ST) and Other Backward Classes (OBC) categories have availed 36% of loans.

The NPA figures for Mudra loans are much better than those for banks’ micro, small and medium enterprises (MSME) portfolios. Delinquencies on account of MSMEs rose to a high 13.08% for public-sector banks’ (PSBs) at the end of March 2018, compared with 12.56% in March, 2017, FE had reported on November 5.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby sivab » 09 Nov 2018 09:16

jpremnath wrote:.If spending reserves is good economics, why arent other countries doing the same?..


First of all it is not reserves, calling it reserves is kind of misnomer. It is surplus income held back by RBI.

US congress does not allow FED to accumulate surplus income at all except for a token amount.

US Fed transfers almost all its income every year. It was $92 billion for 2017. See below.

https://www.federalreserve.gov/newseven ... 70110a.htm

The US federal reserve act allows $10 billion as aggregate accumulated surplus income that can be retained
by fed over years. Even that token amount was raided by US congress for $2.5Billion in 2017 and Fed could do nothing about it.

https://www.bloomberg.com/news/articles ... udget-deal

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vera_k » 09 Nov 2018 10:19

Theoretically, a central bank does not need large reserves. Long as it has paper, ink and metal, it can always create more money.

Does the US Fed have more ability to fire up the printing presses than the RBI?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Austin » 09 Nov 2018 11:09

Govt and RBI have to listen to each other and respect each other’s turf : Raghuram Rajan

https://economictimes.indiatimes.com/ma ... 520329.cms

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Austin » 09 Nov 2018 11:27


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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Yagnasri » 09 Nov 2018 12:13

Austin wrote:Govt and RBI have to listen to each other and respect each other’s turf : Raghuram Rajan

https://economictimes.indiatimes.com/ma ... 520329.cms


Coming from him it means RBI will do whatever it want to do and GoI can not do anything about it.

What is the role of RBI in huge NPAs created in banks particularly PSU Banks and whether it did anything to put robust regulatory measures in place to prevent such incidents even now is the question people should be asking. The reaction of the RBI is more adhoc even now.

Questioning the deeds or failures of RBI somehow becoming interfering with the autonomy in the eyes of the so called supporters of RBI who are basically people who have some or other problem with the present dispensation. It is not a good way to conduct a debate.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 09 Nov 2018 12:33

Good video., compares GDP PPP. Quibble., at the end honorable mentions should mention B’desh instead of Bakistan

Austin wrote:

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Trikaal » 09 Nov 2018 13:20

Yagnasri wrote:
What is the role of RBI in huge NPAs created in banks particularly PSU Banks and whether it did anything to put robust regulatory measures in place to prevent such incidents even now is the question people should be asking. The reaction of the RBI is more adhoc even now.


RBI has applied Prompt Corrective Action plan on the 11 PSUs whose CRAR has really deteriorated. This means lending limits and rollback of services, closing of branches, etc to save capital. Banks are being punished for the NPAs and this in my opinion is the real sticking point between GOI and RBI. GOI wants more lending to boost the economy. RBI otoh wants these banks to recover first. All other issues are auxiliary at best.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Yagnasri » 09 Nov 2018 18:29

There is no prompt action. Very big time NPA issues are known for years inside the banking industry. Most of the PSU banks were cooking their books to show low NPA figures. Most of the RBI actions like CDR were going nowhere. RBI knows it for a long time.It took no action for years and years.


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