Indian Economy News & Discussion - Nov 27 2017

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

Postby Rishirishi » 20 Jul 2019 04:23

tandav wrote:
Kashi wrote:Something that government does not seem to have addressed is that where will all the new vehicles be parked in our increasingly crowded towns and cities.

It's high time we had a rule that once can buy a car only if they have a spot (owned or rented) to park it.

+100 Indian cities simply do not have space for private car ownership. We will as a nation have to adopt shared ownership of mobility assets


Absolutely agree. The government should put a charge on car owners, and use the charge to provide better public transport.

Currently Mumbai has 1 million cars. If they put a monthly charge of Rs 50 000 per month and brought down the numbers to say 150 000, the city would get something like 9000 crores per year in charges. The Buses would move faster (move more people), ambulance would arrive on time, kids could use the streets to play. Currently BEST only has revenue of 180 crores and run 2500 buses. Imagine what kind of service could be delivered for free with 9000 crors? We are talking of 10 to 15 000 electric AC buses.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby tandav » 21 Jul 2019 04:22

5000/month is ok. 50K is steep. 100,000 parking spots and 5000/month is Rs 600 Cr which is sufficient to get at 100 EV/EVAC buses. Need to understand the economics of EV/EVAC buses

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 21 Jul 2019 07:42

cross posting from PRC economy thread:
Rishirishi wrote:
Vips wrote:China’s debt at 303% of GDP, 15% of global total: Report.

A key gauge of China's debt has topped 300% of gross domestic product, according to the Institute of International Finance (IIF), as Beijing steps up support for the cooling economy while trying to contain financial risks.


The thing with China is that they can simply forgive all the debts. They have already built a massive infrastructure, this is going no where. They know very well this game of debt will not last for ever. Any "normal" economy would have failed long time ago. But the Chinese can keep it going, and when it finally comes to an halt, they can simply reboot the whole system, by writing off all the debts.


Agree. The fears of a debt/financial crisis in China are overblown for precisely this reason -- the line between public/private sector is not so sharp and the govt can effectively write off public/private sector debt to the extent needed. There are two potential problems with this
1) Inflaton: but unlikely given the massive overcapacity in China
2) loss of economic dynamism due to moral hazard. This is a real problem IMO.

With the above reasoning in mind, total debt/GDP numbers should be examined to see the composition: local vs foreign ccy, public vs private. Until not so long ago, lots of analysts used to sound alarm bells about high debt/GDP ratio of Japanese govt, seemingly oblivious to the fact that local ccy govt bonds are not a credit instrument at all but a rate instrument. Japanese govt is never going to default on JGBs.

Lesson for India: ignore all the alarmist talk about how govt debt is too high and we cannot take on more. As long as debt is in local currency and inflation is managed, there is no problem.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Nihat » 21 Jul 2019 11:25

In which case, is the governments obsession with fiscal prudence misplaced

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Katare » 21 Jul 2019 11:33

My understanding of country/national debt is that it changes country to country. Capacity of debt depends on the debt holders. Japan has several x of its gdp in debt and still enjoys AAA ratings while Pakistan is junk rated at well under 100% of gdp in debt.

Capacity comes down to govt revenue to gdp ratio, cost of debt (interest rate) and above all national savings. Each country tries to maximize its debt under certain threshold where cost is affordable, strategic risk is contained and capital has velocity and well distributed.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 21 Jul 2019 12:00

Nihat wrote:In which case, is the governments obsession with fiscal prudence misplaced


Yes, definitely. Please see my earlier posts on this thread a couple of pages up.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 21 Jul 2019 12:07

Katare wrote:My understanding of country/national debt is that it changes country to country. Capacity of debt depends on the debt holders. Japan has several x of its gdp in debt and still enjoys AAA ratings while Pakistan is junk rated at well under 100% of gdp in debt.

Yes, it depends on the payback capacity. Pakistan's junk ratings are for USD debt. This makes sense as pakistan cannot print USD so it has a real chance of default. Under what scenario do you foresee Japan defaulting on JPY debt? Or India defaulting on INR debt?

Capacity comes down to govt revenue to gdp ratio, cost of debt (interest rate) and above all national savings. Each country tries to maximize its debt under certain threshold where cost is affordable, strategic risk is contained and capital has velocity and well distributed.


"National Savings" is a very misunderstood concept. Many people including professional economists seem to believe that you need an accumulated stock of savings to finance investment. This is not so: investments can also create savings.

Let me illustrate. Say GoI decides to build a new airport, to fund this it issues 1000 crores of fresh bonds. A Bank can buy these bonds and immediately repo them out to the RBI at the repo rate, to generate funds for the purchase.

With the money in GoI's account, it will pay its contractors, who will pay their employees and subcontractors and so on. All of these flows will pass through the economy, generating income and taxes, and end up with some bank account or the other (ignoring physical cash). Which shows up on the RBI's balance sheet as the banks maintain accounts with the RBI. All the investment by the govt ended up as someone's savings.

Net result? The RBI's balance sheet has expanded, and a new project has been financed. The investment generated its own savings. Issuing govt. bonds is like issuing money. Which is why gov bonds are "money-like" instruments.


Sidenote:
Sovereign ratings for local currency debt are a joke (when sovereign has full control of the ccy). In 2011, there was a downgrade of US gov debt.

https://en.wikipedia.org/wiki/United_St ... downgrades

So what was the result?

However, U.S. treasury bonds, which had been the subject of the downgrade, actually rose in price and the dollar gained in value against the Euro and the British pound, indicating a general flight to safe assets amid concerns about a European debt crisis.[31]


Hilariously, the same securities rallied on the news. I don't know how people still take these ratings seriously.

I should point out also that JGBs are not AAA rated. It is several rungs below.

https://tradingeconomics.com/japan/rating

Not that it means much.

Edit: Added explanation.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Najunamar » 21 Jul 2019 19:54

Rahulsidhuji, nice explanation. But is it not possible the exchange risk is what gets factored in the local sovereign ratings? It is for the foreign investors primarily who can also invest in the local currency denominated bonds right? So if your argument is for the local buyers of government paper in local currency the ratings are meaningless that might be true (even there for the bonds to be traded with external players you are influenced).

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Katare » 21 Jul 2019 21:31

Rahul,
Not sure why you think people and economists misunderstand national savings which is elementary economics 101. But what You are trying to explain is called money velocity and related advantages of it. The velocity depends on efficiency of the economy and its capped by the inflation target of monetary authority. Higher velocity creates more capital which generates savings, investments, taxes and gdp growth but also debt and inflation. All things (i.e. outputs - gdp growth, taxes, debt capacity, savings, investment...) depend on structure and fundamental nature (economic development level, literacy, health, law and order, geography, demographics, neighborhood, climate, govt system, natural resources....)of individual economy and that is why there are so much talk of structural reforms and that is why they are so difficult to implement.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rishirishi » 22 Jul 2019 02:31

Rahul,
Not sure why you think people and economists misunderstand national savings which is elementary economics 101. But what You are trying to explain is called money velocity and related advantages of it. The velocity depends on efficiency of the economy and its capped by the inflation target of monetary authority. Higher velocity creates more capital which generates savings, investments, taxes and gdp growth but also debt and inflation. All things (i.e. outputs - gdp growth, taxes, debt capacity, savings, investment...) depend on structure and fundamental nature (economic development level, literacy, health, law and order, geography, demographics, neighborhood, climate, govt system, natural resources....)of individual economy and that is why there are so much talk of structural reforms and that is why they are so difficult to implement.


All present economic theory presumes capital holders have freedom to do as they please. This is true from Adam Smiths time. He was funded by the mighty and produced a theory from the capital holders perspective. The west including India is dependent on how private capital behaves.

I suspect the Chinese may have invented the new theory. C is does not take into account private capital interests. They have 2 dimensions in mind. The first is being able to pay for the imports. Which they are managing just fine. The second dimension is the build infrastructure and invest in means of production (meaning basic industries like power, metal, cement etc).
They just build infrastructure as fast as it is possible. Normally such overspending would have to be financed with taxes and borrowings. But the Chinese do not care, they just borrow from local residents and keep going.

In this way, they are able to build massive infrastructure and keep the economy running. The new infrastructure is doing wonders to the economy as it increases the productivity. In my opinion china is probably ahead of many developed countries on the infrastructure front. For example they managed to build 10 000 km of High speed rail in just 10 years. That is more HSR then rest of the world combined.

But this whole model is fragile and i wonder what will happen if there is a huge drop in demand from the importing countries. let us see.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Vips » 22 Jul 2019 02:52

India enters 37-year period of demographic dividend.

Since 2018, India’s working-age population (people between 15 and 64 years of age) has grown larger than the dependant population — children
aged 14 or below as well as people above 65 years of age. This bulge in the working-age population is going to last till 2055, or 37 years from its
beginning.

Many Asian economies — Japan, China, South Korea — were able to use this ‘demographic dividend’, defined by the United Nations Population
Fund (UNFPA) as the growth potential that results from shifts in a population’s age structure. This transition happens largely because of a
decrease in the total fertility rate (TFR, which is the number of births per woman) after the increase in life expectancy gets stabilised.


Image

Japan was among the first major economies to experience rapid growth because of changing population structure. The country’s demographic-dividend phase lasted from 1964 to 2004. An analysis of the first 10 years since this phase shows how such a shift in the population structure can propel growth. In five of these years, Japan grew in double digits; the growth rate was above 8% in two years, and a little less than 6% in one. Growth slid below 5% in only two of these 10 years.

China entered this stage in 1994 — 16 years after Deng Xiaoping’s economic reforms started in December 1978. Although its growth accelerated immediately after the reforms, the years of demographic dividend helped sustain this rate for a very long period.

In the 16 years between 1978 and 1994 (post-reform, pre-dividend) China saw eight years of double-digit growth. In the 18 years since 1994 there have been only two years when China could not cross the 8% growth mark. Analysing the demographic dividend data for two of the four Asian tiger economies shows similar patterns. (Taiwan has been excluded as historical growth rate data is not available).

In Singapore the dividend years started in 1979 and in the next 10 years there were only two years when its economy grew at less than 7%. The island country saw double-digit growth in four of these 10 years. South Korea entered this phase in 1987 and in the next 10 years there were only two years when its growth rate fell below 7%. In Hong Kong, it was 1979 when the dividend years kicked in, and the growth rate dipped below 8% in only two of the next 10 years.

Image

It is, however, important to note that this change in population structure alone cannot push growth. There are many other factors. In the late 20th century demographic dividend in Asia resulted in a seven-fold increase in the GDP of many countries.

In Latin America the growth was only two-fold, the UNFPA points out in its explanatory note on demographic dividend. The UN agency further states that countries can only harness the economic potential of the youth bulge if they are able to provide good health, quality education and decent employment to its entire population.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 22 Jul 2019 05:05

Katare wrote:Rahul,
Not sure why you think people and economists misunderstand national savings which is elementary economics 101. But what You are trying to explain is called money velocity and related advantages of it. The velocity depends on efficiency of the economy and its capped by the inflation target of monetary authority. Higher velocity creates more capital which generates savings, investments, taxes and gdp growth but also debt and inflation. All things (i.e. outputs - gdp growth, taxes, debt capacity, savings, investment...) depend on structure and fundamental nature (economic development level, literacy, health, law and order, geography, demographics, neighborhood, climate, govt system, natural resources....)of individual economy and that is why there are so much talk of structural reforms and that is why they are so difficult to implement.


No, I wasn't explaining velocity, but if that's what you took away from my post, maybe I just wasn't clear enough. Oh well.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 22 Jul 2019 05:18

Najunamar wrote:Rahulsidhuji, nice explanation. But is it not possible the exchange risk is what gets factored in the local sovereign ratings? It is for the foreign investors primarily who can also invest in the local currency denominated bonds right? So if your argument is for the local buyers of government paper in local currency the ratings are meaningless that might be true (even there for the bonds to be traded with external players you are influenced).


I don't think that's it. e.g. would this theory explain why Japan is rated relatively low (JPY is one of the best ccys in periods of stress)? Or the US downgrade I mentioned earlier?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 22 Jul 2019 10:00

replying to post on PRC econ. thread:

Rishirishi wrote:
Rahulsidhu wrote:
Agree. The fears of a debt/financial crisis in China are overblown for precisely this reason -- the line between public/private sector is not so sharp and the govt can effectively write off public/private sector debt to the extent needed. There are two potential problems with this
1) Inflaton: but unlikely given the massive overcapacity in China
2) loss of economic dynamism due to moral hazard. This is a real problem IMO.

With the above reasoning in mind, total debt/GDP numbers should be examined to see the composition: local vs foreign ccy, public vs private. Until not so long ago, lots of analysts used to sound alarm bells about high debt/GDP ratio of Japanese govt, seemingly oblivious to the fact that local ccy govt bonds are not a credit instrument at all but a rate instrument. Japanese govt is never going to default on JGBs.

Lesson for India: ignore all the alarmist talk about how govt debt is too high and we cannot take on more. As long as debt is in local currency and inflation is managed, there is no problem.



Well I think the basic problem is how the government end up spending the cash. If it goes for subsidies and other unproductive things, it will just harm India. But If India somehow managed to free another 250 billion dollars per year for Infrastructure the game would change very fast. That would be sufficient to build 25 000 km 4 lane highway every year. Within 10 years India would have 250 000 km of first class highway. Every village would be near a highway. It would do wonders to the economy. Just think about it about 30% of the vegitables in India simply rot on the way to the market.


This is exactly right. HOW the money is spent is what really matters.

My proposal for the extra spending would be
1) Cut taxes across the board. Give money to the private sector.
2) Infrastructure projects
3) Health and Education
4) Defence (homegrown products)

A country with our levels of income and hugely favourable demographic profile has no shortage of projects to fund, in contrast to say a country like Japan. A higher deficit number and more govt. debt would be a small price to pay.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 22 Jul 2019 17:36

China's total debt/GDP does stand at 300%. India's is around 150%.
China's government debt to GDP stands around 48%.
India's government debt to GDP is around 68%
China's corporate debt to GDP is around 170%. NPAs are around 1.7%.
India's corporate debt to GDP is around 50%, NPAs are around 10%.
China's household debt to GDP is around 53%.
India's household debt to GDP is around 33%.

Numbers don't add up because they are from memory.
India's corporate sector could take on more debt, but remember those NPAs! India's corporate sector has been deleveraging.
Presumably taking on more debt would be safe. Perhaps it requires China's style of managing the economy to be safe.
All I can say is that more than five years later, India is still suffering from the effects of UPA's binge in deficit spending and lending. So be careful what you wish for.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 22 Jul 2019 18:04

just one point sir, the pvt corporate debt is highly interlinked to govt in case of china. I dont say that it is completely independent in case of India, but still there is still some distance. In case of china, the linkage will be unearthed

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 22 Jul 2019 18:06

^ Need to distinguish between public and private debt as they are qualitatively very different. While private sector debt builds instability into a system, public debt is an instrument of stability. It provides a safe asset for investors.

As for UPA's deficit spending, I will repeat: how you spend it matters. They hiked MSPs very sharply leading to high inflation and no hike in productive capacity. The investments of UPA era were in unviable power plants and luxury apartments with no takers. That is a recipe for disaster.

But increased spending does not, by magic, cause high inflation - the mechanism has to be understood. Different kinds of spending will have different impacts. An investment program for easing infrastructure bottlenecks can actually lead to lower inflation.

I am not asking for private sector to leverage up. They will take their own calls based on output demand. At the moment they are deleveraging and even shutting down plants. So not sure why you bring that in. The problem is that the govt is also, for no good reason, trying to deleverage at the same time, which is a pro-cyclical policy move, and just the opposite of what it should be doing.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 22 Jul 2019 18:12

https://twitter.com/CNBCTV18News/status ... 2894721025

Interesting point of view by this interviewee. I can't really add anything but it does seem like the budget planners didn't really understand the ramifications on financial investors this surcharge hike will have.

Haven't done the numbers, but it does feel like the govt has lost way more in LTCG (10% of the stock market returns) than it will likely make on the surcharges.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A Nandy » 22 Jul 2019 20:31

https://rightlog.in/2019/07/modi-govt-c ... alised-01/

Modi government has taken many steps to overhaul Indian bureaucracy and civil services in the last five years. Now the government plans to ‘rationalize’ 60 plus civil services which include IAS, IPS and IFS. The Department of Personnel and Training (DoPT) has prepared five year vision document to reform the infamously lethargic and inefficient Indian Civil Services.

“Rationalising the services essentially means reducing the number down from the existing 60-plus civil services to about three-four,” said a DoPT official on the condition of anonymity. “The idea was proposed last year by NITI Aayog and the government will now seek to implement it,” the official added.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Vivek K » 22 Jul 2019 20:54

A_Gupta wrote:China's total debt/GDP does stand at 300%. India's is around 150%.
China's government debt to GDP stands around 48%.
India's government debt to GDP is around 68%
China's corporate debt to GDP is around 170%. NPAs are around 1.7%.
India's corporate debt to GDP is around 50%, NPAs are around 10%.
China's household debt to GDP is around 53%.
India's household debt to GDP is around 33%.

Numbers don't add up because they are from memory.
India's corporate sector could take on more debt, but remember those NPAs! India's corporate sector has been deleveraging.
Presumably taking on more debt would be safe. Perhaps it requires China's style of managing the economy to be safe.
All I can say is that more than five years later, India is still suffering from the effects of UPA's binge in deficit spending and lending. So be careful what you wish for.

Gupta ji my two cents
- India needs to take more risks in the industrial sector a) provide cheap money and b) remove inspector raj - remove taxation raids on industry. Cheap money will allow potential reduction of NPAs. b) In place of loan waivers to farmers, use that money to a) restructure their debt, b) provide support in terms of subsidized seeds, help with irrigation wells, help in farming techniques and to buy farming equipment, c) provide stable power and d) create marketing support for farmers. This will allow farmers to become stronger and improve the farm sector.

Unnecessary persecution of industry for vote gains should stop. The purpose of industry is - profit and that holds good the world over. The purpose of farming too is profit. Need to make structural adjustments to benefit both sectors as both help to make the economy strong.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 22 Jul 2019 23:45

One more data point - allegedly, China runs a government fiscal deficit of less than 3% of GDP.
Exercise: evaluate China vs India in their effectiveness at shutting down unviable firms.

One can open the money spigots, but how does one ensure the money flows to the right places?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nachiket » 23 Jul 2019 00:08

Rishirishi wrote:Absolutely agree. The government should put a charge on car owners, and use the charge to provide better public transport.

Currently Mumbai has 1 million cars. If they put a monthly charge of Rs 50 000 per month and brought down the numbers to say 150 000, the city would get something like 9000 crores per year in charges. The Buses would move faster (move more people), ambulance would arrive on time, kids could use the streets to play. Currently BEST only has revenue of 180 crores and run 2500 buses. Imagine what kind of service could be delivered for free with 9000 crors? We are talking of 10 to 15 000 electric AC buses.

1 million to 150,000 :-? If you manage to achieve this lofty goal, what will that do to our auto-industry? You know, the one that generates all the jobs and economic activity.

This can be moved to Urban development thread. Mumbai's problem is not too many cars. Mumbai's problem is the absolutely ridiculous condition of roads. Dirt poor parts of Africa probably have better roads than Mumbai, not to mention the luckier parts of India like Delhi and Hyderabad. All you have to do is drive a few km out of the city on NHAI roads to get the feeling that you are in a different country based on the quality of road surface alone. What you suggest is the typical government cop-out. We do not want to do our jobs and fix the roads so lets get rid of the cars instead.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Vivek K » 23 Jul 2019 00:38

A_Gupta wrote:One more data point - allegedly, China runs a government fiscal deficit of less than 3% of GDP.
Exercise: evaluate China vs India in their effectiveness at shutting down unviable firms.

One can open the money spigots, but how does one ensure the money flows to the right places?

Stay engaged - afterall you're not simply opening the vaults. They could relax the norms for lending to industries with verifiable projects "that are completed and set into motion".

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 23 Jul 2019 00:42

^^^ I would open the money spigots if and only if after this proves to be effective.
https://swarajyamag.com/politics/output ... get-reform
Output-Outcome Monitoring Framework: A Critical Budget Reform
Another key reform has been the development of the Output-Outcome Monitoring Framework (OOMF). This framework for FY 2019-20 covers major Central Sector (CS) and Centrally Sponsored Schemes (CSS) with outlays larger than Rs 500 crore, along with clearly defined and measurable output and outcome indicators as well as targets for the current financial year.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 23 Jul 2019 01:10

Image

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Vivek K » 23 Jul 2019 01:40

A_Gupta wrote:^^^ I would open the money spigots if and only if after this proves to be effective.
https://swarajyamag.com/politics/output ... get-reform
Output-Outcome Monitoring Framework: A Critical Budget Reform
Another key reform has been the development of the Output-Outcome Monitoring Framework (OOMF). This framework for FY 2019-20 covers major Central Sector (CS) and Centrally Sponsored Schemes (CSS) with outlays larger than Rs 500 crore, along with clearly defined and measurable output and outcome indicators as well as targets for the current financial year.

Monitoring is a given! Enhanced monitoring is GOI's job and must be done professionally. The problem is banking officials take bribes and break the rules and then GOI comes back and attacks Industry instead of looking at banking reform. Also, cannot let a couple of bad actors be the basis for locking down the industrial sector - there is just too much at stake. India needs to look at matching the Chinese growth rates instead of taking steps that will scare investment.

Industrial sentiment must be nurtured. GOI must take all steps.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 23 Jul 2019 02:13

^^ideally the banks should be monitoring and actioning. They should have the crystal clear picture first, as soon as it gets available. it is not the monitoring, but the actioning. Banks had no teeth. For MSMEs, NPA would be reduced only by chasing the defaulters, sometimes at the risk of their own lives. This coupled with stoppng of salaries for missed NPA, Sales targets. More than industrial sentiment fear of law and honesty must be nurtured. IBC has to work at grassroot level as well.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 23 Jul 2019 02:22

Interesting perspective on why commercial vehicle demand may be falling, the utilization rate of trucks may be going up as they spend less time waiting
https://www.crisil.com/en/home/newsroom ... ts-go.html

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Vivek K » 23 Jul 2019 02:30

But why this knee-jerk reaction of chasing defaulter at the risk of lives. Was the appraisal by the bank incorrect? Is the industry in recession? Or is their willful criminal default?
If the appraisal was incorrect - was it because of bribe taking that influenced the decision? What is the correct fix - to improve the appraisal process. Outsource to third parties and if they don't perform then take contractual action.

If industry is in recession, will locking it down help or harm employment? When you give loan waivers to farmers that employ a fraction of the number employed by industry yet want to foreclose on industry are you destroying industrial sentiment? If industry is in recession, it is better to try to revive it and provide additional lending - mortgage company equity or take appropriate measures to commit the company to revival - but make the money available.

If there is willful criminal default, take legal action at the promoters, but keep the company running under institutional control if necessary - fire the Board and install directors reporting to the bank.

In the final analysis, not taking any risks has neither produced growth nor reduced NPAs. So how much longer will this foolhardy scheme be applied. Industrial sentiment is nurtured with care.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Vips » 23 Jul 2019 04:42

Centre targets adding 1.3 crore tax filers during current fiscal year.

The Government intends to add 1.3 crore new income tax filers during the current fiscal, the Finance Ministry informed the Lok Sabha on Monday.

Minister of State for Finance Anurag Singh Thakur, in a written reply, said the new target is against 1.1 crore filers added during FY19. For achieving the new target, various measures are being taken including identification of potential non-filers through centralised Non-filer Monitoring System (NMS), formulation of region-specific strategies for identifying potential non-filers, issue of statutory notices to enforce compliance, holding of outreach programmes to encourage voluntary compliance, use of mass media for creating awareness, simplification in income-tax returns and filing process to encourage voluntary filing, etc. he said.

The Government is also examining recommendations of a committee for granting certain privileges to some categories of taxpayers. These could be giving access to lounges at domestic and international airports, invite for important government functions, among others. Such privileges will be given to those who pay taxes over certain threshold diligently and honestly.

The number of taxpayers for Assessment Year 2018-19 was 8.44 crore, which included persons who filed returns for the Assessment Year 2018-19 as well as persons who did not file returns but in whose case tax has been deducted at source during FY18.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Schmidt » 23 Jul 2019 09:45

https://www.msn.com/en-in/money/news/wh ... li=AAggbRN

If according to the FM less than 5000 entities ( including many FPIs and Trusts ) come under the Super Rich ( > 2 Cr pa ) category , then the newly imposed surcharge is essentially a political move to embellish the govts pro poor ( by way of anti Rich ) image

Also , the move seems to have impacted BJP MPs as well !!

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby a_bharat » 23 Jul 2019 11:28

Deleted
Last edited by Suraj on 23 Jul 2019 11:52, edited 1 time in total.
Reason: Poster cannot understand 'no politics'

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 23 Jul 2019 14:33

An increase in government borrowing runs the risk of flooding the debt market, while making it expensive for companies to borrow, according to outgoing Reserve Bank of India Deputy Governor Viral Acharya.

In a lecture shared by the RBI late on Monday, Acharya said India’s borrowing relative to its output has ranged from 67% to 85% since 2000 and has outpaced many emerging markets including China.

“As more government debt floods markets, the relative safety and liquidity premium attached by investors to high-rated corporate bonds diminishes, raising the cost of borrowing especially for AAA-rated borrowers and making it relatively less sensitive to policy rate cuts,” Acharya said.



https://www.btvi.in/news/rise-in-govt-b ... rya/139306

Here it is.. the ruling philosophy of Indian macro policy makers for the last few years. Summarised by one of its main proponents.

I would love for someone to explain to me how this actually works. To me, this would only make sense in a gold standard, where the borrowers are competing for a fixed amount of coins. In a fiat money system, like I demonstrated in an earlier post, govt. bonds generate their own funding.

RBI guy, who oversaw ~2.5% real short term interest rates, arguing against looser fiscal policy lest corporate borrowing rate rise too high. :shock:

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 23 Jul 2019 15:14

Vivek K wrote:But why this knee-jerk reaction of chasing defaulter at the risk of lives. Was the appraisal by the bank incorrect? Is the industry in recession? Or is their willful criminal default?

The cases i know of, were due to various reasons. The person who approved OD was corrupt and those afterwards had to chase the defaulter. In many cases, the business went down or in some cases the guys thought that they could get away with it by having the case run in court for decades.
Vivek K wrote:If the appraisal was incorrect - was it because of bribe taking that influenced the decision? What is the correct fix - to improve the appraisal process. Outsource to third parties and if they don't perform then take contractual action.

From what i know yes a significant %, dont want to extrapolate my personal experiences but the other cases are not insignificant. In the end if everyone in system blames others it doesnt behove well.

Vivek K wrote:If industry is in recession, will locking it down help or harm employment? When you give loan waivers to farmers that employ a fraction of the number employed by industry yet want to foreclose on industry are you destroying industrial sentiment? If industry is in recession, it is better to try to revive it and provide additional lending - mortgage company equity or take appropriate measures to commit the company to revival - but make the money available.

That has been done for quite some time. Banks were in this mode for almost half a decade. I think it's like gehun ke saath ghun wala case. Big guys abused the system big time due to which some genuine guys who wanted to do business were effed up too.

Vivek K wrote:If there is willful criminal default, take legal action at the promoters, but keep the company running under institutional control if necessary - fire the Board and install directors reporting to the bank.

before IBC, it was next to impossible. Most of those guys were well connected through both poloticos, legal, police or all. So it was difficult to get around them. Also, the binge lending was a forced one on bankers rather than industry needs based. Many cases i know were because bankers were given stiff lending targets with the threats of lending else their salaries will be stopped by DGM etc...

Vivek K wrote:In the final analysis, not taking any risks has neither produced growth nor reduced NPAs. So how much longer will this foolhardy scheme be applied. Industrial sentiment is nurtured with care.

which analysis are you talking of??? has anyone bothered to do such analysis in first place. I agree not taking risks doesnt help economy. But a majority sentiment that I heard from old timer bankers was that most businesses want to make easy buck by cheating others or doing the margin trading...

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 23 Jul 2019 17:01

https://www.livemint.com/money/personal ... 62675.html

Draft Act has little room for owner-tenant fights

Ashwini Kumar Sharma
Draft Model Tenancy Act tries to balance the rights and interests of owners, tenants
The draft Act proposes to cap security deposit to a maximum of two months’ of rent for residential houses
Renting a house in most Indian cities is usually difficult for people, especially millennials and those who have just started working, due to the high security deposits and other conditions that owners place. But that does not mean owners land the sweeter deal. Giving your house on rent usually is a huge risk, given innumerable cases of squatting and tenants causing damages to the property. Recognizing the problems at both ends, the Model Tenancy Act, 2019, drafted by the ministry of housing and urban affairs, tries to strike a balance between the interests and rights of the tenants as well as the owners. We take you through its proposals and the issues it seeks to address.


security deposit
The draft Act aims to increase accountability and transparency in the ecosystem for renting out the premises in a disciplined and efficient manner. Among various other things, it tries to address the most ambiguous factor—how much security deposit should a landlord ask for? At present, the security deposit amount is, typically, about two or three times the monthly rent in cities like Delhi, but it goes up to 10-12 months of the monthly rent in cities like Mumbai and Bengaluru.

They can also consider UK style separate deposit protection schemes along with arbitration mechanisms.


The draft Act proposes to cap the security deposit to a maximum of two months’ of rent in case of residential properties and a minimum of one month’s rent in case of non-residential property.

“The landlord usually enjoys the power of position and this often leads to the tenant being treated as an underling," said Amit Kumar Agarwal, chief executive officer and co-founder, NoBroker.com, a realty portal.

Amount of rent
Though the general practice is to include a clause in the rent agreement related to increase in rent after a certain period at a certain rate, that may or may not always be in line with what the law says. “In case of tenancies, which are governed under the existing rent control legislations, the landlord can’t increase or determine the rent without the approval of the rent control tribunals nor do the rent control legislations envisage escalation of standard rents to market rates," said Abhilash Pillai, partner, Cyril Amarchand Mangaldas, a law firm.

The draft Act tries to address the issue of how rent can be increased. It proposes that rent can either be increased as per the terms and conditions mentioned in the agreement, or the landowner shall be required to give a notice in writing three months before the revised rent comes into effect. On the other hand, the tenant should either accept the increased rent or give a notice for termination of the agreement. If the tenant fails to reply on the notice of increase in rent, the tenant shall be deemed to have accepted the increase proposed by the landlord.

Vacation of house
According to Pillai, most disputes between tenants and landlords get triggered when the landlord increases the rent or seeks vacation of the property. “Further, there are only limited grounds through which a landlord can evict a tenant," added Pillai, who believes the present rules favour tenants more.


1. This is probably the most contentious part...perhaps laying out basic conditions part of the agreement and then let rest of the cases decided by courts
2. there has to be fixed criteria and notice periods for it.


Rent agreement
The draft Act also makes it mandatory for tenants and landlords to enter into a written agreement while taking or giving a property on rent. Moreover, within two months of executing the rental agreement, both the landowner and tenant are required to inform the rent authority about the agreement. Within seven days of doing so, a unique identification number will be issued by the rent authority to both the parties.

To make the process smooth, the draft Act proposes to set up a digital platform in the local vernacular language of the state for submitting the tenancy agreement and other documents. It has also proposed a grievance redressal mechanism comprising of the rent authority, rent court and rent tribunal, in cases of disputes.

Even if the draft Act comes into force, it is unlikely to affect existing rent agreements. “The Model Act is prospectively applicable and will not affect existing tenancies," said Anuj Puri, chairman, ANAROCK Property Consultants Pvt. Ltd, a real estate consultancy.

Implementation
The draft Act has some proposals that can go a long way in enabling the owners and tenants to live in peace, but there are certain concerns over its implementation. Experts fear this Act, too, may go the RERA (Real Estate (Regulation and Development) Act, 2016) way.

starting with Karnataka, UP, Haryana, MH, and Delhi would be best options as renting there is most pervasive


......
The copy of the draft Act is available on the ministry’s website (Mohua.gov.in) and is open for comments from the public and other stakeholders till 1 August.

I think they should also cover misselling by real estate agents and property maintenance agencies from a futuristing pov as the mobility has increased and perhaps look at ways of enabling indian real estate as an investment option for foreign investors..

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Vips » 23 Jul 2019 18:47

Land being super expensive in Mumbai, there is never going to be housing built for Renting. The middle class and even the well to do upper middle class will have little option but to buy in the super extended suburbs to be able to live in reasonable quality homes. Thanks to the overwhelmingly pro tenant Rent act, Mumbai has been reduced to slumbay. Even the new draft laws have little to address the concerns of the owner and to top it the laws in India where 'possession' trumps 'ownership or title' will always be a hindrance for the owners to propose building for renting.The restriction on security deposit and limit of charging 2 to 4 times rent after the agreement period is not going to be enough for tenants from going in for litigation once they are living in a multi crore apartment. Do not know about the situation in rest of India but in the city of mumbai landlords would rather keep their houses in locks rather then renting it out. Question of new stock of homes built for renting simply does not arise. The draft control laws is a 'one size fits for all' solution which will simply not work in Mumbai.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 23 Jul 2019 19:17

^^it is open for suggestions ....why dont you provide suggestions/comments

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Vivek K » 23 Jul 2019 20:09

ArjunPandit wrote:The cases i know of, were due to various reasons. The person who approved OD was corrupt and those afterwards had to chase the defaulter. In many cases, the business went down or in some cases the guys thought that they could get away with it by having the case run in court for decades.

So then there are two problems you cite, yet only one remedy is applied letting the other continue to hurt growth. Prosecuting the borrower is contractually correct bu what about the OD granting authority? That individual should have the same fate as the borrower. Again, banking reforms are quite important and could prevent large losses.
That has been done for quite some time. Banks were in this mode for almost half a decade. I think it's like gehun ke saath ghun wala case. Big guys abused the system big time due to which some genuine guys who wanted to do business were effed up too.

Exactly - if one guy abuses the system, should we close the whole system down? Then should we still expect economic growth? If India wants to be an industrial powerhouse, would this help or hurt its goals.
which analysis are you talking of??? has anyone bothered to do such analysis in first place. I agree not taking risks doesnt help economy. But a majority sentiment that I heard from old timer bankers was that most businesses want to make easy buck by cheating others or doing the margin trading...

That my friend was a figure of speech - "in the final analysis like "finally".
It seems you're listening to only one side of the story. I will say this - show me an honest Indian banker and I will show you an honest Indian Industrialist. All bankers that I have met in my lifetime that were working with industry, were unfortunately not above board. So banking reform and increased accountability in the banking sector must be implemented.

But does one take Industry only as a profit center? Then why is farming give such a large social support - no income tax, massive loan waivers while Industries pay large sums as taxes and never receive loan waivers. Even in western countries with capitalist systems, Industries are looked at as more than profit centers - they are also taken to fulfill social responsibility of gainful employment - for example in the US, rather than shut down the non-performing auto industry, loan bailouts were given to ensure their survival.

India needs to rationalize its taxation, its farm sector and provide relief to its industrial sector if it wants to grow. There is a saying - if you do the same thing over and over again, why do you expect a different result? India needs to cast away its old ways and try new things.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 23 Jul 2019 20:41

Vivek K wrote:
ArjunPandit wrote:....

So then there are two problems you cite, yet only one remedy is applied letting the other continue to hurt growth. Prosecuting the borrower is contractually correct bu what about the OD granting authority? That individual should have the same fate as the borrower. Again, banking reforms are quite important and could prevent large losses.

Yes, many of those things were fixed over time. More accountability has been institutionalized. That too has led to slow speed of credit extension. Bankers are wary of signing anything coz it may come to bite it. This is coming to a negative sum game because of current environment.

Vivek K wrote:
....

Exactly - if one guy abuses the system, should we close the whole system down? Then should we still expect economic growth? If India wants to be an industrial powerhouse, would this help or hurt its goals.

absolutely not sir, dont get overly fixated on growth. We are still growing very fast. Growth (some not all) can be cancerous. Yours truly did a very basic study (for US SMEs) many years back where we established a sizeable (20-30%) chunk of SMEs were showing very high growths two quarters before they defaulted. They couldnt manage cashflows and expenses well and went winds changed kaput. I think of this as pains due to push ups or a stink due to drain clean up in Delhi before 'monsoons'. Now do we dump the stuff beside the nallah delhi ishtyle or clean it up properly that's upto us. I think there is still some way to go for full clean. but do we need to? I am not fully clear.

Vivek K wrote:
...

That my friend was a figure of speech - "in the final analysis like "finally".
It seems you're listening to only one side of the story. I will say this - show me an honest Indian banker and I will show you an honest Indian Industrialist. All bankers that I have met in my lifetime that were working with industry, were unfortunately not above board. So banking reform and increased accountability in the banking sector must be implemented.

apologies, i misunderstood. Coming from a family of bankers, I have seen both sides of the story and bad apples on both sides. There are different forms of give and take. To be fair, many of it is a hangover from license raj where babus were babus not signing could be death of business and loss of reputation to the individual in market. It was a problem from both sides. Privatization reduced at lower level, but did not eliminate it.

Vivek K wrote:But does one take Industry only as a profit center? Then why is farming give such a large social support - no income tax, massive loan waivers while Industries pay large sums as taxes and never receive loan waivers. Even in western countries with capitalist systems, Industries are looked at as more than profit centers - they are also taken to fulfill social responsibility of gainful employment - for example in the US, rather than shut down the non-performing auto industry, loan bailouts were given to ensure their survival.

That's a very philosophical question. The same holds for working class too. I dont think tax rates are that exhorbitant in india too. IMHO we crib and self flagellate too much. Want everything right now. I also very well know how much taxes many such audi driving guys pay. The problem is cultural and pervasive. Anyone who can get away with anything would do that thing. Professionals abuse HRA and medical. Farmers abuse the free water and electricity in many cases. Not to forget the excesses by legislative

Vivek K wrote:India needs to rationalize its taxation, its farm sector and provide relief to its industrial sector if it wants to grow. There is a saying - if you do the same thing over and over again, why do you expect a different result? India needs to cast away its old ways and try new things.

I am fully with you on this, except The same thing different result thing ignores. What changes is time and different environment. We can discuss are these the right things to do right now.
From what little I know, a clean up was essential. IBC & GST have been done.

Should we open credit gates right now, I dont think so. Growing at 6-7% for 1-2 years is fine. There's lot of uncertainty in global economy and it is best not to open floodgates right now.
Happy to hear your viewpoint. Apologies, if you didnt like any of my earlier statement.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Vivek K » 23 Jul 2019 22:39

Arjunji no offence was taken and no apologies needed.

So my take on -
Should we open credit gates right now, I don't think so. Growing at 6-7% for 1-2 years is fine. There's lot of uncertainty in global economy and it is best not to open floodgates right now.


I think that the world is always in flux and if we wait for it to stabilize, then it may be too late. We need to look at our own fundamentals. Look at our ability to sustain the required defense expenditure
- IAF is short of 10-15 squadrons; do we have the money to import 10-15 squadron worth of fighters to build our capability? No. We will replace just a bit more than we phase out so in truth, we will never attain the 45 squadron goal. Therefore never be able to project massive force and will forever need to contend with a nuisance Pakistan.
- Navy - can we match China's pace of development of Aircraft Carriers or nuke subs or destroyers or frigates? No unless we expand our shipyards significantly
It is clear that to keep up - we need larger annual expenditures to support growth of armed forces. Current numbers don't provided the ability to do that.

Some economic indicators are showing a slow down. My personal interaction with owners of small industries tells me that they will not invest any further. So staying happy with stagnation is dangerous.


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