Indian Economy News & Discussion - Nov 27 2017

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Indian Economy News & Discussion - Nov 27 2017

Postby Peregrine » 21 Aug 2019 23:28

Mods please delete Article if Inappropriate. Posting in full as Access Economist Site is Restricted - Thanks in Advance

The world economy
Markets are braced for a global downturn
The signals from bonds, currencies and commodities are increasingly alarming

Looking for meaning in financial markets is like looking for patterns in a violent sea. The information that emerges is the product of buying and selling by people, with all their contradictions. Prices reflect a mix of emotion, biases and cold-eyed calculation. Yet taken together markets express something about both the mood of investors and the temper of the times. The most commonly ascribed signal is complacency. Dangers are often ignored until too late. However, the dominant mood in markets today, as it has been for much of the past decade, is not complacency but anxiety. And it is deepening by the day.

It is most evident in the astounding appetite for the safest of assets: government bonds. In Germany, where figures this week showed that the economy is shrinking, interest rates are negative all the way from overnight deposits to 30-year bonds. Investors who buy and hold bonds to maturity will make a guaranteed cash loss. In Switzerland negative yields extend all the way to 50-year bonds. Even in indebted and crisis-prone Italy, a ten-year bond gets you only 1.5%. In America, meanwhile, the curve is inverted—interest rates on ten-year bonds are lower than on three-month bills—a peculiar situation that is a harbinger of recession. Angst is evident elsewhere, too. The safe-haven dollar is up against many other currencies. Gold is at a six-year high. Copper prices, a proxy for industrial health, are down sharply. Despite Iran’s seizure of oil tankers in the Gulf, oil prices have sunk to $60 a barrel.

Plenty of people fear that these strange signals portend a global recession. The storm clouds are certainly gathering. This week China said that industrial production is growing at its most sluggish pace since 2002. America’s decade-long expansion is the oldest on record so, whatever economists say, a downturn feels overdue. With interest rates already so low, the capacity to fight one is depleted. Investors fear that the world is turning into Japan, with a torpid economy that struggles to vanquish deflation, and is hence prone to going backwards.

Yet a recession is so far a fear, not a reality. The world economy is still growing, albeit at a less healthy pace than in 2018. Its resilience rests on consumers, not least in America. Jobs are plentiful; wages are picking up; credit is still easy; and cheaper oil means there is more money to spend. What is more, there has been little sign of the heady exuberance that normally precedes a slump. The boards of public companies and the shareholders they ostensibly serve have played it safe. Businesses in aggregate are net savers. Investors have favoured firms that generate cash without needing to splurge on fixed assets. You see this in the vastly contrasting fortunes of America’s high-flying stockmarket, dominated by capital-light internet and services firms that throw off profits, and Europe’s, groaning under banks and under carmakers with factories that eat up capital. And within Europe’s stockmarkets a defensive stock, such as Nestlé, is trading at a towering premium to an industrial one such as Daimler.

If there has been no boom and the world economy has not yet turned to bust, why then are markets so anxious? The best answer is that firms and markets are struggling to get to grips with uncertainty. This, not tariffs, is the greatest harm from the trade war between America and China. The boundaries of the dispute have stretched from imports of some industrial metals to broader categories of finished goods (see article). New fronts, including technology supply-chains and, this month, currencies, have opened up. As Japan and South Korea let their historical differences spill over into trade, it is unclear who or what might be drawn in next. Because big investments are hard to reverse, firms are disinclined to press ahead with them. A proxy measure from JPMorgan Chase suggests that global capital spending is now falling. Evidence that investment is being curtailed is reflected in surveys of plunging business sentiment, in stalling manufacturing output worldwide and in the stuttering performance of industry-led economies, not least Germany.

Central banks are anxious, too, and easing policy as a result. In July the Federal Reserve lowered interest rates for the first time in a decade as insurance against a downturn. It is likely to follow that with more cuts. Central banks in Brazil, India, New Zealand, Peru, the Philippines and Thailand have all reduced their benchmark interest rates since the Fed acted. The European Central Bank is likely to resume its bond-buying programme.

Despite these efforts, anxiety could turn to alarm, and sluggish growth descend into recession. Three warning signals are worth watching. First, the dollar, which is a barometer of risk appetite. The more investors reach for the safety of the greenback, the more they see danger ahead. Second come the trade negotiations between America and China. This week President Donald Trump unexpectedly delayed the tariffs announced on August 1st on some imports, raising hopes of a deal. That ought to be in his interests, as a strong economy is critical to his prospects of re-election next year. But he may nevertheless be misjudging the odds of a downturn. Mr Trump may also find that China decides to drag its feet, in the hope of scuppering his chances of a second term and of getting a better deal (or one likelier to stick) with his Democratic successor.

The third thing to watch is corporate-bond yields in America. Financing costs remain remarkably low. But the spread—or extra yield—that investors require to hold riskier corporate debt has begun to widen. If growing anxiety were to cause spreads to blow out, highly geared firms would find it costlier to roll over their debt. That could lead them to cut back on payrolls as well as investment in order to make their interest payments. The odds of a recession would then shorten.

When people look back, they will find plenty of inconsistencies in the configuration of today’s asset prices. The extreme anxiety in bond markets may come to look like a form of recklessness: how could markets square the rise in populism with a fear of deflation, for instance? It is a strange thought that a sudden easing of today’s anxiety might lead to violent price changes—a surge in bond yields; a sideways crash in which high-priced defensive stocks slump and beaten-up cyclicals rally. Eventually there might even be too much exuberance. But just now, who worries about that?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vera_k » 22 Aug 2019 18:42

Some detail on the Parle story from yesterday -

Slowdown in certain sectors limit job options

increase in GST did not go down well with consumers of low-priced biscuits (under Rs 100 per kg). The new GST regime clubbed biscuits in this segment (earlier exempt from excise duty) with those priced above Rs 100 per kg (the premium variety) at 18%

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby hanumadu » 22 Aug 2019 19:01

The word on SM is that there are a lot of new entrants, especially at the lower end of the biscuit market like ITC and hence the troubles of established players.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby srin » 22 Aug 2019 19:03

vera_k wrote:
Yagnasri wrote:The main problem is they are all forced to pay the tax now while earlier they all used to escape paying a not even half of the tax. The model of not paying the taxes and keeping that money as un accounted profit is no longer viable. That is the reason many units are facing very low profits etc. Same with Auto mobile dealers


Are the totality of GST collections higher than the tax collected under the previous tax policy?

If so, then yes we can say that some complaints can be attributed to a history of non-compliance. At the same time, if tax received under GST is higher, then there is flexibility to reduce some of the tax rates. Data to answer this question seems scarce.


Apparently, it is lesser. Very surprising personally.

From https://www.businesstoday.in/magazine/the-hub/the-big-gst-hole/story/373481.html
So much so that in 2018/19, the Union government had to revise its GST collection target by Rs 1 lakh crore - from Rs 7.43 lakh crore to Rs 6.43 lakh crore. That the target for 2019/20 is Rs 6.63 lakh crore, just Rs 20,000 crore more than the last year's revised target, is the most significant admission by the government that it expects very little from the new tax system in its current form. It, after all, set a target of 8 per cent growth in indirect tax collections, but just 3 per cent in GST collections.
GST collections have not picked up as expected due to a combination of factors. One is faulty design of the system. Another is economic slowdown. Then, there are massive leakages and non-compliance, something the CAG report also suggests. All these will have to be fixed on priority if GST is to realise its full potential.


From https://economictimes.indiatimes.com/news/economy/indicators/indias-fiscal-deficit-goals-threatened-by-tax-evasion-as-demand-wanes/articleshow/70732480.cms
The government’s total tax revenue in the last financial year ended March fell short of target by Rs 1.7 lakh crore ($24 billion), according to provisional numbers. That’s due in part to GST collection trailing monthly target for most of the year.

A revenue miss again will put the fiscal deficit goal of 3.3% of GDP at risk, and limit the government’s ability to spend on infrastructure and welfare programs.

The finance ministry expected GST to help boost GDP growth by as much as two percentage points. Despite lowering of the GST rate to revive consumption, economic expansion has slowed, coming in at 5.8% for the quarter ended March.


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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Kashi » 22 Aug 2019 19:20

Just a noob question. GST collections do not include taxes from Petroleum products and Tobacco and also alcohol perhaps? If we combine all these taxes, then what's our collection for the fiscal?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby hanumadu » 22 Aug 2019 19:30

GST collections are still increasing but GOI seems to have budgeted much more last year going by the increases in the previous two years, probably fueled by DeMo. I think there was also a short fall in direct taxes too.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby abhijitm » 22 Aug 2019 19:42

hanumadu wrote:The word on SM is that there are a lot of new entrants, especially at the lower end of the biscuit market like ITC and hence the troubles of established players.

Biscuit industry is hit severely by chips and crisps companies. I used to see people buying biscuits at railway platform shops. These days people only by crisps and other Rs. 10/20 stuff.

Cheap biscuit market is reduced. But a new high end biscuits market is opened and increasing steadily. Parle however has missed that bus.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vimal » 22 Aug 2019 19:52

Only type of Indians consuming Parle-G are the NRIs and they do it for nostalgia over anything else. No self respecting Indian in India would be caught eating Parle G, it's considered cheap.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 23 Aug 2019 01:31

Some info on the Indian biscuit market:
https://www.techsciresearch.com/report/ ... /1099.html

The falling trend of plain biscuits was there from 2012:
http://www.bakerybazar.com/2012/11/gluc ... cream.html

A rather confusing article on the impact of GST on the Indian bakery industry
http://www.bakerybazar.com/2017/09/impa ... ustry.html

Some irrationalities (opportunities for clean-up) in GST on bakery items:
https://www.avalara.com/in/en/blog/2018 ... reats.html

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby zoverian » 23 Aug 2019 05:17

vimal wrote:Only type of Indians consuming Parle-G are the NRIs and they do it for nostalgia over anything else. No self respecting Indian in India would be caught eating Parle G, it's considered cheap.



True. I eat Parle G only here in Singapore :)

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Manish_Sharma » 23 Aug 2019 10:03

https://wap.business-standard.com/artic ... ssion=true

Economy Policy
Unprecedented financial sector crisis in 70 years, says NITI Aayog

By Indivjal Dhasmana & PTI | New Delhi | Last Updated at August 23 2019 06:50 IST

Unprecedented financial sector crisis in 70 years, says NITI Aayog
By Indivjal Dhasmana & PTI | New Delhi | Last Updated at August 23 2019 06:50 IST

NITI Aayog Vice-Chairman Rajiv Kumar
Government think tank NITI Aayog on Thursday described the current stress in the financial sector as “unprecedented in the last 70 years”, saying nobody is trusting anyone else in the sector. It made a case for extraordinary steps to deal with the crisis that has resulted in an economic slowdown.

NITI Aayog Vice-Chairman Rajiv Kumar also said there was no business of the government to hold back payments to companies.

It is being sorted out, he said at an event in New Delhi on Thursday.

Nobody is trusting anybody else... within the private sector nobody is ready to lend, everyone is sitting on cash... you may have to take steps that are extraordinary,” Kumar said.

He said the government needed to take steps, which eliminate apprehension from the minds of private sector players and encourage them to step up investments.
He also said private investments will drive India out of the middle income trap.

Elaborating further, Kumar said some of the steps have already been announced in the Union Budget to address stress in the financial sector and give a push to economic growth which hit a five-year low of 6.8 per cent in 2018-19.

Explaining how stress in the financial sector led to a slowdown in the economy, the NITI Aayog vice-chairman said the entire episode started with indiscriminate lending during 2009-14, leading to an increase in non-performing assets (NPAs) after 2014.

Rising NPAs reduced the ability of banks to do fresh lending, he said, adding the space was occupied by shadow banks with a credit growth of 25 per cent.

The non-banking finance companies (NBFCs) could not manage this high loan growth leading to defaults by some of the large entities triggering slowdown in the economy eventually.

“The whole nature of the game has changed after demonetisation, the goods and services tax and the Insolvency and Bankruptcy Code. Earlier, you had 35 per cent cash sloshing around, while it has now become much less. All these put together, it is a fairly complex situation. There is no easy answer,” he said.

Here's link to related articles
https://wap.business-standard.com/amp/t ... ajiv-kumar

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 23 Aug 2019 18:07

Indian policymakers seem to think that the slowdown (to the extent they do recognize it) is a very complex issue that can only be dealt with through esoteric "structural reforms™ ".

In actual fact, the entire problem is very simple when viewed through the correct macroeconomic lens: The govt+RBI is the issuer of money, and it has not issued enough for the private sector to save up and invest. Here is my very simple two step formula to revive growth and confidence:

1) Govt pays up all the money it owes to private sector: invoices/tax refunds/salaries.
2) Cut taxes everywhere.

Let the deficit rise. It really does not matter. Very simply, govt deficits = pvt sector savings.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Raveen » 23 Aug 2019 20:51

Rahulsidhu wrote:Indian policymakers seem to think that the slowdown (to the extent they do recognize it) is a very complex issue that can only be dealt with through esoteric "structural reforms™ ".

In actual fact, the entire problem is very simple when viewed through the correct macroeconomic lens: The govt+RBI is the issuer of money, and it has not issued enough for the private sector to save up and invest. Here is my very simple two step formula to revive growth and confidence:

1) Govt pays up all the money it owes to private sector: invoices/tax refunds/salaries.
2) Cut taxes everywhere.

Let the deficit rise. It really does not matter. Very simply, govt deficits = pvt sector savings.



Oversimplifying a ton of things. What needs to happen is lowering interest rates, add more liquidity by handling UPS's legacy NPA mess.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby morem » 23 Aug 2019 22:42

zoverian wrote:
vimal wrote:Only type of Indians consuming Parle-G are the NRIs and they do it for nostalgia over anything else. No self respecting Indian in India would be caught eating Parle G, it's considered cheap.



True. I eat Parle G only here in Singapore :)


100% true

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahul M » 23 Aug 2019 23:56

abhijitm wrote:
hanumadu wrote:The word on SM is that there are a lot of new entrants, especially at the lower end of the biscuit market like ITC and hence the troubles of established players.

Biscuit industry is hit severely by chips and crisps companies. I used to see people buying biscuits at railway platform shops. These days people only by crisps and other Rs. 10/20 stuff.

Cheap biscuit market is reduced. But a new high end biscuits market is opened and increasing steadily. Parle however has missed that bus.

I am not in the FMCG domain but hide&seek, & milano, both parle products are very popular hi-end biscuits.

I buy parle-G for the street dogs in my area. :oops: eat it only when I am famished and have run out of food.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 24 Aug 2019 02:57

https://swarajyamag.com/economy/sithara ... f-slowdown
Sitharaman Makes Amends For Budget Misses, Addresses Fears Of Slowdown

But far from giving in to industry’s pressure tactics in order to grab special tax sops for specific sectors, the reliefs announced are mostly logical and calibrated.

The key measures announced to address the slowdown are the following.

First, the auto sector, which has seen a major structural slowdown over the last one year, get policy boosts that do not amount to any direct tax cuts.

The government will buy more vehicles, BS IV vehicles sold till March 2020 will be allowed to ply as long as they remain registered, depreciation rates on vehicles bought this fiscal will be raised, and the one-time registration fee hike has been deferred to mid-2020.

A new scrapping policy is also being announced to accelerate the replacement of old vehicles with new.
...
Second, the tax surcharge on foreign portfolio investors (FPIs) and long-term and short-term capital gains is gone.
...
Third, banks will cut rates and pass on the recent repo rate cuts to borrowers. To make this a painless process for banks, the Finance Minister has promised to frontload the Rs 70,000 crore recapitalisation of banks, which will enable them to lend another Rs 5 lakh crore and lower rates.
...
Fourth, micro, small and medium enterprises will be given refunds on their GST payments within 30 days.
...
Fifth, Sitharaman has also withdrawn the post-budget changes which threatened to make violations of the corporate social responsibility (CSR) law a penal offence, complete with a jail term. She has now made it clear that shortcomings in this regard will not be penalised.
...
Sixth, the promise to withdraw the angel tax on start-up promoters and investors has been reiterated, thus re-emphasising that the taxman will not act arbitrarily on this front.
...
The Finance Minister promised more announcements to revive animal spirits and reverse the sentiment of slowdown gripping some sectors of the economy. As long as the macro and fiscal measures do not focus on favouring one sector or the other, it will be a boon.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 24 Aug 2019 05:43

The Mini-Budget shows the government's desire to be focused on execution and to learn from the feedback it gets and act quickly:
Mini Budget: FPI surcharge rolled back; no angel tax for start-ups
Facing an economic slowdown and depressed capital markets, Finance Minister (FM) Nirmala Sitharaman on Friday announced a slew of measures, including a rollback of the surcharge on foreign and domestic portfolio investors, to perk up consumer demand and investments.

Apart from stating measures, almost rivalling a Budget, Sitharaman also said there would be two more sets of announcements in the coming few weeks — one aimed squarely at homebuyers and real estate companies. At a much-awaited press conference, Sitharaman announced steps such as enhancing the liquidity of banks to shore up purchases by consumers, easy goods and service tax (GST) refunds to micro, small and medium enterprises, easing conditions for a beleaguered automotive sector, and exempting all eligible start-ups and their investors from the “angel tax”.

Sitharaman also said banks would now be more prompt with transmission of rate cuts and launch repo-rate linked products, there would be a more transparent one-time settlement policy for the dues of micro, small and medium enterprises (MSMEs), the government and state-owned companies would release pending payments worth as much as Rs 60,000 crore, and Aadhaar-based Know Your Consumer would be allowed for opening demat accounts and investing in mutual funds.

The FM withdrew the enhanced surcharge on long- and short-term capital gains for FPIs as well as domestic portfolio investors. This will hit the exchequer by Rs 1,400 crore. “The pre-Budget position is restored. It is being done to encourage investment in the capital market,” the FM said.

Following the increase in surcharge in the Budget, the effective income tax rate for individuals with taxable income of Rs 2-5 crore went up to 39 per cent from 35.88 per cent and for those above Rs 5 crore to 42.7 per cent. However, withdrawal has been made for surcharge on only capital gains on equity. “FPIs having business income would still be affected,” said Amit Maheshwary, partner at Ashok Maheshwary and Associates, LLP said.

Sitharaman also announced withdrawing “angel tax” provisions for the start-ups registered with the Department of Department for Promotion of Industry and Internal Trade (DPIIT) to mitigate their and investors’ genuine difficulties. Besides, a dedicated cell under a member of the Central Board for Direct Taxes (CBDT), too, will be set up for addressing the problems of start-ups.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vimal » 24 Aug 2019 07:00

x-posting from understanding us thread.

I think this might good news for India. How good of a news is something I do not know.

https://www.washingtonpost.com/business ... e-do-that/

Trump ‘hereby’ orders U.S. business out of China. Can he do that?

Some see Trump’s command as more than ‘cheap talk,’ saying he has real tools to encourage compliance.

President Trump’s extraordinary edict demanding U.S. companies move out of China — delivered in a series of angry tweets Friday — left industries of every stripe scrambling to understand how seriously to take the order, and how the White House might enforce it.

Businesses from retail to electronics to home goods, many already under pressure from a months-long U.S.-China trade war, were contacting their industry associations for guidance and awaiting more substantive announcements from the White House.

“I’m trying to keep my cool and not get worried and upset, but it’s becoming hard,” said Magi Raible, founder of LiteGear Bags, a luggage maker based in Vallejo, Calif.

She has a meeting next week with an industry colleague to discuss moving more of her manufacturing from China to India or South Africa, she said.



“The tweet isn’t entirely cheap talk,” said Derek Scissors, a China expert at the American Enterprise Institute, a think tank partly funded by industry.

Trump fired off the tweets after China imposed a new round of retaliatory tariffs on $75 billion worth of American imports Friday.

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Indian Economy News & Discussion - Nov 27 2017

Postby Peregrine » 24 Aug 2019 16:00

Oil is once again turning PM Modi’s friend with govt move to boost economy Sanjay Dutta – TNN

HIGHLIGHTS

- The price drop could not have come at a better time and will support steps to revive growth.

- Cheaper oil keeps macroeconomic parameters such as CAD (current account deficit) and inflation in the comfort zone by reducing crude import and subsidy bills.


NEW DELHI: Oil is once again proving to be Prime Minister Narendra Modi’s friend when his government is making efforts to fend off a possible slowdown in the pace of economic growth. Crude prices dropped sharply on Friday, the day finance minister Nirmala Sitharaman announced a slew of measures to boost business + confidence and pump-prime the economy.

US crude plunged over 3% to $53.58 per barrel as China announced fresh tariffs on US goods, clouding hopes of revival in global demand. Right on cue, global benchmark Brent, which is more pertinent for India, fell 2%, or $1.19 to trade at $$58.75 per barrel.

The price drop + could not have come at a better time and will support steps to revive growth. Cheaper oil keeps macroeconomic parameters such as CAD + (current account deficit) and inflation in the comfort zone by reducing crude import and subsidy bills.

Low oil prices will help boost demand and reduce input cost for farmers who use diesel to run farm equipment. Lower subsidy liability frees up funds for social sector and infrastructure spending, which are expected to drive economic activity.

A Macquarie Capital report suggests every $10/ barrel fall in oil prices reduces import bill and CAD by $9-10 billion, or 0.43% of the GDP.

When Modi took oath as PM for the first time in May 2014, India was paying about $108 per barrel for the mix of crude it buys, known as the ‘Indian basket’. By the third year into Modi’s first term, the price had more than halved to about $48 per barrel. The crash allowed the government to mop up resources by raising fuel tax and splurge the money on big-ticket social sector schemes.

Something similar is happening again. Exploiting the window of heavy downward pull on oil prices, the government raised fuel tax by Rs 2 a litre in the budget to garner about Rs 20,000 crore this fiscal. Another round of fuel tax hike cannot be ruled out if oil continues to slide.

The Economic Survey for 2018-19 had projected subdued oil prices as demand concerns on the back of economic slowdown outweighed worries over supplies tightening as a result of extended production cut by OPEC-plus grouping amid loss of Iranian shipments due to US sanctions.

Oil has been on an upswing since 2017. Global marker Brent topped $80 per barrel around the time of Karnataka assembly election in May 2018, forcing the government to cut tax twice as fuel prices hit record high. Since then prices have been on a downtrend, except for brief spell beyond $70 in May, and dropped below $60.

In Video: India's economy is better than the rest of the world: Nirmala Sitharaman

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Mukesh.Kumar » 24 Aug 2019 16:11

X-Posting from Achievement Tracking thread- This is a big once indeed

Mukesh.Kumar wrote:RUPAY launched in UAE. This is a big one for our indigenous payment system.


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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 24 Aug 2019 18:10

Regarding NPAs: It is true that there was reckless lending in UPA2 era, but another fact is that NDA policies post 2014 have exacerbated the crisis.

How? By running too tight a ship. Based on neoclassical econ precepts -- targeting a lower deficit -- the govt. has sought to deleverage at the same time as the private sector was deleveraging. What SHOULD have been done is for the govt to expand its deficit -- putting more money into the hands on the pvt sector. This would have enabled a soft landing. Similar to what was done in the US in 2008-09 but smaller.

I will not even mention the RBI which has kept rates too high. Also driven by the same ideas.

Now, we are at a stage where not only money is tight, but confidence has taken a serious blow too. Tax collections growth has slowed. Even NPAs have begun to rise. But this is entirely predictable.
Image

Yesterday's announcements were a step in the right direction, but much more needs to be done. This is an entirely self-inflicted and avoidable crisis. Bad econ and bad politics.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 24 Aug 2019 18:43

To explain the above post a little:

The sectoral balances identity for any economy is thus

(G-T) = (S-I) + (M-X)
Fiscal Deficit. Pvt sector surplus Foreign sector surplus

This is just an accounting identity, following from GDP accounting.

Here is an interpretation: the govt, very easily can spend more and tax less (higher LHS) leading to money (rupees) flowing into the hands of 1) the private sector (anything govt spends ends up in pvt bank accounts) and 2) foreign sector (leakage through trade deficits)

What we would like to boost is the pvt sector surplus as this would lead to more spending, higher confidence, and higher investments.

But there is a risk that a good chunk of the fiscal stimulus flows abroad - in our case through Chinese imports. To avoid this, tariff barriers are needed.

The other risk is that there is a rise in inflation. This is not a huge risk at the moment but spending must take this into account. Tax reductions must similarly take into account international competitiveness as well as domestic income inequalities.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby tandav » 24 Aug 2019 19:34

https://indianexpress.com/article/business/economy/niti-aayog-chief-rings-the-alarm-bell-calls-for-unprecedented-steps-5928626/

As noted and increasingly apparent to NITI AAYOG a very large part of slowdown is attributable to Govt clients defaulting on timely payments to contractors which has a cascade effect on all vendors downstream. A huge number of these are highly productive MSME who have delivered the work but have not been paid and are now receiving notices from GST officials who look at past invoicing and make random tax demands and garnish funds. Contractors in Govt sector cannot raise invoices until measurement is recorded in Measurement Book. In lumpsum contracts this is left to whim of Engineer in Charge who in general seems to take great egoistic pleasure in making comments, rectification requests and corrections and sending files on goose chase. A typical invoice to govt authority goes to approximately 10 people and can spend more than 6 months to get paid. Given this work in projects stops or goes slow due to lack of cash flow and delivery is delayed adding to costs and invariable shortcut in quality

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 24 Aug 2019 19:58

^^ I've seen and heard the same. Which is why this was step 1 in my two step stimulus package.

A big "structural reform" would be simply for the govt. to, by policy or by law, be required to make due payments within a short, specified time frame.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby tandav » 24 Aug 2019 20:19

Rahulsidhu wrote:^^ I've seen and heard the same. Which is why this was step 1 in my two step stimulus package.

A big "structural reform" would be simply for the govt. to, by policy or by law, be required to make due payments within a short, specified time frame.


THis should be extended to all entities... if we make the GST payment then payment to vendor is to be done within 30days or disputed online...

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby yensoy » 24 Aug 2019 21:01

morem wrote:
zoverian wrote:True. I eat Parle G only here in Singapore :)

100% true


This observation is amazing! I didn't realize I had blown my cover with Parle-G. In particular the one wrapped in wax paper, not any new variants in mylar packaging.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 25 Aug 2019 20:03

^^^Rahulsidhu what was the consumer price inflation when NDA-1 took office?

This is Chidambaram:

Was high inflation a big red in your report card?
I think so. I think high inflation was a big red in the UPA-2 report card.
—-

IMO high growth rate but with high inflation is not electorally acceptable in India. To do anything for Indian economic policy one has to first win and then stay in office.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby hanumadu » 25 Aug 2019 20:50

Surjit Bhalla
@surjitbhalla
·
1h
Fake Analysis with a heavy does of ideology; Parle "chimed in and said jobs were at risk for as many as 10,000 of its workers." Parle sales GROWTH declined by 2 %,from 9 to 7 %, about same as inflation decline, & profit growth 21 % yoy;When will media shelve pursuit of ideology?
Quote Tweet


In reply to
Shekhar Gupta
@ShekharGupta
Columnist
@andymukherjee70
writes: “Indians unable to buy Rs 5 biscuits shows how badly wages are suppressed”

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby wig » 26 Aug 2019 10:19

https://timesofindia.indiatimes.com/bus ... 787285.cms

Do bond yields hold telltale signs of an impending recession

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby M_Joshi » 26 Aug 2019 13:03

tandav wrote:https://indianexpress.com/article/business/economy/niti-aayog-chief-rings-the-alarm-bell-calls-for-unprecedented-steps-5928626/

As noted and increasingly apparent to NITI AAYOG a very large part of slowdown is attributable to Govt clients defaulting on timely payments to contractors which has a cascade effect on all vendors downstream. A huge number of these are highly productive MSME who have delivered the work but have not been paid and are now receiving notices from GST officials who look at past invoicing and make random tax demands and garnish funds. Contractors in Govt sector cannot raise invoices until measurement is recorded in Measurement Book. In lumpsum contracts this is left to whim of Engineer in Charge who in general seems to take great egoistic pleasure in making comments, rectification requests and corrections and sending files on goose chase. A typical invoice to govt authority goes to approximately 10 people and can spend more than 6 months to get paid. Given this work in projects stops or goes slow due to lack of cash flow and delivery is delayed adding to costs and invariable shortcut in quality


This is entirely true. If Govts/PSUs start doing timely payments that would in itself would curtail the banking crisis. Our company is a victim of this too. Govt will take 2-3 months to make payment & this increases our Working Capital requirement to 4-5 months (2-3 months pre-dispatch + 2-3 months in payment). Our CC limits & vendor credit gets stretched to the limits. In many cases especially to Contractors as against the suppliers like us, Govts' take 6-12 months for payment. Bill clearing in itself requires a lot of manpower & time consumption & trips to babu's office which is an un-necessary strain on a business's P&L. Reduction of Govt's payment terms to even 20-30 days will provide the capital impetus to the economy that it currently needs. Since Private Investment is low currently, Public Investment needs to pickup but with good payment terms otherwise the sitation will remain more or less the same.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Manish_Sharma » 26 Aug 2019 13:25

vera_k wrote:Some detail on the Parle story from yesterday -

Slowdown in certain sectors limit job options

increase in GST did not go down well with consumers of low-priced biscuits (under Rs 100 per kg). The new GST regime clubbed biscuits in this segment (earlier exempt from excise duty) with those priced above Rs 100 per kg (the premium variety) at 18%


Twitter:
Surjit Bhalla
@surjitbhalla
Fake Analysis with a heavy does of ideology; Parle "chimed in and said jobs were at risk for as many as 10,000 of its workers." Parle sales GROWTH declined by 2 %,from 9 to 7 %, about same as inflation decline, & profit growth 21 % yoy;When will media shelve pursuit of ideology?

https://twitter.com/surjitbhalla/status ... 02913?s=20

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby hanumadu » 26 Aug 2019 21:14

https://timesofindia.indiatimes.com/business/india-business/rbi-board-approves-rs-1-76-lakh-crore-transfer-to-govt/articleshow/70845849.cms

Last year's short fall in taxes covered. Now that every body was clamouring for a stimulus, no one should oppose this move.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby VinodTK » 26 Aug 2019 23:56

hanumadu wrote:https://timesofindia.indiatimes.com/business/india-business/rbi-board-approves-rs-1-76-lakh-crore-transfer-to-govt/articleshow/70845849.cms

Last year's short fall in taxes covered. Now that every body was clamouring for a stimulus, no one should oppose this move.


Last 5 years hard work is beginning to pay dividends.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 27 Aug 2019 02:07

1,76,000 crores
Reminds me of 2G loss

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Manu » 27 Aug 2019 02:15

Rahulsidhu wrote:
Yesterday's announcements were a step in the right direction, but much more needs to be done. This is an entirely self-inflicted and avoidable crisis. Bad econ and bad politics.

This is a partial roll-back of the foolish budget which was supported by some here.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 27 Aug 2019 02:55

Manu wrote:
Rahulsidhu wrote:Yesterday's announcements were a step in the right direction, but much more needs to be done. This is an entirely self-inflicted and avoidable crisis. Bad econ and bad politics.

This is a partial roll-back of the foolish budget which was supported by some here.

That isn't really a reasonable way to put it. You're simply doing the converse of what you argue others did. Please don't do that here. There was a time for criticism, and now there's a time to consider the remedial response by the government. It is reasonable even for a contentious budget to get a mix of positive and negative opinions. There's no reason to blame people for trying to parse positive sentiment in economic pronouncements.

The original budget was controversial. It received support and criticism. However, the government was sufficiently receptive to the criticism that it reconsidered its actions and presented an unprecedented addendum mini-budget to roll back or modify things it felt were an issue, together with means to boost economic confidence.

With the kind of mandate it has, governments tend to get blinded by their own power. It's a good sign that even with this mandate, the government is sufficiently keen on listening to feedback such that it would take unprecedented measure where it felt it took a wrong step in handling an economic issue.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 27 Aug 2019 03:13

VinodTK wrote:
hanumadu wrote:https://timesofindia.indiatimes.com/business/india-business/rbi-board-approves-rs-1-76-lakh-crore-transfer-to-govt/articleshow/70845849.cms

Last year's short fall in taxes covered. Now that every body was clamouring for a stimulus, no one should oppose this move.


Last 5 years hard work is beginning to pay dividends.


I read about this a lot. Still can't figure our where RBI got all this surplus.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 27 Aug 2019 11:02

^^ (I am not 100% sure, just guessing. Please correct if I am wrong)

This "excess capital" is mainly due to USD appreciation. Maybe also some trading profits. The RBI holds a large amount of foreign currency. As INR slips, the balance sheet generates a profit due to revaluation. This shows up as excess capital.

Say the RBI holds $400b. A 5% move in USDINR generates $20b of profits. Just ballpark numbers.

To me it is merely an accounting trick. RBI is owned by GoI. The reserves would be transferred by simply crediting the said amount to the GoI account with the RBI (which is an asset for GoI, liability for RBI). If this accounting action helps break the artificial revenue constraints for the govt, I am all for it.

The opposition to the move seems to coming from the same fiscal scolds who want the govt. to cut budget deficits. Must be ignored.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 27 Aug 2019 14:18

A_Gupta wrote:^^^Rahulsidhu what was the consumer price inflation when NDA-1 took office?

This is Chidambaram:

Was high inflation a big red in your report card?
I think so. I think high inflation was a big red in the UPA-2 report card.
—-

IMO high growth rate but with high inflation is not electorally acceptable in India. To do anything for Indian economic policy one has to first win and then stay in office.


Implicit in your post is the assumption that higher fiscal deficits will incontrovertibly lead to higher inflation. I am questioning this assumption. I have posted about this in the past as well.

Thought experiment: If there were to be a 2% GST cut across the board, what would that do to inflation? What about fiscal deficit?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby a_bharat » 27 Aug 2019 16:40

vijayk wrote:
VinodTK wrote:
Last 5 years hard work is beginning to pay dividends.


I read about this a lot. Still can't figure our where RBI got all this surplus.


Take a look at this link that nicely explains RBI reserves:

Summarizing from the above link:

RBI makes money in different ways:
    Print money and lend to banks, earning repo rate
    Interest from GOI Bonds (Rs 48,000 Cr in FY18)
    Interest from Forex Reserves (US Treasury Bills, etc -- Rs 23000 Cr in FY18)
    Gains/Losses through Currency valuations, bond price movement because of interest rate changes, etc.
RBI maintains a huge war chest for different contingencies (currency and interest rate risks, etc.). Currently it has 7,00,000 Crores of reserves for this purpose, which is considered too much by some. Hence GOI demand for return of a big chunk of these reserves.


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