Indian Economy - News & Discussion 27 May 2012

Aditya_V
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Re: Indian Economy - News & Discussion 27 May 2012

Postby Aditya_V » 01 Oct 2013 20:25

Not really, With the Chennai ORR being built to reach Ennore and Kattupalli ports and with the Chennai east coast tracks going past these ports a few KM away, I don't it will be too difficult getting Rail access.

I think Amma wants to kill the Chennai port in favour of these 2 new ports. The added distance to Ford and Hundai could be anther 30KM, if the ORR gets built then that could provide better access to Trucks that current Parrys corner, Washermenpet area can ever provide.

manish
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Re: Indian Economy - News & Discussion 27 May 2012

Postby manish » 01 Oct 2013 20:29

Aditya_V wrote:Not really, With the Chennai ORR being built to reach Ennore and Kattupalli ports and with the Chennai east coast tracks going past these ports a few KM away, I don't it will be too difficult getting Rail access.

I think Amma wants to kill the Chennai port in favour of these 2 new ports. The added distance to Ford and Hundai could be anther 30KM, if the ORR gets built then that could provide better access to Trucks that current Parrys corner, Washermenpet area can ever provide.

Aditya_V saar, rail access in itself is not the problem, the ennore port for example already has rail access for a very long time (the port started ops in 1997).

As I mentioned in my earlier post, the problem is one of bottlenecks in the rail network that links the port sidings to the rest of the IR network. The daily throughput on the port's side is limited by this.

The ORR is certainly a big positive development, no two ways about it.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby RamaY » 02 Oct 2013 01:28

vina wrote:And in addition this govt seems to be nuttier than a fruit cake, with the endeavor being focused on moving the IT industry from Bangalore to 2nd tier city. If there is a bigger fool's errand, I haven't heard of it. And then there is this toxic rhetoric coming out of "forcing" the IT industry to employ "locals" . Together, it is so incredibly stupid that it has all the hall marks of killing the goose that lays the Golden Eggs.

Moving Infy to Gulbarga ! Can anyone think of anything more daft ? Buffoons have no imagination in getting big manufacturing and large scale industries with big labor intensity there in Karnataka (oops, that will actually require these clowns to actually do things like answer questions about land, water and power and roads and infra), but want a free ride on IT and it's success. Basically the redistribution "buddhi" at work . Take IT and spread it thin across KTK ! Not viable and wont happen.

The sooner they kick out the old coots like the current IT minister here and appoint a younger, more dynamic and forward looking person with some grey matter between his ears, the better. If not, in the best case,we will have the stagnation and woes of the current (more of the same old) and in worst case inflict serious and irreparable damage if some quixotic quest to "impose locals only (does that mean the MLA/MP chamchas and fellows from his constituency ?" on the Industry and spread it out to random places.


We have similar issue in Andhra Pradesh as well.

There was this info (I think Ramanaji mentioned it) that when CBN proposed Vizag instead of Hyderabad for the intel Fab, it went to china.

Then now a new IT Investment Region is announced for Hyderabad with an expected direct employment of 1.5mil and indirect employment of 7mil. It is causing lot of heartache especially in view of T-state demand.

I wish the govts act a little smart to welcome investments wherever they come. I would rather develop different regions for different industries based on favorable conditions.

The POSCO $12b investment cannot be moved to Bangalore same as Infy cannot be moved to Orissa. Every place has a different USP.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby krishnan » 03 Oct 2013 15:46

India's finance minister may have to slice at least Rs 200 billion ($3.2 billion) from government spending to prevent a budget blow-out, which could threaten to send the country's credit rating into ‘junk’ status, two ministry officials said.

P Chidambaram will make a final decision on whether to go ahead with the cuts at the end of October, when he gets an update on revenue collections, the officials, who have direct knowledge of the process, said.

If he goes ahead with cuts, the minister would likely focus on areas of discretionary spending but keep programmes, such as food subsidies, in place as state and national elections near, these officials said.


http://www.rediff.com/business/slide-sh ... 131003.htm

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Re: Indian Economy - News & Discussion 27 May 2012

Postby SaiK » 03 Oct 2013 17:31

http://www.thehindu.com/news/national/t ... epage=true The report “contains within it the danger of a substantial pre-emption of grant resources in favour of a few populous States if applied more generally to Central transfers.” Given that barely six months remain for the UPA government’s term, “I do not think this is the appropriate time to undertake such a sensitive and complex exercise.”

Ms.Jayalalithaa, who wrote to Prime Minister Manmohan Singh on Tuesday urging him to reject the report, said it was apparent that the report was an attempt to provide an “intellectual justification” to deliver resources to a potential political ally. Also it was to meet the political objective of the mentor of the report.

quite a valid argument.

Theo_Fidel

Re: Indian Economy - News & Discussion 27 May 2012

Postby Theo_Fidel » 03 Oct 2013 20:10

Why can’t the UG just give Bihar a grant of say Rs 20,000 Crore with some strings attached. Instead of messing with the entire transfer process.
I don’t think anyone is opposed to supporting Bihar. In fact similar transfers will be necessary for Chattisgarh, MP, RJ, type state. UP is too big, not sure how you fix that. But right now there is no evidence that Bihar is not receiving central transfers. Per this report despite having a GDP share of 2.3% Bihar gets a 8.2% share of transfers.

AMMA should not complain too much. Back when TN was amongst the most poor and destitute of Indian states, yes even behind Bihar, GOI used to regularly bail out the SG even though other obstructions were placed in its path. The state that should really complain is Maharashtra it looks like.

http://www.financialexpress.com/news/fo ... rs/1177413

Bihar chief minister Nitish Kumar’s insistence on linking his post-election support to a party that promises Bihar ‘special category’ status is not without reason, the state’s increase in annual GDP is almost entirely driven by what happens to central transfers in the year. In FY13, central transfers — both tax transfers as well as plan funding — were R50,750 crore and the state’s GDP rose R61,645 crore; in FY12, R44,870 crore was transferred while the GDP rose R42,532 crore (see graphic).
None of this is surprising at one level since, as is the case with any spending, there is an immediate boost to GDP. What is surprising is the lower level of private sector response to government spending. In the case of even Chhattisgarh, which has a state GDP size of R1.6 lakh crore as compared to Bihar’s R3.1 lakh crore, and is also Naxal-affected, while R14,100 crore of central transfers were made in FY13, state GDP rose R20,673 crore; in FY12, R12,740 crore of central transfers led to a R21,537 crore hike in GDP.
DK Pant, chief economist at India Ratings, however, is not surprised. “Industry needs power and roads at the very minimum... What your data is showing is that things were so bad, the government is trying to fix the infrastructure deficit. Once this is fixed, industry will come... Whether that takes two years or five years is difficult to say.”
Indeed, other data for Bihar corroborate this story. The share of the construction segment rose to 13.5% of GDP in FY12 from 6.7% in FY05. Manufacturing’s share of GDP, in contrast, has fallen from a low 6.5% in FY94 to 4.9% in FY12.
Uttar Pradesh, another state whose ruling party put a similar ‘special category’ demand in return for post-poll support, has seen a similar dependence on central transfers for boosting growth. In FY13, R83,620 crore of central transfers resulted in an increase of R90,722 crore; in FY12, central transfers were R74,200 crore versus a GDP increase of R78,843 crore.
For more prosperous states, generally also with higher levels of industrialisation, this multiple is naturally very different. In the case of Tamil Nadu, central transfers are typically between a fourth and a fifth of the total hike in the state GDP each year. For Punjab, the ratio is similar; for Gujarat, the importance of central transfers is even lower. Even at an all-India level, central transfers account for around half to a third of incremental GDP each year.
Since local supply responses don’t happen immediately, but over a period of several years, a good way to judge what is happening is to look at what has happened over a period of a few years. That doesn’t change things too much in the case of Bihar. While R2.38 lakh crore of central funds were transferred between FY06 and FY13, GDP rose by only R2.3 lakh crore during this period.
In the case of Haryana, while central transfers totalled R39,641 crore, GDP rose by R2.55 lakh crore. At an all-India level, transfers rose R27.67 lakh crore versus
GDP growth of R64.9 lakh crore. States like Jammu & Kashmir are exceptions to this rule, and in this case, central transfers are around three times higher than the increase in GDP, suggesting a lot of the funds are leaking along the way.
While committees such as those headed by Raghuram Rajan have made out a case for higher transfers to states like Bihar, it has to be pointed out that such states are not being discriminated against right now either. In FY13, Bihar’s own taxes were R15,700 crore versus R33,130 crore of central tax transfers. And if you take into account all other transfers, Bihar gets 8.8% of all money flows from the Centre to the states. Juxtapose this with Bihar’s 2.8% share in India’s GDP or its 8.6% share in the population and there’s little evidence of a bias against the state. Maharashtra, by contrast, accounts for 13.9% of India’s GDP—and 9.3% of the population—but gets just 6.2% of all central transfers, including the tax ones.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby nawabs » 03 Oct 2013 20:35

India gets whopping $71bn in remittances in '13, tops globe

http://www.moneycontrol.com/news/econom ... ef_article

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Re: Indian Economy - News & Discussion 27 May 2012

Postby Supratik » 03 Oct 2013 22:18

nawabs wrote:India gets whopping $71bn in remittances in '13, tops globe

http://www.moneycontrol.com/news/econom ... ef_article



Good. So we can expect a transfer of about $1 trillion over the next 10 yrs.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby RamaY » 03 Oct 2013 22:24

Supratik wrote:
nawabs wrote:India gets whopping $71bn in remittances in '13, tops globe

http://www.moneycontrol.com/news/econom ... ef_article



Good. So we can expect a transfer of about $1 trillion over the next 10 yrs.

My guess is that at least 50-60% of this goes into Housing and Education sectors (majority of remittors are middle-class families).

I hope 15-20% goes into capital industries. One area GoI can offer good financial instrument opportunities.
Last edited by RamaY on 03 Oct 2013 22:24, edited 1 time in total.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby svinayak » 03 Oct 2013 22:24

Supratik wrote:
nawabs wrote:India gets whopping $71bn in remittances in '13, tops globe

http://www.moneycontrol.com/news/econom ... ef_article



Good. So we can expect a transfer of about $1 trillion over the next 10 yrs.

Nobody is asking the question.
Why is the Rupee INR going down.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby RamaY » 03 Oct 2013 22:30

OK, this answers few questions...

Budget 2013: Tax-free infrastructure bonds of Rs 50,000 cr may prove to be duds

EW DELHI: One of the Budget proposals to spur infrastructure investments — issuing tax-free bonds of Rs 50,000 crore — may prove a nonstarter because most institutions that can raise funds through this route have yet to spend cash raised through earlier bond sales. With infrastructure projects across sectors failing to take off in 2012-13 due to various delays, institutions such as National Highways Authority of India (NHAI) and India Infrastructure Finance Company have either sitting on cash raised through earlier bond issues or slashed fund-raising plans because there are not many all-clear projects to fund.

Unless the government finds a way to speed up infrastructure projects stuck in red tape, these institutions will not be rushing to bond market, particularly now that the government has set strict conditions of 'need and capacity to raise money'. :evil:

The finance ministry recently reprimanded NHAI for parking funds raised through bond issue in bank deposits. The highway authority has not been able to deploy more than a quarter of the Rs 10,000 crore it raised by selling tax-free bonds in 2011-12. :( "The authority hasn't raised a single rupee out the Rs 10,000 crore limit sanctioned to it for this year and doesn't plan to issue bonds till after 2014-15," a senior road ministry official said.

India Infrastructure Finance Company (IIFCL) Chairman and Managing Director SK Goel said the firm would raise just Rs 5,000 crore out of its Rs 10,000 crore limit this fiscal. "We have been told to raise the money only when we need and that nobody should keep the funds in bank deposits," he said.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby Supratik » 03 Oct 2013 22:32

Acharya wrote:
Nobody is asking the question.
Why is the Rupee INR going down.


Rupee is not going to improve w/o solving fundamental economic issues which in turn can happen only if the INC has a light-bulb turning on in its head and asks SG and NACxalites to stfu or change of Govt. However, Rajan has managed to improve it by allowing more hot money. It is a quik-fix and not long term solution but then he doesn't run the Govt.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby svinayak » 03 Oct 2013 22:34

Supratik wrote:

Rupee is not going to improve w/o solving fundamental economic issues which in turn can happen only if the INC has a light-bulb turning on in its head and asks SG and NACxalites to stfu or change of Govt. However, Rajan has managed to improve it by allowing more hot money. It is a quik-fix and not long term solution but then he doesn't run the Govt.

With that kind of demand for rupee due to remittance there should be good upward movement of Rupee.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby RamaY » 03 Oct 2013 22:36

Acharya wrote:With that kind of demand for rupee due to remittance there should be good upward movement of Rupee.


Unless, all things we buy using those remittances are imports.

In other words Indian Exports + Remittances < Indian Imports.

Beside inflation, we need to reverse this equation. only then Rupee will appreciate.

JMHT

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Re: Indian Economy - News & Discussion 27 May 2012

Postby Supratik » 03 Oct 2013 22:37

Acharya wrote:With that kind of demand for rupee due to remittance there should be good upward movement of Rupee.


Yes, but even with that Govt. isn't able to balance its finances.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby manish » 03 Oct 2013 23:14

Meanwhile, the bloodbath on the jobs front in core sector industries seems to continue although the media and general populace largely ignores it. The tendency is to ignore more or less all news from non-ITVity sectors esp on the jobs and people front.

The infra sector has seen a fairly brutal culling. Just as a case study, I went through the numbers that Lanco, one of the big players in the sector has been publishing.

Before you read further, consider that the staff 'on-rolls' at a typical big infra co would consist mainly of white collar corporate staff/highly skilled ops staff/middle to upper middle class junta as all the lower level staff would come from contractors or be outsourced. Let's look at their staff numbers, as published by them in their earnings releases over the past 12 months:

End of Quarter: Reported Headcount (Percentage Change Q-o-Q)

Q4FY12: 8,400
Q1FY13: 7,800 (-7%)
Q2FY13: 6,800 (-13%)
Q3FY13: 6,755 (-1%)
Q4FY13: 5,710 (-15%)
Q1FY14: 5,367 (-6%)

Total change: -36%+!!

So in little over 12 months, one of India's top infra companies has lost over 36% of its staff :eek: :eek: Unlike in the IT sector, the core sector/heavy industries have probably had almost no additional hiring done over the period across the board, leaving little or no avenue to find new jobs for the poor guys who end up losing their income sources.

What would one do? I don't know, and in our country we don't even have any social security/unemployment benefits to speak of.

Some guys have got it really bad in this downturn, just that the online world is yet to come to grips with it. No offense to anyone or any sector but just compare this to the level of outcry and the media frenzy that gets triggered when some random MNC captive BPO arm lets go of a handful of people from the likes of ET/ToI. Or perhaps in Lanco's case, its owners' political connections help to keep a lid on it, although I did see one or two articles in the press a while back reporting job losses at Lanco.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby V_Raman » 04 Oct 2013 00:24

Theo_Fidel wrote:No improvements will happen to Chennai port as long as AMMA is in power. The port is doomed to over congestion and is almost unusable right now.


IMO Chennai port should eventually be closed for commercial operations. The city needs that land for other uses. Maybe Navy can use it in the future.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby Virupaksha » 04 Oct 2013 01:08

manish,

lanco is a little bit of a non-representative of India as a whole, it is representative of the mess andhra is going through.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby Theo_Fidel » 04 Oct 2013 01:09

LANCO does not have a prayer of a chance of surviving. They carry too much debt including foreign debt and also are dependent on importing coal. They are also stuck in a sector with withering competition from dozens of massive players, many larger than them. Will probably get taken apart and absorbed not dissimilar to MAYTAS, anyone remember them. They too were dismembered and ILFS absorbed one large chunk IIRC.

There was a report about this earlier.
http://www.business-standard.com/articl ... 726_1.html

This is the reality of a modern economy unfortunately
Give it enough time and one of the Titans like TATA, Birla and Ambani will do something stupid and end up getting dismembered and eaten by others.
Circle of life and all...

Tough on employees. Really tough, for usually no fault of their own.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby Aditya_V » 04 Oct 2013 15:30

manish wrote:Some guys have got it really bad in this downturn, just that the online world is yet to come to grips with it. No offense to anyone or any sector but just compare this to the level of outcry and the media frenzy that gets triggered when some random MNC captive BPO arm lets go of a handful of people from the likes of ET/ToI. Or perhaps in Lanco's case, its owners' political connections help to keep a lid on it, although I did see one or two articles in the press a while back reporting job losses at Lanco.


MOI after 3 years in real world jobs moved to BPO for job safety. In Chennai above a certain limit, which is not enough to pay housing EMI;'s, there are literally no job replacements taking place. People are holding on to their jobs while many are being retrenched.

The only sector with relative job security and pay is BPO/KPO.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby nawabs » 04 Oct 2013 18:55

Feel-good, cheap consumer loans: Who is govt trying to fool

http://www.moneycontrol.com/news/econom ... ef_article

The government’s decision to recapitalise banks which lend at lower rates to certain consumer sectors such as two-wheelers and durables. Business Standard reports (4 October) that this decision was taken "in principle" at a meeting between Finance Minister P Chidambaram and Reserve Bank Governor Raghuram Rajan.It quotes Chidambaram as saying: "Lower interest rates will depend on the lending capacity of banks. Banks will decide on sectors where lower rates will boost demand. I will meet bankers soon."


First, it is the government's job to decide which sectors must be given a fillip by enabling banks to lend to them at lower rates. Wrong. In fact, this is the surest way to build a bad loan portfolio . When rates are cheaper for some sectors, more borrowing will happen there and increase the potential for non-performing assets. Cheap loans to homes in the aftermath of Lehman enabled SBI to build a lot of dud loans. Does it make sense to ask consumers to borrow more to buy bikes and TV sets when they should be more worried about jobs and salaries -which is what is under threat in a slowing economy? It is not the government's job to tell banks where to lend and how much. Bankers can decide that for themselves based on their own assessments of creditworthiness. The RBI, in fact, went the other way less than a fortnight ago when it banned zero-interest consumer loans . What's the logic of banning what banks thought made sense and now enticing them to lend cheap to the same sector with promises of recapitalisation?


Second, cheap interest rates are the best way to revive demand. Again, a flawed assumption. While cheaper money can indeed stimulate demand, the larger determinants of demand are economic conditions and consumer confidence. Consumers, in fact, are benefited more if companies cut prices to boost demand instead of offering cheaper loans. Ask yourself a simple question: would you prefer to pay less for a car with a smaller loan or pay more for the same car, priced higher, and financed with a larger loan?


Third, it seems capitalising banks has no costs. The government glibly says that it will raise the Rs 14,000 crore capital set aside for banks to enable them to lend more. Let us be clear: capitalising banks is no different from borrowing from them. In a situation where there is a huge fiscal deficit, capital for banks will come only by raising the deficit further. And what is the fiscal deficit? The money government borrows. And who does the government borrow from? Banks. In short, recapitalising banks means borrowing money from them and returning the same and calling it share capital. So, when the government says it will capitalise banks if they lend cheap for mobikes, it is saying it will borrow more from banks to give it back to them as share capital which can then be used to expand subsidised lending to two-wheeler and TV buyers. How daft is this? Reducing interest rates artificially in this roundabout way means government is encouraging demand in some sectors at the cost of the others. Credit will be diverted to boost auto sales, while some other credit-starved sector -mostly small scale units that create jobs -will be charged more or not lent money at all. Does all this make sense? Should government be playing favourites with some sectors and starving the rest? Worse, should it be borrowing more to do this kind of artificial pump-priming? In an election year, the government is more eager to finance feel-good buying with cheaper loans instead of focusing on reviving growth the hard and sensible way: reforming regulations and improving the business climate. Giving dollops of cheap money to favoured sectors is the exact opposite of reform.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby nawabs » 04 Oct 2013 19:19

Study lists why India’s special economic zones policy didn’t work

http://www.livemint.com/Politics/pZ1V1B ... didnt.html
The commerce ministry commissioned the think tank Indian Council for Research on International Economic Relations (ICRIER) to do the comprehensive cost-benefit analysis of the SEZ policy.The ICRIER study was commissioned in April this year against the backdrop of declining interest in SEZs after the government imposed a minimum alternative tax on SEZ units in April 2012 and to examine many negative perceptions about the industrial zones. The commerce ministry also asked ICRIER to examine the impact of foreign trade policy and the regulatory framework as well as analyse incentives provided under free-trade agreements signed by India with other countries and their effect on the SEZs.


Arpita Mukherjee, a professor at ICRIER who is heading the study team, said the implementation of the foreign trade policy in 2009, through which a slew of export incentives were given to exporters outside SEZs, acted as a disincentive to invest in SEZs. “In a way, you created zones to promote exports and disincentivized such activity by giving more export benefits to units outside such zones,” she said.The commerce ministry provides incentives to exporters outside SEZs through the duty drawback scheme, and focus market and focus product schemes, among others.The duty drawback scheme allows manufacturers to seek a refund of duty paid on imported materials used in the manufacture of goods which are exported; the focus market and focus product schemes incentivize exports to specific geographical regions and specific products. Mukherjee said ideally such benefits should also have been extended to SEZs to ensure a level playing field. “The situation further aggravated with the global economic downturn of 2008-09 when demand for Indian goods fell drastically and duty-free sale of SEZ products within the country was not allowed,” she said.


Since the SEZ policy was announced in 2000, 576 formal approvals have been granted for setting up of such enclaves, out of which 392 SEZs have been notified.Only 170 are operational. One of the most common refrains against the SEZs has been that they failed to achieve their intended objective of encouraging manufacturing exports from India and instead became attractive centres for information technology firms to avail of tax incentives by shifting to the zones from domestic tariff areas.To be sure, SEZs have access to duty-free imports of manufacturing inputs because technically they are considered to be outside of the country’s domestic tariff area. But, with India signing free-trade agreements with countries where duties on many products are eliminated or reduced substantially, the advantage accruing to SEZs was negated, Mukherjee said. “Such a situation does not arise in other countries since their differential tariff rates are much lower than India,” she said.


Mukherjee pointed to a difference between the models followed by China and India— while China created a limited number of large, self-sustainable, confined enclaves near port facilities to boost exports, India opted to license a large number of SEZs without ensuring proper infrastructure outside the zones.


There is another hurdle that SEZs face. Tax incentives granted to SEZs are seen as breaching World Trade Organization rules that bar financial contributions by a government or public body.Units in SEZs still enjoy income-tax benefits. Mukherjee said countries impose countervailing duties to negate direct tax subsidies, which reduces the competitiveness of exports from such enclaves.So far, 33 countervailing duty measures have been slapped on against India, second only behind China (42). “We have to substitute such tax incentives to SEZ units by subsidies on inputs, which are used in production of exports material and are not considered subsidy under WTO rules,” Mukherjee said.

Looking at SEZs only from the incentives perspective is a narrow approach to the problem, said Biswajit Dhar, director general, Research and Information System for Developing Countries, a think tank under the external affairs ministry. “SEZs were supposed to be areas where government provides state-of-the-art technology and infrastructure facility. However, later they were left to private developers. We should go back to the original idea and develop such zones as pockets of excellence,” he said. SEZs should provide better infrastructure facilities, which in turn will reduce the cost of operations and act as an incentive for exports, said Ajay Sahai, director general of the Federation of Indian Export Organisations.“When it comes to allowing SEZs to sell in domestic market, one has to take into consideration the concerns of the domestic manufacturers,” he said.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby Suraj » 04 Oct 2013 22:05

The SEZ policy did not work ? They generated ~$100 billion in exports last fiscal, approx a third of our exports. The export growth from them looks like this:

Code: Select all

Year     Value
2007-08  66K cr.
2008-09  100K cr.
2009-10  220K cr.
2010-11  316K cr
2011-12  365K cr.
2012-13  476K cr.

Some of these exports came from non-SEZ exports recategorized as SEZ ones. However, both aggregate and SEZ-generated exports have grown at a similar clip. Overall exports read:

Code: Select all

Year     Value
2007-08  $163B
2008-09  $185B
2009-10  $179B
2010-11  $251B
2011-12  $306B
2012-13  $303B

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Re: Indian Economy - News & Discussion 27 May 2012

Postby Supratik » 04 Oct 2013 23:13

The SEZs were deliberately killed by UPA under leftist/NAC pressure and guise of corporate loot. All kinds of conditions were introduced to kill it e.g. Reliance SEZs could not proceed owing to lack of contiguity of land. Imagine 10000-25000 acres being developed in one go. Why do you need contiguity of land? PM as FM introduced disincentives for SEZs. If there is Govt change they should look at SEZs afresh.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby Suraj » 05 Oct 2013 01:03

Sorry, I disagree. Their turnover and export data shows otherwise. The SEZ Act was one of the most political capital intensive issues backed by INC in UPA-1, where they faced much opposition from their own allies pushing it through. The problem was the same as what government policy often faces - the lack of coordinated policymaking. No supportive land acquisition policy. No supportive environmental clearance mechanism. SEZs have been around in various forms for decades now, but were just chickenfeed for much of that time. Their being export behemoths today is a very recent phenomenon dating back to just 5-7 years.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby brihaspati » 05 Oct 2013 04:14

Suraj,
I can onlee see some degree of incentive for smaller scale IT investments - but that market is not as lucrative as it was before. But more importantly the MAT policy is giving the jitters to potential investors. Do you think that there will be any degree of stability on the taxation issue from the gov side - before the elections? How far does the opposition agenda deal with this? I might have missed - but I saw no explicit treatment of this aspect in the speeches/flyers/ads/talks.

There was a lot of rhona dhona bout MAT anyway from people I met last month. But these are primarily transnational players, so if it is actually promoting desi interest - then good perhaps.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby Suraj » 05 Oct 2013 04:40

What is MAT policy ?

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Re: Indian Economy - News & Discussion 27 May 2012

Postby brihaspati » 05 Oct 2013 04:50

Suraj wrote:What is MAT policy ?

Minimum Alternate Tax (? as far as I know withdrawal of exemptions are what the rhona is about)

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Re: Indian Economy - News & Discussion 27 May 2012

Postby Suraj » 05 Oct 2013 05:10

Thanks. I recall the MAT/DDT tax issue from a couple of months ago. Here's a refresher article I found, demonstrating how GoI is doing what it does best - how very poor ability to coordinate policymaking:
Why SEZ policy reforms have no takers
Historical evidence suggests that even though the export zones have been an integral part of India's export promotion policy since 1965, the government has never demonstrated a strong commitment to the programme. In the early phase, the crippled investment climate it offered in SEZs thwarted the programme from taking off. In 2005, a special legislation and overriding laws were formulated to provide a significant "push" to the policy. But when the policy came under heavy criticism, the government responded by diluting it through a series of policy reversals for fear of losing popular support.

These policy reversals and public bickerings between the commerce and finance ministries over the SEZ policy sent negative signals around the world regarding the government's sincerity towards its policy, discouraging in particular foreign direct investors. In March 2011, SEZs were dealt a major blow when they were brought under the purview of minimum alternate tax (MAT) and dividend distribution tax (DDT). Uncertainties continue to dog the policy. The Direct Tax Code Bill, 2010, pending with the Parliament seeks to further dilute the incentive package offered to SEZs by replacing the profits-linked tax benefits with investment-linked ones.

At the aggregate level, SEZs appear to have made a significant contribution to investment and exports. They have received investment of over Rs 2.39 lakh crore. Exports from SEZs have seen a dramatic jump from Rs 22,840 crore in 2005-06 to Rs 4.76 lakh crore in 2012-13. But a disaggregated analysis is less favourable. Of the 589 formally approved and 389 notified SEZs, only 170 are operational. Further, only two SEZs accounted for nearly 42 per cent of the total SEZ exports in 2011: the Jamnagar refinery and DLF Infosys Mangalore. The share of FDI also remains abysmally small. Not only that, the proposed FDI in newly notified SEZs has been declining. It has declined from Rs 34,509 crore as on 31 December 2009 to Rs 30,964 crore in September 2010 and then further to Rs 26,984.4 crore as on March 31, 2012.

The reforms are claimed to be an outcome of a comprehensive review of the SEZ policy after intense stakeholder consultations for over a year. Unfortunately, however, major demands such as the withdrawal of MAT and DDT, extension of benefits of some of the incentive schemes to SEZ units, and relaxation of rules pertaining to domestic tariff areas (DTA) sales to counter the business cycle effects have not been acceded to. There is an unduly heavy emphasis on the expansion of SEZ infrastructure, while ignoring the issue of creating a favourable investment climate in them to attract production investment.

The zero-duty EPCG scheme has also taken away one of the attractions of SEZs. The introduction of MAT and DDT undermined the direct tax exemptions also. Further, the practice of assessing custom duty on goods manufactured in SEZs based on their full value upon entry into domestic (DTA) commerce is discouraging for investors, in this global recession scenario. In successful countries, such as China, Malaysia, Korea and Taiwan, customs duty on DTA sales is assessed only on the imported materials used in the production of SEZ exports. China also permits duty-free domestic sales if the SEZ product is based on new and sophisticated technology. This has not only been a major incentive for investors to invest in SEZs but has also proved to be a key motivation for SEZ investors to forge linkage with the domestic economy. Further, in view of the fact that under the regional trading agreements, imports of agreed products from partner countries to India enjoy nil or negligible duties, it is ridiculous that imports from SEZs are allowed after paying the full range of duties.

Those who participated in the SEZ debates on this thread 5 years ago will remember that opposition to SEZs then was based around not having preferential laws within SEZs, but to implement them nationwide. I'd pointed out then that it's the lack of political consensus driving the SEZs then - it enabled some zones to be created where preferential policies could be implemented. However, it seems continued poor coordination among ministries has resulted more legal roadblocks being placed in the way of SEZs, instead of them driving greater trade and economic activity incentives outside SEZs too.

There's not much positive to say here. While not anywhere near killing the whole thing, the policymaking tangle seems completely expected of the current administration, considering its general level of performance these days. It's not hard to fix, but it's not going to happen with this administration in place.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby Supratik » 05 Oct 2013 14:58

Yes, MAT is one of the issues. IMO, SEZs have done well inspite of Govt. policies not becoz of it. Most promoters have either exited or postponed their SEZ plans. Reliance has exited both the Haryana and Navi Mumbai projects.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby harbans » 05 Oct 2013 15:22

Awesome speech and awesome points made by NM today:


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Re: Indian Economy - News & Discussion 27 May 2012

Postby Rahul M » 05 Oct 2013 17:20

harbans ji, why don't you at least give a wrap-up of what he said, so that we can decide if it should stay in this thread. otherwise mods would be very tempted to delete what we would see as politics in econ thread. most don't have the time to go through a 50 min long video.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby krishnan » 05 Oct 2013 19:01

and people like me dont have speaker/headphone :mrgreen:

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Re: Indian Economy - News & Discussion 27 May 2012

Postby harbans » 05 Oct 2013 19:43

Rahul, i think it is significant in itself as he is a potential PM. He is talking about how the Gold act and economic policies of yester years created the Gold mafia and subsequently they reinvested in Bollywood and a host of Industries. He touches how PVNR tried to offset the damage. These views in an economic forum are warranted because it gives an insight to how the next possible PM will change policy and in turn affect us for good or bad. I am not an economist, and surely he would have touched upon some points that many who understand the nuances better may give better insights.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby Austin » 06 Oct 2013 09:02

Will contain CAD below $70 bn: FM
http://www.tribuneindia.com/
Bangalore, October 5
Asserting that the government has the capacity to overcome "this period of stress", Union Finance Minister P Chidambaram today said the current account deficit would be contained below $70 billion this fiscal.

“Last year, I was told by pundits, analysts and rating agencies and all the wise people who appear on televisions every day that we cannot contain the fiscal deficit. I’m happy that we were able to surprise them; ....We are told that the government cannot contain the current account deficit, I said last year we had the deficit of $88 billion, this year I'm betting at $70 billion, and I will contain it below $70 billion,” he said at a State Bank of Mysore event here.

“I say this because we have intellectual capacity among our senior economists and administrators, we have the institutional capacity and above all we have our people who give us the confidence to overcome stress,” he said.

“Our people save and that is a biggest asset to us. People of India save like no other people anywhere in the world, in worst of times our savings ratio did not go below 30 per cent,” he said.

Answering a question about his confidence in controlling the CAD, he said, “The confidence comes from my knowledge of the numbers, from the fact that gold imports have sharply compressed in July, August and September, exports have picked up briskly and smartly.” — PTI

If the savings of Indians are channelised into productive investment and if we create a climate where people can take risk, I have no doubt in my mind that we will be able to get over this period of stress

—P Chidambaram, finance minister

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Re: Indian Economy - News & Discussion 27 May 2012

Postby RoyG » 06 Oct 2013 20:08

Yawn, so essentially what he is saying is: Listen, I'm going to spend, spend, spend and the entire country will foot the bill...But hey, I PROMISE that I will contain the current account deficit so don't worry, BE HAPPY!

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Re: Indian Economy - News & Discussion 27 May 2012

Postby nawabs » 06 Oct 2013 23:31

Projects worth Rs.15 trillion stalled for want of clearances

http://www.livemint.com/Politics/h7meso ... ances.html
Industrial projects worth over Rs.15 trillion are stalled for want of various clearances and other issues, according to data compiled by the prime minister’s project monitoring group (PMG). Of this, power is the most troubled sector where 136 projects worth over Rs.7.14 trillion are stalled. This is followed by steel, where 25 projects entailing investments of over Rs.3.36 trillion are stuck.

The other leading sectors where investments are stuck are oil and gas sector (32 projects entailing Rs.2.08 trillion investments), special economic zone (Rs.52,271 crore), roads (Rs.40,155 crore) and mines (Rs.37,399 crore). In total, 319 projects worth over Rs.15.19 trillion stalled investments have been identified so far by the PMG.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby hanumadu » 07 Oct 2013 11:37


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Re: Indian Economy - News & Discussion 27 May 2012

Postby nawabs » 07 Oct 2013 13:44

WTO chief may seek India’s help to negotiate deal at Bali

http://www.livemint.com/Politics/55lxw2 ... -Bali.html
As time runs out for concluding negotiations for a deal at the World Trade Organization (WTO) ministerial at Bali in December, WTO director general Roberto Azevedo is likely to seek India’s help when he meets trade minister Anand Sharma on Monday.Azevedo, who has previously served as Brazil’s ambassador to WTO, is the first member of a developing country to take charge of the Geneva-based multilateral trade body. Azevedo in his first visit to India will also meet industry lobby groups to garner support for a deal at Bali.In the absence of a broad-based agreement on the Doha round of trade talks that started in 2001, member countries are making a last-ditch attempt to work out areas where a consensus could be reached.

India has been demanding a balanced outcome from the WTO ministerial in Bali with the interests of the so-called least developed countries (LDCs) and developing nations at its core.While developed countries are projecting trade facilitation as a sure thing at the Bali meeting, developing countries want a deal to allow them to increase their ceiling on food subsidies above what is permissible at present as well as a package for the least developed countries.Developed countries have shown inclination for a peace clause for developing countries on the food security issue for 2-3 years, while developing countries, represented by the G-33 group, are demanding this at least for a period of 9-10 years, Mint reported on 25 September.A so-called peace clause in WTO parlance gives legal security to member countries and protects them from being challenged under other WTO agreements.If the ceiling for food subsidy is not increased, then, at its present level, India may cross the ceiling within 3-4 years. Such subsidies cannot extend 10% of the total value of the production of that product.Through the newly enacted food security law, the government commits to provide subsidized foodgrain to two-thirds of the country’s population, thus putting additional subsidy burden on the government.

On the issue of trade facilitation, developed countries that are expected to largely benefit from an agreement are reluctant to commit any kind of financial assistance to developing countries to upgrade their systems, while demanding legally binding commitments from developing countries and LDCs.For instance, developed countries want India’s proposal on customs cooperation to be accepted on a ‘best endeavour’ basis, while their proposals are to be accepted by developing countries on a binding and justiciable basis.

Developing countries think the proposal on the table at present on trade facilitation only increases the burden on developing countries by forcing them to upgrade their export infrastructure without any reciprocal commitment on the part of developed countries for financial assistance or technology transfer.

“We will tell him that we are not being obstructionist for a deal at Bali. If developed countries agree on an interim arrangement on the peace clause, then we should not have a major problem with trade facilitation,” Mint reported on 25 September quoting a government official who spoke on condition of anonymity.

India should tell the WTO chief that unless its concern on the food security issue is satisfactorily addressed, it would be difficult for India to agree to a larger deal at Bali, said Abhijit Das, head and professor at the Centre for WTO Studies under the Indian Institute of Foreign Trade. “There has to be an overall balance and give-and-take in such negotiations. At present, developing countries are being given a short trip,” he said.

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Re: Indian Economy - News & Discussion 27 May 2012

Postby Austin » 07 Oct 2013 14:16

RoyG wrote:Yawn, so essentially what he is saying is: Listen, I'm going to spend, spend, spend and the entire country will foot the bill...But hey, I PROMISE that I will contain the current account deficit so don't worry, BE HAPPY!


He has already reduced an appetite for gold or made it more costly to buy and all new Capital Defence Purchase has been frozen.

That leaves the Oil as the only factor which ofcourse remains high but that is something he cant control.

All in All he may achieve CAD goals or even over achieve it by small margin but that would come at a price.


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