Indian Economy - News & Discussion 27 May 2012

[alexis]

CAD: A slippery slope that may stop Reserve Bank of India in its tracks

http://economictimes.indiatimes.com/new ... 358463.cms

Clearly it is inflation which is the core problem of the fall in GDP and the economy. See the report above. The UPA govt policies has robbed the internal bank ( read fiscal deficit ) and the external bank ( read current account deficit ). Let us wait and see if the INDIAN electorate prefers good governance over bheek in name of welfare, caste, religion, community....

Indian electorate prefers latter! that has been the scen till now. Hopefully things will change for the better.

Whatever may be the growth rate, the ground scenario (atleast on infra business side) is bleak with regulatory issues and government inaction blocking any resurgence.

[vera_k]

Is the Indian economy stronger

India’s GDP growth for 2010-11 stands reworked to 9.3% instead of the earlier estimate of 8.4%—nearly one percentage point higher. Much of this increase comes from revised manufacturing sector growth—9.7% year-on-year, or 2.1 percentage points more. What’s more, the increase in the estimated growth for 2010-11 is itself built upon a 1.6 point increase in growth during the previous year (now 11.3% for 2009-10).

Given that the data is much delayed, it is no wonder that RBI is unable to make timely changes to control inflation. So interest rates will be too low when growth is picking up, and too high when it is slowing down. Should result in a rollercoaster ride.

[Theo_Fidel]

BTW guys, I dont think a 5% 'hindu' rate of growth is much of an insult anymore. There are 'christian' nations that will give their left testimonials for anything close to it.

The indian electorate wants help right now. 48% of GJ is not a ringing endorsement one way or another. Economic reform is still poised on a knife edge IMO..... the case still needs to be made...

[shyam]

When there is no need to associate the growth with religion, it need not be used. It was used as a derogatory term, and we don't need another non-Hindu to tell us that it is not so. When India was growing at >!0% rate, none of these folks wanted to call that Hindu rate of growth.

May be, we should call the financial fraud going on in the west as Christian financial fraud.

[Arjun]

Narendra Modi is an idea whose time has come

There may be many reasons not to have a Prime Minister like Modi. Those affronted by his government’s perceived complicity in or passivity during the 2002 riots have made a persuasive case for a decade now. And, yet, today, the critical consideration that ought to weigh with voters is the opportunity cost that India would pay if it persists with dysfunctional non-governance of the sort that Manmohan Singh offered for close to a decade – and which Rahul Gandhi will likely continue. For that would truly crush India’s spirit for eternity, and India deserves better than that.

Amongst the many gems in the article above is the portion highlighted, which I think is key. The opportunity cost of not having someone like Modi in to lead India is gigantic - literally makes the difference between tens of millions being pulled out of poverty vs being stuck for several decades in that rut.

This is the key debate that the country needs to weigh in on - far more so than the airy-fairy economic intricacies that academic types prefer to focus their energies on....

[Arjun]

The government finally owns up to GDP growth data that is closer to the IMF figure...GDP to grow at just 5% in 2012-13: Govt

[Theo_Fidel]

Looks like I forgot a smilie again. Bloody fool!

[amit]

Narendra Modi is an idea whose time has come

There may be many reasons not to have a Prime Minister like Modi. Those affronted by his government’s perceived complicity in or passivity during the 2002 riots have made a persuasive case for a decade now. And, yet, today, the critical consideration that ought to weigh with voters is the opportunity cost that India would pay if it persists with dysfunctional non-governance of the sort that Manmohan Singh offered for close to a decade – and which Rahul Gandhi will likely continue. For that would truly crush India’s spirit for eternity, and India deserves better than that.

Amongst the many gems in the article above is the portion highlighted, which I think is key. The opportunity cost of not having someone like Modi in to lead India is gigantic - literally makes the difference between tens of millions being pulled out of poverty vs being stuck for several decades in that rut.

This is the key debate that the country needs to weigh in on - far more so than the airy-fairy economic intricacies that academic types prefer to focus their energies on....

Arjun,

You're single minded devotion to the cause of championing the idea of NaMo as the next PM is admirable and more power to you; from a purely administrative and vision perspective, he's the best we have.

However, one needs to be cautious of falling into the same trap that we've fallen with the Gandhi parivar. And that is putting more faith in the individual rather than the system that propels him/her forward.

In short, NaMo at the head of a majority BJP government or a coalition in which BJP has a significant majority can do wonders - the same way he's done in Gujarat. But a NaMo at the head of a wobbly coalition with BJP as the largest party and dependent on regional allies for stability? Can he pull it off? Maybe he can but to blindly think that he'll deliver despite all odds is a bit too much of a hero worship IMO.

A fragmented mandate is as much responsible for the stalling of reforms as has been the stupid nature of Congress' approach to liberalisation. I really think we need to be realistic in our expectations.

JMT

[amit]

The government finally owns up to GDP growth data that is closer to the IMF figure...GDP to grow at just 5% in 2012-13: Govt

Can you elaborate what exactly you're trying to prove? As you've been at pains to show, different accounting standards result in the different figures for the GDP between IMF and the Indian govt.

Whichever figure you use, it shows there's been a dramatic slowing of growth so why blow your horn on the IMF numbers?

Do you realise that if the GoI lowers its GDP numbers then the IMF numbers would also go down by the same percentage since the two are calculated in two different ways? It's not as if the GoI numbers are going down and becoming the same as the IMF numbers.

[amit]

Looks like I forgot a smilie again. Bloody fool!

Don't lose your humour Theo. At the end of the day that's all one has - a good laugh!

[JohnTitor]

The government finally owns up to GDP growth data that is closer to the IMF figure...GDP to grow at just 5% in 2012-13: Govt

Saw this funny comment on that article?

Naresh (In looted India)
3 mins ago
All you people are stupid! Moan Mohan sing is the smartest man. He is a great eCONo-MISSt. The problem was BJP and RSS all along.. Now I understand! These bjp liars were shouting india shining and all nonsense.. but the reality was that the economy was growing at 9% and inflation at 4%. They tried to cheat the country. Thanks to our great PM WOman-mohan singer, who sings the praises of queen sonia and price raul, we now know the truth. He us passing economic reform (aka scams) to help slow the economy. It's working. Economic growth has slowed from 9% to 5% in 10 years of congress rule. Bjp is stupid if they think they can grow the economy and get away with it. The people of India won't stand for growth and other bjp nonsense. Please vote congress again in 2014 so that they can finish the job and slow the economy to 2%.

it sure makes sense

[amit]

The government finally owns up to GDP growth data that is closer to the IMF figure...GDP to grow at just 5% in 2012-13: Govt

Some portions of this should be quoted since its from CSO:

In 2002-03, the GDP had grown at 4 per cent. Since then the Indian economy has been expanding at over 6 per cent, the highest rate being 9.6 per cent in 2006-07.

CSO's advance estimate lowered the growth in agriculture and allied activities to 1.8 per cent in 2012-13, compared to 3.6 per cent 2011-12.

Manufacturing growth is also expected to drop to 1.9 per cent in this fiscal, from 2.7 per cent last year.

The CSO's GDP growth projection is a lower than the 5.5 per cent forecast made by the Reserve Bank in its quarterly monetary policy review last week.

In its mid-year economic review, the government had also estimated growth ranging from 5.7-5.9 per cent.

[subhamoy.das]

Amongst the many gems in the article above is the portion highlighted, which I think is key. The opportunity cost of not having someone like Modi in to lead India is gigantic - literally makes the difference between tens of millions being pulled out of poverty vs being stuck for several decades in that rut.

This is the key debate that the country needs to weigh in on - far more so than the airy-fairy economic intricacies that academic types prefer to focus their energies on....

The sad part is that it is these tens of millions who will - most probably but we could be suprised - not realise their once in a life time opportunity and vote for the KANGRESS parivar to receive bheeks and remain in eternal world of poverty and promises not kept.

[subhamoy.das]

When there is no need to associate the growth with religion, it need not be used. It was used as a derogatory term, and we don't need another non-Hindu to tell us that it is not so. When India was growing at >!0% rate, none of these folks wanted to call that Hindu rate of growth.

May be, we should call the financial fraud going on in the west as Christian financial fraud.

A glimpse of the INDIA electorate .... naMO has a daunting task at hand.

The word was used to corellate when there was total policy paralysis and investment climate was real bad and every thing was controlled from Delhi, and interest rate was high and inflaction was high and economy was screwed. We are back to those days after 10 years of the same KANGRESS rule and hence that word is creeping up again. Blame the KANGRESS not the word.

[Suraj]

The decrease in manufacturing growth in the last two fiscal years is both troubling and curious. On one hand, the growth rates are much below the 5-10% range it was in through most of the last decade. On the other hand, manufactured goods exports constitute a significant reason for the 20% y-o-y export growth rate in recent years. It is curious that on one hand we are able to generate substantial export growth and generate exports north of $300 billion, but on the other hand CSO data claims manufacturing sector growth is 2%.

Further, I would take advance estimate numbers for GDP growth (the estimate typically reported in February of a fiscal) with gigantic pinch of salt. The fiscal year ends March 31. The first formal GDP report is made in late May. It is revised again in late November, and a final estimate is made over a year later. As the 2010-11 data shows, CSO may revise number by as much as a percentage point of GDP growth in the end.

[Singha]

firstpost:

India’s gross domestic product (GDP) is estimated to grow an annual 5 percent in the 2012/13 fiscal year, a government statement said on Thursday, citing provisional estimates.

The latest estimate is the worst of all growth projections issued by the government and the RBI. Last month, the RBI had pared the GDP growth estimate for the fiscal year ending in March to 5.5 percent, the worst since 2002/03.

[Arjun]

Can you elaborate what exactly you're trying to prove? As you've been at pains to show, different accounting standards result in the different figures for the GDP between IMF and the Indian govt.

Whichever figure you use, it shows there's been a dramatic slowing of growth so why blow your horn on the IMF numbers?

Do you realise that if the GoI lowers its GDP numbers then the IMF numbers would also go down by the same percentage since the two are calculated in two different ways? It's not as if the GoI numbers are going down and becoming the same as the IMF numbers.

You're right, Amit (for once )...

The difference between the two estimates seems to be primarily the result of subsidies - so unless there's been a change in the level of subsidies looks like both Indian and IMF figures will go down in tandem. (Suraj does differ on this point though, and there may be merit to his argument that monetary easing / bailouts should be considered as subsidy.)

Anyway, like I've mentioned before, the key for me is not as much the absolute levels of growth, but the fact that at least on one estimate that many think is consistently applied across countries - we are now behind Asean and (gasp !) Bangladesh.. The reason this is important is because it takes away the figleaf of global slowdown as reason for the fall - clearly different nations have shown differing levels of resilience out here.

[amit]

Arjun,

For once you seem to getting a faint glimmer of understanding, I'm pleased. ( )

If you're going to compare India's GDP growth with Bangladesh, then hey why don't you compare India's growth with that of Japan or the US? India is still growing substantially faster than these two nations.

However, given your new level of understanding you'd know that it's really waste of time to compare GDP growth rates of Japan and the US with that of India because these economies are substantially bigger. So what does that mean? It means a 1 percentage point growth in the US translates in $$$ terms to far greater amount of money added to the economy than a 1 percentage point growth in India.

Now do a comparison in absolute numbers between India and Bangladesh GDP size. And then please have a look at what low base effect means.

All this is not say that the Indian economy is not in trouble. Doing == with countries like Bangladesh is good past time to show how bad the "Congis" are but it does not IMO add to the collective level of knowledge about what's happening in the Indian economy. For example, Suraj points out a very interesting data point: Exports growing and yet manufacturing is at 2 per cent.

Do you have any idea why? I'm certainly trying to find out.

Added later: Incidentally since you're so stuck up with the IMF forecasts, here's what they say for 2012 and 2013:

Asean region: 5.1% for 2012 and 5.5% for 2013.

India: 4.9% for 2012 and 6% for 2013.

And yes Bangladesh: 6.1% in 2012 and 6.1% in 2013.

Finally to give a sense of perspective. IMF forecasts 5.4 per cent growth in 2012 for Asia (including China) and 5.9 per cent in 2013

Source here. It's always useful to go to the original source when dealing with economic numbers. IMVVVHO.

[Arjun]

You're single minded devotion to the cause of championing.....

I see it as fiduciary responsibility... nothing more. Wish we had more Indians thinking through that lens... Just flagging a debate that I think is extremely important, far more so than anything else out there from an Indian perspective.

In short, NaMo at the head of a majority BJP government or a coalition in which BJP has a significant majority can do wonders - the same way he's done in Gujarat. But a NaMo at the head of a wobbly coalition with BJP as the largest party and dependent on regional allies for stability? Can he pull it off? Maybe he can but to blindly think that he'll deliver despite all odds is a bit too much of a hero worship IMO.

A fragmented mandate is as much responsible for the stalling of reforms as has been the stupid nature of Congress' approach to liberalisation. I really think we need to be realistic in our expectations.

This is an important debate for the country, Amit. So I am glad you are raising the questions that you do.

My thinking on this is that industry-specific reforms are just one aspect among a few, that are key for generating growth and that are in the hands of the government. Three other aspects I would point out are 1) Governance quality 2) Leadership / Vision / Attitude and 3) Fiscal Policy.

By Governance quality, I mean the difference in day-to-day management ability, decrease in corruption, quick decision making, responsive bureucracy, and so on.

Leadership / Vision is different in that it requires 'big picture thinking' on how and where India can differentiate. It would also include the attitude towards GDP growth. Attitude towards generating pride in the country's own capabilities is another key factor. This attitude in turn would generate confidence in future outlook which in turn should translate to corporate investments which results in a growth differential.

Monetary policy is not in GOI hands but fiscal policy is - and the NDA has always been a supporter of fiscal rectitude.

These 3 aspects as far as I can see are not dependent on coalition partners at all...Even if we were to ascribe only a 1% potential growth benefit to Modi (as compared to the Dynasty) on each of these 3 points - even without reforms we are talking of 3% potential differential. Some types of reforms are certainly dependent on coalition support - but frankly I see the three points I listed above as potentially a far more significant contributor to growth than even industry-specific reform...

[amit]

By Governance quality, I mean the difference in day-to-day management ability, decrease in corruption, quick decision making, responsive bureucracy, and so on.

More power to you and of course NaMo. However, if you think that he can single-handedly make the bureaucracy more responsive and ensure quick decision making with allies like - most probably - Mamata Banerjee - well then let's just wait and see. I can only say: I hope you're right. The same applies to reducing corruption - mind you I'm not just talking about the type of corruption we saw with Raja and the 2G scam but the daily corruption which grinds our whole system to a halt at every levels of government.

Regarding big policy decision, I'd like to see if he can implement the big ticket reforms like GST and pension. If he can then hat's off because that would immediately add at least 2-3 percentage points to the GDP growth number without having to do anything else. Can he carry his own party as well as the allies? Again IMO the jury is out on this one. [Note: It's interesting that the normally very vocal NaMo has been remarkably reticent in expressing his "opposition" to GST which is one of the central economic memes of his party].

Leadership / Vision is different in that it requires 'big picture thinking' on how and where India can differentiate. It would also include the attitude towards GDP growth. Attitude towards generating pride in the country's own capabilities is another key factor. This attitude in turn would generate confidence in future outlook which in turn should translate to corporate investments which results in a growth differential.

All these are lofty ideals and again more power to NaMo but to be frank - and this is not a knock down on him - I'm hugely sceptical as to how much he can achieve as head of a coalition of opportunistic regional parties who's only long-term vision is winning the election in their states and India be damned. Again if he can do that then he'll be remembered as one of the greatest sons of Mother India.

Monetary policy is not in GOI hands but fiscal policy is - and the NDA has always been a supporter of fiscal rectitude.

I'm not too sure what you mean by this. Could you elaborate with some examples?

These 3 aspects as far as I can see are not dependent on coalition partners at all...Even if we were to ascribe only a 1% potential growth benefit to Modi (as compared to the Dynasty) on each of these 3 points - even without reforms we are talking of 3% potential differential. Some types of reforms are certainly dependent on coalition support - but frankly I see the three points I listed above as potentially a far more significant contributor to growth than even industry-specific reform...

Please excuse me for saying this but I think this sounds more like wistful thinking of a patriotic India who wishes the best for his country. The points you mentioned like reducing corruption, having a more responsible bureaucracy generating pride in India as a whole as opposed to states and regions are more dependent on allies than reforms which can be carried out via administrative fiat, for example like how this current government pushed through the FDI in organised retail.

Again I must state, I'd be very happy if you're proved right and I'm proved wrong, I also want the best for my country and I think NaMo offers hope. However, I'm not as optimistic as you are - call me a cynic if you will but I've seen too many good intentions being sacrificed on the alter of Realpolitik.

[Arjun]

If you're going to compare India's GDP growth with Bangladesh, then hey why don't you compare India's growth with that of Japan or the US? India is still growing substantially faster than these two nations.

However, given your new level of understanding you'd know that it's really waste of time to compare GDP growth rates of Japan and the US with that of India because these economies are substantially bigger. So what does that mean? It means a 1 percentage point growth in the US translates in $$$ terms to far greater amount of money added to the economy than a 1 percentage point growth in India.

Now do a comparison in absolute numbers between India and Bangladesh GDP size. And then please have a look at what low base effect means.

All this is not say that the Indian economy is not in trouble. Doing == with countries like Bangladesh is good past time to show how bad the "Congis" are but it does not IMO add to the collective level of knowledge about what's happening in the Indian economy.

What kind of attitude is this, Amit? All these years the talk was of India overtaking China as #1 on growth rates, and you are now wanting to justify a dramatic reversal in ranking by consoling yourself that we are better off than laggards like the US and Europe?

See, this is one attitude that is unacceptable. We all know demographic dividend is a key reason for the spectacular performance of China earlier, and now India. Bangladesh is comparable to India in demographics (don't mean religious demography) - and you are still looking for a reason to justify India's poor relative performance ??

When I mentioned attitude towards growth in my earlier post, this is part of what I mean. This is an attitude that looks for excuses - I think we need to get rid of it. We are nowhere near reaching a plateau in growth or demographics like in the West - and there is no way we can compare ourselves to their situation.

[Arjun]

I'm not too sure what you mean by this. Could you elaborate with some examples?

The fiscal deficit situation of the country is a key factor in the fall in growth rates (GOI borrowings leading to crowding out of productive private investment). This is again a result of redistribution schemes that we are all aware of....

The BJP was the one that originally proposed the Fiscal Responsibility Act, that specified deficit goals of not more than 3% if I am not wrong. It has been against non-productive schemes like NREGA...BJP was the one that kickstarted divestment of GOI firms. All facts pointing to a much more fiscally conservative government under Modi. He's also publicly stated his preference for 'small government' on several occasions.

[amit]

^^^^^

Two things Arjun.

1) While I agree NREGA, from a purely economic POV is wastage. You need to look at the amount of money involved in the bigger scheme of things. For example the gold import bill dwarfs the amount of money spent on NREGA.

2) Remember Disinvestment Minister Arun Shourie and the kind of brick wall he hit in this visionary scheme to his disinvestment plans? Please don't develop a chimera to support you world view.

[amit]

What kind of attitude is this, Amit? All these years the talk was of India overtaking China as #1 on growth rates, and you are now wanting to justify a dramatic reversal in ranking by consoling yourself that we are batter off than laggards like the US and Europe?

See, this is one attitude that is unacceptable. We all know demographic dividend is a key reason for the spectacular performance of China earlier, and now India. Bangladesh is comparable to India in demographics (don't mean religious demography) - and you are still looking for a reason to justify India's poor relative performance ??

When I mentioned attitude towards growth in my earlier post, this is part of what I mean. This is an attitude that looks for excuses - I think we need to get rid of it. We are nowhere near reaching a plateau in growth or demographics like in the West - and there is no way we can compare ourselves to their situation.

I'm sorry Arjun but that's pure rhetorical bulls**t. I called you out when you compared a $110-$115 billion economy with India's $1.7 trillion economy in terms of growth rate. In response you bring up as your defence Shiv ji's "open fly, torn shirt" argument by asking why we compare Indian growth rates with China's? Is it your understanding that the Indian economy is behind China's by the same factor as Bangladesh's economy is behind India?

Just for record I'm not saying we are better off than the US or Japan. I was pointing out the futility of comparing two totally different economies in terms of growth in one stray year with out doing a progression (for example the same IMF numbers show that this financial year India will growth 6 per cent and Bangladesh will growth by 6.1 per cent; here's a maths question for you, in terms of $$$ added to the economy how much is that for India and how much is that for Bangladesh?).

Do you know, for example, that in 2011 Bihar had a higher GDP growth than Gujarat? According to your economic logic that means Bihar is doing better economically than Gujarat. Horror of horrors is Nitish a better economic manager than NaMo? What say you?

The fact that when I point out to you an economic fallacy you think I'm making excuses shows that it's point less to continue this discussion. Funny I had initially thought otherwise. But heck I'm always an eternal optimist.

I'm sorry but I find this Bushian logic of "You're either with us, or against us" that you and many others wear on their sleeves mildly amusing.

Who the heck do you think I'm making excuses for?

[Arjun]

I'm sorry Arjun but that's pure rhetorical bulls**t. I called you out when you compared a $110-$115 billion economy with India's $1.7 trillion economy in terms of growth rate. In response you bring up as your defence Shiv ji's "open fly, torn shirt" argument by asking why we compare Indian growth rates with China's? Is it your understanding that the Indian economy is behind China's by the same factor as Bangladesh's economy is behind India?

Just for record I'm not saying we are better off than the US or Japan. I was pointing out the futility of comparing two totally different economies in terms of growth in one stray year with out doing a progression (for example the same IMF numbers show that this financial year India will growth 6 per cent and Bangladesh will growth by 6.1 per cent; here's a maths question for you, in terms of $$$ added to the economy how much is that for India and how much is that for Bangladesh?).

Do you know, for example, that in 2011 Bihar had a higher GDP growth than Gujarat? According to your economic logic that means Bihar is doing better economically than Gujarat. Horror of horrors is Nitish a better economic manager than NaMo? What say you?

Ok if we are to compare at all, the correct metric is not total size of GDP - but per capita GDP.

On that basis, China is at $5000+, India is at $1500+ and Bangladesh is at ~$850. Indian figures are maybe 90% more than BD, and Chinese is more than 3x of India.

Lets look at Gujarat and Bihar. Gujarat per capita GDP is around Rs 64K, Bihar's is around 16K - ie Gujarat is 4x times that of Bihar.

So, I would say the low-base effect is one that should help Bihar in comparison to Gujarat, and India in comparison to China - but I don't really see it as being as big a factor in BD vs India.

Finally, I would take the projections of growth (as opposed to estimates of actual) of IMF with a pinch of salt. They started out projecting India growth for '13 at 7% if I am not wrong, then progressively reduced it to 4.5%.

[amit]

Arjun,

Nice bit of downhill skiing.

You start off by saying "Chi Chi" just see our mai baap IMF has said even Bangladesh will have a GDP growth that's more than India's.

When I point out the fallacy of the argument you bring in China and per capita growth!

Boss do you realise that your point about why Gujarat is a better economic story when compared to Bihar despite lower economic growth in 2011 is precisely the same reason why I said it's pointless to compare the GDP growth over one discrete year between India and Bangladesh.

Anyway my last post on this. It's not pleasant to watch someone getting their chaddis in a twist by trying to defend the indefensible.

[Arjun]

Boss do you realise that your point about why Gujarat is a better economic story when compared to Bihar despite lower economic growth in 2011 is precisely the same reason why I said it's pointless to compare the GDP growth over one discrete year between India and Bangladesh.

Well I am saying there is a low-base effect that is clearly in play in the Gujarat-Bihar comparison just given the vast gulf in per capita income between the two. And the divergence in per capita income between India and BD is nowhere near as large.

Given this, I really don't see how you can apply the same reasoning to both situations. Anyways, guess this particular conversation is not headed anywhere...

[RoyG]

USA type concepts like government getting out of the way work in developed socities with 100% literacy and large personal resources. In fact it doesn,t even work there despite all the ideological posturing. We need governance that works at the local level raising people education level and provide civilization. This never happens automatically.

The US doesn't have 100% literacy. If by large personal resources you mean technology and natural resources, then yes you are right and they have a relatively open business climate which allows them to take full advantage. Throughout indian history the "government" didn't do much of the heavy lifting. It was the family and personal savings which ensured a competitive and sustainable economic model. When we were under Islamic and Victorian colonialism who preserved "civilization"? The government? Sure government will play a role in some sectors like education, strategic resources, etc but by and large we need less bureaucracy, not more.

[RoyG]

BTW guys, I dont think a 5% 'hindu' rate of growth is much of an insult anymore. There are 'christian' nations that will give their left testimonials for anything close to it.

The indian electorate wants help right now. 48% of GJ is not a ringing endorsement one way or another. Economic reform is still poised on a knife edge IMO..... the case still needs to be made...

Ok, since socialism has its origins in Christianity I propose we call it the Christian rate of growth then. Almost all of Gujarat is benefiting in one way or another from efficient administration and the pro business climate. Economic reform poised on a knife edge? The case needs to be made? What in bloody hell are you talking about?

[Suraj]

Here's the link to the CSO's Advance Estimate report:
Advance Estimate of National Income,2012-13 (PDF)
Note that CSO has a release calendar showing the dates when each quarterly and annual GDP report is released. The AE is not an official report, but an estimate created for the purposes of reporting data in the economic survey as part of the Union Budget released at the end of February.

2012-13 GDP Advance Estimate: Rs.10,028,118 crore or $1.9 trillion @ Rs.53/dollar

[svinayak]

What is the PPP value

[Suraj]

CSO does not report PPP data, or even figures in dollars. PPP numbers are reported by external agencies like the World Bank database. According to the wiki link sourcing data from IMF and WB, our PPP GDP was $4.5 trillion in 2011, and probably around $4.8 trillion for 2012, based on the future PPP GDP projection, since actual data for 2012 is typically announced by these agencies in mid 2013.

[Arjun]

Further, I would take advance estimate numbers for GDP growth (the estimate typically reported in February of a fiscal) with gigantic pinch of salt. The fiscal year ends March 31. The first formal GDP report is made in late May. It is revised again in late November, and a final estimate is made over a year later. As the 2010-11 data shows, CSO may revise number by as much as a percentage point of GDP growth in the end.

Suraj, clearly there has been a disastrous fall in growth rate over the last year or two. If I may ask - to what reasons would you attribute this fall, and what are the learnings from it in light of the fact that most Indian economists seem to have been completely clueless in their ability to predict it beforehand ?

[Suraj]

I haven't really looked at it in much detail yet, but I'd encourage you and anyone else to look too. Finding useful data about the topic is far more meaningful for this thread, than just whines about political matters that just exhaust everyone's emotional energy.

[Don]

http://news.yahoo.com/exclusive-austeri ... UA33TQtDMD

Exclusive: Austerity in India - Defense and welfare spending to be slashed
By Manoj Kumar | Reuters – Thu, Jan 31, 2013.


NEW DELHI (Reuters) - India's finance minister is putting welfare, defence and road projects on the chopping block in a last-ditch attempt to hit a tough fiscal deficit target by March, risking short-term economic growth and angering cabinet colleagues.

The cuts will reduce spending by about 1.1 trillion Indian rupees ($20.6 billion) in the current financial year, some 8 percent of budgeted outlay, or roughly 1 percent of estimated gross domestic product, two senior finance ministry officials and a senior government adviser told Reuters.

It is the first time the scale of the cuts and details of where the axe will fall have been made public, with officials revealing startling details about delays to arms purchases and belt-tightening for politically sensitive rural welfare schemes in an election year.

Finance Minister P. Chidambaram has staked his reputation on lowering the deficit to 5.3 percent of GDP to improve the investment climate following ratings agency threats to downgrade to junk India's sovereign debt if action was not taken.

After a series of investor-friendly reforms and small steps to reduce fuel subsidies, he has now turned firepower on big-spending colleagues, some of whom are pushing back, worried cuts will hit voters ahead of a national election due in early 2014.

"Every ministry is affected by the budget cuts. We are trying hard to get as much money as possible," said a senior official in the road transport ministry, who declined to be named because of the sensitivity of the issue.

A drop-off in investment, hurting growth, is blamed in part on public spending that is funded through market borrowing crowding out the private sector.

Policymakers say getting India's finances in order will give private players room to borrow and the confidence to invest.

"With fiscal discipline, what will happen is that there will be larger money with the private sector, which can be used for the growth," said B.K. Chaturvedi, a senior adviser to the government on infrastructure spending.

Chidambaram will officially report the revised spending figures for 2012/13 when he presents next year's budget to parliament on February 28.

"It is I who have done the math, the deficit will remain below 5.3 percent this year, next year it will be below 4.8 percent. I am not going to cross these red lines," Chidambaram told Reuters in an interview on Tuesday.

His attention has turned to spending because revenue has dropped. The economy is on track to grow about 5.6 percent this year, the lowest rate for a decade, and the government is struggling to raise $10 billion in hoped-for windfall cash from partial privatisations and mobile spectrum sales.

The government had originally targeted a fiscal deficit of 5.1 percent in the current financial year, but loosened the target in October. It was 5.8 percent in 2011/12.

JAVELIN SLOWED?

The impact of measures to cut bloated subsidies will mostly not be felt this fiscal year, which runs to the end of March.

"We are estimating a budget cut of 1.1 trillion rupees ($20.6 billion) as an outer limit. However, the final picture will be clear by March 15 when we have a clear idea about tax collections and the fuel subsidy bill," said a senior finance ministry official, who declined to be named.

A senior official at the defence ministry -- the world's biggest arms importer in recent years -- said a $1.9 billion cut there could delay efforts to buy howitzer guns and Javelin anti-tank missiles from the United States by at least few months.

"The Indian army would be hit hard due to budget cuts," said the official, noting that a defence deal worth more $12 billion for procuring 126 jet fighters from France's Rafale was already delayed by at least three months.

Up to $4 billion will be lost at the rural development ministry, which has the largest budget after defence, hitting spending on roads, housing, and the government's flagship rural job-guarantee program, a senior official in the ministry said.

Top officials at the finance, transport, rural development ministries and a government body on spending said ministries were likely to get 20-30 percent less funds for assets and projects such as roads, power, rural housing, jobs and shipping.

RISK OF DEEPENING SLOWDOWN

Critics warn that at a time of low growth, lower spending risks deepening the slowdown without helping the deficit-to-GDP ratio, a problem familiar to the austerity-racked economies of Europe.

Chidambaram's cuts mainly affect capital investment and he has avoided attacking government wage bills and subsidy spending known in India as "non-plan expenditure".

Even so, powerful ministers have protested about the impact lower spending will have.

Jairam Ramesh, Rural Development Minister and a close confidant of Rahul Gandhi, the ruling Congress party's likely candidate for prime minister in next year's vote, wrote to Chidambaram asking for a review of the cuts to rural welfare.

"Both Prime Minister and you have spoken about the need for fiscal consolidation, but not at the cost of our social priorities," a government source said, reading from the letter to the finance ministry.

Congress draws support from India's rural majority and a second-term victory in 2009 was partly due to a scheme guaranteeing work to the country's poor, along with a $13 billion farm debt waiver introduced by Chidambaram.

Abheek Barua, chief economist at HDFC Bank, India's second largest private lender, recognized the need to lower the deficit but said the cuts would hit the investment cycle and short-term demand and damage a drive to improve creaking infrastructure.

"Ideally the government should have cut non-planned expenditure such as subsidies," he said. "It also fails to a address the supply bottlenecks leading to inflationary pressures."

The finance minister was backed by Prime Minister Manmohan Singh and influential adviser Montek Singh Ahluwalia in a series of meetings with government officials, two officials privy to the agenda of the meetings said. Congress party leaders have publicly given backing to fiscal consolidation in recent days.

Harvard-educated Chidambaram has promised to provide enough funds for the government's flagship programs -- food security, rural jobs, village roads, health and education in the budget -- once he succeeds in improving the government deficit this year.

India earmarked $97 billion for spending on such projects out of the $278 billion budget for the current fiscal year.

The finance ministry has also imposed a ban on hiring in ministries, meetings at luxury hotels, the purchase of new vehicles and places some restrictions on foreign tours.

[Yogi_G]

Savings rate to dip to 30% in 2012-13: India Ratings

A very healthy savings rate was one of our core strengths, but with the threat of that coming down it really is a matter of concern.

[Arjun]

I haven't really looked at it in much detail yet, but I'd encourage you and anyone else to look too. Finding useful data about the topic is far more meaningful for this thread, than just whines about political matters that just exhaust everyone's emotional energy.

Didn't mean to put you on the spot, Suraj. I do think some amount of relooking at economic models and hypotheses is in order, given the data we have from the last 2 years of declining growth. Also, it seems to me that economic indicators that take a year or two post-facto to get firmed up may not be of much practical use in today's world. Perhaps the need is for leading indicators that provide a more immediate sense of where the economy is headed. I do intend to post my thoughts over the next week or so, and would be good to get others' thoughts as well.

As regards political matters, at the end of the day economics is a social science. It is not a physical science that is divorced from human reality or emotions. Morover it is perhaps the one social science with the most potential for impact on human welfare and society. So while the theoretical part of economics would be concerned with models of economic growth, employment & inflation - the applied part of economics should concern itself with propagating the insights and identifying leaders who are well schooled in these basics. To believe that these matters are too emotionally exhausting is a bit of a cop-out on the part of economists, to my mind.

[Suraj]

I would say you are putting yourself in a spot - I see that your post contains multiple 'I think' and 'perhaps' and references to social sciences. Please present data instead of just theories. As much as economics is about the political economy, this thread attempts to focus on the data-side aspects of the Indian economy. Other side theories are best of farmed into its own thread, like subhamoy.das' services vs manufacturing thread.

I'll restate what Amit already did - criticizing the fact that Bdesh grew faster in one year is just thinly veiled political rhetoric. Back in 2004-05 or so, TSP grew faster for a year and that led to whining here. What's the point ? Every year we add more than Bdesh's entire economic output to our own. In good years our GDP grows by more than TSP's entire economy. In other words, their cumulative output is equal to the delta in our output, on an annual basis. Unless GDP growth shows a multiyear trend (say a 5-year average) below others in the subcontinent, this is a meaningless distraction. This 'Bdesh grew faster! whine!' just serves to insult them; if they set in place policies that enable strong growth, more power to them.

Savings rate to dip to 30% in 2012-13: India Ratings

I'm surprised the rate is still above 30%. For an estimated 5% growth rate, assuming investment/GDP of approximately the same figure that translates to an ICOR of 6. Historic ICOR values for trend GDP (say a 5-year rolling average) is much lower than than - typically 4-4.5 at most. High interest rates are a probable issue here - high cost of money will reduce the rate of return on investment, since a greater fraction goes into debt servicing. Unless savings/GDP erodes to the low 20% range over a multi-year period due to both economic and political factors, growth rate will pick up, partly due to the low base effect of the current fiscal year.

[Supratik]

BTW, Bangladesh IIRC has been growing at 6% for the last many years. So it is not a blip on the radar.

[Arjun]

I'll restate what Amit already did - criticizing the fact that Bdesh grew faster in one year is just thinly veiled political rhetoric.

I guess its a matter of perspective, Suraj. I take it that you like blunt language, and prefer no waffling - so I will comply with your preference going forward.

I find this attitude of 'All iz well' that I've been seeing on this thread ever since I've tracked it, the fact that the disastrous performance of the economy over the last couple of years was totally missed - and a tenor of the thread which is in complete contrast to that of every other expert analysis on the Indian economy - as equally thinly veiled political rhetoric.

Let me ask you, do you seriously think India is performing anywhere near what its potential is ?

I'm surprised the rate is still above 30%. For an estimated 5% growth rate, assuming investment/GDP of approximately the same figure that translates to an ICOR of 6. Historic ICOR values for trend GDP (say a 5-year rolling average) is much lower than than - typically 4-4.5 at most. High interest rates are a probable issue here - high cost of money will reduce the rate of return on investment, since a greater fraction goes into debt servicing. Unless savings/GDP erodes to the low 20% range over a multi-year period due to both economic and political factors, growth rate will pick up, partly due to the low base effect of the current fiscal year.

Was ICOR value of any assistance whatsoever in being able to predict the growth rates of the last 2 years ?