Indian Economy - News & Discussion 27 May 2012

[SaiK]

we should bump up minimum wage proportional to inflation rate on an exponential formula scale.. that way, we will have the well oiled up people base to support themselves at the deepest of troubles in the plausible eventuality.

[putnanja]

Is it possible that one of the sources of our inflation is these exports. For instance NRI folks can pay any price necessary for say Basmati rice. If the price doubles in India it has no effect on NRI. India agricultural product exports are now about $42 Billion per year per this report. Which is a very large number IMHO.

Traditionally exports were meant for surplus production but with strong incentives it is possible to destroy local demand and push products abroad. One way to destroying local demand is inflation.

http://www.indianexpress.com/news/agric ... p/1067663/

Isnt agricultural exports tightly controlled? I still remember few years back when India banned all exports of rice. There was really a shortage of basmati and sona masoorie in US. They later lifted ban on basmati, but ban on sona masoorie continued for a year or so. Around that time, they banned toor dal and other dals too. Around my area, prices of dals went up by 2-3 times per lb.

GoI has banned sugar and onion exports too earlier. So, I don't think agricultural exports are affecting inflation. In fact, I think last two years saw bumper crops

[Uttam]

Uttam: GoI has been doing that for decades, but not via currency devaluation (which would suggest exchange rate manipulation). Instead, it does so through persistently high inflation. There's no other way they can run schemes like assured 8% returns in provident funds. Which is why the likes of CPI/CPIM agitating against reduction in the provident fund rate *and* agitating simultaneously about inflation, is such facepalm-worthy irony - they're two sides of the same coin...

Then if the exchange rate parity holds the devaluation we are seeing today is just a delayed outcome of the long running high, not yet hyper, inflation.

[SaiK]

see, there are limits.. beyond which people will find cheaper of the cheaper dals. for example, when dals were sky rocketing, they reduced intake.. and then they also found substitute legumes from other intl stores as stop gaps.. people will work out ways.. it is not like a direct equation on which we can use that data.

[Suraj]

Then if the exchange rate parity holds the devaluation we are seeing today is just a delayed outcome of the long running high, not yet hyper, inflation.

I don't know if I can make such a conclusion, because I find it really hard to apply ceteris paribus over this period. The rest of world hasn't remained static in recent years, and there's a pronounced effort on the part of every major developed economy to devalue its currency through inflation to combat their rising debt load. Competitive devaluation wars are on, whether in the guise of 'quantitative easing' or 'Abenomics'. In effect they're doing what GoI's also been doing. Any Indian data extracted from RBI or other websites, supporting why we're seeing so much weakness from the Rupee would be much more helpful.

[Uttam]

The inflation-inducing actions in the developed economies haven't really induced any inflation there. Whereas in India they did and did a lot. May be its because all that printing of fiat money in the developed markets was coupled with a gain in productivity in the developed economies, whereas in India it was coupled with less gains or reduction (considering some of the employment guarantee schemes and their impact on rise in agriculture labor costs) in productivity.

Overall, it seems to me it is the mis-management of the economy, little or no gain in productivity, along with fiscal profligacy is what is causing a run on INR.

[Suraj]

A large part of QE money goes into recapitalizing the depressed asset prices from the bust, i.e. the 'wealth effect'.

I disagree that they don't cause inflation. That's only because they're not reporting, or presenting, that inflation conventionally. For example, standard inflation data from the Fed does not include food price inflation, as far as I'm aware.

Further, US inflation has been 'stealth' in some ways. You might notice this in the grocery store, where a pack of cereal has not changed in price, but its size has become smaller. It's a very smart method - people are good at noticing a price difference, but not so much a weight/volume difference.

Yet another form of inflation is via the deposit rates today - at 0.25%, you're already behind the curve by 2-3% even with prices remaining fixed.

[Theo_Fidel]

From the RBI. The USA only counts 2 of these for inflation....



The difference of course is poor folks spend something like 60% of their income on food & fuel. In USA they only spend 10% of income on these things. So the impact is very large on India. In order to control inflation RBI has crippled growth itself.

[Austin]

Suraj , No matter how we spin this and without denying the fact that our exports are growing we still import more than we export and that more is really a big number. Thats plain cold fact we have to deal with unfortunately.

Unless we can compensate it via far higher revenue from services and/or reduce imports this issue will always be a problem.

As far as forex goes you must be well aware that by next year March-April we will have to pay our creditors a substantial portion of that money and unless we figure out a way to get more $$$ our forex reserve will thin out , so even our forex numbers might be a temporary thing.

[Austin]

News paper are touting Raghuram as our new messiah who would guide our ship to the coast for safety ...... chances are when there is so much hype around a person he turns out to be a under performer since the expectations are already set too high.

The RBI governor always takes a cue from FM ....so as long as there is a political will to take some tough decision on reform front and keep their own greed under check ......any RBI governor would be like a Gold Medalist MMBS Doctor trying to treat a 3rd Stage Cancer Patient .....all the best he can do is prescribe some good pain killer so as to reduce the pain of terminally ill patient but cant really heal him.

[Suraj]

Suraj , No matter how we spin this and without denying the fact that our exports are growing we still import more than we export and that more is really a big number. Thats plain cold fact we have to deal with unfortunately.

I think we're talking past each other again We've both made our respective points in excruciating detail, so I'll move on.

[Supratik]

The appointment of RR seems to indicate confusion in the economic ideology of UPA. How do you reconcile Communist-run NAC with an IMF man as RBI Gov.? Maybe they want hunt with the hound and run with the hare. However, he has loads of experience and we should not bring in CTs unless there is evidence to the contrary.

[James B]

News paper are touting Raghuram as our new messiah who would guide our ship to the coast for safety ...... chances are when there is so much hype around a person he turns out to be a under performer since the expectations are already set too high.

The RBI governor always takes a cue from FM ....so as long as there is a political will to take some tough decision on reform front and keep their own greed under check ......any RBI governor would be like a Gold Medalist MMBS Doctor trying to treat a 3rd Stage Cancer Patient .....all the best he can do is prescribe some good pain killer so as to reduce the pain of terminally ill patient but cant really heal him.

Raghuram himself says that he has no magic wand. RBI governor can only play an effective role when the economic fundamentals of the country are robust. Right now Indian economy is suffering on many fronts and therefore options before Raghuram are as limited as it was for Subbarao. Raghuram cannot work in isolation from government, he has to implement whatever the FM wants. If FM wants more growth, he will cut interest rates and if FM wants inflation to be controlled, he will increase the interest rates. If FM wants more liquidity in the system he has to reduce CRR and so on so forth.

RBI governor has very limited financial instruments and he has to use them effectively in concert with GoI's economic policies.

[James B]

The appointment of RR seems to indicate confusion in the economic ideology of UPA. How do you reconcile Communist-run NAC with an IMF man as RBI Gov.? Maybe they want hunt with the hound and run with the hare. However, he has loads of experience and we should not bring in CTs unless there is evidence to the contrary.

RBI has no role in implementing any economic ideology. It is the domain of FM. If govt. want to dish out dole, RBI governor can do nothing about it.

[Austin]

No two views on that and that what I stated , He has to work in close conjunction with FM and take leads from FM on interest rates etc ... and FM himself has to take a lead from PM and the political climate they operate in.

Let the new man do his work may be he will come with better ideas and better ways to implement things and do it well compared to the previous guy..

[Supratik]

RBI has no role in implementing any economic ideology. It is the domain of FM. If govt. want to dish out dole, RBI governor can do nothing about it.

Thats true. I was pointing out to the economic opposites in Govt. RR would have been better as economic adviser as RBI Gov has limited role.

[svinayak]

RBI has no role in implementing any economic ideology. It is the domain of FM. If govt. want to dish out dole, RBI governor can do nothing about it.

Thats true. I was pointing out to the economic opposites in Govt. RR would have been better as economic adviser as RBI Gov has limited role.

Why is there a political appointee instead of the regular bureaucratic appointee?
RBI cannot do much

[Hari Seldon]

^RBI can ruin a lot by raising or lowering rates before their time, though.

[rgosain]

As currency markets tend to be forward looking, the depreciation of the Rupee points to further political instability or worse a UPA government back at the helm with Rahul and Jean Dreze to manage india's economic future. A decade of congress rule has turned India back 20 years.

Some of my West African colleagues joke that ideologues like Dreze can only operate in India because no self-respecting African nation would tolerate them, and it reflects poorly on the self-respect of many Indians.

[Singha]

http://www.yale.edu/gsp/colonial/belgian_congo/

the belgian colonial rule in congo alone led to death of 10 mil people in a couple decades and entire economy was destroyed.

[subhamoy.das]

And that is the only reason and it is MIS-RULE. And All other techical details on CAD and inflation and RBI etc is just that - an attempt to divert this cold fact. And who is responsible for electing these mis-rulers, the vast majority of the indian electorate. They keep on sending these folks as their representative to the system and now the system is screwing them. I am a happy person that atleast this part of the indian system is working. Jaisi Kari waisi bharni. The currency will tank more and the same electorate will find the pain excruciating and they will face the FOOD INSECURITY Bill. The only solace that I get by sharing my hard earned tax money is that it goes into funding the entities which delivers like Army, DRDO, ISRO, CDOT, CDAC, IIT, IIM, IISC and best part of it is that this TAX money is funded by American Citizens.

[Arjun]

SA Aiyar is a pretty sane writer except when talking about politics or when under the influence of his halfwit brother.

Today's article in TOI is actually a good read: Between rock, sand and a hard place

[Austin]

India's forex reserves fell $3 billion in week ending August 2

KOLKATA: India's foreign exchange reserves dipped $2.996 billion in the week to August 2 to $277.167 billion. Reserves in rupee terms however rose Rs 337 billion to Rs 16,859 billion.

Foreign currency assets fell $2.155 million to $249.896 billion, Reserve Bank of India said in its weekly report.

Foreign currency assets expressed in dollar terms include the effect of appre-ciation or depreciation of non-US currencies such as euro, pound and yen held in the reserves.

[subhamoy.das]

our forex hovered around 300b figure for a long time and has staretd to come down steadily. If it breaches 200b mark then we will be staring at the pre-liberisation situation of having only enough to cover 6 months of import. I am loving it. Dejavu and seems we are going back to my child hood days where even a VCR was a luxury!....

[Austin]

There is no point being too pessimistic about our Economy , All the Gloom Doom Scenario is uncalled for and it will affect the ordinary citizen of this country then those who looted us.

We will tide over this too just a moment in life of our country.

[gakakkad]

I expected some discussion on this as it was a major event of sorts from the pov of Indian economy. Spot commodity trading was banned. NSEL is almost defunct now.

http://blogs.wsj.com/indiarealtime/2013 ... -exchange/

[Austin]

our forex hovered around 300b figure for a long time and has staretd to come down steadily. If it breaches 200b mark then we will be staring at the pre-liberisation situation of having only enough to cover 6 months of import.

Actually our short term debt of $172 Billion need to be paid by March 2014 , So unless MOF can make arrangement of these funds from somewhere we will see our Forex reserves dwindling.

Half of India Inc's $200-bn forex debt is unhedged: CRISIL

[Suraj]

Am I missing something here ? India's forex reserves have been between $270-300 billion for years now. Where does it say '$172 billion of short term loans have to be repaid by March 2014' ? The standard procedure is to refinance these loans. If they're in USD, then they might face the additional burden of the 100bp increase in pervailing loan rates in the US, but other than that, refinancing loans in this manner is nothing new - most of this debt probably already has been refinanced in the past.

[Austin]

^^ India has to repay $172 billion debt by March 2014

[Austin]

Outgoing RBI governor D. Subbarao was in at a difficult time. He played straight, say experts.
It’s Not All Depreciation

PM’s man Rajan loves a challenge. The RBI is just the place now.
The Revivalist Refrain

[Austin]

Finance Ministry working on additional steps to contain rupee fall

Worried over the widening current account deficit (CAD) and the sliding rupee, Finance Minister P Chidambaram on Friday held a series of meetings with top officials to firm up additional steps to support the currency.

The measures could include further relaxation of external commercial borrowing (ECB) norms for state-owned companies, curbs on import of non-essential goods and encouragement to exports, sources said.

Mr Chidambaram also held deliberations with Commerce Secretary S R Rao.

The Ministry, according to sources, is likely to announce additional steps soon to contain CAD and check volatility in the forex market.

Mr Chidambaram had earlier said the government would be looking at “some compression in non-oil and non-gold imports, especially of non-essential goods.” He had specifically cited the examples of coal and electronic hardware and said that the officials would be working out a list of imported items that could be compressed.

The Minister had also said that blue chip public sector undertakings could be encouraged to raise funds from overseas markets. Pursuant to the announcement, heads of several PSUs met Finance Ministry officials, pleading for relaxation of the ECB norms.

The new measures being considered by the Finance Ministry are in addition to steps taken recently by the Reserve Bank to tighten liquidity and curb volatility in the rupee, which touched a life-time intra-day low of 61.80 to the dollar on August 6.

The RBI yesterday announced it would auction Rs 22,000 crore of bonds every Monday to suck out liquidity and check speculation in the forex market.

Earlier, the central bank had raised the Marginal Standing Facility rate to make borrowing from the RBI expensive for banks. The RBI and the government have also taken steps to curtail imports of gold.

The current account deficit, which occurs when the total imports of goods, services and transfers exceed exports, had hit a record high of 4.8 per cent of GDP in fiscal 2012-13 as rising purchases of oil and gold from overseas widened the trade gap.

A widening CAD also weighs heavily on the local currency.

[Suraj]

^^ India has to repay $172 billion debt by March 2014

Thanks. Like I said, they can refinance this over, not pay it back in full. They'll just pay a higher coupon because US rates are up since last year too. Depending on their calculations, they may choose to swap it down with a Rupee loan (which will entail forex outgo to pay the outstanding balance in foreign currency) or swap with a new loan to cover the remaining balloon payment.

It doesn't work in the form of the forex reserves falling by $172B next march. If one checks the RBI reports, there's always a sizeable short term debt load that never seems to fall, because it's being constantly recycled into more refinanced debt. However, the rate of the rupee depreciation does make things harder, as does the fact that US borrowing rates are up by ~25% in the last 3 months.

[vera_k]

For those who have a subscription, the Economist has an article about how Indian businessmen are moving out of the country due to local regulations. Article says even the new Tata chief Mr. Mistry is Irish.

[Theo_Fidel]

Posting in full to spite the economist.

Code: Select all

The Indosphere
Made outside India
As growth slows and reforms falter, economic activity is shifting out of India
Aug 10th 2013 | COLOMBO, DUBAI AND MUMBAI |From the print edition

INDIA’S diaspora of 25m people is something to behold. In colonial times Indian labourers and traders spread across the world, from Fiji to the Caribbean. A second wave of Indians left between the 1970s and mid-1990s, when the economy was in a semi-socialist rut. Migrant workers rushed to the Arabian Gulf and South-East Asia, then booming. Educated folk and entrepreneurs fled to the rich world. Plenty struck gold, including engineers in Silicon Valley and Lakshmi Mittal, boss of ArcelorMittal, a giant steel firm. Often they now have little to do with India beyond sending cash to relatives and groaning as the once-vaunted economic miracle fades.

Yet alongside this distant diaspora, a network of people and places is more directly engaged with India’s economy. Its most conspicuous element is the plutocrat who owns firms in India, but like his Russian and Chinese peers shops in Paris, educates his children in America and Britain and sometimes has foreign citizenship: Cyrus Mistry, the boss of Tata Sons, India’s biggest firm, has an Irish passport. At the network’s core, however, is not the gilded elite but offshore hubs, including Dubai and Singapore, often with sizeable Indian populations and with their own economic strengths.

The idea that some things are better done abroad is hardly new. Hong Kong was a gateway to imperial and then Red China. In 1985 Yash Chopra, an Indian film-maker, led a trend of shooting Bollywood “dream sequences”—in which the hero and heroine sing amid meadows and snowy crags—in Switzerland. The Alps were easier, cheaper and safer than the more familiar location of Kashmir.

Film buffs now view Swiss dream-sequences as cheesy, but India’s big offshore hubs are more in fashion than ever. They present a mirror image of India’s red tape, weak infrastructure and graft. Dubai is a prime example. For long-haul flights Indians prefer its airline, Emirates, to their own. More than 40% of long-haul journeys from India go via a non-Indian hub, often in the Gulf. Indian airports no longer make grown men cry (Delhi’s is first rate), but few foreign airlines want to make them their base. Indian planes are usually serviced in Dubai, Malaysia and Singapore, reflecting a history of penal taxes in India and high customs duties on imported spare parts.

A stroll round Dubai’s gold souk, a glittering warren of shops and discreet offices, housing bullion worth $3 billion-4 billion, points to another specialism—trading jewellery as well as precious stones and metals. A third of demand is from India, reckons Chandu Siroya, one of the market’s big participants. Indians go to Dubai to avoid taxes at home and because they trust its certification and inspection regime.

Dubai’s ports, air links and immigration rules also make it a better logistical base than India. Dawood Ibrahim, a Mumbai mafia don, ruled from Dubai by “remote control” before eloping to Pakistan in 1994. Since those wild days legitimate Indian firms have thrived in Dubai. Dabur, which makes herbal soaps, oils and creams, runs its international arm from there. Dodsal, which spans oil exploration in Africa to Pizza Huts in Hyderabad, is based in the emirate. Its boss, Rajen Kilachand, moved from Mumbai in 2003. “Dubai is a good place to headquarter yourself,” he says, adding that a “Who’s Who” of Indian tycoons has a presence. Dubai is gaining traction in finance, too. Rikin Patel, the chief executive of Que Capital, an investment bank, says Indian firms are raising debt in Dubai to avoid sky-high interest rates at home.

Treasure Island

About 5,000km (3,000 miles) south of Dubai lies Mauritius, an island so beautiful that Mark Twain said God had modelled heaven on it. About half its people are descended from labourers brought from India when Britain ruled both places. It is the main conduit for foreign investment into India with 30-40% of the stock of foreign capital sitting in funds domiciled in the island. A 1982 tax treaty allows investors using Mauritius to pay tax at the island’s rate (which, in practice, is zero), not the Indian rate. Foreigners also like the stability of Mauritius’s rules and its army of book-keepers and administrators. Many investors also use “P-Notes”—a kind of derivative with banks that gives them exposure to Indian shares without having the hassle of directly owning them.

Sri Lanka has testy relations with India, but Colombo is a vital port. About 30% of containers bound for India go via intermediate hubs fed by small vessels, either because big shipping lines do not want to deal with India’s customs regime or because their ships are too big for the country’s ports. About half of this trans-shipment business happens in Colombo. Its importance could increase now that a big extension to the port there has just opened. The project was funded by a Chinese firm probably too polite to admit that its investment is partly based on the idea that India’s ports will never be world-class.

A roll of the dice

Sri Lanka also wants to develop a casino industry. Gambling is illegal in almost all India, so people use offshore bookies or the internet. James Packer, an Australian business dynast with a gambling empire in Macau, is said to be considering creating a casino resort in Colombo aimed at attracting Indian high rollers.

The largest hub for Indian trade is probably Singapore. It is the centre for investment banking, which thrives offshore, owing to the tight regulation of India’s banks and debt markets. Reflecting this, the global exposure to India of Citigroup and Standard Chartered, the two foreign banks busiest in India, is 1.9 times the size of their regulated Indian bank subsidiaries.

Fund managers running money in India are often based in Singapore. India’s best financial newspaper, Mint, now has a Singapore edition. At least half of all rupee trading is offshore, says Ajay Shah of the National Institute of Public Finance and Policy in Delhi. Investors and firms do not like India’s fiddly rules and worry that the country may tighten capital controls if its currency falls too far, says one trader in Singapore. He denies, though, that the rupee’s fall is mainly the work of speculators abroad. “The onshore guys have as much of a role,” he says.

Indian e-commerce firms often get their data crunched in Singapore, using web-hosting and cloud-computing firms, such as Google and Amazon. Amitabh Misra, of Snapdeal, says bandwidth costs less, technology is better and you avoid India’s headaches—such as finding somewhere to work, coping with state-run telecoms firms and having to wait to import hardware.

Singapore is also a centre for legal services. International deals involving India often contain clauses which state that disputes be arbitrated outside India, with its clogged courts. Singapore, along with London and Paris, has become the preferred jurisdiction. “The level of comfort Indian companies get from Singapore is unmatched,” says Vivekananda N of the Singapore International Arbitration Centre.

When India’s economy thrived, in 2003-08, so did its offshore hubs. Singapore’s service exports to India tripled. Yet these centres may sometimes be a reverse barometer. If things improve in India, activity should shift to the mainland, and vice versa. By gradually improving its ports, for example, India has convinced more shipping lines to make direct stops.

The government wants to attract activity back to create jobs and boost foreign earnings. Pride plays a role, too—it is unbecoming for a potential superpower to have outsourced vital economic functions. India has far less control over Dubai and Singapore than China does over Hong Kong. Plenty of policy statements in recent years argue that India should become a global hub for aviation, legal arbitration, diamond trading and international finance.

In the real world, however, the question is whether activity is leaving India as its prospects have dimmed. A lead indicator is the purchase of gold by Indians—a form of capital flight. Gold imports have hit $50 billion a year, almost offsetting the boost the balance of payments gets from remittances from Indians abroad.

Some service industries do seem to be shifting from India. India’s balance of trade in business and financial services has slipped into modest deficit from a surplus five years ago. The number of big India-related corporate legal cases at Singapore’s arbitration centre has doubled since 2009, to 49 last year. It is setting up a Mumbai office to win more business. Trading of equity-index derivatives has shifted—a fifth of open positions are now in Singapore and DGCX, a Dubai exchange, is launching two rival products this year. A recent deal by Etihad, the airline of Abu Dhabi, to buy a stake in Jet, an Indian carrier, should see more long-haul traffic shift to the Gulf. (Jet’s boss, Naresh Goyal, lives in London.) More rupee trading seems to be taking place offshore.

The biggest worry is that heavy industry is getting itchy feet. Coal India, a state-owned mining monopoly sitting on some of the world’s biggest reserves, plans to spend billions of dollars buying mines abroad—red tape and political squabbles mean it is too difficult to expand production at home.

Some fear manufacturing is drifting offshore. In the five years to March 2012, for every dollar of direct foreign investment in Indian manufacturing, Indian firms invested 65 cents in manufacturing abroad. Some big firms such as Reliance Industries plan to invest heavily in India, but others such as Aditya Birla are wary. Its boss, Kumar Mangalam Birla, has said that he prefers to invest outside India—an echo of his father, who expanded in South-East Asia during India’s bleak years in the 1970s.

The Gulf has seen tentative signs of Indian manufacturers shifting base. Rohit Walia, of Alpen Capital, an investment bank, says that in the past year he has helped finance an $800m fertiliser plant and a $250m sugar plant. Both will be built in the United Arab Emirates, by Indian firms that will then re-export much of the output back home. The Gulf’s cheap power and easy planning regime make this more feasible than setting up a plant in India. “It’s a new trend,” says Mr Walia.

The temptation for India is to invent new rules to keep economic activity from moving abroad. In 2012 the government tried to override its treaty with Mauritius, only to scare investors so much that it had to back down. To try to plug its balance of payments, India is tightening rules on buying gold. The country’s ministry of finance is said to be examining the shift of currency-trading offshore. The government has intervened to insist that shareholder disputes arising from the Etihad-Jet deal be settled under Indian law—not English as originally proposed.

Yet in the long run, coercing Indians and foreigners to do their business in India would be self-defeating. Some may simply go on strike and it is far better that activity takes place abroad than not at all. Any rise in the share of offshore activity is best viewed as a warning system about what is most in need of reform at home.

The biggest warning sign would be if Indians themselves started to leave. Despite some mutterings among the professional classes, that does not seem to be happening. Still, if India does not kick-start its economy and reform, more than derivative trading and Bollywood singalongs will shift abroad.

[gakakkad]

^^ Even though economist is racist rag and the above article is overtly pessimistic , it does have some some valid points which of course are all to well known amongst most in brf.


other article published a couple of weeks ago in the economist.

http://www.economist.com/news/finance-a ... -past-year



most articles have the same old maal recycled over and over again with little substance. The above is no exception. But the table seems interesting however.

Bottom line is that if we simplify tax structure, improve power generation and distribution, land and labour reforms , simplification of corporate laws and judicial reforms than we grow. else we don't. thats about what is said over and over again in all the doom and gloom articles using different language and anecdotes .. no one have anything new to offer. like how to get these things done.

[gakakkad]

w.r.t Raghuram Rajan , he advocated Islamic banking in India as per recommendations of sacchar committee ..here's an old article from indian express dated september 2008.

http://www.financialexpress.com/news/Ra ... ing/357126

The high-profile committee on financial sector reforms, headed by International Monetary Fund former chief economist Raghuram Rajan, is likely to submit its final report to Prime Minister Manmohan Singh, who is also chairman of the Planning Commission, by the middle of the month.
The committee, which was set up by the Planning Commission to recommend various ways to take the country’s financial sector reforms forward, has included a few points pertaining to Islamic banking. The final report has two pages referring to themes like equity financing in place of charging interest on lending—a key principle of Islamic banking—which is yet to be allowed by the government.

The topic of equity financing is complicated . But I hope his reference to "Islamic Banking" is mere anecdotal w.r.t equity financing and not political..

[svinayak]

Why is a foriegn rag talking about details of the internal reform
Something is wrong unless it is a form of messages to internal groups
These rags have no stake in India and their interest in India is a suspect

[subhamoy.das]

and who would put their money in India - to re-finance - and at what cost? Rating agencies are about to move the currency to JUNK grade. It is indeed doom and gloom all over in the economic front and if the electorate choose the 3 Ms, then it could well be the start of the balkanization of the Indian union as it is a strong currency which acts as the glue in a federal structure like India. Twiking the RBI policies here and there will add no value. We need a strong leader with strong mandate to carry out reforms. I hope the electorate gives a good mandate to NAMO and that is the only cure that can salvage the situation.

[James B]

IIP contracts by 2.2% in June. And IIP of May revised to 2.4% from 1.6%.

CPI still above 10% (10.64% from 10.84%)

Quasi-sovereign bonds to be issued to refinance CAD.

Rupee took a battering again today.

FM announced that there will be curbs on imports. The list of items will be declared tomorrow.

[James B]

Import duty on Gold to be hiked further from current 8%.