Indian Economy - News & Discussion 27 May 2012

vishvak · Post by **vishvak** » 24 Aug 2013 17:07

kmkraoind wrote:National Interest: Current accountability deficit - By Shekhar Gupta in Indian Express

Postscript: Here is a conversation not long ago with a well-informed global tycoon with large business interests in China and India. What is the difference between doing business in the two, I asked. In China, he said, once they decide to do something, they do it, no second thoughts, no retreats. Deng, he said, said 30 years ago, that within 25 years China should control 90 per cent of the world's rare metals and minerals (gadolinite, cerium, plus scandium and yttrium, etc) without which no modern electronic or telecom gadget can be produced. By now, they control at least 80 per cent of these. And when the Japanese "misbehaved", the Chinese squeezed these supplies and all of them, from Panasonic to Sony, went down on their knees. "And you know what," he said, "of the remaining 20 per cent in the entire world, India has more than half. And if you cannot access most of it, because of people you call as Maoists or Naxalites or their intellectual backers, and you think the Chinese have nothing to do with it, you know where you live. On cloud cuckooland."

So India has about 10% of rare earth metal ores, but neither industries to utilize it well nor policy to reduce high prices due to artificial shortage as mentioned above.

Also see how world goes round: the Chinese stated openly to control 90% of rare earth supplies and now control about 80% already. ; )

More from the same article:

The oil ministry has refused to recognise or clear two of Reliance’s gas-fields (NEC-25 and R series, adding up 30 mmscmd), and blocked Cairn’s Rs 13,000-crore investment that can produce another one lakh barrels of oil a day. Now how much is that worth at today’s price of a hundred dollars per barrel? And this, when under the production sharing agreements, the exchequer will get 80-85 per cent of this gas and crude. So you add the self-inflicted net deficit on steel (15), coal (16) and petroleum (20) and you get to 51 billion of the current year CAD estimate of 70.

51 billion $$ out of 70 billion $$ is the import lobby tax?

And who all benefit out of these short sighted policies even when there are abundant supplies- relatively speaking.

If I am not mistaken, the increase in CAD increases debt management in quantity and complexity.

gakakkad · Post by **gakakkad** » 24 Aug 2013 17:21

rare earth metal mining is accelerating in several countries.. in a few years time chi-panda won't really dominate... more hype than an actual problem... of course afaik ,deshland does not even have a policy or a plan in place for rare earth metals..

baring prometheum ,they are not exactly rare..cerium is about as abundant as copper.. only problem is that their mining is dangerous and expensive..when panda undercut prices ,developed nations shut their mines and bought from panda...now panda is arm twisting ..so they are looking to start there mines again. Japanese have found abundant source on pacific bed..

Mining reforms have been discussed about in this forums from time to time..and mining reforms can mitigate the CAD to an extent..

in the long run ,we need to reduce dependence on crude oil as an energy source...

vishvak · Post by **vishvak** » 24 Aug 2013 17:46

Isn't it all confusing.. the mining policy - especially every metal and fuel comes from mining!

We can perhaps reduce dependence on oil when we have control over it at the same time no interference from lobbies too.

On the other hand, we have abundant coal but we are now importing coal.

All maayaa of CAD onree. God forbid we can stand on our own feet, then what would happen only!

member_20317 · Post by **member_20317** » 24 Aug 2013 22:06

vishvak ji, its not just coal. We also import certain kinds of steel.

Control over imports is certainly important. But the last time during good times when we wanted UMPPs the refrain was that equipment is either not there or that the UMPPs must be allowed to import cheap. Now the UMPPs are playing hide and seek, so no Generation and hence T&D equipment trade remains shriveled to that extent. And now not even cheap imports.

Life can develop any which way. But there has got to be a vision and a will to fight it out. And a responsibility to say - sorry I messed up but I was wise enough to have a Plan B too, kindly consider it.

Theo_Fidel · Post by **Theo_Fidel** » 24 Aug 2013 22:36

There was essentially 1 domestic power company for a long time. BHEL. L&T + Mitsubishi has just started a cluster near Chennai. JSW has expanded and there are a couple more companies running around. Domestic competition is extremely fierce right now. There is about 25,000 MW of annual capacity production chasing about 15,000 -20,000 MW of annual electricity installation.

BHEL has recently slashed their prices and are now much more competitive. They have swallowed the pill on the profit decline. As a result GOI now requires new UMPP projects to use domestic equipment. No exceptions.

BTW TATA Mundra running on imported coal is generating enormous losses still despite tariff revisions. It looks like the decline of rupee is going to make the imported coal power plants all staggeringly more expensive. The Reliance Sasan should unaffected as it is domestic coal.
----------------------------------------------

Chennai is all a twitter over the Nokia ultimatum. The Big lioness in charge herself has apparently been to Nokia office twice. TN will pay the promised payout one way or another. Nokia hard ball will probably work.

One of the completely unnoticed little items is that India is now a global exporter of cellphones! Even if it is low end stuff.
Need to replicate this in other industries like TV/Appliances/electronics/etc

http://www.business-standard.com/articl ... 799_1.html

ashish raval · Post by **ashish raval** » 24 Aug 2013 23:16

India CAD position is precarious not out of control though. It can quickly go downhill if currency goes to around 70. Manufacturing Exports will dwindle as Company profits will fall sharply because manufacturing cost goes up coupled with humongous import bill. India has to open up new energy sectors like Fracking etc.

Prem · Post by **Prem** » 24 Aug 2013 23:19

vishvak wrote:="kmkraoind"]National Interest: Current accountability deficit - By Shekhar Gupta in Indian Express
More from the same article:
The oil ministry has refused to recognise or clear two of Reliance’s gas-fields (NEC-25 and R series, adding up 30 mmscmd), and blocked Cairn’s Rs 13,000-crore investment that can produce another one lakh barrels of oil a day. Now how much is that worth at today’s price of a hundred dollars per barrel? And this, when under the production sharing agreements, the exchequer will get 80-85 per cent of this gas and crude. So you add the self-inflicted net deficit on steel (15), coal (16) and petroleum (20) and you get to 51 billion of the current year CAD estimate of 70.
51 billion $$ out of 70 billion $$ is the import lobby tax?And who all benefit out of these short sighted policies even when there are abundant supplies- relatively speaking.If I am not mistaken, the increase in CAD increases debt management in quantity and complexity.

CAD is black money conduit with proportional nature. Worst is using DGHC to nulify the effiorts in Oil and Gas exploration using arbitrary Mai Naa Manu authority unless nod from the Comission Ki Queen in Cong Mahal.

harbans · Post by **harbans** » 25 Aug 2013 01:51

The Chinese get their Rare Earth minerals from Tibet. They will also in 2 decades dam the Brahmaputra and get all their water.

Prem · Post by **Prem** » 25 Aug 2013 03:14

harbans wrote:The Chinese get their Rare Earth minerals from Tibet. They will also in 2 decades dam the Brahmaputra and get all their water.

Soon Nevada and CA mines will come on line for Rare Earth Minerals and prices will drop.

Theo_Fidel · Post by **Theo_Fidel** » 25 Aug 2013 08:07

harbans wrote:The Chinese get their Rare Earth minerals from Tibet. They will also in 2 decades dam the Brahmaputra and get all their water.

I'm sure they will try. If only to spite us. But....

About 15% of the Brahmaputra flow comes from Tibet. 70 MAF IIRC of a total flow of 500 MAF.
India should move to exploit its share and establish a prior claim. Else we are only bloviating.

Singha · Post by **Singha** » 25 Aug 2013 08:22

there are weaknesses in domestic metal production
- until lately I think all car steel was imported, might have changed now
- for ships (granted we are not a major shipbuilder) , the mil-grade steel was first made for ADS-1 . so I guess older boats were made with imported steel
- for submarines which demand even harder varieties esp the deep diving n-boats I guess we are still importing
- we dont mine things like titanium hence I guess lack the skills to weld and machine it even if we import raw stock

making steel for construction beams n rods and machinery is just the initial steps .... all the above are costlier per unit of weight and fetch good returns imo. if the big steel and metals projects now scrapped by NAC mafia had proceeded, we would have received good infusion of latest tech and a bump up in scalability.

habal · Post by **habal** » 25 Aug 2013 14:09

Singha wrote: - we dont mine things like titanium hence I guess lack the skills to weld and machine it even if we import raw stock

hmm .. US is not self-sufficient in Titanium, it is exported from India by Indian Rare Earths Limited.

In the 90s, I had somehow managed to procure a kg of titanium dioxide from IREL while laying mosaic on floor, to be mixed with white cement for better whiteness.

gakakkad · Post by **gakakkad** » 25 Aug 2013 14:46

US produces more Ti than India..India does have the expertise to process Ti sponge needed for aerospace and defence...100% fdi is permitted in Ti mining...

IREL offers ilmenite with upto 80% Ti content..metallurgy is not technically backward in India as a science....it is mainly policy backwardness...

http://www.irel.gov.in/scripts/products.asp

Austin · Post by **Austin** » 25 Aug 2013 16:07

Lucid Haze: What Did You Dream About Yesterday?

What went wrong? Cynically putting politics and polls ahead of economy and prosperity, and slavish obedience to political masters.
Manjeet Kripalani

When a nation starts to descend into a crisis, the satire and ironic humour of its hapless citizenry begins to blossom. India is at that stage. Quiz questions like “What will hit Rs 100 first, a kg of onions, the dollar or a litre of petrol?” and funnies like “Nowadays, Indian exporters meet at Vivanta and importers at Sukh Sagar” and “If money is the root of all evil, then the rupee is the square root” are doing the rounds in Mumbai, our financial centre. On social media, adverts for engagement rings have replaced diamonds with onions, and jokes abound about the onion being a monetary unit larger than a trillion, and the rupee being replaced by the onion as legal tender.

The desperation of the citizenry is clearly lost on the policymakers in Delhi, whose every action is intensifying the country’s financial misery and dark humour. The economic mismanagement of the past four years has been exacerbated in the last month by the raising of short-term interest rates, the bond market sell-off, mounting debts absorbed by the public sector banks, the food security bill, capital controls, gold import restrictions and the absurd taxes on imported television sets, among other actions.

Can this be reversed? Not if the so-called ‘dream team’ at the helm of India’s economics continues in its misplaced labours. The team currently comprises Prime Minister Manmohan Singh, Montek Singh Ahluwalia of the Planning Commission, finance minister P. Chidambaram, economic advisor and former RBI governor C. Rangarajan and the new RBI governor and IMF economist Raghuram Rajan. While Manmohan Singh and Chidambaram have a record of reform, that is firmly in the past, and their good habits have not carried over into the present. Over the past decade, none of the current caretakers of India’s economy have a landmark reform marked to their name; in the last year, this condition has become especially acute as the economic crisis has deepened.

What has gone wrong? Cynically putting politics and electoral logic ahead of the economy and prosperity, and slavish obedience to political masters, for sure. But also plain poor leadership—and survival through a round robin of blame. The Planning Commission chair blames the finance minister, who faults the US Federal Reserve and our own Reserve Bank, which cites the limitations of its mandate, and looks to the prime minister who speaks so softly that he is inaudible even to his economic advisors whose counsel is contrary to their own previously proffered knowledge.

For after Manmohan Singh, the public’s deepest disappointment is reserved for Raghuram Rajan, the renowned economist imported from the IMF and the University of Chicago barely a year ago precisely for his bold views. Indeed, in the 2012-2013 Economic Survey of India which he authored, he recommended curbing the 5 per cent fiscal deficit by ending wasteful subsidies, structural reform and job creation, lowering interest rates, controlling inflation and decried capital controls. Instead, he has acquiesced to the opposite of all the above, including passing the damaging Food Security Bill. Despite living and working in a liberal economy like the US for 25 years, despite boldly predicting the global financial crisis, despite his sound economic principles, he has chosen not to dissent while in New Delhi. He is now party to the collapse of a once robust emerging market with much hope for its youthful population—surely a blemish on his own once-promising intellect.

The Mumbai share bazaar, which was already sent to hell by the coalition partners of the 2004 UPA dream team’s government but to whose doors the 2009 UPA government has begged foreign institutional investors to recongregate, has expressed its disenchantment with dramatic daily sell-offs. In its lexicon, the term ‘dream team’ has been replaced by the ‘Nightmare from Delhi’. The market gives the dream team 0/10—indeed, it gets negative marks.

There’s little to do now for the rest of us, but to:

Hope that US employment numbers stall and so does its recent manufacturing revival so that the US Federal Reserve can continue its quantitative easing, to the benefit of emerging markets like India. This is a short-term hope, and will bring us right back to our structural problems.

Replicate the policies of our own Indian states like Orissa and Chhattisgarh, whose finance ministers have focused on increasing revenues, lowering deficits and debt ratios and tackling issues of corruption.

Pray for early elections, which will bring in a new team, hopefully one with conviction, some integrity and a better grasp of reality.

(The author, a former India bureau chief of BusinessWeek, is executive director, Gateway House.)

Austin · Post by **Austin** » 25 Aug 2013 16:08

It’s a crisis alright...but it’s not a blowout. Professional doomsaying is booming too.

Year Of Despair

habal · Post by **habal** » 25 Aug 2013 18:05

gakakkad wrote:US produces more Ti than India..

It doesn't have any deposits, just imports.

saip · Post by **saip** » 25 Aug 2013 21:46

I found last year, when I went thro a dozen airports in India, that only HYD airport is not named for a local leader. Why was PV Narasimha Rao name not considered for it?

Manmohan SIng Returns to Rao

Lilo · Post by **Lilo** » 25 Aug 2013 22:23

Managing and nurturing economic reforms is a political process. It's not a technocrat's job but that of a political leader. And Dr Singh has never been either an effective politician or a leader.

It is not surprising therefore that, as the myth of Manmohan Singh "the great reformer" breaks down, Dr Singh's need for a Narasimha Rao-like "friend, philosopher and guide" has been growing. In his last ten years as prime minister, Singh hardly found time to acknowledge Rao's contributions to India. In fact, he hardly reacted when Rao's body was not even allowed to be taken inside the All India Congress Committee building after his death in 2004 as the Congress Party tried its best to deprive Rao of all the credit that should have been his due as the nation's prime minister at one of the most difficult times in its contemporary history.

The early 1990s was a time when a succession of weak governments had left India rudderless - economically, politically and strategically. The world was changing rapidly and the Indian economy was collapsing. India was facing a million mutinies and there was no one of national stature to stem the tide. The Mandal-Mandir discourse - controversies surrounding caste reservations and Ayodhya - was threatening to unravel the country. It was at such a juncture that Rao assumed power. He had scant support from the senior party leadership of his own party, all of whom had their own aspirations to become prime minister.

Despite the caricature of Rao being indecisive, he was one of the most decisive leaders this nation has seen. On all crucial issues, he took decisions that have continued to shape India's rise over the last two decades. Manmohan Singh may be touted as the father of Indian economic reforms, but it was Rao who fathered the process. Dr Singh was an economic technocrat with little understanding of political constraints and hardly any ability to navigate them. It was Rao who shielded Dr Singh from the left wing of his own party, a flank that had left no stone unturned in opposing the economic liberalisation programme.

Rao made economic reforms politically tenable at a time when his own party was out to scuttle his most ambitious undertaking. He effectively linked economic policy with foreign policy as he reached out to the US, recognising that India would need the support of the West if economic reforms were to succeed. His imprimatur is everywhere in Indian foreign policy today: Delhi's subtle balancing act in West Asia; trying to establish a stable balance with China; the outreach to East and Southeast Asia as part of India's 'Look East' policy.

It was therefore distinctly odd the way Manmohan Singh acquiesced in his party's decimation of Rao's legacy. Now, when the Indian economy - Dr Singh's claim to fame - seems to be unravelling, he is suddenly remembering the role that Rao had played in making the reforms happen.

It was Rao's sagacious political leadership that sustained the economic reforms programme in the early 1990s. Today, the Congress Party's leadership has little understanding of what's at stake. Neither Sonia Gandhi nor Rahul Gandhi has shown any leadership on the issue. No wonder Dr Singh feels lost, adrift at a time of global and local economic turmoil. Acknowledging Rao in his last speech from the Red Fort was perhaps Singh's way of finally paying his tribute to one of the finest prime ministers this country has seen.

<OT>PVNR is not halal for the sikular brigade as they conveniently hanged the blame for Babri Demolition around his neck with regard to their IM votebank.
Therefore one never finds his pic in Congi cutouts - EVER.
Nor does anyone in the congress govt of AP( his home state) ever remembers his name in any public speech or function. Its like he doesn't exit for the congis.
</OT>
^^ Nice article by Harsh Pant on the dead man BTW.

JwalaMukhi · Post by **JwalaMukhi** » 25 Aug 2013 22:42

saip wrote: Manmohan SIng Returns to Rao

Politics is the last refuge for a scoundrel. But for a politician MMS, the last refuge is now turning to be to tap some of the reflected glory of Shri. Pamulaparti Venkata Narasimha Rao. A last ditch effort to resurrect an epic failure by a seasoned politician. It is time to run for the hills and know something is wrong, when misfits start venerating the best out of necessity and convenience.

kumarn · Post by **kumarn** » 25 Aug 2013 23:25

Is this guy credible?

India’s Real-Estate Bubble Is About To Burst – Violently

India’s Inevitable Economic Collapse

Suraj · Post by **Suraj** » 26 Aug 2013 00:24

Please stop derailing this thread with nonsense about airport names and questions like whether random sensationalist blogs on the internet are credible.

Austin · Post by **Austin** » 26 Aug 2013 07:56

Rupee crisis cripples Indian fuel importers

India’s currency crisis is crippling fuel importers as surging commodity prices, burgeoning demand and the flailing rupee have pushed India’s LNG import bill up by 240% in little more than two years.

Capital flight and lacklustre economic performance have dealt severe blows to the Indian rupee, with the currency weakening by 15% against the United States dollar over the past year and 24% in the past 10 months. Having traded at INR 51.73 on 5 October 2012, the rupee’s value against the dollar fell to INR 64.4 on Wednesday.

“Indian policy makers have limited capacity to respond…but the rupee’s continued slide signals that investors do not believe [in their power],” said Capital Economics in a research note on Tuesday.

India’s reliance on imports to meet more than 75% of its energy consumption has put buyers in a difficult situation, with almost its entire energy bill priced in the increasingly strong US dollar. The currency’s devaluation has weighed heaviest on gas importer Petronet, as India’s demand for the fuel grows at a faster rate than the more polluting oil and coal.

India’s gas demand more than doubled from 24.8 billion cubic metres in 2002 to 55 bcm in 2011, according to BP’s 2013 Statistical Review of World Energy. This was not so much of a problem when the country’s economy was performing well, as a strong rupee made dollar-denominated gas relatively cheap.

However, spikes in the cost of LNG post-Fukushima, combined with the rapid depreciation of the rupee, have dramatically boosted the fuel bill.

Doubling up

In January 2011, a spot cargo arriving in India’s Dahej terminal would comfortably have been sourced for $9/MMBtu, which at the time was equivalent to INR 405/MMBtu. However, with the rupee hitting record highs against the dollar this month, the $14.25/MMBtu an importer would now be expected to pay is equivalent to INR 912/MMBtu.

Despite the fact the vast majority of India’s imports are term volumes rather than spot, the currency devaluation has still hit balance sheets hard.

The volume of India’s LNG imports has grown by more than 50%, from 12.57 bcm in 2010 to 19.05 bcm in 2012, as more import capacity has come online – compounding its financial woes. As a result, India’s LNG import bill has increased by 240%. Petronet’s problems have not gone unnoticed in the stock market. Since approaching record highs in November 2012, the importer’s share price has plunged by more than 40%.

There are signs Petronet is not willing to take further punishment, however. Years of LNG growth look set to end in 2013, with imports during July being 6.7% lower year on year, according to Interfax calculations.

India’s military has also begun to cut back on fuel consumption, with the Ministry of Defence ordering a 40% reduction in consumption to help combat its mushrooming fuel bill.

In the face of growing demand, the government has tried to prop up purchasing, offering an import duty exemption to all importers of LNG and natural gas. Companies such as Gail, Petronet and the National Thermal Power Corp. had previously been required to pay a 5% duty on the value of imports.

To make importing more attractive, the government has also raised domestic rates from $4/MMBtu to $8/MMBtu, effective from 2014, as it plans to double import capacity from 17.5 mtpa to at least 35 mtpa towards the end of the decade.

Powerless to resist

More worrying for end-users is the fact India’s government appears powerless to resist the plight of its currency. While the Japanese yen has plunged in value over the past year through its own economic policy, the rupee’s predicament has been completely involuntary as an economic slowdown has sparked historic levels of capital flight.

News on Wednesday that India’s central bank, the Reserve Bank of India (RBI), had announced a plan to purchase $1.2 billion of long-term government bonds had no effect on the currency’s dollar valuation, which remained at parity to the previous day’s close of INR 63.3 – although the Sensex, India’s benchmark equity market, rose by 5%.

There have been murmurs within the market the RBI is prepared to step in to stem the tide by offloading dollars from its foreign currency stockpiles.

Whether it will work is another matter, as other measures to prevent devaluation have failed so far. Import duty on gold has been increased in recent weeks, limiting the investors’ ability to withdraw to the ‘safe-haven commodity’. The market, however, perceived this as a sign of weakness, which only compounded the speed at which money exited the country.

Austin · Post by **Austin** » 27 Aug 2013 10:30

Photos

The rise and fall of India's economy

Javee · Post by **Javee** » 27 Aug 2013 12:33

Theo_Fidel wrote:BTW TATA Mundra running on imported coal is generating enormous losses still despite tariff revisions. It looks like the decline of rupee is going to make the imported coal power plants all staggeringly more expensive. The Reliance Sasan should unaffected as it is domestic coal.

If TATA with their own mines in Indonesia are generating loses, I would question the logic of building Cheyyur UMPP (near Chennai). Where are we going to get coal from? From North and Central or overseas? Rather they should just build these plants where coal is available and build grid capacity to evacuate the power generated, more on the lines on Neyveli NTPC plant.

subhamoy.das · Post by **subhamoy.das** » 27 Aug 2013 13:49

Rupee and SENSEX in a continued free fall today. Sensex tanked 600 points. Investors are punishing UPA+CONGKI for wreckin the econmy for creating poverty and then re-wrecking it to support poverty. So it is like they created the cancer and now spending money on expensive medication to keep the patient alive. Never went for surgery to take the cancer out!

vina · Post by **vina** » 27 Aug 2013 14:06

Finally some admission from the Govt that the F**ked up. Chidambaram admitted today in the parliament that the policies followed between 2009 and 2011 contributed to the inflation today and the current account deficit.

The only thing he didn't do is name Pranab Mukherjee. It takes some luck (I wish I had some of that) and to have been born under an especially lucky star for someone to have been an instrumental part in wrecking the Indian economy THRICE and then getting to become the president.

The 2009-2011 expansionist policy must have been used to build hard assets and ram the projects to completion in those 2 years. Instead of that, the Kangress, used that to provide subsidy (esp diesel, power and fertilizers), allowed projects to become snarled and run to the ground because of red tape and the infernal loud mouth and bull in a china shop - Jairam Ramesh (who seems to have forgotten to put his brains back on, when he took it off with his cap before he went to bed , what else do I make out of his mealy mouthed interview in the ET today and his earlier rant against the German automakers on selling Diesel vehicles when the problem was the perverse incentives he and his fellow Govt buffoons put in because of price distortions, he would know from his undergrad classes that Diesel vehicles are inherently more efficent that petrol because of higher compression ratios and higher calorific value of diesel and that it is a trade off between capital and running cost in the petrol vs diesel and if there is rationality, it can be mathematically precisely modeled , but I digress) and expanded that dig a hole and fill a hole program called MNREGA.

In the absence of hard assets focus in building, all that spending just went poof with nothing to show for and all that we have left is the persistently high inflation and massive current account deficits and rupee taking a beating.

vishvak · Post by **vishvak** » 27 Aug 2013 14:13

About coal mines it seems that even when Indian units need coal, its supply is either halted or discontinued outright. While NTPC is looking into supplying power to pakis. This is very strange and it is not even colonial time. Even fresh water going to pakis only brings whines and power won't be any different so it is better to pull coal supplies well for our own and stop whines from across the border.

member_20292 · Post by **member_20292** » 27 Aug 2013 14:14

^^^
@vina

but wait there's more

the fsb just got passed today !

Austin · Post by **Austin** » 27 Aug 2013 14:55

Finance Minister P Chidambaram insists India can afford Food Security Scheme as rupee falls

The legislation, which provides cheap food to nearly 67% of India is being seen as a mega vote-getter for the Congress as it seeks a third term in power in elections due by May.

The scheme has to be cleared by the Rajya Sabha and approved by President Pranab Mukherjee before it becomes law.

"After providing for the Food Security Bill, we will remain within the limit I have set for myself in the Budget," Finance Minister P Chidambaram told reporters at a press conference in the capital. The scheme will add 25% to the existing 900-billion-rupee or 90,000 crore food subsidy bill.

The government has budgeted an additional 230 billion rupees annually for the programme on top of the existing 900-billion-rupee food subsidy bill.

Mr Chidambaram, who has been seeking to reassure investors about India's finances, reiterated that a budget deficit of 4.8 percent of gross domestic product remained a "red line" that would not be crossed this year.

Austin · Post by **Austin** » 27 Aug 2013 14:57

Highlights: Finance Minister P Chidambaram on state of economy

Finance Minister P Chidambaram is presenting the ministry's report on the state of economy.

Here are the highlights:

30 per cent of pending projects have been cleared.
Cabinet Committee on Investment has cleared 18 power projects
9 infrastructure, energy projects have been cleared by the committee
Approvals are in place, they will have to go back to banks
Then you will see investments being made
Can't mention a timeline but projects are not being stalled
Bottlenecks are being removed
If investments start, many things will happen... demand for various things will increase
Message that we are sending is that we are keen on getting investment cycle started again
Found a number of projects were stalled, CCI was constituted for that purpose
Now, removing bottlenecks
The investment cycle has started and it will gather pace as we go on
We have appointed two committees and asked them to submit report within 15 days
Meanwhile, some discussion about where FMC should be located
Once the two reports come, the government will take action
We are keeping a careful watch and are in touch with SEBI and FMC regulator
After Food Bill, the Land Acquisition Bill is the next listed item
Every emerging market is challenged today, India too
The impact is more in currency and equity market
Be patient, Rupee will find its appropriate level. Currently, Rupee is undervalued
Have to do what requires to be done

vina · Post by **vina** » 27 Aug 2013 15:30

I was watching Yashwant Sinha tear into the govt in the Lok Sabha on TV . He was right on the point, and said largely what I said in my earlier post, about how the 2008 US meltdown saw the GOI raise fiscal deficit to 6% of GDP and that was wholly spent in consumption spending and nothing on investments in fixed assets and how that led to consistent 10% + consumer price inflation since then until now and that in effect is the root cause of the current problem!

He also tore into Jayaram Ramesh and said that he single handedly brought down the GDP by close to 2.5% ! He mentioned one particular point. It seems that the Govt had forced the NHAI to get local body / Panchayat board clearance on alignment and land impact from every village in it's path and said imagine a 500km road and if you need to get the Panchayat clearances from every village on the alignment, how long will it take (if at all ) to get the approvals in place ! And recently , they changed the rules saying for "linear projects" (roads, railway lines, pipelines, power transmission lines etc), that local approval wasn't necessary!

Sinha said, "Ab ayee Akal inko, after the damage has been done!" .

Layer upon layer of idiocies like that would have seen humongous amount of damage done. I can imagine all roads, pipelines, trasmission lines and stuff stalled for a huge number of years just by this.

This entire UPA-II reeks of being a govt run by some Dilli-Billi Jholawala type activists and other associated lotus eaters, and just rank incompetents and crooks, who have never done a day's honest job in their lives and are simply clueless about how things actually work.

On top of that, we had those disastrous budgets by that geriatric dinosaur , who mercifully got kicked upstairs.

Virupaksha · Post by **Virupaksha** » 27 Aug 2013 18:00

vina wrote: This entire UPA-II reeks of being a govt run by some Dilli-Billi Jholawala type activists and other associated lotus eaters, and just rank incompetents and crooks, who have never done a day's honest job in their lives and are simply clueless about how things actually work.

On top of that, we had those disastrous budgets by that geriatric dinosaur , who mercifully got kicked upstairs.

brutum fulmen - as we all know when asked to choose the alternative, what Vina's vote will be.

member_20317 · Post by **member_20317** » 27 Aug 2013 18:00

Vina ji, this J. R. Ramesh fellow was also the involved in the Land Acquisition Rehabilitation and Resettlement Bill.

And now we know what that means.

Cosmo_R · Post by **Cosmo_R** » 27 Aug 2013 18:07

mahadevbhu wrote:^^^
@vina

but wait there's more the fsb just got passed today !

FSB? I thought it was the VSB as in Vote Security Bill

Chandragupta · Post by **Chandragupta** » 27 Aug 2013 19:08

Just saw something on the news ticker, something to do with Anand Shama and 500 tonnes of Indian gold. 1991 redux?

nawabs · Post by **nawabs** » 27 Aug 2013 19:16

Govt may use its gold reserves to reduce CAD, hints Anand Sharma

http://zeenews.india.com/business/news/ ... 82699.html

Government may use a portion of the country's gold reserves to reduce India’s widening current deficit, Union Commerce and Industry Minister Anand Sharma has hinted.

The Commerce Minister said that only 500 tonnes of gold will be sufficient to trim down India’s current account deficit.

India's CAD -- the gap between inflow and outgo of foreign exchange -- widened to a record high of USD 88 billion or 4.8 percent of the GDP for the fiscal ended March 31, from USD 78.2 billion in 2011-2012, about 4.2 percent of the gross domestic product.

India's wide current-account deficit has been pushing the rupee lower. The rupee today breached the 66-mark against the dollar for the first time in history and quoted at 66.07 Vs dollar.

member_20317 · Post by **member_20317** » 27 Aug 2013 19:30

See when in difficulty one needs gold.

But surely they would not be selling it at these reduced prices. I am sure they will only use it as security.

Supratik · Post by **Supratik** » 27 Aug 2013 19:46

So they will pawn gold. 1991 redux. Next, is LA bill as formulated by the Communist-run NAC which in its current form will make it difficult to set-up industries.

vera_k · Post by **vera_k** » 27 Aug 2013 19:58

vina wrote: the 2008 US meltdown saw the GOI raise fiscal deficit to 6% of GDP and that was wholly spent in consumption spending and nothing on investments in fixed assets and how that led to consistent 10% + consumer price inflation since then until now and that in effect is the root cause of the current problem!

The domestic problem predates the 2008 meltdown. Looking at the data, inflation was a problem starting late 2006, and interest rates needed to rise to match, but didn't. This helped make 2007 a banner year for annual GDP growth. Of course, this makes it more egregious that the stimulus following the meltdown was not used differently.

nawabs · Post by **nawabs** » 27 Aug 2013 20:27

India explores currency swaps in struggle to stem rupee’s plunge

http://www.livemint.com/Page/Id/2.0.3099984789

India said it will set up a panel to identify potential partner countries for currency-swap agreements as the nation tries to buttress foreign reserves and stem the rupee’s record plunge.The task force will report in a month, commerce minister Anand Sharma said at a briefing in New Delhi on Tuesday. India’s economic growth is expected to exceed 5.5% in the fiscal year ending in March 2014, he said.

The rupee tumbled to an unprecedented 66.19 per dollar on Tuesday as the prospect of reduced US Federal Reserve stimulus and India’s record current-account deficit spur capital outflows. Boosting foreign reserves is key to rupee stability, Bank of America Merrill Lynch said this month.
We think the authorities will continue to explore swap facilities with other central banks, can put further controls on imports, especially of luxury items, and can attempt to increase capital inflows, for instance by issuing quasi-sovereign bonds, Tushar Poddar, an economist at Goldman Sachs Group Inc. in Mumbai, wrote in a note.

India entered a $15 billion swap arrangement with Japan in 2011 to improve access to dollar funding during a crisis.

Constitution of Task Force on Currency Swap Arrangements and Trade

http://pib.nic.in/newsite/erelease.aspx?relid=98824

In view of the rising trade deficit and consequent current account deficit, a need has been felt to examine the role of Currency Swap Arrangement/Agreements in order to suggest a possible mechanism to address the issue. It has been decided to constitute a Task Force on Currency Swap Arrangements/Agreements. The Task Force will have the following Terms of Reference:

1. To examine various types of Currency Swap Agreements/Arrangements and their implication for India’s trade and financial system;

2. To study the pros and cons of Currency Swap Agreement/Arrangement for India’s trade;

3. To explore the possibility of Currency Swap Arrangement/Agreement between India and identified countries and make recommendations accordingly.