Indian Economy - News & Discussion Oct 12 2013

[Austin]

10 Countries Sitting On Enormous Mounds Of Gold

Interesting some countries in the list have more than 60 % in Gold as Foreign Reserves

India

Official gold holdings:
557.7 tonnes

Percent of foreign reserves in gold:
8.4%

[Prem]

With CAD down, INR is moving up North starting this week.

[Austin]

Government to set up inflation target, RBI to implement: Chidambaram

[chetak]

Government to set up inflation target, RBI to implement: Chidambaram

This guy is another mundu. Prefers to get it washed by others though......

[svinayak]

This guy is another mundu. Prefers to get it washed by others though......

What is the difference between him and Saint Mundu

[Theo_Fidel]

Photo of India showing the growth effect and night time lighting from 1994-2008.
The hinterland areas that are not keeping up are starkly visible.

[Prem]

India’s Extreme Makeover

India long was a favorite of international investors for its rapid growth rates, enormous market and promising demographic trends, but last summer’s taper tantrum exposed its Achilles’ heel: a yawning current-account deficit as the country imported and consumed much more than it could afford.That was fine as long as outsiders were willing to bridge the gap, but when the Fed’s taper talk raised the prospect of higher returns back home — and India’s own economic growth hit a rough patch – investors retreated en masse, sending India’s currency and markets plunging.Once a proud member of the BRICS club of most-promising emerging markets, India now found itself lumped in with the “Fragile Five” – developing economies whose poor fundamentals left them most exposed to swift and damaging outflows of capital.Fast-forward nine months. India still is struggling with elevated levels of inflation that have forced the central bank to raise interest rates a number of times despite poor economic growth. The policies it adopted to deal with the crisis have come down particularly hard on some sectors. But the current-account deficit has come down from about 6.5% of gross domestic product last year to just 0.9% now – a remarkable swing in such a short time. Investors have rewarded the change, buying Indian assets even as they sold out of other emerging markets during the most recent bout of market turmoil early this year.

http://blogs.wsj.com/economics/2014/03/ ... -makeover/

[Christopher Sidor]

Christopher Sidor: What article ?

The curious case of Bombay Plan ---- Contemporary Issues and Ideas in Social Sciences June 2010

[Christopher Sidor]

India’s Extreme Makeover

India long was a favorite of international investors for its rapid growth rates, enormous market and promising demographic trends, but last summer’s taper tantrum exposed its Achilles’ heel: a yawning current-account deficit as the country imported and consumed much more than it could afford.That was fine as long as outsiders were willing to bridge the gap, but when the Fed’s taper talk raised the prospect of higher returns back home — and India’s own economic growth hit a rough patch – investors retreated en masse, sending India’s currency and markets plunging.Once a proud member of the BRICS club of most-promising emerging markets, India now found itself lumped in with the “Fragile Five” – developing economies whose poor fundamentals left them most exposed to swift and damaging outflows of capital.Fast-forward nine months. India still is struggling with elevated levels of inflation that have forced the central bank to raise interest rates a number of times despite poor economic growth. The policies it adopted to deal with the crisis have come down particularly hard on some sectors. But the current-account deficit has come down from about 6.5% of gross domestic product last year to just 0.9% now – a remarkable swing in such a short time. Investors have rewarded the change, buying Indian assets even as they sold out of other emerging markets during the most recent bout of market turmoil early this year.

http://blogs.wsj.com/economics/2014/03/ ... -makeover/

First of all the CAD has come down, because of the following factors
1) GoI has asked the PSU's under its control to declare massive dividends, even when some of them were not doing well.
2) it has targeted money from disinvestment and introduced policies which have tempted FDI inflow.

Secondly What GoI has not done is gotten its expense under control. Our taxes have not grown as much they should have. What it has not done is make India competitive in the world markets. It should have targeted to bring down our trade deficits with countries like PRC, but that would harm certain very powerful industrialist like Reliance. We should go whole hog into renewable energy, but here we are raising the price of gas to 8 usd, just so that a certain private player can profit of it. The consequence of this to our down stream power, fertilizer production costs is not considered.

[Uttam]

First of all the CAD has come down, because of the following factors
1) GoI has asked the PSU's under its control to declare massive dividends, even when some of them were not doing well.
2) it has targeted money from disinvestment and introduced policies which have tempted FDI inflow.

Secondly What GoI has not done is gotten its expense under control. Our taxes have not grown as much they should have. What it has not done is make India competitive in the world markets. It should have targeted to bring down our trade deficits with countries like PRC, but that would harm certain very powerful industrialist like Reliance. We should go whole hog into renewable energy, but here we are raising the price of gas to 8 usd, just so that a certain private player can profit of it. The consequence of this to our down stream power, fertilizer production costs is not considered.

I think your (1) is confusing Current Account Deficit (Imports - Exports) with Budge deficit (Govt. Expenditure - Revenue).

[Supratik]

Secondly What GoI has not done is gotten its expense under control. Our taxes have not grown as much they should have. What it has not done is make India competitive in the world markets. It should have targeted to bring down our trade deficits with countries like PRC, but that would harm certain very powerful industrialist like Reliance. We should go whole hog into renewable energy, but here we are raising the price of gas to 8 usd, just so that a certain private player can profit of it. The consequence of this to our down stream power, fertilizer production costs is not considered.

Leftists often think with their hearts which sometimes makes them come to irrational conclusions. Take the case of RIL gas price which is being currently said to be a case of crony capitalism - see AAP, Kejirwal and Outlook magazine among others. Here is why? Oil and gas prices internationally are controlled by a cartel whether we like it or not. IIRC the cost of one barrel of oil should be $25 but is sold for $100. Take an example. You are a potato seller and the market price of potato is Rs 10. But I say "Dear Christopher, I am your Indian brother. Please sell it to me for Rs2 because you get the potato for Rs1 only". In the real world will you do that? Arbitrarily asking RIL to sell gas at lower than international prices will not benefit India and may actually harm it. Here is why? RIL has say $3 billion to invest in gas. If it invests in India and get $2 and invests in Kazakshtan and get $8 it is simply not going to invest in India. The case is similar for every other private player whether national or international. You may say "So what? Ask ONGC to extract gas and sell it for $2. The problem is the past experience of 60 yrs is that state oil and gas companies are inefficient. So ONGC is not going to be able to extract sufficient gas to meet demand as much as a private player will (purely for profit purposes). But the demand will continue to rise which has to be met. So we will import more and at international prices which will be an import burden and show up on our CAD.

At any rate, gas pricing is currently in the Supreme court. Let them decide whether the committee that decided the price was correct or not.

[Suraj]

Exports fall and...
Exports contract for the first time in eight months to $25.7 b

The only “green shoot” in the Indian economy, exports growth, contracted in February for the first time in eight months. Exports growth declined by 3.7 per cent to $25.7 billion from $26.7 billion in February 2012, according to official data released on Tuesday.

Against the government’s exports target of $325 billion for the current financial year, with just one more month to go before it ends, cumulative exports for April 2013-February 2014 stand at $282.8 billion.

“We have reached $282 billion, and if we will follow the same trend as we did last March, it (exports) should be close to $310 billion (by the end of the current fiscal),” Commerce Secretary Rajeev Kher told reporters here. India’s exports in March 2013 had risen 6.97 per cent. “I will not be happy with $310 billion. We need to have better performance...We have not done well as we should have,” he added. Mr. Kher hoped that exports from the textiles and pharmaceuticals industries would improve in the months ahead. After the peak of 13.47-per cent growth in October, exports have been losing momentum. Major export sectors, including petroleum, engineering and pharmaceuticals, declined in February.

Imports, too, fell in February; 17.1 per cent to $33.8 billion. However, the greater decline in imports improved the trade deficit to a five-month low. Led by a 70 per cent drop in gold imports to $1.6 billion, the trade deficit narrowed to $8.13 billion. A 12.7-per cent contraction in non-oil non-gold imports helped, too. Oil imports declined by 3.1 per cent to $13.6 billion. Exporters’ body Federation of Indian Export Organisations (FIEO) said that due to the decline in overseas shipments, India’s exports would fall short of target by about $15-18 billion. “Credit is the biggest problem which the exporters are facing. Arrears of duty refund claims have crossed Rs.20,000 crore. Global demand is there, but we are unable to take advantage of this due to credit problem,” FIEO President Rafeeque Ahmed said.

In its response to the FEO President’s statement, the Central Board of Excise and Customs (CBEC) denied that customs, excise duty and service tax refunds/drawbacks were being held up by the Department. “More amounts have been refunded in 2013-14 compared to the corresponding period in the previous year,” the statement said.

... power generation projects get postponed citing poor economic climate.
Rs 49,200-cr Odisha, Tamil Nadu UMPPs postponed

The award of two 4,000-Mw ultra mega power projects (UMPPs), entailing mega investment of Rs 49,200 crore, has been pushed by two-and-a-half months to June, with the shortlisted firms requesting more time for price bids.

Power Finance Corporation (PFC), the power ministry’s arm which manages the bidding for the UMPPs, had in December 2013 shortlisted nine companies for the Odisha UMPP and eight companies for the Tamil Nadu UMPP in the Request For Qualification (RFQ) stage.

The Request For Proposals (RFPs) were to come by February 26. “All the companies together sought extension of 10 weeks for RFP submission for the Odisha project and eight weeks for the Tamil Nadu UMPP, arguing the market condition is not ripe for such huge investments. The extension has been granted,” a senior PFC executive told Business Standard. He added the projects are now likely to be awarded only after the general elections in May.

The nine companies in the race for the Odisha UMPP are NTPC, Tata Power, NHPC, Adani Power, JSW Energy, Jindal Power, Sterlite Infraventures, CLP India, and Larsen & Toubro (L&T).

Eight companies — Adani Power, CLP India, GMR Energy, Jindal Power, JSW Energy, L&T, NTPC, and Sterlite Infraventures — are to give price bids for the Tamil Nadu project.

The Odisha UMPP, which will come up at Bedabahal in Sundargarh district, is a pit-head project, based on domestic coal to be sourced from allocated captive coal blocks, with an expected investment of around Rs 25,000 crore. The Kancheepuram UMPP is a coastal project based on imported coal to be set up in Kancheepuram district, with an investment of Rs 24,200 crore. The project would be India’s third coastal UMPP after Mundra in Gujarat (Tata Power) and Krishnapatnam in Andhra Pradesh, operated by Reliance Power. PFC had kicked off bidding for the two UMPPs in September 2013. Applications for pre-qualification were opened in November 2013. PFC had initially planned to award the two projects by the end of the current month.

Overall GoI's doing a splendid job of ensuring all sectors of the economy stagnate.

[nachiket]

They really need to stop calling them "Ultra Mega Power Projects". The name sounds like something an eight-year old might come up with.

[sanjaykumar]

Or perhaps a VVIP.

[Austin]

Iran prefers euros to rupees for India oil exports: Official

[vishvak]

India to slash Iran oil imports to meet nuclear deal parameters

..Iran is giving India a discount on crude and offering free delivery.

However, South Korea has increased its imports this month. link

[Prem]

http://www.business-standard.com/articl ... 590_1.html
Panasonic to make India a regional hub from next month

Consumer durable major Panasonic is making its Indian operations a regional hub with markets like Middle East, Africa and neighboring countries set to become a part of the new entity with effect from next month. The Osaka-headquartered is looking to leverage on India's emergence as a manufacturing hub and its strategic location by making it a regional entity, to add to its five regions globally.
"From next month India will become a regional headquarter, covering areas like SAARC, Africa and Middle East and will report directly to global headquarters in Japan," Panasonic India Manging Director Manish Sharma told PTI. Currently, Panasonic India comes under the company's Singapore-based establishment. Other global regions of the Japan-based firm are based out of Japan, North America, Asia, Europe and Latin America.
Asked about the reasons for making India a separate region, Sharma said: "Firstly, all these countries fall in the vicinity of India. Secondly, India has become a manufacturing hub and is strategically located and that could help in taking products to these markets." Thirdly, all the countries except in the Middle East are emerging markets and thus strategies being implemented here can be utilised in these markets also, he added. Commenting on the Indian operations, Sharma said that the company is in line to achieve its stated sales target of USD 1.65 billion in the current fiscal. "We are in line of achieving double digit growth this fiscal. April-June period of last year was pretty good for the air conditioner business," Sharma said. Panasonic India has set a revenue target of USD 3.66 billion by 2015-16. Besides, the Japanese firm has embarked on a mission to distribute one lakh solar lanterns to needy people in Asian and African countries. "We have set a target of distributing 35,000 of these one lakh lanterns in India by 2018. Last year, we distributed 5,000 such units and this year we plan to distribute another 4,000," Sharma said. The company has collaborated with six NGOs in various states including areas of Bihar, Andhra Pradesh and Orissa for distribution of the lanterns.

[Prem]

http://www.marketwatch.com/story/jim-gr ... 2014-03-25
Jim Grant: India is world's next growth story

NEW YORK (MarketWatch) -- Jim Grant, founder of the contrarian Grant's Interest Rate Observer, sounded bullish about India on Tuesday in an appearance on CNBC. "The world is always looking for the next growth story, and I would nominate India," he said on air, adding that China is fading. Grant said prime ministerial hopeful Narendra Modi, expected to emerge victorious in India's upcoming election, is focused on modernization. Bets that Modi will get India's economy back on track have boosted Indian ETFs such as the iShares MSCI India Index Fund /quotes/zigman/8623286/delayed/quotes/nls/inda INDA -0.15% and the WisdomTree Trust India Earnings , but some analysts have said investors should temper their exuberance .

[Christopher Sidor]

Secondly What GoI has not done is gotten its expense under control. Our taxes have not grown as much they should have. What it has not done is make India competitive in the world markets. It should have targeted to bring down our trade deficits with countries like PRC, but that would harm certain very powerful industrialist like Reliance. We should go whole hog into renewable energy, but here we are raising the price of gas to 8 usd, just so that a certain private player can profit of it. The consequence of this to our down stream power, fertilizer production costs is not considered.

But I say "Dear Christopher, I am your Indian brother. Please sell it to me for Rs2 because you get the potato for Rs1 only". In the real world will you do that? Arbitrarily asking RIL to sell gas at lower than international prices will not benefit India and may actually harm it. Here is why? RIL has say $3 billion to invest in gas. If it invests in India and get $2 and invests in Kazakshtan and get $8 it is simply not going to invest in India.

RIL was contracted to sell gas at a particular level at the promised rate of production. That did not happen. Now according to an affidavit given by GoI to the courts RIL is just an extractor of the gas and it is not owner. If RIL cannot extract the gas at the contracted level then it should be shown the door and said thanks for their failure. And really I do not care if Reliance invests $8 is Kazaksthan or in Timbuktu. What my concern is that a company which was supposed to extract gas at a particular price point for a given production level did not do that and no penalty was imposed. In fact GoI went out of the way to give this company relief by doubling the price. And it did this twice.

[Arjun]

If RIL cannot extract the gas at the contracted level then it should be shown the door and said thanks for their failure.

And the original contract given to a foreign firm or is it ONGC you had in mind ? If you are looking at a rebid, why do you think the new bidders would not take into account RIL's failure to make the original price workable ?

[Supratik]

RIL was contracted to sell gas at a particular level at the promised rate of production. That did not happen. Now according to an affidavit given by GoI to the courts RIL is just an extractor of the gas and it is not owner. If RIL cannot extract the gas at the contracted level then it should be shown the door and said thanks for their failure. And really I do not care if Reliance invests $8 is Kazaksthan or in Timbuktu. What my concern is that a company which was supposed to extract gas at a particular price point for a given production level did not do that and no penalty was imposed. In fact GoI went out of the way to give this company relief by doubling the price. And it did this twice.

IMO, the initial contract itself was unviable. Further, from what I gathered RIL overestimated the gas field reserves and was unable to recover gas at the desired production level. To get to the desired level it needs to discover more which needs investments. Hence, it needs more price.

[Prem]

DPM= Double Post Maartyred

[Prem]

http://www.ft.com/intl/cms/s/0/96536c8a ... z2xHwO5px9

Rupee gains on India election fever

High quality global journalism requires investment. India’s rupee strengthened to cross 60 to the US dollar on Friday, following a rush of foreign investment into India’s equity markets on increased optimism that a strong government will win the general election.The rupee dropped sharply last year as volatility swept through emerging markets, and the central bank was thought to be selling dollars and encouraging remittances to prop it upMarkets are betting on an election victory for pro-business Narendra Modi’s Bharatiya Janata Party. Modi has for 13 years been the chief minister of Gujurat, a state that is often lauded as India’s most investor-friendly.As well as optimism around Indian politics, the currency may be reacting to improvements in India’s external balances.The current account deficit has narrowed sharply to 0.9 per cent of GDP in the three months to December from 1.2 per cent in the previous quarter, partly thanks to a series of measures aimed at reducing gold imports.In a note to clients earlier this week, analysts at ICICI Bank wrote: “The Indian rupee has witnessed remarkable stability in the recent weeks, trading in the range of 60-62. The extreme volatility in INR has reduced considerably over the last few months.“Our analysis suggests that realised volatility for USDINR cross has fallen by around 80 per cent compared to the peak volatility in September 2013. In the immediate near term, the upcoming general elections are likely to increase volatility in the rupee.”

[Supratik]

I predict rupee reaching in or around 50 to dollar if elections deliver a stable NM Govt. The rupee depreciated due to bad economic policies of UPA.

[panduranghari]

^ I really doubt that it will. USA has to stop QE for that to happen. US won't. Don't expect miracles from Modi government. The structural deficit cannot be corrected without serious changes. The economy is like a drug addict. Giving it less drug or more drug is not going to help . The drug has to be completely stopped.

[Supratik]

I think it will be in the low 50s based on sentiments coupled with the new 0.9% deficit rather than any hard economic decisions but on expectations. Externals will continue to contribute to preventing it from rising further. Remember a few years back the mandate of the RBI was to keep it between 40 and 50.

[panduranghari]

Isn't RBI also working for GOI to increase employment. Don't you think the 2 goals are mutually incompatible?

[Supratik]

No as depreciation is not the only way to create export-based employment if I understood you correctly. As has been discussed on this forum previously a stable and predictable currency is better for the economy.

[panduranghari]

Absolutely - stable and predictable currency. Without that there will be a mismatch in production- consumption. But if a currency has to be made stable I.e not too much inflation or deflation - what will be the factor preventing the RBI from adopting an approach which will not penalise savers? As of now, lots of money is chasing an imaginary return- sometimes with substantial risk- without being assured any predictability in the status of currency. Anyone invested in the debt market when Re-$ exchange rate moved from 50 to 70, was nursing their wounds. Now, when the hope of economic recovery is pushed by prospect of Modi becoming PM, the debt market may recover with exchange rate moving towards 50. Will it? I doubt it. But we will see more debt market investments pushed by the financial houses. This is wrong because like a herd the sheeple are being directed towards a slaughter and RBI should be preventing this. But you see they won't. Too many vested interests are running the show without any regard to a common average Indian who really wants just a stable predictable currency.

[Supratik]

The RBI had in repeated statements a few years back stated that it wants to manage the currency between 40 to 50 to the dollar. However, currencies can move due to external reasons which caused the rupee the first major depreciation which was not really in RBI's control. The next major depreciation leading to higher 60s was a reflection of the culmination of bad economic policies of UPA. I think Chidambaram did well to cut-down the deficit and Pranabda was more the culprit than him for the economic disaster along with the ponzy schemes of SG-led NAC with the economist PM busy playing carrom. The leftist rats of the NAC have left the sinking ship with the likes of Aruna Roy, Yogendra Yadav moving to AAP, Jean Dreze taking a break, and the likes of Harsh Mander moving to USA. The rally we are seeing now is mostly based on sentiments and expectations (FIIs returning) rather than in any hard economic upturn.

[Austin]

India's fiscal deficit during April-February at $100 billion, stays above budgeted estimates

India's fiscal deficit in the first eleven months of financial year 2013-14 touched Rs. 5.99 lakh crore, or 114.3 per cent of the full year target, government data showed on Monday.

The deficit was 97.4 per cent during April-February a year ago.

In the interim budget in February, the Congress-led government had revised the full-year fiscal deficit target to Rs. 5.25 lakh crore, or 4.6 per cent of gross domestic product (GDP), from Rs. 5.42 lakh crore, or 4.8 per cent, earlier.

Net tax receipts were at Rs. 6.27 lakh crore in the first eleven months of the current fiscal year to March 2014, while total expenditure was about Rs. 14 lakh crore.

http://profit.ndtv.com/news/economy/art ... tes-384288

[Paul]

XIIth Five Year Plan approach paper

[Suraj]

^ I really doubt that it will. USA has to stop QE for that to happen. US won't. Don't expect miracles from Modi government. The structural deficit cannot be corrected without serious changes. The economy is like a drug addict. Giving it less drug or more drug is not going to help . The drug has to be completely stopped.

QE tapers should have the opposite effect - a 'flight to safety' resulting in capital leaving EM equities and therefore the dollar strengthening. It's more QE that would weaken the dollar, speaking solely about the effect of Fed actions. The recent Rupee slide is not temporally correlated with the QE, as much as it was to generally degrading macroeconomic sentiment in India, plus the CAD pressure driven by gold and oil imports until mid/late 2013.

[nachiket]

How does the mere expectation of a change of government have an effect on the value of the Rupee? I can understand stock markets rising but wouldn't the value of the currency be dependent on more tangible economic factors? After all the new government, regardless of who it is won't be able to fix the economy in a jiffy. It's going to be a long term process.

[Suraj]

All markets - equity, currency, commodity, debt - have a tendency to price in expectations early. The strengthening of the Rupee is symbolic of the expectation that a new government will be substantially more decisive. The current one has been deplorable; the amount of policy stasis for 3 years now has brought the entire industrial sector to a standstill. If there was any honor in the polity, they'd just say 'We are sorry. We have wasted the mandate the people gave us in 2009. We will sit in opposition now as penance' instead of trying to furiously paint lipstick on a pig at election time.

[Aditya_V]

I predict rupee reaching in or around 50 to dollar if elections deliver a stable NM Govt. The rupee depreciated due to bad economic policies of UPA.

The current bit of euphoria is Uncle helping INC, by saying CHidambaram to cut CAD etc. Expect markets to crash big time in may and rupee going south. FUndamentals will take 4 years of good governance tto recover

[Supratik]

The current bit of euphoria is Uncle helping INC, by saying CHidambaram to cut CAD etc. Expect markets to crash big time in may and rupee going south. FUndamentals will take 4 years of good governance tto recover

They did it for their own survival. A tanking economy means they will be out of job. But it is too little too late.

[Suraj]

All business news articles suggest the markets are pricing in a change in regime, not more of the same, or worse, supporting the ineffectual current FM.

[Prem]

This fiscal Economy is expected to grow 5.5% As per ADP. If Modi Sarkar kick start the infrastructure development it can easily add another 2% to this growth and bring the Gaddi back on track in 2 years or so.

[Prem]

http://venturebeat.com/2014/04/01/micro ... h-company/
Microsoft wants to kickstart the next billion-dollar Indian tech company

Microsoft Ventures is revving up its India Accelerator program.The Indian arm of the Redmond, Wash.-based tech giant today announced that it’s accepting applications for its fifth Ventures Accelerator batch in Bangalore, India. Microsoft India is looking for a mix of Indian startups and international companies (interested in Asian markets) to participate. The program is scheduled to kick off in July and end with a demo day in November.“Our Accelerator is turning out to be one of the most competitive programs in this part of the world, with hundreds of startups wanting to be part of it,” Ravi Narayan, director of Microsoft Ventures in India, said in a statement. “The visibility, reach, and intensity of the program drives startups to achieve tremendous progress during the four months of the program.”16 startups made it into the summer batch, Microsoft India’s fourth, which will “graduate” in late May. They range from SlideRule, a startup facilitating online course discovery, to Appointy, a scheduling software startup that aims to help businesses grow virally.36 companies graduated from the first three batches, according to Microsoft India, which said 82 percent of the companies received funding during or after the accelerator program.Interested startups can apply for the Bangalore accelerator program here.“We will work closely with our industry partners, mentors, and panel of jury to identify exceptional technology entrepreneurs who are solving big problems at scale, both for India and global markets,” said Narayan. “We welcome all technology startups, from India and abroad, to send in applications.”