Indian Economy - News & Discussion Oct 12 2013

Rishirishi · Post by **Rishirishi** » 21 Dec 2014 05:06

One does not have to build super duper infrastructure in whole of India. Some small centers arround ports, with some electricity will do. That is what the Chinese did. They developed the area arround Hong kong and Shanghai frist. I was in Shenzen in 1995. One Sheraton a few highways and industrial area was there. Now it is a city of 12 million.

Hari Seldon · Post by **Hari Seldon** » 21 Dec 2014 06:43

Rishirishi wrote:One does not have to build super duper infrastructure in whole of India. Some small centers arround ports, with some electricity will do. That is what the Chinese did. They developed the area arround Hong kong and Shanghai frist. I was in Shenzen in 1995. One Sheraton a few highways and industrial area was there. Now it is a city of 12 million.

+1. IMHO, that is what DMIC is attempting to do - build a Guandzhong in India.

A few mini inducstrial corridors - Blr-chennai, Vijaywada-Vizag, Kolkata-Cuttak etc might not be such a bad idea either. Coup would be to have enabling inductrial corridor specific legislation that eases some of these infra, land and labor woes...

Pratyush · Post by **Pratyush** » 21 Dec 2014 10:25

India cannot follow the Chinese route of growth. It needs to target one major industrial town every district. That is employing 100000 workers at minimum along with the required infrastructure. Coupled with projects such as DMIC.

panduranghari · Post by **panduranghari** » 21 Dec 2014 13:25

Rishirishi wrote:One does not have to build super duper infrastructure in whole of India. Some small centers arround ports, with some electricity will do. That is what the Chinese did. They developed the area arround Hong kong and Shanghai frist. I was in Shenzen in 1995. One Sheraton a few highways and industrial area was there. Now it is a city of 12 million.

That's because their economy is geared towards exports. Not internal consumption. Unless they address that, it's an uphill struggle to improve living conditions and create a sustainable economic model. If container traffic comes to a stop, the factories in China stop producing.nthe workers move back to the countryside. The infrastructure rots. And thus the 'economic miracle' becomes a 'decline'. Surely, you can see this as it hasn't escaped the world press. It's been widely written about. Everyone from Faber to Pettis to Greenspam has written eloquently about this.

panduranghari · Post by **panduranghari** » 21 Dec 2014 13:28

Pratyush wrote:India cannot follow the Chinese route of growth. It needs to target one major industrial town every district. That is employing 100000 workers at minimum along with the required infrastructure. Coupled with projects such as DMIC.

DMIC is to keep Gujarat relevant in case Mumbai or Delhi don't survive in case of an emergency. But yes I agree with your sentiment. Infrastructure should be distributed right across the country.

geeth · Post by **geeth** » 21 Dec 2014 19:42

I still have my doubts on what GST would accomplish. Most of the tax dodging enforcement has already been claimed by the VAT. If interstate commerce is the worry I think people would find it unlikely to improve much.

That is what I also.thought with proposed combined rates of more than 26%, how is it going to be the " most important legislation since 1947"? Will the CGST rates begin after turnover crosses 1.5 crores.as.is with excise duty now? With a tax rate of more than 26% how can you make manufacturing globally competetive?

Needless to say, I hate to pay this much tax and I am suffering from this loot. One thing I knew from begining is that MODIJI is not going to reduce taxes..if at all , he would put to good use what is collected..

M Joshi · Post by **M Joshi** » 21 Dec 2014 21:46

[quote="geeth"][quote][b] I still have my doubts on what GST would accomplish. Most of the tax dodging enforcement has already been claimed by the VAT. If interstate commerce is the worry I think people would find it unlikely to improve much. [/b][/quote]

That is what I also.thought with proposed combined rates of more than 26%, how is it going to be the " most important legislation since 1947"? Will the CGST rates begin after turnover crosses 1.5 crores.as.is with excise duty now? With a tax rate of more than 26% how can you make manufacturing globally competetive?

Needless to say, I hate to pay this much tax and I am suffering from this loot. One thing I knew from begining is that MODIJI is not going to reduce taxes..if at all , he would put to good use what is collected..[/quote]

Govt. has not given out the GST rate so I don't know how you've decided that it is 26%. Also GST is to SIMPLIFY the existing tax regime. Never has it been said that tax rates would be lowered. You can only understand the complexity of taxes if you are a manufacturer yourself. Today through my manufacturing + trading firm I made a VAT sale of an item purchased by me paid with taxes - Excise + CST. Now the VAT varies from 0.5% to over 13.75%. This particular sale was for 13.75%. For other items it's 5% or 4%. So the customer pays 13.75% VAT but I am not able to adjust it either in Excise or CST that I paid. On top of that there's a stupid policy of giving Cforms which is an avoidable and unnecessary waste of resources for any business. For any service that my firm makes I have to make two separate bills for excise + vat & for service tax. On top of that VAT/CST is ALSO charged on the excise duty that I pay. So I'm paying tax for a tax that I'm paying!

Here's why GST is needed:
1) A business has to manage different non adjustable taxes and that too different rates for different times for a same business.
2) Rates of items keep changing through different taxnotifications. You miss one and you're at mercy of tax babus.
3) My unit is 2 kms from Punjab border & I've to pay 5.5% entry tax to sell in Punjab!! How do businesses like me compete and expand when you've entry tax barriers like that.
4) Ask any truck driver or transporter what mess it is at state barriers on borders. I hope with GST the transportation time will reduce.
5) Every quarter I file a VAT/CST return, a Excise return , a Service tax return, and pay these taxes separately. Why not simplify it into one and save the trouble and confusion?
Let me give you one more personal example. To process steel worth rs. 28 lakh in Punjab I was asked to pay 1.5 lakh in entry tax even when that material was to brought back in my state after servicing & the service to be provided only costed rs. 30,000!!! So I had to pay rs. 1,50,000 for a service of rs. 30,000?! And every tax officer I talked to, I got a different answer. I decided it's better to spend rs. 15 L to have that steel processing plant in my own unit than pay RS 1.5 L every time.

So IMHO, a proper GST framework IS needed, doesn't matter 12% or 20%.

pankajs · Post by **pankajs** » 21 Dec 2014 22:03

In addition, I have also heard the following.

1. Ease and speed of movement between states.
2. Rationalization of warehouses and logistics.
3. Money and personal deployed to deal with or game the multilayer tax system will now be deployed to a more productive use.
4. Pockets of unorganized sector still did not have to pay taxes or pay less tax.

Kajaria ceramics mgmt. stated that the price differential of 15-20% existing between organized and unorganized tile industry will narrow down to 10-14% post GST. That I guess was because of the lower taxes on unorganized sector.

Suraj · Post by **Suraj** » 21 Dec 2014 23:32

panduranghari wrote:That's because their economy is geared towards exports. Not internal consumption. Unless they address that, it's an uphill struggle to improve living conditions and create a sustainable economic model.

That's not a very complete picture. They chose that model initially because it provided the fastest rate of growth using a proven model. There's no need to re-invent the wheel and seek models that look great on paper but are unproven in reality. There are tons of models that never made the transition from ideal success to real world success. Better we take a proven working model and implement it as effectively as possible.

Further, despite them not focusing on internal consumption, today their internal market is massive, in most consumer categories. It happened because they simply fostered savings for a decade to fund their export engine, and when they built a domestic market later, people had enough to afford the goods.

Prem · Post by **Prem** » 22 Dec 2014 05:04

To have good economic equilibrium and balanced growth,We need maximum 2 Trillion $ exposure to outside world, rest unlimited can be domestic market, at least till our real shoe size grows to 18-22.

member_28714 · Post by **member_28714** » 22 Dec 2014 10:45

panduranghari wrote:India has more than enough man power and capital. What is missing is infrastructure and capital allocation. And PM Modi has promised good governance. If he is allowed 3 terms, he will deliver. I hope to see more debate in 'arthakranti'.

then why is cost of capital 20% for industry?

geeth · Post by **geeth** » 22 Dec 2014 11:24

Govt. has not given out the GST rate so I don't know how you've decided that it is 26%. Also GST is to SIMPLIFY the existing tax regime. Never has it been said that tax rates would be lowered. You can only understand the complexity of taxes if you are a manufacturer yourself

I did not decide the rate ...but that is what is proposed by the empowered committee. I am also a manufacturer, hence the concern. At present, if I make interstate purchase for raw materials, I pay 2% CST on C form and 14.5% VAT with no input tax credit on interstate purchase. Effectively I pay 16.5% if all my raw material purchase are interstate. This is if the turnover is below 1.5 crores. For turnover above 1.5 crores I pay additional 12.3% Excise duty with input credit..is that right?

Now with GST, I will end up paying 13 odd percent as VAT if turnover is below 1.5 Crore and additional 12 odd percent CGST for turnover above 1.5 crore..is that correct (subject to confirmation of rate)?

Previous committee had proposed 7 & 6 percent respectively for state and central GST..So new proposal is a huge jump. How does it address Tax Terrorism?

M Joshi · Post by **M Joshi** » 22 Dec 2014 18:41

geeth wrote:
Govt. has not given out the GST rate so I don't know how you've decided that it is 26%. Also GST is to SIMPLIFY the existing tax regime. Never has it been said that tax rates would be lowered. You can only understand the complexity of taxes if you are a manufacturer yourself
I did not decide the rate ...but that is what is proposed by the empowered committee. I am also a manufacturer, hence the concern. At present, if I make interstate purchase for raw materials, I pay 2% CST on C form and 14.5% VAT with no input tax credit on interstate purchase. Effectively I pay 16.5% if all my raw material purchase are interstate. This is if the turnover is below 1.5 crores. For turnover above 1.5 crores I pay additional 12.3% Excise duty with input credit..is that right?

Now with GST, I will end up paying 13 odd percent as VAT if turnover is below 1.5 Crore and additional 12 odd percent CGST for turnover above 1.5 crore..is that correct (subject to confirmation of rate)?

Previous committee had proposed 7 & 6 percent respectively for state and central GST..So new proposal is a huge jump. How does it address Tax Terrorism?

Well to answer you first point, VAT is not 14.5% on all items. As I said it varies from 0.5% to maybe 16%. So in your formula of total tax = VAT + CST + excise, VAT should be taken as weighted average of VAT on all items, which in all probability should be in 6-8% range.

Also the assertion that there will be two tier GST of CGST & SGST & that you'll have to pay 13% SGST below 1.5 crore turnover and additional 12% CGST over that turnover, partially defeats the purpose of GST. AFAIK FM has not agreed to this tax structure in his latest talks with the states. If you've any news item sharing a contrary view then please let us know.

panduranghari · Post by **panduranghari** » 22 Dec 2014 20:24

George wrote:
then why is cost of capital 20% for industry?

Because it should be higher. The idea that people are in business to make big bucks is close to American Business Model. There are costs of doing business. Some time you pay in the form of capital, sometimes in the form of intellectual property rights sometimes in the form of high labour costs. etc.

Suraj,
Regards The points made regarding Chinese business model - I do not disagree. There is nothing to disagree about. The only moot point is the colossal misallocation of resources purely to drive GDP numbers is a recipe for continued collateral damage to the health of the nature and humans.

Gyan · Post by **Gyan** » 24 Dec 2014 12:21

I sat down and wrote a long post over one week and lost it. I still don’t know how. So here is the summary:-

1. Keeping fiscal deficit low but still allowing inflation by permitting hot FII money is bad economics
2. Arvind Subramanian the Economic Adviser to Govt of India appointed by Modi also talks about increasing Public Infrastructure investment
3. Some Indian English Business TV Channels are also propagating this view i.e. the talking heads are against keeping fiscal deficit low but still allowing inflation by permitting hot FII money and admit that it is bad economics
4. It is reversal of almost of 25 years of economic policy of inviting foreign investment while killing Indian Pvt/Public Sector by keeping internal interest rate high
5. By my rough Calculation Our Combined Union and State Budget is around Rs 34 lakh crore per annum while only 2% out of it is infra spend.

Suraj · Post by **Suraj** » 24 Dec 2014 23:50

The primary driver of inflation and cost of capital is not FII inflows. They are driven by bottlenecks in supply and distribution combined with lack of effectively policy supporting domestic production. Further, government borrowing crowds out private borrowing, raising rates. In this regard, FII capital helps, because there has been significant interest in government and PSU debt by FIIs this year, hitting the $30 billion limit that GoI placed on FII holdings of domestic debt. By buying GoI debt, they reduce the pressure on the Indian banking sector to fund the government borrowings through the SLR mechanism.

Suraj · Post by **Suraj** » 25 Dec 2014 00:02

TFR has dropped like a rock in the last 15 years:
Implications of India's declining fertility rate

The latest official birth rate data indicate that fertility is declining at a faster rate than expected, implying that India will reach the point at which population stabilises a little earlier than anticipated. The numbers compiled through the Sample Registration Survey conducted by the Registrar General of India show that the overall fertility rate (the average number of children borne by a women in her lifespan), which was 3.6 at the beginning of the 1990s, has come down to just 2.3 in 2013 - a mere 0.2 points short of reaching the "replacement rate" needed to maintain the population at more or less a constant level. At current rates, the country can hope to reach peak population somewhere between 2020 and 2022, rather than in 2025 as was projected earlier. Essentially, the crude birth rate (CBR) - the number of births per 1,000 people - has dropped to 21.4 in 2013, a perceptible fall of 0.2 points in a single year. Predictably, it is the highest in Bihar (27.6) and the lowest (14.7) in Kerala. Just nine states, mostly in the north and east, have not yet reached the replacement level of 2.1; in at least eight states the average number of children per family has gone down below two.

This also places renewed urgency for economic growth, because otherwise we'll start growing old before we grow sufficiently rich, and dependency ratio worsens.

nawabs · Post by **nawabs** » 26 Dec 2014 14:36

China challenges India's polished diamond throne

http://www.business-standard.com/articl ... 048_1.html

India's long-held position as the world's top diamond polisher is being challenged by soaring output from China, compelling the south Asian country to seek help from ally and top rough diamond supplier Russia to defend its market share.

India has traditionally relied on the middlemen in trading hubs of Antwerp, Tel Aviv and Dubai for its supply of rough diamonds, which mainly come from Russia or Africa. Most of the world's diamond output is sent to India for cutting and polishing before being retailed around the world.

But China has managed to break the established trade route by getting diamonds directly from African mines in which Chinese companies have a stake. This has boosted the value of China's net exports of polished diamonds by 72% in the past five years to $8.9 billion.

While India's exports, supplied by firms such as Asian Star , Gitanjali Gems Ltd and Venus Jewel, rose 49% to $14 billion over that time, shipments have seen a sharp drop this year.

"China's active procurement of rough supply from African countries was reducing the supply available to Indian manufacturers," said Sandeep Varia, an executive of Indian industry body Assocham. "Many units across the country had to lay off workers due to losses."

As a result, China's share of the global polished diamond market has tripled to 17% in the past decade, according to data from the United Nations. India's share has fluctuated between 19 and 31%.

BRING IN RUSSIA

Prime Minister Narendra Modi, who comes from Gujarat where the polishing industry is centred, has answered calls to bolster the diamond sector by convincing Russia to sell rough diamonds directly to India.

During President Vladimir Putin's visit to New Delhi this month, Russia's state-run diamond monopoly Alrosa signed a dozen deals to increase direct rough diamond deliveries to India that would help reduce the cut taken by middlemen in the secretive precious gems trade.

The direct deals would also reduce risks linked to Western sanctions imposed over Russia's annexation of Crimea, while Modi is additionally seeking arrangements that would allow Russian jewellery makers to send rough diamonds to India and re-import polished stones duty-free.

But to compete effectively with China, India will also need to streamline its tax and import rules, industry sources said.

"China is not going to displace India as the leading diamond polishing hub any time soon, but India needs to reform its archaic tax rules to make the Indian diamond polishing industry more attractive for foreign miners," said Martin Rapaport, chairman of diamond and jewellery service firm Rapaport Group.

India is looking to build a special notified zone where companies can import rough diamonds on a consignment basis and re-export unsold ones, mirroring China's investor-friendly trading zones that avoid complicated export and import taxes.

"These are positive moves for the industry," said Mehul N. Shah, committee member of India's Bharat Diamond Bourse. "It will increase profit margins of the Indian diamond manufacturing industry and make it more competitive."

Despite China's upper hand in securing rough diamonds, its cutting and polishing industry is not as organised as India's and rising labour costs are a problem.

"The Chinese diamond polishing industry works on a contract-basis and through joint ventures," said Rapaport. "They are consistent at mass producing small stones, but lack the expertise required for bigger and finer stones."

darshhan · Post by **darshhan** » 26 Dec 2014 15:20

Suraj wrote:TFR has dropped like a rock in the last 15 years:
Implications of India's declining fertility rate
The latest official birth rate data indicate that fertility is declining at a faster rate than expected, implying that India will reach the point at which population stabilises a little earlier than anticipated. The numbers compiled through the Sample Registration Survey conducted by the Registrar General of India show that the overall fertility rate (the average number of children borne by a women in her lifespan), which was 3.6 at the beginning of the 1990s, has come down to just 2.3 in 2013 - a mere 0.2 points short of reaching the "replacement rate" needed to maintain the population at more or less a constant level. At current rates, the country can hope to reach peak population somewhere between 2020 and 2022, rather than in 2025 as was projected earlier. Essentially, the crude birth rate (CBR) - the number of births per 1,000 people - has dropped to 21.4 in 2013, a perceptible fall of 0.2 points in a single year. Predictably, it is the highest in Bihar (27.6) and the lowest (14.7) in Kerala. Just nine states, mostly in the north and east, have not yet reached the replacement level of 2.1; in at least eight states the average number of children per family has gone down below two.
This also places renewed urgency for economic growth, because otherwise we'll start growing old before we grow sufficiently rich, and dependency ratio worsens.

This has already happened in states like Kerala, West Bengal and Assam. Most of my friends from these states have no more than one child. It is like watching a whole society committing suicide. Ofcourse islamics in these states are still procreating at a fast pace.

vina · Post by **vina** » 26 Dec 2014 18:15

GST!! If there is something that will get rid of the disgrace that passes off at the interstate borders, nothing will be more useful.

For eg, I drove down to Kumarakom with family over the Christmas/New Year break. From Bangalore to Coimbatore, we did it in 3 1/4hrs (non stop). From Coimbatore to Kuaramakom was a friggin 10 hr drive ! The cross from TN into Kerala at Palghat /Walayar checkpost is a disgrace. It is a 2 lane road, with trucks backed up a couple of kilometres on either side, and there is a shack like thing which looks like it was built some 50 years ago, where each truck goes and does some paperwork and then gets across the border. You are looking like a good day for the truck to get across. If you hired a taxi, sure, your driver has to line up to do the paperwork (once at the hosur border and once at the kerala border).

The NH-47 the main carriage way in Kerala is a joke. Something seems atleast work in progress, on the Kerala side, on the TN side from Coimbatore to Palghat, nothing at all. No machinery, no work going on, nothing, except, some pillars and stuff built where you can sort of see where the highway will get formed.

All in all, roads in Kerala feel like they are in a time warp, if you go back maybe 30 years in TN and other places, where there were no by passes built around towns, no shoulders on the roads, basically a 2 lane carriageway and horrendous traffic. It feels like absolutely no new road was built in 40 years. SHQ says that the roads feel the same way it did when she grew up there as a kid. No sir, they enforce equality in everything, especially traffic. The average traffic speed on the road is reduced to the slowest truck,auto rickshaw whatever is on the road, because there is no way to pass.

And on top of this (or rather because of this), the folks here drive like they have a death wish when they get behind the wheel. It is really ludicrous driving and I shudder to think of the accident rates here. Doing 50 kms here takes something like 3 hrs ONE WAY! If we are whining about Bangalore traffic, we have no idea of how horrendous the places like Kochi etc are.

Drove down to Ambalapuzzha to the Sree Krishna Temple from Kuaramkom and it took me 4 hrs one way! Some of those roads are frankly a joke, with a single lane bride in "State Highways" and the major crossing point across the Vembanad lake being a 2 land road on the Thaneermukam dam! No sir , no stinkin bridges or anything. Thanks. The Paal Payasam at the temple was heavenly as always. There is quite nothing like it. Pink from having been cooked with the local red rice, the rice cooked in the milk itself and milk thickened while being cooked. No sir, no short cuts by adding milk Nestle Milkmaid condensed milk on cooked rice like the maid does . The temple makes that stuff the old way, just like my mom does and my grandma did.

But somehow I think that my ancestors from Alappuzha would have gotten to the temple and back in the bullock carts on pretty much the same roads faster than I driving my fancy car! Kerala road wise , factoring in the traffic seems to be at a standstill for the past 200 years.

Kerala needs to get rid of that Walayar checkpost ASAP. That state clearly has absolutely no use for it. The business and time lost in that rubbish far outweighs any revenue the state collects. Rememeber, the closest major port for the industrial areas of Coimbatore and Tiruppur etc would be Kochi and I am sure given the state of the Walayar checkpost and the criminal state of roads, I am sure no one sends anything across. Phack!

I am amazed that all the Mallus living in TN and KA and other places haven't raised hell on the state of the roads and the absolutely criminal nature of the crossings to only major land outlets that Kerala has. I cannot believed that they haven't kicked the testimonials of the politicos to a pulp and got something done. It seems as if someone called AB Vajpayee never became PM and built all those expressways all over the country.

If Modi gets the GST in place and the checkpoints are finally history, that will be truly momentous.

VinodTK · Post by **VinodTK** » 26 Dec 2014 19:40

China challenges India's polished diamond throne

NEW DELHI (Reuters) - India's long-held position as the world's top diamond polisher is being challenged by soaring output from China, compelling the south Asian country to seek help from ally and top rough diamond supplier Russia to defend its market share.

India has traditionally relied on the middlemen in trading hubs of Antwerp, Tel Aviv and Dubai for its supply of rough diamonds, which mainly come from Russia or Africa. Most of the world's diamond output is sent to India for cutting and polishing before being retailed around the world.

But China has managed to break the established trade route by getting diamonds directly from African mines in which Chinese companies have a stake. This has boosted the value of China's net exports of polished diamonds by 72 percent in the past five years to $8.9 billion.

While India's exports, supplied by firms such as Asian Star (ASAN.BO), Gitanjali Gems Ltd (GTGM.NS) and Venus Jewel, rose 49 percent to $14 billion over that time, shipments have seen a sharp drop this year.

"China's active procurement of rough supply from African countries was reducing the supply available to Indian manufacturers," said Sandeep Varia, an executive of Indian industry body Assocham. "Many units across the country had to lay off workers due to losses."

As a result, China's share of the global polished diamond market has tripled to 17 percent in the past decade, according to data from the United Nations. India's share has fluctuated between 19 and 31 percent.

BRING IN RUSSIA

Indian Prime Minister Narendra Modi, who comes from Gujarat where the polishing industry is centred, has answered calls to bolster the diamond sector by convincing Russia to sell rough diamonds directly to India.

During President Vladimir Putin's visit to New Delhi this month, Russia's state-run diamond monopoly Alrosa (ALRS.MM) signed a dozen deals to increase direct rough diamond deliveries to India that would help reduce the cut taken by middlemen in the secretive precious gems trade.

The direct deals would also reduce risks linked to Western sanctions imposed over Russia's annexation of Crimea, while Modi is additionally seeking arrangements that would allow Russian jewellery makers to send rough diamonds to India and re-import polished stones duty-free.

But to compete effectively with China, India will also need to streamline its tax and import rules, industry sources said.

"China is not going to displace India as the leading diamond polishing hub any time soon, but India needs to reform its archaic tax rules to make the Indian diamond polishing industry more attractive for foreign miners," said Martin Rapaport, chairman of diamond and jewellery service firm Rapaport Group.

India is looking to build a special notified zone where companies can import rough diamonds on a consignment basis and re-export unsold ones, mirroring China's investor-friendly trading zones that avoid complicated export and import taxes.

"These are positive moves for the industry," said Mehul N. Shah, committee member of India's Bharat Diamond Bourse. "It will increase profit margins of the Indian diamond manufacturing industry and make it more competitive."

Despite China's upper hand in securing rough diamonds, its cutting and polishing industry is not as organised as India's and rising labour costs are a problem.

"The Chinese diamond polishing industry works on a contract-basis and through joint ventures," said Rapaport. "They are consistent at mass producing small stones, but lack the expertise required for bigger and finer stones."

amritk · Post by **amritk** » 27 Dec 2014 00:21

vina wrote:GST!! If there is something that will get rid of the disgrace that passes off at the interstate borders, nothing will be more useful.

Since the purpose of these is to collect money, why not replace it with the following system. The truck files a declaration of goods online at a convenient time, pays online, then drives through without stopping unless flagged for a random audit. They could also file by phone via a call centre if access to computer is a problem. In theory the number plate could be automatically checked in the database also, though in practice reading (by camera) the creative artwork that passes for number plates could be a problem.

Arjun · Post by **Arjun** » 27 Dec 2014 19:25

Had to post this latest from Surjit Bhalla: Why no applause for Modi's reforms

The first half of this article is kind of pointless, but the second part (from middle of second page, posted below) is outstanding ! Don't know why he had to sully his reputation with the tripe in the beginning

Let me just take one example of how people’s attention has been distracted, helped no doubt by Congress strategists and experts. Today, inflation is a thirdof what it was last year — from 11 per cent in November 2013 to 4.3 per cent in November 2014; for the WPI, the numbers are 7.6 and 0 per cent, respectively. This is attributed by many to global deflation (the same that has been in process for the last six years when the UPA managed to deliver double-digit inflation). A big lie — in the previous two years (2012 and 2013) the median developing country CPI inflation averaged 4.2 per cent; in India, the average was close to 10 per cent.

But wait, Indian inflation is down because of Modi’s luck with crude prices. The oil price was stable in both 2012 and 2013 at around $100 (WTI) — the same time UPA inflation was raging. But wait, Indian inflation is down because of Modi’s luck with international food prices. But international food prices in November 2014 were only 4 per cent lower than November 2013.

So what has brought Indian inflation to 4.3 per cent? As has been mentioned umpteen times in this column, the primary determinant of inflation in India is not what the RBI does, but what the Central government (ministry of agriculture) does. The last minimum support price (MSP) increase by the UPA government, in March 2014 for the kharif crops, was 8.2 per cent versus 6.1 per cent in March 2013. The sheer audacity of the Sonia Gandhi-led government to increase MSPs at such a large rate in March 2014 was, of course, only paralleled by its belief that inflation did not matter for votes.

The first MSP of the Modi-led government was in October 2014, and the order of magnitude was (-)0.3 per cent — no typo there, minus 0.3 per cent — the seventh lowest change in 38 years. Of course, the fact that food inflation is down this year is not because of the rabi crop MSP for 2015. This policy will have its lowering effect next year, when inflation is likely to be close to 4 per cent, regardless of what the RBI does. (RBI, are you listening?)

Inflation is declining in 2014 because of “only” a 6.5 per cent aggregate (kharif and rabi) MSP increase in 2013, compared to a 14.4 per cent increase in 2012. In addition, inflation is declining because of several decisions the Modi government has taken regarding the pricing and marketing of food, and especially the release of foodgrains from the excess food “reserves” in the government’s possession.

But the BJP not only does not get any credit for reforms and improving the economic climate, it gets blamed for not doing anything for the economy! The reality is: inflation is down by a third, labour reforms have begun, near approval of the very important fiscal GST legislation, and ordinances on economic reforms relating to coal and insurance. The last two could have been legislation — but both BJP follies and opposition for the sake of opposition intransigence ensured that such was not the case. By the way, while several hugely negative economic policies occurred under the UPA, can any of the Congress naysayer experts point to a single positive policy initiated by the Sonia Gandhi-led UPA in its 10 years in power?

The BJP must feel that it can’t do anything right with respect to economic policy. It must feel like the son for whom the mother bought two shirts for his birthday. The son obediently put on one of the shirts to show and thank his mother. Upon which, the mother snorted and complained “You didn’t like the other shirt?”

SaiK · Post by **SaiK** » 29 Dec 2014 02:22

We are still hyphenated! catching up with China is important first step.

Theo_Fidel · Post by **Theo_Fidel** » 29 Dec 2014 02:34

Lets catch up with Nigeria first....

Anand K · Post by **Anand K** » 29 Dec 2014 09:44

Anyone got a detailed comparison of BRICS by the GDP components? Couldn't find one myself.

svinayak · Post by **svinayak** » 29 Dec 2014 11:00

data In India - 840 million voted in last general election and India's population already crossed 1.4 billion people unofficially and officially 1.31 billion and by 2020 India will have a population of more than 1.55 billion unofficially and officially 1.4 billion.Amazing but true we would have crossed china in this front.According to PPP basis by Paris Based OECD India already crossed 6 trillion dollar GDP in 2013 judging by their calculation on PPP.

Aditya_V · Post by **Aditya_V** » 29 Dec 2014 11:41

I think oFficial cenus we are only 1.21 billion in 2011 expected to be 1.41 billion in 2021, unless there about 190 million BD's. I think 840 million were eligible to vote and about 65% of those voted.

panduranghari · Post by **panduranghari** » 29 Dec 2014 15:29

Anand K wrote:Anyone got a detailed comparison of BRICS by the GDP components? Couldn't find one myself.

from http://forums.bharat-rakshak.com/viewto ... 3#p1750423

Vamsee · Post by **Vamsee** » 29 Dec 2014 20:58

Its raining ordinances

6 ordinances in last 10 days and more in pipeline

1) Insurance FDI limit hiked to 49%
2) Coal Mines amendment
3) Motor Vehicle act
4) Cabinet approves ordinance on amendments to Land Acquisition Act
5) Something was done regarding arbitration. Now there is a fixed time ( 9 months/ 2 years) for disputes. Heard it live on CNBC TV 18 so details are still sketchy. We need to wait for details.

Aditya_V · Post by **Aditya_V** » 30 Dec 2014 10:53

Good route, Rajya sabha has now to accept or reject, let them reject it and get it done through Joint parlimentary sessions. Rajya Sabha today is only trying to sabotage Lok saabha than doing anything constructive.

nawabs · Post by **nawabs** » 30 Dec 2014 19:09

Arjun wrote: So what has brought Indian inflation to 4.3 per cent? As has been mentioned umpteen times in this column, the primary determinant of inflation in India is not what the RBI does, but what the Central government (ministry of agriculture) does. The last minimum support price (MSP) increase by the UPA government, in March 2014 for the kharif crops, was 8.2 per cent versus 6.1 per cent in March 2013. The sheer audacity of the Sonia Gandhi-led government to increase MSPs at such a large rate in March 2014 was, of course, only paralleled by its belief that inflation did not matter for votes.

The first MSP of the Modi-led government was in October 2014, and the order of magnitude was (-)0.3 per cent — no typo there, minus 0.3 per cent — the seventh lowest change in 38 years. Of course, the fact that food inflation is down this year is not because of the rabi crop MSP for 2015. This policy will have its lowering effect next year, when inflation is likely to be close to 4 per cent, regardless of what the RBI does. (RBI, are you listening?)

Inflation is declining in 2014 because of “only” a 6.5 per cent aggregate (kharif and rabi) MSP increase in 2013, compared to a 14.4 per cent increase in 2012. In addition, inflation is declining because of several decisions the Modi government has taken regarding the pricing and marketing of food, and especially the release of foodgrains from the excess food “reserves” in the government’s possession.

But the BJP not only does not get any credit for reforms and improving the economic climate, it gets blamed for not doing anything for the economy! The reality is: inflation is down by a third, labour reforms have begun, near approval of the very important fiscal GST legislation, and ordinances on economic reforms relating to coal and insurance. The last two could have been legislation — but both BJP follies and opposition for the sake of opposition intransigence ensured that such was not the case. By the way, while several hugely negative economic policies occurred under the UPA, can any of the Congress naysayer experts point to a single positive policy initiated by the Sonia Gandhi-led UPA in its 10 years in power?

The BJP must feel that it can’t do anything right with respect to economic policy. It must feel like the son for whom the mother bought two shirts for his birthday. The son obediently put on one of the shirts to show and thank his mother. Upon which, the mother snorted and complained “You didn’t like the other shirt?”

[/quote]

RBI report says inflation to stay around 6% in next 12 months

http://www.business-standard.com/articl ... 652_1.html

Retail inflation would be around six per cent in the next 12 months, “if the international crude oil prices remain around the current levels and the monsoon next year turns out to be normal”, Reserve Bank of India (RBI) said in its Financial Stability Report released on Monday. At the same time RBI believe domestic activity which weakened in second quarter of 2014-15 is likely to be muted in third quarter also because of a moderate kharif harvest. RBI's current central estimate for GDP for 2014-15 is placed at 5.5 per cent with a gradual pickup in momentum through 2015-16.

In its fifth bi-monthly monetary policy review held earlier this month, RBI Governor Raghuram Rajan had said a change in the monetary policy stance was likely early next year, if improvements in inflation and fiscal health continued. The repo rate stands at eight per cent since the last increase of 25 basis points in January.

Economic growth has remained weak and this was evident from the fact that domestic activity weakened in the second quarter of 2014-15, with growth at 5.3 per cent. “Activity is likely to be muted in the third quarter also because of a moderate kharif harvest. Choppiness in the Index of Industrial Production growth during 2014-15, so far, has raised questions over consolidation of industrial growth. With capacity utilisation during the first quarter 2014-15 being the lowest in the past four years, significant new investments may take time to materialise. In addition, measures of new investment intentions currently show only a modest pick-up in investments,” the report noted.

SaiK · Post by **SaiK** » 02 Jan 2015 05:41

World Corruption Index 2014
The 2014 Corruption Perception Index measures the percieved levels of public sector corruption

red and yellows
dirty fellows

A RACIAL CHART!?!?!?

COME ON DESH! LETS GET OUT OF RED! AND SHOW THE WHITES ABOUT WHAT ANTI-CORRUPTION MEANS!

M Joshi · Post by **M Joshi** » 02 Jan 2015 12:18

India's manufacturing sector output reaches 2-year high in Dec: HSBC

The headline HSBC India Purchasing Managers' Index (PMI) -- a composite gauge designed to give a single-figure snapshot of manufacturing business conditions -- stood at 54.5 in December, up from 53.3 in the prior month.

Manufacturing companies registered a further rise in new export business in December and new work from abroad expanded at the quickest pace since April 2011.

The latest data also indicated towards a brighter picture in terms of prices, as inflationary pressures eased during the month.

"In line with falling commodity prices over the last few months, input price inflation was modest, and this trend was also mirrored in output prices," HSBC said.

OTOH Chinese PMI for the month of December was 49.6.
Signs of the beginning of the change.

Sachin · Post by **Sachin** » 02 Jan 2015 15:22

Vamsee wrote: 3) Motor Vehicle act

MV Act 1988 was to be replaced by a National Road Safety Act which had very steep fines and other penalties. Has that got passed as an Ordinance? Then did not see any news on that.

Austin · Post by **Austin** » 02 Jan 2015 15:47

Most of the countries where corruption is Clean are regulated like massive bribing for business would be called as lobbying and special interest group exist eg banking industry etc that regulate and officially channalise corruption , At lower level the corruption is taken care by so called Agents that do your work at a cost or you just end up tipping them

Hence those preception Index hardly is the real story

Surya · Post by **Surya** » 03 Jan 2015 00:31

not really - the clean ones are Canada, Australia, and the Scandinavian countries - they are not the places where a lot of lobbying and agents are found.

If you mean USA etc thats the next level and is not really indicated as Clean -

Hitesh · Post by **Hitesh** » 03 Jan 2015 04:22

Those countries are clean because the bureaucrats' salaries are high and they don't want to lose their job security and tenure by undergoing risky corruption endeavors. They enjoy a lot of perks in addition to their generous salaries. Thus motivation for corruption is vastly lower than other countries.

Austin · Post by **Austin** » 05 Jan 2015 11:54

Surya wrote:not really - the clean ones are Canada, Australia, and the Scandinavian countries - they are not the places where a lot of lobbying and agents are found.

If you mean USA etc thats the next level and is not really indicated as Clean -

These countries are clear coz corruption are leagalised in many ways and they have invented names that is more pleasing than bribing which has become a way of life.

Other than that babus earning high in these countries and a political sustem thats less corrupt at grassroot level helps it making it much better.

These reports are just perception index btw its like asking someone do you feel there is corruption and they make these reports which dont really reflect the true nature of corruption in all these countries.

Considering all these reports come from Western countries much like Human Right report or Credit Ratings they have their own inherent biased towards their own system of governance calling them Neat and Clean compared to others and much like their AAA rating thats perpetual the corruption perception index would be perpetual.

Suraj · Post by **Suraj** » 05 Jan 2015 13:04

A VERY significant step towards enabling cities to fund their development via debt issues rather than just tax revenues:
Municipal bonds: FinMin asks urban development ministry to identify cities

Days after the Securities and Exchange Board of India (Sebi) proposed new rules for issuance of municipal bonds, the finance ministry has asked its urban development counterpart to identify five or six cities, and specific infrastructure projects in those cities, for which those civic bodies could issue such bonds.

Municipal bonds are instruments issued by municipal bodies, or by states on these bodies’ behalf, to raise capital for infrastructure projects. After Finance Minister Arun Jaitley in the Union Budget for 2014-15 announced the intention to develop 100 smart cities, the government deliberated on various ways to finance the infrastructure for such cities and decided reviving the dormant municipal bonds could be one of the ways.

According to the plan, these will be Tier-II and -III cities and include smaller state capitals and satellite towns around larger metros. The official added the urban development ministry was expected to come up with specific names within a week.

On December 30, Sebi had released a concept paper on the issue and trading of such bonds on exchanges and invited comments from the public. The concept paper said the civic body issuing these bonds would have to obtain ratings from credit rating agencies and would have a minimum tenure of three years.

The market for municipal bonds has existed in India since 1998, when Ahmedabad became the country’s first city to issue such bonds. But 25 municipal bond issues in the past 16 years have garnered only about $300 million, according a report by Mukul Asher, professor at the National University of Singapore, and Shahana Sheikh of New Delhi’s Centre for Policy Research. The amount raised so far is only a fraction of those raised by developed markets like the US, where the municipal bond market is worth more than $3 trillion.

This has tremendous potential to help fund urban development, and eliminate the dependence on tax revenues and grants from the center as the primary source of such funding. Further, it provides cities an incentive to implement projects efficiently, because the bond rate will be priced for risk as viewed by the bond market; in order to issue at the lowest coupon rate, cities will have to prove their implementation efficiency.