Indian Economy - News & Discussion Oct 12 2013

RamaY · Post by **RamaY** » 08 Apr 2015 16:59

A_Gupta wrote:http://www.counterpunch.org/2015/04/07/ ... servitude/
The thrust of the article is that corporations are taking over India and
Across the globe, powerful corporations and their compliant politicians seek to sweep away peoples and their indigenous knowledge and culture in the chase for profit and control. They call this ‘development’. They will allow nothing and no one to stand in their way.

There is a pattern. We need more research data to support it but there is a pattern. Unless curtailed, once settled, it's going to look like a feudal society.

- Marriages between political & industrial families
- Progeny going to Ivy Leagues
- Corporations as new form of feudal economy
- Huge land allocations for these companies
- Company employees as vote banks
- These vote banks in turn sustain the business-political enterprise

Yagnasri · Post by **Yagnasri** » 08 Apr 2015 17:38

RamaY garu,

In Indian contest you missed the politicos, media fellows etc. They are as worst than industrialists etc. The main difference from Khanlands EU nations and India is the natural and extent of peoples participation. Here in India people do participate many times more. Registration of voters etc in India is done by the Election Commission whereas in Khanland people have to come forward and get themselves registered. Poor in India are active participants in election process and in Khanland as per my knowledge they do not. I may be wrong here.

Uttam · Post by **Uttam** » 08 Apr 2015 21:14

Here is wonderful interview with Raghuram Rajan. Looks like he has recovered well from his foot in mouth disease. He explains in very mango man language the rational behind interest rates, exchange rates, inflation, economic development, appropriate forex reserves, and banking as a sector. Please read it in its entirety.

Banks shouldn't decide rates, markets should: Raghuram Rajan

Hari Seldon · Post by **Hari Seldon** » 09 Apr 2015 07:44

>>PMOIndia-ReportCard ‏@PMOIndia_RC 12m12 minutes ago
Moody's changes India's outlook to positive, affirms Baa3 rating

It’s early, but El Nino casts shadow over monsoon

Rahul M · Post by **Rahul M** » 09 Apr 2015 07:49

from above

>> There is a strong correlation between an El Nino event and a poor monsoon.

IIRC there's weak correlation, not strong.

Suraj · Post by **Suraj** » 09 Apr 2015 09:43

PM launches MUDRA Bank to fund small businesses

FUNDING PUSH
Primary product of MUDRA will be refinance for lending to micro businesses and units. The initial products are:

SHISHU: Covering loans up to Rs 50,000
KISHOR: Covering loans above Rs 50,000 and up to Rs 5 lakh
TARUN: Covering loans above Rs 5 lakh and up to Rs 10 lakh

MUDRA's role will include:

Laying down policy guidelines for micro enterprise financing business, registration of MFI entities
Accreditation, rating of MFI entities
Laying down responsible financing practices to ward off over-indebtedness and ensure proper client protection principles and methods of recovery
Development of standardised set of covenants governing last-mile lending to micro enterprises
Promoting right technology solutions for the last mile
Formulating and running a credit guarantee scheme for providing guarantees to loans and portfolios being extended to micro enterprises
Support development and promotional activities in the sector
Creating a good architecture for last-mile credit delivery to micro businesses

Coal auction unlocks Rs 4 lakh crore: Coal Secretary

The auctions and allotments of 67 coal blocks so far has unlocked a total value of nearly Rs 4,00,000 crore, a senior coal ministry official said here today.

"Out of 67 blocks auctioned or allotted, a total benefit of Rs 3,35,000 crore is for states and another Rs 69,000 crore will be unlocked by way of tariff benefit to the consumers," Coal Secretary Anil Swarup said here today at Coal Consumers' Association of India interactive session.

Till now, 29 blocks have been auctioned and another 38 allotted to the state-owned entities.

The passing of the Coal Mines Special Provisions Bill, 2015 in Parliament allows the government to continue auctioning coal blocks to private companies.

Sixteen blocks will be put under hammer by third week of April, of which 11 will be for the power sector and the rest for the non-regulated sector.

Swarup said the government was deliberating on the segmentation of industries for the non-regulated sector for allowing a level-playing field. "I support the demand for segmentation of industries, like sponge iron, which should not be competing with cement bidder and we will also not differentiate between two companies of the same industry," he said.

Replying to a question, Swarup said that the government was deliberating on further lowering the end-use investment for blocks which will come in the next 2-3 years. He assured that none of the coal blocks is going to washeries. Swarup also expressed the confidence that with 204 blocks lined up to be allotted by March, 2016 in a transparent manner with a peak capacity of 800-900 million tonnes, 500 million tonnes of coal would be produced by 2020 to meet the 1.5 billion-tonne coal production target.

No plans to raise the FII debt holding cap from $30 billion, probably because RBI already has its hands full mopping up billions of dollars from the market each week, causing forex reserves to rise to almost $350 billion now:
No plan to raise FII G-sec limit

The limits for foreign institutional investment (FIIs) in government bonds are not likely to be raised for the present, as inflows into the economy remain strong, Finance Secretary Rajiv Mehrishi said on Wednesday.

“We have enough foreign fund flows. That is why there is no urgency to raise the limit," he told reporters after a meeting between Finance Minister Arun Jaitley and Reserve Bank of India Governor Raghuram Rajan here.

The government allows foreign investors to invest a maximum of $30 billion in government debt. Of this, $5 bn is for long-term investors. The investment by foreign funds in government bonds was 99.92 per cent of the $25 bn limit and 100 per cent for the $5 bn limit as of Tuesday, showed data from National Securities Depository Ltd.

Frederic · Post by **Frederic** » 10 Apr 2015 03:43

India's rich temples may open gold vaults for PM Modi
***********************************************

Source : Reuters:

http://www.trust.org/item/20150409210057-krzyy/

India is the world's biggest consumer of gold and its ancient temples have collected billions of dollars in jewellery, bars and coins over the centuries - all hidden securely in vaults, some ancient and some modern.

A few years ago a treasure of gold worth an estimated $20 billion was discovered in secret subterranean vaults in the Sree Padmanabha Swamy temple in Kerala state.

Now, Prime Minister Narendra Modi wants to get his hands on this temple gold, estimated at about 3,000 tonnes, more than two thirds of the gold held in the U.S bullion depository at Fort Knox, Kentucky, to help tackle India's chronic trade imbalance.

.....

Modi's government is planning to launch a scheme in May that would encourage temples to deposit their gold with banks in return for interest payments.

The government would melt the gold and loan it to jewellers to meet an insatiable appetite for gold and reduce economically-crippling gold imports, which accounted for 28 percent of India's trade deficit in the year ending March 2013.

India's annual gold imports of 800 to 1,000 tonnes could be cut by a quarter if temples decided to participate in the scheme, say government and industry sources.

"We would be happy to deposit our gold to nationalised banks if the policy is beneficial, safe and earns good interest," said Narendra Murari Rane, chairman of the trust for the Siddhivinayak temple, portions of which are gold-plated.

.....

INTEREST RATE KEY

Key to Modi's plan will be the interest rates offered for gold deposits.

A similar gold monetization plan launched in 1999 proved ineffective, in part because the interest rates offered on gold deposits were regarded by temple officials as too low.

Under that scheme India's top lender the State Bank of India offers 0.75 percent to 1 percent and only 15 tonnes of gold has been deposited so far.

Temple officials at Siddhivinayak and Shri Saibaba Sansthan in Shirdi, both in the western state of Maharashtra, say they expect interest rates in the new scheme to be much higher and so would consider participating.

The government plans to reveal rate details when it launches the new scheme. Siddhivinayak's Rane said he expected at least 5 percent interest on gold deposits.

Rajendra Jadhav, executive officer of the Shri Saibaba Sansthan temple trust, said rates will also be key to his temple's decision. He declined to say how much gold the temple, dedicated to a 19th century saint, had in its vaults.

A successful gold monetization programme could go a long way in helping India reduce its trade imbalance.

India raised the import duty on gold, the country's biggest non-essential import, and imposed other restrictions in 2013 after the current account deficit hit a record $190 billion.

If India can cut imports, that would pressure gold prices that fell to a four-month low last month before recovering. Lower gold prices will help India cut its import bill.

However, a successful scheme could also expose the government to potential risks, if gold prices were to take off and depositors decided to withdraw at the same time.

Recall that S.Gurumurthy was stressing this point in one of his lectures. I am sure there is a link for that talk somewhere here in the forum.

arshyam · Post by **arshyam** » 10 Apr 2015 03:55

^^ He says this in most of his lectures. He even pitched the idea to Pranab Mukherjee, when he was running the Finance ministry, but the latter didn't take it up. It's mentioned in this speech:

Also Prof Vaidyanathan has been saying something similar, use our purchasing power to call the shots at the World Gold Council, but apparently we are not even a member of it.

Never heard of these people: http://www.gold.org/about-us/our-members

Suraj · Post by **Suraj** » 10 Apr 2015 04:05

WGC are a consortium of mining companies. We don't have a presence in the gold mining business, unless we find another Kolar Gold Field.

Frederic · Post by **Frederic** » 10 Apr 2015 04:07

But saar, having a bumper reserve of gold at our disposal will enable the gobermint to call the shots wrt the pricing?

At least, this is what Shri.Gurumurthy postulates. Any thoughts?

Suraj · Post by **Suraj** » 10 Apr 2015 04:19

GoI's actions are carefully thought out, trying to monetize our massive private gold hoard while avoiding the mistakes of the previous efforts. If we do so effectively, we will have a greater clout in the gold market. Right now we're largely a passive importer and consumer. I don't think the current government's efforts are simply doing the same thing previously done, while seeking different results.

I'm keen on seeing how well the gold monetization effort plays out. I'm of the opinion that the best way to make it happen is to make financial inclusion, nominal economic growth, formal employment growth and industrialization work. Why ? Because people hold on to gold as a hedge against uncertainity and store of value against inflation. Periods of fast growth and low inflation lead people to invest their money elsewhere. Stagnant periods drive gold hoarding because people worry about their money being eroded by inflation. In that regard, a lot of current programs work together.

A very good view of how GoI is announcing multiple policies that are intended to work together as they mature, is Chapter 3 of the current Economic Survey. Read Pg.53 on - the chapter titled "‘Wiping every tear from every eye’: the JAM Number Trinity Solution" . The survey was authored by CEA Arvind Subramaniam, but you can see Modi's paw prints all over this chapter.

PMJDY, MUDRA and other programs, even the gold monetization scheme, are related efforts being driven right from the top, by someone with a very good idea of what he wants to accomplish here, and the means to get it done, never mind he's no Oxbridge economist like the rather useless predecessor.

amit · Post by **amit** » 10 Apr 2015 07:19

Suraj,

Of all the schemes that have been announced over the past year I personally have the highest hopes from MUDRA. If the bank can get the loans to the right people this will have immense impact on both growth and employment IMO.

Meanwhile some really good news, posted in all place on Washington Post

India’s schools now have an equal ratio of girls and boys, and that’s a big deal

Some impressive stats:

One of the most startling findings in the report shows that India will be the only country in South and West Asia to have an equal ratio of girls and boys in primary and senior school this year – rare good news for a country battling widespread criticism over its treatment of women.

Between 2005 and 2014, India stepped up investment in education from about $14 billion to $62 billion.

About 45 percent of schools now have electricity, up from 20 percent in 2003.

About 78 percent of paved roads have been built around schools, up from 63 percent.

I would urge folks to keep in mind the sheer size of absolute numbers in a country like India when they look at the percentage figures.

However, not every thing is hunky dory.

Even as school infrastructure and facilities improved, learning outcomes remained poor. Fifth-grade students in government-run schools in nine Indian states cannot read second-grade textbooks, said the Annual Status of Education Report in January.

“The children are physically present, but many of them are cognitively absent. Addressing learning is the next major issue for us,” Govinda said. “We have to significantly enhance teacher quality now.”

I'm posting this in economics dhaga because this news implies that in 10-15 years we will be having far more well educated people entering the workforce. This is a double edged sword. If the economy is able to absorb these workers, India's growth will start to soar just around the time when China's growth - despite Shanghai stats will be plummeting - and this will work wonders. However, if Indian growth falters in this 10-15 years and the economy cannot absorb these new people, then that a toxic brew for social disorder.

Which why Modi needs to get it right (and so far the indications are good) and he needs at least 10 years time.

Prem · Post by **Prem** » 10 Apr 2015 08:16

http://in.reuters.com/article/2015/04/0 ... BW20150409
India's rich temples may open gold vaults for PM Modi

Reuters) - The two-century-old Shree Siddhivinayak temple in Mumbai devoted to the Hindu elephant-headed god Ganesha bristles with close circuit cameras and is guarded by 65 security officers.It is one of India's richest temples, having amassed 158 kg of gold offerings, worth some $67 million, and its heavily guarded vaults are strictly off limits.India is the world's biggest consumer of gold and its ancient temples have collected billions of dollars in jewellery, bars and coins over the centuries - all hidden securely in vaults, some ancient and some modern.A few years ago a treasure of gold worth an estimated $20 billion was discovered in secret subterranean vaults in the Sree Padmanabha Swamy temple in Kerala state.Now, Prime Minister Narendra Modi wants to get his hands on this temple gold, estimated at about 3,000 tonnes, more than two thirds of the gold held in the U.S bullion depository at Fort Knox, Kentucky, to help tackle India's chronic trade imbalance.Modi's government is planning to launch a scheme in May that would encourage temples to deposit their gold with banks in return for interest payments.The government would melt the gold and loan it to jewellers to meet an insatiable appetite for gold and reduce economically-crippling gold imports, which accounted for 28 percent of India's trade deficit in the year ending March 2013.India's annual gold imports of 800 to 1,000 tonnes could be cut by a quarter if temples decided to participate in the scheme, say government and industry sources.
"We would be happy to deposit our gold to nationalised banks if the policy is beneficial, safe and earns good interest," said Narendra Murari Rane, chairman of the trust for the Siddhivinayak temple, portions of which are gold-plated.But some Hindu devotees are not happy with the idea that their offerings could be melted down.A Mumbai-based gold merchant, who said he and his father had donated around 200 kg of gold to Siddhivinayak and other temples over the years, said it would be a sin for the temples to earn interest on the gold offered to the gods."I make donations to God; not to any temple trust," the 52-year-old merchant said.Modi would also like to convince Indians to open their family vaults, which hold an estimated 17,000 tonnes of gold in jewellery and other heirlooms.
But it will be much harder to convince Indian families, who sometimes have little faith in financial institutions, to break tradition and hand over gold passed down the generations.India's love affair with gold spans centuries is rooted in the Hindu religion. One of the biggest annual buying seasons is the Diwali festival around October to November. Gold marriage dowries are widespread and with 70 percent of the population rural, gold is financial security.
A similar gold monetization plan launched in 1999 proved ineffective, in part because the interest rates offered on gold deposits were regarded by temple officials as too low.Under that scheme India's top lender the State Bank of India (SBI.NS) offers 0.75 percent to 1 percent and only 15 tonnes of gold has been deposited so far.Temple officials at Siddhivinayak and Shri Saibaba Sansthan in Shirdi, both in the western state of Maharashtra, say they expect interest rates in the new scheme to be much higher and so would consider participating.The government plans to reveal rate details when it launches the new scheme. Siddhivinayak's Rane said he expected at least 5 percent interest on gold deposits.Rajendra Jadhav, executive officer of the Shri Saibaba Sansthan temple trust, said rates will also be key to his temple's decision. He declined to say how much gold the temple, dedicated to a 19th century saint, had in its vaults.A successful gold monetization programme could go a long way in helping India reduce its trade imbalance.India raised the import duty on gold, the country's biggest non-essential import, and imposed other restrictions in 2013 after the current account deficit hit a record $190 billion.If India can cut imports, that would pressure gold prices XAU= that fell to a four-month low last month before recovering. Lower gold prices will help India cut its import bill.However, a successful scheme could also expose the government to potential risks, if gold prices were to take off and depositors decided to withdraw at the same time."There is going to be a lock-in period under the new gold monetizing scheme," said Sudheesh Nambiath, an analyst at precious metals consultancy GFMS. "Banks will have to replenish the stocks with imports later (if temples withdraw gold)."

vishvak · Post by **vishvak** » 10 Apr 2015 09:10

This scheme is not exactly BIG, considering annual gold imports are about 900 tons already. On the other hand, gold at temples would be in form of jewelry and in case of Shri Padmanabha Swamy temple, the coins date back hundreds of years. Such a scheme will destroy intrinsic historic value while interfering in temple wealth and management. Actually, considering that India needs to have a say in global market, a simple rule of Govt. offering to ascertain and mark and quality of "imported gold" alone can directly affect the global market, without unnecessary divergence.

RoyG · Post by **RoyG** » 10 Apr 2015 20:00

I agree. I think that we should store the gold treasures away in a vault to keep them safe and instead try and instead tap the market and private individuals to shore up our gold stock.

chaitanya · Post by **chaitanya** » 10 Apr 2015 21:08

India's Feb industrial output grows at 5%, fastest in 9 months

India's industrial output growth accelerated to 5.0 per cent in February, its fastest pace in nine months, mainly driven by growth in capital goods and consumer goods sectors, government data showed on Friday.

India plans to release industrial output data based on a new methodology and use a different base year for calculating the index in the next few months, a senior government official at the statistics ministry told Reuters on Thursday.

Suraj · Post by **Suraj** » 10 Apr 2015 21:32

The Feb IIP is a welcome piece of news. If it's sustained 2-3 months, we can truly saw the investment cycle is taking hold.

Supratik · Post by **Supratik** » 10 Apr 2015 21:47

Very good news on the education front. First we should get the quantity up and then the quality. Also good news is that all communities are sending their girls to school.

arshyam · Post by **arshyam** » 10 Apr 2015 21:50

^^ Watch what NaMo says in this video. Once 100% enrollment was achieved, he wanted to focus on reducing dropout rates. He has the right approach.

(Of course, ignore the barbs served by the interviewer)

Supratik · Post by **Supratik** » 10 Apr 2015 21:57

17 agreements signed between India and France. Please post details here.

VenkataS · Post by **VenkataS** » 11 Apr 2015 02:15

Arshyam - I cannot see a video link in your post with respect to Modi speaking about Education. Can you please edit your post.

RoyG · Post by **RoyG** » 11 Apr 2015 02:47

arshyam wrote:^^ He says this in most of his lectures. He even pitched the idea to Pranab Mukherjee, when he was running the Finance ministry, but the latter didn't take it up. It's mentioned in this speech:

Also Prof Vaidyanathan has been saying something similar, use our purchasing power to call the shots at the World Gold Council, but apparently we are not even a member of it.

Never heard of these people: http://www.gold.org/about-us/our-members

For some reason the government doesn't fully realize that our gold reserves in private hands is a strategic weapon. This really frustrates me. Hopefully, all these gold deposit schemes become a reality and the gov adds 3000-6000 tons to its reserve stock. We also need to ensure that the gold that is with the IMF makes its way to indian vaults. If we don't hold it, we don't own it.

arshyam · Post by **arshyam** » 11 Apr 2015 03:47

VenkataS wrote:Arshyam - I cannot see a video link in your post with respect to Modi speaking about Education. Can you please edit your post.

I edited and saved the post, now the video shows up. I couldn't find anything wrong with the original link, not sure why it wasn't embedding the video.

Anyway, if it still does not work, here is the full url: https://www.youtube.com/watch?v=niNRq5xZ-3o

Suraj · Post by **Suraj** » 11 Apr 2015 04:18

Along with IIP, more numbers are lining up:
Car sales rise first time in 3 years

Sales of passenger cars in India rose in 2014-15 after a decline in the earlier two years, by almost five per cent to 1.87 million.

In the previous two financial years (ending March 31), car sales dropped 7.7 per cent and 4.7 per cent, respectively, according to data from the Society of Indian Automobile Manufacturers (Siam).

However, commercial vehicles declined 2.8 per cent to 614,961, though sales of medium and heavy CVs increased 16 per cent to 232,755 units. Mathur said sales of heavy trucks had gained due to the start of various infrastructural activities like mining and construction of roads, while sales of light CVs have still not picked up. “The ntotal volume of medium and heavy CVs is far lower than in 2011-12,” said Sandilya.

Sales of two-wheelers grew 8.1 per cent to 16 mn, backed by strong scooter sales. Scooters as a segment grew 25 per cent to 4.5 mn in 2014-15. Motorcycle sales, however, fell 2.5 per cent to 10.7 mn.

HDFC cuts home loan rates by 20 bps to 9.9%

After the lending rate cuts by banks, India's top mortgage lender, HDFC, has cut its home loan rate by 20 basis points (bps) to 9.9 per cent with effect from Monday. With this, the gap between the rates offered by HDFC and State Bank of India (SBI) on home loans has widened.

Earlier HDFC gave home loans at 10.10 per cent, while SBI charged 10.15 per cent. The country's largest bank is now offering home loans at 9.95 per cent for women customers and 10 per cent for others. In a statement, HDFC said the reduction in retail prime lending would benefit all customers and the reduction will also be applicable on loans to non-resident Indians (NRIs). HDFC also revised its deposit rates.

RBI's forex reserves climb to an all-time high of $ 343 bn

The Reserve Bank of India’s foreign exchange reserves hit an all-time high of $343 billion for the week ending April 3, show data released on Friday.

The rise in reserves was $1.63 billion. This is the ninth time this year foreign exchange reserves touched an all-time high. Foreign currency assets rose $2.40 billion to $318.64 billion.

The reserves have been rising because the central bank has been mopping dollar flows through state-run banks.

During the week, gold reserves fell $799 million to $19.04 billion.

For the week under review, the special drawing rights rose to $4.02 billion, while India’s reserve position with the International Monetary Fund was up $5.4 million to $1.30 billion.

In the meanwhile, RBI also released data on its foreign currency operations in February according to which net purchases stood at $ 7.84 billion compared with $ 12.14 billion the previous month. The outstanding net forward purchases was at $ 5.83 billion compared with $ 5.58 billion the previous month.

Prem · Post by **Prem** » 11 Apr 2015 05:21

http://www.rbi.org.in/scripts/WSSView.aspx?Id=19749
Reserves are up again by Buck and Half !

Supratik · Post by **Supratik** » 11 Apr 2015 12:53

X-posting

20 agreements

http://www.narendramodi.in/list-of-agre ... pril-2015/

arshyam · Post by **arshyam** » 11 Apr 2015 22:17

Suraj wrote:RBI's forex reserves climb to an all-time high of $ 343 bn
This is the ninth time this year foreign exchange reserves touched an all-time high.

We should stop using such terms. With acchhe din here, the reserves will keep climbing for a while, and pretty much every week's data will break the record...

Suraj · Post by **Suraj** » 12 Apr 2015 00:05

All but about 2-3 weeks so far this year have been 'all time highs' for forex reserves this year. They will tire of it soon enough.

srin · Post by **srin** » 12 Apr 2015 10:11

Here's an analysis of it, though a lot of it went over my head: http://capitalmind.in/2015/04/rbi-is-bu ... 7-billion/

There’s only one scary part about this: Inflation. RBI has been printing to buy dollars recently, so why isn’t there any inflation? Answer: because it’s not allowed rupees to go berserk, in terms of higher money supply. RBI has been selling rupee bonds and putting the rupees out that it gets of circulation. But not any more.

(RBI owns rupee government bonds because it buys them once in a while, typically as “OMO” operations or as part of deals it makes in the market. It holds these bonds on its balance sheet as part of its long term assets.)

There’s a very good reason that inflation will hit us in a few months, because the RBI has recently changed; it’s no longer selling any more rupee bonds.

Suraj · Post by **Suraj** » 12 Apr 2015 10:39

There's not necessarily any need for inflation to occur just because RBI stops issuing market sterilization bonds. They can do something else instead - let the Rupee appreciate. The current exchange rate is suited to the stagflationary conditions since 2011, but as the economy strengthens, it's normal for the Rupee to move higher too.

panduranghari · Post by **panduranghari** » 12 Apr 2015 13:19

RoyG wrote: For some reason the government doesn't fully realize that our gold reserves in private hands is a strategic weapon. This really frustrates me. Hopefully, all these gold deposit schemes become a reality and the gov adds 3000-6000 tons to its reserve stock. We also need to ensure that the gold that is with the IMF makes its way to indian vaults. If we don't hold it, we don't own it.

Isn't gold held by Indians within India in theory reserves? And is it not better that the reserves are distributed more widely than held in one place? If Paki Goldfinger decides to bomb Indian gold reserves with a nuke rendering the gold radioactive for a short time(

), would the reserve held widely amongst the public in India rescue the currency?

Rahul M · Post by **Rahul M** » 12 Apr 2015 13:27

Suraj, how strongly correlated are INR USD exchange rate and our export performance ? what is the upper limit to which INR can appreciate without affecting exports ?

chaanakya · Post by **chaanakya** » 12 Apr 2015 17:38

I Dollar equals to about 6.2 yuan and it does not affect Chinese Export then A strong rupee would not affect it provided we are competitive and qualitative and produce in bulk.

panduranghari · Post by **panduranghari** » 12 Apr 2015 20:35

Has anyone read the financial sector legislative reforms commission report?

http://finmin.nic.in/fslrc/fslrc_report_vol1.pdf

http://finmin.nic.in/fslrc/fslrc_report_vol2.pdf

It's very good. It will revolutionise finance sector. The question does arise, does GOI have the courage to implement these reforms.
This section was why Rajan was at logger heads with the government. His powers would be curbed.

India has a fully open current account, but many restrictions on the capital account are in place. A major debate in the field of economic policy concerns the sequencing and timing towards capital account convertibility. The Commission has no view on this ques- tion. The focus of the Commission has been on establishing sound principles of public administration and law for capital account restrictions. A large array of the diiculties with the present arrangements would be addressed by emphasising the rule of law and by establishing sound principles of public administration. In terms of creation of rules, it is envisaged that the Ministry of Finance would make ‘rules’ that control inbound capital flows (and their repatriation) and that rbi would make ‘regulations’ about out bound capital flows (and their repatriation). With rbi,the regulation- making process would be exactly the same as that used in all regulation-making in the Commission framework. With Ministry of Finance, the rule-making process would be substantially similar. The implementation of all capital controls would vest with the rbi. The dra Code envisages the full operation of the rule of law in this implementation.

General outline:

The first step is the construction and analysis of a system-wide database. This effort, which will be located at the Financial Stability and Development Council (Financial Stability and Development Council (fsdc)), will analyse the entire financial system and not a subset of it. The discussions at fsdc would communicate the results of this analysis to all regulators, who would co-operate in proposing and implementing solutions.

The second step is the identification of Systemically Important Financial Institutions (sifis). The analysis of the unified database, using rules which are agreed upon at fsdc, will be used to make a checklist of sifis. These will be subjected to heightened micro- prudential regulation by their respective supervisors.

The third step is the construction and application of system-wide tools for systemic risk regulation.

The fourth step is inter-regulatory co-ordination. Effective co-ordination across a wide array of policy questions is an essential tool for systemic risk reduction.

Finally, the fifth step is crisis management. The Commission envisages the Ministry of Finance as playing the leadership role in a crisis. Here, fsdc will only play a supporting role.

Four of the five elements of the systemic risk process involve a leadership role at fsdc. The Commission envisages that fsdc would be a new statutory agency, in contrast with its relatively informal existence at present.

panduranghari · Post by **panduranghari** » 12 Apr 2015 20:57

Prime minister Narendra Modi's longest foreign tour of eight days to France, Germany and Canada is an occasion for multipurpose diplomacy to further India's interests. It advances a 'Link West' agenda to complement the 'Act East' policy and presents India as a balanced player that is strategically attentive in all geographic directions.

Industrialised Western middle powers have tremendous potential to assist India's rising economic graph. Modi is tugging at the hearts and minds of corporate titans sitting over investible capital in France, Germany and Canada because he is perceived to be walking the talk on overhauling the Indian economy. His 'Make in India' campaign is garnering serious foreign attention and buyin thanks to the accelerating pace of our GDP growth.
High-profile CEO forums with visiting Indian prime ministers are not Modi's inventions. They have been held even by his predecessors during foreign visits. But now, these interactive sessions are laced with greater hope and belief among foreign investors because Modi is hitting the right notes and running India like a CEO.

As he struts the stage in western Europe and North America, the proverbial wind is at his back, with the Indian economy entering a sweet spot after six years of list ..

Read more at:
http://economictimes.indiatimes.com/art ... aign=cppst

Read it all. Very good job.

Supratik · Post by **Supratik** » 12 Apr 2015 21:10

Full convertability is not desirable at least at this stage. It led to the East Asian crisis which set them back by 20 yrs. They are stuck in a high middle income or low high income stage and have been unable to make the jump. The Western powers + Japan control world capital. So they have less worries about capital outflows.

RoyG · Post by **RoyG** » 12 Apr 2015 22:35

panduranghari wrote:
RoyG wrote: For some reason the government doesn't fully realize that our gold reserves in private hands is a strategic weapon. This really frustrates me. Hopefully, all these gold deposit schemes become a reality and the gov adds 3000-6000 tons to its reserve stock. We also need to ensure that the gold that is with the IMF makes its way to indian vaults. If we don't hold it, we don't own it.
Isn't gold held by Indians within India in theory reserves? And is it not better that the reserves are distributed more widely than held in one place? If Paki Goldfinger decides to bomb Indian gold reserves with a nuke rendering the gold radioactive for a short time( ), would the reserve held widely amongst the public in India rescue the currency?

To your first point, yes. Hence, "gold reserves in private hands is a strategic weapon." Your second point is just bizzare. Just because Pakistan/China can nuke this and that, doesn't mean that you cower down and do nothing. Why build anything? Most of India's reserves should be held in private hands but 3000-6000 should be in the hands of GoI. We can scatter it in 1-3 sites.

Suraj · Post by **Suraj** » 12 Apr 2015 22:42

Rahul M wrote:Suraj, how strongly correlated are INR USD exchange rate and our export performance ? what is the upper limit to which INR can appreciate without affecting exports ?

A significant fraction of our exports are exchange rate agnostic; they come from petroleum and petrochemical exports, and gems and jewelry. Both involve importing something, a value add and export. Doesn't matter what the exchange rate is, in this situation. Another large fragment is engineered goods, and chemical products. Neither are as low margin as, say, textiles.

We should worry about getting our road and rail transportation up, and port capacity up, before worrying about exchange rate. There's a lot of slack in the supply chain that can easily make up for any notional lack of competitiveness arising from exchange rate strengthening:
India's Major Ports Fight to Ease Congestion

Rahul M · Post by **Rahul M** » 12 Apr 2015 23:29

very insightful. thanks a lot.

Suraj · Post by **Suraj** » 13 Apr 2015 00:25

Our port capacity and performance remains abysmal for our needs. Colombo port has greater TEU throughput than any port in India. Our busiest container port, JNPT, is #33 , with 4.1 million TEUs . Never mind the likes of Shanghai or Rotterdam, it ranks behind Colombo and 'well known' ports like Yinkou and Lianyungang. To be fair they are massively expanding JNPT to 10 mTEU capacity by 2020 . But they're already well behind the curve as far as getting port capacity in place is concerned. A lot of ports that had comparable or lower capacity have rocketed far ahead of JNPT now.

Besides that, turnaround time for ships is very poor - it takes 84 hours in India, compared to 7-8hrs in the top ports like Shanghai or Hong Kong. Worrying about exchange rates in this situation is like driving a car with a clogged air and fuel filter, poor engine lubrication and useless coolant, loaded with too much, and instead of fixing that, worrying about the gentle incline in the road. Fix the infrastructure costs and we can easily bear much stronger exchange rate and come out much further ahead simply because of the positive gains from having better infrastructure in place.

With all these hurdles, I am amazed that we even managed to grow our exports from ~$35 billion in 1999-00 to $320 billion now. It could have been far more with sustained investment in port and feeder infrastructure, and the new focus on DFC and port expansion should help us raise exports to $750-800 billion with nothing more than sustained and effective execution of existing plans.