Indian Economy - News & Discussion Oct 12 2013

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nachiket
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Re: Indian Economy - News & Discussion Oct 12 2013

Post by nachiket »

Somnath, the social sector schemes were a fait accompli delivered to the present govt. by the NAC loons and their masters. Removing them root and stem is what is needed, but that would be electoral suicide. I don't know how they started out but they became part of the previous govt.'s scorched earth policy when they figured out the schemes (including your favorite MNREGA) were disastrous and they were going to lose the elections.

The present govt. has done the next best thing. Tried to target them better. Instead of one MNREGA worker filing up a hole another one digs, try to use them for building lasting rural infrastructure, and so on. It's not perfect but you can hardly blame the current govt. for that.

Your comments about corruption compensating for inefficiencies are even more hilarious. Perhaps that is why you left out the part about the coal scam from my quoted post. The coal scam was the precise reason so much power generation capacity was lying idle. Way to remove inefficiencies. I guess they couldn't indulge in enough corruption in the road building sector. That's why the rate of road building had slowed to a crawl. :lol:

And removing corruption isn't the only thing different. This government actually does it's job. It has substantially reduced bureaucratic and governmental lethargy and incompetence as well. You just have to look at the number of projects stuck for ages in red tape and environmental clearances left by the previous govt. that the present one cleared in record time. Just Jairam Ramesh and Jayanti natarajan between themselves probably cost us a percentage of GDP growth every year.

My point is, your more of the same argument falls flat on the ground. If you need more examples, just read the previous pages of this thread.
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Re: Indian Economy - News & Discussion Oct 12 2013

Post by Arjun »

somnath wrote:The new Indian headline growth numbers are quite problematic. Even RBI doesn't quite "understand" them, a euphemism for saying that it doesn't all add up.
:shock: India cooking its books! Quite brazen I must say....does that also happen to be the Stanchart view :P
Theo_Fidel

Re: Indian Economy - News & Discussion Oct 12 2013

Post by Theo_Fidel »

WRT power and steel over capacity, it is a passing phase linked to the EB cash flow problems and the lack of expanding infrastructure demand. There is high demand for power that EB's are unable to supply. This over capacity will be easily eaten up in the next 5 years of expanding economy. So if you want capacity after 5 years the planning and investing should start now.

The main problem right now is that the private sector is not making a lot of money. If they were making money hand over fist, 30% margins, etc they can easily afford to pay for the high interest, new investment , wage increase etc. Margins are low, hence investment is low. The main reason for this is probably the domestic economy is not expanding fast enough and the export economy is not growing fast enough to change what is going on. Not sure why domestic consumption is paralyzed. Probably a Nobel prize is in there for who ever figures that one out.

WRT corruption, all countries including industrialized ones have staggering levels of corruption at the highest levels. You think not, then look up the story of the Oak Flatts copper mine in USA. A $100 Billion copper deposit is being sold to a company at ~$10 per acre. It is the relentless international media barrage that convinces us the India is somehow special in this regard. Many of us have posted that at least in our limited interactions we havn't run into corruption. Sure it exists, but as long as business gets done things keep moving, hold you nose and pass the salt. People who imagine that any administration is clean need to rethink their position. JJ is corrupt yet she keeps the lights on and the economy moving so people forgive her at the polls. Replacing her with someone clean but incapable would be a real disaster...
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Re: Indian Economy - News & Discussion Oct 12 2013

Post by srin »

somnath wrote:
srin wrote: And if someone isn't interested in declaring their unexplained assets or availing of the amnesty scheme (getting off by paying a penalty), I wouldn't shed tears for them.
One, it makes a tax law an exercise in coercive extraction (with stiff prison terms). If coercion was enough to unearth unaccounted for income, FERA, VP Singh and Indira Gandhi would have been the most succesfull tax collectors!
Let's be very clear. The law doesn't apply to assets or income out of the assets that were obtained legally - like, you obtained when you were resident of another country or when you invested abroad using LRS scheme or as in my case, ESOP for which I've paid perquisite tax. The law only applies to what cannot be explained.
I really don't get the "coercive extraction" part :rotfl: I mean, were they voluntarily willing to donate it to the Govt ? How did they come upon the asset ? And why didn't they declare it before ? And how did they create the asset/income ?
If someone doesn't want to go to prison, they can take advantage of the amnesty scheme till end of Sept and declare it and legalize it.
I know a lot of people who have R2I'ed from Khandom and have been submitting tax returns in US for Indian assets (it is called FATCA, I believe).
Two, it gives enormous discretion to Assessing Officers, essentially reversing a 2 decade long process of tax reforms where at least in theory, discretion was sought to be minimised.
Nope - I refer you to this video (jump to around 15:00)

Three, it reverses the movement of foreign income/asset disputes towards Civil (by replacement of FERA by FEMA) from criminal again (through the new black money law).

Black money and illegal activities are not co-terminus. A trader/entrepreneur not filing tax returns on his income (or filing depressed return numbers) has generated black money, but not committed a criminal activity.
Why should having black money not be criminalized ? I'm completely supportive of prison as a penalty. And it is good that the Govt that I elected (with 1/500m vote) has indeed taken it up seriously, unlike some Govt which helped generate most of the black money.
Since 1991, one of the greatest achievements of reforms has been to make it easier for people to comply, and make tax assessment, dispute resolution and recovery a matter of civil discourse (as it is in most civilised countries). The new law reverses that trend, for an uncertain result.
Very simple. Declare the income you earn, declare the assets you own abroad and if you haven't done that in the past, pay penalty before end of next month and sleep in peace.
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Re: Indian Economy - News & Discussion Oct 12 2013

Post by vina »

Yawnn.. Chinese cut interest rates in midnight (to coincide with US market trading) and lower reserve ratios and the US markets still close in the red after a initial pop, an intra day loss of 400 points. Aint lookin good. Yuan is going to be under more pressure.

Chinese are having to do two contradictory things. Lower interest rates AND keep the Yuan stable / within band to avoid contagion effects and emerging market crisis. Well, they better exercise their command and control over the Yuan and keep it where it is and put to good use their vaunted $3T reserves and give the capital fleeing out a "nice" exit.

Cowardly dhoti clad Yindia is of course different. The currency will drop like a turd in a panic and any hot money flowing out will need to pay through their noses to repatriate. And when the going is good, no one wants to repatraite anyways and there are folks pounding on the door to get in. Yindia in short is a "Roach Motel" , you go only in and never go out. Sort of like in the "Hotel California" .. Very appropriate I suppose, if Yindia too can get the Kalifornicashun levels of wealth , creativity,resilience and innovation.
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Re: Indian Economy - News & Discussion Oct 12 2013

Post by somnath »

Theo_Fidel wrote:WRT power and steel over capacity, it is a passing phase linked to the EB cash flow problems and the lack of expanding infrastructure demand. There is high demand for power that EB's are unable to supply. This over capacity will be easily eaten up in the next 5 years of expanding economy. So if you want capacity after 5 years the planning and investing should start now.
There is no "easy" evident sources of demand. SEBs (actually state Transcos and Gencos) are bankrupt in most states. They just cant buy enough power to soak up all the installed capacity. Without reforming them, offtake will remain depressed, especially given depressed commercial demand on account of slower growth.
Theo_Fidel wrote:The main reason for this is probably the domestic economy is not expanding fast enough and the export economy is not growing fast enough to change what is going on. Not sure why domestic consumption is paralyzed. Probably a Nobel prize is in there for who ever figures that one out.
A Nobel prize is due to the guy who can figure out how the headline GDP growth rates magically went up to 7%+ starting from last days of the UPA govt. Pretty much no one takes the numbers @ face value, including the RBI. I suspect the govt doesnt take it all that seriously either, given how loudly everyone in govt has been pleading to the RBI for a rate cut - why would we need monetary easing if growth is already 7%?

The govt has now set up a committee to examine the numbers!

The good news is global deflation - we import deflation (in intermediates, oil and food), and part of that can be used to fund incremental public investments. But before that, the right policies need to be set in place.

Not more of the same thing. An important pointer was the IOC disinvestment - it ran into the black monday, and was almost completely underwritten by LIC. There went something like 10-15% of LIC's entire incremental annual deployment in one shot. Just with one disinvestment. Where will Suresh Prabhu's Railway funding from LIC come from now, without the structural changes in Railways (As Sreedharan mentioned in the ET interview today)?
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Re: Indian Economy - News & Discussion Oct 12 2013

Post by Vishal_Bhatia »

I wonder how much of this demand slowdown is due to the mes that is the residential realty sector. NCR inventory levels are at 78 months, while Mumbai's are somewhere around 50--60. I have now started seeing ads in Mumbai newspapers of developers offering waivers on stamp duty/registration charges and doing away with floor rises. Problem for builders/developers is that almost every potential/fence-sitting buyer is convinced that the rates will go down further and is holding. Am glad this is happening though: the over-priced mess that Mumbai's property market was is the reason for its current slow phase of growth.
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Re: Indian Economy - News & Discussion Oct 12 2013

Post by Singha »

blr 27 months, chennai 36 months per this link
http://trak.in/tags/business/2015/05/08 ... te-market/

needless to say given the people piling on, blr is the top growing real estate market in india.
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Re: Indian Economy - News & Discussion Oct 12 2013

Post by Supratik »

@Somnath,

You are not an unknown on this forum. We already know which school of economics and politics you belong to. And there is a difference between a professional and a troll. Your comments about this forum is an indication of the latter. We follow what is available in the open. "Extreme overcapacity" is not something that is being reported. Since you claim to have all the figures and analysis why don't you educate us e.g. the govt says that there is adequate power but an inability to evacuate that power due to e.g. insolvency of the SEBs. There are problems with power plants based on imported coal and gas which is due to issues that have nothing do with capacity. How is that "extreme overcapacity"?
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Re: Indian Economy - News & Discussion Oct 12 2013

Post by arshyam »

What do these real estate capacities in months signify? Is a lower number good or bad? TIA.
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Re: Indian Economy - News & Discussion Oct 12 2013

Post by Prasad »

Average number of months needed to sell all units. Lower number implies greater willingness among people to buy houses one would guess and extrapolated to favourable conditions (financial and otherwise) to get into buying real estate --> More people have money to invest in real estate/ready to take the plunge since conditions seem favourable.
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Re: Indian Economy - News & Discussion Oct 12 2013

Post by somnath »

Supratik wrote:We follow what is available in the open. "Extreme overcapacity" is not something that is being reported.
Hmm, either you dont follow these things or you do. Because besides industry reports and brokerage analyses (largely perused in the pofessional domains), there is actually plenty of reportage in the pink papers (and blue TV channels) on these things! Given you missed all of them, one can only surmise that you dont!

Here are some recent "popular" news sources on the over capacity in the power sector

http://economictimes.indiatimes.com/ind ... 463610.cms

http://indianexpress.com/article/india/ ... mand-flat/
India sees lowest plant load factor in 15 years; power capacities operating at 65%

Worrying still is the fact that at last count, 57 base-load thermal units across India’s northern and western heartland were faced with ‘reserve shutdown’, a technical term for a unit shut down due to lack of demand.
So muc so, that a few months back the marginal cost of a unit of power in the power exchange touched zero!
http://timesofindia.indiatimes.com/busi ... 227137.cms


I can give you more "professional" sources of data but I suspect they will be a touch dense for you, given how quickly you assume which "school of economics" I belong to (well, actually halfway between the Austrian and the Marxist will be my choice :wink: ).
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Re: Indian Economy - News & Discussion Oct 12 2013

Post by Vayutuvan »

I am not an economist. Now that disclosure is out of the way, I have a very simple question for somnath.

Somnath, why there are so many power cuts and unplanned power outages in India? It is a constant problem in Hyderabad and even in Mumbai at times. Everybody has an inverter in the alert net to drive a fan or two and a few light bulbs/tube lights. Are the power rates set too low for even residential customers? We know already about agriculture sector because they have subsidies.

Ok strike that. It is the problem with SEBs. That does make sense. SEBs need to be made more efficient and corruption free. Easier said than done. But at least the incumbents are making a start or so one hopes.
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Re: Indian Economy - News & Discussion Oct 12 2013

Post by Supratik »

Somnath, that is called "systemic problem" not "extreme overcapacity". India is a power-hungry country.
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Re: Indian Economy - News & Discussion Oct 12 2013

Post by member_29058 »

vayu tuvan wrote:I am not an economist. Now that disclosure is out of the way, I have a very simple question for somnath.

Somnath, why there are so many power cuts and unplanned power outages in India? It is a constant problem in Hyderabad and even in Mumbai at times. Everybody has an inverter in the alert net to drive a fan or two and a few light bulbs/tube lights. Are the power rates set too low for even residential customers? We know already about agriculture sector because they have subsidies.

Ok strike that. It is the problem with SEBs. That does make sense. SEBs need to be made more efficient and corruption free. Easier said than done. But at least the incumbents are making a start or so one hopes.
There are no takers for all the generation capacity that is in place. There is demand but they don't have the money to pay for the power due to the health of the discoms (state distribution companies)," a senior government official told ET, adding that discoms across all states had incurred accumulated losses of Rs 2.51 lakh crore in 2012-13.
In 2014-15, 22,566 MW of capacity was commissioned, which officials and experts said were stuck in the pipeline for years till they were put on the ..
That line explains all
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Re: Indian Economy - News & Discussion Oct 12 2013

Post by Gus »

over capacity in the power sector

lol,,now i heard it all...
nachiket
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Re: Indian Economy - News & Discussion Oct 12 2013

Post by nachiket »

The govt. is trying for total rural electrification within the next few years. Lakhs of villages are still unconnected to the grid. If the central and state governments are successful in building the distribution infrastructure to connect those villages, the power demand is going to go up considerably. Then this "excess" capacity won't be "excess" any more. If industrial activity picks up in the same period, we'll be back to huge shortfalls and everyone will be blaming the govt. for not planning ahead.
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Re: Indian Economy - News & Discussion Oct 12 2013

Post by arshyam »

^^ Tell that the people who still don't have a power line to their homes, or those folks who do but can only look at them with longing :rotfl:
somnath wrote:Worrying still is the fact that at last count, 57 base-load thermal units across India’s northern and western heartland were faced with ‘reserve shutdown’, a technical term for a unit shut down due to lack of demand.
Lack of demand from whom? The end user, or the EBs staggerring under enormous fiscal burdens that they cannot afford to purchase power?
somnath wrote:So muc so, that a few months back the marginal cost of a unit of power in the power exchange touched zero!
http://timesofindia.indiatimes.com/busi ... 227137.cms
Hmm, let's see what this article posted by you to back your fantastic claim says (btw, this article was posted months ago on the power thread, so, yes, folks here are aware of what it says):
Power minister Piyush Goyal on April 30 told Parliament that most parts of the country have surplus power. "The sad part is that states are not acquiring or buying power to be able to give their residents uninterrupted power supply," he told the Lok Sabha.
Does that necessarily mean over capacity?
A day before on April 29, he found there was so much surplus power at 3.30 pm that the national grid monitoring station indicated power was available at "zero rupee per unit".
Okay. Outcome of no buyers in the market. Still no conclusion of overcapacity.
Similarly, a look at the data from Indian Energy Exchange shows there were more bids for selling power than for buying in April. In the complicated power trading business, this may not be seen as an empirical proof. But, it certainly is a strong indicator of the trend. While the poor financial health of the state discoms is largely to blame, there are other factors such as fuel prices, difficulty in bill collection, etc that prevent utilities from procuring power. This has led to a fall in demand in the face of rising capacity.
Again, yes there is surplus power, but it is not a definitive sign of overcapacity as much of the power is not being evacuated due to systemic issues. Not overcapacity. The article then dwells on these systemic issues:
gas-fired plants. These plants are idling because supply of cheap domestic gas has been snapped due to shortage. Since utilities booked the capacity of these plants on domestic gas-based tariff, they are unwilling to consider running them with imported fuel as the cost would double.
Coal-fired plants too face somewhat similar situation. Many of them have to import to make up for shortfall in domestic supplies. This raises fuel and transport costs.
Many utilities are also turning to power exchange to take advantage of falling rates as inter-region connectivity and transmission network's carrying capacity improves.
Then there are heavily deficit states such as Tamil Nadu and Kerala that pay Rs 8.5 per unit to buy power from the exchange. "If there was better connectivity with the south, our unbought 100 million units would have been lapped up by these states," the NTPC executive said.
Central Electricity Authority data shows that power plants were spinning at an average 63% of their capacity, down from 78% three years ago. The idling gas-fired plants may have much to do with this, since generation capacity has been going up steadily during this period.
Hmm, so these reasons for the lower PLF are due to systemic issues, not because of overcapacity. If the grid were built as planned, maybe TN and Kerala would have consumed most of the surplus, leaving less surplus on the table. Where is the overcapacity then?
somnath wrote:I can give you more "professional" sources of data but I suspect they will be a touch dense for you, given how quickly you assume which "school of economics" I belong to (well, actually halfway between the Austrian and the Marxist will be my choice :wink: ).
You know, instead of appearing to be above us uneducated economic dunces, why don't to try to educate us? We may be able to manage reading these sources and figure out what you are saying. Of course, that may not work in your favour, hence the pontification?

We have seen such behaviour in the previous dispensation (not saying you belong there or support them, but that you sound similar). "Let there be money", says GoI, and voila, comes NREGA, whose funds are eaten on the way. "Let there be food", said GoI, and voila, comes out the Food Security Bill, giving the farmer the same food he produces at lower cost than his labours. Finally, "Let there be light", says GoI, and voila, the light bulb should come to life like in the movie Swades, but it doesn't. Fact of life: it is not that easy. Just building a few power plants without ensuring evacuation and delivery will lead to 'on-paper' overcapacity only, and large parts of the country suffer from power cuts and cannot buy from the grid since it doesn't exist. Telling us to eat cakes then is only adding insult to injury.
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