Indian Economy News & Discussion - Aug 26 2015

Gus · Post by **Gus** » 11 May 2017 16:53

we've always been shafted by these rating agencies. at some point, we need our own - like the chinese do, only more transparent and credible.

Karthik S · Post by **Karthik S** » 11 May 2017 16:59

With 6% of GDP, Chinese are still spending $700B on infrastructure. What more is left for them to build I wonder.

Suraj · Post by **Suraj** » 11 May 2017 19:43

Gus wrote:we've always been shafted by these rating agencies. at some point, we need our own - like the chinese do, only more transparent and credible.

We have our own. It's called CRISIL. During UPA-1 S&P became a major shareholder of it. Not sure why GoI permitted that at the time. Ideally it should be independent and a counterweight to those guys.

prahaar · Post by **prahaar** » 11 May 2017 19:47

Until now I was under the impression that CRISIL is analogous to SEBI. Learn something new every day. Thanks. In past there was some rule regarding the use of "of India" in the name. It gives an impression of being a government recognized body.

morem · Post by **morem** » 11 May 2017 20:43

Crisil was bought by S&p I think

Karthik S · Post by **Karthik S** » 11 May 2017 20:46

S&P is a majority stakeholder.

Vamsee · Post by **Vamsee** » 12 May 2017 00:24

Crisil is a subsidiary of S&P
ICRA is a subsidiary of Moodys

VKumar · Post by **VKumar** » 12 May 2017 00:32

CRISIL is a scam. Google for this. CRISIL credit rating complaints

Suraj · Post by **Suraj** » 12 May 2017 01:18

VKumar wrote:CRISIL is a scam. Google for this. CRISIL credit rating complaints

All credit rating agencies are arguably scams in some way, particularly the western model where the operate from the fees gained from those whom they rate. The question is one of whether it's ours or controlled by someone else.

VenkataS · Post by **VenkataS** » 12 May 2017 02:57

Mods : I am hoping that these inline images are not a violation and that you will allow them to remain as they are very illustrative.

I collected some information and produced this table and chart (with help from Chacha and based on World Bank data).

It shows the importance of sustained economic growth over an extended period of time. India's average annual growth rate over this 55 year period is 5.38% which helped us to grow our per capita GDP by 17.88 times over this period whereas South Korea's average annual growth rate over this period was 9.83% which helped it to grow it's per capita GDP by 173.95 times. China and Hong Kong are not far behind Korea's growth as well over this period.
We need sustained 10% (plus) growth rates over an extended period of time to emulate their successes.

I tweeted about this to Modi, Jaitley, and NCBN in the hopes of providing additional inspiration to them in their work.

Gus · Post by **Gus** » 12 May 2017 03:16

Compound interest is the most powerful force in the universe.

vish_mulay · Post by **vish_mulay** » 12 May 2017 05:42

Hope this is a right thread for my query. anyone here has any experience in applying for or helping someone get the Mudra loans from govt? My mothers loyal aid for last 25 years (we call her mausi, literally she is like mother to us) is retiring due to ill health and its very emotional time for all of us. She wants to spend her last days at our native village with her brother and nephew. This particular nephew is a very nice and driven chap who wants to expand his farm tools repair shop and needs capital (currently he is borrowing from the local money lender with 24% interest short term). I can give him capital but was wondering whether he is eligible for the Mudra scheme and hence this query. I am encouraging him to write business details and future plans but being just ITI graduate and in market for less than 3 years, I am not sure he is capable of doing it. Any pointers how, where and paper process required for getting Mudra loan will be highly appreciated. Thanks in advance.

gakakkad · Post by **gakakkad** » 12 May 2017 07:36

VenkataS wrote:

This chart is perhaps the most direct indictment of the Nehru-Gandhi family and the best possible proof of why fabian socialism fails... India barely grew as fast as US in the last 60 years...If we don't take the post-91 figures into account , India was growing even slower than US pre-91...

Suraj · Post by **Suraj** » 12 May 2017 08:37

Have you looked at the Mudra website ? IIRC the forms are available at all PSU banks .

KL Dubey · Post by **KL Dubey** » 12 May 2017 10:37

VKumar wrote:CRISIL is a scam. Google for this. CRISIL credit rating complaints

Agree. Totally useless agency.

Austin · Post by **Austin** » 12 May 2017 11:29

Most of these figures like GDP etc are phoney number and just flawed more so if you even add debt of these nations. Many of these nations the rich one have more debt on them then their entire GDP put together. These are indebted nations living on borrowed money.

I would say India in 60-70's was a much happier and richer country then it is for some time , These things can be gauged only when you live in the country and meet and interact with people daily and gauge the mood of the nation something throwing phoney GDP numbers wont tell you.

If you calculate per capita of all BRF number it will be resonably good if Mukesh Ambani becomes BRF member it will sky rocket.

Suraj · Post by **Suraj** » 12 May 2017 11:46

Austin: please, lets not go down that tangent in this thread. Use the perspectives on global economy thread for that screed.

Suraj · Post by **Suraj** » 12 May 2017 20:43

To those who's commented on this before (Gus and some others): IIP and WPI data has been revised to use the newer 2011-12 base year used by GDP numbers. With the new base year, industrial production growth data has retroactively improved for the past 5 year period. It's possible GDP data will also be reviewed, since they're currently computed using old IIP series data:
New IIP, WPI series introduced, show overall benign macronumbers

Macro economic parameters improved in terms of industrial production in volume terms and wholesale price index under the new series of these indices. While the index of industrial production (IIP) rose 2.7% in March as against 1.9% in February, WPI inflation declined to a four-month low of 3.85% in April as compared to 5.29% in the previous month.

Inflation on the consumer price index, which has already been revised to a new series, declined to 2.99% in April as against 3.81% in the previous month.

The new series, launched on Friday, saw the base year in the two indices shifted to 2011-12 as against earlier 2004-05 to bring them in parity with other macroeconomic numbers such as the consumer price index and the gross domestic product.

The new series of IIP showed higher growth rates in most months in the period April 2012 to March 2017, as compared to the existing series. This is attributable to shifting of base to a more recent period; increase in number of factories in panel for reporting data and exclusion of closed ones and inclusion of new items and exclusion of old ones.

Marten · Post by **Marten** » 12 May 2017 21:23

vish_mulay wrote:Hope this is a right thread for my query. anyone here has any experience in applying for or helping someone get the Mudra loans from govt? My mothers loyal aid for last 25 years (we call her mausi, literally she is like mother to us) is retiring due to ill health and its very emotional time for all of us. She wants to spend her last days at our native village with her brother and nephew. This particular nephew is a very nice and driven chap who wants to expand his farm tools repair shop and needs capital (currently he is borrowing from the local money lender with 24% interest short term). I can give him capital but was wondering whether he is eligible for the Mudra scheme and hence this query. I am encouraging him to write business details and future plans but being just ITI graduate and in market for less than 3 years, I am not sure he is capable of doing it. Any pointers how, where and paper process required for getting Mudra loan will be highly appreciated. Thanks in advance.

Tata Capital may have some publicity related schemes. Junta votes for a project and it is funded even if the person doesn't meet norms.

Suraj · Post by **Suraj** » 12 May 2017 21:24

Rising Rupee No Barrier For India's High-Tech Export Machine

Indian exports are defying a firm rupee, riding a rise in global growth with a surge in shipments of the kind of high-tech goods every nation covets.

Exports rose to a six year high in March and, for now, that upward trend is tipped to continue as the world economy chugs along and foreign direct investment boosts productivity and stabilizes the economy, said Pranjul Bhandari, chief India economist for HSBC Holding Plc.

“India’s merchandise exports have risen sharply over the last two months,” Bhandari wrote. “We find that the rise is coming from high-tech goods, particularly engineering goods and chemicals as well as medium-tech goods."

The improving performance comes despite the rupee's gain, which is up 5.1 percent this year and among the top-performing in Asia. Late last month, as the rupee hit a 20-month high, the Federation of Indian Export Organisation, said the currency’s appreciation is posing a challenge to competitiveness.

Austin · Post by **Austin** » 13 May 2017 15:46

Prannoy Roy Speaks To Arvind Subramanian On State Of The Economy [ Video Interview ]

http://www.ndtv.com/video/business/ndtv ... o-featured

Karthik S · Post by **Karthik S** » 13 May 2017 16:53

Austin wrote:Prannoy Roy Speaks To Arvind Subramanian On State Of The Economy [ Video Interview ]

http://www.ndtv.com/video/business/ndtv ... o-featured

Good find with lot of good info. Rising exports despite strengthening rupee, inflation < 3%, revised IIP 5%. IDK what S&P are thinking considering so much difference between China and India in their rating. Cheen have 205% of debt as a percentage of their GDP, wow they are in serious mess.
Lastly looks like we still have socialists and commies in GST council, WTH were they thinking to put cars, AC and (did I hear furniture as well) in luxury item and tax 28%? These people have a frozen view of poor Indians and now they'll tax 28% for AC? Every damm house in cities has one these days. These have become a middle class goods and should not come under luxury items. And 6 slabs are too much, must bring down to 3 or 4 max.

Prasad · Post by **Prasad** » 13 May 2017 20:43

http://www.business-standard.com/articl ... 248_1.html

So the revision of base year shows last couple of UPA years were better than NDA2 years so far.

Dipanker · Post by **Dipanker** » 13 May 2017 20:57

VenkataS wrote:

Are these numbers inflation adjusted? Otherwise when adjusted for inflation, a per capita of $83 in 1960 may be substantially higher than the 2015 per capita of $1581.

Supratik · Post by **Supratik** » 13 May 2017 21:50

India per capita GDP now is around 2000 and China around 10000. Also comparison should be from 1978 for China and 1991 for India. the other countries were never socialist/communist.

Suraj · Post by **Suraj** » 13 May 2017 22:18

Karthik S wrote:Lastly looks like we still have socialists and commies in GST council, WTH were they thinking to put cars, AC and (did I hear furniture as well) in luxury item and tax 28%? These people have a frozen view of poor Indians and now they'll tax 28% for AC? Every damm house in cities has one these days. These have become a middle class goods and should not come under luxury items. And 6 slabs are too much, must bring down to 3 or 4 max.

To be fair, the GST Council's actions are not quite a 'top down' thing from centre. It's primarily populated with state FMs, and the compromises are driven by various states' motives. The somewhat messy compromise that has been agreed upon is just how they got so many different states to finally sign on the dotted line. Those parameters can change in future once everyone is on board and simplification becomes easier to agree upon as GST functions on a day to day basis. In that situation it's easier to argue 'see, it's all working fine, but we just have too many slabs. Let's make it 3-4 onlee...'

Austin · Post by **Austin** » 13 May 2017 22:46

Karthik S wrote:
Austin wrote:Prannoy Roy Speaks To Arvind Subramanian On State Of The Economy [ Video Interview ]

http://www.ndtv.com/video/business/ndtv ... o-featured
Good find with lot of good info. Rising exports despite strengthening rupee, inflation < 3%, revised IIP 5%. IDK what S&P are thinking considering so much difference between China and India in their rating. Cheen have 205% of debt as a percentage of their GDP, wow they are in serious mess.

Its Credit to GDP Ratio , There are many countries that have similar to Chinese Credit to GDP ratio or even worse than that.

Austin · Post by **Austin** » 13 May 2017 22:48

Global agencies’ arguments on India rating are ‘fundamentally flawed’: SBI report

http://www.thehindubusinessline.com/mon ... 693666.ece

Mumbai, May 11:

Terming the arguments set out by global credit rating agencies for not upgrading India’s rating as ‘fundamentally flawed’, State Bank of India expressed concern that despite robust macro fundamentals, the country may not soon witness a rating upgrade.

Reasoning why India may not witness a rating upgrade, SBI said: “This is because, with the FRBM (Fiscal Responsibility and Budget Management) Committee emphasising on attaining 60 per cent Debt-to GDP-ratio by 2023, the rating agencies will get a reason to maintain the status quo, despite the other visible advances which India has made.”

Referring to rating agencies’ common argument of India’s high debt-to-GDP ratio being the reason for not upgrading the country’s rating, SBI’s economic research team, in its report Ecoflash, observed that at 69.5 per cent, the agencies argue this is on the higher side and effectively acts as an enabling factor for crowding out private investment.

“This argument is however fundamentally flawed, for two reasons. First, there are a number of countries which are rated above India, but have a significantly higher gross general government debt...

“Second, it is the composition of the government debt-to-GDP per se that matters for any discussion on debt solvency. For India, public debt is mostly internal,” said the report put together by the bank’s economic research team headed by Soumya Kanti Ghosh, Group Chief Economic Advisor.

India (rating: ‘BBB-’) has been languishing at the bottom of the investment-grade ladder in the ratings universe. In fact, India has had a net rating upgrade only once in the past 25 years, the report said.

Underscoring the fact that countries such as Japan (general government debt-to-GDP ratio of 239.2 per cent), Singapore (112 per cent), the US (107.4 per cent), Spain (99.3 per cent), France (96.6 per cent), and Canada (92.3 per cent) have debt positions which have been worsening over time, but that has not affected their ratings much, the report observed that this may be because of other macro fundamentals and the advantage of already being in the developed country bracket.

“India, on the other hand, has been consistently on the path of reducing its debt-to-GDP ratio to its present level from a peak of 84 per cent in 2003. The General Government Debt as a percentage of GDP was 69.5 per cent for 2016, and if we look at only public debt, it amounts to 42 per cent of GDP, of which only around 4 per cent is external debt,” said the report.

Austin · Post by **Austin** » 13 May 2017 22:54

GOI is simply getting worked up by these Credit Rating Agency Ratings which is as much about Economics as it is about Politics.

These ratings agency are there to forward western economic dominance and if you have good economy but bad political equation with Western Nation you can get downgraded to Junk Status

And even if you have bad economy you would still get AAA rating because that would be the right thing to do politically. Like Once Obama famously said during 2008 crisis US will always Remain AAA no matter what and then S&P chief had to resign because they down graded US ratings one notch down !

Cheen similarly wont get downgraded based on its underperforming economy and bad debts but will retain good credit ratings because of its good political equation with west and the dependencies that West has on Chinese Economy for its own growth

Supratik · Post by **Supratik** » 13 May 2017 22:58

A_Gupta · Post by **A_Gupta** » 14 May 2017 00:28

“Second, it is the composition of the government debt-to-GDP per se that matters for any discussion on debt solvency. For India, public debt is mostly internal,” said the report put together by the bank’s economic research team headed by Soumya Kanti Ghosh, Group Chief Economic Advisor.

AFAIK, the main effect of the Standard & Poors or Moody's credit rating of the Indian government is on the interest rates the Indian government must pay for loans. How much lower would the GOI's interest payments be if Moody's changed the credit rating from Baa3 to Baa2?

Anyway,
https://www.moodys.com/research/Moodys- ... -PR_356437

Meanwhile, on the revenue side, India's large low-income population limits the government's tax revenue base. At 20.9% of GDP in 2015, general government revenues were markedly lower than the 27.1% median for Baa-rated sovereigns. Although the implementation of GST and other measures aimed at enhancing income declarations and tax collection will help widen and boost revenues, the effects will only materialize over time and their magnitude is uncertain so far.

Karan M · Post by **Karan M** » 14 May 2017 06:04

i suspect the ratings upgrade is a deep state ploy to put pressure on india for fcra and other modi govt moves.

SwamyG · Post by **SwamyG** » 16 May 2017 02:42

http://economictimes.indiatimes.com/new ... 688676.cms

In an exclusive opinion poll of 59 CEOs for ET, the Modi government’s performance got an average rating of seven on a scale of 1 to 10, with a majority saying that their businesses have now fully recovered from the after-effects of demonetisation. About 46% of poll respondents praised the government’s work as excellent and said it has delivered on key promises.

Suraj · Post by **Suraj** » 16 May 2017 03:04

Exports are picking up some serious momentum, at a time when Rupee is soaring too. Can't remember when we last had >20% export growth for successive months:
April exports rise 20% for eighth straight month at $24.6 bn

Exports in April grew at 19.4 per cent, resulting in growth for eight consecutive months, but the trade difference was the highest in 29 months because of a 49.2 per cent jump in imports.

The increase in imports was because of rising commodity prices and inbound shipments of gold, but it was also an indication of industrial recovery.

Exports had, however, grown higher at 27.6 per cent in March, which was the steepest in a little over five years.

Rupee rises to Rs.64.05 per dollar on strong macro data

Continuing its dominance against the dollar, the rupee shot up by a whopping 26 paise to end at a fresh 21-mth high of 64.05 driven by robust macro data even as exporters aggressively offloaded the American currency.

This is the rupee's highest closing since August 10, 2015, when it had ended at 63.87 against the US dollar.

The forex market sentiment remained broadly supported after retail inflation dropped sharply to 2.99 per cent in April from 3.90 per cent in March while wholesale inflation (as per new series) slipped to a four-month low of 3.85 per cent.

Though, industrial output growth slipped to 2.7 per cent in March as against 5.5 per cent a year ago, as per the new base year 2011-12.

Govt close to finalising 2nd ETF basket

The finance ministry's department of investment and public asset management (Dipam) is close to finalising the constituents of a second exchange traded fund (ETF).

ICICI Mutal Fund will manage this second ETF fund. The first one was launched in March 2014 and is managed by Reliance MF. It has garnered Rs 11,500 crore for the exchequer, in three tranches.

While the first ETF constituted exclusively of shares of state-owned companies, the second one, says sources, could comprise shares of at least two of three private companies in which the government holds a stake through Specified Undertaking of the Unit Trust of India.

States' fiscal deficits touch 3.6% at 12-year high on higher capex, 2.7% excluding UDAY

According to the State Finances Report 2016-17 released by the RBI last Friday, excluding Uday bonds, the combined fiscal deficits of the states would have been 2.7 per cent of gross domestic product (GDP). But including this, deficits jumped to a 12- year high of 3.6 per cent, which is the highest since FY04 when it had stood at 4.2 per cent.

"Though states' fiscal deficits rose to the highest since FY04 at 3.6 per cent in FY16, the expansion of state budgets have been mainly due to higher capital expenditure, which is a long-term credit positive for the states," India Ratings said in a note today.

Good stats article showing how IIP and WPI figures changed with new series:
Statsguru: New data paint a rosier picture
FICCI estimates 7.4% GDP growth in current fiscal

Industry body FICCI's latest Economic Outlook Survey has pegged India's gross domestic product (GDP) growth at around 7.4 percent for the fiscal year 2017-18. The survey was conducted during March and April 2017 recorded a median GDP group forecast of 7.4 percent for the current fiscal year, with a minimum and maximum level of 7 percent and 7.6 percent respectively.

The pick-up in overall GDP growth will also be supported by an improvement in industry and services sector growth.

"The industry and services sector are expected to grow by 6.9 per cent and 8.4 per cent respectively in 2017-18," FICCI said.

achoudhury · Post by **achoudhury** » 17 May 2017 02:19

The sovereign rating is not just used for Govt borrowing. It impacts private sector borrowing as well as investment decisions by fund houses. Lot of allocation is based on the credit rating, especially by Pension funds. If India had better credit rating then investment in Infra would have been far better as Pension funds are ideally suited to fund long gestation infra projects which provide long term stable IRR

Suraj · Post by **Suraj** » 17 May 2017 08:43

GST Bonanza Turns City at India's Dead Center Into Nation's Warehouse

Nagpur is in the dead center of the country, at the crossroads of busy road and rail corridors that bisect India east to west and north to south. Now, India is on the cusp of a sweeping tax overhaul that could turn the city of 2.4 million people into one of the nation’s biggest logistics hubs.

Known for its oranges, tiger sanctuaries, and 45-degree Celsius (108 Fahrenheit) summer heat, Nagpur has seen a groundswell of investment from retailers and warehouse companies betting that the debut of Prime Minister Narendra Modi’s national goods-and-service tax on July 1 will transform the city’s fortunes.

The new tax will replace layers of provincial levies and unify India’s 29 states into a single market. Transport Minister Nitin Gadkari said it could push economic growth into double digits by eliminating shipping delays across state borders and cutting corruption.

At present, trucks can queue for up to three kilometers to pay an entry fee at New Delhi’s 122 checkpoints. About 75 percent of the country’s road-hauling firms operated fleets of fewer than five trucks, according to a 2014 government report.

Future Group’s warehouse in Nagpur.Photographer: Dhiraj Singh/Bloomberg

jamwal · Post by **jamwal** » 17 May 2017 13:18

NDA beats UPA, rolls out roads faster

The government's work order for highway expansion has shot up by 122% during the first three years of Modi government and the pace of construction has gone up by 25%, according to data released by the road transport and highways ministry. During 2011-2014, daily highway construction was about 13 km in comparison to 17 km during the three years' of Modi government. The acceleration in award of works to road builders — over 11,000 km on an average in the past three years against only 5,000 during UPA's corresponding period — has significance considering that this will translate into actual construction of roads by April 2019 when the government faces election. It is expected that by 2019, the government will be in a position to achieve more than 30 km of highway construction per day, a source said. Highways minister Nitin Gadkari has set the target of pushing daily highway construction to 41 km. Highway development is considered one of the biggest job generators and increased road connectivity has been recognised as a major contributor to economic activities even in the hinterlands. However, for the current financial year, the government has set the target of awarding at least 30% of highway projects on public private partnership (PPP). Last year only 17% projects were bid out on PPP mode. Similarly, shipping ministry data show high increase in capacity of 12 major ports under government from 745 million tonnes in 2012-13 to 1,065 million tonnes in 2016-17.

http://timesofindia.indiatimes.com/indi ... 709063.cms

Hari Seldon · Post by **Hari Seldon** » 17 May 2017 17:21

After PM Narendra Modi boost, BHIM app referral scheme gains momentum (FinExp)

GoI learning Marketing 101 to boost adoption amongst janta and traders of much needed (and almost 'free') Govt schemes like the BHIM app for fin inclusion.

National Payments Corporation of India managing director on Tuesday said that Bharat Interface for Money (BHIM) referral bonus scheme for consumers has started gaining momentum in the country.

The scheme, aimed to promote the use of the application, was launched by Prime Minister Narendra Modi on April 14, 2017 on the occasion of commemorating the 126th birth anniversary of Dr Bhimrao Ambedkar.

The Narendra Modi government has decided to spend Rs 495 crore on the scheme for a period of six months (from April 14, 2017 to October 14), NPCI said in a statement.

As per the scheme, the referrer is expected to encourage the referee to download the BHIM app and enter the referrer’s mobile number as the referral code. Both the referrer and referee will get a bonus provided the new user completes three successful transactions (minimum amount of Rs 50). The referrer will get Rs 10 per successful referral, while the new users will get Rs 25 for downloading and transacting from BHIM App.

Sounds like small change, eh? INR 10, 25, 50 and so on for referrers and referreds alike?

My bet is it'll go viral very soon in our vast hinterlands among the great unwashed. Rural India is smart AND price-sensitive enough to switch mobile carriers for a half-paise per second change in talk-time call-rates, after all.

Won't be long before the trade picks it up as well. KirANas may resist due to govt ability to track digital payments, however. But a foot in the door is all that's needed. We'll see.

Jai ho.

A_Gupta · Post by **A_Gupta** » 17 May 2017 18:17

achoudhury wrote:The sovereign rating is not just used for Govt borrowing. It impacts private sector borrowing as well as investment decisions by fund houses. Lot of allocation is based on the credit rating, especially by Pension funds. If India had better credit rating then investment in Infra would have been far better as Pension funds are ideally suited to fund long gestation infra projects which provide long term stable IRR

Thanks! I think the GOI's credit rating is the lowest possible within the "investment grade" class? What credit rating would make a meaningful difference?

Maybe demonetization will have brought sufficient new taxpayers into the net to take away one objection against raising India's credit rating.

Uttam · Post by **Uttam** » 17 May 2017 19:14

Thanks! I think the GOI's credit rating is the lowest possible within the "investment grade" class? What credit rating would make a meaningful difference?

Maybe demonetization will have brought sufficient new taxpayers into the net to take away one objection against raising India's credit rating.

Aswath Damodaran from NYU provides wonderful data on country default risk premium for various sovereign rating. Check it out

http://pages.stern.nyu.edu/~adamodar/Ne ... yprem.html