Indian Economy News & Discussion - Aug 26 2015

[samirdiw]

1. Government is inefficient., cite crony corrupt leaders to prove the point.

Is the vision around infrastructure spending sound? Are they spending where the return on investment over medium term is the best there can be? E.g Spending money over the last 3 years building 4 lane highways without biting the bullet and going for an expressway network. Can the goods move around from factories to port any faster on highways going through small towns?

+1. This is the kind of thinking we need.

[kiranA]

Some simple theorizing (without a lot of ifs and buts) on low GDP growth over the last 3 years:

* Govt is inherently inefficient. It has become increasingly better at tax collection over the last 3 years. It has been able to reduce fiscal deficit drastically mainly because of maintaining fuel prices even though crude oil price has come down drastically. The savings are not being passed to common man, where it could be more efficient. Govt has been spending the money it has been collecting on infrastructure improvements and new subsidies (free LPG for example, that is being used for cooking does not add much to economy. People used to cook even before that). Because of corruption at various levels, that extra money has been converted into real-estate and gold. Both of which are not very good drivers of economic growth.

* Farm loan waivers simply put more money on inefficient farming techniques.

* Govt's infrastructure improvements have been in areas that do not increase efficiencies for transportation. For e.g., the only 2 long expressways built in India over the last 10 years have been built by Mayawati and Akhilesh Yadav. Adding more lanes to existing highways (without making them limited access expressways) which this govt has been concentrating on, does not help much with drastic improvements in time.

* With demonetization, the black money of small businesses, instead of running the economic engine, has gone back to the banks to sit there becoming inefficient. The Banks haven't been able to loan it out to businesses.

* With GST, smaller companies that did not pay taxes before are now forced to pay taxes. That efficient money now becomes inefficient money.

Govt's reforms with aadhar linked subsidies and GST will likely only show benefits over the long term.

A really good post. But it will be very unpopular here .

[A_Gupta]

If not paying taxes makes money "efficient" (whatever that means), then the Pakistani economy should be beating hollow the Indian economy.

The joke is that "market efficiency" doesn't mean that money works better. It simply means that "prices always fully reflect available information."

PS: "white" money can be used for a wider variety of things than "black" money, so white money will inherently find its way to more productive uses than black money (if by "efficient money" is meant the productive use of money). Still puzzling over what "efficient money" means.

PPS: "(free LPG for example, that is being used for cooking does not add much to economy. People used to cook even before that)" On the other hand it is said that not making the average road speed faster is less efficient -- but people used to drive even before that, no? In my reckoning, if a family gets an additional hour every day to spend on something else because of more efficient and clean fuel for cooking, that is a major economic benefit.

[Rishirishi]

If not paying taxes makes money "efficient" (whatever that means), then the Pakistani economy should be beating hollow the Indian economy.

The joke is that "market efficiency" doesn't mean that money works better. It simply means that "prices always fully reflect available information."

PS: "white" money can be used for a wider variety of things than "black" money, so white money will inherently find its way to more productive uses than black money (if by "efficient money" is meant the productive use of money). Still puzzling over what "efficient money" means.

PPS: "(free LPG for example, that is being used for cooking does not add much to economy. People used to cook even before that)" On the other hand it is said that not making the average road speed faster is less efficient -- but people used to drive even before that, no? In my reckoning, if a family gets an additional hour every day to spend on something else because of more efficient and clean fuel for cooking, that is a major economic benefit.

Very good pont.
It is often claimed that Governemnet just causes inefficency and less governement means more wealth. In that case Afganistan should be where Switzerland is today.

Example 1:
Switzerland together with countries like Germany, Sweeden, Netherlands has some of the worlds most stingent building regulations. Result bulding and construction is of very good and lasting quality.
UK and USA has by far deregulated as much as possible. The result is faulty homes with lots of problems.

Example 2
USA spends 16% of GDP yet 25% of the population does not have access to healthcare. People have very high insurance premiums, which go up by the age. Canada on the other hand spends 8% og GDP and can provide free healthcare to all.
The private system has proven to be very expensive as there are a lot of inefficientcies like, needless testing, over medication, sales cost, profit margins etc


Example 3
Train travel between Heathrow and central London costs 22 pounds one way. The train from Amsterdam to Schipol costs about 5 pounds. Train system in UK was one of the oldest and very good when there was a single train system (British Rail). Now there are half a dozen train companies who charge way more then what is normal in rest of Europe. The service is pathetic.

[guru.shetty]

If not paying taxes makes money "efficient" (whatever that means), then the Pakistani economy should be beating hollow the Indian economy.

The joke is that "market efficiency" doesn't mean that money works better. It simply means that "prices always fully reflect available information."

PS: "white" money can be used for a wider variety of things than "black" money, so white money will inherently find its way to more productive uses than black money (if by "efficient money" is meant the productive use of money). Still puzzling over what "efficient money" means.

Like all arm chair "economists", I am trying to understand the disappointing GDP numbers. I am not trying to argue that black money is better than white money. White money indeed find its way to more productive uses than black money. The question here is of a transitionary nature. If an economy is used to particular amount of liquidity (white + black money) and you remove the black money from that liquidity, what is the result? PM Modiji in his independence day speech mentioned that 3 lakh crores (or ~50 billion dollars) has come back to the bank of which 2 lakh crores are under scrutiny. What is not clear is whether that money has stayed in the bank. If so, what is the result of removing $50 billion of liquid assets from a economy? Will you see a GDP slowdown?

In 2008, when US came with TARP funds to "bailout" economy, they put in ~$800 billion of liquidity into a $17 trillion economy and many mainstream economists argue that event saved US economy. Many mainstream economists also argued back then that increasing taxes would be a disaster at that time and were recommending additional tax credits so that people spend and effect the local economy better than what Govt could potentially achieve with larger projects. We may have removed $50 billion of liquidity from a $2.4 trillion economy. Would it have caused the GDP slowdown?

About taxation, my argument is also that whether the increase in tax compliance (direct taxes as well as indirect taxes via fuel taxes) has hit the GDP growth rate. What was previously used to provide local employment (either directly or indirectly), is now going to the government. Now the question is how well does Govt spend it. If it is spending on things (even with all the leakages) that has a multiplier effect on springing up GDP, then it is better than leaving it with people. But if it is spending it on things that make your economy NOT as competitive as your competitors (like China and east Asian countries), then it will slow down GDP. For e.g., why are factories that have been priced out in China moving to Vietnam and not India?

Do we need SEZs that should be there to suck that into India? Would having expressways connect that SEZs to ports help? For e.g., Wistron is setting up shop near Bangalore, but is far away from any ports. There are no expressways connecting Bangalore to either Mangalore or Chennai.

PPS: "(free LPG for example, that is being used for cooking does not add much to economy. People used to cook even before that)" On the other hand it is said that not making the average road speed faster is less efficient -- but people used to drive even before that, no? In my reckoning, if a family gets an additional hour every day to spend on something else because of more efficient and clean fuel for cooking, that is a major economic benefit.

My argument is whether moving to LPG from kerosene make women go out and work to provide that economic addition? Or is she watching TV with the extra time? For e.g. the following study shows that providing free electricity to villages may not have the economic addition that we think it will, unless we provide them holistic support for entrepreneurship.

https://www.swissinfo.ch/eng/opinion_of ... a/43294158

A negative quote from the above link

At the same time, other findings were sobering. We found virtually no evidence that these solar microgrids had any broader socioeconomic effect. There was no evidence of new businesses being opened at a higher rate; women did not spend more time working. Savings and consumption remained unaffected as well.

[disha]

Is the vision around infrastructure spending sound? Are they spending where the return on investment over medium term is the best there can be? E.g Spending money over the last 3 years building 4 lane highways without biting the bullet and going for an expressway network. Can the goods move around from factories to port any faster on highways going through small towns?

+1. This is the kind of thinking we need.

It does look like a bunch of yahoos are suddenly popping up., supporting each other. One makes a straw man argument and another goes and does a yahoo! to support the straw man as "lateral thinking".

What is the difference between "spending money over last 3 years building 4 lane highways" and "an expressway network"? Of course., the next argument to that will trot out - German style autobahns compared to Desi style 4 lane highways.

And "can the goods move around from factories to port any faster on highways going through small towns"? Why would goods move faster to ports bypassing towns and directly to ports? Exports? What about imports? Directly going to factories? What are towns for? So highways should not go to small towns? And there is no internal trade within India? That is all of which India produces is exported out of ports? And all of which it consumes is imported from ports? What does the small towns of India consume and produce? Nothing?

[disha]

A really good post. But it will be very unpopular here .

Can you answer why you consider it as "unpopular" here? Outside the prism of politics?

[disha]

It was not my intention to imply that *this* govt is inefficient. Intention was to say that most places in the world, governments are inefficient compared to private sector.

This is conflating ideology with intent with data and stating a broad cliche without any basis. Let's take example of UJALA., is it inefficient compared to a private program? Of course government producing soaps or scooters or TVs is inefficient compared to a private sector. But do cite an example of a private sector going for a polio eradication in a large country and tell us how efficient was it compared to a government program.

It is very important to remove black money from India and make Indians more tax compliant. The current tax compliance is very poor. But the question is, is this hurting economic growth over short term by removing the efficient money from private sector (and unorganized sector) and giving to government.

On what basis did you come to conclusion that "money in the hand of private sector will be utilized efficiently"? Lot of the pharma companies for example do shows in Las Vegas and in Goa. Pray how the money is utilized better when hiring "eye-candy"? Or when a billion dollar Antilla is created?

There has to be a explanation for low growth when the country's population is huge and increasing, a huge amount of people entering workforce age, but growth averaging around only 7%.

Okay now the straw man is - "there is low growth"!? Compared to what? Compared to when? How do you say "7% is low growth"? For that matter I would say even "12% is a low growth". Let's toss around numbers and come up with numbers like "200%" or "300%" - best is bakistani "400% growth" - do you think that is high enough growth? Just because you think "7" is a low number, does not make it a low growth.

Is the vision around infrastructure spending sound? Are they spenfing where the return on investment over medium term is the best there can be? E.g Spending money over the last 3 years building 4 lane highways without biting the bullet and going for a expressway network. Can the goods move around from factories to port any faster on highways going through small towns?

Answered separately but can you tell us why this bridge https://en.wikipedia.org/wiki/Bhupen_Hazarika_Bridge is NOT a sound spending on infrastructure? And can you tell us why this bridge https://en.wikipedia.org/wiki/3rd_Narmada_Bridge is the dumbest thing? This bridge was made alongside another already existing bridge!

[disha]

My argument is whether moving to LPG from kerosene make women go out and work to provide that economic addition? Or is she watching TV with the extra time? [/b[For e.g. the following study shows that providing free electricity to villages may not have the economic addition that we think it will, unless we provide them holistic support for entrepreneurship.

So your argument is that women must not move from kerosene to LPG because they will spend more time watching TV? If that is the thrust of your argument., then it is plain stupid. LPG is a much cleaner and more efficient fuel and its usage vis-a-vis kerosene impacts the health of the women and the family.

Now you cite selectively from an article from a dubious source. Yes., dubious., since the esteemed professor does *not* understand the villages of India without growing up in one just as a professor in India cannot imagine life in a rural outpost in montana.

To cite it completely:

What did we find? Microgrids substantially decreased spending on kerosene. Interestingly, it is mostly spending on the black market that went down; people still bought some kerosene on the subsidized public market. Given the negative effects of kerosene, this is undoubtedly good news. Beyond kerosene, this intervention rapidly increased electrification rates. Again, this is encouraging, as it demonstrates that a program without subsidies can reduce energy poverty.

At the same time, other findings were sobering. We found virtually no evidence that these solar microgrids had any broader socioeconomic effect. There was no evidence of new businesses being opened at a higher rate; women did not spend more time working. Savings and consumption remained unaffected as well.

So the esteemed professor lets out a big gas as follows:

1. Spending on kerosene sourced from the black market went down (most of it gone)
2. Savings and consumption remained same.

So if there was no significant savings when a rural household shifts its energy needs from black-marketed kerosene to clean and efficient LPG., either the energy consumption has increased or even if it remained the same, the health outcome became better. So what if the housewives watched more of ZeeTv saas-bahu serials., at least entertainment is a value - there is a huge industry that produces movies like BunderWoman and MakdiManush where a whole set of people spend hours watching it.

[samirdiw]

Having Expressways ways doesn't mean small towns are not connected. Pretty dumb to think that way. Usually, there are smaller roads connecting to the expressway that takes to the towns. Think more fishbone than a worm.

Taking it further a cross-grid type express network on a country wide scale would be unparalleled in the world and transform the nation.

[Suraj]

PMI manufacturing rebounds in August after GST jitters

A day after gross domestic product (GDP) data showed a three-year plunge in economic growth at 5.7 per cent in the first quarter of the current financial year, Purchasing Managers’ Index (PMI) data for manufacturing released on Friday gave a ray of hope.

Manufacturing activities bounced back to the growth path in August after the goods and services tax (GST) nervousness pulled it down to contraction in July.

PMI for manufacturing rose to 51.2 points in August from 47.9 points in July. A PMI below 50 shows contraction while above this level denotes expansion. Manufacturing was one of the biggest segments hit by persisting effect of demonetisation and pre-GST confusion as it grew only 1.2 per cent in April-June, from 5.3 per cent in January-March.

Author of the PMI report, Pollyanna De Lima, pegged economic growth in FY18 at 7.3 per cent, indicating the economy will improve after the dismal performance in the first quarter. The economy rose 7.1 per cent in 2016-17.

Also to cope with high workload, manufacturers hired extra staff at the fastest pace since March 2013, showed the survey.

1% of expected invoices uploaded to GSTN

About 1% of the expected goods and services tax invoices had been uploaded on the GST Network more than a month after the facility opened, suggesting a last-minute scramble near the September 5 deadline and a clamour for an extension.

Only 4.4 million invoices have been uploaded as part of the GSTR 1 return filing, a facility that became operational on July 25.

“At least 440 million invoices should have been uploaded. The facility is open for 38 days, but only 4.4 million invoices have been uploaded. In last-minute filing, they will commit errors and the system will not accept the return,” said a GSTN official. Taxpayers would then seek an extension, he added.


"We will consider extending the deadline if people face genuine difficulties in filing GSTR 1," said another official.

The last date to file provisional return GSTR 3B was extended from August 20 to August 25 after taxpayers faced difficulties in filing.

So far, 39.7 million returns have been filed by the 5.95 million entities registered for the GST in July, excluding those under the composition scheme. Based on this, 20-25% of those registered have not filed tax returns.

PM Modi asks taxmen to use data analytics to track undeclared wealth

Prime Minister (PM) Narendra Modi said there was a need to overhaul the old tax structure on Friday at a gathering of top-level income-tax (I-T) officials on Friday, as the existing tax laws are over 50 years old and do not fit in with today’s environment and present economic situation.

Modi is backing a major change in the system, which could change the entire tax department’s strategy to nab tax evaders.

Modi suggested several measures for better tax administration. In his speech, Modi expressed displeasure over exhaustive allocation of resources into search, seizure and scrutiny of tax evaders. He objected to the fact that 90 per cent of resources were being utilised for scrutiny, which only accounted for 9 per cent of the tax collection. “Ninety per cent of the collections come from advance tax, while huge resources are spent to collect the balance,” an I-T official, who attended the meeting, explained.

[guru.shetty]

Not to make the economy thread into a roads and highway thread but, China's GDP in 1999 was $1 trillion. It just had started building its expressway network a few years ago and had reached 10,000 kms in 1999. Today it has an expressway network of 130,000 kms.

India's GDP is $2.4 trillion and it has expressways of ~1000 kms. Good chunk of it built by the 2 of the unlikiliest people in India - Akhilesh and Mayawati. Akilesh built 300 km Agra-Lucknow expressway in 22 months flat spending $2 billion. The biggest expense was land which was acquired paying 4 times "market" rate.

[vina]

To summarise..

Trouble With Indian Economy IS - ISI/DSE/JNU ding dong , with JLN & Indira, replaced markets with Baboons in nearly every area of consequence

Fix for Indian Economy - Send Baboons to the Zoo and replace them with functioning Markets, in ALL areas except Public Goods where markets fail

[A_Gupta]

https://papers.ssrn.com/sol3/papers.cfm ... id=2985529

Abstract
Achieving universal access to electricity is one of the most important energy policy goals set by governments in the developing world. The recent empirical literature, however, paints a mixed picture about the economic viability of rural electrification. Although many studies find substantial socioeconomic benefits from rural electrification, others propose that these benefits are overstated. This paper examines the hypothesis that the magnitude and the nature of benefits associated with electrification are highly context dependent. Using a panel data of 7,018 rural households in Bangladesh for 2005 and 2010, the paper explores two underlying determinants of the heterogeneity: the quality of electricity supply and the number of years of being connected to the grid. The analysis uses an instrumental variable and propensity-score-weighed fixed-effects model to address potential endogeneity of electricity adoption. The analysis finds that power outages have a negative impact on almost all development outcomes considered, while some benefits of electrification accrue only over the long run. The overall gain from expanding access to and improving reliability of electricity supply in Bangladesh is estimated to be US$2.3 billion a year.

[yensoy]

^^^^ Access to electricity should be a fundamental right (well maybe a little below in the totem pole but a citizen right nevertheless) so let's not try to measure everything in terms of RoI - electricity should be provided to all residences in India, period. Alternatively, some plan around solar should be available to the tiny fraction of homes that are unlikely to ever join the grid due to remoteness or natural barriers.

[uddu]

Modi versus Moody's: India pushes plan to end western dominance in credit rating
http://economictimes.indiatimes.com/new ... 359929.cms

Prime Minister Narendra Modi's growing global assertion was on show at the Xiamen BRICS Summit today when he pitched for setting up of a BRICS credit rating agency to counter western rating institutions and cater to the financial needs of sovereign and corporate entities of developing nations.

India had first mooted the idea of having such an agency for the BRICS grouping to challenge the dominance of credit-rating market by S&P, Moody's and Fitch. These three western rating age ..

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

[disha]

Not to make the economy thread into a roads and highway thread but,

Sure please do it in roads & highway thread., and do answer the questions raised.

[csubash]

Excellent post Vina.

But- A bit uncharitable on Modi.
Where is the money for the infrastructure & public goods is going to come from? India has a massive leak of resources/money from delivering the public goods. Black money is predominantly sourced from delivering public goods - unless this is stopped there would be very little to spend. Demonitisation, Aadhar, DBT essentially is to try close those leakages before spending big on public goods. I do have a feeling this government is going to spend big from next budget - advancing budget & 2 full budgets to present.

[Gus]

LAB was blocked and Modi did lose some capital on it before letting it go. I fear it would be focus on existing cleared projects and the ones which may get into a fight, will be shelved to 2019.

[disha]

1. Don't spend your time arguing with ignoramuses who don't understand what GDP is and how it is measured (classic case and econ 101 question...

Classic eCON., use the wrong tool to measure an altogether orthogonal outcome and call the outcome failure., and claim oneself as a genius for coming up with a shiny gorgeous tool.

Anyway., it is interesting that in the overall #Blow2Modi and #MudiMustResign rant which BTW should go to different thread., one can still discern some points:

1. You do have hopes from Modi to make changes to the Indian Economy!
2. Your policy prescriptions on whole sale change in the way Indian administrative structure is currently setup belongs to another thread. Those are the structural reforms which no eCON daily will bother to carry any news about anyway.

And BTW., #notebandhi is over., it is over a year now. Any issues with #notebandhi is by that class of people who cannot partake in black economy anymore.

[A_Gupta]

The only citation of the paper by the dubious esteemed Swiss professor who "found virtually no evidence that these solar microgrids had any broader socioeconomic effect" was the paper I cited above, repeat: https://papers.ssrn.com/sol3/papers.cfm ... id=2985529

This via scholar.google.com. It is always useful to find out what other workers in the field think of any particular paper.

Some quotes from there. This next refers to the Swiss prof. paper:

Using a randomized field experiment in India, Aklin et al. (2017) find no evidence for changes in spending, business creation, time spent working or studying and other indicators of socioeconomic development within a year of electrification.

Well, an year is not enough.

Our authors theorize:

The second factor that could contribute to the heterogeneous effects of electrification is the duration households have been connected to the electric grid. While some basic benefits such as more efficient lighting can be achieved almost immediately upon electrification, other development impacts accrue only over the long run. For example, improved lighting may allow businesses to be open more hours in the evening. This would lead to more economic activities and contribute to income growth in the long term. With improved income, households can afford more ti me- and labor-saving electric devices, and to engage in more income generating activities. Once a virtuous cycle kicks in, the accumulated benefits of electrification could be positively correlated with the number of years a household has been connected to the grid during an extended period.

And this is what the authors claim to find:

For example, each additional year of being connected to the grid is associated with a 7.8 percent reduction in kerosene consumption and a 1 percent increase in annual income. Labor market benefits of electrification seems to take the longest time to materialize.

and (this in Bangladesh)

We also find that electrification disproportionally benefits women and girls. After gaining access to electricity, girls’ study time on average increases 0.47 hours a day while women’s labor force participation increases 2.3 percentage point a year. On the other hand, no statistically significant effects are observed for boys’ study time or men’s labor force participation.

Of what value in GDP terms is a half-hour of extra study for girl students each day? Econ 101 cannot answer that question. One of the problems that people tend to forget is that GDP is only a one proxy measure for people's welfare. GDP is not an end in-of-itself. Given India's poverty and unemployment, GDP growth, and job growth are certainly very important proxies for people's improving standard of living; but they are a proxy measure only.

I'd also like to remind people yet again, that efficiency in production, is e.g., more output per hour of labor, or converting 90% of raw material into useful product instead of a previous 80%; but market efficiency simply means that prices reflect all available information. What this basically means is that there are no arbitrage opportunities, or more accurately, all arbitrage opportunities quickly used up. In the absence of an "efficient market" a sort of economic equivalent of a perpetual motion machine is possible, and Econ 101 goes down the tubes. An efficient market is not necessarily a more productive market. It is just a market for which Econ 101 theory works.

[krisna]

People talk about economy without basic infrastructure.

sample this
electricity came on first somewhere in 1890s around.

By 50 years , entire western Europe and usa were electrified.
India in 1947, only 1000 villages had elelctricity. what happened in next 70 odd years.
still we have not done basic stuff.

similarly lot more to ask for since independence like roads, sanitation, houses, schools primary health centres etc etc. otoh our political wizards took british manufactured caste census made sure it survived with yahoos claiming it is present from centuries when it was only few decades old if one looks at facts in good scholarly way bereft of emotions.

If focus was razor sharp since 1947 , majority of problems would have been minimized.

But but we have all have pet peeves. we are not immune to that being humans.

jmts.

[SBajwa]

by Guru Shetty
Can the goods move around from factories to port any faster on highways going through small towns?

Farmers are growing stuff workers are producing stuff but the issue is of how not to waste and how to manufacture with better quality.
Farmers after getting a good crop do not waste money on labor and go to traders asking them how much they will get for their produce which depending upon that year's crop (peas, tomatoes, potatoes, onions,etc) give them a figure., that results in either farmer hiring labor or ploughing the field and starting over. This happens a LOT!! I say it happens 3 times a year in most of India.

So! what farmers need is cold/freezing storage at their village so that they can save their produce (peas, tomatoes, potatoes, onions, fish, eggs, etc) and sell them when people want (off season) so that price is same around the whole year. Modi and Piyush Goyal both are/were doing very good job in this direction.

I have been living in USA from 31 years and still not forgotten the taste of Dassheri mangoes., I never went to India in last 31 years in June when these mangoes are available. I am willing to pay $50 per kg of these mangoes but I can't get them. The problem is infrastructure at village/local level which NAMO has already identified and is working with! These should be the priorities

1. 24X7 electricity at village level has to be the first infrastructure development in 2017.
2. Roads, Rails, waterways.
3. rest with economic only (not with defense)

[krisna]

<snip>

India's GDP is $2.4 trillion and it has expressways of ~1000 kms. Good chunk of it built by the 2 of the unlikiliest people in India - Akhilesh and Mayawati. Akilesh built 300 km Agra-Lucknow expressway in 22 months flat spending $2 billion. The biggest expense was land which was acquired paying 4 times "market" rate.

Please avoid like the above.

The national highways are done by NHAI

state govts have little to show for the above esp the likes of mayawati and akhilesh.

list of expressways

The construction speed in this NaMo govt is unpredented in Indian history .
Over 50% of Indian highways done or intiate during ABV govt time.

The length of national highways in the country was 29,023 km in 1980, which expanded to 76,818 km by the end of 2012. Over 50% of the total road network or 23,814 was added under the Vajpayee government between 1997 and 2002, the largest construction of national highways during any five-year period since independence.[10] The UPA government added 18,000 km of highway in its ten-year administration between 2004 and 2014

For much of India's history under congress, they were behaving like british regent ruling India giving doles to few but keeping rest of India hungry and downtrodden.
As JLN said he is the "last white man ruling India". His family behave as they are "the last white family" ruling India for british.

[Suraj]

SBajwa and others, this is not the US economy thread. Please keep the focus of this thread where it is. Otherwise I'll just delete all succeeding posts or move them elsewhere.

[arshyam]

^^ Suraj saar, a request: please delete the previous ones as well. It's quite nauseating to read, frankly. Looking at the flurry of posts, I came here to see some more gyan from disha and vina saars, and got this with my morning cuppa .

Oh, and please delete this post of mine too if you'd like.

[arshyam]

Moving things back on track...

RBI gives HDFC Bank 'too big to fail' status along with SBI and ICICI - Reuters via TNIE

MUMBAI: Reserve Bank of India (RBI) has added HDFC Bank to a list of "domestic systemically important banks", or the equivalent of "too big to fail", according to a statement on Monday.

HDFC Bank, the second-biggest Indian lender by assets, joins top lender State Bank of India and third-ranked ICICI Bank on the list.

Being named systemically important imposes additional capital requirements on the lenders.

The extra capital requirement for HDFC Bank will be applicable beginning April 1, 2018, RBI said

Suresh Prabhu outlines his focus areas: ‘More jobs, FDI, exports to be priority’ - Arun S, The Hindu

Will accelerate pace of Make In India and Startup India, says new commerce and industry minister

Suresh Prabhu said on Sunday that his priorities as the new commerce and industry minister will include backing measures to generate more jobs, particularly in the manufacturing sector, helping India attract more Foreign Direct Investments (FDI), and increasing India’s share in global exports.<snip>

[arshyam]

Looks like the logistics industry is happy with the way GST has rolled out so far:

Moving to the faster lane - M. K. Agarwal, The Hindu

We are in times of outstanding significance and consequence for our nation. The start of the GST era is already upon us with the law coming into effect July 1 onwards. Just a few months earlier, sceptics were actively debating whether the roll-out would happen within the stated timeline, or if it would see administrative delays.

However, here we are, in a post GST India and the implementation of ‘One Nation, One Tax, One Market’ reform has proven sceptics wrong. GST reform is certain to catalyse conformity in every part of the business chain and to expand the tax base in a transparent and efficient manner. There are likely to be initial hiccups for a few months as organisations, large and small, across industry sectors are adapting to this fundamental change.

Of course, these pain points will be short lived as companies are expected to settle in rapidly into the new GST era. The introduction of GST tax reforms will have the most far-reaching ramifications in the growth of the logistics sector in India.

Supply chain evolution

From a macroeconomic perspective, a commonly used metric to assess global economies in terms of supply chain efficiency is the ‘logistics costs as a percentage of national GDP’. This percentage for India is as high as 14% compared with 8% in developed nations. Digging deeper into the logistics costs percentage and breaking it down into components reveals the actual challenges. Compared with global economies, India has some of the cheapest transportation and warehousing costs. However, our inventory carrying costs and losses (related to wastage of food), is the highest in the world. The high inventory carrying costs are due to modest physical infrastructure, inadequacy of technology adoption and complicated tax structure. On the issue of complex taxation, recent actions related to the Goods & Service Tax (GST) denote a major legislative milestone in the long-term evolution of efficient logistics in India.

There are facets of our industry where the GST is undeniably expected to impact. Interstate movement of goods has become easier with reduced procedures and restrictions at state borders. Dismantling of check posts at state borders on July 1 has remarkably reduced transit times by about 18% for organised players as average truck speeds have increased.

In the long term, GST offers a unique opportunity for customer organisations to eliminate inherent inefficiencies in the location, movement and inventory holding of goods. GST is the trigger for the user industry to migrate from legacy supply chain models designed for optimising tax payouts, to more efficient models, though these are medium- to long-term plans. In this context, tremendous opportunities arise for logistics players.

Complex amalgamation

The logistics industry supports goods movement for numerous end-user verticals, which requires specialised capabilities and product know how. This complex amalgamation of overall goods movement has placed the onus of preparedness post-GST on the logistics players.

Moreover, state governments have begun issuing interim transit rules, requiring logistics players to quickly adapt for efficient movement of goods. While these were early hiccups, an anticipated disruption in the medium and long term is the proposed implementation of the e-way bill legislation.

We believe that the initial draft e-Way bill Rules needed to recognise the process involved in time-sensitive multi-modal transportation. A desirable GST structure will support reduction of bottlenecks and therefore, we urge the regulators to take cognisance of unique features of the logistics industry in formulating final rules.

The GST is already proving to be a blessing in the context of supply chain costs and lead time to market. At a broader level, numerous initiatives in the area of trade and industry promotion have helped place India favourably in an otherwise volatile global economy. Complemented by this encouraging environment, GST is expected to help unlock much-needed efficiencies in the way domestic businesses operate today. Shifting gears and moving on to a faster lane is a matter of time for the logistics industry at large.

(The writer is member, CII Southern Regional Council and founder & CEO, Gati Limited)

[Austin]

India’s August gold imports surge on duty-free buying from South Korea

http://www.thehindubusinessline.com/mar ... 844012.ece

[Malayappan]

https://twitter.com/CNBCTV18Live/status ... 7690886148

The video covers the speech of Sanjeev Sanyal in a seminar. Interesting insights on the way this government processes issues. Worth a watch - a bit less than 40 minutes long! Worth it!

[KrishnaK]

India GDP growth to re-accelerate as GST impact fades: Morgan Stanley

"Indeed, we remain skeptical that the GDP statistics are fully reflecting the underlying growth trends in the economy," Morgan Stanley said in a research note.

It further said that a number of high frequency growth indicators are indicating that end demand is holding up well and is running counter to the slowdown exhibited in the national accounts.

Ironic, no ?

[vina]

Watched Raghuram Rajan's interviews on multiple TV channels yesterday. We are blessed to have people like him around and I fervently wish that he becomes the Finance Minister soon. That will fix a whole host of structural and other issues in the economy and put us on a sustained 10% growth trajectory , with low inflation for the next 20 years thereafter. But no. We would rather kick him out and hand economic policy to some absolute whack jobs like S. Gurumurthy and some random yin- yangs who live in some alternate reality and who are simply so full of themselves even when they are criminally stupid , dumb and plain wrong to even know any better ,when someone else tells them so

The Modi govt economic policy is run by a much of whack jobs, especially the DeMo. The entire Demo exercise was a fool's errand and Raghuram and the RBI warned the govt of the serious costs. Manmohan Singh warned of a 2% hit to the GDP (after the exercise, coz obviously he couldnt have know of it before). Guess what ,it IS a close to 2% hit and a loss of 200,000 Crore in output, massive job losses in unorganised sector, a disaster which can't have any benefits because the cost of followup to see it through to realise anything would be simply too much politically (measures like disallowing withdrawals of over Rs 50,000 in a given year, banning cash payments for whole bunch of transactions , compulsory escrow and other tracking for land and real estate deals etc) and even that would be nebulous and not visible and wholly intangible..

But no, between DeMo and privatisation and bank cleanup , the latter was FAR easier. The Rs 2L crore, if spent on bank clean up would have got the economy moving again.

Fundamentally PRIVATE INVESTMENT IS DEAD it has been comatose since the UPAII started, and now it is just plain dead as nails . We need some huge fundamental things like accelerated depreciation , investment subsidy (think on the lines of cash for clunkers the EU did) and tax holidays to get investment going again (suspend the idiotic MAT business that got introduced just to fix guys who had large depreciation due to big investments for 10 years) . For that , the Govt needs to GET out of business , cut it's spending and the pressure it puts on borrowing. But no, the Govt thinks, it can jump start investment in a classic "Keynesian" manner by borrowing and spending.

But pray WHAT is the the visible effects of the govt spending ? It is not showing up in the bottomline of companies. It is NOT showing up in anything tangible on the ground (for e.g., how many tons of goods have moved on the DFC , the much ballyhooed infra initiative ? something that can change the game fundamentally), how is it that we are a power surplus country (for God's sake, I can't believe it.. the cost of power is so high for the guys who pay that we can't even evacuate the full installed capacity).

Lastly, I find Dr Rajan's explanation for the GDP bump that happened after UPA II to be very convincing . It is like this. When oil prices and commodity prices fell, what happened, is that our import bill fell, and with that , our net exports rose (coz the imports fell) ,which added roughly 1.5 to 2% of GDP over time. That effect is gone. Earlier, the global economy was comatose. But now major economies are firing (US, EU , even Japan). The exports in East Asia have recovered (Korea has done incredibly well, so has Japan and even China to a lesser extent), while our exports have simply not moved at ALL.

However, we are told that Nirmala Sitharaman has done an "incredible" job and promoted to Defence Minister . Frankly, I want to see the graph in exports under her watch and a graph of growth in world trade for the same period. Looks like we lost share in the % of global trade in the period.

All in all, I think the Govt should be ALARMED and indeed put in the emergency huddle to do something. But no, all we hear are platitudes .

If at the end of all this, if whackjobs like the SJM and the DeMo urging dudes are thoroughly discredited and turned to pasture (basically, the Marx with Cow types) that is the best thing that can happen. Guys like S. Gurumurthy and R. Vaidya and the rest of the SJM types should simply shut up. For 50 years, the whack jobs of the Red Commies wrecked this country (the ISI/Plannign Commission/DSE/JNU types) and now the Saffron Commies (i.e. Marx + Cow) types want to do an encore.

[Karthik S]

Watched Raghuram Rajan's interviews on multiple TV channels yesterday. We are blessed to have people like him around and I fervently wish that he becomes the Finance Minister soon. That will fix a whole host of structural and other issues in the economy and put us on a sustained 10% growth trajectory , with low inflation for the next 20 years thereafter. But no. We would rather kick him out and hand economic policy to some absolute whack jobs like S. Gurumurthy and some random yin- yangs who live in some alternate reality and who are simply so full of themselves even when they are criminally stupid , dumb and plain wrong to even know any better ,when someone else tells them so

The Modi govt economic policy is run by a much of whack jobs, especially the DeMo. The entire Demo exercise was a fool's errand and Raghuram and the RBI warned the govt of the serious costs. Manmohan Singh warned of a 2% hit to the GDP (after the exercise, coz obviously he couldnt have know of it before). Guess what ,it IS a close to 2% hit and a loss of 200,000 Crore in output, massive job losses in unorganised sector, a disaster which can't have any benefits because the cost of followup to see it through to realise anything would be simply too much politically (measures like disallowing withdrawals of over Rs 50,000 in a given year, banning cash payments for whole bunch of transactions , compulsory escrow and other tracking for land and real estate deals etc) and even that would be nebulous and not visible and wholly intangible..

Your admiration for the guy who actually caused SME industries to close down because of high IR, and Manmohan Singh not withstanding. Is that 200,000 Crore hit on output or 200k crore hit on the growth of output?

[yensoy]

UPA II was an indecisive government and a lot of the growth happened because of crony capitalism, at the expense of health of banks. We are facing the consequences of the misdeeds of the past.

Cleanup actions will in the immediate term result in pain, but will lay the ground for long term growth, at least that is my belief.

Private investment is dead because companies don't see the numbers working out. We definitely need Govt to use its flood of liquidity (from demo) to incentivize investment and production. Loan waivers is another big ticket item which has to be done for political and humanitarian reasons; hopefully some of the waived money will come back into the system with increased consumption in the rural areas. If the loan waivers is only a paper transfer from Govt to banks to square accounts of farmers, then there will be only hurt.

[Atish]

Raghuram Rajan is stating the obvious. But look at what NaMo inherited:

1. A system where the cost of land is way way higher than any comparable economy of similar income per capital.
2. Probably the worst labor laws among Asian countries.
3. A financial system that's bankrupt.
4. A non functioning and utterly corrupt judicial system for civil cases also (business litigation)

Land, Labor and Capital are all in a mess. Essentially you are completely uncompetitive.


Add to it there is no system for Creative Destruction. No bankruptcy laws to close down inefficient sectors and redeploy dead capital.

DeMo was a great exercise as it has dealt a body blow to real estate speculation. Its a beginning. RERA will help so will bankruptcy code.

The whole world has resolved Upper House obstructionism. This means that the current dispensation cannot pass a single Bill that it wants.

Modi is doing a fantastic job against all odds. He is a unique politician in one sense, he views Political Capital as an INCREASING resource. You gotta be patient, very patient.

What Rajan is saying are pretty obvious things about what happened. He has no prescriptions on what to do and would be politically feasible. He is not without blame either. He did not give such interviews when he was CEA. He did not sound out the NPA problem until it was very very late.

Diagnosis is easy. Treatment is not.

Land prices in India should and are coming down drastically. This hurts a ton of people many of whom are good honest hard working patriotic folk who dont understand what hit hem. This is a massive bubble bursting that had to be pricked.

Ronald Reagan was the most unpopular man when he raised interest rates sky high and increased unemployment and real human suffering. It was necessary.

India's structural problems are way way bigger than USA in 1981.

[Uttam]

Raghuram Rajan is stating the obvious. But look at what NaMo inherited:

1. A system where the cost of land is way way higher than any comparable economy of similar income per capital.
2. Probably the worst labor laws among Asian countries.
3. A financial system that's bankrupt.
4. A non functioning and utterly corrupt judicial system for civil cases also (business litigation)

Land, Labor and Capital are all in a mess. Essentially you are completely uncompetitive.


Add to it there is no system for Creative Destruction. No bankruptcy laws to close down inefficient sectors and redeploy dead capital.

DeMo was a great exercise as it has dealt a body blow to real estate speculation. Its a beginning. RERA will help so will bankruptcy code.

The whole world has resolved Upper House obstructionism. This means that the current dispensation cannot pass a single Bill that it wants.

Modi is doing a fantastic job against all odds. He is a unique politician in one sense, he views Political Capital as an INCREASING resource. You gotta be patient, very patient.

What Rajan is saying are pretty obvious things about what happened. He has no prescriptions on what to do and would be politically feasible. He is not without blame either. He did not give such interviews when he was CEA. He did not sound out the NPA problem until it was very very late.

Diagnosis is easy. Treatment is not.

Land prices in India should and are coming down drastically. This hurts a ton of people many of whom are good honest hard working patriotic folk who dont understand what hit hem. This is a massive bubble bursting that had to be pricked.

Ronald Reagan was the most unpopular man when he raised interest rates sky high and increased unemployment and real human suffering. It was necessary.

India's structural problems are way way bigger than USA in 1981.

Atish: Very well said. As accomplished an academic Rajan is, his views on policy execution in a diverse country like India are rather poor. He made a tremendous contribution towards Indian economy by breaking inflation's back, but he does not realize that an economy is a super-mega freight train. To get it to move first you have to clear the hurdle and then press the accelerator. Once hurdles you listed are cleared, the economy will move fast and will be difficult to stop.

There is no doubt NaMo has enormous political capital. He is using this political capital to tackle some of most difficult decisions. Demonetization, corruption, opening up for foreign investment, The Insolvency and Bankruptcy Code, Bank NPAs are some of the example. Laws related to land acquisition and labor reform are yet to be taken up but these are the biggest hurdles. On other issues like hygiene, skill development, etc. NaMo hasn't achieved a lot of success but at least there is a well meaning effort. Overall, Rajan should stick to writing papers and teaching classes because he has no clue of how to deal with a messy democracy.

[nam]

Regarding the cost of land, I agree it is high. However how do countries like Japan, which has major land shortage and very expensive do manufacturing?

Do Japanese have multi-storied factories?

I am sure it is possible to have multi-storied factories if there are land constraints. The same way you built high rise residential in cities which are expensive.

Or is it a case of trying to grab real estate under the excuse of building industries?

[prasannasimha]

Mumbai has multilevel factories and galas

[nam]

If companies can built factories in probably the most expensive city in India, land prices cannot be an excuse then.

Then the question to ask is, why do companies prefer to built in Mumbai against some cheaper locations? The answer must be the ecosystem. Manpower, transport, raw materials, electricity etc.

If the ecosystem is present, then land prices are probably not a major factor.

[nam]

There was a tweet about which countries produces the most fakes. Obviously the answer is China. Then it occurred to make, this is a not something the Chinese should be ashamed about.

Infact it shows their urge to produce and sell. By hook or crook. Ofcourse the Chinese government indirectly supports by looking away. Fundamentally the Chinese have created a market out of selling fakes.

Until people in India have such an urge to produce and sell( some fake, some real), unfortunately we cannot be a major manufacturing country.