Indian Economy News & Discussion - Nov 27 2017

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Rahulsidhu
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 02 Jan 2018 01:56

Rahul M wrote:
... One idea would be for the MoF to connect the reduction in corporate tax (say) to a proportionate increase in total employed : capital invested (in Cr) ratio. That is, for any excess in TECI ratio above a certain benchmark (to be set adjusted annually) the corporate tax would get reduced by the corresponding percentage. The upper limit to such reductions might be set at 5% (i.e effective corporate tax of 25% ).

... I fear there might be industries which are being rendered obsolete by tech or will move fully into automation in the near future. Industries we need to get out of.


Sir, while the intention behind this suggestion is very noble indeed (to generate employment), I fear that as a policy this is the exact opposite of what should be done. Allow me to explain.

I am starting with the assumption that we are all looking for the same outcome, i.e. a prosperous Indian society that can lead the world in many technological domains. Just employment, by itself, should not be the objective; if it is then the easiest way is to go *down* the tech. curve and force more labour utilization for usually inferior quality output.

If there is one lesson we can learn from economic history, it is that economic growth comes overwhelmingly from productivity growth. This was very much arguable before the industrial revolution (e.g. European economy expanded after the Black death as population increased) but since automation came into play, this is less and less debatable. In our present age, it is truer than ever.

This lies at the heart of what is known as The great divergence, i.e the great widening between per capita incomes between W.Europe and the rest of the world. As per estimates by A. Maddison, the ratio of GDP/capita of Britain and India went from ~3 to ~9 between 1820 to 2008. Much of this stems from the systematic de-industrialization of India. Interestingly, Ricardo's principle of comparative advantage would suggest that de-industrializing was the right policy for India since labour was cheaper here, but we all know it only resulted in even more poverty.

So, what is the way out of this poverty? We need to ensure the creation of world-beating industries in India. This does not mean India has to beat the world in every sector, just that we have to be competitive *internationally* at the global level in many (as appropriate to the size of India). Today, we are very much struggling here as there are very few industries we are competitive in, much less leading. IT services is the obvious counter example but the industry as a whole is losing its prominence. Small-automobiles is another sector but there is a big risk coming with the electrification of transport.

To come back to the point, the leading industries of today will be more automation driven than less, and to incentivize employment is shooting oneself in the foot. Its a mistake to think industry captains would automatically gear up to navigate the technological challenges of tomorrow if left alone, let alone when incentivized by the govt. not to!

Indeed, many govt have in the past forced their industries to automate and move up the technology frontier. For example, Korea mandated its (heavily state assisted) steel, automobile and chemical industries to compete in the export markets. This meant they could not compromise on quality (which was the path of least resistance, just maximize short term profit like what happened in India pre-Maruti era).

All this is purely from an overall wealth-generation perspective. In a democratic country as large as India, purely following long term optimal economic policy is never going to work. Which is why it might make sense to promote labour intensive industries as well. But this should be done as a part of a separate policy and recognized as a social welfare expense. Also, often times the path to world beating industries happens to lie through labour intensive industries (e.g. electronics assembly). This is the best of both worlds.

TL;DR : A blanket incentive to industry to promote employment is not a good idea. A better idea might be to push them to export (to compete globally) and also promote labour intensive industries as a social welfare program.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 02 Jan 2018 03:10

We are assuming that the Indian economy is in a downward spiral and there is no job creation. Neither is further from the truth. Of course there are vast regions in Indian euphemistically called the BIMARU where large scale economic growth and proper job creation is needed. For now, let's park those aside.

Indian economy will grow 7-8% y-o-y and will be a $10 Trillion economy by 2030. That is given.

What happens after that should be the major concern for the policy makers now. Indian economy will be in permanent "middle-class economy" trap. Very difficult to break out. The reasons are several and one of them is the protection of innovation. That is any small or incremental innovation in product or process will be immediately copied and hence the incentive to innovate and profit from it will reduce. The cost to protect your incremental innovation will be higher than the profit one seeks from it, resulting in lack of innovation. And hence one of the reasons of "middle-class economy" trap.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 02 Jan 2018 05:19

Quick question

The world economy is booming
We are getting huge FDI

Why is India unable to create jobs/growth piggybacking on worldwide growth?

Such boom in early 2000s pushed up our growth hugely

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 02 Jan 2018 05:28

Rahul M wrote:which particular industries are potential low hanging fruits ? on the flip-side I fear there might be industries which are being rendered obsolete by tech or will move fully into automation in the near future. Industries we need to get out of.


Toys? Textiles? FinTech? Personal care? Tourism? Film? Transportation? There are lot of industries India can tackle and make it money spinners.

And the talk about "Automation" making entire skills and talents obsolete is pure Bokwas. Of course credit financing needs to be broad based.

Here is an example, if by automation I can bring down the cost of manufacturing and assembling li-ion batteries to say $50 per KW then immediately one can come up with ancillary industries. Right from E-Luna to high-end sports car designed in B'glore and assembled in M'glore for a Guppi (Gujarati Yuppi) to race in those Thar deserts.

Point is, with democratization of industries due to "automation", all industries will become accessible and not cornered and corralled. For every worry about "Automation", the other opportunity of it also needs to be analysed and a skill set trained to take advantage of such an automation needs to be inculcated.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 02 Jan 2018 05:53

vijayk wrote:Why is India unable to create jobs/growth piggybacking on worldwide growth?

Such boom in early 2000s pushed up our growth hugely


If the economy is growing with RE still in slump, but the jobs are not then it is generally a "productivity growth". That is the same worker is now more productive. Or the jobs are being created but is not measured or is measured but is not reported.

Economy is definitely growing. Here are indirect clues to the same:

1. Car companies are seeing a huge sales growth: http://www.thehindu.com/business/maruti-honda-record-double-digit-growth-in-pvs/article22347490.ece

2. Core sectors are growing: http://www.business-standard.com/article/economy-policy/industrial-revival-core-sector-growth-hits-13-month-high-of-6-8-in-nov-118010100585_1.html

3. Thousands of villages are now electrified, the households are going to get electrified: https://economictimes.indiatimes.com/industry/energy/power/electricity-to-all-india-racing-to-connect-thousands-of-villages-with-power/articleshow/62324483.cms

So how many are joining the formal economy if the productivity growth is not so huge to explain the above number?

Clue will be in the EPF numbers or rather the growth in EPF numbers. Since that explains both the formalization as well as the growth in the "industrial/service" economy. For the agriculture economy, it is a different ball game.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Dipanker » 02 Jan 2018 06:02

disha wrote:Indian economy will grow 7-8% y-o-y and will be a $10 Trillion economy by 2030. That is given.


Wikipedia says India's current GDP is $2.439T (2017).

I don't see how a $2.439T economy becomes a $10T economy at 8% real growth in 12 years, here is the compounding : 2.439 *( 1.0 + 0.08)^12 = ~$ 6.142 T

For $2.439T to grow into $10T, we can use the same compounding formula 2.439 * ( 1.0 + 0.08)^n = 10 and solve for n which comes out to be 18.33 years, or more like 2036 instead of 2030.

If we want to be a $10T economy by 2030, we can use the same formula and this time solve for r in
2.439 *( 1.0 + r )^12 = 10, meaning our real growth rate needs to be 12.5%.

So to summarize, India will need a real growth-rate of ~12.5% to grow into a $10T economy by 2030, at ~8% real growth rate it can become a $10T economy only by 2036. If the real growth rate turns out to be lower than that 8% ( so far the average real growth of past 17 years have been around ~7%) , it will take even longer than 2036.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby krisna » 02 Jan 2018 06:09

Demo, GST no downer, India in a sweet spot
With both domestic and global economy showing signs of recovery, hopes have sprung anew that 2018 augers well for the country. There are expectations that the Indian economy would continue to show an improved performance as our inherent strengths and the proactive policy environment have spawned new growth opportunities. It is anticipated that India would return to emerge as a bright spot in the prevailing world order with GDP growth likely to accelerate to 7.5-8.0 per cent in 2018 from a projected 6.7 per cent in 2017.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 02 Jan 2018 06:24

Dipanker wrote:
disha wrote:Indian economy will grow 7-8% y-o-y and will be a $10 Trillion economy by 2030. That is given.


So to summarize, India will need a real growth-rate of ~12.5% to grow into a $10T economy by 2030, at ~8% real growth rate it can become a $10T economy only by 2036. If the real growth rate turns out to be lower than that 8% ( so far the average real growth of past 17 years have been around ~7%) , it will take even longer than 2036.


^Bokwas. You are taking a single-line number and constructing a mathematical argument over it, without assuming that the GDP number is always relative where rupee appreciation as well as US inflation (or deflation) are significant factors and in my single-line number on Indian growth I would have accounted for either!?

Please talk to Mukesh Ambani and convince him on the numbers. Oh maybe he is mathematically challenged and not accomplished like you, hence something for you to chew on:

https://swarajyamag.com/economy/indias-gdp-will-be-around-12-trillion-by-2030

But the doubters have their math and economics wrong. On 31 December 2017, India’s economy is likely to be $2.5 trillion. My prediction is that India’s GDP will be $12 trillion by 31 December 2030. Hence, it is my assertion that not only are many journalists off the mark about India’s prospects, even the country’s leading industrialists such as Ambani may be a tad too conservative in their estimates. Let us see how.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Dipanker » 02 Jan 2018 06:32

disha wrote:
Dipanker wrote:
So to summarize, India will need a real growth-rate of ~12.5% to grow into a $10T economy by 2030, at ~8% real growth rate it can become a $10T economy only by 2036. If the real growth rate turns out to be lower than that 8% ( so far the average real growth of past 17 years have been around ~7%) , it will take even longer than 2036.


^Bokwas. You are taking a single-line number and constructing a mathematical argument over it, without assuming that the GDP number is always relative where rupee appreciation as well as US inflation (or deflation) are significant factors and in my single-line number on Indian growth I would have accounted for either!?

Please talk to Mukesh Ambani and convince him on the numbers. Oh maybe he is mathematically challenged and not accomplished like you, hence something for you to chew on:

https://swarajyamag.com/economy/indias-gdp-will-be-around-12-trillion-by-2030

But the doubters have their math and economics wrong. On 31 December 2017, India’s economy is likely to be $2.5 trillion. My prediction is that India’s GDP will be $12 trillion by 31 December 2030. Hence, it is my assertion that not only are many journalists off the mark about India’s prospects, even the country’s leading industrialists such as Ambani may be a tad too conservative in their estimates. Let us see how.



Yeah to meet Ambani's prediction of $12T by 2030, we better start growing at the real growth rate of ~14% for the next 12 years!!

What is he smoking?!

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 02 Jan 2018 06:43

Dipanker wrote:Yeah to meet Ambani's prediction of $12T by 2030, we better start growing at the real growth rate of ~14% for the next 12 years!!

What is he smoking?!


Something high quality. But I guess you cannot afford even a fraction of his lifestyle and hence the inane stutterings from you on Ambani's smokes.

Indian economy can become a US $5 Trillion tomorrow if the RBI chooses so by letting the Rupee appreciate to half its current $ to Rs. exchange rate!

Here is something you do not read:

https://www.bloomberg.com/news/articles/2017-10-24/u-s-spotlight-on-india-s-dollar-purchases-crimps-policy-toolkit

The rupee has strengthened 4.3 percent this year, heading for its first annual gain since 2010, and was trading at 65.1625 per dollar as of 10:33 a.m. in Mumbai on Wednesday. An index of the currency’s real-effective exchange rate was at 116.83 in September, near the record seen in April, indicating it is overvalued against a basket of 36 trading partners.


Since the article has published in September, Rupee further appreciated to 63.86 per dollar as of today.

Hence instead of trying to fix mine, or Ambanis or Harsh Gupta's maths., please try to fix your understanding of "economy". Including what is "GDP measured in dollar terms".

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby hanumadu » 02 Jan 2018 06:47

Dipanker wrote:
disha wrote:Indian economy will grow 7-8% y-o-y and will be a $10 Trillion economy by 2030. That is given.


Wikipedia says India's current GDP is $2.439T (2017).

I don't see how a $2.439T economy becomes a $10T economy at 8% real growth in 12 years, here is the compounding : 2.439 *( 1.0 + 0.08)^12 = ~$ 6.142 T


From 2002 to 2014 (12 yrs that is) Indian GDP grew from 500 Billion to 2 Trillion. Was India's growth rate 12.5% during that period.

Some mofo foreign journalist raised the same questions on twitter and twitterati tore him a new one.

It has been answered here and elsewhere multiple times. Please read the back pages.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Prem » 02 Jan 2018 07:00

Dipanker wrote:
disha wrote:[Yeah to meet Ambani's prediction of $12T by 2030, we better start growing at the real growth rate of ~14% for the next 12 years!!

What is he smoking?!


8-8.5% growth, 3 to3.5% inflation and even 2 % currency appreciation do much more than this .

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby sudarshan » 02 Jan 2018 07:09

Prem wrote:
Dipanker wrote:


8-8.5% growth, 3 to3.5% inflation and even 2 % currency appreciation do much more than this .


Yeah, even the economically challenged yours truly figured it out years ago. You can't just take the reported "real" (i.e., inflation-adjusted) GDP growth rate and calculate how big the economy will be in 20 years, 10 years, 5 years, or even 1 year from now. Economies grow at the rate of real GDP growth rate + inflation rate (this should be differential inflation, right, between Indian and US economies?) + currency appreciation WRT $. So a reported real GDP growth rate of 8% translates easily to 14% or 15% in the actual yearly economic expansion. Ambani seems to be right on the dot.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 02 Jan 2018 07:57

Dipanker wrote:
disha wrote:Indian economy will grow 7-8% y-o-y and will be a $10 Trillion economy by 2030. That is given.


Wikipedia says India's current GDP is $2.439T (2017).

I don't see how a $2.439T economy becomes a $10T economy at 8% real growth in 12 years, here is the compounding : 2.439 *( 1.0 + 0.08)^12 = ~$ 6.142 T

For $2.439T to grow into $10T, we can use the same compounding formula 2.439 * ( 1.0 + 0.08)^n = 10 and solve for n which comes out to be 18.33 years, or more like 2036 instead of 2030.

If we want to be a $10T economy by 2030, we can use the same formula and this time solve for r in
2.439 *( 1.0 + r )^12 = 10, meaning our real growth rate needs to be 12.5%.

So to summarize, India will need a real growth-rate of ~12.5% to grow into a $10T economy by 2030, at ~8% real growth rate it can become a $10T economy only by 2036. If the real growth rate turns out to be lower than that 8% ( so far the average real growth of past 17 years have been around ~7%) , it will take even longer than 2036.

For goodness' sake. You simply do not understand what real GDP growth rates and nominal GDP growth rates are. You're mixing up the two. This is the SECOND time you've done this in ~2 months, despite a previous explanation. Please stop this.

"Real" GDP growth rate is a statistical construct. Everything you see out in the world we live in, is nominal growth. Nominal growth has been almost continuously in double digits for quite some time now:
Image
The GREEN line is what the multiplier against current GDP will be, not the red line as you're babbling!

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 02 Jan 2018 08:17

Rahul M wrote:which particular industries are potential low hanging fruits ? on the flip-side I fear there might be industries which are being rendered obsolete by tech or will move fully into automation in the near future. Industries we need to get out of.

Industries where there exists enough potential to make quick progress, through a combination of ambitious ministerial backing and motivated bureaucracy, few requirements depending on others (including other ministries or departments) to accomplish the work, not a significant amount of requirement in infrastructure terms to get in the way, quick access to ports to ship out products assuming export led production, and more. Auto is a potential area. But auto production is heavily capital intensive. Textiles ? Maybe, but the major textile hubs are not near major ports, embroiled in mismanaged policies, lacking ambitious ministers in charge... Small electronics is another potential area. I'll leave it to others more familiar with individual industries to make suggestions.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Akshay Kapoor » 02 Jan 2018 09:22

Suraj wrote:
Dipanker wrote:
Wikipedia says India's current GDP is $2.439T (2017).

I don't see how a $2.439T economy becomes a $10T economy at 8% real growth in 12 years, here is the compounding : 2.439 *( 1.0 + 0.08)^12 = ~$ 6.142 T

For $2.439T to grow into $10T, we can use the same compounding formula 2.439 * ( 1.0 + 0.08)^n = 10 and solve for n which comes out to be 18.33 years, or more like 2036 instead of 2030.

If we want to be a $10T economy by 2030, we can use the same formula and this time solve for r in
2.439 *( 1.0 + r )^12 = 10, meaning our real growth rate needs to be 12.5%.

So to summarize, India will need a real growth-rate of ~12.5% to grow into a $10T economy by 2030, at ~8% real growth rate it can become a $10T economy only by 2036. If the real growth rate turns out to be lower than that 8% ( so far the average real growth of past 17 years have been around ~7%) , it will take even longer than 2036.

For goodness' sake. You simply do not understand what real GDP growth rates and nominal GDP growth rates are. You're mixing up the two. This is the SECOND time you've done this in ~2 months, despite a previous explanation. Please stop this.

"Real" GDP growth rate is a statistical construct. Everything you see out in the world we live in, is nominal growth. Nominal growth has been almost continuously in double digits for quite some time now:
Image
The GREEN line is what the multiplier against current GDP will be, not the red line as you're babbling!


Suraj, during DEMO you wrote some excellent posts explaining various aspects of the economy and the monetary system and black money. In the context of estimating the size of the economy what are your views on taking ‘black becoming white’. So just hypothetically if we estimate that black economy is 2 trillion then is it possible to see how much can become white and inldude that in future GDP projections.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 02 Jan 2018 10:06

Yes. Hypothetically in a simplified manner, formalization of economic activity means sections of unaccounted for black economy becomes white .

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby suryag » 02 Jan 2018 13:07

Suraj sir - what are the other economic reforms beyond GST that will add a percent or two to the GDP. There are a few that am aware of Labour reforms(being pursued by State Gov), Land reforms(got stuck) but beyond these what are the structural reforms that will boost the GDP as we go into 2018


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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nam » 02 Jan 2018 17:12

Dipanker wrote:
disha wrote:Indian economy will grow 7-8% y-o-y and will be a $10 Trillion economy by 2030. That is given.


Wikipedia says India's current GDP is $2.439T (2017).

I don't see how a $2.439T economy becomes a $10T economy at 8% real growth in 12 years, here is the compounding : 2.439 *( 1.0 + 0.08)^12 = ~$ 6.142 T


The Chinese were around 2.3T in 2006. Almost similar to where we are now. The Chinis are now 12T. Yuan was 16 to a dollar. Now around 6 to a dollar.

So growth + stronger currency helps the cause. The Chinese gives a real world example of what can be achieved.

Even if we don't grow at the Chinese speed, we would have made good progress.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chola » 02 Jan 2018 17:47

^^^ A huge problem with that example. PRC is a trading power so chinis had deliberately kept its exchange rate low (16 yuans per dollar in 2006) in order to cheat on trade.

In the decade since, the US and EU had forced the chinis to loosen their peg so that the yuan rose naturally upwards to its more stable (and fair) state of 6 yuan to a dollar today.

The rupee on the other hand is already at its natural exchange rate. In fact, the RBI spent most of its history defending the Rupee from DEPRECIATING against the US dollar. The chini central bank in the 10 years you mentioned fought to keep the yuan from appreciating to cheat. So that example is very wrong. The yuan and Rupee are diametric opposites. Cheen cannot serve as a model for India here.

Unless our manufacturing and exports go up exponentially so there is more demand for our goods (and therefore more demand for our currency,) the Rupee will not go up 300 percent against the dollar in 10 years like the yuan.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Austin » 02 Jan 2018 18:13

Best is to make Rupee Free Floating and Capital Account Convertible so that market forces can decide the right value of Rupee versus USD/Euro let RBI fight inflation and not fight for Rupee peg vs USD, The artificial benchmarking of Rupee versus USD and then defending it spending Reserves is not a right long term approach.

Considering we would be one of the fastest growing economy for long time to come Rupee would evenutally get stronger against USD and Euro

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Karthik S » 02 Jan 2018 18:20

suryag wrote:Suraj sir - what are the other economic reforms beyond GST that will add a percent or two to the GDP. There are a few that am aware of Labour reforms(being pursued by State Gov), Land reforms(got stuck) but beyond these what are the structural reforms that will boost the GDP as we go into 2018


FDI is one, by normal estimations, every $50B FDI will add 1% GDP growth.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nam » 02 Jan 2018 18:23

The Chinese example is something for us to see how things might turn out. Ofcourse, it is not necessary ours will be a similar story. Our currency will eventually be stronger than what it is today.

We can blame Chinis for foul play and all that, however at the end of the day they are wining. No one care about their fudging as long as they export cheap. The Chini currency starting growing stronger from 2007-08 onwards, giving them tremendous buying power.

We need to scale up out manufacturing. No two ways about it. We need to be an alternative to the Chinis.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 02 Jan 2018 19:21

Capital account convertibility has to be approached with caution.
2015 article:
http://www.livemint.com/Opinion/hJXNd4C ... rises.html
The number of financial crises in the three eras are summarized in the chart above. In This Time is Different: Eight Centuries of Financial Folly, Carmen Reinhart and Kenneth Rogoff, the latter a former chief economist of the IMF, emphasize “the striking correlation between freer capital mobility and the incidence of banking crises… One common feature of the run-up to banking crises is a sustained surge in capital inflows, a ‘capital flow bonanza’ roughly involving several per cent of GDP inflow on a multi-year basis. The probability of a banking crisis conditional on a capital flow bonanza is higher than the unconditional probability”. While I am aware that the correlation is not necessarily cause and effect, in this particular case, there is enough supporting evidence to suggest that there is a cause-and-effect relationship between capital account convertibility and financial crises: it is difficult to believe that the relatively few crises in the middle period had nothing to do with the foregone policy choice out of the impossible trinity of monetary policy choices, namely, capital account convertibility. Even the IMF’s institutional view now envisages that capital controls may not be heresy in certain circumstances (more on this in a subsequent article).

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Akshay Kapoor » 02 Jan 2018 19:35

nam wrote:The Chinese example is something for us to see how things might turn out. Ofcourse, it is not necessary ours will be a similar story. Our currency will eventually be stronger than what it is today.

We can blame Chinis for foul play and all that, however at the end of the day they are wining. No one care about their fudging as long as they export cheap. The Chini currency starting growing stronger from 2007-08 onwards, giving them tremendous buying power.

We need to scale up out manufacturing. No two ways about it. We need to be an alternative to the Chinis.


But not with the environmental catastrophe. We need to find our own solutions.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nam » 02 Jan 2018 20:57

There will effect on the environment. We made providing electricity a higher priority, than worrying about the effects of using coal.

With the advent of battery powered vehicles, we can at least reduce effects to some extent.

Hope technology evolves to help us reduce it further.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 02 Jan 2018 21:42

suryag wrote:Suraj sir - what are the other economic reforms beyond GST that will add a percent or two to the GDP. There are a few that am aware of Labour reforms(being pursued by State Gov), Land reforms(got stuck) but beyond these what are the structural reforms that will boost the GDP as we go into 2018

Bliss to not call me sir :) to answer your question, I’m torn . Successive big ticket reforms in the form of Aadhar/bank accounts/Rupay/DBT, demo and GST have been implemented . To me, the key is to keep rapidly finetuning them to iron out kinks .

Since the timeframe quoted is upto next poll cycle, large scale reforms like urbanization will not play out enough in time . Therefore the goal is to maximize the impact of what’s possible over approx 15-18 months .

I’ll turn around your question and ask - how do you see labor reforms being effective in just that little time ? Budget time to actually pass legislation, and make it work . Labor laws are in the state or concurrent list IIRC, so at best center can encourage states to be reform minded and avoid stopping any state from implementing pathbreaking labor reforms, and compel others to do so to compete . In fact that’s essentially been GoIs approach to this .

Given the timeframe in question, my conclusion therefore is hat there’s no time to actually pass legislation and make it stick wife enough in time . Better to maximize the positive impact of what’s already been done .

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Akshay Kapoor » 02 Jan 2018 21:57

Suraj wrote:
suryag wrote:Suraj sir - what are the other economic reforms beyond GST that will add a percent or two to the GDP. There are a few that am aware of Labour reforms(being pursued by State Gov), Land reforms(got stuck) but beyond these what are the structural reforms that will boost the GDP as we go into 2018

Bliss to not call me sir :) to answer your question, I’m torn . Successive big ticket reforms in the form of Aadhar/bank accounts/Rupay/DBT, demo and GST have been implemented . To me, the key is to keep rapidly finetuning them to iron out kinks .

Since the timeframe quoted is upto next poll cycle, large scale reforms like urbanization will not play out enough in time . Therefore the goal is to maximize the impact of what’s possible over approx 15-18 months .

I’ll turn around your question and ask - how do you see labor reforms being effective in just that little time ? Budget time to actually pass legislation, and make it work . Labor laws are in the state or concurrent list IIRC, so at best center can encourage states to be reform minded and avoid stopping any state from implementing pathbreaking labor reforms, and compel others to do so to compete . In fact that’s essentially been GoIs approach to this .

Given the timeframe in question, my conclusion therefore is hat there’s no time to actually pass legislation and make it stick wife enough in time . Better to maximize the positive impact of what’s already been done .


I think administrative (IAS) and judicial reform will go a long way. Restructuring of the many ministries and departments , reducing departmental power and discretion will help. Govt can certainly do adminstarive reform at central level. That’s one trick Modiji has missed.

State level - I know your question wasn’t on state govts but two departments at state govt that can sorted out will really help. Revenue/land records and irrigation. I’m talking about efficient and non corrupt functioning of these departments not any major projects. Regform of State Judiciary and Provincial civil service is also needed.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 02 Jan 2018 22:00

Not within the scope of this thread . And I don’t see either happening in the stated timeframe .

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Akshay Kapoor » 02 Jan 2018 22:11

I once saw a ministry of finance position paper (shown to me by an IAS officer who was in North Block in the late 90s) that said that between 1 and 3 pct of GDP growth can be added by doing the above. I won’t post more on this but I think we seriously miss a trick if we ignore the impact of rule of law, good land records, speedy and fair judicial processes, effecient irrigation etc on Indian Economy.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 03 Jan 2018 08:09

My argument is not that those reforms aren’t going to help . Far from it - they’re super impactful . My answer to the original question attempts to keep the timeframe of 12-16 months in mind . I don’t think these can be passed, and made to show impact to a large number of people, in that much time . There’s only a certain number of sessions of parliament to pass such acts through legislature (especially where state and center both have to act) and then implement them via the executive.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby shaun » 03 Jan 2018 09:31

Departments get PMO stick for Made in India hurdles
https://economictimes.indiatimes.com/news/economy/policy/departments-get-pmo-stick-for-made-in-india-hurdles/articleshow/62345536.cms
NEW DELHI: The Prime Minister's Office has admonished departments, ministries and public sector units for not being supportive enough of the 'Make in India' programme by imposing bid conditions regarded as discriminatory toward domestic manufacturers.

Companies such as Larsen & Toubro and state-owned BEMLBSE 0.50 % are among those that objected to such terms.

"It is very disturbing that the broad message has not been appreciated by various departments," the PMO said in aletter after the Department of Industrial Policy and Promotion raised the issue.

ET has seen a copy of the letter. Following the PMO's instructions, DIPP issued a directive to secretaries of all departments to "ensure the tender conditions are strictly in sync with the public procurement order... Any tender which is not sensitive to 'Make in India' message deserves scrutiny".
The government is betting big on manufacturing through 'Make in India' to create millions of jobs that the country needs to revive growth, lift incomes and eradicate poverty. It has created 25 focus sectors under the initiative including automobiles, textiles, construction and aviation to make India a part of the global supply chain. The National Manufacturing Policy seeks to raise the contribution of manufacturing to GDP to 25% by 2025 from 18% now.

Domestic firms had pointed out what they regarded as the unfairness of bid terms at a recent meeting of the Standing Committee for Implementation of Public Procurement Order 2017. DIPP brought these to the attention of PMO.


'Arbitrary Conditions'
BEML, which makes rail cars, has not been able to bid for a Mumbai Metro project due to a condition requiring the bidder to have 130 coaches in service for five years. BEML has manufactured 1,200 coaches but has only been doing so for three years.

"These are arbitrary conditions and these very specific numbers have not been justified by the department concerned," a senior government official told ET. "Such practices have been going on for years and it is for the first time that the government is calling for an urgent review to fix these glaring problems."

Larsen & Toubro raised concerns regarding a tender for finalising an engineering, procurement and construction (EPC) contractor for Talcher Fertilisers. This stipulated experience of setting up an ammonia and urea fertiliser project in the past 20 years when there has been no such greenfield project in India in that period.

The departme of fertilisers told the standing committee that the project will be re-tendered with modified conditions.
The standing committee also found that Rail Vikas Nigam Ltd, a unit under the railway ministry, had specifically called for products of three foreign manufacturers. Similarly, in the procurement of medical devices, many hospitals including those under central control have made US Food and Drug Authority (FDA) approval mandatory in tender documents.

"It can be made a sufficient condition but making it mandatory is untenable," said the official cited above. The ministry of health is expected to issue a regulation on medical devices in January 2018 and consider the issues raised by concerned stakeholders.

The cabinet had in May 2017 approved a policy requiring purchase preference to domestic suppliers in all public procurements and 50% of value addition being made locally. DIPP has formed a Public Procurement Cell to ensure mplementation of the policy and provide a platform for domestic manufacturers to air concerns.


Don't know how many such Arbitrary Conditions , preventing our domestic companies to compete or even bid in defense procurement . we will remain largest importer of foreign made weapons if the system is not properly overhauled.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 03 Jan 2018 11:19

^Some babu has to now explain to his SHQ now on why his ‘plum’ posting is not plum anymore.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby JohnTitor » 03 Jan 2018 11:57

^^ Agreed

Those conditions though, appearing arbitrary, are far from it. It’s a deliberate attempt to exclude certain companies from applying so that the ones that are eligible will have a greater chance of winning the contract.. I’m willing to bet big that palms are being greased..

Shame on these people who are willing to sacrifice national interest for personal gain. Disgusting

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chola » 03 Jan 2018 14:42

vijayk wrote:Quick question

The world economy is booming
We are getting huge FDI

Why is India unable to create jobs/growth piggybacking on worldwide growth?

Such boom in early 2000s pushed up our growth hugely


Two major answers to that question:

1) lack of value-added exports; this is the main creator of jobs from global growth, this allowed you to tap treasure from more mature markets while you are growing your own; Japan, Taiwan, SoKo and Cheen all followed this strategy to provide jobs and adequate wages.

2) technology and automation; we might simply be unlucky enough to hit our growth spurt just when the world is going to robots and AI. There will be a job squeeze EVERYWHERE not just India

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby JohnTitor » 03 Jan 2018 23:44

Another reason might be that most of the service jobs are for services of non-indian clients.

There are hardly any local clients because local clients don't produce any products for local or global markets. Again generalising here but what I mean is that they aren't large enough to sustain the numbers as global clients can.

India needs to focus on startups.. a handful of a 10000 startups can become global giants but indians(actually asians) by and large are risk averse-this isnt a bad thing as such but it acts as an impediment

Things might be changing, slowly but changing

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 04 Jan 2018 02:15

This news-item is from December 30, 2017 and relates to January-March 2017.
http://indianexpress.com/article/busine ... h-5004342/
The total estimated employment increased by 1.85 lakh, including 59,000 women, across eight sectors in January-March 2017, according to the latest Quarterly Employment Survey (QES) estimates conducted by the Ministry of Labour and Employment. While there were positive changes across all eight sectors, the maximum increase of 1.02 lakh — nearly 55 per cent of the total addition — was recorded in the manufacturing sector. Among the other sectors, there was an estimated increase of 31,000 in health, 29,000 in trade, 13,000 in IT/ BPO, 3,000 in transport, 3,000 in accommodation and restaurant, and 2,000 each in construction and education.


The Quarterly Employment Survey (QES) is an establishment-based survey, providing data on changes in non-farm employment in the organised sector. The scope of the current QES is limited to establishments having 10 or more workers (organised sector), as identified by the sixth economic census. The eight sectors that were surveyed constitute about 81 per cent of the total employment of units with 10 or more workers, and about 15 per of the total employment.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 04 Jan 2018 02:19

The Ministry of Labour and Employment could certainly employ one person to maintain a better website.
Anyway, here's the PDF referred to above.
http://labourbureaunew.gov.in/UserConte ... %2B6koM%3D

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby KrishnaK » 04 Jan 2018 05:50

chola wrote:^^^ A huge problem with that example. PRC is a trading power so chinis had deliberately kept its exchange rate low (16 yuans per dollar in 2006) in order to cheat on trade.

In the decade since, the US and EU had forced the chinis to loosen their peg so that the yuan rose naturally upwards to its more stable (and fair) state of 6 yuan to a dollar today.

The rupee on the other hand is already at its natural exchange rate. In fact, the RBI spent most of its history defending the Rupee from DEPRECIATING against the US dollar. The chini central bank in the 10 years you mentioned fought to keep the yuan from appreciating to cheat. So that example is very wrong. The yuan and Rupee are diametric opposites. Cheen cannot serve as a model for India here.

Unless our manufacturing and exports go up exponentially so there is more demand for our goods (and therefore more demand for our currency,) the Rupee will not go up 300 percent against the dollar in 10 years like the yuan.
Increased capital inflows should increase the value of INR too. Just started reading Michael Pettis' The Great Rebalancing. He states that both Japan's raising the value of the Yen after the Plaza Accords and China's revaluation are pretty much hoaxes - they both kept interest rates artificially low amongst other things, forcing the savings rates up. Currency manipulation is just one form of intervention he says - with other forms of financial repression including low interest rates, low wage growth, tarrifs, consumption taxes etc all forcing household consumption to save at very high levels by cutting down on their own consumption to finance the surplus for exports. You're right, India and China are vastly different. No GoI can afford to keep real interest rates/wage growth low enough to finance the kind of export driven growth as the Japan model practitioners.


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