Indian Economy News & Discussion - Nov 27 2017

[Viv S]

Cant the government just borrow from RBI the excessive forex at low interest and use it on infra project ?

The RBI did not create the forex. It received them in lieu of rupees issued to exporters, foreign investors, remittance receivers etc.

The govt cannot spend dollars on infrastructure - it is not legal tender in the country. It can borrow capital for infra but that is done through debt instruments who’s interest rate is only peripherally linked to the size of the RBI’s forex reserves.

Standard practice for dealing with currency risks related to high forex holding is to invest them in foreign gilt-edged bonds (the most popular being US treasury securities).

[Suraj]

Cant the government just borrow from RBI the excessive forex at low interest and use it on infra project ?

Forex is not rupees.

Looks like we are a few months away from overtaking HK, Taiwan and Russia on the forex holdings list. It was merely ~2 months ago that we hit $400 billion and already we're at 422 billion.
List of countries by foreign-exchange reserves

[Suraj]

The mechanism linking high value transactions to checks against IT records is in operation now, and Rs.26400 crore extra tax was collected from those who had high value transactions but not IT returns:
Government’s monitoring of non-tax filers yield Rs 26,425 crore in tax till December

The government collected nearly Rs 26,500 crore till December last year in form of tax through a non-filer monitoring system, Finance Minister Arun Jaitley in a written reply told Parliament on Friday. fe “Due to constant and intensive follow-up of NMS data, more than 1.72 crore tax returns have been filed by the persons in different NMS cycles and self assessment tax of about Rs 26,425 has been paid by them till December, 2017,” Finance Minister Arun Jaitley said in a written reply to the Lok Sabha. The Finance Minister said that the Ministry has now broadened the mechanism of accumulation and verification of financial information by including various types of high-value transactions from banks and financial institutions in the form of Statement of Financial Transaction (SFT).

Nearly 35 lakh non-tax filers with tax liability have been identified, informed Finance Minister. He also said that Permanent Account Number (PAN) is helping in producing enough data that the tax department is comprehensively mining to track tax evaders. For the April-January period, direct tax collection grew by 19.3 percent to Rs 6.95 lakh crore against the needed 18.3 percent growth for the full year to meet the revised estimate target of Rs 10.05 lakh crore in the current fiscal. The government revised the direct tax collection target upwards from Rs 8.5 lakh crore, in the Budget presented earlier this month.

Earnings improve, but not yet in high gear; India Inc net up 10.6% in Q3

IIP expected to remain robust in Dec 2017 after Nov high

After registering the highest growth in 17 months in November, the index of industrial production (IIP) may remain robust in December, lead indicators point out. This is largely due to the low base effect a year ago, which was brought about by demonetisation. Consumer price index (CPI)-based inflation also hit a 17-month high in December, but may cool down a bit in January.

IIP data for December, out in this evening along with CPI for January, will be crucial for the second advance estimates of GDP for 2017-18, which will be released by the end of this month. IIP constitutes only a fourth of the data for industry in GDP these days, with the bulk taken from corporate results filed with MCA 21 or the stock exchanges. Also, price deflators in GDP are different from CPI inflation or even WPI inflation, but may correspond to broad movements.

Despite core sector growth at a 5-month low of four per cent in December, Aditi Nayar, principal economist with Icra has pegged industrial production growth at about 8 per cent again in December. The sector makes up about 40 per cent of IIP. "Overall, IIP growth may remain robust at around eight per cent in December 2017, despite the sequential dip in the performance of the core sector," she said. Based on the available trends, she expected a continued divergence in manufacturing growth, compared with that of mining and electricity, in the IIP in December. It was manufacturing that posted double-digit growth, while expansion in mining and electricity were below five per cent in November.

[hanumadu]

https://swarajyamag.com/economy/dr-pate ... et-problem

One of the worst-kept secrets of Indian promoters is that they have very little skin in the game when it comes to investing their personal money in the companies they run. In the United Progressive Alliance (UPA) era, and even before, during then licence-permit raj, promoters often brought in their share of equity in new companies by gold-plating project costs. They raised more loans than necessary, and then used the surplus to bring in their share of the initial investment. Put simply, they used bank money as personal money.

Jaggi has talked about gold plating before too. I wonder what would be the extent of gold plating, 10%, 20% or 30%.

In the Modi era, with the Mauritius, Cyprus and Singapore tax loopholes being gradually closed, and with the scrutiny of inflows and outflows now tighter, illegal hoards abroad are unable to come back easily.

In other words, the personal balance-sheets of many promoters are illiquid, or stuck abroad, and cannot easily find its way back into investment.

[vijayk]

Earnings improve, but not yet in high gear; India Inc net up 10.6% in Q3
IIP expected to remain robust in Dec 2017 after Nov high

The profit went up from -17 to +10 for domestic and -14 to 11.5 for all.

[Supratik]

IIM study finds 15 million jobs created every year.

http://www.financialexpress.com/economy ... y/1018590/

[nandakumar]

IIM study finds 15 million jobs created every year.

http://www.financialexpress.com/economy ... y/1018590/

I think the FE story is confused between 'Labour Force' and 'Participation rate'. The latter refers to the number actually joining the ranks of the employed.

[Supratik]

Actually the number 25 million being added to the population is higher estimate. It should be around 18 million (180 million per decade). Half are girls who often do not work in our country. So the estimates are on the higher side. But jobs are being created maybe not high paying.

[Prasad]

In a first, e-goods made in India pull ahead of imports

The Centre’s efforts to promote local manufacturing through the ‘Make in India’ programme seem to be reaping dividends with the domestic production of electronics, one of the key reasons behind foreign currency spends after oil, moving ahead of imports for the first time in 2016-17.
Official sources told TOI domestic electronics production in 2016-17 stood at $49.5 billion, higher than the near $43 billion spent on imports

[Suraj]

December IIP rises to 7.1, January retail inflation falls to 5.07%
November IIP growth was also revised upwards to 8.8% from 8.4% originally. Probably December numbers will be revised upwards next month.
Updating this post with new IIP data from December:

Code: Select all

Mth	CY	  FY      IIP	3-mo IIP	6-mo IIP	Notes
Dec	2017	2017-18	7.1	6.0	4.6	
Nov	2017	2017-18	8.8	4.9	3.4	
Oct	2017	2017-18	2.2	3.5	2.2	
Sep	2017	2017-18	3.8	3.2	2.4	
Aug	2017	2017-18	4.5	1.9	2.2	
Jul	2017	2017-18	1.2	0.9	1.2	GST Effective
Jun	2017	2017-18	-0.1	1.6	1.5	
May	2017	2017-18	1.7	2.5	1.4	
Apr	2017	2017-18	3.1	1.5	2.1	
Mar	2017	2016-17	2.7	1.4	1.3	
Feb	2017	2016-17	-1.2	0.4	0.9	
Jan	2017	2016-17	2.7	2.7	1.0	
Dec	2016	2016-17	-0.4	1.1	0.2	
Nov	2016	2016-17	5.7	1.5	0.6	Demonetization
Oct	2016	2016-17	-1.9	-0.6	-0.2	
Sep	2016	2016-17	0.7	-0.8	0.0	
Aug	2016	2016-17	-0.7	-0.3	-0.1	
Jul	2016	2016-17	-2.4	0.3	0.4	
Jun	2016	2016-17	2.1	0.8	0.5	
May	2016	2016-17	1.2	0.2	-0.1	
Apr	2016	2016-17	-0.8	0.4	-0.8	
Mar	2016	2015-16	0.05	0.2	1.0	
Feb	2016	2015-16	2.0	-0.3	1.6	
Jan	2016	2015-16	-1.5	-2.0	2.3	
Dec	2015	2015-16	-1.3	1.8	3.3	
Nov	2015	2015-16	-3.2	3.5	4.2	
Oct	2015	2015-16	9.8	6.7	5.2	
Sep	2015	2015-16	3.8	4.8	4.2	
Aug	2015	2015-16	6.4	5.0	3.9	
Jul	2015	2015-16	4.2	3.8	3.6	
Jun	2015	2015-16	4.4	3.5	3.4	
May	2015	2015-16	2.7	2.7	2.9	
Apr	2015	2015-16	3.4	3.5	1.8	
Mar	2015	2014-15	2.1	3.2	0.6	
Feb	2015	2014-15	5.0	3.1	0.6	
Jan	2015	2014-15	2.6	0.2	-0.1	
Dec	2014	2014-15	1.7	-2.1	-0.5	
Nov	2014	2014-15	-3.8	-1.8	-0.2	
Oct	2014	2014-15	-4.2	-0.4	1.2	
Sep	2014	2014-15	2.5	1.1		
Aug	2014	2014-15	0.4	1.4		
Jul	2014	2014-15	0.5	2.9		
Jun	2014	2014-15	3.4			
May	2014	2014-15	4.7			GE 2014

[Suraj]

It's clear from the data above that momentum is building in the industrial sector. A full half year period shows sustained acceleration in 3-month averaged IIP, with successive months north of 7% now. There has not been a single month of substantially negative IIP (more than -2%) since July 2016. There are three months since then with -ve growth, but two of them are statistical noise (less than -0.5%), and only -1.2% in Feb 2017 - almost a year ago, being of note.

What's more, the 'quality' of IIP growth is good, particularly the sharp growth in capital goods output. So there's clearly positive momentum despite (or because of) DeMo in Nov 2016 and GST in July 2017.
Dec industrial production grows 7.1%; Jan retail inflation eases to 5.07%

Industrial output grew by 7.1% in December, maintaining the recovery momentum, on the back of robust performance by manufacturing as well as higher offtake of capital goods and non-durable consumer goods.

The IIP growth for November, 2017 was revised upwards to 8.8% from provisional estimates of 8.4% released last month. Retail inflation declined to 5.07% in January due to easing prices of vegetables, fruits and fuel components, an official data showed today.

Based on Consumer price index (CPI), the inflation was at 5.21% in December -- a 17-month high, and 3.17% in January last year.

The IIP growth in December was mainly on account of uptick in manufacturing sector, which constitutes 77.63% of the index. It grew by 8.4% during the month as compared to just 0.6% in December 2016.

The capital goods, a barometer of investments, showed a sharp increase in output by 16.4% in December, 2017 as against a decline of 6.2% year ago.
The consumer non-durables, which are mainly fast moving consumer goods, too showed an increase of 16.5% as against contraction of 0.2%.

In terms of industries, 16 out of 23 industry groups in the manufacturing sector have shown positive growth during December 2017 as compared to the same month year ago.

IIP data for December, along with CPI for January, will be crucial for the second advance estimates of GDP for 2017-18, which will be released by the end of this month.

[Arjun]

In a first, e-goods made in India pull ahead of imports

The Centre’s efforts to promote local manufacturing through the ‘Make in India’ programme seem to be reaping dividends with the domestic production of electronics, one of the key reasons behind foreign currency spends after oil, moving ahead of imports for the first time in 2016-17.
Official sources told TOI domestic electronics production in 2016-17 stood at $49.5 billion, higher than the near $43 billion spent on imports

I thought for a moment exports of e-goods was more than imports....but even this is great news. Looks like imports has dropped below 50% of total domestic demand.

[vijayk]

https://news.webindia123.com/news/artic ... 74998.html

A slight easing of food prices helped lower India's retail inflation in January to 5.07 per cent even as factory production growth slowed somewhat in December to 7.1 per cent, according to official data on Monday.

India Inc lauded the continuing high single-digit recovery in industry as well as the slight fall in inflation.

While retail inflation was 5.21 per cent in December 2017, the Index of Industrial Production (IIP) had grown at an impressive 8.8 per cent in November.

However, on a year-on-year basis, the manufacturing sector expanded by a healthy 8.4 per cent, while the mining sector's output inched up by 1.2 per cent and the sub-index of electricity generation increased by 4.4 per cent.

"In terms of industries, 16 out of the 23 industry groups in manufacturing sector have shown positive growth during December 2017 compared with corresponding month of the previous year," the CSO said.

According to the data, the industry group 'manufacture of other transport equipment' has shown the highest growth of 38.3 per cent followed by 33.6 per cent in 'manufacture of pharmaceuticals, medicinal chemicals and botanical products' and 29.8 per cent in 'manufacture of computers, elecronic and optical products'.

[VKumar]

In the new budget, government has increased basic customs duty on many food items as well as an additional duty @10% (for social welfare). The items taxed heavily include extra virgin olive oil (increased from @12.5% to @30%), olive oil (from @20% to @35%) and Cranberry juice (from @10% to 50%). These two foods have no substitute in India and are mainly consumed for health reasons. Olive oil is consumed for coronary heart disease, and cranberry juice to prevent urinary tract infections. This will hit the consumers hard. Considering the rather small quantum's of imports and their health properties, government should reconsider the increase.

[vijayk]

December IIP rises to 7.1, January retail inflation falls to 5.07%
November IIP growth was also revised upwards to 8.8% from 8.4% originally. Probably December numbers will be revised upwards next month.
Updating this post with new IIP data from December:

Code: Select all

Mth	CY	  FY      IIP	3-mo IIP	6-mo IIP	Notes
Dec	2017	2017-18	7.1	6.0	4.6	
Nov	2017	2017-18	8.8	4.9	3.4	
Oct	2017	2017-18	2.2	3.5	2.2	
Sep	2017	2017-18	3.8	3.2	2.4	
Aug	2017	2017-18	4.5	1.9	2.2	
Jul	2017	2017-18	1.2	0.9	1.2	GST Effective
Jun	2017	2017-18	-0.1	1.6	1.5	
May	2017	2017-18	1.7	2.5	1.4	
Apr	2017	2017-18	3.1	1.5	2.1	
Mar	2017	2016-17	2.7	1.4	1.3	
Feb	2017	2016-17	-1.2	0.4	0.9	
Jan	2017	2016-17	2.7	2.7	1.0	
Dec	2016	2016-17	-0.4	1.1	0.2	
Nov	2016	2016-17	5.7	1.5	0.6	Demonetization
Oct	2016	2016-17	-1.9	-0.6	-0.2	
Sep	2016	2016-17	0.7	-0.8	0.0	
Aug	2016	2016-17	-0.7	-0.3	-0.1	
Jul	2016	2016-17	-2.4	0.3	0.4	
Jun	2016	2016-17	2.1	0.8	0.5	
May	2016	2016-17	1.2	0.2	-0.1	
Apr	2016	2016-17	-0.8	0.4	-0.8	
Mar	2016	2015-16	0.05	0.2	1.0	
Feb	2016	2015-16	2.0	-0.3	1.6	
Jan	2016	2015-16	-1.5	-2.0	2.3	
Dec	2015	2015-16	-1.3	1.8	3.3	
Nov	2015	2015-16	-3.2	3.5	4.2	
Oct	2015	2015-16	9.8	6.7	5.2	
Sep	2015	2015-16	3.8	4.8	4.2	
Aug	2015	2015-16	6.4	5.0	3.9	
Jul	2015	2015-16	4.2	3.8	3.6	
Jun	2015	2015-16	4.4	3.5	3.4	
May	2015	2015-16	2.7	2.7	2.9	
Apr	2015	2015-16	3.4	3.5	1.8	
Mar	2015	2014-15	2.1	3.2	0.6	
Feb	2015	2014-15	5.0	3.1	0.6	
Jan	2015	2014-15	2.6	0.2	-0.1	
Dec	2014	2014-15	1.7	-2.1	-0.5	
Nov	2014	2014-15	-3.8	-1.8	-0.2	
Oct	2014	2014-15	-4.2	-0.4	1.2	
Sep	2014	2014-15	2.5	1.1		
Aug	2014	2014-15	0.4	1.4		
Jul	2014	2014-15	0.5	2.9		
Jun	2014	2014-15	3.4			
May	2014	2014-15	4.7			GE 2014

very encouraging. constant improvement. Hope this continues to improve.

The fact that our e-imports coming down and domestic is growing up means Make in India is working too.

[disha]

In the new budget, government has increased basic customs duty on many food items as well as an additional duty @10% (for social welfare). The items taxed heavily include extra virgin olive oil (increased from @12.5% to @30%), olive oil (from @20% to @35%) and Cranberry juice (from @10% to 50%). These two foods have no substitute in India and are mainly consumed for health reasons. Olive oil is consumed for coronary heart disease, and cranberry juice to prevent urinary tract infections. This will hit the consumers hard. Considering the rather small quantum's of imports and their health properties, government should reconsider the increase.

Shift to Sesame oil, Cotton seed oil, Sunflower oil, Coconut Oil - all are equally good and some even better. For juices, Pomegranate, Grape, Mango (good for constipation as well), Amla, mulberry, orange, water melon, lemon, black plum, apple - all far better than cranberry.

And since only rich can afford extra-virgin olive oil, I think they can afford to pay 17.5% more.

Rest of this discussion can be taken up in Foods thread.

[disha]

Some months back, I indicated that a wall of money is going to be moving to infrastructure.

Of course significant resources https://thewire.in/219895/budget-2018-t ... structure/ were earmarked in 2018/2019 budget for infrastructure development. It is a very large sum. However I was not impressed. Where was the zoom/zoom I was looking for?

This is what *is the news*:

https://swarajyamag.com/insta/indian-ra ... -corridors

[hanumadu]

In the new budget, government has increased basic customs duty on many food items as well as an additional duty @10% (for social welfare). The items taxed heavily include extra virgin olive oil (increased from @12.5% to @30%), olive oil (from @20% to @35%) and Cranberry juice (from @10% to 50%). These two foods have no substitute in India and are mainly consumed for health reasons. Olive oil is consumed for coronary heart disease, and cranberry juice to prevent urinary tract infections. This will hit the consumers hard. Considering the rather small quantum's of imports and their health properties, government should reconsider the increase.

Shift to Sesame oil, Cotton seed oil, Sunflower oil, Coconut Oil - all are equally good and some even better. For juices, Pomegranate, Grape, Mango (good for constipation as well), Amla, mulberry, orange, water melon, lemon, black plum, apple - all far better than cranberry.

And since only rich can afford extra-virgin olive oil, I think they can afford to pay 17.5% more.

Rest of this discussion can be taken up in Foods thread.

I don't even believe olive oil is better for Indians than the other oils. Our bodies must have adapted to the oils we have been using for millennia. And the food doesn't taste as good with olive oil. If you are eating in moderation, any oil should not make a difference.

[Raveen]

Rapeseed aka Canola is better for heart health than olive oil. Moving on.

[shashankk]

Tried to find one thread dedicated to Infrastructure but couldnt find. Pardon me if its wrong thread.
Lots of interesting questions and answers about transportation infrastructure development in India.

[Austin]

Punjab National Bank Reports $1.8 Billion Fraud At A Mumbai Branch

[vijayk]

Punjab National Bank Reports $1.8 Billion Fraud At A Mumbai Branch

2011 is the year.

http://www.firstpost.com/business/pnb-r ... 51407.html

[vinod]

In other words, the personal balance-sheets of many promoters are illiquid, or stuck abroad, and cannot easily find its way back into investment.

Don't we want this money to come to India and invested here in INDIA rather than be utilized somewhere else? Of course, we want this to be done in a fair manner.. and ensure this is not a route for future corruption. I'm not sure how to achieve this. May be somebody cleverer can figure out a way...

[Suraj]

Don't we want this money to come to India and invested here in INDIA rather than be utilized somewhere else? Of course, we want this to be done in a fair manner.. and ensure this is not a route for future corruption. I'm not sure how to achieve this. May be somebody cleverer can figure out a way...

Dealing with the moral hazard you're referring to, is primarily why it's taking time to figure out how to get that money back into the country in an appropriate manner, without giving a free pass to anyone in the process.

[ssundar]

Punjab National Bank Reports $1.8 Billion Fraud At A Mumbai Branch

2011 is the year.

http://www.firstpost.com/business/pnb-r ... 51407.html

Sorry, where in these articles does it say that 2011 is the year?

[Bart S]

Punjab National Bank Reports $1.8 Billion Fraud At A Mumbai Branch

Hope they don't let this Niraj Modi guy and the others involved to escape to overseas refuges like Mallya did.

The strong NPA rules that the govt put in place must be backed by strong action on such folk.

[vijayk]

2011 is the year.

http://www.firstpost.com/business/pnb-r ... 51407.html

Sorry, where in these articles does it say that 2011 is the year?

http://www.dailypioneer.com/todays-news ... fraud.html

According to a statement issued by the PNB, “The bank detected some fraudulent and unauthorised transactions, in one of its branches in Mumbai for the benefit of a few select account holders with their apparent connivance. Based on these transactions, other banks appear to have advanced money to these customers abroad. “In the bank these transactions are contingent in nature and liability arising out of these on the bank shall be decided based on the law and genuineness of underlying transactions. The quantum of such transactions is $1,771.69 million (approx) or over Rs 11,346 crore,” it said.

Since more than one lender is involved, all banks have been asked by the Department of Financial Services under the Finance Ministry to submit a status report soon on the fraud. “The LoU was issued fraudulently by PNB to billionaire diamond merchant Nirav Modi and associates and was encashed overseas by them from different banks, both private and public sector. All this was being carried out in connivance with officials as high as Deputy General Manager since 2011,” sources said.

“As a corrective measure, PNB has suspended 10 employees in connection with the fraud,” it added.

While filing its complaint to the investigating agencies, the bank also said that a deputy manager, Gokulnath Shetty, who was posted in the bank’s foreign exchange department in Mumbai since March 21, 2010, along with another official Manoj Kharat had fraudulently issued LoUs to these firms without following prescribed procedure and without making entries in the banking system, avoiding detection of transactions.

Meanwhile, Sebi is likely to probe possible disclosure lapses by banks and other listed companies, including several jewellery firms, that have come under the scanner in connection with the whopping Rs 11,000 crore fraud.

https://www.hindustantimes.com/business ... JFF3J.html

The international branches of many other Indian banks—it is believed as many as 30—including Allahabad Bank, Axis Bank Ltd, State Bank of India (SBI), Union Bank of India and some foreign banks loaned money to Modi’s companies based on these fraudulent guarantees.

PNB has already suspended 10 employees. The fraud dates back to 2011, although it isn’t clear how long it lasted or how many guarantees were given.

Any delay in addressing the issue could result in a full-blown war between banks.

[vijayk]

https://www.hindustantimes.com/india-ne ... vmEfK.html
Centre unable to sell surplus land of 3 ailing PSUs
The total liabilities of the three ailing companies amount to Rs 20,358 crore. Out of this, the liability for IDPL stands at Rs 10,866 crores, BCPL Rs 8,681 crore and HAL Rs 811 crore.

In 2016, the Union cabinet approved a plan to monetise almost 1,600 acres of land belonging to the four companies and spread over different parts of the country. The four companies have a total land of 2,352 acres.

When the panel asked if there were other ways to make these companies profitable, the government maintained that in view of the cabinet decision to offload stakes, no comment can be offered at this stage.

The total liabilities of the three ailing companies amount to Rs 20,358 crore. Out of this, the liability for IDPL stands at Rs 10,866 crores, BCPL Rs 8,681 crore and HAL Rs 811 crore.

“Overall we see that developers are wary of buying land on down payments. They want to enter joint ventures with the government because customers these days prefer ready-to-move-in properties. I think the government should have allowed private players to bid and enter into a mechanism to develop the land,” said Vineet Ralia, MD at real-estate firm Sare Homes.

[vijayk]

is this true??

twitter

I am a Modi fan. After recent budget my son asked me what yr Modi did to our salaried class. Just i made a rough calculation of his monthly savings comparing 2013 n 2018 budgets. Now he is convinced.

https://swarajyamag.com/economy/income- ... d-for-modi

Economic reforms were the key poll plank on which the Bharatiya Janata Party (BJP) ran its 2014 campaign and the reason many middle-class voters leaned toward Modi. Fiscal consolidation is an essential part of this reforms agenda. As tax sops (euphemistically, tax relief) impact the revenue of the exchequer while the expenditure commitments broadly stay the same, any additional relief leads to a higher deficit. The impact is especially higher in the case of income tax as a uniform rate structure applies to a relatively large base of tax payers. The small change of introducing a standard deduction of Rs 40,000 in lieu of transport allowances and medical reimbursements proposed in this budget alone is expected to cost the exchequer nearly Rs 8,000 crore.

Similarly, halving the tax rate for individual tax payers with incomes between Rs 2.5 lakh and Rs 5 lakh from 10 per cent to 5 per cent, costs around Rs 15,500 crore. In the current economic situation, where the economy is on a respectable growth track and hence there is no ‘boost to consumption’ rationale for reducing income tax rates, tax relief would only mean increasing the debt at the cost of fiscal prudence. As a key element of the economic reforms agenda is eliminating arbitrary subsidies and sops for political appeasement, any tax relief whose sole justification was a popular expectation for such a cut would have meant continuing the past pattern of pandering for political benefit.

Some have argued that the middle class bears a disproportionate burden through income tax and hence a relief was due. A quick look at the tax data would suggest that this argument is without basis in fact. About 51 per cent of the total tax collected by the Centre still comes from indirect taxes. Indirect taxes are applied to all consumers irrespective of their income levels. Such high proportion of indirect taxes in total tax revenue means that even a poor person who buys items from the market but does not pay income tax pays more tax as a percentage of income than an average middle class person. One should also remember that India’s individual income tax rates are on the lower side when compared to other G20 economies.

The individual income tax payers also benefit from substantial exemptions provided on income tax. Considering the total impact of all exemptions and rebates provided to the individual tax payers, the total revenue foregone by the exchequer in 2017-18 is projected to be Rs 76,581.41 crore. Of which Rs 58,932 crore were for exemptions for investments and savings under Section 80C and Rs 6,598 crore was for the rebate provided under Section 87A. A large part of these benefits are accrued by the middle class.

The disgruntlement of the middle class over a denied tax relief seems short-sighted especially when one looks at the larger picture. The Modi government has stuck by its agenda and has demonstrated great fiscal discipline and wisdom by concentrating on public services that would have a larger benefit for the middle class in the long run rather than an immediate tax cut. They have shown a single-minded focus on improving infrastructure, upgrading the cities and reviving the economy. On the tax front, the government has brought a level of certainty to the tax regime and ease of interaction with the taxman.

[Deans]

I was CEO of a promoter run company - brought in my the minority & foreign investors, as they felt the Indian promoter family running it was misusing their funds - which was correct. The company had taken a loan from PNB, possibly due to an `arrangement' the promoter had with the bank. Sanctioning that loan - given the company's balance sheet, pointed to either gross incompetence by PNB, or a bribe.

[Austin]

PM Modi Sets Stage For Trade War With Import Duties: Foreign Media

President Donald Trump signaled tit-for-tat duties against India's barriers on motorcycles, while the German Ambassador to India, Martin Ney, questioned the decision to raise custom duty on the import of auto components. The U.S. commerce department on Tuesday said it was examining imports of welded pipes from India and five other countries.

[vijayk]

http://www.firstpost.com/business/nirav ... 52751.html
Nirav Modi left India on 1 January, say agencies; Punjab National Bank detected the fraud on 3 January, says CEO Sunil Mehta

http://www.firstpost.com/business/pnb-r ... 52855.html

PNB Rs 11,000-crore fraud: Bank took 7 years to detect Nirav Modi scam; is another Vijay Mallya in the making?


We need to privatize these damn banks

[vijayk]

http://www.opindia.com/2018/02/nirav-mo ... d-to-know/

In an import-export transaction, the parties involved generally do not meet face to face. Hence they involve their respective bankers to bring a level of trust and faith to the transaction. Banker solves the very basic issue that “what if Indian person sends money to the supplier and he doesn’t supply goods at all or what if the supplier sends the goods and the Indian person doesn’t pay up”? That’s where the Bankers come into the picture.

A Letter of Undertaking (LOU) is a confirmation issued by a local bank (in this case PNB) on behalf of its customer (in this case Nirav Modi and his entities) to another bank outside India (in this case branches of Axis Bank etc) for conducting an international transaction. The letter simply states that if the customer fails to pay for the goods then the Bank (read PNB) shall pay on its behalf. So once a banking entity confirms payments, the foreign supplier has nothing to worry about and they may supply the goods (in this case diamonds).

Once the foreign Bank/Branch receives the LOU they approve the “buyer’s credit” for the borrower (in this case Nirav Modi and his entities), which is then transferred to an account called the “Nostro account” of the bank which issued the LOU. In simple terms, the “Nostro account” is a foreign currency bank account held in another bank for cross-border transactions. To initiate this transfer the Banks don’t communicate via emails etc but use a very secure system called SWIFT to send messages. Once the SWIFT message is sent by Indian Bank and confirmed by the foreign banks the money transfer is initiated.

The Modus Operandi:

As per the reports, 2 of the bank staffers were involved in this fraudulent activity. Firstly they would issue the LOU’s from their branch but never made relevant entries in the Bank accounting systems. Moreover, it is alleged that Nirav Modi’s entities did not have credit facilities with PNB which entailed them access to LOU’s. So it can be said that these LOU’s were off balance sheet items.

After this, the Complaint filed by PNB with the Central Bureau of Investigation, also alleges that the staffers sent SWIFT messages to foreign bankers and completely bypassed the Core Banking System/software. Foreign bankers trusting the SWIFT instructions and LOU’s extended credit and transactions were happening all this while. As per further reports, the total value of such transactions is well over INR 11000 crores

This is nothing but a clear case of systemic failure, audit failure on the part of internal auditors, risk managers and even the management as well as the RBI and Finance Ministry. Heavily depending on my corporate governance background, I can say that a simple reconciliation of SWIFT messages and outstanding liability could have detected this fraud long ago. That this reconciliation is not happening since 2011, is nothing short of shocking.

[Bart S]

http://www.firstpost.com/business/nirav ... 52751.html
Nirav Modi left India on 1 January, say agencies; Punjab National Bank detected the fraud on 3 January, says CEO Sunil Mehta

http://www.firstpost.com/business/pnb-r ... 52855.html

PNB Rs 11,000-crore fraud: Bank took 7 years to detect Nirav Modi scam; is another Vijay Mallya in the making?


We need to privatize these damn banks

The timing seems convenient. He was probably tipped off by the bank insiders.

[Vips]

Centre to change base year for GDP, IIP to 2017-18.

The government will change the base year to 2017-18 for the calculation of GDP and IIP numbers while for retail inflation the year will be revised to 2018, Union minister D V Sadananda Gowda said today.

"During 2018-19, the ministry is proposing to initiate steps to revise the base years of gross domestic product (GDP), Index of Industrial Production (IIP) and Consumer Price Index (CPI) to accommodate and factor the changes that take place in the economic scenario of the country, the statistics and programme implementation minister said at a conference on budget provisions.

The statistics ministry has proposed the new base year for GDP and IIP as 2017-18 while for CPI it will be 2018.

Gowda said the ministry will undertake various steps in the next fiscal beginning April that will improve the statistical system that will help meet the data requirements in the emerging socio-economic scenario.

The Ministry of Statistics and Programme Implementation (MOSPI) has been allocated Rs 4,859 crore in the Union Budget 2018-19.

[Vips]

Defence IPOs set to hit the Street after a gap of 30 years.

Two public sector defence firms are hitting the capital markets to raise nearly Rs 6,000 crore in the first such IPOs in the defence sector after nearly three decades.

Hindustan Aeronautics, which makes military aircraft and helicopters, is planning to raise about Rs 4,000 crore while defence equipment maker Bharat Dynamics is estimated to raise about Rs 1,800 crore, according to bankers.

[vijayk]

I wonder if the public banks are forced to put every transaction into a private blockchain which is connected to RBI/Fin ministry which can be periodically verified/reconciled with smart contracts reducing need for self audits. Here looks like scam is being perpetrated by bank management in collusion with some employees and this businessmen. I wonder how many more such scams are still in their books

[Suraj]

It's worth first reading the details of the fraud before throwing random technology at it. This is an issue with how banks manage internal and external bookkeeping. In effect two independent ledgers that weren't in sync. It would be no different with blockchain - they'd just be two different ones. Technology cannot replace lax procedural framework.
PNB fraud explained: How India’s 2nd largest PSU bank lost Rs11,400 crore

The bank alleged two junior employees at the Mumbai branch had helped the companies and people managing them get “letters of undertaking” (LoUs) from it without having a sanctioned credit limit or maintaining funds “on margin”. The LoUs were used to obtain short-term credit from overseas branches of other Indian banks, PNB said.

PNB says that on 16 January the accused firms presented a set of import documents to the Mumbai branch and requested buyers’ credit to pay overseas suppliers. Since they had no pre-arranged credit limit, the branch official asked the companies to put down the full amount as collateral so the bank could issue LoUs to authorize the credit.

When the firms argued that they had used such facilities in the past without keeping any money on margin, PNB scanned through records and found no trace of any transactions, according to the bank’s account.

It then found that two junior employees had issued LoUs on the SWIFT interbank messaging system without entering the transactions on the bank’s own system. Such transactions went on for years without detection, PNB said.

Banking sources have said in some banks the SWIFT system, which is used for international transactions, and the core banking system work independently of each other. In PNB’s case, it said the outstanding LoUs were not available on its core banking system run on Infosys’s Finacle software, thus the LoUs issued went undetected.

[ShauryaT]

^No recon between SWIFT and the internal systems? Basic reconciliation procedures should have flagged this easily.

[Suraj]

Yes, it sounds absurd that the bank's internal system was not coordinated with their SWIFT transaction system. No amount of technology can fix such a basic failure to keep internal and external systems reconciled. As such, PNB didn't "lose" money. Their broken systems were misused to generate guarantees on SWIFT used to obtain credit elsewhere. Technically the fraudsters should be ones after whom all the other parties who lent them money should go, though PNB cannot avoid blame for such a systems issue.