Indian Economy: News and Discussion (June 8 2008)

Suraj · Post by **Suraj** » 01 Mar 2009 02:15

On paper, yes. But all industrial data (i.e., IIP) is formally reported on a 1993-94 base year. The change from 1993-94 to 1999-00 was not a comprehensive exercise , and at best a minor jugaad exercise encompassing a small basket of goods and services. Neither of those base years are realistic any longer; our economy is currently a little over 2x larger than it was in 1999-00, forget about 1993-94. More than that, the range of goods and services produced has changed drastically.

derkonig · Post by **derkonig** » 01 Mar 2009 02:21

wig wrote:massive investments made in infrastructure should enable the BPL sectors of people to raise their living standards.
it is this development activity that funds deficits.
but more disturbing and a problem that simply refuses to go away is the costing incurred in implementation. All costs in infrastructure development are inflated to almost double the cost.
dams, roads, bridges, drains - it hardly matters whether the project is big or small
the costing is skewed and the entire thing of how costs are inflated is instituionalised
this money that leaks or probably the more appropriate word is misappropriated fuels
a)inflation
b) people start hoarding assets/ buying additonal long term or end term investments (land, houses, flats) and pushing up prices so that those who really need these objects end up being unable to afford them
c) this parallel economy drives people into illegal avenues. the dividing line becomes hazy!

Given our current fiscal deficits & that the RBI seems to be printing money, unless the GoI comes up with some meaningful steps, we are bound to see the return of high inflation as the increased money supply will push up prices.
Also, given the -ve sentiment all around, it is unlikely that we are going to see any increase in supplies of goods & services as most cos will want to keep a tight leash on their output. Such measures will effectively push up prices & thus inflation.

Suraj · Post by **Suraj** » 01 Mar 2009 02:36

Spending on infrastructure is, as long as the spending goes into the actual construction, probably the most ideal manner of deficit spending. Inflation is a mismatch of supply and demand, and both components are dynamic. If prices rise, demand will fall and so will inflation. In any case, we're heading towards a deflationary spiral considering the industrial output and inflation data. I don't mind a continued accrual of the fiscal deficit as long as the government also continues to foster economic activity and develops a broader bond market that enables companies to easily access capital from diverse sources based on requirement.

Theo_Fidel · Post by **Theo_Fidel** » 01 Mar 2009 04:15

Suraj wrote:The change from 1993-94 to 1999-00 was not a comprehensive exercise , and at best a minor jugaad exercise encompassing a small basket of goods and services. .

This is correct.

IIRC correctly one of star additions, mentioned in the press summary, was Duck Eggs of all things.

And so it goes.

Equally significantly, it could help curb migration from rural to urban areas and thereby ease the pressure on cities that are struggling to cope with the influx.

I'm not sure this bit desirable though.

As I've mentioned before, the problem in the rural jobs sector is not that they exist, but that so many of those jobs are menial labor jobs.
Sounds like this was just a reclassification of job categories.

Najunamar · Post by **Najunamar** » 01 Mar 2009 05:16

Suraj wrote:Inflation is a mismatch of supply and demand, and both components are dynamic. If prices rise, demand will fall and so will inflation. In any case, we're heading towards a deflationary spiral considering the industrial output and inflation data.

Just wanted to add the caveat that price elasticity is not a given for all goods and services, pehaps more of a given for services and non-essential goods; However, the kind of construction spending on hospitals, schools, affordable housing, factories to process/package food that is implied in Suraj's e-mail may not be so elastic.

Surajji, from your second statement I infer you are not in the Milton Friedmanesque camp of "Inflation is always and ever a monetary phenomenon" -because, the kind of money supply growth we are seeing/will be seeing soon will make the Weimar republic blush hence, where is the question of deflation?

Suraj · Post by **Suraj** » 01 Mar 2009 07:37

I was speaking in very broad terms, and of course, different goods/services have different price elasticities.

I think the reference to the Weimar Republic is an exagerration - I would give the RBI far more credit than that. Who is 'we' anyway - India or the US ?

Najunamar · Post by **Najunamar** » 01 Mar 2009 08:31

Suraj wrote:
I think the reference to the Weimar Republic is an exagerration - I would give the RBI far more credit than that. Who is 'we' anyway - India or the US ?

I agree that comparison to the Weimar republic is a bit of a stretch - but I think we are seeing significant money supply growth with a willingness to step in and do even more both in the US and in India. It is highly improbable that any meaningful deflation will be allowed in either US or in India.

During the Great Depression, I have read that in India despite urgent pleas by INC, the British administration did not indulge in any deficit spending and the "home charges" broke our (Indian) economy. Supposedly around 25 M Pounds worth of gold swindled by the British from India and later sent to the USA (no doubt to pay for theiir imports from US).

http://en.wikipedia.org/wiki/Great_Depression_in_India

This time around, I am sure the authorities having the controls in their own hands will not let that happen in India. In the US, they did have the means to prevent it but chose to sit idly when gold was pouring in from UK & Germany.

ramana · Post by **ramana** » 02 Mar 2009 11:05

AAJTAK was reporting that RIL is doing some recapitalization. Couldnt understand the complex Hindi.

Suraj · Post by **Suraj** » 03 Mar 2009 03:17

YemBeeYay's running riot

Govt to hold competition for Re symbol

The Indian rupee could soon get a unique symbol, with the finance ministry holding a public competition for a design, just like the US dollar ($), the euro (€), the Japanese yen (¥) or the pound sterling (£).

While it was not immediately clear what prompted the government to search for a new symbol for the Indian currency, officials said one reason could be India’s growing influence on global economy. “Unlike a host of global currencies, the Indian rupee does not have a unique symbol and Rs is the abbreviated form which it shares with currencies from Nepal, Pakistan, Sri Lanka and Seychelles,” said an official.

Vedanta to invest Rs 70,000 cr ($14 billion) in India

Anil Agarwal-led Vedanta Group will pump in whopping Rs 70,000 crore in India by 2011-12, a stride that will make it the world’s fifth-largest metal and mining entity rubbing shoulders with the likes of BHP Billiton and Rio Tinto.

“We intend to invest Rs 50,000 crore in (the) aluminium sector and Rs 20,000 crore in other areas like copper, iron ore and zinc by 2011-12 in India,” Vedanta Group Executive Chairman Anil Agarwal said.

Of the proposed investment, about 50 per cent has been invested while the fund for the rest is tied up, he added.

“We are sitting on Rs 30,000 cash (for the projects). There is no funding problem,” Agarwal said, ruling out any adverse impact of the global economic slowdown on the plans. After executing the Rs 70,000-crore investment plans in the country, Agarwal said, Vedanta’s production will increase manifold and it would clinch the position of the world’s fifth-largest metal and mining company from the present tenth position.

With the proposed capital expenditure, Vedanta Group intends to augment its annual aluminium production to 2.6 million tonnes from the current 500,000 tonnes, besides enhancing the iron ore output from group firm Sesa Goa to 25 million tonnes a year from 10 million tonnes now.

The company also plans to raise its copper and zinc production to 1 million tonnes a year each, from 500,000 tonnes and 800,000 tonnes annually, respectively.

Vedanta Group firm Hindustan Zinc has already embarked on an expansion, which would see it become Asia’s largest silver producer with an annual capacity of 500,000 kg.

Commercial vehicle sales an important barometer of economic activity:
CV demand up, industry optimistic

The demand for trucks and buses looks to be on the growth path again. Market leader Tata Motors has raised production over recent weeks, while Chennai-based Ashok Leyland says the worst is over for the commercial vehicle industry.

P M Telang, executive director, Tata Motors, said: “The demand for Commercial Vehicles (CVs) has gone up in recent weeks across the country. There was a major inventory correction in earlier months through cuts in production, but demand has recently picked up very well. We are currently facing a supply constraint, with demand exceeding supply.”

Experts said the spurt in demand for CVs was triggered by the government’s steps when it announced the second stimulus package in the first week of January. The package eased liquidity to some extent.

A special line of credit was made available to Non-Banking Finance Companies (NBFC) with the help of some state-run banks. Additionally, an accelerated depreciation benefit of 50 per cent was provided for CVs purchased in the current quarter.

Ashok Leyland, the largest CV maker after Tata, is expecting growth in the current quarter to be better than the earlier two, although flat when compared to the same period last year.

Ashok Leyland Chief Financial Officer K Shridharan said: “There will be no dip in sales in the current quarter, as demand has shown an upswing. The quarter will, however, be subdued when compared to the corresponding one the previous year. We believe the worst is over for the industry.”

According to Tata Motors, its sales of trucks, buses and light commercial vehicles grew 35 per cent in February, at 23,454 units, against 17,373 units sold in January. However, when compared to last year in the same month, sales have declined 25 per cent, from 31,317 units.

The company’s sale of medium and heavy commercial vehicles in February, at 8,810 units, was a jump of 52 per cent over January, which had seen much the same trend as in the final three months of last year.

Theo_Fidel · Post by **Theo_Fidel** » 03 Mar 2009 04:01

Exports and imports are down dramatically.

We are not insulated. Will the neta's wake up at least now.

http://www.hindu.com/2009/03/03/stories ... 901600.htm

...India’s exports declined by 15.9 per cent in January over the year-ago period, posting contraction for the fourth consecutive month.Imports also registered a fall of 18.2 per cent for the first time in the current fiscal.According to official figures released here on Monday, exports dropped to $12.38 billion in January from $14.71 billion a year ago, while imports dipped, for the first time this fiscal, to $18.45 billion from $22.5 billion, leaving a monthly trade deficit of about $6.07 billion. Exports contracted by 12.1 per cent to $12.8 billion in October 2008, showing a negative trend for the first time in the last five years.

The import number falling so drastically is an illusion. Almost all of it is oil decline.

Non-oil imports in January were estimated at $13.99 billion, 0.5 per cent lower than non-oil imports of $14.06 billion in January 2008, according to official figures.

This still makes me nervous as it could be continuing consumerist imports.

I fear a BOP Armageddon is coming. While the government fiddles...

Rahul Mehta · Post by **Rahul Mehta** » 03 Mar 2009 09:00

Theo_Fidel wrote:I fear a BOP Armageddon is coming. While the government fiddles...

And what do you propose we BRites should do?

Should we also fiddle ?

Or do you propose that we should NOT fiddle but just sing and dance?

Arya Sumantra · Post by **Arya Sumantra** » 03 Mar 2009 18:27

Rahul Mehta wrote:
Theo_Fidel wrote:I fear a BOP Armageddon is coming. While the government fiddles...
And what do you propose we BRites should do?

Should we also fiddle ?

Or do you propose that we should NOT fiddle but just sing and dance?

India should offer to do free trade with gulf states if they are willing to do that trade in Rupee. That would take care of our big Oil related forex outflow. Difficult to boost exports much in this scenario while we cannot cut oil imports. Under present economic scenario they(gulf states) would be willing to latch on to relatively stable economy and with amreekaa indiscriminately printing dollahs the gulf states would be far more open to such an idea. Besides these states are eager to provide employment to their youth in industry outside oil. An unhindred access to a huge market like ours will be a welcome opportunity.

Rahul Mehta · Post by **Rahul Mehta** » 03 Mar 2009 18:42

Theo_Fidel: I fear a BOP Armageddon is coming. While the government fiddles...

Rahul Mehta : And what do you propose we BRites should do? Should we also fiddle ? Or do you propose that we should NOT fiddle but just sing and dance?

Arya Sumantra : India should offer to do free trade with gulf states if they are willing to do that trade in Rupee. That would take care of our big Oil related forex outflow. Difficult to boost exports much in this scenario while we cannot cut oil imports. Under present economic scenario they(gulf states) would be willing to latch on to relatively stable economy and with amreekaa indiscriminately printing dollahs the gulf states would be far more open to such an idea. Besides these states are eager to provide employment to their youth in industry outside oil. An unhindred access to a huge market like ours will be a welcome opportunity.

Hmmm... my question to TF was "what BRites should do?"

Something with the reach of our arms.

And yes, India should make such offer to Gulf. But given the US's military influence in Gulf, will they dare to do so? Saddam tried that and US Military made a pendulum out of him.

But yes, we should ask Gulf countries to trade in rupees. But what next if they refuse?

Liu · Post by **Liu** » 03 Mar 2009 18:45

Arya Sumantra wrote:
Rahul Mehta wrote:India should offer to do free trade with gulf states if they are willing to do that trade in Rupee. That would take care of our big Oil related forex outflow. Difficult to boost exports much in this scenario while we cannot cut oil imports. Under present economic scenario they(gulf states) would be willing to latch on to relatively stable economy and with amreekaa indiscriminately printing dollahs the gulf states would be far more open to such an idea. Besides these states are eager to provide employment to their youth in industry outside oil. An unhindred access to a huge market like ours will be a welcome opportunity.

if gulf state imported lots of Indian goods,a Currency swap agreements between India and gulf state might be ok.

Theo_Fidel · Post by **Theo_Fidel** » 03 Mar 2009 21:09

The oil basket is actually not the worst of our problems right now.

IIRC correctly India actually has a positive trade balance with many of the gulf states.

The real problem is that the government needs to caution the people to exercise austerity and not be splurging on luxury goods at this time. Even the US is cutting way back into consumption. So far no one in charge is willing to say a recession is coming and we need to prepare. People need to have more caution.

ramana · Post by **ramana** » 04 Mar 2009 01:32

All that area was rupee trade area till the 1965 Indo-Pak war when KSA switched to Dollar as the currency.

Suraj · Post by **Suraj** » 04 Mar 2009 04:59

Electoral politics getting in the way of economics - the union commerce ministry is blocking Maharashtra's attempts to dilute the SEZ Act with it's own local laws to permit greater labour flexibility:
Maharashtra's SEZ Bill faces Centre hurdle

After two years of prolonged correspondence between the state and the central government, the commerce ministry cleared the Maharashtra Special Economic Zones (SEZ) and Designated Areas Bill in May last year. However, it refused to allow the state government to relax the labour laws in the SEZs.

Subsequently, the state government prepared the Bill incorporating the changes suggested by the commerce ministry. However, it did not take the Bill to the legislature due to the controversy regarding land acquisition for some SEZs in the state. Instead, it decided to bring an Ordinance. But since here too the commerce ministry’s clearance was needed, the Bill was again sent to the Centre.

However, the ministry that had earlier cleared the provision in the Bill allowing the state to override all other laws, objected to it this time, said a senior official of the state government’s industry ministry.

On the export data:
The slide accelerates

There is little question that the falling numbers month after month are closely correlated to the intensifying slowdown in the main export markets of the US, Europe and Japan. Until there is a recovery in those economies, the export community should brace itself for bleak times. It is small consolation that exports grew by over 13 per cent during the April-January period. Since the tide turned in October, the buoyancy of the first half of 2008-09 has been virtually forgotten. Neither is it of great significance that exports in rupee terms actually grew by 4.3 per cent during January 2009, and by about 26 per cent during the April-January period. This was the result of the sharp depreciation in the rupee. At an aggregate level, this may have helped shore up exporters’ margins, even as volumes declined sharply. However, the benefits of this have been quite asymmetric. There are persistent reports of export units across sectors shutting down and, consequently, many jobs being lost. Rupee depreciation has apparently not been enough to protect everybody’s margins.

Imports also declined during January, by over 18 per cent from January 2008. Much of this was attributable to lower oil prices, with oil imports declining by 47.5 per cent. Non-oil imports also declined, but by a mere 0.5 per cent in dollar terms. These numbers are consistent with the anticipated slowdown in economic activity, which was reflected in the sharp drop in the GDP growth rate during the October-December quarter. However, the relatively modest drop in non-oil imports is an encouraging sign that the slowdown may not be as severe as was feared. (no breakdown of capital and consumer goods imports though)

...The entire framework of export incentives is production-based. If exports are taking place, the incentives can be exploited. However, if they are not, the incentives are useless. Instead of emphasising more incentives within the same framework, which appears to be the government’s response to the falling numbers, the focus should shift on providing support to viable exporters, while facilitating arrangements that allow the fragmented sector to efficiently manage collective risk. Some degree of consolidation is essential for the sector to take advantage of a recovery in key markets as well as to prepare it for the next, inevitable, downturn.

Fiscal deficit estimate off the mark by Rs 51,000 cr

The Budget estimate of fiscal deficit for the next financial year has been underestimated by nearly 0.9 percentage point of Gross Domestic Product (GDP), or about Rs 51,000 crore.

This is because the estimates for revenue collections in the Interim Budget for 2009-10 do not reflect the full impact of the duty concessions announced by the government since December 2008.

The Budget estimate for fiscal deficit in 2009-10 put it at 5.5 per cent of GDP, compared with 6 per cent in the revised estimate for 2008-09.

The reduction of 4 percentage point in excise duty along with a cut in countervailing Customs duty was estimated to cause a revenue loss of around Rs 14,700 crore for the last four months of 2008-09. Thus, for six months, it would mean a revenue loss of Rs 22,050 crore, which is 0.4 per cent of GDP.

Further, the 2 percentage points reduction in excise duty and service tax announced last week will result in revenue losses of Rs 29,100 crore or 0.5 per cent of GDP. These two tax cuts will add 0.9 per cent to the 5.5 per cent fiscal deficit estimated in 2009-10.

R Vaidya · Post by **R Vaidya** » 04 Mar 2009 18:09

Time to Get Back Black money in Swiss accounts

http://www.dnaindia.com/report.asp?news ... 5&pageid=0

Rvaidya

Rahul Mehta · Post by **Rahul Mehta** » 04 Mar 2009 18:34

R Vaidya wrote:Time to Get Back Black money in Swiss accounts

http://www.dnaindia.com/report.asp?news ... 5&pageid=0

Rvaidya

In 2002, I had a thread on BR where I had demanded that we GoI should threaten Swiss Govt with cutting off diplomatic and all relations unless and until the disclose the information. People had a good laugh. And since admins dont have money to buy hard disks, they trashed that thread after a few months. Even now, the problem is

1. MMS is not making any demand tow Swiss to get that information, as many Nbjprie on whom he depends have cash in Swiss bank.

2. LKA has not make any such demand either

3. Baba Ramdev and CPM are athe ONLY people who have asked GoI to take some action in the direction.

So what option we BRites have, given that most senior leaders including PM-in-waiting are not interested in getting this information?

Singha · Post by **Singha** » 04 Mar 2009 18:38

CPI(M) has its money in dubai accounts and national panda bank probably, thats why they are making noise.

Arya Sumantra · Post by **Arya Sumantra** » 04 Mar 2009 18:54

Let us be realistic here. One cannot force such a thing especially when those at the very top have their fingers dipped in it. With the swiss banks heavily exposed to the economic crisis in US, even preserving the current value of that money is threatened. The best way is to try the soft approach. Like an apsara tempting a rishi, the promise of better returns/growth or at least safe preservation of value in the country itself can lure that money back to India in a sustainable way. We need to tempt our own mantris as "foreign" investors. We can only tempt that money back into India. An analogy of how Rishyashringa was brought to Anga desh comes to the mind.

Vipul · Post by **Vipul** » 05 Mar 2009 05:32

Reserve Bank cuts key rates.

The Reserve Bank today cut its key overnight lending and borrowing rates by 50 basis points each with immediate effect, signalling banks to further soften interest rates.Since October, the RBI has reduced key policy rates to fuel demand in the economy reeling under the impact of the global financial meltdown.

The repo, the rate at which RBI lends short-term funds to commercial banks, has been reduced from 9 per cent in October to 5 per cent now. Similarly, the reverse repo, the rate at which banks park overnight funds with RBI, has been brought down from 6 per cent to 3.5 per cent.

The decision, RBI said, "Will further encourage banks to provide credit for productive purposes at viable interest rates. The Reserve Bank on its part would continue to maintain ample liquidity in the system."

Singha · Post by **Singha** » 05 Mar 2009 08:57

a collapse of couple of large prominent swiss banks, a couple in bahamas/cayman islands with depositors not paid back by the swiss govt would be great to flush out those trillions of stolen money into useful areas back in desh.

otherwise the principal amts are so huge, even with 0% interest it will be kept there for future gens to use like a offshore trust fund.

svinayak · Post by **svinayak** » 05 Mar 2009 09:23

India’s Central Bank May Continue Cutting Rates to Spur Growth
Email | Print | A A A
http://www.bloomberg.com/apps/news?pid= ... er=economy

By Cherian Thomas

March 5 (Bloomberg) -- India’s central bank indicated it may keep cutting interest rates after economic growth slowed to a five-year low last quarter.

The Reserve Bank of India yesterday reduced the benchmark repurchase rate to a record low of 5 percent from 5.5 percent and the reverse repurchase rate to 3.5 percent from 4 percent, adding it will “maintain ample liquidity in the banking system”.

Governor Duvvuri Subbarao is driving policy rates down to unprecedented lows to revive investment and spur consumption in Asia’s third-largest economy. The $1.2 trillion economy is slowing as exports decline and companies’ access to funds from overseas and from the stock market is cut off by the global recession.

“Credit availability in India is drying up and is the problem,” said Chetan Ahya, an economist at Morgan Stanley in Singapore. “We expect the RBI to cut the policy rate by another 50 basis points by the end of the second quarter of 2009.”

The deepening global recession and slumping share markets, including a 13 percent decline in India’s key stock index this year, have forced policy makers around the world to slash borrowing costs.

The U.S. Federal Reserve’s benchmark rate is near zero, the Bank of England’s is the lowest since its creation in 1694 and the European Central Bank today will probably trim its main rate to 1.5 percent, the lowest level in 10 years of setting policy, according to economists.

Slowing Inflation

Subbarao has room to slash rates because falling commodity prices have slowed inflation to a 14-month low of 3.36 percent from a 16-year peak of 12.91 percent in August.

India’s economy expanded 5.3 percent in the three months to Dec. 31 from a year earlier after a 7.6 percent gain in the previous quarter, the statistics agency said last week. That was less than the 6.1 percent predicted by economists.

India, which grew an average 9 percent in the past four years, is suffering from a slump in exports after trade as a percentage of GDP rose to 35 percent in the year ended March 31, 2008, from 21 percent in 1997-98.

The nation’s exports declined last quarter for the first time in seven years. Local demand has also been hit because commercial banks, laden with high-cost deposits, have been slow to reduce lending rates.

Prime Minister Manmohan Singh’s government has backed the monetary stimulus by lowering taxes and increasing spending on infrastructure.

Tax Cuts

Acting Finance Minister Pranab Mukherjee Feb. 16 lowered the excise duty to 8 percent from 10 percent and the service tax to 10 percent from 12 percent. He extended a 4 percentage-point cut in central value-added tax announced in December beyond March 31.

Before yesterday’s announcement, the combined stimulus from interest-rate cuts, increased government outlays and lower taxes totaled almost $80 billion, or 7 percent of India’s gross domestic product, according to the central bank.

Overseas borrowing and the sale of new shares on the stock market provided Indian industry with about 40 percent of total funding in the year ended March 31, 2008, according to Tehmina Khan, an economist at Capital Economics Ltd. in London.

Still, the spending is straining the budget deficit, which the finance ministry forecasts will widen to 6 percent of GDP in the year ending March 31 from a target of 2.5 percent. The government expects borrowing next year to increase to a record 3.62 trillion rupees ($72 billion). Indian government debt is the equivalent of 80 percent of the nation’s GDP.

Yields on India’s benchmark bonds due in 2018 have risen 1.19 percentage points to 6.44 percent this year because of deteriorating government finances.

Weighing on Confidence

“The massive public debt is weighing on investor confidence,” said Sherman Chan, a Sydney-based economist at Moody’s Economy.com. “There is an urgent need to clean up the government balance sheet after the global storm.”

The government, whose five-year term ends in May, wants to prop up growth and reduce unemployment as it prepares to face general elections.

Standard & Poor’s said Feb. 24 that the nation’s credit rating may be cut to junk as government debt reaches a level that’s “not sustainable.” S&P lowered India’s rating outlook to negative from stable.

Gaurav_S · Post by **Gaurav_S** » 06 Mar 2009 15:16

India seeks global symbol for rupee

India announced on Friday a contest to design a global symbol for the rupee so that the currency can join the likes of the US dollar and the yen which already have their own identifiable symbols.

The new symbol will be the "identity of the Indian currency," a finance ministry statement said.

"Major world currencies like the US dollar, pound, yen and euro have an identification symbol. The government of India is also proposing to have a symbol for the rupee," finance ministry official BS Rawat told AFP.

"The symbol for the Indian rupee is to be selected through a public competition" that closes on April 15, Rawat said.

The currency is at present denoted simply by "Rs" or "INR" which is short for Indian rupee.

But Rawat said these were not "symbols" but "abbreviations" for the word rupee and hence the contest that is open to artists who are "resident Indians."

Arya Sumantra · Post by **Arya Sumantra** » 06 Mar 2009 21:17

Rahul Mehta wrote:
Theo_Fidel: I fear a BOP Armageddon is coming. While the government fiddles...

Rahul Mehta : And what do you propose we BRites should do? Should we also fiddle ? Or do you propose that we should NOT fiddle but just sing and dance?

Arya Sumantra : India should offer to do free trade with gulf states if they are willing to do that trade in Rupee. That would take care of our big Oil related forex outflow. Difficult to boost exports much in this scenario while we cannot cut oil imports. Under present economic scenario they(gulf states) would be willing to latch on to relatively stable economy and with amreekaa indiscriminately printing dollahs the gulf states would be far more open to such an idea. Besides these states are eager to provide employment to their youth in industry outside oil. An unhindred access to a huge market like ours will be a welcome opportunity.
Hmmm... my question to TF was "what BRites should do?" Something with the reach of our arms.

And yes, India should make such offer to Gulf. But given the US's military influence in Gulf, will they dare to do so? Saddam tried that and US Military made a pendulum out of him.

But yes, we should ask Gulf countries to trade in rupees. But what next if they refuse?

Ok US may be protective of oil trade being in dollahs but atleast we can sign Free trade in Rupees with African countries and those of South America. They are rich in non-oil commodities too. In fact I believe the free trade agreement we are about to sign with ASEAN should also be in Rupee terms. Of course they need to agree but in present circumstances when they will see their main export demand slump they will likely agree. Basically ANY country that is rich in commodities and its cost effectiveness or tech prowess is not such as to do to our manufacturing what china did to US should be a candidate for a free trade in Rupees with India.
Free trade in Rupees is the only way I can see to prevent economic stagnation in the prevalent scenario.

Ananth · Post by **Ananth** » 07 Mar 2009 01:56

There seems to be some truth to this "core sector bounces on stimulus" report referred in previous page:
http://forums.bharat-rakshak.com/viewto ... 24#p621824

JSW Steel sees 60pc jump in sales this quarter on good demand
http://economictimes.indiatimes.com/New ... 235506.cms

Tata Steel’s February sales grow 47%
http://www.livemint.com/2009/03/0622385 ... ry-sa.html

John Snow · Post by **John Snow** » 07 Mar 2009 02:06

Two things to remember
INRS counterfieting needs to be aggresively fought and stopped.
All the funds that have been cayman, Isle of Man, Licheistaine (sp?) and Swiss banks cant be fretted out as these (lockers have been cleaned up) or the respective banks invested in ponzi schemes themselves which have vapourised into art, diamonds and other exotic and luxary products (compacted)

Suraj · Post by **Suraj** » 07 Mar 2009 06:36

Core sector growth slows to 1.4% in Jan

Continuing its declining trend, the index of six core industries grew at its slowest pace in January 2009, as crude and petroleum products output went into the negative territory. However, cement was the only industry to grow at a faster pace on annual basis.

The index expanded by 1.4 per cent in January 2009, against 3.6 per cent in the year-ago month. Economists expect the Index of Industrial Production (IIP) to remain weak in the month under consideration, as the core industries constitute nearly 27 per cent of IIP.

After expanding 4.7 per cent in September 2008, the pace of growth in the core sector index has been declining steadily.

“The core sectors are a large block of the basic goods segment of the IIP. The 1.4 per cent growth in January is one of the lowest,” said a report prepared by Saugata Bhattacharya, vice-president, Axis Bank, who expects the IIP to dip by 1 per cent in the month under consideration.

The IIP had dipped by 2 per cent in December 2008, the worst performance by the index in the backdrop of dropping demand in the domestic, as well as overseas markets.

The key reason for muted growth in the core sector index was due to a unprecedented fall in crude oil production, which dipped by 8 per cent in the month, compared with a contraction of 0.2 per cent in the same month of the previous year.

RBI's measures will help absorb the impact of high fiscal deficit

The Reserve Bank of India (RBI) finally did on Wednesday evening what had been anticipated since the presentation of the Interim Budget on February 16, and what it should almost certainly have done at the time of its last quarterly review in January. The Budget estimated that the fiscal deficit would be 6 per cent of GDP, which implied a significant increase in the government’s borrowing requirements during the current year. Since this would be likely to cause interest rates to rise (as indeed they did, at the long end), which would be counter to the objectives of monetary policy, the RBI was expected to fairly quickly accommodate the higher borrowing requirement by infusing more liquidity into the system. Another way to deal with the extra load was to use some of the Rs. 1,00,000 crore outstanding under the Market Stabilisation Scheme (MSS), which had been used to manage the foreign exchange inflow. Even though the government pays interest on the bonds issued under this scheme, it cannot use the money for anything at all. It required an amendment to the terms of the scheme, which was done on February 26 through the signing of a Memorandum of Understanding between the government and the RBI, which transferred Rs 46,000 crore from the MSS kitty to the general pool, making it accessible to the government for spending. This new arrangement has now been operationalised by the RBI in Tuesday’s policy announcement.

Obviously, this amount covers only a part of the borrowing requirement, so further measures were needed. The RBI decided to cut both the repo rate and the reverse repo rates by 50 basis points each, taking them to 5 per cent and 3.5 per cent, respectively. Many people would see this as inadequate in the current circumstances; a 100 basis point reduction, if not more, would certainly have been a reasonable response.

Lending rates may have been notched down by the banks, but the real question is whether credit is actually flowing to the sectors where it is needed most. The RBI’s statement points to rather worrying declines in the growth rate of non-food credit and underlines the reluctance of banks to lend to businesses and consumers in such a vitiated environment. Unless this issue is dealt with, all the policy measures in the world will not translate into any growth momentum.

After his initial proactive measures, Subbarao has been circumspect in acting on monetary levers, particularly during the January review and the interim budget. However, the falling inflation gives him more scope to cut rates further:
India inflation slows to 3.03%, lowest since 2002

India's inflation slowed to the lowest since 2002, giving the central bank room to add to yesterday's cut in interest rates.

Wholesale prices climbed 3.03 percent in the week to Feb. 21 from a year earlier after gaining 3.36 percent the previous week, the commerce ministry said in New Delhi today. Economists expected an increase of 3.07 percent.

Reserve Bank of India Governor Duvvuri Subbarao yesterday slashed interest rates for the fifth time since October to revive an economy growing at the slowest pace in six years. Economists including Rajeev Malik said further cuts can be expected as the global recession threatens to pummel India.

``Rapidly falling inflation, increased downside risk to growth and the hefty market borrowing requirement of the government will prompt the Reserve Bank to cut rates further,'' said Malik, regional economist at Macquarie Group Ltd. in Singapore. He expects the central bank to lower borrowing costs by another 100 to 150 basis points by June.

India's central bank yesterday reduced its key repurchase rate to an all-time low of 5 percent from 5.5 percent and the reverse repurchase rate to 3.5 percent from 4 percent. The bank has cut the repurchase rate by 400 basis points since October and the reverse repurchase rate by 250 basis points.

Getting banks to lend is another matter. The RBI can take the horse to water but cannot quite make it drink.

shyamd · Post by **shyamd** » 07 Mar 2009 18:47

Arya Sumantra wrote: India should offer to do free trade with gulf states if they are willing to do that trade in Rupee. That would take care of our big Oil related forex outflow. Difficult to boost exports much in this scenario while we cannot cut oil imports. Under present economic scenario they(gulf states) would be willing to latch on to relatively stable economy and with amreekaa indiscriminately printing dollahs the gulf states would be far more open to such an idea. Besides these states are eager to provide employment to their youth in industry outside oil. An unhindred access to a huge market like ours will be a welcome opportunity.

Inshallah, in time. Oman is getting the presidency for the GCC region soon (I think sometime this year), and they will be proposing the India-GCC FTA to the GCC very soon.

Old article, much has happened since.
No headway in GCC-India FTA

Bilateral trade rose to $25b in 2006

By K.V.S. Madhav

The much-awaited Free Trade Agreement (FTA) between India and GCC appears to have hit yet another roadblock with the Indian Revenue Department opposing the inclusion of crude oil in the pact, citing a huge dent on the customs revenue.

Crude oil accounts for a substantial share of India-GCC bilateral trade and its inclusion in the FTA would bring in revenue losses on account of customs duty exemption, officials maintained.

"The Revenue Department is opposed to allowing crude oil imports at zero duty and wants that this item be kept out of the FTA with the GCC," reports quoting a senior Indian government official said in New Delhi.

However, such a stance may put a spoke in the FTA plans.

The issue came up at a recent briefing session by Commerce Ministry officials on the progress of FTA plans with various countries, including the GCC bloc, at the Prime Minister’s Office.

More than 70 per cent of India’s crude oil imports worth $60 billion originate from the GCC bloc — Saudi Arabia, Kuwait, Bahrain, Qatar, UAE and Oman.

Despite a framework agreement with six members of GCC signed in 2004, the FTA plan did not make much headway and was bogged down by inter-ministerial differences and negotiations over various components of the economic cooperation agreement.

But the Indian Ambasador in Bahrain, Balkrishna Shetty, exuded confidence that the negotiations, which were in the final stage, would be completed soon and the FTA was likely to be signed in the first-quarter of next year.

"Such hiccups are inevitable when an agreement of this magnitude is signed. There will be gains and losses on both sides. Some sectors are bound to benefit and offset the imminent losses in other areas, but the overall outlook for the India-GCC FTA is bright and trade is bound to boom," said Osman Sharief, Bahrain Asian Traders Committee of the Bahrain Chamber of Commerce & Industry.

Bahrain, in particular, can gain more once the FTA comes by. "Asians in the Gulf region can play a big role in pushing forward the efforts to achieve the FTA," he maintained.

"Bahrain is keen on the FTA, but if there are hold-ups it will go ahead with an agreement with India on its own. The scope for further cooperation is immense based on the historical friendship and mutual understanding and the current economic boom and developmental efforts in both countries," the Ambassador said.

Manufacturing, services, education, training, infrastructure projects, petrochemicals, information technology, tourism and healthcare were promising areas for joint ventures between the countries.

The FTA is expected to remove restrictive duties, push down tariffs on goods and pave way for more intensive economic engagement between the nations.

The GCC is India’s second largest trading partner and the largest single origin of imports into India and the second largest destination for exports from India. Bilateral trade rose to nearly $25 billion in 2006, excluding energy imports by India worth approximately another $22 billion.

In fact it registered a more than four-fold rise from $5.55 billion in 2000-01 to $23.42 billion in 2005-06, the period marked by buoyancy in exports and imports.

The UAE emerged as the single largest investor in India among the GCC countries, accounting for nearly 79 per cent of the total inflow from the region, followed by Bahrain, Oman, Saudi Arabia, Kuwait and Qatar.

Arya Sumantra · Post by **Arya Sumantra** » 07 Mar 2009 21:21

shyamd wrote:
Arya Sumantra wrote: India should offer to do free trade with gulf states if they are willing to do that trade in Rupee. That would take care of our big Oil related forex outflow. Difficult to boost exports much in this scenario while we cannot cut oil imports. Under present economic scenario they(gulf states) would be willing to latch on to relatively stable economy and with amreekaa indiscriminately printing dollahs the gulf states would be far more open to such an idea. Besides these states are eager to provide employment to their youth in industry outside oil. An unhindred access to a huge market like ours will be a welcome opportunity.
Inshallah, in time. Oman is getting the presidency for the GCC region soon (I think sometime this year), and they will be proposing the India-GCC FTA to the GCC very soon.

Yes but I suggested it only if FTA is in Rupees as highlighted. Agree that US will not allow it. We could negotiate with US promising not to export any weapons system or any Automobiles under a Rupee based Free Trade. They should be more open to it since it does not threaten west's predominant sales of planes and cars to Gulf states.

sarulan · Post by **sarulan** » 07 Mar 2009 21:25

I am wondering when Citi BofA themselves are in deep trouble, what will happen to the trillion of black money our politicians have in Swiss banks. Is it gone in to the black hole? It will be a sweet revenge when they find out the lockers are empty.

Singha · Post by **Singha** » 07 Mar 2009 22:55

I hope a few billion get flushed down toilet. suddenly you will see flurry of FDI into India via gulf and mauritius based front cos.

Sanjay M · Post by **Sanjay M** » 11 Mar 2009 18:53

Economic slowdown forces govt to increase infrastructure spending for more stimulus:

From The Economist print edition

India's economy
Bridges to somewhere

Mar 5th 2009 | GURGAON

The slowdown puts the onus on the government to start rebuilding India’s rickety infrastructure

ramana · Post by **ramana** » 11 Mar 2009 20:39

sarulan wrote:I am wondering when Citi BofA themselves are in deep trouble, what will happen to the trillion of black money our politicians have in Swiss banks. Is it gone in to the black hole? It will be a sweet revenge when they find out the lockers are empty.

That Bank of Spain study posted by vsudhir in the prespectives thread says ~ $4T was the rise in funds in Western Europe of whihc $2T was in Swiss banks alone. So hopefully the decline was uniform in which case the Swiss got hammered. But hear rumors that France and Germany escaped the toxic asets mayajaal. And Swiss are close to these two in thinking. So someone needs to look into it.

RamaY · Post by **RamaY** » 12 Mar 2009 03:25

ramana wrote:
sarulan wrote:I am wondering when Citi BofA themselves are in deep trouble, what will happen to the trillion of black money our politicians have in Swiss banks. Is it gone in to the black hole? It will be a sweet revenge when they find out the lockers are empty.

That Bank of Spain study posted by vsudhir in the prespectives thread says ~ $4T was the rise in funds in Western Europe of whihc $2T was in Swiss banks alone. So hopefully the decline was uniform in which case the Swiss got hammered. But hear rumors that France and Germany escaped the toxic asets mayajaal. And Swiss are close to these two in thinking. So someone needs to look into it.

IMO some of it came back to India thru Dubai/Mauritius FDI route. Most of it went to recent real estate boom. Is there any way we can see the source of FDI and where they went in the past 2-3 years?

Even if we got $10-50B thru this route in the past 5 years, it is a drop in the ocean.

shyamd · Post by **shyamd** » 12 Mar 2009 03:54

I posted a link in Intel and National security thread a week ago on Hassan Ali Khan's assets that ED had found. Total assets in his name stashed in foreign banks is $1410 billion.

Rahul Mehta · Post by **Rahul Mehta** » 12 Mar 2009 08:40

sarulan wrote:I am wondering when Citi BofA themselves are in deep trouble, what will happen to the trillion of black money our politicians have in Swiss banks. Is it gone in to the black hole? It will be a sweet revenge when they find out the lockers are empty.

US elitemen have robbed elitemen (and Nbjpri) of corrupt countries more than they robbed Americans common. eg Consider Sharad or Pramod who as per rumor mill have Rs 10,000 cr and Rs 2000 cr respectively in Swiss banks. Say they invested in Dow Jones or worse in Lehman Bonds. Then they lost 50% or more. And this money moved into the hands of elitemen and USG, who used to the money to grab oil wells and mineral mines all over the world. And these Indian elitemen etc cant even cry aloud of their losses.

shyamd wrote:I posted a link in Intel and National security thread a week ago on Hassan Ali Khan's assets that ED had found. Total assets in his name stashed in foreign banks is $1410 billion.

Is it $1.410 billion or $1410 billion [:o] ?!! I can dare to assume only former.

If this gangster is worth $ 1.4 billion, I wont even guess how much money Sharad and Pramod have. But they lost a big chunk to Western elitemen via Wester share mkt and bond mkt. And soon, Swiss banks will go belly up and elitemen will loose whatever they are left with.

Singha wrote:I hope a few billion get flushed down toilet. suddenly you will see flurry of FDI into India via gulf and mauritius based front cos.

Unlikely, because if Sharads or Pramods try to withdraw their funds from Swiss banks, the Swiss banks will go belly up. The Swiss Govt will protect the local Swiss citizens and local Swiss companies and other white accounts. But people with underground accounts will lose all their money.

Nadar Shah came from Iran and robbed the then Delhites. Here, it is worse. The Indian elitemen went all the way to Switzerland and gave them their money. That would be like Delhilites going to Iran to give them their monies. I have zero sympathies for Nbjprie who will lose their swiss deposits. But sad part is that the people who got robbed -- India's commons -- will never get this money.

Prem · Post by **Prem** » 12 Mar 2009 10:10

ramana wrote:
sarulan wrote:I am wondering when Citi BofA themselves are in deep trouble, what will happen to the trillion of black money our politicians have in Swiss banks. Is it gone in to the black hole? It will be a sweet revenge when they find out the lockers are empty.

That Bank of Spain study posted by vsudhir in the prespectives thread says ~ $4T was the rise in funds in Western Europe of whihc $2T was in Swiss banks alone. So hopefully the decline was uniform in which case the Swiss got hammered. But hear rumors that France and Germany escaped the toxic asets mayajaal. And Swiss are close to these two in thinking. So someone needs to look into it.

Some one in India mentioned ,balance is intact but no withdrawl .

satya · Post by **satya** » 12 Mar 2009 17:15

Some one in India mentioned ,balance is intact but no withdrawl

.

Waiting for May 16 election result and Rupee-USD rate to breach 55 depending on result may slide even beyond 58 -60 .