Indian Economy: News and Discussion (June 8 2008)

joshvajohn · Post by **joshvajohn** » 20 Mar 2009 12:05

Credit card details on sale in India: Report
http://www.indianexpress.com/news/credi ... rt/436927/

comments:
BBC has been famous for discrediting India and her business. This is an attempt to publicly disredit and create fear among those who wish to set up call centres in India. BBC has been doing such things a long time. They used to do with the Child labour issues to discredit Indian companies and also those who are buying Indian goods. Ofcourse I am not denying there are a few problems in Indian society and business. But they do very selective study and make sure the public generalises these issues and thus our industries are discredited which is part of their business adventures since memorial.

Suraj · Post by **Suraj** » 20 Mar 2009 12:49

Merely raising the credit card rate ceiling does not sound negative . Predatory and bait-switch card issuing practices are something to regulate, but a high card interest ceiling like 49% is not . Unfettered cheap credit card access can lead to a dangerous consumer debt spiral. This caused a macroeconomic crisis in south korea just three years ago. Those who pay off bills judiciously every month don't need to care about card rates anyway. Encouraging 'commons' to depend on cheap credit cards to bridge their indebtedness, will result in a wider consumer debt crisis down the road .

satya · Post by **satya** » 20 Mar 2009 17:59

On Credit Cards Business in India : Not many Banks are making money on CC units ( there was an excellent article in last week's Mint about CC business in India ) , reason : not many customers go for roll over credit denying banks their earnings since most of them stopped charging annual fees among others . In India , banks are trying to find a new model tht can work with local mindset , will take time to find one .CCs in West means a whole lot different than in India ,in India CC= karz .

Vipul · Post by **Vipul** » 25 Mar 2009 18:08

India tops remittances in 2008 with $ 45 Billion.

Ananth · Post by **Ananth** » 26 Mar 2009 00:51

http://www.thehindubusinessline.com/200 ... 160800.htm
Turner Review: Learning lessons from India

This article is again a vindication of stance of Dr. Reddy's actions while at RBI.

The Review has blamed three things for the current crisis. First, after the fashion of the day, is the euphemism for China’s huge reserves and the US’ habit of living off borrowed funds, namely, macro-economic imbalances.

This term will not make China happy because it seems its delegates had threatened to walk out of the first G-20 meeting last year if the communique contained the term. So it was left out.

Clearly, with their foolish investment policy of putting all their eggs in one basket now exposed, Lord Turner at least has not felt intimidated by China.

The second reason he has identified is inadequate bank capital and the need for better liquidity regulation — of the sort Dr Reddy had advocated and implemented in India. If Indian banks are not in trouble, a large part of the credit must go to him. It was he who implemented what the Turner Review is now calling for, namely, “Counter-cyclical capital buffers, building up in good economic times so that they can be drawn on in downturns, and reflected in published account estimates of future potential losses” and “a central role for much tighter regulation of liquidity.”

But it is the third reason adduced by Lord Turner that is of real importance. He blames “financial innovation of little social value” for the crisis. In other words, what he is saying is that if you let them do as they please — the core of principles-based regulation — they will land you in trouble.

One of the side items from the above article there is a pretty strong lobby inside GoI establishment which is quite Anglophone as far as economic policies are concerned. There is also another lobby which seems to be driven by empirical experiences of the babudom rather than theories peddled by the outsiders. Has the Anglophone lobby is so strong that it can overrule Rakesh Mohan from becoming Governor, or is it mere an articfact of the "dream team"?

ramana · Post by **ramana** » 26 Mar 2009 01:10

Ananth, You left out:

And, if I may respectfully suggest, this knocks the Mistry Committee Report and, to a lesser extent, the Raghuram Rajan Committee report, out of the reckoning as blueprints for financial sector reform in India. Both were so heavily influenced by the US-UK model that their credibility is now seriously open to question.

In the end, we are left with several questions, only some of which can be asked openly. One of them is addressed to Indian economists: Why is it that if India has an approach to something, Indian economists wait for it to be validated by the West before they accept it? Indeed, why do they attack the Indians who advocate that view before such validation is bestowed by the West? I genuinely believe that the Finance Ministry, which funded the Mistry report, and the Planning Commission, which funded the Raghuram Rajan report, have some serious explaining to do. As indeed do the economists who toed their line and kept up LeT like attacks on the RBI.

IOW the Mistry and RR reports were sarkari commissions to propose Indian financial reforms in a manner same as US-UK. Was this really MMS-Ahluwalia duo playing Savanarola or Rasputin?

Rahul Mehta · Post by **Rahul Mehta** » 26 Mar 2009 07:46

Ananth wrote:One of the side items from the above article there is a pretty strong lobby inside GoI establishment which is quite Anglophone as far as economic policies are concerned. There is also another lobby which seems to be driven by empirical experiences of the babudom rather than theories peddled by the outsiders. Has the Anglophone lobby is so strong that it can overrule Rakesh Mohan from becoming Governor, or is it mere an articfact of the "dream team"?

If such Anglophone lobby exists, and they are so strong as you fear, what solution do you propose? Merely making Rakesh Mohan RBI-G does not seem to be a good solution, since if this Anglophone lobby is so strong, they can they even influence Rakesh Mohan after he becomes RBI-G.

---

PS : Any solution, that causes no harm should be ALWAYS be welcomed, even if there is no proof that the problem exists.

Ananth · Post by **Ananth** » 26 Mar 2009 08:49

Rahul Mehta wrote: If such Anglophone lobby exists, and they are so strong as you fear, what solution do you propose? Merely making Rakesh Mohan RBI-G does not seem to be a good solution, since if this Anglophone lobby is so strong, they can they even influence Rakesh Mohan after he becomes RBI-G.

---

PS : Any solution, that causes no harm should be ALWAYS be welcomed, even if there is no proof that the problem exists.

Rakesh Mohan is/was quiet a respectable economist when he was at Fin Min and his move to RBI was an indicator that he was being groomed for the top post. According to the article the Anglophone lobby was the driver behind the Mistry and the Rajan reports. In the past we had reports that Reddy had to fight to maintain independence at RBI and not succumb to pressure of MoF. The above article is another data point that the Anglophone lobby would like India to follow certain policies which India resisted under Reddy in the past and which proved singularly important in insulating this country.

What the above article states is that Rakesh Mohan was considered a "Reddy Clone" i.e. he would have maintained independence of the RBI and would have pursued a measured and delibrate monetary/fiscal policy went against his candidature. There are no guarantees that he would be toothless after becoming RBI-G. Rakesh Mohan is still Deputy Gov so you will definitely see Reddy's legacy continue.

abhischekcc · Post by **abhischekcc** » 26 Mar 2009 09:02

Is the current RGI-G an Anglophone?

PC used to strongly diasagree with YVR, and Subbarao is supposed to his choice.

Singha · Post by **Singha** » 26 Mar 2009 09:12

somehow PC doesnt engender much trust in me. spider feeling only.

Rahul Mehta · Post by **Rahul Mehta** » 26 Mar 2009 09:35

Two excellent articles

http://www.rupe-india.org/47/depression.html

http://www.rupe-india.org/47/leather.html

And every article on http://www.rupe-india.org is worth read. They are anti-Military, and so I do not approve them. But information they give you is worth read.

-----

abhischekcc: Is the current RGI-G an Anglophone? PC used to strongly diasagree with YVR, and Subbarao is supposed to his choice.

Singha: somehow PC doesnt engender much trust in me. spider feeling only.

Singha, pls describe these spider feeling.

Now since I am part of "Anglophone have hijacked RBI" debate, let me make my stand clear. First, I would give an analogy. I went to a doc a few days ago for some minor medical problem. Here is the summary of conversation

Doctor : You might be having disease X, and so take medicine A.

Me : can we first run tests to ensure that I have disease X before I start the medicine A

Doctor: There are no tests to prove that you have disease X. But if you have disease X, medicine A will cure you. Now since medicine A does NOT have any side effect, there is no harm in taking them and there is no need to wait for the proof that you have disease X.

I agree with the doctor. Many people insist that dont talk of solution unless you have first proved in court of law that the problem exists. This demand should be confined ONLY if solution has severe costs and side effects. If the solution is inexpensive and has no bad side effect, then pro-status-quo guy's demands to provide the proof that problem exists should be ignored.

Now I am NOT claiming that some people in Govt and RBI are "Anglophone". But if such Anglophones exists, then damage can be immense. Now there is NO way to prove that such Anglophones exists -- they are smart enough to leave no trace. We can get into endless "MMS, PC, LKA, Mdoi are Anglophones" vs "prove that PC, LKA, Modi are Anglophones" debate. Instead, So I have following question to the conspiracy theorists : what solution do you propose to deal with these Anglophones If the solution has no side effects, I am positively interested.

---

[PS : I also have following question to those who claim that Govt is full of Anglophones - why do you use word Anglophone and not slurs like WB, IMF, MNC, CIA agent? The latter has same meaning and is more accurate. Are you worried that use of such word will give you the image I have? Is the choice of word because you are image conscious, the way teenagers are conscious about their appearance? ]

adityaS · Post by **adityaS** » 26 Mar 2009 10:57

^^^ RM: thanks for the links to RUPE, it makes for interesting reading. The article on the economy is particularly good material for the Rhetoric and Dialectic thread.

vina · Post by **vina** » 26 Mar 2009 11:12

Rahul Mehta wrote: the land rent from ALL GoI plots such as Delhi airport, JNU, IIMA, all IIM plots etc. The rent from Delhi airport alone can be, at present mkt value and 3% rent a year, be Rs 50 per common per year. If rents of all GoI plot is added, it can become as high as Rs 5000 per common per year. This system would need an Executive Notification, whose draft I will published later in some other thread, if someone demands.

Mehtaji. The Govt of Karnataka recently imposed a tax on Central Govt land holdings. .Stuff like GPO etc in Bangalore were told to pay the tax . However that was challenged in court by the Central Govt and the court struck it down on the ground that only the Parliament has the right to enact tax laws. Saw a fleeting news item in the newspaper. Dont remember details

So an Executive Notification wont do. You need to get Parliament to pass those laws in a Finance Bill.

Vipul · Post by **Vipul** » 26 Mar 2009 17:51

Inflation at 30-year low of 0.27%.

shyamd · Post by **shyamd** » 26 Mar 2009 19:39

Macro Fundamentals Push Indian Rupee to Record Low

Print

* Mar 2 and 3: Rupee fell 2% to a record low of 52rupee per U.S. dollar(USD) on concerns of impact of plunging exports (-16% in Jan-09) on current account deficit, foreign institutional investment outflows ($1.8 billion ytd); equity market sell-off to a 3-year low (-12.65% ytd), risk of a S&P ratings downgrade to 'junk' as fiscal deficit approaches 9-10% of GDP, concerns of slowing GDP growth
* After falling 23.8% vs. USD in 2008 due to capital outflows of close to $13 billion and growing external deficits, Indian rupee has fallen -6.7% ytd. Central bank is intervening aggressively to prevent rupee from falling below 50/USD mark
* Depreciation will continue during 2009: On continued risk aversion, global credit market turmoil and recession through 2009. Exports are expected to contract in 2009 putting pressure on trade deficit. Slowing IT service exports and remittances will put further pressure on the current account deficit. Stock market correction, slowing corporate earnings, economic growth will continue to cause FII outflows (-$13 bn in 2008). Easing FDI, M&A and PE activity, FII outflows will ease capital a/c surplus. USD demand by domestic firms and exporters to fund their operations abroad since they face difficulty in accessing dollar funds both at home and abroad. USD demand by oil importers and foreign banks to buy dollars in spot market and sell in overseas NDF market to arbitrage the price differential. Further policy rate cuts is expected to drive down interest rates
* Central bank: has been been selling dollars ($57 bn during Mar-Dec 2008) in FX market to contain downward pressure on rupee. forex reserves down to close to $229.27bn at the end of Feb 2009 from the May-08 peak of $316 bn. Central bank is easing capital inflow rules (FII participation in stock market, corporate & govt bond market, raised interest rate cap on Non-Resident Deposits, ceiling and cost on external borrowing by domestic firms, introduced Foreign Currency Exchangeable Bonds for corporates to raise capital abroad; lending forex reserves to public oil companies amid high global oil prices, FDI rules). Since exports are expected to trend down through 2009, central bank might maintain depreciation bias like other Asian countries. Central bank: "will buy or sell rupees only to curb volatility not target any level of rupee"
* Upside for rupee: Impact of easing of oil and commodity prices and slowing domestic consumer and industrial import demand on trade deficit; high interest rate differential with U.S.
* Citi: Rupee will weak in H1 2009 with risk aversion and deleveraging of investors however higher growth and improvement in trade deficit are supportive factors for rupee i H2 2009
* Kotak: In spite of export contraction, lower oil and non-oil imports will lead to a current a/c surplus by Jan-Mar 2010 so that in spite of low capital inflows, the pressure on BOP may be contained->While rupee will remain under pressure in Jan-Mar 2009, it will stabilize thereafter due to improvement in BOP, but is unlikely to appreciate until the U.S. dollar appreciation trend reverses
* Scotiabank: Political uncertainty and monetary policy easing will weigh on the near-term outlook for rupee; sharply deteriorated govt. finances would be constraining factor on the extent of rupee rally
* ANZ: Slowing down foreign equity outflows, a key driver of rupee weakness in 2009, (improved by 56% on year-to-date) and narrowing of trade deficits are supportive of rupee in 2009
* ICICI: easing volatility of equity market improved the risk of rupee, but it would be temporary relief and would focus on global equities trend. Rupee would remain volatile in the short-term around 51-51.75
* Goldman Sachs(via economic times): After a 3-12 month horizon, rupee will strengthen as deleveraging pressures ease
* Barclays (via bloomberg): Rupee will tumble to 56/USD by June 2009 on capital outflows and current a/c deficit
* Morgan Stanley(via bloomberg): As current account and fiscal deficits widen and risk aversion continues, rupee could depreciate 6% to 53 per $US by the end of 2009
* Sumitomo Mitsui Bank(via bloomberg): with weak data compare to China declining stock market, rupee would fall 52.50 by end of March 2009
* HSBC (via Bloomberg): Rupee would depreciate almost 10% to record low of 54 per US$ by the end of 2009 due to slowing remittance and FII equity outflow

Ananth · Post by **Ananth** » 26 Mar 2009 21:53

Vipul wrote:Inflation at 30-year low of 0.27%.

Besides being a function of falling commodity prices isn't the inflation low also due to high base factor? Further which component of inflation is that: WPI, CPI ??

Vipul · Post by **Vipul** » 26 Mar 2009 22:27

Its WPI.In the article it mentions that the retail price inflation right now is above the WPI and will come down with a lag.(but then isnt that the case always?)

Ananth · Post by **Ananth** » 27 Mar 2009 00:44

http://www.thehindubusinessline.com/200 ... 700800.htm

What India is experiencing is disinflation. We are clearly far away from the dangers of deflation. As Dr Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission has pointed out, week to week price movements are not meaningful and, in fact, some moderation in the WPI is good.

Since monetary policy has a 12-18 months lag, for any meaningful assessment of inflation, it is necessary to consider a medium-term horizon of 3-5 years.

Viewed in this manner, the massive monetary easing would probably show up in acceleration in inflation 12-18 months hence.

Advocates of monetary easing point out that the money-income-prices interrelationship no longer holds and that an expansionary monetary policy will boost output without any adverse impact on inflation. In India we are burning the candle at both ends — fiscal and monetary. And aping the industrial countries can, in the medium term, have adverse effects on the economy.

It is possible that the RBI may not be able to withstand the covert pressures, between now and the end of June 2009. What would the scenario look like if the RBI policy interest rates were reduced to zero?

This, in turn, would put pressure the banks to reduce deposit and lending rates. There would be an exodus of term deposit holders from banks and savings in financial assets could decline. To the extent that overall savings fall, and consumption is encouraged, the medium-term growth of the economy would be lower.

ramana · Post by **ramana** » 27 Mar 2009 03:38

is this good news or flight of capital?

India, top gold importer turns exporterMarch 27th, 2009
Reuters Mumbai, March 26: India, normally the world’s top gold importer, may have turned net exporter in the last few months as Indians melt down their jewellery to catch high prices.
India imported no gold at all in February for the first time, and traders say it probably won’t again in March.
In fact, gold now appears to be seeping out of India in the form of gold coins, which allow big traders to skirt restrictions on exports, a trend that underscores the resistance to spot gold prices challenging last year’s all-time $1,030.80 high.
“In February and March many people have exported gold...about six tonnes may have gone out,” said a senior member of a large trade association in Mumbai’s gold hub Zaveri Bazaar.
As Indian prices fell below global rates, an arbitrage opened for traders stuck with high stocks in a domestic market awash with gold as scrap sales surged as much as four-fold.
“We exported 100 kgs for the first time last month...it was just enough to make a small profit,” the head of a large trading house in New Delhi said.
The dramatic reversal in gold trade partly explained why world prices have been stuck at below $950 an ounce for the past month, despite continued heavy investment in exchange traded funds (ETFs) and several bouts of risk aversion. It may also pinpoint the pain threshold for Indian consumers, as well as the potential for changing retail behaviour in a rapidly developing economy — one that may be increasingly sensitive to high prices as the world battles recession.
“There has been some degree of change in taste, both in terms of what kind of jewellery people want to buy and also changes in consumer spending priorities, with other things starting to feature on people’s wish list,” said Mr Philip Klapwijk, chairman of the London-based research firm GFMS Ltd.
In 2008 gold imports had almost halved to 396 tonnes, the lower end of typical annual imports of 400-800 that have prevailed even as population and incomes rose steadily.

Katare · Post by **Katare** » 27 Mar 2009 06:46

Steel cos pump up the volume

NEW DELHI: India’s largest steelmakers are operating at full capacity after a five-month lull that saw them cutting production, raising hopes that
an economic recovery may be just around the corner.

SAIL, Tata Steel, JSW and Essar have all resumed normal production, a marked contrast from last October when most steel companies were forced to cut output by up to 40% due to a steep fall in demand.

The steel sector’s revival can be linked to an improvement in the economic situation since January, largely due to the fiscal and monetary measures taken by the government and RBI to spur demand. Demand in the rural sector has also picked up in the past two months.

“Since steel has a high co-relation with the GDP, a pickup in production is a clear indication of an increase in manufacturing and industrial growth,” said HDFC Bank chief economist Abheek Barua.

Vipul · Post by **Vipul** » 27 Mar 2009 19:09

Six core industries show signs of revival in February.

Forex reserves see highest weekly rise in 13 months.

animesharma · Post by **animesharma** » 27 Mar 2009 19:23

Sorry for breaking the flow, but can some one please put some insight on how Indian economy is dependent on US and Europe for credit?

Vipul · Post by **Vipul** » 27 Mar 2009 23:07

‘JD(U) wants $1456 bn from Swiss bank back’.

Sharad Yadav would ofcourse start with himself.

Suraj · Post by **Suraj** » 28 Mar 2009 00:27

India Inc set to lap up AS 11 breather

Indian companies, which have taken a foreign exchange loan to buy or create an asset, are likely to post better results than expected for the year ended March 2009, as they will not be required to provide for forex losses on these loans.

CFOs said that most companies were likely to take benefit of the suspension of Accounting Standard 11 (AS 11) for two years (till 2011). AS 11 requires them to book gains or losses on such loans to their account.

The National Advisory Committee on Accounting Standards (NACAS), a government appointed body that recommends revision of accounting standards, has postponed the adoption of AS 11 till 2011.

The suspension will also help companies, which had made significant mark-to-market provisions in the past three quarters, to write back the losses they had booked, Hinduja Group CFO Prabal Banerji said.

The 158 companies that have an outstanding FCCB of $17 billion are hoping the Indian currency appreciates, so that they can reap the actual benefit of the postponement. For the time being, it would only bring a temporary relief in the profit and loss accounts of these companies that would boost their earnings per share.

Note the data regarding the total outstanding FCCB figure - $17 billion.

vsudhir · Post by **vsudhir** » 28 Mar 2009 17:36

PM urges India Inc to be sensitive

Prime Minister asks Indian industrialists to be sensitive to the adverse impact of economic crisis on weaker sections and seeks their help in meeting challenges.

Vipul · Post by **Vipul** » 29 Mar 2009 03:27

Tax haul edges past last year's figure.

Total tax collections this year would exceed the previous year's figure, despite the economic slowdown, revenue secretary P V Bhide said on Friday at the annual session of the CII.

"The gross revenue from direct and indirect taxes will increase nominally despite the sacrifices we have made," he said. The duty cuts that Bhide meant were announced in the wake of the economic slowdown.

Direct tax collections for this fiscal, as of mid-March, were Rs 3,12,800 crore, up nominally from Rs 3,12,202 crore in the same period last fiscal.

On the customs duty side, Bhide pointed out that "the trend was disheartening, suggesting a tough quarter ahead."

As for exports, the year is expected to end with exports worth $170 billion, against a target of $200 billion, said commerce secretary G K Pillai, while speaking at the same session.

The next fiscal (2009-10) would see exports flat, notching up a figure of $170-175 billion, he said.

Meanwhile, cabinet secretary K M Chandrasekhar stated that "there are trouble times yet to come." Referring to the IMF forecast of India growing 5.1% in 2009 (second in the world after China), he said the country was likely to perform better than that.

Chandrasekhar listed the measures taken by the government for boosting the economy, but admitted, "Inspite of these steps, there's a certain stickiness in the actual bank lending rates." He said there was hardly any response from the private banks, and "we need to look into how the effect of the stimulus package can be carried forward."

The cabinet secretary also urged the industry to look for new markets, as traditional markets would be drying up. The fiscal space, he said, was limited for the government. "We have to make economic crisis a part of history and move on," Chandrasekhar said.

Earlier in the day, Montek Singh Ahluwalia, deputy chairman of the planning commission, said the ongoing crisis was "probably the worst crisis in the last 60 years". It would push the Indian economy off the higher growth trajectory it has seen in the last five years, he said.

shyamd · Post by **shyamd** » 30 Mar 2009 17:28

Advani promises to bring back money from Swiss banks

Asks PM to raise issue at G-20 summit.

Adding to his list of pre-poll promises, L K Advani, prime-ministerial candidate of the Opposition Bharatiya Janata Party (BJP), today said he would bring the Indian money deposited secretly in Swiss banks and other tax havens across the world back, in case his party got a chance to rule the country after the next Lok Sabha elections.

Advani, who announced this as the BJP stepped up its campaign for the coming elections, also asked Prime Minister Manmohan Singh to discuss the issue at the G-20 summit, which he is going to attend in London on April 2.

“If the people of India elect a BJP-led NDA government in May 2009, we assure the nation that India will join the global effort to put an end to banking secrecy and intensify it by every means — diplomatic, political and economic — to get back the real sovereign wealth of our country,” Advani said in a statement.

He said the return of Indian money deposited secretly with banks abroad — which was estimated to be about $1,400 billion (Rs 70,00,000 crore) — would be a key issue in the BJP’s campaign. The party plans to conduct mass opinion polls on the issue on April 6, the foundation day of the party. Also, he said, the chief ministers of all the BJP-ruled states would write to the prime minister on this.

The BJP’s idea is to link the plank of “Indian money in foreign banks” with its agenda for development during the campaigning. The BJP leader said the “estimated Indian wealth in foreign banks is enough to relieve the debts of all farmers and the landless; is sufficient to lay highways and roads across the country; provide Rs 4 crore to each of the 600,000 Indian villages, etc.”

To emphasise the BJP’s seriousness on the issue, Advani even announced his proposal to set up a national task force which would be entrusted with the task of outlining an action plan for seeking return of the Indian money from abroad. The proposed task-force would comprise R Vaidyanathan of IIM-Bangalore, S Gurumurthy of the Sangh Parivar, lawyer Mahesh Jethmalani and former Intelligence Bureau chief Ajit Doval.

“The BJP sees in secret banking the RDX that has the potential not only to blow up national financial systems but also to support and fund global terror networks whose attacks on India increased during the UPA regime,” Advani said.

The BJP leader accused the Manmohan Singh government of not pursuing the German government’s offer to all countries to avail of the information it had got from the Swiss government on some 1,400 secret accounts. He asked the PM to follow the line taken by the United States and other Western nations, which are facing economic recession, to seek details of secret accounts of Indians from these banks.

Singha · Post by **Singha** » 30 Mar 2009 20:35

well Rvaidyaji's newspaper piece seems to have struck a chord.

ramana · Post by **ramana** » 30 Mar 2009 21:37

ramana wrote:is this good news or flight of capital?

India, top gold importer turns exporterMarch 27th, 2009
Reuters Mumbai, March 26: India, normally the world’s top gold importer, may have turned net exporter in the last few months as Indians melt down their jewellery to catch high prices.
India imported no gold at all in February for the first time, and traders say it probably won’t again in March.
In fact, gold now appears to be seeping out of India in the form of gold coins, which allow big traders to skirt restrictions on exports, a trend that underscores the resistance to spot gold prices challenging last year’s all-time $1,030.80 high.
“In February and March many people have exported gold...about six tonnes may have gone out,” said a senior member of a large trade association in Mumbai’s gold hub Zaveri Bazaar.
As Indian prices fell below global rates, an arbitrage opened for traders stuck with high stocks in a domestic market awash with gold as scrap sales surged as much as four-fold.
“We exported 100 kgs for the first time last month...it was just enough to make a small profit,” the head of a large trading house in New Delhi said.
The dramatic reversal in gold trade partly explained why world prices have been stuck at below $950 an ounce for the past month, despite continued heavy investment in exchange traded funds (ETFs) and several bouts of risk aversion. It may also pinpoint the pain threshold for Indian consumers, as well as the potential for changing retail behaviour in a rapidly developing economy — one that may be increasingly sensitive to high prices as the world battles recession.
“There has been some degree of change in taste, both in terms of what kind of jewellery people want to buy and also changes in consumer spending priorities, with other things starting to feature on people’s wish list,” said Mr Philip Klapwijk, chairman of the London-based research firm GFMS Ltd.
In 2008 gold imports had almost halved to 396 tonnes, the lower end of typical annual imports of 400-800 that have prevailed even as population and incomes rose steadily.

In answer to my question above see this:

milindc wrote:
Acharya wrote:China News, China
http://watchingamerica.com/News/24128/u ... -concerns/
Yaling Tan pointed out that the result of an over-supply of U.S. dollars will be rising gold and oil prices. However, as investors increasingly value gold, America, the holder of the largest gold reserves, will be able to take more initiative globally. At the same time, other countries holding U.S. dollar-denominated assets will become more and more passive. Because the U.S. dollar is a reserve currency, America can take the risk of printing more dollars, and because of this America will finally plunder the "global fortune."
Since US holds the largest official Gold reserves (261M troy ounce, translates to about 8100 tonnes), it can still control the new monetary supply after dollar devaluation.

The problem with this approach, for US, is that India might become one of the richest countries in the world, piggybacking on the strength of private reserves, estimated to be about 30,000 tonnes.

I think Uncle will try to create some black swan scenarios, with intention of emptying the Indian private coffers. While I was researching this, I came across a well researched article that documents the plundering of India Gold reserves over last 1000 years. In fact every major economic upheaval in last 100 years was tied to India's gold or silver reserves.

Indian Gold Reserves. Forgotten History! Lost Opportunity?
A must read article..

India has 20% of the world population and also 20% of the world’s above-the-ground gold.
....
For much of the last 2000 years, India has been the largest buyer of gold. Pliny, the Roman historian lamented, 1800 years ago, how India, the sink of precious metals, was draining Rome of gold - an appellation that resonates even today.
....
During various collapses of temporary gold standards in history, Indian gold reserves (usually unwillingly) stabilised world economies. In recent history, Indian gold reserves went out to stabilise the American currency during the Great Depression and the German currency during the post-Wiemar drift. Indian silver reserves broke the Hunt Brothers’ back and their silver gambit in the 1980’s.
....
Like much of Western history, the British (Lord Willingdon, Montagu Norman, Winston Churchill (as the Chancellor of the Exchequer), Neville Chamberlain) executed a scorched earth policy in India. (After all what is brown life worth?) They implemented a series of economic and administrative measures that killed millions in the Bengal Famine would impoverish India - and sustain the empire.
....
Done over the protests by Gandhiji, trade bodies and merchants and threats of resignation by the Viceroy and his Executive Council , the resulting ‘money famine’ (page 155) had the Lord Willingdon ecstatically say ‘… Indians are disgorging gold … (page 156).

SaiK · Post by **SaiK** » 30 Mar 2009 22:13

India can learn from khan failures on high health care costs.. especially for special treatments that is costly for regular blue/white collars. I have been networking the concept of not taxable part for all premiums paid for better health care expenses. This ensure a better working middle class society., anywhere in the globe for that matter.

milindc · Post by **milindc** » 31 Mar 2009 01:25

ramana wrote:is this good news or flight of capital?
India, top gold importer turns exporter March 27th, 2009

It is not good news. In this global recession, it is selling once's family jewels for worthless promissory notes (aka $).
Wait on Uncle's DDM stooges shouting in every media outlet 'sell, sell, sell Gold'. If this happens in next yr, I'm pretty sure Uncle is behind the move.

ramana · Post by **ramana** » 31 Mar 2009 01:43

To my simple mind if the price goes up too high then there will be rush to sell by the profit-minded people. The other is if there is economic or political crash then also might have to part with it for livelihood. Another would be govt backed scam to monetize the gold holdings.

MilindC, Can you keep track on this thread?

Rahul Mehta · Post by **Rahul Mehta** » 31 Mar 2009 07:44

milindc wrote:
ramana wrote:is this good news or flight of capital?
India, top gold importer turns exporter March 27th, 2009
It is not good news. In this global recession, it is selling once's family jewels for worthless promissory notes (aka $).
Wait on Uncle's DDM stooges shouting in every media outlet 'sell, sell, sell Gold'. If this happens in next yr, I'm pretty sure Uncle is behind the move.

AKAIT, it is bad news. People in India sell gold when they are absolutely broke. If many people are selling their gold, this only means they are broke.

Also, purchasing Gold is good thing, but only as long as Military is strong. India has been a big time gold importer through out 2000 years. But it also "exported" away gold when foreigners like Ghazni, Nadirshah or East India Company came and looted our Gold. Weak Military and lots of gold helps only the foreigners.

.

Vikas · Post by **Vikas** » 31 Mar 2009 09:11

Where does the report say that Indians are selling Gold. All it says is that people are not buying Gold like they were doing earlier and that makes sense since economy is not doing great. Common sense !!

amdavadi · Post by **amdavadi** » 31 Mar 2009 10:15

recently i went to couple of desi Jewelry shops in bay area. They all told me India & UAE isnt buying gold instead some have decided to sell.

milindc · Post by **milindc** » 31 Mar 2009 11:09

ramana wrote:To my simple mind if the price goes up too high then there will be rush to sell by the profit-minded people. The other is if there is economic or political crash then also might have to part with it for livelihood. Another would be govt backed scam to monetize the gold holdings.

MilindC, Can you keep track on this thread?

Will do.

VikasRaina wrote:Where does the report say that Indians are selling Gold. All it says is that people are not buying Gold like they were doing earlier and that makes sense since economy is not doing great. Common sense !!

Gold exports ooze from India, world's biggest buyer

Droves of Indians rushed to profit from the high price by taking trinkets to gold shops for sale, giving a dramatic fillip to the trade in scraps.

"As against a normal scrap sale of 2 kgs a day, about 7-8 kgs have been coming," said Jitendra Kantilal, a partner at a large Mumbai trader, Jugraj Kantilal & Co, which melts gold scrap into bars for sale to the market.

Dileep · Post by **Dileep** » 31 Mar 2009 11:21

Most of the gold is locked away at the SHQs, which can't be unlocked even with the barrel of a handgun. What you see getting liquidated are the dust on the surface onlee.

Seriously, increasing price won't loosen up the stash. Creating desperation will. That is scary

abhischekcc · Post by **abhischekcc** » 31 Mar 2009 11:31

I think the export of gold from India is a good thing. Not only does it help release the 'dead' money stuck in gold. Besides, sale abroad will help in bringing in Forex now that exports are down. Sales by individuals will help support consumption. I don't see any downside to gold sales at this time.

Tamang · Post by **Tamang** » 31 Mar 2009 20:10

If I am not wrong then Vaidyanathan sir is a BRite.

'Swiss black money can take India to the top' - Professor R Vaidyanathan

Bade · Post by **Bade** » 31 Mar 2009 20:20

I caught a glimpse of the question on this issue posed to PC Chidambaram on Zee news yesterday and his body language showed extreme discomfort. He seemed to want to end the session and stood up abruptly and left...not what I have seen him do ever. This kangress govt will not do anything to get the money back as they have the most to lose from this.