Indian Economy: News and Discussion (June 8 2008)

Katare · Post by **Katare** » 14 Jul 2009 01:08

harbans wrote: China was the same size as India today somewhere in 2002. How did China grow 4 times in 7 or 8 years?

What is your source for this information, it seems highly unlikely that it's true. Look at Suraj's post he seems to suggest 1999-00, which may be closer to the truth. I suspect in 2009 we are where China was in mid 1990s, if you beleive their's and our official stats. You need to check the data from WB/ADB to come to some conclusion.

suryag · Post by **suryag** » 14 Jul 2009 01:13

Not that i am an econs guru but as someone suggested if we start accounting unofficial economy our economy, would be atleast be 1.25 times of what is being reported

Abhijeet · Post by **Abhijeet** » 14 Jul 2009 01:14

vina posted some stats saying that GDP-wise, India is where China was 9 years ago. So India GDP in 2009 == China GDP in 2000.

China had far better infrastructure than India at the same GDP level though.

Suraj · Post by **Suraj** » 14 Jul 2009 01:40

Abhijeet wrote:China had far better infrastructure than India at the same GDP level though.

Because their investment and current account (exports-imports) have historically been a far bigger component of GDP than ours, where consumption predominated. It wasn't until 2003-04 that our savings/GDP and investment/GDP really took off (>25%), whereas the Chinese have been running at 30-40% investment/GDP ratio for about two decades.

The savings and investment/GDP figure is the single most important barometer I'm interested in, and from an infrastructure perspective, the fixed capital investment (GFCF) to GDP. While our current investment/GDP figure is at a historical high, at east Asian levels, this has only been the case for the last 5 years, which is too short a period, compared to other E/SE Asian countries. There's no option but to consistently invest massive amounts in infrastructure every year.

harbans · Post by **harbans** » 14 Jul 2009 11:14

What is your source for this information, it seems highly unlikely that it's true. Look at Suraj's post he seems to suggest 1999-00, which may be closer to the truth. I suspect in 2009 we are where China was in mid 1990s, if you beleive their's and our official stats. You need to check the data from WB/ADB to come to some conclusion.

and

vina posted some stats saying that GDP-wise, India is where China was 9 years ago. So India GDP in 2009 == China GDP in 2000.

China's GDP Hit 1.23 Trillion US Dollars in 2002: NBS
30 Dec 2002 ... China's GDP Hit 1.23 Trillion US Dollars in 2002: NBS. China's economic growth in 2002 is expected to reach 8 percent, Director of the ...
english1.peopledaily.com.cn/200212/.../eng20021230_109314.shtml - Cached - Similar

Google: 2002 China Economic GDP trillion dollars

Katareji, IIRC Surajji quoted 99-00 because that was the time China crossed the 1 Trillion USD mark. India did that in 2007. So if China was 1.23 t in 2002 end, or 2003 beginning, we're the same size. 6.5 years behind at the max. Indias GDP now is around the 1.3 t USD..Google will get lots of sites and info that what i said is indeed accurate.

vera_k · Post by **vera_k** » 14 Jul 2009 12:25

^^^

This is accurate. China's apparent outsized lead in GDP today is because of 3 factors post 2002 -

1. An upward revision of about 20% in the size of the GDP in December 2005.

2. An acceleration in GDP growth rates from 8% to 11%

3. A stable to slightly appreciating currency.

harbans · Post by **harbans** » 14 Jul 2009 13:22

Vera ji, thanks. The 3 points you have put forward seem logically the reason why in 6 years China went more than 3.5 times. We too have a lot of unorganized sectors that may not be included in the GDP calculation. If we have a similar revision and maintain 9% or more growth rates, currency appreciates a bit, specially since we're beginning to strike oil and gas, there is a distinct possibility, India may catch up with China, sooner than some experts believe. I am trying to find why China made the upper revision in 2005. Bringing in unorganized sectors into the ambit of GDP calculations?

vera_k · Post by **vera_k** » 14 Jul 2009 14:09

With the Left planning to run up the fiscal deficit, the currency is likely to depreciate.

ashi · Post by **ashi** » 14 Jul 2009 19:35

(1.1x)^y=4x

my math shows that it takes 14 years to reach 4 times of original size, assuming 10% growth each year

Suraj · Post by **Suraj** » 14 Jul 2009 20:46

I've said this several times before, but I'll say it once again - the real GDP growth rate is *not* the rate at which the GDP actually grows in real life, in local currency. You use nominal growth rate for that.

That said, this entire debate is rather meaningless number jockeying. For what it's worth, India's GDP has tripled since 1999-00 , from $400B odd to ~$1.25 trillion, despite half of that period (99-03) being one of very low GDP growth (~4%).

Akshut · Post by **Akshut** » 14 Jul 2009 20:59

Have a look at following IMF projections from 2000 to 2014, for India and China.

...........GDP(Billion dollars).......2000....................2008......................2009.....................2014

India...................................461.....................1209....................1185

............1739

China ................................1,198...................4401......................4832......................8500
.
http://www.imf.org/external/pubs/ft/weo ... C&grp=0&a=
.
Any explanation? Depreciation of Rupee against Dollar?

Suraj · Post by **Suraj** » 14 Jul 2009 21:07

Why are you comparing nominal Indian GDP against PPP Chinese GDP ?

The 'decrease' in Indian GDP is an artifact of IMF's own estimation of exchange rate.

Added:

Before someone takes those IMF projections seriously, one should do a simple experiment - look at their projections 5-10 years back, against current data. By their estimation, our current economy would have been far smaller at this point than it is now.

Our GDP growth has easily outdone every projection from ~5 years ago, whether it be World Bank, IMF or the BRIC report projections that are the comparison (all of them had similar estimates). For example, our 2008-09 GDP (year ended March 2009) is 50% larger than what the 2004 BRIC report estimated for the end of 2009.

Abhijeet · Post by **Abhijeet** » 14 Jul 2009 23:09

Suraj, while certainly the savings to GDP ratio is important in creating a pool of capital from which to fund infrastructure projects, there's also no doubt that China is far ahead of India in terms of execution capability. In other words, even if the savings rate is high, the Indian government has to get a lot better at deploying that capital (or selecting private partners to deploy it).

China is an outlier in terms of infrastructure quality for its GDP level, while India probably ranks low on the same measure among peer countries.

Suraj · Post by **Suraj** » 14 Jul 2009 23:24

Abhijeet: Sure, that's a valid addition to the original statement I made. Please see my summary of this years budget, where I wrote specifically about the important of execution as well.

For what it is worth, India still manages a good incremental capital output ratio (ICOR), i.e. the rate at which it translates new investment into growth. For example, we averaged investment/GDP in the low 30%s over the past half a decade, while averaging roughly 8.5-9% growth, which translates to ICOR of 3.5-4 . The Chinese ICOR is not much different, if you look at their investment/GDP and growth rate - the latter is higher in their case simply because the former also happens to be. In specific areas, they are significantly more efficient in terms of output generated, e.g. road building, power...

Therefore, for overall growth, what matters most is increasing savings/GDP and investment/GDP. There's *no* way to sustain growth other than sustained high investment/GDP. We're already a pretty efficient user of capital, and have demonstrated the ability to return growth that scales roughly linearly with increasing investment/GDP .

For specific sectors like infrastructure, it requires adequate legislative support, and a proper policy framework. We know how quickly the right policy framework changed our telecom scene. From my perspective, we have some very good ministers in good positions this time around - Pranabda in FinMin, Kamal Nath in surface transport and Jairam Ramesh in environment. I'll give Anand Sharma time to prove himself in the commerce ministy, and he has a motivated junior in Jyotiraditya Scindia.

rsingh · Post by **rsingh** » 15 Jul 2009 02:19

Guys Please somebody post Graphs comparing Indian and Chinese GDP in correct way............ie apple to apple and peach to peach. It would be a great help for posters like me who do not like reading big secular essays. Thanks

Suraj · Post by **Suraj** » 15 Jul 2009 02:30

rsingh wrote:Guys Please somebody post Graphs comparing Indian and Chinese GDP in correct way............ie apple to apple and peach to peach. It would be a great help for posters like me who do not like reading big secular essays. Thanks

There's no such data available.

rsingh · Post by **rsingh** » 15 Jul 2009 02:50

www.visualizingeconomics.com is a data mine.This may help

Suraj · Post by **Suraj** » 15 Jul 2009 03:00

rsingh: the problem is not the data part. It is the apples to apples part. There are sufficient differences between the way GDP data is collected and reported between the two countries that you cannot obtain anything that is apples-apples. At best, there are two sets of data, one from each country, collected using independent mechanisms.

Since you didn't want to read detailed discussions, I'll just keep it short and say the data you want is unavailable. Thanks.

RamaY · Post by **RamaY** » 15 Jul 2009 03:10

FWIW

Code: Select all

Country	GDP PPP $trillion	Investment as %GDP (0 to 1)	Education as % of GDP	Stock of Money ($trillions)	Military Expenditure as % of GDP
China	             7.8	             0.402	                           1.9	                          2.3	                         4.3
India	             3.267	            0.39	                          3.2	                      0.2509	                         2.5
Japan	             4.348	            0.225	                          3.5	                        4.37	                         0.8
United States	      14.29	            0.146	                          5.3	                       1.596	                       4.06

And...

China Average GDP Growth 7.9% (If you believe their numbers)
Indian Average GDP Growth 4.3%

Abhijeet · Post by **Abhijeet** » 15 Jul 2009 12:59

The ICOR lumps together investment by private companies (which, being chronically capital-deficient in India, have always been careful with their money) and government spending (which has had no incentive to be efficient).

Are you aware of any studies of the ICOR specifically for government projects? Even with all their white elephants, I would imagine that the Chinese government is a much more efficient user of capital than the GoI.

Suraj · Post by **Suraj** » 15 Jul 2009 13:32

Sorry, I don't have public/private ICOR breakdown. Why not look it up - the more posters involved in hunting for obscure data, the better

Abhijeet · Post by **Abhijeet** » 15 Jul 2009 18:15

I consider myself lucky if I get a few minutes a day to browse BR, much less hunt for obscure economic data.

But it would be an interesting thing to know.

RamaY · Post by **RamaY** » 15 Jul 2009 18:32

Suraj wrote:Sorry, I don't have public/private ICOR breakdown. Why not look it up - the more posters involved in hunting for obscure data, the better

Just sharing whatever info I have. Wouldn't it be better to check whatever data we have than no data at all?

Where can we get reliable data in public sources? Could you please direct me to such sources, as I need that data for my project.

SwamyG · Post by **SwamyG** » 15 Jul 2009 20:52

RamaY: India is the slow and steady elephant

RamaY · Post by **RamaY** » 15 Jul 2009 21:15

SwamyG wrote:RamaY: India is the slow and steady elephant

The more I think and analyze, the more optimistic I am becoming about this. I am really hopeful that whatever noises UPAv2.0 is making are with good intentions and capabilities only. If they do 50% what they say they are doing, I am happy with that.

wig · Post by **wig** » 15 Jul 2009 21:48

wrt china government investing funds efficiently it raises queries over the sources of funding. we in india generate government funds through taxation direct {income tax (corporation and indv/firm/aop) wealth} and indirect taxes (central excise, customs, service ) states consitituting the union have also sources to tax. Taxation in china is not quite so clear. the number of corporations on the Shanghai exchange and the data available there does not lend itself to analysis the way we can do on Indian or western stock exchanges.
secondly there are no figures on taxpayers( direct taxes) in china other than the few large business center. this is probably a legacy of its communist regime wherein enterprise was a function of the state
the alternate means that china is raising taxes from a very narrow base and that leads to a conundrum where is the money coming from. in my humble opinion that implies funding comes from indirect taxes or money redirected from profits made from state enterprises. however in the absence of any system of checks and balances ( applied by a complex taxation regime) the accounting system will function in a arbitrary manner.
continuing with the above line of reasoning it is very difficult to comment on the efficiency or otherwise of govt investment ( on what to base the return on investment) . i would look forward to the learned members of this forum expounding on this issue

paramu · Post by **paramu** » 15 Jul 2009 22:58

SwamyG wrote:RamaY: India is the slow and steady elephant

And dragon is a mythical creature!

Katare · Post by **Katare** » 15 Jul 2009 23:55

PPP figures corrected for revisions etc are the only way you can compare relative economic strength. not possible in this thread!

Suraj · Post by **Suraj** » 16 Jul 2009 02:12

Rs 18,000 cr tax collections signal recovery in industry: CBEC

The Finance Ministry today said that customs duty collections at about Rs 18,000 crore in the first quarter of this fiscal and initial reports on steel and cement sectors point to a recovery in industry that would also benefit from tax cuts announced as part of stimulus packages.

Customs collections are six per cent higher during April-June this year over the previous quarter, mainly on account of higher imports of raw materials and capital goods, Central Board of Excise and Customs Chairman P C Jha said.

"This is a signal that the manufacturing sector will also improve. In imports, major components are raw materials and capital goods that means in future, (the) manufacturing sector will improve," he added.

Steel consumption rises by 5.2% in first quarter

Steel consumption has risen 5.2 per cent during the first quarter, showing signs of improvement in demand for the commodity in the economy, the Steel Ministry said in a statement today.

Meanwhile, finished steel production went up by 3.4 per cent to 13.98 million tonnes during April-June 2009 as compared to 13.53 million tonnes during the same period last year.

However, the export of steel took a hit and fell sharply by 37.8 per cent in the period to 0.642 million tonnes from 1.032 million tonnes in the year-ago quarter.

Imports also fell 5.3 per cent from 1.493 million tonnes to 1.414 million tonnes during the period.

Steel, cement consumption shooting up

For the quarter ended June 30, finished steel production went up by 3.4% to 13.98 million tonnes compared to 13.53 million tonnes during the same period last year. Consumption of finished steel was up by 5.2% from 12.2 million tonnes during Q1 of this fiscal to 12.83 million tonnes in April-June this year. However, on the exports front, April-June 2009 quarter witnessed a decline of 1.032 million tonnes to 0.642 million tonnes recording a fall of 37.8% while imports also fell 5.3% from 1.493 million tonnes to 1.414 million tonnes, according to data released by the ministry of steel.

Cement production during the April-June quarter was up by 12.43% (501.33 lakh tonnes) while despatches increased by 12.26% (498.34 lakh tonnes) as compared with April-June 2008 quarter.

The rising capital goods imports + strong core sector growth is a precursor to rising industrial output in the coming months.

SwamyG · Post by **SwamyG** » 16 Jul 2009 04:09

The top three countries in the 2009 GSLI remain the same: India, China and Malaysia once again show their versatility as low-cost locations with a strong business environment and good people skills and availability.

SwamyG · Post by **SwamyG** » 16 Jul 2009 06:02

Here goes my summary of the above report. My focus has been on India and I have ignored the developments in Tier 2 cities in USA and UK.

1. The top 3 countries remain the same – India, China and Malaysia.
2. India is still the largest provider of offshore services. The Philippines is a distant second. Together the countries account for 50% of the World’s BPO market.
3. Position of India and Philippines is unthreatened.
4. North American companies account for 70% of outsourcing.
5. But there is a shift in the demand side – European companies are fast catching up to N.A and the demand from Europe exceeds NA companies.
6. Established leaders in Eastern Europe including Poland, the Czech Republic and Hungary fall behind because of increasing costs eroding their competitiveness.
7. Countries in S.E.Asia and Middle East make significant gains.
8. NASSCOM has revised down its industry growth figures for 2009 – due to the impact of the current economic crisis.
9. 40% of activities in Indian service centers are driven by banks and the meltdown of the banking sector worldwide thus has a disproportionate impact on Indian service industry.
10. Banks worldwide have shed 5% of their entire workforce. In USA it is 8%.
11. Another trend is the move from Captive Centers to Outsourcing Providers.
12. Cost is important by quality of labor pool is gaining importance when it comes to outsourcing decisions. Governments through out the word recognize and are making changes to University curricula and courses.
13. In 2009 GSLI, experienced labor force is a key to success.
14. Apart from the economic crisis, lawmakers are inserting provisions in bailout packages to limit the expansion of off shoring operations of banks.
15. Off shoring trend is not going to reverse anytime soon. It could slow new operations. Off shore operations is integral part of the supply chains for most financial companies and to keep them afloat these operations are necessary.
16. Companies might increase staff in off shore locations as they lay off staff on shore. Two reasons – cost and efficiency.
17. Countries who have tied their currency to US dollars are the biggest winners since 2007. Many middle-income countries are suffering due to exchange-rate shifts.
18. India will continue to be the leader in the foreseeable future. In just one decade India has transformed and reinvented the outsourcing industry several times over and staying ahead of all trends. It is indispensable in off shoring and no country or combination of countries can replace it – for now.
19. India started out as a low-cost location and has moved up the value-chain. India supports virtually any outsourcing services – including data entry, finance and accounting, customer-facing functions and high-end work such as Knowledge Management and Legal processes.
20. Indian outsourcing companies are rapidly expanding across the world. Their offshore footprint is increasing and makes it impossible for countries to compete with India head-on.
21. India has become an enabler for industry growth in other countries.
22. Bangalore, Hyderabad and Gurgaon are the hubs of global off shoring universe. The spokes extend into Argentina, Brazil, China, Hungary, Mexico, Singapore, USA and Uruguay + multiple Indian centers. This creates opportunities in the host countries.
23. Infosys and Wipro expand more aggressively than most Western MNC; they bring expertise to train large numbers of new staff quickly.
24. China shares many characteristics with India but lags far behind India. Few of the reasons are – language capabilities, concerns around intellectual property protection, and economy geared towards manufacturing.
25. Japanese companies are China’s main customers.
26. India’s position could be vulnerable owing to (a) currency movements (b) Terrorism (c) Corporate scandals
27. Malaysia: Ranks #3 owing to safe business environment, high-quality human capital at affordable price and strong government support.
28. Philippines: Is the second largest off shoring destination, with 15% of the global market (this means India has 35% share). It is the home of contact centers catering to USA market. It is moving into nonvoice BPO services.
29. Sri Lanka and Pakistan have climbed up. {I am not going to spend time on Pakistan}
30. Sri Lanka took off when HSBC established a base in 2005. Civil war and relatively weak English speaking capabilities are weaknesses. Advantages: Proximity to India and supply of chartered accountants trained on the same accounting standards used in UK serving as a backup to Indian centers.
31. Thailand and Indonesia share characteristics with Philippines but lack English skills. Infosys took over Philips’ Captive Off shoring in Thailand and has gained a foothold there.
32. Vietnam: A country to watch as it climbs 9 spots to become the 10th country in the list. The focus is on IT services from Japan, as Regional Offshoring is on the rise.
33. Central & Eastern European (CEE) countries: These countries declined in the rankings. Main reasons for the fall are rapid increases in costs (partly because of currency appreciation against US dollar) and wage inflation.
34. Baltic countries are emerging as alternatives to CEE. Russia has declined because of volatile political environment and escalating costs.
35. MENA (Middle East & North Africa) are hot destinations. Home to large and well educated populations; proximity to Europe.
36. Wipro and Infosys are aggressively expanding into Cairo. Egypt is the country to watch.
37. Sub-Saharan Africa: Mauritius ranks favorably at 25th; as it has favorable business climate. South Africa is the largest offshore destination
38. Latin America and Caribbean: Chile, Brazil and Mexico are the top three and doing well.
39. Research shows developed countries and their countries have gained from offshoring. Employment and wages have increased faster in tradable service occupations than non-tradable service occupations.

Suraj · Post by **Suraj** » 17 Jul 2009 07:14

Insurers likely to invest Rs 1.75 lakh cr in equities

The Indian insurance industry is likely to pump in around $25-30 billion (around Rs 1.25-1.75 lakh crore) in the country’s equity market.

Nischal Maheshwari, head (research), Edelweiss Research, a Mumbai-based research firm, said that the cash flow would happen in FY10 and FY11. The firm has derived this figure assuming the industry’s growth rate at 17-18 per cent. He noted that currently the industry was growing at 25-30 per cent.

Edelweiss has brought out a study titled “India strategy: Governance and capital re-igniting growth”. According to the report, the near-term occasional dips in the equity market were opportunities for long-term investments. Maheshwari noted that insurance companies were looking at investing in large-cap funds and Nifty stocks.

Indian wholesale price index declines 1.21%

India’s wholesale prices fell for a fifth straight week even after an increase in fuel costs, allowing the central bank to keep interest rates low to support economic growth.

The benchmark wholesale-price index declined 1.21 percent in the week to July 4 from a year earlier after tumbling 1.55 percent in the previous week, the government said today. Prices plunged 1.61 percent in the first week of June, the biggest drop since December 1978, according to central bank data.

“India’s growth remains below trend and the inflation risk is manageable,” said Rajeev Malik, regional economist at Macquarie Group Ltd. in Singapore. “The central bank is unlikely to shift its policy stance unless the pace of credit expansion picks up meaningfully” and accelerates growth.

Keeping interest rates low will be challenging for Reserve Bank of India Governor Duvvuri Subbarao as parliament yesterday approved government plans to increase borrowings to a record 4.51 trillion rupees ($92 billion) this year.

India Rain Deficit To Narrow, Aiding Crop Sowing

India’s monsoon deficit will drop below 20 percent by end of this month as rains increase, easing a dry spell that’s dented sowing of crops in the world’s second- biggest producer of rice, wheat and sugar.

The shortfall for the season started June 1 narrowed to 27 percent as of yesterday from 45 percent last month, the India Meteorological Department, said. Falls were 6 percent more than the long-period average for the week ended July 15, the first weekly surplus this year, the weather office said.

Rains have intensified since July 8, helping allay fears of a drought undermining Prime Minister Manmohan Singh’s efforts to push economic growth back to a 9 percent pace. A deficit of as much as 50 percent earlier this month in the northwest region, the nation’s grain bowl, has dimmed prospects for bigger crops of rice, oilseeds and sugar cane.

wrdos · Post by **wrdos** » 17 Jul 2009 08:34

Hi Suraj!
I think his data of both countries are nominal GDP.

Hmmm, anyway GDP is something a very risky index especially for international comparisons. For example, Russian GDP is almost the same as the South Korean, and in many years was even lower as a matter of fact.

Suraj wrote:Why are you comparing nominal Indian GDP against PPP Chinese GDP ?

The 'decrease' in Indian GDP is an artifact of IMF's own estimation of exchange rate.

Added:

Before someone takes those IMF projections seriously, one should do a simple experiment - look at their projections 5-10 years back, against current data. By their estimation, our current economy would have been far smaller at this point than it is now.

Our GDP growth has easily outdone every projection from ~5 years ago, whether it be World Bank, IMF or the BRIC report projections that are the comparison (all of them had similar estimates). For example, our 2008-09 GDP (year ended March 2009) is 50% larger than what the 2004 BRIC report estimated for the end of 2009.

Suraj · Post by **Suraj** » 22 Jul 2009 01:08

Data suggests strong volume growth in the FMCG sector, implying robust consumer demand, lower prices, and also reduction in built up inventory, enabling companies to ramp up or expand manufacturing:
FMCG cos to see robust volume growth

Fast moving consumer goods (FMCG) companies, say analysts, may register a lower year-on-year (YoY) sales growth but higher volume growth for the quarter ending June 30. The full benefits of falling commodity prices and lower input costs should also increase the gross margins of these companies, they said.

“The FMCG universe is likely to register lower sales growth of 10.9 per cent year-on-year (y-o-y) due to muted sales growth in Hindustan Unilever (HUL) and ITC, and lower price growth for most other companies. However, volume growth is expected to be strong for most categories. Lower input costs and excise benefits will result in margin expansion and, hence, we expect operating profits for the sector to grow 21.5 per cent y-o-y,” say ICICI Securities’ analysts.

With most companies either effecting a direct rollback in prices (HUL, Marico) or offering various trade and consumer promotions, growth in sales will be mainly volume driven. “FMCG companies will post 8.7 per cent growth in sales, 15.2 per cent in Ebitda and 13.6 per cent in net profit. Excluding HUL, the growth would be much better at 15.4 per cent in sales, 20.2 per cent in Ebitda and 24.3 per cent in net profit,” says Pritee Panchal, FMCG sector analyst with SBICap Securities.

However, going ahead, while the makers of personal and packaged goods should benefit with no letdown in consumer demand, especially with the benefits of the National Rural Employment Gurantee Scheme and farm loan waivers causing rural demand to hold strong, weak macro-economic conditions, coupled with falling income levels, could lead to moderation in consumer spending in the ensuing quarters.

Disinvestment to start with listed cos

The Finance Ministry today said that the disinvestment programme will kick off with the dilution of government equity in listed entities, where public holding is less.

In an interview with PTI, Finance Secretary Ashok Chawla also ruled out using the proceeds of disinvestment to finance fiscal deficit, even as it is expected to widen to about 18-year high of 6.8 per cent of GDP this fiscal.

"Basically, we will first go with the companies which are listed and where stocks in public float is much less — two per cent, five per cent etc. There is scope for that to increase," Chawla said.

There are at least 12 listed public sector units where public shareholding is less than 10 per cent. They include companies like NMDC, MMTC, Neyveli Lignite, Hindustan Copper.

However, Chawla did not name the companies where disinvestment process could start.

There were speculations that the government may use part of the proceeds to finance fiscal deficit, but currently the proceeds go to the National Investment Fund, norms of which do not allow this.

When asked whether NIF norms will be changed, Chawla said, "That I can't say. The Cabinet will decide that. But, either way whether it is spent through NIF or otherwise, it will be spent on flagship social sector programmes," he said.

GoI projects reduction in the budget deficit for next year:
India’s ‘Unprecedented’ Deficit-Cut Plan Feasible, Adviser Says

India’s plan to cut the budget deficit next year by an “unprecedented” 1.3 percent of gross domestic product is possible, a senior policy adviser said, allaying concerns of rising government debt.

“Comparison with the past will not be very useful because both this year and last year were exceptional years of crisis,” Saumitra Chaudhuri, a member of the planning agency that sets India’s development agenda, said in an interview on July 17. “The deficit target can be met with a combination of higher tax revenue and modest expenditure reform.”

Finance Minister Pranab Mukherjee rattled investors earlier this month by forecasting the deficit at a 16-year high of 6.8 percent of GDP for the current year to support economic growth amid the worst global recession since the Great Depression. Moody’s Investors Service and Standard & Poor’s said government finances have weakened and are watching Mukherjee’s plan to trim the deficit before changing India’s credit rating.

Mukherjee told lawmakers and investors after his budget on July 6 that reviving growth is his immediate priority and vowed to trim the deficit to 5.5 percent in the year starting April 1. India’s $1.2 trillion economy grew 6.7 percent in the year ended March 31, the weakest pace since 2003.

Chaudhuri, a former economic adviser to Prime Minister Manmohan Singh, estimated the loss of revenue from excise and customs tax concessions this year at about 1 percent of GDP.

Even if three-quarters of the tax concessions are rolled back next year, the deficit will come down to 6 percent, Chaudhuri said.

Further, an economic recovery and improving tax receipts may reduce the deficit by 0.2 percent of GDP, he said. Then, the government needs to rationalize some of its expenses, particularly fertilizer and food subsidies, and the deficit could touch 5.5 percent of GDP without even taking account of government asset sales, Chaudhuri said.

S&P places India’s long-term local currency rating at BBB-, their lowest investment-grade level, and said in February it could reduce the rating to junk if the deficit isn’t narrowed. Moody’s has a rating of Ba2, two levels below investment grade.

S&P estimates Indian government debt at 85 percent of GDP at the end of March 2009.

Neshant · Post by **Neshant** » 22 Jul 2009 08:54

Moody’s Investors Service and Standard & Poor’s said

Rating agencies are a fraud. They rated tons of worthless morgage backed securities as AAA which blew up the market. Now they are back in the rating game as if nothing happened.

neel · Post by **neel** » 22 Jul 2009 22:06

Neshant wrote:
Moody’s Investors Service and Standard & Poor’s said
Rating agencies are a fraud. They rated tons of worthless morgage backed securities as AAA which blew up the market. Now they are back in the rating game as if nothing happened.

They may try to act as if nothing happened, but at the end of the day, their credibility has been substantially reduced (at least in the minds of competent observers/investors).

Suraj · Post by **Suraj** » 23 Jul 2009 02:47

Neel: welcome back! Please stick around.

Direct tax collection rises 3.65%

Net direct tax collections during the first quarter of the current fiscal (2009-10) grew 3.65 per cent on account of higher tax refunds. For the April-June period, direct tax collection (corporate tax and personal income tax) of the government stood at Rs 59,465 crore, up from Rs 57,373 crore in the same period of the 2008-09 financial year, according to a finance ministry statement.

“Lower growth in net tax collection was mainly on account of higher tax refund outgo of 52.01 per cent at Rs 17,600 crore in the present quarter, against Rs 11,578 crore in the first quarter last fiscal,” said the release.

The high refunds are due to the revenue department’s initiatives of faster processing of returns on the new national computer network. The system, which is available from the current fiscal, has the ability to process up to 200,000 returns every day. At present, there are close to 33 million taxpayers in the country.

PSU selloff planning starts in August

Work on disinvesting government holdings may gather pace after the first week of August. Administrative ministries of around 15 Public Sector Undertakings (PSUs) have been asked to give feedback on the feasibility of coming out with initial public offers (IPOs) by then.

Official sources added that the government would be going in for a phased programme of increasing the public float of listed government companies to 10 per cent through either offloading its equity or through follow-on issues. The follow-on issue would take place only if a PSU was in need of fresh equity.

The 15 companies include listed firms like MMTC, in which the public float is less than 10 per cent, and other candidates like State Trading Corporation, Bharat Sanchar Nigam, Coal India Ltd, Engineers India Ltd, National Mineral Development Corporation (NMDC), Hindustan Copper, Manganese Ore India Ltd (MOIL) and Kudremukh Iron Ore Corporation Ltd (KIOCL).

NHPC IPO may raise Rs 1,850 cr

The government is set to exceed its 2009-10 disinvestment target of Rs 1,120 crore through the first company that is slated to go to the markets this year — NHPC.

Sources said the government could mop between Rs 1,550 crore and Rs 1,850 crore by divesting 4.5 per cent (of the expanded equity) because it was considering a fairly aggressive price band of Rs 28 to Rs 33 per share. A final decision to this effect will be taken in the meeting of the Empowered Group of Ministers (EGoM) on July 24, government sources added.

The EGoM, headed by Finance Minister Pranab Mukherjee, includes Deputy Chairman of the Planning Commission Montek Singh Ahluwalia and representatives from the administrative ministry concerned — in this case Power Minister Sushilkumar Sinde.

Overseas investors invested $4 billion last month

The India story not only holds, it is getting stronger, going by the spate of GDR (Global Depository Receipt) issues and Qualified Institutional Placements (QIPs) over the last one month.

While nearly $4 billion has been mopped by companies through QIPs, more than $2 billion has come in through GDRs and ADRs (American Depository Receipts). Among the bigger fund raisers have been Sterlite, which picked up $1.5 billion, Tata Steel ($500 million), Tata Power ($335 million) and Suzlon, which managed to raise around $110 million.

Mehra pointed out there was no shortage of money with fund managers. “Individuals overseas continue to save — whether through insurance companies or asset management companies, so there is enough money coming in,” he said. Money is not just coming in from traditional markets such as the US and Asia but also from Europe.

Vedika Bhandarkar, head (investment banking), JP Morgan, said of late a fair share of the inflows were from continental Europe. “We’ve seen several new funds participating from countries such as France, Italy and Germany,” she pointed out, adding that the trend was visible not just for primary market issuances but in the secondary market, too.

Asians, however, remain the biggest investors, contributing to most of the subscription — 40 to 45 per cent — for the GDR issues. Twenty-five to 30 per cent of the money is flowing in from the US and a similar amount from Europe. It’s pretty much the same for a QIP, said investment bankers, except that about 10 per cent of the issue would be subscribed to by Indian institutions, so that the US and Europe would be contributing slightly less.

Major reform bills unlikely in current LS session

The UPA government may decide to play safe and not bring contentious legislative bills during the current session of the Lok Sabha.

To his close quarters, Finance Minister Pranab Mukherjee has also indicated he doesn’t want to rush to pursue the reforms agenda. Mukherjee, who likes to call himself a “conservative economist”, feels there is enough time for the government to address the issues related to reforms.

This means the Pension Fund Regulatory and Development Authority (PFRDA) Bill or the banking amendments are unlikely to come during this session. The PFRDA Bill seeks to formalise a new defined contributory pension scheme introduced for government employees from January 2004 and extend it to the unorganised sector.

According to top sources, the much-hyped Food Securities Bill is also unlikely to be introduced during this session, as it is still “under preparation”.

The Insurance Bill had already been tabled in the Rajya Sabha early this year, during the first UPA government’s tenure. It is currently pending with the Standing Committee on Finance, as the panel is yet to be reconstituted in the new Lok Sabha.

Cashback now available:
Now withdraw cash at shops

Automated teller machines (ATMs) have put an end to long queues at bank tellers’ windows. Now, long queues outside ATMs may also wither away.

The Reserve Bank of India (RBI) has allowed withdrawal of cash from point-of-sale (PoS) terminals, where customers swipe their credit or debit cards to pay for purchases. Noting that the use of debit cards has been steadily increasing, an RBI circular today said withdrawal of cash up to Rs 1,000 per day through debit cards issued in India was now being permitted.

At present, customers are only allowed to withdraw cash at ATMs. There are currently 44,857 ATMs in the country, while the number of PoS terminals at 4,70,237 is over 10 times higher.

RBI said customers could use the cash withdrawal facility at merchant establishments irrespective of whether they make a purchase or not. “This facility may be made available at any merchant establishment designated by the bank after a process of due diligence,” the circular said.

Suraj · Post by **Suraj** » 24 Jul 2009 03:13

No one wants to work for NREGP in this village

WHEN Keshav Tandon, of Banarasi village in Raipur district, announced the launch of a project to deepen two village ponds, he thought it will be a showpiece for the National Rural Employment Guarantee Programme in the state. For, Banarasi has been facing acute water shortage.

Tulsidas, one of the 142 job cardholders for NREGP work in the village, said the reason for villagers boycotting NREGP projects was simple: there was no incentive to work for just Rs 75 a day when one could easily get double the amount just 25 km away, in the capital of Chhattisgarh. Tulsidas and his wife both work as labourers at construction sites in Raipur.

Tandon is hoping the increase in the minimum wage for NREGP to Rs 100 may encourage people like them to work on the village projects. He may be right. Listen to Rakesh, another cardholder. “At Rs 100 a day, it makes sense to work in the village instead of cycling for miles to earn just Rs 50 more,” he said.

Tandon said the other problem that had distanced villagers from NREGP projects was the requirement of opening a bank or post office account. “Since one requires Rs 500 just to open the account, it doesn’t make sense,” he said.

The problems faced by villages such as Banarasi are, however, non-existent in agricultural areas of the state. In fact, the situation there is exactly the opposite. The government rate for agricultural wages is Rs 80, but the big farmers pay just Rs 40-50. This has diverted workers towards NREGP even as the agriculture sector reels under a severe shortage of workers.

The IIP data for June should be close to 10% now:
Core sector grows 6.5%

Double-digit growth in coal and cement production saw the index of six core sector industries growing 6.5 per cent in June 2009 compared to 5.1 per cent last year. The sector grew at 4.8 per cent in the April-June quarter compared to 3.5 per cent for the same period last year.

“It is gratifying to note that core sector industries have recorded growth during the last three months. June’s growth has been powered by improved production in cement, coal, crude oil and electricity. This is a clear indication that the economic stimulus packages are yielding results,” said Anand Sharma, minister for commerce and industry, on the sidelines of a Ficci conference.

The three stimulus packages, which extended fiscal reliefs to various sectors to pump demand, constituted around 3 per cent of the gross domestic product (GDP).

Maruti is a good proxy for the volume auto sector:
Maruti Q1 net profit up 25%

Maruti Suzuki, the country’s largest car manufacturer, posted a net profit of Rs 583.5 crore for the first quarter of the financial year 2009–10. This is a rise of 25.4 per cent against the Rs 465.9 crore earned for the same quarter last year.

Total sales for the period between April and June this year rose by 34 per cent, to Rs 6,340 crore. Given the gloomy outlook for the auto industry for this year, analysts say Maruti’s first quarter performance was extraordinary. “Both the top line and the bottom line surpassed our expectations,” says S Ramath, Analyst at IDFC SSKI Securities.

Operating profit for the quarter ending June increased by about 45 per cent, to Rs 641 crore against the Rs 442 crore earned last year. The Ebitda (earnings before interest, taxes, depreciation and amortisation) margin inched up from 12.1 per cent last year to 12.5 per cent for the quarter ending this June.

vina · Post by **vina** » 24 Jul 2009 17:11

Oh my God!. It really made my day. I just opened up the latest issue of the e Con -o-Mist , yup the one with the "Macro Economic Theory" melting chocolate ice cream on the cover. Never imagined that the e-Con-O-Mist with it's smug "oh so superior" establishment patrician airs would have to eat so humble pie and actually print unimaginable thing on it's hallowed figures on the pedestal - the Macro Economics.

The so called "Dismal Science" (which others know as basically glorified quackery masquerading as "science") seems to have taken it to the chin in this downturn. Oh yeah. All those nice clean assumptions and "models" (basically half baked sham , which have very approximate connection with reality at best) which were used to make life and death decisions and the justifications for the same, which affected everyone on earth, have had their "intellectual' and "rational" facades ripped off.

Now all that is well and good. If a Paul Krugman can admit "Macro Economics has been a terrible waste over the past 30 years at best and positively harmful at worst", it still shows that the spirit of a true truth seeker is present in him, however "dismal" his field his, because, he can face the objective truth.

Not so the DSE, JNU, ISI ding dongs. I have not seen a [g]SINGLE[/b] quack oops.sorry, "Respected Professors" and "Thinkers" (past and present), own up to their intellectual charlatanism for the past 40 years and their outsized role in framing and justifying the intellectual underpinnings and consensus for the dreadful performance of the Indian economy all those years and the huge huge responsibility of consigning the vast majority of this country to a miserable and pitiless existence.

On the contrary, the modern day inheritors of that legacy, who are even scarier and nuttier than the originals like Prabhat Patnaik , Utsa Patnaik, CP Chandrashekar and the rank troglodytes who are even nuttier than a fruit cake, continue with nary a look back at the past and go on and on like a broken LP record. JNU well, anyways is the well known necropolis of learning , so we can write them off as nut cases. What about the 'oh so scientific' ISI and DSE ?. When will their reputations get torn up and consigned to the dust bin like JNU. When will a degree from DSE make one close to being unemployable in the real world (beyond some wolly headed academia and des ki seva and other chamchagiri some "media" scam) like the JNU types. Let that day come and I will take an India trained economist seriously again.

Suraj · Post by **Suraj** » 26 Jul 2009 01:59

Banks are showing strong growth in Q1:
ICICI bank posts 68% rise in net income

Helped by strong treasury operations, ICICI Bank, the country’s second largest lender, today reported a 68 per cent rise in consolidated net profit to Rs 1,036 crore during the quarter-ended June, 2009, as against Rs 617 crore in the corresponding period last year.

The increase was despite a 0.2 per cent decline in consolidated income to Rs 14,615 crore, which was attributed to market-linked businesses such as insurance.

Govt banks log robust growth

Hyderabad-based Andhra Bank posted the highest growth of 230 per cent in net profit at Rs 256.22 crore over Rs 77.62 crore a year-ago, backed by a rise in its net interest income, fees and commissions. Net interest income rose by 27.46 per cent to Rs 441.37 crore in April-June 2009 compared to Rs 346.26 crore in the previous comparable quarter. Other income comprising streams such as fees, commission and recoveries jumped by 118.9 per cent to Rs 238.07 crore.

Bangalore-based Vijaya Bank returned to black and posted a net profit of Rs 143.3 crore as against a net loss of Rs 76.64 crore in April-June 2008. The rise in net profit was primarily because of Rs 90-crore write-back of marked-to-market provisions.

Its net interest income rose by 53.75 per cent at Rs 341 crore, while its trading income rose by 3.6 times at Rs 72 crore over the corresponding quarter of last year, according to Chairman and Managing Director Albert Tauro.

Dena Bank has posted a 68.4 per cent growth in net profit at Rs 115.02 crore from Rs 68.3 crore a year ago. Its NII rose by 14.51 per cent to Rs 250.5 crore from Rs 218.75 crore.

Recruiting agencies see pickup in hiring

The job market has begun to show signs of a revival led by sectors like telecommunication, pharmaceutical, life sciences and financial services. Human resource firms claim there are more vacancies now than a year ago when the slowdown first set in, though these are way below past peaks.

TeamLease Services Managing Director Ashok Reddy said that the demand for temporary employees had gone up nearly 100 per cent from the earlier levels.

“On an average, we have over 3,000 vacancies now, against the peak of 8,000 to 10,000 in 2005 and a low of 1,400 some months ago. Sectors like telecommunication, financial services, fast-moving consumer goods and IT to some extent have enough openings that need to be filled.”

He attributed the marginal improvement in demand to opportunities in sectors like pharmaceutical, life sciences, healthcare and power which have not borne the brunt of the slowdown.

With the government-sponsored stimulus in place, employers expect the economic environment to improve and have therefore begun to hire. Several of them had cut their rolls sharply at the first sign of the slowdown. And low salary expectations have helped.

“Organisations are looking at it as the right opportunity to get the right people at the right cost. While hiring is not back to normal, strategic hiring for special skills is going on across the sectors,” said Hewitt Associates Practice Leader Sandeep Chaudhary.