Indian Economy: News and Discussion (Jan 1 2010)

[Suraj]

There's an *enormous* amount of economic low hanging fruit in India, particularly in the realm of fixed asset creation. It doesn't require innovation, as much as the ability to deploy capital and effectively execute projects on time and under budget.

I've nothing against black money, particularly not when it is invested in infrastructure and real estate. In fact, those are the best places for it to flow into ? Why ? Because they're relatively illiquid, as opposed to investment in equities, debt or commodities. Further, black money itself is nothing more than capital generated out of economic activity that had so far been hidden from official economic accounting, partly out of venality and because the rent-seeking state made it hard for businesses by charging a level of taxation disproportionate to the amount of supoprt they provided to private economic activity.

Black money coming back into the mainstream is just an indicator that those who are holding that money find that the cost of keeping that money out of formal economic channels is now higher than the gains by 'whitewashing' that money. People talk about 'bringing back the money in swiss banks'. Well, black money being invested in formal Indian economic activity is just that. One of the pluses of high economic growth is that hundreds of billions, if not trillions, in capital that had been siphoned away over decades to preserve its value from a high inflation/low growth stagnant socialist system is now coming back to make good on the current gains.

That brings up the matter of FDI. According to DIPP data, fully 42% of $11 billion of FDI into India in this calendar year (upto May) came from Mauritius. That channel is popularly known for being the route for roundtripped capital, and black money coming back in from abroad. GoI knows this, but does nothing. Why should they ? Most of it is hidden Indian capital coming back to invest in the gains India's economic growth can now provide. It also brings with it the headache of managing the glut of liquidity, which in turn pushes up inflation. But overall, the policy calculation appears to be to let the current status quo continue.

[enqyoob]

Very interesting. Thanks! Begins to explain a lot of the sharp growth rate.

Also brings back the Enqyoob Theory of Money (ETM) that was the point of arguing circa 2000 that Yahoo! stock should only be worth $2, except for the hype and speculation on growing from $500 to $502 tomorrow. Unfortunately I was too busy arguing with the Textbook EkhanoComics experts here, to go and implement my own insights, so that I was holding on to those $500 purchases as they crashed.

So the Indian Rupee is now beginning to be seen as a stable currency with an overall rate of return that far exceeds inflation, even from relatively safe and "pedestrian" investments like Real Estate. Suddenly, and esp with the Yoo Ess and desi guvrmands blowing the cover off the Swiss vaults, it is time for the Protectors of the Black Money to seek other investments. No longer safe to keep it in "hard" currencies.

Since the Rupee is now free to float, a small annual appreciation w.r.t. dollar, pound, Oiro, yen etc is not out of the question, hey? With such large "round-trip" inflows, it suddenly makes it wiser to invest in rupees than in those other currencies, for the first time in many decades. This also happened on a smaller extent a few years ago when the dollar went down to <40 rupees while remaining stable against other currencies.

So what happens if ppl see that rupee is on steady upward path? Isn't there a massive rush to buy rupees? Doesn't that imply a spectacular rise of the rupee, say to where the dollar is 5 rupees again like in 1965? Why with all this, is the rupee stuck at 46.7 to the dollar?

Maybe they are all buying gold?

[vina]

Since the Rupee is now free to float, a small annual appreciation w.r.t. dollar, pound, Oiro, yen etc is not out of the question, hey? With such large "round-trip" inflows, it suddenly makes it wiser to invest in rupees than in those other currencies, for the first time in many decades. This also happened on a smaller extent a few years ago when the dollar went down to <40 rupees while remaining stable against other currencies.

Yess. yess. I had to buy dollahs back then and bought them at Rs 38.xx to the dollar. Nice . Gives a handle on inflation (imports, esp petroleum prices go down)..

So what happens if ppl see that rupee is on steady upward path? Isn't there a massive rush to buy rupees? Doesn't that imply a spectacular rise of the rupee, say to where the dollar is 5 rupees again like in 1965? Why with all this, is the rupee stuck at 46.7 to the dollar?

Problem is, it is not a one way path. You can lose your shirt if you bet against it. The rupee is market driven and is really not a fixed currency like our Tarrel than Mountain friends. If there is a long term one way bet (say 20 years) it is the RMB against the USD. So , if you want to buy retirement property, buy it in China NOW, sell it after 20 years and take money back to Yoo Yess and you will be vely vely lich.

Not so with Yindia . Though on a PPP basis the currency will appreciate, it is difficult to make a bet on the actual currency levels on a nominal basis. That will expect you to factor in inflationary expectations over the next 20 years.

With our tarrel than mountain friednds, the currency is so overvalued ( atleast 30%) , that it gives you the safety factor to against the do the RMB/USD long term trade.

[Suraj]

The RBI maintains a dirty peg on the dollar. Their idea is to have a Rs/$ exchange rate within a zone of comfort though it tends to be fairly wide; the exchange rate is the least politically sensitive one of the impossible trinity, while the inflation and interest rates get much more press.

The RBI maintains exchange rate stability through sterilization, using market stabilization bonds issued by GoI. Some countries also enable their central banks themselves to issue these bonds; I believe the Chinese PBoC does. There's a limit to how much can be issued in bonds, since they accrue interest which GoI must pay out of its finances.

Why does RBI just not leave the exchange rate alone ? Remember the massive political fallout during the SEZ crisis a couple of years ago ? Three administrations - the last NDA one, and successive UPA ones, have backed and developed a draft SEZ policy favouring export led growth. Exports need a stable and weak Rupee. Therefore RBI on its part attempts to keep the Rupee as cheap as possible. While not as stable as CNY-USD exchange rate, it's still arguably worked: Exports from SEZs up 121% to $50 billion in 2009-10. People talk about the costs of the SEZ policy in terms of displacement, ecological damage etc. The gains have been a cumulative SEZ-generated export volume in the region of $100 billion over the last 4-5 years, and continuing to grow strongly.

[Dileep]

Why real estate is bought black? Because of the preposterous stamp duty (at least in SRK). You pay 14% of the value shown on the document. So, you end up showing only 10% of the actual value on the document, the rest being 'black'. Even if YOU, the buyer, want to pay the 12%. you can't put the real amount you paid, because it will upset the other transactions, not to mention, the seller will be liable to capital gains tax.

I pay my tax paid 'rin white' money, which instantly becomes 'carbon black' black in the hands of the seller.

Now, when I decide to sell, all I can get is the 'carbon black' money. The only thing I can use it would be to buy other real estate, build a bungalow, buy a car etc. I have to pay capital gains on the value shown on the document as well.

[SwamyG]

^^^
When I was scouting for property in Hyderabad; the posh lady who was associated with a chota-mota developer does not ask if black money would be used. Instead the question is phrased as "how much in white and how much in black?". Several IT-vity folks in my family circle own more than one flat. They are middle class folks who have bought 25L and 35L worth flats, not crores. Some of them seek loans from relatives, paying them interest less than the bank - kind of win-win. The person giving the loan gets good-name in the family circle and more interest than the bank would give him if he stashed the rupees. Some very close relatives don't mind giving few thousand rupees without charging interest.

'Jugaad' at its best.

By the way, has anybody heard in the last 4-5 years of Indians cutting down spending on both essential and non-essential items?

[Abhijeet]

The core of the Indian economy is not FDI, remittances or even exports. Most Indians consume products manufactured in India, and the money to buy those products generally comes from local jobs rather than relatives living abroad. Wealth is generated in the same way as in any other country: by increasing the productive capacity of the people.

The main challenge to the Indian economy is not that funds from abroad will dry up due to the whims of hedge funds and PE groups (even Carlyle ). There are two fundamental threats to the long-term health of the Indian economy, IMO:

- Governance is in a shambles at the local, state and federal level. The government cannot provide basic things like law and order, roads, water, power and sewerage. the federal government is busy paying people to dig holes and fill them up again. The economy may have doubled in the last 10 years, but infrastructure has improved only by a few percentage points (if that -- in some areas it has actually gotten worse). This will bottleneck the economy sooner or later.

- The quality of human capital is extremely poor, to be kind. The average Indian is under-educated, under-skilled, under-employed, and gullible enough to vote for politicians who perpetuate his conditions. Unless there is a massive improvement in the quality and coverage of basic education in India, the demographic dividend is going to consist of people who are unfit for most modern economy jobs.

The economy cannot keep galloping along while these two issues remain unresolved. One of two things will happen: either growth slows down to match the environment, or the environment accelerates to keep pace with growth.

[enqyoob]

Exports need a stable and weak Rupee.

My take on that is that exporters need a weak and weakening rupee, because they get to stash their cash as phoren exchange in Zurich or Mauritius, and use it to fund phoren activities. So it is in their interest to keep the Indian rupee weak and Indians SDRE and operating under Mushroom Theory of Management.

But once a roaring market develops in India, and rupee is STABLE or slowly rising, the exporters go into a panic. So the trend may reverse, phoren exchange comes pouring into India, and the rupee vaue goes up.

[ManjaM]

http://www.amazon.com/Indias-Time-has-C ... r-mr-title

S Gurumurthy of Swadeshi Jagran Manch has written about the need and impact of a stronger rupee in his book "Indias Time has Come". His estimate was that Rupee should be allowed to come to its natural exchange rate of 9rs per 1$ and this would make products cheap enough to encourage local consumption. Also positively impacted would be price of petrol which would fall to Rs30/liter.

[Manishw]

^^^ Very Interesting idea. Just yesterday I was toying with the idea of appreciation of the Indian rupee to escape inflation but did not think it to be practical since I was linking the rise to the Reminbi's rise which I thought was nearly impossible.

[Suraj]

Ship collision, oil spill halt JNPT traffic
Pictures + article in Yahoo news

Operations were suspended at India’s busiest container terminal, Jawaharlal Nehru Port, as authorities attempted to contain damage from the collision of two cargo vessels off the coast of Mumbai on Saturday.

Several cargo containers abroad one of the ships were flung into the sea following the accident, which also triggered an oil slick along the Mumbai coast. The Indian Coast Guard has pressed into service several boats and helicopters in an attempt to stem the fuel leak, but some officials said the operation has met with only limited success so far and the spill was now threatening areas hundreds of kilometres away from the collision site.

The Jawaharlal Nehru Port Trust (JNPT) has, meanwhile, sought the services of experts from SMIT Salvage, a Netherlands-based company involved in emergency response and wreck removal operations. The experts are expected to reach Mumbai by Wednesday. However, in a statement issued late in the evening, the Director General of Shipping said effective salvage operations can begin only by the end of the month when the weather improves.

Many of the 120-odd containers that fell in the sea are still floating, making navigation in the area difficult. A fourth of them contain, what the DG Shipping termed, dangerous cargo. “Heavy oil spillage can be sighted from the ship’s fuel tanks,” the statement added.

“The channel is not navigable; it cannot be operated,” said N M Kumar, deputy chairman, JNPT. He said the floating containers could endanger ships on the route. The DG Shipping said JNPT is closed during the night and only a “few movements of ship were undertaken during the day”. It is not clear when full operations will resume at the port. The Indian Navy is undertaking an inspection that will determine if operations can resume at the nearby Mumbai Port Trust.

JNPT handled 4.1 million containers in the year ended March 30, 2010. Total cargo tonnage, including commodities and other types of freight, rose 6 per cent to 60.7 million tonnes in the year.

Car sales up 38%, bike sales up 30%, CV sales up 37% in July

Domestic passenger car sales jumped by 37.95 per cent to 1,58,764 units in July compared to 1,15,084 units in the same month last year.

According to the figures released by the Society of Indian Automobile Manufacturers (SIAM) today, motorcycle sales in the country grew by 30.09 per cent to 7,10,621 units during the month under review from 5,46,233 units in the same month last year.

Sales of commercial vehicles jumped by 36.99 per cent to 51,481 units from 37,580 units in the year-ago period, SIAM said.

GoI lowers PSU public float requirement to 10% from 25%

The government on Monday diluted the guidelines on public shareholding by lowering the minimum public float requirement for state-owned enterprises to 10 per cent against 25 per cent prescribed earlier.

Besides, it provided freedom to private sector companies by dispensing with the rule that required entities with less than 25 per cent public shareholding to dilute at least 5 per cent stake annually. Under the new rules, government as well as private companies can raise the public shareholding level within three years without any annual floor.

“They are doing the right thing. What we have seen is that markets open and shut, which would have meant that equity dilution would have been done even when the markets are not doing well. Giving them two-three years is the right way to do it,” said JP Morgan India Managing Director and Head of Investment Banking Rohit Chatterji.

The move follows lobbying by the industry and investment bankers, who had also suggested that depository receipts be included in the 25 per cent norm.

NHAI, PlanCom differ on cost of 4-lane highways

The cost of building four-lane highways has become another bone of contention between the Planning Commission and the National Highways Authority of India (NHAI). The Plan panel is against an NHAI proposal to increase the cost allocation of building each four-lane highway by 33 per cent from Rs 9 crore a kilometre (km) to Rs 12 crore.

The Planning Commission is of the view that even after factoring in the inflation, the cost estimate is exaggerated. “At 6 to 7 per cent inflation, the cost would only increase to Rs 9.6 crore and not Rs 12 crore, as demanded by NHAI,” said a highly-placed government official, on condition of anonymity.

NHAI says the revised cost is based on change in prices of construction material and the wholesale price index (WPI). Assuming the cost of construction material goes up 7-9 per cent a year and WPI increases by 5 per cent per annum, NHAI says the cost of building every km of a four-lane highway could go up to Rs 11.35 crore in 2010-11.

Analysts, too, feel building a four-lane highway at Rs 12 crore per km will be quite high. “The cost of building four-lane highways should rise to a maximum of Rs 9.7 crore a km. Increasing it to Rs 12 crore will be too high,” said Parvesh Minocha, managing director (transport business) at Feedback Ventures, an infrastructure consultancy firm.

The exchange rate is affected by a host of factors. Weakening exchange rates trigger cost push inflation from the cost of dollar denominated crude, and therefore petroleum products. The typical exchange rate move in a cyclical upturn in economic activity is for the exchange rate to move higher, driven by the glut of incoming capital from various sources, until such a point where the opposition to the exchange rate appreciation becomes pronounced, or the clampdown on economic activity to cool inflation lowers demand enough, or both.

During the peak of an economic cycle, GoI+RBI does allow the Rupee to appreciate as a means to handle inflation. The problem, though, is that they seldom appear to reduce the price of petroleum in the process, with the arbitrage gains instead going directly to the public refining companies to offset their previous losses.

Underinvoicing of exports and overinvoicing of imports (or the reverse) as a mechanism of capital flight/return happens all the time, with the Mauritius route being one channel for capital to return.

Assuming the west continues to be in an economic funk and asset prices keep stagnating or falling, both in nominal and real terms, more capital will come to India to take advantage of the gains available here. The result would be continuous inflationary pressures driven by the amount of liquidity in the system, and pressure for the Rupee to appreciate further.

[SwamyG]

FT reports that the rural demand helped the Indian car sales.Linky

[vina]

Gurumurthy of Swadeshi Jagran Manch has written about the need and impact of a stronger rupee in his book "Indias Time has Come". His estimate was that Rupee should be allowed to come to its natural exchange rate of 9rs per 1$ and this would make products cheap enough to encourage local consumption. Also positively impacted would be price of petrol which would fall to Rs30/liter.

This sounds like the story (apocryphal?) of Stalin setting the Ruble vs USD rate. The economists came up with a number of 26 rubles or something, Stalin removed the 2 and made it as the exchange rate!.

Sorry. That is King Canute like economics and will play havoc with people's lives.

[RamaY]

thoughts on kaala lakshmi

That is why in Desh the long-term capital gains (>1 yr) are tax free. It is an effort to make kaala lakshmi into dhana lakshmi

[enqyoob]

I gave up on the Exchange Rate By Diktat route a while back, but now I am even more confused. If the Rupee is truly Free 2 Float, can RBI "fix" the exchange rate except by dumping new rupees into circulation or lowering interest rates (which may not do the job if it hikes industrial output) etc??

IOW, RBI can only do band-aid type things, whereas capital inflow esp. with Mauritius factor, may be more like a river in flood??

The changed to Rs. 9 per dolah may not happen tomorrow (I HOPE!! ) but if the trend keeps going that way, there is nothing impossible about it. Consider the following:

USD in Rupees
1965: 5
1978: ~6
1984: 12
1990: ~25 (?? I lost track somewhere there.)
1997: 47?
2002: 45
2006: 50?
2008: 39?
2009: 47.5
2010: 46.5

During this time, the USD has itself declined against, say, Gold by some huge factor. Say factor of 4 minimum.
Point is, the slide can be reversed in, say, the same 35 years. That is a pretty decent ROI at any decent interest rate even after TDS, enough to bring a lot of Kala stuff out.

1980s to 98 was a total ripoff of India, that had no relation to any values inside India, it was all on the Margins argument of "exports" but here I am fully part of the Neshant/Rahul Mehta School of GloomNDoom in maintaining that this collapse was completely crooked.

But then I look at the warning signs. Naxals are WINNING in Chattisgarh, train robber gangs can concentrate 50 robbers in one spot against 4 unarmed security guys, entire Northeast from Bihar eastwards is essentially a lawless zone, Andhra is on the verge of fratricidal explosion, Naxal types rising in Western Ghats, Taliban taking over Kashmir and Kerala, Marxists still going strong in Kerala and WB. Maybe all this "Booming Economy" stuff is far worse than "India Shining" in understanding the real sentiment in most of India?


Would you want to bring up ur hard-stolen baksheesh in such an environment??

[Suraj]

I gave up on the Exchange Rate By Diktat route a while back, but now I am even more confused. If the Rupee is truly Free 2 Float, can RBI "fix" the exchange rate except by dumping new rupees into circulation or lowering interest rates (which may not do the job if it hikes industrial output) etc??

The INR is not a free float currency. The exchange rate is no longer set by diktat (i.e., no 1970s/1980s style official and market rates), but capital controls ensure RBI can manage entry and exit of capital and thereby, control over the exchange rate. These controls are far more liberal than they used to be in the FERA/FEMA days.

Please keep unrelated topics (naxals etc.) meant for various strat forum threads there, instead of bringing it here.

[Rahul M]

suraj, I talked to someone who is in the govt sales tax dept and this is what he had to say about kirana stores.

> the VAT level equivalent to organized retail is at the wholesalers which is duly taxed and revenue is tracked (as far as it goes)
> the smaller kirana stores do not pay any VAT. in his opinion it is not cost-effective to bring smaller stores under the VAT net or to track their revenues. the manpower required for the effort would cost higher than the taxes recovered.
> the larger stores especially in more central locations do pay VAT.

[Sanjay M]

EconomyWatch has their latest growth projections for the Indian Economy:

http://www.economywatch.com/economic-st ... year-2015/

[ManjaM]

Gurumurthy of Swadeshi Jagran Manch has written about the need and impact of a stronger rupee in his book "Indias Time has Come". His estimate was that Rupee should be allowed to come to its natural exchange rate of 9rs per 1$ and this would make products cheap enough to encourage local consumption. Also positively impacted would be price of petrol which would fall to Rs30/liter.

This sounds like the story (apocryphal?) of Stalin setting the Ruble vs USD rate. The economists came up with a number of 26 rubles or something, Stalin removed the 2 and made it as the exchange rate!.

Sorry. That is King Canute like economics and will play havoc with people's lives.

From what i understand the current exchange rate is what is managed by RBI. As an earlier poster mentioned, successive governments have encouraged it to support their export oriented strategy of development. SG suggests less controls and intervention by RBI.

To say the current system has worked wonders with peoples lives is to be blind to the ground situation. Wont a drop in price of fuel bring down the prices all around? I am not sure of the mechanics, but the exchange rate, fuel prices, commodity prices all seem to be linked.

i dont know how you concluded that whatever SG has said is as arbitrary as Stalins purported behaviour. the book i suggested is 136 pages long and covers many important topics on economics especially relevant to india. please feel free to contact him for clarification before comparing a chartered accountant to a mass murderer.

[Suraj]

Such a massive change in the exchange rate is extremely destabilizing. While a rising proportion of overall exports are high value petroleum and chemical products, a significant fraction is still from textiles, gems/jewelry and other labour intensive low/medium technology sectors. Those would be decimated by such a massive loss of competitiveness.

Further, it's utterly pointless to expend enormous amounts of political capital to force through an economic policy (the SEZs) only to turn around and do something that amounts to launching a ship and then firing a salvo of torpedoes at it right after it floats out.

In the long term (~20 years) the Rupee ought to appreciate to such levels, but SGs prescriptions as such aren't very meaningful.

[Manishw]

^^^ Yes that is why it is being said that this 'Decade' belongs to India and not 'Year'.

[Sanjay M]

^^ And since India belongs to Nehru-Gandhi royal family, then by extension so does this decade

[SwamyG]

Suraj, Vina et al: India imports more than it exports, so if rupee is strengthened isn't it good for India? The imports will be cheaper, no? By rupee strengthening, doesn't it also imply that I can get more idliss and dosai for my twenty rupees? I appreciate the impending gyan.

[vera_k]

China became a manufacturing power by having a favourable exchange rate. Is it even possible for manufacturing to take off given the current Re exchange rate? Shouldn't the rupee be devalued significantly to help exporters?

Or is the plan to have everyone transition out of agriculture onto NREGA job sheets?

[SwamyG]

^^^
Relying only on Exports is bad for the health of a nation.

[Suraj]

What does "India imports more than it exports, so if rupee is strengthened isn't it good for India?" mean ? It's far too vague a statement. How about I argue back that less crude imports, India exports more than it imports, and that therefore the Rupee benefits by being weak ?

I understand that certain imports are very beneficial, e.g. import of machinery, which in turn boosts industrial output. A lot of other imports are end consumption goods that I see little purpose in encouraging, when local industry can produce it. My point is that 'imports' is not a monolithic entity to be viewed as a single entity; we want to make some imports cheap and others expensive.

More than absolute exchange rate, what's important is stability of the exchange rate, particularly for a currency that is under pressure to appreciate otherwise, due to disproportionate capital inflows via FII/FDI/etc . Our export industry remains relatively inefficient, and cannot absorb wild gyrations in the exchange rate, especially periodic bouts of sharp appreciation.

Some trade news:
India Works to Clear Hundreds of Containers Obstructing Mumbai Ports After Accident

India ordered salvagers to remove hundreds of containers obstructing Mumbai’s ports by Aug. 14 as the government accelerates attempts to reopen the nation’s busiest cargo-box harbor.

“This work has to be speeded up,” Rakesh Srivastava, joint secretary for ports at the Ministry of Shipping said in an interview after a meeting to discuss the recovery measures today. Salvagers are retrieving only four to six boxes a day of the 300 floating and submerged, he said.

Jawaharlal Nehru Port and the smaller Mumbai Port remained closed today after halting operations yesterday. The closure of the two ports, which handle about 40 percent of India’s exports, has disrupted deliveries of oil to a local refinery and hindered shipments of grains and other exports. As many as 32 ships have been stranded in the ports or were waiting docking, according to the government.

“The closure will obviously have a big effect on our business,” said S. Hajara, chairman of Shipping Corp. of India, the country’s largest shipping line. “There is no compensation for losses as the closure of the port is not something that anyone is insured against.”

Mediterranean Shipping Co.’s MSC Chitra shed the containers after colliding with another vessel on Aug. 7, the shipping ministry said in a statement yesterday. The vessel is now listing after being deliberately beached.

The ship had 1,219 containers on board, of which 31 held hazardous chemicals and pesticides, Satish Agnihotri, India’s director general for shipping, said in Mumbai yesterday. Srivastava, the shipping ministry official, said that these containers were well-packed and were not expected to cause environmental problems.

[SwamyG]

How is it vague? Maybe I am not using all the right terminology here {hame maaf karna bhai} Let us consider this quote below:

India’s June exports surged 30% from a year ago to $17.75 billion, for the eighth straight month, Trade Secretary Rahul Khullar said today. Imports for the month rose 23% to $28.3 billion which would widen the trade deficit to $10.55 billion.

Doesn't this mean India imports more than what it exports?

[Suraj]

SwamyG: That's not the issue. You claimed it's good for the Rupee to appreciate because imports exceed exports. Why ? What do we gain by deliberately hampering an export industry we've put a lot of political capital into (and achieved significant results in the process), just because we're compelled to import raw feedstock (crude, chemicals) and machinery, both of which we'd like to import cheaply but are compelled to pay a premium for, unless we can find domestic replacements ?

I'm just saying that "imports > exports implies strong rupee is good" has no particular causal basis; the ideal exchange rate does not follow from our trade balance at any given time. Our entire policy framework attempts the reverse - to encourage exports, and simultaneously push for the development of domestic petroleum sources to replace costly crude imports, which constitutes our biggest import bill.

[James B]

India’s June exports surged 30% from a year ago to $17.75 billion, for the eighth straight month, Trade Secretary Rahul Khullar said today. Imports for the month rose 23% to $28.3 billion which would widen the trade deficit to $10.55 billion.

Doesn't this mean India imports more than what it exports?

Of course India imports more than exports. But, please do remember that our potential to import also depends on export industry. Take the example of IT industry, auto industry, textiles, pharma industry (and the ecosystem depending on such industries), which provide a number of jobs to Indians and thus increase the consumption potential and also demand for imported goods. If you appreciate the value of rupee - a lot of these industries suffer due to lack of competitiveness wrt to other countries, thus a many number of Indians losing jobs and this affecting domestic consumption and industries depending on such consumption. Is this desirable??. Huge trade with some trade deficit is fine as it provides a lot of jobs in the country. Meanwhile, our govt. should focus on increasing our indigenous capabilities where our dependence on imports decrease. Its a win-win situation.

[SwamyG]

Suraj: I did not claim anything, I asked questions. Few more

So as a country, are we creating policies that makes us dependent on Exports? Based on my read of your last statement, does it also mean we are deliberately keeping the rupee low?

[Suraj]

Suraj: I did not claim anything, I asked questions. Few more

Fair enough

So as a country, are we creating policies that makes us dependent on Exports? Based on my read of your last statement, does it also mean we are deliberately keeping the rupee low?

Please define 'dependent on exports'. What percentage of exports/GDP constitutes dependence ? That we are a low income country with low costs is a natural arbitrage opportunity for low/medium value high volume exports. Why should GoI *not* take advantage of it ? Does that make us liable to face cyclical world economic peaks and troughs ? Yes. But the whole point of liberalization was opening up to the world, including to trade.

GoI+RBI do keep the Rupee cheap, as a matter of policy. It just gets lesser focus than inflation and interest rates do.

[Suraj]

Interesting GST moves. States have almost forced the centre to drop the veto clause that would have enabled the centre to push through measures or block state opposition. On the flip side, this means that GST rate changes can only be consensus-driven:
Centre may drop veto from GST bill

Amid opposition from the states, the Centre may smoke the peace pipe by dropping the contentious provision in the Constitutional Amendment Bill on a Goods and Services Tax (GST) that proposed to arm the Union finance minister with veto power. The Bill is being redrafted to say no proposal will be cleared by the GST council unless there is a consensus among all the 30 states and Union Territories, as well as the Centre.

If the proposal goes through, in the GST regime, the requirement of consensus will mean that a proposal from the Centre or any state can be turned down even if one state objects to it. This can make it difficult for the Centre as well as the states to mutually arrive at a decision.

Earlier, the Centre wanted to retain the veto power even if two-thirds of the states present during a meeting were in favour of a proposal. So, if 10 states were present, and seven voted in favour of a proposal, the Centre could still have its way.

The move faced opposition from even the Congress-ruled states such as Andhra Pradesh.

The deadlock over veto powers to the Centre had threatened to derail implementation of GST from April 2011. Under the new regime, all indirect levies, barring customs and octroi, will be subsumed under GST.

Industry wants holding caps on exchanges raised

At present, investors who can buy up to 15 per cent in a stock exchange include domestic banks and financial institutions, clearing corporations, depositories and stock exchanges.

This is one of the important proposals put forward by a section of the industry before the Bimal Jalan committee, set up to review the ownership and governance of market infrastructure institutions. The committee’s report is expected next month.

Industry players feel the current cap of 15 per cent for financial institutions acts as a road block in attracting genuine investors. Incidentally, when the norms were first promulgated, the cap was five per cent. Only later were certain categories of investors, including stock exchanges, allowed to increase their share to 15 per cent.

According to people familiar with the development, the industry suggestion also stems from the fact that the proposed takeover norms stipulate increasing the open offer threshold to 25 per cent from the current 15 per cent.

“Institutions want the committee to align the structure with the proposed takeover norms and also with the Companies Act,” said a person familiar with the development. “A stake of 25 per cent gives the holder immense power under the Companies Act. Domestic institutions will be more comfortable acquiring a stake in exchanges if there is a possibility of taking it up to 25 per cent,” he explains.

The committee is also looking at whether the current limit for foreign institutional investors in stock exchanges needs to be reviewed. Market participants have also been asked to give views on whether foreign stock exchanges can be permitted to hold up to 15 per cent or more equity in Indian stock exchanges. The committee will also specify shareholding norms in depositories. Recently, BSE raised stake in Central Depository Services Ltd to 51 per cent, while NSE holds a little over 25 percent in National Depository Services Ltd. The exchanges are in a race to provide end-to-end solutions to clients.

[SwamyG]

Dependent: When it becomes 'too big too fail'

[Nihat]

FM should have veto power in g.s.t. Or else it will take an eternity to arrive at a decision , owing mainly to internal politics among parties.

[Vipul]

Indirect tax kitty swells 46%.

[abhischekcc]

I need a little help.

I am currently reading a book called 'The Imperial Monetary System of Mughal India'.
It deals only with the medieval Mughal monetary system, with only references to Maratha System.

I need to find material on the Maratha Monetary System so that I can compare the two.
Suggestions for books, especially online material, would be much appreciated.

[Aditya_V]

How is it vague? Maybe I am not using all the right terminology here {hame maaf karna bhai} Let us consider this quote below:

India’s June exports surged 30% from a year ago to $17.75 billion, for the eighth straight month, Trade Secretary Rahul Khullar said today. Imports for the month rose 23% to $28.3 billion which would widen the trade deficit to $10.55 billion.

Doesn't this mean India imports more than what it exports?

Yes thats true, but this number is only for goods, does not include Invisibles- i.e services, so IT and ITES exports is not included.

Also one has to remember around 23-24% of the Import Bill is oil and anther 25% is GOLD, Precious metals and Precious Stones. Things which have little economic value

[kmkraoind]

I need a little help.

I am currently reading a book called 'The Imperial Monetary System of Mughal India'.
It deals only with the medieval Mughal monetary system, with only references to Maratha System.

I need to find material on the Maratha Monetary System so that I can compare the two.
Suggestions for books, especially online material, would be much appreciated.

Abhischek garu, I do not know if it helps or not, but Try This

[abhischekcc]

Thanks, kmkroaind.
Will look into it.

[krisna]

TVS Electronics unveils Keyboard with the new Indian Rupee Symbol

The company dedicated this development to the nation on its 64th Independence Day.