Indian Economy News & Discussion - Aug 26 2015

Suraj · Post by **Suraj** » 26 Jan 2016 12:54

The coming Union Budget 2016-17 will likely come good on Finance Minister Arun Jaitley’s promise to continue the government’s public spending push, with capital expenditure (capex) for the next year expected to come close to Rs 3 lakh crore for the first time.

At a time when private sector balance sheets are stretched and banks burdened with non-performing assets, Jaitley had stated the Centre’s commitment to boost spending in infrastructure as an impetus for growth. For 2015-16, the finance minister had budgeted Rs 2.41 lakh crore in total capex (including loan disbursements), about Rs 49,053 crore, or 25.5 per cent, higher than the 2014-15 revised estimates of about Rs 1.92 lakh crore.

Next year too, a similar push is expected as the 2016-17 budgeted capex could be around 20-25 per cent higher than this year. Compared to the budgeted figures available, that comes to around Rs 2.90-3.02 lakh crore.

Official sources said for enhanced capital spending by the government to act as a stimulus for the private sector to invest again, some six to eight quarters of sustained boost was required. They reckon that 2016-17 will be a final push for the government to provide that boost before the year-on-year increase in capex can be eased back.

In addition to public spending, plans to recapitalize banks:
Govt may infuse more than planned Rs 70,000 crore in PSU Banks
The Finance Ministry is considering infusing more than the announced Rs 70,000 crore in public sector banks to help strengthen their balance sheets.

"We are assessing the capital requirement position of each bank depending on their bad loans and, if need be, we may have to expand the capital infusion programme," said a ministry official.

An announcement to this effect could be made next month by Finance Minister Arun Jaitley in the Budget 2016-17 if the government decides to expand the capital infusion programme, sources said, adding that the plan is at a preliminary stage and no decision has been taken so far.
“We have four quarters of this year and four quarters of the next. This is a burden which the government has to take, but it is necessary given that India Inc is not in a position to substantially increase investment,” said an official, adding the year-on-year expansion in capital spending next year was likely to be the same as this financial year.

This continues GoIs effort to reverse the negative calculus from the UPA era:

A_Gupta · Post by **A_Gupta** » 27 Jan 2016 08:39

http://www.bloomberg.com/news/articles/ ... r-outflows
Rajan Seen Buying Extra $4 Billion of India Bonds After Outflows

Reserve Bank of India Governor Raghuram Rajan is seen ramping up bond purchases as foreigners dumping emerging-market assets push short-term money rates to the highest since May.

The central bank began buying debt last month after a gap of almost two years and has injected a total of 200 billion rupees ($2.9 billion) via open market operations on Dec. 8 and Jan. 21. The RBI will purchase an additional $4 billion of rupee-denominated notes this quarter, according to the median estimate of seven analysts surveyed by Bloomberg News. Bank of America Merrill Lynch expects as much as $12 billion to be injected in the fiscal year ending March.

The cash squeeze is worsening as global investors pulled $1.8 billion from Indian stocks this month and as Prime Minister Narendra Modi curbs spending to meet budget goals. The benchmark 10-year yield climbed toward the highest since August, the government missed its target at an auction of bills on Jan. 6 and underwriters rescued bond sales three times in two months.

SaiK · Post by **SaiK** » 27 Jan 2016 19:24

why the indic stock markets have remained dull since modi sarkar took office? time to invest or wait for another low?

panduranghari · Post by **panduranghari** » 27 Jan 2016 20:19

Sensex is at Pre Modi Election level. Its not the failure of Modi's economic policies. Its the failure of the economic model. Unfortunately the common man will blame him for the further turmoil expected. And at this juncture, it necessary to speak up and explain what the government is doing to ensure the transition is as smooth as possible. And if the GOI fail to do it, we cannot blame the common man from finding the current government responsible. So SaiK, what say you?

Suraj · Post by **Suraj** » 27 Jan 2016 20:32

An important trend to consider is that since mid/late 2014, a significant amount of FPI inflows have gone into not equities but debt. This is because both equities and debt have an FPI cap, and once equity caps were hit, they focused on debt. Multiple foreign bond funds are overweight on Indian equities now, with big bond fund managers like Jeffrey Gundlach stating they are overweight on India:
Gundlach: Emerging Markets To Drop 40%

The one exception is perhaps India. Gundlach remains a staunch bull on that particular country due to the massive growth in its labor force. "When there's blood in the streets, buy India," he suggested. "Maybe you can buy it now if you have a really longtime horizon, but it may get caught in the broader emerging market sell-off."

As long back as Aug 2014:
FII debt inflows outpace equity

Foreign portfolio investors are the sultans of Indian equities, given that they own 22 per cent of the BSE 500, second only to Indian promoters who control 28 per cent of the universe. A quarter of India’s largest companies are owned by foreign institutional investors (FIIs) and the value of their equity ownership stands at a staggering $315 billion.

Foreign portfolio investors have pumped in $13.4 billion into debt and $12.2 billion into equities. For the first time, FII flows into debt have surpassed that into equity. Strategists believe this signifies the deepening of India’s financial markets.

Equities have always been the preferred investment for FIIs against debt. Since 2010, FIIs have pumped in $39 billion into debt against a staggering $86 billion into equities.

The past year of softness in the equity indices has corresponded with the rise of FPI debt holdings, and both equities and debt hitting investment limits for the year. 'Blame' if any, lies with the RBI and the very talkative Rajan, who have been extremely conservative about raising these limits.
FPIs to pick debt over equity again

With the Reserve Bank of India (RBI) increasing the foreign portfolio investment (FPI) limit in government securities and also allowing foreign investment into state development loans (SDLs) in a phased manner, FPI inflows into Indian debt is set to surpass equity flows for the second consecutive year, reports fe Bureau in Mumbai.

According to Bloomberg data, foreign institutions have invested $6.33 billion in India’s debt capital markets, while equity inflows have halved to $3.6 billion so far this calendar year. In CY14, FPIs invested $26.25 billion in debt instruments compared with $16.16 billion into Indian equities.

Bankers are optimistic FPI appetite for Indian paper will remain robust and additional G-Sec limits will be fully utilised as and when they are announced.

In its September 29 credit policy, the RBI had announced an increase in the FPI limit in G-Secs to 5% of the outstanding stock by March 2018, thereby opening up an additional R1.2 lakh crore investment limit over the next two and a half years.

FPIs have also been permitted to invest in SDLs, which will be increased in phases to 2% of the outstanding stock by March 2018. This would amount to an additional limit of about Rs 50,000 crore.

Over the next two and a half years, FPI investment limits into G-Secs and SDLs will be close to double the current figure of $30 billion allowed in G-Secs.

Limits for the residual period of the current financial year would be increased in two tranches from October 12 and January 1, 2016.

Each tranche would entail an increase in limits by Rs 13,000 crore for central government securities, of which Rs 7,500 crore will be for long-term investors and Rs 5,500 crore for others, RBI’s September credit policy statement said, adding that Rs 3,500 crore limit in SDLs will also be opened up for all FPI investors.

SaiK · Post by **SaiK** » 27 Jan 2016 22:07

Wonderful there Suraj! great post! gives me some idea for delaying even a chota-mota fund.

pandu*hari, no I am not blaming... I am seeking data.

Singha · Post by **Singha** » 29 Jan 2016 06:35

TOI:

patanjali has taken a 4.5% share in toothpaste segment. brokerages are lowering earnings estimates of global cos in such segments due to threat of patanjali.

its has already launch noodes in nov 2015.

it is planning to launch more products in food and drinks segments.

Dipanker · Post by **Dipanker** » 29 Jan 2016 09:52

Rajan questions overlap, accuracy of GDP numbers

MUMBAI: Reserve Bank of India governor Raghuram Rajan on Thursday called for improving the method of calculating the country's gross domestic product (GDP) as the current practice does not adequately reflect value addition. He said there is a need to calculate data in such a way as to avoid an overlap and to capture the net value addition to the economy. Rajan called for the need to look at job creation numbers which are currently not available in India.

Suraj · Post by **Suraj** » 29 Jan 2016 10:06

Investors chase gold bonds in falling stock market

The second tranche of sovereign gold bond received a better response than the first, a government official said, as a price discount and its safe haven appeal amid a slide in equities attracted investors.

India plans to raise Rs 15,000 crore in bonds linked to the precious metal in the financial year ending March 31, to wean investors off buying physical gold and stem the outflow of foreign exchange spent on gold imports.

GOLD BOND ISSUE
* 917 kg of gold for which banks received applications in the first tranche
* 2.79 tonnes of gold for which banks received applications in the second tranche
* 900 kg of gold offered for monitisation so far
* 4.6 tonne Reduction in gold import requirements in 2 months

In the second tranche, 316,000 applications were received for 2,790 kg of gold worth Rs 726 crore, far higher than the 62,169 applications for 915.953 kg of gold in November. "Outcome significantly better than the 1st tranche," economic affairs secretary Shaktikanta Das said on Twitter on Thursday. "Scheme picking up." The government said in a statement that increasing awareness among investors and more clarity about the provisions of the issue had helped boost interest in the scheme this time around.

The price of the bonds is linked to the price of bullion and they carry annual interest of 2.75 per cent, allowing consumers to invest in "paper" gold rather than physical gold.

Prime Minister Narendra Modi made a high-profile announcement about both the bonds and a programme to mobilise gold held by households and temples for recycling, or the gold monetisation scheme. A lacklustre response to the first bond tranche pushed the Reserve Bank of India to lower the issue price for the second tranche to Rs 26,000 per 10 grams, more than two per cent below the prevailing market price for the metal.

Suraj · Post by **Suraj** » 30 Jan 2016 01:27

Govt's cash balance with RBI high, puts stress on liquidity

The government's cash balance with the Reserve Bank of India (RBI) was Rs 1.4 lakh crore on January 28, an amount unusually high for this time of the financial year and is causing acute liquidity pressure in the banking system.

The cash pile-up indicates the Centre may be reluctant to spend in order to meet the fiscal deficit target of 3.9 per cent of the gross domestic product (GDP) for 2015-16.

With government action plus RBI intervention in the foreign exchange (forex) market, liquidity shortage in the banking system has assumed mammoth proportion - prompting RBI to offer assistance of Rs 1.6 lakh crore through its overnight and dated liquidity windows so that call money rates remain near the repo rate of 6.75 per cent.

Fiscal deficit at 88% of Budget estimate by Dec

The Centre’s fiscal deficit touched Rs 4.9 lakh crore by the end of December 2015, constituting 87.9 per cent of the budgeted Rs 5.5 lakh crore, official figures showed on Friday.

This meant that the government would need to limit its excess its expenditure over revenue by Rs 60,000 crore in the next three months. However, the target of the deficit is not only in absolute terms, but more importantly as 3.9 per cent of the country’s gross domestic product (GDP). With revision of GDP numbers on Friday and expected lower nominal growth than over 11 per cent assumed in the Budget for 2015-16, would require the government to limit the deficit by another Rs 29,000 crore, economists said.

The deficit had surpassed the Budget estimate by this time a year ago. The fiscal deficit was 87 per cent of the estimate till November.

The government’s capital expenditure rose 33.45 per cent to Rs 1.9 lakh crore till December from Rs 1.4 lakh crore in the corresponding period of 2014-15. Revenue expenditure was up three per cent to Rs 11.3 lakh crore from Rs 10.9 lakh crore a year ago. Of this, Rs 27,000 crore increase went to interest payments and non-interest revenue expenditure was up just Rs 3,000 crore because of lower fuel subsidies. Total receipts at Rs 8.2 lakh crore accounted for 67.6 per cent of the Rs 12.2 lakh crore Budget estimate. This was much higher than in the corresponding period of 2014-15 when receipts were 55.7 per cent of those budgeted.

Tax revenue swelled to Rs 6.2 lakh crore till December, 67.6 per cent of the Rs 9.2 lakh crore estimated. By December 2014 tax revenue accounted for 55.8 per cent of estimates. This is despite a likely shortfall of Rs 25,000-Rs 30,000 crore in direct taxes in 2014-15. Non-debt capital receipts were Rs 22,000 crore, 27 per cent of the budgeted Rs 80,000 crore for 2015-16. The government could not even start strategic sales, which were budgeted to generate Rs 28,500 crore. Disinvestment has so far not yielded half of the budgeted Rs 41,000 crore.

The government’s non-tax revenue was Rs 1.8 lakh crore, 90 per cent of the budgeted Rs 2.2 lakh crore, and higher than the 70 per cent of estimates during the first nine months of 2014-15.

FY16 wheat output to surpass last year's level

The country’s wheat production in 2015-16 is expected to surpass last year’s level of 88.94 million tonnes on favourable cold weather conditions despite low acreage, Agriculture Minister Radha Mohan Singh said on Friday.

Though total area sown to wheat this year is slightly lower than 2014-15 crop year (July-June), the crop yields are expected to get a boost as India Meteorological Department (IMD) has forecast stable weather till March, he said.

Last year, wheat output had declined to 88.94 million tonnes from a record 95.85 million tonnes achieved in the previous year because of drought and unseasonal rains.

Never doubted new GDP numbers: Rajan

A day after stating that “there are problems with the way we count GDP”, Reserve Bank of India Governor Raghuram Rajan on Friday said he had never raised doubts over the GDP numbers and they were broadly correct.

“It was not anything about new GDP numbers or the way GDP is calculated. I think it’s broadly correct,” Rajan said. Observing that there were “no hidden messages” in his lectures, he said: “You do not have to gauge intent. I am direct when I speak.”

A_Gupta · Post by **A_Gupta** » 30 Jan 2016 17:39

The New York Times:
http://www.nytimes.com/2016/01/31/world ... force.html

In India, women’s participation in the labor force stands at around 27 percent, lower than any other country in the G-20, except for Saudi Arabia. Standard models suggest that a lucky confluence of factors — economic expansion, rising education levels and plummeting fertility — would draw women swiftly into India’s economy.

Instead, the opposite is happening: From 2005 to 2012, women’s participation rates slid to 27 percent from 37 percent, largely because rural women were dropping out of the work force. Of 189 countries studied by the International Labour Organization, India ranks 17th from the bottom.

This is terrible news for India, as it strains to become a competitive producer for world markets. Economists have put forward two theories to explain the decline. The first is that India’s boom has created jobs in segments that are generally not accessible to women, like construction. The second has to do with culture: Unless their choices are dictated by destitute poverty, Indian families seek the status that comes from keeping women at home.

rgosain · Post by **rgosain** » 30 Jan 2016 17:46

A_Gupta wrote:The New York Times:
http://www.nytimes.com/2016/01/31/world ... force.html

In India, women’s participation in the labor force stands at around 27 percent, lower than any other country in the G-20, except for Saudi Arabia. Standard models suggest that a lucky confluence of factors — economic expansion, rising education levels and plummeting fertility — would draw women swiftly into India’s economy.

Instead, the opposite is happening: From 2005 to 2012, women’s participation rates slid to 27 percent from 37 percent, largely because rural women were dropping out of the work force. Of 189 countries studied by the International Labour Organization, India ranks 17th from the bottom.

This is terrible news for India, as it strains to become a competitive producer for world markets. Economists have put forward two theories to explain the decline. The first is that India’s boom has created jobs in segments that are generally not accessible to women, like construction. The second has to do with culture: Unless their choices are dictated by destitute poverty, Indian families seek the status that comes from keeping women at home.

So during the rule of the Upa, the pet indian party of the NYtimes, female labour participation declined thanks to the vote bank subsidy projects and other crap . Also a lot of those females who would have joined the labour force would have come from the minority community given the increase in that community's population. Either those women are not encouraged to work, or do not have the skills for the roles. You don't need to read the NYT to know this

Supratik · Post by **Supratik** » 30 Jan 2016 18:17

This may not be impossible. The average Indian family is still not very supportive of females working except in sections of the middle and upper middle classes. From anecdotal examples many educated females I know are not working as their spouses earn a lot or in order to raise families. In rural areas and lower income families in urban areas they may have been forced to work due to poverty. With more and more people coming out of poverty the need for females to work may temporarily reduce. However, this is going to be temporary as with rising aspirations and education many females will go back to working. This is just a hypothesis.

SSundar · Post by **SSundar** » 30 Jan 2016 18:40

Anecdotally, we can assert that the rising middle class is educating its girls and the knowledge economy such as IT and BPO services has a high rate of female employment This did not decline.

The sizable decline must be in the poor labor sectors. I doubt the UPA created many jobs at all in these sectors, magnifying the natural bias against females in the labor market. The fewer jobs would have been more heavily contested for by males.MGNREGA might definitely have played its role.

The US labor dept publishes the raw numbers periodically in an Excel downloadable format. Does India do the same?

Supratik · Post by **Supratik** » 30 Jan 2016 18:52

Possible. We need reports on monthly job creation with break-ups to really find out what is happening.

nirav · Post by **nirav** » 30 Jan 2016 19:08

SaiK wrote:why the indic stock markets have remained dull since modi sarkar took office? time to invest or wait for another low?

panduranghari wrote:Sensex is at Pre Modi Election level.

Not really. Nifty closed @ 7563 for January 2016. Modi election results weekly stats are OHLC - 6863,7563,6863,7203

The lowest low Nifty made since posting a high of 9119 on 02.03.2015 is on 20.01.2016 of 7242.

The relentless crude oil bear market while looking similar on charts to that of 2008 has a different fundamental component ingrained in it of Saudi action of not cutting out put to snuff out US shale gas.
Current weakness in global stock markets have been attributed to Chinese Market fireworks ..

We meanwhile have a BIG event coming up next month. The union Budget. Lows from hereon upto the 200 DMA of Nifty of 6855 are good buy on dip opportunities, for the long term investor. Basically atleast till GE2019 results.

Dipanker · Post by **Dipanker** » 30 Jan 2016 19:33

Govt lowers GDP growth rate to 7.2%

New Delhi: India’s economy grew a tad slower than earlier estimated in the last fiscal year, the government said on Friday, revising down the pace of expansion to 7.2% from 7.3%.

chetak · Post by **chetak** » 31 Jan 2016 23:10

The vicious congi scorched earth policy and how they mined their retreat.

Thank god that the crude prices have favored the Modi govt so far.

Modi should have made a "state of the union" address immediately on taking over or make one even now in parliament detailing the congi perfidy on the Indian people

Gurumurthy / jetli should be speaking on this topic to audiences at places like the India Today conclave

Details from gurumurthy.

The article is a bit old and dated but still the anti national intentions of chidu and the congis is unmistakable. Never will chidu ever be trusted again.

How to Handle UPA's Financial Landmines?

How to Handle UPA's Financial Landmines?

By S Gurumurthy

Published: 06th July 2014

Some chartered accountants who attest corporate accounts bear uncomplimentary reputation for fudging accounts as the last resort to balance the books.* The last resort of such chartered accountants seem to have become the first option of finance ministers. Look at the way the numbers have been fudged and other financial landmines have been concealed in Budget 2013-14 and the Interim Budget for 2014-15. Take the fiscal deficit figures for 2013-14. Former finance minister P Chidambaram has taken credit for containing the deficit at 4.6 per cent of the GDP. It is crude fudging. Chartered accountants are definitely more subtle. Chidambaram has fudged the deficit for 2013-14 on three counts. One, he got the banks to deposit the tax deducted at source payable after 31.3.2014 in advance, to include it as his collection in 2013-14, thus stealing a revenue of Rs 20,000 crore which his successor Arun Jaitley would have collected. Two, short fall of Rs 15,000 crore in the revenues in the Revised Estimate given by Chidambaram for 2013-14 has been kept in wraps. Third, the petroleum subsidy has been short provided by Rs 10,000 crore in 2014-15–Jaitley has to fund this in his Budget. These three items will push the fiscal deficit for 2013-14 from 4.6 per cent to 5 per cent. This is the beginning, not the end, of the story.
Stopping development to cut deficit

The Fiscal Policy Strategy Statement attached to the 2014-15 Budget says the actual fiscal deficit had reached 94 per cent of the budgeted deficit in November 2013 itself, but it was maintained at the same level till March 2014–meaning that, in the last four months to March 2014, the deficit was very little. How did Chidambaram achieve this miracle? By “austerity measures”, non-plan spend was cut by 10 per cent and plan expenditure was “rationalised” –says the Strategy Statement. True? The story of a cut in non-plan spending is a half-truth–it finally vaulted over the budgeted figure by Rs 6,000 cr. It is the plan spending–read development spending–that has been cut by Rs 80,000 crore. Had the development spend been as budgeted, the deficit would have vaulted by further 0.7 per cent to 5.7 per cent. See the irony. Chidambaram proudly raised his voice to announce a 34 per cent [Rs 1.41 lakh crore] rise in development spend in his Budget speech in February 2013 and got encomiums. In February 2014, he announced a cut back of the very same spend by 58 per cent and got credit for reducing the fiscal deficit! There is not even a remote sense of remorse for cutting two-fifths of the development spend.

Fudging 2014-15 accounts

Now come to the Interim Budget for 2014-15. By stealing revenues of Rs 20,000 and short providing petroleum subsidy of Rs 10,000 crore, Chidambaram has already caused a Rs 30,000-crore hole in the final Budget that Jaitley will present. See further. Chidambaram has claimed to have fixed the fiscal deficit for 2014-15 at 4.1 per cent–a parting lie that again won for him the credit for lowering the deficit! Besides, he has concealed many financial landmines which can booby-trap Jaitley’s Budget. And also the nation’s economy, unless detected and addressed in time. Chidambaram has projected the nominal GDP growth at 13.4 per cent but a higher revenue rise at 19.2 per cent for 2014-15. How could revenues rise more than growth? Economists call the extra revenue over growth the buoyancy ratio. The buoyancy ratio assumed by Chidambaram for 2014-15 is 43 per cent over the GDP growth. For 2013-14, he had projected a nominal GDP growth rate of 13.4 per cent and got a lower revenue rise of 13 per cent rise– that is negative buoyancy ratio. That the projected buoyancy of 43 per cent for 2013-14 is just a mirage is corroborated by the budgeted rise of customs revenue by 15 per cent in 2014-15 against just 6 per cent in 2013-14–one and half times the rise in 2013-14. Similarly, Chidambaram projects excise to rise by 11.7 per cent in 2014-15 against 1.6 per cent in 2013-14–by more than seven times the previous year’s rise. If the revenues rise in 2014-15 is like 2013-14 only, the deficit will be higher by Rs 48,000 cr. More. Chidambaram had projected disinvestment receipts of Rs 54,000 crore in 2013-14, but ended up with `19,000 crore. Still he has projected a disinvestment income of Rs 52,000 cr for 2014-15. Here too if the 2013-14 numbers are repeated, the deficit will go up by Rs 33,000 crore. Again, Chidambaram has estimated non-plan spending to rise by some 8 per cent in 2014-15 but it had risen by some 17 per cent in 2013-14. Increase in interest outgo and normal rise in salaries alone would exhaust the rise in non-plan expenditure projected. If the non-plan spend rises in 2014-15, like in the previous year, the deficit would be up by Rs 1 lakh crore. Also, Chidambaram’s Budget does not recognise the Pay Commission arrears of Rs 40,000 crore for which a bill is waiting to be presented to Parliament. This will add Rs 40,000 crore to non-plan expenditure each year in 2017-18 and 2018-19. These add up to Rs 1,81 lakh crore to the deficit over Chidambaram’s number. Jaitley has to handle this in 2015-15 and later. This is besides the transfer of the deficit of `30,000 crore from Chidambaram’s 2013-14 account to Jaitley’s 2014-15 account.

More boobytraps

Information hidden in different places in the government discloses further financial landmine. As the plan spend till now is very poor, the plan spend for 2015-16 and 2016-17 is projected to rise by 20 per cent. But even with such increased allocation, Gross Budgetary Support for the 12th Plan will be only Rs 29.10 lakh crore. It will be short by Rs 6.58 lakh crore against Rs 35.68 lakh crore reckoned in the 12th Plan. It is clearly bound to affect growth. On the revenue side, even assuming that the General Sales Tax and Direct Tax Code become operative in 2015-2016 and up the GDP by 1 per cent and consequent rise in revenue, still the final resource gap will remain negative until 2016-17. To manage this gap, Tax-GDP ratio has been revised to 11.25 per cent from the projected 10.72 per cent in 2015-16, to 12 per cent from 11.20 per cent in 2016-17, to 13 per cent from 11.79 per cent in 2017-18 and to 14 per cent from 12.52 per cent in 2018-19. The revisions are just statistical hope. Yet, these hidden landmines can blast the economy out of control. And more. By transferring centrally-sponsored schemes to states in 2014-15 – resulting in a further transfer of Rs 1.19 lakh crore to states–Chidambaram has made Jaitley’s job more difficult as that much amount could have been churned by the central government for its new schemes. Here is some more hidden information. The public debt situation is grave. The dreaded debt-trap–where the government will be borrowing to pay only interest–is in sight by 2015-16. Proceeding from where Chidambaram has left the economy, the net government borrowing after repayment of debts will be Rs 4.20 lakh crore in 2016-17, but the interest burden of Rs 5.12 lakh crore for that year will exceed the borrowing by Rs 92,000 crore. This figure is likely to rise further and not go down till 2019-20. If he looks at these numbers, Jaitley will lose sleep. Unless, like diesel price rise, some harsh steps are taken this year and next, the nation may risk downgrade of its credit rating.

What should be done?

The UPA regime had only spent and never attempted to raise revenue for a decade. The result is the present financial mess. If this government has to start undoing the damage, it has to go for innovative, bold and fresh resource mobilisation. First, the annual tax giveaways of Rs 5.50 lakh crore have to be withdrawn, as suggested in the Economic Survey 2013-13. If it is withdrawn by one-fifth this year, it will yield a revenue of Rs 1.10 crore to government. Next there is need to tax the non-delivered forex, financial and equity derivatives. A tax of 10 paise per Rs 100 [at 0.1 per cent] will yield revenues of over `60,000 crore. Economist John Maynard Keynes had suggested this tax to contain speculation. In a paper [July 26, 2000], the Center for Economic and Policy Research noted that in most of the West such tax is levied on equity derivatives and the rate varies between 0.5 per cent and 1.6 per cent. Only in the US, the tax rate is low at 0.004 per cent. Most derivative transactions are speculative. The suggested tax is desirable even to contain volatility in markets. Also, new sources of revenue will emerge. These two measures will yield an additional revenue of Rs 1.70 lakh crore which can handle the financial landmines hidden in the files of government. Unless such bold steps are taken to raise revenues the status quo will continue. And it does not need a seer to say what the financial land mines left by UPA will do to the country.

(*I stopped attesting company accounts as far back as 1979 when corporate accounts were more reliable.)

Suraj · Post by **Suraj** » 01 Feb 2016 21:28

Core sector output recovers, rises 0.9% in December

The combined output of eight crucial infrastructure sectors rose by a slight 0.9 per cent in December after contracting the month before.

The industries, carrying a total weight of nearly 38 per cent in the Index of Industrial Production (IIP), continue to be hit by falling international crude oil prices coupled with weakening global consumer and industrial demand.

Data released by the ministry of Commerce and Industry on Thursday showed the eight core industries — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity — grew by a cumulative 1.9 per cent in the months leading up to December in the current financial year 2015-16.

Core sector growth had contracted for the first time in seven months in November after maintaining steady growth at 3.2 per cent in the two months before. The December figures were brought on by continued and accelerating decline in crude oil, natural gas. However, coal production and electricity generation linked to it, both recovered significantly to manage a slight uptick in overall figures.

Rice procurement up 25% to 24.47 MT

Government's rice procurement has increased 25% to 24.47 million tonnes in the 2015-16 marketing year so far despite prospects of lower production due to poor monsoon.

The Food Corporation of India (FCI) and state government owned agencies undertake the procurement operations. The Centre has kept rice procurement target of 30 MT for the current marketing year, which started in October.

These agencies had procured 19.66 million tonnes in the year-ago period, while the total purchases had reached 32 MT.

At present, procurement has been completed in Punjab and Haryana, while the operations are in full swing in Uttar Pradesh, Chattisgarh, Andhra Pradesh and Telangana.

Manufacturing PMI rises to four month high in January

After contracting in the previous month, manufacturing registered a four-month high growth in January following inflows of new business from both domestic and export sources, showed a widely tracked Nikkei purchasing managers'index (PMI) survey. However, investment goods output and new orders fell which may have impact on future growth of manufacturing.

However, inflationary pressures remained on upside because of which a commentator associated with PMI does not expect the Reserve Bank of India to cut the policy rate on Tuesday.

Firms hired additional hands to keep up with the production demand.

PMI rose to 51.1 points in January from 49.1 in December. A reading below 50 denotes contraction and one above that is expansion.

"Alongside a resumption of output at some firms impacted by December’s flooding, manufacturers also benefited from rising inflows of new business from domestic and export clients," said Markit Economics, a compiler of PMI data.

Although the rate of expansion was only moderate, it was the sharpest signalled for four months, it added.

Both levels of production and total new business registered mild increases following contractions in December.

The consumer goods sub-sector remained the principal growth engine at the start of the year, seeing substantial expansions of both output and new orders. In contract, producers of investment goods saw output and new orders fall, while production volumes stagnated in the intermediate goods category.

The trend in new export order inflows strengthened during January, amid reports from companies of improved sales demand. "The level of income new export business has now risen in each of the past 28 months," Markit said.

RBI, FinMin on same page on fiscal prudence

Days after Reserve Bank of India Governor Raghuram Rajan made public his opinion that the government should stick to fiscal prudence, senior government officials said he had also written to the finance ministry about it.

The note from the governor was a reflection of the close coordination between North Block and Mint Road in a difficult financial year, a senior official said.

This made it easier for the mandarins to decide to stick to the target for reduction in the fiscal deficit while firming up the Budget numbers.

According to an official, strong support from RBI to the finance ministry would make it easier to maintain fiscal discipline in a year of massive challenges for the world economy. One official said it was only after the finance ministry and RBI closed ranks that the governor decide to make public his position.

FM likely to announce 4 major ports in Budget

Finance Minister Arun Jaitley is likely to propose four new major ports to be constructed, in the Budget for 2016-17. These ports would be at Dahanu (Andhra Pradesh), Colachel (Tamil Nadu), Sagar (West Bengal) and Dugarajapatnam (Andhra Pradesh) at an estimated cost of Rs 32,000 crore, sources said.

Spanning 13 maritime states and Union territories, India's 7,516.6-km coastline is serviced by 12 major ports, and 200 notified minor and intermediate ports. The 12 major ports are Chennai, Cochin, Jawahar Lal Nehru, Kamarajar, Kandla, Kolkata and Haldia, Mormugao, Mumbai, New Mangalore, Paradip, V O Chidambaranar, and Vishakhapatnam. In 2014-15, these ports handled 581.33 million tonnes (mt) of traffic.

A study by Mckinsey and Aecom for the shipping ministry underlined the need of building coastal capacities to meet future cargo volume. The study notes Indian ports handled 857 mt of bulk cargo in 2013-14. It estimates that in 2025, bulk traffic will increase to 1,850 mt a year. Exim bulk will rise four per cent to reach 1,000 mt a year. The growth in export-import cargo will remain muted due to increase in production of coal and continued weak global demand for iron ore. The coastal bulk traffic, however, will grow at the rate of 22 per cent to reach 750 mt by 2025. This would require building dedicated coastal capacities at specific ports.

PM wants 50% farmers to join insurance scheme in two years

Highlighting benefits of the just-announced crop insurance scheme, Prime Minister Narendra Modi on Sunday said awareness about it should be spread across the country so that at least 50 per cent of the farmers join it within two years.

In his monthly radio programme ‘Mann Ki Baat’, he also pitched for continued efforts to popularise Khadi and awarness to save girl child, mentioned about the recently launched ‘Startup India’ programme and talked about the upcoming International Fleet Review to be held in Visakhapatnam.

Modi said he needs “maximum help” from people about spreading awareness regarding the Pradhan Mantri Crop Insurance Scheme which was launched earlier this month.

“In our country, a lot is said in the name of farmers. I don't want to get involved in that debate. But farmers face a major crisis. In natural calamity, their entire effort goes waste. His one year goes waste. To give him security, only one thing comes to mind and that is crop insurance,” he said in this year's first edition of the monthly radio programme.

“In 2016, the central government has given a big gift to the farmers — the Pradhan Mantri Crop Insurance Scheme. This scheme has been brought not for the purpose that it should be praised or the Prime Minister should be hailed,” he said.

The prime minister said that for so many years, there has been a talk regarding crop insurance but "not more than 20-25 per cent" of the country's farmers had been been able to benefit from such schemes.

India needs $1 trillion for new roads, ports, airports: Nitin Gadkari

Terming infrastructure building as a “major challenge”, Union Minister Nitin Gadkari has said the country requires $1 trillion for the development of new roads, ports and airports over the next few years. Upgrading infrastructure is a major challenge for policy makers of the Asia's third largest economy and India needs about $1 trillion (about Rs 67,00,000 crore) for new roads, ports and airports over the next few years, Gadkari said.

He said the NDA government is set to transform India's infrastructure and added there is no dearth of funds for this priority area.

"Money is not a problem, mentality is. Unfortunately we have a demoralised bureaucracy," Gadkari said.

Confident of removing bureaucratic hurdles in the way of road projects, the minister said companies in the sector are victims of the government's indecisiveness and the need for multiple approvals.

He said the government had several rounds of discussions with bankers and contractors to clarify issues relating to land acquisition and project approval.

"In the next five years we are going to change the infrastructure of this country. I know my work, I am doing it," he added.

Building of infrastructure will add 2 per cent to the India's GDP growth, said the minister.

Gadkari said his ministry is working on a target of 30 km of new roads per day by March 31 besides working towards achieving an ambitious target of 100 km a day.

SaiK · Post by **SaiK** » 01 Feb 2016 23:32

land acquisition and real-estate sector needs a big re-look. big bucks area!

Suraj · Post by **Suraj** » 04 Feb 2016 14:15

Services PMI follows manufacturing PMI:
January services PMI at 19-month high

Growth in India’s services activity rose at its fastest pace in 19 months in January as demand picked up, a business survey showed today.

The Nikkei/Markit Services Purchasing Managers' Index (PMI) surged to 54.3 in January from December's 53.6, marking a seventh month above the 50-level that separates growth from contraction.

Growth was noted in four of the six monitored categories, the exceptions being Hotels & Restaurants and Transport & Storage.

“The Indian economy shifted into a higher gear in January, supported by a quick rebound in manufacturing production following last month's floods. Concurrently, the service sector gained traction and posted its strongest monthly gain in activity for over one-and-a-half years,” said Pollyanna De Lima, economist at Markit.

Austin · Post by **Austin** » 04 Feb 2016 14:55

India's debt position remains comfortable, says Arun Jaitley

Finance Minister Arun Jaitley on Wednesday sought to play down worries on the government's public debt, saying it's in a comfortable position and the overall liabilities of the Centre are on a medium-term declining trajectory.

"Conventional indicators of debt sustainability, i.e. level and cost of debt, indicate that debt profile of the government is comfortably placed in terms of sustainability parameters of public debt and is consistently improving," he said in a foreword to the status paper on government debt.

He further said the overall liabilities of the central government are on a medium-term declining trajectory with a low rollover risk.

"The government is primarily resorting to market-linked borrowings for financing its fiscal deficit," Jaitley added.

Most of the debt is of domestic origin insulating the debt portfolio from currency risk, he said, adding that limited external debt provides safety from volatility in international financial markets.

The central government's debt at 47.1% of GDP at end of March 2015 has stabilised after witnessing a consistent decline from 61.4% in 2001-02.

In value terms, the debt stood at Rs 59.07 lakh crore at March-end 2015, up from Rs 53.40 lakh crore at the end of 2013-14, according to the report.

The debt-GDP ratio worked out to 66.7% at March-end 2015, significantly lower than historic high of 83.3% in 2003-04 owing to fiscal consolidation at central and state levels.

As much as 93.8% of total central government debt at March-end 2015 is denominated in India's currency.

As percentage of GDP, external debt constituted a low 2.9%, implying low currency risk to government debt portfolio, and the impact on balance of payments remains insignificant.

Most of the public debt in India is at fixed interest rates, with only around 1% floating rate debt at March-end 2015, insulating debt portfolio from interest rate volatility and providing stability to the Budget in terms of interest payment.

"The government is continuing its efforts to elongate the maturity profile of its debt portfolio for lower rollover risk," it said.

hanumadu · Post by **hanumadu** » 05 Feb 2016 21:41

DGFT ‏@dgftindia 2h2 hours ago
Government imposes Minimum Import Price condition on 173 tariff lines relating to Iron and Steel
http://dgft.gov.in/Exim/2000/NOT/NOT15/ ... .38(E).pdf

Looks like moves to stop cheap import. The notification is valid for 6 months only. Is it because of WTO rules? Can Indian extend it indefinitely? Don't know why GOI took so long to do this.

Suraj · Post by **Suraj** » 05 Feb 2016 22:09

Great move by GoI to slap this tariff. The Chinese are busy trying to dump their excess capacity on the world. Not just iron and steel but even fabrics and medicines.

Yagnasri · Post by **Yagnasri** » 06 Feb 2016 12:45

http://www.moneycontrol.com/news/cnbc-t ... 36821.html

http://www.indiainfoline.com/article/ne ... 308_1.html

http://www.business-standard.com/articl ... 040_1.html

http://www.dnaindia.com/money/report-go ... ts-2174517

There is logic for 6 months period. At least two years or three years will confidence to the industry and the bankers.

member_28397 · Post by **member_28397** » 07 Feb 2016 10:20

India was the largest remittance receiving country, with an estimated $72 billion in 2015, followed by China ($64 billion), and the Philippines ($30 billion).

http://www.worldbank.org/en/news/press- ... port-finds

Supratik · Post by **Supratik** » 07 Feb 2016 17:06

deleted

svenkat · Post by **svenkat** » 07 Feb 2016 18:01

X posted
http://swarajyamag.com/biz/farms-to-factories-how-coimbatores-economy-was-transformed-by-entrepreneurship/

Entrepreneurship in and around Coimbatore is a fascinating story of the region’s transformation where rural farmers built a diversified and relatively prosperous economy.

Chinnu Senthilkumar is a Partner & CTO in Exfinity VC fund. Chinnu held senior Management roles in Intel, SanDisk in US and India and holds 9 US patents.

This author hails from a rural agricultural background and would like to highlight the successful example of Coimbatore and its surrounding Districts aka the ‘Kongu’ region of Tamil Nadu in this regard.

Coimbatore and its surrounding districts, located in the western parts of Tamil Nadu, are known for their entrepreneurship and have distinguished themselves in multiple SME sectors ranging from Engineering machinery, Electric Pumps, Textiles, Trucking, Poultry, Sabudana production etc. This directly contributes almost 40% to the state’s GDP and is estimated to be around USD 140 Billion. Unlike Tier–II economic clusters like NCR region, Pune etc. which leverage their physical proximity to the country’s biggest economic and political hubs like Delhi and Mumbai respectively, Tamil Nadu’s western districts practically grew its economy on its own!

In FY 2015, Tirupur’s textile cluster, located in a drought-prone area managed to export about USD 5 Billion worth of knitwear products! Two-thirds of India’s requirement of Electric motors and pumps are manufactured in Coimbatore. Namakkal and neighbouring districts have managed a share of 20% in India’s total egg production and have even started exporting to Middle-Eastern countries.

Sabudana, used in a variety of dishes such as desserts like kheer, khichdi, vada or used as a food on days of fasting (vrat-upwas), traces its history to Salem’s cottage industry as early as the 1930s and ’40s and today 70% of India’s Sago processing happens in Mills around the Salem District.

The greater point is that over the last 60-70 years, rural farmers of western Tamil Nadu took up entrepreneurship and skillfully graduated from producing raw agricultural goods to producing finished processed goods and in the process moved up the economic value chain. Over time, determined entrepreneurs predominantly from the farming community successfully forayed into other non-agri sectors, forming a well diversified Tier-II/III economic cluster in the region which can withstand global economic fluctuations and unpredictable monsoons.

As a result, though Tamil Nadu’s western districts are located in a drought-prone region, farmer suicides reported from this region are relatively less compared to regions like Vidarbha, Bundelkhand etc.

In 1960-70s Tamilians were migrating to big metros like Mumbai, Delhi in search of job opportunities ranging from clerical to manual labourers. But today in a reversal trend Tamil Nadu has a fairly large inbound migrant population, estimated to be over 10 lakhs, mainly employed in the state’s western region. These migrant workers hailing from Assam, Bihar, Orissa, Bengal, Uttar Pradesh and even Nepal, work in small engineering ancillary units, Lorry bodybuilding units, hosieries, roadside eateries as well as fancy city restaurants, as security guards and even farmhands. Tamil Nadu’s western districts are the most sought after places for employment opportunities.

Entrepreneurship around Coimbatore districts is a fascinating story as to how entrepreneurship can transform a region, and how such spirit of entrepreneurship is generated. Of course, perils are associated with economic growth like anywhere else and require a judicious balancing between economic growth and environmental sustainability.

The tradition of business and entrepreneurship in the Coimbatore belt evolved over a period of last two hundred years, reached its pinnacle in the ’50s and ’60s, thanks to the late Chief Minister K Kamaraj. Kamaraj and his able Cabinet Ministers R Venkatraman and C Subramanian laid the foundation for Tamil Nadu’s Tier–II/III economic clusters, even before these terms were coined. Thanks to their vision, Tamil Nadu enjoys a healthy economic activity in Tier-II/III cities like Coimbatore and Trichy absorbing rural youths into the economic mainstream and offering non-agri opportunities.

While IT industry boom and economic liberalization initiated in the ’90s benefitted big metros, the Tier-II/III cities were left out of the economic growth story widening the urban-rural inequality. We may not want mass migration of rural farmers into big metros in search of jobs and creating further slums, perhaps Tier-II/III cities centered economic growth offer better alternatives for the rural population.

Once the spirit of entrepreneurship enters the living traditions of the people, then it is only a matter of expansion and diversification into related and even different areas of economic activities.

Our policy planners may want to study Coimbatore region’s success story where rural farmers built a diversified and relatively prosperous economy over a period of last 50 years and may consider implementing the success elsewhere to alleviate India’s rural issues!

chanakyaa · Post by **chanakyaa** » 08 Feb 2016 03:44

Clarity likely soon in bullion market

Proposed gold spot exchange, a joint venture between sectoral body and BSE, is expected to transform its trading in India
...
The government is considering a proposal to set up a gold exchange, said sources, and the approval is expected in a month. It has been proposed by the India Bullion and Jewellers Association (IBJA) and the BSE stock exchange, in a 70:30 equity partnership.
.....

Suraj · Post by **Suraj** » 08 Feb 2016 20:47

Advance estimates for GDP for the current fiscal are due out before the budget:
Ahead of Union Budget, Government to come out with GDP numbers

A declining GDP growth rate in nominal terms has already made difficult the government's task of reining in the fiscal deficit at 3.9% of GDP for 2015-16. If the inflation trajectory remains more or less same, the task to check the deficit at 3.5% of GDP for the next financial year will also remain a challenge.

It should be noted that the government has already deferred the fiscal consolidation roadmap by a year. According to a roadmap, laid down by the then finance minister P Chidambaram, the deficit was to be curtailed at 3.6% of GDP in the current financial year and 3% by 2016-17.

Nominal GDP, assumed to grow 11.5% for the current financial year in the Budget, has grown only 7.4% in the first half of the current financial year. The mid-year economic analysis of 2015-16 projected the nominal GDP to grow by 8.2% in the entire 2015-16.

The Budget assumed 11.5% growth for 2015-16 over nominal GDP of Rs 126,537,62 crore (advance estimates) for the previous year. That meant nominal GDP of Rs 141,08,945 crore. Fiscal deficit at 3.9% of this GDP turns out to be Rs 5,55,649 crore, according to the Budget Estimates for 2015-16.

However, actual nominal GDP for 2014-15 turned out to be lower at Rs 124,88,205 crore. So, lower growth of 8.2% (projected by the mid-year analysis) would make the growth to be 135,12,238 crore. Fiscal deficit at 3.9% of this GDP means Rs 5,26,977 crore. Thus, the government will have to restrict the deficit by Rs 28,672 crore (Rs 55,649 crore-Rs 4,87,040 crore) more to retain it at 3.9% of GDP.

If one assumes slightly higher growth rate at 8.5% of nominal GDP for 2016-17 than 8.2% projected for the current financial year, then nominal GDP would be Rs 146,60,778 crore for 2017-18. Retaining fiscal deficit at 3.5% of GDP would mean Rs 5,13,127 crore in absolute terms. This means that the government has to tighten its fiscal belt by just over Rs 13,000 crore more.

Even then, there are many who say this is a greater challenge as the seventh pay commission report and one rank one pension (OROP) are to be implemented and the need to have greater public expenditure to perk up the economy.

For instance, a report by Deutsche Bank said the government is likely to meet its fiscal deficit target of 3.9% for the current financial year and is expected to set it at 3.8% of the GDP for the next fiscal.

It said the target of reining in fiscal deficit at 3% of GDP would be deferred by a year more from 2017-18 to 2018-19.

Together with advance estimates, the government would also come out with third quarter GDP data for the current financial year.

India Ratings has projected the economic growth at 7.6% in the October-December quarter of the current financial year — the fastest pace of expansion in five quarters.

“Growth may have ticked higher in third quarter by 7.6%. The growth is likely to get support from a favourable base effect, as gross domestic product (GDP) in third quarter of last financial year grew by 6.6%,” Devendra Pant, Chief Economist, India Ratings said.

In the current financial year, Indian economy grew by 7% in first quarter and 7.4% in second quarter. These figures may also be revised in the data to be released today.

Ahead of Budget, railway finances way short of Prabhu's promise

When Rail Minister Suresh Prabhu presented his maiden Budget last February, he promised a freight growth target never achieved before in the national transporter's 160 year-old history. Railways was to carry an incremental 85 million tonnes (mt) of goods in 2015-16, against the traditional average loading of less than 50 mt annually. That was the biggest announcement of the Budget.

"Freight traffic is pegged at an all time-high incremental traffic of 85 mt, anticipating a healthier growth in the core sector of the economy, specially where rail co-efficient is high and by tapping full railway potential to cater maximum to demand side," Prabhu had said. Railway board members had explained the tall target was based on an expectation of 8-9 per cent GDP growth and increased coal traffic, amid a mood of hope and celebration of change.

A year later, the mood has turned somber and the grim reality of dismal freight growth, which accounted for 65 per cent of railways' total earnings of Rs 1.63 lakh crore in FY15, is staring at Indian Railways in the face. Railways' freight volumes were budgeted to rise eight per cent to 1,186 mt in 2015-16 from 1,101 mt in 2014-15. Between April and December 2015, freight volumes stood at 816 mt, seven per cent less than the targeted 880 mt during the period and a marginal one per cent higher than 808 mt recorded in the corresponding period in the last financial year.

The Railways had budgeted for a six per cent increase in goods earnings to Rs 1,11,852 crore in 2015-16 from Rs 1,05,791 crore in FY15. Between April and December 2015, freight earnings stood at Rs 80,526 crore, three per cent less than the targeted Rs 82,676 crore during this period and six per cent more than Rs 75,779 crore recorded in the corresponding period in the last financial year. This increase in the year-on-year earnings despite low growth in volumes is explained by the average four per cent hike in freight rates announced in the last Budget.

Ahead of the Budget to be presented on February 25, Prabhu has acknowledged subdued freight volumes, apart from the impact of the seventh pay commission, as major problem areas for Railway finances. Of the incremental 85-mt tonnage target, 42 mt was to come only from coal, the largest component of Railways' commodity traffic basket. Also, nine mt extra was to come from iron ore and seven mt from cement traffic.

Supratik · Post by **Supratik** » 08 Feb 2016 21:24

nominal GDP growth rate at 11.5%? Numbers don't seem right in that article.

svenkat · Post by **svenkat** » 08 Feb 2016 21:31

http://www.thehindu.com/news/national/tamil-nadu/jayalalithaa-asks-modi-to-rescind-notification-on-gail-project/article8209194.ece?ref=sliderNews

Asking the Centre to rescind notification on GAIL gas pipeline passing through Tamil Nadu, Chief Minister Jayalalithaa has written to Prime Minister Narendra Modi seeking changes in the Central law to provide for social impact assessment for the project.

In a letter to Mr. Modi, Ms. Jayalalithaa said the proposed alignment would cause “irreparable damage” to Erode, Tirupur, Coimbatore, Namakkal, Dharmapuri, Krishnagiri and Salem districts through which the Kochi- Kuttanad -Mangaluru-Bengaluru gas pipeline would traverse.

Contrast the news item with the Swarajya article on Coimbatore region and one understands the difficult issues of the political economy.

A_Gupta · Post by **A_Gupta** » 08 Feb 2016 21:55

Opinion: R Jagannathan
http://swarajyamag.com/economy/modi-and ... dget-flop/

If the reports now leaking out of North Block are anywhere near true, we are going to get even more initiatives (this time on irrigation, transport and agriculture) from the centre in the 29 February budget. Both the Modi government and the finance ministry are setting themselves up for failure through an initiative overload.

One can only hope that the news report is off the mark.

Suraj · Post by **Suraj** » 08 Feb 2016 23:08

India's Q3 GDP growth at 7.3%, full year growth estimated at 7.6%

Indian economy is estimated to expand by 7.6% in the fiscal year 2015-16, highest in at least four years compared to 7.2% in the previous fiscal, data released by central statistics office showed on Monday.

In the third quarter of the fiscal, the gross domestic product expanded by 7.3%, led by double digit expansion in the manufacturing and service sector segments.

The first quarter growth saw a substantial upward revision from 7% to 7.6%, while the growth for the second quarter from July-September was revised from 7.4% to 7.7%.

The GDP growth in nominal terms saw a slight uptick to 9.2% in the Q3 led by upward inflationary movement, as against 6.4% in the previous quarter.

Manufacturing sector posted a 12.6% growth in the third quarter, the highest in the current fiscal. It is estimated to expand by 9.5% in the current fiscal, a substantial improvement from 5.5% in 2014-15.

Agriculture sector, which has been affected by two consecutive drought years, posted a 0.1% deflation in the quarter ended December.

The gross fixed capital formation, a proxy for investment saw share in GDP contract to 27.8%, as against 30.9% and 30.5% in the previous two quarters respectively.

Suraj · Post by **Suraj** » 09 Feb 2016 05:29

Govt to take buyback route to tap Rs 78k cr of public sector firms' cash

The government has asked state-run companies to buy back shares, people with knowledge of the matter said, as Prime Minister Narendra Modi looks to narrow Asia's widest Budget deficit without cutting stimulus spending.

The boards of Coal India, MOIL, National Mineral Development Corporation (NMDC), National Aluminium Co (Nalco), India Renewable Energy Development Agency (Ireda) are among those that will have to decide on valuations, the people said, asking not to be identified, as the talks are private. These companies had about Rs 78,450 crore in cash and marketable securities last year - according to data compiled by Bloomberg - more than double Modi's social welfare budget.

A revenue boost is crucial as back-to-back years of weak rainfall compel Modi to spur demand in rural areas even as pressure mounts to avoid runaway spending. The rupee, sovereign bonds and stocks had their worst January since 2011, weighed down by the global slowdown and as concerns about fiscal slippage mount. While weak global demand denies companies adequate returns on their investment, falling share prices offer them a good chance to consolidate ownership, the people said. About 50 listed state-run companies had a total Rs 2 lakh crore in cash and marketable securities in 2015.

Suraj · Post by **Suraj** » 09 Feb 2016 06:48

The upward revision of both Q1 (Apr-Jun) and Q2 (Jul-Sep) numbers in this new report made me look up the original report for Q2.
Current Q3 report with Q1 and Q2 upward revision data, released Feb 8 2016
Q2 data, released Nov 30 2015
The most interesting and heartening piece of information for me is that gross fixed capital formation (investment/GDP) is up from 27.8% and 28.3% for Q1 and Q2 in the original report, to 30.9% and 30.5% in the updated report. This suggests a lag effect in obtaining all data. For Q3, the initial GFCF is 27.8% . This will likely be revised up to ~30% when Q4 numbers are out.

Getting investment/GDP back above 30% is a strong accomplishment because it shows that the growth momentum is building again. The above data also shows that GFCF data for 2014-15 has been revised upwards. For Q1-Q3 of 2014-15, GFCF was 31% . The growth stagnation between 2011-2014 was characterized by a steep drop in GFCF from the mid 30% range to 27%, due to a focus on subsidies over capital spending, as seen in the graph in the following post at the top of this page. If GoI can get GFCF back to >35% by next year, they'll have significant growth momentum to work with.

SwamyG · Post by **SwamyG** » 09 Feb 2016 07:22

It looks like Piyush Goyal is all set to electrify all villages by 2017. If anyone is wondering "uh, oh... from whose father's pocket will power come?". Rest assured, if things go as per Piyush's plan and implementation, India will in a few years be no longer power deficit. Already noises are being made about the new problem - India becoming power surplus. He is LEDifying India at an increased rate.

All this electrifying powerFUL changes will snowball into a giant advantage for the Indian economy. With his impetus to renewable energy, and Modi and team's plan to introduce renewable energy sources in Indian Railways and possibly airports; the power distribution will undergo a quantum change.

* More power generation.
* Conservation of environment by utilizing more Renewable Energy sources.
* Better distribution of power - smarter grids
* Electrification of India

These are just some of the changes. The companies that will benefit range from LED manufacturers to solar/wind power generators.

Fasten your seat belts, flight taking off.

hanumadu · Post by **hanumadu** » 09 Feb 2016 10:02

A_Gupta wrote:Opinion: R Jagannathan
http://swarajyamag.com/economy/modi-and ... dget-flop/
If the reports now leaking out of North Block are anywhere near true, we are going to get even more initiatives (this time on irrigation, transport and agriculture) from the centre in the 29 February budget. Both the Modi government and the finance ministry are setting themselves up for failure through an initiative overload.

One can only hope that the news report is off the mark.

Seriously, Initiative overload? I though lack of funds would be an issue. But here Modi wants to spend more and people have a problem with that.
So, the govt is talking of expanded NREGA, many new schemes and still stick to fiscal deficit road map. Modi must have discovered a money spring some where.

vina · Post by **vina** » 09 Feb 2016 10:55

handmade wrote:Seriously, Initiative overload? I though lack of funds would be an issue. But here Modi wants to spend more and people have a problem with that.
So, the govt is talking of expanded NREGA, many new schemes and still stick to fiscal deficit road map. Modi must have discovered a money spring some where

There was a one time "magic spring" last year when the govt. got lucky and the commodity prices (especially gold and oil sank). So you got a boost of roughly $70 per barrel of oil last year. A part of that bonanza was diverted into filling the hole in the deficit and the remaining was purportedly "spent" .

Trouble with this "pump priming by the Govt." Keynesian stuff is that it is not showing up anywhere on the ground in terms of revenues and creation of demand. With the second monsoon failure in a row there is huge amount of rural stress and that is showing up in rural demand. The urban consumption demand is stable at best and investment has really not recovered to any sizeable amount. So the spending business has in effect been a bust.

What the govt did in terms of this "spending/Keynseian" pump priming by postponing the fiscal deficit was to keep the pressure up in terms of deficit. If you combine the Central + State deficits, India has by far the highest deficits in Asia. This has kept the real yields high (the 10 year is stubbornly above 7.75% yield for the past 1 year at least), DESPITE the RBI cutting interest rates by close to 100 bps. Now with nominal rates so high (and also real rates at 1% to 1.5% to kill inflation) , the Govt's extending borrowing and spending (despite the oil bonanza) binge has kept cost of capital high for everyone, and this has further hurt any recovery of consumer demand and the investment cycle. It is for this reason , India has a pretty steep Yield curve beyond the 5 year maturity. Not good for investments at all! While the unclogging of stuck investments was necessary, what the Govt did in terms of keeping spending up probably didn't work at all and indeed aggravated the problem.

Jagannathan is right. The spending should have gone into fixing the financial system and bad loans and recapitalisation of the banks. That would have allowed pass thrus of the rate cuts and enabled fresh lending. The bad loans could have been put into a "Bad Bank" and could have been worked thru the collections & re org process.

Now with the rural monsoon failure and the distress, the govt has no choice but to go on a dole/initiative binge for rural India. This is probably , too late (more so if the monsoon is good this time) and the enhanced outlays for pay commissions and stuff along with the fiscal consolidation road map is going to keep the pressure on revenue receipts really high. Trouble is this time, you DONT have the $70 bonanza in oil, in best case, you can get a $10, if oil sinks to $20 per barrel and on the contrary if the USD weakens (if Fed holds off), you can see oil get closer to $50.

For the coming budget to be anywhere close to being credible, the govt needs to pencil in oil at an average price of $50 and a 5% to 8% depreciation of the Rupee, and the attendant inflation , along with the need to cut spending to keep the macro numbers credible. Failing which , we are going to see a budget which will simply not be credible.

Vajpayee did NOT get a second term because of rural distress, particularly in Andhra which wiped out Chandrababu and did the NDA in. Congress got lucky with good monsoons. Modi I think got lucky because the rural distress hit in the early part of his term. I hope the rain Gods are kind to him over the next 2.5 years. But in any case , I have a very uneasy feeling about this forthcoming budget. The Govt has boxed itself into a corner, has next to no levers to pull (A very smart person asked me yesterday, what CAN Jaitely do given the setup,and I had a hard time thinking of the options Jaitley has and came up with a lame, ok, decontrol urea, which simply wont fly) and zero margin for error. If they make a make believe Pranab Mukerjee' esque budget and there is a macro shock (just think if Saudis and Iranians start shooting at each other ), it will be curtains.

disha · Post by **disha** » 09 Feb 2016 11:11

If the SA and Iran start shooting at each other., they will still need to sell oil - actually more of it. And if oil prices go up, others will be happy to sell - more of it.

So yes all government can do is prepare for the 'oil shock'., but the equation has changed. Oil shock may even be a shock of the past. Excessive production capacity and innovations in battery means newer tech like electric cars and scooters can be put on the market sooner.

One initiative Modi Sarkaar can take and it will make it popular is take out the auto rickshaws and replace them with Electric ones. With free charging of batteries & replaceable batteries at select auto locations. And see the drop in petrol/kerosene consumption.

So the dhoti-shiver is unwarranted.