Bharat Rakshak

panduranghari wrote:You all guys who are ranting and raving at Raghuram Rajan, should first read

http://www.rbi.org.in/scripts/BS_Speech ... spx?Id=930

And then comment on what he said. Show me anything which suggests he is anti- Modi government. Its like sheesh. You guys should stop relying on MSM. In the GDF you guys rant about how bad MSM is and here you use the MSM to make your points.

I am glad RR is the RBI governor. He knows what he is talking about. What I do not understand is why Urjit Patel- a Kenyan national is a deputy governor of RBI?

For all that, he seems anxious. “Central bankers have had enormous responsibilities thrust on them to compensate, essentially, for the failings of the political system. And my worry is we don’t have sufficient tools to do that, but we’re not willing to say it. And, as a result, we push as hard as we can on the existing tools, and they may create more risk in the system.” An early critic of quantitative easing, Rajan picked a very public fight this January, accusing the US Fed of reining in QE without considering the effect on emerging economies, not least the period of capital flight and investor panic in India, prior to his arrival at the RBI.
“Six years since the financial crisis, central banks still have their foot fully on the accelerator . . . [pushing] credit into emerging markets,” he says. “We don’t know how this will end . . .  It may end smoothly, if we let the air out of these inflated markets slowly, or by a series of mini-crises. But it may be more dramatic if, one fine day, suddenly the world realises the US is going to raise interest rates quite quickly . . . then the air will go out much faster.”

George wrote:For what Armegeddon is he saving for?.

kumarn wrote:Just on TV: November WPI is 0.00%.

please please raghu bhaiyya, cut rate, at least for my student loan emi sakes

panduranghari wrote:Don George,

I will critique the RR speech when I have some more time. I promise to do that by the end of the week.

However, this would be helpful.

FT interview

For all that, he seems anxious. “Central bankers have had enormous responsibilities thrust on them to compensate, essentially, for the failings of the political system. And my worry is we don’t have sufficient tools to do that, but we’re not willing to say it. And, as a result, we push as hard as we can on the existing tools, and they may create more risk in the system.” An early critic of quantitative easing, Rajan picked a very public fight this January, accusing the US Fed of reining in QE without considering the effect on emerging economies, not least the period of capital flight and investor panic in India, prior to his arrival at the RBI.
“Six years since the financial crisis, central banks still have their foot fully on the accelerator . . . [pushing] credit into emerging markets,” he says. “We don’t know how this will end . . .  It may end smoothly, if we let the air out of these inflated markets slowly, or by a series of mini-crises. But it may be more dramatic if, one fine day, suddenly the world realises the US is going to raise interest rates quite quickly . . . then the air will go out much faster.”

George wrote:For what Armegeddon is he saving for?.

Do you really want me to get into that? Either you do not really understand the economy or you are just a internet warrior used to twitter talk.

How many points to make?

CAPE over 25x. S&P stock rise purely due to stock buy back. No investment by the companies. Apple having market capitalisation more than the economy of Russia. WTI falling as globally the demand is decreasing as people cut back. Read posts by Austin on perspectives of global economics

For all that, he seems anxious. “Central bankers have had enormous responsibilities thrust on them to compensate, essentially, for the failings of the political system. And my worry is we don’t have sufficient tools to do that, but we’re not willing to say it. And, as a result, we push as hard as we can on the existing tools, and they may create more risk in the system.” An early critic of quantitative easing, Rajan picked a very public fight this January, accusing the US Fed of reining in QE without considering the effect on emerging economies, not least the period of capital flight and investor panic in India, prior to his arrival at the RBI.
“Six years since the financial crisis, central banks still have their foot fully on the accelerator . . . [pushing] credit into emerging markets,” he says. “We don’t know how this will end . . .  It may end smoothly, if we let the air out of these inflated markets slowly, or by a series of mini-crises. But it may be more dramatic if, one fine day, suddenly the world realises the US is going to raise interest rates quite quickly . . . then the air will go out much faster.”

Mumbai, Dec. 15: The Reserve Bank today relaxed norms for structuring existing long-term loans to infrastructure projects.

The move will not only revive stalled projects but also help banks to tide themselves over mounting bad loans.

The new guideline widens the scope of the 5:25 scheme by including existing standard long-term project loans worth over Rs 500 crore to be flexibly structured and refinanced.

Under the 5:25 scheme, banks can extend loans to an infrastructure developer for 25 years with an option to rewrite or reset the terms of the loan or transfer it to another bank or financial institution after five years.

The latest development will ensure long-term viability of existing projects by aligning the debt repayment obligations with cash flows generated during their economic life, the RBI said in a circular.

A month after a contraction, merchandise exports in November rose 7.3 per cent to $26 billion, compared to $24.2 bn in the same month last year. However, imports grew 26.8 per cent in the month, fastest in this financial year, reaching $42.8 bn over the $33.8 bn a year before, with inbound shipments of gold up 500 per cent.

The trade deficit in November, as a result, widened to an 18-month high of $16.9 bn. Before this, it was only higher in May 2013, at $20.1 bn.

However, many economists said the current account deficit would not surpass two per cent of India's gross domestic product (GDP) this financial year.

Total exports during April-November, first nine months of 2014-15, were $215.75 bn, about five per cent higher from the $205.4 bn in the corresponding period of 2013-14. With four more months before the year ends, exporters believe the government target of $325 bn will be met.

The Kalyani group has formed a 'Make In India' project team pulling in senior executives to work on an import substitution strategy.

Using available government data, the team is targeting $30-40 billion worth of iron and steel products that are imported into India. These products are mainly imported for the defence, energy, automotive, construction and mining equipment industries.

"These are the low hanging fruit, but in five to seven years we want to build an industry that is globally competitive, and then you Make in India for other parts of the world," Baba N Kalyani, chairman of the Kalyani group, said in an interview with Business Standard.

Make in India is a Union government initiative to facilitate investment in manufacturing within the country. The Kalyani group with an annual turnover of Rs 12,000 crore plans to increase its business three to four times over the next 10 years by embracing Make in India.

"I believe it is true for any manufacturing company in India. If a company honestly starts working on the Make in India concept, it should be able to quadruple its business by 2020-2025," Kalyani said.

As a step to ease the pressure on stressed assets, the Reserve Bank of India has allowed lenders to restructure existing loans above Rs 500 crore to infrastructure and core industries’ projects.

Banks and financial institutions will have an option to periodically refinance such loans. Bankers said the revised norms will provide relief to completed projects which have started commercial operations in the said sectors. Many of these were finding it difficult to repay due to shortfall in cash flows and cost overruns.

This leeway is expected to help ensure the long-term viability of existing projects by aligning the debt repayments with the cash flows generated during their economic life. It is a step that will reduce potential stress, said Arundhati Bhattacharya, chairman of State Bank of India.

B K Batra, deputy managing director, IDBI Bank, said the new norms were positive in the sense that they'd help to reduce the debt servicing burden on companies. Banks will save on provisioning for restructured loans.

Banks may refinance the project term loan periodically (for example, five or seven years) after the project has commenced commercial operations. The repayments at the end of each refinancing period could be structured as a bullet repayment, with the intent specified upfront, RBI added.

Refinancing can be done by existing lenders, a new set of lenders or a combination of both or by issuing corporate bonds. Such refinancing can be repeated till the end of the repayment schedule.

Bank can so address existing standard restructured assets; the latter's label won't change. Similarly, existing non-performing loans can be restructured under the new norms but these would continue to carry the “NPA tag”, and refinancing can be done only after it becomes a standard asset, said RBI.

Rajan has got it mostly wrong: 'Make in India' is largely about 'Make for India'

Too much has been made of RBI Governor Raghuram Rajan’s advocacy of ‘Make for India’ as though it is a contradiction of the Narendra Modi government’s ‘Make in India’ programme. I am not sure Rajan intended this contradiction, but if he did, he is surely largely wrong about it.

First, I have never read anywhere that ‘Make in India’ is largely export-oriented or an import-substitution policy. Those policies failed under Congress-backed socialism till 1991. ‘Make in India is not a throwback to pre-1991 India. At best, one can say that it is an exhortation to foreign companies to make India a manufacturing hub. ‘Make in India’ is not thus in contradiction to ‘Make for India.’

PTIPTI
I don’t know where Rajan got the impression that ‘Make in India’ is all about emulating China in making export the basis of growth. He should check the ‘Make in India’ website and nowhere does it give the impression that it is all about exports.

The broad goals, stated upfront, on the ‘Make in India’ website (check it out for yourself here) are this: “A major national programme designed to facilitate investment, foster innovation, enhance skill development, protect intellectual property, and build best-in-class manufacturing infrastructure.” In fact, you have to try very hard to even find the word ‘export’ on the website.

Go into any of the industry-specific verticals on the website, and the emphasis is on the domestic market (ie, ‘Make for India’ is the theme, rather than just ‘Make in India’ for export to the world outside).

The automobiles vertical points out that India is the seventh largest producer of vehicles in the world, and the “fourth largest automotive market by volume by 2015.” It also points out that autos have four large manufacturing hubs in India, and account for 7 percent of GDP by volume.

Go deeper, and all the talk is about India’s potential, and not particularly the export market. The domestic market is touted as the main reason to invest, and the growth drivers too talk about the domestic potential.

Go to the ‘Policies’ tab, and the talk is about ‘New processes’, “New sectors’, ‘New infrastructure’ and ‘New mindset’. Nowhere does it even mention new export-orientedness or new import substitution. Rajan can surely say that none of this will work, but that only time and experience will prove. It is not necessary to diss an idea at the outset, though Rajan did say he was not advocating “export pessimism.”

It is only in the defence sector that there is even a hint of import-substitution, and here too it is only implied. There is a mention that 40 percent of the budget is spent on capital acquisition and 60 percent of defence equipment requirements are met by imports. So, clearly, here the aim is to reduce imports, and possibly build exports, since even Modi has talked about India being a global arms supplier.

Defence, in fact, is the one area where no government believes in unbridled competition or import dependence because it is considered too vital for national interest. So, if anything, India is only doing what every other country in the world does: become more self-reliant in its defence needs.

So what is Rajan really talking about? And how sensible is his idea of ‘Make for India’ as a substitute for ‘Make in India’ when the reality is that China is increasingly making more for India in several crucial sectors – from telecom to toys to electronic items to everything. The whole of small-scale manufacturing in India has been reduced to a packaging and labelling operation. Most manufacturing in India has been substituted by trading in the manufacturing zones of India. There is surely a case for making ease of doing business, which includes ease of manufacturing business, so that some of our competitiveness is restored.

Rajan is also wrong to believe that the policy of backing specific sectors does not ever work. The success of the Indian IT industry was largely because of government support to it for more than two decades, where profits from the export of software were not taxed to encourage forex earnings. This is what is today saving us from a current account crisis. BPOs came to set up shop in India because labour was cheap and English-speaking talent was in abundance.

India has become an auto hub precisely because the industry was nurtured under fairly robust tariff walls in its nascent stage. (I am not advocating protection at all, but just to show that Rajan cannot take a doctrinaire approach to industrial policy-making, when the global reality is one of mercantilism and protection. He can check if the Swiss will even allow an Indian watch-maker to succeed in their backyard.)

Rajan’s bottomline is this: “I am counselling against an export-led strategy that involves subsidising exporters with cheap inputs as well as an undervalued exchange rate simply because it is unlikely to be as effective at this juncture. I am also cautioning against picking a particular sector such as manufacturing for encouragement simply because it has worked well for China.”

This is fine as far as it goes. Government should not be in the business of picking sectoral winners or losers, but there is no harm in backing up industries where India has a clear competitive advantage – like IT, generic pharma, textiles, metals (iron, steel, aluminium), etc.

What Rajan should know is that ‘Make for India’ was India’s slogan till 1991 and it brought us the Nehruvian rate of 3-4 percent growth. India has slowly globalised and become more competitive, but the ease of doing business is still far behind the rest of the world. This is a key aim of “make in India’, not export-led growth or import substitution.

Either Rajan has said it wrong or the media has interpreted him wrongly. ‘Make in India’ is largely about ‘Make for India’ even as it now stands. the policy may or may not succeed in all areas, but is Rajan trying to say it is not even worth trying?

Rajan has got it mostly wrong: 'Make in India' is largely about 'Make for India'
Too much has been made of RBI Governor Raghuram Rajan’s advocacy of ‘Make for India’ as though it is a contradiction of the Narendra Modi government’s ‘Make in India’ programme. I am not sure Rajan intended this contradiction, but if he did, he is surely largely wrong about it.

Theo wrote:This entire article misses the whole point about scale. What India lacks is scale folks. No company can be competitive in the world or even India while making for only for India. All things being equal a company in China manufacturing for 10 different markets and making 10 times the widgets will clobber a company in India making only for India. Even in car manufacturing Indian factories depend on the volumes of export to lower the cost in the domestic world. This is exactly what crushed the entire import substitution economy. Ambassador discovered that there was a market for maybe 20,000 cars inside India. That was the end of investment. Any 'Make in India' must produce for both India and the globe, in fact if you look at East, SE asia, they starved and suppressed domestic consumption in order to export + capital investment. The India economy is not mature/large enough to sustain this on its own. Maybe one day, but not for a couple of generations. As it is without exports no manufacturer will risk his capital and will prefer to twiddle his thumbs....

Tuesday, 16 December 2014 | Shivaji Sarkar |

Lowering of interest rates for industries hurts the consumers because, as lending rates to the giants are reduced, the common man takes the brunt by losing on deposit rates. It’s a double whammy for the common man

It is time that the Reserve Bank of India raises the deposit rate, to save the investors. Industry, which has misled the Government since 2008, has no case to demand another ‘incentive’ — subsidy at the cost of the common man.

Industries have benefitted tremendously during the so-called economic slowdown and does not deserve any more. Companies have learned from the bad economics of the West, and poor corporate governance to increase their profits. The Western world was afflicted because of deliberate bad management of the finances. Now, innumerable Satyams are likely to rob the Indians.

On an average, Indian industry during the past five years has earned tremendous profit by fleecing the common man. The accumulated profit, during the past five years, of many companies goes over 500 per cent. Even the weakest have clocked 100 per cent.

Inflation is their creation. Industries have jacked up prices of all consumer products from soap, food and beverages to cars and machineries despite fall of prices of raw material. The industry, through large retail chains, also cartelised to increase prices and bolster their profits. But businesses shied away when it came to corporate social responsibility.

They have gobbled up incentives worth thousands of crores. Not only did they restrict the passage of benefit to the consumers, who are forced to sustain their unethical functioning, but they also blatantly raised the prices of products on silly pretexts. And now, they want to further rob the consumers by trying to gain lower interest rates.

Yes, it hurts the consumers because as lending rates to the giants are reduced, the common man takes the brunt by losing on deposit rates. It is a double whammy for the aam aadmi. Industry has been clamouring for a rate-cut, citing the decline in inflation to a ‘five-year low of 5.52 per cent and fall in oil prices’. They are silent on heaping Rs2.36 lakh crore of non-performing assets (or bad debt) on the public sector banks.

The corporates have absorbed the people’s hard-earned money and are now demanding postponing of re-payment, euphemistically called ‘restructuring’. Interest earnings lost on such lending as well as capital loss to the banks are, unfortunately, being treated lightly. It appears that public money belongs to everybody except those to whom it really belongs.

They are not even answering where the money loaned to them has been siphoned off. It has certainly not gone into productive use. Has it created black money? Where have they parked the people’s money? The corporates owe an answer before they demand any further concessions. The number of industries in India has increased manifold in the last few years, a clear indication that the corporate need to shed more than to grab. Are they listening?

Numerous Indian industries are growing in stature and gaining more importance as days pass by. Though the main occupation for the bulk of the Indian population has been agriculture, India has been moving towards rapid industrialisation, with its different sectors like iron and steel, real estate, information technology, food and beverage, travel and tourism and business process outsourcing. The 10 richest houses that manage many of these activities have thrived during the years of ‘slowdown’.

Others have not lagged behind. The gross domestic product slowdown has strangely seen adding to their kitty. The common man has lost jobs, has settled for poorer wages, and the Government was forced to shell out over one lakh crore rupees to pacify them with employment guarantee schemes like the Mahatma Gandhi National Rural Employment Guarantee Act, so that the corporate world could further prosper.

The Comptroller and Auditor-General of India has been eloquent on how the corporates have become the largest possessors of fertile agriculture lands, which, as so-called special economic zones, have become their sprawling fiefdoms. In 1996, the fear of a corporate zamindari was expressed. It has become a reality. The special economic zones are bigger rackets than the coal block allocation scam. A review of all of these is called for. Many schemes have to be scrapped and the properties of poor taken over must be handed over to the original owners.

It seems at least one person is treading with caution: Reserve Bank of India Governor Raghuram Rajan, despite being under pressure. Mr Rajan realises that even at 5.52 per cent inflation, prices are not affordable; there has been an almost 46 per cent increase in commodity prices. He also knows that a rate-cut would be counter-productive, as the corporate are not reducing prices. The RBI chief does not believe that the primary factor holding back investment in the country today is high interest rates.

Theo_Fidel wrote:This entire article misses the whole point about scale. What India lacks is scale folks. No company can be competitive in the world or even India while making for only for India. All things being equal a company in China manufacturing for 10 different markets and making 10 times the widgets will clobber a company in India making only for India. Even in car manufacturing Indian factories depend on the volumes of export to lower the cost in the domestic world. This is exactly what crushed the entire import substitution economy. Ambassador discovered that there was a market for maybe 20,000 cars inside India. That was the end of investment. Any 'Make in India' must produce for both India and the globe, in fact if you look at East, SE asia, they starved and suppressed domestic consumption in order to export + capital investment. The India economy is not mature/large enough to sustain this on its own. Maybe one day, but not for a couple of generations. As it is without exports no manufacturer will risk his capital and will prefer to twiddle his thumbs....

The Rupee cracked for 4% because Raghuram Rajan DIDN'T drop interest rates. If only he had announced a 500 bps cut, to say 3% nominal Repo rate, the Rupee would be UP 4% instead

'Make in India' has no intrinsic meaning

krishnan wrote:L&T will finish it within 6 months , if they dont have any land issues

vina wrote:Rather than executing on that single minded focus, we are into distractions like "conversions" and this and that , and nothing of consequence in reforms until now.

'Make in India' has no intrinsic meaning

you mean the opposition is into distraction like "conversions" surely Vina

vina wrote:Oh, you mean that it was actually Congress MPs who did that conversion thing in Agra and want to repeat it on Dec 25 in some other place ?

vina wrote:

krishnan wrote:L&T will finish it within 6 months , if they dont have any land issues

Atthaikku Meesai Veccha Chittappa!

If Aunt had a moustache, she would be the Uncle!