Indian Economy - News & Discussion Oct 12 2013

Suraj · Post by **Suraj** » 19 Feb 2014 10:52

I'm not suggesting money cannot be made from smuggling. I'm saying that the last few months since GoI's duty imposition has not been kind to a gold smuggler because of a falling spot price in gold. There's money to be made when prices are rising along with demand. When both are falling, the business case for smuggling is hard to sustain for long, unless one is talking about gold that has been stored from quite some time ago and is being smuggled in to exchange for cash.

It's hard to compare the present to pre-1991. Those were the perfect storm days for gold smuggling, thanks to the FERA norms, lack of convertibility, a slow economy and inflation. The present has a stagnant economy and inflation, but there are very different external trade and convertibility parameters compared to back then.

As for GoI losing money, raising duties so much was never going to be without consequences. It might increase overall revenues (I could not find a breakdown of duties specifically from gold) if the duty level is bearable, but there will definitely be leakage on account of smuggling. On the other hand, it cut down demand, lowered spot prices and in the process, made smuggling itself unviable. It's a blunt tool they had to use because they painted themselves into a corner by creating such stagflationary conditions exacerbated by the mounting CAD caused by people hedging with gold.

Austin · Post by **Austin** » 19 Feb 2014 12:40

From what I have read Gold prices are on 3 month high but lets assume for argument sake the Gold prices are falling but the demand is not as you are see from the report 150-200 T are being smuggled in.

There is also a possibility that excessive gold bought when prices were lower are now smuggled in to make windfall.

If you buy it legally you still have to pay 10 % more but if they smuggle in can still sell at 5 % margin then there is still black profit to be made ... there is no gurantee that GOI will revoke the tax.

All said and done no one can deny this out of blue tax on gold has lead to increased smuggling and money in black market changing hand.......we can just hope that the hands were not thr wrong one that end up funding terror in India.

Uttam · Post by **Uttam** » 19 Feb 2014 20:51

Suraj wrote:I'm not suggesting money cannot be made from smuggling. I'm saying that the last few months since GoI's duty imposition has not been kind to a gold smuggler because of a falling spot price in gold. There's money to be made when prices are rising along with demand. When both are falling, the business case for smuggling is hard to sustain for long, unless one is talking about gold that has been stored from quite some time ago and is being smuggled in to exchange for cash.

Falling Prices may not (and most likely is not) due to lack of local demand (India). Anyway, in absence of extreme volatiltiy of prices on a day to day basis, the smuggling will still be profitable in presence of falling prices because the smugglers will still be able to capture the spread between domestic and international prices.

Theo_Fidel · Post by **Theo_Fidel** » 19 Feb 2014 21:25

Per the RBI, gold spread between India/Foreign is about 3% of gold prices right now. About $50. I’m having a hard time seeing how a would be smuggler makes this pay off. At least not yet.
Back in the 80’s it was 50%-60%. Which would mean $500-$700 in present prices. If the spread increased that much yes, smugglers would benefit.

http://www.rbi.org.in/scripts/Publicati ... x?id=15162

Suraj · Post by **Suraj** » 19 Feb 2014 21:45

Here's the spot price history I referred to: 1-year INR gold spot prices. As you can see, while prices are up recently, it's down significantly from the Sept 2013 peak. Considering this and the more open gold price market that reduces the domestic-international spread, I don't see a lot of margin for a smuggler, unless prices are rising strongly, providing some time spread.

Austin · Post by **Austin** » 22 Feb 2014 09:50

FDI inflows remain unchanged at $1.1 bn in Dec 2013

New Delhi, Feb 19:

India received $1.1 billion of foreign direct investment (FDI) in December 2013, unchanged from the level in the same month a year earlier, according to data from the Department of Industrial Policy and Promotion.

For the April-December period, foreign investment inflows dipped 2 per cent to $16.56 billion from $16.94 billion during the corresponding period of the previous year, it said.

During the first nine months of this financial year, the highest FDI came in services ($1.59 billion), followed by pharmaceuticals ($1.26 billion), construction development ($914 million) and automobiles ($871 million).

Mauritius led inflows into India with $3.67 billion of FDI during April-December, followed by Singapore ($3.2 billion), UK ($3.14 billion) and the Netherlands ($1.6 billion).

The country needs foreign investment to help regain its growth momentum. India’s economic growth slowed to a decade’s low of 4.5 per cent in 2012—13.

India is estimated to require about $1 trillion between 2012—13 and 2016—17, the 12th Five—Year Plan period, to fund infrastructure projects.

Suraj · Post by **Suraj** » 23 Feb 2014 02:42

Infrastructure investment declines

Investment in infrastructure fell from Rs.645,175 crore in 2010-11 to Rs.576,855 crore in 2012-13, the Lok Sabha was informed Wednesday.

Minister of State for Planning Rajeev Shukla said infrastructure was defined to include electricity, renewable energy, roads and bridges, telecommunications, railways, mass rapid transit system, irrigation, water supply and sanitation, ports and airports.

With a >10% decline in investment over two years in just nominal terms (even more in real terms due to inflation), there's no surprise as to GDP growth rate falling below 5%.

Singha · Post by **Singha** » 23 Feb 2014 16:22

some of the sickular sins of the UPA could be forgiven but not this, not blocking and downplaying infra projects in a nation lagging decades behind east asia investment levels of fixed infra. this is pure treason and condemning one more generation(tens of millions of people) to another 20-30 extra years of marginal living before any chance to claw their way into lower middle class. this is == to the british wilfully diverting grain shipments into other parts of the world and letting the bengal famine happen. we had people too weak to resist vultures and dogs who boldly picked out their eyes and tore open their tummies to get at the tasty bits like the livers.

Prem · Post by **Prem** » 24 Feb 2014 04:11

Singha wrote:some of the sickular sins of the UPA could be forgiven but not this, not blocking and downplaying infra projects in a nation lagging decades behind east asia investment levels of fixed infra. this is pure treason and condemning one more generation(tens of millions of people) to another 20-30 extra years of marginal living before any chance to claw their way into lower middle class. this is == to the british wilfully diverting grain shipments into other parts of the world and letting the bengal famine happen. we had people too weak to resist vultures and dogs who boldly picked out their eyes and tore open their tummies to get at the tasty bits like the livers.

All the tell tail sings tell us that our esteem Economist PM sahib took personal interest in accomplishing this glorious task.

Austin · Post by **Austin** » 24 Feb 2014 05:21

some help from Chinese hand

China Offers to Invest $300bn in India's Infrastructure Projects

China is offering to finance as much as 30% of its neighbour India's targeted investment in infrastructure projects over the next few years.

India's Economic Times reported that a Chinese working group submitted a five-year trade and economic planning cooperation proposal to the Indian government in the first week of February.

As per the plan, the world's second largest economy will offer about $300bn (£180bn, €218bn) to India for its $1tn investment in infrastructure projects, which are planned over a five year period ending in 2017.

India previously rejected all China investment proposals, as it was nervous about China's growing influence in South Asia especially in critical areas such as telecom or power.

The investment would enable Chinese companies to be involved directly in India's rail, road, power and telecom infrastructure.

A government official familiar with developments told the newspaper that India's commercial department is likely to hold an inter-ministerial meeting next week to discuss the investment proposal from China.

"China has expressed a strong desire to invest in India's infrastructure sector," the official said.

"However, it needs to be assessed how to leverage that. We need to identify sectors from where we can gain, such as software or IT, pharma, among others."

If approved, the investment would be the largest by any single country in India, exceeding the Japanese funds, which previously helped finance a large number of infrastructure projects.

China's Growing Investment in Asia

Asia's largest economy currently has more than $3.8 trillion in reserves that it looks to invest effectively.

China has been investing in developing countries in Asia and Africa, at the same time gaining business for its companies.

In Asia, China has provided funds to countries such as Pakistan, Sri Lanka, and Nepal, all neighbouring India.

Since the end of a 30-year long civil war in Sri Lanka, China has emerged as the island nation's largest loan provider. So far, China has loaned about $4bn to the country, funding its massive infrastructure projects in highways, railways, coal power plants, airports and harbours.

China has also helped crisis-hit Pakistan with a number of infrastructure projects. Last year, China agreed to provide a loan of $9bn to build two large 1,100 megawatt nuclear power plants for Pakistan in Karachi. Pakistani President Mamnoon Hussain, who is on a visit to China, is expected to agree to a $20bn deal with Chinese authorities to build a trade and transport corridor.

India's recent economic growth and policy reforms have pushed the need for infrastructure developments. China's insistence to invest in India reflects its decision to capitalise on the economic opportunities from the massive requirement for infrastructure in the country.

nawabs · Post by **nawabs** » 24 Feb 2014 12:54

Budget format might be changed

http://www.business-standard.com/articl ... 330_1.html

The format of the full Budget might undergo some changes when the new government tables it in Parliament.

To help compare the numbers better, the finance ministry might retain the interim Budget Estimates along with the new ones.The printing of Budget documents starts roughly 10 days before the tabling in Parliament. In that case, the government would have some data as on June 30, if, say, the Budget is tabled by the middle of July.

Explaning the rationale for such a move, a finance ministry official said, “Most of the numbers given in the interim Budget are at the end of January. By the time the new government is formed, we will have a new set of data. We will tell them what has changed between February and June and accordingly, interim Budget Estimates might also be retained.”

Also, since the government would get updated numbers for 2013-14, if the Budget is tabled sometime in mid-July, the finance ministry might give actual numbers for the year instead of Revised Estimates.

The full Budget tabled on July 6, 2009 by then-finance minister Pranab Mukherjee (now President), had not given such numbers.

Suraj · Post by **Suraj** » 26 Feb 2014 01:28

Shankar Acharya evaluates the UPA's economic performance:
UPA's economic legacy - Good, bad or ugly?

If one takes the decade of UPA rule as a whole and looks at a few key economic indicators, it is possible to claim, at first glance, that this government's achievements are good, perhaps even very good. After all, overall economic growth has averaged 7.5 per cent per year, the fastest in any decade in India's history. This rapid growth in gross domestic product (GDP) has raised average income, as reflected by per capita national income, by nearly 75 per cent in real, inflation-adjusted rupees. This, too, is the highest decadal increase in average income in India's history. Turning to poverty, the latest official data show that the percentage of the population below the poverty line (Tendulkar definition) has dropped sharply from 37 per cent in 2004-05 to 22 per cent in 2011-12. It is the steepest decline in the poverty ratio ever seen in India.

Unfortunately, there are at least three broad sets of reasons why such a favourable assessment does not stand up to scrutiny. First, most of the high growth occurred in the first seven years up to 2010-11 (averaging 8.5 per cent a year), after which economic growth crashed, mainly because of the cumulation of bad economic policies pursued by the government. In both the two most recent years, 2012-13 and 2013-14, official estimates show that GDP growth was below five per cent, the first time this has happened in two successive years in the last quarter of a century. Industrial production has plummeted to zero in the last two years. Even the buoyant service sectors of the economy have slowed significantly. Inflation in consumer prices has jumped and remained high (nine to 11 per cent a year) in the last five years. The foreign trade and current account deficits rose steadily and dangerously since 2008-09 and triggered two bouts of sharp exchange rate depreciation (in 2011 and 2013). The golden years of high growth with financial stability are long past.

Second, the UPA's economic policies were mediocre to start with and worsened increasingly as the decade evolved. Indeed, the high growth and low inflation of the first five years were due mainly to the global economic boom of 2002-07 and the wide-ranging, productivity-enhancing economic reforms carried out prior to 2004. The sole, important, growth-supporting UPA policy was the major fiscal consolidation achieved between 2004-05 and 2007-08. And this major policy achievement was wholly squandered in 2008-09, through pre-election ramping up of major subsidies (oil, food and fertiliser), entitlement programmes (such as the Mahatma Gandhi National Rural Employment Guarantee scheme), government pay and other sops. The subsequent persistence with "fiscal populism", and the associated high fiscal and revenue deficits, kept inflation and interest rates high and helped widen the external account deficits to dangerous levels.

Among the other most noteworthy macro, sectoral and governance failures of the government were:

the perpetuation of laws and policies, which hugely discouraged new employment in the organised sector, thus condemning over 95 per cent of the young new entrants to the labour force (the so-called demographic dividend) to low-paid, insecure occupations in the unorganised or informal sector of the economy;

the growing recourse to "crony-capitalist" policies in key sectors such as telecom (the notorious, 2G spectrum allocation scam), mining (coal and iron ore), and land allocation, which have come to light since 2010 and their debilitating aftermaths continue to impact these and related sectors;

the deliberate appreciation of the rupee in 2009-10 was ill-judged and contributed significantly to the subsequent widening of external deficits as both import substitution and exports were effectively discouraged;

the sudden tightening of environmental standards (2010) and the inexplicable recourse to capricious and retrospective tax policies (2012), together with sectoral scams noted above, played havoc with the general investment and business climate and contributed to the sharp economic slowdown;

the large increases in food procurement prices and a failing public distribution system turned the government into a massive hoarder of foodgrains and ramped up food inflation;

even the success of inducing record investment in new power generation turned sour because of failures in co-ordinating fuel linkages (coal and gas) and weak energy pricing policies, leaving many thousands of costly megawatts of generating capacity idle or underutilised;

the government's focus on entitlements and coverage, along with neglect of quality and accountability, meant that large parts of the massive systems of public education and health were seriously dysfunctional, though here the blame also falls on state governments.

Third, the witch's brew of poor economic performance in recent years and a longer history of bad economic policies have combined to leave an unenviable array of economic vulnerabilities and challenges for whichever government takes office this summer. They include:

the failure to create reasonably decent jobs for the burgeoning young population of new job seekers (over 10 million each year), with profound adverse consequences for social and political stability;

the extraordinary loss of growth momentum in the economy;

the unprecedented stagnation in manufacturing output, despite the ready availability of cheap, low-skill labour;

the continued scarcity of good-quality, efficient infrastructure (power, roads, ports, railways, water supply and sanitation);

the heightened vulnerability of agriculture to water stress in large parts of the country;

the widespread cancer of stalled, incomplete and delayed projects, which have reduced growth and burdened the banking sector with a mountain of dodgy loans that weigh heavily on the viability of many public sector banks and weaken overall financial stability;

the array of ill-conceived and inefficiently run entitlement programmes (such as rural employment guarantee, food security and education), which achieve limited welfare gains at the cost of enormous stress on fiscal capacity and foregone public investment;

weak external finances, which are vulnerable to exogenous declines in capital inflows or to normalisation of recently increased gold duties and import restrictions, which have resurrected a rapidly growing trade in "hawala"-financed gold smuggling;

a legacy of new lows in the quality of central governance (including economic governance), which have further weakened the country's rickety public administration in all areas.

Fundamentally, the decade of the UPA government failed to undertake economic, social and administrative reforms to strengthen India's long-term development potential, despite the golden opportunity offered by the years of high growth and investment. It is hard to resist the conclusion that the overall economic legacy is bad, if not ugly.

It's increasingly getting public acceptance that the UPA coasted on the fiscal prudence and investment in infrastructure initiated by the NDA, and once the music stopped, they were left high and dry. Successive years of <5% growth, and zero industrial growth, is something we have not seen since before liberalization.

Add to that the fact that core sector investment was not even kept stable in nominal terms. It fell 10% in nominal terms, and probably 20% in real terms, in effect killing growth, which is nothing more than return on investment.

gakakkad · Post by **gakakkad** » 26 Feb 2014 04:38

zero industrial growth was uncommon even in pre-liberalisation era. that is how brilliantly these morons have performed.considering the fact that inflation is understated Indian manufacturing is effectively in recession...

if this government continues for a few more years, the symptoms will be apparent in banking as well as agricultural sector...the gory details are best left to the readers imagination...

Prem · Post by **Prem** » 26 Feb 2014 06:37

Dont want to do Paki accounting but MMS policies made India loose a decade of economic growth. His PMship have hurt the Indian economic growth by aggregate ~600-800~ Billion$ and it will eat up perspective growth of another 200-300 Billion $ before the Gaddi come back on right track. MMS Na hotta tho GDP would have been touching 3.7 Trillion and growing solid. His parting shot of depreciating the currency is the most despicable act to award him the Title of Pakistani PM of India or Trillion $ Hit Man.

Vikas · Post by **Vikas** » 26 Feb 2014 14:46

I still wonder,'What were they thinking when the ship was sinking' ?

gakakkad · Post by **gakakkad** » 26 Feb 2014 17:21

Jhujar wrote:Dont want to do Paki accounting but MMS policies made India loose a decade of economic growth. His PMship have hurt the Indian economic growth by aggregate ~600-800~ Billion$ and it will eat up perspective growth of another 200-300 Billion $ before the Gaddi come back on right track. MMS Na hotta tho GDP would have been touching 3.7 Trillion and growing solid. His parting shot of depreciating the currency is the most despicable act to award him the Title of Pakistani PM of India or Trillion $ Hit Man.

the loss is atleast 10 trillion by 2020,even if we have a sensible govt from the coming fiscal... In 2010 GDP was about 1.5 t .. Real growth rate was 9%.. Nominal cagr was close to 15% ...At this rate gdp would have been 5.5-7 trillion by 2020.(depending on how we calculate inflation)...

Present Nominal gdp is 1.7-1.9 depending upon exchange rate...present real growth rate is 4 % and nominal cagr is about 8 %...it ll take 3 years oF good governance to get the rate to 2008 levels.
so we ll have a gdp of 2.8-3t by 2018 even if it is Modi at the centre.and 3.8 by 2020...A mean loss of 1.5-2 t every year ..coming to a cumulative loss of 10 trillion...Now that kind of money is a lost civilization.

And god forbid ,if Modi does not form the next GOI.............................

Suraj · Post by **Suraj** » 26 Feb 2014 21:35

Indeed. The losses are simply staggering. This isn't a scam. The magnitude of losses on account of three years of lost growth dwarfs the largest scam out there. We are talking hundreds of billions in the last three years, and the fact that we lost out on the compounding effect from each of those years.

The central failure of the government is that THEY DID NOT ACT. One year, yes that's forgivable. Even two years, blame democracy and slow machinery. But an economy stuck in the sand for three years ? And that too in the hands of the government with the largest mandate in a quarter of a century ?

The government uses the free pass of average 8.5-9% growth due to the tailwind of prudent policies and huge investments in infrastructure made during the NDA days, combined with the global economic boom. The only aspects of economic activity that have remained strong in the last few years are export growth and agriculture. The latter has in fact increased its share of GDP in the last two years because industrial growth has stagnated well below the 3-3.5% agricultural growth rate, in comparison.

This matter needs more press. The cost of NREGA and FSB hasn't been in tens of billions, but hundreds of billions. The simplest way to emphasize the losses is to describe it in real world terms - how many more jobs would have been created, how much more money a person would have made per month, etc. Large numbers have a way of looking too desensitized, and describing the loss in personal terms is more effective.

Theo_Fidel · Post by **Theo_Fidel** » 26 Feb 2014 23:21

The NREGA has been a long term disaster dreamed up by the Jean Dreze type bubble heads. Yes women have benefitted and Yes migrant children have gotten more schooling. But the opportunity cost has been very expensive and more than any of the marginal benefits. Conveniently said Jean Dreze is missing in action and unwilling to come forward, defend himself and confront his poor judgment.

My own view is that the country is growing at 4%-5% only because the South & W/NW are still growing at 6%-7% on a relatively high base. In the vast hinterland there is almost no forward movement, or at least if there is, it was not visible to me.

Which brings me to my pet peeve of the Dedicated Freight Corridor project. Anyone remember that one. Conceived back in the first year of UPA-1. So here we are 10 years later and not a mile of rail has been laid and is operational. The East & West wings of the project would have sliced through the heartland of the country and brought new investment and access to industry for the 2/3 of India that has been essentially cut off from reform and economic progress. This one project could have brought a bang to our GDP numbers, liberated the Railways from its problem of running mixed lines and reduced the cost of business through much of the hinterland. Neglecting to fast track this project was a disaster and shows a lack of understanding of how economies grow and people become more productive.

gakakkad · Post by **gakakkad** » 27 Feb 2014 00:01

The 10 trillion loss figure , I calculated is extremely conservative..

The absolute loss in terms of lost education,employment opportunities etc incalculable . I ll quote an example to illustrate the point.

AIIMS students protest, demand hospital facility

http://timesofindia.indiatimes.com/city ... 420041.cms

BHOPAL: Students of All India Institute of Medical Sciences (AIIMS), Bhopal resorted to a day-long protest on Friday demanding facilities at par with other medical colleges. All 210 students of AIIMS threatened to go on indefinite strike from Monday if institute administration failed to act on their demands.

Students of MBBS and nursing college at the institute alleged they are missing out on practical education as AIIMS Bhopal lacks a fully functional hospital and minimum facilities as prescribed by Medical Council India (MCI).

Quoting figures released last week by ministry of health and family welfare (MoHFW), they said AIIMS Bhopal is worst performing in terms of patient load in outpatient departments (OPD), compared to hospitals in each of six new AIIMS. AIIMS Bhubaneswar and Raipur have double the patient load of AIIMS Bhopal.

"Eight months into our second year for MBBS, we are still being forced to go without practical teaching as institute lacks a functional hospital," said a medical student.

I know from a friend that AIIMS bhopal does not have a hospital and lacks basic laboratory services... Having been through the rigours of medical training , I can imagine the massive loss of opportunity to the students ... I also know that it is inconceivable that the facilities will come up, by the time the batch passes out.. The lack of training represents loss of opportunity that can be valued at crores of INR per student... these students were lured into taking aiims bhopal by the AIIMS name tag... Most of them were getting mbbs at several other places...and now they ll be passing mbbs with hardly any practical training.

Imagine the cost to humanity ,when people who were willing to get an education did not get any because ,schools and colleges which were supposed to open failed to open due to funds diverted into nrega,fsb corruption and policy paralysis ... even when colleges opened they failed to provide decent training and only ended providing paper degrees...like aiims bhopal...

Imagine loss of employment because businesses did not open due to non development of roads ,and electricity supply...

one of the reason why we don't have ground breaking researchers is lack of medical training .. no doctor can hope to become a decent biomedical researcher without knowledge of college level physics,mathematics ,chemistry and biochemistry...such an opportunity was never given to me ,nor any other med student in Inda.. I myself remember taking online lectures from mit/stanford open course ware these were not even cursorily taught in my med school.(i self learnt college level physics ,mathematics,biochemistry and molecular biology during my mbbs days)...

loss due to nrega,corruption fsb etc is not even the tip of iceberg ...if anyone of you can calculate loss of opportunity due to UPA rule it would be great...so that we can tweet about it...loss of opportunity due to poor governance should be mainstream media discourse ...

panduranghari · Post by **panduranghari** » 27 Feb 2014 01:01

^ Terna medical college when it was given approval by MCI, hired actors to play patients and doctors, rented a 6 storey building for 3 months in Dadar, Central Mumbai , put infrastructure resembling a hospital and got approval. Once it was approved some politician invested big bucks, got plot in Navi Mumbai and now it's a fully functional medical college.

What a joke.

rgosain · Post by **rgosain** » 27 Feb 2014 03:25

Theo well said:
Jean Dreze with his degree from the hallowed portals of the University of Essex has been a blazing success for his masters and mentors. He has succeeded in bleeding the treasury dry, destroying any attempts to build for the future and debased the currency to serve his masters. Even if a fraction of the funds were utilised for infrastructure investment, the long term savings would have been beneficial. For example according to the World Bank, spending $1 on flood-defences save $8 in the long term and a whole lot of life.

gakakkad · Post by **gakakkad** » 27 Feb 2014 03:54

panduranghari wrote:^ Terna medical college when it was given approval by MCI, hired actors to play patients and doctors, rented a 6 storey building for 3 months in Dadar, Central Mumbai , put infrastructure resembling a hospital and got approval. Once it was approved some politician invested big bucks, got plot in Navi Mumbai and now it's a fully functional medical college.

What a joke.

that is a different problem altogether... while the example I posted was from an AIIMS... If premier insti's like aiims and iit end up as hogwashes it is a massive governance problem..

Austin · Post by **Austin** » 27 Feb 2014 11:24

Rajan Says RBI Aims to Curb Inflation ‘Over Time,’ Not Abruptly

Reserve Bank of India Governor Raghuram Rajan said the central bank aims to bring down inflation “over time rather than abruptly” in its effort to curb price pressures and generate sustainable growth.

“Rather than administer shock therapy to a weak economy, the RBI prefers to disinflate over time rather than abruptly” raise interest rates, Rajan said yesterday in Mumbai, according to an e-mailed text of his speech. “As of now, we believe the rate is appropriately set.”

A Volcker-like tightening “may lead to a collapse in demand and bring inflation down quickly, it will cause significant damage to the economy,” Rajan said. “A developing country is not in the same resilient position as the United States.”

Rajan said the central bank is “committed to getting the strongest growth possible for India,” and the best way to support growth is by bringing inflation down over a “reasonable period of time.”

Rajan said it would be “good” if the prime minister or parliament set a medium-term inflation target, based on advice from the central bank.

To control food inflation, India needs to focus on curbing rural wages and cut the role of middlemen in the farm trade to decrease price differences between wholesale and retail food prices, Rajan said.

Suraj · Post by **Suraj** » 28 Feb 2014 05:52

Here's something that will make vina do cartwheels:
Narendra Modi positions himself as 24-hour CEO-cum-COO

But the Gujarat chief minister and BJP prime ministerial candidate went beyond the vision thing and offered something that is sorely needed: the promise of a 24-hour prime minister who would tackle the country’s problems by getting to the roots. His message: vision is important, but execution ability is super-critical.

On growth, which is the country’s main concern, Modi’s approach was elliptical. He seemed to suggest that growth too comes from doing things right rather than announcing things. He pointed out that Gujarat was a drought-prone state, with droughts in seven years out of 10. But the state’s focus on water conservation, soil quality, seeds, and use of technology in agriculture made it a high agri-growth state – with an average of over 10 percent growth over the last decade. Put another way, he was saying if you deal with the nuts-and-bolts of implementation, growth will follow.

Modi’s second big pitch was on federalism. He strongly criticised centralised planning in Delhi and more or less rubbished the need for a Planning Commission. If Modi becomes PM, we can expect the Planning Commission to be made irrelevant, if not scrapped altogether.

In Modi’s world, it is the states that give India strength, not Delhi-driven policy or resource allocations. He said Delhi cannot evolve policies for states, for this needs you to consider each state’s strengths, and not offer one-size-fits-all solutions for all states. He subtly promoted himself by pointing out that almost all prime ministers were Delhi animals. What Delhi now needed was someone who understood states and had done good work there.

His idea of a national cabinet is not a bunch of ministers sitting with the PM in Delhi to decide issues, but a super cabinet where the PM and CMs jointly decide what is good for the country. "The Union cabinet is not complete without the CMs," he seemed to imply.

A third priority he offered was simplifying laws. He had a clear antipathy to excessive legislation – a UPA tendency where everything has been converted into a right (right to food, right to education, etc). Though he did not specifically refer to these as hindrances, he did say that for every new law legislated, 10 others must be scrapped so that it is easy to follow the law. He expressed horror at the sheer amount of laws we pass without bothering about implementation.

In Modi’s scheme of things, if you invest in cleanliness and preventive healthcare, the government’s health budget can actually be reduced. That’s a subtly radical idea no doubt – which any supply-side economist would approve of. Modi's belief in more governance, less government, clearly emerges in the details – if not the broad vision.

Modi’s ultimate calling card was his willingness to devote time to day-to-day governance by being a 24-hour chief executive. "Bad governance is like diabetes. It invites all other diseases," he said. What Modi was offering his audience was not insulin, but a sugar-free diet that would avoid diabetes.

This is exactly the kind of leadership through effective governance and implementation that the country needs. Just implement the basics effectively.

panduranghari · Post by **panduranghari** » 28 Feb 2014 05:59

He has experienced the life of a common man and a CM. He can see what both would like.

What Shakespeare said about men and greatness seems very apt here-' Some people are born great some achieve greatness and some have greatness thrust upon them'.

Singha · Post by **Singha** » 28 Feb 2014 10:41

what is the fate of the NE monsoon this year? has it abjectly failed?

blr atleast has seen no rain in the last two months, the whole place is covered in dust and humidity is so low its uncomfortable to sleep at night.

what is the situation in the coastal and central plains of TN ?

Aditya_V · Post by **Aditya_V** » 28 Feb 2014 21:31

Bad, no NE moonsoon in Chennai atleast. Its going to be a tough summer.

Populist measures and crony capitalis means it will take anther 5 years to get back on track. We need 15 years of INC free, Third frront free governance to get bak on track.

But those NGO fed gravy train including many in Media did not like it.

Today the CSR sections of Companies act have been put in effect. Only thing is not many companies are in profit for it to be applicable.

nawabs · Post by **nawabs** » 28 Feb 2014 22:48

El Niño scare: Govt prepares emergency plans for 500 districts

http://www.business-standard.com/articl ... 746_1.html

The government, on Wednesday, swung into action following reports that El Niño might disrupt the monsoon in 2014, by giving shape to contingency plans for 500 districts.

It also asked states to be prepared for insufficient rainfall, even as impact of El Niño might not be as severe as in 2009, when India had faced the worst drought in 30 years.

El Niño is a weather phenomenon that disturbs the formation of clouds due to warm waters off western coast of south America. It emerges after a gap of every three-seven years and affects monsoon rain in India.

Agriculture Minister Sharad Pawar said contingency plans were ready for 500 districts and would be made operational in the event of low rainfall during monsoon. The plans include close monitoring of the situation, keeping ready sufficient quantities of short-duration varieties of major crops, issuing location-specific advisories and taking the help of research institutes.

Australia’s Bureau of Meteorology and the US Climate Prediction Center have warned of increased chances of the return of the El Niño weather pattern that can trigger drought, hitting production of key crops such as rice, wheat and sugar cane.

However, Pawar said, “Our Met Department is seriously concentrating on this subject. This type of situation, we have seen in 2009 as well. But whatever assessment made by experts about this issue, they said it would not be that severe which will impact overall production and productivity. But still, we are keeping a close watch (on it). “

El Niño had been responsible for causing below normal rain three times in the last decade — 2002, 2004 and 2009 — in India.

Monsoon rain was 22 per cent below normal in 2002, while it was 17 per cent below normal in 2004.

In 2009, when India faced one of the severest droughts in recent years, rain in the four-month season was 27 per cent below normal. Food grains production in 2009-10 dropped to around 218.11 million tonnes, almost seven per cent less than the previous year’s. The year 2012 was also an El Niño year, which witnessed seven per cent below normal rainfall.

Last month, India’s leading private weather forecasting agency, Skymet, had predicted monsoon in 2014 could have a high chance of being “below normal” due to the emergence of El Niño. Skymet said 2014 monsoon will most probably not experience a La-Nina year (this phenomena correlates well with excess rainfall). Therefore, there is little chance of excess rain.

The India Meteorological Department classifies monsoon rain between 96 and 104 per cent of the long period average (LPA) as “normal”, while that between 105 and 110 per cent of the LPA is considered “above normal”. More than 110 per cent of LPA is excess rainfall. Also, rain between 90 and 94 per cent of the LPA is considered “below normal, “while rain below 90 per cent of LPA is “drought”.

Singha · Post by **Singha** » 01 Mar 2014 08:45

I am almost sure we are heading into a bad monsoon, the countryside is dry and struggling.....I had visited a place near KA-TN border ... dust .... dry soil..no evidence of any rains for months....

but ofcourse MSM will devote 1 page to snowstorm in america and we will get details about how americans had to struggle for 2 hrs walking on the road to reach home. or camp overnight in their offices.

Singha · Post by **Singha** » 01 Mar 2014 10:26

The various windbags crowding our tv channels seem to be unaware and uncaring of this heavy torpedo already homing in.
congis don't care as they don't expect to be in charge come June.

anchal · Post by **anchal** » 01 Mar 2014 10:39

Last night untimely rains and hailstorm devastated crops in my village (West UP). Heavy losses expected in potato crops from a region which produces 30% of India's potato. Brace for a real high food inflation this year too

Obviously no News Hour Tonight on this topic. The same old Nautanki will play on with panelists drinking LIVE on the TV, same coverage for revolutionary IITian start-up. Any profession which has to be hauled up for their disproportionate crimes is journalism. These guys has completely LOST IT

kmkraoind · Post by **kmkraoind** » 01 Mar 2014 12:33

Heard on the Street: Have cash... want to turn it white?

Stock market operators can turn your black money into white at a cost. They ask you to buy a stock, hold it for more than a year and rig the share price. Their commission? Only 5 per cent in cash.

Take the case of a small IT company where a few high net worth (HNI) individuals were asked to buy the stock at around Rs 60-70 in April-May last year. The stock touched a high of Rs 290 on February 25.

An HNI has tax-free income (long-term capital tax is exempt) of more than Rs 200. He will give his black money to the operator, who will reverse the entry and buy back shares from the HNI from the open market. The operator has announced an open offer to buy back the shares of the IT firm through a front company.

Theo_Fidel · Post by **Theo_Fidel** » 02 Mar 2014 00:37

It is unfortunately a little late to worry about the NE monsoon which ended prematurely 2.5 months ago. I think I posted then that it had failed after we got a 30% NE monsoon after the IMD predicted an 120% susplus NE monsoon! Only redeeming point is the SW monsoon was excellent and one of the best in years. That should soften the blow. The main problem will be drinking water in Chennai.

Austin · Post by **Austin** » 03 Mar 2014 12:58

China emerges as India's top trading partner: study

India's eastern neighbour China has emerged as its biggest trading partner in the current fiscal replacing the UAE and pushing it to the third spot, according to a study conducted by PHD Chamber of Commerce.

India-China trade has reached $49.5 billion with 8.7 per cent share in India's total trade, while the US comes second at $46 billion with 8.1 per cent share and the UAE third at $45.4 billion with 8 per cent share during the first nine months of the current fiscal, the study revealed.

The UAE was India's biggest trading partner in the 2012-13 fiscal.

India's trade (exports and imports) with China was only of $7 billion in 2004 which rose to $38 billion in 2008and to $65 billion in 2013.

"India's direction of foreign trade has exhibited a structural shift during the last decade. Trade volume and trade share of emerging and developing economies has increased while the share of conventional trading partners has showed a declining trend," PHD Chamber president Sharad Jaipuria said.

However, with the revival of demand in advanced economies, the US has re-emerged as India's top exports destination. India's exports to the US during April-Dec 2013 stood at $29.3 billion followed by the UAE at $22.3 billion and China at $10.8 billion. In the 2012-13 fiscal, UAE was India's top exports destination followed by the US and Singapore, the study pointed out.

Besides, UK and Germany have come down in the list of the top export destinations, while Belgium and Italy are out of the list. On the other hand, Saudi Arabia and Netherlands have made it to the list of top ten export destinations.

One significant development in India's import scenario is the emergence of Saudi Arabia, UAE, Kuwait, Qatar, Iraq and Switzerland amongst the country's top ten import sources.

Aditya_V · Post by **Aditya_V** » 03 Mar 2014 21:48

Question is they are exporting finished goods and we are exporting raw materials rather than the otheer way around.

Suraj · Post by **Suraj** » 03 Mar 2014 22:55

With China our trade is lopsided - we export raw materials and import finished goods. With the ROW, except for oil, it's the other way around - we increasingly export the value added stuff, importing crude and exporting refined petroleum, or importing raw gold and gems and exporting finished jewelry.

Christopher Sidor · Post by **Christopher Sidor** » 04 Mar 2014 23:07

Read this fantastic article about the Bombay plan and the remarkably parallel between it and the first three 5 year plans, especially the second 5 year plan. The 3rd five year plan failed miserably due to our gross ineptitude of 1962. The point was that while the aims of Bombay plan and 5 year plan converged to a large degree, they differed on two crucial aspects,

1) Along with the five year plan there was a gradual decrease in breathing space for the Indian companies. Their operating space was being squeezed via the permit-license raj system.
2) The government of independent India instead of building capital markets in India restored to money printing on a massive scale and also on currency devaluation. Independent India's biggest devaluation occurred immediately after independence when a rupee which had parity with dollar fell to 4 rupees to a dollar a fall of over 300%.

While we are reforming the first in a very screwed up manner, recall all the corny capitalism of NDA+UPA we are still in enthrall of the second where our government continues to print money like there is no tomorrow. I wonder when will we start to reform on the second point.

Suraj · Post by **Suraj** » 04 Mar 2014 23:09

Christopher Sidor: What article ?

Commerce minister sees exports crossing $300 billion

Commerce and Industry Minister Anand Sharma on Tuesday said this financial year, India’s merchandise exports would exceed last year’s $300 billion. He, however, refused to comment on whether these would meet the government’s target of $325 billion.

Last year, during the annual review of the Foreign Trade Policy 2009-2014, the government had set an export target of $325 billion. While presenting the 2014-15 interim Budget earlier this month, Finance Minister P Chidambaram had said this financial year, exports would stand at $326 billion.

On gold imports, Sharma said soon, the commerce ministry would take up the matter with the finance ministry and seek relaxation of the 80:20 rule imposed by the Reserve Bank of India. Under the rule, import of gold isn’t allowed unless 20 per cent of the previous imports are exported. The norm had left many confused, leading to imports being held up at customs.

Manufacturing PMI shows best monthly gain in a year

Activity in India's manufacturing sector expanded at its strongest pace in a year in February, a survey showed Monday, providing some relief after a clutch of recent weak data showed little signs of a turnaround in the economy.

The HSBC Purchasing Managers' Index (PMI) for the manufacturing sector rose to 52.5 in February, its highest since March 2013. The index was at 51.4 in January. The 50-point mark separates growth from contraction in this index based on a survey of 500 large manufacturing units.

The encouraging signs in the manufacturing sector come after data on Friday showed the nation's economy expanded at a tepid pace of 4.7% in the October-December period, a shade below the previous month's 4.8% growth and recording a sub-5% expansion for the seventh successive quarter.

Suraj · Post by **Suraj** » 06 Mar 2014 09:30

FIEO estimates exports will fall short of the $325B target by about $10B
India not to achieve $325 billion export target this fiscal: FIEO

"We will not be able to achieve the $325 billion exports target," Federation of Indian Exports Organisation (FIEO) President Rafeeq Ahmed said.

The country's merchandise exports would touch $312-315 billion by the end of this fiscal, ending March 31.

During April-January, exports grew by 5.71 per cent to $257 billion, while imports dipped by 7.81 per cent to $377 billion. The trade deficit was about $119 billion.

Ahmed said that liquidity is a big issue for exports and pending claims of refund of service tax, duty drawback, rebate claims and VAT are affecting exports.

There is an urgent need to enhance investments in building infrastructure such as roads and ports, he said.

"Inadequate infrastructure is impacting exports. Transactions costs is very high," he said, adding that the banks should provide credit at affordable rates to exporters.

The manufacturing sector, which constitutes over 75 per cent of the index, declined by 1.6 per cent in December, as against a contraction of 0.8 per cent in the year-ago period.

Nothing surprising. GoI has decreased infrastructure spending by 10% in nominal terms in the last 2 years, which, added to transaction costs, have hurt export growth as well.

The extent of the near total stagnation of manufacturing output in the last two years unfortunately gets very little press attention, even though the lack of investment in the core sector is the cause of both slowdown in GDP growth and the rising inflation.

Singha · Post by **Singha** » 06 Mar 2014 14:42

there are also fairly shocking amts of VAT, service taxes etc levied in india.
a 18K bill becomes 21k.
a 1500 food bill goes to 2000 when one adds in 10% service charge as well.

the local Adigas is the only affordable VFM place left. 80/- for a filling N/S thali.

mithai is super expensive....25 for a rasgulla or peda anyone?