Indian Economy - News & Discussion 27 May 2012

vera_k · Post by **vera_k** » 10 Aug 2012 08:23

Secular government restores Hindu rate of growth

nawabs · Post by **nawabs** » 10 Aug 2012 10:31

Delay in GAAR won’t prevent anti-tax evasion drive: FM

http://dailypioneer.com/business/86198- ... ve-fm.html

Government has given an assurance to investors that though the implementation of General Anti Avoidance Rule (GAAR) has been delayed by a year as need was felt to provide wider consultation among stakeholders on it, this would not in any way have any significant impact on the efficacy of measures being taken against proliferation of black money and checking tax evasion.

Theo_Fidel · Post by **Theo_Fidel** » 12 Aug 2012 08:50

The usual monsoon slump is quite bad this year.

Katare · Post by **Katare** » 13 Aug 2012 23:11

At least electricity is doing good, with contracting manufacturing sector power availability should improve further.

Pratyush · Post by **Pratyush** » 14 Aug 2012 14:08

How can you improve electricity production in a year with bad monsoon and slump in mining sector.

Is it because of an increase in non conventional sources of electricity eg wind and solar.

Pratyush · Post by **Pratyush** » 14 Aug 2012 14:17

Inflation is down, not out; expect a surge later this year

Who killed the India growth story: Delhi, not Mint St

vishvak · Post by **vishvak** » 14 Aug 2012 20:14

People have to pay to maintain not only infrastructure for power, but also for personal arrangements as per unavailability of power.

So if power from grid is not available, people buy generators for personal or industrial purpose. And then import oil to run independent generators. This is perhaps the jugaad.

link: Generators whirring, India's factories shrug off blackouts.

The flip side is that people pay to maintain state level power grid and personal level power backups. This perhaps too adds to inflation.

2 paise.

Vipul · Post by **Vipul** » 15 Aug 2012 04:48

One-third of slowdown due to interest rate hikes, says Gokarn.

Reserve Bank of India (RBI) deputy governor Subir Gokarn on Tuesday said the central bank had come to a rough conclusion that about a third of the slowdown was due to interest rate hikes and the rest due to a combination of other domestic and global factors.

In an interview with CNBC-TV18, Gokarn said the slowdown in growth is more due to global headwinds. “When the world economy was growing at 3-3.5 per cent or 4 per cent in pre-crisis years, Indian growth was close to 9 per cent. Global growth is now much less and we have seen adjustments, so some of it is there,” Gokarn said. He said rating agencies would put a lot of weight on the fiscal condition when reviewing the country’s sovereign rating. “So, when you are looking for signs that the rating is vulnerable, the fiscal situation is really the No.1 priority,” Gokarn said.

“We got to be able to identify the right solution for the problem and fiscal consolidation is at the centre of it. Along with fiscal consolidation, if it’s done with adjustments in energy prices, there is a positive impact on balance of payments also because if fuel is more expensive, there will be a little less of it imported,” Gokarn said.

Virupaksha · Post by **Virupaksha** » 15 Aug 2012 10:48

1) Just read the Prime Minister's speech and started banging my head. He has laid the NAC's agenda on the forefront and has basically said infrastructure, reforms or any can wait while he spends to the hilt. He puts most of the blame for the slowdown on the europe crisis. He also hints at domestic issues hindering it but evades as to what those are and what he is trying to overcome them. Unfortunately, going more than that will put the blame on his party only, so as usual silence.

2) For good ness sakes, he is considering the establishment of National Skill Development Authority, yes you read it right. An authority for the skill development.

3) Joo dare to ask what he has done and dare to do for infrastructure. Yes, he gloriously proclaims that they have set ambitious targets. I have set the targets, now my work is complete. The hoors of planning commission jannat beckon me while the jhollah wallahs entertain me.

Recently we have taken new measures to accelerate infrastructure development. Ambitious targets have been fixed in roads, airports, railways, electricity generation and coal production.

The only other mention of ANY kind of infrastructure is the rural electrification.

4) He also proudly mentions that one in every 5 households is eligible for the NACs dole out scheme, NREGS and says that last year 8 crore have availed of it. 8 crores out of working population of around 40 crores (according to census) now live on the dig a ditch and cover the ditch scheme.

Read and weep. He has basically said that they are 2014 election mode, which they have been since 2004- dont expect anything out of us except more jholawallah schemes.
http://timesofindia.indiatimes.com/indi ... 501134.cms

Tells me how much PVN was the architect of the 1991 reforms while all the praise was appropriated by MMS.

Singha · Post by **Singha** » 15 Aug 2012 10:59

keeping everyone poor and on govt support is a goal where many interests converge - INC, EJ, commies, civil society activists, jholawallah MNC-NGO jetset types.

only they will manage and control this from posh places in delhi and mumbai while rest of country is a black hole.

AbhiJ · Post by **AbhiJ** » 15 Aug 2012 13:36

Singha wrote:keeping everyone poor and on govt support is a goal where many interests converge - INC, EJ, commies, civil society activists, jholawallah MNC-NGO jetset types.

only they will manage and control this from posh places in delhi and mumbai while rest of country is a black hole.

I doubt that. If Shiv Sena-BJP comes in Power in Maharashtra - The above Nexus will take a Serious Beating. The Maharashtra Government is one Loophole which most of here miss out.

I am trying to analyze if a Narenda Modi as PM for (2014-2019), how much time will be taken to undone (Ctrl+Z) of the Shit done from 2004-2014. In the Last NDA Government, they did an up heal task (10/10) for the 50 Year Old Socialist Economy they inherited.

RoyG · Post by **RoyG** » 16 Aug 2012 00:04

It wont take much. The effects of opening up the economy and speeding up reforms are rather quick because society, not the gov, does the heavy lifting.

Don · Post by **Don** » 16 Aug 2012 11:26

It is very to scary to look at the future of India with its frightening demographic growth and poverty.

http://www.bloomberg.com/news/2012-08-1 ... racle.html

Rejuvenating India’s Growth

Is India’s growth miracle coming to an end? Sadly, and despite the nation’s vast untapped potential, the answer may well be yes.

Prime Minister Manmohan Singh had a chance to dispel the pessimism on Wednesday, and wasted it. His address from New Delhi’s Red Fort to celebrate India’s 65th birthday as an independent nation was a moment to convince the country of the need for a new round of economic reform, the cause he first championed 20 years ago as finance minster. Nobody was surprised that the speech was low-key: Singh is calm and quiet to a fault. Even so it was a letdown. Heavy on generalities and devoid of details, it conveyed no sense of purpose or urgency, two things India badly needs.

Before the reforms that began in 1991, India had grown sluggishly for decades, even as China’s economy had soared. Complacent politicians blamed democracy. Change was hard, they said. India couldn’t hope to match an authoritarian state when it came to growth.

Singh and the other reformers proved them wrong. They dismantled the so-called License Raj -- a system of permits and controls that told the country’s industrialists exactly what to make and how -- and they eased restrictions on foreign trade. The growth rate doubled to 9 percent and stayed there. World- class companies appeared from nowhere, and poverty retreated faster than ever before.

The miracle began to fade in 2009, not just because of the global recession. Last year the economy grew by 6.5 percent -- halfway back to the “Hindu rate of growth” that an earlier generation of leaders deemed depressingly adequate. The World Bank and other development agencies, and many Indian business leaders, say the country should still be growing at 9 percent or 10 percent a year, and they’re right.

Growth is faltering because the first great surge of reform petered out. The public sector remained a crushing fiscal burden, through an unfathomable array of badly targeted subsidies. The direct cost of food, energy and other supports is nearly 10 percent of gross domestic product. Their indirect cost is enormous, too. Subsidies on such a scale invite corruption, which is worsening, spurring the populist reform movements of Anna Hazare and others. Subsidies can also deter private investment, a main cause of the power cuts that blacked out half the country this month.

Crowded out by the cost of subsidies, pressing infrastructure needs go unmet. The tax system is complicated and unpredictable. Recently the government broke its promise to let foreigners compete in retailing, a sector crying out for modernization. Many industries continue to be heavily regulated.

Singh understands all this and made glancing reference to it in his Independence Day speech: “To attract foreign capital, we will have to create confidence at the international level that there are no barriers to investment in India.” Yet he offered no specifics.

Far from promising to unravel the Subsidy Raj, he took credit for the outlays needed to advance it: seed subsidies, fuel subsidies, housing subsidies, you-name-it subsidies, a bank account for every household, electricity for every household. Oh yes. There’ll also be room in the budget for a Mars orbiter mission.

The prime minister blamed a lack of political consensus for recent policy reversals and slowing growth -- an echo of the favorite excuse from the pre-reform era. He’s right. He leads a turbulent coalition, shares de facto power with Sonia Gandhi, and is opposed at every turn by the Hindu-populist Bharatiya Janata Party.

It’s hard to be India’s prime minister, all right, but leaders have to build consensus, and Singh is failing. In the early 1990s, an economic crisis provided the initial momentum to the reform program. Today’s sluggish growth is disappointing, but it isn’t an emergency, so a different case for reform is needed, one based on an undisguised commitment to market forces and private enterprise. A constituency receptive to this case now exists thanks to the flowering of Indian business since 1991.

Two recent appointments offer a glimmer of optimism. Singh has reinstated Palaniappan Chidambaram, a veteran reformer, as his new finance minister and hired Raghuram Rajan of the University of Chicago’s Booth School of Business as his economic adviser. Intellectually, this triumvirate is convinced of the need for fiscal discipline, investment in crumbling infrastructure and renewed economic reform -- and investors know it. They know, too, that turning those ideas into action is the problem.

India’s leaders solved it once, and must solve it again. The first step is for Singh to pick a fight he can win, and use it to announce a new phase of reform. Letting foreign investors enter retailing is the perfect place to start. The government’s retreat on the issue signaled weakness; that message needs to be reversed. The economic case in favor is strong and, crucially, can be cast in populist terms: A more competitive retail sector would drive down prices of food and other goods, so the policy is pro-poor.

It won’t be an easy fight, but settling for paralysis could unwind the achievements of the past 20 years. Avoiding that tragedy is worth a few risks.

Read more opinion online from Bloomberg View. Subscribe to receive a daily e-mail highlighting new View editorials, columns and op-ed articles.

Today’s highlights: the editors on the messy Medicare debate; Jonathan Alter on Paul Ryan’s gift to Democrats; Caroline Baum on why conservatives don’t mind meddling in private affairs; Ezra Klein on how Ryan could be Democrats’ worst nightmare; Jonathan Mahler on the U.S. popularity of European soccer; Adam Kirsch on the politics of personal destruction in “Advise and Consent”; Russell G. Ryan on giving the Securities and Exchange Commission too much power.

subhamoy.das · Post by **subhamoy.das** » 16 Aug 2012 11:51

Don wrote:It is very to scary to look at the future of India with its frightening demographic growth and poverty.

http://www.bloomberg.com/news/2012-08-1 ... racle.html

The reformist PM in the 90s of PVNR and not MMS and at that time the DYNASTY was also very weak. We all know how PVNR was treated by the DYNASTY. But now MMS is an appointed PM of the DYNASTY and has no power to control anything beyond fumbling written speeches. This articles has not acknowledged this root cause. MMS is the same person but the diff in his boss has made all this downhill journey.

member_22539 · Post by **member_22539** » 16 Aug 2012 11:57

It is very to scary to look at the future of China with its frightening demographic shrinking/ageing and hidden poverty.

Now all I need to do is pick a doom and gloom farticle, but the dilemma is which to choose, there are too many choices.

(Sorry about going off topic, but 50-centers need to be put in their place.)

Prem · Post by **Prem** » 17 Aug 2012 07:51

http://www.nytimes.com/reuters/2012/08/ ... .html?_r=1
Judging the Impact of a Junk-Rated India: Not as Bad as It Looks

[quote]Credit default swaps suggest India is already a bigger investment risk than emerging markets such as Vietnam and more than double the risk of fellow BRICS Brazil, Russia, China, and South Africa. Overseas portfolio investors have also been conditioned to low expectations for a government that has long disappointed on fiscal reforms - the key factor in whether or not India averts a ratings downgrade.
Given its sizeable foreign exchange reserves and low overseas debt, a ratings downgrade would not trigger financial turmoil. Still, it would be humbling for a country with big aspirations to sit at the top table of emerging economies. "I am not going to sell my positions, as India is going to get downgraded. I do not treat or regard India as an investment-grade country," said Kenneth Akintewe, who helps manage around $7 billion in Asian fixed-income assets at Aberdeen Asset Management. "The rating agencies have tended to move behind the markets, and markets have priced in that eventuality long before the rating agencies do anything," he said.
The key concern is the fiscal deficit, which overshot a target of 4.6 percent of GDP by 1.2 percentage points in 2011/12 and is expected to swell to 6 percent of GDP in the current year to March 2013.Typically, a country can take a big hit when its sovereign rating is cut to junk as investment houses with mandates barring them from higher-risk investment withdraw their capital. However, in India, foreign investment penetration is low. Foreign investors own only about $20 billion of the country's roughly $500 billion bonds outstanding -- or in line with government caps.
And despite the prospect of a ratings downgrade, foreign investors have continued to build positions since the S&P and Fitch statements. They bought a net $1.7 billion in government debt between May and so far in August, bringing their total net purchases for the year to $4.8 billion. In stocks, foreign investors have reversed course since the beginning of July, buying a net $2.8 billion to bring their year-to-date buying to $10.3 billion. Nor have foreign investors stopped buying into Indian overseas debt, as a string of state-owned banks including SBI and Indian Overseas Bank have shown.[/quote ]

Don · Post by **Don** » 17 Aug 2012 12:05

Jhujar wrote:http://www.nytimes.com/reuters/2012/08/ ... .html?_r=1
Judging the Impact of a Junk-Rated India: Not as Bad as It Looks

Credit default swaps suggest India is already a bigger investment risk than emerging markets such as Vietnam and more than double the risk of fellow BRICS Brazil, Russia, China, and South Africa. Overseas portfolio investors have also been conditioned to low expectations for a government that has long disappointed on fiscal reforms - the key factor in whether or not India averts a ratings downgrade.
Given its sizeable foreign exchange reserves and low overseas debt, a ratings downgrade would not trigger financial turmoil. Still, it would be humbling for a country with big aspirations to sit at the top table of emerging economies. "I am not going to sell my positions, as India is going to get downgraded. I do not treat or regard India as an investment-grade country," said Kenneth Akintewe, who helps manage around $7 billion in Asian fixed-income assets at Aberdeen Asset Management. "The rating agencies have tended to move behind the markets, and markets have priced in that eventuality long before the rating agencies do anything," he said.
The key concern is the fiscal deficit, which overshot a target of 4.6 percent of GDP by 1.2 percentage points in 2011/12 and is expected to swell to 6 percent of GDP in the current year to March 2013.Typically, a country can take a big hit when its sovereign rating is cut to junk as investment houses with mandates barring them from higher-risk investment withdraw their capital. However, in India, foreign investment penetration is low. Foreign investors own only about $20 billion of the country's roughly $500 billion bonds outstanding -- or in line with government caps.
And despite the prospect of a ratings downgrade, foreign investors have continued to build positions since the S&P and Fitch statements. They bought a net $1.7 billion in government debt between May and so far in August, bringing their total net purchases for the year to $4.8 billion. In stocks, foreign investors have reversed course since the beginning of July, buying a net $2.8 billion to bring their year-to-date buying to $10.3 billion. Nor have foreign investors stopped buying into Indian overseas debt, as a string of state-owned banks including SBI and Indian Overseas Bank have shown.

Altair · Post by **Altair** » 17 Aug 2012 18:03

Ratings by the three rating agencies is a big sham. No body in financial domain takes them too seriously anyways. It is just like knowing Zimbabwe vs Bangladesh ODI score.

ShauryaT · Post by **ShauryaT** » 18 Aug 2012 01:05

Shyam Saran: India's next tryst with destiny
Unlike China, India has not clearly embraced its post-reform policy direction

One, if we accept that the post-1990 economic reforms and liberalisation have enhanced India’s national power, then they must be accorded political legitimacy. Beyond a certain threshold, there is a trade-off between policies of accelerated growth and expanded entitlement payments such as subsidies, employment guarantee and food security. This should be acknowledged and a political consensus must be evolved on the preferred choice.

Two, the role of the state in economic activity needs to be redefined. There is some reluctance to divest interventionist approaches and abandon administrative pricing of resources, which have led to huge distortions in the economy. Our embrace of the market has been half-hearted and halting.

Three, the entry of foreign capital into India continues to be met with ambivalence. Unlike in China, no effort has been made to articulate a clear and persuasive case for the role of foreign capital and technology in India’s development.

Four, the institutional and governance structure at the central and state levels has remained essentially unchanged since the early days of India’s independence. Their overhaul is long overdue.

Five, perhaps the most important element is to invest in building human and institutional capacities required to implement an altered vision.

As we celebrate the anniversary of India’s independence, a national discourse on the above elements may contribute to the drawing up of a new template for India’s next tryst with destiny as a great power.

Prem · Post by **Prem** » 18 Aug 2012 04:00

http://www.ft.com/intl/cms/s/0/4df682f4 ... z23qVvYe6O

Coal deal lost India $33bn, says auditor

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email [email protected] to buy additional rights. http://www.ft.com/cms/s/0/4df682f4-e869 ... z23qWEPIIL

India’s official auditor on Friday accused the government of losing more than $33bn in potential revenue by transferring coal mining blocks too cheaply to private companies, reigniting a row about corruption and prompting calls from the opposition for the resignation of Manmohan Singh, prime minister.Mr Singh’s Congress-led coalition immediately disputed the findings of the Comptroller and Auditor-general (CAG), arguing that big investments in mining and power stations were essential in this energy-hungry nation.

nachiket · Post by **nachiket** » 18 Aug 2012 04:06

The scams just keep on piling. CWG, then 2G and now coal. This government has sucked the economy dry.

Pratyush · Post by **Pratyush** » 18 Aug 2012 10:59

CAG not following mandate, ‘coal-gate’ report not final: Narayanasamy

The taming of cag is going to start if this is the thinking of INC.

CoalGate replaces 2G as the mother of all revenue-loss scams

nawabs · Post by **nawabs** » 20 Aug 2012 14:49

Well read the wisdom these guys want to impart to all lowly lives in India:

Inflation good for farmers, I am happy with the mehengai: Beni Prasad

http://newindianexpress.com/nation/article592551.ece

Union Minister for Steel Beni Prasad Verma Monday stoked a controversy with his comment that price rise was beneficial for farmers. The opposition pounced on his remark accusing the government of being part of the "mehengai mafia" (price rise mafia).

The minister made the remark Sunday while talking to reporters on the sidelines of a function in Barabanki, near Lucknow. Asked to comment on price rise, Verma said the government was taking steps to tackle it, but he was happy with the rising prices of food items as it was beneficial to farmers.

"With the increasing price levels, the farmers are benefitting. Dal, atta, vegetables have all become expensive. I am happy with this mehengai. The more the prices rise the better it is for farmers," the minister said.

His remark attracted criticism from the opposition Bharatiya Janata Party (BJP) with party leader Shahnawaz Hussain saying that though the government maintains it is for the common man, the minister's remark showed it has "actually moved far away from the people".

However, BJP leader Mukhtar Abbas Naqvi was more critical, saying the government was the "Mogambo" or villain of price rise. He was referring to a popular portrayal of a villain from a Hindi film.

"The government is the mehengai ka Mogambo. It is certain that when prices rise, when there is unemployment and farmers commit suicide... then it is but natural that the mehengai ka Mogambo will be happy," Naqvi told reporters.

"The government has become a member of this mehengai mafia and that is why when the common man mentions price rise, they are happy."

brihaspati · Post by **brihaspati** » 21 Aug 2012 07:39

Very interesting discussion going on about the need for reforms, the stock "Hindu rate of growth" (strictly speaking Nehruvian rate of growth), and how the reformist trio (or triumvirate?) with a Chicago Biz school recruit to boot, must play the role of the historical trio of Caesar, Pompey and Crassus "saved" the Roman Republic.

All these pointers make me very curious.

(1) We know that the Nehruvian rate of growth hobbled India's growth until late 80's. India suffered from poor infrastructure, lack of capital, lack of FDI, and "socialist" economy. But surely Indian big capital had offered to invest massively in infrastructure and industrialization right after freedom was attained? Did GOI refuse such investment offers out of socialist pride? Similarly since labour productivity is such a big problem, surely Indian industrialists must have keenly felt the problem and offered to invest in upgrading skills and education set? How did the GOI go about refusing such offers?

(2) If Indian growth is so closely tied to the capacity of the world market to absorb Indian products, then does it imply that Indian capital needs to invest in the world market to increase world market's capacity to absorb Indian products and fuel Indian growth?

(3) FDI in retail sector will lower costs and hence a win win situation for everyone. There must be solid evidence for this from those markets abroad where FDI has gone in heavily and the retail sector has been opened wide for foreign invetsments. Can we have a a range of references for these?

(4) A lot of the reforms that we have so correctly identified as promoting growth and trickle down prosperity for all and sundry - must have been already implemented in many western countries, including the country in which Chicago Biz School is located. Given the periodic denuding of wealth from a lot of people in the middle and lower income group in those regions of the world, there must be other factors than our much needed reforms that can jeopardize such wonderful measures. It might be helpful to discuss those specific factors so that we can avoid those factors for India.

(5) Educational upgrading and skillset development to use massively labour-replacement technologies is correctly identified to be a key factor of growth and all round prosperity in a national economy - as has happened say in the prosperous economies of the idnustrialized "west". Can we get a trajectory of records of how such skillset development for all these prosperous economies actually took place? Also after such massive and allround skillset improvement for the overwhelming majority of the population in the industrialized "west", labour productivity has gone so high that these "advanced" western economies were and still are far ahead of the obviously less "improved" and "educationally upgraded" workforces like that of China. Even if intensively labour-replacing technology produces fewer and fewer high-skilled jobs, surely the trickle down benefits from the super productivity of the few is so great that the western economies are actually flourishing nowadays.

Some stats and a few economic history references on a global zonal division basis would be really really helpful.

chetak · Post by **chetak** » 22 Aug 2012 23:12

Toronto research firm rocks clubby world of India Inc.

Earlier this month Veritas released a report on IndiaBulls Group, a one-time brokerage that has branched into real estate and other businesses. Although fast-growing IndiaBulls has a “buy” or “hold” rating from almost every Indian analyst, Veritas advocates an immediate sell.

The report – titled “Bilking India” – opens with the allegation that the sole reason for the creation of IndiaBulls’ real estate division “is to bilk institutional and retail investors for the benefit of select insiders. The controlling shareholders are running the organization as a piggy bank.” Veritas said the information in the report was drawn from dozens of public documents including annual reports and court filings.

The company responded with a bitter denunciation of Veritas and its staff, saying it had knowingly published incorrect information – and lodged a criminal complaint, alleging that Veritas’ researchers asked for a bribe to suppress a negative report.

The police case is a new twist for Neeraj Monga, Veritas’ executive vice-president and one of two authors of the IndiaBulls report (with Nitin Mangal), although not an uncommon tactic in the business world in India. Mr. Monga called the bribery charge baseless and Veritas has released the correspondence between him and an analyst at a U.K.-based brokerage, the exchange that is the basis for the IndiaBulls legal case, as evidence there was no impropriety. In that correspondence, Mr. Monga cites the company’s $40,000 (U.S.) subscription fee and offers to hold release of the IndiaBulls report for a day if the brokerage wishes to purchase it.

Mr. Monga, who is Indian-born and grew up in Delhi, went to Canada for an MBA at the Richard Ivey School of Business in 1998, and was soon hired by Michael Palmer, a Bay Street broker setting up a new firm specializing in independent research, including forensic accounting, on Canadian public companies.

A few years ago, the firm branched into research on international firms. “Given the significant interest in BRIC [Brazil, Russia, India, China] countries and my background in India, and knowing the Indian place on the world transparency index, we said maybe we should look deeper into India,” Mr. Monga said.

India offers ample fodder for what Veritas is best at ferreting out, Mr. Monga said: “Improper accounting, siphoning of funds, poor quality balance sheets, poor disclosure.” The company sells its research on a subscription basis to institutional investors, in North America and abroad.

Last year, Veritas said that based on its books, Kingfisher Airlines, one of India’s major carriers, was in fact “insolvent.” The company later grounded most of its fleet and stopped paying salaries. This year, the research firm said DLF Ltd. – India’s biggest realty company by sales, and a market darling – is a “crumbing edifice.”

And Veritas has repeatedly slammed the Reliance group – which is controlled by the Ambani family, India’s richest. A June report called the accounting practices of the behemoth Reliance Communications “whimsical.”

“We neither believe in the reported book equity of the company nor in its reported fixed asset base,” Mr. Monga and his colleagues wrote. They accused the controlling family of causing a $4.5-billion loss to shareholders by de-merging its communications business and transferring it through a series of transactions to the younger of the Ambani brothers. The telco’s stock fell to its lowest level ever after the release of the Canadian research; the company called the findings “mala fide [with or in bad faith] in intent and approach.”

Mr. Monga seems almost to revel in playing an “emperor’s new clothes” role, speaking what he says is unvarnished truth about major business players that get an easy ride from Indian investment research analysts.

“The intent is not to be deliberately provocative – but once you see such blatant disregard for your investors and such bravado – you feel the need to be strident,” he said in a telephone interview from Toronto. “The intent is to ensure that people understand that this is unacceptable. It’s trying to contribute at policy level in India – this is advocacy.”

Arun Jain, an expert on corporate governance who teaches at the elite Indian Institute of Management in Lucknow, said the hard-hitting Veritas reports raise the question of why no Indian firm is doing similar work. “Sometimes the gap between who is being analyzed and who is doing the analysis is not big,” he said.

India’s business world can be a cozy one. “You know that someone you write about this week could be a potential client next week, so if you don’t have something nice to say, you just don’t do a report,” said an analyst who has worked for the Indian branches of several international firms, and who did not want to be quoted by name.

“There is no independent research in India – research here is done to hawk stuff not detail something,” said Dhirendra Kumar, who heads Value Research Online, a Delhi-based investment analysis firm. “The whole system is embedded with conflict of interest.” And the firms Veritas has taken on “are very powerful,” he added. “Not too many domestic people within India would like to get into them with the same language that Veritas been able to do.”

Indeed, in India the power of the Ambanis is perceived as virtually without limit. A chief player at IndiaBulls is the close relation of a powerful chief minister.

N. Balasubramanian, founding chair of the Centre for Corporate Governance and Citizenship in Bangalore, noted that in India, a large proportion of listed companies have concentrated ownership or controlling entities, such as family groups or the state (much as in Canada, he added). “Such ownership obviously is a fertile field for tunnelling or diversion of wealth and other private benefits of control,” he said, but, “Investors are aware of this and build in the extra governance risk premium in their valuations.”

International investors, with their willingness to tolerate practices that wouldn’t be acceptable in their own countries, aren’t helping the situation in India, Mr. Monga said – and they need to stop hiding behind the excuse that this is an evolving market. “If they continue to fund questionable corporate houses in order to participate in the Indian growth story, they are actually strengthening the hands of those who are undermining the Indian institutional framework,” he said. “Some of these corporate houses are circumventing the spirit of the Indian regulatory process in order to enrich insiders at the expense of retail institutional investors.”

Prof. Jain was pessimistic about the prospects for improvement. “None of these practices have become better in the last few years, the regulatory environment has not become more stringent – I don’t think there is improvement at all,” he said. “I would put the role on the stock exchanges themselves, to act in a more vigorous manner – and SEBI [the Securities and Exchange Board of India] has to become more pro-active.”

Prof. Balasubramanian, however, believes that the Indian regulatory framework is solid and that agitation such as that by Veritas is going to have a noticeable effect. “I believe it is a sign of the Indian market ‘growing up’ and in the process exposing these pains in the maturation process.”

_________________

FIGHTING WORDS

IndiaBulls Group: “A piggy bank” for controlling shareholders.

Kingfisher Airlines: “Insolvent.”

DLF Ltd., real estate company: A “crumbing edifice.”

Reliance Communications: “Whimsical” accounting practices.

chetak · Post by **chetak** » 22 Aug 2012 23:23

India begins the post-Mukherjee clean-up.

Pranab Mukherjee’s reign as Indian finance minister was stained by economic meddling and political favouritism. Now he is gone, and some of his excesses are being reversed. An enemy has been pardoned and a friend has not received a plum job. This could be the beginning of a better era.

Imagine if Tim Geithner had been accused of putting pressure on the securities regulator to protect some political friends. The U.S. Treasury Secretary would be in serious hot water. But when the former number two at the Securities and Exchange Board of India (SEBI) accused Mukherjee of something similar – putting pressure on the SEBI chairman to “manage” some high-profile corporate cases – there was little attention.

Rather, in a move that was all too typical of the Mukherjee regime, the finance ministry countered with allegations against the whistle-blower, K.M. Abraham. But the post-Mukherjee government is different. Prime Minister Manmohan Singh has cleared Abraham.

In another development, the board of UTI, Asia’s oldest asset management company, is set to appoint a new chief executive. The position has been vacant for the past year and a half as the finance minister put pressure on the company, 26 per cent owned by U.S. fund manager T. Rowe Price, to appoint the brother of one of Mukherjee’s most powerful advisers. The former political favourite, Jitesh Khosla, hasn’t made the new shortlist.

RamaY · Post by **RamaY** » 22 Aug 2012 23:29

brihaspati wrote: Some stats and a few economic history references on a global zonal division basis would be really really helpful.

You must be a kakhi-cheddi wearing hindu revisionist to ask for numbers, references and logic. I am glad people like you are not leading Indian E-Khan-o-Me.

I know these numbers cover only External debt and not total debt, which will be ~3 times but what the hell... numbers lie anyways.

http://freebeacon.com/us-per-capita-deb ... an-greece/

U.S. debt per capita is nearly $45,000, approximately 15 percent higher than that of Greece ($38,937), and more than double that of Portugal ($19,989).

Republican analysts on the Senate Budget Committee calculated the figures using the most recent data available from the International Monetary Fund.

Under President Obama’s fiscal year 2013 budget, U.S. debt per capita is projected to reach $75,000

http://timesofindia.indiatimes.com/busi ... 277789.cms

According to finance ministry data, the per capita debt in India was estimated at nearly Rs 33,000 at the end of March 2012, compared to a little over Rs 26,600 a year ago, led primarily by internal as well as external loans. This is in addition to the home and auto loans that individuals have taken. While companies as well as governments avail of external loans, internal debt is mainly on account of government borrowings, either from the market or even from individuals in the form of small savings schemes such as the National Savings Certificate or Public Provident Fund.

OK let us assume that US per capita debt is $45000 and Indian per capita debt is $1000 (Rs 56000 and counting). If I take total debt then the US per capita debt is $128000 and let us assume it is $10,000 for India per capita.

What life style one can get for the difference $100,000? Can an Indian afford US levels of infrastructure, e-con-omy life style if India were to borrow say $121 trillions?

RamaY · Post by **RamaY** » 22 Aug 2012 23:32

Altair wrote:Ratings by the three rating agencies is a big sham. No body in financial domain takes them too seriously anyways. It is just like knowing Zimbabwe vs Bangladesh ODI score.

Only partially true sir. The ratings are big sham, alright. But many financial domain decisions, such as interest rates bond rates etc., are linked to these.

Only people like hedge funds do not take them seriously. But they get impacted by the decisions of the other rules-following mutual funds and pension fund investors.

Theo_Fidel · Post by **Theo_Fidel** » 23 Aug 2012 00:42

RamaY,

Take a look at the perspectives thread. USA total debt is posted there.
Per capita total debt is more like $250,000.

What is it doesn't mention is the capital stock of the nation. This is the real wealth of a country.
Including all the land, water, education, IP, knowledge base, etc.

Some time back I had posted these amounts. USA capital stock was on the order of $200 Trillion from which they generate a ROI of 7.5% ergo GDP of $15 Trillion.
India's capital stock was a paltry $15 Trillion from which we generate a ROI of 13% ergo GDP of $2 Trillion.

The difference is between the $200 Trilllion capital stock of USA vs $15 Trillion capital stock of India.

This can only be bridged to decades and centuries of constant heavy investing.

RamaY · Post by **RamaY** » 23 Aug 2012 00:58

Theo ji,

I agree. But please consider this possibility. Assume we borrow $121 trillions (or a number you pick based on the difference in the total national debt) and invest it in various sectors in India.

What would be the capital stock of India?

Theo_Fidel · Post by **Theo_Fidel** » 23 Aug 2012 02:17

RamaY,

You couldn’t invest it at one go and there are depreciation factors at work here...

But assuming we are very efficient and 2/3 as $80 Trillion sticks, then our capital stock would approach $100 Trillion.
If (big if) we can generate income of 10% from this our GDP would be $10 to $12 Trillion annually. Per capita Income of $10,000.

To my mind this would be a prosperous India.

If the interest rate on that $120 Trillion in debt was 3% then $4 Trillion would go towards interest payment.
This is a difficult load but it is manageable.

But if it spiked to 10% interest the cost would be $12 Trillion annually and we would be bankrupt. This is what is happening to Greece, Ireland, Spain and Italy
In the EU.

Since our interest rate is already 12% this entire question is moot.

ramana · Post by **ramana** » 23 Aug 2012 02:18

RamaY wrote:Theo ji,

I agree. But please consider this possibility. Assume we borrow $121 trillions (or a number you pick based on the difference in the total national debt) and invest it in various sectors in India.

What would be the capital stock of India?

With present crop of politicians?

Negative for they will steal all that and more.

RamaY · Post by **RamaY** » 23 Aug 2012 02:21

Agree. When $120t investment is made and the social indicators are increased then it is upto the national leadership to ensure that the interest ratesremain low

no wonder in certain countries cost of capital is near free.

Anyways my point was different.

nawabs · Post by **nawabs** » 23 Aug 2012 22:48

India approves Walt Disney's Rs.1,000 crore investment

http://www.newstrackindia.com/newsdetai ... ment-.html

The Indian government Thursday said it has approved US-based Walt Disney's Rs.1,000 crore investment proposal in broadcasting business in India.

Based on the recommendations of the Foreign Investment Promotion Board (FIPB), the government approved the Walt Disney's investment proposal at a meeting held July 27, 2012, finance ministry said in a statement.

The American firm's proposal is for "induction of foreign equity for inter alia expansion of the business and making downstream investment in other companies and subsidiaries of the company, including broadcasting companies."

The government has also approved nine other investment proposals. The total approved foreign direct investment (FDI) in the 10 proposals are to the tune of Rs.1,259.92 crore.

Meanwhile, the government has deferred 16 proposals and rejected four proposals of overseas investments

Don · Post by **Don** » 24 Aug 2012 18:53

http://online.wsj.com/article/SB1000087 ... 60320.html

India Foreign Direct Investment Slumps 78%

By ANANT VIJAY KALA And MUKESH JAGOTA

NEW DELHI--Foreign direct investment into India slumped 78% in June, reflecting the weakening confidence of overseas investors.

FDI during the month fell to $1.24 billion from $5.65 billion a year earlier, government data showed Friday.

For the April-June period--the first quarter of the fiscal year--FDI fell 67% to $4.42 billion.

The fall doesn't come as a surprise as overseas investors remain wary due to a delay in economic reforms and uncertainty in tax laws, which have damped India's growth prospects.

New Delhi's plans to introduce a retrospective tax on overseas merger deals involving Indian assets as well as a new rule to check tax avoidance have dented investor confidence.

India's growth too has slowed, adding to the gloom. It grew just 5.3% in the April-June quarter, its weakest pace in nearly a decade.

"There is heavy pessimism towards the domestic economy primarily arising from government inaction and also the policy instability," said Anjali Verma, an economist at MF Global MFGLQ -3.45%India.

Ms. Verma said investments won't revive anytime soon unless the government sorts out issues such as environmental clearances, land acquisition, securing supplies, among others, that have been leading to delays in projects.

On Thursday, the federal cabinet deferred a decision on changes proposed in a draft land acquisition law that is aimed at streamlining the land acquisition process for projects.

Ms. Verma said clearance for such legislation needs to be hastened to ensure speedy implementation of projects.

Don · Post by **Don** » 24 Aug 2012 18:57

http://www.businessweek.com/news/2012-0 ... -credit#p2

Bloomberg News

Bond-Quota Sales Fail as Pimco Frets on Inflation: India Credit

By David Yong and V. Ramakrishnan on August 24, 2012

India fell short of its target at a seventh straight sale of permits to buy rupee bonds and existing quotas are underutilized by global funds on concern the fastest inflation among the biggest emerging markets will accelerate.

Overseas investors bought 137 billion rupees ($2.5 billion) worth of licenses on Aug. 20, 55 percent of the amount offered. They owned 161.7 billion rupees of government bonds at the end of July, 29 percent less than the permitted amount, according to the Securities and Exchange Board of India. The margin is the widest since December, and compares with as little as 4.3 percent in February.

India’s budget and current-account deficits are set to overshoot Prime Minister Manmohan Singh’s target amid the weakest economic growth in almost a decade. Central bank Governor Duvvuri Subbarao has refrained from cutting interest rates as the worst monsoon since 2009 threatens to stoke inflation. That’s reduced the appeal of India’s 10-year bond that yields 8.23 percent, almost triple the 3.34 percent in China.

“We are concerned about twin-deficit dynamics and elevated inflation, due partly to the weak rainfall season and oil prices,” Roland Mieth, a Singapore-based senior vice president at the Asian unit of Pacific Investment Management Co., said in an Aug. 22 e-mail. Pimco manages $1.82 trillion, including the world’s biggest bond fund. “The rupee has stabilized but the question remains whether this is sustainable.”

‘Dominant Threat’
Subbarao on July 31 kept borrowing costs at the highest level among the largest emerging markets as he raised the Reserve Bank of India’s inflation forecast to 7 percent from 6.5 percent for the fiscal year to March 31, and scaled back its economic growth estimate to 6.5 percent from 7.3 percent. One of his deputies, Subir Gokarn, said Aug. 19 inflation is the “dominant threat.”

India’s June-September monsoon, which brings more than 70 percent of annual rainfall, was 14 percent below a 50-year average as of Aug. 22, the nation’s weather bureau said.

The 9.3 percent jump in Brent crude-oil futures this month to $114.66 per barrel, following the 7.3 percent gain in July, may spur inflation and widen the current-account deficit, the broadest measure of trade. Asia’s third-largest economy imports about 80 percent of its oil.

The current-account shortfall widened to a record 4.2 percent of gross domestic product in the year ended March 31, from 2.7 percent in the previous fiscal year, RBI data show.

India’s benchmark inflation rate was at 6.87 percent in July, faster than 1.8 percent in China, 5.2 percent in Brazil and 5.6 percent in Russia.

Budget Deficit
Singh’s efforts to keep fuel and food affordable for two- thirds of India’s 1.2 billion people who, according to World Bank estimates, live on less than $2 a day, may prevent the government from meeting its goal of containing the budget deficit at 5.1 percent of GDP in the year to March 2013. The government plans to increase debt sales by 12 percent to a record 5.69 trillion rupees this year to bridge the shortfall.

The gap may touch 5.8 percent, boosting government borrowing by 450 billion rupees, Vivek Rajpal, a Mumbai-based fixed-income strategist at Nomura Holdings Inc. said in a research note yesterday.

“India’s current-account deficit and persistent inflation have resulted in negative sentiment toward the economy,” Alia Yousuf, head of emerging-markets in London at ACPI Investments Ltd., said in an Aug. 22 e-mail. “This, against an uncertain global macro outlook, has damped demand from foreign investors for Indian bonds.” ACPI manages $3 billion of assets.

Bond Yields
The 10-year bond yield has climbed 19 basis points, or 0.19 percentage point, since touching this year’s low of 8.04 percent on June 13. The benchmark note yield was little changed at 8.23 percent today, according to the RBI’s trading system.

Rupee-denominated government bonds returned 8.2 percent in the past 12 months, trailing the 14.5 percent gain in Indonesian securities and 12.3 percent earned by Philippine debt in Asia’s best performances, HSBC Holdings Plc indexes show.

Standard & Poor’s lowered India’s sovereign credit outlook to negative from stable on April 25, saying the move reflects a one-in-three likelihood of a ratings downgrade to junk status because of slower investment and economic growth. Fitch Ratings cut its outlook on June 18, citing limited progress in paring the budget deficit. Both companies rank India’s debt BBB-, the lowest investment grade.

“India appears to be largely in the same position” since June, Art Woo, the Hong Kong-based director of Asia Pacific sovereign ratings at Fitch, said in an Aug. 22 e-mail. “The economy has continued to slow, inflation remains at elevated levels and the budget is still under pressure.”

Default Risk
Bond risk has risen. The cost of insuring the debt of government-controlled State Bank of India (SBIN), which some investors consider a proxy for the sovereign, climbed 59 basis points in the past 12 months to 320, according to data provider CMA. The average price of credit-default swaps for Asia’s 10 biggest economies dropped about 10 basis points to 130 in the period.

The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to debt agreements. An increase signals worsening perceptions of creditworthiness. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

Rupee bonds may yet find buyers after the currency rebounded in the past two months from a record low, according to Aberdeen Asset Management Plc. (ADN), which manages $300 billion globally.

Rupee Outlook
The rupee has appreciated 3.5 percent to 55.3850 versus the dollar since hitting a record low of 57.3275 on June 22, the best-performance in Asia in the period. The currency has pared its decline in 2012 to 4.02 percent. It will end the year at 54.85 per dollar, according the median forecast in a Bloomberg survey.

“With the rupee stabilizing, you can see a more constructive landscape for risk,” Kenneth Akintewe, a Singapore-based fund manager at Aberdeen, said by telephone on Aug. 22. “Relative yields are definitely attractive.”

The failure to sell all the bond quotas offered at auctions may stem from a rule change in January, when SEBI said permits bought by foreigners will lapse upon redemption or sales. That curbed investors’ ability to take advantage of market opportunities, according to ACPI.

Rule Change
“The turnover restriction has prevented inflows seeking arbitrage opportunities between Indian and foreign rates through the bond and foreign-exchange markets,” ACPI’s Yousuf said. “Until overall foreign sentiment towards Indian investments improves, we expect to see some under-utilization in the quota limits.”

At New York-based Invesco Advisers Inc., Senior Portfolio Manager Claudia Calich is staying out of the Indian market partly due to concerns about the economy and capital controls.

“The nation’s outlook remains challenged by its twin fiscal and current-account deficits, slow implementation of structural reforms and high inflation,” Calich, who oversees $1.7 billion of emerging-market assets, said in an Aug. 22 e- mail. “Even at current valuations, we see better investment opportunities elsewhere in Asia.”

vera_k · Post by **vera_k** » 28 Aug 2012 20:15

A sneaky revision before the GDP data

growth in the fourth quarter of FY09 has now been revised downwards by the Central Statistics Office (CSO) from the earlier 5.9% to a much lower 3.5%.

krisna · Post by **krisna** » 29 Aug 2012 19:42

Has Sonia Gandhi killed economic growth?

n his Independence Day address, Prime Minister Manmohan Singh blamed the lack of an ingredient called "consensus" for slow economic growth.

The precise words he used were: "As far as creating an environment within the country for rapid economic growth is concerned, I believe that we are not being able to achieve this because of a lack of political consensus on many issues."

Most people heard this statement and thought that the prime minister, as usual, was trying to deflect blame for the dramatic slowdown in growth under his watch in the second term of the United Progressive Alliance - from 9.5 per cent half a decade ago to 5.3 per cent right now - by pointing out the difficulties of our fractious democracy.

And pray, whose responsibility is it to create a consensus within the alliance? The chairperson's, of course. And who is the chairperson? Congress President Sonia Gandhi.

In other words, Manmohan Singh could be saying as plainly as he can, without bringing the house down on himself, that anyone looking to pin responsibility for the slowing growth should look at Gandhi and not him.

Sonia Gandhi never took upon herself the job of selling economic reforms even to her own partymen, forget about the UPA.

Just think: when was the last time you heard Gandhi speaking passionately about economic growth - of encouraging new business investments, or building roads, ports and power plants, or unleashing "animal spirits", as Manmohan Singh would put it? Never.

In the last two years, the NAC, which is comprised mostly of social activists, has sent 24 letters to the government, of which 10 are about how to spend money on various welfare programmes such as the Food Security Bill or MNREGA.

The rest are a mixture of rights legislation and social reform legislation (for domestic workers, the disabled and the minorities, etc). A lot of the work of the NAC is useful, but its mandate leaves no one in doubt that for the Congress party, NAC's primary political purpose is to think up schemes to dole out money that will keep its constituency happy.

And Sonia will not put her political capital to use for building a consensus on any of these issues, because that would damage her political positioning and put the party's vote at risk.

Worse, she could not or would not even put her political capital to use to keep some of the most corrupt characters out of Manmohan Singh's cabinet, which has led to the scams and the consequent vitiation of the business environment and investment slowdown.

So to put it in a nutshell, Manmohan Singh is mostly right when he points the finger at Sonia for not providing him the basic ingredient he needs to cook up a fantastic growth broth.

The money that is lost to the exchequer through corruption is not fully lost to the country; it goes to companies and most of it will get invested, generating employment.

But the money that is lost due to a slowdown in growth rate is lost forever without anyone anywhere being the better for it. Sonia and Manmohan will both have to share the blame, in that order.

abhishek_sharma · Post by **abhishek_sharma** » 31 Aug 2012 00:44

Don · Post by **Don** » 31 Aug 2012 17:48

http://news.yahoo.com/india-disappoints ... tml?_esi=1

India disappoints with 5.5 percent growth

By NIRMALA GEORGE | Associated Press – 1 hr 17 mins ago....

NEW DELHI (AP) — India's economy grew a disappointing 5.5 percent in the last quarter ending June, marking a sharp slowdown from the 8 percent growth in the same period a year ago.

The economy grew only 5.3 percent in the quarter before, signaling a sharp downturn from previously robust growth.

Economists say the dismal performance of the economy reflects the government's disarray and inability to push through crucial economic reforms.

The economic figures for the April-June quarter released Friday by the government showed that industrial and investment activity had failed to pick up pace while the services sector weakened.

Agriculture grew 2.9 percent compared to 3.7 percent a year ago, while the services sector declined to 6.9 percent compared to 10.2 percent.

Manufacturing grew by a negligible 0.2 percent against 7.3 percent growth in the same period last year.

The only bright notes were in the construction sector, which showed a robust 10.9 percent growth; and financing, insurance, real estate and business service activities, which expanded by 10.8 percent.

With a political impasse in India's Parliament holding up government decision-making, and the central bank refusing to reduce interest rates, companies have shied away from investments.

Over the past year, the government has been roiled in a string of corruption scandals involving government ministers and bureaucrats.

Opposition parties have paralyzed parliamentary business since the latest scandal erupted on the sale of coal mining blocks without competitive bidding. The national auditors said the sale was expected to net private companies windfall profits of up to $34 billion.

Other bad news came from the weather: a weak monsoon season hit farms dependent on rainfall, pushing up food inflation.

C. Rangarajan, who heads the prime minister's Economic Advisory Council, said the 5.5 percent figure was "consistent with the 6.7 percent growth we had projected." He said he expected growth to pick up in the last two quarters.

He said the government was committed to giving a push forward to the economy.

"The investment sentiment must improve. The strong growth in some of the key infrastructure sectors like coal, power, steel and cement could lead the way for improving the investment climate," Rangarajan said.

Industry leaders and economic analysts said the figures were disappointing and reflected a deceleration of manufacturing and services. Slowing factory output and investment would hurt long term growth, they said.

The Confederation of Indian Industry, the country's main industry organization, said it was "deeply concerned with the continuing downward trend in GDP growth."

CII head Chandrajit Banerjee warned that opportunities for the revival of economic growth would soon peter out if the economy continues its downward spiral.

"The GDP numbers leave no doubt about the criticality of the situation and we once again appeal for a coordinated monetary and fiscal intervention to address this deteriorating situation," Banerjee said.

Other economic commentators felt the GDP numbers were in line with expectations.

"Given the headwinds for agriculture due to deficient monsoon and the decline in domestic and global consumption along with the ongoing deterioration in investments, the outlook on GDP is very cautious," said Shubhada Rao, the chief economist at Yes Bank.

..