Indian Economy News & Discussion - Nov 27 2017

[KL Dubey]

On that image posted by Vijayk there is 40 mt gap between capacity and production. India is still exporting iron ore to other nations. So increasing the capacity within India makes sense even if there is glut worldwide. India can stop exporting iron ore and move up the value chain by producing steel within.

The capacity is currently 40 MMT/yr higher than production. If it is desired to reduce imports immediately, then using that existing "excess" capacity is more important than creating new capacity.

But the reason for increasing capacity is long-term. As the article already states, India's target is 300 MMT/yr by 2031 based on future domestic and global demand projections. The challenge is to try and reduce the cost of production without environmental damage. Having iron ore resources is a plus. Moving towards recycled feedstock (scrap metal) is also wise. And quite predictably, India will impose tariffs on Chinese dumped steel.

[bala]

The capacity is currently 40 MMT/yr higher than production. If it is desired to reduce imports immediately, then using that existing "excess" capacity is more important than creating new capacity.

A small quibble: excess capacity is going to be there always due to maintenance and other emergencies. Efficient ones try to narrow the gap of capacity vs production.

The ones that are slated for capacity are close to pit heads which is much more desirable. Many new ones are coming up there. On the export of iron ore: there are long term contracts which have to be fulfilled and India does not abruptly do things to change them.

[VenkataS]

The AQI in Delhi and across some areas of North India is at alarming levels. It is at 614 in Noida at 5:30 AM Saturday (Nov 16th) morning. The health impact of this level of pollution must be huge. In 2019, one study calculated the economic impact of pollution in India to be 1.36% of GDP. It must have gotten worse by now and is probably worse in Delhi and surrounding areas. It is bad and unhealthy in most other big Indian cities as well. Why is this not being considered as a national emergency.
China seems to have effectively addressed this issue especially in the larger cities like Beijing where I see the AQI currently is 24. So it is probably very doable. Requires a goal and an effective policy and implementation.

Is no one concerned about the alarming levels of air pollution in India and its impact on the health of the citizens and the broader economy?

[A Deshmukh]

On recycling/Steel:
From what I remember, a lot of TEU/Containers that Chinese export into US just sit around their destination.
Not sure if these can be imported to India for recycling as containers or scrap steel.
Cost of reverse logistics would be a challenge.

[Vayutuvan]

@A Deshmukh ji, If that has to work, one needs to breakup almost all containers and stuff them into a few containers and ship them on a container ship. Obviously there would be a weight limit but the density goes up vis a vis shipping the empty containers. Also there could be consolidators who can some material India needs or even other recyclables.

[tandav]

The AQI in Delhi and across some areas of North India is at alarming levels. It is at 614 in Noida at 5:30 AM Saturday (Nov 16th) morning. The health impact of this level of pollution must be huge. In 2019, one study calculated the economic impact of pollution in India to be 1.36% of GDP. It must have gotten worse by now and is probably worse in Delhi and surrounding areas. It is bad and unhealthy in most other big Indian cities as well. Why is this not being considered as a national emergency.
China seems to have effectively addressed this issue especially in the larger cities like Beijing where I see the AQI currently is 24. So it is probably very doable. Requires a goal and an effective policy and implementation.

Is no one concerned about the alarming levels of air pollution in India and its impact on the health of the citizens and the broader economy?

The bad air in North India is due to these 6 factors which are tied to essential economic activity
1) Solid waste not being collected efficiently by Municipal Corporations due piss poor QA/QC and non payments to contractors in this sector. Leading to communities burning solid waste that is accumulating in their neighborhoods. Most places municipal authorities are illegally burning waste in the landfillls/ dumping sites
2) Agricultural Parali burning in rural areas
3) Coal burning for Industrial process (both for electrical power generation and industrial heat especially for steam generation)
4) Diesel / Petrol combustion soot SOX and NOX (especially when diesel is adulterated with kerosene)
5) Road Dust, Top Soil Erosion Dust, Construction Dust
6) Rubber tyre Dust

[Cyrano]

^^^Absolutely right. Add polluted water and soil around the NCR region, what people breathe, eat, drink and even walk on is poisonous and nearly toxic.

The problem becomes very visible in Delhi during winters, but all our metros, tier 2 & 3 cities are on the same disastrous spiral unfortunately.

There is a whole layer of economics of collecting, sorting, recycling, disposal of wastes and pollutants we have neglected for decades and its become a huge monster to deal with. But it can and must be tackled on war footing.

We need to develop and oftentimes rediscover our own norms, metrics, tools and processes of harmonious living with the environment and nature, and avoid jumping to the drumbeat of western bandwagons.

[vijayk]

[tandav]

^^^Absolutely right. Add polluted water and soil around the NCR region, what people breathe, eat, drink and even walk on is poisonous and nearly toxic.

The problem becomes very visible in Delhi during winters, but all our metros, tier 2 & 3 cities are on the same disastrous spiral unfortunately.

There is a whole layer of economics of collecting, sorting, recycling, disposal of wastes and pollutants we have neglected for decades and its become a huge monster to deal with. But it can and must be tackled on war footing.

We need to develop and oftentimes rediscover our own norms, metrics, tools and processes of harmonious living with the environment and nature, and avoid jumping to the drumbeat of western bandwagons.

This is actually due to the near complete failure of /Local Self Government / Panchayat / Municipal Systems in India. There is no direct transfer of GST and IT revenue to to municipal authorities. Very few municipal authorities are financially viable. Most are not able to collect property taxes or Charge users for services such as water and sewerage provided. The Corporator, MLA, MP are busy extracting slush money from public tenders and contractors don't get paid for years even if work is done. As a result frequent strikes and stoppage of work takes place. Contractors bid very low to get contracts and do very little work.

Delhi region AQI deterioration is due to Solid waste being burnt across municipal areas due to contractors billing the exchequer without actually getting the waste into the landfills. Rather than scientifically transporting , sorting and converting to valid added infrastructure and/or burning in properly operated W2E plants (waste 2 energy). The contractor are submitting fraudulent EPR (extended producer responsibility) certificate and burning it themselves where ever they can. Apparently there is a sordid scheme where the contractors were transporting waste from one landfill to another and getting paid for both biomining of the origin landfill (that is treatment of legacy waste) and tipping fees of the receiving landfill.

The entire design build operate framework of environmental infrastructure whether it is solid waste or liquid waste management or industrial waste management in India is corrupt to the core. Outcomes are perfect on paper only. Corrupt Pollution Control Boards, Politically connected Contractors, and sundry officials are merrily minting money doing very little work. Especially in North India.

[fanne]

What does the BR economic experts make of 5.7% low economic growth for the quarter?

[ernest]

What does the BR economic experts make of 5.7% low economic growth for the quarter?

https://youtu.be/zrCQdXsrVJE?si=sV9UhcNlv4e4qs-r

Neelkanth Mishra (Axis Bank CE, UIDAI, Economic Advisor to GoI) attributes it to controllable cyclic trends. Low spend by govt during election season due to MCC, reduced credit creation, and FII outflows (due to better US bond yields), which all contributed to low urban consumption and private sector investment.
Already govt spend is back up in recent months, and he expects to see better urban consumption data coming out of october. With the discipline fiscal policy and good forex reserves, we should be able to counter this cycle. The policy has been to have disciplined and sustainable growth, in which recent quarters are just a small downswing, which do not invalidate the overall approach if the growth rates bounce back in coming quarters.
He also talks about challenges in continued high cost of capital and competition in exports.

Overall, just a few bad quarters due to combination of factors, in an otherwise steady longterm growth trend that looks sustainable.

PS: not an economics expert here. Just conveying Neelkanth's points, about which he and and other economic advisors to the govt have been consistent over the years.

[ernest]

This is actually due to the near complete failure of /Local Self Government / Panchayat / Municipal Systems in India. There is no direct transfer of GST and IT revenue to to municipal authorities. Very few municipal authorities are financially viable. Most are not able to collect property taxes or Charge users for services such as water and sewerage provided. The Corporator, MLA, MP are busy extracting slush money from public tenders and contractors don't get paid for years even if work is done. As a result frequent strikes and stoppage of work takes place. Contractors bid very low to get contracts and do very little work.

Painful but hard truths. A lot of economists, including Muralidharan in his book Accelerating India's Development have provided diagnosis to the same problem with data and research. Fiscal deregulation and accountability of local bodies will be key to delivering better quality of life including pollution control to the Indian population. However, reforms initiated now will take well above a decade to show results, and might include a tough period with lot of corruption given the sudden growth in funds.

[Supratik]

Macro causes
1. Govt capex both center and state slowing down due to elections.
2. Global economy still not robust
3. Stalled reforms

Worries
4. Urban consumption slowing down may be due to rising cost of living and not enough formal job creation. Marcellus investments has flagged poor growth in FMCG sector.

Solution to 1 and 3 lies with govt. 2 is not in control. 4 tax cuts (slab changes) especially of the salaried class.

[drnayar]

currently just 486 large ships for 1.5 billion people !! ... ship building needs to happen at enormous speed in india ..asap

[williams]

This is actually due to the near complete failure of /Local Self Government / Panchayat / Municipal Systems in India. There is no direct transfer of GST and IT revenue to to municipal authorities. Very few municipal authorities are financially viable. Most are not able to collect property taxes or Charge users for services such as water and sewerage provided. The Corporator, MLA, MP are busy extracting slush money from public tenders and contractors don't get paid for years even if work is done. As a result frequent strikes and stoppage of work takes place. Contractors bid very low to get contracts and do very little work.

Painful but hard truths. A lot of economists, including Muralidharan in his book Accelerating India's Development have provided diagnosis to the same problem with data and research. Fiscal deregulation and accountability of local bodies will be key to delivering better quality of life including pollution control to the Indian population. However, reforms initiated now will take well above a decade to show results, and might include a tough period with lot of corruption given the sudden growth in funds.

In the short term, we can have large air ionizing purification systems installed in major metros to suck the air, collect the dust and exhaust it. China started using it. Long term, we will have to work with local municipalities to fix waste disposal. Waste incinerator plants with pollution control filters is another solution. These incinerators can also produce bit more energy. Our folks are corrupt, but once they see the benefits many will help out. After all it is the same workers who fought Covid reasonably well. As I mentioned before the best prescription for all these is massive afforestation and converting organic waste into bio energy. Good folks has to get their act together.

BTW China has not solved the air quality problem completely, except they tend to report more positive news and our people tend to report more negative news. Here is the map of air quality as of today: (source: https://www.iqair.com/us/air-quality-map)

[tandav]

Painful but hard truths. A lot of economists, including Muralidharan in his book Accelerating India's Development have provided diagnosis to the same problem with data and research. Fiscal deregulation and accountability of local bodies.... snip

In the short term, we can have large air ionizing purification systems installed in major metros to suck the air, collect the dust and exhaust it. China started using it. Long term, we will have to work with local municipalities to fix waste disposal. Waste incinerator plants with pollution control filters is another solution. These incinerators can also produce bit more energy. Our folks are corrupt, but once they see the benefits many will help out. After all it is the same workers who fought Covid reasonably well. As I mentioned before the best prescription for all these is massive afforestation and converting organic waste into bio energy. Good folks has to get their act together.

BTW China has not solved the air quality problem completely, except they tend to report more positive news and our people tend to report more negative news. Here is the map of air quality as of today: (source: https://www.iqair.com/us/air-quality-map)

1) Ionizing purification technology : I do not believe is scalable. I recall seeing some pilot plant using Ionizers and HEPA filters based technology for high density public places but the efficacy is unproven. Power costs of running city wide air purification equipment (similar to home air purifiers) is likely uneconomical.

2) Electrostatic precipitators (ESP) : There is another industrial method used which charges the particles and uses electric fields to precipitate the dust. Maybe what is termed as Ionizer is actually Electrostatic precipitation. Costs of running ESP is very high and is generally used in Stack gas purification.

3) Reduction of pollution load is the only scalable way. China (especially Beijing) invested in Public transit, electric vehicles, afforestation, moving polluting industry from near major cities, installing advanced pollution control at Coal fired power plants, reducing road dusts and construction dust by strict enforcement of environmental laws

4) China and Poland did try Electron Beam NOX SOX removal at industrial scale plants. Not sure if that technology is now widely used.
http://www.nukleonika.pl/www/back/full/ ... 3p271f.pdf

5) A lot of the haze you see is the Mix of particulate matter, NOX SOX with condensing water vapor near dew point when the temperature falls at night in North India.

[Adrija]

^^
After a decade of reforms, we remain hobbled by three structural factors which are now crying for urgent attention:
1. “Business cholesterol” as Manish Sabharwal terms it… the innumerable regulations which businesses not only have to manage through but which make them get exposed to constant harassment and corruption….. both at central and (much more) state levels……
2. Judiciary: we continue to struggle on sheer scale, and states are not interested in investing in increasing capacity
3. Capabilities of the local government tier, and this is completely frustrating any efforts on “Ease of Living”
It’s time for NaMo 3.0 to tackle these now urgently unless we want the growth to start petering out, which it will once the government exhausts potentialities for “macro-capex” (the inter-city spends- ports, highways, railways etc). And if we don’t capture the current opportunity then India is doomed to remain poor and grow old..
#2 requires – for more reasons than one- an All India Judicial Service which can then be a part of the UPSC (and/or lateral entry from Defense forces- see below), which requires a constitutional amendment
#3 requires one constitutional amendment (to give Local bodies direct share of financial resources from GST raised in their territory) and the creation of a municipal cadre in each state
The Centre should then work with interested state government to offer direct entry to the municipal cadre to all the Agniveers; and expand the concept to officer class and offer them direct (optional) entry to the proposed Judicial service (amongst other options- including say MBA and nudge the PSUs to recruit).. that would allow for the manpower bill to be manageable and offer a highly trained capability set to be inducted in our municipal level for management of our living space
And create a fourth tier as well- at each district a committee of all the heads of the local bodies in that district + the MLAs + MP, and make that responsible for the creation and management of solid waste incinerator/ treatment plant, hospital, veterinary hospital as well as a helipad, fire services and an orphanage and mental hospital in each district..

[A_Gupta]

currently just 486 large ships for 1.5 billion people !! ... ship building needs to happen at enormous speed in india ..asap

Other stats:

"As of December 2023, there were 1,526 shipping vessels registered under the Indian fleet. This represented an increase from 2014, when there were 1,213 shipping vessels. The number of shipping vessels in the country has experienced a steady growth over the past decade."

[Cyrano]

The centre vs state vs concurrent list of responsibilities I suspect puts a lot of these into states' list. At least on BJP ruled states a lot of these measures can be implemented according to norms and policies established by the centre (needed to achieve commonality and standardise, like Bharat norms for vehicles) and yes financing for Capex and part of opex.

Waste treatment and recycling can be economically viable, even profitable, and will contribute a lot more to improve quality of life than wind farms and solar panels to meet some mythical net zero goals pushed by the west.

[chetak]

The AQI has a cascading effect on multiple aspects of the economy, healthcare expenditure, industrial downtime, investment, availability of well qualified labor and aspirational management cadres who will come into a less polluted city where quality schools and other allied infrastructure would tend to attract them to relocate (or not relocate, as the case may be)

[Haresh]

The centre vs state vs concurrent list of responsibilities I suspect puts a lot of these into states' list. At least on BJP ruled states a lot of these measures can be implemented according to norms and policies established by the centre (needed to achieve commonality and standardise, like Bharat norms for vehicles) and yes financing for Capex and part of opex.

Waste treatment and recycling can be economically viable, even profitable, and will contribute a lot more to improve quality of life than wind farms and solar panels to meet some mythical net zero goals pushed by the west.

Is food waste in Indian towns and cities collected separately ?
Is used cooking oil collected and blended with diesel?

From what I have observed it is just dumped. The food waste just rots and encourages rats, and the used oil is just dumped in drains and water bodies.
Used oil does have a commercial value.

Waste food can be processed through waste food digesters
https://www.sciencedirect.com/science/a ... 2417315687

https://www.sciencedirect.com/science/a ... 4024042312

Lot's of uses for cooking oil as well.
https://www.google.com/search?q=uses+fo ... e&ie=UTF-8

The dirty environment is just so off putting, it really effects quality of life. I always get a throat infection after visiting Delhi.
This video has been doing the rounds on YT and some have taken real offense to it.
https://www.youtube.com/watch?v=IFUIdcrgW6M

[Mort Walker]

What does the BR economic experts make of 5.7% low economic growth for the quarter?

GST needs to be cut in half. Along with petrol & diesel within GST. Size of Central & State government bureaucracies need to be reduced significantly.

[Cyrano]

Then how will we fund the umpteen central and state government schemes and freebies Saar?

[Cyrano]

Haresh Ji,
Not to my knowledge. We are really no where in waste segregation, collection and the rest of the chain. Sadly.

[arshyam]

Is food waste in Indian towns and cities collected separately ?
Is used cooking oil collected and blended with diesel?

From what I have observed it is just dumped. The food waste just rots and encourages rats, and the used oil is just dumped in drains and water bodies.

Haresh Ji,
Not to my knowledge. We are really no where in waste segregation, collection and the rest of the chain. Sadly.

Not true - both Bangalore and Chennai do this - we have been segregating at source for 5+ years now, and the municipal services collect the waste separately and convert the wet waste into compost. It's available for a low rate/free for anyone to purchase.

Chennai has been bio-mining its landfill and has made some progress in reducing the size of the landfill. There's been a lot of work on recycling water via tertiary treatment (where it is close to drinking water) and supplying to industries in the Sriperumbudur area. But there's still a lot of work to do.

The bigger issue, this practice is not uniform across the country - many cities, Hyderabad included, don't segregate waste for some reason. Smaller cities with small budgets are even more likelier to not follow any of these practices and simply dump the stuff, most likely next to some railway track where it provides a nice welcome to visitors.

There are some structural problems that need to be addressed here, not least of which is the state government hoarding power and funds and not giving importance to local bodies. Currently, the local body is just treated as a means of distributing patronage by the local MLA to his/her henchmen/women. The only way I can think of fixing this (uniformly, not depending on a state's benevolence) is to introduce a third "local list" in the Constitution, and municipal-level facilities such as roads, drainage, lighting, water supply, parks, etc. are moved into this, while letting the state focus on providing these facilities to these local bodies. This should be accompanied by regular elections to these local bodies held by the Central Election Commission at the same time as that of the state assemblies. Doing so would ensure due importance is given to local bodies by both authorities and the voting public, and we could see a vast improvement across the board.

[ernest]

The AQI has a cascading effect on multiple aspects of the economy, healthcare expenditure, industrial downtime, investment, availability of well qualified labor and aspirational management cadres who will come into a less polluted city where quality schools and other allied infrastructure would tend to attract them to relocate (or not relocate, as the case may be)

Air pollution has serious impacts on brain function. There are serious papers that establish the link between air pollution and dementia. Allergies triggered by air pollution lead to stress and cognitive impairment. Directly affective productivity and economy. The cost estimates of pollution are still underestimating, IMO.

https://www.nih.gov/news-events/nih-res ... ntia-cases

[Cyrano]

Glad to hear about Chennai and Bangalore leading the way, I wasn't aware of it.

[Suraj]

What does the BR economic experts make of 5.7% low economic growth for the quarter?

The official press release is
Press Note on Quarterly Estimates of GDP for Q2 of 2024-25 (pdf)

Here are my views:
* The prevailing narrative is that consumption is down due to inflation etc. However, personal consumption as reported by Private Final Consumption Expenditure (PFCE) data in Statement 2 does not show this. PFCE is 56.3% of GDP in Q2, unchanged from Q1 and up 0.4% from the prior fiscal year when Q2 GDP grew 8.1% In other words, the year ago period saw 8.1% GDP growth on the back of lower private consumption as a share of GDP.
* The problem is not investment either. Gross Fixed Capital Formation (GFCF) remains on a rising trend. H1 GFCF was 33.8% of GDP in 2022-23, 34.4% in 2023-24 and now 34.6% in 2024-25 . Very close to the psychologically important 35% of GDP being invested.
* Exports are stable at 23.5% of GDP and imports are down to 25.3% of GDP down from 27% of GDP in the prior fiscal year. So why did prior FY Q2 have 8.1% growth and this year only sees 5.4% ?
* The delta is entirely on account of discrepancies which saw a delta of 89k cr YoY (~2% of GDP) and an even more astonishing 3.8% of GDP swing between Q1 and Q2.
* It's unclear why discrepancies shows such swings Q-on-Q and Y-on-Y - it suggests that income and expenditure data collection are poorly synchronized and that GDP data at the current cadence is effectively a low fidelity signal.

If I had to offer any suggestions it would not be on policy, but to improve the fidelity of data collection because this much noise makes short term policymaking quite difficult.

[fanne]

Thanks!!

[Yogi_G]

The AQI number of 21 for Bangalore above is more due to rains recently. Typically it is 40-50. Not great but better than Hosa Dilli. My Uncle who is a farmer mentions that laziness of stubble burning is something he hasnt seen yet in many parts of the country. Responsible disposal of it alongside preparation for cattle feed (even that of wheat) is something he recommends strongly.

[chetak]

Such an important issue raised by MP @KartiPC on opaqueness of CIBIL scores.

You can literally do nothing if your CIBIL score is downgraded for no fault of yours.

Koi sunwai nahin hain CIBIL ki galti ke liye! (There is no remedy for CIBIL wrongdoing).

Hope they are brought under relevant gamut of law for compliance and transparency!

Hope the office of @nsitharamanoffc and FM @nsitharaman takes this up post budget for consideration for the betterment of middle class ease of doing business.

[Shankas]

TransUnion is a US credit scoring agency.

[Suraj]

Indian credit scoring should only ever be maintained within India, which means zero access to Indian credit and consumption data to US credit agencies. They can access curated data at a premium by paying an Indian provider for it, subject to Indian consumer protection laws.

[ernest]

Indian credit scoring should only ever be maintained within India, which means zero access to Indian credit and consumption data to US credit agencies. They can access curated data at a premium by paying an Indian provider for it, subject to Indian consumer protection laws.

Given the leverage credit agencies can have on steering behavior, we definitely need to have control over our own data and following our own rules.

[Cyrano]

Good to see what seems to be useful criticism by opposition MoP after a long time. Let's hear the Govt/FM's response.

[chetak]

[chetak]

[A_Gupta]

The GST collections (in crores)

Code: Select all

        2023       2024 
 Jul  165,105 	 182,075  --> +10.3%
 Aug  159,069 	 174,962  --> +10.0%
 Sep  162,712 	 173,240  --> +6.5%
 Oct  172,003 	 187,346  --> +8.9%
 Nov 167,929 	 182,269  --> +8.5%
 

Is there a signal of slowdown in these numbers?

[A Deshmukh]

Avg collections: Rs 5,876cr/day
Jul, Aug, Oct are 31 days. Sept & Nov are 30 days.

[Suraj]

GST collections in October was 9% YoY and November was 8.7% YoY .

I haven't found a good source or monthly ewaybill generation data, but that data might offer even more insight.