Indian Economy News & Discussion - Nov 27 2017

[williams]

Just want to add a note on freebies: many nations have them including the US (food stamps). BJP freebies has one major feature that many miss. Previously freebies by Kangress never reached the intended people directly. There were middle men/women who took a cut and also only gave dole-outs to their favorite folks. Here BJP with JanDhan bank account and AADHAR card delivers the freebie directly, no leakage, no pilferage, etc. Also women seem to be the target of the dole out, which is good since they are responsible ones in the family. Over time, the freebies can be reduced. Many folks gave up their gas cylinder discount by the Govt.

The middle class can now stop whining due to taxes. One benefit is that the money is with the people and they will spend or save. Both have secondary good consequences to the economy. Giving the money to the govt to spend on babus/judiciaries and then have them make decisions is lugubrious. This reminds me when will the BJP put an axe on babus/judiciary. The babu /officialdom cabal requires severe pruning. We can do away with so many departments which are completely useless and tax payer waste. The judiciary requires another revamp. Having justice based on a britshit system, wasting their time on writing judgements, and things like that, are all old schoool. The govt should invest in massive computer systems to have powerful search capability. Use AI to completely research cases. All routine cases can be disposed by a computer program, no judges/lawyers required. Now the new fangled generative AI using LLM (large language models) can effectively write a judgement complete with citations. This could be much better than what a judge produces. BJP needs to usher in the new era and get rid of most courts/judges in the nation.

Very very important needed reform. We also need to ensure consumption does not end up as a boon for Chinese imports. We need to protect local manufacturing and local products.

[vera_k]

I understand that increased consumption means an increase in GST collections. But how does the declaration of higher income increase GST collections?

It makes more money available for above board transactions. Not applicable as much for salaried people. But for those with "flexibility", it means transactions will be done with money accounted for, less with black.

[uddu]

https://x.com/dmuthuk/status/1885877068 ... hLlEw&s=19

More people would show higher income now, upto tax free limit. Though this may not increase tax collections, it would lead to formalisation of economy resulting in better GST collections.

I understand that increased consumption means an increase in GST collections. But how does the declaration of higher income increase GST collections?

it will not. But what it will do is sudden improvement in many of the HDI indicators. Also will show the real underdeveloped districts and the category of people and the segments of economy that need real support.

[uddu]

Some interesting indicators
Arms exports (SIPRI trend indicator values) - India
https://data.worldbank.org/indicator/MS ... cations=IN

Arms imports (SIPRI trend indicator values) - India
https://data.worldbank.org/indicator/MS ... cations=IN

Military expenditure (% of GDP) - India
https://data.worldbank.org/indicator/MS ... cations=IN

Military expenditure (current USD) - India
https://data.worldbank.org/indicator/MS ... cations=IN

Military expenditure (current LCU) - India
https://data.worldbank.org/indicator/MS ... cations=IN

Exports are rising and imports are plummeting from 2022
With the rise of GDP, the overall percentage of GDP on defense is on the downward trend, while the overall Expenditure on defense showing continuous growth.

[bala]

Very very important needed reform. We also need to ensure consumption does not end up as a boon for Chinese imports. We need to protect local manufacturing and local products.

The import from China is a worrying trend. Currently, China is running their factories to the tilt and flooding goods worldwide at cheap prices. Indian banias see a good deal and import them. China is also using nations like Vietnam, Mexico and Canada. DJT has imposed tariffs on China, Canada and Mexico and may in future include Vietnam. The trade picture for India China is that India's export to china is miniscule but its imports are huge from China. This requires correction and Modiji has to address this issue. At the same time the deep state MNCs are moving manufacturing into India for scale of operations. This has to be managed by the Govt in a judicious manner.

I am hoping the extra money due to tax savings in the middle class should allow some bania minded folks to start small factories that manufacture imported goods. Actually a list of imported goods must be freely circulated and govt should incentivise anyone who can make things within India. India has a very young population compared to the world. This dividend has to be put to use. Youngsters should not be enamoured with being cool like others around the world. Instead they should work hard to make the things which will make them cool. The things you consume are the ones to be made here within India locally and if possible export them. There is no substitute for hard work.

With many not paying taxes, I think the Govt should consider an account hundi which anyone can contribute some money. They are many who feel that fiscal deficits should be tackled promptly, similar to your own household budgets, and are willing to part a few bucks to tame the deficit. This money strictly goes towards the deficit. A similar hundi collection for defence indigenous products would be nice to have.

In the US most companies have volunteering work done by their employees. I am not sure whether a similar thing is prevalent in India. Time for the middle class with tax breaks to pitch in to help straighten out their local neighborhoods.

[bala]

India is at a turning point and the leadership class (not just politicos) have to understand what growth means and entails in the world. You are talking about becoming #3 or #2 or even #1 eventually. You need a different mold of thinking and shaping up for what the future entails. Simply aping western paradigms, or having the coolest next new fangled thing is not it. VishwaGuru status is beckoning. Can India produce thought leaders who dictate the future trend? Can the nation's talent be groomed to be more daring and take on the world? What does it take for the nation to be bold and enterprising. We have to remember that the Indus Valley civilization ruled the world.

Let me be more forthright. The current bureaucracy, court system, administration, rulership of states, cities/towns and even the center are not upto the challenge. They are wrapped in old systems bequeathed by the Britshits which have ossified themselves and do not change with times. This system is living in a bygone era which is not relevant. Everything requires a new thinking and leadership should bring about the change which is appropriate for the nation, starting with the constitution of India, education systems, skills enhancement, civic sense and much more.

Currently India has the maximum number of GCC (global competency centers) in the world. All the GCCs are for MNCs controlled in part by the deep state. Just having all the MNCs in India with their manufacturing clout will become passe over time. You have to have your own Indian MNCs perhaps manufacturing in other nations too, and you call the shots. Leadership is required, thinking up new paradigms, leading with bright ideas and more. Every existing product in the world can be thought afresh from scratch. Are the youth in India capable of such drastic transformation which puts their talent to the fore. Maybe some who work in GCCs figure out components/products and come out and create their own versions, and slowly these chaps band together and take on the MNCs full force.

[williams]

The key thing GoI has to focus now is to provide the necessary resources minus the bureaucratic hurdle for MSMEs to become larger enterprises. Lack of finances and skilled human resources is lacking in spite of all the programs. Our products need to be manufactured at scale if we even have a chance to compete with Chinese prices. Current large private and public enterprises lack the ideas that MSMEs bring to the economy, but they face huge hurdles when it comes to upward movement.

[A_Gupta]

How much government support does a MSME lose when it climbs up in turnover and investment to no longer be in the MSME category? ( For medium Enterprises, it is Rs. 50 Crore of investment and Rs. 250 Crore of turnover. The new budget proposes:

Micro Enterprises: Increased from Rs 5 crore to Rs 10 crore
Small Enterprises: Increased from Rs 50 crore to Rs 100 crore
Medium Enterprises: Increased from Rs 250 crore to Rs 500 crore
)

[drnayar]

maybe thats why india needs its adani, ambani etc

[tandav]

snipped

Let me be more forthright. The current (my add: education system), bureaucracy, court system, administration, rulership of states, cities/towns and even the center are not upto the challenge. They are wrapped in old systems bequeathed by the Britshits which have ossified themselves and do not change with times. This system is living in a bygone era which is not relevant. Everything requires a new thinking and leadership should bring about the change which is appropriate for the nation, starting with the constitution of India, education systems, skills enhancement, civic sense and much more.

Snipped

Totally agree. I must say the IAS system is long past its sell by date. A bunch of exam writers with no deep expertise are being made to play ringa ringa roses across various posts with near 0 expertise. Bureacrats must have skin in the game. I feel we have to study the Chinese system in detail on how they manage to conceive and execute long term plans with such speed. It is indeed obvious that China and especially Chinese cities have leap frogged even USA, Japan and EU by quite a margin. Yes there is a major risk of misallocation of capital since it is driven by the government but I find that most of their allocation are rather productive and not really a major miss.

Their methods of identifying and harnessing talent and putting money/resources into the hands of capable people is impressive. It appears that most capable chinese people are also CPC members (they join CPC in college/university where the CPC has a significant outreach program to identify such talented folks). Post this if they join CPC they are vetted by giving these folks specific result oriented projects like for example improve GDP of this county. With such a mandate the Chinese babu goes about trying his best to exceed his KPIs. S/he courts foreign investments, domestic investments, creates infrastructure, puts in training programs, resolves disputes, helps raise capital, better market access etc etc. A Chinese bureacrat has a value adding collaborative mindset whereas an Indian Bureacrat seems to have a rent seeking silo mindset.

[williams]

Chinese system is a dictatorial system. You cannot have farmers protest, strikes, bandh, rioting etc and there is no free press. And further no election fever every six months. All land is owned by the state and your motivation to do anything is fear to survive and brain washed nationalistic ferver . Now combine that with a more monolithic culture, you will see things work faster than usual. That will not work here. We need ways to root out the lethargy in different ways.

[Hriday]

https://x.com/dmuthuk/status/1889859533 ... Tn-QQ&s=19

Also China is struggling to go beyond $13,000 percapita. Middle income trap is real. Many good well governed countries find it extremely impossible to break this middle income trap. As Debashis Basu repeatedly points out most of today's rich countries are rich from 18th century. Only half a dozen countries were able to become rich in the last 100 hundred plus years.

Be it a country or a common man, it is extremely difficult to get rich.

Sorry to say that India can never become a developed country, say on par with today's America or Singapore. It may not be possible even for China. They have started becoming old and population would shrink.

The best hope for India is to become a middle income country by 2047, which is say today's Malaysia.

[Hriday]

Video of FM Nirmala Sitharaman saying the same is in the link below.
https://x.com/AbhishBanerj/status/18894 ... bnYog&s=19

This is a VERY important data point that every Indian should know ... but BJP has failed to publicize it

Average rate of tax:

Before GST: 15.8%

After GST: 11.3%

Idea that GST increased taxes is total nonsense

Good that Nirmala Sitharaman said it loudly

[S_Madhukar]

…
Sorry to say that India can never become a developed country, say on par with today's America or Singapore. It may not be possible even for China. They have started becoming old and population would shrink.
…
The best hope for India is to become a middle income country by 2047, which is say today's Malaysia.

True but I doubt most of Europe is going to “feel” rich as before. UK GDP per capita is somewhere between 24-30K depending on how you measure it and that makes it lower than Korea and Japan.
We need to ensure easily accessible digital education for all because that is even now available for all in the West.
It’s a different story if $ weakens .
But the learning is real , we won’t just get there by optimism

[A_Gupta]

Don’t equate development with being high income or high wealth.

E.g., having public digital infrastructure is higher development than not having it; and the street vendor accepting digital payment is higher development than not having the facility; but it may not have made his income or wealth go up as much as the convenience of managing his sales.

Development is in terms of the facilities available to the citizen. Yes, more income/wealth makes more things potentially available. But for example, all the income in the world does not give Americans access to convenient high-speed rail.

[vera_k]

Video of FM Nirmala Sitharaman saying the same is in the link below.
https://x.com/AbhishBanerj/status/18894 ... bnYog&s=19

This is a VERY important data point that every Indian should know ... but BJP has failed to publicize it

Average rate of tax:

Before GST: 15.8%

After GST: 11.3%

Idea that GST increased taxes is total nonsense

Good that Nirmala Sitharaman said it loudly

Whether this message is useful, depends on the audience.
If you're the type that doesn't pay income tax or hides income away from income tax, GST is great, because it reduces one's tax burden.
On the other hand, for someone paying income tax on all their income, there are some instances where they get taxed more than earlier.

For example, there is this example where GST was introduced on packaged food in 2022, which would be net additional tax if one is already paying income tax.

GST on Rice, Wheat, Cereals

[Yagnasri]

Hence exception for taxes up to 12 Lakhs. So, most of the salaried professionals are now out of IT. The problem with IT is there is no way to get business people, etc, to pay for proper IT. Our people are experts in creating ways to escape it. So GoI may have new ways to get them to pay some direct taxes one way or another.

[vera_k]

The increased deduction helps now, until things change with either changes to GST or inflation eating away the value of the standard deduction.

It will add complexity, but deducting some amount of GST paid from income tax needs to be looked at to improve compliance. Should be possible for at least higher value transactions where PAN needs to be submitted.

[S_Madhukar]

Well some of our maids in the city drive scooties, send kids to private English medium schools - not bad at all but I much prefer them paying GST so that at least they are aware that life is not all freebies. Otherwise they end up with an attitude that they must get freebies, pay no tax and ask for 20% hikes every year as if they are on permanent jobs and 24 days off.
In fact some of them get government flats, which they rent out to further add to their income and then they go and squat somewhere else. Our so called common people also have some Harshad Mehta in them !
No wonder (wrongly) people don’t mind hiring illegals for cheaper rates!

[Lisa]

It needs to be made a legal requirement for the personal details of ANY employee to be both recorded and UPLOADED onto a government portal. Duplicate Aadhar card details and duplicated DOB details would become automatically obvious.

Failure to do the above needs to be made a felonious offence.

[Suraj]

Contributed this article to SwarajyaMag:
Hacking the Human Development Index: Why UNDP's Latest HDI Scores For India Are Misleading

[VinodTK]

Growth in December quarter seen to rebound at 6.2-6.4%

:
:
Economists estimate growth in Q3 to be in 6.2-6.4% range, higher than the seven-quarter low of 5.4% in July-Sept. Growth in July-Sept was slower than 6.7% in April-June period and below 8.1% recorded in July-Sept of 2023-24. The sharp slowdown was attributed to a number of factors, including slowing govt spending due to elections and sluggish consumption owing to stubborn price pressures.

[A_Gupta]

Contributed this article to SwarajyaMag:
Hacking the Human Development Index: Why UNDP's Latest HDI Scores For India Are Misleading

Thanks, this is great!

[Supratik]

Very good article by Suraj.

Don't be fixated by quarterly or yearly ups and downs in GDP growth rate. Be fixated on the average. Be Rahul Dravid and not Virender Sehwag.

We need to keep the average strike rate at 7-8% real GDP growth rate and 10-11% nominal upto 2047.

The big bull in the China shop is the dollar to rupee exchange rate. If you can fix that no one can stop you.

[Cyrano]

Contributed this article to SwarajyaMag:
Hacking the Human Development Index: Why UNDP's Latest HDI Scores For India Are Misleading

Read it, excellent work!

[Suraj]

Here's the GDP official press release: PRESS NOTE ON SECOND ADVANCE ESTIMATES OF ANNUAL GROSS DOMESTIC PRODUCT FOR 2024-25
QUARTERLY ESTIMATES OF GROSS DOMESTIC PRODUCT FOR THE THIRD QUARTER (OCTOBER-DECEMBER) OF 2024-25

This report is an eye-opener. There's been some kind of significant overhaul in data collection. Pretty much very quarterly figure has undergone revision , across three fiscal years.
2022-23 GDP growth increased from 7.0% to 7.6%
2023-24 GDP growth increased from 8.2% to a provisional 9.2%

The latter number is astounding, and doesn't even make much sense because the report above only quotes the first three quarters of that fiscal to compare to this fiscal, and they respectively have been upgraded from 8.2%, 8.1% and 8.4% to 9.7%, 9.2% and 9.5% . To achieve the expected 9.2% full year GDP would need a major drop in the last fiscal Q4.

In my opinion, this won't happen. The current revised estimate for FY2023-24 has a GDP at constant prices of Rs.176.51 lakh crore, which will likely be upped in May when they full year data for this fiscal and 2023-24 are released, putting the 2023-24 GDP growth at closer to 9.5%

Note that the current fiscal year performance of 6.5%, 5.6% and 6,2% are against the upward revised 2023-24 data. Against the original 2023-24 data, they would read 8.6%, 7.3% and 7.9% respectively. I suspect that this time next year, when the current fiscal data gets revised, we're going to look at numbers closer to these for current year.

This means that since the 2020-21 COVID year, India reports
2021-22: 9.7%
2022-23: 7.6%
2023-24: 9.5%
2024-25: ~8%

Will 2025-26 - the upcoming fiscal year, see us hit 10% ?

[ritesh]

Well some of our maids in the city drive scooties, send kids to private English medium schools - not bad at all but I much prefer them paying GST so that at least they are aware that life is not all freebies. Otherwise they end up with an attitude that they must get freebies, pay no tax and ask for 20% hikes every year as if they are on permanent jobs and 24 days off.
In fact some of them get government flats, which they rent out to further add to their income and then they go and squat somewhere else. Our so called common people also have some Harshad Mehta in them !
No wonder (wrongly) people don’t mind hiring illegals for cheaper rates!

Controversial suggestion...

- increase GST by 20-30% across all segments, except daily essentials and meds
- provide reimbursement upto 50% of GST as per respective tax bracket to eligible individuals
- declare minimum wages preferably in per hour per week basis.

Above steps would help in increasing disposable income, tax collection and help in expanding the tax compliance.

[Cyrano]

Came across some news item couple of days ago that Modi Ji is considering a subsistence allowance for all needy citizens ie those who are jobless or have no declared source of income. Can't find it now.

This is the European welfare state model which invites all kinds of abuse and (illegal) migrants. Very quickly it will become unaffordable, creates massive opportunities for fraud and almost impossible to roll back.
Therefore a very bad idea.

If anyone has come across this news item please do post here.

[drnayar]

Came across some news item couple of days ago that Modi Ji is considering a subsistence allowance for all needy citizens ie those who are jobless or have no declared source of income. Can't find it now.

This is the European welfare state model which invites all kinds of abuse and (illegal) migrants. Very quickly it will become unaffordable, creates massive opportunities for fraud and almost impossible to roll back.
Therefore a very bad idea.

If anyone has come across this news item please do post here.

that would be music to illegal beedis and and esp a certain peaceful religion

[AkshaySG]

Seems Q4 2024 was the first $1 Trillion GDP Quarter... Great stuff
Afaik we crossed 1$Trillion Year in 2007 so around 18 years to 4x this

Next target is $1 Trillion/ month which based on current rates should be somewhere around 2039-40.

[fanne]

From Suraj's post,it looks like our real GDP growth has been few % point higher than the officially recorded. That makes one hell of difference, once you factor in the compounding effect of these few % point each year.

[Supratik]

AFAIK GDP figures are revised 2-3 times to get to final figure.

[Suraj]

Only 2022-23 has a final figure - 7.6% . 2023-24 was preliminarily raised to 9.2% . For 2024-24 (the ongoing FY) the first report will be on May 31.

[A_Gupta]

If the above link for MOSPI's GDP estimate does not work for you (it does not for me), then try this one (the above one is to MOSPI, this one is to PIB):

https://pib.gov.in/PressReleasePage.aspx?PRID=2106921

[A_Gupta]

Feb 2025 GST report
Total Net GST Revenue (crores)
Monthly:
Feb-24 1,50,528
Feb-25 1,62,758
YoY : 8.1%
Year-To-Date
2024: 16,38,350
2025: 17,79,506
YoY 8.6%

Source (PDF): https://tutorial.gst.gov.in/downloads/n ... 202025.pdf

[KL Dubey]

Seems Q4 2024 was the first $1 Trillion GDP Quarter... Great stuff
Afaik we crossed 1$Trillion Year in 2007 so around 18 years to 4x this

Next target is $1 Trillion/ month which based on current rates should be somewhere around 2039-40.

PPP is a better measure of actual increases in output (GDP). Exchange rate won't be the same in 2040.

As of now Bharat is already a $1.5 tn/month economy. We should aim to triple PPP GDP by 2040, i.e. to $4.5 tn/month and surpass USA. That would require a steady 8% growth rate.

[Vayutuvan]

Problem is that PPP GDP and actual GDP will converge as we become wealthier. Labor is going to become more expensive so INR wouldn't buy as many services as they are able to today.

[A_Gupta]

India's Index of industrial production records growth of 5.0% in January 2025
https://www.pib.gov.in/PressReleasePage ... ID=2110777

Annual Survey of Unincorporated Sector Enterprises (ASUSES)
https://www.pib.gov.in/PressReleasePage ... ID=2110717

As per the report of ASUSE 2023-24 conducted during October, 2023 – September, 2024, the total number of surveyed establishments in ASUSE 2023-24 was 4,98,024. The estimated number of establishments in the unincorporated non-agricultural sector is 7,33,99,476 during October, 2023 – September, 2024.

The total number of establishments in the sector increased substantially from 6.50 crore in 2022-23 to 7.34 crore in 2023-24, representing a healthy 12.84% growth.

The sector employed more than 12 crore workers between October 2023 and September 2024, marking an increase of more than one crore workers from 2022-23 and reflecting robust labour market growth.

[Hriday]

India had a trade surplus in February 2025. I don't follow the details much. Any idea if this trend will continue? I recently tried with Grok 3 to know how much govt will get through taxes and the taxes from the increased GDP if there is an import substitution of 10 billion dollars per year. The figure was unbelievably high. Don't know if it is reliable. If anyone here can present economics in an interesting way it will be a great help to the general public.

https://pib.gov.in/PressReleasePage.aspx?PRID=2111954

[Supratik]

This is just monthly data which can go up and down. You have to look at yearly data. Yes there are benefits if you become a net exporter from a net importer. Some of them are the following.

Save foreign exchange
Create domestic jobs
Create ancillary and subsidiary companies
Multiplier effect on consumption as salaries and profits will stay in India
Strengthen the rupee
Increase foreign exchange reserves