Indian Economy-News & Updates

[Rangila]

Rajan says drop in public, private investments top concerns| Reuters

 

[Dungeness]

I'm back guys! (to this section )

India Reforms Are Gathering Pace

India Reforms Are Gathering Pace

November 16, 2015

A comprehensive note from Jupiter Investment Management's Avinash Vazirani (Manager of the Jupiter India Fund) highlights how Prime Minister Modi's recent high profile visit to the UK shines a light on Anglo/India relations, and the potential for closer ties between the two countries on issues such as climate change and defence. While this is very interesting for politicians and general observers, Modi's comments on the attractiveness of India as an investment destination should be a focal point for investors, he says. As a long term investor in the Indian market, the background changes discussed below, and which are receiving little or no publicity, are setting the scene for a transformation of the Indian economy the likes of which we have not seen in recent history.

Indian stocks have been an isolated area of relative calm amid the storm that has raged across global emerging markets in recent months. Vazirani believes the game-changing reforms that have helped drive growth in India are continuing to gain momentum, and together with strongly positive business conditions, will help power the next leg of Indian economic growth. Meetings with government have also left him confident that the government will do whatever it takes to ensure fiscal and monetary policy are aligned to protect India's low-inflation, rate-cutting cycle.

One of the flagship reforms of the Modi government has been its introduction of a programme of universal social security designed to help lift hundreds of millions out of poverty, for the first time establishing minimum living standards and bringing vast swathes of the population out of the shadow economy and into the formal banking system. A system of biometric identity records, linked to bank accounts and mobile phone accounts will provide basic health and life insurance and social security benefits. This should dramatically reduce the waste and inefficiency of the state's payment of subsidies.

The speed and success of this scheme has been breath-taking. Since its launch in September 2014, 190m bank accounts have been opened and 165 million debit cards issued. Shared ownership of bank accounts means that this figure already covers a large portion of the estimated 600,000 Indians who did not have access to bank accounts before the programme was rolled out. With around 2 million new accounts opening per week, the remaining pool of 200-300 million people without access to a bank account is decreasing fast.

It's easy to overlook the amount of job creation that's happening in India as a result of other government initiatives, he says. The ‘Make in India' scheme aimed at persuading foreign companies to manufacture in India has already seen Taiwanese electronics giant Foxconn sign up to spend US$5 billion building its factories in Maharashtra State, while the ‘Skill India' programme aims to give 4 million Indians the skills that should help fuel India's burgeoning economy. Meanwhile the MUDRA programme of microenterprise funding that seemed to be in its planning stages just months ago has already disbursed $3.5 billion dollars in loans to small businesses. Under the scheme, banks make loans to small businesses, laying off this risk to this to a government agency. According to government sources, at least half a million jobs have been created, while the boost to GDP (gross domestic product) of the extra economic activity from these newly-funded businesses is clear.

The government's focus on agricultural productivity is another area of major change. It's being pursued in a number of ways, he says. The first is a plan to ensure every field is irrigated (hitherto farmers have relied on unpredictable rainfall), funded through the agricultural credit bank (NABARD). Next, crop insurance has been trialled in pilot schemes across India and will be rolled out across the country next year. Under the scheme, farmers can insure crops so that in the event of drought or infestation, they are reimbursed. Then there is the farmers' Soil ID card system, which will help farmers understand which fertiliser to use, and has seen a 60 percent uptake already. All of these initiatives are bringing another (rural) section of the population into the formal banking and social security network and into the formal economy. As well as delivering a boost to the safety of their livelihoods, from an investors' point of view, it constitutes a huge secular increase in business for banks and insurance companies and we continue to watch this space.

After years of stagnation, India's infrastructure build-out got back into gear under Narendra Modi's government. Today in India, new highways are being built at a rate of 18 kilometres per day. A previously-stalled project to redevelop India's ports has re-started, with new contracts being given out to developers. And the largest piece of India's transport infrastructure project is its railways. Here, the government has earmarked a massive 8.5 trillion rupees (around $150 billion) and for the first time that figure constitutes a guaranteed allocation from budget resources – a first in India. Contracts for the build-out have been awarded, and the process of upgrading India's transport system is underway.

On the fiscal side, the new government has vowed to devolve spending budgets to the states that make up the Indian federation. As a result of new laws, some 42 percent of central taxes now go directly to state governments (up from 32 percent). The new Goods and Services Tax (GST) legislation, which promises to harmonize what is currently a patchwork of sales tax regimes across the Indian states, in favour of a single national sales tax, and should produce a major boost to revenues by reducing the cost of business, is currently stalled in parliament amid dogged resistance from parliamentary opposition. Here, again, Vazirani says he gets the sense that this is a reform whose benefits are so clear compelling that both sides of the argument – even those currently delaying its progress through parliament – know it has to happen. While there has been some confusion around the amount that individual states can add to the tax for themselves (in fact they may apply an extra 1 percent for a limited period of two years), there is no question that this is another move that will be hugely beneficial to state finances, which in turn will help reduce inflation.

And while the government has no real scope to affect monetary policy change or set the independent central bank's inflation targets, recent conversations with government have reassured him that the government will do whatever needs to be done to align fiscal with monetary policy and ensure that any threats to India's new low-inflation, rate-cutting environment are dealt with adequately and promptly.

However, one reform the government has been able to implement within the monetary sphere has been a shake-up of India's banking sector. The 21 new licenses issued since the beginning of this initiative – 11 to payment banks and 10 to small finance banks – are part of the transformation of a sector that has been open to accusations of risk-averse lending, inaction on non-performing loans and insufficiently autonomous board and executive appointments. "The new entrants to the banking sector are a good sign, a new bankruptcy code will give its existing members the means to recover bad loans in a way they couldn't previously and there is even talk of a special situations fund which could take on some of these assets," he says.

The final piece, on board appointments, is part of the government's wider plan to beat corruption at board level and improve the corporate governance not just of banks, but of state-owned companies too. Here, the new administration is making huge strides, sending a message to government-controlled companies by refusing to appoint non-executive board members who will not comply with its new corporate governance standards. "These are measures will take some time to show through, but the message is clear: in my view, the outlook for Indian businesses has never been brighter."

@Dungeness : To keep you updated on the overall scenario

Thanks for tagging me. Best wishes to Indian people, but so call Modi's magic reminds to be seen.

 

[Nilgiri]

Thanks for tagging me. Best wishes to Indian people, but so call Modi's magic reminds to be seen.

It will take a few years to materialise macro-economically given the damage that was done by previous administration.

Rajan says drop in public, private investments top concerns| Reuters

Credit crunch will probaby easy starting in mid 2016 as the capital flows prop up the associated margins and buffers.

GST, more tax reform and bankruptcy code will also really help as a boost to overcome the credit crunch.

 

[Rangila]

 

[Nilgiri]

View attachment 273558

Much of the measures have yet to be operationalised to really encourage people to get into the scheme.

Right now no ones going to even give their kitchen utensils to the govt.

 

[Arron Bert]

Is India investing heavily in Middle East?

 

[Ryuzaki]

Is India investing heavily in Middle East?

Only in Iran

 

[Arron Bert]

Only in Iran

OK.

 

[Rangila]

 

[Nilgiri]

View attachment 273598

You are taking particular sectors for China and the overall (value) scenario for India. Its apples and oranges.

After all:

China exports, imports continue to fall in September

The key important metric is the % of Indian exports of the entire worlds exports.

 

[Rangila]

You are taking particular sectors for China and the overall (value) scenario for India. Its apples and oranges.

After all:

China exports, imports continue to fall in September

The key important metric is the % of Indian exports of the entire worlds exports.

That was the copy paste of a Google search page;

As for the Orange & Apple:

Which country has lost (hefty) 45% of its export business?
China lost apx 9% year on year that is:

International slump factor is well known, but country losing nearly half its export business?
Now this is Chalk & Cheese to write home about.

 

[fsayed]

In a rare meeting, Congress vice-president Rahul Gandhi apprises FIIs about party's stand on stuck GST Bill - The Economic Times

NEW DELHI: Businesses lobbying ministers for favourable policies is common practice, but doing that with Opposition leaders is extremely rare. But a bunch of top foreign institutional investors has done just that.

Some 20 or so top foreign fund representatives met Congress Vice-President Rahul Gandhi in Delhi on Thursday to discuss the fate of key economic legislations, notably the long-pending Goods and Services Tax (GST) Bill, the unusual meeting underscoring the nervousness in markets whether economic reforms will once again become hostage to politics in the upcoming winter session of Parliament.

The meeting, at Gandhi's Tughlak Lane residence and arranged at the behest of the investors, was labelled by one of the attendees as an attempt to get a 'first-hand view' of the Congress party's stance in the upcoming Parliament session. Put bluntly, they wanted to know whether or not Congress would support the GST Bill's passage in the winter session that starts on November 26. Representatives of firms such as Capital International, HSBC, T.

Rowe Price, Dutch Pension Fund and Jupiter Capital are among those said to have attended the hour-long meeting with Gandhi, who was accompanied by United Progressive Alliance-era minister and close adviser Jairam Ramesh and other party functionaries.

While representatives of the firms were not available for comment, one of the Congress functionaries present at the meeting said Gandhi assured the investors that his party was not against economic reforms and put the onus for the Bill's passage on the government.

"It was the Congress party which ushered in liberalisation and first brought the GST Bill. But the party is equally committed to protecting the marginalised, the poor and make sure the security support systems are in place," said this person.

"He (Rahul Gandhi) didn't say that we will stall Parliament. 'The GST Bill is our Bill, we introduced it three years ago...We are not against growth but the present government has to engage with Opposition. They can't take a stand just because they have the numbers'," the person quoted Gandhi as saying.

Rahul Gandhi too acknowledged the meeting on his twitter handle @officeofRG. "Had a fruitful discussion with top foreign institutional investors yesterday on state of the economy & its priorities."

Market watchers warn further delay in passage of key reforms, including GST, could lead to some foreign investors paring a portion of their Indian holdings. "Investor patience is running thin and the government needs to push through at least one big-banner reform in the winter session of Parliament to regain confidence," said Taimur Baig and Kaushik Das, economists at Deutsche Bank.

The hour-long meeting largely focussed on the GST Bill, but the bankruptcy law was also discussed.

In a recent interview with Reuters, Finance Minister Arun Jaitley said the government is ready to discuss all issues with the Opposition on GST, but would not compromise on the basic architecture of the tax reform.

Congress leader and former finance minister P Chidambaram has put three conditions for supporting the Bill. These include a constitutional cap of 18% on GST, a dispute resolution authority, and dropping of the 1% tax proposed on interstate movement of goods. ' The government could not get the GST Bill passed in the monsoon session because it refused to accept these conditions.

 

[Nilgiri]

Which country has lost (hefty) 45% of its export business?

Thats a monthly y.o.y by nominal USD because of much lower oil prices (and India is a big oil refiner exporter) A month does not equal a whole years performance.

Besides, Export volumes are doing steady and fine...though can be doing much better....but theres a big uphill task left over from the previous crappy congress regime....w.r.t lack of competitiveness and credit crunch for private companies. Both carry weighty inertia that may take another year or two to resolve fully.

 

[SanjeevaniButi]

OK.

LOL.... you got trolled

 

[fsayed]

Factories running 30% below capacity: Rajan | Business Standard Mobile Website