Getting Indian economy back on track

nrj

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Re: India's economic situation could be worse than 1991: Kelkar

Infuse fear & then carry out unpopular reforms. It is not too hard to decode.
 

TTCUSM

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India Growth to Drop to Decade Low Amid High Inflation:

Indian growth may weaken to a decade- low this year after investment stalled, the International Monetary Fund said, as it called for interest rates to remain unchanged until the nation's high inflation rate eases.

Gross domestic product will rise 4.9 percent in 2012, less than a July forecast of 6.1 percent, the Washington-based lender said in its World Economic Outlook report today. The expansion will accelerate to 6 percent next year, it said, helped by improving overseas markets and a boost to confidence from a recent government policy revamp.
 

ice berg

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Is 5-point-something the new Hindu rate of growth

Is 5-point-something the new Hindu rate of growth - The New Indian Express

By Shankkar Aiyar

02nd December 2012 12:00 AM



On Friday, India got further validation of the poor state of the economy. It was informed that the economy grew slower in the second quarter of this fiscal than the previous quarter. In some quarters, the information was interpreted as good news. It has been argued—with a degree of exuberance influenced perhaps by Dalal Street—that the economy has bottomed out. That is quite a left-handed compliment to the UPA—the belief that things can't get worse. The most charitable riposte one can think of is that the optimism is debatable.

The devil is in the details. Industry which once grew in double digits has been sputtering for over four quarters. The data for the past 12 months reflects the consequence of the magnitude of inflation-fuelled costs and policy paralysis. Manufacturing has been negative for six of 12 months, mining for 9 of 12 months and capital goods for 11 of 12 months. Indeed, in the last 12 months, manufacturing has grown at 0.25 per cent, mining at 1.03 per cent, and capital goods at 11.45 per cent. It has been pointed out that the fall in capital goods output is the consequence of cheap imports. Perhaps it is so, but the question to be asked is whatever happened to the quest for competitiveness. Under the UPA, despite the many committees, manufacturing has regressed from being the potential saviour of the economy—shifting surplus labour from farms to factories —to a sector that desperately needs a saviour.

The bad news is that even if it has 'bottomed out', GDP growth threatens to stay so. The question that must now haunt policy-makers is whether 5-point-something is the new Hindu rate of growth. The 'Hindu Rate of Growth' as we know was coined by economist Raj Krishna to mock at the slow pace of growth through the Nehruvian socialist era. And the economy once again seems headed to the era of status quoism. On Saturday, I put this question to four of the most eminent persons in India's political economy—Dr C Rangarajan, Dr Bimal Jalan, Dr Y V Reddy and Dr Subbarao. The consensus was that India could do better—notch 7 to 8 per cent GDP growth—but as Rangarajan pointed out, "it cannot come without doing anything". Dr Jalan said, rather inimitably, "I hope you popularise this idea of a new Hindu rate so that something does get done." The economy is stranded in a systemic crisis.

The central issue facing the economy is political profligacy. Consider the paradox: everything that must fall is rising—fiscal deficit, current account deficit and inflation. That which must rise is falling: GDP, exports, value of rupee. The alarm bells should have rung in the PMO when Pranab Mukherjee heralded government expenditure crossing `10 lakh crore as an achievement. The first question that should have come up is: who is paying? In 2009-10, the government was borrowing around `700 crore a day. In 2011-12, the government was borrowing `1,600 crore a day. Between April and October this year, the government has borrowed over `370,000 crore in 180 days. Inflation is now the principal output and growth a mere by-product.

There has been much debate about the need to cut interest rates—as if monetary policy can rein in the consequence of fiscal policy. Be that as it may, can a 25 or even 50 basis points cut revive manufacturing? And what about depositors—are they obliged to lend at negative returns on hard-earned savings when inflation is high? What about safety—what if the economy doesn't turn around and the NPAs pile up? Interest rate is only one of the many factors influencing growth. It might interest the votaries that throughout the high growth period, interest rates only went up.

The central issue here is not affordability or availability but viability. Stalled policy spikes costs, delay inhibits viability and precludes growth. Corporates and PSUs are sitting on cash. Investors are sitting on the fence. Over `5 lakh crore worth investments are stalled for clearances. All of them are waiting for the patient on Raisina Hill to show some sign of life. Take the power sector which has a multiplier effect on growth and financial stress. Next month will be one year since the PMO took the initiative to clear the problem of fuel linkage amid banner headlines. There has been scarcely any movement on the ground. The need to create a national investment board is again a symptom of a larger crisis of onus.

The curious thing about India is governments individualise what should be institutional and institutionalise what must be individual responsibility. The quest for growth must be an institutional responsibility and every minister has an obligation to propel growth. Individual ministers seem wedded to the case-by-suitcase cause. Growth, it would seem, is another planet.

The theory of economics defines that growth must come from a virtuous cycle led by investment, employment, income, savings and consumption. The 5.5 per cent growth is led by consumption. Investment has declined and savings have fallen. It is estimated that at 8-plus per cent growth over 12 million jobs are created. At five-point-something, job creation will be much slower. To get a perspective, consider this: Over 16 million students enrol in graduate classes in universities across India. Do the math on how many will be jobless. The political consequence of poor economics will visit the UPA sooner than later.

Politics is the art of the possible and economics the negotiating instrument. The infamous Hindu rate of growth was but the secular failure to see the writing on the wall. The writing has been on the wall for over nine quarters now, and it is not in Greek, Spanish or Latin.
 

sesha_maruthi27

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Re: Is 5-point-something the new Hindu rate of growth

What is this "new HINDU rate"?

I request the MODS to change the heading as new "INDIAN rating"....

Boss, please don't differentiate us in the name of religion, we are INDIANS first......

Troll inside CHINA not here.....
 

hit&run

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Re: Is 5-point-something the new Hindu rate of growth

When growth is down its Hindu, when its up its secular. Europe is ----ed up and USA is gasping it should be Christian growth ?

Growth has nothing to do with Hindu or no Hindu, it has to do with policy.
 

GromHellscream

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Everyone all over the world is printing money and rupee even devalued a lot?
What happened in India?
 

nrj

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Printing money is no option, it will only increase inflation.

National output must increase.
 

cir

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Printing money is no option, it will only increase inflation.

National output must increase.
One would assume that the currency of a country that prints money depreciate against the currency of one that does not。

Unless India is also printing money,and on a far larger scale?
 

cir

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Updated December 10, 2012, 5:42 a.m. ET

.India's November Car Sales Drop 8.3%

By SANTANU CHOUDHURY And RAKESH SHARMA
NEW DELHI--Car sales in India fell for the third time in four months in November as rising fuel prices, high borrowing costs and fears of job losses in a slowing economy crimped demand.

The sales decline intensifies worries among car manufacturers that the local market is unlikely to rebound in the current financial year through March.

Local sales fell 8.3% to 158,257 cars in November from 172,493 a year earlier, according to data issued Monday by the Society of Indian Automobile Manufacturers, or SIAM.

Sales in December will lag those in each of the previous three months, despite year-end discounts by companies to clear stocks, said SIAM Director-General Vishnu Mathur.

Enlarge Image

CloseIndranil Mukherjee/Agence France-Presse/Getty Images

Customers speak to a sales executive at a car showroom in Mumbai on Nov. 10. Car sales in India fell 8.3% from a year earlier in November.
."There is a lot of uncertainty in the market. People are not sure of their jobs," said Mr. Mathur." This is impacting sales."

The drop in November comes after a 23% sales jump in October.

Sales in October were driven by higher dispatches from factories ahead of the main Hindu festival of Diwali, celebrated in early November, and also because of comparison with a low base.

Car sales in India are counted as factory dispatches, not retail sales.

Despite the current slowdown, India is considered one of the biggest emerging markets for automobiles globally.

The growth potential has led companies such as Volkswagen AG, VOW3.XE -0.48%Ford Motor Co., F +2.14%Hyundai Motor Co., 005380.SE +0.66%Nissan Motor Co. 7201.TO -0.77%and Renault SA RNO.FR -0.03%to invest billions of dollars in building new factories in the country. More companies are planning to enter the Indian market.

Sugato Sen, SIAM's deputy director general, said China's Beiqi Foton Motor Co. 600166.SH +0.32%has purchased a plot of land at Chakan in the western Indian state of Maharashtra to build a commercial-vehicle factory.

Another Chinese auto maker, Great Wall Motor Co., 2333.HK 0.00%is also considering a plan to enter the Indian market, Mr. Sen said.

Their plans for India come despite the local auto industry facing a tough business climate.

SIAM has recently lowered its forecast on India's car-sales growth to between 1% and 3% this fiscal year from 9%-11%. The auto body has also cut its forecast on motorcycle and scooter sales growth to 5%-7% from 11%-13%.

"Going ahead, we expect the demand scenario to remain challenging as the slowdown in economic growth coupled with higher interest rates and fuel expenses continue to dampen consumer sentiments," Yaresh Kothari, an analyst at Mumbai-based Angel Broking, wrote in a recent note.

In November, sales of Maruti Suzuki India Ltd., 532500.BY -1.13%the local market leader and a unit of Suzuki Motor Corp., 7269.TO +0.21%increased 2.3% to 74,793 cars.

Second-ranked Hyundai posted a 0.5% fall in November sales to 34,698 cars. Sales of Tata Motors Ltd., 500570.BY -0.69%which makes the Nano minicar, plunged 42% to 13,538 cars.

Car makers such as Ford, General Motors Co., GM +2.52%Nissan, Volkswagen and Toyota Motor Corp. 7203.TO 0.00%also recorded lower sales in India, while Honda Motor Co., 7267.TO -0.69%Renault, BMW AG, BMW.XE -0.54%Audi AG NSU.XE +0.97%and Daimler AG DAI.XE -0.80%posted growth.

Sahil Kedia and Rohit Goel, Mumbai-based analysts at Barclays Capital, said recently that demand for SUVs and diesel cars as well as the introduction of new vehicle models will "drive volumes in the near term."

In India, diesel cars are preferred over gasoline models because of a big difference in the prices of the fuels.

The government regulates and subsidizes the price of diesel, which is 30% cheaper than gasoline at New Delhi retail outlets.

Car sales during the April-November period grew 1.3% to 1.24 million autos. At the same period, sales of SUVs, most of which are diesel-powered, climbed 62% to 357,872 vehicles.

In the truck and bus segment, local sales in November declined 7.3% to 61,410 vehicles. The drop was due to a 33% fall to 17,441 units in the sales of medium and heavy commercial trucks and buses.

Tata Motors, which leads the market for commercial vehicles, posted a 9.7% decline in sales to 35,807 vehicles. Ashok Leyland Ltd. 500477.BY -1.43%and Mahindra & Mahindra Ltd., 500520.BY -0.90%however, reported an increase.

Motorcycle sales remained almost flat in November at 867,518 units, compared with 867,088 a year earlier.

Hero MotoCorp 500182.BY +0.83%Ltd.--the largest maker of motorcycles in India--second-ranked Bajaj Auto Ltd. 532977.BY +1.01%and Yamaha Motor Co. 7272.TO -0.43%recorded lower sales in the past month.

Honda, TVS Motor Co., 532343.BY 0.00%Suzuki and Royal Enfield Motors, however, recorded higher motorcycle sales.

Motorcycle sales were subdued partly due to weak demand in rural India, said SIAM's Mr. Mathur.

Scooter sales rose 6.6% to 244,392 units in November.

Mr. Mathur said the expansion could mainly be due to a growing number of young customers in cities preferring such vehicles.

India's November Car Sales Drop 8.3% - WSJ.com
 

nrj

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One would assume that the currency of a country that prints money depreciate against the currency of one that does not。

Unless India is also printing money,and on a far larger scale?
It will only lead to more depreciation of currency and looking at oil import levels, I don't think RBI will do that.
 

afako

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Re: Is 5-point-something the new Hindu rate of growth

What is this "new HINDU rate"?

I request the MODS to change the heading as new "INDIAN rating"....

Boss, please don't differentiate us in the name of religion, we are INDIANS first......

Troll inside CHINA not here.....
It is Nehru Rate of Growth.
 

ramakrishna

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Congratz to MMsingh govt. Dollar reached its peak rate .... 1USD = 60Rs .... that will effect directly on imports & oil ... and indirectly effect groceries, vegetables .... ENUFF IS ENUF ...if cong govt cant do anything ..... its their moral responsibility to get down from the govt. ......
 

SamwiseTheBrave

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it looks like the outgoing UPA 2 govt. is making all possible efforts to block india`s growth as a manufacturing destination int he near present and future.
Heres how i see the pieces of the puzzle fitting together :
Simple question :What do you need to make societies industrialized ? the famous 4 M`s : men, material , machinery and money
1. land acq. bill makes it hard to develop industrial SEZ`s and mining/resources - the "materials" factor
2. MNREGA & FSB kills any incentives for the non-agricultural population to take up wage jobs in industries, or at best, jacks up the price rather than using the same money to create a social safety net, plus the fact that the labor laws are still extremely stifling - this hampers the "men" factor
3. there is virtually no incentive for local indigeneous tech development , which is what the IIT`s were originally setup for - the window of opportunity to use the buoyant economic conditions of the last decade to acquire technology and develop the industrial base was completely
4. capital is again controlled mainly the FII & FDI inflows - the huge govt. spending and subsidy for the "men" factor also blocks the "money" factor, and the basic fact that an entire sector of the economy is not encouraged nand entangled in red tape, "permission raj" again hinders money flows into the sector.
heck, one of the largest mobile phone markets in the world cant even make its own cell phone !
such a shame - what do you folks think ? am i just being a nutbag conspiracy theorist or is this something real going on here
 

CrYsIs

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India is now a failed economy

India's economic model has essentially failed. Talk of matching East Asia's growth rates has been exposed as wishful thinking. Superpower dreams are giving way to the same old reality of poverty, depleted ground water and graft.

India's manufacturing industry remains stuck at 14pc of GDP. This is a far cry from levels in Thailand (30pc), South Korea (31pc) or China (32pc), or Japan in its day, the typical threshold for catch-up economies graduating to a higher league. India has actually lost 5m manufacturing jobs over the past decade, slipping from 55m to 50m.

The economic boom fizzled two years ago, ending in the sort of stagflation that bedevilled Britain in the 1970s. India's "misery index" is back where it was a quarter of a century ago when the old Hindu Model was overthrown and the country embraced free market globalism, up to a point. The International Monetary Fund expects growth to languish at 4.6pc this fiscal year, with inflation at 10.5pc. "India has very little room to adopt countercyclical policies," it said.

Capital Economics says India is the only BRIC economy that has slipped down the World Economic Forum's ranking of competitiveness since 2006, though Russia and Brazil have drifted badly as well. India has dropped from 43 to 60 in relentless decline, scoring 85 for infrastructure, 98 for technological readiness, 110 for macroeconomics and bribes, and 129 for starting a business.

Standard & Poor's has threatened to relegate India to junk status unless it hacks away a thicket of patronage subsidies – 14pc of the budget, up from 10pc in 2008 – and brings the public accounts under control. The combined state and local budget deficit is down from double-digit levels but is still 7.7pc of GDP. "We may lower the rating to speculative grade in the next year or so if the next government does not appear capable of reversing India's low economic growth," it said.

In any case, India does not have the infrastructure to carry a modern economy. Its 12th Five Year Plan (2012-2017), written in the glory days of 2011, competes for realism with Soviet forecasts under Gosplan. It heralded growth of 8pc through the middle of the decade, though ministers talked then of nearer 9pc, such were the habits of extrapolation. These delusions were rudely interrupted when the rickety network of regional grids broke down in the peak summer of 2012, leaving 650m people and New Delhi itself without power for days.

The country has done remarkably little over the years to reform the grid. A quarter of the electricity is stolen or leaks away. Factories suffer stops for hours at a time. Tata Motors has been forced to build its own power grid. Half the roads are still unpaved. Plans to build 25,000km of new railways by 2020 look increasingly implausible.


Five years ago it seemed like every big investment bank was publishing "Chindia" predictions, arguing back and forth whether the Chinese tiger or the slower but younger Indian elephant would prove to be the economic hegemon of the 21st Century. It all looks very dated now. China still has a shot. India may have let it slip away.
Modi's Thatcherite talk cannot restore India's flagging fortunes - Telegraph
 

CrYsIs

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Re: India is now a failed economy

I hope the New PM Narendra modi reverses the situation as soon as possible.

But the reality is quite grim.

India a country of 1.2 billion people or over 17% of this planets population generates a revenue of only 210 billion $ which is even lower than the tiny Switzerland ,a state the same size as Uttrakhand.In contrast the annual revenue generated in China is well over 2 trillion $ despite having a similar size where as in the US the annual revenue generated is over 6 trillion $.So running India is like running a family of four in under rs 3000 a month.

The vast majority of that revenue is spent on defense,subsidies,oil and cheap vote winning gimmicks resulting in very little being left for health,education and other socio economic priorities and nothing being left for very critical stuffs like infrastructure.On the top of that many of the states are absolutely bankrupt and do not even have the money to pay salaries to their employees.

The outgoing Congress has left an Achilles heel for the new government which is called as Food security act.India neither has the money nor the resources for that but this act cannot be repealed since it will be seen as anti-poor.

India has become like a family where the father has lost his job and is running his family by taking up loans.
 

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