Indian Economy: News and Discussion

[Prashant12]

Forex reserves at life-time high of $426.082 bn

Mumbai, Apr 20 The country's foreign exchange reserves expanded by USD 1.217 billion to touch a life-time high of USD 426.082 billion in the week to April 13, helped by rise in foreign currency assets, the Reserve Bank of India (RBI) said.

In the previous week, the reserves had increased by USD 503.6 million to reach USD 424.864 billion.

It had crossed the USD 400-billion mark for the first time in the week to September 8, 2017, but has since been fluctuating.

In the reporting week, the foreign currency assets, a major component of the overall reserves, increased by USD 1.202 billion to USD 400.978 billion.

Expressed in the US dollar terms, the foreign currency assets include the effect of appreciation or depreciation of the non-US currencies such as euro, pound and Japanese yen held in the reserves.

Gold reserves remained unchanged at USD 21.484 billion in the reporting week, the central bank said.

The special drawing rights with the International Monetary Fund (IMF) increased by USD 6.6 million to USD 1.540 billion.

The country's reserve position with the IMF also rose by USD 8.9 million to USD 2.079 billion, RBI said.

https://www.outlookindia.com/newsscroll/forex-reserves-at-lifetime-high-of-426082-bn/1292204

 

[ezsasa]

.....
While this is great news, im still skeptical about this whole adding a billion every few years theory... that has held true for countries which have large export driven manufacturing economies unlike ours.. if you look at our export mix we produce nothing which is of value to the world!

There is a limit to what we can achieve in 25 years. It’s only after 2000 the real money started flowing in. And we also had atleast 8-10 years of policy paralysis in those 25 years.

China has 10-20 year head start without policy paralysis.

 

[ezsasa]

Is it that IMF gives optimistic numbers?
=======
India is world’s sixth largest economy at $2.6 trillion, says IMF

https://www.hindustantimes.com/busi...on-says-imf/story-7wXZPXSWlvvImlAvpLKeNL.html

is my logic correct?

If 2.6 trillion is total GDP, as per below chart about 1 trillion is import/export that would mean 1.6 trillion $ of domestic trade i.e more than 100 lakh crores of domestic trade..

probably first time we hit 1 trillion $ import export mark..

 

[YagamiLight]

I agree with some of your points. Though I would like to point out a few

1. Steel- Steel is also necessary for building infrastructure within. Highways, railway corridors, real estate all of it requires huge amounts of steel. Increased steel production is also an indicative of increased local demand as in the international market, China is already dumping steel at lower prices. I am not sure how much share we occupy over there.

---- Nobody occupies any real space apart from China, they make 50% of the worlds steel, so despite their enormous appetite they still have more lying around than India's total production. Hence the dumping, 800 Mn tons is what they make opposed to 100 odd for us. So its safe to assume they dominate well over 50%. We export about 5 Mn Metric Tons, which isn't bad but is pocket change compared to what China exports. Another bit to note is China does this with a larger strategic intention as well, if you kill a countries steel industry you start the painful decline of their manufacturing industry as a whole. The UK and USA are prime examples, that is why steel is treated as such a crucial industry

2. Petroleum products- What these refineries are doing is value addition and developing expertise along the way. Their earnings translate to economic growth, more job opportunities and more tax revenues for the government.
----- Not really, once set up and fully staffed these refineries don't add jobs because they just intend to maintain production, similar to steel. I had a friend from IITB who worked in the Jamnagar factory, he didnt mince words when he said our refineries are 2-3 generations behind what the west use. How much research do or value add do you think a lala firm like IOCL or a baniya firm like Reliance does.. zilch

3. Pharma- We can and must do much better and that will start by building a stronger R&D base both in academia and industry. China is pumping in huge amounts of money to expand and improve their scientific research base. It has started happening in India, but a long way to go.

-- JNJ spends 8.2 Bn on R&D alone it is always a function of topline.. when Ranbaxy does a few hundred crores they cant expect to achieve any major breakthrough. In China a lot of R&D costs are cushioned by the govt. in India that ecosystem simply doesnt exist

Many people here think that manufacturing sector is what makes the country great. That's a false assumption. Services sector is what makes the country wealthy. Look at all the "industrialised" countries of the world. Every one of them will have a strong services sector forming 70%of the GDP . So stop thinking that manufacturing is a be all end all of economic well being. Also, see China vs Korea/Japan. Latter two are services sector dominant economies while the former is a manufacturing economy. Which one do you think is richer now?

 

[YagamiLight]

is my logic correct?

If 2.6 trillion is total GDP, as per below chart about 1 trillion is import/export that would mean 1.6 trillion $ of domestic trade i.e more than 100 lakh crores of domestic trade..

probably first time we hit 1 trillion $ import export mark..
View attachment 24497

No it isnt. You are confusing completely unrelated things

 

[G10]

Many people here think that manufacturing sector is what makes the country great. That's a false assumption. Services sector is what makes the country wealthy. Look at all the "industrialised" countries of the world. Every one of them will have a strong services sector forming 70%of the GDP . So stop thinking that manufacturing is a be all end all of economic well being. Also, see China vs Korea/Japan. Latter two are services sector dominant economies while the former is a manufacturing economy. Which one do you think is richer now?

Without manufacturing base there can be no indegenisation. No proper Research and development.

 

[Tanmay]

https://www.moneycontrol.com/news/b...ounts-opened-globally-world-bank-2553755.html

That's a huge news
55% of bank accounts opened newly across world are from india

 

[YagamiLight]

Without manufacturing base there can be no indegenisation. No proper Research and development.

Not really, most of the manufacturing for Apple happens in China while the R and D happens in USA. Again, I am not saying u don't need manufacturing, I am saying services sector growth is far more important. However, even more important is to reduce the number of farmers(not agricultural production)

 

[nongaddarliberal]

Not really, most of the manufacturing for Apple happens in China while the R and D happens in USA. Again, I am not saying u don't need manufacturing, I am saying services sector growth is far more important. However, even more important is to reduce the number of farmers(not agricultural production)

Yup. Farmers are at most 3% of the population in any developed economy. Only if the percentage decreases to that extent can farming be a high income job for the farmer. If 50% of our population is in farming, its as good as saying 50% of our country is in poverty. And food prices will also decrease due to economy of scale from massive farms owned by a few people, which will get rid of most of our inflation.

 

[nongaddarliberal]

Not really, most of the manufacturing for Apple happens in China while the R and D happens in USA. Again, I am not saying u don't need manufacturing, I am saying services sector growth is far more important. However, even more important is to reduce the number of farmers(not agricultural production)

For job growth we need manufacturing. It is the only way our massive unskilled population can get employed if they are to move away from agriculture. We have not embarked on the type of massive skill development required to transfer our hundreds of millions of farmers straight into high tech services.

 

[Suryavanshi]

For job growth we need manufacturing. It is the only way our massive unskilled population can get employed if they are to move away from agriculture. We have not embarked on the type of massive skill development required to transfer our hundreds of millions of farmers straight into high tech services.

Let's assume that Indias population is 1 billion for making my point clear through a ideal case.

When we say 50% of our population is unemployed they think that we have 500 million people just sitting around well that's no entirely the case.
Remember we have a population of kids between the age 1 to 18 that's like 20% of the population for a young country like india that is about 200 million.
These kids aren't in the workforce and they don't do job they are currently studying.
Off course I'm not counting the child labour and kids that aren't in schools.

10 % of the populations must be above 60 i.e. retiring age that's 100 million.

That means at any given time we need 700 million jobs.

 

[nongaddarliberal]

Let's assume that Indias population is 1 billion for making my point clear through a ideal case.

When we say 50% of our population is unemployed they think that we have 500 million people just sitting around well that's no entirely the case.
Remember we have a population of kids between the age 1 to 18 that's like 20% of the population for a young country like india that is about 200 million.
These kids aren't in the workforce and they don't do job they are currently studying.
Off course I'm not counting the child labour and kids that aren't in schools.

10 % of the populations must be above 60 i.e. retiring age that's 100 million.

That means at any given time we need 700 million jobs.

Right. And we need 700 million FORMAL jobs, not just any job if we want to reach 10-15 trillion GDP (nominal). That will also massively improve tax to GDP ratio, transparency in the economy, and fair wages. But the point is we can't have any more than 5% of the workforce in farming if we want to become a developed country.

 

[Suryavanshi]

Right. And we need 700 million FORMAL jobs, not just any job if we want to reach 10-15 trillion GDP. That will also massively improve tax to GDP ratio, transparency in the economy, and fair wages. But the point is we can't have any more than 5% of the workforce in farming if we want to become a developed country.

Let's check it then.
You say 5% for farming and no more that 50 million
Now look at some big job sources.

India has 2 million police jobs currently and there is vacancy for much more.
India has 3 million soldiers army and paramilitary included.
Indian Railway employees 1 million workers.
Approx there are 1 million doctors in india

 

[nongaddarliberal]

Let's check it then.
You say 5% for farming and no more that 50 million
Now look at some big job sources.

India has 2 million police jobs currently and there is vacancy for much more.
India has 3 million soldiers army and paramilitary included.
Indian Railway employees 1 million workers.
Approx there are 1 million doctors in india

Large scale manufacturing needs to come, and absorb the workforce that will move away from farming. And it doesn't necessarily need to be export oriented manufacturing. We can make large quantities of cheap but good quality products for our own massive population. Currently at least 300 million people are actively working in agriculture. Hopefully we will reduce that to around 50 million. Which means we need to create about 150 million manufacturing jobs and another 100 million basic service sector jobs (restaurants, mechanics, drivers, shopkeepers, etc). If we somehow develop their skills, we can put them in even better jobs.

We are talking about hundreds of millions of jobs bro, 7-10 million is peanuts compared to the actual requirement to transition to a developed country.

 

[Alfalfa]

Many people here think that manufacturing sector is what makes the country great. That's a false assumption. Services sector is what makes the country wealthy. Look at all the "industrialised" countries of the world. Every one of them will have a strong services sector forming 70%of the GDP . So stop thinking that manufacturing is a be all end all of economic well being. Also, see China vs Korea/Japan. Latter two are services sector dominant economies while the former is a manufacturing economy. Which one do you think is richer now?

Im sorry but you are the one who is mistaken man, no country has become great on services alone.. If you look at services as a % of GDP and make that call then you are misguided for a number of reasons.
1) Countries account for services in differing ways, so a lot of industries which are actually manufacturing get counted as service sector because they are somewhere upstream on their particular value chain. Like they do with small manufacturers and OEM service providers in the Mittelstand, Germany or China counting its Railways.
2) Korea and Japan are services dominant? Really? They are two of the most industrialized countries on earth!
3) Name one global power today with an economy over 1.5-2 Tn. which has never had any golden era in manufacturing?

 

[nongaddarliberal]

I have a question that has been bugging me for quite a while. What is India's total government expenditure and tax collection? There is a LOT of contradictory information regarding this. The IMF says that our revenue is 540 billion USD and Expediture is 710 billion USD. That means our tax to GDP ratio would be 19%, expenditure would be 24% of GDP (Assuming GDP of 2850 billion USD). These figures dont seem believable for many reasons. I dont think we have reached anywhere near 19% tax to GDP ratio, and we certainly dont have a fiscal deficit of 5% of GDP.

Our tax to GDP ratio is estimated to be just under 15%, and expected budget deficit to be 3.5%.

https://www.google.co.in/amp/s/www....ndias-tax-to-gdp-ratio-so-low-239152.html/amp

https://www.google.co.in/amp/s/m.ec...-5-of-gdp-report/amp_articleshow/62804874.cms

Anyone has better insight into this?

 

[aditya10r]

I have a question that has been bugging me for quite a while. What is India's total government expenditure and tax collection? There is a LOT of contradictory information regarding this. The IMF says that our revenue is 540 billion USD and Expediture is 710 billion USD. That means our tax to GDP ratio would be 19%, expenditure would be 24% of GDP (Assuming GDP of 2850 billion USD). These figures dont seem believable for many reasons. I dont think we have reached anywhere near 19% tax to GDP ratio, and we certainly dont have a fiscal deficit of 5% of GDP.

Our tax to GDP ratio is estimated to be just under 15%, and expected budget deficit to be 3.5%.

https://www.google.co.in/amp/s/www....ndias-tax-to-gdp-ratio-so-low-239152.html/amp

https://www.google.co.in/amp/s/m.ec...-5-of-gdp-report/amp_articleshow/62804874.cms

Anyone has better insight into this?

I will write deeply into this tomorrow.

I have some good data on that.

================================================

 

[ezsasa]

I have a question that has been bugging me for quite a while. What is India's total government expenditure and tax collection? There is a LOT of contradictory information regarding this. The IMF says that our revenue is 540 billion USD and Expediture is 710 billion USD. That means our tax to GDP ratio would be 19%, expenditure would be 24% of GDP (Assuming GDP of 2850 billion USD). These figures dont seem believable for many reasons. I dont think we have reached anywhere near 19% tax to GDP ratio, and we certainly dont have a fiscal deficit of 5% of GDP.

Our tax to GDP ratio is estimated to be just under 15%, and expected budget deficit to be 3.5%.

https://www.google.co.in/amp/s/www....ndias-tax-to-gdp-ratio-so-low-239152.html/amp

https://www.google.co.in/amp/s/m.ec...-5-of-gdp-report/amp_articleshow/62804874.cms

Anyone has better insight into this?

Here you go.... My contribution to your question. Data taken from Fin ministry reports.
amounts are in crores.

 

[ezsasa]

Just for information -----
GDP in Local currency: 1 lakh crore = 1 trillion

For 2017:

India : 121 trillion INR
Pakistan : 32 trillion PKR
China : 82.7 trillion RMB
Bangladesh : 19.5 trillion BDT

 

[nongaddarliberal]

Here you go.... My contribution to your question. Data taken from Fin ministry reports.
amounts are in crores.

View attachment 24529

So according to that info our total government revenue is only 375 billion USD.