Indian Economy: News and Discussion

[Advaidhya Tiwari]

Yes, I also realize that the rupee appreciated last year for no real reason and the correction has come this year. My point is we wouldn't have to worry about any of this if we had a trade surplus which a developing country with low wages should have. I remember making fun of the pakis this January that their GDP grew 0% in dollar terms due to their currency depreciation in 2017, and now the same thing has happened to us this year.

P.S. no I actually live in Moscow

The problem with that is that Pakistani GDP is based on almost nil production. Also, currency depreciation has been 18%:

The biggest problem of Pakistan is that it has no technology at all. Technology which India had in 1995 is not there in Pakistan.For example, India has Navy construction, radar, satellite launchers, ballistic missiles which were accurate etc which Pakistan does not have even till date. Pakistan does not even have car manufacturing.

 

[ezsasa]

Because of the massive rupee depreciation our GDP in dollar terms remains at 2.6 trillion in 2018, same as 2017, instead of the 2.85 trillion it should have been. And this is inspite of 7% + GDP growth. I don't know how we will attain our goal of 10 trillion by 2030 at this rate. And let's not get into PPP. You can't pay for rafales with PPP dollars. Until we achieve a trade surplus, the rupee will always remain this volatile. We can't keep compensating for the trade deficit with remittances and FDI. Clearly that doesn't work when oil prices shoot up.

One correction: GDP nominal is calculated on base price of 2011-12. USD was 52.5 INR.

If you calculate at current USD conversion, GDP would be about 2 trillion USD or less.

I think I posted those calculations 6-7 months back.

 

[nongaddarliberal]

One correction: GDP nominal is calculated on base price of 2011-12. USD was 52.5 INR.

If you calculate at current USD conversion, GDP would be about 2 trillion USD or less.

I think I posted those calculations 6-7 months back.

That just spoilt my day. I didn't realize we weren't using current exchange rates.

 

[Advaidhya Tiwari]

One correction: GDP nominal is calculated on base price of 2011-12. USD was 52.5 INR.

If you calculate at current USD conversion, GDP would be about 2 trillion USD or less.

I think I posted those calculations 6-7 months back.

That just spoilt my day. I didn't realize we weren't using current exchange rates.

Wrong. We use current dollar exchange rate for nominal GDP. The GDP of 2017-18 was 167 lakh crores which comes to 2.61 trillion USD when 1USD is 64INR.

The nominal GDP in INR also uses current INR value without inflation adjustment. The real GDP is what uses INR with inflation adjustment adjusted to 2011-12

 

[ezsasa]

That just spoilt my day. I didn't realize we weren't using current exchange rates.

Indian government doesn’t calculate in USD, they release the numbers in crores.

IMF, world bank and other financial institutions use $.

I was hoping base numbers would be moved to 2018-19, but given rapid drop in USD exchange rate now I doubt govt will do it next year. If they do GDP numbers will drop drastically, half a trillion $ or more.

 

[ezsasa]

Wrong. We use current dollar exchange rate for nominal GDP. The GDP of 2017-18 was 167 lakh crores which comes to 2.61 trillion USD when 1USD is 64INR.

The nominal GDP in INR also uses current INR value without inflation adjustment. The real GDP is what uses INR with inflation adjustment adjusted to 2011-12

Let me find my calculation sheet, I did it for both base price and current prices at that time.

 

[ezsasa]

Let me find my calculation sheet, I did it for both base price and current prices at that time.

Here you go.... Calculations are done quarter wise...
Base price with USD rate during 2011 gives the closest number to IMF and world bank numbers..

 

[nongaddarliberal]

Here you go.... Calculations are done quarter wise...
Base price with USD rate during 2011 gives the closest number to IMF and world bank numbers..
View attachment 28574

That table shows market prices at 2.5 trillion

 

[ezsasa]

That table shows market prices at 2.5 trillion

yes. the last two columns are relevant to this discussion. Third one from right is probably wrong way to calculate GDP in USD.

 

[nongaddarliberal]

yes. the last two columns are relevant to this discussion. Third one from right is probably wrong way to calculate GDP in USD.

When we calculate for the current exchange rate of 73 INR to USD it comes to about 2.3 trillion. Most nominal GDP figures of countries are simply their current GDP in their national currency converted to dollars. Only growth rates take constant prices into account. Total GDP value is based on current exchange rates.

 

[ezsasa]

When we calculate for the current exchange rate of 73 INR to USD it comes to about 2.3 trillion.

Numbers for Q1 2018...

2017 for comparison...

 

[ezsasa]

When we calculate for the current exchange rate of 73 INR to USD it comes to about 2.3 trillion. Most nominal GDP figures of countries are simply their current GDP in their national currency converted to dollars. Only growth rates take constant prices into account. Total GDP value is based on current exchange rates.

is this for 2018? what is the GDP in lakh crores you have taken?

 

[nongaddarliberal]

is this for 2018? what is the GDP in lakh crores you have taken?

I took the figure of 167731.46 market value from the table you provided and converted to USD.

EDIT: fuck I see your point. This is the 2017 figure which I converted to current exchange rates.

 

[nongaddarliberal]

is this for 2018? what is the GDP in lakh crores you have taken?

I used the third column of market prices and converted it into USD. Not calculating with the 2011 base prices figure.

 

[Advaidhya Tiwari]

Here you go.... Calculations are done quarter wise...
Base price with USD rate during 2011 gives the closest number to IMF and world bank numbers..
View attachment 28574

Just look at how your Q1 is higher than other Qs in base conversion at USD base (2nd from right). That is quite wrong. Also, the IMF number is 2.611 trillion USD which neither of your column shows. Hence it is not necessary that the base 2011 is correct. Both 2.596 trillion as well as 2.621 trillion are having almost similar error from IMF number of 2.611 trillion. How can you say that one calculation is better than the other?

I took the figure of 167731.46 market value from the table you provided and converted to USD.

EDIT: fuck I see your point. This is the 2017 figure which I converted to current exchange rates.

The current GDP for Q1 FY19 has grown by 13.75% whereas the real growth has been 8.2%. So, rest 5.55% is nothing but inflation price. This means that the nominal growth of GDP is still 1% in dollar terms despite USD depreciating to 73. So, even this year, we can find Indian GDP in dollar terms growing due to higher inflation despite crash in rupee.

Calculating from FY18 data of 167.7 lakh crore is not correct as there is always growth in FY19. So, the effect of depreciation in Rupee must be considered after subtracting growth

 

[nongaddarliberal]

Just look at how your Q1 is higher than other Qs in base conversion at USD base (2nd from right). That is quite wrong. Also, the IMF number is 2.611 trillion USD which neither of your column shows. Hence it is not necessary that the base 2011 is correct. Both 2.596 trillion as well as 2.621 trillion are having almost similar error from IMF number of 2.611 trillion. How can you say that one calculation is better than the other?



The current GDP for Q1 FY19 has grown by 13.75% whereas the real growth has been 8.2%. So, rest 5.55% is nothing but inflation price. This means that the nominal growth of GDP is still 1% in dollar terms despite USD depreciating to 73. So, even this year, we can find Indian GDP in dollar terms growing due to higher inflation despite crash in rupee.

Calculating from FY18 data of 167.7 lakh crore is not correct as there is always growth in FY19. So, the effect of depreciation in Rupee must be considered after subtracting growth

Yes, 167.7 lakh crore is the 2017 figure, not 2018. And coming back to my original point, 1% growth in dollar terms is not a lot higher than 0% and is still worrying.

 

[ezsasa]

Just look at how your Q1 is higher than other Qs in base conversion at USD base (2nd from right). That is quite wrong. Also, the IMF number is 2.611 trillion USD which neither of your column shows. Hence it is not necessary that the base 2011 is correct. Both 2.596 trillion as well as 2.621 trillion are having almost similar error from IMF number of 2.611 trillion. How can you say that one calculation is better than the other?

my calculation will never match exactly with IMF numbers because my USD rate is for last day of the each quarter, i don't know if they use average or median for USD conversion rate during the quarter.

 

[Advaidhya Tiwari]

my calculation will never match exactly with IMF numbers because my USD rate is for last day of the each quarter, i don't know if they use average or median for USD conversion rate during the quarter.

Then how can you say that using 2011 USD rate and 2011 INR base is correct? It could be today's market rate in both GDP and USD. Since both have similar error, you can't conclude that 2011 base was used while calculating GDP

Yes, 167.7 lakh crore is the 2017 figure, not 2018. And coming back to my original point, 1% growth in dollar terms is not a lot higher than 0% and is still worrying.

The growth in USD terms of 14.8% for FY18 despite annual GDP growth being 6.7% is more than enough to compensate the difference. The addition 8.1% growth in USD which never happened in INR is now being adjusted with rupee depreciation.

 

[nongaddarliberal]

Anyone has any ideas on how India can attain a trade surplus?

 

[Advaidhya Tiwari]

Anyone has any ideas on how India can attain a trade surplus?

India can attain trade surplus by cutting oil supply and using coal liquefaction in its place. but that will have its own consequences like lack of petrol for 2 wheelers (Indians buy 2.5crore 2 wheelers a year), lack of sufficient petrochemicals etc.

The second import that can be cut are in electronics by making them in india by heavy R&D investment. Another important import that can be cut is in tourism and foreign studies.

But, why is it needed? India has its own source of FDI and remittance which will keep coming. Hence there is little need for trade surplus. Unwarranted compromises must not be done just to get surplus