Indian Economy: News and Discussion

Haldiram

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Haldiram ji, could you elaborate what kind of manipulation does US fed do? do they devalue usd like china does?
Every country does the normal buying and selling of forex of other currencies, but the weapon that the US has which other powers don't is that it has fused the fate of its $ with oil, since the $ is the default currency in which oil can be bought. They provide military protection to the Sauds to use it as a leverage to increase or decrease oil production to control its own currency's valuation in the open market. And then they pump the money back in their own economic machinery.

Other countries can't do that. All they can do is print more and cause inflation for themselves. The US can print more $ and still ward off inflation by blackmailing the Sauds to maintain oil demand-supply at a certain level.

upload_2019-9-8_15-46-18.png


Russia has oil but they were not able to make their currency the default payment gateway for Russian oil so they couldn't leverage this power like the US did.
 

Peter

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There are certain sectors which are linked to the core soul of the economy (metals, energy, forging, transport) where there is no scope for a drastic increase in efficiency and therefore no change in their cycle length. A nation's economy pegs its growth rate to whichever sector it relies most on. Oil producing Muslim nations have pegged to the 50 year value cycle of oil which is coming to an end now (hence the frantic run to invest their money in India). Manufacturing nations like China are pegged to a 15 year cycle. Service/consumption based middle rung economies like India are pegged to a 5 year cycle of consumption of low ticket retail items. Our cycle length will change (increase) as we are moving to make manufacturing our core base.

The petrodollar will continue to hold weight but as our output grows, we will also end up accumulating more of it in our purse by virtue of our exports. In one way or another, it will alter the power dynamics between nations, even if the dollar is not destroyed. We'll just have more of the same $ purchasing power that the US bullies others with and going by oil's price trends, it may touch 38$/barrel in 5 years. More $ reserves and cheaper oil = the death of petro $'s bullying power.

Oil is showing signs of peaking out and reverting to its long term mean (so the $ pegged to this commodity will also shed its importance in proportion) :

I am really amazed and awesteuck at the depth and variety of topics you have mastered. You are probably one of the most valuable members on DFI now.

Coming to the topic, does crude oil production ever have a peak? Is the entire global warming panic/ scare which leftist media outlets like BBC,Guardian and their poster girl Greta Thuneburg shoving at our throats all a part of hiking fossil fuel prices. It seems climate alarmism is intrinsically linked to fossil fuel pricing.

Also what is your take on removal of gold as a backing for the dollar by Nixon. Is a gold backed reserve currency better or worse than the current petro dollar fiat dollar we have now??
 
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Haldiram

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does crude oil production ever have a peak?
The production is artificially made to peak out, i.e a production limit is decided by oil producing members in OPEC meetings with a direct intention to curtail the supply to increase the profits that accrue from it. One need not worry about them producing "too much oil" because the agenda of OPEC is basically to bully each other into producing less and less to maintain artificial scarcity of oil so that the price remains high. There's always behind-the-scenes string pulling from the US. Each oil producing country keeps an eye on the other's production and snitches if someone produces more than the agreed quota.

upload_2019-9-8_16-0-0.png



Global warming is a political agenda. It's not that the climate is not changing, but the tauba tauba from US is primarily because their $ will lose its foothold in the world when the world moves away from hydrocarbons. Before that shift happens, they want the world to transition to renewable energy solutions from American companies so that the US $ could stay relevant. Instead of hydrocarbons, they will sell solar panels. They have a record breaking number of patents in renewable energy and they are blackmailing all emerging nations to only buy those. Otherwise, a country that dropped 2 nuclear bombs, tested more than a 100 large hydrogen bombs during the Cold War, invaded Iraq despite knowing it would lead to the oil wells being set ablaze and cover half the planet in smoke, it does not particularly look like the US loves the environment as much as it advertises.

Gold backed currency is a problem for non-gold producing nations. It gives a disproportionate lead to nations which already have large mines, just like oil based petrodollar gives an unfair advantage. Currencies should be free floating based on the trade surplus. May the currency of country that produces the best machines, electronics, and services win. Irony is that the champion of free-trade, the US, will never agree to real free trade with free floating currencies. They only sell us the churan of free trade because their own $ is insulated by oil backing.
 
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Haldiram

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@Peter Live example of the difference in the business life cycles being played out in the Indian markets. Those sectors which have less emphasis in the economy bottomed out first. Those with more focus are looking up.





Banking and IT is at the top, outperforming even the aggregate national GDP. Metals and Auto bottomed out almost -60% below the national average output. FMCG is in 1:1 sync with the GDP/Index because retail consumption from kirana shops is the basis of our economy.

This is going to flip in a decade. Heavy manufacturing, and infrastructure will have a better run than soft sectors like banking and IT once the new cycle picks up. Industrials will outperform the Index. All the core branch mechanical, electrical, instrumentation, civil engineers who had lean fortunes till now compared to IT engineers getting better salaries will see a multifold revival in their incomes in the coming decade when manufacturing takes the front seat.
 
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tharun

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How much is our current gdp in terms of rupees and dollars?


Sent from my Redmi 4 using Tapatalk
 

ezsasa

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Had enough of automobile industry acting like a crybaby and pinning the blame on govt...

Govt should turn the tables, and ask a reverse question. Some thing like “auto industry is one of the major drivers of employment and economy in India, what did the sales forecast of auto sales indicate and what did auto industry do about it?

If auto industry says “we didn’t foresee this?” Govt can say “if you are can’t forsee this, you are being irresponsible with your big player status and you need to have a relook at your forecast methodology”

If auto industry says “we did forsee this and we did nothing about it”, govt can say “law is required to release yearly half yearly and quarterly forecasts publicly so that shareholders are more aware of their investments”.

@Haldiram
 

IndianHawk

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Had enough of automobile industry acting like a crybaby and pinning the blame on govt...

Govt should turn the tables, and ask a reverse question. Some thing like “auto industry is one of the major drivers of employment and economy in India, what did the sales forecast of auto sales indicate and what did auto industry do about it?

If auto industry says “we didn’t foresee this?” Govt can say “if you are can’t forsee this, you are being irresponsible with your big player status and you need to have a relook at your forecast methodology”

If auto industry says “we did forsee this and we did nothing about it”, govt can say “law is required to release yearly half yearly and quarterly forecasts publicly so that shareholders are more aware of their investments”.

@Haldiram
If there are layoffs people will blame govt only. Auto industry doesn't have to fight election .

Anyway the real pressure auto industry faces is from there shareholders. Which will definitely ask tough questions.

On one hand we have Kia seltos selling like hot cake on another hand we have slowdown.
Industry wants to sell outdated products ( alto , swift etc ) or extra expensive products ( Toyota ) .

People want something new design , updated equipment at decent prices.

Change is required.
 

ezsasa

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If there are layoffs people will blame govt only. Auto industry doesn't have to fight election .

Anyway the real pressure auto industry faces is from there shareholders. Which will definitely ask tough questions.

On one hand we have Kia seltos selling like hot cake on another hand we have slowdown.
Industry wants to sell outdated products ( alto , swift etc ) or extra expensive products ( Toyota ) .

People want something new design , updated equipment at decent prices.

Change is required.
Yup, and I am saying transparency should be a matter of policy.

Today they can get away with it, but ten years from now the stakes are going to higher because of India’s larger economy.
 

captscooby81

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Look at the last month sales figures of compact SUV, i shared overall figure of sales few pages behind. Maruti Brezza sold more cars compared to July but half the volume compared to last year ,

Aug-18 and Aug-19 the numbers are almost identical . Both at 26,000 cars for compact SUV , But every brand is having negative growth . Why because of Hyundai venue had taken the numbers from other brand and added 9000 cars to it numbers and so does XUV 300 which had taken numbers from Nexon and Ecosport and Brezza .

suv-sales-aug-2019-india.jpg




Had enough of automobile industry acting like a crybaby and pinning the blame on govt...

Govt should turn the tables, and ask a reverse question. Some thing like “auto industry is one of the major drivers of employment and economy in India, what did the sales forecast of auto sales indicate and what did auto industry do about it?

If auto industry says “we didn’t foresee this?” Govt can say “if you are can’t forsee this, you are being irresponsible with your big player status and you need to have a relook at your forecast methodology”

If auto industry says “we did forsee this and we did nothing about it”, govt can say “law is required to release yearly half yearly and quarterly forecasts publicly so that shareholders are more aware of their investments”.

@Haldiram
 

ezsasa

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Look at the last month sales figures of compact SUV, i shared overall figure of sales few pages behind. Maruti Brezza sold more cars compared to July but half the volume compared to last year ,

Aug-18 and Aug-19 the numbers are almost identical . Both at 26,000 cars for compact SUV , But every brand is having negative growth . Why because of Hyundai venue had taken the numbers from other brand and added 9000 cars to it numbers and so does XUV 300 which had taken numbers from Nexon and Ecosport and Brezza .

View attachment 38348
New numbers have been released today.........

Anyways I have a larger point, industry should not be publicly blackmailing govt. today it’s auto, tomorrow it’s gonna be some other sector.

My point is if they are not able to forecast sales, how is it govt’s fault?
 

Haldiram

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Had enough of automobile industry acting like a crybaby and pinning the blame on govt...

Govt should turn the tables, and ask a reverse question. Some thing like “auto industry is one of the major drivers of employment and economy in India, what did the sales forecast of auto sales indicate and what did auto industry do about it?

If auto industry says “we didn’t foresee this?” Govt can say “if you are can’t forsee this, you are being irresponsible with your big player status and you need to have a relook at your forecast methodology”

If auto industry says “we did forsee this and we did nothing about it”, govt can say “law is required to release yearly half yearly and quarterly forecasts publicly so that shareholders are more aware of their investments”.

@Haldiram
The Auto industry had record breaking sales in 2018. They exhausted their inventory like a clearance sale and went into preparation for BS6 in 2019. It's not a surprise for them. It's only being politically magnified now. The "high base effect" of comparing with record breaking sales makes the low sales now seem "record low". They aren't making new ones, just selling out whatever inventory remains so even they know sales are supposed to be low.

Automakers in high spirits after record sales in FY18




Almost no anal-yeast has pointed out this major data point >> They made 5 years worth of sales in a single year in 2018. It's almost like they flushed out their whole inventory for the decade for good. Everything was anticipated and planned for. The CEOs wouldn't have blurted this out sooner because they wouldn't want the stock price to collapse. Now that it has collapsed, they feel confident to speak out.

This happens at the bottom of every bear market. People, analysts, CEOs, business magazines, only start speaking of a slowdown after the information has become stale and they have themselves extracted their chestnuts from the market. Gullible retail investors become extra bearish after reading these reports and start offloading their holdings. This is the time the big fish are loading up on equities so they are going from press conference to press conference spreading gloom.

If a biscuit maker tells the media he is unable to sell biscuits, it's a good sign the stock price has bottomed out and one can buy. The same phenomenon also works when the cycle reverses. When the sales start improving (as they are now), they quietly accumulate equity. Once the market goes up, then all the anal-yeasts will start going on TV channels and giving positive vibes. By that time the entire rally would have reached its peak and then retail investors enter at a peak and get trapped.

Understand the cycle for what it is and where we stand in it. The business cycle and news flow cycle are not synced 1:1. They are offset by 6-9 months. If the news is admitting to something bad NOW, it means the bad thing happened at least 9 months ago and is likely already fixed now. Same with news of revival. The revival will happen now, but the good news of the revival will only start flowing in after the June quarter of 2020 when the information would be stale to act on. Scared retail guys can only stay away and ponder and debate over such news while the CEOs are loading up on equity at lower rates.

Why do you think Anand Mahindra, with a net worth of 20$ billion spends his day sharing pupper videos on social media when M&M stock has fallen -60%? does the slowdown not worry him? There's a method to this madness. Almost every serious investor I've seen instinctively behaves the same way in a bear market. They take some time off, keep an eye on the market, keep their nerves calm, keep buying systematically at dips and generally do not fret much about slowdowns. The retail guys do just the opposite. One who doesn't have even 1L invested in the market keeps sweating daily about doomsday scenarios bombarded into his head by Twitter and Whatsapp groups.
 
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Haldiram

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Muthoot Finance plans closure of 300 branches in Kerala

Reason for closure : Blackmailing by unions.


A section of the 600-plus employees in its home state of Kerala, belonging to the trade union Muthoot Finance Employees' Union (MFEU) and supported by the left wing Centre of Indian Trade Unions (CITU), is on an indefinite strike from August 20
Mr. Muthoot also said the company had abandoned its plans to have its new headquarters in Kerala because of frequent strikes and business losses. The company had 3,000 employees in Kerala.

Muthoot's stock price shot up 4% after they announced the closure of their Kerala operations. Union-baaz people gon learn a lesson now.
 
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Haldiram

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SBI cuts FD rates twice in 15 days.

Quote from SBI >> "In view of the falling interest rate scenario and surplus liquidity, SBI also realigns its interest rate on term deposits (TD) w.e.f. September 10. Bank slashes retail TD rates by 20-25 bps and bulk TD rates by 10-20 bps across tenors," SBI said. For FDs maturing in 7 days to 45 days and 46 days to 179 days, the rate of interest remains unchanged at 4.50%

@vampyrbladez liquidity crunch solved. Now we are in surplus liquidity. Liquidity always leads to FD rate collapse. Me had said, still Nibbas parked in FD. Now the next renewal of their FD will happen at these lower rates and inflation will have become 6% by then, which is the next logical step. So FD - inflation = -2% returns. Baaki sabh kushal mangal.


upload_2019-9-9_20-21-26.png

upload_2019-9-9_20-21-51.png


Yup, all 'liquidity' measures >>

They pumped 70k crores into ailing PSUs for credit liquidity.

In addition to that >>

For purchase of high-rated pooled assets of financially sound NBFCs, amounting to a total of Rupees 1-lakh crore, or Rs 1 trillion, during the current financial year, Government will provide one time six months' partial credit guarantee to Public Sector Banks for first loss of up to 10 per cent.

And the rest of the money will come from the selling of stake (promoter share reduction from 75% to 65%). This 10% amounts to 2.5 lakh crore of money at current valuations.

They are basically telling companies >> "if you want money for expansion, raise the funds from the markit and give the citizens a respectable stake in your equity in return for their money. You are not entitled to get low interest rate lending from the Bond markit".

To loss-making companies >> "if you want money to cover your NPAs, sell your land and assets and settle your debts. We will not use taxpayer money to bail you out."

This is a very balanced strategy. What the corporates were asking was to reduce lending rates so that they could borrow our money at cheaper rates, but if interest rates were lowered, which retail investor would want to lend his money to corporates via an FD/Bond that yields 5%? The bond market would have collapsed.

Conversely, if they increased Bond yields, then more people would be tempted to park their money in Bonds instead of spending that money and jumpstarting the economy. So the gormint had to strike a balance between savings versus spending. They need us to save in Bonds so that that money can be lent to companies to start their the CAPEX cycle for the long term, but they also want us to spend so that the economy doesn't stagnate in the medium term.

They made sure our tax money was not misused for bailing out corporates for free*. It's still our money that will be used to revive the economy, but, in return, the companies are being made to give us a stake in their companies. And if they need more money, they can borrow from the Bond market at 7%. The citizens are happy to lend their money for nation building provided they are being made stakeholders in future profits and not just current losses. << That is the punchline of the budget.

They have acted in good faith. No defaulter was spared. No free bailouts were granted. Taxpayers weren't made to bear the burden of the NPAs created by irresponsible NBFCs. I feel satisfied.

In my next post I'll post a list of defaulters who have been made to sell off their assets to settle their debts.
I'm satisfied with how the gormint has handled everything. They kept inflation below 3% for 5 years so that commoners didn't face the heat of the trade war. They didn't allow the corporate vultures to get bailouts from tax payer's money. They auctioned their ill-gotten wealth using the new IBC law and got the money back. Now we are in a liquidity surplus. Still people be blaming FM for no reason. European economies were not about to come out of liquidity crunch in 10 years. We came into liquidity surplus within 6 months of a liquidity crunch.
 
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indiatester

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Got it on WhatsApp... not sure of authenticity.
— By Vipin Gupta, MD of Boston Consulting Group

India’s GDP growth rate decelerated to a more than five-year low at 5% in the June quarter of 2019-20, against 5.8% in the March quarter. Depending upon which side of the ideological divide you are on, you either curse Modi or look for alternative bugbears. Here is my take on the slowdown.

The first 5 years of Modi Government saw some really transformational steps in the Indian economy. Demonetisation, GST, RERA, NCLT all came in the Modi first term.

1. Demonetisation doesn’t have too many votaries now, but it clearly gave the corrupt politician/ businessman/ babu a hard tonk on the head. All of a sudden, cash in the mattress was no longer a great asset. GST’s long awaited (flawed?) implementation meant that a shift from the informal to the formal sector is well underway. Large companies are increasingly buying their supplies from GST compliant vendors to avail Input Tax Credit. As a consequence, a large number of MSMEs, who flourished only because of tax evasion and/ or underhand cash dealings have suddenly found their business models unviable. If anecdotally corruption has gone down in the Modi regime, purchase of property and other high value luxury items will automatically take a beating.

2. The real estate industry is going through its own churn and consolidation in the hands of a few large corporate players. RERA implementation has meant that a lot of Tier II and Tier III builders have been forced to shut shop. Taking upfront advances from gullible customers, launching new projects without completing older ones, moving money for one project to another and delaying deliveries interminably has its own set of penalties under RERA. Some big names of the industry are either in jail or out on bail. All this has meant, considerable slowdown in the construction sector activity. Since property prices have stayed flat to down in most areas in the last 5 years, speculative and benami investments in real estate have also reduced sharply benefiting genuine first-time home buyers.

3. A lot of UPA I & UPA II growth was fuelled by reckless PSU Bank loans to crony capitalists, who either mis-allocated capital to unviable projects or simply siphoned away money to their personal companies. Now with the fear of NCLT, the choice for Indian industry is clear. Either reduce leverage or risk losing your crown jewels and/or go to jail. Could you have imagined pre 2014 that Essar Oil would one day be sold, Essar Steel would be up for sale and that ADA Group would be selling its prized assets in a race to avert bankruptcy? Emphasis on deleveraging has meant that Indian private sector has had little appetite for fresh investments in recent times. If it were not for robust FDI inflows in the last couple of years, we would have been in even deeper shit.

4. PSU Banks have been forced to recognise NPAs, which had been ever greened for years. Once the skeletons came tumbling out, one saw supposedly AAA companies like ILFS and DHFL defaulting on their dues. Today we have a situation, where there is a complete mistrust in the financial system. Smaller NBFCs which were financing the MSME sector and the self-employed are finding it impossible to refinance their liabilities. Sharp drop in sales of cars, motorcycles and trucks can largely be explained by reduced availability of credit in recent months. Shared mobility was any way reducing the charm of car ownership for millennials worldwide, but that is part of a different discussion.

This Manthan of the Indian Economy in the first term of Modi Government may have caused considerable pain, but will be good for the economy in the long run. Going forward economic rewards should go to clean professionally run enterprises and not to those who only specialised in gaming the system. But it is not my case that Modi has done everything right on the economic front. Some of the key areas, where things have gone wrong and course correction is imperative are as follows:

1. Modi has not been able to build and retain a team of competent economic advisors, who are willing to stand up to him and question his ideas. Some of his out of the box ideas including Demonetisation and GST suffered due to poor planning and flawed execution. As a friend puts it eloquently, the Government is basically a two and half man team in every situation – Modi, Shah & the most pliable bureaucrat around.

2. Despite some improvement in the World Bank’s Ease of Doing Business rankings, a lot more needs to be done to make life easy for the honest Indian Businessman. Extortionary tax rates and a corrupt taxation bureaucracy has meant that very little resources are left for productive reinvestment. Wealth creating and Job creating entrepreneurs have to be encouraged and feted, not crushed under mountains of paperwork. Modi has to understand that most jobs in recent times have been created not by established business houses or PSUs, but by start-ups run by first time entrepreneurs largely funded by foreign capital.

3. Indian interest rates are among the highest in the world. RBI under various governors has to shoulder its share of the blame in this matter. In the name of inflation targeting, repo rates were kept too high for too long. While inflation is well and truly under control, growth has cratered. There is another side to this picture. If the lending rates have to be reduced, bank deposit rates, small savings rate & the PF rate also have to be brought down. Not an easy task in a loud and argumentative democracy.

4. Modi in his first term did precious little to reform the bumbling public sector. Most PSU stocks are today trading at multi year lows. Good money is still being spent after bad, be it in Air India, BSNL, MTNL or the Public Sector Banks. High time some of these white elephants are privatised or summarily closed down, if a sale is not feasible. Pampered PSU employees with an endless appetite for tax payer funded bailouts should not be allowed to keep the Indian economy hostage. Even stake sales in PSUs, which have been executed in the Modi era have been a farce. Cash rich PSUs have been forced to buy government holdings in other PSUs, synergies be damned. ONGC’s takeover of HPCL’s equity from GoI was a prime example. Government has forced cash rich PSUs to declare large dividends only to fund its gargantuan appetite for funds. Just yesterday, Mrs. Sitharaman announced merger of number of PSU Banks. How it changes the lending culture at the banks or reduces costs for the banking system in the near term is anybody’s guess. Strategic stake sales, the only real way to extract value for GoI holdings has been an anathema for Modi Government till now.

5. With a faltering domestic engine, a lot more should have been done to encourage exports. Indian exports have stayed largely flat in the first tenure of the Modi Government. Part of it has to do with the slowing global economy. But we are also losing market share to smaller developing countries like Bangladesh, Malaysia, Indonesia and Vietnam. Land and capital costs are already very high in India and the BJP/ RSS obsession with a strong exchange rate doesn’t make life easy for our exporters.

6. Reforms in the Indian legal sector are a crying need. The pendency levels in Indian courts and tribunals are shocking to say the least. Even the newly formed NCLT tribunals seem to have caught the adjournment bug. Modi government has been extremely tardy in making appointments, especially in the lower rungs of the judiciary. Unless investors are confident that commercial disputes would be resolved expeditiously and fairly, there will always be scepticism about India as an Investment destination.

7. Modi government has also been rather selective in going after crooks. They have their own select set of friends in politics and in industry, who are benefiting disproportionately from the current dispensation. May be Modi is not a reformer in the true sense of the word. It is even possible that all his actions till date have been designed only to dismantle the eco system which has kept Congress in power for the large part since independence. But once you transition to a rule-based economy, the crooks on the BJP side better be careful. Afterall in politics, you may be ruling one day but will move to the opposition benches after some time, as BJP has already seen play out in Rajasthan and MP.

In conclusion, some of the growth woes in the economy are transitional, as the effects of Demonetisation, GST, RERA & NCLT implementation play themselves out. But some of the problems are more-deep rooted because of our own unique set of issues. Moreover, we don’t have global tailwinds to support domestic growth currently. But all is not lost, yet. There are some major pluses working in favour of our country and our economy:

1. Our demographic dividend for one with the world’s largest youth population looking desperately for quality jobs & willing to work for almost a pittance. A focus on skill development rather than useless graduate degrees can make these hordes of youngsters highly productive assets for the economy.

2. Global oil prices have stayed low for large part of the Modi tenure, which has allowed the government significant head room for developmental expenses. At least in this area, the government has shunned populism and not reduced domestic fuel prices in proportion to the fall in global crude prices.

3. Interest rates are at their all-time lows in the developed world, with negative prints being seen in large parts of Europe and Japan. India can attract significant FDI/ FII flows in the next couple of years, provided we play our cards right. Global MNCs are greedily eyeing our large domestic market, which is likely to grow at 6% + in the foreseeable future in a growth starved world.

4. The ongoing US China spat should be seen by the Government as a once in a life time opportunity, with a large number of American companies looking for alternative bases to hedge their bets vis-à-vis China. We should be rolling out the red carpet for them and not smothering them with our bureaucracy.

All in all, the Modi government has its task cut out in reviving growth. What it does in the next 12-18 months, will determine the future trajectory of the Indian economy. But will it be enough to keep the Indian masses happy and gainfully employed, only time will tell.
 

vampyrbladez

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4. The ongoing US China spat should be seen by the Government as a once in a life time opportunity, with a large number of American companies looking for alternative bases to hedge their bets vis-à-vis China. We should be rolling out the red carpet for them and not smothering them with our bureaucracy.

This is the panacea!!!!!!!!!!!!!!!!!!!
 

Nicky G

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4. The ongoing US China spat should be seen by the Government as a once in a life time opportunity, with a large number of American companies looking for alternative bases to hedge their bets vis-à-vis China. We should be rolling out the red carpet for them and not smothering them with our bureaucracy.

This is the panacea!!!!!!!!!!!!!!!!!!!
Our government is fast asleep. Other, smaller South Asian countries are offering tax breaks and other incentives to woo US companies.
 

vampyrbladez

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Our government is fast asleep. Other, smaller South Asian countries are offering tax breaks and other incentives to woo US companies.
India plans to offer incentives to companies moving from China

1 min read .

Updated: 25 Jun 2019, 10:12 AM IST

Shruti Srivastava , Bloomberg
  • Financial incentives to lure companies are among measures being considered by India
  • There is also an effort to step up exports in sectors vacated by the US due to the trade war standoff with the US, a person familiar with the development said.

Financial incentives such as preferential tax rates and the tax holiday provided by Vietnam to lure companies are among measures being considered, the person said, asking not to be identified as the discussion is still private. Industries identified for incentives include electronics, consumer appliances , electric vehicles, footwear and toys, according to a trade ministry document seen by Bloomberg.

Economies, including Vietnam and Malaysia, have benefited from businesses trying to sidestep tariffs, while India has largely missed out on any investment gains. The trade ministry’s effort is part of a larger plan to cut reliance on imports, while boosting exports, and needs Finance Minister Nirmala Sitharaman’s approval.

The trade ministry didn’t immediately respond to an email and a call seeking comment.

Other measures include setting up affordable industrial zones across India’s coastline and giving preference to local manufacturers in government procurement as an incentive to win over companies looking for an alternative production base, according to the trade ministry document circulated to stakeholders.

The plan will help grow India’s manufacturing base and will aid Prime Minister Narendra Modi’s flagship ‘Make in India’ initiative, which aims to boost manufacturing to 25% of the economy by 2020. Doing that will help India narrow its huge trade deficit with China, its largest commercial partner.

A sector-wise analysis by the industry department, which oversees the foreign direct investment policy, shows investments by Chinese companies can flow into smartphones and components manufacturing, consumer appliances, electric vehicles and parts, and daily use items like bed linen and kitchenware, 95% of which are currently imported from China.

There is also an effort to step up exports in sectors vacated by the US due to the trade standoff. The government has identified more than 150 items where it feels exporters can increase business with China. Some of these are prepared or preserved potatoes, synthetic staple fibers of polyesters and t-shirts, hydraulic power engines, and supercharger for motors.

https://www.livemint.com/politics/p...ompanies-moving-from-china-1561437267139.html
 

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