Tracking Indian Economy till general elections 2019

Sakal Gharelu Ustad

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Indian economy is on a downward spiral right now. Keep this thread to monitor the updates- the next big policy rollouts as well as the impact. For smooth sailing economy needs to revive else Mission 2019 will be very difficult for Modi.

While economy does not directly translate into votes all the time, but it can still be a big factor.
 

Akshay Fenix

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PMI manufacturing rebounds in August after GST jitters

PMI for manufacturing rose to 51.2 points in August from 47.9 points in July. A PMI below 50 shows contraction while above this level denotes expansion. Manufacturing was one of the biggest segments hit by persisting effect of demonetisation and pre-GST confusion as it grew only 1.2 per cent in April-June, from 5.3 per cent in January-March.

Also to cope with high workload, manufacturers hired extra staff at the fastest pace since March 2013, showed the survey.

The survey showed that manufacturers remained cheerful of growth prospects, with marketing efforts, the launch of new products and favourable economic conditions expected to lead to output growth in the year ahead.

http://wap.business-standard.com/ar...-august-after-gst-jitters-117090101411_1.html
 

bose

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India have to pickup on the manufacturing in big way, that can only give bulk employment, generating employment is key to present government success ...

Off topic:

@Sakal Gharelu Ustad where were you ? I see you after long time...
 

prohumanity

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Some very fundamental changes are being made in Indian economy and it is natural to have a short term turbulence. Demonetization, GST, RERA, Shell company crackdown are not small things. They are the foundation stones to create a transparent and lawful business environment. If Modi succeeds in these major steps, the whole World will flood India with investments and there can be an upward spiraling of economy leading to a lifetime of Boom. If he fails, the same forces of corruption will come back much more strong and unbeatable and Indian economy will go in doomsday. Its a huge gamble Modi Govt is willing to take.
 

airtel

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Govt deregisters more than 2 lakh firms in crackdown on shell companies
The government said the directors of deregistered firms would not be able to operate the bank accounts till these entities are legally restored.

The government on Tuesday said that names of over 2.09 lakh firms have been struck off from register of companies for failing to comply with regulatory requirements and action has been initiated to restrict operations of their bank accounts.

Continuing its crackdown on shell companies which are allegedly used as conduits for illicit fund flows and tax evasion, the government said the directors of deregistered firms would not be able to operate the bank accounts till these entities are legally restored.

"The names of 2,09,032 companies have been struck off from the register of companies under Section 248 (5) of the Act. The existing directors and authorised signatories of such struck-off companies will now become ex-directors or ex-authorised signatories," an official release said.

Section 248 of the Companies Act -- which is implemented by the corporate affairs ministry -- provides powers to strike off names of companies from the register on various grounds including for being inactive for long.


About the directors and signatories of the over 2.09 lakh firms, the government said they would not be able to operate bank accounts of such companies till these entities are legally restored.

The restoration, as and when it happens, would be reflected in the official records by way of change in the status from 'struck off' to 'active'.

"Since such 'struck off' companies have ceased to exist, action has been initiated to restrict the operation of bank accounts of such companies," the release said.

The Department of Financial Services, through the Indian Banks Association, has advised banks that they should take immediate steps to put restrictions on bank accounts of such struck-off companies.

"In addition to such struck-off companies, banks have also been advised to go in for enhanced diligence while dealing with companies in general," the release said.

A company even having an active status on the corporate affairs ministry website but defaulting in filing of its due financial statements or annual returns, among others, "should be seen with suspicion as, prima facie, the company is not complying with its mandatory statutory obligations".

http://www.moneycontrol.com/news/bu...-in-crackdown-on-shell-companies-2379419.html
 

abingdonboy

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Posted elsewhere:

As a supplier to a few of the large automobile factories in India. The growth for April-June 2017 quarter was bound to be less due to GST. Companies were postponing their orders to avail input tax credit which they previously were not getting on many items. Many such non-essential products (ie. not raw materials) orders were delayed and they have picked up post GST implementation in July.

Mind you, as opposed to what the air-headed, out-of-touch & paid media reports suggest, demonetisation did not have any role to play in lower GDP growth figures for this quarter. It was mainly GST related strategic postponement of orders.

My expectation is Q2 will see significant improvement in GDP numbers while Q3 & Q4 will see a take off. It is already visible in automobile sales.

The political slaves of most the corrupt party might be very excited at the relatively low GDP growth without realising that these figures were the norm during their misrule & that too without bringing any significant disruptions. Just their sheer corrupt & ineptitutde ways.



There has definetly been a concerted push recently by certain quarters to make hay whilst the sun is shining (in light of these damp GDP figures), only under Modi are quarterly GDP figures scrutinised to this degree. Simple logic stipulates that post November 2016 the fundamentals of the Indian economy have only improved and this will be reflected in the months/reports to come. There is a weird black magic going around where people are trying to conflate their political objections to the Govt reflect the way they view the economy sorry but this is a game where cold hard facts matter only. GST alone is going to act as a huge catalyst for the economy, a quarterly blip is just that.
 

Sakal Gharelu Ustad

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Posted elsewhere:

As a supplier to a few of the large automobile factories in India. The growth for April-June 2017 quarter was bound to be less due to GST. Companies were postponing their orders to avail input tax credit which they previously were not getting on many items. Many such non-essential products (ie. not raw materials) orders were delayed and they have picked up post GST implementation in July.

Mind you, as opposed to what the air-headed, out-of-touch & paid media reports suggest, demonetisation did not have any role to play in lower GDP growth figures for this quarter. It was mainly GST related strategic postponement of orders.

My expectation is Q2 will see significant improvement in GDP numbers while Q3 & Q4 will see a take off. It is already visible in automobile sales.

The political slaves of most the corrupt party might be very excited at the relatively low GDP growth without realising that these figures were the norm during their misrule & that too without bringing any significant disruptions. Just their sheer corrupt & ineptitutde ways.



There has definetly been a concerted push recently by certain quarters to make hay whilst the sun is shining (in light of these damp GDP figures), only under Modi are quarterly GDP figures scrutinised to this degree. Simple logic stipulates that post November 2016 the fundamentals of the Indian economy have only improved and this will be reflected in the months/reports to come. There is a weird black magic going around where people are trying to conflate their political objections to the Govt reflect the way they view the economy sorry but this is a game where cold hard facts matter only. GST alone is going to act as a huge catalyst for the economy, a quarterly blip is just that.
There are many businesses who won't see sunlight thanks to GST.

+ve: Reduced transport time leading to supply chain optimization

-ve: Many unorganized firms losing business due to high tax rate (don't tell me rates are low. Many small firms paid nothing)

____________________________________________________________

I would have agreed with 1-2 quarter blip but firms are not borrowing, hence GDP if unlikely to pick up in next quarters if no one is investing. FDI can make up a bit for this, but as of now investment is down.

No investment ==> no growth

The investment cycle has to pick up to show results. And once investment picks up, then GDP will increase 2-3 quarters after that. But bank NPAs is a big drag right now and things will improve much slowly if the -ve channel I mentioned above is acting.

 

ezsasa

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There are many businesses who won't see sunlight thanks to GST.

+ve: Reduced transport time leading to supply chain optimization

-ve: Many unorganized firms losing business due to high tax rate (don't tell me rates are low. Many small firms paid nothing)

____________________________________________________________

I would have agreed with 1-2 quarter blip but firms are not borrowing, hence GDP if unlikely to pick up in next quarters if no one is investing. FDI can make up a bit for this, but as of now investment is down.

No investment ==> no growth

The investment cycle has to pick up to show results. And once investment picks up, then GDP will increase 2-3 quarters after that. But bank NPAs is a big drag right now and things will improve much slowly if the -ve channel I mentioned above is acting.

genuine question ...

can you explain this graphic? most of us don't understand this banking jargon.
 

Sakal Gharelu Ustad

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genuine question ...

can you explain this graphic? most of us don't understand this banking jargon.
- The two columns are comparing FY17 and Financial Year(FY 18).

- Then each row corresponds to different kind of funding.

___________________
The most important is first row. Non-food bank credit or insimple terms bank lending. If firms are investing heavily, then bank lending should be +ve like in FY17. But this last quarter banks are being repaid, implying investment didn't take place.

Then there are non-bank sources in rest of the rows, like by LIC (7) and other entities. These are similar.

Non bank foreign sources are FDI/FII.

Last row gives some total. Post addition, it is still negative due to reduced lending by banks and firms paying back.
 

ezsasa

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- The two columns are comparing FY17 and Financial Year(FY 18).

- Then each row corresponds to different kind of funding.

___________________
The most important is first row. Non-food bank credit or insimple terms bank lending. If firms are investing heavily, then bank lending should be +ve like in FY17. But this last quarter banks are being repaid, implying investment didn't take place.

Then there are non-bank sources in rest of the rows, like by LIC (7) and other entities. These are similar.

Non bank foreign sources are FDI/FII.

Last row gives some total. Post addition, it is still negative due to reduced lending by banks and firms paying back.
so firms paying back their loans is a bad thing?
shouldn't banks be happy that some of their NPA numbers are being compensated?
isn't it possible that companies have found an alternative source of cash other than banks?
 

Sakal Gharelu Ustad

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so firms paying back their loans is a bad thing?
shouldn't banks be happy that some of their NPA numbers are being compensated?
isn't it possible that companies have found an alternative source of cash other than banks?
If you want growth, more money should be invested than return. Remember this is a net value- lending- loan repayment. It does not tell if and whether this year loan repayment has been more (or better) than last year. It only tells more is being returned than invested.

Also, it does not tell if NPA is returned. That can only be known by looking at NPA figures. Just because healthy firms are returning, does not mean NPAs are returning as well.

Most sources are accounted in this table including foreign ones. So, unlikely.

---------------------------------------

In summary, if investment climate was good. Firms will be happy to borrow and banks happy to give loans.
 

KumarG

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- The two columns are comparing FY17 and Financial Year(FY 18).

- Then each row corresponds to different kind of funding.

___________________
The most important is first row. Non-food bank credit or insimple terms bank lending. If firms are investing heavily, then bank lending should be +ve like in FY17. But this last quarter banks are being repaid, implying investment didn't take place.

Then there are non-bank sources in rest of the rows, like by LIC (7) and other entities. These are similar.

Non bank foreign sources are FDI/FII.

Last row gives some total. Post addition, it is still negative due to reduced lending by banks and firms paying back.
Any serious finance / economics person knows that impact of policy changes takes 2 to 3 quarters to realise within economic data.

Demonitisation, which was in effect recapitalisation of banks and a shrinking of money supply (unless all cash deposited has been withdrawn), would work as contractionary action - reducing growth and inflation - without RBI directly having to employ instruments of monetary policy. It would also have implied effects on fiscal policy by increasing government revenues in a systemic manner. One can also add GST reform to an expansion of fiscal policy.

In light of such large-scale changes, it is natural for firms to be wary about capital expenditure - especially since most of corp finance decisions depend on debt rather than utilisation of equity. On the other hand, since India still continues to attract FDI at low rates (cost of capital), firms might just be finding it easier to fund through equity (as @ezsasa has pointed out).

Incidentally, all this pseudo-contraction also frees up RBI to slash interest rates without being worried about inflation. We might lose out on some carry-seeking investment then, but the monetary boost to the economy should go well with GST imho.

TL;DR - we just don't know the full impact of demo + GST yet. Give it another 2-3 quarters. And watch out for any signals from RBI.
 

Sakal Gharelu Ustad

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Any serious finance / economics person knows that impact of policy changes takes 2 to 3 quarters to realise within economic data.

Demonitisation, which was in effect recapitalisation of banks and a shrinking of money supply (unless all cash deposited has been withdrawn), would work as contractionary action - reducing growth and inflation - without RBI directly having to employ instruments of monetary policy. It would also have implied effects on fiscal policy by increasing government revenues in a systemic manner. One can also add GST reform to an expansion of fiscal policy.

In light of such large-scale changes, it is natural for firms to be wary about capital expenditure - especially since most of corp finance decisions depend on debt rather than utilisation of equity. On the other hand, since India still continues to attract FDI at low rates (cost of capital), firms might just be finding it easier to fund through equity (as @ezsasa has pointed out).

Incidentally, all this pseudo-contraction also frees up RBI to slash interest rates without being worried about inflation. We might lose out on some carry-seeking investment then, but the monetary boost to the economy should go well with GST imho.

TL;DR - we just don't know the full impact of demo + GST yet. Give it another 2-3 quarters. And watch out for any signals from RBI.
You are right except on recapitalization. That was something BJP expected to do if 10-15% notes hadn't returned. Sadly, it did not work out.

NPAs are still outstanding, hence steps like Bank mergers. But it would only drag the mess up for too long.
 

ezsasa

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If you want growth, more money should be invested than return. Remember this is a net value- lending- loan repayment. It does not tell if and whether this year loan repayment has been more (or better) than last year. It only tells more is being returned than invested.

Also, it does not tell if NPA is returned. That can only be known by looking at NPA figures. Just because healthy firms are returning, does not mean NPAs are returning as well.

Most sources are accounted in this table including foreign ones. So, unlikely.

---------------------------------------

In summary, if investment climate was good. Firms will be happy to borrow and banks happy to give loans.
ideally what you say may be correct...
Usually indian companies do a lot of jugaad, their books don't represent the ground reality.
also i am not hearing of companies being shutdown because of demonetisation and GST, so they must be running probably at a lower capacity.

i'd rather wait for two more quarter as i said in december 16, before i say of demonetisation and GST failed.
 

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