Indian Economy : News,Discussions & Updates

[randomradio]

Well they have been proven wrong. Their decision to hike rates in June and August have already been proven wrong. The effect of US sanctions in Iran was the main reason for worry about inflation that has now been proven wrong and oil prices have cooled down. So why not do the correction? We are here on this forum and let us see what happens in Jan when we usually have the lowest inflation rates. For oil and as well as for food.

Sure. Let's see what the market forces decide. For now, the govt has cut excise duty on fuel, which will reduce inflation. Inflation should go into a downward trend in order for the RBI to cut rates. But the CRR should remain untouched.

Govt is not doing it for elections, it is doing it to support its future policies. If they had to do it, they would have done it three months back as politically that was the best time but they waited to let GST collections reach the targeted values. The overall shortage for this FY for GST is just 27K crores and govt will make it up this shortfall within this fiscal itself as from now on the GST collections will only grow. I will be least surprised if the govt exceeds its GST targets within this year itself.
The compensation which needs to be paid for states like TN was one of the main reasons for higher GST but it has now been proven that those states do not need compensation from central GST and that gives the govt leeway to add fuel in GST.
‘Year 1 GST compensation to States only Rs. 5,000 crore’

GST has been a good policy. But I don't see why the RBI has to release their CRR just because of that. The CRR is meant to be released during crisis times, not when things are going well.

We can't have the RBI releasing money based on faith. Money flow should be backed by hard data, or else Zimbabwe.

 

[CountryFirst]

there was no problem with RBI after demonetisation and GST implementation as they disrupted the economy but economy came out of those ill effects rather quickly and these Jaichands who want to sabotage are growth story are being exposed. They have no reason now to cry about inflation. Ideally an inflation rate 50% of growth rate is considered an ideal inflation rate but if the growth rate is low, than an inflation rate equalt to the growth rate must be maintained otherwise it will result in deflation.
USA grows at about 1.5-2% annually and they maintain an inflation of 2% but for India depending on our growth rate 3.5-4.5% is ideal rate and we are maintaining this rate for last two years on annual basis.
A small check of Chinese inflation rates in last two decades when they maintained a scorching growth rate will make things clear to those who doubt these figures.
The way oil price is coming down and likely hood of fuel being added to GST basket in Jan 2019 will result in sudden drop of inflation and may result in deflation making our economic fundamentals weak. Govt is therefore forcing RBI to increase money supply in anticipation of this move and RBI governor is working to derail our economy. Anyone who calls 3.7% inflation high for an economy growing at 7.5% is unfit to be even countered.

I don't understand economics so I can't comment on this, but I trust in Modi, Ajit Doval, Amit Shah team.

 

[vstol Jockey]

GST has been a good policy. But I don't see why the RBI has to release their CRR just because of that. The CRR is meant to be released during crisis times, not when things are going well.

But the CRR should remain untouched.

Cash Reserve ratio is the actual fundamental which increases/decreaases money supply, repo rates govern lending rate/Interest rates. What we need is reduction in both to meet the needs of a growing economy. I will want CRR at about 3% and repo rates and reverse repo rates around 5% and 4.75%.

 

[randomradio]

Cash Reserve ratio is the actual fundamental which increases/decreaases money supply, repo rates govern lending rate/Interest rates. What we need is reduction in both to meet the needs of a growing economy. I will want CRR at about 3% and repo rates and reverse repo rates around 5% and 4.75%.

And inflation?

 

[vstol Jockey]

And inflation?

Inflation is the excess money in the system. How much it should be is what I have already posted as too much of it is bad and too little is also bad. Inflation is not a cuss word but deflation is.
If RBI wants to tame inflation, let it keep CRR at present values but why not reduce Repo rates? The credit growth has reduced to single digits in India from high twenties
India Domestic Credit Growth Domestic Credit Growth Rate | Economic Indicators
Our banking system is inefficient compared to other developed countries. Our minimum BPLR is about 2% higher than Repo rate for secure loans like housing and vehicles and for businesses it is much higher about 13.5%. LIBOR is at about 1.75% and the lending rate is about 2.25-2.5%. They have a margin of just 0.5-0.75% compared to minimum of 2% in India. Lower Repo will allow higher credit growth. But once again people will cite NPAs. I am not for throwing caution to wind while lending but genuine people must get the benefits of lower rates like housing etc where the banks are very well protected.
refusal of present RBI governor to provide anykind of relief clearly shows that his intentions are not nobel and that he has no care for the economy of India. he seems to be a man obsessed with destruction of Indian Economy. His predecessor doubled the NPAs from 4.5lakh core to 9 lakh crore overnight by changing the norms for declaring the NPAs. That was his parting shot to destroy our economy. It was his thinking that banks were not reporting NPAs correctly but when the AQR came out with the figures, he was proven wrong. He had to prove his notion correct and he did that by changing the norms for NPAs.
Now his successor is doing exactly that. First Raghurajan eroded the value of Indian Banks and loaded their books with NPAs and now Urjit Patel is making sure that our economy is even denied most needed Oxygen. His best efforts have not borne fruits as the people of India have performed outstandingly and that has exposed their game plan. I am very sure that very soon he will be booted out and also openly declared a traitor of the nation.
If RBI Governor has sound knowledge of economy and Finances, people sitting in Niti Ayog are also not fools, infact they are better qualified than him. Jai-italy does not have brains of his own. the demands of the Govt are based on what Niti Ayog and others have advised them and not a figment of imagination of Modi and Jai-italyji.

 

[randomradio]

Inflation is the excess money in the system. How much it should be is what I have already posted as too much of it is bad and too little is also bad. Inflation is not a cuss word but deflation is.
If RBI wants to tame inflation, let it keep CRR at present values but why not reduce Repo rates? The credit growth has reduced to single digits in India from high twenties
India Domestic Credit Growth Domestic Credit Growth Rate | Economic Indicators
Our banking system is inefficient compared to other developed countries. Our minimum BPLR is about 2% higher than Repo rate for secure loans like housing and vehicles and for businesses it is much higher about 13.5%. LIBOR is at about 1.75% and the lending rate is about 2.25-2.5%. They have a margin of just 0.5-0.75% compared to minimum of 2% in India. Lower Repo will allow higher credit growth. But once again people will cite NPAs. I am not for throwing caution to wind while lending but genuine people must get the benefits of lower rates like housing etc where the banks are very well protected.
refusal of present RBI governor to provide anykind of relief clearly shows that his intentions are not nobel and that he has no care for the economy of India. he seems to be a man obsessed with destruction of Indian Economy. His predecessor doubled the NPAs from 4.5lakh core to 9 lakh crore overnight by changing the norms for declaring the NPAs. That was his parting shot to destroy our economy. It was his thinking that banks were not reporting NPAs correctly but when the AQR came out with the figures, he was proven wrong. He had to prove his notion correct and he did that by changing the norms for NPAs.
Now his successor is doing exactly that. First Raghurajan eroded the value of Indian Banks and loaded their books with NPAs and now Urjit Patel is making sure that our economy is even denied most needed Oxygen. His best efforts have not borne fruits as the people of India have performed outstandingly and that has exposed their game plan. I am very sure that very soon he will be booted out and also openly declared a traitor of the nation.
If RBI Governor has sound knowledge of economy and Finances, people sitting in Niti Ayog are also not fools, infact they are better qualified than him. Jai-italy does not have brains of his own. the demands of the Govt are based on what Niti Ayog and others have advised them and not a figment of imagination of Modi and Jai-italyji.

Niti Aayog have been attacking RBI needlessly. They are attacking Rajan for the demo slowdown and attacking RBI for overreacting to the rise in inflation. Neither of those are justified.

The fact is there is rise in inflation. If inflation drops, the rates will drop. If inflation rises, the rates will rise. And the effect is immediate anyway. The RBI is definitely not overreacting to the changes. The market decides rates, as it should be.

Rajan did not load banks with NPAs. The NPAs were already there long before his tenure, he brought it out into the open. The banks were simply propping up failing businesses while businesses were running ponzi schemes to survive. Public sector banks should be wound down, they are dangerous for the country.

 

[vstol Jockey]

Niti Aayog have been attacking RBI needlessly. They are attacking Rajan for the demo slowdown and attacking RBI for overreacting to the rise in inflation. Neither of those are justified.

The fact is there is rise in inflation. If inflation drops, the rates will drop. If inflation rises, the rates will rise. And the effect is immediate anyway. The RBI is definitely not overreacting to the changes. The market decides rates, as it should be.

Rajan did not load banks with NPAs. The NPAs were already there long before his tenure, he brought it out into the open. The banks were simply propping up failing businesses while businesses were running ponzi schemes to survive. Public sector banks should be wound down, they are dangerous for the country.

After all that I have written, your post is not understood. I had explained in detail about NPAs and also told you about inflation rates. Everything is under control and why must we still be extra cautious? You have still not answered as to what made you decide that Niti Ayog guys have inferior knowledge compared to super duper Urjit Patel? I also told you about chinese model of growth and how they took risks to be where they are to be the second largest economy of the world. You have to explain to me how this extra caution is adding to our economic growth. We have better fiscal discipline compared to what Chinese ever had, we have inflation well within our targeted values, we have growth rates as desired, then why must we be extra cautious? I told you about that Dangal strategy. If a rustic man could have such a brain, I think we must lock down all our IIMs.
Finally, do you know that Urjit is not even an Indian Citizen?

 

[vstol Jockey]

And here I thought he was born in Kenya and was given Indian citizenship in 2013 before being appointed Deputy Governor. Also, Modi chose him

What took you so long to jump in? I knew it and FYI, he was adviser to Gujrat Govt under Modi in 2007. Now that you have enlightened us all so much, how about other things that I posted?

 

[vstol Jockey]

Among the major economies of the world, India has the second highest ratio of NPAs (9.85%). In contrast, China, whose economic growth is largely fueled by borrowings, has only 1.75% NPA.


PwC's Financial RegTech Insights: March 2018

The above may be the reason? The potential of underwriting of bad debts by the Government is low, thereby reducing the revenue expenditure of the government and thereby meeting the fiscal target of controlling the Budget Deficit to below 3.3% of GDP?

Our pow-wow started from NPAs and you have still not explained me the rationale of making one defaulter with one bank a defaulter for all banks? FYI, Gadkari had defaulted in loans with one bank and rescheduled his loans and repaid all banks. But Raghurajan stopped it all as his stupid idea that banks were mis-reporting NPAs was found to be wrong.

Then you can write to MHRD and IIMs. Am a Hell product myself

Do you remember my very opening comment that I would rather have an uneducated Jaat head RBI?

 

[vstol Jockey]

Leave that, the Government failed to factor in the corrupt structure that exists in the system, from bankers to the public. It was only at a late sage that they realised the potential damage to economy they had created when they inducted armed forces to print the currency note 24 x 7. IAF sorties, of C17s and C130s, took loads of cash among other means to distribute. There was, like I said, lot of currency well available before 1 Dec. But, the execution by banks, of providing the cash at ATMs was deliberately subverted. It is this very same sector which is asking for lenient funding as elections draw near. How else would you fund your elections?

Now you are speaking my language. Since you are a Jaat, I will now show you more respect as my family trained Gokula Jaat in Tilpat to take on Aurangzeb way back in 1660 when nearly every Rajpoot king had refused to help Brahmins and Hindus in particular. We re-trained them to be warriors using agricultural equipment as they had been reduced to being farm labour by Rajpoots.
Your post about NPAs is wrong. What you have omitted is the fact that mindless lending under watch of MMS and Raghurajan was the biggest contributing factor.
Chanakaya was an illiterate as he had no degree to flaunt like you do. So were everyother Rishi who contributed to our knowledge including Rishi Charak. Hell @Hellfire, they did not even go to any school. But what we have is that we have Gyaanis, learned and idiots. Gyaanis are never idiots but a very large number of learned are IDIOTS.

 

[vstol Jockey]

Sir.

You have not read anything that I have written so far. What you are doing is reading very selectively, and then trying to put it in context with what you are saying and somehow missing the point altogether. Please read my Post #558 on Page 28 and just answer one basic Question, what stopped GoI (NDA Govt) from acting?

Now my suggestion to drive in the point is:

Let us discuss the case of Zimbabwe (or Venezuela). Right now. What do you know of it?

I will. But imagine, the moment I said I will show you more respect, this site crashed. LOL

 

[vstol Jockey]

You have not read anything that I have written so far. What you are doing is reading very selectively, and then trying to put it in context with what you are saying and somehow missing the point altogether. Please read my Post #558 on Page 28 and just answer one basic Question, what stopped GoI (NDA Govt) from acting?

I am not writing anything based on my opinion but the assessment of Niti Ayog with whom I do agree. If Urjit Patel is a highly qualified person as claimed and supported by you, how can you call others idiots? I am not suggesting the changes. Niti Ayog is though I do have had my own opinion for last two years which supported what Niti Ayog is also saying now.
Between two of us, I am sure you will agree that we have no qualification to question Niti Ayog which has far more qualified people in it? You need to explain why you are against Niti Ayog and supporting the present RBI Governor? What is that reason based on present fundamentals of our economy.

 

[randomradio]

After all that I have written, your post is not understood. I had explained in detail about NPAs and also told you about inflation rates. Everything is under control and why must we still be extra cautious? You have still not answered as to what made you decide that Niti Ayog guys have inferior knowledge compared to super duper Urjit Patel?

Niti Aayog is the govt's new Planning Commission. They are fine for most stuff except when toeing party line. Their very first meeting was even chaired by Modi. It's a vested interest group.

The RBI is behaving like a professional institution, Niti Aayog is not.

I also told you about chinese model of growth and how they took risks to be where they are to be the second largest economy of the world.

How many times have they had a CAD in the last 20 years?

We have better fiscal discipline compared to what Chinese ever had, we have inflation well within our targeted values, we have growth rates as desired, then why must we be extra cautious?

The Chinese financial discipline was better than ours. It's a surplus economy, and its growth happened riding on low inflation rates. Their average inflation since 1989 was 5.22%. Ours was well over 7%. Their savings rate even today is 46%, while ours has likely dipped below 30%.

And regardless of all this, they still raised their short term debt rates last year.

Their first CAD in the last 20 years happened only this year.

Finally, do you know that Urjit is not even an Indian Citizen?

He's an Indian citizen.

 

[vstol Jockey]

Niti Aayog is the govt's new Planning Commission. They are fine for most stuff except when toeing party line. Their very first meeting was even chaired by Modi. It's a vested interest group.
The RBI is behaving like a professional institution, Niti Aayog is not.
How many times have they had a CAD in the last 20 years?
The Chinese financial discipline was better than ours. It's a surplus economy, and its growth happened riding on low inflation rates. Their average inflation since 1989 was 5.22%. Ours was well over 7%. Their savings rate even today is 46%, while ours has likely dipped below 30%.
And regardless of all this, they still raised their short term debt rates last year.
Their first CAD in the last 20 years happened only this year.
He's an Indian citizen.

I knew that he has been given Indian citizenship only to be RBI governor.
Who chairs the Niti Ayog meetings and who all can?
What made you conclude that Niti Ayog which runs the economy of India and its policies is incompetent compared to RBI which is not answerable to none?
When and how have you reached this conclusion that Chinese financial discipline was better than ours when we all know that they have the largest GDP to debt ratio? Can you please explain fiscal discipline and financial prudence and things associated with strength of an economy in modern context?
How did chinese economy grow out of Mao's philosophy of a lost generation of late sixties when people were sent to farms for agriculture? what changed that they decided to become a manufacturing economy instead of an agrarian economy and what risks did they take to be one?

 

[vstol Jockey]

Sir.

I am neither against Niti Ayog nor against RBI. I was against your statement targeting the RBI Governors without any citations/proofs. It is very easy to undermine a system, but very difficult to build it further and then improve it's shortcomings. The system works only in one way - the GoI puts forward the Fiscal Policy and the RBI makes a monetary policy to execute those aims. There is no two opinion about it.

The narrative has been so easily shifted by the present misrepresentation and misreporting of facts that the GoI has tried to play it GoI vs RBI. Not once has PM asked the RBI Governor to put in his papers, which, as per law, the PM can ask. If the RBI Governors were to be blamed, you think Modi would have held onto him?

The reason is very simple, they want a scapegoat because in 2nd half of the next fiscal, that is somewhere about this time, the economy is going to hit a bump and there shall be lower growth than expected. The employment is not high and the educated professional salaried class is disgruntled by him. To shore up numbers, they need to pump in money, and of course that shall drive up the inflation. True jobs will get created, true also that there will be some growth in economy, but at the same time, the RBI has asked for direct access to workings of the State Banks and PSBs to control the non-priority sector expenditure, which remains even my refrain. If the Govt wants to pump in more money, when you talk of CRR, it is not so easy for RBI to do. For every additional rupee pumped in, government securities will need to be floated, which will make your securities unattractive for foreign investors if you are irrational about it.


I tried to give an example of Zimbabwe to simplify the explanation. In a nutshell and simplified words:

Mugabe undertook land, business and wealth re-distribution by simply nationalizing land holdings, businesses and manufacturing units to take from the whites who were dominating, to the blacks. This resulted in a massive hit to the Zimbabwean economy as untrained/unskilled/incompetent workforce took over the economy. To offset the effects, the Government hit upon the brilliant idea of printing more money and pumping it into the market. The result: while the situation of manpower and skill set remained grim , people had plenty of money to buy stuffs, as a result, with scarcity creeping in due to shortfall in produce for domestic consumption, the prices started rising up. But that was not the end, they pumped in more money. The inflation hit a figure of 231 Million % as per Zimbabwean Central Bank, in July 2008! And the rest, as they say, is history.

Now extrapolate it to soaring NPAs in overall financial sector. Real Estate remains a big bubble waiting to burst. Why do you think that the GoI has still not placed Affordable Housing under Priority Sector for Loans?

It still does not explain why RBI Governor has superior knowledge compared to better qualified members of Niti Ayog who are asking for same changes which I wrote two years back when we had demonetisation?
How can you compare an apple with an orange when you compare Zimbabwe with India?

 

[Pundrick]

What CapEx? Another statue? How about actually imposing penalties on the State Governments/Entities of extraordinary cost over runs?

I hope you do realize that it remains a given that the second half of next fiscal will see a slowdown in both industrial output and expenditure as also challenges in the agricultural sector due to persistently high costs of transportation among other considerations?

The cost of holding $ is huge for country like India. India should not run after Forex blindly, we just need to maintain minimum reserve which we can use to pay the import bill. Our reserves recently crossed $ 422 billion, it was the best time for the RBI to release some money in the Indian market as the monsoon was expected to be normal i.e. Food inflation under control, the world economy also looked stable.

We are hardly getting any return while holding those billions of dollars, why not spend some on infrastructure, we are anyway looking outside for investment in infra sector.

 

[randomradio]

It still does not explain why RBI Governor has superior knowledge compared to better qualified members of Niti Ayog who are asking for same changes which I wrote two years back when we had demonetisation?
How can you compare an apple with an orange when you compare Zimbabwe with India?

It's not about who knows more or who is right. It's about bringing politics into an apolitical body. The govt shouldn't be interfering in the workings of the RBI.

 

[vstol Jockey]

It's not about who knows more or who is right. It's about bringing politics into an apolitical body. The govt shouldn't be interfering in the workings of the RBI.

Yes Govt must not interfere in the working of RBI but what if RBI Turns against the Govt like in present case? They are defying everyone and have assumed themselves to be the only brain in the world.

Can you explain how? Interesting concept.

How do we grow Forex reserve. Its either thru inflows or thru buying them from the market. RBI has been using Rupee to purchase $ from the market resulting in depreciation of rupee vs $. If we grow Forex purely by inflows, I am fine with it but by pumping more rupee to buy $ and making things costly for Indian consumers due to costly imports as the rupee lost value and than cry about inflation for not increasing money supply into the system is a sure shot recipe for disaster. RBI had been growing Forex at the cost of Rupee and the day shit hit the ceiling, Rupee tumbled 15%. Now take another case, If we had kept rupee stronger by not buying Forex from open market, May be we would not have faced such an erosion in rupee value as the rupee would have been trading close to 58 level at the beginning of the crisis. Buying $ to prevent rupee from appriciating and growing Forex is a good move but to buy forex to devalue rupee is a stupid move. In my very opening statements I had stated that IMF wanted rupee devalued and the present Governor is following their dictates. Just go thru the article you posted.
“The result has been an accumulation of forex reserves as the RBI has curtailed undue appreciation of the currency and tried to keep the INR in its fair trading band,” Richa Gupta, Senior Economist, Deloitte India told FE Online. She added that it is unlikely for the US Treasury to react negatively to development as “India does not have a very important base of manufacturing exports to the US”.

This my dear is the cost for High Forex and the cost is huge.

 

[randomradio]

Yes Govt must not interfere in the working of RBI but what if RBI Turns against the Govt like in present case? They are defying everyone and have assumed themselves to be the only brain in the world.

The RBI is not defying anyone. RBI decides how much is CRR, SLR and the rates. The CRR and SLR have been unchanged for years now.

And the rates change based on inflation, it is entirely dictated by market forces. And the RBI has actually chosen a neutral stance on the rates, which is perfectly normal.

It's the govt that's interfering in the RBI. The govt has no right to dictate monetary policy. The current policy is entirely being dictated by market forces, as it should be.

You should be telling the govt to reduce excise duty on fuel instead.

 

[randomradio]

RBI has been using Rupee to purchase $ from the market resulting in depreciation of rupee vs $.

RBI has been selling dollars for months now. Forex has fallen from 422B to 392B.

RBI sells a record $12 billion in spot and forward to salvage the rupee