Friday, December 23, 2016

India's Demonetization Disaster: Modi Likens Critics to Pakistan

Indian Prime Minister Narendra Modi has accused his critics of his demonetization decision of “brazenly standing in support of the corrupt and the dishonest” and equated their criticism with the “firing at the borders by Pakistan in a bid to provide cover to infiltrators”,  according to the Indian media reports.

Diverting Attention:

Modi's attempt to use Pakistan to divert his people's attention from India's internal problems is not new. In fact, it's part of a pattern that seems to work in India. But why is it? What makes so many Indians so gullible? To answer this question, let us look at the following quote from Indian writer Yoginder Sikand's book "Beyond the Border":

"When I was only four years old and we were living in Calcutta (in 1971)...it was clear that "Pakistan" was something that I was meant to hate and fear, though I had not the faintest idea where and what that dreaded monster (Pakistan) was. What I heard and read about the two countries (India and Pakistan)--at school, on television and over radio, in the newspapers and from relatives and friends--only served to reinforce negative images of Pakistan, a country inhabited by people I necessarily had dread and even to define myself against. Pakistan and Muslim were equated as one while India and the Hindus were treated as synonymous. The two countries, as well as the two communities were said to be absolutely irreconcilable. To be Indian necessarily meant, it seemed to be uncompromisingly anti-Pakistani. To question this assumption, to entertain any thought other than the standard line about Pakistan and its people, was tantamount to treason."

Having been brought up with the misguided notion that Pakistan is evil incarnate, it seems that a large plurality of Indians viscerally hate Pakistan, and also hate anything that is likened to their western neighbor.

Such tactics may serve the politicians well but they do not solve India's long-standing problems that have put Indians among the most deprived people with the world's largest population of poor, hungry and illiterates.

Modi's hasty demonetization decision is also indicative of the rash decision-making by India's Hindu Nationalist leader. It's dangerous for stability in South Asia.

Demonetization Debacle:

Mr. Modi's blunder in hasty demonetization of large Indian currency notes has brought untold suffering to the people of India. The instant removal of 85% of cash from circulation in a cash-based economy has been harshly criticized almost universally by experts around the world.

Morgan Stanley’s Ruchir Sharma has said it's Mr. Modi’s “clumsy exercise of state power” and it won’t achieve its ostensible aim—cracking down on so-called “black money” salted away by tax dodgers, according to Sadanad Dhume's op ed in Wall Street Journal.

Kaushik Basu, a former chief economic advisor to the government of India and former chief economist at the World Bank, has called it “poorly designed, with scant attention paid to the laws of the market.”

Forbes magazine's Steve Forbes has called Modi's demonetization decision "sickening and immoral". Wall Street Journal's editorial page has described it as "India's bizarre war on cash".

Here's an excerpt of how the Economist magazine describes the effects of Modi's "botched" demonetization decision on life and economy of the nation:

"Cash is used for 98% by volume of all consumer transactions in India. With factories idle, small shops struggling and a shortage of cash to pay farmers for their produce, the economy is stuttering. There are reports that sales of farm staples have fallen by half and those of consumer durables by 70%. Guesses at the effect on national output vary wildly, but the rupee withdrawal could shave two percentage points off annual GDP growth (running at 7.1% in the three months to September)".

Summary:

Prime Minister Narendra Modi's hasty demonetization decision has exposed his rash decision-making style. It has already caused untold suffering for ordinary Indians. Mr. Modi's decision processes have also raised serious questions about the formulation of Hindu Nationalists' Pakistan policy.  Fears of miscalculation by Mr. Modi's inner circle about Pakistan's response to any major provocation could result in serious consequences for the entire region.

Related Links:

Haq's Musings

Hinduization of India Under Modi

Modi Fudging Indian GDP Figures

Is India Succeeding in Isolating Pakistan?

India's Covert War Against Pakistan

BJP Superpower Delusions and Policy Blunders

India Home to World's Largest Population of Poor, Hungry and Illiterates

MPI Reveals Depth of Deprivation in India

15 comments:

Anonymous said...

http://www.barrons.com/articles/bullish-on-china-india-doubtful-on-the-philippines-1482555886

Riaz Haq said...

How #India broke its #economy (on purpose). #Modi #Demonetization #BJP http://fortune.com/2016/12/26/india-demonetization-rupee-notes/ …

The same night that Donald Trump stunned pundits and became America’s President-elect, Indian Prime Minister Narendra Modi dropped a bomb of his own: At midnight, his country’s 500- and 1,000-rupee notes would become “worthless little slips of paper.” He was taking those notes (worth about $7.37 and $14.74, respectively), amounting to 86% of India’s currency, out of circulation. Indians were given until Dec. 30 to swap their old bills for new ones.
Modi warned that the surprise demonetization might involve short-term pain, and it has: The new bills weren’t ready, nor were the nation’s few ATMs, which had to be reconfigured to distribute them. The economy all but ground to a halt as millions spent their days waiting in bank lines (dozens, according to reports, died doing so). The cash crunch has led others to resort to bartering, and Goldman Sachs has shaved 1.5% from its 2017 GDP forecast for India.

Many are skeptical the scheme will achieve its original aim—eradicating the untaxed “black money” that fuels corruption. But there’s another likely benefit: 90% of transactions in India involve cash, and the lack of it has boosted alternatives. Bitcoin and digital payment use have surged (fewer than 2% of Indians have credit cards). India may be on the way to a more efficient, cashless economy—it’s just going to be a bumpy ride.

Riaz Haq said...

Electronic Dance Music Stars Denied Visas to Perform at #India's Sunburn Fest Due to #Pakistan origin http://www.billboard.com/articles/news/dance/7633337/krewella-visa-india-sunburn-fest-pakistan-heritage … via @billboard

Krewella won’t play India’s Sunburn Festival after the duo’s visas were apparently denied due to their Pakistani heritage.

Jahan Yousaf and Yasmine Yousaf, the Pakistani-American sisters who perform as Krewella, shared a handwritten post on social media explaining the visa snafu. The pair, who performed twice in India in 2014, say they’re “so heartbroken” by the situation.

“It is with heavy hearts that we inform you that due to our Pakistani heritage, our visas have been repeatedly denied and we will not be able to enter your country for Sunburn Festival,” the message reads. Our team tried every avenue possible but now have reached the end. We are so heartbroken since we were looking forward to being reunited with our Desi Krew. We hope the state of affairs between the two countries can be resolved someday soon.”

According to the Guardian, travelers who disclose a family connection with Pakistan triggers demands for extra information and a long processing period, which can make travel to India impossible.

The complicated entry protocols caught out Pakistan Cricket Board chairman Shaharyar Khan last year when he was reportedly held-up by immigration officials at Kolkata airport for several hours after arriving through the wrong port of entry.

Sunburn celebrates its 10-year anniversary in Pune on Dec. 28 through Dec. 31 with such headliners as Afrojack, Armin Van Buuren and Axwell & Ingrosso. Krewella were scheduled to perform on Dec. 29.

Riaz Haq said...

#Demonetization pushed #India factory activity into contraction in Dec 16, biggest month-to-month decline since 2008

http://www.cnbc.com/2017/01/02/demonetization-cash-crunch-pushed-indian-factory-activity-into-contraction-in-december-survey-shows.html

Indian factory activity plunged into contraction last month as a cash crunch following Prime Minister Narendra Modi's currency crackdown severely hurt output and demand, a survey found on Monday.

The Nikkei/Markit Manufacturing Purchasing Managers' Index fell to 49.6 in December from November's 52.3, its first reading below the 50 mark that separates growth from contraction since December 2015.

It was also the biggest month-on-month decline since November 2008, just after the collapse of Lehman Brothers triggered a financial crisis and brought on a global recession.

"Having held its ground in November following the unexpected withdrawal of 500 and 1,000 bank notes from circulation, India's manufacturing industry slid into contraction at the end of 2016," said Pollyanna De Lima, economist at survey compiler IHS Markit.

"Shortages of money in the economy steered output and new orders in the wrong direction, thereby interrupting a continuous sequence of growth that had been seen throughout 2016."

The output sub-index at 49.0 was its lowest this year, though the rate of contraction was only slight.

The new orders sub-index which measures both foreign and domestic demand was also knocked to its weakest in 2016.

Contractions in momentum were reported across all major sub-indexes in the survey, such as purchasing activity and employment, highlighting the blow to the economy after the government's demonetization drive.

Modi's decision to scrap high-value banknotes as part of a crackdown on tax dodgers and counterfeiters removed 86 percent of the currency in circulation virtually overnight, denting consumption in a country where the vast majority of people still rely on cash for day-to-day activities.

Economists have begun slashing GDP forecasts and some of the more pessimistic views are that growth will halve from the 7.3 percent year-over-year rate clocked in July-September, especially as consumer spending accounts for over half of India's output.

Riaz Haq said...

#India #demonetization: #FMCG sales down 1-1.5% in Nov. Hero #motorcycle down by a third. Credit growth at 30-yr low

http://www.economist.com/news/finance-and-economics/21713842-benefits-withdrawing-86-rupees-circulation-remain-elusive

MOST economists might hazard a guess that voiding the bulk of a country’s currency overnight would dent its immediate growth prospects. On November 8th India took this abstruse thought experiment into the real world, scrapping two banknotes which made up 86% of all rupees in circulation. Predictably, the economy appears indeed to have been hobbled by the sudden “demonetisation”. Evidence of the measure’s costs is mounting, while the benefits look ever more uncertain.


As data trickle through, so is evidence of the economic price paid for demonetisation. Consumers, companies and investors all wobbled in late 2016. Fast-moving consumer goods, usually a reliable growth sector, retrenched by 1-1.5% in November, according to Nielsen, a research group. Bigger-ticket items seem to have been hit harder. Year-on-year sales at Hero Motocorp, the biggest purveyor of two-wheelers, slid by more than a third in December.


A survey of purchasing managers in manufacturing plunged from relative optimism throughout 2016 to the expectation of mild contraction. Firms’ investment proposals fell from an average of 2.4trn rupees ($35bn) a quarter to just 1.25trn rupees in the one just ended, according to Centre for Monitoring Indian Economy, a data provider. As a result, corporate-credit growth, already anaemic, has reached its lowest rate in at least 30 years (see chart).

All this amounts to “a significant but not catastrophic” impact, says Shilan Shah of Capital Economics, a consultancy. Annual GDP growth forecasts for the fiscal year ending in March have slipped by around half a percentage point, to under 7%, from an actual rate of 7.3% in the last full quarter before demonetisation. Other factors, such as the rise in the oil price and the surge in the value of the dollar after the election of Donald Trump, are also at play.

Riaz Haq said...

Even #Trump Building Isn’t Immune to #India’s Real Estate Woes After #Modi's #Demonetization http://bloom.bg/2jrHJcW via @business

by Pooja Thakur Mahrotri
January 10, 2017, 1:00 PM PST January 11, 2017, 1:20 AM PST
Land prices may decline 25 percent, homes 20 percent: analysts
Cash component of home purchase often as much as 50 percent
After trying for four months to sell his apartment in a western suburb of Mumbai, Meher Verma decided to cut the price by 10 percent. With property demand plummeting in the wake of November’s sudden ban on high-denomination notes, he’s not sure the reduction will do the trick.

“I was hoping to sell my house soon,” said Verma, who put his two-bedroom property in Andheri on the market for $400,000 in September. “Now it looks like I might have to cut my price or wait much longer for the market to improve.”

Real estate has long been a place where Indians have parked cash, often using money on which taxes haven’t been paid. Now, with Prime Minister Narendra Modi’s crackdown on so-called black money and the underground economy, real estate is taking a hit. The rate of home sales has fallen by about half since the government acted in early November, according to an estimate from Khushru Jijina, managing director of Piramal Fund Management Pvt. in Mumbai, who cited discussions with developers. Home prices may decline 20 percent and land prices could plummet as much as 25 percent, according to analysts’ projections.

“Those who were looking to buy property as an investment vanished overnight from the market after the cash ban,” said Aubrey Carvallo, a Mumbai broker who has never seen demand in Mumbai so low in his two decades of working in the industry. He’s been unsuccessfully seeking buyers for eight apartments with prices starting at 15 million rupees ($220,000). “They are thinking of moving to stock markets and other financial assets, as real estate prices are set to correct in the coming years with the government crackdown on unaccounted money expected to continue."

India’s largest developers, including DLF Ltd. and Lodha Developers Ltd., say they’re taking a hit on sales. Even an association with the U.S. president-elect hasn’t helped stoke sales at Lodha, which is building a Donald Trump-branded apartment tower in Mumbai’s Worli district. The 75-floor Trump Tower Mumbai includes a 24-hour resident manager and a fractional membership to a private jet service. The company has sold 226 of the 396 units in the project from its launch in 2014 through last June, said Lodha, which added that it limits the sale of its inventory at the Trump Tower.


Lodha said in an e-mailed response to Bloomberg News that while it has notched sales of more 3 billion rupees for all its properties since November’s demonetization, sales would have been higher without the policy change.

“No doubt that sentiment for real estate will be subdued over the next three to six months,” said Jijina at Piramal, citing the most pressure on luxury projects India-wide and in secondary cities such as Ahmedabad, Indore and Jaipur. Markets such as the region around the New Delhi area “where some developers took only cash will be in severe trouble,” he said.

India’s S&P BSE India Realty Index, comprising 10 property stocks, has dropped 8 percent since the cash ban on Nov. 8, compared with a 2.5 percent decline in the broader S&P BSE Sensex Index.

India withdrew 86 percent of the country’s banknotes in the nation’s biggest crackdown against corruption in almost four decades. Unaccounted-for money makes up as much as one-fifth of the Indian economy, according to Ambit Capital Pvt.

Demonetization of high-value currency notes may especially hurt luxury market and land transactions because the cash component ranges from 30 percent to 50 percent of the value of such deals, said Mumbai-based Pankaj Kapoor, founder of Liases Foras Real Estate Rating & Research Pvt.

“Land prices could drop as much as 25 percent once corruption is reduced and black money is out of the equation,” Kapoor said in an interview.

Riaz Haq said...

#India vehicle sales dropped 19% to lowest level since 2010 after #Modi's #Demonetization http://www.bloomberg.com/gadfly/articles/2017-01-11/it-s-hell-on-two-wheels-in-india … via @bfly

What sort of auto market could be dealt the biggest blow in 16 years by a change in rules on banknotes? Ask Indian Prime Minister Narendra Modi.Vehicle sales in December slumped 19 percent from a year earlier to 1.2 million, their lowest level since 2010. If that sounds like an outsized impact for a class of consumer goods that are mostly not paid for upfront in Western countries -- let alone bought with hard currency -- you can take it as a salutary reminder that India's isn't like any other automotive market.The drop was overwhelmingly driven by vehicles that are so peripheral in developed markets, they're often forgotten -- motorbikes and mopeds.
TWO WHEELS GOOD, FOUR WHEELS BAD

In the U.S., the 501,000 two-wheelers sold in 2015 came to about 2.9 percent of total vehicle sales. Even in China, roughly three passenger cars are sold for every two motorcycles. In India, more than seven two-wheelers were sold or exported last year for every passenger car.So when investors think about the country's growth to become the world's third-biggest automotive market by 2020, it's worth reflecting that about 90 percent of the increase in unit sales over the past five years has come from bikes, scooters and mopeds -- an extra 5 million, compared with less than 200,000 for passenger cars.
Two for the Show
Motorcycles and mopeds have accounted for 90 percent of the growth in Indian automotive sales since 2011

Why should this distinction matter? The main reason is embedded in those December sales figures: Just as the wider spread of vehicle finance gives the European and U.S. automotive industries a different character to that in China, so the importance of two-wheelers gives the Indian industry unique qualities that are easily underestimated. This tripped up no less an industrialist than Ratan Tata, who created an expensive white elephant for Tata Motors Ltd. when he bet the country's middle class would trade in their two-wheelers for the low-cost Tata Nano car.The core sales demographic is (like India itself) less affluent, more rural, and has less access to the sort of finance products that make Western automotive markets as responsive to movements in interest rates as they are to shifts in selling prices.KEY SALES DEMOGRAPHICRural poorEmissions rules have some unusual quirks, too: While passenger cars are being brought into line with current European clean-air levels by 2020, mopeds and three-wheeled auto-rickshaws still commonly use the dirtiest two-stroke engines -- a situation that ought to be a risk factor for manufacturers if rules are ever homogenized.So if you're looking for bellwethers for the Indian industry, it could be worth paying a little less attention to Maruti Suzuki India Ltd. and Tata Motors and a little more to their smaller-cc cousins Hero MotoCorp Ltd. and Bajaj Auto Ltd. If you're impressed by Maruti's 18 percent year-on-year jump in sales volume in the September quarter, take a look at Eicher Motors Ltd., whose sales of Royal Enfield motorcycles were 42 percent higher in December than a year earlier.Even without two-wheeler sales, the country's rapidly growing auto market would be a force to be reckoned with. Meanwhile, though, it's a mistake to forget that in India, small is still beautiful.

Riaz Haq said...

#IMF revises #India GDP growth down to 6.6%. Says #India no longer fastest growing economy. #DeMonetisation #Modi

http://blogs.wsj.com/indiarealtime/2017/01/16/india-is-no-longer-the-worlds-fastest-growing-economy-imf-says/

Canceling nearly 90% of cash in circulation cost India the mantle of world’s fastest-growing large economy in 2016, the International Monetary Fund said, though it categorized the slowdown as temporary.

India’s growth slowed to 6.6% last year from 7.6% in 2015, according to the fund’s latest World Economic Outlook, which estimates that China’s economy grew by 6.7% in 2016. The fund expects India’s expansion to bounce back to 7.2% this year and accelerate to 7.7% in 2018. China, meanwhile, is projected to continue decelerating, to 6.5% in 2017 and 6.0% the year after.

The IMF said it trimmed its 2016 forecast for India by one percentage point “primarily” because consumers tightened their purse-strings after November’s currency invalidation.

The fund’s sister institution, the World Bank, doesn’t think that was enough for India to lose the global growth crown, however. In the latest update to its global forecasts, released last week, the bank lowered its estimate of India’s 2016 growth to 7.0%—down from its earlier prediction of 7.6% but still ahead of China’s 6.7% growth.

None of these comparisons is exact. The IMF and World Bank both follow India’s practice of presenting output growth for the fiscal year, which ends March 31. China’s numbers—as with those of nearly every other large economy—are for the calendar year.

Still, the downgrades reflect deep uncertainty about India’s economic health since Nov. 8, when Prime Minister Narendra Modi stunned the country—and the world—by declaring all of the country’s high-denomination bank notes null and void for transactions. The move, aimed at flushing out stacks of cash amassed by businessmen and crooked bureaucrats, has driven families to cut back on spending, companies to let go of workers and investors to put projects on hold.

Earlier this month, India’s Central Statistics Office said it expected growth for the financial year to come in at 7.1%. But that projection was calculated using economic data only through last October, before the currency move was announced. More-recent data weren’t—and in some cases, still aren’t—available to statisticians.

Riaz Haq said...

#India set for slowest growth period as #Modi's #demonetization dents #economy. #Achhedin #BJP

http://www.cnbc.com/2017/01/17/india-demonetisation-news-india-could-see-four-consecutive-quarters-of-below-7-percent-growth.html


India seems set for four consecutive quarters of sub-7 percent growth for the first time since at least 2011, as the government's demonetization drive triggers a shortage of cash, Societe Generale said.

The country's Central Statistics Office amended the way India counted its gross domestic product (GDP) numbers in January 2015, amending the base year to 2011-2012 from 2004-2005.

Under this new series, which dates back to June 2011, India experienced three consecutive quarters of growth below 7 percent between December 2012 and June 2013, according to Kunal Kumar Kundu, India economist at SocGen. If Kundu's forecasts turn out to be accurate, this would mark the first time growth will be below the 7 percent mark for four quarters in a row for the series.

A combination of crimped rural demand, falling capacity utilization and weakening business confidence could result in a far lower growth rate than India would be comfortable with, Kundu said in a note on Friday, starting with the quarter that ended Dec. 31.

SocGen slashed India's fiscal 2017 growth rate to 6.6 percent on-year from 7.3 percent previously. For fiscal 2018, which ends March 2019, the bank expects growth to be 7.2 percent on-year, down from an earlier projection of 7.7 percent.

"We also see the potential revival in already anemic private investment taking far longer than we originally anticipated," Kundu added.

More than 50 days have passed since India introduced its demonetization program in November, impacting 86 percent of India's currency in circulation. The government recalled existing 500 ($7.35) and 1,000 ($14.70) rupee notes and replaced with newly printed 500 and 2,000 rupee notes.

Initial data released in the aftermath showed the drastic slowdown in factory activity, in line with consensus.

Reuters reported the Nikkei/Markit Manufacturing Purchasing Managers' Index fell to 49.6 in December from November's 52.3, its first reading below the 50 level that separates expansion from contraction, since December 2015. Meanwhile, consumer prices rose at annual rate of 3.41 percent in December, their slowest pace since November 2014, said Reuters, and well below the Reserve Bank of India's 5 percent target by end of fiscal 2017.

Analysts reckon subdued consumer prices would leave the Reserve Bank of India with more room to cut rates. SocGen estimates two rate cuts of 25 basis points each for 2017.

SocGen also pointed to a study by the All India Manufacturers' Organization (AIMO), which showed micro and small scale industries suffered 35 percent job losses and a 50 percent decline in revenue in the first 34 days since the demonetization program. By March 2017, those numbers could be as high as 60 percent drop in employment and 55 percent fall in revenue, according to AIMO. These industries usually are very reliant on cash transactions.

The study pointed out factors that contributed to the impact included "zero cash inflow, rules curtailing cash withdrawals, staff absenteeism, a weaker rupee, (and) choked fundraising options," among others, Kundu said.

In his New Year's eve address, Indian Prime Minister Narendra Modi introduced various procedures aimed to cushion the blow from demonetization. They included special provisions for senior citizens, villagers, entrepreneurs and small businesses.

Riaz Haq said...

#Indian economy not in good shape: Ex PM Manmohan Singh. #India #BJP #Modi #Demonetization http://toi.in/RqQcnY90 via @TOIBusiness

A day before presentation of Economic Survey, former Prime Minister Manmohan Singh on Monday painted a bleak picture of the Indian economy insisting "it is not in good shape" while former Finance Minister P Chidambaram said the government is "hiding behind" GDP numbers that are being challenged.
Releasing the "Real State of Economy 2017", a document prepared by the Congress research cell at the party headquarters here, Singh said it speaks about the state of India's economy, its many issues and where it is heading.
"That the Indian economy is not in a good state is obvious. Even IMF has downgraded our GDP growth and it will not be 7.6 per cent but less than 6.6 per cent," he said.

Chidambaram said the state of the economy "is not something that we can be happy about" and expressed concern over the low credit growth which he claimed is at 5 per cent, the "lowest in several decades".
"BJP is hiding behind a GDP number which is being challenged. People are not dazzled by it, but are asking where are the jobs? "NDA government tends to believe exaggerated version of economy, this research document is closer to truth than what government will say tomorrow," he said.
Chidambaram said every government must be optimistic, but optimism must stem from a realistic assessment of situation. "Yet, if government presents tomorrow a rosy picture of the economy, people of India are entitled to question that.
There are no jobs, capital formation is declining, credit growth is the lowest in several decades," he said. Chidambaram wanted government to focus on fiscal consolidation and said, "there are serious question marks on this government's ability to follow fiscal prudence".
He dismissed suggestions that the 2008 farm loan waiver was a populist measure, saying, "It was based on the response to a demand from the farming community and was a very wise decision."
"This was especially so as the international financial crisis hit in September 2008, which crippled even major economies but did not affect India much," he said.

He claimed that while there are no jobs, new capital investment and no credit growth, the document released "candidly, truthfully" assesses the state of India's economy, supported by hard research and data.
Hoping that government will not cut social sector spending, the former Finance Minister claimed that the MNREGS was the lone scheme that provided some succour to poor by way of jobs.

Riaz Haq said...

#India's factory output shrinks in December - http://Moneycontrol.com . #Modi #Demonetization http://t.in.com/16a9 via @moneycontrolcom

India’s factory output contracted 0.4 percent in December amid signs of faltering industrial activity because of demonetisation. Factory output measured by the index of industrial production (IIP) is the closest approximation for measuring economic activity in the country’s business landscape. India’s factory output grew by a surprisingly robust 5.7 percent in November, running contrary to retail sales data showing slide in household spending and muted corporate investment hit by an economy-wide cash-crunch The opposition has been unsparing in its criticism about the government’s move to demonetise old Rs 500 and Rs 100 notes has forced many factories to cut down production, because of falling sales and low funds to pay wages in cash. Latest data shows that capital goods output, a metric to gauge capacity additions by companies, have contracted. It fell to -3 percent in December from 15 percent in November. The government has forecast that private final consumption expenditure (PFCE) during 2016-17 at constant 2011-12 prices—a scale to measure household spending—will be valued at Rs 67.13 lakh crore compared to last year’s Rs 63.01 lakh crore. Consumer spending as measured by PFCE will likely grow 6.54 percent in 2016-17 over last year, compared to 7.4 percent growth in 2015-16, signs that households have deferred spending to deal with the currency culling exercise. Electricity output was 6.3% in December, down from 8.9 percent in November. Mining sector output came in at 5.2 percent against 3.9 percent (MoM). Manufacturing sector output was at -2 percent against 5.5 percent (MoM).

Read more at: http://www.moneycontrol.com/news/economy/indias-factory-output-shrinksdecember_8472401.html?utm_source=ref_article

Riaz Haq said...

#Modi blames #Pakistan for #Kanpur #train tragedy when NIA investigators silent : Uttar Pradesh News - #India Today

http://indiatoday.intoday.in/story/narendra-modi-gonda-pakistan-kanpur-train/1/890869.html

While the investigators have been cautious in blaming Pakistan or its intelligence agency ISI for Kanpur train tragedy, PM Modi told an election rally at Gonda in UP that the derailment was a conspiracy hatched across the border.

Addressing an election rally at Gonda in Uttar Pradesh, Prime Minister Narendra Modi today blamed Pakistan for Kanpur train derailment. About 150 people had lost their lives in the train tragedy November last year.
Modi stated that the Kanpur train derailment was a conspiracy hatched across the border. He said that the people of the city need to elect those who were full of patriotism.
The Kanpur train derailment case is being investigated by multiple agencies including the National Investigation Agency. The investigators involved with the case have, however, stayed away from naming ISI or confirming a foreign hand behind the derailment.

An informed source, privy to probe details, said, "The investigation is in nascent stage."
WHY MODI RELATED KANPUR TRAGEDY WITH PAKISTAN: THINGS TO KNOW
PM Modi was addressing a poll rally at Gonda, which will go to poll in the fifth phase of elections in Uttar Pradesh. Gonda is close to the Indo-Nepal border and the PM expressed concerns about its safety.
"A rail accident happened in Kanpur, few people have been caught. Police found out that it was a conspiracy from across the border. If such people, who will help (conspirators), get elected from here, will Gonda be safe? Will nation be safe then," asked PM Modi.
PM Modi's comment is in sharp contradiction to investigations so far by UP police, central railway board and even National Investigation Agency (NIA). These agencies are yet to draw any conclusion on a Pakistan link to Kanpur train derailment. A senior officer of the NIA refused to comment on the issue.
The probe conducted by three agencies did not pick any forensic evidence of explosives. The recovery of technical evidence in the form of audio clips is still being examined. A team of NIA has gone to Nepal to make further probe. But no strong leads have emerged so far.
However, a clear Pakistani ISI link emerged to Ghorasahan in East Champaran district of Bihar, where an IED was discovered in October last year.
Bihar Police had arrested three murder case accused identified as Moti Paswan, Umashankar Prasad and Mukesh Yadav, who spilled beans of ISI link. They told the Bihar Police that the ISI had planned the derailment of Indore-Patna Express in November last year.
Moti Paswan told the police that he visited Kanpur rail track before the train derailment. Police also recovered two WhatsApp audio clips from the phone of one of the accused. Two suspects could be discussing Kanpur derailment.
Paswan is said to have confessed to having been involved in the train derailment along with two others including Zubair and Ziaul, who have been arrested in Delhi.
The NIA earlier this month said that Dubai-based Shamshul Huda was the "mastermind" for the Ghorasahan sabotage behind the Indore-Patna Express train accident in Kanpur on November 16 last year. But, a similar link has not been confirmed by the NIA.
Intelligence agencies suspect that Shamshul Hoda could be behind the derailment as he is said to have extensive network of sleeper cells in Delhi, Kanpur, Patna and Nepal. Hoda is further understood to have been in touch with one Sheikh Shafi in Pakistan. Sheikh Shafi is believed to be one who gives regular instructions through Hoda on how to carry out terror attacks in India.

Riaz Haq said...

More layoffs likely as #India's #manufacturing sales shrink. #Modi #Demonetization #MakeInIndia http://ecoti.in/H8qyXb via @economictimes

http://economictimes.indiatimes.com/news/economy/policy/more-layoffs-likely-as-indias-manufacturing-sales-shrink/articleshow/57374939.cms


Despite the government's efforts to attract investment under its Make in India campaign, sales of manufactured goods fell 3.7 per cent during 2015-16 -- the first decline in seven years --sparking fears of layoffs and debt default in the months to come.

Spurred by a global slowdown and lack of demand, sales of manufactured goods were falling even before demonetisation, affecting sectors ranging from textiles to leather to steel.

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A range of factors including falling investment, increased input costs and higher import duties have caused demand for manufactured goods to fall, a trend that was visible before demonetisation and has strengthened since.

While the services sector grew by 4.9 per cent in 2015-16, faster than the 3.7 per cent recorded in the previous financial year, manufacturing contracted for the first time in seven years, from a growth rate of 12.9 per cent in 2009-10 to -3.7 per cent in 2015-16, ..

Riaz Haq said...

Off balance: #India’s twin balance-sheet problem. Credit slump amid rising non-performing loans. http://www.economist.com/news/finance-and-economics/21717988-fast-growing-economy-india-stuck-alarming-credit-slump-indias-twin … via @TheEconomist

IF INDIA is indeed the world’s fastest-growing big economy, as its government once again claimed this week, no one told its bankers and business leaders. In a nation of 1.3bn steadily growing at around 7% a year, the mood in corner offices ought to be jubilant. Instead, firms are busy cutting back investment as if mired in recession. Bank lending to industry, growth in which once reached 30% a year, is shrinking for the first time in over two decades (see chart). If this is world-beating growth, what might a slowdown look like?

India’s macroeconomy chugs along (though the quality of government statistics remains questionable), but its corporate sector is ailing. The sudden and chaotic “demonetisation” of 86% of bank notes in November hardly helped. But the origins of India’s troubles go much deeper. After India dodged the worst of the financial crisis a decade ago, a flurry of investment was made on over-optimistic assumptions. Banks have been in denial about the ability of some of their near-bankrupt borrowers to repay them. The result is that the balance-sheets of both banks and much of the corporate sector are in parlous states.

After years of burying their heads in the sand, India’s authorities now worry that its “twin balance-sheet” problem will soon imperil the wider economy. Both the Reserve Bank of India (RBI) and the government have nagged banks to deal with their festering bad loans. Around $191bn-worth, or 16.6% of the entire banking system, is now “non-performing”, according to economists at Yes Bank. That number is still swelling.

Given the linkages between them, companies and banks often run into trouble concurrently. But countries where banks’ balance-sheets resemble Swiss cheese usually have no choice but to deal with the issue promptly, lest a panicked public start queuing up at ATMs. India is different. State-owned lenders make up around 70% of the system, and nobody thinks the government will let them go bust. As a result, what for most economies would be an acute crisis is in India a chronic malaise.

That doesn’t make it any less painful. Investment is a key component of GDP, and it is now shrinking, thanks to parsimonious firms. India runs a trade deficit and the government is seeking to cut its budget shortfall, which leaves consumption as the sole engine of economic growth. Indeed, until demonetisation, consumer credit was booming, up by about 20% year on year. Some may wonder whether those are tomorrow’s bad loans, or when consumers will run out of stuff to buy.

Meanwhile, banks’ profits are sagging, even without the impact of fully accounting for dud loans. State-owned lenders collectively are making negative returns. Thirteen of them are described in a recent finance-ministry report as “severely stressed”. Demonetisation did indeed bring in lots of fresh deposits, but the bankers were then browbeaten into slashing the rates at which they lend, further denting their margins.

The dearth of investment is in part due to a lack of animal spirits. Sales outside the oil and metals sector are up by a mere 5% year on year, compared with nearer 25% at the start of the decade. Capacity utilisation, at 72.4%, is low by historical standards: even if money were available, it is not clear many would want to borrow.

Bankers, companies and policymakers once hoped the twin balance-sheet problem would eventually solve itself. Everyone’s incentive has been to look away and hope economic growth cures all ills. It has not: profits are in fact shrinking at the large borrowers, many of them in the infrastructure, mining, power and telecoms sectors. But banks have cut credit across the board, including to small businesses.

Riaz Haq said...

#Indian states on a borrowing binge are an unlikely competitor for #Modi and bonds. Rates rising. https://www.bloomberg.com/news/articles/2017-03-15/states-on-borrowing-binge-is-bad-news-for-modi-and-indian-bonds … via @business

Prime Minister Narendra Modi’s government is finding itself pitted against an unlikely competitor as it pursues bond investors to finance the budget deficit: Indian states.

With an ever-rising supply of debt that offers yields higher than sovereign notes, borrowing by state administrations threatens to overshadow that by the federal government, according to Edelweiss Asset Management Ltd. and HDFC Standard Life Insurance Co. That complicates matters for Modi, whose promise of fiscal discipline has lured foreigners to local bonds after a four-month hiatus.

Increased competition from states is also bad news for the sovereign-debt market, which saw benchmark notes in February post their biggest monthly loss since 2013, after policy makers in Asia’s third-largest economy signaled an end the monetary easing cycle. There is also a growing risk that, unless state deficits are pared, their debt levels could quickly get on to “an explosive path,” JPMorgan Chase & Co. said in a February report.

“There’s an increasing amount of concern over the states’ bond supply and the time when it will overtake government bond supply is not far away,” said Dhawal Dalal, chief investment officer for debt at Edelweiss Asset. “Concern about the health of the states is also something that worries market participants.”

Working together, India’s 29 states combined would form a bloc that has a bigger economy than the whole of sub-Saharan Africa, more members than the European Union, and twice the population of North America. Net borrowing by states will rise 12 percent to 3.8 trillion rupees ($58 billion) in the next financial year, after an estimated 30 percent-surge to 3.4 trillion in the fiscal year ending this March 31, according to ICRA Ltd. Modi plans to borrow a net 4.2 trillion rupees in the coming year.

“The disproportionate market focus on central finances masks the fact that India’s fiscal centre-of-gravity has rapidly moved from the center to the states,” Sajjid Chinoy and Toshi Jain, economists at JPMorgan Chase, wrote in the report. Borrowing by states is poised to overtake the centre’s by 2018-19, they said.

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While higher yields and the implicit sovereign guarantee are a draw with investors, the securities are hardly a match for government bonds when it comes to liquidity. That’s partly why foreign investors, who were granted access to state debt in late 2015, have largely stayed away from the sector.

Investment by global funds stands at 14.8 billion rupees, data from the National Securities Depository Ltd. show. That’s just seven percent of the 210-billion rupee limit available to them.

“We buy state bonds only for portfolios where liquidity risk is not a concern, because the yield offered is close to top-rate corporate bond,” said Badrish Kulhalli, Mumbai-based fixed-income manager at HDFC Standard Life. “The extra supply of state bonds means the government bond yield curve will also steepen.”