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Indian economy to grow at 7.6 percent in 2015: Moody’s Analytics

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picture from- www.stockwatch.in

New Delhi: Predicting a 7.6 percent growth rate for India, research firm Moody’s Analytics on Thursday warned that the economic expansion might slow down due to lack of reforms.

moody
The economic research and analysis firm’s India forecast said that “The economy will likely expand 7.6 percent in 2015 thanks to lower interest rates. A lack of reforms could derail medium-to-long term growth prospects.”

The report, “India Outlook: Waiting for Reforms to Fuel Growth”, said that “Green shoots are slowly emerging, but the government’s failure to deliver promised reforms is the major impediment.”

Moody’s Analytics’s associate economist and author of the report Faraz Syed cited key reforms such as the land acquisition bill, flexible labor laws, and the goods and services tax (GST), which have the ability to propel India’s growth.

However, these key reform bills are still in parliament’s ambit and the government has till now failed to create a consensus to get them passed.

“Without a majority in the upper house, the ruling Bharatiya Janata Party’s power has been nullified and the opposition has blocked proposed reforms,” the report said.

On the bright side the report predicts another interest rate cut by the Reserve Bank of India (RBI) this year. The decision, it informed, will be on the back of better rains, lower commodity prices and strong external balances.

India Inc. has been demanding a rate cut as it believes that this may be the last time in this calendar year for RBI to ease lending before inflation spirals and the US Fed decides on its own rates in September.

The Indian monetary policy review by the RBI is scheduled for August 4.

“We expect at least one more benchmark rate reduction in 2015 to complement the 75 basis points already delivered this year,” the report predicted.

“Accommodative monetary policy will lift GDP to 7.6 percent in 2015, increasing to 8 percent in 2016.”

The economic research firm pointed out that tampering with the central bank’s independence would make it difficult to anchor inflation expectations and weigh on India’s economic prospects, particularly financial market stability.

Recently, the government introduced a draft financial code which proposes to clip the RBI’s wings.

The code, if implemented, will undermine RBI’s ability to rein-in inflation. This will also discourage investors from taking risks in the future as the RBI is viewed by many as an anchor for financial stability in the country.

“India’s monetary policy, with Governor Raghuram Rajan at the helm, has been effective. However, a recent draft bill could undo the RBI’s good work,” the report elaborated.

“Moving to the new model would severely dent the RBI’s competency: credibility would be lower, politics would drive decisions, and transparency would be reduced.”

(IANS)

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Demonetisation Anniversary: BJP acts cheeky, releases new video showing Frustration of ‘Corrupt’ Politicians following Demonetisation

The one-minute video, which is now going viral on social media, has already been re-tweeted more than 2 thousand times since it was released on November 7, on the eve of demonetization move.

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Demonetisation Anniversary
Screen grab of the sarcastic video released by BJP to mark Demonetisation Anniversary. Twitter

New Delhi, November 8, 2017 : On November 8 2016, every Indian citizen sat glued to their TV screens as Narendra Modi was set to make a big announcement. Outcome? The Indian Prime Minster shocked the entire nation with the introduction of Demonetisation, a move that was to change the very foundation of the cash-dependent Indian economy.

The much-debated move by Modi garnered the attention of several well-versed economists from the country and abroad, alike. While some people willingly welcomed the move, there were others who stood in staunch criticism.

As the move completes its first year, the Bharatiya Janata Party (BJP) is set to observe November 8 as ‘anti-black money day’ to celebrate Demonetisation anniversary in the country.

On the eve of the Demonetisation anniversary, the BJP released a cheeky video claiming to depict how ‘corrupt’ politicians have been criticizing the move, as the nation won following demonetisation.

WATCH BJP’S TONGUE-IN-CHEEK VIDEO

In the video, the BJP attempted to take a dig at corrupt politicians, who have been criticizing PM Modi’s Demonetisation move.

In the video, a woman, playing the character of a frustrated, corrupt politician can be seen going on a rant over PM Modi’s note ban initiative, which was aimed to combat black money, corruption, fake currency and terrorism.

The video ends with a voice-over saying demonetisation has not only brought out this frustration of corrupt citizens, but also black-money, claiming that almost 99 per cent cash which was previously lying hidden with people has now entered the banking system.

The one-minute video, which is now going viral on social media, has already been re-tweeted more than 2 thousand times since it was released on November 7, on the eve of demonetization move.

Ahead of the Demonetisation anniversary, the last few days have witnessed several leaders present their opinions on PM Modi’s demonetization move.

Finance Minister Arun Jaitley called PM Modi’s note ban initiative a ‘watershed moment’ while Piyush Goyal, Minister of Railways believes the move has pushed India towards a more transparent economy.

However, the move is being criticized by ex-Prime Minister Manmohan Singh calling it ‘irresponsible’. The opposition maintains that PM Modi’s note ban initiative has caused reckless damage to the country and the Indian economy.

On Demonetisation anniversary, the BJP is set to observe November 8 as ‘anti-black money day’, while opposition leaders are set to observe the day as ‘black day’ in protest against the note ban initiative.

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Economic Survey 2016-17 : Arun Jaitley Says Significant Decline in India’s Reliance on Cash

Economic Survey is a snapshot of the state the country is in

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Economic survey presents a state of the country
The Economic Survey 2016-17 was charted by Finance Minister Jaitley on August 11 (representational image) Wikimedia
  • Finance Minister Jaitley tabled the second volume of Economic Survey 2016-17 in both Houses of Parliament
  • Second volume to be presented by Chief Economic Adviser Arvind Subramanian and his team

New Delhi, August 12, 2017: The last day of the Monsoon session of the Parliament saw the Indian Finance Minister Arun Jaitley table the second part of Economic Survey 2016-2017.

The survey revealed that a sharp, however balanced decline has been observed in the use of cash after Prime Minister Narendra Modi heralded the demonetization move in November last year. This trend has been observed both, in levels, and as a share of GDP and money.

Before assessing whether the move was a success or a failure, we must first identify what were the objectives behind stalling Rs. 500 and Rs. 1,000 notes,

  • Immediate objective – flush out large amounts of black money that were hoarded in cash at the moment
  • Long term objective – transform the cash-based Indian economy into a digital economy

It was assumed that these objectives would make India an efficient economy with higher tax revenues.

Before the introduction of demonetization, India heavily relied on cash, which in turn led to an unhealthy cash-to-GDP ratio (12 percent) – a trend that was only worsening with time.

The finance minister presented the second volume of Economic Survey 2016-17 in both the houses of the Parliament with demonetization being discussed for a significant part. The following has been revealed in an attempt to gauge the outcome of the move,

  • At present, total cash in holding is Rs. 3.5 lakh crore. This figure is 20 percent less than what it would have been had the economy not been demonetized.
  • Cash as a share of GDP has also witnessed a decline by 1.6 percentage points. Previously it was 11.3 percent of GDP and now stands at 9.7 GDP.
  • Cash as a share of M1 which economically represents liquid portions of money supply, has also declined by five percentage points.

To ease understanding of everybody from a non-economic background, these trends indicate a significant reduction in Indian economy’s reliance on cash since November 2016.

Another bonus point is the huge amount of cash that was previously lying dormant with people and has now entered the banking system.

ALSO READ: Indian Government’s Demonetisation measures did not impede Future Black Money Flows: UN report

When talking about the long term objective of the move- digitalization, a significant movement can be observed across all sectors :

  • The affluent segment of the society has increasingly shifted to mobile banking, online transactions, and app-based banking solutions
  • The middle segment are using their debit and credit cards
  • People from the less affluent segment are slowly joining the digital economy with their Jan Dhan accounts and RuPay cards
  • Pensioners who were previously only undertaking transactions in cash are now being encouraged to use card-based techniques.
  • Farmers, who comprise a significant part of the Indian economy, are also being encouraged to issue and use Kisan credit cards.

The Indian banking sector is not only promoting the issuance of debit and credit cards but also their use.

The question that comes to mind here is, was demonetization successful? 

It would be wrong to say that the economy has completely transformed into a digital economy as many people have shifted back to cash. However, digital transactions are higher than pre-demonetization levels, and the overall movement is in the positive direction.

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The Indian economy can thus, be rightly considered on the path to a holistic digital economy as the Economic Survey 2016-2017 notes “surge has moderated but the level and pace of digitalization are still substantially greater than before demonetization.”

However, while there is proof that the reliance on cash has declined sharply, it has also been pointed out in the survey that a “definitive judgments can only be passed if current levels of cash relative to GDP persist over time but so far”.


 
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Indian knitwear Industry Gears up to defeat China in Apparel Export

T.R. Vijaya Kumar, the great Indian clothes maker thinks it’s time for his country to take on Bangladesh, Vietnam, and even China for leadership in the global apparel industry.

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Textile. Wikimedia

Sept 17, 2016: T.R. Vijaya Kumar, the great Indian clothes maker thinks it’s time for his country to take on Bangladesh, Vietnam, and even China for leadership in the global apparel industry.

He’s a second-generation manufacturer, who transformed his small family clothing business in southern India into an apparel exporter of 1,700 employees and his goal is to double its sales by 2020. When it comes to his hometown of Tiruppur, which is mostly referred to as the knitwear capital of India, his ambitions are bigger and  broader, tripling exports and adding 500,000 jobs in the process, reported Bloomberg.

But the problem that is occurring is that other Asian countries are more ahead than India. India’s $17 billion exports of apparel were half as much as Bangladesh’s last year and its 3.7 percent global market share were behind Vietnam’s 5.1 percent. Apparel is a labor-intensive industry, which has helped developing economies transition out of agriculture. The Indian economy needs to generate more than eighty million new jobs by 2025 to keep up with its fast-growing population.

Indian Knitwear Industry in Tiruppur

PM Narendra Modi’s biggest failure so far has been an inability to boost employment, according to a recent poll. His new government recently announced a nearly $1 billion package for textile and garment makers, including subsidies for hiring, tax refunds and relaxation of overtime rules with a goal to create 10 million jobs and boost exports by $30 billion in the next three years.  Adding to the challenge is that the textile industry suffered a reputation blow last month, August 2016, when Target Corp. terminated $90 million of business with Welspun India Ltd. for labelling cheaper bedsheets as premium Egyptian cotton.

A key weakness of the sector is worker productivity, which is almost three times lower than in China. About 78 percent of Indian companies employ less than 50 workers, compared with 15 percent in China, according to Subramanium. That also means a lot of them remain below the threshold of government taxes and regulation, known by economists as the “informal” economy. A report released this year by the World Bank showed that Bangladesh had 15 times more garment workers formally employed than in the informal sector, while India has about seven times more informal garment workers than formal.

That gap could widen as foreign garment and textile producers continue to embrace automation. “India needs to start climbing the ladder fast to take advantage of its young population,” said Russell Green, an international economics fellow at Rice University’s Baker Institute for Public Policy in Texas. “Automation is making the ladder shorter and shorter over time.”

There’s more holding India back. A focus on cotton garments limitThat gap could widen as foreign garment and textile producers continue to embrace automation. “India needs to start climbing the ladder fast to take advantage of its young population,” said Russell Green, an international economics fellow at Rice University’s Baker Institute for Public Policy in Texas. “Automation is making the ladder shorter and shorter over time.”s its access to the winter clothes market, while buyers perceive the country as slower and less reliable than China or Vietnam, according to the World Bank report. In neighbouring Bangladesh, where garments account for 80 percent of overseas shipments, the monthly minimum wage is about 30 percent lower than India’s $105, and exporters don’t pay duties to the European Union.

Among them is Venkatachalam Babu, a small business owner who pays workers by the piece. In a workshop attached to his home, his staff of 12, including two family members, cut and stitch children’s underwear and pants from leftover fabric he buys from exporters.

While foreign markets are out of reach, Babu can bank on a fast-expanding domestic market that smaller rivals don’t have. Once an employee himself, he started his company 20 years ago with four workers. He’ll register it, he said, when the headcount crosses 20 people.

“We want to grow big,” he said as his mother sat cross-legged on the floor sorting pieces, surrounded by bags of fabric. “A problem is labor shortage.”

Tiruppur exporters have also joined forces to lower costs by educating companies on “lean” production management techniques and training factory staff to raise output. The government is partly funding the programs.

Kumar said the push was inspired by Modi, who during a 2013 campaign stop told the manufacturers to make proposals to expand, rather than just list concerns. Now the group hopes to take its action plan to the capital, 1,500 miles north, and have Modi mobilize all ministers at once.

– prepared by Shayari Dutta of NewsGram