INDIAN ECONOMY

who-is-to-be-blamed-

Who is to be blamed?

It might appear bizarre at the first instance but senior advocate Harish Salve blamed the Supreme Court for India’s current economic downturn. To him the genesis lies in SC’s verdict on 2G Spectrum Case in which it knocked down all 122 spectrum licenses issued to telecom operators. He underlines that when a foreigner invested billions of dollars, it was the country’s rule which said he must have an Indian partner. The foreigner did not know how the Indian partner got the licence. Blanket cancellation of licences marred foreign investors’ confidence in the system. “That’s when the decline of the economy began,” says Salve.

 

Following CAG revelation in 2010 that 2G scam caused a loss of Rs 01.76 lakh crore to the govt exchequer. The SC had then cancelled 122 licences in February 2012, rejecting Salve’s argument who appeared for 11 telecom companies in the case.

 

Recently, Finance Minister had underlined that people preferring Ola and Uber, among other reasons including less appetite for vehicle loan and future of electric mobility, was responsible for slowdown in automobile sector. Later she infused 70,000 cr package to boost economy.

 

17 Sep 2019
did-jairam-ramesh-hit-the-bulls-eye

Did Jairam Ramesh hit the Bulls Eye?

The BJP might have earned applaud from all across sans handful opposition leaders over abrogation of Article 370 & 35A, but current economic slowdown with GDP @ 5 % appears to be the point on which opposition can take on BJP.


Taking a cue, Jairam Ramesh took a lead in social media when he tweeted that “Ever know what NITI in Niti Ayog stands for? It’s clearly Not In Touch With India”.

 

In a select gathering of retired bureaucrats, his pot-shot at NITI Aayog had become the center of discussion. A former Secretary of a key department observed that when the opposition leaders are clueless over how to make their criticism correct, sharp and acceptable to the masses, Ramesh’s Tweet seems to have hit bulls eye as it was well received in social media. Another retired civil servant observed that most of the opposition leaders have lost their credibility whereas a few still remain acceptable and authentic in public. So it was his clean image and not sharpness of his Tweet that made it effective.

09 Sep 2019
who-is-to-be-blamed-

Who is to be blamed?

By IndianMandarins 17 Sep 2019

It might appear bizarre at the first instance but senior advocate Harish Salve blamed the Supreme Court for India’s current economic downturn. To him the genesis lies in SC’s verdict on 2G Spectrum Case in which it knocked down all 122 spectrum licenses issued to telecom operators. He underlines that when a foreigner invested billions of dollars, it was the country’s rule which said he must have an Indian partner. The foreigner did not know how the Indian partner got the licence. Blanket cancellation of licences marred foreign investors’ confidence in the system. “That’s when the decline of the economy began,” says Salve.

 

Following CAG revelation in 2010 that 2G scam caused a loss of Rs 01.76 lakh crore to the govt exchequer. The SC had then cancelled 122 licences in February 2012, rejecting Salve’s argument who appeared for 11 telecom companies in the case.

 

Recently, Finance Minister had underlined that people preferring Ola and Uber, among other reasons including less appetite for vehicle loan and future of electric mobility, was responsible for slowdown in automobile sector. Later she infused 70,000 cr package to boost economy.

 

did-jairam-ramesh-hit-the-bulls-eye

Did Jairam Ramesh hit the Bulls Eye?

By IndianMandarins 09 Sep 2019

The BJP might have earned applaud from all across sans handful opposition leaders over abrogation of Article 370 & 35A, but current economic slowdown with GDP @ 5 % appears to be the point on which opposition can take on BJP.


Taking a cue, Jairam Ramesh took a lead in social media when he tweeted that “Ever know what NITI in Niti Ayog stands for? It’s clearly Not In Touch With India”.

 

In a select gathering of retired bureaucrats, his pot-shot at NITI Aayog had become the center of discussion. A former Secretary of a key department observed that when the opposition leaders are clueless over how to make their criticism correct, sharp and acceptable to the masses, Ramesh’s Tweet seems to have hit bulls eye as it was well received in social media. Another retired civil servant observed that most of the opposition leaders have lost their credibility whereas a few still remain acceptable and authentic in public. So it was his clean image and not sharpness of his Tweet that made it effective.

namo-2.0:-tackling-core-problems-require-fresh-approach-towards-administration

NaMo 2.0: Tackling core problems require fresh approach towards administration

By IndianMandarins 08 Jun 2019

The survival and glory of the NaMo administration in its second run will depend on its ability to resolve and harmonize a US$176 billion question. This level of trade deficit, year after year, is not only unsustainable but is absolutely lethal to the development of domestic industry, enterprise, and skill. There is a direct link between high imports and loss of jobs accompanied by the destruction of skill and degradation of educational and industrial infrastructure. That's the reason why Trump's USA is engaged in trade conflict with important countries of the world. Like Trump, NaMo, too, can't ignore India's trade problems for far too long if he has to survive in politics and find a place, indeed more than a footnote, in history.

 

The good thing is that NaMo is seen to be aware of the problem. So the first thing he did on assuming power this second term was to immediately constitute two powerful political committees: one on accelerating investment in infrastructure and manufacturing to generate more jobs and another on speeding up training in industrial skills. While this initiative is undoubtedly good, it may be better if he steps a move ahead and involves the country's ethical business houses, and not the spent forces like those who are seen straining the country's IBC laws with the help of cash-fat lawyers, with the government initiative. The reason is after all the money for investment has to come from these business houses on their own or in collaborations with European, American, Japanese and East Asian capital including from Taiwan.

 

While initiating measures for expanding and boosting India's manufacturing base, the government may have to restrain its tendency to disempower new and old entrepreneurs. It has been seen that the government does it by imposing financial, tax, and volume restrictions on the industry. Such past practices have ensured that manufacturers and suppliers can't avail of big opportunities when they come their way. In brief, the focus should be on turning the country a pivot in the global supply chain. This is what China did; and that's the reason why a lot of global manufacturers, even if they wish to move out immediately of China because of the latter's trade war with the US, they can't because the supply chain that China has created in really impressive.  

 

Andy Browne, Editorial Director of the Bloomberg New Economy, has narrated an interesting anecdote in this regard. A French fashion designer once described to him the pitfalls of quitting China. He moved his business to Ho Chi Minh City, a haven for manufacturers fleeing China due to rising costs and, more recently, the trade war. He had joined the exodus early.

 

Browne writes: Rushing to assemble his first made-in-Vietnam collection in time for the Spring Fashion Week in Paris, he (French fashion designer)couldn't find stylish zippers, so he scrambled back to China to see his old supplier and returned with two bulging suitcases. These were held up for weeks by customs officials at Ho Chi Minh airport. Similar ordeals ensued to get hold of lace, embroidery and fancy buttons".

 

This anecdote has a moral for India. Since your customs and tax officials are no better than their counterparts in third world countries, if you want global capital to move to India fast, don't create a tax and Exim regime to make them feel that they have jumped from the frying pan into the fire. As the Vietnamese story reveals, migration of global capital to India would be a process. And the government has to facilitate this process at every stage - from small things to big things. Which means that NaMo has to reform his administration. Can he do that? If he can, which no one has wanted to do, he may surely secure a place for himself in history - indeed more than a passing reference.

(By M K Shukla & Rakesh Ranjan)

modi-govt-2.0-outlining-a-growth-story:-drive-conveniently,-drive-easy

Modi Govt 2.0 outlining a growth story: Drive conveniently, drive easy

By IndianMandarins 02 Jun 2019

India needs an investment ranging from $5 to 10 trillion to develop its infrastructure, science, agriculture, industry, and commerce to a point where the per capita GDP improves from $2000 to $20,000 in the next 10 years. Where will, or could, this money come from? Only from the US, Europe, and East Asian countries like Japan and South Korea. Forget about China. Let it invest in Pakistan.

 

That being the reality, New Delhi may have to work really hard and pragmatically in the next few months to streamline its economic reform agenda and tune the foreign policy accordingly. The concept of economic nationalism is good, but it has to be distilled too often through pragmatism to turn on its potency.

 

Currently, Europe, which could be one of the major financiers to India's growth story, has been waiting helplessly for the last 15 years for a free trade agreement. Similar is the story of trade relations with the US which has expressed its great displeasure by withdrawing the GSP trade scheme. Trade relations with Japan and South Korea are good but not without creases. 

 

In all cases, irrelevant issues have been raised by negotiating officials. So the matter needs to be sorted out at the government and ministerial levels.

 

The US move to withdraw GSP on India's exports to that country has only added urgency to the matter of redefining India's relations with financing countries. No great achievements would be made if New Delhi tries to woo Chinese capital, which is already tied with financing India's adversaries and enemies.

 

The US president is known for his transactional nature. Since the US played a pivotal role in backing France-sponsored Western move to blacklist Masood Azhar by taking the issue to the larger UNSC, which would have made China explain the reasons for its 'constructive support' to Azhar, China blinked and backed off because it had no valid reasons for imposing its willful and malicious hold on Azhar's blacklisting.

 

For a much-needed favor shown to India, Trump naturally wants reciprocal favor. And like always, New Delhi is whining and grumbling. Instead of sending the new foreign minister Jaishankar to Washington to handle the matter urgently and negotiate a win-win deal on minor trade issues that could snowball into bigger problems, spinmasters are trying to convey that the move may not be much damaging.

 

The commerce ministry has said and believes that the GSP withdrawal may impact marginally as the total duty reduction under the scheme was only $190 million a year on the trade value of $6.3 billion. Since, in 2018, India had a goods trade surplus of $21.3 billion with the US, the ministry is not bothered about the fact that what begins as a trickle could become a powerful trend. Look at our trade deficit with China: it began as a trickle 15 years ago and now it costs a huge $70 billion that empowers China to freely finance our adversaries, enemies, and internal saboteurs.

 

New Delhi doesn't seem to have played its hands deftly during the first NaMo term 2014-19 on issues that concern the West, which remains the largest source of FDI, FPIs, technology, IT, and outsourcing businesses. In 2018, for instance, it created avoidable tax hurdles in the functioning of Amazon. It really sent out a wrong signal that it was being done to protect domestic e-commerce and other retail businesses. After the Vodafone incident, this was the second instance of creating unnecessary tax problems for major foreign operators. In both cases, the FinMin was run by lawyers.

 

So, in a sense, it's a great relief that the FinMin has come to be occupied by Nirmala Seetharaman who understands the complexities of global finance and business.

 

Looks like she may get adequate support from the new foreign minister who after retirement was put on probation in learning the ropes of international finance and trade at Tata Sons. This couldn't but have been done with an agreement between Ratan Tata and Narendra Modi. Possibly, Modi's first term taught him that he needed a foreign minister who could deal with global businesses as proficiently as he dealt with politics. And so, he must have organized Jaishankar's appointment on Tata Sons. 

(By M K Shukla & Rakesh Ranjan)

sensex-earned-dividends-post-exit-polls

Sensex earned dividends post Exit Polls

By IndianMandarins 20 May 2019

The Exit Polls brought fortune for the capital market today making it the best gains for the Sensex and the Nifty in 10-years.

Sensex, on Monday, opened at 38,819.68, up by 888.91 points while the Nifty opened at 11,691.30, up by 284.15 points

Benchmark indices surged in trade with the Sensex ending the day with mammoth gains of 1422 points, following exit poll predictions of a clear majority for the ruling NDA. The Sensex ended the day at 39,352 points, while the Nifty rallied 421 points to close at 11,828 points.

Indiabulls Housing led gainers from the Nifty with the stock ending 12 per cent higher, while SBI jumped more than 7 per cent.  Shares of Yes Bank, which had hit a 52-week low on Friday, gained substantial ground. The shares ended up 7 per cent at Rs 144. Shares in Anil Dhirubhai Ambani Group (ADAG) companies saw solid buying support with Reliance Capital up near 6 per cent.

Further, Indian Rupee too,m jumped against the US Dollar and rose to a two-week high of 69.36 against the USD as compared to Friday’s close of 70.23. Stock market experts believe that the exit poll results were better than expected which is being reflected in the stock market.

It may well be underlines that in 2004, markets had gained in the pre-poll rush, in hopes of a second term of BJP under Atal Bihari Vajpayee, but the markets crashed soon after the results were out. All it would depend on the final poll results on May 23, 2019.

quick-take:-good-governance-pivots-on-management-of-paradoxes

Quick Take: Good governance pivots on management of paradoxes

By IndianMandarins 27 Dec 2018

If the NaMo administration has been seen failing in the last four and a half years on its promise of "minimum government and maximum governance", it may be largely due to the inability or unwillingness or both of the PM to manage the paradoxes of the agricultural economy, GST - and now startup economy.

 

While the government's patent failure to manage the paradoxes of agricultural economy and GST regime has provided the opposition with the much-needed ammunition to question the government's sincerity towards farmers and small industrialists and traders, the FinMin's insatiable greed to increase its revenue earning at any cost including taxing investments -Angel tax is a prominent case in point - may cause incalculable harm to the growth of startups in the country.

 

No country in the world is known to have ever taxed investment. But India is as unique as its founder state Magadh.

 

In these columns, we were the first - when no one was even remotely aware of -four and a half years ago to point to the emerging paradoxes in the agricultural economy and how these paradoxes, if not managed well in time, could prove to be the Government's Achillie's heels. And lo and behold, that has happened.

 

Similarly, before introducing the GST regime, if the government had shown the conscious volition to minimize the problem associated with the filing of GST returns (which could have been advised by any practising chartered accountant), small businesses, which form the core of the BJP's support base, wouldn't have been wounded and thus alienated as badly as they actually did.

 

The combined consequences of the failure to manage paradoxes of the agricultural economy and GST regime have triggered a triple NDA failure to retain three northern states of Chhatisgarh, MP, and Rajasthan.

 

Now, let's deal with the failure to create a conducive environment for the growth of startups. In this case, the government initially got two things right.  The first was providing matching funds to venture capital funds and, thus, providing a multiplier-effect for local capital. The second was transforming the Department of Industrial Policy and Promotion (DIPP) into a champion for startups within GoI- like the way it was turned into a vehicle for improving the country's position in the World Bank's Ease of Doing Business ranking

 

Venkatesh Shukla, President of TiE (The Indus Entrepreneurs, Silicon Valley, US), writes: "With competent leadership, DIPP has served this role well. But its effectiveness is limited given that the best it can do is to educate and persuade other parts of the government to do the right things without having the authority to make it happen". Indianmandarins has learned that on the issue of taxing Angel investment, it was never consulted.

 

Shukla adds: "After a recent outcry, a typical bureaucratic response came in: we will go easy on enforcing angel tax for the time being. Translation: we are not going to solve the core problem, so we have control and discretion over you, and please keep knocking on the door for our benevolence. License Raj again, anyone?" He points out: "Guess how the most promising startups are dealing with such idiocy? By incorporating abroad, even if the entire workforce and market are in India. It’s India that’s the big loser."


Clearly, India is no longer seen "reforming, performing, and transforming" as the PM claimed from the ramparts of the Red Fort On 15 August 2018.

(By M K Shukla)

pragmatism-has-its-own-rewards:-quick-take

Pragmatism has its own rewards: Quick take

By IndianMandarins 14 Dec 2018

India's ex-King of Good Time and publisher of sexy calendars Vijay Mallaya is like the proverbial camel who is humbled about his height only when it comes near the mountain. Hunted by Indian law and finding no support from British laws, he has offered to pay back 100% of the principal debt. While banks are yet to respond to his offer, senior Cabinet Minister Nitin Gadkari, who is known for his pragmatic viewpoints - the viewpoints that have made him the most successful minister in the NaMo administration, has argued for exonerating the ex-boss of the defunct Kingfisher Airline. We will revert to his reasoning later.

 

Interestingly, twice-born socialist Rahul Gandhi, who has been exorbitantly generous in targeting equally twice-born socialist Narendra Modi for his alleged hobnobbing with capitalists, has not yet responded to Gadkari's viewpoint on the Mallaya affair. Perhaps he had had a lot of good time with Mallaya and his high-spirited best companions in the world.

 

In fact, Gadkari at one shot has put two great socialists of the world Rahul and Narendra Modi on the dock even as they get ready to waive off farmers' debts running into Rs 3-4 lakh crores. Of course, these great socialist gamblers wouldn't be paying from their own pocket, and hence their generosity. The blood money to farmers would be paid for draining out their blood over the last four decades through a series of parasitic policies that have turned the net terms of trade absolutely negative for farmers.

 

But this below-contempt low cunning will open a Pandora's box of constitutional questions. First and foremost, the two great leaders will be charged with differentiating individuals on the basis of absolutely unsustainable democratic grounds. Since everyone is supposed to be equal before the law, it will be surely asked why the government is willing to waive off the entire loan and interest of farmers, while not willing to waive off the interest part of Mallaya's loan. Since Mallaya's default took place in the background of the exorbitantly high cost of aviation fuel, it may be argued that his default in payment was caused by an extremely difficult business environment like those faced by farmers, and therefore there was no malafide intent.

 

Minister Gadkari has argued on the same sustainable ground.

 

Speaking at the Times Network-organised India Economic Conclave in Mumbai, he said, “Mujhe Vijay Mallya se kuch lena-dena nahin hai… 40 saal jab Mallya regular payment kar raha tha, byaaj bhar raha tha, tab Mallya ka prime account tha… aur 40 saal ke baad, aviation mein jaane ke baad… woh bhi mujhe malum hai history poori… uske baad woh adchan mein aaya toh woh ekdum chor ho gaya?… jo 50 saal byaaj bharta hai woh theek hai, par ek baar woh default ho gaya… toh thurant sab fraud ho gaya? Yeh mansikta theek nahin hai.”

 

“(I have nothing to do with Vijay Mallya… Mallya’s was a prime account for 40 years when he repaid loans regularly. He entered the aviation sector, and ran into problems. So does that make him a thief? He defaulted once, and he turned to be a fraud? This mindset is not right.)”

 

Gadkari’s remarks came after the UK court order was welcomed by the FM.

 

On December 10, following the Westminster court order, Finance Minister Arun Jaitley tweeted: “Great Day for India. No one who cheats India will go scot free… An offender benefited during the UPA. The NDA brings him to book.”

 

BJP president Amit Shah also took to Twitter and credited the Prime Minister for the extradition order. “Vijay Mallya’s extradition is a very significant development in India’s fight against corruption. The credit for this goes entirely to Prime Minister @narendramodi, who ensured that the agencies were unrelenting in their pursuit of the man who had bled Indian banks and fled,” Shah tweeted.

 

On Thursday, Gadkari was referring to a loan from the Maharashtra government-owned entity Sicom to Mallya, extended 40 years ago, which he repaid on time without any default. Stating that ups and downs are part and parcel of any business, the Union Minister said that if someone goes through a downward cycle, then he or she has to be supported.

 

Gadkari said: “Agar Nirav Modi ki baat hai, fraud hai, usko jail mein bhejna chahiye. Agar Mallyaji ne kuch fraud paper diye, galat kiya toh bhejo, koi problem nahin hai. Par jo aadmi adchan mein aata agar usko hum yahin thappa laga denge ki woh fraud hai, toh humari economy aage nahin jaayegi.”

 

“As far as Nirav Modi is concerned, if he is a fraud, he should be sent to jail. If Mallyaji has given some fraud paper or done anything wrong, he should also be sent, there is no problem. But if we stamp every person who runs into problems as fraud, our economy will not go forward.)”

 

Well done, Minister Nadkari.

(By M K Shukla)

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