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Modi sarkar economic reforms/governance performance thread

FischerTal

By FischerTal
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Kalia_Test Newbie

Kalia_Test

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Indias-FDI-inflows.jpghttp://www.valuewalk.com/2015/08/indias-fdi-trends-looking-positive-goldman-sachs/ FDI is proving to be the star of Modi's economic recovery. Along with remittances of 70 billion and falling commodity prices keeping the trade balance in check (despite falling exports) I think India is headed for a very strong macroeconomic position. 70 billion remittance and 50 billion FDI should eat into the 140 odd billion trade balance. CAD should be in between 1-2% of GDP which is a solid place for India to be in. At the height of the 2013 crisis India had a CAD of 5% of the GDP due to total mismanagement by the Congress led UPA. If India can get remittances to touch 100 billion and FDI to get to 70-80 billion per financial year IMO we should be running a small current account surplus by 2019. The GDP too will be solidly 8% growth plus.
Somehow, the granular data is not much encouraging at first glance. I usually depend on RBI portal and DIPP for data. Data till May 2015 is available below ( split by FDI inflows from 2000 and also for the 2 months in FY15 ) :- http://dipp.nic.in/English/Publications/FDI_Statistics/2015/india_FDI_May2015.pdf Raw numbers look good but a close look at sectoral inflows ( in page 2 in link ) is a mixed bag. All FDI is good in short term for bridging CAD but the real good FDI IMO is one where 1. It generates local employment 2. Brings Technology too to India 3. Promotes exports so that the benefit is magnified 4. Profits are not quickly repatriated. Other factors too but if we take just the above 4 - The best FDI is the one into IT and Pharma ( for all 4 factors ) - we get local employment, technology, we export the products and services and earn foreign exchange and the profit repatriation is nominal through dividends and Royalties ( think IBM, Microsoft,etc) Next is defense where we currently import a LOT. For this reason itself, it should be high. Next is Infrastructure ( including Power, roads, highways, ports, airports , warehouses,etc ) where HUGE capital is required and returns are more bond-like. This is a fertile area where we need to get the sovereign funds of Nordic countries,UAE, Pension funds to invest into - even if the instrument is quasi-debt. Telecom - sort of neutral. Last is Financial Services and 'Trading'. Financial Services scores low on all 4 points and it is something that Indian firms can/should do - I don't need a Citibank here ( except for one or two offices for its own global forex business,etc ) nor do I need AIG, HSBC. They don't generate huge employment ( I am not talking of their back-office/BPO ) and profits are repatriated heavily. I am assuming this 'Trading' covers FDI in e-commerce. Need to check.
G_B_ Grand Master

G_B_

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^ i agree with your analysis.(very informative btw) But at a time when emerging markets are in general facing a flight of capital and also having their exports coming under pressure. I think India have made impressive gains. Like it or not a lot of analysts in New York are going to read into this inflows and based on that make their call on the rupee. These people dont go into details, especially emerging markets. I will fully admit that recovery in general right now is patchy at best. But its heading in the right direction.

Kalia_Test Newbie

Kalia_Test

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^^^ Agree. Increase in FDI in this environment is in itself a big achievement. As and when the opportune time comes, we need to try and nudge the FDI into our preferred sectors through policy initiatives. At the moment, Defense is most preferred by us and is attracting attention by Global firms too. Hope to see announcements of lot more JVs like L&T- Airbus JV for defence,etc :nice:

Kalia_Test Newbie

Kalia_Test

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GB and Kalia' date=' as usual, terrific stuff - Thanks![/quote'] Flattered :--D 2 more points I just realized after going through the report I linked to :- - Reinvested earnings are counted as FDI flows for current period. I am assuming it means if HUL, P&G India, Bayer India, Nestle India,etc declare dividends in INR ( a majority of the amount should go to parent company after conversion to whatever currency ) but the parent does not actually repatriate the money and chooses to re-invest ( by way of repurchase of shares/rights subscription,open offer, etc) - it counts as FDI inflow. Interesting ( unless I am making a blunder here ). So the INR never got converted to foreign currency and back but is still treated as FDI inflow. This is significant as they seem to form 30% of overall FDI inflows. I can however understand the rationale. For all practical purposes, this the money that the parent could have taken back but decided to re-invest. - State-wise FDI flows is very interesting. Leaving aside Mumbai and Delhi ( as they represent companies operating all over India ) - FDI in West Bengal and Bihar is pathetic. Page 3 will tell us more about our own individual states and how they operate more than anything else.
Texan Grand Master

Texan

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Flattered :--D 2 more points I just realized after going through the report I linked to :- - Reinvested earnings are counted as FDI flows for current period. I am assuming it means if HUL, P&G India, Bayer India, Nestle India,etc declare dividends in INR ( a majority of the amount should go to parent company after conversion to whatever currency ) but the parent does not actually repatriate the money and chooses to re-invest ( by way of repurchase of shares/rights subscription,open offer, etc) - it counts as FDI inflow. Interesting ( unless I am making a blunder here ). So the INR never got converted to foreign currency and back but is still treated as FDI inflow. This is significant as they seem to form 30% of overall FDI inflows. I can however understand the rationale. For all practical purposes, this the money that the parent could have taken back but decided to re-invest. - State-wise FDI flows is very interesting. Leaving aside Mumbai and Delhi ( as they represent companies operating all over India ) - FDI in West Bengal and Bihar is pathetic. Page 3 will tell us more about our own individual states and how they operate more than anything else.
Interesting and good point. Yes, many companies choose not to repatriate money in foreign currencies due to huge tax implications. Apple has about $200 billion cash in hand, but 90% of it exists in foreign currencies.
Kalia_Test Newbie

Kalia_Test

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Great news - RBI grants “in-principle†approval to 11 Applicants for Payments Banks https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=34754 The Reserve Bank of India has today decided to grant “in-principle†approval to the following 11 applicants to set up payments banks under the Guidelines for Licensing of Payments Banks issued on November 27, 2014 (Guidelines). Aditya Birla Nuvo Limited Airtel M Commerce Services Limited Cholamandalam Distribution Services Limited Department of Posts Fino PayTech Limited National Securities Depository Limited Reliance Industries Limited Shri Dilip Shantilal Shanghvi Shri Vijay Shekhar Sharma Tech Mahindra Limited Vodafone m-pesa Limited ---------------------------- Payments Bank concept is very interesting. With department of Posts getting a license, there is a huge opportunity to move further towards Financial inclusion. Deepak Shenoy has a nice piece on what this means :- http://capitalmind.in/2015/08/new-payment-bank-licenses-are-finally-here-heres-what-they-can-do/ :yay:

amiret Newbie

amiret

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Indian economy can double in three years: Suresh Prabhu

KOLKATA: The Indian economy can double in three years and has the potential of becoming a $20-trillion economy, railways minister Suresh Prabhu said on Friday. "Inflation is down, the economy is looking up, and foreign direct investments have been increasing. There is a tremendous respect among investors for the efforts of Prime Minister Narendra Modi and are eager to invest in India," "In this context, we can double the economy in the next three or three-and-a-half years," said Prabhu. Prabhu asserted that only economic growth was not the agenda; rather the removal of poverty and corruption was also essential.
Er, NO WE CAN'T double in 3 years .Because that would mean we would have to grow at 26% pa? Perhaps mr.prabhu has hired "Great Tweeter"'s pre-election jumla writers . :hmmm: We can ignore the error and applaud M.Prabhu's undoubtedly noble intentions. :hatsoff:
randomGuy Grand Master

randomGuy

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Great news - RBI grants “in-principle†approval to 11 Applicants for Payments Banks https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=34754 The Reserve Bank of India has today decided to grant “in-principle†approval to the following 11 applicants to set up payments banks under the Guidelines for Licensing of Payments Banks issued on November 27, 2014 (Guidelines). Aditya Birla Nuvo Limited Airtel M Commerce Services Limited Cholamandalam Distribution Services Limited Department of Posts Fino PayTech Limited National Securities Depository Limited Reliance Industries Limited Shri Dilip Shantilal Shanghvi Shri Vijay Shekhar Sharma Tech Mahindra Limited Vodafone m-pesa Limited ---------------------------- Payments Bank concept is very interesting. With department of Posts getting a license, there is a huge opportunity to move further towards Financial inclusion. Deepak Shenoy has a nice piece on what this means :- http://capitalmind.in/2015/08/new-payment-bank-licenses-are-finally-here-heres-what-they-can-do/ :yay:
good for janta but these will prove strong competition for existing private banks and affect their margins
Kalia_Test Newbie

Kalia_Test

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Indian economy can double in three years: Suresh Prabhu Er, NO WE CAN'T double in 3 years .Because that would mean we would have to grow at 26% pa? Perhaps mr.prabhu has hired "Great Tweeter"'s pre-election jumla writers . :hmmm: We can ignore the error and applaud M.Prabhu's undoubtedly noble intentions. :hatsoff:
Suresh Prabhu ‏@sureshpprabhu 2h2 hours ago Said in Kolcutta our GDP could double in 6 to 6 and half not 3 years as reported.ICAI,organisers too have issued clarification.Wrong report Suresh Prabhu ‏@sureshpprabhu 1h1 hour ago Speech is recorded where it's said GDP could double in 6 to6.5 years.It was in context of how CAs could help realise this Potential of India 6-7 years is certainly doable ( 10-12% growth) if GST and other major reforms are allowed to be passed asap and crude stays around current levels
Kalia_Test Newbie

Kalia_Test

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good for janta but these will prove strong competition for existing private banks and affect their margins
Yep. Competition will certainly increase ( one of the reasons why Banking stocks got extra harsh treatment after announcement ). The real smart Banks anticipated this and formed JVs already - like Kotak Bank JV with Airtel. Once customers start using Airtel Pay ( which is itself a JV with Kotak ), Kotak will use its vast customer base ( Airtel's ) to cross-sell its full Banking service, MFs, Insurance and what not. Also, as Payment Banks cannot lend, the competition is for retail deposits upto 1 lakh only. Corporate Banking, SME Banking,etc are not affected at all. Banks with high CASA like HDFC,Kotak have more reasons to worry. http://www.thehindubusinessline.com/banking/bharti-airtel-and-kotak-bank-team-up-for-payments-bank-foray/article6835266.ece I would assume majority of these new licensees will need tie-ups with formal Banks like Dept. of Posts might tie up with SBI. As consumers, we can be excited as it promises much more ease of money transfer, payments,etc. It is still 18 months away though.
randomGuy Grand Master

randomGuy

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Yep. Competition will certainly increase ( one of the reasons why Banking stocks got extra harsh treatment after announcement ). The real smart Banks anticipated this and formed JVs already - like Kotak Bank JV with Airtel. Once customers start using Airtel Pay ( which is itself a JV with Kotak ), Kotak will use its vast customer base ( Airtel's ) to cross-sell its full Banking service, MFs, Insurance and what not. Also, as Payment Banks cannot lend, the competition is for retail deposits upto 1 lakh only. Corporate Banking, SME Banking,etc are not affected at all. Banks with high CASA like HDFC,Kotak have more reasons to worry. http://www.thehindubusinessline.com/banking/bharti-airtel-and-kotak-bank-team-up-for-payments-bank-foray/article6835266.ece I would assume majority of these new licensees will need tie-ups with formal Banks like Dept. of Posts might tie up with SBI. As consumers, we can be excited as it promises much more ease of money transfer, payments,etc. It is still 18 months away though.
Mobile operators like Bharti AirtelBSE and Vodafone India diversifying into the payments banking business could significantly lower their subscriber churn as those opting for mobile money services are unlikely to leave in a hurry. Besides, the telcos could make extra Rs 1,200-1,500 crore each in revenue over three years, say analysts. : : "As a result, we forecast payments banks will have a minuscule share of less than 0.5 per cent of the current and savings account (CASA) deposits of the Indian banking system five years after launch," the report added.
http://economictimes.indiatimes.com/industry/telecom/how-payment-banking-may-help-telcos-like-airtel-vodafone-reduce-subscriber-churn/articleshow/48566699.cms how much of this is factored into the stock price of airtel and idea - has to be looked into.
Kalia_Test Newbie

Kalia_Test

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Suresh Prabhu ‏@sureshpprabhu 22m22 minutes ago PTI clarifies.Shocked to read headlines,!What was said is recorded.Hope reporting will be more careful on numbers& timelines,while quoting There are too many anti-BJP members in media and many that try to latch on to mis-quoted statements to prove a point :sad:

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