Thread: Indian Economy

For one thing you could test for statistical break from the post 1991 time trend trend rate of growth by employing a simple Lucas like model.

ie

The natural logs of

lngdp= alpha + beta1 (time trend 1980-2002)+beta(2)lngdp(-1)

Then you could calculate the time trend based on statistical significance via OLS.

You could then rerun this same regression by adding another time trend from 2002 onwards (until 06 by using the IMF predicted growth rate)
ie
the above equation + beta3(time 03-06) while I fear that your results will probably have to wait an extra year to test for the break.

That would confirm if India has broken the 6.2% Neo hindu rate of growth.

See example
http://lnweb18.worldbank.org/sar/sa.nsf/Attachments/annexch8/$File/annexch8.pdf

Data on the Indian economy can be found here, make sure you would use CONSTANT PRICES for all variables and not current prices.

http://www.rbi.org.in/scripts/Annual...dian%20Economy

India has climbed the competitiveness index

http://www.economist.com/markets/dis...ory_id=4462765

See the graph

http://in.news.yahoo.com/050930/137/60dd2.html

Friday September 30, 06:19 PM
India's external debt dips $1.3 bln in Apr-June



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MUMBAI (Reuters) - India's external debt fell by $1.31 billion to $122.15 billion in April-June from the previous quarter, mainly due to the dollar's appreciation against other major currencies, the Reserve Bank of India said on Friday.

Short-term debt in the quarter stood at $7.28 billion, 6.0 percent of the total debt and down from $7.52 billion at the end of March.

The RBI said, however, external commercial borrowings (ECBs) rose during April-June, with companies' syndicated loans and overseas bond issues pushing up the ECB total to $27.2 billion.

Corporates have made a beeline to raise foreign currency loans at rates lower than domestic ones to fund capital expenditure plans.

The Indian central bank said foreign exchange reserves exceeded external debt by $16.2 billion at the end of June, providing 113.3 percent cover to the total debt stock.

Asia's third-largest economy had $144.22 billion in foreign exchange reserves on September 16, the fifth largest accumulation of reserves in the region.

The central bank said addition to foreign exchange reserves during the April-June quarter from the current and capital accounts was $1.2 billion.

Valuation losses due to the dollar's rebound against other major currencies accounted for a decrease of $4.3 billion in total reserves compared to $1.0 billion in a year earlier, resulting in a net decline of $3.1 billion in the quarter.

India's central bank states foreign currency assets in U.S. dollar terms and includes the effect of the appreciation or depreciation of other currencies held in its reserves such as the euro, pound sterling and yen.

India to open up financial sector, slowly

India on Saturday said it would open up its financial sector further, but this would happen gradually after putting in place appropriate laws and appointing regulators.

"It is our intention to move forward, but at every step the watchword will be caution and placing suitable instruments to prevent financial shocks," Finance Minister P Chidambaram said in his lecture at Yale University.

"We have taken measured steps in banking, insurance, capital markets, securities markets and the debt markets," he said, adding that American banks, insurance companies and other financial intermediaries seem to have realised the opportunities that lie ahead and accepted the wisdom of India's policy to 'hasten slowly.'

There has been considerable interest on the part of American corporations in the Indian financial sector, as this is the sector where Washington's comparative advantage seemed to lie in the present day, Chidambaram said in his lecture to the Yale University.

Turning to the Indian economy, Chidambaram said India was now coming to a point where its contribution to world economic growth would be significant with a GDP of nearly $800 billion and each 10 per cent rise in India's GDP would contribute $80 billion to world output.

Chidambaram said India's greatest achievement lies in the political arena. "Every tenet of political science argues that poor countries succumb to violence, fanaticism, civil wars and dictatorship. India is the exception."

India is the best functioning multi-cultural, multi-ethnic, multi-religious country in the world, he said, adding that "looking forward, individuals and firms, both domestic and foreign, can feel confident about India, including its political and social stability over the next 50 years."

Showcasing India as major foreign investment destination, particularly in infrastructure, Chidambaram said there was an 'obvious fit' between India's values and those of the mature industrial economies.

Observing that economic interdependence between India and the United States was growing at an astonishing rate, he said there had been a heightened interest in portfolio investment in Indian equities from US institutional investors.

He regretted that outsourcing had been wrongly interpreted as 'exporting of jobs' and making it controversial, which is unfortunate for all sides.

"Producing goods and services in India makes goods and services cheaper in the US," he said, adding that in a highly competitive world, with intense competition among companies to cut costs, any hesitation to outsource spares, intermediate inputs and some processing requirements or services from the most cost competitive corners of the world may result in a total loss of business for the company and an even greater loss of jobs.

Furthermore, Chidambaram said that if one looked ahead in time, the ageing profile of many developed economies meant they would have the choice of either importing people or outsourcing work.

Though little noticed, the finance minister said there was growing inter-dependence between India and the US based on financial markets. Net capital flows into India have been at a level of $12 billion in each of the last two quarters.

US institutional investors were increasingly investing in India and all kinds of investors were participating in this, ranging from pension funds to university endowment funds to mutual funds to insurance companies, he said.

"They are entering into every aspect of India's economy, through venture capital, listed equity, corporate bonds and government bonds, he said, adding that foreign investors are trading on India-related instruments, both spot and derivatives in India and on offshore markets.

"Conversely, Indian multinational corporations are increasingly buying companies in the US and setting up operations in the US," Chidambaram said, adding that "two-way financial flows is thus an important aspect of our interdependence."

Referring to the problems faced by the global community, the minister said there were four major issues -- delays in completing the Doha round, terrorism, international financial architecture and global warming.

"In my view, the three large countries -- the US, China and India -- would do well to collaborate in solving these problems," he said, adding that persistence of these problems point to failure of global public goods and to the deficiencies of multilateral institutions.

The World has changed enormously since 1945 when United Nations, World Bank and IMF were set up, Chidambaram said, emphasising that there was need for a far-reaching examination of the mandate, governance, management and behaviour of these organisations to make them relevant in 2005.

The mandate of these organisations were outdated in the context of the present problems, he said citing the example of the United Nations, which was "conceived at a time when no state actively pursued a policy of support to cross-border terrorism."

"The governance of these organisation is not aligned with present realities," he said, adding that the UN, World Bank and IMF disempowers four of the five biggest economies, China, Japan, India and Germany in various ways.

The management of these organisations was dominated by the US and to a lesser extent by Europe. "This contaminates the behaviour of the organisations, and the extent to which other countries see the UN, the International Monetary Fund and the World Bank as neutral bodies."

In a TV interview on the Charlie Rose show, he said: "The emergence of India and China along with Brazil and South Africa, on the path of reform, progress and prosperity is good for the world."

However, both India and China would not rise to the level of the US in per-capita income even if the size of their economies rise because of the large population, he said.

http://inhome.rediff.com/money/2005/sep/24india.htm

The land ceiling act is being abolished this fall btw.

Enough of Shamghai
By: Satish Purohit
May 31, 2005

The time for tall tales is over, says Chief Minster Vilasrao Deshmukh. As a first concrete step towards turning Mumbai into Shanghai, Deshmukh has agreed to vigorously support the construction of skyscrapers in the city.

“Mumbai cannot expand horizontally, so we have to work towards growing vertically,” Deshmukh told Mid Day yesterday. “But we will of course have to carefully study the pitfalls before doing so,” he added.

The chief minister said the government will have to formulate new policies to facilitate the building of skyscrapers, after consulting with experts.


Support

The good news is Deshmukh has the support of rival parties on the issue. Vinod Shelar, a BJP general secretary, said: “I am for skyscrapers, but parallel development of infrastructure is important. Development has meaning only if it benefits everybody.”


Cumballa controversy

Deskmukh said, “The recommendations of the old committee set up to study the Cumballa twin tower issue are yet to be looked at, but we are prepared to do so.”

The committee he was referring to was set up a couple of years ago after residents protested against the construction of the Cumballa Hill twin towers. It was headed by former chief secretary Ajit Nimbalkar.

Nimbalkar, who submitted a report on the issue in 2004, said, “When you are planning to go vertical, you have to ensure that you have the required infrastructure to support high-rises.”


‘Only solution’

Builders believe skyscrapers are the only way to solve overcrowded Mumbai’s massive housing problem.

According to the Mumbai Metropolitan Region Development Authority, the city needs 85,000 housing units urgently, and is already running a 45,000-unit deficit.

“The potential benefits are tremendous,” said Niranjan Hiranandani of Hirananadani Constructions, “but sadly, we lack the vision and the political will to make things happen. My tallest building, Marina, is in Dubai. You can’t create something that grand without the government’s support.”

Architect Hafeez Contractor, who is busy planning the 160-floor Noida Tower, which will be the world’s tallest building at 710 metres, agrees. “Mumbai has so many reasons to go vertical but there are people who will come up with 20 reasons to oppose it.”


Hurdles

Mumbai’s space problem, caused by the Urban Land Ceiling Act of 1977 and the BMC’s development control regulations, is aggravated by widespread slum encroachment.

Sanjay Chaturvedi of Accommodation Times said, “The city has the finances, some of the best architects in the world, and the demand. The government should seriously rethink its policy on skyscrapers.”

However, there are first some serious hurdles to overcome. Being an old city, much of Mumbai’s infrastructure, such as water pipes and sewage lines, are over a century old.

Anuj Puri, CEO of Chesterton Meghraj, said, “Mumbai’s infrastructure as it stands today cannot take the burden of skyscrapers. Plus, we don’t have enough energy. Having said that, the existing infrastructure can be revamped to accommodate high-rises.”

http://web.mid-day.com/news/city/2005/may/110523.htm

100% investment in construction possible by foreign bodies FINALY.

PC boost for Mumbai realtors

Nandu R Kulkarni in Mumbai
May 29. — Union finance minister Mr P Chidambaram’s Budget announcement permitting 100 per cent foreign investment in the construction sector has increased land prices in central Mumbai where vacant textile mill premises are up for sale and deals worth more than Rs 10,000 crore are believed to be in the offing.
The Supreme Court has also given clearance to the development of land belonging to 16 mills under the National Textile Corporation. The NTC controlled by minister Mr Shankar Sinh Vaghela’s textile ministry is thrilled by the prospects of huge earnings from the defunct textile mills. The NTC owns about 90 to 100 acres of prime land. Some corporate houses and private owners have also decided to sell sprawling plots for development and construction since the prices in central Mumbai in the past three months have increased 30 per cent on an average.
One of the reasons for the sudden spurt in prices is that local builders think that they can resell these properties to foreigners at more attractive prices and earn significant profits. The central areas of Mumbai such as Lalbaug, Lower Parel and Elphinstone Road, once dominated by textile mill workers, have suddenly assumed an up-market look. Several corporates, newspapers and advertisement and PR agencies have shifted their offices to the heart of the city.
Bids for six textile mills’ land under NTC have already been opened. Stocks and financial entity India Bulls, with the backing of Farallon of USA, has already bought Jupiter Mill’s 11-acre land for Rs 276 crore, industry sources say. A part of it would be sold to builders and developers. Oberoi Builders have bought about 17 acres of Apollo Mills’ land for about Rs 104 crore in Lower Parel. Phoenix Mill land too is under negotiation. Most of the tallest city buildings have been planned in central Mumbai.
Glaxo SmithKline have also been named as prospective sellers of a part of their properties. The Wadias own about 60 acres near Dadar that may also be made available for development and construction. The government has also decided to spruce up these areas of the city by rehabilitating the residents of BDD and BIT chawls, which are known as the labour colonies of Mumbai.
The transformation is expected in the next three to four years. The Bombay Chamber of Commerce and Industry has prepared a plan to transform Mumbai into an international city. The plan is called Bombay First.
http://www.skyscrapercity.com/showth...=195591&page=5

Sorry if I post too much about Mumbai BUT I LOVE THIS CITY.

But India has challenges that law ahead, ie the corrupt Govt. :(
http://timesofindia.indiatimes.com/a...ow/1248594.cms

Leak takes sting out of CBI raids

TIMES NEWS NETWORK[ FRIDAY, SEPTEMBER 30, 2005 11:37:39 PM ]

Citibank NRI Offer

NEW DELHI: The CBI’s plans to conduct countrywide raids, covering 198 premises in 54 cities, were leaked, triggering suspicions about the role of insiders wanting to alert some of the 70 government officials who were on the list.

The top-secret plan for the raids, the latest in a series of exercises undertaken by the agency against allegedly corrupt public servants, found its way into the media before CBI sleuths visited their 'targets', in what is seen as a major embarrassment for the premier investigating agency.

CBI chief US Mishra acknowledged that the media had come to know of the raids. "It is a matter of serious concern and we will look into it and take action against the official concerned," he said.

He, however, suggested that leaks could have also taken place because the CBI, under the rules, was required to get government sanction before proceeding against officials of the rank of joint secretary and above, four of whom featured in Friday's raids. CBI has been campaigning for doing away with the provision.

The embarrassment was palpable at the media briefing. The CBI chief announced that raids had helped uncover property worth over Rs 14.28 crore and a rather unimpressive haul of Rs 88 lakh in cash.

Suspicions lingered that leaks about the raid might have alerted some targets into spiriting away possessions acquired through illegal wealth. Doubts stemmed from the not-so-huge quantity of cash recovered.

Originally Posted by Sameer

For one thing you could test for statistical break from the post 1991 time trend trend rate of growth by employing a simple Lucas like model.

ie

The natural logs of

lngdp= alpha + beta1 (time trend 1980-2002)+beta(2)lngdp(-1)

Then you could calculate the time trend based on statistical significance via OLS.

You could then rerun this same regression by adding another time trend from 2002 onwards (until 06 by using the IMF predicted growth rate)
ie
the above equation + beta3(time 03-06) while I fear that your results will probably have to wait an extra year to test for the break.

That would confirm if India has broken the 6.2% Neo hindu rate of growth.

See example
http://lnweb18.worldbank.org/sar/sa.nsf/Attachments/annexch8/$File/annexch8.pdf

Too much econometrics. We should stick to macro-economic fundamentals and economic structure and important issues in this regard.
Sameer, you are frightening everyone.

Originally Posted by Monk

Too much econometrics. We should stick to macro-economic fundamentals and economic structure and important issues in this regard.
Sameer, you are frightening everyone.

Well all those nice and simple macro economic equations rely on econometrics, this was how the relationship can be checked and maintained.


For example Klein has developed a 300 simultaneous equation system for the Indian economy, his growth rate forecast extended to 2005 (started 1998), he was right on the money minus 2003 when bad monsoons hit.

In any event I have my eye on testing for the relationshop between trade entropy and growth as an update to Marwah and Klein (1998) work extending some of the work i did not productivity recently.

I wish to have a better measure of the elasticity of capital for India.

What do you think is going to be the impact of agriculture on the 2nd quarter GDP growth rate. manufacturing is certainly slowing down, I think IIP of July was 6.7% and August 8.3%, so we are not going to see double-digit growth this quarter. So unless agriculture kicks in, growth rate for 2nd quarter can't be maintained above 8%. I am working on the assumption that services growth rate will be consistent.

Growth rate of agriculture should in theory pick up but there are two more months of monsoon possibilities left, manufacturing will have to slow down but again it will depend on consumption during Diwali time and December.

For every one percent increase in rain from mean, overall GDP growth will increase by 0.27%.

Eventually the Indian economy will grow at 7-7.3% for the year.

Let us wait for investment as % of GDP data to be released, then we can use last year's ICOR and forecast growth.

I stick to the official 7%. :0

As for the impact of oil prices if anyone is curious
The effect of oil prices is being partly offset by exports of processed petroleum products. For example, during 2003-04, crude oil imports were ~$20billion and refined exports were at $3.5billion. In 2004-05, the corresponding figures were $29billion and $6.5billion .

In the next 2-3 years, Indian oil refining capacity will at least double due to massive investments by Reliance (doubling of Jamnagar refinery capacity), Essar (Vadinar refinery) and state owned oil companies. These will translate to offsetting increasing fractions of the crude import bill.

It is a strategy similar to importing ore and exporting finished goods. While there will always be a progressively increasing domestic oil demand, judicious investments in refining capacity can ensure that the net import bill can be handled comfortably.