RisingShiningSuperpower
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Western media continues to attack India by casting aspersions on her integrity. It's time to write to Reuters and Wall Street Journal to stop this blatant racism!
India will become a superpower by 2020 no matter what these doubters and haters say. Modi-ji will make it happen!
India’s New Math Hardly Solves Old Problems: Heard on the Street - WSJ
India’s New Math Hardly Solves Old Problems
By
Abheek Bhattacharya
Too bad fixing India’s statistics ministry is nowhere on Prime Minister Narendra Modi ’s list of priorities.
India’s official statisticians projected Monday that the economy would expand 7.4% in real terms in the year ending March, equaling China’s. Much faster than previous estimates of below 6%, the forecast is a result of India’s recent revision to the way it calculates gross domestic product.
Those revisions raised eyebrows when first unveiled on Jan. 30. They showed growth accelerating during the year ending March 2014 when other indicators suggested a stark deceleration.
Monday’s estimates for the current fiscal year are also hard to believe, partly because of the specifics. Government spending apparently grew 32% on year in real terms in the December quarter, driving overall growth. Yet the government’s own auditor says the central government spent just 5.1% more last quarter in nominal terms, according to J.P. Morgan.
No wonder even India’s top policy makers are puzzled. Central bank Governor Raghuram Rajan last week said it would be “premature to take a strong view” on what the new data imply.
Still, investors can afford to take a few strong views. First, New Delhi’s new data at least confirm the economy is accelerating—to 7.4% from 6.9% last fiscal year—something other indicators such as corporate investments also bear out. And though the headline growth rates have changed, the magnitude of the acceleration actually hasn’t changed much from what most analysts earlier forecast.
Next, the size of the underlying economy mostly remains the same, keeping key ratios such as the budget deficit as a proportion of nominal GDP constant. This means Mr. Modi’s government, which is aiming for a budget deficit of 3.6% of GDP next fiscal year, doesn’t have much wiggle room to boost spending when it presents a new budget on Feb. 28.
And for all the complaints now, keep in mind that Indian policy makers have always groaned about the quality of data. The earlier GDP data set was hardly perfect, since it counted producer costs instead of the prices consumers pay for goods. That it typically arrives with a two-month lag, compared with weeks in other economies, eroded its value further. Other emerging economies also suffer such woes. Nigeria last year revised its 2013 nominal GDP by 89%.
That’s why key policy bodies in India such as the central bank have historically consulted multiple indicators of economic activity. Perhaps the most important lesson for investors, too, in such markets is to resist the temptation of pinning their hopes on one all-encompassing number.
Write to Abheek Bhattacharya at abheek.bhattacharya@wsj.com
Trick or treat? India's strong GDP figures mask economic reality| Reuters
Trick or treat? India's strong GDP figures mask economic reality
(Reuters) - For business, the government and the Reserve Bank of India, data revisions that have transformed India’s $2.1 trillion economy into one of the world's fastest growing are too good to be true.
Now, the search is on for reliable indicators of underlying activity, vital for Finance Minister Arun Jaitley as he draws up his annual budget and for RBI Governor Raghuram Rajan as he weighs whether to cut interest rates again.
"Let's not get carried away – the ground reality is very different," one senior finance ministry official told Reuters after figures on Monday showed that India's economy outgrew China's in the three months to December.
Based on a new calculation method, the statistics department said the Indian economy grew 7.5 percent year-on-year in the last quarter and is on track to expand 7.4 percent in the year through March 31.
It was quite a turnaround for Asia's third-largest economy, which based on the old calculations was struggling to recover from the longest spell of sub-par growth in a generation.
Yet far from vindicating Prime Minister Narendra Modi's stewardship of the economy, the revised growth numbers are at odds with evidence on the ground.
Stalled projects and stretched capacity in the power, infrastructure and housing sectors are having knock-on effects down the supply chain to small- and medium-sized enterprises (SMEs), said Anil Bhardwaj, secretary general of the Federation of Indian Micro and Small & Medium Enterprises.
"This is a bit perplexing. The feedback we are getting on the ground is not as positive. SMEs are not getting the orders," Bhardwaj told Reuters.
"There is an improvement in business sentiment, in the environment, but unfortunately there is no movement on the ground."
Larsen & Toubro (LART.NS), an industrial group regarded as a bellwether for the wider economy, lowered its order book estimates on Monday and said a recovery in its domestic business was at least a year away.
"India Inc, while it continues to be aspiring, is still on the wait and watch mode," Chief Financial Officer R. Shankar Raman told reporters.
WEAK REVENUES, WEAK DEMAND
The 2015/16 budget that Jaitley will unveil on Feb. 28 will be based on an expectation that the economy would grow at the roaring pace of 8 percent or more, one source familiar with the matter told Reuters. Yet revenues will lag.
"Everyone is happy that India's GDP growth has picked up, but we are worried over slower growth in tax collections," the source said.
Indirect tax receipts, which include customs and factory gate duties as well as levies on services, have risen by just 6.7 percent so far in this fiscal year against a budget estimate of 26 percent for the full year.
A weak tax take also points to fragile consumer demand. Although a plunge in global oil prices has cooled inflation, that has yet to encourage Indian consumers to buy TVs, cars or appliances.
Households are still not confident of any quick turnaround in their fortunes, according to a monthly survey by ZyFin Research. Weak demand has hobbled New Delhi's efforts to revive sluggish auto sales with tax breaks, leading car makers to scale back sales forecasts.
Govind Shrikhande, managing director at Indian retailer Shoppers Stop, is puzzled by the latest GDP estimates.
"Is it a trick or a treat?" he asked. "I haven't understood how they are calculating it, but we are not seeing it reflected in business as yet."
Falling merchandise exports and sluggish non-oil, non-gold imports suggest demand remains weak in domestic and overseas markets. Exports fell 2.3 percent month-on-month in December, while imports of goods other than oil and gold fell 7.1 percent.
Statisticians defend the jump in their growth estimates, attributing it to better measurements of improved business efficiency that has boosted profits even as sales stagnate.
The statistical fog, meanwhile, makes it unclear how much room Rajan will have to stimulate investment and consumer demand without fuelling inflation after cutting interest rates last month.
Financial markets expect Rajan to make three more quarter-point cuts by December in the RBI's main policy rate, now at 7.75 percent.
"The faster pace of growth puts Mr Rajan in an awkward position," UBS economists Edward Teather and Alice Fulwood said in a note, adding that even if the RBI revises up its own GDP estimates there is still room for policy rates to fall.
(Additional reporting by Manoj Kumar in New Delhi and Nivedita Bhattarcharjee in Mumbai; Writing by Rajesh Kumar Singh; Editing by Douglas Busvine and Mike Collett-White)
India will become a superpower by 2020 no matter what these doubters and haters say. Modi-ji will make it happen!
India’s New Math Hardly Solves Old Problems: Heard on the Street - WSJ
India’s New Math Hardly Solves Old Problems
By
Abheek Bhattacharya
Too bad fixing India’s statistics ministry is nowhere on Prime Minister Narendra Modi ’s list of priorities.
India’s official statisticians projected Monday that the economy would expand 7.4% in real terms in the year ending March, equaling China’s. Much faster than previous estimates of below 6%, the forecast is a result of India’s recent revision to the way it calculates gross domestic product.
Those revisions raised eyebrows when first unveiled on Jan. 30. They showed growth accelerating during the year ending March 2014 when other indicators suggested a stark deceleration.
Monday’s estimates for the current fiscal year are also hard to believe, partly because of the specifics. Government spending apparently grew 32% on year in real terms in the December quarter, driving overall growth. Yet the government’s own auditor says the central government spent just 5.1% more last quarter in nominal terms, according to J.P. Morgan.
No wonder even India’s top policy makers are puzzled. Central bank Governor Raghuram Rajan last week said it would be “premature to take a strong view” on what the new data imply.
Still, investors can afford to take a few strong views. First, New Delhi’s new data at least confirm the economy is accelerating—to 7.4% from 6.9% last fiscal year—something other indicators such as corporate investments also bear out. And though the headline growth rates have changed, the magnitude of the acceleration actually hasn’t changed much from what most analysts earlier forecast.
Next, the size of the underlying economy mostly remains the same, keeping key ratios such as the budget deficit as a proportion of nominal GDP constant. This means Mr. Modi’s government, which is aiming for a budget deficit of 3.6% of GDP next fiscal year, doesn’t have much wiggle room to boost spending when it presents a new budget on Feb. 28.
And for all the complaints now, keep in mind that Indian policy makers have always groaned about the quality of data. The earlier GDP data set was hardly perfect, since it counted producer costs instead of the prices consumers pay for goods. That it typically arrives with a two-month lag, compared with weeks in other economies, eroded its value further. Other emerging economies also suffer such woes. Nigeria last year revised its 2013 nominal GDP by 89%.
That’s why key policy bodies in India such as the central bank have historically consulted multiple indicators of economic activity. Perhaps the most important lesson for investors, too, in such markets is to resist the temptation of pinning their hopes on one all-encompassing number.
Write to Abheek Bhattacharya at abheek.bhattacharya@wsj.com
Trick or treat? India's strong GDP figures mask economic reality| Reuters
Trick or treat? India's strong GDP figures mask economic reality
(Reuters) - For business, the government and the Reserve Bank of India, data revisions that have transformed India’s $2.1 trillion economy into one of the world's fastest growing are too good to be true.
Now, the search is on for reliable indicators of underlying activity, vital for Finance Minister Arun Jaitley as he draws up his annual budget and for RBI Governor Raghuram Rajan as he weighs whether to cut interest rates again.
"Let's not get carried away – the ground reality is very different," one senior finance ministry official told Reuters after figures on Monday showed that India's economy outgrew China's in the three months to December.
Based on a new calculation method, the statistics department said the Indian economy grew 7.5 percent year-on-year in the last quarter and is on track to expand 7.4 percent in the year through March 31.
It was quite a turnaround for Asia's third-largest economy, which based on the old calculations was struggling to recover from the longest spell of sub-par growth in a generation.
Yet far from vindicating Prime Minister Narendra Modi's stewardship of the economy, the revised growth numbers are at odds with evidence on the ground.
Stalled projects and stretched capacity in the power, infrastructure and housing sectors are having knock-on effects down the supply chain to small- and medium-sized enterprises (SMEs), said Anil Bhardwaj, secretary general of the Federation of Indian Micro and Small & Medium Enterprises.
"This is a bit perplexing. The feedback we are getting on the ground is not as positive. SMEs are not getting the orders," Bhardwaj told Reuters.
"There is an improvement in business sentiment, in the environment, but unfortunately there is no movement on the ground."
Larsen & Toubro (LART.NS), an industrial group regarded as a bellwether for the wider economy, lowered its order book estimates on Monday and said a recovery in its domestic business was at least a year away.
"India Inc, while it continues to be aspiring, is still on the wait and watch mode," Chief Financial Officer R. Shankar Raman told reporters.
WEAK REVENUES, WEAK DEMAND
The 2015/16 budget that Jaitley will unveil on Feb. 28 will be based on an expectation that the economy would grow at the roaring pace of 8 percent or more, one source familiar with the matter told Reuters. Yet revenues will lag.
"Everyone is happy that India's GDP growth has picked up, but we are worried over slower growth in tax collections," the source said.
Indirect tax receipts, which include customs and factory gate duties as well as levies on services, have risen by just 6.7 percent so far in this fiscal year against a budget estimate of 26 percent for the full year.
A weak tax take also points to fragile consumer demand. Although a plunge in global oil prices has cooled inflation, that has yet to encourage Indian consumers to buy TVs, cars or appliances.
Households are still not confident of any quick turnaround in their fortunes, according to a monthly survey by ZyFin Research. Weak demand has hobbled New Delhi's efforts to revive sluggish auto sales with tax breaks, leading car makers to scale back sales forecasts.
Govind Shrikhande, managing director at Indian retailer Shoppers Stop, is puzzled by the latest GDP estimates.
"Is it a trick or a treat?" he asked. "I haven't understood how they are calculating it, but we are not seeing it reflected in business as yet."
Falling merchandise exports and sluggish non-oil, non-gold imports suggest demand remains weak in domestic and overseas markets. Exports fell 2.3 percent month-on-month in December, while imports of goods other than oil and gold fell 7.1 percent.
Statisticians defend the jump in their growth estimates, attributing it to better measurements of improved business efficiency that has boosted profits even as sales stagnate.
The statistical fog, meanwhile, makes it unclear how much room Rajan will have to stimulate investment and consumer demand without fuelling inflation after cutting interest rates last month.
Financial markets expect Rajan to make three more quarter-point cuts by December in the RBI's main policy rate, now at 7.75 percent.
"The faster pace of growth puts Mr Rajan in an awkward position," UBS economists Edward Teather and Alice Fulwood said in a note, adding that even if the RBI revises up its own GDP estimates there is still room for policy rates to fall.
(Additional reporting by Manoj Kumar in New Delhi and Nivedita Bhattarcharjee in Mumbai; Writing by Rajesh Kumar Singh; Editing by Douglas Busvine and Mike Collett-White)
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