LyrArc Article Gist
S. Gurumurthy of the Hindu points out the dangers of economic growth without job creation in a country like India. He points out that demonetization- removal of high denomination currency notes- came at a critical time when the economic growth was not creating enough jobs. He points to the five year period till 2010 as having created 2.7 million jobs with 8.5% growth. Even though with lower growth of 5.4% in the period 1999-2004 the job growth was for 60 million jobs created. Had demonetization not happened he says, the economy could have seen the problems the U.S. faced in 2008 with a bubble developing in the real estate market. The fundamental shift of the economy to digitization of payments, increase in tax receipts brings more of the informal economy- with a size of 50% of the economy generating 128 million jobs ten times the formal sector - into the formal economy. A step that is key for India to see rapid growth in the decade ahead. The slackening of the economy for a year is part of  a needed long term plan, says Prof. Gurumurthy, visiting IIT faculty in Bombay, just as liberalization was in the 1990's.  Some errors were made in implementation and flow of credit to the informal economy, including by the RBI, yet the fundamental shift through demonetization served a good purpose. Gurumurthy says, sadly this is missing in the current politicized debate.  ...

LyrArc Article Gist
A live interview by BBC Hindi with Arvind Kejriwal, chief minister of Delhi. In the interview Kejriwal says there are 55 deaths from the demonentisation by removal of 500 and 1000 rupee notes in India. When questioned about this and proof, Kejriwal says BBC is biased. The effort by the the Modi government to  remove these rupee notes is an effort to get people in the informal economy,  the deals in real estate, and people in other parts of the economy which pay little or no taxes to bring the cash to banks and pay the taxes due. This is intended to increase government revenue for investments in infrastructure and education, healthcare. services. The large scale of the shift has caused difficulties for ordinary people, and the upper classes, and the government is working to work through these problems. In India the black money as it is called is estimated to run to about 1 trillion dollars. It is also the result of corruption and has deprived the economy of needed investments and modernization. ...

LyrArc Article Gist
Arvind Panagriya, Prof. of Economics at Columbia University, points out the key initiatives of the Modi government in its first four years which will show results in future years for development of the country.  He mentions the Swachh Bharat Mission and cites results that show rural households with toilets are now 84% up from 38%.  By 2019 the whole country will be defecation zone free on the 100th anniversary of the birth of Mahatma Gandhi. The Dhan Jan Yojana DJY accounts opened for rural households are up to 316 million. Aadhar cards for identification are up from 650 million to 1.2 billion. The Aadhar and DJY work together to enable direct transfer of benefits to poor households, eliminating the leaks in benefits transfer and ghost accounts of the period since independence in 1947. Not mentioned by Panagriya is the Health Insurance scheme for lower income households that enable families to survive a sudden medical expense that could put them in dire straits.  These efforts work in a way to change India from the ground up from its villages and rural areas as envisioned by Mahatma Gandhi in the struggle for independence. The land acquisition law amendments were put on hold till farmers concerns could be better accomodated, an area of concern for industrial development cited in an editorial in the Hindu newspaper. Fiscal consolidation and inflation targeting have resulted in an average inflation rate of 4.3% for the 4 years of the Modi government. Inflation was over 9% in the last 2 years of the previous Congress UPA government with GDP growth dropping to 5.9% for the last two years. Average GDP growth for four years for the Modi government is 7.3%, even after the changes to implement GST taxation for one national tax eliminating state barriers in interstate commerce and demonetization to fight corruption and black money. Rate of GDP growth should be higher after the gains from the initiatives and the new GST integration of the country are felt, with increase in investment and FDI, after infrastructure improvements and land acquisition arrangements are made. Transportation infrastructure modernization initiative pushes ahead with the first bullet train in the pilot project for Ahmedabad- Mumbai set to start in 2022. This is a $17 billion project financed for $13 billion by the Japanese government at 0.1% loan for 50 years, moratorium on repayments for 20 years, using E5 Shinkansen series technology. Implementation of this project on a sound financial basis should lead to transformation of the Indian rail network, raising the level of technology implementation across the entire Indian rail system. Such an achievement would rival the first introduction of railways into India in the nineteenth century under the British. A new bankruptcy law is intended to free up capital for investment by putting behind the large number of non performing loans in the Indian banking system. Changes made by the central bank RBI are designed to speed up this process so that loss making enterprises are absorbed, consolidated or shut down, a legacy from the earlier period.     ...

LyrArc Article Gist
The perception comes from seeing decisions made but not the process of decisions which is lengthy and even seen by participants as long, in which Mr. Modi act as a patient listener to all voices. Could'nt it be shorter is felt by some participants, yet Mr. Modi would have 2-3 meetings listening to all participants with humility before arriving at a decision. Tough decisions were made on vaccines to get to 1 billion vaccinations goal, on demonetisation and GST, and on digital India, housing schemes, bank accounts, and Jal Jeevan.  Mr. Shah points out that where earlier governments had brought bank accounts, electricity water, and cooking gas to some people, the approach of Mr. Modi was to get electricity, water, cooking gas to all homes for 1.4 billion people in India. He says Mr Modi is hard for even his colleagues to understand in terms of his passion and endless capacity for hard work for bringing essential services to every Indian, and the last Indian is a concept that not the BJP or any party had, it was entirely Mr. Modi's idea for New India. Mr. Modi he says is not the BJP or himself even, he is always thinking how could the lives of ordinary Indian be better in every way, and every rupee going to that last man in line in a nation of 1.4 billion. It can best be understood through Vivekananda's writings some 125 years ago. The passion for India and the Indian people of Vivekananda in his writings is a huge reservoir of energy for someone like Modi, that Modi has tapped into from his beginnings in Gujarat government and more so when he left Gujarat for Delhi. Vivekananda's foresight, energy, and passion for the Indian people is reflected in the efforts for New India. ...

LyrArc Article Gist
Economists estimate a loss of 0.5% to 1% in GDP from the move to cancel large denomination rupee notes by the Modi government to stem corruption. Forecasted growth was at 7.6%. The real estate sector where most deals are in cash and black money is most hit. At the same time more deposits are being made of old currency notes, increasing the money banks have to lend. The government says the rural sector is not affected as badly as critics suggest- with 6.3% increase in sowing of winter crops.

LyrArc Article Gist
About 86% of the total value of cash in circulation was affected by the withdrawal of 1000 and 500 rupee notes by the Modi government on Nov. 8, 2016. This is about 22 billion bills. The effect on the economy will take about a year to work its way through. The government has removed restrictions effect a March date for withdrawals from ATM machines previously limited to Rs 2500, as it says it has enough new bills printed in Rs 2000 denomination.

LyrArc Article Gist
India now leads developing countries with one billion digital payments a month. The stage is set now one billion digital payments a day. The digital payments have moved rapidly compared to the slow progress before 2011. The spread of internet, digital infrastructure, the Modi government digital projects including bank accounts for all citizens, demonetisation accelerating digital progress, GST, and the joint efforts of the government, the central bank, and the private sector have helped accomplish this shift to digital transactions. 

What is remarkable about this is also that India developed its own system without copying the U.S. or China digital payments, avoiding the defects of the other existing systems.

LyrArc Article Gist
BJP led by prime minister Narendra Modi wins a huge majority of 325 seats out of 405 in India's largest state Uttar Pradesh for the state assembly elections. The national opposition party Congress wins only 7 seats in what was once the main source of Congress support during the period of Jawaharlal Nehru and Indira Gandhi. This will enable the BJP to push forward with the modernization program for infrastructure and roads, and other development. Opposition in the upper house Rajya Sabha and lack of support from states will not be a major hurdle in development now that BJP has won in states such as Orissa, Maharashtra, Uttar Pradesh, and Uttarkhand in recent state elections after its win in the 2014 national parliamentary election. This also gives credibility to the government's other efforts such as demonetisation to fight corruption in real estate and other areas. India's GDP is a fraction of China's and it is smaller than that of countries such as Indonesia, because of the poor administration and lack of development in India's 2 largest states of Uttar Pradesh and Bihar in the northern Hindi speaking region. To double the GDP from its current level will require doubling the GDP of Uttar Pradesh and Bihar. Bihar's state government is run by a former BJP leader, who has also pushed for improving standards of living and economic growth.  ...

LyrArc Article Gist
India's economy has overcome the challenges posed by demonetization and the implementation of the GST tax that slowed growth to 5.7% for much of 2017. The growth rate increased to 7.2% in the last quarter of 2017. The GST tax change that created a single market is likely to increase growth. Growth of 8-10% matching China's growth rate in the last two decades is possible. Faster economic growth is needed to meet the need for more jobs, as 1 million new job entrants enter the job market each month. Indian Railways received 20 million applications for 100,000 new jobs showing the need for new jobs cannot be met at current growth rates. A major problem is the condition of the banking sector with bad loans affecting ability of banks to lend. A planned bailout of the banking sector and a new bankruptcy code are efforts to address this problem. Governance in the banking sector is also a problem that needs to be addressed. The price of oil is now up to $65 a barrel, increasing the cost to India which now faces a larger oil import cost.   ...

LyrArc Article Gist
A new Pew Research Center Survey shows prime minister Modi enjoying 88% popularity, very high ratings for a world leader. More unusual is that Modi's popularity was 87% in a Pew Survey in 2015, showing extraordinary resilience. This comes after moves to remove the large denomination rupee notes under what is called demonetization to take out some of the black money in India and increase tax revenues that were lost due to evasion. In South Asia tax evasion is rampant, much more than in countries like Italy of the eurozone. The move was difficult as it required being sudden, and a shift to use of debit cards and ATM's which required additional effort, slowing the economy. The other moves such as on GST tax were designed to facilitate doing business in India with one tax and free movement of goods replacing different state by state taxes. Business has not responded quickly to support Modi, and the Indian economy being prepared for the long term growth Modi hopes to generate is slowing in the short term. GDP growth has dropped to 6%. A bullet train planned in western India with help from Japanese financing and technology is being criticized unfairly because of the collapse of an old bridge near a railway station in Mumbai. Bruce Stokes, Director of Global Economic Attitudes at Pew Research, says the survey was done after demonetization but before the GST tax overhaul. This is not likely to change Modi's high ratings. The GST overhaul has been on the agenda for many years for all political parties in India. The views of Modi are not necessarily the same as for his BJP party which are lower for the party, the party gaining more from Modi's efforts and leadership, including in his home state of Gujarat. ...

LyrArc Article Gist
This report in DW.com looks at the problems behind the suspension of all operations at India's Jet Airways.  Jet Airways faced little competition in its early years in the early 1990's and was a success as a full service airline competing with state controlled Air India and Indian Airlines. By 2005 the emergence of low cost carriers operating on thin margins and using a cost efficient model of operation hit Jet Airways hard. It still operated as a full service airline failing to change its model to tackle a cost conscious growing Indian market. The $500 million used to acquire a weak budget airline Air Sahara was a costly move leading to a writeoff of the entire investment and a lost opportunity to adapt Jet Airways to the new cost efficient models roiling the airline industry in Asia.  It is difficult to operate in a environment where a depreciating rupee could add an additional burden from volatile oil prices for cost of fuel to operate. Airlines that operated on razor thin margins such as Indigo and SpiceJet used cost and efficiency parameters as key to flying passengers. Jet Airways failed to make this the priority, continuing to operate as a full service airline. The favorable oil price environment for a brief period in 2015 was not used by the airline to streamline costs.  Add to this the effect of Goods and Services Tax which increased costs by 18%, the effects of demonetisation in reducing passenger ability to buy with cash, and the 5% tax on jet fuel in 2018, creating a financial crisis at Jet Airways.  In the end banks decided not to extend further financing for the airline to operate and looked for a large buyer. ...

LyrArc Article Gist
India's economy is at 2.597 trillion dollars at the end of 2017according to World Bank figures, surpassing 2.582 trillion for France. India's economy has doubled in a decade and is expected to pass Germany and Japan in GDP by 2032, to become the third largest after the U.S. and China.

As China's growth has slowed India's is growing. It recovered by July 2017 from one time events designed to actually spur growth such as the effort to implement a nationwide tax for GST. Demonetization also contributes to growth by accelerating the shift away from cash to recorded and taxable transactions. The tax revenue is increasing as less of the economy is in the black market sector. Higher tax revenues enable larger investments in health, education and infrastructure.

New bankruptcy law and speedy resolution of bad debt of banks is also laying the ground for future growth with new investment.

LyrArc Article Gist
India's Ministry of Finance predicts GDP growth of between 7 and 7.5% for 2018-2019, after faltering GDP growth in 2017-2018 following action on demonetization and introduction of a national Goods and Service Tax. The IMF predicts growth of 7.4% for India in 2018 compared to 6.8% in China in 2018, with growth of 7.8% predicted for India in 2019.  Chief Economic Advisor Arvind Subramanian says there are "robust and broad based signs of revival," though risks remain in rising oil prices and inflation. The level is below what it could be, yet robust considering the policy actions taken by the government for the long term such as the nationwide GST implementation, which was taken up by previous administrations of both parties in government but never implemented till 2017. In addition the government faces the tasks of recapitalization of banks, the issues of job creation as manufacturing in India in the global context is only beginning to take shape, and agrarian distress.  The new Budget takes up the issues facing rural areas of the country by compensating farmers to the extent of 150% of agricultural cost and introducing the largest health care security scheme in the world for poor families. This comes a year before new national elections. The Modi administrations's focus appears to be for taking steps that will generate growth over the long term and learning from errors, yet being bold enough to take the necessary action based on experience.   ...

LyrArc Article Gist
The Indian economy grows at 6.3% in the third quarter of 2017. The demonetization, and new GST tax plan, had slowed the economic growth to 5.7% in the second quarter of 2017. Higher economic growth is important to generate the jobs needed as 10 million young people join the workforce each year. The Modi government responded to the slowdown by accelerating spending on infrastructure- a $100 billion spending plan on roads and highways, and $32 billion cash infusion for state run banks with the effort to clean up the bad loans in the banking system. 

Elections in prime minister Modi's home state of Gujarat are coming up and this will give some indication of voter sentiment in 2017. The Pew Research Survey in 2017 shows Modi's personal popularity is high and continues to bolster the government's prospects.

LyrArc Article Gist
The Vice Chairman of the NITI Aayog, which replaced the Planning Commission, says his work in the government led to significant progress with the Indian economy reaching nearly 8% growth.

LyrArc Article Gist
This article in the Economist says the bad loans in the financial system threaten to derail India's rapid growth. It points out that about 17 percent of all loans are estimated to be non-performing. Government plans to set up a bad bank and have bad loans transferred at steep discounted rate to the bad bank are still at an early stage. India weathered the 2008 financial crisis with a financial system in better shape. Since then a surge in lending has led to an increase in the bad loans. Today both banks and corporate firms are facing this problem. The political system and dysfunctional governance with frequent changes for management at state controlled banks are part of the problem.