Economy and Growth, and CAA...

Corporate tax cut and even lower tax for new firms could bolster profits and investment and also increase real incomes by reducing prices... It has the potential to unlock alot of demand and spending in the economy...

The Gov may bring the tenders for private investment where there is a need to increase the productivity or production or supply and incentivise the firms... Though, it has reduced the Corporate tax to 17% for new firms which could make the existing firms a little uncompetitive and discourage investment... which may need re-alignment...

Banks and NBFCs are in problem for wrong policies in the past, but at the same time, both, the Gov and RBI have ensured enough liquidity to the both... Banks must pass on rate cuts to increase business... For banks and NBFCs the RBI is more responsible than the Gov...

As far as fiscal deficit is concerned the RBI has a foreign exchange reserve of $ 450 billion ( approx. 40 lkh crore inr) which might be used for investment and reduce deficit... More supply of dollar would also reduce import cost and trade deficit... oil would be cheap, too....

According to the latest chain based method index on base year 2017-18 last year’s growth rate was 7.9% ( or 107.90) and this year's growth rate is 13.36% (or 113.36)...

Banks borrow short and lend long which risks solvency if people start pulling money back, due to higher inflation and consumption... when they should borrow long and lend short... Therefore, the question is which rate should be higher or which should be lower.... or borrowing cost in the longrun would be high or lending rate in the shortrun...

Generally, longrun rate is higher than the shortrun, but according to the above condition short run rate should be higher than the longrun rate because banks would borrow long at lower cost and lend short at higher rates... But, the evidence from the US shows that buying longrun bonds would also lower short run rates...

The RBI is buying longterm bonds which would reduce longterm rates and selling short bonds which could increase shortterm rates... which could affect credit demand... the gap between shorterm rates and longterm rates could widen... and increase banks margins, but not good for credit growth, in the short term borrowing cost could go up...

The question is why the RBI is selling shorterm bonds which could increase shorterm interest rates?

Though, if banks want they could pass on the benefit to the borrower... Same with real estate companies........

Increasing fiscal deficit target means, the Gov would borrow more or more public debt which in a low inflation and low interest rate scene or through counter-cyclical policy could help increase employment/demand and spending and growth only if it increase productivity and help stabilise prices and expectation or inflation and growth...

Inflation could reduce the value of capital if public debt increases only demand without increasing productivity or supply... it would also crowd out private investment, through higher borrowing cost... Inflation and depreciation could increase foreign capital outflows...

The Gov is giving reservation to economically backward earning less than Rs 8lkh which would cover 80% of the population, including the existing reserved category... The Gov must walk the talk... by providing 100% tax exemption upto 8lkh... It is also expansionary... More spending could help higher GST collection and stable rates...

Infrastructure companies and banks, plus NBFCs and real estate companies are expecting demand stimuli to revive the economy... The Gov and RBI have incentivised these sectors in the form of lower taxes and interest rate, but they are reluctant to pass on benefits to consumers...

When commercial banks condition would improve it would also secure loans to NBFCs... and it would increase demand in the real estate... The government has committed Rs 100 lkh crore investments in infra... Former CEA's Economic Survey showed INDIA has a bright future...

Low prices increase the real balances with the public and could increase demand, if lower interest rate and taxes are passed to the consumers, this is very important to increase demand... More directly it is like sitting on your own competitiveness... Especially banks they must pass on rate cuts to boost demand and profits...

Irrespective of other countries currencies INDIA's economy is several more trillion economy in Rupee terms... Multiply 5 lkh crore dollars with 70 rupees... approx... 350 trillion or lkh crore rupees economy...  Currently it is 190 trillion rupees economy… but, there has been quite substantial inequality in the incomes… 90% own 10% of the wealth and 10% has 90% of wealth… 

Data show that Dec q is always better than Sep q followed by even better March and June q's... INDIA is in a cyclical slowdown that we observe every year...

It is crucial to actively manage supply according to demand or expected demand for skills...

Market is running on expectations, the longterm story is intact and the policymakers are committed to growth....

Without passport none should be allowed to enter INDIA because of security concerns... Not all are terrorist, but we should not risk others image and security...

The Act (CAA) is not excluding anybody form getting INDIAn citizenship; it is just against illegal immigration... It sought to define who is a citizen of INDIA amid illegal trespassing... who can vote...

There is no rationale behind accepting refugees or immigrants from a majority nation, if they are refusing them why should INDIA accept them if they are a threat to stability... If their nations (Afghanistan, Pakistan and Bangladesh)... are rejecting them... there must be some issue...

Accepting Hindus, Jains, Sikhs, Buddhists have majority in INDIA and they are facing bitter circumstances in the above countries…

What is the guaranty that they are not terrorist who is trying to use another channel? Who would take that responsibility? They could easily go to a majority nation where there rights would be preserved after all it is a issue of brotherhood, backed by vote banks pol....

INDIA is deeply affected by terrorism... and cross border politics... Not all are terrorist, but some of them are... Anybody can enter INDIA if they have legal documents... there is no discrimination...

Income, Demand and Growth (Rate)...

There is no Gov that is deliberately wrong 'coz it reduces the chances of re-election... Rajan may provide solutions to increase growth, he had been an insider in the Gov... It was Rajan's own advice to increase investment in infra, const and real estate where NPAs are highest... back in 2008...


Lower income tax would boost indirect tax collection, if people increase spending.. Real balances with the public would also increase due to lower GST and corporate taxes which may further increase spending and indirect tax revenue...


Higher disposable income could increase spending and indirect tax collection and reveue... Moreover, the Gov may also try boost real incomes by including the oil in the GST list of highest tax slab... Oil is scarce therefore it is rational to put it into highest GST tax rate to control demand.... Currently tax on oil is 100% of the price...


Daily consumption has not gone down, including conveyance, because it cannot that is why cpi has gone up, but consumption of manufactured products has gone down that is why core-cpi is mute... If the price of daily consumption goes down it could increase real cash with the public and demand for manufactured goods...


In a country where there is a large number of poor people, not everybody is fortunate and can afford a living without employment and earning... 6.1% unemployment rate is not that high in a slowdown, just above the natural rate of unemployment... Unorganised sectors create more employment in INDIA than the organised sectors... Nonetheless, there is a wage and demand problem...


Growth in September, qoq 2019 has gone down compared to the June quarter which was higher than the March qoq, preceeded by a growing December and September quarters 2018 and has increased over the same quarter last year, yoy, we have produced more on yoy basis...


Gross fixed Capital Formation is continuously goingup with temporary short and small blips...


If  Gov, banks and industry pass on the lower oil prices, rate cuts and corporate tax cuts and GST, respectively, to consumers it would increase real wages and incomes and demand and spending... but, they are just holding on price and demand and growth transmission and investment in the expectation that growth would revive then they would initiate... they could themselves revive investment and growth... they may miss growth when inflation and cost are low... As soon as they pass on benefits of excess capacity and higher productivity to the consumers it could increase demand and growth...


INDIA is growing 4% qoq and 16% annually... According to the latest chain based method if last year’s growth rate was 8% and this year’s growth is 5%.... then the growth rate would be -3 upon 8 multiplied by 100 equals -37.5%... compared to same q last year…


As far as -37% less growth than the last year same q is concerned it shows that growth rate is less than the previous yearonyear 100% when the growth rate was 8%, but the growth rate has increased 62.5% of the yoy 8% growth rate... Therefore, this year's growth on September q last year would be 5%... which has been added yoy and qoq... though lower qoq... 5% growth is the just one quarter's growth and when we add we arrive around 20% nominal growth and 16% real annual growth rate...


INDIA is growing 4% qoq and 16% annually or yoy... According to the latest chain based method if last years growth in GDP at constant prices was 34139 inr billion and this years growth is 35851 inr billion.... then the growth rate would be again 4-5% qoq which means every quarter and not compared to previous quarter...


Analysts are expecting a 5.5% growth for the next year… There are 4 quarters in 1 year, if the average growth is 5.5% then the 4 quarter growth might be 4%,5%,6%,7% or 7%,5%,4%,6% or 5%,4%,7%,6%.........


Growth has just gone down in the past two quarters... It is a short period of slowdown and nothing like recession... Inflation, especially core-CPI, but also CPI to an extant ,and growth are in a seasonal/cyclical slowdown... Floods and drought upset prices every year... which also affect rural demand when 70% people live in villages and are unproductively engaged in agriculture... The FM must comeup with a package for the rural sector as 60% of the population is seasonally occupied by the agriculture...


Stock screener could be a game changer the way investors view stock market investment... It is lesss time taking. now... and more predictable than before... stock prices…


Investors must choose stocks with P/B ratio at 2-3 with consistent growth and returns... Moreover, SIP or STP style is good, but for high returns investors must buy more at 10% or more correction, they must be mentally prepared... As share price go down they need less and less money to buy more stocks... which could maximise returns...


Bonds price-in yields if the market expects rate cut... The recent surge in bond yields are close to the amount of rate cut expectations which show correction in expectations...

Growth (Methodology) and the Monetary Policy...

Growth has increased on yoy base year when the economy grew 8%, this year’s growth increased 4.5%, over the last year same quarter when the economy was away slowdown so how could there be slowdown, now...


The economy has slowed compared to the last two quarter, but the economy has increased over the last year, so growth would add, the economy has increased last year’s 8% and 5% this year’s compared to last year if we use same base year to calculate real GDP growth rate...


September quarter is always slow compared to other three quarters... December shows improvement, followed by March and June... June quarter is always the best...


INDIA''s economy has done better than the stock market... Economy's has grown (real terms) 16% and the stock markets 13% per-annum in the last 8 years since 2011-12 base...


INDIA's food inflation is responsible for the growth cycles due to flood and also lack of irrigation facilities... when inflation increases it increases inflation and interest rate expectations which delays investment decisions and slows the cycle...


Any price rise could be transmitted to the general price level through interest rate, wages, and exchange, depreciation in the nominal exchange rate due to higher inflation and expectations could make imports costly...


The policy makers must avoid uncertainty or unforseen demand and supply shocks or grey rhino and black swan events from the expected growth path of the economy, and seriously try or commitment to achieve the projected growth rate to increase investment/employment and demand/supply in case of adverse shocks...


Similarly, the RBI may reduce uncertainty around interest rates, by remaining accommodative and tolerate higher inflation upto 6% to increase growth.... Achieving the inflation target is also an important part of the policy b’coz it is an indicator of demand... Higher inflation or price expectations at the target may help increase demand and spending and growth...


If INDIA could remove risk associated with food and oil inflation it could lower inflation and increase competitiveness, it would increase real disposable income and it would also increase real interest rate saving and investment, wages are consumed and profits are saved and invested... when everybody would spend it increases demand and supply... when both would increase prices could remain stable...


Lower taxes are also a form of fiscal spending... Rs 100 trillion commitment to spend is also ambitious...


Only INDIA's growth rate has gone down, but growth is still higher than the previous year same quarter...


INDIA has grown more than 200% in the last 7 yrs in GDP at constant price terms after 2012... In 5yrs economy will more than double to $5 trillion... Don't believe anybody, believe the data...


Only growth rate has gone down, growth has increased yoy GDP has grown, GDP at constant prices has increased 16% on the 2012 base year in real terms... The growth is down in cyclical or seasonal terms due to flood and lack of irrigation which INDIA faces every year...


Chidambaram Sir must tell the public that why we need cash when everybody has a bank account and mobile/internet... It increases the cost of banks... Moreover, all the money in banks would increase money supply and help increase rate cut transmission...


RBI Guv commentary showed that there is less space for rate cuts going forward keeping inflation in mind that has already cut real interest ahead the RBI meet by more the rate cut expected by the RBI...


The commentary was mature and expected to improve growth going forward (green shoots and revival in agriculture due to higher food prices too)... The RBI tried to stabilise expectations and promised to further strengthen growth through an accommodative stance, the RBI monetary policy would help the markets stabilise and gain ground before marching fore...


RBI must not discriminate between PSBs, CBs, NBFCs and Cooperative banks because there is no restriction on inter-banks inter-NBFC liquidity afterall it's all people money... though shadow banks must be properly regulated, the lesson we have learnt from US and China...


To much frequent changes in the base year could make the historical growth comparison impossible and redundant.. It would be difficult to compare growth pre and post the base year... To capture price changes we already use deflator to nominal GDP to arrive at the real GDP growth and growth rate... Changing base year in a sense is debasing of the growth rate...

Growth Expectations and, then, the Growth Debate...

Expectations are self-fulfilling, if business think that they would hold till the economy bottoms out that would further deepen the slowdown, similarly if they expect that the economy would bounce back (higher GDP and income and demand) they would invest more which means further income and demand in the economy which means more investment...


If the business after fiscal monetary and monetary policy increase employment and demand that is also virtuous... Investment has been put on hold for a very longtime now... Corporate earnings have never bottomed out completely from the last slowdown during UPA... But, the corporate tax cut has artificially tried to increase corporate earnings to push fore the investment and demand cycle...


Lower growth rate expectations further lower growth rate "coz business invest less, that is the basic observation of Harrod-Domar... China has used higher projected growth rate to increase investment and growth of the economy... The RBI and Gov may avoid lower growth expectations while providing stimuli which are provided to increase growth expectations...


Lower growth often coincides with higher unemployment and lower prices which lower cost and makes the economy competitive and increase demand and spending and exports which is an incentive in itself... Nonetheless, expecting too much and delay in spending could worsen growth rate and expectations...


Lower growth and prices are the right time to increase consumption and investment to lower average cost of production and increase demand and supply or quantity and growth and expectations...


Give hope when others are hopeless... The economy has just caught cold, but the doctor has declared the patient dead... Very bad diagnosis... without providing any cure...


Growth has not gone down, the value of deflator has goneup... The mathematics is consistent 8% nominal GDP and 4% inflation, and a real GDP of 4%...


Real market interest rates are still much higher, the RBI may cut real repo rate to zero to lower real market rates which looks ideal because it is expected to maintain a neutral interest rate or r* to neither be accommodative nor restrictive, neither inflationary nor disinflationary at full employment... Lower borrowing cost could increase demand/supply and growth as long as there is unemployment in the economy... after which inflation might increase...


The data analysts are quoting is quite different from the data available on the web...


INDIA's GDP percapita income and GDP at constant prices have been continuously increasing which shows that there is no severe demand slowdown in the economy, but a blip... Constant prices are a way of measuring the real change in output.


The pattern we see every year is that June quarter is always good followed by a slowdown in September quarter but a better December quarter and then even a better March quarter more…



For instance money GDP at constant prices has decreased QoQ and but, increased yoy by 5%... INDIA's GDP from manufacturing has increased QoQ and slightly lower YoY...


INDIA is in the mid of a yearly cyclical slowdown which shows improvement in money GDP at the constant prices which has increased 1% on QoQ and is considerably higher than money GDP at constant prices YoY...


INDIA is in a yearly cyclical slowdown, in the agriculture and manufacturing too... GFCF has continuously increased under Modi government... It is Gov own Ministry of Statistics and Programme Implementation (MOSPI) data... December data show that GDP is expected to increase with higher margin...


Analyst lack understanding of the real GDP numbers... GDP at constant prices was 34139.97 inr billion in September quarter 2018 which increased to 35851.75 inr billion September quarter 2019, which increase 5% compared to last year... Therefore, if growth was 8% same quarter last year, this year’s growth rate should be higher (real gdp growth yoy... if we use the same base year


Economists use mathematics to verify their ideas... Because it never lies... 34139.97/100 equals 341.39 equals 1% and money GDP at constant prices increased 35851.75 - (from) 34139.97 equals 1711.78 then 8% would be 2731.21then 1711.78/341.39 ie 5%8+5=13% maths may not be right, but the economy has increased 1711.78 that is 5% higher than same quarter last year which would only add to 8% because growth has increase yoy...** figures in inr billion...


The point is that money GDP at constant prices has gone up compared to GDP at constant prices same quarter yoy... which means growth has increased compared to same quarter last year... when the economy grew, say 8% at a healthy pace... we are producing more than the last year... This year’s growth would higher than 8% if we use the same base year as for calculating growth rate previous year same quarter because we have produced more than last year ...


INDIA economy has increased more than double in the last 8 years... The statisticians are changing base year every year to calculate real GDP growth rate, but if we use 2011-12 as the base year for calculating real GDP growth rate the INDIA economy has increased considerably...


INDIA's real GDP growth rate for September 2019 if we use 2011-12 as the base year has been 35851.75 -13500 (app.)/13500*100 equals 165.57% in the last 8 yrs, with an annual growth rate, 165.57/8 equals 20% per year... using deflator of 4% the real growth rate would be 16%....

                                           INDIA's GDP at Constant Prices


Lack of skills would depress wages of the skilled in sectors like the skilled engineering and medical, unskilled like agriculture, construction... Though, the Govt has restricted supply of CAs, CSs... Supply of the right skills could help maintain wages, incomes and demand and could attract investment...