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Modi seeks reforms to Indias stutteri...

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I_say
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Posted on Wednesday, August 14, 2019 - 04:22 pm:       

GST implementation couldn't have been more ridiculous
 

I_say
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Posted on Wednesday, August 14, 2019 - 04:20 pm:       

I support Modi on his defense/security tactics so far.

Kaanee economy topic lo maatram modi ante chu chu. Demonetization and GST type lo inko surgical strike cheyakunda unte chaalu, India lo business la meeda
 

Rajusk
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Posted on Wednesday, August 14, 2019 - 02:58 pm:       


Teluguhero:



Teluguhero:




Now that there will be a less of a drain going into the pockets of anti-India forces who were partying at the country's cost

that money can be well spent to resurrect the economy
 

Teenmaar
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Posted on Wednesday, August 14, 2019 - 02:54 pm:       

kasmir tourism will solve all the problems, $ 6 B per year target fixed by amit shah
 

Vishvak
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Posted on Wednesday, August 14, 2019 - 02:35 pm:       


Teluguhero:

stuttering economy


Adenti economy super duper undi kada

Vi veri universum vivus vici
 

4evertdp
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Posted on Wednesday, August 14, 2019 - 02:35 pm:       


Teluguhero:

Modinomics




modinomics antey andariki bodi gunduu chesi vadilestahdaa??
Thank you EVM.
 

Teluguhero
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Posted on Wednesday, August 14, 2019 - 02:33 pm:       

https://asia.nikkei.com/Spotlight/Cover-Story/Modi-seeks-ref orms-to-India-s-stuttering-economy

Modi seeks reforms to India's stuttering economy

Landslide victory gives reelected prime minister a second chance at 'Modinomics'


KEN KOYANAGI, Editor-at-large, Nikkei Asian Review
AUGUST 14, 2019 16:43 JST
MUMBAI -- On a night in early August, as a monsoon roared outside, a group of around 100 small business owners gathered at the banquet hall of a hotel in a Mumbai suburb. Some have been in business for decades, but still employ only a few dozen full-time staff -- the consequence, they said, of strict labor laws and union protections that have hampered their ability to grow.

"Having direct employees means a lot of regulatory requirements," said the owner of a heavy machinery manufacturer, which employs 12 people. "You lose the flexibility to control your costs because of tough restrictions on layoffs."

When, later that evening, representatives of the banks arrived to promote their lending products, they were given a rough ride.

"You ask for collateral and all of [the company's] details, but you still reject loans. How do you explain that?" one entrepreneur asked. "Even if you approve a loan, your interest rate is something like 15% and too high. We cannot take such a risk."

These entrepreneurs' frustrations with regulation and the high cost of capital in India reflect the wider maladies of the country's economy. After years of rapid expansion, India's economic growth has slowed, consumer confidence is waning and foreign direct investment has plateaued. To compound the problem, an international trade and currency war is looming, the global economy could be heading for another downturn, and India looks set to be dragged into a protracted conflict of its own making in Jammu and Kashmir, the once-autonomous region that it brought under direct rule in August.


Outside the offices of Modi's Bharatiya Janata Party in Gandhinagar: Supporters celebrate after learning of official poll results on May 23. © Reuters
The building economic gloom in India threatens to take the gloss off Narendra Modi's landslide electoral victory in May, which delivered him a thumping majority in parliament and an almost free hand on policymaking. Despite the short-term constraints, however, his government hopes that the size of his mandate will allow him to finally push through difficult, but essential economic reforms that will move the country away from its dependence on waning domestic consumption and toward a more balanced, export-led model -- and toward an ambitious target of becoming a $5 trillion economy by 2025.

"What we will do in the next five years is very different [from the first term]," Sanjeev Sanyal, principal economic adviser to the prime minister, said in an interview with the Nikkei Asian Review. "It is very clearly about growth."

Getting down to business

The Modi government began its second term with a very public show of rolling up its sleeves. Ministers were told they had to be at work by 9:30 a.m., and had to make themselves available for meetings. Lawmakers churned through a packed slate of legislation, passing an unprecedented 28 bills in the "monsoon session" of parliament, a period from June 17 through Aug. 7.

The new laws ranged from new pension allowances for small farmers, to an increase in the number of high court judges, to a new mandatory national minimum wage, and came at such a pace that one opposition lawmaker remarked: "Are we delivering pizza or passing legislation?"


Tilak Raj Bathla, owner of a weaving factory in Panipat in the northern state of Haryana. Many of India's smaller business owners still feel burdened by labyrinthine regulations and the high cost of borrowing. © Reuters
The productivity drive may have been motivated by a need to address the fading confidence in the Modi government's economic stewardship.

Modi's Bharatiya Janata Party came to power in 2014 on a platform that combined Hindu nationalism with promises to revitalize the economy by restarting long-stalled infrastructure projects and by promoting pro-business initiatives, such as the "Make in India" campaign aimed at boosting the manufacturing sector.

Economic growth accelerated in the first few years of Modi's first term, even breaching 8% in 2016 and 2017, and the government was able to push through major -- but controversial -- reforms, including the demonetization of small-denomination bills and the introduction of a harmonized goods and services tax.

By 2018, however, things had started to go sour. In a Gallup poll in April, just ahead of the elections, less than half of those surveyed said that they felt that the economy was improving; among urban citizens, that figure was down to 43%, a dramatic fall from 68% just two years before. The most recent economic survey from the Reserve Bank of India, in early August, showed that Indian consumers are trimming their discretionary spending and preparing for a weaker jobs market. That has translated into poorer business sentiment, the RBI found.


The country is also in the grips of a credit crunch, precipitated by a crisis in the nonbank lending sector. Nonbank lenders make up about a fifth of the total loan market, often servicing small companies and individuals who would struggle to secure a bank loan. Last year, Infrastructure Leasing and Financial Services, one of the country's largest nonbank lenders, defaulted on a series of debt payments, forcing the government to step in.

Since then, fears over the stability of the so-called shadow banking system have grown and nonbank lenders have cut back their activity, in turn hitting the automotive and property sectors which rely on consumer lending.

Tata Motors, India's largest automaker by revenue, posted a larger-than-expected loss in the quarter to June 2019; Maruti Suzuki India saw an 18% slump in sales over the same period. On an earnings call in August, Pawan Goenka, managing director of Mahindra & Mahindra, said that "July was the worst I have seen in the past 18 to 20 years, as a single month. Roughly 10% to 15% of those who would have got loans are not getting loans."


Automakers are feeling the pain from falling spending: "Roughly 10% to 15% of those [customers] who would have got loans are not getting loans," said Pawan Goenka, managing director of major car manufacturer Mahindra & Mahindra. © Reuters
Growth in the first quarter of 2019 was just 5.8%, down from 6.6% in the last quarter of 2018. The RBI cut rates for the fourth time in a year last week, taking its key lending rate to the lowest it has been for almost a decade.

Reform drive


The current slowdown serves to highlight India's need to move away from its reliance on domestic spending as the main driver of its economy. Household consumption makes up almost 60% of India's GDP, and the government has, in the past, maintained that the domestic middle class gave the country a unique growth engine, distinct from the export-led growth that powered the development of China.

That doctrine seems to be changing, as the Modi government moves to embrace a growth model that more closely follows those of Japan, South Korea and China -- one predicated on investment and on trade.

"It is very clear that there is only one model by which you can sustain very high levels of growth for a period of time, which is the investment-led growth model," Sanyal said.

That, he said, means creating a virtuous circle: Improving the country's business environment and reforming labor laws should drive more private sector investments. In theory, that should lead to more employment and higher incomes, which would boost the country's low savings rate.


Modi's second-term government made a public showing of rolling up its sleeves, passing an unprecedented 28 bills during the "monsoon session" of parliament. © DD News
Fixing the business environment would require the Modi government to reform the tangled mass of regulation that has built up over decades. According to the legal and regulatory database company Avantis, there are more than 1,000 laws that cover business activities, and companies can face up to 2,962 different filing requirements.

Labor laws are also immensely complex, and often change depending on how many employees a company has. For example, companies with seven or more employees are governed by the Trade Unions Act, whereas companies with 10 or more are governed by the Factories Act, making the regulatory requirements quite different for a company of nine people versus one of 10, or one of seven versus one of six. These changes go up in increments, but change quite profoundly at 100 employees, above which manufacturing companies become governed by the Industrial Disputes Act. Under that law, companies cannot dismiss any employees without the prior approval of the government, creating a major disincentive to grow beyond 99 staff.

"In the name of helping small companies, we have created a network of policies that discourage them to grow," Sanyal said.

The government has already begun to rationalize some of its overlapping labor and business laws, and has identified others that need attention -- a move that is likely to be welcomed by businesses.

"To pursue the $5 trillion goal, India must do a lot more to become a less hostile habitat for entrepreneurs, in terms of excessive regulation and a control-obsessed civil service," said Manish Sabharwal, the chairman of TeamLease Services, the country's largest staffing company.

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