Tuesday, September 29, 2015

Make in India Campaign - FDI in Manufacturing increases

The manufacturing sector in India witnessed a sharp jump of 50 per cent in foreign direct investment (FDI) in the year 2014-15, thereby reflecting the traction received by the government’s ‘Make in India’ initiative.

The manufacturing sector continued to be the largest beneficiary and accounted for 38 per cent of the total FDI received and rose to $9.6 billion.

It is the first time in 3 years that FDI in manufacturing has witnessed an expansion. While it stood at $9.3 billion in 2011-12, it declined in the following two years to $6.5 billion and $6.3 billion in FY13 and FY14, respectively. However, as a result of the government’s push on manufacturing in India and ease of doing business initiative, the FDI in manufacturing has witnessed a boost. 

Source: http://indianexpress.com/article/business/business-others/govt-initiatives-help-revive-fdi-inflow-after-3-year-slump-up-54-in-fy15/

FDI Inflow improves

India has emerged as the most favoured destination for foreign direct investment (FDI) in 2015 so far, outpacing China and the US, London-based business daily Financial Times (FT) said in a report on Tuesday.
FDI inflows into India during January-June stood at $31 billion, ahead of China’s $28 billion and the US’s $27 billion. 
India also jumped 16 notches to 55 among 140 countries in the World Economic Forum’s Global Competitiveness Index that ranks countries on the basis of parameters such as institutions, macroeconomic environment, education, market size and infrastructure among others.
According to data from FDI Markets, an FT data service, FDI inflow into India grew 47% to $24 billion in 2014.
India’s Foreign Investment Promotion Board, the nodal authority that scrutinises overseas investment proposals, cleared 18 proposals worth about Rs 5,000 crore.

Value of Key Indicators (29 Sept 2015)

(Date of last Change indicated in bracket)

Bank Rate: 7.75 % (29 Sept 2015)

CRR: 4 % (9th Feb 2013)

SLR: 21.5 % (3rd Feb 2015)

Repo Rate: 6.75 % (29 Sept 2015)

Reverse Repo Rate: 5.75 % (29 Sept 2015)

RBI announces Interest Rate Cut

The Reserve Bank of India on Tuesday cut its key policy rate, repo rate, by 50 basis points to 6.75 percent against expectations of a 25 bps cut to spur demand in the economy, which the central bank said is crucial to growth in an environment of multiple global headwinds.

Market experts and analysts reacted to the RBI move with a sense of surprise and elation. They said the move was timely and would go a long way in providing the much-needed boost to the economy and the financial market .. 

Wednesday, September 2, 2015

US and Indian Family systems

Source: http://www.newindianexpress.com/columns/s_gurumurthy/Tendulkars-prose-and-economics/2013/11/23/article1905633.ece

  • “Revere your mother and father as God,” mandates Taitriya Upanishad. Bhishma Pitamaha says in Mahabharata, “The father equals ten teachers. But the mother equals ten fathers or perhaps the whole world in importance.”
  • All ancient traditions of the world revere mothers. But what about the modern society? Does it recognise or accept reverence for mothers? Or, for others? Doubtful. 
  • In the US, some 55 per cent of the first, 67 per cent of the second and 74 per cent of third marriages end in divorce.
  • Over 40 per cent of the babies are born to unmarried women, half of them teenagers. And some 60 per cent of men and women are avoiding marriage. The dysfunctional traditional families and its consequence, contract-based socioeconomic order, have orphaned and condemned elders, infirm and unemployed as state-dependents.
  • This is the output of unbridled individualism and its offshoot, modernity. 
  • Yet, many educated Indians think that modernity means just Western dress, English language and urban living.
  • How do the relation-built, duty-based traditional economies and the rights-centric, duty-free modern economies differ? Take just two areas — savings and social security. 
  • See how the microeconomic behaviour affects the macro economy. The family-based Asia accounts for three quarters of global savings. 
  • But the individualist US borrows almost the equal amount from the world. Why? 
  • American families have virtually lost their propensity to save. The families’ share was four-fifths of total US savings in the 1960s and, by the third quarter of 2006, it became minus — yes minus — one fifth, implying that the US families spent 20 per cent more than their current income. 
  • The erosion in family values which undermined family responsibilities and dented the propensity to save, has made the Americans profligate. Some 11 crore US families use 120 credit and debit cards. 
  • Their total borrowings exceed $12 trillion against the current US GDP of $16 trillion. Since 1970, US foreign debt has risen by 160 times, its national debt by 40 times, but its GDP only by 16 times. 
  • As the families disintegrated, the care of parents, elders, infirm and unemployed fell on the State which has virtually nationalised families through social security schemes. The present value of the future social security burden of the US is estimated at over $100 trillions — more than six times the present US GDP.
  • This is seen as dynamiting the US economy. As far back as in 1980s, the US National Bureau of Economic Research had warned that if the government took over traditional family duties through State-organised social security, “serious erosion of family values” was inevitable. (The American Economy in Transition by Martin S Fieldstein p341).
  • The warning, unheeded then, has now come true. This is as much the outcome of modern individualism as of the economics of theories founded on it.
  • In contrast, most Asian families save and save a lot. Because of high savings, social security to the aged, infirm and unemployed is provided by Asian families, not by governments.
  • Alan Greenspan, the former US Federal Reserve chairman, made fun of the Asian nations saying that they save a lot due to insecurity about future, because their governments do not provide social security, while the confident Americans need not and do not save, because the US government provides social safety net. This was before the 2008 meltdown. Greenspan may not dare repeat his words now because, as The New York Times says, half the US families receive state aid.
  • In contrast, Asia’s family saving has privatised social security as families’ moral responsibility.
  • A Brookings Institution economist Barry Bobsworth described the Asian savings as “dynastic”—belonging to future generations, not just the personal savings of the saver. The traditional reverence for parents and elders and the consequent duty and relation-based family life have made savings dynastic, moderated consumption and funded family-provided social security.
  • Forty years after being warned, the US is now desperate that social security be privatised. But that would need recreating traditional families that the current economic theories cannot. The lesson? “Matru Devo Bhava” and “Pitru Devo Bhava” — revering mother and father as Gods — and like social norms build a stable macroeconomic model founded on dynastic savings and moderate consumption and keep social security privatised.
  • Clearly, traditional reverence for parents and elders at the micro level and macroeconomics of dynastic savings and family provided social security are interrelated. When will the Indian socioeconomic discourse internalise this profound truth?