Comment by Riaz Haq on May 31, 2023 at 7:37am

#India’s #economy grew 6.1% in the fourth quarter, but the #unemployment rate also jumped to 8.1% in April, the fourth consecutive month of higher #jobless rates. #Jobs #Modi #BJP
https://www.wsj.com/articles/indias-gdp-grows-6-1-amid-strong-domes... via @WSJ

India’s economy grew 6.1% in the fourth quarter compared with the same period last year, as domestic demand for goods and services picked up and consumer confidence, while still lower than before the Covid-19 pandemic, continued to strengthen.

The South Asian country also reported gross-domestic-product growth for the full fiscal year of 7.2% compared with the previous year. India’s central bank in April raised its growth forecast for the current fiscal year to 6.5% from 6.4%.

Authorities have been working to combat elevated food prices that have increased costs for households around the world since Russia’s invasion of Ukraine last year. Inflation eased in the January-to-March quarter to between 5.5% and 6.5%, after hitting 7.8% in April 2022.

“Domestic demand in India is doing better than the rest of the world,” said Sujan Hajra, chief economist at Anand Rathi Securities in Mumbai. The reason, he said, was improved income growth and higher consumer spending.

Hajra said that since India, unlike other major economies, didn’t implement large-scale fiscal stimulus programs during the pandemic, it has avoided the negative impact from the withdrawal of those programs.

Many economists predict that India will continue to be one of the world’s fastest-growing economies, but creating jobs for its millions of unemployed people remains a major challenge.

The unemployment rate jumped to 8.1% in April, the fourth consecutive month of higher jobless rates, according to the Centre for Monitoring Indian Economy, an independent think tank in Mumbai. Prime Minister Narendra Modi is seeking to expand manufacturing jobs as global supply chains shift and companies diversify out of China.

“Its growth story will be determined on how well it can create such opportunities,” Hajra said.

Kavita Lama, who runs two salons in New Delhi, said her business has faced many shocks in recent years. Covid restrictions in 2020 and 2021 severely hit her income. Even after the pandemic waned and curbs eased, many customers held back on spending amid rising inflation and financial insecurity.

Now, clients are back, said Lama. She has raised prices for services like hair cuts, hair coloring and manicures three times in the past two months, she said.

“They don’t want to save anymore,” she said. “They are ready to spend more even if the services are getting costlier.”

A monthly survey by India’s central bank shows consumer confidence has improved. In March, 75% of those surveyed said they had boosted their spending, compared with 64.1% in the same month a year earlier.

Sales of vehicles, which is a key indicator of consumer demand, have also grown. India’s total passenger-vehicle sales volume grew 17% in January, 11% in February and 4.7% in March from the same period a year ago, according to the Society of Indian Automobile Manufacturers.

Comment by Riaz Haq on June 15, 2023 at 6:48pm

JP Morgan on Indian IT sector: Shares of most IT services companies were under pressure on Wednesday after foreign brokerage JP Morgan reiterated its negative stance on the entire IT services universe. The brokerage said it expects every IT firm to disappoint the street in Q1 and H2FY24. Further, it has placed Infosys, TCS, and Mphasis on 'Negative Catalyst Watch', as reported by Zee Business.


https://www.zeebiz.com/markets/stocks/news-jp-morgan-indian-it-sect...

The brokerage has maintained an 'underweight' rating on Infosys with a target price of Rs 1,150. On TCS, too, JP Morgan is underweight and has set the target price at Rs 2,700. As regards Mphasis, the target price is set at Rs 1,550. That's an 18 per cent decline from the previous close of Rs 1,898. Moreover, it has downgraded Persistent Systems to underweight from neutral and cut the target to Rs 4,100 from Rs 4,200 earlier. The brokerage said it finds the stock expensive given slowing growth in a tough macro environment.

The brokerage mentioned that EPAM recently cut its guidance from +3% growth in CY23 to -2% and the cuts were led by a cut in discretionary digital engineering spending. Persistent Systems has the highest exposure to discretionary spending at 83 per cent as compared to peers' 40-75 per cent. Further, it has maintained an underweight stance on Tech Mahindra, but the target price has been raised to Rs 950 from Rs 900 earlier.

At the time of writing this news, the S&P BSE Information Technology index was trading nearly half a per cent lower at 29,087.66 levels. KPIT Tech was the biggest loser on the index (down nearly 5 per cent). Persistent Systems was next on the list with a 2.62 per cent loss. Cigniti, Ramco Systems, LTI Mindtree, and Mastek were also among the losers. However, the stocks trimmed their losses later. At close, the IT index stood at 29,174.47, down 0.17 per cent.

Nirmal Bang Securities is also cautious about the sector. In its latest report, the brokerage said it continues to remain cautious on the IT sector with an 'underweight' (UW) stance and "will wait for better valuations or evidence that the worst is behind us. Only capitulation by the US consumer would, in our view, signal that we are close to the end of the current cycle of pain."

The brokerage further said, "Management commentary/data points across global IT services players and cloud/SaaS players in the June 2023 quarter-to-date (QTD) as well as from the recent meetings we have had in Bengaluru with a few Tier-1 players suggest that the June 2023 quarter is likely to be weak for Tier-1 players as has been widely expected. The situation for Tier-2 players will be much more company-specific."

Comment by Riaz Haq on June 16, 2023 at 4:30pm

Blow for TCS! Transamerica Life Insurance cuts short $2 billion contract with Indian IT giant


https://www.businesstoday.in/latest/corporate/story/blow-for-tcs-tr...

The deal between TCS and Transamerica Insurance was signed in January 2018, as per a release by the IT services company. The deal ensured that TCS earned at least $200 million in annual revenue.

India’s largest IT services company, Tata Consultancy Services (TCS), has confirmed that its 10-year deal with Transamerica Life Insurance Company, which was signed in 2017, has been ended before completion due to the current macro-economic environment. The 10-year deal was worth $ 2 billion.

The company said in a statement, “Considering the current macro environment and respective business priorities, Transamerica and TCS have mutually agreed to end the administration arrangement for Transamerica life insurance, annuities and supplemental health insurance, and other employee benefit products.”

The deal between TCS and Transamerica Insurance was signed in January 2018, as per a release by the IT services company. The deal ensured that TCS earned at least $200 million in annual revenue. The release from January 2018 also highlighted that TCS was signed to simplify the service of more than 10 million policies into a single integrated modern platform.

“Transamerica and TCS will work together to ensure a smooth transition of the administration of these products to a new servicing model, which we expect to take approximately 30 months,” they added.

For the financial year 2022-23, TCS has reported a 14.8 percent year-on-year (YoY) increase in consolidated net profit. The profit for the quarter ended March 31, 2023 stood at Rs 11,392 crore.

The consolidated revenue from operations of the IT company came in at Rs 59,162 crore, up 16.9 per cent, from Rs 50,591 crore YoY. In the December quarter of FY23, it stood at Rs 58,229 crore.

The revenue rose 10.7 per cent year-on-year (YoY) in constant currency (cc) terms. Earnings before interest and taxes (EBIT) stood at Rs 14,488 crore with EBIT margin contracting 0.5 per cent YoY to 24.5 per cent. Net margin came in at 19.3 per cent.

This development comes as the IT services company's new CEO, K Krithivasan, started his term on June 1.

Comment by Riaz Haq on June 17, 2023 at 5:06pm

Excerpts of "India is Broken" by Princeton Economist Ashoka Mody


And economic inequalities now had become much wider. With exquisite timing, on April 22, four weeks into the lockdown, Vogue India invited its readers into another Mumbai world, the twenty-seven-story Mumbai home of Mukesh Ambani, India’s reigning business tycoon and one of the world’s richest people. The Ambani home, located eleven kilometers (seven miles) away from cramped Dharavi, has ceilings so high that the structure is tall as an average sixty-story building. It is equipped with three helipads, a theater that can accommodate eighty guests, a spa, and a garage for 168 vehicles. The “sun-kissed living area” offers a “breathtaking view of the sea.”11

In the India of 2020, the Hindu-Muslim divide and egregious economic inequalities were reverberating echoes of Bengal in the 1940s. And disconcertingly, despite decades of economic progress, the echoes also sounded in the economic desperation of the reverse trek from the city to the village. The ongoing reverse trek revealed the continued risk of sudden income loss, health catastrophe, and the loss of even woeful living spaces: it revealed an India that was broken for hundreds of millions of Indians.12 This book is my attempt to explain why India, for so many, is broken.

Mody, Ashoka. India Is Broken (p. 5). Stanford University Press. Kindle Edition.

Comment by Riaz Haq on June 17, 2023 at 5:07pm

Excerpts of "India is Broken" by Princeton Economist Ashoka Mody


The grim reality is that, to employ all working-age Indians, the economy needs to create 200 million jobs over the next decade, an impossible order after the past decade of declining employment numbers.1 Right from independence, the Indian economy produced too few jobs. For more than 80 percent of Indians, the informal sector employment became the safety net, where workers idled for long stretches, earning below- or barely-above-poverty wages. Demonetization in 2016, a poorly executed goods and services tax in 2017, and COVID-19 in 2020 and 2021 struck hammer blows on the informal sector while creating no new options. Indeed, technology accelerated job destruction, especially in retail and wholesale trade. More Indians just stopped looking for work.

Set against this bleakness, many pundits and leaders look back to celebrate and draw hope from India’s high GDP growth rates of the 1990s and 2000s. That celebrated celebrated growth, however, was an outcome of unusually buoyant world trade, rampant natural resource use, and a domestic finance-construction bubble. Even as wealthy Indians accumulated astonishing riches, job creation remained weak. The most severe forms of poverty came down, but still afflicted over 20 percent of Indians; another 40 percent lived precariously, ever at risk of falling back into a dire existence. The median Indian lived in that vulnerable zone—and, looking through a government-induced data fog, still lives there.

The unchanging problem through the post-independence years has been the lack of public goods for shared progress: education, health delivery, functioning cities, clean air and water, and a responsive and fair judiciary. Along with scarcity of jobs, the absence or poor quality of public goods makes the lived reality of vast numbers


Mody, Ashoka. India Is Broken (pp. 398-399). Stanford University Press. Kindle Edition.

Comment by Riaz Haq on June 17, 2023 at 5:08pm

Excerpts of "India is Broken" by Princeton Economist Ashoka Mody

On July 1, 2017, with the economy barely back on its feet from the demonetization shock, the government rolled out the goods and services tax (GST). The GST was a worthy initiative. Its primary goal was to get rid of cascading taxes (taxes on taxes). Under the pre-GST system, a manufacturer would pay sales tax on inputs such as the steel he purchased from another state. He would include the taxes paid on steel and other inputs in determining the price he charged for the pots and pans he produced. His buyer would then pay sales tax on that all-inclusive pots and pans price. The GST would prevent these compounding costs. It would levy tax only on the value added by the producer of pots and pans through a system for refunding taxes paid on inputs. Importantly, the GST also sought to create a common market with uniform tax rates throughout the country, collapsing into one system the widely varying types and rates of taxes charged by different states.

The GST was decades in the making because it required integrating the complex system of central and state indirect taxes. It also required the agreement of all states, which would not be able to set tax rates when formulating their fiscal policies. Narendra Modi as Gujarat’s chief minister had long stymied the initiative.


India needed GST, but its rollout was an economic and administrative mess. States demanded that their large revenue earners—taxes and duties on petroleum, alcohol, electricity, and land transactions—be excluded from the GST net. Those exclusions undermined the objectives of reducing taxes on taxes and creating a common market with uniform rates across the country. Also, active lobbying led to arbitrary differences in tax rates on different products. Most immediately, though, onerous reporting requirements, poorly functioning online reporting and information systems, and inadequate training of tax officials made matters intolerable for businesses. Small firms were unable to cope with the new system. They went into a seizure for the second time in less than a year.31

Mody, Ashoka. India Is Broken (p. 342-343). Stanford University Press. Kindle Edition.

Comment by Riaz Haq on June 17, 2023 at 5:08pm

Excerpts of "India is Broken" by Princeton Economist Ashoka Mody


The Indian GDP growth story was nearly over. In its 2018 annual report on India, the IMF confirmed that the demonetization and GST implementation shocks had taken a significant toll on the Indian economy. Non-performing loans of banks (loans that were not being repaid on time) had risen from about 4 percent of all loans in late 2014, when RBI governor Rajan first rang the alarm bells, to about 9 percent in 2017. For government-owned banks, almost 12 percent of all loans in 2017 were non-performing (Figure 21.3). The government had done little to discipline big companies for not repaying their debts. Instead, the government once again used scarce taxpayer money to refill the hole that the defaults left in the capital of the banks they owned. These bank recapitalizations added up to about $13 billion in the fiscal year 2017–2018, with similarly large amounts anticipated in each of the next two years. Choked with bad loans, major government-owned banks drastically slowed their lending. The industrial sector, saddled with debt, virtually stopped borrowing. Although GDP growth remained mysteriously high—above a 7 percent annual rate—corporate investment was evaporating.32


Mody, Ashoka. India Is Broken (pp. 343-344). Stanford University Press. Kindle Edition.

Comment by Riaz Haq on June 19, 2023 at 9:17pm

The Modi Decade by Shashi Tharoor - Project Syndicate

By Shashi Tharoor

The BJP’s belligerent Hindutva nationalism – which promotes a narrow interpretation of history and demonizes India’s minorities, particularly Muslims – can be likened to a toxin injected into the veins of Indian society.

https://www.project-syndicate.org/commentary/indian-modi-government...


Last week, Indian Prime Minister Narendra Modi’s government inaugurated a new parliament building in New Delhi. It was supposed to symbolize the vision of a “new India” that Modi and his ruling Bharatiya Janata Party (BJP) claim they have been realizing during nine years in power. But the building has proved highly controversial, with 20 opposition parties boycotting the inauguration ceremony – the latest manifestation of the seemingly irreparable breakdown in relations between the opposition and the government.


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Such initiatives are not perfect – toilets lack enough running water, women are unable to afford to refill gas cylinders, and electricity supplies are erratic. But they have undoubtedly improved the quality of rural life, especially in the poor states of the northern “Hindi Belt.”


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But these successes have been offset by far less admirable policies. The BJP’s belligerent Hindutva nationalism – which promotes a narrow interpretation of history and demonizes India’s minorities, particularly Muslims – can be likened to a toxin injected into the veins of Indian society.

With BJP leaders and their acolytes in the Hindutva “Parivar,” or “family” of associated organizations, regularly spouting inflammatory and divisive rhetoric, it should be no surprise that violence has surged. Muslims have faced lynching by so-called cow vigilantes, and some Christians have been subjected to vandalism and assault during the Christmas season.

Though Indian elections remain free and fair, anti-democratic trends have taken hold between votes. Dissent is framed as disloyalty, with criticism of government policies labeled “anti-national.” The tax agencies and financial police have been unleashed against opposition leaders and their supporters, and “bulldozer justice” has been dispensed mainly against Muslim protesters – whose homes and businesses are literally bulldozed – without due process.

Moreover, the autonomy of Indian institutions – from the Reserve Bank of India to the Election Commission – has been weakened. Even the judiciary has come under pressure. Parliament has been reduced to a bulletin board for government decisions.

The Modi government has also fallen far short on economic policy. Despite the progress in areas like transport infrastructure and technology diffusion, India has a long way to go on many fronts, particularly schooling, skills development, sanitation, and public health-care facilities.

Likewise, the benefits of economic growth have failed to reach the poor and lower-middle class. Unemployment is at record highs, and female labor-force participation is plummeting. Many small and micro-enterprises had to be permanently closed after the disastrous demonetization of 2016. Farmers are struggling to cope with falling incomes. Budgetary allocations for many essential welfare programs, including the National Rural Employment Guarantee Scheme, have dwindled. Crony capitalism is rampant.

The Modi government’s response to the COVID-19 crisis also left much to be desired. Though Indians were eventually vaccinated, images of migrant workers trudging homeward during a nationwide lockdown still haunt the country. And while the government claims that less than 500,000 people died, the World Health Organization estimates that the real figure is ten times higher, raising questions about the reliability of official statistics.

Comment by Riaz Haq on June 23, 2023 at 8:33pm

Don’t Believe Modi's Indian Economic Success Story

https://foreignpolicy.com/2023/06/23/modi-india-economy-success-story/

While campaigning for the U.S. presidency, Joe Biden sharply criticized the Modi government’s human rights record, writing how two of its landmark laws are “inconsistent with the country’s long tradition of secularism and with sustaining a multi-ethnic and multi-religious democracy.” Today, Indian Prime Minister Narendra Modi leads a country that is suddenly at the center of U.S. strategy in Asia. And Biden has changed his tune, inviting the prime minister to a state visit this week.

It’s widely understood that when U.S. elites refer to India having a functional free press, judiciary, and democracy, they are either dishonest or in denial about how the country’s political system has developed under Modi. But the same is true when they praise India’s economy. The U.S. government seems to be operating under the assumption that Modi’s India can sustain the country as it decouples from Chinese manufacturing. There is little reason to believe that is true.

Modi’s “Gujarat model” shot him to the prime ministry in 2014. As chief minister in Gujarat, he had led a developmentalist state: midwifing new industries, repairing bureaucracies, and making huge electricity and infrastructure investments. The state’s growth rate boomed as subsidies were given to politically connected conglomerates and to state-owned players.

But the model has failed when extended to the national stage. While Modi has succeeded in selling himself to his constituents and the world as India’s great modernizer, builder, and attractor of capital, the country’s growth under Modi has flagged. Heaps of praise from foreign India watchers might lead one to think otherwise. India’s boosters point to Modi’s “Make in India” 2014 electoral pledge to boost manufacturing to 25 percent of Indian GDP and his government’s all-in bet on capital investments in airports, along with roads and rail—11 percent of its 2023 budget—to create a larger internal market.

Comment by Riaz Haq on June 23, 2023 at 8:34pm

Don’t Believe Modi's Indian Economic Success Story

https://foreignpolicy.com/2023/06/23/modi-india-economy-success-story/

Though Modi promised to add 100 million manufacturing jobs, India actually lost 24 million of those jobs between 2017 and 2021. COVID-19 was only the last straw: 11 million jobs had already been lost before the pandemic hit, as state banks cloggedwith nonperforming assets followed by a shadow bank crisis led to a crunch in construction. In India, more people are out of work now than in 2011. Job prospects in cities are so dismal that agriculture now employs a greater share of workers than it did 5 years ago. In 2019, 12.5 million people applied for 35,000 railway jobs.

The failure to add manufacturing jobs is especially stark when India is compared with similar economies in Vietnam and Bangladesh. Both nations doubled their share of manufacturing employment between 2000 and 2020, while India’s share barely rose 2 percent. Now, Vietnam exports approximately the same value in manufactured goods with its 100 million people as does India with its 1.4 billion.

As for Modi’s bet on logistics and transport, it has largely failed to inspire domestic investment. Finance Minister Nirmala Sitharaman has pleadedwith Indian capitalists to invest in India, saying, “I want to hear from India Inc: what’s stopping you when countries and industries abroad think this is the place to be now?” Instead, they tend to offshore their profits and show a preference for financial assets.


Indian capitalists blame lack of demand for their refusal to invest. Modi’s crony capitalism has produced a massive upward distribution of wealth while failing to generate a middle-class consumer base large enough to entice investors to expand. Every index of private consumption of India’s vast working and middle class—sales of fast-moving consumer goods, two-wheelers, entry-level cars, even rail travel—has stagnated over the last decade, as Vivek Kaul has documented.

As the Economist reported, private investment in 2019-20 was only 22 percent of GDP, down from 31 percent in 2010-11. Investors also privately admitted to fearing Modi’s unstable and capricious use of tax authorities, which his government uses to punish political foes.

This is a development model that privileges huge, politically connected Indian incumbents—foreign firms have to seek partnerships with them to succeed. And contrary to its image of global economic openness, the government has also hikedtariffs on various goods—including goods from the United States, as highlighted by arguments over Harley Davidson during the courtship between Modi and the Trump administration.

Pollution also shortens life expectancy for 248 million residents of northern India by an estimated eight years. Cleaning up pollution reduces morbidity and increases people’s productivity, making it a vital investment in economic growth. In 2019, the Modi government declared a so-called war on pollution but allocated a scant $42 million to the effort. Modi simply will not take steps employed in countries around the world to fight pollution by taking on powerful opponents. In contrast, China’s war on pollution, launched in 2014, has significantly cleaned up its air. The Indian government has even gone so far as to label environmental activists in Greta Thunberg’s Fridays For Future organization as terrorists, arresting them under India’s draconian sedition laws.

Institutionalized sexism also severely hampersIndian economic growth. Female employment rates (ranging from formal work to self-employment to informal labor) have been dropping for over three decades, with only 7 out of 100 urban women now employed, placing the nation behind even Saudi Arabia in terms of female labor participation. The Modi government’s low funding of the Mahatma Gandhi National Rural Employment Guarantee Act in 2023 further hurts working women; conversely, boosting rural employment and creating urban employment guarantee schemes would be an easy growth (and electoral) win.

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