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Economic Survey Doubts

Hi All,

Let's make a commond thread for all doubts releated to ES.
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Comments

  • Chapter-1:
    Can any1 explain the BOLD part?

    Special safeguard mechanism (SSM) which came for discussion in Nairobi ministerial meeting . The question which arises is whether India even needs such protection

    We are already allowed tariff from 40 per cent to 100 per cent (India’s modal rate in agriculture) to 150 per cent.
    In a preponderance of tariff lines, there is a considerable gap between applied tariffs and the level of tariff binding
  • thanks @Captain_Peroxide for explaining it
  • edited March 2016
    What factors influence Rupee Appreciation and depreciation? AFAIK, when there is outflow of foreign currency/capital, then rupee becomes relatively more in supply and hence depreciates. That's the only simplistic concept I apply. What are the fine points here? Also, how buying/selling Forex modulates the rupee liquidity? I also read somewhere that too much Foreign Exchange intervention causes inflation.

    Also, in Eco Survey Part II Chapter on 'Monetary Management',it is written that-Avg. borrowing by banks have increased significantly in immediate aftermath of Fed rate hike compared to pre-hike scenario, leading to appreciation of rupee. However, subsequent to easing of liquidity conditions, the rupee started depreciating.

    Please explain. Even a basic explanation will be really appreciated. @techack @Captain_Peroxide and all others.
    Have Hope & eschew greed. Keep Calm. Stop worrying. || Be a soldier.
  • Defcon1 said:

    Pag 54 vol 1
    What is Bc they are talking about ?

    Banking Correspondents
  • Page-144, volume 1:(Chapter 10: Structural changes in India's labour market)

    Economic survey introduces two words: PRODY and EXPY.Please explain.
    One day, perhaps, love may die of disuse, left to rust in wind and weather.
  • edited March 2016
    @Captain_Peroxide @rookie @IWRA
    Gents,

    Please help me with the GDP of India @ constant prices and current prices, in $$ !!
    I am so damn confused with so many different figures I am seeing ..

    Eco survey se I get $1.6 Trillion (GDP) and $1.5Trillion(GVA) at constant prices .. is it correct ? What about current prices? IMF says $2.3 Trillion for current prices ..

    and GDP PPP is $8.5 Trillion ??

    Please confirm ..
    Indian Foreign Service | Career Diplomat
  • PRODY: complexity/sophistication related to the product
    EXPY: similar concept for export marker
  • edited March 2016

    @Captain_Peroxide @rookie @IWRA
    Gents,

    Please help me with the GDP of India @ constant prices and current prices, in $$ !!
    I am so damn confused with so many different figures I am seeing ..

    Eco survey se I get $1.6 Trillion (GDP) and $1.5Trillion(GVA) at constant prices .. is it correct ? What about current prices? IMF says $2.3 Trillion for current prices ..

    and GDP PPP is $8.5 Trillion ??

    Please confirm ..

    What rupee-dollar exchange rate did you use for conversion?

    In India GDP is calculated by CSO. For current financial year (2015-16), only three quarters data is available and so one can only present the official AE(Advanced Estimate) data which was released by CSO during press release on 8th Feb 2016. (This same data has been copy pasted in Economic Survey, Chapter 1 volume 2...Page no 2).

    Also, please note that CSO mentions GDP values in INR in their official release.So I am not sure which conversion rate to be used for $$ value.

    This is what the press release revealed.

    “The real GDP or GDP at constant (2011-12) prices for the years 2014-15 and 2013-14 stands at Rs 105.5 lakh crore and Rs 98.4 lakh crore, respectively".

    These are for last two fiscal years.

    For 2015-16 Advance Estimate(AE) GDP value is 113.5 lakh crore=1.72 trillion $$ (Using 1 USD=66 INR).Note that this is at constant price(2011-12). I couldn't find the exact data for current prices.

    For GVA value for FY15-16, the Advance Estimate value is 104.3 lakh crore=1.58 trillion $$. Again at the constant or base price (2011-12).

    If one asks about India's GDP,one should quote these values, because these are the authoritative figures.

    CSO press release:

    http://mospi.nic.in/Mospi_New/upload/nad_PR_8feb16.pdf
    One day, perhaps, love may die of disuse, left to rust in wind and weather.
  • CC'ing @Teddy

    Can you throw some light on above query?Especially India's GDP at current prices.
    One day, perhaps, love may die of disuse, left to rust in wind and weather.
  • survey talk about sectoral output to total output vs sectoral GVA to total GVA
    what wud be exact difference, does output indicate the share in the final product
    मैं खड़ा हूँ उसी दोराहे पे, आज भी इंतज़ार में तेरे !
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  • edited March 2016

    @Captain_Peroxide @rookie @IWRA
    Gents,

    Please help me with the GDP of India @ constant prices and current prices, in $$ !!
    I am so damn confused with so many different figures I am seeing ..

    Eco survey se I get $1.6 Trillion (GDP) and $1.5Trillion(GVA) at constant prices .. is it correct ? What about current prices? IMF says $2.3 Trillion for current prices ..

    and GDP PPP is $8.5 Trillion ??

    Please confirm ..

    Sir let me try

    GDP= Total monetary value of all goods and services produced within a nation's geographic borders over a specified period of time.

    GDP at Constant prices= Expression of GDP in terms of a base period. It is 2011-12. As per RBI ( https://www.rbi.org.in/scripts/PublicationsView.aspx?id=16443 ), it is 88320.12 billion rupees, if you convert this in USD price of 2011-12 which was 52.835 Rupees according to US fed exchange ( http://usd.fx-exchange.com/inr/2011_12_12-exchange-rates-history.html ), we get:

    1 billion= 100 crore

    88320.12 billion in dollars= 88320.12*100*1crore/52.835= 1.671 trillion USD

    Similarly GVA from same RBI site is 81955.46 billion rupees, doing same calculation...

    81955.46 billion in dollars = 81955.46*100*1crore/52.835= 1.55 trillion USD

    Therefore it is correct.

    As per IMF this document at ppp it is 7.3 trillion dollar. I can't find about 8.5 trillion USD.
    So the rupee dollar exchange rate for FY 11-12 has to be used when we are calculating real GDP. (=GDP at constant price,,,2011-12 level).

    For nominal GDP( =GDP at current price) rupee dollar exchange rate for FY14-15 has to be used.

    Is it so @Captain_Peroxide ?

    Also..since exchange rate fluctuates over the year, how do they normalize it for GDP conversion, means which particular value they choose? Has CSO published their methodology regarding that?
    One day, perhaps, love may die of disuse, left to rust in wind and weather.
  • edited March 2016
    ^^ @Captain_Peroxide I just checked RBI site.

    The values you have taken are for 2011-12.

    We must quote GDP values for current fiscal 15-16. Since only three quarters have passed the CSO AE estimate value can be used.( Which has not been updated on RBI site).

    I also perceive some confusion on your part regarding India's GDP values and its relation with year 2011-12.

    Let me try to explain. Correct me if I go wrong.

    In 2010 India changed base year for GDP calculation from 2004-05 to 2011-12.

    Now India's official GDP in any financial year (Real GDP)= GDP value adjusted for year 2011-12.

    So if CSO is calculating GDP value in FY 19-20, it will first calculate GDP at prevailing prices of that time (current price) and then will deflate it to 2011-12 level ( using a GDP deflator).

    The values you have quoted are for FY11-12 and not for recent fiscals.

    I hope it clears some doubt.
    One day, perhaps, love may die of disuse, left to rust in wind and weather.
  • edited March 2016
    [Content removed]
    [Moderator Note: stop your promotion in threads right now else you will be banned @Insignia88 ]
  • edited March 2016


    Now what I did was calculating gdp and gva of the country in 2011-12 using 2011-12 dollar prices only to show that in 2011-12 we were 1.6 trillion USD economy which was our base year. If you will calculate real gdp (using 2011-12 dollar price as per definition) for 2014-15 from RBI website you will get real gdp of 2.01 trillion USD and given high growth rate for this year, it will be obviously more than 2.01 trillion dollars , am i right? Correct me if I am wrong.. So those figure quoted by mango dolly I think were related with 2011-12 gdp only. This is my assumption.

    Answer: Seems right. Because I calculated GDP for FY15-16 based on CSO press release of 8th Feb (Page no 9).It has mentioned India's GDP at current prices to be Rs. 135.7 lakh crore which comes to be 2.05 trillion $$. Note that I used 1 USD= 66 INR

    For 2015-16 also, to calculate real gdp we will use dollar price of 2011-12 only but the figure as you said has yet not been updated on rbi and reason given by you. So we cant exactly calculate at this time.

    Answer: Yes not exactly, but AE value can be used as I did above.


    For 2015-16 nominal GDP we will use 2015-16 dollar price. @IWRA

    Query: Now,my doubt is when you say we will use 2015-16 dollar price, so which particular date in 2015-16? Is it 31st Dec 2015 or 7th March 2016. because this values changes throughout the year, that's why I asked if any normalization is done for getting this dollar price for GDP conversion from rupees to dollar.

    @Captain_Peroxide
    One day, perhaps, love may die of disuse, left to rust in wind and weather.
  • do anyone of u here also feel that econmic survey has become more jargonised and complex to understand in bjp govt than upa govt... as economists have changed so thier interpretatn...
  • edited March 2016

    @rookie
    Gents,

    Please help me with the GDP of India @ constant prices and current prices, in $$ !!
    I am so damn confused with so many different figures I am seeing ..

    Eco survey se I get $1.6 Trillion (GDP) and $1.5Trillion(GVA) at constant prices .. is it correct ? What about current prices? IMF says $2.3 Trillion for current prices ..

    and GDP PPP is $8.5 Trillion ??

    Please confirm ..

    Bro as far as I know.. GDP at current prices is about $2.3 trillion and at constant prices is about $1.8 trillion and PPP is about a massive $7.5 trillion. I think constant prices will take inflation into the picture and differs from current prices @mango_dolly I am not sure though, plz confirm from different sources.
    |If you tremble with indignation at every injustice, then you are a comrade of mine|| ||Upsc wars veteran|
  • See, if it can help.
  • What is the exact difference between tax, levy, cess and surcharge?
  • Some days back I posted a doubt in this thread , then read a bit and now have attempted to explain. Please give your inputs/correct me

    Avg. borrowing by banks have increased significantly in immediate aftermath of Fed rate hike compared to pre-hike scenario, leading to appreciation of rupee. However, subsequent to easing of liquidity conditions, the rupee started depreciating. - Well, due to Fed rate hike, Foreign Investors are again flocking to the US and moving out of here. This has led banks to borrow more rupee-(But Why - is my doubt) its demand goes up and hence rupee appreciation. But consequent easing of liquidity conditions - meaning greater supply of rupee => relative scarcity and demand of rupee down=> rupee depreciation.

    Demand for the Rupee is driven by two sources- Current Account or Trade and Capital Account or Investments. Higher CAD will leads to demand for more $ and consequent weakening of Re. Also, greater investment into India (favourable Capital Account) will lead to demand for more Re and lead to strengthening of Re. In current scenario CAD is not an issue. So does this mean the fall of Re is due to weak foreign investment? Also, tightening the liquidity conditions will stem the fall of Re-> where does FOREX reserve buying and selling come in picture here?

    Another doubt- What really is the 'write off of debt'? Some kind of adjustment in the balance sheet? And what really is Strategic Debt Restructuring- i just know its conversion of debt into equity? How is Loan being converted into equity?
    Have Hope & eschew greed. Keep Calm. Stop worrying. || Be a soldier.
  • @Captain_Peroxide recently a Pune based startup Arthakranti proposed that replacing the present tax system with a single 2 per cent levy per receipt in bank accounts + keeping import duties intact would lead to tax collections of Rs. 40 lac crore as against 9.44 lac crore as of now. FICCI chairman said method is brilliant but would lead to collections of 14 lac crore. What does this levy on receipts mean? Also, one of the reason given for such high accumulations given was that the method is inclusive. How come? when India has such a poor banking penetration ?
  • @Captain_Peroxide recently a Pune based startup Arthakranti proposed that replacing the present tax system with a single 2 per cent levy per receipt in bank accounts + keeping import duties intact would lead to tax collections of Rs. 40 lac crore as against 9.44 lac crore as of now. FICCI chairman said method is brilliant but would lead to collections of 14 lac crore. What does this levy on receipts mean? Also, one of the reason given for such high accumulations given was that the method is inclusive. How come? when India has such a poor banking penetration ?

    I guess the proposed system was not just for bank transactions but for any transaction above a certain amount.. something around rs 2500.. it is inclusive since it covers all the individuals.. but it is again a regressive taxation as the poor people will be more affected.. and people will try to dodge it by multiple transactions in small amounts lesser than the limit

  • Hi all, do answer queries on Debt write off and Forex reserves if you have some idea . Also, FSLRC had raised concerns about a Central Bank also managing the Public Debt. Why is it a concern and why PDMA was mooted? @Captain_Peroxide @rookie @manish gupta1 @maserati
    Have Hope & eschew greed. Keep Calm. Stop worrying. || Be a soldier.
  • What is the exact difference between tax, levy, cess and surcharge?

    Tax- Kind of 'fee' that you pay to the government. It is an amount that govt legally takes from you to do various activity for the interests of the nation and its development.

    Tax levy- It is a kind of mechanism. Tax dept sends you a legal notice to remind you non payment of taxes that you have to pay. If you didn't pay than tax levy is imposed on you to seize your assets until you pay full tax in one go or in periodic installments.

    Cess- Tax on tax, like krishi kalyan cess swatch bharat cess educational cess for meeting out one particular purpose in general. For ex if you pay a direct tax of 10% on 10 rupees
    =which is equal to Re 1;
    and govt imposes a cess on it of 2% so you will calculate it on the tax amount which you will pay to govt. that is, 2% of Re 1 which is 2 paisa here, so total tax you will pay is Rs 1.02 only..

    Surcharge= Extra tax you give to the govt. over and above the tax that you already pay... that is...

    In above example, a surcharge of 10% is imposed on you above that normal 10% tax rate...

    Initially you pay= 10% of Rs 10= Re 1

    now surchrage of 10% is imposed on again Rs 10= Re 1

    so net tax is =Re 1+Re 1 = Rs 2...

    Notice the diffence between cess wala tax (Rs 1.02) and surcharge wala tax (Rs 2) ? :)

    Cess and surcharge both are temporary for a fixed time until purpose is fulfilled.
    cess and surcharge are same : both r tax on tax, not form the divisible pool with state.
    only difference is cess imposed for a particular purpose and can't be spend on any other thing
  • @Teddy
    bhai plz explain present gdp growth which govt gives is based upon upon GVA not on sectoral growth rate? (GVA will be always greater than sectoral because of forward backward linkages)
    ye sahi hai ya mai galat hoon thoda confuse ho gaya hoon .
  • Please help me to understand "tail risk scenario", Economic survey vol 1, page 7, (the global context, point 1.25)
    IF YOU WANT TO BE THE BEST , YOU HAVE TO BEAT THE BEST.

  • Tail Risk- Simply put, it is the risk of rare events.
    Graphically, tail risk is associated with a Fat Tail. Here the normal distribution principle is not followed and hence risk of ,say an asset/portfolio moving more than 3 sigma from mean is there. => higher probability of big losses.

    Why is it bad? Not only is it riskier, but Tail risk is also difficult to predict ( as it doesn't follow the normal distribution curve).Hence (In a world of interconnected financial systems, complex financial instruments etc,) Tail risk leads to unexpected systemic shocks.-> which can affect a broad range of investments.

    E.g. the 2008 economic recession was due to Tail risk associated with the sub-prime lending. This kind of lending was riskier than assessed by many. While going was good, many reaped it in the rewards but when the asset price bubble collapsed, the risks became systemic. Why was it a tail risk really? Because the defaults were not independent events but rather correlated due to an underlying push for NINJA loans among those who weren't credit worthy. Lending to them on an aggregate level amounted to more than the statistically derived risk from normal distribution and became Tail Risk.

    In the Economic Survey, two Tail Risks have been identified- First, currency devaluation in Asia which can cause deflationary pressure in India and Second, policy actions aimed at preventing capital outflows from emergent markets(I believe due to Fed Tapering etc which causing FIs to move back to US where interest rates are increasing and emergent countries want to stop the capital flight)- which can further adversely affect the growth impulses from foreign capital.

    The details of these two tail risks- I am myself not very sure (others please add ) But broadly, these are competitive currency devaluation and certain policies to prevent exit of foreign capital from India.

    Why are they tail risks? again, because they are Unexpected , based on the vulnerabilities of other EMs and Fed policy etc and have higher prob, of bigger losses.

    So what is the Economic Survey telling India to do? - To plan for such unforeseen events.
    How? By suitable fiscal and monetary policies which a) don't cause further deflation -pressure in India, and b) which don't rely on foreign capital for growth and look for domestic demand to boost growth


    @ampri and others I have summarized the basics. May pl feel free to add points
    Have Hope & eschew greed. Keep Calm. Stop worrying. || Be a soldier.
  • arrow28 said:

    Some days back I posted a doubt in this thread , then read a bit and now have attempted to explain. Please give your inputs/correct me

    Avg. borrowing by banks have increased significantly in immediate aftermath of Fed rate hike compared to pre-hike scenario, leading to appreciation of rupee. However, subsequent to easing of liquidity conditions, the rupee started depreciating. - Well, due to Fed rate hike, Foreign Investors are again flocking to the US and moving out of here. This has led banks to borrow more rupee-(But Why - is my doubt) its demand goes up and hence rupee appreciation. But consequent easing of liquidity conditions - meaning greater supply of rupee => relative scarcity and demand of rupee down=> rupee depreciation.

    Demand for the Rupee is driven by two sources- Current Account or Trade and Capital Account or Investments. Higher CAD will leads to demand for more $ and consequent weakening of Re. Also, greater investment into India (favourable Capital Account) will lead to demand for more Re and lead to strengthening of Re. In current scenario CAD is not an issue. So does this mean the fall of Re is due to weak foreign investment? Also, tightening the liquidity conditions will stem the fall of Re-> where does FOREX reserve buying and selling come in picture here?

    Another doubt- What really is the 'write off of debt'? Some kind of adjustment in the balance sheet? And what really is Strategic Debt Restructuring- i just know its conversion of debt into equity? How is Loan being converted into equity?

    Write off of debt is not adjustments in a balance sheet, it is rather subvention or completely forgiving off loans.
    How this is done - govt. agrees to pay on the behalf of the defaulter.
    Why this is done - reason may vary from saving their vote bank, to decrease mounting pressure off farmers' head, due to spillover effects of abseentism of an exit policy, to repick sectors that have failed in the near past etc.

    In the absence of private investment and increased funding on infrastructure projects and debt restructuring including improving financial health of PSBs, banks are trying to trying to increasingly borrow motivated by reduction in rates by RBI and not passing it to the consumers so that they can cover their expenses.

    I didnt understand clearly what you wanted to ask, but if this is what you were asking, I hope my answer helps you along.
  • ampri said:

    Please help me to understand "tail risk scenario", Economic survey vol 1, page 7, (the global context, point 1.25)

    Thanks arrow 28 but do I need to go this much deep even for GS?? I am a political science (humanities) student, new on this forum, and it's my final year 6th sem)hons from DU.
    IF YOU WANT TO BE THE BEST , YOU HAVE TO BEAT THE BEST.
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