Debt tripled under Modi Raj

[Joe Shearer]

Is that deflection or whataboutery when you cannot address the points raised?

Maybe both.

Notice how everyone is accurate?

 

[SoulSpokesman]

@Joe Shearer

Naturally, as per the deft explanation offered, payment was to be from relatively low cost long tenure debt from multilateral entities like the World Bank, and sovereign lenders like the Japanese.

Presumably the reference is to Megha. I am not aware of the specific lenders to the projects.

As far as the WB and JICA funded projects are concerned, contracts are awarded against ICB. If Megha (or anyone else) won those contracts against international bidding, fair enough.

That is one of the main complaints: that the government ran out of money, and resorted to borrowings to fund their spectacular infrastructure projects.

That complaint itself is ridiculous- I have already shown data that there was no extraordinary rise in indebtedness in the Modi era, especially if allowance was to be made for the Covid years.

Regards

 

[FuturePAF]

A bigger chunk of our debts are taken by corporations in India (although they come as national debt because they are Indian entities after all, and these debitors are in Indian jurisdiction. Hence these big numbers.

So similar to what Latin America did in the 70s and caught up with them in 1982. Transitioning from public debt to private debt. India has many things go for it, but expectations rising among the public and the reason why politicians overspend on social spending or aid their industrialist friends will limit year on year growth as population keeps rising. If I remember correctly India subsidizes the food supply of about 800 million Indians. It was a signature project of Modi.

The way China really grew in 40 years was to cut population growth (on top of being nearly completely open to FDI) and spread what was generations worth of growth into a single generation. They did use that time together technology value chain.

Are Indian companies moving up the tech value chain though or just servicing other countries major enterprises the way TCS is doing? If not, India could be headed for a fate like Latin America.

No doubt India can weather storm, for some years, with its large reserves, but in the long run it will need competitive industries. With China’s industrial overcapacity, Indian firms may not be able to adequately, for a couple decades, the very decades of its demographic dividend, to achieve adequate market share in growing export destinations In key tech to subside firms moving up the venue chain.

For example, Chinese steel producers could wipe out Indian firms producing inputs for products exported to the developing world as well as Europe. Furthermore, the west has learned from outsourcing to China the first time around, to not do it again a second time, and squander a generation of domestic industrial capacity, and outsource to India. At best they will seek to near shore to places like Mexico and Latin America (in the case of the US) or MENA (in the case of Europe) in a negotiated deal to slow down immigration.

 

[Mrloveday]

That is one of the main complaints: that the government ran out of money, and resorted to borrowings to fund their spectacular infrastructure projects.

As you are an expert on the Sangh Parivar and its funding methods, you can obviously help the forum to understand how a contributor to Electoral Bonds to the extent of several times their eligibility (prior to the modification to the laws to permit this to be overcome) was awarded a mega-project several hundred times more than the Electoral Bonds amount itself. Naturally, as per the deft explanation offered, payment was to be from relatively low cost long tenure debt from multilateral entities like the World Bank, and sovereign lenders like the Japanese.

Your complete transparency and good faith in these narrations is touching.

https://www.business-standard.com/elections/lok-sabha-election/electoral-bonds-to-return-if-bjp-maintains-power-after-polls-fm-sitharaman-124042000460_1.html

Bhaiyyas & Gujjus are hell bent on legalizing corruption.

 

[Joe Shearer]

View attachment 35266

https://www.business-standard.com/elections/lok-sabha-election/electoral-bonds-to-return-if-bjp-maintains-power-after-polls-fm-sitharaman-124042000460_1.html

Bhaiyyas & Gujjus are hell bent on legalizing corruption.

There are also the intellectuals who are persuaded that a little corruption is a lubricant to the system.

 

[Mrloveday]

There are also the intellectuals who are persuaded that a little corruption is a lubricant to the system.

Electoral Bonds will help bring in one party system in India.

The Central Government controls agencies like ED and CBI. Why would anyone donate to any other party other than the BJP in near future?

It ain't only about black money.

Gujjus won't to eliminate democracy.

 

[Vikramaditya1]

So similar to what Latin America did in the 70s and caught up with them in 1982. Transitioning from public debt to private debt. India has many things go for it, but expectations rising among the public and the reason why politicians overspend on social spending or aid their industrialist friends will limit year on year growth as population keeps rising. If I remember correctly India subsidizes the food supply of about 800 million Indians. It was a signature project of Modi.

The only way China really grew in 40 years was to cut population growth and spread what was generations worth of growth into a single generation. They did use that time together technology value chain.

Are Indian companies moving up the tech value chain though or just servicing other countries major enterprises the way TCS is doing? If not, India could be headed for a fate like Latin America.

No doubt India can weather storm, for some years, with its large reserves, but in the long run it will need competitive industries. With China’s industrial overcapacity, Indian firms may not be able to adequately, for a couple decades, the very decades of its demographic dividend, to achieve adequate market share In key tech to subside firms moving up the venue chain.

For example, Chinese steel producers could wipe out Indian firms producing inputs for products exported to the developing world as well as Europe. Furthermore, the west has learned from outsourcing to China the first time around, to not do it again a second time, and squander a generation of domestic industrial capacity, and outsource to India. At best they will seek to near shore to places like Mexico and Latin America (in the case of the US) or MENA (in the case of Europe) in a negotiated deal to slow down immigration.

No, that's quite an extreme comparison. What Latin America did was basically trade protectionism. They heavily borrowed and started lending to companies at cheaper rates which yeah aided their growth for some time. Industries in India are not heavily incentivized or protected from competition. Take Flipkart for example, they are an Indian company which was in direct competition with Amazon for market share. They received no governmental support vis Amazon but became a big enough company on it's own might. Most of Indian entities are not protected and Indian market is free for the most part because we need to attract investment afterall.

Now the subsidies, they are significant, the entire subsidy program only takes up 10% of the annual budget. Which IMO should be reduced, but we are a democracy afterall, we need to give such freebies, I can uncomfortable agree to the 10% expenditure.

China is going to reap the bitter fruits of unnatural population reduction. China should've let population decline naturally. The population growth in India has also reduced, in fact it is one of the lowest in the region. I wouldn't worry too much about the population growth as long as government dont introduce some punishment for having more babies. The population will decline naturally.

Coming to forex, this is also a very different point of view for India. Our forex is not to weather the storm of debt repayment. Forex is mainly focused on currency stabilization, building investor confidence and Export - import.

Indian companies are moving up value the value chain actually, no need to concentrate on IT sector, take Pharma, Moto vehicle, electronics manufacturing, there are other sectors too. Even in IT sector, we used to mainly have the run of the mill call centers and backend debuggers now more and more products are coming into being. Disruptive techs like UPI and an ecosystem surrounding fintechs have already been expanded to around the world. Take any of the above mentioned sectors, there are quite some Indian companies with global presence. Maybe not as big as the likes of Xiaomi, BYD et al but Indian companies are increasingly more present globally. Seeing China as competitor is one way to look at it, India might collaborate in sectors we see are mutually beneficial.

As for Chinese steel producers wiping out Indian firms, well they can try. Anti dumping duties and WTO protects against such practices. Take for example, the Pharma API's, the Chinese destroyed Indian API sector flooding our market with cheap API, which although aided Indian pharma initially but the Chinese began price gouging in the sector so much that India simply revived it's API sector again now China is facing an over capacity of API's, they might reduce the prices again to a very low level, that'll only help Indian pharma sector again.

To sum it all up, Indian industrial sector and economy has little to no comparison to Latin American boom. Different times, strategies and different population rate. Population advantage is significant for India, we can never stop growing the only way to disrupt is through another covid type pandemic that would force shut down on everything. Debt although is high in the region in absolute numbers, it's overshadowed by revenue growth without fueling an inflation, or hitting pockets of corporations. A missed part is, India's startup ecosystem which is increasingly becoming a backbone of the economy.

 

[FuturePAF]

No, that's quite an extreme comparison. What Latin America did was basically trade protectionism. They heavily borrowed and started lending to companies at cheaper rates which yeah aided their growth for some time. Industries in India are not heavily incentivized or protected from competition. Take Flipkart for example, they are an Indian company which was in direct competition with Amazon for market share. They received no governmental support vis Amazon but became a big enough company on it's own might. Most of Indian entities are not protected and Indian market is free for the most part because we need to attract investment afterall.

Now the subsidies, they are significant, the entire subsidy program only takes up 10% of the annual budget. Which IMO should be reduced, but we are a democracy afterall, we need to give such freebies, I can uncomfortable agree to the 10% expenditure.

China is going to reap the bitter fruits of unnatural population reduction. China should've let population decline naturally. The population growth in India has also reduced, in fact it is one of the lowest in the region. I wouldn't worry too much about the population growth as long as government dont introduce some punishment for having more babies. The population will decline naturally.

Coming to forex, this is also a very different point of view for India. Our forex is not to weather the storm of debt repayment. Forex is mainly focused on currency stabilization, building investor confidence and Export - import.

Indian companies are moving up value the value chain actually, no need to concentrate on IT sector, take Pharma, Moto vehicle, electronics manufacturing, there are other sectors too. Even in IT sector, we used to mainly have the run of the mill call centers and backend debuggers now more and more products are coming into being. Disruptive techs like UPI and an ecosystem surrounding fintechs have already been expanded to around the world. Take any of the above mentioned sectors, there are quite some Indian companies with global presence. Maybe not as big as the likes of Xiaomi, BYD et al but Indian companies are increasingly more present globally. Seeing China as competitor is one way to look at it, India might collaborate in sectors we see are mutually beneficial.

As for Chinese steel producers wiping out Indian firms, well they can try. Anti dumping duties and WTO protects against such practices. Take for example, the Pharma API's, the Chinese destroyed Indian API sector flooding our market with cheap API, which although aided Indian pharma initially but the Chinese began price gouging in the sector so much that India simply revived it's API sector again now China is facing an over capacity of API's, they might reduce the prices again to a very low level, that'll only help Indian pharma sector again.

To sum it all up, Indian industrial sector and economy has little to no comparison to Latin American boom. Different times, strategies and different population rate. Population advantage is significant for India, we can never stop growing the only way to disrupt is through another covid type pandemic that would force shut down on everything. Debt although is high in the region in absolute numbers, it's overshadowed by revenue growth without fueling an inflation, or hitting pockets of corporations. A missed part is, India's startup ecosystem which is increasingly becoming a backbone of the economy.

Sure it’s not the same as Latin America but there are key parallels that are similar. Companies can move faster, but profit incentivizes push the consequences onto society, and masses of unskilled or unemployed/underemployed workers is one risk all nations ignore at their peril.

Indian tariffs are very high, they are called in the US The “Maharaja of Tarrifs”

India also maintains very high tariff peaks on a number of goods, including flowers (60 percent), natural rubber (70 percent), automobiles and motorcycles (60 percent to 75 percent), raisins and coffee (100 percent), alcoholic beverages (150 percent), and textiles (some ad valorem equivalent rates exceed 300 percent).

Source: https://ustr.gov/sites/default/files/2014 NTE Report on FTB India.pdf

There is also there is still a lot of paralysis. The following video is from 14 years ago, but honestly doesn’t most of this still hold, even after 10 years of the business friendly Modi.

It’s not that only 10% goes to subsidies, but that foreign companies what more free access to these industries where the potential growth is highest.

China won’t collaborate much with anyone in product development unless it has to or to get around tariffs, such as Chinese products being final assembled in Vietnam to re-export to the US. Heck, China sells precursors to India because they have a large Pharma industry that has gotten around western regulations. If China could do it itself, it wouldn’t have “collaborated” with India in that sector. The only other aspect is that China keeps a level of trade in favor of that nation to keep a certain lobbying that country happy, and lobbying their central governments to keep the relationship stable.

Indeed the startup scene is where the largest amounts of growth is possible, but so is heavy industry in niche markets.

Btw, all the favors maybe there for India to grow, faster and at a scale larger than any other nation out there today, but western countries have pressure from the public to bring back domestic manufacturing. Prospects aren’t as bright in the developed world as they were for China a generation ago. Also, in the developing world, China is set to keep beating India on price and even quality at certain places.

Modi was right in one way, it’s not a brain drain for India, but the west is a brain bank. The only question is when will India be set up adequately to withdraw from this bank.

The past 30 years may well be remembered as a dark age of U.S. manufacturing. Boeing’s decline illustrates everything that went wrong to bring us here. Fortunately, it also offers a lesson in how to get back out.

Add all the capacity you want. It won’t reverse the country’s long decline as a manufacturing superpower if corporate America keeps gurgling its sad, tired story about the impossibility of making things on these shores anymore. It’s a story that helped pour a whole lot of wealth into the executive pockets peddling it. But a half century of self-inflicted damage is enough. The doors have fallen off, and it’s plain for all to see: The story was barely bolted together.

Boeing and the Dark Age of American Manufacturing

Somewhere along the line, the plane maker lost interest in making its own planes. Can it rediscover its engineering soul?

www.theatlantic.com

 

[Nilgiri]

@Nilgiri keeps himself best informed and should be the best to answer.

However, from a VERY PARTISAN POINT OF VIEW, my opinion is that failures to meet taxation targets, favours shown to crony capitalists, and rank bad economic and financial management led to large gaps between revenue and expenditure.

This was ignored and over-ridden by the incumbent government's inherent corruption, and the drive to award contracts with money that it didn't have, at the cost of basics, coupled with the desperate need to showcase their bold spending on strategic areas - defence acquisition, marquee infrastructure, such as the roads network, stupid grandstanding like the institution of 110-kmph trains capable of running at 130 kmph but hamstrung by bad carriageways....a variety of factors like this.

I doubt that more than two or three other Indian members would agree, even partially, with this response. Look for other inputs.

(Human) Time is upstream to money. It is essentially the exchange of time w.r.t resource processing and transfer (from core intellectual progress over time over regd our needs and larger objectives and purpose) that is the basic thing money and then sanctioned currency address to begin with and ease (given the resolutions available compared to barter, public trust reposited, standardisation and so on).

BJP et al. is social engineering first. That's where by far most of the time is spent....and India's population has it in abundance, especially whichever chip on shoulder (immutable identity wise) can be networked to enough degree collectively into permanent grievace addressal for as much tyranny of mob majority as possible in crucial raw areas of the country this exists to be exploited and entrenched.

Actual physical/rational engineering (building from the margin on offer to society that can be invested for better tomorrow and practical today) is a nominal afterthought, a distraction to keep enough gullible people duped or blind in first place.

If you dutifully put on the glasses, indeed the city is emerald in colour.....pay no attention the man behind the curtains etc.

 

[Nilgiri]

What has the debt been spent on?

Putting aside the political parties/politics deepset problems at their various intensities on the various important issues..... we can try a basic objective reference setting.

The debt (govt wise) would basically split evenly (since it supports the gap between revenue and expenditure) into what the govt spends on.

From top of my head at union level (~ 60% of total govt spending), its something like this % wise in the latest chunk of recent years (since %'s are what are generally scaled this decade in a growth glide pattern etc and generally wont see drastic changes etc). i.e I'm using ~ 500/800 billion USD for union/total govt spend I remember seeing a cpl years ago iirc....for my rough 60 vs 40 breakdown between these two (union/federal vs state) govt layers.

% of total union govt spending:

20 - 25% range:

- Interest on existing debt (i.e servicing)

8 - 12% range (each):

- Defence
- Transport
- Transfers to state budget support

5 - 8% range (each)

- Pensions
- Food subsidy
- Rural development
- Govt administration

In the 5% and below range are many things:
- Education
- Health
- Farming subsidy
- various other programs

The remaining 40% of total govt spending is done by the states (they have their own specific revenue sources alloted to them and so on (debt they take in INR as well), in addition to what they earn from GST and then the aid/support the central govt sends them, this last bit was mentioned above).

This varies from state to state in composition, but since large chunks like defence and other union-only things (like any foreign debt servicing, national federal infra etc) are not in their ambit to begin with.....there tends to be more making up on the education, health front here.

Folks can look up more here and/or correct any errors I have made with other sources:

https://prsindia.org/budgets/states

Budgets

(There is panoply of dicussion papers as well for deeper dive stuff)

Regarding the larger debt leverage picture you and others mention in number of other posts and again off top of my head mostly:

I believe it is about 85% of GDP for govt currently and about 50% for private ( household and corporate total)...combining to ~ 135% of GDP.

This should be manageable to service and more or less is holding steady (given the various credit ratings, uptake potential involved and debt market dynamics).

The 50% private might grow to 100% this decade or it may need another decade.

You have to remember a lot of these things are not directly tied to GDP, but leveraged on things like larger total wealth and market capitalisation and so on.

India's market cap for example is currently at 4.5 trillion and several financial analysts project it reaching 10 trillion by 2030.

Credit suisse estimates total wealth of India currently in the 16 - 20 trillion range similarly.

So large sections of what you wrote are relatively unfounded as one can look at the objective numbers regd Indian govt bonds on the open market with the credit ratings and relative measures and so on out there, i.e what is the govt's "desperation" for credit (and thus ability to hedge against default):

~ 7% yield on 10 yr bond (this yield is fairly flat for short and longer term too, though at least not inverted) on a BBB credit rating.... central interest rate of about 6.5% now iirc, its credit default score is decent enough in the end and iirc 1.4% default risk on the 5 year bond (China has this at about 1.2% risk).

Its complete different magnitude of tension/comfort compared to say Pakistan (given some Pakistani members constantly pooh pooh this with some "grey economy" argument in all kind of off topic convo chains I have come across here lately).

Pakistans total wealth and market cap can all be looked up along with its forex situation....relative to its govt budget, revenue and then private debt along with GDP estimated and so on (as small as these are relative to its population to begin with, and barely changing for a long time).

There's basically a reason why pakistan 10 year govt bond offers a 15% interest now....the govt is deperate for finance, so much so that the yield curve is inverted too (i.e 17% yield for shorter term maturities and 14% or so for longer term ones)....at least its not a crazy inversion but still this is extremely bad to have for spate of years for a country this size.

The credit rating is junk (CCC or something), interest rate is 22%? and it has something iirc like a 10% default risk on 5 year bonds, which is real bad again for this size of country and early stage of pakistan's economy relative to world setting/opportunity.

Regd. China, that is not a good model to follow at all for India (only certain elements are to be studied and applied, which is a separate topic). Though BJP certainly has its version of moribund fascination with their larger despot mirror regime in the CCP anyhow.

Their mistakes and costs are mounting now past the demographic and sociological issues the CCP have largely manufactured and baked in for long time this century (i.e for example what has been over-commited to real estate as an investment route, that is showing large signs of ponzi scheme bubble, at the same time as their market cap hemorrhaged a full 6 trillion USD in the last few years).

But India's challenges are immense in how to re-orient optimally what it has at hand, i.e better transmission of genuine price signalling commensurate to its human resource stock at hand. The politics and corruption are great obstacles and inertias in this.

 

[War Lord]

He will still win. The satta market says 325 seats. We still are at the mercy of the imbecile masses in the delta, and toxic pockets like Gujarat.

Fingers crossed!!

I hope the debt ceiling of 1 "Arab" is reached. One can only dream.

 

[War Lord]

Fingers crossed!!

I hope the debt ceiling of 1 "Arab" is reached. One can only dream.

IDK if it's already reached lol

Cuz wtf is "205 lakh crores"?

Urdu/Arabic/Farsi counting is already so confusing. Why can't we just use 100,000, million, billion and trillion lol

 

[FuturePAF]

Putting aside the political parties/politics deepset problems at their various intensities on the various important issues..... we can try a basic objective reference setting.

The debt (govt wise) would basically split evenly (since it supports the gap between revenue and expenditure) into what the govt spends on.

From top of my head at union level (~ 60% of total govt spending), its something like this % wise in the latest chunk of recent years (since %'s are what are generally scaled this decade in a growth glide pattern etc and generally wont see drastic changes etc). i.e I'm using ~ 500/800 billion USD for union/total govt spend I remember seeing a cpl years ago iirc....for my rough 60 vs 40 breakdown between these two (union/federal vs state) govt layers.

% of total union govt spending:

20 - 25% range:

- Interest on existing debt (i.e servicing)

8 - 12% range (each):

- Defence
- Transport
- Transfers to state budget support

5 - 8% range (each)

- Pensions
- Food subsidy
- Rural development
- Govt administration

In the 5% and below range are many things:
- Education
- Health
- Farming subsidy
- various other programs

The remaining 40% of total govt spending is done by the states (they have their own specific revenue sources alloted to them and so on (debt they take in INR as well), in addition to what they earn from GST and then the aid/support the central govt sends them, this last bit was mentioned above).

This varies from state to state in composition, but since large chunks like defence and other union-only things (like any foreign debt servicing, national federal infra etc) are not in their ambit to begin with.....there tends to be more making up on the education, health front here.

Folks can look up more here and/or correct any errors I have made with other sources:

https://prsindia.org/budgets/states

Budgets

(There is panoply of dicussion papers as well for deeper dive stuff)

Regarding the larger debt leverage picture you and others mention in number of other posts and again off top of my head mostly:

I believe it is about 85% of GDP for govt currently and about 50% for private ( household and corporate total)...combining to ~ 135% of GDP.

This should be manageable to service and more or less is holding steady (given the various credit ratings, uptake potential involved and debt market dynamics).

The 50% private might grow to 100% this decade or it may need another decade.

You have to remember a lot of these things are not directly tied to GDP, but leveraged on things like larger total wealth and market capitalisation and so on.

India's market cap for example is currently at 4.5 trillion and several financial analysts project it reaching 10 trillion by 2030.

Credit suisse estimates total wealth of India currently in the 16 - 20 trillion range similarly.

So large sections of what you wrote are relatively unfounded as one can look at the objective numbers regd Indian govt bonds on the open market with the credit ratings and relative measures and so on out there, i.e what is the govt's "desperation" for credit (and thus ability to hedge against default):

~ 7% yield on 10 yr bond (this yield is fairly flat for short and longer term too, though at least not inverted) on a BBB credit rating.... central interest rate of about 6.5% now iirc, its credit default score is decent enough in the end and iirc 1.4% default risk on the 5 year bond (China has this at about 1.2% risk).

Its complete different magnitude of tension/comfort compared to say Pakistan (given some Pakistani members constantly pooh pooh this with some "grey economy" argument in all kind of off topic convo chains I have come across here lately).

Pakistans total wealth and market cap can all be looked up along with its forex situation....relative to its govt budget, revenue and then private debt along with GDP estimated and so on (as small as these are relative to its population to begin with, and barely changing for a long time).

There's basically a reason why pakistan 10 year govt bond offers a 15% interest now....the govt is deperate for finance, so much so that the yield curve is inverted too (i.e 17% yield for shorter term maturities and 14% or so for longer term ones)....at least its not a crazy inversion but still this is extremely bad to have for spate of years for a country this size.

The credit rating is junk (CCC or something), interest rate is 22%? and it has something iirc like a 10% default risk on 5 year bonds, which is real bad again for this size of country and early stage of pakistan's economy relative to world setting/opportunity.

Regd. China, that is not a good model to follow at all for India (only certain elements are to be studied and applied, which is a separate topic). Though BJP certainly has its version of moribund fascination with their larger despot mirror regime in the CCP anyhow.

Their mistakes and costs are mounting now past the demographic and sociological issues the CCP have largely manufactured and baked in for long time this century (i.e for example what has been over-commited to real estate as an investment route, that is showing large signs of ponzi scheme bubble, at the same time as their market cap hemorrhaged a full 6 trillion USD in the last few years).

But India's challenges are immense in how to re-orient optimally what it has at hand, i.e better transmission of genuine price signalling commensurate to its human resource stock at hand. The politics and corruption are great obstacles and inertias in this.

The prospect for India’s economy on the whole are balanced and set for growth, especially in comparison to Pakistan. Something the decision makers in Pakistan should finally accept and learn to how catch up with. It may take decades to do on a per capita basis, but something that needs to be set as a national goal.

The longer they wait the more they will have to catch up with, that’s they may not be able to enjoy it’s fruits in their lifetimes.

 

[GatlingGun]

Would you care to also note down what's written in the blue colored section that's immediately below the circled part? The list of top 10 countries with most debt in particular.

While Pakistan is nowhere to be seen in that top 10 list.

Because their economy is less than 1/10th of our let alone other developed countries present there

 

[GatlingGun]

Imagine a country ruled faced by political instability, extremism and terrorism is doing better than Gujarati's Vishwaguru.

Pakistan has less poverty. Pakistan has less hunger issues. Hehe.

What they say about Gujaratis is true. They would sell their mothers. Can never trust them.

How are they doing better?? Their external debt per capita is higher than us while GDP per capita lower than us.

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