Archive for January, 2019


India job data spells trouble for Narendra Modi

Indian youth queue at a jobs fair in Mumbai on October 12, 2011.Image copyrightGETTY IMAGES
Image captionOne out of every five young people is out of work

India’s unemployment rate is the highest it has been since the 1970s, according to a government jobs report.

Economist Vivek Kaul explains what this means and why it matters to Prime Minister Narendra Modi’s government, which is accused of withholding the findings months before the general election.

What does the report say?

It says that India has a jobs problem.

The country’s unemployment rate – 6.1% – is the highest it has been since 1972-73, the earliest year for which comparable data is available. This is according to the latest employment survey, which was exclusively accessed by The Business Standard newspaper, after the government had allegedly refused to release it.

On its own, an unemployment rate of 6.1% may not sound too dire, until you consider that in 2011-12, it was just 2.2%. And it’s particularly high among people between 15 and 29 years – in urban India, 18.7% of men and 27.2% of women in this age group are looking for jobs, while in rural India, its 17.4% and 13.6% respectively.

How significance is it?

Over the years, the story of India’s economic growth has been sold on the basis of its massive and young workforce – people under the age of 35 make up 65% of the population. The idea was that 10 to 12 million young people would enter the workforce every year. As they start earning and spending, growth would accelerate and this would pull millions more out of poverty.

Prime Minister Narendra Modi addressing BJP party workers during a public meeting on October 29, 2017 in Bengaluru.Image copyrightGETTY IMAGES
Image captionMany see the upcoming election as a referendum on Mr Modi

But, as the survey shows, the unemployment rate among young people is very high. Nearly one in every five is unable to find a job. India’s so-called demographic dividend is nowhere in sight.

This timing of this finding – just months ahead of a general election – makes it all the more significant. The report was approved by India’s national statistics commission. Two of its members resigned earlier this week, citing the government’s alleged refusal to release the report as one of the reasons.

Job creation was a key promise during Mr Modi’s election campaign in 2013.

In early January, the Centre for Monitoring Indian Economy, a private institution, had raised the alarm, saying the number of unemployed people has been rising steadily and had reached 11 million by the end of December 2018.

Who is to blame – the government or the economy?

It is a little bit of both.

The Indian economy and the bureaucratic machinery that supports it do not encourage entrepreneurship and job creation – there is a lot of red tape and crucial reforms are still pending. One cannot lay all the blame on Mr Modi, who has been in power for just five years. The problem is older and deeper.

An Indian resident holds 500 and 1000 rupee notes.Image copyrightGETTY IMAGES
Image captionThe surprise cancellation of 500 and 1000 rupee notes hurt the economy

But Mr Modi had promised “minimum government and maximum governance”, which translates to efficiency and growth and failed to deliver on this. His government also did two things that badly hurt the economy.

In 2016, his government cancelled all 500 ($8; £6) and 1,000 rupee notes, which accounted for 86% of the currency in circulation. This was supposed to be a crackdown on illegal cash but India’s central bank subsequently said most of that money made its way back into the banking system.

Demonetisation, as it is known, adversely affected large parts of India’s economy and particularly the informal sector which relied heavily on cash transactions. Agriculture also suffered as farmers largely pay in and get paid in cash. Several small business shut down and those that managed to survive cut jobs. In such situations, young people are more likely to get fired.

Then in July 2017, the government implemented the Goods and Services Tax (GST), a sweeping new single tax code that replaced numerous central and state levies. But it crippled small businesses, partly because it was shoddily designed and implemented. This has also delayed job recovery, suggesting that employment could increase next year.

The data for this survey was collected between July 2017 and June 2018. It is the first survey of jobs since demonetisation and the new tax code.

Is there a problem with the data?

When opposition parties had expressed concern over rising unemployment in the past few years, Mr Modi had often dismissed the criticisms saying “no-one has accurate data on jobs” and calling the figures they quoted “propaganda”.

Mr Modi was referring to India’s large informal economy, which accounts for nearly three-fourths of the country’s jobs. But any meaningful employment survey would have to capture this demographic. The periodic labour force survey collects data from large as well as small enterprises across India – it, therefore, takes into account the informal sector.


Bank of India, Maharashtra to come off central bank watchlist – source

NEW DELHI (Reuters) – Bank of India and Bank of Maharashtra will be dropped from the Reserve Bank of India’s prompt corrective action plan (PCA) for state-owned banks with high levels of bad debt and inadequate capital, a source told Reuters on Thursday.

The move follows improvements in their asset quality and capital ratios and a ruling by the RBI on Thursday, said the source, who asked not to be identified as the discussions are private.

The RBI’s board for financial supervision chaired by new governor Shaktikanta Das took the decision at its meeting on Thursday after reviewing the latest quarterly performance of all 11 banks on the PCA list, the source said.

Bank of India shares rose as much as 5 percent after the news before ending 3.65 percent higher. Bank of Maharashtra rose as much as 5.6 percent before ending up 3.2 percent.

A third lender may also be removed from the list pending the outcome of a technical clarification from the bank, the source added.

The RBI did not respond to an email seeking comment.

The 11 state-owned lenders on the RBI’s list are barred from issuing fresh big-ticket loans or expanding operations and their financial performance is given close scrutiny.

There are 21 listed state-run banks in India that provide about two-third of the total loans. With nearly half of them under a PCA plan and the rest cautious due to a record $150 billion in bad debt, the government has been keen the curbs be relaxed to boost their ability to lend.

Bank of India’s net non-performing assets fell to 5.87 percent in the October-December quarter from 7.64 percent in July-September. Its capital adequacy ratio improved to 12.47 percent from 10.93 percent.

Bank of Maharashtra’s net non-performing assets fell to 5.91 percent from 10.61 percent while its capital adequacy improved to 11.05 percent from 9.87 percent.

The government increased its planned capital infusion into state banks by 410 billion rupees ($5.76 billion) to 1.76 trillion rupees in the current fiscal year ending March.

Source: Reuters


‘Discuss only non-contentious bills’: Opposition tells PM Narendra Modi at all-party meet

Senior Congress leader Ghulam Nabi Azad said that the Opposition had asked the government to take up only those bills that were not controversial in Parliament during the Budget session.

INDIA Updated: Jan 31, 2019 17:58 IST

HT Correspondent
HT Correspondent
Hindustan Times, New Delhi
PM Narendra Modi,all-party meet,budget session
The Opposition parties have conveyed to the prime minister during an all party meeting held in New Delhi to not present any controversial bills in Parliament during the Budget session, a day before the interim budget is presented before Parliament.(PTI)

The Opposition parties have asked Prime Minister Narendra Modi to not present any controversial bills in Parliament during the Budget session. This was conveyed to the prime minister during an all party meeting held in New Delhi a day before the interim budget is presented before Parliament.

Senior Congress leader Ghulam Nabi Azad said that the Opposition had asked the government to take up only those bills that were not controversial in Parliament during the Budget session.

“We should take up only those bills which are not controversial… on which there is total unanimity,” the Leader of Opposition in Rajya Sabha said.

Azad said it would be difficult for Parliament to function if the government pushes for contentious bills.

The TMC leaders said that once the President’s address and budget discussions got over, there would only be a few hours left for discussion. They said that the issue of jobs and famer distress should be discussed during that time.

They questioned why the government had listed as many as 48 bills to be discussed in just 240 minutes. “Why has Government listed 48 Bills in 240 minutes? Only 5 minutes per Bill!,” they said.

They also said that the TMC would raise the issue of misuse of the CBI. “CBI is being misused against political opponents. This will be raised strongly by us and other Opposition parties,” Derek O’Brien said.

Source: Hindustan Times


Hours after extradition, AgustaWestland co-accused Rajiv Saxena sent to 4-day ED remand

Dubai-based businessman Rajiv Saxena and corporate lobbyist Deepak Talwar were deported to India from United Arab Emirates (UAE) in the early hours of Thursday.

SNS Web | New Delhi | 

Delhi’s Patiala House Court on Thursday granted the Enforcement Directorate a four-day custodial remand of AgustaWestland VVIP chopper case co-accused Rajiv Saxena.

The probe agency had sought an eight-day remand of the Dubai-based businessman, with the ED counsel DP Singh saying that the agency was aware of Saxena’s health and medical condition and that every possible need will be taken care of.

Accused Rajiv Saxena’s counsel Geeta Luthra had argued before the court that the businessman was brought to India in an illegal manner and therefore the remand request had automatically become incorrect.

After successful extradition of Christian Michel James in December 2018 in the Rs 3,600-crore AgustaWestland chopper deal case, co-accused Rajiv Saxena and corporate lobbyist Deepak Talwar were deported to India from United Arab Emirates (UAE) in the early hours of Thursday.

Hours after extradition, the ED had started the interrogation of the duo.

The extradition comes as a major boost to the Indian agencies investigating corruption angles in two separate cases involving Saxena and Talwar.

While Rajeev Shamsher Bahadur Saxena was wanted in the AgustaWestland money laundering case, Deepak Talwar was wanted by the Enforcement Directorate and the Central Bureau of Investigation for alleged misuse of over Rs 90 crore taken through the foreign funding route.

A two-member team of the Enforcement Directorate, headed by an Inspector General rank officer and officials of Ministry of External Affairs and Research and Analysis Wing (R&AW), accompanied the two accused to Delhi from Dubai in the aircraft that landed at the Indira Gandhi International (IGI) Airport in Delhi around 2.30 am, an IANS report said.

The two were placed under arrest by the ED after completion of the immigration process and medical examination. They will be produced before a court later on Thursday, said officials.

Both Saxena and Talwar were picked by Dubai authorities on Wednesday “in assistance” to a request made by Indian agencies, PTI reported.

Talwar faces charges of criminal conspiracy, forgery and various sections of the FCRA for allegedly diverting foreign funds to the tune of Rs 90.72 crore meant for ambulances and other articles received by his NGO from Europe’s leading missile manufacturing company. The agencies are also probing his role in some aviation deals he struck during the UPA regime.

Besides ED and CBI cases, Talwar also has a tax evasion case filed against him by the Income Tax department.

The ED had summoned Rajiv Saxena multiple times in the case and had arrested his wife Shivani Saxena from the Chennai airport in July 2017. She is now out on bail.

According to the ED case, Saxena, his wife and their two Dubai-based firms — Ms UHY Saxena, Dubai and Ms Matrix Holdings — routed “the proceeds of crime and further layered and integrated into buying the immovable properties/shares among others”.

The ED had said that its probe found that “Agusta Westland International Ltd, UK paid an amount of Euro 58 million as kickbacks through Gordian Services Sarl, Tunisia and IDS Sarl, Tunisia”.

It also said these companies “further syphoned off the said money/ proceeds of crime in the name of consultancy contracts to Interstellar Technologies Ltd, Mauritius, and others which were further transferred to UHY Saxena, Dubai and Matrix Holdings Ltd. Dubai and others”.

The ED had named Rajeev Saxena in its chargesheet and got a non-bailable warrant issued against him.

On January 1, 2014, India scrapped the contract with AgustaWestland, the British subsidiary of Finmeccanica, for supplying 12 AW-101 VVIP choppers to the India Air Force over an alleged breach of contractual obligations and charges of Rs 423-crore kickbacks paid by the firm to secure the deal.

(With agency inputs)


China’s factory activity shrinks as slowdown worries rise

Worker with a circuit board in a Yamaha musical instrument factory in TianjinImage copyrightGETTY IMAGES

Chinese factory activity contracted for a second straight month in January, the official Purchasing Managers Index (PMI) showed.

The index ticked up to 49.5, but remained below the 50-point level that separates growth from contraction.

China reported its weakest economic expansion in 28 years in 2018, and growth is expected to slow further.

Already, a number of multinationals have said sluggish growth in China has affected their bottom line.

The manufacturing data was up slightly from the 49.4 level recorded in December.

Marcel Thieliant, economist at Capital Economics, said while the PMI didn’t weaken any further in January, “it still suggests that the economy lost momentum at the start of the year”.

Other data, such as consumer sentiment and retail sales figures, also point to weakening demand in the world’s second largest economy.

Several international companies have warned on China’s slowdown, including Apple.

The tech giant blamed a 5% fall in revenues partly on China.

Shares of industrial equipment giant Caterpillar took a beating earlier this week, after the company reported its sales slipped 4%, largely due to slow sales in China.

Chipmaker Nvidia also reported softer sales due to a sluggish Chinese market.

3M, which makes products from adhesive tapes to air filters, also said weak customer demand in China affected its bottom line.

China has been attempting to reform its economy to rely more on domestic consumption instead of exports and investment to fuel growth.

The US-China trade war is also creating economic uncertainty.

The latest figures come as officials from both sides meet in Washington to try ease trade tensions.

If the two sides cannot reach an agreement by 1 March, the US has said it will increase the tariff rate from 10% to 25% on Chinese goods worth an estimated $200bn (£154.4bn).

Source: The BBC


China scales back Iran nuclear cooperation ‘due to fears of US sanctions’

  • Islamic Republic’s nuclear agency says China is dragging its feet on work to redesign reactor agreed as part of international nuclear deal that Donald Trump has since tried to end
  • Iran’s claim that China fears its companies will be hit with sanctions comes amid ongoing efforts to resolve stand-off with Washington
PUBLISHED : Thursday, 31 January, 2019, 8:04pm
UPDATED : Thursday, 31 January, 2019, 8:04pm

Ali Akbar Salehi, the head of Atomic Energy Organisation of Iran (AEOI), said on Wednesday that the Chinese were “reducing the speed of cooperation despite their commitment” to redesign the Arak heavy water reactor.

Salehi told the state-run Islamic Republic News Agency that China fears possible US sanctions on its nuclear-related firms if it continues its cooperation with his country.

He also urged China to re-engage with the project, but insisted that Iran had “alternative choices” if it continued to drag its feet.

The project was agreed as part of a 2015 nuclear deal between Iran and the five UN permanent Security Council members – Britain, China, France, Russia and the US – plus Germany and the EU under which the Islamic republic would scale back its nuclear activities in exchange for reduced sanctions.

But the agreement has been in jeopardy since the election of Donald Trump, who pulled out of the agreement in 2017, claiming it was a “terrible deal” that did nothing to curb the nuclear threat from Iran.

The US has since imposed new sanctions on Iran, targeting its atomic energy organisation along with its banks, national airline and shipping companies.

The reactor at Arak, however, remained exempt from sanctions.

But the increased rivalry between the US and China has also raised the pressure on Beijing regarding its engagement with Iran.

Last month the Huawei executive Sabrina Meng Wenzhou was arrested in Canada for possible extradition to the US on fraud charges relating to alleged breaches of Washington’s sanctions on Iran – a move that has further damaged relations.

Earlier this month Behrooz Kamalvandi, a spokesman for the AEOI, also accused China of delaying work on the project.

“Redesigning the Arak reactor with China is supposed to [be proceeding] faster,” Kamalvandi told the state news agency.

“Iran and China [were supposed to] cooperate in installing the equipment in the redesigning process,” Kamalvandi said, adding that his county was willing to start the next phase of work on its own if necessary.

James Floyd Downes, a lecturer in comparative politics at the Chinese University of Hong Kong, said Beijing may be “concerned about the possible sanctions on Chinese nuclear-related firms if it continues to cooperate with Iran”.

Downes continued: “At the same time, it is also likely that a closer relationship with Iran may negatively affect the continued trade war negotiations with the Trump Administration in Washington. This is likely to exacerbate tensions and the overall situation with Washington.”

Zhao Tong, a fellow at Carnegie-Tsinghua Centre for Global Policy, said it was difficult to determine why China had slowed down its work on the reactor.

“Even though Washington has withdrawn from the [nuclear deal] the US should still have a strong interest in seeing this reactor being converted as soon as possible, because the conversion could help reduce Iran’s potential capacity to pursue nuclear weapons,” Zhao said.

“I don’t see any reason why the United States would want to undercut China’s efforts in this regard. This is not a case of China-Iran cooperation to enhance Iran’s nuclear weapon capabilities. In fact, it is the opposite,” Zhao added.

Meanwhile, a two-day meeting of the five major nuclear powers ended on Thursday with the parties reaching a consensus on “a clear understanding of the direction of cooperation” and said they would “continue to work to promote the establishment of a zone free of nuclear and other weapons of mass destruction in the Middle East”.

“The current international security situation is complicated and has evolved,” the statement continued, vowing to use the platform to maintain dialogue and a coordinated response to international challenges.

Both Downes and Zhao said the talks were likely to have included discussions on expanding their common ground on nuclear issues in the Middle East, including Iran’s atomic programme.

Source: SCMP


Chinese premier, Cambodian PM welcome launch of China-Cambodia culture, tourism year

BEIJING, Jan. 30 (Xinhua) — Chinese Premier Li Keqiang and Cambodian Prime Minister Samdech Techo Hun Sen sent congratulatory messages on the launch of the China-Cambodia culture and tourism year 2019 in Phnom Penh on Wednesday, expressing hope for strengthening the bilateral friendship and ties.

In his message, Li said that China and Cambodia, both boasting a long history, rich culture and beautiful scenery, are good neighbors, friends, partners and brothers and enjoy a long-standing friendship. There are wall paintings in Cambodia’s famed Angkor Archeological Park depicting friendly exchanges between the two peoples more than 1,000 years ago.

Li said the China-Cambodia culture and tourism year is an opportunity for the two sides to promote cultural and people-to-people exchanges, so as to foster a solid ground for building a community with a shared future together.

For his part, Hun Sen said the long-standing friendship between Cambodia and China remains unshakable with closer and fruitful cooperation.

He added that the launch of the culture and tourism year benefits the bilateral friendly cooperation under the framework of the Belt and Road Initiative toward a win-win end, as well as the development of tourism in the two countries.

Source: Xinhua


Fresh round of China-U.S. trade talks start in Washington

WASHINGTON, Jan. 30 (Xinhua) — China and the United States kicked off here on Wednesday morning a new round of high-level talks to address their differences on outstanding economic and trade issues.

The talks, scheduled for two days, mark a significant step in the implementation of the important consensus reached by Chinese President Xi Jinping and U.S. President Donald Trump during a working dinner in Buenos Aires, Argentina, on Dec. 1.

The two heads of state agreed back then that the two sides should try to reach a mutually beneficial and win-win agreement within 90 days to bring an early end to their months-long trade friction featuring massive tariffs on imports from each other.

The latest talks began shortly after 9 a.m. local time (1400 GMT) at the Eisenhower Executive Office Building, part of the White House complex, following a brief session open to the media.

All the discussions and negotiations, which are expected to last until Thursday afternoon, will be held behind closed doors.

The Chinese delegation, headed by Vice Premier Liu He, includes senior officials from major economic sectors of the Chinese government, while the U.S. team is led by Trade Representative Robert Lighthizer and includes Treasury Secretary Steven Mnuchin, among others.

The White House has said that the U.S. side welcomes the Chinese delegation, which arrived in Washington on Monday, and that Trump is scheduled to meet with Liu on Thursday.

The world is watching these talks closely, with many hoping for some substantial, positive progress to be made.

Analysts have warned that the lasting trade tension between the world’s two largest economies would not only impact their own businesses, workers and consumers, but also stoke global market fears of uncertainty and disruption, and erode confidence in the long-term global economic growth.

While acknowledging that the talks will not be easy given the complexity and difficulty of certain issues in dispute, China maintains that there will be no insoluble problems between the two countries as long as they both keep the great benefits of cooperation in mind and show sincerity and mutual respect at the negotiating table.

Source: Xinhua


Election worries muddy waters for bond investors in India

MUMBAI (Reuters) – Doubts over how India will vote in a coming election and fears that the government will overspend persuading people to extend its mandate is keeping investors wary of buying bonds despite the lure of low inflation and possible interest rate cuts.

“There is obviously increasing uncertainty going into the general election and that is making investors generally a bit more cautious,” said Leong Lin-Jing, investment manager at Aberdeen Standard Investments in Singapore.

On Friday, the Hindu Nationalist government of Prime Minister Narendra Modi will unveil an interim budget that is expected to be full of goodies for rural and urban middle class voters.

Direct cash transfers to farmers, interest-free loans and income tax cuts might help the ruling Bharatiya Janata Party’s chances in a general election that must be held by May.

But pre-election largesse won’t reassure investors wanting more commitment to fiscal consolidation.

Investors have generally liked Modi’s pro-business stance, and his government’s earlier fiscal conservatism. And the size of the BJP’s parliamentary majority at the last election bred confidence in Modi’s ability to deliver on policies.

But the BJP’s defeat in state polls last month, and recent opinion polls that show it could be forced to form a coalition with partners who could make it harder to press forward with economic reforms and revert to fiscal prudence.

“It is really about having a stable leadership,” said Mitul Kotecha, senior emerging market strategist at TD Securities in Singapore.

“If there is no clear mandate at the elections then implementation of reforms could take a hit and prompt foreign capital outflows from India’s bond and equity markets.” And if the opposition Congress Party were to form the next coalition government it could adopt populist measures even more worrying for investors.

Earlier this week, Congress announced plans for a universal basic income scheme to support 300 million poor, which some analysts reckon would cost around 1 trillion Indian rupees ($14 billion)annually, and also potentially ignite inflation.

“The universal basic income scheme or any such fiscal largesse can lead to higher wages and therefore higher core inflation,” Maneesh Dangi, head of fixed income at Aditya Birla Sun Life, one of India’s largest mutual funds.

(Graphic: Foreign flows into Asian bonds-monthly –

The fears of fiscal slippage have already pushed benchmark 10-year bond yields up about 30 basis points during the past six weeks, and some analysts expect them to rise further.

That gloominess comes despite hopes of a more dovish stance on interest rates from the Reserve Bank of India following the appointment last month of a new governor. Dangi, who manages around $22.5 billion of debt assets, believes the bond market should be even more bearish, as it is probably over-optimistic over chances for an early RBI rate cut.

“In our view the market is overextending its bullishness that there will be a rate cut in February,” he said.

Worried about underpriced risks posed by fiscal slippage and the RBI proving to be more hesitant reducing rates, Aditya Birla Sun Life has significantly cut holdings of long-tenure bonds and switched to tenures of one to two years.

Aberdeen has also cut its exposure to Indian debt paper during the past couple of weeks.

The uncertainties have prompted some investors to sharply reduce their duration of debt holdings while many are switching to Indonesia, Malaysia, Philippines and Thailand.

India saw a sustained sell-off by foreigners who have sold $736 million of Indian debt so far in January on top $5.9 billion sold in 2018. In contrast, foreigners bought 7.09 trillion rupiah ($501.95 million) of debt in Indonesia this month after having pumped in 57 trillion rupiah ($4.05 billion) in 2018.

For all the near term uncertainty, foreign investors remain bullish on India in the long term given its stable macro-economic outlook and attractive returns.

“There is a bit of hesitancy ahead of elections about raising exposure to India, but we are constructive on India in the medium to longer term,” said Kotecha.

($1 = 14,125.0000 rupiah)

Source: Reuters


After 2 statistics panel members quit, Govt clarifies on jobs report, revised GDP data

Regarding the announcement of the back-series data, the ministry said the NSC had itself urged it to finalise and release it.

SNS Web | New Delhi | 

A day after two independent members of the National Statistical Commission resigned over a disagreement with the Government, the Ministry of Statistics and Programme Implementation issued a clarification stating that “no concerns were expressed by the members in any of the meetings of the Commission in the last few months”.

NSC acting chairperson PC Mohanan and another member JV Meenakshi quit on Monday expressing concerns on the functioning of the panel including the release of the labour force survey results and the Back Series of GDP.

“I have resigned from NSC. We thought that the commission is not very effective nowadays and we also thought that we are not able to discharge the commission’s responsibility,” Mohanan told PTI.

“We have resigned from the NSC. Over the months, we have been feeling that we were not been taken seriously and being sidelined by the government. Recent decisions of the NSC were not being implemented,” Mohanan was quoted as saying by media reports.

Source: The Statesman

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