[Samurai]

Originally Posted by vrprabhu

I am sure many would recollect the 'dot-com' bust in ~ 2008.

Dot-com burst happened in 1999... I think you are referring to subprime scandal that burst in 2008.

[JayKis]

Looks like you guys where right. Missed the "Annual" bit on the headline" there. My Apologies! The annual is only 9%.



Mods Kindly merge the posts.

[drsingh]

Originally Posted by Sutripta

Last week one would have said, with deep conviction, that the constitution trumps other laws. But if I'm not mistaken (open to being corrected) the part of GST payments to be made to states is also part of the Constitution. Added to the Constitution by the current regime. And the AG recently advised the govt. that that part of the constitution can be disregarded, it does not hold.

Sutripta

The Epidemic Act is designed to give emergency powers. Used by the British colonial regime to override constitutional rights at the time of an 'epidemic' .

I understand your point of view from an idealist view of constitutional law. But from a realistic viewpoint, constitutional rights have been diluted by successive governments by amendments. The only limits on power of the government to redistribute resources under present conditions is politics.

The States do not have any other resource to meet revenue shortfall. They will play political posturing to get some other concessions on taxes before making a compromise.

Already taxes have gone up on fuel, mobile phones, alcohol, DTH , telecom sector AGR revenue, cigarettes, etc. Healthcare sector is being corporatized. Extension of compensation cess and increased state share of taxes in future or cheaper loans etc. are some concessions that will bring States to the table.

All these things are going to push more parts of the economy into the unorganized sector. A new equilibrium will be reached between the Black and the white economy.

[OrangeCar]

My 2 cents here..

The slowdown has been there for a while. See below dropping growth rates for over 4 years.



Obviously the government had these figures, and knew about dropping GDP. The government knew what happened the last time when something abrupt was announced (demonetization). One would think government would have been a tad bit more careful of making a demonetization type televised address switching the main energy supply buttons off. It obviously did not. Maybe, they thought GDP deceleration was not happening, or lock down impact on GDP will not be significant, or the government just does not understand these issues and thus... does what it thinks is right for television TRP.

Below is the QoQ GDP growth rates.


Manufacturing has been reporting negative growth for three quarters, excluding the current disastrous one. Net - our Manufacturing sector is much smaller than what it was a year ago.


Construction sector was already in negative territory. This quarter.. halved!


What happens when any sort of trade is not allowed? Almost half of GDP lost.


Real estate.. down!


All above graphs are from CNBC TV18.

Below table gives rates across countries. Source.

OECD source for other countries data.

Takeaways -

1. We are the worst performing economy (do not want to call ourselves a major economy).
2. Per capita GDP of in India is USD 2000. And we posted the highest decline. (China's per capita GDP is close to USD 10000 - 5 times ours).
3. We as a nation should know what we can afford. We cannot ape European nations or other developed countries like AUS or NZ (because in our mind - hum kissi se kum nahi - we are less to none).
4. Citizens are on their own. Govt. when short of money will just raise taxes. Please fend for yourselves.

[vrprabhu]

Originally Posted by Samurai

Dot-com burst happened in 1999... I think you are referring to subprime scandal that burst in 2008.

Yes, you are right - it was the sub-prime crisis blew up around 2006 and effects lasted for some time. My mistake.

Not sure about the time of dotcom bust - but wasn't 1999 the period when Y2K hype was peaking? Dotcom bust would have happened subsequently - i.e. post 2001.

Originally Posted by OrangeCar

Citizens are on their own. Govt. when short of money will just raise taxes. Please fend for yourselves

Well said, but how?

And, pray, what happens when taxes are raised? Will it increase demand? That's why I now tend to believe what Mr. Ashok Rajagopal has been posting - we are in for tough times, over and above the troubles brought about by COVID.

BTW, inflation is inching up....

[avishar]

I cannot tell you how many Blue Tick "Economists", business leaders, professors, Government economists, business-news analysts that I have come across on twitter that cannot understand the difference between basic stuff like quarter-on-quarter, year-on-year, adjusted prices, current prices etc.

I ended up arguing with one guy who was convinced that Year-on-Year meant comparing the full year with the last year.

It is dangerous the amount of misinformation that is being spread including by a senior government spokesman.

Vivek Kaul has written a great blog to clarify it all. (Separately I enjoy his writings, he also explained the GST compensation cess confusion really well)

The US Economy Contracted by 9.1% and not 32%. India’s Economy Contracted by 23.9%.

Summary: I had absolutely no plans of writing this. But given what has been happening on Twitter and WhatsApp since the morning, I was forced to write this. Please read and share widely.

There is a full-fledged controversy raging on the internet where people have said that the economy of the United States, as represented by its gross domestic product (GDP), contracted by 32%, during April to June 2020. This was worse than India’s contraction of 23.9%.

This comparison is totally wrong. The way the United States reports GDP growth/contraction is different from the way India does. Let’s try and understand this in detail...

The simplest way to double-check:

Both adjusted to 2012 prices. (Q1 for India is Q2 for USA which is April - June)


USA:

Q2 2020: 4,329.3 bn

Q2 2019: 4,764.4 bn.

Change: -9.1%

(https://bea.gov/sites/default/files/...nd.xlsx… and go to Appendix Table B tab)


India:

Q1 2020 : Rs 35.35 lakh crores ($ 480 billion)

Q1 2020 : Rs 26.89 lakh crores ($ 370 billion)

Change: -23.9%

(http://www.mospi.gov.in/sites/defaul...Q1_2020-21.pdf page 4 Statement 2 table)


Right now there are only TWO countries who have reported a contraction worse than India, and that is:

Peru : -30.2%

Macau : -67.8%

Macau's severe contraction is easy understand. It is a city-state dependent almost entirely on tourism and gambling.

[JayKis]

Originally Posted by avishar

Vivek Kaul has written a great blog to clarify it all. (Separately I enjoy his writings, he also explained the GST compensation cess confusion really well)

The US Economy Contracted by 9.1% and not 32%. India’s Economy Contracted by 23.9%.

Actually looks like even Vivek Kaul got it wrong too

He writes "In April to June 2020, the US economy contracted by 9.1% in comparison to January to March 2020. This is a quarter on quarter comparison. This figure is then annualised."

The above is is not true.

The USA Q1 vs Q2 growth is -31.7%.
https://tradingeconomics.com/united-states/gdp-growth

The Annualized Growth rate Q2 2020 vs Q2 2019 is -9.1%.
https://tradingeconomics.com/united-...-growth-annual

Some sources.

https://www.statista.com/statistics/...gdp-in-the-us/
https://www.bea.gov/news/2020/gross-...ts-2nd-quarter

Basically from the numbers all over this is what can be inferred. (subject to this being right too :-) )

Country Q2vsQ1(2020), Q2(2020)vsQ2(2019)
India -29.3 (?), -23.9
US -31.7, -9.1

(?) - Couldnt find this number anywhere but Orangecar post says!

[avishar]

This statement is not correct if you want to compare to India:

The USA Q1 vs Q2 growth is -31.7%.
https://tradingeconomics.com/united-states/gdp-growth

Refer to:




Q1 = 4329 billion

Q2 = 4628 billion

Change : -6.5%

So as you can see US contracted by just 6.5% quarter on quarter compared to almost 30% for India.

Originally Posted by JayKis

Country Q2vsQ1(2020), Q2(2020)vsQ2(2019)
India -29.3 (?), -23.9
US -31.7, -9.1

(?) - Couldnt find this number anywhere but Orangecar post says!

It's actually all available publicly. Let's see what it is.

The Ministry Of Statistic and Programme Implementation releases the quarterly release and uploads it on their website.

It's all explained there, sector by sector, segment by segment. This is the document that everyone then refers to analyse where/what happened.

http://www.mospi.gov.in/sites/defaul...Q1_2020-21.pdf


GDP growth is always calculated on constant prices. So one needs to go the constant prices table like so:




For Q1 it is Rs 26.87 lakh crores.

To find out what this number was in the preceding quarter, we have to go back the MOSPI website and find the full year/4th quarter release.

http://mospi.gov.in/sites/default/fi...20of%20GDP.pdf




It is Rs 38.03 lakh crores.


So Quarter-on-Quarter decline for India is 100-(26.87/38.03*100)= 29.3% contraction.

That figure is correct.



So,


Country Q2vsQ1(2020), Q2(2020)vsQ2(2019)

India -29.3, -23.9
US -6.5, -9.1

[Samurai]

Originally Posted by vrprabhu

Yes, you are right - it was the sub-prime crisis blew up around 2006 and effects lasted for some time. My mistake.

Your original year was correct, the crash started in Jan 2008.

Originally Posted by vrprabhu

Not sure about the time of dotcom bust - but wasn't 1999 the period when Y2K hype was peaking? Dotcom bust would have happened subsequently - i.e. post 2001.

What? Lot to unpack here. I was working in Silicon Alley when it happened, so I know that Y2K had nothing to do with Dot-com crash.

About Y2K - The problem was genuine, no one thought software built 20-30 years ago would run so long. A lot of noise was made, for the right reasons. So billions of dollars were spent on reviewing, fixing & testing old code to ensure nothing would happen on the midnight of 31-12-1999. Next day morning, this happened: NOTHING!

Customer: Hey, nothing happened.
Y2K consultant: Thanks, you are welcome.
Customer: Wait a minute. You said it will be an Armageddon. Whole world will be in chaos.
Y2K consultant: Yes, that is if we didn't fix it. But we fixed it.
Customer: So you say.... Since nothing happened, how do we know what would have happened if nothing was done?
Y2K consultant: You wanted chaos even after we fixed it?
Customer: This was a hoax.
Y2K consultant:

Dot-Com was a stock market bubble over a wave of Internet related technology companies. Lots of fake products and services were launched and investors threw money at them like is was a dance bar. And the companies were burning money on all kinds of unnecessary expenses. It was a real wild-west party, except it happened in East too, where I was located. Every one was an investment expert until the bubble burst in 1999. Lots of regular people lost their shirt in the melee. I was sending all my savings to India for the construction of my house, so I lost nothing.

[V.Narayan]

Originally Posted by ninjatalli

I sincerely wish your words ring true going forward. Unfortunately we are dealing with a lot that is exceptionally good at this, and a whole segment of population with sheep mentality. The norm seems to be be quiet and hide behind caveats and throw dirt at other meaningless aspects to keep the ball rolling within the herd.

Originally Posted by extreme_torque

You are overestimating my friend. It is not like before these numbers came out everything was hunky dory. ... We now live in a democracy with compromised institutions.... We all know what happens to anyone who dare raise his/her voice or dissents. This process of conditioning the masses has been going on for long and without opposition.

Perspectives differ. Maybe my hope stems from having seen times and regimes which were equally bad and seemed (at that time) that they would never change --> 1975-77; 1979-80; 1989-91 and seen how the fabric of the nation pulls itself together in a million ways and how change, nursed in wombs not seen easily, comes forward to right what's wrong. It takes time. It seems everything will go south forever - and for sometime it sure does. I am hopeful. We don't need to argue. We can each carry our own thoughts. As this is an apolitical forum I won't explain further. To each his own perspective and hope.

[JayKis]

Originally Posted by avishar

This statement is not correct if you want to compare to India:
Refer to:
Attachment 2050357
Q1 = 4329 billion
Q2 = 4628 billion
Change : -6.5%
So as you can see US contracted by just 6.5% quarter on quarter compared to almost 30% for India.

Would have loved to believe the above numbers but the US govt website says differently or maybe its my understanding. It clearly says -31.7% with respect to the preceding quarter. Please see the screenshot below.

Note: This is the exact wording - "Real gross domestic product (GDP) decreased at an annual rate of 31.7 percent in the second quarter of 2020 (table 1), according to the "second" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP decreased 5.0 percent"



https://www.bea.gov/news/2020/gross-...ts-2nd-quarter

Your India calculations seem to be spot on! Thank You!

[Hayek]

Originally Posted by JayKis

Would have loved to believe the above numbers but the US govt website says differently. It clearly says -31.7% with respect to the preceding quarter. Please see the screenshot below.

The way the US government reports numbers is on a seasonally adjusted annualised basis. Easier to explain with normal circumstances. If GDP rises by 0.5% from Q1 to Q2, that reflects a annualised growth rate of a little more than 2% pa. The US government also reflects the fact that there are normal differences in GDP from quarter to quarter (eg Christmas retail sales in Q4) to arrive at what they report. So when Q2 GDP fell by 9% from Q1, they annualised and adjusted it to report a 31% annualised rate of decline.

For India, Q2 GDP is 29% below Q1. If we reported it the way the US does, we would have a ~75% annualised rate of decline.

It does not make sense to report it this way when you have one off events like Covid - so the way we reported it as -23.4% comparing this quarter with the same quarter last year make sense. If you did that, the US number would be about -9%. Not surprising, given that we shut down virtually all industry and trade for all of April - before gradually starting to unlock in May. Note that the US did not do that nationally.

Some of my clients’ factories even in Italy and Spain were functioning in March and April - while they were forced to shut their Indian operations. I don’t think there is any other country in the world that reported 0 car sales for April this year. Won’t say more as I will end up getting infracted.

[Sutripta]

Originally Posted by drsingh

I understand your point of view from an idealist view of constitutional law. But from a realistic viewpoint, constitutional rights have been diluted by successive governments by amendments.

Protection of the Constitution means its own protection, and the protection it affords us - the common citizen.
What protects the Constitution is the 2/3 majority rule. What protects us is the Supreme Court. Your guess as good as mine where we stand now.

They will play political posturing to get some other concessions on taxes before making a compromise.

Common thought. But what is the states leverage, its bargaining chip?

Extension of compensation cess and incresed state share of taxes in future or cheaper loans etc. are some concessions that will bring States to the table.

Some compromise will be have to be reached, and will be reached. But the states have a very weak (actionable, not moral) hand. And the trust deficit between the opposition and the ruling party is huge. No matter what the compromise, both parties will feel bitter, and will try to play fast and loose.

No easy answers. No silver bullet solutions. The devil will have to be paid his due.

Sutripta

[avishar]

Originally Posted by JayKis

Would have loved to believe the above numbers but the US govt website says differently. It clearly says -31.7% with respect to the preceding quarter. Please see the screenshot below.

Attachment 2050364

You don't have to believe anything, you just have to calculate.

That -6.5% which I showed is the real decline.

They take this -6.5% and then annualized it. And annualization is not a simple calculation of multiplying it by 4, but they use a formula.


How to Calculate the Annual Growth Rate for Real GDP




If you plug in the numbers around -6.5 and -7% you will come to -31%



Even if you think about it logically, US GDP will not fall by 30% in succeding quarter but only be -9% less when compared to the quarter in the previous year. It is not possible unless the previous year also they had a COVID lockdown.

[V.Narayan]

Can the experts opine on why the INR is appreciating against the USD? It ended today at 73.00 to a USD. The forecast for November-December is ~INR 68. Thanks in advance for your trouble & effort.