Friday, 16 February 2018

Why do we need economic growth?

Most things don’t grow forever. If a person grew at the same rate for his whole life, he’d become gigantic. Yet most economists are united around the idea that the economy needs to grow, always. And at a high rate, for the good of the country and its people.
  • Economic growth is the increase in the goods and services produced by an economy, typically a nation, over a long period of time. It is measured as percentage increase in real gross domestic product (GDP) which is gross domestic product (GDP) adjusted for inflation. The economic growth every year is essential to a country’s stability and prosperity. But some economists argue that it makes more sense to focus on measures of well-being than growth.
  • Maximizing growth doesn’t necessarily help people, but also that rapid growth can itself come at a cost, such as when the pursuit of growth is used to push through policies that are expected increase the GDP but may have negative consequences for millions.The pursuit of growth can be quite dangerous. The welfare of a nation can scarcely be inferred from a measurement of national income.
  • For a developing economy where the basic need isn’t met and growth is necessary for more food. Economic growth in a developing economy can go a long way to improving living standards. When people are living in poverty, they experience a deprivation of basic human needs, such as food, shelter, education, basic health care. Economic growth can enable many of these basic needs to be met and this economic growth can radically increase living standards among those countries.
  • It's an election winner. Politicians see growth as very important. Elections are won or lost on the state of the economy. Look what happens if growth disappears and recession looms. People get very concerned about falling incomes and rising unemployment. 
  • If poverty is to be relieved and the rich are not to be made poorer, then growth is necessary. Making the poor richer is not easy and there are many political obstacles in the way. But at least growth makes it easier.
  • When real incomes are already quite high, economic growth can have a marginal impact on living standards. There is a strong diminishing marginal utility to extra income. 
  • Economic growth is driven by technological improvements, which reduce the costs of production and enable more to be produced. This technological progress in many ways feels an inevitability. How could you stop this technological progress? Technological improvements have particularly improved the productivity of agriculture and manufacturing. This means we can support ourselves with a smaller % of the workforce on agriculture and manufacturing. Many of new jobs are in service sector.
  • In theory, economic growth should enable people to work less, enjoy more leisure time and would enable to retire earlier, if they are able and willing.
  • Increased GDP offers the potential for higher living standards but certainly doesn’t guarantee it because of uneven distribution and how it is used. GDP measures activity in the economy, but there’s no way to know whether that activity is actually good for society. The BP oil-rig explosion, which killed 11, and the subsequent spill, which leaked 3 million barrels of oil into the Gulf, actually lifted GDP because of the amount of money spent cleaning it up.
  • Economists often say that without growth it will be impossible to address income inequality. But even with growth, there’s no guarantee that inequality will decrease. The economy’s current trajectory is of increasing inequality. Economic growth leads to the depletion of resources - a problem that's likely to get worse as world population and world consumption grows.
  • One of the biggest sources of rising expenditure in western economies is health care. There are simply more things that can be treated. Also, there is the irony of having to treat diseases of affluence (such as obesity, heart attacks, cancer etc).
  • Economic growth will not solve the fundamental problems of human psychology / behaviour. It can increase sense of inequality. Growth will not reduce the incentives to cheat and steal. It does not make people more charitable and good-natured.
  • Environmental problems facing humanity, economic growth could exacerbate these issues and reduce living standards.
  • Some of the most content people in the history of the world got by on a lot less. Some saints have argued they were much happier when they forsook their wealth.
  • Rather than worrying about increasing real GDP, we could spend time promoting greater social harmony.
  • The point is that life is a struggle for most people in developed economies, and technology and increased efficiency has not done much to fix that over the last 40 years. No doubt there are a few that have enjoyed increased leisure time, but at the expense of the masses.
Do we need economic growth? Not really. But, if managed well, it doesn’t have to do any harm and gives the potential to make improvements in our material well-being. Needless to say, economic growth is far from the panacea to make society better. It is a neutral component of human well-being. There’s nothing wrong with targeting economic growth as long as you are aware of its imitations. Governments and society need to be judged on so much more than simply whether their economies are growing.

We have to find a way to make the aspects of capitalism that serve 
wealthier people serve poorer people as well.

If money is your hope for independence you will never have it. 
The only real security that a man can have in this world is a reserve of 
knowledge, experience, and ability ... Henry Ford

Money has no utility to me beyond a certain point ... Bill Gates

For India with large number of unemployed youth, economic growth is the only way to create enough jobs and security. The present phenomenon of jobless growth is unsustainable. The current trends of economic growth are also associated with increased pollution, over exploitation of non-replenishable natural resources, destruction of ecology etc is a destructive growth. Additional wealth created is grabbed by top 10% wealthiest people. The disparity between rich and poor is widening. This kind of growth is absurd. In an ideally developed world all people should be equal, even though perfection is unachievable. We need to grow to accommodate ever rising population.

How cronyism dictates Modi’s India

Gautam Adani & Narendra Modi
  • Strategic litigations are being used by big corporates to curb free speech and discourage high-quality investigative journalism.
  • While Prime Minister Narendra Modi claims that there’s not a single stain of corruption on his three-year tenure in the Centre, a barrage of attacks on media, creeping self-censorship and a belligerent government clamping down on those trying to do their job well and ask critical, uncomfortable questions about the state of the political economy.
  • With 58% of India’s wealth owned by the top 1% of population, crony capitalism is thriving and under this government's regime. Despite PM Modi’s hard talk against corruption and claims of ending it altogether, there exists a concerted attempt to delete every mention of such collusions.
  • The "collusions" of the alleged Modi-Adani nexus, whether in terms of bending of rules pertaining to special economic zones as to benefit the Adani Group per se, or helping the businessman deal with black money, give him undue loans from public sector banks on overseas projects that had run into troubles with local authorities there.
  • It was SBI trying to extend a line of credit worth $ one billion to Adani Group for the Carmichael coal mining project in Australia, or helping the billionaire from Gujarat engage in "riskless capitalism" by tweaking SEZ rules, laying waste to India's environment, or saving Adani from green penalties, the collusion has been happening right before our eyes. 
  • Of course, Gautam Adani* had reportedly poured money into Narendra Modi's Lok Sabha election campaign in 2013-14, making it the costliest ever in the history of India. The Gujarat-based businessman's proximity to the prime minister was flaunted in the politician flying all over India in Adani's private planes and choppers.
    *Adani is a college dropout, who spurned his father's textile shop to set up a commodities export firm in 1988. He survived the terrorist attack in Mumbai's Taj Mahal Palace Hotel in 2008.
  • Adani Group allegedly took out over Rs 5,000 crore to tax havens abroad, using inflated bills for the import of power equipment from South Korea and China, and the SIT on black money was told by the Directorate of Revenue Intelligence (DRI) and the Enforcement Directorate (ED).
  • Despite his anti-black money bluster, one of the biggest black money cases before the retired Supreme Court judge-led Special Investigation Team - a decision taken by PM Modi himself in the initial days of his taking office - has been that of the Adani Group of Industries. 
  • What has happened to that investigation? No clue. Brutal clampdown on any mention of the alleged Modi-Adani nexus, strangling free press by using what in legal jargon has come to be known as a "SLAPP", or strategic litigation to avoid public participation.  
  • Press freedom in India ranks at a dismal number 138.

Nirav Modi defrauds PNB of Rs.11,400 crores and flees away

Nirav Modi with PM Narendra Modi at Davos on 24-Jan-2018
Nirav Modi, who defrauded PNB by over Rs.11,000 crores
  • Punjab National Bank (PNB) said on 14-Feb-2018 that it had been defrauded of about Rs 11,400 crores by jeweller Nirav Modi, his maternal uncle Mehul Chinubhai Choksi, and other relatives through a clutch of companies they own.
  • Two of its employees were involved in the scam, where the bank’s core banking system was bypassed to raise payment notes to overseas branches of other Indian banks, including Allahabad Bank, Axis Bank, and Union Bank of India, using the international financial communication system, SWIFT.
  • As the payment request was raised by PNB, and therefore, the payment would have to be met by the Delhi-based Punjab National Bank. PNB in a letter to banks, indicated clearly that it was in no mood to pay back and alleged connivance of employees at the foreign branches of other Indian banks. The banking system is heading towards a protracted legal battle as other banks will start suing PNB over non-payment of dues and refusal to honour commitments.
  • An age-old method employed to defraud the banking system. It involved LoUs raised at the PNB’s Mumbai office by firms owned by Modi and his family. A LoU works like a bank guarantee, which the importer can sell to other banks at a discount. At the end, the bank that holds the LoU goes back to the issuer bank (PNB in this case) and gets its due. The issuer bank (PNB) recovers its due against the LoU from its client (Modi).
  • However, issuance of the LoU involves a lot of process and to mitigate the risks of fraud, banks insist the client deposit an equivalent amount of assets, mainly cash, in the local branch, to avail of the overseas facility. Since LoU expires within a maximum of 180 days and fresh LoU needs to be issued. Since first LoU was issued to Nirav Modi in 2011, several fresh LoC's issuance could not have happened with political patronage and connivance of bank's top brass.
  • PNB disclosed that it detected fraudulent and unauthorised transactions worth around $1.78 billion (approximately Rs 11,400 crores) “for the benefit of a few select account holders” with the help of the bank staff based in one of its Mumbai branches. “In the bank these transactions are contingent in nature and liability arising out of these on the bank shall be decided based on the law and genuineness of the underlying transactions,” the bank said.
  • DFS Secretary Rajiv Kumar said this seemed to be an isolated case and would not impact other banks.
  • Nirav Modi & his family are believed to have left the country several days before lodging of FIR by CBI and is believed to be in Switzerland.  
  • An interesting reader's comment ...
    "You cannot fault Rajiv Kumar, for sure. He knows which side of the bread is buttered, and so, unsolicited, he jumps to the govt's defence by invoking 2011. But deafening silence from the FM, the RBI, the Finance Secretary -- not to mention the PM for whom, understandably, Rs 11k Crore is a measly little sum totally undeserving of his attention. He is busy doing what he does best: address election meetings where, other than subtly stoking communal fires, he speaks grandly of Vikash. Surely his Vikash model has stood Nirav Modi in good stead, and as far as the ordinary Indian citizen is concerned, our PM couldn't care less, as every Bharatiya happens to know by now. So the field is left open for the usual buffoonery of Ravishankar Prasad and a pugnacious (though completely witless) intervention by the Raksha Mantri. Nobody has apparently suggested to Nirmala Sitaraman that she had better take care of the country's porous borders -- which happen to be under her charge and are leaking all the while -- rather than talking about things she doesn't have the foggiest idea about. But, then, who will advise whom about what in the madhouse that Modi's India has turned into?"


  1. On 14 Feb 2018, the CBI received complaints from PNB, which detected a Rs 11,292 crore fraud involving jeweller Nirav Modi.
  2. The number of suspended employees now stands at 18.
  3. Nirav Modi’s home, offices in Mumbai, Delhi and Surat were raided by the ED on 15 Feb 2018.
  4. The CBI and the ED have moved separate applications with the EAM, seeking the revocation of passports of Modi and his partner Choksi.
  5. PNB suspended 10 officials from its Mumbai branch in connection with the case.
  6. In two days, PNB lost over Rs 8,000 crore of market valuation.
  7. The case turned political after the Congress termed Nirav ‘Chotta Modi’.
  8. Officials said Modi and his family fled India in the first week of January, days before the first complaint was filed.

Power corrupts and absolute power corrupts absolutely. 
All those experiments have a bad ending.

Every new government will be 'clean' during first 1-2 years. Their misdeeds will surface by end of 3rd year or later. BJP & Modi are no exception. Modi just followed the time tested corruption path established by Congress and even more reckless. Only narrative is different. The fact that more than 90% of political donations reached BJP coffers speaks volumes about quid pro quo's involved. While the Nirav Modi's scam occurred during past 1-2 years, BJP attempting to link it to Congress invoking 2011 is just nonsense. BJP may or may not be responsible for this scam, but the way they are responding leaves people of India without any doubts about their involvement. There is no way BJP or any political party will accept their wrong doings, the best - people of India can do is to defeat them in 2019 general elections. This may pave way to Congress regain power but we hardly have choice. In Indian political arena even a saint ascending to power will end up in corruption, cronyism, nepotism etc. Even in USA, no one ever retired from Presidency more respected by political friends and foes alike. Such is the power of power & money.

Thursday, 15 February 2018

Why the fuss about Fiscal Deficit?

  1. Budget deficit =      total expenditure – total receipts
  2. Revenue deficit =   revenue expenditure – revenue receipts
  3. Fiscal Deficit =       total expenditure – total receipts except borrowings
  4. Primary Deficit =    Fiscal deficit- interest payments
  5. Effective revenue Deficit = Revenue Deficit – grants for creation of capital assets
  6. Monetized Fiscal Deficit =  part of the fiscal deficit covered by RBI borrowing

The Golden Rule of fiscal policy is that the government should borrow only to invest that benefits future generations and not to fund current spending, maintaining inter-generational equity. Hence, the best way is to spend the borrowed money is for projects like infrastructure. The policy suggestion is that government’s budget should have no revenue deficit, a situation where the government’s day to day earnings are not enough to finance its day to day activities.
  • Overseas investors and rating agencies relies a lot on this number to judge the health of the country's economy.
  • Fiscal Responsibility and Budget Management (FRBM) panel has recommended a fiscal deficit target of 2.5% of the GDP for fiscal 2022-23. The panel suggested 'escape clause' in case of over-riding consideration of national security, acts of war, calamities of national proportion and collapse of agriculture severely affecting farm output and incomes. Also, "far-reaching structural reforms in the economy with unanticipated fiscal implications" too can trigger deviation, not exceeding 0.5%, from the targets.
  • This forces the government to walk the tightrope every time the budget comes, as it also has to attend to social sector needs and create enough stimulants for the growth engines of the economy to keep running.
  • Any slip on fiscal deficit discipline puts the government at risk of inviting the wrath of the global rating agencies, whose outlook often determines the volume of investment flows into the domestic economy and markets. 
  • Any government's move to go for additional market borrowing will be seen as a ‘negative’ that could widen the fiscal deficit. 
  • A small fiscal deficit is a good idea but the problem is when the deficit swells and becomes untenable. In a high fiscal deficit environment, government borrowing can crowd out* bank credit, thereby forestalling any chance of capex revival.
    *is the high level of public borrowings that reduces the borrowing opportunity of the private sector.
  • Fiscal deficit is met through borrowing by the government from the open market at competitive rate of interest, which increases the overall interest rate in the economy. It also adds to the burden on the future generation violating the principle of inter-generational equity.
  • Surging oil prices mean a higher import bill for India and that will translate into higher expenditure. The faltering tax receipts, which are yet to shake off the twin impact of the GST and demonetisation will also widen fiscal deficit.
  • Share sale in PSUs is not easy with the market outlook not that promising, limiting the government’s ability to mop up much revenue from that avenue.
  • Credit growth in the economy is burdened with huge NPA loads forcing banks remain extra cautious in extending credit to industry. 
  • Some economists and industry veterans say there is nothing so sacrosanct about this 'fiscal deficit' number and the government can always relax it a bit and work on it later on. It would be unwise to cut back on government expenditure, only to contain fiscal deficit, as long as that extra expenditure of the government is for investment and not for consumption.
  • Ex-RBI Governor Raghuram Rajan opposed the higher fiscal deficit view for stimulating economic growth citing the dismal scenario of the Brazilian economy. He warned that the enormous costs of becoming an unstable country far outweigh any small growth benefits that can be obtained through aggressive policies. 
  • Higher inflation remains the biggest headwind in deficit dynamics. Retail inflation @ 5.21% in Dec 2017 was much above RBI’s comfort zone of 4%. RBI’s stand is that higher fiscal deficit will bring more inflation and may distort economic activities in general.
  • This year, loans repayment & interest payouts will take up 32% of the centre’s earnings, pensions and subsidies 23%, state grants 23% and defence expenditure 16%. These repetitive expenses will effectively mop up 94% of the total budget receipts. That leaves little room for allocations to new ideas or schemes. Higher fiscal deficit indicates the fragile state of the Centre’s finances, and its control over interest, pension and subsidy expenses indicating extremely limited elbow room in deciding on its budget allocations. 
  • The other problem with the expenditure pattern is that the bulk of the budget spending goes into consumption or maintenance expenses, with very little spent on creating new assets.

The analysis tells us that for government to be really able to launch bold new schemes or make a difference to citizens’ welfare, it needs to clean up its finances first — pare down debt, save on interest payouts, reduce pensions and subsidies and raise asset creation. It must also ensure that its receipts grow at a far faster pace than expenses in future, so that the debt can be paid down. Therefore, the success or failure of the annual budget exercise really has to be measured on the progress in these parameters over the years.

Govt breached fiscal deficit target of 3.2% (actual 3.5%) in the current year 2017-18, same as previous year. The budget for 2018-19 projected fiscal deficit target at 3.3% of GDP against the earlier target of 3%. The reason for breaching current year target is mainly due to demonetisation and GST resulting in lower revenues and higher expenditure. 2018-19 being an election year, the budget is not so conducive for higher revenues and govt populist expenses are likely to go uncontrolled. Rising NPAs are big drag on economy. Oil prices surge will result in lower GDP growth and higher inflation thus widening fiscal deficit. Modi has learnt in very hard way not to play gimmicks with economy with reckless adventures but people of India paid the price for no fault of theirs.

Tuesday, 13 February 2018

What to do with your money right now?

If you are just retired and with plenty of cash, retirement benefits, naturally you will have a dilemma what do with the money safely with maximum returns, liquidity and with minimum income tax liability. While equities and mutual funds seems to get you good returns, never go by television recommendations unless you have in depth knowledge of what you are set up to do.
  • Never lose money. Focus on capital preservation strategies.
  • Remember, risk exists every where. 
  • Spread your money across asset classes; debts, equities, mutual funds, real estate and gold. 
  • Retain certain amount of cash both at home and in bank to manage unforeseen situations.
  • Make sure to have enough life, accident and health insurance cover for you & family.
  • Stay away from hyped markets. That would be the right time to exit.
  • Avoid cryptocurrencies unless you are tech savvy, prepared to gamble and lose.
  • Don't lend money to friends & relatives. You may end up losing money and also relationships.

  • Insurance is not investment. It is the price you pay for some kind of protection of your family against contingencies of unforeseen events like death / accidental death / hospitalisation shocks. 
  • Do take appropriate life, personal accident and mediclaim policies for self and family.
  • Don't buy equity-linked insurance plans (ULIPs). Your money goes to the agent and the insurer and not into your investments. They are losing propositions.
  • Buy either term policies (these are the cheapest) or buy money-back schemes, which are also cheap but you get your money back. Read the fine print carefully rather than trust an agent's verbal assurances.

  • Investments in PPF, NSCs, 5 year Bank deposits, NPS etc. may save you on income tax liabilities, But be aware of 5+ year lock in periods.

  • The last two years equities have seen terrific returns from the stock market. Is the economy booming? No, but a lot of investors hope that it will start growing faster. 
  • The World Bank and other institutions forecast that growth should accelerate in 2018-19. Many savvy investors have already entered the stock market on that expectation. 
  • As more money has come into the market, it has boosted share prices and created a positive feedback loop where investors have pumped even more money into stocks.
  • Despite forecasts, markets could go in either direction.
  • Unless you are an active watchful person, on daily basis, with propensity to exit as per strategy, risks are high.
  • Index funds have shown persistent growth over years with lower risks. Invest in less risky index funds rather than in risky equities.
  • Equities may not get you periodical returns but in long term they are sure get you impressive gains.
  • Good to be a equities trader rather than and equities investor.
  • Those who have time and inclination to do their own research may invest directly in stocks or via equity mutual funds. The second route is fire-and-forget. Both methods can fetch great returns. Both methods also carry the risk of capital loss.
  • May be it is good to stick to mutual funds and commit to systematic investment plans (SIPs) for three years, or longer. These are likely to fetch excellent returns.
  • The economy may recover. But uncertainty exists.
  • Series of assembly elections and a general election scheduled in the next 15 months. Political uncertainty might cloud short-term returns. What happens if there are apprehensions that the Narendra Modi government will not return?

  • Debt comes in many shapes and sizes. Bank fixed deposits are the default option. You can also buy mutual funds dealing in different types of debt. In addition, you can buy corporate debentures, or subscribe to corporate fixed deposits.
  • Interest rates rise when inflation rises. If inflation rises, the value of money erodes faster. If interest rates rise, any portfolio of previous debt instruments loses value because that same money invested now could be earning more interest.
  • Bank deposits are safest, highly liquid but with low returns. The new FRDI Bill highlights the fact that bank deposits are not guaranteed beyond the limit of Rs 1 lakh. That limit was set in 1993. The limit might get raised to Rs.5 lakhs, prior to the passing of Act. Be informed of this.
  • Avoid PSU banks with huge NPA's. Also avoid private banks with low equity, lower reserves and higher NPAs. Any government would be reluctant to take this step, fearing a political backlash. Since many PSU banks are struggling to cope with bad debts bail-ins are now neither impossible, nor illegal.
  • Mutual funds exploit changes in interest rates. Safety varies. Mutual funds that focus on corporate debt give much higher returns but take larger risks. It's important to understand that you can lose capital in a debt fund. So understand safety, risks and returns before investing.

  • Real estate is entirely local market. The investment is illiquid. Selling may take several months. But returns are impressive. 
  • This segment has huge percentage of 'black money' intertwined with 'white money'. 60:40 is the default ratio. Even 80:20 is not uncommon. 
  • Booms and busts are cyclical and occur side by side too.
  • Sometime legal complications might get your investment locked for several years.
  • Apart from politicians, corrupt bureaucrats and unethical businessmen, you may get entangled with mafia and local goons.
  • So invest only in legally clear properties. Obtain the help of known advocates and chartered accountants. Remember brokers are not your friends.
  • Stay away from hypes.

  • Gold and precious metals are the age-old hedge against inflation and uncertainty.
  • But gold yields no interest and capital appreciation is uncertain.
  • Making charges for jewellery add considerably to cost. It's still worth investing as security. 

Neither a borrower nor a lender be ... William Shakespeare

Monday, 12 February 2018

RSS, Tricolor flag & Patriotism

  • One fact is certain: the organization (RSS), which runs the party (BJP) that runs the regime (Modi led NDA) cannot just appropriate the 'Indian national movement' as its own.
  • RSS had refused to participate in the freedom struggle. It has, therefore, no right to claim its glory even though the Congress cannot also monopolize on any 'sole heir status' for various reasons.
  • K.B. Hedgewar, who founded the RSS in 1925, did have some initial loose association with the freedom struggle. But from the 1930s, he ensured that his boys in khaki shorts stayed away from this historic movement. He said "Patriotism is not only going to prison. It is not correct to be carried away by such superficial patriotism." 
  • The Hindu Mahasabha's V.D. Savarkar, who is another cherished role model of the current dispensation, had been active long before Hedgewar but he was rather mercurial. He did lead strident anti-British agitations and was jailed, but he also signed multiple clemency petitions to the colonial government, promising total cooperation if he was released. The Congress retaliated in 1934 and banned its members from joining communal organizations like the Hindu Mahasabha, the RSS and the Muslim League. 
  • In any case, during the critical phase of the Quit India movement and other agitations, not only was the RSS missing but we also have British reports of the 'good conduct' and the law-abiding nature of its members, while thousands of women, children and men all over India braved the onslaught of imperial repression.
  • Nana Deshmukh in his book, RSS: Victim of Slander (1979): "One might well ask: why did the RSS not take part in the liberation struggle as an organisation? The question arose for the first time when Gandhiji launched his movement in 1929-30. It was decided that the members of the RSS were free to take part in their individual capacity". Fine. But it may be instructive to know which particular RSS member actually took part and what suffering he went through for it. 
  • It is only logical that the RSS and its dedicated cadre that run the government should come clear on this phase of history before attempting to snatch credit in this new version of ultra-nationalism.
  • On the eve of Independence, when much of the nation was preparing to celebrate freedom, the RSS's mouthpiece, Organiser, declared that the Indian tricolour will "never be respected and owned by the Hindus. The word three is in itself an evil, and a flag having three colours will certainly produce a very bad psychological effect and is injurious to a country." 
  • Second head of the RSS, M.S. Golwalkar lamented that "our leaders have set up a new flag for the country. Why did they do so? It is just a case of drifting and imitating... Ours is an ancient and great nation with a glorious past. Then, had we no flag of our own? Had we no national emblem at all these thousands of years? Undoubtedly we had. Then why this utter void, this utter vacuum in our minds?" 

Gandhi's assassination on January 30, 1948, however, changed the political chessboard of India decisively. The government banned the RSS and the then deputy prime minister, Patel, declared quite unequivocally that though "the RSS was not involved... his assassination was welcomed by those of the RSS and the [Hindu] Mahasabha who were strongly opposed to his way of thinking and to his policy." Golwalkar repeatedly pleaded with Patel, but the leader, whom the current regime seeks to appropriate, remained firm. He lifted the ban on July 11, 1949, only after the RSS pledged to stay away from politics, not be secretive and abjure violence. More important, it had to profess "loyalty to the Constitution of India and the National Flag". After removal of ban, RSS hoisted the flag at their headquarters on 26th January 1950. Sardar Patel died on 15th December that year, and RSS never hoisted the flag in their headquarters after that until 2002.

Looming coal shortage

Coal meets almost half the energy needs of the entire world. It plays a vital role in steel production and the manufacturing of cement. Coal takes thousands of years to form naturally and are not replaceable at the pace they are consumed. Global coal output is likely to reach a plateau by 2025 and thereafter, it is likely to be on a permanent decline, marking the ‘beginning of end’ of the resource. Depletion of conventional energy resources has made conservation of energy and the identification of new and/or renewable energy sources vital.

  • Increase in price due to growing gap between demand and supply of coal.
  • Dependency on other fuels for the generation of electricity. 
  • Many established thermal power generation capacities would face the threat of sitting idle and being underutilized in absence of coal.
  • All sectors will have to grapple with increasing power cuts or blackouts, leading to shut downs that would impact their production and margins. 
  • A coal shortage can have a ripple effect across industries, which will ultimately reflect in the growth rate of economies.
  • In India, thermal power accounts for about 65% of the total electricity generated. India is third-largest producer of coal globally, and yet, is also the fourth-largest importer of coal. India imports 30% of its coal needs of which half by power companies.
  • Thermal power plants accounts for 88% of water consumed by all industry sectors put together. They also add to the environmental and social burdens. 
  • Coal India Limited, the largest coal producer in the world, has not supplied coal as per commitments to power stations and the gap is widening. Much of the coal produced in the country is of a relatively inferior grade. 
  • New laws by exporting countries such as Indonesia and Australia increases the cost of the imported coal for India. As power producers are unable to entirely pass on the costs to the consumers, they face increased pressures on their margins.
  • In the light of all this, it is prudent to not rely on any nonrenewable resources including coal. Instead, industries and countries should concentrate on increasing productivity and efficiency of the existing technologies. This will also bring down energy costs with minimal interference in processes. 

  • A surge in electricity demand growth and poor coal production by Coal India threaten to accentuate the fuel crisis. At a time when coal prices are on fire in the overseas market and imported fuel-based gencos are idling, Coal India’s production has set alarm bells jangling. The coal production situation might snowball into a crisis.
  • An unexpected rise in demand for thermal power triggered a fuel crisis in July 2017. It was initially attributed to a fall in hydel supplies and stronger growth in demand on the back of the rural electrification push.
  • The demand surge caught CIL off-guard. The company was in the process of cutting down production due to sluggish demand for almost two years. Excessive production over the previous two years, when demand was flat, had led to a multi-year-high pit-head stock of 68mt. CIL deployed its pit-head stock to cater to the demand, using the improved railway logistics.
  • By end of Dec 2017, supplies started easing out, though stocks at power plants were lower than last year.
  • Coal production grew 2.6%, 0.7% and 1.3% in Nov, Dec and Jan respectively, taking the 10-month average to 1.6%. CCL and BCCL, reported 11-13% decline in production.
  • At the current monthly average of 53 mt, annual production may only touch 550mt against target of 600mt. With pitheads stocks bottoming out to 33mt, CIL cannot push off-take further without matching production growth.
  • Meanwhile, electricity demand grew 5.8% in July, up from 2.6% in FY17 and 4.3% in FY16, with UP, MP, Maharashtra, Telengana and Gujarat being major buyers.
  • The result is showing in low fuel stock at power plants. As on Feb 1, 2018,  the average inventory at power plants was 9 day's equivalent against desirable 21 day's.

Telangana state (TS) has shortage of 2,000 MW at the time of 'AP Re-organisation' in June 2014. Although some thermal generation has been added in the last 4 years, the increased demand due in Hyderabad city, new lift irrigation schemes, tap water to every household and supplying of 24 hours power to all villages and all agriculture pump sets - the demand has gone up exponentially and is slated to touch 10,000 MW in a year or two. Last two years coal position was extremely good and overall demand for power was subdued and was favorable to TS for purchase power on spot basis at low prices. This year with increase in demand, shortages of coal and imported coal becoming very expensive TS might face not only shortages but also power expenses shooting up and that would be painful and politically disastrous for ruling TRS party. In any case dependence on Thermal power needs to be reduced by making investments in solar power, reduction in consumption by increasing efficiency and eliminating wastage.