Creaks and Leaks

11 November 2009

Creaks and Leaks

The Reserve Bank of India gently applied the internal brakes last month by requiring Indian Banks to set aside more money to invest in Indian Government Bonds. The Government could use the help because it has to borrow $100 billion this year to keep the lights on and has been doing so at an average of $3 billion a week. Those are real numbers.

The not so real numbers are measures of the percentage change in Industrial Production which suggest that the manufacturing sector is expanding by 10%. The GDP numbers suggest the economy is growing by 6.5%.

But the taxes collected in customs, excise, and duties declined 12% year over year to $5 billion for the month of October. Higher economic growth, lower tax collection, and the Planning Commission is not involved in any of this?

The Finance Ministry promises to get to the bottom of the apparent contradiction provided Indian equity prices do not arrive there first.

Manana