Posts Tagged ‘growth’

India to more than double coal production in next 5 years

August 26, 2015

Coal production in India is not keeping up with consumption. One of the bottlenecks has been the private production of coal which was expected to grow much faster but has been hampered by scams and bureaucratic regulation. Now the Coal Mines Special Provision Bill was passed in March and is meant to encourage the private sector and allows foreign investment through an Indian subsidiary.

The government is very ambitious and targets a domestic annual production of 1.5 billion metric tons by 2020 which is 2.5 times larger than the current 600 million metric tons.

India coal production target

The US Energy Information Administration (EIA) reports:

Coal consumption in India, particularly in the electric power sector, is outpacing India’s domestic production. From 2005 to 2012, India’s coal production grew by only 4.7% per year to about 600 million metric tons while the country’s coal-fired electric power capacity grew by a much faster rate (about 9.4% per year), reaching 150 gigawatts. To help resolve the shortfall in coal supply and to support expanded coal-fired generation, India has set a coal production target of 1.5 billion metric tons by 2020. Recent shifts in government policies and practices may play a key role in India’s ability to meet this coal production goal.

Increasing coal production from its national coal producer. Coal India Limited (CIL), the national coal producer responsible for more than 80% of India’s current production, initially planned to produce 1 billion metric tons of coal by FY2020, almost double its FY2015 production. Although CIL revised its current expectations downward to about 900 million metric tons, its annual production must still rise faster than the current rate of increase to achieve its new goal. Since 2012, CIL has increased coal production by outsourcing production operations to private and foreign companies in an effort to improve mechanization and mining expertise and by working to adhere to detailed mine plans for achieving its 2020 production target.

Encouraging greater private and foreign participation. In August 2014, allegations of impropriety, hoarding of coal resources, lost government revenue, and a lack of transparency led India’s Supreme Court to cancel 214 coal licenses allocated to the private and public sector, representing 9% of FY2013’s production. The Ministry of Coal quickly reauctioned many of these properties to help minimize the disruption from the cancellation, but the impact of this redistribution of coal properties on production is uncertain.

Private mining may be expanded further as a result of the Coal Mines Special Provision Bill passed in March. This law opens the door to commercial coal mining by both private companies and foreign companies having an Indian subsidiary. The government is now evaluating the effect of a coal block auction to allocate properties for commercial development—a significant change for a coal industry that has been nationalized for 40 years.

The simple reality is that coal is essential – and irreplaceable – for Indian development and growth.

Gold price at 5 year low – grounds for optimism?

July 20, 2015

I grew up in the post-war period when gold price was fixed at $35/ounce. That came to an end in 1971 when the US Dollar was decoupled from the gold price. Gold price has little to do with supply and demand and is more a measure of existing financial turbulence or fears about coming turbulence.

gold price 1900 - 2000

gold price 1900 – 2000

The gold price dropped to just under $1100/ounce yesterday. But does it actually function as a forward indicator of what is to come? Many analysts see it as a trailing indicator reflecting the movement of money into a “safe haven” or out of “safety” into areas of perceived , future growth. Rising gold prices then reflect – after the event – turbulent times. Growth, of course, lags investment. Therefore, it is thought, that falling gold prices is a forward indicator of coming growth and an indicator at least of bullish sentiment if not necessarily of a bull market.

Gold price 2010 - July 2015  graphic Bloomberg

Gold price 2010 – July 2015 graphic Bloomberg

Certainly the soaring gold price after the financial crisis reached its peak of $1883/ounce in September 2011 and stayed at very high levels through 2012. The current decline started in January 2013 and has been followed by rising markets for the last 2+ years. But while a weak growth (sans inflation) is beginning to show up globally (strong in the US, weak in Asia and treading water in Europe), a real growth spurt ought to bring gold price down to less than $1000/ounce.

So the current level and falling trend shows at least that in spite of the Greek problems and the Eurozone weakness, expectations of growth are still strong. Historically, before and during the “good days” of the 1990s, gold prices were at or lower than $400/ounce. The 2008 financial meltdown itself took prices from 800 to 1800.

Gold price 1980 - july 2015

Gold price 1980 – july 2015

So I’m looking for a global growth level corresponding to gold prices back to around $900/ounce. But, unfortunately, I suspect that the gold price will not function as a forward indicator but will only reflect what has already happened. So, if it drops to less than $1000, my retirement funds will be reasonably safe.

But if it rises, I’ll have to have scrambled long before it does.

“Poor” Indian monsoon so far unlikely to derail growth

August 30, 2014

With one month to go for the “official” 4 month-long monsoon season, rainfall has been 18% deficient so far. At the half-way mark most states were deficient in rainfall. However about half the states have now crept back to “normal” rainfall. With any El Nino only expected to be weak – if it even actually develops – a catastrophic monsoon can now be ruled out. Rainfall will be below normal but the last month of the monsoon holds some hope for further recovery. There is also some hope that the monsoon – which developed about 10 days late – may also be delayed in withdrawing giving some rainfall into the first two weeks of October. It will still be a “poor” monsoon but may not be labelled “bad” or “catastrophic”.

IMD’s chart covering the 3 months so far is below. Green is “normal”, red is “deficient”, yellow is “scanty” and blue is “excess”:

Monsoon 2014 75%

Monsoon 2014 75%

There is still some risk that a poor monsoon will hold back the industrial recovery somewhat. The growth in the last quarter has been the highest for 2 years as sentiment has turned positive, and is not likely to be reversed by this “poor” monsoon.


India’s economy grew by 5.7% in the three months to June, its fastest pace in two-and-a-half years, according to an official estimate. The economy was helped by strong growth in electricity, gas and water supply, and financial services, the Ministry of Statistics said.

The growth figure was higher than analysts had been expecting. …

….. Ever since the Narendra Modi government took charge, business sentiment has improved on the ground. Investors have started pumping in money again, capital markets have been roaring, consumer demand has revived & hiring has picked up.

But this euphoria is primarily driven by sentiment and more steps would be required to sustain this optimism.

Germany: Highest growth rate since Reunification

August 15, 2010

The motor of the European economy is revving up again.

Der Spiegel reports:

Graphic: German growth forecasts for 2010

Germany just posted its strongest quarter of economic growth since reunification in 1990. During the second quarter, an exports boom, increased consumption and government stimulus helped the country chalk up growth of 2.2 percent. Buoyed by a surge in exports and continuing government stimulus programs, Germany’s economy is recovering at a faster pace than most economists expected. During the second quarter, gross domestic product increased by 2.2 percent on the previous quarter, the Federal Statistical Office in Wiesbaden announced on Friday, marking the largest quarterly economic growth since the country’s reunification in 1990.

There has been some criticism of the austerity package being introduced by the German government and of the ending of the stimulus packages. But perhaps the timing is right after all. But whether German growth can prevent a doubel-dip recession in the rest of Europe remains to be seen.

The 5 million unemployed in Germany in 2005 has now reduced and could soon be  less than 3 million.

In addition to benefiting the labor market, the German economic stimulus program also boosted consumer spending. Short-time workers have more disposable income than the unemployed, and as a result, German consumers were hardly forced to cut back during the crisis.

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