Bharat Rakshak

Budget 2010 to push up consumer expenditure
Biprorshee Das | afaqs! | Mumbai, March 02, 2010
http://www.afaqs.com/perl/news/story.html?sid=26394

Budget not a 'game changer'
http://www.marketwatch.com/story/budget ... 2010-02-28


Not quite a dream Budget, but…
Monday, March 01, 2010 1:55 PM
http://www.istockanalyst.com/article/vi ... id/3905405

PM rules out fuel price hike rollback
Published on Tue, Mar 02, 2010 at 08:29 | Updated at Tue, Mar 02, 2010 at 10:25 | Source : Reuters
http://www.moneycontrol.com/news/econom ... 44302.html

India Says Oil Prices May Add 0.4 Percentage Point to Inflation
http://www.businessweek.com/news/2010-0 ... ation.html

The present government has failed to maintain a balance between common man and reform. There is no human face in congress while doing reform as they are not worried about any election. I think it is time for DMK Trinamool and other to rethink their support for congress! Unless there is a fear of withdrawal the present government will be taking side with INCs. One needs to keep a balance in reform.

woah!

what a bold prediction.

Coming from the Man himself , it's quite hard not to attach credence to it.

Not one of those links actually backs up your dramatic statement.
So you would like the govt. to fall based on this budget.

Do have any idea what that would actually do to the economy? Or do you not care. Burn 'em all.

Before spouting 60's era rhetoric at least think one more time only.

This is news & discussion thread.

Actually it might even be a little conservative.

Great things will happen in the next 25 years.




Take a look at this chart of the working age populations in the 2 countries.




Or this one showing the staggering numbers involved.

Right now China enjoys an enormous demographic dividend with about 300 million more workers than India. In 25 years India will have more workers than China.

But over the next 25 years 250 million additional workers, over an above attrition, will join the workforce.
This will be the largest, most educated, capable and definitely most confident generation at anytime in India, maybe even the planet.

Great things are expected of them. The big Finance types in the US are well aware of this Shift. As is MMS.

Hello Theo-Fidel
Everyone wants an elected government to survive for five years. There is no doubt in it. But the Government should not promise something to common man and then do exactly against it in the budget. If you look at the manifesto of Congress government - http://www.congress.org.in/manifesto09-eng.pdf
They say the inflation and rising prices would be controlled. Then they themselves increase the prices of Petrol and gas knowing that other prices will go up. This is unfair. Also pointed out by the opposition parties and by some of their own supporters. Because Sarad Pawar supports it they know the numbers and do not worry about DMK's and other voices.

So in this sense there is no human face to liberalisation process. Say if people call for Bandhs against the government against the price rising then we go into chaos. What I am suggesting is that even the price rising can be done in a slow and steady way while making sure that the social security system also works as support for common people (through food security act - which is just restated in the budget) so that no one gets affected dramatically.

When the prices go up what happen at the ground realities.

India tops world hunger chart
http://timesofindia.indiatimes.com/indi ... 197047.cms
India's Food Inflation Rate Soars to over 17% per Week
http://www.bloggingstocks.com/2010/03/0 ... -per-week/

1.25L suicides in '08, 14 every hour
http://timesofindia.indiatimes.com/indi ... 608685.cms

When the government is not delivering what it promised rather makes a negative impact on common people then democratic rule is for them to go!

The kids that are born around today will see a new India, unlike what some of us know or grew up in.

Theo: It is one thing to have so many millions of potential workers, and another thing to find work for them. How is India going to find work for them?

Exports rise 11.5% in January

The usual end-of-fiscal-year liquidity issues:
Bond yields inch towards 8%

This is a pointless argument. We just discussed that most inflation is in agriculture.

If prices don't go up who is going to pay down the deficit or pay for the oil exploration program. Or would you like these things to wither away. A 7.8% increase must be swallowed now when the economy is healthy so we don't have a problem when the oil price spikes again.

The regular folk don't drive cars or heavy trucks or have generators in the backyard. For agriculture the price of natural gas matters more as it affects fertilizer and pesticides.



What the hell does this even mean. Feels like you are repeating some DDM term that sounds cool.



Blah! Blah! Blah! more poverty wallah statements.

I ask you why a government should fall if its reform process is not to your liking and you resort to suicide statistics. Really. Think a little more Sir!!

That 250 million is quite destitute. Things like inflation have no meaning to them. They live on what they can grow or trade for. Most have never seen a hundred rupee note in their life. They have no education. No skills. Have a life expectancy of 35-40 years. They are quite simply lost. Wasted through through years of neglect of education, lack of cultural reform, superstition and failure to access the modern economy. And mostly by us listening to these stupid poverty wallahs.

You think a budget is going to change that.

What the hell do you do you expect from the government.

Political Peace, deficit control and a minimum of turmoil is what we need. You seem to want the exact opposite. Like the wonderful social republic I deal with every day.

I don't think we should worry about that.

They will figure it out.

One thing we need to make sure is both men and women work in future. We have been wasting half our population for long enough.

I cannot consider poor people as waste nor failures nor lazy people nor wallahs. I am shocked to see one Indian seeing another poor Indian in this way (assuming the writer as Indian)!!! If you do not sympathise with poor at least do not ridicule them.

Gandhi said, "poverty is the worst form of violence".

Here is what yours...

Where did I say this?

Don't make up stuff in your attempt to act sympathetic to people you may know nothing about.

Opposition forces adjournment over fuel price hike news
03 March 2010
http://www.domain-b.com/industry/oil_ga ... _hike.html

Effect of fuel price hike on prices should be avoided: DMK
http://www.dnaindia.com/india/report_ef ... mk_1354709


PM’s justification of petrol price hike flawed: CPI(M)
http://beta.thehindu.com/news/national/ ... 125598.ece

BJP will move cut motion on fuel prices
http://www.dnaindia.com/india/report_bj ... es_1354513

I did some number crunching on Reemploying Agri-sector Labor force to increase Agri-sector efficiencies. This is not complete and will add more details as I go. Appreciate feedback/discussion.

Note: All data from CIA Factbook


After this investment
Present Agri-Sector GDP $273,460,000,000
Efficiency improvement (50%) $136,730,000,000
Corporate Investment into Food processing Industry and other $100,000,000,000
Annual ROI $36,730,000,000
ROI on Industry investment ~20-30%

On a total investment of $2 trillion retraining investment and $100 billion Agri-sector investment, our ROI is $136 billion = 6%; which is less than GOI risk free rate = 7.5 - 8.0%


*** Source: http://www.indianexpress.com/news/govt- ... n/580320/0

Quote:

During the package period, the state government cleared Rs 29,234 crore investment in large and medium sectors. More than Rs 8,400 crore investment was approved in the small scale sector and Rs 2,181 crore for expansion of existing projects.

“In total, 12,649 units were approved with employment avenues for 4.56 lakh people,” said a status note recently prepared by the Industries department. Himachal Pradesh has made it mandatory for industrialists and other investors to provide 70 per cent employment to Himachalis.

Excellent post Ramay.

IMHO 2 Trillion to retrain 250 million people maybe too high. This works out to $8000 per capita or 4 lakhs.

We should just cut them a check and let them earn 8% from the GOI.

Here in Nagercoil, going to 6 week tractor school costs Rs 1500, 6 months Tractor mechanic is Rs 8000. Welding school local polytechnic is Rs80,000 for 2 years. Agricultural engineer is a 3 year course for about 2-3 lakhs.

But the poor are willing to pay for these things themselves. The number one demand I always get is to help pay for school fees. Right now Rs 180 a month gets you into a local "English" medium school. That's where the demand is.

The present lot are not really willing to change their ways. Convincing them will be difficult.

Thank you Theo-Fidel garu for the kind words!

That $2T bill includes Retraining Costs = ~$145B and the capital investments required to employ them in a 3rd generation industrial economy.

If you notice the 1.5 to 2 percent difference between Risk Free rate and expected GDP increase is what GOI is budgeting for Farm-Subsidies ($2T x 0.15 ~ $30B ~ Rs 120,000 crores).

That said,

There are high levels of inefficiencies in Indian Agri-Sector and we should be able to correct them with low-level investments. My thoughts are -

1. India's food grain productivity per hectare is ~3.5 tons where as PRC has ~6.5 ton per hectare productivity. We should be able to achieve 20% efficiency improvement just by educating, incentivizing the farmers as required.

2. Encourage small-scale & grid-connected Solar/Wind power generation where they can pay rent to the farmers. My favorite is something like Sterling Energy Systems model. A dish occupying ~50-100 Sq. Yds (1-2% per acre) produces 25KW energy and farmers can earn upto Rs 500 as monthly rent per dish.

3. Develop strong food-processing industry. Make it a precondition for opening up Retail sector for corporate sector. Every 1000 crore investment/revenue projection should include 50-100 crore investment in AC-godowns and food-processing industry or something like that. This will enable the slow (managed) transition of agri-based labor into next-gen industry.

Thanks for your contributions so far RamaY! Very interesting indeed. This is the first attempt at quantitatively analyzing the cost of shifting the rural agricultural population to industrial activity that we've ever done here. Another aspect of the matter is land acquisition, an emotive matter that often defies dry economic solutions.

A combination of long term land leases and coverage of education/retraining costs may enable a significant number of people to acquiesce to pursue a different economic direction than one they're culturally and historically used to. Change often is so scary and unknown that without a credible path for their transition out of rural agricultural life, such a move will face enormous opposition, as we've seen.

I am honored Suraj-ji!

I will end my argument with this:

We must treat our Agri-sector as Indian version of SMB (Small & Medium Business) and nurture it accordingly. We can definitely improve the sector level efficiency by industrializing it, but it will result in a net –ve economy as explained above. India is not a corporation that can be turned into lean organization by increasing efficiency and reducing employee count.

The sector is going thru its own natural evolution. Newer generations are either moving into industrial or services sectors based on the education levels. We must encourage it thru offering free education (I prefer education vouchers) till High-school diploma level (I prefer current 12th grade CBSE syllabus combined with PolyTechnic type courses).

RamaY: This is a ji-free zone

It's very interesting that you mention an SMB approach. Are you familiar with the Chinese TVE reforms from the 1980s ? If you aren't already familiar, you might find it a very interesting case study. It might give you further ideas, though not necessarily such a statist approach as the TVEs were. We discussed them on a past avatar of this thread a couple of years back, but didn't continue down the path to estimating costs associated with moving our agricultural workforce into industry, as you did.

Suraj,

No, I haven't heard about TVEs before. But I did some googling and got some idea now. Let me research further and see how we can identify an Indian solution/strategy. Please refer me any links/materials you have on this.

As the next step on Indian Budget, I would like to separate the real non-plan allocations; so we can close on the cost of running business as usual (salaries, expenses, etc). Then we can discuss the planned allocations in detail. I have a feeling that we are unnecessarily maintaining a deficit budget. Let us see.

My dream budget will have the following characteristics
- Deficit free
- Equal Allocation for the following groups (I assume there is ~500,000 Crore Planned portion based on 900,000+ crore revenues)
- - Defense
- - Education & Medical Services
- - Farming, Irrigation, Food security
- - Civic and industrial infrastructure
- - All other (Police, Courts, Environment, Forests etc)

Some part of the opposition to land acquisition is because the persons divested of their holdings does not get any benefits from the increase in price of the land after the acquisition. This resistance can be overcome by giving the landowners land in the residential and/or commercial areas where land has been acquired. Highways can have towns next to them. Industry will have a housing area/township adjacent to it. We can give all the land owners land in these area. So they enjoy any further future appreciation in the price of their land.

Another problem is that land owners, usually farmers have no other skills that they can rely on, nor do they have the financial management skills to make good use of the money they receive as compensation. A flat/shop in the new townships coming up will give them a secure source of income.

The argument that people need to benefit from the increase in price after the land is acquired is bogus because the increase in price is not due to any of their efforts for them to partake in it.

It may be instructive to study how land reforms were implemented in the states. Those reforms were in large part responsible for creating the educated urban middle class today by pushing young people to the cities as their families were divested of their land holdings.

A good solution would be schemes like the new medical degree for rural students that will eventually provide more income to people than they can derive from agriculture. In other words, provide incentives for the young to take up alternative occupations so that labour intensive agriculture is gradually abandoned over the years.

Ok then. I am not giving you my land.

You may not have a choice. Remember eminent domain. As long as there is a valid public need for the land and the compensation is reasonable, you will have to sell the land or lose it in forced taking and receive lesser compensation, a practice that is well honored in U.S.

Exactly. Eminent domain is how land reforms were enacted after Independence.

Eminent domain is only applicable in a narrow context where the land is to be expropriated for public use. It cannot serve as the basis for land acquisition in a broader sense. kumarn makes a very good point in that sense - an academic argument is not going to make the landholder give up his land; both parties will look out for their own interests. Fiat measures will lead to a political backlash.

Actually Eminent Domain is almost never used in the US.

The real mechanism is the Rezoning of land from RA (Agriculture) to C/R/H (Commercial/REsidential/Housing).

This one step often increases the property taxes about 5-10 times, so no one can afford to let the land just sit there. They must sell to a developer and soon.

The big fight in the US is when a city decides to Annex a large adjacent area because it is tired of the area leaching off its Emergency, educational and infrastructure services without paying for them. There are very often bitter campaigns to fight for and against this process, something I often advice cities on.

Raising the property taxes would be a meaningful mechanism if people actually paid those taxes! My personal experience is that very few farmers are paying any kind of property tax. 40 years after losing our holdings in land reform, our extended family was able to get legal titles from the government after buying back the 40 years of unpaid tax receipts at $15/acre.

Now as practical matter, who is going to eject the freeloaders on the land? India is pretty much a lawless place in these matters with local goondas a.k.a politicians ruling the roost.

There are three data points from different sources that seem to be inconsistent:

- India's economy will overtake Japan's in two decades (Martin Wolf's article in the FT)
- China's economy this year will overtake Japan's (general expectation, I believe)
- India's economy in 2009 was the same size as China's in 2000 (an article posted last year by vina)

If all of these are true, does that mean that India will take 20 years to cover the distance covered by China's economy in 9?

Surely not. The growth rate differential is not 1:2. Which of these is wrong? Are we going to overtake Japan earlier than previously forecast?

Comparing extrapolations from past to present, and from present to future, is at best confusing.

The combination of strong disinvestment proceeds so far (and more in the pipeline) and the 3G license auction has the potential to significantly lower the fiscal deficit:
More than Rs 25,000 cr ($5.5 billion) from disinvestment this year

'The 3G money raised may be more than estimated'

Current estimates:
Mechanism Current_Est Max_Est
Disinvestment Rs.25000cr/$5.5B Rs.40000cr/$8.7B
3G License Rs.75000cr/$16.4B Rs.120000cr/$26.2B
Total Rs.100000cr/$21.9B Rs.160000cr/$34.9B

Direct tax collections up 7.5% till February

On deaf ears
Does India’s government pay any heed to its economic advisers?

Mar 4th 2010 | From The Economist print edition
http://www.economist.com/business-finan ... d=15606303

It was a good effort on your part to quantify. We don't need to see this as something impossible or something that is expensive. It could be very productive from the day one. We are going after a sector that is really down instead of decent production of grains.


One of my friends from Punjab told me that Reliance has taken substantial areas of agricultural land on lease for 20 years to produce organic verieties. Well, one can say Punjab is easy as it is fully equipped for such a thing.

I believe the following will put this to top start:
1) Incentive based and tax credit based encouragement will bring corporations forward to even backward areas. Incentives if the local villagers of the leased are used in training and labor as opposed to using migrant labour. This will ensure status quo in terms of unskilled labour of the villages. It is very important.
2) Leasing land with good lease value will encourage most of the agricultural land owners to lease it out. The bigger farmers will partner as it will be win-win. Leased lands for agro development by corporates actually increase the value of the land. When land is aquired for other purposes, the land owner actually gets a good price. Current contentious issues are minimized.
3) Importantly, if bigger corporates like Reliance etc, are involved, the supply chain and storage will become more streamlined. As an added incentive, India also should open up retail. Retail also needs to become more structured and organized.
4) Agriculture becoming corporate and opening up of retail actually will kill the number of middle layers in the chain. With an added tax incentive to agro based industries and retail, the customers can get food at a cheaper price.


Government can spend the money that is being wasted currently on poverty alleviation programs towards training.

If planned properly the whole thing is do-able without distress to anyone. However, if we do piece-meal fashion, we will be creating more disparities like the Telangana Vs. Andhra etc.

Yes. A few years before 2020 if the economy stays on track.

I'm not sure what that sentence means, assuming you were replying to my post. Extrapolations by definition take past trends and project them out to the future.

I think vera_k is right and that India may overtake Japan earlier than previously forecast.

Muppala garu,

Valid points. There definitely is a way to implement such strategies. My thoughts on the guidelines are

- Lease period does not go beyond 20-25 years (Lease has to be renegotiated at the end of the period).
- Farmers get fixed leased amounts. (Rs 1000 per acre per month?)
- Farmers get 30-40% of stocks in the resulting company; prorated per acre. Will also get 3-4 board members (in a 10 member board)
- Govt get to nominate 1 board member.

Hide your money under your mattress - Geithner to travel to India in early April

http://www.marketwatch.com/story/geithn ... 2010-03-04

Treasury Secretary Timothy Geithner will travel to India in early April to take part in bilateral economic talks, the department announced Thursday. Geithner will participate in the first U.S.-India Economic and Financial Partnership meeting, designed to strengthen ties between the two countries. The talks are modeled on similar dialogue with China. During the meeting on April 6, cabinet officials from the two countries will meet to discuss economic policy, the banking sector and infrastructure spending. President Barack Obama announced the partnership during Indian Prime Minister Manmohan Singh's state visit last November.

hope he's not pushing some international currency agenda.

Antother fear is he might be pushing for the entry of goldman sachs type companies into India to game the financial system and rip it off the way they do in America. I see this guy as nothing more than a spokesman for that "industry" which he no doubt plans on joining once he leaves office. The banks owe him a lot after all the tax money he's given to them.

there is no sense in signing up for scams. No Thanks!

Geithner isn't in a position to do any such thing. There's no need for such alarmism. He'll obviously parrot his own line, and we'll nod, and smile and ignore it. Hopefully he'll get laughed at by Indian students, to complement the event in Shanghai last year.

We've already weathered the worst of the earlier crisis because our central bank avoided the pitfalls of the US approach built around dissolving the Glass-Steagall act. If we could ignore such temptations at the height of the boom when everything seemed to work, it's not hard to ignore him now, when the downsides are openly apparent.

Dreaming the Possible Dream

http://www.nytimes.com/2010/03/07/opinion/07friedman.html




How can we get these guys back?