Indian Economy News & Discussion - Aug 26 2015

[geeth]

Take a look at Rs 1 Billion on antilla, this is wealth destruction you are seeing folks.

Hope it is typo error...to my knowledge, it is One Billion Dollars, not ruppes.., Latest on wealth destruction is 40 crore sari worn by Nita Ambani.

[hanumadu]

I think it is 2 billion rupees (200 crores) which some where down the line got converted to 2 billion dollars and it stuck. How on earth would a 25 story house in a residential plot cost more than the biggest of hotels in prime property the world over with hundreds of rooms?

[johneeG]

That would be one reason, but I suspect wont be a big one. Simply because there is so little of national income in agri (~14%), and bulk of the farmers would not qualify under any tax bracket.
………………..
I think the general axiom that India's tax-to-GDP is low is intellectually lazy. Tax-to-GDP is a function of per capita income, adn we are still a mdoest 1600 dollar PCI country. However, it is also a fact that a lot of money and income in India is concentrated (our Gini has gone up in the last few years), and hence a lot of income can be taxed. Unfortunately, not too much robust intellectual frameworks have been analysed around this question.
…………………
The new found love for "tough laws" to dig out black money is taking us back. Black money is best brought in by intelligent policy, not by threatening people.

The comment at that point was more respect to the sheer number of income tax payers. I just pointed out that 50% of Indians are exempt from being counted at all.

I don’t disagree with the rest of your post on agriculture. One should remember that due to the legacy of the EIC, agriculture tax would set the whole nation on fire. Not worth the hassle, as GOI has repeatedly decided. There was a time when agriculture was 60% of GDP and GOI was sorely tempted to go after it.

At our income level India is quite a fairly taxed nation. Though I would also say, if you owe taxes, cough it up. Nation definitely needs it to pay bills. We need to remember that back in 1930 when USA was at our development level, total federal tax was 3%-6% of income and total tax was less than 10%.

I think the exemption for Agriculture from tax is to keep the input costs low for agriculture. The same is the reasoning for providing subsidies to chemical fertilizers and pesticides and seeds. The idea is to keep the input costs low.

There was some discussion about Agriculture in this thread. My views:
I think the problem with agriculture is that it has become a loss making venture. It has become a loss making venture because of high input costs.

There are two ways to make Agriculture profitable:
a) increase the selling cost, so that the farmers can get profits.
b) decrease the input costs, so that the farmers can get profits.

a) increase the selling cost, so that the farmers can get profits.
If the selling cost of agricultural products is increased, then agriculture will become profitable. But, it will lead to inflation of all agricultural items which will drive more and more inflation. This is simply unsustainable socially and politically.

b) decrease the input costs, so that the farmers can get profits.
So, this is the only viable option. How do you decrease the input costs? The first question is: why are the input costs of agriculture so high? Mostly because of chemical fertilizers and pesticides. And water motors. But, mostly chemical fertilizers and pesticides. So, the only viable way to make agriculture profitable is to reduce the dependency on chemical fertilizers and pesticides. Then, what is the alternative?

Some kind of homemade alternatives using cow dung, neem, ...etc to act as natural fertilizers and pesticides. They are cheaper and hence reduce the input costs. So, agriculture become profitable and inflation of food items is under control.

Right now the policy is neither here nor there, so the results are neither here nor there. The agriculture is not profitable and the inflation is not in control because the govt policy is trying to travel both these boats at the same time without addressing the root cause.

Link to post

[Arjun]

What kind of expenditure is 'wealth destruction' and what is not is rather subjective.

Ambani probably invested a much smaller percentage of his wealth on his personal residence than the regular middle class. And the middle class buying Chinese made junk may well be a bigger pointer to national wealth destruction than the monstrosity of Antilla

[somnath]

do you have more info on IIP methodology ? the exact statistical tools I mean..

You can find the model in the document I referenced - it has the assumptions on R, Cov etc.

Hope it is typo error...to my knowledge, it is One Billion Dollars, not ruppes.., Latest on wealth destruction is 40 crore sari worn by Nita Ambani.

We should be careful to describe consumption as "destuction of national wealth". Consumption creates jobs, wealth and boosts national income all round. Else, buying an Innova instead of a Duster is a "destruction" of natioanl wealth" too!

I am no fan of the Ambanis, but they are the largest single private sector investor in India. What they do with their money is completely their business, as much as it is completey my business if I buy an Innova instead of a Duster! In both instances, national income has been boosted.

[Viv S]

I think it is 2 billion rupees (200 crores) which some where down the line got converted to 2 billion dollars and it stuck. How on earth would a 25 story house in a residential plot cost more than the biggest of hotels in prime property the world over with hundreds of rooms?

From what I understand, unlike hotels that will employ the same floor plan and decor on every level (i.e first floor and top floor are identical), each floor in this house is absolutely unique with its own independent layout and theme. No standardization at all.

But yes, $2 billion is probably an exaggeration.

[geeth]

We should be careful to describe consumption as "destuction of national wealth". 

And you should be careful about what you write. Don't try to put words into my mouth..I never said national wealth destruction. In fact I was just quoting someone else. I agree to some extend that a Billion Dollar house complex for self or a $250 million bithday gift (which was idling with Mumbai customs for about 8 months) or Rs 40 cr Sari are examples of wealth destruction. I agree it is his money and is free to destroy it. But yes, it is destruction.

https://en.m.wikipedia.org/wiki/Antilia_(building)

[Theo_Fidel]

We should be careful to describe consumption as "destuction of national wealth". Consumption creates jobs, wealth and boosts national income all round. Else, buying an Innova instead of a Duster is a "destruction" of natioanl wealth" too!

No, it is wealth destruction not consumption. Consumption is something completely different. Esp. in a poor nation trying to escape the many obstacles to wealth. Note that I did not say it was a plus or a minus. It is one thing for wealthy countries to do this and quite another for India. India has very poor capital stock, ~ $ 12 Trillion last I checked, while places like USA have ~ $200 Trillion in capital stock. We only have income of ~ $2 Trillion per year to add to our capital stock. Every Antilla delays us along our struggle to become wealthy as it is not an accumulation to out capital stock.

The wealthy have a right to spend their money how they like. But because they are few and with lots of money the money spending tends to become skewed. Take for instance education. In a skewed economy, as a proportion of their income the middle class spend many times what the wealthy do on productivity enhancing activities, education, skills, tools, machinery, infrastructure, etc. Or taxes, we just got through discussion on how the brunt of taxation is borne by the middle class, WRT to public safety, infrastructure, transport, education, water, etc.

To be honest I don't know the answer to this conundrum. All countries have gone through this robber baron phase including crony capitalism. What would say is countries that control their consumption and divert it to capital accumulation activities do a much better job of growing long term and becoming/staying wealthy AND passing on that wealth to the next generation. Indians are poor because face it we have not been passed on a lot of wealth from previous generations for a multitude of reasons. Building a $1 Billion apartment complex in Manhattan is wealth generation for centuries to come, building things like Antilla, naaah!

[gakakkad]

A lot of Subrata rays wealth won't be passed on to anyone...just disappeared in thin air...likewise mallya...he sank himself and nearly took many banks with him....what if Mota bhai gets caught in a big financial scam and goes in for it ?

[somnath]

To be honest I don't know the answer to this conundrum. All countries have gone through this robber baron phase including crony capitalism. What would say is countries that control their consumption and divert it to capital accumulation activities do a much better job of growing long term and becoming/staying wealthy AND passing on that wealth to the next generation. Indians are poor because face it we have not been passed on a lot of wealth from previous generations for a multitude of reasons. Building a $1 Billion apartment complex in Manhattan is wealth generation for centuries to come, building things like Antilla, naaah!

Crony capitalism and conspicuous consumption are somewhat unrelated. Crony capitalism is an issue in india , in fact its presence is one of the relative failures of the reforms process. A few years back raghuram rajan famously authored an analysis of how india's Forbes list is overly dominated by people owing their wealth to govt concessions and licenses, comparable to Russia!

However India is hardly Robinson Crusoe, all countries, esp in Asia have large doses of it.

Way to solve crony capitalism is by good policy, essentially non discretionary rules.

Public utilisation of wealth is a different concept , it comes with maturity of the economy and the families. India's big business families have started - Premji, Nadar are exemplars, the Tata's have been at it for many years. But we are far behind the West, it will happen over time, I am sure.

In the meanwhile it's better to have mukesh build antilla here than buy a mansion in London.

[Austin]

Any reason why Rupee is under pressure and above 65 now the China thing has subsided

http://www.bloomberg.com/quote/USDINR:CUR

[somnath]

Any reason why Rupee is under pressure and above 65 now the China thing has subsided

http://www.bloomberg.com/quote/USDINR:CUR

1. Global markets are spooked, in risk off mode, impacts EM flows. Large outflows this month from FIis.
2. U.S. fed hike - still even chances of a rate hike in sep, notwithstanding RAjan's advice yesterday
3. INR is somewhat overvalued in the EM peer group - hence vulnerable tactically.

In the meanwhile, confidence in the govt reforms agenda is ebbing rapidly.

http://www.livemint.com/Opinion/XA9VnEr ... eezer.html

The govt seems to be in perpetual election campaign mode - land acquisition was effectively buried yesterday. Today Bihar, tomorrow it will be WB, Assam , UP.

India will have a cyclical bounce back no doubt - but the govt is in a "more of the same, but more efficient, and better PR" mode.

There is no dearth of good advisors - Panagariya, Debroy, Arvind S, Rajan. What is absent seems to be political imagination to push reforms through.

[ShauryaT]

Another move, where power is centralized and not devolved, IMO a fundamentally flawed structure for India.
Before Cities Can Become Smart, They Must First Be Empowered BY MUKTA NAIK

The real need of empowering elected city governments—and by extension empowering citizens—for long-term urban development in accordance with the intent of the 74th amendment has, once again, been bypassed.

[A_Gupta]

Does this make sense?
"Payments banks' Rs 14 lakh crore bonanza for infrastructure sector"
http://www.businesstoday.in/sectors/ban ... 23236.html

Thanks in advance!

[A_Gupta]

Question - if PM Modi can do one out of two - land acquisition or GST - which one should he do?

IMO, it may be best to do GST, which makes India truly into one market. The States can come up with their own land acquisition policies.

[gakakkad]

http://www.financialexpress.com/article ... du/127275/

Govt to soon take call on special Parliament session for GST Bill: Naidu



Don't bother about media distortions etc...Modi has backed our of no reform , nor will he ever...

He has by no means given up on labour and LAB too...it ll be done...

[krisna]

By that logic the Hindu growth rate of 3.5 can well be 5.5!

Arun Shourie quotes

It has almost become routine to slight Hindu sentiments — our smart-set do not even notice the slights they administer. Recall the jibe of decades: ‘the Hindu rate of growth’. When, because of those very socialist policies that their kind had swallowed and imposed on the country, our growth was held down to 3-4 per cent, it was dubbed — with much glee — as ‘the Hindu rate of growth’. Today, we are growing at 9 per cent. And, if you are to believe the nonsense in Sachar’s report, the minorities are not growing at all. So, who is responsible for this higher rate of growth? The Hindus! How come no one calls this higher rate of growth ‘the Hindu rate of growth’? Simple: dubbing the low rate as the Hindu one established you to be secular; not acknowledging the higher one as the Hindu rate establishes you to be secular! “. —Arun Shourie

http://forums.bharat-rakshak.com/viewto ... 2#p1885642

In broader context there has been concerted effort to paint Indian traditions as decadent and abusive.
In 1900s economic books were written saying that only Christian countries esp protestant ones were entrepreneurs etc. Hindu and Buddhist ones do not progress. Hence for economic prosperity one needs to jettison Hindu Buddhist traditions.
At that time westerners which were prosperous obviously Christian thought it to be right.
Many developing countries also thought so. Probably JLN also.

To maintain that in 1960-70s developed countries thought of doing it in a better way by checking the economies for centuries.
A Belgian economist stunned them saying India China were superior economically.
This made them get Angus Madison to do the work for millennium economy which resulted in a different result than they ever imagined.

Gurumurthy also talks about the above in one of his talks in YouTube. Will try to get the link soon.

[ShauryaT]

Question - if PM Modi can do one out of two - land acquisition or GST - which one should he do?

IMO, it may be best to do GST, which makes India truly into one market. The States can come up with their own land acquisition policies.

That is an easy one for me. I oppose the GST bill, so LAB it is. The 2013 bill is a travesty for the right of the sovereign power of eminent domain. The SC should have struck down the 2013 act as unconstitutional and an impediment to article 31. We must be the only nation in the world to make it so difficult to act upon eminent domain. As mentioned earlier, it is not land but justice that is the real issue here but instead of tackling that issue we have made it virtually impossible to acquire land. Do not see how, delegating this matter to states in light of the law in place, helps the matter.

[Kakkaji]

At least 60% of mineral foundation to be used for social infrastructure

The Centre is likely to make it mandatory for new District Mineral Foundation (DMF) to spend at least 60 per cent of its money on social infrastructure such as schools, hospitals, women and child development. This year's amendment to the Mines and Minerals (Development and Regulation) Act, passed in March, says "state governments have to set up a DMF in every district affected by mining-related operations…the object of a DMF shall be to work for the interest and benefit of persons, and areas affected by mining-related operations, in such manner as may be prescribed by the state government".

According to a senior official, the Centre will soon issue binding guidelines for state governments. These would specify that only up to 40 per cent of the amount could be used for physical infrastructure such as roads and bridges. For, the worry here is that the DMF funds would be so used as not to give any substantial benefit to the locals.

Most districts affected by mining and related operations are extremely poor, not having amenities like clean water, schools or hospitals.

[Suraj]

Payments banks Rs 14,00,000 cr bonanza for infra sector

Payments banks can annually free up as much as Rs 14,00,000 crore in incremental credit for the fund-starved infrastructure sector, says a SBI Research report.

"Apart from helping banks offer facilities to the unbanked sections, we estimate that on the asset side, an incremental amount of at least Rs 14 trillion (Rs 14 lakh crore) per annum can be freed up for credit needs of the infrastructure sector, as these banks can only invest in G-secs, this entire amount can be freed up to lend to infrastructure," SBI Research said.

Explaining how they arrived at the Rs 14 lakh criore of additional funds for investment, the report said people are holding around 13 per cent of cash with them for their day-to-day transactions. In a simple arithmetic, even if the cash with the public comes down by 1 per cent, it will increase banks' deposit base by around Rs 15 lakh crore and given a credit-deposit ratio of 75 per cent banks can loan out an additional Rs 11.25 trillion, through the multiplier effects.

On the liability side, "we believe retail penetration of banking credit is very low at 9.5 per cent of GDP. This is much less than China's 22.5 per cent and significantly lower than our South Asian counterparts," says the report.

Stating that there is a huge opportunity for banks to unlock their retail business potential, the report said, "even if the incremental share for retail loans as a percentage of GDP are to increase by only 1 per cent, it could mean an additional Rs 1.3 trillion benefits to the banking system," the report said.

On August 19, the Reserve Bank had granted in-principle approval to 11 entities from 44 applicants to set up payment banks. Some of those who got the licence include Reliance Industries, the Birlas, the Mahindras, Vodafone, and Bharti Airtel, among others.

Reserve Bank isn't done with rate cuts, says Rajan

Hinting at a fourth interest rate cut this year, Reserve Bank of India (RBI) Governor Raghuram Rajan has said the central bank isn’t done with lowering rates. The primary problem in the global economy, he added, was slowing economic growth.

RBI has reduced the key policy rate thrice this year, by a combined 75 basis points. It, however, kept the rate unchanged at its monetary policy review in August.

Remittances to India surge 25% on yuan devaluation

NRI remittances to India jumped by up to 25 per cent in the past few days as the devaluation of the Chinese yuan weakened the rupee and led to attractive exchange rates, top executives of exchange houses in the UAE have said.

The exchange rate for the rupee hovered between 17-17.35 these past two weeks and on Friday touched 18 against the UAE dirham. It hit 18.10 on Monday -- the lowest since 2013.

White-collar workers in the UAE took advantage of the freefall of currencies and remitted more money compared to the past few months, according to a report in the Khaleej Times.

Exchange rates for rupee across the Gulf Cooperation Council (GCC) have also been at their highest in quite some time, with the currency going for 18.70 against the Qatari riyal, 17.29 against the Saudi riyal, 173.05 against the Omani riyal, 217.49 against the Kuwaiti dinar, and 174.06 against the Bahraini dinar, the report said.

Favourable exchange rates helped surge remittances to India between 20 per cent and 25 per cent, it said.

Last year, India received $70.4 billion remittances from its worldwide diaspora.

The NRIs based in the UAE sent home $12.6 billion remittances in 2014, according to the World Bank.

[somnath]

Question - if PM Modi can do one out of two - land acquisition or GST - which one should he do?

IMO, it may be best to do GST, which makes India truly into one market. The States can come up with their own land acquisition policies.

LAB is dead - the PM announced is officially yesterday. GST, in its current form isnt a quarter of what it was set out to do. However, there is now an optical value to GST. One, it has become some sort of a totem pole of reforms creds of this govt to the market. Two, it is also a bellwether of how much this govt can get done through the legislature. On purely these optical grounds, GST assumes importance (for both market as well as the govt).

On LAB, just like Labour reforms, the govt should quickly pass the buck on to the states. Let the states customise the law the way they want it.

Does this make sense?
"Payments banks' Rs 14 lakh crore bonanza for infrastructure sector"
http://www.businesstoday.in/sectors/ban ... 23236.html

These are the sort of reports that are more for general public (rather, mass media) consumption, rather than investors/analysts.

Lets look at what they are saying

Explaining how they arrived at the Rs 14 lakh criore of additional funds for investment, the report said people are holding around 13 per cent of cash with them for their day-to-day transactions. In a simple arithmetic, even if the cash with the public comes down by 1 per cent, it will increase banks' deposit base by around Rs 15 lakh crore and given a credit-deposit ratio of 75 per cent banks can loan out an additional Rs 11.25 trillion, through the multiplier effects.

One, calculation. The total currency with public is ~14 lac crores. 1% of that would be 14 thousand crores! Either the report is wrong, or the paper is quoting it wrong.
Two, payment banks are not allowed to lend, they are allowed to invest their deposits only in G-Secs. So assumptions of C/D ratio are stupid, at this stage.
Three, this assumes that "cash" in the system is because somehow existing banks (all hundreds of them) somehow let them be, and didnt want to bank the cash! Some of it is true, but its not a snap of a finger.

It would be useful to get this report though. Fundamentally, the business model of payment banks is still being figured out. The ones most clear on this are those with ecosystem models - Jio, Paytm, Bharti. I suspect that the licensees expect a gradual change in regs per se in order for them to get into more of the vanilla banking stuff, something like what happened in telecom many years ago.

[somnath]

Another move, where power is centralized and not devolved, IMO a fundamentally flawed structure for India.
Before Cities Can Become Smart, They Must First Be Empowered BY MUKTA NAIK

The real need of empowering elected city governments—and by extension empowering citizens—for long-term urban development in accordance with the intent of the 74th amendment has, once again, been bypassed.

Actually, this is another case of old wine, rebrewed and presented in a new bottle. UPA had this JNNURM, which was basically a way of the Centre funding part of urban municipal projects. The most visible outcomes of this funding has been public transport buses in most cities - they sport the JNNURM badge.

The smart cities thing is more of the same, and essentially as flawed as JNNURM. Cities need proper governance structures around them, independent of the state govt, independent of the central govt. Else, its just a case of pushing some more cash through the same system, and hoping that some of it sticks.

There is an open question whether we need "more" cities - post independence, we have only had 1 new city developed (Chandigarh), and a couple of half-new cities maybe (Dispur, Gandhinagar). There is a strain of thought that argues that we should be building new cities. The other strain of thought is to strengthen existing cities.

But in either case, without appropriate urban governance structures, all the plans and funding well end up being lipstick on a pig's lips.

[Singha]

how do the chinese big city model work? are their mayors reporting to the state CM or a separate post reporting to the central govt directly? i know some of the successful mayors have gone on to PM/president posts.

also how is the funding coming top down there....in india the central govt takes most of the funds and then distributes it back to the state, which distributes it as it sees fit, some of it to the cities.
since cities are a small fraction of the MLAs, they do not have too much clout vs the needs of the entire state.

does china have a separate funding channel direct from peking to showpiece cities?

suggestion has been made to declare the major cities as union territories, but no state will permit that as their capital regions contribute a huge % of the revenue and black money also.

[somnath]

how do the chinese big city model work? are their mayors reporting to the state CM or a separate post reporting to the central govt directly? i know some of the successful mayors have gone on to PM/president posts.

Not just china, in a number of countries mayors have gone on to have larger profiles than provincial state politicians, and gone on further. Putin was mayour of St. Petersberg, Rudi Giuliani in NY - there is a long list. In most of these cases, mayors are directly elected (or appointed in China), have substantial powers over all aspects of city governance - local taxation, police, land laws, environment clearances etc. Unlike India, where CMs are loathe to cede any effective power to even an indirectly elected mayor.

The funding, like JNNURM, is like all "central schemes" to states. So part of central devolution to states happens through untied funds, and part of it happens tied to specific programmes. NREGA is one example of it, JNNURM is another. This govt has actually reduced the number and amount of "central schemes", and given more money to states as "untied funds". This is what most state govts have been asking for, so it is good in principle.

The trick is to have a city head that has full accountability on results and authority to take decisions.

Unfortunately, none of our politicians are truly "reformist", all of them want to retain control.

[Suraj]

The lopsided power of state governments w.r.t. cities is also a result of the population distribution (approx 31:69 urban to rural breakdown) as well as the continuing strong net migration into cities. The result is that a) there's no 'need' to make cities attractive to new migrants, because they're streaming in anyway and b) the much larger rural voting bloc gets cross-subsidized by the urban population's output. The result is that cities have low democratic representation, and correspondingly lower fiscal and taxation independence, in our system.

The Chinese system is quite different. The government nominally owns all the land. They gain revenue just from leasing it out to business. Banks are mandated to fund urbanization. The city leaders, as opposed to prefectural heads, are the ones who climb the party ladder. This really began during Deng Xiaoping's time. His successor and deputy - Jiang Zemin and Zhu Rongji - were successive mayors of Shanghai, the city Deng intended to showcase as the symbol of his economic policies. Therefore, every mayor there tries to build up his city, as a means of career progression.

In our system, there's no such political incentive lining up heavy investment in the city with political fortunes at a higher level. In fact, Modi is the person actually heralding a change - he's the first ever leader to be elected because the population wants him to do at the central level, what he asserted he accomplished at the state level. No PM before ever did so - every one of them were Delhi insiders, even if they had been CMs before.

What's more, Modi's administration also cultivates his best state level leaders for progression to the national level . For example, Parrikar has already been picked up from Goa. SSC and V Raje have both been supported through political crises, and are tasked with running laboratories for policies to be expanded nationally, e.g. labour laws in the case of Rajasthan, and agriculture/irrigation technologies in the case of Rajasthan.

While this isn't the same as increasing the political and fiscal autonomy of cities, it's still a significant change from the past towards a more meritocratic system tying economic and administrative nous with political progression, whereas before state leaders were known as state leaders controlling their own fiefdoms, and Delhi insiders led national politics.

[somnath]

What's more, Modi's administration also cultivates his best state level leaders for progression to the national level . For example, Parrikar has already been picked up from Goa. SSC and V Raje have both been supported through political crises, and are tasked with running laboratories for policies to be expanded nationally, e.g. labour laws in the case of Rajasthan, and agriculture/irrigation technologies in the case of Rajasthan.

Much as we (at least the "optimists") would like to attribute a new found penchant for state-level talent hunts, the rationale are rather more quotidian.

Both Shivraj Chauhan as well as VAsundhara Raje are state leaders with political clout of their own - they can split the BJP state unit if they were shoved out (we saw what happened to BJP in Karnataka with Yeddyyurappa's exit, or in UP with Kalyan Singh). In general, the BJP is structurally a lot more tolerant of (and hence attractive to) local talent - after all its not a family owned business. Even Congress had to kowtow to regional leaders - YSR in AP was an example, so was Sharad Pawar in Maharashtra, Mamta Bannerjee in WB. Funnily enough, the same is applicable for CPM - Achuthanandan continues despite pretty severe provocations, purely on account of his clout.

Net net, political conpulsions drive this, not a systemic change of sorts.

Point is that no party believed in systemic devolution of powers downwards. If anything, CMs in the last 15-20 years have taken to becoming de facto mayors of their capital cities. Result has been disastrous - Mumbai has MMRDA, MSRDC, the Metro corporation, Monorail corporation, all besides BMC - stepping on each other's toes all the time, and preventing all acccountability. Waterlogging in monsoons - BMC lays the blame on MMRDA's doorstep, MMRDA on BMC.

Its a shame, leading to all kinds of stupid outcomes.

[Austin]

Mumbai has MMRDA, MSRDC, the Metro corporation, Monorail corporation, all besides BMC - stepping on each other's toes all the time, and preventing all acccountability. Waterlogging in monsoons - BMC lays the blame on MMRDA's doorstep, MMRDA on BMC.

Its a shame, leading to all kinds of stupid outcomes.

+1 , Couldn't have put it better

[amit]

What's more, Modi's administration also cultivates his best state level leaders for progression to the national level . For example, Parrikar has already been picked up from Goa. SSC and V Raje have both been supported through political crises, and are tasked with running laboratories for policies to be expanded nationally, e.g. labour laws in the case of Rajasthan, and agriculture/irrigation technologies in the case of Rajasthan.

Suraj,

Important point. What I admire about what Modi is doing is that he is systematically bringing/promoting leaders who are outside the ruling elite (spread across all political parties) who have cornered power in India at the centre, you know the St Stephens-JNU-Delhi University-Calcutta University type. Folks like Parrikar, Amit Shah, Smiti Irani et al are from outside this cabal. Mind you that does not necessarily make them better leaders but it certainly imparts a fresh way of looking at problems which has been absent.

One of my criticisms with regard to the previous NDA govt of ABV was that it might have been a different party but it's worldview was a carbon copy of the Congress-Left. The outliers like Murli Monahar Joshi, despite being highly educated, did not have the political finesse to stamp their footprint in Delhi. I have better hope for this lot of "outsiders". If they can click then the pressure on the other parties from state leaderships will be inexorable and that's needed for our political system to survive.

Just take the example of the CPI(M). State level leaders like Budhadeb Bhattacharya, Biman Bose etc were far better attuned to ground realities having fought and won elections than Sitaram Yechury and Prakash Karat. And yet they had to bow to their diktats and the result of that is there for all to see.

Regarding smart cities I personally have some misgivings. It's great that India has announced 100 smart cities but funding and governance, as you mentioned, is a major challenge. But even more fundamental is the question: What exactly is a smart city?

Does a city qualify to be a smart city if it provides fee WiFi in certain stretches of the city? Is it smart if you could download an app and know which bus is going which direction? Is it smart when you have street cameras, flood monitors, weather quality monitors, traffic light monitors which all feed into one central control room? Or does a city become smart when you can avail of telehealth services such as having a device on you body which monitors your health and send a automatic ping to your healthcare provider the moment your heart acts up?

The point of all this is that smart city can mean anything. With ubiquitous connectivity, cheap IoT devices and Hadoop enabled Big Data analytics you can do anything you want. In this situation you need to identify what are the services that you want in your smart city and that should be decided based on the requirement of the people.

For example there is a small little city in Iowa on the Mississippi River called Dubuque. It uses Big Data analytics to find out the correlation between power consumption and water consumption. It has installed intelligent electricity meters at homes which can tell residents when the electricity tariff is low and that's when they should used their washing machines. It uses people movement data to decide flexible bus routes.

Rio de Janeiro on the other hand has built a huge command centre with banks of monitors. At the centre data from traffic cameras, flood monitoring devices, security cameras installed in the favelas as well as tip offs from citizens via a mobile app are all fed into the screens and civic officials, police, major's representatives all sit in the command centre and use the feed to decide on the course of action.

Then you have a country like Singapore which has decided to use smart city tech to improve telehealth, transportation and security and focus all tech development in these areas.

Another major point is that connectivity is the cornerstone of a smart city infrastructure. You need to get it right. For example I may have high tech device on my body which monitors my heart condition but it doesn't help if it can't send an emergency distress signal via my mobile phone because the connection was gone since I was inside a lift.

IMO the government needs to decide what it means by smart city otherwise all the vendors will come with their wonderful presentations and sell all manner of lemons. Furthermore, the smart city requirements will vary from city to city. The decision has to be taken at the city level.

All this needs to be put in place before we do smart cities. I don't see any of that. Smart city sounds very sexy but it involves a lot of hard work and hard nosed decisions.

Sorry for the long ramble.

[Hari Seldon]

Would be a stretch to say that attempts to change the status quo in local self-governance are not being made by the new govt.

The baseline being what the old govt was upto (JNNURM anyone?) all these years, presumably. Cities disproportionately contribute to GDP and for max RoI, makes sense to invest in them. No-brainer and all. However, the adherents of the 'Jean Dreze school of economix' pumped dole into a leaky social spending bucket sans any attempt to put in place reliable accountability systems or delivery mechanisms and we know what happened after that. But no, hasn't gone unnoticed that the super comprehension walas are quick to pan the same programs re-purposed towards fixed asset creation (roads, toilets, solar) in the rurals as more of the same. Oh, and all the while merrily spraying tangential BS like 'Sudarshan Rao school of history' into said 'discussion'. Partisan hackery is what it is, and is visible to even with plain-vanilla rather than super-duper types of comprehension.

I for one wanted the Gujarat compulsory voting bill enacted into law. When turnout at local polls jumps from 20% at present to some 80% due to the law, we'd see the corporators and ward councillors forced to appeal to and address the needs of a much wider swathe of the public than at present. Sadly, the hizzoners in their infinite wisdom struck down a good laboratory experiment framed as a state law.

CBN's experiment in AP of using land-pooling rather than the traditional hassle-prone way of land acquisition for AP's new capital is an interesting experiment. Center seems to have given it the thumbs up by trying to go the same route on its neo-LAB approach. Or so it seems at first glance.

Anyway, would be nice to keep partisan hackery in the GDF political drama dhagas rather than inject it here. Just a thought, JMTPs and all that. Other standard disclaimers hold. As usual. Only.

[somnath]

For example if I sell you a meal for Rs100 out of which Rs15 is paid by me as taxes then at factor prices my book earnings would be Rs 75 but at market price it would Rs100. Now supposed my cost for the meal was Rs50 which I outsourced to a single vendor. I pay him Rs 50 out of which he pays Rs 5 as tax. So at factor price his book earnings is Rs45 but at market prices his book earnings is Rs50.

So in this simple universe the economic output at factor prices would be Rs75+Rs45 which is < than the market price earnings of Rs100+Rs50. In the real universe this all adds up significantly.

Not to belabour upon the point - I agree that we should migrate to more globally accepted norms of accounting - the hole remains in this example. At all stages, the taxes paid accrue to the govt. These taxes dont lie in a bank account, but get spent on buying goods and services. Essentially, GDP calculation (whether based on factor prices or market prices), is C+I+G+X-M. This is a simple fundamental equation.

He said the informal sector grew by 20 per cent which explains the big jump in the GDP numbers while the earnings numbers of corporates were flat. I'd buy that explanation.

You could, its a free country! But as I said before, unless we have the "C" from the informal sector magically getting diverted away from Hero motorcycles and Maruti cars and DLF/Raheja houses into garage jugaad stuff, that doesnt pass the smell test. Remember, the absolute GDP number hasnt changed much between the two methodologies, only the growth rates have.

[amit]

Hey, that's strange, my post to which you answered Somnath seems to have disappeared!

I was having some connectivity problems, I wonder if that's the reason. Anyway good that you saw it.

We have our differences on this one and think both of us are probably partially right. Time to move on.

[Singha]

the telecom providers need a size12 boot to install more towers and ensure call quality whose metrics are monitored by the govt.
here I am in the exact middle of the 'gold coast' IT corridor in blr and if I have start my 3G data connection, I will be lucky to get 2G. @ home which is 3km off, I will be lucky to get even 2G and call quality is poor.

and airtel is peddling its 4G!!

[amit]

the telecom providers need a size12 boot to install more towers and ensure call quality whose metrics are monitored by the govt.
here I am in the exact middle of the 'gold coast' IT corridor in blr and if I have start my 3G data connection, I will be lucky to get 2G. @ home which is 3km off, I will be lucky to get even 2G and call quality is poor.

and airtel is peddling its 4G!!

And the reset of the world is moving to small cell communication and HetNet connectivity! That's the key to building smart city. If you or your intelligent IoT devices can't connect to the Internet from every square centimeter of the city then the "smart" part of the smart city becomes very dumb. You need a gold standard broadband network before you can have a smart city.

[suryag]

singha ji - it wont be all that bad, have been working with a few of the companies to ensure they have carrier acceptance trials for phones being introduced on the lines of what DoCoMo(japan), VzW and ATT have. This would ensure better devices enter market and not every TDH comes in and starts selling. It wont solve the problem entirely but will mitigate it as some of the newer phones have better signal reception(Receive diversity and intereference cancellation/mitigation @ nominal costs). on the other hand we are also pushing for spectrum refarming so that LTE can be deployed in erstwhile 2G spectrum but saala not much traction over there because of the ASP of lte handsets. lte on the other hand is good as it improves spectral efficiency. Motabhai is being more aggressive in this sense as they want to go 4G from word go provided VoLTE picks up to displace both 2G and 3G stranglehold on voice traffic. The other part where considerable money is expected to be spent is the upgrade of the ofc backbone which is the real sand in the tracks that slows down most of our connections(not the last mile air interface 3g or 4g). here a lot is getting stuck because of the way we did our previous ofc layout(the data requirement on backbone was totally unanticipated and was built like our 2-lane highways of 2000s era)

additionally, all the operators in india switch you to 2g when you are guzzling data to cover up the backbone problem

[Theo_Fidel]

Can I just say that a fiber connection is an absolute must. Having gotten used to it I am loath to give it up. 3G/4G is cute for app level stuff, GPS, maps, banks, etc even if half the time it doesn't work even in USA. But when I need real power, streaming movie, upload presentation, VFH, video conference etc, that fiber connection is an absolute must. Once you experience 1 Gigabits/sec upload/download symmetric speed at home, all else is maya....

Smart city should start with that, the WiFi, 3G/Many G, etc can be added on top later.

[suryag]

Yes for any smart city the backhaul/backbone needs to be built to cater to 10x current consumption or at the least have provision for laying cables easily, without that you can put Xg but nothing great will happen w.r.t end user tput

[somnath]

Interesting article by Mihir Sharma on how India can gain from China's collapse.

http://www.business-standard.com/articl ... 794_1.html

Interesting points.

On infra

First, the question about physical port infrastructure. Again, given current conditions, this is actually not a constraint. The head of Visakhapatnam port recently pointed out that Indian ports were only using 60-70 per cent of their capacity. In some big ports, like Kochi and Chennai, only about 40 per cent is likely being used. We are so accustomed to being short of physical infrastructure that we have overlooked the fact that that is not, in fact, the immediate problem. The problem is the red tape that slows things down at our ports. To fit into supply chains, you need both imports and exports to be much easier, and paperwork-free. Naturally, this needs to extend to other permissions - and Commerce Minister Nirmala Sitharaman promised an expert committee would prepare a law to fix this - in early April. It was supposed to report in 30 days. We have heard little since. I admit it: if this is the level of urgency on display, then we are indeed in trouble. Something must change.

On INR

Why do mechanisation and tight supply chains work? Because they are cheaper. What is the way to counteract their effect? By being cheaper ourselves. This needs cutting out transaction costs in our economy, yes. But it also needs a rupee that is closer to 75 to the dollar, or more.

I am not sure the point on INR is such a slam dunk - India is a net importer (as Mihir himself says earlier in the article) - but the need to get cracking was never more urgent.

[amit]

With regard to smart city infrastructure. Of course you need a good fibre broadband network for backhaul. But in the front end that is communication from device to the network, what is more important is ubiquitous and rock solid connectivity rather than the sheer speed of connectivity.

Let me give an example, one of the most popular "smart" city applications is smart parking. There are many ways this is achieved but let me describe one particularly elegant setup that I saw a couple of years ago being trialed in Barcelona.

For street parking in a particularly busy area, a disc with a transmitter was fixed to the asphalt inside the parking lot. This was a very simple binary transmitter which sent about 50 kilo bits of information. When the sun shown on it or the street light, it sent a beep that the lot was free and when a car went into the lot it sent out another beep showing it was dark. Now the area had several hundreds of these disks (with a battery life that would make them last for several years) embedded and each of these disks sent the information. There were several receivers put on light poles in the area and each receiver got bips from several dozens of such disks. This information was passed on to a server which collated the data on Google Maps. As a user all you needed to do in download an app and it would show which lot was empty on which street and which was filled.

Now this entire setup can work perfectly well on a 2.5G or a 3G network because it's not data heavy but the key was constant connectivity. If you can't give that then the entire network doesn't work.

The fact is IoT devices mostly (save for video cameras) send information in a very data lite way and so 4G is not always needed. What is however needed is gapless connectivity, meaning you can't afford to have dead zones. That's why a lot of work is being done on heterogenous networks which uses whatever connection that are available seamlessly to transmit data, it could be the mobile network, WiFi or small cells network. You wouldn't even know which network is being used by your device.

These are essential building blocks of smart cities and a lot of planning and investment need to go into these before a smart city becomes feasible. Where do we see this happening in India?

[Singha]

cemented ducts in every road to lay water, gas, telecom lines are a must. we are only now waking up to the fact that uncontrolled digging bad, 100 yrs after london and paris.

[somnath]

These are essential building blocks of smart cities and a lot of planning and investment need to go into these before a smart city becomes feasible. Where do we see this happening in India?

The first "smart" building block for any urban agglomeration, including the large ones like Mumbai, Delhi etc would be universal coverage of 24/7 water throughout the city. That would require water-metering every home, with dynamic pricing. 24/7 power - largely there in Mumbai and Calcutta, not in the others. Universal 3G coverage -no city has this. Half decent public transport - Delhi has parts of it, Mumbai a little bit as well.

If we have these four, the balance will be built up by the private sector organically.