Indian Economy: News and Discussion (Jan 1 2010)

[csharma]

When is India's Q3 GDP number coming out? What are the estimates?

[Suraj]

GDP data for Q3 of calendar year 2010, or the 2nd quarter of FY2010-11 (July-Sept) will be out end of November. The bumper harvest data will probably not be visible in that quarter data, and the high base effect from last year may result in lower than expected numbers. The Oct-Dec quarter will probably be the better one, due to both the farm output data and a low base from last year.

While FII inflows are up dramatically, FDI is down:
FDI down 60% in August, 35% for fiscal year

Foreign direct investment in August dipped by about 60 per cent to $1.33 billion, the lowest in this fiscal, industry department data released today showed. The FDI inflows in August 2009 were $3.26 billion.

During the first five months of 2010-11, the inflows declined by 35 per cent to $8.88 billion compared to $13.76 billion in the same period last year, the official said.

Contrary to smart recovery in the domestic economy and a rebound in exports, overseas investment in form of equity inflows are on decline since June.

The overseas investment in June was at $1.38 billion, while that in July was $1.78 billion. The FDI in the first two months of this fiscal, April and May was $2.17 billion and $2.21 billion respectively.

Crisil chief economist D K Joshi said India provides good opportunities for growth and the declining trend will not continue. "FDI inflow has to pick up in long run but given the uncertainties in the global economy it is difficult to predict from when it will improve," Joshi said.

[Theo_Fidel]

New term 'Micro-Reforms'.

http://economictimes.indiatimes.com/art ... 790688.cms

Decoding the savings rate miracle

One of the real macroeconomic successes of this phase of India’s reform process has been the increase in our savings rate. This has also resulted in a higher investment rate, which, indeed, is now leading to a higher level of GDP growth. For example, in the three years to FY 2004, the savings rate hovered around 25% of GDP; but in the recent three years, it has averaged 34%.

If we look at the three components of the savings rate — household, corporate and public sector savings — we find that the corporate sector and, to a lesser extent, the public sector have caused this remarkable rise, the household rate having risen from 15% to 22% in the seven years to FY 2004 and stood flat since then. Corporate savings have increased from about 4% to 10% while the public sector has actually gone from a negative number to positive 4% — together the two accounting for the positive swing of 10%.

Let’s examine what has caused this corporate and public sector savings spurt. During this same time period from 2003 to 2009, the overall corporate profitability — measured in the PAT to sales ratio — more than doubled from 3.6% to 8%. At the same time, companies reduced the dividend rate from half of profits down to a quarter — in other words, companies were not only growing their top lines faster on account of faster economic growth in general, their profitability rate also almost doubled during this time, and they distributed less of their profits. This increased growth in the top line, higher profitability along with higher retention is what led to the doubling of the corporate and public sector savings rates.

The other consequential impact of this has been the increase in corporate tax collections . Interestingly, since 2004, the overall tax to GDP ratio has gone up by almost 20% — from 8.9% of GDP to 10.7%. Most of the increase was driven by increased direct tax collections — again from the corporate sector — an increase from 1.9% of GDP to 3.6%.

This is largely because of micro reforms. Take the case of telecom. In fiscal 2000, this sector hardly existed and the predominant player was BSNL. Today, the turnover in this sector is in excess of $50 billion — a compounded growth rate of 50% per annum. This one sector itself has contributed approximately 5% to India’s total GDP growth over the last 10 years.This growth has been largely possible on account of the new telecom policy in 1999 and the high volume , low-cost competition it engendered.

Similarly, take the case of power. In 2003, the New Electricity Act further incentivised the participation of the private sector in power.

[Suraj]

One of the primary contributors to the dramatic rise in savings and investment rates vs GDP was the 1999-00 11th finance commission. Without getting into general politics, the NDA was more inclined to the devolution of fiscal power to the states, while the UPA has always been in favour of central fiscal authority. Rather than argue for one over the other, I think both have merits depending on the circumstances, but under the circumstances of the period (reforms sputtering, massive burden due to 5th pay commission, Asian financial crisis etc) the measures taken in that finance commission were very fortuitous to us.

The finance commission proposals undid the effect of the 5th pay commission, lowered the ability of the public sector to crowd out the private sector out of the borrowing market, and thereby lowered interest rates, and improved the chronically inflationary conditions we've experienced for decades. Those who talk about high inflation today need to realize that the current spurt would have been viewed in a benign way 20-30 years ago, when inflation consistently ran higher, combined with high borrowing costs, eroding earnings, and making access to credit costly for companies.

The better personal and private sector fiscal conditions translated dramatically to the spike in savings rate. Feel free to take a look at the economic survey data on http://www.indiabudget.nic.in - until 2003, we never had savings rate > 25% of GDP (except 1-2 one year blips coming close). We typically hovered in the 15-20% range for decades, while the likes of Japan and Korea achieved 40% or more. Why is this important ? Because more savings means more capital to invest (as opposed to debt servicing), i.e. more investment/GDP. More investment = more return (i.e. GDP growth), assuming capital is allocated meaningfully, in other words, the incremental capital output ratio is stable or improving.

Since 2003, savings/GDP has never gone below 25%, and infact, once it passed 30%, it has never fallen below that level either . We've consistently maintained savings/GDP of 32-36% in the last few years, and investment/GDP of about the same (depending on how much external capital added to savings). As long as we maintain that high savings/GDP, we will generate a high trend GDP growth rate as a mathematical consequence, not some due to some divine planetary alignment. The biggest two numbers of value to me during the quarterly GDP data reports are therefore the savings/GDP and investment/GDP (gross fixed capital formation) data; if they're stable or rising, growth will accelerate. If they're falling, there's trouble ahead.

[Theo_Fidel]

Since 2003, savings/GDP has never gone below 25%, and infact, once it passed 30%, it has never fallen below that level either . We've consistently maintained savings/GDP of 32-36% in the last few years, and investment/GDP of about the same (depending on how much external capital added to savings). As long as we maintain that high savings/GDP, we will generate a high trend GDP growth rate as a mathematical consequence, not some due to some divine planetary alignment. The biggest two numbers of value to me during the quarterly GDP data reports are therefore the savings/GDP and investment/GDP (gross fixed capital formation) data; if they're stable or rising, growth will accelerate. If they're falling, there's trouble ahead.

I have a minor quibble with the 'maintain' terminology. While accurate in percentage terms, in real terms it is actually rising dramatically.
Every year we save 12-14% more money in dollar terms. So it is that in 5 years we have gone from saving $300 Billion to saving $600 Billion today.
In five years time we will have to save $1.2 Trillion to keep the growth going. In ten years $2.4 Trillion.

One can see the heroic effort it is going to take. This is why I get very annoyed over the squabbling over the piddling sums involved in the CWG.
A chunk of our people still seem to think in small country terms while the money flow challenges are gargantuan. The sums are staggering.

You can see that we save that much money today because our investments over the past 5 years, made using that $300 Billion savings are paying off.
Savings is actually a lagging indicator in this regard.

The reason I bring this up is that it is easy to lose the momentum by wasting the savings for even a few years. Say we find a reason to disincentivize savings
and the Govt/PSU/Gharibi programs find a way to squander $100 Billion a year, our growth rate would fall dramatically and our savings rate would fall with it as our
ability to save falls dramatically. This is not beyond the poverty wallahs in the congress who have the high priestess in their thrall. I don't understand it.

In this respect at least the Congress is still reaping the benefits of the programs 5+ years ago instituted as you say by the NDA govt. The real impact of Congress policies
WRT to savings and productivity is only now starting to kick in and the next few years will be fascinating to watch. The jury is still out on that.

I say this as a Congress supporter.

P.S. don't look now but Japan's saving rate has fallen horrifically as its economy stagnates. Household savings rate is now 2%. Don't know how they are going to escape this one.

[svinayak]

One can see the heroic effort it is going to take. This is why I get very annoyed over the squabbling over the piddling sums involved in the CWG.
You can see that we save that much money today because our investments over the past 5 years, made using that $300 Billion savings are paying off.
Savings is actually a lagging indicator in this regard.


I say this as a Congress supporter.

Dont bring politics into the economy discussion. Number of BJP states are more than 10 and there is all kinds of growth in different ruled states.

[Hari Seldon]

Wow. Enlightening discussion - suraj guru and theo garu. This is the value-add stuff that BRF non-mil forums alone muster and regular media falls soooo short of. Thanks for posting!

[vera_k]

With rampant inflation, the reason that disincentivizes savings is here ain't it?

[Suraj]

Theo, it's true that savings/GDP as an absolute figure has tracked nominal rate of GDP growth in dollar terms, i.e., approximately 11-15% a year, and that seen in absolute terms, the numbers are increasingly large - it would imply savings in excess of $1 trillion over the next half a decade, larger than our GDP 3-4 years ago.

I saw a blip during the 2008-09 timeframe, when savings and investment fell by a few percent, from the mid 30%s to lower 30%s. However, it's since slowly gained back part of that ground. Sure, $2.4 trillion in savings sounds like a shockingly high figure now, but 10 years ago, the current $600 billion annual savings/GDP was equally shocking, for it is well in excess of GDP at that time (~$400-450B at turn of century).

A growing young workforce will typically increase the savings rate, due to lower level of consumption and social security (health, insurance and retirement) requirements. However this is contingent on actually deploying that workforce and putting money in their hands for labour. The issue leads me to wonder whether the NREGS program, though not particularly helpful for general productivity, serves (perhaps unintentionally) to broaden money supply base and serves as a means to expand easy credit, which in turn ensures that debt servicing costs are minimal and companies generate plenty of cash flow and enhances savings further. On the flip side, the way they're doing it also stokes several instances of localized inflation, which has been documented in areas where NREGS was implemented. It's to be expected, considering the sudden increase in supply of money, without a concurrent increase in supply of goods and services to match.

[SureshP]

Suraj,
The savings/GDP and investment/GDP figures for India, as you say, are of critical importance and provide a clearer and long term view as to how the Indian economy is likely to perform. It would be a great help if these figures for the past 2, 3 or more decades can be graphically represented.

I am happy to do the graphs if I could locate a source or sources for these figures. Any ideas ?????

[Suraj]

SureshP: See Economic Survey 2008-09: Gross Domestic Savings and Gross Domestic Capital Formation As per cent of GDP at Current market Prices, from the budget website. Please chart Col 5 (savings as % of GDP) and Col 17 (investment as % of GDP) against year. Thanks.

vera_k: please elaborate.

[SureshP]

Thanks Suraj I will do the graphs sometime next week

[Theo_Fidel]

Thanx for the comments Suraj,

I was an early opponent of the NREGS. Not for transferring money to people but for the wasted effort involved. Why not just transfer the money directly with some provisions such as say so many hours of community service or job/vocational training or adult literacy program. All these would have been more relevant IMHO.

I've been reading up and mulling on this savings rate thing a bit more. I am a little concerned that if we keep increasing our savings amount at this rate very soon we are going to run out of productive avenues for the money which will then spark a China type bubble here. We are not immune to this disease esp. if we start seeing $2.4 Trillion every year. A much better situation would be to divert more of this money towards the consumption rate of our people and to squeeze more efficiency out of the system. I would actually be happy to see our savings capped at about $1.5 Trillion with GDP growth of 7% or so. This is a lot more sustainable situation.

Correct me if I'm wrong.

[vera_k]

With rampant inflation, the reason that disincentivizes savings is here ain't it?

To expand on this, what I remember learning was that people tend to consume more in the presence of inflation, while they tend to save their money in a deflationary or moderately inflationary economy. With inflation making a return in India, wouldn't people tend to spend and consume more today, instead of trying to save up for something that will be out of reach due to expectations of future price increases?

[Suraj]

I don't see any means to 'cap' rate of savings to GDP in any way. It's an aggregate of available capital generated within the economy. It will retain its own level of equilibrium. For example, a constant 36% investment/GDP and an incremental capital output ratio (number of rupees invested per rupee output) of 4 would imply a 9% trend GDP growth rate. The ICOR will be consistent as long as level of return on investment is stable. If it gets better, it means return-on-investment is improving, and may lead to increased investment, upto a point where RoI starts tapering off due to the law of diminishing returns. This in turn will reduce the amount of investment, due to lower returns.

A decade or more of high fixed capital formation is a good thing - there's such a tremendous lack of fixed infrastructure in India that we could basically throw steel and cement to build stuff for 10-20 years and not run out of useful things to build. I like the Chinese approach on that - if they're going to wantonly piss away money, they might as well do it building hard infrastructure; even if there's a crash, they'll be left with tons of fixed assets, not piles of useless paper.

I don't see much gain in a consumption driven economy today - I see much more value in incentivizing fixed asset investment instead. Reminds me of the story of 1960s South Korea - they taxed stuff like makeup and basically tried to channel every bit of capital they had into fixed asset investment and export generation. They took away the fruits of the labour of one generation for about 2 decades, in return for the subsequent massive development the next one saw. It was amazing to read - a country where essentially all the parents grew up in abject poverty and the kids now grow up knowing nothing but near or at first world level of life.

[wrdos]

India imports 15,000 Chinese laborers to build, teach infrastructure projects
by Washington Post

http://www.washingtonpost.com/wp-dyn/co ... 03990.html

By Rama Lakshmi
Washington Post Staff Writer
Saturday, October 23, 2010; 8:36 PM

Perched precariously on scaffolding, several Chinese workers showed Indian laborers how to weld the shell of a blast stove at a steel plant construction. Step by step, the Indians absorbed the valuable skills needed to build a large, integrated factory from scratch in record time.

"I have worked on building four new steel plants in the last 10 years in China, and I am here to teach Indian workers to do the same," Hulai Xiong, 38, said about the construction site in the eastern Indian state of Jharkhand. "In China, we build very fast. Indian workers are slow and sometimes lazy. They are not familiar with modern industrial construction processes."

Clad in blue overalls, 1,600 Chinese supervisors, technicians and other laborers work at the 2,000-acre site. The $1.7 billion factory, which also relies on Chinese technology, employs 5,000 Indian workers.

Skilled Chinese workers are helping India expand its infrastructure at a frenetic pace, even as the two Asian giants compete for economic dominance.

Their presence in a nation of more than a billion people with staggering unemployment may appear incongruent. But the government says Indian workers lack the technical skilled needed to transform the country into a 21st-century economic powerhouse.

Until the gap is bridged, companies are relying on the expertise of Chinese workers to build mega infrastructure projects. Chinese workers have worked on ports, highways, power and steel plants in India. Chinese equipment and expertise have also been used in a crude oil refinery, a cable-supported bridge, the telecommunication networks and even the glass facade of the new airport terminal in New Delhi.

The Indian workers are learning a new work ethic from the Chinese and are now more punctual, not stopping work to take frequent tea-breaks or gossip, managers said.

There are subtle politically-tinged changes, too.

"The Chinese do not like it when Indian workers ask too many questions or argue," said Singh, the plant director. "But after working together, the Chinese are now learning to answer some of the questions, and the Indian are learning to ask fewer questions. The hare and the tortoise are learning to work together."

[Theo_Fidel]

Heres the real head line as the panda troll stripped it.

Chinese workers fuel India's staggering infrastructure boom

India imports 15,000 Chinese laborers to build, teach infrastructure projects
by Washington Post

Why arn't these guys building in China I wonder. Souldn't they be building steel plants in China 'like mushrooms'.
How can you spare the originally 50,000 skilled laborers I wonder. India could not even today.

The real reason the chinese are their is because of the chinese construction companies involved. Note that the project well beyond the completion date of June 2010.
How come chinese companies are unable to function without chinese workers. What sort of weird competitive disadvantage is this.

The Indian workers are paid 1/10th what the 'skilled' chinese are paid. Of course you can't get skilled Indians at that pitiful wage, esp. out to Jharkhand.

How come the media see's but does not see.

[ramana]

The episode on Hisotry channel on dangerous roads had a good point to mention. I ndia is rushing at breakneck speed to build hydel projects in the upper Himalayas. The epsiode whosed trucks being used ot ferry material to the construction sites about ~100miles from Shimla. Looks like the hills near Shimla will be lit up once electricity is generated from those hydel projects.

[svinayak]

The episode on Hisotry channel on dangerous roads had a good point to mention. I ndia is rushing at breakneck speed to build hydel projects in the upper Himalayas. The epsiode whosed trucks being used ot ferry material to the construction sites about ~100miles from Shimla. Looks like the hills near Shimla will be lit up once electricity is generated from those hydel projects.

Too many American drivers in that region. Too close to Chinese borders. something is happening. Informers to give detailed info for the next conflict. Social engineering

[Vipul]

How they Saved the India story.

FOR FOUR weeks starting mid-September, 2008 — your money, in equities, mutual funds, perhaps even in private banks, was, or was perceived to be, at enormous risk. This is the inside story, never told in such detail before, of how your money was saved as India coped with the global financial crisis triggered by the meltdown of the investment bank, Lehman Brothers, in the United States.

On the second anniversary of the crisis, in September 2010, basic assumptions about how our money is governed seem boring. But that time two years ago, those assumptions were under threat. Today, the Sensex coming close to 20,000 again seems unremarkable. Then, the Sensex falling below 10,000 was not even the worst of problems for the economy’s managers; there were things far worse. India’s quick recovery and its high growth rates now owe a lot to how the crisis was handled then.

Never before had government decision-making been so unorthodox as it was in those four weeks. And seldom had it been so effective. One of the things all the players remember is how many phone calls they made, and how few files were opened. There was no time for files. There was no time for bureaucratic rules.

[Abhijeet]

I paid Rs. 56.17 per litre this morning for petrol. This works out to about $4.72 per gallon.

I'm grateful to my elected government for allowing me to purchase fuel at this subsidized rate.

[jagga]

Can it be true? My Math tells me its about 20% of Indian GDP.

Fake money worth Rs 120,000,000,000,000 in India

Even as the government of India speaks of taking preventive measures to curb the menace of fake currency, statistics show there is nearly Rs 12,00,000 crore worth of fake currency still in circulation in India.

[rohiths]

Can it be true? My Math tells me its about 20% of Indian GDP.

Fake money worth Rs 120,000,000,000,000 in India

Even as the government of India speaks of taking preventive measures to curb the menace of fake currency, statistics show there is nearly Rs 12,00,000 crore worth of fake currency still in circulation in India.

That is way too much and wrong. Totally exaggerated
The whole M1 is not even 12L crores

[Vipul]

India's crisis man calls for action on capital inflows.

Expressing concern over the rising capital flows into the country, former Reserve Bank of India governor Y V Reddy said that the time has come to devise ways to control them.

The policy boost given by the US Government to revive its economy is one of the factors that is causing high inflation in countries like India, he said.

"USA is trying to pump in liquidity to revive its economy. Quite a bit of that liquidity is going to India and China. So, it is not serving the purpose. Liquidity is coming to countries where inflation is very high. There is already a bubble building up and therefore something has to be done," Reddy said on the sidelines of an event here.

He said now the time has come to address the issue of capital flows and think about ways to control them.

About two to three years back, everyone thought that restriction on capital flows was bad. But now there is a rethinking about it. We should think about the action the country should take to reduce excessive capital movement and also what is the origin (of capital flow), he observed.

The former central bank governor pointed out that the capital flows would also depend on the difference of tax rates among the countries.

When there are tax differential regimes, capital movement is high from one regime to another and it has been accepted in principle by G20 and is looking at it, he said.

[Hari Seldon]

^^Wow. Thx for posting! Shall x-post in the persp dhaga.

[ShivaS]

If we can import PMs and PMs bahus why not workers from China?

[tejas]

http://www.business-standard.com/india/ ... rs/412177/

Some interesting numbers dealing with consumption in India and the authors concluding statement is right on the money--- unfortunately the govt/babooze will never give up control willingly. This could prove fatal for India.

[Airavat]

Second Five Year Plan: India's Economic History

For India's vaunted $10.8 billion second five-year plan, launched with high hopes last year as an answer to India's ancient poverty, was in desperate trouble, and every legislator was demanding: "What do we do now?" Nehru had no answer, except to insist that "the basic structure" of the five-year plan would be carried out.

In London last week there were whole warehouses full of unsold Indian tea. Increasing competition from Japan has prevented any significant increase in foreign sales of Indian cotton goods. The jute industry, faced with competition from Indonesia and Pakistan, is so deep in the doldrums that more than 10% of India's looms are being held idle in an attempt to maintain world jute prices.

A third assumption was that between 1956 and 1961 India could count on getting at least $1.6 billion in foreign aid. All of these arrangements, firm and tentative, would at best net India $700 million. A month ago, in a desperate gamble on international credit, India released the sterling reserves held in London to back its currency, made them -available to pay for imports essential to the plan. Today those reserves are down to $666 million, and are draining away at the rate of $16 million a week.

From the start, the second five-year plan was badly administered. New projects popped up like toadstools, and for months half a dozen uncoordinated ministries bought "plan equipment" without bothering to inform the Finance Ministry what they were buying or how much they were spending. Though India has explored less than 20% of its mineral resources, Indian politicians resisted importation of foreign geologists or engineers, arguing that "India must save its resources for itself."

The Socialist bias of Nehru's political philosophy, which expressed itself two months ago in a tax on capital assets, discourages private industry, foreign and domestic. Said leading Indian Industrialist G. D. Birla: "As things stand now, there is not the slightest possibility of raising any sizable capital in India."

Throughout Southeast Asia today new nations, hungry for economic growth, are eying the progress of democratic India and Communist China. If India falls too far behind, Indians will be tempted to switch to China's totalitarian methods; if they do, nations on India's flank, such as Burma, Ceylon and Pakistan, might be drawn by their massive neighbor into the path toward Communism.

The U.S. can ill afford to let India lose the race, and does not intend that it should. The Agriculture Department has opened negotiations to barter U.S. surplus wheat for Indian manganese. More important, the Eisenhower Administration is earnestly exploring ways and means of raising the aid money that would give the stumbling giant time enough to find its own strength.

[SwamyG]

How they Saved the India story.

Wow. As Hari garu says "Jai Ho".
From the article.

His sartorial worries were dismissed by Chidambaram, who told Krishnan (in Tamil): The PM isn’t calling you to see a prospective bride.

PC comes off nicely in the drama.

[Rahul M]

I hope one of the insiders writes a book on how GOI handled the crisis. it would be a fascinating read.

[rohiths]

I hope one of the insiders writes a book on how GOI handled the crisis. it would be a fascinating read.

There is already a book written by Y V Reddy. (ex RBI governor)
The name is
India and the Global Financial Crisis: Managing Money and Finance (Anthem Studies in Development and Globalization)

[vina]

How they Saved the India story.

Nice spin. But much of it basically untrue, esp the ICICI story. Remember, I at BR here had called Bear Stearns AND Lehmans' collapse and also said that in India ICICI was going to be in deep doo-doo and actually advocated (before the shocks hit India) of taking money out of the stock markets and putting it in SBI as cold cash.

What saved ICICI was NOT KV Kamath's "Hand on my heart, your money is safe" . He had zero and still has zero credibility in my book, (despite what the Financial press scoundrels and spin doctors project and the latest being Forbes Indias "Infosys Needs This Man" (yeah, like a bullet to it's head) ) and if at all there was India's Lehman it was ICICI. What saved it was that the Govt decided to back stop it and open the liquidity tap full throttle to it and said in as many words that ICICI will be bailed out, come what may. And same with ALL mutual funds.

That Govt backing is what saved ICICI.

[SwamyG]

Nice spin. But much of it basically untrue, esp the ICICI story. <snip> <snip>

That Govt backing is what saved ICICI.

The private sector wanted one thing, the babus and government disagreed and did something else that worked. Could there be a spin? Possibly, a government is likely work towards getting a good name for itself and bask in glory. After all in a democracy, political parties have to beat their own trumpets. But if you are going to to it is "untrue" then you need to offer more material. Your conclusion that government stepped in to save India is what the article's gist is about.

[vina]

The private sector wanted one thing, the babus and government disagreed and did something else that worked.

Sorry. Again the same spin in that story. Who is/was the "Private Sector" it was KV Kamath and ICICI who wanted a ban/restriction on their stocks so that they could save their sorry A**es.

The guys who got murdered in that collapse in 2008 were the ICICI types and the Real Estate types (DLF, Unitech et al). Nothing fancy there, both extremely dodgy. Both got bailed out by the Govt. ICICI by back stopping and the RE by restructuring of the loans and terms from the Govt owned banks .

As for the Mutual Funds, it is anyway largely govt owned (UTI etc) or owned by Govt banks like SBI etc. Oh, UTI got bailed out TWICE in the years 2000-2010, once during Vajpayee and once during MMS.

[Neshant]

Looting the producers of the wealth to backstop losses is the only thing going on.

There is no magic to that no matter what bottle that snake oil its packaged in.

[Rahul Mehta]

Looting the producers of the wealth to backstop losses is the only thing going on.

So what drafts of Govt Notifications, Legislation do you propose to stop this loot?

[SwamyG]

Vina: I am missing your point. I will admit there could be a spin, as I said all governments in democracy do that. How do you differ from the narrative in the article - i.e the politicians/babus stepped in and save the country. Do you agree or disagree?

[svinayak]

How they Saved the India story.
Nice spin. But much of it basically untrue, esp the ICICI story. Remember, I at BR here had called Bear Stearns AND Lehmans' collapse and also said that in India ICICI was going to be in deep doo-doo and actually advocated (before the shocks hit India) of taking money out of the stock markets and putting it in SBI as cold cash.

What saved ICICI was NOT KV Kamath's "Hand on my heart, your money is safe" . He had zero and still has zero credibility in my book, (despite what the Financial press scoundrels and spin doctors project and the latest being Forbes Indias "Infosys Needs This Man" (yeah, like a bullet to it's head) ) and if at all there was India's Lehman it was ICICI. What saved it was that the Govt decided to back stop it and open the liquidity tap full throttle to it and said in as many words that ICICI will be bailed out, come what may. And same with ALL mutual funds.

That Govt backing is what saved ICICI.

During that time somebody known to me inside the regulatory body had told me that media reports from the western press were bad mouthing ICICI banks and there is a hard downgrading of that bank in the media groups. This is an indication that they wanted a fall guy inside India to showcase financial collapse and show India as part of the global meltdown.
The Indian officials keep a keen watch on media reports and market sentiments to see which direction the western contoled media reports Indian banks and companies for Indian economy. This is closely watched to get the drift the west wants to pull down the Indian economy.

ICICI was not a surprise and they were prepared for it. It was abandoned by the western financial institutions to take care of itself and fall down if it was possible. Indian election was in May 2009 and they pulled it together to create a political block to support Indian economy.

[jagga]

PM for early India-ASEAN FTA in services, investment

Pitching for greater integration between India and South East Asian countries, Prime Minister Manmohan Singh on Saturday pressed for early free trade agreement in services and investment and announced visa-on-arrival facility to nationals of Cambodia, Vietnam, Philippines and Laos.

Would the Visa on arrival reciprocated for Indian nationals by above countries?

[Vipul]

New IIP from Jan; reflects better picture of factory output.