Bharat Rakshak

It doesn't matter who is eating it or how or if people are not impressed by the the back end. That is not the concept behind the Big Mac. The questions is the cost of doing things in India & USA. By that measure all ingredients are bought in India for 300+ stores. This is a large enough professional enterprise to compare the cost of national capabilities.

@ vera_k chicken burger @ mcdonalds.. cost 20-30 inr and not 75 inr...as shyam mentioned , chicken burgers at other restaurants are even cheaper...

Menu price of a McVeggie burger ranges between Rs. 43/- to Rs. 64/- inclusive of taxes and menu price of McChicken burger ranges between Rs. 58/- to Rs. 75/- inclusive of taxes. Menu price of EVM is Rs. 89/- and Menu price of Large Meal ranges between Rs. 108/- to Rs. 122/-.

Vera where did you find the Maharaja Mac, Bay Area?

you can get a chicken burger in India at a lot cheaper costs at other places...food costs me a lot more in US than it does in India...mcdonald need to send profits back to us...

levi jeans in India cost as much as that in the US because they need there profits in dollars..But you can get far better quality jeans in India at less than quarter cost (unbranded ones , or the ones stitched at your tailor )...

The government has reported the last fiscal's fourth-quarter GDP growth at 5.3%. The GDP growth for the whole of financial year 2012 stands at 6.5%.

GDP growth was at 9.2% in the correspoding period of the last fiscal, while the GDP growth for FY11 stood at 8.4%.

The GDP growth for FY13 is estimated to be between 6.5-7%.

Q4 manufacturing sector growth at -0.3% vs 7.6% y-o-y.

Q4 construction sector growth at 4.8% vs 8% y-o-y.

Q4 farm sector growth at 1.7% vs 7.5% y-o-y.

Q4 mining sector growth at 4.3% vs 0.6% y-o-y.

The Prime Minister's Economic Advisory Council chief C Rangarajan has said that it will be tough for the Reserve Bank of India to cut rates if inflation remains sticky. He said that growth is important but inflation cannot be ignored. He sees softer rates boosting Q1FY13 GDP growth.

The Finance Ministry has revised the FY12 fiscal deficit estimate from 6.9% to 6.7%

http://www.thehindu.com/business/Economy/article3476035.ece?homepage=true
India’s economic growth rate slipped to 5.3 per cent in the fourth quarter of 2011-12, lowest in nearly 9 years due to poor performance of the manufacturing and farm sectors.

The Gross domestic product (GDP) growth in the January-March quarter of 2010-11 was 9.2 per cent, according to the government data released today.

GDP in 2011-12 also moderated to 6.5 per cent from 8.4 per cent in the 2010-11.

During the quarter ending March 31, growth in the manufacturing sector contracted to 0.3 per cent, from 7.3 per cent in the corresponding period of 2010-11.

Farm output also exhibited a similar trend and expanded by just 1.7 per cent during the quarter, compared to 7.5 per cent in the Q4, 2010-11.

However, mining and quarrying production growth stood at 4.3 cent during the quarter under review, as against a growth of meagre 0.6 per cent in Q4 of in 2010-11.

Growth in the construction sector slowed to 4.8 per cent during the January-March quarter of 2011-12, from 8.9 per cent in the year-ago period.

The trade, hotels, transport and communications segment grew by 7 per cent during in the quarter under review, as against 11.6 per cent expansion in the year-ago period.

However, electricity, gas and water supply grew by 4.9 per cent in the January-March period, compared to 5.1 per cent growth in the corresponding period last fiscal.

The growth of the services sector, including insurance and real estate remained unchanged at 10 per cent in the fourth quarter ended March.

Manufacturing growth in 2011-12 slowed to 2.5 per cent, compared to 7.6 per cent in the previous fiscal.

Besides, output of mining and quarrying sector declined by 0.9 per cent last fiscal, as against the positive growth of 5 per cent in 2010-11.

Further, the agriculture, forestry and fishing sector grew by just 2.8 per cent last fiscal, as against 7 per cent expansion in 2010-11.

Growth of the construction sector stood at 5.3 per cent last fiscal, compared to 8 per cent in 2010-11.

The only silver lining is the growth in electricity, gas and water supply segment where output rose by 7.9 per cent in the last fiscal compared to 3 per cent in 2010-11.

Persistent sluggishness in the economy due to slowdown in the manufacturing sector, coupled with decline in mining and quarrying, is likely to put pressure on the Reserve Bank to cut interest rates in its policy review in June.

How linked in India is the GDP growth rate to the number of jobs created. For example, in the US I think its around 3% of GDP growth required to be able to give jobs to all the out coming graduates. Just wondering if the ugly head of unemployment will rear up again given our low GDP growth numbers for this quarter, but of course its too short a period of low growth to make a big impact.

The third—and perhaps most important—issue raised by lower growth is another kind of stability: social. India, unlike the other BRIC countries, is still desperately poor. One businessman and guru interviewed by your correspondent recently declared that "the next fifteen years will be India's worst since independence" and that there was a one-in-ten chance of a revolution. If India's economic miracle turns out to have been a mirage, it will not be so easy to dismiss that kind of talk as cranky. There is already widespread disgust at corruption. And at least ten million young folk will enter the workforce every year for the next decade or so. They will be coming to the big cities, looking for jobs that won't be created if India expands at a rickshaw rate of growth. Talk of a demographic dividend may turn back into talk of a time bomb.

ashi: I hate to break this to you, but there have been 'revolutions' going on in India nonstop since 1947. The overt anger at corruption is a symptom of the growing middle class heading up Maslows chain after their basic needs for food and shelter have been met - they now want a good quality of life. As the urban/rural population ratio gets closer to the 50% mark this will just become much more strident, and that is a good thing, not a bad situation, as the Economist portrays it. In India, the most amount of things get done when the government has its back to the wall. Foreigners don't really get that.

Cross post. A little discussion about "demographic dividend".

India's economy A Bric hits the wall



I don't think 10 years ago anyone would describe China as desperately poor. So the theory of 10 years trailing doesn't really convince me, at all.

The view that India's democracy is a self correcting mechanism that steers the country back onto the right course when things go wrong, was an integral part of the bull's view of India. Hopefully it is one idea from the boom that proves to be correct.

The gall! Udayan Mukherjee mentioned a "joke" this morning in CNBC. So it goes,

Q: Why would Hindus vote for congress this time and not for BJP?
A: Because Congress has successfully brought back Hindu rate of growth to the nation while BJP dint.

I dont whether to cry or to laugh at ourselves.

Suraj, the danger which the article says is the ten millions of unemployed young people every year, if India fails to provide opportunities for them. It is not the middle class you need to worry.

Strains on India’s Government Grow After Sharp Economic Slowdown

MUMBAI, India — India’s growth fell to its slowest pace in almost a decade last year, according to government estimates published Thursday, putting further pressure on a fractured coalition government in New Delhi that has been widely criticized for its management of the economy.

India’s economy grew 6.5 percent in the fiscal year that ended in March, down from 8.4 percent the year before, as sectors like manufacturing, mining and agriculture did poorly. In a worrying sign for the rest of this year, the report showed a sharp drop-off in economic activity in the first three months of 2012, with growth falling to 5.3 percent, from 9.2 percent a year earlier.

Analysts were expecting India’s growth rate to slow because of a contraction in new investments by the private sector and the financial effects of the crisis in Europe, but the numbers were worse than predicted. Moreover, more sectors exhibited slower growth, raising new concern about the economy.

“The latest growth numbers signal India’s deteriorating economic prospects and presage much worse to come as industrial output has stalled and investment is falling,” said Eswar Prasad, an economist at the Brookings Institution and Cornell. “These numbers reflect not just a loss of economic momentum but, far worse, a loss of confidence in the government’s ability to tackle the enormous short-term and long-term challenges to sustaining growth.”

The full-year growth number was below the country’s growth rate during the financial crisis in 2008-9, when India grew at 6.7 percent. The last time India grew at a slower pace was in the 2002-3 fiscal year, when it registered a 4 percent pace.

Analysts say it will be harder for Indian policy makers to respond to a slowing economy now than in the financial crisis more than three years ago. At that time, the government’s finances were relatively healthier and it was able to spend money to stimulate the economy. Now, however, New Delhi is desperately trying to cut its fiscal deficit from 5.9 percent of its gross domestic product to 5.1 percent. Also, the Reserve Bank of India has less room to cut short-term interest rates to stimulate lending because inflation remains high, at about 7 percent.

Many analysts have been arguing that the best way for policy makers to respond to slowing growth is further liberalization of India’s economy, large parts of which are still heavily regulated. The government could, for instance, make it easier for foreigners to invest in industries like retail, aviation and insurance that need more capital.

But the government, led by the Indian National Congress Party, has struggled to pass unpopular measures in recent months because of opposition from its coalition partners and political rivals. Last year, it indefinitely deferred a plan to allow foreign supermarkets into the country after a coalition partner threatened to pull out if the change went through.

On Thursday, much of India was shut down in protest against a sharp increase in petroleum prices by government-owned oil companies. Policy makers said the increase was needed to offset the rising cost of oil imports, which have become more expensive as India’s currency, the rupee, has fallen sharply against the dollar. In New Delhi and Mumbai, roads normally clogged with traffic were largely empty Thursday afternoon.

The benchmark Nifty stock index closed down about 0.5 percent. The rupee was trading at 56.1 to the dollar after crossing 56.5 earlier in the day. As recently as February, the rupee was trading about 49 to the dollar.

India’s Economy Slows, With Global Implications
NEW DELHI — India’s coalition government just celebrated the third anniversary of its tenure with a self-congratulatory banquet that could not have been more poorly timed: India’s currency, the rupee, is falling; investment is down; inflation is rising; and deficits are eating away at government coffers.

While short-term growth has slowed but not ground to a halt, India’s problems have dampened hopes that it, along with China and other non-Western economies, might help revive the global economy, as happened after the 2008 financial crisis. Instead, India is now facing a political reckoning, as the country’s elected leaders must address difficult, politically unpopular decisions — or risk even deeper problems.

“When India was being run comparatively well in 2008, they seemed to cope with these external shocks, at least from a financial perspective,” said Glenn Levine, a senior economist at Moody’s Analytics in Sydney, Australia. “I think people are starting to question the long-term Indian story. That is the difference now.”

India’s difficulties come as the global economy is wobbling once again. Europe is grappling with a sovereign debt crisis that could shatter the continent’s economic and political union. The United States is still not producing enough new jobs. China’s growth has weakened, with a real estate downturn and stalling exports, while important emerging economies like Brazil are slowing down, adding to pessimism about the world economy at a critical time.

India is often viewed as a rising global powerhouse and, not too long ago, Indian officials were predicting growth rates of 9 percent or higher. The Obama administration, eager to tap into such a booming market and envisioning India as a regional counterweight to China, trumpeted the United States-India partnership. Some analysts even saw the global downturn as an opportunity for India, making it more attractive for foreign investors wary of putting money into declining advanced industrial countries.

Today, India’s economy is still expanding, with growth projected between 6 percent and 7 percent this year. And analysts say India’s long-term strengths remain significant. It has one of the world’s youngest populations, and polls consistently show they are overwhelmingly optimistic about their future. Meanwhile, India’s businesses are competing more aggressively on the global stage.

But the slowdown has punctured the once bubbly mood in the business and political classes and brought sharp criticism of the government. Indian business leaders, foreign investors and analysts say India’s strengths are being undermined by growing political dysfunction: the populist tendencies of Indian politicians, a lack of action by top leaders and allegations of corruption that have undermined the authority of policy makers.

India is desperate for investment in mining, roads, ports, urban housing and other areas, but Indian businesses and foreign investors are starting to shy away. Indian corporations, unable to obtain governmental licenses or permissions for projects, are investing overseas instead. Foreigners are also pulling back; their investment in Indian stocks and bonds totaled only $16 billion in the last fiscal year, compared with $30 billion the year before. The trend accelerated in recent months after the Finance Ministry, trying to stem a rising budget deficit, proposed a raft of new taxes on foreign institutions doing business in India.

“A quiet crisis of confidence is building up,” said Pratap Bhanu Mehta, president of the Center for Policy Research in New Delhi. “There is no certainty over the regulatory regime. There is no certainty over the tax regime.”

Indians have long thrived amid adversity, often by creatively — at times, illegally — subverting onerous regulations with a workaround ethos that has spurred economic activity. Even today, industries like pharmaceuticals, information technology and consumer goods, which do not need many licenses and official approvals, are prospering. But those sectors tied to the government, including mining, construction and manufacturing, are struggling.

“We have consciously kept away from businesses where we would have needed lots of permissions,” said Ajay Piramal, who heads a Mumbai-based conglomerate focused on pharmaceuticals.

At the core of the political uncertainties is the weakened status of the Indian National Congress Party, which leads the coalition government, known as the United Progressive Alliance. Since 2004, the government has operated under an unorthodox partnership between Sonia Gandhi, president of the Congress Party and the governing coalition, and Manmohan Singh, her handpicked prime minister.

The division of duties worked during the government’s first term. Mrs. Gandhi managed the coalition partners, rode herd on the Congress Party, championed safety net programs for the poor and oversaw election strategy; Mr. Singh, a quiet economist considered a father of India’s reform era, moved India closer to the United States and oversaw a booming economy where growth topped 9 percent.

In 2009, voters returned the U.P.A. to power amid expectations that India, having shrugged off the 2008 global recession, was on an inevitably upward growth track. But analysts say the contradictions in the Singh-Gandhi partnership have since been exposed. Mr. Singh holds the most politically powerful job in the country, yet is seemingly reluctant to wield power and often must seek approval on policy questions from Mrs. Gandhi. She oversees an advisory panel largely consisting of social activists that her critics regard as a shadow government.

The result has been a lack of a clear political agenda emanating from the top, analysts and business leaders say, allowing the bureaucracy to fall back into its traditional resistance to making decisions. When officials do act, they often change course after encountering political opposition.

“The last year was wasted,” said Sanjaya Baru, a former spokesman for the prime minister who is now at a research institute. “We’ve had a crisis of leadership on the economic side.”

Moreover, the government has been on the defensive since a series of corruption scandals, dormant for several years, exploded into public view. Attempts by technocrats to push through a so-called “second generation” of deeper economic changes were undermined by the inability of the Congress Party to corral its coalition partners.

In December, Mr. Singh’s cabinet announced that foreign retailers like Walmart would be allowed for the first time to open stores in the country with local partners. But Mr. Singh was forced to reverse course after an ally, Mamata Banerjee, the chief minister of the state of West Bengal, balked and threatened to bring down the government.

Then in March, facing pressures to raise revenues and stem the rising fiscal deficit, Pranab Mukherjee, the finance minister, released a budget that proposed new taxes on foreign entities in India, including levies on past deals that the Indian Supreme Court had ruled were not taxable in the country. Foreign investors were stunned, and analysts say the outflow of capital is one reason the rupee has tumbled 13 percent since the end of February.

“We are fed up and our investors are not keen to even talk about India,” said a senior executive at an American bank in Mumbai, asking not to be identified so he could speak bluntly. “They are sick and tired.”

Kaushik Basu, the government’s chief economic adviser, acknowledged that the government had made mistakes and had missed opportunities to better position India as the global economic landscape shifts. Yet he said that the rising pessimism was unwarranted and that India was still growing, still had high investment and savings rates, and should take advantage of the depreciation of the rupee to push exports. He said India’s problems were no worse than those in other emerging economies.

“It is a difficult stage,” Mr. Basu said in an interview. “But I do remain very, very optimistic. Six months and we will pull up.”

In the meantime, the immediate challenges are piling up. This month, in a move to raise revenues, the government raised gasoline prices, drawing public fury. Now the question, analysts say, is whether the administration can muster the political courage to trim the bigger subsidies affecting diesel fuel and cooking gas.

Mr. Singh warned last week that the government would have to make some unpopular decisions. Many experts, however, say they expect more stalemate.

“It has always been tough,” said Mr. Levine, the Moody’s economist, “but there is a sense, at the moment, that it’s too difficult. For the time being people are just giving up on it.”

Link
India’s Economy Slows, With Global Implications
Mr. Singh holds the most politically powerful job in the country, yet is seemingly reluctant to wield power and often must seek approval on policy questions from Mrs. Gandhi. She oversees an advisory panel largely consisting of social activists that her critics regard as a shadow government.

The late Raj Krishna, a professor at the Delhi School of Economics, came up with the term “Hindu rate of growth” to refer to the Indian economy’s sluggish gross domestic product (GDP) growth of 3.5 percent a year between the 1950s and the 1980s. The phrase has been much used and abused since then.

A misinterpretation that is often made is that Krishna used the term to infer that India grew slowly because it was a nation dominated by Hindus. In fact, he never meant anything like that. Krishna was a believer in free markets and wasn’t a big fan of the socialistic model of development put forward by Jawaharlal Nehru and the Congress party.

In fact, looking at the slow economic growth of India, he realised that the Nehruvian model of socialism wasn’t really working. This was visible in India’s secular or long-term economic growth rate which averaged around 3.5 percent during those days.

The word to mark here is “secular”. The word, in its common every day usage, refers to something that is not specifically related to a particular religion. Like our country India. One of the fundamental rights Indians have is the right to freedom of religion which allows us to practice and propagate any religion.

But the world “secular” has another meaning. It also means a long term trend. Hence when economists like Krishna talk about the secular rate of growth they are talking about the rate at which a country like India has grown year on year, over an extended period of time. And this secular rate of growth in India’s case was 3.5 percent in those decades. This could hardly be called a rate of growth for a country like India which was growing from a very low base and needed to grow at a much faster pace to pull its millions out of poverty.

So Krishna came up with the word “Hindu” which was the direct opposite of the word “secular” to take a dig at Nehru and his model of development. Nehru was a big believer in secularism. Hence by using the word “Hindu” Krishna was essentially taking a dig at Nehru and his brand of economic development, and not Hindus.

The policies of socialism and the licence quota raj followed by Nehru, his daughter Indira Gandhi and grandson Rajiv ensured that India grew at a very slow rate of growth. While India was growing at a sub 4 percent rate of growth, South Korea grew at 9 percent, Taiwan at 8 percent and Indonesia at 6 percent. These were countries which were more or less at a similar point where India was in the late 1940s.


The Congress party’s fascination for the Nehruvian brand of socialism continues. But, if economic growth could be created by just distributing money to everyone, then India would have been a developed nation by now. Reuters
The Indian economic revolution stared in late July 1991, when a certain Manmohan Singh (in an avatar different from the one who sits on the PM’s chair now), with the blessings of PV Narasimha Rao, initiated the economic reform process. The country since then has largely grown at the rates of 7-8 percent per year, even crossing 9 percent over the last few years.

Over the years this economic growth has largely been taken for granted by the Congress-led UPA politicians, bureaucrats and others in decision-making positions. Come what may, we will grow by at least 9 percent. When the growth slipped below 9 percent, the attitude was that whatever happens we will grow by 8 percent. When it slipped further, we can’t go below 7 percent was what those in decision-making positions constantly said. At a recent TV show, Montek Singh Ahluwalia, the Deputy Chairman of the Planning Commission, kept insisting that a 7 percent economic growth rate was a given. Turns out it’s not.

The latest GDP growth rate for the period of January to March 2012 has fallen to 5.3 percent. I wonder, what is the new number Ahluwalia and his ilk will come up with now. “Come what may we will grow at least by 4 percent!” is something not worth saying on a public forum.
But chances are that’s where we are headed. As Ruchir Sharma writes in his recent book Breakout Nations – In Pursuit of the Next Economic Miracles: “India is already showing some of the warning signs of failed growth stories, including early-onset of confidence.”

The history of economic growth

Sharma’s basic point is that economic growth should never be taken for granted. History has proven otherwise. Only six countries which are classified as emerging markets by the western world have grown at the rate of 5 percent or more over the last 40 years. These countries are Malaysia, Singapore, South Korea, Taiwan, Thailand and Hong Kong. Of these two, Hong Kong and Singapore are city-states with a very small area and population. Hence only four emerging market countries have grown at a rate of 5 percent or more over the last four decades. Only two of these countries, i.e. Taiwan and South Korea, have managed to grow at 5 percent or more for the last 50 years.

“In many ways the “mortality rate” of countries is as high as that of stocks. Only four companies – Procter & Gamble, General Electric, AT&T, and DuPont – have survived on the Dow Jones index of the top-30 US industrial stocks since the 1960s. Few front-runners stay in the lead for a decade, much less many decades,” writes Sharma.

The history of economic growth is filled with examples of countries which have flattered to deceive. In the 1950s and 1960s, India and China, the two biggest emerging markets now, were struggling to grow. The bet then was on Iraq, Iran and Yemen. In the 1960s, the bet was Philippines, Burma and Sri Lanka to become the next East Asian tigers. But that, as we all know, never really happened.

India is going the Brazil way

Brazil was to the world what China is to it now in the 1960s and the 1970s. It was one of the fastest-growing economies in the world. But in the seventies it invested in what Sharma calls a “premature construction of a welfare state”. Rather than build road and other infrastructure important to create a viable and modern industrial economy, what followed was excessive government spending and regular bouts of hyperinflation, destroying economic growth.
India is in a similar situation now. Over the last five years the Congress party-led United Progressive Alliance is trying to gain ground that it lost to a score of regional parties. And for that it has been very aggressively giving out “freebies” to the population. The development of infrastructure like roads, bridges, ports, airports, education, etc, has all taken a backseat.

But the distribution of “freebies” has led to a burgeoning fiscal deficit. Fiscal deficit is the difference between what a government earns and what it spends.

For the financial year 2007-2008 the fiscal deficit stood at Rs 1,26,912 crore against Rs 5,21,980 crore for the current financial year. In a timeframe of five years, the fiscal deficit has shot up by nearly 312 percent. During the same period the income earned by the government has gone up by only 36 percent to Rs 7,96,740 crore. The huge increase in fiscal deficit has primarily happened because of the subsidy on food, fertiliser and petroleum.

This has meant that the government has had to borrow more and this in turn has pushed up interest rates, leading to higher EMIs on loans. It has also led to businesses postponing expansion because higher interest rates mean that projects may not be financially viable. It has also led to people borrowing less to buy homes, cars and other things, leading to a further slowdown in a lot of sectors. And with the government borrowing so much there is no way the interest rate can come down.

As Sharma points out: “It was easy enough for India to increase spending in the midst of a global boom, but the spending has continued to rise in the post-crisis period…If the government continues down this path, India may meet the same fate as Brazil in the late 1970s, when excessive government spending set off hyperinflation and crowded out private investment, ending the country’s economic boom.”

Where are the big ticket reforms?

India reaped a lot of benefits because of the reforms of 1991. But it’s been 21 years since then. A new set of reforms is needed. Countries which have constantly grown over the years have shown to be very reform oriented. “In countries like South Korea, China and Taiwan, they consistently had a plan which was about how do you keep reforming. How do you keep opening up the economy? How do you keep liberalising the economy in terms of how you grow and how you make use of every crisis as an opportunity?” says Sharma.

India has hardly seen any economic reform in the recent past. The Direct Taxes Code, initiated a few years back, has still not seen the light of day, but even if it does see the light of day, it’s not going to be of much use. In its original form it was a treat to read it. Almost anyone with a basic understanding of English would have been able to read and understand it. The most recent version has gone back to being the “Greek” that the current Income Tax Act is.

It has been proven the world over that simpler tax systems lead to greater tax revenues. Then the question is why have such complicated income tax rules? The only people who benefit are CAs and Indian Revenue Service officers.
Opening up the retail sector for foreign direct investment has not gone anywhere for a long time. This is a sector which is extremely labour intensive and can create a lot of employment.

What about opening up the aviation sector to foreigners instead of pumping more and more money into Air India? As Warren Buffett wrote in a letter to shareholders of Berkshire Hathaway, the company whose chairman he is, a few years back: “The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favour by shooting Orville down…The airline industry’s demand for capital ever since that first flight has been insatiable. Investors have poured money into a bottomless pit, attracted by growth when they should have been repelled by it.”

If foreigners want to burn their money running airlines in India why should we have a problem with it?

The insurance sector is bleeding and needs more foreign money, but there is a cap of 26 percent on foreign investment in an insurance company. Again this limit needs to go up. The sector is very labour intensive and has potential to create employment. The same is true about the print media in India.

The list of pending economic reforms is endless. But India needs much more economic reform in the days to come if we hope to grow at the rates of growth we were growing.

To conclude

Raj Krishna was a far sighted economist. He knew that the Nehruvian brand of socialism was not working. It never has. It never did. And it never will. But somehow the Congress party’s fascination for it continues. And in continuance of that, the party is now distributing money to the citizens of India through the various so-called “social-sector” schemes. If economic growth could be created by just distributing money to everyone, then India would have been a developed nation by now. But that’s not how economic growth is created.

All that the distribution of money creates is higher inflation which leads to higher interest rates and in turn lower economic growth. Also India is hardly in a position to become a welfare state. The government just doesn’t earn enough to support the kind of money it’s been spending and plans to spend.

It’s time the mandarins who run the Congress party and effectively the country realise that. Our rate of growth of India’s economy (measured by the growth in GDP) will continue to fall. And soon it will be time to welcome the new “Hindu” rate of economic growth. Sonia Gandhi and Manmohan Singh are taking us back to where Nehru left off. And how much will the new Hindu rate of growth be? Let’s say around 3.5 percent.

Morgan Stanley bomb: Predicts India’s 2012 GDP at 5.7%

Morgan Stanley just made a shocking prediction. The international investment house says that after India’s abysmal 5.3 percent growth in the March-ending quarter, it expects the economy to grow by —hold your breath— 5.7 percent in 2012.

That is the first prediction by a top brokerage of India’s 2012 economic growth coming in below 6 percent. “Reflecting the incoming weaker growth data and continued weak global funding environment, we are cutting our 2012 GDP growth estimates further to 5.7 percent from 6.3 percent,” it said in a 1 June note after the release of GDP data on Thursday.“On a fiscal year basis, we have cut F2013 GDP growth from 6.3 percent to 5.8 percent (a 10-year low).”

Morgan Stanley also said it expected GDP growth to remain below 6 percent until the quarter ending December 2012.

Gloomily, Morgan Stanley also said it expected GDP growth to remain below 6 percent until the quarter ending December 2012.

The brokerage also acknowledged that “a stagflation-like environment” is emerging in India, a fact Firstpost noted here earlier. “While GDP growth is decelerating sharply, headline inflation has remained persistently above the Reserve Bank of India’s comfort zone,” it said. “Over the next three quarters, even as we expect GDP growth to remain below 6 percent year on year, headline inflation is likely to remain above 7 percent.”

Monetary policy can do little to handle the effects of such a situation, while making the task of lowering the cost of capital even more difficult, the brokerage noted. “In our view, unless fiscal policy is truly tightened, it will be hard to bring down the short-term cost of capital meaningfully and revive the growth trend.”

Clearly, reviving the growth trend will remain a Herculean task. Internationally, the brokerage believes two things could ease India’s economic stress: a sharp decline in crude oil prices and an improved global capital market environment, which boosts capital flows into the country. Locally, aggressive and persistent policy action reviving private investment sentiment and reduction in government expenditure and subsidies could help reverse what MS calls India “bad mix of growth’.

It admits, however, that there is little hope of these positive triggers materialising.“The announcement of fuel price hikes in the last few days is a good sign – but a sustained major effort will be needed to turnaround the growth cycle,” it said.

So there you have it. From 8 percent to 7 percent to 6 percent and now below 6 percent. How low does India’s GDP growth need to go before alarm bells start ringing in New Delhi?