Indian Economy - News & Discussion 27 May 2012

[RoyG]

That's a fair enough comment. Market forces will decide the winners and losers. But that begets the question: Why is the BJP getting its chaddis in a twist over it? It's not as if Walmart, Tesco and others are rushing in with the purse strings open.

Sorry in this case they sound as shrill as Mamata Didi.

They are capitalizing on anti-congress mood in the country. It's give and take. Personally, I believe FDI in retail will happen but it won't do much for the economy. Right now cutting spending, streamlining taxes, and reducing regulations are what is needed. All this FDI business isn't all the important especially when most of it is our own money being channeled back through Mauritius.

[harbans]

Amit ji, should carry this elsewhere. Yet i think this could be a move to isolate NM and pressure him to confirm to an economic agenda that is left driven if and when he comes to power..anyways posting the rest in NM thread for the purpose..

[Aditya_V]

This Indirect Tax behaviour by Goverment services has had a very big role to play in stunting India's Manufacturing sector. This move will keep India noncompetitive in Manufacturing, may be this what the UPA and its leftist Masters want.

Govt firm on arresting indirect tax evaders

[nawabs]

RBI chief rejects high inflation as 'new normal'

http://www.moneycontrol.com/news/wire-n ... 35893.html

The Reserve Bank of India (RBI) rejects the notion that high inflation is the "new normal," RBI Gov. Duvvuri Subbarao said, noting that many of the supply-driven causes of Indian inflation can be corrected by appropriate policies.

"Accepting a new normal for inflation not only has no theoretical or empirical support, but entails the moral hazard of policy inaction in dealing with supply constraints," Subbarao said in the text of a speech to bankers in New Delhi on Friday, a copy of which was made available to journalists

"The 'new normal' argument ... is that it will be politically difficult to reverse these entitlement programmes, they are here to stay, and that India should accept wage-price pressures as a structural feature and adjust its inflation goal accordingly," Subbarao said.

He said high growth in wages is not sustainable in the absence of improved productivity.

"We must recognize that the government does not have the fiscal capacity to continue entitlements and welfare programmes at this level. The government's embrace (of) fiscal responsibility will act as a self-limiting check on the wage-price spiral," he said.

[RamaY]

Things idiot P Chidambaram must be talking instead of telling Indians buy less gold, eat no food, have sex at 16 and so on...

Arun Jaitley on India's economic priorities: CHALLENGES WHICH INDIA MUST OVERCOME

Good governance needs strong leadership. It needs decisiveness to form a policy. Leadership must necessarily have credibility. The economic model for India is increasingly becoming a subject matter of larger consensus. You need a 9 percent growth for the next decade or more. A continuous 9 percent growth will target investment; it will create jobs. It will generate larger revenue for the government. Enhanced revenue can be used for infrastructure creation and social spending. It will expedite poverty alleviation schemes. Unfortunately, the past few years have witnessed a policy paralysis and declining credibility of the political leadership. This tendency has to be replaced. Our poverty alleviation schemes including income enhancing schemes must combine their social objects and asset creation. The need to eliminate manual scavenging, uplift the weakest, particularly the tribals, concentration on health care, education and rural infrastructure are the major challenges of the day.

How do you reach a 9 percent growth rate?

In order to reach a 9% growth rate India must have decisive policy formulation. We need to expedite and improve upon the infrastructure creation. Unfortunately success stories like the Telecom sector and National Highways were marred by corruption. It is not healthy for the economy to hold up innumerable large investments in the name of a new licensing regime In the name of environment protection. Economy and ecology must co-exist. It is extremely necessary that our manufacturing sector reforms are expedited. We live in an age where consumers buy products which are cheaper. Low Cost manufacturing is the key to success. Rationalizing of interest rates, improvement of infrastructure, effective implementation of power sector reforms and availability of utilities on internationally comparable prices is the need of the hour.

Our concentration on Highways, Ports, Airports, Rural roads has to be given its due importance. India has failed to exploit its' tourism potential. Lower taxes on tourism related industries, improved airports, railway stations and cheaper hotels are necessary to exploit our entire potential. We need to liberalise the movement of goods within the country. Higher taxation is a short-lived policy which will never bring long term results. Taxation rates have to be modest and internationally comparable. You can export goods, you can recover export taxes. We have seen several success stories. Expansion of the educational network, Information Technology, Telecom , Pharma sector, the auto sector, the Highways, expansion of the Urban Housing are some of the success stories we have witnessed in recent years. One new policy and new legislation must further these successes rather than curtail them.

[RoyG]

"We must recognize that the government does not have the fiscal capacity to continue entitlements and welfare programmes at this level. The government's embrace (of) fiscal responsibility will act as a self-limiting check on the wage-price spiral," he said.

For all those who believe in the stupidity of runaway public spending as a solution for the current economic quagmire...This is the first time I've ever seen a statement like this from RBI.

[VKumar]

Government largesse on 'welfare' is a handout to win votes.

[Prem]

Delhi-based Playcez is the first GSF India grad to land funding, closes 6-figure dollar seed round

http://thenextweb.com/asia/2013/03/07/d ... eed-round/

Earlier this week we published an interview with Rajesh Sawhney – the man behind GSF India and its new accelerator program – in which he voiced his expectation that “nine or ten” of the inaugural class of 15 startups will close funding in the coming months. That first step has been taken after Delhi-based event discovery app Playcez, became the first graduate of the GSF India accelerator to raise investment.It has closed an undisclosed 6-figure US dollar seed round — which is said to be just short of $1 million — led by Sawhney himself (representing GSF India) and Mukul Singhal of SAIF Partners. The planned use for the funds is fairly vague — “penetrating a rising class of smartphone users in India” — but the two investors will play prominent roles helping it grow.Long-term seed-stage investor Singhal will provide advice and support around the company’s business model, while Sawhney — who told TNW he “gets excited about people [in India] who think global” — will help Playcez develop its business to expand overseas.“What impresses me is [founder] Ashwani [Gaur]‘s obsession with building a world-class product,” Sawhney says. “Ever since I met him six months ago, Playcez continues to evolve as a product and build great consumer traction.”The startup comes out of private beta next week with a bold claim that “boring weekends and evening will soon be history”. Playcez says it will take a data-centric approach to event discovery, monitoring social networks, and in particular check-in services like Foursquare, using algorithms that can tell which locations are the most popular in a given locale. It then provides recommendations based on what is hot in each city.
Gaur says the company is mobile-first, which is certainly the way to go in a country where reports suggest mobile Internet usage surpassed PC-based Web browsing last year. He reveals that the app was built in just five weeks, during the GSF India incubator period.Sawhney says he wants to see at least 40 startups pass through the incubator this year. The program has already expanded to Chennai and the immediate goal is to have 10 accelerator ‘centers’, some of which may be located outside of the country, he says.GSF India has a network of more than 200 investor partners and 17 entrepreneurs-in-residence across the world. The company teamed up with Seedcamp and 500 Startups last year, and plans to bring on half a dozen more partners in 2013.

[nawabs]

The tyranny of the balance-of-payments

http://timesofindia.indiatimes.com/home ... 869859.cms

India's current account deficit (CAD) has ballooned, reaching 4.6% of the Gross Domestic Product (GDP) in 2011-12. While the latest Economic Survey advises cutting gold and oil imports, the budget speech emphatically points to larger capital inflows as the solution.

Both the survey and the speech couldn't be more wrong. Restricting gold or oil imports will not change the total imports or the CAD. And bringing more foreign capital will increase , not reduce the latter.

The reason for these outcomes lies in what i call the tyranny of the balance-of-payments (BoP) identity. In its simplest form, the identity says that the CAD must equal net capital inflows (K) minus additions to RBI foreign exchange reserves (R): CAD = K—R.

By definition, CAD is the total value of imports minus the sum of the total value of exports and net foreign remittance. Capital inflows include investment by foreign entities in Indian stocks, bonds and companies; increases in NRI deposits; government borrowing abroad; and external commercial borrowing (ECB).

A simple international transaction illustrates why no country can escape the BoP identity. Suppose Goldman Sachs invests $100 million in the Indian stock market. This generates K = $100 million in the BoP identity. Because stocks can only be purchased in rupees, some entity must convert the dollars into rupees. There are three possibilities.

First, the RBI may buy the $100 million, placing equivalent rupees in the hands of Goldman Sachs. The transaction enhances the RBI foreign exchange reserves by $100 million and therefore R = $100 million. The net effect of the Goldman Sachs investment is K—R = 0 and CAD = 0.

Second, Goldman Sachs buys the rupees from an Indian bank. The bank may in turn either invest the $100 million abroad or sell them to someone else who does the same. In either case, the action results in K = —$100 million, exactly offsetting the inflow associated with the purchase of Indian stocks by Goldman Sachs. On net, we have K = 0, R = 0 and CAD = 0.

Finally, after buying $100 million from Goldman Sachs, the bank sells them to an importer. Dollars are used to affect imports leading to K—R = $100 million and CAD = $100 million. The bottom line is that if there is positive net capital inflow, either the RBI must buy the associated dollars or the current account deficit will rise by the equivalent amount. No nation can escape this fate.

Now return to consider the current account deficit in India. India began the decade of the 2000s with a modest current account deficit in 2000-01, which turned into a surplus in the following three years and then into a modest deficit again until 2007-08. But beginning in 2008-09, the year of global financial crisis, the current account deficit became significantly larger, skyrocketing to 4.6% of the GDP in 2011-12.

What changed beginning in 2008-09? Throughout much of the 2000s, capital inflows had built up and the RBI had simultaneously bought the associated dollar inflows, building its reserves. From 2000-01 to 2007-08, $252.5 billion worth of foreign capital flowed into India on a net basis and the RBI absorbed $236 billion of the associated dollar inflows by accumulating reserves. This left a paltry $16.5 billion for the CAD to absorb over the eight-year period.

But beginning in 2009, India had a changed RBI. Perhaps yielding to US exhortations against currency manipulation (mostly aimed at China), it virtually stopped intervening in the foreign exchange market. From 2008-09 to 2011-12, $183.8 billion worth of capital flowed into the country but the RBI reserves actually fell by a modest sum of $6.4 billion. As a flip side, cumulative CAD over just four years ended up being $190.2 billion.

RBI defenders might argue that with the rupee nominally depreciating against the dollar and inflation raging, purchases of dollars by the RBI would have led to even larger depreciation of the rupee. But the rupee depreciation did not begin until June 2011. The RBI had plenty of opportunity to buy dollars prior to that date. Moreover, the large capital inflows were a self-inflicted wound: the RBI has deliberately progressively loosened its hand on the ECB.

There is one final point concerning exports. One increasingly sees official statements these days including in the Economic Survey that India cannot count on expanding exports due to a stagnant world economy. Such export pessimism is both misplaced and self-defeating. In 2011, India's share in the world merchandise exports was a minuscule 1.7% compared to China's 10.4%. India has vast scope for export expansion just by increasing its share in global exports.

In fact, in expanding exports, India faces far smaller political challenge abroad than did China 10 or more years ago. Whereas China had to wipe out the domestic apparel, footwear and toy industries in the United States and Europe to get where it got and deal with the associated political backlash, India only has to displace some of the Chinese exports into these markets. Export expansion through increased share is entirely feasible even within a stagnant global economy provided we have the courage to undertake the necessary internal reforms making the policy environment friendlier for labour-intensive manufacturing.

[Prem]

India Industrial Production Beats Estimates After Policy Changes
http://www.bloomberg.com/news/2013-03-1 ... anges.html

Production at factories, utilities and mines climbed 2.4 percent from a year earlier after a revised 0.5 percent drop in December, the Central Statistical Office said in a statement in New Delhi today. The median of 28 estimates in a Bloomberg News survey was for a gain of 1.3 percent.
.The government in last month’s budget said it will trim the fiscal deficit to a six-year low, seeking to reduce inflation risks and boost the central bank’s scope to cut interest rates. Wholesale prices probably increased at the slowest pace in more than three years in February, the median estimate in a Bloomberg survey shows before a report due March 14. “Amidst expectations of a stretched and gradual demand revival, a sharp upswing in output is unlikely,” Tirthankar Patnaik, a Mumbai-based strategist at Religare Capital Markets Ltd., said before the release. The central bank will probably lower borrowing costs at next week’s policy meeting, he said. Finance Minister Palaniappan Chidambaram targets a budget gap of 4.8 percent of gross domestic product in the year through March 2014, from 5.2 percent, in a bid to avert a credit-rating downgrade. The administration has taken steps in recent months to open the economy to more foreign investment, spur exports and speed up stalled road and rail projects to revive growth.

[nawabs]

World Bank Group President Jim Kim Visits Uttar Pradesh

http://www.worldbank.org/en/news/press- ... ar-Pradesh

Earlier, in a meeting with the World Bank Group president, the Uttar Pradesh Chief Minister, Akhilesh Yadav, shared the state government’s development priorities and sought assistance of more than $3.5 billion over the next three to five years. In addition, the state is also set to gain from over $1.6 billion support through other projects already being planned during this period. These requests will be formally posed to the Department of Economic Affairs, Ministry of Finance, Government of India.

[JE Menon]

Suraj,

Why didn't you delete the moralizing Advise of Theo? Are you being secular?

Last caution

[Prem]

Asians Hunt Gas Treasure Locked in Ice Beneath Seabeds: Energy
http://www.bloomberg.com/news/2013-03-1 ... nergy.html

Japan and India, Asia’s biggest energy consumers after China, are closer to unlocking natural gas deposits trapped in ice below the seabed that may prove bigger than the world’s known fossil-fuel reserves.
Japan Oil, Gas & Metals National Corp. said yesterday it produced gas in the world’s first offshore test to extract the fuel from the frozen depths. A team including Oil & Natural Gas Corp. (ONGC), India’s biggest energy explorer, will drill off the east coast this year and try to produce the fuel, according to two officials at the regulator Directorate General of Hydrocarbons. They asked to not be named before the official announcement.The nations are trying to catch up with North America, where discoveries of gas in shale rock and tar sands herald an energy revolution carrying the U.S. and Canada toward energy independence. While shale is found in only certain parts of the globe, carbon frozen with water -- called methane hydrates or burnable ice -- is found under most sea beds. The catch: There’s no technology yet to commercially extract that gas.“Methane hydrates are everywhere, including in some of the fastest-growing economies,” said Will Pearson, director for global energy & natural resources at Eurasia Group in London. “If the technology is developed, it’ll alter the gas market. What is already the golden age of gas will last much longer.”Natural gas, the fuel burned to make heat and electricity, is predominantly methane. A methane hydrate is a crystal of methane molecules surrounded by a cage of water molecules, according to the U.S. Geological Survey.Methane hydrates, stable under low temperatures and high pressure, can disintegrate when removed from those conditions.
Double Size
Initial estimates suggest carbon deposits in hydrates are double the size of all known oil, gas and coal reserves, the U.S. Geological Survey said in a January 2013 report. The world’s proven reserves of natural gas alone were 208.4 trillion cubic meters at the end of 2011, according to BP Plc. (BP/)
Gas molecules locked in ice have also been found in the North American permafrost and the Gulf of Mexico.
India is drilling for frozen gas it has preliminarily estimated to be as large as 1,894 trillion cubic meters, according to the website of the Directorate General of Hydrocarbons, the oil and gas exploration and production regulator. Japan’s deposits of frozen gas may be large enough to supply its needs for about 100 years, according to Japan Oil, Gas & Minerals, a government-affiliate known as JOGMEC.
‘More Independence’
“Methane hydrate could give Japan its own energy source and more independence,” said Tomoo Suzuki, professor emeritus at Tokyo Institute of Technology, who leads a study on methane hydrate deposits off the coast of Kochi prefecture. “The question is whether extracting gas from methane hydrate can be economically viable.”India, which discovered methane hydrates in the Bay of Bengal off its east coast, will later this year drill a few wells and engage in some test production to determine the size of the resource, a person familiar with the program said. Scientists have also found traces of conventional gas under the layer of hydrates on the ocean floor, the person said.Oil & Natural Gas Chairman Sudhir Vasudeva didn’t answer calls to his telephone seeking comment on the company’s plan to extract methane from hydrates.
Test Phase
In Japan’s test phase, gas was produced in the Nankai Trough about 50 kilometers (31 miles) off the coast of the country’s main Honshu island, JOGMEC said.
The Eastern Nankai Trough deposits may hold the equivalent of about 40 trillion cubic feet of methane, a primary element of natural gas, according to the statement. That’s equivalent to about 11 years of Japan’s LNG imports, it said.The country is trying to to enable commercial use by fiscal 2018, according to JOGMEC. Japan used a depressurization method in its latest test, a technology that was used when Japan and Canada jointly conducted a test production in the permafrost of northern Canada in 2008. That was the world’s first continuous and stable production from frozen gas sediments, according to the company.
Production Cost
The success of the offshore test doesn’t guarantee commercialization because of the short time span of production, said Yuji Morita, a senior researcher at Japan’s Institute of Energy Economics. The production cost won’t be an issue in the run-up to the commercialization of the fuel, Morita said.
“Hydrates store immense amounts of methane, with major implications for energy resources and climate, but the natural controls on hydrates and their impacts on the environment are very poorly understood,” the U.S. Geological Survey said in its January report. “Extraction of methane from hydrates could provide an enormous energy and petroleum feedstock resource.”
Explorers must find a way to avoid releasing large quantities of methane from hydrates into the air and the ocean. Methane traps heat so effectively it is about 10 times more potent than carbon dioxide as a greenhouse gas, according to the agency. Ice melts can reduce the pressure on the hydrates, resulting in the gas leaking out.Nations around the world are seeking new energy sources as demand increases. China, the world’s biggest energy consumer, is looking for technology to produce from the world’s biggest estimated shale gas deposit and enhance output from coal seams.
While India imports more than 75 percent of its crude oil and a quarter of its natural gas requirements, Japan buys all its oil and gas from overseas and is seeking to find ways to cut its dependence on Middle Eastern crude oil.“Countries that highlight the opportunity are those with limited oil and gas production,” said Nathan Piper, an Edinburgh-based analyst at RBC Capital Markets. “Gas hydrates remain challenging due in part to the offshore location.”

[Prem]

India may become 5th largest manufacturing nation: BCG
http://economictimes.indiatimes.com/new ... 017189.cms

MUMBAI: India may become the fifth-largest manufacturing nation - from ninth position at present - if the country is able to increase the share of manufacturing in GDP to 25 per cent, a Boston Consultancy Group report has said. The National Manufacturing Policy envisages that India's manufacturing sector should increase its share of GDP from 15 per cent at present to 25 per cent by 2022, ( LIke i said 2022 we break the logjam and few legs ) in line with global peers. It will help India become the fifth-largest manufacturing nation, said the BCG report.
However, despite high potential, the Indian manufacturing sector has not been able to achieve the requisite growth and its share of GDP has remained relatively flat for over two decades because of poor productivity, BCG-CII said in the report titled `People productivity-Key to Indian manufacturing competitiveness'. An improvement in `people productivity' can be beneficial across all levels of an organisation, it said, adding that it is critical for the Indian manufacturing sector to work toward enhancing people productivity. It is also important to attract quality talent to the sector, said the report. A survey of placement committees across the top domestic educational institutes suggested that poor job offerings, lack of glamour quotient and lack of awareness concerning potential of manufacturing jobs were some of the reasons behind students' less preference for manufacturing companies, it said. Apart from brand building, student-connect and awareness activities, in the longer term the manufacturing firms need to work on developing a more conducive working atmosphere, providing better employee experience, and repackaging job offerings to suit students' expectations, it said. With China's manufacturing competitiveness losing sheen fast, challengers are aggressively vying for a bigger piece of the USD 8.8 trillion1 global manufacturing pie. India, with its large working population and low labour costs (or substantial labour-cost competitiveness) is at a distinct advantage, and can grab a lion's share, the report added.

[Klaus]

Now's the right time for Indians, both in government and otherwise to learn from the Russian experience in Cyprus and come clean with regard to their deposits in various European tax havens. This admission can pave the way for remittance of the black money back into India.

[chola]

It is black money in the first place because the ones who put it in Western havens do not trust the rupee. Don't bank on it coming back.

[Theo_Fidel]

Welcome back Chola. Good to see you.

You are absolutely right. Couple of caveats however. This is not the 1980’s and there are a lot lot more avenues for investment and making money in India itself, and GOI is a 100 times more willing to let the money re-enter the market. This was the big complaint for the black money folks back then. I would say however that 2 things encourage a return. Form my perspective things have changed quite a bit. The property value explosion means that black money folks are anxious to convert their cash into property right now while things are hot.

- Higher interest rates
- Paradoxically Depreciation of Rupee also triggers a return as people try to lock in gains.

Does anyone really believe that India’s $70 Billion+ of remittances is all clean money…. ..I suspect a large chunk is black money sneaking backing in.

[RamaY]

It is black money in the first place because the ones who put it in Western havens do not trust the rupee. Don't bank on it coming back.

Are you sure it is the distrust in INR that encouraged the people putting their Black money in swiss banks?

[chola]

Does anyone really believe that India’s $70 Billion+ of remittances is all clean money…. ..I suspect a large chunk is black money sneaking backing in.

Of course it is not all clean and laundering requires a trip out and then back in. But that is different from the ones with stationary accounts in the West. There is no stability in the rupee so as long as you start off with foreign currency you can make a killing during the depreciation. But if you start off with the rupee, you will lose your shirt.

People with the wherewithal to sneak money do so because it will protect their wealth.

Are you sure it is the distrust in INR that encouraged the people putting their Black money in swiss banks?

If their intentions were simply tax related then it would have beeb easier to stash it inside Bharat than to create a possible trail in highly regulated banks in the West. You make the special effort to move money to Europe because of stability. Otherwise, you can just create an account in the Maldives.

[RamaY]

I thought the whole saga of blackmoney was for two reasons

1. One cannot save that much money in Indian accounts without relieving identities. Swiss banks were famous for numbered accounts.
2. Bribes from international players are stashed in swiss banks so the recipient's names were kept secret.

The stability of INR is a new phenomenon. That too became meaningless for past 5 years once RBI allowed a lot open conversion policy. Now INR is tied to two thing - Inflation in India and Interest rates outside.

[RamaY]

Following is the "Planned Expenditure" of various state budgets in Rs Crores.

All the other amount in those state budget is spent on unplanned expenditure meaning salaries, and interest on loans.

For example Guj budget is 110,000 crores (IIRC) where as AP's budget is 156000 crores. That means AP spends more than 100,000 crores on salaries and interest, where as Guj spends hardly 59000 crores.

1. UP = 57800
2. Guj = 51000
3. AP = 48934
4. Maha = 45000
5. Ktaka = 42030
6. Rajasthan = 33,500
7. TN = 28000
8. Bihar = 28000
9. MP = 28000
10. Haryana = 26490
11. WB = 25000

[svinayak]

India's federal cabinet cleared a food security bill allowing 67% of the population access to cheap food grains, according to three ministers. The food security bill would permit the release of large quantities of grain from the government's large storage sites at very low price, and will be debated by lawmakers in parliament before a vote, reported The Wall Street Journal. Full Story (WSJ Subscription Required)

[Austin]

Excellent News , Hope it gets cleared in Parliament

Some Details http://www.ndtv.com/article/india/cabin ... ill-344404

The cabinet has approved the bill. We will try to bring it in the Lok Sabha this week," Food Minister KV Thomas said after the cabinet meeting.

The bill says about 800 crore people will be entitled to five kilos of subsidised grain per month. Rice will be made available at Rs. 3 a kilo; wheat will cost Rs. 2 a kilo and cereal will be sold for Rs. 1 per kilo.

[nachiket]

^^How are we supposed to afford this new vote-winning scheme of the congress with budget deficit already out of control and economy rapidly going down pakistan?

These schemes sound nice and noble, but the fact remains is that if 800 crore people are going to buy rice at Rs. 3 a kilo, the rest of the 300 core people have to make up the difference for all of them in addition to buying their own rice at full price. How do you think that is going to work out?

This will probably ensure UPA3 in 2014 I guess, which is its real purpose anyway.

[Aditya_V]

If you think the 5KG rice will reach the needy, you must be joking. This scheme will push up prices, lead to import scams and hunger will continue. This just increases the allocation in the PDS system.

Best way is create jobs for landless labourers who will spend thier money judiciously and since it earned by hard work will ensure that thier children are better skilled.

This free dole will only increase laziness and corrupt practices.

[krishnan]

It already has, rice has hit 56/kg mark

[Austin]

All schemes in India are scam ridden , so I dont expect Food Bill wont have its own can of worms . even our normal day to day bread butter PDS are ridden by scams and ineffeciencies. That is something we have to sort it out ourself.

Atleast its money better spent then making money in some defence deal or 2G or some other scams.

[krishnan]

ration shop is major scam. The sugar they sell is probably a scam in itself.... takes 2 full spoon of it vs 1 spoon full sugar that we buy from regular shop

[Austin]

The way ration shops works from personal experience , is they get the requisite quota from government and by word of mouth people come to know that rice , wheat , sugar, kerosene etc is available in ration shop.

They sell those stuff for 2-3 days if you miss the deadline or are unlucky enough to be informed then you are told that all products are sold and its over , these ration shop owners sell it to private shop or agents at a premium who in return sell it to private shop.

Its not uncommon in Mumbai to find out ration shop stuff like kerosene , wheat or rice being sold at private kirana shops at 3x times the cost , with kerosene the die they use is a give up.

Quality is variable some times you get good quality rice or wheat compared to what you get at Kirana shop , some times the quality is low.

[RamaY]

Excellent News , Hope it gets cleared in Parliament

Some Details http://www.ndtv.com/article/india/cabin ... ill-344404

The cabinet has approved the bill. We will try to bring it in the Lok Sabha this week," Food Minister KV Thomas said after the cabinet meeting.

The bill says about 800 crore people will be entitled to five kilos of subsidised grain per month. Rice will be made available at Rs. 3 a kilo; wheat will cost Rs. 2 a kilo and cereal will be sold for Rs. 1 per kilo.

There are only 121 crore people in India

[RamaY]

Don't know where this falls.

The cotton farmer suicides is a well known story. Thousands of farmers committed suicide due to fake seeds and low prices.

This year after the harvest (between November and February) the farmers got a price of Rs 2600-3500 per quintal.

Now that the cotton is collected by the middlemen, the price of cotton went up to Rs4500-5000 per quintal.

The middlemen profited nearly Rs 6000 crore with this price change in Andhra Pradesh alone.

This is how the middlemen mafia is hurting the farming industry.

Can't there be a better way? The govt could have offered the farmers an option. For example:

CCI (cotton commission of India?) can offer scheme to cotton farmers. They can store their cotton in CCI godowns. CCI pays them the supporting price, say Rs3000 per quintal.

The farmer has 6months to claim his cotton, if the price changes.

For example the cotton price for next 6 months (assuming that is the season length) is like this
3000-3200-3500-3700-3400-3800-3200 (new crop comes here)

The farmer can claim the difference anytime. CCI will charge nominal interest on the Rs3000 it paid in the beginning plus some storage charges. Say a 6% annual interest rate plus Rs 5 storage charge per quintal will workout to be Rs 20 per month per quintal.

Benefits:
1. This will put majority of the money in the farmers hands at support price
2. Farmers get benefit from upside price changes
3. Govt gets a reasonable returns on its initial investment or cotton at the support price
4. Price manipulation by middlemen is avoided

[amit]

This is how the middlemen mafia is hurting the farming industry.

This is a point that applies to the entire farming industry and not just cotton farming. (BTW, just so that you know, I agree with your point about the middleman thekedars fleecing cotton farmers.)

And this is why I think organised retail - done in sufficient scale - can be a boon to small farmers, especially the ones which produce perishables like vegetables and staples.

Some initiatives like ITC's e-choupal, for example, have been very successful. Cutting out the middleman and buying in bulk and investing in future production are all good news for farmers. Unfortunately the scale that it is done today is too minute to have any overall impact. We need far bigger scale and that's why I think FDI in retail, which not only has the ability to bring in investment but also worldclass supply chain logistics expertise, is important.

As always the case the middleman mafia is politically powerful and hence everybody from Mamata didi, CPIM, BJP, Mulla Yadav and even sections of the Congress are opposed to this because they have a case of bleeding hearts, worrying about how the "poor farmer" would be fleeced.

Bloody hell what does the mandi thekadars do today? And in the process contribute to 30 per cent waste because they will not spend money building cold storages and invest in refrigerated trucks. The onus is on the farmer to get his produce to the mandis and he gets paid only if the stuff is sold and not for stuff that may rot because of a lack of storage facilities.

[Hari Seldon]

^^ The APMC act first needs to go. That egregious piece of legislation is the single biggest hurdle in the system - the farmer gets pi$$ poor rates while the end-consumer also gets whopped with soaring prices.

[amit]

^^^^

I agree. I should have qualified my statement - I have in earlier discussions - organised retail and FDI in retail are not silver bullets. However, they would be/are effective when implemented with a slew of other measures.

The act needs to go as does all those stupid inter-state taxes which results in a situation when a particular produce rots in one part of the country due to over production while another part of the country pays through its nose for the same product.

Oh yes, the real silver bullet IMO is GST but again...

[Gus]

IMO, another major problem with too much middlemen is the inevitable long lead times and lack of information exchange between both ends (point of sale and farmer)..this leads to 'whiplash effect' where small variations at point of sale causes huge changes in the farmer end.

This is a problem because people still plant seeds by word of mouth and everybody plants the same damn thing and price crashes and everybody suffers. You can see this cycle now and then, there a little scarcity and prices go up and everybody plants it and prices crash and the small farmer suffers heavily because he might have taken loan to do a borewell for water for that crop etc.

[Prem]

http://techwhack.co/infibeam-houses-htc ... let-43576/

India has now become a hub for the mobile manufacturers as they have seen a huge demand in the country for the Android based phones with Full HD display screens. Sony and Samsung have already introduced a range of their new Smartphones in the beginning of this year and now it’s HTC’s turn to do so.TC has realized the potential of introducing its high-end Smartphone model of Butterfly in India. The HTC Butterfly is a Phablet (phone + tablet) that features a 5 inch LCD3 Capacitive display screen and is powered by Qualcomm Snapdragon technology. This exclusively designed phone runs on Android 4.1 Jelly Bean OS and Sense 4+.HTC has in-built a powerful 8 MP Primary Camera with LED Flash and a 2 MP front camera for video calls. The phone boasts of having the internal memory of 16 GB that is extensible up to 32 GB. It supports various connectivity options such as 3G, GPRS, Bluetooth, Wi-Fi and it is also Java enabled.Richard Javier, HTC Philippines Country Manager said on the launch, “Competitions are getting scared of this (HTC Butterfly) product.” The four main features of the HTC Butterfly as mentioned by HTC Trade Marketing Officer Nicole Chiu are Amazing Camera and Sound, High Performance, Stunning View, and Premium Design.

[Theo_Fidel]

The APMC may be a problem in places but I personally have never encountered it. I’m able to sell my produce to coop’s and private millers without any problems. Tamil Nadu has always been agri-business friendly that way. There is even no restriction to shipping product to Kerala, KA & AP even if local prices rise.

The private folks will only accept Grade 1 materials however. For instance moisture content has to be below 13% or they will simply not accept it. This after spending Rs20,000 on truck, labor and diesel to get to their gates they will simply turn you away. This is tough for a poor farmer to achieve and live with. Also they have now started requiring protein content of 6% or better. For pineapples private sellers will only accept fully refrigerated trucks.

As you can imagine 90%+ of Indian farmers have no ability to reach these standards and hence are stuck with using the mandis. Even the lowest of grades will be accepted by someone at the mandi. I have said this before Indian farmers are very hard working and dedicated to their task, but I would not call them as very informed and world class in their efforts. The yield of grain in my area for instance is roughly 1.5 tonnes per hectare. World class production is 12 tonnes+ per hectare and in places like California exceeds 20 tonnes+ per hectare.

In a well run system 80% of our farmers would move on and only 20% of present agriculture land will remain under production. Rest would be released for other uses.

[RamaY]

There was a debate few weeks ago on Indians buying Gold in this dhaga -

In the past few weeks, Euro bank accounts in Cyprus, a supposedly developed economy with >$20,000 per capita income, became near worthless if they are >$130,000.

Of course people will come up with million excuses. Of course Cyprus doesn't have good fundamentals, doesnt have natural resources, have too much real/fake money coming in and so on.

How different is India for the past few years. Major states like AP, which were economic engines for last two decades, don't have electricity to power their industry, farmers committing suicide, no drinking water, no governance, no security, and of course no toilets. The stock markets are going thru an extended recession and the small investors are leaving the capital markets.

What would be a better alternative than Gold for a Cypriot or Indian?

Cypriot lesson: Gold is like a Swiss account for you and me

This is where the future is headed...
Bank of England tells banks to raise £25bn

No new government money will be required. Banks are likely to raise the funds by issuing more bonds or selling shares.

But BBC business editor Robert Peston says in the short term the need to raise cash will be bad news for investors, including taxpayers who still own big stakes in two banks - Royal Bank of Scotland and Lloyds.

Who will want to buy these Bank bonds and stocks given the Cypriot experience? Only Dhimmi-Kalidasas.

Lets come home...
S&P: India Banks May Need $48 Billion More for Basel III

MUMBAI--Ratings company Standard & Poor's said Monday India's banks may need up to 2.6 trillion rupees ($48 billion) of additional capital over the next five years as they implement the Basel-III international banking guidelines.

The Basel-III rules call for banks to increase their capital and holdings of highly liquid assets in order to cushion them from financial shocks.

S&P's estimate is sharply lower than what India's central bank expects the country's banks may need. Reserve Bank of India Governor Duvvuri Subbarao in September said local banks may need an additional 5.0 trillion rupees by March 2018.

What is Rs 5 trillion? It is Rs 5,00,000 Crores! Since 75% of Indian banks are owned by GOI, it has to put aside Rs 3,50,000 crores to meet this capital requirements.

How much budget allocation idiots MMS, Montek and P Chidambaram did for this purpose in 2013 budget?

[vishvak]

The Cyprus episode doesn't solve problems at roots. A small country like Cyprus can not be taken as template to set precedent either.

A small country like Cyprus should not have problem in possessing clean banking industry, nor would it take a lot of time to make one. In fact, looking at size of the country and being first world to boot, it would be most smooth to correct all wrongs. However in the name of black money and Russian Mafia, all drawbacks of banking industry are overlooked - meaning bank raid will not solve problems but there is already talk of Cyprus as template without solving any problems!

India should summarily reject such economic circus models, and no visa should be given to 100k€ bankers for whom any uninsured deposits are fair game by default. Indians deserve better models than to be stuck in 100k€ models and there must be explicit rejection of Cyprus model and such first world practice, as well complete and total blacklisting of 100k€ bankers and banking practices.

[Theo_Fidel]

RamaY,

At the risk of triggering the gold discussion hungama yet again, countries have confiscated gold as well in the past.
Make no mistake if all the Cyprus money was in gold and the system had essentially lost $100 Billion the sovereign will confiscate the gold as well.
Many countries in such circumstances have made the possession of gold illegal. If you can't sell it what use is it to you. gold is only valuable because of the cash economy allows folks to exchange it for cash.

But your point is taken that it would be harder for the govt to rob you. IMHO the negatives out weigh this small gain however.

This is probably OT here...