Indian Economy: News and Discussion (June 8 2008)

[ramana]

sigh. I guess we need to put links for Econ 101.

[Rishirishi]

There is a paradox. Think about this . Since the industrial revolution, productivity overall has grown by leaps and bounds, human population has exploded in size, despite that, over all, a greater proportion are employed, better fed and live longer across the globe and measurably richer than in the pre industrial days!. So if your hypothesis of "productivity is the enemy of jobs" is correct, given the huge productivity gains that have taken place, across most of the "bulk" job sectors like agriculture etc in the preindustrial days., less than 5% of the global population should be employed!

I have repeatedly used the word “selective” in my post which critics have conveniently left out because an all around de-industrialization is easier to bash than selective and self-introspective de-industrialization done by industrialists themselves wherever necessary. With today’s technology and looking at prowess in industrial robotics virtually everything that the labourers do can be automated. So do you mean you will automate everything in the name of efficiency leaving 0 employment for plentiful unskilled labour? There has to be an optimum somewhere in between where the interdependence of men on machines and machines on men (for maintenance/building of machines) creates maximum employment in the society. I have plotted a rough schematic as shown below to summarise the scenario. Leaving to individual discretion of industrialists they need to move from red to green area.



There should be segregation of industry into sectors and labour laws be made flexible or rigid accordingly. FRONTLINE businesses(those that earn money for Indian economy from outside) like IT/Services/other exporters AND key raw materials industry (Steel. Cement etc) AND new tech start-ups should be given more flexibility in labor laws. DEPENDANT businesses(those that thrive on internal economy but don’t bring wealth from outside) retail, cellular services etc should be doing fine with current labour laws. Hide the inefficiencies in dependant businesses and protect them from intl. competition and let others be efficient. Just as Japan protects its Rice industry while being efficient in other manufacturing areas.

If entire India was efficiently employed, do you think there are markets big enough for buying the produce? China has already optimized scale, JIT etc for its manufacturing and has problems supplying to even the world’s No. 1 shopper USA. US has an economy bloated with easy credit and indiscriminately printed paper dollars. Now that the fake economy is punctured and deflates to real size where will the market be for all that massive produce? Where?

There are several industries that work in cyclical business. E.g. toys are a good example, where the holiday season far exceeds the rest of the year. Companies need flexibility to handle this, something the current Indian employment laws do not address. There was an interview with Baba Kalyani of Bharat Forge where he mentioned that the inability to easily hire or retrench workers to support cyclical businesses, and that he chose to invest in greater mechanisation despite the higher initial outlay, to get around the problems with easily obtaining labour that would be both cheap enough and flexible enough.

Seasonal businesses should be allowed to hire seasonal labour as long as employers PREDEFINE and clarify the employment duration and employment hibernation prior to recruitment. Agriculture itself is seasonal in labour demand and rural farm workers don’t have problem because season is predefined and there is no uncertainty passed on to them. Trading in firecrackers during Diwali or Kites during Makar Sankranti are seasonal businesses. Labourers making pyrotechnics/kites already know when they will be employed and when they will be in hibernation. But predefining employment duration for redundant labour in a cyclical semiconductor wafer-fab is difficult.

It is uncertainty that should not be passed on lower rungs because their rewards are small. Since those at the top are rewarded greater compensation it is their job to face greater uncertainty(liability of redundant labour). Top-management will have to accept their failure in future prediction. Exceptions to this can be made during macro-economic emergencies like in west today. And firing individual for non-performance is fine anytime.

Another example is that of the big retail vs mom-pop shop saga. An advanced vertically integrated retail system produces significant services sector employment, but the natural resistance to change almost brought the process to a standstill, and has significantly held it back still.

A lot of case studies based on Wal-mart need to be seen in the light of Indian ground realities. Land in urban areas is expensive in India. The cost benefits achieved from efficient supply-chain can be offset by cost of renting huge retail space in crowded urban areas. You don’t need a big-box outlet. Besides, cost of buying a gallon of milk is NOT what you pay at counter of wal-mart. It is cost at counter + cost of driving car upto & from walmart + Time wasted in check-out queue + cost of refrigeration until consumption. Farther the big box is from home, bigger the petrol bills, the greater the inventory at home and longer the refrigeration storage. Case studies of big-box retail don’t talk about this. Contrast this with neighbourhood mom-n-pop store which is located at walking distance. Being nearby you don’t build up inventory in your fridge but instead PURCHASE JUST-IN-TIME.

Instead of big-box let the outlets be maintained by mom-n-pop stores. But they could have a common feeder supply-chain employing latest Just-in-time inventory management tools and RFID tags. Overseas the 7-11 stores are small too but they provide common provisions in efficient manner and have their own supply-chain and JIT inventory. Let the common supply-chain for Mom-n-Pop stores consisting of computer networks, RFID infra and truck fleets be a private organization or better still be a co-operative formed of mom-n-pop stores. For discussion call it: Mom n Pop Stores’ Co-operative Supply Chain (MPCSC). This will cut out the redundant middlemen from supply-chain but still allow poor to open their stores.

Besides how would wealth trickle-down if nouveau-riche service sector yuppies do not buy from those mom-n-pop stores but instead buy from large corporates’ retail chains. As wealth permeates even the mom-n-pop stores will look chic(all-glass with A/C & spotlights) and have variety to service uber rich in cities. At least wealth will be spread out wider. Why do you need chains? Let’s not Mc Donaldize India. They have obsession with homogeneity to the point of being boring, we don’t.

There are a lot of thoughtful considerations here. It’s not merely resistance to change. Some changes are like upgrading Windows with every version without true cost-benefit analysis.

We need the organized and unorganized in all sectors.

>> Agreed.

the de-mechanised "local sourcing" utopia is a recipe for disaster...it will only
result in us being screwed in every orifice and hung out to dry.

It depends on product we are talking about. A toothpaste can be made with equipment that can fit in a garage. Don’t see a need to make a Colgate outside Mumbai and burn diesel to transport it all the way to Orissa. Every state/district can have its own brand. Same cannot be said of some Pharmaceuticals or Automobiles or cosmetics though.

Scale in itself does not mean efficiency. In fact really big organizations are resistant to change and reform rapidly eroding any momentary size advantages they have. I think this has been dramatically revealed recently.

True. Many large corporations prefer to outsource the job of innovation to much more flexible smaller companies. Intel does a lot of design R&D but for process R&D it does buy solutions readymade from much smaller Applied Materials. If their solutions are cost-effective then Intel applies them on a large scale.

Yet another illustrative example of the phenomena is that of the Dharavi slumdwellers or urban squatters rejecting alternative, better residential options that are provided to them.

Dharavi is industrial-cum-residential slum. It has small workshops for making plastics(buckets, tumblers etc), leather shoes, belts etc. All proposals promise to replace that with purely residential schemes and that’s partly the reason why they are shot down by locals. Let there be small shops sized spaces for their micro-businesses and vocations in the proposal besides residence and all Dharavi dwellers will agree to the proposal.

The bullock cart is good if the garbage collector drives the animals within its limits. Should your garbage collector service 10 more sites at 10 km distance from each other, will the bullock cart suffice?

There will be another garbage collector with another bullock cart for that job. Besides 10 sites 10 kms apart sounds more like US scenario not Indian.

Productivity increases when time saved by individual is re-invested in another productive task. There is no benefit when a housewife saving time with a dishwasher uses the time saved for saas-bahu TV soaps or chatting over phone with another housewife about how she cooked a vegetable. But there is benefit if the housewife uses that time saved to educate her kid or do family accounts.

Just as there is a concept of Time Value of Money(TVM) in finance there should be Monetary value of Time (MVT) of an individual. Not every one’s time is worth the petrol/coal they burn.

Fundamentally, you need to let the market function.

Markets would even decide that UK should not be making or doing anything because they are not cost effective at anything. Look who is in better situation today: Protectionist France and Germany. Which country in its strictest sense allows market to function completely? Not even US, look at Big 3. If not for barriers called FDA clearances, India pharma majors would have swooped their markets not leaving any generics company alive. We have to be selective.

When someone in Parliament posed a question on similar lines as "Why does a country with so many maid servants and dhobis need vacuum cleaners and washing machines" to Narasimha Rao, in the first flush of is liberalization push, his answer was profound, just like that man himself.

"Because you will remain a nation of maid servants and dhobis otherwise"

The Indian population is too big to be entirely occupied by IT-vity jobs of entire world. Someone will have to be a maid servant or a dhobi. Dignity of labour is the way to go instead of looking down on certain vocations.
Parents say to the kids: Padhoge likhoge to banoge Nawab.
But Sab lag Nawab ban gaye to kaam kaun karega??
South Korea was recently shocked when a PhD in Physics applied to city cleaning job. Apologies for not providing link. Look at Canada. It needs more plumbers, technicians etc than PhDs. There is plenty of room at the top but not enough to take everyone. India needs many more and much better equipped ITIs and Polytechnics and as Rishirishi said German model is really worth emulating.

Perhaps the idea of selective demechanization is 100 years too soon. As of today we burn away our coal and Oil as if there is no tomorrow and future generations will somehow fend for themselves entirely with Photovoltaics and N-power

It is impossible to impose regulation on a single part of the economy, without making effects on other parts. The IT industy, is for example dependent on catring companies, private taxi's, builders, telecom providers, schools for kids employees, etc etc etc if thease service providers are overregulated, the IT service provider will be hampred in delivering a good service. If call centre needs to bulild a facility fast, it would not help having a "de mechanised" construcion industry. Or imagine someone wanting to replace the electronic entry systems, with manual labour. The same goes for automobile, textiles, electronics etc etc. Trying to micro manage the economy, leads to inefficiencies, corruption, vested interest, loss of opportunity and slower then potential growth. That is why, time in and time out, the less regulated economies have usually done better, even at the cost of fluctuations in the job market. However some regulation is required to avoid mess like the financial crisis in US. The crux is to make good regulations.
With all the corruption and mismanagement by babus, it is particularly ture for India. India seems to have good macro economic management (regulation of banks, interest rates, money supply etc). The basic problem now is poor management of public funds and micro level governance.

[Arya Sumantra]

A lot has been said about letting markets decide for themselves what survives and what doesn’t.

Markets only care for SHAREholders but a Nation cares for ALL STAKEholders. That’s the difference.IMHO
When you care for only a part of the entire system how can your decisions be necessarily optimum for the whole system?

Markets are geared to raise the gains of investors of a Nation (Investors + Non-investors)
When everything follows as per the market and market grows the investors gain,
1) if investors’ gains trickle down to non-investors – it’s an Inclusive growth (OPTIMUM)
2) if investors’ gains DO NOT trickle down to non-investors – Exclusive growth, rich-poor divide grows (SUB-OPTIMUM despite freely functioning markets)

Carbon credits introduced ecological costs into the calculations made by all in the market in order to save environment. Otherwise left to itself markets had NO incentive to save the environment.

Unless Socio-economic credits factoring cost of creating skilled manpower, re-training of laid-off manpower, layoff compensation etc are created, the freely functioning markets will have no consideration for laid-off manpower. The markets can then factor-in these costs decide survival/efficiency decisions. e.g. if you lay off in droves you bought Socio-economic credits or Labour credits from someone who created extra employment elsewhere.

There are even others factors that are missed out in market based survival/efficiency decisions. Example: Saving the Industries if they are in key Technologies areas, Strategic areas(energy security, food security, military security etc), Heritage etc
Markets thought it was fit to sell Unocal to China, US intervened (energy security)
Markets thought it was fit to sell US ports to Dubai Authority, US intervened (strategic)
Markets thought it was fit to sell Mercedes to Gulf Sheikhs, Germany intervened (Tech & National brand retention)
Markets thought it was OK to allow Lehman to collapse, Experts now call it mistake
Markets thought it was OK to allow affected Banks to fail, US & EU bail them out (investor confidence)
Markets thought it was OK to allow Big 3 to collapse, US revives them. (manufacturing industry retention)
Markets favoured that India export & supply foodgrains during food prices boom, GoI banned export (food security)


Freely functioning markets is a good concept but an INCOMPLETE concept. A lot of important variables need to be quantified and entered in the equations. That’s why time and again there is intervention from govt.

For all their impracticality, the socialist “ding dongs” prevent pure capitalists from going on a rampage in implementing textbook ideas of capitalist free market economy. Helps the nation tread a middle path until a better formulation of free-market model is developed by Economists.

JMT

[Rishirishi]

A lot has been said about letting markets decide for themselves what survives and what doesn’t.

Markets only care for SHAREholders but a Nation cares for ALL STAKEholders. That’s the difference.IMHO
When you care for only a part of the entire system how can your decisions be necessarily optimum for the whole system?

Markets are geared to raise the gains of investors of a Nation (Investors + Non-investors)
When everything follows as per the market and market grows the investors gain,
1) if investors’ gains trickle down to non-investors – it’s an Inclusive growth (OPTIMUM)
2) if investors’ gains DO NOT trickle down to non-investors – Exclusive growth, rich-poor divide grows (SUB-OPTIMUM despite freely functioning markets)

Carbon credits introduced ecological costs into the calculations made by all in the market in order to save environment. Otherwise left to itself markets had NO incentive to save the environment.

Unless Socio-economic credits factoring cost of creating skilled manpower, re-training of laid-off manpower, layoff compensation etc are created, the freely functioning markets will have no consideration for laid-off manpower. The markets can then factor-in these costs decide survival/efficiency decisions. e.g. if you lay off in droves you bought Socio-economic credits or Labour credits from someone who created extra employment elsewhere.

There are even others factors that are missed out in market based survival/efficiency decisions. Example: Saving the Industries if they are in key Technologies areas, Strategic areas(energy security, food security, military security etc), Heritage etc
Markets thought it was fit to sell Unocal to China, US intervened (energy security)
Markets thought it was fit to sell US ports to Dubai Authority, US intervened (strategic)
Markets thought it was fit to sell Mercedes to Gulf Sheikhs, Germany intervened (Tech & National brand retention)
Markets thought it was OK to allow Lehman to collapse, Experts now call it mistake
Markets thought it was OK to allow affected Banks to fail, US & EU bail them out (investor confidence)
Markets thought it was OK to allow Big 3 to collapse, US revives them. (manufacturing industry retention)
Markets favoured that India export & supply foodgrains during food prices boom, GoI banned export (food security)


Freely functioning markets is a good concept but an INCOMPLETE concept. A lot of important variables need to be quantified and entered in the equations. That’s why time and again there is intervention from govt.

For all their impracticality, the socialist “ding dongs” prevent pure capitalists from going on a rampage in implementing textbook ideas of capitalist free market economy. Helps the nation tread a middle path until a better formulation of free-market model is developed by Economists.

JMT

I agree with you, that it is important to regulate indutries that are vital to the nation. Like Banks, oil, infastructure, hospitals, medecines, etc etc. It is also essential to regulate empoyers to that they do take reasonable care of safety etc etc.
Businesses act on their self interest, and the wealth creation to the nation is a by product. No one has yet come up with a model creates more wealth to the nation. That is why, one should be very careful when regulation. During the licence raj, they tried to steer the capital towards infrastructure and heavy industry. They also tried to control the manufacturing volume to avoid over production. In a way it was communism franchised out to business houses. The end product was a misrable growth, increased poverty and uncompetative industries. In the mid 90's I remember reading an article about Suzuki's claim, that it was not possible to make a sofisticated product like grea boxes in India. Now Indian companies are making simulation software for the same processes.

[Harshad]

Markets thought it was fit to sell Unocal to China, US intervened (energy security)
Markets thought it was fit to sell US ports to Dubai Authority, US intervened (strategic)
Markets thought it was fit to sell Mercedes to Gulf Sheikhs, Germany intervened (Tech & National brand retention)

US actions are more out of post 9-11 paranoia and fear mongering.

Markets thought it was OK to allow Lehman to collapse, Experts now call it mistake
Markets thought it was OK to allow affected Banks to fail, US & EU bail them out (investor confidence)
Markets thought it was OK to allow Big 3 to collapse, US revives them. (manufacturing industry retention)

Investor confidence? Tell me whats your confidence in the stocks of bailed out firms? Are you buying any Citi, or AIG stocks? Why not?
GM's problem is lack of sales due to credit freeze. And it applies to all motor car makers in US. Any other industry lwould have adjusted production to meet the lower demand. But GM Ford and Chrysler cant do that because of all the contracts signed with the union. Thus Wagoner et al and the Bhiksham Dehi Operation.
Action on Lehman was the only correct measure taken.

Markets favoured that India export & supply foodgrains during food prices boom, GoI banned export (food security)

A lot of food is sold to 5 star hotels and other chains in INDIA by INDIANS a price higher than what consumers pay. What do you say about that?
Also by implication India should not export clothes because of Indians living in abject poverty should be clothed first.
Further if you dont export, Pakistan will take your spot.
BTW there are a lot of manufacturers in India who dont want to export to the US because they want to cater only to the domestic market or at most Euro Zone.

[Singha]

WSJ.

The Humbling of Mumbai's Bankers

By MANISHA GIROTRA

MUMBAI -- When Einstein was asked in the last years of his life what he had really wanted to become, he said: "I wanted to be a plumber right from my childhood days. And that's really what I should have become given all the misapplications my inventions have been put to."

Today, as an investment banker here, I pretty much feel the same way. It is almost as if everyone from Obama to my 91-year old neighbor, retired from the army, decided to blame the woes of the world on the greed of Wall Street, rogue investment bankers and the stock markets. Given all the negative publicity around my profession and the way my fraternity and its "inventions" are being castigated, maybe I, too, should have followed my heart and become the chef I always wanted to be …

My community is a much-humbled lot. The 20-somethings straight out of business school, who thought that the Sensex's rise would defy gravity, have had a very early lesson that will stand them in good stead through their working lives. In the bubble of last few years, there was a real concern that the young Mumbai workforce would throw caution to the wind and succumb to the temptations of living life "with leverage." The recent slowdown has reset expectations. The mantra of work hard and save for a rainy day is firmly back in place.

“"Given all the negative publicity around my profession … maybe I, too, should have followed my heart and become the chef I always wanted to be."”

It's not just bankers in Mumbai who are feeling the pain. The sentiment across Corporate India is somber, the mood changed from "Lets go out and conquer the world" to "Lets survive this recession sensibly and preserve cash." Everyone is united in the view that the industry has to collectively survive the slowdown and that India Inc. cannot afford another Satyam. "United We Stand" is the new catchphrase of Indian corporate honchos.

I even see it in my personal life. Conversation among the "yummy mummies who lunch" has moved from discussing hot stock market picks to the rising price of bhaji snacks in the market. Not long ago, these lovely ladies had to have "limited edition customized bags." Today, they are furiously lapping up goods at deeply-discounted "terrorist hit" prices at the Gucci and Tod's showrooms in the shopping arcade at the Oberoi hotel (one of those attacked in late November.) Holiday destinations have switched from Mauritius to Alibaug, three hours from Mumbai, as the "children must be grounded and know their country better."

Having said all that, I must note that living in Mumbai also teaches you that, through good times and bad, there truly are two Indias in every city. The slowdown is largely confined to two square kilometers in South Mumbai and affects those whose fortunes are linked to the global economy or the stock markets.

For the average Joe on the street, not much has changed. Life continues to be hard work 24x7. The terrorist attacks of late November were just another attack on Mumbai's soul. The politicians remain as two-faced as ever with little desire to do anything for the country or the poor.

This is the Mumbai where the theory of decoupling holds true and the only reality is making ends meet. For the global few of us, the idea of decoupling has become just another false assumption to pin on Wall Street.

—Manisha Girotra is the chief executive of UBS India.

[Suraj]

CSO has released the advanced estimate for GDP in 2008-09, along with their GDP growth estimate:
official press release
GDP: Rs.54,26,277 crore (~$1.2 trillion at Rs.47/dollar)
Real GDP growth rate: 7.1%
Nominal GDP growth rate: 14.9%

Reports:
BusStd: CSO estimates India FY09 GDP growth at 7.1%

Given the impact of the global financial meltdown, the government today projected Indian economic growth to slow down to 7.1 per cent in the current fiscal against 9 per cent in 2007-08.

While manufacturing, agriculture, power, construction and financial services are likely to pull down growth, services including trade and hotels as well as mining are projected to give a push to the economy.

Agriculture is set to grow by 2.6 per cent in 2008-09 against 4.9 per cent in the previous fiscal, manufacturing is likely to expand by 4.1 per cent against 8.2 per cent, and construction by 6.5 per cent against 10.1 per cent.

Financial, insurance, real estate and business services are set to grow by 8.6 per cent against 11.7 per cent.

On the other hand, the category of trade, hotels, transport and communication is projected to grow by 10.3 per cent against 12.4 per cent and community, social and personal services by 9.3 per cent against 6.8 per cent.

Bloomberg: India’s Economy May Expand at 7.1%, Weakest Pace Since 2003

Asia’s third-largest economy will probably expand 7.1 percent in the year ending March 31, the statistics office said in a statement in New Delhi today. The median forecast of 24 economists in a Bloomberg News survey was for a 6.8 percent gain.

India and China, the world’s fastest-growing major economies since 2004, are succumbing to the worst global financial crisis since the Great Depression, rendering millions of people jobless. While that may create social unrest in China, Singh faces the risk of being voted out in general elections, said Duncan Campbell, director of the International Labor Office’s economic analysis department.

“Around 7 percent growth isn’t good enough for India,” said Geneva-based Campbell. “India needs 10 percent growth each year for a one percent increase in employment.”

That may be a hard task to achieve in the immediate future as foreign investors, stung by the global recession, shy away from emerging markets including India, says Morgan Stanley economist Chetan Ahya.

Ahya said overseas investors were instrumental in the Indian economy’s record 9.3 percent average expansion in the three years to March 2008. Last year they pulled out $13.1 billion from Indian stocks after buying $17.2 billion of equities in 2007.

Forbes: India sees 2008/09 GDP growth at 7.1 pct

KEY POINTS:

- Farm output growth is estimated at 2.6 percent for the full year 2008/09, compared with 4.9 percent in 2007/08.

- Manufacturing growth is estimated at 4.1 percent for the full year versus 8.2 percent in 2007/08.

- Services growth is estimated at 9.6 percent for the year against 10.9 percent in 2007/08.

[Arya Sumantra]

WSJ.

The Humbling of Mumbai's Bankers

By MANISHA GIROTRA

—Manisha Girotra is the chief executive of UBS India.

The title should have been The Humbling of Mumbai's Foreign Bankers. It's palpable because these representatives of phoren companies(Macaulay's Banias) used to carry an air about themselves at the corporate meetings.

[Vipul]

Govt is feverishly printing money: S Gangadharan.

The UPA government has completely messed up its finances. Faced with falling tax revenues and huge expenditure increases in an election year, it is printing currency notes like crazy to make ends meet.
At last count, the government had already "monetised" -- ie printed notes -- worth Rs66,946 crore to bridge the yawning gap between revenue and expenditure. As we near elections, it will print more in the hope that some of it will translate into votes.

Whenever the government wants to borrow more than what people are willing to lend it, it simply passes the hat around to the Reserve Bank. It is technically called borrowing, but in reality it is tantamount to printing money to pay for its expenditure.

With so much "monetised" money sloshing about in the economy, the net result is often higher inflation - after a lag. So, if you are celebrating the dramatic drop in inflation from nearly 13% in August last year to just over 5% now, don't. The inflation dragon has only gone into hibernation. It will return.

The reason why the centre's finances are in a shambles is populism. In last year's budget, the centre announced a Rs60,000 crore farm loan waiver. Then there was the Sixth Pay Commission report, and the huge oil and fertiliser subsidies. The net result: as at the end of December 2008, the centre's fiscal deficit -gap between revenue and expenditure that has to be bridged by borrowings - had already spiralled to Rs2,18,262 crore. And this is merely official deficit. Unofficial deficit - which includes oil and fertiliser subsidies that are not shown in the budget - is much higher at Rs3,04,204 crore. And that's a conservative estimate.

The 2008-09 budget had pencilled in only Rs1,33,287 crore as fiscal deficit. The gap between the real fiscal deficit and the budgetary claim has resulted in huge additional borrowings and a frenetic printing of notes.

Cash balance with RBI falling

The UPA government has "monetised" -- ie printed notes -- worth Rs66,946 crore to bridge the yawning fiscal deficit.

As of January 30, 2009, the monetised deficit of the government stood at Rs 66,946 crore. This recourse to credit from the Reserve Bank suggests that traditional avenues of financing the deficit are not sufficient. Already, more than a quarter of the fiscal deficit as of December 2008, has been met by borrowings from the central bank. Worse still, more of the same may be in the offing as the year draws to a close.

Why? The facts tell their own tale. The economic stimulus package entails huge expenditure. On the other hand, the revenue front is far from rosy. Duty cuts in indirect taxes will render the exchequer poorer by Rs10,000 crore while the slowdown in economy will hit even normal flow of receipts.

Now there's news that, even in regard to direct taxes, the picture is less than sanguine. A Rs100,000 crore revenue shortfall stares us in the face.

The gross borrowing programme of the centre is set to go up to Rs2,52,154 crore from the originally envisaged Rs1,78,575 crore. The Reserve Bank has indicated that more borrowing to the tune of Rs50,000 crore is likely before March 2009.

Thanks to huge spending, the centre's cash balances with the Reserve Bank are falling. Till December 2008, there had been a drawdown to the tune of Rs60,959 crore in cash holdings - the budgeted figure for 2008-09 is only Rs7,224 crore. Besides, the government has availed itself of ways and means advances of Rs11,654 crore. As the exchequer comes under strain, it is a safe bet that the Reserve Bank's credit to the centre, that is "monetised" deficit (defined as Reserve Bank's holdings of treasury bills, and bonds adjusted for the government's cash balances), will also swell.

So, brace for higher inflation later this year or in 2010.

[SwamyG]

Suraj:
The Bloomberg article says:

“Around 7 percent growth isn’t good enough for India,” said Geneva-based Campbell. “India needs 10 percent growth each year for a one percent increase in employment.”

Is 7% really that bad for India? There are countries out there under recession, and pundits opine that +7% growth is not enough. Is there a threshold GDP growth (like the 10% number quoted in the article) that is essentially, or can we cheer that in these troubled times, we are clocking 7%?

I want to be able to cheer, looks like experts say don't.

[vsudhir]

GOI's ill advised mmoney printing spree will cause severe trouble sooner or later.

The FRBM act has all but been sidelined with off balance sheet liabilities balloning (e.g., subsidies from PSU oil firms).

From here, outlook doesn't look good at all. Gets ever harder to reverse these spending binges once they're out of the bottle, as Bibek Debroy notes.

7% growth ain't bad at all, IMHO, in this milieu. What concerns me is that if we are indeed under-reporting inflation, as various analysts have suspected, then obviously real growth will look nice and fat etc. Overprinting rupees is then a surefire way to deep, warm soup onlee.

[Vipul]

Suraj:
The Bloomberg article says:

“Around 7 percent growth isn’t good enough for India,” said Geneva-based Campbell. “India needs 10 percent growth each year for a one percent increase in employment.”

Is 7% really that bad for India? There are countries out there under recession, and pundits opine that +7% growth is not enough. Is there a threshold GDP growth (like the 10% number quoted in the article) that is essentially, or can we cheer that in these troubled times, we are clocking 7%?

I want to be able to cheer, looks like experts say don't.

Dont know about India but China needs a minimum 9% of GDP growth each year just to sustain its present level of employment.

[Suraj]

Is 7% really that bad for India? There are countries out there under recession, and pundits opine that +7% growth is not enough. Is there a threshold GDP growth (like the 10% number quoted in the article) that is essentially, or can we cheer that in these troubled times, we are clocking 7%?

The idea is that a developing nation with a growing labour pool needs fast economic growth to absorb that labour pool. While not exact, they attempt to derive a thumbrule of what constitutes sufficiently fast growth to create the number of jobs to absorb the people entering the workforce each year. In a developed economy, such pressures are fewer, and at near full employment, they can continue to improve per capita income with far lower growth rate than a developing economy where many new people enter the workforce every year.

This is just the other side of the 'Indian demographic dividend' coin - for that to be a dividend we *must* have contiued rapid growth rate. 5% GDP growth rate is essentially recessionary conditions in our context. 7-8% would be some kind of minimum required, and closer to double digits is ideal.

[Nandu]

KPMG global capital flows intention from 2009-2013, survey:

Predicts manufacturing growth in India.

http://www.kpmg.com/Global/PressRoom/Pr ... urvey.aspx

India can expect its share of international corporate investment to rise by 8 percent to 18 percent over the next five years, the largest increase recorded in this survey. It will move from seventh to fourth in the investment league table, overtaking the U.K., Germany and France.

Respondents expect India to do particularly well in industrial products, where it will displace the U.S. to take second place behind China, and in manufacturing, where it is expected to lead the world in terms of investment, with 25 percent of corporates expecting to invest five years from now. By contrast with the other BRIC countries, in the next year 64 percent of the investment into India is expected to come from new entrants to the country.

In terms of influence, India is expected to achieve the remarkable feat of overtaking Japan, France, Russia and Brazil in the ranks of the most influential countries, with a rising influence in all sectors, particularly business and consumer services, IT/telecoms and manufacturing.

Indian business expects the bulk of its investment this year to go to the U.S. (35 percent) with 15 percent expecting to invest in the countries of the Middle East and 10 percent in Singapore and Hong Kong. Looking ahead, the U.S. stays popular with 25 percent, and the Middle East with 15 percent, but countries of the Asia Pacific region can expect an increase in investment, with Singapore, Australia, and Malaysia the choice of 10 percent of respondents, alongside South Africa.

[SwamyG]

Suraj & Vipul: Thanks for the gyaan. Rephrasing so that I understand it: Let us consider then 8% to be the minimum required growth rate to be not recessionary. So, if say USA is growing at 2%; then India has to grow at 10% to be able to maintain a similar growth pattern as that of USA. Am I correct?

[Suraj]

What is "similar growth pattern" ? The nature of the economy and workforces of the two countries are vastly different. I suppose you could oversimplify things that way for terseness, but you can't call it 'correct'.

You should not apply developed world definitions of recession to the Indian context. The link between recession and economic growth differs in developed countries with a stable employment base, and developing countries with a rapidly growing one. The latter needs a minimum level of growth, well in excess of 0%, in order to employ everyone entering the workforce each year.

[SwamyG]

This is what I mean. Say USA is growing at 2%, then should India grow at 10% to be called growing. If it made 8% then it would not be growing right? USA would be creating jobs for its population, but India would not be creating the necessary jobs for its new work force?

[Theo_Fidel]

If I might step in.

The fear is not that the economy will not create the jobs.

One way or the other people in India work to feed their families.

It is that the jobs created will be of the menial type. These jobs are low productive and hence will inevitably mean more poverty and not less.

This is the threat of the demographic dividend, hordes of poorly employed, unhappy people causing even more unrest.

It is definitely wise to think that we are running out of time in terms of harnessing this potential. Unfortunately our Neta's or our people don't understand that we are running out of time.

Because the ultimate fear is that we will grow old before we get rich.

In terms of the US, their prosperity has been built on moderate economic and population growth over very long periods. Their economic growth has rarely exceed 3-4% but their population growth has been slow as well.

Most of the long term projection for India use a 6% growth rate model so even 7% is excellent. The problem comes in appreciably reducing poverty. This only comes when we grow at 8% and over.

[SwamyG]

Theo saar: You are always welcome to step in. All gyaan deeply appreciated.

7% is excellent you say! So I can resume my cheering that I put on hold.

Regarding happiness, every now and then there is an article here or there saying Indians are usually a happy lot. Do we have to run behind GDP all the time? Can't we have some kind of GHP that Bhutan brought forward? Ultimately the happiness quotient will keep the people causing trouble, not just economic prosperity, right? Yes we have to reduce poverty and provide opportunities for Indians to prosper and get out of poverty. No questions about that.

[Suraj]

With regard to the earlier report on gross domestic savings and investment as a percentage of GDP, here is the official CSO report:
Quick Estimates of National Consumption Expenditure, Saving and Capital Formation 2007-08

Note that this is upto fiscal 2007-08, i.e. the fiscal year ended March 2008. The relevant data is in the data according to current prices, listed in page 5: Gross Domestic Savings and Gross Capital Formation as a percentage of GDP, reported as 37.7% and 39.1% respectively .

At the end, there's additional data breaking down GDP from public and private sectors (page 30). It shows the continuous reduction in the contribution of the public sector to GDP, from 25.6% in 1999-00 to 20.5% in 2007-08, which is quite significant in such a short span.

Breakdown of gross capital formation at current prices is listed on page 26. GCF for 2007-08 is Rs.18,45,513 crore, or about $395 billion .
Gross fixed capital formation (GFCF) was Rs.16,05,440 crore, or about $345 billion. The largest contributors were private corporate sector (~$140 billion), machinery and equipment (~$105 billion), and construction (~$95 billion). Interestingly (and probably positively) investment in machinery exceeds construction investment.

[Abhijeet]

I have a question for people in India who have kids of school or college-going age.

What would you say is their general level of economics understanding? For college-age students, are they more likely to agree that increasing efficiency and productivity are good things in general, or are they more likely to believe in theories such as "automation results in job losses", "selective de-industrialization is desirable" etc?

I'm asking because I feel disappointed that periodically someone will come to this forum and cause debate over what seem like very basic economic ideas. I would have thought that most educated people in India would have moved beyond this basic level of understanding almost 20 years after 1991.

Has the post-liberalization generation internalized more free-market ideas, or are they still influenced by "commanding heights of the economy" type theories? Is there an understanding of the fact that the reason we underperformed other countries in the last few decades is very directly related to misguided economic policies?

Of course, I'm making the assumption that young people think about economics at all, which may seem unlikely. But I do believe that teens can have built up a model of the world that will stay with them for some time, and ideas about economics are one of the cornerstones of a person's worldview.

[svinayak]

I will repeat that this sort of myth making revisionism does not change the reality. The levers of innovative thinking do not exist in India yet. As long as they do not, we will have a tough time with prosperity, and gaining on the west.

What is myth making here. We are talking of real history.
Everyone agrees that India has a long way to go. There is no dispute there.

Also, If we had all that knowledge in the past then it is even more shameful that we did nothing with it and rather had to wait for a foreign power to come a show us our own history.

Military and Navy power was the reason for the control of world trade by the western economies in the last 300 years. The small chapter posted there talks about the rise of the west in the last 300 years. Mughal empire was unable to understand the impact of the strong western navy. What is the problem in understanding this. Military power protects the trade.

Prior to the arrival of British irrigation the Indus valley supported less than 10 million people. Mean while, the principles of irrigation including the Grand Anicut had been in function for 2000 years in the South, even further back at the Thamarabarani.

Indian population was mostly supported in the Gangetic valley

THe problem is with the book by Jerad Diamond

[Singha]

kids are 300% into automation and power tools. no commies there except self-suppressing elite femmes who study in parts in DU.

[Suraj]

Govt okays major easing of FDI norms

Retail, telecom, media and a host of sectors in which foreign direct investment (FDI) is restricted stand to gain from changes in FDI policy that the Cabinet Committee on Economic Affairs (CCEA) cleared today linking approvals to the concept of control for the first time.

The new norms were proposed by the Department of Industrial Policy and Promotion (DIPP) and discussed by a Group of Ministers on February 3.

“The objective of these new guidelines is to make FDI norms simple and transparent according to DIPP,” Home Minister P Chidambaram told reporters today when he announced the new measures.

The new measures will be implemented with prospective effect. Government sources said two Press Notes — policy documents governing FDI norms — of the 2009 series will be released in the next 10 days.

Under the new guidelines, downstream investments by an Indian company that has foreign investment but is “owned and controlled” by Indians will not be considered FDI (see graphic).

“Owned” in this context will mean having a more than 50 per cent shareholding and beneficial ownership. "Controlled" means that the owners will have the power to appoint the majority of board directors and legally direct the board’s actions.

“This means there is a huge opportunity for Indian-owned and -controlled companies to bring in FDI and then undertake downstream investments, without bothering about sectoral limits or restrictions,” said a senior government official.

However, if the investing Indian company is foreign-owned and controlled, then its entire downstream investments will be considered indirect FDI.

But there is an exception. If the foreign-owned and controlled Indian company undertakes downstream investments in 100 per cent owned subsidiaries, the amount of indirect FDI will be equal to the percentage of foreign investment in the Indian company.

“Although the proposed policy puts to rest the debate on computing FDI in sectors in which limits apply, it also implicitly allows FDI (without control) in all sectors and industries through downstream route. For instance, FDI is currently prohibited in multi-brand retail, real estate trading, gambling, agriculture etc. If these sectors are not excluded from the proposed policy liberalisation, this is definitely a leap,” said Akash Gupt, executive director, PricewaterhouseCoopers. Some Indian-owned companies in sectors like telecom may get more room to bring in additional investment, said analysts.

But insurance, in which the government is proposing to increase FDI to 49 per cent from 26 per cent, will be kept out as it is governed by an Act of Parliament, the official said.

Retail, in which FDI is only allowed in single-brand and wholesale cash and carry business, is likely to benefit to a great extent because of the new guidelines. Many foreign players currently operate through the franchisees. “If foreign investments can be routed through Indian-owned and -controlled companies, overseas retailers will definitely like to be a part of this,” said a Dehi based analyst.

High base effect likely to pull down December IIP

The Index of Industrial Production (IIP) is likely to dip for the second time this financial year as uptick in certain sectors, as reflected in data for the core sector, will not be able to match the impact of the high “base effect”. IIP data for December will be released on Thursday.

The factory output index has to grow 6.55 per cent on a month-on-month basis for the December IIP numbers to be in the positive territory. It grew by 2.38 per cent in November 2008, after a 0.34 per cent fall in October.

“The index number stood at 284.7 in December 2007. We expect the number to be 271 in December 2008. This means the IIP may dip by 4 per cent,” said Soumendra Dash, chief economist, CARE Ratings.

The IIP had dipped for the first time (by 0.34 per cent) in this financial year in October. This was the time when India started feeling the full brunt of the global economic slowdown.

Saugata Bhattacharya, vice-president, Axis Bank, expects the IIP to dip by 1.7 per cent during the month. “This is an optimistic number. The base effect is too high and growth in production is muted,” he said.

Apart from the high base effect, economists point at two factors that are likely to drag the IIP down — the waning domestic demand for manufactured goods and dipping exports — both of which led to less production by factories. Exports had dipped 1.1 per cent in December 2008.

Preparing for GST

In a properly unified market, taxpayers should have to deal with just one set of tax authorities, and have the same tax structures across the country. A system that gives tax credits will create incentives to pay taxes, and will help to lower costs as tax rates can be cut when the taxable base broadens. According to the former finance secretary, Vijay Kelkar, currently the chairman of the 13th Finance Commission, the introduction of an all-India Goods and Service Tax (GST) in place of the current plethora of central and state-level indirect taxes will result in an efficiency gain of 1.5 per cent of GDP each year, or Rs 75,000 crore. Put a modest discount rate to this and, Dr Kelkar estimates, the net present value of the savings could be as much as half of India’s GDP. In other words, after Manmohan Singh’s initial burst of economic reforms in 1991-93, this is the biggest reform measure that India could witness. Experts will quibble on the value of the savings, on the discount rate, and more, but that would be to miss the point — Dr Kelkar’s numbers are directional, and that is why the GST is being attempted.

Whether the country will be able to switch to a GST by April 1, 2010, as the agreed schedule says, is however a different matter altogether. The fact is that there is a great deal of ground still to cover. For starters, there is no clarity as yet on what the single GST rate should be — the National Institute of Public Finance and Policy had done some initial analysis last year which suggested that 10 per cent (with a 7 per cent non-rebatable excise on items like cars, petroleum products and tobacco) would be a revenue-neutral rate, but major states would need to get separate studies done. The central government too needs to move towards a uniform GST rate; the cenvat rate is largely 10 per cent, but there is a plethora of exemptions, and the service tax rate is different. These need to be rationalised.

At the level of states, as this newspaper reported a few days ago, alcohol is likely to be kept out of GST; petroleum products are already out of it, and it is likely that tobacco will be slipped into the same special category. Keeping such big revenue sources outside the purview of GST will clearly weaken it, so another possibility being discussed is to bring all these products into the GST with moderate tax rates, and leaving a sin-element outside the net. Thus, there could be a low GST on tobacco and a larger non-vattable sin-tax on tobacco. Similarly, the large difference between the VAT rates for raw materials (4 per cent) and final goods (12.5 per cent) has ensured that the state VAT is still not designed to encourage compliance. Nor has there been any meaningful progress in setting up an information system for keeping track of taxes on goods that move across state borders. In short, there are several vital links that are still missing, such as a transition system to the dual-GST on all goods and services.

As should be expected, these were pretty much the same issues that delayed the introduction of a uniform VAT across all states. Given this, it may not be a bad idea to spend some more time to iron out operational problems instead of trying to rush things through because of a deadline. Also, there can be little doubt that the success of VAT had a lot to do with the fact that the economy was on an upswing — so, it was easier to convince states that the buoyancy in revenues which they were witnessing was the result of VAT. Delaying the introduction of the GST till the economy is on a rebound would help its acceptance.

[Raja Bose]

kids are 300% into automation and power tools. no commies there except self-suppressing elite femmes who study in parts in DU.

Dont forget femmes from that cradle of jhollawallahs....JNU

[Singha]

the gangetic and brahmaputra valleys have a dense network of tributary rivers
and are perennial mostly being snowfed and heavy monsoon rains. the soil is very
fertile. I dont think anyone needed to think about irrigation there in the past because one crop (kharif) was enough to keep everyone fed for the populations we had then hundreds of years ago. the water table even today is in each reach in
rural areas.

TN/AP is not so blessed with water, hence no surprise they planned for canals and
tank irrigation long ago. TN has the lowest water table on average in country
today.

much of the indus valley was not settled due to harsh climate , isnt that why
eventually mohenjodaro and others were abandoned? the thar and sindh deserts
took their toll and the river saraswati dried up for example. even today indus
valley look so dry compared to ganga and brahmputra regions. they get much less
monsoon rain.

[Singha]

WSJ

At Tata, Buyer's Remorse

By UDAY KHANDEPARKAR

Tata Group, India's most venerated conglomerate, is facing what could be the trickiest financial challenge of its 140-year history.

Some of the group's flagship companies are strapped for cash, thanks to slumping business and an ill-timed buying spree. The group's parent, Tata Sons, has offered some help -- like spending $475 million to boost its stake in Tata Motors last year. But, as a private company, it is hard to know how much capacity it has to do more.

The value of Tata Sons' holdings in the group's 27 listed companies has halved in less than a year, to under $25 billion. That is a problem, given that one way Tata Sons raises cash is by offering up its equity stakes as collateral. On Monday, Tata Steel, whose shares are down 76% in a year, said Tata Sons has pledged 13.2% of the company as collateral against borrowings.

Tata Group Chairman Ratan Tata at the Society of Indian Automobile Manufacturers conference in New Delhi last year. Some of the group's flagship companies are strapped for cash, thanks to an ill-timed buying spree.

The cash crunch is most acute at Tata Motors, with $2 billion of debt from the acquisition of Jaguar Land Rover due by June, and cash on hand of only about $100 million. The company needs its banks to roll over the loan and has no contingency plan.

Tata Sons could once rely on its privileged standing among investors both within and outside India, but as the crunch deepens, even that stellar reputation is on the line

[wrdos]

CSO has released the advanced estimate for GDP in 2008-09, along with their GDP growth estimate:
official press release
GDP: Rs.54,26,277 crore (~$1.2 trillion at Rs.47/dollar)
Real GDP growth rate: 7.1%
Nominal GDP growth rate: 14.9%

So it means, in USD term, the 2008 Indian GDP was $1.15 trillion?

So far as I know, the 2007 Indian GDP was some thing around $1.1 trillion. Thus it means that Rupee depreciates as much as 14% if compared with the end of 2007?

[Suraj]

The Rupee rose to around Rs.39/dollar around late 2007 - early 2008 due to huge capital inflows - over $30 billion in FDI, around $18 billion in FII, and $27 billion in remittances. It's now around 47-48/$ due to the equity market foreign investors pulling out about $15 billion, though FDI (over $20 billion in April-November) and remittances ($40 billion in 2008) remain strong. It is not possible to easily represent GDP in USD when the exchange rate is so volatile. If one were to use an IMF-like reporting mechanism of a 3-year rolling average exchange rate, the GDP would be about $1.35 trillion for this year.

[nsa_tanay]

I am not sure if its the proper thread to post this message/info. Its circulating as chain email.

please Type this words "Indian Black money in swiss bank" in Google and saw the result. Our Indians' Money -70,00,000 Crores Rupees In Swiss Bank

1) Yes, 70 lakhs crores rupees of India are lying in Switzerland banks. This is the highest amount lying outside any country,from amongst 180 countries of the world, as if India is the champion of Black Money.

2) This money belongs to our country. From these funds we can repay 13 times of our country's foreign debt. The interest alone can take care of the Centre's yearly budget. People need not pay any taxes and we can pay Rs. 1 lakh to each of 45 crore poor families.

3) Let us imagine, if Swiss Bank is holding Rs. 70 lakh crores, then how much money is lying in other 69 Banks? How much they have deprived the Indian people? Just think, if the Account holder dies, the bank becomes the owner of the funds in his account.

4)Indian people have read and have known about these facts. But the helpless people have neither time nor inclination to do anything in the matter. This is like "a new freedom struggle" and we will have to fight this. This money is the result of our sweat and blood. The wealth generated and earned after putting in lots of mental and physical efforts by Indian people must be brought back to our country.

[Raja]

Tata Group could very well be the first major Indian casualty from this crisis. They seem to have made some very poor decisions in the past few years by making heavy bets outside of India. I hope this does not happen.

[Liu]

excuse me ,everyone here!
may I ask question?

which do you think is the biggest barrier to the further development of india's economy ?

1. infrastructure.

2. land distribution system.

3. political system

4.anti-industrialization policy.

[Suraj]

Too simplistic and general a question. Depending on local factors, any one of those (or some other factor) might predominate. India is far too big and diverse for such a simple explanation about what drives it or stands in its way.

[Satya_anveshi]

Tata Group could very well be the first major Indian casualty from this crisis. They seem to have made some very poor decisions in the past few years by making heavy bets outside of India. I hope this does not happen.

UKondom always wants to sell its bloated assets to anyone that wants to buy. TATA in may ways wanted to re-ignite the trend when others saw thru the gameplan. In that way TATA was doing the english bidding and has now burnt his hands.

Poor TATA folks...they work like peasants and save with sweat/blood and now have to feed the $hits in UK who get top salaries, benefits, 4 day workweeks, and top of it are lazy b@stards.

Bad Karma or paying back- who knows?

[Chinmayanand]

The Rupee rose to around Rs.39/dollar around late 2007 - early 2008 due to huge capital inflows - over $30 billion in FDI, around $18 billion in FII, and $27 billion in remittances. It's now around 47-48/$ due to the equity market foreign investors pulling out about $15 billion, though FDI (over $20 billion in April-November) and remittances ($40 billion in 2008) remain strong. It is not possible to easily represent GDP in USD when the exchange rate is so volatile. If one were to use an IMF-like reporting mechanism of a 3-year rolling average exchange rate, the GDP would be about $1.35 trillion for this year.

Rupee may fall to 53-57 against the dollar and after that it will rise back to 39.Its gonna make a multiyear bottom against the dollar pretty soon.RBI had to really put its weight to weaken the rupee.Later on, the financial crisis came to aid RBI .But pretty soon, maybe by mid 2010 , rupee will bottom out and it will be time to move our savings from dollar to rupees.
If gold is the real currency, India is the wealthiest nation in the world.
The golden bird !!!

[Suraj]

India’s Inflation Slows to 1-Year Low OF 4.39% After Fuel Prices Reduced

India’s inflation slowed to a one- year low after the government cut fuel prices, giving the central bank room to reduce interest rates to revive a weakening economy.

Wholesale prices climbed 4.39 percent in the last week of January from a year earlier after gaining 5.07 percent the previous week, the commerce ministry said in New Delhi today. Economists expected an increase of 4.41 percent.

The Reserve Bank of India has slashed interest rates to a record low as the worst global financial crisis since World War II threatens to engulf Asia’s third-largest economy. The central bank has room to adjust rates further and will take any action “deemed appropriate,” Governor Duvvuri Subbarao said Feb. 8.

“Given the slowdown in India’s growth momentum and declining inflation, there is both room and a need for more policy easing,” said Sonal Varma, an economist at Nomura International Plc in Mumbai. “We expect the Reserve Bank of India to cut its repurchase and reverse repurchase rates by 50 basis points before March.”

Overall grain output shows slight reduction due to monsoons

The country’s grain output in 2008-09 is estimated at 227.88 million tonnes, according to the second advance estimate released today, down 1.26 per cent from the previous year’s final estimate of 230.78 million tonnes. The dip can be attributed to poor kharif output as the monsoon was delayed in a number of states.

The kharif grain output is estimated to have declined 2.48 per cent to 117.96 million tonnes while the rabi grain output has remained flat at 109.92 million tonnes, according to a government release.

Output has declined mainly in kharif pulses and coarse cereals while a marginal dip has been projected in the rabi wheat output.

However, rice production is estimated at an all-time high of 98.89 million tonnes. The wheat output of 77.78 million tonnes is also the second best.

The Food Corporation of India has procured 21.64 million tonnes of rice in the ongoing kharif marketing season (October-September). This is an increase of over 17 per cent from the corresponding period last year.

Wheat harvesting is scheduled to begin from April and the FCI is expected to procure not less than 20 million tonnes. This is certainly good news for the government, which, in election mode, is keen to keep food prices stable.

[wig]

hi liu,
methinks the greatest barrier to development is a lack of education.
skill sets that can fetch employment are lacking . learning on the job results in lower remuneration.
then the system somehow i cannot exactly say why does not encourage innovation.
and setting up anything productive especially manufacturing is too time and energy consuming not to mention that one end's up running between various departments.
things are smoothed up somewhat by bribes and the laws are designed more as a hindrance!
but then the issue is too complex. unbridled development for india with very few open spaces and tremendous population pressures is not always desireable.
having said that this is not to imply that large swathes of the nation should be berefit of basic necessities.

[Singha]

I was in a interior village around 30km away from blr today. its easy to see the wealth and productivity tailing off further one gets from the highway. shops become smaller and less, bikes get replaced by cycles and walking, tractors by bulls, even health seems to improve in the more well connected villages. people were unformly decent though.

a study found per capita income in well connected villages lot more than interior ones.

I hope the yahoos in charge are continuing to pour money in more and better rural roads. has a massive downstream effect on all aspects of life.

it was pleasant to see no kids loitering around in villages, all were in schools we passed or walking back after school, neatly dressed in uniforms and some even had ties. this was in sarjapura region.

[AnimeshP]

Hey guys ... what do you think will be the overall economic impact of the general election in 2009
Will it act as a minor stimulus now that a lot of money (both black and white) will make its way to the general public as political parties pump up the campaign expenses and the govt ramps up the expenditure for the purpose of conducting the elections ... (in 2004 the Govt of India spent around Rs.1000 crore comp to conduct the election)

your thoughts ...

[Raghav K]

hi liu,
methinks the greatest barrier to development is a lack of education.
skill sets that can fetch employment are lacking . learning on the job results in lower remuneration.

Mr/Ms "Wig" You need to change your name. If you are chinese again, please use your last or first name.