Indian Economy: News and Discussion (Apr 1 2011)

RamaY · Post by **RamaY** » 14 Apr 2011 19:16

Suraj,

My final post on this topic for this round

Based on Somnath, your, and Theo's posts we can safely conclude that -

(1) British rule did not contribute much to the upliftment of Bharatiya masses. In spite of the much published "whiteman's burden" Bharatiya society got a very bad deal during their 200 years (this is very important as no die-nasty ruled modern India = India that is conquered that long) rule.

(2) The same can be applied to the continual Islamic rule; in spite of the well-debated one god, one system and one rule logic.

***

Coming to the share of Defense Vs Education and Health; let me give you an analogy -

Consider two families of same size and characteristics. Assume that family1 has a monthly income of Rs10,000 where as family2 Rs20,000. Given the assumption that both families have same characteristics; that is their Safety needs (rental house in safe community etc), Education (for their 2 children), health (basic health insurance), food security (same amount of groceries), and discretionary expenditure (whatever is left).

Let us assume to achieve a reasonable HDI a family needs Rs 4500 for rent, 2500 for education, 2000 for health insurance, and 4000 for food. Now let us see how our families allocate their budget

Item ----------- Family 1 ----- Family 2
Security ====== 3500 --------- 4500
Food ======== 3000 --------- 4000
Health ======= 1500 --------- 2000
Education ==== 2000 --------- 2500
Balance ====== 0000 --------- 7000

I hope you get the point. Most of our parents and even we make these compromises. Often times we compromise on other key (equally essential aspects) in order to live in a safe community. That is basic human need (personal security > food security > Health > education). The same is happening with India. By jumping around the numbers (without using the same base) and giving birds-view e-con-miopic concepts we can easily confuse ourselves and others.

Assuming Indian tax revenues to be 12% of GDP and a 2.5% of GDP allocation on defense means it is 20% of budget where as allocation to education and health care is in the range of 25% and 15-20% respectively. For a budget of India's size this doesn't meet neither its defense needs nor its development needs. It is not one Vs the other.

One FACT somnath doesn't bring to the table is that in India, public can get private education and health care; but not private military (of course to fight external security threats). No body is including the private spending on health and education in the overall calculation. This is the nonsense that gets our undies twisted when we extrapolate these "selective" data into policy.

***

Somnath, of all the people you should know HDI is just an index/score. It is calculated based on many parameters (IIRC > 40 parameters in HDI calculation). That is the reason why I posted that India's power index (where India rated 5th). Just by manipulating one of the 5 parameters or by altering their weightages one can make India either a top Ranker or no-player.

For example my credit score says 580 (based on some parameters); which influences a bank's decision to offer a maximum credit limit of $600 on my credit card. That doesn't reflect my true financial ability to handle higher/lower debts. Too much trust and dependence on these score is one of the key contributors to the housing bubble of 2008.

***

Theo,

What is education? What "KNOWLEDGE" that certain sections held from the overall public? What are the employment opportunities of knowing Vedas and related training; now or before? Who and how many people are after these courses in this modern age and why/why not?

What is vocational education? Is it education in your opinion? Who got this education starting ancient times? Who holds these positions now? How many brahmins do you see in these areas even today?

How come knowledge is limited to only Brahmin studies (Vedas, grammer, Tarka, Meemansa, Vaishesina, and so on); but not the other fields like architecture (masonry), engineering (all kinds of smiths), health care (Ayurveda and associated fields), and Agriculture and Bio-tech (Farming and animal husbandry)? What are the areas that offered mass employment and which castes were allowed to perform them?

Do you know that in old days most of non-brahmins knew read/write? What else is modern "universal education system" is promissing to offer beyond read, write and some vocational education for majority of the masses? how is it different from old times?

***

JMHT

Suraj · Post by **Suraj** » 14 Apr 2011 20:50

RamaY: the fact that HDI is an index does not obviate the fact that we have very real failings in some key socio-economic statistics, from literacy rate, infant mortality, child/maternal health levels and life expectancy. The emphasis on the HDI figure is a proxy for the concern for these factors; they are a key component of what makes our demographic dividend a dividend, rather than a liability.

somnath · Post by **somnath** » 14 Apr 2011 21:02

RamaY wrote:(1) British rule did not contribute much to the upliftment of Bharatiya masses. In spite of the much published "whiteman's burden" Bharatiya society got a very bad deal during their 200 years (this is very important as no die-nasty ruled modern India = India that is conquered that long) rule.

Dadabhai Naoroji - "History of unBritish rule of India"..

RamaY wrote:(2) The same can be applied to the continual Islamic rule; in spite of the well-debated one god, one system and one rule logic

Well not sure about that....Its a varied and complicated history - no blanket answers possible - for large periods of Mughal rule, India was incredibly prosperous...

RamaY wrote:Assuming Indian tax revenues to be 12% of GDP and a 2.5% of GDP allocation on defense means it is 20% of budget where as allocation to education and health care is in the range of 25% and 15-20% respectively. For a budget of India's size this doesn't meet neither its defense needs nor its development needs. It is not one Vs the other

Not sure where you got the idea of "one or the other"...I was only pointing out that the capacity for further enhancement in the share of defence is limited..BTW, the nos are like this - defence: ~2.8% of GDP, Health: ~1.2%, Education: ~2.8% - if you take only central allocations, the numbers are much lower...

RamaY wrote:One FACT somnath doesn't bring to the table is that in India, public can get private education and health care; but not private military (of course to fight external security threats). No body is including the private spending on health and education in the overall calculation. This is the nonsense that gets our undies twisted when we extrapolate these "selective" data into policy

the real "nonsense" is how much of the total healthcare cost of India is "out of pocket", or borne by private individuals...Its the HIGHEST % in the world, and is a scandal....No civilised country forces down this proportion of its healthcare burden on its citizenry, more so for a poor country like India...

RamaY wrote:Somnath, of all the people you should know HDI is just an index/score. It is calculated based on many parameters (IIRC > 40 parameters in HDI calculation). That is the reason why I posted that India's power index (where India rated 5th).

???HDI measures individual parameters - and we are uniformly shoddy in many...As for these power indices, thanks to our sheer weight of numbers, we always come out looking good..For example, we would have 300 million illiterate (highest by far), but also have 2 million engineers graduating every year (one of the highest) - these power indices take the latter, hence we tend to look good...HDI looks at the former...

Theo_Fidel · Post by **Theo_Fidel** » 15 Apr 2011 00:38

RamaY,

It was never just a Brahmin thing. All the privileged classes colluded, the Brahmins were the most visible aspect of it.

But you are right that there was a tendency to hoard 'knowledge' rather than 'understanding'. Even back then the reformers despaired that there was a tendency towards rote learning and degree acquiring rather than actual discipline and accomplishment.

Another data point.

1877 - Total education expenditure 1.6 Million pounds. 400,000 pounds for elementary education.
1909 - Total GOI revenue ~ 60 Million pounds. Education budget 4.5 Million Pounds. 1.1 Million for Elementary.

Looks like we were a really poor country.

RamaY · Post by **RamaY** » 15 Apr 2011 00:48

Theo garu

http://www.ukpublicspending.co.uk/uk_ye ... #ukgs302E0

In 1909 British GDP was 2B pounds and national budget is around 130 millions. I do not know how much contribution Indian province made to that budget.

Just wanted to put things in perspective - in1909 Britain ruled many colonies including British India (Includes todays Pakistan, BD, India, and Burma).

somnath · Post by **somnath** » 15 Apr 2011 07:13

RamaY wrote:Theo garu

http://www.ukpublicspending.co.uk/uk_ye ... #ukgs302E0

In 1909 British GDP was 2B pounds and national budget is around 130 millions. I do not know how much contribution Indian province made to that budget.

Just wanted to put things in perspective - in1909 Britain ruled many colonies including British India (Includes todays Pakistan, BD, India, and Burma).

These are just numbers for UK..The colonies were not "part" of UK, they were distinct political and economic entities...As to the UK budget, a small amount would have come from India (as contribution to British military efforts) in 1909...Most of the "expropriation" happened via trade - Dadabhai Naoroji is the best source for details...

Theo_Fidel · Post by **Theo_Fidel** » 15 Apr 2011 08:03

Meanwhile time to check in on that fickle creature..

http://www.business-standard.com/india/ ... on/432049/

La Nina may ensure near-normal monsoon

La Niña, a weather pattern arising in the Pacific Ocean that causes heavy rain in South Asia, is assuming a neutral condition, senior India Meteorological Department (IMD) officials have said. This suggests the country will have a near-normal Southwest monsoon.

The officials, however, refused to comment on the monsoon forecast for the year, which the department is expected to announce on

April 20. A near-normal monsoon is defined as 98-102 per cent of the long-period average. Agriculture accounts for 14 per cent of India’s gross domestic product.

Still staggers me that Agriculture has fallen to 14%. And is heading for sub 10% level soon.

somnath · Post by **somnath** » 15 Apr 2011 08:54

Theo_Fidel wrote:Still staggers me that Agriculture has fallen to 14%. And is heading for sub 10% level soon

That is the basic maths of India's poverty...14% of GDP, or ~ 245 billion dollars...Approx 60% rural population, or 700 million..Translates to 350 dollars per capita..So even the average is half the 2 dollars/day poverty mark...The numbers of poor therefore is bound to be high...

shyam · Post by **shyam** » 15 Apr 2011 10:08

Goldman Sachs Advancing in India Means Turning Half-Cent Fees Into Profit

Interesting tidbits:

For Goldman Sachs Group Inc. (GS), which is ramping up efforts to arrange takeovers and stock sales in India, progress can be slow and profit from deals elusive.

The New York-based company that dominated global merger advisers for most of the past decade spent three years working on the transaction that vaulted it to second from ninth place in India. Its first share sale in India this year may be a $1.3 billion offer from state-owned Power Finance Corp., for which it will split a fee of 1 rupee (2 cents) with three other banks.
...
To boost business, Goldman Sachs appointed Sonjoy Chatterjee, 42, as chairman of India operations in March. Having joined last June from ICICI Bank Ltd. (ICICIBC), the nation’s second- largest lender, Chatterjee is the first Indian-born banker to lead the firm in the country since it ended a venture with Kotak Mahindra Bank Ltd. (KMB) in 2006. Vijay Karnani, a 13-year Goldman Sachs veteran, was promoted to co-CEO along with Chatterjee.
...
Goldman Sachs units have invested about $2 billion in India, most of it since 2005, buying stakes in companies including Mahindra & Mahindra Ltd. (MM), Max India Ltd. and TVS Logistics Services Ltd.
...
Mumbai-based HDFC Bank Ltd. (HDFCB), India’s second-largest privately owned lender, hired Rakesh Singh from N M Rothschild & Sons (India) Pvt. to head investment banking in India, two people with knowledge of the matter said. Singh will join HDFC Bank this month, they said.

somnath · Post by **somnath** » 15 Apr 2011 10:29

shyam wrote:Its first share sale in India this year may be a $1.3 billion offer from state-owned Power Finance Corp., for which it will split a fee of 1 rupee (2 cents) with three other banks.

Shyam-ji, not as ridiculous as it seems...In India, because of high NIMs on demand deposits these mandates are hugely profitable..

BAsically, for this deal, assuming its oversubscribed by (say) 3 times - GS (and the other 2 co-lead banks + all collecting banks) will get to enjoy "float" on application monies of ~ 3 billion dollars, for an approx 7-14 days (date of application to date of allotment)..Say 7 days, given MIBOR is ~7-7.25% for that tenor, GS (+2 co leads + collecting banks) will earn a cool 4 million dollars...As lead manager, GS will typically strike a deal with all the collecting banks to split this 50:50, or net a cool 2 million dollars (of which the co-leads will probably split get a million, or less)..Not bad at all...

Hari Seldon · Post by **Hari Seldon** » 15 Apr 2011 11:07

Well, seems Shri Jairam Ramesh is determined to put a spanner in the works of the proposed Rs 54 kilo cr Posco project in Orissa due to Forest Rights act dispute by 2 villages. In the meantime, our Iron Ore is being sent to PRC to become steel. Why not have a Posco do the same insie our country and also contribute taxes to GoI kitty, jobs for our people, basic infra in a backward area and all those nice things, I wonder?

putnanja · Post by **putnanja** » 15 Apr 2011 11:23

Hari Seldon wrote:Well, seems Shri Jairam Ramesh is determined to put a spanner in the works of the proposed Rs 54 kilo cr Posco project in Orissa due to Forest Rights act dispute by 2 villages. In the meantime, our Iron Ore is being sent to PRC to become steel. Why not have a Posco do the same insie our country and also contribute taxes to GoI kitty, jobs for our people, basic infra in a backward area and all those nice things, I wonder?

I have my doubts about Jairam Ramesh. He also made some stupid comment about India's china policy being alarmist when in China, regarding India's policies about chinese companies like Huawei etc. He was openly lobbying for Chinese companies. Some do call him a very intelligent minister though, and that may be true. Except he may be using his intelligence to serve a different country

vina · Post by **vina** » 15 Apr 2011 11:24

somnath wrote:Say 7 days, given MIBOR is ~7-7.25% for that tenor, GS (+2 co leads + collecting banks) will earn a cool 4 million dollars...As lead manager, GS will typically strike a deal with all the collecting banks to split this 50:50, or net a cool 2 million dollars (of which the co-leads will probably split get a million, or less)..Not bad at all...

Come on. An I-Bank earing what $4m from a $1.3B IPO/FPO ? You will be laughed out of the room in NY if someone did that kind of deal.

Even something like 1% (which itself is deeply deeply discounted from the 5% to 6% card rate) is going to net $13M in the worst case and in anyways, even if you take out the $4m you project out , you are still giving up $9m in fees alone! The more realistic figure is around 2.5% to 3% or so . Yeah, Goldman is giving it for free to do the deal, which they would have missed otherwise.

In anycase, India as a country is "overbanked" by a huge magnitude and it is going to be difficult to be profitable in such an environment , esp in Yumm and Aye. They are better off at trying their hand in asset mgmt (and the recent Benchmark buy was a decent start) for long term profits .

somnath · Post by **somnath** » 15 Apr 2011 11:35

vina wrote:Even something like 1% (which itself is deeply deeply discounted from the 5% to 6% card rate) is going to net $13M in the worst case and in anyways, even if you take out the $4m you project out , you are still giving up $9m in fees alone! The more realistic figure is around 2.5% to 3% or so .

No one in Asia pays 5-6% fees for equity raisings...Not even relatively "unknown" companies trying 400-500 million dollar IPOs..

On the numbers though, the point was that it isnt as bum a deal as the "1 rupee" figure quoted shows..There is money to be made, besides the ego of the league tables..

vina wrote:They are better off at trying their hand in asset mgmt (and the recent Benchmark buy was a decent start) for long term profits

Asset management is very difficult to make money in...In India, very few AMCs make money, and the number of them making material amounts of money can be counted on the fingertips of one hand..What asset management is good for is high ROE and ROCE...Once the company recovers its fixed costs, contributions drop straight to bottomline..And capital doesnt need to expand with business..

vina · Post by **vina** » 15 Apr 2011 11:58

somnath wrote:No one in Asia pays 5-6% fees for equity raisings...Not even relatively "unknown" companies trying 400-500 million dollar IPOs..

On the numbers though, the point was that it isnt as bum a deal as the "1 rupee" figure quoted shows..There is money to be made, besides the ego of the league tables..

True, but something like 1.5% to 2% would have been par for the course! But with others willing to do it for free, you don't have a choice. Either you do it too or you walk!

What asset management is good for is high ROE and ROCE...Once the company recovers its fixed costs, contributions drop straight to bottomline..And capital doesnt need to expand with business..

Yes. The variable costs are rather low in an AMC and all the unit contributions largely go straight to the bottom-line (I believe it is called "Padtha" in India.. didn't know that Marwari term until I R2Ied. My YumbeeYea Giri was in Vidhesh onree) and can have pretty low break even points.

All in all, India is a pretty tough Eye Pank market. The sweet spot could be large inbound/outbound cross border Yumm & Ayes where the global biggies have a natural advantage (better coverage, client list , balance sheet, execution ability etc) and their full service offerings (including advisory etc) starts becoming a significant difference. If they are planning to survive on purely domestic stuff, I think they aren't going to amount to much.

After all, the Muck&Sees and others in the "con-sultan" business too haven't really seen their revenues go on fire, with most of them barely profitable and doing GUBO and hence coming down from their chee- Operational work, that is so de-classe.. Chee-Chee. We do "Karporate Stratejee" onree into jumping into operational work. Now of course they will do ANY kind of work, including doing the office Xerox work if you wanted them to!

And of course, the "Bharosit" banias scrw*ed them on fees by doing buck passing between each other saying "uss se lo", "nahin, ussi se le lo" recenlty and that ended in the courts where it will lie for 400 years I suppose!

Singha · Post by **Singha** » 15 Apr 2011 14:13

how much does a guy with 15 yrs exp in a typical mutual fund in india make?
how much does such a person in a pvt/MNC bank based out of india make?
finally how much in a consulting job like mckonsey or deloiter in india?

any ballpark figures boys?

Sri · Post by **Sri** » 15 Apr 2011 15:24

Singha wrote:how much does a guy with 15 yrs exp in a typical mutual fund in india make?
how much does such a person in a pvt/MNC bank based out of india make?
finally how much in a consulting job like mckonsey or deloiter in india?

any ballpark figures boys?

15 years being the bench mark:

Mutual fund (Fund manager): Fixed component = INR 18,00,000/- to INR 25,00,000/-
Variable = Between 5 to 8 % of achievement over and above the Index - servicing cost

MNC Bank (Considering having a MBA or CA) Take home could be easily : INR 18,00,000/- to 35,00,000/- (Citi is crazy spoils th market)

Consultant (Mckinsey no Idea, but people like KPMG / PWC / E&Y) : INR 35,00,000/- easy....

biswas · Post by **biswas** » 15 Apr 2011 22:46

^ is that per month or annually :/

amdavadi · Post by **amdavadi** » 15 Apr 2011 23:40

It has to be yearly....

vera_k · Post by **vera_k** » 16 Apr 2011 00:03

Salaries are lower than in IT, which is why the IT MNCs are able to attact a lot of lateral hires from the mutual fund industry. But there are better perks as it is a sales and marketing driven industry. Has always puzzled me as to the cause for the lower salaries, since funds in India charge more fees than those outside the country.

Ambar · Post by **Ambar** » 16 Apr 2011 05:16

Sri wrote:
Singha wrote:how much does a guy with 15 yrs exp in a typical mutual fund in india make?
how much does such a person in a pvt/MNC bank based out of india make?
finally how much in a consulting job like mckonsey or deloiter in india?

any ballpark figures boys?

15 years being the bench mark:

Mutual fund (Fund manager): Fixed component = INR 18,00,000/- to INR 25,00,000/-
Variable = Between 5 to 8 % of achievement over and above the Index - servicing cost

MNC Bank (Considering having a MBA or CA) Take home could be easily : INR 18,00,000/- to 35,00,000/- (Citi is crazy spoils th market)

Consultant (Mckinsey no Idea, but people like KPMG / PWC / E&Y) : INR 35,00,000/- easy....

I cannot comment about a mutual fund manager or a Mckinsey consultant, but if we are talking about a branch manager for a MNC bank with MBA, then 18 lacks-35 lacks is way out of whack! Cousin works as a branch mgr in HSBC with MBA and 12 yrs of exp, and makes less than half the figure quoted above. If it is for some other role, then probably those figures are right. But there's no way a regular manager makes 18 - 35 lacs !

manish · Post by **manish** » 16 Apr 2011 08:59

vera_k wrote:Salaries are lower than in IT, which is why the IT MNCs are able to attact a lot of lateral hires from the mutual fund industry. But there are better perks as it is a sales and marketing driven industry. Has always puzzled me as to the cause for the lower salaries, since funds in India charge more fees than those outside the country.

Salaries in almost every industry are lower than in IT, barring a few exceptions.

Even for the top 10/15 b-school grads (the IIMs and the almost there types) too, IT continues to be a pretty attractive option for the same reason - 9-15L starting salaries+chance to go 'onsite'(+lots of pyts+ and the seemingly yuppie work env) makes people queue up to join them. In almost all these colleges, a good 20-30% seems to opt for IT year after year, while the rest opt for a variety of other roles which may be far more meaningful and interesting otherwise but lack the pay, perks and the spit and polish of the IT sector (before someone jumps on me, I am excluding the top 5-10% that goes into bideshi I-banks, consulting and such from IIM-A/B/C).

How they fare later on is a different matter altogether however IMHO.

Arjun · Post by **Arjun** » 16 Apr 2011 10:05

Sri wrote: 15 years being the bench mark:

Mutual fund (Fund manager): Fixed component = INR 18,00,000/- to INR 25,00,000/-
Variable = Between 5 to 8 % of achievement over and above the Index - servicing cost

MNC Bank (Considering having a MBA or CA) Take home could be easily : INR 18,00,000/- to 35,00,000/- (Citi is crazy spoils th market)

Consultant (Mckinsey no Idea, but people like KPMG / PWC / E&Y) : INR 35,00,000/- easy....

I-bank and PE compensation in India would be way higher than these figures

somnath · Post by **somnath** » 16 Apr 2011 11:01

Sometime back we had a spirited conversation about crony capitalism in India (evidenced in parts by the grossly disproportionate #s of billionaires in our midst, for a country of a PCI of 1400 dollars)....

Some suggestions around the same theme...Kingfisher Airlines, hugely indebted, some part of bank loans were converted to equity recently, at an exercise price 60% above the market price of the share..
http://www.business-standard.com/india/ ... ng/432380/

Critically,

It has already been reported that this conversion of loans into shares was done at a share price that was about 60 per cent higher than the prevailing market price. The justification has been that loans from group companies have been converted at the same price — but if news reports are anything to go by, the group loans were unsecured while the banks had secured company assets

Most curiously,

the banks have settled for a little over 23 per cent of the company stock. Converting a slightly larger chunk of loans would have got the banks 26 per cent of the equity — and the right to block special resolutions. Converting a still bigger chunk (for about 30 per cent of the equity) would have reduced the Mallya group holding to less than majority, and thereby transferred some clout from the promoter group to the board of directors. And with 30 per cent of the stock, the banks could have asked for not one but three board seats, out of nine

This is a corporate governance issue, both for the banks as well as for Kingfisher....RBI and SEBI should get into it pronto...Unless of course, the strings have already been pulled by the king of good times

Singha · Post by **Singha** » 16 Apr 2011 12:43

thanks for the figures gents. I was totally in the dark about these fields and thought they must all be earning far higher - something like 50L + 30-40% bonus p.a. had heard of $150k starting sals and 200% bonuses in wall street and assumed the same.

sounds like except 5% of people who find a place in MNC consultancies and PE/ibanks (who typically have quite small staff numbers), ITvity is the sector providing the fattest cuts of steak on a large scale basis.

there are LOTS of useless people manager types (1st level, 2nd level, director) in IT with 10-20yr exp band who are earning 25-50L + 10-30% bonus risk free every year...I see a lot of them every day

they let the sher khan unit drive the technical issues and customer engagements while dutifully seeking out people intensive low end work from parent co and showing their loyalty by being 'online' in internal chat tools way more than they need to. if talking the talk is all it takes to be a product powerhouse, India sure is a uberpower.

there are even lots of techincal types (ie who still design/code) in itvity MNCs who earn in 25-40 bracket...a respectable figure looking at the picture painted.

Vikas · Post by **Vikas** » 16 Apr 2011 20:11

Wrong thread..Moving to Nukkad

joshvajohn · Post by **joshvajohn** » 17 Apr 2011 12:01

Deleted

Prem · Post by **Prem** » 18 Apr 2011 09:00

http://www.ft.com/cms/s/0/04a15fe0-693d ... ab49a.html
Tata stands by $26bn India investment

The

Tata group, India’s powerful salt-to-steel conglomerate, has reiterated plans to invest $26bn in the country over the next five years, in a bid to dispel a belief that it is turning away from its home market.Kishor Chaukar, managing director of the group’s strategic arm Tata Industries, said the Tata group intended to invest heavily in India’s power, steel and automotive sectors, as it seeks to double group revenues to about $150bn in the next five years.The planned $26bn investments are predominantly for projects that have been previously announced and are already in the pipeline. They include a $3.7bn, 4,000-megawatt power plant under way in the western state of Gujarat, and a $4.4bn integrated steel plant that has been bogged down by difficulties in acquiring land in the state of Chhattisgarh, a hotbed of Maoist insurgency.However, Mr Chaukar’s emphasis of Tata’s commitment to the domestic market came just a week after he told the Financial Times that the company was responding to an “alarming” deterioration in India’s business climate by encouraging group firms to look for investment options overseas to reduce “one-country” risk.In a Sunday interview with the semi-official Press Trust of India, in which he outlined Tata’s ambitious plans for the country, Mr Chaukar downplayed the Tata group’s appetite for additional overseas acquisitions.

Theo_Fidel · Post by **Theo_Fidel** » 18 Apr 2011 18:30

http://www.economist.com/blogs/freeexch ... aces_china

India outpaces China
Winning the growth World Cup

China grew by 10.3% last year, a punishing pace to beat. India, according to the advance estimate by its Central Statistics Office (CSO), grew by 8.6%. Fast, but not fast enough. But today a colleague pointed me to the IMF's latest World Economic Outlook (Table 1.1), released earlier this week. It says that India grew by 10.4% in 2010. How can that be?

India has two idiosyncrasies in the way it reports its GDP figures. First, it reports growth for the fiscal year, not the calendar year. So the 8.6% estimate refers to the 12 months ending on March 31. That in itself makes little difference. But the second idiosyncrasy is more important. India typically reports its GDP "at factor cost". That means it adds up all the income earned in the course of producing the country's goods and services. Other countries, including China, typically report their GDP "by expenditure", adding up all the spending on domestically produced goodies. Since every purchase is a sale, expenditure should equate to income: every rupee spent by one person is a rupee earned by someone else. But a couple of things get in the way: taxes and subsidies.

A sales tax adds to the amount you have to spend on a good. This boosts measures of GDP by expenditure, relative to income-based measures. A subsidy has the opposite effect.*

If these taxes and subsidies remained steady as a percentage of output, they would not affect the growth rate of GDP, even if they do affect its level. But in India net indirect taxes rose from 7.5% of output in 2009 to 9.2% in 2010, boosting the growth rate of GDP by expenditure for that year.** That was enough to lift India's growth by this measure to 10.36% in 2010. That's fully 0.06 percentage points faster than China. Jai Hind!

* A numerical example might help to illustrate the difference. In the first three months of 2010, India's GDP at factor cost amounted to 12,051 billion rupees. But the buyers of that output paid an additional 1,888 biilion in indirect taxes, adding to the expenditure measure of GDP. They also benefited from 544 billion in subsidies, subtracting from the expenditure measure. The net result was that India's GDP by expenditure in January-March 2010 was 13,395 billion (=12,051+1,888-544).

Does this difference mean that China's GDP is permanently 10% inflated over India ?

somnath · Post by **somnath** » 18 Apr 2011 20:07

^^Complete voodooo analysis...Whether its measured at the "income" level or "expenditure" it doesnt matter...All the taxes levied by the govt (and subsidies offered netted off) also go back as income (or expdt) of the govt..So in the C+I+G frameowrk, the numbers remain exactly the same!

The reason for the difference between the Indian estimate and IMF is different..IMF adds in the exchange rate movement to the real growth rate reported in lcy terms by the govt, so as to get a USD growth number...In an idea world, the ccy appreciation should be balanced out by the differentials in respective inflation, or the GDP deflator - interest parity principle...But often in ccy markets, the theory doesnt work out as predicted...Which is what happened this year, and as INR appreciated more than CNY against USD, IMFestimates on growth pegged India higher...

vera_k · Post by **vera_k** » 18 Apr 2011 20:49

^^

Except that the CSO does not include government income in their GDP at factor cost calculations. They do compute GDP based on expenditure, similar to the Chinese, so perhaps they should switch to reporting that as the headline number. Would make for good PR and a more accurate comparison.

CSO - 3rd quarter GDP estimate

Rupesh · Post by **Rupesh** » 19 Apr 2011 04:05

I cannot comment about a mutual fund manager or a Mckinsey consultant, but if we are talking about a branch manager for a MNC bank with MBA, then 18 lacks-35 lacks is way out of whack! Cousin works as a branch mgr in HSBC with MBA and 12 yrs of exp, and makes less than half the figure quoted above. If it is for some other role, then probably those figures are right. But there's no way a regular manager makes 18 - 35 lacs !

Regional Managers In eye see eye see on an average make onleee 10 lacs PA, a bit more in ech dee eff see ( got a few friends in those banks ) add to this 12 hr * 6 day week

K_Reddy · Post by **K_Reddy** » 19 Apr 2011 11:05

I have 5 years of experiance in IT(PeopleSoft) and I make over 10L/Y. I hope to move into the 1L/m bracket this year end! There are 23 year old guys straight out of MBA's making 16/y in my company(Its a big 3 consulting firm). I think we have a huge property boom ahead guys. The job market, espacially IT, is very hot.

amit · Post by **amit** » 19 Apr 2011 11:48

Interesting article by Reuters:

India's manufacturing revs up as trade deficit looms

Vipul · Post by **Vipul** » 19 Apr 2011 19:12

India’s FY11 exports up 37.5% to $245.9 Billion.

India’s exports grew 37.5% to $245.9 billion in the fiscal year that ended in March, trade and commerce minister Anand Sharma said on Tuesday.

The figure comfortably beat the FY11 export target of $200 billion set by India’s trade ministry.The export growth was largely powered by the engineering goods sector.

Petroleum exports have risen by 50% to $ 42 billionn while the trade gap is at $104.1 billion.

Aditya_V · Post by **Aditya_V** » 19 Apr 2011 19:30

Hari Seldon wrote:Well, seems Shri Jairam Ramesh is determined to put a spanner in the works of the proposed Rs 54 kilo cr Posco project in Orissa due to Forest Rights act dispute by 2 villages. In the meantime, our Iron Ore is being sent to PRC to become steel. Why not have a Posco do the same insie our country and also contribute taxes to GoI kitty, jobs for our people, basic infra in a backward area and all those nice things, I wonder?

This is what the Media, Maoists and NGO game is about, see the Maoist presence all you will notice thier bases and power grow when area is becoming Mineral rich. Mining has not stopped int he areas they control(which is then exported), only manufacturing has.

See when ore is exported, cash to the seller is settled in Foreign Tax havens, somthing which is not done, if you have a proper manufacturing facility in India.

vera_k · Post by **vera_k** » 19 Apr 2011 20:57

Realtors fail to repay bank loans

Central bank rebuffs SBI on home loans

Seems like both regulators like RBI as well as the finance ministry have decided to let some air out of the bubble.

SureshP · Post by **SureshP** » 19 Apr 2011 21:20

India Inc profit per employee at Rs 6 lakh
Agencies

Tuesday, Apr 19, 2011 at 1422 hrs IST

New Delhi: Indian companies pay a salary of Rs 4.8 lakh to each of their employee on an average, but earn a profit of Rs 6 lakh per employee in return, says a new survey.

According to a study by PricewaterhouseCoopers (PwC) -- Measuring Human Capital -- Driving Business Results -- organisations in India pay an average remuneration of Rs 4.8 lakh and earn Rs 6 lakh of profit per employee, which makes the human capital return ratio on investment to 1.79 for organisations in the country.

Besides, companies make an investment of Rs 7,000 on learning and development (L&D) per employee.

It further said that Indian companies make a pure profit of Rs 15 from every Rs 100-worth revenue generated by each employee.

"With India being the fastest growing economy, organisations that would maximise their human capital contribution to business performance, would be the ones to best leverage the positive economic environment," PwC India Leader People and Change practice Sankar Ramamurthy said.

Among sectors, engineering and manufacturing generate the most revenue and profits per employee followed by fast moving consumer goods (FMCG) and pharmaceutical space.

Moreover, organisations with higher revenue base incur 1.3 times higher cost per employee but also earn 1.4 times higher profit per employee organisations compared with lower revenue base companies.

The report, which is based on a survey of 37 firms across different sectors noted that Indian organisations spend about Rs 25,500 per hire on an average.

However, FMCG and other unclassified sectors spend more than double the amount towards their recruitment. This could be because of the high cost of their recruitment teams.

The report further said that information technology and information technology enabled services (IT/ITeS) sector recruits the highest number of graduates, but when it comes to retaining entry level talent, engineering and manufacturing sector leads the industry.

IT/ITeS, which has the lowest spend on L&D per employee, witness the highest termination and resignation rate as well.

http://www.financialexpress.com/news/in ... h/778240/0

Suraj · Post by **Suraj** » 20 Apr 2011 06:51

Exports are up sharply in 2010-11 fiscal year. One would recall that the original target was $200 billion, same as the previous fiscal year, after the global economic crisis. The $200 billion target for 2009-10 was not met, and exported for that fiscal year were approx $177 billion.

For 2010-11 (April 2010 through March 2011) the initial target was $200 billion again, but since this was reached by February, the revised goal was $224 billion, subsequently increased to $230B and then to $235 billion. The official figure exceeded even this revision: $245.9 billion, up by 37.5%

Indian exports at record high

India's merchandise exports topped the government's estimate and rose to a record high last fiscal year, helped by order flows from new markets, but global economic uncertainties are clouding growth prospects this year amid prolonged local inflation and rising credit costs.

Exports for the year ended March 31 totaled $245.9 billion, rising 37.5% from a year earlier.

Engineering exports--at $60 billion--were the biggest chunk of Indian shipments in the just-ended fiscal year, Commerce and Industry Minister Anand Sharma said at a news conference Tuesday.

The government initially fixed the full-year export target at $200 billion, but later raised that to $220 billion-$225 billion as overseas demand for Indian products, especially engineering and electronics goods as well as plastics, improved.

Demand for some other products, such as gems and jewelry and textiles, also remained steady despite the global downturn.

India, which is aiming to reach annual exports of $450 billion in three years, is targeting export growth of 25% a year, Mr. Sharma said. He didn't forecast the export aim for this fiscal year.

"2011 is not looking good," Commerce Secretary Rahul Khullar said at a news conference.

As major Western economies such as the U.S. and the E.U. continue to expand at a feeble pace, the recent devastating earthquake in Japan has added to the risks for global demand.

However, India's higher exports will help ease some concerns over the current account deficit, which the commerce secretary expects to be between $25 billion and $30 billion.

Imports in March were up 17.3% at $34.7 billion, while exports surged 43.7% to $29.1 billion, Mr. Khullar said.

Exports post highest ever growth in 2010-11

In FY11, growth in exports came mainly from engineering products rising by a staggering 84.8 per cent to $60.1 billion, petroleum soaring by 50.6 per cent at $42.5 billion, electronic goods by 34.5 per cent at $7.4 billion, textiles at $21 billion, drugs and pharmaceuticals at $10.3 billion and carpets at $1.1 billion. This is for the first time that exports of carpets from India have exceeded the $1 billion-mark.

Good show on the part of the exporters and the efforts of the ComMin, FinMin and GoI to enhance export growth. We might soon see exports exceed imports, considering that the monthly deficit is now under $5 billion, with differential growth rates upto 25% more in favour of exports. Presumably once all data is collected, the final figure will be around $250 billion.

This performance helps us exceed Australia, Brazil, Switzerland and Saudi Arabia, among several others, to jump to #17 in the list of countries by exports. Next are Spain ($268B), Taiwan ($275B) and Belgium ($279B). If we do achieve 20% export growth this year, we're in a position to exceed all those and get to $300 billion in exports this year, and into the top 15. Ten years ago, exports were approx $40 billion per year.

somnath · Post by **somnath** » 20 Apr 2011 07:13

^^^There has been improvement in various things, but the big joker in merchandise exports is petroleum exports...In the last 10-12 years, India has become a refining hub of some sorts...RIL's Jamnagar refinery itself would account for 50-60% of all petrol exports..