Indian Economy: News and Discussion (June 8 2008)

[Katare]

Imports contract 32% in March

Quick estimates available with the commerce ministry suggest imports contracted 32 per cent and stood at $16.05 billion, compared with $23.57 billion in the year ago month

Imports have been contracting since January 2009 due to a waning demand in the domestic economy as well as falling crude oil prices. The last time one saw a fall in imports for three consecutive months was in the September-November, 2001, period.

[amol.p]

Indian stock market may regain 21,000 levels: Report

-dont know wether this is trap to get in common investors again.........

The Indian stock market has been termed as a potential "baby bull" as the Sensex may continue to advance over next 15 years and is Cashing in on your money
Know about stock arbitrage
Better returns: Book capital losses
Plan long term portfolio
likely to breach its all- time high level of 21,000 during the period, a report says.

At a time when developed markets across the world are in a bearish phase, a technical research report by US-based Elliot Wave International has termed India, Taiwan and New Zealand as potential "baby bulls", while stock markets in Japan, Singapore, Hong Kong, China and Australia are going to be under the "bear" grip, the report stated.

The report has analysed that recent sharp reversal rally in Indian market, post the October 2008 lows, points at regaining earlier high levels.

It added that if the rally continues in the same proportion as between 2003 and 2008, "the Sensex may continue advancing for 15 years before reaching the end of wave".

"The potential baby bulls completed only three waves down from their respective highs, which makes them strong candidates to rally back to at least near their all-time highs -- if not beyond," the report stated.

Sensex had touched all-time high of 21,206.77 points on January 10, 2008, since then it plunged even below 8,000.

The report stated that Sensex would now embark on third wave which could see the index witnessing a multi-month rally, although share prices may come down for short periods.

"The decline since the 2008 high can be counted as three waves. A three-wave decline opens possibility of a rally back to near the 2008 highs. But there is reason to set our sights even higher," the research firm said in its Asia-Pacific Financial Forecast report.

The report said each high and low in the stock market is calculated on the basis of waves. The highs achieved by the Indian bourses between 2003 to January 2008 forms the first wave, while the bear market, till it saw the October lows, formed the second wave.

Since 2003, when the Sensex was quoting around 5,800 levels and had seen lows to the extent of 2,904.44 points, it had been on an upswing and reached the 21,000 level from where it started coming down to below 8,000 levels.

So far this year, Sensex had regained 9.20 per cent to 10,534.87 points.

Elaborating further the report said, "the Sensex declined in three waves to the October low, where it retraced approximately 50 per cent of its 2003-2008 rally on a percentage basis. The index has also just broken out of its downward trend channel.

"Even if the declines from their all-time highs later turn out to be only the first legs of a larger correction, the three wave corrections at present imply significant rally in the intermediate term. We should then be able to reassess the long term wave count from higher levels," the report said.

http://economictimes.indiatimes.com/art ... 374556.cms

[Ameet]

Rupee Pain Means Exporters Gain as Indian Companies beat China to Sales

http://www.bloomberg.com/apps/news?pid= ... refer=home

Highlights:

The rupee will weaken another 5.9 percent to 53 per dollar this year, according to the median estimate of seven exporters surveyed by Bloomberg last week. The Reserve Bank of India may favor a weaker currency to bolster Asia’s third-biggest economy, said Richard Yetsenga, a Hong Kong-based strategist at HSBC Holdings Plc, who forecasts a steeper rupee decline to 54.

“The central bank won’t mind an orderly movement in the currency, even if it means a weaker rupee,” Yetsenga said. “They will allow exporters to take that advantage.”

India’s goods exports, which account for about 20 percent of gross domestic product, tumbled 22 percent in February from a year earlier, the most since at least 1995, a Commerce Ministry report showed on April 1. China’s slid 26 percent, according to Chinese customs data.

[vsudhir]

Well, what do we have here Biraders? The conomist rag pontificates on the RBI's regulatory role and restrictions on phoren banks in India.

For I'm a jolly good fellow

More than can be said of the UKstani banking regulators, IMHO.

The conomist poses some good questions, such as:

Does India need foreign banks?

According to the RBI’s “roadmap”, laid out four years ago, it was due this month to review the onerous restrictions under which foreign banks labour. They hold only 8% of the system’s assets and were allowed to open only 16 branches between them in the year to March 31st 2008, even as the SBI alone opened 913. Standard Chartered, which has 90 offices in the country, offered to open 100 rural branches, according to Digby Jones, Britain’s former trade minister. It was refused. Nor are foreign banks allowed to buy a ready-made branch network by taking over an Indian bank.

In a “desperately underbanked country the size of India, this is unpardonable”, says Ajay Shah of the National Institute of Public Finance and Policy in Delhi.

Thank you Ajay Shah for providing a quotable quote to conomist. Here's more from Sri Sri Shah.

Nothing will force the RBI’s hand until India appoints a new finance minister after its elections, which finish on May 13th, and foreign banks get back on their feet, says Mr Shah. Policymakers from Britain and America used to rail against India’s financial protectionism, but they are now preoccupied at home.

Right. And how many branches does SBI have is yamerika or londonistan? GOTUS has brazenly sat on SBI's application for an overseas branch in NYC for well over 17 yrs now. Didn't the conomist know? Or perhaps, they didn't care enough onlee?

But if the RBI’s self-assessment is any guide, it is in no hurry to follow the roadmap any further. Its report casts doubt on the benefits of foreign entry, arguing that India’s new private-sector banks already benefit from nifty technology and sophisticated management. It also noted the dangers. It no doubt worries that if a troubled foreign parent abandoned its local offspring, it might pose a threat to financial stability, as many feared would happen in central and eastern Europe.

And would they be wrong in thinking so?

Foreign banks, which appeal to companies and richer Indians, are more profitable in India than their local rivals (see chart). India will never resemble Latin America or central Europe, which have sold much of their banking systems to the West.

Hmmmm, so sad, no? That India will never make Latin America's mistakes?

But the RBI argues that it is already more liberal than i11ts neighbours. In China, for example, foreign banks only hold about 2% of assets. The RBI also permits foreign banks to set up “non-bank financial companies”, such as Citigroup’s Citi Financial which offers retail loans but does not take deposits. There are other ways for outsiders to profit from India’s financial evolution. Although no single investor can own more than 10% of an Indian bank, foreign investors as a whole own 65% of ICICI and 48% of HDFC, India’s two biggest private banks (if their depository receipts are counted). Both shares have plummeted since January 2008. But the RBI will celebrate many more birthdays before foreigners can take a more direct stake in Indian banking.

Wow. Conomist actually exploring ways in which foreigners can benefit from India's 'financial evolution' instead of exploring ways to diss India further? What a change, eh?

Keep 'em foreign banks out, pls! Or at least allow them no further ingress. They've brought some competition and tech to the desi banking sector, and some jobs in outsourcing. For that, thank you and we're even now. In any case, soon, we should make laws stating that no company that does business in TSP can do business in India forcing the issue for many MNCs out there. Let them have to choose where they want to go.

OK, which BRFite wrote this comment there?

In a “desperately underbanked country the size of India, this is unpardonable”, says Ajay Shah of the National Institute of Public Finance and Policy in Delhi.

This is a big lie. Ajay Shah needs to travel around the country.

Visit any mofussil town (anything bigger than a village) anywhere in the country and you can see one or more banks...and now a days most of them have ATMs and other amenities. I have been traveling across United States and India the last 10 years and I could see small Indian towns better represented by banks than rural American towns.

Of course it is easy to spit out few numbers (no of banks per 1000 people) but such data is not relevant or useful.

Most of the old generation nationalized banks which are currently in the rural sectors allow minimum deposits of Rs.100 and more (a major criteria for most Indians)...meanwhile the "new generation banks" purely target the middle and upper middle class with a minimum deposit of Rs.5000 and (more with hefty fees if you go below )~ just like the famous American banks.

Remember Indian middle and upper classes are 10% of the population of the country. Any banking sector reform should address the need for better representation in rural India (if it is needed), the Standard Chartered's and ABN's of the world do not need the customers who are outside their target list. They will further pollute the scenario by poaching committed workers and crass scheming by showing short term gains.

I can see the reasoning behind such arguments by magazines like Economist and their shills in the corporate and "think tank" sectors. Their sole existence depends on such "reforms".

[shynee]

China withholds approval for ADB's India loan

China has allowed a long-standing territorial dispute with India to spill over into the international arena by withholding approval for a multilateral development plan for India.

The unusual friction between Asia's two largest emerging economies occurred ahead of a board meeting of the Asian Development Bank at the end of last month, when China used its right to postpone approval of the lender's country partnership strategy for India, outlining ADB lending to India until 2012.

The Chinese did not give a reason for their intervention. But the ADB said Beijing was unhappy that its Indian plan proposed lending to projects in the disputed north-eastern region of Arunachal Pradesh. People familiar with the plan said the projects were for flood management, water supply and sanitation. China and India fought a war in 1962 over disputed territory. China declared victory and then pulled back its troops.

The ADB would not provide the financial details of its India plan ahead of board approval, but India was the biggest recipient of ADB lending last year, with almost $2.9bn (€2.2bn, £1.9bn). "The ADB has never deferred any loan to India. There is nothing like that [in the past]," said an ADB official in New Delhi.

China's reluctance to approve the country plan for India comes at a time when Beijing is lobbying hard for a larger role in the International Monetary Fund and other international organisations. Analysts said this incident could herald future conflicts, once China gains the influence it is seeking in multilateral organisations if future initiatives infringe on what Beijing sees as its interests.

"This effort [to block the ADB's plan for India] is a clear signal to partner countries that China sees partnership as sometimes less important than power projection," said Russell Moses, a Beijing-based political analyst. "There are powerful officials who have no problem injecting strategic considerations into multilateral financial decisions."

Some analysts also worry that greater Chinese involvement in institutions such as the IMF could allow it to wield veto powers over rescue packages for countries that did not comply with its political demands, especially over issues such as Tibet and Taiwan.

"Of course this [incident within the ADB] makes some people nervous but at this point it doesn't seem so unreasonable, given the fact this is contested territory," said David Zweig, director of the Center on China's Transnational Relations at the Hong Kong University of Science and Technology.

[adityaS]

An interesting (if slightly slanted) take from the Asia Times on how our elections may affect the economy:

The world's most important election By Martin Hutchinson

There was a gradual easing of controls in the 1980s and a somewhat more vigorous one after 1991 under prime minister Narasimha Rao and his finance minister Manmohan Singh, but Indian economic growth thereafter appeared to relapse back into its usual torpor until the advent in 1998 of the Bharatiya Janata Party (BJP) government led by Atal Bihari Vajpayee. The Vajpayee government pursued market-opening policies with considerably more vigor than any of its predecessors, with the result that by 2004 Indian growth was running around 8% annually and the country had been included among Goldman Sachs' BRIC (Brazil, Russia, India and China) group of emerging markets that would in future dominate the planet.

In an exhibition of voter ingratitude unequalled since the British electorate threw out Winston Churchill in 1945, the Indian electorate in 2004 rejected Vajpayee and the BJP so strongly that a Congress-dominated coalition was formed under Manmohan Singh. There was much talk of further economic reform, but in reality reform essentially ceased, although economic growth didn't.

[putnanja]

RBI knows banking better than US Fed: Stiglitz

Nobel laureate Joseph Stiglitz complimented the Reserve Bank of India last week for resisting pressures to deregulate the banking sector.

Stiglitz, a professor at Columbia University, said one reason India is "one of the least dark spots" in the gloomy global economic scenario is that its central bank has resisted such moves.

...
"The Indian central bank understands central banking and regulation much better [than the US Fed]. . . There were some political pressures to deregulate and RBI resisted some of those pressures," Stiglitz said.

...

[harbans]

Just a small question: It is obvious that growth is faster with less central regulation, though the risk factor also increases. So lets take a case like India of today. Assume we derulate and allow massive inflows with the minimum regulatory conditions. We grow to 12 trillion USD by 2020 say and then major sectors go bust. We have to put in 3 trillion dollars to bring back the cycle again and end up 2025 at 14 million USD because of the pain of adjustment.

Now in a regulated economy we throttle lots of useful funds and consequently grow slower. We continue this approach and by 2020 we are a 7 trillion USD economy, without having to face few sector bust scene as in the above scenario.

Now which is a better route to follow? Go freer and run to 12t USD economy by 2020 albeit with some pain or go slow without risks and be a 6 t USD economy by 2020 albeit with lesser risk and pain.

[Prem]

Harbans
In a business training class , My nephew was asked about his preferance between a crooked employeee who makes 10k profit a month for company or an honest emplyeee who contribute 1k a month .

[Vipul]

Good guys always finish last.If the size of the economy is large (and supports more jobs) then some accompanying pain is going to be worth it.

[Sagar]

Good guys always finish last.

The loudest have the final say,
The wanton win, the rash hold sway,
The realist's rules of order say
The drunken driver has the right of way.

---Ethan Coen's Poem. For more go to http://www.npr.org/templates/story/stor ... =103175352

[vera_k]

Now which is a better route to follow? Go freer and run to 12t USD economy by 2020 albeit with some pain or go slow without risks and be a 6 t USD economy by 2020 albeit with lesser risk and pain.

Obvious answer is to go freer and grow faster alternatively called the South Korea or Amazon.com model . The greater size will provide access to greater benefits similar to how paying a cover charge or entry fee allows you access to otherwise unobtainable benefits.

[derkonig]

http://www.topmba.com/research/global_2 ... ools_2009/

IIMB leads the Yindian pack, followed by piradhers at A & C.
As usual, ISB doesn't make the cut.

[Singha]

who cares? there is no more money to maintain their fatkat lifestyles

no more super vacations to bora bora and turkey and buying art as investment

[LokeshP]

http://www.topmba.com/research/global_2 ... ools_2009/

IIMB leads the Yindian pack, followed by piradhers at A & C.
As usual, ISB doesn't make the cut.

ISB is mentioned in the article as being in top 20. what are you referring to?

[derkonig]

^^
Reply in Edu dhaga..

[Vipul]

Met forecasts near normal rains.

The annual monsoon, crucial to the country’s agriculture-based economy, will be slightly lower this season than in the previous year, the weather office said today in its forecast.

The country is likely to receive “near normal” rainfall in the June-September period, which would be 96 per cent of the Long Period Average (LPA), the India Meteorological Department (IMD) said.

The LPA rainfall over the country as a whole for the period 1941-1990 is 89 cm.

However, scientists at the weather office said the LPA forecast, though on the lower side, was not a cause for worry.

“Though the monsoon is on the lower side, there is absolutely no cause for worry,” said Director General of IMD Ajit Tyagi.

The monsoon forecast is in the normal range and there is always a degree of variability, he said, suggesting that the actual rainfall could be higher than predicted.

The climatic conditions are favourable for good rainfall, Tyagi said, pointing out that the La Nina factor (cooling of the central Pacific Ocean) was near neutral. In 2007, the IMD had forecast 95 per cent rainfall and updated it to 93 per cent in June, but the country received 105 per cent rain than the LPA. The following year, it had forecast 99 per cent rains of the LPA and made an update to 100 per cent, whereas the country received 98 per cent rain.

Monsoon rains are a major influence on output of key crops and economic activity, and also affects sentiment in the country’s financial markets.

[joshvajohn]

The new government has to set up a committee to look into emerging economy. not neo-liberals rather people like M S Swaminathan, A Sen and good social scientists who can help Indian economy to grow together with the public both development and richness.

[vsudhir]

'India's GDP to fall to 3.4% in 2009'

[Suraj]

Folks, please keep the rhetoric related to the elections to the Elections 2009 thread.

[vina]

The word "social scientist" is an oxymoron and anyone who calls himself that is exactly that an ox(y) , moron (ie bewakoof bhains) and to put it in polite language an intellectual charlatan.

Said Oxy Morons had a free run of this country for 40 years and condmened it to continuing grinding and dehumanizing extreme poverty when countries which followed far more sensible policies (like S. Korea, much of S.E Asia), leapfrogged from way behind and with far fewer resources (human, natural etc) to first world or at least 2nd world status.

These bweakoof bhains should crawl back under the rocks into their hole in the muds called JNU and ISI and remain there until kingdom come.

[negi]

Sir even ISI ?

[Rahul M]

yep negi saab, the social scientists at eye ess eye (stat institute, not the inter-servi or Indian standards insti) were the main ideologues behind the 5 year plans and associated hum bugs.

[harbans]

Obvious answer is to go freer and grow faster alternatively called the South Korea or Amazon.com m

Indeed, it is advisable to go faster so that more people are lifted out of poverty faster, and we reach a larger economic size quicker than just a slow rate. So while NK has also not been affected by the present turmoil it really doesn't mean that protectionism and heavy regulation is the right and most painless path to take. So it's always better to deregulate while making your watchdog system sharper and more effective to deal with imbalances that may arise. Thanks for the answers.

PS: Premji, did'nt understand your analogy of the corrupt and the honest company guy. I possibly did'nt phrase my question very correctly i guess.

[Singha]

was P.C.Mahalananobis from kashmir or wb? as some kinda guru in ISI iirc he was in charge
of coming up with the 5 yr plans etc.

Yindia seems to produce a lot of intellectually bright people but who decide for whatever reason
to get influenced by the success stories of others instead of getting grease on the hands and
experimenting to find out what really works here - to our own circumstances.

[negi]

yep negi saab, the social scientists at eye ess eye

I knew Vinaji was alluding to ISI India only; however I was surprised to see JNU jhollawallahs and ISI being referenced to in a same sentence.

[svinayak]

was P.C.Mahalananobis from kashmir or wb? as some kinda guru in ISI iirc he was in charge
of coming up with the 5 yr plans etc.

Yindia seems to produce a lot of intellectually bright people but who decide for whatever reason
to get influenced by the success stories of others instead of getting grease on the hands and
experimenting to find out what really works here - to our own circumstances.

Indian intellectual people were led into false track right from the early 1920-1930s as part of the post-modernist education. Leftism, socialism are product of this experiment.

[SRoy]

P C Mahalanobis

[Vipul]

Govt mulls new data series in 3 months.

The government is planning to finalise a list of data series that will be called “core statistics”, that is, numbers that have national importance, within the next three months.The development comes after Parliament gave its approval to the Collection of Statistics Bill, 2008, which gives the government power to classify any statistics as “core statistics” and also determine a method to collect and disseminate these.

“We have written to various government departments asking them what statistics are crucial for them. After receiving the response, we will come out with a list,” said a senior statistics ministry official.At present, a number of government agencies collect and disseminate data, often leading to non-conformity with the widely-accepted standards.Once the list of core statistics is released, the official said, the ministry would specify standards for both collection and dissemination.

For example, the data relating to price change (wholesale price index) and industrial output (Index of Industrial Production) would have to disclose the non-response rate, the percentage of data points that are not reported while computing the index.At present, when the provisional WPI is released, only a fourth of data points are obtained and the rest are extrapolated from the previous week’s response. A user of this data would like to have this information.

India is now a part of International Monetary Fund’s (IMF’s) Special Data Dissemination System (SDDS), which specifies the standards to be followed for different type of data series. The identified core statistics would adopt these standards, said a government official.

For example, IMF’s SDDS requires summary methodology (like concepts, definitions, nature of basic data and compilation practices) for each data series. India has so far produced this under the data category producer prices in the real sector only, according to an analysis done by the Reserve Bank of India (RBI).

The central bank had suggested posting of summary methodologies on all data categories.Further, with the availability of core statistics, it would become easier for the National Statistical Commission, which is a non-executive advisory body to the government, to get a better understanding of the factors affecting the national economy and to fine-tune data collection.

[Adrija]

I know it's very fashionable to curse the first 30 years of Indian economic planning (ISI/ 5 yr plans/ blah blah), but if we had not done that, perhaps the outcome would have been very very similar to Brazil/ Argentina- a deeply unequal society with extremely high Gini co-efficients, and leadership held hostage to a small bunch of fatkats..

Slow growth was the price we paid for the desperate poverty and inequality the british left us.

That was the JLN era.

Perhaps the mistake we made was not liberalizing in the 1970s, when heavy industry had been established and we had a good base for economic take-off. But we know why that happened the way it did- IG had to seek left support.

So why curse Mahalanobis and his ilk?

IMVVHO/ JMTs of course

[vera_k]

Forget the 1970s - what is the excuse for persisting with the government controlled planned economy today?

[VinodTK]

Pharma exports in better health again

[Rahul Mehta]

Forget the 1970s - what is the excuse for persisting with the government controlled planned economy today?

(elitemen = desi elitemen + MNCs)

"Government controlled planned Economy" gives a set of laws to elitemen to harass small players. So the elitemen pay senior leaders of BJP, Congress, CPM etc not to fix these laws that enable IAS to harass small businessmen. At the same time, elitemen/MNCs have paid MPs to draft SEZ law to ensure that IAS cant harass elitemen at all.

So now the elitemen have best of both worlds in India. They can work freely and they can also use labor laws, VAT laws, many other laws to harass small players till they collapse.

[amit]

Indian intellectual people were led into false track right from the early 1920-1930s as part of the post-modernist education. Leftism, socialism are product of this experiment.

Folks,

I wouldn't go so far as to say that intellectual giants like Prasanta Chandra Mahalanobis were deliberately led into a false track.

You gotta remember that the 1920-1930s were one of the darkest periods of Western Capitalism, with US reeling under the Great Depression. And at that time Socialism/Communism appeared to lead to a bold new world and the intellectual class, especially in Britain, were attracted towards it. Mahalanobis and others were naturally attracted towards this line of thinking as students.

As an example just think of few years ago (before the current economic crisis) how a book written in a very low brow style by Thomas Friedman, The World is Flat, took the world by storm as it seemed to be that pathfinder to a great new idea which would solve all the world's problems. Overnight Globalisation became the new Messiah of economic planning.

It's easy to state, with the benefit of hindsight, that Mahalanobis and others were wrong because they did not have the intellectual ability to think for themselves. We have the huge benefit of hindsight to come to this conclusion. They didn't have either a time machine or a crystal ball and hence went about doing what they thought was best. And everything was not necessarily an unmitigated disaster.

While, again using hindsight, we can state that the socialist method of five year planning introduced by Nehru with Mahalanobis at the helm resulted in the infamous Hindu rate of growth, let's not dish Mahalanobis' greatest contribution to India - ISI.

Before the Communists took over and totally politicised West Bengal's education system, ISI used to be considered one of the world's top institutes for statistical research. It still has a very formidable reputation.

I remember an anecdote narrated to me by an elder friend. After passing out of ISI in the late 1970s he went to Waterloo to do his Masters and PhD programme. During his interview, the guy who was heading the panel told him that the recommendation given by his Professor at ISI was good enough for him as the Professor was an internationally recognised authority. My friend was not asked a single question about his subect.

On another note, regarding the Five-year plans there's an interesting book by Sanjeev Sanyal called: The Indian Renaissance. In chapter 2 Sanjeev gives a lot of anecdotal insights about how planning was done.

Allow me to post a small extract:

Speaking at the presence of Prime Minister Nehru at the Indian Statistical Institute, Calcutta on 3 November 1954, Mahalonobis said:

"Work is already in progress on a 12-sector model (that is, a 12X12 table)..."

Thus, India's future was decided on the basis of a statistical table with 12 columns and 12 rows. In today's age of computers, this is something that even a ten-year-old can do on an Excel sheet. Unfortunately, it seems to have impressed a lot of people in the fifties. The only constraint that was correctly judged by Mahalanobis was the lack of trained personnel. However, even here, he was unable to get away from his static world-view of input-output model:

"In dealing with the programme of industrial production one of the most important questions would be an adequate supply of trained personnel at all levels. This may indeed prove to a serious bottleneck... Input-output tables in respect of manpower will be of help in this connection".

In other words, the whole eduction issue was merely a matter of adding in an extra row in the model...

Sanjeev goes on to observe that this did lead to the investment in education but rather than invest in the general primary education, the country used all its education budget to provide specialised personnel for grandiose public sector projects - that is the institutes of higher learning.

All the IITs, IIMs, (many of the) RECs etc were a product of the extra row in the model. While it's a nobrainer that the money should have been spent on primary education at that time, these institutes of higher learning have come in handy now that India has finally thrown off socialism, nah?

And how many of us who are dishing Mahalonobis here are a product of the these elite institutions where we got a great education for practically free (when considered with world standards of cost)!

[vina]

I wouldn't go so far as to say that intellectual giants like Prasanta Chandra Mahalanobis were deliberately led into a false track. .......

let's not dish Mahalanobis' greatest contribution to India - ISI.

Before the Communists took over and totally politicised West Bengal's education system, ISI used to be considered one of the world's top institutes for statistical research. It still has a very formidable reputation.

I remember an anecdote narrated to me by an elder friend. After passing out of ISI in the late 1970s he went to Waterloo to do his Masters and PhD programme.

In chapter 2 Sanjeev gives a lot of anecdotal insights about how planning was done.

Speaking at the presence of Prime Minister Nehru at the Indian Statistical Institute, Calcutta on 3 November 1954, Mahalonobis said:

"Work is already in progress on a 12-sector model (that is, a 12X12 table)..."

Thus, India's future was decided on the basis of a statistical table with 12 columns and 12 rows. In today's age of computers, this is something that even a ten-year-old can do on an Excel sheet. Unfortunately, it seems to have impressed a lot of people in the fifties.
In other words, the whole eduction issue was merely a matter of adding in an extra row in the model...

Mahlanobis and his ISI caused far deeper damage and more grevious wounds on India than the Paki ISI. While the Paki ISI might have resulted in deaths in thousands, the Calcutta ISI because of their massive 'underwhelming' achievement killed and malnourished hundreds of millions across generations.

The problem is this "intellectual hubris" . Okay, you created a model with 12*12 factors and were kicked about it (coz that was what your "tools" allowed at that time). What about the broader realization of Unk-Unk , ie stuff you know , you DON'T know about and that your model in no way in hell is even accurate to describe any complex system or even close to reality? Ok, how about if you created a 120000000000000000000000000000*120000000000000000000000 model which is probabably beyond the range of today's and probably the next couple of decades super computers. Will such a thing work ?.

I heard Stiglitz say this about the planned economy . There is no way it can work, because, it is impossible to process and manage all the data , along with the impossibly high number of correlations to make it work!. Finally the sane guys gave up on that "planned" rubbish. It is not for no reason that it is ONLY GOD who is OMNISCIENT. Just because you create a 12*12 model and create a planning commission and a bureaucracy you become omniscient , or even if you create a 120000000000000000000000 * 1200000000000000000000 model. One Yindoo mystic/ yogi comes and tells PC Mahalonbis and his ISI wankers that only GOD can know everything, those numb skulls would have laughed it off and baited him as "backward" and "unso -piss-ticated" and why ?, because those guys could do statistical math, that is why.

And that is precisely why they are intellectual charlatans . When you don't know the limits of your own learning, you are not a scientist anymore, but a quack. There is a known quote of Issac Newton, who likens himself to a small boy picking at small pebbles in a beach of an ocean of knowledge or in the Yindoo tradition, Saraswathi, the goddess of learning herself is always pictured with a Veena and books , no to show that she has "mastery' , but she herself doesn't know everything and is still a seeker.

That is why Issac Newton was a scientist. He tried to describe reality as it is. PC Mahalobis and the Planning Commission /JNU ding dongs are quacks, because, they tried to alter reality to their wonkish "models" by fiat/law/ and the Khaki clad underlings.

[amit]

The problem is this "intellectual hubris" . Okay, you created a model with 12*12 factors and were kicked about it (coz that was what your "tools" allowed at that time). What about the broader realization of Unk-Unk , ie stuff you know , you DON'T know about and that your model in no way in hell is even accurate to describe any complex system or even close to reality? Ok, how about if you created a 120000000000000000000000000000*120000000000000000000000 model which is probabably beyond the range of today's and probably the next couple of decades super computers. Will such a thing work ?.

Vina,

You don't have to prove that Mahalanobis (let's call him PCM for short here) got it terribly wrong. I think I already did that.

However, it's easy to sit back 50 years or so on, with a wealth of knowledge of the (disastrous) results of their planning (as well as the 1956 Industrial Policy Resolution) and then shout about "intellectual hubris".

Remember they did not have the comfort of this hindsight which you liberally use to deride their "hubris". PCM was tasked with the job of getting the economy of a newly Independent nation up and running. And at that time it was pretty universally thought in intellectual circles that the Command approach is a good model for a newly developed economy.

Of course this has been totally discredited now but how was PCM supposed to know? Irrespective of his failure, to deride his intellectual ability or accomplishments in other fields is to display another sort of "hubris", I'm sorry to say.

I heard Stiglitz say this about the planned economy . There is no way it can work, because, it is impossible to process and manage all the data , along with the impossibly high number of correlations to make it work!

Sure Stiglitz is right. But like everyone else he's right because he's got the benefit of hindsight to see that it didn't work in India, the Soviet Union or China.

Let's take another example of when Stiglitz is right. He made a recent statement which is also absolutely right and that is the RBI knows more about Central banking than the US Fed. Now, I really wonder if he would have made that same statement say four-five years ago when the US was growing at an incredible 4-4.5 per cent and Alan Greenspan was saying sagely that all this is due to the growing productivity of the US workforce, and every Tom, Dick and Harry were bobbing their heads in agreement? Again all this is the benefit of hindsight.

Alan (and probably Stiglitz, if he's even half the good economist that he is) probably had an inkling of the real estate bubble and the financial blackhole in investment banking but kept very quiet. The poor RBI guys were at that time being hauled over the coals for being too damn conservative.

And that is precisely why they are intellectual charlatans . When you don't know the limits of your own learning, you are not a scientist anymore, but a quack.

Alas, "hubris" is not the sole preserve of a "charlatan" such as PCM

PC Mahalobis and the Planning Commission /JNU ding dongs are quacks, because, they tried to alter reality to their wonkish "models" by fiat/law/ and the Khaki clad underlings.

Look the point is PCM was wrong, his central planning model was wrong and it didn't work. That being said, it's not his fault that India took 40 years to realise that.

He was given the onerous responsibility to shape India's economic future and given the knowledge base and intellectual thought prevalent during his age he gave it his best shot. To question is intellectual ability or his sincerity or to accuse him of being a closet Communist shows, I'm afraid, a knee jerk (over)reaction.

One more point. Don't confuse the ISI's achievements in the field of statistical research, not only in India but in the world, with the political predilections of a generation of a section of students who came out of that institution. Not everyone was/is a leftwing Commie just because he/she studied in ISI.

[vina]

Look the point is PCM was wrong, his central planning model was wrong and it didn't work. That being said, it's not his fault that India took 40 years to realise that.

He was given the onerous responsibility to shape India's economic future and given the knowledge base and intellectual thought prevalent during his age he gave it his best shot. To question is intellectual ability or his sincerity or to accuse him of being a closet Communist shows, I'm afraid, a knee jerk (over)reaction.

You presume that PCM, gave birth to the model and went away to the heavens. No, he was alive and kicking until 1972. The problems with his model were apparent right then. The bad news about the Soviet Model was all too visible and it was apparent to every sane practitioner that India's development model was flawed. In fact Jagdish Bhagwati and his wife Padma Desai had commented on it back in the late 60s itself. But no, PCM and the ideological ding dongs in the Kangress and Left would have none of it. The were on a millenarian vision like radical Islam. The thing is not working?. Well, it must be because a "faulty" /"corrupt" version is being done. So you need a "pure version" and you need more of it. Sounds familiar to the Islamic fundamentalists and other types of fundamentalists doesn't it. ?.

No less of an intellectual giant than Rajaji came out strongly , along with the Bombay Group way back in 1956 against this. Rajaji sacrificed his political career for that.

Very interestinig read in YV Reddy Lectures. Aside from the humorous quotes about economists and a Yindoo Economists description of cycle of birth etc and also about Jagadish Bhagwati's lecture and quote , also about Rajaji.

All through this, not a word from PCM about his models or anything. No word of failure. Nary a whisper from 1960 to 1972. All we see is more "modeling" from JNU type ding dongs in today's world.

One more point. Don't confuse the ISI's achievements in the field of statistical research, not only in India but in the world, with the political predilections of a generation of a section of students who came out of that institution. Not everyone was/is a leftwing Commie just because he/she studied in ISI.

Yeah, ISI is good at statistics,exported many well known "statisticians" etc but why sweep the big elephant under the carpet? ISI got it's start from politics. That it retreated from politics and handed that over to JNU and other commies is good. But the disastrous failures in mis-applied statistics and lack of scientific temper will be what the ISI will be better known for when it's epitaph is written. It is a clear warning on the of Warren Buffet's "Beware of Geeks bearing models" or of the classic "War is too serious a business to be left to the Generals" against the hubris of specialists.

In many ways, I thank god for one particular thing. To escape from the destiny of being a clerk /typist which the "social engineers" in TN (another orwellian nightmare like a big brother "Planning Commission" ) wanted me to become, I wrote every entrance exam under the sun and yeah, including the ISI B.Stat Hons at Loyola College , Madras (which was then the center in south) and cleared it. Destiny decided otherwise and I went to a college in Madras. Wonder how things would have turned out if I had landed up in Calcutta and done a B.Stat Hons there in life. Maybe I would have ended up as a wonk in some market survey organization or as a bearded ideologue.

[Singha]

probably a senior JNU prof in developmental economics by now. wearing khadi and cycling to IIC/Vigyan bhavan
to lecture sincere young revolutionaries and students on the ills of capitalism. the occasional third-world NGO type conf in geneva/honduras/jakarta too
and joining in various protest marches ofcourse rubbing shoulders with professionals the Roy madam...

[amit]

Wonder how things would have turned out if I had landed up in Calcutta and done a B.Stat Hons there in life. Maybe I would have ended up as a wonk in some market survey organization or as a bearded ideologue.

Or maybe you'd have ended up like my friend (who's experience I quoted at Waterloo) and his wife.

He runs a hugely successful consultancy (doing some esoteric mathematical modeling) and divides his time between India and Singapore. His wife, who's also a PhD used hold a very high profile job in Citibank in the Asia Pac business. It's another matter that she left in disgust at what she perceived as rampant "bad banking" (and euphemism for greed).

Not everyone who passed out of ISI ended up with either a jhola or a Panning Commission sinecure. In fact it's only a minority who did. To state otherwise is to do a typical Commie-style typecasting.

For PCM's contribution to the academic world I suggest you have a look at the Wiki article on him. There are more links there, particularly to Mahalanobis distance. I suggest you compare his academic achievements with any other statistician produced in India post Independence to understand why it's rather odd to see the type of language you are using to describe him, just because he belonged to a group of people led by Nehru who (wrongly) took India on the Socialist path.

A chance meeting with Nelson Annandale, then the director of the Zoological Survey of India, at the 1920 Nagpur session of the Indian Science Congress led to a problem in anthropology. Annandale asked him to analyse anthropometric measurements of Anglo-Indians in Calcutta and this led to his first scientific paper in 1922. During the course of these studies he found a way of comparing and grouping populations using a multivariate distance measure. This measure, D2, which is now named after him as Mahalanobis distance, is independent of measurement scale.

Inspired by Biometrika and mentored by Acharya Brajendra Nath Seal he started his statistical work. Initially he worked on analyzing university exam results, anthropometric measurements on Anglo-Indians of Calcutta and some meteorological problems. He also worked as a meteorologist for some time. In 1924, when he was working on the probable error of results of agricultural experiments, he met Ronald Fisher, with whom he established a life-long friendship. He also worked on schemes to prevent floods.

Sample surveys

His most important contributions are related to large scale sample surveys. He introduced the concept of pilot surveys and advocated the usefulness of sampling methods. Early surveys began between 1937 to 1944 and included topics such as consumer expenditure, tea-drinking habits, public opinion, crop acreage and plant disease. Harold Hotelling wrote: "No technique of random sample has, so far as I can find, been developed in the United States or elsewhere, which can compare in accuracy with that described by Professor Mahalanobis" and Sir R. A. Fisher commented that "The I.S.I. has taken the lead in the original development of the technique of sample surveys, the most potent fact finding process available to the administration".

My last post on this issue as we both agree that Mahalanobis was wrong about centralised planning.

The disagreement is about whether he should be labeled as a "charlatan" or that he suffered from intellectual "hubris".

[amit]

probably a senior JNU prof in developmental economics by now. wearing khadi and cycling to IIC/Vigyan bhavan
to lecture sincere young revolutionaries and students on the ills of capitalism. the occasional third-world NGO type conf in geneva/honduras/jakarta too
and joining in various protest marches ofcourse rubbing shoulders with professionals the Roy madam...

Singha ji,

Sorry to say, this shows that you've met very few ISI types I'm afraid.

And Oh, yes, Mahalanobis was not a Kahmiri Pandit like Nehru. He was a certifed Bong who's father was influenced by Debendranath Tagore, Rabindranath's father and he joined the Brahmo Samaj.

All this information is freely available in Wiki.