Indian Economy: News and Discussion (June 8 2008)

Prem · Post by **Prem** » 10 Nov 2009 03:50

Vipul wrote:Any info or estimate of the total collective gold holdings by Indians? I have read varying reports upto 40,000 tons.

This close to 1 and Half Trillion Dollar idle capital. Add Swiss Bank Deposits to this and both have the potential to change the economic fortunes of Desh.

SwamyG · Post by **SwamyG** » 10 Nov 2009 03:53

Vipul:
Around June-July 2009, it was thought Indian households had about 20,000 to 25,000 tonnes of gold.

vera_k · Post by **vera_k** » 10 Nov 2009 05:20

This link from 1997 estimates 29,000 tons in private hands. Should be between 40 and 50 thousand tons today since just official imports since then have been about 8000 tons.

Prem · Post by **Prem** » 10 Nov 2009 06:29

From the above lik by VeraK

Strategy to Leverage Existing Gold Reserves

The country’s existing reserves could be made available for investment in development if the public comes forward to lend them to the banks for extended periods of time, so that the reserves can be utilized as security for raising international loans or expanding the domestic money supply. The funds raised could be channeled into investments in infrastructure projects such as power, roads and telecommunications, eliminating the necessity of seeking large amounts of foreign private investment in these sectors. Depositors could be offered a low rate of interest on their gold deposits, backed by government guarantees. Based on the gold reserves, Indian banks should be able to raise funds internationally at very attractive rates and lend those funds to Indian business for investment in infrastructure. This proposal would not be inflationary, since much of the funds raised would be utilized for purchase of capital goods abroad and the investments would be made in assets that will greatly contribute to growth of national productivity.

vera_k · Post by **vera_k** » 10 Nov 2009 06:41

One of the reasons why people don't lend jewelry to banks is because the womenfolk need it often. Jewelry insurance can be a way around this. So when you give jewelry to the bank, they assess it and place it in a secured location. They can count it as an asset and use it to raise more funds. Now if the womenfolk need it for a special occassion, they should be able to get it back from the bank by taking out an insurance policy to cover the few days or weeks that the jewelry will be out of the bank.

animesharma · Post by **animesharma** » 10 Nov 2009 17:41

Sorry if posted earlier... but its worth a read.

India's per capita income will overtake US, UK by July '48: Hans Rosling

Hans Rosling, 61-year old professor of global health at Sweden’s Karolinska Institute, is known to dispel myths about the developing world with

his compelling arguments, and forecast the new world order by presenting data through moving bubbles and other objects that bring some of the most complex and boring trends to life. Mr Rosling, who presented his latest findings about how income per person in India and China will overtake that of the US and UK by July 2048 at TED conference, told ET that his one month stint as a student in Bangalore’s St John’s Medical College helped him realise the potential of India. Excerpts:

What is the basis for this forecast? And what according to you will be the new world order?
I realised during my early days as a student in Bangalore’s St John’s Medical College that the developed world will not continue to dominate for ever. In fact, I think that India and China will overtake US and UK in terms of income per person by July 2048.

The West and in particular the US has three fundamental problems which are far bigger than they appear — the first of which is the Trade Unbalance — more imports than exports something which has not changed for a while The Federal Reserve Balance sheet which has only been going down over the last decade or so and a Clear Oil Addiction.

The west consumes far too much power for its own good. They are three primary factors in India’s favour — Rich Human Resource Capital and Inequalities which unlike China and some other countries are favourable. In China, in order to develop rural China — money and goods have to travel over a 1000 km. In India though, the disparity lies only within a state and hence a smaller distance has to be traversed geographically. This is India’s advantage.

How confident are you about this prediction?

Well of course, it’s been done by drawing these lines with the help of software, but you cannot be really confident about it. There is a need to realise that it is about to happen and it is something that can happen in our lifetime. That is why I illustrated it by saying that it will happen on July 27 to be precise.

What do you think of trade barriers, as emerging economies become bigger?

What I am most worried about is the reaction of the western world when they see India and China become bigger, what really worries me is a possible war. I also see new, subtle trade barriers emerge. For instance, they are calling products manufactured by India and China as contaminated, and are getting experts and researchers to prove that. These trade barriers are very subtle.

What challenges do you see for India and China to become bigger, global powers?

There are three reasons why 2048 prediction may go wrong. The first of which is Trade Barriers — if the west becomes vary of India and China’s success one thing to certainly watch out for is the imparting of high duties on Indian and Chinese goods as a counter measure. They could also show Indian and Chinese manufacturers in poor light — showing them as unsafe, unhygienic options for consumption products.

The second is Climate - if both India and China have climate which is not congenial to the the produce of agricultural goods. Lastly, the probability of War and the probability of how India and China’s rise might make the West envious of its success could be a challenge.

Vipul · Post by **Vipul** » 10 Nov 2009 20:49

Thanks SwamyG and Vera_k.

Abhijeet · Post by **Abhijeet** » 10 Nov 2009 23:23

Leaving aside the specificity of the prediction (down to the month, July 2048), which I think he is doing to provoke - how is that prediction even remotely likely to come true? Is he predicting that US/UK incomes will decline between now and then? Or is India going to grow at 30% in real terms between now and then?

I think most forecasts have India PCI at between 25% and 30% of US/UK PCI in that timeframe, which is a lot more reasonable.

Abhijeet · Post by **Abhijeet** » 10 Nov 2009 23:33

Immediately after posting that, I did a quick Google search. According to a post on his Twitter account (http://twitter.com/Hansro), he is linearly extrapolating this graph:

http://graphs.gapminder.org/world/#$maj ... 001700blaz

It also seems to be PPP PCI. Seems to be more for shock value than a serious prediction.

putnanja · Post by **putnanja** » 11 Nov 2009 01:00

How are cross-border Hawala trades executed

AjayKK · Post by **AjayKK** » 11 Nov 2009 15:37

NREGA: An exchange with Jean Dreze -

Swaminathan S Anklesaria Aiyar debates the pros and cons of cash transfers as also the desirability of building durable infrastructure to remove poverty with Dreze, key champion of the flagship programme

http://epaper.timesofindia.com/Default/ ... =HTML&GZ=T

SSAA: I now champion capital intensive poverty alleviation — through mechanised high-quality rural roads, electricity and telecom. When these arrive in villages, jobs get created automatically. Good rural infrastructure in Tamil Nadu has turned villages into towns, making it India’s most urbanised state.

Dreze: I am all for rural infrastructure and also impressed with the TN model. But why not both?

SSAA: Lack of durable assets created by rural employment seems a serious shortcoming. I expected the Maharashtra EGS to provide all the rural works needed by the state within two decades, but rural Maharashtra is still in indifferent shape, despite occasional successes.

The Centre has had a ‘million wells’ programme for over two decades, and the target is still one million wells — those built quickly run dry. Mud roads disappear after every monsoon. Contractors say only earthworks can be done using 60% labour. Even a simple wall, they say, entails only 30-40% labour cost — the 60% NREGA requirement leads to corruption.

Dreze: I think that there is a serious lack of evidence here...... there may be lots of hidden possibilities here.

SSAA: I favour cash transfers as an emergency measure in this drought to get cash quickly to people. It should be possible to get some cash to job-card holders —maybe the equivalent of 30-50 days work. Cash transfers can be a substantial, temporary supplement to actual work done. Payment for this work could be based on daily wages and not measurement of work, as you suggest.

Dreze: Again, I am not clear about the targeting mechanism.

SSAA: NREGA must be creating some durable assets. But I remain convinced that poverty will best be removed through mechanised, capital-intensive rural infrastructure. NREGA looks to me a palliative, not the key to rural prosperity.

Hear Ye! Hear Ye!
Here Comes Another Day
Come One, Come All
And To Erect Another Wall
And Also A Billion Wells
Thus Enlist Our Voting Vassals
Oh , They Oppose Our Mudworks
Dismiss Them With A Smirk
And Come Next Fall
Rerun the Cycle, We Shall
In The Name of Mahatma Gandhi
Its Back To Days Of Mrs.Gandhi
We Shall Promise Economic Patronage,
And Link Party To The Electorate
By Initiating Guilt and Reciprocity
We Will Evade Electoral Nitty Gritty
Ah, There Remains A Hole In The Wall
As Big And Large As Well As Tall
Productivity Gone For A Loss?
Ain't Not My Problem Boss
And You Better Not Call It Truly Bizarre
Our Scheme Should Solve It, Yaar
Dreze Is Indeed Cooking Jin Pulao
Let Us Relive Teh Aromatic Era Of Haath Badao - Muhar Lagao -Garibi Hatao

Prasanth · Post by **Prasanth** » 11 Nov 2009 18:45

Sorry for the belated reply, but I can't help but to be euphoric on the 200 tonne gold purchase. We basically had just given China one nice bitch slap!!

ramana · Post by **ramana** » 11 Nov 2009 22:37

What exactly was the Finance minister meaning at the Economic summit in Delhi when he said" Stimulus will be revised based on anti-protectionist measures in West"?

Does he consider stimulus as a hedge for anti-trade measures? And who were the people on the dias with him?

svinayak · Post by **svinayak** » 12 Nov 2009 02:49

Abhijeet wrote:Leaving aside the specificity of the prediction (down to the month, July 2048), which I think he is doing to provoke - how is that prediction even remotely likely to come true? Is he predicting that US/UK incomes will decline between now and then? Or is India going to grow at 30% in real terms between now and then?

The question is why are they concerned about Indians having money. One guy told me that Indians having money is considered no no.

Katare · Post by **Katare** » 12 Nov 2009 04:06

Prasanth wrote:Sorry for the belated reply, but I can't help but to be euphoric on the 200 tonne gold purchase. We basically had just given China one nice bitch slap!!

You probably know that China is worlds largest gold producer?

Katare · Post by **Katare** » 12 Nov 2009 22:19

Good performance since August's higher growth came on a much smaller base

Industrial production up 9% in September

Manufacturing was up 9.3% in September against 6.2% in the like period last year, while mining and electricity generation grew 8.6% and 7.9% during the period under review

Suraj · Post by **Suraj** » 13 Nov 2009 02:16

Note that in addition to the September IIP figure, the August IIP data was revised upwards from 10.4% to 10.96%
IIP growth continues to be robust at 9.1%

Industrial output, as measured by the index of industrial production (IIP), grew by 9.12 per cent in September, up from 6 per cent in September 2008. It was mariginally lower than the 10.4 per cent in August this year.

The growth in industrial output for August was revised upwards to 10.96 per cent.

Therefore, for second quarter, the IIP figures were:
July: 7.1%
Aug: 10.96%
Sept: 9.1%
This gives an unweighted average of 9.05%. Since August and particularly September generates more economic activity due to the approach period to the festival season, the weighted average would exceed this figure.

In the first quarter, monthly IIP was 1.4% (April), 2.7% (May) and 7.8% (June), or a 3.97% unweighted average. As you can see, IIP has trended up since June, and stayed above 7% since then. In the first quarter, we reported GDP growth of 6.1%, despite <4% industrial growth and 2.4% agricultural growth.

Assuming services sector growth remains stable at around 8-8.5% in the second quarter, the much higher average industrial growth compared to first quarter (>9% vs <4%) indicates that 2nd quarter GDP growth (data will be released on November 30) will be between 7-7.5% .

csharma · Post by **csharma** » 13 Nov 2009 10:50

Relatively positive article on India in Time.

http://www.time.com/time/magazine/artic ... 10,00.html

The India Model

Those arriving in New Delhi a day early for the recent World Economic Forum India summit were greeted by a smog so dense, so noxious, that it seeped indoors, giving a brackish smell to hotel lobbies and making one wonder whether India's breakneck economic growth was going to be accompanied by the sort of pollution that made hellholes of old industrial cities such as Pittsburgh and Manchester. By the next day, thankfully, the smog had dispersed, and though that was probably because of a change in the weather, it was easy to believe that it had been blown away by the gale of optimism and self-confidence that India's leaders now routinely display. Though India's boom has been tempered by the global economic crisis, Prime Minister Manmohan Singh told the summit that he expected growth in fiscal year 2009-10 to reach 6.5% — hardly shabby — before recovering in the medium term to the 8% to 9% that was seen in the years before 2008.

But headline growth numbers are just the start. It is the sheer ambition of India's government that takes the breath away. At the World Economic Forum meeting, Kamal Nath, the Road Transport and Highways Minister, outlined a 12,500-mile (20,000 km) highway-construction program that will require India to build 121/2 miles (20 km) of new roads a day — and that is only a part of a gobsmacking infrastructure program that will include more power generation, more air- and seaports, more irrigation projects. Singh stressed the importance of nationwide improvement in education and health, which will also involve huge amounts of public investment. And if that is not enough, the government is committed to increasing the living standards of the hundreds of millions of Indians in rural areas who live on less than $2 a day, while ameliorating the state of the cities to which many of them are flocking, in a mass urbanization that in human history has been rivaled only by the one now under way in China.

Abhijeet · Post by **Abhijeet** » 14 Nov 2009 02:38

SwamyG wrote:I am not opposed to minority selling or disinvestment per se. I don't want the people to be dependent on just the Government or private sector. Long term I do not like to see we end up with companies that are too big to fail types and that the population are totally dependent on just few of these companies. I used the word "indiscriminate" and that is key in my opinion.

Some perspective is in order. India is a long, long way away from being overly dependent on the private sector. If anything, it needs to wean itself from its over-reliance on the "mai-baap" model of government. At present, the government is still basically hostile to the private sector (ask all the private airline companies). This has to change.

Yes, the developed economies over-reached in the last few years. That doesn't mean that all the lessons from their developmental paths are now null and void, and that we now have to question even basic things like exposing PSUs (very slightly) to market discipline.

Abhijeet · Post by **Abhijeet** » 14 Nov 2009 02:48

Rahul M wrote:I'm not much in favour of entry of big players into retail space, all the noise about organised retail notwithstanding.

Why? Small retailers in India are hardly very innovative or customer-friendly. They typically have one or more of the following problems:

- Limited selection of items
- Poor inventory management, so that they run regularly out of stock
- Unfriendly return policies - "goods once sold will not be exchanged or refunded"
- No economies of scale, resulting in higher prices

Any cost cutting they do is typically through tax evasion.

I've posted before that India needs Walmart or Ikea-type companies to use huge economies of scale in bringing down prices for consumers. This alone can increase people's standard of living significantly.

I would like to see an India where most durable goods don't have prices that are expensive even when converted to US dollars.

ppatil · Post by **ppatil** » 14 Nov 2009 14:48

India Stampedes Into Gold

Another positive article about India's gold purchase. What struck me about the article is the following part

The timing of India’s announcement was very interesting too. During the last two weeks of October, when India was negotiating with the imf, Russian officials reportedly “leaked” that Russia might, for the first time since the fall of the Soviet Union, sell a large portion of its state gold reserves.

By leaking that it would sell large amounts of gold, Russia helped keep a lid on gold prices just as India was seeking to complete the largest gold purchase in history. What will Russia ask for in return for this favor?

Do India and Russia have that kind of close economic co-operation? This is a refreshing to hear after hearing gloomy news about Indo-Russia relations.

Lauka · Post by **Lauka** » 14 Nov 2009 16:29

Was the 200 ton really 100% gold?

http://news.goldseek.com/GoldSeek/1258049769.php

Rishirishi · Post by **Rishirishi** » 14 Nov 2009 21:54

ppatil wrote:India Stampedes Into Gold

Another positive article about India's gold purchase. What struck me about the article is the following part

The timing of India’s announcement was very interesting too. During the last two weeks of October, when India was negotiating with the imf, Russian officials reportedly “leaked” that Russia might, for the first time since the fall of the Soviet Union, sell a large portion of its state gold reserves.

By leaking that it would sell large amounts of gold, Russia helped keep a lid on gold prices just as India was seeking to complete the largest gold purchase in history. What will Russia ask for in return for this favor?
Do India and Russia have that kind of close economic co-operation? This is a refreshing to hear after hearing gloomy news about Indo-Russia relations.

India is probably Russias closest ally. It purchases arms, Indians seldom act against Russian interest, is a counterweight to China and US (to a certain extent). India supplied much required food items, during the dark times after the colapse of Soviet Union. Putin, the former KGB person, is very well connected within Indian strategic circles.

svinayak · Post by **svinayak** » 14 Nov 2009 23:46

Rishirishi wrote: During the last two weeks of October, when India was negotiating with the imf, Russian officials reportedly “leaked” that Russia might, for the first time since the fall of the Soviet Union, sell a large portion of its state gold reserves.

By leaking that it would sell large amounts of gold, Russia helped keep a lid on gold prices just as India was seeking to complete the largest gold purchase in history.
Do India and Russia have that kind of close economic co-operation? This is a refreshing to hear after hearing gloomy news about Indo-Russia relations.

US does the same thing with KSA to keep oil prices down during war times when US is invading in 1991 and 2003. Also US trading companies and financial institutions play in the commodities market for oil when the oil price is high to make money and share the profit with KSA and other oil countries in the ME.

PRC China is used by US to keep inflation down so that US budget can be run on high deficit to fund large expenses such as defense. China is used by other countries to create large artificial demand so that they can profit from commodities trading in the world market. Lot of Chinese demand for commodities are not real demand but created to change the market price in the world market.

Prem · Post by **Prem** » 15 Nov 2009 00:34

And everyone work for real Great Godfather Goldman Sachs doing God's work by writting commodity contracts and taking cut.

Suraj · Post by **Suraj** » 16 Nov 2009 03:36

Steel demand estimated to rise 10% this year, and production to over 50MT
India Steel Demand Rises 7% up to October on Automobile Demand

India’s steel demand grew 7 percent in the first seven months of the fiscal year up to October, Steel Secretary Atul Chaturvedi said, spurred by the needs of makers of cars and appliances and builders of rural homes. Demand for some products rose 9 percent in the same period, he said in Kolkata, while attending an industry conference in the city.

Increasing demand for automobiles, refrigerators and air conditioners and rising farm income are boosting steel sales in India, the world’s second fastest-growing major economy. The nation’s industrial production in September rose 9.1 percent from a year earlier, according to Nov. 12 government data.

Steel consumption rose 5.7 percent to 26.49 million metric tons in the six months ended Sept. 30 from a year earlier, former steel secretary Pramod Rastogi said last month.

India’s steel demand may gain as much as 10 percent this fiscal year, almost double the pace previously estimated, as the government spends more on infrastructure, Rastogi said in June.

SAIL leads the way as disinvestment begins. GoI currently holds 86% of SAIL and will divest 10% in the first stage, and another 10% in separate stages, so that it still retains 66% ownership:
Stake Sales in India SAIL, NMDC to Begin This Fiscal

India plans to begin selling stakes in state-owned companies Steel Authority of India Ltd. and NMDC Ltd. this fiscal year, Steel Minister Virbhadra Singh said at an industry conference in Kolkata.

The proposed equity sale in New Delhi-based Steel Authority may be followed by a public offer of shares by the company, Steel Secretary Atul Chaturvedi said at the event. The two offerings may raise as much as 160 billion rupees ($3.5 billion) and the government may receive about half that amount, he said.

The government, which holds almost 86 percent of Steel Authority, the nation’s second-largest steelmaker, and 98.38 percent in NMDC, the biggest iron-ore producer, plans to sell shares as it needs funds to shrink its budget deficit and invest in infrastructure. India is implementing a plan to spend $8.95 billion this fiscal year to build road and telephone networks, power plants and irrigation facilities.

Steel Authority received approval for a public offer equivalent to 10 percent of existing capital, the state-run company said in a statement last month. Another 10 percent in two stages will be sold from the government’s holding in the company, it said.

csharma · Post by **csharma** » 16 Nov 2009 11:01

Steel production I believe was 56 million tonnes last year and should touch 60 million tonnes this year.

Suraj · Post by **Suraj** » 17 Nov 2009 00:05

Power generation is the new area of everyone's interest:
Bharat Forge plans Rs.50000cr ($11 billion) investment in power

The Kalyani Group's flagship company Bharat Forge is planning to make a big foray into the power sector with an investment of up to Rs 50,000 crore and a targeted generation capacity of up to 10,000 Mw, over the next 10 years.

"The group plans to diversify into other capital goods segment to de-risk itself from relying only on the auto components business. It has identified power sector as a priority area and is looking at generating 10,000 Mw of power in the next 10 years," a source said.

With each megawatt requiring an investment of about Rs 5 crore, Bharat Forge's plans could entail an investment of Rs 50,000 crore, the source added.

When contacted, Bharat Forge Chairman and Managing Director Baba Kalyani said the country's power generation capacity would have to be increased to nearly 800,000 Mw by 2031-32 to sustain an 8 to 10 per cent economic growth over the next couple of decades.

"Bharat Forge's initiatives in the power sector are geared to help India achieve this. We are making significant investments to address some of the key constraints that the country faces in enhancing power generation rapidly," he said, but did not comment on specifics.

India GDP to hit $2 trillion in 2014-15

"India's GDP is likely to grow at an average 12 per cent in nominal terms. Hence, India will be a $2-trillion economy by 2014-15," Enam Securities Head, Research, Nandan Chakraborty and economist Sachchidanand Shukla said in a report titled 'India Strategy' released today.

This growth will be led by the huge consumption demand in sectors like FMCG, power, auto (small car hub), IT and pharma, it added.

The brokerage firm said insurance companies, financial services and equity markets will flourish as the country's annual savings pool grows to $700 billion from $400 billion at present.

"More than half of this ($700 billion) could flow into financial savings. With favourable demographics and average seven per cent real growth, India can sustain more than 30 per cent savings rate akin to the Asian tigers, or China and Japan.

Global construction mkt to hit $12.7 trn, India to lead

The global construction market is expected to soar to a size of $12.7 trillion by 2020 with the sector output likely to rise sharply over the next decade driven by emerging markets like India, China and Brazil, a report says.

"Construction in major emerging markets such as India and China will see much higher levels of growth than developed countries by 2020. Growth in construction output in India will accelerate faster than in China up to 2020, but we expect growth in GDP to be higher in China," the Global Construction 2020 report stated.

It expects construction output to grow by more than three times in emerging markets compared to developed ones by the next decade.

"The predicted sharp rise in construction levels will be a reflection of strength of markets in emerging economies such as India, Brazil and China, who are set to double output over the next decade," RICS Chief Economist Simon Rubinsohn, who was closely involved with the team preparing the report, said.

SwamyG · Post by **SwamyG** » 17 Nov 2009 03:11

^^^
Yup, so it looks like. Moser Baer to invest $5 bn in Chennai and Hyderabad plants

vina · Post by **vina** » 18 Nov 2009 12:16

From New Yawk Times.

Labor Shortage Threatens Coconut Industry in Kerala

Another example of what I was talking about earlier about how the wage rates in general are going up across most of TN. I would say that is now a generic all India trend with probably depressed areas of UP, MP, Bihar, Orissa, Jharkhand and Chattisgarh as exceptions.

If a coconut tree climber can make $8 per day, I dare say even a semi skilled trade cannot be too far away from that number.

But look at the larger picture. The Commie Govt in Kerala wants to MECHANIZE . Can you believe it ?. Has the whole world turned upside down ?. Arent these the luddites who held up computerization on a big scale in India for all those years ?. Arent the commies the ones who came up with rules such as for every one computer you have in the bank, you should hire two people ?.

Think of it. If 20 years ago, someone had invented a mechanized coconut harvester and brought it to Kerala, all hell would have broken loose. The commies would have been out their with their pitchforks and aruval baying for that inventor and entrepreneur's head.

Oh, how the world turns ! Indeed, these aren't tidings of good things happening in India today and a better future for all, I haven't seen it.

On a personal note, after nearly 7 years of me trying to get SHQ to buy a dishwasher, it happened.. The maid gave a run around last week and went AWOL over the weekend. The dishes piled up and SHQ went crazy and decided enough was enough with the maid business and swore on getting the dish washer. We went and checked out Siemens, LG and IFB and we will be buying the IFB dishwasher this weekend!. I laughed at SHQ's histrionics and gave her the oh -so- superior, self satisfied, I told you so look.

.. One of the few times you win against SHQs I guess.

This maid washing dishes business too should go the way of the grinder, mixie, washing machine replacing hired help/labor at households. It is liberating for everyone.

Dunno who it is , but the famous quote "No power can hold back an idea whose time has come" holds true now. The time HAS come indeed my friends.

shyamd · Post by **shyamd** » 18 Nov 2009 19:03

^^^ I have been talking about labour shortage in TN from back 2 years ago when we were having our debate on ekhanomics!! TN is a different story altogether compared to the states you mentioned. Wage rates are ridiculously high and semi/skilled labour(carpenters) in the Coimbatore belt is high too. Just about every business is complaining that they can't find good quality carpernters for building construction and the wages for "kooli" are extortionate.

I hear TN govt have a new policy where all medical costs up to 1 lakh is paid for by the govt. On my last visit to TN, I noticed that almost every area (rural and urban) has a park with swings etc provided by the govt. I also hear the gang is making huuggeee amounts of cash but the service provided by the govt is good so people are happy.

Bade · Post by **Bade** » 18 Nov 2009 20:48

If a coconut tree climber can make $8 per day, I dare say even a semi skilled trade cannot be too far away from that number.

So true, from almost monthly harvesting of coconuts a decade ago, nowadays the 'KaNakkan' who has a monopoly of climbing trees for the family is called in every 3-4 months or so. The yields have gone down, due to felling of trees and high costs of maintenance (water and fertilizer), now that the family cowsheds with 3-4 milking cows have also vanished in the two decades since. The smaller land holdings along with the lower price of coconuts, means all this is not a very promising and profitable activity at small scales anymore.

Dileep · Post by **Dileep** » 19 Nov 2009 11:25

Coconut climbing is a highly skilled, risky job. When digging ditches get you Rs 300 a day, coconut climber should be getting much more. Even more than a carpenter or mason.

I mean, look at it this way. I myself cast a concrete slab and installed it. Would I climb the tree and pick the coconuts myself?

No!

Abhijeet · Post by **Abhijeet** » 19 Nov 2009 15:06

Isn't it more accurate to say that there is a shortage of skilled and semi-skilled labour rather than a general labour shortage? This comes back to the question of education - even vocational training is not as widely available as it should be, resulting in labour shortages for one industry and a surplus of unskilled, uneducated people.

Anecdotally, I see plenty of people engaged in subsistence level activities such as operating small roadside stalls in Chennai. I'm sure they would be happy to do more skilled activities, and would earn more doing so.

ArmenT · Post by **ArmenT** » 19 Nov 2009 21:50

Gold demand falls 34 percent in Q3

LONDON (Reuters) - Gold demand fell 34 percent in the third quarter as high prices weighed on investment flows and led to a slump in jewelry buying in key markets like India and the Middle East, a World Gold Council report showed on Thursday.

What do Econ gurus make of this? Any connection with India buying the Gold Bullion recently to keep the demand up?

krishnan · Post by **krishnan** » 19 Nov 2009 21:51

Demand down? They should visit T-Nagar gold stores

KrishnaMu · Post by **KrishnaMu** » 20 Nov 2009 05:31

Recession, what recession? Number of Indian billionaires doubles

In India, the rich just got richer. Despite one of the worst global recessions in history, the number of billionaires in the subcontinent has almost doubled since last year.

Figures show that there are now 52 billionaires in India, compared with 27 last year. Over the course of the year, the stock market has gained more than 75% and the economy has grown at almost 7%, pouring billions of dollars into the bank accounts of India's richest people.

Suraj · Post by **Suraj** » 20 Nov 2009 05:56

Several times, we've discussed why sovereign credit ratings from the usual suspects are, well, suspect. Here's an article that very nicely covers the problem of the S&P/Moody's duopoly of the credit rating agency (CRA) domain, while trashing the low investment grade rating they accord to India, which currently has the same sovereign credit rating as Iceland, the epicentre of the Nordic credit bubble. This level of stupidity places a real cost of $2 billion annually in extra interest payments upon India:
More standard ratings, less moody ones

Standard and Poor’s (S&P) and Moody’s continue to dominate the credit rating industry in terms of global reach and acceptance. Effectively, S&P and Moody’s are a duopoly at an international level even though there are many regional and country-specific credit rating agencies (CRAs). Further, Moody’s is the only publicly-held company among the larger CRAs and its high profit margins seem to indicate monopoly pricing power.

In the wake of the sharp downturn in the valuations of mortgage-backed securities last year, financial firms justified their investment in these non-transparent instruments on the triple ratings accorded to them. Bear Stearns was rated single A till just days before its stock price collapsed at the end of March 2008. Similarly, AIG and Lehman Brothers were rated single A almost till they went bankrupt in mid-September 2008.

The dubious role played by CRAs in the financial sector meltdown has been extensively documented. For example, the Securities and Exchange Commission’s (SEC’s) “Summary report of issues identified in the Commission Staff’s examination of select Credit Rating Agencies, July 2008”. Additionally, there is widespread agreement that there is an inherent conflict of interest in CRAs depending on the clients they rate for their revenues. As Dr YV Reddy had mentioned in his Justice KM Reddy Memorial Lecture in November 2009, one of the contemporary issues which deserves reflection relates to “infrastructural services for economic activity, such as credit rating services”

As of November 12, 2009, India was rated BBB– by S&P. It follows that for most Indian corporate houses and other sub-national entities, the BBB– sovereign rating becomes a credit ceiling. As can be seen from the table, on November 9, 2009, a BBB corporate house’s cost of borrowing was 0.78 percentage points higher than a single A rated entity. Therefore, an Indian corporate house would probably access funds from international sources at a spread of at least 2 per cent or more compared to a single A.

At the end of March 2009, the outstanding volumes of long-term ECBs and NRI deposits were $62.7 billion and $41.6 billion, respectively. These two sub-categories added up to about 40 per cent of India’s external debt. Assuming that Indian ECBs and NRI deposits have been contracted at an additional cost of 2 per cent, due to India’s relatively low sovereign credit rating, the extra interest outflow per annum is approximately $2 billion.

Let us also assume that India would be able to access debt funding from external sources for about 50 per cent of the $500 billion needed for infrastructure projects over the next decade. If the cost of borrowing for this $250 billion is again higher than warranted by 2 per cent because India is under-rated, and the average modified duration of this pool of debt is five years, the present value of the additional cost would be about $25 billion.

Is it really credible that as of November 2009, the Government of India (GoI) has a higher probability of defaulting, over a five-year horizon, on its external debt obligations as compared to Enron four days before it went bankrupt or Lehman in the second week of September 2008? Currently, the GoI’s BBB– rating is the same as that of Iceland and the UK is rated triple A while China is placed at A+. Are countries rated higher if they impose fewer controls on their capital accounts? Clearly, the answer is that CRAs do not have the answers. One way forward could be for India to push for discussions about perceived anomalies in sovereign ratings in FSB and BCBS forums. Since rating agencies serve a quasi-regulatory function, we could seek the setting up of a multilateral CRA. Sovereign ratings are crucial benchmarks and a multilateral agency could concentrate exclusively on providing country ratings with its deliberations open to independent evaluation.

Suraj · Post by **Suraj** » 21 Nov 2009 03:23

Two pieces of news: On one hand sequential capex spending growth has slowed:
Capex spending slows in Q2

There has been a 2 per cent sequential rise in the capital employed (CE) in the September quarter, compared to a 4.8 per cent rise in the June quarter over the March quarter. In absolute terms, CE has increased by Rs 26,365 crore, compared to Rs 53,600 crore in the first quarter.

The slowing in capital expansion is clearly seen in the current financial year. Large sectors such as cement, metals, oil and gas, power and telecom have provided negligible funds in the second quarter for their capex plans. There are several large projects in oil and gas, steel and telecom sectors which have been completed, and if one notes the current environment in these areas, no fresh investment will come forward.

More, incremental sectoral allocation in the first quarter has been largely due to the utilisation of unallocated funds, as several big and mid-size companies completed expansions by using this money.

... yet power and fuel (especially diesel) consumption demand is up strongly, suggesting that the additional capacity will soon be utilized requiring stronger capex growth:
Domestic fuel consumption up 12% in Oct

Fuel consumption rose 12 per cent to 11.058 million tonnes in October against 9.872 million tonnes a year ago, according to the data available from the Petroleum Ministry.

The surge was led by a smart 12.5 per cent growth in demand of diesel at 4.768 million tonnes. Diesel is the most consumed fuel in the country.

Petrol sales soared 18.6 per cent to 1.11 million tonnes while liquefied petroleum gas (LPG) demand rose 10.1 per cent to 1.095 million tonnes.

Power demand traces economic recovery

In a clear indication of an economic revival, the demand for power in India has jumped 6.3 per cent in the April-October period this financial year, compared with the same period of 2007-08 when it had increased by a mere 0.3 per cent, its lowest growth in the past five years, owing to the global financial meltdown.

According to the latest data obtained from the Central Electricity Authority (CEA), while power demand increased marginally from 108,911 Mw in the first seven months of the financial year 2007-08 to 109,304 Mw in the same period of 2008-09, it jumped to 116,281 Mw in the first seven months of 2009-10, as industrial activity improved due to the recovery. Factories accounted for around 30-40 per cent of the total power consumed in the country.

The latest figures of the Index of Industrial Production (IIP) released last week, where power carries a weight of around 10.17 per cent, also point to this recovery in demand. The power sector has grown at a rate of 6.8 per cent between Aril and October this year, compared with 2.5 per cent in the same period a year ago.

Power is one of the six major sectors contributing to the country's infrastructure in addition to cement, steel, coal, crude oil and petroleum products. The growth of these sectors account for more than a quarter in the IIP.

Therefore while the capex data is a concern, there's clear evidence that capacity utilization will rise, and that capex spending growth will also improve.

Vijay Kelkar's opinion on disinvestment:
Kelkar calls for strong divestment process

Vijay Kelkar, chairman of the thirteenth finance commission, has called for a “much stronger” disinvestment process of public sector companies, saying the money raised should be used to take care of environment degradation.

Valuing the public sector units, both listed and unlisted, at $300-400 billion (Rs 13.8-18.4 lakh crore), Kelkar said the country needed to restructure its assets by moving half of the capital to areas that only the government could take care of. “We need to reshuffle the priorities and raise $300-400 billion by privatising public sector companies and use this money on environment,” he said.

“On a mark-to-market basis, our PSUs are valued between $300 billion and $400 billion. If you divest 50 per cent, you have a $200-billion fund,” he added. Without jeopardising the national capital, the fund could be used for new needs like environment, urban infrastructure, need for solar energy and mass rapid transport system. Noting that the domestic capital market was more sophisticated now, unlike in the past, he said the government should retreat from industries that can be handled by private sector players. “Now, we don’t require public sector hotels, airlines, etc. Earlier, when we didn’t have a capital market, we didn't have entrepreneurship,” he said, adding that building environment was a new capital requirement.

Assocham pushes for ambitious export goal:
Draw export strategy of $300 billion exports by 2013: ASSOCHAM

"India should be undeterred with the weakened pace of exports and draw up ambitious export strategy of $300 billion by 2014 as developing and economies of scale will have completely recovered by then to absorb 'Made in India brands’," it said.

Demanding incentives for the exporter, Assocham has suggested creation of separate berths on major ports and substantial reduction in existing freight rates.

It has also stressed for exports subsidisation to create more space for Indian products in markets of Africa, Latin America, Nepal, Srilanka, Bhutan, Burma and Bangladesh.

"Export subsidies need to be extended to Indian exporters by substantially reducing excise and local levies and other duties including import duties on inputs required to make finished products for exports," the chamber said.

In the Foreign Trade Policy announced in August, while giving sops like extension of tax holiday schemes the government had said it would strive to double the exports by 2014.

Neshant · Post by **Neshant** » 21 Nov 2009 03:43

One way forward could be for India to push for discussions about perceived anomalies in sovereign ratings in FSB and BCBS forums. Since rating agencies serve a quasi-regulatory function, we could seek the setting up of a multilateral CRA.

its a good point.

rating agencies like moody's and S&P are a scam. They are single handedly responsible for the rating sub-prime junk as AAA+ yet they have not been taken to court.

GOI should initiate a discussion with them regarding their ratings criteria. Barring that, should they refuse, simply refuse to allow them to rate Indian debt or operate within the country. - I wonder whether this is a possibility ? They will bend eventually as India is too big a market for them to ignore.

I'd also advocate setting up a local independant debt rating agency to compete with them.