Indian Economy: News and Discussion (Jan 1 2010)

abhishek_sharma · Post by **abhishek_sharma** » 20 Mar 2010 13:12

A Joseph Stiglitz film:

http://www.stiglitz-thefilm.com/

joshvajohn · Post by **joshvajohn** » 20 Mar 2010 18:15

Indian wealth stashed abroad: What Advani says
http://business.rediff.com/slide-show/2 ... i-says.htm

India targets ‘black’ money
http://www.thenational.ae/apps/pbcs.dll ... 79918/1005

Switzerland ready to provide assistance to India on tax havens
http://nation.ittefaq.com/issues/2010/0 ... ws0001.htm

Neshant · Post by **Neshant** » 21 Mar 2010 00:08

Switzerland ready to provide assistance to India on tax havens

Bullsh&t i heard this 5 years ago. There is nothing forthcoming. They wish to continue doing business in India and the majority of their business is ripping off India.

If they can pull financial fraud on the US and stall for ages in the face of massive US pressure and threats of lawsuits and sanctions, what do you think they will do in India.

Lets see the action.

joshvajohn · Post by **joshvajohn** » 22 Mar 2010 04:47

Talking to 20 countries on black money: PM
TNN, Mar 6, 2010, 03.15am IST
http://timesofindia.indiatimes.com/indi ... 648743.cms

Ameet · Post by **Ameet** » 22 Mar 2010 10:24

India Inc’s billion-dollar sales club swells

http://economictimes.indiatimes.com/New ... 710204.cms

Close to two dozen Indian companies joined the billion-dollar revenue club over the last two years, reflecting the strength of Asia's third-largest economy that came out unscathed from the most severe global economic crisis since the Great Depression.

.........the number of companies in the billion-dollar club went up to 124 compared with 104 in the year ended March 2008.

Cipla, Lupin, Tata Tea, Tech Mahindra, Lanco Infratech, IVRCL Infrastructures and Bharat Electronics are among the firms that joined the billion-dollar revenue league in the last two years. Some like Motherson Sumi Systems and Apollo Tyres, which gained size through global acquisitions, also figure among the entrants.

tejas · Post by **tejas** » 22 Mar 2010 19:30

No need to do extraordinary labor to go after black money in Switzerland. There's $500 billion in assets in PSUs ( Parasitic State Undertakings)*

*Copyright pending.

putnanja · Post by **putnanja** » 23 Mar 2010 01:16

RBI to try polymer currencies

MYSORE: The Reserve Bank of India will introduce polymer currencies and one billion units of Rs.10 denomination will be circulated for field trial.

This was disclosed by RBI Governor D. Subbarao here on Monday during the foundation stone-laying ceremony for a new bank note paper mill.
...
...
However, the main raw material in the making of the note papers was almost entirely dependent on imports and the supply of the papers rested with a strong oligarchy which did not augur well for the country as it exposed the nation to the vulnerabilities of a suppliers market. “Hence the country needs to move towards self-sufficiency in production for operational, economic and strategic reasons,” he added.
...
...
On the menace of counterfeit notes, he pointed out that in Australia the fake notes detected was in the range of 7 units per every million pieces while it was 10 pieces for every million currency notes circulated in Switzerland. In India, it was 8 per million units but this did not include the fake notes seized by the police. The situation was not very alarming but the issue was of serious concern to the government and the RBI, he said.

RamaY · Post by **RamaY** » 23 Mar 2010 04:40

Continuing on India-2010 Budget discussion...

(all numbers are in Rs Crores)

1. Total Revenue Receipts = 811,458

2. Total unplanned expenditure = 553,613
This is the cost of running the business as usual. Two items I removed from budget numbers are:
1. Capital Outlay to Defence - Rs 60,000
2. Subsidies - This is a whopping Rs 128,224 Crore rupees

My approach leaves
3. Plan Outlay = Rs 257,845 Crores
for Planned expenditure after balancing the budget; below is a sample allocation. Please note that this budget has ZERO deficit at this point.

I will present my thoughts on how India can manage the budget allocations that it finances using Deficit Budgets in a way that it adds net present economic value.

Thanks,
As always highly appreciate spirited discussion and innovative ideas

Suraj · Post by **Suraj** » 23 Mar 2010 10:37

RamaY: Could you explain the two items in more detail ? I don't mean just a brief outline of what they are, but how they'll work, what are potential hurdles or problems, and such ?
* Farm Insurance
* Agri Dev and Employment

Infrastructure investment during 12th plan to reach Rs.41 lakh cr ($1 trillion)

"A preliminary assessment suggests that investment in infrastructure during the 12th Plan would need to be of the order of about Rs 40.99 lakh crore ($1,025 billion) to achieve a share of 9.95 per cent as a proportion of GDP," Planning Commission Deputy Chairman Montek Singh Ahluwalia said in a report on Investment in Infrastructure.

Yesterday, the Planning Commission had said investment in the infrastructure sector in the Eleventh Five Year Plan (2007-12) will be close to the target of $500 billion, thanks to a better-than-expected show by the telecom sector.

The Commission had set a $500 billion target of investment in the infrastructure sector during the Eleventh Plan Period.

Average growth during 12th plan period estimated at 8%

The Planning Commission is likely to scale down the average growth rate for the eleventh plan period (2007-12) to 8 per cent from an earlier projection of 9 per cent.

The downward revision in the mid-term review of the Plan, that is to be finalised tomorrow, has been primarily guided by the effect of the global economic downturn in 2008-09 and 2009-10. The Planning Commission has pegged the growth for the next financial year 2010-11, at 8.5 per cent.

One of the major challenges during the Plan has been the stunted growth in agriculture. In the first year of the Plan, the sector grew 4.9 per cent but slowed considerably in the later years.

In the current financial year, agricultural growth is projected to show a decline of 0.2 per cent. While it has been 2.1 per cent between 2007 and 2010, the overall economic growth has been 7.7 per cent.

Subbarao signals more rate hikes

Reserve Bank Governor Duvvuri Subbarao said India risks a “hard landing” if inflation isn’t reined in as Goldman Sachs Group Inc. and Morgan Stanley said last week’s interest-rate rise isn’t sufficient to curb prices.

“If we don’t tighten now and take action, the adjustment that we will have to make later on will be strong and we might indeed have a hard landing,” Subbarao told reporters in Bangalore yesterday. “Even if there’s a short-term trade-off between growth and inflation, in the medium term it is important that inflation is kept low in order to sustain growth.”

Subbarao’s comments signal India’s central bank may follow the first increase in interest rates in almost two years with more measures to rein in inflation from a 16-month high. Indian bonds and stocks fell yesterday, trimming the most expensive equities among the largest emerging markets, on investor concern countries from China to Brazil may also raise borrowing costs.

RamaY · Post by **RamaY** » 23 Mar 2010 20:28

Suraj garu,

I have posted this in Indian Interests a long time ago and that thread is locked.

Posting in full again

Farm Subsidies & Aggriculture

I have allocated a total of Rs 108,000 crores towards farm subsidies and employment scheme and below are my assumptions, strategies, and calculations.

My primary assumption is that a nation-state has to find an efficient way to provide employment to its citizens in a way that, their incomes are above the poverty line (so can be taxable, if needed) and contribute towards national self-reliance, wealth accumulation, and power projection.

The recent economic earth-quake resets certain economic rules that are prevalent for the past century and half. My ideas are based on certain ground rules that India must be able to feed (food security) its huge population, develop renewable energy sources (in the absence of proven oil and gas reserves), be environmentally conscious, and work towards improving Gross Happiness Indix, so that the end result will be a happy, healthy, environmentally-sound base economy that can offer high level of employment opportunities.

Farm-Subsidy program

The subsidy structure allows that small farmers get the most benefit.
1st acre – Rs 2000
2nd acre – Rs 1000
3rd acre – Rs 750
4th acre – Rs 250

2000+1000+750+250 = 4000 = Rs 1000 per acre.

My plan envisions to provide a subsidy of Rs 1000 per acre-month (pro-rated) for all the farming families up to a max limit of 4-5 acres per family. For example, if I have 1.5 acres of land, I will be eligible for Rs 3000 farm subsidy per month and if I have 10 acres of land, my eligibility will be limited to Rs 4000 per month.

Now this subsidy if not 100% free. I can either opt to return this money interest free or pay it thru the harvest up to 30% of the yield, whichever is lower. For example, I owe the govt 18,000Rs (12x1500) and I have a total harvest of say 8 tons of rice in that year. I can either pay the 18k in cash or submit 2.4 tons of rice at FCI (Food Corporation of India), whichever is profitable to me.

This option (plan) acts as crop-insurance, because in the event that I got only 3 tons of harvest in a particular year, I would return only 0.9 tons of harvest and my loan is closed. I will take a new loan next year towards next year’s harvest.

The second part of the program is an employment scheme in farming sector.

From CIA Factbook, I gathered that

Code: Select all

India Total Land:::2,973,190Sq. KM  = 734,691,248Acres = 73.47Crore Acres
Irrigated Land:::558,080Sq. KM  = 137,904,571Acres = 13.79Crore Acres
Arable Land (48.83%):::1,451,809Sq. KM  = 358,749,736Acres = 35.87Crore Acres(Potential commercial forest land)

Non-Arable Land:::1,521,381Sq. KM  = 375,941,511Acres = 37.59Crore Acres

100 Cities (20L - 1Cr):::90,000Sq. KM  = 22,239,484Acres = 2.22Crore Acres
1000 Towns (50K - 20L):::25,000Sq. KM  = 6,177,635Acres = 0.62Crore Acres
600000 villages (1 sq km):::600,000Sq. KM  = 148,263,229Acres = 14.83Crore Acres

TOTAL Populated Ares:::715,000Sq. KM  = 176,680,347Acres = 17.67Crore Acres

Permanent Forests/nature:::806,381Sq. KM  = 199,261,164Acres = 19.93Crore Acres = 27% of total land area

From the above 35.87 crore acres of available arable land, I would like to assign 5 crore acres to 1 crore below poverty line families and offer them Rs 1000 per acre per month subsidy for first 5 years on the pre-condition that

They grow
1. Other type (teak, deodar, other forest type) – 1 Acre
2. Permanent Crops (bamboos, Eucalyptus, type) – 1 Acre
3. Bio-diesel (Jatropha, palm oil etc) – 2 Acres
4. Arable (vegetables etc) – 1 Acre

arable land - land cultivated for crops like wheat, maize, and rice that are replanted after each harvest; permanent crops - land cultivated for crops like citrus, coffee, and rubber that are not replanted after each harvest; includes land under flowering shrubs, fruit trees, nut trees, and vines, but excludes land under trees grown for wood or timber; other - any land not arable or under permanent crops; includes permanent meadows and pastures, forests and woodlands,

This plan will automatically bring 1 crore families (~4crores population = 4% of total population) out of poverty immediately while adding

1. 10 million acres of new forest lands
2. 10 million acres of commercial timber
3. 20 million acres of bio-diesel = ~3billion gallons of bio diesel saving ~$3B oil imports from 5th year. The best part is this is green and renewable.
4. 10 million acres of additional food products.
5. 100 million carbon credits (2.5 credits per acre for the first 3 categories) = 100 million megawatts of electricity production = India can add another 11000 MW of thermal power generation without violating Kyoto protocol.
6. If allowed to rent the land to establish Sterling Energy Systems’ solar power dishes at 3-4 units per acre (so they do not over crowd the land) the farmers can earn additional rent at least another Rs 500 per acre.

Thus we can achieve all the stated objectives
1. Poverty alleviation
2. Food Security
3. Energy Security
4. Forests & Environment
5. New Economy (eco-friendly employment creation)
6. Cultural preservation - the tribal population is given economic security without threatening their unique cultures built around environment.

Risks:
1. The farm subsidy program needs National-Id in place so the program is not misused and the target population receives the benefits directly to their account IN CASH.
2. Close integration is required between Farm Land registration, National Id program, and Farm Subsidy programs.
3. The FCI channel can be abused (already highly corrupted channel) during crop collection.
4. Unemployment Program has to be devised in a way that the land is allotted to Tribal populations only and not sold/resold to politically motivated groups.

Theo_Fidel · Post by **Theo_Fidel** » 23 Mar 2010 23:23

RamaY wrote:My primary assumption is that a nation-state has to find an efficient way to provide employment to its citizens in a way that, their incomes are above the poverty line (so can be taxable, if needed) and contribute towards national self-reliance, wealth accumulation, and power projection.

Agriculture can never do this for you.

I have commented on this before. The population in agriculture has to come down to 5% or less. There is no other option.

Right now 60% of the population in agriculture has to depend on a 18% slice of the GDP.

This means they are guaranteed to have a per capita income 1/4 that of the rest of the population. i.e. Grinding Poverty.

In Southern TN for instance it is not uncommon for a village of 5000-10000 people to have 500 or so acres of crop land.

This works out to 2-3 families per acre!

Where do these people go in your 1 family per 5 acre scheme.

5 acres will guarantee poverty in most of India for a family.

I have 17 acres and it is touch and go whether it is profitable or not. Of course I do not have to depend on its income.

Also smaller farms, less than an acre, are the most inefficient enterprises. Most of these are used for local consumption and never enter the general economy. Much bartering goes on. Many are left fallow as the farmer is too poor to afford inputs.

Encouraging these is not a good idea.

Around here a farm needs to be 20-25 acres to be reasonably efficient (Afford tractors, proper soil testing, irrigation & drainage, etc).

This maybe different elsewhere.

RamaY · Post by **RamaY** » 24 Mar 2010 03:39

^^^

I never said, my plan envisions keeping a certain percentage of population in agri-sector. All my plan does is improve the effectiveness and efficiency of current farm subsidies (> Rs. 120,000 Cr per year) to achieve long term food, energy, and financial security. You need to go thru my overall vision to know the proportion of population that will remain in Agri-sector after 10-20 years.

India has 358,749,736 acres of arable land, but uses only 137,904,571 acres that is <40% efficiency.

If we can bring all the arable land into a sustainable program, and make it economically self-sufficient, it will have the following affects on Indian economy –

1. At 5 acres/family the available arable land (358,749,736 acres) can support 7 crore families. That is, 7x4 = 28 crore population. That is a fair 25% of Indian population.

2. Presently our agri-sector GDP is ~$273B. This can be increased to $710B (real GDP) by optimizing the arable land. This is ~$2T+ PPP economy. This works out to be $2840 per capita income for that 25% of population and ~$8500 PPP. This is more than 100% improvement.

Another question is the feasibility of agri-sector as the primary income source. I disagree with conventional wisdom here; and my thoughts are –

At present our food-grain production efficiency is 3.5 tons per acre. In comparison China produces 6.5 tons of food grains per acre. If we can increase the food grain production by 50% to 5.25 tons per acre, it will increase it is a ~$2000 income (@ Rs 1000 per 100Kg food grains) improvement per family at 5 acre level with a gross income of Rs 2,62,500 per family. At 60% profit margin it works out to be Rs 1,60,000 income per family. This is a fair income level per Indian standards. Please note that this family will have near-zero expenditure on food-grains for personal use.

That is why I say we must treat this sector as Indic-version of SMB. We must make this sector profitable for the population and governance. There are good economic opportunities to exploit in this field.

Theo_Fidel · Post by **Theo_Fidel** » 24 Mar 2010 05:25

http://www.thehindubusinessline.com/201 ... 151100.htm

The report has projected national savings to touch $1.4 trillion by 2020. The savings growth projection has taken into account higher domestic savings as a percentage of GDP, assuming household savings will grow at 35 per cent from 32 per cent at present.

Assuming a nominal annual growth rate of 13 per cent, the report has projected India's GDP to quadruple over the next ten years to $4.5 trillion from current $1.1 trillion.

http://economictimes.indiatimes.com/new ... 717057.cms

NEW DELHI: Commerce and Industry Minister Anand Sharma today expressed confidence that the size of Indian economy is likely to double to USD 2.5
trillion by 2015.

2000 years to the first Trillion. Now 5 years to the next. Isn't compound growth a wonderful thing.

Theo_Fidel · Post by **Theo_Fidel** » 24 Mar 2010 06:36

RamaY wrote:^^^
Presently our agri-sector GDP is ~$273B. This can be increased to $710B (real GDP) by optimizing the arable land. This is ~$2T+ PPP economy. This works out to be $2840 per capita income for that 25% of population and ~$8500 PPP. This is more than 100% improvement.

Again no modern economy has an agriculture sector more than 5% of GDP.

For 25 % of Indians to live off agriculture the rest of India has to allocate an equivalent amount of GDP for food, cotton, etc.

In your case this would be ~ 35% of after tax Rupees. Leaving very little for all our other requirements. Guaranteed poverty for all.

Prosperity will only come to our people when we devote less than 5-10% of income to food. Ergo that has to be the sustainable agricultural population.

And don't even bring up the export nightmare...

As a side note less than 2% of the USA population is in agriculture. While it is 60% for us. This is why they so rich & we so poor.

India has 358,749,736 acres of arable land, but uses only 137,904,571 acres that is <40% efficiency.

Not sure where you got this but its not true at all. The smaller number may the irrigated section while the rest is rainfed. Look at india on google earth. There is not an inch of land that is not farmed. Every valley, hill side and mountaintop is under the plow. I challenge you to find even 1 million acres of unencumbered arable land. let alone 200 million acres.

RamaY · Post by **RamaY** » 24 Mar 2010 07:33

Theo_Fidel wrote: 2000 years to the first Trillion. Now 5 years to the next. Isn't compound growth a wonderful thing.

India was > trillon $ (if it was there) economy many times in the past 2000 years. The modern concept of economic-growth is made necessary due to islamic partially and to British rule for sure.

GDP estimate

According to economic historian Angus Maddison in his book The World Economy: A Millennial Perspective, India had the world's largest economy from the first to eleventh century, and in the eighteenth century, with a (32.9%) share of world GDP in the first century to (28.9%) in 1000 AD, and in 1700 AD with (24.4%).

Similarly, the hypothesis that agri-sector is 3rd-world economy need not be a correct, IMHO. Please read my proposal one more time and see the land allocated to 3rd wave economy, 2nd wave economy, and 1st wave economy.

RamaY · Post by **RamaY** » 24 Mar 2010 07:45

For 25 % of Indians to live off agriculture the rest of India has to allocate an equivalent amount of GDP for food, cotton, etc.

In your case this would be ~ 35% of after tax Rupees. Leaving very little for all our other requirements. Guaranteed poverty for all.

In my model, on average (after leaving out current irrigated land)
- Only 20% of land is allocated for food production
- ~40% of land is allocated for energy (bio-fuels)
- 20% is allocated for timber and other industrial products

so in total only 20% of 25% = 5% of land is allocated for food-grain production and it matches your standards.

Not sure where you got this but its not true at all. The smaller number may the irrigated section while the rest is rainfed. Look at india on google earth. There is not an inch of land that is not farmed. Every valley, hill side and mountaintop is under the plow. I challenge you to find even 1 million acres of unencumbered arable land. let alone 200 million acres.

My data is from CIA factbook (already mentioned). But you could be right.

If there is no additional land, then it should be even easier to limit the model to Farm Insurance program. In that program, not all the money is lost as atleast 60-70% of the money can be recovered (after wastage and risks).

The point is how to bring efficiencies in to the current model of Farm Subsidies. My idea is just one alternative, and I believe it is better than what GOI does now.

If there are better alternatives, we should discuss them and do a payoff analysis.

Theo_Fidel · Post by **Theo_Fidel** » 24 Mar 2010 11:00

RamaY wrote:so in total only 20% of 25% = 5% of land is allocated for food-grain production and it matches your standards.

It is not a question of land, but of the number of people working it.

If there are better alternatives, we should discuss them and do a payoff analysis.

Yes, there is a better model. One that is proven (repeatedly) and is organic.

The population must urbanize and increase productivity. dramatically. Greater than 80% must move to cities towns and larger agglomerations of minimum 100,000, and soon. They must stop being so dependent on the agricultural production and apply themselves to technical production. This is always more productive. No need to do a payoff analysis.

1 bale of cotton = Rs 2500 to farmer = 800-1000 shirts worth Rs 1 lakh to manufacturer = Rs 10 Lakh to bulk retailer = Rs 100 lakh to designer label.

You tell me where the people should be. There is no alternative to hard work, high education and superior technical ability. This is not going to happen on a farm.

geeth · Post by **geeth** » 24 Mar 2010 16:26

>>>You tell me where the people should be. There is no alternative to hard work, high education and superior technical ability. This is not going to happen on a farm

I have plans to do farming, which is my passion..are you discouraging me..?

RamaY · Post by **RamaY** » 24 Mar 2010 19:11

Theo_Fidel wrote: Yes, there is a better model. One that is proven (repeatedly) and is organic.

The population must urbanize and increase productivity. dramatically. Greater than 80% must move to cities towns and larger agglomerations of minimum 100,000, and soon. They must stop being so dependent on the agricultural production and apply themselves to technical production. This is always more productive. No need to do a payoff analysis.

1 bale of cotton = Rs 2500 to farmer = 800-1000 shirts worth Rs 1 lakh to manufacturer = Rs 10 Lakh to bulk retailer = Rs 100 lakh to designer label.

You tell me where the people should be. There is no alternative to hard work, high education and superior technical ability. This is not going to happen on a farm.

How is urbanization organic to India? How much of its population lived in cities in its '000 years of history?

You sound impatient in your proposal. How do you envision to move India's rural population to cities? China style? Do you fathom the investment required to do that just from civic infra perspective? What do you expect to do with those people in cities? How do you plan to build the necessary industrial and services industry? What type of industrialization you envision for India in next 20-100 years?

We must not judge a persons character, happiness, and intelligence based on where they live. What makes you think that our rural population is generally ill-educated (define education for me), and do not do hard work?

Abhijeet · Post by **Abhijeet** » 24 Mar 2010 19:38

RamaY, are you thinking that a large percentage of the population being farmers can be a steady state scenario for India? That is, can 25% of the population be farmers in the long term, while still enjoying a decent standard of living? Or is this more a transitional scenario till we reach a more modern percentage of 2-5%?

I don't think that even basic economic modeling will support the notion that a quarter or more of the country can be involved in farming and still be considered well off in the modern world. As a transitional step, perhaps, but not indefinitely. At some point the farming to non-farming population ratio must fall into line with those of all other countries that have modernised.

What was "well off" in the 16th century would be considered poor in most countries today, so there's not much point comparing what percentage of the population was involved in farming in previous centuries.

SBajwa · Post by **SBajwa** » 24 Mar 2010 20:31

Indian landmass is an excellent land for agriculture. We can easily capture the following markets in the world., provided that the modern methods are used.

1. Fruits.
2. Organic Fruits and vegetables.
3. Medicinal herbs/tables made from Turmeric, etc (Ayurvedic).

We just need to market these around the world!! This is a tip for a future well educated business man (MBA)

Hari Seldon · Post by **Hari Seldon** » 24 Mar 2010 21:00

Potentially huge news here.

India Reviews Tax Treaty With Mauritius

HONG KONG -- In a move that could have wide-ranging impact on foreign investment into India, Indian lawmakers are preparing to introduce a new tax code next year that could change Mauritius' status as a tax haven for foreign funds investing in India.

The proposals are part of efforts by Indian regulators to raise more tax revenue from the financial services sector. The proposals, which are currently in a comment period, cover a wide variety of measures including a draft bill to override the tax treaty with Mauritius. That bill would have significant impact on investments into India as currently 80% to 90% of foreign investment into the country flows through Mauritius, a small tropical island off the coast of Africa.

Jai ho.

Akshut · Post by **Akshut** » 24 Mar 2010 21:11

Wouldn't it affect the services export and FDI?

Suraj · Post by **Suraj** » 24 Mar 2010 21:15

That Mauritius route is roundtripping capital. Frankly, it should be left alone, or at least, not completely elimininated. Further, the WSJ figure is way off - Mauritius does not account for anywhere close to 80% of our FDI; the latest monthly FDI statement for Dec 2009 from Commerce Ministry provides hard numbers.

On the matter of agriculture, I agree with Theo_Fidel's position. Investing in trying to make rural agriculture based life capable of 'sustaining' a population just punts the ball further along as far as urbanization is concerned. That investment is better spent on early urbanization measures, and the returns from that effort ploughed right back into further investing in urbanization and industrialization. Viewing everything from a government revenue/expenditure perspective is misleading - a lot of the impetus will come from private entities investing in realty, industries and infrastructure.

svinayak · Post by **svinayak** » 24 Mar 2010 21:34

Theo_Fidel wrote:
Again no modern economy has an agriculture sector more than 5% of GDP.
For 25 % of Indians to live off agriculture the rest of India has to allocate an equivalent amount of GDP for food, cotton, etc.
In your case this would be ~ 35% of after tax Rupees. Leaving very little for all our other requirements. Guaranteed poverty for all.
Prosperity will only come to our people when we devote less than 5-10% of income to food. Ergo that has to be the sustainable agricultural population.
And don't even bring up the export nightmare...
As a side note less than 2% of the USA population is in agriculture. While it is 60% for us. This is why they so rich & we so poor.

Reading American history will give a sense of transition of economy from agriculture to industrial base. Between 1870-1910 US economy transferred from a basic agriculture to Industrial economy comparable to Europe. There is a historical period in the world economy.
Poverty was still more than 50% until 1950. After WWII another big economic expansion changed the economy further into a global and service economy. Even in 1970s there was rural poverty in the countryside. By creating large urban industrial areas the per capita income was raised for a large portion of the population.
India is in a different period of the world economy - post industrial world of the western economies.
With a demographic advantage and rise of asia and with resources very close to its region India can create its own economic boom for consumer products, hi tech and services. The hold of the western economy in the global economy has to fall and is happening due to demographic shift.

Theo_Fidel · Post by **Theo_Fidel** » 24 Mar 2010 22:25

Pandyan,

I've cross posted in the agriculture thread WRT to your question.

Geeth,

Not discouraging at all. Just saying that 60% of India can not be in agriculture. Get into this with your eyes open. I kinda stumbled into it and its been tough some years.

There is definitely a place for well educated creative farmers in India. When I see the silly things farmers around here do I can only shake my head at times.

RamaY,

I was not trying to be short.

I'm just impatient that we keep going through this argument as a society. The majority of Indians still have this romantic attachment to agriculture as a wealth generating activity. It is subsistence activity. Basic survival, nothing more.

And yes the majority of the local farming population even here in Kanya Kumari is uneducated and lack knowledge. I know this because I pay the schooling fees for two little girls who now live with their grandmother. Their mother died two years ago because their father refused to take his wife to the Hospital and instead went to the local quack and got a ointment for her stomach pains. Instead of applying it on her stomach he had her drink it. She died after 3 days of acute agonizing pain.

Life in rural India is fairly short for most people.

Katare · Post by **Katare** » 24 Mar 2010 22:40

PM sets 10% growth target for 12th Plan

SBajwa · Post by **SBajwa** » 24 Mar 2010 23:11

Not discouraging at all. Just saying that 60% of India can not be in agriculture.

Well!! agriculture can easily be expanded to include following

1. Cotton production for cotton mills.
2. Juice and candy factories.
3. chicken, eggs, fish, honey, meats, milk and milk products, etc production.
4. High priced dry fruits (pistachios, almonds, etc) and related industries.
5. High priced fruits (mangoes, grapes, guava, papaya, coconut, etc) and related industry (juices jams, pickle/achaar, wine, sugar, alcohol, beer, etc).
6. Tourism., (get the people to visit these gardens and related factories).

and to do above!! All you need is a good education at the basic level. I would include an economics and agriculture related curriculum at a very early age in schools (3rd grade). This can educate the children/farmers/adults on the basics of irrigation, water farming, seeds, etc.

We have agriculture universities all over India all we need is a related education course in these university, graduates of these can become teachers of "agriculture" subject at schools. We definitely need to educate the young/old/everybody in rural area to get more economic advantage of this god gifted geographic mass that is very rich in soil and fresh water.

Actually!! I would make it an offense in good land areas., to grow rice and wheat in India as we have other places in the world where rice and wheat are grown cheaply.

India can easily become a developed country if we focus more on our agriculture and related industry.

Prem · Post by **Prem** » 24 Mar 2010 23:14

Question for Gurus,
Was Indian economy 1.2 Trillion in last fiscal year or the number is for current fiscal year for growth can be caluclated only on previously gathered $ data. IMHO, if things remain same and going by past growth , the doubling ought to happen in 2014 and then again in 2019 Plus change in base year as well effect of exchnage rate . The one extra year groth in 2020 will/can give us additional half a Trillion ( whats couple of billions to indoos but 3 Pakiland worth ) plus GNP.

RamaY · Post by **RamaY** » 25 Mar 2010 01:17

Abhijeet wrote:RamaY, are you thinking that a large percentage of the population being farmers can be a steady state scenario for India? That is, can 25% of the population be farmers in the long term, while still enjoying a decent standard of living? Or is this more a transitional scenario till we reach a more modern percentage of 2-5%?

If I map my thought process it would look like: 1. Philosophy -> 2. Strategy -> 3. Policies/Plans -> 4. Organization/structure -> 5. Execution/Control
My above posts fall into 3rd step.

My plan realizes into – out of the 25% population in Agri-sector
 Agri Sector – Food production = 1st wave economy = 20% of 25% = 5%
 Agri Sector – Bio-diesel production = 4th wave economy = 40% of 25% = 10%
 Agri Sector – Industrial plantation = 3rd wave economy = 20% of 25% = 5%
 Agri Sector – Forestry = 4th wave economy = 20% of 25% = 5%

And I plan to achieve this transformation with as little amount of capital investments (please see my post here) as possible.

Abhijeet wrote: I don't think that even basic economic modeling will support the notion that a quarter or more of the country can be involved in farming and still be considered well off in the modern world. As a transitional step, perhaps, but not indefinitely. At some point the farming to non-farming population ratio must fall into line with those of all other countries that have modernized.

The conventional wisdom is that economies move linearly from one wave to another wave. But India can leapfrog from a 2.1 wave economy into a 3.8 wave economy by understanding the linkages between various economic sectors and how they interact with each other. See if below picture makes sense to you:

Abhijeet wrote: What was "well off" in the 16th century would be considered poor in most countries today, so there's not much point comparing what percentage of the population was involved in farming in previous centuries.

This is a rhetorical statement. Let us have a serious discussion. I was talking about the notion of India becoming a $1T economy after 2000 years. The size of the economy is relative depending on many variables.

As of 2009 the per-capita GDP (not Income) of an Indian is $3,100. We all know that an agri-citizen’s per capita GDP is lower than this number, but let us assume it is at par. My strategy would increase this per capita GDP to $11,135. This works out to be a 14% GDP growth in this sector.

Theo-Fidel,

Once again your argument is tangential. Education or health need not be a function of location (rural/urban) or economic-sector.

Suraj · Post by **Suraj** » 25 Mar 2010 02:35

What is 'Renewable Economy' ? How is it so distinct from industrial and services activity as to warrant being a separate economic activity category.

My problem with grand experiments of this kind, even on paper, is that unless it is proven on a small scale as one that is self-supporting and capable of extending itself on its own, it will not work. Otherwise, such a claim risks being seen as little more than a grandiose 'yum bee aay' presentation.

RamaY · Post by **RamaY** » 25 Mar 2010 03:26

Suraj wrote:What is 'Renewable Economy' ? How is it so distinct from industrial and services activity as to warrant being a separate economic activity category.

My problem with grand experiments of this kind, even on paper, is that unless it is proven on a small scale as one that is self-supporting and capable of extending itself on its own, it will not work. Otherwise, such a claim risks being seen as little more than a grandiose 'yum bee aay' presentation.

Not a new concept Suraj! This is something the advanced economies are trying to achieve in next 50 years. They are trying to develop necessary technologies and establish the infrastructure required to achieve

- Renewable energy sources
- Convert the current 2nd wave based machinery to work with renewable energy resources
- Green living even in cities like New York
- renewable industry raw-materials

and so on.

What I am proposing is to develop a renewable economy bottom-up, which is different from what already industrialized nations are trying to do. India doesn’t have to build an industrial economy at break-neck speed and then somehow develop an associated service economy so that it can evolve into an renewable economy. Remember what India did vis-à-vis telecom/communications sector? India can do the same with agri-sector as well.

All it requires is smart use of farm subsidies and facilitating associated technology infusion.

Suraj · Post by **Suraj** » 25 Mar 2010 04:05

RamaY: I'm not questioning that there is a lucrative green/renewable business area. I'm questioning why it merits a separate classification, apart from industries and services. What you are referring to is just the application of specific industrial technologies and service activities. It isn't anything radically different as to merit a separate classification of its own. It isn't going to evolve an entire macroeconomy all its own, but will be a niche within general services and industrial activity. In fact, stuff like giving old newspapers and junk to the kabaadiwala has been available in India for a very long time already.

RamaY · Post by **RamaY** » 25 Mar 2010 04:32

I see it differently Suraj. My interest is in tuning the capital outflows of our economy so that we can employ 450 million labor force (more than 3 times that of USA and double of EU) in sustainable manner.

If India were to achieve US/EU level of industrialization, Indian economy must be 3x14 = $42T economy. This will take India ~38 years at 10% growth; assuming that USA economy remains stagnant all the while. Now mix the other (-ve) variables into the equation.
- India has 1/3 land, water, mineral resources
- India has >30% illiterate population.

...

I will pause this discussion by saying this. We can revisit this discussion after some time.

The western economic models are developed based western socio-economic variables. All those variables may not apply in Indian scenario. We need to come up with our own models to achieve the required sustainable growth.

Please see this video. Based on one criteria Kerala has better health care than Washington DC. Earlier someone posted that better education and health can only be achieved by urbanization and industrialization. That is not true. This fallacy applies to economic structures as well.

Gus · Post by **Gus** » 25 Mar 2010 05:30

Some months ago I read an article of an IIT-M grad experimenting in farming part time and then turned full time. He adapted / adopted several Israeli techniques to farm in semi arid water shortfall area near chennai. Will try to fish it later and post it.

paramu · Post by **paramu** » 25 Mar 2010 05:41

RamaY wrote:The western economic models are developed based western socio-economic variables. All those variables may not apply in Indian scenario. We need to come up with our own models to achieve the required sustainable growth.

As we recently discovered, even this western economic models are not sustainable. There had been enough fraud and countries available to be exploited, to sustain this thus far.

2% of population in agriculture, with full automation for maximum productivity - only 2% in manufacturing, and with full computerization - only 3% in services, what would remaining 93% of population do? Watch bollywood movies?

Western notion of perpetual growth is unsustainable and that should not be what we try to emulate. Textbook approach is not going to work, it may do wonders in short term but it may not be viable if we look how it has to sustain for several generations.

astal · Post by **astal** » 25 Mar 2010 06:29

RamaY,

I admire your effort to think of an alternate model for growth in India. There are fundamental problems with farming as a way to mass prosperity as mentioned by many posters. I will recap them.

Agriculture is susceptible to natural events such as lack of rain, pests, floods and other disasters.
When nature is bountiful there is overproduction. Prices fall and farmers bear losses.
Technology and efficiency in agriculture have been growing allowing fewer workers to produce the same output.
Empirically, as income increases, a smaller portion of it is devoted to agricultural products. Thus the wealth expansion path is skewed away from agricultural goods. Rich people tend to spend a higher proportion of their income on industrial goods and services.
A large number of farmers implies small farms. Small farms have less potential for efficiencies of scale and technology. They cannot grow varieties.
Small farms have less access to insurance, transport and irrigation mechanisms.

Models reflect what has been observed when countries are developing. Maybe some things are not applicable to India. While promoting mass employment in agriculture we have to be careful not to deprive generations of better alternative employment opportunities though misguided policies and good intentions. Mao and his

Great leap forward

should serve as a model of what not to do.

Less people employed in agriculture, producing more efficiently is the need of the day. Larger individual holdings, more food related industries and agribusinesses, technology and mechanization are unavoidable.

Even with your optimistic numbers of 25% employment in agriculture, our cities will eventually have to sustain double their current population. Most likely the future is urban for the vast majority of Indians.

The strategic aspect of food production however may need some attention but this does not require a large proportion of people employed in agriculture.

Regarding sustainability and holistic growth and balance with nature, it is an important aspect of future growth. Re-forestation, energy plantations, carbon control and water management are important. They may employ a small number of people but not a double digit percentage of the labor force. The Indian public and policy makers will give these aspects priority once our incomes have gone above a certain level. This will necessary due to our high population density and has precedence in our ancient philosophy. Until such time we need to manage larger urban populations, mass rural emigration and high demand for infrastructure so that this mass of rural migrants can be employed at their potential.

SBajwa · Post by **SBajwa** » 25 Mar 2010 19:02

Some months ago I read an article of an IIT-M grad experimenting in farming part time and then turned full time. He adapted / adopted several Israeli techniques to farm in semi arid water shortfall area near chennai. Will try to fish it later and post it.

There are hundreds of examples like this everywhere. One person in Punjab was only going to inherit 4 acres of land., thus he had no other choice but to educate and join services. After his education., as he couldn't get a job with services he started Mushroom farming in those 4 acres and now (15 years later) his mushroom farming business has expands and he grows 40% of India's mushroom.

RamaY · Post by **RamaY** » 25 Mar 2010 19:29

I was hoping that people read and analyze the data before making sweeping comments, but looks like it is too much to ask for. So I am re-presenting the data in a different format. See if this makes sense.

Hypothesis 1 - India cannot afford to have 25% of its population to remain in Agri-economy to sustain its economic development.

The net result as presneted in above total is -

The percentage of labor force in agri-sector is reduced from 52% of total labor force to 17% (C/1) and the population depended upon agri-economy is reduced from 52% to 27% (C/1). The revised agri-economy will have the labor force is reduced by 1/3 and population by ½.

Land allocation (resource allocation) per agri-labor is increased from 1.63 Acres to 5.00 Acres. This is >300% increase of resources and should help alleviate poverty in this field.

Hypothesis 2 – Economic models recommend that the population/labor-force move from Agri > Industrial > Services to achieve higher economic growth and prosperity.

Here the models keep the underlying sectors constant and move population/labor-force from one sector to another.

My model recommends to synchronize the labor-force/population transition across sectors AS WELL AS moving the underlying economic-sectors as well.

My proposal (in previous posts) is just that. Move India’s agri-sector resources primarily land, financial resources (such as subsidies, capital investments etc), industry (energy crops), and services (green-tech) and others in the same plane.

Then India can avoid the organized and forced migration of its masses (the conventional wisdom) from one sector to another, and instead fine tune to suit its values, resource/population equations, and financial/infrastructure constraints.

Hypothesis 3 – Agri-sector is not a profitable enough sector to achieve required per capita GDPs.

My model predicts that the resultant agri-sector will have achieve family incomes of $14,847 REAL ($44,541 PPP) and a per-capita income of $11,135 PPP over 10-15 years.

This translates into approximately 8% (15 years) to 12% (10 years) GDP growth in this sector.

Is this good enough for India?

Katare · Post by **Katare** » 25 Mar 2010 21:04

Rama,

You should open a new thread for your hypothetical analysis....