Indian Economy: News and Discussion (Apr 1 2011)

[Vipul]

Remittances, software exports help curtail balance of payment deficit.

Increased remittances from Indians abroad and higher software services exports have helped contain the current account deficit in the balance of payments despite rising trade deficit.

Preliminary figures released by the Reserve Bank of India show that the current account deficit remained flat at $16.9 billion during the quarter ended September 2011, the same level as in the quarter a year ago.

Total merchandise trade deficit rose 19 per cent to $44 billion during the quarter from $37 billion during the previous comparable quarter. As a percentage of GDP, current account deficit as of end-September was marginally lower at 3.6 per cent of the GDP, compared to 3.7 per cent in the year-ago period.

Service sector surplus as reflected in invisibles in the balance of payments, however, was lower at $27 billion ($20 billion) on higher software income and remittances by the overseas Indians.

Both software services income and remittances rose 25 per cent during the quarter to $15 billion and $16.2 billion, respectively. But investment income - largely comprising returns from deploying foreign exchange reserves - continued to dip on account of a benign interest rate environment globally.

Overall balance of payments that include both current and capital account transactions for the quarter ended in a lower surplus of $276 million ($3.3 billion) due to lower capital account surplus of $18.4 billion ($21.6 billion).

On a balance of payments (BoP) basis, merchandise exports recorded a growth of 47.2 per cent (year-on-year) during second quarter of 2011-12 as against an increase of 20.1 per cent during the corresponding quarter of 2010-11. Similarly, on a BoP basis, imports registered a growth of 35.4 per cent (year-on-year) during the quarter as against an increase of 21.9 per cent during same quarter last year.

Services receipts recorded a growth of 9.3 per cent (year-on-year), led by software, travel and transportation. Services payments, however, declined by 3.9 per cent to $18.50 billion during the quarter from $19.20 billion in corresponding quarter of last year.

While net secondary income (private transfers) receipts remained buoyant at $16.20 billion, primary income account (investment income) continued to show a net outflow.

The financial account surplus moderated in the second quarter of 2011-12 primarily on account of outflow of portfolio investment. ''There was, thus, a negligible accretion to foreign exchange reserves ($300 billion) during the second quarter of 2011-12 (excluding valuation),'' the RBI said.

[Christopher Sidor]

Europe May Hurt India’s Bid to Lure Investors --- Bloomberg Dated 3-Jan-2012

My worst fears may come true. We just might relive the 1989-91 fiasco. Be prepared to see RBI mortgage its gold to pull us out of the mess that our elected representatives have put us in. It seems we have learnt nothing from the fiasco of 1991. Then also manmohan singh was in charge of the economy. Now also he is in charge. And if worse comes to worse, it will undo all the good that 20 years of liberalization, ushered in by Manmohan Singh again, has done.

India’s bid to lure overseas capital by loosening curbs on stock investments may be undermined by Europe’s debt crisis, according to a strategist who predicted a year-end drop for the nation’s equities.
“This is a desperate attempt by the government to bring dollar flows to stabilize the rupee,” said Indrajit Sen, a Mumbai-based derivatives strategist at Fortune Financial Services India Ltd. (FFSI) “Overseas retail investors may not invest aggressively.”

So we might not have trade related, i.e. import-export impact, but our impact to the European debt crisis might be worse than what will happen to China.

Foreign institutional investors (FIINDRGP) pulled out $512 million from local equities last year, compared with a record inflow of $29.4 billion in 2010, as Europe’s debt crisis threatened the global economy and reduced demand for emerging-market assets. The withdrawals contributed to a 25 percent slide in the BSE India Sensitive Index (SENSEX) and the S&P CNX Nifty Index in 2011, the second worst annual decline for both gauges, and helped send the rupee to an all-time low.
....
....
India’s current-account deficit widened to near a record last quarter, the central bank said Dec. 30. The gauge of trade and investment flows posted a $16.89 billion shortfall in the three months ended Sept. 30 as Europe’s crisis hurt demand for Indian exports while a 16 percent decline in the rupee last year made imports expensive. The European Union is the Asian nation’s biggest trading partner.
....
....
“We have run out of fiscal space and must once again begin the process of fiscal consolidation.” said Manmohan Singh.

While I dont personally subscribe to the view that the Stock Exchange is a barometer for economic progress, especially in India, the fact that our stock market has not reached the peaks of 2007-8 says a lot.

Indian equities are influenced by offshore (FIINNET) flows. A record flow in 2010 made the Sensex the best performer among the top 10 markets globally that year. The largest-ever outflow in 2008 led the biggest annual slump of 52 percent. Widening the class of investors may help reduce this volatility, the government said in its statement.

[member_21708]

Deleted

[vera_k]

The actual procedures that apply in this case should be watched. Access can be limited to individual investors from countries with KYC norms equal to or better than India can be allowed to tackle the concerns around black money. Would think that this is the way it will be in any case, since the same channels could be used for terrorism related money flows.

Far as Sonia wanting to get her money back, she can always do it in Air India 1 accompanied by a flight of SU30-MKIs. If she's hard up, some businessman friend can lend a private plane to bring back a stash of gold. That is if the existing procedures that welcome FDI aren't enough to get the money in the country.

[member_21708]

Post deleted

[Suraj]

RBI has several avenues to promote dollar inflows today, as compared to 1991. For example, NRE FD accounts have been deregulated so that they now return a much higher interest rate, promoting higher remittance inflows. The FD nature ensures that the RBI can depend on these to tide over any short term liquidity issues, as the current situation. Further, remittances unlike hot FII inflows, tend to be much more stickier.

[pankajs]

Power Problems Threaten Growth in India

MUMBAI—Almost a decade ago, India's government, seeking to overcome one of the biggest challenges to the nation's development, set an ambitious goal: electric power for all by 2012.

Instead, as the target date of March nears, the power sector is in shambles, and its dire state threatens India's economic prospects at a time when a high inflation rate, a burgeoning government budget deficit and ripples from the European financial crisis are already damping growth.

India is the world's fifth-largest electricity producer after the U.S., China, Japan and Russia, but its per capita consumption is among the world's lowest, at 778.71 kilowatt hours a year. Almost 300 million people don't have access to electricity. The country needs a huge jump in supply to sustain its rapid economic growth, fight poverty and light the homes of those powerless millions.

The depth of India's power problems became apparent in autumn 2010, when blackouts interrupted irrigation and manufacturing across the country, even hitting wealthy urban neighborhoods. The industry has plunged into crisis, driven by a mix of factors—some brewing for years, some recent.

Government giveaways such as free electricity for farmers have drained cash reserves from the largely state-run electricity-distribution system, leaving it financially crippled and unable to purchase power despite existing demand. A giant new offshore gas field has delivered less fuel than promised. An ambitious nuclear-power program has been stymied by demonstrations at plant sites since the Fukushima disaster in Japan in March. And despite abundant reserves of coal, India can't produce enough to feed its power plants.

Coal-fired plants, which account for roughly half of the country's total electricity-generating capacity, should maintain stocks to last 22 days on average, according to the guidelines of the Central Electricity Authority. But a Dec. 29 report from the regulator showed that of 89 such plants it monitors, 46 didn't have enough coal to last a week, with some holding less than a day's worth or no coal at all.

As more power plants come online—the government and private industry are estimated to have spent as much as $100 billion since 2007 to add capacity—coal shortages are expected to worsen. At the current rate of growth in coal production, the requirements of existing power plants and those under construction won't be met until the year beginning April 2016, Credit Suisse analysts said in a November note.

More than half of India's installed electricity-generating capacity of 182 gigawatts is coal-based, and a large chunk of future power projects also will run on coal. By comparison, China's installed capacity at the end of 2010 was 962 gigawatts, about 73% of it from coal.

India's coal sector is hampered by primitive mining techniques and rife with theft and corruption; the monopoly coal producer, state-controlled Coal India, has consistently missed production targets. Shoddy transport infrastructure, inadequate for moving coal from far-flung mines to where it is needed, compounds the problems.

To increase output, Coal India needs to mine new deposits—but most lie under protected forests or conflict-ridden tribal lands. Government efforts to create an effective land-acquisition program for such projects, including compensation for displaced people, haven't made much progress.

"The federal government has neither set up any national fund for the rehabilitation of the displaced persons of various power projects in the country nor set up any committee to study the issue of setting up of such a fund," K.C. Venugopal, junior power minister, told Parliament in September.

"Domestic coal production cannot keep up with the rising demand, especially from power companies," said Coal Minister Sriprakash Jaiswal. "They have to import to feed their rising needs and bridge the gap." But international coal prices have surged.

"The situation is extremely challenging considering the fact that billions of dollars have been invested in building power plants but they can't be used to produce power due to nonavailability of coal," said Ravi Sharma, chief executive of Adani Power. Adani Power's parent, Adani Group, has invested heavily in coal mines in Australia, but India lags behind other major nations in securing coal assets abroad. It accounted for 9% of overseas deals in the sector in the financial year ended March 31, trailing the U.S., Japan and China, according to data provider Dealogic.

"Progressive governments elsewhere are not just aggressively scouting but are tangibly tying up resources known to be available globally. India needs to also get its act right," said Anil Sardana, managing director at Tata Power Ltd., one of India's largest private power producers.

Efforts to develop other fuels have stumbled. India had hoped to set up gas-powered plants after Reliance Industries Ltd. made the country's biggest gas discoveries in the deep water off the eastern coast, but output has failed to meet company projections.

Hydroelectric power projects in the mountainous north and northeast are caught in ecological, environmental and rehabilitation controversies. India imports power from Bhutan and expects to import from Nepal, too, but the geographical challenges in the region are immense.

Once electricity is generated, it must be supplied where it is needed. A crucial link is the provincial distribution utilities that buy electricity and resell it to consumers. Operating at huge losses, they are fast running out of money to buy what electricity is available. Not only do they give away huge amounts of electricity to farmers, partly to curry political favor, but they also lose more to rampant electricity theft and to government departments that don't pay their bills. Inefficient collection is a problem across the country. The result: The amount of electricity categorized as lost in India's states reaches as high as 40%, and even in the best performers stands at 15%.

With fuel costs high and utilities losing money, raising power prices might seem like a solution—but it is a politically charged and sensitive issue for a government facing high inflation and widespread corruption.

The Finance Commission, which defines financial relations between the central government and the states, forecast that in the year ending March 31, state transmission and distribution utilities will lose 803 billion rupees, or $15.2 billion, equal to about 0.8% of the nation's gross domestic product. It also forecast that such losses will rise.

Blackouts are just one effect. By creating uncertainty about future electricity sales, the losses also lead power companies to shelve projects, and add to pressure on lenders that finance the sector. With its latest five-year plan ending in March, India's government is set to miss its own generation goal: It has met only 64% of the target so far.

Colossal mismanagement by successive governments

[member_21708]

<snip>

when a mod requests something, comply if you want to continue your stay. accusing them of hitlerism does no good to you. if you want to discuss politics find some other place on the net.

[Singha]

http://www.firstpost.com/economy/export ... 65654.html

export scam v2.0

[pankajs]

India raises iron ore export duties to 30%

India has raised export duties on iron ore to 30 per cent, according to industry executives, in a move that analysts say is likely to prop up global iron ore prices in spite of weaker demand.

The country is traditionally the world’s third-largest supplier of the steelmaking ingredient to the international markets

Indian exports in 2011 were down 25 per cent from 2010 at about 80m tonnes, according to Mr Hamilton. Sesa Goa, the country’s leading iron ore exporter, estimates that exports in the fiscal year to March will be just 70m tonnes – implying a 30 per cent drop in the January-March period from a year earlier.

The move is the latest example of a trend of growing resource nationalism, as governments attempt to keep the benefits of their commodities wealth within their own borders.

The rise is likely to squeeze the margins of export-focused Indian miners such as London-listed Vedanta, through its subsidiary Sesa Goa.

[Theo_Fidel]

export scam v2.0

Not a bad thing that black money is returning to desh. Sometimes we just have to hold our noses and try to close the door after the horses have bolted. IMO Indian accounting rules are so arcane and insane that large chunks of money gets stuck outside just for violating this rule or that rule.

So it chose a loophole to return. Big deal. Look at it as FDI. And go after the true illegals like corrupt officers and politicians.

[Singha]

I had the same thought too. any money coming in that is not used for terrorism/EJism/drugs is useful money.

[Vipul]

India manufacturing PMI at 6-mth high.

Services sector grows at fastest pace in 5 months.

[uddu]

A nice article that explains in simple terms, how the FDI in retail is going to be a big disaster in present form. After reading this i also want the existing One brand FDI in retail to source about 50 percent of their products from local market. They have to setup factories manufacturing their products in India. Already most of branded products are imported. This must stop.
Great Walmart of China & why FDI in retail will kill Indian jobs!
http://www.rediff.com/business/slide-sh ... 120105.htm

{The first part explains about FDI that's good for the Indian economy. The ones that will not just employ people, and that also huge numbers of them but also help local manufacturing and jobs to be created, helping bring down cost, better products etc. This is the kind of FDI India needs.}
Foreign investment is invariably beneficial as it creates jobs, adds value, and contributes to the GDP.
Companies like Hyundai, Ford and Honda have built a giant automobile industry in India now producing over 2 million cars and tens of thousands of new jobs. By 2017 India will emerge as the third-largest car-making country in the world, producing over 7 million automobiles. This would not be possible without foreign investment, technology and leadership. In sector after sector, foreign investment has created huge new capacities catering to domestic and foreign markets. The level of foreign ownership makes no difference to the contribution foreign companies make to the economy. The desirability of foreign investment must never be questioned as long as it creates jobs, adds value and contributes to development.

In fact their utility in developed economies is due to the labour savings they achieve. This, combined with bulk buying and the recourse to monopsonic (the opposite of monopoly) practices, results in pushing down producer prices, undoubtedly with resultant benefits to the consumer. On the other hand, the more of a commodity large retailers purchase in bulk, the lower the prices growers of agricultural commodities obtain! Studies by FAO and Oxfam attest to this. For instance, a decade ago coffee growers earned $10 billion from a global market of over $30 billion but now they receive less than $6 billion out of a global market $60 billion.The cocoa farmers of Ghana now receive only 3.9 per cent of the price of a typical milk chocolate bar but the retail margin hovers around 34.1 per cent. {etc etc}
{Now comes the funny but very important part}
The average size of a Walmart is about 100,000 sq ft and the average turnover of a store is about $53.2 million, each employing about 300 workers. The turnover per employee averages $175,000.
Walmart has a 9 per cent return on assets, a 21 per cent return on equity, and its CEO Michael Duke's $35 million salary, when converted to an hourly wage, worked out to $16,826.92. In comparison to this new employees are paid $8.75 an hour that would gross $13,650 a year. By contrast the average Indian retailer had an annual turnover of Rs 330,000. Only 4 per cent of the 12 million retail outlets were larger than 500 sq ft in size. India has 53 towns each with a population over 1 million. If Walmart were to open an average Walmart store in each of these cities and they reached the average Walmart performance per store -- we are looking at a total turnover of over Rs 141,000 million with the employment merely of about 16,000 persons. Extrapolating this with the average trend in India, it would mean displacing about 758,000 persons. Quite clearly Walmart is not going to create more jobs in India. On the contrary it will cause a massive loss of jobs in direct retail.
{Now nailing some lies}
Finally, the study showed that food prices rose faster than other consumer goods between 2000 and 2010.
Big business and MNC's like PepsiCo, Cargill, ConAgra and even ITC have been procuring food grains and farm produce for several years now and there is no evidence that general prices have increased.
Even where better prices were paid to contract farmers, data available suggests that input costs have been higher.
Simple economic logic tells us that nobody pays more for a commodity that can be obtained for less. Business is about extracting profits and not about charity.

[Aditya_V]

Even where better prices were paid to contract farmers, data available suggests that input costs have been higher.
Simple economic logic tells us that nobody pays more for a commodity that can be obtained for less. Business is about extracting profits and not about charity.

Your post is in direct contrast to what RG has pubically stated regarding FDI in retail recently? are you calling him a Liar?

[manish]

Even where better prices were paid to contract farmers, data available suggests that input costs have been higher.
Simple economic logic tells us that nobody pays more for a commodity that can be obtained for less. Business is about extracting profits and not about charity.

Your post is in direct contrast to what RG has pubically stated regarding FDI in retail recently? are you calling him a Liar?

Yes.

And I don't think he got approval from Mr. Sibal either! This is gonna hurt religious sentiments now...

[member_21708]

Decoding the mystery behind the rupee's fall
http://www.sify.com/finance/Decoding-th ... eaefd.html

[Pranay]

http://timesofindia.indiatimes.com/busi ... 378278.cms

State Bank of India, cash-strapped Kingfisher Airlines' largest creditor, has called the Vijay Mallya-led air carrier a non-performing asset.

"Kingfisher is a NPA (non-performing asset) for us. They are in default," SBI Chairman Pratip Chaudhuri told reporters here on Thursday.

SBI, the leader of the consortium of banks that have lent funds to Kingfisher Airlines, has an exposure of Rs 1,457.78 crore to the struggling firm. SBI's exposure is the highest among any of the lenders to the airline, followed by IDBI Bank (Rs 727.63 crore), Punjab National Bank (Rs 710.33 crore), Bank of India (Rs 575.27 crore) and Bank of Baroda (Rs 537.51 crore).

[pankajs]

Indian government has no intention to control overspending: Jim Walker

From a long term perspective, Indian companies are likely to produce superior returns with respect to China and certain parts of North Asia, said Walker.

With macro-economic concerns weighing on the Indian market, analysts see growth taking a backseat. They feel that the Indian market will continue to remain bearish even if inflation simmers down going forward.

Jim Walker, Founder CEO and Managing Director at Asianomics and an influential economist in the Asia Pacific region, told NDTV Profit that India will witness slower growth in 2012 as the monetary policy is likely to be tightened again.

He said that the government pays lip service to those medium-term fiscal strategies and is taking worse decision.

The Indian government is expected to spend much more than it earns and originally estimated in the budget of February 2011.

“India will grow at a rate of 5 to 6 per cent in 2012,” he said.

Read the article for the complete interview.

[Prem]

RBI: Rupee Is Stabilizing

SINGAPORE – India's central bank stands ready to intervene in the currency markets to smooth any sharp move in the rupee, which is expected to stabilize after its recent fall, a Reserve Bank of India deputy governor said Thursday. "We will respond strongly to any sharp one-way moves" in the currency, Subir Gokarn said in Singapore. e said recent measures such as raising deposit rates for non-resident Indians and putting restrictions on forward hedging contracts have helped stabilize the exchange rate. The RBI acted after the rupee fell more

http://online.wsj.com/article/SB1000142 ... 85592.html

[Prem]

http://www.businessweek.com/news/2012-0 ... yield.html
Cotton Harvest in India Seen Missing Estimate on Lower Yield

Jan. 5 (Bloomberg) -- Cotton production in India, the world’s second-biggest grower, will be less than forecast after unseasonal rains areas cut yields, a textile-mill group said.The harvest may reach 32.5 million bales to 33 million bales of 170 kilograms each in the year that started Oct. 1, D.K. Nair, secretary-general of the Confederation of Indian Textiles Industry, said in a phone interview from New Delhi. That compares with 35.6 million bales estimated by the Cotton Advisory Board on Nov. 15 and 34.5 million bales predicted by the U.S. Department of Agriculture on Dec. 31.A smaller Indian crop may support in prices, which slumped 56 percent from a record $2.197 per pound on March 7 in New York on expectations of bigger global harvests. Global production will be a record 123.42 million bales of 218 kilograms each this crop season, the USDA said on Dec. 9.“Although the area is higher, yields have come down because of bad weather,” Nair said yesterday. “There has been some crop loss in Andhra Pradesh because of rains and there were problems in Maharashtra.”The area under cotton climbed 9.9 percent to 12.2 million hectares (30.1 million acres) from a year earlier, according to the board. Maharashtra and Andhra Pradesh states are the second- and third-largest growers.“Prices will see some upside on lower Indian output, but gains will be capped as production globally is on the higher side,” Vandana Bharti, vice president for research at SMC Comtrade Ltd., said by phone from New Delhi.
Chinese Demand
Cotton for March delivery was little changed at 95.80 cents a pound on ICE Futures U.S. in New York at 3:03 p.m. in Mumbai. Futures slumped 37 percent last year, the most since 2004.Overseas sales may be about 8 million bales this year, 14 percent higher than a year earlier, after the government freed exports, Nair said.
“There is good export demand from China as it’s building reserves,” he said. Exporters may have registered with the trade ministry to ship 4.4 million bales since Oct. 1, he said

[Prem]

http://daily.bhaskar.com/article/GUJ-AH ... 14322.html
‘Trading with China an economic compulsion’

Ahmedabad: Notwithstanding the ordeal Indian diplomat S Balachandran and traders Shyamsunder Agarwal and Deepak Raheja had to go through in China, traders and industry bodies say they believe India can’t do without trading with the Chinese Dragon.Bilateral trade between the two Asian economic giants has grown from just $2.33 billion in 2000-01 to $60 billion in 2010 and is expected to touch $100 billion by 2015. Of the thousands of Indian traders who fly to China every day, more than 100 are from Gujarat along. Most of them are involved in export-import business.“China has become a global destination for business. Not only Indians, business communities from around the world trade there. Similarly, hundreds of Gujarati traders have been visiting China and importing stuff,” said marketing director of A Innovation International Ltd, Jayesh Patel. For the last one decade, the company has been importing machines from China.Patel said that many Amdavadi traders, including him have been cheated by Chinese.“China is a huge country and in certain provinces, we have been looted and cheated many times. But, we are overtly dependent on China as Indian customers seek cheap products which are only available in China,” said Patel. Looking at the global economic scenario, India can ill afford to scrap trading with such a huge economy, believes chairman, CII Gujarat council, Atul Garg. “Now, we can’t afford to discontinue business with China.
But, we will have to be cautious. The traders should not enter the interiors of China or the provinces and areas which are unknown,” said Garg.The president of Gujarat Chamber of Commerce & Industry (GCCI), Mahendra Patel, who is also CMD, Mamata Group, had a factory in China. “Earlier, we had set up a factory in China which was sold later on. We have been trading with China, but have never faced such issues. However, cases of Indian traders being beaten up or assaulted by Chinese have been on the rise recently. Though Indian government will take necessary steps, traders and businessmen should be careful,” he said.The immediate former chairman of CII Gujarat Council, Yatindra Sharma also said that MNCs in China are safe. “We have been dealing with only MNCs who have manufacturing bases in China. Even though, track record of China has become a big question mark these days, trading with them is compulsion,” he said.
Another machine importer, Nischal R Patel, director of Krishna Hi-tech has discontinued trading with China. “After seeing various cases of frauds, we decided not to trade with China. We have observed that there are certain provinces which are not safe,” he said.

[SBajwa]

http://www.tribuneindia.com/2012/20120105/biz.htm#5

India Inc raises $1.58 bn in Nov through ECBs, FCCBs

Mumbai, January 4
India Inc raised over $1.58 billion from overseas markets in November through external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs). Companies had raised $2.47 billion in October through ECBs and FCCBs.

The fall is on account of volatile global conditions, according to experts.

Around 75 companies raised around $1.33 billion for various projects through the automatic route in November which does not require approval from the Reserve Bank of India or the government. Another $253 million was raised through the approval route, according to RBI data.

Public sector ONGC Mangalore Petrochem raised $250 million through ECBs for its new projects. Similarly, Tata Teleservices mopped up $200 million for import of capital goods through ECBs. Infrastructure Development Finance Co raised $100 million for onward or sublending.

Corporates, registered under the Companies Act, 1956, were earlier allowed to access ECBs up to $500 million in a financial year under the automatic route. However, in September, the government raised the limit of external borrowings with tenure of 5 years or more under the automatic route to $750 million.

For the services sector, the ECB limit under the automatic route was doubled to $200 million and for NGOs from $5 million to $10 million.

ECBs, which are not covered by the automatic route, is considered under the approval route on a case-by-case basis by the Reserve Bank.

ECBs are used as an additional source of funding by Indian corporates to augment resources available domestically. FCCBs are also governed by norms similar to external commercial borrowings.

Other major fund raisers in November included OCL Iron & Steel Ltd, which raised $95 million for its rupee expenditure. — PTI

IDFC Rs 4,400 crore bond issue opens Jan 11

Infrastructure Development Finance Co (IDFC) said Wednesday it would raise Rs 4,400 crore through the issuance of a second tranche of tax-saving long term infrastructure bonds on Jan 11. The issue will be open for subscription till Feb 25, it added.

[SBajwa]

http://www.tribuneindia.com/2012/20120105/biz.htm#1

Economy likely to do better in FY13: CEA

New Delhi, January 4
India's economy will likely grow faster next fiscal year than in 2011-12 because of an improved external environment and a shift in policy focus from containing inflation to promoting growth, Chief Economic Adviser Kaushik Basu said Wednesday. However, he told Reuters in an interview that public finances were expected to remain under pressure in 2012-13.

Although the official forecast for FY13 is still to be released, some private economists now expect the annual economic growth to be below 7%, lower than 7-7.5% widely expected for the current fiscal.

"I’d forecast next year to be better than the present one," Basu said, predicting close to 7.5% growth in 2011-12, a pickup the following year and a return to the economy's "full-steam" growth of around 9% by 2013-14.

In December, the government slashed its growth forecast for the current fiscal year to about 7.5% from 9% amid slowing domestic and global demand.

"The US is on a slow rise. Europe is still on the brink, but if you ask me to bet I would say, on balance, it would escape falling into another recession," Basu said. "If these expectations are right, then I think India has enough fundamental strength that we will get out of the current slowdown and begin to move."

A combination of policy paralysis in the wake of a slew of corruption scandals, high inflation, high interest rates and an uncertain global environment has hurt Asia's third-largest economy, which had averaged annual economic growth of nearly 10% before the financial crisis of 2008.

GDP growth slowed to 6.9% in the quarter to end-September, its weakest pace in more than two years, and industrial output contracted in October for the first time in more than two years.

Basu said weak industrial activity could pull down growth in the October-December quarter to below 6.9%, but there would be a recovery in the final three months of 2011-12.

"My belief is we have done pretty poorly in the third quarter. In the fourth quarter (January-March), I expect a bounce back, though a moderate one. Growth should exceed 7.5%," he said.

A slowing economy has hit government's tax revenue receipts, sparking concerns that the federal fiscal deficit could miss the budgeted target of 4.6% of GDP by almost one percentage point in the current fiscal year.

"I don't think it’s going to be a very big miss the way some people in the market are speculating. We’re keen to keep it as close as possible to the target," Basu said.

The cash-strapped government said last week it would borrow an additional 400 billion rupees through bonds in 2011/12. — Reuters

[Theo_Fidel]

Meanwhile...

Yup! Inflation has now turned into deflation! RBI has routed both inflation and economic growth. Killing two Kauva with 8.5% REPO rate or 13% bank lending rate.

http://business-standard.com/india/news ... 36/460939/

Food inflation gives way to deflation, prices fall 3.36%

[pankajs]

Meanwhile...

Yup! Inflation has now turned into deflation! RBI has routed both inflation and economic growth. Killing two Kauva with 8.5% REPO rate or 13% bank lending rate.

http://business-standard.com/india/news ... 36/460939/

Food inflation gives way to deflation, prices fall 3.36%

Saar the over all Inflation is still around 8-9%. The food price moderating is good news IMHO. High food prices hit the most vulnerable the hardest.

[gakakkad]

from the Jim Walker interview posted above-

So there are a lot of reasons to be positive about India from a corporate perspective. However, there are a lot of reasons to also be negative about India from a policy perspective. Given the global investment climate, the way that people are looking at investments, they prefer somewhere where they're relatively steady and relatively safe and they don't see that in India at the moment looking at the government’s actions. So the market is getting a lot cheaper, but there are still a lot of negative over hangs from the public sector.

We can clearly see the mess GOI is making .

[chetak]

Meanwhile...

Yup! Inflation has now turned into deflation! RBI has routed both inflation and economic growth. Killing two Kauva with 8.5% REPO rate or 13% bank lending rate.

http://business-standard.com/india/news ... 36/460939/

Food inflation gives way to deflation, prices fall 3.36%

Saar the over all Inflation is still around 8-9%. The food price moderating is good news IMHO. High food prices hit the most vulnerable the hardest.

They target WPI whilst the aam aadmi gets it in neck from the unmeasured but very much higher retail price index.

[Vasu]

from the Jim Walker interview posted above-

So there are a lot of reasons to be positive about India from a corporate perspective. However, there are a lot of reasons to also be negative about India from a policy perspective. Given the global investment climate, the way that people are looking at investments, they prefer somewhere where they're relatively steady and relatively safe and they don't see that in India at the moment looking at the government’s actions. So the market is getting a lot cheaper, but there are still a lot of negative over hangs from the public sector.

We can clearly see the mess GOI is making .

Policy has always been India's weak link, but what the UPeeA Government should be remembered for would be the grand squandering away of their time in office to strengthen anything from policy to infrastructure. They shamelessly took the people's mandate for granted and used this time for the never seen before loot of the nation. When the Left was their ally in UPeeA I, at least the Government was on its toes all the time.

If I remember correctly, that was the plot created for them to win the second election - the Left is holding back the economy and if the UPeeA can come to power on its own, the economy will soar because they will be able to take bigger policy decisions. Yes, that is the lie Sonia Maino and her cronies sold and now it just becomes that much harder for this country to rise economically after so many years of gigantic mismanagement.

[member_21708]

Worst is over for the Indian economy: Credit Suisse
http://www.business-standard.com/india/ ... se/461033/

[tejas]

http://www.business-standard.com/india/ ... al/460973/

This is a must read article on the market distortion roots of corruption in India.

[harbans]

Tejas Ji, have been talking on this and Lok Pal bill forum on the importance of Policy reform now months back. Went ballistic as most people want punitive aspects to take the front seat wrt required Policy reform. The import of reform has yet to sink in a vast majority of public opinion in India. Also the financial losses sustained as a result of delay in policy reform is an area not yet under public opinion radar.

[Prem]

http://www.businessweek.com/news/2012-0 ... redit.html
Bids Double Offers on Tax-Exempt Debt on Rate Peak: India Credit

Jan. 6 (Bloomberg) -- India’s individual investors, lured by yields at about the highest since 2008, offered to buy more than twice the amount of tax-exempt bonds sold by state-run companies as a central banker said interest rates have “peaked.”National Highways Authority of India and Power Finance Corp. received 335 billion rupees ($6 billion) of bids from private investors for the 140 billion rupees being sold to finance government improvements, underwriters said. The notes yield as much as 8.3 percent, compared with the 7.55 percent that Indian Railways Finance Corp. offered in October, when it sold the nation’s first public issue of tax-free debt.“The hope that we are now at the top of the rate cycle adds to investor interest and tax-free and tax-deductible bonds offer better implied yields,” S.J. Balesh, a Mumbai-based senior director at Infrastructure Development Finance Co., or IDFC, said in an interview on Jan. 3. “There is more retail interest because of the high yields offered.”Investors want to lock in yields as Deputy Governor Subir Gokarn signaled yesterday that the Reserve Bank of India’s benchmark rate won’t rise from the current 8.5 percent. India’s repurchase rate compares with 0.25 percent in the U.S. and 1 percent in the euro zone after policy makers sacrificed growth last year to rein in price increases in a nation where the average person lives on less than $2 a day. The inflation focus meant that 10-year government bond yields rose 65 basis points in 2011 while the Sensitive Index of shares fell 25 percent

[Austin]

Who Killed the Rupee?
Government was not averse to a 10 per cent depreciation in the rupee: Sources

The rupee seemed to have discovered a stable life at between Rs.44 and Rs.45 per US dollar for the first seven months of 2011. Suddenly, in August, it began its slide to Rs.50 when it breached the Rs.46 mark. In the next three months, by the first week of November, it had lost 10 per cent of its value, hitting the Rs.49-50 exchange rate band. The Government and the Reserve Bank of India (RBI) were unconcerned. A depreciation of the rupee could have helped boost a sagging growth rate by buoying exports. On November 8, Subir Gokarn, deputy governor of rbi outlined the argument for no intervention. "In exchange rate policy, rupee is a floating currency. It remains that exchange rate is market determined and there is no intent to intervene with a particular exchange rate in mind." Gokarn ruled out defending the rupee using foreign exchange reserves. Unwittingly or not, he had stabbed a rupee that was already bleeding.

Gokarn's remark came at a particularly inopportune time. The eurozone crisis had taken a turn for the worse in November. The fall of an ineffective Greek Government and the imminent resignation of the tainted Italian Prime Minister Silvio Berlusconi were meant to inspire confidence in investors and lenders. Instead, there were serious doubts over whether the new technocratic governments in the two countries would have the political legitimacy to push tough austerity measures that were necessary to rein in the debt overhang. In the US, a congressional committee with members from both major political parties, the Democrats and Republicans, failed to reach an agreement on an acceptable debt ceiling for a struggling American economy in mid-November. Those events together increased global economic uncertainty and triggered a flight for safety as investors cashed out of emerging markets like India, selling rupees to buy dollars, thus driving down the price of the Indian currency. The decline in the BSE Sensex mirrored the decline in the rupee.

Gokarn's statement greatly accelerated a decline that may have happened more slowly because of external factors. The rupee fell below Rs.50 and had lost another 10 per cent of its value in less than a month, hitting an all-time low of Rs.54.20 on December 15. The RBI, under pressure from the finance ministry, intervened on the evening of December 15, banning certain forms of speculation in the rupee. The rupee recovered marginally to Rs.52.70 the next day. In the interim, Gokarn performed a 180-degree turn. On December 3, he said, "Not using reserves to prevent currency depreciation poses the risk that the exchange rate will spiral out of control, reinforced by self-fulfilling expectations." Two weeks later, he hardened the RBI's stance on defending the rupee when he said, "The measures we have already unveiled are not the only ones we have. There are a number of other measures we can use." But the damage had already been done by him.

The Government and RBI were prepared for a decline of around 10 per cent. They were disconcerted by a 20 per cent tumble.

By August, the Government was anticipating a depreciation of the rupee as a fallout of its failure to contain inflation for over one-and-a-half years. An alibi was ready. A 10 per cent decline could have easily been ascribed to a worsening of the economic environment in the US and Europe. Says Commerce Secretary Rahul Khullar, "The difference between inflation in India and inflation in the US has been around 8 per cent per annum for the last two years. In fact, except Brazil and Turkey, no other country has had inflation as high as ours in the past year. That was eroding our competitiveness, while the nominal exchange rate remained at the Rs.44 level. "A 10 per cent fall in the value of the rupee would have corrected that problem. Says Khullar, "I think Rs.49-50 per US dollar is a fair value."

Sources in the finance ministry confirm that the Government was not averse to a 10 per cent depreciation in the rupee. By boosting exports, and making domestic industry more competitive vis-a-vis imports, a 10 per cent depreciation could have boosted a stalling growth rate. The fact that exchange rates of other major emerging economies like China had not declined against the US dollar by similar magnitudes would have given Indian exporters an added comparative advantage. Investment banker K. Vaidya Nathan believes that the decline in the rupee works in India's favour, "I think China would love to have the problem that we have. The crux of the economic brawl that the US has with China is that the yuan is being kept artificially depreciated. Now the market is doing the job for us."

The Government would have bought this argument had the rupee not started to sink below the Rs.50 per dollar mark. Once it fell below Rs.50, officials in the finance ministry believed that it had "overshot" a reasonable correction. Jayanth Varma, professor of finance at IIM Ahmedabad, agrees with the finance ministry on this overshoot. "It can now be plausibly argued that the correction has gone far enough," he told India Today. At levels below Rs.50, the costs of depreciation, primarily its effect on inflation and the fiscal deficit, start outweighing the benefits, mainly of additional exports.



Explains Khullar, "On the import side, there is a 100 per cent pass-on in prices. The price of key imports like crude oil, edible oil and pulses will immediately rise by 20 per cent." This has serious implications for the Government's fight against inflation. It also has serious implications for the fiscal deficit as it raises the Government's fertiliser and oil subsidies bill. The Government is already forecast to overshoot its fiscal deficit target of 4.6 percent for the financial year 2011-12 by one percentage point. That will not inspire confidence in foreign investors, particularly foreign institutional investors who have been pulling out of Indian stock markets in 2011.

The Government's inflation managers are not the only concerned interest group. Large Indian corporates have an estimated $150 billion in outstanding dollar-denominated loans that are due to be repaid in the next six months. Many firms did not hedge their exposure. A 20 per cent decline in the rupee has inflated their debt burden. India Inc has, therefore, been exerting pressure on the Government and RBI to stem the fall of the rupee. Jayanth Varma believes that this should not be the Government's concern. "Corporates should have been hedging their risk," he says. In reality, the Government has little choice but to heed India Inc's concern. Industry has already been reeling under the effects of a high interest rate regime. The Index of Industrial Production for October was '5.1 per cent. Industry is clearly not in a position to take another major blow.

Ironically, even exporters, the one interest group which ought to have welcomed the decline of the rupee, are unhappy about the 20 per cent depreciation. Says Ramu S. Deora, president of the Federation of Indian Export Organisations, "For an average exporter in any sector other than commodities, 25-75 per cent of inputs are imported." That raises costs. The additional cost is not necessarily covered by additional revenue. Says Khullar, "When buyers abroad see a depreciation of this magnitude, they negotiate with Indian exporters to split the gains. Indian exporters have to give in because the importers have bargaining power. They can always buy from elsewhere." Deora and other exporters are making precisely this point in their meetings with the RBI and the commerce ministry.

To make matters worse, the Government may not have the firepower to contain the rupee at a Rs.49-50 level in the short term. The effects of RBI's measures announced on December 15 are already evaporating. Says a senior official, "You can curb some forms of speculation but you can't change the expectation of market players." The RBI could make a forceful intervention to shore up the rupee by selling dollars (and buying rupees) from the $300 billion it holds in foreign exchange reserves. Vaidya Nathan believes that the RBI can use this 'war chest' to defend the rupee. But others believe that the reserves may not be enough to beat back market forces. Global trading in the rupee is around $75 billion a day. A substantial intervention is therefore necessary to manipulate that market.

Writes economist Ajay Shah on his blog, "If RBI sells $80 billion in reserves, the market will see that. They will know that further defence of the rupee is going to be tough (since $300 billion in reserves is starting to look like a small hoard), and speculators across the world will start betting that RBI's defence of the rupee will fail." Agrees Jayanth Varma, "The reserves are roughly comparable to the levels which the Koreans found to be inadequate in 2008."

Says a senior policy official, "The RBI has changed its stance after the hysteria created by corporates, exporters and the media. The truth is that there is not much the RBI can realistically do in the short term to stem the decline." He adds, "In any case, how is the government or RBI to determine what the right price for the rupee is. That task is best performed by market forces." Percy S. Mistry, chairman of financial advisory firm Oxford International and former chairman of a high-powered Government committee on financial sector reforms, believes that the collapse of the rupee is driven more by a vote of no-confidence by foreign and domestic investors in the India story than by external factors or even inflation. Says Mistry, "It is in the community of domestic and foreign investors that the relative supply-demand relationship for dollar versus rupee is determined. There is no plausibly positive texture to the India story anymore in the minds of foreign investors; and, increasingly, in the minds of the largest Indian corporates."

That is a remarkable turnaround from even a year ago. Says Mistry, "India was generally rated through 2000-10 as one of the three best emerging markets to invest in. Now it is ranked the worst of some 40 emerging markets to invest in whether from the viewpoint of FII or FDI. The natural consequence is the markdown of the rupee by even more." Mistry says that he hasn't seen such pessimism about India abroad since the crisis of 1991.

The only sustainable way to resurrect the rupee is to revitalise the India story. Mistry has a number of suggestions. "We need rapid improvements in public and corporate governance. The Government should relax immediately the absurd policies restricting FDI to various limits, whether 26 per cent, 49 per cent or 74 per cent. And swifter action needs to be taken to bring closure to the never-ending soap operas on a variety of corruption scandals." Officials in Government are pessimistic. Says a senior bureaucrat, "All our vital economic indicators are heading in the wrong direction. The current account deficit is growing, the fiscal deficit is above danger levels, inflation will persist at 9 per cent, and growth is below 7 per cent. In such a scenario, the rupee will decline even more dramatically." If the rupee-dollar exchange rate dives to Rs.60 or below, more than the RBI, it is the Government, having mismanaged the macroeconomy and brought policymaking to a standstill, that will have to take all the blame for killing the rupee.

- With inputs from Rajesh Sharma and Shravya Jain

[krisna]

Of Paupers, Poors and Beggars

Shining India does not shine on the mirror of facts; it shines only in the fantasy world of Planning Commission statistics, planned election strategy of ruling Congress Party, Sonia Gandhi and her National Advisory Council’s sycophants. Prior to major national elections dole out programmes like Food Security Bill (Act) are announced ad nauseam by the government to garner vote. In 2005 it was NREGA, renamed MGNREGA. In 2011 it is Food Security Bill-food for all at subsidized rates.

sobering facts on pverty with facts in the article-
http://maloykrishnadhar.com/wp-content/ ... -a-day.jpg

Poverty is widespread in India, estimated to have a third of the world’s poor. According to a 2005 World Bank estimate, 26.1% of the total Indian population was below the international poverty line of US$ 1.25 a day, in nominal terms Rs 21.6 a day in urban areas and Rs 14.3 in rural areas. According to UN Millennium Development Goals Report, as many as 320 million people in India and China are expected to come out of extreme poverty in the next four years, while India’s poverty rate is projected to drop to 22% in 2015. The report also indicates that in Southern Asia, however, only India, where the poverty rate is projected to fall from 51% in 1990 to about 22% in 2015, is on track to cut poverty in half by the 2015 target date.

Despite claims of increased GDP and estimated 7-8% growth rate, present statistics indicate that in industrial sector growth rate has slowed down and turning to over -5% index. Several strange facts are not known to the common people, even the conscious middle class about socio-economic conditions of India. The following chart will offer a quick glimpse. These are official statistics. Real ground situation is more serious.

Code: Select all

    Number of people, in India, who are below poverty line (Real estimate 50 cr) : About 300 million (30 Cr.)

    Number of people, in India, who work in the organized Public Sector, i.e. with the Central and State Government ( Nearly 2.5 cr) : About 19 million (1.9 Cr.)

    Number of people, in India, who work in the organized Private Sector : About 8 million (0.8 Cr.)

    Number of people, in India, who work in the unorganized Sector (nearly 40 cr) : About 320 million (32 Cr.)

    Number of people, in India, who are unemployed approximately (Nearly 50 crore) : About 300 million (30 Cr.)

    Number of JOBS which need to be created every year, to fulfill the aspirations of the people of India (Nearly 2 cr) : About 10 million/yr. (1 Cr.)

    Number of people BORN every year in India (China is only 10 million per year. Population growth alarming. : About 27 million/yr. (2.7 Cr.)

There has been no uniform measure of poverty in India. The Planning Commission has accepted the Tendulkar Committee report which says that 37% of people in India live below the poverty line (BPL). In fact it is nearly 50%. The Arjun Sengupta Report (from National Commission for Enterprises in the Unorganized Sector) states that 77% of Indians live on less than Rs 20 a day (about $0.50 per day). The N.C. Saxena Committee report states that 50% of Indians live below the poverty line.

Multi dimenisonal poverty Index chart-
http://maloykrishnadhar.com/wp-content/ ... -Index.jpg

According to a recently released World Bank report, India is on track to meet its poverty reduction goals. However by 2015, an estimated 53 million people will still live in extreme poverty and 23.6% of the population will still live under US$1.25 per day. This number is expected to reduce to 20.3% or 268 million people by 2020, in case job generation programmes progress evenly and growth in industrial and agricultural sectors keeps pace with the domestic and market expectations. However, at the same time, the effects of the worldwide recession in 2009 have plunged 100 million more Indians into poverty than there were in 2004, increasing the effective poverty rate from 27.5% to 37.2%. Between 1999 to 2011 this rate has marginally gone up because of devaluation of the Rupee, high inflation and abnormal price rise.

We are on track but just, may derail due to faulty policies of Sonia and her cotorie

The definition of poverty in India has been called into question by the UN World Food Programme. In its report on global hunger index, it questioned the government of India’s definition of poverty saying: The fact that calorie deprivation is increasing during a period when the proportion of rural population below the poverty line is said to be declining rapidly, highlights the increasing disconnect between official poverty estimates and calorie deprivation.

India has the highest number of malnourished people, at 230 million, and is 94th of 119 in the world hunger index, and the number of malnourished children; 43% of India’s children under 5 are underweight (BMI<18.5), the highest in the world as of 2008.

Two important projects of the Government: MGNREGA and the latest Food Security Bill (Act likely soon) which aimed at poverty alleviation and economic sustainability of the poors and the BPL are considered as flagship programme of the government. The NREGA was introduced in 2005 with a view to provide minimum 100 days employment to the rural people at minimum daily wage rates. Dr. Jean Drèze, a Belgian born economist, at the Delhi School of Economics, has been a major influence on this project. A variety of people’s movements and organizations actively campaigned for this act. The act directs state governments to implement MGNREGA schemes.

Several misuses and corrupt practices have haunted the programme. Though designed to provide some subsistence income to the rural poors this scheme is tied down in labyrinthine shackles of panchayet and bureaucratic systems. The MGNREGA is one of the largest initiatives of its kind in the world. The national budget for the financial year 2006-2007 was Rs 113 billion (about US$2.5bn and almost 0.3% of GDP) and now fully operational, it costs Rs. 391 billion in financial year 2009-2010. It was argued that funding would be possible through improved tax administration and reforms, yet the tax-GDP ratio has actually been falling. There are fears the programme will end up costing 5% of GDP . Can India afford such colossal expenditure in the name of giving employment, which do not create infrastructure, generate jobs, improve home and small industries, encourage artisans and turn the jobless people productive and national assets? NO. MNGREA is another name of making people dependent on beggary, through limited manual work.

Another important criticism is that the public works schemes’ completed product (e.g. water conservation, land development, afforestation, provision of irrigation systems, construction of roads, or flood control) is vulnerable to being taken by over wealthier sections of society.

Further concerns include the fact that local government corruption leads to the exclusion of specific sections of society. Local governments have also been found to claim more people have received job cards than people who actually worked in order to generate more funds than needed, to be then embezzled by local officials. Bribes as high Rs 50 are paid in order to receive the job cards from the panchayets.

A multi-crore fraud has also been suspected where many people has been issued the NREGA card who is either employed with another Government Job and who are not even aware that they have a Job Card.

The productivity of laborers involved under NREGA is considered to be lower because of the fact that laborers consider it as a better alternative to working under major projects. There is criticism from construction companies that NREGA has affected the availability of labor as laborers prefer to working under NREGA to working under construction projects. It is also widely criticized that NREGS has contributed to farm labor shortage. In July 2011, the government has advised the states to suspend the NREGA programme during peak farming periods.

Many observers have commented that the UPA government has been trying to create a bonded vote bank through huge state expenditure in a mammoth project, which has become ungovernable, ridden with corruption and giving an impression to the people that beggary is better than productivity. This is enlarging the pyramid base of paupers, poors and beggars in India, dependent on various kinds of doles.

The Food Security Bill, another brain child of Sonia Gandhi and her NAC (same Dr. Jean Drèze, a Belgian born economist, at the Delhi School of Economics and N. C. Saxena as seed propagators).

This new act will add immense burden on national resources and will nearly drain the treasury.

Very valid criticism of the FSB has come from R. Ranganathan, eminent journalist and economic analyst. According to him The Food Security Bill is not the way to ensure food security. Nothing could be further from the truth. Food security comes from ensuring three things: creating jobs and income, ensuring higher food output by raising productivity, and creating a safety net to feed those who can’t do so in distress situations.What the Food Security Bill does is to make the exception the rule: offering food subsidies to almost all people (65 percent of the population) without an end-date. This is irresponsible populism. A government that does nothing in its seven-year tenure so far to improve agricultural productivity and which fails to invest in research and infrastructure suddenly wants to end food insecurity with a bill two years before an election. If it genuinely cared for the poor, what stopped the government from helping them in phases every year from 2004? By now hunger could have been eliminated. The FSB is thus an attempt to fool the electorate before elections, with the bill being paid by all of us – either as taxes or higher inflation. The 2011 move is well calculated to garner vote by offering subsidized food; creating new class of beggars.

He feels government is afraid of withdrawing any subsidies to the better off for fear of offending them, and then claims that those opposing the FSB are anti-poor. Even a petrol price hike gets Congress party men worked up enough to get it withdrawn. Pranab Mukherjee is shrinking from imposing a tax on diesel cars. The UPA is willy-nilly subsidizing the rich – and unwilling to back off from this. The Congress exploits the middle class and small and marginal traders and manufacturers and gives tax holidays to the rich. The problem is politicians want to eat their growth cake and have it, too.

These are the taxes forgone on the “rich” and on “business”. But are they really only that? Concessions to export houses create high-value jobs in the IT and other sectors (and prevent the rupee from crashing much more); concessions to companies to set up industries in backward areas and the north-east are the only way to create jobs there; concessions to middle-class salary earners are the only way to get them to save and buy insurance. And excise and customs cuts lower prices on all goods. Which “benefits” do we want to eliminate? The finance ministry has fought shy of withdrawing even the 2008 post-Lehman stimulus package, or raise customs duties on items like petroleum goods. The UPA can choose how it wants to tax the rich to feed the poor. It has ducked this choice – and this is why we are in a financial mess, unable to fund a legitimate food security measure.

The only logical way to tackle hunger is to try different methods in different states and see which one works best and extend the model nationally. This is how the mid-day meal scheme introduced in Tamil Nadu – and much derided by critics then – was adopted nationally.

NREGA is in the doldrums, since states and district administrations are unable to provide enough work for the poor. The scheme is riddled with massive corruption. Money is being spent carelessly, and the scheme is not achieving its basic goals – ensuring higher incomes, and the creation of assets in rural area that will ultimately improve agricultural productivity.

By making both a creaky NREGA and FSB nearly universal, the UPA is actually saddling the country with huge costs without delivering worthwhile results. There is no enhancement of productivity, job generation, promotion of industry, promotion of cash-crop initiative, and utilizations of the vast human resources in nation building work. By vote-bank doling the Congress is pushing the vast segment of the populace to beggary. A subsidy makes a beggar out of the poor. It is demeaning. An income is what the poor need – though no one denies the need for direct food supply schemes when things are bad. Most farmers don’t find farming remunerative, so government gives them cheap electricity, cheap fertiliser, subsidized power and diesel and a minimum support price for their produce. Government does not tax the rural rich. Money flow from big industry to agri-sector is increasing rapidly. It is a ruse for tax evasion.

India’s state-run cold storage and grain storage system is shambolic, so where is the guarantee that some 65m tones of food grains procured from farmers for distribution for the scheme – up from 55m tones presently – will not rot before reaching the beneficiary?

If the food security scheme does not work, economists believe, India is doomed to remain a hungry republic. It is already one of the fast-growing economies with the hungriest people in the world. And it can get worse.

Sonia Gandhi’s election eve gamble is likely to drain out Indian resources to unproductive charity, a confused political perception which can at best turn 65% of Indians to perpetual beggars-unable to come out of the dungeon of poverty, unemployment and wastage of human resources. Sonia appears to be determined to turn India to a nation of beggars

Long and excellent article from MK Dhar with damning indictment of Sonia and her NAC.

[vishvak]

Clean up RBI’s mess
A critique on RBIs policies on increasing rates as means

A 25.5 per cent fall in capital goods is a nightmare. Production of capital goods is the best indicator of economic direction. Capital goods are used in the production of other goods. So, a shrinkage of capital goods production has a multiplier effect. This may not be visible soon, but it is going to show itself in 2012 and in the coming years. No investment is taking place in the most crucial sector.
...
When global interest rates are close to zero, how can Indian industry compete when they have to borrow at 15 per cent? That’s a 15 per cent competitive disadvantage. Add another 10 per cent minimum overheads, and Indian industry starts with a 25 per cent disadvantage in the global market. How are they expected to export with such huge competitive disadvantages? The RBI wrecked Indian industry at a time when India should have been trying to capture the world market during the global turmoil. We are going to see one of the biggest trade deficits this year. I guess it will be close to $200 billion. Given the state of capital goods production, what are we going to produce that’s exportable?With such a huge trade deficit, the demand for dollars is going to be insatiable. We have not seen the bottom yet. The rupee fell 19 per cent to the dollar in 2011. I predict it will go down close to 60 to a dollar in 2012. That is importing inflation in a big way.

text from this link.

[pankajs]

OVL to resume drilling in South China Sea

New Delhi: As part of its efforts to assert India’s presence in the South China Sea, state-owned ONGC Videsh Ltd (OVL) will resume drilling in the disputed hydrocarbon block No. 128.

[gakakkad]

PM asks diaspora to contribute more in building modern India

The chap is asking for the diaspora to contripoot to Yindia's prosperity . Does he realise that he too has a role in building a 'modern India' ? And that role goes well beyond farting random nonsense on TV. Does he realise that Anatonia Maino 'sonia' got ruinous bills like NREGA right under his nose ? He has lost the moral right to request the diaspora or the middle class or the industrialist of anything .

[chetak]

Deleted. You're on thin ice here. As a first offence from a stable contributor, I avoided a formal warning, but please desist. This post will be recorded in your user notes

[shaardula]

wrt PM's plans....

meanwhile i read in a paper on jan 5 that, as of dec last, pension funds are dead in india. a new irda mandate that pension funds guarantee a return of 4% has killed the pension fund industry in india, apparently. LIC, Bajaj Alliance, Kotak etc all have had to withdraw their 'products'.