Indian Economy: News and Discussion (Jan 1 2010)

vina · Post by **vina** » 26 Feb 2011 09:35

somnath wrote:One last point...the quality of the Economic Survey continues to be exceptional under Kaushik Basu - he is perhaps the best CEA after Shankar Acharya...(taking parochial pride in the fact both are bengalis )...

Err, I would temper that with the "performance" err. Circus, that was the Didi's act yesterday. The sounds of stuff circling the drain before the final woosh for the railways is what I am hearing. I just hope Didi becomes the Chief Minister of Bengal soon and inflicts her craziness there and leaves the rest of India and the railways to saner people to nurse back to health.

Let us see what the other Bengali in the cabinet does on Monday.

Arjun · Post by **Arjun** » 26 Feb 2011 09:42

vina wrote:Nah. The BJP needs to get rid of the SJM kind of luddites first. The SJM belong to the CPI/CPM or CPI-Marxist-Leninist and Maoists. The SJM are just "believing" Marxists with the same kind of economic outlook that is statist and status quoist.

Is that the problem India faces here and now or is this it: National Advisory Council hirings signal socialist agenda ?

Holy cr*p !! From the article above....

Gandhi is credit with creating some of the flagship schemes, including the rural jobs programme that already costs about 1 percent of GDP. She has overruled ministers to widen a food subsidy bill...

On issues of economic reforms, Indian media often report differences between her and Prime Minister Manmohan Singh, an economist credited with opening up India's heavily socialist economy in the 1990s.

Why are we discussing Yashwant and RSS, when such flagrant shenanigans are going on as we speak at the INC ????

somnath · Post by **somnath** » 26 Feb 2011 10:31

vina wrote:Err, I would temper that with the "performance" err. Circus, that was the Didi's act yesterday.

101% - Mamta Bannerjee is a disaster ^ 10...Pity, Bengal deserves much better, Railways anyways wil be rid of her next year..

Arjun-ji,

Whatever guidane SG might be giving MMS, there isnt anyhing "extra constitutional" about it...The Head of the INC, an elected MP, is "presscribing" policy to the PM..If you dont like it, or the polciies, vote out SG next time, or vote out SG and retain MMS!

You might quibble about the recos of NAC - but RTI is hardly a leftist fad, neither is the Food Security Bill, or Right to Education...at least you can indulge in an intelligent debate on them...[Deleted]

Arjun · Post by **Arjun** » 26 Feb 2011 10:36

Suraj wrote:GDP advance estimate is Rs.78,77,947 cr (~$1,750 billion) (section 0.1: Key Indicators)

Wow...20% + growth rate !! I guess inflation can be useful in some ways....

Arjun · Post by **Arjun** » 26 Feb 2011 10:48

somnath wrote:Whatever guidane SG might be giving MMS, there isnt anyhing "extra constitutional" about it...The Head of the INC, an elected MP, is "presscribing" policy to the PM..If you dont like it, or the polciies, vote out SG next time, or vote out SG and retain MMS!

I have responded to this non-sequitor a couple of times already. You might want to read my longish post on this same page, and point out where you see the fallacies in my argument.

You might quibble about the recos of NAC - but RTI is hardly a leftist fad, neither is the Food Security Bill, or Right to Education...at least you can indulge in an intelligent debate on them...What do you say to people whose worldviews start with cow urine and end with cow dung?!

RTI is good....Food security and right to education are obviously ideal - there is the only the small problem of the implications on the economy....Anyway there are three bottomline issues (a) this is obviously a heavily leftist council, and as someone who supposedly is against the Congress Left I am surprised you support this (b) it is obvious (read the article from Reuters in my previous post) that SG first comes up with what is required for obtaining votes and then goes to the council to provide the intellectual justification for it and (c) by overruling ministers on matters of fiscal deficit she is interfering in the executive governance of the country.

Again, and one reason I used the language Suraj objected to above, is I see no rationale for not focusing on what the current problem for the country is and continuing to bring up the RSS in every debate. The whole RSS issue is 10 years old - what relevance does it have at all to what we are facing right now in terms of governance? In any case I have whole heartedly agreed with many of you that RSS should be stopped from interfering in politics since that is not their domain - but what gets my goat is that you don't apply the same yardsticks for the Dynasts (who come in with lower IQ than the RSS folks) interfering in the executive affairs of the country. If SG wanted to run the country she should have become the PM - you can't have your cake and eat it too !!!!

[Deleted. No more on the topic]

Suraj · Post by **Suraj** » 26 Feb 2011 11:08

somnath and Arjun: Both of you need to back off and calm down. I tried to give this thread some latitude to cover new ground in debate, but if you (and vina for that matter) cannot heed the caution to stick to economics and put a complete stop to flamebait and rhetoric - and that applies to both of you since 'cow urine' and 'Queen Bee' are no different in that sense - I will just apply a warning to both of you.

somnath · Post by **somnath** » 26 Feb 2011 11:21

Arjun-ji,

I dont like the dynasts at all myself...(on a different note, you might want to read Patrick French's latest book on India - has a whole chapter of a great quant analysis on the "dynastic" influence in India's politics - good read)..But even if I dont like them, they are elected politicians...SG is an elected PResident of the ruling party...So if she is influencing policy, and you dont like it, you have an opportunity to throw her out...With RSS, even if you generally liked the ABV administration, you had no way of "getting back" at the ubiquitous Ram Lals who would go around influencing policy without ever facing the vote...(mind you, not just legislative policy suggestions, but executive actions - appointment of ministers, bureaucrats, PSU chiefs, education policy -the sort that doesnt get adjudicated at a legislative level)...

Anyway, RSS is peripheral currently...

about the NAC, the reuters article is a usual media snippet...nothing terribly insightful there...The govt is in the business of making policy choices - equity v/s fisc, growth v/s inflation are policy choices that it has to make...If the party that the govt belongs to has a certain stance on those choices that you (or I) dont like, we can always throw the party out...Or at least, throw the offending sections out...A case in point was UPI I - obviously there was quite a bit going in favour of the govt..At the same time, the Left was seen as the problem, even as they supported the govt for most of the term...The people therefore had a chance to return UPA while giving the Left a bloody nose....

It would be a good idea to discuss some of the more contentious policy choices ostensibly influecned by the NAC - the Food Security Bill and NREGA for instance...As you would perhaps know by now, I am not a huge fan of the "fiscal fundamentalists" club...But the merits of the policies can be discussed fruitfully, esp with NREGA now that we have some data to discuss as well...

Suraj-ji, I dont think there is any "flame" war here - just an exchange of POVs! And no analysis of the NDA's performance can remain divorced from the influence that RSS has had over it, in same way as an analysis of INC performance has a big dose of the family's predilections..

Arjun · Post by **Arjun** » 26 Feb 2011 11:58

somnath wrote:I dont like the dynasts at all myself...(on a different note, you might want to read Patrick French's latest book on India - has a whole chapter of a great quant analysis on the "dynastic" influence in India's politics - good read)..But even if I dont like them, they are elected politicians...SG is an elected PResident of the ruling party...So if she is influencing policy, and you dont like it, you have an opportunity to throw her out...With RSS, even if you generally liked the ABV administration, you had no way of "getting back" at the ubiquitous Ram Lals who would go around influencing policy without ever facing the vote...(mind you, not just legislative policy suggestions, but executive actions - appointment of ministers, bureaucrats, PSU chiefs, education policy -the sort that doesnt get adjudicated at a legislative level)...

Ok, here's my last post on this issue. The fundamental principle that is being debated here is what is the right governance model for running the executive branch of the country. I see both the BJP/RSS issue and the INC issue as representing exactly the same violation of the spirit of the constitution. When you are talking of the ability to vote out INC, the situation is exactly the same for the BJP. If the BJP is pursuing a relationship with RSS that the country objects to the country can vote them out for a party that does not have this relationship. I see no significance whatsoever in your distinction that RSS is the one controlling and that the RSS cannot be voted out - so what? You can vote out the BJP.

Btw, so I am clear - I am NOT supporting the BJP-RSS relationship. I am stating that the problem is exactly the same whether it is BJP-RSS or MMS-SG, and both raise fundamental questions as to what is the vision behind how the executive governance of the country is supposed to function. I want both of these to be put to an end. As regards INC, either the Dynasty assumes office directly and takes responsibility for their executive actions, or they remain subservient to MMS' decisions. A mix and match where the dynasty can palm off all failures on MMS and take credit for all the populist programs should not be allowed.

My last post on the issue - back to budget now !!

ShauryaT · Post by **ShauryaT** » 27 Feb 2011 01:43

vina wrote:Nah. The BJP needs to get rid of the SJM kind of luddites first. The SJM belong to the CPI/CPM or CPI-Marxist-Leninist and Maoists. The SJM are just "believing" Marxists with the same kind of economic outlook that is statist and status quoist.

[Deleted harsh language]

One can be opposed to an ideology, however before doing an equal-equal, one has to come to a certain understanding of it.

From my perspective, the SJM approach is an alternative set of thoughts and processes, based on an Indic outlook and philosophy. It is not perfect and not fully evolved. Comparing it to a failed ideology like communism is like saying, since capitalism won the western game, India is served best by blindly following it without giving alternative processes any chance.

I would venture to say, India needs such a pressure camp, which charts out a unique course for India instead of a simple copy and/or hodge podge of western models - which is incorporated in our pre-amblem. A lobby that advocates swadeshi over mindless globalization is essential and valid. I also wish that their program and messages were more positive than negative in approach.

Readers can make up their own minds, but please do base your opinions on reasonably accurate information.
Swadeshi Jagaran Manch - Wiki
Swadiesh Jagran Manch - A Vision of Self Reliance

ShauryaT · Post by **ShauryaT** » 27 Feb 2011 05:03

Suraj: How does one separate the politics part in a political economy? Granted it can get testy at times and a headache for you all, but it is political ideology and interests along with the economics.

One reason economists are derided is because they sometimes forget that it is humans that make and are affected by policy.

Just a question to understand from you, to what degree is this thread reserved for economic stats/news and to what degree the policy that shapes them can be debated.

Would like to stay within those lines.

Theo_Fidel · Post by **Theo_Fidel** » 27 Feb 2011 07:24

Shaurya, et al.

It is useful to think in terms of Signal to Noise ratio. S/N.

Right now there are several posters who only post noise. All opinion with out back up is noise. A little bit of noise is OK but with no meaty signal it is GIGO.

There are several charts I want to post, many comparison pictures, etc but I will not because of the noise level here. I'm sure there are several long time posters who are staying away just because of the noise level. Neel, for one.

Lets try to improve the signal strength before dumping more noise.

somnath · Post by **somnath** » 27 Feb 2011 07:42

Kaushik Basu on growth - predicts double digit growth in 2 years time...he has been unusually prescient till now (he predicted that growth would be back to 8% in 2009, that India should overtake China's growth by 2012)...

http://www.indianexpress.com/news/econo ... u/755188/0

SharyaT-ji, you are right..It is impossible to discuss economic policy choices without getting into the political economy...(Which is why it is critical to have a Finance minister who has the instincts and political heft rather than technical competence...)

I agree also on the fact that no country has the same set of issues, therefore solutions need to be different...I went through the SJM site - here's there latest resolution..

http://www.swadeshionline.in/resolution-1

I havent seen a more eclectic mishmash of motherhood statements and cliches without an iota of thought - no wonder, they work at cross purposes..Sample this..

S.J.M. Demands—
1. The Govt. should put and end to deficit budget regime and adopt soon surplus budgetary policy.
--------------
3. Greater importance to be given for agricultural production through proper pricing policy.
--------------
8. The Govt. should adopt a true universal public distribution system and enlarge the commodities offered. They must be managed efficiently.

--------------

The Central Govt. is running huge fiscal deficit due to wasteful expenditure. It was Rs. 3,36,992 crores in 2008-09 climbed to 4,14,041 crores in 2010-11. This is pumping more & more money into the economy causing inflationary spirals.

Govt should run a "surplus" - how? No mention or study of how India can run a surplus fisc....Pricing on agri commodities need to be hiked, and PDS expanded - obviously they dont realise that both these go against the imperative of running a surplus fisc...further, the govt is "pumping more money" by running a deficit - again obvioulsy these guys dont realise that India stopped monetising deficits many many years ago...

You will never see this in any output of a rigorous think tank - including (say) the NAC...You can disagree on the policy assumptions and choices, but would never be confronted with infantile sloganeering...

Why is SJM/RSS-types important? Because they are the patron saint of the premier opposition party, and a wannabe ruling party...And an active participant in executive decision making, when BJP is in power...It is the imprint of the same philosophy that made the BJP preface the agri policy section of its last election manifesto by saying that in the 14th century India had a paddy-productivity of 20 tons/hectare, whereas the curent situation is 5! (BTW, the best in the world is Australia, that has around 10)....Which is precisely why a YS needs to be appointed as FM (against the wishes of the then PM), and then a policy hotch-potch followed for the better part of the term...As Patrick French writes, one of these guys spoke to him seriously on how there were aeroplanes in the VEdic age!

Anyhow, enough of this for now...Once the budget is done and over with, it might be a good idea to examine the impact of NREGA- which is the most contentious of all policy choices made by the INC..."Proof" of its leftist bias in some circles...We have some data now on NREGA - so it would make for interesting analysis and discussoin....I will try and put togtehr a compendium of available resources on the topic...

ShauryaT · Post by **ShauryaT** » 27 Feb 2011 08:54

A little dated, so apologies if it has been posted before.
The UPA’s triple whammy

Rising fiscal deficit, rising current account deficit and high inflation do not bode well for the Indian economy

Despite acknowledgment of serious problems, the overwhelming consensus is that the current demographic dividend will ensure double-digit economic growth, and this will in turn wash away all other sins such as fiscal deficit, lack of economic reforms, economic inefficiency, high and rising cost of living and suchlike. But this view is beginning to sound less and less convincing as high inflation returns. Actually, inflation never went away. The government is pointing to global factors for rising food prices. It may be true up to a point. However, as Omkar Goswami points out in Businessworld, the absence of a productivity revolution in India over the years has a lot to do with it:

It is important to understand not just the numbers but what drives them. To what degree demographic dividends hide the sins is up for debate.

Prem · Post by **Prem** » 27 Feb 2011 09:18

Top priority for infra projects
http://www.thehindu.com/business/Econom ... 490297.ece

Of the 559 central projects costing Rs.150 crore and above, 293 stood delayed by up to 36 months as on October 2010. Only 14 projects were running ahead of schedule while 117 were on schedule. In the road transport and highways sector, 51 projects reported delays of 1 to 36 months; in the power sector 20 projects reported delays of 1 to 18 months and in the petroleum sector 16 projects reported delays of 1 to 16 months, it said. However, the telecom sector continues to do well and most of the projects in this sector were on schedule.The Economic Survey said timely completion of infrastructure projects remained the top priority for sustaining growth momentum and called for streamlining land acquisition and environment clearance for the core sector projects.“The foremost challenge is to make huge capacity addition in a time-bound manner while ensuring that projects embody value for money and investments result in world class infrastructure,'' the Survey said.
Though the actual expenditure in the ten infrastructure sectors stood at Rs.10,65,828 crore during the current Plan period's first three years against the target of Rs.9,81,119 crore, the survey said that capacity addition was lower than aimed in power, roads and railway lines.Quoting a preliminary assessment made by the Planning Commission, the Survey said the infrastructure sector needs a huge Rs.41 lakh crore ( This is close to Trilion$) investment in the XII Plan. “There is an urgent need to streamline land acquisition and environment clearance for infrastructure projects,'' the Survey said

somnath · Post by **somnath** » 27 Feb 2011 09:20

One of the interesting points of the speech tomorrow would be how Pranab M projects fiscal deficit...2010-11 was a good year, but buffered by the 3G/BWA auction..There isnt another windfall on the horizon...So the assumptions would be interesting to see...

Suraj · Post by **Suraj** » 27 Feb 2011 10:28

ShauryaT wrote:Suraj: How does one separate the politics part in a political economy? Granted it can get testy at times and a headache for you all, but it is political ideology and interests along with the economics.

One reason economists are derided is because they sometimes forget that it is humans that make and are affected by policy.

Just a question to understand from you, to what degree is this thread reserved for economic stats/news and to what degree the policy that shapes them can be debated.

Would like to stay within those lines.

Oh please. The reason I put a stop to the discussion is because posters on both sides have shown themselves incapable of avoiding weasel words, ad hominems and character assassination, harsh language and flamebaiting, despite repeated statements to keep the calm. Half a dozen posts have been deleted and more edited to remove the taunting tones used by those on both sides of the debate. I chose to step in and call a ceasefire before I was compelled to warn anyone - just to be fair I would have warned both participants in the argument, not just the one who was being more egregious at any given time, but I preferred to avoid issuing any.

There simply has not been enough maturity in the debate, but that is the nature of attempting to allow the political side of political economy here. Perhaps at some future time when posters are calmer and capable of postiing with less of the standard rhetoric, it will be allowed again. Back to economics only, thanks.

suryag · Post by **suryag** » 27 Feb 2011 11:08

Guys sorry to gatecrash in the discussion above, can people tell me about venture capitalists/companies in India. I found Indian Angel network/National Entrepreneurs network but would like to know if there are more vc firms to whom we would like to pitch a product and seek funding.

Sudip · Post by **Sudip** » 27 Feb 2011 11:46

UK 'to end direct aid to 16 countries'

A draft copy of the government's review of its overseas aid budget - due to be published this week - also reveals aid to India will be frozen.

India is currently one of the biggest recipients of UK development aid, and there have been media campaigns in the UK suggesting an economy growing at nearly 10% a year simply does not need British assistance.

But others point out that nearly half a billion people in India are still desperately poor, and efforts to reduce global poverty will not progress without significant aid.

Arjun · Post by **Arjun** » 27 Feb 2011 12:06

Interesting interview of Pradeep Shah in yesterday's papers. As one of India's most respected FII heads, his words carry weight...

We won’t meet our investment targets

What are you making of the macroeconomic situation with growth slowing down?

For the last 30 years we’ve had a growth rate of 6.2% and with the reforms coming in, there was considerable progress so, in the last few years, we’ve seen 8.5%. But when we compare ourselves with China, we cannot but be disheartened; we were at the same level in 1990—their GDP was $910 billion and we were at $720 billion. Today, their per capita income is at $4,500 and we’re roughly at one fourth. Even in terms of purchasing power parity, they’re twice us at $6,500 (we’re at $3,300). So, clearly we have a lot of catching up to do. But when we see what is going on in India, we wonder whether we will ever catch up. There are such brilliant people in government but no governance and no accountability for wrongdoing. We are perpetuating a culture of allowing wrongdoing to go on unpunished and we’re encouraging the young generation, which is our future, to think in this manner.

Instead of hitting 9% GDP growth, we’re going back closer to 8%...

Yes, we are seeing a slowdown. The consequence of inflation for the poor has been so severe and the pressure on households has been so high that people have had to cut back on essentials, like soap, to maintain food budgets. We see government policies that are well-intentioned but implemented badly and allow for leakage, so the benefits don’t go to the poor. And there are other adverse consequences too. While the mid-day meals have helped attendance in schools, children’s protein intake and so on, we’re not seeing the same with the NREGA. About Rs 1,12,000 crore has been spent in the last five years. What is the outcome? These expenditures were supposed to result in some outcome and we are supposed to have some accountability.

But we’ve seen nothing; it’s been allowed to become a black hole with a lot of leakage. There has, no doubt, been some benefit, but a lot of it has seeped away into the hands of politicians. And where it has reached the poor, it has unfortunately had the deleterious consequence of discouraging productive work and so underemployment is getting perpetuated. So, we need to fine-tune NREGA. Because the government is concerned about votes in the next two and a half years, it wants to come up with more programmes like the Right to Food. No one objects to these but there cannot be seepage. The Congress knows that sops are a political weapon but these have dysfunctional consequences via subsidies distorting the economy.

amit · Post by **amit** » 27 Feb 2011 12:16

Arjun wrote:But when we compare ourselves with China, we cannot but be disheartened; we were at the same level in 1990—their GDP was $910 billion and we were at $720 billion.

In 1990 our GDP was $720 billion???

There's gotta be a typo or mix up somewhere.

Also in the India-China comparison, on point to keep in mind, some years a go, as far as I can recall, China changed its accounting base year. That immediately added more than 20 per cent to the Chinese GDP.

Arjun · Post by **Arjun** » 27 Feb 2011 12:59

amit wrote:In 1990 our GDP was $720 billion???

There's gotta be a typo or mix up somewhere.

Yes the number does not seem right, what I see from other sources is India was at ~320 Bn, and China at 380 Bn in 1990. What is undeniable is that that was the last time the two economies were so close - the trajectory started to differ widely from that year onwards.

Also, exchange rate policy over the years vs USD in each country might have played a role in accentuating the difference. But the broader point of the difference in trajectory since 1990 remains valid.

I would say though, that what is more important than the last 20 years is the next twenty - and certainly that should give cause for optimism IF India plays its cards right. I would focus on Pradeep's views on the latter.

Arjun · Post by **Arjun** » 27 Feb 2011 13:31

9% growth forecast difficult to achieve: Economists

All depends on how long the oil crisis arising out of Libya and N Africa situations lasts...

amit · Post by **amit** » 27 Feb 2011 15:23

Arjun,
A simple policy perscription approach to a India-China growth comparison is a very simplistic approach. China has and is growing so fast not because it has a set of super duper policy driving its growth. They are growing because of the authoritarian regime - which is several orders of magnitude worse than the Dynasty that you love to hate - can ride roughshod over all opposition. As an example India could have had GST up and functioning in 2007 itself if an authoritarian govt had been power which could have ignored the BJP opposition. Many experts have said a GST regime can add more than a percentage point to growth.
Bottomline I personally take with a pinch of salt any comparison between the two which just looks at the policy regime, however eminent the person who is doing it may be. Sure there are a lot of ills in Indian policy making. However no need to look at China wistfully. India as a nation will never go down that path.

Arjun · Post by **Arjun** » 27 Feb 2011 16:43

amit wrote:A simple policy perscription approach to a India-China growth comparison is a very simplistic approach. China has and is growing so fast not because it has a set of super duper policy driving its growth. They are growing because of the authoritarian regime - which is several orders of magnitude worse than the Dynasty that you love to hate - can ride roughshod over all opposition.

You are free to critique the articles that I post. I hold no brief for these, and might agree with some of what is in there and disagree with other parts. Every single policy prescription would have both supporters and detractors - and it would be useful to hear out all points and then deconstruct with your own thoughts on the matter.

One comment here - while admitting the Chinese advantage in authoritarianism, would we also take away from India's performance the advantage of our demographic dividend?

Since you brought up the Dynasty - I would like to add that however authoritarian the CPC is, it is not dynastic (probably one reason it has survived). I will leave it at that - any more on this topic can be dangerous for all concerned !!

amit · Post by **amit** » 27 Feb 2011 18:27

Arjun wrote: One comment here - while admitting the Chinese advantage in authoritarianism, would we also take away from India's performance the advantage of our demographic dividend

China has been growing at 10 % since 1990. Do you think they have had a demographic deficit all this while?
Sorry to say this but I think you've misunderstood how this demographic dividend is supposed to work in India's favour vis a vis China.
Due to its one child policy China will age quicker than India. But this becomes a significant disadvantage for the Middle Kingdom only after 2020 or so. Right now saying India has a big advantage over China cira 2011 due to a younger population is a strawman. Of course that's not to say the demographic dividend is not important - India needs to exploit it in order to become rich before it gets old. But at present it provides no significant strategic advantage over China.

somnath · Post by **somnath** » 27 Feb 2011 19:03

^^^That interview of Pradeep Shah was a typically "short on logic, long on cliches" stuff that is typical of most of the press..

The gaffe on the comparative GDP numbers is too glaring..I dont have access to the databases at home, but I will check in office tom..the numbers were definitely different..Plus, China has revalued its GDP 6-7 times in the last 30-40 years, each time adding a chunky number to its nominal amount...Yasheng Huang and Tarun Khanna wrote an illuminating book on how Chinese numbers dont add up..

but that isnt the important point - its the sheer lack of any thought given to comments that is..

1. NREGA has lots of seepage, and has had no outcomes...
2. There is "tightness" in the capital markets, and investors cannot raise capital..
3. Fiscal deficit "too high"...

complete motherhood statements without any supporting data that he himself contradicts in other places...Ought to be ignored...

As a small measure (on appetite for India paper)..A couple of months back, debt FII limits were auctioned off..The bidding, whcih usualy yields 3-4 bps, yielded 42 bps...there is another auction expected in Mar, and traders are expecting bidding to be topping 100 bps....So much for diminihsing investor appetite!

Arjun · Post by **Arjun** » 27 Feb 2011 19:09

amit wrote:India has a big advantage over China cira 2011 due to a younger population is a strawman. Of course that's not to say the demographic dividend is not important - India needs to exploit it in order to become rich before it gets old. But at present it provides no significant strategic advantage over China.

You seem to be right on this front.

Demographic dividend depends both on the direction of change in the proportion of working age population as well as on the overall % for the country. For the first, China's % will peak in next couple of years then start declining, which will give some advantage to India - but the real benefit will kick in when the proportions crossover (in 2030).

Here's a good analysis on the theme : India China demographic dividend

The proportion of the population of China that is of working age is projected to
peak during the next two years and then decrease thereafter (except for a flattening in the
mid-2020s, which is just before the post-Great Leap baby boom reaches age 65),. In
India, however, the proportion of the population that is of working age will increase
through 2029, and then decrease slowly, but steadily afterwards. China’s demographic
window of opportunity is rapidly closing, while India’s will remain open until at least
2030 (and changes immediately thereafter will be very small). Nonetheless, even in 2025
the working-age proportion of population will be higher in China. The proportion in
India is projected to surpass that in China in 2030.
However, the opportunity to reap a demographic dividend comes from the
positive change in the proportion of the population that is in the labor force, which
creates the demand and supply signals necessary for economic growth (Bloom et al.,
2003). Bloom et al. (2009) find that economic growth in China and India between 1980
and 2000 was mainly due to increasing productivity, in large part because of the shift
from agriculture to industry and services, but that increases in the proportion of working
age and in labor force participation rates contributed significantly as well. While the
effect of the change in the working-age proportion would, other things the same, favor
India, Bloom et al. (2009) find that the level of working-age population percentage also
matters, favoring China in the years leading up to 2030.

amit · Post by **amit** » 27 Feb 2011 19:15

^^^^

All this has been duscussed to death on this thread.

Arjun · Post by **Arjun** » 27 Feb 2011 21:43

somnath wrote:...complete motherhood statements without any supporting data that he himself contradicts in other places...Ought to be ignored...!

Hmmm, complete motherhood statements is it? I seriously hold no brief for opinions by third parties, but your surprisingly strong denunciation of a highly respected industry leader forces me to take a look at the points you raise-

somnath wrote:1. NREGA has lots of seepage, and has had no outcomes...

Here's what Mihir Shah, Planning Commission member has to say in NREGA, Is it a Success?-

Asset creation, I think that has been probably the most serious deficiency of the programme, although there are many others as well. But as far as asset creation is concerned, we have studied it in the mid term appraisal of the 11th Five Year plan and we have said that the quality of work has left much to be desired.

Asset creation was supposed to be one of the major outcomes for the NREGA program. You can argue about employment generation etc, but given Mihir's frank admission, surely nothing merits calling Pradip Shah's views 'motherhood' !!!

Here is Mihir again on leakage in the system-

The problem is whether the wages are actually reaching the intended beneficiaries, whether they are reaching in time, whether people are being able to get payments easily, whether there are delays, whether going to the banks in remote rural areas are proved a problem. All these have been major issues. Particularly in terms of leakages, I think the system has quickly devised its own ways of finding ways around the provisions of the Act.

We have had many cases of leakages happening and especially when material costs are being involved the system of procurement, etc of the materials have not been as strong as they should have been. So, there are whole hosts of problems which need urgent addressing.

somnath wrote:2. There is "tightness" in the capital markets, and investors cannot raise capital..

Have you been following the Indian capital markets at all over the past 2 months. Surely you know that 3 months is a long-long time in capital markets ? Do you know at all the state of the Indian equity markets and the resultant impact on primary issuances? As far as debt goes, are you saying there are no 'tight liquidity' conditions currently on due to the RBI moves, and that interest rate hikes do not impact the raise of debt capital?

somnath wrote:3. Fiscal deficit "too high"...

Why the extreme shock at Pradip Shah that you describe this as 'motherhood'....Not only Pradip but a host of economists have described fiscal deficit as a major problem. Many economists believe one-time revenue (such as 3G etc) are not supposed to be counted when calculating deficit percentage. While you can have a different view on the fiscal deficit situation, there is absolutely no case to use such extreme language on the many, many economists and industry leaders who hold the opposing view.

somnath · Post by **somnath** » 28 Feb 2011 06:42

Arjun-ji, each topic is worth several pages of discussions..So I will wont attempt it at this stage..The point was differnet - the chap was making random statements, some contradicting each other (for example: growth will be low, fiscal deficit is high, but dont raise excise duties as volumes will take care of revenues!)...Sloganeering, or lobbying is not substitute for analysis..Anyways, lets focus on the Budget!

Yes, China's GDP in 1990 was about 400 billion, ours was around 245...

amit · Post by **amit** » 28 Feb 2011 06:43

Arjun wrote:Here's what Mihir Shah, Planning Commission member has to say in NREGA, Is it a Success?-
Asset creation, I think that has been probably the most serious deficiency of the programme, although there are many others as well. But as far as asset creation is concerned, we have studied it in the mid term appraisal of the 11th Five Year plan and we have said that the quality of work has left much to be desired.

Asset creation was supposed to be one of the major outcomes for the NREGA program. You can argue about employment generation etc, but given Mihir's frank admission, surely nothing merits calling Pradip Shah's views 'motherhood' !!!

Here is Mihir again on leakage in the system-
The problem is whether the wages are actually reaching the intended beneficiaries, whether they are reaching in time, whether people are being able to get payments easily, whether there are delays, whether going to the banks in remote rural areas are proved a problem. All these have been major issues. Particularly in terms of leakages, I think the system has quickly devised its own ways of finding ways around the provisions of the Act.

We have had many cases of leakages happening and especially when material costs are being involved the system of procurement, etc of the materials have not been as strong as they should have been. So, there are whole hosts of problems which need urgent addressing.

Arjun,

Sorry say this, but selective quoting of somebody to just prove your point is not really a good way to argue because folks, at least on this thread, try to keep abreast of what's going on.

Mihir da has also said this about NREGA which you conveniently omitted:

This is a programme without precedent. It has achievements also, therefore, without precedent. I would say it is a largest ever employment programme in human history. It has created more work for the poorest people of our country than any other programme since independence.
If you look at the employment generated, if you look at the coverage of the schedule caste and schedule tribe, if you look at the participation of women, if you also look at the financial inclusion that we have achieved, about more than 10 crore bank accounts and post office accounts have been open for NREGA workers. So, I think there is a lot that can be said in terms of achievements.
<snip>
Unfortunately, when you try to implement something so new, based on the same architecture implementation that you had in employment programmes in the past, there are bound to be disappointments.

I agree with Mihir da that when you look at the scope of the programme, then there's bound to be some problems and certainly asset creation is one of them. Which why the Planning Commission member also said this:

There is an Act, which specifies the work on which the money must be spent. Therefore, at least we have a system where there is accountability. There are reforms that we can make in NREGA, which we have suggested in the Planning Commission, which are being put into place in some locations where excellent work is also happening where water harvesting structures are being created.

And here is another quote that you should note:

When India has come out of the recession which the world has founded so difficult to come out of, the NREGA wages have played a major role. You have created so much purchasing power in rural India that demand is created for the products, which were produced by the Indian industry. That is the multiplier actually, the Keynesian multiplier operation.

Some commentators have said that NREGA was one of the reasons Congress did so well in the last elections.

Here's another interesting quote from Mihir Sen:

What I have in mind is also the operation of the accelerator principal. When large number of laborers who are working on NREGA today, they are small and marginal farmers. More than 70% if the laborers let me tell you are actually farmers who have been forced to work on NREGA because the productivity of their lands have been so decimated over the decades that they cannot make ends meet through farming. What is happening where NREGA is implemented well is that water harvesting structures have been created and industrial productivity is being rejuvenated and these farmers are actually going back to farming.

Mihir Sen concludes:

If you see the work done across several states of India by the national consortium of civil society organisation of NREGA, exemplary work has been done in raising agricultural productivity, in reducing migration. How will you reduce migration unless agriculture picks up? And not only agriculture, dairying, fisheries, all the allied livelihoods which can be created on the basis of the foundation that of water security that NREGA creates

So bottomline is sure there are issues with NREGA, as there's bound to be with a project of this magnitude. But any non-biased (as in non political spin) assessment would say that NREGA has scope for improvement but the idea behind it is sound and a lot of poor people have actually benefited.

amit · Post by **amit** » 28 Feb 2011 06:49

Interestingly one of the states which has benefited the most from NREGA due to good implementation is Gujarat.

NREGA’s plan for 2011 is based on Gujarat’s watershed initiative

Small, marginal and those farmers living below poverty line (BPL) in Gujarat may get an opportunity to design solutions for their own plot of land. If everything goes right, Gujarat government, under the National Rural Employment Guarantee Act (NREGA), has plans of taking each farmer's land as an individual project and give liberty to choose what they want to with it to earn livelihood under the scheme.

Around 1 lakh farmers are expected to be benefited by the scheme and the government hopes to take it to 2 lakh in a year's time.
Speaking about the various innovative tactics used by Gujarat farmers Teotia insisted that its time these innovations of these farmers were brought out of the closet.

somnath · Post by **somnath** » 28 Feb 2011 07:05

Amit, NREGA is an interesting initiative to discuss..The good news is that there is enough data now for solid analyses, and quite bit has happened, both top-down as well as bottom-up..Once the budget is out of the way, will try and prepare a compendium on NREGA related studies..

BTW, was watching a programme on NDTV with Ila Patnaik, Surjit Bhalla and Imkar Goswami discussing the budget - no one today dismisses NREGA as "useless black hole" anymore, not even Surjit Bhalla, who otherwise has written reams against the Act...The views are more nuanced...

amit · Post by **amit** » 28 Feb 2011 07:20

somnath wrote:Amit, NREGA is an interesting initiative to discuss..The good news is that there is enough data now for solid analyses, and quite bit has happened, both top-down as well as bottom-up..Once the budget is out of the way, will try and prepare a compendium on NREGA related studies..

BTW, was watching a programme on NDTV with Ila Patnaik, Surjit Bhalla and Imkar Goswami discussing the budget - no one today dismisses NREGA as "useless black hole" anymore, not even Surjit Bhalla, who otherwise has written reams against the Act...The views are more nuanced...

Good idea Somnath, let's get the budget out of the way and then we can discuss NREGA.

somnath · Post by **somnath** » 28 Feb 2011 07:26

On the budget, good article by MK Venu on the GST implications...

http://www.indianexpress.com/news/the-s ... m/755671/0

Highlighting 2 important points:

But, by properly implementing GST, real-estate transactions worth nearly $200 billion annually can be brought under the indirect tax net. Once these become part of the formal economy, income from these activities will be taxed separately. Currently, the government loses both indirect tax as well as income tax from those who benefit from the $200 billion worth of transactions in the real-estate sector.

Just to get an idea of how GST would result in an explosion of revenue productivity, one needs to look at just one figure provided by a finance ministry task force which studied the upside the GST reform provides. The task force puts the potential value of transactions on which the Centre and states can collect GST at over Rs. 35 lakh crore. At present, probably only 60 per cent of this transaction value is being taxed. The remaining 40 per cent represents a fresh source of revenue as these transactions are outside the tax net. India could really shine when all this black turns white.

Ila Patnaik said something interesting in a discussion - in case some states are still recalcitrant, let the GST be implemented in those that agree - start with the INC-ruled states (and WB/Kerala) for a start...It will create a common market for at least 40-50% of the country...the others will soon realise that they are losing out and join in...

Arjun · Post by **Arjun** » 28 Feb 2011 07:42

amit wrote:Sorry say this, but selective quoting of somebody to just prove your point is not really a good way to argue because folks, at least on this thread, try to keep abreast of what's going on.

Amit, suggest you follow the context of the discussion before accusing anybody of 'selective quoting'.

I would not even have responded at all if Somnath had said in his post that he differed with Pradip's views and here were the reasons why. That is perfectly valid way of arguing instead of provocative usage of terms like 'motherhood' etc against an extremely well regarded business chief. He pointed out 3 instances of what he termed as 'random comments' as supposed proof that Pradip's statements were 'motherhood'. I responded back proving that for all of the three instances that he brought up, while parties can certainly have opposing views - there is NOTHING whatsoever to justify usage of such derogatory language. Obviously my response would be in line with the specific comments he had raised !!!

Folks over here are immensely capable of forming their own conclusions as to which side is being Paki and which side is being reasonable. Please allow them to do so.

somnath · Post by **somnath** » 28 Feb 2011 07:48

Another interesting articulation by the "other Modi" on Central transfers..

http://www.indianexpress.com/news/the-c ... n/755568/0

Its an idea whose time has come - this "one shoe fits all" business doesnt work anymore with various states at such vastly different levels of progress...The one statement captures the intent nicely..

. There is a Central scheme that gives Rs. 2 crore for starting a model school in every block but it comes with a big rider — the state must allocate five acres of land for each such school. If this rider is waived, a state government can build two or three schools with that Rs. 2 crore, following most criteria of a model school

Arjun-ji, dont get overwhelmed with semantics (didnt know "motherhood" was a provocative word though)...Basic point is whenever analysis is sacrificed for pure sloganeering or lobbying without thought, it needs to be treatd with contempt...Thats all..Especialy if the chap making the points isn even making them coherently..

Arjun · Post by **Arjun** » 28 Feb 2011 08:17

somnath wrote:Arjun-ji, dont get overwhelmed with semantics (didnt know "motherhood" was a provocative word though)...Basic point is whenever analysis is sacrificed for pure sloganeering or lobbying without thought, it needs to be treatd with contempt...Thats all..Especialy if the chap making the points isn even making them coherently..

I don't see any difference in coherence between his interview and your response to his interview. Now I know otherwise that you are capable of being more coherent, but both a quick interview and a quick response don't normally afford one the luxury of elaborating. Further some of the points such as tight market conditions today are extremely well-discussed and objective parameters and need no elaboration from a person at his level.

Coming to lobbying, sure Congress shills or BJP shills who look through a party-prism and not a policy-prism are deserving of contempt. I hope members who are posting on this particular thread don't fall in either category. But back to Pradip, since you are so convinced he is lobbying what is the cause you believe he is lobbying for?

rohiths · Post by **rohiths** » 28 Feb 2011 08:24

Watch out for Defence allocation which will be very close to or exceeding 2 lakh crores

somnath · Post by **somnath** » 28 Feb 2011 08:43

rohiths wrote:Watch out for Defence allocation which will be very close to or exceeding 2 lakh crores

On Defence, the key number to note is utilisation - in most years, there is a chunk of money simply returned to the consolidated fund of india unutilised!