Indian Economy: News and Discussion (Apr 1 2011)

saip · Post by **saip** » 26 Apr 2011 07:19

I think the TOTAL remittances are 50 bil and not just from M E

Suraj · Post by **Suraj** » 26 Apr 2011 07:22

Clearly we're arguing different things - you about what SEZs ought to be and why the current SEZs are scams, and me that current SEZs follow the letter of the current SEZ Act and therefore are not. It's rather pointless to debate when an excruciatingly debated act is dismissed as a rent-seeking scam, while of course, the dig-and-fill boondoggles of the NREGS is not, though one constitutes forgoing tax revenues and the other throwing money down the drain, or digging and burying it

I'm therefore done talking past each other on SEZs; it was fun debating but getting a tad tiresome now - it's bad enough that someone is compelled to use italics or bold to get their point across, but bold italic fonts are enough a clue that the debate has run its course...

On the matter of trade data, are remittances counted under gross invisibles ? I just checked again at my figure for remittances are a tad short - 2010 figure for remittances alone is approx $56 billion. IT exports were expected to surpass $50 billion in 2010. The latest services trade figures are the 2009-10 figures in the latest economic survey, and I extrapolate a ~$60 billion services trade surplus for 2010-11 from that. I don't have exact data for 2010-11 merchandise import figure - I saw $327B and $350B in different places - which means a merchandise trade deficit of $80-105B, and an aggregate deficit of $20-45 billion. DIPP data indicates FDI of ~$19 billion in April-Feb 2010-11. Considering the net forex revenue growth, FDI+FII does cover the trade shortfall entirely.

This years wild card will be oil prices. If the Fed keeps pumping via QE3 it might cause another oil price shock, even though the same might sustain export growth in the developed world markets at least for the year.

SwamyG · Post by **SwamyG** » 26 Apr 2011 07:29

RamaY: What is the purpose of SEZ and what are the incentives provided for the developer, and why?

somnath · Post by **somnath** » 26 Apr 2011 07:30

Suraj wrote:It's rather pointless to debate when an excruciatingly debated act is dismissed as a rent-seeking scam, while of course, the dig-and-fill boondoggles of the NREGS is not, though one constitutes forgoing tax revenues and the other throwing money down the drain, or digging and burying it

Well I agree, if its not about data but merely an ideological point then there's nothing left to debate...anyways, as far as the latter is concerned, absolutely, between giving KP Singh and his cohorts 15k crores of tax breaks and giving 40k crores to people earning <2 dollars/day, I am with the latter any day....

Suraj wrote:On the matter of trade data, are remittances counted under gross invisibles

Remittances have always been counted under Invisibles...Data from various disparate sources will always never add-up, as there are double-counting and netting-offs that CSO does at its end as the central data repository...

Refer to the RBI update on BoP referenced earlier...

Capital inflows (FDI, FII, ECB) will cover the gap, and leave a relatiely small incremental accretion to Fx reserves...

I think the TOTAL remittances are 50 bil and not just from M E

that is right...US is about 25-30%, ME is 30-35%...

abhishek_sharma · Post by **abhishek_sharma** » 26 Apr 2011 07:39

Quality of Life: India vs. China
Amartya Sen

http://www.nybooks.com/articles/archive ... -vs-china/

RamaY · Post by **RamaY** » 26 Apr 2011 07:48

My point was Table III.2 in the link Somnathji posted. That info (as factual as it can be) puts net invisibles (IT++ serviced plus Remittances) at ~$80B.

Then even this rediff article is wrong.

The top 200 IT companies posted total revenues of Rs 307,126 crore (Rs 3,071.26 billion) in the year, or a growth of 6.2 per cent (from Rs 289,093 crore or Rs 2,890.93 billion in 2008-09).

Per this article, the IT service revenues itself come to ~$70B. Need to see how much of this money is kept outside India.

ranjbe · Post by **ranjbe** » 26 Apr 2011 08:08

I know that countries measure their GDP growth differently, and so it is not a 'apples to apples' comparision. I know this was discussed in the past, but the Economist has has an article claiming India grew by 10.4% versus 10.3% for China in 2010, if identical measuring techniques are used.
The X Factor: India v China
http://www.economist.com/node/18586836

somnath · Post by **somnath** » 26 Apr 2011 08:15

^^RamaY-ji,

No surprises there..News articles (like the Rediff piece) pick up a headline number to report..So s/w companies have revenues of 70 billion dollars...That does not translate to a 70 bill of "exports", and that does not translate to 70 bill of "net invisibles" into India...One, there are expenses - on RE, salaries etc, a lot of which need to be met offshore...Two, onshore work done by Infy UK for Tesco UK for example, is not "service exports" out of India...Three, overseas subsidiaries will keep a certain amount of cash in their balance sheet - does not come in as invisibles either...

If you extrapolate the "software" part of the Invisibles number for the current fiscal, the estimates are about 50 bill for the year...

Essentially, we run a pretty tight external account, with a modest current account deficit financed by capital flows...But we need to be careful about the "modest" bit on current account!

abhischekcc · Post by **abhischekcc** » 26 Apr 2011 09:26

^Even so, this milestone is important one reason.

Earlier, people used to say that India will never overtake China, as China was always growing at 2%+ rates. However, now this debate can be put to rest. That is why you see a lot of hack jobs being done to show India is 'really' doing worse than China.

However, now no one can question India's lacj of 'killer instinct' or make derisive remarks about the 'Hindu rate of growth'. The debate over India's civilizational shortcomings (as defined by the west) is now over. We have beaten the world in its own metrics, it is time to make a more equitable economy.

Suraj · Post by **Suraj** » 26 Apr 2011 10:44

Reliance Industries to invest Rs.1,50,000cr ($34 billion) in next 5 years

Setting its sight on a number of new businesses and expansion of existing ones, billionaire Mukesh Ambani-led Reliance Industries group may invest more than Rs 1,50,000 crore over the next five years.

The group is sitting on a huge cash pile of over Rs 42,000 crore that has nearly doubled in one year, and further money influx is expected in the next few months, while it might raise further funds from the market, mostly through overseas bonds and partly through project equity, sources said.

There might be major investments, totalling nearly Rs 1,00,000 crore, in the group's core businesses of petrochemicals and energy exploration and production over the next five years, they added.

Besides, business initiatives in telecom, power and financial services sectors would also witness investments worth at least Rs 50,000 crore in the next few years.

Surat SEZ zooms ahead with Rs 38K cr exports

Close on the heels of India's gems and jewellery registering a robust 47 per cent growth in export at $43 billion, the Surat Special Economic Zone (SurSEZ) - country's first private sector SEZ at Sachin - too is leading the export performance backed by the strong presence of the gems and jewellery units.

The SurSEZ, which has 70 per cent of the units manufacturing diamonds and diamond studded jewellery, has registered an impressive 62 per cent growth with export of Rs 38,136 crore in 2010-11 compared to Rs 23981 crore in 2009-10. Official sources said almost 70 per cent of the export turnover - Rs 26,695 crore - was generated by the diamond and jewellery manufacturing units due to the robust demand from Far East, China, Hong Kong and US. The export for the month of March-2011 stood at Rs 7,620 crore.

Sources said that SurSEZ is the second largest export zone in the country after the Reliance Industries Limited's (RIL) Jamnagar SEZ. In 2009-10, the Jamnagar SEZ had recorded Rs 80,000 crore export, while SurSEZ had seen its export increasing to Rs 24,000 crore in 2009-10.

There are currently 217 units in operation including diamond and jewellery manufacturing, garment, metallic yarn, engineering, biotech, software and hardware, laser machines, engineering tools, utensils, chemical and pharma, medical tools and writing instruments.

Sharma said, "We have ambitious growth plans for SurSEZ. About 21 new units are coming up in the SEZ."

Sri · Post by **Sri** » 26 Apr 2011 11:15

The whole debate is a fallacy. SEZ perform a very important role in making our exports competitive. Mind you there are many SEZs in Chennai. I myself work in DLF SEZ, which has NO residential area. This particular Mahindra SEZ is approx 70 Km from Chennai. Obviously many people choose not to work there because they find it hard to find accommodation in the nearby area. Hence the promoter is forced to develop residential colonies in and around SEZ.

Also, all allied services are taxed. I know I pay full tax if I visit the Pizza Hut counter in DLF. I know service tax is levied on my company for services like housekeeping and security. Only advantage that we have is that all our invoices to our customers in US do not get taxed. We have another unit in the City (Chennai). Which not a STPI unit or is in a SEZ. That is because that unit is focused entirely on domestic market. We can’t even move our Pcs from DLF to this unit without de-bonding and paying complete taxes.

Now someone might say that we import all our Servers / Sw / PCs / Laptops duty free into a SEZ. Fair enough. This is done to ensure that our pricing is competitive in US. As far as incremental revenue us concerned, please do notice that DLF Sez has approx 120000 people working in it. All of whom are paying income tax plus the secondary support services employment generation is tremendous. Our security in DLF can’t find local guards even. So we have guards here from as far as Assam / Orissa / Bihar. A proper study which takes into account all angles will definitely prove that SEZ has had tremendous impact in countries growth story.

This also brings home the point that I made many moons ago. All this story that India is domestic market lead economy. I beg to differ. Our domestic consumption has increased because a sizable section of our middle class, produces services which we bill in $$$ but pay our employees in rupees. You take that away and you’l see massive decline in consumption levels….

somnath · Post by **somnath** » 26 Apr 2011 12:12

Sri-ji, wont get into a micro-level analysi of numbers on a specific SEZs - I think the macro numbers tell their story, on which enough has been discussed - just a small correction on this..

Sri wrote:This also brings home the point that I made many moons ago. All this story that India is domestic market lead economy. I beg to differ. Our domestic consumption has increased because a sizable section of our middle class, produces services which we bill in $$$ but pay our employees in rupees. You take that away and you’l see massive decline in consumption levels

Conumption demand is generated by these "employees", not by companies billing revenues in $$. Companies would typically use these profits (out of USD billing and INR expenses) to invest...But so would any company generatng a profit, billed in USD or INR is immaterial, though operating margins in IT companies are high compared to some other industries..Investment rates in India have shown a secular growth in the last 10 years, which investments by IT companies and other export firms...But exports still constitute a smallish % of the economy, ~15%..Which is why India is such a big domestic consumption/investment story...

Sri · Post by **Sri** » 26 Apr 2011 12:45

^^^

Somnath Ji, a huge part of income of the IT industry workers is disposable. This creates huge float for our financial institutions. India's It export id in tune of $54 bn. At least 40% of this goes into salaries. So around $22 bn is disbursed in the local economy as pay and compensation. Out of this a very good %age is disposable income which fuels mfg and domestic services industry.

This approx $22 bn float is critical for India.

somnath · Post by **somnath** » 26 Apr 2011 13:14

^^Oh absolutely, the role of the IT industry in stimulating Consumption is undeniable...Especially for select goods/services around urban centres...

But in order to have a proportion, total "C" in India is about 600-700 billion dollars, so 22 is <4% of that..

BTW, what is "float" for FIs doesnt translate into "C", rather FIs would deploy them and it gets translated as "I" (Investment)...Again, while a number like 22 billion is big, keep in mind that the total household financial savings generated every year is about 300-350 billion dollars...Total savings will be again about 600-700 billion...

In reality, part of that salary bill will be spent in "C", part of that will be saved - partly in financial assets and partly in physical assets (real estate, gold) - in other words deployed as "I"...

Net net, while being important, it does not make s/w a "make or break" from a macro perspective..Where it is really critical is from a BoP perspective, the 50 billion every year allows India run the modest trade deficit that it needs to for development..

SwamyG · Post by **SwamyG** » 26 Apr 2011 18:30

somnath wrote:^^RamaY-ji,

No surprises there..News articles (like the Rediff piece) pick up a headline number to report..So s/w companies have revenues of 70 billion dollars...That does not translate to a 70 bill of "exports", and that does not translate to 70 bill of "net invisibles" into India...One, there are expenses - on RE, salaries etc, a lot of which need to be met offshore...Two, onshore work done by Infy UK for Tesco UK for example, is not "service exports" out of India...Three, overseas subsidiaries will keep a certain amount of cash in their balance sheet - does not come in as invisibles either...

If you extrapolate the "software" part of the Invisibles number for the current fiscal, the estimates are about 50 bill for the year...

Essentially, we run a pretty tight external account, with a modest current account deficit financed by capital flows...But we need to be careful about the "modest" bit on current account!

There is also the danger of India "aping" the West when it comes to numbers. Just a climbing exports, climbing GDP, reduced imports, ityadi alone cannot become the metrics for measuring human conditions and happiness. Considering our country's population and size, it does not matter if we have the highest GDP among all countries on this planet - what matters is human conditions.

somnath · Post by **somnath** » 26 Apr 2011 18:33

+1 to that...Amartya Sen says the same thing!

Numbers are also important in order to fund outlays, but time to start subjecting outcomes on HDIs to greater scrutiny....

SwamyG · Post by **SwamyG** » 26 Apr 2011 18:34

Sri wrote: This also brings home the point that I made many moons ago. All this story that India is domestic market lead economy. I beg to differ. Our domestic consumption has increased because a sizable section of our middle class, produces services which we bill in $$$ but pay our employees in rupees. You take that away and you’l see massive decline in consumption levels….

Then how do you answer our Merchandise Exports increase? There is one thing that you are ignoring is the "domestic traction"; once the economy has been rejuvenated sufficiently by the foreign dollars, then the economy will gain traction from domestic transactions. Where you might be right is any sort of 'bubble' that depends on extra-ordinary amount of disposable money.

SwamyG · Post by **SwamyG** » 26 Apr 2011 18:37

somnath wrote:+1 to that...Amartya Sen says the same thing!

Numbers are also important in order to fund outlays, but time to start subjecting outcomes on HDIs to greater scrutiny....

We have great economists and intelligent people, I really hope India comes out with its own version of Bhutan's GHP or something. Who says we have to follow what the West has done so far. Take the good things from everywhere - be it the West or East. Who cares if we are #1, if say, the water table across the country goes down and we have to spend more to get decent quality water? Economy is one facet of culture, and India needs to further incorporate our Indic values and culture into the Indian Economy.

Theo_Fidel · Post by **Theo_Fidel** » 26 Apr 2011 19:16

Sri,

You are absolutely right. As a proportion of our population the IT salaries generate a tremendous amount of free cash that then filters into our MF's and stock markets. This is a major reason the economy took such a huge knock when the external sector income reduced during the ongoing recession. Look at the household sector drop in the chart below. This at a time the economy was still growing and income was still rising. Our growth rate collapsed and almost touched the old 4% rate. When you add the FDI and FPI we are even more dependent on the foreign cash float. We would do well to remember this. Without the external inflows we would be in big doodoo.

The local folk save but put their money into gold or NSS which ends up with GOI. They also park large sums in banks at low interest and under the mattress.

The actual amount of savings put to productive use is still unfortunately only a fraction of the $300 Billion we save domestically.

WRT to Amartya Sen, can I say that I roundly pan his thought process and increasingly irrelevant prattle. He is paid to say those things about India. Money can fix a lot of things. Yes we need a social reform movement but we don't have the time for it. The Chinese started their social reforms back in 1949. It took them 40-50 years of very violent upheaval. We don't have that sort of time or ability for brutality. If Sen loves China so much he should go and live there.

Our demographic dividend is right now. This is not the time to argue stuff. We don't even have 10 years to pull this off. I support the GOI throwing as much money as it can get its hands on towards education. Some of it will stick. The midday meal scheme is essentially a bribe to get kids into school, even if many are shoddy. We should even pay the kids/parents money to keep them in school as long as possible. And TV is changing people far faster than GOI ever could. Once we are modestly prosperous, say per capita income of $10,000, we can focus more on social reform.

SwamyG,

I recommend you read Jared Diamond a little more. He details the ways of slightly more advanced cultures that have swept through the planet obliterating all in its path. His details of how the South Chinese population with a slight advantage in animal, cultural and language skills overwhelmed the native aboriginal population from Thailand to Indonesia is very instructive. The west has found a way to do things more productively. We either incorporate it or get overwhelmed. That is the lesson of history.

Sri · Post by **Sri** » 26 Apr 2011 20:03

Theo ji,

Thank you for taking pains and researching a bit more into the topic. I Agree with you 100%.

For country like ours $22 bn is a huge float by any measure.

If God forbid something happens to IT sector and all the IT workers start cashing in their investments, then it will catastrophic for our economy.

SwamyG · Post by **SwamyG** » 26 Apr 2011 20:26

Theo_Fidel wrote:SwamyG,

I recommend you read Jared Diamond a little more. He details the ways of slightly more advanced cultures that have swept through the planet obliterating all in its path. His details of how the South Chinese population with a slight advantage in animal, cultural and language skills overwhelmed the native aboriginal population from Thailand to Indonesia is very instructive. The west has found a way to do things more productively. We either incorporate it or get overwhelmed. That is the lesson of history.

I remember a conversation about Jared Diamond some time ago that you, me and Acharya had

You believe productivity is the sole criteria that dictates everything on this planet. I do not. I believe we have to live within our means and find a balance in the environment we live in. The same West, that Jared and you determine to be superior, is turning GREEN now. It is incorporating Yoga, meditation and alternative medicines slowly into personal life; they started working on renewable sources of energy and recyclables into business. Corporations are asked to be socially responsible. Investors are even buying stocks of companies that are socially responsible. Corporations are being asked to own up and pay for their "externalities". Maybe we will learn history only if it taught by the Westerners, maybe that is our fate. And if the West does not learn the lessons, then the planet is doomed.

SwamyG · Post by **SwamyG** » 26 Apr 2011 20:33

Sri wrote:If God forbid something happens to IT sector and all the IT workers start cashing in their investments, then it will catastrophic for our economy.

Don't worry, we will survive. We survived long before the IT industry and will survive after the "catastrophe" too. So will the human race.

Theo_Fidel · Post by **Theo_Fidel** » 26 Apr 2011 21:08

SwamyG,

Yes I remember that conversation. Diamond has nothing to say about the fate of the planet. I do agree with you that it is in a precarious state. What he points out is that long term small advantages can end with one culture completely replacing the existing one. Look at the example of the English language which is slowly replacing our native tongues, IMHO the number one reason for this is the complicated script we use. Or the fact that the vast majority of foods grown today in India are not native to it. Even the animals we use were not domesticated here.

I agree that there are more sustainable ways to live in the environment but so did the Native Americans and the Aboriginal Australians.

There is almost no trace remaining of the Indian culture of 10,000 years ago. For that matter little remains of India from 200 years ago even. We need to do a little better than just survive, no.

Sri · Post by **Sri** » 26 Apr 2011 21:29

SwamyG wrote: Don't worry, we will survive. We survived long before the IT industry and will survive after the "catastrophe" too. So will the human race.

SwamyG,

Optimism is good. Optimism with sarcasm even better.

SwamyG · Post by **SwamyG** » 26 Apr 2011 21:32

Theo saar, I never doubt your intentions or your good heart. So let me get that out of the way. I might have a minor nitpick here and there. But I am not an economist or formally trained in Economics. I took Economics elective in my Masters though

.

I do not oppose any society in imbibing material and non-material aspects of living from other societies. So learning English, or eating potatoes, chillies, sweet potatoes, tomatoes ityadi are kosher as they add value to our life on this planet. However, I do think the Western Economic Models, have a flaw here or there. What gets my goats are is that we do not seem to recognize, but for the perspective dhaaga, of the flaws. From India we had our own Economic Model as prescribed in the Purusharthas. Leaving out the spiritual component - Moksha - out of the picture; as per the model all Artha (material benefits) and Kama (pleasures) have to be earned under the umbrella of Dharma (that which sustains life).

I hope you realize, I am not bringing religion, but a native value system into the discussion of economics. Dharma, among other things, means that which sustains society. What it means is BP cannot continue to off-shore drill without short or long term consequences to the geographical area in which it operates. My father owned a piece of plot, in Pamal, near Pallavaram, Madras. There was a leather tannery nearby that made it almost impossible for the water in that area to be good. So, from one perspective, it was providing employment and probably its products were being exported. So it was contributing positively to the economy, but on the other hand it made life in that area hard for the residents. The stench or water pollution was evident. Hopefully, this is where technologies come into existence, as we cannot segregate them in the 21st century.

No, I am not saying bring back the lives of 18th century or 17th century. Modern progress has helped reduce health issues, provided drugs and practices for better care for Women, Children and the Weak. Let me not even get into the benefits, because it is so evident and I am not denying them. I am just pointing that we need to have some balance. And with our growing stature in the World, don't you think India can stand up say "Yes, these metrics are good. We will use them. However, we will introduce x,y and z metrics to measure our life". I would say that is when India has truly arrived.

* - One reason why I think, back in the days some communities were made to live outside the residential areas. Well that is a very dicey subject, as you might guess.

Sri: No sarcasm. I am in the IT industry myself

svinayak · Post by **svinayak** » 26 Apr 2011 21:45

SwamyG wrote:
Theo_Fidel wrote:SwamyG,

I recommend you read Jared Diamond a little more. He details the ways of slightly more advanced cultures that have swept through the planet obliterating all in its path. His details of how the South Chinese population with a slight advantage in animal, cultural and language skills overwhelmed the native aboriginal population from Thailand to Indonesia is very instructive. The west has found a way to do things more productively. We either incorporate it or get overwhelmed. That is the lesson of history.
I remember a conversation about Jared Diamond some time ago that you, me and Acharya had You believe productivity is the sole criteria that dictates everything on this planet. I do not. I believe we have to live within our means and find a balance in the environment we live in. The same West, that Jared and you determine to be superior, is turning GREEN now. It is incorporating Yoga, meditation and alternative medicines slowly into personal life; they started working on renewable sources of energy and recyclables into business. Corporations are asked to be socially responsible. Investors are even buying stocks of companies that are socially responsible. Corporations are being asked to own up and pay for their "externalities". Maybe we will learn history only if it taught by the Westerners, maybe that is our fate. And if the West does not learn the lessons, then the planet is doomed.

I dont consider Jared Diamond book as authoritative but just a general read. He dismisses all the contribution done from major group of population in the history.
This industrialization is only in the last 300 years starting from 1750 and not before that. Hence the colonial powers wielded the control which region in the world would develop earlier.

It will take some 100 years after the end of the hegemony to figure out what is happening.

svinayak · Post by **svinayak** » 26 Apr 2011 21:51

Theo_Fidel wrote: What he points out is that long term small advantages can end with one culture completely replacing the existing one. Look at the example of the English language which is slowly replacing our native tongues, IMHO the number one reason for this is the complicated script we use.

This is wrong interpretation. English is the most illogical language and Indics think in logic in all things.This is imposition of the language by the govt and a deracinated elite who do not value Indian things.

Or the fact that the vast majority of foods grown today in India are not native to it. Even the animals we use were not domesticated here.
There is almost no trace remaining of the Indian culture of 10,000 years ago. For that matter little remains of India from 200 years ago even. We need to do a little better than just survive, no.

Very general statements. All these are the vestiges of the colonization.

Suraj · Post by **Suraj** » 26 Apr 2011 22:44

One must also remember that ancient and medieval India was among, relatively, the most prosperous economic entities of their times, and has been either the first or second largest economic entity for essentially all of recorded history, except for the last 2-300 years. The pursuit of mercantilism, trade and unapologetic accumulation of wealth is neither 'adharmic' nor is it an imposed drive that is western in origin - it's merely recalling our memory of who we were and what we used to do, no different in nature from the gist of Napolean's quote saying let China sleep and to not wake them.

Civilizational history evolves due to a combination of factors, particularly that of what the surrounding land can provide, and how the available resources are used by the people living there. For example, Arab/Saudi or Mongol history evolved in its particularly predatory manner because of their harsh inhospitable terrain that led them to seek fortune elsewhere. Japanese history is characterized by insularity and a quest for order, uniformity and self-sufficiency because of their island status...

One of the primary reasons our civilizational ethos evolved in a manner that emphasizes self-actualization and personal fulfillment is that our history is not characterized by a quest for basic needs; we have not been compelled as a civilization to constantly seek out our material needs - because we've historically produced plenty.

Ours is a fertile land, that produced enormous material benefits, not just for our consumption, but for us to trade and accumulate enormous amounts of wealth with. However, we haven't necessarily had a history of recording our mercantile and trading activities; perhaps we were so self-satisfied with the favourable terms of trade historically that recording it seemed too vain. However, it helps to see what others thought of us - RahulM mentioned a quote by Pliny about this, and there exists several others recording how trade with India (and China) had been a source of constant loss of material wealth by Arabs and Europeans.

The quest to become a big economy and exporter again is not a mindless aping of the west. Rather, it's merely reacquiring a drive that characterized us historically - a drive that was polished and taken to another level by the west, and one that's now upto us to use our own advantages to outdo them at. Most of our history, except for the recent past, is not characterized by handwringing, beaten wife syndromes or withdrawing into isolation. We took on the world and dealt with them on largely favourable terms.

By all means pursue methods that aren't thoughtlessly wasteful, but let's not pretend we should just be happy and not strive to be rich; that is putting the cart before the horse - for most of history we were happy and developed a culture that didn't go around looting everything around us because we were relatively prosperous and content as a result, compared to the state of the world of those times. Not only did we export spices and fabric, but we were major manufacturers - the US national anthem was written on a ship built by Wadia shipbuilders in Bombay.

Sri · Post by **Sri** » 26 Apr 2011 22:52

^^^

This tallies with a book i read long ago "The Spice Route" by John Keay.

It has numbers from Roman and Greek Sides. I'll try if I can get it out again.

sanjaykumar · Post by **sanjaykumar** » 27 Apr 2011 02:52

Not only did we export spices and fabric, but we were major manufacturers - the US national anthem was written on a ship built by Wadia shipbuilders in Bombay.

Did not know that..

I do not consider present day India to be worthy of its history. It really is as simple as that.

svinayak · Post by **svinayak** » 27 Apr 2011 02:57

sanjaykumar wrote:Not only did we export spices and fabric, but we were major manufacturers - the US national anthem was written on a ship built by Wadia shipbuilders in Bombay.

Did not know that..

Not only that the English in 1750s borrowed money from the Surat money lenders since they found that the interest terms were better than the London money market. Surat was the money capital of the world.

Can India build this again.

somnath · Post by **somnath** » 27 Apr 2011 07:08

Theo_Fidel wrote:WRT to Amartya Sen, can I say that I roundly pan his thought process and increasingly irrelevant prattle. He is paid to say those things about India. Money can fix a lot of things

Theo-ji, now that you have decided that money is the motive for Amartya Sen to say what he does, how about getting the basics right (the good prof will never his wrong

)?

Theo_Fidel wrote:As a proportion of our population the IT salaries generate a tremendous amount of free cash that then filters into our MF's and stock markets

Do you have any study on how much of IT salaries get routed into the stock market/MF? What is "free cash" btw? the total net inflows in MFs last year was 12k crores, a miniscule amount of domestic savings in the country..Bulk of the flows into Indian stock markets come from two sources - FIIs and Insurance companies...Individuals contribute a relatively small amount...Bulk of household financial savings in India is deployed in bank deposits and insurance..Shares and MFs constitute a minor proportion..
http://rbi.org.in/scripts/PublicationsV ... x?id=12702

Theo_Fidel wrote:This at a time the economy was still growing and income was still rising. Our growth rate collapsed and almost touched the old 4% rate.

the last year when the economy grew at 4% was in 2002-03...At the peak of the financial crisis, growth was 6.7%...All the "pump priming" was on account of fiscal and monetary interventions..

Theo_Fidel wrote:The local folk save but put their money into gold or NSS which ends up with GOI. They also park large sums in banks at low interest and under the mattress. The actual amount of savings put to productive use is still unfortunately only a fraction of the $300 Billion we save domestically

this takes the cake..So investments in bank deposits, NSS (which is an increasingly minor share) etc are "unproductive"? How so?

To be sure, IT exports are hugely imporant to balance out the external sector, espeially as we have usually run a conscious strategy of a modest current account deficit for the last 15-20 years (barring a couple of stupid years under Yashwant Sinha when we ran a surplus)...

There is no reason to either overplay or underplay any variable, all of them have their own nuances...And yes, given our pathetic HDIs, we would do no better than to pay some heed to what Dr Sen is saying...

Theo_Fidel · Post by **Theo_Fidel** » 27 Apr 2011 07:17

True a lot has been lost. Mostly, because we, for what ever reason could not keep up. If you go into the historic TN archives opposite Egmore station, as I did back in the 80's, the India they show from the 1800's is completely unrecognizable. The concerns then were so strange and bizarre. There are entire sections on widow remarriage. A huge chunk is spent on the struggle to get a valid census. A whole wing is spent on droughts and how to handle them. Stacks upon stacks of ethnographic studies, of tribal peoples who look so strange living in familiar places like Vellore, Ambur and Salem. We don't remember much of this as our people have changed so much in so little time.

Much has been written about our inability/refusal to keep up. I for one believe we can teach the west a lesson or two in this competition.

But this is our moment, a once in a millennium chance to catch up. I hope we don't waste it arguing about whether to give chase or not. We simply don't have the luxury of time. This dividend is one time folks. It will never come around again. The next 35 years is everything. Do what ever shenanigan it takes.

While we are on the subject of bankers, didn't the bankers of Bengal finance the British conquest of much of India after Plassey. The wealth of the Bengal treasury is said to have stunned Clive.

SwamyG · Post by **SwamyG** » 27 Apr 2011 08:38

Suraj wrote: <snip><snip><snip>
The quest to become a big economy and exporter again is not a mindless aping of the west. Rather, it's merely reacquiring a drive that characterized us historically - a drive that was polished and taken to another level by the west, and one that's now upto us to use our own advantages to outdo them at. Most of our history, except for the recent past, is not characterized by handwringing, beaten wife syndromes or withdrawing into isolation. We took on the world and dealt with them on largely favourable terms.

By all means pursue methods that aren't thoughtlessly wasteful, but let's not pretend we should just be happy and not strive to be rich; that is putting the cart before the horse - for most of history we were happy and developed a culture that didn't go around looting everything around us because we were relatively prosperous and content as a result, compared to the state of the world of those times. Not only did we export spices and fabric, but we were major manufacturers - the US national anthem was written on a ship built by Wadia shipbuilders in Bombay.

I agree with all of the <snipped> material, so I don't quote them here

The drive that polished, hopefully, is not the last straw on the proverbial camel (a.k.a this planet).

A question, what is the point in being rich? What is the ulterior motive? The word "rich" is a relative term. As one can see America is struggling to define who is rich for its taxation. Happiness is the goal, being 'rich' is not. Normally, the word is used as something that we have in plenty, something that is vast, unmeasurable, unquantifiable, magnificient ityadi. Being a relative word, it compares, implicitly, with other things. For example, we say "India has a rich heritage". Some might replace the word heritage with traditions, culture, history etc etc. In the area of economics, rich means the ability to buy material and non-material benefits to the self and family with relative ease. We buy material and services ultimately for our happiness.

In the past, India was economically rich, because it was a natural. It was at the right place in the World - between West and East Asia. Its lands were arable, the society had matured and trade was viable. The society, because of the Varna system, allowed the traders to trade without having to bother about protection, because the Kshatriyas protected them. There was plentiful labor, with good rains agriculture boomed. There was 'subhikshem'; and allowed people to contemplate on life and beyond.

I have never characterized that aspiring to earn money or wealth is something despicable or wrong. All the growth of GDP or other numbers mean only so much, what ultimately matters is the welfare/happiness of people. The underlying assumption, of this thread, which I do agree to a great extent, is that when the metrics we currently use improve it implies that lives of our people are improving. I understand that it is impossible to inquire each human being in the country about his or her welfare, so we have to rely on statistics to measure our progress. I am saying, 'good to see we are improving; but let us pause and see how we are doing by bringing additional perspectives and grow in conjunction with what we value'. If I can summarize some of the counter-point to my view is this "let us not pause, we are doing good, let us relentlessly march forward'.

SwamyG · Post by **SwamyG** » 27 Apr 2011 08:42

sanjaykumar wrote:Not only did we export spices and fabric, but we were major manufacturers - the US national anthem was written on a ship built by Wadia shipbuilders in Bombay.

Did not know that..

I do not consider present day India to be worthy of its history. It really is as simple as that.

It seems the ancient Romans cried at the enormous amount of wealth spent on trading with the East, especially India and far East, for buying spices and fine cloth. Once addicted to spice, they just could not live with out it. Southern India boasted fine weavers who could weave cloth so fine, human eye could not easily detect the mesh. And the South Indians enjoyed the tasty wine and Arabian horses

So the Romans spent their time waging wars and conquering territory then spent their loot in buying things from the East. Any modern parallel

SwamyG · Post by **SwamyG** » 27 Apr 2011 08:53

Theo_Fidel wrote:True a lot has been lost. Mostly, because we, for what ever reason could not keep up. If you go into the historic TN archives opposite Egmore station, as I did back in the 80's, the India they show from the 1800's is completely unrecognizable. The concerns then were so strange and bizarre. There are entire sections on widow remarriage. A huge chunk is spent on the struggle to get a valid census. A whole wing is spent on droughts and how to handle them. Stacks upon stacks of ethnographic studies, of tribal peoples who look so strange living in familiar places like Vellore, Ambur and Salem. We don't remember much of this as our people have changed so much in so little time.

Much has been written about our inability/refusal to keep up. I for one believe we can teach the west a lesson or two in this competition.

But this is our moment, a once in a millennium chance to catch up. I hope we don't waste it arguing about whether to give chase or not. We simply don't have the luxury of time. This dividend is one time folks. It will never come around again. The next 35 years is everything. Do what ever shenanigan it takes.

While we are on the subject of bankers, didn't the bankers of Bengal finance the British conquest of much of India after Plassey. The wealth of the Bengal treasury is said to have stunned Clive.

sanjaykumar · Post by **sanjaykumar** » 27 Apr 2011 11:15

I am aware that Pliny the Elder lamented that Rome was experiencing much out go of treasure to India, that Roman ducats have been found in Kerala as have Hindu divine figurines made of ivory in Italy. i am also aware that India did not import much from Europe.

I was referring to the American angle to Indian ship building, specifically.

somnath · Post by **somnath** » 27 Apr 2011 14:20

Well, its official now...

India's new poverty level, using the "officially accepted" Suresh Tendulkar formula, has been estimated to be 32%..This is using the 2009-10 large sample NSSO numbers..

http://www.hindu.com/2011/04/21/stories ... 012200.htm

These are preliminary data. Mr. Sen has worked on them. He has reported that the 2009-10 data shows a decline in poverty from 37.2 per cent in 2004 to 32 per cent in 2009. I agree with him,” Dr. Ahluwalia said.

Unfortunately, seems that NSSO has not put up the survey report on its website yet - I guess it will come in some time...

In the meanwhile, a predictable dig at the survey by, who else, Surjit Bhalla - he talks about the new "hindu constant"!
http://www.financialexpress.com/news/co ... t/780005/0#

There are some real issues with the NSSO data, especially as it keeps excluding a larger and larger share of gross consumption, but it remains the most extensive data gathering exercise to estimate how well we are doing!

SureshP · Post by **SureshP** » 27 Apr 2011 15:12

Innovation deficit hurts India Inc

M. D. Nair

In all the surveys on innovations and outcomes, India ranks low in the pecking order, below even countries such as Brazil, not to speak of China.

Addressing captains of industry from south India in Chennai recently, Union Home Minister,Mr P. Chidambaram, mentioned three important deficits that India Inc needs to pay attention to — regulatory, governance and ethical deficits — in order to ensure8-10 per cent annual growth in the coming years.

Apart from not defining the Government's role in erasing these deficits, the Minister failed to mention yet another important deficit — namely, the innovation deficit that Indian industries face despite the economic liberalisation that began in 1991.

And yet, this deficit has perhaps the maximum strategic implications for the industrial productivity and global competitiveness essential for economic growth.

That the economic status of a country has a direct bearing on the level of innovation prevailing in it is obvious from the fact that the US, which for several years (until 2007) occupied the No. 1 position, slipped to No. 11 following the economic downturn from 2007 to 2010, according to a report from the international business school INSEAD in Fontainbleu, Paris.

The same is true of Germany and many others affected by the recent collapse in global economy. Innovation deficit has become a buzz word in recent times. Many countries including the US, western European nations, Australia and even emerging economies, notably China and India, have identified innovation capabilities as essential for accelerated economic growth.

The US President, Mr Barack Obama, in his 2011 State Of The Union message specially mentioned the US imperative to once again out-innovate other countries if it is to fully recover from the present crisis.

Innovation is the process of converting (translating) an original concept, discovery or invention into an economically beneficial product.

The capability to continuously innovate can ensure a steady flow of profitable processes and products. While they need to be novel, they can be disruptive, incremental or breakthroughs. They should be easy to replicate and should satisfy a specific human need. While the rate of innovation and its precise impact on the economy cannot be easily quantified, the innovation capabilities and deficits of countries can be assessed through various parameters.

Several exercises have been carried out by the Boston Consultancy Group, INSEAD Paris/ CII India, The Economist, Global Innovation Source Board, The World Bank and others. According to the Economist's Global Innovation ranking, Japan has retained the first place, with Switzerland, Finland, the US, Sweden and Germany following in that order. The Economist, however, relies heavily on the acquisition of patents from the US, European and Japanese patent offices for its innovation ranking.

Other studies have used, besides patents per million population, yardsticks such as scientific publications, R&D spending in the public and private sectors, nature and numbers of skilled human resources, and so on.
Where does India Stand?

In all the surveys on innovations and outcomes, India ranks low in the pecking order, below even countries such as Brazil, not to speak of China.

In the Standard & Poor and Business Week study of 132 countries, India ranks 82. No Indian company figures among the top 100 innovators, with Apple, Google and Toyota rated the topmost in the 2008 Business Week survey. These rankings are also reflected in the global competitiveness index. It is clear that unless India's innovation deficit is erased, it will be difficult to ensure sustained economic growth in the coming years.

Moving from a protected economy to a relatively free market economy brings additional pressures to remain competitive in the marketplace. In sectors such as pharmaceutical industry, innovation is the lifeline for survival and growth. Today, Indian pharmaceutical industry is globally ranked No 3 in production and 13 in value terms.

India is a major hub for outsourcing and the largest producer of generic drugs outside the US. Despite these achievements, discovery and development of new drugs — the next logical step to ensure sustained growth and market presence — is still in its infancy. The global market does not have a single drug discovered and developed in India. While in the mid-1960s to 1980s, MNCs such as Ciba-Geigy, Hoechst , Smith Kline & French (SKF) and Boots ventured into drug discovery R&D, all of them closed down not for lack of innovation, but due to commercial reasons dictated by their global operations.

With the advent of the Indian Patents Act 2005, new drugs will be available to the Indian market only from their innovators (patent holders), which means domestic companies will have to innovate if they want to maintain and increase their market share.

Over a dozen private sector companies have entered this space in recent years and will hopefully develop, over time, not only an innovation culture but also skills required to translate discoveries into beneficial products.

India spends one per cent of her GDP on R&D and most of it through national laboratories (although there has been a shift to the private sector), which are hardly the cradles of innovation-led enterprises.

The need of the hour is to promote an innovation culture backed by large investments in knowledge-based enterprises through agencies such as the Knowledge Commission, National Innovation Foundation and various Science and Technology departments, as well as the implementation of a National Innovation Legislation. The Global Innovation Index (GII) measures the strengths of countries in the innovation space. It is clear that only through utilisation of human resources, science and technology base, and business and marketing skills can India erase the current innovation deficits and attain global competitiveness and sustained growth even at the current growth rate.

(The author is a Chennai-based trade and IPR consultant.)

http://www.thehindubusinessline.com/opi ... epage=true

Suraj · Post by **Suraj** » 27 Apr 2011 22:58

somnath wrote:In the meanwhile, a predictable dig at the survey by, who else, Surjit Bhalla - he talks about the new "hindu constant"!
http://www.financialexpress.com/news/co ... t/780005/0#

It's much more worthwhile to examine the message than personalize it with one's own view of the messenger - far too much ideological baggage involved. Bhalla makes some excellent points - the NSSO report just perpetuates the same data aggregations distortions across successive surveys, progressively worsening the quality of the data. Increasing the breadth means little when the depth is even less meaningful - quantity doesn't in itself provide for quality.