Indian Economy: News and Discussion (Apr 1 2011)

Singha · Post by **Singha** » 28 Jun 2011 12:13

> BMS Engineering college in Bangalore was the first private engineering college in the country!

I thought guindy engg college in chennai was the oldest? delhi college of engg(DCE) is also quite old - not sure how old.

vera_k · Post by **vera_k** » 28 Jun 2011 13:19

Theo_Fidel wrote:Those things will not change until social reforms are completed. All those TFTA streets that you see in Europe were diseased hell holes just 100 years back. Takes social priority to make things look TFTA. We are not there yet.

IMO, bettering urban environments does not require social reforms, but reforms in governance -

1. Any city that wishes to grow its boundaries must first get approval of 60% of the voters in the city. This will arrest the current urban sprawl phenonomen where the real estate mafia buys up land in surrounding villages and then gets them merged into the cities by bribing legislators, and provide for a fixed area in which infrastructure improvements have to be made.

2. Every muncipality must be required to run medical colleges and engineering colleges enough to meet its requirement of personnel. This solves the problem of getting trained staff for building city infrastructure (roads, mass transit, sewer, water and managing permits) to standards and for maintaining the public health facilities.

3. Town planning for areas outside the city limits must be administered by the local district authorities under a district wide plan.

4. And finally, property tax rates in cities will have to rise massively to fund urban infrastructure.

Bade · Post by **Bade** » 28 Jun 2011 19:49

Prem wrote:In 2020-2022 ,
Calls for add in Ik-no-no-mist showing the similar map by replacing Poakahonta territories with with European Muncipalities like UK ,Belgium etc.

Or will the map by 2022 when redone, have Pak economy equal to J&K economy onlee.

If that is too early, then by 2050 will do too.

Theo_Fidel · Post by **Theo_Fidel** » 28 Jun 2011 20:09

Yes, CEG is the oldest, 1794 is the date I remember on the plaque near the main office. But it was a government funded college even back then.

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Vera,

You can't govern all the people all the time. Unless you are Singapore and threaten and carry out caning sentences.

Civic responsibility has to come from the people. No government can pick up every piece of paper they throw on the streets. In massaland too trash collection is once a week and even less in many places. There are no street cleaning machines on 99% of the streets. Yet the people keep the streets and parks and grasslands clean. Even pet owners are socially coerced into picking up their own dogs doo doo. No amount of fines or governance can get you there.

WRT your restricting city size, it has been a disastrous idea. In Chennai for instance areas that were kept out of the city urbanized anyway, in their own haphazard fashion. Porur for instance springs to mind. Now that these areas are incorporated, they are a permanent headache with narrow twisty streets, no public parks, not space for infrastructure, etc. It is far better for a city to acquire more land and have some sort of plan for the areas around the city.

Vipul · Post by **Vipul** » 29 Jun 2011 00:14

Twenty years of foreign trade.

VenkataS · Post by **VenkataS** » 29 Jun 2011 07:52

somnath wrote:Well, absolutely...Even today, there is not a single institution in the private sector that can be deemed as world class in anything...The last "world class" institution setup in India was the National Law School in B'lore, and that was a public sector effort...

Without pro-active efforts in setting up the IIXs, no private sector would have even ventured into the arena....

No single university in India is at world class level if you consider research output.
Highly ranked public universities in India have one thing going for them and that is the quality of their incoming students is at par with any others in the world (because of demand greatly outstripping supply).

However if we consider IIMs to be reasonably good management institutes in India then ISB (a private school setup only about 10 years ago) is already at their level. ISB infact has more articles from its resident faculty in top 20 management journals in the world than even the best of the IIMs (it is another matter that these articles are much smaller in number compared to the top US universities).

It was because of the competition from ISB that the IIMs introduced new one year programs for experienced MBA students and started incentivizing more the research output from their faculty.

What we need in India is more ISBs along with similar schools in engineering and science if we expect to be at the forefront of the innovation driven global economy of the future.

However one drawback of ISB and other similar schools is the ability to hire and retain qualified/research driven faculty is dependent on their salaries being competitive in the marketplace (and not fixed/restricted by government payscales). If the salaries are competitive then such schools would need to charge more from their students in tuition (as the ISB does today) than others which are not as research driven.

I think this is okay, we can have a few world class institutions at the top charging higher tuition fees and others which charge lower tuition fees but provide reasonable education. Even in the US there are only a few institutions which are at MIT, Caltech level but a good number of others which provide reasonably good education along with a fair amount of research output (but not at par with ones at the top).

Singha · Post by **Singha** » 29 Jun 2011 08:10

ISB fees for a 1-yr exec mba course is 26L onree I heard (?)

VenkataS · Post by **VenkataS** » 29 Jun 2011 08:22

Singha wrote:ISB fees for a 1-yr exec mba course is 26L onree I heard (?)

I think for their flagship PGP program ISB charges ~19 lakhs per student (not sure about the exact amount) as tuition fees.

Santosh · Post by **Santosh** » 29 Jun 2011 08:34

vina wrote:
sugriva wrote:Yes. For that you have to thank what one maulana of the learned school here refers to as the "ISI/DSE commie ding-dong babu monkeys". It was their foresight that saw to it that we developed 5 world class IIT's and IIM's at a time when our GDP was much lower.
What does ISI/DSE & commie ding-dong monkeys have to do with institutional building ? If these institutions got built it was due to JLN's vision. He was an institution builder par excellence.

Don't give him so much credit vina. Those are simply the side effects of his delusional fantasies of PSU's at commanding heights of economy bu!! cr@p. And even at that he failed miserably. Else we would have had 50 IIT's and our HAL's would be rubbing shoulders with Boeings and LM's.

vera_k · Post by **vera_k** » 29 Jun 2011 08:37

Theo_Fidel wrote:Civic responsibility has to come from the people. No government can pick up every piece of paper they throw on the streets. In massaland too trash collection is once a week and even less in many places. There are no street cleaning machines on 99% of the streets. Yet the people keep the streets and parks and grasslands clean. Even pet owners are socially coerced into picking up their own dogs doo doo. No amount of fines or governance can get you there.

While better civic sense would help, the fact that trash is burnt in apartments and neighborhoods, indicates a collapse of trash collection services within the city. So the first order of business must be to get efficient trash collection going within urban areas. And there is a huge aspect of enforcement - for instance pet owners who don't pick up get reported to the authorities by their neighbors or anyone who observes their behavior.

Theo_Fidel wrote:WRT your restricting city size, it has been a disastrous idea. In Chennai for instance areas that were kept out of the city urbanized anyway, in their own haphazard fashion. Porur for instance springs to mind. Now that these areas are incorporated, they are a permanent headache with narrow twisty streets, no public parks, not space for infrastructure, etc. It is far better for a city to acquire more land and have some sort of plan for the areas around the city.

This happens because panchayats are allowed control over local constructions. This can be prevented if construction permits issued by district authorities who would accord sanction only if it aligns with existing plans prepared by the state's town planning authority. Of course, having the courage to prevent urbanization outside the urban area and demolishing any upstart constructions will need an anti-corruption revolution in administration.

Abhijeet · Post by **Abhijeet** » 29 Jun 2011 09:22

The trash dumping ground I mentioned was right across the road from a software company campus and a set of apartment buildings occupied presumably by IT company employees. I don't want to think about the amount of pollution they and their kids are inhaling each time the dumping ground does its periodic clearing out of garbage.

These are well off, upper class people, living in a filthy, degraded environment where no one cares.

At some point, it doesn't matter how many lakhs you're earning per month or whether the economy is growing at 9% -- the quality of your life is still poor because of external factors like this.

My point was that this is the kind of thing that needs to improve -- in a hurry -- if India is going to be a livable place in the next couple of decades, even if the economy does reach 10 trillion by 2020. Unfortunately I see no real reforms in local governance happening.

vina · Post by **vina** » 29 Jun 2011 12:35

Ouch..Very Ouch. UPA govt ignored farm and labor reforms. Failed at creating jobs..NSSO

Interestingly, it slams the MNREGA as a "band aid"

Hari Seldon · Post by **Hari Seldon** » 29 Jun 2011 12:46

^^ Abhijeet is of course right. Desi quality of life sucks, nobody cares, nobody wants to care, there are no reforms, there can be no reforms,...,we're all doomed only.

We'll someday (hopefully, maybe, perhaps) get to a half-decent living standard and we;'ll get there when we get there and not a day sooner.

However, the fact that govt and governance has abandoned the aam aadmi has also sparked off jugaad type half-solutions driven by sheer demand and jugaad power. The phenomenon of gated-communities wasn't born in isolation. A cocooned urban space with amenities and backup suddenly found so many takers that a whole new set of externalities erupted onto the scene. Now, you'd want to own an apartment in a gated community not just for the amenities and backup but also the quality of neighbors you'd likely get.

Of course, that leaves a whole lot of aam folk still at the mercy of govt vagaries. Which is why I see hajaar hope in mushrooming e-seva centers (many are mere 1-room franchise operations), the full-blown hurry driven both by public demand and ecoomic imperatives to have an electric mass-transit system in place in most cities - whether metro or MMTS/suburban rail - that'll enable folk to live farther away in relatively better places and still commute without breaking back or bank.

End of the day, overlaying TFTA living standards onto Indian conditions is a surefire way to heartbreak only. We're evolving, thanks to the natural human tendency of desiring better living conditions, our own model of what is do-able and sustainable on a small footprint. Sure, we could always have been faster and nicer and better while at it but such is life. Forcing the pace in India has side-effects worse than the ailment, sometimes (e.g., emergency days when trains ran on time and presumably, the garbage got collected on time too).

OK, enough for now, Am OT already, perhaps.

Theo_Fidel · Post by **Theo_Fidel** » 29 Jun 2011 21:20

Inflation is now deeply embedded. Going to take some serious surgery to stop it. Lack of reforms don't help.

http://www.businessinsider.com/inflatio ... ars-2011-6

Inflation Has Cost Indian Consumers $129 Billion Over The Last 3 Years

Indian consumers have lost about $128.7 billion to inflation in the last three years, largely pushed by rising food and fuel prices, according to The Economic Times (via research firm Crisil). Rising costs have chipped away at the purchasing power of the rupee.

The report pointed out that food inflation was at 11.6% during 2008-09 to 2010-11, compared with the 5.7% rate of non-food inflation. Meanwhile private consumption expenditure increased to 17% for the same period, against 14% in the previous three years.

Rising prices have been a boon to traders and the price trends of commodities in the Wholesale Price Index (India's primary measure of inflation) favors the middle and higher income classes.

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The quality of our urban environment is directly linked to how our economy performs. There was a report sometime back that lack of sanitation causes a loss of 5% of GDP annually due to sick days, traffic problems, living hassles, etc. Definitely not OT. I suspect just cleaning up the way we live would add at least another 1% to the growth rate.

If there is a place to attack first it should be the 'potti kadais'. They are the ones who lower the standards of hygiene by dumping on the street and making it acceptable for others to do the same. In India once one person starts that is the end of it. We are like lemmings only. Go to any street, there will be a vast difference between one that is purely residential/commercial/even industrial and one that has a single potti kaddai on it. Esp. if it is a tea stall. My classic example is Ghandi Mandapam near CEG. Used to be filthy hell hole till the tea stalls were removed and now it is clean as a whistle. Stunning. The problem is that the tea stall/kaddais in Chennai are typically started by immigrants with no sense of ownership or belonging. In Chennai a large fraction of the Tea Stalls are actually run be Keralites which always baffles me because they are so neat and clean back home. Once in Chennai they again start throwing everything on the street. There parts of deepest Triplicane with 10 foot wide streets that are clean as a whistle. Yet the hundred foot road in Annanagar, millionaires row, is filthy as Somalia. It is the petty shop owner who starts the decline in standards.

A_Gupta · Post by **A_Gupta** » 29 Jun 2011 21:45

http://www.nytimes.com/2011/06/30/world ... ter30.html
by Manu Joseph
(Manu Joseph is editor of the Indian newsweekly Open and author of the novel “Serious Men.”)

India’s status as a software giant has long been a happy story. But it is an exaggeration. India is a not a software giant. In your computer, there is probably not a single piece of software whose license is held by an Indian company.

What India is, in reality, is a giant back office. There was a time when Indian software companies confidently stated that there were so many talented educated Indians available to them that they would be able to swiftly “move up the value chain.” That was the refrain.

But over the years, it has become evident that beneath the topsoil, Indian talent does not run deep. Hundreds of thousands of graduates are unemployable as they pass out of substandard institutions. And many of them who have begun to work in call centers cannot be trained beyond a point because their fundamentals are weak. For instance, they have never attended an English-language school.

A senior human resources executive with a call center in Gurgaon, on the outskirts of Delhi, said with a chuckle: “The swanky office is to impress the foreign client. Some of our people who work inside, I know they would be happy in a cowshed.”

Not surprisingly, thousands of kilometers away in the English city of Norwich, when a literary agent calls directory service for directions to a restaurant, she covers the phone and complains to a friend, with an expletive: “I’m connected to an Indian call center.”

There are happy Indian stories. As long as they are not fully told.

Singha · Post by **Singha** » 29 Jun 2011 21:48

well then so why the takleef? probably because there are millions in NYC and the english city of norwich who would like to better their wages by working in such jobs.

Suraj · Post by **Suraj** » 29 Jun 2011 23:13

Singha wrote:pretty amazing that 2 tr figure . I recall the days when we used to cower in our dark hovels around 2000, lungi shiver and count our meager $450b gdp....

Hah. Remember Singha, back in 2007 I tried to find out who said "until $1T all is maya", and you and several others ran away with shivering dhotis claiming it wasn't you and that the quote was really "until $2T all is maya" anyway. Now it is close to $2T and the hunt has begun again

Oldtimers will all recall this inside joke

vina · Post by **vina** » 30 Jun 2011 09:06

After 60 years of "commanding heights" , "mineral wealth is national property" and all that balderdash, the Baboons and Mantris in Dilli are piloting a new mining bill which gives the prospector 100% rights to mine what they find and that they will set up an independent regulator for the mining sector!

After all that dumb rhetoric after all these years on "evil mine owners" and all that rubbish, this is a stunning admission that the entire mining policy over the past 60 years has ended in a miserable failure. Coal shortages, iron ore shortages, small scale, substandard illegal mines with rampant criminality and corruption in private sector operating in the margin,less said about the coal mafia the better , all collectively knocking off a couple of percentage points to the GDP and holding back growth.

Craaaaaaack.. Well, that is the sound of the baboon's head cracking itself on the ground in a classic kow-tow. All for the better. Finally with the scam in the works in petroleum exploration, we will finally probably see the remanants of the command economy rubbish and the pig sty of corruption it engendered getting cleaned out and a fresh beginning made.

India Plans Mining License

India's draft mining bill will offer a prospecting licence guaranteeing the holder the right to produce 100% of any find, as the country seeks to attract foreign money and technology to its underperforming mining sector.

The bill will also create an independent regulator for the sector, Mines Secretary S. Vijay Kumar told Reuters, and should be approved by end-2012.

"There is a dire need to attract capital and attract technology," he said, adding India's mineral potential matched resource rich western Australia and southern Africa but exploration had only scratched the surface so far .

India's mining sector has only opened up fully to private investors in recent years and state-run companies have lacked the funds and expertise to probe deeper than the top 50 metres or so where its iron ore and coal reserves are found.

Singha · Post by **Singha** » 30 Jun 2011 09:49

mineral PSUs has been a cesspool of corruption. take any high end gated community in india and chances are you might find a retired bandicoot or two from such mineral PSUs living on their takings from the feeding trough, daughter married in america and son working in australia.
all they can do is ravage the environment, strip mine and destroy pristine areas and line their own pockets and that of contractors and political netas.

somnath · Post by **somnath** » 30 Jun 2011 11:54

In line with many regulators around the world, RBI too brings out a Fianncial Staibility Report every 6 months...the latest got published a few days back..

http://rbidocs.rbi.org.in/rdocs/Publica ... 0611FL.pdf

Seems that the systemic risks are robustly enough met, for now...The key variables to watch out for are

1. Dollarisation of corporate balance sheets - Indian corporates have borrowed aggressively offshore due to obvious borrowing cost differentials..This makes them quite susceptible to INR depreciation...

2. FCCB maturities...this is the real "fun and games" territory...Between this year and next, ~7 billion dollars of FCCBs will need to be repaid, as almost none of them would get converted to equity (which was the idea when these were raised)...Big daddies here are "illustrious" names like GTL and RCom...While it doesnt represent a very large systemic risk, expect some companies to be borrowing @ pretty steep premia...Hopefully, that wont screw up the market for Indian papers in general, but thats hope...We shall see...

The other good insight is on impact of Basel III on Indian banks...Seems that we are pretty well placed...RBI expects minimal impact as the core conditions are already pretty much met...

Anyways, good read for the financially inclined...

somnath · Post by **somnath** » 01 Jul 2011 07:47

Full year BoP data released by RBI...

http://www.rbi.org.in/scripts/BS_PressR ... prid=24645

Currenct Account Deficit marginally lower than last fiscal, 2.6% compared to 2.8%..

Q4 exports grew sharper than trendline for the year, a large extent IMO on account of "bunching up" in anticipation of the phaseout of DEPB scheme...

The significant take-away is the nearly 100% growth in non-software services...As software growth slows to 15-20%, this can be the new engine...There is a lot of action on Indian engg companies providing consulting and construction services...

Singha · Post by **Singha** » 01 Jul 2011 07:57

multi brand retail is now fast tracked to approval so the newspapers say

vera_k · Post by **vera_k** » 01 Jul 2011 08:25

^^

Good, they should get a move on before before online shopping puts retail in retreat as in the more developed economies.

Singha · Post by **Singha** » 01 Jul 2011 11:24

http://timesofindia.indiatimes.com/busi ... 056821.cms

The plan envisages allowing foreign chains such as Walmart and Tesco to hold up to 51% stake in the Indian venture. This is higher than what had been proposed during the first round of consultations.

But there could be areas demarcated for these retailers. For instance, it would be left to state governments to decide whether foreign chains are welcome or not. Similarly, the government intends to allow these chains to operate in large cities only. How large cities are defined remains to be seen. If the cut-off is fixed at one million population, then the retailers can open stores in around 50 cities. But if the bar is raised to 10 million, then only Delhi, Mumbai and Kolkata will make the cut.
.................

In a recent interaction with TOI, economic affairs secretary R Gopalan had said the government could contemplate putting in place rules stipulating majority sourcing from India. But the view in other ministries is that this might not be compatible with the rules prescribed by the World Trade Organisation.

Further, to stay competitive, especially vis-a-vis kirana stores, the organized retailers will be forced to procure from local manufacturers and producers.

Only in case of goods such as electronics or high-technology items that are not manufactured in India or the local producers are not cost-competitive would a retailer opt to import.

In any case, most international players are already in India and have been sourcing for their global requirements or have additionally got into the wholesale cash-and-carry segment where they are not permitted to sell to individuals.

So, in a way, the supply chains have already been built, said a government official. The other requirement that foreign retailers are going to face is a mandated level of investment in back-end infrastructure to develop supply and distribution chains which would help check wastage.

Singha · Post by **Singha** » 01 Jul 2011 11:27

>> Similarly, the government intends to allow these chains to operate in large cities only.

makes no sense to me. its the same old elitism that smaller cities and rural areas need to be 'protected' from the big bad wolf of capitalism and denied the pleasures of the big cities.

it should be open for countrywide and let the retailer himself decide where all it makes sense....naturally they would look at incomes and cachement area and decide on sites. eg home depot or lowe's might find good sales in industrialized towns of punjab-haryana, salem, coimbatore, thane, pune etc. a alcohol chain might want to saturate the small but rich little towns in kerala

if anyone feels that bottom up tier3 strategy using small stores is the way to start, that should also be allowed. not everyone needs to setup supercenters.

vina · Post by **vina** » 01 Jul 2011 11:32

I do hope that IKEA sets up their mega stores in India. Furniture in India is largely ultra expensive, substandard junk,with the "wood" being imported from Malaysia rubberwood pieced together junk at fancy prices and /or crude metal work slapped up together in some backyard in Dilli.

I fervently hope that IKEA sets up in India, does large scale import and also sourcing in India and crashes the price of furniture which is simply insane in India to what it realistically should be.

somnath · Post by **somnath** » 01 Jul 2011 11:32

At the margin, FDI in retail is a good thing - the ICRIER report I posted earlier pretty much demolishes the thesis of small businesses getting adversely impacted..

The issue however is ths, while its not negative, is there a discernible "positive" to it? We already have organised retail in India..they havent made a really serious dent in either employment or for that matter, prices...How would Walmart do things differently?

The big animal here really, is the backend...Procurement and logistics define the net externalities to the economy out of organised retail..And there, regulations and laws are still archaic, esp. on procurement...

First, every state has its own APMC laws, and interpret the laws in their own ways...So procurement is still a hazardous activity for large organised retail..

Second, at the first sight of price rise on a politically sensitive commodity, govt clamps down with ESMA rules - denying organised retailers the right to store...And if they cant store, they cant procure!

And the real externality will be created only when the logistics and supply chain are impacted materially..Without change in regulations, we are going to end up with not much beyond fancier versions of Big Bazaar...

Singha · Post by **Singha** » 01 Jul 2011 11:39

vina sir, in the back of pindi cantt area there is a humongous hole in the ground size of maybe 10 acres and few storeys deep. word in the dark corner is might be a made a mall. I hope rather than a general changu-mangu mall its made a "premium" anchor-store only thing housing few large ones like ikea, home depot, B&Noble, best buy, sports authority,rei and kohls ..on 2nd thought add in india's largest liquor boutique and a "whole foods" for the expat crowd

vina · Post by **vina** » 01 Jul 2011 12:27

Singha wrote:.on 2nd thought add in india's largest liquor boutique and a "whole foods" for the expat crowd

Yes. That will be ice. But while "Whole Foods" is good, as a former New Yorker, I still hold Fairway as simply the best. The collections , freshness, variety of food and choices it has from every corner of the world is simply unmatched. Olives ? You get a couple of dozen varieties, Cheese, the best there possibly can be in any part of the world, wine, meat.. , why even something as simple as coffee beans.. a plethora of top drawer stuff from everywhere in the world , and all this at pretty decent prices .. ah.. just thinking of it makes me hungry and very nostalgic. Food choices wise, nothing comes close to NYC.

That said, Whole Foods is good, but I rate Trader Joe's as more "honest/authentic" than Whole Foods , with it's roots in the Bay Area and everything.

vina · Post by **vina** » 01 Jul 2011 12:37

Singha wrote:>> Similarly, the government intends to allow these chains to operate in large cities only.

makes no sense to me. its the same old elitism that smaller cities and rural areas need to be 'protected' from the big bad wolf of capitalism and denied the pleasures of the big cities.

No. Even worse, a bunch of Baboons and Politicos in Dilli /local capitals sit together with and decide where a store can come up, how big and a host of restrictions etc. Massive scope for corruption and high handedness and cronyism . A classic license permit raj.

But you are right on the unfairness. As a Piss-Ness owner, I can go shop @ Metro here in BLR Kerala and buy stuff there that is in some cases a whopping 30% cheaper than outside (and mind you Metro pays all taxes, I doubt the Kirana pays anything at all!) . Question is why should the security guy guarding the same Metro store not be allowed to buy a 5kg or 10 kg pack of Atta/Rice/Oil/ Essenstials at prices cheaper than outside? Isn't that a tax on him ?

Singha · Post by **Singha** » 01 Jul 2011 12:50

I am sure the cheap wine from trader joe's would sell hot here if the usurious taxes on alcohol were lifted. wine is quite unaffordable now due to taxes. beer does my belly no good. and whisky will kill my organs.

vera_k · Post by **vera_k** » 01 Jul 2011 13:28

vina wrote:I fervently hope that IKEA sets up in India, does large scale import and also sourcing in India and crashes the price of furniture which is simply insane in India to what it realistically should be.

IKEA will have to deal with huge cultural issues in India. The DIY phenomenon is completely missing from what I see. People seem to hire other people and make a big fuss of simple things like putting on a fresh coat of paint in the house or even for cleaning the little apartment patios.

Prasad · Post by **Prasad** » 01 Jul 2011 13:37

Young people will be perhaps be more prone to trying the DIY method?

vera_k · Post by **vera_k** » 01 Jul 2011 14:11

One can hope. It will be good for social progress if lower income but upper class folk start learning and taking part in construction activities.

Singha · Post by **Singha** » 01 Jul 2011 15:00

the furniture shops have well trained guys who come home and assemble it. its built into the cost. IKEA will have to use that model and skip charging extra for home delivery and assembly. cars here are also small - and many people use bikes. bikes >> cars here. there is no way to carry a typical close packed ikea packet on a bike safely for the rear seat person.

out of curiosity, have any of you bought furniture here and living in india at present?

vera_k · Post by **vera_k** » 01 Jul 2011 16:28

Singha wrote:out of curiosity, have any of you bought furniture here and living in india at present?

I bought the furniture in the place I am visiting in the late 1990s from some expensive french brand. IIRC, one of the bed+mattress combos cost the equivalent of $1000 at that time. It was European in the style of Ikea, but was marketed as a premium offering. They came to the flat, set it up and took away all the trash.

Arjun · Post by **Arjun** » 01 Jul 2011 17:57

Relevant to this discussion...

Cafe Coffee Day entrepreneur's next project is to build the Indian version of Ikea:VG Siddhartha is Branching Out

Siddhartha is bringing the same philosophy to his new furniture business, Daffco.

Coffee grows in shade, and the plantations that Siddhartha was buying each year came with a lot of timber — silver oak, nandi and sal trees — which had to be cut periodically.

Just like he did with coffee, converting a commodity into a lifestyle brand, Siddhartha decided to convert timber into value-added furniture.

“We calculated whatever timber we had, converted it into furniture, suddenly it became thousands of crores,” he says. The furniture market is at Rs. 36,000 crore, growing at 15-18 percent every year. “If you believe GDP will grow at 8-9 percent, if you believe construction is going up, where is the furniture going to come from? Once I started thinking like this, the numbers looked mind boggling,” says Siddhartha.

He first experimented with a small 30,000 sq ft factory in Chikmagalur in Karnataka and started supplying furniture at cost to CCD. “Twenty to twenty-five percent of a café’s cost is furniture,” says CK Nithyanand, director, Daffco.

Two years ago, an American company (Siddhartha won’t name it), which had a 30-year lease on 1.85 million hectares of Amazon rainforest in Guyana in South America, came to him looking for funds. Siddhartha knew that India is a timber deficit country, 70 percent of wood used is imported. He decided to acquire a majority stake in the American company. By now Daffco (the furniture company) was already supplying furniture to his cafes and resorts.

Around the same time, a friend passed him a biography of the IKEA founder Ingvar Kamprad. IKEA is the world’s largest furniture company, operating in over 30 countries.

An idea was born. “More than my intelligence, I can pick up ideas and copy them better and faster than others,” he says. It was a chance meeting with the owners of Germany’s largest café chain, Tchibo, in 1994, that first inspired him to set up Cafe Coffee Day in India.

“At every trip that he travelled abroad, he would closely observe how international chains functioned and then he would come back and try and duplicate that in his café,” says Nithyanand.

Siddhartha is convinced that like cafes, he can create a home-grown national brand for furniture too. He is setting up a 600,000 sq ft plant in Chikmagalur that will start supplying furniture in two years.

Siddhartha is talking of millions of dollars of investment here. While a café can be started in a 1,000 sq. ft. outlet, a furniture store size can run into 200,000 sq ft, at rentals of Rs 125 per sq ft Plus, furniture is a business that is run by heavy discounting.

Ask him if he should have at least tested the waters and set up a few stores before leasing timber or setting up the factory and his answer’s a firm no. “I used to read a lot of research reports, which said you must be focussed on core competence. The experts said that if you are going to produce steel, buy out iron ore; don’t be in the mining business. Today whoever doesn’t have a captive supply of iron-ore is dead. I know that for the first three or four years, retail will lose money, we will goof up in our designs in the early stage. But If I own the timber, I can still survive,” he says.

Others agree with his logic. “The one who controls raw material, controls everything in this business,” says Nithyanand.

Even before a single piece of furniture has been shipped from the factory, Siddhartha has already won a contract to supply Rs 30 crore to Rs 40 crore worth of furniture to Home Town, a Future Group company. Mahesh Shah, CEO, Home Town, who was a key negotiator in the deal, says that Siddhartha reminds him of Kishore Biyani, Future Group’s founder: “They have the same intuitive sense for business and are very quick,” he says. “When we were negotiating the rates, his team had come with all kinds of spread sheets and reports and we kept going over the numbers. Siddhartha on the other hand just did the numbers in the head and in a few minutes we had a decision.”

Singha · Post by **Singha** » 01 Jul 2011 20:29

I think americans who have decent means do not buy ikea. its purchased mainly by young people who expect a lifetime of around 3-4 years max from the particleboard and softwood stuff and want it cheaper than real woods and better materials. cheap chic is where they play.
that model and materials may not work in india - people do not have the income to keep buying new stuff so frequently and the climate is quite harsh and uncontrolled.

that being said, IKEA does sell in singapore the same stuff.

Theo_Fidel · Post by **Theo_Fidel** » 01 Jul 2011 21:32

The thing to do with furniture is to get a proper furniture magazine and lay out the sizes and finishes you expect with a good quality carpenter. My mom did this and even I was astounded by the quality the carpenter delivered. The key is the large size full color picture that tells him what you are looking for. Laminate it and keep it in front of him.

For Massaland, India Emporium in Chennai on Mount road will craft and ship furniture of any design (even provided by you) to massaland at a rate of $150 per cubic meter of wood with shipping included. I had a couple of coffee tables and even a dozen 8'x2' book shelves crafted and shipped to me 3 years back for about $500 made entirely out of rose wood (I know, guilty pleasure). Took 3 months to get here though. I need to get more, now where is that contact number...

Ikea stuff is very trendy and to be perfectly honest when you get up close fairly trashy. Would not recommend it for Indian rough use.

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Whiskey in moderation will preserve your organs not rot them.

Esp. the good stuff, though I have developed a preference for Bourbon, kinda odd really. Makers Mark or in a pinch Jim Beam. Much better than that India preferred Jack Daniels IMO.

Also Bullet brand beer in India is the best, strong and not too smooth. Easy to digest as well, not like the Kingfisher stuff that is too thin and dilute. In massaland the only beer I can stand to drink is Guinness on Tap only. I've been known to knock back 6 pints at a sitting.

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Meanwhile....

IIP growth is down to 5.3% . Look at that Electricity growth rate at 10%!

Suraj · Post by **Suraj** » 01 Jul 2011 21:48

IIP, and in particular construction inputs like cement and steel, moderate in the June-Aug period due to decreased construction activity in the monsoon season. It's a typical economic cycle. As I recall, the rains began earlier this year - there were showers in Kerala back in late April-early May. I don't know what accounts for the drop in natural gas output though - anyone from the oil and gas thread have any insights ?