Indian Economy: News and Discussion (Apr 1 2011)

Santosh · Post by **Santosh** » 10 Aug 2011 07:42

Kakkad-ji, not to worry. India is already a chip design power house. With the massive upcoming investment in Hyderabad, India will become a chip manufacturing power house too. Everything will fall in place just like it is happening in cell phones. India is now becoming leading cell phone manufacturer. India needs to bet on the right horses, promote AMD based machines for selecting India and show Intel the size 10 for passing over. Don't worry have curry.

Virupaksha · Post by **Virupaksha** » 10 Aug 2011 07:44

Santosh wrote:Kakkad-ji, not to worry. India is already a chip design power house. With the massive upcoming investment in Hyderabad, India will become a chip manufacturing power house too. Everything will fall in place just like it is happening in cell phones. India is now becoming leading cell phone manufacturer. India needs to bet on the right horses, promote AMD based machines for selecting India and show Intel the size 10 for passing over. Don't worry have curry.

well that massive investment in chips in hyd turned out to be a massive land grab by the sickular party

ofcourse it doesnt become national news ....

http://www.dnaindia.com/money/report_se ... nd_1402600

gakakkad · Post by **gakakkad** » 10 Aug 2011 07:57

Theo_Fidel wrote:Gk,

I'll settle for 1,2 & 3. No way 4,5&6 are happening, there would be war in desh. 7 is critical. 8& 9 are questionable.

10 of course must be done right away. Simple logical. Now where is my hafta.

I do agree that eliminating reservations in India would be an exceptionally difficult task. Arjun Sing , Mandal and VP Singh single handedly destroyed any hopes of Indian unity in 1988. In fact the worst consequence of the bofors scam was the election of VP Singh Gov't . I was a small kid back then but dad tells me lot about the self immolation by some students whose admissions to medical/engineering colleges were cancelled as gov't wanted immediate implementation . There has been a serious compromise of merit in Indian educational institutes. It would be an uphill task to surpass American levels wit so many problems. I am glad that reservations in private Jobs may be constitutionally impossible. Imagine if such a law is passed. Even Tata won't stay back in India.

vera_k · Post by **vera_k** » 10 Aug 2011 08:09

Well, reservations will be on the way out if the Foreign Universities bill is enacted. Pretty soon the only universities that will have reservation will be Indian ones, and their autonomy, quality and funding problems will hobble them.

gakakkad · Post by **gakakkad** » 10 Aug 2011 08:14

Santosh wrote:Kakkad-ji, not to worry. India is already a chip design power house. With the massive upcoming investment in Hyderabad, India will become a chip manufacturing power house too. Everything will fall in place just like it is happening in cell phones. India is now becoming leading cell phone manufacturer. India needs to bet on the right horses, promote AMD based machines for selecting India and show Intel the size 10 for passing over. Don't worry have curry.

China style chip manufacturing is not the aim . Innovation is. If intel sets up a foundry here (they chose to set up their last one in US) it will be inconsequential . Most purely production foundries don't even need a top of the line design team . Intel is an innovations giant . Lets face the facts. Look at the things they are doing. They were even interested in a Biomedical/neuroscience project I am working on . They did not eventually finance it. Mainly because it is not their arena. But they should a lot of interest. They have even got pure science researchers working on nano technology. Couple of years ago their was a prediction that the speed limit for silicon based processors will be achieved by 2020 . There after we would need to look at something else. They came up with multiprocessing . So again indefinite processing power enhancements can be achieved. They have people working on carbon nano tubes , graphene etc .

Look at other American companies. Look at AT&T bell labs. Filled with Nobel laureates .Innovation across the stream. These are the things that made US a super power. Apart from perhaps USSR no one even came close.

My dad has got decent hospitals in India because of which I ll need to practice medicine in India. And because US is no longer remaining economically feasible for docs. Their will be close to 30 % pay cut in the coming decade for docs. But I do feel sad to leave. Especially for academic aspects . No where in India can we get such research experience that I got in the US. I hate to admit , the superpower aspirations will remain a distant dream for both China and India till a lot of corrections are made. We have supressed the Indian in our selves. India is but a lost civilization.

A
We don't under any circumstance want to be another China . China is just an outsourced labour yard.

vera_k · Post by **vera_k** » 10 Aug 2011 10:59

An international conspiracy is afoot to destabilise India's economic growth: Manmohan Singh

This sounds like the neighbours next door who will blame everything but themselves. I wonder what prompted this statement.

abhischekcc · Post by **abhischekcc** » 10 Aug 2011 13:10

Indira Gandhi also made similar statements during the emergency ('foreign hand'). People used to mock her. But later it turned out that MI6 and CIA were indeed involved in the agitation against her (since 1971, but especially during emergency).

So, MMS making this statement now is ominous. And the fact that he is making this statement in front of the communists also indicates the country(s) most likely to be making this conspiracy - US/UK.

Singha · Post by **Singha** » 10 Aug 2011 19:40

the forest dept cancelled the no-objection given to a posco steel plant in bellary last week over concerns it could harm the prospects of sloth bears at a place called daroji bear sanctuary (iirc).
this was supposed to a big 6MT plant. iron ore is locally available there.

vera_k · Post by **vera_k** » 10 Aug 2011 20:58

abhischekcc wrote:Indira Gandhi also made similar statements during the emergency ('foreign hand'). People used to mock her. But later it turned out that MI6 and CIA were indeed involved in the agitation against her (since 1971, but especially during emergency).

Well, Moynihan's book also says Indira Gandhi and Congress was on the CIA payroll at some time, and their support was reiterated in 1974. If they reversed course when Indira Congress's fascism came overground, it wouldn't surprise me.

What I take away is that the conspiracy theory claiming another Emergency is on the cards may well be true if such statements are being made.

abhischekcc · Post by **abhischekcc** » 10 Aug 2011 21:39

How can IG be on CIA payroll if we had just signed a Strategic Friendship Treaty with USSR?

Moynihan's book is part of a counter propoganda measure.

In 1971, IG defied Nixon and broke pakistan, throwing the anglo imperialists into an apoplectic rage. That is the moment when they decided to remove her. The nuke test in 1974 was also intended as a warning to US/UK, making a military threat to India a very painful proposition for them and their hired gun pakistan. Hence, they shifted tack to civil disobedience. In 1975 Allahabad court rescinded IG's election, forcing her to impose emergency. By the way, do you know who filed that fateful case against IG? Shanti Bhushan, the same fellow agitating for imposing an unelected dictatorship in the form of Lokpal. Take a look at how corrupt he is at this URL: http://awareness-2009.blogspot.com/2011 ... hanti.html

Anyway.
Emergency was the first color revolution US tried in India. (George Fernandes was a leading player, and HE was rumoured to be in CIA payroll). Janta Party collapsed after 3 years, allowing IG to come back. The Sikh terrorist movement was part of the destabilization of IG.

----------------
OT
I find it disgusting that such an immoral person, who uses the law to blackmail people, is part of t he Lokpal movement.

Suraj · Post by **Suraj** » 10 Aug 2011 21:44

Folks, please stick to the thread topic. Enough of assorted present and past CTs. Thanks.

Prem · Post by **Prem** » 11 Aug 2011 04:08

India v China: Big Mac edition
http://blogs.ft.com/beyond-brics/2011/0 ... z1ULuFYEMa

Which Asian country’s exports are most buoyed by an undervalued currency?
If you think the answer is China, think again. The Indian rupee is giving the renminbi a run for its money. At least, that is what the Economist magazine’s Big Mac Index suggests.
The famed index, first published in 1986, has included India in ranking for the first time.
The results are surprising. The report found India had the most keenly priced burgers and the most undervalued currency among 37 currencies surveyed – 53 per cent lower than the US dollar.As to why it took so long to place the rupee in the chart: the Big Mac does not feature on McDonald’s menus in India because of Hindu religious sensibilities concerning cows. Instead, the mark of comparison is the Chicken Maharaja Mac which retails for close to Rs119 (£1.60).The index compares currencies according to purchasing power parity, a product of the theory that exchange rates between two countries should move towards “correct” value, which would make the price of a basket of products the same in both countries. As the Big Mac is similar in its contents and is widely available in almost all major economies, comparing its price weighs the relative strength of countries’ currencies.A variation on the comparison – which measures the average time taken by a worker to earn enough money to buy a Big Mac – placed Mumbai, India’s financial centre, as ninth from the bottom. It would take a worker there close to an hour to earn enough money for a Chicken Maharaja Mac.Many economists and market pundits in India pay attention to the Big Mac index – including the Reserve Bank of India. In a paper published in April, members of the banks’ department of economic and policy research cited the 2010 Big Mac index when discussing how undervalued the Chinese renminbi was.The People’s Bank of China may now turn to the Big Mac as grist to its own mill.

vina · Post by **vina** » 11 Aug 2011 09:34

Yawn.. One day pull back rally, which promptly got sold into the next day and the markets tanked. Like I said, keep the shorts firmly in place folks. This thing ain't going anywhere but down.

There was an interview with YV Reddy in the piss-ness channels yesterday and of course he was right on the button.

He basically said that this is a continuation of the 2008 crisis and though it is now a sovereign crisis, this is due to the acts of commissions and omissions in dealing with the root cause of the global imbalances and scathingly, he said, due to the flawed response of the global central banks to the 2008 crisis!

Another very valid point he made was that since the govts took on the risks on the sovereign, they should to correct those imbalances and risks, be able to exercise sovereign powers namely, the power to tax, power to spend, power to regulate and power to redistribute . Now since none of those powers can be used effectively because of ideological logjams and political positions, the ability for the sovereign to effectively act to get us out of this crisis is heavily circumscribed and there is nothing much that can be done!

Well, I think eventually, this logjam/guardian knot will be broken and the fundamental imbalance will be addressed. That is the way out, whether the political system in the US can bite the bullet and do it (like they are doing it in UK, but then UK is a 4th rate economy really), impose haircuts and loan waivers (redistribution away from creditors), spend on required stimulus etc and more importantly jawbone China to fall in line, in the near term or will it take longer is the trillion dollar question.

In the mean time, since tomorrow is Varalakshmi day and with the hope of the macro turning Yindia's way, let me invoke the one of the immortal compositions of Purandara Dasa .

In Carnatic style by MS Subbalakshmi..

Or in Hindustani by Pt Bhimsen Joshi.

Hmm. Telugu and Kannada chauvinists note.. Compositions by Thyagaraja (in Telugu) and Purandara Dasa (largely Kannada) are immortal and sung and performed all over S. India (including hardcore Tam channels like Jaya TV and Sun TV etc and will live forever. There is surely a moral in that somewhere, when you compare the shelf life of some inanity dished out in Sandalwood/Kollywood /Hydwood.

abhishek_sharma · Post by **abhishek_sharma** » 11 Aug 2011 11:00

The Manufacturing Imperative: Dani Rodrik

Vipul · Post by **Vipul** » 11 Aug 2011 20:19

Exports vault nearly 82 per cent to $29.3 billion in July.

India's exports grew at an astounding pace of 81.8 per cent to $29.3 billion in July while its imports grew 51.5 per cent to $40.4 billion during the month. However, the country's trade deficit widened to $11.1 billion during July 2011 from $7.7 billion in June 2011.

Airavat · Post by **Airavat** » 12 Aug 2011 07:02

Fall in crude and commodity prices a boon

State-run oil companies - Indian Oil, BPCL, HPCL, ONGC and Oil India - that have to bear the brunt of fuel subsidy will gain from a decline in crude oil prices to nearly 10-month low.

The decline in base metal prices, including copper, will augur well for industries such as construction, automobile, pipes and capital goods.

fall in prices of palm oil, will help soaps and detergent manufacturing companies such as HUL, P&G and Godrej Consumer Products.

Fall in wheat and sugar prices will be positive for food companies like Nestle, Britannia and GlaxoSmithKline Consumer Healthcare.

Companies that will take a beating from the slump in commodity prices include metal manufacturers and refiners.

Will there be any fall in inflation for the mango men and women?

gakakkad · Post by **gakakkad** » 12 Aug 2011 09:17

Vipul wrote:Exports vault nearly 82 per cent to $29.3 billion in July.

India's exports grew at an astounding pace of 81.8 per cent to $29.3 billion in July while its imports grew 51.5 per cent to $40.4 billion during the month. However, the country's trade deficit widened to $11.1 billion during July 2011 from $7.7 billion in June 2011.

GOI seems to be manipulating export figures. Car sales have fallen 15% this month . Industry has grown only 5-7 % . Global trade has not increased . Figure of 81% is surely Shanghai stats . One explanation for growing export could be rise in local interest rate reduces local demands. So Manufacturers reduce price and start exporting . Due to reduced prices export rises. Other explanation could be Japan tsunami wiping out machine parts and auto component business giving business to Desi companies. But the 80% figure is surely from GOI's Musharraf. Something murky happening folks..... A government that uses purely monetary measures to reign in a supply shortage related inflation can very well cook books.

vera_k · Post by **vera_k** » 12 Aug 2011 10:22

It might just be the Reliance refinery coming fully online. With the rise in oil prices, that should account for a lot of $s.

Airavat · Post by **Airavat** » 12 Aug 2011 10:52

June IIP numbers beat estimates

The Quick Estimates of Index of Industrial Production (IIP) with base 2004-05 for the month of June 2011 have been released by the Central Statistics Office of the Ministry of Statistics and Programme Implementation. The General Index for the month of June 2011 stands at 170.3, which is 8.8% higher as compared to the level in the month of June 2010.

As per Use-based classification, the growth rates in June 2011 over June 2010 are 7.5% in Basic goods, 37.7% in Capital goods and 1.9% in Intermediate goods.

Some of the important items of capital goods showing high growth during the current month include ‘Cable, Rubber Insulated’ (232.4%), ‘Printing Machinery’ (81.1%), ‘Rubber Transmission and V Belts’ (57.0%), ‘Packaging Machinery’ (48.5%), ‘Textile Machinery’ (47.9%), ‘X-ray equipment’ (33.1%) and ‘Industrial Chains’ (32.0%).

KSKumar · Post by **KSKumar** » 12 Aug 2011 18:48

gakakkad wrote:
Theo_Fidel wrote:Gk,

I'll settle for 1,2 & 3. No way 4,5&6 are happening, there would be war in desh. 7 is critical. 8& 9 are questionable.

10 of course must be done right away. Simple logical. Now where is my hafta.
I do agree that eliminating reservations in India would be an exceptionally difficult task. Arjun Sing , Mandal and VP Singh single handedly destroyed any hopes of Indian unity in 1988. In fact the worst consequence of the bofors scam was the election of VP Singh Gov't . I was a small kid back then but dad tells me lot about the self immolation by some students whose admissions to medical/engineering colleges were cancelled as gov't wanted immediate implementation . There has been a serious compromise of merit in Indian educational institutes. It would be an uphill task to surpass American levels wit so many problems. I am glad that reservations in private Jobs may be constitutionally impossible. Imagine if such a law is passed. Even Tata won't stay back in India.

Off topic, but you have this confused. Mandal was all about reservations for Central Govt. employment. So, it is surprising that students had their medical/engineering admissions cancelled.

Arjun Singh introduced reservations in IITs, IIM's and other centrally managed educational institutions in 2006, I think.

Prem · Post by **Prem** » 13 Aug 2011 00:06

Export figuers might hide the return of black money to India.

The rise in export is parrallel to the rise of BRD and ANNA movement/s.

Vipul · Post by **Vipul** » 13 Aug 2011 00:49

Service exports decline in June.

Reflecting the slowdown in developed economies, India's service exports declined to $11.04 billion in June. Services exports stood at over $11.83 billion in May.

The total services exports during the first quarter stood at $33.33 billion, according to Reserve Bank of India (RBI). RBI did not provide comparative data for 2010-11. The decline in the services sector is in contrast to the growth in merchandise exports, which rose 46.45 per cent to $29.21 billion in June, compared with $19.94 billion in June 2010. The cumulative value of exports in April-June was $79.00 billion, up from $54.22 billion in April-June 2010.

Madan Sabnavis, chief economist with rating agency CARE, said the flat growth in the three-month period is a reflection of the long-drawn slowdown in developed markets, key markets for services exports. The information technology and the business process outsourcing sectors have a predominant share in India's services exports.

The downturn in business activity may hit services earnings this year.

Prem · Post by **Prem** » 13 Aug 2011 01:33

http://www.businessweek.com/news/2011-0 ... -8-8-.html
India Industrial Output Growth Unexpectedly Quickens to 8.8%

Aug. 12 (Bloomberg) -- India’s industrial production grew at the quickest pace in three months in June, weathering the fastest interest-rate increases among Asia’s major economies.
Output at factories, utilities and mines rose 8.8 percent from a year earlier, following a revised 5.9 percent gain in May, the Central Statistical Office said in a statement in New Delhi today. The median of 23 estimates in a Bloomberg News survey was for a 5.5 percent advance.
Reserve Bank of India Governor Duvvuri Subbarao, whose term was extended by two years on Aug. 9, has to weigh the risks to expansion posed by Europe’s debt crisis and a faltering U.S. recovery after tightening monetary policy to slow inflation. Asian central banks from South Korea to Indonesia kept borrowing costs unchanged this week as they assess the global economy.“The RBI has a difficult job at hand,” said Rahul Bajoria, a Singapore-based regional economist at Barclays Plc. “The worries over inflation aren’t going away, and at the same time it has to keep an eye on global growth risks.”

krishnan · Post by **krishnan** » 13 Aug 2011 11:44

http://www.sify.com/finance/Debt-laden- ... ml#galname

ICICI Bank's takeover of a stake in a debt-laden telecom tower firm is an ominous sign of things to come as India's slowing economy and slumping shares erode the value of collateral on loans that companies are struggling to repay.

More than $33 billion worth of shares have been pledged with banks as collateral, with founders of as many as 17 companies pledging over 90 percent of their holdings, Bank of America-Merrill Lynch said in a June report.

'There are some companies where the founders have pledged almost 100 percent of their shareholding. It could backfire.'

Infrastructure assets including telecom, construction and power, which account for about 25 percent of total corporate credit, are a key concern for banks.

'Real estate will be more vulnerable to slippages, and infrastructure as well,' said Alok Mishra, chairman and managing director of state-run Bank of India.

Banks are also keeping a close eye on India's No 2 mobile carrier Reliance Communication, which is struggling to reduce a $7 billion mountain of debt, after posting a seventh straight quarterly profit decline in January-March.

Earlier this year, liquor baron Vijay Mallya's Kingfisher Airline ceded a more than 29 percent stake to a group of 14 banks including top lender State Bank of India as part of a debt restructuring.

abhishek_sharma · Post by **abhishek_sharma** » 13 Aug 2011 14:11

Inequality and its Discontents: Why So Many Feel Left Behind

As income inequality increased in the past quarter century in most parts of the world, it was strangely absent from mainstream economic discussions and publications. One would be hard-pressed, for example, to find many macroeconomic models that incorporated income or wealth inequality. Even in the run-up to and immediate aftermath of the 2007–2008 financial crisis, when income inequality returned to levels not seen since the Great Depression, it did not elicit much attention. Since then, however, the growing disparity in incomes between the rich and poor has taken a place at the top of the public agenda. From Tunisia to Egypt, from the United States to Great Britain, inequality is cited as a chief cause of revolution, economic disintegration, and unrest.

This feeling that the incomes of the rich and the poor have diverged in part reflects reality: between the 1980s and mid-2000s, income inequality rose significantly in countries as diverse as China, India, Russia, Sweden, and the United States. The Gini coefficient, a measure of economic inequality that runs from zero (everyone has the same income) to 100 (one person has the entire income of a country), has risen from around 35 to the low 40s in the United States, from 32 to 35 in India, from 30 to 37 in the United Kingdom, from less than 30 to 45 in both Russia and China, and from 22 to 29 in famously egalitarian Sweden. According to the OECD, during the same time frame, the Gini coefficient increased in 16 out of 20 rich countries. The situation was no different in the emerging market economies: in addition to in India and China, it rose in Indonesia, South Africa, and all the post-Communist countries.

For the poor, the gap has been palpable. In much of the world, the size of the economic pie has been shrinking, and the poor’s relative slice has been getting smaller. The poor’s actual income thus declined on two accounts. Despite large increase in global mean income between 1980 and 2005, excluding China, the number of people who live -- or, rather, barely subsist -- on an income below the absolute poverty line (1 dollar per day) remained constant, at 1.2 billion.

In many countries, however, it appears that perceptions of inequality outstripped even these large and very real increases. In three latest World Values Surveys (conducted in early 1980s, 1990s, and 2000s), when given the choice between more freedom and more equality, respondents around the world increasingly selected the second in later surveys. Even when controlling for the changing composition of countries over the past three decades, that result remains constant. Public perception of inequality was behind the curve for over two decades, it seems to have now leaped ahead of it.

Even in countries that have not shown any significant change in the reported gap between the rich and poor, moreover, citizens believe it has grown. This could be correct; measurement problems could have led to faulty data. Commonly used household surveys, from which data on inequality are extrapolated, might have become less reliable in capturing the incomes of the rich, for example. In greater numbers than before, they are thought to decline to participate in surveys or not truthfully report their incomes.

India has become something of a cause célèbre of this problem. Since the country’s economic reform in the early 1990s, its GDP per capita has risen by an average of almost five percent per year. But per capita consumption, as calculated from household surveys, grew only slightly, at one percent per year. Some of the discrepancy is due to the declining share of personal consumption in India’s GDP, but some is thought to have been caused by the low “capture” of the incomes of the rich. In other words, the mean income rose because the rich got richer but did not report it, while the poor and the middle class earned only moderately more income, which was well reported in the surveys, and did not consume significantly more.

Perhaps the rich are undersurveyed. Have our statistical tools thus become much less reliable guides both to income distribution and for conducting policy? Probably not. Wealthy people’s evasion has been a problem since household surveys were first conducted seriously more than half a century ago, and there is no reliable evidence that the problem has become systematically worse. Moreover, statistical instruments that, in principle, should be harder to falsify -- for example, individual IRS reports -- paint the same picture as household surveys. In the United States, both agree on the extent of rising inequality since the 1980s.

Exaggerated perceptions of wealth disparity do not lie in the arcana of survey techniques or the wiliness of the rich but in a combination of domestic and global factors. As an example, consider the recent revolutions in Tunisia and Egypt, which were blamed on inequality. In fact, in neither country had economic growth slowed or inequality risen in recent years. In the last decade, Egypt’s per capita income grew at the respectable rate of 2.6 percent per year and Tunisia’s grew at 3.4 percent. The growth rate of both countries exceeded that of the eurozone (which was just under one percent) over the same period.

The fruits of this higher growth did not go exclusively to the rich. In Tunisia, inequality declined in the 1980s, increased in the 1990s, and has been constant since. In Egypt, it has been on the decline. Just before the revolutions, the level of inequality was high but not outrageous in both countries: in Tunisia, it was almost the same as in the United States, and in Egypt, it was lower. Broadly constant Gini coefficients meant that everyone’s income increased by about the same percentage -- the rising tide lifted all boats. This is not the situation typically associated with widespread disenchantment and imminent revolution

The origins of the anger that developed into the Arab Spring must be sought elsewhere -- in the feelings of injustice that the existing distribution of income had generated, and the perception that inequality was higher than it really was.

Feelings of injustice are driven by domestic factors. When combined with corruption and persistently high unemployment, inequality is transmuted into inequity in people’s minds. In both Egypt and Tunisia, the top of the income pyramid was composed of people who acquired their wealth through corruption. The jobless saw their problems as resulting directly from the way the rich amassed their fortunes. Indeed, fraudulent enrichment, unlike wealth gained from increased entrepreneurship, inventiveness, or harder work, is unproductive -- the result of a zero-sum game.

Meanwhile, exaggerated perceptions of inequality are driven by two global factors: the ethos of today’s capitalism and globalization. Success in today’s world is celebrated immoderately. The new capitalist society -- ushered in by the Thatcher and Reagan revolutions in the United Kingdom and the United States in the 1980s -- is winner-take-all. Worse, the winner wants everybody to know he is the winner. Extravagant consumption, displays of political power, and ostentatious living are used to validate success.

About a century ago, in The Economic Consequences of the Peace, John Maynard Keynes described the West’s pre–World War I capitalist society. It was the opposite of today’s:

Society was so framed as to throw a great part of the increased income into the control of the class least likely to consume it. The new rich of the nineteenth century were not brought up to large expenditures, and preferred the power which investment gave them to the pleasures of immediate consumption. In fact, it was precisely the inequality of the distribution of wealth which made possible those vast accumulations of fixed wealth and of capital … which distinguished that age from all others. Herein lay, in fact, the main justification of the Capitalist System. If the rich had spent their new wealth on their own enjoyments, the world would long ago have found such a régime intolerable.

Keynes thought that the long-term survival of capitalism depended on maintaining this particular structure, in which the rich are receptacles for savings, not engines for extra consumption. Asceticism was the key ingredient of Keynes’ “spirit of capitalism.” He would be perplexed by today’s version. On the one hand, communism and fascism no longer threaten its survival as they did during the inter-war period. But on the other, modern capitalism’s winner-take-all design is so far removed from industrial capitalism that Keynes had in mind that it is hard to believe that he would have been sanguine about its sustainability.

Today’s economic ethos is magnified by a media that focuses only on lifestyles at the top -- those of the richest, the most beautiful, the most successful. Of course, the media does not choose its stories arbitrarily; it is driven by public preferences as much as it shapes them. And people want to know about the top. The difference in skill between the world’s number one tennis player and its hundredth, for example, is minimal, but the difference in the endorsements they receive is huge. Today, it is no longer only the “physical” marginal product (the quality of one’s play) that determines income but also the image of being successful. No one wants to wear a shirt advertised by player number 78 in the rankings.

Thanks to globalization, this ethos has become universal. With this decade’s spread of the Internet, cell phones, and social media, people everywhere have come to know about the lifestyles of the richest of the rich, both domestic and international, and to compare themselves to them. What Marshall McLuhan famously termed the “global village” has come to pass. Carol Graham, a senior fellow at the Brookings Institution, and Stefano Pettinato from United Nations Development Program, have shown that it is not only the global poor who increasingly feel left behind, but also what she termed “the frustrated achievers” -- those who have done well in real terms but feel deprived because others have done even better. According to Graham, the more the frustrated achievers knew about those who did better, the worse they felt about themselves.

China is perhaps the best example of this phenomenon today. While China’s overall living standards have improved massively in recent decades, World Values Survey data show an equally large decline in life satisfaction. Researchers credit this unhappiness to ballooning income differences, especially as ostentatious consumption has became more visible.

The current process of globalization is not much different from what happened in the 1700s and 1800s, when nation-states in Europe were born of disparate villages and townships that had previously been ignorant of the lifestyles of their neighbors. Political consolidation, improved transportation, and greater contact made the differences between people much more obvious. It was often unhappiness resulting from the knowledge of these differences that forced governments to try to reduce the gaps between classes and regions -- that is why French aristocrats lost all their feudal rights during the revolution, and Giuseppe Mazzini’s Italy tried to “Italianize” the Mezzogiorno.

Of course, the globalized world lacks a central authority that could do something about income gaps. Globalization has no “closure”: income differences are exposed and feelings of deprivation grow, but there is no outlet for them nor solution to them. So how should the world deal with the age of “want more”? Solving the problem through remedial action at the global level -- for example, transfers of wealth from the rich to the poor -- is inconceivable. Total official development aid to poor countries is less than three out of every thousand dollars the rich world earns. The current financial crisis is likely to depress that figure further. And such small amounts cannot make a serious dent in absolute poverty across the world, much less in feelings of deprivation.

Modern capitalism’s ethos will also not change overnight; anyway, there are no dour Calvinists ready to replace our happy, globe-trotting millionaires. To jettison globalization is not only impossible, it would be outright foolish. Globalization brings enormous economic and cultural benefits; the last twenty years have seen a jump in income that rivals the increase between 1914 and 1980. Equally foolish would be a Luddite reaction to new technologies or attempts to censor what people can write about themselves or read about the outside world.

The only solution to modern capitalism is modern capitalism, but with high -- very high -- and equitable growth, which is akin to a high tide that not only lifts all boats but also covers the rocks of corruption. The recipe for social instability is low growth, high inequality, high unemployment, and high corruption. Egypt and Tunisia scored high on the last two. Inequality, even if not excessive by world standards, was perceived as inequity, and growth was not a sufficient emollient for corruption.

Inequality has won a spot on the top of the world’s agenda because of its objective long-term increase, the ethos of the new rich, and the forces of globalization. The three factors are not independent. Globalization contributed to the increase in inequality. The ideology of those who became rich justified it. But their behavior made these inequalities more glaring and open to questioning. It ultimately undermined the economic order from which they benefited the most.

g.sarkar · Post by **g.sarkar** » 13 Aug 2011 20:24

http://www.economist.com/node/21525906
Reliance Industries
Too big for India
Investors have fallen out of love with India’s biggest firm. A large acquisition abroad could be its next move
Aug 13th 2011 | MUMBAI | from the print edition
"THE story of Reliance Industries (RIL) is almost folklore in India. It was founded in the late 1950s by the late Dhirubhai Ambani, a former petrol-pump attendant. He had made his first fortune in the port of Aden, in what is now Yemen. He spotted that local coins had a face value less than the value of the silver from which they were made. So he bought every coin he could, melted them down and pocketed the difference. “I don’t believe in not taking opportunities,” he said, according to his unofficial biographer, Hamish McDonald.
Over the following four and a half decades Ambani took plenty more chances, making bets on vast projects and using brawn and guile to deal with officials and politicians. Today RIL is a conglomerate active in energy, refining and petrochemicals, with a market value of $55 billion, or a tenth of the worth of India’s stockmarket. It is run by Mukesh (pictured), Dhirubhai’s eldest son and India’s shyest, richest and most powerful businessman.
The Ambani family and friends still own 45% of RIL. But other shareholders have played a vital role. They bought into the Ambani dream and helped pay for it. The firm’s annual general meeting is still an evangelical affair, where the faithful speak of Dhirubhai as a saint, cheer his daughter-in-law, who sits in the front row, and listen devoutly to Mukesh.
Such devotion was not built on sentimentality. RIL used to deliver superb returns: its share price rose from less than 20 rupees in 1991 to 1,610 rupees in January 2008, after adjusting for splits (but not inflation). Since then, though, and particularly in recent months, they have slumped. At the most recent AGM in June some attendees grouched about the stock price and low dividends; today, with the shares at 770 rupees, they might be grumpier still.........."

http://www.economist.com/node/21525452
India’s economy
Reflections of reality
Does India have a bad-debt problem?
Aug 6th 2011 | MUMBAI | from the print edition
"A RITUAL familiar to students of the subprime and euro crises has started taking place on Indian banks’ conference calls with analysts and investors. The number-crunchers probe the lenders about their exposures to potential bad debts. Bank bosses insist that, although there are niggles, all is under control.
Some scepticism is due. With India’s economy slowing—growth could dip below 8% this year, from a peak of 9-10%—and interest rates rising (see chart), borrowers will be under more strain. India’s banks have been growing fast for years, often a sign that discipline has slipped. Total loans have almost tripled since 2005.
The Reserve Bank of India (RBI), which regulates banks and sets interest rates, has a record of running a tight ship. Gross non-performing loans have fallen from about a fifth of the total in 1995 to under 3% today. But the RBI is neither infallible nor squeaky-clean. Between 2005 and 2008 some foreign banks and several local ones got caught by a mini-boom in unsecured loans to consumers that quickly soured. And since the start of the global financial crisis the RBI has quietly given Indian lenders some get-out-of-jail cards; these may pale into insignificance compared with perks doled out by Western regulators but they suggest that the central bank prefers to fudge the recognition of losses in the system if it thinks stability is at risk.
In 2008, for instance, banks were allowed to restructure weak loans without recognising them as bad debts; these now account for 3-4% of all loans. Lenders have also reportedly been allowed to avoid booking losses on loans to Air India, a state-owned zombie. The stock of all provisions held against all non-performing loans is lower than in other countries, particularly at the state-owned banks that dominate the industry. That means there is less of a buffer before losses start to burn up banks’ capital........"
Gautam

gakakkad · Post by **gakakkad** » 13 Aug 2011 22:04

India has become something of a cause célèbre of this problem. Since the country’s economic reform in the early 1990s, its GDP per capita has risen by an average of almost five percent per year. But per capita consumption, as calculated from household surveys, grew only slightly, at one percent per year. Some of the discrepancy is due to the declining share of personal consumption in India’s GDP, but some is thought to have been caused by the low “capture” of the incomes of the rich. In other words, the mean income rose because the rich got richer but did not report it, while the poor and the middle class earned only moderately more income, which was well reported in the surveys, and did not consume significantly more.

I always suspected that the actual GINI coefficient of India would be in 40s or 50s.

Our growth is clearly unsustainable if serious policy changes are not made. I am not bullish on India's growth in this decade if policy remains the same.

gakakkad · Post by **gakakkad** » 14 Aug 2011 09:05

^^^ Actually thats the GINI coefficient expressed in percentage . ie (100 - % people who own 99 % of wealth.)
In US 20% people own 99% wealth .(GINI coef % is 80) In India officially 33% own 99% wealth (GINI coef% is 67). But I suspect India GINI coef % to be 90 . ie 10% people own 99% wealth.

Even US has great inequality . But the American with median income is quite wealthy . While the person earning 50% of the Indian income is a pauper . So US can afford to grow at a snails pace for decades . But India cannot afford to have a slow down at this point. But if the present policies continue we may even find ourselves in a recession . This is coming from a person whose mind has never been polluted by E-CON-Omics.

GINI index which is described in abhisheks paper is different from the above measure. India's GINI index is officially about 37. If suspect it to be in late 40s or 50s.

This is a useful statistical technique with several non economics applications. Some of us docs to need it. In histopathology (ie cutting sections of a tissue and examining under microscope) it can help quantify inequality of cell size or nucleus size. If the nucleus has unequal size than the tissue may have cancer. GINI coefficient is utilized for that.

http://en.wikipedia.org/wiki/List_of_co ... e_equality

As per the above page GINI index is 37. But actually it is much higher.

ADDED LATER- Officially there are only 300,000 people with a met worth of more than 1 crore in India.(US$ 250,000). We know the figure is nonsense. The actual number could easily be 10 times more . Interestingly an Indian with wealth > $ 1million would not even consider himself as rich. But we also have very poor people.

vera_k · Post by **vera_k** » 14 Aug 2011 21:36

FT article. Registration or subscription might be required.

The vulnerability of India’s economic defences

Two quotes -

The warning bell was sounded this year in the US. Jeff Immelt, the chairman of General Electric, observed that call-centre costs between the US and India were narrowing to within 10 per cent of each other.

Ajay Piramal, chairman of the Piramal Group, a Mumbai-based pharmaceutical company, complains that the cost of skills, inputs and capital is rising.

“We have business in the US. If I leave out labour, all the other costs are becoming lower [there compared to India].

vish_mulay · Post by **vish_mulay** » 15 Aug 2011 07:02

Disclaimer, i don’t understand economy and don’t post in this thread. The link posted above indicates how majority of Indians are still poor and they have not received any benefits from economic liberation in 90s. I went to India last year and found that basic services in India are very expensive as compare to what they were 10-15 years back. These observations are from Pune and dont know whether this is applicable to other cities in India.

1) Had a medical emergency and took one of my relatives to hospital for coronary bypass. I was very impressed with hospital setup and services provided. Cost of procedure was 180000 INR including everything. This individual has a small shop and relatively speaking can be grouped under lower middle class. He paid cash (got 5% discount for full cash payment before surgery) without second thought. For me it was a shock since in late 90s (when I left India) this kind of money was big burden on family. Not anymore.
2) Had tough time finding domestic help for my aging relative. We advertised 4500 INR per month for 8 hrs shift (9am-6pm) since her children come home in the evening. Work load was relatively small. More of a companion with making sure medications and meals are taken properly and help with bath and toilet. First tried nursing agencies and was shocked to hear salaries (8-12000 INR/month without weekends). When advertised in paper, there were responses but quality of applicants was a big question mark. Finally got domestic help with various connections of my mother’s maid and had to pay 6500INR + food and transport. When I left India my mother was paying mostly 600-800 INR for domestic help who grew up with us children and was treated as part of family. My mother married her off and still keeps in touch. That option is no longer available in desh. Days of cheap domestic help are over.
3) Wanted to upgrade home kitchen and toilet (needed western style commode for SHQ since she never used Indian style). Paid 60000 INR + for upgrading kitchen (got granite top and stainless steel sink and rewiring old electrical circuits) and bathroom (western commode, waterproofing and re tiling the whole bathroom). It took contractor less than 5 days to do everything with 3 men team. I had to pay another 2500 INR for painter who took 2 days to paint. I have never heard ~70000 INR for week’s worth of work. I can’t compare how much it would have cost in late 90s. The workers were from Rajasthan (work 8-10 months a year and then go back to home for 1-2 months) and were making 400 INR per day for 8 hrs of work. The mukadam (team leader) had 4 teams working (~ 20 craftsmen) and showed at our place once a day to check on progress. Workers told me he gets anywhere between 15-25000 INR for the job like ours but can’t hire him directly since he is booked by contractors for years.
I know I cant compare US or Australia to India since converting these figures to USD or AUD will make it look cheap but from an Indian perspective I think it is quite expensive. Don’t know whether this has any trickle down impact and standard of living has improved. Again this might be just selective picture from an urbanized center.

gakakkad · Post by **gakakkad** » 15 Aug 2011 08:21

^^^ Actually the cost of living in India is a fraction of that in most other countries. Liberalisation in India is by no means complete. India is the LEAST LIBERAL MAJOR ECONOMY
Most Indians are not poor . 28-35% are poor. Poverty estimates may well be overestimated.

Benefits of liberalisation have reached to those who have worked accordingly. IMHO corruption is not India's biggest problem . Stupidity and vote bank is. The only way a vast majority of Indian poor can be gainfully and productively employed is large scale labour intensive manufacturing . Due to hideous labour laws (which are bad partly because trade unions demand so , partly because the politicians want them to be bad) and shortage of facilities for vocational training 20% Indian population is unemployable. That results in over-employment in agriculture . Over employment can be taken as disguised unemployment. Most economist view India's labour condition as chronic disguised employment .

When you went to India you must have obviously gone to cities. Well the benefits of whatever little liberalisation that has taken place since 1990'S have had a massive effect on urban Indian middle class. Incomes have increased 6 folds-8 folds . Overall some 300 million people( the size of American population) have been relieved from poverty. The only way we can deliver further 300 million people from poverty is by further liberalisation. However , currently the government policies want to drive India backwards . They want to redistribute wealth rather than accelerate growth . That is a stupid policy. The finding of an ISI mole in NAC is a clear indication as to why such policies are allowed.

I am a doctor , and I can vouch that medical facilities in urban India are more efficient and cost effective than the US . Most hi-tech stuff is available. Most families can afford to pay bills ranging from Rs 20k -3 lakh . The poorer families go to charitable hospitals or medical colleges. There the quality is not as good as private hospitals. But most people survive .

VenkataS · Post by **VenkataS** » 17 Aug 2011 23:29

India to be $5.6 trillion by 2020: Dun & Bradstreet

The BIMAROU states (Bihar, Madhya Pradesh, Rajasthan, Orissa & Uttar Pradesh) are also expected to contribute significantly to India's growth story during the current decade.

The contribution of BIMAROU states will be about 24 per cent of the GDP by FY'20, as compared to 21 per cent during FY'10, Singh said.

Notably, four of the five BIMAROU states are expected to see a double-digit average growth over the current decade.

They are estimating a CAGR of 14% over the next nine years.

Prem · Post by **Prem** » 17 Aug 2011 23:33

http://www.guardian.co.uk/global-develo ... aid-agency
India to create central foreign aid agencyIndia is to set up a new central agency to manage foreign aid in a bid to curb corruption and prevents delays in aid delivery

s to set up a central foreign aid agency to prevent funds from being misused and delays in aid delivery .India's aid commitments have soared in recent years as the country seeks to improve its strategic, political and economic clout on the world stage, especially as China extends its hand.The agency will reportedly be called the Indian Agency for Partnership in Development, overseeing $11.3bn (Rs 50,000 crore) over the next five to seven years.

Gopalaswami Parthasarathy, a former diplomat and member of the Centre for Policy Research said an agency is urgently needed, as one person currently handles aid to Bangladesh, Sri Lanka, Maldives and Burma. "How can you have one joint secretary to deal with aid to some of our biggest recipients? He would have political and diplomatic work to conduct too," he said.
The agency will have to ensure quick decision-making and insulate aid from political considerations if it is to deliver aid effectively. Experts say that India's legal framework monitoring government procurement should be strengthened to boost accountability and to prevent it from falling prey to corruption.
The concerns over aid management are timely. Earlier this year, the government auditor revealed that $22.6bn (Rs 1 lakh crore) in foreign aid given to India was lying unused due to poor planning by various ministries.

Vipul · Post by **Vipul** » 19 Aug 2011 21:10

India's engineering exports surge 187 per cent to $8.2 billion in July.

Export of engineering goods from the country surged 187 per cent year-on-year to $8.2 billion in July helped by rising demand and flow of orders from new markets in Africa and Latin America.

India exported engineering goods worth $2.88 billion in July last year, data released by the Engineering Export Promotion Council (EEPC) showed.

During the first quarter of the current financial year (April-July 2011-12), export of engineering goods from the country jumped 114.3 per cent to $31.6 billion from $14.74 billion Q1 2009-10.Engineering exports from the country had grown 84.17 per cent year-on-year to $6.7 billion in June this year.

Provisional data show that exports of engineering goods from India have reached $60 billion (Rs2,72,957.84 crore) during the previous fiscal ended 31 March 2011.

Rising orders from the emerging markets in Latin America such as Brazil, Mexico, Argentina and Columbia as also from the African region helped India's engineering goods post a better performance despite sluggish demand in western markets like the US and Europe.

Indian exporters are now exploring new markets in a bid to reduce the dependence on traditional markets like the US and Europe.
However, a prolonged crisis in the developed markets such as the US and the European Union could hurt India's overall export performance, according to the EEPC.

US and European markets account for about 55 per cent of the country's total engineering exports.India's engineering exports mainly consist of transport equipment, capital goods, other machinery/equipment and light engineering products like castings, forgings and fasteners.

vina · Post by **vina** » 20 Aug 2011 06:23

Provisional data show that exports of engineering goods from India have reached $60 billion (Rs2,72,957.84 crore) during the previous fiscal ended 31 March 2011.

Wow! That is as much as the IT/Vity boyz.. All this with no noise, minimum fuss . Strong and silent , these engg types seem to be.

Singha · Post by **Singha** » 20 Aug 2011 08:14

and they mostly work 6 days a week. no fancy weekend brunches and (INR 90) spanish omelette breakfasts either.

on such shoulders empires rise...

Theo_Fidel · Post by **Theo_Fidel** » 20 Aug 2011 11:38

I told you those riff raff 500,000+ private college engineers were good for something.

chaanakya · Post by **chaanakya** » 20 Aug 2011 12:34

Theo_Fidel wrote:I told you those riff raff 500,000+ private college engineers were good for something.

+100 to your observation

But madarssa trained are also good for something , if not in their country of birth then in their adopted country. Have no doubt about that. Soft power is all about projecting positive about everything what we have got.

Prem · Post by **Prem** » 20 Aug 2011 22:40

Theo_Fidel wrote:I told you those riff raff 500,000+ private college engineers were good for something.

About 2 years ago, NYC Times carried the news about the silent ENG/Manufaturing revolution/ Inevstment happening in India . I posted it on the forum but cant locate it. The pace is gonna accelrate onleeeee.

Singha · Post by **Singha** » 21 Aug 2011 08:07

has been posted earlier
http://www.nytimes.com/2011/07/26/busin ... wanted=all

Manufactured Goods Lead Surge in Indian Exports