Indian Economy: News and Discussion (Apr 1 2011)

abhishek_sharma · Post by **abhishek_sharma** » 30 Aug 2011 07:32

The Economics of Happiness: Jeffrey D. Sachs

Prem · Post by **Prem** » 30 Aug 2011 09:05

http://www.businessweek.com/news/2011-0 ... banks.html
India Proposes Tougher Capital, Sale Rules for ‘Serious’ Banks

Aug

. 30 (Bloomberg) -- India’s central bank recommended tougher capital rules for new lenders and mandatory share sale within two years as conditions for issuing new licenses for the first time in seven years.New lenders will also have to open at least one in four branches in rural areas that have a population of no more than 9,999 people, the Reserve Bank of India said in draft guidelines posted on its website yesterday. The banks may need to meet a minimum capital requirement of 5 billion rupees ($109 million), more than double the requirement for banks in 2004. Foreign shareholding may be capped at 49 percent for new lenders for five years, the central bank said.Stringent rules may restrict the number of entrants, according to Viren H. Mehta, a director at Ernst & Young LLP. The license winners will also face competition from State Bank of India, which accounts for almost a fourth of India’s loans, and ICICI Bank Ltd. Companies including Larsen & Toubro Ltd. and billionaire Anil Ambani’s Reliance ADA Group have expressed interest in operating in a market where credit is forecast to expand 18 percent in the year to March 31.
“If a business group wants to get into the banking business, they have to be serious players,” said Mumbai-based Mehta. “Serious enough to even change their group structures to become eligible for a license.”New banks will also need to maintain a 12 percent capital adequacy ratio, compared with the 10 percent mandated by the regulator when it set guidelines for new lenders in 2001.
‘Impractical’ Guidelines
The owners of the banks will have to reduce their stake to 40 percent within two years after they are given a license, according to the central bank. Governor Duvvuri Subbarao on Aug. 23 said public ownership of banks would inspire confidence in the financial system and mitigate issues of conflict of interest between shareholders and depositors in the banks.“The guideline asking for a listing within two years appears to be a bit impractical,” said Hemant Kanoria, chairman and managing director at SREI Infrastructure Finance Ltd. “It will be very difficult for branches in the rural areas to start generating profits in the first two years

VenkataS · Post by **VenkataS** » 30 Aug 2011 23:15

India's Economic Expansion Slows in Second Quarter

India’s growth rate continued to slide in the second quarter of the year, falling to 7.7 percent, the government reported Tuesday.

Slowing growth in mining, manufacturing and construction accounted for most of the slowdown in the three-month period that ended in June.

With inflation still at 9.2% there will probably be further interest rate increases and consequent slow-down of the economy in the subsequent quarters.

Suraj · Post by **Suraj** » 30 Aug 2011 23:41

This is the first quarter of the current fiscal year (Apr-Jun). Typically fiscal Q1 tends to report muted growth rates, being after the Jan-Mar end of fiscal year rush, and before the effect of the monsoon and festival season in Q2 (Jul-Sep) and Q3 (Oct-Dec). The base effect also plays a role; GDP growth was 8.8% in Q1 of last fiscal year, so 7.7% y-o-y on that base isn't too shabby at all. With last year's GDP being $1760 billion, a ~13.5% nominal growth rate in dollar terms will mean hitting the $2 trillion mark this year. There's a good likelihood of that happening unless there's a repeat of 2008.

Prem · Post by **Prem** » 31 Aug 2011 02:10

http://www.thestreet.com/story/11234277 ... eport.html
JPMorgan Eyeing India Retail Banking: Report

Future Capital is a non-bank finance company with a market cap of about $220 million and a loan book of $619 million. As a company that is majority owned by Pantaloon Retail, India's largest retail chain, Future Capital has a focus on consumer finance, in addition to wholesale banking. The company provides consumer durable loans and loans againstgold. More recently it kicked off a new line of business- lending against gold.
But the retailer is now looking to exit non-core businesses such as Future Capital to finance its retail expansion and recently hired Morgan Stanley (MS_) to help sell its financial services business, according to the report. If the report is true, it does look like JPMorgan is interested in testing the retail banking market in India via the NBFC route. The New York-based bank has a big presence in investment banking and asset management in India but does not operate in the retail banking space. About 34 foreign banks operate in India, with Citigroup(C_), HSBC(HBC_) and Standard Chartered having the largest retail presence.

Prem · Post by **Prem** » 31 Aug 2011 02:15

http://www.foxnews.com/world/2011/08/30 ... lks-india/
Fruit and Vegetables Rot as Hunger Stalks India

SOLAN

, India -- Sunil Sharma, a young tomato farmer in northern India, must navigate decripit roads, corrupt policemen and blazing heat to deliver his produce in an unrefrigerated truck to New Delhi's wholesale vegetable market.India is plagued by malnutrition and soaring inflation, but it's not for lack of food. It is the world's second largest grower of fresh produce, but loses an estimated 40 percent of its fruit and vegetables to rot because of the kind of problems Sharma faces every week.During one recent journey trucking tomatoes for himself and two other farmers to the capital, he was stuck for three days."Of the 350 crates of tomatoes I started out with, I could salvage only around 150 crates. The rest had turned to pulp," a despondent Sharma said.Trader Balwant Singh says the paucity of refrigerated trucks means that delays at state border crossings, traffic jams, or the frequent landslides that clog hill roads can wilt and rot vegetables."There are only one or two trucks, belonging to private firms, that are refrigerated. The rest are open trucks, with tarps or plastic sheets for cover in case it rains," Singh said. "By the time we put up the tarps, the vegetables are soaked, and these begin to decay when we hit the heat and humidity in the plains."
Some believe allowing supermarket giants such as Walmart, Tesco and Carrefour to operate in India's multibillion-dollar retail market could succeed where the government has failed. They are keen to move in, sign contracts directly with farmers, use refrigerated transport and storage to reduce waste and bypass the middlemen.Their entry so far has been blocked by government restrictions out of fear they will wipe out millions of small grocery stores in India. A government panel last month recommended allowing up to 51 percent foreign direct investment in multi-brand retail on condition that at least half the investment is made in back-end infrastructure such as cold storage chains and warehouses. A decision by the Cabinet could take several months.

Virupaksha · Post by **Virupaksha** » 31 Aug 2011 02:22

^^
a hit job for

Prem wrote:http://www.foxnews.com/world/2011/08/30 ... lks-india/
Fruit and Vegetables Rot as Hunger Stalks India

SOLAN
Walmart, Tesco and Carrefour

Abhijeet · Post by **Abhijeet** » 31 Aug 2011 02:36

What part of:

loses an estimated 40 percent of its fruit and vegetables to rot because of the kind of problems Sharma faces every week

is a good thing?

Virupaksha · Post by **Virupaksha** » 31 Aug 2011 02:42

Abhijeet wrote:What part of:

loses an estimated 40 percent of its fruit and vegetables to rot because of the kind of problems Sharma faces every week
is a good thing?

there have been many discussions over this. Refer to this thread and its earlier avatars. Simply put, the deterrence is cost.
That refridgerated truck costs money, then storing it in freezer costs money, mechanization costs money - (walmart and all its mai bap not with standing) which implies food inflation much much greater than what it is today. For the above to succeed, ALL produce MUST go through the above process to be cost effective. Making only the excess to go through the above process is unviable. The owner of the truck and freezer calculates their own ROI.

Tomorrow people shouldnt be asking why tomato is now costing 50Rs/kg even in peak tomato season.

Prasad · Post by **Prasad** » 31 Aug 2011 03:02

But wouldn't the cost of mechanisation be offset by the greater produce being brought to market? More supply keeping the rise in price in check? I mean if you consider anywhere between 30-40% being lost, that is a huge amount isn't it?

Or the govt could subsidise such trucks for the agri sector if they're built in-country? That should be doable right?

Virupaksha · Post by **Virupaksha** » 31 Aug 2011 03:16

The issue is as of today, that 30-40% loss is being as an acceptable loss so that the tomato is cheap.

Will the cost equations change when the tomato is 100Rs/kg instead of 20Rs/kg today, sure.

But does it make sense to increase of cost to 60 Rs/kg preemptively because one likes refridgerated products when the demand-supply equation even with a 30% loss is 20 Rs/kg?? I dont see sense. Does it require walmart to achieve refridgeration, not by a long long mile.

Abhijeet · Post by **Abhijeet** » 31 Aug 2011 08:27

I'm aware of the discussions on this. What I'm not clear on is why pointing out indisputable facts is taken as a hatchet job on behalf of Walmart or the villain of the month.

When the message can't be attacked, the messenger is next in line, I guess.

============

I'm also not sure where the idea comes from that preventing 2/5ths of food from rotting -- through better procedures and dragging the supply chain into the 20th century if not the 21st -- is actually going to raise prices. If that happens, we can simply shift back to letting the food rot, if that's what keeping prices in check.

Singha · Post by **Singha** » 31 Aug 2011 09:43

I have seen these trucks behind Total grocery in blr

http://coldex.in/

Theo_Fidel · Post by **Theo_Fidel** » 31 Aug 2011 09:51

That article is pure garbage and is a propaganda piece for Wal-Mart. One of many posted earlier. Here's why.

Wal-Mart simply does not mean less wastage. They have much tighter standards on production than your local tharkari-wallah and typically reject 30% of produce that is shipped to them. This works in massaland because they have an integrated very very expensive processing system. Rejected produce is converted to pulp or cattle feed.

Viru is right that full mechanizing permanently increases the installed costs. The advantage is that far far fewer workers are used and hence average pay will increase. But food does not become cheaper. We will mechanize when our labor costs become a serious burden. It is far from there right now.

Also keep in mind India is sub-tropical, we can grow vegetables around the year. No off season for us.

Abhijeet · Post by **Abhijeet** » 31 Aug 2011 11:00

Theo, surely there's no reason that Walmart would have the same standards in India as in the US. If 30% rejection causes prices to rise, then they will have 20% rejection, or 10%, or whatever number makes sense.

Rejection for not meeting standards is also different from food spoiling simply because of the brokenness of the current system. If we can reduce the amount of food that spoils before reaching the consumer, why shouldn't we?

Again, if mechanization causes prices to rise (is there empirical data for this from other countries?), then consumers will naturally gravitate away from Walmart and towards our current retailers. Walmart is surely not going to sew up all the supply sources immediately, so the current system will run in parallel with them. In that case, we don't lose anything by letting them bring in all their knowledge from running complex supply chains in the US and applying it to India. Worst case, people don't go to Walmart because they're too expensive (though the mind boggles at the thought).

Dhiman · Post by **Dhiman** » 31 Aug 2011 12:20

Virupaksha wrote: Will the cost equations change when the tomato is 100Rs/kg instead of 20Rs/kg today, sure.

Tomatoes are one of the easiest plants to grow. I used to grow quite a few back in the days. Once planted in soil mixed with manure/fertilizer or in a large pot, they will practically grow themselves as you long as you don't forget to water. Save seeds from one tomato for next year. Three plants, and both you and neighbor will have enough fresh free tomato all season long

Urban farming is a good substitute for food inflation and cheap too.

Singha · Post by **Singha** » 31 Aug 2011 12:31

I have read there are refrigerated trains that ship vegetables from california every day to the north east states - a journey of 5000km and few days. almost nothing in massa comes from less than 500km away, its all concentrated in certain areas where least cost advantage is derived.

Theo_Fidel · Post by **Theo_Fidel** » 31 Aug 2011 20:54

Singha wrote:I have read there are refrigerated trains that ship vegetables from california every day to the north east states - a journey of 5000km and few days. almost nothing in massa comes from less than 500km away, its all concentrated in certain areas where least cost advantage is derived.

Not just any where in California. Central valley. The advantage is climate. It is not necessarily cheaper. They can grow around the year. During summer+3 months local produce shows up but is not very competitive due to labor costs and lack of scale. About 50% of Tomato's in USA however comes from Florida. There is a documentary called 'Harvest of Shame' that documents the process.

WRT Wal-Mart they never drop their standards. Their Tomatos look the same no matter where you buy them, it is their USP. Again there is not less spoilage from shipping stuff across 5000 km. Just that rejected spoiled stuff is processed into another useful product. Mechanization can actually increase losses, as the machinery is not as efficient as delicate human hands. Farmers mechanize not for cheapness but because there is no other option due to labor issues.

Consumers have already delivered their verdict by staying away from Reliance fresh shops. Non A/C pavement Tharakari-Wallah will always be cheaper. India climate is very different.

Prem · Post by **Prem** » 31 Aug 2011 22:10

The 'cold-strage" business is big in india and spread all over . My thinking is if we can some how find a way to export this' wastage" and earn some Damris in teh process.

Prem · Post by **Prem** » 01 Sep 2011 00:59

Zell to Limit U.S. Real Estate Investing as He Expands in Colombia, India
http://www.bloomberg.com/news/2011-08-3 ... india.html

Billionaire Sam Zell said he is entering the real estate markets in Colombia and India in the next two weeks as he continues to favor international investments over U.S. property deals.

Zell, chairman of Chicago-based Equity International, will invest in real estate in Colombia and will eventually move on to residential projects, he said in an interview today on Bloomberg Television. In India, he plans to open hotels. “Colombia is the next star of Latin America,” Zell said on “In the Loop” with Betty Liu. “In India, we’re doing a hotel/motel program like Residence Inn at Marriott and we hope to build a chain across the country.” Zell, through Equity International, which he co-founded with Gary Garrabrant in 1999, has invested in real estate- related companies around the world, including in Brazil, China and Mexico. His involvement in the U.S. property market is “minimal” amid low interest rates and inflation that he estimates to be as high as 6 percent, Zell said.

Singha · Post by **Singha** » 01 Sep 2011 06:58

after a hiatus of 3yrs, shangri-la groups 7* hotel project in blr is resuming construction in a couple months it looks like. 6 floors were there, will add 6 more then interior work.

should be in leela palace snob category

whitefield seems awash in swank new business hotels like fortune select for example. novotel-ibis with maybe 500 rooms is starting imminently just opp intel...

hospitality has improved in unimaginable terms in last 10 yrs, even the remotest tourist places have pretty decent lodgings now albeit not as VFM as thailand.

and its a pretty manpower intensive job...gora and desi fatkats have very specific non-buffety reqs for breakfast (get me a poached egg done for 33 secs , black tea with cloves but no cinnamon, a dosa with asparagus stuffing....) , like evening blanket turndown service and so on...

Airavat · Post by **Airavat** » 01 Sep 2011 08:01

Arunachal Pradesh has highest growth rate

The data provided by the Central Statistics Office shows that the front-runner among high-growth states in 2009-10 was, hold your breath, Arunachal Pradesh, whose GDP grew by a mind-blowing 22.43%. Eat your heart out, mainstream India, the north-eastern star is rising, despite decades of neglect.

There’s more to the story. In second place was another surprise—Mizoram, with a growth rate of 13.95%. Goa came third in 2009-10, growing its GDP by 13.03%. That’s not all. It now turns out that Bihar was not really the fastest growing state in 2008-09—that honour goes to Mizoram, with a growth rate of 13.91%, while Bihar came second. Andaman and Nicobar Islands, growing by 11.17%, came third.

Singha · Post by **Singha** » 01 Sep 2011 10:13

if air connectivity is improved to arunachal with perhaps direct ATR72/bombardier flights from CCU and via Bagdogra, they can soon eclipse the tourist money going to Sikkim and Darjeeling at present. investors will build hotels once the tourist traffic comes just as it happened in Kerala and contiguous area of western ghats in TN and Karnataka.

I say get rid of this indira era "inner line permit" stuff and open the place for full scale tourism rather than keep them in "magnificent poverty" and "noble savage" stuff. we need trident, aitken spence, oberoi, marriott, best western hotels in Tawang, with planeloads of chinese and indic tourists arriving by the hour. Infra will improve in no time and soon a soothing 4 -laned drive from GAU -> Tezpur -> bomdila -> Se La -> Tawang will occur.

gakakkad · Post by **gakakkad** » 01 Sep 2011 16:02

I have seen photo's of Arunachal . It is beautiful. If gov't invests in it for tourism purpose than it is money well spent.

sanjaykumar · Post by **sanjaykumar** » 01 Sep 2011 22:06

Yes open up Arunachal to evangelists and Christian circuses for all.

How about ensuring the rights of the locals to preserve their culture first?

Prem · Post by **Prem** » 01 Sep 2011 22:48

http://online.wsj.com/article/SB1000142 ... 22642.html
Indian Exports Rise 82%

NEW DELHI—India's merchandise exports rose to $29.3 billion in July, up 82% from a year earlier, but economists said the pace is unlikely to be sustained because of global economic problems and aggressive monetary tightening by the country's central bank. Data issued Thursday by the Ministry of Commerce showed also that exports during April-July, the first four months of the current fiscal year, rose 54% to $108.4 billion. Imports jumped 52% to $40.4 billion in July, driven by a 58% rise in non-oil imports to $28.9 billion. Oil imports increased 37% to $11.4 billion. India's July trade deficit widened to $11.1 billion from $10.5 billion a year earlier. Exports from Asia's third-largest economy have been climbing steadily, driven by increased government support to exporters to tap into new markets in Latin America and Africa, which are helping offset slowing demand from traditional regions such as the U.S., Europe and Japan. The government is targeting merchandise exports of $300 billion in the current fiscal year through March 2012, compared with last year's all-time high of $245.9 billion. However, some traditional items such as gems and jewelry have shown unfettered demand even at the time of the 2008 global economic crisis and may help keep demand for Indian exports aloft. Also, the basket of commodities has now grown substantially with engineering goods and chemicals as well as pharmaceutical products steadily gaining prominence in Indian exports. They may help offset any drop in demand in traditional export commodities, analysts said.

( The new markets in Afrika, South America,ME etc will help sustaining growth in export )

gakakkad · Post by **gakakkad** » 01 Sep 2011 22:52

>>>>Yes open up Arunachal to evangelists and Christian circuses for all.

How about ensuring the rights of the locals to preserve their culture first?

Where does evangelists etc even come into picture. Onlee economics.

Rahul M · Post by **Rahul M** » 01 Sep 2011 23:24

http://www.livemint.com/2011/09/0115414 ... .html?h=A1

One can argue at length about these claims, but what bothers me is that she has resuscitated a poverty statistic for India that has long been discredited; that 830 million people in India (77% of the population) live on less than Rs. 20 a day. The figure comes from the 2006 Arjun Sengupta Committee Report on Unorganised Labour.

Against this backdrop, consider just two numbers. In the latest NSS, less than 2% of households said that they do not have two square meals a day (this, in a scenario where underreporting of income and consumption is the norm). And that, as of July 2011, there were more than 600 million GSM cellphone connections in India.

In 2010, India’s per capita GDP was $1265, which translates to about Rs. 156 per day (taking $1=Rs. 45). If, out of a 1.2 billion population, 830 million live on Rs. 20 a day (and obviously they are not in a position to save any money), then the rest 370 million are earning Rs. 461 per day. The average size of an Indian family is five. So we have 74 million families earning on an average nearly Rs. 8.5 lakh a year! That sounds as credible as the Sengupta poverty figure.

Poverty calculations in India have always been a murky area. None of the figures are accepted universally, but some are so clearly off the mark that they are only trotted out periodically to fit specific agendas.

And Arundhati, naturally, would not trust any figure that does not meet her ideological anguish. Thus, for her, 77% it is. So what if no one with even a slightly greater interest in facts than dogma agrees.

@Suraj, do we have a thread on social indicators ?

Suraj · Post by **Suraj** » 01 Sep 2011 23:29

RahulM: let's keep it to this thread. That's been the case so far, and it doesn't make much sense to sanitize out the socio- part of socio-economic issues from this thread.

Rahul M · Post by **Rahul M** » 01 Sep 2011 23:37

we can always x-post at both places. we seemed to have missed a lot of these type of articles lately. I was wondering if people do not post these thinking this is only for macro economic indicators.
anyway, up to you.

paramu · Post by **paramu** » 01 Sep 2011 23:51

gakakkad wrote:>>>>Yes open up Arunachal to evangelists and Christian circuses for all.

How about ensuring the rights of the locals to preserve their culture first?

Where does evangelists etc even come into picture. Onlee economics.

Despite decent economic growth, EJs succeeded in TN and Andhra to some extend. Despite poverty they did not succeed yet in UP and Bihar. Teach Arunachalis (correct word?) who they are and what their identity is, they will stick to it.

gakakkad · Post by **gakakkad** » 01 Sep 2011 23:56

Agree with the livemint article.

The number of cell phone connections in India are about 70 crore. Surely most of them cannot be poor. A great many of those classified as poor can easily be classified as lower middle.

A couple of years ago I saw a BPL card with my maid servant . Her husband was an auto rickshaw driver . I estimated their household Income to be 15k / month . Yet they had a BPL card as it provided some benefits.

When I was in MBBS , a every now and then patients would show their BPL card. It would ensure that they get medicines free of cost. Quite often they had cell phones. This was circa 2007 .

Suraj · Post by **Suraj** » 02 Sep 2011 00:25

There are currently ~860 million cellphone subscribers (link). A recent study indicated that this translates to approximately 575 million unique people - or approximately half the population - owning cellphones, if memory serves me right (there was a recent debate on this in the telecom thread within the last 2 months). The '80% of population barely suriviving on $2 a day' meme has significant holes in it; anyone who can afford discretionary spending on a cellphone can be reasonably expected to have enough money for food.

paramu · Post by **paramu** » 02 Sep 2011 00:29

I don't think cellphone is a discretionary spending. If the cellphone companies start charging for incoming calls, many would simply cancel their subscription. For many in lower economic strata, like maids, it is a way for their customers to get in touch with them easily.

Ambar · Post by **Ambar** » 02 Sep 2011 00:52

Suraj wrote:There are currently ~860 million cellphone subscribers (link). A recent study indicated that this translates to approximately 575 million unique people - or approximately half the population - owning cellphones, if memory serves me right (there was a recent debate on this in the telecom thread within the last 2 months). The '80% of population barely suriviving on $2 a day' meme has significant holes in it; anyone who can afford discretionary spending on a cellphone can be reasonably expected to have enough money for food.

That is too flawed an assumption to debase the poverty statistics. I had mentioned in 'TSP' thread an year ago too. Going by that logic, with 108 million customers and a much larger % of population below the age of 18, Pakis must be doing far better than what other indicators suggest, but that is not the case. Many of those subscribers could be corporates, or prepaid users who cannot keep the phone service up all the time.

Suraj · Post by **Suraj** » 02 Sep 2011 01:26

Ambar: I made a distinction between number of subscribers and number of unique people holding cellphones. The former significantly exceeds the latter. Inactive subscribers are also periodically removed from their roster by telcos.

gakakkad · Post by **gakakkad** » 02 Sep 2011 08:42

Whatever it may be , the number of poor in India is grossly over estimated . It helps the politicians electorally as they have poverty of ideas about how to win election. It helps the BPL card holders in a variety of way . It helps western analyst to continually deride India by exaggerated claims of poverty and make statements like , "country of 800 million poor people" sending things to space . Seems like overestimating poverty is beneficial for all .

Pratyush · Post by **Pratyush** » 02 Sep 2011 10:54

Exports jump 81.8% to $29.3 bn in July

Recently met a chaiwala who knows someone, according to that some one the increase in the Indian trade figures is a result of the repatriation of the black money being held overseas by the Indian firms.

Not being an economic matters guy, I could not verify, what was being told to me was accurate or not.

Singha · Post by **Singha** » 02 Sep 2011 11:33

which brings the question why is overseas black money being repatriated? are they chasing better returns here or its getting hot out there, with gora govts demanding a thick slice of flesh for custodian and anonymity charges?

jamwal · Post by **jamwal** » 02 Sep 2011 16:59

Theo_Fidel wrote:
Singha wrote: WRT Wal-Mart they never drop their standards. Their Tomatos look the same no matter where you buy them, it is their USP. Again there is not less spoilage from shipping stuff across 5000 km. Just that rejected spoiled stuff is processed into another useful product. Mechanization can actually increase losses, as the machinery is not as efficient as delicate human hands. Farmers mechanize not for cheapness but because there is no other option due to labor issues.

Consumers have already delivered their verdict by staying away from Reliance fresh shops. Non A/C pavement Tharakari-Wallah will always be cheaper. India climate is very different.

How does that work ? BTW, I read somewhere that US consumers pay more attention to looks rather than flavour. If it's really true, Walmart like procedures are not going to work here in India where one can find 3 kinds of tomatoes, each with different looks and taste on a single thela.