Indian Economy: News and Discussion (Apr 1 2011)

[gakakkad]

^^ if they manage to reach a tertiary care gov't hospital than they are usually treated quite cheaply..If they produce a BPL card or sc/st card than even expensive drugs are given free of cost..Most medical colleges have charities attached to them..Hari-om trust for instance operates in gujarat.. They too provide a lot of money for the patients...they operate a "coupon" like system... In my MBBS madarssa average cost of a poor patient to remove an appendix or get operated for a hernia (including mesh) was less than Rs.150 .. sometimes even free..
What I realised is that the people flashing the BPL card had cell phones with them ...this was 2007...

[Theo_Fidel]

In the depths of rural areas they have 'canteens' that provide meals for 50 paise or so. Deep in rural country, 2 hours from a highway, near Hallibedu in Karnataka I ate a lunch meal of Puffed Rice and Chutney for 50 Paise 4 years ago. All the local farmers ate there, and I was surprised at how filling it was. The taste was interesting. For 75 Paise you could upgrade to a thimble size glass of Buttermilk which I was dubious about and hence did not upgrade.

On the way to Kodaikanal there are a couple of stalls that offer excellent packets of lime rice & pickle/chutney for Rs 3 even 2 years ago.

There are many destitute old people in the Tirunelveli area who live a spartan existence on the government pension of Rs 230 per month (used to be Rs 180). An old couple would get about Rs 460. It doesn't seem like much but schemes such as these and the Rs 1 rice have slowly and dramatically reduced absolute desperate poverty in TN. I definitely support such programs, even if the targeting could be better some times.

In deep rural TN every little hamlet has a local Quack who will give you an Antibiotic shot for between Rs20-Rs50. An Anti-Biotic shot is given for everything from Diarrhea to Flu to Cancer to Pain relief to kidney failure. Sometimes a steroid shot is also given if Antibiotics are low in supply. If you are really poor a plant extract bottle liquid, usually green and foul smelling, to treat all illnesses can be obtained for Rs 10 or so. This is the majority of healthcare options these people have. It would not be outlandish to say the majority of healthcare in India comes from local Quacks.

[Vipul]

How independent is the Reserve Bank of India?

[Katare]

We are talking about food, cloaths, shade, education and basic health care...

Food - 30 x 2 x 20 = 1200
claoths - 1 pair = 100
house/shade - 1 room with toilet = 200
education = 250
Health insurance = 250

Total = 2000 that is ~Rs 70 per day

if you can have food, cloths, house, education and health insurance than you are not a poor, not in India at least. No country should have more than a third of its population as poor if it wants to keep the focus. Resources should be doled out to the least fortunate and trapped folks at the very bottom. Poverty lines are defined based on the realities of the country not on the what it should be basis. Govt also provides, at lest on papers, free medical tratment on hospitals and free schools and free mid-day meals and old age pension and what not.

I too feel pretty poor most of the time.......and in my defination i am a real poor man who struggles to decide weather I should go to mcDonald to have Lunch for $5 bucks or should i go to Denney's and have proper lunch for $8.00.

[niran]

in place of saying a spade a spade people here are justifying this 32 INR/day/person thingy here,
at least i had expected mucho better here, imagine a niran living in cow belt, to eat that rupis 3 INR
lime rice and pickle so as to remain healthy and be able to avail that BPL card he will have to trek 2800 km one way, and not to mention the health benefit from the trek along with increase naarth south bhaichara, win win for all ,no?

this is just to say in the coming election

see, UPA have reduced poverty by half, don't you beleive us, look at the number of BPL card
cancled, the irrefutable proof, now now do not play dirty politiks,

remember during Laalo reign as CM in Bihar(no jharkhand then) Bihar had the lowest literacy rate in India, so herr CM looked in the problem and found that according to the definition one had to have passed 8th standard to be considered literate,
Herr CM was shocked and horrified by this incompetence, in Bihar a 3rd standard is able to read and write, and decree was promptly announced "henceforth all person attending 3rd standard shall be considered Literate". problem solved, by mere stroke of pen, Herr Lalo is great
all rise and hail the the greatest CM on Earth, you there! add more aloo to me samosa.

all in all it is just fudging of data for coming election plain and simple.

[Pratyush]

The jeehard against economic development steps in high gear with the members of the NAC cabal going on the offensive. Posting in full as it has too many unique points to ignore. What is startling is an absolute belief of the supremacy of his own ideas over the Planning commission.


The poverty trap

By Jean Dreze.

In the good old days, the poverty line was a relatively simple concept. By and large, it was just a statistical benchmark for making ‘poverty comparisons’ — for instance, to track poverty over time, or to compare poverty levels in different parts of the country. Many of these comparisons
are not particularly sensitive to the choice of poverty line, within a reasonable range. There is even a situation going by the odd name of ‘first-order stochastic dominance’, which arises when the relevant comparison holds for any poverty line. For instance, Bihar is clearly poorer than Punjab, wherever one draws the line.

The choice of poverty line, therefore, was not particularly controversial. One widely used initial benchmark was the level of per capita expenditure required to meet pre-specified calorie norms. One may or may not like this benchmark (the calorie ‘norms’ themselves are quite shaky), but at least it was fairly transparent.

There was no claim that reaching the poverty line was a guarantee of being well-nourished (since good nutrition requires much more than calorie adequacy), let alone healthy or well-educated.

Then came the whole idea of ‘BPL targeting’, that is, of restricting various social benefits (in particular, the public distribution system) to households ‘below the poverty line’. This quietly transformed the poverty line from a statistical benchmark into a real-life social division.

The division was all the more artificial as the identification of BPL households was highly unreliable. Indeed, the Planning Commission uses one method to count the poor, and the ministry of rural development uses a different method to identify them. This cannot work. And this is just the beginning of a series of conceptual flaws and implementation problems that plague the BPL census.

It is not surprising that, according to the National Sample Survey (among other sources), about half of all poor households in rural India didn’t have a BPL card in 2004-05. The ‘real-life’ poverty line not only divides people, but it also divides them in a cruel and destructive manner.

The Tendulkar Committee Report further complicated matters by claiming, for the first time, that the poverty line ensures “adequacy of actual private expenditure… on food, education and health” [sic].

That Rs 32 per person per day (the Tendulkar poverty line for urban areas at today’s prices) is wholly insufficient for this purpose is self-evident from a common sense point of view. This is all the more glaring when one looks at the breakdown of the R32 packet, which includes, for instance, just about one daily rupee for health expenditure.

Yet, the experts managed to rustle up technical arguments to substantiate their startling claim.

Consider, for instance, the argument they invoked to establish “food adequacy” at the poverty line. Briefly, it consists of observing that food expenditure at the poverty line is typically higher than “normative food expenditure”.

The latter is defined as follows (hold your breath): “When estimated population from NSS [National Sample Survey] is ranked according to ascending size of food expenditure per capita, normative food expenditure per capita is defined by that level of food expenditure per capita that corresponds to cumulative share of population from NSS that equals the index of malnutrition derived from NFHS-III [third National Family Health Survey] for that state.”

The “index of malnutrition”, for its part, is an unweighted sum of the proportions of underweight children, adult men with a low body mass index (BMI), and adult women with low BMI.

If you didn’t understand that, relax. Because it makes no sense.

However, this woolly-headed argument (somewhat tangential in the report) serves the government’s purpose quite well, since it helps to justify BPL targeting. Indeed, the adequacy argument is the central plank of the Planning Commission’s recent affidavit to the Supreme Court, defending the use of official poverty lines for PDS allocations.

To be fair to the Planning Commission, it is not quite saying (at least not explicitly) that the PDS should be restricted to BPL households. It is just saying that the central government’s commitment ends there.

But the writing is on the wall, not just for the PDS but also for other social programmes that are being quietly ear-marked for BPL targeting, conversion to cash transfers, and “self-liquidation” as the official poverty estimates go down.

The way forward is not to “fix the poverty numbers” but to find a way out of this bankrupt approach of BPL targeting. That is the appeal of universal entitlement programmes such as school meals, integrated child development services (ICDS), and the National Rural Employment Guarantee Act (NREGA).

Many states are now moving away from BPL targeting in the PDS too — not only states like Tamil Nadu and Himachal Pradesh that have a long-standing commitment to universalism in social policy, but also, increasingly, other states such as Andhra Pradesh and Chhattisgarh where the PDS extends well beyond the BPL category. The PDS tends to function much better in those states, because everyone — or almost everyone — has a strong stake in it. This approach is expensive, but at least, it tends to work.

Beyond this, there is a need for informed debate on the future of social support in India. Do we want a divisive, unreliable and exclusionary system of targeted transfers that self-liquidates over time? Or do we want to build a comprehensive social security system inspired by constitutional principles, fundamental rights, and ideals of solidarity and

universalism?

The whole experience of the last 20 years is that over-reliance on economic growth for social progress is a recipe for disappointment. Even Bangladesh and Nepal (starting way behind, and with much slower economic growth) have made far more progress than India during this period, in terms of a wide range of social indicators. Greater attention to social support and economic redistribution is long overdue. Poverty lines, for their part, are best sent back to their statistical kennel.

(Jean Dreze is honorary professor at the Delhi School of Economics. The views expressed by the author are personal)

[Aditya_V]

This is the majority of healthcare options these people have. It would not be outlandish to say the majority of healthcare in India comes from local Quacks.

With Medical College Mafia being what it is with Capitation fees of Rs. 40 lac plus in many collages and with separate capitation fees for MD, Sadly I do not see this changing in the near future.

[sumishi]

... s weakening of the rupee against the dollar an indication of devaluation of rupee to approximate parity with devaluing dollar? Shouldn't rupee be strengthening actually, considering the mess the West is in?

Pranab warns of currency war: The Hindu, September 23, 2011

Finance Minister Pranab Mukherjee on Thursday warned the international community that there is danger of a currency war if the ongoing economic crisis deepens.

Such a currency war can be avoided through dialogue and not through competitive devaluations, Mr. Mukherjee stressed at a crowded press conference of Finance Ministers of BRICS nations Brazil, Russia, India, China and South Africa at the headquarters of the International Monetary Fund here.

“Yes, if the crisis deepens further and there is greater volatility in financial flows, there is an increased risk of this (currency war) happening,” Mr. Mukherjee said in response to a question.

“But our view is that if such tensions arise, it should be eased through the dialogue and not through competitive devaluations,” he said.

Mr. Mukherjee pointed out the currencies used in BRICS countries should be widely appreciated and should be taken into account while determining the ingredients of special drawing rights (SDR) maintained by the IMF, as these nations’ contributions to global output and the economy is increasingly substantially.

“But we are not suggesting right now, because there are many other factors which ought to be taken into account, including free convertibility and other things which are not uniform, but the importance of these currencies has increased,” Mr. Mukherjee said in response to a question.

[sumishi]

The debt danger for India: The Hindu, August 10, 2011
-- C. P. Chandrasekhar

The Indian government’s response to the market collapse that followed the U.S. debt standoff and subsequent Standard and Poor’s downgrade was predictable. While acknowledging that India was impacted, the effort was to play down the likely intensity of that impact. “Our institutions are strong and [we] are prepared to address any concern that may arise on account of the present situation,” Finance Minister Pranab Mukherjee reportedly stated. He also promised that the government “will fast track the implementation of the pending reforms and keep a close eye on international developments.”

That response misses the point. The problem is not that India is not adequately reformed, but that past reforms have resulted in its integration through flows of finance with global capital. This makes the perceptions and behaviour of global capital, whether stimulated by India’s fundamentals or not, of importance to the country. And unlike China, a lot of the reserves that insure the country against adverse global responses are not earned through current account surpluses, but are drawn from what foreign investors have delivered in the past. Keeping legacy capital satisfied is crucial for stability.

Put simply, independent of whether there would be a global slowdown that would impact India, the country is exposed and vulnerable to global financial uncertainty. So even when some of its fundamentals are ostensibly strong it is liable to be hit by weak investor sentiment. India is vulnerable because international finance may assess its so-called fundamentals very differently from the way they are assessed by the government.

Consider the issue that now captures financial market attention: public debt. The experience in Greece, Spain, Portugal and elsewhere suggests that finance capital is increasingly “intolerant” of what is perceived as excessive public debt. In some instances this may be understandable. International financial investors are substantially exposed to government bonds in some of those countries, and their governments seem increasingly incapable of meeting their debt service commitments. Sovereign default threatens investor solvency. What is not understandable is the austerity that finance demands in those countries. It not only triggers protest and social disruption. It also results in contraction of employment and incomes, and undermines the ability of governments to garner the revenues needed to pull themselves out of the crisis.

Trapped in its own ideological quagmire, finance now seems to have lost its bearings. The cause for concern about public debt in a particular context has been extended to an unthinking abhorrence of all debt. The standoff over public debt in the US was not because the US government was over-indebted relative to its GDP. There are many other OECD countries from Greece to Germany that have a higher public debt to GDP ratio than the US. And even to the extent that debt has risen sharply in recent times in the US, it is largely the result of the failure of finance. The huge stimulus and bail-out package adopted by the US government to deal with the crisis delivered by irresponsible financial agents in 2008 took the net public debt to GDP ratio in the U.S. from 42.6 in 2007 to 72.4 per cent in 2011.

Financial interests benefited from that package and also bought into that debt using the near-interest free liquidity provided by the Federal Reserve. In the process they increased their exposure to sovereign debt in the US and elsewhere. But now that they are overcome by fears of sovereign default, they want a “correction”. So even in the U.S. they have not merely backed the irresponsible Republican refusal to accept a routine hike in the debt ceiling cap, but have through discredited rating agency Standard & Poor’s delivered an irresponsible first time downgrade of U.S. debt. That has been enough to trigger the turmoil in world markets.

It is in that background that we should view reports of S&P’s statement that fiscal capacities in Asian emerging markets, including India, have shrunk relative to 2008. This, it has argued, would mean that in the event of a second global slowdown: “The implications for sovereign creditworthiness in Asia-Pacific would likely be more negative than previously experienced, and a larger number of negative ratings actions would follow.”

This is more of a threat than an analysis. But if a wrong downgrade can make a difference to US markets and interest rates, so can it for India’s. The real difficulty is one that emerges from an analysis by Cornell economist Easwar Prasad in the Financial Times. That analysis suggests that though India’s gross public debt to GDP ratio declined from 75.8 per cent to 66.2 per cent between 2007 and 2011, it still is among the highest in the region. India’s 66.2 per cent level compares with Malaysia’s 55.1, Pakistan’s 54.1, Philippines’ 47, Thailand’s 43.7, Indonesia’s 25.4 and China’s 16.5.

So if S&P needs a target to declare that some governments in the Asia-Pacific are excessively indebted, then India is in the firing line. It is no doubt true that a number of factors make Indian public debt less of a problem than in many other contexts. To start with, much of public debt in India is denominated in Indian rupees and is owed to resident agents and therefore is unlikely to be adversely affected by uncertainty in international debt and currency markets. Secondly, within the country public debt is largely held by the banking system dominated by public sector banks. They are subject to government influence and are unlikely to respond to developments in ways that make bond prices and yields extremely volatile. Given these circumstances, public debt is not a potential trigger for a crisis and in any case should not worry private financial interests.

But that is unlikely to satisfy the likes of S&P. India has been a favoured target of foreign finance. And if it does not satisfy its requirements, it can fall out of favour. In its search for new investment targets, global finance has viewed with interest debt markets in countries like India. And in any debt market, what better instrument than relatively risk-free government securities. So, anything that muddies that potential market would disturb finance capital. India may be put on alert and even downgraded. The fact that, at the moment, publicly owned banks largely hold government paper is inadequate insurance.

Besides, there are other reasons why international finance would resent excessive debt-financed spending by governments. One is that given the monetarist mindset that characterises finance, such autonomous debt-financed public expenditure is seen as potentially inflationary. Since inflation erodes the real value of financial assets, it is anathema and, therefore, so is deficit-financed spending. The other is that when rising debt increases the interest burden in the budget and restricts the manoeuvrability of the government, it may push for a reduction interest rates. Private financial interests do not favour such intervention in financial markets. They, therefore, seek to address the problem at its source.

For reasons such as these, international finance is strongly opposed to the build up of public debt as a result of large and rising fiscal deficits. It is no doubt true that even if institutions like S&P flag India’s public debt as excessive, it may not lead to a fall in bond prices and an immediate rise in interest rates. But, it may signal, however erroneously, the overall unreliability of Indian markets and encourage the exit of financial investors from markets other than debt. This perhaps partly explains the current volatility in the equity market.

The issue is not whether India is directly coupled with global bond markets. It is whether India is financially integrated enough for any adverse assessment by sections of international finance to destabilise its markets. That much India’s reform has indeed achieved. So when irresponsible ratings by a rogue agency create instability, the response should not be a pledge to undertake further “reform”. Rather, it should be to rethink which facets of reform have increased India’s vulnerability and how.

[gakakkad]

looks like TOIlet got appreciation letter from signora maino..

For helping "for helping growth have a social purpose" to SDREland....

AK phyrrr...rpg phyrr... ghouri phyrr


http://articles.timesofindia.indiatimes ... toi-awards

[gakakkad]

sooper dooper success from Horse manure & co...

Mehico wants MGNREGA.....

http://www.asianage.com/india/mexico-em ... scheme-182


looks like the global economic slowdown was not enough for the mexicans...Or their Vice president is high on cucaine ... alaaaaaah hu akbar

[Pratyush]

NREGA faces midlife crisis: there is just not enough work!

[Airavat]

Shoppers in Singapore, Japan and India are among the region’s top luxury consumers

[RamaY]

Women from Thane, MH sent a check for Rs781 to PM of India, Father of Economic Reforms, Mr. Clean, Sri Sri Sri Man Mohan Singh asking him to demonstrate how one can live for Rs 26 per day. We already know that the planning commission defined Rs26/day as the PL.

[sum]

I think you meant Rs 32, hain ji?

[Prem]

http://truthonthemarket.com/2011/09/27/ ... law-firms/

The Law Blog reports that India is considering letting in U.K. law firms after long barring all foreign law firms from having offices in India.The LB notes that the UK would have to reciprocate by allowing Indian firms and that “t’s unclear whether U.S. firms would be invited to the party.”Well, I imagine that if the U.S. wants to join the “party” it would have to allow in Indian firms. Which could open U.S. lawyers to all kinds of pernicious global competition. We wouldn’t want that, would we? Even if it means that our counterparts in the U.K. will have access to a huge market denied to U.S. lawyers. Because that would mean that the U.S. would have to allow, say, U.K. firms, and maybe all the new ownership structures permitted under the UK’s new Legal Services Act.The question is how long will U.S. lawyers be able to hide from the rest of the world behind their regulatory wall.

[Prem]

http://www.pharmalot.com/2011/09/india- ... in-pharma/
( Good thinking)

Will India place a cap on foreign investment in its pharmaceutical industry? The issue has been simmering ever since the Department of Industrial Policy and Promotion floated a paper more than a year ago suggesting such a move in response to an increasing number of purchases of domestic drugmakers by big pharma based overseas.A growing number of multi-national drugmakers are, of course, expanding quickly into India by way of acquisitions. And the paper underscored growing anxiety that the Indian government would be unable to pursue its policy of generating low-cost generics and may find it difficult to secure manufacturing facilities to cope with outbreaks of epidemics and health emergencies. At the time the report was issued last year, foreign drugmakers commanded 15 percent of the Indian market, up from 10 percent in 2009 (back story).Now, a high-level panel of the Planning Commission, a government think tank, is recommending that the present cap on Foreign Direct Investment be lowered to below 49 percent among drugmakers from the present cap of 100 percent in order “to retain predominance of Indian pharmaceutical companies and preserve our self-sufficiency in drug production,” The Times of India reports. The commission wants pharma M&A proposals to be overseen by the Foreign Investment Promotion Board for more thorough scrutiny.

[Akshut]

I think you meant Rs 32, hain ji?

I the limit is Rs. 32 for urban and Rs. 26 for rural.

[Aditya_V]

Kingfisher to exit low-cost airline operation

Industrialist Vijay Mallya Wednesday announced the exit of his spirits-to-aviation group from Kingfisher Red, the low-cost airline operations, and said a Rs.2,000 crore rights issue will be pursued to spruce up the financials.

Wonder how he raises 2000 crore so easily even though if go through the financials of the Companies in his group, they will not show any sterling performance.

Well its simple, Liqour is first subject to State excise of 130% plus state sales tax of ~110% in most states. Which means as per the books around 72% of Customer price is supposed to pay Most of the Liquor especially Hard Liqour bottles do not have Manufacturing date or Batch no. Truckers are paid an extra incentive if they bring back Invoices without any stamp from the relevant authorities during delivery so that anther shipment is sent with the same invoice. Truckers share this loot with relevant Sales tax/ state excise personal(the reason why no batch no. with date on bottles) who stamp only 1 in 3 or 4 shipments - this is to ensure the state gets enough income from one of its main taxation revenue streams. Further, most wineshop owners pay in cash

So net result his liquor business records 100% cost for about 25-30% actual turnover shown in books. The rest 70% turnover in Black money which needs to be taken out of the country as black money. His other loss making ventures are part of this money laundering operation.

[Prem]

India’s Birla plans $17bn global expansion
http://www.ft.com/cms/s/0/686855f4-e5e0 ... z1ZGweKaar

Two of India’s largest family-run groups plan to invest billion of dollars around the globe as they seek to boost revenues by expanding in fast-growing emerging markets and by acquiring distressed assets of companies based in developed markets.Aditya Birla Group, India’s aluminium-to-retail and mobile telephony conglomerate, plans investments of $17bn across its 33 companies aimed at almost doubling the group’s revenues to $65bn by 2015. Godrej, one of India’s oldest conglomerates, said it would invest several billion dollars in developing markets in an effort to boost the company’s sales by at least 10 times to $30bn by 2020.
Kumar Mangalam Birla, chairman of the family owned group, and Adi Godrej, the 68-year-old chairman of eponymous Indian consumer goods-to-palm oil group Godrej, told the Financial Times that the bulk of the investments would be rolled out over the next two to five years.
The substantial capital inputs are in stark contrast to India’s investment environment, which has been damped by record high inflation, rising commodity prices and ballooning lending rates. The aggressive moves come as the groups seek to meet the demands of India’s fast-growing economy amid a global scramble to tie up mineral resources.

[vera_k]

Rich must be taxed more says Chidambaram

Another step in moving the economy back to the 70s and increasing concentration of power at Delhi. Effective income tax rates in India are already high compared to the rest of the world. But local tax rates (state income tax, property tax, sales tax) are abysmally low, so you end up with crumbling cities (unsafe water, potholed roads) and little investment in villages. Increasing income tax rates in this situation is simply another means to enable loot by the central government.

[Theo_Fidel]

#1 thing is to end this horrendous inflation so we can get back to full bore investing. Our people are now saving $800 billion a year. It is scary to think what would happen if the mountain of money is not properly channeled.

http://www.ft.com/intl/cms/s/0/15c897b6 ... z1ZGMOR3Md

India’s abject return to talk of Hindu growth rates

India has quickly come to regret Manmohan Singh’s second term as prime minister. The country’s most respected bureaucrat was handed a powerful mandate by his country’s voters two years ago and had a magnificent opportunity to modernise the economy. How distant that dream now seems.

Far from being in pole position among emerging markets, as it deserves, India trails in terms of attracting foreign capital and beating inflation. Some economists and industrialists fear India’s economy could shrink back towards what was derisively called the “Hindu rate of growth” from initial projections of 9 to 7 per cent this year. There is even speculation that the Singh government may not last the distance until elections in 2014 – though those who predict this may not appreciate that India’s electorate has nowhere else to go.

Yet with its young population and fast rising prices India urgently needs new direction – and Mr Singh urgently needs to salvage what until a year ago could have been seen as a near Nehruvian legacy. He has tried to wriggle from the mire with two limp cabinet reshuffles. Now he needs to execute his strongest suit, administrative reform, to restore a sense of principled purpose.

The four critical reforms are all potentially near at hand – but often appear elusive. The first is the overhaul of the arcane tax system, repeatedly delayed by opposition from powerful states. Direct sales tax and goods and services tax reform would iron out disparities between India’s 28 states, improve compliance and end a Byzantine system in which taxes are levied on taxes. Leading industrialists such as Adi Godrej, chairman of the eponymous Mumbai-based consumer goods empire, identify this as the single greatest move Mr Singh can make to accelerate economic growth.

The second is new land reform laws, which are crucial to unlocking India’s much-needed industrialisation and create jobs.

Third is the mines and mineral development bill. This sector has committed heinous, but largely unobserved, wrongs to the environment and rural communities. India has plenty of natural resources to feed its factories but either they are illegally exploited or untapped.

Finally, Mr Singh must cleanse the state’s procurement processes. He can lean on internet technology to run honest tenders and secure financial transfers.

There are a string of other reforms, including raising the foreign investment caps in the insurance sector, opening multi-brand retailing to foreign direct investment and boosting farm output. But Mr Singh’s chief aide, Montek Singh Ahluwalia, warns that approaching India’s parliamentary democracy with a shopping list of reforms is an exercise in futility.

Reforms, like the clipping of subsidies, take place at the margins. Or they come in response to calamity, most notably in 1991 when India’s balance of payments problems threatened default. Today’s crisis is not yet showing up in the current account. Many Indians sense their country’s economy might never fulfil its potential, especially if Mr Singh’s leadership continues to falter and the political system jams.

[saip]

I bought a ticket on Kingfisher Red for Jan 1, 2012. I hope they are still flying when I land there.

[Theo_Fidel]

http://in.reuters.com/article/2011/09/2 ... 7620110928

India's monetary policy makers are prepared to sacrifice some economic growth in order to control inflation and inflation expectations, H.R. Khan, a deputy governor at the Reserve Bank of India, told Reuters on Wednesday.

"Most of the time India's growth hasn't fallen below 6 and 6.7 percent, but there is a huge upside to inflation," Khan told Reuters on the sidelines of a financial conference in Istanbul. "In the short term there could be trade off. But in the medium and long term low and sustainable inflation is necessary for sustaining the growth."

"So if there is a bit of sacrifice on the growth side we don't mind but inflation and inflation expectations have to be controlled," Khan said.

[Suraj]

Though the overall IIP growth in August is just 3.5%, it seems to be skewed by coal, oil and natural gas numbers. Other core sectors are still performing very strongly - steel output at 7.7%, cement at 7.2% and electricity at 8.9% are very encouraging figures. Refined petroleum at 3.9% and fertilizers at 4.3% isn't bad either. It's interesting that the 'dig stuff out' parameters are down significantly, but the 'make basic materials' parameters are up strongly; the latter bear a closer relationship to immediate industrial output and consumption needs.

Strangely though, despite having 60-70% coal fired electricity output we seem to have manages to increase electricity output 9% in a month when coal output was down 15%. Not sure what to make of that. Perhaps it demonstrates greater production efficiency even as feed material (coal/oil/cng) input is being constrained; if that's the case, it might also be a pointer to why inflation is a problem - unlocking coal, oil and NG production might cool prices. Coal production in particular remains an inefficient and heavily politicized sector.

[Virupaksha]

Suraj,

Many of the new coal plants are importing coal.

[Vasu]

Suraj,

Many of the new coal plants are importing coal.

and the old ones too. Indonesia, Australia, Sub-Saharan Africa/Madagascar, Brazil...its all coming in.

[Singha]

the UMPP proposals were all coastal based on the need to import coal easily. I think our coal being high in sulfur is fixed with higher grade australian etc anthracite coal before firing in the thermal plants. I have seen railways trains loaded with australian ore making their way around the eastern coast way back in early 90s.

[Theo_Fidel]

Actually the monsoon this year is probably responsible. Compared to last year the reservoir filled early and allowed the coal plants to back down for maintenance while still raising Electricity production. Several new large dams started electricity production this year as well. Several coal mines were flooded affecting output this monsoon.

WRT coal it is not right to say out put is not increasing. There was a time, early 80's, when I was in college that India total coal production was around 80 million tons. I clearly remember that figure. This year it exceed 600 million tonnes in coal. An 800% growth in 30 years. Production continues to rise at about 30-40 million tonnes per year. In about 5-6 years we will be producing more coal than USA and be #2 in the world. The problem is that the economy is growing far faster than this and so there is now a mismatch of about 150 million tonnes. We could be a lot lot more efficient with our coal. USA produces about 900 million tonnes of coal and fires about 600,000 MW of coal power plants. We only manage to fire about 150,000 MW with 2/3 of the coal production. Even allowing for low quality coal this is quite inefficient.

[Vasu]

Our power sector is one such sector I think which has inefficiencies in every aspect of it, right from production, which you illustrated well by the way we use our coal, right down to how we distribute it to consumers, both industrial and domestic.

For domestic coal, the mines in the Maoist/Naxal areas face the threat from these fronts as well, as illustrated by the case of Essar paying money to the Maoists to keep their mills functioning. The police recently arrested a senior official of the company.

Meanwhile, the draft of the new mining Law is out, and mining companies are already crying at how it will be bad for them. I would love to hear what others have to say about this.

Till now, the mining industry in India has mined billions and billions of dollars worth of ores and coal. There are scams in all the mining states, and there are huge issues of environmental degradation and disregard for the local population, which are swept under the carpet because there's big money made by the miners, the politicians, the police and the rest. If the truth is something else, then please correct me! But 26% of profit sharing may be on the higher side, the Govt. is saying its only a reference figure.

Mining companies to take a hit of Rs 15,000 cr

Mining companies have warned of a price spiral in commodities once the new mining law provisions are in place. The industry sees the government decision of mandatory profit and royalty sharing impacting it by an estimated Rs 15,000 crore every year. This would include a Rs 12,200-crore hit on non-coal mining companies and Rs 2,800 crore on coal miners.

Industry also raised doubts over implementation of the proposal arguing that the provisions on the lack clarity. Rana Som, chairman of NMDC Ltd, India’s largest iron ore miner, says there is a need to review and examine the issues raised by the industry on royalty, profit-sharing and the methodology of providing assistance to project affected persons before the Bill finally becomes an Act.

[Singha]

I read there is also massive pilferage of coal from entities like railways during transit storage. Mughalsarai Jn in eastern UP has been mentioned as one such site....its not too far from the areas like azamgarh and gorakhpur...

[Altair]

Any of you guys know about Vikram Akula? He is into microfinance.

[A_Gupta]

http://blogs.cfr.org/asia/2011/10/02/ca ... ment-game/
Can India and America Up Their Investment Game?

My latest column is out in India’s financial daily, the Business Standard. I used this month’s column to talk a bit about structural impediments hindering U.S. investment in India. These challenges will grow if, as many economists suspect, India’s growth continues to slow from its restored post-crisis clip of 8 to 9 percent a year to something more on the order of 7 to 7.5 percent. And in that context, it’s worth noting that Indian stocks have just completed their worst quarter since 2008. And of course food price inflation remains as stubborn as ever.

Here’s my argument, which reflects in part a perspective from my new perch in Chicago rather than Washington, DC...

[Nihat]

India's factory PMI growth falls to 30-month low

India’s manufacturing growth nearly stalled in September, hitting its weakest spot since March 2009 (30-month low) on slowing output and orders growth following a series of interest rate hikes.

The HSBC Markit India Manufacturing PMI fell more than two points to 50.4 from 52.6, very close to the 50 mark which divides growth and contraction.

The output index plunged by its biggest amount in one month since November 2008, to 51.1 from 56.0.

The data suggest that September was the worst month for India's factories since March 2009 — when it shrank, just as world stock markets carved their lowest point since the financial crisis began.

With developed economies perilously close to a second recession, emerging markets, which have provided the motor for global growth in recent years, are also facing the crunch.

' Growth momentum in India's manufacturing sector eased further in September. This was driven by weaker orders, with export orders still contracting due to the weaker global economic conditions,' as per reports.

India's factory sector has gone from robust growth to near stall speed in just five months and the survey also suggested more weakness lies ahead.

The new orders index, a reliable gauge of future output, fell for the sixth straight month, while export orders contracted for a third month thanks to weak global demand.

Inflation pressures were slightly less intense than in August, the survey showed, but still remain.

'While the persistent inflation pressures support RBI's tightening bias, the slowdown in manufacturing growth suggests that the end to the tightening cycle is at least now in sight,' reports stated.

The Reserve Bank of India ( RBI) is faced with near double-digit inflation which it has tried to control through a dozen interest rate hikes over the past 18 months.

Indian inflation climbed to 9.78 percent in August from a year ago, and has hovered over 9 percent for many months now.

A similar PMI survey released on Friday showed manufacturing in Asian emerging peer China contracting for a third month.

The Japan Manufacturing PMI on Friday showed contraction there for the first time in five months, more evidence that the bounce following the devastating earthquake in March is fading.

Yay !! , time for new rate hikes

[Nihat]

Exports surge 44% in Aug

India's August exports rose 44.25% to $24.3 billion from a year earlier, while imports for the month rose 41.82% to $38.4 billion, leaving a trade deficit of $14 billion, government data showed.

[Singha]

exports will surge even stronger if any hint emerges of swiss banks being probed deeply or going under.

all the loot will find their way back through various channels ranging from suitcases and gold bars in dhows, to overinvoicing of exports.

[Pratyush]

We need to start correlating the Indian export numbers with the import numbers of different countries. Only then will we be able to see the truth of the export surge.

But I recall a conversation with a paanwala who knew some one in DGFT in ministry of commerce. According to him, the growth in exports is just a cover for the repatriation of black money stashed abroad.

[RamaY]

exports will surge even stronger if any hint emerges of swiss banks being probed deeply or going under.

all the loot will find their way back through various channels ranging from suitcases and gold bars in dhows, to overinvoicing of exports.

It is kind of confusing. If exports are increasing, especially if it is swiss money, then shouldn't value of INR raise?

Interesting to see if $1T swiss money comes into Indian economy and is accumulated as FX reserve. Also interesting to see how this money is managed in terms of value of INR and investment patterns.

[Singha]

politicians with loose cash lying around usually loan that to education, hospitality and real estate sector entrepreneurs as seed capital. there is a limit to how much plots of land, flats, houses and accounts,safe deposit boxes in names of relatives they can humanly manage. only a few trusted insiders can know of it, so engaging a army of CA's to keep track of it is not feasible.

[vishvak]

the growth in exports is just a cover for the repatriation of black money stashed abroad.

My 2 cents here. The black money came out of public wealth ie wealth of average Indian, thus denying better growth. The stashes abroad got profits for Swiss banking for wealth and its management. It added to Swiss banking and therefore an average European indirectly. Now if it is coming back as payment of exports, i.e. the raw materials/products are actually exported again for that much part of the wealth. So a list of gains for the Swiss banks could be (1) lot of stash to digest for economy growth for free. (2)a small part of this stash spent on import to Swiss for raw materials/products. What an average Indian lost here is perhaps this (1) Lost wealth in the economy for decades (2)now export of raw-materials/products by selected people (3) Inflation & also high rate of interest for the middle class to bear.

This must be scam of epic proportions, aided by the evil Swiss banks and of course the illegitimate corrupt.

How exactly are the Swiss banks with numbered accounts legitimized? I am not sure if UN encourages numbered accounts otherwise Swiss would point that out. If it is just ad-hoc then that makes banking practices less legitimate than banking in third world countries.