Indian Economy: News and Discussion (Apr 1 2011)

devesh · Post by **devesh** » 21 Oct 2011 23:10

^^^
+1. yup, Naidu's elitism was obvious. ultimately he was a good marketing manager. but forgot that marketing also needs substance eventually...
I wasn't comparing Naidu with NM. that comparison doesn't stand on logic and/or reason.

neel · Post by **neel** » 22 Oct 2011 15:53

abhischekcc wrote:You know, I think Delhi is not as bad as it would have been if it had another class of parasites - investment bankers.

The current economic mess was created by investment bankers alone without any help from the other classes of parasites.

The mess really started in 1998, when the LTC(mis)M firm, (mis)managed by a bunch of MBAs, financial 'innovators', and Nobel Laureates (in derivatives), collapsed. Apparently, what prevented the spread of the contagion at that time was a piece of legislation by the hated politicians. It was the Glass Steagall Act - made to prevent the collpase of economy by hard working investment banksters.

Once, this legislation was removed the doors were open to the mess they have created this time.

---------
Oh yes, if there is a devil, he must be an investment banker.

Do you even know what the Glass-Steagall Act did? It made investment banks and commercial banks separate legal entities. It had no impact on the actual operations of the investment banks. In fact the investment banks without any commercial operations were a major segment of the sector before the crash, and anyway the commercial parts of combined banks are fully insured (i.e. there is now something called deposit insurance, which obviated the need for the wall between commercial and investment banking), so there is no risk of contagion there. There was less contagion from the 1998 LTC debacle because the size of the first order effect was much smaller and the system was less interconnected and leveraged.

In no way did the connection between investment banks and commercial banks matter in the recent crisis, since everyone with any appreciable wealth was heavily invested via some institutional intermediary (e.g. mutual funds, pension funds, sovereign wealth funds, and hedge funds) with the investment banks themselves. The actual crisis that occurred in 2008 (and the one that is occurring in slow motion right now in Europe) was nothing more than the result of how heavily the entire world was betting that the conventional wisdom was correct in considering sub-prime mortgages (or Icelandic Krona and Irish/Greek/Portuguese bonds) to be safe places for parking money.

You are correct that the magnitude of that bet was amplified (i.e. leveraged) more than any other bet in history because of investment bankers having invented new ways to bet (e.g. the CDS a.k.a. large scale lending insurance). Unfortunately, every single government official in the world was an adherent to the conventional wisdom, as it had been 80 years since the last time that it was wrong, so it would have been impossible for any government regulation to have prevented people from behaving as though it were correct. In fact, as applied, all extant regulations (e.g. the Community Reinvestment Act) were construed as requiring that the investment banks behave as though the conventional wisdom was correct.

neel · Post by **neel** » 22 Oct 2011 15:57

anishns wrote:Wonder if this was posted before???

NREGA funds used for buying SUVs: Jairam

Another scam on the horizon!!!

Jai ho! World's largest kleptocracy Jai ho!

At least this way there are actual capital goods that were produced with the funds, rather than some hole in the ground that was dug and then refilled.

Theo_Fidel · Post by **Theo_Fidel** » 22 Oct 2011 18:28

Neel,

That is an interesting perspective.

If so how did the investment arm of banks manage to bring down the commercial arms as well. How did they both go bankrupt, which is what happened when credit dried up. As far as I know both units still function under a single entity and use the capital from the commercial arm to wager on the market. Yes the deposits are insured but still...

The collapse was not just a simple sub-prime problem, the main problem was the opacity of the massive bets the banks had placed without any requirements in terms of reserves, disclosure, open trading, legal rules, etc. No one knew how much they had lost even at one point or even now.

neel · Post by **neel** » 24 Oct 2011 09:14

Theo_Fidel wrote:Neel,

That is an interesting perspective.

If so how did the investment arm of banks manage to bring down the commercial arms as well. How did they both go bankrupt, which is what happened when credit dried up. As far as I know both units still function under a single entity and use the capital from the commercial arm to wager on the market. Yes the deposits are insured but still...

The collapse was not just a simple sub-prime problem, the main problem was the opacity of the massive bets the banks had placed without any requirements in terms of reserves, disclosure, open trading, legal rules, etc. No one knew how much they had lost even at one point or even now.

What commercial arms went down? The commercial arms of distressed combined banks were sold to other commercial arms of combined banks or commercial only banks (e.g. WaMu's commercial operations were sold to Chase's commercial arm). Those businesses are completely intact and did not take massive losses in the way that the rest of the financial sector did. Anyway as much capital is used from the commercial arms, currently the commercial banking sector in the US is holding 4x the required reserves.

As to your second point, it was not the opacity but rather the sheer magnitude of the bets that everyone with any money invested in any non-traditional assets (e.g. pension funds investing in CDO and CDS instruments backed by unrealistically optimistic safety ratings), not just the banks, had made that caused the collapse. The prime loans only started to default when enough sub-primes had defaulted that people finally realized that the conventional wisdom that the demand for housing was limitless (or, equivalently, that the price always goes up) was false. Based on the conventional wisdom, billions of people made trillions of bad decisions (each of which was some variation of the provision or use of easy money) which in the aggregate were the bubble. Once the emperor was known to have no clothes, suddenly everything happened at once: people stopped wanting to buy or finance real estate (which crashed the prices, or burst the bubble if you prefer), everyone involved in making, selling, or financing/insuring real estate (including investment banks who were making and buying and pension funds, sovereign wealth funds, mutual funds, and hedge funds who were buying CDO/CDS instruments) sustained massive losses, which precipitated a liquidity crunch, which induced weak aggregate demand, which begot high unemployment, a combination of that unemployment and the crash in prices both caused governments to not take in as much in tax revenue (which, as a cyclic phenomenon, is an inexorable consequence of having a progressive tax system, since rich people tend to take large losses in bad years, and therefore have much less taxable income during downturns than they do during upturns) and caused the prime mortgage crisis which exacerbated the existing sub-prime crisis, while the government bailouts of the massive losses sustained by politically well connected institutions combined with the insufficient tax revenues resulted in the collapse of Iceland, the slow motion default of Greece, the need to bailout Ireland and Portugal, and the widening sovereign credit spreads between Germany and the rest of Western Europe (viz. Spain, UK, Belgium, Italy, and France), as well as the foreboding sense that the Eurozone may not survive intact and the downgrade in the rating of US treasuries.

abhischekcc · Post by **abhischekcc** » 24 Oct 2011 15:53

neel wrote:Do you even know what the Glass-Steagall Act did? It made investment banks and commercial banks separate legal entities. It had no impact on the actual operations of the investment banks. In fact the investment banks without any commercial operations were a major segment of the sector before the crash, and anyway the commercial parts of combined banks are fully insured (i.e. there is now something called deposit insurance, which obviated the need for the wall between commercial and investment banking), so there is no risk of contagion there. There was less contagion from the 1998 LTC debacle because the size of the first order effect was much smaller and the system was less interconnected and leveraged.

You answered your own question

Hari Seldon · Post by **Hari Seldon** » 24 Oct 2011 18:49

Mai-baap sarkar has lined up the perfect diwali-dhanteras gift for its overjoyed countrymen - RBI set to announce yet anopther 25 bps rate hike it seems. Jai ho indeed. My 2 year fixed portion home loan will end soon and the delicious floating rate will take over after that....yay etc.

gakakkad · Post by **gakakkad** » 24 Oct 2011 19:05

thanks to the NAC donkies , a perfectly functional growing economy was massacred...and the explanation given for slow down or inflation ? Equally ludicrous... "global meltdown" "bailout of greece" bla bla bla...
some how the wall street mess has some thing to do with price of onions in bhatinda .... kudos CON party ...you did it...and if the geniuses pass the food security bill which intends to waste 100 billion dollars on pds a year....than bravo...India will acheive what zimbawe achieved long time back....worlds poorest trillionaire's ...way to go...

http://indiaright.org/storyd.asp?id=590

http://www.jamiajournal.com/2011/03/03/ ... he-making/

Singha · Post by **Singha** » 24 Oct 2011 20:24

I am sure they will find a way to grant free home and car loans to 'oppressed religious minorities' soon and any bank officer rejecting a loan to a 'minority' will be prosecuted under the new communal violence bill.

Theo_Fidel · Post by **Theo_Fidel** » 24 Oct 2011 21:38

Neel,

That is a neat write up.

The scale of the problem was a major issue. But how was this scale hidden till the very end. Why did no one understand just how clueless the banks were. To the very end no one understood just how much cash was involved. People could buy CDO/CDS instruments and not have to transparently reveal that transaction to anyone. Off the books essentially. A major flaw that has still not been addressed. I'm curious to hear you thoughts on that.

Europe is a whole different beast.

Prem · Post by **Prem** » 25 Oct 2011 01:02

Singha wrote:I am sure they will find a way to grant free home and car loans to 'oppressed religious minorities' soon and any bank officer rejecting a loan to a 'minority' will be prosecuted under the new communal violence bill.

Might as well add free Servant from majority community for every minority home and call it some kind fo Nehru, Gandhi or Secular Rojgar programme. Where is the economist in MMS ?

abhischekcc · Post by **abhischekcc** » 25 Oct 2011 01:24

The economist in MMS is being economical with the truth.

Prem · Post by **Prem** » 25 Oct 2011 06:28

http://www.treehugger.com/files/2011/10 ... mpaign=th_

India's making some good progress in wind power: According the HSBC Global Research (via Business Standard), India is on track to install 2,984 MW of new wind power in 2011 -- an increase of 39% over last year's installations.Currently, based on figures from the end of August, India has just about 15,000 MW of wind power installed.According to the World Wind Energy Association, based on data going to June 2011, India was in the number-five position for installed wind power capacity. China led the world (52.8 GW), with the US in second place (42.3 GW), Germany in third (27.9 GW), and Spain in fourth (21.2 GW).
HSBC Global Research forecasts that strong, if a bit slower, growth will continue in India's wind power market in the coming years -- 2400 MW in 2012, increasing to 2700 MW in 2015.As for the reason for this growth, the report notes, "the key drivers for growth are primarily a strong policy framework and improving cost competitiveness of wind technology compared to conventional generation

chetak · Post by **chetak** » 25 Oct 2011 06:57

Prem wrote: Where is the economist in MMS ?

It died with PVN.

abhishek_sharma · Post by **abhishek_sharma** » 25 Oct 2011 07:09

Azim Premji Interview(Video)

Pratyush · Post by **Pratyush** » 25 Oct 2011 09:35

And the waters just keep getting muddied.

Reliance, Essar may hold key to Bahamas “export miracle”

Pratyush · Post by **Pratyush** » 25 Oct 2011 09:37

India losing game to China in private equity space

Pratyush · Post by **Pratyush** » 25 Oct 2011 09:43

Rahul-flation won’t be killed without double-dose rate hike

The punch line is

One reason is the need to maintain the credibility of past actions when inflation is near double-digits. The other reason is to send a strong message to policy-makers that fiscal policy is a mess — and till this is corrected, monetary policy cannot ease.

In fact, Bhalla calls the Congress efforts to boost food inflation through an overdose of procurement pricing “criminal”. Easing interest rates before inflation is down is like rewarding this economic criminality.

In the past, this writer has argued that the main cause of inflation is the Congress’s primary political goal of getting Congress re-elected and bringing in Rahul as PM through economically dangerous giveaways. We have called the resultant inflation Rahul-flation.

The RBI should not reward Rahul-flation by pausing its rate hikes. It should opt for a 0.5 basis points hike tomorrow. Bad politics has to be killed with good economics and hawkish monetary action.

Am not an economist but the authors prescription in the absence of a strong industrial policy geared towards job creation seems imprudent.

Pratyush · Post by **Pratyush** » 25 Oct 2011 09:49

Widening fiscal deficit triggers India downgrade fears

Will a downgrade result in costly borrowings for the Pvt Indian firms. Or will the effect be limited to the Govt borrowings only.

Pratyush · Post by **Pratyush** » 25 Oct 2011 09:59

India to attract $80 billion FDI over 12-24 months, says a Morgan Stanley survey

svinayak · Post by **svinayak** » 25 Oct 2011 10:24

This is part of the $10T money coming back to India.

Pratyush · Post by **Pratyush** » 25 Oct 2011 11:33

^^^

That may be, the question that I have is, where will it be invested. As the nation needs strong job growth. Will the "FDI", be used to generate growth. Or will they just invest in the stock market and skim the profits.

abhischekcc · Post by **abhischekcc** » 25 Oct 2011 12:34

I don't think Indian stock markets can absorb $10t. It has to be invested in the economically productive industries.

Pratyush · Post by **Pratyush** » 25 Oct 2011 12:38

Subbarao blinks in growth vs inflation debate with finmin

Pratyush · Post by **Pratyush** » 25 Oct 2011 12:39

Hot new worry: Stagflation, not just inflation

Aditya_V · Post by **Aditya_V** » 25 Oct 2011 14:46

abhischekcc wrote:I don't think Indian stock markets can absorb $10t. It has to be invested in the economically productive industries.

I think $10t is an exageration. And do you think the countries where is money is stashed will support this kind of money being taken out. no way.

gakakkad · Post by **gakakkad** » 25 Oct 2011 16:53

http://www.livemint.com/2011/10/2413335 ... ctive.html

I agree with the reserve banks decision to increase the rates… As explained in the first post analysis the gov’t is loathe to further rate increases…the reason is that it increases the cost of gov’t borrowing money..so it can no longer borrow money for the flag ship schemes like food security…when gov’t is spending the money so unwisely it is a good thing for the RBI to let them know that such reckless expenditure will have it’s consequences…IMHO RBI is well aware of the fact that rate hike won’t cure demand side inflation..and RBI does not intend to do that… it wants to punish the government for following an imprudent fiscal policy… post 1991 congress never attained a majority..it has been out of power for 8-9 years in the last 2 decades.. many older congress goonda’s must be cherishing the pre-91 day’s when people unquestionably voted for them..imho nac was a deliberate move to go back to the socialist raj.back to the good ol’ days when congi’s won unquestionably..people aspired to become IAS afsar’s and getting sarkari naukri was the considered to be a pinnacle of achievement .. came 91 and electorate tasted capitalism.. and became spoilt..became aspirational..wanted more out of life..No talented student wants to become the IAS anymore…they want MNC’s ,high street fashion and led tv’s..and those who have tasted capitalism don’t vote for congress any longer..the thing is that too many people have tasted a better life…and many other’s aspire the same…so if they attempt reverting back to the old policies it ll have consequences..And RBI making borrowing tougher for the Gov’t is one such consequence … though surely they do sympathize with home owners with pending payments…there action is for the greater good...

When "intellectuals " lament that "reforms" only helped the middil class they mean that reforms created a powerful votebank that would not tolerate congress nonsense...thats why they want the commie mess back again..

gakakkad · Post by **gakakkad** » 25 Oct 2011 17:00

what indic's should be hoping and praying for is another monetary crisis...something bigger and "better" than 1991...because only a crisis can save India now...only a crisis can prevent reckless spending and force further reforms...reforms happened in 91 because gov't was forced to do so...not out of some altruism....

Theo_Fidel · Post by **Theo_Fidel** » 25 Oct 2011 20:49

Cross posted from manufacturing thread. Some relaxation of labor laws on table. Good start.

http://www.reuters.com/article/2011/10/ ... IF20111025

Sharma said the new policy sought to create 100 million new jobs within a decade. In the same period, the government aims to lift manufacturing's share in gross domestic product to 25 from about 16 percent now, the level at which it has stagnated for more than 30 years.

The plan to slash regulation in at least seven special zones in the notoriously bureaucratic country has been in the works since last year but was held up by objections from the labor ministry, under fire from unions. Dipanker Mukherjee, general secretary of the Center of Indian Trade Unions, said the new policy was created without consulting workers and would be opposed "lock, stock and barrel" if it did not protect workers' rights. But Confederation of Indian Industry said the new policy will "revolutionize" the manufacturing sector in the country and will help India head off a global economic slowdown. "The announcement of the policy at this critical time would generate momentum, resulting in long term positive impact on growth aspirations," the industry lobby group's chief Chandrajit Banerjee said in a statement.

The zones will be developed by the federal and state governments along with the private sector to provide infrastructure such as ports and airports as well as freeing up labor rules -- including easing regulations on wage payouts if a company closes.

Suraj · Post by **Suraj** » 25 Oct 2011 23:01

Pratyush wrote:^^^
That may be, the question that I have is, where will it be invested. As the nation needs strong job growth. Will the "FDI", be used to generate growth. Or will they just invest in the stock market and skim the profits.

FDI != FII

Prem · Post by **Prem** » 26 Oct 2011 01:54

A $13 Billion Fast Food Revolution Is Taking Over India
http://www.businessinsider.com/a-13-bil ... ia-2011-10

NEW DELHI, India — At the DLF Place mall in the upscale South Delhi neighborhood of Saket, shoppers and employees sit more or less side-by-side in a new “desi” food court, digging into traditional Indian dishes ranging from biryani to dosas to seekh kebabs.There's something for everybody — at many tables three generations are sitting down together. But that's not the reason these traditional upstarts have succeeded in storming what was once the bastion of western brands like McDonald's and Pizza Hut.Some of the city's most famous restaurants are represented here — some of them a century old — transformed by smart uniforms, cheery signage and shining show kitchens to look every bit as clean, efficient and modern as their multinational competitors. Welcome to the future of Indian fast food.According to Euromonitor and market-research firm RNCOS, India's $13 billion fast-food market is already growing 25-30 percent a year, and global players like Domino's, McDonald's and Yum Brands (KFC and Pizza Hut) are pushing into second- and third-tier cities.
Hardcastle Restaurants, development licensee for McDonald's in India, is planning a massive expansion, doubling its India stores over the next three years with an investment of $100 million. Meanwhile, Yum Brands plans to open 1,000 outlets — half of them KFC restaurants — on its way to $1 billion in revenue from India over the next four years.

gakakkad · Post by **gakakkad** » 26 Oct 2011 08:25

x-post from jan lok pal bill dhaga

abhishek_sharma wrote:The Leadership Secrets of Bismarck

Over the last two decades, a distinctive regime type has emerged across the developing world, one that scholars have come to call competitive authoritarianism. This sort of political system allows for the contestation of power among different social groups, but with so many violations of electoral fairness and so little regard for liberal norms that it cannot be called a true democracy. From Russia to Peru, Cambodia to Cameroon, such regimes are now located in almost every region of the world, and how they develop will determine the shape of the twenty-first century.

One of the best ways to gain insight into the future paths of these political systems, ironically, is to look backward rather than forward, because the past can be prologue. Wilhelmine Germany is a particularly interesting point of comparison, because it had many similar characteristics. Like many of these regimes, it, too, experienced late, rapid growth and social transformation. It, too, developed a competitive form of politics that fell short of full-blown democracy. And potentially like some of today's emerging powers, Germany had a domestic political crisis that was capable of shaking the world.

The larger-than-life figure who presided over Germany's rise was Otto von Bismarck, foreign minister and minister-president of Prussia during the 1860s, architect of German unification in 1871, and chancellor of a unified German empire from 1871 to 1890. Given Bismarck's role in German history, a vast amount has already been written about him, so one might question what more there is to say. However, in Bismarck: A Life, Jonathan Steinberg, a respected historian with a long career at Cambridge University and the University of Pennsylvania, has produced a first-rate biography that combines a standard historical narrative with an intriguing account of Bismarck as a personality.

Incorporating reflections from the man himself, as well as from his friends, enemies, and coworkers, Bismarck offers a fresh and compelling portrait of a fascinating character. Steinberg shows how the German political climate Bismarck fostered -- marked by deference to authoritarianism, an aversion to compromise, and reactionary antimodernism -- contributed to the country's disastrous course in the decades after Bismarck's fall from power. And in doing so, he indirectly sheds light on the prospects of competitive authoritarian regimes in the contemporary era. The thing to keep an eye on, it turns out, is less the character of the classes rising from below than the willingness of elites at the top to loosen their grip on power.

BISMARCK'S POLITICAL GENIUS

Bismarck was born in 1815 to that stratum of Prussian nobility, the Junkers, that combined hardscrabble farming in the rye belt east of the Elbe River with an ethic of disciplined and often militarized service to the Hohenzollerns, Prussia's ruling family. He was educated, witty, and highly intelligent (although not an intellectual). Like many Junkers, his politics were reactionary; he was antidemocratic, antisocialist, anti-Catholic, and anti-Semitic.

Bismarck first rose to prominence during the revolutions of 1848, when nationalist and democratic uprisings challenged Europe's political status quo. As a new member of the Prussian legislature, he forcefully defended the monarchy's desire for unfettered executive power. Thanks in part to his maneuvering then and later, the dynasty survived the tumult and went on to rule for seven more decades -- a period during which Prussia unified Germany around it and blossomed into an industrial and military powerhouse.

Germany's economic development was relatively late by European standards. Social scientists such as Alexander Gerschenkron and Barrington Moore have noted that its embrace of capitalist modernity and rise to power were predicated on a new pattern of authoritarian development -- in Moore's words, a "revolution from above." This meant using industrial policy to push development in those sectors that enhanced state power and simultaneously suppressing or co-opting all political opposition. In order to catch up with the more advanced economies of the West, the government protected heavy industries essential to the nation's military strength, as well as Junker agriculture, with tariffs.

The transformation of a largely agrarian and rural society into an industrial and urban one always involves major changes in social structure. Social change, in turn, almost inevitably leads to the rise of new political actors demanding a voice and a share of power. Although Steinberg does not dwell on the larger socioeconomic or theoretical picture, he does a good job of presenting the specifics of how this story played out in the German case. The success of the German economy led to the expansion of three groups: the bourgeoisie, the middle class, and the working class. These groups challenged Junker dominance through the Catholic Center Party, various liberal parties, and the Social Democratic Party. Ultimately, following Germany's defeat in World War I, these parties would abolish the empire and declare a republic. But Bismarck, by playing these forces off one another and selectively granting policy concessions, managed to keep them at bay for decades.

Nondemocratic regimes that try to manage their publics by simulating democracy have to walk a fine line. Establishing a veneer of democratic institutions, such as elections, can allow traditional or dictatorial rulers to incorporate rising groups into the political process without fully empowering them, thus stabilizing an existing regime and giving it some popular legitimacy. If elections are too obviously a sham and legislatures too obviously impotent, however, their hollowness can spur demands for progress toward real democracy, increasing rather than decreasing the regime's political problems.

The imperial German political system grappled continuously with this tension. It featured a monarch, the kaiser, who appointed the chancellor, the head of government. But it also featured a bicameral parliament, with the powerful lower house, the Reichstag, elected competitively through universal male suffrage. It was here that new social forces in Germany could give voice to their concerns. During his two decades as chancellor, Bismarck reported directly to the sovereign rather than the public at large, but he needed the consent of a majority in the Reichstag in order to pass budgets and other legislation.

The politics that played out in the Reichstag were real. The monarchy could not count on automatic support for all of its policies. It lost battles from time to time, and it was forced to compromise with legislative factions. Despite these constraints, Bismarck outmatched all his competitors in domestic politics, as in foreign policy, by practicing a style of politics similar to that used in competitive authoritarian regimes today.

SUPPRESSION AND CO-OPTATION

Bismarck's strategy was to weaken his opponents through authoritarian suppression while building temporary political coalitions in order to enact his preferred legislation. The skillful execution of this strategy allowed him to keep control over the legislative agenda for 20 years, despite his lack of a natural parliamentary majority and the growing power of the middle and working classes.

His favorite move was to divide and conquer, turning his ire on the Catholics, the liberals, and the Social Democrats in turn. The first of these maneuvers, the Kulturkampf of the 1870s, was directed against the third of the Prussian population that was Catholic. Bismarck saw Catholics and the clergy as potential fifth columnists who could be manipulated by Catholic Austria (which he had kept out of the empire) and the Vatican. He was able to put strong anticlerical measures in place by securing the support of conservatives and liberals. This worked for a while, but in the long run, the Center Party's strength continued to grow, and many of its leaders came to believe that constitutional democracy would protect their interests better than the monarchy.

The Kulturkampf was followed by the Anti-Socialist Laws. After two failed assassination attempts on the kaiser in 1878, Bismarck was able to convince both conservatives and liberals to pass restrictions on the rapidly growing socialist movement, denying socialists the right to publish or assemble. Even as he pressured the working class' formal political representatives, however, Bismarck tried to gain the support of workers themselves by sponsoring an array of pioneering social welfare legislation -- health insurance (1883), accident insurance (1884), and retirement pensions (1889). He was among the first to understand, in other words, that authoritarian regimes can legitimize themselves by lifting their citizens out of poverty and providing some security against economic uncertainty. Here, too, the strategy worked in the short run but failed over time, as the Social Democrats continued to grow, becoming Germany's largest political party in 1912. In 1890, following Bismarck's dismissal, the Reichstag allowed the Anti-Socialist Laws to lapse.

As for the liberals, Bismarck repeatedly sought their help for his moves against the Catholics and workers, but his larger relationship with them blew hot and cold, particularly on the issue of free trade (which they supported and he did not). And toward the end of his term, he turned against them, too, using rising anti-Semitism as a weapon. Like many Junkers and conservatives, Bismarck rejected modernity and capitalism as a Jewish plot to gain power and upset the natural order of society. Over the course of the third quarter of the century, this sort of anti-Semitism gathered steam in Germany. Bismarck did not drive the movement, but he was happy to profit from it, permitting attacks on prominent Jewish liberals as a way of weakening and cowing liberalism as a political force.

Bismarck's success in domestic political combat enabled him to remain in control of the Reich and enact the foreign and industrial policies that ensured Germany's status as a great power. His example seemed to show that illiberal politics could achieve results that matched or exceeded the results of liberal political institutions elsewhere in the West -- and his contemporaries took note, making "revolution from above" an attractive option for other autocrats, not unlike the so-called China model today.

IS COMPETITIVE AUTHORITARIANISM SUSTAINABLE?

Many ambitious politicians in developing countries today, such as Vladimir Putin in Russia and Hugo Chávez in Venezuela, have adopted some aspects of democratic political systems, allowing parties, elections, constitutions, and the like, while harassing their opponents and finding ways to keep power in their own hands. This might well end up being the outcome of the political turmoil in many of the countries that experienced the Arab Spring, such as Tunisia, Egypt, and Libya. And even some democracies have slid backward in their practices, with leaders such as Viktor Orbán in Hungary and Recep Tayyip Erdogan in Turkey using their power to throw unfair obstacles in the way of their political rivals. Some relatively stable authoritarian regimes, meanwhile, such as China, Malaysia, Singapore, and Vietnam, owe their success in part to their ability to enhance the welfare of their populations. Whether they realize it or not, all these regimes are following in Bismarck's footsteps.

Lifting populations out of poverty is clearly a good thing. In the second half of the nineteenth century, as Germany became an economic and military powerhouse, the country's standard of living rose appreciably, and it became a world leader in science, the arts, technology, and education. But in creating a powerful and authoritarian state to attain his goals, Bismarck retarded the political development of the society around it. Through his continuous and contemptuous manipulation of parliament, suppression of dynamic new political forces, and intolerance of all independent sources of intelligence and authority, he denied Germany exactly what it needed to govern itself successfully over the long term: a well-developed parliamentary tradition and robust political parties capable of providing effective leadership. The sociologist Max Weber's classic analysis of Germany's limited democratic prospects at the end of the empire, which Steinberg appropriately highlights and appreciates, should be sobering reading for fans of competitive authoritarians in the developing world today.

To be sure, there are also some grounds for optimism. In her important study Practicing Democracy, the historian Margaret Anderson offers a significantly less gloomy interpretation of imperial Germany's ultimate political trajectory. She paints a picture of a country in which 40 years of competitive politics produced a thriving civil society, a well-established party system, and a vibrant public sphere. Anderson argues that Germany may well have evolved naturally in the direction of real democracy were it not for World War I and the Carthaginian peace that followed. And other scholars have made similar points about less than fully democratic political development in mid-nineteenth-century France and contemporary Africa and other cases with similar features.

The crux of this debate is whether competitive authoritarianism can serve as a useful halfway house toward a better political future -- whether institutions that offer some form of open contestation, even if seriously flawed, inculcate good habits that eventually facilitate the emergence of liberal democracy or whether they constitute a detour away from it.

Here, too, the German case has lessons to teach, if one extends the discussion from Bismarck's era to the decades that followed, and particularly to World War I itself. Anderson, for example, may be correct that Germany was on a path to evolve in a democratic direction in the early decades of the twentieth century. But many would argue that it was precisely in order to head off such an outcome that conservative German elites were prepared to act so aggressively during the run-up to war and accept the terrible risks of an expansionist foreign policy. Bismarck's wars of German unification had helped stymie the reformist impulses of the liberals, after all, so it was not crazy to think that a new round of expansionism might cause the opposing parties to fall into line this time around -- which, in fact, they did for the first three years of the war, until the full economic brunt of failure began to be felt.

Competitive authoritarian political systems, like imperial Germany's hybrid of monarchy and parliamentary rule, might contain the seeds of future democracies. However, for this to occur, the elites that benefit from competitive authoritarianism need to be willing to let the electoral process play out to its conclusion. They have to accept a loss of control over the outcome of elections, the need to compete fairly with newly empowered political forces, and the prospect of ultimately sharing or even losing power. The willingness of local elites to cope with the uncertainty of fully competitive politics will thus be the ultimate factor in determining whether competitive authoritarianism proves a way station in democratic development or a safe house for autocrats.

See how INC doesnt want to allow reforms or loss of control. Its going to lead to bad outcomes for India.

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cross posted from manufacturing thread. Some relaxation of labor laws on table. Good start.

the trade unions will 400 % oppose the move...the best we can hope for is a single window clearance system for new businesses and simplification of environmental clearance ,,maybe some simplification in indirect taxes...the result will be accelerated investment in already growth susceptible areas like guj , haryana etc...the problem areas will remain so..the acceleration in some regions will cause massive migration creating major socio-economic problems ...if the maoist problem is not solved they can and will create more trouble...the trade-union jihadis might join hands with tem..even though that can be prevented easily , its not beneficial for some political parties to do so...we can expect a turbulent decade...congis don't mind turbulence ...they thrive on it...

Prem · Post by **Prem** » 27 Oct 2011 01:14

India clears policy to build new industrial zoneshttp://economictimes.indiatimes.com/new ... 488074.cms

NEW DELHI: India passed a flagship policy on Tuesday to encourage manufacturing by streamlining labour and environmental rules in industrial parks, a move it says is key to create jobs and keep Asia's third-largest economy on a fast-growth track. Business leaders welcomed the news, which will be a boost for Prime Minister Manmohan Singh, whose second-term agenda of big-ticket economic reforms has been knocked off course by corruption scandals and a lack of clear leadership. With an eye to its emerging market rival China, India is desperate to ramp up goods exports and revamp a manufacturing sector that has struggled to be competitive since before economic liberalisation in 1991. "China has done it, Germany has done it, now India has decided to do it," Trade Minister Anand Sharma told reporters after unveiling the policy to build at least seven new industrial parks. India's economic boom has seen average economic growth of over 8 percent annually in recent years but job creation has been very low -- worrying for a country which needs to absorb about 20 million new workers each year. Sharma said the new policy sought to create 100 million new jobs within a decade. In the same period, the government aims to lift manufacturing's share in gross domestic product to 25 from about 16 percent now, the level at which it has stagnated for more than 30 years.

Virupaksha · Post by **Virupaksha** » 27 Oct 2011 08:41

Url in telugu
archive url http://archives.eenadu.net/10-27-2011/S ... htm/story1
present url http://eenadu.net/Pannelsinner.aspx?qry=htm/story1

centre to have more control over state funds.
Before when centre used to give money for a particular project, the states had some level of flexibility to shift money to its requirements, manage money and then spend on centres project so as to give a utilization certificate.

Now the centre has with the help of banks developed a system to directly monitor the bank accounts at the tail end in small towns without the utilization certificates. - to be implemented in 2012-13 year.

So centre is taking more power into its hands.

Pratyush · Post by **Pratyush** » 27 Oct 2011 18:12

Far from dousing it, govt is fuelling further food inflation

Airavat · Post by **Airavat** » 28 Oct 2011 09:56

European deal boosts markets

The BSE-Sensex is trading higher by 521 points (3%) and the NSE-Nifty is up by around 155 points (3%). BSE Midcap and BSE Small cap stocks are trading in the green, with the BSE Mid Cap and BSE Small Cap indices up by 1.2% and 0.8% respectively. The rupee is trading at 48.87 to the US dollar.

Prem · Post by **Prem** » 28 Oct 2011 22:44

F-1 Brings $650 Million Race to Delhi Amid Struggles in Asia
http://www.businessweek.com/news/2011-1 ... -asia.html

Oct. 28 (Bloomberg) -- Formula One arrives in India this weekend with a $650 million bet that it will gain a foothold in the second-most populous nation even as races in China and Korea struggle to lure spectators to the world’s richest motorsport.Organizers from Shanghai to Seoul have suffered financial losses in the last two years hosting races with half-empty venues, according to media reports. As India prepares to hold its debut F-1 race near New Delhi, only 70 percent of tickets have sold, event backer Jaypee Infratech Ltd. said last week.“It will be tough for them not to follow China and Korea into losses,” according to Harish Samtani, a three-time Indian racing champion, who says that hosting an F-1 race is part of a project by Jaypee, a Noida, Uttar Pradesh-based construction company, to attract real estate investment into the area. “On its own, this is one of the world’s worst business models ever, a non-starter in India.”This weekend’s racing is the climax of two decades of failed efforts to bring the sport to the subcontinent. The event is being funded without any government backing, unusual for a debut Grand Prix. Jaypee, controlled by billionaire founder Jaiprakash Gaur, spent $450 million to build a track and $200 million in royalties over five years. The company has priced tickets at an average $200 in a nation where the World Bank estimates 800 million people live on less than $2 a day.During today’s practice racing was temporarily halted after a stray dog ran across the track. McLaren’s Lewis Hamilton set the fastest time during the session, followed by drivers’ champion Sebastian Vettel and his Red Bull teammate Mark Webber.
Chasing Cricket
Formula One is counting on growth in Asia and the Middle East after France was dropped from the schedule because it couldn’t meet the costs and Italy and Germany lost one of their two annual races. India’s expanding middle classes are ripe for new forms of entertainment such as F-1, according to the sport’s chief executive officer Bernie Ecclestone.“India is one of the top five most important countries in the world today, so for us, it’s extremely important to be here,” Ecclestone told reporters in August. “I know we will never catch cricket in India, but I hope we will get close.” Ecclestone could not be reached for comment with three calls from Bloomberg News to his cell phone going unanswered.This weekend’s organizers say the 12.5 million Indians who watched the Formula One championship on television in 2010 will be the foundation for the competition’s success. Yet watching drivers’ race $1 million cars remains a niche pastime in the nation of 1.2 billion people.‘Flying Cars?’“Is this the race with the flying cars?” said Sanjay Kumar Gupta, a 28-year-old taxi driver, who said he isn’t interested in the event. “When we think of sports, Indians don’t include cars

SBajwa · Post by **SBajwa** » 28 Oct 2011 23:25

I never understood the car racing. To me it is a sports like fishing

Rishirishi · Post by **Rishirishi** » 29 Oct 2011 00:50

In stead of spending half a billion dollars on the racetrack, what about spending money on a football federation and started a league.

Prasad · Post by **Prasad** » 29 Oct 2011 01:01

If its private money, what goes my father? As long as tax moneys aren't used, it will live or die by the sword of public appeal/interest.