Indian Economy - News & Discussion 27 May 2012

Arjun · Post by **Arjun** » 02 Feb 2013 10:26

Suraj wrote:I see more progress coming from a bunch of capable state administrations supported by a benign but not particularly heavyweight center, as opposed to a heavyweight center run by a people's hero, but a bunch of benign states. Of course the dream situation would be a capable center plus a set of capable state administrations, but under the present situation, where we have just a handful of well administered states, I consider that in the realm of fantasy...

The current central government really needs to go, but that's a different matter. They've demonstrated themselves to be the biggest disappointment of any central government in the history of the country, taking the second largest mandate in a quarter of a century and throwing it down the drain. I don't care if they elevate Sonia's pet cat to PM's role, but the way they've wasted the enormous political capital they had in 2009 is unpardonable.

Suraj, agree with you that India probably requires more federalism & decentralization as opposed to less...

I see though, that in your first para above - you've contrasted only two scenarios: (a) capable state administrations supported by benign center, and (b) heavyweight center run by people's hero. And you conclude that (a) is better than (b). Unfortunately, India today suffers from a third scenario, which is (c) heavyweight center run by socialist, anti-growth jerks. (a) might be better than (b), but (b) is clearly better than (c).

What does makes sense now is for an NDA government led by Modi, who is in any case a strong proponent of decentralization - to steer the ship from Scenario (c) to (b), possibly implement policy measures to increase decentralization with the goal of veering towards (a) in the long-term.

manish · Post by **manish** » 02 Feb 2013 10:28

hnair wrote:EPA boss is usually a political appointee. The current one is one such, though the previous one was a career one, due to Bush jr's image issues after the horse-breeding gent's Katrina fiasco

AFAIK, the current frizzy haired dude in India has been even (heavy) handed against all state govts, including his own party's, when it comes to env clearances. He approves some, tosses out some.

(My take on the torpedoing in desh - comes more from security and FDI type clearances than env. Case in point are the Adani guys, who get consistently targeted for Sec clearance during port bids (gravpevinve: some alleged affinity to Gujarat's current administration). Of course they have a certain ripe reputation for sharp practices, but then so does the gigantic textile-bhai firm and even the MoD guys/Navy usually have no issues with the Adanis. My personal conclusion is that Grand Chetty R was getting personal there for some reason. Waiting to see how the current incumbent deals with them.)

hnair saar, ref Adani, there are whispers that the real problem is an alleged link to Middle Eastern origin investment vehicles which again, allegedly have ties to a certain gent residing in Kraachi. Colourful stories about a long forgotten kidnapping from the 1990s leading upto these ties which survive to this day...all allegedly of course!

Please take this all with a bucket of salt - although I myself used to attribute the motive behind the rejections as the openly cozy ties between Adani and the ruling dispensation in Gujarat, I have heard this ME-links story from paanwaalas who operate within the same industry circles as Adani does. So take it FWIW.

member_20292 · Post by **member_20292** » 02 Feb 2013 10:56

Theo_Fidel wrote:BTW, POSCO has environmental clearance. Its problem has to do with land acquisition and the militant nature of the locals.

Saar have you interacted with the people of Orissa? In my experience they are some of the most easy going people around.

And actually, in that, lies the problem.

They are generally happy with harvesting betel leaves and farming in that land. Not for them western style consumerism. I go as far as to argue that since only large and tier 2 cities in India are exposed to anything like western style consumerism....then it becomes very tough for them to even have any desire for the money and the employment.

To give you another example; if you are earning 200 K USD, there will be less desire for you to earn 20 million USD per year.

A CEO could come down and tell you..."work harder, you will become CEO and get 20 million USD". But you might have other plans and priorities; helping your kids pass IIT JEE/SAT and then go on to do better things in life. Thus the desire might be less.

Hari Seldon · Post by **Hari Seldon** » 02 Feb 2013 13:02

^^ Environmental clearances apart, dismantling the APMC is again a center thing and not on the states list. End of the day, there are things only the center can do in the economic realm. A man of the states ('states-man'!) is needed at the helm for a limited time only to dismantle some of the more onerous economic provisions the center misuses against the states, IMVHO. Cutting GOI discretionary power by having independent statutory bodies and boards is an excellent example. I simply don't see the UPA variants do anything positive in this regard.

Singha · Post by **Singha** » 02 Feb 2013 17:08

a vast number of commissions, boards, tribunals and appellate type bodies are also part of the octupus that is the delhi sultanate. their office bearers and chamchas are usually party loyalists who could not be given ministries or higher title but kept in lutyens delhi all the same as a kind of queens household and hunting staff. most of them have no purpose in existence other than to obstruct and function as a means to provide money and comfort to this staff of domestics of the queens/sultans household.

they must be dismantled too.

it will take a long time , but a decent goal is the degree of economic freedom the americans enjoy at state govt level. nobody there is bothered a rats ass about the central annual budget or that other joke the "rail budget"

Supratik · Post by **Supratik** » 02 Feb 2013 18:03

Theo are you sure POSCO got the clearance from center? Last, I remember under Sibal, an extra-constitutional body had blocked it and then Jayanti was sitting on it. Since Gujrat is No. 1 in business freedom Modi should know how to make things easier i.e. if he ever comes to power. From Orissa to Gujrat there is great scope for Port-based export-led industrialization. Unfortunately, except Gujrat others have been slow or like TN stagnated.

subhamoy.das · Post by **subhamoy.das** » 02 Feb 2013 18:41

http://economictimes.indiatimes.com/tec ... 263621.cms

While old economy factories have started to move back home the new age knowledge factories continue to move to INDIA.

IT firms like TCS, Infosys & Wipro losing work as MNCs' captive centres are back into fashion....

subhamoy.das · Post by **subhamoy.das** » 02 Feb 2013 18:51

INDIA never had the land, physical infrastructure and supply chain to do the scale of manufacturing as CHINA did. I remember a cover page in TIME which said "The land (less) of opportunity" or some thing similar. INDIA cannot grow HORIZONTALLY ( manufacturing factories are build 100s of acres wide ). INDIA has to grow VERTICALLY ( service offices are build 10s of stories high )......

Theo_Fidel · Post by **Theo_Fidel** » 02 Feb 2013 21:47

Yes! POSCO has environmental clearance from center. I posted it on this very board the day after it was granted sometime in 2011 IIRC. There is some argument about what all it covered however. The port function in particular came under fire I think. But the plant itself is cleared.

Most of the problem with the 'locals' has come from 2 villages. The vast majority were happy to sell out and take the jobs offered. We would go along with the easy go attitude of the local land owners if the opportunity cost to the nation is was not so heavy. The betel farmers produce at best $1-2 million in income and jobs annually. POSCO will produce $2-3 Billion in income and jobs annually. It is a tough thing to do and I have to say that as a nation we agonize over it but if we want any sort of prosperity and jobs for those lads graduating from IIT then these painful decisions have to be made. We must grow wealthier as a nation, this business of folks sitting around and shooting the breeze has to end. I do feel a twinge over the quality of life questions but only for a moment. Rural India is horrible in the choices it is forced to make due to poverty.

This is why I said early that for electronics manufacturing supply chains to come to India will require one of our states to sacrifice a huge chunk of land, say about 100,000 acres at minimum to create a proper electronics manufacturing super cluster. For instance between Oragadam, Sriperumbudur and Chembrambakkam the Chennai area has sacrificed somewhere between 15,000-20,000 acres of land for car manufacturing and ancilliaries. Driven out 100,000 or so farmers+families in the process. Something similar has happened in and around Bangalore with 100,000's of farming families dispossessed for the IT types.

So which state is going to step up. Andhra types I'm looking at you.

svinayak · Post by **svinayak** » 02 Feb 2013 21:50

subhamoy.das wrote:INDIA never had the land, physical infrastructure and supply chain to do the scale of manufacturing as CHINA did. I remember a cover page in TIME which said "The land (less) of opportunity" or some thing similar. INDIA cannot grow HORIZONTALLY ( manufacturing factories are build 100s of acres wide ). INDIA has to grow VERTICALLY ( service offices are build 10s of stories high )......

This is not factually correct

subhamoy.das · Post by **subhamoy.das** » 02 Feb 2013 22:06

Which one u think is factually not correct - available land, available supply chain or available infrastructure?

subhamoy.das · Post by **subhamoy.das** » 02 Feb 2013 22:21

Some of u have suggested that contract manufacturing has generated wealth of 2T USD reserve for CHINA.

Look here : http://en.wikipedia.org/wiki/List_of_co ... e_reserves

CHINA should have been the world's number 1 and INDIA number 9 wealthy country ahead of US and Europe. We all know that is not the case with CHINA at around 100 and INDIA around 120 on a PPP GDP per capita front.

gakakkad · Post by **gakakkad** » 02 Feb 2013 22:28

manish wrote:
hnair wrote:EPA boss is usually a political appointee. The current one is one such, though the previous one was a career one, due to Bush jr's image issues after the horse-breeding gent's Katrina fiasco

AFAIK, the current frizzy haired dude in India has been even (heavy) handed against all state govts, including his own party's, when it comes to env clearances. He approves some, tosses out some.

(My take on the torpedoing in desh - comes more from security and FDI type clearances than env. Case in point are the Adani guys, who get consistently targeted for Sec clearance during port bids (gravpevinve: some alleged affinity to Gujarat's current administration). Of course they have a certain ripe reputation for sharp practices, but then so does the gigantic textile-bhai firm and even the MoD guys/Navy usually have no issues with the Adanis. My personal conclusion is that Grand Chetty R was getting personal there for some reason. Waiting to see how the current incumbent deals with them.)
hnair saar, ref Adani, there are whispers that the real problem is an alleged link to Middle Eastern origin investment vehicles which again, allegedly have ties to a certain gent residing in Kraachi. Colourful stories about a long forgotten kidnapping from the 1990s leading upto these ties which survive to this day...all allegedly of course!

Please take this all with a bucket of salt - although I myself used to attribute the motive behind the rejections as the openly cozy ties between Adani and the ruling dispensation in Gujarat, I have heard this ME-links story from paanwaalas who operate within the same industry circles as Adani does. So take it FWIW.

gautam adani was actually kidnapped by fazl ur rehaman a dawood aide in 1997 and released on ransom of 15 crore INR.. really big money in those days...

Suraj · Post by **Suraj** » 02 Feb 2013 23:02

subhamoy.das wrote:Some of u have suggested that contract manufacturing has generated wealth of 2T USD reserve for CHINA.

Look here : http://en.wikipedia.org/wiki/List_of_co ... e_reserves

CHINA should have been the world's number 1 and INDIA number 9 wealthy country ahead of US and Europe. We all know that is not the case with CHINA at around 100 and INDIA around 120 on a PPP GDP per capita front.

Stop derailing this thread with wildly inconsistent trolling posts like these. The above is the definition of a strawman, where you make claims about what others allegedly said, despite no other reference to what you have literally stated above.

Lets look solely at foreign exchange reserves since that's what you begin with. Why is theirs what it is and ours what it is - where does the 10x gap come from ?

RamaY · Post by **RamaY** » 02 Feb 2013 23:22

Theoji

We need to include social, environmental costs to any project.

A friend of mine is an economic consultant to a couple of African nations. He scientifically proved that many of china's investments that appeared very profitable to the local economy are indeed resulted in net cost to those nations.

Will try to get some details so we can develop some models for our Indian investments.

That doesn't mean POSCO is a bad project without further study/understanding.

I like your comment about some states biting the bullet and sacrificing something's for the sake of nation. It may sound sarcastic but you yourself didn't like the idea of Kudankulam locals sacrificing for the sake of rest of TN and India for ~8000MW energy (70% of current TN capacity) in return for say a 15KM radius protected area, which is equivalent to a mid-size city.

Perhaps there are better ways of handling this. But that would mean proper education (not the reformed type but real education) and information decimation for Indians.

Some of my thoughts circa 2009 on this were posted here http://forums.bharat-rakshak.com/viewto ... 35#p789335

Supratik · Post by **Supratik** » 02 Feb 2013 23:43

I don't think it is the locals fault. If given a good compensation most will quit farming as it is a hard way to earn money and in many cases it is barely enough to satisfy their basic needs. Notice how NHAI has not faced huge difficulties in acquiring land. Thousands of hectares have been acquired by Mayawati near Yamuna expressway where new townships are going to come up. Thousands of acres have been acquired for eastern and western DFC. It is primarily caused by leftists looking for a fight, unscrupulous private and Govt. officials cheating land owners and opportunistic politicians. Even though there were excesses Singur and Nandigram in WB is a prime example where you have all three.

Theo_Fidel · Post by **Theo_Fidel** » 03 Feb 2013 03:40

The POSCO compensation was around 20 lakhs per acre for crop land. In addition each local, this is including the landless, will get Rs3,000 or so PM till they get a full time job. In addition the unskilled will get first crack at such jobs at the plant. This doesn't strike me as a particularly bad package. The folks in KKNPP were demanding exactly this type of package and were turned down. Still the problem like I said comes down to 2 villages who opposed the project from day 1. It doesn't help that the Odisha administration is quite weak and unable to enforce its writ in the area, mostly depending on voluntary compliance. Still I'm sure more could be done. The teeth of the opposition is coming from the most illiterate and destitute. This has been a recurring issue since Nadigram that the more destitute and absolutely dependent on land folks are the more vigorously they defend their property. So oddly enough the poorer states are having more trouble acquiring land than wealthier states like MH, GJ or TN. KA has had trouble with the Mittal plant.

Kakkaji · Post by **Kakkaji** » 03 Feb 2013 09:22

UPA flagship NREGS records sharp slide in job generation

NEW DELHI: While Sonia Gandhi and Manmohan Singh waxed eloquent on the "success" of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and called it a key instrument for "financial inclusion" at a government conference in New Delhi on Saturday, latest data reveal a picture of declining employment generation under the scheme. Even more startling: Jobs created for the most marginalized sections - dalits and adivasis - have suffered the biggest decline.

Between 2009-10 and 2011-12, the total work generated by this flagship scheme declined from Rs 284 crore persondays to Rs 211 crore persondays. That's a dip of about 25% over the first three years of UPA II. (One personday is one person working for a day). The data for the current year up to January-end suggests that there will be a further dip in 2012-13.

Some states that have shown major decline in MGNREGS jobs over this period are Karnataka (65% decline), Rajasthan (53%), Assam (52%), Gujarat (47%), Bihar (45%) and Madhya Pradesh (40%). In most of these states, jobs for dalits have declined by 70% or more.

Only a handful of states — Maharashtra, Tamil Nadu, Kerala, Haryana, Chhattisgarh and Jammu & Kashmir — have shown an increase in jobs created under the scheme. However, in Maharashtra, Tamil Nadu and Chhattisgarh this increase hides a bitter reality — work given to dalits actually declined while work given to "others", that is, upper caste poor, increased.

In the case of dalit households, work created under MGNREGS came down by a staggering 46% over the first three years of UPA II, from about 86crore to 47crore persondays. Adivasi households too seem to be getting increasingly excluded from this lifeline of employment as work given to them declined by 35%, from 59crore to 38crore persondays. This data is put out by the ministry of rural development.

Participation of women too is on the decline. Between 2009-10 and 2011-12, work done by women in the scheme declined by 25%, from 136crore persondays down to 102crore persondays.

The latest data for the current year shows that a total of Rs 146 crore persondays of work under the scheme has been done as of February 2. With less than two months left in the year, it seems very unlikely that the total for the year would reach even the Rs 211 crore persondays recorded last year.

The trend is thus unmistakable — in each year, total jobs created under the scheme have declined, and the decline is more pronounced in the case of dalit and adivasi households.

Delays in payment of wages are a crucial factor in discouraging very poor families, like dalits and adivasis, from seeking MGNREGS work. According to government data, payments to about 27% of those who had worked were delayed by up to 30 days. That's a very long time for a cash-strapped family to survive in the lean season. So, they slip back into their customary ways — migrating out to work, or doing piecemeal manual labour for low wages.

"In Alirajpur, the labourers prefer to migrate to Gujarat and work as construction and agricultural labourers," said Banerjee.

subhamoy.das · Post by **subhamoy.das** » 03 Feb 2013 11:23

Suraj wrote: Stop derailing this thread with wildly inconsistent trolling posts like these. The above is the definition of a strawman, where you make claims about what others allegedly said, despite no other reference to what you have literally stated above.

Lets look solely at foreign exchange reserves since that's what you begin with. Why is theirs what it is and ours what it is - where does the 10x gap come from ?

The remark was specifically made by Supratik: "China is sitting on a 2T $$ reserve just through manufacturing". But the 2T reserver is not the point here. The point here is that offshored manufacturing driven reserver has little correlation with the jobs and consumption and wealth of the citizens of that country visa ve a country which has done 0 offshore manufacturing ( just doubled it income and yet has similar level of abject poors and is till considered a third world country ). And it is also widely debated if that high reserver is really a good thing have at all but I am not going into that debate. I will continue to post news and thoughts around the fact the CHINESE model of outsoruced/contract manufacturing did not, will not and good that it did not happen in INDIA and that service offshoring is the only viable option for mass jobs in INDIA going forward. This idea may be bizzare to you but then it is your view and I can live with that. Like wise your idea of offshored manufacturing as the only path every nation in this world has to take to a high per capita income is also equally bizzare from my side and you should be able to live with that. Only time will say who was bizzare so let us live that to time.

Suraj · Post by **Suraj** » 03 Feb 2013 12:34

There's nothing particularly wrong with what Supratik said there - China runs a substantial merchandise trade surplus gained from their manufacturing engine that directly contributes to their $2T reserves. You are the one who went off on a tangent about per capita incomes etc and the most recent claim about 'but $2T reserves is not the point here'. Other claims include what you've erroneously attributed to me - that I allegedly stated that 'offshored manufacturing is the only path to economic development'.

Please stop trolling in this thread. As much as you may believe in your theoretical model, responding to others' posts with non-sequiturs, or worse, putting words into others' mouths, constitutes derailing this thread. I have nothing personally against your belief in services led economic model and have no desire to moderate your opinion just because I happen to disagree with it, but if you continue with this line of thread disruption, you will earn a formal warning.

subhamoy.das · Post by **subhamoy.das** » 03 Feb 2013 15:51

I looked at all your posts. But the following post caught my attention. There are several others which are on similar lines of "service feeds on manufacturing and cannot generate weatlh as it is not producing items of value. Manufacturing produces things of value and hence produces wealth"

"
All of these examples entail creating things of value, or adding value, which adds to economic growth both from the value addition from making that object *and* doing so cheaply with Indian labour costs. When you are just delivering services without making things, your only advantage is your wage arbitrage spread, and such an economic framework provides low margin for economic growth. Your equipment costs will be in dollars, and your effort priced in rupees, with no built-in means to gain wealth or even compete, beyond wage arbitrage. Unlike services supported by manufacturing, you can't make better and higher value things to become richer, because you're not making anything - someone else gains all the margin from your work. You can't pay more for better work because your advantage lies solely in not paying much. You have no means to bargain because you are not making anything, someone else is, while you're just the outsourced guys competing on wage differential, trying not to be forced out by cheaper Vietnamese or Bangladeshis."

Now where did i put words in your mouth? I am concluding exactly as u wrote - "manufacturing is the way to wealth"...BTW, i repeatedly said it is service + manufacturing for INDIA with the service component much more than manufacturing

Suraj · Post by **Suraj** » 04 Feb 2013 00:49

Please stop editorializing and making grossly inconsistent conclusions. The above post you've quoted explains that an innovative services driven economy has a high cost structure - it costs money to educate and train people to such an extent, and it costs money to equip them with the IT and telecom infrastructure for such a vast services economy to work.

Pointing to some arbitrary western nation and saying "X is rich! X is services driven! So we must be services driven too!" is not a valid argument. Example X is a wealthy nation with substantial accrued wealth and capital to deploy, high labour costs but a highly trained and organized economy. India is a poor country with comparatively little capital, very low labour costs but not a well trained labour pool and a significant unorganized sector that generates no tax revenues.

State the costs of educating the 100s of millions of people you intend to put into such an economy. The costs of all the telecom and IT equipment you intend to equip them with. Do you have a dollar figure for these ? Remember that you have to bootstrap such an economy, starting from a situation where you don't have either the trained manpower nor the tax revenues to invest in their education and training. Further, once you find a way to train them to a level beyond their western competitors on a shoestring budget, you are competing with them on wage arbitrage. Any projections for how many years you will take to break even under such a high cost structure ? You cannot depend on MNCs to offshore their services businesses because then you do not own the IP you create; they do.

There are no shortcuts here. Despite the existence of an IT industry in India today, none of the issues stated above are invalid - all those IT workers were educated at significant cost, and their equipment costs dollar prices to import. While the industry may be booming, our government runs a massive deficit trying to spend enough on socio-economic needs, while our current account remains at barely breakeven including services and remittances. Scaling that up significantly will entail even greater costs. Please start by describing in detail how you intend to address these costs.

subhamoy.das · Post by **subhamoy.das** » 04 Feb 2013 12:37

Let us take our discussion to the new topic I created : Service Vs Manufacturing for mass job creation in INDA.

Don · Post by **Don** » 04 Feb 2013 19:37

subhamoy.das wrote:Some of u have suggested that contract manufacturing has generated wealth of 2T USD reserve for CHINA.

Look here : http://en.wikipedia.org/wiki/List_of_co ... e_reserves

CHINA should have been the world's number 1 and INDIA number 9 wealthy country ahead of US and Europe. We all know that is not the case with CHINA at around 100 and INDIA around 120 on a PPP GDP per capita front.

Looking at your link CHina's reserve is 3,2 Trillion not 2 trillion.

Prem · Post by **Prem** » 05 Feb 2013 00:25

Bayer Fights India's Compulsory Licensing Of Cancer Drug By Claiming It Spent $2.5 Billion Developing It
http://www.techdirt.com/articles/201301 ... g-it.shtml

Back in March last year, the Indian government announced that it was granting its first compulsory license, for the anti-cancer drug marketed as Nexavar, whose $70,000 per year price-tag put it out of reach of practically everyone in India. Nexavar's manufacturer, the German pharmaceutical giant Bayer, naturally appealed against that decision, and the hearing before the India Intellectual Property Appeals Board (IPAB) has now begun. Jamie Love has provided a useful report on the proceedings; here's his summary of what's at stake:
The outcome of this trial, which focuses on the cancer drug Nexavar, is a matter of first impression for the IPAB, and is expected to set precedents on a wide range of issues, including the permissible grounds for granting compulsory licenses, the relationship between the India patent law and the TRIPS Agreement, and the setting of terms and conditions for the compulsory license, including the royalty rates.
Clearly, then, this is a crucially important battle for both sides, and Bayer has started throwing around some huge R&D numbers in an attempt to convince the IPAB that it should be allowed to retain its monopoly in India to recoup those costs:
Bayer presented a January 9, 2013 affidavit from Harold Dinter which made the claim that from 1999 to 2005 Bayer had spent "2 billion euros (approximately US$ 2.5 billion) in the identification and development of anti-cancer molecules leading to the successful approval of Nexavar in 2005." Dinter did not provide detailed support for the numbers, but said they were based upon Bayer's general R&D outlays for anti-cancer drugs, including but not limited to Nexavar, and that the estimate was supported by a new December 2012 study by Jorge Mestre-Ferrandiz, Jon Sussex and Adrian Towse, published by the Office of Health Economics (OHE

Arjun · Post by **Arjun** » 05 Feb 2013 10:57

IMF forecasts 4.5% growth for India; to lose second fastest-growing economy tag

So, the news gets from bad to worse to disastrous....and all we hear is deathly silence from all those self-congratulatory voices of two years back ??

Any ideas on what went totally and completely wrong and what one can learn so it is not repeated ? Can the country's many armchair economists get down from their academic grandstanding and start kicking some serious butt please ?

Suraj · Post by **Suraj** » 05 Feb 2013 12:13

While GDP growth definitely slowed this fiscal, the IMF's numbers look way off. Assuming they are referring to calendar year growth (as they typically do), the average GDP growth for the first three quarters of 2012 was 5.5%, a full percentage point higher than their estimate. To equal 4.5% for the whole year, the last quarter (Oct-Dec), typically a very productive economic time due to the festival season, would have to have near negative growth rate. I don't buy it. Good headline to sensationalize with, but doesn't look factually valid.

Arjun · Post by **Arjun** » 05 Feb 2013 13:18

Difference seems to be because IMF computes GDP at market price and Indian government computes on factor cost.

Anyway, as long as it is apples to apples between countries its fine. So it seems that on market price basis, Indian growth rate may be behind even that of Bangladesh.

Aditya_V · Post by **Aditya_V** » 05 Feb 2013 13:23

Arjun wrote:IMF forecasts 4.5% growth for India; to lose second fastest-growing economy tag

So, the news gets from bad to worse to disastrous....and all we hear is deathly silence from all those self-congratulatory voices of two years back ??

Any ideas on what went totally and completely wrong and what one can learn so it is not repeated ? Can the country's many armchair economists get down from their academic grandstanding and start kicking some serious butt please ?

IMF has string Anti-India tag, they would love us to become thier lenders.

Arjun · Post by **Arjun** » 05 Feb 2013 13:37

Aditya_V wrote:IMF has string Anti-India tag, they would love us to become thier lenders.

Sure we can talk of all kind of CTs...but even the Indian government is not disputing the fact that the IMF figure is correct when GDP is calculated at market price. The key issue here is not the absolute number in itself - but that based on GDP growth calculated at market price, India is now behind Asean and Bangladesh.

Suraj · Post by **Suraj** » 05 Feb 2013 15:35

Arjun wrote:Difference seems to be because IMF computes GDP at market price and Indian government computes on factor cost.

That doesn't make any sense at all. On that scale the fastest economy in the world is Zimbabwe, thanks to hyperinflation. The only difference I can see is IMF represents data in dollars and CSO obviously reports data only in Rupees, so the IMF data has the Rupee depreciation built into its numbers. Frankly, short term exchange rate fluctuations have nothing to do with GDP numbers, and therefore the IMF press release is just sensationalizing...

Arjun · Post by **Arjun** » 05 Feb 2013 15:49

Suraj wrote:That doesn't make any sense at all. On that scale the fastest economy in the world is Zimbabwe, thanks to hyperinflation. The only difference I can see is IMF represents data in dollars and CSO obviously reports data only in Rupees, so the IMF data has the Rupee depreciation built into its numbers. Frankly, short term exchange rate fluctuations have nothing to do with GDP numbers, and therefore the IMF press release is just sensationalizing...

Montek Speak

Delving into economic technicalities, Ahluwalia clarifies that the GDP measured and displayed by the IMF has a 'statistical' problem. He explained, "I don't think that IMF was aware of the fact that there was this little difference. They just took the GDP at market prices. There is a big difference between GDP at market price and GDP at factor cost." This means that Indian agencies calculates figures at Factor Cost, where as IMF has been doing the same on market cost, meaning that indirect infulences like taxes and subsidies are not accounted for.

Understanding IMF Real GDP Growth Forecasts for India

For India, we wish to emphasize the basis on which our forecasts are produced. To be comparable across countries, the IMF growth projections are done at market prices, and for the calendar year, which differs somewhat from the factor cost, fiscal year definition used by Government and most analysts in India. GDP growth estimates at market prices equal the factor cost estimates, minus subsidies but including indirect taxes.

IMF's India growth forecast in line with predictions of economists: Dr Samiran Chakraborty, StanChart Bank

ET Now: The IMF growth outlook on India has been revised down from 6.1 to 4.9%. Is IMF being a little overtly pessimistic on the India story?

Dr Samiran Chakraborty: One has to get this in perspective that the number which IMF has forecast is not the GDP number that we commonly forecast. They have a different variety of GDP which is consistent across all the countries. In that sense, a 4.9 is more like a 5.5 that we forecast. There is a difference between certain elements which the IMF covers and which we do not cover. Therefore, it is a number which is in line with what the market economists are predicting

subhamoy.das · Post by **subhamoy.das** » 05 Feb 2013 15:55

One key point to remember that about 70% of GDP is in local consumption. So GDP gowing down basically means local consumption going down. The main reasons are - all related to abymal governance - supply side restrictions ( lack infrastructure like roads, electricity,ports, low agiculcture yields etc ), high fiscal deficit ( welfare and welfare and loss due to corruption ...) and bad investment sentiments ( GAAR, no GST etc ). All of these have resulted in a high inflation ( read loss of value of currency and the faith in the GOVT or country ) and hence has made cost of goods and services much much costlier which in turn has reduced consumptions and the hurt GDP and hurt bank deposits. Manufacturing exports have slowed down by service exports have picked up. So unless we return to good goverance we will be around 5% of hindu growth rate where the country basically works in auto pilot mode.

Suraj · Post by **Suraj** » 05 Feb 2013 21:57

Arjun wrote:Montek Speak
Delving into economic technicalities, Ahluwalia clarifies that the GDP measured and displayed by the IMF has a 'statistical' problem. He explained, "I don't think that IMF was aware of the fact that there was this little difference. They just took the GDP at market prices. There is a big difference between GDP at market price and GDP at factor cost." This means that Indian agencies calculates figures at Factor Cost, where as IMF has been doing the same on market cost, meaning that indirect infulences like taxes and subsidies are not accounted for.

Still doesn't make much sense. Why would they remove govt expenditure from calculations ? It's further complicated by the fact that CSO reports data both at factor cost (real GDP growth) and at current prices (nominal growth). I'm more inclined to view it as an artifact of attempting to translate figures to dollars. Further, while CSO consistently understates GDP, at least its methods are transparently described on the CSO/MOSPI site; the IMF methodology is not. I'll take our own numbers over even more questionable data from an external party.

RoyG · Post by **RoyG** » 05 Feb 2013 22:38

subhamoy.das wrote:One key point to remember that about 70% of GDP is in local consumption. So GDP gowing down basically means local consumption going down. The main reasons are - all related to abymal governance - supply side restrictions ( lack infrastructure like roads, electricity,ports, low agiculcture yields etc ), high fiscal deficit ( welfare and welfare and loss due to corruption ...) and bad investment sentiments ( GAAR, no GST etc ). All of these have resulted in a high inflation ( read loss of value of currency and the faith in the GOVT or country ) and hence has made cost of goods and services much much costlier which in turn has reduced consumptions and the hurt GDP and hurt bank deposits. Manufacturing exports have slowed down by service exports have picked up. So unless we return to good goverance we will be around 5% of hindu growth rate where the country basically works in auto pilot mode.

Hindu growth rate? Slow rate of growth is a socialist unproductive and unsustainable economic model. Excessive government spending, regulation, and taxation are probably the biggest hurdles we have to overcome in order to prevent a declining rupee and higher inflation. The government needs to let the family and society function optimally by getting out of way.

Theo_Fidel · Post by **Theo_Fidel** » 06 Feb 2013 06:52

USA type concepts like government getting out of the way work in developed socities with 100% literacy and large personal resources. In fact it doesn,t even work there despite all the ideological posturing. We need governance that works at the local level raising people education level and provide civilization. This never happens automatically.

Arjun · Post by **Arjun** » 06 Feb 2013 10:43

Suraj wrote:Still doesn't make much sense. Why would they remove govt expenditure from calculations ? It's further complicated by the fact that CSO reports data both at factor cost (real GDP growth) and at current prices (nominal growth). I'm more inclined to view it as an artifact of attempting to translate figures to dollars. Further, while CSO consistently understates GDP, at least its methods are transparently described on the CSO/MOSPI site; the IMF methodology is not. I'll take our own numbers over even more questionable data from an external party.

Even the GOI is not disputing that when calculated on the basis of market price, the growth figure of IMF is correct: Montek plays down IMF's growth projection for India

IMF calculates gross domestic product (GDP) at market prices (inclusive of indirect taxes), while India calculates GDP at factor cost (exclusive of indirect taxes). If GDP at market prices is taken into account, India’s economy grew just 3.9 per cent in the first quarter of the current financial year, instead of the officially estimated 5.5 per cent.

Ahluwalia attributed the difference between GDP at factor cost and that at market prices to a huge rise in the payment of subsidies. Subsidies are taken as negative taxes and, therefore, would have to be subtracted in the calculation of GDP at market prices.

Suraj · Post by **Suraj** » 06 Feb 2013 11:01

Arjun: the explanation and the IMF's methodology sound messy. 'Market prices' suggest they are working with nominal figures and applying their own measure of a GDP deflator to obtain their numbers. Further, I see no suggestion that bailouts or QE measures in advanced countries are treated as a subsidy, whereas ours are. As much as I have nothing really positive to say about the current growth rate, I prefer to support our data collection and reporting framework over that of anyone else, particularly not an entity like the IMF.

Aditya_V · Post by **Aditya_V** » 06 Feb 2013 11:26

subhamoy.das wrote: So unless we return to good goverance we will be around 5% of hindu growth rate where the country basically works in auto pilot mode.

??? Why this term, it seems to indicate warped thinking. Are Hindu seers running the country???

subhamoy.das · Post by **subhamoy.das** » 06 Feb 2013 11:57

CAD: A slippery slope that may stop Reserve Bank of India in its tracks

http://economictimes.indiatimes.com/new ... 358463.cms

Clearly it is inflation which is the core problem of the fall in GDP and the economy. See the report above. The UPA govt policies has robbed the internal bank ( read fiscal deficit ) and the external bank ( read current account deficit ). Let us wait and see if the INDIAN electorate prefers good governance over bheek in name of welfare, caste, religion, community....