Indian Economy - News & Discussion 27 May 2012

[Singha]

car parts, electronics, chocolates, alcohol, clothing, any other food item or consumer durable.....
wearing a green checked lungi, having a torn banian and a katora in hand for Rs1 rice outside the local INC office is the only way middle class will be permitted to live. they have money, which is communal and hence must be severely punished to paper over the cracks in failed economy.
look for additional surcharges on income tax also and more service taxes.

congis in KA have already raised various property related charges to fund their Rs1 rice utopia.

[Suraj]

No. Import substitution necessarily means drawing up lists of items, and then promoting their manufacture locally via subsidies.

Which isn't any different from what I said.

In the Indian context, it also meant various PSUs set up to manufacture these goods.

Yes, "meant", in past tense. I'm speaking of the present, though.

The higher duties proposed would be fine as a bridge, if they came with an expiration date. In the event, they will likely just draw out the pain and postpone eventual adjustment.

Sure, contingent on the domestic industry being encourage to produce and export these designated luxury goods. For example, Korea and Japan both blocked automobile imports while fostering their own domestic industry into export powerhouses, which in the process gave them world beating domestic manufacturers.

[member_20317]

Suraj ji, protection afforded to Korean and Japanese car industry was a very long term affair. Our kind of mess will not respond to this measure.

It is an education to follow up on other guys comments. I did that w.r.t. luxury goods and here is how things stack up. The nearest analogy would be retrenching the chaprasi because the VPs sucked the company dry.

http://indiatoday.intoday.in/story/luxu ... 28450.html



The market size and distribution and complexities would be such that it does not seem possible to realistically target more then 2 billion spend on that count.

[Supratik]

There are several contradictions in Sen's position on a number of issues. He constantly brings in China but doesn't explain how a democracy can emulate a dictatorship. He doesn't want Modi as his PM but has no qualms about the Chinese state and in hobnobbing with Communists in Kolkata (a Communist is autocratic as he doesn't believe in democracy). He has been unusually silent after Mamata came to power. He is worried about minorities in India but says nada about Tibetans or Uighurs in China. He talks about state intervention in removing poverty, education and empowerment but a modern economy needs much more than these. Otherwise Cuba would be like Singapore and Kerala would have the highest per capita income in India. He doesn't talk much about how to build a modern technological nation.

Bade, Don't know things inside Kerala but "labour empowerment" in WB by Communists has meant endless disruptions, strikes, labor troubles, hooliganism including beating and killing managers which drove out capital which in turn impoverished the very workers they were supposed to empower leading to more poverty. We don't need this kind of empowerment.

[vera_k]

Yes, "meant", in past tense. I'm speaking of the present, though.

Semantics. In the absence of an environment to entice investment in manufacturing, the present isn't too different from the past, far as economic players go.

[RamaY]

Like I said I have my reasons for pointing this out. And why this is so.

Please do tell us. It might be helpful for millions of farmers.

[Theo_Fidel]

For some reason the worker/ High HDI system in Kerala has resulted in a strange resistance to new ideas. High HDI + openness to new ideas = high growth. For instance one of the ways KKY produces more rice than TVN areas is by timing the planting of rice correctly. To get maximum productivity, the timing has to be exactly right, right now it is 6 week window in Late June/Early July or don’t plant outside the window. Recently he planted in Late August, because labor was cheap! If you are going to be late, don’t even bother, its not going to be worth the expenses and the land can do with an occasional break. There is a strange reluctance for folks to follow this one simple rule in Kerala. They prefer to follow tradition which often asks for an early June planting. Many times I have told my cousin not to plant so early, but it is a mann pirappu schedule, and he must follow the local tradition. I'm not sure how to knock him of this....

[RamaY]

For some reason the worker/ High HDI system in Kerala has resulted in a strange resistance to new ideas. High HDI + openness to new ideas = high growth. For instance one of the ways KKY produces more rice than TVN areas is by timing the planting of rice correctly. To get maximum productivity, the timing has to be exactly right, right now it is 6 week window in Late June/Early July or don’t plant outside the window. Recently he planted in Late August, because labor was cheap! If you are going to be late, don’t even bother, its not going to be worth the expenses and the land can do with an occasional break. There is a strange reluctance for folks to follow this one simple rule in Kerala. They prefer to follow tradition which often asks for an early June planting. Many times I have told my cousin not to plant so early, but it is a mann pirappu schedule, and he must follow the local tradition. I'm not sure how to knock him of this....

Thx. I think the late june (or whatever calendar) came into existence from the Indic-lunar calendar. I mentioned this in one of the Indic threads. Due to precision of equinox, the seasons move 1 day ever 72+ (proverbial 72 ) years or so. In the old times the Indic calendars were updated to reflect this change and offer necessary changes in crop schedules (that was one of the meaning of word - Yajna) but nowadays that connection between the calendar and society is gone and became more religious.

Question for you: Why didn't your family follow the correct timing when it knows the yields will be >double even if the labor price is a little high?

[Bade]

Supratik, The "militant" nature of labor activism should definitely be done with. Unfortunately, we see such behavior in our politics too. It is so ingrained within society and more so perhaps in the labor class but not limited to them alone. Bengal perhaps has more instances of such incidents than Kerala, due to a relatively larger presence of industry there.

[Vipul]

Con goons eyeing USO Funds to buy Votes.

India is preparing to give mobile phones to each female member of a household, who has worked for 100 days in 2012 under a rural employment guarantee scheme run by the government, as per an internal presentation of the telecom department.

If implemented, this would be the latest sop the government is planning to woo a population ahead of a slew of state polls leading up to general elections which could be held early next year. This scheme would come close on heels of a food aid programme, the National Food Security Law, which aims to distribute cheap grains to nearly three fourths of India's 1.2 billion people.

The ruling Congress party-led government retained power in 2004 helped to a great extent by promises to guarantee work for India's rural population under a scheme called the Mahatma Gandhi National Rural employment Guarantee Programme ( MNREGA). This scheme will now be the basis for handing out the mobile phones.

According to the presentation seen by ET, the government plans to complete the scheme within three years of the date of implementation. The state governments will be roped in to provide a list of eligible citizens for each village/block/district.

Even though it isn't yet clear as to how the government proposes to finance this scheme but in all likelihood, it could dip into the cash rich universal services obligation fund (USOF), accumulated through an annual 5% levy on the adjusted gross revenue clocked by mobile phone operators, say experts.

At the end of March 2013, the fund had an accumulated amount of 27,949 crore according to the USO fund's data.

The broad contours of the programme would put the onus of providing the handsets bundled with a mobile network on the service provider, which wins the government's contract through competitive bidding and will have to provide a warranty of at least three years along with assurance of easy accessibility to service centers.

These non transferable mobile handsets would have customized embedded opening screen showing details of the scheme and will allow the subscribers to access health records, and records and payment transfers would be through use of mobile number as the first level of authentication.

[Theo_Fidel]

How would you recommend this militancy be dealt with. In Mumbai textile militancy ended with the complete destruction of the textile industry, Datta Samant, et al. Voila, no more militancy. To their eternal credit the politicos refused to Public Sector those militant mills. How do you get Keralites to join the working stiffs, cogs in the machine, etc.

[Suraj]

Yes, "meant", in past tense. I'm speaking of the present, though.

Semantics. In the absence of an environment to entice investment in manufacturing, the present isn't too different from the past, far as economic players go.

What are the semantics here ? The private sector is larger than the public one in essentially every subsector of the broad economy; see Fig. I-14. Unlike in the past, work doesn't go to PSUs by default, except in the hyper-regulated defence manufacturing industry.

What dearth of manufacturing base exists when it comes to a niche like luxury goods, which are the specific topic here ? One of the biggest and longest contributing components of India's export basket is the $45 billion export of gems and jewelry, a typical luxury item. We're a significant auto export base as well, with ~3 million vehicles exported.

My position isn't simply 'import substitution'. I support blocking imports of luxury goods via high duties, while freely permitting capital goods and machinery to be imported, and for competitive high end products to be produced and exported. Is there such an integrated policy in place ? No. But I don't support the position that such a duty must be placed only after such an integrated policy framework is in place - I see a net benefit in such an act and support it, regardless of my own divergent political beliefs with respect to the current administration.

[Bade]

Theo, are you claiming it is not happening now. Forget the nookukuli type head load workers. They are not the types who are going to bring dramatic changes to GDP numbers. As I have said before many a time, with limited potential for large scale industrial scope in KL, it is better for the state to refocus on increasing education standards and increase skill levels of labor class. Human resource export is a good way to sustain life. I do not buy the theory that money-order economy is all a loss for the state or for any other state for that matter. It is a form of outsourcing.

To compare with TN, all those industries and entrepreneurship in TN did not happen overnight post independence, it came with a 200 yrs plus head-start with higher education for which Madras was the center. There is nothing else to do but for the state to focus on this first and open up people with the right skills to migrate in. Start to behave like a modern state. IT, ITES sector perhaps is the only salvation for now. With more education things can be different in two decades times.

One can look at it as an experiment to test the so called "Kerala Model". If it works fine, if it fails you have prove for it. But, it is too early to call it a failure. Besides, being a smaller state it can afford this experiment and so can India as the loss will be limited to the larger nation.

[gakakkad]

w.r.t tax on luxury good import , will it really make much of an impact? how big is the luxury good market in India any way? 8-10 billion USD I believe. How much impact can taxing this have in stabilising the rupee? not much I believe. and moreover out of the 8-10 billion usd market ? what proportion forms imported goods and what is indian manufactured?


meanwhile , more rona dhona

Growth in core industries slumps to 0.1% in June
Growth plunges mainly due to contraction in crude oil, natural gas, coal and electricity output

http://www.livemint.com/Politics/VqMVge ... -June.html

[Abhijeet]

Japan and South Korea invested heavily in infrastructure and education (the carrot) at the same time as they restricted imports (the stick). You can't have one without the other. As is typical for India, however, we will continue to see the stick without the carrot. The government will not develop infrastructure to help Indian businesses to grow manufacturing muscle, but at the same time will subject Indian consumers to even more deprivation by not allowing them to buy affordably priced imports.

As for this applying only to "luxury" goods, you can be sure that the government's definition of luxury goods includes many things that a civilized person would consider necessities. Want to buy a car? A smartphone? A TV? You bad luxury consumer, you.

[Suraj]

As for this applying only to "luxury" goods, you can be sure that the government's definition of luxury goods includes many things that a civilized person would consider necessities. Want to buy a car? A smartphone? A TV? You bad luxury consumer, you.

It sounds like one needs an imported CBU car like a BMW 7 series class to be considered civilized in India these days - buying a locally assembled 3-series doesn't qualify

[Vipul]

Economic census will cost govt Rs 760cr.

The sixth economic census, a complete count of all establishments/units located within the geographical boundaries of the country, will be conducted at an estimated cost of Rs 760 crore, an official of the central statistical organisation said on Tuesday.

The census, known to be one of the most complex and massive administrative exercises in which all establishments including households or non-households, big or small, private or public sector are enumerated, would be conducted across the state between the September and October this year.

Deputy director of central statistical organisation Jitendra Tomar, who has been asked to coordinate with the directorate of economics and statistics, told TOI, "The entire exercise across the country is estimated to cost Rs 760 crore and has to be completed across the country within 30 months of its initiation in the year 2012."

Tomar said that the census proposes to provide information on operational and other characteristics such as number of establishments, number of persons employed, source of finance, type of ownership, religion code and social group of propriety establishments. It will take into consideration the industrial activities of the establishments including their distribution at state, district, village/ward and national levels for comprehensive analysis of the structure of the economy, which will be used for micro level and decentralized planning and for assessing contribution of various sectors in the country's gross domestic product, he said.

The government, in collaboration with the state directorate of economics and statistics, has already started imparting training to people from six divisions of the state. These "master trainers" would be assigned to train the on-field staff. The state government would deploy 1.25 lakh employees from its various departments to complete the mammoth task in a record 45 days. The Centre has provided Rs 60 crore to the state government to complete the task, said a senior official.

The government would collect data of establishments deploying eight or more people. The data would include their addresses, phone numbers, PAN card details and professional data and will be used to form a directory, which could be referred as and when needed.

According to the official, action would be initiated against people who evade or refuse to give details to the field officials under the Collection of Statistics Act, 2008.

For the first time, the census will enumerate transgenders and handicraft activities, both in the organised and unorganised sectors.

Since 1997, five such censuses have been undertaken under the aegis of the central statistical office (CSO), ministry of statistics and programme implementation.

[nachiket]

As for this applying only to "luxury" goods, you can be sure that the government's definition of luxury goods includes many things that a civilized person would consider necessities. Want to buy a car? A smartphone? A TV? You bad luxury consumer, you.

It sounds like one needs an imported CBU car like a BMW 7 series class to be considered civilized in India these days - buying a locally assembled 3-series doesn't qualify

BMW? The government's definition of luxury in India does not mean BMWs and Mercs. Even locally built cars have ridiculously high Excise duties. And CBU cars already have import duty of >100% applied to them. What more can the government squeeze out of this?

No, by luxury items, they essentially mean phones and TV's like Abhijeet said, which probably constitute only a miniscule part of our total imports. I can understand the tax on gold, gems and jewellery, but many of these raw items are exported after being converted into finished products, so it may impact exports as well. And there is the ever present problem of smuggling. The underworld likes nothing better than high import duties.

[Abhijeet]

It sounds like one needs an imported CBU car like a BMW 7 series class to be considered civilized in India these days - buying a locally assembled 3-series doesn't qualify

Ha. If only.

In any case, a "locally assembled 3-series" still costs twice as much in India as it would in the US (Rs.30 lakh vs $30,000), so there is already a massive markup -- caused largely by taxes -- despite the fact that it is locally assembled. This extends to much cheaper cars as well, as we've discussed on the forum many times.

In other words, consumers are already over-taxed; there is no need to add additional disincentives for consumption.

[Karan M]

Buying anything with electronics in India is to pay first world prices at third world earning rates. Add the abysmal infrastucture and housing availability, and the daily hassle of living in such an environment gets to everyone. The end result is a hard scrabble desire to get ahead by any and all means necessary.
The one solace for the middle class was to go mall-jumping/eating-out/buying the occasional gizmo etc. Even that is becoming more and more a luxury. Heck, married folks on dual salaries are thinking twice about even spending on small luxuries like going out to movies etc regularly. There is one segment that regularly splurges on fancy goods for the status effect, but most folks are even looking at the elcheapo local brands etc now - and all those are just rebranded Chinese knock offs of leading brands.

[Suraj]

The duty load is a function of the imported content within the car. CBU units obviously attract the highest duty, while those built locally from SKD kits with reasonable local content have fractionally the lowest duty burden. Sure, that's still a substantially higher price than say, US prices (which in turn are significantly lower than European prices). But so what ? Is the argument that we should have equivalent prices to US for these ? A quick check of BMW China shows that the base 3 series costs ~$57K before taxes and fees, in effect, little different from India.

The US as a market is unique. It's the largest consumer in the world and the holder of the primary reserve currency that a significant amount of the worlds commodities are traded in. BMW NA is happy to pay BMW AG in dollars for the cars they import, and BMW AG gives the dollars to the Deutsche Bundesbank, who uses it to buy oil from Nigeria, as an example of how the currency flows. For BMW India, the transaction begins with buying dollars from the RBI. The US can command both the price competitiveness of volume, no exchange rate risk, and the minimal duty burden supported to reserve currency seigniorage.

While gakkakad's point is quite meaningful - luxury goods imports aren't large enough a part of overall import bill for this duty measure to have significant impact - the fact remains that neither is the idea wrong in general (Japan and SoKo do it too), but it's not against the government or the RBI's current imperative to stabilize the Rupee.

Sure, it's kneejerk and not particularly effective. However, at most, GoI sin in this particular matter is one of omission, not commission - they're not following it up with wider reform measures. It doesn't warrant sweeping statements about going back to the 1970s etc.

Several developing countries, especially the oft mentioned East Asian ones, have a history of having compelled its citizenry to eschew consumption during the early stages of development. The parents of the average modern day South Korean in his/her 30s/40s grew up in a milieu of imposed austerity, where just purchasing too much shampoo was seen as wasteful, back when Park's regime commanded people to save as much as possible to deploy into fixed asset investment.

Criticizing GoI for their inability to effectively implement broad policymaking is fine, but criticizing what is a minor positive reform measure, IMHO, criticism in the wrong direction.

[Singha]

they had concluded a deal with EU for progressive reduction of duties on imported cars from EU over next few years. looks like it was takiya and just survival and vote buying takes precedence now.

[Supratik]

One can look at it as an experiment to test the so called "Kerala Model". If it works fine, if it fails you have prove for it. But, it is too early to call it a failure. Besides, being a smaller state it can afford this experiment and so can India as the loss will be limited to the larger nation.

Except high social indicators there is absolutely nothing that India can learn from Kerala. A money order economy for 1.8 billion (2050) people is a crazy idea. From what I have gathered KL is good in agri, virtually no industry outside some PSUs and is a "Johnny-come-late" in services like IT/ITES but is good in tourism. KL has exported close to 15-20% of its working-age population. For India to emulate that it has to export at least 100 million workers. I find nothing in KL that inspires confidence that it will be an economic powerhouse anytime soon. If our esteemed Nobel laureates and fellow members want us to emulate that for India then sorry to say "Thank you, No". TN and Gujarat are behind KL in social indicators but are two of the manufacturing hubs of India with increased emphasis on services. This is a well tested model that has worked in other countries. Their social indicators are improving each year without compromising on other aspects of the economy. The same people who are trying to sell the KL-model were selling the Soviet model earlier and after its mammoth failure are selling the China model now without understanding that you cannot emulate a dictatorship although you can learn useful things from other countries irrespective of the nature of the state. KL model will lead only to a revolution. Imagine 1 billion+ BA/BSc pass Indians without jobs trying to move to Gulf or USA or Canada. That is one of the craziest things one can think of specially coming from a Nobel laureate.

[subhamoy.das]

My wife runs a small bakery with 4 heads and even she got a TAX notice last week. So things will be come worse on the economic front in the days to come. The poor population - who are the driving the vote bank - is esuring the the middle class come down to their level and this is what is called "INCLUSIVE or SECULAR GROWTH" where all citizens will be poor and the messaih of the poor will have the votes and rule the center. I blame it sqarely on the voters of this country for having rejected a empowerment based model of NDA to a mai bap model of UPA. And I am sure in 2014 this will continue and we will be back to a situation where out golds will again have to be mortgaged. I am heading for a village to catch the fruits of INCLUSIVE GROWTH!

[Supratik]

It is no point blaming the electorate. When you are struggling at less than Rs26/day (the so-called poverty line) the hand-out model will seem much more attractive than the empowerment model.

[shyamd]

Bad economics is good politics. Voters in almost every country vote for the person/party that brings them the greatest benefits. Although the trend does change sometimes as we saw in TN - MK tried to bribe voters heavily but it didn't work. Of course the people are left to pick up the pieces with the high debts he ran up as a result of the populism..

[Sachin]

The poor population - who are the driving the vote bank - is esuring the the middle class come down to their level and this is what is called "INCLUSIVE or SECULAR GROWTH" where all citizens will be poor and the messaih of the poor will have the votes and rule the center.

The middle class have also to be blamed for this. Not done an extensive survey. But the maximum number of whiners, and the maximum number of voters who do NOT go and vote comes from this bucket. In fact I make it a point to make fun of the folks in my immediate family who fall in this group . So the poor people who go and vote becomes the vote bank, would naturally expect to be fed with freebies. The politicians who have to be in the business now knows which people needs pampering.
Aside: In a constituency in Eastern Bengaluru there was a place which had a sizeable population of people from the middle class (many of them being from 100% literate state). A km away there was also a large slum. The local Corporator ensured that the folks at the slum are pampered before the elections. A contingent of Mallu intellectuals went to meet the Corporator. The corporator told them upfront. At election time "keep your intellectual attitude aside, stand in line and vote (for me ). I would ensure you would get some benefit".

[member_20292]

Buying anything with electronics in India is to pay first world prices at third world earning rates. Add the abysmal infrastucture and housing availability, and the daily hassle of living in such an environment gets to everyone. The end result is a hard scrabble desire to get ahead by any and all means necessary.
The one solace for the middle class was to go mall-jumping/eating-out/buying the occasional gizmo etc. Even that is becoming more and more a luxury. Heck, married folks on dual salaries are thinking twice about even spending on small luxuries like going out to movies etc regularly. There is one segment that regularly splurges on fancy goods for the status effect, but most folks are even looking at the elcheapo local brands etc now - and all those are just rebranded Chinese knock offs of leading brands.

and r2ied people are looking to r2USA

[Supratik]

I don't want to talk politics on this thread but if KL had got its politics right it would be an economic powerhouse of India. Imagine what a state with first world HDI and education can achieve. Keralites are also good entrepreneurs like Gujaratis. Sen will never tell that becoz he likes the "color" of the politics in KL and doesn't like the "color" in Gujarat.

[Bade]

Supratik, you are looking at things from a pov where each state is like an independent country. Do you seriously think say even in the case of IT we can truly have multiple Bangalores in India. You would need at least 20 such cities doing just IT related activities at Bangalore level. No it is not going to happen. Many states will act as feeders to where already big investments are made. This is where developing the human capital pays off. In the end everything is about outsourcing services.

Big manufacturing setting up well paying jobs is a thing of the past. It will work in poorer places like Bihar for a generation or two at most, before wages catch up and force a transformation to more automated setups. So it is not for all states. It can still work in WB if labor militancy is taken care of, but the wages in KL are high already and also people can vote with their feet for a better life. It does not have to be Gulf as the savior, if other pockets in India is already prospering and people are willing to move.

[prahaar]

Supratik, you are looking at things from a pov where each state is like an independent country. Do you seriously think say even in the case of IT we can truly have multiple Bangalores in India. You would need at least 20 such cities doing just IT related activities at Bangalore level. No it is not going to happen. Many states will act as feeders to where already big investments are made. This is where developing the human capital pays off. In the end everything is about outsourcing services.

That is totally not true. If a tiny country like Finland, with a feeder population of less than 3 million (i.e. a bit less than half of the population which is below 55, thus also including infants and children in the 3 million figure) is sustaining high tech industries ranging from IT->Telecom->Heavy Engg->Biomedical, etc., there is much more scope in India. There are 4 hot spots for size less than half a million for high tech industries in Finland, India can definitely have many more.

I agree, we do not have the human resource, infrastructure resource (in terms of hard facilities like power, road, water and soft ones like good schools, universities, etc.). Feeders need to be developed. A basic scheme like life long free education (incl. University) except for a select fields will go a long way in improving human capital and consequently productivity.

[Supratik]

Big manufacturing of widgets or even automobiles is no longer feasible in states like WB and KL due to population pressure and small land holdings. Instead numerous small manufacturing factories preferably hi-tech to use the educated labour force e.g. electronics, is the way to go. Like Italy or Taiwan. Plus services. But both states need to get the politics right. Otherwise they will muddle along.

[RoyG]

Swapan Dasgupta ‏@swapan55 1h
Too many people 'in the know' telling me about about discreet visits 2 India by IMF teams. Preparing the ground? Or precautionary measure?

Meanwhile...

[Suraj]

Kandla port, formerly the biggest port in India by bulk tonnage (as opposed to container TEUs, where JNPT leads) has now been overtaken by its private sector competitor, Mundra port, which came into existence barely 15 years ago:
How Mundra overtook Kandla to become largest port by tonnage

Standard story of PSU squandering its superior geographic location while a nimble competitor comes out of nowhere and overtakes them.

[Prem]

http://www.moneycontrol.com/news/econom ... 30151.html
India lacks mood to invest, money is available: Experts

In the blame game which is currently going on between corporate and government, these experts believe that industrial houses clearly have an opportunity to invest considering the lower asset prices, but are stuck with pessimism which is delaying their capital investment. “We are not investing in capex, we are not investing in real assets, we are not investing in productive capacity and that is not smart. There is no shortage of money actually. If you have a good project actually it’s quite the reverse, you have banks chasing you. However, because your mood today is not good the market today is not good people actually tend to differ these decisions,” Munjal points. According to him smarter companies would turnaround in such times. He stressed it was rather a very good time to invest.While Chandrasekaran believes that most importantly India needs to have a long-term plan to achieve this goal. “Let say improvement of quality of life of these 1.2 billion people is going to require 10 initiatives and it is going to take 24 years then irrespective of who is governing, irrespective of the centre or state and all the politics, we got have a framework to drive that.” Munjal puts lot of emphasis on physical infrastructure giving example of US economy which had grown exponentially two times, after development of rail network and electronic highways.“The multiplier effect of this (infrastructure development) is often not understood. How it generates multiple economic opportunities and therefore economic activities and therefore helps in our biggest challenge which is eradicating poverty,” Munjal said.

Below is the verbatim transcript of the discussion

Q: In this new world order, what would your definition of the economic superpower be?

Kapoor: To define economic superpower, I would like to believe it is an economic prosperity and security, which you have to benchmark with possibly the only two economic superpowers in the world. America is about innovation and productivity. China’s success surrounds being the manufacturing factory to the world and building productivity and efficiencies, creating fantastic export capability and to me there is success there, so they did special economic zones (SEZs), they did coastal cities and they built on short-to-medium term wins to become an economic superpower. So, I think we have a lot to learn from benchmarking and then evolve and accelerate our own model of growth and some formulas of that.
Munjal: I would actually change the question itself, can India become a superpower? Of course it can. The question is when and how? We work wonderfully in a crisis, so a slowdown every now and then is not necessarily bad for this country. You already have the world’s best dependency ratio. You also have two habits, one is an old habit and one is a relatively newer habit, an old habit of saving and a newer habit of consuming and spending both of them put together are a very potent mix.......

[Theo_Fidel]

Finland is a nation and can do things Kerala can not. Esp. in high cost of labor environment. It is not a good comparison. Finland would not have got anywhere if it was part of Russia or Latvia or even Sweden.
--------------------------------------------------------

KL population density is not that different from say, Germany or Netherlands. Switzerland too has the same mountain chain problem.

The problem as always is simple. As long as migration from UP, OD or BH is open, there is lower incentive to invest in labor saving productivity increasing technology. Kerala is not able to exploit its high HDI because there is always someone willing to do it for less. So folks have to leave India to find jobs to match their skills. All this IT R2I is happening because of the IT boom in India, damn the wage arbitration. If IT wages in India descend to match wages in Bihar, bang end of R2I.

Some pages back there was a discussion on a mechanical sweeper device and immediately folks said this not for India and folks should be sent out broom in hand to sweep the streets. My question is, would you want your son or daughter to do that job broom in hand? Folks say these things because you can hire people at rock bottom prices in India due to free migration. Take the infrastructure projects in Chennai, to a man they are run by poor migrant labor. Normally wages of the locals would have risen to allow greater productivity gains and more mechanization, but these things are not possible yet in India.

[vina]

Take the infrastructure projects in Chennai, to a man they are run by poor migrant labor. Normally wages of the locals would have risen to allow greater productivity gains and more mechanization, but these things are not possible yet in India.

Yes, as is the metro in Bangalore and nearly ALL construction. The labor is all imported from eastern India .

That said , there is now a lot more mechanization , esp in mechanical handling and nearly all other aspects of construction. Nearly all (even individual house construction) seem to have hoists/lifts in place to get material up ready mixed concrete gets delivered and stuff in place.

No longer, 4000000000000 women and men plastered like ants all over the place working precariously on bamboo scaffolding. All of them have proper scaffolding , a good and strict safety culture (boots, helmets, goggles ) .

Images like this one Nagarjuna Sagar Dam Construction is history.

ANT-LIKE THEY TOILED: The sea of humanity utilised to build this "modern temple", was a scene that touched both Nehru and Galbraith. PHOTOS: GOVERNMENT OF ANDHRA PRADESH

Nagarjuna Sagar

[Yayavar]

Thanks Vina. Great article.

Your observation is quite true - I too have observed the change in construction practices.

[vera_k]

As long as migration from UP, OD or BH is open, there is lower incentive to invest in labor saving productivity increasing technology. Kerala is not able to exploit its high HDI because there is always someone willing to do it for less.

But Kerala is a communist state with strong unions. That in itself is as strong an incentive as any to substitute labor with technology.

[chola]

Can anyone tell me what the heck the RBI is doing?

I don't believe they should have to put in growth killing steps to support the rupee. But once you go down that road, you need to stick to it hell or high water. Don't backtrack a week later! Now we are left with both a debilitated finance sector that could ill afford to give out loans for growth because of high interest and a rupee that is still on the precipice.

Why bother with the NRI bond? The way they are crushing the economy and screwing up defense of the rupee at the same time, it would be far better to hang on to your remittances for a few months, watch the rupee and economy plummet and then swoop in for cheap assets.

The economy WILL turn around even though the rupee might settle at 70 or 80 to the dollar. This would be a good thing for our competitiveness and will set the stage for a boom in manufacturing. But in the meantime, it will be painful as the babus have pretty much messed things up from every angle.