Indian Economy - News & Discussion Oct 12 2013

[Suraj]

Amit, thanks for those two references. They clearly take on the argument of 'food processing will make food expensive for poor SDREs' claim.

It says nothing of the kind so don't claim things with polemics others did not say...

Here's what it really says, exactly what I pointed out. You need a higher income level before industrializing food production.

And you're disconnecting industrialization from income growth. The process of industrializing the food supply chain itself leads to income growth for those involved in the business, who primarily constitute the bottom of the income pyramid as well. You're doing the equivalent of arguing with Henry Ford - "don't build cars because people can't afford it now. Wait until they can." That's not how it works. As that experience demonstrated, the very process of creating an infrastructure to create cars put people to work at earning a formal income, which lets them afford goods, including food.

The process of industrializing food procurement, transport, storage and distribution itself puts to work people who otherwise lead a marginal existence . Such an infrastructure will connect every food procurement region, because it depends on feeding the food production into the supply chain.

I do not agree with the issue of supply and demand. In a country like India, there's no shortage of demand. There is a shortage of supply. Prices of X vegetable don't shoot up every now and then because people suddenly want 3-4x more of that vegetable, but because supply is not uniform. The supply is weak because it's only individuals like you personally trying to invest in storing your produce, but you're clearly not able to achieve the economies of scale to make it work.

This is where the government's current impetus to invest in the food supply chain comes in. Food parks are merely one part of the picture. The very same DBT-L system to enable LPG subsidies are being expanded to cover PDS outlets, which obviously would provide the processed foods generated by the same food park system.
Puducherry first to implement DBT for food subsidy
DBT is direct benefit to govt

Direct benefit transfer (DBT) can help the government save as much as Rs 25,000 crore, or 20%, in food subsidy expenditure in 2015-16 if two-thirds of the country’s population is targeted, as proposed in the national food security Act, according to a report by Crisil Research, reports fe Bureau in New Delhi.

The report assumes that if the extant public distribution system is bolstered as per the food security law, the food subsidy bill in 2015-16 would be R1,21,908 crore, factoring in a 3-4% increase in the benchmark prices of wheat and paddy, while the complete roll-out of DBT could reduce the subsidy level to R97,180 crore by eliminating costs associated with procuring, distributing and storing grains.

PDS leakages, too, have touched 46.7% at the all-India level, as showed by the Shanta Kumar-led panel, while a private study by Jean Dreze and Reetika Khera puts this number at 41.7%.

Importantly, with DBT, a poor family of five that is otherwise eligible to avail of food subsidy but doesn’t have access to the PDS due to various reasons, including absence of ration cards, could get as much as R5,800 in 2015-16, which is higher than the total annual expenditure (food and non-food) of the poorest 5% of rural households.

[Suraj]

FDI may be allowed in sectors with high employment scope

Hinting at opening up of more sectors to foreign investment, Prime Minister Narendra Modi on Wednesday said areas with high employment potential and strong local talent would be the focus to woo foreign investment and expressed confidence that reforms measures like the Goods and Services Tax (GST) and land acquisition Bill will be passed in "a matter of time".

"Wherever there is high employment potential and wherever we have strong local talent, for example, in research and development: those will be the areas of focus for foreign direct investment (FDI).

The 2014-15 GDP advance estimate is due this Friday. Here's what private economic monitoring agencies estimate:
2014-15 growth at 7.3% for 2014-15, slightly lower than the government's advance estimate of 7.4% in February

India Ratings & Research, estimates the country's economic growth at 7.3 per cent for 2014-15, slightly lower than the government's advance estimate of 7.4 per cent.

The economy expanded 6.9 per cent in 2013-14 and 5.1 per cent the previous year."Growth of 7.3 per cent represents gradual economic recovery," said Devendra Pant, chief economist with India Ratings.

Official gross domestic product (GDP) data for 2014-15 are slated to be out on Friday. While slightly better performance on exports (both merchandise and services) compared to what was projected in the advance estimate would boost growth, lower private and government final consumption expenditure would pull it down. Gross fixed capital formation, a proxy for investment, was projected by India Ratings to be 5.1 per cent in 2014-15, the same as estimated earlier. However, it did not believe that private final consumption expenditure growth would be 7.1 per cent in 2014-15, as pegged by the advance estimate. To grow this much, it had to expand 11.8 per cent in the financial year's fourth quarter (January-March), a daunting task, it said.

Consumer expenditure, which reflects demand in the economy, has refused to perk by much, despite low inflation adding to real income of people. "...consumers are still cautious and somewhat sceptical about sustainability of the trajectory of inflation decline. They are in a wait and watch mode and deferring their spending," the rating agency said.

Growth in government expenditure was pegged at 10 per cent in FY15 in the advance estimate but India Ratings said this would require the outlay to rise 10.8 per cent in the fourth quarter, which seemed not likely, given the focus on fiscal consolidation. It estimated the expenditure to grow 9.6 per cent in the year.

The agency also said it expected net exports to grow in the fourth quarter, instead of contracting as calculated in the advance estimate. This would have a positive impact on overall GDP growth. Segment-wise, the rating agency did not expect industry to have grown 5.9 per cent in the year as had been calculated by the advance estimate. It outs this at 5.4 per cent.

However, it pegged services sector growth at 10.5 per cent, close to the 10.6 per cent in the advance estimate. And, agriculture expansion at 1.1 per cent, the same as was calculated by the Central Statistics Office.

A full 40,000MW of stalled projects are due to start production soon, which will increase installed capacity from the present 260GW to 300GW:
Power reforms gain ground in states

Crumbling under decades of accumulated losses, outdated technology and waking up to the fact that power supply decides who stays "in power ", several states are reviving their power transmission and distribution infrastructure.

With demand falling way short of supply, it is clear that this is a problem that needs to be fixed urgently. The country's power generation capacity has reached 295,000 Mw, but 4 million households are still un-electrified. To meet the challenge, states are earmarking substantial amount of money for strengthening supply and availability of power.

Jammu & Kashmir, for instance, has become the first state to come out with a separate budget for the power sector. The state, which faces a power deficit of more than 5.5 billion units annually, plans to tap its natural resources to generate 9,344 Mw of hydro power and has allocated Rs 2,500 crore for its evacuation in 2015-16. "The requirement of the transmission sector for the entire state from the '24x7 Power-for-All' perspective works out to approximately Rs 4,054 crore. The total plan for transmission sector thus would be Rs 6,554 crore," the state's power budget said.

Uttar Pradesh Chief Minister Akhilesh Yadav in his budget for 2015-16 has promised 22 hours of power supply in rural areas and 24 hours in urban areas by 2016. He has also promised to ramp up supply to 21,000 Mw from the current 10,000 Mw. With the state polls bound for 2017, this could be political gimmickry but industry is taking it seriously.

Odisha has proposed to build 4,300 transformers, 860 km high-tension and 1, 260 km low-tension transmission lines during this financial year and has allocated Rs 310 crore for the construction of 550 sub-stations and to upgrade its distribution system.

Along the same lines, Madhya Pradesh has increased its provision to the power sector by Rs 1,718 crore over last year, taking the total budgetary allocation for generation, transmission and distribution to Rs 9,704 crore. It is also planning to strengthen its grid system to support the huge step up in renewable power generation: from the current 1,400 Mw, it plans to scale up production to 3,733 Mw.

With around 40,000 Mw of stranded power capacity likely to go on stream soon with coal and gas supplies being sorted out, there is a crying need for a strong grid to carry the increased power supply. Steps are already being taken in this direction.

"There is a lot of business coming in for engineering, procurement and construction companies from Uttar Pradesh, especially its eastern part, Bihar, Odisha, Telangana and the North East," says Sunil Mishra, director general, Indian Electronics & Electricals Manufacturers' Association (IEEMA).

It looks like 24x7 power by 2019 will indeed be substantially accomplished. The remaining hurdle is not lack of investment in production, but in transmission and distribution.

[Cosmo_R]

NaMo is on record as saying 60% of India's population is involved in farming and produces 13% of its GDP.

Add to this :

"The farmers are going to make money from acquisition which is 25 times or maybe 100 times more than they're going to get from farming in perpetuity," said Chakravorty, the Temple professor, who wrote the book "The Price of Land: Acquisition, Conflict, Consequence."

http://www.ndtv.com/india-news/oppositi ... ort-748828

And you have an explanation of why you cannot lift 300MM out of abject poverty.

The opposition worthies in the RS may understand but it is more important to be seen 'pro-farmer' even when the farmers are destined to lose.

The US is successful in agriculture because 85% of US farms are owned by corporates. One bad (or even many) season(s) don't kill them. Deep pockets.

How can this work in India where land ownership is sacred even if you owe the moneylender and your crops fail and you have to kill yourself condemning your wife and children to servitude ?

JMT leaseholds. Farmers lease their land for 100 years and in exchange get cash equal to 20% of the land value plus annual rent equal to 110% of what they would earn from farming plus a job that pays them but requires them to turn up and trains them in downstream skills.

This is not just to facilitate land acquisition, it is to reallocate human capital to realign it with GDP creation.

Not gonna happen. The pols greatest weapon is exploiting Indian farmers.

[hanumadu]

GST from Jan 1, 2016: Arun Jaitley

Union finance minister Arun Jaitley on Tuesday indicated that Goods and Service Tax (GST) could come into force earlier than expected. Addressing a gathering at Tagore Hall in the city on the occasion of the Modi government completing one year, Jaitley said that GST could be implemented in the country from as early as January 1, 2016.

[amit]

Amit, thanks for those two references. They clearly take on the argument of 'food processing will make food expensive for poor SDREs' claim.

Suraj,

Your welcome. The supply side bottleneck which the current government is trying to solve is only part of the problem of what ails our agriculture. The other, IMO, is the outdated policy measures. It's instructive to compare Chinese agriculture with that of India. One striking similarity between the two countries is that both have very small farm sizes, in fact average Chinese farm sizes are marginally smaller than Indian ones.

And yet productivity is streets ahead and some of the policy reasons for this would surprise many here as these very prescriptions are decried as being anti-farmer!

Here's a slightly dated but still relevant comparative analysis which has a number very interesting insights/nuggets:

COMPARATIVE STUDY OF AGRICULTURE IN INDIA, CHINA AND US

Some excerpts:

Although, in both countries the major emphasis is on rapid industrialization because of the predominantly agrarian nature of the economies, the agricultural sector provides the basic foundation for industrial expansion with supplies of food, raw materials, and labour, with markets for industrial goods and with foreign exchange earned through exports of primary products.

However, while India’s agricultural sector is growing by about 2.5 per cent; China’s has been steadily growing at between 4 and 5 per cent over the last 15 years. By 2005, China had in fact emerged as the world’s third largest food donor. China with lesser cultivable land produces double the food grains, at 415 million tons per year compared with India’s 208 million tons per year

According to the Food and Agricultural Organisation (FAO), the average yield of rice in India between 2003 and 2005 was 3,034 kilograms per hectare. In contrast, the comparative figure for China was more than double at 6,233 kg/ha. For wheat the corresponding figures were 2,688 kg/ha for India compared to 4,155 kg/ha for China, while for rape and mustard India averaged 909 kg/ha to China’s 1,778 kg/ha. For rice the trend rise over 15 years leading up to 2005 in India was only 1 per cent, less than half of China’s 2.1 per cent. According to statistics from the International Rice Research Institute, India produced 124 million tonnes of rice compared to China’s 186 million tonnes in 2004, despite having almost doubled the area under paddy cultivation (42 million hectares vs. 28 million hectares). Regarding rape and mustard, the trend rise in China marked an even larger stride — 3 per cent compared to the India’s mincing step forward of 0.6 per cent. Other crops such as wheat and groundnut reveal similar trends, with China well in the lead.

The widest divergence between India and China, however, is in the profitable horticultural sector with the production of fruits and vegetables in China leaping up from 60 million tonnes in 1980, roughly comparable to India’s 55 million tonnes at the time, to 450 million tonnes in 2003, way ahead of India’s corresponding 135 million tonnes. China’s added advantage lies in the more diversified composition of its agricultural sector, with animal husbandry and fisheries accounting for close to 45 per cent of the total in 2005, compared to less than 30 per cent in India. China has thus clearly developed a more diversified set of instruments than its southern neighbour for increasing net farm incomes.

Written by a team headed by C. Rangarajan, the report points out that Indian agriculture is placed favourably when compared to China in terms of quantity of agricultural land (161 million hectares vs. 130 million hectares), irrigated land (55.8 million hectares vs. 54.5 million hectares), average farm size (1.4 hectares vs. 0.4 hectares) and farm mechanisation (15.7 tractors per 1000 hectares vs. 7 tractors per 1000 hectares). Thus most of the usual excuses for India’s poor agricultural performance do not hold up when it is compared to China.

The reasons for China having outperformed India in agriculture are threefold: technological improvements accruing from research and development, investment in rural infrastructure and an increasingly liberalised agricultural policy.

In China, the Central government invested RMB 12 billion ($1.5 bn) in agricultural research in 2006, up from RMB (Renminbi means, the people’s money, is the currency of China, is also called Yuan. 1 dollar = approx. 6.9 RMB/Yuan) 4 billion in 1995. The country currently has over 1,000 R&D centres devoted to agriculture and there is a huge push towards developing new strains of plants. Some two-thirds of all cotton grown in China is BT cotton and nearly 100 per cent of paddy is of a modern variety. {Remember the opposition to BT Cotton in India?} According to the China Agricultural Year Book 2005, the Chinese authorities received and assessed as many as 2,046 applications for the registration of new plant varieties in the five years between 1999 and 2004. In contrast, despite India having the largest number of agricultural scientists on the government payroll in the world — over 30,000 — their research track record has been so abysmal that India’s current agricultural productivity is roughly equal to what China achieved in the mid-1980s.

Far from developing new strains, the number of field crop varieties released by the Indian Council of Agricultural Research (ICAR) actually fell by 50 per cent between 1997 and 2001, despite the fact that there was a sharp and sustained increase in funding for the organisation. One reason for the poor results of India’s R&D in agriculture is the state of the country’s agricultural universities. According to a report, 90 per cent of the Punjab Agricultural University’s budget is eaten up by staff salaries with only 3 per cent going to research.

In contrast, most agricultural research centres in China must use Central government funding purely for research. Funds relating to salaries and other administrative incidentals must be covered by funds generated by the centres themselves. The centres and their scientists are thus encouraged to engage in joint ventures with private sector companies to form commercial spin-offs from their research. {Remind me which is the Communist country and which is the Free Market Capatalist country}

And here lies the nub of the difference:

In contrast, the main form of government assistance to farmers has been through subsidies rather than investment in India. Unlike India, China does not provide its farmers with subsidies for fertilizers or power. The RMB 340 billion ($44.7 bn) spent on rural agricultural investment by the Chinese government in 2006, only about 5 per cent was by way of subsidies.

“There is some debate regarding subsidies and their utility in China, but the government realises that on the whole subsidies are against market reforms. They distort the market as well as reduce resource efficiency. China’s relative agricultural success to an increasingly liberalised farm policy with a focus on “efficiency as much as on equity.”

[amit]

FDI may be allowed in sectors with high employment scope

Hinting at opening up of more sectors to foreign investment, Prime Minister Narendra Modi on Wednesday said areas with high employment potential and strong local talent would be the focus to woo foreign investment and expressed confidence that reforms measures like the Goods and Services Tax (GST) and land acquisition Bill will be passed in "a matter of time".

"Wherever there is high employment potential and wherever we have strong local talent, for example, in research and development: those will be the areas of focus for foreign direct investment (FDI).

This sounds like geek speak for allowing FDI in retail.

You really can't find a more labor intensive sector/vertical!

[amit]

And you're disconnecting industrialization from income growth. The process of industrializing the food supply chain itself leads to income growth for those involved in the business, who primarily constitute the bottom of the income pyramid as well. You're doing the equivalent of arguing with Henry Ford - "don't build cars because people can't afford it now. Wait until they can." That's not how it works. As that experience demonstrated, the very process of creating an infrastructure to create cars put people to work at earning a formal income, which lets them afford goods, including food.

The process of industrializing food procurement, transport, storage and distribution itself puts to work people who otherwise lead a marginal existence . Such an infrastructure will connect every food procurement region, because it depends on feeding the food production into the supply chain.

Suraj,

To add to your excellent point. It may seem counter-intuitive but a system whereby we eliminate the middleman and thus ensure farmers get better prices for their produce may be the best way to get people off the land and into factory jobs.

Better prices means better standards of living and this would translate to better education for their children. And better educated children can result in them leaving the farms and going into better paying jobs.

We need to reduce the number of people dependent on agriculture. 60 per cent of 1.2 billion is a very large number and this number contributes just 13 per cent to GDP. Our hopes of becoming a top global economy will be severely hampered unless we can do either of two things (actually preferably both things together): Either reduce the 60 per cent number or dramatically increase the 13 per cent number.

[Suraj]

Yes, the problem with agriculture is that the government and political apparatus stands in the way of reform. ITC long back implemented a forward thinking e-choupal initiative to modernize food procurement, but that was only one effort and it is still a long way from being a nationwide system of online access to mandi prices. Reform of the procurement, processing, storage and distribution has to be government-led.

One can debate just how to accomplish this, but as long as it works, it's a worthwhile effort. The current system generates far too little income to the farmers who constitute most of the poor, and the lack of sophistication in handling and distribution means they are themselves subject to the effects of chronic food price inflation driven by a system that pays them too little and wastes a large part of the procurement before it can be sold to the consumers, which includes the farmers themselves.

High and chronic food price inflation is both a political and economic issue:



This is not a symptom of lack of demand. Demand destruction generates deflation, not chronic inflation.

[Suraj]

The 2014-15 GDP data will be released in a few hours. Here are the predictions:
Markets wait for 2014-15 GDP data

The Central statistics office (CSO) will release the gross domestic product (GDP) data for the January-March quarter and full year 2014-15 on Friday.

According to CSO's new GDP data, with 2011-12 as the base year and a methodology allowing for gross-value added, the Indian economy expanded by 6.9 per cent in 2013-14 and for 2014-15, growth is estimated at 7.4 per cent.

In a report released on Thursday, Moody's Analytics, the research arm of global ratings agency Moody's, said that India's GDP growth rate fpr the last quarter of 2014-15 (January-March) is likely to slip to 7.2 per cent from 7.5 per cent in the previous three months, mainly on account of lower production and weak global demand.

Cut Centrally Supported Schemes to 20-25 from 66 now: CMs

In a proposed revamp of centrally sponsored schemes, NITI Aayog’s sub-group of chief ministers on the issue has decided to recommend lowering the number to 20-25 from the existing 66.

Officials said the meeting, chaired by Madhya Pradesh’s Shivraj Singh Chouhan, felt the central share in all CSS should not be less than 50 per cent. And, the funding pattern should stay unchanged for the next five years. At present, the central share in CSS varies from 90:10 to 70:30.

The Centre wants states to fund schemes more, after the 14th Finance Commission recommended an increase in their share of the divisible pool of central taxes to 42 per cent for a five-year period starting from this financial year from the earlier 32 per cent.

The CMs’ have also proposed that the amount of funds in each CSS on which states would have the discretion of spending within the broad objective of the main programme, termed ‘flexi-funds’, be raised to 25 per cent.

A committee on reforming the CSS, formed under the chairmanship of former Planning Commission member B.K Chaturvedi during the previous UPA government, had suggested such flexi-funds be fixed at 10 per cent for each flagship scheme and 20 per cent for non-flagship ones.

The Chaturvedi panel had also recommended bringing down the total number of CSS to 59, including nine flagship ones, from 147 then. The final agreed number was 66. Officials said the Chouhan recommendations are that in all other schemes apart from the 20-25 CSS, states have the option to continue with or drop these, as central funding won’t be available. So, schemes in which states do not see any merit and where central funding is not available might not be run.

The committee has further decided that there be a sub-scheme in all main schemes, which would not be mandatory for states to follow. For example, under the Krishannoti Yojana, some of the sub-schemes are Rashtriya Krishi Vikas Yojana and National Food Security Mission. Under the Pradhan Mantri Krishi Sinchaee Yojana, there are the Accelerated Irrigation Benefit and Flood Management programmes. The states will have an option of not adopting any of the sub-schemes, depending on their priorities.

Government looking to award projects worth Rs 3.5 lakh cr ($57 billion) in next six months: Gadkari

The government has set an ambitious target of awarding highway projects worth Rs 3.5 lakh crore in the next six months, Union minister Nitin Gadkari said on Thursday.

“Infrastructure plays a pivotal role in bolstering the economy and Finance Minister Arun Jaitley has requested us to increase our targets to award Rs 3.5 lakh crore highway projects in the next six months. Given the huge projects in the road, transport, highways and shipping sectors, I am confident that in two years time we will be able to create 25 lakh new jobs. The concerned ministries have entered into a pact with the ministry of skill development for this,” Gadkari said, addressing a press conference in New Delhi.

The minister said 1,231 projects for 37,000 km are on the cards. He added things were also looking up on PPP (public-private-partnership), as a large number of bidders have come for the Solapur-Bijapur, Shivpuri-Devas, Raipur-Bilaspur, Hospet-Chitradurga and Delhi-Mukarma highways, while Larsen & Toubro has bid below 20 per cent of the estimated cost for the Reva to Jabalpur road.

“The highway sector was facing a crisis of confidence and all stakeholders were mired in doubt when we took over but investor confidence has revived. Public-private partnership is picking up; the private sector is evincing interest and there is a major turnaround,” he added.

The ministry is planning to provide better connectivity to places of religious importance such as the Shriram Circuit, Buddha Circuit or Ajmer Sharif, he said. Prime Minister Narendra Modi will flag off during Dussehra a Rs 1,100-km Chardham project worth 11,000 crore to connect Yamunotri, Gangotri, Kedarnath and Badrinath.

“We will also build 5,000-km of roads all along the borders and coastal areas under the ‘Bharat Mala’ project at a cost of Rs 55,000 crore,” he said.

On funding, he said the government was keen on selling 5,000 km road projects worth about Rs 1 lakh crore, which it completed on engineering, procurement and construction (EPC) mode.

[Gus]

More than supply being less, it is supply being unpredictable that causes bull-whip effect. anybody into MRP planning would know that this is what kills lead times and throws all pricing calculations out. because we have many hands between farmer and consumer, effect is even more pronounced.

steadying the supply chain will pay huge dividends.

[RamaY]

With Agri-economy, we are trying to solve multiple problems:

1/ 50-60% of population is still depends on agriculture (one way or the other)
2/ The efficiencies that industrialization brings often don't go to farmers
3/ Reduced food prices means 50-60% Indians can afford three-meals a day
4/ Reduced food prices means 50-60% of Indians get lower incomes


Suraj, any feedback on my article? I think it would be more effective if we share it sooner than later, given the debate on LAB.

[amit]

With Agri-economy, we are trying to solve multiple problems:

1/ 50-60% of population is still depends on agriculture (one way or the other)
2/ The efficiencies that industrialization brings often don't go to farmers
3/ Reduced food prices means 50-60% Indians can afford three-meals a day
4/ Reduced food prices means 50-60% of Indians get lower incomes

RamaY,

IMO No4 is not an entirely accurate assessment. Reduced food prices will come from lower distribution loss and from eliminating the exorbitant profits siphoned off by middlemen. In a new and more streamlined system the farmer (that is the 50-60% of Indians) may get more money despite lower food prices.

Suraj mentioned the ITC e-coupal. I remember at that point of time - where there was a lot of optimism in this sector - a lot of corporates were getting into the business. In some areas - for high value added crops - these corporates supplied the seeds and pre-booked harvests with an advance payment to many farmers. Naturally this gave a level stability that small farmers had never experienced before.

Unfortunately it was at this point of time that the powerful lobby which controls the mandi system got scared and started a political agitation against organised retail which scared all these corporates away.

[RamaY]

Amitji,

Searching for a recent article on the farmer's share of cocoa/chocolate industry and how the share of farm-level product reduced over time in this industry.

There are many studies on how duper-efficient logistics & food processing industry doesn't help the farmers unless farmers are the ones who own the entire supply chain.

That would be a better & smarter approach for India as it tries to increase the share of agriculture to 33% of GDP.

[amit]

Amitji,

Searching for a recent article on the farmer's share of cocoa/chocolate industry and how the share of farm-level product reduced over time in this industry.

There are many studies on how duper-efficient logistics & food processing industry doesn't help the farmers unless farmers are the ones who own the entire supply chain.

That would be a better & smarter approach for India as it tries to increase the share of agriculture to 33% of GDP.

Two points:

1) How do you propose that the farmers would be able to own the entire supply chain? Do you agree that an efficient supply chain is a very specialised and technologically driven system that involves many parts like cold storages, supply trucks, inventory control and tracking and retail access, among others?

2) Why do you want to increase the share of agriculture to 33 per cent of GDP - is that sustainable? Say India has a $5 trillion dollar GDP in 2020-25, you are looking of $1.65 trillion agricultural output? Is that even feasible both in terms economics, land availability and more importantly in terms of ecological sustainability (just think about the amount of fertilizers and pesticides that would be needed)?

In every economy in the world, GDP growth has been manufacturing and services driven after it passes the $1 trillion threshold. I'm sorry but IMO your proposal is simply not feasible.

PS: I always hear about how "there are many studies" which show that efficient agricultural supply chains harm farmers. There are two things in life I'm searching for. One is my own Cheshire cat and the other is some credible reports on why "duper-efficient logistics & food processing industry doesn't help the farmers".

[RamaY]

1. Efficient supply-chain need not be a complex and heavy-investment concept. This is where Govt comes into picture. I hope GoI develops a agri-cloud where millions of (cheap - <1Rs/transaction) services come together to optimize the farmer's ownership of entire food processing supply-chain.

2. Why not? In fact this is NaMo's vision. He wants the economy to be split between Agri-Industry-Services equally (33%) each. This requires redefinition of Agri-sector. I have written an article on this and it is currently with Suraj for review to be included in SRR/BRM. Per my definition, yes a $2T-$5T agri-sector GDP is feasible.

We need to stop thinking linearly from western models and define our own indic paths towards wealth creation.

PS: I will post those articles in Agri-thread one by one... Pls be patient.

[Suraj]

Between 2003 and 2014, the share of agriculture in GDP fell from 23% to 13% . It's going to keep falling, because services and manufacturing grow at 5-10% per year, and agriculture grows at 3-4% in a good year.

Meanwhile, India has consistently been the #3 steel producer so far this year, progressively catching up with Japan, and the only major economy to have positive steel output growth:
India outpaces others in steel output

Even as steel production is on the decline globally, owing primarily to falling Chinese output, India remains the only exception among the major producing nations. According to World Steel Association’s recent data, India’s steel production grew by an impressive 6.7% in the first four months of the current year vis-à-vis a decline of 1.3% in China, the highest producer by a wide margin and 1.7%, globally.

India, now the world’s third largest producer, produced 29.97 MT steel during the January-April period of the current year compared to 28.09 MT in the same period a year ago. China’s production fell to 270 MT from 274 MT a year earlier. Output in Japan fell by 3.7% to 35 MT during the period. Production in the US also dipped by 8.5% to 26.3 MT in the period. Global production came down to 536 MT in January-April from 546 MT a year ago.
In April also, India’s steel production growth remained in the positive terrain while decline in output in all other major producing nations. Production in China, Japan and the US fell by 0.7%, 6.1% and 9.8% respectively.

[amit]

1. Efficient supply-chain need not be a complex and heavy-investment concept. This is where Govt comes into picture. I hope GoI develops a agri-cloud where millions of (cheap - <1Rs/transaction) services come together to optimize the farmer's ownership of entire food processing supply-chain.

I'm eagerly waiting to read your articles. The above needs to be fleshed out because IMHO as it stands now it looks like a pie in the sky concept.

2. Why not? In fact this is NaMo's vision. He wants the economy to be split between Agri-Industry-Services equally (33%) each. This requires redefinition of Agri-sector. I have written an article on this and it is currently with Suraj for review to be included in SRR/BRM. Per my definition, yes a $2T-$5T agri-sector GDP is feasible.

I don't know if this is Modi's vision. I just hope it's not because it's simply not sustainable. Do you realise the numbers? If we take the $5 trillion by 2020-25 benchmark which I mentioned in my previous post, agriculture - which at the moment accounts for around $260 billion or so - would have to grow 7-8 fold at the minimum to become 33 per cent of the GDP. Is this feasible over a period of 5-10 years?

Also, you did not answer my question. Given India's land area and the amount of arable land we have do you think that a $1.65 trillion agricultural economy is sustainable - from an ecological point of view?

We need to stop thinking linearly from western models and define our own indic paths towards wealth creation.

An alternative to western models is always welcome, provided they are feasible models and not just the result of someone's gleam in the eye.

[Suraj]

I can't see agriculture contributing 33% of GDP going forward, unless we reclassify the entire food processing and restaurant business as primary sector rather as a combination of secondary and tertiary sector activities as it is now. In other words, substantial (but nowhere close to 33%) gain in share can really only come out of statistical reclassification.

[member_28397]

http://economictimes.indiatimes.com/new ... 471403.cms

Q4 GDP growth at 7.5%; economy grew at 7.3% in FY15

[RamaY]

Suraj/Amit,

That's why I said we need to define Agri-sector properly.

Economic activity will be what it is.

We can either define Agri-sector in narrowest terms and take everything else into industrial/services sectors and move the labor force accordingly.

Or we can define Agri-sector in much broader terms and bring the necessary skills, processes and infra close to labor force.

I am recommending the 2nd approach because that is how Agri-sector was defined in India traditionally. Secondly it will avoid costly human migration & civic infra development issues.

One may wonder what industry means then? Everything associated with minerals, metals, engineering, MIC falls in to industrial sector.

[panduranghari]

Rama Y,
Please search for Hindu Yajmani System by William Wiser. It will give you a different perspective. Certain things cannot be changed. As long as we have Jaati we will have combined occupations. One can be a farmer and something else, simultaneously. And vice versa.

[RamaY]

OK, with due apologies to Suraj here is my draft article.

Indian Agriculture Sector, at Cross Roads!

As the gods of nature disfavor their source of identity and livelihood, a major section of Indians who are associated with the agricultural sector are standing at the cross roads of despair, revolution, vision and opportunity. The political fortunes associated with this ill-informed majority are attracting all varieties of shrill-politics further muddying the national debate on this key aspect of national interest. This article attempts to present various dimensions of this national problem so readers are better informed and contribute towards a more positive debate and a purposeful national strategy. The need of hour is a national vision that views India’s agricultural sector as an opportunity and not a cynical political ideology that tries to throw this ill-informed sector into rhetorical despair and worse to rebel against a democratically elected government.

India’s Agri-Sector problems are multi-dimensional and are impacting both bottom-line efficiencies and top-line opportunities of national development. Each of these dimensions require a focused study on their own and when intertwined the way they are, require even more careful strategic management. Superficial analysis of such complex problems will lead to wrong understanding of the problem and knee jerk strategies will lead to long term harm to national interests.

Definition of Agriculture
First of all there is no comprehensive definition of and policy on agriculture sector in India. There is no clarity on whether fisheries, poultry, animal husbandry, medicinal herbs, commercial timber and other forest products fall under the ambit of agriculture sector and there is very little policy on how to address the natural interdependencies of all these sub-sectors. For example, a sudden change in a region’s agricultural produce (say from rice to medicinal herbs or commercial timber) may have devastating impact on that region’s animal husbandry eco-system or a policy decision to encourage beef-production/exports may cause extinction of low-milk producing but draught-tolerant native cattle species causing permanent damage to our eco system. By understanding the eco-system as a whole and designing a healthy mix of agricultural products and practices India can identify new top-line opportunities in agriculture sector thus making it a pivot of India’s transformation towards a renewable economy.

Food Security of the nation
Second dimension of this problem is food security of the nation. Not all sectors of nation are suitable to pursue blind comparative advantages. Food security of the nation is one such area. While India achieved food-production self-sufficiency decades ago, one third of Indians are still suffering from mal-nutrition. A solution for this chronic national problem has to travel on a sound logistical and food-processing roadmap, achieving this necessary bottom-line efficiency.

Farm Size and Ownership
Another core aspect of India’s Agri-sector landscape is the farm size. A study conducted by S. Mahendra Dev presents that “there were about 121 million agricultural holdings in India in 2000-01. Around 99 million were small and marginal farmers. Average size has declined from 2.3 ha. In 1970-71 to 1.37 ha in 2000“[1]. Given this scenario there are two approaches to reduce the labor force involved in this sector – (a) make the mechanical farming accessible and affordable to the small farmers or (b) allow people to accumulate large farms to absorb high-cost mechanization. Unfortunately the second strategy goes against another socio-economic policy called “Land Ceiling Act” which limits the agricultural land ownership at 5-45 acres based on various factors. Those who want to mimic the success of agricultural reforms in countries like USA must remember the fact that the average farm size in America was 147 acres in 1900 itself.

Labor Force excess-capacity
Then there is the problem with labor excess capacity in farming sector. Studies put nearly 60% of 600million labor force to be dependent upon the farming sector. At this point, it is important to remember that not all this labor force is involved in farming sector not out of choice but due to lack of skills and opportunities to move into industrial and service sectors. Reducing the percentage of labor force in Indian farming sector to the levels existing in industrial nations would mean facilitating a transition of nearly 300 million working-age labor force into industrial and service sectors. To put things in perspective this is like building a new America ground up in India without adding a single inch of land or natural resources.

National Sample Survey Office (NSSO) studies estimated that nearly 60 million jobs were created between 1999 and 2004 whereas only 15 million jobs were created in next eight years (2005-2012). Assuming that Modi government repeats the performance of previous NDA1 government it would take at least 25 years (that is from 2015 to 2040) to transition the labor excess capacity from farming to industrial/services sectors, that too if we freeze the population growth and demographic trend at today’s levels. But, given current demographic trends of Indian population, India will add more than 350million people into working age while losing only 150 million people to retirement age thus adding an additional dimension (of 200 million labor force) to agri-sector labor excess capacity problem. The underlying fact of this dimension is that India has to live with its farming-labor excess capacity for at least next 20-25 years irrespective of how fast it will industrialize and majority of these people are in 40-70 age group, thus are too late in life to acquire new skills.

I have done a study in 2010 (posted in Bharat Rakshak Forum [2]) and calculated that it will cost up to $2 trillion to retrain and employ 150 million agricultural sector labor into industrial sector. This cost estimate covers both retraining costs and the capital required to setup industries to provide permanent employment. If the target is to transition 300 million work force then the cost would double to $4 trillion, two times current GDP of India.

Another question yet to be answered is what will this gigantic industrial base consisting of 200+ million labor force produce, what is the amount of resources it requires to process annually and who will consume its production? This is where the three slogans make in India, Made in India and Made for India have to merge and transform into India’s national power.

Genetically Modified Organisms Vs Organic Products
An additional technological and even ecological problem we need to solve is should Indian farming sector take the path of GM crops or Organic farming. Interestingly majority of cotton farmer suicides in India are attributed to the so-called “GMO-terminator” cotton seeds or their fake cousins. On the other hand the developed world is reinventing the Organic farming for its real or perceived health benefits and long-term health cost-savings. If India decides to take the GMO route, it needs to develop and build the necessary scientific and industrial base. If India decides to take the Organic road then it needs to detoxify its farming community, which is chronically addicted to chemical fertilizers and pesticides. Given the fact that farming sector also includes aqua-culture (fish, prawn farming) and animal farms, India needs to alter its land usage for different types of crops (Fish/Cattle feed Vs grains/vegetables etc.). Each choice impacts Indian farming sector in a fundamental way and need lot of work to reach the final goal. This dimension of farming sector can open new top-line opportunities in terms of long-term health and ecological benefits to India.

Price support, Food storage and WTO
Another key aspect of Indian farming sector is the pricing mechanism. There is no scientific analysis on the total economic cost of each crop and what the price of the produce should be. Often the price of farm produce is determined by the logistical and political inefficiencies than cost to produce. For example, after setting consumer preferences aside, a kilo of beef costs fraction of its calorific equivalent of vegetable food grains because there is no cost accounting of materials required to produce a kilogram of beef compared to other food products. Often the farmer doesn’t even get a fraction of consumer price for his produce just because the farmer doesn’t have awareness of or necessary logistical access to demand side.

The Objective

I urge the readers to not to fall into pessimism after reading above data. The larger the problem, the bigger the opportunity. I believe that current state of India’s farming sector is a boon to India’s national interests because it has the potential to majorly contribute towards a multi-faceted socio-scientific revolution that India desperately needs to get out of the quick sands of triple colonization the nation went thru in the past 1400 years. Only a mind that is firmly rooted in local flora-fauna that can think out of the western-box can propel a well-rounded development of India in next coming decades.

This is where the national vision comes into picture. Modi government correctly identified that Indian Agricultural sector can be and must be turned into a national asset from a drain on national resources and reservoir of national poverty.

The stated goal of Modi government is to increase the share of agricultural sector in national GDP to 33%. Given the exponential growth India is poised to experience in next couple of decades (a 7% annual growth projects India’s GDP in 2040 will be 5 times that of today), this means two separate goals to the farming sector.
1. Increase share of farm sector in national GDP from current 18% to 33%. That translates into a farming sector GDP of $660B instead of current $360B in 2015 terms.
2. Maintain share of farm sector in national GDP at 33%. This means the farm sector GDP continues to grow at the rate of rest of economy.

Once achieved, these two goals will allow at least 33% of labor force to continue agriculture sector while maintaining comparable per-capita incomes with those in industrial and service sectors. At one go this vision reduces the burden of labor force transition by a whopping 100 million, reducing the timeline of labor excess capacity transition by 10 years (from 25 yrs. to 15 yrs.). The savings achieved in the process (~ $1.5 trillion) can be diverted to transform Indian farming sector to build a renewable national economy.

The Roadmap

Given various dimensions of agriculture sector and the stated goals of Modi government for this sector, we can identify following opportunities for the nation as a whole.

Unified Agriculture Sector definition, vision and policy
An opportunity opens up for the nation to integrate all forms of agriculture into one sector and identify synergies between various sections of agriculture. For example the definition of a farm can include, but not limited to, a solar farm that doubles as cattle-shed, a cattle-farm that doubles as captive organic-fertilizer factory, a farm that contains a mix of commercial timber, bio-diesel plantation, food-grain field and vegetable-farm and so on; the possibilities are endless. Such a definition would facilitate long-term large capital induction into farming sector that is not available today, because diverse product base in the farm will reduce overall risk profile of farm loans.

Farm Ownership and Land Acquisition Bill
For Indian society land ownership is not just a financial aspect but a socio-cultural aspect. There are historical reasons emanating from its prolonged fight with colonial ideologies and entities behind it. The spiritual and emotional attachment Indians have to land is similar to their emotional attachment to gold; land is Sri Bhudevi and gold is Sri Lakshmi both consorts of Sri Mahavishnu. So anyone or any policy perceived to be cutting this emotional bonding will be seen as an agent of yet another colonial player or agent.

In its current form the Land Acquisition Bill offers a onetime non-reversible financial transaction to acquire land from current owners. A better approach can be to provide more flexible options to the land owner such as (but not limited to)
- Land will be acquired permanently for roads and other public infrastructure but 99 year land lease agreement for industrial sector. This will address the perception that land is being transferred to corporate owners.
- Equal amount of land swapping within a meaningful distance (say 10KM) for farmers who are not interested in losing their agricultural land holdings.
- Flexibility for the land owner to choose one time cash transaction or a mix of at-face-value shares in the SEZ/Industry to be setup. This can also include the economic benefits from public infrastructure.

The Land Acquisition Bill will get better approval and traction from land owners if its focus changed from changing the land ownership to facilitating the land owner from one economic sector to another along with their land holding. This will create new opportunities for the people to transition from one sector to another without losing their financial and most importantly emotional attachment with their land holdings.

Reorganizing Agriculture Sector Labor Force
Agriculture sector labor force is not a single monolith and consists of many, often conflicting, interest groups. Remember that 99 million out of 121 million agriculture land holdings are small and marginal farmers, with an average land holding size of 1.37 hectares. Then there are millions of farmers who don’t own land but rent/lease land for farming in addition to many more millions of daily laborers. The farm sector employs people as young as 12 years all the way to octogenarians.

There is a great need and opportunity in developing a national registry of all our agricultural labor force and do a detailed analysis based on demographics, region, skills and economic status. Effective land reforms, skill development and re-employment in non-farming sector must happen only with an accurate understanding of the labor force.

Various government schemes and policies can be utilized to reorganize farm sector labor force in most effective manner. Following some ideas (not limited) that can be used in this process
- Bring farm labor above a certain age group in to newly unveiled Social Security scheme in such a way that they live above poverty line.
- Identify suitable non-landowning labor for skill development and reemployment using MNREGA like schemes.
- Recent economic survey [3] puts the amount of agricultural subsidies (not including Railways, fuel, electricity and water subsidies) at more than Rs 235,000 Crore per year. This works out to be an annual subsidy of Rs 23,500 for those 100 million small and marginal farmers. By monetizing this subsidy into a long-term loan contracts the farming sector can get necessary capital resources to transform itself into a renewable economy.

Ecological Security for Food Security
Nature, by definition, is manifestation of the optimized ecological balance of a given region. By extension of that definition, Indian eco system is the most optimal balance of regional conditions. India’s long-term survivability and success comes from developing on this natural balance than from disturbing it. Indian crops, fisheries, cattle etc. evolved, by natural selection over millennia, to survive and sustain in local conditions in most efficient way. The human aspect of our great civilization can prosper by designing its own vision within this eco-system but not outside of it.

Studies tell us that for the humanity to live at current USA/European levels of consumption would require more than five earths. Even reaching current China level consumption would require one and half earths. Any logical mind will realize the futility of India trying to tread this path. That doesn’t mean Indians cannot achieve advanced economy levels of quality of life. The purpose of India’s progress must be to improve its human development indices with minimum amount of impact on its eco system. This is a not a difficult task at all if the national agenda and policy is built around a renewable economic model from get go.

Agriculture Sector as a renewable economy
With proper vision, groundwork and sound national policies India’s agricultural sector can give the necessary impetus to leapfrog Indian economy from agrarian-economy to renewable-economy bypassing the industrial and service steps. A renewable economy is where 100% of human socio, economic and technological prosperity comes from renewable sources and processes. The advanced economies themselves are moving in this direction because the age of human, land and industrial colonization is ending and each civilization has to live within its own natural means.

Agricultural, industrial and economic scientists must bring their brains together to identify various models to achieve target per-capita incomes at small farm levels (~5 Acres) using a mix of complementing energy, commercial-timber, animal-husbandry, fisheries, food grains and medicinal herbs farming models and technologies. Governments must change policies and laws to recognize farming sector as a small & medium business and encourage necessary innovation in this field.

Conclusion
India’s agricultural sector is a complex multi-dimensional socio-economic-political problem with far reaching consequences to its national security. Indian civilization has not just material but emotional and spiritual connection with their land holding. The problems manifesting in India’s agricultural sector are also a reflection of problems in other sectors. Proper understanding of national vision, overall civilizational needs and objectives is required to realize the underlying opportunities and possible solution strategies.

An effective strategy and efficient execution of national vision is a must to achieve a purposeful transition of labor force excess capacity from farming sector to other sectors.

Modi government, as articulated in different forums has set the right national vision as far as agricultural sector is concerned. Different policy decisions made by this government are emanating from that vision to elevate farm-sector as equal partner in national economy. Schemes like JDY, Universal Social Security and farmer pension schemes are nothing but few relevant pieces of this national vision.

All the noise emanating from the political opposition is just a tactical maneuvering for its political survivability. There is no alternative vision proposed by the opposition groups except demands for continuation of those failed policies and corrupt practices.

The opposition and noise regarding proposed amendments to Land Acquisition Bill are nothing but tactical adventures by the political interests of the opposition groups. So the solution too lies in political tactics. Modi government is well advised to bulldoze its way in the parliament to pass the land acquisition bill as it is necessary to execute its national vision.

Modi government has many other forums to explain, educate, train and help the agricultural sector in its transformation in to an equal pillar of national economy along with industrial and service sectors. As its vision comes into execution the beneficiaries would be the millions of farm labor and the nation as a whole.

[Suraj]

http://economictimes.indiatimes.com/new ... 471403.cms
Q4 GDP growth at 7.5%; economy grew at 7.3% in FY15

Looks like the predictions the day before were right on target, and 7.3% for the whole year is almost exactly the same as the 7.4% predicted in the GDP advance estimate in February. This year should be even better, probably north of 8%, due to greater investment/GDP yields.
India outpaces China for 2nd straight quarter

1) India's gross domestic product grew by 7.5 per cent in the fiscal fourth quarter, beating estimates. A Reuters poll of economists had expected GDP to grow by 7.3 per cent in the January-March quarter.

2) The latest GDP number puts India's economic growth ahead of China, which grew by 7 per cent in the March quarter.

3) For the full year, GDP grew at 7.3 per cent, higher than 6.9 per cent growth the economy clocked in 2013-14, and close to the government's advance estimates of 7.4 per cent.

4) Manufacturing output grew by 8.4 per cent in the quarter to March, but farming retreated by 1.4 per cent. PM Modi has promoted a campaign to 'Make in India' and encourage labour-intensive manufacturing, but has faced opposition in rural areas where the farm economy has suffered lower prices.

5) GDP data for previous quarters were revised. First quarter GDP growth was revised upwards to 6.7 per cent; second was revised upwards to 8.4 per cent. However, third quarter GDP was revised downwards from 7.5 per cent to 6.6 per cent.

6) The downward revision in Q3 suggests some loss of momentum began in the second half of FY2015, said Shubhada Rao, chief economist of Yes Bank.

7) The GDP data for fiscal 2014-15 is based on the new series and takes into account the gross value added into the economy. Many analysts point that the GDP data should not be taken at face value. "The big picture is that the official GDP data are overstating the strength of the economy, most probably by a significant margin," said Shilan Shah of Capital Economics.

8 ) Analysts say domestic economy continues to be sluggish despite robust headline growth. Industrial activity is weak, corporate earnings are under pressure and bank credit recovery remains elusive.

9) Economists say there is a possibility of deceleration in growth before the economy picks up meaningfully. There are concerns that in the current fiscal year, the economy may not be able to grow by 8 - 8.5 per cent promised by the government.

10) The industry wants the Reserve Bank to cut interest rates on June 2, when it meets to discuss its monetary policy. The RBI has so far cut repo rate by 50 basis points in two installments in January and February 2015. Both the rate cuts happened outside the policy meeting.

The weakness attributed to the economy is primarily due to gross fixed capital formation still being weak, at ~29% of GDP currently. Robust sustainable growth needs GFCF to be in the mid 30%s or higher. It fell from ~36% to 28% over the course of the last two administrations, and is only slowly increasing again, due to the government's concerted push to drive the investment cycle.
Official CSO press release on 2014-15 GDP data

[Dipanker]

One thing I find a bit enigmatic is that despite a healthy growth rate for over two decades now, India with a nominal GDP of $2.02 trillion, is still at number 10 in nominal terms where it has been for the last 30 - 40 years. Does this mean that number 1 to number 9 economies of the word have been growing at at same pace as India? But we know that is not the case, so why is India still stuck at the number 10 position where it was 30 - 40 years ago ?

How do we explain this conundrum?

(For comparison China with a nominal GDP of $10+ trillion has leapfrogged to number 2 position. )

[Suraj]

Nominal GDP data depends on exchange rate vs USD. If you grow 10% and currency depreciates 10%, your USD GDP is effectively unchanged. For example, Russia and Brazil saw their GDP figure go through similar boom/bust periods as their respective currencies soared or cratered. The Yuan has a managed rate that they keep in a very tight band, and has continued to appreciate against the USD, which strengthens Chinese nominal GDP in USD terms.

The current focus on inflation management and fiscal prudence will improve the exchange rate gradually, which will further strengthen the nominal GDP figure. The same currency depreciation that understates GDP in USD can work as a positive, i.e. a strengthening currency serves to inflate the GDP in USD.

If you want to see a generally exchange rate normalized GDP number (among other things), look at the table of PPP GDPs.

[panduranghari]

Dipankar ji,
Read increase in GDP as improved access to opportunities for the local populace. Thus if Indian GDP increases,the local people get more opportunities to get out of poverty trap. The west may have declined in nominal terms, but the system is functional is making access available. When the people in west complain about their government taking away their benefits, it translates into decrease in access to those people of the available opportunities within those countries.

The problem with GDP measurement is thus - 2 people measuring their own weight with their own scales. The scales give them a number. The scales could be broken but they do not believe they are. When they are invited by a third person to come and weigh themselves on the scale of the third person, the weight could be different from weight they initially measured. The explanations can vary from the weight was lost from the time the last measurement was done or my lunch was heavy hence I am heavier than what I was when I last measured myself. Like UQ measures prostitution for GDP while most others do not. Like in India, there are many micro industries which are never measured like a housewife looking after her children or grandparents contributing to the care of grand children, if husband-wife are both working. The grandparent or housewife, if working in a child care facility is considered as worker contributing to the economy. However, they do not constitute anything meaningful when measured by neo-keynesians for the purpose of GDP.

The 2% Hindu growth rate measures only those industries which west could measure. The 7.3% growth rate measures only those industries the models (created by the west) measure. Though they are useful up to a certain extent, do not give much importance to it.

[Dipanker]

Except that when the economy is growing at 10% we don't expect the currency to depreciate by 10% in the same period. In fact with that kind of growth rate we would actually expect the currency to appreciate in value. In general I would assume that the relative strength or weakness of currency reflects the relative strength or weakness of the economy. I understand that Russia GDP is linked to oil prices, thus any drop in oil prices adversely affects its economy's outlook and GDP.

Yes I know the PPP based comparison but presumably nominal GDP is better suited for comparing the absolute size of the economies?

[Suraj]

Except that when the economy is growing at 10% we don't expect the currency to depreciate by 10% in the same period. In fact with that kind of growth rate we would actually expect the currency to appreciate in value. In general I would assume that the relative strength or weakness of currency reflects the relative strength or weakness of the economy. I understand that Russia GDP is linked to oil prices, thus any drop in oil prices adversely affects its economy's outlook and GDP.

There's a lot of 'in general' in your post Specifically, the exchange rate is only directly dependent on only the relative demand between rupees and dollars, which in turn is dependent on the nature of trade and investment flows between the two currencies. We maintain a trade surplus with US, but have substantial dollar demand elsewhere to pay for dollar denominated hydrocarbons and other items. If the demand for dollars continues to exceed the demand for rupees driven by our output that necessitates dollars being exchanged for rupees, the rupee weakens. Structural weaknesses in the economy despite top line growth can also affect the exchange rate, e.g. sustained higher inflation in India vs US. In other words, top line growth alone doesn't mean a strengthening underlying currency.

[KJo]

Forex reserves fall sharply by $2.3bn to $351.5bn (Bad Modi, Bad Modi)

In the previous reporting week, the forex reserves had surged by $1.745 billion to touch a record high of $353.876 billion.

The foreign currency assets, a major component of the overall reserves, were down $2.285 billion to $326.839 billion for the week to May 22, the RBI's weekly data release said.

According to DDM, 0.65% is "sharply".

[Dipanker]

The advantage of using "in general" is that it automatically incorporates all the underlying factors! Anyway, assuming that we keep growing at 7.2% rate for the next 20 years when our economy becomes a $8+ trillion economy in nominal terms, that is when we will over take the nominal GDP of Japan, Germany, France, England, Italy, perhaps earlier than that.

[Suraj]

Current GDP is ~$2.3 trillion. We are already past the Italy and Spain, and will overtake France and UK in the next couple of years, and Germany after that. See the following post with data on this thread recently: MaharathiArjun posted on April 23 2015

[Suraj]

Following the massive announcement of road projects, rail follows:
DFCC to award Rs 26,000 crore worth of contracts in current fiscal

Dedicated Freight Corridor Corporation (DFCC), the Indian Railways’ arm implementing the ambitious freight corridor project, is planning to award contracts worth Rs 26,000 crore in the current financial year (2015-16) in a bid to speed up work and meet the deadline for commissioning the Rs 81,000 crore project.

“In 2015-16 we want to finalise all the contracts as the entire funding for the project has been tied up. Five contracts worth Rs 8,000 crore for the Eastern Dedicated Freight Corridor (EDFC) and nine contracts worth Rs 18,000 crore for the Western Dedicated Freight Corridor (WDFC) are to be awarded this fiscal,” DFCC Managing Director Adesh Sharma told Business Standard.

For the construction of the EDFC, contracts worth Rs 4,000 crore were awarded in 2013 followed by another Rs 5,000 crore contract last year. “The additional five contracts this year would be for signaling and telecommunication, electrification and civil construction. Similarly, for WDFC, in order to meet the deadline we will award the nine contracts for electrification, signaling, track works and civil works,” Sharma said.

For the western arm of the project, DFCC had awarded a Rs 7,000 crore contract for the 650-kilometre Rewari and Palanpur section in August 2013. This was followed by a Rs 4,000 crore contract placed last year for electrification between the Rewari and Vadodara stretch. Sharma said the process of awarding contracts has been in sync with the pace of securing funds from multilateral agencies.

WHAT IS THE FREIGHT CORRIDOR PROJECT?

The Golden Quadrilateral linking Delhi, Mumbai, Chennai and Howrah – and its two diagonals Delhi-Chennai and Mumbai-Howrah – accounts for only 18% of the Indian Railways’ network but carries more than 58% of revenue-earning freight traffic. The existing routes of Howrah-Delhi on the Eastern Corridor and Mumbai-Delhi on the Western corridor are highly saturated creating the need for dedicated routes.

DFCC is currently constructing the 3,350-kilometre long freight corridor project including 1,800 Km as its Eastern arm between Ludhiana and Dankuni in West Bengal. The Eastern DFC comprises three phases -- Ludhiana to Mughalsarai, Mughalsarai to Sonnagar and Sonnagar to Dankuni. The Western DFC will come up between Dadri in Uttar Pradesh to Jawaharlal Nehru Port (JNPT) in Mumbai. The project, when commissioned in 2019, would take up more than 70% of the Indian Railways freight traffic on to its faster, longer and heavier trains.

THE FUNDING PLAN

The Eastern DFC accounts for around 40% of the total project cost. Phase I of the project between Khurja and Mughalsarai is being funded through 66% debt from World Bank and the rest as equity from the rail ministry. The Phase II corridor between Mughalsarai and Sonnagar is being funded entirely through the government equity while the third phase between Sonnagar and Dankuni is to be developed on PPP mode.

The World Bank is providing loan of $2.725 billion for funding the Ludhiana-Khurja-Kanpur-Mughalsarai corridor in three phases. The first phase loan of $975 million was approved for the Khurja-Kanpur section in 2011 followed by another $1.1 billion loan for Kanpur-Mughalsarai section signed in December 2014. Negotiations are currently on for the remaining $650 million funding.

The debt for the Western DFC is sourced from Japan International Cooperation Agency (JICA), the Japanese government’s funding arm. Japan is providing a Special Terms of Economic Partnership (STEP) loan of 677 billion yen extended on soft terms for forty years with a moratorium of 10 years. The first tranche of the loan for 90.2 billion yen for construction between Rewari and Vadodara and additional 266 billion yen for funding Phase II (Vadodara-JNPT) of the Corridor has been signed.

[Kakkaji]

NDA govt to give VRS to 2800 employees in 5 sick PSUs; free assets worth Rs 22,000 cr

“We have decided to close down five sick PSUs that fall under my ministry. There are three units that belong to HMT — HMT Watches, HMT Chinar Watches and HMT Bearings. The other two are Tungabadhara Steel Products Ltd and Hindustan Cables Limited,” the minister said on the sidelines of a workshop held here.

“We have decided to close them down, because since 2007 there is not production in these units and we have already spent about Rs 4000 crore only on salary and wages of the employees. How long will we continue to spend on salaries in these nonproductive units,” the minister said adding that the government will be giving an “attractive VRS package” which will be based on the pay-scales that existed in 2007.

[Kakkaji]

Push for national waterways

Calcutta, May 29: The Inland Waterways Authority of India (IWAI) is seeking greater participation from the private sector to develop the national waterways.

"We are considering offering freight subsidies and subsidies for the construction of vessels to the private sector. We are also negotiating with bankers for more credit flow to make their business model viable," he said.

Verma added that the IWAI was lobbying to categorise credit offered for the development of national waterways as priority sector lending by banks.

[Santosh]

Re: GDP - Brazil's economy contracted significantly under Dilma Roussef's socialist policies. Italy and Russia were both expected to contract anyway due to recession and lower oil prices respectively. I doubt if those two will ever catch up to us now. Brazil on the other hand is quite capable of bouncing back. But mean while Bharat will over France and Queendom. I would love to see us in top 5 by 2020. That along with urban rejuvenation and dedicated focus on infrastructure by Modi sarkar will make Bharat a good place to be in.

[Dipanker]

Our goal should be to #3 in nominal terms and narrow the gap with China who has left so far behind.

[Suraj]

If we continue to maintain focused economic policies - constant reform, a strong investment cycle, price stability and exchange rate stability, all of which GoI is already pursuing, my own expectation is that we'll go into the next election cycle in 2019 with a GDP between $3.7-4 trillion, which would put us at either #4 or #5 on the nominal list, depending on how Germany does in the same period. This presumes moderate inflation, growth between 7-10% and practically no appreciation in the rupee vs dollar. any appreciation of the rupee would likely mean the figure would be at or above the upper end of the range.

[Singha]

electric bike startup in india bags more funding
http://yourstory.com/2015/05/ather-energy-funding/

but look how casually they are thinking of production and service delivery with a 2016 launch planned!
unless this is rock solid this will remain a tech curiosity at best, feted at tech shows and on the internet but invisble on the road!

typical engineering r&d approach is to put operations and production as afterthought...we already see many instances of indian projects suffering due to that.

the japanese probably start from the other end and work backwards

[Austin]

World Economic Forum’s 2015 Human Capital Report

http://reports.weforum.org/human-capita ... /rankings/

India @ 100

More details http://reports.weforum.org/_static/huma ... 15/IND.png

[RamaY]

Sigh

I was hoping at least few boos or criticism on my post. This silence is killing me guys...

Anyways, Suraj: I plan to post it on my blog.