Indian Economy: News and Discussion (June 8 2008)

[Kakkaji]

Singur: A dream ride interrupted

The cause for the despondency is barely 3km away from the parrot green Bengal village, lush with banana groves and overflowing ponds. It’s been over a month since work was suspended at Tata’s Nano plant. And for Das, and several other young adults like him, the move has caused a major setback to their fledgling careers. He was among a bunch of local boys who had been trained for free to work as mechanics in the plant.

‘‘Everybody in our group wanted to show the world that sons of farmers can also build cars,’’ says Das, with the nervous uncertainty of a man who sees his dream slipping away.

It’s beyond the factory, in the villages and the shops of Singur bazaar, that one gets a real feel of how life and society in this relatively well-off block of Hooghly district changed dramatically with the setting up of the factory. Till the Tatas arrived with their Rs 1,500-crore project, the area was comfortable in its old shoes. Even to bargadars (sharecroppers), the fecund three-crop land with paddy and potato being the main crops ensured a decent living, compared to other parts of Bengal.

The purchasing power of those who have benefited from the project has gone up considerably. And it reflects in their changed lifestyle. Even the many who haven’t claimed compensation for their land have gained indirectly. The setting up of the plant brought an army of workers, contractors and officers to these parts. A parallel satellite industry grew to service their needs.

Some landowners who received compensation have since metamorphosed into small-time suppliers of sand, stone chips and sundries for the plant. Their collective earnings created what could be termed as the Nano economy. With the suspension of work, they are dejected, angry and bewildered at the same time.

Ballpark figures furnished by bankers, gift shop owners, liquor store owners and motorcycle sellers show how the Nano economy had changed Singur. For many years, Singur only had two banks: United Bank of India and Allahabad Bank. But after the first compensation cheques were handed out in September 2006 and the project moved into top gear in 2007, several other banks opened up: SBI, Bank of Baroda, Axis Bank, Central Bank and Indian Overseas Bank.

During this period, the number of account holders in Hooghly District Central Co-operative Bank (HDCCB) grew sharply. Till December 31, 2006, it had 5,346 account holders; now it has 8,613. The bank’s turnover grew by about 33% between 2006-07 and ’07-08.

In general, those who have received compensation have invested wisely. According to Dibakar Das of HDCCB, also a local CPM leader, some have bought lands in other villages. A few have expanded their business like Nirmal Ghosh of Gopalnagar who has upgraded his lathe machine factory.

Even marginal farmers have found ways to synergize the money they received. Sheikh Mohammed Ali of Joymollah village says 10 marginal farmers like him have pooled in their compensation money to form a group that supplies sand, soil and ash to the plant.

Kalipada Mal of Joymollah says the new economy had even changed behaviour patterns. ‘‘Earlier everybody invited turned up at a wedding. There were gatecrashers too,’’ he says, ‘‘With rising prosperity, few do that.’’ Jobless before the Tata plant was set up, Mal was working as labour supervisor on a Rs 4,500 salary. Now he is unemployed again. He claims to be apolitical but talks more like a CPM sympathiser.

With a higher liquidity flow, consumption too has risen in these parts. Giftshop owner Bidyut Nandi and manager of an automobile shop, S K Abdul Tahir, say that their sales rose by 50-70% in the past two years. Nandi made a lot of money selling office furniture. ‘‘Even people in lungis were making queries about motorcycles,’’ says Tahir.

Subrokanti Rai of Singur Foreign Liquor Shop also admits to a 50% rise in sales in the past two years. ‘‘Now we are back to the pre-2006 days,’’ he says. Interestingly, Rai points out that cops and demonstrators form a decent part of his clientele. Locals recall that barring potato merchants who came for Orissa and Andhra Pradesh nobody would ask for rooms on hire. But by 2007, labourers and junior officials were shacking up to four in grotty hovels paying Rs 300 each per month.

Singur had become a magnet for small traders and hawkers. The satellite economy also boomed. New tea stalls and grocery shops thrived. Hawkers selling lozenges, spicy puffed rice, cucumber, fruits came from Burdwan, Howrah and North 24 Parganas. The plant hired between 2,000-4,000 daily workers. ‘‘This place would become like a bazaar in the evening. One popular hawker used to sell mounds of puffed rice,’’ says Mol. They are all gone.

How the Nano plant transformed lives for the better is illustrated by the story of Tinkar Dolul of Rupnarayanpur village who had set up a bamboo-made grocery store just outside Gate No.3. Dolul earlier used to buy paddy, convert it to rice and sell it for a small profit. When the plant was set up, he invested Rs 2,000 in a small tea stall that prospered. ‘‘I used to sell goods worth Rs 2,000 every day. On Sundays, the worker’s payment day, the sales went up to Rs 3,000,’’ he says.

The money helped him marry off his daughter. “After suspension of work, some labourers left without paying their credits. It’s back to tough times,’’ he says. It is drizzling. But he sells tea with no buyers around.

With few signs of an immediate breakthrough, the sub-contractors have shifted the labourers to other sites. Swapan Bairagya, a 23-year-old drudge now works in Barasat, about 40km from the site. When asked, ‘‘Who’s right? Trinamool or Left Front?’’ he replies, ‘‘I have no politics. I am just a worker on hire. All I know is that I have to work everyday for a living.’’

At the site, sub-contractors not only supplied labourers but also food, even heavy machinery. On Saturday, Narendranath Rai, who prepared meals for 120 labourers, took away the giant cooking vats and containers. ‘‘There is nobody to cook for anymore. We will be back when needed,’’ he says. Adds labour supplier Amjad Sheikh, ‘‘We want work to continue. But I am not sure when or whether it is going to start again,’’ he says.

Security guards say that no machinery has been moved out of the plant. But as reported in TOI earlier, sources have said that Tata engineers had dismantled dies and other key fixtures unique to the Nano and had moved them to an undisclosed location late last month.

It isn’t easy deciphering the truth in West Bengal. After over 30 years of Left Front rule, truth only seems to have different versions here. The politically aligned speak their mind but the neutral prefer silence. Yet sifting through what a cross-section of people say, the picture that emerges from Singur block is this: a majority want the Tatas to stay. Even those who have gained little are not against the project.

Tata’s exit will adversely people in several ways. Especially those who have lost their land and not taken compensation money. Then there are agriculture labourers who used to work on the land taken up for the project who now seek work elsewhere.

The small car brought big dreams to Singur. The realization that it could only have been a dream after all has created a mood of despair. Even though dreams die last.

[vina]

Ah good.. Now that the people of West Bengal, ably led by Mamata Banerjee, have won the final and decisive victory in the war against the blood sucking, capitalists,exploiters, and extractors of "surplus value of labor" and other (undefined) really bad ..bad things..the war which was started and prosecuted by the CPI-M for the past 30 years, it is time for celebrations, especially with the Pujas on ; Double the usual celebrations folks!.

The credit should be shared equally between Mamata and CPI-M. While Mamata might have landed the final killer blow, in no case, should anyone doubt the CPI-M's effort ,sincerity and track record in contributing to the final outcome. They started it, won many a victory earlier based on huge tactical and strategic innovations such as "Gherao", Flash Strikes, Lightning Strikes, Strikes at the drop of a hat, Strike for no reason, Strike out of "sympathy and empathy" for folks totally unconnected with anything you do in life, strikes based on "ideological opposition" .. you name it.. Think of it, words like "Gherao" entered the English dictionary only because of them. Notice that Mamata's final victory was won , only by the full scale application of the "Gherao" tactic invented by the CPI-M. We have also been resolutely fighting against the supreme court judgement on strikes and insist that strikes are the fundamental rights of the "oppressed" workers.

Good.!. Now that victory has won and west bengal is firmly set on the "glorious progressive path" and will soon reach the heights of the basket case called Beggardesh next door, while surrounding states like Orissa and Bihar will soon race ahead , the commies and other "intellectuals" (aka athales) can indulge in serious intellectual masturbation and do a full dissection of the events that lead to the final victory based on the frameworks of Dialectical Materialism, De-Constructionism, Post-Modernism and Snake-oilism , all of which have been fully approved and endorsed by the greatest thinkers in the world (and hence "scientific") like Noam Chomsky, Amartya Sen , Pablo Neruda, Henri Bernard Levy etc and captured on film by Satyajit Ray .

So, while Bengal celebrates in the final victory, the battle moves elsewhere. The evil capitalist Tata empire has now set it's sights on other states. The fascist right wing govt in Karnataka now seems to be moving heaven and earth to invite Tata to set up shop in Dharwad and to supply the "oppressed" workers there for ready made exploitation. After all, what is the use of the roof above the head, the food in their bellies and the health care and education for their kids , if there is no one like the CPM to lead them in the fight against the capitalist class. Don't you know that just like the Catholic church which insists that there is no salvation without the Church (ie.. the middleman has to be there, you cant deal directly with god), the workers cant deal directly with the Tatas without us as the middleman.

Now, while the commie Bongs and pointy headed "intellectuals" in Kolkota can rejoice, let us round headed folks in Karnataka pray that the Govt swings the Nano deal to Dharwad.. It would be a great achievement if they manage to do it. That might be exactly the catalyst that North Karnataka needs to crash industrialize. North Karnataka is the fulcrum for that vast part of deccan in Karnataka, Maharashtra and Andhra revolve around. That will have a huge huge benefecial impact. Onward soldiers.. In to the breach !.. Good luck and god speed Yeddy !

[AjayKK]

Vina, you are spot on , though you miss the point

The hearts of CPI-M, Mamta Bandhkarojee (and 'intellectuals' ) lies in taking WB to the glory of the seventies. There are many uses of the freed land that evil capitalist Tata was eyeing. Can you imagine 1000 acres! Agriculture, horticulture and iron furnaces can generate more than this Nano-paano.
Forget even this, due to abundance of woman-power, manpower and manure-power, a gas plant is the ideal solution.


Even Vietnam has shrugged evil forces to rise to glory!
So it is back to Amar naam, tomar naam—-Vietnaaaaam !


Jyoti babu, mamta didI and other assorted babuididis always 'bat' for the people of WB and India.
But the only problem is that they keep getting other players OUT

[AjayKK]

Gujarat on Tatas’ radar for Nano plant?

http://www.thehindubusinessline.com/200 ... 061000.htm

Ahmedabad, Oct 3 Among the locations to shift the Rs 1,500-crore Nano plant from Singur in West Bengal, Tata Motors is reported to be seriously considering Gujarat where General Motors already has a plant and Maruti will soon have a port terminal at Mundra.

According to reports, Mr Ratan Tata, who said an emotional good-bye to Singur this evening, is likely to meet the Gujarat Chief Minister, Mr Narendra Modi, on October 7 in this regard. Tata Motors officials have already met the State Government representatives in recent weeks.

In view of Mr Tata’s remarks in Kolkata today that the company was exploring offers from three to four states and that Tata Motors would eventually have more than one Nano plant, at least one of these plants may be located in Gujarat.

Recently, Sanand, 30 km from Ahmedabad, is reported to have emerged as a likely destination for the Nano plant, where the State Government may offer 1,000 acres of land to the Tatas, out of the 2,200 acres owned by Gujarat Agriculture University (GAU) in the area.

[Karan Dixit]

I am absolutely against building industrial plants on agricultural land. Agriculture is the bedrock of a sound economy. Unfortunately, there are not many netas who seem to understand it.

#######################


JOHANNESBURG/CAPE TOWN: With the western markets slowing, Indian and South African companies are preparing to step up their engagement with each other over the next few months. A large number of South African companies, from sectors as varied as banking and financial services to FMCG and retail, plan to establish operations in India, attracted by the immense potential of one of the fastest growing markets.

http://economictimes.indiatimes.com/New ... 554253.cms

[vishwakarmaa]

One 20ish year old "expert" on CNBC Tv-18 is passing naive comments like "bailout package will improve liquidity in world economy and so will bring FDI back into India. India's development is dependent on FDI inflow and inflows will come back after this package.".

These experts love to live in a small world.

[vina]

A brilliant Op-ed piece in The Telegraph. I think it is right. The problems of Bengal and Kerala (note, that is different from Bengalis and Malayalis, who are extrememly talented peope.. but you employ them outside Bengal and Kerala and on absolutely no account should you hire them in Bongland and Malluland.. ) , is inherent to those places and politics and the sociology. It is part of the value system. The commies in their "devalued" notions of work have killed the work culture and the pride of their craftsmanship of the average industrial worker in Kerala and Bengal. The entire feel is of that of a "social get rich quick" scheme. None of the rigors and value system of a Calivinistic work ethic that we find in really successful countries in Western Europe and US , the equivalent Japanese / Korean/Chinese reverence for work, or our own "Work is Worship" ethic. It is not without reasons that traditional Indian culture stressed those values and our crafsman had a day of worship and reverence for work tools and work place during Aydudh Puja.. Where is the equivalent reverence in Commie agit prop for work? . Calvinistic ethics traditional India work ethics stressed the separation of labor and the fruits of labor and stress the rights of the worker to the former and not the latter.. Communism on the other hand was totally focused on the latter.. (what else can you expect out of a totally materialistc world view anyways?) and none of the former!..

Murder Most Foul : People of Bengal have created the darkness that envelops them

“The lamps are going out all over Europe; we shall not see them lit again in our lifetime.” Edward Grey, the British foreign secretary, uttered these words in August 1914 on the eve of Britain’s entry into the First World War, as he stood watching the evening lamps being lit from his window in the Foreign Office in Whitehall. Substituting the word Europe with West Bengal, Buddhadeb Bhattacharjee could utter the same sentence sitting in his chamber in Writers’ Buildings and reflecting on the consequences of Ratan Tata withdrawing the Nano car project from Singur.

The abortion of the small-car factory will mean the end of even the trickle of investments that has been coming into West Bengal. One does not have to be a prophet of doom or a great reader of tea-leaves and horoscopes to predict this. Common sense suggests this. In the late 1960s, a kind of terrorism perpetrated by communists forced capital to flee from the state. In the beginning of the 21st century, another kind of terrorism carried out by a rabid anti-communist will lead to another flight of business and industry. Both did what they did in the name of democratic rights and of benefiting the poor. This coming together of opposites is not a mere coincidence. It hides a deeper sociological truth about West Bengal and about those who live here.

Bengalis are against industrialization. If this sounds like too harsh a judgment, look at the evidence. In the middle Sixties, when there was a flight of capital, was there any widespread movement on the part of any section of civil society or of any major political party to stop the flight, to campaign against those forces that caused the flight? The answer is in the negative. But not only that, all the voices that mattered in Bengali culture and society were by and large in favour of the forces and the politics that were directly creating the climate that made it impossible for capital and investment to flourish. In the mass and intellectual euphoria that followed the first communist takeover of power under the aegis of the United Front in 1967, the focus was on bringing about a socio-economic transformation in favour of the rural poor. There was little concern about how wealth would be generated, how economic development would take place and how long-term employment would be created. In those heady days, capitalists were identified as enemies, and they were insulted and physically humiliated.

In the wake of the promise of a rural transformation, there came a movement that spread largescale violence first in parts of the rural world, and then, having failed there, in Calcutta and its suburbs. The initiators of this violence and these killings were hailed in Bengal, in anecdote and anthem, as heroes. And they still are.

After their return to power as the Left Front in the late Seventies, the communists did not follow any policies to encourage the return of industries to the state. On the contrary, economic policies were directed towards agriculture and land reforms. These were trumpeted as the Left Front’s great achievement. Even sections of the intelligentsia hailed it as such without bothering to look at what was happening to the rest of the economy, especially industry. The so-called agrarian achievement served to consolidate the communists’ rural vote bank.

What is equally significant is that the forces opposed to the Left in West Bengal did not articulate any alternative economic programme with industry-based economic development as its focus. The sole anti-Left spokesman, Mamata Banerjee, had (one should add, has) no vision. All she could say was that she would do whatever the Left was doing, but she would do it with greater efficiency and honesty. Industry escaped the hunters for votes.

But both political forces had substantial popular support, one in the rural world, and the other in Calcutta. On the basis of the rural vote bank they had created, the communists won election after election with thumping majorities. The middle and upper and middle classes of Ballygunge and Alipore, oblivious of the monster they were creating, voted for Mamata Banerjee even though she had no programme for the industrialization of West Bengal. Her calling card was that she was anti-communist. This was enough for her to win successive elections with huge margins. Thus industry featured nowhere in the voting preferences of the West Bengal electorate.

The turn of the Left Front government in favour of industrialization that was noticeable from the beginning of the 21st century is fraught with contradictions. There is no evidence that the CPI(M), the leading force of the Left, has abandoned its political practice of calling bandhs and holding rallies, both of which disrupt work and are thus anathema to investors. What is more important is that events have made it clear that the CPI(M), whenever it suits its purpose, will not hesitate to unleash its cadre and muscle power. The communists have made no effort to revive work culture and, despite the West Bengal government’s apparent enthusiasm for industrialization, at the national level the CPI(M) has not abandoned its anti-capital rhetoric. The West Bengal government has ardently wooed a few industrialists, but has done precious little to create conditions that attract industrialists without offering them sops.

The opposition to the Left remains tied to the agenda of opposing whatever the Left does. Recent events in Singur have shown that populism continues to take precedence over industrialization.

It is significant that last year in November, thousands of ordinary people, led by artists and intellectuals took to the streets of Calcutta to protest against the atrocities being perpetrated by the CPI(M) cadre on the poor people of Nandigram. That had raised hopes. It had seemed then that civil society in Bengal, in gestation since the 19th century, had come of age. It was an illusion, however. No one, save a handful of young men and women in Sector V in Salt Lake, marched in favour of industrialization against Mamata Banerjee’s ridiculous dharna outside the Nano plant. Some stray voices of criticism were heard. Very few even stood up to make the point that she, by using her cadre, was violating the law by blocking a major roadway. The cause of industrialization obviously does not stir the Bengalis.

The reasons for this are not difficult to locate. From the 1940s, communism and a Left radicalism has been the dominant ideology in West Bengal. It has informed, if not imbued, all aspects of culture and politics. The ideology first mesmerized the intelligentsia and then through the communist party and its various front organizations acquired its position of dominance. The international situation and Nehruvian socialism aided the process. By definition, the goal and the rhetoric of this ideology were anti-capital. Such was the power of this rhetoric that it influenced those who were politically opposed to communism. They also remained anti-industry. Like an incantation, it was repeated that capital and industry were evil, till it became (and has so remained) part of the culture and the consciousness of the people of West Bengal.

Till this changes, nothing will alter in this state. The intelligentsia is even today wedded to a discredited ideology and political practice, smug in its past beliefs and blind to its present responsibilities. The political parties, whatever be their outward manifestations and visible garb — torn sari or white dhoti and punjabi — continue to believe in the strength of street politics and cadre power. That is the present history of West Bengal.

********

There is a very famous Agatha Christie story in which a group of people collectively murder someone on the Orient Express. It took all the grey cells of Hercule Poirot to arrive at the conclusion that it was not an individual, but a collective act of killing. West Bengal’s future has been murdered. But it will need no Poirot to conclude who perpetrated the murder on the Bengal express. It was a collective act.

Human kind cannot bear too much reality, but the people of Bengal have to live with the fact that they have brought about the darkness that now envelops them, all of us, you, me and the future generation.

[satya]

One 20ish year old "expert" on CNBC Tv-18 is passing naive comments like "bailout package will improve liquidity in world economy and so will bring FDI back into India. India's development is dependent on FDI inflow and inflows will come back after this package.".

With US heading in a deflation mode , and banks & other investors sitting on cash , either they will sit out and wait for US to come out of deflation ( Japanese economy is still in deflation for past 17 yrs ) , US banks will follow Japanese example and lend out money to more credit-worthy foreign companies that don't have the same toxic debts and also not follow this complete non-sense accountancy practice ( last time it was mark to market now being changed back to what ?) , they will have to lend /invest and India is the prime destination. Good news is Paulson ( in all probability an avid Ayn Rand follower , hell bent on creating something by first destroying ) and Bernake ( the follower / great depression specialist as per US House Speaker ) , out and clear advantage India . Its an opportunity like never before for India .

China is in a big hole (who is suppose to use all tht toilet paper if not US , its going to take a massive hit ) , in theory it can use those massive reserves to build up local infrastructure and kick start local economy but not without taking a massive hit on value of its actual forex holdings and also a little thing called 'inflation' purely money-supply phenomena .

So its boom time for economy-related publishing book houses

[vina]

Read the story about Lehman's road to bankruptcy and how they have been trying to sell themselves off for the past 3 years or so. Wall St are the greatest sales guys ever on earth , they have the ability to sell anything to anyone, all it takes is just a sucker. For anyone advocating "Sovereign wealth funds" for India and picking up assets on the "cheap ", be warned, you will lose your shirts.

There is a classic problem of information assymmetry. The seller has far more insider information and true knowledge than you can every do as a buyer. That is why the sale happens in the first place! . Another classic case of information assymetry is the ABS and securitization of risk into CDO, CDS etc.. The banks via their covenants and due diligence about the companies know far far more about the true state than the bond (especially of structured products) can ever know. Ealier when banks lent, they took the risk on the books and so the standards were far higher. When they could pawn it off on others , who had far inferior information who could be satisfied with "AAA' rating (or whatever), they could package and sell junk.. and they did!.

It is the old story.. Yeah.. it might be cheap, because it is a lump of coal and not exactly an unpolished diamond that you think you are buying..

[Philip]

Prince Charles,great friend of India and one fo the world's pioneering environmentalists,has attacked GM's gentically engineered crops warning Indian farmers thus..."the truly appalling and tragic rate of small farmer suicides in India, stemming in part from the failure of many GM crop varieties".

http://www.independent.co.uk/environmen ... 51808.html

Charles targets GM crop giants in fiercest attack yet

In a provocative address to an Indian audience, the Prince echoes Gandhi with a stinging attack on 'commerce without morality'. Geoffrey Lean reports

Sunday, 5 October 2008

Prince Charles has again stirred controversy with his strong views

Charles: 'I blame GM crops for farmers' suicides'

It is less than two months since Prince Charles was on the receiving end of a fusillade of scientific, political and commentariat criticism for voicing, yet again, his concerns about GM crops and foods. He was widely accused of "ignorance" and "Luddism"; of being too rich to care about the hungry, and even of trying to increase sales of his own organic produce. It was put about that Gordon Brown was angered by his intervention.

Yet the Prince has responded by stepping up his campaign, making his most anti-GM speech yet, in delivering – by video – the Sir Albert Howard Memorial Lecture to the Indian pressure group Navdanya last Thursday. And he made it clear that he was going to continue. "The reason I keep sticking my 60-year-old head above an increasingly dangerous parapet is not because it is good for my health," he said " but precisely because I believe fundamentally that unless we work with nature, we will fail to restore the equilibrium we need in order to survive on this planet."

True to his word, he plunged straight into the most controversial and emotive of all the debates over GM crops and foods by highlighting the suicides of small farmers. Tens of thousands killed themselves in India after getting into debt. The suicides were occurring long before GM crops were introduced, but campaigners say that the technology has made things worse because the seeds are more expensive and have not increased yields to match.

The biotech industry strongly denies this, but two official reports have suggested that there "could" be a possible link.

Prince Charles expressed no doubts in his lecture, delivered at the invitation of Dr Vandana Shiva, the founder of Navdanya, and one of the leading proponents of the technology's role in the deaths. He spoke of "the truly appalling and tragic rate of small farmer suicides in India, stemming in part from the failure of many GM crop varieties".

Much of the controversy surrounds claims of failures by a Monsanto GM cotton called Bollguard. The GM company says that "farmers in India have found success" with it, and cites a survey in support. Its opponents produce evidence of their own to show the opposite.

But Prince Charles did not stop there. Broadening his offensive, he said that "any GM crop will inevitably contaminate neighbouring fields", making it impossible to maintain the integrity of organic and conventional crops. For the first time in history this would lead to "one man's system of farming effectively destroying the choice of another man's" and "turn the whole issue into a global moral question." He quoted Mahatma Gandhi who condemned "commerce without morality" and "science without humanity". He added: "One must surely ask the question whether – if only from a precautionary point of view – it might be wise to keep some areas of the world free from GM-based agriculture."

The Prince attacked the contention that "GM food is now essential to feed the world", saying that the evidence showed that modified crops' yields were "generally lower than their conventional counterparts". He called them "a wrong turning on the route to feeding the world in a sustainable or durable manner" and "a risky and expensive distraction, diverting attention and resources away from those real, long-term solutions such as crop varieties which respond well to low input systems that, in turn, do not rely on fossil fuels." There was substantial evidence "to show that a growing world population can be fed most successfully in the long term by agricultural systems that manage the land within environmental limits".

Recent research had shown, he added, that organic farming techniques had increased yields in Brazil by 250 per cent and in Ethiopia were up fivefold, while the world's biggest international agricultural study – headed by Professor Bob Watson, now chief scientist at Department for Food, Environment and Rural Affairs – had backed organic farming, rather than GM to tackle word hunger.

Kirtana Chandrasekaran of Friends of the Earth said: "Prince Charles is right that GM crops and industrial farming are profiting big businesses, not feeding the world's poorest."

[vina]

Ah.. Two Euro (trash) banks in the muck and needing a bailout.. So the smug Oieropean smirk on the "American" problem has been wiped out. Who would'a thunk that German mortgage lender, esp the 2nd largest would go belly up huh ?.

Anyways, Sensex taking a nice spanking at 11,800s or so.. Nice.. Still some ways to go. Toldja that the markets are going to sink bank after the Fed passes the bailout. Now with Oierope in trouble, there is no hiding anywhere saar.. The bubbles have well and truly broken. The commodity cycle has broken as well.

I expect oil to plunge down swiftly from here. That game was always an unstable equilibrium and once the cartel breaks and defections happen and people start cheating, it will be close to impossible to have any pricing discipline. There is massive incentive for the Opec folks to overpump and cheat. Wait for the Iraqis to get into the game , now that they are stable. Unkil should nudge them to start pumping and dumping hard.

The best antidote for low growth and high inflation is cheap oil.. ..!

But hold on to your cash boys.. Still some ways for the market to go down I think.

[vina]

RBI cuts CRR by 50 bps!!.. Gosh.. Now all you smart Yindoos who ran to the banks and opened laddered FDs at 10.x % odd rates, start dancing with joy.. You guys got it right .. Interest rates are going to go down. You caught and locked in the peak deposit rates.. .

Inflation is on it's way down, interest rates on the way down... the earnings are going to be crappy and guidances will be "cautious" .. High P/E multiples will come flushed down the toilet pronto. Time to switch to bond funds. All you smart dudes and dudettes sitting on Mutual Funds, time to exercise the switch option.. Switch your portfolio weights towards bonds and get out of equities.

These times remind of how it was on Lehman Fixed income floor after 9/11 and the Fed started dropping interest rates. Those guys were just jumping with joy after the fixed income "drought" during the go go boom years until late 2000.. The unfurled a huge banner which read "BONDS ARE BACK !" .. Yeah dudes.. Bonds are back me thinks..

[Vasu]

Vina, I don't think there has ever been a time when there hasn't been an information asymmetry. How is it more pronounced this time? My point in asking the question is to ask you, if you're making more of information asymmetry than is needed.

I am surprised that there was a need to cut down CRR in India. I have already seen on this forum examples of unexplained alarm, so I can imagine what the mood must be in the mind of the naive investor.

Maybe I am a naive learner myself, but now that the CRR is down 50 bps, so the banks will lend out more to the public, so I am assuming that interbank lending is not a problem right now, but Indian banks are cutting down on their lending to the individual and commercial borrower?

Also, are you basing your "Bonds are back" on the CRR cut or the general investment mood? True, the days of inflated financials are over, but I think many saw that coming for a while now. Indian markets have for a while been correcting themselves from their "we will reach 25000!" days. What we have seen is the exit of the speculative investor, and not the serious, thinking investor.

[satya]

Vasu

There was a liquidity crisis in Indian market and RBI's CRR cut is in tht direction. We will see if its first step towards rate cut towards end of this month , since by then money via GoI accounts should be flowing back hopefully.

Commoners will have to wait a few months till things are sorted out by banks.

[vina]

Vina, I don't think there has ever been a time when there hasn't been an information asymmetry. How is it more pronounced this time? My point in asking the question is to ask you, if you're making more of information asymmetry than is needed.

Yup..Information asymmetry always existed and that is the reason why most of the dumb deals are done. Look at a classic statistic.. The majority ..more than 50% of ALL mergers are failures !. Look at some of the big ones that happened during the last internet boom ..Look at one of the biggest, the AOL, Time warner. The person I respect deeply in that said, before the deal closed that this was going to be a monumental disaster. Think about it. AOL was the colossus, the darling who rode the internet wave the hardest, was unstoppable, had huge market cap and there were thousands of "analysts" following it and giving it huge market caps, and what do they do ?. they go and buy a crusty old company which sells magazines, movies, TV serials, a classic subscription business with stable cash flows called Time Warner!. Oh, the spin they gave was quite nice. with AOL's internet "technology" and Time Warners media "assets" including Road Runner franchise, they would do broad band and this and that and "synergy" and "growth" and create a gazallion Wampum. My prof laughed and said that Richard Case was a former banker and there is massive information assymmetry here. Think about it, AOL with massive inflated P/E , but far lower cash flows, goes and buys Time Warner, a company with far higher solid cash flows, but lower valuation because of realistic P/Es, for some basically worthless paper .(all stock deal..aka Wampum) . One year later, the AOL Time Warner report one of the biggest losses ever back then ( thanks to write down of "goodwill".aka more wampum) . Time warner were real idiots who trade real cash flows for scraps of paper! . Fact is the company has even today not been able to overcome the effects of the diastrous merger. The list goes on and on..

In fact, during the 80s, when real estate in Japan was worth more than the whole of US (if that isnt a bubble, I dont know what is), the US was down in the dumps and were plummelled from all directions . The Japanese corporations went and acquired US assets like there was no tomorrow. Sony acquired Columbia Pictures (ah.. the integrated media strategy.. we have hardware, they have assets. together there will be "synergy'") .. Chrysler buiding was sold, why even Carnegie Hall was sold! . The Japanes lost their shirts of course, ,why, coz the Americans found suckers whom they could sell lemons at inflated prices to.. Same with all the soverign funds who put in tons of money in Merrill , Lehman and others and who have lost their shirts now!.

My point is simple. When corporates acquire, they do it largely for strategic reasons and there is synergy involved and there is a possibilty of the deal being value accretive. Not so for purely financial investors!. The strategic investors usually have expertise in the operations and have pretty good information about the business they are in. If record of them getting it are so pathetic, what chance does a bureaucracy, however smart it be and staffed with Ivy league economists and MBAs , that it will come up trumps when it brings nothing much to the table other than it's cash and exchanges hard cash in exchange for paper IOUs (aka Wampum). Look around at the track record of most of the sovereign funds and you know the answer.

I am surprised that there was a need to cut down CRR in India. I have already seen on this forum examples of unexplained alarm, so I can imagine what the mood must be in the mind of the naive investor.

Maybe I am a naive learner myself, but now that the CRR is down 50 bps, so the banks will lend out more to the public, so I am assuming that interbank lending is not a problem right now, but Indian banks are cutting down on their lending to the individual and commercial borrower?

I think the CRR cut is needed. The indian govt is not letting on to the deep nature of the crisis. I think today's events have shook north block. Chidambaram is on TV claiming that the govt has "flexible. well regulated and capable" financial institutions and systems and that we will get back to 9% growth in 2009-10 .. See, he has far better information (again assymetry) and I think from the number he sees in front of him and the trends, the growth rates would have crashed and that will get reflected in the stock prices.. and his statement "this is a temporary meltdown that we shall overcome" just tells me how much the govt has been shaken.

The events that are happening are close to apocalyptic. These are not ordinary events, if you are not worried, well you better be worried. Germany, Ireland, Denmark and a couple of other govts have guaranteed public deposits with banks to prevent a run! That is how serious it is!. Iceland has arranged for a $20b bailout of its banks. Can you believe it.. Iceland is in trouble. The effects of the domiones falling in Wall St and US are not contained easily. Indian stands a better chances, yes, but there will be effects here as well.

Also, are you basing your "Bonds are back" on the CRR cut or the general investment mood? True, the days of inflated financials are over, but I think many saw that coming for a while now. Indian markets have for a while been correcting themselves from their "we will reach 25000!" days. What we have seen is the exit of the speculative investor, and not the serious, thinking investor.

BR ahead of the curve as always! .. Yup, we did say over here that sensex at 25K was crazy, but we were the outliers, the lunatics. Common wisdom was that 25k was just a week or 10 days away. Now someone will say if it were for Wall St, we would have got there.. , but that is just as crazy. That thing was unrealistic. If it were for the sub prime ..(mind you, we are hearing the word credit crisis for less than a month), some other random thing would have brought it crashing down.

A market without speculators is an oxymoron. Remember, it is speculators who give liquidity to the market! . No liquidity, no market ! ..Doesn't that look exactly like the "credit crisis" of today, where all guys are sitting with assets and there is no price discovery and no one can sell ?. Without "speculators", the fundamental investors will be like the banks holding the securities which no one knows how to price and hence no one can buy with confidence!.

[Suraj]

Vina: A few months back we spoke on the subject of rate hikes, and my opinion then had been that the US Fed would at best attempt to 'jawbone' the market and not actually raise rates. That appears to be exactly what has happened, and with the new bailout mania, effective rates are headed downhill once again, elsewhere and in India.

With oil prices headed south, the primary cost push variable on Indian inflation is moderating, and with the food situation stable, we can probably look forward to a couple of quarters of strong growth, starting with the traditionally strong 3rd quarter (Oct-Dec).

[Vasu]

thanks for the replies everyone. Vina, first, I am not denying that we are not living in extraordinary times! I think your point about all the sovereign funds buying into 'distressed' American megacorps makes sense. India doesn't need to put any more big bucks into the US, especially when we don't get to see no returns. However, I think you are missing some information ( ). Most of this foreign money is coming with with ropes, not strings attached. They want constant returns, high stakes, or management control and a lot more to park their money into these companies. They are definitely not that naive. I think that could be a major factor why some of these companies couldn't find a foreign buyer. And in a way it complements that theory of 'free market' being total BS and the US is out to protect its status.

Suraj, I have heard that a lot of times as well, in fact, we've all heard the Congresswoman speaking about it, and I think its working. Perfectly good companies and markets are being negatively affected everywhere.

[Prem]

Vina: A few months back we spoke on the subject of rate hikes, and my opinion then had been that the US Fed would at best attempt to 'jawbone' the market and not actually raise rates. That appears to be exactly what has happened, and with the new bailout mania, effective rates are headed downhill once again, elsewhere and in India.

With oil prices headed south, the primary cost push variable on Indian inflation is moderating, and with the food situation stable, we can probably look forward to a couple of quarters of strong growth, starting with the traditionally strong 3rd quarter (Oct-Dec).

Suraj , what is your opinion about how far down the oil price need to fall to becoming non determining factor in economic growth of India? At least we now happily know that by 2011 we will have surplus in Natural Gas and wont be needing IPI pipeline in near future.

[Suraj]

I think the talk about the US 'nationalizing' banks is missing some interesting aspects. GOTUS providing asset cover in the form of US treasury swaps for distresssed assets is a bet that it has a very good chance of getting back on. By gaining stake in assets for pennies to the dollar, and using the backing of the value of the US treasuries to support it, the Fed is in a position to get back on its 'loan' with significant interest.

In buying assets on the cheap, the losers are the ones who hold the assets, i.e. the legion of investors of all hues, along with those whose tax incomes are being spent on the bailout. It is not without reason that the 'Don't bet against the Fed' quote exists. By adding to long term US debt the Fed may still screw itself in the long run, but it gains greater traction in an unstable environment for now.

Regarding rate hikes, that the Fed would not at all raise rates over the last few months was a call I made, that turned out right, for some reasons that I did understand, and some that I didn't quite visualize, like the extent of the recent meltdown.

India's handled the recent tumult relatively well so far from a macroeconomic perspective. Our hard currency reserves are at $292 billion currently, with the fall from >$300 billion being primarily due to oil prices, the RBIs temporary halt to dollar purchases, and FIIs with their herd mentality moving to 'safer' US stocks (which are now being gutted as well). FDI however remains robust, at over $12 billion in April-July 2008; on target for $40 billion this year. Exports are also doing very well thanks to the weaker Rupee.

Some data on FDI and exports from a recent statement by the Commerce Minister:
Weak rupee, SEZs to help attain $200 billion exports in 2008-09

A weak rupee and doubling of exports from special economic zones to 1.25 trillion rupees would help India attain its annual export target of $200 billion for FY09, Trade Minister Kamal Nath on Tuesday.

Investment in new SEZs are expected to touch 2 trillion rupees ($45-50 billion) by December 2009, Nath told a business conference.

"This year exports from SEZs are expected to cross 1.25 trillion rupees ($27-30 billion) registering a growth of around 100 percent," he said.

India's exports during April-July grew 24.6 percent from a year earlier to $59.19 billion, according to government data.

Although a global slowdown was threatening to slow India's export growth, Nath said the annual target of $200 billion was "still achievable".

The fall in the rupee would also help in the export growth, he said.

[Suraj]

Suraj , what is your opinion about how far down the oil price need to fall to becoming non determining factor in economic growth of India? At least we now happily know that by 2011 we will have surplus in Natural Gas and wont be needing IPI pipeline in near future.

Well we actually have some stake in wanting moderately high oil prices (or at least the underlying demand stability), because we've a significant amount of new refining capacity coming onstream, in the form of Reliance, Essar and others, as well as PSU refiners investing in more capacity. Something that doesn't get sufficient press is that refined petroleum exports are amongst our fastest growing exports, and among the top three in terms of export earnings, overtaking our traditional leaders (gems/jewelry and textiles). It is great to have less dependency on imports for domestic energy needs, but we have a stake in wanting oil prices and demand to be stable, as opposed to just 'the lower the better'...

[joshvajohn]

I would strongly advise the Indian Government to freeze selling and buying in the stock market for ten days.

[Rishirishi]

Suraj , what is your opinion about how far down the oil price need to fall to becoming non determining factor in economic growth of India? At least we now happily know that by 2011 we will have surplus in Natural Gas and wont be needing IPI pipeline in near future.

Well we actually have some stake in wanting moderately high oil prices (or at least the underlying demand stability), because we've a significant amount of new refining capacity coming onstream, in the form of Reliance, Essar and others, as well as PSU refiners investing in more capacity. Something that doesn't get sufficient press is that refined petroleum exports are amongst our fastest growing exports, and among the top three in terms of export earnings, overtaking our traditional leaders (gems/jewelry and textiles). It is great to have less dependency on imports for domestic energy needs, but we have a stake in wanting oil prices and demand to be stable, as opposed to just 'the lower the better'...

Oil prices and refining prices are two different things. The refining margin is determined by refining capacity. As the prices lower the demand should theoretically increase or substain.

India ends up paying some 50 billion dollars for oil. In a cartel free world, the oil price would be arround 20-30 dollars per barrel.

[Nayak]

Sony acquired Columbia Pictures (ah.. the integrated media strategy.. we have hardware, they have assets. together there will be "synergy'")

Incorrect. Sony acquired Columbia for the sole reason to increase the # of movies available under Sony brand. They lost the VHS vs. Betamax wars because the # of titles available under betamax was far less.

Sony knew that in future format wars, content would be the deciding factor. Those guys were desperate at that time.

Anyways that is OT.

[pradeepe]

Now, while the commie Bongs and pointy headed "intellectuals" in Kolkota can rejoice, let us round headed folks in Karnataka pray that the Govt swings the Nano deal to Dharwad.. It would be a great achievement if they manage to do it. That might be exactly the catalyst that North Karnataka needs to crash industrialize. North Karnataka is the fulcrum for that vast part of deccan in Karnataka, Maharashtra and Andhra revolve around. That will have a huge huge benefecial impact. Onward soldiers.. In to the breach !.. Good luck and god speed Yeddy !

Btw, I have read that YSR has also been trying to move heaven and earth to get the TATAs to setup shop in AP. The pitch which is being advertised big time is 1000 acres for "free" and all permits within 1 week!. To put that in perspective, I cant get a gas connection in 1 week. I dont like the free part, but AP has been in the boondocks for so long, that all I am going to say is, GO AP!

[svinayak]

I would strongly advise the Indian Government to freeze selling and buying in the stock market for ten days.

Lot of advises we have seen in this forum. But what is the basis for this

[Satya_anveshi]

There was a lot of hu ha about impending dilution of govt stake in SBI, BHEL, BEL, and every other public sector that is worth. What will be the impact of the current economic crisis on dilution of SBI? Can we safely postpone the decision to a "later date"

[vina]

Sony acquired Columbia for the sole reason to increase the # of movies available under Sony brand. They lost the VHS vs. Betamax wars because the # of titles available under betamax was far less.

Ah Mullah Nayakuddin. A thousand maafis. Me poor kaffir practicing haraam interest based finance, used terms like "synergy" between (hardware and content assets) for exactly what you described.. .

Thanks for clarifying that the same thing is sunnah only if explained in plain Pingrezi for the understanding of the quam and momeen.

[satya]

There was a lot of hu ha about impending dilution of govt stake in SBI, BHEL, BEL, and every other public sector that is worth. What will be the impact of the current economic crisis on dilution of SBI? Can we safely postpone the decision to a "later date''

Indian banks survived this current massacre in US & EU markets cuz of strong regulation by RBI tht severely limited dos & donts . Even for pvt India Banks in likes of ICICI and HDFC , they too dont have tht sort of exposure tht may take them down again courtesy RBI's regulation and constant monitoring and implementation of those regulations by our Babu logs .

In current market scenario ,GoI can wait a bit longer to be sure there's enough liquidity available in the market , once its there , no harm in offloading its share . Considering our regulation mechanism so far has withstood very nicely this current storm , there's no reason for GoI to think otherwise other than political reasons , economically cant see one .


OT, heard on bloomberg , CDS on US treasuries has risen to record levels .Good times ahead only for India so tension .

[Suraj]

A rather odd idea - GoI is apparently planning to run what amounts to a bank for forex transactions, so that it doesn't have to impose exchange rate risk upon domestic trading parties, enabling them to instead directly obtain dollars from the overseas dollar fund:
Govt mulls overseas dollar bond float

The government is considering a sovereign long-term dollar-denominated bond overseas to raise funds to ease Indian banks and companies’ access to liquidity, which has been drying up owing to the global financial crisis.

Sources close to the development said, the proposal has been discussed and the details are being worked out jointly by the Reserve Bank of India (RBI) and the government.

To start with, the bond issue is likely to be $1 billion and the amount could be used for further lending to public and private sector projects. This will help the Indian companies meet a part of their foreign exchange expenditure. The maturity of these bonds will be project-linked, said sources.

The cost involved in floating such sovereign funds and servicing the interest will be handled by the government’s recently set-up debt management office. The amount raised through these bonds will be outside the ambit of the foreign exchange reserve and may be held in a separate account.

Thus, sources said, there will be no sterilisation cost involved since the money will not be converted into rupees. “This is not a one-time measure like the Resurgent Indian Bonds (RIB) or India Millennium Deposits (IMD). Instead, this is proposed to be a continuous part of the monetary management process,” said a source.

Sterilisation refers to insulating the domestic financial system from excess money supply while RBI buys foreign exchange from the market. This is done by absorbing these funds by issuing bonds and treasury bills.

As part of the subscription drive, the government intends to target foreign investors, especially institutional investors who have always been seeking higher investment limits in the Indian debt instruments.

Moreover, the Indian companies could bargain for better spread for their overseas loans with the comfort of the forex reserve level.

Exporters' body begins to count derivative losses

According to FIEO sources, the estimates of the losses suffered by Indian companies, especially exporters who subscribed to exotic derivative products, could be between Rs 16,000 crore and Rs 24,000 crore during 2007-08.

Forex derivatives are financial contracts offered by banks to help exporters hedge their foreign currency risks. Through this mechanism, one bets on how other currencies will rise or fall in the money market.

Some exporters have raised the issue with the Parliamentary Standing Committee on Finance and requested its intervention. Between June and December last year, exporters subscribed to financial derivatives to mitigate the impact of the rapidly-appreciating rupee, which was shaving off export margins.

Subsequently, as the rupee moved the other way, exporters alleged the banks sweet-talked them into subscribing to financial derivatives. They also alleged that the derivative instruments issued were not in conformity with the Reserve Bank of India guidelines, according to which derivatives can be sold only in the currency in which exporters trade. The banks sold products in other currencies as well, they said.

“These are extremely complex instruments and exporters do not understand them. Hence, many of us who subscribed to the instruments are facing losses,” said a Mumbai-based exporter.

Exporters have also raised the issue of expiry of interest rate subvention on export credit with the government. In July 2007, the government allowed interest rate subvention on export credit as the rupee was appreciating rapidly against the dollar, wiping out export margins in many sectors. However, as the rupee started depreciating, the government decided to end the sops from September-end.

Exporters maintain that the depreciating rupee, which has reached close to 48, has not benefited them and hence the subvention should continue.

More infra firms can now borrow abroad

In a move that will help mining, exploration and refining companies raise long-term funds overseas, the finance ministry today decided to allow them to borrow overseas under its external commercial borrowing (ECB) policy.

The ECB policy has a separate definition of the infrastructure sector. Prior to today’s announcement, it defined the sector to include power, telecom, railways, roads (including bridges), seaports and airports, industrial parks, and urban infrastructure (water supply, sanitation and sewage projects).

Following a review, the finance ministry today said, the definition had been expanded to include mining, exploration and refinery sectors.

This is the second time in a fortnight that the government has tweaked ECB norms to address the liquidity crunch being faced by Indian companies amid the meltdown in global financial markets.

On September 22, the government had allowed a five-fold rise in the amount that companies building roads, ports and other infrastructure projects can borrow overseas for rupee expenditure in India. The new limit is $500 million. It had also raised the upper limit of interest paid for such borrowings by 100 basis points for tenors above seven years to enable companies to borrow at competitive rates from international markets, where interest rates have hardened.

Despite these changes, overseas borrowing norms remain tight and are nowhere near as liberal as prior to August 2007, when the government clamped down on ECBs to moderate capital inflows. Barring infrastructure, the overseas borrowing route remains closed for other sectors, including manufacturing.

The latest move is expected to result in more foreign fund inflows into India and help check the deprecation of the rupee, which is at a five-year low of over 48 against the US dollar.

Katare: you made a good call regarding the exchange rate reaching Rs.47+ .

[Sanjay M]

But if they erect this $1Billion-USD fund, then they'll be exposing themselves to the further drop in the dollar, which is expected to continue for some time into the future.

[vina]

Sensex below 11,000 ! The skies are falling. But seriously folks, I think 10,000 and below is where we will see the bottom. The real fun will start when Jew Bania Bernanke and Gentile Bania Pualson announce the price at which they are buying the assets off the banks.

I am off to snooze. Just wake me up when they announce that. Meanwhile, the Fed is doing unsecured short term lending.. basiically lending directly to end customers.. no need for banks aye ? .. ..

I think it will finally end only when the US nationalizes it's entire bank sector and does the distressed situation work out under sovereign guarantee.. Like Bade said, everything will be owned and everyone will be working for the Govermund onree.

[vina]

Anyways.. Folks at BRF, I hope all of you are safe and sound and as advised parked your money in in layered FDs.. Atleast those who listened to the urgent plea to switch your MF portfolio allocation towards bonds , you will be laughing your way to the bank. The interest rates have surely to be cut.. Yeah baby, like I said earlier. BONDS ARE BACK, and all you cunning Yindoos who switched portfolio weightages , congratulations!

[vina]

Chidambaram on TV trying to talk up the market.. nice soothing noises of "will provide liquidity', all is well with India, "fundamentals strong" and a commie Panda like parroting out of "statistics" on how this industry did well and that did that etc.. classic accountant speak.. --> host of details about the past with total accuracy , but wholly irrelevant to the future!.. Come on, he is the Finance Minister, not the Accounting Minister.. That is the difference between Finance and accounting isn't it. Finance guys look forward with nose between eyes, while accountants have eyes on the backs of their heads!.

[vina]

Gordon Brown on TV live announcing a 3 point bailout which I summed them up correctly is close to 500b POUNDS.. that is close to a trillion dollars! . .

Also announce "strong legal action" against Iceland banks to recover money the depositors in UK lost when those banks failed .

UK has taken it to the chin. I don't see them coming out of this for atleast 4 to 5 years. The Americans have the size,strenght and dynamism to bounce bank. But tired, wheezing old UK, might be in the death bed and get flushed down the toilet .

[Tanaji]

^^^

Its 50B not 500B, so closer to 90B USD.

http://news.bbc.co.uk/1/hi/business/7658277.stm

Still a lot of money.

This game is great: get paid lavishly, screw up and get your pals in the government to clean up your mess while you retire in even more lavish comfort.

[vina]

^^^

Its 50B not 500B, so closer to 90B USD.

http://news.bbc.co.uk/1/hi/business/7658277.stm

Still a lot of money.

This game is great: get paid lavishly, screw up and get your pals in the government to clean up your mess while you retire in even more lavish comfort.

No on Tanaji. That is for the banks alone . Then there is 200b for "long term strength" and another 200b for credit guarantees or so. Was napping in the afternoon with the TV on and was half asleep. Those figures made me sit up!. I just hope I heard it correctly.

[Nayak]

Time to invest in companies who manufacture and supply paper for currency.

Or maybe dig my backyard, move the bodies and make space for my precious rupiahs.

[Vipul]

Guru's the real estate and stock markets are down.Would it be advisable to invest in Gold/Silver.Any chance of a bubble burst in these?

[ldev]

A rather odd idea - GoI is apparently planning to run what amounts to a bank for forex transactions, so that it doesn't have to impose exchange rate risk upon domestic trading parties, enabling them to instead directly obtain dollars from the overseas dollar fund:
Govt mulls overseas dollar bond float

Rather, I think it is an acknowledgement that access to foreign currency borrowing by Indian corporates has run into difficulty and only the extension of an Indian sovereign guarantee will enable that. Not surprising given that corporates in the west are having difficulty in issuing 7 day-1month commercial paper and the Federal Reserve has stepped in with its commercial paper backstop.

[Suraj]

ldev: yes, but the facility will not be online until at least December, where as the access to dollars is an issue now; as you mentioned it is short term borrowings that are being squeezed. Either it reflects their glacial pace, or the purpose is not quite about immediate liquidity management, but instead serves the purpose of an offshore clearinghouse for foreign exchange transactions without the exchange rate/sterilization implications of the current mechanism.