Indian Economy: News and Discussion (June 8 2008)

Vipul · Post by **Vipul** » 11 May 2009 19:05

Rs 1-lakh cr Jan investment plan belies slowdown.

Suraj · Post by **Suraj** » 12 May 2009 02:13

Auto sales as an economic barometer:
Double-digit, but uneven, auto sales growth in April

The two-wheeler sector, led by Hero Honda, and car market leader Maruti Suzuki together helped the automobile industry achieve year-to-year sales growth of almost 11 per cent in April at 894,058 units. The spurt has come at a time when most companies say the outlook is tough. Total vehicle sales, according to a report released by the Society of Indian Automobile Manufacturers (Siam) today, grew 10.76 per cent compared with the 807,183 units sold in April 2008.

The passenger vehicle industry grew 4.36 per cent, with car manufacturers selling 135,697 units in April. “This has come on the back of 0.54 per cent growth posted by the utility vehicle segment and the multi-purpose vehicle segment,” said Dilip Chenoy, director-general of Siam.

Sales of two-wheelers grew 13.71 per cent to 700,995 units as against 616,468 units in the same month last year. Hero Honda led the growth charts with an increase of 29 per cent to 363,357 units. Bajaj Auto, however, posted a fall of 23 per cent in motorcycles sales during the period. It sold 107,035 units.

Sales of commercial vehicles continued to be under pressure and dipped 11.25 per cent during the period. Sales of vehicles in the medium and heavy commercial vehicles segment dipped almost 42 per cent, while sales of light commercial vehicles grew 28 per cent on the back of good demand for models like Tata Motors’ Magic.

Car sales remain somewhat tepid, but two wheeler sales growth is strong, indicating disposable income growth among lower-middle class consumers is still in good shape. Car sales growth issues may also be due to more stringent loan terms (can anyone in India substantiate if there's differences in loan terms, compared to, say, late 2007 ?) Commercial goods vehicles growth is a source of concern, since it correlates to fixed asset investment. Not a consistent picture overall, but it is just a single month's sampling.

Ananth · Post by **Ananth** » 12 May 2009 06:10

Talk by our own Vaidya sir @ chennai on tax havens: http://www.youtube.com/watch?v=cYkQo8JI ... re=related There are 4 parts to it.

Also see a related talk by M. R. Venkatesh on participatory notes (pn).:
http://www.youtube.com/watch?v=ZXosZOomPS8 It also has four parts.

Sanjay · Post by **Sanjay** » 12 May 2009 17:03

The World Bank is up to its bizarre tricks again:

http://www.hinduonnet.com/thehindu/holn ... 121721.htm

View a rebuttal at:
http://www.rediff.com/money/2008/sep/06guest.htm

Any views on this ?

vsudhir · Post by **vsudhir** » 12 May 2009 17:31

deleted

Suraj · Post by **Suraj** » 12 May 2009 21:49

The rebuttal dates back from Sept 2008. If it indeed corresponds to the original WB article, what's the deal with rehashing it now ? We have plenty of problems to deal with, but a reactive approach entailing wringing our hands each time someone releases a drain inspection report does not help; all that results in is a wholly pointless emotional response.

I wanted to avoid having folks just pile upon the WB; there was an attempt by Sanjay (not Sanjay M) some months back to initiate a discussion on this on more rational data-driven lines, but there was little response. I really did not have sufficient data on my own, but neither did anyone else have the interest in looking it up.

The entire knowledge space on poverty is dominated by western reports and 'social scientist' types. The guilt complex the subject engenders, works very well for the purposes of those two entities. However, just shooting the messenger is not an adequate response...

vsudhir · Post by **vsudhir** » 13 May 2009 04:32

IIP output nosedives 2.3% in March

Suraj · Post by **Suraj** » 13 May 2009 04:49

More on the IIP data:
March industrial output dips 2.3%
March 2009:
Mining: 0.4%
Manufacturing: -3.3%
Electricity: 6.3%
Total: -2.3%

Manufacturing comprises close to 80% of the IIP. It ought to be noted that the IIP uses a 1993-94 base year, which the CSO is still to update.

“Looking forward, we expect an uptick in the April industrial production. The Purchasing Manager’s Index for April has shown its first expansion after contracting for five successive months. Motor vehicle sales have also picked up in the last three months, while railway freight has also shown some increase. The excess liquidity in the system, a substantial easing of financial conditions and a decline in some key interest rate spreads suggest to us that activity will pick up in second half of fiscal 2010,” said Pranjul Bhandari and Tushar Poddar, economists with Goldman Sachs.

However, Joshi of Crisil said decisive upturn in industrial output would not happen unless the global economy recovered, which he expected to be not before October 2009.

Najunamar · Post by **Najunamar** » 13 May 2009 23:57

vina wrote:Does anyone know the cost of mining high quality iron ore in India (Indian ore is of generally good quality) . I have a Goldman Sachs report which says that Brazil's Vale has a cost of $5 per ton (other Brazilian guys have $11), while Chipanda with it's poor quality low grade ore has $60 to $70 per ton.

No wonder Chipanda is long term screwed if it tries to make half the world's steel. The Brazilians, Aussies and Yindians will make them pay a hand and leg for trying to import iron ore (which is a highly concentrated industry, like Oil).

http://www.news.com.au/heraldsun/story/ ... public_rss
is a nice article with some information of relevance to this query by Vina Garu.

Vipul · Post by **Vipul** » 14 May 2009 04:53

Mumbai tax mop-up paints rosy picture.

In an indication that first-quarter direct tax collections could beat expections, tax deducted at source (TDS) collections in Mumbai were
up 47% for the period April 1 to May 11 compared with the year-ago period, according to data with the income tax department.

Senior I-T officials, who monitor business and industry, said the signs so far suggest the possibility of better year-on-year tax collections in the current quarter.

Total TDS collected from Mumbai so far amounts to Rs 6,600 crore, way above the Rs 4,500 crore collected during the corresponding period last fiscal. Reflecting the impact of the slowdown on corporate and individuals alike, tax collections from Mumbai were 13% lower than the targeted Rs 1,50,000 crore in the previous fiscal (FY09). Mumbai accounts for 35-40% of India’s total tax collections.

Since advance taxes for the first-quarter are paid by June 15, the department is not in a position to support its optimism with figures. “It is too early to say. Anyway, advance tax collections will start coming in June,” SSN Moorthy, chairman , Central Board of Direct taxes (CBDT), told ET.

The department says it has the machinery in place to monitor industry and business. Its officers liaise with companies and tax professionals to gauge business trends and possible tax collections for each quarter. One figure that is available as an indicator of what lies in store is TDS collection. This is because TDS is paid every month, unlike advance tax, which is paid in four instalments during a fiscal (June, September, December and March).

TDS collection from Mumbai in FY09 was 27 % higher than in the previous fiscal. The Mumbai region collected Rs 39,000 crore last fiscal by way of TDS while the total advance tax collection stood at Rs 130,000 crore.

FY09 saw an unprecedented 70% growth in collections during the first two months that prompted the finance ministry to revise upward its all-India target to Rs 3,95,000 crore.

Suraj · Post by **Suraj** » 15 May 2009 11:39

FDI inflows exceed FII outflows in Oct'08 - Mar'09

In what can be seen as India’s relative strength amid nations reeling under the onslaught of a global recession, foreign direct investment (FDI) worth $11 billion flowed into the country between October 2008 and March 2009 even as foreign institutional investors (FIIs) pulled out $8.3 billion through the portfolio route over the same period.

FDI is long-term and, therefore, more stable in nature compared with investments through the portfolio route, which tend to be more speculative and volatile.

However, for the full fiscal (FY09), Reserve Bank data show that FDI was almost flat at $33.6 billion ($34.4 billion) while FIIs pulled out $13.8 billion. Of the $33.6 billion FDI in FY09, only a third was invested in the second-half while a bulk of it entered during the first half. This is the first time since 1999 fiscal, which recorded FDI at $2.5 billion and FII at a negative $61 million, that FDI inflows have offset FII outflows by such a huge margin.

The FII figures by RBI include investments into GDRs/ADRs and other offshore funds issued by Indian companies, which comprise a tiny portion of the overall investments. FDI also includes earnings reinvested by MNCs and acquisition of shares by non-residents.

Sanjay M · Post by **Sanjay M** » 16 May 2009 06:50

WSJ:

Election Results No Boost for Reform

http://online.wsj.com/article/BT-CO-200 ... 19242.html

Sanjay M · Post by **Sanjay M** » 16 May 2009 12:16

WSJ/FEER:

Don't Believe The India Hype

Suraj · Post by **Suraj** » 16 May 2009 14:06

FEER, WSJ, Time, Reuters etc all called the elections wrong. They all projected a split verdict and a hung parliament with a very weak centre held to ransom by large regional parties. As it turned out, the results were nothing of the sort. It was characterized by the rout of both the Commies and the large regional parties like BSP. In that sense, they have plenty of egg on their face - their dismissive 'bald men fighting over a comb' view of the elections turned out very wrong.

I don't want to discuss political implications, but the economic implications are, IMHO, very positive. Both the Congress and UPA have been strong backers of economic reforms when they had the necessary political capital. The 2004 UPA regime was hampered by a historically high Left entry to the Lok Sabha, that has now dissipated.

With the world economy the way it is, we need a stable centre with sufficient political capital. As someone primarily interested in the subject of economics, I make little distinction between Congress and BJP, if either have a large enough mandate of their own (e.g. ~200 LS seats). Both will make policies aligned with their own support/business patronism base. But overall, I only see good things for the economy about either national party having a strong mandate to act.

With the Left routed in WB and elsewhere, I hope the SEZ Act implementation can proceed faster. Kamal Nath deserves to retain his Commerce Ministry post. With a greater mandate, they can frame a more effective eminent domain statute that enables effective land acquisition without having the Left hold it all to ransom.

Since Chidambaram has lost, there needs to be an effective person in the FM role. Who are the candidates ? Hopefully not another micromanaging beancounter like PC. We need someone with more capital within the Congress hierarchy, and good execution abilities.

My primary concerns are the UPAs:
* lack of focus on road infrastructure. They have dropped the ball on NHDP to a significant extent.
* overly claiming projects like NREGS benefited them. Extending those would be a costly mistake.

sivabala · Post by **sivabala** » 16 May 2009 23:24

Suraj wrote:...Since Chidambaram has lost,...

Just a correction, no nitpick. PC has won, albeit, a very narrow margin.

Chidambaram declared elected from Sivaganga

Suraj · Post by **Suraj** » 17 May 2009 02:22

Thanks for the update. I see he won after the recount. However, I don't have much confidence in him as an FM again. He lacks sufficient weight within the party, and seems to be a headstrong micromanager. MMS was a good FM when working with PVNR covering for him. I thought Jaswant Singh did a good job in his brief stint. Perhaps Pranab or A K Antony this time ?

I hope Kamal Nath is retained at the Commerce Ministry. He has done an excellent job of safeguarding Indian interests at the WTO and assorted fora, articulating our stand and collaborating with the G-20 to take on western pressure. The Finance Ministry may hate his guts, but he's done well.

During the last 5 years, on the economic side, the FM was the weakest link of the troika of FinMin, ComMin and the RBI. The latter two had capable leads in Kamal Nath and Y V Reddy (now Subbarao). I hope there will be a capable person in the FM post, who can collaborate well with ComMin, as well as (I can hope) someone suitable in law and/or environment ministries.

Having a FM who has the confidence and backing of the PM and party leadership to act without being undermined, like MMS was able to under PVNR, would be ideal. There's also the alternative of a leader who's also an economic visionary, like Ikeda Hayato in Japan in the 50s & 60s, and Park Chung Hee soon after in SoKo, but I don't see anyone on those lines among the current Congress leadership.

Sanjay M · Post by **Sanjay M** » 17 May 2009 04:27

So, Suraj, when is Moh'd Afzal Guru going to be hanged? Any word on what level of political capital will allow Congress to do the needful? Or is that for the 2014 election? Presumably, Kasab can rest easy in the knowledge that he may die of old age before his turn comes.

Suraj · Post by **Suraj** » 17 May 2009 04:44

Sanjay M, this is the economics thread. I specifically restricted myself to trying to derive a picture of who will occupy political positions that are directly related to the economy.

I see the prognosis of economic policies by UPA'09 to be different from UPA'04 simply because these elections gave the largest mandate to a single party since the 1984 elections. I don't expect them to make every decision on the lines of my own liking, but I value the fact that the political space is primarily covered by two large national parties, with one having sufficient mandate to legislate, but the other not being so marginalized as to not be an effective opposition.

Please keep political rhetoric on non-economic topics to the appropriate thread in the strat forum. Further political polemics in this thread on the lines of your last post will be deleted. Thanks.

vina · Post by **vina** » 17 May 2009 08:50

Finally a coherent answer on why Kangress won. It really warms the cockles of my heart. I admit I was an NREGA basher but that was the "technician" in me. It seems to have worked atleast reasonably. Sure fix leakages. But then where is your heart if you can't take care of the distressed sections of the Indian population!.

Bharat Shining, Congress Smiling, Left Whining

SWAMINOMICS
Bharat Shining, Cong Smiling, Left Whining17 May 2009, 0115 hrs IST, Swaminathan S Anklesaria Aiyar

I was dead wrong in predicting a hung parliament with Mayawati having a kingmaking role. Yet, I cannot resist recalling the heading of my March 9 column, 'India slumps, Bharat rises, Congress smiles'. Despite a global recession that has hammered industry, rural areas - called Bharat - have prospered, enabling Congress to win a smashing victory.

Indian voters throw out 80% of all incumbent governments, especially in bad economic times. The global recession has hit India hard - industrial production slumped into negative growth, and exports were down 33% last month. Rural consumer prices are up almost 10%.

For Congress to get re-elected in such circumstances is remarkable. The main reason is prosperity in rural areas, which have 70% of the population. The entire organized sector has barely 30 million workers out of India's total workforce of 500 million, which is overwhelmingly rural. Industrial captains, trade unions and information technology may hog newspaper headlines, but are barely visible to the rural millions.

Luck matters. The monsoons have been good for five years, helping agriculture average 4.5% growth, the fastest ever. This growth has been spread widely, and not limited to a few areas, as in the early Green Revolution. Government food stocks have risen to a mountainous 50 million tonnes. Cotton has become a major export, thanks to BT cotton.

Historically, bumper crops have been associated with falling prices for farmers, while high agricultural prices have been associated with drought and farm distress. But in the last two years, we have witnessed the extraordinary combination of bumper harvests and high prices.

The background to this is global. Record global growth, spearheaded by China, has hugely increased the demand for all commodities, and international food prices went through the roof after late 2007. India responded first by banning exports and then by raising domestic procurement prices substantially. This kept domestic supplies high while ensuring that farmers enjoyed the highest-ever prices. Yet, these high prices are in line with global prices, so no painful price contraction is required in coming years.

The last monsoon was excellent in the Gangetic plain, but poor in many parts of central India, including the cotton belt. However, the procurement price of cotton went up a whopping 40%, so even drought-affected farmers with low yields earned higher incomes. And millions of farmers benefited from farm loan waiver.

High food prices are good for farmers but terrible for landless labourers and urban workers, who normally oust governments that bring inflation. The price rise, as measured by the wholesale price index, is down to almost zero. But the consumer price index for rural labourers - in which food items have a high weightage - reveals almost 10% inflation.

Why was this not fatal for Congress in rural areas? Mainly because labour incomes rose even faster. A series of good harvests greatly boosted rural employment, in agriculture and in allied activities. And the National Rural Employment Guarantee Scheme (NREGS), despite several abuses, reduced rural underemployment and raised wages. Indeed, Punjab's agriculture is suffering from a severe shortage of Bihari migrant labour - Biharis are now finding enough work at home (all is well with the world and peace progress and prosperity if this trend strengthens). Finally, several states have substantially raised minimum wages. In the past, such wage decrees were widely ignored. But the NREGS pays the minimum wage, and this in turn is forcing up the open market rate. What's more, the scheme pays the same rate to women and men, reducing the wage discrimination that women have historically suffered from.

With both farmers and rural labourers prospering, rural sales of fast moving consumer goods have been booming. New cellphone connections hit a record 15.6 million in March, mostly in rural areas. Hero Honda's motorcycle sales, targeted at rural areas, are up 24%.

Voters have hammered the Left Front (oooh.. I luv that) . Its parliamentary tally fell from 60 to 25. It hoped to be kingmaker in New Delhi, but instead now faces defeat in the next state Assembly election in both Kerala and West Bengal. It needs to ask itself why it went ballistic over the nuclear deal with the US, for ideological reasons totally ignored by ordinary voters. It claimed that Muslim voters would be alienated if India backed the US and Security Council pressure on Iran's nuclear ambitions, but in fact, Congress gained massively from the Muslim vote in UP. The Left Front needs to finally stop fighting the Cold War and wake up to the realities of the 21st century.

Looking ahead, Congress must persist with its rural emphasis, and old-agenda items like liberalising pensions and foreign investment. But it needs a new agenda too. Education reform is a key - we must check absenteeism, issue school vouchers, and reduce hurdles to private sector entry in education. Administrative reform is equally vital, to improve the aam aadmi's access to public services.

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For Congress to get re-elected in such circumstances is remarkable. The main reason is prosperity in rural areas, which have 70% of the population.

pgbhat · Post by **pgbhat** » 17 May 2009 08:57

^^^^
Well we can expect hakim Jean Drèze getting atleast padmashri next year for sure.

sugriva · Post by **sugriva** » 17 May 2009 14:10

Suraj wrote:During the last 5 years, on the economic side, the FM was the weakest link of the troika of FinMin, ComMin and the RBI. The latter two had capable leads in Kamal Nath and Y V Reddy (now Subbarao). I hope there will be a capable person in the FM post, who can collaborate well with ComMin, as well as (I can hope) someone suitable in law and/or environment ministries.

The influence peddling has just begun. CNN-IBN reporting that Kamal Nath will be moved to Ext Affairs and hold your breath, Kapil Sibal to be the new Commerce minister.

satya · Post by **satya** » 18 May 2009 02:11

Reforms are definitely going to happen and will be based around increased earning ( revenue for GoI)from one hand and doling out from other & everything in btw for party/family ie we may see new venues to be explored to increase the revenue but don't expect any reforms in the agriculture sector for that has to be kept on hand outs in form of MSPs & loan waivers for votes obviously & NREGS overhaul ( it was never meant for poors in first place . It was meant for party workers to make some extra ).

vera_k · Post by **vera_k** » 18 May 2009 04:08

Montek being proposed for Finance Minister by MMS.

vsudhir · Post by **vsudhir** » 18 May 2009 05:13

Well, I do believe Montek Singh is a rather ok candidate, no? Hope he doesn't carry over the socialistic mission of the planning commission over to FinMin but if he can deliver basic, pressing reforms - more power to him.

I do agree however on the non-liberalisation of the agro sector. Too many vested interests arrayed against it and too little will to do the right thing.

BhairavP · Post by **BhairavP** » 18 May 2009 10:17

Sensex hit the upper circuit today. Trading halted.

vina · Post by **vina** » 18 May 2009 12:02

Well, while you guys are partying with the Sensex hitting circuit breakers, I as usual have to be the Cassandra calling out the dangers ahead.

Folks, truth be said, India "managed" this downturn in two ways. The commodity shock was shielded from the consumers (for Oil prices were not passed on), food prices were not passed on etc, all that was absorbed in terms of higher deficit and the downturn /collapse too helped because it lowered the global interest rates.

The other serious thing was the massive real estate bubble that happened in India. Now the real estate developers of all stripes from the local thug/hoodlum /murder to the big so-piss-ticated shady operators types like DLF, Unitech, HDIL, India Bulls etc , took money hand over fist from everyone (including markets and advances from customers), leveraged it many fold , and splurged on buying up a "land bank" like the entire world was getting sold out. Now they bulked up on assets (much of only partly paid for , but all the same booked as "assets"

(how I'd like to know any accountant here)) in their books and having massive debt (both secured like loans to banks, mutual funds etc and unsecured to contracters etc) , and ZERO CASH on hand.

Now remember what the guy with the French Creole accent taught me in Biz School , "If zyou run ou'ta kaush , zyou are Bankrupt "? . Yes dear sirs, the REAL ESTATE SECTOR IS TECHNICALLY BANKRUPT . There is NO WAY IN HELL they can monetize their assets /near assets and do their inventory cycle, pay their debts and get profits. THERE IS NO CASH FOR THAT . Customers have stopped buying and no idiot will pony up money (hear those horror stories of paying close to 100% and not even a brick of your home being built?) to any developer , however attractive it might sound. And thank goodness to govts like Karnataka who took out advertisements like against DLF in Bangalore. That dog and pony /rank cheating show will not go on any more.

So how will it all end up? The developers will lubricate the political system in Dilli (dilli billi chor hai as always na?) and get the banks and lenders to take the hit by "restructuring". Oh no, just extending the tenor of the loan alone wont solve it. The market clearing price is much much less than today (especially after all the supply coming in) and the developers have to sell at a loss AFTER completing the projects (now you know why they wont. why will you do it, when you know you will have to sell at a loss after completion. Far better not to develop it at all !). The loans have to written off /reclassified as NPA and still continue throwing good money after bad, while the developer scamsters and shady scoundrels will still come out unscathed , go back to their merry old games and scams galore and keep their ill gotten wealth. Oh, for suckers who ponied up money between 2005 and 2008 in the hope of a quick buck and flipping apts, well, you will get the apt eventually, but only around 5 to 7 years min late and with indifferent quality and no redress to any shortcomings , and yeah, you actually made negative returns.

How should it happen in a civilized world ? . The banks take posession of the assets of the developers against which loans were secured , wipe out the equity of the developer scoundrels /scamsters , auction off the "vast land bank" which the developers used the loans and the advances of consumers to build up (Maytas anyone) , recover the loan and pay back the money which customers put up and also other debtors in seniority.

Notice, in a civilized world . LAND VALUES WILL COME DOWN to earth literally (nice pun eh?) if the huge artificially locked up supply is liquidated, real estate prices will come crashing down (because land values are down, existing apts, houses too will come down, coz the alternatives are far cheaper otherwise), while banks and other debtors get the money back and the Developer thugs and thieves are taken to the cleaners as they deserve?

So guess which of the two scenes will actually happen in India ? . I am willing to wager a Rs 10000 bet with anyone here on the board who is willing to bet on the Civilized world scenario. I am putting my money on Dilli Billi Chor Hai scenario. This is the touch stone /test case for the new Finance Minister /MMS govt. So Montek, if you are coming in, I am watching you on this.. Is the govt going to screw the lenders or is it going to liquidate the scoundrels?

The pressing reform needed RIGHT NOW to clean up the real estate mess is strong laws such and mandated procedures such as ESCROW like in Massa , which will prevent the Developers to take your money and use it to go buy up land or square an existing liability and put nothing of your money back in your project, and the ability to massively leverage your money to put the entire project in risk in turn of downturn and huge debt to equity ratios in these projects.

To fix the sector and get it back into sanity, you need to liquidate the current scoundrels and get values back down to earth and then put the entire industry on a sound legal footing , do away with archaic laws, put strong consumer protections in place, make EVERY R.E transaction MANDATORY and LEGAL ONLY VIA ESCROW . This alone will drive out the black money and the politico, crook, criminal and thuggish underworld out of R. Estate , where it is the currently preferred place to park ill gotten wealth and money gleaned from corruption and make it a normal industry with civilized laws and norms.

And oh yeah.. Ol' vina's spidey sense says, keep away from ALL banking stocks as beyond any immediate investment ( > 3 months), esp the ones like HDFC bank , HDFC RE, ICICI, and Govt ones like SBI etc which have huge exposure to RE. Their loans are basically KAPUT. Whether you put lipstick on a pig and "restructure" (fat chance they will see anything back on their loans) and since I bet on scenario of Dilli Billi Chor hai. The banks will be forced to "restructure" (without having to classify them as NPA as currently needed

). But there is only so much lipstick you can put on a pig. Eventually these loans will be classified as Non Performing and see write downs. And I think this Real Estate crisis will need to be addressed within the next 6 months. Builder types are too proximate to Dilli Billis and there is no other way for them to escape bankruptcy and lose assets to the banks .

svinayak · Post by **svinayak** » 18 May 2009 12:07

vsudhir wrote:Well, I do believe Montek Singh is a rather ok candidate, no? Hope he doesn't carry over the socialistic mission of the planning commission over to FinMin but if he can deliver basic, pressing reforms - more power to him.

I do agree however on the non-liberalisation of the agro sector. Too many vested interests arrayed against it and too little will to do the right thing.

Ahluwalia is married to fellow economist Isher Judge Ahluwalia and has two children.

She has been the Chairperson of Indian Council for Research on International Economic Relations (ICRIER) from 2005.

She joined the Maryland School of Public Affairs faculty in fall 2002. As a visiting professor, she teaches courses in the fields of macroeconomics, international economic policy, and international economic development. She was a Senior Fellow at the National Institute of Public Finance and Policy, and an economist at the International Monetary Fund.

Sanjay · Post by **Sanjay** » 18 May 2009 16:26

Does anyone have any details on the implementation on the NREGs and the Bharat Niman programmes ? If these two are even half-way implemented and have one-half of their expected results, the impact on India's human development could be enormous.

Chellaram · Post by **Chellaram** » 18 May 2009 21:11

Sanjay wrote:Does anyone have any details on the implementation on the NREGs and the Bharat Niman programmes ? If these two are even half-way implemented and have one-half of their expected results, the impact on India's human development could be enormous.

Sanjay, have you read this article on NREGA by Jean Dreze from Feb of this year?
http://www.frontlineonnet.com/fl2604/st ... 410100.htm

putnanja · Post by **putnanja** » 18 May 2009 23:35

Chidambaram not keen on home ministry

..
P Chidambaram is resisting moves to make him home minister again. According to top level sources in the Congress, the newly-elected MP from Sivaganga in Tamil Nadu, who barely scarped through, wants the finance ministry which he previously held.

Chidambaram, a lawyer by profession, is clever and ambitious enough to realise that the home ministry will be one of the most treacherous portfolios, where success will be hard to come and brickbats and ridicule are the usual dividends.
...

Sanjay · Post by **Sanjay** » 18 May 2009 23:46

Chellaram, I saw the article but it doesn't say enough. It questions official data - fine but on what basis ? Is there anything to suggest that the data is inflated and if so by what factor ? What was very interesting was that the scheme had yet to take off in the Eastern Region. That is very distressing. In addition, the NREGS must have had an impact on poverty. This is not the only work many of these people have so that some income improvement must have taken place.

Suraj · Post by **Suraj** » 19 May 2009 00:08

The problem with Montek is that he would be nominated through the Rajya Sabha, as far as I know. In the process we would have the PM and FM as RS nominees, both of whom lack sufficient connections to the party power base. This appears to be less than desirable from the perspective of getting things done.

I would prefer someone who can put his head down and be amenable to both the PM and the party leadership, i.e. Pranab or Antony. Kamal Nath would be good too, though I am loath to see him leave ComMin. He ought to realize that with the commies no longer pulling strings, he would have far greater latitude in UPA'09 .

We'll have to wait until the Cabinet is announced on 23rd.

Prem · Post by **Prem** » 19 May 2009 03:52

Hi Suraj,
MMS and him are team. It will MMS job to do the public relation for him. Ahluwalia have been involved sinc N Rao sahib time to liberate the economy.

Suraj · Post by **Suraj** » 19 May 2009 04:46

Absolutely, they (Montek and MMS) have a much better rapport than PC and MMS - that is the plus point of Montek.

However to get things to work, you need strong ties to the party leadership. The dynamic between MMS and his party is vastly different from that between PVNR and the Congress at that time. I fear they will both be undermined, or that the Planning Commission socialist folk will have greater say in the Finance Ministry now.

Dileep · Post by **Dileep** » 19 May 2009 07:22

Montek is a good choice.

He can do what he wants, while MMS can take care of the politix side with Rajmata. Will work nicely.

Prem · Post by **Prem** » 19 May 2009 07:55

Dileep wrote:Montek is a good choice.

He can do what he wants, while MMS can take care of the politix side with Rajmata. Will work nicely.

This is the understanding , and this time he will go full speed and do what he most probably had planned about opening economy in last 5 years.

vsudhir · Post by **vsudhir** » 19 May 2009 08:18

Has Montek spoken yet about what he considers priorities for the economy? IIRC in one intvw in 2007 as planning commission chief he did mention opening up the insurance sector.

girish.r · Post by **girish.r** » 19 May 2009 13:19

vsudhir wrote:Has Montek spoken yet about what he considers priorities for the economy? IIRC in one intvw in 2007 as planning commission chief he did mention opening up the insurance sector.

Hi,

They see it as FDI coming in......

I see it as

Bankrupt Insurance companies waiting to pounce on the hard earned savings of the middle class......

Well just my 2 paisa worth of thought

mnag · Post by **mnag** » 19 May 2009 20:32

A question to gurulog here.

In uSA, gasoline costs about 2.5$ per gallon (120 Rs for 4.4 liter = approx 30 Rs per liter). While in india, it is around 50 Rs per liter. In USA diesel costs around 3$ per galon (Around 35 Rs per liter) which i think is comparable to the cost in india (i am not aware of exact cost of diesel in india).

I keep hearing that govt subsidises petrol in india. If petrol costs twice compared to gasoline even after subsidy,
1. what is the petrol price without subsidy?
2. Why does petrol cost more in india compared to gasoline in us? Is it harder to produce petrol or is it due to inneficency in refinig (compared to usa)?

Suraj · Post by **Suraj** » 19 May 2009 21:35

pandyan wrote:this brings another question to you Suraj saar....can anyone become a finance minister? other portfolios can have ministers who have good leadership/managerial skills. Wouldn't finance job require lot more technical skills, ability to grasp complex concepts and solid understanding of how various factors impact the economy?

Anyone can become a finance minister, but not many make a good finance minister

The FM is not a beancounter, or at least, should not be. His/her task (in our context) is to oversee the revenue collection and disbursal plans (the budget) and to execute the macroeconomic reforms.

The actual specifics are driven by the babus (just like in the case of Railways under Lalu), who remain the steel frame of India. It is why India can so effectively transfer power between administrations, and also why I am sanguine as to who won the elections. All I really care about from an economic perspective is that the GoI have a freer hand to legislate reforms; the babus can execute, but they cannot give direction.