Indian Economy: News and Discussion (Jan 1 2010)

Dmurphy · Post by **Dmurphy** » 10 Apr 2010 23:35

Prem, Rohit, patni, thanks a million, guys! Its solved most of my problem.

Chinmayanand · Post by **Chinmayanand** » 11 Apr 2010 15:04

RBI may lift CRR, rates by 0.25-0.5 pc on April 20: Bankers

Chinmayanand · Post by **Chinmayanand** » 12 Apr 2010 03:52

The late scamster Harshad Mehta once told me that if you want the country to be rich, you must have a strong currency. I didn’t fully follow his intricate logic then, for a strong currency is a consequence, and not a precursor, to building a strong economy.

The India story so far has taken a different route: we have strengthened our economy by artificially holding down our currency. It’s not very different from the way China has built its economy. But it is time to rethink this unholy fetish for a weak currency. It flows from our tendency to privilege exports over imports since we want to hoard foreign exchange. The hoarding instinct is almost always the result of a past shortage psychosis. Thus we will sit on piles of useless foreign currency when it can be put to better use. China has $2.4 trillion of forex reserves - more than twice the size of the Indian economy - and India $260 bn (excluding gold).

Are high reserves a sign of ruddy health or economic diffidence? The official argument in favour of a weak rupee is that it will affect exports, but this is a very short-term view and assumes that India’s exporters are morons incapable of adjusting to new realities. The truth is that a cheap rupee reduces the pressure on Indian manufacturers and service providers to become more competitive by improving productivity.

To be sure, a strong rupee will create its own losers. Domestic manufacturers and exporters with a large rupee cost base will be hardest hit — and they will be forced to improve productivity or shut shop. Our farmers and horticulturists will also face the winds of competition - and that’s not a bad thing when food prices are going through the roof. Our farmers may thus need short-term protection to give them time to adjust.

On the other hand, look at the plus side of the balance-sheet. A stronger rupee will douse inflation faster than a stable one, since we import more than we export. Consider the possibilities.
First, oil. The government has been pussy-footing around oil prices because it does not have the guts to take the politically tough decision to deregulate. But let the rupee gain 10 per cent or more and the oil bill comes down by the same amount. A canny government will allow this to happen and adjust the taxes upward so that the pump price remains the same. The resultant short-term tax booty can be used to ease adjustment pressures when oil prices start zooming — as they surely will.

Second, trade will shift towards goods with high import content since exporters will import cheaper raw materials and export value-added stuff. This is the story of our gems and jewellery export success. There’s no reason why it can’t be replicated in electronic goods, automobiles or anything else. Far from depressing exports, a strong rupee will stimulate the right kind of exports.

Third, our capital costs will come down dramatically as everything from nuclear power plants to industrial machinery will become cheaper. Cheaper electricity and cheaper industrial goods will improve our overall cost competitiveness in the medium term.
Fourth, it will allow Indian firms to become truly global. Most Indian success stories — Infosys included — are really cost arbitrage stories. They buy cheap Indian labour and displace costly US or European labour through a process called offshoring. Since Infosys’ competitors are on the other side of the earth, we steal their jobs while they sleep.

But this is the bottomline: we export because we are cheap. Which is not exactly the way to robust competitiveness. Also, a weak rupee artificially makes Indian labour look cheap. A true multinational should not only be offshoring costs, but multi-shoring it. A strong rupee will make it easier for an Infosys to hire more US and European techies — making it less politically vulnerable to protectionism.

Moreover, a rupee that commands a better dollar rate will be able to buy more assets abroad cheaper — whether it is oilfields or steel or automobile companies. The Tatas would not be struggling with Corus and Jaguar-Land Rover if the rupee had been stronger then.

An interesting speculation: where will the rupee be if allowed to float freely without the Reserve Bank’s nannying? A good place to seek an answer is India’s GDP on the basis of purchasing power parity (PPP). At $3.56 trillion in 2009 (according to CIA estimates), it’s nearly three times the nominal GDP of $1.22 trillion. This means a dollar spent in India can get you three times the goods it can in the US. Of course, this rule of thumb is too simplistic, since the exchange rate is determined by many factors, including capital flows, deficits, relative prices — the works.

If allowed to float freely, the rupee could rise toRs 30-35 to the dollar in two years’ time, other things being equal. The RBI should let the rupee fly - and only try to control the rate of ascent by spacing it out.

Katare · Post by **Katare** » 12 Apr 2010 04:05

I am just amazed that such garbage manages to get published and posted at BRF

Chinmayanand · Post by **Chinmayanand** » 12 Apr 2010 13:31

Instead of

, it would be better if you dissect that article and post a few lines. It's so easy to

amit · Post by **amit** » 12 Apr 2010 16:05

Chinmayanand wrote:Instead of , it would be better if you dissect that article and post a few lines. It's so easy to

Boss I don't think you'd need to dissect this piece of garbage to get the real stench that emanates from it.

However:

To be sure, a strong rupee will create its own losers. Domestic manufacturers and exporters with a large rupee cost base will be hardest hit — and they will be forced to improve productivity or shut shop. Our farmers and horticulturists will also face the winds of competition - and that’s not a bad thing when food prices are going through the roof. Our farmers may thus need short-term protection to give them time to adjust.

Take the bold italics part. Will be forced to improve productivity? If you've been following the trends of the Indian economy over the past decade you'd know that productivity levels, especially in the pvt sector have gone up by leaps and bounds and there's very little value add possibility by improving it even further. What the private sector needs to leap to the next level is increased capacity and scale and access to markets abroad.

The productivity laggards are the Public sector and companies in this sector are least likely to close shop. So you kill the productive pvt sector companies, especially the medium sized ones who are growing fast and well on their way to becoming world class companies?

The second part on agriculture is even more hilarious. So you support the idea of allowing farm imports to severely hit our own farmers? Can you guess which farmers would be the most hit? The (exceedingly few) large farmers or the small and medium farmers? And you want to import "cheap" food and then subsidise the farmers (what does short-term protection mean?) to tide over the "crisis" of your own creation. By the way any idea of how short is short-term? Can you give a time frame? And do you have any ideas of how you'd sell this idea politically to the extremely strong farming lobby? Noticed what happened with sugar recently?

On the other hand, look at the plus side of the balance-sheet. A stronger rupee will douse inflation faster than a stable one, since we import more than we export. Consider the possibilities.
First, oil. The government has been pussy-footing around oil prices because it does not have the guts to take the politically tough decision to deregulate. But let the rupee gain 10 per cent or more and the oil bill comes down by the same amount. A canny government will allow this to happen and adjust the taxes upward so that the pump price remains the same. The resultant short-term tax booty can be used to ease adjustment pressures when oil prices start zooming — as they surely will.

This one takes the cake! What "adjust taxes upward so that the pump price remains the same" means is that you increase the tax on oil. Do you think the common people, opposition parties etc are not going to notice? How do propose to "politically" sell this idea of cheaper oil imports but higher pump prices on account of fresh "taxes"? And also how long do you continue with this?

Second, trade will shift towards goods with high import content since exporters will import cheaper raw materials and export value-added stuff. This is the story of our gems and jewellery export success. There’s no reason why it can’t be replicated in electronic goods, automobiles or anything else. Far from depressing exports, a strong rupee will stimulate the right kind of exports.

Can you cite some examples of "high import content, value added stuff" that can be exported by India? That is apart from gems and jewellery which is very peculiar industry where the raw material prices are exceptionally high due to their scarcity.

Regarding the second bolded part, do know why India is being considered such a hot global destination for manufacture of small cars? I'll give you the answer, its because this is the place where a small car can be designed and built in the cheapest possible manner. Now do you realise what "high import" content would do to this model? Or what it would do the dozens of world class ancillaries that have come up in India?

Regarding electronics, especially consumer electronics, the only reason why India has not been able to become a power house manufacturer is because of the logistics deficit which destroys the efficient supply chain needed to make electronics manufacture worthwhile and cost effective. How does "high import content" help that? The very fact that the author has equated gems and jewellery with electronics and automobile production shows his "expertise".

This is just a very piecemeal look at the article, there are other gems. I'll leave it in Katare's very capable hands to uncover them, if he so chooses.

Look boss, in simple terms what this joker is advising can work for a mature economy which has a primary focus on high value add and innovation; a strong currency works in such an environment. However, India hasn't reached that stage yet. Why do you think the Chinese, with an economy four times our size, are petrified at the prospect of a 20 per cent appreciation of the yuan?

Also what strong rupee would result in just as much import of luxury goods (which would now be cheaper) like high end cars as it may involve import of capital and machinery.

And mind you the points I raise don't even touch on the fiscal side (and problems) which a strong rupee would cause. Inflation may go down in the short-term but there other factors to consider too.

I think you need to think about these points. Then you'll understand the

Chinmayanand · Post by **Chinmayanand** » 12 Apr 2010 17:05

Thanks for your time taken in dissection, Amit ... this is a better way to

, packed with a punch

Theo_Fidel · Post by **Theo_Fidel** » 12 Apr 2010 19:45

WRT DNA India, it is a non-serious publication of Dainik Bhaskaran. I would not use it as informed analysis. Just a broadsheet.

Your source of info always matters.

http://online.wsj.com/article/SB1000142 ... 96134.html

India February Industrial Output Slows

Output at Indian factories and mines rose 15.1% from a year earlier in February, slowing from a 16.7% rise in the previous month, according to government data issued Monday.

This looks like a base effect from last year.

Economic growth of 8.5% in the January-March quarter, "which is going to give an annual growth rate just short of 7.2% (for the last fiscal year), seems now a realistic one," Mr. Basu told reporters on the sidelines of an economic summit.

The strong growth in output has bolstered market expectations that the Reserve Bank of India will hike its key monetary policy rates and may also suck some liquidity out of the financial system to rein in high inflation. The bank next meets on April 20.

Robert Prior-Wandesforde, HSBC's senior Asian economist, said in a research note that industrial output growth may have slowed since December, but that it was little reason for concern, as December's 17.6% expansion was at the second-fastest pace ever.

"With capacity utilization rates apparently so high, it seems more likely that the drop reflects supply rather than demand constraints. After all, imports are now surging," HSBC said.

Not sure how increasing interest rates will help growth in supply. Expected better from the WSJ.

Abhijeet · Post by **Abhijeet** » 13 Apr 2010 01:59

Perhaps a stupid question.

Petrol rates in India are now at about Rs. 52 per litre, or over $4 per US gallon (1 gallon = 3.78 litres). This is comparable to the price in many European countries, and far higher than the price in the US. Yet I constantly hear about how the government is still subsidizing fuel, and that further rate hikes are likely.

In what way is the government subsidizing petrol if it already costs more than in many other countries?

Suraj · Post by **Suraj** » 13 Apr 2010 02:07

GoI subsidizes kerosene sold through the PDS, not retail petrol, as far as I know. The latter instead is significantly taxed.

Katare · Post by **Katare** » 13 Apr 2010 02:34

Chinmayanand,
Please do not take my smily as a personal attack!

Turnaround of India State Could Serve as a Model

So when Bihar announced earlier this year that it had notched an 11 percent average growth rate for the last five years, making it the second fastest-growing economy in the country, the news was greeted as a sign that even India’s most intractable corners of backwardness and misery were being transformed.

Katare · Post by **Katare** » 13 Apr 2010 02:46

Another one in NYT
Looking to Grow in India, Wal-Mart Goes to the Farm

vera_k · Post by **vera_k** » 13 Apr 2010 04:50

The government subsidises petroleum when prices spike in the oil market. When oil reached $120/barrel, Indian customers did not see the impact at the pump the way customers in deregulated markets did.

Katare · Post by **Katare** » 14 Apr 2010 00:55

An analysis of the latest IIP

But the fact remains that the sterling rise in the index is on a very low base. Note that the index grew by a lacklustre 0.2% in February, 2009. On a very low base, 15.1% increase year-on-year is hardly breakneck economic speed that requires deceleration via, say, monetary policy measures.

However, capital goods is one segment where growth has been strong for quite a while now. The latest estimates point at a phenomenal 44.4% increase y-o-y in the index of capital goods output in February. And in the same period last year, capital goods production did grow by a credible 11.8%. This is one segment where growth is not on a poor base.

Theo_Fidel · Post by **Theo_Fidel** » 14 Apr 2010 19:31

http://www.ptinews.com/news/607353_Indi ... s--Experts

India can surpass US economy in 3 decades: Experts

Former senior advisor and a Director at The World Bank, Harinder Kohli said India's average per capita income would jump 22 times from USD 940 to USD 22,000 in 30 years from now.

"India's footprint in the global economy will go to more than 17 per cent in 2039 from less than two per cent in 2007," he said.

Jaspreet · Post by **Jaspreet** » 14 Apr 2010 22:34

India can surpass US economy in 3 decades: Experts

Experts,
I have a very basic question.

Are there enough resources, meaning petroleum, plastics, iron, raw material for cars, TVs, cell phones, etc on earth to take the peoples of India, China and other developing countries to at par with the standards of the developed ones and to sustain all of them there at that level for some time?

If it has been answered before, kindly point me to a link.

Thanks

ramana · Post by **ramana** » 14 Apr 2010 23:07

Most likely there will be exchange rate adjustment to reflect reality by then.

Singha · Post by **Singha** » 14 Apr 2010 23:25

and the per capita consumption of stuff by developed countries will decline from its current peak.

vina · Post by **vina** » 14 Apr 2010 23:56

Are there enough resources, meaning petroleum, plastics, iron, raw material for cars, TVs, cell phones, etc on earth to take the peoples of India, China and other developing countries to at par with the standards of the developed ones and to sustain all of them there at that level for some time?

The answer is YES. You underestimate the ability of the capitalist system to create technological innovations that create radical solutions. That is the a mistake that commie /JNU kind and planning commission type brain dead econometric "modelers" make. The basically assume "existing technology and business/economic models" coz, it is close to impossible to predict future possibilities /uninvented/unthought things in neat mathematical models and in any case, those dunder heads singularly lack imagination and can barely even comprehend, much less imagine those kind of possibilities. They are only good at "rear view mirror" kind of driving. Not looking out in front via the windshield and driving.

To answer your question, there is a well known bet between an optimist economist and a pessimist one (I forget the names, but the incident is well know and real). The "pessimist" guy gave the same reasons as the one you quoted (growing population, leading to lack of resources, costs go up.. yada.. yada). the "optimist" bet on the ingenuity and inventiveness of mankind ..

So they made a bet. In a certain long term period (10 or 15 years after a given date), they would meet again and compare the real cost of vital commodities like iron, steel, coal, oil and agricultural produce like grains etc adjusted for inflation. So guess who won when the met again to compare the bet after that long term period and why ?.

hint.. substitutes kick in, new tech /innovations increase efficiency of use, high prices increase efforts for new sources etc..etc. Think of it. If India and China were to catch up with the US/Europe with the no of telephone lines/devices per person as technology existed in 1980 how much copper would be needed ?. When they actually do so in say 2025, how much copper would have actually been used ?.

Theo_Fidel · Post by **Theo_Fidel** » 15 Apr 2010 00:18

vina wrote:To answer your question, there is a well known bet between an optimist economist and a pessimist one (I forget the names, but the incident is well know and real).

Vina,

I think you are referring to the Ehlich-Simon bet.

http://en.wikipedia.org/wiki/Simon-Ehrlich_wager

In any case the question of resources has changed over the years. For instance about 50% of the metals used in the US now comes from recycling. There is little question now that 20% of US energy will come from renewable sources, mostly wind, in less than 15 years. Probably approaching 50% in 30 years.

No one could have predicted this 20 years ago. Wind!! Really!!

If India is to get there we too must become very very efficient. Right now we are wasteful in some ways. In the use of water, use of land, use of labor, etc. In some ways we are very efficient, in consumption, travel and transportation, for instance.

amit · Post by **amit** » 15 Apr 2010 07:56

vina wrote:
Are there enough resources, meaning petroleum, plastics, iron, raw material for cars, TVs, cell phones, etc on earth to take the peoples of India, China and other developing countries to at par with the standards of the developed ones and to sustain all of them there at that level for some time?
The answer is YES. You underestimate the ability of the capitalist system to create technological innovations that create radical solutions. That is the a mistake that commie /JNU kind and planning commission type brain dead econometric "modelers" make. The basically assume "existing technology and business/economic models" coz, it is close to impossible to predict future possibilities /uninvented/unthought things in neat mathematical models and in any case, those dunder heads singularly lack imagination and can barely even comprehend, much less imagine those kind of possibilities. They are only good at "rear view mirror" kind of driving. Not looking out in front via the windshield and driving.

A bit OT but I'd like to add to Vina's point about technological innovation.

I was having a recent conversation with a semiconductor tech guru in the US.

He gave me an example of what tech innovation could do. According to him, if you buy a typical iPod Classic today, it would cost anywhere between US$200-US$300 depending on where you'd buy it. Production cost would be anywhere between 20-40 per cent cheaper than that.

According to this guy, if you were to make a music player with the same capabilities (in terms of capacity) in 1976 it would have cost US$3 million to build and - here's the interesting part - would be the size of a typical large suburban US home! That's the power of innovation and technology.

So back to the topic, I fully agree technological innovation can solve just about any problem and there's no reason for India and China not to become as rich as the US, unless they botch it up themselves.

Hari Seldon · Post by **Hari Seldon** » 15 Apr 2010 08:18

Also slightly OT,

The biggest impact tech innovation that can now happen is IMHO, is in new energy sources. Energy powers everything - recycling included. Even climate change can be tackled if the tech that powers the sun were available on demand on earth only.

amit · Post by **amit** » 15 Apr 2010 12:36

Hari Seldon wrote:Also slightly OT,

The biggest impact tech innovation that can now happen is IMHO, is in new energy sources. Energy powers everything - recycling included. Even climate change can be tackled if the tech that powers the sun were available on demand on earth only.

Now that you mention this point, my discussion with guy veered to solar and Photovoltaic. He said the only thing that is keeping costs up so much in this segment was lack of scale. According to him once scale was built up, costs could go down drastically. He should know, he designs the equipment which are used to make PV and solar panels.

According to him major tech issues relating to putting solar generating stations on the grid have been largely tackled. And he's sure once all the initiatives in solar taken in China, India, US and Europe kick in, cost of panels would go down drastically.

How about having 10 square Km of Thar Desert filled with solar panels? Now that's what I would call an idea Sirji!

Neshant · Post by **Neshant** » 15 Apr 2010 12:56

India can surpass US economy in 3 decades: Experts

I seriously doubt these straight line projections.

Almost all straight line projections prove to be way off the mark in hindsight.

amit · Post by **amit** » 15 Apr 2010 13:08

Neshant wrote:
India can surpass US economy in 3 decades: Experts
I seriously doubt these straight line projections.

Almost all straight line projections prove to be way off the mark in hindsight.

Neshant ji,

Actually you have decide on which parameters you want to use to do the projections. If you take the purchasing power parity approach, me thinks India would surpass the US long before the three decades are up.

If you want to take US$ dollar GDP/per capita approach then a lot of other factors come in, like the value of the US$ vis a vis Indian Rupee three decades hence, for example. Just imagine if today the value of the Indian rupee were to double vis a vis the US dollar, or conversely the US value halved, then what it would do to the Indian GDP numbers?

IMO PPP is the best way to measure if you want to use a fiscal measure (non fiscal could be things like per capita steel consumption, electricity generation etc). If nothing drastic happens, like the Paquis hoisting a bloody war on us etc, we should overhaul the US pretty much sooner than the three decades time span. Heck we may very well do it at constant currency rates as well, compound growth is a very powerful beast.

JMT and other disclaimers included.

Theo_Fidel · Post by **Theo_Fidel** » 15 Apr 2010 20:36

Neshant wrote:
India can surpass US economy in 3 decades: Experts
I seriously doubt these straight line projections.

Almost all straight line projections prove to be way off the mark in hindsight.

No one said anything about 'Will', it is only 'Can'.

Still up to us to make it happen IMHO.

Lots of Indians have a similar lack of confidence. Not sure where we get it from.

Also 10 Sqkm of solar panels at an optimistic rate of 10% efficiency only generates 1000 MW and that too only when the sun is up.

Say something like 1000 Sq km of Rajasthan makes more sense.

joshvajohn · Post by **joshvajohn** » 16 Apr 2010 01:11

Jethmalani wants SIT to probe money of Indians in banks abroad
http://economictimes.indiatimes.com/new ... 811501.cms

Black money in foreign banks can make Budget ‘Tax free’ for next 30 years: Jethmalani
http://www.mynews.in/News/Black_money_i ... 46879.html

ramana · Post by **ramana** » 16 Apr 2010 02:23

What was he doing when he was Law Minister in the NDA govt? Nothing.

joshvajohn · Post by **joshvajohn** » 16 Apr 2010 23:28

During his time in NDA rule, Swiss banks did not make statements such as "India was not poor country" and then we did not have leaked secrets from the banks those days. It was impossible even for European govts and US to get these secrets out. Now it seems possible. Ofcourse it does not matter who says it? But what he says is important because those investments can be made in India in some industries or education (private univesities and medical colleges and so on) so that, that money can be made useful for investors as well as for the country. I do think Indian govt should be pragmatic in bringing this money and converting it into investments. There should be a period or time frame in which such black money will be given excemption from tax if it is invested in educational institutions or other businesses. This is like Chidambaram bringing gold policy when he was finance minister which was very sucessful and profitable one for the govt at that time.

Abhijeet · Post by **Abhijeet** » 17 Apr 2010 02:14

vera_k wrote:The government subsidises petroleum when prices spike in the oil market. When oil reached $120/barrel, Indian customers did not see the impact at the pump the way customers in deregulated markets did.

Even in probably the most deregulated market in the world - the US - gas prices were only at around $4 per gallon at their peak in 2007.

What the GoI may be doing in India is curbing price volatility, at the cost of keeping the base price high under all circumstances.

Theo_Fidel · Post by **Theo_Fidel** » 17 Apr 2010 02:26

I have been tracking something very peculiar.

See the link I've posted below. It shows the world banks list of country GDP's.

Miraculously 4 countries, Spain, Brazil, Russia and Canada have dramatically leapfrogged over India in the GDP stakes.

By all rights we should be #8, yet there we sit at #12.

http://en.wikipedia.org/wiki/List_of_co ... nominal%29

Anyone know what the source of this miraculous growth is.

I've checked the currency appreciation & GDP growth info and it doesn't show up. For Brazil in particular GDP growth was 2%-4% over the last 8 years yet GDP has tripled.

I suspect the poverty wallahs have struck again.

http://www.google.com/publicdata?ds=wb- ... n_US&dl=en

vera_k · Post by **vera_k** » 17 Apr 2010 05:53

Looks like it is due to exchange rate changes. INR has been a stable to depreciating currency, while the rest have appreciated against the USD.

EURUSD chart

CDNUSD chart

BRLUSD

RUBUSD chart

INRUSD chart

Theo_Fidel · Post by **Theo_Fidel** » 17 Apr 2010 07:42

Thanx Vera.

I did consider that first.

But look at the long term values.

Brazil 2001 to 2009 is 0.40 to 0.60 -So it has appreciated 50%
Russia 2001 to 2009 is 0.035 to 0.035 - Pretty much even
Canada 2001 to 2009 is 0.70 to 1.00 - Appreciated 50%
Spain 2001 to 2009 is 0.90 to 1.40 - Appreciated 50%

India 2001 to 2009 is 0.022 to 0.022 - Not much of a change

This doesn't explain why their GDP has risen 300% and 400%.

India is the only one of that bunch that grew consistently above 7% in that period.
Yet our GDP only went up only 250%.

Is there something we are missing in terms of fairly valuing our economy?

Singha · Post by **Singha** » 17 Apr 2010 09:10

the euro appreciation vs the dollar pushed up the dollar denominated GDP of the EU nations strongly for 'free' though people like spain and UK who benefited have hardly been
doing the right thing for the long term.

abhishek_sharma · Post by **abhishek_sharma** » 17 Apr 2010 09:32

Building a BRIC Foundation

http://www.cfr.org/publication/21910/bu ... ation.html

Prem · Post by **Prem** » 18 Apr 2010 21:39

http://economictimes.indiatimes.com/Int ... 825268.cms
Do you think India’s economy is more balanced than that of China?

It certainly does. Consumption is almost two-thirds of aggregated demand as opposed to slightly more than a third in China. In that sense it is closer to US where the consumption is 70% of GDP, lesser relying on trade, lesser relying on exports, having greater role of services being not very leveraged and a large domestic market where consumers and households can start borrowing more if they do it cautiously to finance with mortgages, purchasing homes or using consumer credit, the finance purchase of durable goods order.

So it is a more balanced economy and that is an advantage. On the other side, China has been ahead of India in the spectrum of reforms that liberalise the economy from trade openness to foreign direct investment, of having less government size in taxes and smaller size of the bureaucracy and more flexible labour market, a greater amount of productive infrastructure. So there are many dimensions where China actually should not be discounted in spite of the challenges they face right now to move away from export reliance towards more consumption demand reliance.

Chinmayanand · Post by **Chinmayanand** » 19 Apr 2010 13:57

Financial reforms can triple market size by 2020: FICCI

Suraj · Post by **Suraj** » 20 Apr 2010 11:54

India Raises Interest Rates Second Time in a Month

India’s central bank raised interest rates for the second time in a month and ordered lenders to set aside more cash as reserves, seeking to slow the highest inflation rate among Group of 20 nations.

The Reserve Bank of India increased its three policy rates by a quarter point each, it said in a statement in Mumbai today. The moves matched the median forecasts in a Bloomberg News survey of 30 economists. Governor Duvvuri Subbarao said the inflation rate is “worrisome,” the statement showed.

Subbarao is aiming to restrain prices by mopping up cash in the economy and averting an overheating of the economy before the nation’s industrial companies, including Maruti Suzuki India Ltd. and ACC Ltd., can expand capacity. The central bank will probably keep raising rates through the year, economists said.

India Stocks Rise as Rate Increase Meets Economists’ Forecasts

India’s stocks extended gains after the central bank raised interest rates in line with economists’ forecasts.

ICICI Bank Ltd., the country’s second-biggest lender, rose 1.8 percent. State Bank of India Ltd., the nation’s biggest lender, gained 1.7 percent. The Reserve Bank of India increased the reverse repurchase rate to 3.75 percent from 3.5 percent, the repurchase rate to 5.25 percent from 5 percent and the cash reserve ratio to 6 percent from 5.75 percent, in line with the median forecasts of 30 economists in a Bloomberg News Survey.

India’s Rupee Strengthens as Central Bank Raises Interest Rates

India’s rupee strengthened, heading for the biggest gain in two weeks, as the central bank raised benchmark interest rates for the second time in a month.

The rupee appreciated as much as 0.5 percent to 44.505 a dollar, before trading at 44.54 as of 11:18 a.m. in Mumbai, according to data compiled by Bloomberg.

RamaY · Post by **RamaY** » 21 Apr 2010 22:36

Suraj garu,

I have a PM for you. Could you pls ping me at ramay dot brf at googlopadhya?

Thanks

Singha · Post by **Singha** » 22 Apr 2010 20:58

WSJ

By Tripti Lahiri

If you live in an Indian city, and if your free time isn’t completely used up queuing for water or traveling hours by bus to work like the majority of Indian city residents, you’re in a very lucky minority. That means you probably have the leisure to occasionally cast a disparaging eye over your surroundings and compare Delhi/Mumbai/Bangalore to more conventionally beautiful and functional cities you have known. Well, you think, things can only get better. Right? Wrong.

A new study by the McKinsey Global Institute, the research arm of the consulting firm, says that Indian cities need to drastically overhaul how they plan. They also need to spend a lot more on works to make room for an expanding urban population. Otherwise many of their residents will be looking back nostalgically on the chaos of today.

“On paper, India does have urban plans — but they are esoteric rather than practical, rarely followed, and riddled with exemptions,” said the report. “For example, no city in India has a proper 2030 transportation master plan, nor has any of them allocated enough space and appropriate zoning for affordable houses.”

This may be a good time to mention that New Delhi’s city plan for 2001 to 2021 didn’t get approved till 2007.

If current trends continue, the report says, Indian cities will swallow an extra 60,000 square kilometers of arable land that they could leave alone if they were better planned — that’s New Delhi 40 times over. The percentage of sewage treated won’t change much, but the volume of untreated sewage will jump 250% to 109 million liters a day. For a sense of what that looks and smells like, try a boat ride on the River Yamuna. Present policies will also encourage private car use, even as the road space available to each car decreases.

“Peak vehicular densities will likely reach 330 vehicles per lane per kilometer,” says the report. “At such densities, an average journey may take up to five hours in peak morning traffic — similar to the acute congestion that disfigures some Latin American cities.”

The report says that because Sao Paolo was slow to develop public rail systems, that city at times sees peak hour traffic lines that stretch dozens of kilometers, although the city is now expanding its metro . And Brazil as a whole may have missed out on some of the per capita income growth that comes with urbanization because of neglecting its cities.

Today, although Indian cities are home to less than a third of the country’s population, they produce almost 60% of GDP. But India’s cities too could become so difficult to operate in, the report’s authors say, that it affects economic growth.

What can be done to prevent that? The research firm says Indian cities need to spend $2.2 trillion in the next 20 years, more than half of that on capital investments alone. Presently India seems set to spend only about $300 billion on urban infrastructure in that time period, less than a third of what the researchers recommend. It’s not looking good.

Still, Indian cities aren’t alone in dealing with speeded-up urbanization and they’re not necessarily the only ones who are having a hard time of it. In fact, India Real Time has heard from those who have visited the world’s fastest growing megacity, Dhaka, that Delhi is a tranquil respite by comparison