Indian Economy: News and Discussion (Jan 1 2010)

andy B · Post by **andy B** » 13 Sep 2010 11:27

enqyoob wrote:To de-OT that observation, Hari, could u pls speculate on what would happen if the long-standing proposal for a common SAARC currency were to be implemented (minus TSP, that is). India, SL, BD, Mauritius, Seychelles, Maldives?? Wish Myanmar was possible to include but it is not, for now.

My 2 naya paisa (literally)

I would think that in the above case we would become the "Germany" amongst these countries. IIRC when Germany went ahead with the Euro one of the things that was advantageous to them was the DM (Mark) was too strong at the time and going to the Euro actually helped them in terms of export (except they didnt know the Southern Europeans would eff it all up down the line

)

Given that we have the strongest economy amongst these countries we would have the most to loose exactly the same is what we see in Europe now. Also given the huge disparity in terms of Economics that would exist between all these countries and India I wonder what would be the approach of these countries towards such an initiative...?

I think India would have more returns politically and in strategic geo-politics than pure economics. As a matter of fact given the basket cases around we would end up lending a lot IMHO.

On the flip side these countries would get tremendous opportunity for infrastructure investment and development as that is what would (should) be the main priority IMO. I think this would become a boon for Indian cement manufacturers and other Civil engineering firms.

One thing that I do think is that if we can get to a common currency for these countries what will happen is it will open up a significant developing market for Indian companies to venture into given the good manufacturing growth we are seeing in India. At the same time it would make some interesting choices available to India for shipping ityadi.

Strictly JMT

Suraj · Post by **Suraj** » 13 Sep 2010 12:14

Folks, the discussion of a SAARC common currency is outside the scope of this thread. Instead, a related matter that would be both relevant and interesting to explore is - what would it take to have those trading with us, do so in Rupees ? This isn't an all or nothing option, and could be done initially on a limited basis; there are several hurdles towards what would make the Rupee an attractive currency of trade for another nation trading with us.

vina · Post by **vina** » 13 Sep 2010 13:33

enqyoob wrote: for a common SAARC currency were to be implemented (minus TSP, that is). India, SL, BD, Mauritius, Seychelles, Maldives?? Wish Myanmar was possible to include but it is not, for now.

A common currency makes sense only when the bulk of the trade happens within a particular bloc and as Hari Garu said there is a common tax authority and (re)distribution mechanism . For Europe, the bulk of the trade of the european economies is WITHIN europe (especially true of Germany, France and others).

Well, within SAARC, we already have Nepal that is pegged to the Indian currency and it does make a lot of sense because India is the largest trading partner and everything else for the Nepalis. But other than Nepal, the intra SAARC trade is minuscule and the respective countries trade far more with the outside world than among themselves.

Now if India is the largest export market by far for Sri Lanka and Bangaladesh , those countries could consider either pegging to the Indian rupee (like what the Nepalis have done) or as for a common currency.

I would prefer a peg. Takes care of H&D loss to the Sri Lankans and Bangladeshis, an option to cut the peg if things go out of hand and policies need to diverge (like India running tight money policies , while Sri Lanka needing loose money for eg, like the current EU situation with Germany vs PIIGS).

Vasu · Post by **Vasu** » 13 Sep 2010 13:44

Making a common currency for the SAARC region makes absolutely no sense. After the Euro, I doubt if any other economic region in the world is capable, or requires a common currency. Apparently the Latin Americans (particularly Chavez), put forward a proposal to create a new regional currency named the Bolivar. Most dismissed it as the socialist's anti-democratic agenda. Actually, it was just the US that would not be cool to any change in the status quo of being the Dollar as the global medium of exchange.

That brings me to discussing an issue that makes more sense - countries not having to deal with each other in dollars but in their own currencies. That to me makes a lot more sense but like I said, the US is against any nation bypassing the dollar as a medium of exchange. I will try to dig up some solid info on this but I believe Iran actually wants to go ahead with a plan to directly sell oil to nations in their own currencies, and this is one reason why the US is so pissed off with the nation.

China can talk against the dollar because it can, and so can countries like Brazil, India, RSA, Japan if they choose to, but most likely its not gonna happen.

Chinmayanand · Post by **Chinmayanand** » 13 Sep 2010 16:19

India Inc faces double-edged sword

Vipul · Post by **Vipul** » 13 Sep 2010 20:48

India revises its wholesale price index.

The government will release the revised series of wholesale price index (with a 2004-05 base) tomorrow (14 September 2010) with the committee of secretaries (CoS) approving the release of the new series at its meeting last month.

Simultaneously, the release of the current series of WPI (with 1993-94 as its base) will be discontinued, an official release said today.

The revised WPI series has a representative commodity basket of 676 items and uses a new weighting diagram reflecting the current structure of the economy, the release said.

The data will be based on 5,482 price quotations selected from across the country for the various items in the commodity basket, substantially increasing the number of quotations in comparison to the existing series.

Some of the important items included in the new series basket are flowers, lemon and crude petroleum in the `primary articles' group and ice cream, canned meat, palm oil, readymade/instant food powder, mineral water, computer stationary, leather products, scooter / motorcycle tyre, polymers, petrochemical intermediates, granites, marbles, gold and silver, construction machinery, refrigerators, computers, dish antenna, transformer, microwave oven, communication equipments (telephone instruments), TV sets, VCD, washing machine and auto parts in the 'manufactured products' group.

The new series of WPI is based on the recommendations of the working group headed by Abhijit Sen, member, Planning Commission. The working group submitted its technical report in May 2008 and recommended the change of the base year to 2004-05.

A comparison of weights, number of items and the number of quotations in the major commodity groups in the current series and the new series is given below:

The Technical Advisory Committee on Statistics of Prices and Cost of Living of the Central Statistical Organisation had also approved the shift in the base year, selection of commodity basket and derivation of weighting diagram with the new series of WPI at its meeting held on 31 December 2009, the release added.

vera_k · Post by **vera_k** » 14 Sep 2010 10:48

India Looks Seriously Bubblicious Right Now

jagga · Post by **jagga** » 14 Sep 2010 14:17

Black money in Swiss banks: How it hurts the economy
Corruption: India lost over $125 bn in outflows

ShivaS · Post by **ShivaS** » 14 Sep 2010 15:25

Economic and Financial policy needs to be centralized to have common currency,
Otherwise it would be like my fathers generation of my joint family with two hundred acres of land only two brothers hard at work& productive, rest 3 playing brackets and cards (I think poker) with money in pocket sometimes with stamp paper ready to pledge property to be at the table or go to every stage play along with their keeps to Chennai, kakinada, Rajahmundry by Howarah Madras Mail... express delivery in Mail or What?

Vipul · Post by **Vipul** » 14 Sep 2010 18:56

April-Aug indirect tax revenue up 45% yoy: govt.

India's indirect tax collections for the April- August period rose more than 45 per cent from a year ago, mirroring optimism by policymakers of the economy achieving 8.5 per cent growth in the current fiscal that ends in March 2011.

Customs collections rose more than 66 per cent to Rs 51,870 crore, while excise collections were up more than 41 per cent at Rs 49,672 crore, the finance ministry said in a statement on Tuesday.Total indirect tax collection for the period stood at Rs 1.24 lakh crore, it added.

krisna · Post by **krisna** » 14 Sep 2010 22:41

Indian model of growth wins praise over its Chinese rival

While Indian economic growth was more fuelled by high domestic consumption and services, the Chinese model relied heavily on manufacturing and exports, said Western and Chinese experts at the state TV debate, on the sidelines of of the World Economic Forum being held here.

Besides, India has comparative strategic advantage in the value chain whereas China relied mostly on the labour and cost advantages, said Fu Jun, professor of the Political Economy of the Peking University.

What India will do next is to continue the strategy and move into other areas. By comparison we (China) have to readjust our strategy into manufacturing. I do not see reasonable balance between supply and demand," he added.

Human resources development minister Kapil Sibal, who was participating in the debate, said, "Because our economy is based on domestic demand, there is much greater innovation and ability of the entrepreneurs to actually produce wealth. In the long run a lot of innovation and lot of wealth production is going to come from our part of the world."
Martin Wolf, associate editor of the Financial Times, who was critical of the Indian growth model said, however, "Indian development is working despite failure of organisation and poor infrastructure. It is clear that lot of successful multinational companies have good assets in India."

Singha · Post by **Singha** » 14 Sep 2010 23:32

for every village they shell & bomb and every warlike tribe they punish in the NWFP and tribal agencies, they are sealing
the package for decades of retaliatory bombings and civil war against the state.

unkil is safe up in the sky, the paki elites not so.

Akshut · Post by **Akshut** » 15 Sep 2010 01:18

Indian economic growth was more fuelled by high domestic consumption and services, the Chinese model relied heavily on manufacturing and exports

Tired of hearing this!!

Seriously we need to get over this statement. Truth is that China model has lifted more no. of poor people. Has better Standard of Living, and all...

How exactly is manufacturing and exports not "good"? High domestic consumption and services are good, no doubt, but why not exports?

Germany rose after WW II on the back of manufacturing and exports, so did Japan. US started its rise with increase in manufacturing and exports. And so did Europe in 18th and 19th century. How is it wrong when China is doing it now? And how is $150 billion of negative trade balance good for India?

ramana · Post by **ramana** » 15 Sep 2010 01:48

A new book India Inc., by Vikas Pota.

http://www.indiaincthebook.com/

ramana · Post by **ramana** » 15 Sep 2010 01:49

And Akshut the recent economic strength of Germany is due to its prowess as a mfg nation.

Akshut · Post by **Akshut** » 15 Sep 2010 02:14

^^ Exactly. We need to push manufacturing sector, backed up by agriculture, more than services.

Human resources development minister Kapil Sibal, who was participating in the debate, said, "Because our economy is based on domestic demand, there is much greater innovation and ability of the entrepreneurs to actually produce wealth.

A poor man who cannot find a job in a manufacturing plant, ends up owning a food stall alongside 20 others, and thus becomes an "entrepreneur". "Service sector" is so rampant that I have seen extra drivers for the same local taxis and auto-rickshaws travelling along. Why can't we have some manufacturing unit to export something to give employment to these guys, and also bring foreign exchange? All this talk by experts of how Indian model is better is like giving sleeping pills to our already slept netas and babus.

I had a word with a Director from the Board of Delhi-Mumbai Ind. Corridor few days back. And railway ministry is at fault for such slow pace on progress of DMIC according to him. He is ex-shipping ministry babu btw. No need or hurry to set up manufacturing units, while more and more stall owners and spare taxi drivers keep on growing. Oh! I mean entrepreneurs keep on growing.

enqyoob · Post by **enqyoob** » 15 Sep 2010 06:00

Folks, the discussion of a SAARC common currency is outside the scope of this thread. Instead, a related matter that would be both relevant and interesting to explore is

Oh! A discussion of a global common currency is fine on the Perspectives of Global Economy thread, but a SAARC common currency discussion (INR, what else? BDR?) is verboten on the Indian Economy thread? WOW!!

I have no problem at all with people discussing what they feel relevant, but do they have to come in with such pompous diktats?

Between the Paki-style Neshrants on the Global thread and these sort of gratuitous bullying diktats, .... enough is enough. 'bye.

Suraj · Post by **Suraj** » 15 Sep 2010 06:39

enqyoob: You want a free license to wind up others with over the top rhetoric, as in the perspectives thread ? What's the point of spitefully turning around when politely requested to keep temperatures down (posts on that thread were reported by others, fyi), picking up some terse three day old suggestion to keep thread focus - without even an implication of censuring anyone - and calling it a 'bullying diktat' ? We mods have no problem with criticism of our work - it's part of the task. However your behavior, including petty namecalling ('Paki-style Neshrants' ?) hardly flatters you.

SwamyG · Post by **SwamyG** » 15 Sep 2010 08:35

Akshut wrote:^^ Exactly. We need to push manufacturing sector, backed up by agriculture, more than services.

I have been a long time advocate for balance among the three. The balance is not like 33.33% in each; but something that every country has to figure and keep changing based on its circumstance. A country that surrenders even one of these to other countries will be under others' mercy and machinations. By using this approach a country might not provide the highest living standards to all its citizens, but will be able to provide stability from the vagrancies of global economics. Germany and China are dependent on their exports. Is it healthy? I hope so for their sake.

ramana · Post by **ramana** » 15 Sep 2010 22:33

Do we have good estimates of the black (off the books) economy in India?

Suraj · Post by **Suraj** » 15 Sep 2010 22:55

By definition, the black economy is not formally accounted for. Estimates range from 30% to almost as much as the real economy. It was almost certainly much larger as a fraction of the formal economy in the past. Now, with the formal economy growing so rapidly, the gains it provides are such that there are fewer incentives to do things off the books. Of course, there are sectors where it is still rampant, like real estate and small entrepreneurship.

ramana · Post by **ramana** » 16 Sep 2010 01:35

Even after tax incentives and reforms? Why is that so? What will make the black more patent?

Suraj · Post by **Suraj** » 16 Sep 2010 01:59

Once in a while voluntary disclosure of income schemes don't really get rid of the informal economic sector. It just serves as a way to whitewash some cash on the cheap. If an informal channel of acquiring wealth remains lucrative (e.g. the white/black real estate transaction mechanism), the situation will remain.

On this note, one reason several countries (China, Russia, Brazil, even TSP if I recall) reported bumps in GDP during the mid 2000s was that they modified statistical policies to add an estimated picture of the informal economy while reporting their official economic data. This was done by various ad hoc means, from what I recall. On our part though, there's nothing of the sort. With an outdated statistical collection policy by CSO, we don't even effectively measure the formal economy, much less account for the informal one.

EPFO hikes interest rate to 9.5% for 2010-11

Nearly 50 million subscribers to Employees’ Provident Fund Organisation (EPFO) are in for a surprise bonanza with the central board of trustees (CBT) today recommending the payment of 9.5 per cent interest on their corpus for 2010-11, compared with the 8.5 per cent being paid for the last five years and was widely expected to continue this year, too.

The 1 percentage point increase will result in an additional outgo of Rs 1,600 crore towards interest payment, Labour Minister Mallikarjun Kharge told reporters after a meeting of the trustees. The hike was possible after EPFO discovered a calculation mistake in the interest suspense account, which now stands at Rs 1,731 crore, instead of Rs 157 crore mentioned earlier.

Exports up 22.5% in August, trade deficit rises

The country’s trade deficit in August reached $13.06 billion, the highest in about two years, with imports outpacing the growth of exports, prompting Commerce Secretary Rahul Khullar to say “it is a matter of concern”.

The trade gap during the April-August period stood at $56.62 billion. With imports growing steadily every month, the balance of trade is likely to end up at around $135 billion in this financial year.

“The problem remains that of the balance of trade deficit. At this level, we are almost having a deficit roughly of $11.2 billion per month, which comes to $135 billion for the entire year. That will be very large, even compared to $118 billion that we had two years ago. We have concerns primarily about the size of the balance of trade deficit. At the pro rata basis, close to $135-billion trade gap is much higher. Therefore, it is a matter of concern,” Khullar said here today.

He, however, said that deficit was “still within manageable limits and can be easily financed.” While the exports could reach $200 billion by the end of the financial year, import can go up to around $350 billion, he added.

While exports grew by an annual 22.5 per cent to $16.64 billion in August, imports jumped by 32.2 per cent to $29.7 billion. During the April-August period, exports posted a growth rate of 28.6 per cent to $85.27 billion annually, while total imports grew by 33.1 per cent to $141.89 billion, according to initial estimates released by the Ministry of Commerce and Industry today.

Indian steel capacity to increase 32% next year

Major steel companies have indicated that more than 32 per cent capacity will be added to the current 63 million tonnes (mt) at a cost of around ' 72,000 crore. Of this, most of the addition will be in flat steel, used in the automobile and white goods sectors, while long products used in the construction sector will account for about 30 per cent.

The addition may be far short of the steel ministry’s projections of 124 mt by 2011-12, but at least it’s not going to be hit by land hurdles or want of funds. The projects have already achieved financial closure.

“Demand has been growing every year at 10-12 per cent; so the market can absorb the additional capacity,” Bhushan Steel Managing Director Neeraj Singal said. Per capita consumption in India is 46 kg, compared to a world average of 200kg.

However, the government has set an ambitious target of becoming the second-largest steel producer in the world. That’s based on the memoranda of understanding (MoUs) that have been signed. Around 222 MoUs have been signed to create capacity of 276 mt steel. At present, Japan is the second-largest producer with a capacity of 87.5 mt.

vera_k · Post by **vera_k** » 16 Sep 2010 04:27

ramana wrote:Even after tax incentives and reforms? Why is that so? What will make the black more patent?

If you want do everything by the books, taxation in India is still fairly high. Add to this the fact that a large number of transactions can be conducted in cash. There is no incentive to declare this income to the government such that it gets its cut, and it is very convenient to just stuff the cash into a gunny bag instead.

I expect that the informal economy will continue to grow for a few more decades as cash transactions will continue to be very prevalent. I mean, with rising local tax rates, cash is beginning to make a comeback here in the USA, so long way to go for a high tax socialist setup like India.

putnanja · Post by **putnanja** » 16 Sep 2010 04:54

I have started noticing that many small businesses in US too are willing to let go of receipt etc if dealing strictly with cash. It is the same everywhere, hide as much as possible from the govt!!

Murugan · Post by **Murugan** » 16 Sep 2010 09:21

ramana wrote:Do we have good estimates of the black (off the books) economy in India?

`Indian black money at $1.4 trln'

Category » Nation Posted On Wednesday, September 01, 2010
United News of India
Thiruvananthapuram, Sept 1:

It is no secret that black money has been flowing out of India into Swiss banks and other tax havens.

''There are presumably more than 70 tax havens in the world.
The ill-gotten wealth of Indian businessmen and politicians could be more in Switzerland and various British/US islands,'' Prof R Vaidyanathan, Professor of Finance at the Indian Institute of Management, Bangalore, and a visiting faculty at Manchester Business School said.

Delivering a lecture on ''Black Money in Indian Economy'' here last evening, he said Indian black money worth 1.4 trillion US Dollar (over Rs 70 lakh crore)-- way over India's gross domestic product of Rs 43 lakh crore for 2007-08 - was deposited in various foreign tax heavens.

On the basis of a report titled ''Illicit Financial Flows from Developing Countries: 2002-2006, Global Financial Integrity,'' financial flows include proceeds from both illicit activities such as corruption, bribery and embezzlement of national wealth, criminal activity and the proceeds of business that become illicit when transported across borders in contravention of applicable laws and regulatory frameworks (most commonly in order to evade payment of taxes), he said.

According to the Global Financial Integrity (GFI) study, Asia accounted for approximately 50 per cent of overall illicit financial flows from all developing countries, he said. ''The report shows that the average amount that moved from India annually during 2002-06 was 27.3 billion USD. ''This means, during the five-year period, the amount taken away was 136.5 billion USD,'' he added.

Urging the Centre to bring back all the Indian black money in Swiss banks, he said the country was facing financial terrorism and a dangerous social situation.

Explaining the importance of bringing back the ill-gotten wealth, he said ''a staggering 1,500
billion USD of Indian money has been stashed away in Swiss banks. If it is retrieved, each Indian family will get Rs 2.5 lakh each. ''India will have a debt-free budget for 30 years and all our external debt will be wiped out,'' he claimed.

Alleging that India was not ready to obtain information about the Indian money stashed in Swiss banks though the Switzerland Government was forthcoming in giving all information, he said ''Germany, the US and many continental countries have got the information from Swiss banks.'' The programme was organised by the Vichara Vedi of Bharatheeya Vichara Kendram here as part of its monthly lecture series.

http://www.centralchronicle.com/viewnew ... leID=46253

(Swami Ramdev keeps the account of black money in India and the money siphoned off abroad. He carries all the reports in a jhola with him wherever he goes and shows to people, teach them about the ills of corruption. He says indian people are financially illiterate.)

Singha · Post by **Singha** » 16 Sep 2010 21:20

economic times.

13 Sep, 2010, 11.04PM IST,PTI
India 7th largest vehicle producing country globally: Govt

NEW DELHI: The government claimed that India has become the seventh largest vehicle producing nation in the world, six years ahead of the set target.

"When we were making the Auto Mission Plan (AMP) in 2006, we had projected India to become the seventh largest vehicle producing country in the world by 2016. We have already achieved this milestone good six years ahead of the set target," Secretary for Ministry of Heavy Industry B S Meena said here at a Ficci function. He said that by 2020 the country will be among the top five vehicle producers.

Currently, China is the largest vehicle producer of the world followed by the US.

The AMP had aimed at increasing the automotive sector's turnover to USD 145 billion in 2016 and providing employment to 25 million people within 10 years. The turnover in 2005-06 was USD 34 billion and was employing 13.1 million people either directly or indirectly.

According to Society of Indian Automobile Manufacturers (SIAM), the country vehicle production increased to 1,40,49,830 units in 2009-10, a jump of over 25 per cent from 11,172,275 units in the previous fiscal. In 2005-06, the total vehicle production was 97,43,503 units.

Meena added during April-August 2009-10, the cumulative production of vehicles grew at 32.4 per cent over the year ago period. "The passenger vehicles, commercial vehicles and two-wheeler segments have all recorded impressive growth rates of 32 per cent, 49 per cent and 31 per cent, respectively, during this period," he said.

He further said that Indian passenger vehicle market is estimated to grow to 9 million units by 2020, while the two-wheeler market is likely to reach 30 million units.

"The realisation of these volumes would position India as one of the top five vehicle producing countries in the world by 2020 with the domestic consumption growing by 4-folds to USD 120 billion," Meena said.

The Secretary, however, cautioned that the most important challenge for the sector is to ensure that this growth is accompanied by strategies aimed at mitigating the adverse impact of vehicles on the environment.

Prem · Post by **Prem** » 16 Sep 2010 23:10

http://blogs.ft.com/beyond-brics/2010/0 ... l-bankers/
Greenspan on India: a textbook case for central bankers

The structure of the Indian economy puzzles many. Asia’s third largest economy has a burgeoning band of billionaires, but also the world’s highest concentration of poor people. High economic growth, enjoyed by the few, is in danger of bypassing the many.Yet where monetary policy is concerned, little is mysterious, says Alan Greenspan, the former governor of the US Federal Reserve.Given the choice of taming inflation in India or resuscitating a deflation-struck US, Greenspan would rather be in the Mumbai seat of Duvvuri Subbarao, India’s central bank governor, than that of Ben Bernanke in Washington.
India, he told a local television channel, is a “textbook” case for central bankers. Inflation is driven in “big part” by a sizeable budget deficit and double digit growth in the money supply. The remedies are known, even if they are not always taken.The US economy, in his opinion, has a more serious ailment.The Reserve Bank of India, the central bank, is showing some gumption in trying to shed the reputation of having the highest inflation in the Group of 20 nations.A move on Thursday to raise key interest rates for the fifth time in a year shows it is resolute in prioritising curbing rising prices over spurring economic growth towards 9 per cent a year.

krisna · Post by **krisna** » 16 Sep 2010 23:19

India infrastructure boom to boost world growth: Adviser

India can showcase its massive infrastructure spending and a wider current account deficit at the next G20 summit as its contribution to reviving global economic demand, a senior adviser to the government said on Thursday.

Asia's third-largest economy is looking overseas to import equipment to help build infrastructure projects worth a planned USD 1.5 trillion in the ten years to 2017.

India is planning to spend USD 1.5 trillion on infrastructure in the ten years to 2017 to overhaul its creaking road, railway and power sectors, long seen as a drag on growth in Asia's third-largest economy.

Investment in infrastructure is more import intensive. So it is our expectation that if we follow that approach, even though exports will be a little depressed compared to what they would have been in a booming situation, the current account deficit may widen," Ahluwalia said.
"We are willing to live with that. We think we'll be able to finance it, so it's not actually a big problem, but the key to financing it is that there should be stability and an element of certainty in the global financial system, especially as far as flows to emerging market countries are concerned."

krisna · Post by **krisna** » 17 Sep 2010 00:48

India tops in inflow, outflow of expatriate executives: Survey

India ranks No 1 among all countries in respect of both the inflow and outflow of expatriate executives, according to a survey of global firms conducted by leading financial journal 'The Economist'.

"India is the next big global market and a stint in any emerging market is being seen as a good career move," EIU Managing Editor Paul Lewis said in a telepresence interaction from London.

Companies are increasingly preferring an executive from an emerging market economy like India, rather than having a Westerner, to work in another emerging market such as Africa. This is why there is a higher expectation of expatriate executives emerging out of India, he said.

Vasu · Post by **Vasu** » 17 Sep 2010 09:33

A rather interesting article on the growth of the public and private sector in India in the last decade. A nice bucket of numbers for reference and research.

Pvt sector share in sales, profit rises 60% in 10 yrs

Liberalisation and appetite to grow have helped private companies to outpace their public counterparts in the last 10 years, by raising contribution in net sales by 20 percentage points to 68.55 per cent and in net profit, by 24 percentage points to 63.86 per cent.

In other words, net sales of the private sector rose at a compound annual growth rate (CAGR) of 23.48 per cent and net profit at 33.47 per cent, while public sector entities grew at a CAGR of 12.65 per cent in terms of net sales and at 19.3 per cent by net profit.

Information technology (IT), capital goods, metals, telecom, automobiles, construction, infrastructure, pharmaceutical and realty sectors led the private sector growth, while banks and capital goods helped public sector to show double-digit CAGR in sales and profit.

Reliance Industries integrated itself to become the country’s largest and the world’s most integrated petrochemical company, while Tata Steel, Tata Motors, Hindalco and top pharmaceutical companies enter world map through overseas acquisitions.

The multinational companies (MNC) operating in fast moving consumer goods, capital goods and pharmaceuticals sectors did well, and posted CAGR of 19.55 per cent in sales and 25.43 per cent in net profit.

Hindustan Unilever was the biggest disappointment of the decade. It grew at a CAGR of six-eight per cent in sales and profit. ITC, despite ridden by endless rise in excise duty, registered a CAGR of 18 per cent in sales and profit.

The private sector edged out the public sector, with the number of companies, with net profit of Rs 1,000 crore, growing from one, namely Reliance Industries, in 2000-01 to 37.

The profit buoyancy saw eight private companies become billion dollar profit companies. They were TCS, Infosys Technologies, Wipro, Bharti Airtel and Reliance Communications. ITC and Hindustan Unilever continued to be the two most profitable companies among MNCs. Thanks to 14 state-owned banks, the number of Rs 1,000-crore plus net profit companies in the public sector increased from seven to 31.

The private sector companies, with overseas acquisitions, increased their presence in the top 10 from two to four. Tata Steel joined the Rs 100,000-crore sales leagues on the back of its acquisitions of Corus. Tata Motors doubled its sales after acquiring Jaguar-Land Rover, while Hindalco improved its sales fivefold in two years after acquiring aluminium giant Novelis.

The information technology (IT) sector, which tilted the balance in favour of services sector, has grown manifold in the last 10 years. Now, the top three IT companies together rake in export revenue worth Rs 80,000 crore from Rs 8,000 crore 10 years ago.

Bharti Airtel, an unlisted entity till 2001, now ranks among India’s top 15 companies, with net sales of Rs 42,000 crore. Bharti Airtel is also the fifth largest profitable company in India, with a net profit of Rs 9,163 crore.

Airavat · Post by **Airavat** » 17 Sep 2010 10:07

Rs 2,200 crore and more of Harshad Mehta

The Finance Ministry custodian has about Rs 2,200 crore worth of cash sitting with it realised from the sale of Harshad Mehta’s assets. But it cannot disburse the amount because of a dispute between the tax department and banks.

According to the Supreme Court, the tax liability of Harshad Mehtra Group is around Rs 2100 crore while bank dues are estimated at Rs 1700 crore. The tax department feels that it has the first right towards those proceeds. However, banks (SBI and Standard Chartered) feel that they should not be left behind as it is their money that is stuck with the Finance Ministry custodian.

Sources say there is a consensus being attempted within the government on this issue. The banks are ready for a pro rata distribution on their proceeds. Meanwhile the custodian is planning to sell more assets of Harshad Mehta valued at around Rs 1000 crore to Rs 2000 crore. Sources added that about Rs 800 crore worth of assets could also fall into the lap of the custodian from Mehta’s wife and mother.

krisna · Post by **krisna** » 17 Sep 2010 19:50

Warning signs: is India’s central bank blowing bubbles?

In the latest move to shed its title as Inflation King of the G20 , India’s central bank raised interest rates for a fifth time this year. But the increase, which took some analysts by surprise, was far more conservative than seems at first glance

What’s more, by using the least relevant lever to raise interest rates, the bank may be helping to blow more hot air into what some are saying is an equity market bubble.

Yesterday the Reserve Bank of India tightened its economic policy by lifting the repo rate to 6 per cent, an increase of 25 basis points. It also pushed the reverse repo rate by 50 basis points to 5 per cent, which surprised analysts who were expecting no move at all.

Meanwhile, these negative interest rates are encouraging money flow into equities, and India’s current account deficit has grown to 5 per cent of GDP this year. It is precisely India’s double digit growth, coupled with its growing budget deficit that is driving inflation.

For now the Sensex seems continues to go up and up - it has increased by 25 per cent since the start of this year alone - indicating a bubble and its burst is looming.

abhishek_sharma · Post by **abhishek_sharma** » 18 Sep 2010 07:36

How WB, IMF got India to adopt reforms in 1991

http://www.indianexpress.com/news/how-w ... 91/682649/

Hari Seldon · Post by **Hari Seldon** » 18 Sep 2010 08:03

^^ I must say that I do get the feeling the desi equities mart is kinda bubblish right now. Bubbles can;t really be prevented but popping them early and often is the right way to go. A large bubble causes more damage, IMO, than two bubbles half its size.

Vasu · Post by **Vasu** » 18 Sep 2010 10:09

More than anything, I have always found it disappointing that the RBI has always been so conservative in the number of tools it uses for conducting monetary policy. True that the tools themselves are not many, but I get a feeling that regular toying with the repo and reverse repo is really not producing the results it should because the market is getting better at reading what the RBI will do next.

Of course, being the growing economic global, mighty super power we are, fiscal policies to contain inflation and reduce deficit, which are actually much, much more effective, are hardly considered by our government, especially this able government full of highly educated politicians with a strong majority in the Parliament.

Suraj · Post by **Suraj** » 19 Sep 2010 01:46

NREGs work mostly useless, must move to land husbandry: Panel

Six sub committees set up by the Central Employment Guarantee Council (CEGC), which was formed under the NREG Act (NREGA – the law enacted to implement the NREGS programme), have raised questions on issues ranging from the utility of work done through NREGS to transparency, capacity building and even the wages.

One of the key issues staring at the ministry is the utility of the work being done under the wage employment scheme that is supposed to offer 100 days of guaranteed work a year to anyone who demands it in rural India.

The sub committee on work appointed by the ministry has said that NREGS might be generating wage employment, but it was certainly not productive in any other way, was unplanned, ad hoc and was thrust on the people.

It has suggested that at least 50 per cent of the funds must be dedicated to works related to land improvement and wanted a shift from land development to land husbandry, including soil improvement. It has also asked for specialised personnel for NREGS, who will be available for planning and mentoring these works over a long-term period, besides integration with the district agricultural plan to link NREGS with the productivity of the soil in the region.

The panel headed by CEGC member and activist K S Gopal and comprising agricultural scientists, NGOs and anchored by the National Institute of Rural Development, Hyderabad, had been mandated to look at measures to optimise the potential of NREGS for enhancing agricultural productivity.

The panel would also look at the impact of NREGS on the farmers under distress, on tribes in the left wing extremist affected areas and districts from where farmers’ suicides have been reported.

It concluded that “works are ad hoc with limited types of physical infrastructure activities ... based on rural development official’s experience or intuition while works on individual lands are decided elsewhere and dumped on the gullible poor...''

It said though the ministry guidelines state that the primary objective for work on individual land is wage employment and its auxiliary objective is strengthening natural resource management, the latter has never been fulfilled.

Industrialisation leaves little room for formers

As India industrialises rapidly, resistance from farmers like Vaghela and rows over acquisition of farmland for industry have become a sensitive issue in a country where two-thirds of the 1.2 billion population is dependent on agriculture. But Vaghela knows his options are limited. Farm income is declining, his crops have repeatedly failed and if he holds out too long, he risks having the land lose its value as it remains a land-locked enclave between factories. The uncertain future he and other farmers like him across the country face has led to a string of violent protests against attempts to acquire land for factories, power plants or roads, posing a risk to India’s economic ambitions.

“The bigger picture is that land is an issue. It is one of those areas that India needs to up its game,” Kevin Grice, senior international economist at Capital Economics in London, said.

“India scores relatively poorly and it is due to micro issues like land, red tape and cumbersome laws,” he said, referring to India’s 133 position in the World Bank’s ranking of ease of doing business.

While few believe foreign interest in India will taper off, these issues could delay a much needed acceleration in the amount of foreign investment pouring into the country.

How India soothes the discontent brewing amongst the tens of thousands of farmers may determine the economic and political future of the country where the rural population is a crucial vote base for both ruling and opposition parties.

Mindful of the social and security concerns, top ruling politicians have said acquisitions should skirt fertile and productive land, and farmers ought to be adequately compensated and offered alternate jobs.

The issue may become a political hot potato this year, with the ruling Congress party championing farmers despite clamour from industry and investors to make it easier to acquire land.

Land promises to be a politically charged issue in crucial state elections this year and next, especially after the ruling Congress party backed farmers protesting against a highway being built on their lands in Uttar Pradesh. At Sanand, the government had initially faced protests, but much of it has calmed down after it hiked compensation by a third to nearly Rs 486 crore ($105,000) per acre.

While this might be a fortune for many where annual per capita income is $3,100, the figure hides the fact there are many people dependent on the same plot of land and farmers have mortgaged land and racked up debt with usurious moneylenders.

Suraj · Post by **Suraj** » 19 Sep 2010 20:50

The investment phase has picked up steam again, despite all the recent rate hikes:
Record lending confounds Subbarao as banks lag behind credit policy

The Reserve Bank of India’s five interest-rate increases this year are failing to stem a surge in credit, showing the challenges Governor Duvvuri Subbarao faces in keeping inflation in check as the economy expands.

Loans to companies including Essar Steel Ltd. and Videocon Industries Ltd. climbed 36 percent to 2.1 trillion rupees ($45 billion) this year, the most since Bloomberg started compiling the data in 2002. State Bank of India and ICICI Bank Ltd., the nation’s two biggest, have raised their lending rates by 50 basis points since March, less than half the 1.25 percentage- point increase in the central bank’s benchmark repurchase rate.

The central bank said in a statement yesterday that inflation “may remain high for some months” as policy makers lifted borrowing costs. Neighboring China, facing the same dilemma as India, is using tighter capital rules to slow lending rather than raise interest rates.

“The real concern is that the banks haven’t passed on much of the policy rate hikes and that has fueled asset-price gains,” said Robert Prior-Wandesforde, an economist at Credit Suisse Group AG in Singapore. “The risk is if interest rates remain loose, signs of overheating will intensify.”

Subbarao boosted the repurchase rate to 6 percent from 5.75 percent, and raised the reverse-repurchase rate to 5 percent from 4.5 percent, the RBI said in a statement in Mumbai yesterday. He has increased rates more aggressively than any other policy maker in Asia this year to cool inflation as gross domestic product grew 8.8 percent last quarter from a year earlier, the most among major economies after China and Brazil.

Prior-Wandesforde of Credit Suisse expects the Reserve Bank to raise the repurchase rate by another 50 basis points by March and the reverse repurchase rate by 25 basis points. The RBI’s next monetary policy meeting is scheduled for Nov. 2.

India’s benchmark wholesale-price index rose 8.5 percent in August from a year earlier after July’s 9.8 percent gain, calculated using a new base year, the commerce ministry said in New Delhi on Sept. 14.

Carl_T · Post by **Carl_T** » 19 Sep 2010 21:18

Hari Seldon wrote:^^ I must say that I do get the feeling the desi equities mart is kinda bubblish right now.

Mind speculating on the reasons? Is it just a surge of foreign capital that is seeking a growing market? If so it may be rational to stay invested.

svinayak · Post by **svinayak** » 20 Sep 2010 11:17

Indian Conglomerate in Talks to Buy MGM
Wall Street Journal - Mike Spector - ‎12 hours ago‎
Indian conglomerate Sahara India Pariwar is in exploratory talks on acquiring beleaguered movie studio Metro-Goldwyn-Mayer Inc. for more than $2 billion, said a person familiar with the matter.

http://news.google.com/news/more?pz=1&c ... E_euBHauDM