Indian Economy: News and Discussion (Jan 1 2010)

[Ameet]

Forbes' has released its 2010 India Rich List, which puts the combined net worth of the country's 100 richest people at $300 billion, up from $276 billion last year.

http://www.campaignindia.in/Article/234 ... -list.aspx

This year, there are 69 billionaires on the India Rich List, 17 more than last year. Mukesh Ambani, head of Reliance Industries, has topped the latest Forbes’ India Rich List with a net worth of $27 billion, for the third consecutive time. Steel magnate Lakshmi Mittal, remains at number two with a net worth of $26.1 billion. Wipro’s Azim Premji is at number three.

[svinayak]

Forbes' has released its 2010 India Rich List, which puts the combined net worth of the country's 100 richest people at $300 billion, up from $276 billion last year.

http://www.campaignindia.in/Article/234 ... -list.aspx

This year, there are 69 billionaires on the India Rich List, 17 more than last year. Mukesh Ambani, head of Reliance Industries, has topped the latest Forbes’ India Rich List with a net worth of $27 billion, for the third consecutive time. Steel magnate Lakshmi Mittal, remains at number two with a net worth of $26.1 billion. Wipro’s Azim Premji is at number three.

I am advising a banker who is starting a credit union bank. He says 50% of the Indian millionairs in his sample lot size do not have money to pay for their next bill.

[Singha]

I had read of the aurangabad merc deal in a interview with SBI chairman, they financed all of those cars.

http://www.businessweek.com/magazine/co ... 694907.htm

Ever heard of Aurangabad, a dusty trading town in the heart of India? Neither, it seems, had Daimler (DAI), the No. 2 maker of luxury cars. So when a Mercedes-Benz dealership in Pune, a six-hour drive away, got a call from Aurangabad's chamber of commerce to place an order for 115 sedans, the sales clerk thought it was a joke.

It wasn't. In the last 10 years, Aurangabad has doubled in population to nearly 2 million, as Western companies such as engineering giant Siemens (SI) and brewer SABMiller built plants there and as Mumbai manufacturers found affordable sites for new factories. "Aurangabad has grown like anything, and people still thought of Aurangabad as this nothing town," says Sacheen Mulay, president of the local chamber of commerce and industry and a multimillionaire from his real estate projects. The idea for ordering en masse was cooked up by members of the chamber of commerce to get some attention for the new Aurangabad. "This is a place of potential buyers, new-generation entrepreneurs. People should take notice of that," says Mulay.

Daimler took note after Mulay and his colleagues went down to Pune with a PowerPoint presentation. The carmaker ultimately sold 148 autos to Aurangabad customers, the largest order in Asia, the company estimates. "We're clearly focused on these tier-two cities," says Wilfried Aulbur, chief executive officer of Daimler's India unit, who got involved personally in completing the order.

Most multinationals build a large presence in the top 10 cities of emerging-market countries such as Brazil, China, India, and Indonesia, so Rio, Shanghai, Delhi, and Jakarta get their state-of-the-art autos, cell phones, and retailers. Yet this focus comes at a cost. In a survey of multinationals, Boston Consulting Group found that most of the companies ignored cities with smaller populations and less apparent potential. Cities such as Aurangabad, Curitiba in Brazil, Xiaochang in China, and Yekaterinburg in Russia get lumped together, BCG found, with the mostly poor, rural populations that few companies, with notable exceptions such as Unilever (UL), are eager to pursue. "The next billion consumers, who are far above the poverty line, have high consuming power, and they are just not coming onto people's radars," says Sharad Verma, a partner at BCG.

Cities with fewer than 5 million residents make up 83 percent of emerging markets' urban consumers, BCG estimates. By 2030, 1.3 billion more people will live in emerging-market cities, driving 67 percent of global gross domestic product growth. Fewer than a fifth of these consumers will live in megacities such as Mexico City. The rest, who will be able to afford new cars, iPhones, and flat-screen TVs, will be spread out among 1,100 cities with populations over 500,000, up from 717 such cities today. Some 460 million people, earning $5,000 to $10,000 a year, will join the middle class in the next five years.

In the few smaller towns where the world's top marketers do show up, the impact is immediate. Amritsar, a town in Punjab best known for the Sikh Golden Temple, is now a thriving trading center for rice and wheat. The Indian conglomerate Bharti teamed up with Wal-Mart (WMT) to build the Arkansas retailer's first Indian store in Amritsar. Last summer, when reporters were given a tour, a traffic jam stretched a kilometer and a half down the road as farmers in tractors and Amritsaris in BMWs thronged the entrance.

Car sales are a good indicator of how much companies can gain from these towns, says Deepesh Rathore, managing director of IHS Global Insight India (IHS). Indians love cars, a visible marker of prosperity and a necessary purchase in places with little or no public transport. Yet General Motors' Chevrolet brand has less than 5 percent of the Indian market, even with eight models ranging from cheap to very expensive. "The most successful car for GM sells 4,000 units a year, which compares to a moderately selling car for Maruti Suzuki, the market leader," says Rathore. "GM has such a limited sales and service network that there's a big chunk of the population they just can't tap." Maruti has 802 sales centers in 555 cities; GM has about 200, mostly in the bigger cities.

Some Indian companies are quickly moving into smaller towns. PVR Cinemas, a Gurgaon-based chain whose shares have risen 75 percent since 2009, is betting its future on places most people can't find on the map—towns such as Nanded, Ujjain, and Vijayawada, says CEO Pramod Arora. "Smaller towns and cities offer immense opportunities, where the consumer base will grow at a phenomenal rate, while the bigger cities will taper off," he says.

Today, PVR has 70 percent of its multiplexes in cities such as Delhi and Mumbai. In those markets most customers pay $6 to $10 to be ushered into slick lobbies, where ads on LCD TVs hawk popcorn and sandwiches. Some even pay $22 for a reclining leather seat and waiter service. In the next two years only half of PVR's screens will be in the big cities, says Arora. Smaller theaters with fewer frills, charging $2 to $4 in cities such as Latur, will soon make up most of PVR's sales. Margins are expected to go up as PVR adds Mumbai-like amenities and customers make enough money to afford higher prices.

Back in Aurangabad, the 148 Benzes are expected to arrive in October. The owners can then drive to the new $66 million mall, one of Asia's largest, which opens in a month under the management of India's Provogue, a men's apparel maker, and London-based Capital Shopping Centres Group, which owns nine of Britain's largest malls. Coimbatore, Indore, and Nagpur will get malls next, says Capital Shopping CEO David Fischel. On YouTube (GOOG), meanwhile, a 3D walkthrough of the Aurangabad mall triggers such comments as "It's really heaven come to our city" and "Bravo, we are waiting for it." Sounds like a sales opportunity.

The bottom line: Smaller cities in Indian and other emerging markets offer the next big growth opportunity for multinationals.

[arun]

The World Bank released 2009 statistics on Sept 27, 2010.

India’s Gross Domestic Product (GDP) for 2009 is listed at USD 1,310,171 Million. (GDP)

India’s Gross National Income (GNI) - Atlas Method for 2009 is listed at USD 1,368,714 Million (GNI)

India’s Per Capita Gross National Income - Atlas Method and Per Capita Gross National Income - Purchasing Power Parity Method for 2009 were USD 1,180 and USD 3,260 (GNIPC)

India’s population in 2009 is listed at 1,155.348 Million (POP)

[paramu]

I am advising a banker who is starting a credit union bank. He says 50% of the Indian millionairs in his sample lot size do not have money to pay for their next bill.

Did they invest their wealth in tanking US real estate?

[ramana]

No they are like Catholic Church: Asset rich and cash poor.

All the money is tied up in their assets and because they are the lone rangers there is no one to buy their assets and thus the cash flow problems.

[Rishirishi]

No they are like Catholic Church: Asset rich and cash poor.

All the money is tied up in their assets and because they are the lone rangers there is no one to buy their assets and thus the cash flow problems.

Not that simple to explain. It is relatively easy to sell current assets like property.

Indian capital costs are high, and business men tend to prolong payments. Hence there is always a chashflow issue, because no one payes on time. This is a great opportunity for banks.

[ramana]

Amit, Hari and others gurus, Can we analyse the Economist report?

FLASH | Tuesday, October 5, 2010 | Email | Print | | Back


Indian economy poised to overtake China's: Report
October 05, 2010 8:19:52 PM

IANS | Washington

, Oct 5 () India may have a long way to go before becoming as rich as China but its economy will soon start growing faster, thanks to a young workforce and a brand of capitalism that outweighs its much derided democracy, says The Economist.

"Despite the headlines, India is doing rather well. Its economy is expected to expand by 8.5 percent," the magazine says in its latest cover story, referring to the bad press the country received ahead of the Oct 3-14 Commonwealth Games.

"It has a long way to go before it is as rich as China - the Chinese economy is four times bigger - but its growth rate could overtake China's by 2013, if not before," the magazine says.

"Some economists think India will grow faster than any other large country over the next 25 years. Rapid growth in a country of 1.2 billion people is exciting, to put it mildly," it adds in the article: "How India's growth will outpace China's."

The magazine says horrible toilets, stagnant puddles buzzing with dengue-spreading mosquitoes, collapsing masonry, and lax security and a terrorist attack did not fetch India ahead of the Games, suggesting it may remain a "second-rate" power.

"Or does it?" the magazine asks, saying the first reason for its conclusion is the benefit Indian economy will derive from its "demographic dividend" that has powered many of Asia's economic miracles.

"India is now blessed with a young and growing workforce. Its dependency ratio - the proportion of children and old people to working-age adults - is one of the best in the world and will remain so for a generation," it says.

The second reason, the magazine says, is the much-derided democracy, despite the notion elected governments retard development in poor countries, are biased towards interest groups and indulge in endless debates and delays on even the most urgent matters.

"No doubt a strong central government would have given India a less chaotic Commonwealth games, but there is more to life than badminton and rhythmic gymnastics. India's state may be weak, but its private companies are strong."

The magazine says Indian capitalism is driven by millions of entrepreneurs furiously doing ahead with this task, and thriving small businesses with many world-class ones whose English-speaking bosses network confidently with the global elite.

"They are less dependent on state patronage than Chinese firms and often more innovative: They have pioneered the $2,000 car, ultra-cheap heart operation and some novel ways to make management more responsive to customers," the magazine says.

"Ideas flow easily around India, since it lacks China's culture of secrecy and censorship. That, plus China's rampant piracy, is why knowledge-based industries such as software love India but shun the middle kingdom," it says.

"India's individualistic brand of capitalism may also be more robust than China's state-directed sort," the magazine adds, but also warns against unemployable workforce and rickety infrastructure.

Yet there is hope. "The Indian government recognises the need to tackle infrastructure crisis, and is getting better at persuading private firms to stump up the capital. But the process is slow and infected with corruption," it says.

"Given the choice between doing business in China or India, most foreign investors would probably pick China," The Economist said. "But as the global economy becomes more knowledge-intensive, India's advantage will grow."

[sourab_c]

IMO, The article provides a false sense of security for India's economic future. We keep glorifying what we have achieved and that blinds us from realizing the true potential of this nation. India's advantage will grow only if India's knowledge base is properly utilized for innovation and research. We are too dependent on few keynote industries that are driving our growth. IT and agriculture for example. It would be very naive of us to rely on the demographic crisis in China and hope that it will somehow help India.

We must create a strong educational base to facilitate research in various fields ranging from defense to green technologies. For that, an overhaul of our education system is a must. The fundamentals of our education system need to be re-examined. For example, instead of just forcing students to memorize from their textbooks and regurgitating everything on their exam, we must promote critical thinking and creativity. The government must do its part and allocate adequate funds on research. You'd be surprised what $1 billion of research can produce. Unfortunately, we just prefers to buy foreign.

I for one would love to see India emerging as a big exporter of wind turbines, solar panels and other green products that have a huge potential in the future apart from just IT. If we are able to grow at 8-9% annually with only 15% exports, we can easily touch double digit growth if that figure goes up a little bit. I think that we are underachieving rather than overachieving. India has huge potential that is yet to be realized.

[Ambar]

The chinese demographics thanks to their 1 child policy is being repeatedly over played.I am not sure if this recent trend is due to the worsening tensions between China and the west, or just a lever that western media is using to keep China in check. The current difference in median age between India and China is ~8 years, it would take decades for us to gain any real advantage based on demographics alone.

India's growth is being mostly fueled by 8 states,and we constantly make the mistake of relating consumerism to growth. Historically for whatever the reasons countries that have better infrastructure and better manufacturing are the ones that turn into economic superpowers, we are massively under-performing in both sectors.Besides, although China is a good yardstick to measure our growth,let us not forget about those who are flying under the radar - Vietnam,Philippines,Indonesia,Thailand and others.We'll have to brace ourselves for some stiff competition from those countries especially in the service sector.

The IT/ITES sector in India is creating a massive brain drain in other sectors. I was recently talking to the dean of a prominent grad college in southern India, he says most colleges are canceling courses in non-IT related fields of science (Biology,Chemistry,Physics and even Mathematics), arts and literature and concentrating mostly on courses related to IT or economics.If there is a massive downturn in IT/Banking, how prepared are we to train and create jobs in other sectors?

The report also talks about 'entrepreneurs'.Entrepreneurship stems from freedom of thought and freedom of thought is offshoot of a great education system. Mired in 18th century colonial style education system our schools and colleges squeeze budding ideas and there by manufacturing 'assembly line workers' and not risk taking entrepreneurs or innovators. Most Indians who are credited with world-class innovation still do it in US under US banners.

And finally,we should never fail to underestimate the investment China has made in geo-politics. It has massively invested in Africa,middle-east and south america fully realizing that the next great war would be mostly commodities driven.If we aspire to be a economic powerhouse,then we need plenty of friends around the globe. China's communism might be a deterrent, but it is a flawed communism that might crash if the global economy worsens within the next 10 years,and then what? A democratic China would like a drunk, lead footed driver on a freeway!

[Hari Seldon]

Amit, Hari and others gurus, Can we analyse the Economist report?

Ramana garu,

Without making claims to gurudom, let me say the ekhanomist (f)article is suspect as is almost the major part of their India pronouncements. I think its beyond overdue that India and Indians take Economist like psy-ops with salt.

Also, the posters above make good points critiquing the report although their crticism may be a tad bit harsh. I hope India won't do that badly.

Point is, the recent crisis shows that complex economic systems while relatively efficient are also increasingly vulnerable to disruption. And disruption is here to stay. The 'stability' engendered in the past 30 yrs was mere illusion only. The real market forces are back. And there's little if any animal spirits (a.k.a. consumer demand) among western economies to counter them.

Economies like ours (and Russia's after the soviet collapse) are relatively primitive, sure, but are also relatively more robust to price-supply-input-quality-design-capital-funding-etc disruptions. So, yes, while growth is good and all, I continue to hope for small-scale corrections periodically every now and then so that we keep awake and alert to the dangers of mistaking complexity and efficiency for nirvana. Nope, no sir, no can do.

The economissed article ignores this angle completely. The Indian entrepreneur who survives India's business landscape is tough-as-nails. Can compete anywhere and with anyone. His one main strength is robustness, higher immunity from economic diseases. Instead, the economissed goes on and on exhorting us to become a copy of western policies and fallacies that lie brutally exposed today. OF course, how did the mighty west lose its way such that it is essentially insolvent today - unable to payback a fraction of its true (expressed and implied) liabilities (include pension, healthcare and bank liabilities here), how it lost competitiveness and robustness, how it might regain the same someday are topics for another thread, another time.

Again, IMVVHO and all that. Perhaps OT for this thread. Shall take the discussion to the perspectives thread only.

[jagga]

Swiss banks to reveal names once India okays treaty, says BJP

The government of Switzerland would be ready to reveal the names and bank account details of Indians who have stashed away billions of dollars of black money in Swiss banks once the Indian Parliament ratifies the revised Double Taxation Avoidance Agreement that was recently signed between the two countries.

This was stated by Tarun Vijay, Bharatiya Janata Party national spokesperson and Member of Parliament, in a statement on Wednesday.

He said that in 'the first-ever move to contact the Swiss government directly' to disclose have the names of Indians who have salted away unaccounted for money in Swiss banks, he met Christa Markwalder, president, Foreign Affairs Committee (Presidentin Aussenpolitische Kommission des National Rats) of the Swiss Parliament on October 5 in Zurich.

[Theo_Fidel]

The economissed article ignores this angle completely. The Indian entrepreneur who survives India's business landscape is tough-as-nails. Can compete anywhere and with anyone. His one main strength is robustness, higher immunity from economic diseases. Instead, the economissed goes on and on exhorting us to become a copy of western policies and fallacies that lie brutally exposed today. OF course, how did the mighty west lose its way such that it is essentially insolvent today - unable to payback a fraction of its true (expressed and implied) liabilities (include pension, healthcare and bank liabilities here), how it lost competitiveness and robustness, how it might regain the same someday are topics for another thread, another time.

This not necessarily a good thing in one respect, the 'Jugaad'. Anyone who has actually had to get things done with the 'Jugaad' entrepreneur can attest to this. For us to grow as a nation in productivity and efficiency the 'Jugaad' has to go. No two ways about it.

We should think in terms of world class rather than 'western systems'. The 'Jugaad' is not best in the world.

The real world class sections of our economy are areas like say the cement industry. Easily one of the most efficient such industry in the world. Lowest in use of energy, materials and working on reducing man power and increasing automation. It is a very complex and sophisticated system which can however be also easily disrupted. Even something as simple as a state tax can cause chaos in the supply mechanisms. Another example is the Automotive glass units in India. Asashi in Chennai alone has a $1 Billion turnover making the most efficient laminated glass anywhere in the world. Their 10,000 employees India wide are all under 35 years and all graduates. Foxconn in Chennai has ~ 10,000 employees under age 35. Yes that Foxconn.

What the Economist is pointing out and what we are missing is that the next generation of Indians is very different from our parents. Literacy rates amongst the 15-25 year old group exceed 80%. In the younger than 15 year group literacy should approach 90%. Amongst our parents group literacy never exceeded 30%. It is the debris of that 70% illiterate population that we see in the pan spitting, trash throwing, manual labor condemned population. The real pain of illiteracy is the curse of being unteachable, they can not change their ways. It is this illiterate group that runs Dharavi for instance. 500 Acres of prime Mumbai land that generates a paltry, for its location, Rs 2000 crore of wealth for its 100,000+ residents. The number of private schools, universities and technical schools available to this younger age group is a 100 times or more than was available to our parents. It is the sad thing about India that even this is inadequate and probably needs to increase another 10 fold.

Growing at 7-8% per annum or 10% per annum in inflation adjusted dollars, we will have a $30-35 Trillion economy in 2040 when our demographic dividend will finally start waning. This works out to $20,000 per capita which would make us modestly rich even in inflation adjusted dollars. In one generation. Contrast that with the idea that China's dividend is just about ending at a per capita income of $3000. Of course none of this is automatic. Much reform and perspiration will be required.

[Gus]

^ Well written. Businesses thrive in predictability. That there is businesses thriving on 'jugaad' in India is no substitute for the 'efficient and predictable' way of running businesses. Just because the environment in India is currently favoring those who are 'jugaad' types do not mean that 'jugaad' type businessing is the best thing.

[Hari Seldon]

^^^ Saar, AFAIK, nobody is claiming 'jugaad'==great whereas predictability == bad. It's nobody's case that the endemic corruption and poor-quality public infrastructure - physical, legal and intellectual - can do without reform.

[Vipul]

Good Post Theo. Lot of info nuggets.

[Gus]

^^^ Saar, AFAIK, nobody is claiming 'jugaad'==great whereas predictability == bad. It's nobody's case that the endemic corruption and poor-quality public infrastructure - physical, legal and intellectual - can do without reform.

saar, when you say

The Indian entrepreneur who survives India's business landscape is tough-as-nails. Can compete anywhere and with anyone. His one main strength is robustness, higher immunity from economic diseases.

It is nice to read. But I would rather be in a place where efficiency, professionalism and predictability are more prevalent than 'jugaad to circumvent obstacles' type environment. Sure these traits are nice, but really, we should strive to a place where we don't require these traits. As much as I admire the Indian entrepreneur for making it work in this environment, I hate the environment that make this a necessity to work.

[Pulikeshi]

Here is a contrarian view point so someone can tear it down

How much of entrepreneurial activity is due to 'Jugaad' and how much due to
'lower cost of capital' available based on traditional caste and other community based lines...
Many of the small business (including mom & pop) stores never grow beyond their
neighborhood. That local thinking is tied to various other issues including access to capital.
If all the folks in Koliwadi-Dharavi are given titles to the parcel of land they own, will it cause
them to sell and move or will they raise capital to scale and expand?
Will natural law of markets kick in if Government's provide title and collect property tax?

I guess my point is 'Jugaad' is a methodology, not the causation of entrepreneurial activity.
Even the largest companies in the west use 'Jugaad' by other names in product development -
they may call it fancy names, but same results. It is more useful to focus on availability of
capital, streamline management of credit, easy entry and exit, business friendly labor laws, etc.
All of which will go a longer way in encourage more structured entrepreneurial activity in India.

[paramu]

But I would rather be in a place where efficiency, professionalism and predictability are more prevalent than 'jugaad to circumvent obstacles' type environment.

You get the environment you described when you have access to cheap credit that grows in tree - err thin air or may be on paper or electronic digits. When that dries away, you will see the ugly face of professionalism and efficiency. Who can survive in such environment? That will be "Jugad"!

But there is scope to move it to the next level that doesn't require cheap money.

[Hari Seldon]

^ paramu saar,

+1 only. 'scarcity' was the human condition for over 99% of its existence on the planet. And except for the past few decades of post-modern neoclassical/monetarist economics when money could be created out of nothing, it was the defining paradigm. I do get the sense that the old, 'real' market forces are back.

However, IMO I 'get' what sri gus and sri theo are saying. I largely agree, actually. What I'm saying is maybe different/tangential. Maybe not. Time will show us anyway. No point talking past well-meaning folk who want India to rise as much as I do. Peace.

[abhishek_sharma]

World Bank debars three Indian cos, one individual

http://economictimes.indiatimes.com/new ... 692271.cms

[abhishek_sharma]

India likely to sign FTA with EU by year-end: Sharma

http://www.indianexpress.com/news/India ... rma/693670

[Vipul]

Govt to create National Register of Business.

The government has decided to create a national register of business aimed at capturing every single commercial activity in the country to ultimately pave way for keeping more accurate statistical data of economic activities.

"We are planning a National Register of Business to keep track of every single commercial activity - both big and small - in the country," Secretary to the Ministry of Statistics and Programme Implementation TCA Anant said here today on the sidelines of a workshop on annual survey of industries.To make it possible, the new economic census will now cover the services sector, including micro home businesses and small kirana stores.

The work on economic census will begin from June-July, 2011, and is expected to finish by the end of FY 2012 expectedly making 2004-05 as the base year, Anant said.

A national register of business will lead to switching from the annual survey of industries to the annual survey of business. The annual survey of industries will only capture industrial production under the Factories Act, but now the government wants to capture the services sector too, which currently falls under the Shops and Establishment Act.

"We wish to aim for an annual survey of business instead of being restricted to industrial output," Anant said. However, Anant did not like to make any commitment on a timeframe for putting it in place.

[Ambar]

Apologies if this has been posted before :



If someone can post a inflation chart from 1960s-present, we can delve into the governments and their economic policies a bit deeper. Thanks.

[saip]

Forex reserves swell $2.57 bn to $294.16 bn

The country's foreign exchange reserves went up for the third straight week, rising by $2.57-billion to $294.16-billion on the back of a healthy jump in the foreign currency assets.

The country's total forex reserves had went up by $3.87-billion to $291.56-billion in the previous week

Written by a US educated person?

They must have gone up by substantial amount (in dollar terms) this week too as rupee has gained against the dollar.

[Singha]

hindu business line.

India's wealth triples to $3.5 trillion: Report

Our Bureau

Mumbai, Oct. 8

India's wealth has tripled to $3.5 trillion in the last decade, says the Global Wealth Report launched by Credit Suisse Research Institute.

The report also said that by 2015, India's wealth could double to around $6.4 trillion. Contrary to popular belief, the report noted that India's wealth distribution was skewed towards the lower end of the wealth pyramid.

The proportion of adults holding $100,000 in India was very small – 0.4 per cent.

However, this group has been rapidly growing in recent years and would continue to do the same, considering the growth trajectory of the country, the report said.

From a global point of view, the number of billionaires stood at over 1,000. Out of these, North America accounted for the highest number of billionaires at 500, followed by Asia Pacific with 245 billionaires and Europe with 230.

The global wealth as of today, held by 4.4 billion adults comes to around $195 trillion, said the report.

It would grow by 61 per cent to reach $315 by 2015, the report added.

[Suraj]

RBI's 'intervention' caution calms Rupee appreciation

The Reserve Bank of India (RBI) Governor Duvvuri Subbarao’s caution that the central bank will intervene if foreign inflows are ‘lumpy and volatile’ has calmed the rupee a bit. The local currency on Monday closed at 44.41 per dollar, compared to 44.44 per dollar on Friday. The rupee, which has gained about 5.7 per cent since the beginning of September, traded at its five-month high.

So far, the central bank has not intervened directly because the country’s current account deficit in the June quarter widened three-fold from a year earlier and the nation needs more capital to fund its infrastructure and other projects.

While addressing global central bankers at the International Monetary Fund in Washington, Subbarao sounded the alert as September received more portfolio inflows that any other month on record.

This year, foreign institutional investors (FIIs) have so far purchased $21.4 billion of stocks, the highest in any year since such investments were permitted in 1992. FIIs have bought $10.5 billion bonds since January, compared to a total investment of almost $18 billion until now. Adding to the inflows are investments in share sales by local companies. Foreign exchange dealers anticipate another $2 billion inflow when state-owned Coal India hits the market with its initial public offering.

Capital inflows on HLCC meeting agenda

The issue of managing capital flows is likely to come up for discussion in the next meeting of the high level coordination committee (HLCC) comprising representatives of regulatory agencies and finance ministry officials.

This assumes significance because of the conflicting signals by the Reserve Bank of India and the finance ministry on capital controls. While the central bank has said rising foreign portfolio investment in the country was a potential threat and measures were needed to manage such flows, Finance Minister Pranab Mukherjee said in a recent media interview that while the ministry was keeping a close watch on foreign inflows, there was no need for imposing any restriction on capital flows.

India has a high level of current account deficit and overseas capital flows have been useful to fill it. In 2010 so far, foreign portfolio investment has been $21.243 billion (Rs 94,000 crore) in equities and $10.4 billion (Rs 46,200 crore) in debt. The flows are expected to continue in the coming months. Even C B Bhave, chairman of the Securities and Exchange Board of India, has said that he has no reason to believe that there will be a sudden reversal in foreign investments.

Huge inflows have been posing a challenge for managing currency, as an appreciating currency leads to loss of export competitiveness. Efforts by the Reserve Bank of India to halt the appreciation of the rupee by buying dollars also increases liquidity in the system. Inflation is already on the rise due to an asset bubble being formed and increasing interest rates to tame it attracts higher foreign investments, as global rates are much lower than that in India.

[Theo_Fidel]

India's wealth has tripled to $3.5 trillion in the last decade, says the Global Wealth Report launched by Credit Suisse Research Institute.

The report also said that by 2015, India's wealth could double to around $6.4 trillion. Contrary to popular belief, the report noted that India's wealth distribution was skewed towards the lower end of the wealth pyramid.

This should be nominal personal wealth in dollars, not national wealth. Not that our national wealth is a lot more.
A huge chunk is non-liquid private property in the west. American private property alone has been estimated at $25 Trillion.

If we can clean up our cities and improve some of the infrastructure our property wealth should boom rapidly.

This is the real shame about our slums and dirty streets and open sewers and shabby apartments, it destroys the property values of building owners.

[Theo_Fidel]

Had the corrupt "Licence Raj" not stifled our economic growth (especially during the 1970s and 80s), we could have been running neck-to-neck with China right now....

This does not explain the full situation.

This system was shambolic because of the people. You can make any system work and efficient, all depends on the people.
Yes there are more efficient systems and less efficient one, but more at the top end of things.

The generation at independence was 6% literate.
The next one, 50's-60's was 25% literate.
The next one, 70's-80's was 50% literate.
The presently growing one 90's on is 80% literate.

You can not build a productive growing economy on a 25% literate population.

Just to give you an example, in the 50's there were 30,000 laborers employed by Neyveli Lignite. Production was a complete shambles. PLF was rarely above 50%.Generation stagnated in the 1000 MW range. This meant that TN was condemned to constant load shedding and no companies would move there. It may seem strange to us now but TN was de-industrializing and was similar to the Bihar of the 90's in many ways. Today the company is run with 6000 core employees, the vast majority of this core are graduates and many of them engineers. The plant now has a capacity of 2500 MW at a PLF approaching 85%-90%, essentially world class availability. TN has industrialized rapidly as power cuts have reduced dramatically. But there are still 13,000 contract laborers left over from the 50's and 60's at the company. Recently they went on strike for 2 weeks. They company operated as usual, there were no power cuts. In essence they are redundant.

How do you blame this on the license raj.

[vera_k]

If we can clean up our cities and improve some of the infrastructure our property wealth should boom rapidly.

This is the real shame about our slums and dirty streets and open sewers and shabby apartments, it destroys the property values of building owners.

Property prices in India are already at or above first world levels, even with the slums and dirty streets. I may be wrong, but I think the bottleneck now is that new entrants to the middle class have trouble getting into the property owning class because of current price levels.

[Theo_Fidel]

If we can clean up our cities and improve some of the infrastructure our property wealth should boom rapidly.

This is the real shame about our slums and dirty streets and open sewers and shabby apartments, it destroys the property values of building owners.

Property prices in India are already at or above first world levels, even with the slums and dirty streets. I may be wrong, but I think the bottleneck now is that new entrants to the middle class have trouble getting into the property owning class because of current price levels.

Correct me if I'm wrong but isn't this a very very tiny chunk of India.
Also I thought the prices are high due to shortages and lack of property on the market.

If our property is first world prices I'm very surprised that its total value is so low.
About $1,500 Billion. About our annual GDP.

Anyone have an explanation.

[vera_k]

Correct me if I'm wrong but isn't this a very very tiny chunk of India.
Also I thought the prices are high due to shortages and lack of property on the market.

If our property is first world prices I'm very surprised that its total value is so low.
About $1,500 Billion. About our annual GDP.

Anyone have an explanation.

I had Mumbai in mind here. The shortages mean that slums and lack of amenities will not deter rise in property based wealth.

The total value is low because of the black market (undervaluation). If accounted value is $1500 billion, real value (i.e. amount at which property trades hands) can safely be assumed to be 2x - 3x that figure. Would tend towards 3x for land and 2x for developed property.

[RamaY]

This does not explain the full situation.

This system was shambolic because of the people. You can make any system work and efficient, all depends on the people.
Yes there are more efficient systems and less efficient one, but more at the top end of things.

The generation at independence was 6% literate.
The next one, 50's-60's was 25% literate.
The next one, 70's-80's was 50% literate.
The presently growing one 90's on is 80% literate.

You can not build a productive growing economy on a 25% literate population.

Just to give you an example, in the 50's there were 30,000 laborers employed by Neyveli Lignite. Production was a complete shambles. PLF was rarely above 50%.Generation stagnated in the 1000 MW range. This meant that TN was condemned to constant load shedding and no companies would move there. It may seem strange to us now but TN was de-industrializing and was similar to the Bihar of the 90's in many ways. Today the company is run with 6000 core employees, the vast majority of this core are graduates and many of them engineers. The plant now has a capacity of 2500 MW at a PLF approaching 85%-90%, essentially world class availability. TN has industrialized rapidly as power cuts have reduced dramatically. But there are still 13,000 contract laborers left over from the 50's and 60's at the company. Recently they went on strike for 2 weeks. They company operated as usual, there were no power cuts. In essence they are redundant.

How do you blame this on the license raj.

TF garu

Perhaps we are mixing two different issues here.

1. The % of automation in a industry domain. This is the main reason for productivity growth
2. The "perception" of literacy as panacea for all issues. As Indian literacy % increased there is increased corruption, environmental damage etc., How can one explain this?

That doesn't mean we do not need 100% literacy. All we need is right "literacy".

[Vipul]

April-Sept indirect tax mop-up rises 44.4%.

[Theo_Fidel]

http://www.thehindubusinessline.com/201 ... 420100.htm

Industrial growth drops to 15-month low of 5.6% in Aug

The country's industrial growth has slipped to a 15-month low of 5.6 per cent in August, partly on account of a decline in capital goods output and effect of a high base.

The 5.6 per cent year-on-year rise in the official index of industrial production (IIP) for August was against the 10.6 per cent growth registered for the corresponding month of last year. It was quite the other way round in July, which returned a 15.2 per cent growth on the back of a 7.2 per cent annual IIP increase for July 2009.

The base effect, however, explains only part of the sharp deceleration that disappointed the markets. A no less significant factor has been capital goods production, which contracted by 2.6 per cent year-on-year, compared with 9.2 per cent growth in August last year.

But how ‘real' is the negative growth in capital goods is a question being asked by some, given that this segment registered a 72 per cent year-on-year increase in the previous month! The latter, along with a 23.7 per cent increase for consumer durables, largely powered the 15.2 per cent overall IIP growth in July.

[Vasu]

Had the corrupt "Licence Raj" not stifled our economic growth (especially during the 1970s and 80s), we could have been running neck-to-neck with China right now....

While our economic/financial reforms began in the late 80's, I believe the core reforms (if at all) only bagan in 1998, with the grand road, port, airport, etc schemes by ABV's government. Thats the enabling factor in my opinion that will be most important in unlocking our society's potential.

Fortunately, improving our general standard of being and quality of life does not need far reaching reforms or massive financial investmentments. While we, and the business world around us, have been talking about financial reforms, and obliging everyone little by little, we have been very indifferent to reforming our actual state of being. Education, housing, food security, everything's suffering still.

[abhishek_sharma]

In Mumbai, Adviser to Obama Extols India’s Economic Model

http://www.nytimes.com/2010/10/16/busin ... mmers.html

[Airavat]

Infosys Q2 results

Infosys-Technologies Ltd beat market expectations and turned in a 13 per cent rise in net profit at Rs1,737 crore for the quarter ended September 2010. The Bangalore-based IT behemoth also announced a special dividend of Rs30 per share as a mark of its entry into the third decade of operations, besides the Rs10 per share interim dividend that it announced, as it had done last year, too. However, the market hammered the company's stock price by 3.39 per cent or Rs108 to Rs3,076.15 on its disappointing guidance. "The continued global economic uncertainty, coupled with extreme currency volatility is a concern for the industry," said V. Balakrishnan, chief financial officer (CFO), Infosys Technologies.

With foreign investors showing growing interest in Indian equities - they have poured in a life-time high of about $22 billion this year so far - there is no end in sight to the spiral of the rupee.

Infosys has seen its revenue growth from Europe spiralling to 20.4 per cent, faster than from North America, mostly due to favourable currency movements in dollar and euro during the quarter. Revenues from North America grew by a meagre 9.6 per cent.

[Vasu]

In Mumbai, Adviser to Obama Extols India’s Economic Model

http://www.nytimes.com/2010/10/16/busin ... mmers.html

While in New York, he and his employer will bitch about the same.

There's an American animation series, South Park, which once had an episode which said that the reason for USA's success is that they say something else and do something else. Democrats are being true to this line's every word.

I have a question for fellow forumers - what kind of economic partnerships and developments are you expecting when Obama comes to India? Will we see any talk on the nukular deal? Will he be a rarified arms dealer? Is there an agenda that we know of?

[abhishek_sharma]

I have a question for fellow forumers - what kind of economic partnerships and developments are you expecting when Obama comes to India? Will we see any talk on the nukular deal? Will he be a rarified arms dealer? Is there an agenda that we know of?

His only aim is to increase exports to countries like India. For example, see:

http://blogs.usembassy.gov/roemer/2010/ ... rade-ties/

President Obama announced at his State of the Union address the National Export Initiative, an ambitious and important program aimed at doubling our exports in five years.

He will, of course, carp at the nuclear liability bill ...