Indian Economy: News and Discussion (Apr 1 2011)

[Prem]

I am sure the cheap wine from trader joe's would sell hot here if the usurious taxes on alcohol were lifted. wine is quite unaffordable now due to taxes. beer does my belly no good. and whisky will kill my organs.

2 Buck Chuck wine they sell is not good for health.

[Theo_Fidel]

Since many here appear not to remember where we were once, just a reminder...

July 2nd, 1991, 20 years ago...

Personally it was quite traumatic. Like selling my mom's gold to put food on the table. Until then I had not really opposed the entire commanding heights and 'Garibi Hatao' craziness. Afterwards I could not bear to think of the cost of wasting money. Let us remember, never again.

http://www.business-standard.com/india/ ... ia/441198/

How serious was the crisis? On the fiscal side, India’s deficit had grown to 8.4 per cent of gross domestic product, or GDP. That was perhaps still manageable. However, the bigger worry was on the balance of payments front — the country’s foreign exchange reserves were hovering at $1.3 billion to $1.5 billion (today the reserves are over $300 billion) and that was not enough to meet the country’s import needs for even three weeks. The total external debt was $70 billion. For an economy whose GDP was under $290 billion the burden was huge, even though only $4 billion out of that had a short-term tenure. India’s international credit rating had taken a hit. The World Bank and the International Monetary Fund were reluctant to sanction new loans unless the new government convinced them of its commitment to reforms.

Signs of the crisis had become evident much earlier. In September 1990, the National Front government of VP Singh had anticipated trouble. It approached IMF and borrowed about $550 million under the gold tranche facility, without making any public disclosure. However, no corrective measures followed to improve the balance of payments situation. The situation got worse when the National Front government fell and Chandra Shekhar formed his minority government with Rajiv Gandhi’s support in November 1990. By January 1991, the Chandra Shekhar government, with Yashwant Sinha as the finance minister, convinced IMF to approve two loans — $775 million under the first credit tranche and $1.02 billion under the compensatory and contingency financing facility. The promise the government made to IMF was that it would initiate economic reforms through the Budget it was due to present in February 1991. By the middle of February, Rajiv Gandhi’s Congress withdrew its support to the government which therefore was in no position to present a full Budget on February 28 as it had planned. Elections were called — a long process that would be over only by the end of May. With no government likely to be in place before June, India's economic crisis worsened.

A day later, another round of currency depreciation took place — this time by 11 per cent. In the space of three days, the Indian rupee’s exchange value vis-à-vis the US dollar moved down from Rs 21.09 to Rs 25.95. Singh held a press conference and said that there would be no further depreciation of the Indian currency. The following day, Chidambaram unleashed a series of trade policy changes — starting with the abolition of the cash compensatory support scheme to removal of supplementary licences, decanalisation of most import items and a transition from the replenishment licence scheme to a new system of tradeable exim scrips. In short, a completely new trade policy regime was in place.

Even as these measures helped strengthen the economic policy framework, Singh had to go in for three more rounds of gold pledging, just to make sure India did not default. On July 6, India air-freighted 25 tonnes of gold to London, to be kept with the Bank of England as security against which it obtained a commitment of a $200 million assistance. A week later, 9.8 tonnes of gold, and on July 18, 12 tonnes of gold were shipped to London with the same purpose. India could now borrow up to $400 million against the pledging of about 47 tonnes of gold. The last round of shipment took place on July 18. Six days later, Singh presented a Budget that changed the face of the Indian economy, not so much because of the fiscal policy directions, but for the new industrial policy that was unveiled in Parliament the same day. That marked a new dawn for India.

[somnath]

IIP, and in particular construction inputs like cement and steel, moderate in the June-Aug period due to decreased construction activity in the monsoon season. It's a typical economic cycle. As I recall, the rains began earlier this year - there were showers in Kerala back in late April-early May. I don't know what accounts for the drop in natural gas output though - anyone from the oil and gas thread have any insights ?

YoY numbers dont typically reflect seasonalities in that fashion, MoM numbers do - IIP is typically represented in YoY terms...

In any case, this isnt IIP at all - this is what is known as "core sector" growth, or "infrastrcture" growth..Its come off to 5.3% from 7.4% last year same period - but the numbers are not strictly comparable...This year, they have added 2 more sectors - natgas and fertiliser to the index....

Monthly trends of core sector can be misleading, due to the composition of the index...Very often, a large power capacity coming on stream, or a large refining plant going in for maintenance shutdown can skew the numbers...

Over a longer period of time though, the trend is pretty clear - higher interest costs are hitting the investment cycle, and slowing down growth...Which was the intention of the rate hikes in any case...Unfortunately inflation's not come off!

[abhishek_sharma]

The value of the future
Mark Buchanan
Nature Physics 7, 516 (2011) doi:10.1038/nphys2039

Economists have often been criticized — by physicists, among others — for being overly formal with their mathematics. Journals are full of proofs and theorems, and for some economists the aim seems to be to give economics an axiomatic basis akin to quantum field theory. Even so, mathematical formalism has its uses, and can be an invaluable guide in confusing terrain.

Consider, for example, the matter of determining the relative values of things at different times, say, now versus the future. What would you pay today to get £100 in one year? You could put £100 today into an investment and earn, perhaps, 5% compound interest, getting £105; equivalently, just over £95 invested now would give you £100 in a year. So, it seems, £95 is what that year-delayed £100 is worth now.

Of course, there are complications. Inflation matters too, making the £100 still less valuable, as does uncertainty about the future; to be blunt, you might be dead in a year. To find some stable ground on this matter — the proper form of discounting, as it is called — economists have turned to formal logic. For all the competing factors, they note, surely one thing should be true: we should treat time consistently so that subsequent periods of time should all contribute to the discounting in an equal way. This condition of 'time consistency' implies that a discount over a time A+B should be equal to a discount over time A multiplied by a discount over time B.

If this is true, and it seems sensible that it should be, then it's possible to show that exponential discounting is the only possibility. It is, using economists' favourite word, the 'rational' way to discount the future. The right exponent to use may be in doubt, but the exponential form itself is not.

Exponentials, of course, grow (or shrink) very quickly, and this kind of discounting rapidly reduces the value of the future. If the human race has another one million years to exist, it would seem, naively, that the second half of that period should be as valuable as the first half. But exponential discounting with even a small rate gives the latter half-million years essentially zero value.

This effect is hugely important in analyses of things like possible responses to climate change. For example, when the UK government's Stern Report in 2006 suggested that fast action should be taken to reduce greenhouse-gas emissions because of the negative long-term consequences, some economists countered that this was an overreaction based on insufficient devaluation of the future. William Nordhaus argued that the value of future economic losses attributed to climate change (or any other concerns about the environment) should be discounted at about 7% per year (Science 317, 201–202; 2007) — far higher than the value of 1.4% used in the Stern review.

As he said, “the key economic variable is the real return on capital, r, which measures the net yield on investments in capital, education, and technology. In principle, this is observable in the marketplace. For example, the real pre-tax return on US corporate capital over the last four decades has averaged about 0.07 per year. The return on capital is the 'discount rate' that enters into the determination of the efficient balance between the cost of emissions reductions today and the benefit of reduced climate damages in the future.”

Obviously, squabbles over the proper value of r make a big difference. But there may also be another more subtle flaw in the logic of discounting, which goes back to the assumption of time consistency. It needn't imply the exponential form, as earlier theorists have thought.

A physicist and an economist, Doyne Farmer and John Geanakoplos, have recently revisited the problem in the case in which the discount rate isn't just a fixed number, but varies randomly through time (as interest rates indeed do in the market). It's tempting to suppose that if discount rates vary, the overall discount factor over a time T should be something like e^−<r>T, with <r> being the average discount rate over the period. In other words, the average of the product of many exponential factors for bits of time along the way can be expressed as the exponential of an average overall discount rate.

But if the discount rate r varies in the right way, it turns out, this simply isn't true. Farmer and Geanakoplos illustrate the effect with several simple models. You might take the discount rate at any moment to be the current interest rate, for example, which moves, according to a standard model in finance, as a geometric random walk. In one simple model, this means that the rate gets multiplied or divided at each moment by a number (say, 1.1) to determine the next rate; a bigger number means more volatility. In such a (realistically) uncertain world, Farmer and Geanakoplos show the exponential discounting function no longer satisfies the time consistency condition. Instead, a different mathematical form is the natural one for discounting, with the discount factor over a time T being proportional to 1/(1 + αT)^β, where α and β are constants.

For long times, this form has a power-law tail proportional to T^−β, which falls off far more slowly than an exponential. Hence, the value of the future isn't discounted nearly as strongly. For example, taking the average interest rate as 4%, with a volatility of 15%, Farmer and Geanakoplos show that in 500 years' time the exponential is already discounting values about one million times more strongly than the random process, and it gets worse after that.

This implies a potentially enormous revision in economic analyses performed to date on climate policy (or steps to counter other problems where costs come in the future). Farmer and Geanakoplos don't claim that this geometric random walk model is the only correct one, or even the best one, it's only illustrative of a broad class of statistical processes. But it also isn't obviously unreasonable. The point is that everything about discounting depends very sensitively on the kinds of assumptions made, not only about the rate of discounting but the very process it follows through time.

As they put it, “no fixed discount rate is really adequate”, and, as a consequence, “the proper discounting function is not an exponential.”

It seems to me this is a finding of potentially staggering importance. What are currently considered the best analyses of some of the world's most pressing problems hinge almost entirely on quite arbitrary techniques for discounting the future.

This is a good IED. Let us hope that people arguing in the nuclear thread see it.

[abhishek_sharma]

U.S.-India Economic and Financial Partnership

MP3 available

[Dileep]

Since we are talking furniture:

Flatbox furniture of varying quality/reliability is available here a plenty. Style Spa (Formerly Gautier) is the market leader and Damro is a close second. there are other outfits that import nameless Malaysian and chinese stuff too. Those are crap.

All of them deliver and assemble in house free of charge.

[paramu]

Like selling my mom's gold to put food on the table.

Nah.. We didn't sell gold. We only pledged gold as collateral, just like many people take gold loan. We took that back after paying it off.

I can see traits what we see many countries today, in that incident. India was made to borrow large forex loans during RG-era

[vera_k]

Style Spa (Formerly Gautier) is the market leader

Yes, this was the brand I bought. But back then it was a lot more expensive than the IKEA equivalent, unless things have changed now.

[Dileep]

Oh, it is pretty darn expensive, if you consider the dollar value. THEN, add the PPP value, it becomes a luxury item onlee. IKEA if it comes in, is going to be places a cut ABOVE stylespa. After all, SKODA is a luxury brand here.

Wooden furniture, carved out by a bunch of drunken rats from a log of rubber wood, stained teak brown, dipped in teak oil, and painted with touchwood costs MORE.

[Singha]

ikea can play on its huge selection of product, something that few if any can match. also turnkey services like design of kitchens and kids rooms or commercial property that people spend a fair amt on now. their entry would normalize the quality and price skews which are wide here vs more open market economies. they also sell housewares decor items and utensils on one floor usally and swedish food is unheard of here. all in all plenty of positives imo if ikea or sports authority or rei come in.

[somnath]

Laveesh Bhandari's take on Indian mining sector reforms...As expected, he advocates a strong regulatory framework as the lynchpin..

http://business-standard.com/india/news ... on/441282/

[somnath]

A few says back, we had this claim..

Reliance and TATA are worth about the same as all the Central PSU's put together. In other words they have just about created more wealth for Desh than all those dinosaur PSU's combined.

The concept is ridiculuous in itself, and the data too clearly wrong, which was pointed out - but I was tickled when I saw this today in BS..

http://business-standard.com/india/news ... /140131/on

The combined market valuation of all listed government entities has grown to close to Rs 20,00,000 crore, as per an analysis of data available with the two bourses, BSE and NSE.

In comparison, all the companies belonging to the country's 10 most valued private business groups together command a cumulative market valuation of this magnitude.

Means nothing really, besides the fact that large parts of the private sector is in SME hands...But was interesting to see the headline...

There are lots of stuff to critique on policy, past and present..But basic data and conceptual clarity is a sine qua non for making those critiques...

[Suraj]

YoY numbers dont typically reflect seasonalities in that fashion, MoM numbers do - IIP is typically represented in YoY terms...

And I suggested that in YoY terms the monsoon started sooner this year, dampening construction activity... Nice job of misreading my posts once again and going off on a pedantic tangent

[Theo_Fidel]

..going off on a pedantic tangent

Scientists apparently don't use Pedantic anymore. No longer halaal, for some reason. I was publicly corrected on this. This sort of behavior is now apparently called Polemical. Just a clarification.

[somnath]

And I suggested that in YoY terms the monsoon started sooner this year, dampening construction activity... Nice job of misreading my posts once again and going off on a pedantic tangent

I was only responding to this..

IIP, and in particular construction inputs like cement and steel, moderate in the June-Aug period due to decreased construction activity in the monsoon season. It's a typical economic cycle

In any case, the data wasnt for IIP, its for "core sector"...

What would be interesting on the "monsoon" angle is the number on Electricity growth - there is is a kind of generic pattern that the onset of monsoons dampen electricity demand..In May, Electricity growth i 10.3%, well above trend growth levels...

Which brings back to my (pedantic!) point on monthly growth data on core sector growth being notoriously unusable for much trending...

IIP itself, and we dont have May numbers yet, ha been very volatile in the last 3-4 quarters, partly because they reclassified the index itself, but also because rising interest rates have decisively impacted the invetsment cycle...Which is big (pedantic, and real!) daddy...

[svinayak]

http://www.dailytimes.com.pk/default.as ... 2011_pg3_5
Piggy banks and political pork —

Cleverly masked from public view is the fact that India runs a huge current account deficit that averages about 3 percent of GDP. We just do not export enough to pay for all the oil, gold and other imports. Gold is the largest component of our imports after oil and the two together make up nearly half of our total annual imports. This current account deficit, roughly $ 40 billion, is met by selling shares in our businesses to foreigners, through borrowings and FDI. So at the margin what are we doing? Here is the vicious circle. Negative real interest rates drive households away from saving in financial assets into gold. The government is forced to import gold because we hardly produce any. To pay for the import of gold, the government sells or induces others to sell shares in profitable businesses to foreigners. So people, here is the deal — you sell productive assets to buy jewellery and trinkets. Would you ever to do that in real life? Yet as a nation we are doing precisely that because the government cheats us out of our savings if we do not.

[somnath]

^^^That article is so full of errors that it is futile to event start refuting it..Plain rubbish...

[Theo_Fidel]

Meanwhile, can we call up special industrial zones. SIZ's anyone. I'm probably going to trigger a long line of tirades against industrializing India and how this a global CT to destroy our nation.

http://www.washingtonpost.com/world/ind ... story.html

Today, only 8.7 million people in this country of a billion-plus are employed in manufacturing. But the government says new regulations being finalized this month could turn India into a China-like manufacturing powerhouse by allowing the setting up of large factories in special industrial zones where labor laws will be more relaxed.

Officials say the zones will make it easier for companies to circumvent a web of more than 150 socialist-era labor laws that have prevented the growth of labor-intensive sectors such as the textile, footwear and toy industries.

“The new manufacturing policy is the unfinished agenda of India’s economic liberalization program, which began in 1991,” said R.P. Singh, an official with the Ministry of Commerce and Industry. “Some of the lingering issues, like labor laws, were considered too sensitive and controversial to touch.”

“While we delayed, China and other Asian economies, which were almost at par with us 30 years ago, have raced ahead. But the writing on the wall is clear. If we don’t do it now, we will be left far behind,” he said.

Domestic and international investors say India’s protectionist labor rules are among the biggest obstacles to setting up and running factories in the country, and they complain about laws that mandate frequent inspections and monitoring of workers’ protections, such as a minimum wage, leave and working hours. They say union rules create bottlenecks that slow production.

“Some of our labor laws date back to the time when the British ruled India, and others are a product of the Soviet-style socialist era when the government was deeply suspicious of private capital,” said R.C. Bhargava, chairman of the largest-selling car company in India, Maruti Suzuki, a subsidiary of Japan’s Suzuki Motor Corp. “Business was seen as an exploiter of workers. So we treated labor with kid gloves.”

Labor rights advocates say that regular inspections are even more important as India’s economy booms and that dismantling the labor laws could weaken unions and lead to exploitation.

“When the government says flexible labor laws for manufacturing hubs, what they really mean is the freedom not to implement labor laws of the land and very little government oversight,” said M.K. Pandhe, vice president of the Center of Indian Trade Unions. “With increased privatization in India, the need is to strengthen our labor laws, not weaken them.”

[Inder Sharma]

A few says back, we had this claim..

Reliance and TATA are worth about the same as all the Central PSU's put together. In other words they have just about created more wealth for Desh than all those dinosaur PSU's combined.

The concept is ridiculuous in itself, and the data too clearly wrong, which was pointed out - but I was tickled when I saw this today in BS..

http://business-standard.com/india/news ... /140131/on

The combined market valuation of all listed government entities has grown to close to Rs 20,00,000 crore, as per an analysis of data available with the two bourses, BSE and NSE.

In comparison, all the companies belonging to the country's 10 most valued private business groups together command a cumulative market valuation of this magnitude.

Means nothing really, besides the fact that large parts of the private sector is in SME hands...But was interesting to see the headline...

There are lots of stuff to critique on policy, past and present..But basic data and conceptual clarity is a sine qua non for making those critiques...

A more accurate measure of wealth creation or destruction is not market capitalization but Economic Value Added(EVA). Let us not forget that many unproductive, loss-making and even bankrupt companies have a roaring market capitalization based on investor sentiment/trader runs.
Whereas, the EVA is all together another cookie since it does not account for the “notional” ‘Sibbalian’ value” but the actual net wealth which is produced relative to the risk-free return. I am sure you would appreciate that.
And it is on this scale, that the glaring hole and burden of the PSU’s on the Indian economy is highlighted. At that, you may also be surprised who are the real value makers in the economy.

[somnath]

A more accurate measure of wealth creation or destruction is not market capitalization but Economic Value Added(EVA).

Indeed...(though most shareholders give a fig to fancy accounting norms, they just look at the paper value...And those nasty "socialistic" types will insist on SVA - Social Value Added - for PSUs)...But keep that aside..

A more accurate measure of wealth creation or destruction is not market capitalization but Economic Value Added(EVA). Let us not forget that many unproductive, loss-making and even bankrupt companies have a roaring market capitalization based on investor sentiment/trader runs

Can you point out which are the many bankrupt/loss-making companies that have "roaring M-caps"?

Whereas, the EVA is all together another cookie since it does not account for the “notional” ‘Sibbalian’ value” but the actual net wealth which is produced relative to the risk-free return

Where did you pick that up from? So, EVA = (Return on stock price - Risk free rate)? Infy is down ~15% YTD, Risk free rate (10 year Gsec) is ~8.5%..Ergo, EVA of Infy this year = -23.5%?

And it is on this scale, that the glaring hole and burden of the PSU’s on the Indian economy is highlighted. At that, you may also be surprised who are the real value makers in the economy

Hmm, have you done any EVA analysis of PSUs? And compared that against comparable EVAs of comparable pvt sector companies?

[Theo_Fidel]

Some more on the draft manufacturing policy. The key will be labor laws. Hope they show some spine. Also a focus on consumer goods which appears to be missing.

http://www.business-standard.com/india/ ... od/438595/

The main issue was the suggestion to create massive National Manufacturing and Investment Zones (NMIZ). The NMIZs, which were expected to be far bigger than Special Economic Zones (SEZs), would come up across India, said the DIPP. The suggestions that the labour laws and environment rules in the NMIZs should be relaxed was opposed by environment and labour ministries.

The new policy is expected to attract huge foreign investments and encourage large-scale industrial activity. Foreign investment inflows have seen a decline in 2010-2011 compared to 2009-10. Besides, this would result in job creation, which remains a primary concern for the government.

According to the draft policy, creating a new and forward-looking policy would result in 100 million jobs by 2025.

The draft policy had also stated that special focus would be given to machine tools, heavy electrical equipment, heavy transport, earth moving and mining equipment.

[amit]

Meanwhile, can we call up special industrial zones. SIZ's anyone. I'm probably going to trigger a long line of tirades against industrializing India and how this a global CT to destroy our nation.

http://www.washingtonpost.com/world/ind ... story.html

Today, only 8.7 million people in this country of a billion-plus are employed in manufacturing. But the government says new regulations being finalized this month could turn India into a China-like manufacturing powerhouse by allowing the setting up of large factories in special industrial zones where labor laws will be more relaxed.

Officials say the zones will make it easier for companies to circumvent a web of more than 150 socialist-era labor laws that have prevented the growth of labor-intensive sectors such as the textile, footwear and toy industries.

“The new manufacturing policy is the unfinished agenda of India’s economic liberalization program, which began in 1991,” said R.P. Singh, an official with the Ministry of Commerce and Industry. “Some of the lingering issues, like labor laws, were considered too sensitive and controversial to touch.”

“While we delayed, China and other Asian economies, which were almost at par with us 30 years ago, have raced ahead. But the writing on the wall is clear. If we don’t do it now, we will be left far behind,” he said.

Domestic and international investors say India’s protectionist labor rules are among the biggest obstacles to setting up and running factories in the country, and they complain about laws that mandate frequent inspections and monitoring of workers’ protections, such as a minimum wage, leave and working hours. They say union rules create bottlenecks that slow production.

“Some of our labor laws date back to the time when the British ruled India, and others are a product of the Soviet-style socialist era when the government was deeply suspicious of private capital,” said R.C. Bhargava, chairman of the largest-selling car company in India, Maruti Suzuki, a subsidiary of Japan’s Suzuki Motor Corp. “Business was seen as an exploiter of workers. So we treated labor with kid gloves.”

Labor rights advocates say that regular inspections are even more important as India’s economy booms and that dismantling the labor laws could weaken unions and lead to exploitation.

“When the government says flexible labor laws for manufacturing hubs, what they really mean is the freedom not to implement labor laws of the land and very little government oversight,” said M.K. Pandhe, vice president of the Center of Indian Trade Unions. “With increased privatization in India, the need is to strengthen our labor laws, not weaken them.”

I just hope this works.

Labour laws are the single biggest bottleneck holding back a manufacturing revival. It's very interesting CITU wants more laws and not less! The dream has always been to turn the whole of India into West Bengal (in manufacturing terms!).

[somnath]

It's very interesting CITU wants more laws and not less!

Labour law reforms are an important cog in the wheel...However, for large scale manufacturing (or infrastructure), the biggest cog in the wheel is land acquisition...

An interesting perspective of the POSCO saga by Sunita Narain...She can be a bit shrill at times, but often has good insights.

http://www.business-standard.com/india/ ... fe/441387/

Posco is then about growth versus growth. It is just we who have discounted this economy of the land for so long in our understanding of what works and what matters. It is just we who have forgotten that development cannot be development if it takes the lives of the very people for whom it is meant. The message is clear: if we want their land, we will have to give them a life.

There is a Haryana model of land acquisition, supposedly good...But the central Act is lying in abeyance thanks to Mamta Bannerjee in parts...Without the land isue sortedout, we will keep encountering more issues...

[Theo_Fidel]

It's very interesting CITU wants more laws and not less! The dream has always been to turn the whole of India into West Bengal (in manufacturing terms!).

Look at what they asked for. Longer tea breaks and more vacations! Really, that's why you strike work. This in a country where 90% get no vacations at all, including Saturday and Sunday. You don't work you don't eat.

I could have forgiven them if they asked for more money, even job security, severance pay, etc. But they ask for longer Tea Breaks. BTW why do they get tea breaks?

[somnath]

The INSEAD innovation index is out for 2011...Like all rankings, this is prone to errors and excesses of methodology, but a good benchmarking tool nevertheless..

http://www.globalinnovationindex.org/gi ... index.html

Ditrubingly, India's rank has been going down consistently - from 41 to 54 to 62...Most of the issues seem to be on the "infrastructure" side rather than "innovation"...

[amit]

An interesting perspective of the POSCO saga by Sunita Narain...She can be a bit shrill at times, but often has good insights.

http://www.business-standard.com/india/ ... fe/441387/

Posco is then about growth versus growth. It is just we who have discounted this economy of the land for so long in our understanding of what works and what matters. It is just we who have forgotten that development cannot be development if it takes the lives of the very people for whom it is meant. The message is clear: if we want their land, we will have to give them a life.

There is a Haryana model of land acquisition, supposedly good...But the central Act is lying in abeyance thanks to Mamta Bannerjee in parts...Without the land isue sortedout, we will keep encountering more issues...

Sorry boss Sunita Narain doesn't know what she's talking about and so makes the typical motherhood statements fined tuned by the like of Medha Patkhar and her ilk. For example sample this motherhood statement:

The iron and steel plant, however vital for the nation’s economic growth, cannot provide local employment. For one, local people are not “employable” in such a plant. And two, this modern state-of-the-art plant needs only a limited number of people in its operations.

On the superficial level what she says above seems to be kosher. However, what she misses and what Mamata Banerjee and her supporters missed in Singur is the downstream employment or employability.

Sure the betel leaf farmers wouldn't or couldn't be employed to man smelters and other stuff that goes into a steel plant. However, a plant of that massive scale does not exist in a vacuum. There will the need for thousands of labourers during the building phase - unskilled labour. There will an influx of thousands of people who would need food lodgings and the works, again for enterprising folks this would be a chance of life time to earn more than they could even imagine.

Eventually a massive township would come up and with it more opportunities, not only in employment but schools, hospitals, transport the works. All the families of the dispossed would find much better employment and the next generation would find hitherto unavailable educational opportunities.

However, all this is not apparent to these illiterate of semi-literate folks in the region. And that's where agent provocateurs like Medha ji and her ilk come in and spread fear of a total loss of livelihood. These groups are extremely well organised on a all-India scale and show up on every corner of India, especially in places where the government has no articulate stand on these and makes an effort to educate the local folks (Gujarat is a good example, how the govt can beat off these folks).

Folks like Sunit Narain just show they are fashionably intoned to these "intellectual class" career anti-industrialist parrot their POV without perhaps even thinking this through.

I've said this before on other platforms, I'll say it again, every one of these agitations are a lost opportunity for India. Singur in West Bengal could have changed the industrial landscape of district, before they closed shop I've driven through that area, the amount economic activity was to be seen to be believed. It seems Posco is going the same way, another triumph for the blinkered anti-development forces of our country.

Sorry for the rant but this is something which usually gets my BP up.

[amit]

The INSEAD innovation index is out for 2011...Like all rankings, this is prone to errors and excesses of methodology, but a good benchmarking tool nevertheless..

http://www.globalinnovationindex.org/gi ... index.html

Ditrubingly, India's rank has been going down consistently - from 41 to 54 to 62...Most of the issues seem to be on the "infrastructure" side rather than "innovation"...

Somnath,

Sometimes read these reports for entertainment, don't take them to heart.

I'll give you an example. Hong Kong is ranked fourth globally in the overall Innovation Index behind Switzerland, Sweden and Singapore.

However, if you look at one layer below, or more precisely two layers below, the overall Index has a number of sub indexes called pillars.

It is within the top five of all pillars, expect two and that is Human capital research (30th) and Scientific output (24th). Now you’ll note that these are the two pillars which are most associated with what we normally understand to mean by innovation. In fact the report also notes this point.

What works for HK and is already working of China (which is shooting up the ranks) is the fact that infrastructure and ease of doing business and regulatory environments and educational institutions have high rankings. However, these areas are only peripheral to innovation and not the core of innovation. Any nations, which can score highly on these points, can get an overall high ranking.

Nevertheless such indexes are useful in as much that India needs to develop these areas as well. We can’t just always rely on “brain power” so to speak.

[amit]

It's very interesting CITU wants more laws and not less! The dream has always been to turn the whole of India into West Bengal (in manufacturing terms!).

Look at what they asked for. Longer tea breaks and more vacations! Really, that's why you strike work. This in a country where 90% get no vacations at all, including Saturday and Sunday. You don't work you don't eat.

I could have forgiven them if they asked for more money, even job security, severance pay, etc. But they ask for longer Tea Breaks. BTW why do they get tea breaks?

Theo that typical of our Marxist friends.

I remember an incident in the early 1980s, during the hey days of militant Left trade unionism at the IRSCO plant in Burnpur. They used have a canteen at the plant which supplied sumptuous meals for as little as 10 paise, comprising rice, dal, veggie, fish (afterall its Bengal), meat (either mutton or chicken) and a sweet dish. You can imagine the amount of subsidy that went into it.

Now it so happened one day the fish sizes (btw two piece of fish were given) was a little smaller than the giant pieces that were give everyday because the canteen manager couldn't get big fish in the market. Immediately there was a flash strike and even workers who were supposed to man the smelter (24 hrs monitoring was required) left their posts. There was a major accident and the plant was shut down for seven months. Needless to say nobody was hauled up and everybody got their pay for those seven months.

That's the nirvana world that CITU wants to get back to. Hack Thoo!

[somnath]

Sometimes read these reports for entertainment

All ranking reports are part entertainment...But the more credible ones have the benefit of being a good benchmark, even if for a limited purpose..And yes, this index has lots of different elements, and as I said, our issues are more with the infrastructure side of the matrix...So take it FWIW...

But on this..

On the superficial level what she says above seems to be kosher. However, what she misses and what Mamata Banerjee and her supporters missed in Singur is the downstream employment or employability

Amit, I dont think the argument made by Sunita Narain is about industry v/s agri...The issue she raises is about land acquisition..Whether we like it or not, land acquisition is the difference between China's ability to execute large projects in time and our deficiency in that respect...(Its not project management or building skills, Punj Lloyd and L&T execute projects on time everywhere else)...Singur is a political case, but from UP to Jharkhand to Chattisgarh to Orissa - land acquisition is becoming an issue...There is no point explaining it away as some conspiracy by Western-funded NGOs...If thhis problem cannot be licked, industry and infrastructure will remain stunted....

It begs for urgent policy responses - the Haryana model I referred to apparently is quite good..On the other hand, Mamata Bannerjee is one person who has blocked the Land ACquisition Act...If people dont find answers, and keep railing away @ assorted conspirators, we will never be able to take that jump...

[amit]

Somnath,

Boss what you say about land acquisition makes a lot of sense, especially the Haryana model. But don't give credit for that to that lady. Her entire premise that betel leaf farmers would have no employment in all the economic activity associated with a $10 billion project is pure bumpkin. IMO of course!

[Hari Seldon]

Whether we like it or not, land acquisition is the difference between China's ability to execute large projects in time and our deficiency in that respect...(Its not project management or building skills, Punj Lloyd and L&T execute projects on time everywhere else)...Singur is a political case, but from UP to Jharkhand to Chattisgarh to Orissa - land acquisition is becoming an issue...There is no point explaining it away as some conspiracy by Western-funded NGOs...If thhis problem cannot be licked, industry and infrastructure will remain stunted....

It begs for urgent policy responses - the Haryana model I referred to apparently is quite good..On the other hand, Mamata Bannerjee is one person who has blocked the Land ACquisition Act...If people dont find answers, and keep railing away @ assorted conspirators, we will never be able to take that jump...

Good points. However, some issues.

1.Haryana did its model sans any land acquisition law from Dilli. Point being that concerned states could go this route if they really cared about fair compensation rather than just indulge in land value arbitrage.

2. Dilli could formulate a law but land is at best n the concurrent list (by some interpretations). I'd say its out and out a state subject. Dilli passing a LA law or passing gas won;t matter one iota if states aren't willing to take the leap themselves. The better states have clearly done better.

3. Yes, there's the power of example. A central law as template can push fence-sitting state gubmints to do the right thing. Perhaps. But since L:A is indeed as important as it is, states should do the right thing anyway.

[Suraj]

While land acquisition may be the primary hurdle, there's no discounting that project management and skilled construction worker supply is also much below what we need. For major projects like DEL T3 for example, we had Chinese workers over just to help install the glass paneling. Yes, these skills can be quickly absorbed, but the standard of general construction in India is a barometer of the lack of trained carpenters, masons, plumbers and assorted vocational professionals. Theo wrote about this in greater detail as well. Money pits like NREGS could have served a far better purpose helping to train people in these skills, and encouraging mechanisation, instead of the 'self selecting' mechanism - which serves to pick those willing to do manual labor - now being used.

[somnath]

Seems that the Debt Management Office plan is well underway...IMO, the single most important piece of reform in public finances since abolition of ad hoc T-bills...

http://www.indianexpress.com/news/part- ... b/812731/0

the current RBI guv has spoken out against the proposal, but he is on his way out, and was clearly going against the tide on this one...

[somnath]

Some more circumstantial evidence of how exports in the first half might be hastened up on the proposed phase-out of the DEPB scheme...

http://www.business-standard.com/india/ ... pb/441476/

Seems exporters are not confident that MoF will operate the replacement programme fairly!

[somnath]

3. Yes, there's the power of example. A central law as template can push fence-sitting state gubmints to do the right thing. Perhaps. But since L:A is indeed as important as it is, states should do the right thing anyway.

In an ideal world, perhaps..But unfortunately, the governance levels in various states are too variable (think Jharkhand, Chattisgarh), and vested interests too entrenched (think Orissa, WB) for positive changes to come about bottoms up always...Importantly, on time...And a very large numbers of projects dont have the luxury of "choosing" their location - typially trasnport infrastructure dont, mineral-based industries dont...

A central legislation helps in laying down clear incentives and disincentives for states to undertake their own reforms...The Electricity Act is a good case in point....

[Theo_Fidel]

The problem in India is an expectation of low standards and rock bottom pricing by the vast majority of Owners. The way I heard it the glass at T-3 was a problem to install as the components were imported from Panda land and all the instructions were in Panda speak. The company refused (no time and not practical even then) to supply a proper english translation. This caused serious problems because typically w/ glass curtain walls tolerances run in the 0.1 mm range. With complex architectural installations, every single bolt and screw is labeled with the exact sequence and even torque settings for every single bolt generated by computer programs.

No way you do this without proper understandable construction documents. Often a stack of documents 1,500 pages deep 75cm H x 100 cm W and with every little screw and bolt shown and numbered.

The skilled expertise definitely exists in India, esp. amongst Gulf/EU returnees, it is how ever very expensive. A truly skilled glazier who can handle T-3's Pilkington Starfire type glass (zero Iron, no green tint), will expect to be paid Rs 400+ per hour. The Chinese charged a heck of a lot more than that. This is the rub. But first you need documents in English. And the glass itself is even more expensive.

The first world is bloody expensive and we keep trying to do it on the cheap.

[somnath]

Direct Cash Transfer rolls on...

http://www.indianexpress.com/news/cash- ... r/813384/0

This shoud be the start of a project to completely distribute subsidies in cash form...

[Aditya_V]

Direct Cash Transfer rolls on...

http://www.indianexpress.com/news/cash- ... r/813384/0

This shoud be the start of a project to completely distribute subsidies in cash form...

I doubt this will work, in poor families there is very strong chance that a) Men of the House use this money for purposes such as Drinking rather than buying Kersosene and b) Illerate poor in India may not have access to Bank accounts- so there is a good chance that these cash transfers sould get Siphoned off by Middle men.

But worth a try since under the existing scheme most of the Kerosene is being is stolen by the Oil Mafia.

[Rahul M]

http://economictimes.indiatimes.com/new ... 046052.cms
Indians lead among emerging mkts in charity

didn't we have a nice discussion on this sometime back ?

[abhishek_sharma]

Technology and Inequality: Kenneth Rogoff