Indian Economy: News and Discussion (Apr 1 2011)

somnath · Post by **somnath** » 07 Jul 2011 10:07

In the meanwhile, the song and dance over land acquisition continues..

http://www.hindustantimes.com/SC-s-G-No ... 18226.aspx

Land Acquisition (and GST) should be the top 2 priorities of the govt on policy front, as of yesterday...

Prem · Post by **Prem** » 07 Jul 2011 21:47

http://www.moneycontrol.com/news/busine ... 63405.html
Home-grown hurdles push Indian firms to invest abroad

With land frustratingly hard to get at home, India's largest rubber producer decided to make its next investment -- and its first overseas -- a continent away, in Africa. Harrisons Malayalam , which is also a major tea grower, is joining a surge in outbound investment by corporate India. It plans to spend up to $112 million somewhere in Africa to buy about 10,000 acres. The overseas investment push by Indian companies, often seen as the assertiveness of a rising power, is increasingly spurred by difficulty finding attractive opportunities in Asia's third-largest economy. "Plantation land in India is very scarce and the competition is intense for the little that is available," said Harrisons Malayalam Managing Director Pankaj Kapoor. "So all the plantation companies are looking at Africa where it is still available and cheap." At home, rising interest rates and inflation, fierce competition in several industries, and policy gridlock amid a spate of corruption scandals that have put India's government on the defensive have deterred investment, slowing economic growth and prompting many Indian firms to seek opportunity elsewhere. While doing business abroad diversifies risk and opens new markets, the export of capital even as inflows slow deprives the Indian economy of investment that could add capacity and ease bottlenecks that drive inflation and crimp growth.
INORGANIC GROWTH India Inc.'s increasingly global focus also makes it harder for equity investors to gain exposure directly to the country's consumption-driven growth, with roughly one-third to half of revenue generated by firms in the 50-share Nifty index coming from overseas, even though exports account for just 18 percent of India's economy

somnath · Post by **somnath** » 08 Jul 2011 08:59

Interesting article by YK Alagh on sugar decontrol...Agri market reforms is one of the most politically volatile issues, and no one understadn those better than Alagh..

http://www.indianexpress.com/news/canes-gain/814372/0

Notice the veiled dig at Raja (or maybe Dayanidhi)...

Vipul · Post by **Vipul** » 08 Jul 2011 20:51

Exports jump 46% to $29.2 bn in June.

Prem · Post by **Prem** » 09 Jul 2011 10:01

http://www.businessinsider.com/indias-g ... her-2011-7

Commodity Online reports that India’s state-owned trading company—Minerals and Metals Trading Corporation (MMTC)—said on Thursday that it would import 350 tons of gold and 1,200 tons of silver in 2011-12 as demand for the precious metals is rising fast. The company almost doubled its import of gold at 45 tonnes during the April-June quarter this year compared to the same period last year.Silver prices have remained robust in India thanks to strong demand and short supply in the global market. The demand for silver is rising as buyers expect better returns and it is much cheaper than gold which has become harder for lower income Indians to buy.

Prem · Post by **Prem** » 09 Jul 2011 10:04

Get To Know The Hottest Economic Region In India

Gujrat, a coastal state in Western India is being dubbed 'India's Guangdong' because of its rapid industrialization.The state has historically produced traders, and has predominantly been known for its diamond exports, salt and petrochemical production, and onshore crude oil, but now, The Economist reports that it accounts for 16% of India's industrial output and 22% of its exports.Gujrat posted just under 12% growth in 2010, compared with national GDP growth that stayed just below 9%. It even posted double digit growth during the economic crisis. The region is fast becoming a refineries and ports hub and expectations are that exporters will be switching from China to India, giving Gujrat's textile industry a huge boost. What's more, in a country riddled with corruption, Gujrat is being flagged as a state with better bureaucracy.The state has been drawing huge investments from some of India's biggest companies. The Economic Times reported that Indian billionaire Anil Ambani plans to invest about $11 billion in Gujrat over the next five to seven years as he is bullish on the state's power sector. Meanwhile, the Tata Group which began in Gujrat currently has about $7 billion in investments in the region.

http://www.businessinsider.com/heres-th ... z1Ra8IsGWN

Singha · Post by **Singha** » 10 Jul 2011 17:19

http://timesofindia.indiatimes.com/busi ... 169458.cms

KV Kamath says economy growing at 11%
TNN | Jul 10, 2011, 06.56am IST

BANGALORE: The Indian economy is growing faster than the officially quoted 8%-8.5% GDP growth rate, said KV Kamath, the newly appointed chairman of Infosys Technologies.

At a meet-the-press event here on Saturday, Kamath said India is actually growing at 11%-12%. Kamath said the economic data used to compute growth rates are not accurate. "As long as we don't have the right statistics, there is a question over the growth rate," he said.

There are several uncounted and unaccounted figures which could easily add another 3-4 percentage points to India's GDP, he said. India, he said, is thus growing at the double-digit rates we have become used to seeing in China in recent years and Japan in the 1980s. As for India's per capita income, Kamath said India stands where China was 10 years ago, and in the next 10 years, it will stand at where China's per capita income stands today. Kamath said for this growth to be truly transformational and benefit a larger proportion of the masses, India has to put more emphasis on certain areas.

The manufacturing sector must further expand as it has the capacity to generate large-scale employment. Infrastructure bottlenecks must be addressed as they hinder development.

Also, consumer demand must be kept robust to drive the economy. He said technology too could help in greater percolation of benefits to the poor. The use of the unique identification platform for cash-transfer schemes using Aadhaar-linked bank accounts would prevent leakages in subsidy programmes like LPG and kerosene. On the high interest rate environment, Kamath said the most affected would be retail customers who take home loans, auto loans, etc. Businesses can tide over these times with internal accruals, he said.

Nihat · Post by **Nihat** » 11 Jul 2011 00:16

I've been confused about the Size of Indian economy for a while now as projections tend to vary. For the year ended March 31st 2011, what is the size of our economy ? . Is it 1.54 tr, 1.72 tr or 1.91 tr. . Also, have we overtaken the Russians in terms of GDP now ?.

Hari Seldon · Post by **Hari Seldon** » 11 Jul 2011 06:55

^^^The figures are hazy and unreliable by design. We want, as Dr MMS says, to rise without alarming (or waking-up?) anybody around. With eth evarity of figures now available, everybody and his uncle can see what they want to see regarding IndEcon growth. Thus, the Brits can hyperventilate on how space-age India doesn't deserve their precious aid one moment & hector us on our apalling poverty, pathetic infrastructure, govt hurdles & business-unfriendliness in general etc. the next. Quietly flows the Ganges.... Only.

ShauryaT · Post by **ShauryaT** » 11 Jul 2011 07:02

Can you sell economic reforms?

Imagine a political party’s Lok Sabha candidate going to a village to seek votes, and saying that if his party is voted to power, it will scrap the MGNREGA because MGNREGA has distorted the labour markets, raised inflation rate and hurt the Indian economy. How would the residents of that village, who get some easy money due to the MGNREGA — without actually going to work in some cases or undertaking unproductive work in most other cases — react to that candidate? If you add an opposing candidate, who instead promises to raise the minimum wage under the MGNREGA, provide insurance cover and sundry other benefits for life to the villagers to the mix, there is little chance that anyone will vote for the candidate demanding scrapping of the economically disastrous scheme.

It is not only the poor, semi-literate villagers who are incapable of understanding the economic rationale. Try telling a educated, middle-class household in urban India that it must pay another Rs 400 for the cooking gas cylinder it currently buys for Rs 400 because that is the amount of government subsidy on each cylinder. For all the logic of spiralling fiscal deficit, tight monetary measures, stunted growth and reduced allocations for development projects, will that family cast their vote in favour of the party promising to remove subsidies? The answer is obviously No.

The MGNREGA and fuel subsidies are just two illustrative examples used to drive the point home. So what is the point?
The point is rather simple. If you are dreaming of some political party coming out openly and publicly in favour of economic reforms, forget it. The normative ideas behind economic reforms usually break down when confronted with the reality of electoral politics. In an electoral democracy in an underdeveloped country, especially the one like ours based on patronage — social, financial and political — no political party can afford to openly sell economic reforms to the masses. It is far easier to dish out promises of immediate patronage than to talk about the damaging effect of those policies on the next generation.

somnath · Post by **somnath** » 11 Jul 2011 07:23

^^^Rather lopsided analysis...There is a larger constituency of reforms in India..If the narrative is well defined, it can be done - we have seen it in Gujarat, in Bihar...We have seen it with the whole price decontrol process in general - has any dispensation provided a narrative of rollback? Just because there is a pet peeve with NREGA doesnt mean it becomes symptomatic of anything that is "bad"...And people miss the point on evolution - already, there are signs of moving to DCTs, which really is the end state objective of all these social ecurity programmes..

Anyways, X-posting - an interesting view on corruption and statbility - how they impact growth..

http://www.business-standard.com/india/ ... on/442225/

As a general proposition it can be said that political corruption is not as much a threat to economic growth as political and social instability. This is neither a nice thing to say or read nor a particularly elevating sentiment, but there it is.

Economists are also aware of the economic consequences of corruption, which can be both negative and positive. Corruption distorts the distribution of gains from economic activity, which contributes to inequity. At the same time, it oils the wheels of economic activity and policy making. Hence, economists cannot take a uni-dimensional view of corruption, while they would take a singular view of the negative economic consequences of political instability.

Prem · Post by **Prem** » 11 Jul 2011 09:22

Fussy Aussie Khassi
Invest in sustainability or uddermine our future?
Some straight talking from Michael Coote in an NBR (July 1st) article about the Indian economy. Noting the government’s enthusiasm for a free trade agreement with India, Coote writes that :

“The D-word – dairy – cited by Mr Key in in linking together the wonders of free trade with China and India should give cause for concern. Recent reports on how the likes of the Hauraki Gulf and the Kaipara Harbour are changing into marine sewage ponds thanks to bovine excrement and fertiliser runoffs show we are being ‘uddermined’ by poisoning our country to feed foreigners. Yes, we can sell artificially sustained grass-fed dairy products, but no – as Mr Key so painfully discovered as an interviewee on BBC television – we can’t keep lying about our pure, clean and green image.”

http://blog.greens.org.nz/2011/07/11/in ... -future-2/

vera_k · Post by **vera_k** » 11 Jul 2011 09:54

http://www.business-standard.com/india/ ... on/442225/

As a general proposition it can be said that political corruption is not as much a threat to economic growth as political and social instability. This is neither a nice thing to say or read nor a particularly elevating sentiment, but there it is.

There is a problem of causality here. It is the lack of economic growth that results in social and political instability, not the other way round. And political corruption can cause that lack of economic growth by limiting the number of people who would otherwise contribute to the economy.

somnath · Post by **somnath** » 11 Jul 2011 10:45

vera_k wrote:There is a problem of causality here. It is the lack of economic growth that results in social and political instability, not the other way round. And political corruption can cause that lack of economic growth by limiting the number of people who would otherwise contribute to the economy.

Well, there are enough instances of seemingly massively corrupt places doing fantastic on growth, so the causality between corruption and growth is a bit tenuous - one can start with China! On the other hand, political instability need not be just on account of economic misery....

Anyways, on FDI in retail - seems BJP is opposed to it and its state govts will not implement the new proposal to allow FDI in multi brand retail..

http://www.business-standard.com/india/ ... di/442274/

Pity, if it happens...

Singha · Post by **Singha** » 11 Jul 2011 11:42

political or business corruption does not limit economic growth in developing countries.
the lack of conducive business policy ie license permit raj does

east asia was plenty corrupt in its boom phase..and still is.
china is plenty corrupt
europe was rife with corruption during its own boom era, so was america
the difference is one can be corrupt + business friendly (grow the pie and claim a share)
or corrupt + business unfriendly (fight over the small pie and shout maoist slogans)

amit · Post by **amit** » 11 Jul 2011 12:15

Singha wrote:political or business corruption does not limit economic growth in developing countries.
the lack of conducive business policy ie license permit raj does

east asia was plenty corrupt in its boom phase..and still is.
china is plenty corrupt
europe was rife with corruption during its own boom era, so was america
the difference is one can be corrupt + business friendly (grow the pie and claim a share)
or corrupt + business unfriendly (fight over the small pie and shout maoist slogans)

Absolutely spot on. Lack of vision and resistance to reforms, IMO has a far more harmful effect on growth than corruption - obnoxious as it is.

Take a look a India. The 2G scandal is the mother of all corruptions. Yet the industry in which this occurred is thriving and is the envy of the world. Now look at some of the mega projects like Posco's steel plant in Orissa. By now that plant was supposed have been producing 5 million tons of steel annually, and providing jobs (including downstream) to more than 100,000 people - in short changing the face of Orissa. Yet, we still have land acquisition problems. Also look at the opportunity cost. Foreign investments has a herd mentality. If Posco had been successful there would - IMO - a beeline of big ticket investment decision. When the Posco deal was announced Mittal immediately showed interest in setting up a similar sized plant and then with the imbroglio interest has petered out.

Bottomline, even though it may go contrary to our ethics (it does for me!) I must say bad policy is more harmful than corruption.

somnath · Post by **somnath** » 11 Jul 2011 12:28

amit wrote:I must say bad policy is more harmful than corruption

And "bad policy" also leads to corruption!

The empirical evidence of corruption constraining growth has always been tenuous...In fact a lot of studies, espeically in developing countries, show that corruption helps in cutting through the inherent inefficiencies of the system...

Here is an interesting study on the same by Uni Chicago..
http://www.mironov.fm/research/corruption.pdf

vera_k · Post by **vera_k** » 11 Jul 2011 12:34

somnath wrote:Well, there are enough instances of seemingly massively corrupt places doing fantastic on growth, so the causality between corruption and growth is a bit tenuous - one can start with China! On the other hand, political instability need not be just on account of economic misery....

What I was hinting at, but left unsaid is that once people taste the spoils of economic growth, then they have to continue making incremental progress at the same rate or better in order to keep them satisfied (i.e. what felled the Vajpayee govt). So if there is corruption, such that the takings do not hinder this basic requirement or indeed if the takings from the corruption trickle down to meet that requirement, there will not be a problem. In that sense you can have high growth and high corruption (China model).

What the unrest right now tells me is that there is a group of people who either are not benefitting from the corruption or who haven't seen their lot get better at the same pace as previously. This can either be fixed by modulating the corruption so opportunities to benefit from it are more equal or even increasing corruption and letting more money trickle down while maintaining the amount of money collected by currently entrenched interests.

But if the corruption simply serves to enrich a select few, while not addressing the fact that some people aren't seeing things get better as quick as they are used to, it will cause political turmoil, simply because better prospects are not perceived to exist as far these people are concerned.

vera_k · Post by **vera_k** » 11 Jul 2011 12:41

somnath wrote: Anyways, on FDI in retail - seems BJP is opposed to it and its state govts will not implement the new proposal to allow FDI in multi brand retail..

What is bewildering is that the BJP isn't asking for its pound of flesh in return. The demand for a Centrally funded urban jobs or unemployment program could be pushed to alleviate the concern that this move will throw people out of jobs.

somnath · Post by **somnath** » 12 Jul 2011 14:53

May IIP - slower than expected..

http://economictimes.indiatimes.com/new ... 195303.cms

Rate hikes are biting in, even as inflation seems to have gotten a handle (at least food inflation)...

Maybe, just maybe RBI can act contrary to expectations by not raising rates in the next policy round...

Singha · Post by **Singha** » 12 Jul 2011 14:57

Jairam Ramesh, who was the minister of state (Independent Charge) of the Ministry of Environment and Forests, has been elevated as the Minister of Rural Development.

--
on paper a promotion, in reality he has been parked in a post where he is powerless to obstruct big projects...lets see what Jayanthi natarajan does...

amit · Post by **amit** » 12 Jul 2011 15:38

Singha wrote:...lets see what Jayanthi natarajan does...

She might do better as she has less pretensions of being an intellectual.

somnath · Post by **somnath** » 12 Jul 2011 16:48

^^^Rural Development is a very important post now - with all NREGS fundign being routed through the ministry...

About Environment, I though Jairam Ramesh was one of the better ministers in view to be honest..He was articulate, viewed his opinions publicly, sought feedback, and copped criticism on occasions...A fresh breath of air from the usual wheeling-dealing, backroom, opaque style of most ministers....They treat us hoi polloi like idiots...JR would make a fantastic Finance Minister, but I guess too junior...

About Jayanthi N, well - she is just another family retainer (as an aside, PC's ex girlfriend

)..Lacks everything barring a good English accent....

vera_k · Post by **vera_k** » 12 Jul 2011 17:39

Right, daresay her new job is to get the stalled projects going. I couldn't figure why Ramesh was taking on Pawar over Lavasa. Probably was the last straw.

Suraj · Post by **Suraj** » 12 Jul 2011 20:46

Good to see Jairam Ramesh finally out of the Environment Ministry. Hopefully we can see some progress on POSCO, ArcelorMittal and a few other big ticket projects, like the Navi Mumbai airport.

Hari Seldon · Post by **Hari Seldon** » 12 Jul 2011 20:48

Jairam Ramesh is ideally suited to be CEC in Nirvachan bhavan. No needing to kow-tow to these pesky netas after that at least...

devaraj_d · Post by **devaraj_d** » 12 Jul 2011 21:52

Suraj wrote:Good to see Jairam Ramesh finally out of the Environment Ministry. Hopefully we can see some progress on POSCO, ArcelorMittal and a few other big ticket projects, like the Navi Mumbai airport.

Yippee...time to start the POSCO project and ship all the iron to South Korea and leave us high and dry just when we need it. POSCO will drain the ore in just 20 years.

JR was the best minister we had. He had the guts to put environment before anything else. No wonder he was moved for doing his job.

VenkataS · Post by **VenkataS** » 13 Jul 2011 04:52

devaraj_d wrote:
Suraj wrote:Good to see Jairam Ramesh finally out of the Environment Ministry. Hopefully we can see some progress on POSCO, ArcelorMittal and a few other big ticket projects, like the Navi Mumbai airport.
Yippee...time to start the POSCO project and ship all the iron to South Korea and leave us high and dry just when we need it. POSCO will drain the ore in just 20 years.

JR was the best minister we had. He had the guts to put environment before anything else. No wonder he was moved for doing his job.

Recent growth not-withstanding, we are still a desperately poor country with a big percentage of our population living at subsistence levels comparable to those in sub-saharan Africa. We need big ticket investments and favorable economic policy framework in India so that huge industries with considerable employment generation potential are established locally.

We are not wealthy enough to be talking about environment issues in the same breadth as some wealthy western nations can afford to talk about. Was the POSCO project so bad to the environment around it for Jairam Ramesh to have held up $12 billion dollars of foreign direct investment. Why weren't compromises made and assurances/alternatives negotiated so that this project was allowed to continue in a modified form. This would have been a huge boost to Orissa and there would have been no need to ship the steel to SK if we had a decent ship building industry going on at home. This steel could have been utilized in Vizag-Calcutta industrial corridor or some such thing.

Finally, we need all the investments that we can get to generate employment and lift millions out of poverty. Our demographic dividend is now, let us do everything we can to take advantage of it now.

Hari Seldon · Post by **Hari Seldon** » 13 Jul 2011 05:03

devaraj_d wrote:Yippee...time to start the POSCO project and ship all the iron to South Korea and leave us high and dry just when we need it. POSCO will drain the ore in just 20 years.

JR was the best minister we had. He had the guts to put environment before anything else. No wonder he was moved for doing his job.

As opposed to shipping to PRC as we're currently doing. Besides, unless I'm mistaken, POSCO is a steel plant, not so much a mining op. IOW, INdia's raw material gets processed and value-added to steel status here in India. Sure, SoKo is welcome to import our steel if they want....

somnath · Post by **somnath** » 13 Jul 2011 06:12

Hari Seldon wrote: Besides, unless I'm mistaken, POSCO is a steel plant, not so much a mining op.

Hopefully, by now it is...Originally, the deal was about letting POSCO export something like 5x (or some number like that) the amount of iron ore required for the plant to export out..The whole deal then reeked of a resource extraction enterprise...

But its been reworked now..BTW, I thought JR's already cleared the project...

VenkataS · Post by **VenkataS** » 13 Jul 2011 07:13

somnath wrote:
Hari Seldon wrote: Besides, unless I'm mistaken, POSCO is a steel plant, not so much a mining op.
Hopefully, by now it is...Originally, the deal was about letting POSCO export something like 5x (or some number like that) the amount of iron ore required for the plant to export out..The whole deal then reeked of a resource extraction enterprise...

But its been reworked now..BTW, I thought JR's already cleared the project...

Did not know these details earlier. Thanks for the info.

But the point to "devaraj_d" still remains, we need investments (both foreign and domestic) in large scale employment generation industries. We should have the proper regulatory frameworks in place to make sure that we are not taken for a ride by the investors. However we should create the impression that we are open for business and that we encourage investments.

Concentrating on the environment (beyond a certain minimum) when we have a per-capita income of $1400 or so does not appear to be a useful strategy to me. Besides our per capita carbon emissions are much lower than the per-capita emissions of major western nations.

devaraj_d · Post by **devaraj_d** » 13 Jul 2011 14:53

VenkataS ji et al.:

This POSCO deal and other deals involving raw materials seem like Tactical Victory but Strategic Loss to me. There is a saying in Thamil “looking around for ghee when you have butter in your hand”. This is how we will be after we have exhausted all of our resources.

1. Ores / Raw steel or iron

We seem to export more than 50% (not 5% not 20% but 50%) of our iron ore. These values I assume are coming from legal exports. Only God knows how much is being looted illegally. So the bottom line is we have more than sufficient iron ore production for internal consumption. Then where is the need for us to raise production other than the desire to export iron ore / iron? Moreover it does not matter whether the steel plant is located in India or SK. Even if we export iron / steel billets it still is a raw product and a lot of value could be still added to it. To make steel you need coal. Fortunately for SK India is sitting on top of a pile of coal. Bingo what a deal! They killed two birds with just one stone!

http://www.livemint.com/2011/06/2710275 ... en-be.html

We have to take a leaf out of China’s policies. I am sure you know that it controls 97% of world’s lanthanide production. It forced many of the companies to move production to China by restricting the export of these rare earths.

http://www.bbc.co.uk/blogs/newsnight/pa ... _game.html

Quote BBC “The Californian mine has not produced since 1998, the Australian mine was set to start production in 2011 but has just lost its financing and the Canadian mine likewise is aiming at 2011. Together their annual production could amount to one third of China's.”
The Chinese tried to take a majority stake in the Australian mine but the deal was scuttled. Why on earth would China with 97% of world’s production and about 35% of reserves (not including the recent discovery of rare earths under the sea) try to buy a major stake in Australia? Are they stupid? Hell No!

Quote BBC “As Deng Xiao Ping presciently commented, at a time when electric cars and wind power seemed like ecotopian wet dreams: "Arabia has oil, China has rare earth".”

The Chinese have realized their strategic importance long time back. It is time our government understood the strategic value of our ores.
Oil exporters such as Saudi Arabia and Russia are already trying to move up the supply chain.

We have to be at the top of the value chain which adds the most value and most jobs. This means that SK is welcome to buy steel, build their ships and sell them from India. Otherwise they are free to go Australia whose economy is mainly commodity based and are happy exporting minerals. They export their sheep and import wool. They export live animals and import meat. I do not want to end up like Australia. (Based on what I heard from an Australian).

Similar to what we did to thorium reserves, iron, titanium and others we have should be declared as strategic reserves because we cannot replace them and when we want them China will be already fully developed and Africa will be growing at a break neck pace. With this additional demand where will you then import from?

I am sure you read about missing copper wires, a fully erected radio tower, railway tracks and manholes covers in US and Europe. I do not want to end up like this as well.

2. Environment vs. Growth

Western companies have outsourced all the polluting industries to us. We seem to be happy doing their dirty work. There are a lot of examples which I assume everybody knows.

IMHO if there is a tradeoff needed between environment and growth we should always lean to the environment side.

Even going green is harming us environmentally. There is a hell a lot of windmills mushrooming around my village. They neither produce electricity (idle 80% of the time as per my observation) nor are green. They have displaced thousands of acres of arable land to irrecoverable concrete dumps. Then we wonder why there is still a shortage of electricity and food prices keep going up.

IMO we should be looking for at the minimum win-win situations when it comes to foreign investment. The Chinese have the guts to ask for “Tails I win, heads you lose” type deal.

I am not arguing from a CO2 emissions perspective. I am just trying to protect our ores. I fully understand that our CO2 will inevitably increase as we grow and get richer as there is a positive correlation between energy use and standard of living. Unfortunately we (or I to be specific) have to accept this. Maybe we use less of carbon intensive energy forms such as coal and more natural gas and nuclear power stations thereby reducing our environmental footprint.

somnath · Post by **somnath** » 13 Jul 2011 17:14

devaraj_d wrote:So the bottom line is we have more than sufficient iron ore production for internal consumption. Then where is the need for us to raise production other than the desire to export iron ore / iron? Moreover it does not matter whether the steel plant is located in India or SK. Even if we export iron / steel billets it still is a raw product and a lot of value could be still added to it.

Iron ore isnt exactly like rare earths - there is a lot of it around, though India has one of the largest reserves...Further, its not as if we are exporting iron ore and importing back steel - we export steel too (we import only some very specialised varities of steel)...

Having said that, export of raw materials is a low value-adding activity, more so for a country of India's size which will need lots of more of every single resource in the coming years...So we need to be careful...Hence, any investment that is only meant of resource extraction in the garb of industrial development needs to be scrutinised..The initial POSCO proposal was something similar...From what I have read, the new deal is much better...They can export some ore, but they will import some (other specialised type) as well, so the nety impact is neutral...

About setting up a steel plant - its not "low value adding" at all..Companies like POSCO bring newer tech and scale to the industry, and generally enriches the industry....It also brings to the country the specialised steel-making capabilities that we lack ...

The other real issue is about land acquisition - and that is a different question altogetgher...

gakakkad · Post by **gakakkad** » 13 Jul 2011 18:12

how quickly would land reforms show acceleration in growth ? There are some acquisition reforms sitting in the parliament that have not yet been passed. Any details of them known ?

Suraj · Post by **Suraj** » 13 Jul 2011 19:17

devaraj_d wrote:IMHO if there is a tradeoff needed between environment and growth we should always lean to the environment side.

IMO we should be looking for at the minimum win-win situations when it comes to foreign investment. The Chinese have the guts to ask for “Tails I win, heads you lose” type deal.

Have you any idea how polluted China is ? The Chinese are so far heavily leaning towards growth over environment that the example makes no sense at all. The kind of things they do with their environment would have caused Medha Patkar's head to explode had it been in India.

Rapid industrialization is dirty. There's no way around that. Industrial Revolution era UK and US was grimy, with no labor laws, nothing. Those socio-economic circumstances bred socialism and communism. Fast-forwarding further ahead, Germany, Japan, Korea all went through a messy developmental phase. Tokyo and Seoul were far grittier and grimier at one time than they are now. Countries go through rapid industrialization, and as people become sufficiently rich, they pause to improve their surroundings and quality of life.

The reason it happened that way is that during the early phase they were maximizing their comparative economic advantages compared to more mature economic entities. That economic advantage is a temporary confluence of factors - evinced by the Chinese leadership's fears of 'growing old before they can grow rich'.

The original statement about 'carting iron of to South Korea and leaving us high and dry' is too much dramatic rhetoric to bother to answer.

Prem · Post by **Prem** » 14 Jul 2011 00:55

http://online.wsj.com/article/SB1000142 ... lenews_wsj
A Rudderless India
Manmohan Singh continues to offer no direction on reforms.

India's political opposition and media are haranguing Prime Minister Manmohan Singh for his lack of action in the face of multiple graft scandals. He has even been called a "PM in hiding." So it was encouraging to see Mr. Singh finally emerge with a plan of action Tuesday, announcing changes in his cabinet. The optimism soon gave way to disappointment, however, as the realization sank in that the changes were cosmetic. More pressingly, they do nothing to steer India's ship of state in the direction of economic reforms.This direction is surely important to help Indians continue to overcome poverty and gain prosperity. But it's also important in the current political context: New Delhi is mired in corruption because it continues to foster big government. Since he came back to power in 2009, Mr. Singh has not advanced any substantial reforms. Instead he has presided over increases in welfare spending.
Congress continues to push the idea of "inclusive growth," as this week's development on the food bill shows. Mr. Ramesh is taking the helm of the Rural Development Ministry, which with an annual budget of 740 billion rupees oversees the rural jobs scheme and was involved in drafting the food bill.Meanwhile, the slowing reform process is taking a toll on India's economic health too. Businesses find fewer opportunities to expand and as a result GDP growth for the January-March quarter slipped below 8% year on year. With capital fleeing since 2010, and manufacturing and fixed investment looking weak, a deeper slowdown is possible.In this environment, a renewed reform thrust from Mr. Singh would revive both growth and his government's political fortunes. If he stays in hiding though, India's ship of state will continue to drift.

somnath · Post by **somnath** » 14 Jul 2011 06:40

gakakkad wrote:how quickly would land reforms show acceleration in growth ? There are some acquisition reforms sitting in the parliament that have not yet been passed. Any details of them known ?

Not land "reforms", land acquisition...The Bill is on www - also referenced in earlier pages here...

somnath · Post by **somnath** » 14 Jul 2011 06:52

Wages of Virtue - wage rates have gone up across the board - NSSO 66th round

http://www.indianexpress.com/news/wages ... e/817186/0

For regular, or salaried, employees, the largest gains have been in urban markets; for casual workers, in rural markets — possibly due to the impact of NREGA. However, looking at the wage-gain numbers across genders shows that it was female workers who made the largest gains, in both rural and urban sectors. This might indicate a tightening in the availability of female workers across the board — perhaps due to withdrawals from the labour force.

And where was the average daily wages of the regular or salaried workers the highest? Interestingly, not in the richest states, but in middle- and low-income states, including Chhattisgarh, Jharkhand, Himachal Pradesh and Kerala. In sharp contrast, male urban regular workers were paid the lowest in the richest states like Gujarat, Haryana, and Tamil Nadu.

Theo_Fidel · Post by **Theo_Fidel** » 14 Jul 2011 07:52

WRT iron ore it is mostly the lower quality hematite (30% iron) that we are exporting. The high quality magnetite (70% iron) is mostly retained in India. POSCO will have to import high quality iron ore to make working the hematite ore in Orissa commercially viable.

If we want to shut down ore export we might as well fire the 5000 Sesa goa workers and the 12,000 ancillary workers in high quality jobs for committing sin in essence by over producing. I suppose those opposed won't mind if their salaries are immediately confiscated to pay the newly unemployed.

The real sad story is that our dinosaur PSU's have been unable to expand to absorb this increased ore production. The private sector is expanding but it is really really hard as POSCO shows.

In the mean time we have quietly turned into one of the worlds largest steel importers. 20 million tonnes annually.

somnath · Post by **somnath** » 14 Jul 2011 08:51

Theo_Fidel wrote:In the mean time we have quietly turned into one of the worlds largest steel importers. 20 million tonnes annually

Data from?

Mainly, we import steel that is of a specific quality - used in automobiles and consumer durables - production of which isnt as much as demand in India...Steel imports are "free" as well, so manufacturers buy from wherever its cheapest..Its not a capacity issue - we also export, almost as much as imports into India...