Indian Economy: News and Discussion (June 8 2008)

[Suraj]

Productivity gains and labour depth are means to a goal - the most efficient means of economy output. Either, or a combination of the two, will be optimum at any given time, and more importantly, the equation of how much labour and how much mechanization is effective changes with time. The labourer's income in the above example will keep rising, but more efficient machines will cut per unit output cost, and will continue to do so until they return their initial capital costs. In the garbage collector example, at some point the labourer will want a wage that is too high to be worth the rate at which he performs with his bullock cart, and the only way his wage will be worth it is using a mechanized system. As per unit labour costs increase, greater mechanization enables increased per unit output to pay that rising income to those involved.

[Singha]

well a lot of things simply cannot be done properly by hand anymore. want to try pounding out car panels with a mallet? want the Amby MKI in 2025? the
world is interlinked and will not accept goods of any less quality.

in areas where labour can manage at less cost like security guards, cleaners, construction crews etc India is already deploying people to the max.

services industries are all manpower intensive. technology always create more
jobs there as tech itself keeps on changing and being made more complex.
bank tellers using PCs can service far more customers than with paper books.

the de-mechanised "local sourcing" utopia is a recipe for disaster...it will only
result in us being screwed in every orifice and hung out to dry.

[Theo_Fidel]

Thanx for the guidance Swamy.

The thing I hate about this mythology is its constant pervasiveness. Every plugged in Native I talk to brings these two points up. We have this vast young population while others are getting old and we we were once 30% of the World GDP.

The sense of entitlement and preening is quite silly.

Keep in mind that it is not that India and China became poor as we were colonized, but it is that we failed to develop the institutions necessary for faster growth. i.e. Europe overtook us as we stagnated. This so called wealthy period was when we looked pretty much like what we did at independence, starving and 6% Educated.

Everything we have today and in the future comes through hard work and effort, something more of our population needs to buckle down to, rather than focusing on the daily chai biskoot bakwas.

One thing I get, running around the smaller towns, is the enormous waste of people living unproductively. I suspect fully 60% of the people in our workforce are stuck in manual labor, including agriculture. How are we going to get prosperous with this huge underclass. I see some changes but nothing on the scale needed.

And we haven't begun to reform our social systems that promote this waste.

To End all this silliness we have the Leader of our ruling party extolling this waste.

http://www.thehindu.com/2009/02/03/stor ... 101100.htm

The NREGS stopped the exodus of labour, empowered women, provided basic facilities in many sectors, including education and health, and transformed life in the rural belt. “Only when the common man prospers will the country prosper.”

So lets recapitulate.

- We prevented people from moving to find productive jobs.
- We made women do hard manual labor, ignoring their children who should be in school.
- We damaged the health of people by subjecting them to hard labor for meager wages that they had to spend on health care and education the government is required to provide to all citizens.
- This the best the rural people can hope for, a brutalized experience, for only this is transformation.

Prosperity is 2 meals a day and physically used up by 40 years. What fun.

Some more details on the imports conundrum here.

Its that capital goods part that makes one nervous. Any one find a better break down.

http://www.business-standard.com/india/ ... 01/347862/

However, non-oil imports, comprising raw material and capital goods, increased 32 per cent to $15.5 billion from $11.78 billion in December 2008.

On a Side note that was the first report where we are a $1.2 Trillion economy.

Historically something profound happens to the investment rate of a country when its per capita crosses $1000.

[Rishirishi]

Yes. And it ignores productivity increases. With the massive gains in productivity , you tend to use far fewer labor for the same things that earlier used to take lot more labor. Affects a whole range of industries and also why even household stuff. How much time does any modern housewife who has access to a grinder or a mixie spend in making dough for idli/dosa compared to what her grand mom did ?

which brings us to any important point- What is more important job creation or productivity gains? Depends on situation. In some cases productivity gains help keep costs low but in others mechanization appears cheaper only because energy costs are undervalued today.(lasting of fossil fuels resources, pollution costs, costs to a nation maintaining energy security, other hidden costs etc)

Do the so called productivity gains really bring benefit to society? A foreign mba student on an exchange program to IIM-B posted the photo of a campus garbage collector on her blog and mocked it. The garbage collector uses a bullock cart for the job. I asked her what was the use of an automobile? Would his time savings be really worth the addition oil import burden on India or the pollution it would cause. What are the chances he would do something really economically worthwhile in time saved?
Same goes with washing machines and dish washers. In their absence the maid servants got jobs. With their arrival, people are craving for more electricity while the jobs for uneducated are reduced.

The only way a developing nation like ours can significantly boost jobs especially for low skilled manpower is by selective De-mechanization of industry. I remember Nirma uses labourers mixing powders by hand instead of a mechanized mixer. Of course they did it to claim Small Scale Industry benefits but atleast it created more jobs and us having to burn less of coal in power stations. Leave out those areas of mechanization where human safety is endangered or where the cost increments due to human substitution hurt the poor and middle class themselves.
Can you argue that US companies saved more in productivity gains by repeated lay-offs over last decade than the $800 billion it is investing now to create new jobs?
The way population is exploding in the developing world, the economic growths will not be able to create enough jobs for large swathes of unskilled labour force. Recent Vib. Guj Summit 2009 announced Rs 12 lakh crore investment and 25 lakh job creation. If you look at job created/ capital invested it is Rs 50 lakh investment per job creation!!

Politicians of the future will have to selectively apply a De-industrial Revolution as a cheaper way to create more jobs.

De-industrirail revolution would be an extreemly bad idea. It would increase costs to the consumer and reduce the pay of workers. India would be condemed to being a poor country.

Job creation and productivity gain go hand in hand. As the workes become more productive they earn more and this leads to increased spending, wich in turn leads to increase in better paid jobs. In the 18th centurey 95% of the people in Europe were emplyed in the farming sector, today only few % are, but the output is far greater. Replacing tractors with shovels would be a disaster.

Job creation in it self is not so imporatnat as, how much the jobs are adding value and increasing the pay. That is why India is in a way doing better then China, because the jobs created in India are better paid. Creating jobs that pay a misrable 2-3 dollars per day, is not really any great achevement.

[vera_k]

Creating jobs that pay a misrable 2-3 dollars per day, is not really any great achevement.

It depends on who's holding those jobs. If these jobs go to people who are living on less than a $ a day, it will pull them out of poverty and will be a great achievement. In any case without these jobs you will have to support the people under the poverty line by giving them NREGS/welfare style benefits, so why not have them work at these jobs instead.

[Rishirishi]

Creating jobs that pay a misrable 2-3 dollars per day, is not really any great achevement.

It depends on who's holding those jobs. If these jobs go to people who are living on less than a $ a day, it will pull them out of poverty and will be a great achievement. In any case without these jobs you will have to support the people under the poverty line by giving them NREGS/welfare style benefits, so why not have them work at these jobs instead.

Note my wording "not really achievement". Any job that pays 2-3 dollar cannot support food, medical, housing and other costs. Ultimately thease costs will have to be carried by the government. It is better then NO job, but not really solving the poverty problem.
For the economy to grow, it is essential to create good paying jobs (above RS 15000 per month). Only then can a person afford to feed, house and school his family, and have a few rupees to purchase consumer goods.

May people have been taliking about China and the "miracle". I say what miracle? They have in effect made a few million pople rich, on the back of 100 million workers living on slave conditions. They can't raise the salary or improve the working conditions, without causing harming the entire economy. Their economic model has delivred some very fast economic growth, but it is not going to last.

[Suraj]

The biggest problem in the way of mass employment in India is not mechanisation. It is the inability to quickly consolidate and build scale because of the administrative and bureaucratic bottlenecks that prevent this. For example, we cannot achieve economies of scale and consolidate in sectors that are SSI-reserved. The SSI approach goes against the concept of economies of scale, quite literally - it means small scale industry, after all.

There are several industries that work in cyclical business. E.g. toys are a good example, where the holiday season far exceeds the rest of the year. Companies need flexibility to handle this, something the current Indian employment laws do not address. There was an interview with Baba Kalyani of Bharat Forge where he mentioned that the inability to easily hire or retrench workers to support cyclical businesses, and that he chose to invest in greater mechanisation despite the higher initial outlay, to get around the problems with easily obtaining labour that would be both cheap enough and flexible enough.

Many small businesses will indeed go down if we attempt to consolidate and bring in more capital and mechanisation. However, quite a bit of that labour can be employed in the new large scale industries. But there will be resistance to such a move, even if the government were to step in with capital/subsidy support, because the fragmented proprietors would resist selling out.

A long time back (>1 year ago) we had a discussion on Tiruppur losing textile orders because they didn't have the scale to compete for the bigger ones. While on one hand the government was not very efficient in handing out the TUFS support capital to enable augmentation of production capacity, these funds were largely spread over the several fragmented producers, so that the marginal increase in production level wasn't as great as what a more consolidated entity might manage.

Another example is that of the big retail vs mom-pop shop saga. An advanced vertically integrated retail system produces significant services sector employment, but the natural resistance to change almost brought the process to a standstill, and has significantly held it back still. Yet another illustrative example of the phenomena is that of the Dharavi slumdwellers or urban squatters rejecting alternative, better residential options that are provided to them.

In fact I not only disagree with 'de-industrial revolution' as a solution, but I reject it the premise underlining it as a reason standing in the way of greater job creation . The primary problem is resistance to change, combined with an inability to properly plan to effect change. For example, the retail controversy could have been lessened by clearly underlining a policy of retraining and reemploying the workers from mom-pop shops in the larger retail chain, and perhaps equity holdings for prior small proprietors in the new retail chain. Similar policies could be effected in other cases. Every time such inertia and resistance to change has been overcome though a planned transition of the original labour force, it has resulted in significant and demonstrable job creation in excess of the original labour force.

[SwamyG]

Theo: The sense of entitlement sometimes is embarrasing. One can say there is a sense of entitlement even in the West about their economic theories and might. So why do you think we became poor. What would you say accounted for the drop in growth and global GDP contribution? You list some of the problems India is facing. There is no denying, we have long ways to go. But you have not written anything to counter Vaidya's point about demography and any Asian ascendancy.

Suraj: Do you want these discussions here, or in the global economic thread?

[Suraj]

SwamyG: This thread is fine if the topic is largely about India or relevant to India, as opposed to one that primarily refers to some other country.

[SwamyG]

Another example is that of the big retail vs mom-pop shop saga. An advanced vertically integrated retail system produces significant services sector employment, but the natural resistance to change almost brought the process to a standstill, and has significantly held it back still. Yet another illustrative example of the phenomena is that of the Dharavi slumdwellers or urban squatters rejecting alternative, better residential options that are provided to them.

The mom-pop does not have the efficiencies of the big-retail, and neither it is able to transfer it to each other. But in the same way, the mom-pop stores can also keep each other insulated from any negative cycles within the industry. I think a country, especially, India needs to have the right mixture of big-retail and mom-pop stores. Neither one is enough. We need the organized and unorganized in all sectors.

[Theo_Fidel]

Suraj,

Scale in itself does not mean efficiency. In fact really big organizations are resistant to change and reform rapidly eroding any momentary size advantages they have. I think this has been dramatically revealed recently.

The SSI items are very few these day IIRC. Shoes, pickle, khadhi (destruction by reservation), jute, coir and such products. Or am I missing something.

The real advantages of scale are in infrastructure, Power, Water, Transport, etc.

Tirupur's problems are exactly in this area. No water/Power to build really big units, no housing/transport for employees, etc.

Completely agree that efficiency comes with ability to absorb change and adapt new technologies to your advantage. No amount of job melas will achieve this.

[Theo_Fidel]

Theo: The sense of entitlement sometimes is embarrasing. One can say there is a sense of entitlement even in the West about their economic theories and might. So why do you think we became poor. What would you say accounted for the drop in growth and global GDP contribution? You list some of the problems India is facing. There is no denying, we have long ways to go. But you have not written anything to counter Vaidya's point about demography and any Asian ascendancy.

This has been written before many many times so I'm not going to get into opinions.
We must see what works and adapt it to our situation.

Frankly Vaidya has not made any points, other than regurgitating previously heard nostrums. No future there.

Nothing is inevitable. All these points were made about the West WRT to the Soviets, The OPEC, Japan, Asian Tigers, etc. The West still stands.

As I said earlier, there are underlying institutions that we would do well to absorb, the first would be to propagate a culture of respect for work nationally. Everyone must work.

[SwamyG]

And do you think The West will continue to stand?* Irrespective of if Vaidya has regurgitated or written something original; I was hoping that since you objected to the Demographic Theory being false you might be able to elaborate little more on why it is false and can not be used for any basis. The way I see is that he makes a few points and leads the talk in one direction. You disagree with him on one thing, and talk about other things. I am only pleading to give more gyan onlee

I agree we need to adapt things to our situation.

* - Reminds me of the Ozymandis poem in school.

[Suraj]

Theo: It's true that at the other end of the extreme scale begins to result in inertia and inflexibility. But under the current circumstances in India, that's rather far away, and any path to progress entails significant changes, the opposition to which constitutes the primary hurdle to job creation and economic development.

These 'vested forces opposing development' are not political parties, who are just riding sentiment, but instead those directly affected by change. Reform measures often maintain such a top-down view that there's little explicit mention of how labour transition to the new industry sector will be clearly affected.

While the notional average worker income may be low, the overall cost of labour is so high due to indirect/transactional costs that there are many cases where companies wilfully choose mechanisation as it is the cheaper approach, and admit as such on the record, as Kalyani did.

In Tiruppur's case, the fragmented industry makes the lack of infrastructure almost self-fulfilling. How do you get around the chicken-egg problem ? Would greater electricity/water supply itself result in consolidation, rather than spread the income so thin that companies still can't afford to house employees or invest in transport facilities ? Textiles are a pretty low margin high competition business anyway.

[Theo_Fidel]

SwamyG,

We are talking in circles and off topic as well. I'm not trying to avoid the question.

Strongly recommend you read some books by Jared Diamond, an social evolutionary scientist. esp., "Guns, Germs and Steel." Its a fairly hefty 500 page book, and quite dense. I've read it several times. I still learn new concepts from it. It might be out of print so Amazon might be your best bet. Should be in everyone's library.

He explains some of these really complex ideas in simple terms far far better than I can.

Bottom line is that most of human population has been in Asia, while most world dominant cultures have come from the west. Why?

You can read a synopsis as well as criticism's on Wikipedia.

http://en.wikipedia.org/wiki/Guns,_Germs,_and_Steel

[SwamyG]

The going gets worse for Tirupur’s textile exporters

[SwamyG]

Theo: I have seen his documentary. I think I got the DVDs from Netflix. Yeah, it is off topic. That is why I wanted it in the Global Economic thread. And there are several criticisms on his theories too.

Added: The dominant cultures have come from the West only in the last few centuries. And looks like you think the West is invincible. So I had the curiosity. I will leave you alone. Ipdodhaikku )

[svinayak]

Strongly recommend you read some books by Jared Diamond, an social evolutionary scientist. esp., "Guns, Germs and Steel." Its a fairly hefty 500 page book, and quite dense. I've read it several times. I still learn new concepts from it. It might be out of print so Amazon might be your best bet. Should be in everyone's library.

He explains some of these really complex ideas in simple terms far far better than I can.

Bottom line is that most of human population has been in Asia, while most world dominant cultures have come from the west. Why?

You can read a synopsis as well as criticism's on Wikipedia.

http://en.wikipedia.org/wiki/Guns,_Germs,_and_Steel

There are several problems with his theories and conclusions.

Several information is not properly analysed.
One explanation for India throughout the history he concludes is the effect of the caste system. He is unaware of the actual fact that the current caste system is only been 200-300 years old. Also he is unable to explain that India has largest percentage of high IQ population which is an anomoly of caste system was debilitating.

[joshvajohn]

Comments: sorry if I am disconnecting any discussions in this thread. I thought this is also concern of Indian economy. This ruling of SC judge is threatening not only those who are doing middle classes and small scale business folks and also the way the judges make decision about these issues. IT RAISES LOTS OF PEOPLE'S SUSPICION ABOUT THE SC' JUDGES AND THEIR DEALINGS!


Defaulting credit cards will attract 49% interest now
4 Feb 2009, 0420 hrs IST, Dhananjay Mahapatra, TNN
http://timesofindia.indiatimes.com/Defa ... 072018.cms


NEW DELHI: Supreme Court on Tuesday allowed MNC banks to charge hefty penal interest up to 49% on defaulted credit card payments, ending the respite
that lakhs of card holders have had since September last year when the National Consumer Disputes Redressal Commission capped the penalty at 30%.

[svinayak]

False information from western media
http://online.wsj.com/article/SB123360106598140289.html

Another area of concern is transparency. Credit Suisse, in a report issued Jan. 19, noted that the Singh family, which holds some key management positions at DLF and owns a large chunk of the company, has privately controlled entities from which DLF buys land. DLF has "no transparency in the land acquisition process," Credit Suisse said. Credit Suisse said that, in general, there is a higher risk of corporate-governance issues when a deal is with a related party.

Credit Suisse analysts said they believed DLF's disclosure of its land holdings in its annual report was inadequate.

In an email, a DLF spokesman said DLF has never bought land from its main shareholding family or any of the family's companies. "All related party transactions are disclosed completely," he said.

[Theo_Fidel]

Suraj,

Agree. The vested interests can wreck even the most nominal forms of reform.

The violence against the Reliance stores comes to mind.

But the situation is much much better than even 15 years ago when Dutta Samant single handedly destroyed the Mumbai textile industry. The nation is much more agreeable to change if it is properly explained to them, mostly.

Witness the transition to VAT, The Tax PIN, Education cess, dislocations from road and metro construction, etc.

Many companies have ways around these transactional complications. Many hire contract labor or temporary staff for long periods. India being less tightly policed there are ways around every law. I suspect the Kiyani's of the world have to use the most highly automated processes to ensure quality. When he says I can't higher labor, I suspect what he's really saying is that I can higher them 'cheaper' than the machine.

High skilled labor is still in terrible short supply in India. Esp. labor with experience. Part of it is the pace of our growth. In Chennai alone the auto industry employment has gone from about 10,000 to over 300,000 in just 15 years. I you want an employee with about 10 years experience, they are quite simply not available.

[Harshad]

Do the so called productivity gains really bring benefit to society? A foreign mba student on an exchange program to IIM-B posted the photo of a campus garbage collector on her blog and mocked it. The garbage collector uses a bullock cart for the job. I asked her what was the use of an automobile? Would his time savings be really worth the addition oil import burden on India or the pollution it would cause. What are the chances he would do something really economically worthwhile in time saved?

The bullock cart is good if the garbage collector drives the animals within its limits. Should your garbage collector service 10 more sites at 10 km distance from each other, will the bullock cart suffice? Wouldn't a gasoline driven vehicle give more revenues?

Same goes with washing machines and dish washers. In their absence the maid servants got jobs. With their arrival, people are craving for more electricity while the jobs for uneducated are reduced.

You are assuming that Washing mashines and dishwashers and all the RM that goes in it will be produced w/o labour.& Electricity generation is substantial to power up these machines too.

I remember Nirma uses labourers mixing powders by hand instead of a mechanized mixer. Of course they did it to claim Small Scale Industry benefits but atleast it created more jobs and us having to burn less of coal in power stations. Leave out those areas of mechanization where human safety is endangered or where the cost increments due to human substitution hurt the poor and middle class themselves.

You are still discounting labour dissent and production halts due to strikes and other factors. Should all washing power supply be stopped, we would be having
Uski baniyan meri Baniyan se safed kaisi? situations

Can you argue that US companies saved more in productivity gains by repeated lay-offs over last decade than the $800 billion it is investing now to create new jobs?

Yes. Because every business needs to adjust capacity to align to the demand. Unless you are
GM, types who can get Bailout money because your nada of pyjama is in the hand of unions which you gave them in a moment of drunken abandon

Fundamentally, you need to let the market function.

[Theo_Fidel]

There are several problems with his theories and conclusions.

Several information is not properly analysed.
One explanation for India throughout the history he concludes is the effect of the caste system. He is unaware of the actual fact that the current caste system is only been 200-300 years old. Also he is unable to explain that India has largest percentage of high IQ population which is an anomoly of caste system was debilitating.

Undoubtedly there are many weaknesses to his theories, but the shear scope of his subject matter often causes him to ignore some detailed analysis.

As far as the caste system, every society has a way of dividing it labor. The caste system was India's. This division of labor is necessary for the efficient functioning of any economy. Where it failed in India was in becoming ossified and preventing change and mobility from occuring.

But look at his major points.

- Geography. To this day the peoples in the North and South of India grow and consume different foods, animals (Vegetarianism) and have resistance to different sets of diseases.
- India never managed to become a densely urban society. We still have this challenge ahead of us.
- We never managed to use our natural resistance to malaria and typhoid and yellow fever successfully to expand, as these were climate specific. It did protect us from full colonization as in the Americas.
- Entire food groups that have allowed us relative prosperity where completely absent earlier. Tomatos, Potatos, Chilly, Dwarf Rice, Winter Wheat, etc.
- We still do not have the instruments of technological progress in our hands yet. Over 95% of innovation still comes from the West. Just production is not enough.
- We never successfully domesticated several animals as part of our diet. Pigs and Chickens come to mind.
- The Himalayas protected us but also allowed us to stagnate easily. Every culture that came through those mountains found us weak and unresistant. Our modern day jousts with TSP and China have made us stronger not weaker.

It tries to tell us what appears to have worked for successful cultures and we should at least examine the ideas for ourselves.

P.S. I have not seen the TV documentary but I can't image it to be anything more than a pale glance at such a dense book. Recommend several readings.

[svinayak]

There are several problems with his theories and conclusions.

Several information is not properly analysed.
One explanation for India throughout the history he concludes is the effect of the caste system. He is unaware of the actual fact that the current caste system is only been 200-300 years old. Also he is unable to explain that India has largest percentage of high IQ population which is an anomoly of caste system was debilitating.

Undoubtedly there are many weaknesses to his theories, but the shear scope of his subject matter often causes him to ignore some detailed analysis.

As far as the caste system, every society has a way of dividing it labor. The caste system was India's. This division of labor is necessary for the efficient functioning of any economy. Where it failed in India was in becoming ossified and preventing change and mobility from occuring.

But look at his major points.

- Geography. To this day the peoples in the North and South of India grow and consume different foods, animals (Vegetarianism) and have resistance to different sets of diseases. (he does not know Indian History)
- India never managed to become a densely urban society. We still have this challenge ahead of us. (Indians did not need to since Indian geography is very fertile)
- We never managed to use our natural resistance to malaria and typhoid and yellow fever successfully to expand, as these were climate specific. It did protect us from full colonization as in the Americas.
- Entire food groups that have allowed us relative prosperity where completely absent earlier. Tomatos, Potatos, Chilly, Dwarf Rice, Winter Wheat, etc. - This due to European and Middle east trading
- We still do not have the instruments of technological progress in our hands yet. Over 95% of innovation still comes from the West. Just production is not enough. - THis is only last 300-400 years
- We never successfully domesticated several animals as part of our diet. Pigs and Chickens come to mind. - India is a very fertile region
- The Himalayas protected us but also allowed us to stagnate easily. Every culture that came through those mountains found us weak and unresistant. Our modern day jousts with TSP and China have made us stronger not weaker.

It tries to tell us what appears to have worked for successful cultures and we should at least examine the ideas for ourselves. - Nobody disagree with it.

P.S. I have not seen the TV documentary but I can't image it to be anything more than a pale glance at such a dense book. Recommend several readings.

Very superficial differences you are bringing among India ignoring Indian history.

One quarter of WORLD population has been Indian thoughout history. He does not even acknowledge the contribution of Indians in history fairly and accurately. How can this kind of analysis ignore 25% to 30% of world population over 2000 years.

As far as the caste system, every society has a way of dividing it labor. The caste system was India's. This division of labor is necessary for the efficient functioning of any economy. Where it failed in India was in becoming ossified and preventing change and mobility from occuring.

This is only last 200-300 years. Does not explain what happened previous to that period.

I have done the analysis of his book for the last 10 years.
I will give a better analysis of Indians from other books.


http://indiaresearch.org/India_at_Strat ... _eBook.pdf

Ascendancy of the Western Powers:

The "military revolution" refers to the technological and organizational innovations that enabled Europe to replace Asia as the world's dominant military power between the Renaissance and Industrial Revolution. During the late Middle Ages, Asian armies routinely crushed European forces, as demonstrated by the collapse of the Crusades, the Mongolian invasion of Central Europe, and the Turkish conquest of the Balkans. The success of the Ottoman Turks in particular offered a powerful indictment of the superiority of Asian infantry and cavalry tactics, gunpowder weaponry, command hierarchies, and logistical support over the feudal armies of the West. Yet the military might of western Asia paled in comparison to the power of eastern Asia. The Ming Dynasty of China in the 15th century and the Mughal Empire of India in the 16th century each employed large standing armies armed with sophisticated weaponry and centralized bureaucracies. Nevertheless, by the late 18th century a revolution had occurred: European powers were routinely and decisively defeating Asian armies, as demonstrated by the Russia's conquest of the Crimea, the British East India Company's conquest of Bengal, and the French invasion of Egypt. China's turn at military humiliation would come with the First Opium War (1839–1842). This transfer of military superiority was the result of Western flexibility and Eastern rigidity with regard to technical and organizational changes. The motivation of Europeans to invest continuously in naval, siege, and field warfare innovations during the military revolution was a direct response to their interminable political conflicts.

Illustrating this process was the rise of Western naval supremacy during the 16th century. Especially critical was the Portuguese work of the 15th century under Prince Henry the Navigator and King John II. The Portuguese developed oceangoing vessels that relied on inanimate power for both propulsion and defense, and astronomical science for navigation. The result was the employment of the light and maneuverable caravel, and the heavy, fortress like carrack for ocean voyages. By the early 16th century, these vessels employed both lanteen and square sails, and were armed with muzzle-loading artillery. Their navigators used the compass, quadrant, and tables of solar declination to determine latitude, as well as a Ptolemaic mapping system to chart their course. Equally significant was the carrack's ability to function simultaneously as a commercial and military vessel.

Western naval rivalries stimulated the innovation of increasingly powerful warships during the late 16th century, including the oar- and sail-propelled galleasses that Hapsburgs used to crush the Turks at Lepanto in 1571, and the sleek galleon that the English used to deflect the Spanish Armada in 1588. Such naval innovations accelerated during the 17th century with the use of increasingly specialized naval vessels, including bomb ketches for offshore bombardments, frigates for long-range privateering, heavy warships with multiple gun decks for concentrated engagements, and the flutte for economical transportation. Consistent funding of scientific education and research also became a standard naval strategy in 17th-century Europe. The Royal Observatory founded by Charles II and the Paris Academy of Science founded by Colbert and Louis XIV are the most direct examples. The political demand for a practical technique to measure longitude, in fact, motivated much of the astronomical and horological research conducted during the 17th and 18th centuries.

On land, the Ming and Qing Dynasties of China, as well as the Mughal and Maratha Empires of India built enormous fortresses that were virtually impermeable to heavy siege artillery. They routinely employed gunpowder weaponry in their active defense as well. The Ottoman Empire, on the other hand, excelled in assaulting fortresses. Their siege of Constantinople in 1453 was a brilliant example of coordinated artillery, naval, and infantry action, while their sieges of Rhodes in 1522 and of Cambria in 1669 demonstrated a mastery of mining attacks. In terms of developing a comprehensive system of siege warfare, however, Western siege armies were outclassing their Asian counterparts by the early 16th century. Although Europeans had used large-caliber bombards to both assault and defend fortified positions during the second half of the 14th century, their enormous weight rendered them difficult to transport, while their stone projectiles made them difficult to supply. Towards the end of the Hundred Years' War (1338–1453), the French developed smaller caliber guns with higher muzzle velocities and placed them on stable carriages for greater mobility. The employment of corned gunpowder and iron shot further increased such artillery power. Thus armed, the French reduced all British strongholds in France except Calais between 1450 and 1451, and crushed English field armies at Formigny and Castillon. Armed with such artillery, the Spanish reduced the Moslem fortresses in Granada to wrap up the Reconquista by 1492.

Another central element in the military revolution was the transition from small-decentralized armies focused around feudal cavalry forces to disciplined national armies dominated by infantry and artillery firepower. This transition began during the 14th century. The vast training needed to use the longbow effectively, however, led to the crossbow's becoming the dominant missile weapon for Western infantry forces during the 15th century, followed by the harquebus or matchlock during the 16th century. The Spanish ability to discipline and coordinate their infantry to fight in such an integrated formation rendered them virtually invincible in 16th-century field warfare, as demonstrated in the conquest of the Aztec and Inca Empires, the Battle of Pavia (1525), and the field actions of the Dutch Revolt. Nevertheless, such infantry innovations hardly gave the West a decisive advantage over Asian military armies. Europeans, after all, did not dare engage the Ottoman Turks in a large-scale battle for most of the 16th and 17th centuries.

By the late 17th and early 18th centuries, however, the strength of Asian field armies was in decline. Western European field armies were routinely employing innovations in military technology that gave them significant advantages. As initiated by Maurice of Nassau during the Dutch Revolt and developed by Gustavus Adolphus during the Thirty Years' War (1618–1648), such drill enabled infantry units to concentrate their fire in devastating volleys even under terrifying combat conditions. The growing strength of Western field warfare in the 18th century also depended on artillery innovations. While the basic smoothbore-artillery design of the 15th century remained, a series of artillery reforms created both powerful and maneuverable field artillery systems. This began with Gustavus Adolphus introduction of the three-pounder regimental artillery piece into the Swedish army during the 1620s. The trend accelerated during the mid-18th century with the artillery reforms of Austria and France that furnished the first heavy field guns that could be moved routinely in combat. Equally significant was the way such 18th-century artillery was used. Following the ballistics research conducted during the War of the Austrian Succession, the killing efficiency of Western field artillery improved significantly when directed by officers trained in Newtonian science.

The Portuguese used their naval innovations to control the coast of Africa and enter the Indian Ocean by 1494. Their initial probe into Chinese waters, however, was decisively crushed in 1522 by the gun ships of the Ming Dynasty. Chinese naval power was demonstrated during the early 15th century when Admiral Cheng Ho's fleets of war junks dominated the Indian Ocean. Changes in political priorities rather than technical conservatism led the Ming Dynasty to abandon its commitment to naval expansion. This left a partial vacuum in the Indian Ocean that the Portuguese quickly exploited. This paved the way for the Europeans to enter India. The entry started with the First the Portuguese then the Dutch, the English and the French.

The Historical Struggle for Dominance in World Trade:
With Europe's discovery of the sea route to the East and America, the maximum control of natural resources as well as markets for manufactured products could be attained through gaining title to lands of easily conquerable people. The race was on to colonize the world. “By 1900 Great Britain had grabbed 4,500,000 square miles.... France had gobbled up 3,500,000; Germany, 1,000,000; Belgium 900,000; Russia, 500,000; Italy, 185,000; and the United States, 125,000.”
An imperial center must be careful about importation of manufactured products from either its colonies or from other great powers:
“So it is now,” explained the British Protectionist Act of 1562, “that by reason of the abundance of foreign wares brought into this realm from the parts of beyond the seas, the said artificers are not only less occupied, and thereby utterly impoverished ... but divers cities and towns within this realm greatly endangered, and other countries notably enriched.”

In the late 17th-Century, Jean Baptiste Colbert, French Naval Secretary of State and Finance Minister, recognized the threat if France became dependent upon British mercantilism—as was being established by Lord Shaftesbury. Therefore, Colbert duplicated Britain's industrial development efforts. France purchased the latest technology, encouraged skilled workers, protected the home markets, eliminated internal tariffs, and constructed canals and roads. France developed flourishing industries, a profitable shipping industry, and a powerful navy. However, wars, spendthrift governments, the revocation of the Edict of Nantes (which encouraged persecution of Protestants and forced 500,000 of France's most productive workers to flee) and the 1786 Eden Treaty with Britain (a replay of the Methuen Treaty's monopoly agreements which severely damaged Portugal, Holland, and Germany) impoverished the French economy.

Napoleon understood Britain's economic warfare and in 1807 issued his Continental Decrees to establish manufacturing to protect France's market from Britain and to prevent the loss of continental wealth. Napoleon was forced to devise a new tactic to deal with his perpetual enemy Britain: the Continental System. Developed during 1806/1807, this policy called for economic warfare against the “nation of shopkeepers,” whereby France, either through the cooperation of friends or by the use of force against enemies, would close the entire European continent to British trade and commerce. By weakening Britain's economy, Napoleon would destroy her ability to wage war, and also make it impossible for Great Britain to provide the huge subsidies to Continental allies which had characterized all the previous coalitions against France.

Napoleon resurrection of Colbert's protective system started the rapid industrialization of Europe. This immense trading bloc would have meant the end of Britain's dominance of world trade. Britain, the European monarchies, and the Church (fearful of a revolution) quickly entered into a “Holy Alliance” and defeated Napoleon at Waterloo. The markets of Europe were breached and industries throughout the continent collapsed. This collapse, along with the unequal trades imposed upon the fledgling United States alerted Friedrich List and Alexander Hamilton to the necessity of protecting regional industries and markets. One cannot miss the similarity between the industrial collapse on the Continent and its dependency upon Britain after the French defeat and the 1991-to-1999 collapse of the Russian economy and its dependency on the West.

At its peak Britain was manufacturing 54% of the finished products in world trade. The British “exulted at their unique state, being now (as the economist Jevons put it in 1865) the trading center of the universe.” The world was Britain's “countryside,” a huge plantation system feeding its developed imperial-center-of-capital:
The plains of North America and Russia are our corn fields; Chicago and Odessa our granaries; Canada and the Baltic our timber forests; Australia contains our sheep farms, and in Argentina and on the Western prairies of North America are our herds of oxen; Peru sends her silver, and the gold of South Africa and Australia flows to London; the Hindus and the Chinese grow our tea for us, and our coffee, sugar and spice plantations are all in the Indies. Spain and France are our vineyards and the Mediterranean our fruit garden; and our cotton grounds, which for long have occupied the Southern United States, are being extended everywhere in the warm regions of the earth.
To funnel this wealth to the mother countries, exclusive trading companies—East India Company (English, Dutch, and French), Africa Company, Hudson Bay Company, et al., were established.


Discovery of Indian Ocean and India:

Names shape the way we see the world. Clearly the European mariners, traders and mapmakers were obsessed with their imagined "India". They labeled not only the Subcontinent Peninsula, India, but also the Ocean, the Islands to the East, the Caribbean West Indies as well as the Inhabitants of America. Europeans imagined the peninsular area we now call India as a wondrously rich place and central to human activity in the region. Yet the Indian Ocean is rich with cultures and festering with cultural contacts that beg for examination.

Time is also a context we must wrestle with as we study the Indian Ocean. Just as cutting the map shapes our view, the periodization of history impacts our understanding. We will have to divide Indian Ocean history into three periods: The Ancient Indian Ocean (upto 700 A.D.); The Indian Ocean World Economy (700 A.D. to 1500 A.D.) and The Modern World System (1500 to 2000 A.D.)
There is only our finite ability to grasp the enormity of human experience in the Indian Ocean. Thus we will use exemplars – specific cases – to illustrate the patterns and connections that comprise the Indian Ocean as a world system. However as Ashin Das Gupta, the noted Indian Historian cautions:
"To see the Indian Ocean steadily and as a whole, to see it in its multiplicity and appreciate it’s contrasting richness and finally to tell its story in a coherent manner is probably a task beyond scholarly resources as the moment." (1987)

Kenneth Hall reports that the Indian Ocean trade developed in stages, expanding with Roman conquest. When they reached India they found an established trade to the Malay Peninsula to the East. A major draw for the Indian traders was gold and tin. Indians of the first century called Southeast Asia Suvarnadvipa or "Land of Gold" (Cleary and Chuan 2000). Funan, located in the Mekong Delta into the Malay Peninsula, was an important tributary state to China that sent ships both east and west in the Second to Fourth Centuries. It controlled the overland route across the Isthmus of Kra to Indian traders on the Bay of Bengal. When the Chin Dynasty lost control of the central Asian caravan routes in the Fourth century, they expanded maritime trade straight across the South China Sea to the traders in the Straits of Mallaca(Hall). Trade was primarily coastal, but the monsoon winds were probably a well-guarded trade secret among seafarers that ventured farther offshore to reach distant ports. These ports emerged as meeting places where traders from each segment could make their deals and wait, sometimes for months, for favorable winds to take them home.

It is clear that until the arrival of Arab traders in the Indian Ocean in the second century AD, the Indian merchants held an unchallenged monopoly of overseas commerce in the Indian Ocean waters. According to the distinguished naval historian, Rear Admiral Sridharan: the takeover of trade from South Indian merchants by the Arab middlemen apparently came about at the end of the Chola period. So long as the Cholas wielded their naval power, the Arabs do not appear to have ventured to interfere. But the decline of the Chola power and the decadence of the Sri Vijaya Empire in Indonesia had created a vacuum in overseas commerce and the Arabs stepped in and in their trade rivalry effectively kept the Chinese away from the Indian Ocean. With the passing away of the overseas trade to the Arabs there was little or no direct interest taken by Indians in overseas commerce and they were content to trade with the Arab intermediaries and agents who sailed with their wares between the East and the West.’
We can divide the Indian Ocean into three circuits of trade centered on the Arabian Sea, the Bay of Bengal and the Chinese-Indonesian Archipelago. Thus trade originating in Alexandria might travel through Aden to Calicut to Mallaca to Canton. Barendse concurs that these "world economies" existed within the context of the seasonal monsoons that facilitated the network of traders that allowed the transport of goods across the Old World. (2002, 3-5). Individual traders making an entire trip to the east were few (See Marco Polo Account), rather the trade occurred in segments via the Silk Road, through the Persian Gulf or the Red Sea.

"…the real reason the Italians continued to come, even when wars heated up or piracy inflated the costs of protection - were the spices and dyes from Malaysia and Indonesia, the pepper and silk and cotton from India, and the porcelains and silks of Cathay so demanded in Europe. All these came through the closely guarded Red Sea ports, either obtained in Aden from Indians merchants or brought from farther away on Arab ships." (Abu-Lughod- 1989 -241)

Arab and Indian Sea Routes (From Abu-Lughod 1989)

While Arab traders dominated the Arabian Sea, Indian and Chinese ships carried the trade from India to the Straits of Malacca. During the Sung period Chinese ships took goods to the Indian traders in the Straits but later opened their ports and sent Chinese traders to India. (Abu-Lughod 1989 274), Van Leur notes by 1600:

"Indian and Burmese shipping and trade and the traveling trade from the Persian, Arabian, and Turkish towns came to the Far East from the Indian ports and the Moslem states to the west of them. Junk shipping with its traders and its emigrants swarming out from the ports of South China…was directed toward the ports and shores of Farther India and Indonesia. The Indonesian produces, cloves, nutmeg, mace, pepper, sandal wood, sapan wood, gold, tin precious stones, drugs and medicinal products and rarities …were shipped to the north and the west, traded in exchange for Indian and Persian textiles, slaves, money and uncoined metal, and or Chinese goods –silk and silk cloth, porcelain, lacquered objects, copper work, paper ,medicinal products, sugar, sumptuous handicraft goods – the largest part of which later were reshipped to the west from the Indonesian staple ports. " (Van Leur , 1955 120-1)

The Chinese markets were alternately opened and closed to outside traders. The Srivijaya were the leading maritime power in Southeast Asia from 670 to 1025. They where straddling the Malacca Straits, serviced Chinese, Indian and Arab merchants in a series of ports. (Hall ) This state coordinated a variety of economic enterprises delivering local goods for trade, but also coordinated at least 14 cities on both sides of the strait as well as the policing the straits. (Cleary and Chuan 2000) Its strength was the diplomatic ability to negotiate alliances with local groups as well as with the traders from east and west.
When the Portuguese navigator Vasco da Gama landed at Calicut in 1498, he was restoring a link between Europe and the East that had existed many centuries previously. The first known connection between the two regions had been Alexander the Great's invasion of the Punjab, 327–325 BC. In the 2nd century BC, Greek adventurers from Bactria had founded kingdoms in the Punjab and the bordering areas.

Western contact with Indian civilization was around the period 1500 AD. However, not until rather late did the West begin to understand and appreciate the spiritual heritage of India. While it is true that sketchy accounts of India (mainly French and some Dutch) began to appear in Europe in the 16th and 17th centuries, these were decidedly critical and dismissive.
While various scholars date the beginning of the modern age differently, the direct roots of the Modern World System go to the European voyages of exploration and domination. In the Indian Ocean, Vasco de Gama’s arrival in India(1498) marks the new era. The Portuguese rapidly dominated the Indian Ocean, defeating the Egyptian fleet at Diu in 1509, and ranging from the coast of Africa to China. They established two squadrons, one to block the Red Sea and one to patrol the West Coast of India, in support of three great markets: Malacca, Calicut and Ormuz with a secondary stop in Aden. Malacca became the great storehouse as mariners waited for the monsoon winds. (Wallerstein 1974 -327)
"The Portuguese did not create the trade. They took over a preexisting trade network, in the hands at that point of Moslem merchants (Arabs and Gujeratis) in the Indian Ocean and Wako pirates in the China Sea." (Wallerstein, 1974 328). Van Leur argues that "the Portuguese colonial regime, built upon war, coercion and violence did not at any point signify a stage of ‘higher development’ economically for Asian trade." (1955 117) rather it was the Dutch and British that would reconstruct the Indian Ocean.

Although the Portuguese were the first European power to subdue the Straits of Mallaca and thus access to China and the East, it is the Dutch VOC (Verenigde Oost-Indisch Compagnie) that asserts control. Granted privileges to reach agreements with (or conquer) supplying states, establish monopolies in trade and deliver goods to the Netherlands, the VOC built and armed ships, and established forts in its efforts to bring eastern goods to market at a profit. (Knaap 1996 9) European traders were directly supported by their governments and would construct a worldwide division of labor that would sweep from the sugar plantations of the Caribbean to the rubber plantations of Indonesia. The "Chinese State had no interest in directly providing military and political backing for its subjects overseas forays" thus Dutch and Spanish were able to prevent the Chinese merchant communities in Bativia and Manila from buying land and allowed angry "natives" to massacre them. (Pomeranz 2000 202). Barendse notes that trade was through an interlocking set of circuits, with goods transshipped at intermediate ports but with the arrival of the European these circuits were replaced by direct links between Asian ports. (Barendse 2002 . The growing global markets caused increased demand for a variety of commodities and the result was increased production that demanded the shift of labor, sometimes between continents. European demand for sugar drove the early Atlantic slave trade, but the Indian Ocean Diasporas began much earlier.

Diaspora refers to the dispersal of people over time and space. The movements of people in the Indian Ocean world over the past 5000 years have been considerable. Many of these shifts in population were voluntary as the merchants and sailors moved about the Indian Ocean. The monsoon winds dictated residency in ports until favorable winds would allow them to complete their return voyages. In some cases permanent enclaves appeared in these entrepots.
"If Arab and Persian traders controlled a sizeable share of Surat’s trade, for example, Gujarati and Sindi Banias were ubiquitous in the Gulf. Again, while there were a few hundred Indians from Goa resident at Mozambique, there were thousands of Africans resident at Goa, which was as African as Mozambique was Indian." (Barendse 2002, page 5)

More substantial and positive assessments began to circulate only in the latter half of the 18th century. At that time, a few generally sympathetic Englishmen, brought to India by the British conquest, began a more serious examination of the history, philosophy, and literature of the "Hindoos." Of these, some of the most important were Charles Wilkins, who provided the first translation of The Bhagvat Geeta, or Dialogues of Kreeshna and Arjoon; Sir William Jones, the first giant of Indology, whose early essays "On The Hindus," "On the Gods of Greece, Italy and India," and "On the Chronology of the Hindus" were widely read in England and Europe; and Thomas Colebrook, who contributed the first serious analysis of the Vedas by a Westerner. All of these works were to travel across the Atlantic, importantly influencing the philosophical development of Ralph Waldo Emerson.
The perception about India by the west as a complex, religious country has been projected to the rest of the world for the last 300 years and this view is the dominant view prevalent in the west. This view is not too favorable to India currently and will need major update by Indians. According to the European perception people of India are broadly taken as Aryans who are the upper caste (class) and Dravidians who are the lower class. The ethnicity in the sub-continent is divided as Muslims and non-Muslims in whom the Muslims are connected to the outside world from their history of conquest. Muslims were the original invaders of the native people and the current Indian people are the conquered people.

The influence of India on her neighbors, specifically those in Central, East, and Southeast Asia, has long been recognized, largely because peoples of these other nations went to great lengths to accurately translate and disseminate Indic knowledge into their own languages and cultural idioms. This resulted in an accurate transmission that maintained respect for the cultural source. Indians had immense trading networks that ran through Central Asia and Eastern Europe until as late as the 1700s. Why did this trading network collapse completely and what were its consequences?

India and the East:

For anyone who seeks to understand Southeast Asia, the French historian and doyen of Southeast Asian studies, G. Coedes’ classic treatise, The Indianized States of South-East Asia, is a highly recommended reading. Coedes describes much of Southeast Asia and Indochina as ‘Indianized’ states, where two great civilizations of Asia, the Chinese and the Indian, merge and converge in unique harmony. Coedes calls this area ‘Farther India’: ‘From Burma, Malaya peninsula and the island of Sumatra, the western face of Farther India is turned toward the Indian Ocean.’
The same thought, in a different context, is echoed by historian K.M. Panikkar, who in his brilliant exposition, India and the Indian Ocean, speaks about the ‘influence of the Indian Ocean on the shaping of Indian history.’ For Panikkar, the geographical ‘imperative’ of the Indian Ocean – and indeed the Himalaya in the North – has conditioned and shaped the history and civilization of this subcontinent. ‘The importance of geographical path on the development of history is only now receiving wide and general recognition,’ he says.

That Southeast Asia has always been an integral part of the Indian consciousness is borne out by the fact that the countries of Southeast Asia so comprehensively embraced Buddhism in all its aspects. This spiritual and cultural affinity became an inseparable part of their ethos and way of life. Successive Indian kings and kingdoms from the first century AD and even before to the beginning of the 15th century, had regarded Southeast Asia and the lands lying beyond as vital for their own strength, security and sustained development. This intricate and abiding web of relationships in turn contributed significantly to India’s sense of security in an extended neighborhood in which India is neither seen as an alien power nor as a country with a colonial past. The relationship spanning nearly 2500 years was founded and nurtured on mutual interest and security in which both partners constantly enriched and reinforced each other.

The advent of the British in India and the struggle for influence between European powers that ensued all over Southeast Asia, suspended the continuous interaction that had existed between India and the region. Southeast Asia itself was carved up into areas of influence by the major colonial powers, viz., the British, French, Dutch and Portuguese. India’s cultural and commercial interaction with this region was therefore subordinated to the political and strategic considerations of the great powers. This left the ‘Indianized’ states of ‘Farther India’ free to nurture, develop and evolve a distinct cultural personality of their own, albeit heavily influenced by their long association with India and China.
The well known Indonesian scholar O. Abdul Rachman notes, for instance: ‘From their birthplaces in India, the great religions of Hinduism and Buddhism found their way to Indonesia, where they mingled with the indigenous belief systems to become an enduring and integral component of Indonesian culture. Islam also arrived in Indonesia by way of the Indian subcontinent. During their long process of consolidation, adaptation and growth in Indonesia, these great religions came to be seen by comparing, for example, any of a wide range of religion-cultural expressions and artifacts – such as temples, shrines, ceremonies, and classic literature such as the Mahabharata and Ramayana – in their respective Indian and Indonesian contemporary manifestations.’
Another Indonesian scholar, Soedjati Djiwandono, quotes President Sukarno as saying:

“In the veins of every one of my people flows the blood of the Indian ancestors and the culture we possess is steeped through and through with Indian influences. Two thousand years ago, people from your country came to Jawadvipa and Suvarnadvipa in the spirit of brotherly love. They gave the initiative to found powerful kingdoms such as those of Sri Vijaya, Mataram and Majapahit. We then learned to worship the very Gods that you now worship still and we fashioned a culture that even today is largely identical with your own. Later, we turned to Islam, but that religion too was brought to us by people coming from both sides of the Indus.”

In his masterly and majestic survey of world history, the eminent historian Fernand Braudel refers to India and East Asia as the ‘greatest of all the world economies’ of the pre-industrial, pre-capitalist era. Braudel talks of the ‘Far East’ as comprising ‘three gigantic world-economies’: ‘Islam, overlooking the Indian Ocean from the Red Sea and the Persian Gulf, and controlling the endless chain of deserts stretching across Asia from Arabia to China; India, whose influence extended throughout the Indian Ocean, both east and west of Cape Comorin; and China, at once a great territorial power – striking deep into the heart of Asia – and a maritime force, controlling the seas and countries bordering the Pacific. And so it had been for many hundreds of years.’
‘The relationship between these huge areas,’ says Braudel, ‘was the result of a series of pendulum movements of greater or lesser strength, either side of the centrally positioned Indian subcontinent. The swing might benefit first the East and then the West, redistributing functions, power and political or economic advance. Through all these vicissitudes however, India maintained her central position: her merchants in Gujarat and on the Malabar and Coromandel coasts prevailed for centuries on end against their many competitors – the Arab traders of the Red Sea, the Persian merchants of the Gulf, or the Chinese merchants familiar with the Indonesian seas to which their junks were now regular visitors.’
Discussing the place of the ‘East Indies’ in this ‘Asian Super World Economy’, Braudel adds: ‘The logical confluence of trade, the crossroads lying at the centre of this super world economy could hardly be elsewhere than in the East Indies.
On the eastern side of the Ocean, Indian contacts date to in prehistory, but about 2000 BCE wealth became apparent generating a constant flow of traders, adventurers and priests to the Malay Peninsula (Sandhu 174). Likewise Chinese settlement predated the European arrival in the Malacca Straits. (Clammer 157) As the meeting place between the Indian and Chinese centers, the markets of Indonesia were filled with foreign merchants when the Dutch arrived (Petronel 237). By the 1740s thousands of Chinese migrant laborers were in Bangka mining tin. (Vol 15)

[Theo_Fidel]

I have done the analysis of his book for the last 10 years.
I will give a better analysis of Indians from other books.

I will look forward to it.

I will repeat that this sort of myth making revisionism does not change the reality. The levers of innovative thinking do not exist in India yet. As long as they do not, we will have a tough time with prosperity, and gaining on the west.

Also, If we had all that knowledge in the past then it is even more shameful that we did nothing with it and rather had to wait for a foreign power to come a show us our own history.

Prior to the arrival of British irrigation the Indus valley supported less than 10 million people. Mean while, the principles of irrigation including the Grand Anicut had been in function for 2000 years in the South, even further back at the Thamarabarani.

[vina]

Same goes with washing machines and dish washers. In their absence the maid servants got jobs. With their arrival, people are craving for more electricity while the jobs for uneducated are reduced.

When someone in Parliament posed a question on similar lines as "Why does a country with so many maid servants and dhobis need vacuum cleaners and washing machines" to Narasimha Rao, in the first flush of is liberalization push, his answer was profound, just like that man himself.

"Because you will remain a nation of maid servants and dhobis otherwise"

The only way a developing nation like ours can significantly boost jobs especially for low skilled manpower is by selective De-mechanization of industry....
Politicians of the future will have to selectively apply a De-industrial Revolution as a cheaper way to create more jobs.

This "cap on productivity" /"de-industiralizatio" as you call it is the JNU commie ding dong's wet dream and there are tons of "papers" those types have put out. No serious economist will even look at that junk.

There is a paradox. Think about this . Since the industrial revolution, productivity overall has grown by leaps and bounds, human population has exploded in size, despite that, over all, a greater proportion are employed, better fed and live longer across the globe and measurably richer than in the pre industrial days!. So if your hypothesis of "productivity is the enemy of jobs" is correct, given the huge productivity gains that have taken place, across most of the "bulk" job sectors like agriculture etc in the preindustrial days., less than 5% of the global population should be employed!

[Vipul]

India's savings and investment rates for FY08 at 37.7% and 39.1% of GDP respectively.

[Suraj]

The savings/investment rate data is excellent. We're almost at the 40% investment/GDP ratio, and this base of investment will help us weather the global crisis.

Inflation falls further, after a short spike a week back due to the truckers strike briefly skewing data:
India’s Inflation Slows to 5.07%, Near a 1-Year Low

India’s inflation slowed to near a one-year low, giving the central bank more room to cut interest rates to stimulate economic growth.

Wholesale prices climbed 5.07 percent in the week to Jan. 24 from a year earlier after gaining 5.64 percent the previous week, the commerce ministry said in New Delhi today. Economists expected an increase of 5.25 percent.

Governor Duvvuri Subbarao said last week inflation will slow to below 3 percent by March 31 and indicated the central bank will reduce rates to help the economy weather the global recession. A top aide of Prime Minister Manmohan Singh said today that rate cuts may come after the government’s interim budget on Feb. 16.

“Interest rates are bound to fall as prices ease and the economy slows,” said N. R. Bhanumurthy, an economist at the Institute of Economic Growth in New Delhi. “The central bank will have to assess the government’s borrowing program before it set interest rates.”

The central bank will “have to figure out” the liquidity that will be needed in the banking system after seeing the government’s borrowing program for the financial year starting April 1, said Suresh Tendulkar, chairman of Singh’s Economic Advisory Council.

Singh’s government will announce an interim budget on Feb. 16 because its five-year term ends in May this year.

India’s central bank kept interest rates unchanged last week after lowering them to a record on Jan. 2 to help shield Asia’s third-largest economy from a global slump. The Reserve Bank of India’s reverse repurchase rate is at 4 percent and the repurchase rate at 5.5 percent.

Wholesale prices in the week to Jan. 24 fell after the index of manufactured products declined by 0.5 percent, today’s statement said. The index of fuel, power and light rose 0.6 percent on higher prices of naphtha and furnace oil, it said.

Today’s inflation rate may be revised in two months, after the government receives additional price data. The commerce ministry cut the inflation rate for the week ended Nov. 29 to 7.86 percent from 8 percent.

[putnanja]

Centre in B'lore to process I-T returns

[Theo_Fidel]

In the mean time we import a product that we are stuffed to the gills with.

Note that Thermal coal is not Coking coal and the ash content excuse does not apply.

http://www.bloomberg.com/apps/news?pid= ... fer=africa

India will import as much as 100 million metric tons of thermal coal by 2012 as new power plants are built, according to Coal and Oil Group, the country’s largest importer of the fuel for energy generation.

The investment rate of 39% is very heartening. Might want to keep an eye on the growth rate however.

Hopefully our high ROI of 3.5 won't show signs of flagging.

[Rishirishi]

Suraj,

Agree. The vested interests can wreck even the most nominal forms of reform.

The violence against the Reliance stores comes to mind.

But the situation is much much better than even 15 years ago when Dutta Samant single handedly destroyed the Mumbai textile industry. The nation is much more agreeable to change if it is properly explained to them, mostly.

Witness the transition to VAT, The Tax PIN, Education cess, dislocations from road and metro construction, etc.

Many companies have ways around these transactional complications. Many hire contract labor or temporary staff for long periods. India being less tightly policed there are ways around every law. I suspect the Kiyani's of the world have to use the most highly automated processes to ensure quality. When he says I can't higher labor, I suspect what he's really saying is that I can higher them 'cheaper' than the machine.

High skilled labor is still in terrible short supply in India. Esp. labor with experience. Part of it is the pace of our growth. In Chennai alone the auto industry employment has gone from about 10,000 to over 300,000 in just 15 years. I you want an employee with about 10 years experience, they are quite simply not available.

I think this post hits the nail on the head. Indias future is not going to be made by toys industry or sectors reserved for small scale industry (the sector does not really contribute much any way). Only High tech/innovative products and services can produce the type of jobs that ca change the Indian economy. I think India is on the right track. India has had the highest income growth among the skilled workforce. The country is able to absorbe the huge number of graduates every year. India needs to keep up the good work.
There is a great need to improve on the semi skilled workforce. Indian plumbers, carpenters, masons, mechanics, welders, electricians, etc are not up to standard, resulting in poor workmanship. improvement in this sector would improve the salary of the lower sections of the society and pay handsome economic dividendes. India should model the semi skilled sector after the German model of apprenterhip.

[Theo_Fidel]

Imports are down dramatically!

Capital goods are down 25% while other non-oil items increased 2.7%.

At first glance we appear to be consuming more and investing less.

But if you look at the break down the increases did not come in consumer products. This is good. Means our BoP appears to be stabilizing.

http://www.business-standard.com/india/ ... 36/348285/

Non-oil imports, which have a share of 70 per cent in India’s import bill, increased just 2.7 per cent in January 2009 against a 32 per cent increase in the previous month. This is because capital goods imports, which are seen as a barometer of industrial expansion, plunged 25.5 per cent in January. Capital goods consist of items like electrical goods, machinery and transport equipment.

Sources said of the 27 broad categories of goods imported by the country, only five grew — fertilisers, sulphur and unroasted iron pyrites, pearls and precious stones and project goods.

[putnanja]

Unique identity number for all residents soon: Minister

...
“The Planning Commission will cull out a unique identity number from a number of documents which a resident now has like the one pertaining to income tax or passport. It is a massive exercise and will take more than a year just to collate and disseminate data.”

The number would be on the lines of the social security number in the U.S.

“Sixty-five to 80 per cent of the residents will be covered by this scheme by 2011, when the census takes place, and most of the residents will be covered by 2013. The stress is more on socio-economic factors as it will also help in identifying genuine below the poverty line residents, Mr. Chavan said.
...

[Suraj]

GST to give $15 billion push to economy

The Goods and Services Tax (GST), proposed to be introduced from April 2010, would benefit the economy by at least $15 billion (about Rs 73,000 crore) per year as the effective tax rate is expected to drop significantly, said Vijay Kelkar, chairman of the 13th Finance Commission.

A fall in tax incidence on goods and services offered would enable producers to sell their products at a lower price, leading to increased demand.

“Economic value of this (referring to $15 billion), at a modest 3 per cent discount rate, would be close to $0.50 trillion (or half a billion dollars) and more importantly, this means an additional employment of 5 million,” said Kelkar while delivering the convocation address of the Indira Gandhi Institute of Development Research.

The aim of the GST is to have one uniform tax and do away with multiple taxes like excise duty, central sales tax and services tax, so that tax administration and payment can be done easily. At present, a few taxes on finished product at the state-level cannot be set off against taxes paid on inputs. This leads to a cascading effect of tax on tax.

“Introducing the GST will do more than redistributing the tax burden from one sector or group in the economy to another. This also brings about a macroeconomic dividend as it reduces the overall incidence of indirect taxation and, therefore, the overall tax burden by removing the many distortionary features of the present sales tax system,” he said.

Under GST, both the Centre and the states will have powers to tax goods and services. At present, states do not have the power to tax services.

Kelkar hoped low GST rates, which could be achieved by introducing the minimum number of rates, would ensure higher compliance and acceptance, so that it would result in revenue gains to all states.

“At present, the combined statutory rate of the value added tax (VAT) is close to 30 per cent, which is applied to a narrow base. As a result, the effective rate is very low. Our preliminary research indicates that the effective revenue neutral rate at which GST can be implemented will be far lower than 30 per cent, indicating a significant reduction in the effective tax burden on our economic agents,” Kelkar said.

“Consequent to alignment with the lower effective rate, we can also expect an upsurge in compliance as has been witnessed in the case of direct taxes,” he added.

In addition, a comprehensive GST structure would also eliminate export taxes and help improve international competitiveness.

“This would considerably help improve the production and export of labour-intensive manufacturers as well as employment in our economy,” Kelkar added.

[SwamyG]

Theo:
>>India never managed to become a densely urban society. We still have this challenge ahead of us.

What benefits do you see in India becoming one such? Can you elaborate?

>>We never successfully domesticated several animals as part of our diet. Pigs and Chickens come to mind.
Apart from animal protein, what are the other benefits that you imply? Cows, Goats, Turkey (vaan kozhi) were also domesticated and became part of diet.

I agree the TV documentary would not have done any significance to the book.

[SwamyG]

Theo
Prior to the arrival of British irrigation the Indus valley supported less than 10 million people. Mean while, the principles of irrigation including the Grand Anicut had been in function for 2000 years in the South, even further back at the Thamarabarani.

I have the book "A History of Vijayanagar: The never to be forgotten empire" by B.Suryanarain Row. Admitting some kind of exaggeration in reporting and observations. Since more than one person has reported such numbers, the probability of these numbers being near the actual value is high.

I paraphrase from the Introduction chapter:
1) Abdur Razzak visited Bijangar in 1443 AD. He claims to have seen 1000 elephants and 11,00,000 lakhs (eleven lakhs).

2) Nuniz a Portuguese traveler remarks that Krishna Deva Raya marched to the seige the battle of Raichur with 703,000 foot, 32,6000 horse and 551 elephants.

3) Paes another Portuguese traveler who was often present at K.D.Raya court observes that the King had continually a million fighting troops - which included 35,000 cavalry in armor. In one instance Raya dispatched 150,000 soldiers under 50 captains. Sometimes when he wants to show his strength he is known to put 2 million soldiers.

4) Castanheda who visited near the end of K.D.Raya's reign comments that King kept around 100,000 horses and 4,000 elephants.

5)The King's special bodyguard consisted of 6,000 well trained, well-mounted and richly-dressed horsemen.

6)The military population at the capital was 150,000 men.

7)The grand city is said to have had about 30,00,000 (thirty lakhs)

[Arya Sumantra]

There is a paradox. Think about this . Since the industrial revolution, productivity overall has grown by leaps and bounds, human population has exploded in size, despite that, over all, a greater proportion are employed, better fed and live longer across the globe and measurably richer than in the pre industrial days!. So if your hypothesis of "productivity is the enemy of jobs" is correct, given the huge productivity gains that have taken place, across most of the "bulk" job sectors like agriculture etc in the preindustrial days., less than 5% of the global population should be employed!

I have repeatedly used the word “selective” in my post which critics have conveniently left out because an all around de-industrialization is easier to bash than selective and self-introspective de-industrialization done by industrialists themselves wherever necessary. With today’s technology and looking at prowess in industrial robotics virtually everything that the labourers do can be automated. So do you mean you will automate everything in the name of efficiency leaving 0 employment for plentiful unskilled labour? There has to be an optimum somewhere in between where the interdependence of men on machines and machines on men (for maintenance/building of machines) creates maximum employment in the society. I have plotted a rough schematic as shown below to summarise the scenario. Leaving to individual discretion of industrialists they need to move from red to green area.



There should be segregation of industry into sectors and labour laws be made flexible or rigid accordingly. FRONTLINE businesses(those that earn money for Indian economy from outside) like IT/Services/other exporters AND key raw materials industry (Steel. Cement etc) AND new tech start-ups should be given more flexibility in labor laws. DEPENDANT businesses(those that thrive on internal economy but don’t bring wealth from outside) retail, cellular services etc should be doing fine with current labour laws. Hide the inefficiencies in dependant businesses and protect them from intl. competition and let others be efficient. Just as Japan protects its Rice industry while being efficient in other manufacturing areas.

If entire India was efficiently employed, do you think there are markets big enough for buying the produce? China has already optimized scale, JIT etc for its manufacturing and has problems supplying to even the world’s No. 1 shopper USA. US has an economy bloated with easy credit and indiscriminately printed paper dollars. Now that the fake economy is punctured and deflates to real size where will the market be for all that massive produce? Where?

There are several industries that work in cyclical business. E.g. toys are a good example, where the holiday season far exceeds the rest of the year. Companies need flexibility to handle this, something the current Indian employment laws do not address. There was an interview with Baba Kalyani of Bharat Forge where he mentioned that the inability to easily hire or retrench workers to support cyclical businesses, and that he chose to invest in greater mechanisation despite the higher initial outlay, to get around the problems with easily obtaining labour that would be both cheap enough and flexible enough.

Seasonal businesses should be allowed to hire seasonal labour as long as employers PREDEFINE and clarify the employment duration and employment hibernation prior to recruitment. Agriculture itself is seasonal in labour demand and rural farm workers don’t have problem because season is predefined and there is no uncertainty passed on to them. Trading in firecrackers during Diwali or Kites during Makar Sankranti are seasonal businesses. Labourers making pyrotechnics/kites already know when they will be employed and when they will be in hibernation. But predefining employment duration for redundant labour in a cyclical semiconductor wafer-fab is difficult.

It is uncertainty that should not be passed on lower rungs because their rewards are small. Since those at the top are rewarded greater compensation it is their job to face greater uncertainty(liability of redundant labour). Top-management will have to accept their failure in future prediction. Exceptions to this can be made during macro-economic emergencies like in west today. And firing individual for non-performance is fine anytime.

Another example is that of the big retail vs mom-pop shop saga. An advanced vertically integrated retail system produces significant services sector employment, but the natural resistance to change almost brought the process to a standstill, and has significantly held it back still.

A lot of case studies based on Wal-mart need to be seen in the light of Indian ground realities. Land in urban areas is expensive in India. The cost benefits achieved from efficient supply-chain can be offset by cost of renting huge retail space in crowded urban areas. You don’t need a big-box outlet. Besides, cost of buying a gallon of milk is NOT what you pay at counter of wal-mart. It is cost at counter + cost of driving car upto & from walmart + Time wasted in check-out queue + cost of refrigeration until consumption. Farther the big box is from home, bigger the petrol bills, the greater the inventory at home and longer the refrigeration storage. Case studies of big-box retail don’t talk about this. Contrast this with neighbourhood mom-n-pop store which is located at walking distance. Being nearby you don’t build up inventory in your fridge but instead PURCHASE JUST-IN-TIME.

Instead of big-box let the outlets be maintained by mom-n-pop stores. But they could have a common feeder supply-chain employing latest Just-in-time inventory management tools and RFID tags. Overseas the 7-11 stores are small too but they provide common provisions in efficient manner and have their own supply-chain and JIT inventory. Let the common supply-chain for Mom-n-Pop stores consisting of computer networks, RFID infra and truck fleets be a private organization or better still be a co-operative formed of mom-n-pop stores. For discussion call it: Mom n Pop Stores’ Co-operative Supply Chain (MPCSC). This will cut out the redundant middlemen from supply-chain but still allow poor to open their stores.

Besides how would wealth trickle-down if nouveau-riche service sector yuppies do not buy from those mom-n-pop stores but instead buy from large corporates’ retail chains. As wealth permeates even the mom-n-pop stores will look chic(all-glass with A/C & spotlights) and have variety to service uber rich in cities. At least wealth will be spread out wider. Why do you need chains? Let’s not Mc Donaldize India. They have obsession with homogeneity to the point of being boring, we don’t.

There are a lot of thoughtful considerations here. It’s not merely resistance to change. Some changes are like upgrading Windows with every version without true cost-benefit analysis.

We need the organized and unorganized in all sectors.

>> Agreed.

the de-mechanised "local sourcing" utopia is a recipe for disaster...it will only
result in us being screwed in every orifice and hung out to dry.

It depends on product we are talking about. A toothpaste can be made with equipment that can fit in a garage. Don’t see a need to make a Colgate outside Mumbai and burn diesel to transport it all the way to Orissa. Every state/district can have its own brand. Same cannot be said of some Pharmaceuticals or Automobiles or cosmetics though.

Scale in itself does not mean efficiency. In fact really big organizations are resistant to change and reform rapidly eroding any momentary size advantages they have. I think this has been dramatically revealed recently.

True. Many large corporations prefer to outsource the job of innovation to much more flexible smaller companies. Intel does a lot of design R&D but for process R&D it does buy solutions readymade from much smaller Applied Materials. If their solutions are cost-effective then Intel applies them on a large scale.

Yet another illustrative example of the phenomena is that of the Dharavi slumdwellers or urban squatters rejecting alternative, better residential options that are provided to them.

Dharavi is industrial-cum-residential slum. It has small workshops for making plastics(buckets, tumblers etc), leather shoes, belts etc. All proposals promise to replace that with purely residential schemes and that’s partly the reason why they are shot down by locals. Let there be small shops sized spaces for their micro-businesses and vocations in the proposal besides residence and all Dharavi dwellers will agree to the proposal.

The bullock cart is good if the garbage collector drives the animals within its limits. Should your garbage collector service 10 more sites at 10 km distance from each other, will the bullock cart suffice?

There will be another garbage collector with another bullock cart for that job. Besides 10 sites 10 kms apart sounds more like US scenario not Indian.

Productivity increases when time saved by individual is re-invested in another productive task. There is no benefit when a housewife saving time with a dishwasher uses the time saved for saas-bahu TV soaps or chatting over phone with another housewife about how she cooked a vegetable. But there is benefit if the housewife uses that time saved to educate her kid or do family accounts.

Just as there is a concept of Time Value of Money(TVM) in finance there should be Monetary value of Time (MVT) of an individual. Not every one’s time is worth the petrol/coal they burn.

Fundamentally, you need to let the market function.

Markets would even decide that UK should not be making or doing anything because they are not cost effective at anything. Look who is in better situation today: Protectionist France and Germany. Which country in its strictest sense allows market to function completely? Not even US, look at Big 3. If not for barriers called FDA clearances, India pharma majors would have swooped their markets not leaving any generics company alive. We have to be selective.

When someone in Parliament posed a question on similar lines as "Why does a country with so many maid servants and dhobis need vacuum cleaners and washing machines" to Narasimha Rao, in the first flush of is liberalization push, his answer was profound, just like that man himself.

"Because you will remain a nation of maid servants and dhobis otherwise"

The Indian population is too big to be entirely occupied by IT-vity jobs of entire world. Someone will have to be a maid servant or a dhobi. Dignity of labour is the way to go instead of looking down on certain vocations.
Parents say to the kids: Padhoge likhoge to banoge Nawab.
But Sab lag Nawab ban gaye to kaam kaun karega??
South Korea was recently shocked when a PhD in Physics applied to city cleaning job. Apologies for not providing link. Look at Canada. It needs more plumbers, technicians etc than PhDs. There is plenty of room at the top but not enough to take everyone. India needs many more and much better equipped ITIs and Polytechnics and as Rishirishi said German model is really worth emulating.

Perhaps the idea of selective demechanization is 100 years too soon. As of today we burn away our coal and Oil as if there is no tomorrow and future generations will somehow fend for themselves entirely with Photovoltaics and N-power

[SwamyG]

the de-mechanised "local sourcing" utopia is a recipe for disaster...it will only
result in us being screwed in every orifice and hung out to dry.

It depends on product we are talking about. A toothpaste can be made with equipment that can fit in a garage. Don’t see a need to make a Colgate outside Mumbai and burn diesel to transport it all the way to Orissa. Every state/district can have its own brand. Same cannot be said of some Pharmaceuticals or Automobiles or cosmetics though.

I have seen Madras and Hyderabad, in the early mornings, tempos and lorries loaded with local produce going to a central distribution centers. Smallers tempos etc transferred these produce to local stores. There were mandis (like the Farmers Markets in the USA) where people thronged to get the produce. I have seen folks in their TVS-50s with several cloth bags around their shoulders. The shop keepers sold well, the people bought them well (cheaper prices at these mandies with the customary Indian haggling).

It was neither an "utopia" nor a "disaster"; it had gainfully employed several people across different sectors.

Arya: Your write-up is very good. The mom-n-pop stores kind of operate on Adam Smith's 'invisible hands'; they knew their customers well and kept the economy chugging. They would even greet with you a smile. I remember way way back, some of the mom-n-pop groceries stores actually did door deliveries. The guys would come in big carton boxes with the groceries wrapped in newspapers. We collected the newspapers and resold them That would get our 50 paise contribution for the cricket ball.

[Theo_Fidel]

Arya its obvious you have thought about this for some time.

I would like to point out a few assumptions you are making that are not realistic.

First you assume that certain mechanized processes are inefficient.
Second you assume that people will accept their unproductive lives indefinitely.
Third you assume that sustainability is a function of development. i.e. Increased development is inherently unstable.

First mechanized processes are often inefficient in India due to the ground situation here right now. In your garbage collection example I would point out that a mechanized system with proper access to roads and dumping areas can collect trash from upwards of 100 houses per hour with 3 people. The bullock card would be hard pressed to do that in an entire day and the bullocks still have to be fed, which is not cheap. It is in fact more environmentally destructive as the bullock release methane gas and consume fodder that requires more deforestation. The city of Chennai removes 3000-4000 tons of garbage a day using 50-100 trucks employing 300-400 persons. Even this is inadequate. Assuming a bullock card can move 2 tonnes this works out to 2000 bullock carts employing 6000-8000 people every single day. Keep in mind that the entire fleet of buses in Chennai is only about 2000. We would have gridlock. Where are these people going to come from in a city that already has severe shortages of labor. We have to withdraw them from say automobile manufacture. Asking 10 people to share the wages of one is not the way to get to a living wage.

Second the bullock cart driver may be doing his job but I can guarantee his children are in school and he will do every thing he can to prevent them following in his profession. As our economy grows you are going to see increasing shortages of labor. No one wants dehumanized menial jobs. Working on the fields manually, transporting garbage manually, washing clothes manually are horrible jobs that destroy lives and shorten peoples lifespans, wasting their potential. The number one reason India is poor is the presence of manual labor. In fact entire books have been written to try and understand why it continues in India and how to end it. It is why people here rail against things like NREGS which destroy peoples lives and perpetuate poverty.

Third, the process of development is for most purposes linear. Our present dependance on oil will end, as there is plenty of energy out there we can harness if push came to shove. Oil right now is cheapest, But every time it spikes above $70 a whole range of other energy sources becomes viable, and starts to come on stream. Development only provides us with the tools to develop further in a more sustainable way.

Dharavi is industrial-cum-residential slum. It has small workshops for making plastics(buckets, tumblers etc), leather shoes, belts etc. All proposals promise to replace that with purely residential schemes and that’s partly the reason why they are shot down by locals. Let there be small shops sized spaces for their micro-businesses and vocations in the proposal besides residence and all Dharavi dwellers will agree to the proposal.

This is partly true. Many of the businesses are highly polluting and corrosive. Tanning, Chrome plating, textile dyeing, etc are not activities that can be permitted in a residential area. The real reason they will not move is that almost all these area's are rented. So the ones getting the compensation are the slum lords. The actual residents get nothing.

Productivity increases when time saved by individual is re-invested in another productive task. There is no benefit when a housewife saving time with a dishwasher uses the time saved for saas-bahu TV soaps or chatting over phone with another housewife about how she cooked a vegetable. But there is benefit if the housewife uses that time saved to educate her kid or do family accounts.

This is a very spurious argument, and very misogynistic & offensive I might add. For the economy to progress both males and females must work productively. At least in Chennai almost all the married younger couples I know are both employed. There are a few upper middle class types who dilly dally but they are a tiny section of the population. In the long run there can not be a dedicated housewife label as this would mean that half our population is economically unproductive. Even though there maybe other social benefits, economically it will be a disastrous waste for our nation in our competition with the world. And make no mistake it is a competition to be productive. Last time we dawdled we were completely crushed by other more resourceful cultures.

The Indian population is too big to be entirely occupied by IT-vity jobs of entire world. Someone will have to be a maid servant or a dhobi. Dignity of labour is the way to go instead of looking down on certain vocations.

As long as you are willing to pay them a living wage. Somewhere in the region of Rs 50 per hour in our cities. Or about Rs 500 per day. Anyone getting paid less than that in India is working for wages that will continue to have serious social consequences in terms of poverty and welfare of the children. Some jobs can never be dignified unless they are mechanized.

Perhaps the idea of selective demechanization is 100 years too soon. As of today we burn away our coal and Oil as if there is no tomorrow and future generations will somehow fend for themselves entirely with Photovoltaics and N-power

Why not. Already Hydel and wind is 40% of our energy. Commercial stage fusion demonstration experiments are underway. World natural gas can last for a 200 years or more. The sun continues to shine more energy on the earth in 1 hour than we have used in all of history. Its up to us to give these technologies to future generations rather than pessimistically withdraw into a shell and condemn them to a medieval lifestyle.

[vina]

With today’s technology and looking at prowess in industrial robotics virtually everything that the labourers do can be automated. So do you mean you will automate everything in the name of efficiency leaving 0 employment for plentiful unskilled labour? There has to be an optimum somewhere in between where the interdependence of men on machines and machines on men (for maintenance/building of machines) creates maximum employment in the society.

What you are talking about is the proportion of labor and capital that goes into an enterprise. That is decided by the cost incentives in place for each factor of production. Now , Capital is expensive , difficult to access and is high risk. A rational entrepreneur will simply not go the max capital way because that is sub optimal , highly expensive and very risky (it will be probably highly inflexible, and the break even volumes will be very high because of high fixed costs).

Now in India, the incentives are perverse. Labor is not a "variable" cost but a high fixed cost. In fact, a much higher fixed cost than capital (primarily in the form of plant and machinery!). So there is high disincentive in India to go highly capital intensive route and the "optimum" in India because of the rigidities and inflexibilities in labor skews it towards the capital intensive route.

So what you should really argue for is flexibility in labor markets in case you want to increase the percentage of labor in the mix , away from capital. So fiat based stuff of industrialist "should" do this or that and enforce it via govt fiat and a inspector permit raj , the stuff of wet dreams of JNU Commie Ding Dongs , is fundamentally flawed, especially if the incentives are perverse and your aims don't align with the "natural" state of things. In fact the primary method of JNU Ding Dongs, when faced with a contradiction such as "Extra strong labor protections lead to overall displacement of labor with capital , thus reducing possible employment" is to use the Khaki Clad Police as "Enforcers" ie use coercion. Fits in very well with their thuggish brutal ways of all totalitarian regimes and their inspiration like Soviet Russia and Commie China.

There should be segregation of industry into sectors and labour laws be made flexible or rigid accordingly. FRONTLINE businesses(those that earn money for Indian economy from outside) like IT/Services/other exporters AND key raw materials industry (Steel. Cement etc) AND new tech start-ups should be given more flexibility in labor laws. DEPENDANT businesses(those that thrive on internal economy but don’t bring wealth from outside) retail, cellular services etc should be doing fine with current labour laws. Hide the inefficiencies in dependant businesses and protect them from intl. competition and let others be efficient. Just as Japan protects its Rice industry while being efficient in other manufacturing areas.

That is the most half assed argument floated around. Why should the "external" world be the benefieciaries of "efficiency" and why should the Indian customer be subjected to "inefficienies" . In fact this entire external vs internal thing is bogus. How will you size a plant based on such parameters. You will base it on overall aggregate global demand (if you are globally competitive) and gain maximum economies of scale. If you break it up into bogus "external" vs "internal" thingy, you lose massive efficienies and you will be competivie neither globally and your plants domestically will be sub scale and high cost!. Net result, your domestic consumers end up spending far higher on costs than what a far richer customer in US pays for the same thing!.

. Now that the fake economy is punctured and deflates to real size where will the market be for all that massive produce? Where?

Nowhere!. That is why the plants stop producing, get liquidated , labor and capital stock gets reorganized and gets directed towards sectors where there is demand!. This is the fundamental way markets and capitalism works. If it wasn't you will have the state supporting billions of bullock cart owners and bullocks and carts, even when the entire transport infrastructure gets mechanized via trucks and cars , or support women plugging wires to complete calls even when the entire switching exchanges are automated!

But predefining employment duration for redundant labour in a cyclical semiconductor wafer-fab is difficult.

It is uncertainty that should not be passed on lower rungs because their rewards are small. Since those at the top are rewarded greater compensation it is their job to face greater uncertainty(liability of redundant labour)....
Top-management will have to accept their failure in future prediction.

In bad times they get fired. Fundamentally there is great uncertainty to any prediction!. All sizing and production decisions are fundamentally made against uncertainty. The workers think they are protected against that because "managers" make those calls. Well, they are not. They are just as exposed to the variableness. That is a fact of life in all non planned economies. In "planned economies" you dont have uncertainity because the demand is controlled (price,quantity ) to the size of your plant and investments are as a rule "under" , so you have huge shortages like in the Soviet Union /Socialist India and low overall economic gorwth and prosperity

Besides, cost of buying a gallon of milk is NOT what you pay at counter of wal-mart. It is cost at counter + cost of driving car upto & from walmart + Time wasted in check-out queue + cost of refrigeration until consumption.

Believe me. EVERY cost item will be fully reflected in the price of something you buy at Walmart. Where Wal Mart makes money is in local monopolies and efficiencies from concentration in a contiguous area.

Overseas the 7-11 stores are small too but they provide common provisions in efficient manner and have their own supply-chain and JIT inventory.

Next time, just check in to 7-11 and compare the price of the EXACT same thing with that of a WalMart and you can see the difference in price. It is a trade off of value and convenience (buying in small lots, closer access etc that you are talking about) vs price!.

Remember, if you want to buy ONE can of coke, you walk into your 7/11. You want to do your monthly grocery, you drive to a Wal Mart!. That is when it makes sense to drive to that place and buy in quantities. It is not logical to drive to Wal Mart for a single coke!.

Besides how would wealth trickle-down if nouveau-riche service sector yuppies do not buy from those mom-n-pop stores but instead buy from large corporates’ retail chains. As wealth permeates even the mom-n-pop stores will look chic(all-glass with A/C & spotlights) and have variety to service uber rich in cities. At least wealth will be spread out wider. Why do you need chains? Let’s not Mc Donaldize India. They have obsession with homogeneity to the point of being boring, we don’t.

How many Wal Marts or big box outlets does New York City have ? Just google around, you will find the answer interesting. Big Box retail can work only in a specific set of circumstances and large dense cities are NOT the natural places for such outlets!. (just google around to find out why).

So rest contented, that your worst "fears' wont come about under any circumstances.! Point is , you should let markets function and multiple business models to be experimented upon . Only then you can get efficiency and sensible solutions. "Solutions" imposed from top based on the machinzations of interest groups of "know all" "Planners" from ding dong places like JNU and Plannign Commission is just ridiculous and a terrible overall waste!

It depends on product we are talking about. A toothpaste can be made with equipment that can fit in a garage. Don’t see a need to make a Colgate outside Mumbai and burn diesel to transport it all the way to Orissa. Every state/district can have its own brand. Same cannot be said of some Pharmaceuticals or Automobiles or cosmetics though.

That is toothpaste thing is not true. It is the same as the automobiles. It is obvious you dont have any hands on experience in running a business. Why dont you put your money where your mouth is and start making toothpastes in your city, or atleast be an "angel investor" and put money with some venture which wants to do that. Just think over that from that perspective and you will quickly agree that it wont work.

If reality was what you think it is, you will have exactly the same situation as you mentioned. In fact, read the label in your toothpaste tube very carefully if you are in India. You will find the manufacturer to be some unheard of guy in some random place .. Like Pepsodent Manufactured by XYZ in Trithala , Kerala, marketed by Unilever India!