Indian Economy: News and Discussion (Apr 1 2011)

Theo_Fidel · Post by **Theo_Fidel** » 04 Aug 2011 01:58

Human ingenuity and entrepreneurship can not be replaced by robots. It is the sweat of human endeavor that makes life better for us. To do this we need a proper wealth base.

Suraj did not mention the side benefits of the increased worker:dependent ratio. The biggest is the ability to invest and create Wealth in desh due to freed up capital. To give you some consideration of the scale, the wealth of the nation (roads, houses, education, institutions, patents, technical knowledge, etc) has to be raised from about $12 Trillion to about $400 Trillion to ensure a modest per capita income prosperity of $20,000 per year or so. The only way to get there is to invest our wealth over the next 30 years before we too start growing old.

The people are coming one way or the other. The question is can we grow prosperous before we grow old.

Bade · Post by **Bade** » 04 Aug 2011 02:34

Theo, popular science channels are openly talking about increasing human longevity in the next 30 yrs itself. One can think of the added problems that will create in the current economic model with people not dying off. We may end up having a lot of time to grow old.

Suraj, why buy from the Japanese? The hardworking geniuses need to build that within our population set. The need to trade with others is due to disparities in achievements and services one can provide for ourselves. But at the total equilibrium point even nation state boundaries will not matter much.

Ironically, it will look like a welfare state dependent on the backs of the majority robots and few geniuses.

The hard part is colonizing the resources to make products that the dependents need, if not all are available in adequate quantities.

Suraj · Post by **Suraj** » 04 Aug 2011 04:52

Robots are capital and technology intensive. Their creation and use arose from the need to automate tasks that amounted to repetitive drudgery, required precision and speed, as well as addressing hazardous operations. Basically, they're a creation of economic circumstances where significant technology and capital were available compared to labour.

Developing countries in comparison are comparatively capital deficit but utilize their cheap labour pool to build their wealth base. As a trivialized example, people hire a maid with a broom in India, but just buy vacuum cleaners in the US; it's comparatively more affordable to pay someone a little every month to do that work than to make an immediate capital outlay on a technological device, and to pay for the electricity (and depend on reliable electrical supply). Same for the hypothetical replace-humans-with-robots argument. Consider the cost of robots/mechaniization all around - assorted vending machines, ATMs, etc.

Add up the cost of building enough of them to replace several hundreds of million people. That cost is paid with the accrued wealth within the economy. If you attempt to add up the numbers, you'll find that it's not remotely practical. The likes of Japan can do that to some extent because of a massively greater amount of accumulated wealth per capita. India doesn't have the benefit of that capital base to throw at. What we have is cheap labour of employable age (but not necessarily skilled or being applied), and comparatively manageable young/old dependent population. Our demographic dividend lies in training and applying that employable labour pool to build our wealth. If we don't, then we have a graying population in addition to lacking wealth - the growing old before growing rich situation.

gakakkad · Post by **gakakkad** » 04 Aug 2011 08:10

Theo_Fidel wrote:Human ingenuity and entrepreneurship can not be replaced by robots. It is the sweat of human endeavor that makes life better for us. To do this we need a proper wealth base.

Suraj did not mention the side benefits of the increased worker:dependent ratio. The biggest is the ability to invest and create Wealth in desh due to freed up capital. To give you some consideration of the scale, the wealth of the nation (roads, houses, education, institutions, patents, technical knowledge, etc) has to be raised from about $12 Trillion to about $400 Trillion to ensure a modest per capita income prosperity of $20,000 per year or so. The only way to get there is to invest our wealth over the next 30 years before we too start growing old.

The people are coming one way or the other. The question is can we grow prosperous before we grow old.

Spot on. This is exactly how an esteemed IIM-A prof put it. He went to a conference where he met some commies from New Delhi. Apparently some of the central govt E-CON-omist (the belgian and his chelas) have a different view. They would rather transfer India into a medieval village . A lot of NAC'S proposals are based on gimmicky indices similar to happiness quotient. And hence the idiotic welfare scheme. Corporate gurus have tried to argue with these nuts to leave desh alone. But its all futile.

Prem · Post by **Prem** » 04 Aug 2011 22:27

Dhiman wrote:times seem to be changing => India to give $2bn to fund bailouts in Europe

Buying into Greek Shipping industry might be a betetr way to help them and ourself in the long term.

Bade · Post by **Bade** » 04 Aug 2011 22:59

To grow to $400 Trillion in 30 years requires growth at a constant ~ 12 % for that long. The year 2050 at a hundred years of the Republic is going to be the marker.

Theo_Fidel · Post by **Theo_Fidel** » 05 Aug 2011 02:07

Bade,

It is unfortunately a little more complicated than that.

Our investment rate right now is about 35%. Or about $600 Billion out of a GDP of $1.7 Trillion or so. Rest is spent on things like food, fuel, etc. Say we include intangible things like education and knowledge. SAy that increases value at 3% or so. So we are adding to our Capital stock at only about 8% or so. It is also not a straight compounding calculator as capital stock also depreciates, at least the fixed stock. it is a purely accumulative calculator. Inflation would be the value inflator.

So very rough numbers. In thirty years. Nominal GDP growth of 10%. No depreciation assumed. Dollar inflation of 3%. (guys don't jump over this number, I know it is red rag and all..)

Code: Select all

Investment rate      Total Wealth Accumulation        Very rough per capita income 2040 (assume GDP of 8% of wealth/population 1.6 B)

30%                          $130 Trillion                            $6500 
35%                          $160 Trillion                            $8000
40%                          $195 Trillion                            $9750
45%                          $230 Trillion                            $1150

Of course nominal GDP might grow faster. It is also horribly back loaded. 80% of wealth accumulation occurs after year 15. Here is a sample of the 35% investment rate by year.

Code: Select all

Prem · Post by **Prem** » 05 Aug 2011 08:37

http://blogs.ft.com/economistsforum/201 ... z1U7eQuL3w
Is India heading into a middle income trap?

The gloss is coming off the India story. Recent weeks have seen downgraded growth forecasts, rising inflationary pressure, poor job creation numbers, a faltering stock market and an erratic trajectory in inbound foreign investment. These developments, coupled with the signal failure to deliver on any of its promised “second generation” economic reforms, are leading many commentators to point to a state of “policy paralysis” in the current government.
With a growth rate of national income stuck at around 8.5 per cent, the much-vaunted plan of achieving double-digit growth rates in the coming few years has been unceremoniously shelved. This means that rather than it taking 7 years for income to double, it will instead take 9 years, which in turn implies that achieving rich country income levels is pushed back another generation or more. Endemic poverty and social deprivation will haunt another generation. This could have been avoided, had the growth momentum been maintained.
The most important aspect will be to redefine the concept of “inclusive development”, moving it away from today’s model of redistribution substituting for growth, to a mode of growth with redistribution. The process of replacing inefficient subsidies with direct cash transfers to the poor, already afoot, ought to be accelerated. Labour law reform may be coupled with the establishment of a social security system, which provides a safety net to those who may lose their job in a more flexible labour market. And, crucially, the nexus between big business and big government must be broken, so that the average voter realises that true economic freedom empowers him.
India cannot wait much longer to return to the high road of economic development, and avoid the quicksand of the middle income trap that beckons today.

uddu · Post by **uddu** » 05 Aug 2011 09:48

This Nanna Mujahid in economy, has a zimple question to Economic Mullahs of BR
pls don't mind my lack of knowledge on Economics, I have just set foot on the Economic Madrassa just now onlee.

The question is
1) Is inflation created by lack of products in the market or over consumption?
In India's case is it not due to lack of products rather than over consumption (say Hundred people wanting 100 bread loaf but only 70 available, hence the increase in price) rather than (Hundred people all wanting two loaf of bread each)

The solution to this problem especially will work perfectly in countries will small population or developed economies (one needing to buy two loaf) is put in restriction or make it unaffordable for the person to have two loaf and he/she has to be satisfied with one loaf. Will this work in India? The person is looking for one loaf and he/she will die if he/she did not get it. Or in a way is it not making us more poor and pushing us into more poverty making the life of Common man miserable?

Can the solution to this problem can be mass production ensuring that the 100 people do have 1 loaf each? That means produce 30 more loaf of bread and make it affordable to the common man, or say meet the requirement of the market and bring the prices down? Will that not work?

So the next argument can be it's not possible, becoz ti will require other resources, to make a bread, manpower to power need to be increased. Yes it has to be. Why not create more jobs and more power. So all the sectors need to pull up according to the requirement. This will surely increase more requirement for bread, as more people are getting employed, so increase the production further and similarly increase the production in other areas from housing power everything that will feel the shortage in the near future. And if anything is over produced (except houses) that can be exported as well.

Is this what the Chinese did while they were growing (I mean the model, and neglect the negatives of that like more houses constructed with no takers etc, we can avoid such issues) Can't we a nation with large population be looking at doing it the big way rather than being the losers? Because the prices are not going to go down. Either you to have utter poverty for 50 percent and 50 percent prosper and even have to push the not poor into the poor category with high prices and less growth). So why not adopt the way of High growth and lower prices? Mass production.

vera_k · Post by **vera_k** » 05 Aug 2011 11:04

^^^

Why indeed not? But you have to convince the NAC and Manmohan Singh types with their focus on NREGA style redistribution programs while doing little to improve bottlenecks to mass production (infrastructure, education/skills and finance). Maybe the short term (10-15 year) solution is to cut a deal with the PRC and import some of their manpower to get things done quickly.

I'm saying this because I suspect most of the adults receiving NREGA wages cannot be trained to be more productive and will be on this program till they die. Meanwhile the younger generation is not yet ready to step in in the numbers required.

I'd also say that there is not yet an economic growth consensus in India. For all the bashing the PRC receives on growth statistics fudged by local party officials, it is pretty clear that if any fudging is going on, it is because the officials are looking at growth as job #1.

vera_k · Post by **vera_k** » 05 Aug 2011 11:07

China offers cheap yuan loans to finance more than $50bn Indian orders for power equipment

Seems like a win-win solution. I hope the government does not get in the way.

uddu · Post by **uddu** » 05 Aug 2011 14:42

Beware of Chinese products, they come cheap, but they are also cheap in quality. We had issues with Chinese equipment in power sector with losses incurred etc.
Issues with Chinese equipment
Chinese equipment stalls Durgapur Power plant; seeks BHEL help

http://www.business-standard.com/power/ ... /107702/on
Facing problems with Chinese power equipments, state owned Durgapur Projects Limited is believed to have approached BHEL for carrying out repair and recommission the 300 MW thermal power plant in West Bengal.

Chinese firm Dong Fang had supplied turbine to DPL, which has become inoperable due to some technical snag since nearly last three months, sources in the know said.

When contacted, Li Qi, CEO of Dong Fang (India), told PTI "two months ago we were informed by DPL that some snag has developed in the equipment... We completed this project one year ago and transferred it to DPL."

Meanwhile, BHEL sources confirmed that DPL has contacted them to put the unit back on stream. In view of the Chinese technology, BHEL will have to resort to reverse engineering to gauge the extent of the problem before offering solutions.

DPL's maintenance contract with Dong Fang has also lapsed and the Chinese firm is believed to have said that turbine may have to be taken back to their factory in China for carrying out necessary repair, which may take a long time besides additional cost.

Keeping in mind such incidents, Central Electricity Authority (CEA) has recently issued guidelines saying power equipments suppliers must have manufacturing facility in India, so that any technical snag could be repaired without losing any time.

'BHEL power equipment outguns Chinese rivals'

http://expressbuzz.com/finance/bhel-pow ... 97402.html
NEW DELHI: Amid debate over efficiency of power equipment supplied by BHEL and Chinese firms, brokerages have given thumbs up to the Indian PSU, saying its offerings have an "edge" over rivals from China.

State-owned BHEL synchronised 9,442 MW of generating equipment last fiscal. This accounted for about 57% and 89% of total thermal and hydro capacity additions in the country.

However, of late, many private players such as Reliance Power have ordered Chinese equipment for their projects including Ultra Mega Power Projects (UMPPs).

Meanwhile, against the backdrop of comparisons between equipment supplied by BHEL and the Chinese players, a working group has been set up by the Power Ministry to analyse the performance of the sets from the two entities.

The debate over BHEL and Chinese sets comes at a time when the Indian power sector is projected to see an ambitious capacity addition of over 80,000 MW in the 12th five-year plan (2012-17).

Various reports by different entities, however, have supported BHEL, say experts.

"BHEL retains the edge over the Chinese of a five% better heat rate, PLF (Plant Load Factor) and lower auxiliary consumption. This is reflected in the trust that private IPPs (Independent Power Producers) have reposed in BHEL," global group Bank of America Merrill Lynch said in a recent report.

PLF is an indicator of generation efficiency.

Meanwhile, industry sources requesting anonymity said that a major concern with Chinese sets is the lack of asset maintenance by Original Equipment Manufacturers (OEMs), even during the initial years of operation.

Further, they added, that there are also apprehensions about after sales support and related costs as compared to domestic entities like BHEL.

A recent report from JM Financial said that life-cycle cost of BHEL equipment is lower as compared to that of Chinese sets, mainly due to better PLF and lesser operational costs.
And also about the Chinese playing the dirty game. A 2010 report.
China killing Indian manufacturing: L&T chief
http://business.rediff.com/report/2010/ ... -chief.htm
Private sector engineering major Larsen & Toubro has said that China is systematically killing Indian manufacturing sector and sought 25 per cent anti-dumping duty on Chinese goods.

"China has a fixed currency. It is not a market economy like ours. China is systematically killing the Indian manufacturing sector," L&T chairman and managing director A M Naik, who was in Surat [ Images ] for foundation stone laying ceremony of a forgings unit at Hazira said.

"There are taxes on goods manufactured locally, but none on imported products (from China). This is an unfair situation for Indian goods. This is why there should be 25 per cent anti-dumping duty on Chinese products," Naik said.

It seems things has improved a lot for Indian power companies.

gakakkad · Post by **gakakkad** » 05 Aug 2011 15:26

@ Uddu There is a systematic effort by the Indian CON-grass led GOI to dismantle the energy industry of India. Do you know that the Chinese power industry rely's solely on India ? The thing is Gov't has made it duty free for the Chinese manufacturers to import to India. The chinese gov't has given their companies complete tax exemption to export to India. So a Chinese company selling power/energy equipment to India does not have to pay any tax whatsoever. Neither in India nor China. While an Indian company has to pay various taxes in India. So in terms of price GOI has ensured that Indian companies cannot compete with the Chinese. Thereby dismantling our capacity.

http://energybusiness.in/lt-drops-power ... ion-plans/

chaanakya · Post by **chaanakya** » 05 Aug 2011 16:54

gakakkad wrote:@ Uddu There is a systematic effort by the Indian CON-grass led GOI to dismantle the energy industry of India. Do you know that the Chinese power industry rely's solely on India ? The thing is Gov't has made it duty free for the Chinese manufacturers to import to India. The chinese gov't has given their companies complete tax exemption to export to India. So a Chinese company selling power/energy equipment to India does not have to pay any tax whatsoever. Neither in India nor China. While an Indian company has to pay various taxes in India. So in terms of price GOI has ensured that Indian companies cannot compete with the Chinese. Thereby dismantling our capacity.

http://energybusiness.in/lt-drops-power ... ion-plans/

This is really serious issue. Is it in Thermal power only or in other categories as well?

Vipul · Post by **Vipul** » 05 Aug 2011 21:06

China after reaching capacity of 800,000 MW is not going to generate enough demand for its Power equipment companies.These companies have a combined capability of manufacturing equipment to generate 100,000 MW each year.So in order to keep the order book full for these companies and also to finish off emerging competitor's in India, it is offering easy finance terms to Indian companies to choose its junk.

vina · Post by **vina** » 06 Aug 2011 09:24

Cross Posting..
Muh hwaa haa.. Finally one of uncle's poodles (or is it one of the heads of Cerberus the 3 headed dog that guards the gates of hell) finally got the cojones to bark and call a spade a spade and all hell has broken loose in the Obama administration in panic !

. Now frankly when they could dish it out all this while with their poodles/cerberus to other sovereign govts on mere whims and wholly unrealistic benchmarks, but cant take it when the boot is kicking their bottom, I have no sympathy for Unkil.

But a more "deeper" thought is what happens to all that Phynance theories about "risk free rate" ..All of Phynance is based on that, from portfolio math to risk neutral valuation and all that fundamental stuff. If US Treasury is no longer risk free , so what is risk free . A pill-o-soppy-cal kweschun that was ducked for so long by the e-Con-o-Mists. Well, this is something that is worthy of the likes of Super Comprehension to ponder over and chew on. Well, what d'ya know. Go ask Super Comprehension!

Since this is Indian e-Con-o-Me dhaga onree, I think a crash in commodity prices is very good for India. Also , the coming crash of China is even better. I one fell swoop, the US (or rather S&P) has shafted China.. Well, think of it. All that $2T reserves dropped in value by a couple of hundred billion! . Now the true music beings. The Chinese will suddenly realize that they are out of time and can't do the "managed" growing of domestic consumption and removal of the fixed peg. They have to do it quickly and diversify away IMMEDIATLY. A massive double whammy! Panda is Phacked.

All very good for Yindia. Global interest rates will remain low, commodity prices will crash ( there is no monetary bullets left..sorry you cant go much below zero anyways , to pump the commodity bubble!)

Jai Ho!

But right now keep the shorts firmly in place folks.

chetak · Post by **chetak** » 06 Aug 2011 09:33

Airavat wrote:India one of key markets: HSBC

Hongkong and Shanghai Banking Corp. Ltd (HSBC) on Tuesday said pre-tax profit from India rose 33% to $451 million (Rs.1, 993 crore) in January-June 2011, driven by rising fee income from global banking and markets division, even though its loan book did not grow because the bank was cautious in lending.

Asia, led by Hong Kong, contributed 59% or $6.8 billion of HSBC’s $11.5 billion pre-tax profits, mainly due to a 17% rise in fee income to $2.7 billion. HSBC, the fourth largest financial institution in the world by market value, said India along with China, Singapore, Indonesia, Malaysia and Australia are key markets because of economic growth in the region even as concerns remain in the developed markets including the US and Europe.

“Markets like India and China are strategic markets and we will continue to feed both. In India, especially, the attrition rate is high and there is a war for talent,” Wong said via a video conference.

“Markets like India and China are strategic markets and we will continue to feed both".

What he actually meant to say was...

“Markets like India and China are strategic markets and we will continue to feed in both".

Hari Seldon · Post by **Hari Seldon** » 06 Aug 2011 09:40

vina garu,

Also , the coming crash of China is even better. I one fell swoop, the US (or rather S&P) has shafted China.. Well, think of it. All that $2T reserves dropped in value by a couple of hundred billion! . Now the true music beings. The Chinese will suddenly realize that they are out of time and can't do the "managed" growing of domestic consumption and removal of the fixed peg. They have to do it quickly and diversify away IMMEDIATLY. A massive double whammy! Panda is Phacked.

Spot on only. And poor panda can't even whine victimization and all that - their own dlagon-rating agency, presumably with the full faith and credit of the PRC - had previously downgraded khanland after all...LOL Loving it only....jai hu, jai hu

gakakkad · Post by **gakakkad** » 06 Aug 2011 09:58

^^^ Cant help the feeling of schadenfreude

Prem · Post by **Prem** » 07 Aug 2011 02:41

http://www.engadget.com/2011/08/06/indi ... ware-race/
Indian $70 solar slate joins XO-3 and Sakshat in vaporware race

Another day, another phantom budget tablet: today's unnamed low-cost model is manufactured by Bharat Electronics, out of India. The Bharat slate runs Android 2.2, sports solar charging for back-up power, and sings for only 3000 Rupees, or just shy of $70. No word on processor speed, RAM, or storage, but Hindu Business Line states that the Froyo pads will "allow data to be stored and uploaded in real time to a central server," suggesting a cloud-based storage system. Availability? None for now, this slate is being sold exclusively to India's Ministry of Rural Development for use in a poverty survey. Bharat's Chairman and Managing Director, Ashwani Datt, stated they would have to configure a new version of the slate if they were to offer it to students or consumers. We'll let you know what we think just as soon as we get our hands on the XO-3 and that other tablet from India. You know, for vaporous comparison

Shankas · Post by **Shankas** » 07 Aug 2011 03:37

uddu wrote:Beware of Chinese products, they come cheap, but they are also cheap in quality. We had issues with Chinese equipment in power sector with losses incurred etc.
Issues with Chinese equipment
Chinese equipment stalls Durgapur Power plant; seeks BHEL help
http://www.business-standard.com/power/ ... /107702/on
Facing problems with Chinese power equipments, state owned Durgapur Projects Limited is believed to have approached BHEL for carrying out repair and recommission the 300 MW thermal power plant in West Bengal.

Chinese firm Dong Fang had supplied turbine to DPL, which has become inoperable due to some technical snag since nearly last three months, sources in the know said.

When contacted, Li Qi, CEO of Dong Fang (India), told PTI "two months ago we were informed by DPL that some snag has developed in the equipment... We completed this project one year ago and transferred it to DPL."

This is their standard answer. The reason they can't fix anything on site is because products are reverse engineered and the don't know how to fix them.

Heard this in Africa - Chinese Guarantee expires when their Aircraft takes off.

vera_k · Post by **vera_k** » 08 Aug 2011 10:52

Foreign investors doubt India's export numbers

Export statistics released by commerce don't match data IMF trade data of imports reported by other countries.

Airavat · Post by **Airavat** » 08 Aug 2011 11:07

GoM decontrols urea prices

Shares of fertiliser firms rose 2-5 percent early on Monday in a weak Mumbai market after the government moved a step closer to decontrolling urea prices and bringing it under the nutrient based policy. Urea is the most widely used soil nutrient in India and companies have been struggling to increase production on issues related to availability of natural gas and rising cost pressures cutting profits. The present retail price for urea is about 5,300 rupees per tonne and farmers will have to pay 10 percent more for the nutrient in the first year after the new policy is implemented. "The development also ensures that fertiliser makers price the products in a competitive manner and in a way that farmers can afford it," another analyst with a Mumbai-based brokerage said.

vina · Post by **vina** » 08 Aug 2011 11:53

Hmm. Looks like the stunning export numbers that India reported is being questioned by Jeffries & Co , coz, the numbers dont tally with the import numbers the importing countries reported to IMF for the trade data.

Hope that the commerce ministry is not getting into the Shanghai Stats mode.

abhischekcc · Post by **abhischekcc** » 08 Aug 2011 14:53

chaanakya wrote:
gakakkad wrote:@ Uddu There is a systematic effort by the Indian CON-grass led GOI to dismantle the energy industry of India. Do you know that the Chinese power industry rely's solely on India ? The thing is Gov't has made it duty free for the Chinese manufacturers to import to India. The chinese gov't has given their companies complete tax exemption to export to India. So a Chinese company selling power/energy equipment to India does not have to pay any tax whatsoever. Neither in India nor China. While an Indian company has to pay various taxes in India. So in terms of price GOI has ensured that Indian companies cannot compete with the Chinese. Thereby dismantling our capacity.

http://energybusiness.in/lt-drops-power ... ion-plans/
This is really serious issue. Is it in Thermal power only or in other categories as well?

They did something similar in dismantiling the SSIs as well, when the large firms, which were new entrants, were given loans at concessional rates, while more hurdles were placed in front of the smaller firms.

Theo_Fidel · Post by **Theo_Fidel** » 08 Aug 2011 21:02

New base for IIP ?

http://www.financialexpress.com/news/Ne ... er/825703/

Global economic crisis had hit India’s industrial output much harder than estimated by the old calculations of the Index of Industrial Production (IIP) in 2008-09.

Even in the following year in 2009-10, when the Indian economy started recovering from the crisis, industrial expansion was much lower at 5.3% according to the new series of IIP, as compared to 10.5% under the old series of IIP.

This comparison has been made by the Prime Minister’s Economic Advisory Council (PMEAC) in its Economic Outlook 2011-12 released on Monday. The PMEAC said the old series substantially underestimated the industrial output growth in the three years preceding the crisis year of 2008-09.

For instance, the old series pegged the IIP growth at 8.7% in 2007-08, whereas, as per the new series, IIP growth was actually 15.5%. That means an underestimation of almost 7 percentage points. “The revised series shows an output growth pattern that is fairly different from what the old series has indicated,” PMEAC said in its report.

Prem · Post by **Prem** » 08 Aug 2011 21:42

X-post
http://www.celsias.com/article/beginnin ... ollar-oil/
The Beginning of the End of the Supremacy of the US Dollar in Oil
[quote]India’s government has decided to pay for its imports of Iranian oil in rupees.
The decision by one of the world’s strongest emerging economies, represents yet another undermining of the both the sanctions currently imposed on Iran by both the United States and the United Nations Security Council and the fiscal hegemony exercised over global oil trade by both New York and London.According to a report in India’s The Telegraph newspaper, "Through this method, the path for India's national currency to enter the international currency market will be paved. India's Ministry of Finance has considered a method to resolve the tension over currency with Iran.According to this proposal, oil buyers are allowed to open Letters of Credit in rupees and this Letter of Credit can be used by Iran to buy Indian productsUnder terms of the arrangement, Iran can buy Indian commodities including tea, rice, machinery, and engineering and technical services instead of using dollars, while Iran under terms of the arrangement can convert its surplus currency revenues from selling of oil to India into euros. Should Tehran endorse the arrangement it will mark the first time that the rupee will be utilized as an international currency beyond the dollar/euro zone[/quote

gakakkad · Post by **gakakkad** » 09 Aug 2011 00:17

so finally we can print notes to buy oil. some countries will be truly pissed off.

vina · Post by **vina** » 09 Aug 2011 09:21

Yawn... Macro e-Con-O-Mic tide turning India's way. Global interest rates and low commodity prices are good for India. I am taking a bet that the RBI will actually drop a symbolic 25bps in the next interest rate meet, signalling a downward bias in the interest rate.

And yeah, I also expect Shri Bernanke to pull out some unorthodox rabbits out of his hat in today's Fed meeting to get the e-Con-O-Mee going in the US. The old "Quantitative easing" business is probably run it's course and given the Chinese obduracy with currency is actually just fueling inflation . The way to deal with the Chinese is to punch them in the chin and kick the feet out of their exports if they don't play ball, sort of like what Japan was forced to do in the early 90s There is NO other way out of the mess, other than address the fundamental economic imbalance. Chinese currency is undervalued AT LEAST 20% with true fair value being some 25% to 27% up from here. That is the way to get consumption going in china, prick that investment bubble and the idiotic commodity excess. So, expect the US and Europeans to jointly work on that and kick China in the nuts. Unkil will rope in Japan, S. Korea (where the index melted some 9% this morning when I looked) and the Euros (Germany esp ) will get the Russians on board. For India, that is perfectly in our national interest to do so and we will happily do so. So , everyone lines up against China and says,

Freely float your currency, or no market access to your exports under WTO

. This will come in the next few months.

Meanwhile , I hope the e-Con Baboons and the Mantris and the Dilli-Ding dongs in general , pull their pants up and get their acts together this time now the macro is swinging our way. I just hope unlike in 2006 & 2007, when under the thumb of the Commies , the UPA wasted the fiscal leeway due to the economic cycle in expanding "Entitlement Programs" like NREGA and doling out subsidies, they bite the bullet, totally decontrol energy prices, put a freeze on entitlement spending and this time actually use the leeway from the fiscal cycle to invest in productive growth oriented avenues, massive investment in infra, and do the deep reforms in the sectors hitherto largely untouched (agriculture, retail, financial markets, etc. .. labor can come last) to set the stage for strong productivity growth to have sustained strong growth over the next decade.

I pray to Bhagwan, Allah, Yahweh, Jesus, No God,Ahura Mazda, whatever/whoever, to finally knock some sense into the MMS and the Dilli Ding-Dongs to kick the National Advisory Council jokers in the nuts and tell them to make themselves scarce for the next 2 years and show up just before elections , so that you can put nice big sounding entitlement plans for the election manifesto , but actually dont have to do anything for the next 2 years.

ramana · Post by **ramana** » 09 Aug 2011 09:27

vina, The American century turned out to be a few decades. The Chinese one is less than a decade.

vina · Post by **vina** » 09 Aug 2011 09:36

ramana wrote:vina, The American century turned out to be a few decades. The Chinese one is less than a decade.

At the rate the Chinese are going, it is going to be still born, unless they fundamentally reform their economic system. The problem is that they dont realize that their formula for success until now is past it's sell by date and cant work going forward. Somethings gotta give and unless they move to something that will work sustainably and take them to the next level, they are toast. The current system with it's imbalance is dead. The Chinese think that they can continue with the merry old ways. They cant. This system needs 2 people to play tango, one the Chinese and the other the US and Europe. US and Euro cant play this game anymore and the game is over.

Now the music has stopped , is there going to be another tune , or is the chair going to get kicked out from under you.

So like the song goes.. "Bad Boyz, Bad Boyz , watcha gonna do ? Watcha gonna do when they come fer you!"

vina · Post by **vina** » 09 Aug 2011 09:48

Lo, ji. Lookee.. Inflation Climbs in China on Higher Food Prices

See, the Chinese too have a inflation problem fueled by excess liquidity (at BRF in 2008, we had said that the stimulus would be largely mis spent and result in inflation down the line.. brone out by the high speed rail fiasco and the food inflation and now the cratering global economy will bring growth down again... oh well.. go ask Glandpa Hu and Wen. What goes my father's) . In India , it makes it to the headlines, in China it is either not discussed or suppressed and any small "incidents" that break out are put down by the CCP police.

vera_k · Post by **vera_k** » 09 Aug 2011 10:28

Donald Trump was on TV claiming the Chinese currency is 41% undervalued. And that he would be satisfied with a 25% import duty. But all his bluster is meaningless unless he can convince the Republicans to raise taxes. No way the USA can be like the Indian economy with minimal tax collection and still aspire for AA+ or AAA.

sukhish · Post by **sukhish** » 09 Aug 2011 11:04

India all the way. american century indeed seems to have fizzled out in less than three decades. looks like desi civilization is about conqur. DESIS ALL THE WAY

gakakkad · Post by **gakakkad** » 09 Aug 2011 15:58

sukhish wrote:India all the way. american century indeed seems to have fizzled out in less than three decades. looks like desi civilization is about conqur. DESIS ALL THE WAY

I put my money on 21st century being " NOBODIES CENTURY"

Boss , no country in the world has ever been as dominant on the global scale as the US. We have a long , long way to go. Just look at the American universities . No Indian university comes any where close. Intel , AMD , NVIDIA etc . Do you see any Indian company there?

It can be an Indian century if and only if the GOI does the following -

1)Economic reforms - Land , financial , retail FDI , Raising the insurance FDI cap , doing away with the license raj , Labour reforms , Single window clearance for setting up and approving new Businesses

2) Promoting competition in Agriculture , doing away with subsidies . Sweeping reforms to reduce population employed in agriculture. Green revolution Part 2 reduction in Agricultural land usage, increasing yeild per area.

3) Tremendous Educational reforms .permitting FDI in education. Autonomy to Universities. Research promotion. Employing foreign faculty of repute/ Nobel laureates .

4) Doing away with reservations

5) Scrapping MNREGA and other such schemes

6) Corporatizing Indian railway. Private production of locomotives

7) Serious , transparent infrastructure investment

8 Spending money on Hydrogen fuel cell vehicle research to reduce dependence of Oil

9) Setting up nuclear plants with capacity of 100000 MW by 2030 . Reducing energy loss in transmission and distribution.

10) Making me the PM

AND only BRfites having voting rights. WKK , naxals / EJ should be counted as robots in the next Census and treated accordingly. That will solve our labour problem.

abhischekcc · Post by **abhischekcc** » 09 Aug 2011 16:19

We do not have to follow a linear path to success.

Prem · Post by **Prem** » 10 Aug 2011 01:45

RBI Extends Governor Subbarao's Term

MUMBAI – Faced with global economic instability, India's federal government Tuesday chose continuity over change at the central bank, saying that it has extended governor Duvvuri Subbarao's term by two years. The new term will run from Sept. 5 to Sept. 4, 2013, the government said. "Though there was time [to decide on an extension] till September, we decided we should do it quickly to ensure that there is no uncertainty," India's finance minister Pranab Mukherjee told reporters in New Delhi after the announcement.
He added that Mr. Subbarao is doing a "particularly good job."

http://online.wsj.com/article/SB1000142 ... 84384.html

Prem · Post by **Prem** » 10 Aug 2011 01:47

http://online.wsj.com/article/SB1000142 ... 98400.html
Indian Mutual Funds Open Up to Foreign Investors

MUMBAI – Indian capital markets regulator Securities and Exchange Board of India Tuesday allowed foreign investors to buy local mutual funds, with a total limit of $10 billion for equity schemes and $3 billion for debt funds meant to invest in infrastructure. The regulator permitted foreign investors to hold mutual fund units in both electronic form and through unit confirmation receipts. In his budget speech in February, the finance minister had said mutual funds registered with the regulator will be allowed to accept subscriptions from foreign investors. Foreign institutional investors and sub-accounts registered with the regulator, as well as Indians living abroad are already allowed to invest in local mutual funds.

Theo_Fidel · Post by **Theo_Fidel** » 10 Aug 2011 07:22

Gk,

I'll settle for 1,2 & 3. No way 4,5&6 are happening, there would be war in desh. 7 is critical. 8& 9 are questionable.

10 of course must be done right away. Simple logical. Now where is my hafta.

RamaY · Post by **RamaY** » 10 Aug 2011 07:29

Gakkaduddin,

I disagree with everything except 7 and 10

. Point 1 is good but I am against FDI in most of the sectors.