Indian Economy - News & Discussion Oct 12 2013

Christopher Sidor · Post by **Christopher Sidor** » 26 Dec 2013 13:39

^^^
This is 5 years too late in coming. This was clear to many of us by 2008-9. India needed to wean itself away from the dependency of foreign capital. Now at the fag end of 2013 after doing grievous harm to our economy the realization is dawning. I would love to say "Better Late then never" but these "Nikama" people have Wasted the last 5 years.

Gerard · Post by **Gerard** » 26 Dec 2013 20:34

How life is improving in India's poorest regions

nachiket · Post by **nachiket** » 26 Dec 2013 21:04

A quick look at wiki shows that India's current GDP (nominal) is approximately equal to what China's GDP was in 2004, just nine years ago. Looking at the vast gap now, that doesn't seem like much. But since 2004, China has enjoyed an unbelievable string of yearly growth rates. Unfortunately for us, that was probably a result of all the investments they did in infrastructure in the decade before that. Since we have made no such investments since 2004, we'll probably take another 8-10 years to even start getting consistent growth rates anywhere close to the Chinese ones. And this is assuming that whichever government comes to power in 2014 starts setting things right in earnest. Now even if they do get every policy right (which is unlikely), the delay in getting results will probably mean that the administration may be booted out of power in 2019 in favor of another populist admin promising quick results. Truly a difficult situation to be in.

Whoever comes to power in 2014 needs to try and make policy changes without worrying about the next elections. I have little hope of that actually happening though.

Austin · Post by **Austin** » 26 Dec 2013 21:15

Cebr World Economic League Table

http://www.cebr.com/reports/cebr-world- ... gue-table/

http://www.cebr.com/reports/cebr-world- ... wnload-pdf

svinayak · Post by **svinayak** » 27 Dec 2013 03:35

India can win the gold game

Simple difference

A look at the history of gold control by governments explains why gold control policies work in the West but not in India. In the West, governments — whether democratic or autocratic, socialist or capitalist — long back robbed the people of their gold, nationalised it and made it a State asset. There is no private gold or culture of gold in the West. It is a State monopoly and has long ceased to be the people’s preference and personal asset. It is just another metal for investment.

But that could never happen in India. While three-fourths of the gold imported into India is for jewellery, only a fourth is for investment. No seer is needed to say that economic theories on gold developed in the West are inappropriate to India. Indian needs a home-grown theory.

To evolve an India-centric policy on gold, it has to be conceded that Indians will continue to buy gold (officially imported or smuggled) as long as the world supplies gold to India. If there is no gold in the world, what Indians will do is a hypothetical question.

India imports a quarter of world’s gold supplies; this is regarded as a curse since it dents India’s current account. But the establishment thinkers have never asked themselves what would happen to the world gold market if India did not need imported (or smuggled gold) for a year. The answer is obvious. The world gold market will crash. Who will benefit from the crash? Unquestionably India, as Indians will spend less in dollars for gold.

Indian demand

One good thing, as the Bureau of Indian Standards (BIS) notes, is that Indians do not buy more gold because it is cheap. Nor do they stop or buy less because gold is costlier. But if Indians become prosperous, says the BIS, they buy more gold. So, cheap gold does not entail more gold imports. It just means less outgo of forex.

Indian gold demand causes high gold prices in the world market. Who then is capable of bringing down the world gold prices other than the biggest buyer of gold in the world — namely India itself? If India’s gold imports fire up world gold prices, India cutting imports will bring down gold prices.

But, India can decisively influence gold prices if, and only if, it has guts and acts strategically. First, it must aggregate its gold demand by canalising its import through banks and stop private import of gold. Second, it must sell gold at global rates plus 10 per cent to anyone in India. Third, it must build adequate strategic buffer stock of gold so that it can potentially and even actually stop or cut imports and use the buffer stock to meet domestic demand. This will empower India, the largest importer of gold, to bend the world gold prices.

But wherefrom and how will the government of India build a strategic buffer stock of gold? Here lies the challenge.

Strategic stock counts

Estimates of stocks of gold with Indians range from 20,000 to 40,000 tonnes. Therefore, India lacks not gold stock, but strategic stock of gold with government. Data shows that the share of investment gold — namely unornamented gold — which used to be between a fifth and quarter of the stock in the past, has risen sharply of late. But assuming that only a fifth of the stock is held as investment in India, gold in non-jewellery form will be 4,000 tonnes on the lower side and 8,000 tonnes on the higher side.

The Indian government can build a strategic buffer stock of 3,000 tonnes of unornamented gold by issuing bonds to be subscribed by gold holders in India, returnable to them as gold on maturity.

Once this happens, by using, or even by signalling the use of its buffer stock to stop or reduce gold imports, India can cause a glut in the world gold market and bring down prices. India can also cartelise with China and both, accounting for half the world’s demand for gold, can virtually fix gold prices. India can force down the gold prices, plan ahead and buy and add to its strategic stock of gold. The more the buffer stock, the more will be India’s capacity to handle the world gold market.

The gold game can thus easily come into India’s hands. Western countries cannot play the gold game because they cannot sell gold domestically.

RoyG · Post by **RoyG** » 27 Dec 2013 05:14

I've been advocating a strategic stock for some time. We need to catch up with the Chinese, Russians, EU, and Yanks. We should build a few secure hi tech vaults around the country to store it.

Austin · Post by **Austin** » 27 Dec 2013 09:27

Looks like our GDP figures for 2013 has taken a hit due to Rupee Fall according to CEBR.

We are ~ $1.75 T Economy

Neshant · Post by **Neshant** » 27 Dec 2013 12:09

RoyG wrote:I've been advocating a strategic stock for some time. We need to catch up with the Chinese, Russians, EU, and Yanks. We should build a few secure hi tech vaults around the country to store it.

I worry that the Indian govt has been hijacked by idiot economists who advocate fiddling around & micro-managing where people invest their wealth.. rather than letting the people decide where the wealth should go.

That article above on gold is brilliant.

Just as oil prices are "bent" by the US to serve its interest, and Libor rates are rigged by the UK to serve its interest, so too should gold prices be "managed" by India to serve its interest.

RoyG · Post by **RoyG** » 27 Dec 2013 13:10

Neshant wrote:
RoyG wrote:I've been advocating a strategic stock for some time. We need to catch up with the Chinese, Russians, EU, and Yanks. We should build a few secure hi tech vaults around the country to store it.
I worry that the Indian govt has been hijacked by idiot economists who advocate fiddling around & micro-managing where people invest their wealth.. rather than letting the people decide where the wealth should go.

That article above on gold is brilliant.

Just as oil prices are "bent" by the US to serve its interest, and Libor rates are rigged by the UK to serve its interest, so too should gold prices be "managed" by India to serve its interest.

S Gurumurthy is one of the principal economic advisors to Modi.

Supratik · Post by **Supratik** » 27 Dec 2013 20:08

Right now it is necessary to control the CAD to stabilize the currency. So restriction of gold imports as a short term solution is the right thing. The other would be to cut down on those freebie schemes and subsidies but that is unlikely specially in an election year.

vishvak · Post by **vishvak** » 27 Dec 2013 20:24

Italy ahead of India. What an achievement. By Italy.

shyam · Post by **shyam** » 28 Dec 2013 09:17

Regulatory Arbitrage: Morgan Stanley Seeking Permission To Launch Prop Trading In India

shyam · Post by **shyam** » 28 Dec 2013 09:18

Indian Bitcoin Exchanges Halted As Government Shifts Capital Control Attention Away From Gold

Austin · Post by **Austin** » 28 Dec 2013 13:09

link

subhamoy.das · Post by **subhamoy.das** » 28 Dec 2013 19:10

Exchange rates does not reflect true value of the goods and services produced in a country. Use GDP PPP model. India should be word's 3rd largest economy, ahead of japan, at this time.

Singha · Post by **Singha** » 28 Dec 2013 21:16

Imho a fair n balanced composite national power model is best to judge the stack of nations. For example brazil has a bigger dollar economy than india but a lot less military and tech power barring the success of embraer. Neither they have protective umbrella of bigger goondas. They are just lucky to have relatively good and nice neighbours.

China is not sitting crowing about their gdp only..some in their leadership have expressed the view that their job is to constantly increase their cnp index rather than just focus on raw gdp.

Gdp without nuclear weapons and delivery means is just a powerless number.

Christopher Sidor · Post by **Christopher Sidor** » 28 Dec 2013 21:31

Looking at what Austin has posted it is mortifying to note that our deficit as a % of GDP is almost equal to that of what USA and UK have. We need to reduce our government expenditure.

Suraj · Post by **Suraj** » 28 Dec 2013 23:39

Will the export sector be a job driver?

At a time when economic growth refuses to perk up drastically to raise hopes of employment generation, it seems a massive job boom is going to come from the merchandise export-oriented units.

Exporters are anxiously looking to hire a large number of workers to support the growth and rise in demand that they are currently witnessing in the international markets.

The export sector is showing a gradual turnaround of sorts with revival of growth in some of its traditional markets like the US and Europe. Merchandise exports grew double digits for four straight months till October in 2013-14. Even though the merchandise outbound shipments rose just 5.86 per cent in November year-on-year, players are confident that outbound shipments may again witness huge growth from December onwards.
...

Exports, which receive about 40 per cent contribution from the small and medium enterprises, employ about 170 million people across the entire value chain, according to a study by Assocham.

In some of these sectors such as textiles, ready-made garments, leather and handicrafts the potential of employment is huge. For example, the handicrafts sector which employs around 7.5 million people is facing a manpower crunch of over two million at present.

“We are not getting the artisans we require. They are all going for MNREGA-like programmes and refusing to come back. We are facing acute shortage of skilled artisans,” said Lekhraj Maheshwari, a Jaipur-based handicrafts player, who exports metal wares and imitation jewellery in the American markets.

East Asian growth was driven by pricing down labor in the export industry. By preventing that, we're harming a sector capable of directly and indirectly employing almost a fifth of the population.

Neshant · Post by **Neshant** » 29 Dec 2013 01:09

Supratik wrote:Right now it is necessary to control the CAD to stabilize the currency. So restriction of gold imports as a short term solution is the right thing.

No its not. To reduce the CAD, stop govt over-spending and printing worthless money.

The solution is not to start deciding for those who have earned the wealth as to what they should or should not purchase.

Idiot economists who try to micro manage the free market inevitably cause massive disasters when they start buying into their own hubris that they know what ails the economy and how to fix it.

When they are proven disastrously wrong as bernanke was in 2008, they begin stealing wealth through the printing press, higher taxation and all other manner of robbery & con artistry to cover up the debacle.

Had Bernanke been a businessman, he would be bankrupt today. The amount of wealth he has vaporized by creating the leveraged real estate bubble by playing around with interest rates...and the amount of wealth he has subsequently stolen from the productive economy to hide that resulting disaster is mind boggling.

Greenspan has likewise gone from being called a maestro to looking like a fool.

Austin · Post by **Austin** » 29 Dec 2013 13:37

Singha wrote:Gdp without nuclear weapons and delivery means is just a powerless number.

IHMO Nuclear weapons does not itself any Guarantee if the other side perceives the nation weak .... in our case we have all kinds of weapons but our international influence is pretty negligible and worst our perceived enemy cares a damn.

Having Army and nuclear weapons is all nice and eye candy but when push comes to shove ability to demonstrate the will to use it to compliment diplomacy is what really matter and distinguishes the chaff from wheat.

The most recent example of International Diplomacy in Syria has shown which country had the courage to stand for what it perceives as right and the rest of heard came to fore .... you can count 2-3 country that stood apart Nuclear weapons or not.

Supratik · Post by **Supratik** » 29 Dec 2013 19:59

Neshant, I said "short term". It is like putting band-aid. All that you said will require a new Govt. with a different economic model.

Austin · Post by **Austin** » 29 Dec 2013 20:17

Gold Smuggling Spikes In India As Tax Meets Bridal Season

Christopher Sidor · Post by **Christopher Sidor** » 30 Dec 2013 13:06

The Rise of a New Elite --- Value Research Online 28-Dec-2013

This article describes how due to unprecedented growth in the so called BIMARU states in the last 5 years has lead to creation of new state-level and in some cases district-level elites. According to this article these elites are different than those based out of Delhi and Bombay. This article is written with an eye to investment opportunities. All said and done, what this article brings out to the fore is that a majority of our industrial and corporate houses, whether based out of Delhi or Bombay or any other provinces are family run businesses at the end of the day. Not many of these are professional run companies. This is a problem because our experience has shown that family run business are more prone to carrying out dubious practices. Now compare this with our own home-grown professional businesses. Just like our politics is in enthrall of family run political parties, Congress, NCP, DMK, Shiv Sena, etc our industrial houses are also in vice like grip of dynasties. One feeds on the other and this culture needs to be broken.

Austin · Post by **Austin** » 30 Dec 2013 15:50

Inflation limiting RBI's ability to boost growth: Raghuram Rajan
http://profit.ndtv.com/news/economy/art ... ome-latest

The report also reiterated the RBI's previously stated concerns about the level of bad assets in the banking sector, while noting a corporate "failure" could trigger contagion in the interlinked banking system.

"The outlook for the economy has improved, with export growth regaining momentum, but growth is still weak," Dr Rajan wrote.

"The challenges of containing inflationary pressures limit what monetary policy can do."

The RBI report also called the "fall in domestic savings and relatively high fiscal deficit" as other key concerns for the Indian economy.

The government is expected to slash spending to meet a fiscal deficit target of 4.8 percent of gross domestic product for the year ending in March.

Dr Rajan urged the government to continue to push through policy reforms and fiscal consolidation, while noting the prospect of a divided verdict in general elections due by May was creating investor uncertainty.

"Policy certainty is something investors look for in the current environment," Dr Rajan wrote in his foreword.

"A stable new government would be positive for the economy," he added.

Singha · Post by **Singha** » 30 Dec 2013 19:30

http://www.nytimes.com/2013/12/30/healt ... sContainer

an article about Indian efforts to override some drug patents to allow cheaper generics for life saving drugs. I found the comments from americans interesting...looks like they are so pissed with being price gouged by Big Pharma, there is overwhelming support for what India is doing rather than complains about IP violations.

Aditya_V · Post by **Aditya_V** » 31 Dec 2013 16:09

Christopher Sidor wrote:Looking at what Austin has posted it is mortifying to note that our deficit as a % of GDP is almost equal to that of what USA and UK have. We need to reduce our government expenditure.

Easier said than done, UPA has created a huge constituency of Freebies and AAp like parties means there is no incentive for anyone to tackle this in the short term. We have huge interest costs from reckless spending over the last few years, Defense cannot go down, OIL prices what they are subsidies cannot go down, Our tax rates and taxation departments working over time with ridiculous laws since 2006(for eg see Service tax, excise, transfer pricing related laws and rules and disputes) have squeezed the maximum out most businesses.

We should first reform tax laws and policies , ensure growth and then tackle the deficit issue. We would need for that 15 years of power with Governments unlike the one we have seen for the last 10 years.

By reckless policy over a decade we have mortgaged our future, Govt defecits are a mortgage of future Income (basically spending today and expecting our children to pay)

Austin · Post by **Austin** » 31 Dec 2013 17:19

Hope this turns out true

Sensex could touch 25,000 next year: Ambit Capital

chola · Post by **chola** » 31 Dec 2013 21:35

subhamoy.das wrote:Exchange rates does not reflect true value of the goods and services produced in a country. Use GDP PPP model. India should be word's 3rd largest economy, ahead of japan, at this time.

PPP does give us better ivory tower results when measuring lun-size against the likes of Japan and Europe. But it is less than worthless when it comes helping people and companies who are actually trading and making money.

There is no CEO who would consider India a bigger economy than Japan. PPP is a product of leftist academia and is nowhere near a true reflection of goods and values. In fact, something that cannot be sold through a convertible currency does nothing for the country in the global hierarchy so converting to PPP is moot.

Insisting that we have the world's 3 largest economy by PPP actually harms us by lying to our baboos that they are doing better than they really are. More importantly, it does not reflect our ability to buy on the world's stage. We cannot buy anything on the scale of Canada never mind Japan so insisting that we can do so creates dangerous financial miscalculations.

sanjaykumar · Post by **sanjaykumar** » 01 Jan 2014 01:22

Edited by admin. Warning..do not troll.

Christopher Sidor · Post by **Christopher Sidor** » 01 Jan 2014 20:20

Austin wrote:Inflation limiting RBI's ability to boost growth: Raghuram Rajan
http://profit.ndtv.com/news/economy/art ... ome-latest

There is another side effect of increasing rates. There is a real concern that raising rates further will lead to an increase in NPA's of our banks, especially the PSU Banks. This would be disastrous. As it our corporate bond market is way too shallow.

Another aspect that is troubling is the fact that our savings are going down. This means that due to extreme inflation Adam admi is dipping into his/her savings to make ends meet. Which is bad. Very bad

Austin · Post by **Austin** » 01 Jan 2014 20:30

Economy ends 2013 on sluggish note

NEW DELHI: There was no respite from sluggish data this year. Two sets of data released on Tuesday, the last day of 2013, showed the health of the economy still remained fragile.

During April-November, the fiscal deficit was estimated at nearly Rs 5.1 lakh crore, or 94% of the full-year, estimate of Rs 5.42 lakh crore as revenues remained sluggish and total spending touched 61% of the budget estimate of Rs 16.6 lakh crore.

Separate data showed the core sector grew 1.7% in November 2013 compared to an expansion of 5.8% in the year earlier period. The November data showed some signs of improvement from the previous month when the sector had contracted 0.6%.

The core sector accounts for nearly 38% of the index of industrial production and any sign of improvement in this vital segment augurs well for industrial output. Factory output had contracted 1.8% in October while retail inflation shot up above 11% in November, raising fresh doubts about the health of the economy.

"The sub-2% core sector growth combined with the moderation in the growth of merchandise exports, prevailing issues in the sugar and gems and jewellery sectors, and an uneven uptick in domestic consumption led by rural demand, suggest that industrial growth remained muted in November 2013," ICRA economist Aditi Nayar said in a statement.

But economists cautioned that fiscal situation was a bigger concern. "It will be difficult to meet the target on a business as usual basis," said D K Joshi, chief economist at ratings agency Crisil.

"The government will have to resort to expenditure cuts, rollover expenditure to next year and speed up divestments and finally they will have to dig into dividends from public sector units to keep the fiscal deficit within the target of 4.8% of gross domestic product," said Joshi.

Finance minister P Chidambaram has said the government will not breach the red line on the fiscal deficit and will keep it within the target of 4.8% of GDP.

The core sector, which spans coal, steel, cement, fertilizers, crude oil, natural gas, petroleum refinery products and electricity, has remained volatile in the past few months making it difficult to derive a trend.

But overall, the industrial sector has remained under stress, hit by stubborn inflation, high interest rates, high input costs and rising wage pressures. Investment has remained sluggish as demand remains muted. Economic growth slowed to a decade low of 5% in 2012-13 and is expected to be on similar lines in the current fiscal year.

Two sectors, natural gas and petroleum refinery products, remained laggards. Coal production grew by 2.3% in November from a year earlier, crude oil production increased by 1.1% in November.

Natural Gas production declined by 11.3% in November compared to contraction of 15.1% in November, 2012. Petroleum refinery products fell 5% in November compared with a growth of 29.9% in the year earlier month.

Fertilizer production posted a growth of 0.6% while steel production recorded a growth of 3.9%.

Cement production rose 4.2% in November compared to a decline of 0.2% in November 2012. Electricity generation increased by 5.9% in November compared with a growth 2.9% in the year earlier month.

sanjaykumar · Post by **sanjaykumar** » 02 Jan 2014 00:16

All right.

Here is the ease of doing business index again. Again India is in the illustrious company of Ethiopia and Uganda. http://doingbusiness.org/rankings

A casual inspection of the index will discover that the index correlates with per capita income. Now association does not prove causality but it is suspicious.

What are the cultural characteristics of Indians that are responsible for a mismanaged economy? To claim that India is poor because of the British is to negate China's example. China suggests if anything that it is rich because the British sold them opium.

JE Menon · Post by **JE Menon** » 02 Jan 2014 12:15

>>What are the cultural characteristics of Indians that are responsible for a mismanaged economy?

This is not an apt topic for discussion in this thread. Take it elsewhere on the forum where it may be more suited, because the answers will have nothing with news about the economy, or discussion of it.

Austin · Post by **Austin** » 02 Jan 2014 16:43

India's External Debt at US$ 400.3 billion in End-September 2013

At end-September 2013, India's total external debt stock stood at US$ 400.3 billion, recording a decline of US$ 9 million over the level at end-March 2013.

Long-term debt was US$ 305.5 billion at end-September 2013, showing an increase of 0.6 per cent over the end-March 2013 level, while short-term debt declined by 2.0 per cent to US$ 94.8 billion.

Short-term debt accounted for 23.7 per cent of India's total external debt, while the remaining (76.3 per cent) was long-term debt. Component-wise, the share of commercial borrowings stood highest at 32.3 per cent of total external debt, followed by NRI deposits (18.8 per cent) and multilateral debt (13.1 per cent).

Government (Sovereign) external debt stood at US$ 77.3 billion, (19.3 per cent of total external debt) at end-September 2013 vis-a-vis US$ 81.7 billion (20.4 per cent) at end-March 2013.

The share of US dollar denominated debt continued to be the highest in external debt stock at 60.7 per cent at end-September 2013, followed by the Indian rupee (20.9 per cent), SDR (7.6 per cent), Japanese yen (5.7 per cent), and euro (3.2 per cent).

The ratio of concessional debt to total external debt was 11.5 per cent at end-September 2013 as compared to 11.4 per cent at end-March 2013.

India's foreign exchange reserves provided a cover of 69.3 per cent to the total external debt stock at end-September 2013 vis-vis 73.0 per cent at end-March 2013.

The ratio of short-term external debt to foreign exchange reserves increased to 34.2 per cent at end-September 2013 from 33.1 per cent at end-March 2013.

Arjun · Post by **Arjun** » 03 Jan 2014 13:18

X-posting from Elections Thread...

Arjun wrote:If Congress took India down from 9% growth rate to 5%, Kejriwal seems all set to take it all the way down to 2% to satisfy his urge to play Robin Hood ! He has already set back Power reforms in India by 3 - 5 Years, within a week of taking office as CM...imagine the supreme damage he would inflict on the country as PM.

Christopher Sidor · Post by **Christopher Sidor** » 03 Jan 2014 17:31

^^^^
Not exactly. One of the reasons why Power distribution was privatized was the fallacy that private companies will be able to bring in more efficiencies and hedge better against price rise. That is far from being realized. On the contrary certain private power distribution companies have behaved worse than public sector power distribution companies. They have not hedged any rise. Whether they have bought in any efficiency is debatable. Talk to any Mumbaikar on how in the past 4 years has BEST revised its traiff. Many of these so called Delhi power distribution companies have gone ahead and bought meters and other critical infrastructural materials from PRC. Thus indirectly helping our biggest enemy.

Worse Delhi privatization became the model on how not to privatize electricity supply and generation. There is no competition in power distribution. We have replaced public sector monopolies with private sector monopolies with all the bad aspects of a private sector monopoly. For the past 10 years various complaints about meters being faulty were not listened to. It is only near the elections when Congress realized that the game was up were these complaints given a patient hearing.

Delhi Power distribution privatization followed the same mess which the Public transportation privatization (Blue line, green line, red line, killer line and so on followed).

Singha · Post by **Singha** » 03 Jan 2014 18:37

TELCO reports a 46% drop in CV sales in 2013. clearly shows where the INC has taken the economy.

Arjun · Post by **Arjun** » 03 Jan 2014 18:40

Christopher Sidor wrote:^^^^
Not exactly. .

Christopher, Which particular point are you disputing ?

My primary point was that while Modi has been a pioneer in being singularly responsible for turning the focus of political debate in the country squarely onto growth and development parameters (a point he has hammered home in each and every one of his speeches) - Kejriwal's entry sees India sliding back into a socialist framework where growth and development are de-emphasized in favour of populist schemes and 'aam admi' concerns. The issue right now is lack of growth - which is what Modi had made central to Indian poltical debate. Kejriwal's entry has definitely meant a regression for India....growth rates might go down further, below even the UPA's disastrous performance, with all the FUD that the AAP has managed to create.

As far as Power Sector reforms go, Jaggi in his article makes 2 key points -

1. Slashing power tariffs was uncalled for when there has been no audited evidence yet of fudging by the Discoms
2. Slashing power tariffs does not help the cause of Power Sector Reforms in any way whatsoever given that the industry is neck-deep in losses - and this move will encourage other states to follow suite with populist measures.

Would appreciate if you can make explicit which of these points above you are disputing and why.

Christopher Sidor · Post by **Christopher Sidor** » 03 Jan 2014 19:20

What the article basically said was that power sector reforms or the privatization of power distribution was essentially right. I am disputing that. The power sector reform has not managed to meet any of its goals. A relook is required and possibly a rollback too. None of the power companies have managed to hedge against the rise of power bills.

Basically the unbundling of power sector, i.e. distribution, transmission and generation has not helped. What this has done is that it has jacked up the end price of the electricity. The Generation company has a certain set of inputs to generate electricity. Then it seeks certain profit by selling the electricity. For the Power Distribution company the selling price of power Generation company becomes one of its input price. Then it has to factor in its manpower cost, its fixed investment as in transformers, meters, electric lines, etc. On top of this it has to generate profit. Then there is the transmission company which is responsible for linking the generators and distributors together and also tries to get in some amount of profit from the transmission of electricity. This structure is a heaven for accountants but hell for everybody else.
Now consider the fact if there had been a single entity which was responsible for generating the power and then distributing the power. In that case the input would be the power generation inputs like coal/gas/hydro/etc. While the selling price would be what it would give to the end consumers. It would not seek to eek out a profit out of each and every step of the electricity setup.

Also our power sector reforms should have been meant as a force multiplier. It should have let us the create industries which would manufacture power equipments from smart meters, to ceramic transformers, to HVDC lines, etc. What has happened is that power sector reforms went down the path of the telecom industry. All the capital expenditure done and the capacity building was done for outsiders who benefitted. Majority of the IT infrastructure spend for Airtel, Vodafone, etc was done by foreign firms like IBM which is not an Indian company but a subsidiary of an American company. All the value that was added was done on the stock markets of US or Europe.

Added to this there has not been any significant regulation of the power distribution companies or any competition introduced in the power distribution. This has led to these companies acting as monopolies like BSNL operated prior to opening up of Indian Telecom sector. Arrogant and dismissive of the end consumers. Basically all the monopolies are like that, irrespective of whether they are public sector monopolies or private sector one. In case of private sector they are more insidious than the public sector as they tend the subvert the system.

I am not disputing what you said about Modi. In Gujarat he has implemented some very novel power schemes, which have helped Gujarat and particular Gujaratis a lot. We have had private power supply in Ahmedabad/Gandhinagar for a long time under the aegis of AEC. I recall only a single hour of power cut in my 7 years of stay over there even in sweltering heat of ahmedabad when temperature was 48-49 or when it was raining cats and dogs.

Supratik · Post by **Supratik** » 03 Jan 2014 21:07

Can you provide referable studies that show that power sector reforms have been a failure? What alternatives do you propose? How can competition be introduced in the same locality e.g. Delhi? Do you think there should be multiple players generating, distributing to the same locality like telecom firms?