Indian Economy: News and Discussion (Jan 1 2010)

Abhijeet · Post by **Abhijeet** » 13 May 2010 19:51

muraliravi wrote:Do each day to day item, i am pretty sure 1:15 is a nice ratio. Then add the overall expenses, a guy making 80k in the US has the same std of life as someone with 12 lakhs per annum. Again do compare similar cities, not mumbai with st. louis.

This is not true. For day to day goods such as food and consumables, household durables such as furniture and appliances, and higher-end items such as consumer electronics, the prices in India are far higher than PPP prices. At the mid to upper end they converge to and quickly surpass developed country prices.

The prices of most goods don't vary by location since there is typically a national MRP. Services are the only thing at PPP prices or lower.

A simple thought should indicate this. A person making 80K in St Louis can afford all of the following things and have disposable income to spare:

- A Honda Accord sized car
- Furniture that costs a few thousand dollars
- A two bedroom house (bought, not rented) - they're even cheaper now!
- A 42" TV with a home theater system
- Central airconditioning that can be kept on 24x7 without worrying too much about electricity bills
- Food from around the world even out of season
- Etc

How many of these things can a person living in India making 12 lakhs afford? Hint: very few. Furniture, perhaps, if you get it custom made from a local carpenter. If you walk into a big store like Homestyle, the items there are Ikea quality and Ethan Allen prices (in relative terms). The house might be relatively cheap in a small city, that is true, but the infrastructure will be nowhere near acceptable.

The argument cannot be that Indians are just "used to" driving smaller cars and making do with less. If you compare like goods to like, the purchasing power is nowhere near comparable.

muraliravi · Post by **muraliravi** » 13 May 2010 21:51

I am not saying smaller car. A hond accord equivalent on 1:15 scale is 4.3 lacs
u can get a tata indigo for that. If u say tata sucks and honda rocks i cant argue
tata has economies of scale in india and honda does not.

Same holds for local stores. Ethan allen in india is a niche indian handicraft in the US.

I again disagree with ur parameters for comparison

bhavani · Post by **bhavani** » 13 May 2010 22:06

Abhijeet wrote:A simple thought should indicate this. A person making 80K in St Louis can afford all of the following things and have disposable income to spare:

- A Honda Accord sized car
- Furniture that costs a few thousand dollars
- A two bedroom house (bought, not rented) - they're even cheaper now!
- A 42" TV with a home theater system
- Central airconditioning that can be kept on 24x7 without worrying too much about electricity bills
- Food from around the world even out of season
- Etc

You are comparing apples to oranges.

Food from different parts of world is not relevant here, it has more to do with people of different kinds living in US.

Compare the price of health expenditure in India and US, in a medium town. If a self employed man in US buys health insurance it is of order of 500-600$ per month.

Costs of having a maid or cleaner.

In India 90% of people in small towns etc get furniture made, not many go to ready made furniture stores. In India i have found quality of wood used to be better than US. The finish on the product may not be great, but those things last for years. There are so many local carpenter and iron works shops in all parts of India.

Supply of electricity and water has to do more with overall infrastructure rather than cost of living. In US in a small suburb of detroit in an apartment 900 sqft your heating and electricity bill comes to a neat 250-300 dollars for 6 months of year and 100$ for rest of year. compare that to electricity bill in India in a small town.

IN US also people have started feeling the sting of big heating and electricity bills which have shot up rapidly.

Abhijeet · Post by **Abhijeet** » 13 May 2010 23:39

muraliravi wrote:I am not saying smaller car. A hond accord equivalent on 1:15 scale is 4.3 lacs
u can get a tata indigo for that. If u say tata sucks and honda rocks i cant argue
tata has economies of scale in india and honda does not.

This is a good example of comparing unlike goods. A Tata Indigo and a Honda Accord are not the same class of car, not because Tata sux0rs and Honda r0x0rs, but because these specific models differ on many parameters such as engine capacity, overall size, quality of fit and finish etc. You might be able to find lower-quality "substitutes" in Indian prices for many goods sold in the US market, which is what you have provided an example of and what most Indian consumers live with. However an item of equivalent quality will generally be comparable in price to the one in the US market (and conversely, if the Indian product is available in the US market, it will generally be at a price comparable to that in India).

My statement is that prices for goods of comparable quality have already equalized to a large extent between India and developed economies, even when the good is manufactured in India and sold to Indian consumers. Therefore, continuing to inflate the value of those items by multiplying them by the PPP multiplier provides a misleading picture of the true purchasing power of one dollar in India.

Abhijeet · Post by **Abhijeet** » 13 May 2010 23:42

bhavani wrote:You are comparing apples to oranges.

Food from different parts of world is not relevant here, it has more to do with people of different kinds living in US.

Compare the price of health expenditure in India and US, in a medium town. If a self employed man in US buys health insurance it is of order of 500-600$ per month.

Costs of having a maid or cleaner.

In India 90% of people in small towns etc get furniture made, not many go to ready made furniture stores. In India i have found quality of wood used to be better than US. The finish on the product may not be great, but those things last for years. There are so many local carpenter and iron works shops in all parts of India.

Supply of electricity and water has to do more with overall infrastructure rather than cost of living. In US in a small suburb of detroit in an apartment 900 sqft your heating and electricity bill comes to a neat 250-300 dollars for 6 months of year and 100$ for rest of year. compare that to electricity bill in India in a small town.

IN US also people have started feeling the sting of big heating and electricity bills which have shot up rapidly.

Services are indeed priced at or below PPP rates (which I mentioned). Some goods - furniture in your example, and as I mentioned before - can be brought down to Indian prices by substituting cheap Indian labour for mechanized processes. It doesn't work for everything though, and therein lies the rub.

muraliravi · Post by **muraliravi** » 14 May 2010 00:07

Abhijeet wrote:
bhavani wrote:You are comparing apples to oranges.

Food from different parts of world is not relevant here, it has more to do with people of different kinds living in US.

Compare the price of health expenditure in India and US, in a medium town. If a self employed man in US buys health insurance it is of order of 500-600$ per month.

Costs of having a maid or cleaner.

In India 90% of people in small towns etc get furniture made, not many go to ready made furniture stores. In India i have found quality of wood used to be better than US. The finish on the product may not be great, but those things last for years. There are so many local carpenter and iron works shops in all parts of India.

Supply of electricity and water has to do more with overall infrastructure rather than cost of living. In US in a small suburb of detroit in an apartment 900 sqft your heating and electricity bill comes to a neat 250-300 dollars for 6 months of year and 100$ for rest of year. compare that to electricity bill in India in a small town.

IN US also people have started feeling the sting of big heating and electricity bills which have shot up rapidly.
Services are indeed priced at or below PPP rates (which I mentioned). Some goods - furniture in your example, and as I mentioned before - can be brought down to Indian prices by substituting cheap Indian labour for mechanized processes. It doesn't work for everything though, and therein lies the rub.

Then lets formulate a table, where items which are below and above ppp rates are listed. Lets see if the average is ppp.

Suraj · Post by **Suraj** » 14 May 2010 00:17

The PPP numbers reported are collected by international agencies like WB or IMF. They are by definition not very accurate, because it's impossible to find a one-size-fits-all metric for all the diverse economies on this planet. At best, they can normalize prices across a basket of equivalent goods and services.

The point of my original email was to correct a ranking based on whatever happens to be the present PPP computation metric, not the veracity of the metric specifically from the perspective of the Indian or US economies. India does not report GDP on any metric other than nominal GDP as reported in Indian rupees. Any other measure, whether it be absolute GDP in USD, or PPP, will be affected by assorted 'translation errors'.

Abhijeet · Post by **Abhijeet** » 14 May 2010 00:49

Suraj, my original post was not intended to be a rebuttal of yours - just that the mention of PPP prompted me to write about something that I have been thinking about for a while.

I think anyone who blithely expects PPP to hold and then actually tries to live in India based on those numbers is in for a bit of "cognitive dissonance".

Suraj · Post by **Suraj** » 14 May 2010 01:06

Hi Abhijeet, no problem. It was a very interesting discussion.

vina · Post by **vina** » 14 May 2010 04:29

Just as a feared. A massive boondoggle with the rest of India's money by the fat cat Bas***ds in Dilli in the name of "Commonwealth Games".

Commonwealth Games cost up 1575% since bid . It is going to end up costing us something like Rs 30,000 crores, roughly $6 Billion!

I am simply stunned at the enormity of this swindle. Sitting in Bangalore, I have no interest whatsoever in some Canadians, Brits and Australians doing track and field and swimming in Dilli. Who gives a rat's a** and I totally resent having to pay for the "privilege" of financing the games and building the infrastructure for the Dilli fat cats out of my tax rupees.

NEVER AGAIN

vera_k · Post by **vera_k** » 14 May 2010 05:59

Delhi is to India as Punjab is to Pakistan

abhishek_sharma · Post by **abhishek_sharma** » 14 May 2010 07:00

INDIA 2030

http://www.newyorker.com/online/blogs/s ... -2030.html

abhischekcc · Post by **abhischekcc** » 14 May 2010 09:21

>>Delhi is to India as Punjab is to Pakistan

How f*cking true!!!

shyam · Post by **shyam** » 14 May 2010 13:13

One more parameter to be considered for PPP ratio computation.

How much debt does an average American take to enjoy the comforts he has, and how much does an average Indian take? Without this heavy debt that supports the huge consumption base, and the willingness of Chinese to supply products at dirt cheap prices, cost of most of the items in America would go through the roof.

Vipul · Post by **Vipul** » 14 May 2010 18:52

Vina dont say never again.
The Crook Indian sports federation and Olympics honchos want to bid for 2020/2024 Olympics in Delhi.
Its only the competing cities doing a better job in presenting/selling their cities hosting capabilities which is going to save us from
a very very expensive tamasha being held in Delhi at the expense of the tax paying citizens.
The Govt invested and readily gave more then 30,000 crores for building Metro rail in Delhi, while for Mumbai the govt of Maharashtra has to literally beg for viability gap funding.

Prem · Post by **Prem** » 15 May 2010 00:49

Ukrainian Arrested in India on TJX Data-Theft Charges
A Ukrainian national has been arrested in India in connection with the most notorious hacking incident in U.S. history.
IDG News Service — A Ukrainian national has been arrested in India in connection with the most notorious hacking incident in U.S. history.
Sergey Valeryevich Storchark was one of 11 men charged in August 2008 with hacking into nine U.S. retailers and selling tens of millions of credit card numbers. He was arrested in India earlier this week, according to a spokesman with India's Central Bureau of Investigation (CBI).
In a statement, the CBI said they'd arrested Storchark in New Delhi on the night of May 8, as he deplaned from a flight from Goa, for layover before a flight to Turkey. U.S. authorities had asked for his extradition via diplomatic channels, the CBI said.Authorities say that Storchark was a reseller of stolen credit cards -- one of the men that hacker Albert Gonzalez and his accomplices turned to when they wanted to sell the data they'd stolen from major U.S. retailers such as TJX, Dave and Buster's, Office Max and DSW.
In 2008, U.S. Attorney General Michael Mukasey described this as probably "the single largest and most complex identity theft case

http://www.cio.com/article/593613/Ukrai ... ft_Charges

manish · Post by **manish** » 15 May 2010 10:21

Vipul wrote:Vina dont say never again.
The Crook Indian sports federation and Olympics honchos want to bid for 2020/2024 Olympics in Delhi.
Its only the competing cities doing a better job in presenting/selling their cities hosting capabilities which is going to save us from
a very very expensive tamasha being held in Delhi at the expense of the tax paying citizens.
The Govt invested and readily gave more then 30,000 crores for building Metro rail in Delhi, while for Mumbai the govt of Maharashtra has to literally beg for viability gap funding.

Good point there Vipul ji. When people admire DMRC and how Sreedharan has been able to pull it off, they often forget that Delhi Metro had it easy when it came to crucial things like land acquisition. Apparently, the land was acquired under an emergency clause which made sure things never got delayed in courts - contrast this with Mumbai or Bangalore where the metro officials probably spend more time in litigations that on the construction sites.

Second aspect is that govt land was practically given away for free to metro, again making things easy and allowing DMRC to report an operating profit early on. While I do admire the Metro (and Mr E Sreedharan) and have enjoyed travelling on it numerous times, it gets a little tedious when other cities are unfairly lambasted taking it as an example.

The playing field was never level and I doubt it ever will be. Probably the only way forward is to somehow (how??) wrest other major metros from state govt control and give them control over their own fortunes. Mumbai, Bangalore and Chennai should be first in line for this.

vina · Post by **vina** » 16 May 2010 04:55

The playing field was never level and I doubt it ever will be. Probably the only way forward is to somehow (how??) wrest other major metros from state govt control and give them control over their own fortunes. Mumbai, Bangalore and Chennai should be first in line for this.

Oh, the Cities are the cash cows that are milked for all sorts of boondoggles all over the state. Why will any politico let go of the cookie jar, especially when he has his hands in it ?. Just look at KA. The amount of corruption possible via "speed money" , "licenses" and what not in Bangalore is orders of magnitude more than what is possibly in the other parts of KA put together. Just by being a nuisance and delaying NICE, our "mannin magas" and "humble farmers" can easily increase their net-worths multiple times . No way saar. Wont happen.

vera_k · Post by **vera_k** » 16 May 2010 07:25

shyam wrote:One more parameter to be considered for PPP ratio computation.

How much debt does an average American take to enjoy the comforts he has, and how much does an average Indian take? Without this heavy debt that supports the huge consumption base, and the willingness of Chinese to supply products at dirt cheap prices, cost of most of the items in America would go through the roof.

This is possible because the USA is considered to be very credit worthy by borrowers. For a variety of reasons, India can not hope to reach similar status for many more decades. In this respect, the internal and geopolitical risks facing India reduces Indian PPP by a significant amount.

Prem · Post by **Prem** » 17 May 2010 08:15

Why we never lost our way on Wall St
http://www.hindustantimes.com/Why-we-ne ... 44182.aspx

Events worked to confirm this view. The Harshad Mehta scam led to a collapse in the stock market and many of my colleagues lost their savings. In 1997, the Asian crisis drove home to me how fragile an economic bubble could be. As globalisation gathered pace, we were all at the mercy of the whims and yes, the greed, of global financiers. They could make or break our markets. They could destroy our currencies. And they could take economies from boom to bust.

Now, as I read the commentaries that greet the release of the sequel to the original Wall Street, I can’t help feeling that eventually, India got it right. Despite pressure from the West and the advice of many home-grown pundits, the government refused to embrace globalisation as completely as Wall Street demanded. The fiscal conservatism and the monetary caution that international bankers mocked us for probably saved the Indian economy. As Wall Street led America into its deepest recession, India remained relatively unscathed. In fact, the damage to our economy was almost exactly equal to our exposure to global finance. But because we had refused to be swayed by the cult of easy money and greed, we were immune to the problems that Wall Street caused the rest of the world.More encouraging, to me at least, was that the middle-class saw through the greed-is-good mantra. The stock market has yielded good returns over the last ten years (even the troughs have eventually been smoothed over) and most experts predict that the growth will continue. Last week, I interviewed Deepak Parekh, one of the few financial wizards who always puts the little people first. Deepak believes that it would be foolish not to put a portion of our savings in some market-related instrument or investment.And yet, despite such powerful encouragement and the prospect of good returns, the Indian middle-class has eschewed the get-rich-quick frenzy of the 90s. No longer do salaried people dream of getting a 100 per cent return on their investments in a couple of months as they did in the 90s. Instead, we are much more prudent, much more cautious and — well, yes — much more Indian in our approach. We put our jobs and our careers first. Everything else is just icing on the cake

shyam · Post by **shyam** » 17 May 2010 09:50

vera_k wrote:This is possible because the USA is considered to be very credit worthy by borrowers. For a variety of reasons, India can not hope to reach similar status for many more decades. In this respect, the internal and geopolitical risks facing India reduces Indian PPP by a significant amount.

I am not talking about credit worthiness, but pointing out the fact that an average american borrows a lot and that creates a huge consumer market. This mass consumption in turn reduces the prices of many items people consume.

Neshant · Post by **Neshant** » 17 May 2010 12:59

they can only do that because they are paying for goods with their printed money and its the worldès reserve currency.

anyone else that tries to emulate that will end up in a mess. the UK will soon enter that category.

Prem · Post by **Prem** » 18 May 2010 08:16

Courtsey Ram Narayan
http://www.atimes.com/atimes/China/LE18Ad01.html
Argumentative Chinese step forward

I heard from a number of prescient Chinese academics and strategic consultants that there was a creeping apprehension in Beijing's corridors of power that the economic growth gap between two countries "is closing" and that India "might one day overtake China". Overconfidence is not a Chinese trait and they are in many ways wary of being outdone. One fascinating historical parallel made by a scholar went like this: "Will China become the next Japan, and will India become the next China?" In other words, will China enter a period of stagnating growth with demographic decline and will India enter a zone of double-digit economic growth with a favorably low population dependency ratio?
A Chinese information technology entrepreneur who was involved in setting up some of China's most successful Internet companies with state blessing, addressed a gathering of Indian politicians and scholars, saying that India must learn from its larger neighbor the techniques of strongly policing the worldwide web. In his hyper patriotically charged view, India has a "weak government" that cannot have "security" enjoyed by the Chinese government unless it employs stricter Internet censorship. A tightly regimented society being peddled as a model to a much freer country like India speaks of the defensiveness of Chinese stung by Western media accusations that they live in an abusive polity with no political rights. One recurring theme during my China visit was a decidedly anti-Western tendency and appeals to India to not fall for the "trap" of the "new yellow peril" or "China threat theory". Chinese foreign policy observers kept reminding me that Western portrayals of China as a belligerent power or an obstacle to multilateral institutional consensus was a ruse to pit India against it. A peculiar view in Beijing, often shared by Indian leftists, is that Western powers have are planning a devious game to "divide China and India" and that war between the two Asian powerhouses will "play into the hands of Western interests". While there is a case to be made on specific issue areas for India to avoid being used by the United States or the European Union as a card against China, the generic Chinese assumption that India could be turned into a Western instrument to embroil China in a regional conflict is naive.

sanjaykumar · Post by **sanjaykumar** » 18 May 2010 09:28

"Will China become the next Japan, and will India become the next China?"

Of course not, India will become the next United States-hopefully a kinder, more avuncular version of Uncle Sam.

vina · Post by **vina** » 18 May 2010 09:51

This could be the future way to go. Rather than large giant energy stations and transmission lines and Paki like Dilli Billis stealing power from others, distributed power may be the way to go. Check it out Miniature Nuke Plants

svinayak · Post by **svinayak** » 20 May 2010 10:15

How Duvvuri Subbarao Is Steering India's Economy
The governor of the Reserve Bank of India has gotten India out of recession, but inflation and an expanding deficit persist
http://www.businessweek.com/magazine/co ... 058633.htm
By Bruce Einhorn

BW MAGAZINE

May 17, 2010
The Big Bounce

Ben Bernanke and Jean-Claude Trichet may seem to have the toughest central bank jobs going—until you consider Duvvuri Subbarao. The former World Bank economist became governor of the Reserve Bank of India in September 2008, just days before Lehman Brothers collapsed. He spent his first months slashing interest rates to keep India's economy growing. Then the crucial monsoons failed to arrive, which sent food prices skyrocketing. Now, India is struggling with a stubborn budget deficit—6.9 percent of gross domestic product for the year ended in March—and inflation of almost 15 percent.

It's not an easy hand to play for the 60-year-old Ohio State graduate, who earns praise from many economists. Subbarao and his team "have done a very good job," says Timothy Condon, chief economist in Singapore with ING Financial Markets. Having helped India avoid severe recession, Subbarao has raised rates 50 basis points so far this year. He's likely to raise them by another 100 points, to 6.25 percent, by yearend, says Rahul Bajoria, an economist in Singapore with Barclays Capital (BCS). The economy is expected to grow almost 9 percent in 2010.

The problem is that inflation has spread as manufacturers face steeper prices for fuel and other raw materials. Unlike China, India lacks world-class infrastructure that lowers the cost of moving goods. The Finance Ministry also has trouble cutting the budget since much of it is spent helping the very poor afford food. Subbarao "has very little flexibility," says M. Govinda Rao, director of the National Institute of Public Finance & Policy in New Delhi.

Still, many economists believe the deficit won't overwhelm India. Most of India's debt is held by local investors, says Dharmakirti Joshi, chief economist with Standard & Poor's (MHP) unit Crisil in India, so a bondholder panic is unlikely. Robust GDP growth helps, adds Joshi: "If you get high growth, you can run high deficits."

Subbarao's next battle is taming the hot money that flows into countries like India, often fueling bubbles and then exiting fast. India "may well employ" capital controls to protect its financial system, Subbarao said on Apr. 26.

The bottom line: Analysts expect the deficit and inflation to ease. If the next monsoon disappoints, problems will persist.

vera_k · Post by **vera_k** » 20 May 2010 10:22

shyam wrote:I am not talking about credit worthiness, but pointing out the fact that an average american borrows a lot and that creates a huge consumer market. This mass consumption in turn reduces the prices of many items people consume.

But what came first? The borrowing is enabled by low interest rates, which in turn are possible because the sovereign is extremely credit worthy.

svinayak · Post by **svinayak** » 20 May 2010 10:31

Amartya Sen: The Open India (AUDIO)
http://www.huffingtonpost.com/christoph ... 74009.html

India's grandest eminence outside the subcontinent is satisfied that we've all absorbed the news that behind the modern Bangalore boom lie 3000 years of an "accounting culture" and India's own imperial trading history. The name of Singapore, he notes, comes from the Sanskrit for "City of Lions." So "all those people who say: the West is materialist and business-oriented, Indians are spiritualist and thought-oriented, are talking absolute nonsense." Neither are those "new" Indian stakes in software and biotech all that new, or all that Indian. Many of the great Indian success stories were incubated in Silicon Valley, starting in the 1950s, and at MIT, where Nehru got the model of the endlessly fertile Indian Institutes of Technology. So Kipling is dead and buried; the twining of East and West, the meeting of the twain, is no surprise anymore. The unfolding story, in Amartya Sen's telling, is Open India.

Part of the reflection of Open India is the willingness to accept that you don't have to belong to the mainstream [80-plus percent Hindu] in order to be counted as a genuine Indian. As Rabindranath Tagore said in two quite famous statements: one, that anything that we admire, no matter its origin, instantly becomes ours. And the other, similarly, that any person who comes from abroad and is ready to live the kind of life that people lead in India is instantly accepted as being Indian. Because a lot of Indians are going everywhere in the world, and they're traveling as a kind of modern Jew of the 20th century and 21st century, India doesn't get enough credit for the fact is that there has been more immigration into Indian than almost any country in the world -- for one thing, tens of millions of Bangladeshis. Even though people grumble about it... you don't see the kind of hysteria about it that's going on Europe, for example, or the United States. That anger may yet come, but it hasn't been a part of traditional India at all. The fact is the boundaries are porous between India and abroad and it's served India very well. I think Indian booming would not have happened but for the openness of the educational sector, of the high tech sector, and the big booms, the informational as well as biochemical and medical, have come very much from a dialectic interaction with the West.

Amartya Sen warned famously (five years ago) that India is at risk of becoming "half California, half Sub-Saharan Africa." To me he says he was offering tabloid India a caution, not a prediction. In conversation these days, Amartya Sen sounds half Victorian gent, half liberal social critic, but not a worried man -- not about India's engagement with the United States in Afghanistan, for example; and not urgently concerned about the decline of the once sacrosanct "village India." He doesn't "miss" village India, he said, "because it's not gone." From his father's house 100 miles from Calcutta, "I walk half a mile, and I'm in rural Bengal."

ramana · Post by **ramana** » 21 May 2010 01:28

Couple of psy-ops in the Bruce Einhorn article in Business Week. Before going to Ohio State and later to World Bank, D Subba Rao was the IAS topper from Andhra Pradesh cadre in 1974(?). He was in WB as Govt of India representative. So all his expertise is already formed and his stints at those places have done little to form his experience. They are nice but not crucial for his success.

paramu · Post by **paramu** » 21 May 2010 02:00

vera_k wrote:But what came first? The borrowing is enabled by low interest rates, which in turn are possible because the sovereign is extremely credit worthy.

Interest rates have nothing to do with credit worthiness. If that was so, you should see sky high interest rates in US as many people are defaulting on their debt. If Fed can create money from thin air and give them to banks at cheap rates, these banks in turn can give credit to its citizens at low rate.

shyam · Post by **shyam** » 21 May 2010 07:13

vera_k wrote:But what came first? The borrowing is enabled by low interest rates, which in turn are possible because the sovereign is extremely credit worthy.

You are confusing between sovereign credit worthiness and personal credit worthiness. During recent crisis we saw that sovereign credit worthiness rated by Moody's, S&P etc. are bogus. The key advantage US enjoys is that their $ is the reserve currency and so other countries need that. To earn that they have to export real quality stuff to US in return for recently printed dollar. Only thing they can do with excess dollars they have is to lend that back to US at whatever rate they can get. Take out the reserve status of dollar, who would be keen to earn that and why would anybody lend their money to US at cheap rate? BTW, this money is used by government to fill their budget gap and not to lend to the public.

Personal credit worthiness is a different story. People can borrow money from the banks who get their money at cheap rate from the Fed using fractional reserve banking. There are personal credit worthiness measures like FICO scores, but US system allows people to default on their debt with no serious consequences, and rebuild from scratch. Compare that with what would happen to you if you default on your debt in India; hence there is a general reluctance among Indians to borrow (things are changing recently as Indians try to imitate Americans without understanding the reason for latter's behavior). I would say that the creditworthiness of US public isn't that great when compared to that of Indians.

chetak · Post by **chetak** » 21 May 2010 12:17

National Rural Employment Guarantee Scheme (NREGS)
for whose benefit??

This scam is being played out all over the country in one form or the other.

http://www.dailypioneer.com/257278/Ravi ... hemes.html

LUCKNOW | Friday, May 21, 2010

Ravine rangers ‘scavenging’ on govt schemes

Bishwajit Bannerjee | Chitrakoot

Once lords of the ravines, the brigands of Bundelkhand’s ‘panchnada’ (confluence five rivers) have now turned parasites, surviving on commissions from gram pradhans for work being carried out under the National Rural Employment Guarantee Scheme (NREGS) and other developmental schemes. And since bad habits die hard, their demand for ‘cuts’ (read extortion) is often laced with threats and coercion.

The gram pradhans of the region have been receiving threatening letters to part with 10 per cent of the project cost. The threats are so scary that some pradhans prefer to stay out of their villages at night.

Woman gram pradhan of Gidurah village in Chitrakoot, Sanjo Kol, received one such letter which said no development work was to be carried out without the permission of ‘Dasyu samrat’ Raja Yadav alias Khan.

“Jo bhi kaam ho raha hai uska 10 per cent dasyu samrat ko dena hoga. Yadi is chitthi ka apmaan hua to dushmani ho jayegi aur aapko goli maar di jayegi,” the letter in Hindi said.

Prem · Post by **Prem** » 21 May 2010 22:25

Abbott to Buy Piramal Generics Unit for $3.72 Billion (Update2)
http://www.bloomberg.com/apps/news?pid= ... jHQh5vC1To

May 21 (Bloomberg) -- Abbott Laboratories will buy Piramal Healthcare Ltd.’s branded generic-medicine unit in India for $3.72 billion, making it the country’s biggest drugmaker and tapping into a market expected to more than double by 2015. Abbott said it will pay $2.12 billion upfront and $400 million annually for four years from 2011 for the unit, which sells retail-ready pharmaceuticals in India, Sri Lanka and Nepal. The Abbott Park, Illinois-based company will pay cash for the transaction, expected to close in the second half of 2010. The acquisition announced today will be the second-largest takeover in India’s health-care industry and give Abbott a 7 percent stake in the $8 billion Indian pharmaceutical market. The move fits into Abbott’s strategy of broadening its business beyond brand-name pharmaceuticals in the U.S. and Europe, where sales are slowing because of generics competition and pricing pressure from governments. “They are putting in place the next wave of growth drivers -- not for next quarter, but for 2012, 2013 and beyond,” said Rick Wise, an analyst with Leerink Swann Co. in a telephone interview. “I think this is a high-quality asset that does terrific things for Abbott on a long-term basis.”

Suraj · Post by **Suraj** » 25 May 2010 03:51

Borrowing to be cut after wireless auction: Finance Secretary

India may cut its record borrowing target for the fiscal year as an auction of wireless airwaves fetched more than estimates, Finance Secretary Ashok Chawla said.

Vodafone Group Plc and Bharti Airtel Ltd. were among nine carriers that bought third-generation wireless permits in an auction that raised 677.2 billion rupees ($14.4 billion) last week for the government. Finance Minister Pranab Mukherjee had budgeted 350 billion rupees in revenue from the sale.

Companies must pay the license fees by May 31, fueling concern cash in the banking system may decrease. The government doesn’t expect any liquidity crunch due to 3G spectrum payments, Chawla said.

The Reserve Bank of India is monitoring liquidity in the nation’s banking system after the sale of 3G licenses, Governor Duvvuri Subbarao said on May 20. The central bank has “always assured adequate liquidity in the system,” Deputy Governor Shyamala Gopinath said the same day.

ramana · Post by **ramana** » 25 May 2010 04:14

Prem, Piramal is in the junior pharma sector which is being bought up left and center by major pharma. I think they sold out cheaply just as the Parle guy did. Sure what they got looks like a lot but its much less than its potential. Apparently, many patents of major pharma are going to expire in a couple of years so they need new formulations to extend the exclusivity or else cheaper mfg facilities. Piramal is in the later category.

paramu · Post by **paramu** » 25 May 2010 06:29

We have to remember we already lost Ranbaxy, and now Piramal.
Key advantage India enjoyed was generic manufacturers and we are slowly losing them.

Muppalla · Post by **Muppalla** » 25 May 2010 08:30

paramu wrote:We have to remember we already lost Ranbaxy, and now Piramal.
Key advantage India enjoyed was generic manufacturers and we are slowly losing them.

Reddy labs is doing fine I guess.But a related question to gurus of this field - Do we have list of pharma companies in India like top 10 interms of global reach?

thx

Prem · Post by **Prem** » 26 May 2010 03:38

Ballmer: 'China is a less interesting market to us than India'
From Bloomberg News: "For Microsoft ... the billions of dollars in lost revenue from piracy in China outweigh the possible benefits of expanding in the country through acquisitions, (CEO Steve) Ballmer said. For example, owning Baidu Inc., China's biggest Internet search-engine operator, would only boost Microsoft's revenue by about 1 percent, he said." Read

http://blog.seattlepi.com/microsoft/archives/207605.asp

ramana · Post by **ramana** » 26 May 2010 03:44

There is a difference between Reddy labs which innovates and Piramal who make off patent medicines.

But I agree loss of Ranbaxy and now Piramal will be loss to Indian consumer. It was not in a vacuum that these two developed into pharma giants. There was lot of protection from Indian state in order to make off patent medicines available to common people. When the IP regime got tightened(product vs process patents) these type of firms couldnt face the heat and sold out.

sunilUpa · Post by **sunilUpa** » 26 May 2010 03:56

Reddys lab is not doing well. Their NDA program is not yielding the results they seek and it is not right to say that they innovate and Piramal didn't. Vast majority of Reddys income comes from me too products.

Indian consumers will not loose due to market factors, there is too much competition. India's pharma market is unique due to Brfanded generic approach (Similar to Turkey)

Unfortunately none of the Indian majors are too successful in innovation. You do hear about a deal here and there, but there is no consistency.