Indian Economy: News and Discussion (Apr 1 2011)

ManuT · Post by **ManuT** » 15 Jun 2011 21:09

Worth a post, I guess.

In graphics: Rising Asia
The BBC's Power of Asia season examines how economies in the region have changed over the past 30 years. Use the chart builder below to compare countries in terms of wealth, health, life expectancy, education and energy consumption.

http://www.bbc.co.uk/news/world-asia-pacific-13746908

Singha · Post by **Singha** » 15 Jun 2011 21:59

http://economictimes.indiatimes.com/mar ... 856588.cms

15 Jun, 2011, 06.35AM IST, Ravi Teja Sharma & Sobia Khan,ET Bureau
Brokers hunt for jobs as sales slump hits realty

NEW DELHI | BANGALORE: Yusufbhai has just opened a stationery shop in a Bangalore bylane. He has christened it 'Smart Shop', borrowing the name from the realty brokerage firm, Smart Properties, he ran from the same premises until about two months ago. Yusufbhai switched to retail after his property business hit a rough patch following a slump in home sales. About three-quarters of his revenues came from sale of apartments, the remaining from renting.

"With home sales plummeting, it doesn't make business sense anymore," he explains. It's the same story in other big cities. In Mumbai, Pranay Shah, a mid-size broker has set up a small fast food joint to make ends meet. In Nagpur, Sashinath Chinchole has quit the real estate business and set up an ice-cream parlour. Their worries are not unfounded. While the large and established players in the property business have managed to stay put even during the slump, thousands of smaller players like brokers and agents are being forced to look for other jobs.

Also hit are lakhs of people employed with such small outfits - each of which hires 5-15 people.With many brokers shutting shop or downsizing, these people are out in the market, looking for jobs in sectors such as retail, banking, insurance and call centres. The real estate industry employs about 10 lakh people across the country, the majority in the unorganised sector.

In the first quarter of 2011, home sales dropped 17% in Mumbai, 14% in Bangalore and 15% in Hyderabad. According to consultant Jones Lang La-Salle, unsold residential units in projects that are complete or are nearing completion in 6-12 months in Mumbai and Delhi-NCR are as high as 25% and 16%, respectively. In other big cities, including Bangalore, Chennai and Kolkata, the numbers range between 12% and 19%. Sales in tier-II and tier-III cities are steady, though there is some panic due to the increase in interest rates, which have climbed to about 11% from 8.25% a year ago.

"For smaller brokers, the impact of the current market factors is a lot more compared to the larger brokers," says Abdur Ravoof, president of the National Association of Realtors India . Ravindra Bramhe, chairman of the Maharashtra Property Brokers' Association, says, "Even for our members - who are fairly well-off - business is down 40% compared to 2009-10. But the smaller guys are in trouble and are setting up businesses that move on a daily basis. Many I know have asked their employees to look out."

Mrinal Chaudhary, 24, chose to work in the real estate sector in the National Capital Region after his MBA last year because it was booming. He worked with a small real estate brokerage firm, which sold apartments in Greater Noida. He made an average Rs 45,000 a month, sometimes even Rs 80,000. Then came the farmers' agitation on the Yamuna Expressway, and business disappeared. Chaudhary moved to a bank. He has vowed never to return to the sector.

For whatever business is left in the market, there are hundreds of agents in queue. For instance, there are pockets on the Noida Expressway, near large projects, where real estate brokers can be seen sitting inside small tents, under the sweltering sun, waiting for business. Those who can't afford to set up these tents can be seen on the roadside, running after every car that passes by, with brochures and flyers of projects in hand. Industry refers to them as the broker mandi. "All my friends and colleagues are now looking outside real estate before things get worse," says Chaudhary. Many have returned to the insurance industry and others have found jobs with small call centres. A few have found employment with retail stores, says Chaudhary.

Many other young sales executives still working with brokerage firms are struggling, not knowing whether they will get a salary at the end of the month, as most of these firms have switched from a fixed salary model to a revenue-based fee model for their sales staff. "This was required," says Sumit Joshi, director of Noida-based Capitol Realtors, a mid-size real estate brokerage that has downsized as well as started working on a revenue-based fee model. To tide over the slowdown in sales, his firm has also recently diversified into loans, both for real estate and business, and loan against property by tying up with multiple banks.

With opportunities opening up in other sectors, the number of resumes received by hiring services firm TeamLease Services from the real estate sector has shot up. Says Rituparna Chakraborty, co-founder and senior vice-president, TeamLease, "Employment in organised real estate is at a nascent stage. And that is why employees seek opportunities in other sectors whenever business is down." Brokers, who ran successful businesses employing people on their rolls, are turning employees themselves. Take the example of Bangalore-based Mustafa Sharif, who has been leasing and renting commercial and residential establishments for a decade. He had to shut shop a few months ago, and chanced upon a job with a local builder. He now earns Rs 35,000 a month and has given his shop to his cousin to run some business.

Uncertainty in real estate was hard to bear for N Darshan, who downed the shutters on his five-year-old brokerage in Bangalore recently. "There was a time when there were no sellers and only buyers. But things have changed. Now I have turned my real estate shop into a cyber cafe," he says. Across town, another broker Shiva Kumar has put up a photocopy machine to balance his real estate broking business. "There is no assured income in real estate anymore. The commission on selling homes too has shrunk with buyers willing to pay only half the brokerage," says Kumar.

SwamyG · Post by **SwamyG** » 15 Jun 2011 22:00

Prem: You follow the Indian growth in terms of GDP. You had posted Hindustan Times article that talked about $2 trillion in 2011-2012 and $6 trillion in 2020. I saw a news item that wonder if India could reach $4 trillion by 2016-17 or even before that. http://www.bizindia.net/news/News.asp?n ... 7&catID=58

But what is really impressive is the pace at which the size of the economy has doubled from $1 trillion to $2 trillion. India's GDP touched the first trillion in dollar terms in 2007-08, when the size of the economy grew from $949 billion in 2006-07 to $1,241 billion in 2007-08.

And now, in just four years, the economy is projected to move up and touch $2 trillion.

And the bigger GDP will increase the per-capita wealth. According to PMEAC estimates, per capita GDP when the economy touched the first trillion-dollar mark was $1,090 or R43,817. And now, when the GDP touches the second trillion in 2011-12, the per capita GDP would be around $1,662 or R74,780.

So the big question is when the size of the economy will double yet again and touch $4 trillion mark. Will we repeat the feat in another four years and hit the the $4 trillion mark in 2015-16 or would we reach there even earlier?

Vipul · Post by **Vipul** » 15 Jun 2011 22:31

$11.46 bn services exports in April, imports $6.88 bn: RBI.

India's services exports in April stood at $11.46 billion, while imports were valued at $6.88 billion, the Reserve Bank of India (RBI) today said.

This is for the first time monthly figures are being made available. In a press statement, the central bank said now the aggregate data on trade in services will be released on a monthly basis after a gap of about 45 days.

"As a follow up of the implementation of the recommendations of the Working Group on Balance of Payments (BoP), provisional aggregate data on trade in services have been compiled for the first time for April 2011," it said.

These provisional data will undergo a revision when the BoP data are compiled on a quarterly basis which will be released with a lag of a quarter, it added.

Prem · Post by **Prem** » 16 Jun 2011 03:18

SwamyG wrote:Prem: You follow the Indian growth in terms of GDP. You had posted Hindustan Times article that talked about $2 trillion in 2011-2012 and $6 trillion in 2020. I saw a news item that wonder if India could reach $4 trillion by 2016-17 or even before that. http://www.bizindia.net/news/News.asp?n ... 7&catID=58
But what is really impressive is the pace at which the size of the economy has doubled from $1 trillion to $2 trillion. India's GDP touched the first trillion in dollar terms in 2007-08, when the size of the economy grew from $949 billion in 2006-07 to $1,241 billion in 2007-08.
And now, in just four years, the economy is projected to move up and touch $2 trillion.
And the bigger GDP will increase the per-capita wealth. According to PMEAC estimates, per capita GDP when the economy touched the first trillion-dollar mark was $1,090 or R43,817. And now, when the GDP touches the second trillion in 2011-12, the per capita GDP would be around $1,662 or R74,780.So the big question is when the size of the economy will double yet again and touch $4 trillion mark. Will we repeat the feat in another four years and hit the the $4 trillion mark in 2015-16 or would we reach there even earlier?

SwamiG,
Ghee Shakkar and laddoos in your mouth for posting the great NEWS. Alhamdulillah, Indians are on right path. 4T by 2015-2016 will beat the BRF estimated timeline by one year and Half Trillion $.

Hundreds of Billions here and there and soon we will be talking about real money in Indian economy . But SDRE in me still wait for 2020-2022 when we double the GDP from 2016-2017. Onlee then India have arrived Pucca and not little Kaccha.

SwamyG · Post by **SwamyG** » 16 Jun 2011 08:07

Prem ji: I will take all ghee shakkar and laddoos in advance. I was amazed at the wish-fulness or audacity of the article, somebody is NOT wondering if it will take four years, but actually wondering if $2t to $4t will happen in less than four years

Please to note ji, that is not a news, just some analysis. Here is more analysis that projects India to reach $4t in 5-6 years: https://www.carlsonfunds.com/press/vide ... india.html. Some excerpts from the transcript:

India, on the other hand, has been underperforming lately. Why is that and what do you see going forward in India?

The Indian market has been lagging the emerging markets and the Asian markets over the last four months so far this year. This is after a reasonably strong outperformance in 2009 and 2010. So some of it is the mean reversion trade playing out but there are a few issues that have come to the fore. One is the scare of inflation and increasing interest rates that it has brought about. The other is to do with governance-related issues in India emanating from some corruption scandals that broke out which has hurt sentiment and it has to some extent affected government functioning and delayed the investment cycles taking wings in India over the last six months. Finally oil prices have gone through the roof in recent weeks and that also brings in inflationary pressure into a new dimension and use it for the push. So these factors have also led to macro-led GDP downgrades and earnings downgrades as well. A combination of all this has resulted in this underperformance so far this year.

And finally, one question I might want to ask you: how do you look at the long-term growth prospects for India?

On that count, although we have a number of uncertainties in the short run, the long-term story, the Indian growth story is playing out just fine. Just to put this in perspective: in 2008 around the time of the global financial crisis India used to be a 1 trillion dollar economy. In the next 12 months it is going to be 2 trillion dollar economy which means that the economy has doubled through a period of exceptional turbulence in various global economies. This proves the point that the long-term growth potential in India aided by favourable demographics and income growth and a growing middle class is not just in the future but playing out as we speak. Moving at this clip India should be a 4 trillion dollar economy in another 5 to 6 years and therefore the long-term story is structurally intact and throws up a whole range of possibilities and opportunities for investors that look at India.

So that puts India at $4t in 2016-2017 time frame. Maybe we will hit that mark in 2016; 2015 be good onlee.

sanjaykumar · Post by **sanjaykumar** » 16 Jun 2011 08:45

Errr.. the US dollar has lost about 20 to 30% recently (as judged by gold and oil as well as convertibility ratios).

Prem · Post by **Prem** » 16 Jun 2011 09:04

US Vs INR have not been violently voaltile.
Talking about Gold , the rise in the God price have increased the networth of many million Indian housholds. 20k Tons have roughly added value worth 900Billion in last 3 years . If the wild guess of 45-70K Tons is right then its time for India to jump few notches high on economic scale .

Vasu · Post by **Vasu** » 16 Jun 2011 09:27

Whenever inflation starts becoming a problem, the government/RBI turn to the good ol monetary policy, playing around with all the rates, while the fiscal policies of the government remain in the doldrums.

In my simple logic, fiscal policy, say in this case easing the supply side constraints, are a lot tougher for the government to achieve, and hence the easiest way out to 'contain' inflation is the monetary policy. Please help me understand it better, gurus.

Also, am I the only one to think that Indian industry has not been making enough noises about the government's lack of fiscal policy push? And just when there are signs that the economy is slowing already, inflation again spooks the RBI to raise rates. 9 times in 5 quarters!

Especially this government which seems to be running around like a headless chicken, ineffective in policy, in reforms, in infrastructure, law and order, governance and logic, can't be counted upon to take any fiscal reforms seriously.

Enough is enough, India Inc tells Reserve Bank

“Enough is enough”, said Videocon Chairman and Managing Director Venugopal Dhoot, adding a rate rise beyond this would slow down investments. Dhoot argued high interest rates in India as compared to other countries will lead to capital inflows into India. “That will mean appreciation of the rupee, which will hit exports. I think RBI will have to be mindful of that,” he said.

In a letter to RBI Governor D Subbarao, the Federation of Indian Chambers of Commerce and Industry (Ficci) said further rise would affect business sentiment adversely and further dampen the pace of investments. According to Ficci, the GDP growth figures in the fourth quarter of 2010-11 have confirmed the slowing in sectors such as manufacturing and mining.

The country’s business leaders argued that inflation is being primarily driven by supply-side factors, for which monetary policy plays a limited role.

On the other hand, a secular rise in the interest rates over the last 15 months has adversely affected industrial output and growth.

In its financial stability report published on Monday, the central bank had said while inflation is likely to stay at elevated level more moderation in growth may take place. But, industry captains also argue that rising rates is not a permanent solution.

Interest rate hike will hurt growth, fears FICCI

"We have seen the central bank taking swift measures, with key policy rates being hiked nine times since March 2010, to rein in inflationary pressures. However, food inflation has proved to be stubbornly insensitive to any such moves," Udayan Bose, chairman of corporate finance committee at FICCI, said in a letter to RBI Governor Duvvuri Subbarao.

"As this is largely a problem arising out of demand-supply mismatch, any move to control such inflation through monetary moves has been futile. On the contrary, aggressive monetary tightening is having an adverse bearing on economic and industrial growth of the country," he said.

"Inflation is no longer confined to food articles alone and has become more generalised. However, the inflationary pressure emanating from manufactured products has less to do with demand side pressures and is largely the result of rising input costs," he said.

"And for addressing this, we need creation of more capacities in all segments encompassing industrial raw materials. Unfortunately, a tight monetary policy also hits at this very objective - limiting capacity addition at a time we need it most," he added.

somnath · Post by **somnath** » 16 Jun 2011 09:45

Vasu wrote:In my simple logic, fiscal policy, say in this case easing the supply side constraints, are a lot tougher for the government to achieve, and hence the easiest way out to 'contain' inflation is the monetary policy.

Fiscal policy is simply about govt revenues and expenditure management...Easing supply side constraints is a much wider canvas, primarily related to infrastructure - fiscal support (govt investment) is one element of it, but there are issues around enabling legislations, reforms on stuff like land acquisition, and of course, plain old governance...

About inflation bein sought to be combated by "monetary policy", well, as Milton Friedman said, "inflation everywhere is a monetary phenomenon"!

There are no easy answers to be honest...RBI is confronted with multiple conflicing objectives...It is a fact that inflation has been high, stubbronly so...It is also a fact, conceded time and again by the guv himself, that a large part of it is due to supply side constraints...At the same time, it is also a fact that emerging markets are seeing "imported inflation" from the US, as various QE rounds and a relatively stable dollar is pushing dollar inflation into local economies...RBI can use rupee apreciation as a tool to counter inflation, but then it would start hitting exports, especially in a scenario where most Asian countries are holding their currencies down...

Even the inflation, deconstructed into "core" (minus fuels), and then onwards into "manufacturing inflation" (minus food), has been high....the only viable policy measure therefore is to raise rates to cool demand..

Unfoirtunately, this RBI guv has been the worst in the policy area that we have seen in many years..The last rate hike, 50 bps, was accompanied by a lamenting statement of how he is helpless! It sent a signal across to the market that RBI isnt serious about the problem, and is simply grandstanding...

Is fiscal deficit causing inflation? Not at all, there is no evidence of that...While no one taks the budget estimates seriously, even if the deficit is at last year's levels, the incremental is too marginal to have a really material impact on interest rates...Rising policy rates by RBI is the big daddy...

there are no easy options net net, but RBI hasnt played its cards well IMO in the last 2 years.....And they are simply catching up now by being ultra hawkish...

GuruPrabhu · Post by **GuruPrabhu** » 16 Jun 2011 09:51

Bangalore traffic is the most ridiculous I have seen on this planet over last 4-5 decades. On a recent visit, I believe I managed an average speed of about 5 kms/hour in the middle of town. And the driver was so aggressive that I wanted to step out and walk, but unfortunately I didn't know where to walk.

How do Bangalore-vasis handle this? I can not imagine a worse place in India.

Vasu · Post by **Vasu** » 16 Jun 2011 10:10

Thanks Somnath sir.

I think my main concern in all this, which you also wrote about is...

but there are issues around enabling legislations, reforms on stuff like land acquisition, and of course, plain old governance...

Supply side economics hasn't really seen a lot of government support in my eyes, and policy wise, well, despite all the big elite degree holding names, this government's one of the worst in my eyes.

Perhaps in my mind i'm giving too much weightage to the food part of inflation, I mean, after all thats what gets the people on the streets, not the high cost of ore or coal, and for food, I suppose the government can do much better than the crazy Sharad Pawar saying its not his job to bring down food prices (or something like that).

Aditya_V · Post by **Aditya_V** » 16 Jun 2011 10:16

GuruPrabhu wrote:Bangalore traffic is the most ridiculous I have seen on this planet over last 4-5 decades. On a recent visit, I believe I managed an average speed of about 5 kms/hour in the middle of town. And the driver was so aggressive that I wanted to step out and walk, but unfortunately I didn't know where to walk.

How do Bangalore-vasis handle this? I can not imagine a worse place in India.

OT- please post in Indian roads or Mass transit thread.

somnath · Post by **somnath** » 16 Jun 2011 14:21

In the last few weeks, a lot of govt econmic spokesmen, including ministers and the CEA, made announcements of an imminent opening up of multi-brand retail to FDI...
This is one of the last frontiers of foreign investment into India, and one of the most vexetious..

A couple of analyses on the proposal, from both sides of the divide..
http://www.business-standard.com/india/ ... ht/439197/
http://www.business-standard.com/india/ ... on/438940/

I have myself found myself to be vacillating on the issue...One reason is this urban legend that "40% of all fresh produce in India is wasted"...No one's done a proper analysis of this, but the legend persists...And people like Kishore Biyani, who should know a thing or two about retail, hotly contest this axiom...

there are already pvt sector players in organised retail, are there benefits of FDI? If so, what? One that I can think of, but needs to be regulatorily mandated, is to link FDI with sourcing from India, which would increase exports...

But it is a good area to think about...

Singha · Post by **Singha** » 16 Jun 2011 18:38

one area which could drastically change is arrival of e-commerce giants like amazon. none of the indian retailers have a credible e-commerce business to supplement their back end.

another is the usual suspects like target, walmart, kohls, Ikea, home depot.

I do not see any 'strategic' benefit of only letting indian cos play in this space. reasons being
- both will employ the same pool of indians and operate in the same places starting from the metros downward
- both will source from same stuff from same places whether india or timbuktoo - its not as if Mr Biyani's big bazaar is _not_ chock full of chini maal
- more such shops mean more jobs, more logistical cos and transport links stretching back to producers..sure some will fail eventually and pull out but its no skin off GOIs nose...such is the nature of the capitalism...

in short, if Mr Biyani can sell shoes of many brands in his stores I dont see why Kohls cannot setup a store across the street and sell the same shoes.

somnath · Post by **somnath** » 16 Jun 2011 19:08

Singha wrote:in short, if Mr Biyani can sell shoes of many brands in his stores I dont see why Kohls cannot setup a store across the street and sell the same shoes

Absolutely, and this is really the crux..The question to be asked is whether organsied retail is beneficial for the economy as a whole? If the answer to that is yes, then there isnt much "strategic" in the sector to be reserved for Indians only...

That question however is important, and there have been lots of studies in US/Europe that tend to point towards a mixed picture...In India, a couple of years back the govt commissisoned a study by ICRIER on precisely this question...The conclusions were largely, overwhelmingly in favour...

http://siadipp.nic.in/policy/icrier_report_27052008.pdf

Singha · Post by **Singha** » 16 Jun 2011 20:01

india is the perfect place for bigbox stores and smaller stores to co-exist. our precarious road and public transport ensures that people normally do not wander far from generally thickly populated localities except maybe once a week. all else is purchased from local shops, the really small neighbourhood ones even do home delivery. nobody really buys stuff like milk and bottled water in bulk from a bigbox store - its delivered at home.

once a week, people are willing to drive a bit far and use one of the big bazaar / total type stores for "bi weekly" or "monthly" stuff like rice, atta, cooking oil, diapers(!) , cornflakes...

in america the small shops cannot exist - the roads ensure that its fairly possible to drive 5 km for pack of milk or a sixpack of beer. there is no "neighbourhood" anyways just vast housing subdivisions, wooded areas and large strip malls.

Virupaksha · Post by **Virupaksha** » 16 Jun 2011 20:55

Vasu wrote:Thanks Somnath sir.

I think my main concern in all this, which you also wrote about is...

but there are issues around enabling legislations, reforms on stuff like land acquisition, and of course, plain old governance...
Supply side economics hasn't really seen a lot of government support in my eyes, and policy wise, well, despite all the big elite degree holding names, this government's one of the worst in my eyes.

Perhaps in my mind i'm giving too much weightage to the food part of inflation, I mean, after all thats what gets the people on the streets, not the high cost of ore or coal, and for food, I suppose the government can do much better than the crazy Sharad Pawar saying its not his job to bring down food prices (or something like that).

Thank Sonia and her chamcha NAC for the food inflation.

When around 60,000 crores of NREGS is "wasted" every year in dig and fill pockets kinds of scams, without building any meaningful infrastructure in a country where infrastructure is lagging behind to say the least, we see the supply side constraints causing inflation as we are seeing today. When people dig and fill the same ditch twice, the third time, they will simply stand aside, get into an agreement with the local leader and fillout paper work saying they have digged and filled thrice, fourth time and so on. So NREGS is a dole for doing nothing, essentially and i.e. corruption is at the core of NREGS as a built in.

That money could have been used to build cement roads or even the leftist favorites toilets across the villages. This will mean that the farmers get better connectivity and will stimulate the local economy for every one, because EVERY one gets better connectivity, access to hospitals and thus increased productivity and demand in the long term. We could have re invigorated the ITIs so that the shortage of technicians today could have been reduced.

What it will not get is making people dependent on the dole from the local leader and so no increase in long term votes. So good politics lead to bad economics.

With NREGS, you have increased the money supply in the local economy, but because absolutely no supply side constraint has been removed. You have just increased/doubled/tripled the costs of the small scale farmer because you have removed the labour from working. Who will work when they get money for sitting?? So the farmer who was a little better off before that and so he didnt join the dole of NREGS, but is worse off now, has to increase his price to survive. Simple economics tells you that this can lead only to runaway inflation. No wonder we are seeing the highest inflation in urban areas for food, what else is the urban area directly dependent on rural areas (and labour)?

We have Theo, a farmer giving out examples of how NREGS has ruined his farm economics and so trying to move towards mechanization. But mechanization is difficult because of his small farm size. So he is in double jeopardy. All the gains of land reform previously are being lost because a small farmer cannot survive these changes without consolidation. What NREGS is trying to create is people without work ethic dependent on dole - the communist ideal of transferring wealth.

They have numbed down the Pradhan Mantri Grameen Sadak Yojana and have brought about the leftist ideal, NREGS of transferring wealth instead of generating it.

sivab · Post by **sivab** » 17 Jun 2011 19:18

x-post

http://www.thehindu.com/business/Econom ... epage=true

India likely to be largest economy by 2050

U.S. Assistant Secretary of State Robert O. Blake on Friday said the future of Indian economy seems very bright and the country is likely to become the world’s third largest economy by 2030, and the largest by 2050.

Hitesh · Post by **Hitesh** » 17 Jun 2011 19:25

I hope the NREGS, despite all of its flaws, will finally do the needful, kick out a large majority of the rural population out of the farming industry towards other forms of industry and encourage the remaining farmers to consolidate their farming processes and make them more efficient and bring them in line into the 21st century world.

Virupaksha · Post by **Virupaksha** » 18 Jun 2011 01:16

Hitesh wrote:I hope the NREGS, despite all of its flaws, will finally do the needful, kick out a large majority of the rural population out of the farming industry towards other forms of industry and encourage the remaining farmers to consolidate their farming processes and make them more efficient and bring them in line into the 21st century world.

Is NREGS giving any incentive to get people "kicked out"? No, they were "kicked out" of productive jobs. Is NREGS incentivising them to have better education/improving their skill sets? No, the incentive is to do nothing.

The pay from NREGS is what I would call "na ghar ka na ghaat ka". It is not big enough to enable a person and his children to be able to afford decent studies, but is not small enough that they cannot survive.

What NREGS is promoting and institunalizing future rural political goondas and chamchas.

The farming industry will be more mechanized (not efficient, efficient is different from mechanization) and consolidation of the lands into the local "zamindars", who alone will have the money to complete such mechanization.

somnath · Post by **somnath** » 18 Jun 2011 06:45

^^^We have discussed NREGS, and its pros and cons to death, so no point regurgitating..

But on the issue of farm sector "efficiency", it is a huge red herring to say that increased farm wages are responsible for reducing that...The primary reason, one acknowledged in successive policy papers (incl the latest one by the Agri Prices Commission - Prof Gulati's interview was in that context), is about the lack of research breakthroughs and withering away of farm extension services...Not some skill deficiency at a farm worker level...

The perverse explanation of the scenario is that at current levels of farming efficiency, workers can only be paid below-susistence wages for small farms to be profitable...Ergo, till we lick the farm efficiency issue - an accumulated problem over 4 decades, we should let 30% of the population starve (literally so)...

Its not a "choice" that can pass muster in a democratic political economy...

the attempt is to cut through the "either or" question - provide a safety net through NREGS for the immediate term, while investments are hopefully done to increase efficiency in the long term...

somnath · Post by **somnath** » 18 Jun 2011 07:37

In the meanwhile, while the actual CAG report on the gas issue is not yet on the net, glimpses are coming in thck and fast...

http://www.thehindu.com/news/national/a ... 104532.ece

We had a discussion sometime back, and some people went on about how the "socialists ding dong" policy was responsible for the imborglio, when the issue was plain and simple cronyism, and policy dovetailed to support cronyism...

Making a comparison of the procurement procedures provided under the present PSCs with that of Bangladesh, the CAG states: “In fact, a comparison of the procurement procedure under PSCs in Bangladesh and India reveals that the clauses are similar; expect that the Bangladesh PSCs require approval by the Management Committee for high value procurements (typically greater than $500,000). This clause is, however, strangely missing from the Indian PSCs in almost all its versions

We are almost bound to see similar issues with SEZ (we already have some noises, yet muted), which is the other "policy scam" perpetuated.....

Suraj · Post by **Suraj** » 18 Jun 2011 07:39

Since no one seems to have posted this:
Exports surge 57% in May

The country's overseas shipments of goods stood at US$25.9bn last month while imports were at US$40.9bn, he told reporters in New Delhi today.
India's merchandise exports grew by an impressive 57% in May while imports too jumped by 54% in the month, Commerce Secretary, Rahul Khullar said on Friday.

The increase in imports in May was due to oil imports rising 18 per cent to $10.6 billion, while the growth in gold and silver imports went up by over six times to $8.96 billion. In April-May, oil imports were $20.3 billion (13 per cent growth), while gold and silver imports were worth $13.5 billion (222 per cent).

Interesting that there's been such a massive spike in the import of gold and silver. At $25B+ per month we should hit $300 billion exports this year.

somnath · Post by **somnath** » 18 Jun 2011 08:15

Suraj wrote:Interesting that there's been such a massive spike in the import of gold and silver

Its directly linked to jewellery exports... Also domestic demand and increased unit price of gold (and silver)...Jewellery exports have nearly doubled in the same period..Plus, domestic demand, both consumption and investment, has been strong - and the continuous rise in Gold prices means in value terms its gone up 200+%...

The same goes for increased value of exports as well - a lot of it is due to increased price of oil products globally...

Prem · Post by **Prem** » 18 Jun 2011 09:10

Suraj wrote:Since no one seems to have posted this:
Exports surge 57% in May
Interesting that there's been such a massive spike in the import of gold and silver. At $25B+ per month we should hit $300 billion exports this year.

Great prospects now for hitting 1Trillion target in total export of goods and services by 2015.

somnath · Post by **somnath** » 18 Jun 2011 10:29

Prem wrote:Great prospects now for hitting 1Trillion target in total export of goods and services by 2015

Well, maybe...If the recent boost is not just an accounting anomaly to take the last remaining advantage of the DEPB scheme...DEPB expires on June 30 and one hypothesis is that exporters have been simply shifting produce from godowns in India to godowns abroad to take advantage while it lasts......

wig · Post by **wig** » 18 Jun 2011 11:29

India likely to be largest economy by 2050:

US Assistant Secretary of State (Bureau of South and central Asian affairs) Robert O Blake today said the future of Indian economy seems very bright and the country is likely to become the world's third largest economy by 2030, and the largest by 2050.

He added, "The incredible growth of India's economy has resulted in positive spillover effect for the US between 2002-2009, US goods exports to India quadrupled, growing from USD 4.1 billion to more than USD 16.4 billion in 2009."

http://www.ptinews.com/news/1687774_Ind ... 50--Blake-

wig · Post by **wig** » 18 Jun 2011 11:30

i recall reading somewhere that duty entitlement pass book (DEPB) has been extended till 30 sep 2011

Theo_Fidel · Post by **Theo_Fidel** » 19 Jun 2011 01:51

ravi_ku wrote:The farming industry will be more mechanized (not efficient, efficient is different from mechanization) and consolidation of the lands into the local "zamindars", who alone will have the money to complete such mechanization.

I hope you don't think that this will lead to cheaper food.

I can guarantee that mechanization will easily double and even triple the cost of food on your table. Full processing and packaging will double it again. Organized retail will double it once more. Thats how you end up paying Rs 250/ kilo of 'Texmati' rice from Target/Walmart in massaland. Even in Indian stores Ponni is roughly Rs 140 per kilo on average after GOI export subsidies. Of course our losses to food spoilage will drop to 5% or so as well. Industrially cropped and grown food is not cheap. It only works where the price of food is high enough that such practices can be supported. I have no problems with mechanization if people are willing to support the structurally high prices permanently. Every time price of oil doubles the price of food too will double or triple.

If the NREGA continues I can guarantee food inflation will continue. Consumers will pay for it one way or the other. In the mean time many of the marginal farmers will go bankrupt and kill ourselves. The average size of a farm in my area is about 3/4 of an acre. Total rice farmer earnings will be about Rs30,000 to Rs40,000 per year only because we get a double crop. You try to mechanize on that sort of income level. The vast majority till and harvest their own field then go to work on the larger fields. Along with the landless now they go to NREGA. In effect it is your Zamindars (what ever that means) who are going bankrupt. Well not really, they just choose not to plant.

What is the point of mechanization if you don't become more efficient. So we have to hire 10 workers to run a machine that needs just 2. Honestly I wish the farmers went on strike for 1 year or even 6 months. We will see how your NREGA fares at that point.

And then we have another google chacha posting another silly spreadsheet about some commission talking about 'research break troughs & extension services', really! You give us a realistic price for rice, meaning you pay Rs 80-100 minimum per kilo w/ annual inflation increase, the farmer will get Rs 30-40 or so, and you watch the innovation/productivity flow. We will beat the world.

Right now food is cheap in India. Too cheap to mechanize farming.

Vipul · Post by **Vipul** » 19 Jun 2011 04:10

India's answer to Visa from today.

Rupay, dubbed as India’s answer to MasterCard and Visa, is set to make its debut tomorrow. Bank of India will give the first batch of automated teller machines (ATM)-cum-debit cards to Unique Identification (UID) number holders in Pagdha village of Maharashtra’s Thane district.

The card, which will be given to ‘no frills’ account holders, can be used to withdraw cash from ATMs as well as from micro-ATMs, the hand-held devices with the bank’s business correspondents. However, for swapping the card in point-of-sale terminals at merchant establishments, customers will have to wait till the year-end.

RuPay card will have two identification features. The cardholder will have to provide the UID number for biometric identification for using micro-ATMs, while the PIN will be required for transactions via ATMs.

“Since these cards are Aadhar-based, we will issue these cards to around 90-95 people in the village who have already been allotted the UID numbers,” said A P Ghugal, general manager, Bank of India.

The bank plans to roll out these cards through each of its five sponsored regional rural banks by next month. Corporation Bank and Union Bank of India are next in line to issue the ATM-cum-debit RuPay cards.

To start with, banks are targeting semi-urban areas. “To make these cards functional, one needs data connectivity which is not available in rural areas, so banks are starting out with semi-urban areas for now,” said A P Hota, managing director and chief executive officer, National Payments Corporation of India (NPCI).

Backed by NPCI, RuPay card is a payment gateway and an alternative to the global real-time payment processing firms like Visa and MasterCard. “Premium payment service providers may not be interested in penetrating to the ground level. This is the value proposition that only RuPay offers. Initially, it will be helpful in filling up the gap and later on, it can be issued to matured customers in urban areas as well,” said Hota.

Since these cards are being issued to 'no frills' account holders for now, the limits for withdrawal and transactions will be in line with terms and conditions laid down by the banks on their respective 'no frills' accounts.

These cards cannot be used at point-of-sale terminals for now. "NPCI is working towards setting up the acceptance infrastructure for RuPay cards, which will be completed within six months. This will enable bank customers to use these cards at merchant establishments as well," said Hota. Debit card usage in India has grown rapidly. According to the Reserve Bank of India, the outstanding number of debit cards rose 25 per cent, while the volumes transacted jumped 46 per cent in 2010-11 compared to the previous year.

vera_k · Post by **vera_k** » 19 Jun 2011 06:28

School is out for the year, so I am travelling through urban Maharashtra, and taking notes FWIW.

1. Toys in Indian stores are about 15% cheaper than in US big box stores.

2. Health club memberships are priced about the same as any mass market US club (24hr fitness, Golds Gym).

3. Liquor is cheaper by 20% compared to TX, by 40% compared to CA.

4. City centers are in poor state, and comparable to African cities. Except that the African cities don't have as much traffic or people around.

5. Urban poverty seems to be on the rise, with a lack of employment options. There are people hawking wares at traffic stops. It is not yet at the level you see in places like Lagos.

6. Hygiene and cleanliness is improving. Haven't seen cattle or cow pies on the road. Slums are cleaner such kids doing their business on the road isn't seen as much. There are sporadic implementations of using trash for composting, power generation, but the open trash dumps can still be seen.

7. Electric supply is much improved. Gujarat electricity board has advertisements in the newspapers to sell surplus power.

Virupaksha · Post by **Virupaksha** » 19 Jun 2011 09:26

Theo ji,

I wrote the same thing (or atleast tried with my rudimentary writing skills) exactly what you have written.
I was trying to explain how NREGS is the root of food inflation today.
I knew that food will not become cheaper, that is why I tried to differentiate between mechanization and efficiency.

Please read that post in conjunction with my previous post linked below
http://forums.bharat-rakshak.com/viewto ... 5#p1111635

wig · Post by **wig** » 19 Jun 2011 10:46

it is not exactly the whole truth that the depb scheme is being withdrawn. whilst the depb scheme is being extended till 30 sep 2011; the powers that be propose an alternate duty drawback scheme. i opine that since this new scheme has yet to be notified by the govt they perforce extended the depb scheme. as an aside the cost to the govt of depb is presently inr 8500 crores.

The government yesterday extended the tax incentive scheme for exporters, DEPB, till September 30, a step which will benefit the exports sector.

"The Duty Entitlement Pass Book (DEPB) scheme gets an extension of three months from June 30, 2011 to September 30, 2011," the Directorate General of Foreign Trade said.

Under the 14-year-old DEPB scheme, the government spends annually about Rs 8,500 crore for re-reimbursing exporters on the taxes paid on import equivalent content of export products.

As the scheme was set to close on June 30, exporters were agitated and lobbying hard with both Finance and Commerce ministries for its extension.

A lion's share of about 60 per cent of the funds under the DEPB goes to exporters in the chemical and engineering sectors.

Both the Ministry of Finance and Ministry of Commerce and Industry have said that the scheme would not get any further extension after September.

The government plans to replace the DEPB by an alternate Duty Drawback scheme. Commerce Secretary Rahul Khullar had said DEPB was being extended so that there could be smooth transit to Duty Drawback scheme

http://www.tribuneindia.com/2011/20110619/biz.htm#3

somnath · Post by **somnath** » 19 Jun 2011 11:15

^^^I didnt know about the extension of the dates...But generally, talking to chaps handling trade finance on the street, seems that there is a rush of invoicing that is being bulked up at the frontend...Apparently, exporters arent all that clear about whether the new scheme will be as lucrative..

Singha · Post by **Singha** » 19 Jun 2011 11:43

http://www.business-standard.com/india/ ... /138791/on

India's total retail sector is estimated at $590 billion, with unorganised sector accounting for $496 billion, according to an Icrier report.

The government's policy on retail investment will also help in boosting the country's FDI, which declined by 25% to $19.42 billion in FY11 from $25.83 billion in the previous fiscal.

somnath · Post by **somnath** » 19 Jun 2011 12:02

Singha wrote:India's total retail sector is estimated at $590 billion, with unorganised sector accounting for $496 billion, according to an Icrier report.

The government's policy on retail investment will also help in boosting the country's FDI, which declined by 25% to $19.42 billion in FY11 from $25.83 billion in the previous fiscal.

The ICRIER report is the one referenced above...The numbes would have gone up since 2008 as well...

And if permitted, FDI flows will increase, no doubt - its a capital intensive sector, and there will be large inflows in the begining...

somnath · Post by **somnath** » 19 Jun 2011 12:29

In the meanwhile, some more evidence of the cronyism that was the bane of the RIL gas issue..

http://www.indianexpress.com/news/cag-i ... r/805713/0

A regulator that is simply a department to the ministry, a compromised set of ministers and officials, and a corporate adept at the art - a volatile cocktail

Singha · Post by **Singha** » 19 Jun 2011 13:16

I am not sure how R-co is considered a master chankian at using the system. their ceo has been grilled , three of their top shots were arrested.

reliance infra and reliance comms have suffered heavily and will shortly be off the sensex list, which will trigger automatic sells by index based funds which track the sensex and nifty closely
http://www.business-standard.com/india/ ... in/439557/

I am 300% sure if the 2G thing were invested fairly and fully, a lot of "most revered" type carefully managed corporate facades would be damaged not just R who is anyways perceived as juggad types who get things done.

somnath · Post by **somnath** » 19 Jun 2011 17:15

^^A lot of corporates are adept at "managing" the system, but none more so that Reliance...Doesnt mean that they cant get caught..Remember Arun Shourie in the '80s? With a hyperactive media today, optics have become important..Hence more difficult to "hush up"...