Indian Economy - News & Discussion 27 May 2012

[RamaY]

3D printers are just a fad and will fade away pretty soon. Raw material is very expensive, takes too long a time to print anything complicated and the gee-gaw that comes out is of underwhelming quality. It is a just a toy and it is not yet clear whether it will be anything more than that.

Very well could be. No one can predict the future with certainty. We are talking about possible economic paths. I can post few videos on 3-D printing, on-demand manufacturing, componentized engineering etc., which can offer a better value proposition for Bharat than repeating China's disasterous manufacturing industry that is polluting its land, rivers, air and society.

Fascinating. Who produces the 3D printer in the 100s of thousands to equip all those malls ? How about the precision engineering required to produce the components ? And the material that is fed to the printer ? The electricity ?

No wonder I thought you are very poor in offering an economic vision and debating about it.

We have been discussing hundreds of $b spent in capital goods imports in the past few pages. Given a chance, what would you import? The same 2nd gen industrial equipment or the technology and manufacturing facilities for 4th gen industry equipment like factories of hydrogen cells, 3-d printers, solar fabs and so on?

All I hear from you is
- India has to import the capital thru FDI (or even that is impossible, per one of your posts)
- India has to import the industrial equipment
- India has to import energy equipment and resources
- India has to import raw materials

Do you see any value proposition for India? what is your vision for economic policy? Supporting GoI in looting its citizens all their gold, money and girls in order to pay for all those imports? Look at the solutions you offered. Real estate for gold? Whose lands you plan to give in return for gold? Temple lands for temple gold?

I asked Theo what is his definition of progress. Now JohneeG is also asking the same question. Perhaps you guys think about that first before going gaga over why there was no grand trunk road before Akbar the secular. How did 18 Akshauhinis of army came and camped in Kurukshetra from all over Asia, without roads and boats? Did they fly in?

Once we define progress then we can find out ways to achieve that with the resources India has or with limited imports. Only then we can talk about exporting something of value to rest of the humanity.

Or let's get back to posting news clips from Paid-Media news papers that tell us last years news and scams.

[Suraj]

No wonder I thought you are very poor in offering an economic vision and debating about it.

This is getting absolutely tiresome. I strongly suggest - for the benefit of your own continued presence here - that you stop making a conversation personal. Stop branding others as 'sickular' or 'bharatiya' or whatever. Enough with the paternalism of 'I pity you' and 'tsk tsk, that's why you're a bad moderator/futurist/visionary/etc'. Any further episode and you'll be summarily banned once again. You already have 12 warnings and 3 past bans on your record.

[RamaY]

Fair enough. Time will be the judge.

Lets move on to the topic.

[Theo_Fidel]

Does 'urbanization' mean:
a) roti(food), kapda(clothes) aur makan(made of brick and cement)
b) bijli(electricity & fuel), sadak(roads), pani(water supply)
c) education, technology, and employment

Although I am yet not sure on cement houses. If we do more research on our traditional way of making houses (mud, clay, wood) and design it properly to have leveled floor, enough internal light scattering making home well-lit, the homes built in traditional manner are much more cooler in warmer days than cement houses. My well ventilated ancestral home where loo flows in May and trmperatures in range of 42-45 are daily average, thr home interiors are quiete cool and a ceiling fan suffices. In the "new" cement concrete flat even AC (set at 25 degrees) does not suffice.

Urbanization is not just about supplying the basics.
It is about reducing the agricultural labor requirement to essentially zero.
It is about increasing the population density to 1000+/- per sqkm.
And it is about large agglomerations of people. Typically you need something like 100,000 folks for a large urban area. Something like 10,000 folks is getting close to being unable to eliminate agriculture. It is the elimination of agriculture that releases labor for skill development and specialization. No elimination of agriculture and skill development is unlikely or tougher.
-----------------------------------------------------

A/C doesn't work as advertised in apartments in India because they are not designed for it. WRT cement houses, there is no need to build our houses this way. The ideal design would be a concrete/brick external skin with an 4" insulating polystyrene layer, preferably on the outer skin, protected by brick/plaster/stucco/cement board/siding/etc for the outer building skin with the interior left unfinished with Gypsum board hollow stud walls and all the electrical/plumbing/AC ducts running through the hollow walls. This is how condo's are built in Florida or Arizona. All openings should be draft sealed. After doing this a simple 1 ton A/C, not much bigger than your, 3/4 ton parked on your bedroom window could easily cool your entire 1200 sqft apartment down to 18C. I don't think your electric bill will be much higher either. India is very wasteful right now which I have always found very odd.

My water bill for family of 3 adults + 2 kids was just over 5000 gallons this month, this roughly 15,000 litres for an entire month. My DAD & his 3 tenant families go through a 40,000 liter tanker every 3 days! Something I simply can not fathom. The water for the flush, Indian style uses 3 times the water for the high efficiency flush I use in USA. This in water starved Chennai. The ayyah when she washes the clothes uses 400 litres of water at a single sitting per my rough estimate. I estimate she used 250 liters to clean one basin full of dishes. My washing machine in usa uses less than 80 liters per load. My dish washer uses an incredible 18 liters of water per load.

All these designs/research/engineering have all ready been done. Just steal from the west. No traditional system is scalable or sustainable at our urban scale requirements. Simply set up the manufacturing necessary.

We punish ourselves unnecessarily in India. JMT and all that.

[disha]

There's such a thing as being ahead of its time. Leonardo da Vinci's design for aircraft and helicopters were ahead of its time because there wasn't sufficiently advanced materials science to support it. Charles Babbage's Difference Engine could not be built for lack of machining precision at that time. Electric cars will similarly face challenges with battery design over the next several years. Even Teslas are quite limited cars today - drive them spiritedly, and I'd be lucky to make it from north to south bay without having to spend a while charging it. Battery technology, whether it is charge storage density, or charging rate, isn't advanced enough yet.

For the latter part: Have you even sat in a Tesla, leave driving one and leave alone driving from "north to south bay" (some 50 miles)?. It is easier to read some article and comment rather than comment after actually experiencing one.

Regarding Da vinci - there is a saying "Need is the mother of all inventions"., when there is sufficient "need" it will be invented. Visionaries will create the "need" for their invention. Da Vinci's designs were "not ahead" but were actually flawed - since the mathematics of his time did not give him the solutions to the problems he was facing. This does not take away anything from Da Vinci BTW.

There are two sets of problems- a) that the technology cannot be translated into production at the desired level of tolerances and b) that it cannot be produced at sufficient scale to make it cheap enough to be a commodity.

It's all well to be a visionary, but productizing something takes a lot more than vision. Without either the technology to translate the vision into reality, or the brute economies of scale to make it cheap enough by amortizing the cost over a large volume, translating vision to reality is not possible.

If there is a "genuine" need "cost" becomes relative. Classic example in everyday use is IPhone. Anyway, discrimination of thought requires for us to understand that even though your argument is very valid in several areas, it is equally invalid in other areas.

[disha]

Does 'urbanization' mean:
a) roti(food), kapda(clothes) aur makan(made of brick and cement)
b) bijli(electricity & fuel), sadak(roads), pani(water supply)
c) education, technology, and employment

Although I am yet not sure on cement houses. If we do more research on our traditional way of making houses (mud, clay, wood) and design it properly to have leveled floor, enough internal light scattering making home well-lit, the homes built in traditional manner are much more cooler in warmer days than cement houses. My well ventilated ancestral home where loo flows in May and trmperatures in range of 42-45 are daily average, thr home interiors are quiete cool and a ceiling fan suffices. In the "new" cement concrete flat even AC (set at 25 degrees) does not suffice.

Urbanization is not just about supplying the basics.
It is about reducing the agricultural labor requirement to essentially zero.
It is about increasing the population density to 1000+/- per sqkm.
And it is about large agglomerations of people. Typically you need something like 100,000 folks for a large urban area. Something like 10,000 folks is getting close to being unable to eliminate agriculture. It is the elimination of agriculture that releases labor for skill development and specialization. No elimination of agriculture and skill development is unlikely or tougher.
-----------------------------------------------------

A/C doesn't work as advertised in apartments in India because they are not designed for it. WRT cement houses, there is no need to build our houses this way. The ideal design would be a concrete/brick external skin with an 4" insulating polystyrene layer, preferably on the outer skin, protected by brick/plaster/stucco/cement board/siding/etc for the outer building skin with the interior left unfinished with Gypsum board hollow stud walls and all the electrical/plumbing/AC ducts running through the hollow walls. This is how condo's are built in Florida or Arizona. All openings should be draft sealed. After doing this a simple 1 ton A/C, not much bigger than your, 3/4 ton parked on your bedroom window could easily cool your entire 1200 sqft apartment down to 18C. I don't think your electric bill will be much higher either. India is very wasteful right now which I have always found very odd.

My water bill for family of 3 adults + 2 kids was just over 5000 gallons this month, this roughly 15,000 litres for an entire month. My DAD & his 3 tenant families go through a 40,000 liter tanker every 3 days! Something I simply can not fathom. The water for the flush, Indian style uses 3 times the water for the high efficiency flush I use in USA. This in water starved Chennai. The ayyah when she washes the clothes uses 400 litres of water at a single sitting per my rough estimate. I estimate she used 250 liters to clean one basin full of dishes. My washing machine in usa uses less than 80 liters per load. My dish washer uses an incredible 18 liters of water per load.

All these designs/research/engineering have all ready been done. Just steal from the west. No traditional system is scalable or sustainable at our urban scale requirements. Simply set up the manufacturing necessary.

We punish ourselves unnecessarily in India. JMT and all that.

There are several wrongs and generics I can point out in the above., not sure how to address it in the next 5 mins!. Here is an attempt taking one part:

My DAD & his 3 tenant families go through a 40,000 liter tanker every 3 days! Something I simply can not fathom. The water for the flush, Indian style uses 3 times the water for the high efficiency flush I use in USA. This in water starved Chennai. The ayyah when she washes the clothes uses 400 litres of water at a single sitting per my rough estimate. I estimate she used 250 liters to clean one basin full of dishes. My washing machine in usa uses less than 80 liters per load. My dish washer uses an incredible 18 liters of water per load.

1. Get your Dad and 3 tenant families a dish washer. They do not require an ayaah to do the job., they can do it themselves. It is a "mental" issue (changing habits) instead of a technological issue. The argument that dishwasher is not good for "Indian food" is useless.

OR

They can follow the "Hindu" way of eating on Banana/Other leaves and composting the food leftovers. A part of that is using the compost bin for food leftovers and use utensils and still use the dishwasher.

2. For the clothes, get a washing machine for your folks. One has all the ranges available., one does not need an Ayah for that too. And you cannot compare your Ayah with the washing machine., does not prove your point., just proves that your folks back here (or home) are resistant to change - something like the FOBs use Rin/Surf to wash their clothes and still search for it in Indian shops 10 years later.

Sir - change starts from within.

Will come back later to talk about efficient homes - read Atriji's & Johneeg's posts though first.

[Suraj]

For the latter part: Have you even sat in a Tesla, leave driving one and leave alone driving from "north to south bay" (some 50 miles)?. It is easier to read some article and comment rather than comment after actually experiencing one.

What's your point ? It's a wonderful piece of technology etc regardless of whether or not I currently own one, but it's still limited by battery technology.

[disha]

^^ No it is not limited by battery technology.

[Suraj]

I thought you had facts to explain why it achieves the range of less than half a tank of gas in an IC engine, under ideal driving circumstances, and requires several hours to charge fully, as opposed to minutes to refill a petrol tank.

My factual basis for its battery limitation is this:
* the energy storage density of the battery is lower than IC - it cannot store the equivalent of a full tank of petrol.
* the charge rate does not come close to matching the speed at which a petrol tank can be refilled.

If you choose to follow some alternative argument of how electric cars are a paradigm shift that requires 'thinking differently', that's besides the point. They're not a drop in replacement that's even more convenient than what existed before, as digital cameras are compared to film roll, for example.

[disha]

I thought you had facts to explain why it achieves the range of less than half a tank of gas in an IC engine, under ideal driving circumstances, and requires several hours to charge fully, as opposed to minutes to refill a petrol tank.

My factual basis for its battery limitation is this:
* the energy storage density of the battery is lower than IC - it cannot store the equivalent of a full tank of petrol.
* the charge rate does not come close to matching the speed at which a petrol tank can be refilled.

If you choose to follow some alternative argument of how electric cars are a paradigm shift that requires 'thinking differently', that's besides the point. They're not a drop in replacement that's even more convenient than what existed before, as digital cameras are compared to film roll, for example.

Dude I own one!

[Suraj]

You still haven't answered the question: I thought you had facts to explain why it achieves the range of less than half a tank of gas in an IC engine, under ideal driving circumstances, and requires several hours to charge fully, as opposed to minutes to refill a petrol tank.

[Atri]

Urbanization is not just about supplying the basics.
It is about reducing the agricultural labor requirement to essentially zero.
It is about increasing the population density to 1000+/- per sqkm.
And it is about large agglomerations of people. Typically you need something like 100,000 folks for a large urban area. Something like 10,000 folks is getting close to being unable to eliminate agriculture. It is the elimination of agriculture that releases labor for skill development and specialization. No elimination of agriculture and skill development is unlikely or tougher.
-----------------------------------------------------.

Apart from the point about reducing agricultural labor thing (which I agree in principle not in practice because it is not implemented properly), rest does not make sense.

What is sanctimonious about 1 lakh people living together? Why should the population density be increased to more than 1000 people per sq km? Why cram people together at all?

Release from agriculture (which also means the size of farm increases) and tapping the labor for other industry in his same village of nearby village environment (in service or manufacturing sector), is most appropriate. This is what I am advocating. When I shared that NaMo link yesterday, this is exactly I was intending to say.

No need to displace these people to big cities. As JohneeG said, give bijli-sadak-pani-capital-internet/telephone-and other amenities and select sectors where factories can profitably work on not more than 8/9 acres of plots. Couple that with BPO and KPO type industry which has very low material investment (apart from an ambient room, good internet/phone connection and continuous electricity supply) and let people find their way. All 8 lakshmis will smile on individual.

Now Suraj garu might say a village with all these facilities and factories is in fact a bustling city. Then I would say that we are talking same thing but like an argumentative India referring to same satya with different name.

[RamaY]

I asked this question couple of years ago.

USA's labor force in 2012 is about 155 million compared to ~750mil in China and other ~750mil in India.

Assuming by using a magic wand, China and India will achieve USA levels of industrialization and productivity.

What will this 1.5 billion work force will produce, that too at western productivity levels? Who will consume all these goods? Will there be enough raw materials on the earth to sustain such an economic activity?

[disha]

You still haven't answered the question: I thought you had facts to explain why it achieves the range of less than half a tank of gas in an IC engine, under ideal driving circumstances, and requires several hours to charge fully, as opposed to minutes to refill a petrol tank.

Forget half a tank of gas and an ideal IC engine. Even EPA is struggling to come up with calculations that explain it easily in terms of gallons of gas or range. So instead of doing the calculation for you., I can do it for EPA and get some money as a consultant.

Bottomline - comparing an "ideal" electric engine with an "ideal" IC engine "at half a tank of gas" is meaningless for practical purposes. Does not give any data and is like the classic "2 space"/"4 space" war which some programmers indulge in.

What you need is data regarding following areas:

1. Range anxiety.

Hummer (2004) with half a tank of gas has a range of 120 miles., 144 miles in "range extended" driving conditions..
Prius 2010 with half a tank of gas has a range of 225 miles., 250 miles in "range extended" driving conditions
Tesla 60kwh with half a charge has a range of 65 miles., 72 in "range extended" driving conditions
Tesla 85kwh with half a charge has a range of 107 miles., 140 miles in "range extended" driving conditions.

Tesla 85Kwh same as Hummer (2004).

2. Fill up

Hummer to Prius - 5-15 mins

Tesla 85Kwh with dual charger in home - 2.5 - 5 hours.
Tesla SuperCharger - 30 mins (free electricity) - 2014 80% of US population covered.
Tesla Battery change station - 5-15 mins (with fuel tank equivalent cost).

So above is the data you can use.

In 2014/2015., take your Tesla and plan a coast-to-coast trip. Free charge ups.

[vishvak]

Some info about oil prices in last few week
link

But crude has been gaining for weeks as a labor strike in Libya, widespread theft in Nigeria and ongoing problems in Iraq have taken at least a million barrels a day off the world market.

Joint Statement on the Japan and India LNG joint study on pricing in the Asia Pacific Market in Tokyo link

So natural gas pricing is linked to crude!! Very interesting read. The discrepancies in world trading markets are unreasonable to say the least.

[Theo_Fidel]

Atri,

That is an interesting concept. Many attempts have been made to pull it off but none have been able to resist the pull of the cities. It is not that easy to get

bijli-sadak-pani-capital-internet/telephone-and other amenities

to rural areas. In fact it is bankruptcy worthy expensive.

Let us take the USA. It has the money and resources to do this yet the villages & even town all through this land continue to die and wither away. The reasons are simple. It all comes down to money & economics.
- Electricity. While all rural settlements have electricity, it is still not economic. There is a subsidy paid by the cities to take electricity to the rural areas.
- Telephone/Cellphone. Yes there is a subsidy there too, yes even for cellphone. There was report recently that in many villages the cellphone subsidy alone is now reaching $3000 per cellphone!
- Most of these rural areas/villages do not have municipal water, too expensive. They depend on well water and septic systems which are very expensive to operate correctly.
- Schools, without heavy subsidies rural schools are simply uneconomic. When the state cut off subsidy last year in my state alone 160 rural schools closed as the local folks can not afford them.
- Rural Hospitals, again closing quite rapidly as subsidies get cut off.
- Roads, poor quality and rapidly deteriorating as too expensive to fix without subsidy.

This is why you can not take $100 Billion to upgrade 100 sqkm of land, spread it over 100,000 sqkm of land and expect the same outcome.

Think about it this way, in cities space is at a huge premium due the very expensive infrastructure all around you. Even a detached home can be a $ 1 million type luxury. Now your proposal would mean everyone is living next to very expensive infrastructure. Very utopian but economically infeasible.

It is all possible as long as someone is generating the massive surplus necessary for the subsidy. And that someone is willing to pay the bills for eternity.

[Cosmo_R]

For those who are interested, 3D printing is one of the 12 disruptive technologies included in Mckinsey's latest report on the technology innovations that are likely to shape the world in the next 10 - 15 years. There is some detailed market sizing available in that particular chapter which folks I am sure would find interesting. The report is freely downloadable from the Mckinsey website.

Agreed. Disruptive. What do you think it bodes for: a) manufacturing—especially components, b) labor in 'emerging economies' or whatever we are going to call the those who missed the last bus?

[disha]

That is an interesting concept. Many attempts have been made to pull it off but none have been able to resist the pull of the cities. It is not that easy to get

bijli-sadak-pani-capital-internet/telephone-and other amenities

to rural areas. In fact it is bankruptcy worthy expensive.

It not an interesting/new concept., this is as old as 1990's discussions on urban-rural migration and have come up in various forums including NWHCR workshops during "family planning" studies, child and women health.

Listen to Modi talk about Rurban areas and do visit Gujarat's interiors - from satellite towns to small towns to villages.

Let us take the USA. It has the money and resources to do this yet the villages & even town all through this land continue to die and wither away. The reasons are simple. It all comes down to money & economics.
- Electricity. While all rural settlements have electricity, it is still not economic. There is a subsidy paid by the cities to take electricity to the rural areas.

Wrong.

- Telephone/Cellphone. Yes there is a subsidy there too, yes even for cellphone. There was report recently that in many villages the cellphone subsidy alone is now reaching $3000 per cellphone!

Wrong again. Australia has even lesser density and still has managed to overcome that "subsidy".

- Most of these rural areas/villages do not have municipal water, too expensive. They depend on well water and septic systems which are very expensive to operate correctly.

Wrong again.

- Schools, without heavy subsidies rural schools are simply uneconomic. When the state cut off subsidy last year in my state alone 160 rural schools closed as the local folks can not afford them.

Something called demographics and aging population. Infrastructure extended to say 100 persons now is more than sufficient for 80 persons and of different demographics.

- Rural Hospitals, again closing quite rapidly as subsidies get cut off.

Basic care vs. specialized care. New advances are already happening here.

[quotes]
- Roads, poor quality and rapidly deteriorating as too expensive to fix without subsidy.[/quotes]

That is the case for all infrastructure - maintenance has to be factored in.

Bottomline: First let all of Indian villages reach to half a standard of American villages and then we can discuss about efficiencies.

Think about it this way, in cities space is at a huge premium due the very expensive infrastructure all around you. Even a detached home can be a $ 1 million type luxury. Now your proposal would mean everyone is living next to very expensive infrastructure. Very utopian but economically infeasible.

Think about it this way., why is manhattan so expensive?

It is all possible as long as someone is generating the massive surplus necessary for the subsidy. And that someone is willing to pay the bills for eternity.

Food security bill?

[Theo_Fidel]

Just for reference here is Australian cellphone coverage map. Apparently this is overcoming the problem. No sort of discussion is possible with this sort of 10th standard debating style.



While we are at it.... $2500 to $ 6000 in subsidy for internet.

http://www.computerworld.com.au/article ... idy_costs/

An audit into the Federal Government’s Australian Broadband Guarantee (ABG) has found the program cost the Federal Government up to $258 million during its operation.

The Department of Broadband, Communications and the Digital Economy established the program in 2007 as a subsidy to service providers for the setup cost of internet connections that do not meet metro-comparable broadband speed benchmarks.

The program was allocated $237.7 million by the government in 2008 to operate for four years, and was initially worth some $2500 and up to $6000 per customer for participating ISPs.

And while we are at it this report from 2011 says the access fund is $8 Billion program.

http://www.nytimes.com/2011/10/07/busin ... .html?_r=0

And rural electricity in India too is heavily subsidized.
Here is one report from 2012.
Indian Govt earmarks Rs 5.4 billion subsidy for rural electrification
http://panchabuta.com/2012/11/29/indian ... ification/

[disha]

My factual basis for its battery limitation is this:
* the energy storage density of the battery is lower than IC - it cannot store the equivalent of a full tank of petrol.
* the charge rate does not come close to matching the speed at which a petrol tank can be refilled.

Here is a factual basis:

1. Energy density of a full tank of petrol does not come anywhere close to a nuclear fission device. Still we use petrol instead of nuclear fission devices to run our automobiles. Yes, there was talk of using nukes to run cars.

2. Modular technology allows one to snap out a battery pack, and then snap in a battery pack. Faster and automated than say putting gas. It is already demonstrated and put in use.

3. Super capacitors have already arrived that can cut the charge rate to few minutes.

So all your points on pure "electric vehicles" being inefficient at a technical level and hence economically unfeasible are wrong. At least we can put that line of argument to rest.

Will Tesla as a company succeed is a different question. Its business model is already successful, will it be able to survive the "Detroit" monopoly is the key question.

[disha]

Just for reference here is Australian cellphone coverage map. Apparently this is overcoming the problem. No sort of discussion is possible with this sort of 10th standard debating style.

Good atleast you have started putting data., even though it is misleading data.



The above is a map of cell towers of optus 3g n/w. Good that the cell towers density follows the known population centers of Australia. A single cell phone tower servicing a 25 sq km area will not even show up as single pixel in the above image.

And while we are at it., can you talk about the basic POTS (plain old telephone system) and the Solar powered digital concentrators and the community based TeleCenters in Australia?

If Australia with an internal density of 0-5 persons/sq. km can achieve an effective teledensity (POTS/Mobile/Iridium/...)., sure India can do better.

The problem with your line of argument on urbanization is that you do not have any middle ground. Your arguments for massive urbanization are based on experiences with ultra-low density populations.

If you read carefully, nobody has argued about a "rural" area with only few dozen souls (as in case of Aus.) or few hundered in a square mile in US context to be economic powerhouses.

In case of India, any "settlement" which is <15,000 is considered a village. So of course we are talking about 3x to 5x times more density than US! It changes dynamics on your fiscal calculations about cost and subsidy!!

So is your argument is that:

1. Providing bijli/sadak/paani/basic health care to Indian villages not cost effective hence should be abandoned?

2. That Indian villages cannot be self-sustaining?

3. And some Indian villages cannot produce world class or world beating goods and services?

[disha]

And while we are at it this report from 2011 says the access fund is $8 Billion program.

http://www.nytimes.com/2011/10/07/busin ... .html?_r=0

And rural electricity in India too is heavily subsidized.
Here is one report from 2012.
Indian Govt earmarks Rs 5.4 billion subsidy for rural electrification
http://panchabuta.com/2012/11/29/indian ... ification/

And do you realize how much the government actually saves when rural folks do not migrate to cities?

And BTW, 1/3rd of Indian FMCG is bought by rural areas - so yes, the subsidy is coming back into cities in some form.

[RamaY]

Atri,

That is an interesting concept. Many attempts have been made to pull it off but none have been able to resist the pull of the cities. It is not that easy to get

bijli-sadak-pani-capital-internet/telephone-and other amenities

to rural areas. In fact it is bankruptcy worthy expensive.

Let us take the USA. It has the money and resources to do this yet the villages & even town all through this land continue to die and wither away. The reasons are simple. It all comes down to money & economics.
- Electricity. While all rural settlements have electricity, it is still not economic. There is a subsidy paid by the cities to take electricity to the rural areas.
- Telephone/Cellphone. Yes there is a subsidy there too, yes even for cellphone. There was report recently that in many villages the cellphone subsidy alone is now reaching $3000 per cellphone!
- Most of these rural areas/villages do not have municipal water, too expensive. They depend on well water and septic systems which are very expensive to operate correctly.
- Schools, without heavy subsidies rural schools are simply uneconomic. When the state cut off subsidy last year in my state alone 160 rural schools closed as the local folks can not afford them.
- Rural Hospitals, again closing quite rapidly as subsidies get cut off.
- Roads, poor quality and rapidly deteriorating as too expensive to fix without subsidy.

This is why you can not take $100 Billion to upgrade 100 sqkm of land, spread it over 100,000 sqkm of land and expect the same outcome.

Think about it this way, in cities space is at a huge premium due the very expensive infrastructure all around you. Even a detached home can be a $ 1 million type luxury. Now your proposal would mean everyone is living next to very expensive infrastructure. Very utopian but economically infeasible.

It is all possible as long as someone is generating the massive surplus necessary for the subsidy. And that someone is willing to pay the bills for eternity.

Sources please.

[RamaY]

In addition to what Dishaji wrote...

Is not same as

[RamaY]

The Nehru-Gandhi-Maino family government mis-governance since 1947 (60 years) has cost India $120 trillion so far

How much did the Congress mis-governance Cost India?

http://www.deeshaa.org/2013/09/08/how-m ... ost-india/

[Suraj]

disha: I don't see range anxiety as the primary basis for an all-electric car's shortcomings. For ~90% of normal use, a Tesla will be fine. But that doesn't take away the fact that it remains restricted by only one thing - battery technology.

The energy density of today's batteries is far lower than hydrocarbons, much less fissile material. That is a fact. That is why it needs so much capital investment upfront in particular technologies as supercharging stations and battery swapping stations. It cannot be just parked in a normal gas station, plugged into a normal 120v outlet and expected to recharge in full in 5-10 minutes.

Instead, it requires Tesla to take on clean energy capital support and other means to invest the massive amounts in charging stations. It's not guaranteed that these investments will not be a huge loss to them if, for example, a new battery technology breakthrough enables superdense charge storage capability combined with rapid charging capability, that makes their charging station investments lossmaking, either due to redundance, or the need for further investments to modify the entire network.

Within the car itself, the constraints of battery technology is such that they cannot produce a vehicle for under ~$75K minimum (not counting the federal credit, which is an explicit subsidy to the buyer, but doesn't reduce production cost). The technology cannot be scaled down to produce a $20K car cost effectively (which is possible with IC engines), with a battery of similar energy capacity. It will take further economies of scale (which obviously isn't going anywhere) to pull down the costs. It's quite possible that e-car growth will be curtailed by various fears of 'Peak Lithium' due to supply issues, for as long as they depend on Li-ion technology, as well.

The net result is a vehicle technology that currently depends on a combination of things:
* battery technology that doesn't yet have the energy density, requiring massive ongoing capital investments in rapid charging/swapping locations, which may or may not require further investments as battery technology evolves.
* explicit subsidization of the initiative by government partly by taxing IC fuels, and private funding sources.
* the willingness of early adopters - you're one of them - to pay the premium to support a new technology. There's nothing wrong with this - every new technology depends on early adopters' willingness to pay that premium.

Electric cars will very likely become more ubiquitous in future. Their constraints may be minimized by the capital investments made upfront. But those are paid for by the taxpayer through the federal subsidies, by the private investors, and by the buyer willing to pay a premium. Over years, that cost may be amortized.

This is how the development and deployment of any new technology works. It happens on the back of technology (for batteries in this case) progressively maturing over time, combined with substantial capital investments to build the necessary economies of scale. Applies to e-cars, 3D printers or any other new technology.

Now the question is, is that the approach you want India to take ? The fundamental basis for doing so is the ability to generate and deploy capital in supporting the development and deployment of these technologies, and amortizing their costs over time to make them cheap enough. However, India is *not* a capital surplus nation, and the most efficient choice is to use technologies whose development costs have already been amortized, to rapidly build our labour skill base as well as internal capital base.

The problem with visionary ideas isn't the ideas themselves, but the huge cost of developing and deploying them to the extent that they become cheap. With a capital deficit nation lacking in access to cutting edge technology as well, our ability to compete in investing enough to beat out competitors to develop those technologies is also limited.

There are quite a few examples of unique domestic technologies (anyone remember the skybus ?) that couldn't make it simply because they required capital, technology and willingness to absorb risk. Please read about the Skybus - it's a very good example of what happens when we attempt to develop technologies without the capital and technological base - the result is a project that's underinvested in, and gets shelved after a single accident because there's no capital willing to risk such early losses to carry it through. Even the LCA or Arjun MBT faces the same problem - ADA/DRDO works so slowly and painstakingly because they're limited by the amount of money available; one crash and DDM will be screaming 'stop the project and import!'

The best way to avoid that is to have enough $$ in hand to bear the risks associated with developing new technology, and pay to train labour, develop, licence or steal technology needed, and put those two to work, and be willing to face a lot of failures. The easiest way to generate capital is to aggressively use technologies whose development costs have been amortized, enabling us to pay only usage costs, and save the generated capital.

[Arjun]

Agreed. Disruptive. What do you think it bodes for: a) manufacturing—especially components, b) labor in 'emerging economies' or whatever we are going to call the those who missed the last bus?

Haven't given it as much thought as I would like to, but my immediate reaction would be that low-end manufacturing would get replaced by a combination of higher-end manufacturing and services.

So if we take the toy industry, the low-end toy manufacturing slave camps in China get replaced by a fewer number of higher end 3D printer manufacturing facilities which are more dispersed globally (since cost would not be the prime factor for capital equipment). Also there would be opportunity for higher-end services such as engineering design for each of the toys or output that needs to be 'printed' out...

Both of these trends bode well for India. Essentially any country which can offer higher-end manufacturing capabilities while having strong services capabilities is well positioned for the future.

[Arjun]

The easiest way to generate capital is to aggressively use technologies whose development costs have been amortized, enabling us to pay only usage costs, and save the generated capital.

The easiest way to generate capital is not to play in the innovation game at all ?? Somehow I have difficulty in agreeing to that. Most of the value-add in any industry is captured by the firm investing in either brand or innovation. If I hear you right, you think India would generate more capital by foregoing the brand investment or innovation in any industry and go for the crumbs that remain after the brand and innovation battles have already been won by others. I don't see how that squares up.

[disha]

Suraj,

Is it battery technology that is restrictive? Think of the battery pack as a tank where one puts in the gas called electrons. Now how you put it matters., if the hose is small it will take time to fill the tank and if the hose is big, the tank will fill faster. Alternatively change the tank itself.

Given the two statements above, I can turn around and say the infrastructure of putting electrons faster into the tank is not there. However the electricity grid is there and the electrons are cheaper some 4x cheaper than the gas (actually 8x, but let us stick with 4x).

So all we need is a big hose because we want to pump large number of electrons in same amount of time. The technology for that exists too. So what remains? Distribution outlets - in effect "gas stations". However each gas station today has gas, water and air and also electricity minus the big hose.

In an instant, the technology problem to me looks like a business problem. That is if I can convert 1 gas station per square mile to have at least one charging station that gives 50-100 miles in a 10 mins. charge., that is a start. However, turn the problem around once more, there are now @6000 charging stations across US. For example, Target superstores have on an average 8 charging stations. Free. So this can be leveraged.

Initially it may sound inconvenient, but turn the problem around again. A 25 gallon gas tank when full will take away 75-100 $ in an instant. So for some inconvenience upfront one can incorporate an electric car into a normal lifestyle.

Hence the electric vehicles are here to stay. Hybrids and plug-in hybrids are pass, they have been the stepping stones.

Now are we to say that the battery technology will remain static? Will the battery technology never improve? If in 1993 I would come and say that 1 Million HEVs/PHEVs/BEVs (hybrids, plug-ins, battery) will be sold within 20 years of time - I would have been laughed at.

Critical mass is gathering, @5% of all sales in US of personal automobiles are of the above category.

The energy density of today's batteries is far lower than hydrocarbons, much less fissile material. That is a fact. That is why it needs so much capital investment upfront in particular technologies as supercharging stations and battery swapping stations. It cannot be just parked in a normal gas station, plugged into a normal 120v outlet and expected to recharge in full in 5-10 minutes.

The cost difference to setup a "supercharging" station compared to a normal gas station is not much actually. See Target charges for instance. Why are they setup that way? It pays to have a well heeled customer in store than in walmart.

Instead, it requires Tesla to take on clean energy capital support and other means to invest the massive amounts in charging stations. It's not guaranteed that these investments will not be a huge loss to them if, for example, a new battery technology breakthrough enables superdense charge storage capability combined with rapid charging capability, that makes their charging station investments lossmaking, either due to redundance, or the need for further investments to modify the entire network.

Nothing is guaranteed in life. . Cliche's apart, the part of "supercharging station obsolescence" is FUD. It is like saying that larger gas tanks and high octane ultra-clean 5 min/in/out Chevron gas stations are going to put the "gas stations" in general into obsolescence. They are still super-duper-charging stations.

Within the car itself, the constraints of battery technology is such that they cannot produce a vehicle for under ~$75K minimum (not counting the federal credit, which is an explicit subsidy to the buyer, but doesn't reduce production cost). The technology cannot be scaled down to produce a $20K car cost effectively (which is possible with IC engines), with a battery of similar energy capacity. It will take further economies of scale (which obviously isn't going anywhere) to pull down the costs. It's quite possible that e-car growth will be curtailed by various fears of 'Peak Lithium' due to supply issues, for as long as they depend on Li-ion technology, as well.

More FUD and you are running on fumes now! Here is why, improvement in IC engines have been incremental and the basic IC engine has not changed much. So the $20k car cost is basically subsidized for almost a century. You make the same case for batteries down below.

Further, lithium is immensely and easily recyclable. It is cheaper to recycle lithium, so if one purchases a $75k car and the price of lithium increases, it is like investment . Keep that aside. And even though lithium is "rare-earth" it is very much available in earth crust. It is not "rare" as in "rare earth"., and if Li-battery technology improves then for the same charge, less Li is used which is again recycled every 7-10 years.

And why are we spending time on just Li- based recyclable batteries? What about Zn/Air (even lighter and denser)., Carbon nanotubes (ooh exotic) etc.

* explicit subsidization of the initiative by government partly by taxing IC fuels, and private funding sources.
* the willingness of early adopters - you're one of them - to pay the premium to support a new technology. There's nothing wrong with this - every new technology depends on early adopters' willingness to pay that premium.

Thank you for the second part, though it was an impulse purchase after surviving on corollas and 2nd hand sentras and hondas. For the first part, here is a twist on subsidies, a cleaner air quality saves several 1000s from the ERs. So the subsidies behind EVs is well spent. A direct cost comparison is tough, but even the IC was subsidized.

Further the cost per mile is actually cheaper in case of EVs (HEVs/PHEVs/BEVs) than ICs. And electrons can be generated using PVs/Nuclear/Coal - yes clean coal!! (Theo must be saying Oh-mamma now)

Now the question is, is that the approach you want India to take ? The fundamental basis for doing so is the ability to generate and deploy capital in supporting the development and deployment of these technologies, and amortizing their costs over time to make them cheap enough. However, India is *not* a capital surplus nation, and the most efficient choice is to use technologies whose development costs have already been amortized, to rapidly build our labour skill base as well as internal capital base.

All the more reason for India to go the hybrid/diesel., hybrid/NG way and then to EV. Skip a generation of gas engines and directly jump to EVs. The ranges are very smaller in India and Gujarat and MP already have 24x7 electricity to a village level. Further, India is not lacking in Solar power or even coal. And one does not need a hi-fi battery swapping machine - India can harness that labor.

There is no "vision" required here, just a will to do. For example, do you see 2-stroke scooters/bike on the road? The moment Hero Honda said that it can do 80 Km/Litre, all the 2-stroke engines were going to go the way of DoDo (it is a niche now as I hear).

I saw the first CFLs bought by - drumroll - Indian consumers. Why? To reduce the electric bills.

The auto-rickshaws does not require a very high density Li-ion batteries, they can do with some low density ones which while the fellow is taking a nap can be either changed or charged. Of course hybrids help the range anxiety. The savings in the air pollution itself will be immense.

Problem is that the technologies are seen through "western" eyes and not the "indian" eyes. For example, you will find "generators" in all shops in Hyderabad - this are not some high funda diesel electric generator - this are Lead-acid batteries in series kept under the chairs/tables which will at least keep the lights up for a while. And li-ion batteries are already replacing them. In fact in Bihar you will find low to high quality solar cells - why?

It is not about vision - again - it is about will to do something.

There are quite a few examples of unique domestic technologies (anyone remember the skybus ?) that couldn't make it simply because they required capital, technology and willingness to absorb risk. Please read about the Skybus - it's a very good example of what happens when we attempt to develop technologies without the capital and technological base - the result is a project that's underinvested in, and gets shelved after a single accident because there's no capital willing to risk such early losses to carry it through.

There is no risk taking - but if you look at the skybus - it is costly - setting up the concrete piers to hang a bus with humans in it and move it at the speed of a running horse. Scary. Costly. Should not have been attempted in first place - because it just does not make sense.

Even the LCA or Arjun MBT faces the same problem - ADA/DRDO works so slowly and painstakingly because they're limited by the amount of money available; one crash and DDM will be screaming 'stop the project and import!'

They are defense project and will not comment on it. DDM is a #paidmedia anyway.

The best way to avoid that is to have enough $$ in hand to bear the risks associated with developing new technology, and pay to train labour, develop, licence or steal technology needed, and put those two to work, and be willing to face a lot of failures. The easiest way to generate capital is to aggressively use technologies whose development costs have been amortized, enabling us to pay only usage costs, and save the generated capital.

Here is my example, try to setup a private initiative in Hyderabad with a capital base of say 1 Cr (peanuts) (and outside of It-vity)., a bunch of goondas will show up with their Hapta. Everybody and incl. your neighbour will scream at you for "profiteering" and "making use of the labors sweat" even before the MOU is signed. Then there are a range of Sarkari babus to satisfy. After that there are the CONgis with #pappus in their pants. Then there are a range of bank babus to satisfy. This is again in Hyderabad. Better to enjoy Golkonda fort and faluknama and beat back a hasty retreat. Assuming you cross all that, you have to source material and machinery.

Heck just open a samsung phone shop and ask everybody around you to become a doctor or an engineer.

Business is willing to bear the cost and take the risk, get the damn government out of the way. Goes back to my point on Guj. and TN being better states when it comes to business friendliness.

[Suraj]

We are innovative - at cutting costs and streamlining existing technology. When done in an organized manner - a Tata Nano effort rather than a roadside jugaad - it is something we are very good at. The process is characterized by taking an existing set of mature technologies, making it leaner and less wasteful, but by compromising in other ways (e.g. fewer luxuries, less crashworthiness).

What is much harder to do for a capital deficit nation is innovating in areas that require massive capital to translate the cutting edge technology into something that's a regular commodity. There's little capital in the hands of GoI, private investors or the average consumer to bankroll the development of a cutting edge electric car in India, for example. Companies do not have big R&D budgets. As Theo mentioned previously, we do not even make the high end steel used in auto manufacturing.

One Skybus accident and the whole thing is dead in the water now. The CABS crash set the program back by a decade. The loss of an LCA prototype would put severe pressure on it ever being inducted.

The logical approach to innovation early in the curve is to minimize waste and build up a base of capital and technology. Building such a base increases tolerance for risk, and improves the odds of being able to deliver on time and at cost. Our defence projects are a testament to the difficulty it takes to do this when dealing with a capital and technology deficit. It's not easy, and should not be underestimated, whether it's tanks or 3D printers being discussed.

[Suraj]

disha:You completely misunderstand my point. I'm no arguing against electric cars. They'll probably take over from IC based ones in the next few decades. It doesn't change the point that the energy density of their source of energy is much lower than that of hydrocarbons.

More FUD and you are running on fumes now! Here is why, improvement in IC engines have been incremental and the basic IC engine has not changed much. So the $20k car cost is basically subsidized for almost a century. You make the same case for batteries down below.

That is not 'FUD'. That's the central basis of why IC is better now - it's a mature technology whose costs and potential have been developed over a century. It's development costs have been amortized long ago and there's enough economies of scale. Electric car technology is not mature - it's a frontier technology bankrolled by, among other things, the taxes on the same IC technology's fuel.

It's the maturity of IC technology that permits it to be built into both $2K and $2M cars, and yet for the fuel and its distribution to be so cheap as to subsidize the technology that can replace it. You may be discussing the technology. I'm not. I'm discussing the economics of it - this is the economics thread after all. It's not a mature technology until it can support itself.

If you choose to instead see the previous post as 'chee, Tesla bad! IC cars good!', you clearly missed the point. I'm not making a value judgement, either against the technology or your choice of car, which you're implying I am doing, with the suggestion of 'FUD'.

[panduranghari]

Electric cars will very likely become more ubiquitous in future

Electric cars as they are now will never be ubiquitous. The current car is 80% hydrocarbons. We havent got so much hydrocarbons left. US way of car based suburban living was a blip. Won't be repeated again.

[Abhijeet]

In the vein of the well-known phrase "Never underestimate the bandwidth of a station wagon full of tapes hurtling down the highway", I'll offer another: Never underestimate the ingenuity of hundreds of millions of well-educated people with humanity's sharpest tools at their disposal.

Predictions about how the developed world's lifestyle is doomed because it's unsustainable etc underestimate human creativity. People in the developed world will figure out how to solve the sustainability issues for their lifestyles long before any cataclysmic change occurs that drops them back into pre-industrial times. The world isn't going back to that level of development, and it's only the industrialized countries of today that collectively have the human resources to figure out how to live more efficiently without sacrificing their quality of life.

The question for India is: do we want to wait and watch from the sidelines, unable to play the game of industrialization, hoping for the downfall of those who are ahead, just so that we can say "look, we were right in being content in our poverty all along"? Or do we want to actually become rich first, through techniques that have worked well throughout the world over the last 300 years (industrialization, de-agriculturalization, urbanization), and then work out our uniquely Indian mode of living, if any?

Suraj is exactly right about not trying to reinvent the wheel at our current stage of development. We lack so many necessary resources for fundamental innovation (financial institutions, pools of capital, skilled workers, consumer markets) that it's a childish dream to expect us to blaze new trails while becoming rich in the process. 3D printers in every village - honestly.

[RamaY]

We are innovative - at cutting costs and streamlining existing technology. When done in an organized manner - a Tata Nano effort rather than a roadside jugaad - it is something we are very good at. The process is characterized by taking an existing set of mature technologies, making it leaner and less wasteful, but by compromising in other ways (e.g. fewer luxuries, less crashworthiness).

What is much harder to do for a capital deficit nation is innovating in areas that require massive capital to translate the cutting edge technology into something that's a regular commodity. There's little capital in the hands of GoI, private investors or the average consumer to bankroll the development of a cutting edge electric car in India, for example. Companies do not have big R&D budgets. As Theo mentioned previously, we do not even make the high end steel used in auto manufacturing.

One Skybus accident and the whole thing is dead in the water now. The CABS crash set the program back by a decade. The loss of an LCA prototype would put severe pressure on it ever being inducted.

The logical approach to innovation early in the curve is to minimize waste and build up a base of capital and technology. Building such a base increases tolerance for risk, and improves the odds of being able to deliver on time and at cost. Our defence projects are a testament to the difficulty it takes to do this when dealing with a capital and technology deficit. It's not easy, and should not be underestimated, whether it's tanks or 3D printers being discussed.

Risk aversion and fear of failure and associated national self-flaggation are different problems from availability of capital. The solution to these problem is right political leadership and right national vision which are OT.

I truly wonder if lack of capital is a real problem either. If india is so poor on cash, how is it entertaining so much imports into capital goods account to begin with.

I think the real issue here is that, in India, lot of people have small amounts of money. In a normal scenario, these people will have reliable economic policies and invest possibilities tha allow them to pool that money towards internal investments into manufacturing technologies with in India. The shorter time to market these technologies offer the better for the society. No wonder Indians are buying $50b of gold and at the same time are importing $100b of capital goods but "cannot" invest in the market for innovation or manufacturing.

In the absence of all these policy instruments, the public are bypassing this investment phase and are directly buying manufactured goods from outside. This is why India is importing even glues and toys etc.,

Another challenge for India is lack of standardized consumer goods, in all aspects of their life. It cuts across all fields, construction, transportation, civic infra and you name it. West was able to benefit from economies of scale because it standardized the consumption market. It goes all the way to standardized shopping malls, store designs, containers, food packaging to the cup holders in the cars and so on.

Of course India too can take the route of standardization. But the western societies are done with standardization and are craving for personalization of goods and services. Can india skip the phase of standardization phase and continue with the personalized nature of goods and services?

The answer is yes and that is where the technological leap comes into picture. The 3-D printing like technologies (don't hang up on the name) is offering solutions in many sectors: from toys to manufacturing small items like nuts and bolts to medicine to rocket engines to fire arms to even rocket engines. Similarly 4-D printing technology can be used in our infra development where we do not have the luxury or political inclination to rebuild all out cities like china.

[Arjun]

We are innovative - at cutting costs and streamlining existing technology. When done in an organized manner - a Tata Nano effort rather than a roadside jugaad - it is something we are very good at. The process is characterized by taking an existing set of mature technologies, making it leaner and less wasteful, but by compromising in other ways (e.g. fewer luxuries, less crashworthiness).

What is much harder to do for a capital deficit nation is innovating in areas that require massive capital to translate the cutting edge technology into something that's a regular commodity. There's little capital in the hands of GoI, private investors or the average consumer to bankroll the development of a cutting edge electric car in India, for example. Companies do not have big R&D budgets. As Theo mentioned previously, we do not even make the high end steel used in auto manufacturing.

One Skybus accident and the whole thing is dead in the water now. The CABS crash set the program back by a decade. The loss of an LCA prototype would put severe pressure on it ever being inducted.

The logical approach to innovation early in the curve is to minimize waste and build up a base of capital and technology. Building such a base increases tolerance for risk, and improves the odds of being able to deliver on time and at cost. Our defence projects are a testament to the difficulty it takes to do this when dealing with a capital and technology deficit. It's not easy, and should not be underestimated, whether it's tanks or 3D printers being discussed.

There seems to be a mixing up of decisions that are more appropriate to the private sphere and those that are meant to be for public policy.

What individual entrepreneurs and businessmen would invest in is entirely their private sphere - and that is determined by the market and by individual interest and talents. There are entrepreneurs in India who would compare with the best in the Valley in innovation, and who have the credibility to raise significant capital for their ventures. If they choose to invest in what their heart or mind tells them to - that is entirely upto them and to their talents. Advising them to stick to low-end ventures if their heart or talent tells them otherwise would obviously be quite ridiculous !

Coming to public policy and where the government needs to invest - (a) in any case the government should not be in the business of business. (b) It needs to put in place policies to promote large-scale manufacturing and massive urbanization (at least until distributed modes of development are proven to be something beyond a chimera). (c) It needs to have the kind of skill development vision that Modi displays in aggressively and constantly sniffing out the next big employment generation opportunities and investing in relevant training institutes (d) The stalled infrastructure buildout of the country needs kickstarting again. Need to see more of the Vajpayee era aggression in highways and related infrastructure.

[RamaY]

Tale of two stories...

1/ Planning Commission's definition of Poverty

Based on the recommendations of the Tendulkar Committee, the Planning Commission had set the poverty line at Rs 965 per capita per month in urban areas and Rs 781 per capita per month in rural areas.

Per this calculation, a family of 5 will have about Rs 4000 in rural areas and Rs 5000 in urban areas can be called poor.

Beyond this debate GoI accepts that 65% of Indian Population (800+ million of them) are poor and need programs like FSB etc.,

2/ This week SBI sets car loan eligibility as Rs 6L/yr income.

So how is Automobile industry doing?

Production

The cumulative production data for April-March 2012 shows production growth of 13.83 percent over same period last year. In March 2012 as compared to March 2011, production grew at a single digit rate of 6.83 percent. In 2011-12, the industry produced 20,366,432 vehicles of which share of two wheelers, passenger vehicles, three wheelers and commercial vehicles were 76 percent, 15 percent, 4 percent and 4 percent respectively.

Domestic Sales

The growth rate for overall domestic sales for 2011-12 was 12.24 percent amounting to 17,376,624 vehicles. In the month of only March 2012, domestic sales grew at a rate of 10.11 percent as compared to March 2011.

Passenger Vehicles segment grew at 4.66 percent during April-March 2012 over same period last year. Passenger Cars grew by 2.19 percent, Utility Vehicles grew by 16.47 percent and Vans by 10.01 percent during this period. In March 2012, domestic sales of Passenger Cars grew by 19.66 percent over the same month last year. Also, sales growth of total passenger vehicle in the month of March 2012 was at 20.59 percent (as compared to March 2011). For the first time in history car sales crossed two million in a financial year.

At an average price of Rs 6L per car, 2 million cars means $24B sales in one year. Can we call this lack of capital and support for innovation? This is just one industry.

***

PM of India and GoI have been saying that India will need (and are working towards it) at least $2T investment in India's infrastructure sector. Let us assume we are pooling only $100B per year, in the worst case scenario. Can this be called lack of capital and lack of support for innovation?

Why is GOI implementing programs like NREGA that, by design, discourage innovation, capital goods development and industry development?

OR as Rahul Gandhi said the other day

"Opposition says that infrastructure of roads, airport, bridges to progress country forward. These alone can't take the country ahead unless those who work to make these are taken care of too."

Should India focus on another green revolution that will make food accessible to all Indians at affordable prices? Is India food-deficient nation today? Then why its exports of food grains and meet exports are growing much faster than its economy?

Where is the disconnect?

[svinayak]

One more FUD


Don’t Give Up on India Yet

It’s hard to be optimistic about India right now. Asia’s third-largest economy is growing at the slowest pace in a decade, the trade gap is widening, the rupee is plunging and the government’s cost of borrowing is soaring as confidence evaporates and investors flee.

The wave of negative news has fueled speculation that India could be hurtling toward another economic disaster, something in the magnitude of the 1991 balance-of-payments crisis when the government, on the brink of default, shipped its entire gold reserves to Europe to secure an emergency loan from the International Monetary Fund. India’s economy is a lot bigger now, meaning that a repeat of that scenario would have a much greater impact on the world economy this time around.

All this makes for scary reading, but is the situation really that bad?

Perhaps not. Credit Suisse Head of Southeast Asia and India Economics Robert Prior-Wandesforde suggested in an report this month entitled, “India: Recovery Cancelled?” that the doom and gloom about India may be overdone and, contrary to the view of many market observers, he was cautiously optimistic about the country’s economic outlook.

In Prior-Wandesforde’s view, the biggest risk to Credit Suisse’s assessment of the Indian economy may just be fear. One could argue that India’s normally strong animal spirits have been “beaten down” by corruption scandals and economic uncertainty, which may explain the flight of capital from India, he said. But at the same time, he noted, the amount of money Indian companies are spending to invest abroad has not grown relative to the amount of money foreign corporations are spending in India. That indicates that businesses, at least, aren’t running for the hills yet.

With all the headwinds India faces, it may be difficult to be blue-sky optimistic about the country. But with an improved fiscal situation, favorable harvest weather, the possibility that a depreciating currency could boost exports and the fact that interest rates are unlikely to stunt growth as much as is widely expected, it would also be wrongheaded to write off India just yet.

[Suraj]

Risk aversion and fear of failure and associated national self-flaggation are different problems from availability of capital. The solution to these problem is right political leadership and right national vision which are OT.

I truly wonder if lack of capital is a real problem either. If india is so poor on cash, how is it entertaining so much imports into capital goods account to begin with.

In the absence of all these policy instruments, the public are bypassing this investment phase and are directly buying manufactured goods from outside. This is why India is importing even glues and toys etc.

Both are issues - the fact that we are deficient in capital and technology, and that we don't use what we have, well. Solving the latter is the first step, but it doesn't imply harnessing front-end capital intensive technologies to do so. In fact, the point is to avoid doing so and instead use existing technologies and simply localize them as we're good at doing - because the costs of developing those technologies has already been amortized, and we simply pay the far lower cost of localizing them.

That's not a suggestion that we ignore all the cool stuff and focus on applying the mundane stuff well for the conceivable future. The transition from being capital deficit to capital surplus can be as short as a decade or two, but the more we aim too far and just replace one set of inefficiencies (misusing existing capital) with another (over-reaching on inventing something new), the harder we make it for us to get to the point where suddenly we have both the accumulated capital compounding rapidly, and a trained workforce capable of executing rapidly.

Take the Skybus - there was no external vendor with standardized COTS designs for the guideway and coaches, that could be licensed and produced (with localization like more powerful A/C for Indian weather). Indian Railways and GoI lacked the funding to carry it through once one prototype was involved in an accident, and no one else stepped forward either. The Skybus is not very old - it went into cold storage less than a decade ago. It was even backed by the then PM ABV. None of that was enough - it still lacked the capital support and technology.

The answer is not 'stop all the scams and give the money from the prosecuted people to these projects and aal iz well'. The fact that we underinvest and take a long time is a systemic shortcoming due to lack of either capital or a trained workforce having enough technology to do their work. Many of these simply cannot be solved overnight by throwing more money or even more people in - ADA or GTRE scientists will not magically figure out how to intuitively tell if a design is good or bad, as a US or Russian engineering outfit might do on the back of decades of accumulated experience.

A perverse example of the costs of investing in the cutting edge while capital deficit is what PRC did to build the Han SSNs and Xia SSBNs in the 1970s. I read someplace that - at the height of the Cultural Revolution - these projects were consuming approximately 2% of their GDP then. Mind you, this isn't the whole defence budget, but just the development cost of one project. Millions dying in the countryside and that much capital - as a fraction of total output - going into designing nuclear submarines, as rudimentary as they were.

[RamaY]

The answer is not 'stop all the scams and give the money from the prosecuted people to these projects and aal iz well'. The fact that we underinvest and take a long time is a systemic shortcoming due to lack of either capital or a trained workforce having enough technology to do their work. Many of these simply cannot be solved overnight by throwing more money or even more people in - ADA or GTRE scientists will not magically figure out how to intuitively tell if a design is good or bad, as a US or Russian engineering outfit might do on the back of decades of accumulated experience.

True. Stopping all scams will be helpful but not necessarily the only solution.

GoI in the past 10 years, not definitely an overnight by any scale of time, failed to do anything in the following areas:

- Developing economic policy that will make the capital affordable and accessible to Industry (not businessmen).
- Developing an education policy that will pave way for better academic excellence and development of 'employable skillset' a.k.a trained workforce
- Facilitating these two societies join hands with various GoI initiatives that have budgets of more than say $10B. I can easily show at least 10 such initiatives announced by GoI in the past 10 years. When done, this would have acted as the seed capital and markets for associated research, development and infra development.

Coming to the examples of ADA and GTRE, these are very very bad examples from economic policy discussion. Yes these are key technologies India must work to be good at, but the current discussion is about the nuts and bolts of the society that will be mass produced.

The technologies and processes we are talking about, in general economy which covers 90% of GDP, is not that extremely technologically challenged. All the necessary technology is already there. All we need is more implementation/practice of this already existing technology, processes and innovation.

Saying that India lacks the technological know how even to make the basic infra needs is not only incorrect, but also puts a flood light on the failure of successive governments since 1947. The nation had all the time in the world (60 years) and all the resources (60yrs x $200B average economy since 1947 = $12T), people (even with a 1% literacy rate, that is a constant supply of 3-4 million labor pool).

The "continuous" reference to lack of resources, experience, institutional foundations proves only one thing. That India developed ZERO capability as on today (in 60 years) that can be used for tomorrow's planning/investment.

Are we ready to accept that claim/statement/assessment?

[Suraj]

Coming to the examples of ADA and GTRE, these are very very bad examples from economic policy discussion. Yes these are key technologies India must work to be good at, but the current discussion is about the nuts and bolts of the society that will be mass produced.

They're not. They're very pertinent examples of *current* cutting edge technologies that are extraordinarily hard to master. They're not even future frontier technologies. Even on the base of existing expertise and technology, it's the mastery over the cutting edge materials technology and engineering that makes the difference between being able to design a barely adequate design and a competitor to what's the current state of the art.

Converting new technologies into 'nuts and bolts mass produced items' takes a level of capital investment, risk tolerance and technological support that we don't necessarily have, across the board. I absolutely agree that some projects can be better funded. I'd much rather we avoid defence imports even at the cost of developing a prototype domestically, but fund it much better, and stick with it. It may crash, people will die, and there'll be negative publicity, but that's the cost of just getting to 90s or early 2000s state of the art, not even the present day, much less the future.