Thread: Indian Economy

Originally Posted by Akshay

As they say..

First mile is hard to run.. second mile is easily done.

As economy is doubling every 7 years, so in next 9-10 years we should expect us to be in China's current position.

Yeah, you're right.

What were we doing in the 1980's?

Liberalisation should have started back then, don't you think?

BTW, have you seen anything on how they plan to spend on infrastructure? I think the idea of using forex reserves has been shelved..

The Indian economy is well above 1 trillion USD if you account for the black economy which is alive and kicking. It is estimated that its actual size stands at between 37%-50% of total GDP. In India or in many third world countries for that matter, one should not be too quick to discount the unorganized sector.....

Also converting Rs GDP into USD GDP at current USD rate is not in my view that relevant,

If USD depreciates by 4% this year vs Rs, it does not mean that Indians are 4% better off, hence PPP is a better but still not perfect by far measure

Overall its good to see that the economy is doing well, if you look at southern and western states' GDP, the growth rate is in the 9s.

With regard to the trade deficit, one must not take a negative view of the current account deficit as it entails a net inflow of capital which leads to growth. It really depends on the components of imports, in fact recent studies by Marwah and Klien have suggested that trade openness Imports plus exports as a percentage of GDP (a 1% change in that variable) leads to a 0.07% change in GDP for India...

Indian economy can clock 9.5% growth: CII

The Indian economy can clock an average of 9.5% growth over the next five years or the Eleventh Five Year Plan period, with the terminal year of the Plan period registering double-digit growth, provided a capital investment of $1.5 trillion is made in the same period, according to industry chamber Confederation of Indian Industry (CII).

CII expects that the incremental capital output ratio (ICOR) for the 11th Plan period will deteriorate slightly to 3.8% from the current 3.6%. However, this decline will be more than compensated by an increase in investment to GDP ratio on an average to 36.2% from the current level of about 30%.

The crucial issue will be to mobilise the required investment for the purpose, said the chamber president R Seshasayee. At current rates and with no changes the economy would probably manage about $966 billion over the next five years, according to a CII study.

Laying down the roadmap for the required investment, CII has identified four broad sources of raising revenue: public sector plus others, private sector, household sector and foreign direct investment (FDI), which during 2004-05, had contributed in the proportion of 29.6%, 27.7%, 39.8% and 2.9% respectively.

The chamber said that particular emphasis needs to be given to FDI as there exists a great potential to increase its magnitude, and also it brings with it the required expertise as well as technology. While the current FDI inflow is to the tune of 1% of the GDP, CII believes that a favourable global environment could see India targeting about 2.5% of GDP as FDI.

Citing poor state of infrastructure as an impediment to growth, the industry body said that infrastructure spend by the end of 11th five year plan should go up to at least 10% of GDP. Keeping in mind the experiences of other developing economies where only about 22% of infrastructure investments came from private sector in the 90's, CII said that the government has to play the lead role in coming up with public investments, as private sector in India can potentially take care of about 25% of total investments in infrastructure.

According to CII, over the next five years, a cumulative investment of $337.5 billion (1999-00 prices) is required in infrastructure in order to achieve an average of 9.5% GDP growth for the 11th plan period. Out of this, about $84.4 billion should be the target for private sector's contribution to infrastructure investments, provided all necessary enablers are in place.

The chamber has further suggested that the government should seriously consider leveraging a larger external debt for India. Among the emerging nations, India has one of the lowest external debts to GDP ratio and a modest increase in this would not be of any significant risk, provided India is able to leverage this effectively, said the CII President.

Appreciating the performance of Public Private Partnerships (PPP) so far, CII has suggested that in order to strengthen this system, the government needs to focus on resource building and imparting understanding of PPP and its formatting, amongst officials in the centre and especially the states.

Creation of an Oversight panel on PPP is essential, which could both track the development of PPPs and also have a system of vigilance and rating for PPP projects, said CII in a release.

UB to buy Whyte & Mackay for Rs 4,350 cr

Largest M&A by an Indian firm, to be complete by January-end.

The Vijay Mallya-controlled United Breweries group is close to acquiring Glasgow-based distillers Whyte & Mackay for nearly £500 million (Rs 4,350 crore) by the end of this month.

This will be the largest buyout by an Indian company abroad, pipping Dr Reddy’s Laboratories’ acquisition of Betapharm last year for ¤480 million (Rs 2,736 crore).

Sources close to the deal said United Spirits, a part of the group flagship United Breweries, might be the investment vehicle for the acquisition of Whyte & Mackay.

Advisers of both the companies were adding final touches to the deal with Citigroup advising Whyte & Mackay and UBS advising United Spirits.

The broad contours of the agreement suggest that the strike price represents a premium on an estimated £475 million bid in November, which was rejected by Whyte & Mackay’s South African-born owners, Vivien Imerman and his brother-in-law Robert Tchenguiz.

Employees of Whyte & Mackay were informed to expect a new owner by the end of the month. Mallya is expected to retain the services of Whyte &Mackay group managing director Bob Brannan.

Whyte & Mackay’s brands include Whyte & Mackay blended Scotch whisky, Dalmore single malt whisky and Vladivar vodka.

Once signed, this acquisition will be close on United Breweries’ attempt to acquire Taittinger, the world’s sixth largest champagne company, for £400 million.

United Breweries was founded by a Scotsman who merged four breweries in India in 1915, which was later acquired by the Mallya family.

This company is now the vehicle for the takeover of an established Scottish spirits group.

This acquisition will mark the end of any significant whisky group other than Edrington, owner of Famous Grouse, Macallan and Highland Park, being controlled from a Scottish headquarters.

Flying Freighters in $1.1 bn deal for 6 A330-200

BS Reporter / Mumbai January 17, 2007

Flyington Freighters, a cargo airline company promoted by Hyderabad-based publishing group Deccan Chronicle, have signed an agreement for acquiring for six A330-200F aircraft from Airbus Industrie. The listed price for six freighters are estimated at $1.1 billion.

Earlier, the company had signed $1 billion deal with Boeing to acquire four B777 freighters.

Flyington Freighters is the first cargo airline to order the A330-200F, which is the latest freighter from Airbus. The first aircraft will join the fleet in the second half of 2009.

The company was initially planning to start its cargo operations by December 2006. “We are happy to be the first cargo airline to order the A330-200 Freighter. We ordered it because it offers us significant operational benefits and suits our business model,” said T Venkattram Reddy, Chairman, Flyington Freighters.

The A330-200F is the only mid-size, long-haul all-cargo aircraft capable of carrying 64 metric tonne over 4000 nautical miles. The A330-200F offers 30 percent more volume than any freighter in its class.

Currently, there is no domestic company is involved in international cargo airline services. Blue Dart Aviation is the only domestic player in cargo airline segment. Courier firm First Flight had also forayed into this sector recently with three leased aircraft in last year.

“India is one of the world’s most important aviation markets right now and the development of locally based freight operations will play a big part in the growth of the region’s cargo market. The A330-200 freighter has more lift, more range and better flexibility than any other freighter in its class”, said John Leahy, Airbus Chief Operating Officer, Customers.

One of the many advantages of the A330-200F is that it is the first freighter to introduce a versatile main-deck cargo loading system, which can accommodate both pallets and containers, enabling operators to service each of these very different markets.

Flyington Freighters is planning to make Hyderabad a hub for its cargo operations and will operate to China, East Asia, Hong Kong, Japan, Malaysia, Middle East, Los Angeles, New York and Europe.

Initial capital outlay for the company is estimated at $15 million, which will be contributed by promoters.

STRATEGY ANALYTICS: Indian Automotive Electronics Market Reflects Burgeoning Indian Economy

BOSTON--The latest Strategy Analytics Automotive Electronics Service report, “India: A Growing Automobile Market and for Automotive Electronics,” demonstrates the strong growth of the Indian automobile market, as more players enter that market to take advantage of increasing domestic sales and better opportunities for export.

India will see a large increase in manufacturing capacity from a series of major investments by General Motors, Hyundai and Suzuki. The level of localized sourcing and new technology will enhance the market. Demand for better comfort and convenience from Indian consumers, as well as for more applications delivering better safety, will further increase domestic sales. Legislation has set new emissions standards requiring better engine management systems. As already seen in the semiconductor industry, India will see more research and development centers for automotive products for the future. Indian car makers will follow foreign players in exporting cars to markets overseas.

“With the growth of its automotive market, India rivals China as a fast growing economy,” says Kevin Mak, Industry Analyst of the Automotive Electronics Service. “As India becomes a global center for technological development, its component and semiconductor industries will grow further while remaining a low-cost supplier to mature markets.”

Indian economy strong, growing globally
Journalist calls economy's growth 'democratic model'
By Alisha Chaudhary | Indiana Daily Student | Monday, January 22, 2007

The economic balance of power is soon to tilt, at least if Manjeet Kripalani, the 2006 Edward R. Murrow press fellow at the Council of Foreign Relations is to be believed.

Kripalani, the India bureau chief for Business Week, came to IU for a lecture on "Economic and Political Impediments to India's Embrace of the Market" presented by the India Studies Program and the Kelley School of Business.

"There are only two kinds of stories: 'aah' the wonder of it and 'oh' the pity of it," Kripalan said. "In 1996 when I went to India it was a 'pity story', but then things changed and India turned into a wonder story."

Kripalani focused her talk on India's impact on globalization and globalization's impact on India. While she was aware of the scope of India's socio-economic problems, she stressed that they could not outweigh the revolution that the trio of cellular, software and satellite had stirred.

"India is a society in transition and it represents inside-out change. There is a silent revolution in India as India has chosen social equity over economic equity," she said.

India attained independence on Aug. 15, 1947.

Kripalani articulated that India is a story of grassroots growth, which gives the country a "democratic model of development" as opposed to the "autocratic development" model of neighbor China. This to her was the foundation of India's growth.

"India is the only country which upon independence was given universal adult franchise -- one person, one vote," she said. "And nobody in India would replace water and electricity for their vote."

What brought this change in the destiny of India? According to Kripalani, India's tipping point came at the outset of the new millennium.

"In the wake of the threat of the Y2K virus, Indian coders saved the world when all computers were supposed to shut down," she said. "With the technical boom, Indian tech workers were in great demand in California, giving the entire nation a sense of pride. This was the moment when India felt it had a place in the world and belonged to its future, not just the past."

India has the cheapest cellular services in the world and the lowest banking transaction costs, Kripalani said. Indian elections are a "joy for a liberty lover to see -- completely free and fair, noisy and colorful," Kripalani said.

Eighty percent of foreign direct investment comes to India from its stock exchange. She said the non-governmental organizations, the banks and the private sector are addressing challenges, which the government fails to take up.

"India has the largest young population in the world, which could be turned into a very strong asset if it is channeled correctly," she said. "But it has few young politicians. The mismatch between midnight's children (the politicians) and liberalization's children (the youth) is apparent."

But why is global India important?

"Much of the world looks like India -- confident, pluralistic, multi-lingual and multi-religious. India serves as the bridge between the Islamic and the Christian world," she said.

Sumit Ganguly, director of the India Studies Program, said lectures such as these add to the element of diversity at IU, a view exemplified by the multi-lingual, multi-racial audience for the lecture.

"Indian economy is undergoing a fundamental transition; it has grown, in the last quarter, at a rate of 10 percent as indicated by robust and reliable statistics," Ganguly said.

Globalisation shakes the world
By Steve Schifferes
Economics reporter, BBC News, Bangalore

Globalisation is a word that is on everyone's lips these days, from politicians to businessmen. BBC News is launching a major examination of the subject.

Few places in the world have seen the dramatic effects of globalisation more than Bangalore, the Silicon Valley of India, which is experiencing an unprecedented IT boom that is transforming the prospects of the Indian economy.

For Santosh, a tour guide in Bangalore, life is good. As a result of the IT boom, he has launched his own web-based travel firm, getoffurass.com, and is doing a booming business selling weekend getaway holidays to stressed-out IT workers.

For Dean Braid, a skilled car engineer in Flint, Michigan, life is not so good. He - and 28,000 other workers - were laid off from Buick City when GM closed the complex in 1999, and hasn't worked since.

Globalisation is blamed for many of the ills of the modern world, but it is also praised for bringing unprecedented prosperity.

But what is globalisation, and what are the forces that are shaping it?

Globalisation - good or bad?

The accelerating pace of globalisation is having a profound effect on life in rich and poor countries alike, transforming regions such as Detroit or Bangalore from boom to bust - or vice versa - in a generation.

Many economists believe globalisation may be the explanation for key trends in the world economy such as:

* Lower wages for workers, and higher profits, in Western economies
* The flood of migrants to cities in poor countries
* Low inflation and low interest rates despite strong growth

And globalisation has played a key role in the unprecedented increase in prosperity in the last 50 years, which is now spreading from the United States and Europe to include many formerly poor countries in Asia, including China and India.

Defining globalisation

In economic terms, globalisation refers to the growing economic integration of the world, as trade, investment and money increasingly cross international borders (which may or may not have political or cultural implications).

Globalisation is not new, but is a product of the industrial revolution. Britain grew rich in the 19th century as the first global economic superpower, because of its superior manufacturing technology and improved global communications such as steamships and railroads.

But the pace, scope and scale of globalisation have accelerated dramatically since World War II, and especially in the last 25 years.

The rapid spread of information technology (IT) and the internet is changing the way companies organise production, and increasingly allowing services as well as manufacturing to be globalised.

Who leads in global IT outsourcing

Globalisation is also being driven by the decision by India and China to open their economies to the world, thus doubling the global labour force overnight.

The role of trade

Trade has been the engine of globalisation, with world trade in manufactured goods increasing more than 100 times (from $95bn to $12 trillion) in the 50 years since 1955, much faster than the overall growth of the world economy.

Since 1960, increased trade has been made easier by international agreements to lower tariff and non-tariff barriers on the export of manufactured goods, especially to rich countries.

Those countries which have managed to increase their role in the world trading system by targeting exports to rich countries - such as Japan, Korea and now China - have seen dramatic increases in their standard of living.

In the post-war years more and more of the global production has been carried out by big multinational companies who operate across borders.

Multinationals have become increasingly global, locating manufacturing plants overseas in order to capitalise on cheaper labour costs or to be closer to their markets.

And globalisation is even harder to track now that one-third of all trade is within companies, for example Toyota shipping car parts from Japan to the US for final assembly.

More recently, some multinationals like Apple and Dell have become "virtual firms" outsourcing nearly all their production to other companies, mainly in Asia.

Service sector globalisation

It is not only the Western manufacturing industry that is under threat from globalisation.

The services sector, which includes everything from hairdressers to education to accounting and software development, is also increasingly affected by globalisation.

Many service sector jobs are now under threat from outsourcing and offshoring, as global companies try to save money by shifting many functions that were once done internally.

What China has become to manufacturing, India has become to the new world of business process outsourcing (BPO) - which includes everything from payroll to billing to IT support.

India is the world's leading exporter of IT services, with its volume of offshore business doubling every three years.

Every major international company in the IT industry now has a huge presence in India, and plans to expand its investments.

The Bangalore Tigers

Several dynamic new Indian companies are now challenging the multinationals for global leadership in this area, including TCS, Infosys and WIPRO.

The IT services boom has helped to transform the Indian economy, which is now growing at more than 9% per year, the same rate as China.

The new-found affluence of the young workers in the IT sector has in turn changed attitudes to wealth and consumption in India - with educated young people for the first time being able to afford such luxuries as motor cars and home ownership.

Western anxiety

The dizzying pace of change in the new world of globalisation is unprecedented, and can be frightening.

A recent poll by Deloitte in November 2006 showed a sharp increase in worries about outsourcing of white collar jobs in the UK.

Just 13% said it was a good thing, compared to 29% in January, while 82% of the public believed enough jobs have been sent abroad already, and 32% wanted to force companies to bring jobs back to Britain.

Meanwhile in the US, the Democratic victory in the November Congressional elections had a lot to do with worries about the effect of globalisation on wages and jobs.

The speed and scale of economic change has made it increasingly difficult for governments to keep their economic destiny in their own hands.

And what is most disturbing for many people is that no-one seems to be in charge, or be able to agree fair rules for the new global economic order.

Crisis of legitimacy

The international institutions meant to deal with the globalising world are all in trouble.

For example, the World Trade Organization (WTO) is now under fire for failing to take into account labour standards or the environmental impact of trade.

And its efforts to break down global trade barriers are faltering.

Meanwhile the International Monetary Fund (IMF) and the World Bank, set up in 1944 as part of the UN system to run the international monetary system and to co-ordinate aid flows to poor countries, have come under criticism for not giving a bigger role to emerging market countries like India and China.

And the IMF has found it increasingly difficult to influence the world's capital markets, whose huge financial flows dwarf its resources - or to correct the huge global imbalances that arise from trade.

Who should run the world?

There is even less international regulation of other aspects of globalisation.

Attempts by the OECD to set rules governing foreign investment by multinational companies collapsed in the 1980s, while the rules for international banking, stock markets and accounting are increasingly being negotiated by international quangos behind closed doors.

And while the rights of workers to organise unions is enshrined in resolutions passed at the International Labour Organization (ILO), it lacks any enforcement powers.

The key question is whether the growing globalisation of the world economy will lead to a parallel increase in global regulation - and whether that would be good or bad for world economic growth and equality.

Globalization has been one of the best instruments at increasing gdp growth in the world over the last 20 years, if it was not for globalization, there would be no prospect of China growing or India doing better.

To sum up a few sailent points

Globalization has created a world of low inflation which has immensely benefited the world from increasing disposable incomes, creating low interest rate environments that have seen house prices soar in the west, the list goes on and on

Things are much more efficient now

Poor countries that have property embraced globalization have grown faster than when they were closed off.

Everyone has gotten richer faster, now I know you will all say whaaa, well just because everyone has gotten richer faster in countries that have embraced globalization does not mean that disparities have not increased, they actually have and hence in relative terms some have gotten poorer.

But is it the fault of globalization?

Politicians and lefties will blame globalization but if one picks up the economics book, he will quickly realize that globalization can only make your economy grow faster which it has been able to do, the DISTRIBUTION OF THIS EXTRA INCOME, A FUNCTION OF GREATER GROWTH IS THE JOB OF, YES YOU GUESSED IT, THE GOVERNMENT OF THE COUNTRY IN QUESTION, but guess what, when governments stink and cant redistribute wealth to accomodate some sectors that have suffered or better yet retrain people so that they work in sectors where their country has a comparative advantage, politicians and lefties will blame it all on globalization, its just easier for vested interests and politicians to blame globalization than to blame themselves for failing to redistribute the extra wealth that is generated.

India is a case in point.

Another important point to remember is that free trade is also equal to fair trade, sometimes some of the stuff that happens between China and the US for example is not a good example of fair or free trade. China should unpeg its undervalued currency, plain and simple, the problem is that for political reasons it has not and the US for whatever reason has failed to put enough pressure on China, hence when Lou Dobbs etc of CNN talk about exporting America, its easy picking on the system.

Russia invites India to join Sakhalin III project - Ivanov-1

22/01/2007 19:29 (recasts, adds paragraphs 2-4)

BANGALORE (India), January 22 (RIA Novosti) - Moscow is interested in Indian capital investment in the Sakhalin III oil and gas project in Russia's Far East, the Russian defense minister said Monday.

Sergei Ivanov, who is also a deputy prime minister, is currently leading a Russian delegation in India.

"Russia is interested in Indian participation in the Sakhalin III project and the development of the Vankor oil and gas fields in the Krasnoyarsk Territory," he said.

The minister arrived in India ahead of President Vladimir Putin's visit to the country, scheduled for January 25-26.


RIA Novosti - World - Russia invites India to join Sakhalin III project - Ivanov-1

I always wondered how we are going to transport oil from sakhalin peninsula to india??

Its too far from india to move the oil either through pipelines.and even with tankers i think its too far to be financially viable.

can we just swap these oil resourses with japanese or korean oil (which they are presently sourcing from middleeast) so that both india and japan can enjoy a significant saving in transport costs??