High Growth Of Economy Of India & China Causing Sleepless Nights?

I always read about rapid progress of India's economy with avid interest but harboured some doubts at the same time. It excited me to imagine India being ranked the third largest economy in the world by the year 2010. Those forecasts have been made, after all, based on facts and figures; the international watchdogs and analysts corroborate the same even as I fail to get any glimpse as though the same might be taking place obscurely.
The annual deliberations between the Confederation of British Industry and the government of United Kindom, interestingly, have removed remaining doubts from my mind as I learnt who was saying what. The Chancellor of Exchequer, Gordon Brown, has warned "Over the next fifteen years, up to half the world's future growth will come from India and China. By 2020, the G-7 share of growth will fall just to one-third". I quote from The Times of India what George Osborne, the right-hand man of David Cameron, the leader of Tories had told the Confederation of British Industry - "How are we going to compete against countries with low wages and high ambitions? There are quite a lot of lazy assumptions out there that we need to confront. There's the assumption that we'll do the clever stuff and we'll move up the value chain, and leave the Chinese and Indians to do cheap things. Let me tell you no one has told them that." Paradoxically, U.K. and other developed countries are now getting scared of the economic boom taking place in India and China. As reported in Economic Times, the US treasure secretary, Henry Paulson, wailed "We cannot tell the developing countries that we benefited from free markets, but we will not allow them to do the same. It's morally wrong - we are condemning them to being a perpetual underclass."
The cat is now out of the bag. The globalisation mantra chanted for years to the developing countries like India and China for allowing MNCs and FDIs (to exploit the natural resources as well as to escape from the rigid claws of environmental controls in their own countries) has begun to backfire. The disciples i.e. India and China having mastered the mantra are now ready to take on their gurus.
I think India has to wait patiently for poetic justice to be delivered. What do you say?

Malls Threaten To Edge Out Small Retail Outlets

Swanky malls with their eye-catching interiors, cool comfort and convenience of shopping, huge spaces to move around freely and car parking as well as refreshment facilities are drawing huge crowds in India. However, the public accustomed to a entirely different style of shopping and small retail outlets known as 'kiryana stores' stand no comparison to the land, labour and investment made in malls. There are reportedly 12 million such small retail outlets for a population of 1.07 billion and buyers numbering 405 millions in India. The rich number 6 million having a purchasing power of $28 billion and the total purchasing power is estimated to be $230 billion. This gives India a dubious distinction of being known as 'nation of shopkeepers'.
Be that as it may, the retail is one of the fastest growing sectors in the economy. The world's biggies are waiting to spread their wings in India introducing their modern and western management style along with a lot of dazzle. The supremo Wal-mart - a 260 billion retailer has just inked a JV with India's leading Bharti group. The reason for their enthusiasm to have presence in India is understandable as India's GDP will cross a staggering $740 billion by end of this year and is already world's 4th largest economy likely to become the third largest after USA and China by 2010.
So the media hype and the palpable soaring interest among the rich, the urban population particularly the youths who are vulnerable to ape western lifestyles with plenty of cash at their disposal are becoming somewhat disgusting. I am not quite enamoured at the idea of such malls barging into our lives. That is because, I know, it would herald the death of thousands and thousands of small retail outlets. Those are mostly family-oriented business joints which employ least capital, land and labour. They are small in size but their services extend far beyond mere shopping. From giving credits to customers and personalised attention, these outlets serve as a place for social mixing. The shopkeepers know their customers and their families by name and at times discuss personal problems confronting them. Among their other services, home delivery is quite fascinating. In Western countries where the culture is different and almost every person possesses cars - malls are very convenient places for shopping. But why we have to go malls located far away for our daily needs when we can get them round the corner. Let us not forget that shopping is a part of our daily life unlike in the West where it is done weekly or fortnightly. Bargaining is a part of shopping experience in these market places. Moreover, when millions of job-seekers are looking for jobs, why should the millions already working in small retail outlets loose their jobs only for malls to flourish which will require much less hands because of mechanisation and automation. Malls may be very cozy place but you loose your identity and power there.
So all that glitters is not always gold. I cannot think of a life without those small retail outlets - Wal-marts or no Wal-marts!

The Eternal Triangle Of Corus - Tatas - CSN

When Tatas successfully bid for the acquisition of the Anlo-Dutch behemoth Corus, it was an euphoric moment for me as the Indian corporate giant appeared to be emerging as an Indian MNC to take on the world champions of industry. I also found it somewhat ironical that because of the globalisation, Tatas were set to become for U.K. in 21st century what was East India Company when it had entered India in 18th century. The acquisition was very keenly watched as it was slated to be the largest Indian acquisition of any foreign company worth $8.1 billion that could push the rank of the new combine Tata-Corus to become the fifth largest steel manufacturer in the world.
So far, everything seemed to proceed on the expected lines and we were all thrilled to see the beaming smiles of the top Tata officials in TV and print media. The Corus board had also approved the offer of 455 pence a share made by Tatas though a third party could still throw a spanner in the works till the EGM of shareholders put the final seal on it. The acquisition drama would have lost its excitement had not CSN - a Brazilian steel manufacturer announced its plan to bid 475 pence a share raising the buyout price to $8.3 billion. The new suitor CSN's entry can be likened to the usual Bollywood stuff where the hero who is deeply in love with the heroine suddenly faces the risk of loosing her as someone villainously tries to snatch her.
Getting down to brass tacks, CSN has not only made a higher offer, albeit informally so far, it has the advantage of owning iron ore mines and have been exporting 30 million tonnes annually which is likely to go up to 50 million tonnes by 2010. Owning iron ore mines by steel manufacturers is winning half the battle in competition. It is because of such advantages that Tatas are credited with making the cheapest steel in the world. In case of Tata-Corus combine, Tatas would be able to supply slabs only to Corus who would have to alter their existing manufacturing process. CSN's steel manufacturing capacity is higher than Tata's and had made 5.8 million tonnes during the year 2005.
The bidding war has just started and the share price of Corus has already crossed 500 pence a share. In the changed situation, Tatas will have to revise their offer to clinch the deal. I am sure Tatas will not throw in the towel so early. Though Tatas are viewed as a role model in the corporate world, they seem to have a weakness. When it comes to showing its nerves of steel in forays in new locations, it has disappointed its admirers and its image has taken a beating in the past as in Gopalpur and Bangladesh.
What Tatas will do to win the hands of Corus? I will be happy to see Tatas a winner. Let not the acquisition drama end like the film Devdas where the hero ruins himself instead of trying to save Paro.

Untangling Issues From China

When I wrote my last post titled 'China - The Unchallenged Victor', little did I know that my next post would also be on China and that too, so soon. That is because I am not a sinologist. But going through the newspapers in the morning today, I found serious contradictions in a few news items which forced my thoughts to culminate in this post.
Politicians are well-known for backtracking on their statements they make once any controversy arises. They usually take refuge under a refrain 'I have been misquoted'. But what surprised me was the latest example of contradictions being made in the same breath by the ebullient Steel Minister, Ram Vilas Paswan. He said "The government should frame proper policies on the entry of Chinese companies in India". Interestingly, the above plea was made as Indian steel companies are apparently apprehensive that allowing Chinese companies with their ability to make cheap steel may threaten their existence. Instead of India trying to be competitive cost and quality wise, the honourable Minister is trying to stop steel companies from China entering India and that too when we are swearing by globalisation mantra. The contradiction did not end there as he went on to say "SAIL should look for acquisitions, like Tata Group's acquisition of Corus".
The startling comments on another issue coming from the other extreme of the political spectrum are quoted from a news item titled 'CPM's fixation with China continues' appearing in Economic Times. "These are historical issues. These are disputes. That's why issues are being discussed", Mr Yechury told reporters. He even suggested a resolution to the dispute: don't transfer populated areas on either side. In other words, Mr Yechury does not think that the Indian government is correct when it says that the whole of Arunachal Pradesh belongs to India.
So we have a Steel Minister and Indian steel industry scared of competition from China and yet are interested in spreading wings as part of globalisation opportunities. Then we have a national party CPM - part of the present UPA government who are flexing their muscles after improving their number of seats in Lok Sabha that does not support the Indian government's stand that the whole of Arunachal Pradesh is part of India.
I am really flabbergasted at the political fare spread before us. What should I choose and what should I reject?

China - The Unchallenged Victor

Today, China is the cynosure of the whole world being the fastest growing economy. The enviable position was attained by attracting $72.4 billion foreign direct investment (FDI) during 2005 which is one fifth of all FDIs bagged by developing economies. It has also assiduously built a foreign exchange reserve of $1 trillion. It produces and consumes one third of the world steel so much so that the entire world steel industry seems virtually to be at its beck and call. There are plenty of other examples to showcase its invincible position for China to say deservedly to the world - "I am the monarch of all I survey".
India, too, has been hogging limelight for its spectacular GDP growth rate in excess of 8% for the last three years. Though next only to China in matters of recent rapid economic progress, India remains way behind. Being part of the same race, comparisons between the achievements of two nations are often made. The two most populous nations of the world are vast and part of Asia. Perhaps the commonality ends there. The social, political, cultural and linguistic differences between them are too significant.
Yet, I find a common tendency among analysts and some determined bloggers to compare and contrast the two on any issue. We must remember that India is the biggest democracy in the world and embraced liberalisation in 1991 after much dithering. Even today, the Left parties continue to throw a spanner at times in the government's policies whenever they consider it politically expedient to do so. It is a different matter that their counter-parts in China are giving smooth passage to inviting FDIs without any let or hindrance. And whereas any development work can be delayed or stalled in India by a small group of disgruntled citizens or vested interest, there is virtually one-party rule in China.
With both the two big nations trying to attain supremacy, there can never be total cooperation and trust among them though a lot is being expected out of the ensuing visit of the Chinese President to India. While bilateral trade is expected to cross $50 billion by 2010, there are some disturbing news that China will join hands with Pakistan to claim Siachen - a strategic military location for India. There was a war over border disputes in 1962 just before "Hindi-Chini bhai bhai" slogan became immensely popular with the Indians.
The future path, therefore, ought to be traversed with caution exercising wisdom gained out of past mistakes.The bureaucracy and the political mindset seem transfixed at China. It must be realised that India started the reforms process 15 years after China had started besides having constraints in framing and implementing policies unlike China. I read an editorial in Times of India that India is trying to put a man on the moon simply because China is also gearing for the same feat. Stretching competition to such extents can be self-defeating.
Let us work determinedly even if our pace is slow reminding ourselves of the saying "Slow and steady wins the race". More importantly, India must retain its own identity and refrain from playing second fiddle to China.

India's Second Green Revolution Desperately Needs Strong Support

"India has to now embark upon the second green revolution" - those words came not from the Prime Minister not the Agricultural Minister not even any politician-turned President but APJ Abdul Kalam while inaugurating the Global Forum on Agricultural Research (GFAR) triennial conference. The technocrat and the visionary that he is exhorted to put receding agricultural land, depleting water resources as well as reducing number of farmers to fight impending food scarcity by launching a second green revolution. By 2020, with population growth showing no signs of reversing the trend, 340 million tonnes of food grain will need to be produced in India to remain self-reliant.
I remember the years of 1960s when India had to accept PL-480 aid from USA to tide over food crisis. The spectre of a similar crisis looms large warned the President. It is a sad commentary that while India is frenetically trying to attain the status of a super economic power, sufficient measures are not being taken to avert a repetition of the fiasco of the 1960s. The Agricultural Minister is unperturbed by rising farmers' suicides and is in the news for wrong reasons of being pushed by Rick Ponting from the presentation dais for Champions' Trophy at Mumbai. He is otherwise busy drawing up strategies to enhance his political strength by wooing Congress rebels and forging alliance with break-away parties.
Despite such political apathy to serious problems facing the nation, I could see a ray of hope in the expert solution offered by the President. This second green revolution will be materially different from the first revolution in as much as waste use, plant genomic, post harvest technologies, stress-tolerant crop variant, IT application to enrich database would be the main thrust areas. I also found his advice to enlarge work of farmers from grain production to food processing and marketing most inspiring.
The biggest thrust area for ushering in the second green revolution, however, is undoubtedly the political resolution. A scarce commodity, is it not?

Carbon Credits As Sops Sap Poor Nations

The good earth cannot take any more. With reckless deforestation and wanton industrialisation necessitating rapid transportation of men and materials by automobiles causing carbon dioxide emissions ceaselessly, the die has been cast. Global warming is a stark reality now which cannot be wished away any longer. The changing and unpredictable weather all over the world has been serving as a constant reminder of nature's wrath against human excesses.
Now the death-knell has been sounded by the former Chief economist of World Bank, Mr Nicolas Stern, as appeared in Econmic Times, who has warned that 'the impact of global warming on world economy can be as apocalyptic as that of the Great Depression of the 1930s'. He minced no words to depict the horrifying scenario by saying "in the absence of significant cut in greenhouse gas emissions (GHG), the world economy will shrink by 20% in the decades to come. The rising temperature leading to floods may also displace about 200 million people globally."
The irony has not been lost in the report by raising his finger against industrialised countries as the worst offenders of carbon dioxide emissions. Contrary to the popular belief due to misinformation campaign, India and China have been absolved of customary charges of causing global warming. There is already a system of rewarding and punishing parties depending upon their share of reducing or increasing carbon dioxide emissions. I think carbon trading as prevalent now is not a fool-proof control to reduce carbon dioxide emissions. It is just a way of giving sops to the nations which are able to earn carbon credits by reducing GHG emissions so that the cash-rich nations can continue to do the damage by paying penalty in being the credits.
Already as per a survey 'Voice of the People,2006'conducted by Gallup International and TNS, FDIs are perceived by the majority to help the rich only rather than the masses. In the name of economic development, new mega projects are coming up mostly in developing countries. The damage to the environment and the misery of millions who are routinely displaced as a fallout of these projects will more than offset the so- called benefits of employment generation and raising standards of living. GHG emissions, unfortunately, do not affect selectively but pervade everywhere. So the rich as well as the poor will suffer unimaginable losses in the long-term and we will be leaving the planet in much less habitable condition for the future generations.
What a ghastly scenario! What do you say?

Double Standards For Acquisition And FDI

After globalisation has broken all national and regional barriers, the world, today, has been reduced to a global village. Acquisitions and FDI flows from one part of the globe to the other are now so routine that nobody raises eyebrows even when a developing economy springs a surprise of investing in a developed economy or goes for acquisitions.
Tatas has made recently mega acquisition of Corus in Europe for $8.3 billion besides other Indian foreign acquisitions of nearly $10 billion made in last 5 years. Of course starting from scratch, this is considered sizable even though it is just 1 % of global cross-border deals.
I found a report published in Times of India on a survey titled 'Voice of the People,2006' conducted by Gallup International and TNS intriguing as some findings reveal how people from different parts of the world view differently the whole business of acquisitions and FDIs. I do not know why 44% of the respondents in USA responded negatively to FDI flows to their country when it is the largest investor all over the world. Similarly, the respondents from developing economies - South Africa (71%), Nigeria (76%), Vietnam (75%) surprisingly supported the globalisation.
When MNCs were trying to get a foothold in India in 1970s, Left and socialist parties had given a battle cry against them. Now that Indian MNCs are spreading wings abroad, the voice of opposition seems to have died down. Ironically, it is the turn of the Indian MNCs of defending their acquisitions abroad with promises that there would not be any job cuts after the takeovers.I think no nation can get away with double standards for acquisitions and FDIs. If it goes for acquisitions abroad and invests in other foreign countries, it is only fair that it allows others to do likewise in its homeland.
You cannot have the cake and eat it too!