India: Yesterday, Today & Tomorrow

Today, Indian economy has slowly started getting a respectable position globally. Her GDP growth has now become, what many economists believe, sustainable at 8-10% and in the process the past low growth @5-6% has been buried. Indian MNCs are out for acquisitions abroad and the latest Tatas-Corus deal - the biggest in size by any Indian company involving $12 billion has proved beyond doubt that India has truly become a global player.
How was it yesterday?

"On the eve of industrial revolution (around 1770), India was the second largest economy in the world, contributing more than 20% of total world output. By the 1970s, after two centuries of relative economic stagnation, that share had fallen to 3% - the lowest in its recorded history. From a long-term perspective, the post-industrial economic decline of India (and China) is a historical aberration, driven to some extent by a lack of openness. After independence in 1947, India followed inward-looking and state-intervenist policies that shackled the economy through regulations and severely restricted trade and economic freedom. The result was decades of low growth termed pejoratively the 'Hindu rate of growth'. Reforms beginning in 1991 gradually removed obstacles to economic freedom, and India has begun to play catch-up, steadily reintegrating into the global economy."

So says a report titled 'A game of Catch-up' appearing in Times of India (having its source Golden Sachs' Global Economic Paper no 152).

About tomorrow, I have already reproduced the forecast made, again, by Golden Sachs in my post 'Do you believe India's economy will be the second largest by 2050?' accompanied by my wish-list. The lesson for Indians out of the vicissitudes in last three centuries is "You must run faster to stay where you are".
Is it not?

Do You Believe India's Economy Will Be Second Largest By 2050?

Yes, I do. After all, I am a hard optimist. Why should I doubt the findings of a study that places India in No2 position ahead of USA by the year 2050 especially when the report has been prepared by the internationally reputed Golden Sachs. It had earlier projected India to No3 position just after China and USA by 2032 overtaking Japan.
The sweet music now released also says that India's GDP will quadruple from 2007 to 2020 and the per capita income will increase 35 times by 2050. This will enable Indians to buy cars five times and increase consumption of crude oil by three times. I do not know whether to rejoice at such projections. The scenario of so many cars in congested cities polluting dangerously the already highly polluted environment besides causing other problems is nightmarish and has been touched in my post 'Small cars boom spell urban doom'.
How I wish each word of the projection comes out true by 2050. Many readers may be around then to determine how much of it was realistic and how much was hog-wash. Of course, it is well known that war, natural calamities, epidemics like AIDs and political upheavals may upset the applecart. Nevertheless, I have a wish-list which should materialise preceding what has been forecast by Golden Sachs. My wishes are:
1. India is a strong, vibrant democracy where honest and capable people get elected as their representatives - not by rigging elections, or by use of money or muscle power.
2. India has eliminated hunger and poverty.
3. Every Indian has access to education, health care and social benefits. Cast, creed, language divide created and perpetrated by wily politicians no longer matter.
4.Every village has electricity as well as drinking water and every citizen has a roof over his head
5. Every nook and corner of the country is easily accessible by modern transport.
6. Every citizen is conscious and concerned about environmental degradation and reaches out to do his part to fight air, water and noise pollution.
7. Corruption has been removed from the public life. No one needs to grease the palms of anybody for getting things done.
8. AIDs and other serious diseases have been controlled or eradicated.
9. Women empowerment is visible in every walk of life.
10. Merit has become the sole criterion for advancement and selection in all spheres of life. Political interference, nepotism and sycophancy no longer work. If my wish-list becomes reality, how glorious it would be for India even if the projections of Golden Sachs attain only 50% accuracy.
Is it not?

Dumping Bio-Fuels

India is racing to emerge as a super economic power. Its rapid progress, however, has got some gaping holes which threaten coordinated and sustainable development. Take for example, the acute power shortage or the lack of infrastructure such as highways and expressways. Measures taken in fits and starts have failed to ensure uniform growth of different segments of the economy.
Bio-fuels can be partial solutions to the whopping needs of petroleum products of the country. Oil extracted from jatropha is blended with diesel to produce bio-diesel which serves as a substitute of diesel. Jatropha can be cultivated even in non-agricultural lands; its farming should receive governmental support by way of subsidies and relief from taxes so that at least for a part of its diesel consumption, India could become self-sufficient. The international crude oil price recently dropped to $50 a barrel and the whole economics of bio-fuels have gone up in smoke. As per a report in Economic Times, the cost of conversion of extracting jatropha oil and blending to produce bio-diesel is Rs5 (.09$) per litre. The current selling price of jatropha is Rs12, 000 ($265) per tonne. The cost of bio-diesel works to Rs43 ($.95) per litre as against the prevailing price of Rs35.75 ($.80) per litre of diesel. A price difference of Rs6 ($.15) per litre cannot compensate customer preference, if any. If more plantation of jatropha is undertaken, the competition should bring down the price of jatropha. The conversion cost will be also reduced if more bio-diesel manufacturers take up production and use efficient technology. By proper pricing of diesel vis-a-vis bio-diesel prices, bio-fuels will be accorded the importance in the economy from a long-term perspective. India will then be less dependent on foreign sources for its crude oil supplies.
Let diesel and bio-diesel thrive together and not at the cost of each other.

Rivalry Between India And China Exists Even In Diamond Industry

Everyday, I come across either in print or electronic media some news or the other about China's supremacy over India. The whole world is watching almost in total disbelief as both China and India are racing like Phoenix - the mythical bird in the Arabian desert rising again from the ashes to become second and third biggest economy. In every public platform and discussions, it is now routine to highlight the widening gap in various fields of industry and business of the two nations. I think we are harping on it wrongly as India should try to remove its own deficiencies to improve rather than lamenting all the time about its poor performance in comparison with China.
The latest news about rivalry between India and China came from a survey report of the global consulting firm KPMG which was released by Gems and Jewellery Export Promotion Council. It has made a disappointing projection for India that diamond processing industry in which it had a lion's share would be reduced from its present 57% to 49% by 2015 - a drop of 8% in value terms. It goes on to say that China will emerge as a strong player with a share of 21.3%. I thought both India and China are poor nations and since jewellery is used by only the rich and the very rich, market shares of these two nations would be insignificant. The figures tell a different story. While USA remained the world's biggest market for jewellery with 31% share in 2005, India and China registered their shares at 8.3% and 8.9% respectively. At least in this particular case of market for jewellery, India and China are running neck and neck.
Let us not forget that China got started with liberalisation and globalisation more than 15 years before India finally made up its mind. The Communist regime in China ensured easy implementation of plans and policies whereas in India its political parties with diverse goals cobble up wafer-thin majorities to rule democratically. So India predictably experiences hiccups off and on in adopting globalisation.
Diamond processing industry provides employment and earns foreign exchange. India must do everything to retain its predominant position.

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!

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 And Pakistan - The New Tigers

It is not my simile but used by Asian Development Bank. Its South Asia Economic Report has said that removal of bottlenecks, improved infrastructure and better quality of regulation help South Asian economies, already growing at high rates led by India and Pakistan, emerge as the "new tigers". While developments in India are clearly the predominant factor in the improved economic performance in South Asia, most other countries in the region have been on a similar trend, although their improvements are more modest.
India, buoyed up by a consistent 8% GDP growth for the last 3 years, is gearing itself for further acceleration and achieve 10% GDP over the Eleventh Five Year Plan (2007-2012). The Prime Minister Dr Manmohan Singh has admired the role of the industry in the global arena."They are investing on an unprecedented scale and expanding their capabilities to boldly take on global competition. Many of them are actually taking over firms in other countries, setting up factories and becoming global companies," Singh said.
As I was about to publish this post came the news that the mega deal between Tata Steel and Corus (formerly British Steel) has been clinched. My last post coincidentally was relating to the same deal. It is the biggest acquisition ever made by any Indian company including Tatas in foreign soil. "It is a defining moment" was the reaction of Ratan Tata after the deal was announced. I think the history has taken a full circle. Like 'East India Company' casting its anchor near Kolkata three centuries back and spreading wings all over the country, Tata Steel is the new incarnation of ' East India Company' of yesteryear's. Of course, the mission is different this time.
How I wish India and the neighbours steeped in poverty emerge soon as economic powers globally by working harder. If only terrorism and eyeball to eyeball confrontation over border disputes could be reined in, these new tigers' roar could be heard all over the world. Unfortunately, they cannot even mew out of fear and retaliation by the opponents.

How To 'Tide' Over Energy Crisis

As the population explodes and economy expands, energy needs are multiplying on the expected lines. The unexpected answer is provided by what is abundantly available in nature - tide and wind. Of course, the conventional fossil fuel is also a gift of nature to mankind. But its excessive use has not only depleted already the reserves but also cause new problems of global warming. The search for alternative fuels has found that tide can be a dependable and clean energy source. Unlike the destructive power of tsunami which unleashes devastation and death all round, tidal waves can be tamed and transformed to useful energy.
As time and tide wait for no one, India is going to set up its first tidal energy plant of 3.5 MW capacity to generate power in Sunderbans, West Bengal at a cost of Rs 40 crores($0.9 million). Sunderbans has otherwise been known so far for the famous Royal Bengal tiger reserve. In the whole world, India will become the fourth nation to produce power from tide after Russia (400 MW), France (240 MW) and Canada (20 MW).
In a report appearing in Economic Times, the combined potential for tidal energy in Sundarbans, Kutch and Gulf of Cambay has been estimated at a whopping 9000 MW by the Ministry of Non-conventional Sources (MNES).The best part of the proposed plant spreading over 120m wide and 8500m long area is that it would not necessitate human migration nor would it cause any environmental harm.
Can anything be better than this?

Economy Riding High, So Also FDIs

Every picture of the Finance Minister of India Mr Chidambaram these days shows him wearing a generous smile. Coming from a person who is in the driving seat of the mammoth economy, it is quite understandable. Shaking off its lack-lustre growth rate of 6% in the last decade and achieving an all-time high of 8.2%, India is now in a position to flex muscles before the champion China who are still unbeatable.India's GDP has touched $750 billion by traditional method of assessment. Using the jargon 'purchasing power parity' (PPP) which finds favour with the economists, India ranks fourth largest in the world as per International Monetary Fund (IMF).
When it comes to attracting FDIs, India's performance has been even better. As against bagging $7.5 billion during the year 2005, the Finance Minister, in an interview with Reuters, sounded confident that it would reach $10 billion during the year 2006. He was candid to say that except four or five specific sectors where FDIs have still got caps, the opportunities and the projects awaiting investors are very high.
He would have scored a perfect ten out of ten but for the deficit going haywire so also the inflation. He expects deficit would be contained at 3% and high deficit as well as inflation would become history in 2008.
By then, hopefully, we may see his pictures with a broader smile.