By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk (2011). Jointly posted with Roubini Global Economics
In the aftermath of the global financial crisis, optimists hoped that the BRIC (Brazil Russia India China) would drive the global economic engine. But China’s economic growth has slowed to its lowest rate in three years. Brazil’s economic growth has fallen from around 7.5% to under 3%. Russia’s economy is heavily dependent on oil and energy prices. India also has stalled. This 3-part paper looks at the development and future trajectory of the “I” in the “BRIC”. The second part looks at the India’s current problems.
In late 2011, the Indian government’s 12th five-year plan forecast growth of 9% between 2012 and 2017. By early 2012, India’s growth had slowed to around 6%, high by the standards of developed countries but well below the levels required to maintain economic momentum and improve the living standards of its citizens.
Elements of the “India Shining” story remain intact – the demographics of a youthful population, the large domestic demand base and the high savings rate. Increasingly, India’s problems – poor public finances, weak international position, structurally flawed businesses, poor infrastructure, corruption and political atrophy- threaten to overwhelm its future prospects.
Public Troubles…
In recent years, India has consistently run a public sector deficit of 9-10% of GDP, including the state governments and off-balance-sheet items.
Confronted with the global financial crisis and the additional complication of a poor monsoon, India implemented successive aggressive stimulus packages from 2008 onwards to restore growth. The predictable result was an increase in the central government’s fiscal deficit from 2.6% of GDP in 2007/2008 to its current level of over 6.5%. If the individual states are included, the deficit jumps to around 10%.
The problem of large budget deficits is compounded by one of the major causes – poorly targeted subsidies for fertiliser, food and petroleum which may amount to as much as 9% of GDP.
In March 2012, India brought down a budget forecasting a fiscal deficit of 5.9%, well above its previous fiscal deficit target of 4.6%. The budget did not engender confidence that India was steering a credible fiscal course, bringing its public spending under control.
Prior to the budget, Prime Minister Singh announced a separate stimulus package including $35 billion of public sector investment. The spending was to be financed by forcing state-owned companies such as Coal India and the Oil and Natural Gas Corporation to invest existing surplus cash.
The use of additional fiscal stimulus to restore growth is questionable. India’s strong rate of recent growth (an average rate of 14% between 2004-05 and 2009-10) made large deficits, in the order of 10 % of GDP, relatively sustainable. Slowing growth will increasingly constrain India’s ability to run continuing large deficits.
Indian government’s debt is around 70% of GDP. As its debt is denominated in Rupees and sold domestically, India faces no immediate financing difficulty. Instead, the government’s heavy borrowing requirements crowds out private business.
Indian banks are significant purchasers of government bonds. The banks, generally majority state owned, are also forced to lend to Indian state enterprises. This limits the supply of credit to Indian businesses that are forced to borrow overseas, exposing them to currency risk. Given India’s deteriorating external position, the foreign debt is becoming increasingly problematic.
Foreign Troubles…
India is running a current account deficit of over 3% of GDP trending higher, towards 4%. This is only slightly behind the US and amongst the highest in the G-20.
Exports have slowed as a result of weakness in India’s trading partners. At the same time, imports, a large proportion of which are non-discretionary purchases of commodities and oil, have increased. India imports around 75% of its crude oil from overseas. Higher oil prices combined with increasing political risk in the Middle East increases the pressure on India’s external position.
Over the last 2-3 years, India has financed this deficit through foreign investment, attracted by the country’s strong growth, rising equity markets and future prospects. India’s deteriorating outlook – slowing growth, large budget, large trade deficits and weak equity performance in 2011 – has reduced the flow of investment. India is also increasingly reliant on short term capital flows which are going into money markets rather than long term equity investments, increasing the risk of instability.
Higher commodity prices, wage rises and domestic capacity constraints have kept inflation high forcing the RBI to keep monetary policy tight and interest rates high. However, increasingly, the authorities face a policy dilemma. Lower rates may assist growth and boost slowing demand but are inconsistent with stability of prices and the Rupee, especially with inflation high and pressure on the currency.
India’s weak external position has manifested itself in the volatility of the Rupee, which was one of the worst performers amongst Asian currencies in 2011. Indian businesses, which have unhedged foreign currency borrowings, have incurred significant losses as the value of their debt rises as the Rupee falls.
The problems are compounded by the fact that Indian companies face large debt maturities in the coming year. The ability to refinance the debt coming due remains an issue in an environment of a weakening economy as well weaker company outlook.
European banks have reduced their lending in Asia, choosing to focus on home markets in Europe. In an interesting development, Reliance Communications was forced to turn to Chinese banks for finance. The transaction was conditional on the purchase of equipment from China.
Refinancing issues are also complicated by the fact that the some of the debt is in the form of foreign currency convertible bonds (“FCB”s) designed to convert into the issuer’s shares rather than be repaid at maturity. Indian companies have over $5 billion of convertible bonds maturing in the current year.
In an environment of booming stock markets between 2005 and 2008, FCBs provided companies with low cost debt. However, the toxic combination of falls in share prices and a fall in the value of the Rupee (in which the shares are denominated) means that the FCBs will not convert and need to be repaid. The repayment in foreign currency will crystallise large currency losses. In addition, refinancing the FCBs will result in much higher borrowing costs, which will significantly affect the profitability of Indian corporations.
The refinancing issue poses a problem for the RBI. India has US$250-300 billion in currency reserves (enough for around 7 months of imports). Foreign debts that must be repaid in the current year are around 40-45% of this amount, which if deducted highlights the increasing weakness in India’s external position.
In an effort to manage the problems, India has eased the regulations on foreign lending to India hoping to attract investment.
Bank Troubles…
Slowing growth, tighter credit and other economic problems have increased corporate defaults to the highest level in 10 years resulting in bad loans. Non performing loans are now around 2.5-3.00% of bank assets. Analysts estimate that the major banks have around $25 billion in bad loans, an amount which is increasing.
The problem is greatest for government owned banks, which constitute 75% of the banking system. The bad loans are concentrated in sectors such as power, aviation, infrastructure, real estate and telecommunications.
The common element is that these industries are characterised by government involvement and which have suffered from erratic government policy or wholesale interference. In electricity, state owned utilities have accumulated losses of $14 billion, in part because low government mandated rates dictated by political considerations do not cover the cost of generation.
Two of India’s biggest airlines, the State owned Air India and the privately held Kingfisher Airline, are now struggling to pay employees as they struggle under large debt burdens.
The Indian government has already moved to recapitalise State owned banks to ensure their capital position. In the process, the budget deficit and the government borrowing requirements have come under increasing pressure.
The Victor Kiam Syndrome …
Foreign commentators see India’s growth as being driven by tens or hundreds of millions of individual entrepreneurs, rather than the state as in China. They praise India’s export of services rather than cheap manufacture products. Foreigners also admire India’s business innovation, mostly notably the “frugal innovators” that have introduced cheap “nano” mini cars and inexpensive tablet computers.
The reality is more nuanced. India continues to be dominated by state- owned business and the large oligarchic firms, which existed prior to economic liberalisation. Studies have found the economy continues to be dominated by an oligopoly of incumbents, which have maintained or increased their positions.
India’s exports are diversified—both geographically and in terms of the products it sells. But export oriented firms are affected by the economic weaknesses in their major trading partners. With few exceptions, they have not moved up the value chain, continuing to provide the new economy version of cheap manual labour. Innovation remains weak relative to international market leaders.
Export oriented firms face challenges from rising labour costs, as a result of the shortage of skilled workers. In some areas, cost pressures are forcing these firms to relocate overseas, reversing one of the trends that underpinned growth.
Both international and domestic businesses are restricted by India’s infrastructure weaknesses. Cost structures are increased by the need by businesses to invest in power generators (to counteract inconsistent power supply), workforce training (to overcome staff shortages) and even transport and housing infrastructure for their workers.
Domestic firms also continue to face inconsistent and frequently dysfunctional government regulation and competition.
The airline industry provides a case in point. The weaknesses of Air India, the government owned nation carrier, allowed a number of private carriers to prosper – Jet Airways, Kingfisher, Spice Jet etc.
In recent years, a government recapitalised Air India has added new planes, competing vigorously, to regain lost market share. The combination of a government supported competitor, higher fuel prices and poor management has caused the private airlines to stumble. One private carrier – Kingfisher – is now struggling to pay employees and has been forced to cut flights. In the absence of a substantial new capital injection, Kingfisher’s future is uncertain. Few if any airlines are now profitable and shareholders, lenders and the government are at risk of losing billions of dollars.
Domestic difficulties, in part, have encouraged some firms to expand internationally – Tata Motors purchased Jaguar Land Rover; Tata Steel bought Corus; Mittal Steel bought Arcelor; Bharti Airtel bough Zain Africa. The reverse colonialism has encouraged jingoistic, patriotic breast beating. But the commercial logic of some of the transactions is highly questionable. Funded by large amount of debt, the acquisitions have performed poorly financially. Their long term prospects are uncertain.
The Tata CEO’s personal like of jaguars prompted comparison with the famed Victor Kiam who liked Remington razors so much he bought the company.
There remain governance issues at many Indian companies, highlighted by the fraud at Hyderabad-based Satyam, at the time one of the top five IT outsourcing companies.
We have no Infrastructure Today…
India is plagued by inadequate infrastructure. In critical sectors like power, transport and utilities, there are significant shortages. Poor investment and slow government decision making has hindered development.
Political pressure to keep utility costs low has impeded investment. In the electricity sector, state-owned utilities that purchase power from producers and sell to residential users have incurred large losses. State governments are unwilling to raise retail consumer rates despite increases in the price that power producers charge the utilities.
Electricity generators cannot obtain sufficient coal from the state-owned mining monopoly Coal India, which has been unable to increase production to match the demands of new power plants. Some electricity producers have been forced to invest overseas to assure access to coal.
Attempts to increase rail ticket prices have failed. The Railways Minister’s own party opposed the proposal and demanded he be removed from his job.
Increasingly, the structural problems and poor history of projects has made foreign investors cautious, creating a shortage of foreign capital for investment in infrastructure.
While its workforce is young and growing, there is a shortage of skills.
In a dysfunctional public education system 40% of student do not complete school. The workforce is 40% illiterate. India’s overall adult literacy rate is 66% compared to 93% for China.
Some universities, especially the 16 Indian Institutes of Technology, are world class. But their limited capacity means that are significant shortages. Some estimates forecast a shortage of 200,000 engineers, 400,000 other graduates and 150,000 vocationally trained workers, such as builders, electricians and plumbers, in the coming years. In contrast, there are 60-100 million underemployed or surplus low skilled workers in agriculture.
There is concern that universities graduates are good mainly at cramming to pass examinations. Employers have to invest heavily to make them “job ready”. Graduates who travel overseas for foreign qualifications frequently prefer to stay and work overseas where the rewards are greater.
The shortage has led to large increases in salaries for skilled workers. There are also cultural issues. An Indian magazine Business Today published a story entitled “Brats at Work,” complaining about the attitude of young workers.
Higher wages increase the cost of Indian businesses making them internationally less competitive and fuelling domestic inflation. The shortage of skilled workers also makes it harder to improve infrastructure gap. The problems surrounding the New Delhi Commonwealth Games highlighted both the infrastructure and skills shortages.
The real question is whether India has the collective will and ability to overcome its “sea of troubles.”
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I think a fact needs to be pointed out on your “Viktor Kiam syndrome” example of JLR where you try to imply Ratan Tata acquired JLR on a whim…thats plain wrong!
Tata Motors acquired JLR for USD2.5bn in 2008…Since then we know how the world economy has done…yet theres talk of an impending JLR IPO at USD14bn (5.6x the acquisition price). Even if the actual IPO price is HALF the rumoured price…Tata Motors is still sitting on over 2.8x its investment…hardly a bad investment for a 4 year hold period!
source: http://articles.economictimes.indiatimes.com/2012-04-19/news/31367668_1_jaguar-and-land-rover-xj-jlr
“As its debt is denominated in Rupees … India faces no immediate financing difficulty.” Satyajit Das
Or ever according to MMT.
Instead, the government’s heavy borrowing requirements crowds out private business. Satyajit Das
Then stop borrowing. Finance the deficit with money creation. Borrowing by a monetary sovereign is “corporate welfare” according to Bill Mitchell.
Indian banks are significant purchasers of government bonds. Satyajit Das
Of course since those bonds are a form of “corporate welfare”.
The banks, generally majority state owned, are also forced to lend to Indian state enterprises. Satyajit Das
What is a monetary sovereign doing borrowing money? Cui bono? The minority share holders of the banks? Indian billionaires?
This limits the supply of credit to Indian businesses that are forced to borrow overseas, exposing them to currency risk. Satyajit Das
They could issue more common stock, couldn’t they?
Given India’s deteriorating external position, the foreign debt is becoming increasingly problematic. Satyajit Das
Wouldn’t it have been better to sell the foreigners shares? But retain 51% to remain in control? And never pay dividends?
“Indian banks are significant purchasers of government bonds. Satyajit Das
Of course since those bonds are a form of “corporate welfare”.
The banks, generally majority state owned, are also forced to lend to Indian state enterprises. Satyajit Das
What is a monetary sovereign doing borrowing money? Cui bono? The minority share holders of the banks? Indian billionaires?”
Nice job, Beard, I think you’ve hit the nail on the head here. This salient example of India helps me better understand MMT.
Jaya Bharat (and Nepal and any others whose currencies peg to the IR!)
I used to be a Das fan but not anymore. Whatever he has served up in these first two parts about India is mediocre recycling of conventional wisdom. Its not very different from the economic balderdash that the IMF, the ECB and the Tea Party in the US is serving up. Das’s main grouse seems to be, ‘ITS THE PUBLIC SECTOR THAT IS AT FAULT’!!! Das serves up this message 6 times in a six course meal with varied flavors. He shows a very slight imperceptible genuflection to ‘Oligopolies’. The shot at Ratan Tata for buying Jaguar is totally misleading and his complete absolution granted to Kingfisher airlines is breathtaking to say the least. His diagnosis of the airline industry is, Government is funding a competitor in Air India and Indian Airlines and so hey presto, the entire industry is in the doldrums. The simple question about manipulated oil prices in the USA hovers like Banqo’s ghost over Das’s 3 course meal on India. If Oil prices were not so nonsensically high most of these airline companies including the Government owned ones would have been doing much better. Das also does a 350mph drive past India’s broken and decimated Unions. Listening to the bleating of all the Fat cats from abroad, India dismantled most of its public sector Unions. Banking employees have suffered the most. I know because I bank at one of the major Public Sector banks Das denigrates. There has been a tremendous increase in the use of temporary employees, there is no 8-hour minimum workday, people are worked 6 days a week for more than 10 hours per day, I know this very very personally, I call my banker once every two weeks. Its pathetic that Das has chosen to write a one sided Fat Cat perspective of India. Shame on him. Please do not invite Das to write anymore. I now have little faith in whatever Das writes.
Good comment. See mine below.
Deception is the strongest political force on the planet.
Sorry to pop your bubble, but India was a completely fucked up country heading to bankruptcy in 1991, when Manmohan Singh asked for growing private sector. In your ‘public sector paradise’, we did not have electricity for half the day during most of our childhood. Unions called for statewide or nationwide strikes on every occasion, and at times the occasion could be watching of world cup final. It was a socialist paradise, where getting anything done needed fifteen approvals, bribing four small and big government officials and waiting in line for a week. Been there, done that. It used to take a year or more to get a phone connection at home. Getting a passport? Forget about it.
potty mouth!
Interesting article but the shopworn metrics don’t tell the real story of ‘India’, I would suggest a different title;
“The Great Illusion — India’s Fracturing, Past and Future, “A Sea of Parasites””
India follows the pattern of all global nation states now, they are no longer cohesive entities controlled by their respective resident populations. Roving bands of global corporate raiders now fracture nation state alliances at will. One of the most transparent tells is the propagandistic adoption by ‘India’ of the intentionally divisive private sector vs public sector meme to facilitate and work the fracturing so as to gain control of government; to exploit, to ‘privatize’ (a sweet little euphemism for steal), and ultimately control and herd thin the resident population.
An interesting and more beneficial metric would be to track the growth of this alliance fracturing divisive meme over time with an eye to rating ALL alliances as to who gets best served and by what monetary amount. Skip the masking phony baloney words like; “fiscal stimulus”, “fiscal deficit”, “debt maturities”, etc., and get right to the nitty gritty; create an ALLIANCE METRIC, and define, in a top down ranking, ALL alliances by asset wealth, yearly income, and who gets the profit — who gets served by the alliance? The people of India sector or the parasite sector. This new and more realistic less evasive meme, the ‘people sector’ vs the ‘parasite sector’ could then be rolled out globally.
This would show at a glance that ‘India’, the nation state, is an illusion, like all other nation states now, and identify the < 1% parasites amongst us who intentionally and selfishly fracture them. We could then excise these aberrant, self anointed elite, narcissistic sickos from humanity.
Deception is the strongest political force on the planet.
I’m not well versed on India (so correct me if I’m wrong), but from what I know it has been in terrible shape forever, social and cultural structure even support classicism and this sort of ‘feudalism’ or servant-lords relationships.
Maybe at some point during the last decades there was some change in this due to democratic influence, but now that’0s gone and I would say Occident is following Indian path, and not the other way around (or returning to its feudal origins, western nations I mean).
In other news Das continues to ignore that India printing their own modern makes ricardian equivalence false and that public issuance of credit can’t displace the private sector. See how China has done it for example, both increasing public credit and private credit growth (even if most benefits went to the elites) at the same time.
This “350 mile an hour drive by” does read like a neo-lib set piece. Is it pitch to earn a consulting gig advising austerian and privatizing policy-makers and foreign investors? The lament about local authorities refusing to allow increases in utility rates thereby deterring foreign investors was where I stopped reading.
I found a far more illuminating account of India’s “progress” in the past century in Arundhati Roy’s “Capitalism a Ghost Story.”
http://www.globalresearch.ca/index.php?context=va&aid=29917
Any shill could get coppers thrown in the hat from Koch Brothers for going around the left intelligentsia media (self-imposed exiles from MSM)like NC, Salon, etc. and peeing on fire hydrants.
Long live Arundhati Roy!
I read Das for the Wall Street view, and the comments for nuggets like Ms G’s link. Thank you all for both.
Leverage, India has not been in terrible shape “forever.” Their civilization goes back at least 5000 years, and the was among the worlds wealthiest before they were raped by British capitalism starting around 1757.
Exactly! India was totally kept out of the Industrial Revolution by the British. IMHO, the ability to make machine tools, castings etc. was learned in the 1990’s. While opening up the Indian market to investment by outsiders was a good idea, huge groups like Tata have used their toehold and power with the political establishment to make themselves stronger, crowding out smaller companies. If a country cannot provide low cost power, education, transportation and food for the masses, what’s the use of a democracy? India should keep a tight rein on the financial markets so that they cannot be ruined by foreign plunderers. A growth of 1-2% is probably better than runaway growth that outstrips resources and ruins the environment and health of the people.
India. Another country, where, if you become a big enough bandit, you magicaly become legit, join the club.
Skippy… what was her name? the movie? Indian classic.
Her name was Bandit Queen.
http://en.wikipedia.org/wiki/Phoolan_Devi
Ta, that was one hell of an initiation rite.
I am incensed enough with Das to write another comment here. In part-1 of his series Das writes glowingly about how in the 1990s, Manmohan Singh, then Finance Minister called for reforms to encourage private sector growth in India. Well, since the 1990s we have had plenty of reforms. Most of these ‘reforms’ focused on devastating the Public Sector Unions, diluting labor laws, there was a recent brouhaha in the Indian media about how companies should not fire female employees who are pregnant – this will give you an idea of how far back to Dickensian times Indian labor law has been rolled back. There was also a strong push for the State to divest in Public Sector companies and this has been proceeding apace. So, we have had a decade of laying the red carpet out for the Fat Cat Capitalists, so why have they not done well? Why all this squealing and whining and whinging now? Das is extremely disingenuous in pronouncing death on India’s experiments, he is merely using this dip in economic outlook to paint some incendiary graffiti on what remains of India’s Public Sector. The World economy is now a basket case and Das does not know this? If he was honest he would not be making such quantum leaps about India’s performance. It is also depressing to know and understand that Das is merely an old style Capitalist shill. He does not seek to explore new models of growth or take off his Ivy league school colored glasses to ponder on the complete picture. It seems that to Das everything that has happened starting with the 2007 financial debacle is a disparate series of events that do not impinge upon this concrete edifice of economics knowledge they imparted to him in his Ivy league school. What a disappointment!
Sorry to pop your bubble, but India was a completely fucked up country heading to bankruptcy in 1991, when Manmohan Singh asked for growing private sector. It was a socialist paradise, where getting anything done needed fifteen approvals, bribing four small and big government officials and waiting in line for a week. Been there, done that. In your ‘public sector paradise’, we did not have electricity for half the day during most of our childhood. Unions called for statewide or nationwide strikes on every occasion, and at times the occasion could be watching of world cup final.
Your comment makes me think a Negative Income Tax or “Social Dividend” is wiser than socialism. Isn’t zero work far better than negative work? And actually, it would not be zero work in most cases since most people like to do something useful with their time.
Evidently going by your moniker you prefer the Russian Mafia method of growth and development? Your bubble popped in 2007 and it seems you are oblivious to it. Please be more specific in replying to my comment other than, ‘Neo-Capitalism good, everything else is Marx’ twaddle. The point I am trying to make is, there are many upsides and advantages to using the State to be an equal partner in the marketplace. State owned banks have had very few instances of corruption in the several years we have had public sector banking in India. India along with Canada was among the few countries in the World to escape the idiocy of financial deregulation that started here in the USA. Bribery and corruption are not unique to India, in the USA it goes under the label of Campaign Finance for Senators, Congressmen and Judges. Mining was deregulated in Karnataka but that only put the political mafia in charge of mines. The State may be slow and clumsy but it is at least a better steward at marshaling natural resources than a raping and pillaging MNC. Lets first decide what the discussion is about, are we talking about what is good for a Country? Or are we talking about What is good for a shareholder? This is where Das’s confusion comes from and plenty of other neo-liberal economics shills like him. Sustainability and the concept of the ‘Commons’ is totally absent from their lexicon.
Read Arundhati Roy’s “Capitalism a Ghost Story.” http://www.globalresearch.ca/index.php?context=va&aid=29917
Quite a bit more illuminating on what has driven the economic “progress” of India over the past century.
P.S. Roy’s beautifully written and solidly-researched piece directly addresses the question of “good for the Country vs. good for the shareholders (and a few corrupt 1%-ers in the home land).
I used to read NC first since 2008 however from 2011 I daily read thedailybell.com first. You become aware of the agendas and memes that people carry, and can also sometimes spot economic-prostitutes.
PaulArt is a good example of the kind of idiots that vote congress and other “secular” governments. This idiot cannot stomach the bitter truth. The fact is that after the UPA government replaced the NDA , things have gotten worse for everyone. India ia run by the most corrupt people in planet earth. The media in India has hesitated to report allegations of massive corruption of congress party president sonia gandhi. There is evidence she has parked more than 15 billion dollars in offshore accounts. people such as paulart have tended to believe in the prpaganda from the corrupt media and voted the possible people to power.
Dear Satyajit Das: I am currently reading Extreme money and liking it.
Well I lived in India in 1991 (KS and HP) through the early nineties and had American friends organizing monastery investment portfolios based on that union bastion which is also the world’s largest corporation, the Indian Railways system.
Perhaps the vultures simply cannot stomach the idea that interest rates should be so high so long as India’s poorest of the poor can still afford a bus token to take them across country!
It is true that government work was done in the most cumbersome way, but that was due mainly to the lack of computing power integrated into the government administration (which is huge in India).
But aside from the landless laborers, even poor people (but not often women) own their own homes and land; they are not owned by banks who rent them back to the so-called owners.
This is the fact the 1%ers cannot stomach. They want to turn India into another American style feudal state full of landless laborers.
Indians like everyone else like comforts but they are not so politically naive as Americans (for example).
The Indian govt needs more efficiency and watch dogs, but not 1% foxes pimping themselves to take charge of hen houses!
Just got back from India yesterday. To quote Galbriath, India remains a functioning anarchy. Nothing is going to change that. The big news there is the deterioration of the Rupee (20% this year alone), and why the govt controlled oil companies raised gasoline prices by 7.5 rupees overnight.
The real estate prices in Mumbai are insane, $300/sqft when the median income is still less than $10,000 per year and the poverty definition has been changed once again to cover only those earning less than 28 rupees (50cents) per day.
Like China the great rural migration to cities continues although not at the same pace. Telecommunications have improved tremendously, roads are being built everywhere (30,000 km of new roads are planned and being executed). While FIIs (foreign institutional investors ) will come and go, the middle class is certainly expanding and demand booming. While there is tremendous corruption, there is also a lot of progress.
Yes, while all us strive to build the ideal world we should not short change the real progress that has been made.
debt?
“To quote Galbriath, India remains a functioning anarchy.”
Libertarian heaven! ;)
“Studies have found the economy continues to be dominated by an oligopoly of incumbents, which have maintained or increased their positions.”
Will someone please point out an economy where that is not the case?
Iceland? Norway? Denmark?
India is a kleptocracy like every other economy on the planet. It’s interesting the resemblances with the looting and class war in this country. There is the same pitting of private sector employees against those in the public sector with a view to accelerate the downward spiral in wages and workers’ rights. There is the same grousing about actually training employees and the lament that Indian employers can’t find skilled workers willing to work for the crap wages employers are willing to offer.
Of course, there are also bows to Europe with Das’ austerian concerns. The Indian economy is slowing. Big surprise. The world economy is slowing. What? Das didn’t think India would be affected? Apparently not, since he doesn’t really consider this. Instead Das channels his inner neoliberal. Rather than advocating government stimulus, he sheds crocodile tears over government deficits even though India’s balance sheet looks relatively good compared to most other countries. It all comes across as typically austerian and looter oriented. Cut government spending going into a downturn, sell off the commons, shore up finances by instituting a depression. I mean seriously what could go wrong?
I love the way the author seems particularly indignant about the degree to which India still remains something of a democracy, so that, for instance, politicians feel obliged to keep electricity prices at a level their constituents can actually afford, thus distorting the market. God forbid!
My sentiments exactly. See my comment earlier!
Someone must be getting ready to sell them some health care financing products.
Or that companies are expected to “Gasp! Invest in their employees!”
“politicians feel obliged to keep electricity prices at a level their constituents can actually afford”
How about addressing the huge long term drawbacks of artificially depressing commodity prices?
Do you realize what a bonanza this is for employers, since they can keep salaries low forever in such a setup? Just look at Egypt and their insane control of the price of bread.
Note that I’m not saying: “Go capitalists, strangle the rubes! Choke the %*$#&$(!!”
I’m merely pointing out that over the mid to long term, prices ought to reflect true costs of production and necessary future investments for improvement. There is no other way to progress.
Share of BRICs in world economy 1999: 4.1%.
Share of BRICs in world economy 2011: 18.9%.
All without creating toxic financial bubbles, epic banking crises, or wealth polarization.
It’s time for the industrialized world to learn a few things from the semi-periphery about economic governance, accountability and pragmatism.
We have heard from the commanding heights of capitalism, now the view from the bottom:
http://dissentmagazine.org/online.php?id=603
fyi
Excuse me.
In India today there are over 500 million people who are chronically malnourished. India is an overpopulated cesspit of filth and misery that makes Medieval Europe look like paradise. And people are complaining of a SHORTAGE of labor? Excuse me? The problem with India is that there is NOT a ‘shortage’ of people who have no option but to work for 50 cents an hour. Duh.
I have a solution. Anyone who says that the problem with India is a ‘shortage’ of brilliant computer programmers who are so impoverished that they are forced to work for sub-poverty wages, should be required to practice what they preach and work for the same low wages that they demand that everyone else work for.
Nice series or articles, but largely known to most of us in india who choose to be informed. one grouse i have about economists is that they can only see economic variables as being material to a situation. for example, why is it that india has 500,000 students entering engineering yet such poor infrastructure. there are bigger and deeper things happening, of which ‘poor incentive structures’ is just one part.
i teach at the IITs and have tried to analyse this particular situation. it will appear in a journal soon, but here is a preprint:
http://www.cse.iitb.ac.in/~sohoni/RD.pdf
regs, milind.
Dr Sohoni,
Zem was here ;-)
– your former student
>>>> In recent years, a government recapitalised Air India has added new planes, competing vigorously, to regain lost market share. The combination of a government supported competitor, higher fuel prices and poor management has caused the private airlines to stumble. One private carrier – Kingfisher – is now struggling to pay employees and has been forced to cut flights. In the absence of a substantial new capital injection, Kingfisher’s future is uncertain. Few if any airlines are now profitable and shareholders, lenders and the government are at risk of losing billions of dollars.
This could not be farther from the truth. Air India and Indian Airlines were deliberately hamstrung, and asset stripped. Bilateral landing rights were given away to foreign airlines via an ill advised merger, 118 Boeings were bought, when the airline needed only 20 odd planes, to fly on routes that the airline did not own any more! In the name of route rationalization, profitable routes to the middle east were cut, which then started being serviced by the private airline companies within weeks! Praful Patel, the former airlines minister, is in the pocket of private airlines owners – Goyal and Mallaya. Its a testament to the incompetence of the oligarchs that with their biggest rival hamstrung by its management, they still could not run their own companies profitably.
[Radia tapes, discussing Patels murder of Air India]
http://www.youtube.com/watch?v=xFnxJJzCA_I
http://www.firstpost.com/politics/air-india-or-patel-aviation-why-praful-patel-needs-to-be-axed-176168.html
http://murderingthemaharaja.blogspot.com/2011/09/what-really-happened.html
India was not as good as people talked and it is not as bad as people talk. There are issues which are stiffling the growth. First is corruption at higher level…political-beurocrat-big industrialist nexus is looting the country and every institute is being destroyed in the process, second is race to give handouts to win the elections and third is real-estate bubble….which is going to ruin this country’s economy for foreseable future….politicians have parked their ill gotten money in this sector….scores of ruling politicinas are richest persons in the world
Why is this “government bad, business good” shill posting here? Maybe Yves wanted to add a different perspective?
I agree with most the comments critical of Das. Arundhati offers a more coherent criticism of neo-liberal darling India.
This Nation Conversations podcast with P. Sainath on the Tarnished Truth Behind ‘India Shining’ is also quite the eye opener.
Thanks for the link. I have read P.Sainath in Counterpunch and he also tells the stories from the Indian 99%.
Read first 2 installments and comments and unless I’m mistaken, only 1 person even alluded to the question of sheer numbers, and the enormity of the mass of poor Indians. Failing to act on population growth decades ago badly compromised India’s potential range of options – so much so that it appears India’s elite classes have essentially abandoned efforts to pull the entire country forward. Bear in mind India is physically only a third the size of either China or the US, and has a fraction of even China’s natural resources, let alone those of the still-gifted US.
India simply must place the word “sustainability” front and centre in any and all policy deliberations or the India of 1.6 billion people in 2050 will be an utter nightmare.
That said, I thought this piece written in 1995 of interest with respect to why India has still not duplicated China’s success with literacy, which was pivotal in China’s “lead”:
http://archive.epw.in/data/PDF/001975_EPW_11_11_1995_Vol_XXX_No_45/SPECIAL%20ARTICLES_Literacy%20in%20India%20and%20China.pdf