Indian Economy-News & Updates

LeveragedBuyout · Sep 25, 2014

How Can Modi Persuade More U.S. Companies to ‘Make in India’? - India Real Time - WSJ

September 25, 2014, 8:00 AM IST

How Can Modi Persuade More U.S. Companies to ‘Make in India’?
ByPrasanta Sahu

When Prime Minister Narendra Modi visits the United States this week he will be trying to tighten ties between the world’s two biggest democracies and also attempting to resuscitate investment interest in Asia’s third-largest economy.

Foreign direct investment from the United States has tapered in recent years as India’s economic growth has slowed and companies have been disappointed by New Delhi’s inability to modernize the country’s infrastructure and pass crucial economic reforms.

Foreign direct investment from the U.S.– which is the fifth largest investor in India—fell to around $800 million in the year ended March from a peak of close to $2 billion in 2010.

“The slowing down of investment in the recent past was due to deflating investor confidence in the Indian economy caused by multiple factors including slow decision making on the policy front, regulatory challenges in different sectors (and) retroactive changes in tax law,” said Vikas Vasal a partner at KPMG India.

American companies have tended to invest in the technology services, financial and automobile industries in India. While companies including Ford Motor Co., FedEx Corp. and Citigroup Inc. have made big bets on the South Asian nation, analysts say if India wants more investment in more sectors, it needs to become more open.

During Mr. Modi’s U.S. visit he will meet President Barack Obama and he will also be meeting with some of America’s top executives–including the CEOs of Google Inc., Citigroup and PepsiCo Inc.–hoping to drum up interest in India.

The new prime minister will likely be asked to live up to his business-friendly reputation and answer some tough questions about the country’s foreign investment, labor and tax policies.

Mr. Modi will have to convince U.S. firms that he means business and will take more measures to make it easier to set up shop in the country, said Asoke K. Laha, president-elect of the Indo-American Chamber of Commerce in India.

India was 134th out of 189 last year in the World Bank’s ease of doing business ranking, well behind China which is number 96.

While most global companies understand there is a great opportunity to make money in India as the incomes of a billion people rise, most think it just isn’t worth the trouble.

Vodafone Group PLC, Nokia Corp. and others that have made big bets on India have been slapped with surprise tax bills or regulations restricting their expansion.

Other companies, such as French retailer Carrefour SA, have spent years trying to get a foothold in India, only to give up.

To attract the billions of dollars in foreign funds India needs every year, Mr. Modi will have to come up with more than the awkward slogan “Make in India,” that he unveiled during his Independence Day speech last month.

To trigger a surge in investment, Mr. Modi will need to prove he plans to make the Indian economy more open and more efficient and that he will follow through on his campaign pledges to build infrastructure, reduce red tape and combat corruption.

“The main theme for Mr. Modi’s trip would be to say that India is the place for the U.S. to invest, the government is pro-business (and the) rules are business friendly,” said Mr. Laha of the American Chamber.

LeveragedBuyout · Sep 27, 2014

This article provides more concrete steps Modi could take to promote "Make in India." In short, cut bureaucracy, make land acquisition and zoning changes easier, build infrastructure (especially electricity), and better manage water resources. The first two items require zero investment, only legislation, so they should be the priority.

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Why the World Doesn’t ‘Make in India’ | The Diplomat

Why the World Doesn’t ‘Make in India’
If India is to become a manufacturing hub, it will need some major policy reforms.

By Mohamed Zeeshan
September 27, 2014

Indian Prime Minister Narendra Modi’s maiden Independence Day speech was laced with inspiring rhetoric. But of the many things he said, the one slogan that inevitably caught public attention was this: “Come, make in India!” With those words, Modi was trying to make the case for turning India into the world’s next great manufacturing hub. Understandably, the Indian populace was thrilled.

India is one of the world’s ten largest economies (and is third largest on a purchasing power parity basis), with a total annual output of nearly $2 trillion. As much as 57 percent of this output is produced by a service sector that employs just 28 percent of the population, largely concentrated in urban parts of the country. That is no surprise, because most Indians lack the skills and education to join the more knowledge-intensive service sector. What they need is what successful developing nations all over the world have had ever since the Industrial Revolution: a robust and productive manufacturing sector.

Yet India’s manufacturing sector contributes just 16 percent to the total GDP pie (China’s, by contrast, accounts for almost half of its total economic output). Victor Mallet, writing in the McKinsey book Reimagining India, recently offered an anecdote that was illuminating. “One of India’s largest carmakers recently boasted that it was selling more vehicles than ever and that it was hiring an extra eight hundred workers for its factory,” he wrote, “But the plant employing those workers belongs to the Jaguar Land Rover subsidiary of Tata Motors and is in the English Midlands, not in job-hungry India.”

Mallet goes on to make a point that has been made frequently by Indian economists: The world doesn’t want to “make in India,” because it is simply too painful. There’s bureaucratic red tape, a difficult land acquisition act, troublesome environmental legislation, a shortage of electricity, and a lack of water resources. The only thing India doesn’t seem to lack is labor, but that merely adds to the problem. As Mallet points out in the same essay, aptly titled “Demographic dividend – or disaster?”, “India’s population grew by 181 million in the decade to 2011 – and (despite falling fertility rates) a rise of nearly 50% in the total number of inhabitants is unavoidable.” But the number of jobs being added to feed that population is inadequate.

However, the labor dividend is still important. India doesn’t need to reduce the number of hands on deck. It needs to weed out the challenges that stop them from being productive.

Let’s start with electricity. Almost one-third of the entire Indian population still has no electricity today. That is a whopping 400 million people – more than all of the United States and almost as many as the European Union in its entirety. Much of this has to do with a chronic shortage of coal – a mineral that is responsible for as much as 70 percent of India’s total power output – and losses in transmission. The World Bank estimated that India lost as much as 21 percent of its produced electricity in 2011 through losses in transmission and pilferage – worse than countries like Gabon, Ghana and Senegal for the same year.

Notably, India’s electricity sector is monopolized by state-owned enterprises, both at the central and provincial levels. Private ownership and distribution is difficult and accounts for less than 20 percent of the entire power sector, creating a lack of competition in the market. Renewable energy – a sector most suitable to private production – lacks funding and, like most other sectors, is mired in difficult legislation.

The second great resource needed in abundance for industrial production, but scarce in India, is water. India is a land of rivers, but possesses just 4 percent of the world’s freshwater reserves. Many rivers are mired in dispute, either between nations or between states. The story becomes even more complicated during monsoon season. Few countries have to grapple with both floods and droughts at the same time. Yet, this is common in India. Tropical showers and monsoon winds bring concentrated spells of rain in certain parts of the country, while others are simultaneously mired in drought. Worse, the water that falls during the monsoon is quickly lost, much of it either draining away or causing floods in low-lying areas. If India could find ways to collect and conserve its rainwater, analysts predict that its water shortage might well turn into a surplus.

The good news for Modi is that many of these challenges can be overcome with policy. The recently passed Land Acquisition Act, for instance, applies only to agricultural fields, not the vast tracts of barren land that are untouched in many parts of the country – the northern part of the state of Karnataka, for one. The challenge is to identify these potential “manufacturing zones” and relax laws, supply power, and redirect resources to them. Part of the challenge, as the prime minister has often pointed out himself, lies within the government, not outside. If Modi can streamline the Indian bureaucracy and eliminate some of its excessive discretionary powers, then perhaps “make in India” could become reality.

Mohamed Zeeshan is a student of engineering at VIT University, India and a commentator on issues of Indian and international governance.

Chronos · Sep 28, 2014

LeveragedBuyout said:
This article provides more concrete steps Modi could take to promote "Make in India." In short, cut bureaucracy, make land acquisition and zoning changes easier, build infrastructure (especially electricity), and better manage water resources. The first two items require zero investment, only legislation, so they should be the priority.

---

Why the World Doesn’t ‘Make in India’ | The Diplomat

Why the World Doesn’t ‘Make in India’
If India is to become a manufacturing hub, it will need some major policy reforms.

By Mohamed Zeeshan
September 27, 2014

Indian Prime Minister Narendra Modi’s maiden Independence Day speech was laced with inspiring rhetoric. But of the many things he said, the one slogan that inevitably caught public attention was this: “Come, make in India!” With those words, Modi was trying to make the case for turning India into the world’s next great manufacturing hub. Understandably, the Indian populace was thrilled.

India is one of the world’s ten largest economies (and is third largest on a purchasing power parity basis), with a total annual output of nearly $2 trillion. As much as 57 percent of this output is produced by a service sector that employs just 28 percent of the population, largely concentrated in urban parts of the country. That is no surprise, because most Indians lack the skills and education to join the more knowledge-intensive service sector. What they need is what successful developing nations all over the world have had ever since the Industrial Revolution: a robust and productive manufacturing sector.

Yet India’s manufacturing sector contributes just 16 percent to the total GDP pie (China’s, by contrast, accounts for almost half of its total economic output). Victor Mallet, writing in the McKinsey book Reimagining India, recently offered an anecdote that was illuminating. “One of India’s largest carmakers recently boasted that it was selling more vehicles than ever and that it was hiring an extra eight hundred workers for its factory,” he wrote, “But the plant employing those workers belongs to the Jaguar Land Rover subsidiary of Tata Motors and is in the English Midlands, not in job-hungry India.”

Mallet goes on to make a point that has been made frequently by Indian economists: The world doesn’t want to “make in India,” because it is simply too painful. There’s bureaucratic red tape, a difficult land acquisition act, troublesome environmental legislation, a shortage of electricity, and a lack of water resources. The only thing India doesn’t seem to lack is labor, but that merely adds to the problem. As Mallet points out in the same essay, aptly titled “Demographic dividend – or disaster?”, “India’s population grew by 181 million in the decade to 2011 – and (despite falling fertility rates) a rise of nearly 50% in the total number of inhabitants is unavoidable.” But the number of jobs being added to feed that population is inadequate.

However, the labor dividend is still important. India doesn’t need to reduce the number of hands on deck. It needs to weed out the challenges that stop them from being productive.

Let’s start with electricity. Almost one-third of the entire Indian population still has no electricity today. That is a whopping 400 million people – more than all of the United States and almost as many as the European Union in its entirety. Much of this has to do with a chronic shortage of coal – a mineral that is responsible for as much as 70 percent of India’s total power output – and losses in transmission. The World Bank estimated that India lost as much as 21 percent of its produced electricity in 2011 through losses in transmission and pilferage – worse than countries like Gabon, Ghana and Senegal for the same year.

Notably, India’s electricity sector is monopolized by state-owned enterprises, both at the central and provincial levels. Private ownership and distribution is difficult and accounts for less than 20 percent of the entire power sector, creating a lack of competition in the market. Renewable energy – a sector most suitable to private production – lacks funding and, like most other sectors, is mired in difficult legislation.

The second great resource needed in abundance for industrial production, but scarce in India, is water. India is a land of rivers, but possesses just 4 percent of the world’s freshwater reserves. Many rivers are mired in dispute, either between nations or between states. The story becomes even more complicated during monsoon season. Few countries have to grapple with both floods and droughts at the same time. Yet, this is common in India. Tropical showers and monsoon winds bring concentrated spells of rain in certain parts of the country, while others are simultaneously mired in drought. Worse, the water that falls during the monsoon is quickly lost, much of it either draining away or causing floods in low-lying areas. If India could find ways to collect and conserve its rainwater, analysts predict that its water shortage might well turn into a surplus.

The good news for Modi is that many of these challenges can be overcome with policy. The recently passed Land Acquisition Act, for instance, applies only to agricultural fields, not the vast tracts of barren land that are untouched in many parts of the country – the northern part of the state of Karnataka, for one. The challenge is to identify these potential “manufacturing zones” and relax laws, supply power, and redirect resources to them. Part of the challenge, as the prime minister has often pointed out himself, lies within the government, not outside. If Modi can streamline the Indian bureaucracy and eliminate some of its excessive discretionary powers, then perhaps “make in India” could become reality.

Mohamed Zeeshan is a student of engineering at VIT University, India and a commentator on issues of Indian and international governance.

thanks @LeveragedBuyout

kaykay · Oct 8, 2014

According to IMF WEO October 2014 report, India is now 2.047 Trillion USD economy.

Report for Selected Countries and Subjects

Report for other countries can be found in below link from IMF.
Select Country or Country Groups

@gslv mk3 @anant_s @Skull and Bones @Abingdonboy @Ammyy @GURU DUTT @Aether @third eye
@farhan_9909

Skull and Bones · Oct 8, 2014

kaykay said:
According to IMF WEO October 2014 report, India is now 2.047 Trillion USD economy.

Report for Selected Countries and Subjects

Report for other countries can be found in below link from IMF.
Select Country or Country Groups

@gslv mk3 @anant_s @Skull and Bones @Abingdonboy @Ammyy @GURU DUTT @Aether @third eye

Congratulations laundo, finally in the two trillion chub. Neglecting GDP growth rate, even if the currency rate drops to 2011 level in the coming year, we'd see another 20% jump in the currency adjusted GDP valuation. Any member correcting my view?

SURYA-1 · Oct 8, 2014

My dream is that Modi takes us into 5+ Trillion $$ club by 2024.

Robinhood Pandey · Oct 8, 2014

Finally

Skull and Bones · Oct 8, 2014

3 saal se intezaar me tha BC.

The_Sidewinder · Oct 8, 2014

Skull and Bones said:
3 saal se intezaar me tha BC.

with new policies, economy only gonba grow.

INDIC · Oct 8, 2014

Skull and Bones said:
Congratulations laundo, finally in the two trillion chub. Neglecting GDP growth rate, even if the currency rate drops to 2011 level in the coming year, we'd see another 20% jump in the currency adjusted GDP valuation. Any member correcting my view?

no chance, it will make exports expensive.

TejasMk3 · Oct 8, 2014

Troll-ion

, pls change title

anant_s · Oct 8, 2014

kaykay said:
According to IMF WEO October 2014 report, India is now 2.047 Trillion USD economy.

Skull and Bones said:
we'd see another 20% jump in the currency adjusted GDP valuation

that would be a paradox situation. While we are moving towards a deregulated Fuel market any strengthening of INR will make our lives a little easier (not to mention easing of inflation and CAD) but at the same time exports like gems, IT, BPO will get hurt.
With a pro-development government at helm, things can get only better for economy. Infact SBI chairperson recently commented that she sees economy returning back to 6-6.5% growth from second quarter next year. with things improving elsewhere too (barring perhaps Euro-zone), i think the economy should start motoring 2015 onwards.