Can Indian Economy Avert Crash Landing in 2011?

[twoplustwoisfour]

Inflation in my view is the biggest worry. We waste 40% of our agricultural produce because of inadequate transportation. We need to open up retail immediately. The corporations would greatly enhance our supply chain so we don't have to rot our food for nothing. I think the fear that this move would be death knell to our Mom and Pop shops is highly misplaced. When China opened up the retail sector in 2005 (I think), many feared the same but in reality it actually added more mom and pop shops to the economy. Now the big corporations have about 20% market share while the rest is done through smaller retail stores.This had greatly enhance customer satisfaction and product availability. I would think similar could be done in India.

I don't think opening up retail is the answer. The trader network in agricultural produce has been there for more than the past 100 years. It'll be very difficult for a foreign investor to break that if someone like Reliance couldn't do it.

For me, the answer would be to introduce better technology in our supply chain network along with greater investments into transportation and storage. THAT's the stage where foreign investments could greatly help the country.

 

[somebozo]

I am no expert on Indian economy but my friend at ernst & young says India economy is heavily heading towards short term speculative FDI which would burst like a bubble anytime. India should instead work towards long term sustainable investment. The rapid inflation speaks volumes about something headed in wrong direction.

 

[great]

I don't think opening up retail is the answer. The trader network in agricultural produce has been there for more than the past 100 years. It'll be very difficult for a foreign investor to break that if someone like Reliance couldn't do it.

For me, the answer would be to introduce better technology in our supply chain network along with greater investments into transportation and storage. THAT's the stage where foreign investments could greatly help the country.

Reliance couldn't do it because it doesn't have enough capital to build one. Without significant FDI coming into this sector, it would take decades for one to build up to be efficient. Also it can't be done by one corporation. When you allow investments, there would be multiple corporations who would work together to develop a reliable supply chain.

Take for example 'Air conditioned transportation'. If Reliance has to buy trucks with huge air conditioners that would involve huge capital input. Most of the time these trucks would sit idle when it doesn't have to transport anything. It won't be cost-efficient to Reliance.

But if there are multiple corporations who would utilize those trucks, a specialized corporation would emerge which would optimally use those trucks among corporations. So reliance could just concentrate on front end and marketing and not worry about supply side transportation.

Also Reliance is relatively newbie in retail sector, compared to Walmart, Carrefour, Stop-n-Shop. These companies have expertise and technology in supply side as they been in this business for quite a long time now and have operations in many countries.

Finally, take the present case, rise in onion prices. With big corporations involved they would route the onions from other countries. They would because there is profit to make if they do so. No longer Government would have to worry about onion supply. Market would force Corporations do that for them.

 

[RiazHaq]

India, more than China or Brazil, should watch out for the tidal wave of money made available from the Fed’s quantitative easing, according to Nobel prize-winning economist Joseph Stiglitz.

China and Brazil have recently further restricted the ability of investors to move money in and out of those countries in recent weeks. India also has such regulations, known as capital controls. But it hasn’t been tightening them lately and hasn’t been intervening much in currency markets, allowing the rupee to rise about 5% this year against the dollar. Mr. Stiglitz thinks those factors will make India a target for investors looking for a quick buck.

“I do worry about countries like India where they are debating how much intervention in the market they should have,” he said Thursday in Hong Kong. “The free capital can go to fewer and fewer places, and India’s one of those,” he said.

Speaking more generally, he said: “Strong economies that don’t yet have those capital controls become the focal point for all this loose money and they will be the countries under a lot of stress.”

The trouble of course with such “hot money” is that it leaves the country just as quickly as it came in, whipsawing financial markets and destabilizing businesses, as in the Asian financial crisis of the late 1990s.

Mr. Stiglitz was speaking at the Mipim Asia real estate conference.

Stiglitz: India Could Lose in Capital Controls Race - India Real Time - WSJ

 

[great]

I am no expert on Indian economy but my friend at ernst & young says India economy is heavily heading towards short term speculative FDI which would burst like a bubble anytime. India should instead work towards long term sustainable investment. The rapid inflation speaks volumes about something headed in wrong direction.

Like someone said if you have a decent growth its manageable. Let alone 9% growth.

 

[Rang De]

I dont understand why pakistani writers/bloggers are so worried about India. Be it Economy poverty defence or watever.. u'd find such articles in plenty.

Anyway Here's what Forbes has to say on this same topic

The Indian Economy In The Next Decade - Forbes.com

"Expect more growth; beware deficits and inflation"

@TS/Writer: Thanks for the concern. but i guess we and our leaders wd be able to manage

 

[Marxist]

“ Review of the year 2010” India On Course to Achieve Export Target of US $ 200 Billion

India’s exports have registered a growth of 26.8% during November 2010, at US $ 18.9 billion. During the period April-November 2010, exports have reached a level of US $ 140.3 billion at a growth of 26.7% while the imports were US $ 222 billion with a growth of 24% and a trade deficit of US $ 81 billion. India’s imports in November 2010 were US $ 27.8 billion, up by 11.2%. During April-November 2010, the following sectors have done well viz., engineering, gems & jewellery, petroleum and its products, leather & leather products, carpet, plastics & linoleum, cotton yarn, chemicals etc.

An export target of US $ 200 billion has been set for the year 2010-11. With the present growth trend, we are on course to achieve the export target for 2010-11. There has been minor improvement in the GDP Growth rate of US, one of our major export destinations. IMF has also projected a growth rate of 3.3% in GDP in 2010 and 2.9% in 2011 for US in comparison to the negative growth in 2009.

In the Foreign Trade Policy 2009-14, it has been stated that India’s merchandise exports is expected to reach US $ 200 billion in 2010-11. In order to meet these objectives, the Government planned to follow a mix of policy measures including fiscal incentives, institutional changes, procedural rationalization,enhanced market access across the world and diversification of export markets. Improvement in infrastructure related to exports; bringing down transaction costs and providing full refund of all indirect taxes and levies became the three pillars, which would support to achieve the target.

Government has put emphasis on market diversification as our traditional exports have been hit badly due to their concentration in US and EU Regions. Since the announcement of FTP, 2009-14, focus had been to diversify our markets more into developing countries of Africa, Latin America and some parts ofOceania. A recent preliminary study conducted by Federation of Indian Exporters (FIEO) revealed that the schemes, particularly the Focus Market Scheme (FMS) and Market Linked Focus Product Scheme (MLFPS) have played a key role to diversify the India’s export base. Out of the 27 new countries added under FMS in August 2009, exports to 15 countries registered impressive growth despite the global slowdown.

read more http://indiacurrentaffairs.org/&#82...to-achieve-export-target-of-us-200-billion-2/

 

[Rajkumar]

yeah there may be chance of massive out flow of money when economy of the west further shrinks but question is why time line of 2011?????

 

[Bang Galore]

Reliance couldn't do it because it doesn't have enough capital to build one. Without significant FDI coming into this sector, it would take decades for one to build up to be efficient. Also it can't be done by one corporation. When you allow investments, there would be multiple corporations who would work together to develop a reliable supply chain.

Take for example 'Air conditioned transportation'. If Reliance has to buy trucks with huge air conditioners that would involve huge capital input. Most of the time these trucks would sit idle when it doesn't have to transport anything. It won't be cost-efficient to Reliance.

But if there are multiple corporations who would utilize those trucks, a specialized corporation would emerge which would optimally use those trucks among corporations. So reliance could just concentrate on front end and marketing and not worry about supply side transportation.

Also Reliance is relatively newbie in retail sector, compared to Walmart, Carrefour, Stop-n-Shop. These companies have expertise and technology in supply side as they been in this business for quite a long time now and have operations in many countries.

Finally, take the present case, rise in onion prices. With big corporations involved they would route the onions from other countries. They would because there is profit to make if they do so. No longer Government would have to worry about onion supply. Market would force Corporations do that for them.

Not entirely correct. Reliance has no shortage of capital. The problem lies in the political clout of the middlemen in states like U.P. Reliance were forced to shut shop by the Mayawathi government despite being legally allowed to open there. While I do think that the market should be open to all(both Indian & Foreign), this remains a politically sensitive matter & movement will happen slowly. Also since companies don't own their own agricultural lands, they have to sign up farmers in an agreement which is not worth the paper it is written(typed) on. Enforcement is impossible(imagine the headlines - poor farmer targeted by evil corporates) It will eventually happen but I am not surprised that everyone is a little cautious.

 

[great]

Not entirely correct. Reliance has no shortage of capital. The problem lies in the political clout of the middlemen in states like U.P. Reliance were forced to shut shop by the Mayawathi government despite being legally allowed to open there. While I do think that the market should be open to all(both Indian & Foreign), this remains a politically sensitive matter & movement will happen slowly. Also since companies don't own their own agricultural lands, they have to sign up farmers in an agreement which is not worth the paper it is written(typed) on. Enforcement is impossible(imagine the headlines - poor farmer targeted by evil corporates) It will eventually happen but I am not surprised that everyone is a little cautious.

That wasn't my assumption. I actually saw an interview in which Reliance retail head said the same. That they don't see enough return on investment to invest such a large amount to build supply side. He literally said that. Other reason he said was the lack of technical expertise and technology to build one. He asked to open the retail sector so more FDI could come into the country.

Your reasons could also be true. But that's just UP right? UP isn't entire India. They could have always invested in other parts of the country which are more open.

 

[syntax_error]

@riaz huq
India's current account deficit widened sharply to $13.7 billion in the June-quarter, which was around 3.7 per cent of GDP. The deficit was $4.5 billion in the same period year ago.

are you sure about this???????
INDIA's currrent GDP is trillion plus so 13.7 billion make almost 1% not 3.7%

Its a quaterly figure ..so 1% * 4 quaters is close to 4 %....

 

[PeacefulIndian]

I don't buy too much into what Goldman Sachs or Bloomberg or any other West driven institutions say, even WSJ for that matter. They have always been aiming to portray BRIC countries as 'a bubble', mainly the IC.

Bloomberg had predicted India's current account deficit to be $44 billion this year.

Indian Rupee to Drop on Asia's Worst Current-Account Deficit: Chart of Day - Bloomberg

Barclays predicts India’s annual current-account deficit will widen 15 percent, to $44 billion, in the financial year that began April 1. That would make the rupee more vulnerable to a surge in volatility in foreign capital flows fueled by Europe’s debt crisis, Bajoria said.

And guess what, they missed by more than 300%.

I also don't know why you say CAD was 1% last year, it was 2.9%

FM hopeful of limiting current a/c deficit to 3% - The Economic Times

Goldman Sachs said it estimated India's current account deficit to widen to 4% of GDP in the current fiscal year, from 2.9% in the previous year.

FM is hopeful of containing it to 3%, which would be an increase of 0.1% which is not alarming by any means, thought it is definitely something to be looked at seriously.

In the same link above FM expresses confidence on flow of FDI & assures to maintain it. Analysts are hoping it would again fall to 2% in 2011. CAD should definitely be watched carefully, but does not solely determine the fate of an economy.

 

[RiazHaq]

I don't buy too much into what Goldman Sachs or Bloomberg or any other West driven institutions say, even WSJ for that matter. They have always been aiming to portray BRIC countries as 'a bubble', mainly the IC.

Do you know who created the BRIC acronym? It was Jim O'Neil of Goldman Sachs.

Goldman Sachs has clearly contributed to the euphoria about India, by projecting that its economy could be 50 times its 2006 size by 2050, which would make it the world's third largest, after China and the United States.

However, Goldman's Jim O'Neill has also said that when he ranked countries by the potential risks to their growth — everything from inflation to corruption — India ranked 97th in the world, behind Brazil and the Philippines.

London-based Maplecroft terror risk index based on 2009 data ranks Iraq first, Afghanistan second, with Pakistan and Somalia third and fourth respectively. They are rated at extreme risk along with Lebanon 5, India 6, Algeria 7, Colombia 8 and Thailand 9, according to Reuters.

Haq's Musings: BRIC, Chindia and the Indian Miracle

 

[twoplustwoisfour]

Do you know who created the BRIC acronym? It was Jim O'Neil of Goldman Sachs.

Goldman Sachs has clearly contributed to the euphoria about India, by projecting that its economy could be 50 times its 2006 size by 2050, which would make it the world's third largest, after China and the United States.

However, Goldman's Jim O'Neill has also said that when he ranked countries by the potential risks to their growth — everything from inflation to corruption — India ranked 97th in the world, behind Brazil and the Philippines.

London-based Maplecroft terror risk index based on 2009 data ranks Iraq first, Afghanistan second, with Pakistan and Somalia third and fourth respectively. They are rated at extreme risk along with Lebanon 5, India 6, Algeria 7, Colombia 8 and Thailand 9, according to Reuters.

Haq's Musings: BRIC, Chindia and the Indian Miracle

I'm afraid your data is a little out of date. The latest Maplecroft terror risk index has PAKISTAN at No. 2 while India is not even in the top 10.

Maplecroft | Home | About Maplecroft | Media Room | News

 

[bandit]

I am no expert on Indian economy but my friend at ernst & young says India economy is heavily heading towards short term speculative FDI which would burst like a bubble anytime. India should instead work towards long term sustainable investment. The rapid inflation speaks volumes about something headed in wrong direction.

Your friend at Ernst & Young is probably a low level employee who has nothing to do with Finance, a clerk or paper pusher possibly.
Because anybody who makes a statement about FDI being 'short term' and 'speculative 'cannot be hired by E&Y for very obvious reasons, hes a financial retard.

Somalia is now more at risk from terrorist attacks than Iraq, Pakistan, Afghanistan and Colombia according to a global ranking assessing the frequency and intensity of terrorist incidents in 196 countries. Sixteen countries are rated as ‘extreme risk’ with Somalia (1), Pakistan (2), Iraq (3), Afghanistan (4), Palestinian Occupied Territory (5), Colombia (6), Thailand (7), Philippines (8), Yemen (9) and Russia (10) at the bottom of the ranking.

http://www.maplecroft.com/about/news/terrorism.html

Mr. Haq, this is from the Maplecroft website. Please stop manpulating data and facts as they seem convenient to you, if you are intellectually incapable of having any thoughts of your own you could at least copy and paste true data.