India’s economic miracle losing its lustre: analysts

[Energon]

This all boils down to govt support(besides farming skills) Punjab/Haryana have access to electricity, good quality seeds, land holdings are bigger and clubbed (tractors and other machinery can be used etc), Credit access is Good, Plenty of Cheap electricity and water available and sympathetic govt which partially guarantees bailouts...

One of the biggest tragedies in Indian agriculture has been the misplaced glorification of the untenable Socialistic model where the government is handed the responsibility to divert (already deficient) funds and go to all sorts of lengths to "help" the farmers, the true sons of the soil. Obviously this policy has failed in the past, isn't really working now, and will more than likely continue to fail. The truth of the matter is that other than a few selected areas in the Gangetic plains (that haven't been wrecked through salinity) and other handful of areas growing certain highly desirable cash crops, by and large all agriculture in India is producing way below par; mostly because it's outdated. This whole son of the soil "kissaan" icon is nothing more than a glorified political tool for dhoti clad paan chewing politicians to get votes (and then default on their "promises").

Agriculture in today's world is a highly competitive arena that relies upon high tech methodology in conjunction with proficient supportive systems (such as appropriate transport, cold chains etc) and most of all aggressive marketing strategies. Indian farmers just aren't equipped to handle this, which is why they fall prey to nefarious middle men, corrupt/inept politicians, predetory corporations and superior competition from abroad. Rural India also suffers a great deal from a variety of social problems on account of lack of enlightenment, indulgence in archaic and cruel social norms. All of this in combination with the overall absence of decent governance, rampant corruption and injustice has essentially turned rural India into a ticking time bomb and served as the perfect platform for random communal violence and counterproductive violent organizations like the Naxalites.

I was reading some articles about the Vidharba farmers and was surprised to learn that the highly desirable BT cotton seeds don't really provide the advertised advantages given that the strain was designed specifically for the soil in Missouri, Georgia and Alabama (cotton states) of the USA which as it turns out is very different from that of eastern Maharashtra. Also, social problems such as dowry, gambling and poor financial decision making are big contributors to the farmer suicides.

As far as I can see, education is by far the best tool to combat most of these problems. Now I'm not saying that the strategies you mentioned are wrong; if done properly they would work. But like it or not, the Indian government just isn't proficient at organizing, managing and executing mass programs. Also, the stark reality is that for a number of reasons socialistic policies just don't work like they're supposed to in India; mostly because Indians inherently are some of the world's most capitalistic people, and personally I think that nations ought to play to their strengths, not delude themselves with ideologies that are unrealistic. In India, the part of the population who is most aware, holds influence, has high economic impact and makes their voice heard reaps massive benefits; whereas the ones who don't, get left behind and find themselves disenfranchised waiting and hoping for the government to come to their aid (and remain waiting). The level of education is one of the most important factors when it comes to effective organization and trade management. The farming community should be a self sustaining one whereby they are able to analyze and understand each and every portion of their dynamic and complex trade and make necessary upgrades to keep at par with their counterparts around the world. Don't you think it's weird that in a country of a billion where over 70% of the population survives off agriculture, that in many parts the methodology of this craft hasn't really changed much in over 2 thousand years? One bad monsoon season and hundreds of millions of lives are driven to ruin. Agriculture has to evolve, and this change has to come from within; and education is the only thing that can truly enable this evolution.

 

[ashfaque]

Energon,

As for as socialist policies is concern, this is one of compulsion to current governmnet, just because Left parties are supporting the Gov. You may have seen the post budget discussion and interviews, all left politician were claiming that waivers are not enough and it should have been more.

I agree that Indian people are inherantly capitalist and social policies have been failed. I think if $15 B or more could have been pushed for irrigation and other agricultural projects then it can generate more temporary jobs and a right step towards solving the problems of farmers permanently. Any way one of the recent report says that only 15% of small formers will gain benefit from this waivers, rest of them have taken loan from Baniyas.

 

[Bushroda]

Thanks for your reply, I do agree on the fundamentals and your saving rate is indeed impressive but is the projected growth of 8% sunstainable?

Fifteen years since Indian economy started to take off you've come far in many fields to the envy of friends and foes but two major sectors, infrastructure and agriculture, are still neglected and I remain sceptical when I read reports suggesting a $150 billion immediate investment in modernising and expending infrastructure or the $15 billion loan waiver in the green sector, India can't deliver this in time to sustain growth, let alone reach the projected 10% growth in next decenium.

Neo, thanks for your kind words but you are making a very liberal assesment here. For modernising its infrastructure, India doesn't need just $150 billion here but investment in lieu of trillions of dollars. $150bln would've been raised is no time. For India to reach upto China's current infrastructure level would require it to spend atleast 12% GDP every year up until 2015.

10% growth is impossible. But 8%+ growth is still not evaporating. Although it is unsustainable with current infrastructure but it has been almost agreed upon that it would be a soft landing for Indian economy. That should give a time window wide enough for India to upgrade atleast the minimum essential infrastructure to keep the growth intact.

 

[Energon]

Energon,

As for as socialist policies is concern, this is one of compulsion to current governmnet, just because Left parties are supporting the Gov. You may have seen the post budget discussion and interviews, all left politician were claiming that waivers are not enough and it should have been more.

I agree that Indian people are inherantly capitalist and social policies have been failed. I think if $15 B or more could have been pushed for irrigation and other agricultural projects then it can generate more temporary jobs and a right step towards solving the problems of farmers permanently. Any way one of the recent report says that only 15% of small formers will gain benefit from this waivers, rest of them have taken loan from Baniyas.

Ashfaque, let's call it as we see it. True the UPA has publicized their leftist policies as much as they can, however the probability of doing this a bit closer to election nonetheless is more than likely because they saw what happened to the last government that chose to ignore the sector altogether prior to national elections.

My point is that the mismanagement of the agro-rural complex goes far beyond party politics or the tendencies of the leftists vs the conservatives. Occasional debt relief and other goodies are known to be political ploys of instant gratification to garner a vast number of votes for an upcoming election. However these strategies in the comprehensive picture are akin to putting a band aid on a hemorrhaging laceration. The truth of the matter is that the leadership regardless of which party they belong to have to build up the political will to engage in a long term plans which although may not yield benefits or results for 2 decades will certainly be a permanent step in the right direction for the vast impoverished and embattled masses.

 

[Neo]

The $15 billion loan waiver and Mr Narendra Totaram Cuauhan​

Farm bonanza fails to save India’s dying farmers ​

Saturday, March 15, 2008

PIMPARKHUTI, India: Just before India’s finance minister was announcing a massive farm bonanza last month, Narendra Totaram Chauhan quietly slipped into his cotton fields, opened a bottle of pesticide and drank it.

By the time the minister finished announcing a $15 billion loan waiver to give a new lease of life to millions of indebted farmers, the poison had snuffed the life out of Chauhan. Though the crisis has been building for years, it presents a grave challenge for Prime Minister Manmohan Singh ahead of national polls next year. Farm distress and soaring prices helped turf out the previous government in 2004 and put Singh in power.

So, Singh’s government came up with a plan in the 2008-09 budget: cancel debts of small farmers with loans overdue on Dec 31, 2007, and which remained unpaid up to Feb 29. The write-off came with riders. Beneficiaries can own up to two hectares (five acres) and only bank loans will be cancelled.

This has meant nearly a quarter of 40 million targeted farmers will not benefit because most borrowed from rapacious moneylenders or they own larger tracts of land.“It’s a lose-lose proposition. This will not relieve farmers’ distress,” said Kishor Tiwari, who leads a campaign against farmers’ suicides across the arid plateaus of central India.

But relief is still a distant dream for a majority of farmers here because their average holding is just above two hectares. And small and marginal farmers will not benefit because most of them borrowed from moneylenders and relatives.

The National Sample Survey Organisation says almost half of India’s 100 million farming families are in debt. India’s stunning urban-centric economic growth has bypassed the farm sector where growth is estimated to have slowed to 2.6 per cent in the year ending March 2008, from 3.8 percent the year before. Even though farming supports 60 per cent of India’s 1.1billion people, it contributes only a fifth of gross domestic product and accounts for only around 15 per cent of bank credit.

Economic liberalisation since 1991 has not helped either, with duties being gradually phased out and farmers facing tough competition from heavily subsidised European or American growers.

In the past, farmers used to sell to the government at a price fixed in advance, but that safety net was removed for cotton growers in 2005, leaving them at the mercy of middlemen who often browbeat them into unprofitable sales. Bad weather and falling prices only compound debts.

Farmers are often underfinanced by banks, forcing them to turn to private lenders whose usurious interest rates bind them to a never-ending cycle of debt. Institute of Development Research found that 86.5 per cent of farmers who took their own lives were indebted their average debt was about $835 and 40 per cent had suffered a crop failure. But Prime Minister Singh is defending his scheme.

“It will allow the fresh flow of institutional credit to farmers, it will clean up bankers’ balance sheets, it will stimulate economic activity in rural areas, and I don’t make any apologies on this,” he told the parliament this month.

The scheme will benefit farmers in the states of West Bengal in the east and Kerala in the south where sweeping land reforms left farmers with smaller holdings. Agricultural scientists say state support for agriculture is imperative, calling for help with soil and water management, timely credit and subsidised seeds and fertilisers.

“In the name of liberalisation state support was withdrawn completely and the vacant space has been occupied by the private sector in an unregulated manner,” said K Nagaraj of the Madras Institute of Development studies.

http://www.thenews.com.pk/daily_detail.asp?id=101341

 

[Bushroda]

India could grow 8.5-9.5 pct in medium term - U.N.
Thu Mar 27, 2008 11:10am

NEW DELHI (Reuters) - India's economy could grow 8.5-9.5 percent over the medium term but price pressures may persist due to high global oil and food prices, a United Nations panel said in a report released on Thursday.

"The sustained expansion of the Indian economy would see growth at between 8.5-9.5 percent over the medium term following growth of 8.7 percent in 2007," the U.N. Economic and Social Commission for Asia and the Pacific (UNESCAP) said.

"UNESCAP expects inflation at 5 percent for 2008."

India's widely watched wholesale price inflation inched close to 6.0 percent in early March, above the central bank's comfort level of 5.0 percent.

 

[Neo]

Wrong thread :s

 

[SPI]

India’s economic miracle losing its lustre: analysts​

NEW DELHI: Booming India is reeling from a flurry of bad financial headlines, suggesting the outlook for the world’s second fastest-growing major economy is not as rosy as it was, analysts say.

Economic growth is losing pace and inflation is on the rise, meaning India’s central bank — which has hiked interest rates nine times since 2004 to tame prices — has little room to loosen monetary policy to spur activity, they say.

“The picture of very strong growth and low inflation in India is starting to give way to one of slowing growth and rising inflation,” said Robert Prior-Wandesforde, an economist at HSBC in Singapore.

Last Friday, inflation in Asia’s third-largest economy hit a nearly 10-month high of 5.02 percent, pushing through the central bank’s ceiling of five percent for this fiscal year.

Adding to the gloom has been a 25 percent slide since January 10 in India’s benchmark Sensex share index — whose 47 percent jump last year made it one of the world’s top performers — as foreign investors have bailed out.

“With the (global) economic turbulence, you’re seeing a lot of risk aversion,” said Amitabh Chakraborty, equities president of Mumbai’s Religare Securities.

Also, the Congress-led government, which faces general elections in little over a year, is storing up fiscal trouble with its 15-billion-dollar loan bailout for farmers, big civil service pay hikes and tax cuts announced late last month in its populist, poll-geared budget, economists say.

“We think the fiscal deficit will increase due to the spending pressures,” said Goldman Sachs economist Tushar Poddar.

Economic growth is forecast by the government to slow to 8.8 percent in this fiscal year to March 31, 2008 from 9.6 percent last year — the first deceleration in three years.

Some economists project growth could fall to as low as seven percent next year due to the US-led global slowdown, aggressive monetary tightening and a sharp rise in the rupee’s value against the dollar, which has hit exports.

Seven percent growth would still be enviable by anemic Western levels but is too low for India, where analysts say double-digit expansion is needed to help hundreds of millions escape a grim poverty trap.

The stock market’s slide has also cast a cloud over plans by firms to raise a projected 15 billion dollars in IPOs this year — nearly double the record 8.3 billion raised in 2007.

Already, two high-profile firms have pulled their IPOs, including Emaar MGF — a joint venture of Dubai’s Emaar, the world’s biggest property developer —- which abandoned its bid to raise 1.6 billion dollars, citing “indications of a US recession and global meltdown.”

The IPOs are key to expansion as much of the funds raised would be invested in plant and machinery, and improvements in India’s dilapidated infrastructure such as its potholed roads, shabby ports and unreliable power.

Economists as major growth constraints routinely cite lengthy blackouts even in big metropolitan centres such as New Delhi.

While India’s economy is better insulated than many other Asian nations from the global slowdown because it is not so heavily dependent on exports, it is not immune to the chill financial headwinds, analysts say.

A lot of economic growth has been driven by risk capital, especially from the United States, which is slowing as foreign investors repatriate funds amid fears of a US recession, said Religare’s Chakraborty.

For the time being, the government and central bank are making checking inflation their priority.

The central bank and the government are “signalling the risk to inflation is a bigger worry than the risk to growth,” said JP Morgan analyst Rajeev Malik.

Soaring world commodity and crude oil prices have alarmed the central bank while the government sees cutting inflation as crucial to its political fate, analysts say.

Inflation has been blamed as a key factor in several state poll drubbings for Congress, which owes its 2004 general election win to support from India’s poor masses — hardest hit by price rises.

Prime Minister Manmohan Singh last month called inflation “the cruellest tax” as it hits the poor the hardest. afp

Daily Times - Leading News Resource of Pakistan

India just needs to diversify its service sector and growth rate will climb back
up. the reason for this is because american economy is slowing down.

 

[Energon]

India just needs to diversify its service sector and growth rate will climb back
up. the reason for this is because american economy is slowing down.

Or that they need to make heavy investments into it's own infrastructure and development to cash in on the internal market and human potential.

 

[araz]

India like us is a developing nation. It will have its own teething problems, which need to be sorted out.it may have implications on its development but not enough to hamper it too significantly. There is a lot that we can learn from the Indian and Chinese experience as we really have the potential to grow at the same rate and more if we play the right cards. This is not about getting into a war with anybody else but analyzing the situation and making maximum use of the knowledge that we gain from their experiece.
Araz

 

[SPI]

Or that they need to make heavy investments into it's own infrastructure and development to cash in on the internal market and human potential.

i a agree with. If today india had an infratructure like the united states, India would be unstopeable, even china could not compet (my opinion)