Tuesday, February 1, 2011

India at Davos: Story of Corruption and Governance Deficit

Brand India has lost its luster at Davos in 2011!

Poor governance and corruption are endemic in India, and have been the talk of the town at Davos this year, tarnishing the meticulously crafted image of "Shining India" at the World Economic Forum since 2006. The immediate effect is that that India's foreign direct investment (FDI) is already down by a whopping 36% in 2010 from 2009, and there is no recovery in sight yet. Meanwhile India's current account deficit is exploding, accounting for about 3.5% of GDP.

In 2006, the "India Everywhere" campaign orchestrated by Indian planning commission officials and the Confederation of Indian Industry (CII) dominated the ambiance of the World Economic Forum at Davos, Switzerland. They spent two years and more than $4 million and put together an elaborate marketing and PR campaign to ensure that the "India story" got prominent play and did not get drowned in the noise at Davos. The success of the initiative was apparent by the dramatic increase in FDI inflow to India which doubled from less than 1% of GDP to nearly 2% of the expanded GDP in 2008.

Here is how Times of India reported the scene from Switzerland in 2006:

For once, India is really everywhere at Davos. With the 35th World Economic Forum (WEF) opening at the Swiss mountain resort, one cannot help but notice India Everywhere.

Right from the moment you step off the aircraft at Zurich airport, big hoardings proclaiming India greet you. Upon reaching Davos, located about 150 km from Zurich, the Indian colours are just about everywhere.

In fact, you see more of India than Switzerland in Davos this year.

The buses wear Indian colours, the bus shelters have Indian advertisements, and key bars, pubs and hotels in the city where the economic meet began Wednesday evening are serving up Indian snacks and Indian wines and beer.

Reports from the World Economic Forum at Davos in 2011 offer a very different narrative.

Coming after the massive multi-billion dollar telecom corruption scandal in 2010 and expression of deep concern by some prominient India businessmen about the nation's governance deficit in 2011, India's presence at the World Economic Forum 2011 was decidedly lower key when compared with the heady days of 2006.

Summing up the sentiment at Davos, an Indian journalist opined as follows: "..such a forthright disregard for the so-called "India story" may understandably offend nationalist sentiments and bring on the "west versus rest" polarization that keeps many public intellectuals in business. But the harsh truth is that India has been sold, resold and re-re-sold in so many samosa and Sula evenings that it has lost novelty."

Here's a video clip on India's massive corruption:

Related Link:

Haq's Musings

Indian Economy: Hard or Soft Landing in 2011?

Pakistani Economist Saadia Zahidi at World Economic Forum

Inaction Against Corruption in South Asia

2G Corruption Scandal in India

Musharraf at Davos 2008

Imran Khan at Davos 2011

Delhi in Davos: How India Built its Brand at the World Economic Forum

FDI India, Pakistan, China and Vietnam 2003-2010

China's Trade and Investment in South Asia

India and Pakistan at Davos 2009

India's Twin Deficits

Pakistan's Economy 2008-2010

Inflation Hits India

Goldman Sachs India Warning on Twin Deficits

India's Nov 2010 Imports, Exports


Anonymous said...

riaz jee
Davos 2011 was a crisis sumit!In case you didn't notice.
Not ONE single country was feted at the summit.

We don't need to do another blitz at davos because
1.The time isn't right world economy wise
2.India is already perceived as a major player and a future power by the people that matter.

Riaz Haq said...

Here's a piece by Prabhu Chawla of the Indian Express on India at Davos 2011:

... the ‘event managers’ of the India show were late by three years as nobody in the famous Alpine ski resort today has the patience to hear the old “India Story” that drew applause till 2008 — to the strains of Bollywood music in Zurich — and the line “India Everywhere.” In retrospect, the Indian extravaganza at Davos seems as pretentious as the throng of Kolkata’s dubious book lovers. By 2009, attendance began falling in India-related events at Davos. In that year not even 20 guests attended an Indian IT czar’s evening session. India in 2011 is a disaster story, with Foreign Direct Investment (FDI) contracting by a stunning 31 per cent in a single year — from $34.6 billion in 2009 to $23.7 billion. On the other hand, FDI to Singapore, a country one-fifth the size of the National Capital Region of Delhi, has grown by 122 per cent in 2010—an astounding $37 billion. What is rising is the flight of Indian-owned capital from India: estimated an astonishing $75 billion in the first decade of the millennium, according to a Columbia University study. Against this backdrop, the question that needs to be asked is: Why must the government spend millions of tax rupees to fly its flag at the Alpine jamboree? What object do the evening parties at Davos serve, attended by the same people who usually meet in Mumbai and Delhi for the same purpose — whining and dining.

When put in the China-context, the India story looks even grimmer. The dragon slalomed past the tiger in Davos 2011. China did not have to announce its presence from a restaurant corner, offering samosas as fondue; its aura was felt everywhere. The China-focused sessions spoke more about what China could do for the world than about itself, or its potential. There was no China hoarding visible anywhere. Their delegates numbered just over 20. But hardly a session went without a Chinese face on the podium, or a deferential mention of the country in the proceedings. It was ironic when Min Zhu, a Chinese special adviser to the IMF, not only stole the show in a discussion on India — addressed among others by Chidambaram and ICICI Bank chief Kochhar — but also advised Indians quite magisterially on how serious they ought to get on the inflation problem.
There were plenty more reasons for India to keep a muted profile at Davos 2011. The country has just clocked a current account deficit of $15.8 billion in July-September 2010 — a bewildering 72 per cent increase on the previous year’s $7.26 billion....

Rahul said...

Why do you compare with China. Compare with your own country. What were the comments on Pakistan in Davos. Can you enumerate....

Riaz Haq said...

Rahul: "Why do you compare with China. Compare with your own country. What were the comments on Pakistan in Davos. Can you enumerate.... "

Unlike India with its expensive "India Everywhere" and "India Shining" campaigns, Pakistanis have never paid much attention to World Economic Forum. Nor has China. While India sends hundreds of people to court attendees at WEF, China sends only about a dozen, and Pakistan sends even fewer.

AFAIK, the only Pakistanis who attended WEF at Davos this year are Imran Khan, the cricketer turned politician-philanthropist and Saadia Zahidi, a Pakistani economist.

Imran was there at the invitation of Davos organizers to speak, and Saadia is a director at WEF leading its gender parity program.

Rahul said...

If Pakistan is not sending its delegates to WEF then its doing a pretty big mistake.(But thinking about, that what it will say about itself) As for China's presence you might have missed the news. China was very much there and was trying to attract foriegn investment. because its not illeterate like Pakistanis not to attend WEF

Riaz Haq said...

Rahul: "As for China's presence you might have missed the news."

Read the following from Indian Express on the Chinese team of less than 20, vs hundreds from India:

"When put in the China-context, the India story looks even grimmer. The dragon slalomed past the tiger in Davos 2011. China did not have to announce its presence from a restaurant corner, offering samosas as fondue; its aura was felt everywhere. The China-focused sessions spoke more about what China could do for the world than about itself, or its potential. There was no China hoarding visible anywhere. Their delegates numbered just over 20. But hardly a session went without a Chinese face on the podium, or a deferential mention of the country in the proceedings. It was ironic when Min Zhu, a Chinese special adviser to the IMF, not only stole the show in a discussion on India — addressed among others by Chidambaram and ICICI Bank chief Kochhar — but also advised Indians quite magisterially on how serious they ought to get on the inflation problem."

Rahul: "If Pakistan is not sending its delegates to WEF then its doing a pretty big mistake."

Without much effort at WEF, Pakistan did pretty well in attracting FDI at higher levels than India as perecent of GDP, until the current political, economic and security crisis started in 2008.

Example: While India got FDI at only 1.7% of its GDP, Pakistan got FDI of 2.8% of its GDP in 2007.

It's a miracle that Pakistan still get over $2 billion in FDI and FII in spite of all its current problems.

And Vietnam does little hype at WEF to consistently get FDI of more than 20% of its GDP.

Read the following:


sohail Khan said...

This is a good post because now truth is coming out for India. All the media people make Pakistan look bad and they don't know India is more corrupt and democracy is fraud. one day everyone will know the truth about India becuase it is the main sponsor of troble in Pakistan and also the world.

Riazbhai i also called Templeton about Karachi stock but they charge 5% and no garantee. They can also use my money to invest in India which i dont like. Maybe it is secret.

Please tell me how you made so much money in Karachi stock. I cant find info in newspaper or internet. Maybe all the Indian media dont want money going to Pakistan because then more money will go to India!
Please put info on your webpage about Karachi stock. Thank you very much.

Anonymous said...

Cherry picking news articles seems to make you happy.
Actually its getting a bit boring.Davos or no Davos PAkistan is currently in a lost decade with NEGATIVE percapita income growth since 2008.

India is now the world's 10th largest economy (nominal) and will be 3rd or 4th largest by 2020.

Unfortunately there is pecious little your blogging can do to these facts on the ground.

Incidentally Riaz our merchandize exports will increase 35% this year even though FDI has fallen which means that our domestic industry like Japan/South Korea DOES NOT NEED FDI to export.

We CONCIOUSLY protect our domestic industry by LIMITING FDI which is why we have TATA ,Larsen and Toubro,MAhindra,CG,Thermax etc etc and you don't.

Riaz Haq said...

Anon: "We CONCIOUSLY protect our domestic industry by LIMITING FDI which is why we have TATA ,Larsen and Toubro,MAhindra,CG,Thermax etc etc and you don't."

Unlike China or Pakistan, India's economy depends heavily on FDI and FII to fund its growing trade deficit and overall current account deficit.

India's current account deficit is being increasingly funded by short-term capital inflows (FII) rather than more durable foreign direct investment (FDI), posing a risk to external balance and funding of gap, according to a recent warning by Goldman Sachs. "Nearly 80 per cent of the capital inflows are non- FDI related. Given the excess spare capacity globally, FDI may remain weak going forward," the Goldman note said.

Riaz Haq said...

SK: "Please tell me how you made so much money in Karachi stock. I cant find info in newspaper or internet. Maybe all the Indian media dont want money going to Pakistan because then more money will go to India!
Please put info on your webpage about Karachi stock."

First, let me dispel the notion that I have made a lot of money in stocks in Karachi or anywhere else.

Second, I don't think there are any pure-play mutual funds or ETFs for Pakistan yet, but I have heard of plans for launch of such products this year.

Anonymous said...

Pakistan doesn't have a CAD because its economy is in a coma.

For eg if PAkistan seriously thinks of addressing its power shortfall it must import coal fired plants worth atleast 20-30 billion from China.

But its economy is so paralyzed that the economy is on a per capita basis contracting for the past 3 years and looks set to continue to do so this year.

India on the other hand doesn't really need to worry exports growth>>Import growth for past 4 months so CAD should stablize somewhere this year at below 3% GDP.

Riaz Haq said...

India's corporate mafia is fuelling corruption, says Prashant Bhushan, according to newKerala.com:

"The corporate mafia has come to control every institution of power and governance, be it politicians, bureaucracy, police and, to an extent, judiciary also," Bhushan told IANS in an exclusive interview.

"The corporate houses have become monstrously large and a law unto themselves. They get the law and policies made and decision taken including judicial decisions," he said, adding "very often they decide what the media will report or not report".

Bhushan, the son of eminent jurist and former law minister Shanti Bhushan, said any fight against corruption and for redeeming democratic institutions had to commence with transparency.

"The situation today is much worse than what it was in the early 1970s. At that time we did not have the corporate mafia controlling all the institutions. That was a situation when a powerful prime minister temporarily choked off democracy. Today, this corporate mafia is accountable and more dangerous," Bhushan asserted.

"This system is so bad. There is no point in preserving the illusion of functional democracy when it is clear that most institutions of democracy have crumbled or are non-functional. We need to restore proper democracy in the country and not preserve an illusion of democracy."

The lawyer said the only prescription for rescuing Indian governance from "corporate mafia" was "transparency" and people's right to know about the functioning of the state apparatus.

"Unless we wake up and start engaging in public issues and affairs, we are heading towards disaster," said Bhushan, who is facing contempt of court proceedings for highlighting the alleged misconduct of an apex court judge.

It was Bhushan who convinced the Supreme Court to monitor the Central Bureau of Investigation (CBI) probe into the allocation of 2G airwaves to telecom companies. He also spoke on his fight against corruption and allegations against Central Vigilance Commissioner (CVC) P.J. Thomas.

He said India was in a "very serious situation" and the "biggest threat was corruption that had spread in every vital sphere of the state's functioning".

The crumbling democratic institutions could be "repaired and restored" provided there was a "very strong people's movement in the country that would bring pressure on the institutions".

"Though the judiciary can play a useful role in that process", in the final count it needed the backing of a strong people's movement, he said.
"I think all problems have to be dealt with simultaneously. You cannot shut your eye to a problem in one institution in order to highlight it in another institution. This is a shortsighted policy which does not pay in the long run," he said.

Advocating an independent media, he said that the media should not be controlled by corporate houses or those who have a direct or indirect interest in other business.

Unknown said...

Lets see if you'll allow this or censor it -

A bird, a plane? No, it`s inflation

FIRST, the good news. The reforms package mooted by the PML-N and to be `implemented` by a bipartisan committee has some good stuff in it.

Now to the bad news: even if implemented fully, something only the chronically delusional could hope for, the reforms package doesn`t even begin to address the immediate, and far more dangerous, economic threat.

Essentially, the government is in desperate need of money. Lots and lots and lots of money; perhaps as much as a trillion rupees in the year ahead.

(It`s simple math, really: the government spends twice as a much as it earns. For various complicated reasons, the spending side isn`t the fundamental problem — government spending of around 20 per cent of GDP is par for the course for a country with Pakistan`s economic profile. The revenue side is the main problem, hovering as it is around 10 per cent of GDP, putting us in the league of economic basket cases.)

Scan through what`s been mooted by the PML-N and the measures the bipartisan PPP-PML-N committee is supposed to debate, though, and there`s nothing meaningful about revenue generation.

Which means the government is still left with a VERY, VERY BIG PROBLEM: where will it find a trillion rupees?

Good ol` Zardari asked Obama for a bail-out, hoping to cash in on the ultimate moral hazard with Uncle Sam. Except it didn`t quite work: get real, Zardari was told, we`ll help you guys out when you guys get serious about reforms. So, tail between its legs, the government will end up pounding on the doors of Shahid Kardar. Print us some more money, it will demand of the State Bank, or else we`ll find someone who will.

But here`s the problem. In December 2009, a certain esoteric piece of data read Rs1.35 trillion. That, for simplicity`s sake, was pretty much the currency in circulation in the economy.

In December 2010, this figure had gone up to Rs1.6tr. Rumour has it that the State Bank may be pumping as much as Rs2bn a day into the economy at present.

Quick back-of-the-envelope calculations reveal the full horror of what is in store for Pakistan. Between the end of 2009 and the end of this year, the currency in circulation may well double. But the size of the economy won`t have grown by more than a smidgen.

Twice the money, the same amount of goods and services — figuring out the impact on prices isn`t very difficult.

Plan A is a bailout from the Americans or the IFIs. If Plan A doesn`t work, there`s Plan B: shell out patronage.

Not enough cash to feed the mouths at home? No problem, Benazir Income Support Programme to the rescue. A couple thousand bucks every other month, and don`t forget to vote for the party of Shaheed Mohtarma.

Next, you, your home got damaged in the floods? Lost your goat and sickly cow? Here, take a Watan Card. Twenty thousand cash down, eighty to come. Remember, Shaheed Mohtarma made it all possible. Including the eighty thousand that will come later…

Village needs a road? Here`s a few million for a shoddily built one, enough to drive wagons full of voters to the nearest polling booth come the next election. Gas connection? Local school? Irrigation project? Cheque, cheque and cheque.

Actually, to figure out the PPP`s road map to the next election, look no further than the Musharraf strategy in 2007-08. Subsidies ballooned as the prices of electricity, petrol and other commodities were frozen. `Project money` was thrown around willy-nilly, political expediency trumping economic sense.

But wait, wouldn`t throwing around even more money only compound the problem when too much spending and too little earning was the problem in the first place?

The future is another country. Right now, there are votes to be won.


Anonymous said...

A Lovely Piece

A worldwide survey was conducted by the! UN.

The only question asked was: "Would you please give your honest opinion about solutions to the food shortage in the rest of the world?"

The survey was a huge failure, In Africa they didn't know what 'food' meant, In India they didn't know what 'honest' meant,

In Europe they didn't know what 'shortage' meant, In China they didn't know what ' opinion' meant,

In the Middle East they didn't know what 'solution' meant, In South America they didn't know what 'please' meant,

And in the USA they didn't know what 'the rest of the world' meant!

Bhimsen said...

NEW DELHI: Buoyed by steady recovery in demand for technology services, the Indian IT-BPO sector is estimated to have grown 19% in 2010-11 to $76 billion in revenues, software industry lobby Nasscom said on Wednesday.

“Pent-up demand for IT-BPO services and return of discretionary spending in the market were the key drivers for the industry performance,” Nasscom president Som Mittal told reporters.

Exports continued to be the mainstay of the industry with revenues of $59 billion, growing at 18.7%. Domestic market, on the other hand, grew 16%, to aggregate rs 78,700 crore (about $17 billion).

For FY12, the software and services growth is expected to grow at 16-18% with $68-70 billion in revenues. The domestic market is estimated to grow by 15-17% with revenues of Rs 90,000-92,000 crore (about $19-20 billion).

Riaz, what about the private sector?

Mayraj said...

"Wipro Chairman Premji, who along with a number of eminent personalities had recently written an open letter on a "governance deficit", said they would focus on the "complete breakdown in public governance across the board".
"I am extremely disappointed. I think it is a national calamity and is personally very devastating because one had so much confidence when they (UPA-II) came in," he told television channels when asked whether the present government was "unable to deliver".

"We think it is important. We focus attention on the complete breakdown in public governance across the board, whether it is government, or businessmen, or traders...," he said.
"One has reached a point in public governance where one has to take stock... Enough is enough, we have to reform ourselves. If we don't do that, we are not going to leave children behind us proud of the country, despite 8-9 per cent (economic) growth."

Enough is enough, have to reform: Premji on governance deficit

Riaz Haq said...

Mayraj: "Wipro Chairman Premji, who along with a number of eminent personalities had recently written an open letter on a "governance deficit", said they would focus on the "complete breakdown in public governance across the board".

Azim Premji stands alone in the midst of corrupt and rapacious Indian business and government leaders.

Unlike Ambanis and Tatas, Premji has already given a billion dollars for philanthropy, and he has criticized Indian government on rampant corruption and increasing governance deficit.

But he is a lone voice drowned out by the loud noise of the "India Shining" crowd.

Anonymous said...

Thank you for highlighting the corruption in India. The article by The Conservative BJP leaning Indian Express author is more aimed at the current Congress government. I doubt however that it is your intention to rectify the current level of corruptio that exists.
Your target is to make
Pakistanis feel better by presenting selected issues that serve your purpose

Mohammad said...

Is India in coma? asks Mohan Murti in an Op ED the Hindu:

A few days ago I was in a panel discussion on mergers and acquisitions in Frankfurt, Germany, organised by Euroforum and The Handelsblatt, one of the most prestigious newspapers in German-speaking Europe.

The other panellists were senior officials of two of the largest carmakers and two top insurance companies — all German multinationals operating in India.

European disquiet

Questions ranged from “Is your nation in a coma?”, the corruption in judiciary, the possible impeachment of a judge, the 2G scam and to the money parked illegally in tax havens.

It is a fact that the problem of corruption in India has assumed enormous and embarrassing proportions in recent years, although it has been with us for decades. The questions and the debate that followed in the panel discussion was indicative of the European disquiet. At the end of the Q&A session, I surmised Europeans perceive India to be at one of those junctures where tripping over the precipice cannot be ruled out.
In a popular prime-time television discussion in Germany, the panellist, a member of the German Parliament quoting a blog said: “If all the scams of the last five years are added up, they are likely to rival and exceed the British colonial loot of India of about a trillion dollars.”
One German business daily which wrote an editorial on India said: “India is becoming a Banana Republic instead of being an economic superpower. To get the cut motion designated out, assurances are made to political allays. Special treatment is promised at the expense of the people. So, Ms Mayawati who is Chief Minister of the most densely inhabited state, is calmed when an intelligence agency probe is scrapped. The multi-million dollars fodder scam by another former chief minister wielding enormous power is put in cold storage. Prime Minister Manmohan Singh chairs over this kind of unparalleled loot.”

An article in a French newspaper titled “Playing the Game, Indian Style” wrote: “Investigations into the shadowy financial deals of the Indian cricket league have revealed a web of transactions across tax havens like Switzerland, the Virgin Islands, Mauritius and Cyprus.” In the same article, the name of one Hassan Ali of Pune is mentioned as operating with his wife a one-billion-dollar illegal Swiss account with “sanction of the Indian regime”.

A third story narrated in the damaging article is that of the former chief minister of Jharkhand, Madhu Koda, who was reported to have funds in various tax havens that were partly used to buy mines in Liberia. “Unfortunately, the Indian public do not know the status of that enquiry,” the article concluded.

“In the nastiest business scam in Indian records (Satyam) the government adroitly covered up the political aspects of the swindle — predominantly involving real estate,” wrote an Austrian newspaper. “If the Indian Prime Minister knows nothing about these scandals, he is ignorant of ground realities and does not deserve to be Prime Minister. If he does, is he a collaborator in crime?”

The Telegraph of the UK reported the 2G scam saying: “Naturally, India's elephantine legal system will ensure culpability, is delayed.”

Blinded by wealth

This seems true. In the European mind, caricature of a typical Indian encompasses qualities of falsification, telling lies, being fraudulent, dishonest, corrupt, arrogant, boastful, speaking loudly and bothering others in public places or, while travelling, swindling when the slightest of opportunity arises and spreading rumours about others. The list is truly incessant.
Europeans believe that Indian leaders in politics and business are so blissfully blinded by the new, sometimes ill-gotten, wealth and deceit that they are living in defiance, insolence and denial to comprehend that the day will come, sooner than later, when the have-nots would hit the streets..

Riaz Haq said...

India's prime minister has warned that the country's rapid economic growth is under "serious threat" from inflation, according to the BBC:

Manmohan Singh said getting inflation under control was a matter of urgency, raising the prospect of an eighth interest rate rise in under 12 months.

Emerging markets like India, where GDP growth is running at 8.5%, are helping to drive global economic recovery.

But Mr Singh said India's inflation rate of 8.4% - and food price inflation of 17% - was unsustainable.

"Inflation poses a serious threat to the growth momentum. Whatever be the cause, the fact remains that inflation is something which needs to be tackled with great urgency," he said.

Analysts believe that surging food and oil prices mean that India's central bank may have to raise interest rates before its next policy meeting, which is scheduled for 17 March.

India's stock market has fallen this year on fears that high inflation will scare off foreign investors.

Wages in India are also rising as workers demand pay that keeps up with the cost of living.

Anonymous said...

RBI knows its stuff!

I think a throttling back of growth by 1-2% points for 1 year is perfectly acceptable after all even china's growth is now 9% down from 12% and likely to decrease further by 1-2% points this year.

Anonymous said...

Actually the situation is complicated inflation in India is rising so much partly because 70% of the inflation index is food related and food prices have been rising globally thanks to erratic weather in russia and australia thanks to la nina..
non food inflation is actually not that bad indicating that the economy is not per se over heating
and thus higher interest rates may be counter productive.

Still given its record one should give RBI the benefit of the doubt.

Riaz Haq said...

Anon: "Actually the situation is complicated inflation in India is rising so much partly because 70% of the inflation index is food related and food prices have been rising globally "

Yes, it is hard to fight food and fuel inflation...particularly fuel because India has to import it and its price depends on global suply-demand situation.

And RBI's monetary policy alone is not enough; it'll take a combination of monetary and fiscal discipline whch is lacking in India due to large and growing budget deficit and curret account deficit.

Anonymous said...

And RBI's monetary policy alone is not enough; it'll take a combination of monetary and fiscal discipline whch is lacking in India due to large and growing budget deficit and curret account deficit.

How ?
current account deficit /surplus has zero impact on inflation in any country.Neither does budget defecit infact if anything a large budget deficit causes deflation as governments borrow money from financial markets and institutioanl lenders to make up the shortfall thus taking liquidity out of the market.

Fundamentally even with food inflation indian food prices are low on an absolute $/tonne relative to the rest of the world on most food items.

The problem is due to growth demand for food is increasing far in excess of farm output due to economic growth. This currently cannot be adjusted with imports as external prices of food is much higher than indian prices.

So my prediction is food inflation will continue till indian prices are nearly at par with world prices after which it will plateau out and rise/fall with world prices.

Riaz Haq said...

Anon: "How ?
current account deficit /surplus has zero impact on inflation in any country.Neither does budget defecit infact if anything a large budget deficit causes deflation as governments borrow money from financial markets and institutioanl lenders to make up the shortfall thus taking liquidity out of the market"

All spending, public or private, is stimulative, which stimulates aggregate demand that causes inflation.

If the RBI jacks up interest rates to cool private borrowing and spending, and the governmemt continues its spending spree, the two will cancel each other, the economy will not slow, nor will inflation come down.

Riaz Haq said...

FII inflows (aka hot money) into Indian stock markets surged 66% from $17.4 billion in 2009 to $29 billlion in 2010, according to The Hindu newspaper:

Mumbai, Dec. 31 Year 2010 saw foreign institutional investors buy Indian stocks for $29 billion net. This is the most that they have pumped into the Indian market in a single year despite the market-indices here being fairly range-bound during this period.

This is also much more than the inflows ($17.6 billion) seen in 2007, when the Sensex was on a gaining streak.

The markets did surge a little in 2009, too, when FIIs were net buyers for a total of $17.45 billion.

Domestic institutions, on the other hand, were net sellers of equities for Rs 19,503 crore in calendar 2010.

FIIs were also net buyers in equities in all months this calendar, except in January and May. August saw the highest net purchases in a single month this year for $13 billion.

On a year-to-date-basis, the Sensex and the Nifty returned 15 per cent and 16 per cent, respectively.

It was this relentless buying from the FIIs that pushed up the Indian markets in 2010.

Though the Sensex did reach an all-time high this year, it was quite range-bound. The benchmark has been trading between 17,000 points and 21,000 points right through 2010.


The buying spree on the part of FIIs slowed down in the last month amidst all the scams and the routine FII year-end exits when they need to pay their investors. Their net purchases during December has so far amounted to $0.3 billion only.

“Part of this pullback is because India is perceived to be overvalued vis-a-vis other emerging markets.

“Indian markets have enjoyed around a 30 per cent premium to the other emerging markets. But what has happened this year is that the scams have made FIIs start to question the rich valuations here,” said Mr Saurabh Mukherjea, Head of Equity at Ambit Capital. He added that the next year might see a moderation in FII inflows into the country.

Domestic institutions were net buyers of equity during December and November after being net sellers for five consecutive weeks. Mr Mukherjea said that insurance companies have been seeing inflows trickling in during December and that the fund houses here are also in “slightly better health”.

Mr K. Ramanathan, Chief Investment Officer at ING Investment Management, said that mutual funds faced a lot of redemptions this year and they did not get much incremental net inflows.

“The changes in the regulatory framework too hurt the mutual fund industry. Distributors find it better to sell insurance products as the brokerage there is better than from distribution of mutual funds,” he added.


Bhimsen said...

Economics 101:
There are many causes for inflation, depending on a number of factors. For example, inflation can happen when governments print an excess of money to deal with a crisis. As a result, prices end up rising at an extremely high speed to keep up with the currency surplus. This is called the demand-pull, in which prices are forced upwards because of a high demand.

Another common cause of inflation is a rise in production costs, which leads to an increase in the price of the final product. For example, if raw materials increase in price, this leads to the cost of production increasing, which in turn leads to the company increasing prices to maintain steady profits.
Increased government spending and the resulting higher deficit DOES NOT directly cause inflation unless additional liquidity is injected into the economy by printing money. Too much money chasing fewer goods and services. If the government simply BORROWS money or raises money via BONDS it will not cause inflation - but it may impact future growth!

Anonymous said...

It is very similar to sponsoring an trade show event in Las Vegas. The confederation of Indian Industry decided to sponsor the entire event promoting many aspects of the Indian private sector in 2006.
Once you get the necessary exposure, the various industries count on the multiplier effect which my company got before we sold it to Wipro.

The event was sponsored by the private industry and not the government.

Anonymous said...

Yes, it is hard to fight food and fuel inflation...particularly fuel because India has to import it and its price depends on global suply-demand situation.

not really fuel prices in india are administered and something like 50% of retail prices are due to taxes.

Therefore subsidizing fuel is operationally simple cut taxes to balance out high feed stock prices and direct subsidies to downstream compoanies who import oil

Food inflation on the other hand is more complicated....

Riaz Haq said...

Anon: "not really fuel prices in india are administered and something like 50% of retail prices are due to taxes."

Reducing or removing fuel taxes will make India's budget deficit (already at 5% of GDP) a lot worse, forcing the govt to borrow even more than its is already.

Anonymous said...

Reducing or removing fuel taxes will make India's budget deficit (already at 5% of GDP) a lot worse, forcing the govt to borrow even more than its is already.


tax is a percent of feedstock price say oil is @50/barrel and u tax 20% u get $10

If feedstock is at $100 and u cut tax to 10% u still get $10.

The sensitivity of retail petrol to crude price is not 1:1.

bhimsen said...

After reading some of your previous "musings" I have made some conclusions.

In general you tend to have a bias against India which prevents you from an accurate analysis. The topics you choose are contrived to appease Pakistanis who are ready or waiting for any "ills" of India they can get their hands on.

You accuse a number of magazines of bias reporting but, yet you continue to do the same.
Your investment ideas are often misleading (KSE article) to people you are trying to appease (Sohail, eg).
I understand that you may be trying to "help" Pakistanis by making them feel better by highlighting the ills (and there are many) of India. However, you often propagandize such information at the expense of misleading them.
India has myriad of problems no doubt and any attempt to solve them begins by thoroughly understanding them.
The same goes for Pakistan.

Care to respond?

Riaz Haq said...

Bhimsen: "In general you tend to have a bias against India which prevents you from an accurate analysis"

The fact is that your reading is selective, and you are easily offended when I criticize India based on published data and sources that I cite, but you readily accept all of my frequent criticisms of Pakistani leadership for their corruption, incompetence, poor governance, etc.

And I bet you also think that all of the analysis and reports of the organizations such as UNICEF, UNDP, WHO, IFPRI, OPHI, British intermational aid dept, India's Planning Commission,etc. also have a bias against India for finding that Indians are poorer, hungrier and sicker than Pakistanis and even some of the sub-Saharan African nations.

Bhimsen: "Your investment ideas are often misleading (KSE article) to people you are trying to appease (Sohail, eg)."

I do not offer any investment ideas or advice to anyone; I simply offer publicly-availabl data that shows that the KSE has outperformed BSE over the last one year, five years and ten years.

There is no need or reason for me to appease anyone.

Riaz Haq said...

Thousands of Indian illegal immigrants are slipping into Texas from Mexico, according to LA Times:

Reporting from Harlingen, Texas — Thousands of immigrants from India have crossed into the United States illegally at the southern tip of Texas in the last year, part of a mysterious and rapidly growing human-smuggling pipeline that is backing up court dockets, filling detention centers and triggering investigations.

The immigrants, mostly young men from poor villages, say they are fleeing religious and political persecution. More than 1,600 Indians have been caught since the influx began here early last year, while an undetermined number, perhaps thousands, are believed to have sneaked through undetected, according to U.S. border authorities.

Hundreds have been released on their own recognizance or after posting bond. They catch buses or go to local Indian-run motels before flying north for the final leg of their months-long journeys.

"It was long … dangerous, very dangerous," said one young man wearing a turban outside the bus station in the Rio Grande Valley town of Harlingen.

The Indian migration in some ways mirrors the journeys of previous waves of immigrants from far-flung places, such as China and Brazil, who have illegally crossed the U.S. border here. But the suddenness and still-undetermined cause of the Indian migration baffles many border authorities and judges.

The trend has caught the attention of anti-terrorism officials because of the pipeline's efficiency in delivering to America's doorstep large numbers of people from a troubled region. Authorities interview the immigrants, most of whom arrive with no documents, to ensure that people from neighboring Pakistan or Middle Eastern countries are not slipping through.

There is no evidence that terrorists are using the smuggling pipeline, FBI and Department of Homeland Security officials said.

The influx shows signs of accelerating: About 650 Indians were arrested in southern Texas in the last three months of 2010 alone. Indians are now the largest group of immigrants other than Latin Americans being caught at the Southwest border.

Riaz Haq said...

Hot money inflows now account for 58% of India's forex reserves, reports The Financial Express:

The ratio of volatile capital flows—defined to include cumulative portfolio inflows and short-term debt—to the country’s forex reserves increased to 58.1% in March 2010 compared to last year’s 47.9%.

According to the Reserve Bank of India (RBI), the ratio of short-term debt to the foreign exchange reserves declined from 146.5% in March 1991 to 12.5% in March 2005, but increased slightly to 12.9% in 2006.

However, with expansion in the coverage of short-term debt, the ratio increased to 14.8% in March 2008, to 17.2% in March 2009 and 18.8% in March 2010.

The country’s foreign currency assets are invested in multi-currency, multi-asset portfolios as per the existing norms which are similar to the best international practices followed in this regard. At end of March 2010, out of the total foreign currency assets of $ 254.7 billion, $ 132.1 billion was invested in securities, $ 117.5 billion was deposited with other central banks, BIS and the International Monetary Funds (IMF) and $ 5.1 billion was placed with the External Asset Managers (EAMs).

A small portion of the reserves has been assigned to the EAMs with the main objective of gaining access to and deriving benefits from their expertise and market research, said RBI.

The rate of earnings on foreign currency assets and gold, after accounting for depreciation, decreased from 4.82% in July 2007-June 2008 to 4.16% in July 2008-June 2009.

The RBI held 557.75 tonne of gold forming about 6.0%of the total foreign exchange reserves in value terms as at the end of March 2010.

Of these, 265.49 tonne are held abroad (65.49 tonne since 1991 and further 200 tonne since November 2009) in deposits / safe custody with the Bank of England and the Bank for International Settlements.

In November 2009, the RBI concluded the purchase of 200 metric tonne of gold from the IMF, under the IMF’s limited gold sales programme. The purchase was an official sector transaction and was executed over a two week period during October 19-30, 2009 at market-based prices. As a result of this purchase, the RBI’s gold holdings have increased from 357.75 tonne to 557.75 tonne.

Following the commitment made by India as part of the G-20 framework, the RBI has agreed to purchase SDR denominated notes from IMF up to $10 billion. As on March 31, 2010, $317.9 million was invested in notes of the IMF.

International Monetary Fund designated India as a creditor under its Financial Transaction Plan (FTP) in February 2003. During April 2009 to March 2010, SDR 130 million was made available to Romania, SDR 50 million to Sri Lanka and SDR 117.93 million to Belarus.

The total purchase transactions amounted to SDR 1194.16 million as at the end March 2010. India was included in repurchase transactions of the FTP since November 2005. There were no repurchase transactions during the half year ended March 2010.

The traditional trade-based indicator of reserve adequacy- import cover of reserves- which fell to a low of three weeks of imports at end-December 1990 reached a peak of 16.9 months of imports at the end of March 2004. At the end of March 2010, the import cover stands at 11.2 months.

Anonymous said...


Riaz basically what you are saying if every single dollar of hot money is repatriated today India will still have around $120 billion out of its $300 billion FX pile to finance its CAD at current rates for 3 years assuming not one additional cent comes in way of FII/FDI for the next 3 years.

I think that's a good thing.

Riaz Haq said...

Anon: "India will still have around $120 billion out of its $300 billion FX pile to finance its CAD at current rates for 3 years assuming not one additional cent comes in way of FII/FDI for the next 3 years."

You are assuming that nothing else is affected by it. But that's not how economies work.

First, $120 billion is only enough for just four months of imports for India, an alarming indicator for any nation's balance of payments situation, and its ability to produce goods and services for domestic consumption and exports.

Second, , it'll significantly cut India's economic growth rates which result from significant FII and FDI.

Third, sudden withdrawal of hot money will cause a major Indian stock market crash that can easily destroy overal economic confidence and bring down the rest of the Indian economy dramatically...similar to what happened in the late 1920s depression in America.

Anonymous said...

A sudden withdrawl of all FII from any economy on the planet will wreck it.
That's hardly news.

The point is sudden withdrawls of large amounts usually happen in economies with tiny FX reserves and artificially manipulated exchange rates as the arbitrage opportunities is kind of obvious.

In India on the other hand the RBI doesn't artificially peg the currency to any other aka Yuan to USD.So the rupee is more or less trading at fair value.
In addition the FX pile means the Rupee won't collapse if there is a sudden reversal of flows of FII like 2009 so I think cautious optimism in in order...

Anonymous said...

Riaz ji

You are very worried about India's FII investments and that they pose a threat to our stability

Actually it is a problem of plenty

We dont want excessive investments .Our Rupee is stable at 46 to a USD

The Global volume of FII capital
which runs into a few trillions NEEDS India

FIIs have to invest somewhere They are looking for attractive places like India and China

India's domestic economy is very strong and the 8.5 % growth will continue

Since FII s look out for attractive places with high growth they will keep coming to India

Riaz Haq said...

Anon: "Since FII s look out for attractive places with high growth they will keep coming to India"

If India is so attractive, why are Indians net sellers?

Domestic institutions were net sellers of equities for Rs 19,503 crore in calendar 2010, according to the Hindu Business.

And why has Sensex been range-bound. The benchmark has been trading between 17,000 points and 21,000 points right through 2010?

Anonymous said...

Riaz ji

You have just said that The sensex is range bound .That is true .It will stay around 18500 for a year because of Inflation

Inflation creates savings oppurtunity because the interest rates become high

Since inflation is high at present ALL Commercial banks in India are offering interest of 9.5 % PA on fixed deposits

Even NRIs are investing in Bank deposits

Since Bank deposits are safe middle class is liquidating their Mutual Funds investments and putting it in Bank deposits

But the gross domestic capital formation ie INVESTMENT in the
economy is high at 39 % of the GDP

Since the Foreign Investment is still coming in good quantities the Forex reserves are high

Similarly the Exports are doing well. 215 Billion this year

Then there are Remittances ,Tourism Earnings ,Services exports like IT

SO this year Current Account Deficit will be 3.5 % which is manageable

Our Fiscal deficit is High BUT the very strong Domestic Economy can Absorb it

The food and fuel inflation will NOT stop our Growth of 8.5 %

As our PM recently Inflation has risen because Purchasing Power And Incomes have gone up

Ashmit (India) said...

if you attempting to challenge the indian growth story...the arguments put forth are credible and have the backing of a large section of economists, the world over. BUT, certainly not if you wanna play out a tale about how/if Pakistan is faring better.
Why do you choose to demean your own arguments by clubbing it togethr with how pakistan's growth. in the context of the the pakistani economy, india already appears to be a superpower...
KSE vs BSE...really?! the KSe has a ridiculously puny market cap of 35 billion USD. Reliance Industries alone has a market cap that is 3-4 times the cap of the whole of KSE. BSE's market cap is 1.6 TRILLION USD. How do you even compare the two?
As for range bound movement in the BSE...number of factors are responsible...but i'll have you know that indian equities trade at a premium to most other markets...and there's a strong reason for that - GROWTH ENGINE.
Indian estimate for GDP growth in FY 10-11 is 8.6%. Correct me if i'm wrong, but pakistan has managed a "stellar" performance of about 2-3 percent (http://www.dailytimes.com.pk/default.asp?page=2011%5C02%5C03%5Cstory_3-2-2011_pg5_1).
As for FDI, again the quantum Mr. Haq, makes a difference. If i'm not wrong, despite FDI decreasing India attracted 18 times more FDi than Pakistan in 1st half of FY11.
Pakistan itself has slipped interms of FDi inflow by over 15% (http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/Business/15-Jan-2011/FDI-down-155pc-during-1HFY11)

And as for the link you had posted about FDI as a percent of GDP - the same chart shows FDI as percent of fixed investment. You had chosen 2007 as the year to project the gap b/w pak and ind in terms of FDI as percent of GDP. well the same year stats show that pak needed FDI for 12.7% of gross fixed investment as opposed to india's 5.2%. So...really, who needs it more?
(as for your arguments about the deficit...india's middle class and expected govt spending on infra is expected to attract a lot of attention...so we appreciate your concerns, but we couldn't care less about your pessimistic views...this even as Blackstone Group appears to be confindet of the indian growth story and about the inflow of funds in the indian secondary markets).
On yeah...inflation was another concern that you pointed out. pakistain inflation in the last three calendar years has been swinging wildly betweeen 25% (oct 2008) and 8.9% (oct 2009), managing to stay in double digits throughout 2010 (http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=PKR). And while the RBI action are showing some results in India (inflation has stayed within single digits since aug 2010) pakistan's inflation is picking up upward momentum since the same point - aug 2010. Pakistan's economy can definetly do better with more of your wisdom. I'll stick to slightly more credible names such as Blackstone Group . Hows that??
as for corruption, according to the latest rankings by transperency international (another credible name) india sits at an embarrasing 74. Take a guess at the honorable position that pakistan occupies........
140th. That's almost double that of india. Twice more corrupt??
Pakistan is a joke when compared to india. The only area it looks respectable is - defence might. But even that is subject to a debate about which of the two countries has stronger conventional capabilities. And spare me the details about pak having more nukes. Indian will need only a handful of bombs to dismantle pakistan and vice versa.
Having said that - India doesn't belong in the same league as China. That impressive country has muscle like no other - in all spheres.
But, really, despite jingoistic compulsions please steer clear of an indo-pak comparisons - sounds ridiculous. It hurts, but pakistan is far from being any match to india - just the way china is head and shoulders above india.

Riaz Haq said...

Ashmit: "KSE vs BSE...really?! the KSe has a ridiculously puny market cap of 35 billion USD. Reliance Industries alone has a market cap that is 3-4 times the cap of the whole of KSE. BSE's market cap is 1.6 TRILLION USD. How do you even compare the two? "

Stock markets and companies' shares are investment vehicles and they should be compared based on current valuations and performance, not just size.

It is these criteria that are used by international and domestic investors, not current market cap per se.

The market cap is only relevant when a market like BSE gets so ridiculously overvalued by an avalanche of hot money that it exceeds the India's GDP, and KSE remains cheap and and attractive because it is trading at about 50% of the PE at BSE, and KSE market cap is only a fraction of Pakistan's GDP, a healthy sign that shows potential.

Ashmit: "And as for the link you had posted about FDI as a percent of GDP - the same chart shows FDI as percent of fixed investment. You had chosen 2007 as the year to project the gap b/w pak and ind in terms of FDI as percent of GDP. well the same year stats show that pak needed FDI for 12.7% of gross fixed investment as opposed to india's 5.2%. So...really, who needs it more?"

This is nonsense. India needs FDI more than Pakistan because of its massive current account deficits. And India's FDI's drop of 30% last year is hurting it.

Anonymous said...

Riaz ji

Your Last statement that drop in FDI is hurting India is Completely baseless .

How Exactly is it hurting Please clarify

Our growth IS 8.5%

Our rupee is quite stable at 46

Foreign Investment comes in India through various routes

FDI FII Private equity Firms ,Venture Capitalists ,Export proceeds ,Remittances ,Services Exports and Tourism Earnings

Indian Companies Raise GDR and ADR and also foreign currency loans in various global Capital Markets

The various points that you have raised like Hot Money , Drop in FDI, Inflation ,Corruption ,Income disparities are all true

But the overall macro economic picture is fine

What really matters is the strength of India's Domestic Economy which helps us to face challenges

This strength is reflected in
1.A well diversified economy and Industrial Base
2.Growth rate ,3.Exports , 4.Savings rate and
5. FDI plus FII taken together

Finally Brand India is as strong as ever

The Global concern expressed at Davos shows that that the world WANTS India to have a high growth rate so that recession hit western economies are also benefitted through more trade

Anonymous said...

Stock markets and companies' shares are investment vehicles and they should be compared based on current valuations and performance, not just size.

Really riaz then why do most international news channels only mention the biggies and not tiny ones like KSE...

The market cap is only relevant when a market like BSE gets so ridiculously overvalued by an avalanche of hot money that it exceeds the India's GDP, and KSE remains cheap and and attractive because it is trading at about 50% of the PE at BSE, and KSE market cap is only a fraction of Pakistan's GDP, a healthy sign that shows potential.

India's valuations are due to the high ROCE of Indian corporations.Incidentally since Pakistan economically is not doing anywhere close to half as well as India I think the KSE is hopelessly overvalued and being pumped up by hot money.

comparing KSE $35 billion market cap is less than something like 10 TATA group subsidiaries(individually each of these are valued more than 40 billion TCS,TATA motors,TATA steel etc)

Riaz Haq said...

Anon: "Your Last statement that drop in FDI is hurting India is Completely baseless .How Exactly is it hurting Please clarify"

It's forcing India to take huge risks by relying on hot money to fund its large and growing current account deficit.

India's FDI has declined by a third from $34.6 billion in 2009 to $23.7 billion in 2010. Its current account deficit is being increasingly funded by short-term capital inflows (FII up 66% from $17.4 billion in 2009 to $29 billion in 2010) rather than more durable foreign direct investment (FDI), posing a risk to external balance and funding of gap, according to a recent warning by Goldman Sachs. "Nearly 80 per cent of the capital inflows are non- FDI related. Given the excess spare capacity globally, FDI may remain weak going forward," the Goldman note said.

Read more at: http://www.riazhaq.com/2010/12/indian-economy-hard-or-soft-landing-in.html

Riaz Haq said...

Anon: "India's valuations are due to the high ROCE of Indian corporations.Incidentally since Pakistan economically is not doing anywhere close to half as well as India I think the KSE is hopelessly overvalued and being pumped up by hot money."

Is that why Indians are net sellers of Indian equities?

The fact is that the 66% spike last year of hot money into India unleashed by the US Fed is building a bubble in Bombay that can burst any moment....Chinese are smart and they have already imposed severe limits on hot money inflows there.

Joseph Stiglitz, a Nobel Laureate Columbia University economist, has argued that India is more vulnerable to an asset bubble than China, saying that “strong economies that don’t yet have capital control become the focal point” for the liquidity injected by the US Federal Reserve. Stiglitz thinks that India, more than China or Brazil, should watch out for the tidal wave of money made available from the Fed’s quantitative easing.

Ashmit (India) said...

firstly, the vigour and fervour with which you incessantly sell the same arguments, is commendable. Secondly, for someone who appears to be reasonably well informed of contemporary issues, the way you choose to NOT take cognisanze of the pakistan's pitiable position - fiscally, too, is perplexing.

At the risk of sounding redundant, I have already conceded to your arguments about the nervous situation that India has landed herself in. But, i don't susbscribe to the idea that pakistan fares any better. My contention is simply that India is not great, but Pakistan is far worse.

Now speaking of deficits. How does it feel, as a pakistan supporter, to have matters of cabinet being orchastrated by international agencies? Pakistan's federal ministers have been made to resign, after pressure from the IMF. IMF threatens to choke the credit flow and Pakistan's representatives are seen jumping through hoops.

Reason - fiscal DEFICIT, expected to climb baloon to 8 percent. With tax earnings marginally up by roughly 6% and and non-tax revenues slipping by a huge 35%, the situation looks grim for pakistan.

meanwhile, to quote a online newspaper report (thenews.com/pk) - " The public debt has crossed the red mark of more than 60 percent of the Gross Domestic Product (GDP) or 10 trillion rupees. Hard times and a grim future! A large budget deficit is considered the mother of economic problems. It multiplies public debt, increases interest rates and reduces fiscal space. That’s what has been happening in Pakistan where social sector and development spending have taken a deep cut."

As your govt borrows more, credit becomes more expensive impairing the already slow growth, pushing up inflation to new highs. Leading economists and even the SBP think so (http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=29597&Cat=3&dt=2/6/2011).

And i have come across your jeers about India's CAD while citing a surplus for pakistan (which really doesn't even qualify as pocket change). Well the SBP, itself, doesn't seem to share your sense of optimism. With imports likely to pick up momentum, whatever advantage that the country gained will be dented severely (http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=29064&Cat=3&dt=2/3/2011).

And what about the brent crude going past the 100 dollar mark. Does Pakistan have the wherewithal to weather the storm? The numbers don't think so.

Moreover, debt ratings looks miserable. S&P rates pakistan's sovereign credit as B-, and a short term sovereign credit rating of C. Both significantly lower than the "investment grade".

The picture looks dismal. Its not UTOPIA, here either, but India fares better.

So, yes. I'll concede that grave economic threats confront india, if you concede that pakistan has a lot more to worry about.

And finally, Egypt, Tunisia, have been making headlines for uprisings due to various reasons - but at the risk of sounding simplistic, one of the strong causes being the prevailing situation of economic distress. I came across this interesting read (cant find the link right now). That article showcased how all of those nations, had infact, a track record far superior to that of pakistan. So...is pakistan heading the egypt way? Just some food for thought. Not drawing any analogies.

Anonymous said...


Riaz Haq said...

Anonymous: "http://online.wsj.com/article about car sales"

The January 2011 double digit increase in car sales in India is a clear sign of an over-heating economy due to unrestrained credit expansion that is fueling double-digit inflation.

Riaz Haq said...

Ashmit: "My contention is simply that India is not great, but Pakistan is far worse. "

Judging from the perspective of a few Indian billionaires and their urban middle class supporters, India is doing quite well.

However, from the point of view of the poor South Asians, Pakistan is well ahead of India in meeting the basic needs of the poor.

There are some arrogant Indians in cyberspace as well as the physical world who contemptuously dismiss any comparison of India and Pakistan. However, the responsible Indian and UNICEF officials concur that Indians are much worse off than Pakistanis and Bangladeshis in terms of basic nutrition and sanitation.

India is worse than Bangladesh and Pakistan when it comes to nourishment and is showing little improvement in the area despite big money being spent on it, said India's Planning Commission member Syeda Hameed.

"There has been an enormous infusion of funds. But the National Family Health Survey gives a different story on malnourishment in the country. We don't know, something is just not clicking," Hameed said.

Speaking at a conference on "Malnutrition an emergency: what it costs the nation", she said even Prime Minister Manmohan Singh during interactions with the Planning Commission has described malnourishment as the "blackest mark".

"I should not compare. But countries like Bangladesh, Pakistan and Sri Lanka are better," she said. The conference was organized in 2008 by the Confederation of Indian Industry and the Ministry of Development of Northeastern Region.

According to India's National Family Health Survey, almost 46 percent of children under the age of three are undernourished - an improvement of just one percent in the since 2001.

India might be considered an emerging economic power, but it is way behind Pakistan, Bangladesh and even Afghanistan in providing basic sanitation facilities, a key reason behind the death of 2.1 million children under five in the country. Lizette Burgers, chief water and environment sanitation of the UNICEF, has said India is making progress in providing sanitation but it lags behind most of the other countries in South Asia.

While a mere 14 percent of people in rural areas of India - that account for 65 percent of its 1.1 billion population - had access to toilets in 1990, the number had gone up to 28 percent in 2006. In comparison, 33 percent rural Pakistanis had access to toilets in 1990 and it went up to an impressive 58 percent in 2006.

Similarly in Bangladesh, 36 percent of rural people have access to proper sanitation. The corresponding figures for Afghanistan and Sri Lanka were 30 percent and 86 percent respectively.

So I'd encourage you to think about the 75% of Indians surviving on less than $2 a day (vs 60% of Pakistanis) and the families of the 7000 Indians who starve to death every day, and the survivors of the 200,000 farmers who have killed themselves over the last ten years.

Ashmit: "So...is pakistan heading the egypt way? Just some food for thought. Not drawing any analogies."

Pakistanis have already gone through the struggle that Tunisians and Egyptians are going through now.

It's unfortunate that even the elected leaders in developing nations, such as India and Pakistan, are corrupt and incompetent and serving their people badly.

Anonymous said...

overheating chinese economy

Unknown said...


Malnutrition cannot be the only parameter to measure quality of life.

The most reliable statistic for comparison is the Human Development Index that gives a score of 0.585 for India and 0.527 for Pakistan.

Also as far as corruption goes, the top coterie of decision makers in India is far far cleaner today than at any time in the past. And far more capable as well. Men like Dr. Singh, P. Mukherjee and P. Chidambaram belong to an outstanding calibre with unquestionable personal credentials. A few ministers from regional parties like the DMK and NCP that the Congress relies on for power have been irritants but thanks to overwhelming media exposure, even that is set to become a thing of the past. Also another very positive trend in the states, is that honest and efficient leaders like Nitish Yadav in Bihar, Modi in Gujarat(as much as I dislike the fellow), Shiela Dikshit in Delhi etc have been repeated been re-elected, proving that good governance pays off. Overall if one were to look at the bigger picture instead of individual corruption cases, it would certainly make the unbiased observer feel optimistic.

With the most powerful men in Pakistan being Asif Zardari and Nawaz Sharif, I don't think you're being fair in drawing parallels here.

Riaz Haq said...

Here are a few excerpts from a NY Times story on lagging agriculture in India:

BAMNOD, India — The 50-year-old farmer knew from experience that his onion crop was doomed when torrential rains pounded his fields throughout September, a month when the Indian monsoon normally peters out.
Mr. Talele’s misfortune, and that of many other farmers here, is a grim reminder of a persistent fact: India, despite its ambitions as an emerging economic giant, still struggles to feed its 1.1 billion people.

Four decades after the Green Revolution seemed to be solving India’s food problems, nearly half of Indian children age 5 or younger are malnourished. And soaring food prices, a problem around the world, are especially acute in India.
Critics say Indian policy makers have failed to follow up on the country’s investments in agricultural technology of the 1960s and ’70s, as they focused on more glamorous, urban industries like information technology, financial services and construction.
Food inflation hits especially hard here because Indians — most of whom live on less than $2 a day — spend a bigger portion of their disposable incomes on food than people in other big, developing economies like China and Brazil.

“This is the worst form of taxation on the poorest of the poor,” said Ashok Gulati, Asia director for the International Food Policy Research Institute.
But experts say the widening gap between agriculture’s anemic supply and the rising demand for food calls for fundamental changes in farming policies.

During the Green Revolution the government invested heavily in rural agriculture, with an emphasis on hybrid seeds, fertilizers and irrigation canals.

And rural India has far too few temperature-controlled warehouses that could help farmers and the nation build up reserves as a hedge against poor growing seasons.

When Mr. Talele’s vegetables are ready for harvest he immediately takes them to wholesale markets, which are controlled by committees of local traders. “Whatever the market decides, that’s the price we get,” he said.

Indian officials acknowledge that the country needs to increase investment in irrigation, encourage competition in wholesale and retail markets, and provide targeted food subsidies to the poor. And they also have to provide more education and jobs to villagers, so fewer people are forced to live off the land.

Experts say India needs to make changes like some of the ones China made, beginning in the late 1970s, when it started investing heavily in agriculture and eased regulations on farming.


Riaz Haq said...

BBC's Soutik Biswas's comments on Manmohan Singh's press conference on corruption and governance deficit in India:

..So when Prime Minister Manmohan Singh sat down for a rare hour-long press conference in Delhi this morning, he, unsurprisingly, faced a barrage of questions on what his government was planning to do to crack down on corruption in high places. Unfortunately, say analysts, his answers did not reveal a more assertive chief executive who was fully in control of the situation.

For one, say critics, the reticent Mr Singh appeared to be more bothered by how India's image might have been damaged by the media coverage, than by the rising tide of corruption itself. He gave reassurances that the government was "dead serious" in bringing to book "all the wrongdoers regardless of the positions they occupy". When pressed further, he said: "Wrong doers will not escape this time."

But he also worried that in "projecting" (read, the media reporting) these events, "an impression has gone round that we are a scam-driven country". This was, he felt, "weakening the self confidence of the Indian people". He told the journalists: "In reporting the affairs of our nation, you should not focus excessively on negative features."

Many find Mr Singh's plea disingenuous as India remains one of the most corrupt countries in the world, and graft continues to eat away at its vitals. It hurts the poor most, widens inequity, kills initiative and saps energy out of society. For all its foibles, India's noisy and vibrant media has done more than a good job in relentlessly chasing the alleged scandals - from alleged underselling of telecom licences to purchases for last year's Commonwealth Games. India's merchants of feel-good, however, insist that to highlight corruption at the cost of the country's considerable achievements - and there are many - is wrong.

Critics say Mr Singh should not be worrying about the self-confidence of his citizens. The rising self confidence of Indian people, they say, is despite the weak and ineffectual state; and it mostly comes from the opportunities they have been able to mine for themselves in a highly competitive nation.

Indians may be inured to corruption, but the recent spate of allegations has taken their breath away. Many believe that the time has come for an all-out war against corruption, something consecutive governments have been loathe to do. So, few believe the government when it says it is moving to bring back illicit money that Indians have stashed away in foreign banks. People believe there is a silent consensus among political parties to go soft on corruption. Nothing much has changed during Mr Singh's regime, they say, despite his exhortations and promises.

Mr Singh appears to have taken refuge in the uneasy compulsions of coalition politics to try to take the heat off on the corruption charges plaguing his government - after all, a former minister who is being investigated for his alleged involvement in the telecom scandal belongs to a key ally. So he kept insisting that coalition politics had hobbled him....

Riaz Haq said...

Here's a NY Times story on how Azim Premji's foundation is helping improve primary education in India:

PANTNAGAR, India — The Nagla elementary school in this north Indian town looks like many other rundown government schools. Sweater-clad children sit on burlap sheets laid in rows on cold concrete floors. Lunch is prepared out back on a fire of burning twigs and branches.

But the classrooms of Nagla are a laboratory for an educational approach unusual for an Indian public school. Rather than being drilled and tested on reproducing passages from textbooks, students write their own stories. And they pursue independent projects — as when fifth-grade students recently interviewed organizers of religious festivals and then made written and oral presentations.

That might seem commonplace in American or European schools. But such activities are revolutionary in India, where public school students have long been drilled on memorizing facts and regurgitating them in stressful year-end exams that many children fail.

Outside of India, many may consider the country a wellspring of highly educated professionals, thanks to the many doctors and engineers who have moved to the West. And the legions of bright, English-speaking call-center employees may seem to represent, to many Western consumers, the cheerful voice of modern India.

But within India, there is widespread recognition that the country has not invested enough in education, especially at the primary and secondary levels.

In the last five years, government spending on education has risen sharply — to $83 billion last year, up from less than half that level before. Schools now offer free lunches, which has helped raise enrollments to more than 90 percent of children.

But most Indian schools still perform poorly. Barely half of fifth-grade students can read simple texts in their language of study, according to a survey of 13,000 rural schools by Pratham, a nonprofit education group. And only about one-third of fifth graders can perform simple division problems in arithmetic. Most students drop out before they reach the 10th grade.
Narayana Murthy, a friend of Mr. Premji and chairman of Infosys, a company that competes with Wipro, said he admired the Premji Foundation’s work but worried it would be undermined by the way India administers its schools.

“While I salute Azim for what he is doing,” Mr. Murthy said, “in order to reap the dividends of that munificence and good work, we have to improve our governance.”

Mr. Premji says his foundation would be willing to work with private schools. But he argues that government schools need help more because they are often the last or only resort for India’s poorest and least educated families.

Mr. Premji, whose bright white hair distinguishes him in a crowd, comes from a relatively privileged background. He studied at a Jesuit school, St. Mary’s, in Mumbai and earned an electrical engineering degree at Stanford.

At 21, when his father died, Mr. Premji took over his family’s cooking oil business, then known as Western Indian Vegetable Product. He steered the company into information technology and Wipro — whose services include writing software and managing computer systems — now employs more than 100,000 people. He remains Wipro’s largest shareholder.
After visitors left a classroom at Nagla school, an instructor began leading more than 50 fifth-grade students in a purely rote English lesson, instructing the students to repeat simple phrases: Good morning. Good afternoon. Good evening. Good night. The children loudly chanted them back in unison.
Underfunding is pervasive in the district. But so are glimmers of the educational benefits that might come through efforts like the Premji Foundation’s.

Anonymous said...

Tunisia, Egypt, Bahrain... Sonia & Rahul Gandhi's Corrupt Indian Family next ?


Riaz Haq said...

News about 2010-2011 budgets in South Asia:

The BBC is reporting that "the budget deficit has reduced to 5.1% of GDP this fiscal year, down from more than 6%. The plan is to cut this to 4.6% next year".

Pakistan's budget deficit for first six months of 2010-2011 stood at 2.9%, up from 2.7% last year, according to CNBC and Reuters.

KARACHI, Feb 28 (Reuters) - Pakistan's budget deficit for the first six months of the 2010/11 fiscal year (July-June) was 2.9 percent of gross domestic product, the Finance Ministry said on its Web site (www.finance.gov.pk) on Monday. This compared with a deficit of 2.7 percent in the same period last year. In the October-December quarter, the deficit eased to 1.3 percent from 1.6 percent in the preceding quarter. Analysts said the lower second-quarter deficit was largely due to payments by the United States for logistical support provided by Pakistan in the war against Islamist militants. In November 2010, Pakistan agreed with the International Monetary Fund (IMF) that it would keep the country's budget deficit at 4.7 percent for the 2010/11 fiscal year. However, analysts agree Pakistan will likely overshoot this figure. Some forecast the deficit to be around 8 percent, higher than the central bank's prediction of between 6.0 and 6.5 percent, if fiscal reforms are not implemented. The original target of 4 percent was revised following the devastating summer floods, which caused around $10 billion in damages.

Riaz Haq said...

Soutik Biswas of BBC on "Why India's big, fat weddings will never stop":

The big, fat Indian wedding returned to the front pages of newspapers this week: reportedly a $55m gig with 20,000 guests, a Bell helicopter as dowry, a 100-dish menu, a dozen TV screens showing a video feed of the proceedings, and even a $5,000 tip for the groom's barber. The groom's father - a rich Congress party politician and real estate magnet, exemplifying the intersection of politics and new money in India - wryly remarked that the media reports of the wedding were speculative.

For the Congress party-led government whose credibility is battered by a tsunami of corruption scandals, the hugely ostentatious wedding by a party member should come as an embarrassment, many here feel. One minister is reported to have said recently that nearly 15% of India's grain and vegetables is wasted through "extravagant and luxurious functions". Party chief Sonia Gandhi has pleaded with her workers to be frugal and her MPs to fly economy class. The embattled PM, Manmohan Singh, had feebly exhorted businessmen to refrain from ostentatious displays of wealth because such "vulgarity insults the poor". But what he possibly forgets is that the poor in India are actually insulted every day by many of the men and women they vote into power.

The government is apparently working on a law to curb waste at extravagant weddings and functions. No law will be able to change soon a people and society that remain deeply hierarchical, feudal and class-conscious. At one end of the scale a hapless farmer may take ruinous loans from money-lenders to host a wedding beyond his means. At the other end a billionaire unabashedly builds the world's priciest home (more than $1bn) in Mumbai where half the people live in slums. All this is symptomatic of a society which thrives on perpetuating inequity. With near double-digit growth, there's going to be more money to throw around and flaunt. So don't expect any lame law to curb India's vulgar, overblown weddings any time soon.

Riaz Haq said...

KSE-100 is so far flat this year but BSE is in sharp decline as foreign buyers are fleeing.

Whatever happened to the Indian equity market? asks the BBC:

Back in November, the Sensex squeezed past 21,000 for a day before starting a three month, 16% fall.

In the same time, the world's main indices, the FTSE Dow and Nikkei have all gained up to 7%, two of the remaining BRIC countries have fallen no more than 7%, and Russia's RTS Index has gained 26%.

Unsurprisingly foreign funds have been fleeing Indian equities in the last three months.

India is in a pickle and two reasons spring to mind - the stock market was heavily overvalued and the Central Bank has been raising interest rates.

At the end of the year the price of the average share on the Sensex was 23 times its earning power (ie its p/e ratio was 23 x). The Shanghai Index was 18 x, Brazil's Bovespa 14 x and Russia's just 9 x (the Dow's p/e was 13 x). That kind of valuation may be fine if future growth seems assured, but there are signs it may be falling off.
'Leg down'

GDP in real terms expanded at an annual rate of 8.2% in the last quarter - slowing from the 8.9% rate recorded in April to June. Now, this isn't a serious problem and no one is suggesting that the Indian growth story is in serious trouble, but it may be more than just a blip.

Maya Bhandari, senior economist at Lombard Street Research, says that, on a seasonally adjusted basis, growth was pretty much flat. She adds: "I would expect another leg down in the market in the coming few months."

Food inflation has been entrenched for some time, which means the Reserve Bank started putting up interest rates a year ago and has since hiked them seven times.

"In the last 25 months or so, we have had negative real interest rates and the central bank is going to have its work cut out to bring down inflation. And while it may be raising rates, the bank is holding more auctions and lowering the statutory liquidity levels for banks - all of which has inflationary consequences," says Ms Bhandari.

On top of domestic inflation pressures, the Middle East and North Africa crisis sent oil prices belting up above $100 a barrel, adding to the central bank's imperative to keep the upward pressure on rates.
Rate rises?

India is the world's the fourth largest oil importer and imports over 70% of its oil requirements. Oil prices, which will stay high for as long as the Arab crisis lasts, will damage India's economy more than most of its main rivals. At the moment, most economists are pencilling in another half to one percentage point rise in rates.

Oil is also going to hurt government finances. In his March budget, Finance Minister Pranab Mukherjee estimated that the deficit would fall from an estimated 5.1% of GDP in the year ending March 31, to 4.6% next fiscal year.

But if oil prices keep on going up, the government will have to decide whether to keep on paying out fuel subsidies or deregulate diesel prices.

Keeping the deficit under control would suggest the latter.

Five state elections in the next few months would suggest the former.

London-based India investment consultancy director Deepak Lalwani points out that foreign confidence in India has also not been helped by a slew of scandals, the biggest being allegations that the 2008 sale of second-generation, or 2G, cellular licenses resulted in losses of nearly $36bn in potential revenue for the government.

Riaz Haq said...

The authorities in India have arrested a stud farm owner accused of tax evasion and money laundering, according to the BBC:

Hasan Ali Khan is alleged to have hidden $8bn (£4.9bn) in Swiss banks.

Mr Khan was detained in the western city of Pune and later taken to Mumbai (Bombay) following searches at his home and offices. He denies wrong-doing.

Last week, the Supreme Court criticised the government for not having the "will power" to act against those illegally funnelling wealth overseas.

The Supreme Court set 8 March as the deadline for the government to tell it how it proposes to tackle so-called "black money".

In an angry outburst last week, its judges demanded to know why Mr Khan and others were not being taken into custody and questioned.

"What the hell is going on in this country?" they asked, using unusually strong language for court.

Mr Khan insists he has not acted illegally. "I am innocent. I haven't done anything wrong," he told reporters after his arrest on Monday.

The US-based group Global Financial Integrity estimates that India has lost more than $460bn in illegal capital flight since Independence.

Almost three-quarters of the illegal money that comprises India's underground economy ends up outside the country, it said in a report last year.

India's underground economy has been estimated to account for 50% of the country's GDP - $640bn at the end of 2008.

Authorities say the government is taking measures to bring back the illegal money, but say there are difficulties in sharing the information because of confidentiality treaties between countries.

Riaz Haq said...

Here are some excerpts of an interesting open letter to the Arab pro-democracy protesters from an Indian writer Udayakumar:

1. ... ...there are hundreds of Members of Parliament (in both the upper and the lower house) such as Basudeb Acharia, Manikrao Hodlya Gavit, and Somnath Chatterji who are called "longest serving" members. I wonder if they should be called that or the "longest clinging" members. There is a similar trend in the legislative assemblies of all the states in India too. For instance, M. Karunanidhi, the present Chief Minister (US equivalent of State Governor) of Tamil Nadu state has been a member of the state house for more than 40 years now.

2. You rightly problematize the nepotism of your rulers and think that democracy could end all this. The dynasties of the Kennedys, the Bushs and the Clintons in the United States, and the Gandhi dynasty and quite a few smaller dynasties in India would prove that democracy and elections cannot curtail sycophancy, nepotism, and family succession....

3. ...In December 2008, while announcing federal corruption charges against Illinois Governor Rod Blagojevich, FBI Special Agent Robert Grant said that "if [Illinois] isn't the most corrupt state in the United States, it is one hell of a competitor." Blagojevich ended up in prison. Republican George Ryan is currently serving a 6 1/2-year term in federal prison for racketeering and fraud. Otto Kerner, a Democrat, was convicted in 1973 on 17 counts of bribery, conspiracy, perjury and other charges and sentenced to three years in the prison. In 1987 Dan Walker was convicted of bank fraud years after leaving office. Lennington Small, a Republican who served from 1921 to 1929, was indicted while in office for embezzlement. Most Indian politicians have no qualms about stealing public money and they are said to be the largest clientele of the Swiss banks. Rudolf Elmer, a Swiss bank executive, has said that "Switzerland is the most preferred tax haven for Indians" to stack up their illicit wealth (NDTV, January 19, 2011).

4. ...It is obvious that your leaders, kings and emirs use the national resources for their and their families' aggrandizement. Our democracies are not much different either. An article in opensecrets.org points out: “As Americans worry about their own finances, their elected representatives in Washington — with a collective net worth of $3.6 billion — are mostly in good shape to withstand a recession.” Before the meltdown rained on their parade, members of Congress, “saw their net worths soar 84 per cent from 2004 to 2006, on average.” The article points out that while US senators had “a median net worth of approximately $1.7 million in 2006,” only about “1 per cent of all American adults had a net worth greater than $1 million around the same time.” Reputed Indian journalist P. Sainath points out in his column in The Hindu newspaper (dated June 20, 2009) that the number of ‘crorepatis’ (millionnaires) in the present Indian parliament's lower house (Lok Sabha) is up 98 per cent as compared to 2004. Then there were 154 of them but now there are 306 — almost double. In both the United States and India, money from big corporations and business houses helps politicians secure election victories and eventually "own" them.

5...P. Sainath points out the firm links between wealth and winning elections in India in his above-mentioned article.... This is in a country that has 836 million people who scrape along with less than Rs. 20 (50 US cents) a day. Do you think the poor will ever have a chance of voicing their concerns in the policymaking circles?

Ashmit (India) said...

Despite your almost intimidating profile, the uneducated opinions that you like to proliferate, attempting to scavange for some lost pride for an equally lost nation - are disturbing.
I did run your views by some practiciing and successful economists, CAs, CFPs, brokers and analysts. They back my views about why it continues to remain ridiculous comparing the petty Karachi stock exchange to the behemoth that the BSE is. But i'll save those arguments for another day.
For now, lets look at the data that you have presented. KSE is flattish while the BSE has witnessed a steep correction. Conceded. But, for a ridiculous moment, even if i were to comapre the two indices, one unmistakable factor that you have twisted to suit your morphed views is - TIME. Yes, to view the performance of the indices over the previous few months, Karachi has acttually fared better. But to lend any credibility to insipid ideas such as KSE "outperforming" BSE (?!?!?!?!) you have to take into account performance over the last few years and not months or days.
In the last three years (from 14-march-2008 to 04-march-2011), the KSE story looks pathetic. And the 2008-09 crash, when the whole index was painted red, doesn't quite say much about KSE as "investment destination". On march 14th of 2008, the KSE closed at 15,087. And over the next three years, with the KSE treading the troubled waters, that is the the pakistani corporate and political landscape, the index barely held its own and slipped to 12,045 by 4th of march 2011 (http://www.bloomberg.com/apps/quote?ticker=KSE100:IND) - a fall of over 20% over the 3 years period . The BSE meanwhile, rallied hard. Blazing ahead, nearly hitting the all time high in the november of 2010. Within exactly the same period, the BSE surged from 15,760 to 18,174 (http://www.bloomberg.com/apps/quote?ticker=SENSEX:IND)- a jump of over 15% (this includes the relatively short burst during which the KSE actually fared better). Clearly the BSE, despite all the valuation fears, performed beter for FIIs and DIIs - making us richer!!
From a slightly longer perspective of 5 years, (unfortunately for the hurt pride of some jingoistic pakistanis) the picture doesn't change much in the KSE vs BSE story. On 16th of march of 2006, the KSE closed at 10,689 (http://www.bloomberg.com/apps/quote?ticker=KSE100:IND). Keeping in mind the reference point of 4th march 2011 (KSE - 12,045), despite your efforts to hardsell the undervalued staus of KSE, investors don't quite have the same level of confidence with a snails pace of merely 12.68 percent beinf recorded, OVER 5 YEARS. In exactly the same period, the BSE, drawing from strong growth in economy, surged by 67.34% - from 10,860 to 18,174 (http://www.bloomberg.com/apps/quote?ticker=SENSEX:IND).
And, lets be a little mature about this and not read into blips and spurts as broadbased trends. Besides, all the concerns that were cited in the article that you quoted are shared by pakistan as well. For instance, India imports 70% of its oil needs - BUT, pakistan imports 80% of its oil requirements (http://www.worldpress.org/specials/pp/pak.htm). Spiralling oil prices are a bigger concern for the pakistani economy. I have given a reality check on paksitani inflation figures, deficits, subsidies, etc (in one of my earlier comments).
So please refrain from abusing contributions by other members of the cyber space by using their findings to support convulted ideas such as the BSE being overpowered by its puny neighbour.
The contention is again quite simple. India, in most cases, is simply bigger and better than its neighbours.

Riaz Haq said...

Ashmit: "I did run your views by some practiciing and successful economists, CAs, CFPs, brokers and analysts. ..."

Your experts are wrong. The investors look at multiple criteria that include current market cap, equity valuations and performance over 5, 10 and 15 year periods. KSE-100 index has outperformed not just BSE but all BRIC exchanges and its price-earning multiples are about half of those in Mumbai, Shanghai, etc.

If you had invested $100 in KSE-100 stocks on Dec. 31, 1999, you'd have over $1000 today, while $100 invested in Mumbai's Sensex stocks would be worth about $400. Investment of $100 in emerging-market stocks in general on Dec. 31, 1999 would get you about $300 today, while $100 invested in the S&P500 would be essentially flat at $100 at the end of 2010.

Going forward, here's how I would argue the opportunities offered by KSE:

1. KSE has a strong track record of investor returns over the last one year, five years an ten years.

2. KSE-100 index has outperformed other emerging markets, including BRICs, by a wide margin for over a decade.

3. The worst case investment risks in Pakistan are already reflected in the deep discounts of valuations of Pakistani shares in terms of price-earnings multiples.

4. KSE-100 shares are trading at price-earnings multiples (P-E ratio) of less than 8, about half of other Asian markets in the region.

5. Pakistanis are a young, resilient nation. The people of Pakistan have defied the dire forecasts made after Swat violence in 2009, and massive summer floods of 2010.

6. After the deluge of Aug-Sept 2010, Pakistan's rural economy has bounced back as reflected in rising tractor sales and bumper crops.

7. The KSE selloff during floods has attracted foreign buying, with over a billion dollars pouring in in 2010.

In the end, I would quote Mark Bendeich of Reuters who wrote on Jan 10, 2008:

"A little more than six years ago, immediately after the Sept. 11 attacks on U.S. cities, few sane investment advisers would have recommended Pakistani stocks.
They should have. Their clients could have made a fortune.
Since 2001, the nuclear-armed South Asian country, blamed for spawning generations of Islamic militants and threatening global security, has been making millionaires like newly minted coins.
As Western governments have fretted about Pakistan's nuclear weapons falling into the hands of militants, the Karachi Stock Exchange's main share index has risen more than 10-fold."

And in spite of the 50% drop in KSE-100 2008,, those who invested and held their shares made a 5X return at the end of 2008, not bad.

And, even after the 50% drop in KSE-100 in 2008, any one who bought in year 2000 and held on till 2010, the return would be a whopping 12X, far outpacing returns on BRIC markets or anywhere else.

Riaz Haq said...

The BBC is reporting that widespread corruption in India costs billions of dollars and threatens to derail the country's growth, according to a survey.

The report by consultancy firm KMPG said that the problem had become so endemic that foreign investors were being deterred from the country.

It was compiled by questioning 100 top domestic and foreign businesses.

Its release comes as Prime Minister Manmohan Singh struggles to cope in the battle against corruption.

Earlier this month the head of the country's anti-corruption watchdog was forced to resign by the Supreme Court on the grounds that he himself faces corruption charges.

Over the last six months India has been hit by a series of corruption scandals including a multi-billion dollar telecoms scandal, alleged financial malpractices in connection with the Commonwealth Games and allegations that houses for war widows were diverted to civil servants.
Mega scams

"Today India is faced with a different kind of challenge," the report said.

"It is not about petty bribes (bakshish) any more, but scams to the tune of thousands of crores (billions of rupees) that highlight a political/industry nexus which, if not checked, could have a far reaching impact.

"Corruption poses a risk to India's projected 9% GDP growth and may result in a volatile political and economic environment."

Critics of the government say that recent scandals point to a pervasive culture of corruption in Mr Singh's administration - adding to the difficulties of a politician once seen as India's most honest.

The government denies the claims and has set up a parliamentary inquiry into corruption.

The BBC's Sanjoy Majumder in Delhi says that most Indians routinely pay bribes for a number of services such as getting a driver's licence or a passport.

But, our correspondent says, the KPMG survey makes clear that corruption is now no longer about such petty bribes but mega scams where billions of dollars are siphoned off by government and industry.

The worst-hit areas as identified by the report were real estate and construction - a priority for Delhi which plans to spend $1.5tn over the next decade to improve its over-burdened infrastructure.

The report said that the country's telecommunications industry was also badly affected.

Telecoms Minister Andimuthu Raja resigned in November, denying allegations that he had undersold billions of dollars worth of mobile phone licences. He is now under arrest.

However the KMPG report was not all gloomy. It said that despite the murky regulatory environment, business remained active in India with more than half of those surveyed saying they were unaffected by corruption.

More than 80% of respondents disagreed that corruption had reduced their ability to access domestic or foreign funds, while 55% disagreed that corruption had affected their business.

Riaz Haq said...

Here's an excerpt from BBC's Soutik Biswas on corruption in aviation licensing in India that risks lives:

...some recent disquieting developments have rattled air passengers and raised serious doubts about the quality of the people who are flying what most believe are reasonably well-maintained machines.

Federal aviation authorities say they will be checking the licences of some 4,000 pilots flying commercial aircraft after allegations that at least four were found to have fake documents. Two have been arrested for using fake certificates to obtain licences.

The first, a pilot from the perpetually ailing, state-owned Air India, apparently fabricated his qualifications. The other, who was arrested last week after damaging the aircraft during landing, was found to have used fake documents to get her licence. The licences of the other two pilots are apparently riddled with irregularities, and both have reportedly disappeared.

According to one report by news channel CNN-IBN, a pilot who was caught cheating during a flying test in the US in 2000 and denied a licence, got a commercial licence on his return to India by forging his qualifications and has since been working as a senior pilot with Air India. Air India spokesman Kamaljeet Rattan would not discuss that particular case with the BBC. But he tells me the airline is scrutinising the papers of a dozen pilots. "It's nothing very serious, and not at all scary," he says. "These are routine checks."

Senior aviation officials echo the views of Mr Rattan. "Fake licences are very few so there is no need to panic," says Bharat Bhushan, India's most senior civial aviation official. But there are suspicions that pilots cannot be faking their papers without some inside help. And aviation analysts believe this is the time to crack down. "This is a very serious issue," Kapil Kaul of Centre for Asia Pacific Aviation tells me. "When pilots are faking their certificates it is a criminal offence. It points to a systemic failure. Airline operators also cannot absolve themselves of responsibility. They need to have more vigorous checks. And decisive action needs to be taken against the pilots."

As if all this was not enough, last week the government announced that 57 pilots reporting for duty had tested over the limit for alcohol in the past two years. All were prevented from joining their aircraft. The issue was raised in parliament - according to a parliamentary document I have seen, the pilots were employed by every leading private airline as well as Air India. Ten were sacked; others had their licences suspended or were taken off the flight roster.

The airlines have been keeping a low profile on this - like Mr Rattan want to play down the severity of the problems. By and large Indians appear to have been reassured by the government announcement. There's been no public outcry. But concerns about the quality of some pilots have been around for a while. Last August former civil aviation minister Praful Patel was asked in parliament whether commercial pilots had been drunk on duty. He replied there had been no such incident. Another MP actually asked Mr Patel this year whether "under-trained pilots are flying commercial flights... risking the lives of hundreds of passengers". Again the minister denied any such possibility.

Riaz Haq said...

Latest publication of Wikileaks by The Hindu reveals vote buying by India's ruling party in a 2008 confidence vote:

The ghost of bribes for MPs’ votes returned to haunt the government on Thursday with the entire Opposition demanding its resignation over allegations that UPA-I purchased the support of lawmakers to survive the trial of strength at the height of crisis over Indo-U.S. nuclear deal in 2008.

On top of several scams that had surfaced in the last few months, the government faced a torrid time in Parliament on Thursday with Opposition targeting it on the manner in which it won the vote of confidence in 2008 after the Left parties had withdrawn support to it opposing the Indo-U.S. nuclear deal.

Both the Houses of Parliament were repeatedly rocked by uproar and adjournments by the Opposition members who demanded the resignation of Prime Minister Manmohan Singh and his government saying it did not have any right to continue even for a moment as it was surviving on “political and moral sin“.

The Right and and the Left combined in Parliament whenever it met during the day to launch an assault armed with the claim in a U.S. diplomatic cable revealed by WikiLeaks that an aide of former Union Minister Satish Sharma had shown to the diplomat currency chests that were part of Rs.50 crore to Rs.60 crore money collected by Congress for purchase MPs for the vote in the Lok Sabha.

The only defence that the government came out with was when Finance Minister Pranab Mukherjee told Parliament that a diplomat’s cable enjoyed immunity and he could not confirm or deny its contents.

Riaz Haq said...

Here's a BBC report on pregnant women's deaths in Rajathan due to tainted UV fluids:

..The (three) doctors have been charged with negligence and irregularities in purchases of medicines.

The women died after they were given infected intravenous (IV) fluids at two hospitals in Jodhpur city.

Laboratory tests had confirmed that IV fluids supplied by a local company were "tainted", officials said.

The women died after severe haemorrhaging after they were administered with the IV fluids, authorities say.

India accounts for the highest number of maternal deaths in the world, with tens of thousands of women dying every year due to pregnancy-related problems.


Here's a Deccan Herald story on tainted medicines in India:

It is said that roughly 10 per cent of the medicines available in the market are counterfeit, contaminated or substandard. Profits are huge in the trade. This is a massive racket that involves not just illicit manufacturers but a long chain that includes distributors and then, of course, the shops and hospitals through which these spurious medicines are pushed. It is alleged that pharmacists selling counterfeit drugs profit from doing so. If manufactures are able to push their contaminated drugs easily, it is because hospital authorities are not vigilant. They prefer to purchase medicines from those who grease their palms rather than trusted manufacturers. The problem of contaminated medicines is not one that is confined to allopathic medicines. Testing of some samples of ayurvedic or homeopathic medicines has revealed presence of toxic metal.

Indian pharmaceutical companies export medicines to Africa and Latin America. Therefore, the manufacture of substandard drugs and contaminated fluids poses a grave public health threat that extends far beyond India’s borders. Stern action against those responsible for Jodhpur tragedy is welcome. But it must not stop there. The government must act against other manufacturers of counterfeit and contaminated medicines. The crime they are engaging in is not a minor one. It cannot be brushed aside as mere negligence as they are causing the death of people. They cannot be allowed to play with people’s lives. It is undermining the legitimacy of our medical system.

Riaz Haq said...

Here's Maplecroft risk warning for investing in India, according to Times of India:

LONDON: The United Kingdom-based Global Risks Atlas 2011 on Friday described India as the 16th riskiest country to invest in for the security hazards it poses and rather embarrassingly clubs it with Niger, Bangladesh and Mali. The Atlas is published by Maplecroft, a consultancy founded by Alyson Warhurst, chair of strategy and international development at Warwick Business School.

The evaluation is structured on seven key global risks including macroeconomic risk and threats around security, governance, resource security, climate change, social resilience and illicit economies.

Maplecroft assessed India faces simultaneous threats of terrorist attacks from Islamists and Maoists. It also points at India's lack of social resilience despite a robust economic growth and cites its poor human rights record. It says large sections of the population lack access to basic services such as education, healthcare and sanitation, and highlights its less productive workforce, greater susceptibility to pandemics and susceptible to social unrest.

A press release by Maplecroft lumps Pakistan with Russia on investment risk:

Dynamic political risks constitute immediate threats to business and Maplecroft rates 11 countries as ‘extreme risk.’ Most significantly, the emerging economy of Russia has moved up five places from 15th to enter the top ten for the first time, whilst Pakistan has also moved two places up the ranking to 9th.

The ‘extreme risk’ countries now include: Somalia (1), DR Congo (2), Sudan (3), Myanmar (4), Afghanistan (5), Iraq (6), Zimbabwe (7), North Korea (8), Pakistan (9), Russia (10) and Central African Republic (11).

Russia’s increased risk profile reflects both the heightened activity of militant Islamist separatists in the Northern Caucasus and their ambition to strike targets elsewhere in the country. Russia has suffered a number of devastating terrorist attacks during 2010, including the March 2010 Moscow Metro bombing, which killed 40 people. Such attacks have raised Russia’s risk profile in the Terrorism Risk Index and Conflict and Political Violence Index. The country’s poor performance is compounded by its ‘extreme risk’ ratings for its business environment, corporate governance and the endemic nature of corruption, which is prevalent throughout all tiers of government.
Jim O’Neil, Chairman of Goldman Sachs Asset Management, states: "Growth is happening where political risk is most challenging. So, meticulous monitoring and mitigation now will enable business to flourish and benefit from the opportunities presented by the future growth economies of the BRICs and Next 11".

Looking to the longer term, the BRICs countries are witnessing increasingly worse structural political risk trends for 2011. China (25), India (32) and Russia (51), rated ‘high risk’ and Brazil (97) medium risk, have all seen risks increase compared to scores from last year’s Atlas.

Mayraj said...

We met via Lok Satta.

He says in email message he has published series of articles in monthly issue of Economic Times.

He said:
..doing a series of articles on economic issues in the monthly supplement of Economic Times (IMB) and have been given a monthly series on the same.

Please find the first three parts (3rd part in tomorrow's supplement of ET- Its my Business)

Part 1: "Let me be candid ; I wish to propose an economic revolution. A carefully carved out revolution that will fundamentally alter the face of India. A simple two steps technical solution, in line with the spirit of the constitutional directives, promises a complete answer to poverty, corruption, inequality and its consequences." click to read more http://mayankgandhi05.blogspot.com/2011/01/complete-solution-it-is-possible-to-end.html

Part 2: Budgets have become meaningless rituals as most of the public finance controlling tools like taxes, subsidies have become ineffective to meet its desired goals. Contradictorily, they are boosting inflation, black money and corruption. http://mayankgandhi05.blogspot.com/2011/02/new-tax-regime.html

Part 3: In 1969, President Richard Nixon, in one bold stroke, withdrew all notes above $100. Life became tough for the Mafia and the corrupt. That was the turning point in the black economy of the USA. Coupled with the rise of plastic money in terms of credit cards and debit cards and extensive use of the banking system, black money started reducing from the USA economy.Press on http://mayankgandhi05.blogspot.com/2011/03/economic-times-part-3-currency.html for more.

Riaz Haq said...

Here are some excepts from a recent Wall Street Journal story titled "In India, Doubts Gather Over Rising Giant's Course":

These days, India often is held up as an example of how a democracy in Asia can mirror the spectacular growth of authoritarian China. In the year ending March 31, India's economy is expected to expand by about 8.5%.

Other important gauges of national well-being paint a more troubling picture. "What has globalization and industrialization done for India?" asks Mr. Venkatesan, Microsoft's former India chairman. "About 400 million people have seen benefits, and 800 million haven't."
Calorie consumption by the bottom 50% of the population has been declining since 1987, according to the 2009-10 economic survey conducted by India's Ministry of Finance, even as those at the top of society struggle with rising obesity. Mainly because of malnutrition, around 46% of children younger than 3 years old are too small for their age, according to UNICEF.

Infrastructure in cities and the countryside remains woefully inadequate: In recent years, China has added, on average, more than 10 times as much power as India to its electricity grid each year.

Data from McKinsey & Co. show that the number of households in the highest-earning income bracket, making more than $34,000 a year, has risen to 2.5 million, from 1 million in 2005. But the ranks of those at the bottom, making less than $3,000 a year, also have grown, to 111 million, from 101 million in 2005.
India's modernization was expected to prompt a mass movement of workers from farms to factory floors—a critical component in the transformation of China, South Korea and other Asian nations. But manufacturing as a share of India's economy stood at 16% in 2009, the same as in 1991, according to the World Bank.

Services have increased dramatically as a proportion of gross domestic product, rising to 55% in 2009, from 45% in 1991, according to the World Bank, becoming the chief engine of India's economic strength. But many of the fastest-growing areas, such as finance and technology, employ relatively few and rely heavily on skilled employees. The entire software and technology-services sector, including call centers and outsourcing, directly employs just 2.5 million workers, a tiny fraction of the overall work force.
Agriculture's share of the economy, meanwhile, has declined to about 17% in 2009, from 30% in 1991. But the number of people working in agriculture hasn't dropped commensurately, according to Arvind Panagariya, a professor of Indian political economy at Columbia University in New York. "The dependence on agriculture remains incredibly high when you compare India's high-growth phase with others," he says. "The potential of the country is to grow at 11% to 12%, and it's growing only at 8% to 9%."

Frustration over the economic miracle's limited trickle-down is fueling political movements around the country. Most base their appeal, in part, on the idea that the poor are being ill-served in the new India.


Riaz Haq said...

Here's a WSJ piece on corruption and philanthropy in India:

Indian Prime Minister Manmohan Singh has his hands full with one key task these days—assuring people that his government is fighting corruption.

Whether it’s at the Congress Party’s anniversary session, at a rare prime ministerial presser or in Parliament, Mr. Singh has time and again had to put his hand out for a symbolic thwack for the state of governance in the country.

He did so again on Thursday, in an address at a meeting with his Council on Trade and Industry—though his remarks were somewhat overshadowed this time by celebrations of India’s World Cup victory over Pakistan and India’s announcement that its population has reached 1.21 billion.

This time, his target audience was India Inc. “I am aware of the nervousness in some sections of the corporate sector arising out of some recent unfortunate developments,” said Mr. Singh.

Mr. Singh sought to boost investor confidence in the country by pledging his government is determined to root out graft. “We stand committed to ensuring that our industry moves ahead with confidence and without fear or apprehension. The Government is committed to improving the quality of governance. We are considering all measures, including legislative and administrative, to tackle corruption and improve transparency.”

In the speech, he also promised that reforms would continue, something that many business leaders have expressed concern about.

“It’s great that the issue of corruption has stayed front-and-center for all these months, rather than fading away. But in addition to feeling a bit sorry for Mr. Singh, his remarks are starting to seem rather like—with apologies to the Zen meaning—trying to clap with one hand. Surely it’s time for other folks—say the leaders of political parties at the national and regional levels, and the heads of India’s top businesses—to stand up and tell the country what exactly they’re doing to reduce corruption. So far, we’ve only seen calls from business leaders and former officials for the government to do more.

But recent surveys of corruption in India are gradually shifting focus to the role that private firms also play in generating a “demand” for corruption.

Consulting firm KPMG said in a survey last month that respondents to its corruption survey largely agreed with a statement that the private sector “induces” corruption into the system.

The Hong Kong-based Political & Risk Consultancy Ltd., in a survey put out last week on the corruption perceptions of expat businessmen in the Asia-Pacific region, also noted that private firms play in important role in fostering corruption. And therefore in reducing corruption.

“It takes two to tango and the level of corruption in the public sector would not be possible if there were not plenty of private businessmen willing to pay bribes and work the political system,” said the section on India. “This is why some leading businessmen are bemoaning the telecommunications scandal for the way ‘it has let the genie of corruption out of the bottle’ by revealing how business is conducted in India. The private firms that won the 2-G telecoms licenses are known names, so people can and do see both sides of the corruption equation in this case.”

Here’s a suggestion for a baby step from the corporate world. Maybe what India needs is an anti-corruption counterpart to the “Giving Pledge,” philanthropic effort by Microsoft Corp. founder Bill Gates and investor extraordinaire Warren Buffett.

Instead of promising to give away at least half their assets, rising Indian entrepreneurs, business leaders and the wealthy should promise that at least half or more of their future wealth accumulation will be gathered only through legitimate, law-abiding methods.

What should we call it? The Safai (Clean-up) Pledge maybe?

Riaz Haq said...

Hundreds ill in India after eating adulterated flour, reports the BBC:

Nearly 400 people have been admitted to hospitals in north India after eating adulterated flour, police say.

All the patients had consumed snacks made from buckwheat flour. A mill in the northern state of Rajasthan has been traced as the source, police said.

The patients complained of vomiting, diarrhoea and stomach ache.

Cases of food poisoning have been reported from the capital, Delhi, and towns of Meerut, Ghaziabad and Bulandshar in Uttar Pradesh state.

At least 115 people had been taken to various hospitals in east and north-east Delhi, police said.

They said they have detained a number of people for questioning.

Buckwheat flour is widely consumed in northern India during Navratri celebrations [festival of nine nights] when a large number of devout Hindus shun grains like wheat and rice.

Riaz Haq said...

Here's a Guardian Op Ed by Indian journalist Pankaj Mishra:

Food prices become intolerable for the poor. Protests against corruption paralyse the national parliament for weeks on end. Then a series of American diplomatic cables released by WikiLeaks exposes a brazenly mendacious and venal ruling class; the head of government adored by foreign business people and journalists loses his moral authority, turning into a lame duck.
Even the western financial press, unwaveringly gung-ho about the money to be made in India, is getting restless. Early this year, the Economist asked: "Is Indian capitalism becoming oligarchic?" – a question to which the only correct response is "Hell-ooo". Recently in the Financial Times' Indian business dynasties have been described as "robber barons".

The intimate details about politicians revealed by WikiLeaks still leave you speechless. What can one say about the former cabinet minister, a fervent spokesman for low-caste Hindus, who demanded a large bribe from Dow Chemical Company, which is being helped by senior American officials to overcome its association with the gas leak at the Union Carbide factory in Bhopal that in 1984 killed and maimed tens of thousands of Indians?

Indeed, the cables reveal US business and officials to be as embedded in India's politics as they are in Pakistan's. In 2008, the aide to an old courtier of the Nehru-Gandhi family showed a US diplomat two chests containing $25m in cash – money to bribe members of parliament into voting for an India-US nuclear deal, itself a prelude to massive US arms sales to India. Publicly opposed to the nuclear deal, the leaders of the Hindu nationalist BJP are at pains to reassure American diplomats of their pro-US credentials, even dissing their murderous Hindu nationalism as opportunistic, a mere "talking point".

The cables offer many such instances of the ideological deceptions practised by the purveyors of "Rising India". Virtually all economic growth of recent years, a senior politician admits, is concentrated in the four southern states, two western states (Gujarat and Maharashtra) and "within 100km of Delhi". But why worry? He has nieces and sisters living in the US, and "five homes to visit between DC and New York". As for the entry of retailers like Walmart into India, oh, that "should not seriously hurt the mom and pop stores that form a BJP constituency".

Not surprisingly, the Americans have developed contempt for such representatives of the world's largest democracy, who seem to validate Mahatma Gandhi's extreme denunciations of parliament as a "prostitute". Hillary Clinton gets right to the point in a cabled inquiry about Pranab Mukherjee, the finance minister widely tipped as India's next PM: "To which industrial or business groups is Mukherjee beholden? Whom will he seek to help through his policies? Why was Mukherjee chosen for the finance portfolio over Montek Singh Ahluwalia?" – the last named is a reliably pro-US technocrat.


Visiting the White House in 2008, Singh induced a nationwide cringe when he blurted out to the most disliked American president ever: "The people of India deeply love you." (Even George Bush looked startled.) This love unblushingly speaks its name everywhere in the WikiLeaks cables; even the racketeers of Pakistani military and intelligence appear dignified when compared with the Indians stampeding to plant kisses on US behinds. Singh has presided over an ignominious surrender of national sovereignty and dignity.

Riaz Haq said...

Wikileaks' founder Julian Assange has told Times of India that rich Indians are stashing money in Swiss bank accounts:

Julian Assange, made a stunning disclosure, that there could be Indian names in the data that WikiLeaks would publish. In the course of the interview, Assange appealed to Indians to absolutely not lose hope that the names of those with secret Swiss accounts will come out at one point in the future. Hinting that Wikileaks might work with specialized agencies before releasing the Swiss bank data he pulled up the Indian government for not being aggressive like Germany in going after the list of Indian account holders. In fact he said India should be more aggressive because India seems like it is losing per capita more tax money than Germany

This is the first time Assange has spoken about Indian accounts in these Swiss banks, and comes at a time when the national debate over Swiss Bank accounts has sharpened.

Arnab Goswami: You have strong views on it. And I completely appreciate that you can't talk about it in detail. But let me ask you more generically, that is your heart, you would like to reveal the details...in your heart. I am not asking you when and under what circumstances, but having known about it, you would like to reveal details of how the system operates, wouldn't you?
Julian Assange: Well, we have various types of information about different banking operations in the world. Over time, we have revealed those. In fact, most of the legal attacks on us have been from banks. Banks in Scotland...banks in Dubai...banks in Iceland. We all received legal attacks from these banks. And we will continue publishing data on these banks as soon as we are able to do so.

Arnab Goswami: Have you encountered any Indian names? I am not asking you to tell me where, which banks...
Julian Assange: Yes there are Indian names in the data we have already published or going to publish. I can't remember specifically whether there are Indian names in the upcoming publication. But I have read Indian names. Similarly, in these private Swiss banking concerns, where you need at least a million dollars...which is a significant amount of money...Not an average Indian.

Arnab Goswami: And it is difficult to identify those names. Anything else you can tell us?
Julian Assange: I can't tell you anything more at this stage. As we go through the process of releasing data, as always we have to do extra research. And once we understand which media organizations are best placed to help us with that research, then we operate with them. But we are not at that stage yet that I know all the research that is going on.

Riaz Haq said...

Here are a few excerpts from Wall Street Journal story titled "India's Boom Bypasses Rural Poor":

The Mahatma Gandhi National Rural Employment Guarantee Scheme (NREGA), as the $9 billion program is known, is riddled with corruption, according to senior government officials. Less than half of the projects begun since 2006—including new roads and irrigation systems—have been completed. Workers say they're frequently not paid in full or forced to pay bribes to get jobs, and aren't learning any new skills that could improve their long-term prospects and break the cycle of poverty.

In Nakrasar, a collection of villages in the dusty western state of Rajasthan, 19 unfinished projects for catching rain and raising the water table are all there is to show for a year's worth of work and $77,000 in program funds. No major roads have been built, no new homes, schools or hospitals or any infrastructure to speak of.

At one site on a recent afternoon, around 200 workers sat idly around a bone-dry pit. "What's the big benefit?" said Gopal Ram Jat, a 40-year-old farmer in a white cotton head scarf. He says he has earned enough money through the program—about $200 in a year—to buy some extra food for his family, but not much else. "No public assets were made of any significance."

Scenes like this stand in stark contrast to India's image of a global capitalist powerhouse with surging growth and a liberalized economy. When it comes to combating rural poverty, the country looks more like a throwback to the India of old: a socialist-inspired state founded on Gandhian ideals of noble peasantry, self-sufficiency and a distaste for free enterprise.

Workers in the rural employment program aren't allowed to use machines, for example, and have to dig instead with pick axes and shovels. The idea is to create as many jobs as possible for unskilled workers. But in practice, say critics, it means no one learns new skills, only basic projects get completed and the poor stay poor—dependent on government checks.
But shortly after the program started in February 2006, workers complained that local leaders were docking pay and asking for money in return for job cards. The central government responded in 2008 by sending money directly to workers' bank accounts. But according to workers and auditors, the money takes so long to reach those accounts—up to 45 days—that workers are often forced to accept lesser cash payments from local leaders on the condition that they repay the money at the full amount.

Audits of the program in the southern state of Andhra Pradesh found that about $125 million, or about 5% of the $2.5 billion spent since 2006, has been misappropriated. Some 38,000 local officials were implicated, and almost 10,000 staff lost their jobs.

In one study of eastern Orissa state, only 60% of households said a member had done any of the work reported on their behalf. Earlier this month, the central government gave the green-light for the Central Bureau of Investigation, India's top federal criminal investigation body, to launch a probe into alleged misuse of program funds in Orissa.

In other states, audits are nonexistent or have faced a backlash. Non-governmental groups that have tried to carry out audits in Rajasthan have complained that village leaders often refuse to hand over documents about the employment program. At times, auditors say, they have faced harassment and physical intimidation.

In Nakrasar's one-room village council office, people continue to sign up for the program—many of them women whose husbands have gone to work in urban areas. Shilochandra Devi, a 37-year-old with her program work book in hand, said she could buy more spices because of the program. "And anyway, we're not doing anything else. So why not?"

Riaz Haq said...

Here's an opinion by Taran Marwah of Afund India for July 2011:

All the “reform processes” are on hold in India for the past six months due to scams in various sectors in the Indian economy. Reforms in FDI in Retail, Insurance and Defense etc are in the “cold storage” since January 2011. FDI into India for the period - January to June 2011 is one-ninth than that of China in the same six month period. Plus Indian fiscal deficit is ballooning due to high crude oil prices and Indian Government’s inability to dismantle APM for petroleum products as mentioned above. Such low level of FDI is not a good sign for the Indian Economy. JFI - Indian trade account deficit for last financial year was US $ 105.00 billion. We predict that RBI will further raise interest rates, when its Board meets for monetary policy discussion in the last week of July 2011. We expect a 50 bpts hike in Repo rates by RBI in the last week of July 2011. Analysts feel that the hike will only be to the tune of 25 bpts. Let us wait and see. RBI is willing to sacrifice GDP growth in India at the cost of reining in inflation.

The BSE SENSEX will be bullish if it closes convincingly above 18190. There have been net FII flows into the Indian Equities and Asian Equity Markets in June 2011. If the trend continues in July 2011, then the levels for BSE SENSEX to watch for July 2011 are as follows :
R1 18800 R2 19340 R3 19500
S1 18500 S2 18190 S3 15960 (subject to closing below 18190 for fifteen consecutive days)
We predict that Indian equities will be range bound for the month of July 2011, with a bearish undertone. The levels are as per above figures. But we are bearish for the Indian equity markets for August and September 2011. We will see BSE SENSEX levels lower than 15960 in Q3 2011. By the way Credit Suisse said in its report of June 2011 to its investors that it predicts BSE SENSEX to be around 16000 in Q3 2011 ? We said this or near about (15960) in Q1 2011 ? AOTC – my problem !


Riaz Haq said...

Shares in Infosys have fallen 6% after it said new client numbers hit a four-year low in the most recent quarter, and it had been hit by higher costs, according to the BBC:

The latest quarterly profits from India's second-largest computer outsourcing company also narrowly missed market targets.

Infosys made a net profit of $384m (£243m) in the three months to 30 June, up 18% from a year earlier.

Its revenues for the quarter increased by 23% to $1.7bn.

Infosys said it added just 26 new clients during the three months and that it was having to pay higher wages to attract staff in India's competitive computer industry sector.

The company said it was being affected by global economic uncertainty.

"This is an environment where we need to be cautious. You can look at all the things which are happening," said Infosys chief operating officer SD Shibulal.

"There is still economic instability... there is the European crisis still unfolding. There is always talk about the government spending coming to an end."


Riaz Haq said...

After precipitous drop in FDI, FII inflow into India is also petering out.

Here are some excerpts from an Indian Financial Express story headlined "More FII money to Pak than to India":

Mumbai: Whether Dalal Street likes it or not, India is now the worst-performing market in the world as dark clouds have started cluttering the economic, investment and political horizons. Worried foreign institutional investors (FIIs), who came to India in droves last year, have been pulling out funds with such alacrity this year that even a much smaller — and significantly more volatile and unstable — market like Pakistan has got more foreign inflows in the last six months.
As per figures of the Securities and Exchange Board of India, FIIs have already pulled out $497 million (including GDRs, primary market, stock markets etc) from India from January to June 22 this year. This has come as a big blow to the market which witnessed an inflow of $29.36 billion in the whole of calendar 2010. FIIs took out Rs 14,387 crore (around $3.2 billion) from the secondary market in 2011, bringing the Sensex down from 21,108 on November 5, 2010 to 17,727.49 on June 23, 2011.

Across the border, Pakistan received a portfolio investment of around $230 million in the last six months. That, too, when the Karachi Stock Exchange, its largest, has a market cap of only $35 billion whereas the Bombay Stock Exchange has a market cap of $1,500 billion.
The latest worry of FIIs is the possibility of tightening in rules governing the tax treaty with Mauritius. If both the governments tighten the regulations governing the treaty, the fund flow through this route will come down drastically. “Funds using this route will go elsewhere. India has got minuscule funds FIIs this year,” said a fund manager with a foreign investment firm.

A large chunk of FII investment in the stock market comes through Mauritius as companies registered there are exempted from tax in India under the treaty. The government had recently indicated about reviewing this tax treaty to tighten registration norms and making the fund flows more transparent.


Riaz Haq said...

The Indian economy is in trouble, says Ramtanu Maitra:

Although the economy continues to show high GDP growth, there is a growing disparity between India's sea of poor people and the few at the top of the heap. Out-of-control inflation, caused by the inflow of billions of dollars in hot money, combined with poor productivity due to weak physical infrastructure has resulted in corruption of unimaginable proportions, which has eaten away the gains made earlier. Prime Minister Manmohan Singh, who heads a group of disparate political parties under the banner of the United Progressive Alliance, is busy keeping the coalition government in power by doing little to prevent further deterioration of the nation's economy.
On June 16, the Reserve Bank of India (RBI) raised its benchmark lending rates for the tenth time in 18 months, as a monetary measure to slow down the rampaging inflation monster, which has already greatly hurt the poor, and is now beginning to hit the middle class, which had benefitted in recent years from the GDP growth and wage rise. The earlier nine such monetary measures within the past 18-month period did not slow down inflation. It is inevitable that the high interest rates will attract more short-term hot money into the country, spurring a faster rate of inflation in the coming days.
India has earned the distinction of incurring the highest inflation of major emerging markets. On June 14, the Singh government said inflation had increased 9.1% in May, compared with a year earlier, a rate higher than expected. High inflation was first observed two years ago in the rise of food prices that affected India's poor the most. But since India's hundreds of millions of poor have little voice in directing New Delhi's economic policies, for the greater part of the last two years such inflation was pooh-poohed by Indian economists, accusing the growing army of the middle class of "over-consumption of food." Now, inflation has shown up everywhere, once again, proving the shortsightedness of those economists.
What this picture, which I elaborate below, underscores, is the inescapable truth that if a fundamental shift away from the monetarist system is not initiated in the United States, and soon, we are looking at the literal devastation of the largest population centers in the world, such as India and China. This is, in fact, the concern of all humanity - and must be stopped.
The Growing Anti-Poor Bias Unwilling to change course, and stubbornly defending the failed economic policy, New Delhi is still harping on India's high GDP growth rate. The New York Times reported on June 15, that Kaushik Basu, the government's chief economic advisor, said, in an interview on June 13, that inflation was a problem that all developing countries were facing. "If you look at emerging economies around the world," Basu said, "India's performance looks pretty run of the mill."
But, neither Basu nor others in the Singh government are interested in taking a good look at the damage done by their strictly money-obsessed policies. "The last two years have been a lost opportunity" for India's governing United Progressive Alliance party, Citigroup said this month in a research report.
This monetarist obsession has given rise to full blown inflation across the spectrum. The unprecedented price rise in basic food items is severely impacting hundreds of millions of Indians. Despite the shouting by the globalizers, investment bankers, and their followers within India, millions of Indian families live on a daily diet which consists of cereal - rice, or wheat flour, or both - some vegetables, including onion, and a variety of lentil, or other similar items. Lentils provide the only significant source of protein they have access to, since they cannot afford to buy other high-protein foods, and this includes a large number of people who are non-vegetarians.. .....

Riaz Haq said...

Here's a Times of India story about the impact of corruption on "Brand India":

BANGALORE: Anna Hazare's anti-graft campaign has pushed corruption to the fore again. Corporate honchos say businessmen overseas have been vexed with corruption here for a long time, and this movement addresses their worry too.

Kris Gopalakrishnan, executive co-chairman, Infosys Technologies, said Brand India is affected because of the perception that we can't solve the problem of corruption.

Kiran Mazumdar Shaw, CMD, Biocon, said India has an outstanding business reputation. But people outside feel the cost of doing business in the country comes at a price that may require underhand dealings to get things done. "This perception needs to change," she said.

Krishnakumar Natarajan, CEO, MindTree, echoed that feeling: "Outsiders feel the government is not transparent and India is not an easy place to do business. There is discomfort, especially on issues related to infrastructure," he said.
* Anti-corruption watchdog Transparency International placed India at 87 among 178 countries in the 2010 corruption index. India scored 3.3 on a scale of 10

* Janaagraha initiative ipaidabribe.com shows Bangalore at the top with maximum number of bribes paid. Earlier this week, the site showed 3,641 instances of bribe that amounted to Rs 10 crore. Police, followed by the registration department and municipal services, sought the maximum number of bribes. The site depends on people logging in their bribe-paying details, and therefore is limited to that extent.


Riaz Haq said...

Here are some interesting excerpts from an Outlook India interview with Prof Aswath Damodaran of NYU Stern School of Business:

What risks do the present crisis hold for developing economies like India, grappling for well over a year to curb inflation?

If you are a developing economy you are like a growth company, which is far more dependent on the economy because everything gets magnified. Developing countries are far more exposed to global real economic growth because so much of the value comes from future growth. It is like a mature company is less affected by a recession than a growth company; mature economies are less affected than developing economies by a slowing global economy. Everybody gets hurt, but developing economies in a strange way can get hurt more because everything gets magnified at their level.

So, is India’s current pace of economic growth sustainable?

A scaling effect is going to kick in. It is one thing to grow at 9 per cent a year when you are a smaller economy, but as you get larger people have to get realistic. Policymakers have to realise that planning for 6 per cent real growth for the next 10 years is absurd. As the country scales up, you have got to get more realistic about real growth and have policies in place for what to do as real growth slows down, because it will. It will in India and it will in China. It has got nothing to do with the quality of the policies, it is a fact that as the economy becomes larger maintaining those growth rates is going to be unrealistic.

As we speak, corruption has become a major cause for protests in India....

The way I think about corruption is that it is like paying an unofficial tax. What corruption has done is it has raised the effective tax rate for businesses operating in India from 33.99 per cent to 41, 42, 43 per cent and that lowers investment. It lowers real growth. It has always been a deterrent and it will continue to be so. I think it is important that corruption be dealt with, but you can’t deal with it with an ombudsman, or a group that gets together and says let’s catch corrupt politicians, because it is entrenched in the system. It is built into the system because the salaries of many public servants are set with the implicit assumption that they can supplement that salary by getting paid on the side. It’s almost like waiters in the US get paid a low minimum wage because the assumption is that people will tip them 15 per cent so they can make up that money. It is not going to be easy to take out of the system because you have to revisit the way in which public servants get salaries.


Riaz Haq said...

Indian rupee hit record low amidst high inflation and high twin deficits, according to Wall Street Journal:

The Indian rupee fell to a record low against the U.S. dollar Tuesday as high inflation and a gaping current-account deficit weighed on demand for the local unit, before a recovery in global risk appetite helped trim the greenback's gains.

The dollar was at INR52.30 late Tuesday, up from INR52.16 late Monday, after rising to as much as INR52.725 during the session, its highest ever. The dollar's previous high was INR52.1950 on March 3, 2009.

The pace of the rupee's fall caught most market watchers off guard, forcing firms with unhedged overseas debt to rush for cover, accelerating the fall.

Adding to this, exporters have been wary of locking into a dollar rate for their future revenue, when the dollar's rally may well have more steam.

"The rupee is being swept by a self-fulfilling squeeze--capital is being pulled from hot money markets in Asia, and the rupee is just far more vulnerable than other Asians with its trade deficit," said Sean Callow, a Sydney-based currency strategist at Westpac Bank.

But some argue that the rupee's slide could be on its last legs. UBS, for example, argues that the rupee's fall has less to do with local factors such as inflation and slowing economic growth in India, and more to do with re-rating the rupee to a basket of currencies that's more sensitive to the global economy. The Swiss house advises buying the rupee at this point, as a bet on a global cyclical rebound.

Rupee bulls got a boost when a federal government official told Dow Jones Newswires that the central bank was planning to offer a dollar liquidity window to oil importers. Under the planned window, oil importers would be able to pay for their greenback purchases by selling the central bank the so-called oil bonds, which are issued to them by the government in exchange for selling fuel products at below-market prices.

If this window comes into effect, it would take a key source of greenback demand out of the currency market, helping to ease the rush for the dollar, said the treasury head of a foreign bank.

In the sovereign debt market, Indian government bonds were under pressure on the growing view that the federal government would struggle to stick to its fiscal deficit target.

The benchmark 8.79% 2021 bond ended at INR99.64, from Monday's INR99.76.

Royal Bank of Scotland reckons India's fiscal deficit will overshoot its target of 4.6% of gross domestic product by at least one percentage point because of rising subsidies on food and fuel and dwindling tax revenue.

Traders say an overshoot of the fiscal deficit of that magnitude could push the benchmark bond yield beyond 9%.


Riaz Haq said...

Goldman Sachs' Jim O'Neill, who coined BRIC, says India's performance most disappointing, according to Economic Times:

LONDON: Growth in all four BRIC economies has surpassed expectations in the decade since the term came into existence but India's record on productivity, FDI and reform has been the most disappointing, the chairman of Goldman Sachs Asset Management Jim O'Neill said on Tuesday.

O'Neill, who coined the term, BRIC, in December 2001 to jointly describe the four biggest developing economies, Brazil, Russia, India and China, was speaking at the London leg of the Reuters 2012 Investment Outlook Summit.

"All four countries have become bigger (economies) than I said they were going to be, even Russia. However there are important structural issues about all four and as we go into the 10-year anniversary, in some ways India is the most disappointing," said O'Neill who oversees almost a trillion dollars in assets at Goldman.

Just this week, India's government caved in to opposition pressure and put on hold a landmark reform of the retail sector that was seen opening the doors to billions of dollars in foreign direct investment in the supermarket sector.

The long-awaited measure, passed earlier this month, had been hailed as ending the government's economic reform paralysis that is widely seen as the root cause of high inflation, shrinking capital inflows and a wider current account deficit.

"India has the risk of ... if they're not careful, a balance of payments crisis. They shouldn't raise people's hopes of FDI and then in a week say, 'we're only joking'," O'Neill said. "India's inability to raise its share of global FDI is very disappointing," he said.

United Nations data shows that India received less than $20 billion in FDI in the first six months of 2011, compared to more than $60 billion in China while Brazil and Russia took in $23 billion and $33 billion respectively.

The glacial reform pace has hit India's hopes for double-digit economic growth, O'Neill said, adding: "India is as bad as Russia is on governance and corruption and, in terms of use of technology, Russia is in fact much higher than India."

On the other BRICs, O'Neill said Brazil's main problem was an overvalued currency which puts the country in danger of "Dutch disease" - a term first used to describe how North Sea oil discoveries in the 1960s triggered a surge in Dutch energy exports but also in the Dutch currency, pummelling much of the country's manufacturing. China's challenge was to effectively manage a transition to a higher-consumption economy with slower growth, he said.

O'Neill remains positive on Russia but said much depends on what Prime Minister Vladimir Putin can deliver in terms of reform following an election at the weekend that left his ruling party with a much reduced parliamentary majority.


Riaz Haq said...

Results of PISA international test released by OECD in Dec, 2011, show that Indian students came in at the bottom of the list along with students from Kyrgyzstan:

Students in Tamil Nadu-India attained an average score on the PISA reading literacy scale that is significantly higher than those for Himachal Pradesh-India and Kyrgyzstan, but lower than all other participants in PISA 2009 and PISA 2009+.
In Tamil Nadu-India, 17% of students are estimated to have a proficiency in reading literacy that is at or above the baseline needed to participate effectively and productively in life. This means that 83% of students in Tamil Nadu-India are estimated to be below this baseline level. This compares to 81% of student performing at or above the baseline level in reading in the OECD countries, on average.
Students in the Tamil Nadu-India attained a mean score on the PISA mathematical literacy scale as the same observed in Himachal Pradesh-India, Panama and Peru. This was significantly higher than the mean observed in Kyrgyzstan but lower than those of other participants in PISA 2009 and PISA 2009+.
In Tamil Nadu-India, 15% of students are proficient in mathematics at least to the baseline level at which they begin to demonstrate the kind of skills that enable them to use mathematics in ways that are considered fundamental for their future development. This compares to 75% in the OECD countries, on average. In Tamil Nadu-India, there was no statistically significant difference in the performance of boys and girls in mathematical literacy.
Students in Tamil Nadu-India were estimated to have a mean score on the scientific literacy scale, which is below the means of all OECD countries, but significantly above the mean observed in the other Indian state, Himachal Pradesh. In Tamil Nadu-India, 16% of students are proficient in science at least to the baseline level at which they begin to demonstrate the science competencies that will enable them to participate actively in life situations related to science and technology. This compares to 82% in the OECD countries, on average. In Tamil Nadu-India, there was a statistically significant gender difference in scientific literacy, favouring girls.


Riaz Haq said...

Here are some excerpts of a BBC report on Pakistani PM Gilani's pitch at Davos 2012:

Pakistan's Prime Minister, Yousuf Raza Gilani, has told business leaders attending the World Economic Forum in Davos that his government is stable and Pakistan is open for business.

Mr Gilani tried to convince corporate bosses that despite all the worrying news coming out of Pakistan, his country remains one of the best destinations for foreign investment.

It's a tough sell on his part, not least because of the recent political tensions and a fragile security situation at home. But also because of the country's faltering economy, with its public finances in disarray and growth hampered by the steady erosion of investor confidence.
According to the International Monetary Fund (IMF), Pakistan's economy grew by only 2.4% last year, one of the lowest in the region and way behind India, Sri Lanka and Bangladesh.

At the heart of Pakistan's fiscal problem are some chronic structural imbalances. In a country of 180 million, less than 1% of people pay income tax. Billions of rupees of government revenue never make it into the treasury because of leakages, waste and corruption.

The country's public sector enterprises - such as, Pakistan International Airlines and Pakistan Railways - are ailing due to mismanagement and blatant inefficiencies. Industrial production and exports are hampered by crippling energy shortages, often leading to violent protests.

Absence of private sector investment means fewer jobs and a growing number of unemployed youths. Particularly unbearable for the majority of low-income Pakistani families was the unprecedented continuous double-digit inflation during most of Mr Gilani's four years in office.
Critics of Mr Gilani say that in the face of his government's dismal economic performance, his upbeat statements show the government is either in denial or ignorant of realities.

"During the last four years, we have seen four governors change hands at the State Bank of Pakistan, four finance ministers, four finance secretaries, and five heads of the Central Board of Revenue," points out Dr Ashfaq Hasan Khan, a former adviser to Pakistan's Ministry of Finance.
Economist S Akbar Zaidi believes there is a silver lining and rejects predictions of Pakistan's imminent economic collapse.

"Yes, Pakistan's economy is struggling, but it is not in a freefall or even on the verge of it," he says.
"In fact, in my view, the economy is doing surprisingly better than expected under the circumstances. The economy has shown itself to be much more resilient than many people would like to admit. With necessary structural reforms, Pakistan has all the potential to rise above its current low growth trap."

To be fair, Mr Gilani got off to a bumpy start when he came into office in 2008. It proved to be a disastrous year for Pakistan's economy, mainly due to external shocks it suffered from the sudden rise in world oil prices and the global financial turmoil. .....


Riaz Haq said...

Here's a FirstPost story on India at Davos WEF 2012:

Barely a few years ago, India was the flavour of the season at the World Economic Forum talk-fest in the Swiss Alpine resort of Davos as international moneybags and businesses, looking for the Next Big Thing after China, latched onto the India Story.

They came by the India Adda pavilion, chomped on curry offerings, got a earful of Bollywood beats – and pronounced that India was Everywhere.

This year, after a bruising 12 months of economic mismanagement that saw inflation soar and growth slow down and a whole lot of other things go wrong, the moneybags’ starry-eyed vision of India has faded. India is Nowhere at this year’s Davos gabfest. Indian TV personalities who have made Davos something of an annual pitstop say that the mood among the Indian contingent this year is downbeat, “almost depressed.”

NDTV’s Vikram Chandra reports that a top industrialist told him: “We are back to being on the sidelines, back to watching others take the limelight. Back to the bad old days. It’s feeling as if the India story is over.”

The unnamed Indian industrialist may not be ready to acknowledge it, but the fact that Davos has gone cold on India is perhaps a good thing, given its horrendous record at predicting the future and reading economic ups and downs.

As Clyde Prestowitz, president of the Economic Strategic Institute, notes, Davos has become the platform for an intellectual form of name-dropping and a chance for the select few to gloat that they have been invited to the meeting.

“It’s a combination of competitive vanity and convenience that makes it all work. Glitteratus A begs for an invitation because he/she can’t stand the thought of not being there if Glitteratus B is there. The fact that many are there then makes it easy to do in a few days a lot of business with each other that without the meeting would take weeks or months. So, for organizing a nice party for them, the glitterati each pay… anywhere from $50,000 to several hundred thousand dollars.”

But far from being a forum that sets the economic and business agenda for the world, Davos has been horribly – and embarrassingly – behind the curve in seeing the future. Prestowitz points out that the Davos meeting in 2008, for instance, foresaw none of the cataclysm in the financial markets and the collapse of real estate markets that would define much of that year and the succeeding years.

Just as glaringly, in 1997, these Masters of the Universe labelled Southeast Asia as the world’s most dynamic region, only to see the whole house of cards collapse barely three months later.

The Davos man, writes Prestowitz, “has consistently proven clueless and unable to set an agenda with regard to the global developments on which he is supposed to be the expert.” This is largely because Davos represents the “global establishment”, which by its very nature cannot see anything that doesn’t fit into its orthodox framework, and has a dogmatic faith in the enriching power of unfettered globalisation.…


Riaz Haq said...

Here are some excerpts of BBC's Soutik Biswas's review of Pulitzer-winning New Yorker reporter Katherine Boo's "Beautiful Forevers":

"We try so many things," a girl in Annawadi, a slum in Mumbai tells Katherine Boo, "but the world doesn't move in our favour".

Annawadi is a "sumpy plug of slum" in the biggest city - "a place of festering grievance and ambient envy" - of a country which holds a third of the world's poor. It is where the Pulitzer prize winning New Yorker journalist Boo's first book Behind the Beautiful Forevers is located.

Annawadi is where more than 3,000 people have squatted on land belonging to the local airport and live "packed into, or on top of" 335 huts. It is a place "magnificently positioned for a trafficker in rich's people's garbage", where the New India collides with the Old.

Nobody in Annawadi is considered poor by India's official benchmarks. The residents are among the 100 million Indians freed from poverty since 1991, when India embarked on liberalising its economy.
She used more than 3,000 public records, many obtained using India's right to information law, to validate her narrative, written in assured reported speech. The account of the hours leading to the self-immolation of Fatima Sheikh derives from repeated interviews of 168 people as well as police, hospital, morgue and court records. Mindful of the risk of over interpretation, the books wears its enormous research lightly.
The local councillor runs fake schools, doctors at free government hospitals and policemen extort the poor with faint promise of life and justice, and self-help groups operate as loan sharks for the poorest. The young in Annawadi drop dead like flies - run over by traffic, knifed by rival gangs, laid low by disease; while the elders - not much older - die anyway. Girls prefer a certain brand of rat poison to end their lives.
Boo has an interesting take on corruption, rife in societies like India's. Corruption is seen as blocking India's global ambitions. But, she writes, for the "poor of a country where corruption thieved a great deal of opportunity, corruption was one of the genuine opportunities that remained".

On the other hand, Boo believes, corruption stymies our moral universe more than economic possibility. Suffering, she writes, "can sabotage innate capacities for moral action". In a capricious world of corrupt governments and ruthless markets the idea of a mutually supportive community is a myth: it is "blisteringly hard", she writes, to be good in such conditions. "If the house is crooked and crumbling", Boo writes, "and the land on which it sits uneven, is it possible to make anything lie straight?


Riaz Haq said...

India on verge of financial crisis, says The Guardian:

The Reserve Bank of India (RBI) in Mumbai. The country is facing its own financial crisis. Photograph: Vivek Prakash/REUTERS
India's financial woes are rapidly approaching the critical stage. The rupee has depreciated by 44% in the past two years and hit a record low against the US dollar on Monday. The stock market is plunging, bond yields are nudging 10% and capital is flooding out of the country.

In a sense, this is a classic case of deja vu, a revisiting of the Asian crisis of 1997-98 that acted as an unheeded warning sign of what was in store for the global economy a decade later. An emerging economy exhibiting strong growth attracts the attention of foreign investors. Inward investment comes in together with hot money flows that circumvent capital controls. Capital inflows push up the exchange rate, making imports cheaper and exports dearer. The trade deficit balloons, growth slows, deep-seated structural flaws become more prominent and the hot money leaves.

The trigger for the run on the rupee has been the news from Washington that the Federal Reserve is considering scaling back - "tapering" - its bond-buying stimulus programme from next month. This has consequences for all emerging market economies: firstly, there is the fear that a reduced stimulus will mean weaker growth in the US, with a knock-on impact on exports from the developing world. Secondly, high-yielding currencies such as the rupee have benefited from a search for yield on the part of global investors. If policy is going to be tightened in the US, then the dollar becomes more attractive and the rupee less so.

But while the Indonesian rupee and the South African rand are also feeling the heat, it is India – with its large trade and budget deficits – that looks like the accident most likely to happen. On past form, emerging market crises go through three stages: in stage one, policymakers do nothing in the hope that the problem goes away. In stage two, they cobble together some panic measures, normally involving half-baked capital controls and selling of dollars in an attempt to underpin their currencies. In stage three, they either come up with a workable plan themselves or call in the IMF. India is on the cusp of stage three.


Riaz Haq said...

A gang of #Indian thieves steal bridge in #Bihar, #India. The robbers, posing as #irrigation dept officials, used gas cutters and earthmoving machinery to break down an abandoned bridge in Amiyawar village about 150 km (93 miles) south from #Patna. https://www.scmp.com/news/asia/south-asia/article/3173754/bridge-too-far-indian-police-hunt-gang-accused-stealing-bridge

The robbers, posing as government officials, used gas cutters and earthmoving machinery to dismantle the 60-feet-long iron bridge
Selling metal scrap can be a lucrative business in India, where cases of theft of metal parts from public property to sell are common

Police in India were seeking to arrest members of a gang who dismantled a 60-feet-long iron bridge and likely sold it off in parts as scrap metal, officials said on Sunday.
The robbers, posing as government officials attached with the irrigation department in the eastern state of Bihar, used gas cutters and earthmoving machinery to break down an abandoned bridge in Amiyawar village, about 150 kilometres (93 miles) south from Patna, the state capital.