The Great Indian Story

The great Indian story again ! India has about 50 to 60 billionaires and about 60000 slums where in China has about 120 billionaires and god knows how many slums (I know they have ghost cities - Thanks to Prof Barrows). Know why am i comparing my country with China - because an average Chinese is richer by 2% as on date and i am poorer by 16% because of currency performance. Infrastructure as a percentage of government spending in India was 22% way back in 2007 and in the due course of five years, probably we felt that we are sufficiently developed that it has come down to about 10%. 

Today we speak about food security bill (as i speak, it is being passed) and attending to the needy. What a joke! one that the official statistics show that only 22% of Indian population is below poverty line however it is very puzzling that the food security bill covers more than 65% of the population. I am not here to argue whether we need this bill at this point. With due concern to poverty and attending to the poor people, i have high level of sympathy for them but sorry folks no money. We talk about the needy in a world where my grand father still has to walk 3 miles (again thanks to fabulous infrastructure) to the near by Indian Bank to apply for his "kisan vikas loan". But unfortunately he has not taken the course on operations management and does not realize that the average cycle time for granting a loan to a needy farmer in India is about 3 months. So by the the time the loan is granted, Pongal has gone by and the paddy is cut. Much of the food wastage (more than 30% of grains and food products at FCI is wasted) in India is not just because of poor handling at FCI godowns but a lot because of poor productivity ! Thank God that this year we had a better monsoon and so the food prices should not go up. 

Just tying the knot between poor supply chain practices, the China comparison, and the poor financial system - India has failed in developing the manufacturing sector and as a result still has to rely on Agriculture and to some extent today on Services for its sustenance  As the Indian economy grew between 1990 and 2012, the manufacturing sector failed to grow and we don't want it grow. Much of it could be related to the neo capitalist liberalization: I am not against it for i believe in "Adam Smith - Invisible hand" however India was confused in its course of journey as to whether it is an open or a closed economy. The data published end of August saw Manufacturing growth declining and has achieved the five year worst. It adds no proof to claim that India does not have manufacturing capability. The fact of the matter is - The government has about Rs 7,00,000 crores (I have not inflated any zeros) worth of projects pending approval at least for the last six months among them is the Rs 20,000 crores Vedanta project in Orissa. Without getting into the sympathetic aspects of this issue, we have just left this case (Vedanta case) to be decided by a bunch of panchayats, who govern 35 families in that village (Anil Agarwal must be really happy about this). 

50GW of power plants are shutdown because we don't have coal (for we don't want to give coal after supreme court has put a ban on Coal mining in many parts of India - Thanks to corruption) and corporate India is importing $20bn of coal this year. In addition, thanks to the retrospective amendment of tax that was brought back in 2011 - as a result, we are driving away investors: Nokia, IBM, Vodafone ! Gold imports are curbed, Color television import is being scrutinized (I should be careful even carrying a piece of cigarette for it might attract import duty), and implementing petty capital controls - Penny wise POUND foolish (Sterling Pound is strengthening so wish to put it in capitals). Besides this is the land allocation rule thus making it virtually impossible for the private sector to get any land for industrial activity. Even if they wish to seek, the cost of securing the land might be greater the income generated from the industrial activity. 

All this tells me that hos fascinated we are with this so called term "Raj". Earlier the kings (Raj) ruled us, then we moved to British Raj, followed by License Raj, and now the Resource Raj. I might contend that in the game of vote politics, we don't want any government that comes to power to implement any FDI reforms immediately and all we need is to retain current investor (both domestic and intl) confidence and attack the supply side constraints rather than curbing demand (by not increasing interest rates - Mr RBI, good that you remember Taylor principle but that is largely applicable when you have a developed economy).