In this paper we study the economic evolution between 1960 and 1995 of two states in India â Maharashtra and West Bengal. During this period West Bengal, which was one of the two richest states in India in 1960, has gone from a relative per capita income of about 100 percent of Maharashtra, to a relative income of around 60 percent. Our diagnostic analysis reveals that a large part of the blame for West Bengalâs development woes can be attributed to: (a) low aggregate productivity (b) poorly functioning labor markets and sectoral misallocations. We find that sectoral productivity and labor market allocation wedges were strongly correlated with political developments in West <b>Bengal, namely the increasing vote share of the leftist parties.</b><!--QuoteEnd--><!--QuoteEEnd-->
<b>General Electric chief executive betting on India for long-term growth</b>
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->"We have had a great run in India and it has changed over time. This is the right time to invest in the market," Jeffrey Immelt, 49, chief executive and chairman of GE, told a meeting of industrialists.
"In the past, anytime we invested in the people of India, we made a lot of money and anytime we invested in the market of India, we lost. We now need to be as bold on the market side," Immelt said.
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Yemen Airlines recently came to India for campus recruitment â to hire cabin crew. It was following British Airways, Virgin, Royal Jordanian and Emirates, all of which have already hired from Indian training institutes.
Foreign airlines are airlifting Indian cabin crew by the dozen. <b>Around 21,000 new jobs are going to be created in this sector in the next three years </b>â thanks to an increasing number of carriers either starting shop or expanding their service networks. Of this, 60 per cent of the jobs are going to be with foreign airlines (last heard, the number of weekly flights to Germany are going to be upped to 50 from winter this year â from the current 27).
Taking off simultaneously is the cabin crew training sector â a market that, according to K.S. Kohli, chairman, Frankfinn Institute of Air Hostess Training, opened up in 2000 and will be worth around Rs 1,500 crore in the next three years. <b>There are already 230 training institutes for this sector in the country</b>.
When foreign airlines recruit, only 20 per cent of the advertisements come out in the public domain in India. Training institutes source the remaining 80 per cent.
Why are Indian cabin crew flying high? âIndians come for one-third the salaries that people in the US or Europe get,â says Kohli. Emirates, for instance, pays around a lakh to Indians âbut if they hire someone from the US or Europe, theyâd have to pay thrice over.
âThe price of labour here is cheap, but the quality is world-class,â says Pammi Talwar of the Air Hostess Training Institute that is affiliated to Rai University, and gives a Bachelorâs degree in the field for a three-year course.
<!--QuoteBegin-Mudy+May 28 2005, 07:47 PM-->QUOTE(Mudy @ May 28 2005, 07:47 PM)<!--QuoteEBegin-->In 2 weeks, decrease of USD 2 billion. India is paying Oil bill or slow down in economy or mismanagement?<!--QuoteEnd--><!--QuoteEEnd-->
<i>The fall in the inflows is mainly due to revaluation of international currencies including appreciation of the US dollar, analysts said.</i> http://www.samachar.com/openbin/redirect.v...e~by~$520m
GANDHINAGAR, MAY 28: Gandhinagar, recognised as the ââgreenest cityââ is now eyeing the ââsolar cityââ tag.
The Narendra Modi Government has envisaged an ambitious project to encourage the use of solar power and install non-conventional energy systems in government buildings.
<b>The solar cookers and water heaters are already popular in the state, said Gandhinagar district collector Sonal Mishra. Now the idea is to take forward the process to introduce lights, pumps, power plants and rickshawswhich will be operated by solar batteries. Large scale use of solar distillation plants, dryers and heaters will also be started, Mishra added. </b>
<b>Infrastructure takes a big hit in April 2005</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->NEW DELHI, MAY 27: A massive 7.5 per cent fall in the growth rate of electricity production pulled down the overall infrastructure growth rate by close to 7 per cent during the month of April 2005 compared with April 2004.
Data released by the ministry of commerce and industry on Thursday shows that five of the six core sectors had shown a dip in growth rates during the month of April 2005 vis-a-vis April 2004. The overall growth rate for the month of April 2005 was 3.6 per cent while in April 2004, the same six sectors registered an impressive growth of 10.5 per cent.
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<b>India sheen glitters as China crawls: CLSA </b>
Jim Walker of CLSA says that a downturn in China is likely in the next two years. This is likely to put the foreign investor focus squarely on India.
Jim Walker of CLSA says that China is unlikely to see steady growth as in the past, and a downturn is likely in the next two years. This is likely to put the foreign investor focus squarely on India, he adds.
According to Walker, Chinaâs GDP growth is expected to slow down to 6% in 2006, though 2005 may see it growing by 8-9%. The country's corporate profitability is also under pressure. The Chinese authorities are not talking about revaluating the yuan any time soon, either, he adds.
While the demand for oil is set to rise further, the pressure from China should actually ease, Walker said. Again, while commodity prices should remain firm and the commodity upcycle is expected to continue, no spectacular rise in demand is seen.
On the sidelines of the China slowdown, CLSA's view on Indian companies is positive as they focus on ROCE's and ROI's. Walker says, that foreign investors are expected to focus on India as China weakens, going forward.
Excerpts from an exclusive CNBC-TV18 interview with Jim Walker:
On the expected China slowdown.
I do not think we are going to see that kind of steady growth, as over the last couple of years. We see China having cycles, the same as every other country in the world over the course of the next two years. We expect the cyclical down turn to be a nasty one. This year, there should be plenty of momentum in the Chinese economy and they are starting to struggle with profitability. This year, we are looking at 8-9% GDP growth, far off last year's mark. Next year, we are looking at 6-7%, and in 2007 we expect things to be significantly slower.
On how the slowdown will translate into investor interest in India.
The Indian companies and the corporate sector in India are more focused on the returns from the capital, returns from investment, and returns from equity. The China model was much more market-shield driven, which means they have very little interest in profitability. So I think foreign investors are going to increasingly turn to India, looking for opportunities to invest in the Indian economy, especially given the steady growth and the focus of companies. In China, they are going to get through the cycle and domestic demand is increasing. But the growth in China is going to take a long time, before it turns into profitability.
Whether the China slowdown will have a big impact on commodity prices.
The good news is, there is very strong capital construction cycle going on in China, where infrastructure is being built and urbanisation is an ongoing process. We expect the long cycle to continue and that is the main area where the commodities are consumed. As for the machinery and machine tool area, we expect to see a severe downturn in the investment cycle. So the commodity side will hold up reasonably well, although the growth rate will be weighed down from the last two to three years. It is for the machines and machinery equipment that the Japanese and European manufacturers need to watch. They have been having a field day over the last few years.
On whether the China slowdown will be a negative for oil prices.
I do not think it is really negative. There will still be continued uptake in the demand for oil. People are expecting 15-20% increase each year and I think they are going to be disappointed. Next year, I would expect China to grow in its demand in single digits and even in the year after in mid-single digits.
On when the revaluation of the yuan may come.
The Chinese authorities are not talking about very much. Increasingly, they are concerned about developments within the economy. The removal of the textile tariffs on some of their exports is almost a pre-emptive retaliation against the US and the EU for putting on such controls on Chinese textiles. As a result of that, the manufacturing sector has stopped creating new jobs in China. This is very serious for the Chinese. This will undermine the possibilities of job creation and economic growth, and that means a very slight move on the yuan, if any at all.
William T Wilson, chief economist for Keystone India which facilitates the flow of trade and investment between the US and India, said: "Demographics and economic reform are driving India's growth."
The Indian economy will be the third largest after the US and China in another 25 years, he said.
<b>"With half the population under the age of 25, India will have the youngest labour force in the world, and its population is expected to exceed China's by 2030."</b>
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<b>India's IT exports soar by 34.5 pc</b> <!--emo&:ind--><img src='style_emoticons/<#EMO_DIR#>/india.gif' border='0' style='vertical-align:middle' alt='india.gif' /><!--endemo-->
BANGALORE: <b>India's software and service exports soared 34.5 percent to 17.2 billion dollars in the last fiscal year</b> as companies from abroad outsourced more work, an industry lobby group said on Thursday.
<b>Including domestic revenues, Indian companies earned 22 billion dollars in the year ended March 2005 from software and related services,</b> compared to the previous year, the National Association of Software and Services Companies said.
The pace is expected to continue for the current fiscal year started April 1, with exports in the industry expected to rise 32 per cent, the association said.
Of the total exports, outsourcing services such as software programs, billing, customer management and accounting, grew 44.5 percent to 5.2 billion dollars or 44 per cent of the worldwide total, the association said.
"The Indian software and services industry has been able to maintain its growth and momentum and consolidate its partnership with overseas customers adding to their competitiveness," said S. Ramadorai, chairman of the association said.
"The industry also scaled record levels of employment during the last year with the employee base crossing the one-million mark," he told reporters in the high-tech city of Bangalore, home to more than 1,500 domestic and foreign technology firms.
Kiran Karnik, president of the association which has about 900 members, said the Indian software industry was on course to reach a target of 50 billion dollars in sales by 2009.
<b>Commentary: India's fiscal advance, sadly, is an illusion</b> <!--QuoteBegin-->QUOTE<!--QuoteEBegin-->The proverbial light at the end of the tunnel for India's chronic budget deficits has turned out to be the headlight of an oncoming train. India's federal government announced this week that its most recent full-year deficit was 1.28 trillion rupees, or 4.1 percent of gross domestic product, the lowest since 1997.
Just three months ago, Finance Minister P. Chidambaram forecast the shortfall at 4.5 percent of GDP, unchanged from the previous fiscal year. He then said that deficit reduction, which is what investors and rating companies want the highly indebted Indian government to make its priority, was in a "pause" mode.
So what changed between Feb. 28, when the forecast was made, and March 31, when the fiscal year ended? While bond traders may be tempted to believe that Chidambaram has lifted his finger from the pause button and hit "fast forward," the reality is different.
<b>What's being paraded as a way out of the tunnel of fiscal imprudence is an illusion. One part of the drop in deficit is not sustainable; another part, if it is allowed to continue, may curb the economy's potential to expand. Lackluster growth is a recipe for a disastrous accident of the kind that in the past jolted similarly indebted nations - Argentina and Turkey.</b>
The government saved 52 billion rupees by cutting "plan expenditure," which is what creates new productive capacity and fuels economic growth. There was a gain of similar magnitude in the "nontax revenue," which includes the interest the government earns on loans to provincial authorities and the dividends and profits it gets from state-owned companies and the central bank.
It's a windfall. Only once in the previous six years did the government underestimate in February what it was going to earn as nontax revenue in the year up to March. That was in 2004. And at that time, the difference between what was predicted and realized was only 5.8 billion rupees. The gap is almost 10 times larger now, forcing one to question the validity of the forecast.
The two factors - the squeeze in plan expenditure and the jump in nontax revenue - together accounted for 93 percent of the net improvement in the budget deficit over the February forecast.
The reduction in India's headline budget deficit is taking place just the way economists say it shouldn't.
"In addition to deficit reduction per se it is the manner in which this is effected" that matters, Errol D'Souza, an economist at the Indian Institute of Management, Ahmedabad, wrote in the journal Economic and Political Weekly. "Reduced public investment and increased tax rates aren't as effective as cuts in current expenditures (including subsidies) and the public wage bill."
To be sure, Chidambaram isn't raising tax rates. He has just cut the corporate tax levy to 30 percent, from 35 percent.
That's the most he has been able to push. The government's Marxist backers who are opposing its plan to raise about half a billion dollars by selling a 10 percent stake in a state-run power-equipment maker are unlikely to allow a major cutback in subsidies.
As a result, the federal government wants to make new investments worth only 1.9 percent of GDP this year. That's the lowest in four years, and clearly inadequate to meet the needs of the second-fastest growing major economy after China.
One can argue that India's entrepreneurs should be the ones making investments, with overseas investors filling in wherever required; the government bureaucracy is inefficient, and should therefore have no role beyond regulation.
That argument would perhaps be true in another 20 years. The kind of investments India needs most urgently is in basic infrastructure where gestation periods are high and returns low.
<b>India will need $46.5 billion for improving urban transportation over the next two decades; it will require another $38 billion between now and 2021 for water and sanitation in urban areas.
The government must spend $40 billion over the next 10 years to widen highways, and invest $13 billion a year to meet the country's power needs, the International Monetary Fund estimates</b>.
All of this adds up to a lot of money, and the government won't find it in the local bond market. Unless real interest rates decline, the economy will have to become super-efficient, generating $1 of GDP for every $1 of investment, only to stabilize public debt at an already-high 81 percent of GDP, IMF researchers say.
Nothing about India's budgets is as it seems. This year's deficit target of 4.3 percent was set after removing from consideration 290 billion rupees of the federal government's expenditure: the money it lends to provinces for financing their economic plans.
It was an independent commission that ordained that provincial governments raise the money directly from the market. Even so, the expenditure remains intact on the consolidated accounts of the federal and the state governments. A combined deficit of about 9 percent of GDP is what spooks rating companies like S&P, which rates India's local-currency debt below investment grade.
Without this accounting change, the federal deficit would, instead of falling to 4.3 percent, rise to 5.1 percent, D'Souza, the economist, estimates. A one percentage point jump in the deficit from last year just when rising interest rates are likely to push up the government's debt-servicing costs would mean asking to be hit by that oncoming train.
When it comes to paring deficits, Chidambaram isn't in a pause mode. He is actually rewinding the tape - not because he wants to, but because the Marxists won't have it any other way.
The proverbial light at the end of the tunnel for India's chronic budget deficits has turned out to be the headlight of an oncoming train. India's federal government announced this week that its most recent full-year deficit was 1.28 trillion rupees, or 4.1 percent of gross domestic product, the lowest since 1997.
Just three months ago, Finance Minister P. Chidambaram forecast the shortfall at 4.5 percent of GDP, unchanged from the previous fiscal year. He then said that deficit reduction, which is what investors and rating companies want the highly indebted Indian government to make its priority, was in a "pause" mode<!--QuoteEnd--><!--QuoteEEnd-->
2 June 2005: Pushed by the Delhi government and the Union tourism ministry, the lieutenant-governor of Delhi, B.L. Joshi, has taken a decision in principle to earmark twenty to twenty-five plots for four- and five star hotels in Central and South Delhi.
Officials said that Delhiâs masterplan would be changed to accommodate these new hotels, and there is likelihood that the FAR (floor area ratio) would be increased for them.
Due to the perennial shortage of hotel rooms in Delhi, leading to high rentals, sudden cancellation of reservations, and the consequent distress to tourists, plus the threat that the Capitalâs tourism business would flow partly to less choked suburbs, the tourism sector increased the pressure on the government to permit new hotels.
Once the Delhi government and the Union tourism ministry were convinced that sufficient domestic investments would flow to the new hotel projects, the next step of convincing the Union urban development ministry and the lieutenant governor was taken up. http://www.indiareacts.com/nati2.asp?recno=3328&ctg=
<b>Lobbying on to clear Jet Airways flight to US</b>
3 June 2005: <b>Being probed by the US department of homeland security for links with the Al-Qaeda and Dawood Ibrahim, Jet Airways has moved sections of the government and the NDA opposition to lobby with America and American firms not to bar its inaugural Mumbai-Newark flight on 23 June. </b>
Delaware-based Jet Airways Inc CEO and president Nancy M.Hackerman alleged Jet Airways (India)âs terrorist connection in a complaint to the US department of transportation on 23 May, which has forwarded the matter to homeland security for investigation.
Jet Airways (India) has reacted to the complaint, saying Hackermanâs allegation arose from a dispute over a similar trade name, which the transportation department was not competent to investigate, but sources said with the entry of homeland security, which is ruthless and thorough in its investigation of terrorist links, it could mean delays, and worse.
<b>Officials said certain UPA ministers are demanding a quid pro quo for purchasing Boeing aircraft for Air India, by allowing Jet Airways (India) to fly to the US, and some middle-ranking politicians of the BJP are also involved in this lobbying, but the Bush administration wants to take no chances on a terrorist alert against any airline coming to America. </b>
It was extremely revealing traveling from Europe to India as French voters (and now Dutch ones) were rejecting the EU constitutionâin one giant snub to President Jacques Chirac, European integration, immigration, Turkish membership in the EU and all the forces of globalisation eating away at Europeâs welfare states. It is interesting because French voters are trying to preserve a 35-hour workweek in a world where Indian engineers are ready to work a 35-hour day. Good luck.
Voters in âold EuropeââFrance, Germany, the Netherlands and Italyâseem to be saying to their leaders: Stop the world, we want to get off; while voters in India have been telling their leaders: Stop the world and build us a stepstool, we want to get on. I feel sorry for Western European blue-collar workers. A world of benefits they have known for 50 years is coming apart, and their governments donât seem to have a strategy for coping.
One reason French voters turned down the EU constitution was rampant fears of ââPolish plumbers.ââ Rumours that low-cost immigrant plumbers from Poland were taking over the French plumbing trade became a rallying symbol for anti-EU constitution forces. A few weeks ago Franz Muentefering, chairman of Germanyâs Social Democratic Party, compared private equity firmsâwhich buy up failing businesses, downsize them and then sell themâto a âswarm of locusts.â
The fact that a top German politician has resorted to attacking capitalism to win votes tells you just how explosive the next decade in Western Europe could be, as some of these aging, inflexible economiesâwhich have grown used to six-week vacations and unemployment insurance that is almost as good as having a jobâbecome more intimately integrated with Eastern Europe, India and China in a flattening world.
<b>To appreciate just how explosive, come to Bangalore, India, the outsourcing capital of the world. The dirty little secret is that India is taking work from Europe or America not simply because of low wages. It is also because Indians are ready to work harder and can do anything from answering your phone to designing your next airplane or car. They are not racing us to the bottom. They are racing us to the top. </b>
Indeed, there is a huge famine breaking out all over India today, an incredible hunger. But it is not for food. It is a hunger for opportunity that has been pent up like volcanic lava under four decades of socialism, and itâs now just bursting out with Indiaâs young generation.
ââIndia is the oldest civilization, the largest democracy and the youngest populationâalmost 70 per cent is below age 35 and almost 50 per cent is 25 and under,ââ said Shekhar Gupta, editor of The Indian Express. Next to India, Western Europe looks like an assisted-living facility with Turkish nurses.
Sure, a huge portion of India still lives in wretched slums or villages, but more and more of the young cohort are grasping for something better. A grass-roots movement is now spreading, demanding that English be taught in state schoolsâwhere 85 per cent of children goâbeginning in first grade, not fourth grade. ââWhatâs new is where this movement is coming from,ââ said the Indian commentator Krishna Prasad. ââItâs coming from the farmers and the Dalits, the lowest groups in society.ââ Even the poor have been to the cities enough to know that English is now the key to a tech-sector job, and they want their kids to have those opportunities.
The Indian state of West Bengal has the oldest elected communist government left in the world today. Some global technology firms recently were looking at outsourcing there, but told the communists they could not do so because of the possibility of worker strikes that might disrupt the business processes of the companies they work for. No problem. The communist government declared information technology work an âessential service,â making it illegal for those workers to strike. Have a nice day.
ââThis is not about wages at allâthe whole wage differential thing is going to reduce very quickly,ââ said Rajesh Rao, who heads the innovative Indian game company, Dhruva. It is about people who have been starving âfinally seeing the ability to realise their dreams.â Both Infosys and Wipro, Indiaâs leading technology firms, received more than 1 million applications last year for a little more than 10,000 job openings.
Yes, this is a bad time for France and friends to lose their appetite for hard workâjust when India, China and Poland are rediscovering theirs.
Israelis coming to India
More than 10,000 men and women make their way towards places like Manali, Dharamshala and Kasauli every year where they find peace in Hinduism, nature, and, sometimes, drugs. Many marry locals, convert to Hinduism and cut off all contact with family in Israel.
