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[Asian Union]

India's Economy: How Bad Is It?

A 52-year-old handyman who has lived in New Delhi for 30 years, Ram Samujh has seen bad times before. But these days, as India faces an economic slowdown amid double-digit inflation, the future looks especially bleak.

“There's no more cutting back for me,” says Samujh, a soft-spoken, gray-haired man who carefully takes out a pair of rimless reading glasses. “I'm already down to only the absolute necessities.”

“I'm a daily worker,” said Samujh, whose skills give him a leg up on most Indian laborers. “One day I might get three jobs. But then I might go a week without any.”

Over the past three years, as prices for food and other essentials soared, Sadmujh was also able to charge more for odd jobs like installing new electrical outlets, repairing small appliances and fixing clogged drains. But with India's economic growth slowing to a nine-year low of 5.3 percent for the quarter ended March 31 and 6.5 percent for the fiscal year, Samujh's middle-class employers are also beginning to feel the pain — even as economists predict that prices will continue to skyrocket.

“Things are getting very expensive,” said Bharat Singh, who, as a sub-inspector with the Delhi Police, falls smack in the middle of the $4,000-$10,000 income bracket that economists here define as the middle class.

“Vegetable prices have gone up 25 percent. They are going to increase school fees 20 percent next term. We're no longer able to save any money,” Singh said.

“I'm afraid. I'm really afraid. How will I arrange all the things in the coming months, or coming years. I am afraid to see the future.”

How bad is it?

Many middle-class Indians like Singh — who has three sons, two in private schools and one in college — have already eliminated luxuries like going to the movies and adopted simple economies like eating vegetarian five or six days a week. As car owners getting by on relatively modest salaries, the middle class was hit hardest by the government's move to hike petrol prices nearly 10 percent last month. And though India's labor laws protect them from layoffs, they now face ever greater competition for a stagnating number of jobs, hiring freezes and, possibly, wage cuts — prompting a leading national news weekly to ask: “Was it just a mirage then?”

The short answer may well be yes. Or as Ruchir Sharma, head of emerging markets at Morgan Stanley in New York, puts it: India now has only a 50-50 chance of making it to the ranks of developed nations by 2050.

Though 6.5 percent growth no doubt looks pretty good to countries where a full-on recession is looming, India's economy slowed steadily throughout the fiscal year. And the nature of the growth was not too encouraging, either.

“A lot of the income growth is coming from people selling their land,” said Bibek Debroy, an economist at the New Delhi-based Center for Policy Research. “That's part of the India story, for better or for worse. Parts of India are getting urbanized. So I have a plot of land that is valuable, and I sell it off.”

Real estate gains — which don't create jobs — accounted for an unhealthy part of India's economic growth in the fourth quarter, when it slipped to 5.3 percent. Worse still, India needs to grow at nearly twice that rate to keep its head above water. Because of its expanding population, it needs to create about 12 million new jobs a year to employ the young people entering the work force — which might just be possible at a 9 percent clip, according to Debroy.

But even that's only the tip of the iceberg. To lift some 600 million farm laborers out of poverty, or near to it, India needs more than simple industrialization, it needs a complete metamorphosis. And over the past three months, its nascent manufacturing sector contracted instead of growing.

“The question is not whether we're growing faster than the rest,” said Dharmakirti Joshi, chief economist at Crisil, the India arm of the credit agency, Standard & Poor's. “The question is whether we're growing fast enough to solve our problems. Clearly, we are not.”

That means that the only thing trickling down these days is belt-tightening.

“The poor man's wages have risen quite swiftly until last year. That cushioned them against inflation,” Joshi said. “The high growth we saw allowed people to pay more for household services, more for their drivers, more to farm laborers. But can wages keep rising at the same rate if the economy slows to 6 percent? I don't think so.”

On Monday, Crisil lowered its growth forecast for this year to 6.5 percent from 7 percent. And that could well drop further, if the troubles in the euro zone get worse, oil prices climb back up, or India's government continues to falter.

And wages?

“There's no point in asking for more money now, because nobody will give it,” Samujh said. “It's better to concentrate on keeping my clients happy.”

What's next?

India's business leaders have called for stimulus measures, beginning with an interest-rate cut. And economists like Crisil's Joshi have predicted that some such moves are in the offing — such as fatter tax breaks for export- and labor-intensive industries, and a deep cut to interest rates if growth continues to lag below 6.5 percent.

But it will take more than rearranging the deck chairs to stop the ship from sinking.

“Reform is a generic word,” said Joshi. “You can't ignore the governance and execution aspect of things, which has led to some pessimissm about India right now.”

The conventional wisdom is that India's economic woes stem from “policy paralysis,” a catchphrase that refers to the current government's failure to push through business-friendly economic reforms like loosening the rules on foreign investment for big retailers like Walmart. And, indeed, as the caretaker of a weak coalition government, Prime Minister Manmohan Singh hasn't achieved any big bang reforms, like deregulating fuel prices or selling off beleaguered Air India to end a depressing cycle of multibillion dollar bailouts.

The recent move to hike petrol prices may signal that the economist PM is now ready to rock. And Joshi points out that every Indian government has typically taken a “firefighting approach” to the business of running the country.

“I would not lose hope completely,” Joshi said. “Now there is enough fire, so I would expect some action.”

But the paralysis runs much deeper than policy. And, ironically, the root of the problem may not lie with Singh's recalcitrant partners in the United Progressive Alliance (UPA) — who stopped him from throwing open the doors to Walmart. It may have originated with the very same middle-class Indians who are now complaining the loudest about the slowdown.

The reason? It was the normally apathetic middle class that first fueled the anti-corruption campaign led by social activist Anna Hazare, which brought tens of thousands of Indians onto the streets last summer. Now, as the mass movement takes on the character of a witch hunt, the calls for blood just keep getting louder. And the fear of being targeted in a Central Bureau of Investigation probe has brought the already sluggish bureaucracy grinding to a halt.

Here's why.

Leaving corruption aside for a moment, India normally functions less by policy than by edict. Sure, there's a law at the root of every government activity. But it translates into action only when, say, the minister of education or rural development issues instructions to the secretaries and joint secretaries who actually make things happen.

By “moving a file,” the bureaucrats clear the actual projects, choose the contractors, and so on. In the current climate of fear, however, these bureaucrats are demanding their instructions in writing, and their ministers are afraid to comply, say insiders.

“The damn problem is not coalition politics and FDI in retail and petroleum product prices,” said Debroy. “The issue is that no one takes decisions, full stop.”

http://www.cnbc.com/id/47711508/

[blueazure]

what steps is the indian gov't taking to control its rising population ? we know china's largely unpopular one -child policy started in 78 is now bearing fruit. china projected population for 2040 is the same as today...  

and Pakistan is no different im afraid...  there seems to be no central policy to check the rising population which is already straining our limited resources.

[Caesar]

The topics already exist somewhere on PDF. Anyway what a load of Bollock, ground realities point to towards a weak and disintegrated Pakistan.

[butterfly]

Actually in gulf news a couple of days ago there was a two page article on Indian women selling their kids for 65 dirhams which is equivalent to about £11.
We should focus on ourselves not manage Indias fall. Put our house in ord and let the Indians sort out theirs.

[PakShah]

butterfly, on 08 August 2012 - 08:17 AM, said:

Actually in gulf news a couple of days ago there was a two page article on Indian women selling their kids for 65 dirhams which is equivalent to about £11.
We should focus on ourselves not manage Indias fall. Put our house in ord and let the Indians sort out theirs.

It is true that we need to fix our house, but at the same time butterfly the myth of "rising India" is starting to fall down like a house of cards.

When NATO leaves Afghanistan in 2014, it will be a different world.

India knows that it needs to solve the Kashmir dispute according to just and moral principles or India has to face the consequences.


India and Pakistan won't use nuclear weapons.

Nuclear weapons is only useful when you are the weaker party.

Insh'Allah  we will get what is rightfully ours from Indian occupation!

Even the Chinese detest India, because China has a territorial dispute with India over South Tibet.

The Chinese want their land back.

This Global War on Terrorism seemed as if it was designed to slow the growth of Pakistan and buy India some time, but this stupid plan failed miserably and only hurt the west the most.

Most Non-Muslims in the west either don't know or don't care about Muslims in Central Asia, Pakistan, the Middle East, South Asia, South East Asia, and North Africa

[Reality Bites]

I had betted with an Indian friend $5,000 two years ago that Indian economic bubble bust will happen within 3-5 years and it has already started. Mark my words, the very reason for which West invested in India did not come true.

For example, all car makers came to India thinking that it is 1.3 billion people market but then they realized that no matter how affluent Indians get, 95% will never buy cars. Then they thought Indians will buy their arms but India will completely collapse if it spends too much on dfense like Soviet Union, and now see they are not permitting even Wal-Mart.

I rember this guy who owns King Fisher Airline I met in Toulouse in September 2007 when he had come to place order for 6 Airbus A380 was so damn arrogant and now he is hairline close to bankruptcy because there is no more cash left to save it. He has already sold his cash cow beer business. You cannot make an airline succeed just by hooter like half clad flight attendants.

RB

[Caesar]

You fellows can day dream and wet dream or whatever ..... I believe in facts not fairtales. The facts are Indian people are extremely patriotic, have strong democratic institutions and economy much stronger than many asian countries.

Pak is the exact opposite, filthy unpatriotic, racist people hell bent on killing thier own people, corrupt and dishonest military and political instutuitions and filthy retarded businessmen. And most important of all Pak has been in war for more than 10 years with terrorists which Pak itself created to please its dog master the USA. This dog is now getting a beating from those terrorists and I don't see for how long this country will survivie.

Prove that what I am saying is wrong .... Don't give me religious Bull-cra.p reasoning ... give me economic reasoning and ground realities that I am wrong.

[paglaman1]

I agree with above. Indian economy right now is merely seeing a correction depending on the global ups and downs. Its not as if everyone else is doing great and and India is in the pits. Its a trillion dollar economy which, even at its worst times, is growing at a good 6+ percentage of GDP -- thats a lot of money coming into the fold. FDI has been the highest this quarter in 10 years. So, whoever that person was who betted $5k for a "bubble burst", please hold your horses. The skewed distribution of wealth in India (about mothers selling kids) has been an old malaise, nothing new, and there is a free press and democratic institutions in place which addresses such problems. Of course India is not an Utopia, but it isnt going down the pits either. the moment it does, there are enough checks and balanceswithin the system itself to bring in fresh blood, new hope, new ways.

[PAKPATRIOT]

Caesar, on 10 August 2012 - 09:47 PM, said:

You fellows can day dream and wet dream or whatever ..... I believe in facts not fairtales. The facts are Indian people are extremely patriotic, have strong democratic institutions and economy much stronger than many asian countries.

Pak is the exact opposite, filthy unpatriotic, racist people hell bent on killing thier own people, corrupt and dishonest military and political instutuitions and filthy retarded businessmen. And most important of all Pak has been in war for more than 10 years with terrorists which Pak itself created to please its dog master the USA. This dog is now getting a beating from those terrorists and I don't see for how long this country will survivie.

Prove that what I am saying is wrong .... Don't give me religious Bull-cra.p reasoning ... give me economic reasoning and ground realities that I am wrong.

Most Pakistanis are very critical and open about the problems facing our nation As is evident on PDF. However, considering how the western media is vehemently anti-Islamic and anti-Pakistani, any positives they mention with regards to india is taken with a pinch of salt and reluctance to believe. Especially when this is  the ground reality of the indian nation:

http://www.telegraph...ir-toilet.html#

http://www.guardian....a-africa-oxford

http://www.guardian....r-poverty-india

http://www.bbc.co.uk...-india-19190437

http://articles.econ...ion-underweight


If the above articles were true about Pakistan, you would have every major western media outlet calling for an invasion and massive western military assault on Pakistan for treating it's people so inhumanly. I know someone is going to post some articles now from western "analysts" and "experts" claiming that india is some sort of emerging superpower with a super economy. What good is your huge economy and adulation on paper when the above is the reality for the vast majority of indians. At least the Pakistani people do not live in a dream world or are delusional.

[PakShah]

Caesar, on 10 August 2012 - 09:47 PM, said:

You fellows can day dream and wet dream or whatever ..... I believe in facts not fairtales. The facts are Indian people are extremely patriotic, have strong democratic institutions and economy much stronger than many asian countries.

Pak is the exact opposite, filthy unpatriotic, racist people hell bent on killing thier own people, corrupt and dishonest military and political instutuitions and filthy retarded businessmen. And most important of all Pak has been in war for more than 10 years with terrorists which Pak itself created to please its dog master the USA. This dog is now getting a beating from those terrorists and I don't see for how long this country will survivie.

Prove that what I am saying is wrong .... Don't give me religious Bull-cra.p reasoning ... give me economic reasoning and ground realities that I am wrong.

Just be patient when the Global War on Terrorism ends, India won't be that strong.

India as nation is not that strong. Even Japan as a country has a larger economy than India.

If there is an insurgency in Kashmir for long enough, the Indian state will collapse itself, just like the USSR collapsed after invading Afghanistan, and it looks like that NATO going to collapse after leaving Afghanistan in 2014.

The Eurozone as everyone is saying is in a lot of problems. Even the European Union can collapse.

[Caesar]

PakShah, on 11 August 2012 - 10:08 PM, said:

Just be patient when the Global War on Terrorism ends, India won't be that strong.

You are making assumptions which have no basis. You are assuming that Global war on terrorism will end soon ... incorrect. War on terror will only end if US decided to end it and this is not happening. It has already been 11 years without an end in site.

Another assumption is that India will become weak after this war ends. This once again has no basis, no facts to it.

[PakShah]

Caesar, on 12 August 2012 - 12:02 AM, said:

You are making assumptions which have no basis. You are assuming that Global war on terrorism will end soon ... incorrect. War on terror will only end if US decided to end it and this is not happening. It has already been 11 years without an end in site.

Another assumption is that India will become weak after this war ends. This once again has no basis, no facts to it.

Well isn't this so wrong! When will World war end? People peace now and development especially in Afghanistan and Pakistan.

What is the US doing in Afghanistan?

[blueazure]

all wars end, all empires run out of cash one way or the another

[Caesar]

PakShah, on 12 August 2012 - 04:52 PM, said:

Well isn't this so wrong! When will World war end? People peace now and development especially in Afghanistan and Pakistan.

What is the US doing in Afghanistan?

You haven't answered my questions - on what basis are you making these assumptions??

[Asian Union]

How 14,000-crore budget cuts will affect India's armed forces

The slow growth of the Indian economy in recent years has had a cascading effect on the country's military.

According to government estimates, the defence budget for the current year, 2012-2013, has been cut by a
whopping Rs. 14,000 crore and acquisitions of new weapon systems have been either put on hold or delayed. Defence ministry officials have told that the budget cut is the biggest in several years.

Talking to reporters at the recently concluded Aero India show in Bengaluru, Union Defence Minister AK Antony said, "India is not an island.
The world economy is going through a tough time, we will have to cut down."

Mr Antony said that the government is drastically cutting down on expenditure across the board and "budget cuts fall on our department
too." He said that there will be no cuts in "priority areas" and the "operational preparedness" of the military will not be affected.

Senior officials have told that out of the overall estimated cut, Rs. 10,000 crore comes from the capital budget, which means the defence ministry
would have much less to spend on buying new systems to upgrade old and aging weapons.

The rest, Rs. 4,000 crore, is expected to be slashed from the revenue budget, which is used for paying salaries and meeting other running costs of the armed forces.

The armed forces had sought an outlay of Rs. 2,39,123 crore this fiscal, which amounts to 2.35 per cent of the projected GDP for 2012-13. It was, however, given a little over Rs.1,93,000 crore, from which the Rs. 14,000 crore cuts have been made. About Rs. 67,000 crore of the allocation was for capital expenditure; the revenue budget was pegged at a little over Rs. 1,13,000 crore.

As a result of the cuts, almost all critical purchases of new weapons systems have been affected. India's single biggest defence deal ever, a contract with France for around 200 new-generation fighter jets -pegged at between $15-17 billion - has been deferred to the next financial year.

Although negotiations with France are complete, India wants to stagger the acquisition because of the lack of funds.

Similarly, the purchase of Ultra-Light Howitzers from the US for deployment in the mountainous border areas to counter China has been delayed.

Sources have told that the Indian Navy's plans to rapidly replace its aging fleet of conventional submarines with six new submarines have been affected. Each new submarine is estimated to cost anything between Rs. 7000-8000 crore.

The proposal to equip every infantry battalion of the Indian Army deployed in the plains with Anti-Tank Guided Missiles (ATGMS) has also taken a hit.

The Navy's proposal to acquire multi-role helicopters to replace the old Sea King helicopter fleet has been put in cold storage.

Last week, Union Finance Minister P Chidambaram, when asked about the cuts in the defence budget, said, "You must have the money to provide the
money." He also said that this year's cut could be made good next year only if India recorded faster growth translating into more tax collections.

Modernisation of the Indian military was put on hold during the 1990s and the 2000s as India grappled with its new economic realities, and needs,
post liberalisation. Most of the equipment that the armed forces currently use was developed either in the 1970s or 1980s. It was only in the latter part of the last decade that the focus shifted back on rapidly modernising the military so that it is capable of addressing the altered strategic realities in India's neighbourhood.

[faizan khaliq]

At least they are heading in a right direction , they need to make peace with Pakistan by solving kashmir issue and then both countries should shun away with militaries or at least make them highteck and smaller instead of this slow moving mass and pump and show.

[waz]

Asian Union, on 12 February 2013 - 06:13 AM, said:

How 14,000-crore budget cuts will affect India's armed forces

The slow growth of the Indian economy in recent years has had a cascading effect on the country's military.

According to government estimates, the defence budget for the current year, 2012-2013, has been cut by a
whopping Rs. 14,000 crore and acquisitions of new weapon systems have been either put on hold or delayed. Defence ministry officials have told that the budget cut is the biggest in several years.

Talking to reporters at the recently concluded Aero India show in Bengaluru, Union Defence Minister AK Antony said, "India is not an island.
The world economy is going through a tough time, we will have to cut down."

Mr Antony said that the government is drastically cutting down on expenditure across the board and "budget cuts fall on our department
too." He said that there will be no cuts in "priority areas" and the "operational preparedness" of the military will not be affected.

Senior officials have told that out of the overall estimated cut, Rs. 10,000 crore comes from the capital budget, which means the defence ministry
would have much less to spend on buying new systems to upgrade old and aging weapons.

The rest, Rs. 4,000 crore, is expected to be slashed from the revenue budget, which is used for paying salaries and meeting other running costs of the armed forces.

The armed forces had sought an outlay of Rs. 2,39,123 crore this fiscal, which amounts to 2.35 per cent of the projected GDP for 2012-13. It was, however, given a little over Rs.1,93,000 crore, from which the Rs. 14,000 crore cuts have been made. About Rs. 67,000 crore of the allocation was for capital expenditure; the revenue budget was pegged at a little over Rs. 1,13,000 crore.

As a result of the cuts, almost all critical purchases of new weapons systems have been affected. India's single biggest defence deal ever, a contract with France for around 200 new-generation fighter jets -pegged at between $15-17 billion - has been deferred to the next financial year.

Although negotiations with France are complete, India wants to stagger the acquisition because of the lack of funds.

Similarly, the purchase of Ultra-Light Howitzers from the US for deployment in the mountainous border areas to counter China has been delayed.

Sources have told that the Indian Navy's plans to rapidly replace its aging fleet of conventional submarines with six new submarines have been affected. Each new submarine is estimated to cost anything between Rs. 7000-8000 crore.

The proposal to equip every infantry battalion of the Indian Army deployed in the plains with Anti-Tank Guided Missiles (ATGMS) has also taken a hit.

The Navy's proposal to acquire multi-role helicopters to replace the old Sea King helicopter fleet has been put in cold storage.

Last week, Union Finance Minister P Chidambaram, when asked about the cuts in the defence budget, said, "You must have the money to provide the
money." He also said that this year's cut could be made good next year only if India recorded faster growth translating into more tax collections.

Modernisation of the Indian military was put on hold during the 1990s and the 2000s as India grappled with its new economic realities, and needs,
post liberalisation. Most of the equipment that the armed forces currently use was developed either in the 1970s or 1980s. It was only in the latter part of the last decade that the focus shifted back on rapidly modernising the military so that it is capable of addressing the altered strategic realities in India's neighbourhood.

Great news. I hope their economy goes further down the pan. Their success means weapons for their military, which will be aimed at us and of course the innocent Kashmiri people.

[SUPARCO II]

waz, on 12 February 2013 - 12:14 PM, said:

Great news. I hope their economy goes further down the pan. Their success means weapons for their military, which will be aimed at us and of course the innocent Kashmiri people.

Salaam,

It's around $2.6 billion out of India's around $20 billion military budget.

Salaam

[waz]

W Salam. That's good and still substantial. I hope they go bankrupt.

[Dizasta]

SUPARCO II, on 14 February 2013 - 02:43 PM, said:

Salaam,

It's around $2.6 billion out of India's around $20 billion military budget.

Salaam

$2.6 billion can buy you (12) C-130J-30 Super Hercules, or (8) P-8 Poseidons!!