How bad China really is :

How bad China really is :

I recently read about how China`s one kid policy is coming back at them to haunt it. A statistic says that there will be 32 mil man who will not find women..more disturbing is the fact that there will be too many oldies which will fall on the economy..the ratio of the working age to non working age populace will touch 1 : 6.. there already is a concept of 4-2-1 meaning a kid sharin the burden of parents and grand parents. Blasphemous as it sounds the policy says that if the people in rural areas bear a girl or one with a disability they are allowed a second.. meaning they consider a girl child having the same capability as a disabled. With a total ban on free speech and will the country has many rebellions and strikes - majority of whose volunteers are men who dont have a family to run - so the state cannot threaten them...with forced abortions and fine collection the state is not making too many friends.

The rulers recently decided to relax this one child policy, but from what i have read it seems the damage is already done...the urban populace now no longer want more than 1 kid as cost is one major concern...

The city of Beijing is perennially hit by smog..bad air and the city now issues warning citizens to stay indoors.

Foreign firms operating in the country are made to rethinnk about their presence in the region due to to tighter curbs, restrictions and stupid policy making.

I read they jailed a man for writing a 20 line poem.. how silly are they.

Also their military inroads and skirmishes with India and now with Japan over the Senkaku islands..

GDP is not the only factor for branding a country  a super power..real prosperity comes when the people are happy and from what I kno.. if i dont have the freedom to surf the web, write poems or have babies I`m certainly not gonna b happy.

Ranting

I dont really think that the FED or anyone really knows wats holding the world economy back... is it the PIGS spending...the Housing market collapse.. investor confidence..business cycle or any silly new theory... So when the FED decides one morning to wake up and start buying bonds I sit and wonder wat the hell is happening.. this activity (Bond buyin) has been done more often than not recently by the worlds Central Banks.. - recently we saw ECB do it.. wat baffles me is that even though nothing gr8 is happenin these guys continue with this... wat its doing is they are puttin too much money into the system which I think is not right due to a range of reasons..the FEDS policy now is to carry on with this for an unlimited amount of time.,,,Silly !! The point is who is being helped with this money... and assuming that jobs are gonna be created by this is wishful thinking...I quote one of my favorite freelancer V. Anantha Nageswaran "Restoring economic growth is desirable and will be sustainable only if the underlying imbalances are eliminated. These imbalances are as much ethical and moral as they are economic and social. Wannabe and anointed superpowers are still not paying heed." Back home in India -- the hooohaa abt FDI in retail, Diesel prices, LPG etc.... people say the govt is back on track.. I beg to differ...I think the govt has woken up now..and I think its too late... given the subsidy bill India has this had to be done long back and the govt finally waking up from its slumber is not an economic reform... about FDI well I think I think its no big deal...Walmarts coming to India big deal.. With the scams that keep cropping up ever 6 months -- 2G, Coal, Irrigation, CWG -- Indias political scene has gone frm bad to worse..its pathetic..I never respected Politicians however now I hate them and given a gun (or hulk like powers) I swear these guys are not gonna survive my wrath... I think its time for me to take over control of this planet.... tats enuf of ranting for today...next time I come back..theres gonna be more

True inclusive growth requires longterm vision for agriculture by HIMANSHU

The euphoria about the better-than-expected farm performance in the current agricultural year may be short-lived. The drought may not have had the impact that most of us feared, but has still been instrumental in putting agriculture back on the agenda. As if the erratic monsoon was not enough, the massive failure on the price front at the consumer and producer end will be difficult to ignore whether in relation to growth or food security and livelihood.

It is obvious that agriculture is in crisis but it would be pre- mature and naive to blame this on the monsoon failure.
The crisis is deep-rooted and is a result of years of neglect, especially in the last decade or so.

Given the declining share of agriculture in the gross domestic product (less than 17% last fiscal), this may not be worrying to those who judge its value in terms of this con- tribution. But things get more complicated from the point of employment, livelihood and food security.

Agriculture remains the big- gest employer, with more than half of the Indian population depending on it for livelihood.

However, its share of total investment is ridiculously low at around 7%, having dropped from an average 10%-plus during the National Demo- cratic Alliance regime and around 20% in the beginning of the 1980s. Although there has been a recovery in abso- lute terms since the United Progressive Alliance took over in 2004, in real terms, public investment in agriculture has remained less than what it was in 1980-81. It has in- creased by an average 2% per year in the last 27 years, less than the average rate of growth of agricultural output.

But the neglect in financial investment and allocation is only part of the story. In the last two decades, there has been a collapse of extension services, which are meant to educate farmers on the latest research and techniques to help them raise productivity.

In the Situation Assessment Survey of Farmers in 2002-03, only 8% said they had re- ceived information from ex- tension services or through government demonstrations.
The slump is linked to the de- cline in the agricultural re- search system, which has suf- fered as a result of under-in- vestment and technological stagnation.

The mismanagement on the price front comes on top of all this. The situation has been worsened by political inter- vention in agricultural pricing, particularly in foodgrains such as rice and wheat. As men- tioned earlier, the procure- ment and public distribution systems aren't helping pro- ducers or consumers. The dra- ma surrounding sugar cane pricing was only one aspect of this. While farmers struggled to get remunerative prices for sugar cane and consumers paid through their nose, the sugar mills saw profits surge.

The net result has been the deceleration in yields and in- creased vulnerability to weather fluctuations. Between 1999-2000 and 2007-08, the average rate of growth in yields was 1.3% for rice and 0.1% for wheat. On the other hand, the yield in pulses de- clined at the rate of 0.2% per annum and that for sugar at 0.4% per annum. The only major crop which saw yields increase by more than three times in the past five years is cotton, thanks largely due to the adoption of Bt cotton.

Compared with this, rice yield grew at 2.7% in the 1980s, wheat at 3.4%, pulses at 2% and sugar cane at 1.2%.
Naturally enough, total annual foodgrain availability has de- clined from 186.2kg per head in 1991 to 160.4kg per head in 2007.

Fortunately, agriculture is back on the agenda. Not be- cause of the farmer's plight but because of food price in- flation, which is fuelling gen- eral inflation that has now gone beyond acceptable lim- its. This is despite the farmer putting up a much better per- formance than expected. Un- fortunately, the government has mismanaged the food economy so badly that even increased production is of no use. How else does one ex- plain the fact that vegetable production has increased 5% but vegetables remain the driver of food price inflation?

Of course, there are limits to what we can expect from the Budget. Partly because ag- riculture remains a state sub- ject and very little can be achieved unless states also contribute.

But at the Central level, some urgent measures are needed, among them a step- up in agricultural investment, particularly in irrigation in dry-land areas, research and extension. Secondly, there has to be an increased effort to re- duce regional inequality with particular attention to the eastern states and dry-land ar- eas. Third, there is an urgent need to reform agricultural marketing, including a revamp of the Agriculture Produce Marketing Committee Act.

Finally, there has to be a concerted effort in managing the food economy, including changes in the procurement and public distribution sys- tems. There is no better time than this to enact the National Food Security Act.

While these are some of the short-term measures that may be essential, there is an urgent need to have a long-term vi- sion for agriculture and farm- ers for inclusive growth. And that includes a strategy for im- proving the profitability of ag- riculture. This is not only es- sential for maintaining the growth rate of the economy but is necessary if there has to be any meaning to the agenda of inclusive growth. How can one think of inclusion if more than half the population is ex- cluded from the growth pro- cess?

Himanshu is assistant professor at Jawaharlal Nehru University and visiting fellow at Centre de Sciences Humaines, New Delhi.

COLUMN -EXPERT VIEW - Basic economic freedom: why can't we get it done?

by BINDU ANANTH & NACHIKET MOR

In a country of 1.2 billion individuals, if we exclude children, we should at
least have 900 million bank account holders before we can say the job of
basic inclusion in banking is complete. No matter how we count, however,
the actual number of bank account holders do not seem to cross 200 million.

This is appalling to say the least--and may also, in part, explain why we
escaped the subprime crisis; many people were simply outside the financial
system. The real mystery is why this should be the situation at all?
India has a concentrated banking system, which means that if five
individuals decide that this needs to be done, it will be done. These five are
the finance minister, the Reserve Bank of India (RBI) governor and the chief
executives of the top three banks. Prompted by proactive statements by the
finance minister in his 2006 budget speech, RBI allowed banks the use of
business correspondents to expand rapidly their outreach in a low-cost
manner.
(Business correspondents are intermediaries who carry out banking functions
in villages or areas where it is not possible to open a branch.) The technology
and the onground capability to make this possible with virtually no frauds,
complete with smart cards and fingerprint readers, came soon thereafter and
have existed for a while now. Most major banks-certainly the top three--have
acquired full familiarity with the system, and are using it, though in isolated
pockets, producing a daily issuance rate of at least 50,000 new accounts and
300,000 transactions.

Brazil, using similar legislation and far more primitive technologies, was able
to go from financial access statistics similar to ours to over 80% penetration
from 2000 to 2005. Given that all the enablers are in place in India, why are
we dragging our feet? Why has this effort reached out to only around 10
million individuals in the last three years against the 900 million that it
needs to?

One issue that has clearly emerged as a barrier is the cost of providing this
service and, more importantly, who will bear it. To provide business
correspondent access at each of the 300,000 gram panchayat (village council)
points, we estimate a one-time cost of around Rs1,000 crore (including the
provision of biometric readers) and an annual recurring cost of around
Rs4,000 crore for the 300,000 business correspondents (one for each
panchayat).

There is a potential additional cost on smart cards that may be needed if the
USO (universal service obligation) fund available to the telecom sector is
unable to provide reliable Internet connectivity to every gram panchayat;
with in excess of Rs18,000 crore at their disposal, in our view, this
connectivity is something the telecom sector should be able to provide, or, in
the interim, use USO funds to pay for the smart cards.

This estimate is indeed a large number, and on the face of it, represents a
barrier. However, on closer examination--even if we discount the considerable
value-add for the 900 million citizens when they get such an account (such as
a far superior transmission of monetary policy and far better allocation of
systemic savings) and the enormous expansion in the opportunity set for
multiple stakeholders across the country--there are several directly connected
sources of revenue that each of the stakeholders could put on the table to
defray these costs, obviating the need to play musical chairs.

RBI with close to Rs7 trillion of issued currency notes alone makes in excess
of Rs45,000 crore (estimated using an interest rate of 7%) annually from
what is referred to as seigniorage--the net revenue derived from the issuing of
currency.

This high income is almost directly a result of the need to hold a large amount
of cash. On the over Rs4 trillion of annual payments (at a 5% saving in the
cost of making these payments), the Union and state governments alone
stands to benefit up to Rs20,000 crore annually if these payments become
completely electronic. Banks with over Rs5 trillion of demand liabilities
(deposits) raised at very low costs on account of controlled interest rates on
them (controls designed specifically so that they may be able to pay for the
provision of financial services to unprofitable areas) would have a
guaranteed profit of Rs15,000 crore on a 3% annual savings in the cost of
resources, apart from the substantial profits from lending to at least a
fraction of the newly banked customers.

If RBI, for example, were to take the lead and agree to directly pay the
business correspondents Rs50 for every account that is made available by
them, the annual sum of Rs4,500 crore that this amounts to would reduce its
seigniorage income by less than 10%. If it chooses to, it could also recover this
amount using various instruments at its command from the government and
the banking system.

Some state governments currently pay a fee to banks for establishing business
correspondent networks. This process would be far more uniform and timely if
brought within the ambit of RBI. The finance minister, in the forthcoming
Budget, could make a commitment in this regard and also mandate that all
government payments henceforth be made only through the business
correspondents, and that all participating banks would need to commit to
making an automated access point available to every client within 1km of
their homes. We have all but achieved this feat for our primary schools; it
would be far easier and quicker to do so for financial access with business
correspondents.

If, as we have argued, cost is not an issue, then what is preventing this
access? Could it be that despite the fact that each of the five individuals
referred to earlier has sufficient resources at their command to get the job
done, if need be entirely on their own, none of them views this as their
problem to solve?

Just as microcredit on its own does not represent full financial inclusion, it is
our view that neither do business correspondent accounts.
However, as a recent book--Portfolios of the Poor, Daryl Collins et al,
Princeton University Press, 2009--points out, the poor lead such uncertain
lives that something available to them on a reliable basis becomes a pillar
around which they can finally start to build a more stable and predictable
life.
In our view, while such access to finance is not by itself sufficient to
eliminate poverty, it is a necessary precondition and a right every citizen of
our country has.

Definitive progress on this count would also obviate the need to allow thinly
capitalized entities to accept bank deposits on their own balance sheets;
permitting this would do nothing to reduce the costs of access on a systemic
level discussed here but, as we have seen in the past, would substantially
increase systemic risk and the risk to which these deposits are exposed.

It would be a matter of great shame if, as one of the few nations in the
world capable of launching its own satellites, we remain the sole country
that is unable to provide all its citizens with the basic means to economic
freedom.

Bindu Ananth is president of the IFMR Trust and Nachiket Mor president
of the ICICI Foundation for Inclusive Growth.

From the Economics Times - Times of India Publication * 29/01/2010

Let needs, not wants, decide your buy list

Your financial well-being depends a lot on your ability to draw the line between your needs and wants. Vidyalaxmi helps you with the process


AMEDIUM-SIZED departmental store in Mumbai has stacked a range of imported eatables such as Oreo Cookies, Kraft cheese slices, Pringles, and Tobleroneon in the front rows of its shelves. It seems like the store manager has smartly hidden desi products such as Parle G, Amul Cheese or 5-star behind the foreign goodies to earn on the differential pricing. But the store keeper has a different explanation for the display . He pins it down to customer preference for these products over their Indian peers. Whether his explanation seems convincing or not, the fact is that aspiring Indians are moving more towards a want-based spending pattern than a need-based one.

Needs vs wants


Its easy to differentiate between the two if you go by a textbook definition. But in reality, the distinction is difficult and has been getting narrower over the past few years.
Today, a car has become an emotional need despite the existence of an efficient public transport system. The need for a car has transformed from a status symbol to a luxury to a basic necessity now, says Amar Pandit, a Mumbai-based certified financial planner. The same logic applies to food. From home food to a fast food joint, today customers expect a fine dining experience and not just good food. This ambience comes at a premium and people just dont mind paying for it.
The fact is, wants are unlimited and often the lines between needs and wants get blurry. Hence, one needs to get into introspection before giving into the urge to splurge.
Lets assume a family of four spends Rs 8,000 on food, Rs 25,000 on shelter (Home loan EMI), Rs 20,000 on education and Rs 10,000 on transportation in a Metro. Now calculate the difference between your expenditure and the above example. All you have to do is to write the basic price list and the cost of living in your city and compare the areas to give you a realistic picture.
If you need a mobile because you have a field job, its a need. But if you insist on the latest gadget which you can really afford, its a want. That was an easy pick. But it gets difficult if you have to trade off a washing machine for a refrigerator or substitute a radio with a home theatre-cum-music system.
Additionally, enlist the recurring expenses such as utility bills, transportation and mortgage payments/rent and trim such expenses. They have a higher impact on your overall budget.

Are you saving enough


Its not wrong to give into wants or aspire for a certain lifestyle. It has to be backed by a sound bank balance after providing for future and other necessary expenses. The thumb rule is to save at least 25% of your take-home income. Otherwise, theres a serious problem with your lifestyle, Mr Pandit adds. At this stage, you have to critically evaluate every need and examine if its really a need or just an impulse buy.
Everyone aspires to own a huge house in a dream location. But you have to question if you need it and if you can afford such a big house at that prime location in the city, says Suresh Sadagopan, a certified financial planner at Ladder 7 Financial Advisors.

Why does it matter now


A few years ago, people were constrained by their salary levels. More often, the companies would save on their employees behalf by putting a substantial portion of their salary into PF, gratuity, etc. Now the employees are enjoying a higher disposable income without realising the downsizing in the PF and other saving components . Year 2009 was a particularly difficult one with job losses and paycuts . Hence, you should be financially equipped to handle such circumstances in future.

Retail therapy


Sneha Dharmarajan, a Mumbaibased psychologist, explains. This is a new term coined for people who treat shopping as a mood uplifting exercise . Often people say they feel euphoric after shopping even if they had a not-so good-day at home or work. But what they dont realise is that many do not feel so happy later as its just a temporary feel-good defence mechanism. At such times, you should just distract yourself with a favourite activity like listening to music or reading a book, which has longlasting distracting effect, she adds.

What implications does it have


It could be a root cause for personal finance disasters. By earmarking higher funds to tangible wants, people are unable to save or invest their money for future needs. Every rupee value has an opportunity cost, which is gained or lost, depending upon where you have deployed it. The opportunity cost is highest if invested, high if saved, lower if repaid and lowest if spent.

ENTER THE WORLD OF RETAIL THERAPY



Prepare a shopping list before you enter the supermarket and stick to it



Visit the supermarket only once a month for groceries and other utilities to reduce impulse buys



Check your neighbourhood grocer. He may offer the best deals in town



Keep switching to a low-cost tariff plan on your mobile phone and review your plan once in three months



Drop the high-cost channels on Cable TV. You can keep one educative channel for your children



Keep a back-up emergency fund



Chalk out your expenses and plug the leaks



If you are compelled to buy an item, come back to it the next week to reassess the need



If you are planning to upgrade your functional television, its a want



Dont swipe your credit card for recurring expenses such as groceries, vegetables or essentials

Missing state by Manas chakravarhty , Mint

India's GDP (gross domestic product) data do not add up. ndia's GDP (gross domestic product) data do not add up.
An entire state about the size of Uttar Pradesh (UP) appears to have gone missing. This Lost Pradesh, or Errors and Omissions Anchal or Discrepancy Nadu, call it what you will, fluctuates in size from year to year, but seems to be mysteriously growing larger and larger every year.

Why do I say there's a missing state? The answer is simple: if you add up the gross state domestic products at constant prices put out by the various directorates of economics and statistics in the states, the total is lower than the GDP of the country, as computed by the Central Statistical Organisation (CSO).

If you go to the CSO website and look at the state domestic product at constant prices, 1999-2000 series, you'll find a list of all states and Union territories (UTs) with their GDPs. At the bottom of the list they also have a line for all-India GDP 1999-2000 base, which seems to indicate that it's the sum of the GDP numbers of all the states and UTs. But it isn't so.

What is remarkable is that the totals of the states and UTs do not agree with the all-India number. No wonder CSO is at pains to point out, at the bottom of the table, that the state GDPs have been supplied by the states directly, which implies they aren't responsible for it. (This is GDP at constant prices, 1999-2000, at factor cost. The all-India figure for GDP at market prices, base 1999-2000, is even higher). At the very least, they should have had a row containing the states' totals and added a note about the discrepancies.

I would have expected that, left to themselves, the states would have been interested in showing a higher state domestic product. After all, West Bengal's growth in GDP in the 1990s had attracted plenty of scepticism, because there was little evidence on the ground to show that the growth was indeed taking place. The implication--the state was fudging its GDP data.

But if all the states inflated their GDPs, then their totals should have exceeded the all-India figure. But the reverse seems to be true. All-India GDP is much higher than the combined GDP of all the states and UTs. And not by a small amount either; in 2006-07, for instance, the total of the states' GDP was Rs26,17,531 crore, compared with Rs28,71,118 crore for the all-India figure. That's a difference of Rs2,53,587 crore, or more than the GDP of a large state like UP, whose GDP in that year was Rs2,37,420 crore. The discrepancy is as high as 8.8% of the all-India GDP for 2006-07.

But why should the states underestimate the size of their economies? That's why it looks like we have a very large well-hidden state that appears in the national GDP data, but doesn't figure in the states' list.

The first chart gives you a picture of the discrepancies.
Since the discrepancy is not constant, there's also a difference in the rates of growth of the economy if we take GDP according to the all-India figure computed by CSO, or if we go by the totals of the states. The second chart shows the difference between the growth rates. The difference in growth percentages is not much, except for 2005-06, when it was as much as one percentage point.

This is, of course, not the only discrepancy in the computation of GDP. When calculating GDP at market prices, for example, discrepancies add up to a substantial amount. For instance, CSO says that the sum of the various components of expenditure in the second quarter was lower than GDP at market prices by 2.1% in the second quarter of 2009-10. In the second quarter of 2008-09, this difference was as high as 7.6%.

Interestingly, the difference between the states' total and the CSO all-India figure has been increasing, as is seen from the chart. It was 8.2% of all-India GDP in 2001-02 and 9.4% in 2007-08. The 2008-09 states' total, however, should be larger, because GDP figures for Nagaland, Tripura and the Andamans are not available. Once these numbers are in, the discrepancy for the year should be slightly lower.

The data for 2008-09 haven't been taken into account as they are incomplete, with only 18 states having declared their GDP, according to the numbers made available by CSO.

Defending everyones whipping boy - THE PSB`s

Defending everyones whipping boy

MYTHILI BHUSNURMATH


IN TERMS of timing, I couldnt have picked a less opportune moment to stick my neck out on bank nationalisation; the public is still smarting at how nationalised bank employees held them to ransom with their strike earlier this month.
But come to think of it, given its connotations think bank nationalisation and Indira Gandhi and the Emergency immediately come to mind there is, probably, never a good time to defend bank nationalisation.
Earlier this year the Congress president and the FM were both ridiculed when they dared to speak in support of nationalisation. If the UPA chairpersons views were, somewhat charitably, put down to economic naivete, the FMs homage was seen as another instance of his anti-reform mindset.
Clearly 40 years after the event, bank nationalisation is still a bad word (never mind that both the US and the UK have only recently gone down the same path). So at the risk of being branded a revisionist, or, perhaps worse, clubbed with Mrs Sonia Gandhi and the FM, let me make my pitch in defence of public sector banks (PSBs).
Before you dismiss this as some sort of plug for PSBs, consider: in 1969, when banks were nationalised, the population per bank branch was 82,000 in the rural areas and 33,000 in urban areas. By 2007 that number had fallen to 17,000 in rural areas and 13,000 in the urban areas. In 1969, just 17% of the branch network was in rural areas; today that number is 32%, thanks almost entirely to PSBs.
Yes, there is a large section (41%) of the population that is still without access to modern banking. But what is indisputable is that but for PSBs, access to banking, especially in the rural areas, would have been far less (see table). As of March 2008, PSBs had 35% of their branch network in rural areas; the corresponding number for new private sector banks was just 6.3% while in metropolitan areas where business is more lucrative , private sector banks led the way with 36% of their branch network in metros as against 20% for PSBs.
Take another parameter: credit growth. It is widely accepted that the financial crisis in many western economies took a turn for the worse after credit markets froze. As banks took fright and shied away from lending, many borrowers were left high and dry, perpetuating a vicious downward spiral. Hence, part of the solution lay in persuading banks to continue lending, despite the slowdown. It is a different matter that few complied!
In India, too, industry chambers and the government have been shouting from the rooftops about the need for banks to continue lending. But once again it is PSBs that have ridden to the rescue; credit extended by PSBs, growing 20.4% in the year to March 2009 as against just 4% and 11% for foreign and private sector banks respectively. Yes, it is possible that when they expand their portfolios in a slowdown (in the larger interest of the economy at the diktat of the government), they might also see a rise in the level of NPAs. But that is the flip side of their delivering on their larger social responsibility and not necessarily a commentary on their efficiency.
Indeed, as the report of the Committee on Financial Sector Assessment points out, far from being slothful behemoths, PSBs have responded well to the challenge of competition . Not only is there an overall convergence in their financial results with the other banking groups but, surprise, surprise, their share in the overall profit of the banking sector has increased (emphasis added).
Moreover, thanks to their implicit government guarantee, PSBs are instrumental in promoting financial stability. Contrast the irrational fear that overtook depositors of ICICI Bank on rumours that the bank was in trouble with their rock-solid faith in Indian Bank back in the 1990s when despite public knowledge of its precarious financial position , there was no run on the bank.
This is not to say all is hunky-dory with PSBs. It is not! It is rather to point out that if we expect PSBs to heed a larger call promote financial inclusion, drop interest rates at governments behest (even when it does not make commercial sense to do so), lend to weaker sections, open branches in remote areas and so on and so forth, we must also be prepared to put up with the downside of their public ownership, of which strikes are just one manifestation. Poor work ethos, slow decision-making , bureaucratic interference , etc., being the others.
Does that mean we should cave in to the demands of PSB employees regardless, simply because they have more nuisance value than employees of say, a BHEL or SAIL Not at all! It merely means there is a case for public ownership of banks in a country like India in economic parlance, at our stage of development PSBs are a public good . So there is no point in berating them they are what they are because that is what we want them to be. It is far better, then, to give them greater professional and operational autonomy , even as we retain public ownership!


The recent strike by nationalised bank employees has made the public see red Everyone loves to hate public sector banks but they meet a larger social need and contribute greatly to financial stability Its far better to give them greater professional and operational autonomy, even as we retain public ownership