Comments on: Capital Investment: The Next Wave of Growth http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/ Issues & insights Wed, 08 Feb 2012 06:33:25 +0000 hourly 1 http://wordpress.org/?v=3.0.1 By: satish http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/comment-page-1/#comment-267108 satish Thu, 26 Jun 2008 12:42:30 +0000 http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/#comment-267108 Whatever i said in february has come true. Inflation is 11% without passing the full cost of oil. Steel prices are going to go high following rio tinto getting 96% price increase for iron ore. But i do believe all base metals are overvalued if china grows below 8%. we could see correction there. But oil is in real scarcity. we should expect higher oil prices. no speculation there. People cannot come to terms that oil is driven by demand supply imbalance because the life they dream will become a myth if oil price go up. they will look foolhardy. So people will never accept oil is driven by supply-demand imbalance.Coming recession will be a mythbuster for current euphoria. Most people's conviction will be a falsification. Whatever i said in february has come true. Inflation is 11% without passing the full cost of oil. Steel prices are going to go high following
rio tinto getting 96% price increase for iron ore. But i do believe all base metals are overvalued if china grows below 8%. we could see correction there. But oil is in real scarcity. we should expect higher oil prices. no speculation there.
People cannot come to terms that oil is driven by demand supply imbalance
because the life they dream will become a myth if oil price go up. they will look foolhardy. So people will never accept oil is driven by supply-demand imbalance.Coming recession will be a mythbuster for current euphoria. Most people’s conviction will be a falsification.

]]> By: Vito Shao http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/comment-page-1/#comment-267106 Vito Shao Thu, 26 Jun 2008 10:01:05 +0000 http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/#comment-267106 It is now very good timing to review this article and I believe more significance could be brought about by reading it again some months later. I dont know alot about Indian economy, but i think people were not that worried about the future perspective when this article was published and posted here. Now, inflation made new record and interest rates was just increased, the future may not be gonna look that bright, but not gloomy yet. Personally speaking, when difficult time is gonna come or has already came India does have some advantages and some disadvantages. the indian economy is widely believed to be domestically based, but the fact doesn't assure india can be free from global inflation; the indian economy hardly relies upon export, but the trade deficit along with inflation threatens to scare foreign investment to escape. Still, now i dont think india will follow Vietnam's track, but slow down is inevitable and whether india could repick up its momentum depends heavily opon the world economy's performance. Anyway, india's fate is up to the endurance of its people and the wisdom of its leaders. It is now very good timing to review this article and I believe more significance could be brought about by reading it again some months later. I dont know alot about Indian economy, but i think people were not that worried about the future perspective when this article was published and posted here. Now, inflation made new record and interest rates was just increased, the future may not be gonna look that bright, but not gloomy yet.
Personally speaking, when difficult time is gonna come or has already came India does have some advantages and some disadvantages. the indian economy is widely believed to be domestically based, but the fact doesn’t assure india can be free from global inflation; the indian economy hardly relies upon export, but the trade deficit along with inflation threatens to scare foreign investment to escape. Still, now i dont think india will follow Vietnam’s track, but slow down is inevitable and whether india could repick up its momentum depends heavily opon the world economy’s performance.
Anyway, india’s fate is up to the endurance of its people and the wisdom of its leaders.

]]> By: Mahendra Naik http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/comment-page-1/#comment-266495 Mahendra Naik Sun, 01 Jun 2008 11:56:58 +0000 http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/#comment-266495 My feeling is that we Indians are far more pessimistic about our growth prospects than is warranted. This may be due to years of stuttering on the economy front with stop and go policies. But this may be about to change. As recent GDP growth numbers indicate, political decisions have less and less to do with economic matters. One way of looking at this is that even withn politicians being the way they are, we are still growing at 9% p.a. What happens if a new government gets its act together and unleashes a new wave of reform? My feeling is that we Indians are far more pessimistic about our growth prospects than is warranted. This may be due to years of stuttering on the economy front with stop and go policies. But this may be about to change. As recent GDP growth numbers indicate, political decisions have less and less to do with economic matters. One way of looking at this is that even withn politicians being the way they are, we are still growing at 9% p.a. What happens if a new government gets its act together and unleashes a new wave of reform?

]]> By: NotEvenClose http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/comment-page-1/#comment-265229 NotEvenClose Thu, 03 Apr 2008 12:13:31 +0000 http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/#comment-265229 What do bankers know about buiness? I think we are finding out, not alot. The probabilities fo India's next cycle being one of capital spending is low. The next cycle of India's growth will be the painful absorption of the malinvestments made in this cycle. And, likely finding a way to replace the outsourcing botom's economic input. As, it is ending. What do bankers know about buiness? I think we are finding out, not alot. The probabilities fo India’s next cycle being one of capital spending is low. The next cycle of India’s growth will be the painful absorption of the malinvestments made in this cycle. And, likely finding a way to replace the outsourcing botom’s economic input. As, it is ending.

]]> By: Siva Moturi http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/comment-page-1/#comment-265191 Siva Moturi Wed, 02 Apr 2008 06:19:20 +0000 http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/#comment-265191 A quick analysis of this colorful rosy prognosis: 1) Inflation: True inflation based on typical household basket of consumables/expenses over the last 5 yrs is not as rosy as our fin-min/manmohan claims it to be. Would any one agree with only 6% apprecitation in a)rental cost b)transportation cost 3)commodity cost? As per one calc, India's actual inflation is north of 13%. We claim that china's GDP is cooked...what do you say about india's inflation figure..spiced up with obsolete basket-constituents and thier weights. 2) GDP: Our GDP is driven more by domestic demand/consumption rather than exports. Also, investments required to improve/sustain GDP is supported by strong savings growth. But, the sustainability of this GDP is questionable, given the lack of infrastructure needed for this rate of investments. Theoretical GDP growth you can expect from this level of investments ought to be discounted with india-specific factors to come up with a realistic Trend rate for future. China is more reliant upon exports as bulk of it's GDP drives from this component and therefore coupled to global consumer spending. Govt also should be publishing or atelast keeping track of the contribution-pattern of various GDP components like agri, consumption, govt. spending, exports to bring these in-line with what we need them to be in future through effective policy, fiscal and/or monetary. 3) Credit: Easy access to cost-effective credit is vital to any industry to survive and compete on a global scale. RBI's monetary policy to control inflation would bring in increased rates which would put industry at a disadvantage whose cost-of-debt is more than any other emerging economy. It ought to be allowed to tap into global credit-mkts for cheaper funds to have a level-playing field with global peers. Domestic bond industry also has to be encouraged/improved through fiscal/monetary policy-measures to get /build self-reliant and deeper credit mkts with in india to prevent getting burned in global credit-squeezes like current crisis. 4) Rupee: Over-valued indian rupee has to be controlled through RBI sterilization measures on a continous basis to protect the domestic export-relying sectors like textiles and miliions of jobs linked with those sectors. If china is strongly pegging thier currency to USD and india lets the mkt decide the cross-rates, it would put the entire sectors like textiles in jeopardy and risk being priced-out of global consumer mkts. Passing on the cost is only a luxury with IT sector, but all other sectors depend upon global competetive pricing. 5) Social: Home-ownership is something that a typical middle-class family used to dream and achieve over thier life-time in almost all the job-centers in india, a decade ago. It's next to IMPOSSIBLE for typical middle-classer entering the job-mkt after education, to even dream about that now. [pls. ignore niche demographics like IT, mgmt jobs and focus on broader job-mkt]. Any country in the world can not claim developed status, until it provide it's citizens with affordable means of home-ownership. This unfortunate metamorphosis of housing mkt is direct result of twisted-economic-policies with total blindness about these social factors and chasing growth at the expense of permanent loss of fundamental necessities of household. 6) Jobs: Shrinking contribution of agriculture to GDP is in contrast to millions of unskilled labor that still were stuck with that sector. Even as we successfully are shifting some percent of them to mfg jobs, it has to be accelerated by bringing/encouraging sectors that can assimilate this vast demographic of currently unprodutive unskilled workforce there by brnging them out of poverty lines and helping their families to build a better future. A quick analysis of this colorful rosy prognosis:

1) Inflation: True inflation based on typical household basket of consumables/expenses over the last 5 yrs is not as rosy as our fin-min/manmohan claims it to be. Would any one agree with only 6% apprecitation in a)rental cost b)transportation cost 3)commodity cost? As per one calc, India’s actual inflation is north of 13%. We claim that china’s GDP is cooked…what do you say about india’s inflation figure..spiced up with obsolete basket-constituents and thier weights.

2) GDP: Our GDP is driven more by domestic demand/consumption rather than exports. Also, investments required to improve/sustain GDP is supported by strong savings growth. But, the sustainability of this GDP is questionable, given the lack of infrastructure needed for this rate of investments. Theoretical GDP growth you can expect from this level of investments ought to be discounted with india-specific factors to come up with a realistic Trend rate for future. China is more reliant upon exports as bulk of it’s GDP drives from this component and therefore coupled to global consumer spending. Govt also should be publishing or atelast keeping track of the contribution-pattern of various GDP components like agri, consumption, govt. spending, exports to bring these in-line with what we need them to be in future through effective policy, fiscal and/or monetary.

3) Credit: Easy access to cost-effective credit is vital to any industry to survive and compete on a global scale. RBI’s monetary policy to control inflation would bring in increased rates which would put industry at a disadvantage whose cost-of-debt is more than any other emerging economy. It ought to be allowed to tap into global credit-mkts for cheaper funds to have a level-playing field with global peers. Domestic bond industry also has to be encouraged/improved through fiscal/monetary policy-measures to get /build self-reliant and deeper credit mkts with in india to prevent getting burned in global credit-squeezes like current crisis.

4) Rupee: Over-valued indian rupee has to be controlled through RBI sterilization measures on a continous basis to protect the domestic export-relying sectors like textiles and miliions of jobs linked with those sectors. If china is strongly pegging thier currency to USD and india lets the mkt decide the cross-rates, it would put the entire sectors like textiles in jeopardy and risk being priced-out of global consumer mkts. Passing on the cost is only a luxury with IT sector, but all other sectors depend upon global competetive pricing.

5) Social: Home-ownership is something that a typical middle-class family used to dream and achieve over thier life-time in almost all the job-centers in india, a decade ago. It’s next to IMPOSSIBLE for typical middle-classer entering the job-mkt after education, to even dream about that now. [pls. ignore niche demographics like IT, mgmt jobs and focus on broader job-mkt]. Any country in the world can not claim developed status, until it provide it’s citizens with affordable means of home-ownership. This unfortunate metamorphosis of housing mkt is direct result of twisted-economic-policies with total blindness about these social factors and chasing growth at the expense of permanent loss of fundamental necessities of household.

6) Jobs: Shrinking contribution of agriculture to GDP is in contrast to millions of unskilled labor that still were stuck with that sector. Even as we successfully are shifting some percent of them to mfg jobs, it has to be accelerated by bringing/encouraging sectors that can assimilate this vast demographic of currently unprodutive unskilled workforce there by brnging them out of poverty lines and helping their families to build a better future.

]]> By: sinhapore.j. http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/comment-page-1/#comment-264824 sinhapore.j. Sat, 08 Mar 2008 10:38:52 +0000 http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/#comment-264824 India needs: 1. Network of roads 2. 24X7 electricity 3. Housing for 1 billion plus India gets: 1. Tata tea buys Tetley 2. Mittal Steel buys Arcelor 3. Tata Motors buys Jaguar CHINA GETS WHAT IT NEEDS Unless our think-tanks can create the financial structures which enable India to get what it needs - and not what Europe/UK/USA needs - we will not get there. China's infrstructure financing model is what we shud be analysing for clues, and Korea's and Japan's....please India needs:
1. Network of roads
2. 24X7 electricity
3. Housing for 1 billion plus

India gets:
1. Tata tea buys Tetley
2. Mittal Steel buys Arcelor
3. Tata Motors buys Jaguar

CHINA GETS WHAT IT NEEDS

Unless our think-tanks can create the financial structures which enable India to get what it needs – and not what Europe/UK/USA needs – we will not get there. China’s infrstructure financing model is what we shud be analysing for clues, and Korea’s and Japan’s….please

]]> By: Sharmila http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/comment-page-1/#comment-264763 Sharmila Tue, 04 Mar 2008 05:09:48 +0000 http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/#comment-264763 ICICI Bank's estimates of investment in manufacturing and infrastructure at $700 b for the next three years is encouraging. But as the incremental capital-output ratio increases, will the increased investment translate into higher growth? See Economic Survey 2007-08, which shows that manufacturing ICOR is almost at 9. It even suggests that excess capacity might be building up. This is a danger sign similar to 1997, when the factors of overinvestment, global crisis, pay commission and high interest rates along with poor monsoons combined for a long slowdown. The similarities of 2008 with 1997 are uncanny. Hopefully slowdown will not be repeated in 2008 due to high investment rates. ICICI Bank’s estimates of investment in manufacturing and infrastructure at $700 b for the next three years is encouraging. But as the incremental capital-output ratio increases, will the increased investment translate into higher growth? See Economic Survey 2007-08, which shows that manufacturing ICOR is almost at 9. It even suggests that excess capacity might be building up. This is a danger sign similar to 1997, when the factors of overinvestment, global crisis, pay commission and high interest rates along with poor monsoons combined for a long slowdown. The similarities of 2008 with 1997 are uncanny. Hopefully slowdown will not be repeated in 2008 due to high investment rates.

]]> By: syed mohd faisal http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/comment-page-1/#comment-264665 syed mohd faisal Fri, 29 Feb 2008 04:25:05 +0000 http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/#comment-264665 Go ahead and hug the upcoming sound and healty economy,also do not flee abroad and stay to enjoy sound financial life even in India from very few years of now as day by day new industries have been setting up and new mergers & acquisitions are in the process.Due to slump in U S economy seems nothing to impact on going ahead economy of India as emerging investment flow as well as capital flow are lying on floor of the country, though we have been sharply cutting poverty by 10 % anually so few more years required to reach the height of Indian economy Go ahead and hug the upcoming sound and healty economy,also do not flee abroad and stay to enjoy sound financial life even in India from very few years of now as day by day new industries have been setting up and new mergers & acquisitions are in the process.Due to slump in U S economy seems nothing to impact on going ahead economy of India as emerging investment flow as well as capital flow are lying on floor of the country, though we have been sharply cutting poverty by 10 % anually so few more years required to reach the height of Indian economy

]]> By: SYED MOHD FAISAL http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/comment-page-1/#comment-264664 SYED MOHD FAISAL Fri, 29 Feb 2008 04:19:32 +0000 http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/#comment-264664 Post LPG reforms focused attention on deregulating the country and inducing foreign investments i.e.FIIs & FDIs Eventually, it paved way for India occupying a position among the top countries in the fast growing Asia Pacific region. India has the largest democracy in the world and has experienced stability, since its independence. India's political institutions have encouraged the growth of an open society, where people can express themselves freely. It is truly an example of a free economy. So go ahead and hug the upcoming sound and healty economy,also do not flee abroad and stay to enjoy sound financial life even in India from very few years of now Post LPG reforms focused attention on deregulating the country and inducing foreign investments i.e.FIIs & FDIs Eventually, it paved way for India occupying a position among the top countries in the fast growing Asia Pacific region. India has the largest democracy in the world and has experienced stability, since its independence. India’s political institutions have encouraged the growth of an open society, where people can express themselves freely. It is truly an example of a free economy. So go ahead and hug the upcoming sound and healty economy,also do not flee abroad and stay to enjoy sound financial life even in India from very few years of now

]]> By: Kerala Banking http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/comment-page-1/#comment-264459 Kerala Banking Wed, 20 Feb 2008 05:16:38 +0000 http://indianeconomy.org/2008/02/09/capital-investment-the-next-wave-of-growth/#comment-264459 One of the major challenge is the adverse effects of rupee appreciation. A sharp appreciation of rupee over the past year has begun to erode the competitiveness of our Indian exporting business. This is a blow to the Indian industry that had just stepping to recover from a deep recession and project its profile in the international markets. One of the major challenge is the adverse effects of rupee appreciation. A sharp appreciation of rupee over the past year has begun to erode the competitiveness of our Indian exporting business. This is a blow to the Indian industry that had just stepping to recover from a deep recession and project its profile in the international markets.

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