Thursday, 1 January 2015

Niti Ayog

Niti Ayog to replace Planning Commission. One joke to replace another joke.

What can this poor government do except operate by stunts ? It has realized it cannot do any real vikas. Manufacturing growth is stagnant, GDP growth has dropped from 5.7% to 5.3%. The youth who voted en masse for the great man who promised to solve all their problems have realized they have been taken for a ride. Far from millions of jobs being created ( as the slogan 'vikas ' seemed to promise ), there is going to be more unemployment as 1 crore new youth pour into rhe job market annually, but there are only 5 lac new jobs in the organized sector of the economy.

 So the only thing it can do is shout slogans and do stunts---make in India, swatchata, ghar wapasi, good governance day, and now Niti Ayog.

   Many years ago, a party in U.P. had promised to abolish sales tax if voted to power. It was voted to power, and promptly changed the name sales tax to trade tax, and said it had abolished sales tax.
Hari Om


  1. Grand Master on insight on China, USA and world said about India on manufacturing. This is what he said. He is the best and only nation builder in modern time. Below is what he said.

    One of the commonest objections I come across is, “Don’t compare Singapore to India. India is very large while Singapore is very small.” First of all, I am not comparing Singapore to India. I am comparing the culture and quality of the governance of Singapore to that of India. The values that are expressed by the leaders of a society are independent of the physical size of the society. Values and standards are thus not like physical goods. The value of not tolerating corruption applies with equal force whether the field is large or small. Just because India is a few hundred times larger than Singapore does not mean that the determination to not tolerate corruption has to be a few hundred times the determination required in Singapore’s case.

    LKY then quotes growth statistics which should make Indians hang their head in shame. China is a very large country. So comparing China and India cannot evoke the standard response that is given when Singapore is mentioned in any way with regard to India. Of course, the objection raised is then that India is a democracy while China is not. I have not yet figured out why being a democracy should be a valid explanation for a dysfunctional economic system.

    Their populations do not subsist at the edge of starvation. Of course, all rebuttals to India’s dismal economy cleanly sidesteps the fundamental problem which is that India’s economic policies suck chrome off the bumper of a truck parked a hundred yards away. Open up any newspaper if you dare on any day of the week, and you will see the next asinine brain-dead scheme being proposed by the heirs of Nehru. Yesterday, for example, the government proposes to impose reservations and quotas for private sector jobs. No, not merit or competency—what will matter is if the applicant has the right caste, the appropriate religious affiliation, belongs to the correct vote bank.

    1. Both India and China have both done much better than most of the world. In the decade from 1994 to 2004, India’s GDP grew two-fold from US$310 billion to US$661 billion. But during the same period, China’s GDP grew three-fold from US$542 billion to US$1,649 billion. In 1984, India’s GDP was about 30% smaller than China’s. A decade later, it was more than 40% smaller and by 2004 it was about 60% smaller. Such a wide disparity is unnecessary. India can and should narrow the gap by embarking on a new round of reforms. -

      I have been following the shenanigans of the government of India for a few decades. To quote Groucho Marx, “He talks like an idiot, and behaves like an idiot. But don’t let that fool you. He really is an idiot.” The Indian policymakers behave like idiots, and talk like idiots. Don’t let that fool you. They are actually a bunch of idiots.

      Anyway, enough of this rant. Let us go back to LKY. He asks, “Can India keep pace with China’s growth?” and responds, “Yes, if India does more in those sectors where China has done better.”

      That statement, ladies and gentlemen, is worth drumming into the heads of India’s movers and shakers. Are you paying attention, Dr Singh?

      Where did China do better? Manufacturing. That is where the foundation of a large economy lies. That is where it makes sense to distinguish between a small state like Singapore and a large ones such as India or China. A small economy of only a few million people can get by with only a services sector. But a large country with a billion people needs to have a correspondingly large manufacturing sector. When I say large, I do not mean that it should employ a large percentage of the people. I mean that the value of the production of the sector should be large. Why? Because manufacturing produces goods and it is the availability of goods that make people non-poor -

    2. But India cannot grow into a major economy on services alone . Since the industrial revolution, no country has become a major economy without becoming an industrial power.

      Just as China is learning from India to improve its performance in the IT sector, so India must emulate China’s success in attracting FDIs and the jobs they create in manufacturing. It can do this by building infrastructure and educating and raising the skill levels of its workers.

      Many decades have passed since India’s constitution was adopted in which primary education was given priority. Like pretty speeches, it is a non-starter. A very large percentage of Indians cannot read the constitution of India.

      IT is less than 2% of India’s GDP. While services have grown rapidly, the bulk of the growth is from service sectors where wages and productivity are low. Business services, which include software and IT-enabled services, account for only 0.3% of GDP. Only manufacturing can mop up India’s vast pool of unemployed, narrow the urban-rural divide and reduce poverty.

    3. To create jobs the main thrust of reforms must be in manufacturing. That requires a change in labour laws to allow employers to retrench workers when business demand is down , streamlining the judicial processes, reducing the fiscal deficit, loosening up the bureaucracy, and most of all improving infrastructure. Let me focus on the last two as I believe they are crucial and inter-connected.

      Industrialisation cannot take off without adequate infrastructure: better roads, and a reliable supply of power and clean water, better ports and airports. By one estimate, economic losses from congestion and poor roads alone are as high as US$4 to 6 billion a year. Another estimate is that the cost of most infrastructure services in India is about 50% to 100% higher than in China. The average cost of electricity for manufacturing in India is about double that in China; railway transport costs in India are three times those in China. China has spent over eight times as much as India on its infrastructure. Three years ago, China’s total capital spending on electricity, construction, transportation, telecommunications and real estate was US$260 billion or more than 20 percent of its GDP as compared to US$31 billion or 8 percent of India’s GDP.

    4. Why do I think that India’s policy makers are incompetent? Because it should be clear to the meanest intelligence that industrialization depends on infrastructure and that that should be a priority. Which part of this simple statement don’t they understand. And if they do, why are they preventing the building of infrastructure? No money to finance the infrastructure?

      Today India has 40% below poverty line people with 60% of them do not have access to toilets, with 80% real unemployment every year. It is a nation of unfulfilled greatness and a lost opportunities by its politicians