India Insight

It’s time India bites the diesel bullet

Aditya Kalra

May 24, 2012 01:49 EDT

“81 rupees?” asked an astonished TV anchor when an irate Bengaluru-based consumer called in after the recent 7.5-rupee hike in petrol prices. Perhaps cars that run on milk are now needed, the anchor suggested — when the caller said the dairy product costs around 30 rupees a litre.

While milk-powered automobiles might be a distant dream, the reality remains that those relying on petrol vehicles will now need to do their budgeting again. If a falling rupee and high inflation were not enough, this steepest-ever rise in petrol prices will surely pinch.

The fact remains that petrol prices were decontrolled way back in June 2010. That move gave oil marketing companies (OMCs) freedom to revise prices and also gave the government some saving grace as ministers can now easily say that petrol prices are market driven.

Though the government cannot be blamed for this hike on paper, they do manage to influence OMC decisions. That is indicated by the fact that this hike comes after state elections and a day after the parliament’s budget session got over.

However, it is tough to understand why the government would allow OMCs to raise petrol prices, given the move will not help improve the fiscal situation as the government doesn’t subsidise petrol. It is the subsidy burden of other fuels that strains the government’s finances.

As Hitendra Dave, global markets head at HSBC in Mumbai explained — This (the petrol price hike) has zero fiscal impact. This will only help oil marketing companies.

What was perhaps more needed at this stage was a revision or decontrol of other fuel prices, which could help boost the already weak economic sentiment.

India’s busy Auto Expo and the risk of an industry believing its own publicity

After fighting through the sea of camera-wielding car enthusiasts clutching their bags filled with corporate gifts to meet with Anand Mahindra, vice-chairman of the Mahindra group, it was difficult to argue with his rosy view of India’s car industry.

“Just look at all these people,” said Mahindra. “If these crowds translate into market appetite, it’s not much of a slowdown,” he added, shaking his head at the view from a glass-walled office high above the teeming masses at the India Auto Expo on Friday.

Mahindra has reason to be cheerful. Sales of cars by his group’s autos arm have remained strong this year. But he wasn’t the only executive shrugging off a slump in India’s car industry with glib comments about the sharp elbows of hundreds of thousands of excited punters that thronged the India Auto Expo this weekend.

The data is much less encouraging. Come April, the same executives could likely be digesting a year that saw sales volumes fall. Just a year previously, they were toasting 30 percent growth. But the Auto Show, held every two years in the capital, didn’t give the impression of an industry filled with ideas to tackle the slide.

SUVs, green technology vehicles and cutting-edge concept cars stole the headlines and drew in the crowds, aside from the free calendars and the chance to catch a glimpse of a Bollywood star or two.

But conspicuous by its absence amongst a sea of oversized SUVs was a new offering for the low-cost compact space, the segment that has accounted for most of the sales slump, as first-time buyers and those requiring financing baulk at high interest rates and rising fuel costs.

Amid parliamentary impasse, MPs cheer more perks

Reuters Staff

Dec 2, 2011 04:12 EST

By Annie Banerji

On the way to New Delhi’s international airport, three armed men lean out of the windows of a jeep, furiously waving at the steady stream of traffic to pull over.

As the cars swerve to the dusty edge of the highway, a convoy of a dozen sleek sedans zips past in a blaze of whining sirens and flashing red beacons, breaking all traffic regulations and leaving behind a tangle of vehicles in its wake.

A local politician is late for his flight.

Such situations are likely to become even more commonplace in Asia’s third-largest economy, thanks to a committee that this week submitted a report calling for all MPs to have flashing lights put on their cars to allow them to speed through the country’s clogged streets.

While India’s lawmakers cannot reach a consensus on key economic reforms in parliament (thanks to party infighting) due to shouting across the aisles and drowning out of the speaker, they unanimously rooted for a status upgrade on a list of India’s VIPs.

“MPs have zero work to show on their report card & yet have no hesitation in demanding increase in official status! Earn your increment Mr MP,” tweeted Rahul Kanwal, the executive director of Indian news channel Headlines Today, while “MPs” trended on micro-blogging site Twitter.

The dog days of India’s bizarre summer of politics

Perhaps the government’s decision to push back the opening of the upcoming monsoon session of parliament was not the best idea. For as the dog days of the sub-continent’s sweltering summer drag on, the parliament-less politicians sweat from the sublime to the ridiculous in the baking heat.

From the haphazard ensemble of senior ministers that flocked to New Delhi’s airport to greet yoga guru turned social activist Swami Ramdev with more fanfare than is reserved for visiting heads of state, to the current conspiracy swirling New Delhi surrounding espionage chewing gum found in the finance minister’s private chambers, it has been a bizarre summer for politics fuelled by the hungry media in the world’s largest democracy.

Kapil Sibal, as Human Resource and Development minister, could have spent his summer break drawing up plans to overhaul an education sector that looks dangerously inadequate to deal with the demographic dividend of millions of young Indians that New Delhi likes to trumpet. Instead, he spent his days holed up in five-star hotels begging Ramdev not to stop eating, and playing it coy in press conferences after quietly ignoring veteran activist Anna Hazare’s demands for a stronger anti-graft bill.

Finance Minister Pranab Mukherjee, who has seen a series of economic data releases over the past month pour cold water on optimistic growth prospects, spent the majority of his summer trying to chair what appeared to be most unruly meetings on the anti-graft legislation, but has stolen the headlines recently with a mind-boggling story involving government secrets, ministerial rivalries and old-school espionage — all bonded together with chewing gum.

With TV channels and opposition politicians dubbing it “India’s Watergate”, and political figures from across the spectrum weighing in on the sticky mess, there appears little evidence to go on than a few errant pieces of gum stuck under various desks in Mukherjee’s chambers. With the minister himself telling the media to take their conspiracy theories elsewhere, it appears more a case of unhygienic office visitors than dastardly undercover spies.

Outside of the cabinet, the summer bug spread as the mercury rose.

Should Britain continue its controversial £1bln India aid package?

The UK will continue to send more than £1 billion to India over the next four years, despite huge cuts to government spending under London’s Conservative-led coalition government and soaring economic growth in the Asian giant. Andrew Mitchell, the UK’s international development secretary, told the Financial Times on Monday that Britain’s annual £280 million aid payments to India would not be reduced, in spite of the country’s space ambitions, nuclear energy development, soaring numbers of billionaires and its own aid program to many African nations.

Mitchell’s comments, a day before an official announcement, are likely to infuriate some UK MPs who have seen spending slashed in their constituencies, and those who have called for a reduction in overseas payments as British taxpayers brace for a period of tough austerity measures.

In September, suggestions from Westminster that aid may be reduced sparked a terse response from New Delhi, as Indian officials reportedly mulled rejecting UK support rather than waiting for London to decide whether its slice of the pie would shrink.

British newspapers have questioned financial assistance for a country whose economy is growing at over 8.5 percent with a $31.5 billion defence budget and ambitions to join the U.N. Security Council. Permanent Security Council members Russia and China were told by London last year that continuing to supply aid to them was “not justifiable”.

Yet despite its booming economy and global power aspirations, India still accounts for a large proportion of the world’s poorest people, presenting international donors with a quandary.

“India has more poor people in it than the whole of sub-Saharan Africa. If you’re going to achieve the [UN] millennium development goals, you have to make big progress in India,” Mitchell told the Financial Times.

But should India need cash from British taxpayers to protect the poorest in its society, and could the UK’s overseas aid be better spent elsewhere?

Has Congress lost the plot on inflation?

“Government Plan To Tackle Prices Is Just Hot Air” screamed the front page of Friday’s Mail Today, as India’s political media lined up to belittle what was billed as a list of anti-inflationary remedies but was robustly rejected as “already failed measures and oft-repeated homilies.”

Prime Minister Manmohan Singh’s meetings this week with senior cabinet ministers to tackle year-high food inflation dragged on long into the night, keeping editors on tenterhooks and assuring Congress of front page headlines.

This morning, those headlines would have made for painful reading. After rumours of export curbs and future markets tweaks, what emerged to be a paltry list of recommendations was seen by many as nothing but ineffective band-aids for a broken economy requiring surgery.

Barraged by charges of inaction over tackling corruption, Congress appears to be heading towards firefights on two fronts as India runs out of patience with the ruling party’s attempts to curb inflation.

From economic hero to inflation-battered zero, perhaps more than anyone else Prime Minister Manmohan Singh encapsulates the Congress party’s current woes.

Lauded for his economic nous as Finance Minister and again during his first tenure as Prime Minister, the man who was applauded for creating GDP growth rates above 9 percent is now being chastised for failing to control the inflationary pressures that such rapid growth fuels.

Survey says doing business in India is tough

Anurag Kotoky

Nov 9, 2010 07:24 EST

Even as India Inc celebrates U.S. President Barack Obama’s recognition of the country as a world super power, a recent study by the World Bank presents a contrasting view.

India ranks 134 among 183 nations in a survey called “Doing Business 2011″  — that gauges the ease of doing business in a country — and is ranked behind countries like arch rival Pakistan, Bangladesh and Sri Lanka.

Singapore leads the pack, while Hong Kong grabs the second position in the list.

The report investigates the regulations that enhance business activity and those that constrain it.

It takes into account areas like starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, closing a business, getting electricity and employing workers.

Although India has carried out major economic reforms since liberalising its economy in the early 1990s, many of the reforms are still in the planning stages, and unless it quickens such reforms, doing business in India may remain troublesome.

Could Obama’s loss be India’s gain?

As the pundits predicted, India will have the inauspicious honour of being the first country to host U.S. President Barack Obama following the largest shift in public support away from an incumbent President’s party in over 60 years.

But if the results show a clear message of dissatisfaction at Washington from U.S. voters, the fallout once the dust settles on Capitol Hill could well result in good news for India.

Here are three ways that a shift in Washington politics could play into India’s interests:

Republican candidates swept to power in the House of Representatives, and almost squared the Senate, largely on widespread disaffection with the country’s stagnant economy and large unemployment rates. The new-look Congress will feel immediate pressure to tackle these.

Washington is likely to look at stimulating international trade in order to boost the struggling economy. There’s a reason Obama will have representatives from over 200 businesses in tow when he lands in India, and striking lucrative deals for defence equipment and technology sharing is a priority that crosses the party-political divide.

Now the polls have closed, the anti-outsourcing rhetoric that Obama delivered at the stump to woo voters – attracting the ire of India’s business leaders – is likely to subside. Pro-business Republicans blocked anti-outsourcing legislation in Congress in September, and moving forwards, a GOP-controlled House of Representatives will most probably protect the cost-effective practice for U.S. firms that contributes $60 billion to India’s economy.

Moreover, in an attempt to divert attention from the ranks of Republicans moving into their new Congressional offices in Washington, and remind Americans that he is still commander-in-chief, Obama may well look to forge some big-publicity agreements with India, with defence and nuclear deals high on the U.S. agenda, and an endorsement for a permanent Security Council berth is New Delhi’s holy grail.

from Tales from the Trail:

Green energy aspirations for Obama’s India visit

Deborah Zabarenko

Oct 27, 2010 12:29 EDT

When Barack Obama heads for India next month, he'll be carrying a heavy policy agenda -- questions over the handling of nuclear material, the outsourcing of U.S. jobs and India's status as a growing economic power, along with regional relations with Pakistan and Afghanistan. But Rajendra Pachauri, the Nobel Peace laureate who heads the U.N. Intergovernmental Panel on Climate Change, hopes the U.S. president has time to focus on clean energy too.

Even as Pachauri and the U.N. panel evolve -- and as Pachauri himself weathers pressure from some quarters to resign -- he urged Obama to work on U.S.-India projects that he said would enhance global energy security.

Given India's red-hot economic growth rate -- 8 or 9 percent a year, Pachauri told reporters during a telephone briefing -- he said it makes sense for the United States to work with India to head off an expected soaring demand for fossil fuels.

Over the next two decades, Pachauri said, "If we continue on a business-as-usual path, India will be importing something like 750 million tons (that's about 5.25 million barrels) of oil a year ... and possibly over 1,000 million tons of coal. So I think India has to make some very radical shifts and bring about a movement towards cleaner energy technology."

While the two countries have launched a few initial programs in this area, Pachauri acknowledged that "nothing of great substance has been achieved so far." Obama's passage to India could change that, he said on the call, which was set up by the environmental group Natural Resources Defense Council.

Areas ripe for cooperation include collaborative research and development in new areas of energy technology, as well as "a much more liberal approach" to investments in clean energy technology, Pachauri said.

Low interest financing for Indian clean energy projects, including large-scale solar projects in the Indian states of Rajasthan and Gujarat, would also be welcome, he said.

Going global in India’s chaotic way

Alistair Scrutton

Oct 13, 2010 05:05 EDT

India is globalising, but not the way much of the world wants.

That rather contradictory thought nagged at me one morning during the chaotic Commonwealth Games here in New Delhi.

On the road to the media venue’s gate, I trudged past a squatter’s family living in a tarpaulin. The mother was helping her son pee on my left. Rubbish, the smelly, sickly kind, lay to my right. My shoes sunk in mud from an unfinished pavement.

Hardly the stuff of a showcase international event meant to rival China. But after four years in India, the scene appeared normal. So was news during the Games that stocks had hit a near three-year high and that the Economist had predicted India’s economy would soon outpace China.

For the umpteenth time, a centuries-old history bubbled under the surface of this emerging global power, a pressure cooker of India’s own eccentricities and ills that seem to avoid blowing up, despite straining at the seams.

Indian history is littered with the mistaken predictions of sceptical foreign correspondents who have underestimated the ability of this country, with one sixth of humanity, to confound its critics despite massive social, communal and ethnic problems.