Saturday, September 22, 2012

More on the FDI protests in India

Here’s a collection of articles on the protests about FDI (Foreign Direct investment). The article are from the “Sydney Morning Herald” & “Washington Post”:

 

Singh scrambles for solutions to put India back on track


Date: September 22, 2012


Asia-Pacific editor, Sydney Morning Herald


Unrest … Samajwadi Party activists block a train during a strike in Allahabad this week, above, and burn an effigy of the Prime Minister, Manmohan Singh, below. Photos: AP/Rajesh Kumar Singh Photo: AP

THIS has been a tense and critical week in Indian politics, a week of decisions vital to the emerging economic giant regaining a high growth path.

We all know about the ''Incredible India'' - the travel destination of palaces, temples, and human colour. Now the world's economic analysts and strategists are looking for a ''Credible India'' that can take decisions and stick to them.

Needless to say, resource and energy supplier Australia has a lot riding on it.

Activists hold an effigy representing Indian Prime Minister Manmohan Singh and his cabinet colleagues. Photo: AP

India has been in the economic doldrums for a couple of years. Economic growth that had hit 8 per cent has slipped to a little over 5 per cent in the first half of this year and in July industrial output had almost flattened.

With its fiscal deficit bulging because of subsidies, and inflation edging up towards 8 per cent and requiring punitive interest rates from the central bank, India has been facing the humiliation of a big downgrade in its credit rating to junk status.

Three years after its re-election in 2009, the Congress Party-led coalition government of the Prime Minister, Manmohan Singh, has lost all credibility gained from the strong economic performance of its previous five years in office.

Opposition parties and trade unions called for shopkeepers, traders and labourers in India to block railway lines and close markets to protest against reforms. Photo: AFP

It has lurched from scandal to scandal, the latest being the so-called ''Coalgate'' affair, after the Indian auditor-general calculated that over-generous terms of coal mining concessions would lose the government about $36 billion in future revenue. This came after a similar estimated giveaway in mobile phone licences.

Singh has looked a helpless figure throughout all of this. The former finance secretary and central bank governor has immense prestige as the father of India's opening from his time as finance minister in 1991-96, but has more recently been a figurehead for Congress.

The most powerful figure in the party has been Sonia Gandhi, the Italian-born widow of the assassinated former prime minister Rajiv Gandhi who is nurturing the career of their son, Rahul, currently the party secretary and a backbench MP. Her instincts are populist, amplified by the clutch of regional and lower-caste parties giving the coalition its majority.

After a weak performance earlier this year in elections in Uttar Pradesh, India's biggest state, at which Rahul failed to show the expected voter attraction of the Gandhi dynasty, the government had been in what its Minister for Heavy Industries, Praful Patel, admitted to be ''policy paralysis''.

It has clearly got to Singh. A preliminary sign was the removal of the former finance minister Pranab Mukherjee by getting him kicked upstairs to the presidency, and his replacement by Palaniappan Chidambaram, who had been Singh's partner as commerce minister during the 1990s reforms.

In the past week they have announced a series of big new changes in fiscal and investment policies designed to get economic growth quickly up to an average 8.2 per cent for the next five years, hitting 9 per cent a year by 2017.

First off was a 14 per cent rise in the administered price of diesel fuel and a rise in the price of bottled gas for household use as part of an effort to bring subsidies, currently 2.4 per cent of gross domestic product, below 2 per cent.

Then came a lifting of barriers to foreign investment in two attractive sectors. Foreign multibrand retailers such as Carrefour and Walmart, previously excluded from India, will be allowed to set up local operations with 51 per cent ownership.

Single-brand retailers, such as the big multinational sportswear and electronics chains, will no longer have to source at least 30 per cent of their products from local small and medium-sized enterprises.

Foreign investors will be allowed to take up to 49 per cent of Indian airlines, opening the possibility of foreign partnership in the national carrier Air India to lift it out of its bureaucratic mindset, and fresh investment in the fast-growing private-sector carriers that have been struggling as the sinking rupee raises debt-servicing and fuel costs.

Similar foreign equity levels will be allowed in electricity-trading exchanges, and four big state-owned corporations - Hindustan Copper, National Aluminium, Mines and Minerals
Trading Corp and Oil India - will be floated in the sharemarket.

The aim is to encourage a burst of capital inflow to lessen the need for foreign borrowing and thereby support India's credit rating. Whether it will succeed depends on the politics now. Singh tried to lift the barrier to foreign retail chains at the end of last year, only to be forced into policy reversal a week later by a revolt in his coalition.

This week, one of the bigger coalition parties, the Trinamool Congress, led by the West Bengal Chief Minister, Mamata Banerjee, walked out after demanding the reversal of all the new measures. That brought Singh's numbers in the lower house of parliament down from 273 to 254, 18 below the bare majority of 272.

Sonia Gandhi and other Congress leaders have been trying to rope in the two lower-caste parties strongest in Uttar Pradesh, the Samajwadi Party, whose Australian-educated Akhilav Yadav is the state's Chief Minister, and the Bahujan Samaj Party, whose leader is his predecessor, Mayawati Kumar.

Their numbers in the national parliament would give the coalition a healthy majority. Both these parties have constituencies reliant on subsidies for their tractor, water pump and domestic fuel. No doubt Gandhi is also working on Singh to see if the subsidy cuts could be wound back a bit.

Singh's best counter to win over their recruits is to point out that unless investment inflows and growth can be revived, the 2014 elections could see a return of the Bharatiya Janata Party, a Hindu-nationalist group seen by them as trying to perpetuate the old caste hierarchy.

Retail sector policy is also tailored to appeal to the rural communities. The minimum investment is $US100 million ($95.4 million) and half of that has to be in ''back end'' local procurement and logistics chains in farming areas. Linfox is one Australian company that has already been investing in preparations for this opening.

''On more than one occasion during the last two years, the government has taken decisions only to withdraw them under pressure from allies,'' says Amitendu Palit of Singapore's Institute of South Asian Studies.

''If something similar happens this time too, then not only will the government be stripped of whatever credibility it has, but policy paralysis will be there to stay for the foreseeable future.''


This article was found at: http://www.smh.com.au/world/singh-scrambles-for-solutions-to-put-india-back-on-track-20120921-26c10.html

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Indian prime minister defends economic reforms

 

By Simon Denyer and Rama Lakshmi, Published: September 21


NEW DELHI — Indian Prime Minister Manmohan Singh mounted a spirited defense of recent economic reforms in a nationally televised address Friday, arguing that they were necessary to revive investor confidence in a slowing economy and prevent a fiscal crisis.
Political analysts said it was a welcome, if belated, attempt to make the case for reforms, from a man who has frequently been castigated for being a poor communicator and presiding over a paralyzed administration.

But they said Singh continued to sidestep some of the fundamental issues that have plagued his government, including the corruption and lack of transparency in decision-making that business leaders say is holding back investment and growth.

“I promise you that I will do everything necessary to put our country back on the path of high and inclusive growth, but I need your support,” Singh said, hours after one of his coalition partners formally withdrew from the government to protest last week’s decision to allow in foreign supermarket chains such as Wal-Mart and Tesco and reduce subsidies on diesel.

“We have much to do to protect the interests of our nation, and we must do it now,” Singh said. “The time has come for tough decisions.”

On Thursday, many of the nation’s small shopkeepers closed their stores and thousands took to the streets, arguing that the arrival of foreign retailers would put them out of business.

But Singh said those fears were “completely baseless.” Other sectors of the economy, from information technology to steel and the auto industry, have thrived when exposed to foreign competition and investment, and he said retail trade would, too.

With growth slowing, government borrowing rising and investor confidence slipping away, officials say India’s government was compelled to act last week to ward off the possibility of a downgrade in its debt rating to junk bond status, with potentially disastrous implications for the rupee and borrowing costs.

Business leaders said last week’s policy announcements, which included allowing limited foreign investment in the airline industry, were welcomed as a step in the right direction — a mood-changer but not yet a game-changer — in a country where red tape, corruption, woeful
power supplies and problems in acquiring land act as powerful deterrents to investment.

“He didn’t talk about any of the things that have been consuming the country in the past few months,” said Manisha Priyam, associate professor of politics at Delhi University and a research scholar at the London School of Economics. “He didn’t address issues of transparency, allocation of national resources or any of the domestic reforms that everybody is demanding. Does he not have anything to say on that?”

Nevertheless, the decision to open up the retail market, something the U.S. government has long lobbied for, was a significant political risk for Singh. The government had already backed down from that decision after similar opposition last year.

‘Where is the big picture?’

This time around, Singh’s Congress party says it has enough support from other smaller, regional- and caste-based parties to shore up its coalition and comfortably win any confidence vote in Parliament.

But party insiders say they are aware that these smaller parties, widely seen as corrupt and opportunistic, cannot be depended on indefinitely, and they say they are preparing for the strong possibility of elections next year, rather than in 2014.

That may limit the government’s room to maneuver in terms of further reforms, analysts said.
“I don’t know how much more we can expect — they don’t have the political capital or the numbers to have greater reforms after this,” said columnist Ashok Malik, arguing that the speech lacked a broader sense of direction.

“He explained we have to tighten our belts, but where is the vision, where is the big picture, where is the dream?”

In his taped address, Singh defended his decision to cut subsidies for diesel by saying that “money does not grow on trees,” and warning that India could not afford a collapse in investor confidence suffered by some European countries.

He also pointedly reminded India of the reforms he unleashed as finance minister in 1991, when the country faced a much deeper foreign exchange crisis and he put into place far-reaching measures to liberalize the economy, setting it up for two decades of unprecedented growth.

But Singh’s reputation has fallen sharply in the past two years as the economy has slowed and his government has been mired in a series of corruption scandals, with the prime minister apparently watching impotently from the sidelines.

Difficulty in ‘resolute steps’

To some extent, the recent burst of reforms, coupled with Friday’s speech, seemed like an attempt from Singh to reclaim his legacy, just five days before his 80th birthday.

“The last time we faced this problem was in 1991,” he said, an Indian flag and a bust of independence leader Mohandas Gandhi behind him. “We came out of that crisis by taking strong, resolute steps. You can see the positive results of those steps. We are not in that situation today, but we must act before people lose confidence in our economy.”

The fact that Singh had to make a national address to defend a relatively modest package of reforms underlines how little political support exists for economic liberalization, even today.

That he harked back to the 1991 crisis underlines how deep the malaise has become in the past year.

The problem, columnist and author Shankkar Aiyar said, is that successive Indian governments make bold decisions only in the midst of a crisis. That makes for haphazard policymaking, and limited follow-through.
In essence, India’s path toward becoming a more open, prosperous global power is unlikely to ever be smooth.

“In India, things must get worse before they get better — and sometimes even that doesn’t happen,” said Aiyar, whose forthcoming book, “Accidental India,” explores this dynamic.
“But when the crisis fades, you say goodbye to reforms.”

© The Washington Post Company

 

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Wal-Mart to open retail outlets in India within 18 months after gov’t allows in foreign firms

 

By Associated Press, Published: September 21


MUMBAI, India — Wal-Mart plans to open retail outlets in India in the next 12 to 18 months, the company said Friday, making it the first multinational to jump on the government’s decision to open the country’s huge retail market to foreign players.

Raj Jain, the managing director of Bharti Wal-Mart, a joint venture that operates 17 outlets that cater to small businesses in India, confirmed by email that Wal-Mart plans to open stores that serve consumers over the next 18 months, but declined to say how many.

India announced last week that it would allow foreign firms to take a majority stake in multi-brand stores for the first time. The surprise decision cheered investors but cost the ruling Congress Party an important coalition ally.

New Delhi first tried to enact the measure last year, but backed down in the face of resistance from coalition partners, badly damaging its credibility with global investors. Prior to the reversal, foreign retailers like Wal-Mart could only operate wholesale outlets.

Opponents say the move will cost Indians jobs and decimate millions of mom-and-pop shops. Advocates say welcoming players like Wal-Mart is necessary to attract the investment needed for India to modernize its food supply chains, reduce waste and bring down spiraling food prices.

While India’s retail infrastructure, such as cold storage areas and warehouses, is “desperately lacking,” Wal-Mart can bring its own systems, said Michael Moriarty, a partner in the retail practice of management consulting firm A.T. Kearney.

The new rules mandate that foreign retailers spend half their investment on building supply chain infrastructure and source 30 percent of manufactured goods from local small- and medium-sized companies. Foreign retailers are also restricted to India’s 53 cities with populations exceeding 1 million.

Individual states will have the right to decide whether to let the retailers operate from their territory. Only 10 of India’s 35 states and territories which are controlled by the ruling Congress Party are likely to welcome foreign retailers initially, according to Eurasia Group analyst David Sloan.

India’s rules are more restrictive than those of China, Thailand, Russia, Brazil and Indonesia, all of which allow foreign investors 100 percent ownership in retail, according to Goldman Sachs.

Wal-Mart opened its first wholesale outlet in its partnership with Bharti in May 2009 in Amritsar in Punjab state. British-based Tesco PLC and French retailer Carrefour have also expressed interest in expanding in India.

“There is enormous opportunity in India,” Moriarty said, adding that the country is “underserved” by retailers and that consumers there increasingly have more spending money.
___

AP Retail Writer Anne D’Innocenzio contributed to this report in New York.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


© The Washington Post Company

1 comment:

  1. Hi,
    This is gonna shock all of you , out of your pants.
    It was decided in the Bilderberg club long ago, to gate crash into Indian economy, by a conspiracy.
    If you want to know what this elite club is –
    Punch into Google search
    THE SHREWD CLUB WITHIN THE NAÏVE BILDERBERG CLUB- VADAKAYIL.
    And if you want to know how the Bilderberg bankers control the world using their stooges on the PM’s and Presidents chair—
    Punch into Google search
    THE MURKY TRUTHS OF INFLATION AND GLOBALISATION- VADAKAYIL
    The banking cartel had been given a toe hold in India, by giving away FDI in multi-brand retail and FDI in insurance.
    Insurance affects transport costs and trade costs -- it requires perception to understand all this.
    We are confusing GDP with economic progress. We are destroying entrepreneurial activity and eating our own children. Fitch , S&P and Moody’s are bouncers for the banking cartel. The economics of Rothschild’s Indian alchemist Manmohan and his gunslinger Montek is VULGAR pseudo science.
    The Indian intelligentsia must wake up!
    DORKS and desh drohis shall lay off !
    Capt ajit vadakayil
    ..

    ReplyDelete