Make in India- Why we need it to work?

"Make in India" is a new push on manufacturing by the new Indian Prime Minister, Narendra Modi. It is a sales pitch the Prime Minister is making on 25 key industries to attract foreign businesses into India. It is partly a conference and partly a portal that will list the things Indian government will help foreign investors. 

What does Make in India include?

1. Fundamentally it is a sales pitch . The Prime Minister wants the foreign companies to manufacture their products in India.
2. It covers 25 major sectors (automobiles, chemicals etc) that the government feels are the most important for India. Government is putting all its effort to bring new businesses in these. 
3. It will work well with the "Invest India" - an initiative by the Commerce ministry to make it very simple to get investment approvals for manufacturing. 
4. It will have a web portal with in-depth details on government initiatives in various sectors and also a hotline for foreign investors to get immediate support.

Why we need it to work?
The core idea of the campaign is to make India a manufacturing super power by inviting as many foreign manufacturers to set their base in India.  So what will happen if many foreign companies set their manufacturing units in India?

It creates More Employment More new industries means more new job opportunities. India has an unemployment rate of 8% and according to the recent surveys India will require 55 million more jobs by 2015. "Make in India" campaign gaining desired traction will be a vitamin injection to the employment sector.

It increases Industrial sector’s GDP contribution to our Economy The service sector’s and Industrial sector's GDP contribution to our economy has improved considerably in the last fifty years whereas Agricultural sector has taken a huge hit in GDP contribution to the economy

Making this work will have huge impact on India’s GDP while changing the entire graph of our employment sector.India’s GDP contribution inManufacturing(currently at 15%) will increase substantially.

MNREGA- Why it failed?

The Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) was adopted in 2005 and first became operational in 200 of the poorest districts in India in February 2006. Within two and a half years it was extended to the rest of the country in April 2008.

Why did MNREGA fail?
Work needed to be provided to a person who registers for it within fifteen days of the date of demand. If work is not provided within 15 days of applying, the state is expected to pay an unemployment allowance which is one- fourth of the wage rate.
Therefore, the Act acted as a social safety net, provided employment to the poorest and aimed at inclusive growth and strengthening of the rural economy. This looks somewhat like the unemployment allowance system being followed in some of the developed nations, except that the government forgot-

1. India has a huge population(read unskilled labour force) and comparatively lesser demand for work (rampant corruption and mismanagement worsen the situation). This means the situation is inevitable where many would not get the job and will receive the unemployment-allowance. 
2. The Planning Commission had pointed out that payments to the workers were delayed as there was a late measurement of work. There were constant delays in payments and workers often waited for months to receive their wages. Delayed wages warranted compensation under the Payment of Wages Act. However, due to an ineffective grievance mechanism the problem was not being addressed.
3. There were not enough administrative and technical officials. The lack of administrative power in running the scheme in a proper decentralised manner to accomplish the building of blocks and capacity is simply a blunder.

Among other reasons, these were the ones that made MNREGA a terrible failure. 

There are many reasons for its failure but almost all of them can easily be traced back to 2 factors:
1. Corruption
2. Mismanagement

It was an extremely promising scheme which was implemented in the worst possible way leading to the failure. 

What is the ongoing Greek economic disaster and what does it mean for India?

After the second world war, unification attempts shifted from the power of the gun to the power of the currency. European powers along with the USA worked on a strong economic integration to prevent another world war. 

The first move was initiated in 1951 by a group of 6 countries - France, West Germany, Belgium, Netherlands, Luxembourg and Italy. These continental powers saw most of the action both the world wars. Thus, the economic integration started from there. The West European countries were next to each other, similar in their development and incomes and thus the integration was quite successful. 

However, in 1981 Greece was admitted into EU. This was unusual as Greece was way behind Western Europe in development. Greece was comparable to other eastern European countries and none of Eastern Europe was admitted into EU. 

Troubles with the Greek Economy 
Free trade areas and economic integration often makes sense among comparable economies. However, Greece and rest of EU were quite dissimilar. Greek companies could not withstand the competition, while the wages of Greek employees were rapidly rising to level with rest of EU. 

The result was that unlike every other EU power who enjoyed economic gains by being a part of the EU, Greece receded. Its economy declined

Impact on India-

1. Greece was admitted to EU and later became a part of the Euro.  Trouble there will affect India's exports. India exports nearly $40 billion every year to EU [Rs. 2.4 lakh crores]

2. World financial markets are closely linked. Just as kids in a class catch cold if just one kid gets it, financial markets get screwed if one market goes down. Investors in US and elsewhere would pull money out of India and other "foreign" stocks for the losses in Greece [basic human psychology is that if we get into trouble with one person, we avoid everyone similar to them]. When investors pull money away, Indian stock markets will crash. That will affect Indian companies.

3.When world bond markets get into a problem, Indian government would find it tougher to borrow money and that would affect domestic investments & growth. It would also push down the currency [meaning imports will go up] and cause inflation.

Issues related to Minimum Support Price

India is faced with a complicated situation as on one hand there is record production of cereals and on the other hand there have been trends of stagnant high inflation even when FCI godowns are overstocked. Many blame India’s minimum selling price policy for this situation. It has two unintended negative impacts; one is growth in agriculture is not dictated by demand of economy, other is persistent inflation. There are many other interventions which are isolated/unintegrated and lack broad vision of sector as a whole. Further, India has challenge to align domestic markets with international markets as exports of agriculture products can bring more prosperity to country side. It is said that 1% increase in Agro exports results in Inflow of 8500 crores in the sector. In this sense we can’t ignore WTO negotiations. These are to be negotiated while taking care of sovereignty and food security of India. 

Income based poverty line vs Consumption based poverty line

Even though NSSO captures consumption expenditure which used by Planning commission to determine poverty line. An alternative way of calculation of poverty line can be one based on Income of the population. But till now all committees have favoured consumption based poverty line due to following factors –

1. Huge majority of population has irregular income, most of them are in informal sector which consists of self-employed people, daily wage laborers etc. Income of this group is highly variable both temporally and spatially, while consumption pattern are comparatively much stable.
2. Even in case of regular wage earners, there are additional side incomes in many cases, which is difficult to take into account.
3. For e.g. MGNREGA provides employment for about 100 days, for rest of the time too people will earn something.
4. NSSO’s sample based surveys use a ‘reference period’ (say 30 days). They will ask households under survey about their consumption in last 30 days. This they will take a representative of general consumption of that household. This is not possible in case of income.

Brazil falls deep into recession.

Once a major economic success story, Brazil sank into recession. Its economy contracted 1.9% in the second quarter compared to the first. It was the second consecutive quarter of contraction.

Here are the major reasons why Brazil, is now in a recession:

1. Brazil's exports to China had exploded over the last decade. Now that China's economy is slowing, it needs fewer exports from Brazil. 

2. Brazil's state-run oil company, Petrobras, is in a massive corruption scandal tied to many members in Rousseff's political party. The large money-laundering scandal spans across oil, business and political leaders in the country. 

3. Prices for all of Brazil's key commodities -- oil, sugar, coffee, metals -- have tanked. Commodities are the engine behind Brazil's economy and they've lost value fast.

The recession comes as Brazilians are holding mass calling for Roussef's impeachment. Although corruption isn't new in Brazil, the scale of the Petrobras corruption is large. Petrobras officials said earlier this year that the company lost $2 billion just in bribes.

Why isn't the USA stopping China from becoming an economic superpower?

If we analyse the situation rationally, there are two reasons for this-

1) China has something like 4.5 times America's population, so the fact that their economy is en route to exceed ours is hardly surprising. If you think that's a bad thing, you are essentially saying that 1.4 billion people should be living in poverty. What reason is there for believing that the U.S economy should always be the largest on earth?

2) What do you think the government should be doing to prevent the Chinese economy from growing? A boycott is hardly possible and a trade war would hurt us as badly as them. Investment restrictions would again just hurt us and benefit Europe and Japan.

The fact is that the American and Chinese economies are tightly linked. We should be thinking about how to benefit from China's rise (for example, selling them some scrubbers for their coal plants) instead of pointlessly trying to keep them down.

What is SAARC's impact on Indian economy?

SAARC countries share same cultural history since centuries. In the economic terms they were interdependent up to the point but colonial rulers like British, Portugese, Dutch e.t.c shares the colonies and ruled them for their benefits. After the attainment of collective independence, India remained the largest country in all terms ahead of its neighbours. Because India is somewhat peaceful and had a stable political establishment since independence. No two SAARC countries share a boundary and all of them share a boundary with India. India is strong in economic perspective than other SAARC countries so they were not of much help to India.


Pakistan : It never completed the term of 5 years for any government except the recent one. Army, terrorists, internal conflicts e.t.c. hampers the growth of pakistan in every possible way. - Not helpful at all.

Bangladesh : In 1971 India helped it liberate and still the furore continues,  with the opposition trying to establish a islamic state. - Not helpful

Srilanka : LTTE war - relations degraded. But hosting the tamilians who stayed there. - Interests of Indians ( tamils and fishermen) are involved. Have to co-operate with them for greater development of tamil regions.

Maldives, Nepal, Afghanistan : Unstable and micro economies compared to India. India helped them with grants but never the other way around.

Bhutan : Complete dependence on India. 90% of exports to India.

Because of the low economic growth of these countries their help is very less compared to the help given by India. But these nations are handful in terms of population which are potential markets for exports of India. This is the reason MODI is emphasizing of peaceful and good trade relations with neighbours. With SAARC countries led by India and helping out each other for prosperous south asia. It could turn the tables in favour of India in global arena.

Is moderate inflation good for the economy?

Definitely. Inflation is just pressure that keeps money moving through the system. To have a vibrant economy, you want money to constantly be in action rather than stagnating. Of course, too much pressure is dangerousand the same goes for inflation. 

This leads to a few advantages. The main one is that it incentivizes people who have stuff (ie assets) to go out and actually put them to use. This way more things get done, which is generally beneficial for society. This means more money circulating, more people getting paid, more businesses making revenue, more taxes... All good things.

Another advantage is in fighting against a particular sort of cognitive bias: nobody likes their wages decreased. And yet, rationally, there are times when wages should be decreased. Luckily, this bias can be fooled by keeping the nominal wages the same: as long as the number stays the same, you're happy. Even if, in real terms, the number is actually worth less year over year!

Having more assets circulating also makes things more liquid. If people are more actively buying and selling, it's probably easier to buy or sell whatever you need. This makes doing actual business easier. The main point of the economy is to move necessary things between people who need them, which is exactly what liquidity helps with.

As an interesting detour, consider real estate. Generally, there is a fixed supply of land. You can't just create more, especially in the middle of a city! This means that land is inherently deflationary. If you have a prime spot of land in the middle of a city (but not enough resources to build anything), it would be in your interest not to sell this year, since it will be worth more in the future! But since you're not using it, everyone would actually be better off if you sold it. After all, we don't want our city centers full of empty lots! I figure this is one of the reasons we have property taxes, which can counter the deflationary nature of land and make it easier to buy and sell it.

This extra kick to make people use or sell valuable land—which is beneficial for the city as a whole—plays exactly the same role as inflation in general. We want to run our economy at a reasonable utilization, putting most of our resources to work most of the time. Inflation is a nice decentralized way of making this happen.

At the same time, inflation is not without risks. In some sense, it's an implicit tax on assets. Since government bonds are denominated in currency, inflation is like an extra source of revenue. This could allow a government to levy an extra tax even if it would be opposed, rationally or not. This (rightly) worries some people. However, it does not mean we should not have any inflation! It's just something important to consider.

Unrecoverabe damages caused by the Britishers

How often have we seen the Britishers being thrashed for looting all the wealth and using our human resources to Develop their own country? 

After pondering upon this topic and reading about the facts and figures, this has only left me with a dilemma. On one hand, while Britishers introduced so many policies and laws to divide India, they also gave us the fuel to unite on the same terms and fight against them. 

It's just a matter of perspective, not that I am in any way supporting the various destructive steps that Britishers took. But looking at the greener side, Britishers United us in a way that the entire country stands democratic and together today.

How has Indian youth developed themselves to rise up to become the highest population of English speaking youth? India is the largest democratic country and we do pride ourselves on our transport infrastructure, railways being on the top. 

Unrecoverable loss has been cause by them, but in the other light, let's not overlook the selfish motives which happened to become a changing  point for our nation. 

Growth vs Development

Being in Mumbai for a year has made me realise the major difference in the economic status of this country. You could go to the most expensive house in this city, that being Antilla and be surprised to see that its encircled by slums. 

This shows you the major battle India has been fighting. Economic growth which is taking place at a moderate rate is still much more than the development that can be seen. Numbers don’t speak in terms of the living standard that persists in this country. 

The development is taking place, but not at such a rapid rate. With growth being given such prime importance, it has increased in the previous few years and it can be seen that the PCI has been pressing issue that is undertaken by the government.

But is it enough to just concentrate on the numbers and not on the reality that we witness every day?

The emphasis is basically because the government feels that with the increase in the income of the people, they will be able to develop at a faster rate. Which, if you think more about it is not the only parameter of a developed country.
It has to be combined with other factors such as low infant mortality rate, more awareness, education and health facilities.

This is what is going to help us develop. To combine the numbers with the overall well being of the people.