Olympic bid

[Sandeep]

Well PKBASU, I don't understand in what way my questions are going to distract from the article you have mentioned. They only contradict to what you wrote. I only asked you these questions becasue I already see labour getting costlier in India. A salary of 15k per month is no more a good one in India especially with the advent of software. People now started looking at salaries of say 20k or 30k depending on their experience. If the labour continues to get costlier why should India be destination when there are several other countries which offer labour for cheap. I feel that there is no gaurantee that these MNC's are going to stay in India forever. We have to mobilize the funds we get from software to manufacturing Industry. Some of the alarming features of India where no effort is being put to improve are: -

1)We can't manufacture a car of our own. Indica is the only car which manufactures all parts in India. But the effort is not there to start a car of our own.

2) Indian hardware sector is very bad. Inspite of all the advantages we have no effort has been put to start a hardware industry.

3)In short Indian manufacturing Industry is very very bad. That is the area we need to improve. Those are the one's which we are going to depend in future. We should be in a position to export.

4)Money flow with in the country is imporatant feature of a developed country. We need industries which use our own resources and products manufactured. How long can we depend on other countries? What if America senses threat from India and stops exporting its Intel chips? Almost all processors come from America. How can the world survive with out Computer chips? Our domestic money flow is pathetic. Most of our money comes from Imports and exports.

When I mean by domestic money flow, for example american companies HP, DELL etc use the hardware manufactured with in America only. There is money flow with in the country. They are not dependent. Tomorrow even if world is not with America they can survive. Can India do that? Answer is no. We are completely dependent on every one. Isn't it high time that we concentrate on that part?

[PKBasu]

But PKBASU don't you think Nehru's contribution to independent India is unquestionable. He had tremendous vision. He built us some of the biggest dams for irrigation. He built us huge steel factories and as you said IIM and IIT was very good thought. The onyl sad part of him was that, he is too niave to be a prime minister. Otherwise all his intentions were very good.

I don't doubt that his intentions were very good, and I have great regard for some of what he achieved.
But his naivete on foreign policy was astonishing -- given that foreign policy was what he focused on. 1962 was a disaster that cannot be laid at anybody else's door (apart from his favourite, Krishna Menon, who was even more culpable).
On the economy, building dams and steel mills were clearly important -- at a time when India's infrastructure was abysmal. But the technology in some of the steel mills (obtained from the Soviet Union) was not the best, and the incentive structures in the public sector made them increasingly inefficient over time (although much of the deterioration occurred during Indira Gandhi's time).
I give Nehru enormous credit for creating the IITs and IIMs. And for building and strengthening our institutions (independent judiciary, federal system of governance with strong state leaders around a solid centre, relatively autonomous bureaucracy) -- most of which were destroyed by Indira (who, by contrast, was the best foreign-policy PM we have had, but more on that perhaps another day). I also credit him for not doing silly things like taking over sick industries (rather than letting them die naturally, rather than eat up resources) and nationalising banks -- actions that he is blamed for, when in fact the blame for them too lies with Indira, who was a disaster for the economy in 1969-75.
However, in the broadest macroeconomic sense, the "model" he was trying to impose on the Indian economy was fundamentally flawed: the Soviet model, rather than the US one or the Japanese one. Those who followed the Japanese model (with generous doses of US aid in the early years) succeeded far more (the former Japanese colonies of Taiwan and Korea, then Singapore, Hong Kong, Malaysia, Indonesia, north and east China -- all conquered by Japan in the second World War).

[Sandeep]

PkBasu I seriously feel something is stopping you from answering my questions. I Didn't understand why you said that my questions distract people from the article you mentioned. Can you be a bit elaborate on that comment. You have answered my Nehru questions, I don't know why you are not answerting my other questions. I will read your book, but it takes time.

[PKBasu]

I only asked you these questions becasue I already see labour getting costlier in India. A salary of 15k per month is no more a good one in India especially with the advent of software. People now started looking at salaries of say 20k or 30k depending on their experience. If the labour continues to get costlier why should India be destination when there are several other countries which offer labour for cheap. I feel that there is no gaurantee that these MNC's are going to stay in India forever. We have to mobilize the funds we get from software to manufacturing Industry. Some of the alarming features of India where no effort is being put to improve are: -

1)We can't manufacture a car of our own. Indica is the only car which manufactures all parts in India. But the effort is not there to start a car of our own.

2) Indian hardware sector is very bad. Inspite of all the advantages we have no effort has been put to start a hardware industry.

3)In short Indian manufacturing Industry is very very bad. That is the area we need to improve. Those are the one's which we are going to depend in future. We should be in a position to export.

4)Money flow with in the country is imporatant feature of a developed country. We need industries which use our own resources and products manufactured. How long can we depend on other countries? What if America senses threat from India and stops exporting its Intel chips? Almost all processors come from America. How can the world survive with out Computer chips? Our domestic money flow is pathetic. Most of our money comes from Imports and exports.

When I mean by domestic money flow, for example american companies HP, DELL etc use the hardware manufactured with in America only. There is money flow with in the country. They are not dependent. Tomorrow even if world is not with America they can survive. Can India do that? Answer is no. We are completely dependent on every one. Isn't it high time that we concentrate on that part?

I have already answered your questions in a previous post. But since you persist, here are some responses to the specific questions/comments above:
Rs15K may be a lot in India, Sandeep, but I can assure you the equivalent amount (about US$333) won't even get you a decent month's house rent in San Jose (where you live). Besides, the quality of Indian personnel is what attracts MNCs to the software, IT services and BPO sectors.
Question 1 above: Only about 8 other countries produce cars of their own (China doesn't, for instance, have a car that is more indigenous than the Indica).
Question 2: There are a few Indian companies who are world-class in the IT hardware industry, eg, Moser-Baer (the third-largest producer of CD-Roms in the world; despite its Swiss-sounding name, this company is owned by a solid Delhi family with the surname Puri). But we can certainly do better in IT hardware.
Question 3: Manufactured exports have grown 26% in the latest year, a pretty decent performance. They have more than quadrupled over the past 12 years (pretty decent too). We can do better, but Indian manufacturing is not "very very bad". Our pharmaceutical producers have done remarkably well, and India exports more car and car-parts than Thailand or China (and all other Asian countries other than Japan and Korea). Tata Steel is the most profitable steel company (per tonne of steel produced) in the world, and Hindalco (AV Birla group) is the lowest-cost producer of aluminium in the world.
Question 4: This is the type of thinking that got us (as well as Burma and North Korea) into trouble in the first place. No country is self-reliant -- that is why international trade exists, so that every country can specialise in the goods or processes in which it has a comparative advantage. Nehru's strategy of import-substitution failed because -- even while trying to become self-reliant in everything -- we found that we could not produce machine tools and components, and this import-constraint limited the ability of our manufacturers to grow.

[PKBasu]

And, incidentally, HP and Dell produce hardly any hardware in "America only". Most Dell computers are manufactured in Taiwan (now increasingly in China). Almost every Intel microprocessor is packaged and tested in Malaysia, and most Intel motherboards are made in Taiwan.

[Sandeep]

Ya you are right, but all R&D is done in America. But well thank you for answering. If you think I am not pestering you, here is another question. Rupee is appreciating well against dollar for the past one year. Will it affect exports in India? As we don't get the same amount as we used to but expenditure in India is same. Is it not high time that RBI stabilize dollar value?

Indian cargo exports were hit badly last year, becasue of ship frieghts. Most of the chinese steel companies have offered exorbitant ship frieghts which led almost all ships to travel to china. Should the government of India interfere and grant some kind of concession for exporters other than who export to china?

Are the above mentioned two possible? If so at what cost?

[PKBasu]

The rupee has appreciated against the US dollar, but it is actually at an all-time low in trade-weighted terms -- because it is depreciating against the Euro, Yen and most Asian currencies other than the RMB, HKD and MYR (which are pegged to the US dollar). The RBI is doing a decent job managing the Rupee. I don't see any need for too much further intervention.

I'm not sure what you mean when you say India's "cargo exports were hit badly last year". Despite the cost constraints you mention, exports grew more than 25%, so I see no need for any intervention on this count either.

[Sandeep]

Exports grew, but make a statistical division and observe. Take away IT exports and Iron Ore export. Remaining almost all exports were hit.

[PKBasu]

IT exports are not included in the export growth figure quoted above (which is for merchandise exports, 80% of which are manufactured products). Iron ore comprises less than 2% of merchandise exports.

[India1989]

India makes car totally on its own too like Tata Indigo and other tata cars.

Anyways India does have good industrial production.