Brand India Loses Luster at World Economic Forum

Brand India has lost its luster at Davos in 2011!

Poor governance and corruption are endemic in India, and have been the talk of the town at Davos this year, tarnishing the meticulously crafted image of "Shining India" at the World Economic Forum since 2006. The immediate effect is that that India's foreign direct investment (FDI) is already down by a whopping 36% in 2010 from 2009, and there is no recovery in sight yet. Meanwhile India's current account deficit is exploding, accounting for about 3.5% of GDP.



In 2006, the "India Everywhere" campaign orchestrated by Indian planning commission officials and the Confederation of Indian Industry (CII) dominated the ambiance of the World Economic Forum at Davos, Switzerland. They spent two years and more than $4 million and put together an elaborate marketing and PR campaign to ensure that the "India story" got prominent play and did not get drowned in the noise at Davos. The success of the initiative was apparent by the dramatic increase in FDI inflow to India which doubled from less than 1% of GDP to nearly 2% of the expanded GDP in 2008.

Here is how Times of India reported the scene from Switzerland in 2006:

For once, India is really everywhere at Davos. With the 35th World Economic Forum (WEF) opening at the Swiss mountain resort, one cannot help but notice India Everywhere.

Right from the moment you step off the aircraft at Zurich airport, big hoardings proclaiming India greet you. Upon reaching Davos, located about 150 km from Zurich, the Indian colours are just about everywhere.

In fact, you see more of India than Switzerland in Davos this year.

The buses wear Indian colours, the bus shelters have Indian advertisements, and key bars, pubs and hotels in the city where the economic meet began Wednesday evening are serving up Indian snacks and Indian wines and beer.


Reports from the World Economic Forum at Davos in 2011 offer a very different narrative.

Coming after the massive multi-billion dollar telecom corruption scandal in 2010 and expression of deep concern by some prominient India businessmen about the nation's governance deficit in 2011, India's presence at the World Economic Forum 2011 was decidedly lower key when compared with the heady days of 2006.

Summing up the sentiment at Davos, an Indian journalist opined as follows: "..such a forthright disregard for the so-called "India story" may understandably offend nationalist sentiments and bring on the "west versus rest" polarization that keeps many public intellectuals in business. But the harsh truth is that India has been sold, resold and re-re-sold in so many samosa and Sula evenings that it has lost novelty."

Here's a video clip on India's massive corruption:



Related Link:

Haq's Musings

Indian Economy: Hard or Soft Landing in 2011?

Pakistani Economist Saadia Zahidi at World Economic Forum

Inaction Against Corruption in South Asia

2G Corruption Scandal in India

Musharraf at Davos 2008

Imran Khan at Davos 2011

Delhi in Davos: How India Built its Brand at the World Economic Forum

FDI India, Pakistan, China and Vietnam 2003-2010

China's Trade and Investment in South Asia

India and Pakistan at Davos 2009

India's Twin Deficits

Pakistan's Economy 2008-2010

Inflation Hits India

Goldman Sachs India Warning on Twin Deficits

India's Nov 2010 Imports, Exports

Comments

Riaz Haq said…
Here's a piece by Prabhu Chawla of the Indian Express on India at Davos 2011:

... the ‘event managers’ of the India show were late by three years as nobody in the famous Alpine ski resort today has the patience to hear the old “India Story” that drew applause till 2008 — to the strains of Bollywood music in Zurich — and the line “India Everywhere.” In retrospect, the Indian extravaganza at Davos seems as pretentious as the throng of Kolkata’s dubious book lovers. By 2009, attendance began falling in India-related events at Davos. In that year not even 20 guests attended an Indian IT czar’s evening session. India in 2011 is a disaster story, with Foreign Direct Investment (FDI) contracting by a stunning 31 per cent in a single year — from $34.6 billion in 2009 to $23.7 billion. On the other hand, FDI to Singapore, a country one-fifth the size of the National Capital Region of Delhi, has grown by 122 per cent in 2010—an astounding $37 billion. What is rising is the flight of Indian-owned capital from India: estimated an astonishing $75 billion in the first decade of the millennium, according to a Columbia University study. Against this backdrop, the question that needs to be asked is: Why must the government spend millions of tax rupees to fly its flag at the Alpine jamboree? What object do the evening parties at Davos serve, attended by the same people who usually meet in Mumbai and Delhi for the same purpose — whining and dining.

When put in the China-context, the India story looks even grimmer. The dragon slalomed past the tiger in Davos 2011. China did not have to announce its presence from a restaurant corner, offering samosas as fondue; its aura was felt everywhere. The China-focused sessions spoke more about what China could do for the world than about itself, or its potential. There was no China hoarding visible anywhere. Their delegates numbered just over 20. But hardly a session went without a Chinese face on the podium, or a deferential mention of the country in the proceedings. It was ironic when Min Zhu, a Chinese special adviser to the IMF, not only stole the show in a discussion on India — addressed among others by Chidambaram and ICICI Bank chief Kochhar — but also advised Indians quite magisterially on how serious they ought to get on the inflation problem.
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There were plenty more reasons for India to keep a muted profile at Davos 2011. The country has just clocked a current account deficit of $15.8 billion in July-September 2010 — a bewildering 72 per cent increase on the previous year’s $7.26 billion....
Riaz Haq said…
India's corporate mafia is fuelling corruption, says Prashant Bhushan, according to newKerala.com:

"The corporate mafia has come to control every institution of power and governance, be it politicians, bureaucracy, police and, to an extent, judiciary also," Bhushan told IANS in an exclusive interview.

"The corporate houses have become monstrously large and a law unto themselves. They get the law and policies made and decision taken including judicial decisions," he said, adding "very often they decide what the media will report or not report".

Bhushan, the son of eminent jurist and former law minister Shanti Bhushan, said any fight against corruption and for redeeming democratic institutions had to commence with transparency.

"The situation today is much worse than what it was in the early 1970s. At that time we did not have the corporate mafia controlling all the institutions. That was a situation when a powerful prime minister temporarily choked off democracy. Today, this corporate mafia is accountable and more dangerous," Bhushan asserted.

"This system is so bad. There is no point in preserving the illusion of functional democracy when it is clear that most institutions of democracy have crumbled or are non-functional. We need to restore proper democracy in the country and not preserve an illusion of democracy."

The lawyer said the only prescription for rescuing Indian governance from "corporate mafia" was "transparency" and people's right to know about the functioning of the state apparatus.

"Unless we wake up and start engaging in public issues and affairs, we are heading towards disaster," said Bhushan, who is facing contempt of court proceedings for highlighting the alleged misconduct of an apex court judge.

It was Bhushan who convinced the Supreme Court to monitor the Central Bureau of Investigation (CBI) probe into the allocation of 2G airwaves to telecom companies. He also spoke on his fight against corruption and allegations against Central Vigilance Commissioner (CVC) P.J. Thomas.

He said India was in a "very serious situation" and the "biggest threat was corruption that had spread in every vital sphere of the state's functioning".

The crumbling democratic institutions could be "repaired and restored" provided there was a "very strong people's movement in the country that would bring pressure on the institutions".

"Though the judiciary can play a useful role in that process", in the final count it needed the backing of a strong people's movement, he said.
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"I think all problems have to be dealt with simultaneously. You cannot shut your eye to a problem in one institution in order to highlight it in another institution. This is a shortsighted policy which does not pay in the long run," he said.

Advocating an independent media, he said that the media should not be controlled by corporate houses or those who have a direct or indirect interest in other business.
Mohammad said…
Is India in coma? asks Mohan Murti in an Op ED the Hindu:

A few days ago I was in a panel discussion on mergers and acquisitions in Frankfurt, Germany, organised by Euroforum and The Handelsblatt, one of the most prestigious newspapers in German-speaking Europe.

The other panellists were senior officials of two of the largest carmakers and two top insurance companies — all German multinationals operating in India.
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European disquiet

Questions ranged from “Is your nation in a coma?”, the corruption in judiciary, the possible impeachment of a judge, the 2G scam and to the money parked illegally in tax havens.

It is a fact that the problem of corruption in India has assumed enormous and embarrassing proportions in recent years, although it has been with us for decades. The questions and the debate that followed in the panel discussion was indicative of the European disquiet. At the end of the Q&A session, I surmised Europeans perceive India to be at one of those junctures where tripping over the precipice cannot be ruled out.
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In a popular prime-time television discussion in Germany, the panellist, a member of the German Parliament quoting a blog said: “If all the scams of the last five years are added up, they are likely to rival and exceed the British colonial loot of India of about a trillion dollars.”
One German business daily which wrote an editorial on India said: “India is becoming a Banana Republic instead of being an economic superpower. To get the cut motion designated out, assurances are made to political allays. Special treatment is promised at the expense of the people. So, Ms Mayawati who is Chief Minister of the most densely inhabited state, is calmed when an intelligence agency probe is scrapped. The multi-million dollars fodder scam by another former chief minister wielding enormous power is put in cold storage. Prime Minister Manmohan Singh chairs over this kind of unparalleled loot.”

An article in a French newspaper titled “Playing the Game, Indian Style” wrote: “Investigations into the shadowy financial deals of the Indian cricket league have revealed a web of transactions across tax havens like Switzerland, the Virgin Islands, Mauritius and Cyprus.” In the same article, the name of one Hassan Ali of Pune is mentioned as operating with his wife a one-billion-dollar illegal Swiss account with “sanction of the Indian regime”.

A third story narrated in the damaging article is that of the former chief minister of Jharkhand, Madhu Koda, who was reported to have funds in various tax havens that were partly used to buy mines in Liberia. “Unfortunately, the Indian public do not know the status of that enquiry,” the article concluded.

“In the nastiest business scam in Indian records (Satyam) the government adroitly covered up the political aspects of the swindle — predominantly involving real estate,” wrote an Austrian newspaper. “If the Indian Prime Minister knows nothing about these scandals, he is ignorant of ground realities and does not deserve to be Prime Minister. If he does, is he a collaborator in crime?”

The Telegraph of the UK reported the 2G scam saying: “Naturally, India's elephantine legal system will ensure culpability, is delayed.”

Blinded by wealth

This seems true. In the European mind, caricature of a typical Indian encompasses qualities of falsification, telling lies, being fraudulent, dishonest, corrupt, arrogant, boastful, speaking loudly and bothering others in public places or, while travelling, swindling when the slightest of opportunity arises and spreading rumours about others. The list is truly incessant.
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Europeans believe that Indian leaders in politics and business are so blissfully blinded by the new, sometimes ill-gotten, wealth and deceit that they are living in defiance, insolence and denial to comprehend that the day will come, sooner than later, when the have-nots would hit the streets..
Riaz Haq said…
India's prime minister has warned that the country's rapid economic growth is under "serious threat" from inflation, according to the BBC:

Manmohan Singh said getting inflation under control was a matter of urgency, raising the prospect of an eighth interest rate rise in under 12 months.

Emerging markets like India, where GDP growth is running at 8.5%, are helping to drive global economic recovery.

But Mr Singh said India's inflation rate of 8.4% - and food price inflation of 17% - was unsustainable.

"Inflation poses a serious threat to the growth momentum. Whatever be the cause, the fact remains that inflation is something which needs to be tackled with great urgency," he said.

Analysts believe that surging food and oil prices mean that India's central bank may have to raise interest rates before its next policy meeting, which is scheduled for 17 March.

India's stock market has fallen this year on fears that high inflation will scare off foreign investors.

Wages in India are also rising as workers demand pay that keeps up with the cost of living.
Riaz Haq said…
FII inflows (aka hot money) into Indian stock markets surged 66% from $17.4 billion in 2009 to $29 billlion in 2010, according to The Hindu newspaper:

Mumbai, Dec. 31 Year 2010 saw foreign institutional investors buy Indian stocks for $29 billion net. This is the most that they have pumped into the Indian market in a single year despite the market-indices here being fairly range-bound during this period.

This is also much more than the inflows ($17.6 billion) seen in 2007, when the Sensex was on a gaining streak.

The markets did surge a little in 2009, too, when FIIs were net buyers for a total of $17.45 billion.

Domestic institutions, on the other hand, were net sellers of equities for Rs 19,503 crore in calendar 2010.

FIIs were also net buyers in equities in all months this calendar, except in January and May. August saw the highest net purchases in a single month this year for $13 billion.

On a year-to-date-basis, the Sensex and the Nifty returned 15 per cent and 16 per cent, respectively.

It was this relentless buying from the FIIs that pushed up the Indian markets in 2010.

Though the Sensex did reach an all-time high this year, it was quite range-bound. The benchmark has been trading between 17,000 points and 21,000 points right through 2010.

Over-valued

The buying spree on the part of FIIs slowed down in the last month amidst all the scams and the routine FII year-end exits when they need to pay their investors. Their net purchases during December has so far amounted to $0.3 billion only.

“Part of this pullback is because India is perceived to be overvalued vis-a-vis other emerging markets.

“Indian markets have enjoyed around a 30 per cent premium to the other emerging markets. But what has happened this year is that the scams have made FIIs start to question the rich valuations here,” said Mr Saurabh Mukherjea, Head of Equity at Ambit Capital. He added that the next year might see a moderation in FII inflows into the country.

Domestic institutions were net buyers of equity during December and November after being net sellers for five consecutive weeks. Mr Mukherjea said that insurance companies have been seeing inflows trickling in during December and that the fund houses here are also in “slightly better health”.

Mr K. Ramanathan, Chief Investment Officer at ING Investment Management, said that mutual funds faced a lot of redemptions this year and they did not get much incremental net inflows.

“The changes in the regulatory framework too hurt the mutual fund industry. Distributors find it better to sell insurance products as the brokerage there is better than from distribution of mutual funds,” he added.


http://www.thehindubusinessline.in/2011/01/01/stories/2011010152710900.htm
Riaz Haq said…
Thousands of Indian illegal immigrants are slipping into Texas from Mexico, according to LA Times:

Reporting from Harlingen, Texas — Thousands of immigrants from India have crossed into the United States illegally at the southern tip of Texas in the last year, part of a mysterious and rapidly growing human-smuggling pipeline that is backing up court dockets, filling detention centers and triggering investigations.

The immigrants, mostly young men from poor villages, say they are fleeing religious and political persecution. More than 1,600 Indians have been caught since the influx began here early last year, while an undetermined number, perhaps thousands, are believed to have sneaked through undetected, according to U.S. border authorities.

Hundreds have been released on their own recognizance or after posting bond. They catch buses or go to local Indian-run motels before flying north for the final leg of their months-long journeys.

"It was long … dangerous, very dangerous," said one young man wearing a turban outside the bus station in the Rio Grande Valley town of Harlingen.

The Indian migration in some ways mirrors the journeys of previous waves of immigrants from far-flung places, such as China and Brazil, who have illegally crossed the U.S. border here. But the suddenness and still-undetermined cause of the Indian migration baffles many border authorities and judges.

The trend has caught the attention of anti-terrorism officials because of the pipeline's efficiency in delivering to America's doorstep large numbers of people from a troubled region. Authorities interview the immigrants, most of whom arrive with no documents, to ensure that people from neighboring Pakistan or Middle Eastern countries are not slipping through.

There is no evidence that terrorists are using the smuggling pipeline, FBI and Department of Homeland Security officials said.

The influx shows signs of accelerating: About 650 Indians were arrested in southern Texas in the last three months of 2010 alone. Indians are now the largest group of immigrants other than Latin Americans being caught at the Southwest border.
Riaz Haq said…
Hot money inflows now account for 58% of India's forex reserves, reports The Financial Express:

The ratio of volatile capital flows—defined to include cumulative portfolio inflows and short-term debt—to the country’s forex reserves increased to 58.1% in March 2010 compared to last year’s 47.9%.

According to the Reserve Bank of India (RBI), the ratio of short-term debt to the foreign exchange reserves declined from 146.5% in March 1991 to 12.5% in March 2005, but increased slightly to 12.9% in 2006.

However, with expansion in the coverage of short-term debt, the ratio increased to 14.8% in March 2008, to 17.2% in March 2009 and 18.8% in March 2010.

The country’s foreign currency assets are invested in multi-currency, multi-asset portfolios as per the existing norms which are similar to the best international practices followed in this regard. At end of March 2010, out of the total foreign currency assets of $ 254.7 billion, $ 132.1 billion was invested in securities, $ 117.5 billion was deposited with other central banks, BIS and the International Monetary Funds (IMF) and $ 5.1 billion was placed with the External Asset Managers (EAMs).

A small portion of the reserves has been assigned to the EAMs with the main objective of gaining access to and deriving benefits from their expertise and market research, said RBI.

The rate of earnings on foreign currency assets and gold, after accounting for depreciation, decreased from 4.82% in July 2007-June 2008 to 4.16% in July 2008-June 2009.

The RBI held 557.75 tonne of gold forming about 6.0%of the total foreign exchange reserves in value terms as at the end of March 2010.

Of these, 265.49 tonne are held abroad (65.49 tonne since 1991 and further 200 tonne since November 2009) in deposits / safe custody with the Bank of England and the Bank for International Settlements.

In November 2009, the RBI concluded the purchase of 200 metric tonne of gold from the IMF, under the IMF’s limited gold sales programme. The purchase was an official sector transaction and was executed over a two week period during October 19-30, 2009 at market-based prices. As a result of this purchase, the RBI’s gold holdings have increased from 357.75 tonne to 557.75 tonne.

Following the commitment made by India as part of the G-20 framework, the RBI has agreed to purchase SDR denominated notes from IMF up to $10 billion. As on March 31, 2010, $317.9 million was invested in notes of the IMF.

International Monetary Fund designated India as a creditor under its Financial Transaction Plan (FTP) in February 2003. During April 2009 to March 2010, SDR 130 million was made available to Romania, SDR 50 million to Sri Lanka and SDR 117.93 million to Belarus.

The total purchase transactions amounted to SDR 1194.16 million as at the end March 2010. India was included in repurchase transactions of the FTP since November 2005. There were no repurchase transactions during the half year ended March 2010.

The traditional trade-based indicator of reserve adequacy- import cover of reserves- which fell to a low of three weeks of imports at end-December 1990 reached a peak of 16.9 months of imports at the end of March 2004. At the end of March 2010, the import cover stands at 11.2 months.
Riaz Haq said…
BBC's Soutik Biswas's comments on Manmohan Singh's press conference on corruption and governance deficit in India:

..So when Prime Minister Manmohan Singh sat down for a rare hour-long press conference in Delhi this morning, he, unsurprisingly, faced a barrage of questions on what his government was planning to do to crack down on corruption in high places. Unfortunately, say analysts, his answers did not reveal a more assertive chief executive who was fully in control of the situation.

For one, say critics, the reticent Mr Singh appeared to be more bothered by how India's image might have been damaged by the media coverage, than by the rising tide of corruption itself. He gave reassurances that the government was "dead serious" in bringing to book "all the wrongdoers regardless of the positions they occupy". When pressed further, he said: "Wrong doers will not escape this time."

But he also worried that in "projecting" (read, the media reporting) these events, "an impression has gone round that we are a scam-driven country". This was, he felt, "weakening the self confidence of the Indian people". He told the journalists: "In reporting the affairs of our nation, you should not focus excessively on negative features."

Many find Mr Singh's plea disingenuous as India remains one of the most corrupt countries in the world, and graft continues to eat away at its vitals. It hurts the poor most, widens inequity, kills initiative and saps energy out of society. For all its foibles, India's noisy and vibrant media has done more than a good job in relentlessly chasing the alleged scandals - from alleged underselling of telecom licences to purchases for last year's Commonwealth Games. India's merchants of feel-good, however, insist that to highlight corruption at the cost of the country's considerable achievements - and there are many - is wrong.

Critics say Mr Singh should not be worrying about the self-confidence of his citizens. The rising self confidence of Indian people, they say, is despite the weak and ineffectual state; and it mostly comes from the opportunities they have been able to mine for themselves in a highly competitive nation.

Indians may be inured to corruption, but the recent spate of allegations has taken their breath away. Many believe that the time has come for an all-out war against corruption, something consecutive governments have been loathe to do. So, few believe the government when it says it is moving to bring back illicit money that Indians have stashed away in foreign banks. People believe there is a silent consensus among political parties to go soft on corruption. Nothing much has changed during Mr Singh's regime, they say, despite his exhortations and promises.

Mr Singh appears to have taken refuge in the uneasy compulsions of coalition politics to try to take the heat off on the corruption charges plaguing his government - after all, a former minister who is being investigated for his alleged involvement in the telecom scandal belongs to a key ally. So he kept insisting that coalition politics had hobbled him....
Riaz Haq said…
News about 2010-2011 budgets in South Asia:

The BBC is reporting that "the budget deficit has reduced to 5.1% of GDP this fiscal year, down from more than 6%. The plan is to cut this to 4.6% next year".

Pakistan's budget deficit for first six months of 2010-2011 stood at 2.9%, up from 2.7% last year, according to CNBC and Reuters.

KARACHI, Feb 28 (Reuters) - Pakistan's budget deficit for the first six months of the 2010/11 fiscal year (July-June) was 2.9 percent of gross domestic product, the Finance Ministry said on its Web site (www.finance.gov.pk) on Monday. This compared with a deficit of 2.7 percent in the same period last year. In the October-December quarter, the deficit eased to 1.3 percent from 1.6 percent in the preceding quarter. Analysts said the lower second-quarter deficit was largely due to payments by the United States for logistical support provided by Pakistan in the war against Islamist militants. In November 2010, Pakistan agreed with the International Monetary Fund (IMF) that it would keep the country's budget deficit at 4.7 percent for the 2010/11 fiscal year. However, analysts agree Pakistan will likely overshoot this figure. Some forecast the deficit to be around 8 percent, higher than the central bank's prediction of between 6.0 and 6.5 percent, if fiscal reforms are not implemented. The original target of 4 percent was revised following the devastating summer floods, which caused around $10 billion in damages.
Riaz Haq said…
Here are some excerpts of an interesting open letter to the Arab pro-democracy protesters from an Indian writer Udayakumar:

1. ... ...there are hundreds of Members of Parliament (in both the upper and the lower house) such as Basudeb Acharia, Manikrao Hodlya Gavit, and Somnath Chatterji who are called "longest serving" members. I wonder if they should be called that or the "longest clinging" members. There is a similar trend in the legislative assemblies of all the states in India too. For instance, M. Karunanidhi, the present Chief Minister (US equivalent of State Governor) of Tamil Nadu state has been a member of the state house for more than 40 years now.

2. You rightly problematize the nepotism of your rulers and think that democracy could end all this. The dynasties of the Kennedys, the Bushs and the Clintons in the United States, and the Gandhi dynasty and quite a few smaller dynasties in India would prove that democracy and elections cannot curtail sycophancy, nepotism, and family succession....

3. ...In December 2008, while announcing federal corruption charges against Illinois Governor Rod Blagojevich, FBI Special Agent Robert Grant said that "if [Illinois] isn't the most corrupt state in the United States, it is one hell of a competitor." Blagojevich ended up in prison. Republican George Ryan is currently serving a 6 1/2-year term in federal prison for racketeering and fraud. Otto Kerner, a Democrat, was convicted in 1973 on 17 counts of bribery, conspiracy, perjury and other charges and sentenced to three years in the prison. In 1987 Dan Walker was convicted of bank fraud years after leaving office. Lennington Small, a Republican who served from 1921 to 1929, was indicted while in office for embezzlement. Most Indian politicians have no qualms about stealing public money and they are said to be the largest clientele of the Swiss banks. Rudolf Elmer, a Swiss bank executive, has said that "Switzerland is the most preferred tax haven for Indians" to stack up their illicit wealth (NDTV, January 19, 2011).

4. ...It is obvious that your leaders, kings and emirs use the national resources for their and their families' aggrandizement. Our democracies are not much different either. An article in opensecrets.org points out: “As Americans worry about their own finances, their elected representatives in Washington — with a collective net worth of $3.6 billion — are mostly in good shape to withstand a recession.” Before the meltdown rained on their parade, members of Congress, “saw their net worths soar 84 per cent from 2004 to 2006, on average.” The article points out that while US senators had “a median net worth of approximately $1.7 million in 2006,” only about “1 per cent of all American adults had a net worth greater than $1 million around the same time.” Reputed Indian journalist P. Sainath points out in his column in The Hindu newspaper (dated June 20, 2009) that the number of ‘crorepatis’ (millionnaires) in the present Indian parliament's lower house (Lok Sabha) is up 98 per cent as compared to 2004. Then there were 154 of them but now there are 306 — almost double. In both the United States and India, money from big corporations and business houses helps politicians secure election victories and eventually "own" them.

5...P. Sainath points out the firm links between wealth and winning elections in India in his above-mentioned article.... This is in a country that has 836 million people who scrape along with less than Rs. 20 (50 US cents) a day. Do you think the poor will ever have a chance of voicing their concerns in the policymaking circles?
Riaz Haq said…
The BBC is reporting that widespread corruption in India costs billions of dollars and threatens to derail the country's growth, according to a survey.

The report by consultancy firm KMPG said that the problem had become so endemic that foreign investors were being deterred from the country.

It was compiled by questioning 100 top domestic and foreign businesses.

Its release comes as Prime Minister Manmohan Singh struggles to cope in the battle against corruption.

Earlier this month the head of the country's anti-corruption watchdog was forced to resign by the Supreme Court on the grounds that he himself faces corruption charges.

Over the last six months India has been hit by a series of corruption scandals including a multi-billion dollar telecoms scandal, alleged financial malpractices in connection with the Commonwealth Games and allegations that houses for war widows were diverted to civil servants.
Mega scams

"Today India is faced with a different kind of challenge," the report said.

"It is not about petty bribes (bakshish) any more, but scams to the tune of thousands of crores (billions of rupees) that highlight a political/industry nexus which, if not checked, could have a far reaching impact.

"Corruption poses a risk to India's projected 9% GDP growth and may result in a volatile political and economic environment."

Critics of the government say that recent scandals point to a pervasive culture of corruption in Mr Singh's administration - adding to the difficulties of a politician once seen as India's most honest.

The government denies the claims and has set up a parliamentary inquiry into corruption.

The BBC's Sanjoy Majumder in Delhi says that most Indians routinely pay bribes for a number of services such as getting a driver's licence or a passport.

But, our correspondent says, the KPMG survey makes clear that corruption is now no longer about such petty bribes but mega scams where billions of dollars are siphoned off by government and industry.

The worst-hit areas as identified by the report were real estate and construction - a priority for Delhi which plans to spend $1.5tn over the next decade to improve its over-burdened infrastructure.

The report said that the country's telecommunications industry was also badly affected.

Telecoms Minister Andimuthu Raja resigned in November, denying allegations that he had undersold billions of dollars worth of mobile phone licences. He is now under arrest.

However the KMPG report was not all gloomy. It said that despite the murky regulatory environment, business remained active in India with more than half of those surveyed saying they were unaffected by corruption.

More than 80% of respondents disagreed that corruption had reduced their ability to access domestic or foreign funds, while 55% disagreed that corruption had affected their business.
Riaz Haq said…
Here's an excerpt from BBC's Soutik Biswas on corruption in aviation licensing in India that risks lives:

...some recent disquieting developments have rattled air passengers and raised serious doubts about the quality of the people who are flying what most believe are reasonably well-maintained machines.

Federal aviation authorities say they will be checking the licences of some 4,000 pilots flying commercial aircraft after allegations that at least four were found to have fake documents. Two have been arrested for using fake certificates to obtain licences.

The first, a pilot from the perpetually ailing, state-owned Air India, apparently fabricated his qualifications. The other, who was arrested last week after damaging the aircraft during landing, was found to have used fake documents to get her licence. The licences of the other two pilots are apparently riddled with irregularities, and both have reportedly disappeared.

According to one report by news channel CNN-IBN, a pilot who was caught cheating during a flying test in the US in 2000 and denied a licence, got a commercial licence on his return to India by forging his qualifications and has since been working as a senior pilot with Air India. Air India spokesman Kamaljeet Rattan would not discuss that particular case with the BBC. But he tells me the airline is scrutinising the papers of a dozen pilots. "It's nothing very serious, and not at all scary," he says. "These are routine checks."

Senior aviation officials echo the views of Mr Rattan. "Fake licences are very few so there is no need to panic," says Bharat Bhushan, India's most senior civial aviation official. But there are suspicions that pilots cannot be faking their papers without some inside help. And aviation analysts believe this is the time to crack down. "This is a very serious issue," Kapil Kaul of Centre for Asia Pacific Aviation tells me. "When pilots are faking their certificates it is a criminal offence. It points to a systemic failure. Airline operators also cannot absolve themselves of responsibility. They need to have more vigorous checks. And decisive action needs to be taken against the pilots."

As if all this was not enough, last week the government announced that 57 pilots reporting for duty had tested over the limit for alcohol in the past two years. All were prevented from joining their aircraft. The issue was raised in parliament - according to a parliamentary document I have seen, the pilots were employed by every leading private airline as well as Air India. Ten were sacked; others had their licences suspended or were taken off the flight roster.

The airlines have been keeping a low profile on this - like Mr Rattan want to play down the severity of the problems. By and large Indians appear to have been reassured by the government announcement. There's been no public outcry. But concerns about the quality of some pilots have been around for a while. Last August former civil aviation minister Praful Patel was asked in parliament whether commercial pilots had been drunk on duty. He replied there had been no such incident. Another MP actually asked Mr Patel this year whether "under-trained pilots are flying commercial flights... risking the lives of hundreds of passengers". Again the minister denied any such possibility.
Riaz Haq said…
Cash for votes is a common feature of democracies in South Asia and other developing nations. Latest publication of Wikileaks by The Hindu reveals vote buying by India's ruling party in a 2008 confidence vote:

The ghost of bribes for MPs’ votes returned to haunt the government on Thursday with the entire Opposition demanding its resignation over allegations that UPA-I purchased the support of lawmakers to survive the trial of strength at the height of crisis over Indo-U.S. nuclear deal in 2008.

On top of several scams that had surfaced in the last few months, the government faced a torrid time in Parliament on Thursday with Opposition targeting it on the manner in which it won the vote of confidence in 2008 after the Left parties had withdrawn support to it opposing the Indo-U.S. nuclear deal.

Both the Houses of Parliament were repeatedly rocked by uproar and adjournments by the Opposition members who demanded the resignation of Prime Minister Manmohan Singh and his government saying it did not have any right to continue even for a moment as it was surviving on “political and moral sin“.

The Right and and the Left combined in Parliament whenever it met during the day to launch an assault armed with the claim in a U.S. diplomatic cable revealed by WikiLeaks that an aide of former Union Minister Satish Sharma had shown to the diplomat currency chests that were part of Rs.50 crore to Rs.60 crore money collected by Congress for purchase MPs for the vote in the Lok Sabha.

The only defence that the government came out with was when Finance Minister Pranab Mukherjee told Parliament that a diplomat’s cable enjoyed immunity and he could not confirm or deny its contents.
Riaz Haq said…
Here's a BBC report on pregnant women's deaths in Rajathan due to tainted UV fluids:

..The (three) doctors have been charged with negligence and irregularities in purchases of medicines.

The women died after they were given infected intravenous (IV) fluids at two hospitals in Jodhpur city.

Laboratory tests had confirmed that IV fluids supplied by a local company were "tainted", officials said.

The women died after severe haemorrhaging after they were administered with the IV fluids, authorities say.

India accounts for the highest number of maternal deaths in the world, with tens of thousands of women dying every year due to pregnancy-related problems.

...


Here's a Deccan Herald story on tainted medicines in India:

It is said that roughly 10 per cent of the medicines available in the market are counterfeit, contaminated or substandard. Profits are huge in the trade. This is a massive racket that involves not just illicit manufacturers but a long chain that includes distributors and then, of course, the shops and hospitals through which these spurious medicines are pushed. It is alleged that pharmacists selling counterfeit drugs profit from doing so. If manufactures are able to push their contaminated drugs easily, it is because hospital authorities are not vigilant. They prefer to purchase medicines from those who grease their palms rather than trusted manufacturers. The problem of contaminated medicines is not one that is confined to allopathic medicines. Testing of some samples of ayurvedic or homeopathic medicines has revealed presence of toxic metal.

Indian pharmaceutical companies export medicines to Africa and Latin America. Therefore, the manufacture of substandard drugs and contaminated fluids poses a grave public health threat that extends far beyond India’s borders. Stern action against those responsible for Jodhpur tragedy is welcome. But it must not stop there. The government must act against other manufacturers of counterfeit and contaminated medicines. The crime they are engaging in is not a minor one. It cannot be brushed aside as mere negligence as they are causing the death of people. They cannot be allowed to play with people’s lives. It is undermining the legitimacy of our medical system.
Riaz Haq said…
Here's a Business Recorder report on threats from inflation and capital inflows in Asia:

ISLAMABAD: Inflation has become or continues to be an important risk to macroeconomic and social stability in a number of countries in Asia Pacific, including Vietnam, Sri Lanka, India, Indonesia, Mongolia, Cambodia, Cook Islands, Fiji, Pakistan, and Bangladesh.

This was revealed in a report titled "Asia-Pacific Sovereigns In 2011: Generally Stable Credit Quality; Inflation, Capital Flows Make Policy Environment Tricky.

Issued by the Standard & Poor's Ratings Services, the report said the challenges of strong capital inflows and rising inflationary pressures bring in important credit risks. Domestic politics and increasing geopolitical risks further complicate policy decisions, it said.

The ability of Asia-Pacific governments to navigate external and domestic challenges adroitly while pushing ahead with economic reforms will determine the pace of ascent in their credit ratings.

"In our base-case scenario, strong growth will support credit quality in Asia-Pacific," said Standard & Poor's credit analyst Elena Okorotchenko Asia continues to outperform other regions in terms of growth and sovereign credit trends.

The report said, despite generally stable credit quality, various factors have combined to make the policy environment tricky for sovereigns in the region, said in a report available here Monday.

Economic growth will enable the public sector of high-income economies to reduce fiscal deficits and resume fiscal consolidation and allow emerging market governments to speed up structural reforms.

But the downside risks to this scenario are growing beyond just a slower U.S. economy or the eurozone debt woes.

Food and energy price increases, the familiar bugbears, are providing a strong inflationary impetus across the board, and present low-income sovereigns in particular with difficult political and fiscal choices.

In addition to inflation, a number of sovereigns, such as Indonesia, Thailand, and Korea, could be facing problems with capital flows, either as a result of large inflows/outflows complicating exchange rate management or because of potential policy mistakes in trying to control such flows.

Recent developments in several Middle Eastern countries have raised questions about contagion effects.

Such popular uprisings are highly unpredictable, although the risks appear to be more pronounced where high unemployment among the young, inflation, poverty or wide income gaps are combined with growing political disillusionment in an autocratic and often corrupt regime.

In Asia, there are countries with ongoing political/social tensions and risks independent of recent events in the Middle East: Fiji, Pakistan, Bangladesh, and Thailand.

"We have factored these risks into current ratings on these sovereigns," said Ms. Okorotchenko.

In a number of other countries, the risk of social unrest is present but mitigating factors are currently strong. These are China, Vietnam, Sri Lanka, Malaysia, and Cambodia.

"The risks in these countries are mitigated by some combination of strong growth, low unemployment, and a degree of popular support for the government," she added.

Of the 22 sovereigns that Standard & Poor's rates in the region, 17 have stable outlooks on their ratings. Indonesia and Fiji have a positive outlook, and only three sovereign ratings are on negative outlooks: New Zealand, Vietnam, and the Cook Islands.
Mayraj said…
We met via Lok Satta.

He says in email message he has published series of articles in monthly issue of Economic Times.

He said:
..doing a series of articles on economic issues in the monthly supplement of Economic Times (IMB) and have been given a monthly series on the same.

Please find the first three parts (3rd part in tomorrow's supplement of ET- Its my Business)

Part 1: "Let me be candid ; I wish to propose an economic revolution. A carefully carved out revolution that will fundamentally alter the face of India. A simple two steps technical solution, in line with the spirit of the constitutional directives, promises a complete answer to poverty, corruption, inequality and its consequences." click to read more http://mayankgandhi05.blogspot.com/2011/01/complete-solution-it-is-possible-to-end.html

Part 2: Budgets have become meaningless rituals as most of the public finance controlling tools like taxes, subsidies have become ineffective to meet its desired goals. Contradictorily, they are boosting inflation, black money and corruption. http://mayankgandhi05.blogspot.com/2011/02/new-tax-regime.html

Part 3: In 1969, President Richard Nixon, in one bold stroke, withdrew all notes above $100. Life became tough for the Mafia and the corrupt. That was the turning point in the black economy of the USA. Coupled with the rise of plastic money in terms of credit cards and debit cards and extensive use of the banking system, black money started reducing from the USA economy.Press on http://mayankgandhi05.blogspot.com/2011/03/economic-times-part-3-currency.html for more.
Riaz Haq said…
Here are some excepts from a recent Wall Street Journal story titled "In India, Doubts Gather Over Rising Giant's Course":

These days, India often is held up as an example of how a democracy in Asia can mirror the spectacular growth of authoritarian China. In the year ending March 31, India's economy is expected to expand by about 8.5%.

Other important gauges of national well-being paint a more troubling picture. "What has globalization and industrialization done for India?" asks Mr. Venkatesan, Microsoft's former India chairman. "About 400 million people have seen benefits, and 800 million haven't."
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Calorie consumption by the bottom 50% of the population has been declining since 1987, according to the 2009-10 economic survey conducted by India's Ministry of Finance, even as those at the top of society struggle with rising obesity. Mainly because of malnutrition, around 46% of children younger than 3 years old are too small for their age, according to UNICEF.

Infrastructure in cities and the countryside remains woefully inadequate: In recent years, China has added, on average, more than 10 times as much power as India to its electricity grid each year.

Data from McKinsey & Co. show that the number of households in the highest-earning income bracket, making more than $34,000 a year, has risen to 2.5 million, from 1 million in 2005. But the ranks of those at the bottom, making less than $3,000 a year, also have grown, to 111 million, from 101 million in 2005.
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India's modernization was expected to prompt a mass movement of workers from farms to factory floors—a critical component in the transformation of China, South Korea and other Asian nations. But manufacturing as a share of India's economy stood at 16% in 2009, the same as in 1991, according to the World Bank.

Services have increased dramatically as a proportion of gross domestic product, rising to 55% in 2009, from 45% in 1991, according to the World Bank, becoming the chief engine of India's economic strength. But many of the fastest-growing areas, such as finance and technology, employ relatively few and rely heavily on skilled employees. The entire software and technology-services sector, including call centers and outsourcing, directly employs just 2.5 million workers, a tiny fraction of the overall work force.
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Agriculture's share of the economy, meanwhile, has declined to about 17% in 2009, from 30% in 1991. But the number of people working in agriculture hasn't dropped commensurately, according to Arvind Panagariya, a professor of Indian political economy at Columbia University in New York. "The dependence on agriculture remains incredibly high when you compare India's high-growth phase with others," he says. "The potential of the country is to grow at 11% to 12%, and it's growing only at 8% to 9%."

Frustration over the economic miracle's limited trickle-down is fueling political movements around the country. Most base their appeal, in part, on the idea that the poor are being ill-served in the new India.


http://online.wsj.com/article/SB10001424052748703313304576131792120382006.html?KEYWORDS=india
Riaz Haq said…
Here's a WSJ piece on corruption and philanthropy in India:

Indian Prime Minister Manmohan Singh has his hands full with one key task these days—assuring people that his government is fighting corruption.

Whether it’s at the Congress Party’s anniversary session, at a rare prime ministerial presser or in Parliament, Mr. Singh has time and again had to put his hand out for a symbolic thwack for the state of governance in the country.

He did so again on Thursday, in an address at a meeting with his Council on Trade and Industry—though his remarks were somewhat overshadowed this time by celebrations of India’s World Cup victory over Pakistan and India’s announcement that its population has reached 1.21 billion.

This time, his target audience was India Inc. “I am aware of the nervousness in some sections of the corporate sector arising out of some recent unfortunate developments,” said Mr. Singh.

Mr. Singh sought to boost investor confidence in the country by pledging his government is determined to root out graft. “We stand committed to ensuring that our industry moves ahead with confidence and without fear or apprehension. The Government is committed to improving the quality of governance. We are considering all measures, including legislative and administrative, to tackle corruption and improve transparency.”

In the speech, he also promised that reforms would continue, something that many business leaders have expressed concern about.

“It’s great that the issue of corruption has stayed front-and-center for all these months, rather than fading away. But in addition to feeling a bit sorry for Mr. Singh, his remarks are starting to seem rather like—with apologies to the Zen meaning—trying to clap with one hand. Surely it’s time for other folks—say the leaders of political parties at the national and regional levels, and the heads of India’s top businesses—to stand up and tell the country what exactly they’re doing to reduce corruption. So far, we’ve only seen calls from business leaders and former officials for the government to do more.

But recent surveys of corruption in India are gradually shifting focus to the role that private firms also play in generating a “demand” for corruption.

Consulting firm KPMG said in a survey last month that respondents to its corruption survey largely agreed with a statement that the private sector “induces” corruption into the system.

The Hong Kong-based Political & Risk Consultancy Ltd., in a survey put out last week on the corruption perceptions of expat businessmen in the Asia-Pacific region, also noted that private firms play in important role in fostering corruption. And therefore in reducing corruption.

“It takes two to tango and the level of corruption in the public sector would not be possible if there were not plenty of private businessmen willing to pay bribes and work the political system,” said the section on India. “This is why some leading businessmen are bemoaning the telecommunications scandal for the way ‘it has let the genie of corruption out of the bottle’ by revealing how business is conducted in India. The private firms that won the 2-G telecoms licenses are known names, so people can and do see both sides of the corruption equation in this case.”

Here’s a suggestion for a baby step from the corporate world. Maybe what India needs is an anti-corruption counterpart to the “Giving Pledge,” philanthropic effort by Microsoft Corp. founder Bill Gates and investor extraordinaire Warren Buffett.

Instead of promising to give away at least half their assets, rising Indian entrepreneurs, business leaders and the wealthy should promise that at least half or more of their future wealth accumulation will be gathered only through legitimate, law-abiding methods.

What should we call it? The Safai (Clean-up) Pledge maybe?
Riaz Haq said…
Hundreds ill in India after eating adulterated flour, reports the BBC:

Nearly 400 people have been admitted to hospitals in north India after eating adulterated flour, police say.

All the patients had consumed snacks made from buckwheat flour. A mill in the northern state of Rajasthan has been traced as the source, police said.

The patients complained of vomiting, diarrhoea and stomach ache.

Cases of food poisoning have been reported from the capital, Delhi, and towns of Meerut, Ghaziabad and Bulandshar in Uttar Pradesh state.

At least 115 people had been taken to various hospitals in east and north-east Delhi, police said.

They said they have detained a number of people for questioning.

Buckwheat flour is widely consumed in northern India during Navratri celebrations [festival of nine nights] when a large number of devout Hindus shun grains like wheat and rice.
Riaz Haq said…
Here's a Guardian Op Ed by Indian journalist Pankaj Mishra:

Food prices become intolerable for the poor. Protests against corruption paralyse the national parliament for weeks on end. Then a series of American diplomatic cables released by WikiLeaks exposes a brazenly mendacious and venal ruling class; the head of government adored by foreign business people and journalists loses his moral authority, turning into a lame duck.
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Even the western financial press, unwaveringly gung-ho about the money to be made in India, is getting restless. Early this year, the Economist asked: "Is Indian capitalism becoming oligarchic?" – a question to which the only correct response is "Hell-ooo". Recently in the Financial Times' Indian business dynasties have been described as "robber barons".

The intimate details about politicians revealed by WikiLeaks still leave you speechless. What can one say about the former cabinet minister, a fervent spokesman for low-caste Hindus, who demanded a large bribe from Dow Chemical Company, which is being helped by senior American officials to overcome its association with the gas leak at the Union Carbide factory in Bhopal that in 1984 killed and maimed tens of thousands of Indians?

Indeed, the cables reveal US business and officials to be as embedded in India's politics as they are in Pakistan's. In 2008, the aide to an old courtier of the Nehru-Gandhi family showed a US diplomat two chests containing $25m in cash – money to bribe members of parliament into voting for an India-US nuclear deal, itself a prelude to massive US arms sales to India. Publicly opposed to the nuclear deal, the leaders of the Hindu nationalist BJP are at pains to reassure American diplomats of their pro-US credentials, even dissing their murderous Hindu nationalism as opportunistic, a mere "talking point".

The cables offer many such instances of the ideological deceptions practised by the purveyors of "Rising India". Virtually all economic growth of recent years, a senior politician admits, is concentrated in the four southern states, two western states (Gujarat and Maharashtra) and "within 100km of Delhi". But why worry? He has nieces and sisters living in the US, and "five homes to visit between DC and New York". As for the entry of retailers like Walmart into India, oh, that "should not seriously hurt the mom and pop stores that form a BJP constituency".

Not surprisingly, the Americans have developed contempt for such representatives of the world's largest democracy, who seem to validate Mahatma Gandhi's extreme denunciations of parliament as a "prostitute". Hillary Clinton gets right to the point in a cabled inquiry about Pranab Mukherjee, the finance minister widely tipped as India's next PM: "To which industrial or business groups is Mukherjee beholden? Whom will he seek to help through his policies? Why was Mukherjee chosen for the finance portfolio over Montek Singh Ahluwalia?" – the last named is a reliably pro-US technocrat.

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Visiting the White House in 2008, Singh induced a nationwide cringe when he blurted out to the most disliked American president ever: "The people of India deeply love you." (Even George Bush looked startled.) This love unblushingly speaks its name everywhere in the WikiLeaks cables; even the racketeers of Pakistani military and intelligence appear dignified when compared with the Indians stampeding to plant kisses on US behinds. Singh has presided over an ignominious surrender of national sovereignty and dignity.
Riaz Haq said…
Here are some excerpts from The Economist story on India's "oligarchic" capitalism:

MANY Indians take justifiable pride in the rise of “India Inc”. Since winning independence from the licence and permit Raj 20 years ago, Indian companies have grown in size and scope, venturing into overseas markets and snapping up foreign companies. But even as Indians celebrate the rise of their country’s companies, they fret about the longer shadows those firms now cast. They worry that India’s corporate titans are too firmly entrenched, and too deeply ensconced in the corridors of power.

In the telephone conversations of a corporate lobbyist, tapped by the tax authorities and leaked to the media, Indians have heard ministries described as ATM machines and the ruling party referred to as “our shop”. They have read reports of companies wildly overcharging the government for the Commonwealth games and underpaying for mobile-telephone spectrum. The fear is that Indian capitalism is turning oligarchic.

Oligarchs begin as oligopolists: market power and political power tend to go hand-in-hand. Many people assume that 20 years of liberalisation has largely stripped India’s corporate establishment of its market muscle. But a 2009 paper* by Laura Alfaro of Harvard Business School and Anusha Chari of the University of North Carolina at Chapel Hill documented an economy still surprisingly dominated by incumbents. The authors drew on a database kept by the Centre for Monitoring the Indian Economy, which covers every firm that files financial statements.

As the economy opened up, the database recorded the birth of thousands of new, private firms. By 2005 it contained 8,864 firms under 20 years’ old, amounting to 56% of the total. But these firms’ clout did not match their numbers. They accounted for only 15% of corporate assets, 17% of sales and 13% of profits. About three-quarters of the economy was still in the hands of state firms and old, private firms born before 1985.

In a new paper**, Ashoka Mody of the IMF, Anusha Nath of Boston University and Michael Walton of Harvard echo this finding. Looking at companies listed on the Bombay Stock Exchange, they find that stand-alone, private firms increased their share of sales from 1989 to 2008, largely at the expense of state firms. But state firms hung on to a 37% share and India’s big family-owned conglomerates, known as business houses, actually increased theirs
Riaz Haq said…
Wikileaks' founder Julian Assange has told Times of India that rich Indians are stashing money in Swiss bank accounts:

Julian Assange, made a stunning disclosure, that there could be Indian names in the data that WikiLeaks would publish. In the course of the interview, Assange appealed to Indians to absolutely not lose hope that the names of those with secret Swiss accounts will come out at one point in the future. Hinting that Wikileaks might work with specialized agencies before releasing the Swiss bank data he pulled up the Indian government for not being aggressive like Germany in going after the list of Indian account holders. In fact he said India should be more aggressive because India seems like it is losing per capita more tax money than Germany

This is the first time Assange has spoken about Indian accounts in these Swiss banks, and comes at a time when the national debate over Swiss Bank accounts has sharpened.

Arnab Goswami: You have strong views on it. And I completely appreciate that you can't talk about it in detail. But let me ask you more generically, that is your heart, you would like to reveal the details...in your heart. I am not asking you when and under what circumstances, but having known about it, you would like to reveal details of how the system operates, wouldn't you?
Julian Assange: Well, we have various types of information about different banking operations in the world. Over time, we have revealed those. In fact, most of the legal attacks on us have been from banks. Banks in Scotland...banks in Dubai...banks in Iceland. We all received legal attacks from these banks. And we will continue publishing data on these banks as soon as we are able to do so.

Arnab Goswami: Have you encountered any Indian names? I am not asking you to tell me where, which banks...
Julian Assange: Yes there are Indian names in the data we have already published or going to publish. I can't remember specifically whether there are Indian names in the upcoming publication. But I have read Indian names. Similarly, in these private Swiss banking concerns, where you need at least a million dollars...which is a significant amount of money...Not an average Indian.

Arnab Goswami: And it is difficult to identify those names. Anything else you can tell us?
Julian Assange: I can't tell you anything more at this stage. As we go through the process of releasing data, as always we have to do extra research. And once we understand which media organizations are best placed to help us with that research, then we operate with them. But we are not at that stage yet that I know all the research that is going on.
Riaz Haq said…
Here are a few excerpts from Wall Street Journal story titled "India's Boom Bypasses Rural Poor":


The Mahatma Gandhi National Rural Employment Guarantee Scheme (NREGA), as the $9 billion program is known, is riddled with corruption, according to senior government officials. Less than half of the projects begun since 2006—including new roads and irrigation systems—have been completed. Workers say they're frequently not paid in full or forced to pay bribes to get jobs, and aren't learning any new skills that could improve their long-term prospects and break the cycle of poverty.

In Nakrasar, a collection of villages in the dusty western state of Rajasthan, 19 unfinished projects for catching rain and raising the water table are all there is to show for a year's worth of work and $77,000 in program funds. No major roads have been built, no new homes, schools or hospitals or any infrastructure to speak of.

At one site on a recent afternoon, around 200 workers sat idly around a bone-dry pit. "What's the big benefit?" said Gopal Ram Jat, a 40-year-old farmer in a white cotton head scarf. He says he has earned enough money through the program—about $200 in a year—to buy some extra food for his family, but not much else. "No public assets were made of any significance."

Scenes like this stand in stark contrast to India's image of a global capitalist powerhouse with surging growth and a liberalized economy. When it comes to combating rural poverty, the country looks more like a throwback to the India of old: a socialist-inspired state founded on Gandhian ideals of noble peasantry, self-sufficiency and a distaste for free enterprise.

Workers in the rural employment program aren't allowed to use machines, for example, and have to dig instead with pick axes and shovels. The idea is to create as many jobs as possible for unskilled workers. But in practice, say critics, it means no one learns new skills, only basic projects get completed and the poor stay poor—dependent on government checks.
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But shortly after the program started in February 2006, workers complained that local leaders were docking pay and asking for money in return for job cards. The central government responded in 2008 by sending money directly to workers' bank accounts. But according to workers and auditors, the money takes so long to reach those accounts—up to 45 days—that workers are often forced to accept lesser cash payments from local leaders on the condition that they repay the money at the full amount.

Audits of the program in the southern state of Andhra Pradesh found that about $125 million, or about 5% of the $2.5 billion spent since 2006, has been misappropriated. Some 38,000 local officials were implicated, and almost 10,000 staff lost their jobs.

In one study of eastern Orissa state, only 60% of households said a member had done any of the work reported on their behalf. Earlier this month, the central government gave the green-light for the Central Bureau of Investigation, India's top federal criminal investigation body, to launch a probe into alleged misuse of program funds in Orissa.

In other states, audits are nonexistent or have faced a backlash. Non-governmental groups that have tried to carry out audits in Rajasthan have complained that village leaders often refuse to hand over documents about the employment program. At times, auditors say, they have faced harassment and physical intimidation.

In Nakrasar's one-room village council office, people continue to sign up for the program—many of them women whose husbands have gone to work in urban areas. Shilochandra Devi, a 37-year-old with her program work book in hand, said she could buy more spices because of the program. "And anyway, we're not doing anything else. So why not?"
Riaz Haq said…
Here are some excerpts from an Op Ed in The Hindu on growing disconnect between mass media and mass reality:

•The mass reality in India (which has over 70 per cent of its people living in the rural areas), is that rural India is in the midst of the worst agrarian crisis in four decades. Millions of livelihoods in the rural areas have been damaged or destroyed in the last 15 years as a result of this crisis, because of the predatory commercialisation of the countryside and the reduction of all human values to exchange value. As a result, lakhs of farmers have committed suicide and millions of people have migrated, and are migrating, from the rural areas to the cities and towns in search of jobs that are not there. They have moved towards a status that is neither that of a ‘worker' nor that of a ‘farmer.' Many of them end up as domestic labourers, or even criminals. We have been pushed towards corporate farming, a process in which farming is taken out of the hands of the farmers and put in the hands of corporates. This process is not being achieved with guns, tanks, bulldozers or lathis. It is done by making farming unviable for the millions of small family farm-holders, due to the high cost of inputs such as seed, fertilizer and power, and uneconomical prices.
•India was ranked fourth in the list of countries with the most number of dollar billionaires, but 126th in human development. This means it is better to be a poor person in Bolivia (the poorest nation in South America) or Guatemala or Gabon rather than in India. Here, some 83.6 crore people (of a total of 110-120 crore) in India survive on less than Rs.20 a day.
•Eight Indian States in India are economically poorer than African states, said a recent Oxford University study. Life expectancy in India is lower than in Bolivia, Kazakhstan and Mongolia.
•According to the National Sample Survey Organisation, the average monthly per capita expenditure of the Indian farm household is Rs.503. Of that, some 55 per cent is spent on food, 18 per cent on fuel, clothing and footwear, leaving precious little to be spent on education or health.
•A report of the Food and Agriculture Organisation of the United Nations shows that between 1995-97 and 1999-2001, India added more newly hungry millions than the rest of the world taken together. The average rural family is consuming 100 kg less of food than it was consuming earlier. Indebtedness has doubled in the past decade. Cultivation costs have increased exorbitantly and farming incomes have collapsed, leading to wide-scale suicides by farmers.
•While there were 512 accredited journalists covering the Lakme India Fashion Week event, there were only six journalists to cover farmer suicides in Vidharbha. In that Fashion Week programme, the models were displaying cotton garments, while the men and women who grew that cotton were killing themselves at a distance of an hour's flight from Nagpur in the Vidharbha region. Nobody told that story except one or two journalists, locally.
Is this a responsible way for the Indian media to function? Should the media turn a Nelson's eye to the harsh economic realities facing over 75 per cent of our people, and concentrate on some ‘Potemkin villages' where all is glamour and show business? Are not the Indian media behaving much like Queen Marie Antoinette, who famously said that if people had no bread, they should eat cake.
No doubt, sometimes the media mention farmers' suicides, the rise in the price of essential commodities and so on, but such coverage is at most 5 to 10 per cent of the total. The bulk of the coverage goes to showing cricket, the life of film stars, pop music, fashion parades, astrology…
Riaz Haq said…
Here's a recent piece on FDI decline and FII upsurge in India:

In 2010-11, inbound FDI into India fell by as much as 28%, the second consecutive year of decline and the first such large decline since the opening up of the economy in 1991-92. As a result of this decline, the present level of $27 billion of FDI inflows is the lowest in four years.

A large part of the progress made in FDI inflows over the boom years has now been reversed, with flows down by almost 29% from their high in 2007-08. This trend, more than just being odd, is also worrying when seen in the context of the fact that the past four years cover the recessionary period as well.
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The decline in FDI in 2009-10 could be explained by the fact that it was a year when recessionary effects were visible in the global economy. All BRIC countries (Brazil, Russia, India and China) saw declines in FDI flows during that year.

According to the United Nations Conference on Trade & Development (Unctad), flows into China fell by over 12% and to Russia and Brazil by as much as 49% and 42% from the previous year.

However, a number of emerging markets have shown substantial recovery in 2010. The RBI pointed to Unctad figures to show that countries like China, Brazil, Mexico and Thailand had in 2010 shown a rebound in FDI of between 6-53 percent. Indonesia apparently showed a three-fold rise from the previous year.

In India itself, FII flows have been on the rise over the past two years on an annual basis, with only 2008-09 being a year of sharp outflows. In fact, the outflow of $15 billion was more than made up by inflows of $29 billion — their highest ever — in 2009-10. This level was largely maintained in 2010-11 as well, with a small increase.

Both these factors go on to show that the decline in FDI into India in 2010-11 is not the result of a weak global situation or investor risk-aversion. The causes really lie elsewhere.
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FDI flows showed a dismal performance in almost every month of the previous financial year, with May being the only exception. By the end of the third quarter, it became clear that FDI inflows would be nowhere close to what they were the year before.

The RBI highlighted this in its quarterly ‘Macroeconomic and Monetary Developments (MMD) study released in January 2011 and suggested some reasons for the trend as well.

According to the bank, the “major reason for the decline in inward FDI is reported to have been the environment-sensitive policies pursued, as manifested in the recent episodes in the mining sector, integrated township projects and construction of ports, which appear to have affected the investors’ sentiments.”

The Ministry of Environment had recently questioned the ecological viability of the Korean steel giant, Posco’s proposed plans in Orissa, which could be one of India’s biggest FDIs ever.

The MMD review further goes on to observe that there are other reasons for the decline as well, such as “persistent procedural delays, land acquisition issues and availability of quality infrastructure”.

Indeed, delays in decision-making are visible in sectors like defence and multi-brand retail, discussions on which have been long in the works. The Department of Industrial Policy and Promotion (DIPP) had floated a discussion paper on defence in May 2010 and on multi-brand retail in July 2010.

Feedback on these was received by parties interested in the sector, but a decision on allowing FDI into these sectors is still nowhere in sight.
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This is corroborated by the numbers. Both telecom and real estate have seen an above-average decline in FDI flows during the year. While flows into telecom declined by 35% to $1.6 billion, the flows to housing and real estate declined by as much as 60% to $1.1 billion...


http://www.firstpost.com/business/hot-money-is-flowing-but-rest-of-india-story-has-gone-cold-21519.html
Riaz Haq said…
Here's an opinion by Taran Marwah of Afund India for July 2011:

All the “reform processes” are on hold in India for the past six months due to scams in various sectors in the Indian economy. Reforms in FDI in Retail, Insurance and Defense etc are in the “cold storage” since January 2011. FDI into India for the period - January to June 2011 is one-ninth than that of China in the same six month period. Plus Indian fiscal deficit is ballooning due to high crude oil prices and Indian Government’s inability to dismantle APM for petroleum products as mentioned above. Such low level of FDI is not a good sign for the Indian Economy. JFI - Indian trade account deficit for last financial year was US $ 105.00 billion. We predict that RBI will further raise interest rates, when its Board meets for monetary policy discussion in the last week of July 2011. We expect a 50 bpts hike in Repo rates by RBI in the last week of July 2011. Analysts feel that the hike will only be to the tune of 25 bpts. Let us wait and see. RBI is willing to sacrifice GDP growth in India at the cost of reining in inflation.

The BSE SENSEX will be bullish if it closes convincingly above 18190. There have been net FII flows into the Indian Equities and Asian Equity Markets in June 2011. If the trend continues in July 2011, then the levels for BSE SENSEX to watch for July 2011 are as follows :
R1 18800 R2 19340 R3 19500
S1 18500 S2 18190 S3 15960 (subject to closing below 18190 for fifteen consecutive days)
We predict that Indian equities will be range bound for the month of July 2011, with a bearish undertone. The levels are as per above figures. But we are bearish for the Indian equity markets for August and September 2011. We will see BSE SENSEX levels lower than 15960 in Q3 2011. By the way Credit Suisse said in its report of June 2011 to its investors that it predicts BSE SENSEX to be around 16000 in Q3 2011 ? We said this or near about (15960) in Q1 2011 ? AOTC – my problem !


http://www.afund.com/afundindia.html
Riaz Haq said…
After precipitous drop in FDI, FII inflow into India is also petering out.

Here are some excerpts from an Indian Financial Express story headlined "More FII money to Pak than to India":

Mumbai: Whether Dalal Street likes it or not, India is now the worst-performing market in the world as dark clouds have started cluttering the economic, investment and political horizons. Worried foreign institutional investors (FIIs), who came to India in droves last year, have been pulling out funds with such alacrity this year that even a much smaller — and significantly more volatile and unstable — market like Pakistan has got more foreign inflows in the last six months.
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As per figures of the Securities and Exchange Board of India, FIIs have already pulled out $497 million (including GDRs, primary market, stock markets etc) from India from January to June 22 this year. This has come as a big blow to the market which witnessed an inflow of $29.36 billion in the whole of calendar 2010. FIIs took out Rs 14,387 crore (around $3.2 billion) from the secondary market in 2011, bringing the Sensex down from 21,108 on November 5, 2010 to 17,727.49 on June 23, 2011.

Across the border, Pakistan received a portfolio investment of around $230 million in the last six months. That, too, when the Karachi Stock Exchange, its largest, has a market cap of only $35 billion whereas the Bombay Stock Exchange has a market cap of $1,500 billion.
----------
The latest worry of FIIs is the possibility of tightening in rules governing the tax treaty with Mauritius. If both the governments tighten the regulations governing the treaty, the fund flow through this route will come down drastically. “Funds using this route will go elsewhere. India has got minuscule funds FIIs this year,” said a fund manager with a foreign investment firm.

A large chunk of FII investment in the stock market comes through Mauritius as companies registered there are exempted from tax in India under the treaty. The government had recently indicated about reviewing this tax treaty to tighten registration norms and making the fund flows more transparent.

http://www.financialexpress.com/news/more-fii-money-to-pak-than-to-india/807995/0
Riaz Haq said…
The Indian economy is in trouble, says Ramtanu Maitra:

Although the economy continues to show high GDP growth, there is a growing disparity between India's sea of poor people and the few at the top of the heap. Out-of-control inflation, caused by the inflow of billions of dollars in hot money, combined with poor productivity due to weak physical infrastructure has resulted in corruption of unimaginable proportions, which has eaten away the gains made earlier. Prime Minister Manmohan Singh, who heads a group of disparate political parties under the banner of the United Progressive Alliance, is busy keeping the coalition government in power by doing little to prevent further deterioration of the nation's economy.
On June 16, the Reserve Bank of India (RBI) raised its benchmark lending rates for the tenth time in 18 months, as a monetary measure to slow down the rampaging inflation monster, which has already greatly hurt the poor, and is now beginning to hit the middle class, which had benefitted in recent years from the GDP growth and wage rise. The earlier nine such monetary measures within the past 18-month period did not slow down inflation. It is inevitable that the high interest rates will attract more short-term hot money into the country, spurring a faster rate of inflation in the coming days.
India has earned the distinction of incurring the highest inflation of major emerging markets. On June 14, the Singh government said inflation had increased 9.1% in May, compared with a year earlier, a rate higher than expected. High inflation was first observed two years ago in the rise of food prices that affected India's poor the most. But since India's hundreds of millions of poor have little voice in directing New Delhi's economic policies, for the greater part of the last two years such inflation was pooh-poohed by Indian economists, accusing the growing army of the middle class of "over-consumption of food." Now, inflation has shown up everywhere, once again, proving the shortsightedness of those economists.
What this picture, which I elaborate below, underscores, is the inescapable truth that if a fundamental shift away from the monetarist system is not initiated in the United States, and soon, we are looking at the literal devastation of the largest population centers in the world, such as India and China. This is, in fact, the concern of all humanity - and must be stopped.
The Growing Anti-Poor Bias Unwilling to change course, and stubbornly defending the failed economic policy, New Delhi is still harping on India's high GDP growth rate. The New York Times reported on June 15, that Kaushik Basu, the government's chief economic advisor, said, in an interview on June 13, that inflation was a problem that all developing countries were facing. "If you look at emerging economies around the world," Basu said, "India's performance looks pretty run of the mill."
But, neither Basu nor others in the Singh government are interested in taking a good look at the damage done by their strictly money-obsessed policies. "The last two years have been a lost opportunity" for India's governing United Progressive Alliance party, Citigroup said this month in a research report.
This monetarist obsession has given rise to full blown inflation across the spectrum. The unprecedented price rise in basic food items is severely impacting hundreds of millions of Indians. Despite the shouting by the globalizers, investment bankers, and their followers within India, millions of Indian families live on a daily diet which consists of cereal - rice, or wheat flour, or both - some vegetables, including onion, and a variety of lentil, or other similar items. Lentils provide the only significant source of protein they have access to, since they cannot afford to buy other high-protein foods, and this includes a large number of people who are non-vegetarians.. .....
Riaz Haq said…
Here's a Times of India story about the impact of corruption on "Brand India":

BANGALORE: Anna Hazare's anti-graft campaign has pushed corruption to the fore again. Corporate honchos say businessmen overseas have been vexed with corruption here for a long time, and this movement addresses their worry too.

Kris Gopalakrishnan, executive co-chairman, Infosys Technologies, said Brand India is affected because of the perception that we can't solve the problem of corruption.

Kiran Mazumdar Shaw, CMD, Biocon, said India has an outstanding business reputation. But people outside feel the cost of doing business in the country comes at a price that may require underhand dealings to get things done. "This perception needs to change," she said.

Krishnakumar Natarajan, CEO, MindTree, echoed that feeling: "Outsiders feel the government is not transparent and India is not an easy place to do business. There is discomfort, especially on issues related to infrastructure," he said.
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* Anti-corruption watchdog Transparency International placed India at 87 among 178 countries in the 2010 corruption index. India scored 3.3 on a scale of 10

* Janaagraha initiative ipaidabribe.com shows Bangalore at the top with maximum number of bribes paid. Earlier this week, the site showed 3,641 instances of bribe that amounted to Rs 10 crore. Police, followed by the registration department and municipal services, sought the maximum number of bribes. The site depends on people logging in their bribe-paying details, and therefore is limited to that extent.


http://timesofindia.indiatimes.com/india/Graft-gives-Brand-India-a-hard-time/articleshow/9762758.cms
Riaz Haq said…
Here's a FirstPost story on India at Davos WEF 2012:

Barely a few years ago, India was the flavour of the season at the World Economic Forum talk-fest in the Swiss Alpine resort of Davos as international moneybags and businesses, looking for the Next Big Thing after China, latched onto the India Story.

They came by the India Adda pavilion, chomped on curry offerings, got a earful of Bollywood beats – and pronounced that India was Everywhere.

This year, after a bruising 12 months of economic mismanagement that saw inflation soar and growth slow down and a whole lot of other things go wrong, the moneybags’ starry-eyed vision of India has faded. India is Nowhere at this year’s Davos gabfest. Indian TV personalities who have made Davos something of an annual pitstop say that the mood among the Indian contingent this year is downbeat, “almost depressed.”

NDTV’s Vikram Chandra reports that a top industrialist told him: “We are back to being on the sidelines, back to watching others take the limelight. Back to the bad old days. It’s feeling as if the India story is over.”

The unnamed Indian industrialist may not be ready to acknowledge it, but the fact that Davos has gone cold on India is perhaps a good thing, given its horrendous record at predicting the future and reading economic ups and downs.

As Clyde Prestowitz, president of the Economic Strategic Institute, notes, Davos has become the platform for an intellectual form of name-dropping and a chance for the select few to gloat that they have been invited to the meeting.

“It’s a combination of competitive vanity and convenience that makes it all work. Glitteratus A begs for an invitation because he/she can’t stand the thought of not being there if Glitteratus B is there. The fact that many are there then makes it easy to do in a few days a lot of business with each other that without the meeting would take weeks or months. So, for organizing a nice party for them, the glitterati each pay… anywhere from $50,000 to several hundred thousand dollars.”

But far from being a forum that sets the economic and business agenda for the world, Davos has been horribly – and embarrassingly – behind the curve in seeing the future. Prestowitz points out that the Davos meeting in 2008, for instance, foresaw none of the cataclysm in the financial markets and the collapse of real estate markets that would define much of that year and the succeeding years.

Just as glaringly, in 1997, these Masters of the Universe labelled Southeast Asia as the world’s most dynamic region, only to see the whole house of cards collapse barely three months later.

The Davos man, writes Prestowitz, “has consistently proven clueless and unable to set an agenda with regard to the global developments on which he is supposed to be the expert.” This is largely because Davos represents the “global establishment”, which by its very nature cannot see anything that doesn’t fit into its orthodox framework, and has a dogmatic faith in the enriching power of unfettered globalisation.…


http://www.firstpost.com/world/india-nowhere-at-davos-thank-god-for-that-195985.html
Riaz Haq said…
Here are some excerpts of BBC's Soutik Biswas's review of Pulitzer-winning New Yorker reporter Katherine Boo's "Beautiful Forevers":

"We try so many things," a girl in Annawadi, a slum in Mumbai tells Katherine Boo, "but the world doesn't move in our favour".

Annawadi is a "sumpy plug of slum" in the biggest city - "a place of festering grievance and ambient envy" - of a country which holds a third of the world's poor. It is where the Pulitzer prize winning New Yorker journalist Boo's first book Behind the Beautiful Forevers is located.

Annawadi is where more than 3,000 people have squatted on land belonging to the local airport and live "packed into, or on top of" 335 huts. It is a place "magnificently positioned for a trafficker in rich's people's garbage", where the New India collides with the Old.

Nobody in Annawadi is considered poor by India's official benchmarks. The residents are among the 100 million Indians freed from poverty since 1991, when India embarked on liberalising its economy.
-----------
She used more than 3,000 public records, many obtained using India's right to information law, to validate her narrative, written in assured reported speech. The account of the hours leading to the self-immolation of Fatima Sheikh derives from repeated interviews of 168 people as well as police, hospital, morgue and court records. Mindful of the risk of over interpretation, the books wears its enormous research lightly.
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The local councillor runs fake schools, doctors at free government hospitals and policemen extort the poor with faint promise of life and justice, and self-help groups operate as loan sharks for the poorest. The young in Annawadi drop dead like flies - run over by traffic, knifed by rival gangs, laid low by disease; while the elders - not much older - die anyway. Girls prefer a certain brand of rat poison to end their lives.
--------------
Boo has an interesting take on corruption, rife in societies like India's. Corruption is seen as blocking India's global ambitions. But, she writes, for the "poor of a country where corruption thieved a great deal of opportunity, corruption was one of the genuine opportunities that remained".

On the other hand, Boo believes, corruption stymies our moral universe more than economic possibility. Suffering, she writes, "can sabotage innate capacities for moral action". In a capricious world of corrupt governments and ruthless markets the idea of a mutually supportive community is a myth: it is "blisteringly hard", she writes, to be good in such conditions. "If the house is crooked and crumbling", Boo writes, "and the land on which it sits uneven, is it possible to make anything lie straight?


http://www.bbc.co.uk/news/world-asia-india-17038326

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