Indian Finance and Economy related news and articles

[konada]

Opening a new thread for posting interesting news and articles related to Indian economy and finance.

Just came across this interesting argument by Swami Aiyyar. Although its very simplistic, but many points are valid.:

How India beat China in auto exports (timesofindia.com | September 27, 2009)

Auto companies compete by constantly producing new models with improved features like fuel efficiency. Indian consumers are very price-sensitive, so design changes to reduce costs are also vital. India’s auto parts companies had rarely been asked for innovative changes during the old licence-permit raj, when the Ambassador and Premier faced little competition. But MNCs brought in competition, and started a dialogue with auto ancillary manufacturers on constant design changes. To their surprise, they found that Indian engineers had considerable skills, and could make improvements quickly and cheaply.

Bharat Forge, which makes auto forgings like crankshafts and axles, was among the first to realize that India’s big advantage was not cheap labour but cheap skills. The company decided to have no blue collar workers at all, only engineers. This yielded a huge rise in innovation and productivity, and soon made Bharat Forge the second biggest auto forging company in the world.

For new auto components, global giants like Delphi and Visteon typically took three months to go from concept to design, prototype, testing, removal of glitches, and final manufacture. But Bharat Forge found it could do the entire sequence in just one month.

Soon, every auto company and parts maker in India focused on using cheap skills to constantly produce better and cheaper parts and vehicles. Bajaj Auto once relied on know-how from Kawasaki for motor-cycles, but soon found that its own R&D produced far better bikes for Indian conditions. Maruti Suzuki made India a global hub for R&D. And Tata Motors created the Nano, the world’s cheapest car, making the world sit up.

The ultimate compliment to India’s design skills came from Carlos Ghosn of Renault-Nissan. He decided to build an ultra-cheap car (that might compete with Tata’s Nano) in collaboration with Bajaj Auto. In such partnerships, the global partner usually does the R&D and the Indian partner the low-cost production. But Ghosn decided the new car should be designed by Bajaj Auto, which had never produced a car before. Why? Because Ghosn felt it was easier to upgrade from a two-wheeler than downgrade from a standard sedan to produce an ultra-cheap car.

This then is the secret of India’s success. Don’t waste time with strategic planning and picking winners. Simply let competition happen. You will be surprised how the most unlikely sectors can become world class. That’s how India has just beaten China.

[rms12]

Inflation Picks Up in India (businessweek.com)

India's inflation rate is also rising as the weakest monsoon since 1972 hurts farm output. The central bank forecasts inflation of 6.5 percent by March 31. Potato prices more than doubled in November from the same month a year ago, sugar costs rose 53.76 percent, onion costs increased 32 percent and prices of pulses gained 35.2 percent, today's report showed. Manufactured price inflation accelerated to 3.99 percent in the month. A report last week showed India's wholesale-food prices rose the most in 11 years in the last week of November, soaring 19.05 percent from a year earlier.

[rms12]

India Property Market No Dubai (businessweek.com)

"Dubai was very different from India," Mistry, who was appointed on Dec. 4 as chief executive officer of Housing Development Finance Corp., said in a Bloomberg-UTV interview. In "India, the property market is largely end-user based; in Dubai, the property market is largely investor based."
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"Housing in India is very different from housing in the U.S. or U.K. or Dubai," Mistry, currently vice chairman and managing director of the Mumbai-based lender, said in the interview with Bloomberg-UTV. "The penetration level is so very low that it's a huge requirement, it's a need, it's a necessity, it's not a luxury."
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Mortgages in India account for 7 percent of the nation's gross domestic product, compared with 80 percent in the U.S., Mistry said. Residential supply in India is failing to keep pace with demand as rising incomes make housing more affordable, Mistry said. The cost of a home, on average, is about 4.8 times annual income, compared with 20 times in the 1990s, he said. "The shortage of housing in India is massive," said Mistry. "As long as we are reasonably sure that the fuelling, the increase in real estate prices, has been brought about by the end users, and not by investors, not by speculators, I wouldn't call it a bubble."