The World’s Next Big Trading Block May Be India

Discussion in 'Economy & Infrastructure' started by Rashna, May 12, 2015.

  1. Rashna

    Rashna Senior Member Senior Member

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    The World’s Next Big Trading Block May Be India

    A new Common Market is being formed. It has a bigger economy than the whole of sub-Saharan Africa, more states than the European Union has members, and twice the population of North America. It’s called India.

    For more than six decades since independence, India’s 29 states have operated almost as separate countries. They set their own taxes, charged import duties on goods from neighboring states, had their own politics, culture and even languages.

    Prime Minister Narendra Modi is trying to change that, using his popularity among voters to replace more than a dozen levies with a single goods-and-services tax by next April, leaning on state governments to amend labyrinthine labor and land laws, and revamping the Soviet-style Planning Commission. To win support from states, he’s pledged them a record share of federal tax revenue.


    “There are 29 mini Indias within one big India and they are modifying their approval process, procedures to make themselves competitive,” said Ajay S. Shriram, 61, chairman and senior managing director of DCM Shriram Ltd., a business with interests in sugar, chemicals and cement that has plants and offices in at least five states. “States are trying for their own economic development, which will help improve the ease of doing business and boost the country’s growth.”

    The new commercial competition is beginning to show. Ask Vineet Mittal, vice chairman of solar-power company Welspun Renewables. Five years ago, he tried to get permission to build a solar power plant in a southern Indian state. After six months of waiting for appointments with officials and being given the run around by government bureaucrats, he gave up.

    Second Attempt
    Last October, he tried again. When he arrived at the airport, he was surprised to find liaising government officers waiting for him. They whisked him straight to meet senior bureaucrats and the chief minister of the state. By March, Welspun was ready to start work on a 7.5 billion rupee ($118 million), 100 megawatt project, 20 times the size of the one he tried to propose in 2010.

    “In the past, officials enjoyed making you wait, there was a level of sadism,” Mittal said in an interview in his New Delhi office. “There is drastic change in attitude and culture to attract industries.”

    Given the size of India’s states and a predicted growth rate of at least 7.5 percent over the next five years, the potential benefits of integration for investors are huge. In population terms, Uttar Pradesh is equivalent to Brazil, Maharashtra would be Mexico, while Bihar is on par with the Philippines. Telangana, India’s 12th-largest state, is comparable to Canada.

    “India’s states can be compared to major countries around the world,” McKinsey analysts including Jaidit Brar wrote in a report in October. “Understanding their evolution and making the right bets from a five- to 10-year standpoint is critical to being well positioned for growth in the Indian market.”

    Poor Winners
    Should Modi succeed in forging a single market, the biggest winners could be some of the poorest states. Like the boom for EU newcomers from Central Europe in 2004, growth in laggard states may consistently outpace the national average as India’s lopsided economy begins to balance out.

    Eight Indian states accounted for about 45 percent of the $1.8 trillion gross domestic product in 2012, led by Haryana and Maharashtra, the McKinsey report said.

    “For India to grow at 9-10 percent, many states of India have to grow at 15-16 percent,” Amitabh Kant, secretary in the Department of Industrial policy & Promotion, said in a March interview. “That’s easily do-able because there are very low levels of growth.”

    India has forecast growth of as much as 8.5 percent in the year ending March 2016, which would be the fastest among major economies. Achieving those levels of expansion will require states to adopt supportive policies, the McKinsey authors said.

    That still means a political battle for Modi, whose Bharatiya Janata Party and its allies control 11 states, while the main opposition Congress party-led bloc holds nine, with the rest run by regional parties that include Communists and groups opposing Modi’s policies.

    Political Color
    “The political color of each Indian state has a significant impact upon their relations with the Indian federal government,” Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight, said from Singapore. “States also need to realize that they are not just competing amongst each other, but also face global competition.”

    The infighting, corruption and endless regulations have tarnished the country’s image for investors. India fell to 71st from 60th among 144 nations in the World Economic Forum’s Global Competitiveness Index 2014/15, behind Rwanda and Romania. On the World Bank’s latest Ease of Doing Business Index, India’s position worsened to 142nd out of 189.

    Modi has directed his administration to improve India’s ranking, but many of the measurement parameters -- registering a business, getting electricity, paying taxes, enforcing contracts -- rest with the states.

    India’s states have 22 official languages, excluding English, some of which have their own script. In the 28-member EU, where goods and people are free to travel across borders, over half the population speaks English, while most of the rest speak at least one of the other three main languages.

    It’s easier to drive from France to Germany than it is from Delhi to the Taj Mahal because of the need to stop and pay a road levy when you cross a state border.

    Even with those handicaps, Modi is having some success. The lower house of parliament on Wednesday approved a bill that’ll allow him to work toward implementing a national sales tax and the state of Rajasthan used constitutional powers to amend local laws and make it easier for companies to access land and hire and fire workers. Madhya Pradesh is also relaxing its labor laws.

    Intense Competition
    “We’re trying our best to attract investment by facilitating land, providing incentives and other facilities,” said Apurva Chandra, principal secretary for industries in the western state of Maharashtra, which houses the financial hub Mumbai. “Ultimately this intense competition among states is helping them as well as the country.”

    Maharashtra is working to reduce the number of permits needed to set up a business to about 30 from 70, he said. It now takes 30 days to register a company in Mumbai, compared with an average 9.2 days in developed nations, World Bank data show.

    Maharashtra is the most competitive among innovation-driven Indian states, followed by Gujarat, which Modi governed for more than a decade, according to the Institute for Competitiveness, part of the network of the Institute for Strategy and Competitiveness at Harvard Business School.

    Maharashtra has attracted 30 percent of India’s foreign direct investment since 2000 and Gujarat has lured 4 percent.

    All states will have to follow their example if India’s to benefit, said Welspun Renewables’ Mittal. “If this culture is started by every state, then it’s a game changer,” he said.

    http://www.bloomberg.com/news/articles/2015-05-05/the-world-s-next-big-trading-block-may-be-india


     
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  3. Rashna

    Rashna Senior Member Senior Member

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    This is good news for India. If India is able to get all states to perform at this level it will be equivalent to a thriving world economy on its own steam.
     
  4. Illusive

    Illusive Senior Member Senior Member

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    Not until Mamta rules Bengal and Mulayam/Akilesh duo rules UP
     
  5. Rashna

    Rashna Senior Member Senior Member

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    Modi is getting friendly with didi and UP needs to move away from caste based politics to get some real leaders who are going to make the population dividend work for them.

     
  6. Samar Rathi

    Samar Rathi Regular Member

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    Winter is coming !

    Then the UP election and change is inevitable.
     
  7. salute

    salute Senior Member Senior Member

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    LOL, hahahaha,

    'the whole of sub saharan africa' is considered one of the poorest place on earth,

    not much of proud thing if your country is little better than 'the whole sub - saharan africa'. LOL
     
  8. Rowdy

    Rowdy Co ja kurwa czytam! Senior Member

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    :oops::oops::oops::oops::oops::oops::oops::oops::oops:
    How about a place a little better (and quite bigger) that sub saharan Africa growing at 8% p.a. with a stable political system and security guaranteed by Nuclear Warheads.
    Lots of Pension funds need to be invested.
     
  9. Rashna

    Rashna Senior Member Senior Member

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    Bravo what a discovery~ :rolleyes:
     
  10. salute

    salute Senior Member Senior Member

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    i mean comparison with sub - sahara is LOL.
     
  11. Rowdy

    Rowdy Co ja kurwa czytam! Senior Member

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    No it's not. India is very very poor. Don't be fooled by the islands of excellence.
     
  12. salute

    salute Senior Member Senior Member

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    i meant the same, LOL

    who started this thread to brag about india's riches.
     
  13. Rowdy

    Rowdy Co ja kurwa czytam! Senior Member

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    Huh ... i just said that it is the only market of that size growing at 8+% with political stability.
     
  14. The Fox

    The Fox Regular Member

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    Did you actually read this what relaxing labor laws means read the fine print carefully

    "The state of Rajasthan used constitutional powers to amend local laws and make it easier for companies to access land and hire and fire workers. Madhya Pradesh is also relaxing its labor laws."
     
  15. SREEKAR

    SREEKAR Senior Member Senior Member

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    LOL You are such an intelligent fellow I have ever seen:eek::eek:.You should contest for PM post for next elections ..Whole members on this forum will support you:D
     
  16. salute

    salute Senior Member Senior Member

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    if i became PM of india,

    i gonna make you [​IMG]National Security Adviser and [​IMG]Defense Minister, :p:p:p

    surely all members of this forum gonna agree on this without any [​IMG]

    because defense expertise you have is[​IMG]like no one had before, [​IMG]not just your posts but only your presence here proves that,

    so you are fit for both post. [​IMG]
     
  17. pmaitra

    pmaitra Moderator Moderator

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    Good observation.

    So, this will be pandered across the media as "reform." I doubt anything good will come out of it. So we will see plenty of Walmart like workers all across India, won't we?
     
  18. SREEKAR

    SREEKAR Senior Member Senior Member

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    Sorry I have ambition to become an IPS officer:cowboy::D. You just find another person from this forum.:babybath:.Shall I give you list??:hehe:
    And I hate politics..:playball:
     
  19. salute

    salute Senior Member Senior Member

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    yeah tonnes of ips guys with corruption charges did real service to india, :laugh:

    no other gonna require, you gonna be enough. :laugh:
     
  20. avknight1408

    avknight1408 Regular Member

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    I'm sceptical about this. Politics will be played over distribution of the tax collected. For eg , eventhough Tamil nadu contributed second most to the country's gdp ,recently its funds in the finance commission was cut by 1% while other large states managed to almost retain their share. we have to split politics and economics for this to work properly.
     
  21. Samar Rathi

    Samar Rathi Regular Member

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    But state share has been increased in tax collection so what's this all about?
     

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