Economist, Newsweek, and India

‘The Economist’- North American Edition of Feb 3, 2007 has a cover with- ‘India overheats’ and a special report- India on fire. It also carries a story in Asia section-‘India’s ricksawa- Colonial yokes are not bad for all’. As such ‘The Economist’ is generally critical of India. However one’s criticism is better than someone’s intentional pushing up knowingly for pulling down as the main motive. You feel good seeing so much of coverage for the goingons in your own country in such a prestigious news magazine. The article ‘India overheats’ overviews the status of Indian economy nicely, but ‘India on fire’ presents the problems and cautions.

At some point this year India’s growth rate could even outpace China’s; and if you measure things by purchasing power parity, India should soon overtake Japan and become the third-biggest economy, behind only America and China.

But as a real friendly advice the article continues.

Fast growth is essential to pull millions of Indians out of poverty, so it is sad to pour cold water on this story. But that is precisely what is needed when there are so many alarming signs of overheating.

Inflation has risen to 6-7% (compared with 2.8% in China); a record 99% of Indian firms report that they are operating above their optimal capacity; and credit is expanding at an annual rate of 30%, twice as fast as in China. Unlike China, India also has a widening current-account deficit-a classic sign of overheating, as domestic output fails to keep pace with surging demand. And if you are looking for a stockmarket bubble, Indian share prices have risen more than four-fold over the past four years, far more than in China. If something is not done, then a hard landing will become inevitable.

India is heavily dependent on short-term portfolio capital inflows, rather than foreign direct investment, which is longer-term. Short-term capital has accounted for four-fifths of capital inflows into India over the past three-and-a-half years-although, encouragingly, foreign direct investment did pick up strongly last year. This means India is vulnerable to rising interest rates if there is a sharp reversal in the appetite for risk in global financial markets.

Generous tax exemptions for exporters in special economic zones may erode future revenues. And the government’s Sixth Pay Commission, due to report by April 2008, is likely to lead to a big rise in public-sector pay.

The main focus of the government’s attention should be on supply-and dismantling the many barriers that keep its speed limit below China’s.

Population growth by itself does not add to prosperity, unless young people are educated and new jobs are created.

And under Asia, the issue has a news report about India’s ricksaws- ‘Colonial yokes are not bad for all’.

The Communist government of West Bengal has long wanted to outlaw rickshaws, of the original man-pulled variety, that now exist only in Kolkata. Last December it did so, on the grounds that man-powered transport was inhuman. But what else are the thousands of rickshaw-wallahs, in one of the world’s poorest cities, to do?

I am sure Buddha will go through it.

But the most interesting story has appeared in Newsweek that tells the way is trying to get into high tech. It is story of an individual named Rajesh Jain, ‘The $100 Un-PC’ by Jason Overdorf.

If Rajesh Jain is successful, the NetTV, which hooks up to any television, could be the first in a family of devices that connect the next billion people to the Internet. Jain, 39, is cofounder and chairman of Novatium, the Chennai-based company that makes NetTV and NetPC, a similar product that uses a normal computer monitor. Both are based on cheap cell-phone chips and come without the hard-disk drive, extensive memory and prepackaged software thatadd hundreds of dollars to the cost of regular PCs. Instead, they are little more than a keyboard, a screen and a couple of USB ports-and use a central network server to run software applications and store data. Novatium already sells the NetPC for only $100-just within reach of India’s growing middle class-and Jain believes he can soon drive the price down to $70.

Entrepreneurs, philanthropists and established computer firms have for the better part of a decade invested millions of dollars to lower the cost of a desktop PC and develop cheaper alternatives. Intel has made its Eduwise laptop; AMD, a Personal Internet Communicator; Microsoft, the FonePlus. MIT computer guru Nicholas Negroponte’s Children’s Machine, now called the XO, is the most publicized recent attempt at converting the poor into computer users. But Negroponte’s idea is to spread computers to the poor, with the help of heavy subsidies from private and public philanthropy. His price is still about $140, too high for India. Indeed India rejected Negroponte’s offer of a million for cost reasons. Jain’s motive is different: he wants to make money.

Let us hope the financial wizards of the country headed by the economist Prime Minister would take care of the warnings to avoid overheating as apparent from his promises to deal with inflation that affects badly the more than 505 of the population living on $ 2 a day. And many more Rajesh Jains come forward to take high tech to masses.

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Rural BPOs to bridge digital divide
High growth or hot growth

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