Posted on Friday, March 08, 2013 - 07:27 am:

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Indian billionaire Kumar Mangalam Birla said he would rather invest in countries including Brazil and Indonesia as frequent policy changes at home discourage spending by companies in Asia�s third-largest economy.

"Country risk for India just now is pretty elevated and chances are that for deployment of capital, you would look to see if there is an asset overseas rather than in India," Birla said in an interview to Bloomberg TV India. "We are in 36 countries around the world. We haven't seen such uncertainty and lack of transparency in policy anywhere."

Birla, who runs companies from the world�s largest rolled aluminum maker to India�s biggest cement producer, said he�s looking for buying opportunities in the U.S., Brazil, Thailand and Indonesia. India slipped three levels in the 2013 World Economic Forum�s Global Competitiveness Index from a year ago to 59 and behind Costa Rica and Khazakhstan. Brazil was ranked 48, while Indonesia was in the 50th position.

�When we put up a fairly large investment in Brazil recently, our team said we will commission the project at 10 a.m. on 29th September,� Birla said. �That is a huge difference. The kind of certainty and comfort it gives, is a completely different feeling.�

The Birla group, which aims to increase revenue to $65 billion by 2016 from $40 billion, spent more than $1.5 billion acquiring assets overseas in the past two years, data compiled by Bloomberg show.

A report on Feb. 28 showed India�s $1.8 trillion economy expanded 4.5 percent in the three months to Dec. 31 from a year earlier, lower than forecast and the weakest pace in almost four years, as a decline in investment and exports, and a curb in government spending sapped growth.

�Lost Opportunity�

�It would be very unfortunate if we grow by less than 5 percent,� Birla, 45, said in the interview. �That would be a lost opportunity,� he said, adding that the country should be looking to expand as much as 9 percent.

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Posted on Friday, March 08, 2013 - 07:21 am:

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As the table shows below, the government currently has an excess rice stock worth around Rs 25,400 crore and an excess wheat stock worth Rs 36,300 crore, or more than Rs 60,000 crore in total. These numbers have been arrived at by taking into account the minimum support price (MSP) of rice at Rs 12.5 per kg and the MSP of wheat at Rs 13.5 per kg and multiplying them with the excess stocks.

What the table also tells us is that the government currently has an excess rice stock of nearly two times the buffer and an excess wheat stock of nearly 2.7 times the buffer.

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With an assured price, more rice and wheat lands up with the government than it distributes through the public distribution system. Also, with FCI obligated to purchase what the farmers bring in, its godowns overflow and at times the wheat and rice are dumped in the open, leading to rodents feasting on the crop.

On the other hand, the way things currently are, it helps the farmer but it also results in pushing up market prices, since more of the grain lands up in the godowns of FCI and not in the open market.

The procurement also adds to the food subsidy. The government pays for all the rice and wheat and then lets a lot of it rot. The government currently has nearly 67million tonnes of rice and wheat in stock. Of this nearly 47 million tonnes is excess.

Tilotia expects the rice and wheat stock of the government to go up to 100 million tonnes by the time this harvest season gets over. As he writes, �After the current harvest season, Indian granaries will stock about 100 million tonnes of wheat and rice�A high inventory comes with a heavy carrying cost, which the FCI estimates at Rs 6.12 per kg for year-end September 2014: At 100 million tonnes, this will cost India Rs 60,000 crore a year (forming most of its food subsidy bill)."

A higher food subsidy bill adds to the fiscal deficit and which, as writers at Firstpost regularly keeps discussing, has huge consequences of its own. Fiscal deficit is the difference between what a government spends and what it earns.

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Posted on Friday, March 08, 2013 - 07:07 am:

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If we look at the MSP across various commodities, they have increased by 50-200 percent since 2004-05: The government offers a minimum support price on various commodities, including rice and wheat. At this price, the Food Corporation of India (FCI), or a state agency acting on its behalf, purchases primarily rice and wheat grown by Indian farmers. The theory behind setting the MSP is that the farmer will have some idea of the price he would get when he sells his produce after harvest. What it has led to is that more and more farmers are selling to the government because they have an assured buyer at an assured price. The government now has nearly Rs 60,000 crore of rice and wheat in excess of what it needs to maintain a buffer stock.

While the government is hoarding onto more rice and wheat than it needs, there is a shortage in the open market that is pushing up food and consumer price inflation. It has also pushed up food subsidies and the fiscal deficit. And if the government continues with this policy it likely face other negative consequences as well.

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Posted on Friday, March 08, 2013 - 07:03 am:

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There were many things that Singh did not talk about. Among 150 emerging markets, the fiscal deficit of the Indian government is currently at No 148. Only two countries are worse than us. When it comes to inflation, India is currently at the 118-119th position. The current account deficit (which Singh did talk about) will touch an all-time high during the course of 2012-13. Interest rates have stubbornly refused to come down. And so on.

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