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Old 29th October 2010, 00:02   #46
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under the name of developing/fostering Indian Manufacturers until they attain competitiveness and it is in fact a debatable topic, how long does Tata/Mahindra or Maruti would need to be competitive?

But, in Indian automotive Industry, barriers of entry are high.
Sectors where there is a restriction on manufacturing FDI are Defense, Cigarette & Cigars (?) and specific industries where Small Scale Industries have significant contribution in terms of supply (Am I missing something?).

No Indian auto manufacturer is protected. FDI in auto industry is already 100%.

Maybe what you mean to say is that there are barriers on imports and which are justified if our 3 page discussion is to be considered.

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I look forward to the day when we get truly international standards in our cars.
How do we define world class products? I think we are already there. Its the Indian market that needs to mature.

By Indian market I mean;

Consumer; understand and BUY better safety featured cars, affordability & desire for better electronics in car etc.

Infrastructure (macro economic factor) etc; better infra will certainly bring in those low GC cars.

Technology; which again can be linked to consumer preference, income level etc.

What one needs to consider is the term 'horses for courses'. Manufacturers will introduce country specific products; products that suit local trend and requirement.
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Old 29th October 2010, 21:13   #47
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@Prateek
You are right that in terms of protection/immunity provided by Govt. of India for domestic manufacturer , Automotive Sector does not enjoy the same on paper or in policies. But then how do we justify high duties on imported CBUs and of all why penalise the customer?

On international standards front, yes some variants (generally top end variants) of Indian cars carry equipments to match international safety standards but the price for same in PPP (purchasing power parity) is very high when compared to international prices (someone has mentioned in this thread that Vento would cost 5-6Lacs in Russia but 11 Lac in India. So, an Indian automotive consumer is deprived of truly international standards for the price s/he pays.
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Old 29th October 2010, 23:09   #48
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But then how do we justify high duties on imported CBUs and of all why penalise the customer?
DoD, I will quote myself.

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Originally Posted by prateek99 View Post
Let's consider Fortuner and Captiva. Captiva is a CBU and hence attracts higher import duties. What Govt wants here is to promote a locally manufactured "similar" automobile which has created value in India and not somewhere else (say exporting country of Captiva).

So you want a highest end car (Mercedes AMG or whatever), you don't want a humble C or E manufactured in India, then you pay extra duty. I am not saying AMG is similar to C or E, but they will perfectly meet the need.
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On international standards front, yes some variants (generally top end variants) of Indian cars carry equipments to match international safety standards but the price for same in PPP (purchasing power parity) is very high when compared to international prices (someone has mentioned in this thread that Vento would cost 5-6Lacs in Russia but 11 Lac in India. So, an Indian automotive consumer is deprived of truly international standards for the price s/he pays.
Okay. But I don't think that we should compare INR value while stating PPP. I guess the above mentioned value is currency conversion value and not PPP.

PPP is not a mere conversion rate. It takes into account various factors to arrive at a relative cost of living between countries.

Wiki List of countries by GDP (PPP) per capita - Wikipedia, the free encyclopedia

India's PPP - 3,000 International $
Russia's PPP - 15,000 International $

Doesn't it mean that you will have to shell out 15,000 in Russia for an article which you will get for 3,000 in India.
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Old 29th October 2010, 23:31   #49
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Okay, my bad at assuming 5-6 lac cost of Vento in Russia as PPP

Coming back to cars & high import duties. There can be alternatives to high import duties, like allow a Manufacturer to sell CBU's for X number of years (say 5 years) without charging import duties if Manufacturer is ready to take localisation of the car under question to Y percent (60%). This can be monitored with yearly targets, failure to comply shall penalise the manufacturer. This kind of policy will:

1. Bring competitiveness in industry and raise the bar of car quality at a given price
2. Consumer benefits in a free market and has better options
3. Manufacturers get exposure to Indian industry & buy time before making capital expenditures

My point is to have win win situation for all stakeholders

Happy Motoring!
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Old 31st October 2010, 10:44   #50
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A lot of the present duty structure is based on the outdated socialist mode of thinking where automobiles were considered to be luxury.

While all of us agree on the need for customs duty on imports ( ckd/cbu) is should be lower than the existing rates.

The customs duty structure would do well to have different rates at different price levels like it is in case of road tax/registration.

A person importing a Ferrari or a RR should be charged 110% . However I see no reason why we should pay Honda Accord prices for a Honda City. A lower duty in this segment (say 60%) would encorage competition and also expand the market. A bigger market would encourage local manufacture of these cars( as in case of small hatch backs) and bring prices down.
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Old 2nd November 2010, 15:57   #51
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Default Harley plans to set up assembly facility in Haryana

Luxury car manufacturers will follow the suit once they see the demand rising.

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NEW DELHI: Heavyweight motorcycle maker Harley-Davidson Inc said on Tuesday it plans to set up an assembly facility in Haryana state to serve the local market, using US - made component kits.

The Milwaukee-based company expects the assembly facility to be operational in the first half of 2011, it said in a statement.

The iconic US motorcycle maker, which commenced India operations in August 2009, currently imports 12 completely assembled motorcycle models for the Indian market.

Last month, German luxury car maker BMW said it would start selling motorcycles in India by December through three dealerships, as more global players want to have a share in Asia's third-largest economy's lucrative motorcycle market.

Two-wheeler sales have grown 25.86 % in India between April-September, data with industry body Society of Indian Automobile Manufacturers ( SIAM) showed.

Local players like Hero Honda, Bajaj Auto and TVS Motor Co have seen rising sales this year as the rapidly expanding economy continued to pull buyers.
Source: Harley plans to set up assembly facility in Haryana - The Times of India

Last edited by prateek99 : 2nd November 2010 at 15:59.
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Old 3rd November 2010, 12:20   #52
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Originally Posted by prateek99 View Post
PPP is not a mere conversion rate. It takes into account various factors to arrive at a relative cost of living between countries.

India's PPP - 3,000 International $
Russia's PPP - 15,000 International $

Doesn't it mean that you will have to shell out 15,000 in Russia for an article which you will get for 3,000 in India.

PPP seems to be misunderstood here.
An Indian gets only 3000 International(PPP) $ per annum whereas as Russian gets 15000 Int(PPP) $ per annum. In that sense we (Indian's) havew to work 5 years to get same goods and services that an Russian can earn in one year. We have to work 15 years to enjoy goods and services an American enjoy. (45,xxx Intl$)
Given this comparison, we pay 400% more to a car what a Russian pays or whooping 1400% more than an American.
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Old 3rd November 2010, 17:47   #53
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Yes Kumar. I too was not sure when I asked this.

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Originally Posted by prateek99 View Post
Doesn't it mean that you will have to shell out 15,000 in Russia for an article which you will get for 3,000 in India.
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Originally Posted by KumaravelS View Post
An Indian gets only 3000 International(PPP) $ per annum whereas as Russian gets 15000 Int(PPP) $ per annum. In that sense we (Indian's) havew to work 5 years to get same goods and services that an Russian can earn in one year. We have to work 15 years to enjoy goods and services an American enjoy. (45,xxx Intl$)
It's not how much we get, it's how much we produce.

What comes to my mind by PPP is 'If the entire globe was to have same currency, India's GDP will be 3,000 Int $ per person and Russia's GDP will be 15,000 Int $ per person.'

In other words each Indian will produce 3,000 Int $ worth of goods & services.

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Given this comparison, we pay 400% more to a car what a Russian pays or whooping 1400% more than an American.
I don't think this is the case.

We need to consider the PPP index (which I have not been able to google yet). It will give us the relative cost of living between two countries.

Last edited by prateek99 : 3rd November 2010 at 17:58.
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Old 4th November 2010, 10:03   #54
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Yes Kumar. I too was not sure when I asked this.





It's not how much we get, it's how much we produce.
In economics Production = consumption. So its what we get is what we produce.

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Originally Posted by prateek99 View Post
What comes to my mind by PPP is 'If the entire globe was to have same currency, India's GDP will be 3,000 Int $ per person and Russia's GDP will be 15,000 Int $ per person.'

In other words each Indian will produce 3,000 Int $ worth of goods & services.
And also 3000$ is what each Indians consume too... (on an average)
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Originally Posted by prateek99 View Post
Me>> Given this comparison, we pay 400% more to a car what a Russian pays or whooping 1400% more than an American.

Prateek >> I don't think this is the case.

We need to consider the PPP index (which I have not been able to google yet). It will give us the relative cost of living between two countries.

When I mean 400% more to a car means, an Average Indian worker have to work 4 times more to own a car than a Russian or 15 times more than a American.

For e.g (all $ are Intl $)
PPP gives the relative Index of production/consumption (read as salary/cost ) between two countries (with all its approximation). Which is 3000$ for Indian and 46000$ for American


Car selling price is 20000$
American worker get 46000$ annually,
Indian gets 3000$ annually
For the equivalent goods and service American pays 23000$ (assuming half the salary)
Indian pays 1500$..
With the remaining amount American can buy the car in less than a year whereas Indian can buy the care in around 13 years..

Its as simple as that, for an Individual Good, an Average Indian toil 14 more times than an Average American. The key interpretation is Average Indian vs Average American.
Given that we are discussing in this forum, our Per capita would be much more than 3000 Intl $, probably we are in the mid high level income group within India.
And we compare with Average American, we would toil significantly lesser than Average Indian. But still we toil more than an Average American...

Hope this clarifies instead of confusing..
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Old 4th November 2010, 13:03   #55
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In economics Production = consumption. So its what we get is what we produce.

And also 3000$ is what each Indians consume too... (on an average)
Yep. GDP = Local Production + Imports - Exports (which gives us the net consumption). What confused me probably was your term 'gets'.

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an Average Indian toil 14 more times than an Average American.
In essence you mean; an Indian will spend 14 times the resources (except RM) than an American? Then US should simply manufacture goods there in US and export it to India.

Isn't India's cost of living substantially lower than the US (to say the least)? If US companies were to manufacture MORE value sitting there in US, they would have never come to India.

Isn't that the reason for many companies rushing to China and India to set up manufacturing units? I am specifically talking of EOUs and SW industry (and with the logic of 14 times, for domestic demand too).

In a manufacturing unit, except for Variable Cost, all costs are substantially lower in developing countries, which in my company; (VC) contributes over 60% to the total expenditure.

We are no where comparing cost of living which should give us the answer. I remember reading once that on cost of living front, India is right up there (less $ will get you more goods).

Happy Diwali to all!

PS: I may not have TBHP access for next 10 days
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Old 4th November 2010, 17:00   #56
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Originally Posted by prateek99 View Post
Yep. GDP = Local Production + Imports - Exports (which gives us the net consumption). What confused me probably was your term 'gets'.


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Originally Posted by prateek99 View Post
In essence you mean; an Indian will spend 14 times the resources (except RM) than an American? Then US should simply manufacture goods there in US and export it to India.
Prateek, You have part of the answer in the your questions!!
For a worker, the resource she/he has is his time he works. So an average worker in India works 14 times more to get the same good that is manufactured in U.S and sold in India (after all the coversion). So if U.S exports its goods and services manufactured in U.S, it takes 14 times more effort by an Indian worker than a American worker to get the same benefit.

The same good manufactured in India, An Average American would take 1/15 of his resource(time to work) than it had been manufactured in America. Hence all the outsourcing...

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Originally Posted by prateek99 View Post

Isn't India's cost of living substantially lower than the US (to say the least)? If US companies were to manufacture MORE value sitting there in US, they would have never come to India.

Isn't that the reason for many companies rushing to China and India to set up manufacturing units? I am specifically talking of EOUs and SW industry (and with the logic of 14 times, for domestic demand too).

In a manufacturing unit, except for Variable Cost, all costs are substantially lower in developing countries, which in my company; (VC) contributes over 60% to the total expenditure.
I think my previous explanation would have clarified this point..

But due to outsourcing, duplication of resources (setup cost) logistics, and quality control happens, and hence it would not be 1/15 but probably 1/5th or 1/7th or so.. would be the advantage..


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Originally Posted by prateek99 View Post

We are no where comparing cost of living which should give us the answer. I remember reading once that on cost of living front, India is right up there (less $ will get you more goods).
Cost of living is taken care when we compare in terms of PPP i.e Intl $.

Normal GDP terms U.S Per Capita is still 46000USD, whereas India's per Capita is 400USD. Where in PPP Intl $ U.S Per Capita is 46000 Intl $, whereas India's Per Capita is 3000 Intl $


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Happy Diwali to all!
PS: I may not have TBHP access for next 10 days
[/quote]

Wishing Safe and Joyable Diwali to All.
Prateek, In this connected high pressure world, It would be relaxing not to have access to computers for few days. Spend time with nature, friends and family. Have a nice Diwali.. will continue after Diwali if still there is some confusion...
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Old 4th November 2010, 23:08   #57
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I managed to get here . My train is delayed by 7.5 hrs . And I really think this is my last post as I am not carrying my portable computer.

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Originally Posted by KumaravelS View Post
For a worker, the resource she/he has is his time he works.
So time is money, as we all know.

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So an average worker in India works 14 times more to get the same good that is manufactured in U.S and sold in India (after all the coversion). So if U.S exports its goods and services manufactured in U.S, it takes 14 times more effort by an Indian worker than a American worker to get the same benefit.
And America will wait for '14 times more time (resources)' for revenue realization, keeping their money (time/ resources) idle.

I somehow don't agree to this.

If they use their remaining 13 parts, won't they produce a lot more? Sell and make money faster.

For service industry (IT), your rationale doesn't hold good. Indians won't take '14 times more time (resources)' to write that program.

Manufacturing, maybe yes, because of automation. But I don't think productivity will improve by 1400%.

Quote:
But due to outsourcing, duplication of resources (setup cost) logistics, and quality control happens, and hence it would not be 1/15 but probably 1/5th or 1/7th or so.. would be the advantage..
I guess all such factors would have been normalized while calculating PPP on a whole. Otherwise there is no meaning to the term PPP.
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Old 8th November 2010, 16:08   #58
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Originally Posted by prateek99 View Post

And America will wait for '14 times more time (resources)' for revenue realization, keeping their money (time/ resources) idle.

I somehow don't agree to this.

If they use their remaining 13 parts, won't they produce a lot more? Sell and make money faster.
It takes 14 Average Indian's to consume = one Average American production in terms of PPP$.

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Originally Posted by prateek99 View Post

For service industry (IT), your rationale doesn't hold good. Indians won't take '14 times more time (resources)' to write that program.

Manufacturing, maybe yes, because of automation. But I don't think productivity will improve by 1400%.
As I mentioned it is Average Indian production/consumption vs Average American production/consumption. Not goods by goods comparision.




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Originally Posted by prateek99 View Post
me>> But due to outsourcing, duplication of resources (setup cost) logistics, and quality control happens, and hence it would not be 1/15 but probably 1/5th or 1/7th or so.. would be the advantage..

Prateek >> I guess all such factors would have been normalized while calculating PPP on a whole. Otherwise there is no meaning to the term PPP.
No, outsourcing cost/benefit is not included in PPP.
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Old 14th November 2010, 22:59   #59
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It takes 14 Average Indian's to consume = one Average American production in terms of PPP$.
I don't see lot of value addition thru this statement.

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As I mentioned it is Average Indian production/consumption vs Average American production/consumption. Not goods by goods comparision.
Average doesn't fall from the sky. It comes from combining all the services and manufacturing. When I compared IT, it is probably the single largest representative from services sector. And as I said, automation won't give you 1400% productivity increase everywhere.

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No, outsourcing cost/benefit is not included in PPP.
I was referring to these.

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(setup cost) logistics, and quality control
The very definition of PPP states that it is relative cost between two countries. So it is grossly inappropriate to state that such factors are not included in PPP.

We are not heading anywhere. Lets agree to disagree. Take Care.
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