[v1p3r]

Originally Posted by SmartCat

MEITY chief responded to this interview just a couple of days back. His point is that we can no longer consider Rajan as an Economist because he is trying to become a Politician. He then proceeds to explain the likely value addition (30 percent) in India, as component makers are moving into India too.
https://www.livemint.com/news/india/...502574583.html

There's no materiality to the responses. They're generic 'everyone begins this way'. At least he seems to be more polite and less venal.

Originally Posted by SmartCat

I too think Rajan is positioning himself as a contender for top job in finance ministry in case the opposition comes to power.

I very much doubt that Rajan needs to 'sell' himself. He's on a very short list of people respected globally for his knowledge and accomplishments.

Originally Posted by SmartCat

Now let's look at Ashwini's & Rajeev's credentials (before they entered politics):
https://en.wikipedia.org/wiki/Ashwini_Vaishnaw
https://en.wikipedia.org/wiki/Rajeev_Chandrasekhar

I'm somewhat more intimately acquainted with these two than Rajan. For all his talk of elections, AV is a Rajya Sabha MP. RC is well known for many things, including cars on this forum. Also, Wikipedia pages can be edited at will.

Originally Posted by SmartCat

2) Rajan's statement "we have tried manufacturing schemes since 9 years and failed" is also a political statement, and not something a neutral economist generally makes. 9 years number comes from this Govt taking the reins of power in 2014 and also the Govt's Make In India project.

Actually, he was quoting RC who said that RR should compare 13-14 with 22-23, not 17-18 with 22-23. He's given his logic for the comparison, and said 13-14 vs 22-23 would hurt us more, as the progress shown is not high.

He has made some very valid points about net imports (for mobile phones) actually increasing drastically, as well as the numbers on both Micron and on exports vs GDP.

[WorkingGuru]

With the kind of accusations of impropriety being levelled against RR, for comments he made based on his analysis with his expertise, throws light on why increasing number of PhDs want to go back from industry to research & academics.

When the US had a financial meltdown in 2008, I would think to myself, why couldn't the expert economists have easily pointed this out ? Seeing how one such professional is being pulled apart instead of neutrally examining their comments, makes me wonder that this is why no PhD would want to be a good samaritan in a polarised partisan political world.

Or, maybe I've missed reading Orwells' Animal Farm well enough. So much to learn!

[PreludeSH]

Happened to watch 'Inside Job' on Netflix (little too late since its from 2010) about the housing induced economic crash of 2008. The economist academicians, the regulatory heads and people at helm in financial institutions are all the same.

Same people (or kind) cycle through all these roles. Same people write research papers and receive compensation for lottery like derived products and rate institutions with higher leverages with highest ratings.

There can be many perspectives of the same thing based on which way you look at it from. What your pre-judgement on a thing is and what your own goal is.

[SmartCat]

Originally Posted by WorkingGuru

When the US had a financial meltdown in 2008, I would think to myself, why couldn't the expert economists have easily pointed this out ? Seeing how one such professional is being pulled apart instead of neutrally examining their comments

Originally Posted by PreludeSH

Happened to watch 'Inside Job' on Netflix (little too late since its from 2010) about the housing induced economic crash of 2008. The economist academicians, the regulatory heads and people at helm in financial institutions are all the same.

I think WorkingGuru is referring to Raghuram Rajan being the only economist to have predicted the 2008 crisis. He wrote a paper way back in 2005 about the likely disastrous consequences of financial innovations like "mortgage backed securities" & "collateralized debt obligations"
https://www.nytimes.com/2009/09/06/m...conomic-t.html

There was a telling moment in 2005, at a conference held to honor Greenspan’s tenure at the Fed. One brave attendee, Raghuram Rajan (of the University of Chicago, surprisingly), presented a paper warning that the financial system was taking on potentially dangerous levels of risk. He was mocked by almost all present — including, by the way, Larry Summers, who dismissed his warnings as “misguided.”

[PreludeSH]

Originally Posted by SmartCat

I think WorkingGuru is referring to Raghuram Rajan being the only economist to have predicted the 2008 crisis. He wrote a paper way back in 2005 about the likely disastrous consequences of financial innovations like "mortgage backed securities" & "collateralized debt obligations"
https://www.nytimes.com/2009/09/06/m...conomic-t.html

Yes. He is part of the same series and he did foresee the scam. Economists are mostly right but I was pointing how they cannot be right about everything all the time even if they can. Everyone is a Human and what you say or dont say depends on who you like or hate.

[itisK]

As a country, we can't ever stop our obsession with creating heroes. Why are we so quick to put individuals on such a pedestal where they are deemed to be beyond any criticism?

What makes it funnier is that the same individual has time and again given reasons to doubt that his economic expertise is not free of political agendas. But somehow he is free to do so, but we, the mango people, are not allowed to question his motives.

[buzzy_boy]

As a neutral, and someone who is directly impacted by this policy, here's my take on the policy:

1. I'm totally supportive of well reasoned measures to increase employment opportunities.
2. I have a lot of respect for Mr. Rajan, and the work that he did to deal with the NPA issue in PSBs.
3. Mr. Rajan's arguments taken at face value, does seem shallow. We can't expect companies to do high level value manufacturing from the very beginning. I couldn't see anything wrong in taking a phased approach - with focus on low level manufacturing at first.
4. However, historical evidence (from the IT services industry) shows that the transition will take years.

Still, I believe that the government could do better by:

1. Explaining why ban vs. impose a duty of say 7%
2. Explain their take on the opportunity cost issue raised by Mr. Rajan.

Overall, I am supportive, but honestly the govt. should inform/explain the decision making process in much more detail.

[SmartCat]

Originally Posted by buzzy_boy

Overall, I am supportive, but honestly the govt. should inform/explain the decision making process in much more detail.

This post should answer most of your questions:
https://www.team-bhp.com/forum/gadge...ml#post5599711 (Government restricts the imports of laptops & computers. EDIT: Order suspended till 1 November 2023)

Govt cannot be more open about this because putting import duty & laptop/smartphone import bans is against the spirit of WTO agreements. But we are doing it anyway because it is in India's interests. And also, countries like China regularly find ways to skirt around their WTO commitments. So we are just adopting the China model of getting around restrictive rules.

And also, it does not make sense for Govt to say "We are putting a gun to their PC makers' heads to ensure that they fall in line". So you have to read between the lines to understand what is going on.

Hindi speakers will get his line: "Ghee seedhi ungli se na nikle, to ungli tedi karni padti hai"
Roughly translated to: "When you are straightforward and it fails to deliver, crookedness works"

[anivy]

Originally Posted by SmartCat

India's manufacturing exports is $400 billion and services exports is $300 billion.

Please help with the source of this data.

The dashboard of Ministry of Commerce shows the total exports for the financial year 2022-23 at ~451B USD (USD 450,958 million) and the same is reflected on Trade Statistics site as well.

[SmartCat]

Originally Posted by anivy

The dashboard of Ministry of Commerce shows the total exports for the financial year 2022-23 at ~451B USD (USD 450,958 million)

Your link provides the data actually. What you see when we click on your link is 'merchandise trade' (which is manufacturing exports). If you scroll down further on the same page, it will display 'services trade' data (which includes IT/software exports)



We are looking at not too shabby $900 billion (manufacturing + services) exports this year
https://www.hindustantimes.com/india...497100687.html

[Samarth 619]

To be honest, I think Rajan has a point. For example, even for mobile phones, the Make in India is actually "Assemble in India", and the chipsets are designed/made abroad anyways.
Yes, its good for India, but in the long term, not short. That too with a bucketload of assumptions going the best way.
PC Components are getting very expensive after this. Yesterday only, one of my students got himself a basic gaming/stock trading PC for Rs. 2.7 Lakhs, can you believe it? And very uppermid range specs all round, nothing top most, Core i7 12th Gen, not a Core i9. RTX 3060, not 4080/3090. With this kind of Investment, I'm suspecting he'll have to tolerate a low ROI, but only time will tell.
Now tell me, how many businesses will be affected because of computers getting so expensive? And who will cumulatively calculate the effect when businesses gain low ROI?

As far as being political is concerned, people use this as per convenience to downmerit a person. Use this oppostunity to criticise the actual weak points of Rajan's opinion, is it too tough? The logic is almost humorous. "We can't consider him economist, because he's trying to be politician".
Yes, of course, you can't consider me a biker, because I'm trying to be a professor.

By the way, what's so bad about an educated person being political? Or to Rephrase the question, would you rather let an uneducated goon be a minister, or a gentleman who's actually achieved something in life?
What kind of person do we want as our politician anyways? The local big name who bunked classes or never attended college?

To this point, I believe some will think even I'm political. I'm neutral, but whom do we need to prove it anyways? I never even met someone from this forum in person.

[ishekk]

Originally Posted by SmartCat

Ashwini does address many of the points raised by Rajan.

Rajan's questions are valid. From 2013 to 2022 there has been 1400% increase in production(aka assembling) of mobile phones in India. Now we have Samsung, Oppo, Foxconn etc and earlier we used to have Nokia.
If local outsourcing of parts has not yet happened why will it happen in next 2 years. Has anything changed here. Has it be become easier to open & operate factories. Is government encouraging any entrepreneurs here. Forget about chips, even simple high quality plastic cases of mobiles, display glass are not getting manufactured in India.



In case of Micron, 70% of the $2.75 billion investment is coming not from Micron but from the Gujarat government and the Union government. Quoting Rajan from the interview:

Micron says what we’re doing is we’re going to bring assembly and testing of chips to India. So it’s not as if we’ll become independent. We’ll still be importing the wafers, the etching all that will be done elsewhere and maybe we cut it up. But what are we getting? We’re getting 5,000 jobs. We are paying $2 billion for 5,000 jobs. That’s Rs 3.2 crore per job.

What is the counter to this?

I understand that government's intentions are good; it wants to bring manufacturing to India but in a functioning democracy questions are still asked & we shouldn't target the messenger.

Again quoting Rajan:

And finally – and this is where the scheme is so obscure – how did the data on how you pay get determined?
this is going to become a lot like the license permit raj..

That’s where we were talking about the $10 billion [joint venture by] Foxconn and Vedanta. I don’t understand what those guys have what, you know, abilities they have in manufacturing chips which leads to the question again, how are we choosing these guys?

And I would like to ask if Micron would have chosen some other state, would its proposal would still have got approved?

[SmartCat]

Originally Posted by ishekk

If local outsourcing of parts has not yet happened why will it happen in next 2 years. Has anything changed here.

What's different now is the PLI scheme that was launched last year. The target value addition is 30% of value of the phone. Now let's say the target value addition is not met. It is still fine. It is the Govt taking risk like how an entrepreneur does. If you don't take risks and take aggressive & unconventional action, nothing will ever happen. Anyway, the PLI scheme outlay is still very tiny compared to national budget. Small outlay, high probability of returns.

In case of Micron, 70% of the $2.75 billion investment is coming not from Micron but from the Gujarat government and the Union government.

This is exactly what happens in China by the way. It is just borrowing China's playbook. Govt drastically reduces the risk of companies investing in the country, if Chinese Govt deems such an investment to be critical. Also, Indian Govt's share of investment does not mean they will be putting up $2 billion cash. A significant chunk of Govt's share of investment is likely to be giving land for the project, free electricity, setting up infra for water supply & giving water for free, setting up manufacturing facility buildings and perhaps assistance in hiring employees.

And if Govt is investing $2 billion in the project, they are likely to be a shareholder in the project.

Micron says what we’re doing is we’re going to bring assembly and testing of chips to India. So it’s not as if we’ll become independent. We’ll still be importing the wafers, the etching all that will be done elsewhere and maybe we cut it up.

No country is independent. It's just that India will now be a part of the supply chain. Regarding what they will do at Micron is significant or not, I guess we are not qualified to comment. At the end of the day, it could just be a 1st step, with more complex jobs done in India later. Perhaps such more complex jobs needs upskilling. The people problem too is being addressed on the side:

Lam Research Joins US-India Partnership, Will Train 60,000 Indian Engineers In Semiconductor Tech
https://www.businessworld.in/article...6-2023-481560/

But what are we getting? We’re getting 5,000 jobs. We are paying $2 billion for 5,000 jobs. That’s Rs 3.2 crore per job.

This is just a soundbyte without substance right? We are not "paying" per job here. $2 billion is an investment, not expenditure. Also it is very odd and unusual to divide investment by number of jobs. For eg:

- If Kia setups a Rs. 5,000 cr factory and it has 5,000 employees, does it mean Kia is paying "Rs. 1 cr per job" ?
- If TCS picks up a 10,000 seat ready to move in facility on lease, it will have a minimal initial invesmtent (say Rs. 10 cr). Does it mean TCS is paying "Rs. 10,000 per job" ?

Even if we accept this unusual metric as relevant:

- Over the next 10 years, India will be paying Chinese workers the same amount or more via imports. What is more preferable - paying Indian or Chinese workers?
- Politicians/political parties love giving freebies (election promise) using Govt money. And in some cases, it goes into billions of dollars. How many jobs is that creating?

[ishekk]

Originally Posted by SmartCat

Anyway, the PLI scheme outlay is still very tiny compared to national budget.

It's not tiny. Just for Micron, government is spending Rs 16500 cr($2 billion). The entire higher education budget, which produces all those IIT engineers, is Rs 44,000 crore. Please go through the article/interview.

This is just a soundbyte without substance right? We are not "paying" per job here. $2 billion is an investment, not expenditure.

$2 billion is expenditure with zero shareholding, not investment.
Source:
https://countercurrents.org/2023/06/...is-it-prudent/

https://www.newindianexpress.com/opi...s-2595513.html

https://www.newsclick.in/if-chip-mak...ont-deliver-it

Also it is very odd and unusual to divide investment by number of jobs. For eg:

- If Kia setups a Rs. 5,000 cr factory and it has 5,000 employees, does it mean Kia is paying "Rs. 1 cr per job" ?

Applying same yardstick to Kia is not helpful. Its goal is not create jobs but cars.

Politicians/political parties love giving freebies (election promise) using Govt money. And in some cases, it goes into billions of dollars. How many jobs is that creating?

I am not justifying freebies here. This discussion is not about it.

Yes, the money which government collects should be used to encourage manufacturing, infrastructure building etc. Yes this government is more interested in encouraging manufacturing than previous governments. Yes it's not easy to start manufacturing and solution to the problem is not straightforward.

But all this doesn't means we should accept the government's version as it is and accept their generic statements without actually much changing at the groundlevel. E.g we all know so many departments have corruption like customs, excise, delhi police. You tell me how many arrests have been made in last few years to root out this problem. It's business as usual.

[SmartCat]

Originally Posted by ishekk

It's not tiny. Just for Micron, government is spending Rs 16500 cr($2 billion). ]The entire higher education budget, which produces all those IIT engineers, is Rs 44,000 crore.

Somebody else will say: "millions in India don't have access to toilets. why give ISRO $1.5 billion a year?". End of the day, you have to look at state govt's budget and central govt's budget. And look at this investment/expenditure/subsidy on a percentage basis. There will always be some important segment that can do with more govt money.

$2 billion is expenditure with zero shareholding, not investment. Source:

The 1st source is a 'letter to the editor' or 'open letter' type of source. And third source Newsclick is Chinese propaganda website (NYTimes investigation no less). So source 1 & 3 can come up a with a narrative that belittles the project. Meanwhile, the second source confirms that this is what countries like US/Germany is doing. Quoting from the Indian Express article:

The US has announced a USD 39-bn subsidy for companies setting up semiconductor units in the country, and Germany will offer a USD 11-bn subsidy to Intel for a USD 34-bn plant. The Indian government has announced fiscal support of 50 per cent of the project cost to companies setting up chip plants in the country

If Indian Govt or US Govt or German Govt does not want a share in profits, that is just an additional incentive. But GoI will own the assets/infrastructure developed. So it is still an investment and not expenditure/cash giveaway. If you disagree with the above statement, then you are suggesting that Micron will invest $800 million and they can sell it anytime for $1.5 billion or $2.5 billion? No, they cannot. Micron can cash out of only $800 million (minus depreciation).

Micron's press release:
https://investors.micron.com/news-re...-test-facility

Micron will receive 50% fiscal support for the total project cost from the Indian central government and incentives representing 20% of the total project cost from the state of Gujarat. The combined investment by Micron and the two government entities over the course of both phases will be up to $2.75 billion. Government support will help fund the project and facilitate access to essential semiconductor infrastructure and resources to drive innovation and enhance local talent development.

Sure, we can argue that amount spent on training people on semiconductor fabrication is an expenditure. But then, that is equivalent to expenditure on higher education. As a bonus, this expenditure generates instant returns.