Wednesday, February 25, 2009

The great Indian fiscal mess from the dream team

India compared to other growing economies of the world must be doing better, but it is not so. India being import driven must be the least affected nation in the existing crisis. However, there are lots of internal problems that got magnified by external factors.

Recently, the Comptroller and Auditor General of India (CAG) published a report lashing out at the UPA Govt led by the dream team - Manmohan, Montek and Chidambaram. The dream team didnt do anything good, but ended up making things worse. For the first 3 years of their governance, there was a remarkable fiscal deficit management, much better than the previous NDA govt led by Vajpayee. However, inflation levels was not controlled and this was mainly due to food distribution problems and hoarding by private players. This created a very bad atmosphere and for the first time we imported wheat from australia. Adding to the woes, Govt discouraged small and medium scale businesses by diverting all the money to farm loan waivers which ultimately was caught in corruption. Although banks were involved in disbursal, there were too many rules that excluded a vast majority of farmers. This led to growing fiscal deficit.

Adding to this when signs of global recession began and money was slowly going out of India, govt began to increase interest rates and CRR. This led to increase in inflation rather than decreasing it. When things became worse, Govt followed FICCI to reduce interest rates and RBI began to cut CRR thereby infusing more money into the system. However, till then FDI levels were too good that protected us.

Once the global recession deepened, FII (direct money) was sucked out of the country that wiped away millions of investors assets. Then FDI slowed. Consequently, govt did nothing but allowed things to worsen. When both Europe and US fell into deep recession exports took a deep hit and govt did not do anything to help them. Jems, jewelery, apparel, textile, construction segments took a very bad hit. Nearly 5 million people lost jobs in these sectors. The infrastructure and road highway projects got entangled in issues like how contracts must be signed and executed. This delayed the allocated money spending. At one time industrial growth began to go negative after almost 10 years. And now, in the recent budget, govt decided to increase more money on social sector which is going a waste due to corruption. All this to win over farmers votes. The proposed tax cuts in excise and customs duty is going to do no better than take away money from the government.

These things have led to a big mess whereby fiscal deficit - one of the main strong macro economic factors to go very high as high as 10% of GDP which is the level of 1991 when India began to face its worst crisis. This is what you expect from the dream team. The reality of going 10 years backward while dreaming of going 10 years forward. All the claim of 9% growth is not rosy. Inflation was very high, consumer spending was low and income flow was low during this period. Now, when the growth is coming down instead of going up with the decrease in inflation, there is no confidence in the Indian consumer.

If fiscal deficit is not reduced, then we will surely end up in 1991 crisis. What are the ways of getting out of this mess?

I am not an economist, but can say that the govt must carry out disinvestment. By doing so they can generate billions of dollars domestically without even getting a dollar from outside. This will enable existing PSU to be competitive and also increase money flow into the market. RBI need not then intervene in manipualting interest rates. The same money could also be used in infrastructure by giving incentives to developers who finish projects within deadlines like tax breaks, bonus pay etc. The additional money can then also be used for other basic social programs. This way the govt need not depend on existing FDI resources to control the economy. Tomorrow, if for some reason FDI stops, india will be shattered. The Swadeshi approach will help us a lot. Govt should cushion export sector by giving financial support and take steps to increase consumer confidence domestically. Our banks are strong and they will continue to do so. The new rules of FDI policy will open doors for money, but will create competition which the country is not prepared unless roads and electrcity are in place. The govt must invest more in the private sector.

The foolish spending the govt is doing through the bureaucratic process neither helps in solving the problem nor helps in fiscal management. Govt is hiding a lot of things as claimed by CAG report as it is not accounting how it plans to spend all that it has claimed for.

Wednesday, February 4, 2009

Photo Gallery of Delhi metro and Metro Musuem

Pictures from the year 2008

When I heard the news that Delhi metro Corporation Limited opened a musuem dedicated to the success of Delhi Metro, I was surprised. Does Delhi metro really require a museum. I later realized and asked myself, "Why not?". Isn't it great that our country has an infrastructure that is making not just SE Asia envious, but also London? Isn't it great that Delhi metro is being executed with such dedication that perhaps no infrastructural project in our country ever (since 1947) has witnessed.

Delhi Metro is changing the lives of Delhites. The Chawri Bazaar station is a breakthrough. It is the 2nd deepest METRO station in the world. By 2010, it will be the 3rd largest in Asia. The fares are the cheapest in the world. Most of its coaches are being built in Baroda (Gujarat).


This picture is of Chawri bazaar station. Don't worry about the outside. One should go inside the station. It is extremely clean.

Delhi metro has now got a dedicated bomb disposal and diffusal squad, 24*7 call center, centralized operating center, a dedicated office, new rules just for Delhi metro managers to collect spot fine for any violation/mess. So, far cleanliness has been upto the mark and whenever there has been news of bad maintenance, swift action has been taken.

DMRC has learnt to change and rectify people's complainsts. Here is the series of media news that shows how DMRC has been very effective.

The above headline was made after complaints were received of people overcrowding and not following simple queue formations and easily slipping onto the tracks. Now, steel girdles have been put in such a way that doors open only between the gaps. This eliminates people slipping onto tracks to a very good extent. Simple queue formations are not practised by a vast majority of us. However, on receiving complaints, DMRC sent special squads to help do this (Sometimes, I wonder why we need someone to teach us basic things!!)

Later, Metro began to collect fines on the spot and no one can complain. The managers have been complete rights to collect fines.

So, here are the pics of Metro musuem opened in late 2008.

Photo courtesy: google,, timesofindia and hindu

Delhi metro now connects North and East Delhi

Delhi Metro which is creating headlines everyday in India is not only a success, but also an inspirational story. The single most important reason is that it is being executed with extreme dedication and well ahead of proposed deadline. In fact, the completion of Phase - 1 in 2005 was itself a miracle because it was supposed to be opened by 2008.

After connecting South and central Delhi, Metro now has connected North and East. The East line extending upto Dilshad garden (border of Delhi) was opened last year. Now, today the North line to jehangapuri which passes through Kingsway camp, vishwavidyalaya and other stations was open to public. This is enormously going to help students of the university and the surounding areas. This line was opened 10 months well before the deadline while the eastern one was done 6 months before the deadline. WHAT A PACE!!!

This is what Times of India article quotes,

"The 6.36 km long extension will ferry over 1.51 lakh commuters by 2011 and will add five more stations to the existing Line 2 from Central Secretariat to Vishwavidyalaya. The line runs underground till the next station at GTB Nagar, after which the rest of it is elevated. For better crowd management, the entries and exits to all stations will be uni-directional, which means one staircase will be reserved for people to enter while another on the same side for those exiting.

What sets the elevated stations of this new extension apart from other Metro stations in the city is that they are all "hanging'' from the sides of the bridge. The stations have been designed such that they are all 24-metres wide. Of this, nine metres is a full structure that stands tall in the middleof the road, on the central verge and from the ground level itself. On the upper levels, the station building extends about 7.5 metres from each side, with no pillars connecting to the ground. So, when it is seen from the road, it appears like the sides of the building are hanging from the central structure. The changed design leaves scope for widening the road in future as well.

With opening of this extension on the Vishwavidyalaya side and those to Badarpur and Gurgaon from the Central Secretariat side, Line 2 will become the longest line on the Metro. Also, DMRC has plans to extend this line further from Jehangirpuri to Badli."

The pace at which Delhi metro is being aggressively executed is faster than that of Shanghai or any world metro project. As of now, everyday Delhi metro crowd is 8 lakh. Here is a picture comparing Delhi Metro with all other major metros of the world.

If you observe the chart carefully, Mumbai has 61 lakh at any given day using the old local trains, while other major cities have 6 or lakh people. Going by area wise, Hong Kong has 211 km. As of now, Delhi is 75 km. By 2010, it will be 200 km. By 2020, it will be 400 km - largest in the world.

By 2010, Delhi metro aims to cover Haryana, borders of UP etc. And for sure, it will be done well before 2010 just going by the track record.