The silk route still remains jagged

India’s Foreign Trade Policy (FTP) 2009-14 is a half step undone by more omissions than commissions, say anchal gupta and niharika patra, who argue all is not lost...

The term was originally coined by the German geographer Ferdinand Von Richthofen in 1877. It has been considered as the first ever link between the east and the west in recorded history. Its role in being one of the pillars on which the great ancient civilizations of India, China, Greece and Egypt stood is undisputed. It was the panacea to large trading communities who survived because of it. Unfortunately, the silk routes that can lead India back to brighter shores are still blocked. With demand for India’s exports still remaining low than its 2007-08 levels in the biggest markets of US and Europe, the dark skies for India’s trade might take some more time to clear up. However, with certain developments sending a whiff of fresh air in the suffocated dungeons that is India’s exports, the picture gets complicated.

There is no denying the fact that India’s over dependence on USA and the EU for its cheap and labour intensive exports (same is true for services also) has hurt India in the short term as there have been huge job losses in some of the biggest export sectors. According to latest figures released by the Labour Bureau, the job losses amounted to 1.72 lakhs in the April – June quarter mainly in the textiles and gems and jewellery sector with export oriented units accounting for 1.67 lakhs of the same. It must be remembered that the government itself declared that the total job losses amounted to 5 lakh in the October to December quarter last year owing to the meltdown. With varied statistics putting the job losses at different levels, the in total job losses owing to depression can be put in the range of 1-1.2 million including indirect losses.

However, with the first signs of recovery beginning to pour in the last 2 months, it is widely hoped that the trade train of India can be back at full throttle soon. But, the trade picture can be more complicated than Einstein’s field equations at times. With the drop in demand in biggest economies like USA, Japan, EU and slowing down of China, the oil prices went down to nearly US $40 a barrel from its peak of $145 in the middle of 2008.

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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China 1989-2009 Heading for TIANANMEN Square part-II?

The memories are scattered and yet intense in fragments. We (a few young journalists) were sitting inside the decrepit and fashionably shabby Press Club of India in Delhi. The debate was about what exactly was happening in Eastern Europe and China and how Mikhail Gorbachov was bringing radical changes in the world of Communism. The discussion inevitably veered towards China where a group of students had led a protest movement demanding more accountability and more democracy from Chinese leaders. Most of us thought that the presence of hundreds of thousands of protestors at Tiananmen Square would inevitably lead to democracy in China. Just then, a senior sauntered in and gave us a lesson in realism by announcing that tanks had rolled into the square and hundreds of protestors had been killed.

The day was June 4, 1989. The bamboo curtain came crashing down on the Middle Kingdom and censorship ensured that not much was known about what really triggered the Tiananmen Square protests. It is only subsequent research by scholars that revealed why China was ready to explode in 1989. After ten years of rapid growth and growing employment opportunities since 1978 when Deng Xiao Peng unleashed economic reforms, the Chinese economy tanked in 1988-89. The GDP growth rate crashed and unemployment soared. Rapidly rising inflation too added to the woes of the Chinese. Then, there was massive anger at widespread corruption and cronyism in the Communist Party. Educated Chinese started thinking seriously that they were paying a heavy price for the economic downturn while those favoured by the party were having a ball.

The most agonising question that must engage all those who care about the future of the world is: Are conditions in China in early 2009 similar to what prevailed 20 years ago in 1989? The more important follow up question: how intense and widespread will the protests be in 2009? The most important question is this: How will the Chinese State now handle the protests? Will Tiananmen Square of 1989 be repeated or will China ‘manage’ to control the looming unrest by moving towards ‘more’ democracy and personal freedom?

Even die hard supporters of the Chinese Communist Party (CCP) agree that trouble is looming over the horizon. Says, Zhou Tianyang, one of the most well known scholars of CCP, “Unquestionably, at present, we are inward bound to a peak stage of mass incidents. This year, Chinese people may face even more divergences and spars that will test all the more the governing skills of all levels of the CCP and administration.” Incidentally, ‘Mass Incidents’ is Chinese State speak for riots, protests and unrest! Adds Mao Shoulong, Public Administration expert at Renmin University in Beijing, “The social unrest is gathering. It may well prove as the most severe test since 1989.” Such comments coming from within the establishment in China show how ominous the signs are for the Middle Kingdom.

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Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
 

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Coal Market Targets the growing Indian and Chinese markets

China will face stiff competition for coal shipped by Indonesia, the world's biggest exporter of thermal coal, from India where demand for electricity is rising in an economy seen growing around 8.5 percent.

"With domestic prices rising so strongly -- they are basically on par with import prices now -- the likelihood of China being strong importers of thermal coal over the summer is extremely high," said Daniel Hynes, director of commodity research at Citigroup in Sydney

Chinese domestic coal prices rose to the highest level in more than two years last week as utilities stocked up ahead of the summer months, making imports more attractive.

Chinese buyers have already been on the hunt for Indonesian cargoes as well as some Australian coal over the last few weeks to fill requirements.

Indian demand for Indonesian coal is also on the rise, and India's short-term and long-term demand is likely to be a focus. Growing demand for Indonesian coal by India, to fill the widening gap between domestic coal output and demand, is likely to continue, the analyst added, resulting in intense competition between India and China for tonnage. Indian and Chinese companies are also seeking to acquire stakes in Indonesian coal mines to secure their supply, with Coal India , the world's largest coal miner, in advanced talks to buy up to 40 percent of Indonesian low-grade coal producer Golden Energy Mines for up to $1 billion, three sources with direct knowledge of the deal said.

Although India is home to 10 percent of global coal reserves, it is plagued by a shortfall in local supplies as demand has grown rapidly with the increase in coal-fired power plants.

India's coal demand is forecast to grow 11 percent a year, reaching 135 million tonnes in 2011/12 with imports set to make up about 20 percent of its total consumption.

ANTICIPATION OF RECOVERY

The industry will also be closely watching Japanese demand for coal, which withered after the March tsunami took some coal-fired plants offline and forced some utilities to declare force majeure on coal shipments. Some Japan-bound cargoes have been diverted to destinations such as China.

INDONESIA MINING REGULATION

With demand for Indonesian coal ramping up, in particular from China and India, Indonesian coal production capacity and regulations will also be in the spotlight.

Indonesia's coal, generally lower-quality than the coal its neighbour Australia produces, is attractive to Asian buyers seeking bargains, and cheaper freight from Indonesia offers an advantage.

But the lack of infrastructure and some government regulations have depressed production.

"The overall consensus is that production is still under pressure," Singapore-based UBS analyst Andreas Bokkenheuser said.

Indonesia also struggles to deal with a raft of problems including illegal mining and overlapping mining concessions.

In its latest move to clean up the industry, Indonesia's government will audit some 8,000 new mining permits to make sure they are in line with mining and environmental laws.

"For the fifth or sixth year in a row, it's going to be about production, infrastructure and regulations," Bokkenheuser said.

"There will be talk about new land reform, increasing the investment environment in Indonesia -- that will be the primary focus."

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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