“Publicly available statistics from the Indian government show that 166,304 farmers in India have committed suicide over the last ten years. The death rate has been increasing throughout the past decade, to the point where today there is a suicide every 30 minutes.  More shockingly, these figures are understated as they neglect the inclusion of women, who are not recognized as landowners and therefore not considered to be farmers.”

 Read more here.

Comment:

Problems in sanitation and water in India were my first interests when I began writing as a citizen journalist. But the farming crisis is something I don’t completely understand. Obviously the number of suicides among farmers, who constitute a sizeable proportion of the Indian population, would be high in a country with a population of a billion plus. What I need to research is the relationship they have to the rate of suicide in other segments of the population, in other states, and at other times.

Here is more on the subject from Sainath, an Indian journalist who has won international accolades covering the story. Sainath is a big critic of the neo-liberal growth oriented model of development in India between 1991 and today – the so-called “liberalization” of India.

Arguing the opposite, here is Jagdish Bhagwati, Columbia University professor, and a well-known advocate for liberalization, whose lucid and very well-written books I referenced for the chapters on globalization in “Mobs, Messiahs and Markets.”

I will be posting more as I read.

(An aside: This subject is not at all disconnected from my interests on the American political front, since the same players in the banking scandals – Goldman Sachs et. al.. – have been investing heavily in Indian real estate in agricultural areas.  That’s the plus side of being a generalist, in an age when specialization is the norm. You can connect the dots better and faster.  One example. The only reason I was able to see that the torture of women at Abu Ghraib  wasn’t an ‘Arab street rumor’ was because I had seen at first-hand how the American legal, medical, and carceral systems can operate when it comes to people without money or clout.  I say “can” because this is not a blanket indictment of the system, which still has safeguards and balances beyond what exists in most countries. In fact, given the sustained nature of the state’s assault on the tradition of individual liberty here, I’m surprised how well civil society still functions, however crippled and muffled by the federal government.

Back to India. The India “growth” story always had a good deal of varnish in it. Anyone who lives there or visits often knows the downside of having huge multinationals parked in your back yard – skyrocketing rents/land prices, water shortages, electricity “brown-outs” that go on for hours in the summer. There have some been good things too, of course. Jobs, more and better goods and services, better roads and communication. Nevertheless, growth is a much more complicated story than the investment community would have you believe. 

From AP:

“Manufacturing activity fell more than expected in December, hitting the lowest reading in 28 years as new orders and employment continue to decline.

The Institute for Supply Management, a trade group of purchasing executives, said Friday its manufacturing index fell to 32.4 in December from 36.2 in November. Wall Street economists surveyed by Thomson Reuters had expected the reading to fall to 35.5.

Component readings of the index hit historic lows. New orders fell to their lowest level on records going back to 1948. Prices fell as the number of respondents saying they had paid more in December than in November sank to its lowest monthly reading since 1949.

Any reading for the overall index above 50 signals growth, while a reading below 50 indicates contraction.”

From a comment at Follow the Money blog on the dollar’s sharp move up this fall, during the crisis:

“One of the interesting patterns in the events of this year is US banks using margin calls and collateral liquidations to export deflation globally. They appear to coordinate the margin calls, for example, the prime brokers MS, GS and JPM all raised margin by more than double on thousands of hedge funds on 1-2 October while they were simultaneously railroading the TARP through the House. Margin was due two weeks later, coinciding with a massive sell off in quality assets worldwide, especially gold and oil.

The result is deflation overseas much worse than in the US, particularly to emerging economies where liquidity was more concentrated in the few big players and the hedge fund/private equity funds.

As they have forced sell-offs abroad, they repatriate the margin or collateral proceeds, driving up the dollar and inflating the relative performance of US assets.

Jobbing backwards, it was clear this margin deleveraging occurred in January, March and October – at the very least. As prime brokerage is largely unregulated and data is unreported, this happened outside the normal visibility of the markets.

It would be interesting to know how closely involved Geithner and Paulson are in these margin calls.

It will also be interesting to watch what happens when the deleveraging hits its limit, as the dollar will then be much more difficult to fluff….”

Comment: 

Looks like the dollar is on its way down now.

Some argue that the Indian market will be only temporarily affected by the financial crisis because Indian banks had no exposure to the sub-prime crisis.

But it isn’t so clear-cut.

As to the banks:

In the first place, at least one affected bank, HSBC, the world’s fourth biggest bank, with a market value of more than $200 billion, is invested in the Indian market.

HSBC ended the year up by 21%, apparently because the $17 b loss it took on subprime in the US (98% loss) was made up by its gains in Asia. But HSBC has had other problems, including litigation rising from the subprime hit and another hit from its exposure to Madoff’s fund.  What’s more, Knight Vinke, the activist investor based in Monaco, claims that HSBC”s losses would be twice as high as it admits to if it followed the same accounting rules as its rivals. (Shades of G Sax).

HSBC, headed by Naina Lal Kidwai (more on her at my blog in a post on Indian women business leaders), is also focusing rather heavily on India, with plans to penetrate the insurance and investment bank business.

Looks like it doesn’t have than much else profitable about its other ventures.

HSBC isn’t the only one.

There are a number of other banks described as actively involved in or interested in the Indian market – among them, Fullerton India and Stanchart, according to this piece in Sept 2007 in The Business Standard.

In the second place, subprime exposure isn’t easily ascertained at all, since the risk is separated into different levels and rebundled in rather opaque ways.

Thirdly, we cannot know for sure that there is no corruption involved when the Indian government denies that any banks have exposure.

Fourthly, Goldman Sachs and other banks and funds have been investing quite a bit in the Indian commercial market, so there might be an exposure there, apart from what is or is not present in the residential real estate market,

Besides the banks, there are other economic factors:

Foreign Institutional investors (FII) are only one part of the picture. So the fact that they have been regulated or may have played a smaller role than a worst case scenario doesn’t dispose of the problem of contagion.

World markets affect India in other ways, as Susan Thomas points out in the Economic Times.

1. Many Indian companies are multinationals themselves and produce in and export to foreign countries.

2. Many large Indian companies, like Infosys, are heavily dependent on exports. When they are affected by world markets, they pass on the volatility to their customers. Often this influence is disguised by the existence of intermediary companies.

3. Producer prices tend toward parity across the globe, thus affecting the industries buying products and those industries’ share prices.

No surprise then that Indian industrial production has fallen for the first time since 1992, a predictable consequence of the flight of foreign investors from the stock market, dampening of industrial production, fall in exports and decline in domestic demand… among other things….

Notably, India stock exchanges was the worst performing of the emerging market exchanges in February 2007, a situation quite different from the drop in 2006.

On the plus side: fundamentals remain good and liquidity is strong

But with the worsening news on all fronts, and the latest terror (?) attack in Mumbai, the hope is a little tinged with fear.

Writes Spencer Hahn:

Every week that I get The Economist (it is a free subscription through having tons of frequent flier miles), I know exactly what the editorial, entitled Leaders, will say. This week is no exception.Here’s my favorite passage: “This is a time to put dogma and politics to one side and concentrate on pragmatic answers. That means more government intervention and co-operation in the short term than taxpayers, politicians or indeed free-market newspapers would normally like.”

They have the nerve to call their publication a “free-market”! This reminds me of the lead-up to the American invasion of Iraq, which The Economist enthusiastically supported (“No war should be entered into lightly, or hastily, or on a slender pretext. In this case, however, none of that applies.” Leader, March 13, 2003).

Whatever the circumstances, you can always count on The Economist to toe the establishment line, while broadcasting its free-market “credentials.”