Vinny’s Blog

I am back in US, returned from India. Vacation is over jet lag is not. You read enough about my vacation etc but nothing about economy in India. Let us get started….

So how is economy in India ? Well, it’s definitely not good that much I can tell you. Big ticket items are seeing lower sales and real estate like everywhere else in the world has slowed down quite a bit.

Big ticket items – such as Air Conditioners, Washing Machines, Refrigerators and Dishwashers and some big screen TVs. They are all experiencing slower demand, lower sales numbers. We (me and wife) went into few showrooms during our visit in India to see what’s available and how much does it cost, we could then compare cost in India for the same item, with cost in US. Even before I give you this cost break down first interesting observation that I had that day (it was a weekday ) was that the showroom we visited had 11-14 sales people and there were only 2 serious buyers in the shop me and my wife. During our 40 minutes stay in the shop only 4-5 other customers visited and I did not see any of them buying anything.

It’s not easy to compare cost because products offered in ASIA are slightly different than those offered in North America. ASIA has PAL TVs and North America uses NTSC format for Televisions. However TVs going digital and HD so, with these new formats old differences are taking a back seat ( I think).

TVs that are manufactured in India by foreign companies do well in pricing when compared in India and abroad. But those which are imported from abroad seems to be expensive.

Let us take an example of Samsung TV. Samsung 6 Series TV, 46 Inches in India costs about 133,000 Indian Rupees given a conversion rate of 48 Rupees to a Dollar prices comes to USD 2770 for this TV in India.
http://compareindia.in.com/specification/televisions/samsung-la46a650a1/34611

Same TV in US costs only 1527 USD.
http://www.gosale.com/4939619/samsung-ln46a650-46-1080p?gclid=CPD-1cO87pYCFQrFGgodHhqUrA
Same TV costs almost $1000 more to purchase in India. If you’re wondering why in my comparison it’s not the same model number then my answer is that model sold in ASIA is named correctly using LA, L for LCD and A for ASIA where as the same series 6 model sold in US is named as L for LCD and N for North America. Rest of the number a650 is same and then again what AL means in the last on ASIAn model I don’t know. But you still get the point ! I don’t think Samsung re-invented their Series 6 model line for US or North America so in my mind the comparison is fine.

With these type of comparisons seems to me that electronic items are expensive to purchase in India. Thanks to the government, amount of excise duty, import duty, landing charges that are put on foreign merchandise is huge. I think it’s done on purpose to keep products made locally in demand (cost advantage).

Refrigerators in this case seems to do fine. Cost of Samsung refrigerators in India is 132,000 Indian Rupees which comes to 2770 USD.
http://sumaria.co.in/product_info.php?cPath=214_38_39&products_id=2544

Same refrigerators in US costs 2699 not bad.
http://samsung.amroyal.com/samsung-rm257acrs-25-cu-ft-four-door-refrigerator-freezer-with-quatro-cooling-in-real-stainless.html

Why is that ? My guess is Samsung may be the brand but it’s possible that it’s being manufactured locally in India and/or it has been exempted from being a luxury item and taxes on them are reduced.

Check this news article that indicates that I might be right….

Samsung’s existing manufacturing facilities in India include production facilities for flat colour televisions, including LCD TVs, colour monitors, refrigerators, washing machines and GSM handsets. The company’s R&D operations in India include hardware R&D at Noida as well as software R&D development centres - Samsung India Software Center (SISC) at Noida, for consumer electronics products and Samsung India Software Operations Unit (SISO) at Bangalore, for telecom software development. Source: chennaionline
http://www.chennai365.com/news/samsung-unit-launched-at-sriperumbudur/

From the article…..The Company is manufacturing 21? and 29? flat and ultra slim models as well as LCD models in the screen sizes between 19? to 32? at this facility.

So the bigger TVs could be imported hence the price difference.

In my previous trip to India series I was doing a comparison for cars. Honda Civic costs approx 15,00,000 in India (on road or may be a little bit higher) or approx 31,000 USD.
http://www.carwale.com/new/CarDetails.aspx?car=1206
By comparison Honda Civic in US costs only 15,000 USD or approx. 17,000 on Road.
http://www.edmunds.com/honda/civic/2008/index.html
In other words everyone in India who is driving a Honda Civic is actually worthy of driving a Mercedes in US. Check this out…

http://www.edmunds.com/mercedesbenz/cclass/2009/index.html
Not to mention that car loan in US costs approx 7% where as in India it costs approx 13%.

Seems to me that imported products are artificially made expensive in India by it’s government to keep the consumption low and keep the locally made products in competition by giving them a price advantage over imported ones.

Same thing goes with furniture recliners cost approx. 550$ in India or 26,000 Rupees.
http://www.godrej.com/GodrejNew/GodrejHome/OurCompanies/GNB/ConsumerProducts/Furniture/FIGH/LivingRoom/Sofas/Recliners/ReclinerWales.htm

Similar one in US costs about half as much.
http://palacedecorator.com/f7729.html

Problem is people in India don’t make as much money doing similar jobs as they do in US. That is why jobs keep moving to India. However materialistic things are either more expensive or cost the same in India as they do in US. Something for your to remember.

If Indian government ever let go of the controls (tax ) just imagine what will be the lifestyle of Indians at the same time if taxes are increased or prices shoot north in US imagine what will happen in US. With prices this low people are defaulting with higher price current lifestyle will sure be gone away fast.

Biggest problem if one wants to shop around in India is price information, it’s not available on the net. Stores/Showrooms will advertise in the local news paper about the price but they will never put that info on the net. You may call the store over phone and they won’t tell you the prices.

Only way you can find out price for sure is by visiting the store and that takes too much time………..

Anyway if you’re planning to visit India or move back to India plan your budget see what you can and cannot bring back to India from abroad. But it all requires work…………in case you want to save money.

Here is the kicker……..education that should be cheaper in any country is most expensive in US however (in comparison) it only costs pennies to educate people in India.

Now how about job market ? Credit ? Overall economy…Etc. well it’s all slowing down and India is finally getting a taste of being a global player.

Demand slump: Tata Motors may shut Pune unit for 6 days
6 Nov, 2008, 2134 hrs IST, PTI
http://economictimes.indiatimes.com/Demand_slump_Tata_may_shut_Pune_unit_for_6_days/rssarticleshow/3682623.cms

US financial crisis may hit India’s exports in Q4: Deloitte
6 Nov, 2008, 2037 hrs IST, PTI
http://economictimes.indiatimes.com/US_financial_crisis_may_hit_Indias_exports/rssarticleshow/3682498.cms

and it just did…

Meltdown hits home: Exports dip 15% in Oct
11 Nov 2008, 0230 hrs IST,TNN
http://timesofindia.indiatimes.com/Business/India_Business/Meltdown_hits_home_Exports_dip_15_in_Oct/rssarticleshow/3697331.cms

Diwali consumer goods sales fall 20 pc
http://www.expressindia.com/news/ie/daily/19991111/ibu11027.html

—It was largely believed that India escaped US Subprime mess….well it might have but now it’s on it’s way making it’s own subprime mess. Read ahead and if all this sounds familiar then you know where it’s heading……….Indian subprime in making..

Residential developers offering freebies, discounts
7 Oct, 2008, 1944 hrs IST, PTI
BANGALORE: Rising property prices and increased interest rates, coupled with a demand-supply mismatch has brought down the overall affordability of
residential properties in the country today forcing developers to resort to offering feebies and early bird discounts to arrest fall in sales, according to a recent report.
http://economictimes.indiatimes.com/Markets/Real_Estate/Realty_Trends/Residential_developers_offering_freebies_discounts/articleshow/3570853.cms

RBI governor reassures depositors
11 Oct 2008, 1222 hrs IST,PTI
WASHINGTON: Reserve Bank of India Governor D Subbarao has said that the Indian banks have some exposure to the distressed financial instruments, b
ut this is very small compared with the overall size of the business. ( Watch )
http://timesofindia.indiatimes.com/Business/Intl_Business/Indian_banks_have_little_exposure_to_distressed_assets_RBI/articleshow/3583576.cms

(Similar actions by feds your deposits are now insured upto 250,000$ )

India emergency cut in interest rates
By James Lamont in New Delhi and James Fontanella-Khan and Varun Sood in Mumbai
Published: November 2 2008 19:23 | Last updated: November 2 2008 19:23
http://www.ft.com/cms/s/0/7cbfde96-a911-11dd-a19a-000077b07658.html?nclick_check=1

( Just like feds did in US, emergency rate cut…..)

Govt considering SPV to buy bad loans of banks
Sunny Verma
Posted: Nov 03, 2008 at 0213 hrs IST
Updated: Nov 03, 2008 at 0213 hrs IST
http://www.financialexpress.com/news/govt-considering-spv-to-buy-bad-loans-of-banks/380660/
( Just like feds did with 750$ package bought bad assets from US banks.)

Prime Minister in India requests companies to stop layoffs.
PM to India Inc: Refrain from lay-offs
http://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=&id=cfb8fec6-5bfc-4200-aa81-d52f654c037a&&Headline=Prime+Minister+to+India+Inc%3a+Refrain+from+lay-offs
(in US government urges not to send jobs abroad so locals can remain employed)

As you know layoffs lead to un-employment and then it leads to no income and then things just get worse…as people may not be able to payback their loans.
‘Banks may see rise in bad loans’
Mumbai, Nov. 6 Mr O.P. Bhatt, Chairman, State Bank of India, has said that he expects no slowdown in credit growth in the current fiscal, but banks may see a rise in their bad loans due to moderation in the economic growth.
http://www.thehindubusinessline.com/2008/11/07/stories/2008110752570100.htm

– Let us look at job market now……..

Air India seeks to cut 15,000 jobs
By Amy Kazmin in New Delhi
Thursday Oct 16 2008 08:20
http://us.ft.com/ftgateway/superpage.ft?news_id=fto101620080930556651

Investment banks begin to cut jobs in Indian arms
10 Nov, 2008, 1126 hrs IST,George Smith Alexander & Mahima Puri, ET Bureau
http://economictimes.indiatimes.com/Investment_banks_begin_to_cut_jobs_in_Indian_arms/rssarticleshow/3692603.cms

Goldman Sachs cuts India FY09 growth to 6.7%
10 Nov 2008, 1341 hrs IST,REUTERS
http://timesofindia.indiatimes.com/Business/India_Business/Goldman_Sachs_cuts_India_FY09_growth_to_67/rssarticleshow/3694996.cms

India shares drop 6.6 pct on global recession fears
Tue Nov 11, 2008 5:07pm IST
http://in.reuters.com/article/topNews/idINIndia-36444020081111

Sharp rise in Indian investors’ suicides
By James Lamont in New Delhi
Published: November 7 2008 18:33 | Last updated: November 7 2008 18:33
The global financial crisis is taking its toll in India’s cities as some despairing investors and stockbrokers seek
refuge from their losses and debt in suicide.
http://www.ft.com/cms/s/0/da86bb36-acf8-11dd-971e-000077b07658,dwp_uuid=a6dfcf08-9c79-11da-8762-0000779e2340.html?nclick_check=1

And if this is not bad enough………….

India’s federal and state fiscal deficit is likely to top 7 percent of gross domestic product, one of the highest in the world, and the federal deficit is already projected to blow its 2.5 percent target, leaving the emerging giant with little leeway to ramp up spending, analysts said.
http://in.reuters.com/article/businessNews/idINIndia-36423820081110?pageNumber=2&virtualBrandChannel=0

This is bad time to have deficits…dear !

-More later…….

[views and opinions expressed here are mine and you need not agree with them. You should not make any financial decisions based upon material you read on this website. For that you must contact an expert in the relevant area of your need.]