Weekend reading links

1. Livemint reports that thermal plant capacity utilization levels have touched lows last seen 15 years back. It points out that while capacity addition grew at 13.7 annually in the three years to 2015, consumption grew at just 6%.

The weakness of the consumption may actually be grossly understated by the growth figures, which in 2014-15, was an apparently healthy 8%. In the Indian electricity context, where demand is heavily suppressed by load-shedding and diesel and other high cost generation, any increase in demand is a mixture of both reduction in suppressed demand and actual increase due to new economic activity. In fact, contrary to the CEA figure of 4%, the rating agency ICRA estimates the true power deficit to be about 15%. Therefore, the headline figures are likely to be an over-estimate of the actual demand growth.

2. The boom in engineering college seats, which increased by over 250% in the 2006-07 to 2012-13 period, has burst. The AICTE estimates that nearly 600,000 of the 1.67 million engineering college seats in the country's 3470 engineering colleges may have to be shut down. More on the carnage in technical education,

Educational institutions have sought the AICTE’s permission to close down around 1,973 courses in technical subjects, citing a poor employment scenario and flagging student interest in 2015. The regulator has allowed the discontinuation of 757 such courses this year... Of the 757 technical and professional courses or departments that have been allowed to shut, the overwhelming majority of 556 were engineering courses, followed by 89 in pharmacy, 57 in computer application and 54 management, according to the regulator. In addition, some 83 colleges, including 46 management and 31 engineering colleges, have closed down so far this year. As much as 45% or 345 of the technical education courses closed so far this year are in Telangana and Tamil Nadu alone.

This is a timely reminder about what can happen when things grow faster than the system can support.

3. Livemint points to this research report by brokerage Nirmal Bang which finds India's Gross Financial Savings (GFS) to have touched a 25 year low in 2014-15 and is declining further,

According to the Reserve Bank of India (RBI) data, NFS of Indian households increased from 7.4% of GDP in FY14 to 7.7% last year. Although it is the highest level in the past four years, it remains way below the average of ~10% in the post-liberalisation period. The increase in NFS was primarily driven by the collapse in financial liabilities, as GFS fell to 9.8% of GDP, marking its lowest level in the past 25 years. A detailed look at GFS shows that households increased their exposure to risky assets (up 76% YoY) and long-term safe assets (up 25%), while their savings in deposits (on incremental basis) declined 25% in FY15. As risky assets account for only 4% of GFS, increased exposure to shares and debentures failed of offset the negative impact of deposits (which account for ~50%), as a result of which GFS fell last year. While NFS was up in FY15, the collapse in financial liabilities indicates lower physical savings, which forms a larger portion of total household savings. Consequently, the latter may have been lower in FY15. Not only this, a look at leading indicators reveals that GFS may have declined further in FY16.Incremental bank deposits are down ~22% YoY in the first five months of FY16, while currency holdings slipped by ~25%. Moreover, addition to assets under management of mutual funds was also down ~8% YoY in April-August 2015. Overall, households’ (gross) financial savings are most likely to have declined further this year.

4. Revealing Larry Summers quote as told by Elizabeth Warren,

After dinner, “Larry leaned back in his chair and offered me some advice,” Ms. Warren writes. “I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People — powerful people — listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders.

5. Fascinating article on the heavily subsidized Japanese rice farming sector and the JA-Zenchu rice farmers union, which has campaigned to limit imports, and keep out corporate farming,

Since the 1970s, Japan has effectively paid farmers not to grow rice, the so-called “set-aside” programme that has used hefty subsidies to encourage an ever greater proportion of Japan’s 2.5m hectares of rice paddy to lie fallow. In 1971, some 541,000 hectares were out of use. Today, the total stands at just over 1m hectares. “Even at that level of paddy fields out of use, JA is finding that it is still too small to maintain the desired price because demand is continuously declining. Also, rice farmers are reaching the limit of how much area they want to set aside: for emotional reasons, they want to keep on farming rice and are too old to learn the completely different skills of growing barley or wheat.

6. Doesn't this cartoon reliably caricature the hyper-sensationalistic, night-time news television in India?

7. The latest MGI report on gender disparity and economic growth shows that India can raise its incremental output by about 16%  or $ 0.7 trillion by 2025 if it merely matches the increase in female labor force participation rate of the fastest growing country in the region.  

India sits with Middle East and North Africa in its gender disparities. But increasing women's workforce participation would, more than enabling public policies, require large-scale social transformation on a scale equivalent to that which led to the weakening of caste barriers in Indian society over the later part of nineteenth century and early part of the twentieth century.