The Business Standard writes: “Your favourite car [and] laptop [are] cheaper in New York than in New Delhi.” No kidding. The India-is-cheap meme holds true only as long as you talk about human services. For anything else, it’s not. Pizzas are cheaper in Sofia, microwaves are cheaper in Taiwan, laptops are cheaper in the US, and even relatively highly-taxed England puts India to shame when you compare prices for automobiles and non-grey-market RAM.

For cheaper-to-import items like RAM, cellphones and laptops, the unusually high prices — in a country where the cost of retailing is much lower — can be blamed on the mindset of Indian retailers.

Still thinking along supply-driven market lines, they sell globally substandard items at “affordable Indian prices” and are astonished when they see demand is not high — and why should it be, given that all but the most desperate customers can see what’s on offer isn’t good value for money? Why would one buy, say, 3 megapixel digital cameras for INR 6500-8000 when one can get 4 megapixel cameras for this price abroad? Yet, Indian vendors insist on pricing 4 megapixel cameras at over INR 15000.

To confound things, they sell globally entry-level items at 2X+ markups, thus ensuring that value-conscious buyers stay away or shop abroad. Most egregious example: the $300 Bose noise cancellation headphones cost INR 23000 ($500) at the Bose store in Madras.

For bigger-ticket items, the lack of end-to-end local manufacturing is probably the biggest bottleneck in price reduction. You’d think the big players would build local capacity in a country that has the potential to be a huge market. Think again. The article quotes a GM manager whining about the high duties and “distance” from manufacturing hubs like Mexico. Well, whatcha doin’ importing stuff from Mexico for cars in India? Oh wait, this is the Chevrolet Optra (Suzuki Forenza in the US, Daewoo Nubira in Europe) we’re talking about, and supply-driven markets again indicate that GM can safely pitch it as a luxury family sedan to impoverished Indians; after all you have to earn something like 44X of India’s per capita income to be able to afford one. Hence, especially given that India’s rich are numerous enough for GM to meet their low sales targets, there is no real incentive for them to optimize on price.

I am not going to expect India’s marketplace to improve anytime soon: red tape on the government’s side and lack of a genuine desire to give a good deal to the customer on vendors’ side together conspire to make sure that India is years away from being a consumer nirvana like the US or even China.

I am not an economist; these are my off-the-cuff observations on a Saturday night. Feel free to flame correct me in the comments.

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For this year’s US Presidential Election, the graph to watch is the Iowa Electronic Markets Winner-takes-all market prices graph. Interestingly, it’s been running close to a dead heat these past two weeks. What does the market know that we don’t? (For those interested, the IEM’s 2000 Elections markets have some fascinating data as well.)

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(Via Slashdot) Slate on Macroeconomics and Olympic Destiny:

The model projects such big losses for established Olympic powers — and such big gains for nobodies — largely because of the influence of GDP growth. In the past four years, France and Germany have had comparatively little growth compared with, say, India and Mexico. So, France and Germany are projected to lose medals, while India’s total is expected to rise from one to 10 (!) and our neighbor to the south could win 11 medals, up from six in 2000.

This is all good, but given the paltry sums budgeted for our athletes ($30,000 per athlete actually budgeted — and rampant corruption ensures that what actually reaches them is far less), I’ll eat my words if India’s medals count exceeds five (yes, I know India won its first silver today in double-trap shooting).

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Joshua Allen: Education is not a passive thing that happens to a student, and the more that students realize that their ultimate competitiveness lies within themselves, the more they will be prepared to push the value curve instead of falling for scarcity thinking — and ultimately that benefits everyone.

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USA Today: Pioneer Craig Venter announced that his research group created an artificial virus based on a real one in just two weeks’ time … The project was funded in part by the Department of Energy, which hopes to create microbes that would capture carbon dioxide in the atmosphere, produce hydrogen or clean the environment.

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CBC.ca: Old purple frog danced with dinosaurs.

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Clay Shirky on the NEC list: don’t take products with vanishingly small marginal cost and make them too expensive for your target audience to want to use.

In other news, as I wrote on Sep 5, starting Sep 10, inter-city SMSes will now cost Rs 2 a pop, up 2x the previous price of Rs 1. I wonder what the GSM marketers had in mind: India’s price-sensitive teens/college student market — the biggest users of SMSes — can’t be very happy about this.

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Airtel, along with other GSM vendors, have increased incoming roaming rates to an eyebrow-raising Rs 6.50 a minute. Plans seem to be afoot to raise inter-city SMS rates to Rs 2 a pop too. It’ll be very interesting to see if the very price-sensitive Indian market reacts with decreased use. Considering that trasmitting an SMS inter-city doesn’t cost all that much more over an SMS’ base transmission cost, it looks like the GSM telcos have decided to get into bottom-line-fattening mode after much bleeding over the long-distance wars. And raising roaming rates is a no-brainer, considering that Reliance can’t offer it yet. (I wonder how much BSNL’s roaming service costs?)

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Swaminathan Aiyar on Indian Independence, with a story that’s not usually quoted in textbooks:

World War II converted India from a debtor to a creditor with over one billion pounds in sterling balances. Britain, meanwhile, became the biggest debtor in the world. It’s not worth ruling over people you are afraid to tax. That’s why the British left.

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Worth re-reading: a mid-1998 piece by Paul Krugmann: The Ice Age Cometh.

…suppose that, for whatever reason, the market goes up month after month; your MBA-honed intellect may say “Gosh, those P/Es look pretty unreasonable”, but your prehistoric programming is shrieking “Me want mammoth meat!” - and those instincts are hard to deny.

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