Global Economic News

India's Economic Miracle Was Mainly Smoke and Mirrors

March 12 (EIRNS)—Booming India is reeling from high inflation, suggesting the outlook for the world's second-fastest-growing economy is not as rosy as it was, foreign analysts say. The Indian stock market's slide has also cast a cloud over plans by firms to raise a projected US $15 billion Initial Public Offerings (IPOs) this year.

Already, two high-profile firms have pulled their IPOs, including Emaar MGF—a joint venture of Dubai's Emaar, the world's biggest property developer—which abandoned its bid to raise $1.6 billion, citing "indications of a U.S. recession and global meltdown." The IPOs are key to expansion as the Manmohan Singh government plans to raise funds from outside the country to invest in plant and machinery, and in improvements in India's dilapidated infrastructure such as its potholed roads, shabby ports, and unreliable power. Hours of power cuts, even in metropolitan centers such as New Delhi, are reminders of an inadequate infrastructure and an inappropriate location for investment.

While India's economy is better insulated than many other Asian nations from the global slowdown, because it is not so heavily dependent on exports, the present administration in New Delhi had also made sure that much of the country's economic growth is being driven by risk capital, especially from the United States, which is in the midst of an accelerating collapse.

Third-World Treatment at First-World Prices

March 15 (EIRNS)—Medical insurers have found the ideal answer to the dilemma of how to keep profits high with the high cost of health care in the United States: Outsource it to developing countries like India and Thailand. According to the March 24 Business Week magazine, Blue Cross has already made deals with seven foreign hospitals this year, and plans to add more. Treatment at these hospitals will be covered by Blue Cross, which stands to save tens, to hundreds of thousands of dollars per procedure. A heart bypass performed in India costs a mere $10,000, versus $130,000 in the U.S.

While medical outsourcing, euphemistically termed "medical tourism," may be a shock to Americans, it has a longer history in the U.K., where the long waiting times for treatment and fears of hospital-acquired infections have driven many Britons to seek treatment, not only from private health-care facilities within the U.K., but overseas as well, in recent years. Of course, the rich in many countries with poor medical infrastructure have long travelled abroad for medical care. In the past, many of them came to the world-class U.S. hospitals. These days, they are more likely to travel to Thailand, Singapore, or India, where they get more bang for their buck.

A peek at an Indian medical online site speaks volumes. Medical tourism is developing into a multibillion-dollar business, hoping to attract patients from all over the globe. Large private corporate hospitals are the service providers, attracting talent from the public health-care sector in India to staff the expanding health tourism sector, leaving the public sector even more impoverished.

India and many other Asian countries offering medical outsourcing have large public health problems among their own populations: AIDS, tuberculosis, hepatitis B, malnutrition, etc. So why are these developing countries subsidizing the health-care of the wealthy West?

Eurobonds Crisis in Italy

March 12 (EIRNS)—Italian state bonds on March 11 went partly unsold, for the first time since 1999. Of the 7.5 million offered, only 7.1 were sold. Until the early 1980s, Italian regulations mandated the central bank to be the "purchaser of last resort" in such cases, avoiding a falling price of bonds. That regulation was abolished by Finance Minister Beniamino Andreatta, as part of the post-Aldo Moro liberalization policies. Those policies sent interest rates skyward and created the current Italian public debt, which jumped from about 50% of GNP in the 1970s, to over 100% just before the Maastricht Treaty took effect.

Philippines Rice Emergency Reaches Critical Point

March 12 (EIRNS)—The Philippines rice-buying auction failed on March 11, when it attracted less than two-thirds of the volume asked for, at prices that were as high as $745 a ton, a big jump from the last rice auction in January, when the average price was $474 per ton. Under consideration is a request for supplies from the East Asia Emergency Rice Reserve, a stockpile obtained from Southeast Asian countries as well as China, Japan, and South Korea. Ludovico Jarina, deputy administrator of the Philippines National Food Authority, indicated that "We have already communicated to the East Asian partners." Previously, the Philippines had contacted Vietnam, looking for a country-to-country rice purchase.

Japan's Central Bank May Be Without a Head

March 12 (EIRNS)—Japan's Upper House of Parliament, on March 12, rejected by a 129 to 106 vote, the government's nominee, Toshiro Muto, for Bank of Japan head. Serious political ill-will has built up between the opposition, which controls that house, and the ruling Liberal Democratic Party, over the government methods of passing legislation without consultation with the opposition. There are also concerns over Muto's political ties to the finance ministry. Muto was an early advocate of the privatization of the massive postal savings and insurance system under former Prime Minister Junichiro Koizumi—a disastrous policy for Japan. The term of current bank governor Toshihiko Fukui ends March 19.