Get Indian Economy Back on Track

India a land of billion people is a wonderful country in the world. Very few countries in the globe has absolute democracy and India being one among them. Though as a country it resembled some of western countries in politics but India has its own culture and history dating back to per-historic ages. Consumerism was an unheard term in India till 1990.  The current Prime Minister who was then the Finance Minister of the Country liberalized the Indian economy. This according to many is golden age and good time for India. But to me this is the starting of downfall of this mighty country which was unconquerable even by the Alexander the Great. I feel this is a modern way of imperialism.

Looking back 20 years since opening up of Indian Market the out come is no different than it was prior to 1990. There are still same amount of poor and at places it is even more. Similarly there is more crime now than in 1990. I cannot cite a resource here because back in 1990 there was no record keeping of crime in India but I can quote Wikipedia which kind of put the crime comparison between 1953 and 2006

http://en.wikipedia.org/wiki/Crime_in_India

In this article if you see only burglary is the only crime that has gone down rest every thing has gone up and especially murder, and riots have gone up 100 folds. Does it not alarm a bell in you mind. I am not here to say all these crimes are because of liberalization but I am trying to stress here is liberalization is one of the reason. How do i say this? Because when India was opened up for foreign companies the home grown companies and industries are not well developed to compete the global corporations both monetarily and technologically. This had led to huge destruction of wealth at lower end of the spectrum. Some could argue that there was and is a huge amount of job creation in this period. 

Next Big Thing India can do

The economy in the US has started turning around. There are still problems that needs to be addressed before US can fully stand on there legs. Europe is reeling under pressure except for few nations like Germany, and the Scandinavian countries. There a huge negativity exists in the US which we can see in the news daily about China. People in the US wants manufacturing jobs back to their country, but what can we do about it. We can do many things around this.As a country we need to define our manufacturing policy. If you happen to read the new paper recently Philippines is taking over some of the IT and BPO jobs. We being young nation need to get out of this hangover on IT services and get on to Manufacturing which  will have lasting impact on our economy. We the People of this great nation should force our government to adopt a manufacturing friendly policy. Some of the things Govt can do in this Budget according to me are

1. Give tax break to manufacturing for 10 years
2. Raise Tax on IT services from 0 to 1 %
3. Invest on Infrastructure not just telecom but Road, Rail, Water etc
4. Root Corruption out (For this we need to change Govt. Congress is the problem)
5. Encourage small business
6. Break Big Business.
7. Develop internal economy before opening up (Air Lines, Retail etc)
8. Encourage Indian Companies to acquire more companies abroad (not just ONGC, but more banks, engineering etc)
9. Set up Sovereign wealth Fund and acquire or invest on companies that are strategic to country
10. Device a plan to start manufacturing our own Aircraft and Fighter jets and depend less on foreign procurement.

 If we as a country start implementing some of these enormous amount of permanent jobs will be added and huge up-lifting of society will happen. This will automatically enable India to become a permanent member of UNSC rather than seeking support from all other countries. I think UNSC member ship is more of privilege than right as it involves spending money around the world. Further with out a stable and sound economy and happier people in the country there is no point in securing or garnering support for UNSC. This just undermines the entire country.

Occupy Akbar Rd Moment in Inida

Its been quite some time I wrote a blog, but i decided to write this time about an event similar to Occupy Wall-Street that will happen in India sooner rather later. One could say that the Anna movement is similar but I am talking about a moment 10 or 15 times bigger than the Anna Movement. This will be targeting 7 Akbar Road New-Delhi. The object of Indian movement will also be the same, "Wealth parity". I am not preaching socialism, but uncontrolled capitalism in India is taking toll on millions of people. Recently the planning commission talked about people spending Rs 32/ day as non poor. Mr Montek is a well seasoned economist similar to our Prime Minister but the fact that the statement was written to him but some one who doesn't understand economics and only care about the ill gotten money in Swiss bank and going to New York to in tax-payers money to protect their wealth hiding under the disguise of surgery. What they have totally ignored about rs 32 is the inflation. Inflation in India at current rate is about 9% which reduces the purchasing power of people.

Inflation adjusted value of 100 rs = 91 rs (9% inflation)

Based on this the people who are spending Rs 32 now is not because they have more disposable income rather they had to spend that much to afford what they had before. In a layman language this means these people were able to eat a meal with rs 20 before cannot afford the same meal with rs 20 now. If the congress party in India continues their dynasty politics and ignore the common man then  is the time for "occupy akbar road".

I say Akbar road because there is no point in occupying the Parliament, the Rashtrapati Bhavan, or even the 7 Race Course Road since none of the decision is made there by the elected members or the council of ministers. whatever is signed into law by the president who is another rubber stamp is all written and executed at 7 Akbar Road.

Lets all not wait for this movement to start rather vote these people out of power and take a oath to not to elect anybody who belong to congress party of India


Jai Hind

King Dollar

Its been a while since the previous post,but all is well that I was able to think about some highly debated topic to write and voice my opinion on it. This time around at the end of recession I was thinking about a topic that is continuum of recession. After thinking through for some time I came to conclusion that there is nothing better to write other than dollar.

Every now and then someone or other keep talking about dollar demise and replacing dollar. The American influence has now so deep rooted that even we people in India worry about dollar rather taking care of our problems. What will be the effect of Dollar demise is what we need to see but before getting there we need to surf through the history to understand how dollar came to the power? It all so happened during the World War II when the European Nations were in need of money.Since the United States were one of the few Non-Colonized country at that time not involved in the war, the Allied Powers (Great Britain, France and other countries) chose to deposit their gold as collateral for the money. After the war ended the US dollar was floating around based on the amount of Gold it had. This includes the amount of gold given as collateral by other countries. According to Gold Standard a country can float its currency equivalent to the amount of gold it possess. Since US had all the collateral gold it flouted its dollar freely.
France, taking a note of more dollar in the market started to get back the collateral gold that she has deposited around the year 1970. Looking at this other countries followed suit. This is the start of dollar crisis if rightly seen. Had the US withdrew the excess dollar the dominance of it would have been not severe where it can bring down other economies together.
During the same time the consumerism grew in the US that led to uncontrolled consumption. Here is a country that is now becoming a market for all the countries in the planet. This action indirectly fueled the dollar crises, because the money is now created out of thin air to match this demand.

Let's just rewind back and see other Currency Demise. There were other currency demises including the UK Pound sterling, but dollar demise will be little more painful than those for the same reason as this past recession. Unlike other i differ and i can only believe that it will not be detrimental rather better for the developing countries. The consumerism will have a shift from one end to the other. Now,here is my concern, instead of setting another currency standard the countries should return to the Gold standard or any other similar commodity based standard. What is the use of this? Countries will have ample opportunity to price their produce more competitively and this standard will be stable and less inflationary than the present system. There is also another reason why at least developing and exporting countries need to think beyond dollar because the influence of china is so huge that I doubt the US will be able to maintain its position as largest consumer.

How will this effect be to India is a question we need to look at and analyze. This will be more bloody for India then any other country. This is because of the stupid IT outsourcing industry that our government is promoting. The situation is so dire in India, that there is no investment in other areas including agriculture, manufacturing or in research. Once was a exporter, now the country is importing rice from other countries. But there is a better way to get us out of this, but this process will take long time but will definitely be fruitful. I came to this conclusion because I lost confidence in our government and it I am sure the idiotic politician will not allow any change to happen in either because of lobbying or their investments.

What would be simple process is to avoid these IT outsourcing companies for some time and start focusing on other industries like manufacturing, food processing and other research areas in medicine and drug development. This will force the government to start focusing on other areas and divert funds form the IT SEZ. This will make India become a consumer and producer economy. What Infosys done to India is nothing but making the people loose their identity.

The effect of replacing dollar will create some problem for the US. If dollar is replaced as a trade currency some of the main commodities traded in the US markets like Oil and Gold will become expensive in dollar terms but cheaper for other countries.This will make the US interest payments on their debt costlier and also prevent creating money out of thin air. The free credit will vanish,but all is not bad for the country as people will start saving money and thus giving a more stable economy rather having to undergo bubbles every 8 t o 10 years. The property market in the US will collapse again only to stabilize and become firmer.

Before concluding let me give my prediction for the dollar demise. If the present situation in the US and rest of the world continues then the dollar demise is inevitable and could happen as early as 2013 or by at the latest by 2015. The demise of dollar will have a major impact on India due it over dependence on dollar. Countries like India should stop subsidizing rather promote internal consumption.It should also support manufacturing rather than services to save itself from becoming a fiasco

Recession 2007 Beginning of an End

Recession 2007 is the most happening buzz word in corporate world these days. Even the younger generation (Gen Y) is talking about this. Every one has a opinion about this recession, this is good sign because even a normal citizen who normally doesn't care about these situation is now getting abreast with economy. The business schools around the world are gearing up to prepare cases and this is also many research opportunity. A good number of educated opinions about recession are often different and finger pointing. According to one of India's premier organization the recession is not a big problem to Indian economy and India can come out of this much ahead of other countries in the world. How is soon is a question? More important than this would be how far away is the next recession from India?

Recession is defined as “two successive quarter of negative growth in GDP” by the economist around the world. But I think it would be more appropriate to define recession as when there supply exceeds the real demand. Based on this if we analyze we find that the American economy entered recession in August 2007. Often times we hear that this recession is far more deep and worse than the 1932 recession. Is this true? Let us explore this in detail and contrast 1932 recession and understand what this two recessions outcomes. This recession is truly unprecedented because of the breadth. Both these 1932 and 2007 an eye opener for capitalism.

In the early 20th century the countries were racing ahead to establish there political imperialism. The reason was to establish marketplace for their products. This political imperialism was the outcome of the industrial revolution. The question here is why would they want to establish markets for the products? If we go back in the history all these colonies were setup as business centers initially. After the world wars more of these colonies were became independent countries. With the days passing more and more countries became independent adopted a protectionist mentality and started establishing their own market. The western countries that had huge manufacturing were not able to consume the entire production. This caused the so called great depression on 1932. An important thing to note is this is just another recession in America, no other countries in the world were never a part of this recession. Then what is the rationale for calling this great depression? The answer is simple, after this recession the western countries realized the necessity for the imperialism, but having framed the United Nations now these countries are bound to abide by the law which they framed. Taking advantage of that recession now the countries decided to adopt an alternate path of economic imperialism (Globalization and Open market). But this time the countries were clever enough to frame a strategy that ensured them they never get thrown out of the colonized country.

Now, having spread their wings around the world through their companies the developed countries were making money through their companies and crying foul against those countries that failed to open up the markets for their companies. When we carefully observe that the globalization has always benefited the developed countries. These giant organizations from west came into India during 90's when the current Prime Minister (PM) then finance Minister opened up the Indian market. As soon as these companies entered our land it kept gobbling all our indigenous companies. Today, there is nothing in our mother India that is Indian. With the recent recession the western world are marching towards protectionism but we are left with nothing to beg them not to take that route. We don't have any brand that rivals any of the western brand. If we don't realize now then few years from now we will be left with nothing but a civil war just like Somalia and other African countries. True that we are proud of our achievement in the field of IT but that is just a modern slavery. Everybody talking about the Indian It industry as a high tech industry but in realism it is just a modern slavery. In the last 25 to 30 years of so called IT growth and boom we haven't sent out a software product that says “Its an Indian Software”. The saddest thing is that till today we don't have a software released in Indian Language. To tell the truth the Indian IT Giants are nothing but a “Human Sellers”. We should be feeling bad about this and not proud of this achievement.

Talking about this is not going to helps us anyway. We should get our house in order and start focusing on the development. What can we do to come over this shame and start building a real economy like china. Did I say china? Yes, if one poke his nose into Chinese economy we can see a real growth. They have their own brand to rival any western company and if needed adopt protectionism. First this we need to do is to avoid any product that is not Indian without uttering the word of “protectionism” and at same time develop our own brands and companies in the manufacturing that can take on these back door entrants. Another important and crucial decision we need to do is to shy away form these Indian IT giants and focus on Engineering companies. Also, we should avoid any companies even it is home grown that has more than 10% of foreign investment. The government should stop giving tax exemptions to IT companies rather give it the manufacturing companies to do research and development. Indian Government should also encourage some of the Indian Financial Institutions to go global and buy assets around the world and establish themselves as a niche player in the field. We can also impose some tax on foreign brands like Coke and Pepsi that would generate a huge cash flow to the Indian Exchequer. These measures looks communistic, but we have no alternative because of our initial mistake of opening up the market with out developing it. Let's feel proud of Our Mother India and make her might again.

Jai Ho

India embracing the recession cycle (Capitalism)

Capitalism, this is what every management student is taught for years together now. Making money is the main motto or the ideology for every soul diving into this world from all the business schools in the world. India is no exception to this. Do I sound Leftist? Do you think I am not interested in money? No, I am interested in making money, but one think that we should understand. Let's see what capitalist has brought to India.

1. More industries and jobs to the country

2. Increased number of Billionaires in the Country

3. Luxury and purchasing power to Indians.

Doesn't all these look bright. Yeah, it looks wonderful and makes us proud. We can now call India a developed country. Wait, are we developed fully? Are we self sufficient? and there are so many more questions like this for which the answer is NO. Then what the capitalism or Opening of market given us.

1. Greater rift between rich and poor

2. Unplanned development

3. Last but not the least the "Western Recession".

There used to be a time when the companies provide pension for retirees and people also save money in their Provident Fund(PF) which is until recently was managed by The Govt of India. This money is used by the Govt for infrastructure spending and other developmental activities. But now our highly educated Finance Minister is transferring the fund to "Fund Managers". This is not a new phenomenon,as most of the western world follows this. Just to give you an idea, in America the retirement plan is called 401(k). This is nothing but our PF where we contribute certain percentage and the employer matches the same. This money is managed by fund managers who work for some of the global big names, Viz Morgan Stanley, Franklin Templeton etc. Haven't you heard these names recently. Yes, these are the companies that lost billions of dollars this year and the past year. A recent estimates says that the American pension fund lost close to 3 trillion dollars.

So what is this fund manager do? They take this money and invest in stocks, bonds and other investment portfolio and generate revenue. They are going to generate revenue and why am I whining. There is a huge risk involved in this. The money invested in these vehicles and stock market will give rosy appearance but the real value of the money will be far less than it is appears. The value depends on the performance of those companies on which the fund manager have invested. If that particular company goes out of business then the total value invested with that company becomes ZERO and we loose all the money. This is what has now unfolded in America and we are following the same foot steps. It's better to stop now rather regretting later.

Making money is not bad but it is always better to generate wealth. We in the name of capitalism is blowing up the value of the money and actually it isn't worth that much. On the other hand wealth is created by saving the money and investing properly. Capitalism is always not the answer to growth. Capitalism and Socialism are just the phrases that doesn't carry any meaning. A country should always do what is good for the people and think of ways to generate wealth.

If some one thinks I am insane then here is a question

"If capitalism is good then why in the land of Capitalism every one is crying for help (Bailout) by people's money (Tax). What do you call this may be "modern capitalism" "

Who is next

There is a growing concern about the financial market in the world with the failure of Lehman. With every passing day people keep asking who is next? No one is safe not even the great Goldman. This is evident from the recent filing by Goldman Sachs (GS). There is a huge list of companies waiting to fail and all these are happening just because of the wrong policies of the govenment where they are headquateres. I am just giving you the next possible list and merger options.

Companies for sale Companies will possibly buy it
WaMu JP Morgan
Morgan Stanley Wachovia
AIG will be dismantled and sold
Citigroup will be split into 2 or 3 entities
Goldman Sachs Will survive this turmoil may fall in next

Then there will be a question is this an end?

The answer is plain NO. This financial consolidation will only trigger further consolidation in various industries, that consolidation is detrimental to India. We in India is wholly dependent on america and there IT jobs. Indian Government is doing the same mistake that is done by these other countries where they face recession every 10th year. What will happen to Indian IT companies? Aftermath of this ripple in financial market will be felt much more in India than any other country in the world. The Indian businesses are going to shrink a lot and there will very few companies (IT) that will survive this fiasco. What as an IT employee one can expect out of this situation. Some of the so called "Gaints" will be out of business soon. Here goes my list for the IT companies

Companies up for Sale Companies that will acquire
Satyam IBM
Cap Gemini TCS
Tech Mahindra TCS
Some of the other small and mid size companies will be acquired by Infosys, HCL and Wipro which will eventually size to exists in near future to their competitors.

One of the most notable happenings that will be evident is firing or lay offs. India is going to see a huge round of layoffs in her only sector "IT". This is going to cause a huge hue and cry in India where every body who is spending with no clue of what they get. India is going to see a large amount of deliquencies in loan, credit cards etc. India has a pending financial failure starring at her face.

Lets Face it:

What do we need to do to avert this. Yes now its not late to do some thing. We need to do 2 important things first.
1. Invite more manufacturing companies to Inida. The government should give incentives to manufacturing and encourage research in manufacturing. India has a good opportunity to capitalize on manufacuring as we have leading marquees in automotive, heavy industries etc.
2. Private sector should invest in research and development instead of going behind the american gaints like Merc, Pfizer etc.

If we start an intiative now then we will be truly developed by the less than 10 years.