Indian Economy Slightly Better Poised than other Emerging Economies

THE WORST ever financial crisis to have ravaged the United States since the Great Depression of 1930s, has taken a heavy toll on the world’s largest economy. There is rise in the number of job layoffs and cost cutting. In fact, all the economies of the world are facing crisis to tackle this global meltdown. The meltdown has led to shock waves across the world, with economy after economy gasping for breath to survive this financial tsunami.

Citigroup on Monday (November 17), decided to lay off 53000 employees in the coming months and slash its expenditure by 20 per cent next year. The measures are part of the Citigroup’s efforts to overcome the huge losses it has suffered in the last four straight quarters, including $2.8 billion in the third quarter.

Recently, HSBC announced its plan to shed 500 jobs in Asia, following the slump. The bank decided to trim its work force because of ’organizsational changes in a number of areas as well as the deteriorating economic conditions and our cautious outlook for 2009’, Peter Wong, an executive director for Hong Kong and China, said in an internal message released by the bank. Now DLF has also frozen few of its plans and has cut down few jobs as well. “We must have laid off some employees somewhere,” DLF chairman KP Singh told reporters on the sidelines of India Economic Summit, but did not give the number of jobs that were cut.

Our finance minister has maintained that India will not be much affected by the recession but the fact remains that Indian Inc are getting hit by this slump worldwide. The stock market in the country has crashed in last few months.

The Sensex fell 353 points to end at 8,937 levels while in the broader markets Nifty closed lower by 116 points at 2,683 today. The investors have been dampened by the global recession and corporate layoffs. Investors are discomforted by news, the financial sector is still struggling. The entire world seems to be sinking into recession. Indians all over the world are very susceptible to the recession and are living on edge. There are hardly any new jobs available in the market and retaining one’s job can be considered to be a luxury.

There is no doubt that if the global economies suffer then India is also bound to suffer. But the very fact that India is a domestic consumption- and investment-driven market where contribution of exports to the growth is not as big goes in its favour to tackle this crisis in a much better way than few of the other emerging economies. The inflation rate has also reached in some what comfortable zone and thus economists believe that the government has more room now to focus on the growth rate of our economy.

The New found business : Microfinance

Microfinance is a provision by which funds are made available to poor people. Its aim is to provide service to those people who are away from the main stream banks. It started as philanthropy but is slowly gathering commercial ground. The idea was discovered by Nobel Laureate Mohammed Yunus, three decades ago. The purpose was to improve the standard of living of low income groups. Nearly 70% of India’s population is untouched by formal banking system. A great business can be sensed here. Around 2500 microfinance institutes(MFI) exists in the world. They provide funds to those low income group who have entrepreneurial spirit. The funds are made available at low interest rate. Also no collateral is given for the borrowed funds. Flexibility of payment the main point of attraction. This initialization have saved many poor people from the harassment by landlords. The modulus operandi is very unique. Altruist make funds available. The group of people come together to form Non Government Organization (NGO). The NGO establishes its branches in the rural places where the funds are not easily available. Now the platform is set for distribution of money to the needy.

Five financial institution are coming together to form MFI. The move is made to tap the lowermost section of the society. Joint venture parties includes Life Insurance Corporation, IFC(a world bank wing), National Housing Bank, Standard Chartered and Union Bank of India. The new entity will be called as Financial Inclusion Corporation of India (FICI). From the past experience of being successful in funding scarce pocket of the economy, the FICI is formed to operate more efficiently and more effectively on the national scale. The successful operation of FICI will abolish the income inequality in the society. This will increase per capita income of the nation and hence raise few more million people above the poverty line.

Philanthropists have progressed the microfinance sector to its current level. Now it the turn of private sector big players in finance sector to drive the microfinance sector ahead and make it the part of the mainstream.

Budget 2008: An Overview

Budget 2008 will the fifth and final budget of the UPA government.With both UPA and NDA gearing up for the general elections in 2009,the demands to make the budget compatible with the ruling party’s political calculations are natural. Political compulsions to present a people-friendly budget will deter finance minister P Chidambaram from taking far-reaching measures.

BudgetFM will be doing everything to make the aaam aadmi happy. One of the most common demands made by the common man is that the working class should be given greater tax relief.Women want that there should be no discrimination in the tax structures based on gender.People are okay with the current taxation rates on auto spare parts,oil,cng but there should be no further increase in rates.Traditionally, the perception in the middle class has been that they are a much-neglected lot as far as getting a voice in budget making is concerned.So they are expecting that atleast this time there will be something in store for them.The disaffection of middle class can be quite dangerous for the Congress.

The government must think twice before announcing schemes like National Rural Employment Guarantee Scheme because a recent CAG report found that only 3.2% of the registered households could avail of 100 days of employment guaranteed by the above scheme between February 2006 and march 2007.It highlighted corruption, inefficiency, diversion and misutilisation of funds.So, instead of creating more and more centrally-sponsored straitjacket schemes for the entire country, the Centre should transfer funds to the states to undertake such development activities which suit the specific requirements of a particular state.

The rupee has risen sharply against the dollar with deleterious impact on exports.In the textile sector alone 1.3 million jobs have been lost as a result of declining exports.So the government should either sterilise or slow down the inflows.

Talking about petroleum sector,FM may hand out a few small concessions to the oil PSU’s.There has been no revision in petroleum prices for a year now and those in the power circles believe the Budget won’t throw up anything beyond some exemptions and tinkering in duty structure.

India is growing by 9% annually and needs a good infrastructure backbone to support the current boom in the economy.However,creating infrastructure is a long term phenomena.Infrastructure companies dont want any kind of tax holidays but want the Reserve Bank Of India to offer differential interest rate structure for them.They want that credit should be available at a cheaper rate.The current investment in infrastructure is around 5% of GDP.India needs $490 billion to touch the figure of 9% by 2012 as targeted by the government.For that the companies require two components-financial and physical resources- and both are inter-related.The main concern is physical resources and for that they require advanced technology.They require foreign tie-ups,joint ventures and more of imports.So,the budget should aim at cutting down import duties along with policies to encourage foreign participation.

Corporate India wants the government to do away with taxes like fringe benefit tax which they feel is unnecessary.Indirect taxation of goods and services should be integrated into the Goods & Services Tax(GST) plus the tax on luxury goods should be increased.Retail industry wants that service tax on rental properties should be rationalised as it is hurting them.They also want clarifications in the FDI-related issues.ITeS and outsourcing sectors are expecting that once again they’ll not be brought under the service tax net.

The hospitality industry wants the government to increase the budgetary allocation for tourism.They want that the recent tax holiday incentive granted only to hotels coming up in the NCR region be extended to all categories of hotels.

The Budget could be more populist than the earlier Budgets of Mr Chidambaram, given the Congress needs to spruce up its voter base in the wake of losses in recent state elections.

But,the need of the hour is to take firm and bold steps to control fiscal deficit,rein in inflation,provide growth impulses to the faltering economy and take steps to face global recession.



Taj Mahal refuses American Dollars

Taj Mahal refuses American DollarsThe Taj Mahal, one of the new Seven Wonders of the World and a symbol of eternal love in Agra, has recently announced that it would not accept dollars from visitors. The Taj is the most visited tourist destination in India. Currently about 30 lakh visitors visit this holy shrine every year and this number is going to grow rapidly thanks to the Incredible India campaign run by the government. Continue reading Taj Mahal refuses American Dollars

Indo Pak Battle of a different kind

It was as Indo pak battle. And we aren’t talking of the just concluded Indo Pak series. Nor are we talking of any incursions that took place at the Line of Control. For a change it was an Indo Pak battle that took place in the corporate sector. Vikram S Pandit, currently Citigroup’s investment banking head was pitted against the former Pakistani prime Minister Shaukat Aziz for the post of the CEO of the world’s largest Bank Citigroup.
Continue reading Indo Pak Battle of a different kind

Agriculture seeks another green revolution

Indian AgricultureThe original green revolution of 1960s was supposed to save 58 million hectares land. Today, 120 million of the 142 million cultivable hectare land, over twice the magnitude that the green revolution attempted to save in 60s, is degraded. In the state of Punjab, 84 out of the 138 developmental blocks are recorded as having 98 per cent ground water misuse. The critical limit of the use of ground water is about 80 per cent.

The result has had devastating impact on the agricultural community, leaving farmers with little choice of action. According to the data collected by the National Crime Records Bureau (NCRB), which records the number of suicides across India every year, and scholars at MIDS headed by Professor K Nagaraj, 1.5 lakh farmers committed suicide across the country between 1997 and 2005. Why is this happening? And why does media give little attention to this crisis?

The Indian economy has been doing very well since the last 5 years or so. With the overall growth rate almost touching the double-digit growth, the direction of economic policies being followed in the country are very much clear. We are doing very well in few areas but the lackluster growth in agriculture sector (4 per cent approx) is an area of concern. Without the development of rural India and the farmers, high growth rate of economy is meaningless to an agrarian country like India.

Not only is the growth rate of agriculture sector low but also the share of the sector in country’s GDP has come down drastically in the past few years. The problem of low rate of capital investment, smaller capital formation and low share in the national income are some of the main problems faced by this sector that need to be addressed very urgently.

Farmers committed suicides because of several reasons. Most of the cases of suicide occurred in states such as Andhra Pradesh, Maharashtra, Karnataka, Kerala and Punjab. A study says that more than 40 per cent people, who are currently engaged in agriculture, want an alternative option for their livelihood.

Daniel Webster once said,

“Let us not forget that the cultivation of the earth is the most important labor of man. When tillage begins, other art follows it. The farmers, therefore, are the founders of civilization”.

But, we as a country have forgotten them and instead of being grateful to them for providing us food grains we have refrained from them.

There are many reasons for this crisis, which mainly includes absence of adequate social support, uncertainty of agricultural enterprise in India, lack of credit availability etc. Almost 60 per cent of country’s work force is still employed in agriculture sector and self-sufficiency is quite important for a country as big as ours, due to increasing needs of food grains for the teeming millions.

The need of the hour is to increase the productivity of the primary sector by ushering a new green revolution to raise the annual average growth rate of this sector to about five per cent per annum. It would help the country in achieving sustainable and higher growth rate of the economy as a whole. Sluggish growth rate of the sector is also responsible for accentuating disparities and divides in India in the recent years.

Socio-economic indicators in the rural areas are still way behind in comparison with the urban and industrialized areas. The green revolution of the 1960s was the result of synergy among technology, public policy and farmers’ enthusiasm as well. The post-60th anniversary era in agriculture will depend upon our determination to implement Jawaharlal Nehru’s exhortation, “Everything else can wait, but not agriculture” in both letter and spirit across the country.

Proper pricing should be given to the farmers for their crops and some sort of exemption in loans should also be provided. People should be encouraged to make more investments in this sector. The research in this field should also be placed high on agenda and making farmers aware on optimum use of the land and methods of yielding better crops will also help to some extent.

Equally important is to improve the irrigation system in the country and it is extremely important to cover more and more areas under assured irrigation. The task is Herculian and it needs great show of will power from political leadership and bureaucracy both. Backwardness of the rural sector has been perpetuated over the past several decades and it would be foolish to believe that the deficiencies of rural sector would be removed in a short span.

The Agriculture sector needs very serious and urgent reforms because if this sector is in crisis then as a nation we cannot prosper. We need to focus on the solutions of the problems and will only do harm by neglecting it.

Statistics is all Crap

I was in for an interview, waiting for my turn at the reception. Nervous, shaking, stomach-churning and not to mention those goose bumps. With trembling hands I picked up “Business world” – had to look like a pseudo-intellectual, you see.

Anyways the cover issue declared Infosys as the most respected company in India followed by Bharti Airtel and Mukesh Ambani’s Reliance. Cool stuff, ain’t it?

But hey, wait a minute! What about Tata?

Well, it managed to finish in the top 10, that’s all they had to say about it. Come on now. Just look at Tata’s business, it has lived by the rules, has put the country before itself, has been a household name in India, a driver of technologies in India, always ahead in CSR (Corporate Social Responsibility), has kept only a minuscule amount of its profit for itself and still behind Reliance. Awkward, isn’t it?

Now here comes the funny part. The survey was done by some British Company/ Association BW (if I remember correctly). Absolutely fantastic!!! Aren’t we satisfied with the ridiculous and derogatory statements the British media makes about India that we need to turn to them to rate us? Their sample size was just 499. And they confidently claim to know us, a population of 1 billion+ !!!

Ridiculous, I say. All is fine, but rating Reliance in the Top 3 is got to be a scandal. Ask Anyone and anyone I mean and he’ll tell you about Reliance : “Big Company, Great Company! But respect equally big: Zero, Zero and Zero”

So what am I so pissed off on? The Survey? No, certainly not. The statistics like these ones leave me completely frustrated and especially when they are published in a respected and credible magazine like “Business World”. A sample size of just 499 was taken for India and no quantification of the data was mentioned, and you expect me to rely on this data?

Most of us , don’t have the time to go through the entire article. I did because I had little else to do. And I noticed what I wouldn’t have, had it been a quick read through. The sample size for it was lost in some corner of the article, not to be discovered by many.

Statistics may speak crap. Yes, it’s true but when a “business magazine” serves us the same crap, and that too on a platter, all because it comes from some gutter of London. It is unacceptable and unbearable.

Surveys like these divert our minds and heavily mislead us. And all because of what? Cheap publicity or funding from big MNCs!!!

I do not hold any grudge whatsoever against Reliance.. it is just a reflection of the general sentiment about the company in my environment. The opinion may or may not reflect the opinion of the general public.