Tag Archives: Finance

The Dream team at 7 Race Course Road

20 May

If i could use one word to describe the results of this election : Beautiful !

It is so heart warming to see India giving a big thumbs to stability and reforms .

Now that Congress is all set to form the govt here is my take on what key cabinet positions should be like :

cm_images_Government

Prime Minister : Dr Manmohan Singh

Principal Economic Adviser to the PM :  Montek Singh Alluwallia

Finance Minister : C. Rangarajan

Commerce Minister : Mr. Kamal Nath

Home Minister : P. Chindambaram

External Affairs Minister : Shashi Taroor

HRD :  Sam Pitroda ( Surprise !.. Surprise !)

Railway Minister : Laloo Prasad Yadav ( Yes, despite the fact that he partially dumped Congress. For the greater common good )

Communications & Telecom Minister : Dayanidhi Maran

Defense Minister : Mani Shankar Aiyar

Panchayath Raj Minister :  Rahul Gandhi

Aviation Minister : Praful Patel

Science and Technology Minister : Kapil Sibal

Rural Development Minister : Sachin Pilot

Micro and Small medium Industry Minister :  Jaipal Reddy

Tourism Minister : Jyothiradithya Scindia

Power Minister : Pranab Mukerjee

Agriculture Minister : Suresh kalmadi

Petroleum Minister : Murali Deora

Law and Justice Minister : Bhradwaj

This is a list of young and experienced group of ministers which i believe can be part of the Cabinet Ministry for the next government .

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The Fear of Deflation in Indian Economy

20 Mar

Today’s Economic Times has the screaming article Indian Economy staring at deflation. Is it good news ? in its front page.  Too late .. I have already predicted and reported on this .

On Feb27th of 2009 I had posted a blog  Inflation down to 3.36%. Nothing to be happy about. This blog was posted when 3.36% inflation figures were released by the government.

Is it good news ? Of course not. Why should it be ? Think about it. Deflation arises when less money is chasing more products. So the question now comes – Is it that we Indians have no money to buy ?

On the contrary,Indians have the money to invest. How else would you explain record number of new mobile connections sold ? How else will you explain Mercedes selling more cars in India than in most of the so called “‘mature”, “developed”  markets ? How else can you explain the IPL commercial values involved? How else can you explain DTH connections sold in drones in the last 6 months?

So you see , we can safely say that we Indians have the money to spend. What prevents us from spending a lot ( unlike last year) is the fear factor.

France , America, Britian has millions of job loses reported . France had 3 million out on streets protesting against wage cutes and unemployment. How many such rallies have we seen in India? I will let you answer that question.

First, let us accept the accept that the Indian economy clocked 9% G.D.P last year and it was fueled by entrepreneurship . But, unlike our counterparts ,Indians are largely insulated by the bad economic troubles. But true to our risk averse mind set we are saving our money and too scared to invest or buy in indulgence. Therefore , demand is low.

There are 2 ways at looking at it. Positive and Negative. Taking the current discussion under consideration, we are forced to look at the negative reasons. And negative reasons are very scary indeed.

What can be done ?  Two things – Awarness and Proactive solutions by the government and private companies and banks.

Self Awareness from the people is hard to come by. The government representatives should come out and talk directly to the people instead of just giving out talks in press conference . TV news channels can give a good coverage by inviting top brass to address people directly.

Address the Nation : When was the last the time we actually sat in front of the TV and listened to Presidential speech on the eve of Independence day ? Be honest about it .. But , this is the right time for Ministry of Finance, Planning Commission, RBI head to directly to the people. We should also have business icons and thought leaders like Naryana Mooorthy, Sam Pitroda, Sunil Mittal, Sachin Tendulkar, Dhoni, and writers , celebrities talk directly to the people. The idea is to instil confidence and security to the people.

Go Vernacular : Talking in high jargon filled English is not gonna do the trick. The biggest curse of India is that we have not been able to permeate the growth of the economy to the villages. Few people realise that villages, tier 2 and 3 cities hold the key to super power status of India. They may not be English educated but they have spending power. And like Unilever’s CEO Mr Paul said in a interview , ” We will have to drive people’s habits” . Very True!

But talk to people in their language.

Start spending but in a controlled way . Educate, Empower and set example and spread the word. Be a thought leader yourself. Ask your friends to spend but not in excess. Try to include Indian products in your grocery. This will fuel domestic economy and also in the long term make us a potential market and make it more investor friendly .

Simple things are can go a long way. You dont have to be a Chief Economist to drive change.

Just a thought : We should stop IMF and S&P500 and other agency give investor ratings during recession. Otherwise people are gonna reach such stats and go into a shell and reduce spending and brakes the FDI’s.

Inflation down to 3.36% : Nothing to be happy about.

27 Feb

In month of August – September 2008 our Inflation stood at 12 % .  The whole media industry went hay wire crying that India is a gonner. That Indian economy is dead and that the government did everything wrong with its monetary policies. Little did they realise that increase inflation was simply cos of the global problems affecting India. The primary reason being that crude oil was almost hitting $ 150 per barrel. 

Now, we have an inflation dip . In the today’s Economic Times article Inflation dips to 14 month low , there is a line which says – and i quote – 

With inflation ceasing to be a major concern, aggressive rate cuts are expected from the Reserve Bank to stimulate the economy.

 

This got me thinking… Are we safe in the inflation front? 

Now, let us visit the fundamental of economics  in a simple way 

Inflation is lots of money chasing very limited goods available in the market. Happens when the shop keepers and distributors and dealers increase the cost of the goods . This an offset of very vibrant, positive and booming economy. Inflation is good to a certain extent but when it crosses a benchmark percentage then it is a problem because it will inevitable affect the common man. 

A deflation is when the reverse happens. When the cost of the goods nosedives to unexpected lows. A clear sign of the economy slowing down and leading to a recession. 

Now that we have checked the economic theories , let get out with the analysis. 

 

When the Economic Times claims that there is nothing to worry about, I will have to disagree on their claims. 

Why ? 

Fear Factor 

Let me explain…

People like you and me are worried about tomorrow. We have a fear that we may not have a job tomorrow when we go to office. So we are saving the money which we earn so that even if we lose job tomorrow  we have enough money to sustain for couple of months till we find a new job. Last year we had dozens of HR people chasing us offering jobs everyday .Today it is the opposite. Even IIM- C Day Zero placements results are dismal by its high standards.

What we dont realize is that when we dont spend money to buy goods , there is no liquidity in the market. When there is no money circulating in the market , the goods remain unsold and hence productions slow down and comes to a grinding halt. This in turn on a macro scale slows down the entire economy. 

This is not a good thing to happen. Because this 3.36% on dip in inflation takes a much worrying scenario of –  Will we go into a deflation? Which is an even more serious issue. 

Had this 3.36% of dip inflation come down in a gradual way , then we may not be so alarmed. Because inflation numbers are always fluctuating in a good economy. It shows movement. It shows dynamism. It is kinetic energy of the economy in play. 

But this is not usual circumstances because of global economic crisis

 India cannot go into a recession. Our economic fundamentals are not build that way. But we can go into a stagnation. NO growth and No Fall . The economy will stagnate . People will keep buying the basic commodities for they day to day living. But they will buy it in lesser quantities at not so regular intervals. 

So you will have your mom will buy 2 apples less than when she usually buys. Your wife will buy spinach once a week. Fish and meat on occasions. Wont renew your gym, magazine subscriptions. Cut back on all spending, basically. So you have buying at a slower pace. Neither here nor there. 

The US economy is no where near on a comeback trail. 40% of US treassuries is with China and Japan and even they are having a major economy problem. So , the fear of job loss, the fear of unstability is going to be there for a long time. 

Hence dont be surprised when inflation further dips to 2 % and 1 % . But I hope at least then news media like Economic Times and Business Line wont take things lightly. 

What is the cure?

3.36% is something to be worried about.

Therefore banks should take cue from the govt stimulus policies and start lending more to consumers. For that to happen RBI should crack the whip with more stern actions on the banks which don’t take advantage of the stimulus packages and other monetary policies regulated recently. ICICI bank did a good job on fixing the 10% interest rate on lending last week. More such steps should be taken by  other banks as well.

Citizens should start spending more and try to buy more of  Indian products. This will in turn increase domestic demand and breath life in to Indian industries and reduce dependency on exports. Will help in the fiscal scenario as well! 

And the government can also take measures to increase the consumer confidence by releasing ads in print , tv and radio . A kind of awareness program.

Hope this post helps in sorting out issues on the inflation worries.

Drop in your comment if you agree of disagree on this.

Fiscal Policy : Are we planning to go into a recession?

26 Feb

I want you guys  to read the article Wrong Doctor, wrong treatment from the editorial of the Business Line and give it a serious thought. 

But i must caution that if you are not a keen follower of economic policies happening in India and across the world then you will not be able to grasp the real concept behind what the author is trying to convey in the article. Written in clear and simple words the author of the article is wondering if tthe Govt going dangerously wrong in itr fiscal and monetary policy. 

I personally think there is a element of  merit in the arguments put forth in the article. 

Are we trying to spend the money which we dont have ? Is it not similar to what happened in America in between 1993 and 2007 , the effect of which is now seen as the economic recession now. So, are we getting the wrong economics right in the wrong propotions? 

Are we spending more than what we should be spending ? Are we taking the fiscal problem in a lighter sense ? 

I dont care what economist you believe in . I personally go for Keynesian . Always have. But you may be a Friedman fan for all I care.

But today’s economic situation is so differenent in its scale and scope that I am willing to let go of Keynesian theories and embrace which will work and sound logic from an development prespective. 

I implore you guys to read the article . 

Please drop in your queries, doubts, ideas, thoughts so we can have a sensible discussion this and take it forward.

Also read my post on Is India still in recession to understand what is happeining to our economy.

About time we looked at Rural India !

16 Dec

My uncle wanted to know if I was preparing for IIM exams ( notice that he dint ask me Cat or Xat but IIM) i dint have much to answer him except that , ” No, I am not interested in IIM’s or XLRI’s or any of the so called top colleges” … he gave me the incredulous look that you would have have when you hear that “Kumari” Mayawati has become the PM of our country.

And so when he asked me what my future plans were . I had to give him the truth . I told him though i am in the advertising field I would like to explore opportunities in Rural or Health care/fitness marketing . I also told him that 5-10 years down the lane I would like to specialize in marketing/branding for rural areas and start a non-profit company.I am very passionate about using the tools and knowledge of marketing and integrated PR in Health care/fitness Industry or Rural Marketing.

He gave me that OK-i-don’t-get-your-stupid idea look with a you-aint-gonna-go anywhere – with-that kinda nod and changed the topic. But not before it got me thinking about , ” why not rural India ?” .

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Have you guys read the phenomenal book ” Fortune At the Bottom Of The Pyramid” by C.K Prahalad? If you haven’t yet .. then run to your library or better still buy yourself a copy of the book and  read it . Now is the right time to read the book. As global recession is going south bound and no one has a clue to what to do next .. here is the book which will give answers to the big MNC ‘s and entrepreneurs alike .

(This is not a book review. As a personal principle , I don’t write reviews. I recommend books to my friends but i never give them  a review of the books I read. Who am i to take a judgment call on another man’s work ?)

Getting back to the crux of the post and in conjunction to blog title , I think multinational companies in India and abroad should start looking at reaching out to rural cities/villages to stay afloat during recession. Or prevent another recession in the future.

Most SME’s and MNC’s ignore rural areas because they believe that people in such cities/villages have no buying power. They are considered poor by most global standards. But, that is exactly why we need to see them in a completely different perspective . C.K Prahald challenges the myth that considers poor people as poor when they are not . He quotes the work of Hernando De Soto’s book “The Mystery of Capital” which postulates that poor countries ; people from rural areas are not really that poor. They are often asset-rich and capital -poor. To quote from the book , ” Assets cannot become capital unless the country guarantees a rule of law- primarily the law of contracts – whereby the ownership of assets is clear….. For example, he ( Mr Hernando Soto) estimated that the trapped resources of Mexico are about $ 300 Billion” .

That is a phenomenal number! Imagine what potential can India have when 80% of India’s population in the Bottom of The Pyramid (BOP) slab will be able to quantify ? This 80% currently accounts for 67% of the current consumption. Aint that an awesome information to behold ? India is quite simply and easily one of THE  richest nations in the world and all that potential waiting to be  tapped and unearthed. We should be doing that now!

The Big Idea ? If MNC’s and SME’s ( Small and Medium Enterprises ) can come up with innovative, cost effective and customized products for the rural markets we would unleash a massive wave of marketing and innovation revolution in India. This would also force goverment to work with private companies to set up better infrastructure, proper health care and free education.

Here are my thoughts on a macro scale where we can make some mega changes in this sector :

Not just 4 metros : Metros are so termed because of the huge population and infrastructure growth. I suggest the state govt with the center remove the metros tag altogether. metros means metropolis. Taking TN as an example, let there me more metros in TN alone. Identify and improve those cities . say – Trichi, Coimbatore, Erode..etc .This idea can also be reflected in other states ..

Infrastructure : Have you been noticing that the number of cars in Chennai increasing  and really pissing you off ? Ever wondered why ?The answer is obvious, the middle class are getting prosperous and buying new/more cars. But why only chennai ( and other metro cities across the country) city alone? Because every year, of the lacs of engineers,diploma holders who pass out of universities come to cities like Chennai to work. Because MNC ‘s are well entrenched in metros. Simply put – they seek out better job opportunities and enhanced standard of living. Why not give these Young Turks opportunities in their home cities? Why not prevent them from migrating to the cities? Instead provide opportunities in their native places.

Young Turks : Have better local knowledge: These Young Turks ( as i would like to call them) can be better exploited or rather groomed by companies as they will have better working knowledge of the people in their area. Give them proper training and they will reward you with a better perspective on marketing, product development and sales, much better than IIM grads. And hey, you don’t have to pay top dollars for these turks . Pay them not with just good salaries but show them how they are contributing to their society through the company and you would even reduce attrition rates. Make them not – sales executive and stop their career growth. Give them titles like – Sales Manager or Marketing Manager of the area.. This will usher in sense of ownership as well. Unlike high funda grads these guys are more loyal to companies than most.

Streamline these grads – take care of them : Assign a experienced mentor and segregate these grads to become experts in Rural Management,Micro Finance, market research,rural marketing etc , step up teams and send them out to the field to visit the villages . Make the job profile exiting.A team can consist of 1 rural management expert– he will evaluate and micro manage, 2 market research experts– 2nos because this involves number crunching , 1 micro finance guy – who will identify how and how much loan to provide and 1 marketing expert – he will conduct survey and collect customer info and come up with ideas on marketing. The marketing guy with the rural managementguy can work on business development and sales. 5 in a team for one area/district, as necessary. 20-50 teams can be supervised by a General Manager . 10 General Managers can come under one Head . 5 Heads will report to Vice -President Operations of that Area – say South Market .. etc ..

And when they are out in the field- in villages and rural cities  for days – give them the sense of security that their families are taken care of when they are not around. You will  see ever lasting commitments to the parent company from these guys. Indians from rural cities give more value to relationships and sentiments than money and luxury.

Teach them to be innovative : Pick the latest copy of Businesswold. You will read the cover article about “The Real Nation builders”. They are not from IIM’s or IIT’s . what i am trying to convey here is if you can teach grads from rural areas to be innovative they will bring in results. They will give you great ideas . The MNC only has to identify the right idea , ideate on it , strategize and implement them. There you may need the IIM and XLRI graduated guys with Mckensiey background to do the work.

Use technology : The best software is not good enough if it cant deliver. India is already a tech/software giant. Software companies can then join hands  with services companies and launch customized products in rural areas and benefit from that .

You don’t have to depend too much on global money when it is right there to be taken from our backyard.

Rural India is a gold mine waiting to be tapped.  MNC companies wont just rake in profits but also built a nation in its truest form. All they need to do is understand customer demographic profile clearly and launch products according to them.

Welcome your thoughts and ideas on this .. If you like what you read here.. spread the word around and would love discuss more of the same- here in my blog.

Further reading from Economic Times :

Rural spend,housing to rescue growth

Is India still in recession ?

14 Dec

If you Google this topic you are going to get numerous answers with some mind boggling stats to tell you that India is into recession or slowly moving into it.

I am going to give you a different opinion altogether! I don’t believe even for one second that India is into recession. In fact I will take the “audacity of hope” as my tool to declare that India wont even go close to recession.
You may argue back saying , “dude! don’t you read newspapers or watch news ? did you not check the IIP stats? The numbers are negative man! Our sensex has taken a complete nose-dive. People are loosing their jobs left-right and center. and you still think India is not into recession or moving into it?” ..

I stick by what I just said .You see, India is having a spill over effect of a global recession. And it is that spill over effect that is causing these job loss spree. But compared to our western counterparts Indian companies are not giving out the pink slips in droves. No Sir!

Tell you why …

First , India is not a globalized economy. That is , India is not completely globalized like European countries, Japan and China.

Second , India was already facing a huge inflation problem when the sub-prime crisis (which triggered the global meltdown) started . By the way, Indian lending laws are so stringent and fundamentally strong that , our country cannot just go into sub-prime like crisis at all. We Indians are firm believers in saving money and spending in thrift. So dont worry.. India wont go into a sub prime crisis.

Finally, India’s growth story is not due to any external factors . nay.. India’s growth story is completely domestic driven. The so called middle class income expansion is not just coming from IT and ITES services (which is prone to global imbalances) alone. India is a huge growth engine moving forward in all factors. Our business honchos, policy makers made sure that India and its currency stays as much immune from global currencies as possible.That is why , India is not seeing an companies going bankrupt. How else would you explain ICICI, HDFC and other banks flourishing so well when banks from other parts of the global are going bankrupt? come on .. tell me .. why ?

So how can we explain the negative stats of IIP . Just for the perspective. Our numbers are like  -0.4% as compared to 12.2% last year. This is primary because of decline in exports and fear factor among Indians.Did you know that in theory a recession in the rich world should hurt India less than other emerging markets: exports amount to only about 22% of India’s GDP, against 37% of China’s.

Read the real story of numbers here : Negative show: Industrial output contracts in October.  Read the complete article please.

China is making massive money from it exports like hell because they make goods a rock bottom prices due to availability of cheap labour.

Allow me to explain…

Let us take the example of a manufacturing firm of foreign origin/ or even Indian origin which produces 2000units of its products. 100o units for exports and the other 1000 units for domestic consumption. The company shall be termed X. Let us focus on export units – 1000 nos . Due to the global financial problem people in the other side of the globe don’t have enough money to buy the  products of the company X which they usually do.This would mean the products earmarked for shipments remain unsold in warehouses thereby increasing the inventory. Now, the companies get money only after the products are shipped to the other side and bought by consumers. The money/income thus received is then used to pay for the labour involved, raw materials, profits taken and then a huge chunk is put back into the company to produce more of such products for exports again.

Are you with me ?

Good.. So , when there is no money to re invest , obviously the company wont be able to produce any more goods. Also, the manufacturers will be cautious to use the reserve surplus to manufacture more goods because the economic outlook is bleak.  Eventually and in the long run when there is no enough money to pay, people are shown the door.

Meanwhile, even if we Indians have enough money to spend , we will suddenly check the global scenario and a friend will advice to his colleague , “damn, see US and Europe is into recessions, people are losing jobs.. and that India guy who studied in IIT and such a rich fellow . He killed his family and committed suicide cos of bad debts. Maybe we should be careful now . If  such big big countries can have problems ..how soon do you think we will get into trouble like that . Let us be careful now, yaar! Who knows when we will lose our jobs? Let us save now . We can spend when time are good . ”

Wife will advice her husband , ” listen, don’t buy too much from the stores , ok? We will manage . I saw TV news about the finance problem. And i heard from my mom that her friend’s son lost his job . Did you check the share market points today ? It was down and in red for the whole day , yesterday. We have enough for next 2 days . Just buy little “, and for the first time she will use the word budget … ” Let us have a budget from next month, ok ? ” … Sensex, Budget are words which are new to her dictionary..

Mom will catuion her son/daughter ( who  just joined a firm fresh out of college) , ” Listen, don’t go out too much with friends and waste your salary on movies , clothes or jewellery. Manage with what you have. and beta .. don’t resign or jump jobs. When you get the first salary. Give half to me, I will put in your savings. Don’t buy that bike now. Intrest rates are high . Buy it after 6 months “…

The panic button is on and the story goes on …

Media will use the panic to give you more sensational news from abroad and get you more worried.. It is cyclic..

We start saving a lot more than we should. Hence,money gets stagnated .

When you don’t buy stuff how are you going to give money back to the manufactures to produce more? If they dont have enough to produce, how are they going to pay your salary? When they don’t have enough money to pay your salary ,cos of no work getting done , why do you expect them to pay you for nothing and not ask you to leave?

Simple right?

So, as you see .. the story is we get sentimental and extra cautious when we hear the news around us .

Don’t do that ..!

Check not the news .. check the real facts . Check real information released by the government and listen to well known business industry leaders.

The India Finance Ministry with RBI under the leadership of Dr Manmohan Singh and Deputy Planning Commissioner Montek singh Ahluwalia is doing a good job. The steps taken as of now ( with two stimulus package and petrol price reduction) is showing signs . Inflation has come down. The full impact is yet to be seen. A third stimulus package is on the cards. So relax.. Our policy makers are much better than our counterparts in other parts of the world.

India is having spill over effect. Not a recession. True , our economy has slowed down. From an extremely robust GDP growth of 8-9% we now predict 6% . But that would still make our country one of the fastest growing economy in the world. Only India from the so called BRIC (Brazil,Russia,India,China) nations is faring well compared to others.

But remember in economics and finance, as in other aspects of life the rule still holds water – What goes down should come up. And what comes up , should definitely go down” . Be it Sensex, economy, failure, success, happiness, sadness, love, hatred ..  You can just play the game of the gods..

As one great poet cum dramatist so aptly put ” the world is stage …. ”

I realize this is a very long post. Might be boring for some. But I have tried to put facts and my thoughts in a very simple way. I am no economist and will gladly accpet that I am wrong if proved so ..

I welcome your suggestions and ask those who read to spread the word around if you see merit in my opinions.

Also, check this article,China and India : Suddenly vulnerable , from Economist on what they think about the effects of global recession on India and China.

Budgets are boring – How can we make it simple and efffective

13 Dec

budget

Just a random thought…

Have you ever wondered why your friends never sit down to watch the budget when presented in the parliament?
Because it is too long , too boring and with lots of technical economic jargon.

The budget is for the common man. And most probably the common man of India will fall in the bracket of 21 years – 35years. Unless he is married , a young college going or just-started-working guy wont bother to watch it.

Wondering why FM’s have to give us long and boring budget speeches and waste time?

Here is what he can do :

  • Give a ppt presentation covering the important points. He can just give the Income and Expenditure of the Year, then move on to point out what was the amount collected last year and what is to be allocated for each department in the forthcoming year. Simple one point and the amount highlighted. This should not go more than 30-45 min.
  • Start a website dedicated for Indian budgets alone ( with archives) and make it web 2.0 friendly . which means, make it interactive using RSS feeds, forums , blogs etc . The site content can be moderated by a young techie guy. He should be completed briefed thoroughly on what to be said and what not to be said in the website. You can find numerous such talented tech/management guys via civil services exam . Make sure you pay them good.
  • The minute the Budget gets over, digitize the entire contents online for everyone to read. Make sure the language is clear and simple to follow. The website can also have pop up tabs over technical words so that a 21 year old arts student can understand what the budget means to him.
  • Open tabs to give info like this ” what the budget means to students” , ” what the budget means to the senior citizens” .. one can work out the modalities later.
  • Let the government invite people from Finance Ministry, Planning Commission etc to contribute articles on what they think about the budget. This will ensure a dialogue between the common man and the ministers.
  • Use twitter ( profile created by the govt) to send real time info to everyone in the web. use other micro blogging tools as well.
  • Most of the Babus in the cabinet are not exactly net savvy. No problem. Once the Budget is done, distribute copies of the entire budget with the intricate details to the opposition parties and all other concerned parties and one copy to the press.
  • Budget can be made less boring, more informative, reach more audience and entirely fun and hence more effective and accountable if we can combine knowledge and technology .

what are your thoughts ?

If you like this post , I would like you to spread the word by link back to this blog or bookmark it.