Tag Archives: recession

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.

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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.

IPL disgust – Capitalist Morons – why i will never watch IPL matches

6 Feb

I feel revolted when i see cricket  players being “auctioned” and bought for IPL matches.

How is it that the people who are involved in bidding and buying players have the heart to dish out crores of money to buy players when common people across the country…nay world ( because even foreign players are involved) are loosing jobs or tightening their wallet due to economic slow down ?

In December we witnessed one of the most dastardly terrorist attack the world has ever seen. Hundreds died, still you have hundreds  in hospitals recovering from their injuries , some are still in trauma caused due to the tragedy .

And yet, here we have a group of extremely wealthy corporate assholes paying huge chunks of money to play 20 overs cricket match.  Basically you are just blowing away crores of money in matter of hours.

What i don’t understand is how can Vijay Mallya pay Rs. 7cr on one side for just one English player when  his KingFisher airline is making huge losses and owe the government 100cr on airline fuel charges?

Get this straight ! That 100 crore is not any body’s but our money . Suffice to say he owes people like you and me and the rest of India  Rs100 cr and plus. It our  money –  what we pay to the country in the form tax, guys!

But he is not at fault . The fault is completely ours. We are not proactive. And that includes me as well!

If I was proactive I would have asked him , ” dude!  who the fuck gave you the right to buy another “human being” , when you don’t have the decency to pay back what you owe the government ?  or at least invest that money in improving the efficiency of your company so that you don’t have cut jobs tomorrow ”

I so wanted to ask Mrs Ambani , ” Just because you eat, sleep, drink, swim money , how is that you have the heart to be so bloody ostentatious during such difficult times ?  You live in Mumbai, don’t you ?  what have you done for the injured or the family of the martyrs of the terrorist attack ? ”

To Ms Preity Zinta –  ” That’s right! you have become too old to act as a heroine. Accept that fact. You don’t have producers lined up outside your door to sign up movies. Tough luck! but that is how it is . Use money wisely .. Just because your bf is coming from a wealth family , doesn’t mean that you…. you get the drift , don’t you ? ”

To Ms Shetty –  ” You suck ! how long are you gonna flaunt you Big Boss win ? How long are you gonna live under the assumption that people in India really give a hoot about you ? ”

In the olden days wealthy merchants used to buy slaves and prostitutes from the market . Slaves for hard labour and prostitutes for the obvious reasons. Irrespective of the economic situation around them , they continued to eat, sleep, become fat and have a gal time with women.

How different is that from what is happening today at the IPL auctions ?

Here are my questions to you ?

Why are you watching these matches , just to increase TRP ratings and waste your time only to re fill the pockets of these morons ? Why not use that time to go out and play a match with your friends ? That way you excerise your body!

I am not saying that you should stop watching cricket , but hey ! there are other sports in the country too. There are other players looking out for support from you as well .

There are other players in the arena from other sports who are not asking for money but for appreciation. Who are not seeking brand ambassador tags but money for training and infrastructure.

Simple case in point – corporates chased Sania Mirza not only for her win in Wimbledon but she is considered “hot” and “sexy” . Vijinder Kaur looks like a “model” hence he get brand endorsements .

What about other players who won medals for our nation during the Olympics . Sure you said , ” I am proud of you guys”. After that ? Everybody forgets !

We should be ashamed of ourselves, no?

It is ironic that a boxer whos sport is of destructive nature endoring a insurance product ?

So, ask yourself this question – ” how skin deep and money minded am i ?”

And  another culprit is the media. Ndtv is so jobless that they dedicated a show just to bring in the bidders to talk /discuss about why they paid so much money and blah … blah .. Nonsense . What is there to discuss ? They came with money, they falunted their wealth , bid like it is done in a market and went home with a bunch of slaves. And yeah, they appeared on TV ..  The same goes for other tv channels  as well .

I have decided never to watch 20/20 matches. I feel used by the capitalist assholes . I am too intelligent, too smart and have too much diginty to fall for this bloody money making game.

Sure , money is important. Not advocating to stop wacthing cricket matches or stop cheering the cricket team .But there is a limit to everything !

I suggest you guys do the same ! It is only a suggestion , though

Understand one simple thing – end of the day everything is about how many ads were aired, the TRP raitings and money generated. It is not about the game !

Why

Insipring article on rural bpo in india

29 Jan

yesterday’s editorial by Rasheeda Bhagat – Where money has new meaning , which appeared in Business Line has become one of most inspiring and important article in my life.  it practically changed the way i treat a BPO/Call Centre employee and more importantly it once again showcased  the power rural Indians have in shapping our country.

i request anyone …nay .. everyone who reads this post to follow the article link and the read it. that is not enough.  Pass on the post/link to your friends , relatives, managers where you are working and let them know the potential of rural India.

why is the post important to me ? you need to know my insignificant story first .

the story :

on the first week of Nov 2008 i quit my job at the advertising firm where i was working. i quit suddenly .. just like that ! one reason was due to a pressing  family emergency which i cant write it here for obvious reasons. the other was because i started hating the job. it wast not like that before, though!

i used to love the advertising field. i used to dream of working for an agency  for couple of years, finish a MBA degree . then join main stream marketing , enter Brand Management field with specialization in digital media communications. I was clear in what I wanted to do . But working in the company for close to 5 months I just got too stressed out. I dint have time for my family and friends . Even more alarming was that I dint have time for myself. working Monday to Saturday from 9 am to 9pm drained me out so completely that I was too exhausted on Sundays to do anything. I couldn’t read a book , felt lazy to go out and meet friends, dint have time to visit British Council library ( i used to go there every Saturday for 3 hours from 4 pm to 7 pm ).  i was tired to get up early morning to go out for a run/gym/yoga/meditation etc .. i just couldn’t .. so i quit! Call me a wuss but hey .. I have no regrets .

Today I believe that core marketing and PR has better chances revolutionizing brand management theories than advertising can ever do. I am looking to enter the Afro mentioned fields.

3 months hence I  still havent joined a new company yet. worse ! i dont have money to pay my credit card bills. now comes the call from bank bpo employees cordially asking me to pay my minimum due amount. i tell them i cant pay because i am out of work . i will pay it later with the interest .  but when they keep calling , i get irritated and blast them. i forget for a minute that they are just doing their jobs. they are collection agents and they have to collect and close accounts every month  which are due on late payments.

I forget that they could have been Shahida!

after reading the article yesterday, i realized i could have blasted Shahida or some one like her and now i am reeked with shame.

so .. who is Shahida ?

you will meet her when you read the artcile . here is a snap preview of her …

name : Shahida – age: 25 – location : Tirupathi (A.P) – education : B.A Economics , Telugu medium – occupation: bpo employee at Atlas Documentry Facilities Company Pvt Ltd started by HDFC bank – job profile : backroom processing of banks data’s in fuctions as opening of new accounts,credit card related information,foreclosure of loans ,etc.

pay : rs3,700/month – expense : Rs2000 sent to parents,rs 1,500 for hostel and lodging – for personal expense : rs 200 ( balance amount) – other income : after work shift , she makes 3oo rupees from weaving embroidery sarees.

Total amount on hand : Rs 500/per month.

Money sent to parents which helps in paying for her 2 brother’s college fees – rs 2000

her father earns – rs 60-70 a day .

Compare that with mine :

2-4 movies per month at Satyam Cinemas ( when i go with a friend or with my girl friend ) : rs 500 ( tickets alone)

a meal for 2 at Subway – veg patty sandwhich – rs 201- includes coke under “special offer” scheme . I go there almost every week.

other expenses – very very studpid unnecessary expenses – rs “more than 3000” .

Does that mean, I could /can help educating 2 young guys every month by paying their college fees ? does that mean i can uplift India in my own way in providing education to these students ? Does that mean, if I sacrifice a bit ( do i really have to watch 2 movies every month and eat at subway every week ?) i can make differece to a fellow citizen ?

Do the math and find out how much you are wasting …

And if HDFC or other bank’s marketing people are reading this post. I would like to ask  – why dont you take initatives and reach out to people like me directly to fund education of students – like that of Shahida’s brothers?  I am ready ..

As a customer/client I am ready . The question is whether the people from the bank/govt of india core management team ready to bring out innovative policies to tap working class people like me from urban india to educate the rural india.  I will never call them poor. They are more hardworking, more resourceful, more dedicated than most of us ( including me). They may not have money but I dont give a rat’s ass to money if you have diginity .

This is my clarion call to all the banks in India.

Here is an important line from the article which shook me to the core and changed me as a person.

” They have to fight for what most of us take for granted- a college education,a secure home loan, enough food on the table and a job in an air conditioned office…”

My Salutations :

to Shahida and her coleagues in that bank : My humble pranam to you . you inspire me in a way like no other other “self help” books or the monks who sold their ferraris. from you i realize the value of hard work , money and pride. if you ever read this post i want you to know that you have my sincere admiration and respect . you rock !

to HDFC bank : I am not your customer . I dont know how good is your service to your customer. I won’t comment on that. But this initiative you have undertaken – Kudos to you!  Great work and i wish you guys will go ahead and replicate this kind of work all over India.

I second what Mr.M Durgaprasd ,Assistant Vice-President and Head Operations (BPO), “……. I find them sincere,disciplined and hardworking”.

to govt of india :  most of the policies introduced is rampant with corruption. consider : the amount of money politicians would have pocketed set aside for NREGA.  But the EGMM ( Employee Generation Marketing Mission) initiative is something you will have my complete support.

most corporate look at rural india from a CSR perspective. it is nothing but one form or sympathy and empathy. people from rural india are not looked as someone who can bring in money for the growth of the company and earn a livelihood for themselves . Instead , companies open such initiatives and give it a CSR tag. I think that is stupid. given their dedication to work,opportunity for self empowerment and at the same time contribute to the growth of the company in terms of good service and revenue generation , corporate india should consider them at par with other employees from urban india.

that is why i always consider c.k prahald’s book – fortune at the bottom of the pyramid very important in its concept and execution to change  India.

I have earlier 2 articles on this :

About time we looked at rural india

Is india still in recession

Spread the good word !

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.