Recession – Causes and solution – Rajendra Pratap Gupta


India & Recession – Why & When

It is more than one and a half year that we have heard and read about recession , slowing economy, reduction in industrial output , high inflation , negative agricultural growth , voluntary cut in production , lay-offs , reduction in wages , shutting down of companies etc . Prime Minister and other ministers kept assuring that we are a decoupled economy with very ‘strong fundamentals’, and that India will not be affected. In the interim budget they did not give anything as ‘Stimulus’. Suddenly, when Standard and Poor down-graded our economy ratings to one level above ‘Junk status’. Overnight, the government announced a stimulus for the economy, and still keeps saying that, the economy will grow around 7 %. Personally, I am compelled to be optimistic, as I can’t afford to see my colleagues losing jobs, factories shutting down, people dying of hunger. A country with a billion populations fights a blame game. Government will finally put it on the global crises. But India was supposed to be a self reliant economy? Right? So are we saying we are beggars to the world and when the world goes belly up we will be reduced to what we are? Shame on the politicians who are liars of the highest order and distorting facts

There are five big questions that need answers from all of us and not just the government whom we have voted to power. These questions are related to the so called recession

1. Why it happened
2. Who failed us or who let us down
3. Where are we today
4. What is the solution
5. What we can do to prevent the same

Why it happened?

Congress ruled India for around 50 years .They gave us the infamous license raj, where it was difficult to produce without a license, available only to a select few. Outcome , politicians became rich , corporate houses became richer and the masses in India remained poor. When it came to voting, it was easy to ‘Influence’ and ‘Buy’ votes by offering ‘Daaru’ and ‘Sarees and cycles’. 70 % of the population lives in villages and they are the people who count when it comes to voting, and not people like you and me who read these blogs are merely 40 million in a population of over 1000 million?

In the 1990’s, our economy’s balance of payments situation became worse and Manmohan devaluated the currency twice and opened the economy to the foreign sector. After that, there was no looking back. Our immediate problem was solved but long term problems started. We started measuring our economic strength in the foreign exchange reserves in the country. These foreign investors also got into the stock market. Over the years, we got a very high Sensex- 21000. WOW!

As a result, Mukesh Ambani became the richest man in the world (albeit for a few days!!).

Just a few Indians who left the Indian shores for abroad and made it big ( V.S.Naipaul, Amartya Sen , Indira Nooyi , Arun Sarin etc..) or Arcelor , Tetley, Land Rover & Jaguar , or Corus acquisitions . These were merely aberrations. In India, where 16 % of the world populations reside, why do we not have 16 % of the top executives and 16 % of the top class firms in every sector? So these achievements were not a part of the Indian government’s plan or strategy. Clearly, these were a few aberrations and we arrogated them to India coming of an age. If you are asked about five top Indian names in the global corporate sector, you would find it difficult to reach the number. If you were asked to name five Indian fortune 500 companies, you would start looking at the wall. Is this what a land of billion minds should have produced? So we went wrong in our human resources management

We measured India with how many contracts Infosys or Wipro’s signed in Europe and India, how many call centers started serving US and European clients, and how many dollars got invested into India.

On the other hand , Ambani’s , Birla’s & Tata’s were looking at these ‘News’ and assuming that the entire India is growing fast . The reports that Indian government churns out is nothing but a bunch of information that government wants the public to know ,so that the government remains in the good books of the public and makes it win the elections and give it another term.

While Manmohan had opened the economy, he did nothing for farmers or small scale industries or BPL people. The result, we created a huge disparity in the income generation and spread. This was the sowing of seeds for a long term economic failure that our economy is facing today. Ideally, 25 out of the 100 richest people should have been from India, 100 of the fortune 500 companies should have been from India and 50 % of all patents should have been from India. Our billion plus population is for a mere statistics. Actually, our effective population is not more than 150 million. Rest is mere numbers or rather they have been just treated as numbers. I recall a definition of a politician ‘One who promises to protect rich from the poor and poor from the rich on the pretext of extracting money from the rich and votes from both’

Who failed us ?

Government did not fail alone. Media, in my belief, which is the teacher of modern society failed by selling its ethics and focusing on yellow journalism. Most of the top journalists are known to enjoy privileges and selling their conscience to others and write what their ‘Actual employers’ pay.

Judiciary: I read a day before yesterday a judge having said that, they should not equate to politicians & judges should not be asked to disclose their assets. SHAME ON YOU MR. Judge. Hopeless is a charitable word to describe judiciary in India . All the pillars of democracy have failed as judiciary is corrupt to an extent of over 90 %. Can you imagine the rot when a judge issued the summons to the President of India, Dr.A.P.J.Abdul Kalam? What worse can you imagine? If the president can be a victim of this inefficient judiciary what can a common man expect? If the judges have any shame they must quit en masse! You are a bunch of corrupt and inefficient people on the tax payer’s money and you don’t want to disclose your assets? Why the hell you want to keep them secret? Tell me a reasonable cause

Could you not try cases related to political corruption on priority things would have been different. But these greedy judges are not worth trusting for any worthwhile things for a suo moto action. They just keep passing judgments that gives them publicity.

No one trusts the government; everyone fears the judiciary and enforcement agencies. In all, the system has failed to deliver. I am not commenting the education and healthcare system as they don’t exists in the country

In all, I believe that our education system & more importantly teachers, media and judiciary have failed and delivered a fatal blow to our democracy

Teachers should be blamed for not being able to inculcate values amongst the students

Where are we?

A country is as strong as its citizens. When more than 80 % of the people are struggling to earn a two meals a day even after 61 years of Independence, have we gone the right way?

We are today in midst of two serious crises. One is the economic crises and the other is political crises.

Economic crisis can further be divided into two.

First, the one that has resulted into wrong economic policies blindly focused on FDI inflow and on making India a body shopping country. Also that, Indian government did not focus on developing the agriculture, infrastructure, SME, Retail & research based education. This had created a ‘Big economic divide’. Our politicians did not realise that the capacity building that could have resulted on building these sectors could have catapulted India to a different growth trajectory in the last two decades.

Second is the one that has been due to FDI, stock markets and the so called retail revolution. This was limited to about 35 towns directly and indirectly this gave employment to a lot of rural migrants. Knowing well that, most of agricultural families also depend on the members that work in towns and send money back home. These people have been affected due to reality and retail sector that is slowing down. All these are having a cascading effect.

Most important : Every one , right from the Reserve Bank governor to PM says that the worst is yet to come but they don’t tell what is the worst and when it will come and what is the solution ? It is like an astrologer telling you that you will die. Everyone dies one day , so what big a deal to tell that ? One should be able to tell when and how will you die .

I believe that , We are actually nearing the mid of recession cycle, and we will come of it in another year and a half.

Political crises: For more than 50 years, our country has been ruled by Gandhi family – A family of Kashmiri Pandits. This is enough to understand their commitment.

Who took the Kashmir issue to UN? Jawaharlal Lal Nehru, and we blame Pakistan for internationalizing the issue? Learn history

Congress lead by Gandhi’s has created a vicious cycle. Even today, Sonia Gandhi is the Chairperson of UPA, constitutionally authorized to oversee the implementation of CMP. Why these dual centers of power? Ideally, the Prime Minister’s role should not have been decimated. Why in the first place this extra authority created? Gandhi’s love for power is not hidden and they will keep away anyone who comes in their way. Gandhi’s have never allowed anyone to be number one in the party or politics. Whether it was Sharad Pawar or anyone else. No matter what. Also, that they have paid the price for this? What the Gandhi family is doing is against the law of nature. Power is like sand being held in the fist. The more you tighten the fist, more the sand will flow out. I would not be shocked if the family suffers a few adversaries in the times to come. They have always paid the price for their misconduct and the country had paid more …………………..Till the country gets rid of this family in politics, nothing can change.

Also, every Indian citizen has failed by not being active in politics and just making politics a tea table and road side discussion item. It is such a serious issue and has been treated casually by the Indian population.

What is the solution?

Complex problems have simple solutions – Read my earlier blog – An open letter to the PM.

Economic crisis has a political solution and political crises have an Economic solution.

First thing that needs to be done is to cut interest and lending rates in one shot and not in installments. I have been telling our PM since last year that we don’t need ‘Baby steps’, we need firm and drastic measures

Secondly, we must announce massive investments in infrastructure, Education & Research and IT (Government should set at least 100,000 IT kiosks as Government’s touch points for public access). The work should be given to IT companies of small and medium scale to retain the young IT talent.

FDI In retail should be discouraged and stopped immediately. We need an Indian version of FDI – Finance from domestic institutions.

Agriculture should be given a big push with incentives for organic farming & cash crops. According to NSS (National sample survey), even if one works for a day in a field, he is a farmer!! Which inflates the number of farmers in the country?

Five sectors can relieve India of its miseries; Infrastructure, Agriculture, Education, Retail & IT. Fortunately, we are at a nascent stage in every major sector . Be it agriculture , SME, Retail , IT , Automobiles, industrial growth , urbanization etc . In the US , the problems are of plenty , saturation & wastage . We are just at the reverse . Whilst US might find it difficult to protect and grow , we can log on to a massive growth with the right initiatives . Infact, India and US are at the two extreme ends of the growth cycle. All sectors in India have a potential for phenomenal growth. The 800 million Indians have to be made earning class and a spending class, and this one thing will take India to a 10 % + growth for the next twenty five years . We have a long way to go . Right governance can help us . NREGA Is not the right solution for a long term growth

Where will money come from?

What do you do when your family gets into financial problems? You sell a part of your assets for temporary relief and buy them back or buy better things in the good times or when the financial condition improves

India needs to re-look at the ‘Navratnas’ and dilute the equity and follow a moderate privatization drive to raise money to invest in the five sectors mentioned above. This is the way India can come out of the recession faster and build an economy with 8-10 % GDP growth every year or more.

India’s parallel economy is much bigger than the economy of taxes ( Black money economy is for sure a lot bigger than our 1000 Bn USD economy ). This money needs to be brought back and invested . I am not at all mentioning the money hoarded in Swiss banks and other heavens. All this can solve India’s problems today evening. This is a must , if we want to build an economy based on solid Economic and social foundation.

Lay-offs are one part of the problem what about the fresher’s who are struggling for jobs. We need to create more job opportunities. No one seems to be addressing the issue knowing well that, we will have more 10 crore people who will get hunting for jobs in the next 5 -10 years

Defence spending should be cut and the same be invested in infrastructure. The defence strategy should be re-looked and reworked

All tenders for house-keeping, parking stands, vendors in public places and railways etc………should be reserved for both educated and uneducated youth irrespective of caste but on financial background

We must have guidelines where we build economy on 40 % services, 50 % manufacturing and 10 % on global trade. We must never exceed exports more than 10 % of our GDP

Need driven services never go slow or out of business? Indian economy must be ‘inward looking’ and should be build on essential services and these should not be imported. All the national demand should be met by domestic producers. Need driven sectors like agriculture , FMCG, Healthcare ,textiles , processed food , Education , Oil and natural gas should be country centric and needs more thrust for explosive growth .

Any tender worth 500 Crores or more should not be allotted to bidders who have a manufacturing outside India. This will increase capacity building within the country

Seeing that it is recession time, the EMI of housing and vehicle loans for people who have lost jobs should be adjusted for at least two years. If the loans of 65000 crore can be waived for an income class that does not pay income tax (farmers). Why not give a moratorium on payments for the income class that pays tax. The two years EMI that are deferred for payments should have the interest based on the PLR or at reduced rates.

Every Indian needs to spend 10 minutes a day for politics and community work – An hour a week. Go start a neighborhood-nation building programme to ensure good governance. Rest I will add in my next blog

There are three sources of growth for an economy, increase in capital, and increase in labour force, and improvement in productivity. We will have to address all three

There is a difference in Economic growth and economic development. Economic growth is purely GDP but economic development is a broader concept that includes not just GDP but also indicators like social justice , income distribution, political freedom, pollution , Equality of income …………GDP captures average national income , but do not reflect how that income is spent.. Even increase in aids and cancer incidences in the country will add to the GDP expenditure on health services , Also, calamity will lead to the increase in GDP due to increase in reconstruction activities.

Moreover, GDP growth rate is inadequate measure of growth as it is calculated largely on the basis of rate of growth of income of the upper 20-30 % of the population who receive disproportionately large share of income. It calculates only money transactions and leaves many important activities and social measures and conditions like adult literacy rate, life expectancy and HDI rank

We must change our economic measurement methods from Economic growth to economic development

India needs to re-look into the growth measurement model. We have a solution for economic crises. We need to act fast and grow faster. Rest in my next blog

Good luck

Rajendra Pratap Gupta
President
Country First
Mobile:
India + 91 9323109456
Email: President@countryfirst.org / mail@rajendragupta.org
http://www.countryfirst.org
http://www.linkedin.com/in/rajendragupta

Advertisements

5 comments

  1. nnaemeka chukwu

    wat u said about economic recession is true.Can u help tell me how political prtoblems can be solved?your reply is highly expected.thanks

    • Rajendra Gupta

      thanks for reading the blog and the comments . As far as i recall , i had posted a solution on the blog . Might be i deleted it after the election results were out.

      I shall collect my thoughts and post it on the blog soon . Please bear with me for some time as i am travelling till 12th . Thanks for your patience and understanding

      Best regards

      Rajendra

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s