Category: corruption

Food Security Bill – Another bill for poor and dollars for congress


Please ask the Hon’ble PM to give a statement on a scheme similar to the Food security bill launched with much fanfare in 1975 to reduce malnutrition . This scheme was called the Integrated Child Development Scheme (ICDS) . It has been around for the past 38 years and now again another bill to remove malnutrition ?  Despite this scheme being around for about four decades, the scenario is as mentioned below ;

It is a matter of serious concern that the mean per capita consumption of calories has never crossed the minimum threshold  for intake ( 2400 Kcal in rural and 2100 Kcal in urban areas), and still about 3/4th of the households do not consumer the minimum calorific intake (Dr.D.K.Taneja, 2013, p. 21)

Protein Energy Malnutrition (PEM) most commonly prevalent in India . 45.3 percent of children under 3 years are under weight as per NFHS -3.  Also, as per NFHS-3 , 33 percent of adult women and 28.1 percent of adult men have below normal BMI (Dr.D.K.Taneja, 2013, p. 301)

According to the information procured from the Ministry of Women and Child development via RTI through their letter dated 25 July 2013 ( F. No. 10-1/2011-CD.II(Pt.II)

Total money spend in 11th plan on ICDS was Rs.43829.53 Crore

Total money spent in 2012-13 is 15701.50 crore

During the 12th Five Year Plan, a total approved allocation of Rs. 1,23,580 crore has been made for the scheme. Any additional requirement of funds under ICDS Scheme can be met through Supplementary Demands for Grants and savings. ( Source http://pib.nic.in/newsite/erelease.aspx?relid=93731 )

I think food security bill means  ‘another bill for the poor and dollars for the congress’ .

This bill might be another money-making scheme in the name of aam aadmi .. Already, all the FM channels have been bombarded with advertisements for the Food security bill making the intentions of congress very clear that this is a poll gimmick

Rajendra Pratap Gupta

http://www.commonmansblog.com

India entering a phase of recession


Recently , very few people noticed a four line news that , Moody’s Investor Service downgraded the so-called financial strengths ratings and the baseline credit assessments of;

1. Bank of Baroda

2. Canara Bank

3. Punjab National Bank

The outlook on Union Bank of India has also been changed to negative .

This is the first indicator of ‘Gloom & Doom’ that is set to hit the economy soon. Somehow , India has missed the recession in 2008 , but India will now enter into recessionary phase that is likely to last between 3 -6 years .

Somehow , the investments that came due to ‘overselling’ the India story like the SEZs, power plants , airports are fading off and most of the infrastructure companies are under a huge pile of debt. More NPAs and job losses will follow .

I see that not a single politician or an economist can put his head out and speak the truth that India is hitting a phase of recession ( probably , they do not know it , like the American crisis ). From a high of 9 per cent growth , we are already down by 45 % in our GDP growth . How else do we define recession ? Are we already not into a recession with companies laying off people every month and our growth slowing down by 45 % ?

Let us accept the situation and plan now. Else , India will be headed for an unprecedented crisis. I am not more worried with 2014 election as much as the rapidly falling economy . On many occasions ,i have pointed my friends across political parties that they would be better off losing 2014 elections than winning them , as there is enormous crisis to be faced, and a lot of dirty and hard work to be done to reverse the falling fortunes of this country and it is not going to be an easy 2014 for politics and politicians .

Let us consider this situation ;

India needs foreign exchange – USD . This can come due to ;

  1. Exports
  2. FDI
  3. Reduced imports

Now , exports might start shrinking or remain the same , so not much can be done on that front .

FDI comes in India for

1. Either setting up manufacturing

2. Investment in corporates / stock markets

All the money that comes in FDI needs to produce profits due to either exports or domestic consumption . Both are not going to happen the way investors look at ROI or IRR on their investments as the local consumption story is missing . India has already passed off 100s of millions of poor as ‘middle income aspirational class wanting to spend’ , and this was the biggest fraud of Sonia & MMS led congress government and 100s of corporates have lost millions of dollars every month and are now exiting India or slowing down

Only way the foreigners can make money is dabbling billions of USD in stock markets . So, now FDI’s constitute 11.2 % of GDP in India (2011-12) , and FIIs can play a spoil sport for Indian Economy and generate a balance of payment crisis in any trading hour !

Also, how i could i miss writing about another direct cash transfer scheme of Congress ! Party has got a new way to make money ‘ CSR spending’ under the new companies act .Now politicians can ask corporates for CSR spending and bang ! You know why this bill got passed so easily. And if i am a corporate and i wish to get a license or avoid something  OR  seeking favours like Robber Vadra,  i will give money under CSR to a politician’s NGO….. Wow , another MNAREGA, NRHM and a wonderful legal cash transfer scheme , So who says that XYZ paid bribes , now you cannot prove it , it was just a CSR spending . So, corporates , what are you waiting for , come buy your Rajya Sabha seat , it just cost 100 crores in CSR spending ! Come and block your seats now , it is election year , and sweet -legal deals available through all state leaders and through various national schemes , we have legalised bribes and you have an option to chose your preferred medium . Hurry, this is the last congress government.  Hurry up, come , before we run out of time as Elections are  likely in November

BTW, time for any sensible politician to come out with a job creation and wealth generation model for India before thinking of FDI or going back to 9 per cent growth

Earlier we realise , the better it is . India is into a recession now !

Rajendra Pratap Gupta

http://www.commonmansblog.com

Indian Economy – econoquake waiting to happen, with disastrous seismic cracks


Indian Economy – econoquake waiting to happen, with disastrous seismic cracks

It is a known fact that when symptoms become visible for a chronic disease, complications are tough to treat and the disease is in an advanced stage, but if the disease is diagnosed in earlier stages, the diseases are easy to treat and cure.  In India, now symptoms like fiscal deficit, current account deficit, increasing NPAs, inflation, unemployment, lack of investment sentiment, withdrawing of investors etc. are symptoms of a economic earth quake (what I call as econoquake), and it is like a disaster in slow motion for India.

The Indian economy has passed through its worst phase after independence since 2004 and the rot continues to grow.

USD vs INR

Here are some symptoms that tell how serious is the disease; Indian rupee was trading at 8 Rupee to a dollar in 1973, and has become Rs. 60 to a dollar.  Does it not indicate that valuations of this country, and the fact that the economy has weakened by about 750 % in the past 40 years!  Ideally, we should have grown and become 1 Rs. to 1 US $, but the poor leadership from these ‘Text Book economists’ (Manmohan Singh, Chidambaram, Montek, Subbarao) have brought down this great nation.  Let us analyze a little more in detail

All the data or facts I am quoting are from credible sources and are publicily accessible . (http://blogs.economictimes.indiatimes.com/Whathappensif/entry/rbi-data-shows-how-upa-killed-the-rupee?fb_action_ids=10151534667996725)

foreign-debt-trebles-in-a-d

If the 10-year RBI data on short-term foreign debt is analyzed, it is fairly obvious that the UPA destroyed the value of the Rupee.  In 2004 when the Vajpayee Government was voted out, the foreign debt at $ 112.4 billion was well covered by the forex reserves.  Nine years later it has grown by 350 percent to $ 390 billion and the forex reserves cover falls 25 percent short.

over-50-percent-debt-is-sho

However the rise of foreign debt is not the only reason why the Rupee collapsed from Rs 39 to a dollar to Rs 61 for a dollar during the intervening period.  Foreign debt is a necessary evil that is needed by developing countries to push forward their needs to fund foreign capital funded infrastructure.  Usually such addition of infrastructure results in long-term asset building that adds to improved productivity of the nation.  However in India’s case the rise of external debt has been primarily to fund the current account deficits catering largely to the working capital needs and funded through the short-term loan at higher interest rates.  This short-term debt component was very comfortable at just 3.9 percent of the Forex reserves when the NDA was voted out of power nine years ago.  By 2009 when the UPA II was re- elected it was around 17.2 percent and by March 2013 the short-term external debt rose to a whopping 33.1 percent of the Forex reserves, which had fallen to $ 292.65 billion.  With the reserves further dropping to $ 280.18 billion following RBI’s intervention to stem the Rupee slide in July, the ratio would have worsened.

Debt 1

Short term debts and the External Commercial Borrowings that would need repayment during this FY 2013-14 is high and would cause large outflow of dollars and put pressure on the currency intermittently.  For example during May 22 and June 19 there was a net debt outflow of $4.7 billion, one of the prime reasons why Rupee tanked.

These ECB’s and short-term debt have grown to an enormous 56 percent of the total debt by March 2013 almost 2.5 times what they were when the UPA came to power nine years ago.  As per RBI data short term debt payable during this Financial year is $ 96.7 billion while ECB’s with 6 month to 1 year maturity that need to be repaid are around $ 21 billion, and NRI deposits maturing during the year are $49 billion.  The Rupee is catching a cold because the total foreign debt to be repaid this year works out to a massive $172 billion that is around two-thirds the foreign exchange reserves.  Even if interim measures to stop speculation are taking by the RBI it will not address the inherent weakness of the system.  Rather it may enhance volatility, as speculative traders if restricted will move offshore to short the Rupee.

USD vs Chinese Yuan

Similarly, if we compare our neighbor, China with larger population, Chinese currency has become strong.  Though, I must admit, it is not a fair comparison!  But the essence is, India is also intervening to control the rupee and Chinese central bank also intervenes, but I guess they have done a better job and the Chinese currency has strengthened compared to US dollar over the past decade and the Indian rupee has not just been weakened, it has been ‘hammered’, and continues to be the worst performing currency in Asia.  We can compare Malaysian Ringgit, Singapore dollar or UAE Dirham.  All these currencies have strengthened against the Indian rupee

Why rupee will continue to fall?

Domestic markets are failing.

CDR gives an indication that the corporate sector is crashing!

http://www.livemint.com/Industry/h7u6wQngeSZ6jL8MfCBpGL/Restructured-loans-cross-227-trillion-pace-slows.html

The latest data from the CDR cell suggests that Indian banks added Rs. 15,016 Crore of restructured loans in the March quarter, about Rs. 9,000 Crore less than what they had done in the pre ceding quarter.  On a cumulative basis, total restructured loans crossed Rs. 2.27 trillion, or 4.4% of the total loans given by Indian banks.

Gross non-performing assets (NPAs) of 40 listed Indian banks rose to Rs.1.79 trillion in December fromRs.1.25 trillion a year ago, an increase of 43.1%.  In the past, the Reserve Bank of India (RBI) had cautioned banks about the need for enhanced risk assessment tools to monitor loan quality.

Defaults in Agricultural credit in another bubble?

http://www.livemint.com/Industry/ph30HumD1FPAGaBj0XCOyH/Kisan-Credit-Cards-Bad-loan-bubble-waiting-to-burst.html

A surge in exposure to farm debt through Kisan Credit Cards (KCCs) could emerge as a risk for India’s state-run banks, according to experts.

Subsidized loans are given to farmers through KCCs by state-owned banks.  Until March 2012, the outstanding amount on such loans was Rs.1.6 trillion through 20.3 million cards, as per the latest Reserve Bank of India (RBI) data.  This may have risen to around Rs.2 trillion, bankers said.

Agriculture is one of the largest sources of bad loans for most banks.  It is contributing 9.72% to the gross NPAs of SBI and 7% of Central Bank of India.  The nation’s largest lender SBI has the largest gross NPAs —Rs.53, 457.79 Crore, or 5.3% of loans, followed by Punjab National Bank (Rs.13, 997.82 Crore, or 4.61% of loans), Central Bank of India (Rs.8, 938.47 Crore, or 5.64% of loans) and UCO Bank (Rs.6, 711.29 Crore, or 5.53% of loans).

FDI is like mirage for UPA

Government’s efforts to promote India as an investment destination does not seem to be yielding fruits as FDI inflows registered 38 per cent decline to $22.42 billion in 2012-13 compared to the previous year.

It is clear that the UPA government is on the ventilator and no sensible MNC or investor is going to even announce investment for during this government.  Knowing well, that the next government will certainly not be either from congress or due to its support.  That is one major reason why we have seen in the last week POSCO cancelled its Rs. 30,000 Crore steel plant on July 16th, L.N.Mittal cancelled its Rs. 50,000 Crore steel plant on 17th July 2013.  This is a loss of Rs. 80,000 Crore worth of investment committed to India.  Normally, when the government is about to be re-elected, we know that practically, all the companies wants to wash its hands in Ganges, and get speedy approvals for obvious reasons.  A ‘Needy’ political party in power wants to ‘cash in’ and so does the ‘greedy’ corporates.  We have seen how business leaders get national awards like padamshree and padmavibhushan in the election years or the year preceding the election year … but this time, the scene is different.  No sensible business house, no matter how ‘greedy’ it is, will commit any investment before the next general elections.  So, I see no respite to Indian economy till 2014 end or may be, 2015.

FII’s the real culprits for rupee slide?  May be!

FDI Inflows in India and Outflows from India from 2007 to 2012: (amount in US$ billion)

 

FDI Inflows to India

FDI Outflows from India

2008-09

2009-10

2010-11

2011-12

 

2008-09

2009-10

2010-11

2011-12

 

Total

43.4

35.6

27.4

36.5

 

19.3

15.9

15.3

12.6

 

As a % of GDP

3.4%

2.6%

1.7%

2.0%

 

1.5%

1.2%

0.9%

0.7%

 

FDI Investment Stocks

125.2

171.4

204.7

203.9

 

63.3

80.9

96.4

108.8

 

FDI Investments Stocks as % of GDP

9.8%

12.7%

12.6%

11.2%

 

4.9%

6.0%

5.9%

6.0%

 

Country

2008-09

2009-10

2010-11

2011-12

Total

2008-09

2009-10

2010-11

2011-12

Total

Singapore

3.42

2.38

1.70

4.31

11.81

4.06

4.20

3.99

1.86

14.11

Mauritius

11.04

10.34

6.98

8.92

37.28

2.08

2.15

5.08

2.27

11.57

Netherlands

0.85

0.90

1.21

1.16

4.12

2.79

1.53

1.52

0.70

6.54

USA

1.80

1.94

1.17

0.91

5.82

1.02

0.87

1.21

0.87

3.97

UAE

0.25

0.63

0.34

0.33

1.55

0.63

0.64

0.86

0.38

2.51

British Virgin Islands

No data

No data

No data

No data

No data

0.00

0.75

0.28

0.52

1.55

UK

0.83

0.66

0.76

2.75

5.00

0.35

0.34

0.40

0.44

1.53

Cayman Islands

No data

No data

No data

No data

No data

0.00

0.04

0.44

0.14

0.62

Hong Kong

No data

No data

No data

No data

No data

0.00

0.00

0.16

0.31

0.46

Switzerland

No data

No data

No data

No data

No data

0.00

0.00

0.25

0.16

0.41

Other Countries

No data

No data

No data

No data

No data

7.65

3.19

2.65

1.23

14.71

Japan

0.41

1.18

1.56

2.75

5.90

No data

No data

No data

No data

No data

Cyprus

1.30

1.63

0.91

1.32

5.16

No data

No data

No data

No data

No data

Germany

0.60

0.63

0.20

1.46

2.89

No data

No data

No data

No data

No data

France

0.46

0.30

0.73

0.47

1.96

No data

No data

No data

No data

No data

References:

(1) OECD data on FDI in Figures as on January 15, 2013.

(2) Zenith International Journal of Business Economics and Management Research, July 2012.

(3) World Investment Report various issues.

(4) If there are any inadvertent errors in the data, it is regretted

Please see how foreigners are investing money in stock markets, and have taken over 100 Billion USD (108.8 Billion dollars, Which is 6 % of India’s GDP) outside India just in one year (2011-12).

How will our Finance Minister address the Balance of payment issue, which needs 75 billion USD?

11 % of GDP is in the hands of FDI / FIIs?  Are we safe?  Is our growth trickling down or trickling outward?  This is in complete deviation of the path of a self-reliant India propounded by our freedom fighters.  We are not building a West India company on the lines of the erstwhile East India Company?  Time to take a serious look at the data and take concrete actions.  It is a wake-up-call for India

Dr.Akash Mehta compiled this data on FII’s on my request.  Acknowledged with thanks Dr.Mehta.

Vehicle sales – another symptom of the anemic economy

Car sales in India fell for a record eighth month in row in June with a dip of 9 percent as economic slowdown and low consumer sentiments continue to hit demand, prompting industry body SIAM to seek stimulus package for the automobile sector from the government.

With actual sales in the first quarter of this fiscal turning out to be wide off the mark from what it had forecast in April, Society of Indian Automobile Manufacturers (SIAM) stayed away from revising sales projections it had made in April this year and stated that even those targets were unlikely to be met, except in two-wheeler segment.

According to the latest figures, domestic car sales stood at 1,39,632 units in June as against 1,53,450 units in the same month last year.

We know the problem.  So what next?

India has focused too much on FDI / FII’s to bring in dollars, and the capitalists countries are like Shylock (Merchant of Venice).  They will extract their pound of flesh. So, India got quick dollars from FII’s, and FII’s made quicker returns and exited the markets and today FIIs have 11 % of the investment in stocks, as I have given the data above.  The fact is that, a clutch of foreign investors can destabilize India by withdrawing their investment.  FIIs are short-term hedgers and they damage infringe long-term damage to our currency & country.  Small retail investors become bankrupt because of FIIs.  What came out as a myopic solution to our fiscal deficit and balance of payment crises has today turned into a major national security issue?

Economic Competitiveness: We need to focus on economic competitiveness.  We have lost in the last few decades.

Areas to focus, agriculture – we need to amulify agriculture (taking a cue from Amul’s experiment of cooperative movement in milk).  We need to support farmers.  Make a paradigm shift in modernizing agriculture, training, and equipping farmers to set up SME food processing units.  This should make us the top most processed food country in the world in the next decade.  The national highways project of Shri.  Vajpayee (Golden Quadrilateral Project) was the best step taken since independence for inclusive growth, and this must be pursued aggressively.  During NDA regime the road building was 20 KMs a day and under UPA it is down to a KM or two.  The Atal Behari Vajpayee government bequeathed a robust economy to the UPA.  Remember that the growth rate registered in 2003-04, the last year of the NDA regime, was an impressive 8.5%.  Foreign exchange reserves were plentiful.  General prices were well under control.  Share markets were booming.  And there was a general sense of well-being. Work on the Golden Quadrilateral highway linking four corners of India was on in full swing.  And various public infrastructure projects under the Public-Private-Partnership model were proceeding without any hitch.

Now, in the last year of the UPA-II, we are back to the Hindu rate of growth.  If the economy logs anything above 5% it would be a miracle

(http://www.sunday-guardian.com/analysis/back-to-where-the-economy-was-during-the-early-90s)

My personal prediction is, that we will be below 4 % in growth soon if the regime continues the same way and I have predicted it long back

(https://commonmansblog.com/2013/06/04/the-titanic-is-sinking-can-we-do-something/)

Tourism- spiritual tourism – Tourism is the next best bet after agriculture and we must focus on it by innovating in this sector.  I have detailed plan for creating millions of jobs and billions of dollars through employing matriculate youths in this sector.

Intellectual property (IP): India has become a sweatshop and nothing wrong in it, but we need to focus on building IP in science, technology, defense, & agriculture.  It is shame that India has not even built a software platform (operating system) and still relies on Microsoft and IOS.  Indians in software arena should take a challenge and build the best operating system rather than spending billions of dollars buying MS Office and Apple operating system or Google.  We need a search engine developed by Indians.  India spends billions of dollars on universities but the IP registered by just one company Texas Instruments (for the sake of giving example I am quoting Texas Instruments) from its Bangalore office might exceed the patents granted to researchers in Indian universities.  We need a complete over haul in our education systems that give the world the most valuable IPs, which can be monetized.

Geographical indicators (GI’s): We all are aware that many Geographical Indications like Darjeeling Tea, Mysore Silk, and Champagne across the world have become premium global products.  While protection of GIs is very important, it is all the more important to extract economic benefit out of registered GIs.  In India we have 184 Indian GIs has been registered till now but hardly a few of them have accessed global market.

On the other hand we are also seeing growing number of GIs from other countries like Peruvian Pisco, Scotch whisky, Cognac, Prosciutto de Parma, Tequila etc. have registered in India.

While it is understood that not every Indian GI has the potential of capturing global market, but many of them have.  However we have not seen enough initiative and support system for such promising GIs having healthy export market.  There must be a plan to build on the legacy of these GI’s, and targeted GI must be turned into a USD 10 billion global markets for Indians.

21062107

Boost manufacturing with a focus on SME’s:  Women’s employment has taken an alarming dip in rural areas in the past two years, a government survey has revealed.  In jobs that are done for ‘the major part of the year’, rural women lost a staggering 9.1 million jobs.  This emerges from comparing employment data of two consecutive surveys conducted by the National Sample Survey Organization (NSSO) in 2009-10 and 2011-12.  NDA, during 1999-2004, 60.7 million jobs were created while UPA Government, during 2004-2009, created only 2.7 million jobs.  (Data source: National Sample Survey Office).

Organic farming, Herbals & Nutraceuticals: The whole world is moving to traditional and complimentary medicine and India has a scientific traditional medicine dating back to 5000 years.  We can create rotation farming for herbals and organic foods and create millions of jobs and billions of dollars worth of exports.

Foreign policy: Neighbors can help.  We need not be hooked to G8 / 14/ 20.  It is time to have a strategic alliance in Asia, A-2 (India and China) on the lines of G-4, we need to create A-4, the big 4 Asian economies must come together to lead Asia.  This is where India must initiate moving from G-20 to A-4.

Lastly, it would not be wrong to say that lakhs of small and medium enterprises , and even 27 big corporate houses have 41 trillion rupee debts (http://www.livemint.com/Companies/7TnLNfHilL2UOkPVNku8UM/Kumar-Mangalam-Birla-is-the-highestpaid-director.html )  . So , this is a steriod induced survival for most of the corporate entitites be it small or big .More pain is expected by this year end. So the government needs to keeps its head low and overheads lower and find solutions to avoid NPA’s . Though, it is an another thing, that UPA has in itself become an NPA.

Rajendra Pratap Gupta

www.commonmansblog.com