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 ;

Exports
FDI
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

Rich get richer and poor get poorer in India – GDP statistics

On 15th June , i wrote on my blog about the topic ‘ High GDP but low GDP per capita’ is like growth without progress and prosperity . Well, i did not know that 11 days after the blog a report would come out that would validate my analysis . Here is the report

According to the 2009 Asia Pacific wealth report , by Capegemini and Merrill Lynch wealth management , India’s high net worth Individuals ( HWNI’s ) are 120,000 ( 0.01 % ) but their combined net worth is close to one third of the India’s GDP

At the peak of recession ,in 2008, India had 84000 HNWI’s with a combined net worth of $310 billion . To put that figure in perspective , it was just under a third of India’s market capitalization , that is, the total value of all companies listed on the Bombay Stock Exchange – as of end March 2008. The average worth of each HNWI was Rs.16.6 crore .

According to the firm’s 2010 World Wealth Report , India now has 126,700 HNWI’s , an increase of over 50 % over the 2008 number . In 2009 alone , an estimated 13.6 million more people in India became poor or remained in poverty than would have been the case had the 2008 growth rates continued , according to the United Nations Department of Economic and Social Affairs ( UNDESA ). Also, an estimated 33.6 million more people in India became poor or remained in poverty over 2008 and 2009 than would have been poor has the pre-crisis (2004-7 ) growth rates been maintained .

I keep saying that recession or growth that we keep reading in the Times of India or The Economic Times , is only affecting people who read these newspapers. Rest all live under abject poverty .

Read the presentation that i made at the 6th India Innovation Summit on 18th June 2010 at Bangalore . You will see that our demographic dividend is fast becoming demographic disaster !! ( Download the presentation from http://www.rajendra.groupsite.com )

Rajendra Pratap Gupta

Email : office@rajendragupta.in

High GDP but low GDP per capita – Time to give a public explanation – the Congress and the Opposition

If we see , India’s GDP is growing but the majority of the population is not prospering . Why ??

Let us consider this

The quarterly growth report card shows that Mining and Manufacturing contributed between 18-22 % of the GDP in the Q 1 , 2010 numbers released last week.( Remember mining is concentrated in a few government PSU’s or some mining barons like Reddy’s of Karnataka etc )

Exports are roughly 13 % of the GDP

Agriculture contributes 20 % of the GDP ( Supporting 60 + % of the population )

My view is that, the decline in agriculture & growth in mining can be related directly to the growth of Naxalism , as one creates a naxalites and the other nurtures it !!

Rate of growth of yields per unit area in Agriculture has fallen in:

Food grains from 3.39 % in 1992-93 to 1.39 % in 2001-02

Non-Food grains from 3.19 % to -0.57 %

According to the Economic survey between 1980-81- 2001-02 the capital formation in agriculture has fallen from 3.4 % to 1.3 %

FDI in Agriculture was never encouraged or focussed – Announcements does not matter Dr. Manmohan Singh ji ?

Between 2002-08, population growth has been 1.4 % and the labour force has been growing at 1.9 %

According to the World Bank Development report

Between 1988 to 2008( 20 years ) as a percentage of GDP the :

Agriculture sector decreased from 30.5 % to 17.3 , whereas 65 % of the population depends on agriculture

Industry grew from 26.2 % to 28.8 % ( Population & people employable has been growing faster )

Manufacturing decreased from 16.2 % to 15.1 %

Services increased from 43.4 % to 54.6 % ( Private sector contributed to this )

Household final consumption expenditure decreased from 65.8 % to 54.1 %

Imports of goods and services increased from 7.5 % to 28 %

Yesterday , in the Times of India , the Finance Ministry’s chief Economic Advisor said that GDP growth of 8.9 % in the Q 1 of 2010-11 was due to robust growth in capital goods and consumer good production

Does it not look like some Middle eastern countries , where the GDP is very high but GDP per capita is less, as the high GDP is due to mineral oil wealth , and low GDP per capita is due to the fact that the oil wells are in the hands of a few royal families !! In India , Mining , Exports and trade is in a few hands and the focus , incentive and investment is maximum from the government !! For Agriculture , we all do not depend on the government but on the Rain Gods !!

BJP must act as a responsible opposition . The current state of affairs is not just a failure of the ruling front, but of the entire opposition . Public demands an explanation from both !

What is government doing ? Bhopal Gas tragedy GOM’s is just an issue to divert the attention from real burning concerns of the public

Politicians are addressing 90 % urgent matters and 10 % important matters.

Time to act responsibly and explain or else both Congress and the opposition would be damned in the next election

Rajendra Pratap Gupta

Email: office@rajendragupta.in