Kamalnath Says, Worst for the Economy is over !- Is he in senses ?? Rajendra Pratap Gupta

Worst for the economy is over – Senior Congress Minister – Fooling Indians to vote ???

On 28th December 2008, I had written on this blog, that the GDP growth will be less than 6 % , I had also given the reasons as to why it would fall below 6 % for sure, when the government was firm that GDP growth would be 7.1 %. The fact is out now , and we our GDP has grown as low as 5.3 % in the Q3, 2008.

We will have lacs of suicides from job losers ! Earlier it was the farmers , now it will corporate people and workers who will commit suicides or commit crimes or suffer a nervous break-down. Why are we sleeping now . We just have 45 days – Please check the congress score card on my blog , They are a bunch of inefficient & dishonest people ! Can we entrust them our nation ?

As per the latest data ,

• India had an external debt of $221.3 Bn at the end of June 2008, 20 % of it is the short term debt, this will be hurt badly due to weak rupee .
• NRI deposits declined by as much as 1.1 Bn USD at the end of June 2008 compared to end – March 08 level.
• India’s foreign exchange reserves declined by 62.35 Billion dollars to 249.53 Bn USD as on Feb 20, 2008 from 311.88 Billion as on April 4, 2008.
• Agriculture is reporting negative growth at -2.2 % in Q3 , 2008,
• Exports have plummeted and people in export oriented companies are being fired every minute
• Industrial production is at a record low
• Fiscal deficit is highest since independence
• Sensex is at a record low in the last 40 months , Investors have lost more than 2/3rd of their investments
• Real estate sector is facing worst crisis ever
• GDP fell to 5.3 % in Q3 , 2008
• Rupee is weakest at about Rs.52 to a dollar
• Tax collections and revenue earners for government are dipping every day due to the above mentioned factors

Is what we call an economy of strong fundamentals ? When US , Europe and Japan sank into recession, immediately our growth story withered away, and we had been fooled to believe that India had strong fundamentals and we will not be affected . Is this not severe recession ?

At the top of all this , our learned writer of the book ‘India’s Century’ & also our Union trade and commerce Minister , Kamalnath had said just 3 days ago, that the ‘Worst time for the economy is over’. And just three days after the rupee is about 52 to the dollar and the sensex is on its 40 months low !! How clueless is our Union Minister ? Do we give such people to run our trade and commerce for the next five years ? If his words cannot last even a week , how come he writes a book on India’s century ?

We are into an unprecedented crisis , if we let congress win , I am sure that some of us will not even survive to vote !!

Rajendra Pratap Gupta
President
Country First
Email: rajendra.india@gmail.com
President@countryfirst.org
Mob: +91-9323109456

Indian Government is clueless about the Economic Crisis – Rajendra Pratap Gupta

India is clueless about how to resolve the current economic crisis?
For over a year, the world has been sliding into the grip of recession. First it was America, then Europe and now Japan. It was naive of our Harvard and Oxford educated FM & PM to keep denying that India would not be affected from the crisis. They kept shouting that India was fundamentally strong and that the crisis would not impact the Indian economy. Even after issuing a ‘Token Bailout’ package the Congress government believed India was better compared to the rest of the crisis affected economies. But of late, congress has accepted the fact that 2009 would be worse.
The height of irresponsibility and lack of knowledge is evident from the fact that Indian Government also did what America was doing i.e. issue a bailout package. India should have acted differently. But why apply brains? Just copy what USA is doing – copying others is the biggest folly of our selfish and mindless politicians !! Way back in August 2008, i wrote for Financial Express supplement – SME World about the impending crisis. This article got published in November 08 issue of the magazine (download the original article from http://www.rajendra.collectivex.com ). But the contents were very much available on my blogs much earlier. I had clearly mentioned that the crisis in India started much earlier and the government was a silent spectator. It did nothing to correct it. Now it is acting posthumously. The moment banks started hiring recovery agents , the crisis has started. After all , banks don’t hire recovery agent for small NPA’s.
I see quite a few reasons for this illogical and irresponsible bailout step. Why should bailout be avoided and what did the current government to the economy. Listing a few view points
• Indian government and our foreign educated PM & FM are totally clueless about the crisis , so leave alone management of the crisis
• They quickly hired foreign experts in their advisory council. Irony is that these foreign experts have rarely stayed in India and know little about the realities on the ground. Adding to this , they had the so called Knowledge commission , P.M’s advisory council, Economic advisory council and many such sinecure posts to keep the sycophants and power hungry corrupt people on benches on our tax payers money
• Political compulsions & uncertainty keep the government & the public guessing for the future moves and the markets will never gather momentum
• Real issues have not been addressed so far, and i don’t see any signs of revival in the economy with such an irrelevant approach to this crisis which will worsen with time passing
Now let’s examine what the government is doing:
• Pumping more liquidity in the banking system
• Decreasing interest rates
• Announcing sops for exporters
• Announcing increase in NREGA scheme
• Making tall statements of strong fundamentals etc…..
Now let’s see what each of the above mentioned steps would lead to:
• Putting more liquidity in the system. But Indian financial system was never cash strapped, Banks were growing very well. We have enough of money available! Now, the bank and financial institutions are becoming risk averse. Who trusts these crooked politicians? If the banks dole out loans and they turn out to be NPA’s. Manmohan and PC Would be gone by then , and the poor branch manager or the M.D. of the bank will become the scapegoat. So in as much as these measures are announced with much fanfare, the implementation is poor. No one is trusting each other. It is a ‘crisis of lack of trust and transparency in our System’. PM can increase liquidity by repo rate cut, but he cannot force the local branch manager of State Bank of India to start lending tomorrow from 9.30 AM till 5.30 P.M. Imagine, even if this was a reality. Would you and i take this loan? For what & Why? We are concerned about the uncertainty of income and job. Liquidity in the system is not the remedy, right? So clearly, government is not taking the right step as it does not know or acknowledge the problem in reality. Today, even corporates like TATA are finding it difficult to raise money. Let’s see why? TATA’s went overboard, and brought big businesses abroad for billions of dollars, and mostly, in all cash deals!! Wrong strategy? When they brought these companies, the stock markets were racing around 20000. Their stocks were really valuable. Had they done a cash and stock deal for all its acquisitions, they would have been better off even when the markets tanked. Now for the price they brought Land Rover and Jaguar, they could have bargained to buy the entire company!!! Any ways, the companies that owned these brands are fast becoming history or getting bailouts and kind of getting nationalised or filing for bankruptcy. Same is the case with Arcelor Mittal. What a deal it was. Now the question is, was it structured in the right manner?? Wait for another quarter, Iconic Ambani’s are likely to tell a similar story. Indian systemic corruption has created mammoth business houses, and the future of this natural imbalance is a foregone conclusion. It was just a coincidence that Satyam got caught. No big corporate can exist without political patronage, and this political patronage comes at a price in cash and with moral flexibility . Satyam is just the tip of the Iceberg. Each and every corporate has shady spots somewhere or the other. Difference is that they have not been caught like Satyam.
• Lowering interest rates: Still the loan port folio of financial institutions is not increasing. Reason , people believe that companies due to drop in sales going forward, and increasing inventory pile up, will dole out better discounts and so are deferring the buying decisions, till the prices drop further. The recession has taught people that, cash in hand is better than ‘Notional money’ in real estate etc…. People are pretty sure that times ahead will not be easy. Assume for a while that, even if the corporates go for taking a loan and increasing the production. Who will bring the buyers? People are in no mood for discretionary spending. All in all, lowering interest rates is also not working in isolation. The problem is totally different and not getting addressed here at all. In today’s tour economy is akin to cycling, either we are peddling or we will fall!
• Announcing Sops for exporters: Suppose, i am an exporter and i am exporting to USA, Europe and Russia. My order books have dried up as the economy is headed for trouble in these countries. Will Sops help me bring orders? Is this not an eye wash for the public? Sops will only work when orders start pouring in. This is again a misfired weapon.
• Announcing increase of funds for NREGA (National rural employment guarantee Scheme) Schemes: This scheme was already in place. We have never been able to quantify the positive impact of this scheme on poverty alleviation. Albeit , our politicians have become richer ! We all know the fake musters made and the amount eaten by the babu’s and ministers. What poor need is not money, but training to earn money consistently. It is like if you feed fish to poor; you can feed him fish a few times, better teaching him how to fish and he can earn for himself every day. How long will NREGA spend our hard earned money on feeding people? This is a misguided and misplaced scheme. What we need is a NYVTS – National Youth Vocational Training Scheme & NRSS – National Re-Skilling scheme – to re-skill and retrain people in better earning vocations and not NREGA. We must create – SEZ’s – Skilled Entrepreneur Zone in every tehsil / district to empower the rural –real India. Still 68 % of the population lives outside urban India. Mind you, urban poor are worse off than rural poor. What schemes are meant for them?

Solution to the Crisis:
Essence of this is that printing & pushing ‘Notional money’ in the system is not the solution. It is an illusionary step. Creation of money by the hands of people is the right solution. How will that happen? I believe that government (Even the US Govt.) should not have resorted to bailouts. If Lehrman Brothers collapsed, it collapsed. So what? Let all the financial institutions and auto majors be left to meet within themselves and come out with a solution. They could have formed a practical consortium to deal with the problem, shared resources and planned a better crisis management. Now each of these corporates will get a bailout package, they will go out on the rampage with cut throat Competition and crisis will aggravate, a few of the bailed out companies will eventually cease to exit. We are just giving a palliative care through bailouts. Competition and collaboration are two ways to save the economy. We need collaboration now. Today the government is patronizing inefficiency and paying the price for poor regulation as bailouts and it will cost it dearly.
Even after the bailout, i fail to understand, how 16 or 25 billion dollars will save General Motors? About a year back , GM had about 30 billion dollar as cash and it was burning billions of dollars every month and finally they fell on the knees.People are not going to buy a Chevy due to the fact that the GM motors has a government bailout plan and package! History was a witness to Enron collapse, World Comm collapse, and IT Sector bust after the boom. Well that’s in a business cycle. All that goes up comes down. If the government wanted to do well. It could definitely take some practical steps like.
• Put a moratorium on corporate , housing and other loan EMI’s for the next 3 years or part payment instead of full EMI’s for the next 2-3 years a nominal interest be added, so that even banks do not suffer loss. But public should be relieved of the burden of payments substantially and immediately
• Automobile industry should be happy as the crude oil is cheaper. What the government could do is to step in and make the cab drivers replace taxi’s older than 10 years by a bank loan for 10 years duration at reduced interest rates like 7.5 % for any duration i.e. fixed rate of interest for the entire term of the loan . The duties and other taxes should be cut by 50 % for all the taxi’s that are older than 10 years, by 75 % for vehicles that are more than 5 years to less than 10 year old. Would this not boost both the auto industry and the banks? Also, this would increase collection of the government as road tax. Which could be reduced by a good 50 % for all purchases made in the next three years? It would boost a whole lot of industries associated with Auto , fuel, Iron and steel , rubber , etc …….Make the small car ‘Nano’ and the ‘electric car & scooters’ totally duty free . Any ways, the government collections are down. At least, here it will not lose anything, but only gain as whatever taxes it can collect directly. But indirect collection of taxes will get a boost as a host of activities will increase with this push. It will lead to substantial increase in employment
• Business and Real estate : Service tax on rental be abolished , Increase the tax slab for interest payments to Rs.2 lacs, issue home loans at fixed rate of interest from 7 % till 8.5 % for any amount of time . Appoint immediately a Housing regulator to check inflated real estate cost and check the cartelization to keep the prices low. One thing that government can do is that, all buildings under construction and not sold, in those buildings, 70% of the units can be sold and remaining 30 % have to be rented only. Government must construct flats & shops for poor and low income groups for rental occupancy only. This will not only boost the demand but also keep the real estate prices low. The stamp duty and other government charges should be reduced by about 50 %. Any ways, government is not making any money due to poor or nil demand in real estate sector. 50 % taxes would be good enough at this point in time. Even the biggest real estate company by market cap, DLF has reduced the prices of their projects due to poor sales and their prices have dropped by a good 32 % in one of the Bangalore projects. Most of the real estate co’s are abandoning the projects.
• Alternative Energy: Wind power and solar power is to be immediately pursued in every house hold, town & district. This can be financed by banks and will lead to a cleaner and greener countryside and improve the economy and generation of power for households and communities
• SME: this sector is contributing to just 39 % of the manufacturing output. In developed economies, this sector contributes about 90 % of the manufacturing output. Government needs to push this sector into growth mode by setting up nodal growth centres for SME’s manned by professionals from the corporate world. Setting up incubation centres in major national & regional institutes for providing technical support and professional guidance. For detail steps , read the article that i have recently written for The Financial Times supplement – SME World
• Transport & Logistics: Approx 90 % of all the commercial vehicles sold in India is via loans. According to Deepak Sachdeva , President of the Delhi Goods Transport association , between April and December alone, close to 158000 commercial vehicles were repossessed or either surrendered due to loan defaults. This impacts the employment of drivers, helpers and host of other people who run the road side businesses dependent on the truck movements. We need to incentivise these set of people and relieve them from the loan burden with moratorium on EMI payments. Reduce tax on road permits , remove penalty for late payments of EMI for up to 2 years . Octoroi tax must be abolished immediately.
• Agriculture: The government needs to push this sector with more reforms and technical innovations considering that more than 80 % of the farms are of small size holdings less than five acres. We need to bring a sigh of relief to these farmers by host of measures
These are just a few of the steps that government can start with. Rest later

Rajendra Pratap Gupta
President
Country First
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FDI in Retail

Dated : February 16th, 2009

Dr.Murli Manohar Joshi
Chairman
Parliamentary Committee on Commerce
New Delhi

Ref : Foreign Direct Investment in Retail Sector

Dear Dr.Joshi,

I wish to draw your attention to the following for a postive consideration and further recommendations.

There has been a lot of debate about the opening of the retail sector for foreign direct investment

My view is , that the retail sector in India is a major employer and is the key to India’s youth employment and empowerment . It today comprises of about 12 million establishments . Adding to this, there are atleast 2 helpers at a retail outlet. Further , indirect employment is provided to at least 6 people

With such a massive employment potential . We must consider the following before we talk of FDI in retail sector

1. Why should foreign brands take away India’s earnings ? Land is ours, employees are ours, spending is ours , raw material is ours. Then why do we allow foreign co’s take away our earnings by just putting their brand names ?

2. It is a known fact that, most of the reputed brands all across the wordl manufacture their products in India sub continent and sell across the World . The products are of highest international quality and well accepted . Why do we not sell locally and serve the local economy as well

3. It is well known that this big foreign MNC’s change the rules of the game by increasing rentals , salaries and lowering prices or even increasing them . Thereby , making it difficult for the localites to operate . We cannot regulate all this , but for sure , we can check the entry of these MNC gaints

4. What the retailers in India need is a different version of FDI – Finance from Domestic Institutions . If we get finance from domestic finance intitutions , we will be more competitive and we can grow profitably and grow even internationally . Indian products are already sold in differne parts of the world

5. I also suggest you to consider and recomend that retail be given an ‘industry status’ and there should be a separate ministry for retail and vocational training . That also takes care of re-skilling of the talent . We have a sever skill gap that needs to be immediately addressed

Hope that your good selves will consider my suggestions and incorporate with your recommendations

Looking forward to hear from you

Thanks again with high regards

Rajendra Pratap Gupta
President
Mobile : +91 9323109456
+91 9867300045
Email: president@countryfirst.org / mail@rajendragupta.org

Address to the Journalists who covered the Mumbai Terror Strike on Nov 26,2008

This is the text of the speech delivered to over 100 Journalists who were Felicitated recently at a function organized on Feb 2nd 2009 at Mumbai.
Good Evening Friends,

We all are glad to have ‘brave hearts’ with us today and we feel proud of you. In fact, on 26th November, i was awaiting to board the flight at the New Jersey airport for Mumbai when i got a call from my friend with whom i had the lunch that afternoon. He sounded worried and said, Rajendra, my God, did you see what is happening in Mumbai? I asked him? What do you mean Nailesh? He said terrorist have taken over Taj and Hilton hotels and a police Commissioner has been shot dead. It sent shudders down my spine. I had heard about Akshardham temple but now, it was my very own Mumbai .I walked to the nearest TV screen at the airport. I was shocked. I could watch all this thousands of miles away as you all staked your lives and kept sending the live footage. This held the nation captive for three days to the television sets. After the freedom movement, this was the first time that united the communities and the nation.
Press has always played an important role in nation building and society.
How many of you know how the democratic movement started? It was with the Introduction of printing press in mid 15th century in Europe, the proliferation of printed information helped fuel the rise of democracy. So my journalist friends, when you started the democratic movement, you will also have to safeguard the same.
After this November 26 terror strike, a lot many politicians have lost their jobs and so a debate has started on whether press should have shown everything live. I strongly believe that, since the press was showing it live, and that the whole nation was watching it, those who were fighting the battle with terrorists performed to their very best. Else, we could have lost many more lives. You all in fact, pushed the forces for their best performance . Freedom of press should not be compromised .I would go to the extent of requesting to the government to even make the sting operations legal and give immunity to the press for bringing such issues to the public . Most of the development and progress that you see in India today, is due to two reasons ; first, cheap telecommunications and second, proliferation of the Media. Media has opened the eyes and ears of the common man.
Now coming to the root cause of terrorism: Remember that each of the terrorist had 400 USD. Intelligence agencies took weeks to figure out why only 400 USD was in each pocket. This is exactly the amount you require to pay to enter your boat or jetty into the Indian waters. Our national security is priced at USD 400 ? If we stand at the Vashi check post , the price is down to 500 rupees. You can get your truck into Mumbai by just slipping a Rs.500 note at the check post
“Unemployment, uncertainty & frustration amongst the youth coupled with corruption in the government and administrative inefficiency is the root cause of terrorism and you just cannot fight it with sophisticated weapons alone” .
Terrorism survives and thrives on political and systemic corruption and inefficiency .
Remember,
When trust fails, people resort to justice
When justice fails, people resort to power
When power fails, people resort to violence
India has already slipped into an economic recession .Thousands are becoming jobless every week. This will increase criminalization and health problems.
How can we help fight terrorism? We must have a nationwide ‘Neighbourhood program’. Where every 50 or 100 people in a locality form groups and spend 4 hours a week for community work. This way, we will be able to watch and ward out suspicious people and help build closer ties within the community and will be more active to serve the community and the nation better
Why did Country First decide to honour our Brave hearted journalists? Today we only recognise the contribution when someone dies, but rarely during their lifetime. You all could have been hit by hundreds of bullets getting fired. But you decided to stay there , track this terrorist strike at the cost of your lives. Police had weapons, all you had is just a camera & the conviction and courage to stand there without caring for yourself in the interest of this nation – that is Country First ! Some of you had a near death experience .We must recognise your contribution. So we are here today
Hat’s off to you !
Jai Hind!
Rajendra Pratap Gupta
President
Country First
Email : President@countryfirst.org / mail@rajendragupta.org
Mobile :+91 9323109456 / 9867300045

Satyam Saga- Many heads may tumble. Raju’s life might be in danger

Rajendra Pratap Gupta

The satyam saga is not as simple as people believe . My personal view is, that it happened due to the political comfort Raju enjoyed with all the powers that are at play. More specifically , all the A.P. Governments be it of CBN or YSR..

I am sure that, this dirty trail will pull out many political skeletons. And if this is bound to happen, Raju’s life might be in danger . No A.P. politician would like to be named when elections are just a few weeks away. I fear that Raju might be eliminated in the name of a heart attack

The center must interrogate , investigate and keep the custody of Raju out of Andhra . But as we know, that our courageous politicians , corrupt agencies working under political influence and control, inefficient judiciary and biased press will not let the truth be out for the common man. That is what is called the CMP – Common Minimum Programme !!

Government has given mobilizing advance to Maytas infra. What steps have been taken to build safeguards for the two thousand Crores given as mobilising advance ? It is well understood that government has a cut in every such deal. Rajiv Gandhi once said that, out of every rupee meant for poor , 15 paisa reaches the poor. In ( political – business ) deals , poor are our politicians and they demand much more than 15 paisa out of every rupee in the name of the party and themselves – They have no shame – Remember Bangaru Laxman ?. How come suddenly a news paper cartoonist like Bal Thackeray and his entire clan run deals worth hundreds of Crores !! A poor man when becomes a saviour of the poor ( read politician ) suddenly becomes rich ?? I recall a quote- A Politician is one, who extracts votes and money from the rich and poor on the pretext of protecting each from the other !!

A few days back, I was talking to one of my friends who has access to the powers at the center. I was shocked to learn , that planning commission does not issue money to the states till there is a guarantee for the portion of the money being returned for fighting elections. If the grapevine is to be believed , this amount per state runs into thousand crore plus !!! That’s why when you complain about corruption , no one listens, as all the powers are deeply involved into it either at the front end or at the backend . Corruption is the politician’s only religion . Corruption is a trickling down process and is like rain water . It comes from the top and not the other way round !

While a lot of people are looking at bringing about a change in the governance of the nation . But trust me , it will not happen soon. Reason is, that there are only less than 5 percent of people who read and get frustrated about the current state of affairs ; unfortunately, they don’t even vote . So frustration alone will not change this system.. Rest 95 percent are victims and partners by force to such an ‘illegal democratic System’. The corruption is “institutionalised business” to such an extent that you and i cannot imagine as honest individuals . A Member of parliament. has to pay for becoming an M.P. then he has to collect the same money ( with returns ) from business houses, IAS & IPS officers in the name of getting things done !! A low level clerk or the hawaldaar / constable has to be pay for his posting and lucrative transfer . At the end , i and you have to pay for all this as bribe. This is my definition of the current democracy – a totally manipulated system by the politicians , for the influential at the cost of the common man.

Those of us who think that we can change it by mere lighting a candle or filing an PIL. Just go and check how many election commissioners , retired judges that have given favourable judgements are in plum postings post retirement ? why did Chief Election Commissioner T.N.Sesan not become a Union minister and Mr.Gill become a union minister ? Why do IPS officers , Judges become governors of states after retirement ? Many such cases exists. Just peep into the past. You might have all answers. Why does the CBI need a permission from the government for prosecuting the officers or M.P.’s ? Simply to delay and bid time . Anyways, an average Indian is so lost in daily chores that he/she doesn’t have time to get ‘involved’ in ‘such issues’ . Votes that the ‘intellectuals’ like us give does not exceed 3 % .Mostly, we don’t even go to vote. Majority of the people who vote for these corrupt politicians decide not on the basis of good governance, but whether his wives get a saree and the family gets a sumptuous meal a few days till the voting day. These are the 600 million innocent and exploited people who for almost next five years after elections will go to bed empty stomach every day. They cannot practice our principles ! And the politicians don’t wish them to prosper . If these 600 million people prosper and come out of poverty, corrupt people like Lalu Yadav, Shibo Soren, Mulayam Singh , Amar Singh, Sharad Pawar and many more would not be rubbing shoulders with Sonia or Manmohan or dreaming to be union ministers !! We all know why Ashwariya got the Padmshri award ? Simply because Amar and his gang have bailed out the congress ? Rahul Gandhi and Sonia Gandhi talk about democracy in the nation . If Rahul was not Gandhi would he become the Gen.Secy of the congress so soon ? When the party itself is against democracy and decides the top posts based on sycophancy , favouritism and dictatorship how can it guarantee democracy to the nation ? Why are we getting fooled. I would go to an extent of writing that Manmohan would have been forced for the cardiac surgery . So that if by chance , Congress comes to power. On health grounds , Manmohan can be retired and Rahul can step in to lead the nation to disaster ! Anyways, the Gandhi dynasty has ruled the nation for 90 % of the time since Independence . Earlier , they can be credited with ‘license raj’ and now ‘quota raj’ . Both the steps led them to manipulate and come to power but weakened he nation and divided it . We have gone backward than becoming developed . Elections have never been fought for good governance . It has been fought to stay in power. The priorities are misplaced totally. Last five years into power they had all to develop an indigenous growth model for India . But they went on to build a dollar based economy and gave us recession to live with . What a colossal failure for Sonia , Manmohan and PC !!

Don’t expect the system to change soon . A new cult has to come up from the youth , specially women who will have to lead another mass movement to make it happen. And it cannot happen if you read this and still decide to sit back and go into thinking mode.

We must get up to action .

Rajendra Pratap Gupta
President
Countryfirst
Email: mail@rajendragupta.org
rajendra.india@gmail.com

Economic forecast for 2009

If the Indian economy grew at 8 -9 % in 2007-8. I must believe that, about half of this came due to intrinsic or local market factors that is about 4 to 4.5 % . So we will continue with that growth with some downward slide in 2009, and also that the remaining half was due to foreign or extrinsic factors. Which i believe, will reduce by a good 50 % . So intrinsic or internal growth will contribute between 3.5 to 4.5 % and remaining 2- 2.5 % will come from the extrinsic factors . So in all , i guess the next year we will witness growth somewhere around 6.0 to 7.0 %. If the World economies shrink badly , which is expected. This might impact this growth a little more and bring it down under 6.0 %

Rajendra Pratap Gupta
President
Countryfirst
Cell : + 91- 9323109456
+ 91- 9867300045
(USA) +1515-450-6165
Skype: rajendra.india
E-Mail: mail@rajendragupta.org / rajendragupta@aol.in
http://www.countryfirst.org

Beauty and business – Aviation Sector

Dear Mr.Praful Patel,

When a few months back Jet airways sacked about 1200 air hostess . Seeing these pretty girls crying , you were moved so much that you called the Jet Airways chief and pressurised him to with draw the order. You even went to the extent of black mailing ( by saying that if the airlines needs sops , they need to avoid sacking )

Look here now :

There are about a crore travel agents in India who sell almost 85 % of the air tickets ( as per the report published today in The Economic Times ). They are nearing to get out of business. As the airlines have decided to withdraw the commission on the sale of air tickets and also the surcharge that these agents were levying on air tickets.

Most airlines did away with the 5% commission on Nov 1,2008 forcing travel agents to shift to a fixed transaction fee for every ticket issued. However ,the fixed transaction fee which was in the range of Rs.350 to 2500 a ticket depending upon the class and routes , had also been discontinued from December.

Mr. Patel, India is in a severe recession ( read http://www.rajendragupta.wordpress.com ) , and putting one crore travel agent’s families out of business is a proof of your inaction and being unpragmatic. Please wake up and get into the act immediately. It’s a call to action

Best,

Economy in recession, aviation , Stock markets , India , Rajendra Pratap Gupta

Way forward for India- Declare Pakistan a rogue state

For the last few decades, India has been losing lives, money and economic opportunities due to the terrorist activity emanating from the land of Pakistan. Since , terrorism is not limited by geographies , it is high time, that India initiates a “Global partnership to fight terrorism” . Forms an international coalition of military forces that fights terrorism across borders . Let all countries sign the partnership, contribute to this military force , and let these forces enter any member country, and take all steps to ensure that none of the countries allow its land to be used for terrorist activities. This is the only way to fight terrorism. Am sure that Pakistan will always avoid to join this . This could be done under the auspices of UNO. The burden on individual nations would not be much , but the outcomes would be phenomenal.

Else, there is a more harsh way to deal with it- which we should avoid. Attack Pakistan and countries that indulge in terrorism. If i were the PM , probably , i would have given a 24 hour ultimatum to Pakistan to handover the most wanted terrorists. In case, it failed to do that , i would have bombed Pakistan and taken the India’s political map back to pre 1947 days. Why let our billion population live under constant fear of dying any moment with bullets , when we have already given what Jinnah wanted and shared our culture , people and natural wealth more than 60 years ago. We lost millions then , and we continue to lose now . We have already divided the nation in 1947 based on religion. Why not decide either ways now. If India wants to be secular , it has to be safe or else , let it be a Hindu nation . if that let’s poor Indians to live in peace – We have tried all peace processes , our options are running out ! Why lose lives after lives every day because we have chosen to be a secular nation. Are we paying the price of being a secular nation !! Our politicians should not forget that we are not dying with terrorism but living with terrorism , and that’s more dangerous . We are dying every moment , psychologically. Why ? What is our fault.

In any case, after terrorist attacks in Mumbai, we must snap all ties with Pakistan and declare it a ‘Rogue and Terrorist state’. If we want to have a milder approach . Let it be declared a ‘Terror watch list nation’ and take this issue internationally.

Peace is the first pre-condition to progress and development . How long we will continue to live under the fear of dying with bullets ? Any nation that has the potential to develop and grow exponentially is a victim of terrorism today. I am not too sure who is behind the ‘Terrorism’. But the first suggestion is the most practical .

I want all Indians to not waste any more time . But get organised locally and form chapters to take the nations issues in our hands. It is high time we do it. If we fail to act in the next general elections , we will lose another five years and push India behind by another 30-50 years . Do we have that luxury ? We have a billion + population and majority of them are frustrated with the current system. Let’s change it . It is only in our hands. We have a big responsibility and people have expectations from educated people like us who can use the internet , write and read and connect. Let’s not betray them. More than 99 % of India wants us to bring about the change , do we ditch them ???

You all must be expecting that these politicians will act. No , they will not . Till date, the person who was sentenced to death for attacks on parliament is not hanged. We have politicians who make tall media statements and fail to act where they need to. They want their stupid and ugly face and words to come every now and then on the media …………We cannot be silent spectators anymore . Act now.

Each one of us has the potential to change this moment and this nation. We need to take the first step. The first step is to act immediately and connect with all our friends and start a wave, a moment to redefine the role of each one in building a nation. India has always shown the world the way to learn and lead . We can do it now and you will have to start.

Note this ,

One mind can awaken another, the second can awaken their next-door brother, three awake can awaken the town, by turning the place upside down, and many awake can make such a fuss, that they finally awaken the rest of us. – Helen Kromer

Best ,

Indian Economy headed for a severe historic recession

Indian Economy – Getting into worst ever recession ??

It is high time , we acted fast by reducing fuel prices, drastically reducing loan rates and take all possible measures to ease out of a severe recession. Every where, there is a job loss, loss of contract, shrinking consumer spends , production cuts, halting growth plans, adding to this , the recent terror strikes have crippled our already bad travel and aviation sector. We need to convince the consumer that all these steps would be long term. Trust me, we are headed towards a severe recession that will blow out the India story. We don’t need a nuclear deal or a moon mission as a priority today, what We need is ,to keep our feet on our ground. India needs to be pragmatic. This road to recession can be a good turning point for the Indian Economy if used as an opportunity

Why is Indian economy in recession? Indian economy was known as the most intriguing economy for the last three years. There was a lot of hype and hoopla created around the same, everyone wanted to ride the booming India. Some called it the ‘rise of the east’ or ‘a billion under-served customers’. It was the country no one wanted to miss. What happened? What went wrong and why at all?

Firstly, a few things led to a sudden hype. Rise of Infosys and Wipro’s, TATA Tetley acquisition, Arcelor Mittal takeover, Indra Nooyi taking over PepsiCo as CEO, Arun Sarin took over Vodafone etc… This was backed by a lot of media coverage.

Secondly, the triumvirate of Manmohan Singh , P. Chidambaram & Montek Singh talking of a double digit growth excited a lot enthusiasm of politically connected ( and not so politically connected ) business groups to enter into ‘businesses of future’ like infrastructure , power, retail etc… This was based on ‘Big Talk’ of the triumvirate. We all know how many people pumped in money at unrealistic valuations and market was heated up beyond logic, banks were also enjoying the party, share market was expanding like a balloon, manpower was charging anything and still jumping for tempting offers, retail was spotting everywhere. Result: competition became suicidal. Money got pumped into real estate and supply increased and the prices soared. Brands started fighting for space and not profits. Finally, reality was surfacing; growth was not double digits; which the triumvirate shouted for three years. We saw profits were not as projected, corporates were missing numbers, shutting the outlets and man power layoffs. Just forcing Jet airways to take back air hostesses will not cover the reality…………how unfortunate!!!

Thirdly, the ‘Big consulting majors’ were talking in 2007 -8 about the multi-billion dollar markets suddenly growing three fold or four fold by 2012-15. How stupid of CEO’s who believed these news releases of these so called ‘big consulting majors’ and spent millions to buy their reports & finally presented their boards with these rosy projections and raised funds. Now they are shying about the current share prices and valuations (let’s not even talk about growth achievements versus plan or the crazy profits numbers!!!)

All the three factors basically did no good but just created a ‘sexy story’ about a nation like India, where more than 70 % people don’t have access to basic healthcare, only 3 % dabble in stock markets, only 10 towns can boast of a retail revolution, has 36 billionaires and more than 800 million living on about a dollar a day.

Let’s evaluate a little more ……..When people talked of India in 2007 they talked about big IT giants , call centre’s high paying jobs to teen agers, overseas acquisitions of TATA’s & Mittal’s, Mumbai becoming like Shanghai, Big malls coming , dollars flowing as FDI, Big brands coming to India , MNC’s coming to India, ballooning stock markets, BPO’s multi million outsourcing contracts & the great retail revolution. Now with US / Europe in recession and may be, with Barack taking over as the next US President. India will have to take a big hit. We just saw the first wave of negative effects of the US Financial market collapse. India’s stock market crashed almost to a third of its high. With India’s IT / BPO shying and taking to lay off’s, we know the real estate sector would be hit as the entire 2 BHK ( Two bed room , hall & Kitchen ) flat story was built on these young ‘Ripe aged’ employees buying flats at the age of 25-30. Splurging on mobiles and white goods by credit cards …………all this is over (believe me!!)

The hype was more of a story of 36 billionaires , Infosys, TATA, Arcelor, stock market manipulations , FDI and not the story of economic development & and the 800 million population. What we see happening was a foregone conclusion. It was not a ‘bubbling economy’ but an ‘economic bubble’. And it got burst

When the banks started hiring recovery agents, it was the start of the default / delinquency crises (credit card delinquency has gone up to as high as 14 %). Loan defaults would follow shortly and this will be a big blow to the banking / loan system. When the government has to get in to pump in money or the so called confidence, It’s a sure shot sign of crisis or recession or both.

I wish that congress leaders should have thought well before announcing a Rs.60000 crore write off for farmers. This has put a pressure on banks and it will manifest in banking / loan crises. Now imagine, I am a farmer with an Rs.10000 loan for my sister’s marriage or due to a crop failure (trust me, farmers crisis has come due to rise in social costs as much as crop failure). If my loan was waived off what it did to me? Firstly, it gave me nothing to raise a healthy crop and earn for the season so my problem would be standing as such on my head. Has it given me seeds or irrigation which i needed? I could have earned and paid for the loans in the next few years (a moratorium on payments & Interest was more than enough). Moreover, it has set a precedent for me not to pay my loans and hope for future waivers. When politics drives finance, chaos is the only outcome.

Take a cue from USA . They have pumped 700 billion dollars ( India cannot think of even a tenth of this amount in the case of a crises !!! ). This pumping of funds actually helped the banking system in the US and not the economy as people have been made to believe in !

We can knock off any crises if India develops an indigenous model for growth in which technology only becomes the enabler and not the key driver or determinant. What i am pointing is that, we need not depend on FDI totally. When FDI came in, we were roaming the whole world and shouting about it. Now that these economies are under crises, they will take care of their home first, and may even exit from our country as we have seen in the case of FII’s exiting the stock market and leading to a sudden crash. We must have started our economy with 75 % dependence on domestic and 25 % on foreign fund generation besides a host of infrastructure & ground level measures. We need a ‘self reliant India growth model’ and not a USA – Europe dependent-driven growth model. Hope the policy makers will learn from the crises & take steps to correct it.

Now a day’s the most talked about line from the ruling politicians is, that India is fundamentally strong economy. Which ‘Fundamentals’ are they referring to ? Our consumer sentiment is low, stock markets have crashed, industrial production is low , inflation is high, uncertainty is looming over every corporate , retrenchment is happening , rupee is weak against the dollar, farmers that constitute 65-70 % of the population are committing suicides , IT & BPO industry is hit hard due to US –Europe recession, terrorism and lawlessness is rampant. I am still trying to get which fundaments appear to be strong !!! Is it the large suffering population that is being referred to ?

Coming to the most happening sector – The great Indian retail story : I see some retailers having burnt their fingers in metros , now are planning of moving to class II & III towns for the next cycle of growth. Let me express boldly, that this will be a big loss making proposition. In towns like Mumbai and Gurgaon, retailers are having a tough time, how come they will survive in smaller towns with more ‘service class’ & ‘Small time traders’ people. At least , bigger towns have industries and other corporates to support higher spending opportunities. Some learned Advisors have informed these retailers that 70 % of India lives in rural areas so rural India is a bigger market than urban India (calculating that rural India with USD 530 income per capita is three times the population of urban India with the per capita income of USD 1200). What an ‘unintelligent logic’. The 530 USD that the rural India earns is not even enough to spend on basics, unlike urbanites who have the basics already and can afford to spend on the new class of products which supports the modern retail formats. It is analogous to three boys of seven years marrying a girl of eighteen years (3 boys x 7 years = 21 Years, marriageable age!!!). Intelligent logic isn’t!!! That’s what our great retailers are trying to do . Only smart ones are Pantaloon and Wal-mart. Rest all are smart looking idiots !!!

Retailers must realise that they are making investments for 2012-15 market projections. The figures of these projections are not even validated. But the cash burnout is happening now. Imagine this , rentals going up by 5 % every year , salaries by 20-30 % , cash burnout for new openings , increasing offering –SKU’s, reducing margins to attract customers or wash off old inventory. However can a retailer survive ? Adding to this , move to class II towns!!!

Just to make a note that if in towns like Panvel in Navi Mumbai, the two supermarkets owned by Foodland have closed within a year due to opening of ‘MORE’ supermarkets, D’mart & Reliance Fresh stores, how can small kirana stores survive? If i don’t go wrong, even ‘More’ & Reliance will have to shut down in the times to come in the area or make perpetual losses . So the retail story in its current form is not a lasting one. But the lessons are to be learnt . One thing that has happened in India which is totally wrong is that, we have tried to CCP (cut, copy and paste) foreign retailers. But we have missed to note the most important point , that foreign retailers were pretty slow in the first ten years in their country. Even Mukesh Ambani made a strategic mistake; he announced 5 billion dollar investment in retail only to face the back lash from local traders. No one expected seasoned businesses houses to make such tall claims ….This gives us a clear feeling that Indians are unaware and unprepared for the hype that has been created by the media and neither are they guided by the realities . I would call Wal-Mart the smartest retailer in India. They have just done a retail tie up in India without using its brand name . So that the Indian partner has the expense & experience and Wal-mart has the learning’s. Moreover, their growth plans are practical. Just 15 stores now compared to 600 + stores of Reliance and Birla’s. What if the Ambani’s & Birla’s want to change the strategy or make changes backwards because of their learning’s?? It is easier to correct and make changes in 15 stores of Wal-Mart then 600+ stores of Reliance or Birla’s.

We must note:

85 % of the rural India does not have the power to consume very much at the prices that currently prevail in the market.
30 % of urban India constitutes 75 % of the GDP.
70 % of the rural India constitutes 23 % of GDP
According to the Central Statistical organization, in 2001, 48 % of the rural GDP was agricultural.

In 2001, the NDP contributors were: agriculture 46 % , industry 21 % and services 33 %.

If India needs to grow sustainably, we need to make a prudent choice between education, vocational training and SSI. Needless to mention that, India’s growth will be driven by creating more jobs in lowest rungs of the society. They will build the real consumption led growth for a ‘Shining India’. The earlier, the better.

India today is in a recession and we must accept the fact. By closing our eyes the problems will still remain. We must build growth models not based on dollars , stock markets , urban India but go in for holistic models of growth that suit the local conditions and requirements , are broad based for all sections of society and industry , and just don’t reflect isolated figures .

US economy, Recession , terrorism, Economic fundamentals, Barack Obama, Recession in Indian economy, Terrorism , Curruption.

US Economy, War against terrorism, Crude oil & Iraq War – The real reason

People do not realize that the real reason for Iraq war and the current war threat against Iran was not the nukes , not terrorism and not the Oil. It is all about protecting and propping up of the greatest con-job in the recent history, the US petro dollar scam

Back in 1971, the USA printed and spent far more paper money than it could cover by gold

• Few years later, French demanded redemption of its paper-dollar holdings in gold. But the USA rejected as it actually didn’t have enough gold for the dollars it had already printed and spent all over the world, thus committing an act of bankruptcy.
• So the USA went to the Saudis and cut a deal – OPEC denominate all sales of oil in US dollars
• From that point, every nation that needed to buy oil had to firstly hold US dollars, which meant that they exchanged their goods and services for dollars, which the Americans just printed.
• The Americans brought their oil literally for free by printing those dollars. The ultimate free lunch for the Americans at the expense of the rest of the world.
• However, the scam began to unravel when Saddam Hussein started selling Iraq’s oil directly for Euro, abrogating the cozy arrangement the Americans had with OPEC. Thus Saddam had to be stopped. How?
• USA concocted up a pretext to wage war (drama of twin tower blast) and invade Iraq and the first thing the Americans did was to revert sales of oil back to dollars. The currency crisis was averted for the moment.
• But Hugo Chavez (Venezuela President) also started selling Venezuelan oil for currencies other than dollars, so there were a number of attempts on his life and “regime change”, traceable right back to the CIA. The petrodollar cat was out of the bag.
• Iran President (Ahmedinejad), watching all of this, decided to kick The Great Satan in the goolies and do the same thing – sell oil for every currency EXCEPT US dollars.
• The shell game is coming to an end for the Americans. As the nations of the world find that they can buy oil for their own currencies instead of holding paper US dollars, more OPEC nations will abandon the dollar.
• The worst thing for the Americans is that eventually, they will also have to buy their oil with Euro or Rubles instead of just printing paper money to get it.
• That will be the end of the American Empire, the end of funding for the US military and the destruction of the US economy.
• The great scam is coming to an end and there’s not a lot that the USA can do about it, except start another world war!!!
• Wait and Watch… Only few years/months ahead.

It is several years that a plan for establishment of an oil exchange center under the title of “Iran Oil Bourse” (IBO) is under discussion. (1) The most important point about the plan is that it wants to replace dollar with euro for the currency that is used for oil transactions. According to the existing schedule, the IBO will start functioning from March 2006. Some sources have claimed that the US is so sensitive to this move against dollar that it is going to attack Iran before the IOB starts working. These sources claim that the same issue instigated the US attack against Iraq.

I do not think that IOB will be a real source of threat for anyone and source of interest for Iran at the present conditions and under the control of the Islamic Republic of Iran. The government of the Islamic regime of Iran, as an inefficient, unpopular, undemocratic, anti-human rights, corrupt, non-transparent, illogical (ignoring the national interests and defending the hardliner religious zealots all over the world), un-elected, tyrannical, mismanaged, isolated, sanctioned government, which is hostage to the religious ideology of the Arabs of 1400 years ago, is not able to start such a plan. At the same time, the engineers of the conspiracy theories of “petrodollar wars” are neglecting (probably intentionally) many important issues in this case. Most of these theories are based on false assumptions.

The Iranian oil Bourse will not start at the time claimed. It will not be able to make any changes in the oil market and it is not able to do any thing important against dollar. The countries like Russia, China, Europe and many others are not so na�ve to wait until a corrupt and inefficient system like the Islamic Republic of Iran makes a change that they like. If they were interested in doing something like this (changing the dollar base with euro for oil transactions), they would have done it much before. There are several attempts, including by Putin in Russia and the UAE for doing this and they were stopped due to the existing difficulties. The I R of Iran has not solved those difficulties and at the same time it has thousand of important problems over them. Which country or reputed company is ready to establish a brokerage unit for oil (as matter of fact for anything else) in the Kish Island of Iran and put its personnel and establishment subject to the jurisdiction of the revolutionary courts of Iran? Or the illegal acts of the disciplinary forces of the Iranian regime or the irresponsible actions of the “organized thugs” called Bassijis (note the attacks of the organized thugs against the foreign embassies in Iran due to several unimportant cartoons).

That is the petrodollar wars?

Hadi Zamani (2) in his informative and detailed series of articles about the Iranian oil bourse (written in Persian and posted consecutively in http://news.gooya.com) has mentioned: “according to the theory of petrodollar wars, the monopolistic situation of dollar for the foreign exchange reserves of the world imposes a great burden over all countries… It allows the USA to continue to have its structural economic imbalance and lets it keep its hegemony over the international economy… therefore keeping the status of dollar is at the top of the foreign policy priorities of the United States. At the moment, due to the risks and dangers that threaten the status of dollar, the US is following a militaristic policy in the Middle East region in order to stop the collapse of its economic, political and military hegemony… on the basis of the arguments related to the petrodollar wars, the reason for US attack against Iraq� was not combat against international terrorism or stopping Iraq from getting the nuclear weapons. The US aim was keeping the hegemony over the international economy. For the same reason, immediately after the occupation of Iraq, the US officials ordered the oil transactions of Iraq back to the dollar system…”.

Professor Krassimir Petrov (3), from the American University in Bulgaria (his article on this subject has been used by countless sources and websites as an academic argument for the validity of petrodollar wars theory) writes: “… Bush’s war in Iraq was not about existing weapons of mass destruction, about defending human rights, about spreading democracy, or even about seizing oil fields. It was about defending the dollar, ergo the American Empire; it was about setting an example that anyone who demanded payment in currencies other than U.S. Dollars would be likewise punished….The Iranian government has recently proposed to open in March 2006 an Iranian Oil Bourse�If so…The Europeans will not have to buy and hold dollars in order to secure their payment for oil, but would instead use with their own currency. The Chinese and the Japanese will be especially eager to adopt the new exchange. It will allow them to drastically lower their enormous dollar reserves and diversify them with Euros… The Russians have economic interest in adopting the Euro… Russians have also revived their nationalism; if embracing the Euro will stab the Americans, they will gladly do it and smugly watch the Americans bleed. The Arab oil-exporting countries will eagerly adopt the Euro as a means of diversification against rising mountains of depreciating dollars. Should the Iranian Oil Bourse gain momentum and accelerate, the interests that matter…will eagerly adopt the Euro, thus sealing the fate of the dollar. Americans cannot allow this to happen, and if necessary, will use a vast array of strategies to halt or hobble the exchange�s operations: Sabotaging the exchange, coup d’etat, Negotiating acceptable terms, joint UN war resolution, unilateral unclear strike, and unilateral total war. [this section is made brief]”

Jerome R. Corsi (4) has stated in his writings: “Iran and Venezuela have joined forces in an effort to undermine the U.S. dollar. In October 2005, Venezuelan President Hugo Chavez announced that Venezuela was ready to move the country’s foreign-exchange holdings out of the dollar and into the euro. He also called for the creation of a South American central bank designed to hold in euros all the foreign assets.”

Also, Mike Whitney (5) in his article dated Feb. 4 2006 claims: “Many war-weary newshounds are probably wondering why Russia caved in at the IAEA board meeting and agreed to have Iran sent before the UN Security Council� Obviously, Russia’s foreign minister comment that the referral to the UNSC is “only a warning” doesn’t adequately explain why Russia would have placed its ally in such grave danger of a preemptive attack. It may be, in the words of the Godfather, that the Bush administration made Putin “a deal he couldn’t refuse”. For one thing, Most News reports just yesterday that “Lukoil will replace the disgraced Halliburton” in providing fuel in Iraq…The truth is, that even the control of oil is not nearly as critical to the US as maintaining it’s continued dominance in the exchange of oil in greenbacks. If Iran is allowed to open its oil bourse (exchange) in March and openly compete with the US’s monopoly on trading oil in petrodollars, the central banks across the globe will dump hundreds of billions of dollars overnight, and the American economy will disappear beneath the waves.”

In his other article, Mike Whitney (6) has added: “…The [US] administration has no hope of securing the votes needed for sanctions or punitive action. The trip to the Security Council [of the Iranian nuclear case] is purely a ploy to provide the cover of international legitimacy to another act of unprovoked aggression… We should now be focused on how Washington intends to carry out its war plans, since war appears to be inevitable. Bush has no intention of occupying Iran. Rather, the goal is to destroy major weapons-sites, destabilize the regime, and occupy a sliver of land on the Iraqi border that contains 90% of Iran’s oil wealth. Ultimately, Washington will aim to replace the Mullahs with American-friendly clients who can police their own people and fabricate the appearance of representative government. But, that will have to wait. For now, the administration must prevent the incipient Iran bourse (oil-exchange) from opening in March and precipitating a global sell-off of the debt-ridden dollar..”

The answers to the theory

Paul Craig Roberts has written “readers keep asking if Bush is attacking Iran because it plans to open an oil bourse that would permit oil to trade in Euros…, the answer is no…, the dollar’s value depends on the world’s willingness to hold dollar denominated assets, not on the currency used to pay oil bills.” (7)

Once again looking at the articles of Hadi Zamani on the subject makes many points clear. He writes in the articles mentioned earlier that: “…those who oppose this doctrine argue [I have put the reasons that Zamani has mentioned in numbers changed some words accordingly]:

1- This doctrine exaggerates the status of dollar for the US economy.

2- The doctrine is ignoring the elements that have resulted in the present role of dollar as the reserves currency in the world and coasts of staying in such a position.

3- The euro is not able to tolerate the costs of being a currency for exchange reserve and the European countries are not ready for such a burden.

4- This doctrine is not taking into consideration the realities and complex mechanisms of the oil market

5- The doctrine is based on several handpicked evidences and it degrades the functions of the global economy into several conspiracies.

6- The first reason for the present role of dollar as the dominant currency in exchange reserves is the power of the American economy, not political conspiracies. The UIS produces almost one third of the Gross Global Products.

7- In the long run, dollar has more stability as compared to the other currencies.

8- Transferring the euro into the currency for the global reserves will increase its value 20 to 40 percent, and such an increase will weaken the exports of the euro countries considerably. The European economy is not powerful enough to tolerate such a pressure.

9- There is no serious indication that the countries of the world, including the oil exporting countries are ready to accept a euro based oil market. Since 1986 the oil prices are determined according to complex tables and spot changes in the New York and London exchange markets (called New York Mercantile Exchange, or NYMEX and International Petroleum Exchange or IPE correspondingly.)

10- OPEC countries are not ready to change the basis for oil transactions so easily. OPEC has tried several times to change the basis for the oil prices to euro, or Special Drawing Rights (SDRs of the IMF) or a basket of currencies and each time it has been abandoned.

The plan for establishment of Iranian Oil Bourse was first tabled in 2000� The IOB will include petrochemical products and gas too. In the initial phase the transactions does not include crude oil (perhaps up to three years). Later it will include all oil transactions including the swap operations of the Caspian Sea oil. According to the claims of the Iranian government the IOB will turn into a major oil transactions center in the Middle East. The transactions will be in euros and the monopoly of dollar over the global oil markets will be ended.

However, entering this business requires a reform and preparation in the economic, legal and administrative structure of the country. At the moment Iran lacks proper financial, banking, insurance, customs, and commercial structures, proper tax laws, the dominance of the governmental sector, lack of competition in market, weakness in attraction of foreign investment, lack of necessary expert manpower, lack of necessary advanced technology, weakness in the electronic commerce structure, lack of necessary economic, legal and technical infrastructures, lack of system of the credit cards in global level, lack of commercial customs, Iran is not still a member of the World Trade Organization (WTO), Iran is already under American sanctions, Iran is not in a proper situation in the global economy, Iran has to observe the OPEC quotas, and this limitation cannot work in an international oil bourse. The IOB is based on the good market for the producers, but the fluctuations in the oil prices may put the same countries in a difficult situation.

Zamani adds an important point for those who care about the religious aspects of the IOB and he says, “It seems that the IOB is against the religious rules of Islamic Shari’a in Iran. The IOB faces problems based on the Islamic jurisprudence limitations and stumbling blocks…oil bourse is in fact a future market. One of its aims is to reduce risks of the oil transactions… according to the studies of the Iranian experts, the mechanism of future oil bourse transactions is basically contrary to the Islamic jurisprudence of the Islamic Republic of Iran (please refer to the article in Persian by Hojaolislam Ghanimi Fard, and Mohammad Aram Bonyar in the site of Imame Sadegh University regarding the “Feasibility Study of the Establishment of the Oil Bourse by the Islamic Republic of Iran).” Zamani concludes: “The success of the oil bourse depends on transparency of the economic structure and rationalization of the Iranian foreign policy.” (8)

Also, Colin Nunan has written in the Energy Bulletin “…However, others have claimed that the idea that the currency in which oil is sold matters at all is based on a poor understanding of economics…Those arguing that the denomination of sales is crucial to dollar strength have tended to say that countries are forced to save dollars so that they have dollars to buy oil. Their critics, however, reply that you do not have to save in dollars to buy oil since you can save in whichever currency you want and then buy dollars on the foreign exchange market whenever you want to buy oil. What matters, say the critics, is in which currency people ultimately save rather than in which currency they trade�So can we conclude that an Iranian oil bourse trading oil in euros is the real reason for the current crisis? Perhaps this is prematurely jumping to conclusions… I have yet to see a clear statement on this from the Iranian government.” (9)

The IOB is a good idea. In the hands of a proper Iranian government that establishes good relations with many countries, including and especially the USA, it could turn in the long run into a profitable center. The present day Iran lacks the necessary preparations for such a move. Even if taking steps for such reforms are started today, it will take sometime to make the necessary grounds ready. However, the government of the Islamic regime of Iran is not even walking in the direction of those reforms. Unfortunately the IOB is a stillborn.

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