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 ;
- 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
Last week , i was in Delhi and met up with two friends who gave me shocking news .
One friend works as a vendor to Ministry of Defence ( MOD ). He informed that the MOD is not in a position to pay for the orders already placed as there is no money available .Always, MOD was flush with funds , and this is happening for the first time in history
Also, a senior official of the Ministry of Health informed that , they are planning with money ! This means that there is no money with the ministry but meetings with regards to planning are going on
Corroborating these two meetings with RBI’s news ( dated 5th Nov , 2011) that , RBI cannot pay interest on CRR. I am afraid if India has already fallen off the fiscal cliff !
By the way, Indian Government is borrowing at the rate of 1.5 lac rupees per second to run the Government this year . Nothing more to write . I believe that the Government owes an explanation
Dr.Murli Manohar Joshi
Public Accounts Committee
Government of India
6 , Raisena road , New Delhi 110001
I am sure this finds you fine .It was really nice talking to you yesterday. I wish to submit the following for your kind consideration
Recently , the government has raised Rs. 1.06 Lac Crore from the 3 G & BWA auctions. Though it is a different issue that the government was expecting a modest Rs. 32000.00 Crore from the auction ! The following should be considered
- What was the basis of the government’s projections ? Was it a failure on the part of the government that the proceeds of the auctions exceeded by 3 times of the projections from the government ? This clearly gives a reason to believe that there was a systemic failure on the part of the government and it shows up in government’s failure to arrest price rise ( inflation )
- Was the spectrum auction and sale the best option ?
- If the government went for a zero price or nominal booking price, and allotted spectrum for the entire India as one circle with say a 25 % – 30 % of the recurring revenue share from the telecom providers, would it not be better in serving the interest of the government in the long term ? It would have eventually generated much higher return per year and every year rather than one a time high auction fee ! What was the basis of deciding one time auction fee with an expected collection of Rs.32000 crore ? This money ( Rs.1.06 lac crore ) might give temporary sound bites to Pranab Da ( and the PM ) for no efforts of his or Mr. Raja . But the fact is that , it will put a strain on the telecom companies and will also suck the liquidity from the markets . This will also cause a long term loss to the government as it could have gained immensely , had it gone for a lower or zero initial fee and a larger share in the recurrent revenue from the telecom providers. This is a myopic policy of this government and a big loss to the exchequer
- What was the total loss in previous auctions done in arbitrary allocation of telecom spectrum, and what is the progress in the CBI investigation ? Why has the FIR lodged by the CBI not named anyone ? When the senior most minister or the bureaucrat should be named in the FIR , what has prompted the CBI to lodge the FIR against unnamed persons ?
- Since Rs.10.6 Lac Crore is already raised through the auctions, i suggest that the government allocates the 10 % the money raised in India Innovation and Entrepreneurship fund to promote innovation and entrepreneurship amongst youth of the nation
I am sure you will take up these matters in appropriate forums . We look at your leadership in addressing some important issues concerning the nation .
With best regards
Rajendra Pratap Gupta