On October 11, 2012, i wrote the blog ‘From Emerging to a Submerging Economy’ https://commonmansblog.com/2012/10/11/india-from-emerging-to-a-submerging-economy/
I read the story in the Economic Times today, titled ‘Feast of Burden’ ( Page 10, ET dated August 3-9, 2014). It is almost two years since i wrote my blog and this story on corporate debt. Things are still the same , rather have gone worse . For example ,
The cumulative debt of;
- Tata Group is about Rs. 2.00 lac Crore
- Reliance ADA Group is about Rs. 83,000 Crore
- Jaypee Group is about Rs.66,000 Crore
- Bharti Group is about Rs.60,541 Crore
- GMR Group is about Rs.37,788 Crore
- Lanco Group is about 34, 876 Crore
- HCC is about Rs. 11,150 Crore
I am not mentioning the rest of the groups like ESSAR etc…. Small and mid-size companies would further make the situation scary .
It is time that the Government asked all these companies to come out with a clear statement of how they are going to service these debts, to ensure that these companies do not end up creating a ‘cloud burst’ for the Indian middle class and disturb the economic prospects of this developing country
Rajendra Pratap Gupta
Please see the total debt , interest and principal payments by the Government of India . Still do you think that we can pull this country out of the mess under the UPA ? We need radical changes
As per data made available by the Ministry of Finance on debt vide RTI dated 13th May 2013 letter dated AAAD/COORD/ L(1)2012; AS ON 31/12/2012
Government Loans :
Total multilateral debt is INR 2,401,829,740,367
Total bilateral debt is INR 1,046,418,091,740
Total Government loans ( multi-lateral and bilateral ) is INR 3,448,247,832,107
Non – Government loans
Multi-lateral INR 302,495,682,321
Bilateral INR 190,240,677,456
Total Non-governmental Multilateral & Bilateral loans – INR 492,736,359, 778
Grand total ( Government & Non-Government ) 3,940,984,191,885
Total yearly payments of interests & principal
2011-12 2012-13 ( 01.04.12 – 31.12.2012) Figures in 1000 INR
Interest 2425686378 2028398390
Principal 34823428250 24641868095
Please see the data below . If you carefully examine the data , a few things are apparent ;
1. Sales drop in tractors indicate poor state of affairs in agri- rural India ( decline in agricultural sector )
2. Sales drop in Medium and heavy ( M&H) segment indicate actual decline in industrial output
3. Sales drop in light commercial vehicles (LCV ) indicate that the ‘Public sentiment’ is negative .
In the tractor segment 3,44,911 units were produced as against 3,72,282 units in the same period of last FY, registering 7% decline according to the data of Tractor Manufacturers Association [TMA].
As per the data of the Society of Indian Automobile Manufacturers [SIAM], total production in M& H segment was 2,11,530 vehicles against 2,72,400 in the same period of last financial year.
Source : http://www.business-standard.com/article/companies/steep-fall-in-commercial-vehicle-production-in-apr-dec-113012500139_1.html
VE Commercial Vehicle sales down 20% in December
By PTI Jan 01 2013 , New Delhi
Indian Economy From Aviation, Retail , Healthcare & SEZ Perspective
A lot of experts spoke about the robustness of the Indian economy when the global recession of 2008 did not entirely slow down India’s growth. Experts spoke at length about the pragmatism of India’s central bank leadership and its policies to have evaded the crisis. They even spoke about the sturdiness of the capital market and the role of the regulatory authority. Today the global crisis is over in most of the nations. United States is back on track with the unemployment figures at a controllable rate and the retail spending picking up. Similarly Japan is expecting the return on investments it made after the Tsunami crisis last year. The amount spent on reconstruction has boosted the economy and it is expected to grow at respectable 2 percent this year. Only Europe seems to be lagging behind, however it must be taken into account that integrating economies of over 30 nations is a daunting task and credit has to be given to EU’s leadership for having dealt with the crisis in a respectable manner.
When compared to the growth rates of these developed nations India’s 7.6 percent growth rate seems to be enviable. So is everything great with the Indian economy? Is it really faring the way it is being projected? Every year fiscal consolidation is the buzzword yet the budget keeps running into deficit. The finance minister keeps promising to bring it under control yet deficit has increased from 4.6 percent last fiscal to 5.9 percent this fiscal year. Most of the deficit is on the account of food, fuel and fertilizer subsidies. The government keeps making provisions for the underprivileged but it is equally true that they are not getting the desired benefits. Most of the provisions are limited to mike & paper.
Let us evaluate the top most (so-called Sunrise ) sectors in India that are consumer driven and how they are faring – Retail , Healthcare , Aviation and also the ‘Oversold & over hyped SEZ story’.
We will have a moment of truth !
The India Aviation industry is in a tailspin. Every other day Air India, Kingfisher, Jet Airways etc are making the headlines for all the wrong reason.
Air India the state-owned company has been relying on frequent government bailouts for its existence. Air India alone was responsible for the 10 percent of the global aviation industry losses in the year 2008 while it handled dismal 0.35 percent of the global passenger traffic. It is also over staffed with over 500 employees per aircraft whereas the industry average is around 120.
Kingfisher airlines owned by the flamboyant liquor baron Vijay Mallya is in troubles. Banks have finally decided to withdraw support in terms of providing further debt. The only hope which the country’s third largest carrier can have right now is a government bailout. However there is a vehement opposition to such an action by the government. Experts and other industrial groups have strongly advised against such an action as it is a free market economy and it would amount to sheer wastage of taxpayers’ money.
Jet Airways has recently been in news when the tax authorities decided to freeze its account as it was about to default on its service tax payments. The Jet Airways spokesperson attributed the problem to rising crude oil prices and the high airport duties and lack of support from government in terms of policies. According to them the delay in service tax payment was a minor operational issue. However the mounting losses over past few years tell an entirely different story. They were in news few years back for having laid off over 1200 employees and later taking them back next day after intervention from a local politician.
Other airlines in India like Spice jet, Go Air etc. have been on the fringe and have been moving back and forth from black to red. An only Indigo airline is making profits. Several other have bowed down under pressure. They were either forced to shut down operations like Paramount Airlines or they managed to exit at the right time like Air Deccan and Sahara Airlines.
So what exactly is ailing the airlines in India? Rising crude oil prices are often quoted as the culprit. In India fuel cost is almost 40 percent of the operational cost of running an airline whereas in other countries it remains around 15 percent. High fuels cost give little margin to maneuver in terms of other aspects like offering attractive tickets rates and other offers. However this is not the entire picture. Even though the crude prices reduced from $ 156 barrel to $70 barrel in 2008 to 2009, the Indian carriers continued to bleed and posted losses.
The real problem is of excess capacity due to overselling of India’s growth story . India’s daily domestic passenger traffic is approximately 1.51 lakh passengers whereas the capacity is around 2.16 lakh passengers. Imagine the revenue loss everyday on account of unused capacity. This has happened only due to the mindless unplanned expansion by the airlines hoping to cash on the Indian Incorporation growth story sold by the gang of politicians right from Sonia , Manmohan & inefficient Pranab and highly promoted Montek ! The airlines promoters were chasing numbers which was arrived on mere speculation & playing a ‘Valuation game to make quick buck’. They went on buying spree and expanded their fleet. Today the aircrafts remain underutilized. India has the aircraft flying hours of 12 per day compared to 16 per day internationally.
Looking at the complete picture it is difficult fix the responsibility on the airline owners. They are capitalists who are driven by market forces. They anticipated growth in market based on market forecasts and other factors like projected rate of growth of GDP. They expected growth in industrial output and service industry output and subsequent increase in airline travel. However the reality was far removed from it. The India Incorporation failed to deliver and they were left in lurch. Today they are hoping for a miracle to save them from their predicament.
Losses Made by Major Domestic Carriers in India
|Carrier||Cumulative Loss 3 years (Cr)|
According to the experts the retail trade industry in India is having a bright future & is consumption driven due to the ‘reducing poverty due to social schemes and increasing middle class due to India’s growth story ‘. One of the studies by North bride capital expects it reach about USD 850 billion by 2012. Out of which organised retail will be having a share of over 20 percent. In numbers it over USD 175 billion. That is a huge market. According to others this figure will be achieved by 2015. Similarly other reports have painted rosy picture for the entire industry. Currently it is increasing at a rate of 5% yearly. A further increase of 7-8% is expected in the industry of retail in India by growth in consumerism in urban areas, rising incomes, and a steep rise in rural consumption.
As per consulting firm KPMG’s findings in a March 2009 report, the organised retail market in India has witnessed steady growth at 15 per cent in fiscal 2009. It will grow much faster, at the rate of 30-35 per cent annually, than the traditional one in the coming years. Fast moving consumer goods (FMCG) and apparel sectors are likely to drive this growth.
According to the 8th Annual Global Retail Development Index (GRDI) of AT Kearney, India retail industry is the most promising emerging market for investment. In 2007, the retail trade in India had a share of 8-10% in the GDP (Gross Domestic Product) of the country. In 2009, it rose to 12%. It is also expected to reach 22% by 2010.
A India’s Retail Market Report by Boston Consulting Group
Total Size ($ Billions)
Organised Retail ($ Billions)
The true story of the retail industry: It has become a ‘Valuation game’ due to over selling the India story of the growing middle class
Subhiksha, Vishal Mega Mart, Koutons , Wadhawan group’s Spinach etc; do these names sound familiar and have something in common. Yes these are players in the organised retail industry who have succumbed and failed to deliver at their promoters expectations. These chain stores were at one time case studies of India’s organised retail success. So what actually forced them lower their shutters.
According to Jagannadham Thunuguntla, head of SMC Global all these cases are classic examples of the retailers getting carried away by the India’s fascinating growth story and the phenomenal rise of the middle class.
The phenomenon is not limited with these cases mentioned above but also with the so-called successful ones in the industry. Country’s largest department store Shoppers Stop for instance posted an overall loss of Rs.4 crore in the last five years, while its debt soared to Rs.390 crore. The Tata group’s retail arm, Trent decided to close down its loss making chain, Fashion Yatra. It was launched in Oct 2008 and it was aiming at low-income shoppers in Tier 2 – 4 towns. Similarly Reliance Retail decided to close its Reliance Wellness format and not only that it scaled its hypermarket format down in some cities. Hypercity closed down its catalogue selling venture and also got rid of its Gourmet City format.
For the modern retailers penetrating further into urban markets has become a challenge. They have no option but to continue to create, preserve and then destroy the store formats they have come up with. Having closed down and revived several formats, most retailers have realised they need to constantly experiment with them to stay afloat.
So we can clearly see that India’s organised retail industry, which has the coveted potential of nearly a billion plus customers with enough cash to spare, has so far claimed a number of players, small and large. These players expanded too soon based on mere speculations.
While these retail stores were expanding and accumulating debts they hoped that the middle class with disposable income would be ready in short time to support them. Things did not turn out the way they had planned. India Incorporation failed to deliver and along with that came the global economic crisis. These firms ultimately paid the price by closing down their shutters. For instance Subhiksha had expanded to over 1600 stores country-wide entirely on debt. This was a blunder that it committed as it was counting on the rising customer demand which was only on papers.
Not only the growth stories are misleading, at the same time the country’s back-end is not developed and huge investments go into developing it. The vital supply chain required for the retail networks are entirely missing. This leads to a huge inventory cost which the small retailers are unable to cope up with. Take for example, it is estimated that in the food retail business in India, the wastage due to lack of proper storage facility is staggering 40%. This entire situation is largely the result of the lack of proper policy framework from the government.
The Indian retailers like Future group , Reliance and others are backing FDI so that they can get investment and save themselves from the fate of Subhiksha , Koutons , Gini & Jony , Spkykar , Vishal Mega mart , Foodland super markets, Surya Group etc . We have more companies going into CDR – Corporate debt re-structuring post the closure of the financial year 2011 ( March 2012 ). Banks do not wish to announce the failures or NPA’s in this year.
Ideally , retail businesses should have been making money due to consumer demand but the fact remains that India’s income and growth story is limited only to 6-10 towns and impacts less than 10 % of India’s population
SEZ’s in India
India adopted the concept of zones from as early as 1965. Kandla in Gujarat was the first Asian export processing zone till the advent of the modern SEZ’s as such zones are now known as. With the passing of the SEZ Act in 2005, it was hoped that the Chinese success story would be replicated in India. It was expected that investor’s confidence would be established in the Government’s commitment to a stable policy regime. The real aim was to generate greater economic activity and employment with the establishment of SEZ’s following the Chinese model of economic growth !
There were numerous applications from multiple sources with individuals, indigenous companies, foreign MNC’s all rushing to have a share in the pie. Sadly it was a short phenomenon. The initial excitement was over as the problems started cropping up. Today in the last two years, as many as 60 applications for SEZs have been withdrawn, while 35 developers have applied for de-notification, according to data by CB Richard Ellis (CBRE), the real estate consultants.
Till date, the government has approved 584 SEZs. There are 381 notified SEZs, of which 148 are operational. Of these 148, only 17 are multiproduct SEZs. The remaining ones are SEZs dealing in engineering, electronics, IT/ITeS, hardware, textiles, bio-technology and gems & jewellery.
So what exactly is wrong with the SEZ idea in India which paid its dividends in China, Poland and Philippines?
On the whole the SEZ idea in India seems to be very much the product of the irrational expectation which has been fueled by imagination.
Healthcare Companies : Most of the healthcare companies are ‘managing profits’ and as i write , a major healthcare ( hospital ) chain and a pharmaceutical conglomerate is about to wind up in the next 3 months . Imagine a healthcare & hospital company winding up ?
So the Congress party has sold the India story purely on ‘Imaginative basis and on speculative data’ numbers , have no idea of what is fueling inflation and what will deliver growth ? With all sunrise sectors on a downslide , it is better to replace these ‘ignorant intellectuals’ and bring in people who can understand the economy and run it efficiently .
Based on the governments high-octane pitches for the India’s growth story , consulting companies have brought out reports supporting government announcements , and business houses have approached investors or moved to stock market and raised money and have put up expansion plans . But the reality is that, India does not have a growth story with the current fundamentals being very weak and ‘Leaky’ social schemes are making the party rich and not the population !
Also, that the current stand of the government to raise the tax issue with Vodafone is a clear proof of what i am writing . India is desperate for funds and behaving like a dictator reversing a five decade legislation for just 10,000 crore ( USD 2 billion ). Does it not show the lack of morality and desperation for funds ? Rest will become apparent in April – May-June Quarter !
Lastly , the financial deficit of the government proves the rest ; all is not well with the India ‘bubble’ story ! Tough times are ahead , if we don’t take immediate action !
Rajendra Pratap Gupta
Healthcare I Retail I Rural Economy I Public Policy
Dear National Leaders,
For the last couple of months , we are seeing a ‘high octane’ battle being fought between the parties for two issues ‘ Corruption in congress and unchecked inflation’. As a common man , I am worried that this great nation is going to dogs because of the lack of governance in the ruling party , and lack of outcome based action in the opposition ( which needs to unite for a national cause ) .
The current government is a serious threat to the national security One side , Rahul Gandhi says that Congress will fight corruption , and Sonia says that she has a five pronged strategy for fighting corruption , one the other side , we see that congress goes and co-habits with DMK for the Tamilnadu elections, and the government is shy of disclosing the names of 17 account holders in Swiss banks , so it clearly tells what kind of five pronged approach congress has to fight corruption .
Arrest of Raja by CBI is a tactic by congress , CBI is not a prosecuting agency, it is an investigative agency.If congress was serious , the system would have sent him to judicial custody – I am sure that intelligent people who understand the mechanization of congress , get the meaning.
My biggest worry is that Indian military is getting weaker day by day , and we are waiting for an attack to happen , India could face serious losses and a major setback , if that were to happen. I do hope that BJP will take action . Scams can be handled , may be, even some lost money could be recovered. But if we are attacked by a foreign power and we fail , We would have lost it all.
Congress has to go now and so has to the Gandhi Dynasty from Indian politics . I would suggest BJP to start Egypt like movement so that our Hosni Mubarak’s ( Gandhi’s ) and Mohammad Bin Tugluk ( Manmohan ) go soon , and the country can be put back on track We don’t want our great nation to suffer more .
Please get your act together
A Common Man
Rajendra Pratap Gupta
Dear Mrs.Sonia Gandhi,
Since you are the President of Congress party , please look into this email
Over the last few years , we have tried to accept Dr.Manmohan Singh as our Prime Minister , but his performance as a congressman might be good , but he has failed completely as a Prime Minister . Congress has been blinded by Gandhi dynasty to such an extent that it has become poor in chosing the right people for the right job. May be that your and Rahul’s intellect is not upto the mark where you can choose competent people .
Over the years , congress government under your Presidency has become a government of faulty planning , false promises , blaming coalition for your failures and blame free investigations in most of the scams
- This government has too many highly educated people, economists & NRI experts & advisors , but still the wisdom to understand the problems and give exact solutions is missing .
- Every time your Congressmen give a new date about controlling inflation , and every time they miss it . When the inflation is perpetually high , you blame coalition politics for it. So why do Indian’s pay a price for your forming the government ?Dissolve the government and go for fresh elections .
- You are not able to judge the talent and most of your ministers are highly inefficient and corrupt , and we were hoping that Sharad Pawar would be removed so that he could focus on the ICC world cup in 2011( Which he will do anyways !!), but he seems to have hypnotized you !! He is still around !
- Your party believes that , by revealing the names of those who stole the government money and deposited them in Swiss Banks , would pose a security risk ! So you are trying to tell India that, majority of your office bearers are Swiss account holders !! And that their getting caught would mean that the government would collapse !! Anyways , Julian Assange is on the way for dropping a few names , and I do hope that they are not from India & Congress !!
- Industrial growth has been reduced to 2.7 % , lowest in the past 18 months . Would like to answer it why ? Rather , I must ask you if your people know at all why it happened ?
- People are very bullish about rural India, and every major FMCG , White good & vehicle manufacturing company is over- joyed with the growth coming from rural India in terms of the purchases being made . Let me take you through a very dangerous & disturbing development in rural India – I call it Rubble ( rural bubble ). I have been visiting rural India and talking with villagers . Here is what I want to tell you. Let’s take the example of Chavane village in Raigad. The village has changed dramatically in the past 3 years. It is great to see concrete (Pucca )houses with two wheelers parked in front of the houses. As you dig deeper , the facts reveal that people sold their land to MHADA for Rs.30,000.00 per acre for SEZ, and with sudden flow of funds, the thatched roof houses got converted into Concrete (Pucca ) houses, and two wheelers were also purchased along with some jewellery . Villagers had for the first time seen so much money, so instant money that came by selling land was used to make aspirational purchases , and it is over now , lands are gone as well !! What will the farmer do ? What will the farm labourers do ? How will they earn their living ? Let’s take another village 80 Kms from Nagpur , where Lanco plant is being built . Villagers have sold land for the rates as high as Rs. 25 lac per hectare . In India , average size of the land holding would be around 5-7 acres. Selling the entire land would fetch Indian farmers between Rs. 1.25 lac to 1.75 crore depending upon the size of the holding and the rate paid by the acquirer. On these lands , manufacturing plants would come up. We would never see greenery again. And farmers and their children who do not have jobs and land to do farming will be the next anti social elements or naxalites !! With land not available for agriculture , inflation would be higher than what it is today . Today farming is seen as a disdainful activity , and people want to do a job of Rs. 4000 but do not want to work in farming . Your congress government has kicked the ass of 100’s of millions of farmers over the past 60 years , and we are on a temporaray rural growth that I call as a rural bubble – Rubble !! India is headed for a major crises , & all because of the faulty policies of successive congress governments focused just on building billionaires , industries and encouraging FDI !! Get retail FDI in India , and see how the 12 million kirana stores and their families will starve to death . I have had discussions with the Parliamentary Committee of Commerce , Chairman in 2009 , Dr.Murli Manohar Joshi , and have given him in detail the reasons why we need to avoid FDI for the next 5 years at least !!
- For price rise , last year ,Manmohan ji said that it was due to poor rains , in 2010 we had good rains and good crop , so why the price rise ? Kindly explain
- I was in Nagpur on 17th / 18th , and I read in one of the news papers about the fact stated by none other than Mr.Subramanian Swamy that, your bank balance was about Rs.10 crore some twenty years back , and now it is Rs.80,000.00 crore !! I think that this shows that inflation is very high at 10, Janpath . Please clarify if you actually made 60 % money in the 2G scam or this money came from abroad ? You are answerable
- Ironically , in the current times , we have a strong opposition but a weak ruling party . How can this government run ? If BJP comes down on its demand for JPC in budget session, Indian public will assume that it ‘settled’ the matter with congress and will never let them win again the seats that they are looking for, and if they keep their agitation on like the winter session , your government will have to go , and India will see a sign of relief !!
- Madam, congress might be your personal fiefdom , but not this country . You have created multiple power centers more powerful than the PM , like Rahul , NAC etc….You are the worst Congress President in the history of this country . But usual , we have a saying ‘Andhon main Kane Raja’ So you are the right person for the congress, which does not have any talent left !!
- We have an outdated finance minister , unfit Agriculture minister , Hyper environment minister and an ineffective Person on the seat of the PM. All along, I have heard that we need 100 good people or 1000 good bureaucrats etc. But the fact is that , we just need one right person : at the seat of Prime Minister . One right person will change the future of this nation , and Manmohan certainly is a disaster at the cost of people . At this time , we cannot afford to have a lame duck as a Prime Minister of this youthful nation . Please give us a Prime Minister , we do not need a professor !!
- A suggestion for controlling food inflation : Please ask the government to start a daily free ( even if you charge the farmers for this service, it is fine ) truck service from the remote villages to cities , where only farmers can come directly to the market and sell their products, rather than selling through agents , mandis or APMC . This will ensure that the person who adds maximum value and takes maximum risk for growing the produce ( farmer ) should also get the maximum profit . The profit at every point of sale post the harvestor ( farmer) should not cross 15 % , and this will bring down the prices to reasonable levels permanently . I read Subbarao stating that the government is desperate to control inflation and will raise the base rate , I heard Chidambram that government is clueless about the tools to control inflation , Sharad said that he cannot control what the farmers want to grow and so he cannot control food inflation . All these stupid statements come because you have bookish professors and so-called highly placed intellectuals and NRI & outdated advisors , who have no connection to ground reality . I do not understand how will raising the rates decrease inflation ? You have been doing this for the last two years and the result has been same – inflation has only increased . Do we need such economists who do not have answers to the common man’s problem ?
- Do you never apply your brains about this fact that, the prices of the grains and vegetables are sky-high , still the farmers are committing suicides ? Does this not help you understand the problem and get an answer ? You all must be high level fools then !!
- In addition to high prices of food stuffs, by increasing the price of petrol again you have signaled the common man that ‘do not eat , do not go to work’
Nitin Gadkari ji , please take up these matters with utmost seriousness , as congress is forcing the poor people to take to suicides by failing to control prices . If BJP does not take the matter seriously , the people of India will feel betrayed. Congress is fast becoming a failed party under you Sonia Gandhi ! Please either give us a PM or you and PM can go now ….. do not let this great country go to dogs !! This email is marked to Sharad, your dear son , FM , HM etc. to do some soul-searching and step down
Rajendra Pratap Gupta
India & Recession – Why & When
It is more than one and a half year that we have heard and read about recession , slowing economy, reduction in industrial output , high inflation , negative agricultural growth , voluntary cut in production , lay-offs , reduction in wages , shutting down of companies etc . Prime Minister and other ministers kept assuring that we are a decoupled economy with very ‘strong fundamentals’, and that India will not be affected. In the interim budget they did not give anything as ‘Stimulus’. Suddenly, when Standard and Poor down-graded our economy ratings to one level above ‘Junk status’. Overnight, the government announced a stimulus for the economy, and still keeps saying that, the economy will grow around 7 %. Personally, I am compelled to be optimistic, as I can’t afford to see my colleagues losing jobs, factories shutting down, people dying of hunger. A country with a billion populations fights a blame game. Government will finally put it on the global crises. But India was supposed to be a self reliant economy? Right? So are we saying we are beggars to the world and when the world goes belly up we will be reduced to what we are? Shame on the politicians who are liars of the highest order and distorting facts
There are five big questions that need answers from all of us and not just the government whom we have voted to power. These questions are related to the so called recession
1. Why it happened
2. Who failed us or who let us down
3. Where are we today
4. What is the solution
5. What we can do to prevent the same
Why it happened?
Congress ruled India for around 50 years .They gave us the infamous license raj, where it was difficult to produce without a license, available only to a select few. Outcome , politicians became rich , corporate houses became richer and the masses in India remained poor. When it came to voting, it was easy to ‘Influence’ and ‘Buy’ votes by offering ‘Daaru’ and ‘Sarees and cycles’. 70 % of the population lives in villages and they are the people who count when it comes to voting, and not people like you and me who read these blogs are merely 40 million in a population of over 1000 million?
In the 1990’s, our economy’s balance of payments situation became worse and Manmohan devaluated the currency twice and opened the economy to the foreign sector. After that, there was no looking back. Our immediate problem was solved but long term problems started. We started measuring our economic strength in the foreign exchange reserves in the country. These foreign investors also got into the stock market. Over the years, we got a very high Sensex- 21000. WOW!
As a result, Mukesh Ambani became the richest man in the world (albeit for a few days!!).
Just a few Indians who left the Indian shores for abroad and made it big ( V.S.Naipaul, Amartya Sen , Indira Nooyi , Arun Sarin etc..) or Arcelor , Tetley, Land Rover & Jaguar , or Corus acquisitions . These were merely aberrations. In India, where 16 % of the world populations reside, why do we not have 16 % of the top executives and 16 % of the top class firms in every sector? So these achievements were not a part of the Indian government’s plan or strategy. Clearly, these were a few aberrations and we arrogated them to India coming of an age. If you are asked about five top Indian names in the global corporate sector, you would find it difficult to reach the number. If you were asked to name five Indian fortune 500 companies, you would start looking at the wall. Is this what a land of billion minds should have produced? So we went wrong in our human resources management
We measured India with how many contracts Infosys or Wipro’s signed in Europe and India, how many call centers started serving US and European clients, and how many dollars got invested into India.
On the other hand , Ambani’s , Birla’s & Tata’s were looking at these ‘News’ and assuming that the entire India is growing fast . The reports that Indian government churns out is nothing but a bunch of information that government wants the public to know ,so that the government remains in the good books of the public and makes it win the elections and give it another term.
While Manmohan had opened the economy, he did nothing for farmers or small scale industries or BPL people. The result, we created a huge disparity in the income generation and spread. This was the sowing of seeds for a long term economic failure that our economy is facing today. Ideally, 25 out of the 100 richest people should have been from India, 100 of the fortune 500 companies should have been from India and 50 % of all patents should have been from India. Our billion plus population is for a mere statistics. Actually, our effective population is not more than 150 million. Rest is mere numbers or rather they have been just treated as numbers. I recall a definition of a politician ‘One who promises to protect rich from the poor and poor from the rich on the pretext of extracting money from the rich and votes from both’
Who failed us ?
Government did not fail alone. Media, in my belief, which is the teacher of modern society failed by selling its ethics and focusing on yellow journalism. Most of the top journalists are known to enjoy privileges and selling their conscience to others and write what their ‘Actual employers’ pay.
Judiciary: I read a day before yesterday a judge having said that, they should not equate to politicians & judges should not be asked to disclose their assets. SHAME ON YOU MR. Judge. Hopeless is a charitable word to describe judiciary in India . All the pillars of democracy have failed as judiciary is corrupt to an extent of over 90 %. Can you imagine the rot when a judge issued the summons to the President of India, Dr.A.P.J.Abdul Kalam? What worse can you imagine? If the president can be a victim of this inefficient judiciary what can a common man expect? If the judges have any shame they must quit en masse! You are a bunch of corrupt and inefficient people on the tax payer’s money and you don’t want to disclose your assets? Why the hell you want to keep them secret? Tell me a reasonable cause
Could you not try cases related to political corruption on priority things would have been different. But these greedy judges are not worth trusting for any worthwhile things for a suo moto action. They just keep passing judgments that gives them publicity.
No one trusts the government; everyone fears the judiciary and enforcement agencies. In all, the system has failed to deliver. I am not commenting the education and healthcare system as they don’t exists in the country
In all, I believe that our education system & more importantly teachers, media and judiciary have failed and delivered a fatal blow to our democracy
Teachers should be blamed for not being able to inculcate values amongst the students
Where are we?
A country is as strong as its citizens. When more than 80 % of the people are struggling to earn a two meals a day even after 61 years of Independence, have we gone the right way?
We are today in midst of two serious crises. One is the economic crises and the other is political crises.
Economic crisis can further be divided into two.
First, the one that has resulted into wrong economic policies blindly focused on FDI inflow and on making India a body shopping country. Also that, Indian government did not focus on developing the agriculture, infrastructure, SME, Retail & research based education. This had created a ‘Big economic divide’. Our politicians did not realise that the capacity building that could have resulted on building these sectors could have catapulted India to a different growth trajectory in the last two decades.
Second is the one that has been due to FDI, stock markets and the so called retail revolution. This was limited to about 35 towns directly and indirectly this gave employment to a lot of rural migrants. Knowing well that, most of agricultural families also depend on the members that work in towns and send money back home. These people have been affected due to reality and retail sector that is slowing down. All these are having a cascading effect.
Most important : Every one , right from the Reserve Bank governor to PM says that the worst is yet to come but they don’t tell what is the worst and when it will come and what is the solution ? It is like an astrologer telling you that you will die. Everyone dies one day , so what big a deal to tell that ? One should be able to tell when and how will you die .
I believe that , We are actually nearing the mid of recession cycle, and we will come of it in another year and a half.
Political crises: For more than 50 years, our country has been ruled by Gandhi family – A family of Kashmiri Pandits. This is enough to understand their commitment.
Who took the Kashmir issue to UN? Jawaharlal Lal Nehru, and we blame Pakistan for internationalizing the issue? Learn history
Congress lead by Gandhi’s has created a vicious cycle. Even today, Sonia Gandhi is the Chairperson of UPA, constitutionally authorized to oversee the implementation of CMP. Why these dual centers of power? Ideally, the Prime Minister’s role should not have been decimated. Why in the first place this extra authority created? Gandhi’s love for power is not hidden and they will keep away anyone who comes in their way. Gandhi’s have never allowed anyone to be number one in the party or politics. Whether it was Sharad Pawar or anyone else. No matter what. Also, that they have paid the price for this? What the Gandhi family is doing is against the law of nature. Power is like sand being held in the fist. The more you tighten the fist, more the sand will flow out. I would not be shocked if the family suffers a few adversaries in the times to come. They have always paid the price for their misconduct and the country had paid more …………………..Till the country gets rid of this family in politics, nothing can change.
Also, every Indian citizen has failed by not being active in politics and just making politics a tea table and road side discussion item. It is such a serious issue and has been treated casually by the Indian population.
What is the solution?
Complex problems have simple solutions – Read my earlier blog – An open letter to the PM.
Economic crisis has a political solution and political crises have an Economic solution.
First thing that needs to be done is to cut interest and lending rates in one shot and not in installments. I have been telling our PM since last year that we don’t need ‘Baby steps’, we need firm and drastic measures
Secondly, we must announce massive investments in infrastructure, Education & Research and IT (Government should set at least 100,000 IT kiosks as Government’s touch points for public access). The work should be given to IT companies of small and medium scale to retain the young IT talent.
FDI In retail should be discouraged and stopped immediately. We need an Indian version of FDI – Finance from domestic institutions.
Agriculture should be given a big push with incentives for organic farming & cash crops. According to NSS (National sample survey), even if one works for a day in a field, he is a farmer!! Which inflates the number of farmers in the country?
Five sectors can relieve India of its miseries; Infrastructure, Agriculture, Education, Retail & IT. Fortunately, we are at a nascent stage in every major sector . Be it agriculture , SME, Retail , IT , Automobiles, industrial growth , urbanization etc . In the US , the problems are of plenty , saturation & wastage . We are just at the reverse . Whilst US might find it difficult to protect and grow , we can log on to a massive growth with the right initiatives . Infact, India and US are at the two extreme ends of the growth cycle. All sectors in India have a potential for phenomenal growth. The 800 million Indians have to be made earning class and a spending class, and this one thing will take India to a 10 % + growth for the next twenty five years . We have a long way to go . Right governance can help us . NREGA Is not the right solution for a long term growth
Where will money come from?
What do you do when your family gets into financial problems? You sell a part of your assets for temporary relief and buy them back or buy better things in the good times or when the financial condition improves
India needs to re-look at the ‘Navratnas’ and dilute the equity and follow a moderate privatization drive to raise money to invest in the five sectors mentioned above. This is the way India can come out of the recession faster and build an economy with 8-10 % GDP growth every year or more.
India’s parallel economy is much bigger than the economy of taxes ( Black money economy is for sure a lot bigger than our 1000 Bn USD economy ). This money needs to be brought back and invested . I am not at all mentioning the money hoarded in Swiss banks and other heavens. All this can solve India’s problems today evening. This is a must , if we want to build an economy based on solid Economic and social foundation.
Lay-offs are one part of the problem what about the fresher’s who are struggling for jobs. We need to create more job opportunities. No one seems to be addressing the issue knowing well that, we will have more 10 crore people who will get hunting for jobs in the next 5 -10 years
Defence spending should be cut and the same be invested in infrastructure. The defence strategy should be re-looked and reworked
All tenders for house-keeping, parking stands, vendors in public places and railways etc………should be reserved for both educated and uneducated youth irrespective of caste but on financial background
We must have guidelines where we build economy on 40 % services, 50 % manufacturing and 10 % on global trade. We must never exceed exports more than 10 % of our GDP
Need driven services never go slow or out of business? Indian economy must be ‘inward looking’ and should be build on essential services and these should not be imported. All the national demand should be met by domestic producers. Need driven sectors like agriculture , FMCG, Healthcare ,textiles , processed food , Education , Oil and natural gas should be country centric and needs more thrust for explosive growth .
Any tender worth 500 Crores or more should not be allotted to bidders who have a manufacturing outside India. This will increase capacity building within the country
Seeing that it is recession time, the EMI of housing and vehicle loans for people who have lost jobs should be adjusted for at least two years. If the loans of 65000 crore can be waived for an income class that does not pay income tax (farmers). Why not give a moratorium on payments for the income class that pays tax. The two years EMI that are deferred for payments should have the interest based on the PLR or at reduced rates.
Every Indian needs to spend 10 minutes a day for politics and community work – An hour a week. Go start a neighborhood-nation building programme to ensure good governance. Rest I will add in my next blog
There are three sources of growth for an economy, increase in capital, and increase in labour force, and improvement in productivity. We will have to address all three
There is a difference in Economic growth and economic development. Economic growth is purely GDP but economic development is a broader concept that includes not just GDP but also indicators like social justice , income distribution, political freedom, pollution , Equality of income …………GDP captures average national income , but do not reflect how that income is spent.. Even increase in aids and cancer incidences in the country will add to the GDP expenditure on health services , Also, calamity will lead to the increase in GDP due to increase in reconstruction activities.
Moreover, GDP growth rate is inadequate measure of growth as it is calculated largely on the basis of rate of growth of income of the upper 20-30 % of the population who receive disproportionately large share of income. It calculates only money transactions and leaves many important activities and social measures and conditions like adult literacy rate, life expectancy and HDI rank
We must change our economic measurement methods from Economic growth to economic development
India needs to re-look into the growth measurement model. We have a solution for economic crises. We need to act fast and grow faster. Rest in my next blog
Rajendra Pratap Gupta
India + 91 9323109456
Email: President@countryfirst.org / firstname.lastname@example.org