Archive for August, 2013

27
Aug
13

Indian Economics

There’s major problem in Indian economy. Industrial and economical activities are losing momentum, every next quarter. In spite of that I think our economy has lot many potentials to perform or even out perform all other economies and there is reason to it. Our 1st and foremost problem is depreciation of our currency. Where is the problem? Most of the economist are giving following reasons, but without any solution. They say in government there are masters of economics. But fact is things are not happening. We need to consider all following points again:-
1. Current a/c deficit. Now we are importing pulses, coal, iron ore, and what not. All mentioned commodities were export items earlier. Government is not allowing export of rice. Earlier huge quantity of rice was been exported to Russia. There is slow down in textile also. Here in India we are selling garments with tag: Made in Bangladesh. Still, crude and gold contribute the most in our import bills. Although Government has increased import duty to 8%, but that’s not sufficient. It should go to the level of 30%. If one is fancy about gold, why Government and tax payer should pay penalty on it. Government must come out with incentives for EOUs, like lower % of excise on export items. Lower tax or tax holiday for export units, lower interest rate on land and plant purchasing for EOUs. These loans will be on collaterals only. Stop importing expensive phones or levy 100% tax on phones above cost of RS.5000/=. 30% import duty on imported led and plasma and lcd. Like wise steps government can take.
2. High Inflation: Government is fighting to it for last 3-4 years. Earlier it was cyclical event. Every time in the season of new crop and veggies, inflation automatically used to cool off. But this time in spite of all the efforts of Government of India, inflation is riding high only ( food inflation specially ). But other efforts made by Government to control inflation have dented the growth badly. GDP has come down to 4.6 from 9 in last 4 years. No new issues are hitting market. No new manufacturing activities are taking place. Rather we see slow down in some areas. Many prefer to import from other countries to trade here instead of manufacturing here. Interest rates are stable at higher rates. Even today on contrary two private Banks increased PLR. Government is not taking much action against commodity vendors, those who are hording stocks. Whatever may be the reason, but fact is inflation is high, in spite of money market is squeezed. National Spot Exchange is been killed in this tight money market. Investigation is still on, hence difficult to say basic problem in advance. One point is clear NPAs of Banks have increased. It shows how the health of economy is. Only solution to high inflation is infrastructure and only infrastructure. This budget, FM, declared 3000 plus KM roads construction in next 6 months? But National Highway Authority declared that it do not have the strength to execute the same.
3. Lower GDP: lower growth is also also of the main reason to depreciation in Indian Rupee. Here, take example of USA, showing recovery. Take example of Germany, showing growth. Its result of well planned economic strategies. Here in India, take scheme of “Food for all”. Can’t we say “Food for Work.” Here we have young generation looking for job. A MBA qualified from an average college, is ready to take job for RS.15K only, and all are not MBAs. Call for roads, flyovers, dams, water harvesting plants, maintaining existing infrastructure, renovation etc. Not only that Government need traffic policemen, guards, surveyors, etc. Development is rural areas. Come on give slogan. Food for Work. It will give strength to countrymen as well country also. Same action will generate revenue also.
Like a bird I fly
In search of food and some work;
God knows my hunger..
To implement same, we will require trainer also, to convert un-skilled labour to skilled. In many areas it takes only a week to train an individual or a team. Give loan to good entrepreneurs at lower interest rates against collateral. Regularise Real Estate sector, and make a board like SEBI, which regulates stock market. It will attract many players and investors. Register all Brokers and agents with board and where all deals will be reported to board. Make future market open for all 24 hours. Believe it, only above 3 steps will generate, crores of jobs in next 5 years only. Make more and more land fertilize for cultivation. India can grow @15% PA, in all conditions, if we can manage to lower our dependence on monsoon. Good monsoon should be only bonus. Multiply number of Cows and buffalos @100% PA. Not only that quality and health of these also should be improved. Good quality feed and cleanliness is the mantra etc. Consumption of milk is going up @14% PA. Make a law that no milk giving cow or buffalo is slaughtered. Provide roads and trains for transportation with better speed and frequent availability of transport vehicles. Now question is where is money? Here comes the test, where to allocate with priority. It’s all hit and run. Better management of resources. Change in education, develop entrepreneurs, but not clerks only. It must be the priority.
4. Main point. RBI purchased near to 300 Billion $, when it was trading @45 and it slide to 39 even (WHY RBI CAN’T SELL SAME DOLLARS NOW TO SUPPORT OUR CURRENCY ?). Foreign players, infused $s at that time through different OTC counters ( Banks ) and asked for Rupee. RBI printed money at that time, and that excess supply of money attracted inflation. Higher no. Of growth in Cars, Two wheelers, LCD, LED, Plazma, Air Conditioner, expensive Mobiles, all set records. Which money was to be used in manufacturing units or in infrastructures, same followed property and Gold. RBI keep supplying liquidity for 3-4 years, which not only make property expensive, higher salaries and wages, etc. Only problem is all liquidity consumed by real estate and gold, but not manufacturing and industrial activities. If that would have been the case …….. . Anyhow, in total ,RBI have enough $s to teach lesson to speculators, who are trying to take our currency to lower levels. Only will is required by our leaders, who can give message to all, that we will punish badly to those who try to even think to hit our currency. It’s all matter of courage and will to stand for our motherland, our rupee. More coordination is needed between our finance ministry and RBI, to formulate strategy.
5. Global melting : Europe is showing some signs of recovery, lead by Germany, after all-round collapse. In coming years euro may strengthens, if recovery is maintained. This will support Indian currency also. China has also shown some improvement. US is also planning to cut few of stimulating actions ( reduction in long term bond purchasing ), in result of economic growth. Overall global growth and inter countries trade is the mantra of success for all. If we talk about business cycle also. Its almost 5 years of recession or downfall or sideways economic activities. Downtrend can last up to maximum 7 years. It was Jan. 2008, when whole world was hit by payment defaults by big business houses, banks or even countries, and first time in history Governments of most of the countries supported private sector as well as economies of their countries. Its now time when 5 years have passed and may be somewhere in next year we may see good result starts reflecting of efforts made by all different governments of the world.
6. Lastly we can pray to God to help all to grow and flourish.
Disclaimer : all suggestions made are just personal views and have not been tested on ground, hence may, may not be correct. Few ideas may have come up due to emotions and attachment. It has no link to financial markets. Whole write up is an observation for personal satisfaction and self study only.

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07
Aug
13

the man who predicted 2008 fall ————- our new RBI Governor

do you remember Jan 08th 2013 , “Anil a Delhi resident is punished 7 years jail , along with RS.20K fine, for snatching RS.700/-; What panishment should be given to PAK troops , who kill 2 Indian Jawans and behead. Pakistanis took advantage of the thick fog in the thicky forested mountains. Shame to them for such a coward task. Now question is what Indian government will take action against Pakastani troops. Anil was punished for 7 years jail and fine of RS.20K, what to those who have deheaded pure soul Jawans, at the time of ceasefire. ” now its again Pakistan has executed a shameful act. is Indian Government prepared to react in any form?

there is a good news also today, the man who predicted 2008 fall, Mr. Rajan, who succeeds D Subbarao, will be the first non-civil servant in 10 years to steer the RBI. The previous non-IAS RBI Governor was Bimal Jalan, who had an almost six-year stint that ended in 2003. Mr. Rajan is going to be the youngest Governor of RBI. WE ALL WELCOME THIS DECISION. Congratulations Mr. Rajan




August 2013
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