tag:blogger.com,1999:blog-61300988039665880612024-03-14T01:56:16.038-07:00Mentorpreneur Sanjiv's BlogThrough this blog, I hope to reach out to all of you who have ideas and abilities that are yet to be recognized by the world at large. I wish to have experts respond to your business queries and back your ideas and abilities with sound business plans and if need be, even fund them. I intend to create a collaborative platform for professionals to interact and find their place in the Sun. In short a Win-Win for everyone…
May the spark of enterprise ignite our world!Anonymoushttp://www.blogger.com/profile/18059544114255678456noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-6130098803966588061.post-42090329897695749292013-02-28T05:33:00.000-08:002013-02-28T06:56:12.198-08:00Budget 2013-14: Hopes Belied & an Opportunity Lost?<div dir="ltr" style="text-align: left;" trbidi="on">
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A lot was expected from Finance Minister Mr. P. Chidambaram, who had taken over the reigns as FM in September last and worked to improve
India’s fiscal imbalances with great zeal and vigour. He travelled extensively
convincing rating agencies and global investors that he would spare no effort
at maintaining, if not improving upon, India’s sovereign rating by reducing the
Fiscal Deficit and improving GDP. What built expectations was that he succeeded
in reducing Fiscal Deficit to a level of 5.3% of GDP and efficiently cleared
several major policy hurdles like FDI investment in Retail, Airlines &
Media, partial decontrol of fuel subsidies.</div>
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India Inc. and investors were sure that he was the right man
to steer India’s economy, through the troubled waters it had landed in, due to
widening fiscal deficit and current account deficit, slowing growth, falling profits,
high inflation and a weakening currency. He had shown his displeasure at the RBI’s
reluctance to start softening interest rates to promote industrial growth, even at
the risk of a higher inflation rate. He was possibly the only Cabinet Minister
who was working hard to do the job he had been chosen for and had the support
and blessings of the Prime Minister, Dr. Manmohan Singh and the President of
the Congress, Mrs. Sonia Gandhi. </div>
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What was expected from him was to tackle the rising Current
Account Deficit (CAD) on a priority which could be done through making India
more attractive for foreign investors and probably reintroducing a one-time
amnesty scheme for Indians to bring back their undeclared funds stashed abroad.
Not only would this have bridged our ever-widening CAD, but, also helped in
strengthening the falling Indian Rupee. India being a nett importer with a current
monthly trade deficit of close to US$ 20 billion, largely on account of Crude
and Gold imports, has a lot more to gain by a strengthening currency. Fall in
exports could have been set off by corresponding export incentives. However,
the Budget failed to address this issue, which I find its biggest failing.</div>
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Apart from that, the Budget had a bit for everyone. The FM has chipped away carefully to sculpt a
perfect statue from a block which wasn’t ready to be sculpted yet. The final result is one which does not appease
one with an eye for art (in this case the economy), but, to the untrained eye
passes as a masterpiece!</div>
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Coming back to the Budget, the FM started his speech by
stating his goal as one that led the economy to a higher growth path by
inclusive growth and development. With that setting the tone, every minute
segment of India’s vast demographics was covered, from the Scheduled Castes
& tribes, minorities, students, children & farmers to working women, widows,
micro, small and medium industry. He even announced 1000 crore for a Women’s
Bank to be launched by a PSU soon, with women managing it and specifically catering
to the needs of women as clients!</div>
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The Budget provides for a 30% increase in Plan Expenditure,
after having cut down the previous year’s Budgeted Expenditure by 20%. However,
no complaints here, as the Fiscal Deficit has to be kept in control and the FM
has assured that the target for this shall be 4.8% of GDP as against the 5.2%
which was achieved in the previous year after large cuts in plan expenditure and
much fiscal prudence. This however, was a number that the FM had made public at
his several investor meets abroad earlier and hence was in line with
expectations. Similarly the Revenue Deficit is to come down to 3.3% from 3.9%
in the previous year. The FM certainly needs to be congratulated on both.</div>
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The Financial Sector got its share of sops, with PSU Banks
being promised capital infusion of Rs. 12,517 crore by March 2013 and an
additional capital infusion of Rs.14,000 crore in 2013-14. The FM decided to
remove complexity of categorization of FDI and FII in line with globally
accepted norms of classifying over 10% control in an Indian Company as FDI,
while less than 10% would be looked at as FII investment. Interestingly, FII’s
have now been allowed to participate in the currency derivatives segment and can
offer Corporate Bonds and Government Securities as collateral exposure.</div>
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Start-ups and SME’s can rejoice once they read the fine
print of the Budget proposals, as they are now allowed to List on the SME
Exchange without coming out with an IPO, which can follow subsequently. Apart from this a provision is being made by the MCA to identify Educational Institutes contributions to whose Incubation Centres would qualify for benefits under Corporate Social Responsibility. The FM
also recognized that the MSME sector did not want to grow beyond the specified
levels as they stood to lose benefits, and in order to help them grow, has
allowed such benefits to continue up to 3 years beyond their crossing those specified
levels. </div>
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Coming to Industry, the FM has encouraged the formation of
Infrastructure Debt Funds and proposes to let IIFCL with support from ADB, to provide
the much needed funding to Infrastructure companies. He proposes to raise
50,000 crore through Tax-Free Bonds in 2013-14, which would be used towards
developing India’s fragile infrastructure. Apart from this the usual plans for
road development were announced across the country with a specific mention of
the North East.</div>
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The one Big Change that industry can look forward to is the
reintroduction of Investment Allowance, which is now set at 15% for investment
in new plant and machinery in excess of 100 crores. This allowance is over and
above the regular depreciation benefits. With any hope, consumption-led-growth coupled
with easier finance could convince industry to invest more in plant & machinery,
thereby leading to a recovery for the struggling capital goods manufacturers.</div>
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The FM went easy on the middle class by leaving Tax Slabs
and rates unchanged. In fact he made things slightly easier for them by
allowing a 2,000 tax credit to individuals with income upto 5 lakhs. A further
rebate of 1 lakh on interest was offered to those seeking new Housing Loans. To
encourage first time investors in entering Capital Markets, RGESS was extended
to investments made over 3 years from 1 year earlier and participants income
level increased to 12 lakhs from 10 lakhs earlier.</div>
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However, to raise funds for all this, the rich and
super-rich were made to bear additional taxes in the form of a Surcharge of 10%
on Income Tax for the 42,800 individuals/HUFs/Firms whose taxable income was in
excess of 1 crore. Surcharge was increased from 5% to 10% on Corporates with
taxable income in excess of 10 crores. Further, the Surcharge on Dividend
Distribution Tax also stands increased to 10% from 5%. A new TDS of 1% has been imposed on all change
in title of Land deeds in excess of 50 lakhs, except for agricultural land.</div>
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Commodities Transaction Tax (in line with STT) of 0.01% has
been imposed on trading in all commodities apart from agricultural commodities. Duty on mobile phones priced above Rs.2,000 has been increased to 6% from the currently prevailing 1%. Imported high end cars (& yachts) will now attract an import duty of 100% as
against the existing 75%. Locally manufactured SUVs will now attract an Excise
Duty of 30% against the existing 27%. Smokers were penalized once again with an
increase of 18% in specific excise duty. Apart from that, all air-conditioned
restaurants would now fall under the ambit of Service Tax and not only those
with Liquor Licences, as was the norm earlier.</div>
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The fact that the FM could manage this deft balancing act without
resorting to an all round increase in Income and Service Tax, Excise Duty while
keeping the peak rate on imports at 10% is commendable. It was a tough act for
any FM and on that score Mr. Chidambaram does deserve praise at attempting a
balanced budget that stays focused on Fiscal Consolidation while restoring Macroeconomic
credibility with the international community. </div>
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Anonymoushttp://www.blogger.com/profile/18059544114255678456noreply@blogger.com1tag:blogger.com,1999:blog-6130098803966588061.post-46589406505487964042012-08-14T07:15:00.001-07:002012-08-14T07:15:05.926-07:00Is this Independence?<div dir="ltr" style="text-align: left;" trbidi="on">
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On the auspicious occasion of the 66th anniversary of India's
Independence, I would like to express my deep anguish at the state of affairs
in the so-called, world’s largest democracy. We freed ourselves from British
rule in 1947, but, are ruled by corrupt politicians, bureaucrats, thugs and sycophants today.
The values for which India has been praised by global leaders & thinkers for
centuries, stand eroded and we are part of and witness to the shambles that
surround us.</div>
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Here are some such quotes about India:</div>
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“If there is one place on the face of earth where all the
dreams of living men have found a home from the very earliest days when man
began the dream of existence, it is India!" ~ French scholar, Romaine
Rolland</div>
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“India is the cradle of the human race, the birthplace of
human speech, the mother of history, the grandmother of legend, and the great
grandmother of tradition. Our most valuable and most astrictive materials in
the history of man are treasured up in India only!" ~ Mark Twain</div>
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“We owe a lot to <span class="ilad"><span id="IL_AD7">the
Indians</span></span>, who taught us how to count, without which no worthwhile
scientific discovery could have been made!" ~ <span class="ilad">Albert
Einstein</span></div>
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“India conquered and dominated China culturally for 20
centuries without ever having to send a single soldier across her border!"
~ Hu Shih, former Ambassador of China to USA</div>
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“She (India) has left indelible imprints on one fourth of
the human race in the course of a long succession of centuries. She has the
right to reclaim ... her place amongst the great nations summarizing and
symbolizing the spirit of humanity. From Persia to the Chinese sea, from the
icy regions of Siberia to Islands of Java and <span class="ilad"><span id="IL_AD4">Borneo</span></span>,
India has propagated her beliefs, her tales, and her civilization!" ~
Sylvia <span class="ilad"><span id="IL_AD10">Levi</span></span></div>
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<span class="ilad">If you felt your chest swell with pride as
you read the above quotations, you are a true Indian and still take pride in
our country. If not, please do not bother to read any further.</span></div>
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What our freedom fighters achieved for us after many
sacrifices, sixty five years ago, stands in ruins today. A very capable and
intelligent people who have made their mark in all walks of life despite grave
adversities, are today at the risk of losing their freedom to corrupt manipulators
who form the very system that is supposed to serve the people in a democracy.
By definition, <span class="ital-inline"><span style="color: #333333;">Government</span></span>
<span id="hotword" name="hotword">is</span> <span id="hotword" name="hotword">necessary</span> <span id="hotword" name="hotword" style="cursor: default;"><span style="color: #333333;">to</span></span> <span id="hotword" name="hotword">the</span> <span id="hotword" name="hotword" style="cursor: default;"><span style="color: #333333;">existence</span></span> <span id="hotword" name="hotword" style="cursor: default;"><span style="color: #333333;">of</span></span> <span id="hotword" name="hotword" style="cursor: default;"><span style="color: #333333;">civilized</span></span> <span id="hotword" name="hotword">society.</span> But unfortunately, rather than providing an
infrastructure and framework to support its people, when those in power are
only looking to further their own wealth and political interests, there is little
hope for its citizens. We have seen several instances of politicians, bureaucrats
and the judiciary, being investigated, accused of and arrested for rampant
corruption over the past couple of years. However we are yet to see these very
public servants being punished for their crimes, which is a clear indication of
the fact that our system is already in an advanced state of decay.</div>
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In a country where parents think that giving a donation to
get their wards admission in a reputed Kindergarten is perfectly acceptable,
the very foundations of a generation are weak. Children are exposed to corruption
at practically every stage, till they grow into corrupt adults. And nobody sees
anything wrong with that!</div>
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It is high time that all of us patriotic Indians who cringe
at the very thought of what is happening to our society, woke up and realized
that we are to blame for allowing corruption to breed around us. We need to
eradicate this evil ourselves, by not acceding to unjust demands or actions
that are contrary to the interests of others in our society. We need to get the
crooks and goons who have infested our system to realize that we are not going
to tolerate them any longer and that we are not afraid of them, but, they need
to fear extermination.</div>
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Let us not get carried away by the inflammatory speeches of
those who seek power for themselves and only intend to use us as a means to
that end. Let us shun violence and respect public property, as damaging it only
diverts more of our scarce resources from the infrastructure, which is so essential
for our growth. Let us respect the efforts of those around us who are making a
positive contribution to the growth of others, as that takes our nation
forward. </div>
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Let us all pause for a while in our pursuit of material assets
and think how we can contribute to the change that we want to see around us.
Remember none of us can survive in an environment that is poisoned. We need to
cure it ourselves…</div>
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Jai Hind! </div>
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Anonymoushttp://www.blogger.com/profile/18059544114255678456noreply@blogger.com1tag:blogger.com,1999:blog-6130098803966588061.post-8877602696419204472012-06-01T10:57:00.000-07:002012-06-01T10:57:03.268-07:00India's Shine Starts Wearing Off<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-family: Verdana, sans-serif;">In continuation of yesterday's post on the "Global Economy" is this one on the "Indian Economy", which forms Part-2 of my presentation at CRN Virtual Expo. India is surrounded by the same dark clouds currently, as the rest of the world. In the section which follows, I have attempted to outline various factors that have become a major source of worry, over the past year.</span><br />
<b><span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></b><br />
<b><span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">THE INDIAN ECONOMY</span></span></b><br />
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<b><span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">UPA-II completes 3
years in power</span></span></b></div>
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<span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">In
the aftermath of various scams, exposure of various corrupt politicians and
public servants and the Anna Hazare movement, the UPA-II government seems to
have lost its ability to take decisions. A government whose arrival 3 years ago
had been hailed by industry and markets; which was expected to take several
long pending policy decisions without the fear of convincing its erstwhile Left
allies – seems to have failed the Indian electorate miserably. <o:p></o:p></span></span></div>
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<span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">Several
much awaited policies and implementations like the GST, Multi-brand retail,
removal of subsidies on petroleum products and fertilizers, Banking &
Insurance reforms are still in a state of suspended animation, while the
government continues muddling though regressive policies on taxation of
overseas investment retrospectively.<o:p></o:p></span></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 10pt;">India's
economic growth has slumped to a near three-year low and its current account
deficit is the highest since 1980, a gap that is difficult to control when the
rupee is at a record low. The government has projected a budget deficit of 5.9
per cent of GDP, which Moody's Investor Service says is credit negative.
Inflation is the highest among the BRICS group of major developing countries
and industrial production has contracted unexpectedly in March.</span><br />
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<b><span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">Industrial growth
turns negative<o:p></o:p></span></span></b></div>
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<span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">India’s
industrial production as represented by IIP index turned negative in March,
falling 3.5% on the back of contraction in mining & manufacturing output.
There was also a slowdown in electricity and capital goods output fell by 21.5%.
The broad trend points towards a slowdown, with cumulative growth for FY 12
standing at 2.8% year-on-year as against that for FY 11 at 8.2%.<o:p></o:p></span></span></div>
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<b><span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">No end in sight to
corruption & scams</span></span></b></div>
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<span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">In
late 1989 a horrified nation voted out the ruling Congress & late PM Rajiv
Gandhi on account of their alleged involvement in a 64 crore kickback from
Bofors. Today, from the number of scams reported, even corporators and
magistrates get paid much more and we are no longer shocked. Whether or not the
CAG has its numbers right, the scams unearthed now have mind-boggling figures
in comparison – From the Rs. 176,000 crore 2G spectrum scam of
2010 to last week’s Rs. 1,070,000 crore Coal mining scam.
Indian money in Swiss Banks is estimated at over US$ 1.5 trillion, which is
more than its GDP. A lot can be done, but, will it?<o:p></o:p></span></span></div>
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<b><span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">Interest rates
hamper new investment<o:p></o:p></span></span></b></div>
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<span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">With
tight liquidity and high interest rates, businesses have drastically cut down
on capital expenditure on new & expansion projects. This obviously brings
down the business prospects of the feeder industries which are various
suppliers & vendors, leading to a consequent slowdown in their business.<o:p></o:p></span></span></div>
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<b><span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">Policy paralysis
adds to Industry woes<o:p></o:p></span></span></b></div>
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<span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">With
all the hue & cry about corruption, honest public servants and fence
sitters feel more comfortable holding back decisions on new projects &
purchases, lest their actions are also probed by investigating agencies. As a
result of this, the infrastructure & capital equipment industry is already
reeling, while others are feeling the heat. <o:p></o:p></span></span></div>
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<b><span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">Inflation continues
to bother<o:p></o:p></span></span></b></div>
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<span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">The
steep fall in the Indian Rupee has increased input costs of imported
components, commodities and equipment, at a time when the consumer is looking
to cut expenses owing to double digit food inflation. As a result of this
consumption is bound to suffer.<o:p></o:p></span></span></div>
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<b><span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">Outcome of recent elections threatens stability of Congress</span></span></b></div>
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<span style="font-family: Verdana, sans-serif;"><span style="color: #3f1f09; font-size: 10pt;">After the recent 5 state Indian
Assembly elections, in which over 24 million people voted, it became apparent
that the electorate had lost faith in the ruling party. Possibilities of a
mid-term poll loom large, with the fear that there is no national political
party that seems ready to take over the reins of this country.</span><span style="font-size: 10pt;"><o:p></o:p></span></span></div>
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<b><span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">Oil prices big
cause of worry<o:p></o:p></span></span></b></div>
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<span style="font-family: Verdana, sans-serif;"><span class="messagebody"><span style="font-size: 10pt;">Among the largest users of crude, India
lies roughly at the 12th place, using about 2 million barrels per day of which
about 80% is imported. Worse, this demand is rising by an implicit 4% per
annum, when the global demand is slowing down to about 1.8% per annum. The loss
to our Balance of Payments in 2011 on account of crude imports alone was in
excess of US$ 50 billion. Crude rises, we lose; crude falls but rupee also
falls, so we lose again.</span></span><span style="font-size: 10pt;"><br />
<b><br />
<!--[if !supportLineBreakNewLine]--><br />
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<b><span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">Foreign investors
turn cautious<o:p></o:p></span></span></b></div>
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<span style="font-size: 10pt;"><span style="font-family: Verdana, sans-serif;">After
the GAAR rules, the retrospective taxes sought to be imposed on Vodafone,
Cairns and several other foreign investors, the revocation of one hundred and
twenty two 2G Spectrum licences issued to operators like Telenor, Etisalat and
others, FIIs have turned very cautious on India. </span><span style="background-color: white;"><span style="font-family: Verdana, sans-serif;">They are unsure of what else could be revoked retrospectively
and to compound their worries the fall in Rupee and Stock Markets has taken away
most of the gains on investments made here in the past 5 to 6 years.<o:p></o:p></span></span></span></div>
</div>Anonymoushttp://www.blogger.com/profile/18059544114255678456noreply@blogger.com0tag:blogger.com,1999:blog-6130098803966588061.post-84913473445064839902012-05-31T08:01:00.000-07:002012-05-31T08:01:32.608-07:00Not Out Of The Woods Yet<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-family: Verdana, sans-serif;">I was asked to speak on "The Global Economy: Threats & Opportunities" at the CRN Virtual Expo earlier in the day today - A topic close to my heart and always at the top of my mind. I put a few thoughts together on a PowerPoint first and then decided to delve deeper into them, so I could actually provide some valuable insights to the participants (most of them Entrepreneurs and CEOs) attending the Expo. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">The idea was to learn from past mistakes made by our world leaders and prepare ourselves for any economic fallouts of the current events, which are shaping our destinies. As I started listing these out, I realised how bad a shape the world is in. So here go some thoughts which tell me that we are not out of the woods yet...</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<b style="font-family: Verdana, sans-serif;">THE GLOBAL ECONOMY</b><br />
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<b><span style="font-family: Verdana, sans-serif;">Shaky at best,
since the US Housing Crash in 2007</span></b></div>
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<span style="font-family: Verdana, sans-serif;">The
US </span><strong style="font-family: Verdana, sans-serif;"><span style="font-weight: normal;">Housing Market Crash of 2007</span></strong><span style="font-family: Verdana, sans-serif;"> was the
worst housing crash in U.S. history and resulted in the world’s most severe
financial crisis since the Great Depression. The cause for this crash was like
any other financial bubble, a result of greed, federal short-sightedness,
financial innovation and poor regulation. It had its origins in the dot com
bubble bursting in 2000, resulting in a shift of dollars from stock markets to
housing. Cheap money available for new loans in the wake of the economic
recession, made the Federal Reserve and Banks encourage people to borrow money
against secured housing to help the economy grow. Financial innovation from
lenders created new types of loans such as interest adjustable loans, interest
only loans and zero down loans. This fuelled housing prices and the greed to
make easy money got people to buy more by borrowing more, in an effort to take
advantage of market conditions. With zero down loans to buy new homes, an
unlimited supply of money was created. Each such loan was securitized by the
bank, given a AAA Rating and the risk was passed off to someone else, notably
foreign investors and pension funds. The total amount of derivatives held by
the financial institutions exploded and the total % cash reserves grew smaller
and smaller. Consequently from 2003 to 2007 the amount of subprime loans had
increased a whopping 292% from 332 billion to 1.3 trillion. When credit markets
froze in 2007, housing prices started tumbling from their peak, borrowers
failed to repay their loans & the value of the security in a rapidly deteriorating,
seller only market was inadequate to cover the lenders’ exposure.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Though
the financial crisis was resolved by start of 2009 through some drastic &
unforeseen measures by the US Federal Reserve & Senate, the housing market
continued to decline throughout the year, with over 3 million foreclosure
filings for 2009. Unemployment rose to over 10% and the housing market crash
created the worst recession since the early 1980’s. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">By
2011, after two rounds of Quantitative Easing in the US, apparently the US economy had stabilized and was
on a growth path with unemployment numbers coming down, GDP growth and
corporate earnings recovering, even though housing prices were yet to recover
and there was still a surplus of housing inventory.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-family: Verdana, sans-serif;">Nascent recovery,
nipped in bud by Europe Crises</span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">These
greenshoots of economic recovery were threatened by the unfolding of the Economic
Crisis in Europe, where country after country reported a fall in GDP and was
unable to meet the huge fiscal deficits that ensued on account of increased
government spending in the aftermath of the US economic recession. The various
causes attributed to the EU Crisis are the 2007–2012 global financial crisis
& the resulting recession;
international trade imbalances; fiscal policy choices related to
government revenues and expenses; and approaches used by nations to bailout
troubled banking industries and private bondholders, assuming private debt
burdens or socializing losses.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The
underlying reason however, remains the greed of people and nations in tapping
the availability of over US$ 70 trillion of global savings of fixed income
investors in search of high yields overwhelming the policy and regulatory
mechanisms in country after country, generating bubble after bubble across the
globe. While these bubbles have burst causing asset prices to decline, the
liabilities owed to global investors remain at full price, generating serious questions
regarding the solvency of governments and their banking systems.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The
PIIGS (Portugal, Ireland, Italy, Greece and Spain) as we know the failing
European nations thus far, have created their own recipes for disaster, that
threaten to break up the European Union. In Ireland, banks lent huge amounts of
money to property developers, generating a massive property bubble. When the
bubble burst, Ireland's government and taxpayers assumed private debts of the
banks losing an estimated 100 billion Euros. In an effort to mask its growing
fiscal deficit Italy from EU, Italy circumvented Treaty rules and debt levels
through the use of complex currency and credit derivatives structures. In
Greece, the government gave out extremely generous pay and pension benefits to
public workers while hiding its growing debt from EU officials with the help of
derivatives designed by major banks. In Spain, the crisis was generated by
long-term loans (commonly issued for 40 years), the building market crash,
which included the bankruptcy of major companies, and a particularly severe
increase in unemployment, which rose to 22.9% by December 2011- all
contributing to a negative GDP growth of -4.6% for 2010.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Most
other constituents of the EU have similar problems at hand and despite the 1
trillion Euro European Financial Stability Facility or sovereign bailout, the
fear of financial contagion is very real.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-family: Verdana, sans-serif;">Recent downtrend in
China real estate looks ominous</span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">It
is believed by many that China’s rapid development of infrastructure and recent
GDP growth in excess of 9% make it the showpiece amongst emerging BRICS markets
and are a result of meticulous planning and execution. It would be interesting
to learn that China’s growth story revolves around property construction as
much as its exports and domestic consumption. </span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Local Chinese governments have
mounting debt to fund infrastructure projects of 10.7 trillion yuan ($1.7
trillion) and depend on land sales to fund payments. According to sources, debt
in Local Government Funding Vehicles amounts to around one-third of China's
GDP. According to the China National Bureau of Statistics, property
construction accounts for more than 13% of China's GDP (up from around 3% of
GDP in 1999). Bank deposits are low yielding and the borrowing rate is either
very low or negative which encourages explosive loan growth (also known as a
debt bubble) and this has been prompting the locals to invest in property. By
now many who could borrow have bought more than one property, which remains
unoccupied due to high availability of new & under construction properties,
and costs money to maintain.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">However,
starting September 2011, the demand for property started falling with many new
projects being offered at 20 to 30% discounts by the developers. Certain
markets fell by 30% in November alone, and by now have resulted in losses of as
much as 50% over the past 6 months. <o:p></o:p></span></div>
<h6>
<span style="font-weight: normal;"><span style="font-family: Verdana, sans-serif; font-size: small;">This looks ominous for the growth
of the Chinese economy & its banking system, which UBS believes has an
exposure of as much as 50% of its books to the Chinese property market.
Remember, just like the subprime disaster in the US, the Chinese economy has
wrapped itself around its bloated property market… so if it crashes, the whole
system could come tumbling down.<o:p></o:p></span></span></h6>
<div class="MsoNormal">
<b><span style="font-family: Verdana, sans-serif;">Dark clouds of
another oil war in Iran</span></b></div>
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">Iran wants
nuclear power and possibly the capacity to build a nuclear weapon; which is
unacceptable to Israel and the U.S. Following the U.S. invasions and
occupations of Iraq and Afghanistan, Iran has emerged as the principal power in
the region, capable of further destabilizing either of its war-torn neighbours.
The US has imposed sanctions including an oil embargo on import of crude from
Iran, while, Tehran has led a move to ditch the U.S. dollar as the standard
currency of exchange in the global oil market and cutting off supplies to
France and the UK. <o:p></o:p></span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">US
President Mr. Obama, speaking at the American Israel Public Affairs Committee,
in early March has declared that he would not tolerate a nuclear-armed Iran and
would act — militarily, if necessary — to prevent that from happening.<o:p></o:p></span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">If the
situation spins out of control in any of several possible directions, oil
prices could shoot to $200 a barrel. Of course, the downside of open
hostilities could throw the entire Middle East into chaos and it is conceivable
that even Russia and China could be drawn into the conflict in some way.<o:p></o:p></span><br />
<div class="MsoNormal">
<b><span style="font-family: Verdana, sans-serif;"><br /></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: Verdana, sans-serif;">Fiscal deficits a
big challenge for most economies </span></b></div>
<h6>
<span style="font-weight: normal;"><span style="font-family: Verdana, sans-serif; font-size: small;">Over the years Governments across
the world have been mounting expenses by building unwieldy bureaucracy and
appeasing public servants with wage hikes, while simultaneously reducing tax
burdens and lavishing sops on the electorate. While this kept everyone happy as
long as the economy was growing, it has thrown up several challenges with
recessions & slowdowns over the past few years.<o:p></o:p></span></span></h6>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Amongst
the OECD (Organization for Economic Co-operation and Development) some countries had severe deficits
in 2011, including a -10.3% deficit in Ireland, -10% in United States, -9.4% in
the UK, -9% in Greece and -8.9% in Japan. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Countries
with high sovereign debt, fiscal deficits and contingent liabilities, in
particular, are at risk of contagion, but current heightened market-uncertainty
is leading to flight-to-quality, which could raise rates across countries.
Credit Default Swap (CDS) spreads for Greece, Spain, Portugal, and Italy jumped
to fresh record-highs and this year’s gains on global equities have been wiped
out. Worries about elevated European debt, tightening credit, and Euro Zone
cohesiveness led to further depreciation of the euro, which has hit a 14-month
low against the U.S. dollar in May. Benchmark U.S. Treasuries have surged on a
general flight-to-quality, which if sustained would lead to higher borrowing
costs across nearly all countries. Already elevated sovereign debt levels
are likely to rise over the near-term across many countries, given the degree
of fiscal deterioration since the onset of the crisis.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-family: Verdana, sans-serif;">Political unrest in
several countries</span></b></div>
<div class="MsoNormal" style="background: white;">
<span style="font-family: Verdana, sans-serif;"><br />
Since the Second World War or probably the disbanding of the erstwhile USSR,
the world has never seen as much political unrest as we are witnessing since
2011. Blame it on the loss of jobs, economic disparity, inflation, corruption,
religion or systemic decay of governance – the economic crises that has swept
the world since 2007 has resulted in political unrest of a magnitude not
witnessed before.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white;">
<br /></div>
<div class="MsoNormal" style="background: white;">
<span style="font-family: Verdana, sans-serif;">What started in the troubled Middle East and African region
spreading through countries like Tunisia, Egypt, Libya, Bahrain, Syria,
Yemen has now reached Greece, Italy and Spain. In some countries at least,
particularly those with upcoming elections, worries over further unrest will
deter the government from more aggressive reforms. The propensity for civil
unrest in France, Spain, Portugal and Italy will act as a check on their
governments.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white;">
<br /></div>
<div class="MsoNormal" style="background: white;">
<span style="font-family: Verdana, sans-serif;">From the looks of it, <em><span style="font-style: normal;">political
unrest will do nothing but increase throughout 2012 all over the world. Driven
by labour groups, youth organizations, political parties, bloggers and tweeters
and the poor and unemployed, we may see a growing movement of discontent.
People will be demanding socioeconomic and political change. They will be
protesting the things they don’t have and the things that are being taken away
from them. People everywhere seem to be seething with discontent under the
surface. They are angry at corrupt regimes regardless of where they are in the
world.</span></em><i> <o:p></o:p></i></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-family: Verdana, sans-serif;">Volatile commodity
& currency markets</span></b></div>
<h6>
<span style="font-weight: normal;"><span style="font-family: Verdana, sans-serif; font-size: small;">Building a business in volatile
markets is one of the biggest challenges facing most global businesses ever
since 2007, when volatility in both commodities and currencies reached new
heights. We have seen crude fluctuate from US$50 per barrel in 2007 to US$146
in 2008, down to US$32 in 2009 and back to US$126 in 2012. Other industrial
commodities like Copper, Steel, Rubber etc have seen similar swings. Gold
itself has been equally volatile moving from US$640 per ounce in 2007 to
US$1890 by late 2011, before falling to levels of US$ 1550 currently.<o:p></o:p></span></span></h6>
<h6>
<span style="font-weight: normal;"><span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">Rapid fluctuation in currencies
on account of global funds alternating between seeking higher returns in
emerging markets prior to returning to the supposed safety of the US$, have
kept policy makers and businesses on tenterhooks. The Indian Rupee itself has
fluctuated between 39 to over 56 to a US$ in this period, making the smartest &
largest of Indian businesses with any international exposure lose large sums in
currency fluctuations. </span><span style="font-size: x-small;"> <o:p></o:p></span></span></span></h6>
</div>
Anonymoushttp://www.blogger.com/profile/18059544114255678456noreply@blogger.com0tag:blogger.com,1999:blog-6130098803966588061.post-26956679526351856292012-03-24T13:28:00.000-07:002012-03-24T13:28:34.347-07:00Ending Corruption in IndiaI have no doubts about the intelligence of Indians and the fact that the vast majority of us are against corruption and interested in the nation's growth and prosperity. However, despite all the attempts being made by the Citizens and the various political parties in the country, I read a lot of gibberish & see no major ideas coming forth that could vanquish Corruption & Black Money from India in a short period of time.<br />
<br />
May I suggest 3 simple measures that, if implemented, would bear results in no time?<br />
<br />
#1. Give the nation 5 days to deposit all currency notes in denominations of Rs.500 & Rs.1,000 in Banks, prior to demonetizing these notes. Banks would be required to issue Debit Cards of equivalent value against the deposits received to the respective depositers. PAN Nos. of all depositers must be taken prior to issue of Debit Cards, and those without PAN Nos. should go through the UID process viz. biometrics, photographs, residence proof etc. prior to being given a claim on the funds deposited by them. The list of all deposits and depositers (with PAN Nos.) must be furnished by the Banks to the RBI (Reserve Bank of India) and the Income Tax Deptartment. Thereafter, no currency note of a denomination exceeding Rs.100 should be put back in circulation, as all transactions involving higher amounts would be through Debit/Credit Cards only and through Banking Channels. <br />
<br />
Result: End of Black Money, Inflation & Counterfeit Currency in one stroke; while GDP & Tax collections would shoot up.<br />
<br />
#2. Any payments made in excess of Rs.1000 in Cash should be subject to TDS & must be accompanied by the PAN No. of person/party receiving the money. Issuance of a Cash Receipt should be made mandatory and in case such a receipt is not furnished, it should be considered a Crime & made punishable under the provisions of the IPC (Indian Penal Code).<br />
<br />
Result: End of bribes & corruption.<br />
<br />
#3. A last chance be given to any resident Indian with deposits in overseas accounts (largely Swiss Banks with an estimated US$1.5 trillion of deposits from Indians) to bring back the funds to India through a Special Amnesty Scheme whereby all the Funds would go into "Zero Coupon 10 Year Infrastructure Bonds" failing which all deposits/depositers would be investigated & imprisoned (if & when proven guilty) apart from such funds being seized. Upon maturity i.e. after 10 years, such amounts would be returned in Indian Rupees at the US$:INR parity prevailing then. This could take RBI's Forex Reserves up to US$1.8 trillion from the US$ 290 billion currently, thereby affecting the exchange rate of the Indian Rupee. I suspect that the US$ after 10 years may not be worth more than Rs.20 (hence, the Government would borrow at a current exchange rate of around Rs.50 to a US$, but, redeem close to Rs.20 to a US$), as with these funds & infrastructure in place India could record GDP Growth in excess of 15% per annum consistently, and become the second largest (if not the largest) economy in the world by the next decade.<br />
<br />
Result: Huge build up of infrastructure at a very low cost & consistently high GDP growth accompanied by the strengthening of the INR and bridging our balance of trade position.<br />
<br />
WHERE THERE IS A WILL THERE IS A WAY!Anonymoushttp://www.blogger.com/profile/18059544114255678456noreply@blogger.com0tag:blogger.com,1999:blog-6130098803966588061.post-86786592115136639532011-07-13T06:47:00.000-07:002011-07-13T06:47:36.423-07:00Modernites show us the way to a cleaner environmentA Group of students from Modern School, Barakhamba Road displayed that they are as aware of the problem of urban waste management as they are concerned about preserving their environment. <br />
<br />
Each year the Vinod Dixit Foundation - named after late Mr. Vinod Dixit, himself a Modernite and a member of the Indian Administrative Service, son of noted independence activist, a former Governor and Cabinet Minister, Shri. Umashankar Dixit and husband of Delhi Chief Minister, Mrs. Sheila Dixit- selects a few projects undertaken by groups of students from Modern School that broaden the horizon of the students beyond the confines of the syllabus and classroom and take them into the wider areas of enquiry, understanding and knowledge. For this purpose, projects on a wide variety of topics are considered ranging from science exploration to music and theatre to social service.<br />
<br />
This year one such group of students from Modern School, Barakhamba Road decided to do something meaningful about the challenge that solid waste disposal presents in urban metros. Led by Aditya Bhavnani, the group also comprised of Akshat Arora, Padmavathy Ramanarayanan, Meher Tandon and Parnika Mehra, all students of XI Standard. Aditya’s idea of undertaking a project that was self sustaining and helped reduce the menace of solid waste, hence, protecting the environment was agreed upon by his team and selected by his School before being given the go-ahead by the Vinod Dixit Foundation in May 2011. <br />
<br />
With a sanctioned budget of a mere eight hundred rupees, these school children went ahead with a six week long project in their Summer Vacations despite Delhi’s soaring temperatures. The project essentially involved identifying a Housing Society wherein the residents were made aware of the threat posed by non-bio degradable solid waste to the environment, as a first step. Garbage from houses contains a large component of plastic through milk pouches, plastic containers, P.E.T. bottles, caps etc. which are not bio degradable and hence pose a major threat to the environment. <br />
<br />
The students identified The Yamuna Co-Op Group Housing Society Ltd. near Alakhnanda in South Delhi as the one where they would undertake their project. After getting the approval of the Society, they interacted with the residents and distributed plastic bags to each of the 195 apartments in the complex, with a request that all plastic waste be collected in these bags. Thereafter, they collected this waste from each of the apartments on a weekly basis and consolidated it in a room given to them by the Society for this purpose. At the end of the six weeks project duration, these environmentally conscious students managed to gather 103 kg of plastic waste, which they transported and sold to a plastic recycler for a sum of one thousand and fifty rupees. This amount was then donated to the Society after demonstrating that this was a self sustaining exercise and beneficial to the residents of the society and the environment, both.<br />
<br />
If Resident Associations across the country were to adopt the model that these young students have built and proven, it would clearly lead to a cleaner and greener environment while simultaneously making residents more environmentally conscious and reducing the strain on already stretched municipal resources. It is clear that our youngsters are concerned about their environment and want to do something about its further deterioration before it is too late. Organisations like the Vinod Dixit Foundation and its patrons and schools like Modern School need to be lauded at their efforts in getting youngsters to think and act on evils plaguing our society and environment. As citizens of this country, we need to start that change rather than waiting for it to happen!Anonymoushttp://www.blogger.com/profile/18059544114255678456noreply@blogger.com0tag:blogger.com,1999:blog-6130098803966588061.post-1459250172080472052011-04-07T15:15:00.000-07:002011-04-07T15:15:13.670-07:00India comes together!What a week this has been! Soon after India came together as one on the 2nd of April when MS Dhoni & his Men in Blue lifted the World Cup, within a span of 48 hours we have the nation standing as one behind Anna Hazare. The World Cup victory brought out the patriot in every Indian across the world regardless of caste, creed, language, state, religion, financial standing or political affiliations. Electronic media kept everyone updated and connected as events unraveled. Maybe a hangover of that euphoric feeling of victory coupled with bubbling patriotism amongst 1.2 billion Indians, have driven the same lot to now achieve another victory – this time against corruption.<br />
<br />
A series of scams involving politicians and bureaucrats in high offices had shaken the conscience of the nation over the past few months. Despite public outcry, it was felt that no worthwhile investigations were being conducted and that the offenders would get away scot free. This is because of several systemic deficiencies in our anti-corruption systems and because for several decades now, politicians have controlled the system itself to their advantage, as such the enforcement and legislative checks have lacked teeth. A Lok Pal Bill has been languishing in Parliament for 43 years and even if it is finally passed, will again lack the teeth to effectively discourage or punish offenders in high positions. With an estimated USD 1.5 trillion of unaccounted deposits in Swiss Banks, Indian politicians and bureaucrats are possibly the richest of the most corrupt in the world. Recent scams include the Common Wealth Games, 2G Telecom scam, UP rice scam, Cash for Votes, Adarsh Housing, LIC Housing, Karnataka Land scam etc. which have shocked Indian citizens by the sheer greed of our public servants. <br />
<br />
Enter Anna Hazare, a 73-year-old Gandhian, who decided it was time to end corruption in India by pushing through a bill that would give an independent body the power to punish corruption even in the highest public offices of the nation. This “Modern Mahatma” is taking the utmost act of courage and determination selflessly by commencing his fast-until-death unless he gets the powers that be to accept his version of the Jan Lok Pal Bill as an Act in Parliament. His fast has entered its third day today and suddenly citizens across the country (and non-residents settled abroad) who had possibly never heard of Anna are standing up in his support in millions. <br />
<br />
Anna Hazare’s campaign is not aligned to or against any political party, as he feels that every political party has misused its position whenever they have been in power. Therefore, it is extremely important that the citizens of this country unite to demand systemic changes. Towards that goal he, along with noted social activists & leaders including Sri Sri Ravishankar, Kiran Bedi, Prashant Bhushan, Arvind Kejriwal, Reverend Vincent M Concessao, Swami Agnivesh, Mufti Shamoon Qasmi, Mallika Sarabhai, Maulana Kalbe Rushaid Rizvi, Justice D S Tevatia, former joint director of CBI B.R. Lall-and several others’ have designed a citizen-developed bill called the Jan Lokpal Bill which has strong measures to bring all corrupt people to book, whether they are corporates, bureaucrats or politicians.The Bill aims to create an independent body, selected by judges, citizens and constitutional authorities, with enough power to investigate and punish all politicians. No minister or bureaucrat will be able to influence its investigations. Since 1968, when this bill was first introduced, greedy politicians have thwarted its passing. Now the government is pushing for a watered down Lokpal with no hope of ending fraud, vice and dishonesty -- it gives politicians overriding power to decide who will be investigated, and is a complete sellout. <br />
<br />
Pressure is mounting on India’s cleanest Prime Minister Dr. Manmohan Singh to endorse the "Jan" Lokpal. Members of the opposition party have begun to make the right noises in support of Anna Hazare. And even the National Advisory Council, a powerful advisory body to Mrs. Sonia Gandhi have come out in favour of the bill. But corrupt politicians and vested interests are doing all they can to kill it, for obvious reasons. The rate at which people are signing petitions in support of “India Against Corruption” , Tweeting and finding support for the Cause on Facebook apart from the several thousands who are swarming Jantar Mantar at New Delhi where Anna is fasting, or those doing candle walks in several cities across India or the Dandi March from San Diego to San Fancisco, goes to show that the cause has become a movement in less than sixty hours. If the demands are not accepted soon, it may just become a Revolution! <br />
<br />
So, is India going to go the way of Egypt, Yemen, Libya, Bahrain etc.? Not really. Anna Hazare is protesting the Gandhian way, peaceful and non-violent. The Government cannot afford to let his fast continue and as such, I believe that an amicable solution will be reached by discussion by the weekend. With a clean PM like Dr. Singh in place and a selfless social activist like Anna Hazare on the other side, the Jan Lokpal Bill will soon become a reality, paving the way for a new India where development, inclusive growth and the well being of its people become the driving engines, replacing the misguided self-interest of corrupt public servants.<br />
<br />
Here’s to a new found hope and the well being of Anna Hazare… ,Anonymoushttp://www.blogger.com/profile/18059544114255678456noreply@blogger.com3tag:blogger.com,1999:blog-6130098803966588061.post-41522980348391314272010-03-05T13:39:00.000-08:002010-03-05T13:44:46.871-08:00US Dollar Strength: Is this the recovery of confidence?I have just returned from a reunion dinner (after over two decades) with some of my former colleagues at what was then India’s largest IT Company. The occasion was the visit of one such colleague who has been living in the US (Washington DC, to be more precise) for the past thirteen years. A few shots of Johnny Walker Swing down, brought the discussion to the IT industry, economy and the future of the world. My eyes popped open in disbelief at my dear friend’s belief in the US Government and the US economy. According to him “all is well” as the US dollar has been gaining strength (and hence is secure) and that the US has a future that India will take years to reach. I assured him that India would certainly not be either that debt-ridden nor that over-leveraged ever. We ended up making a bet – in the true “3 Idiots” way – to see who was correct exactly 5 years from now. <br /><br />The US Dollar Index (also called USDX or Dollex) has been exhibiting unusual strength over the past couple of months, having risen from a level of 74.5 to almost 81.4 and thereafter refusing to budge below 80 for any reasonable period of time. I get to meet several people who have started believing that the recent strengthening of the US$ is due to the recession in the US having ended and a harbinger of good days that lie ahead. Unfortunately, few people (and even fewer Americans) really understand what is responsible for the US Dollar’s current strength.<br /><br />To understand the reason’s for its recent strength, one must first realize what the US Dollar Index actually is. The US Dollar Index (USDX) is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies. It is a weighted geometric mean of the dollar's value compared only with:<br />• Euro (EUR), 57.6% weight<br />• Japanese Yen (JPY), 13.6% weight<br />• Pound Sterling (GBP), 11.9% weight<br />• Canadian Dollar (CAD), 9.1% weight<br />• Swedish Krona (SEK), 4.2% weight and<br />• Swiss Franc (CHF) 3.6% weight.<br /><br />USDX started in March 1973, soon after the dismantling of the Bretton Woods system (in 1971) wherein, the United States unilaterally terminated convertibility of the dollar to gold, thereby making the US Dollar the reserve currency of the world. At its start, the value of the US Dollar Index was 100.00. It has since traded as high as the mid-160s and as low as 70.698 on March 16, 2008, the lowest since its inception in 1973. The makeup of the "basket" has been altered only once, when several European currencies were subsumed by the Euro at the start of 1999.<br /><br />The recent strength of the USDX is more because of the massive erosion in the value of the Euro on account of the infamous sovereign defaults of the PIGS (Portugal, Ireland, Greece & Spain) and the recession in the UK and the consequent fall in the Pound Sterling. Also most traders who had earlier shorted the US$, have covered their positions and gone long, while creating shorts in the Euro - to add to the woes of the European Union. These longs would give way to fresh shorts, once the traders realize that there is more to lose than gain in carrying forward these positions.<br /><br />The Western world is still in a state of disarray and it is highly unlikely that it will come out of this mess by printing more fiat currencies and creating further debt. The basket of currencies that determined the USDX in the seventies, itself is today more representative of financial turmoil that these so called developed nations have created for other nations. I don’t see much hope of any sustainable long term financial order coming from most of the countries that form either the basket of currencies or the reserve currency. The answer will have to come from Asia, whose demographic & GDP growth coupled with internal consumption and high savings rates will have to provide the world with an alternate to dying Western economies with high deficits. <br /><br />There are some fundamental reasons as to why the US dollar is in trouble long term and why the precious metals sector and the commodities sector stands to benefit from these dollar woes.<br /><br />1. The US has a massive current account deficit since 1990s, which only seems to be getting bigger. Economists may play with the numbers by stating that one month is less than the other and so forth, but the trend is visibly up. It now comes close to 6% of the total economic activity in the US.<br />2. The US needs to attract a whopping 1.8 billion dollars a day to compensate for the current account gap. A trend that is simply unsustainable.<br />3. The US has a national debt of $12.4 trillion and increasing. However, this does not take into consideration several unfunded liabilities such as Social Security and Medicare. If these are combined, the debt levels soar to well unimaginable levels and clearly present a picture that the ablest (most corrupt) of men in the Treasury or the Fed would not be in a position to defend.<br />4. 44 states out of the 50 in the US are facing budget shortfalls. California is leading the way as it is expected to spend 50% more than it will generate this year. Since 2007, US states have collectively spent 300 billion more than they have generated. These deficits mean higher taxes and so far 33 states have raised taxes, but collections have plummeted to their worst levels in 46 years; as you cannot squeeze water out of a rock! No jobs means no revenues but states are selling new bonds at record rates to raise funds. If this is not a sure recipe for long term disaster, what is?<br />5. Eventually the Fed is going to have to raise rates to continue attracting the huge amounts of money it needs to function. Overseas investors are going to start demanding higher rates. Higher rates will kill any fragile economic recovery that the US may be beginning to see. Precious metals thrive in a high interest rate environment. From a long term perspective the bull market in precious metals has only just begun. <br />6. While Government officials talk big about a strong dollar policy, they actually favour a weak dollar. This serves two purposes, it helps increase exports and it allows the government to pay its debt with lower valued dollars. As long as the Government continues to borrow at these mind boggling rates, it is going to unofficially favour a weak dollar.<br />7. By inflating the money supply, the government is imposing a nefarious silent killer tax on the masses. The only way to hedge against this outright theft is to hedge yourself by getting into hard assets (meaning precious metals, oil, agri-products etc).<br /><br />Watch your step & de-risk your investments. If you have to play stocks, move into markets that have local consumption along with high savings & GDP growth rates. If it is paper currencies, stay away from the Euro, the US$ & the Dhiram – You may want to look at the Swiss Franc or the Australian $ or even the Singapore $. If it is precious metals & commodities that you favour, do look closely at whether your EFTs actually hold physical bullion or they are relying on paper trades through COMEX etc. You may just be safer holding physical Gold & Silver.Anonymoushttp://www.blogger.com/profile/18059544114255678456noreply@blogger.com0tag:blogger.com,1999:blog-6130098803966588061.post-79706909401710561492009-12-14T14:11:00.000-08:002009-12-14T14:39:09.691-08:00Gold: Is the dream run over?The fall in Gold prices (from US$ 1225 to $ 1115 levels) over the last few days, has got a lot of people worried that maybe, Gold was a bubble and that its dream run is now over. With that in mind, I wanted to take a few minutes today to map out my thoughts and readings on this subject.<br /><br />So where is Gold going from here?<br /><br />This actually is a very tricky subject to analyze because there is such a confluence of factors. Indeed, even if we go from what history shows us, we get mixed messages.<br /><br />For starters, Gold has outperformed every asset class on the planet for the last 10 years. The last bull market in Gold lasted roughly ten years, running from 1970 to 1980. So strictly looking at Gold from a timing perspective (with no eye to fundamentals, inflation forecasts, etc.) this current Bull market is looking a little like close to ending by 2010.<br /><br />In contrast, from a gains perspective, Gold looks like it’s just getting started. During the last bull market in gold, the precious metal rose 2,329% from a low of $35 in 1970 to a high of $850 in 1980. From mid-1971 to December 1974, gold rose 471%. It then fell 50% from December ’74 to August ’76. After that, it began its next leg up, exploding 750% higher from August ’76 to January 1980.<br /><br />In its current bull market (2000 to today) Gold has followed a similar pattern albeit at a much slower pace. The precious metal took nearly twice as long to complete its first leg up (2000-2007) rallying 300+% ($250 to $1,032).<br /><br />Then, just like during the last Gold bull market, the precious metal staged an 18-month correction (Feb 2007-September 2009) though this time around it only fell 30% rather than the full 50% retracement in the ‘70s. Gold then erupted into its second major leg up a few months ago, tearing through the $1,000 price point and soaring to over $1,200+.<br /><br />Here’s a chart detailing the two decades: <br /><br />GOLD Bull market of ‘70s Current Bull Market<br /> <br />First leg up 1971-74 (471%) 2001-07 (312%)<br /> <br />Correction 1974-76 (-50%) 2007-09 (-30%)<br /> <br />Second leg up 1976-80 (750%) 2009-? (?%)<br /> <br /><br />If Gold were to follow the historic trends of its last Bull Market, one could argue, from a gains perspective, that the precious metal has only just begun its second leg higher. And if history is any guide, this leg will be the big one (last time around Gold rallied 750% which would forecast a move to $7000 per ounce in today’s Dollars).<br /><br />Thus, history is showing us two very different points of view. In terms of timing, this current Gold bull market is looking pretty old (if history serves as a guide it will end in 2011). However, from a historic gains perspective, Gold’s bull market is still very much in its infancy.<br /><br />Another way of looking at the price of Gold is simply as a reference point for fiat currencies. If your currency is strengthening (e.g. AUD), gold prices quoted in your home currency will decline. If, on the other hand, your currency is weakening (e.g. USD), gold prices quoted in your home currency will rise. Much of gold's move in USD terms is due to the depreciation of the USD. So in real terms, gold hasn't actually appreciated as much as it seems till now. Several experts have claimed that Gold would hit the US$ 2300 mark by 2011, which is the inflation-adjusted price of Gold in 1980. <br /><br />In his book “Sub Prime Resolved” Anil Selarka reasons, based on evidence and official figures compiled from the Fed & the US Treasury that, “United States has lost almost 78% of its gold through covert lending practices to certain banks, investment banks and hedge funds to depress the gold prices with intent to control the inflation numbers to help them justify lower interest rates”. An excerpt from his book follows: <br /><br />“The FED and Treasury appear to have been concealing lending of gold to hedge funds by camouflaging transactions through various central banks. When those Central Banks lend to these hedge funds to short the gold, they appear to claim the gold from Fed and Treasury who earmark the gold in its balance sheets. In other words, the earmarked gold shown in Fed / Treasury balance sheets is in fact owned by foreign Central Bankers and is no longer owned by the United States. If the shorted gold does not return to Fed / Treasury, they will be obliged to show it as “sale” one day. That day of reckoning will come when the Foreign Central Banks start demanding the gold physically.<br /><br />According to my own research almost 6100 tons of gold earmarked in the Fed/Treasury balance sheets are non-returnable. The hedge funds who shorted it at prices $260 to $360 can not buy back at today’s prices. If they can not return, their deposits will be at the most forfeited. In other words, the Fed/Treasury will be forced to recognize the forced sale of gold @ $260 to $360 or more, but not more than $430 at the most. That is, Americans have lost their most valuable and prized asset – Gold – due to fraud perpetrated by the Fed/Treasury officials. It happened without their knowledge because the Fed/Treasury balance sheets were never audited. The office of OCC (Office of Controller of Currency) conducts only physical verification of the gold, not the true ownership. This is why Ron Paul, Senator, introduced a bill to audit the books of Fed. That is not enough. The gold is handled mainly by US treasury – Fed merely manages the operational part.”<br /><br />Building on the theory, he goes on to justify a price target of US$ 6400 per oz. for gold!<br /><br /> <br />Taking a closer look at US history, the 70's bull market in gold seems to have been a result of a currency crisis that resulted from President Richard Nixon dropping the gold standard – an act which many refer to as “unconstitutional”. The ensuing increase in gold prices was a result of the excessive printing of the fiat currency (namely the US$) that had taken place prior to dropping the gold standard (while US citizens were prohibited from trading their dollars for real money i.e. Gold). Once it was legalized again, there was a decade long rush for the exits. This was also reflected in the inflation rate. Volcker put an end to the currency crisis by raising interest rates above the inflation rate. <br /><br />That bought the US ten years of prosperity, which were then followed by ten years of excess under Greenspan, which resulted in the currency crisis that the US is facing now. The difference between 1980s and today is that now the US has a huge debt to deal with, which will prevent it from raising interest rates. Once the monetary inflation that has already taken place starts hitting prices, look out! There won't be a way to stop it. The dollar is on the verge of death, and the only way that individual investors are going to be able to avoid the knockout blow is to get into gold, silver, or some other tangible asset or commodity.<br /><br /><br />Happy investing!Anonymoushttp://www.blogger.com/profile/18059544114255678456noreply@blogger.com0tag:blogger.com,1999:blog-6130098803966588061.post-89346427981021509212009-12-11T04:59:00.000-08:002009-12-11T05:08:27.303-08:00Global Economic FactorsThe Global Backdrop:<br /><br />US Dollar<br />Currency markets have been pretty volatile right through 2009, with the Dollex (US$ Index) moving up from a level of 79 in mid-Jan to a level of 89 by March’09 and then moving down steadily to a level of 75 till last Friday. The 50 DMA currently lies at 76 while the Dollex is at 75.72. An attempted breakthrough from its 50 DMA gave the US$ some strength for a couple of days, but, proved short lived. Currently the Dollex is struggling to break through 76 convincingly, which can give strength to the US$, while a fall through 74.5 levels might quickly take it to 71 levels. Watch the Dollar, as its strength will bring down markets & commodities, while a Dollar weakness will give markets the strength to breakout of their current range bound scenario.<br /> <br />Bail-outs<br />With the Fed having pumped in at least US$ 1.7 trillion on several bail-out packages and Governments all over having followed suit with varying amounts, there are plenty of funds in the markets chasing a limited number of assets, leading to what is commonly being referred to as the asset bubble.<br /><br />Interest Rates<br />With the Fed having brought down interest rates to near zero levels, the weak US Dollar is also chasing assets that can provide returns over the short term. As such since the fall in the Dollex starting March ’09 stock markets globally have been attracting a lot of investment and have all turned in phenomenal returns in excess of 50% till date already. Considerable funds have also flowed into emerging markets and commodities.<br /> <br />Commodities<br />With the flow of excess liquidity in global markets, commodities have risen sharply, even though industrial recovery and consumption have yet to turn up significantly. Crude on the other hand after a quick recovery from US$35 to US$ 82 per barrel levels, has lost ground and currently is struggling at US$ 70 per barrel owing to slack demand and an inventory build-up in western markets. Metals and bullion (Gold & Silver) have however commanded centre-stage in the commodity price rise. If industrial production & consumption does not pick up any further (which is a strong possibility), base metal prices may soon run out of steam. Gold & silver, however, continue to look attractive both as investment and insurance in a period when fiat currencies continue to get printed at will. Also, several Central Banks including the RBI clearly intend to bolster their gold reserves, in order to protect their currencies from further devaluation.<br /><br />GDP Growth<br />India surprised the world with its 7.9% GDP growth rate for its Second quarter (July-September ’09) announced a week ago. The US is trying to tell the world that it is out of its recession (a fact that it did not concede till 6 months after it was in one). Australia & Norway have started increasing interest rates - a message that their woes are now a thing of the past. China’s jugglery of figures and balance sheets continues, as it continues to give messages to those within & outside that all is well. The question here is that once the interest rates are raised & liquidity pulled out of the system, will there still be any real growth? Guess we need to wait another two quarters (at least) before we are clear that we are not in for any unpleasant surprises again.<br /><br />Inflation<br />Excess liquidity has got the inflation monster rising again. Unfortunately, with the masses having lost a record number of jobs and a majority of their savings (apart from homes) in the recent crash, this is not the time any Government would like to battle inflation. The Food Index has shot up dramatically since 2007 even though the WPI and CPI are not looking alarming, as yet. The interesting thing to note in all this is that the very same liquidity and low interest rates that help industrial recovery work against inflation. So, if inflation is to be controlled, then industrial recovery will have to be put on the back-burner for a while.Anonymoushttp://www.blogger.com/profile/18059544114255678456noreply@blogger.com0tag:blogger.com,1999:blog-6130098803966588061.post-64266292433896209702009-12-09T02:05:00.000-08:002009-12-09T02:12:09.925-08:00The Roller CoasterGlobal Markets have been on a Roller Coaster ride like never before since 2005. The period 2005 – 2007 saw us pulling up slope after slope, with occasional minor drops which helped gather momentum and added to the thrill, all along. A period that had all the Bulls enjoying as they speedily raced away from the Bears, left waiting at the lows. And then, came the big one…<br /><br />Pushed hard by FIIs, DIIs, HNIs, Hedge Funds, momentum players & retail investors the Roller Coaster made a big steep climb all the way to a top of 21000 by early January 2008 – a level that needed a lot more momentum to cross, which the system could not provide. And that led to a steep fall, all the way to 8000. While all Bulls were gasping for breath the Roller Coaster hit a bottom and started climbing again…<br /><br />This time the climb was propelled initially by DIIs, Hedge Funds and an unprecedented Election outcome. Soon enough FIIs and ETFs joined in gleefully. Any surviving HNIs and Retail investors, looked skeptically at the slope ahead and felt that it was too early to have a big rise again and that having woken up to the reality of the next slope only around 16000 levels, this could not be as big a climb as the last one. And so they sat around to watch the gyrations around 16000 to 17000 levels, each thinking that the ride was almost over. However, now almost everyone can see one more slope ahead, and wants to enjoy the thrill of being on this one…<br /><br />So where do we stand on this one? We are at 17200 and are seeing more participation again. Practically everyone who was riding in 2007 is back to enjoy the ride. The one missing participant since the last descent from 21000 has been the retail investor. The Roller Coaster has waited long enough in a range, for him to regain consciousness & enjoy the ride. Volumes and momentum have been built selectively and pockets of opportunity are visible amongst mid-caps & sectors that have either not performed or have burnt out in this rise. IPO plans in Realty, PSU, Power, Telecom - promise to take away whatever savings might still have remained with the Retail investor. The stage is hence set for the Retail investor to enter and Cats & Dogs are set to fly…<br /><br />Fasten your seat-belts and prepare yourself for 2010. If you thought that the Roller Coaster ride was over, think again!<br /><br />If my intuition and reading of the market forces is correct, 2010 will leave the world gasping for breath and only those with guts of steel should venture into areas they have not mastered. We are in for a ride of a lifetime…Anonymoushttp://www.blogger.com/profile/18059544114255678456noreply@blogger.com0tag:blogger.com,1999:blog-6130098803966588061.post-59961641570974984042009-11-20T03:57:00.000-08:002009-11-20T04:01:06.782-08:00The story so far...When I stepped into professional life, armed with an Engineering degree and a couple of post graduations in Management and Marketing, I felt I was ready to conquer the world. Working sixteen hours a day (and maybe eight hours on weekends) at an average, I wanted to learn all I could and out-perform everyone on my first job (which I did) to rise quickly to the top of the corporate ladder. Everything worked well, except that I was made to realize that hard work, loyalty and results are not everything in the structure of our organization (a major private sector corporation) and that patience and experience were required too.<br /><br />Being much younger then, patience was a scarce commodity. I put my three years-odd of performance appraisals behind me and moved into a public sector enterprise, where I was told that growth would not be too fast, but, at least I would get an opportunity to learn from our R&D and play an important role in India’s development. More mature by then, I learnt whatever I could during my three year stint and waited for the right opportunity to encash that knowledge.<br /><br />Within a span a two years from then (at the age of 29), I became the CEO of a software export subsidiary of a leading Indian IT company that was listed on the bourses. I guess I must have been the youngest CEO of a public-held company in India then, without being related to any members on the Board.<br /><br />The joy was short lived, as I soon realized that even in listed companies the management lacks a clear business vision and at times is rather orthodox in its approach. Priorities are often misplaced and people tend to stay in their comfort zones (often bound by tradition) rather than experiment with new ideas that could transform business success radically.<br /><br />I stepped out of this cocoon to start my own venture in 1991. The vision was to create an informal yet professional organization that could grow multifold through excellent services delivered to its clients by a highly motivated workforce that identified with the organization. We created a team that could snatch victory out of the jaws of defeat and became the fastest growing system integrator in India.<br /><br />Revenues and scales grew and we merged with a Bangalore-based ERP pioneer in 2002, which transformed itself into an IT solution provider. The company created history by being ranked by Deloitte as one of the fastest growing technology companies in India and Asia-Pacific, three years in a row. We innovated and we thrived on innovation, reaping contracts, awards and accolades all along. The company did a successful GDR and today trades on BSE, NSE and SGX (Singapore Stock Exchange).<br /><br />While I have no complaints about achieving what I did in my 26 years of hard work, I am sure I learnt everything the hard way and even so had to learn it from scratch each time. I wish I had someone who could have guided me, when I was thrown into the ocean of global business without knowing how to swim or had someone to turn to for a second opinion (or even a first). There were always new problems and rather than finding someone to solve them, I learnt to master the situation myself. From being a CEO & Managing Director, to being a Salesman, a Project Manager, an R&D engineer, a network designer, a PR professional, a Legal expert, an international trade & taxation expert, a fund raiser – amazing roleplay!<br /><br />When you are ready to label yourself an entrepreneur, you need to be prepared for everything. And believe me, something new will still come up and surprise you! Your own domain expertise be damned, business will make you do everything you were never prepared for, unless your pockets are deep enough to hire the best of professionals at fees you’d rather earn yourself!<br /><br />Which is why large businesses (with strong business models) keep growing larger, while most small businesses find it hard to survive. Was there a way out of this paradox?<br /><br />And this is where it struck me! What if there was an organization that acted as a support system to an entrepreneur, that handled all areas wherein the entrepreneur lacked domain expertise and let him focus his energies on what he was best suited for and passionate about?<br /><br />And that was the birth of Mentorpreneur…<br /><br />Mentorpreneur is an organization that takes on the roles of “Mentoring” through its international network of entrepreneurs, executives, engineers, attorneys, consultants and other industry professionals who provide mentoring and advisory services to business decision-makers and leading investors from around the world. Further, it provides “entrepreneurial” guidance and seed capital of its own or guides the entrepreneur in raising Private Equity or even taking the IPO route and or GDR/ADR route to raise capital to fuel his growth plans. Mentorpreneur aspires to create enlightened leaders who can turn stumbling blocks into stepping stones, on which excellent organisations can be built.<br /><br />Through this blog, I hope to reach out to all of you who have ideas and abilities that are yet to be recognized by the world at large. I wish to have experts respond to your business queries and back your ideas and abilities with sound business plans and if need be, even fund them. I intend to create a collaborative platform for professionals to interact and find their place in the Sun. In short a Win-Win for everyone…<br /><br />May the spark of enterprise ignite our world!<br /><br />Best wishes,<br /><br />Sanjiv Bhavnani <br />Chief Mentor<br />MentorpreneurAnonymoushttp://www.blogger.com/profile/18059544114255678456noreply@blogger.com0