The following is directly reproduced from the article titled "The breaking point" by Omkar Goswami in Businessworld Magazine dated 31 Jan 2011. http://www.businessworld.in/bw/2011_01_22_The_Breaking_Point.html
I can’t recall writing on the same topic over two consecutive columns. This is a first. Since the last column, I have been going through the supply and demand data on articles of food in India, and I am now convinced that food inflation has reached a new structural level. Despite some cyclical movements, we will now be seeing many more episodes of high food inflation. The prices of food — especially vegetables, fruit, milk, eggs, fish and meat — will plague us like never before. And the solutions will need greater political and administrative bandwidth and imagination than what the present dispensation possesses.
Let me start with the data. The chart (see ‘Crippling Food Inflation’) plots wholesale price index inflation for three broad classes of products: (i) fruit and vegetables, (ii) milk, and (iii) eggs, fish and meat. These account for a sizeable chunk of a family’s food consumption basket, in urban as well as rural India. More significantly, across a large cross-section of the population, these are items on which expenditure rises at rates faster than disposable income. As families get better off, they spend proportionately more on fruit, vegetables, milk and the like. This is important because the demand for these is rising phenomenally, while the supply isn’t.
As of December 2010, fruit and vegetable inflation was running at 22.8 per cent compared to a year earlier; milk was at 18.2 per cent; and inflation on account of eggs, fish and meat stood at 19.2 per cent. To be sure, vegetables spiked in December due to the onion effect. From December 2009, fruit inflation has been reigning at double digits, peaking at 32.4 per cent in July 2010. Milk inflation has been continuously in double digits since March 2009, or 22 months on the trot; and for 12 successive months it ruled above 20 per cent.
To my mind, there is no doubt that India is, and will be, facing higher food inflation than earlier, and will do so over long periods of time. That is the obvious outcome when a rapidly burgeoning middle class across urban and rural India faces the worst supply chain in the country. We have more rent-seeking intermediaries in the food chain than warranted by any notion of sanity. More fruit and vegetables rot between the fields and the consumer than any country that postures as a 9 per cent GDP growth economic superpower. Every field-to-mouth supply chain in India is riddled with laws, regulations and procedures that are antiquated and ridiculous. The food supply chain is not about efficiently transporting food to consumers at affordable prices, but about lining the pockets of various useless intermediaries.
Moreover, since the green revolution of four and a half decades ago, there has been no significant long-term improvement in agricultural productivity — be it in cereal, oilseed, vegetable or fruit cultivation. If anything, untrammelled use of subsidised fertiliser and pesticides, coupled with excess water drawn at zero power tariffs, have reduced our ground water and leached the soil.
Consider a simple fact. We are a nation where services grow at over 10 per cent per year; where industry has started growing at double-digits; but where agriculture averages a growth of 2 per cent. Add to this a ‘protect the farmer’ policy framework where food imports are frowned upon — to be sporadically undertaken only during crises. Why should we not expect long periods of double-digit food inflation?
There is a solution. It involves eliminating restrictions in the food supply chain, and letting corporations get into managing the process; seriously investing in science and agricultural extension; and opening up agricultural imports. Can the present governments — at the state and the Centre — execute these? You know the answer. Thus, the gloom.
M Jayakumar's blog
Wednesday, February 2, 2011
Dear Indians, learn to live with high Inflation - Part 1
The following is directly reproduced from the article titled "Will inflation get worse" by Omkar Goswami in Businessworld Magazine dated 17 Jan 2011. http://www.businessworld.in/bw/2011_01_08_Will_Inflation_Get_Worse.html
Being in the dismal profession, let me start 2011 with some grumpy news. India might have moved on to a higher inflationary path — one that could stay with us longer than we think.
First, the data. The chart (‘Rising Prices?’) plots inflation of the wholesale price index (WPI) for all products and primary commodities. Let’s start with the latter, which accounts for a fifth of the weight in the WPI and has considerable bearing on daily expenses. For 39 of the 56 months between April 2006 and November 2010, WPI inflation of primary commodities has been ruling at 9 per cent or more. For 31 of these months, it has been at double-digits. For 20 months, it has been at 12 per cent or more. And there have been six months where it has crossed 20 per cent. In November 2010, it was at 13 per cent — lower than earlier, but still too high for political comfort. I suspect that when the data comes out, onion prices will jack this up for December 2010.
Now consider articles of food, which comprise 14 per cent weight in the WPI, or about 70 per cent of the value of primary commodities. From June 2009 to October 2010, it has persistently remained in double digits, rising to over 20 per cent for six consecutive months between December 2009 and June 2010. For the first six months of 2010, it was over 20 per cent; and has remained above 14 per cent for the first 10. These are frightening numbers.
Overall, WPI inflation is also too high. Although a bit lower in November 2009, it was still ruling at 7.5 per cent. More significantly, five of the 11 months of 2010 saw it at double digits — something that we last witnessed between June and October of 2008.
Why did we see higher inflation over a longer period of time? It has to do with ancient, creaking supply facing vibrant demand. Let me explain. The size of the urban middle class, howsoever defined, is growing at double-digits, and will continue doing so until the scale effect comes into play. Not only is this class growing in size, but it is also increasing its per capita disposable income — also at double-digits. Thus, there is a huge, and growing, domestic demand pull for goods and services which India had never seen in the past. It is not just urban India. There is no denying that incomes are rising, more for some, and less for others. Demand is growing like never before.
Supply isn’t — at least anywhere near that pace. Agricultural productivity is pathetic, the supply chain is mired in the late 19th century, and wastage is beyond belief. Nothing has been done in the past decade to raise farm productivity, improve transport and storage, reduce the layers of needless intermediaries and effectively improve food supply. Our food manufacturing sector is equally poor. Please visit rice husking plants, oil mills and sugar factories and you will know what I mean. And the politics of farmer protection translates to idiosyncratic — often knee jerk — policies regarding food imports.
In such a milieu, I can’t see how we won’t face higher inflation than earlier. It will be driven by food, followed by some elements of manufacturing. The standard economic response will be the Reserve Bank of India raising interest rates in an attempt to choke off burgeoning demand. And the political response will be hartals, rasta roko, storming the well of the House and, if the timing is such, incumbents losing state elections.
Don’t believe those who claim that India can live with 8 per cent WPI inflation over long periods and continue to generate 8-9 per cent real GDP growth. It doesn’t, and won’t, happen. There lies the risk — of high inflation closing the taps, and choking off growth.
Being in the dismal profession, let me start 2011 with some grumpy news. India might have moved on to a higher inflationary path — one that could stay with us longer than we think.
First, the data. The chart (‘Rising Prices?’) plots inflation of the wholesale price index (WPI) for all products and primary commodities. Let’s start with the latter, which accounts for a fifth of the weight in the WPI and has considerable bearing on daily expenses. For 39 of the 56 months between April 2006 and November 2010, WPI inflation of primary commodities has been ruling at 9 per cent or more. For 31 of these months, it has been at double-digits. For 20 months, it has been at 12 per cent or more. And there have been six months where it has crossed 20 per cent. In November 2010, it was at 13 per cent — lower than earlier, but still too high for political comfort. I suspect that when the data comes out, onion prices will jack this up for December 2010.
Now consider articles of food, which comprise 14 per cent weight in the WPI, or about 70 per cent of the value of primary commodities. From June 2009 to October 2010, it has persistently remained in double digits, rising to over 20 per cent for six consecutive months between December 2009 and June 2010. For the first six months of 2010, it was over 20 per cent; and has remained above 14 per cent for the first 10. These are frightening numbers.
Overall, WPI inflation is also too high. Although a bit lower in November 2009, it was still ruling at 7.5 per cent. More significantly, five of the 11 months of 2010 saw it at double digits — something that we last witnessed between June and October of 2008.
Why did we see higher inflation over a longer period of time? It has to do with ancient, creaking supply facing vibrant demand. Let me explain. The size of the urban middle class, howsoever defined, is growing at double-digits, and will continue doing so until the scale effect comes into play. Not only is this class growing in size, but it is also increasing its per capita disposable income — also at double-digits. Thus, there is a huge, and growing, domestic demand pull for goods and services which India had never seen in the past. It is not just urban India. There is no denying that incomes are rising, more for some, and less for others. Demand is growing like never before.
Supply isn’t — at least anywhere near that pace. Agricultural productivity is pathetic, the supply chain is mired in the late 19th century, and wastage is beyond belief. Nothing has been done in the past decade to raise farm productivity, improve transport and storage, reduce the layers of needless intermediaries and effectively improve food supply. Our food manufacturing sector is equally poor. Please visit rice husking plants, oil mills and sugar factories and you will know what I mean. And the politics of farmer protection translates to idiosyncratic — often knee jerk — policies regarding food imports.
In such a milieu, I can’t see how we won’t face higher inflation than earlier. It will be driven by food, followed by some elements of manufacturing. The standard economic response will be the Reserve Bank of India raising interest rates in an attempt to choke off burgeoning demand. And the political response will be hartals, rasta roko, storming the well of the House and, if the timing is such, incumbents losing state elections.
Don’t believe those who claim that India can live with 8 per cent WPI inflation over long periods and continue to generate 8-9 per cent real GDP growth. It doesn’t, and won’t, happen. There lies the risk — of high inflation closing the taps, and choking off growth.
Wednesday, September 8, 2010
Petroleum price mythology
The following has been reproduced from the article "Is petroleum pricing all gas?"
by S. Pushpavanam in Economic Times dated Sept 6, 2010
http://economictimes.indiatimes.com/articleshow/6503804.cms
The Organization of the Petroleum Exporting Countries (Opec) claims on its website that it sold crude oil (2004-08) worth $3,346 billion to G-7 countries, but G-7 countries got $3,418 billion by way of taxes on the price.
Opec says the real villains are the governments that use petrol as a means of taxation. UAE, Mexico and the US are at the low end of the scale that indicates taxes on petrol, with India, UK and Germany at the high end.
In India, nearly 50% of the price per litre of petrol goes to the government, but the pricing is not transparent and has notional and unreal elements. Several myths in the petroleum pricing need to be broken.
We are told that kerosene and LPG are subsidised. Let me illustrate. A grocer can sell chillies at 80% profit, sugar at 50% profit and, in order to capture the market, he may sell salt at cost price or less.
When he makes a huge profit on the whole, does individual pricing matter? This can be called differential pricing, a pricing strategy or price manipulation, but never subsidy or cross-subsidy.
A clear example of subsidy is public distribution system. The gap (. 12-50) between actual cost and the selling price is provided by central and state governments so that the poor can afford to buy the rice. In petroleum products, there is no subsidy because of the overall profit.
The government does not give anything and we pay more taxes than the notional subsidy.
The ninth report of the Standing Committee on Petroleum Products (page 23) says, “We have to take care that these subsidies are also recovered out of the overall sales which we make so that there is no impact on the Budget.
There is no drawal from the exchequer.” Language is used to hide meanings. You must have heard subsidy being given or received: ONGC pays out subsidy.
ONGC chairman R S Sharma’s statement on July 30 states that they have paid out fuel subsidy worth . 5,515 crore in April-June quarter to oil marketing companies. What he means — but does not want us to understand — is that instead of selling crude oil at . X, they should have sold crude oil at . X+.
But when they have made a profit of . 3,661 crore even for one quarter, how could anyone call this a subsidy? A deception of great magnitude is being practised by the bureaucrats of the oil industry and oil ministry. In fact, in 2009-10, we contributed . 1,83,861 crore to central and state exchequer through taxes and duties via the oil sector.
Crude suffers octroi, then cess at . 2,500 per metric tonne, sales tax, education cess, port charges and Customs duty of 35%, and refined petrol attracts 30% sales tax in Tamil Nadu, 7.5% Customs duty, central excise and central sales tax. The cess collected so far since 1991-92, . 84,337 crore, was meant for Oil Industry Development Board (OIDB), but only .
902 crore has been given to OIDB. This shows that deregulation will not push the prices down as it can impact only part of the cost.
It is the oil companies that luxuriate on high petrol prices. ONGC has a profit of . 16,767 crore (26.8% on net sales of . 64,276 crore), Indian Oil Corp (IOC) . 10,220 crore (4.11% on . 2,49,271 crore), Hindustan Petroleum Corp (HPCL) . 1,301 crore (1.2% on . 1,07,637 crore), Bharat Petroleum Corp (BPCL) . 1,837 crore (1.5% on . 1,22,275 crore) and Oil India . 2,610 crore (32.33% on . 7,905 crore) — their total profit being . 32,735 crore in 2009-10.
It is clear from their sales volume that IOC, BPCL and HPCL should have made at least five times more profit but haven’t. Because they have spent it on themselves lavishly. The salaries are scandalous:
According to IOC financial reports, a casual labourer who joined 15 years ago is paid . 8,39,757 per annum! Some drivers with M.Com degrees are paid . 22 lakh per annum. A V-standard caretaker gets . 8,56,731. Officers above these levels are paid a minimum of . 24 lakh per annum.
The 56-year-old senior attendant (VIIIth standard), Prakash Paswan, who joined on March 6, 1976, today gets . 45,99,234 (Rupees forty-five lakh, ninety-nine thousand, two hundred and thirty-four only)! This will suffice. This is how the huge profits — all our money — are spent.
Another myth is the concept of under-recovery. The cost of domestic crude is equated to the imported price of crude oil. When this is not fully recovered from the consumer — due to administered price — the difference between cost of Indian production and cost of imported crude is called under-recovery.
This is applied to refining cost, freight and delivery charges. This totally notional and unreal amount is paraded as loss. The Chaturvedi Committee report on this is yet to be made public.
There is another dark area: while drilling, natural gas springs out free. Crude refining produces LPG, motor spirit (petrol), naphtha: kerosene, aviation turbine fuel, high-speed diesel oil and low diesel oil.
Then finally: furnace oil, lubricant oil, bitumen, petroleum coke, paraffin wax and other waxes. Is the total refining cost added to each petroleum product arbitrarily or is it proportionately apportioned to each derivative? This must be explored.
What is urgently needed is a non-governmental committee of cost accountants and technical persons from oil industry to analyse thoroughly the costing and come out with recommendations for honest and transparent pricing, and with suggestions to cut costs. A lower petrol, diesel and LPG price will boost the economy, ensure savings for the consumer, and ultimately help the nation.
by S. Pushpavanam in Economic Times dated Sept 6, 2010
http://economictimes.indiatimes.com/articleshow/6503804.cms
The Organization of the Petroleum Exporting Countries (Opec) claims on its website that it sold crude oil (2004-08) worth $3,346 billion to G-7 countries, but G-7 countries got $3,418 billion by way of taxes on the price.
Opec says the real villains are the governments that use petrol as a means of taxation. UAE, Mexico and the US are at the low end of the scale that indicates taxes on petrol, with India, UK and Germany at the high end.
In India, nearly 50% of the price per litre of petrol goes to the government, but the pricing is not transparent and has notional and unreal elements. Several myths in the petroleum pricing need to be broken.
We are told that kerosene and LPG are subsidised. Let me illustrate. A grocer can sell chillies at 80% profit, sugar at 50% profit and, in order to capture the market, he may sell salt at cost price or less.
When he makes a huge profit on the whole, does individual pricing matter? This can be called differential pricing, a pricing strategy or price manipulation, but never subsidy or cross-subsidy.
A clear example of subsidy is public distribution system. The gap (. 12-50) between actual cost and the selling price is provided by central and state governments so that the poor can afford to buy the rice. In petroleum products, there is no subsidy because of the overall profit.
The government does not give anything and we pay more taxes than the notional subsidy.
The ninth report of the Standing Committee on Petroleum Products (page 23) says, “We have to take care that these subsidies are also recovered out of the overall sales which we make so that there is no impact on the Budget.
There is no drawal from the exchequer.” Language is used to hide meanings. You must have heard subsidy being given or received: ONGC pays out subsidy.
ONGC chairman R S Sharma’s statement on July 30 states that they have paid out fuel subsidy worth . 5,515 crore in April-June quarter to oil marketing companies. What he means — but does not want us to understand — is that instead of selling crude oil at . X, they should have sold crude oil at . X+.
But when they have made a profit of . 3,661 crore even for one quarter, how could anyone call this a subsidy? A deception of great magnitude is being practised by the bureaucrats of the oil industry and oil ministry. In fact, in 2009-10, we contributed . 1,83,861 crore to central and state exchequer through taxes and duties via the oil sector.
Crude suffers octroi, then cess at . 2,500 per metric tonne, sales tax, education cess, port charges and Customs duty of 35%, and refined petrol attracts 30% sales tax in Tamil Nadu, 7.5% Customs duty, central excise and central sales tax. The cess collected so far since 1991-92, . 84,337 crore, was meant for Oil Industry Development Board (OIDB), but only .
902 crore has been given to OIDB. This shows that deregulation will not push the prices down as it can impact only part of the cost.
It is the oil companies that luxuriate on high petrol prices. ONGC has a profit of . 16,767 crore (26.8% on net sales of . 64,276 crore), Indian Oil Corp (IOC) . 10,220 crore (4.11% on . 2,49,271 crore), Hindustan Petroleum Corp (HPCL) . 1,301 crore (1.2% on . 1,07,637 crore), Bharat Petroleum Corp (BPCL) . 1,837 crore (1.5% on . 1,22,275 crore) and Oil India . 2,610 crore (32.33% on . 7,905 crore) — their total profit being . 32,735 crore in 2009-10.
It is clear from their sales volume that IOC, BPCL and HPCL should have made at least five times more profit but haven’t. Because they have spent it on themselves lavishly. The salaries are scandalous:
According to IOC financial reports, a casual labourer who joined 15 years ago is paid . 8,39,757 per annum! Some drivers with M.Com degrees are paid . 22 lakh per annum. A V-standard caretaker gets . 8,56,731. Officers above these levels are paid a minimum of . 24 lakh per annum.
The 56-year-old senior attendant (VIIIth standard), Prakash Paswan, who joined on March 6, 1976, today gets . 45,99,234 (Rupees forty-five lakh, ninety-nine thousand, two hundred and thirty-four only)! This will suffice. This is how the huge profits — all our money — are spent.
Another myth is the concept of under-recovery. The cost of domestic crude is equated to the imported price of crude oil. When this is not fully recovered from the consumer — due to administered price — the difference between cost of Indian production and cost of imported crude is called under-recovery.
This is applied to refining cost, freight and delivery charges. This totally notional and unreal amount is paraded as loss. The Chaturvedi Committee report on this is yet to be made public.
There is another dark area: while drilling, natural gas springs out free. Crude refining produces LPG, motor spirit (petrol), naphtha: kerosene, aviation turbine fuel, high-speed diesel oil and low diesel oil.
Then finally: furnace oil, lubricant oil, bitumen, petroleum coke, paraffin wax and other waxes. Is the total refining cost added to each petroleum product arbitrarily or is it proportionately apportioned to each derivative? This must be explored.
What is urgently needed is a non-governmental committee of cost accountants and technical persons from oil industry to analyse thoroughly the costing and come out with recommendations for honest and transparent pricing, and with suggestions to cut costs. A lower petrol, diesel and LPG price will boost the economy, ensure savings for the consumer, and ultimately help the nation.
Thursday, March 25, 2010
Procedures to attend conferences abroad with travel grants - Indian students
When to start?
If you are planning to attend a conference, it must be planned at least 4 months ahead i.e. if you are planning to attend in July start now. Since most of us never went outside the country, it requires lot of coordination also. (I started late and faced lot of problems)
What you need?
- Lot of patience and perseverance.
- Passport - I advice all to take a passport right away (tatkal is better) than to rush at the last minute. (I did the same mistake – it leads to unnecessary tension and pressure)
- Money is important but not more than will power and patience
Who will fund my trip?
This is the most crucial part of the trip. There are lot of agencies that are offering travel funds. Some of them are listed below. Each of these has different forms.
Agency a) Webpage, b) What it covers (Max limit), c) Eligibility, d) How and when they pay?
1. Department of Science and Tech, New Delhi
a) http://www.serc-dst.org/application_for_travel_support.htm
a) http://www.serc-dst.org/application_for_travel_support.htm
b) Airfare + Visa + Registration fee, No Limit
c) At least two papers in international journals,
d) DD will be sent to Accounts Officer of your centre(6-12 months)
2. CCSTDS, Chennai
b) Anything like food, lodging, etc. with bills Max. Rs.20,000/-
c) Requires proof of funding from other agencies like DST
c) Requires proof of funding from other agencies like DST
d) DD will be sent to student (1-2 months)
3. CSIR, New Delhi
b) 50 % of airfare Max. Rs.50,000/-
c) Same as DST
d) Same as DST
c) Same as DST
d) Same as DST
4. Sir Ratan Tata Trust, Mumbai
a) http://www.srtt.org/individual_grants/education_grants.htm
b) Partial airfare
a) http://www.srtt.org/individual_grants/education_grants.htm
b) Partial airfare
- Also the funds from DST and CSIR are mutually explicit i.e. since both give airfare, only one can be used at a time
- DST travel grant can be used once in three years up to 35 years. Many of us are eligible for at least two times from now
- In many agencies, two applications from same institute are not entertained during same month. If then, only younger will get travel grant. Check the prospectus carefully
- All agencies encourage getting funding from other agencies – if you get only one agency’s support and cant make the trip, you are also blocking the trip of another candidate
- All have to be applied at least 3 months ahead. Don’t apply to CSIR/DST much before three months, they will surely lose/misplace the application
- Keep in touch with the agency’s office through phone. Emails are not yet available with them
Procedure to apply and get the money
1. Download the form and send it after attested by Guide/ Div Head/ IGCAR Director along with necessary attachments
2. The agency sends you a official communication that you can attend the symposia and they will provide the funds in future (The time taken for sending this communication varies – DST, CSIR, CCSTDS take nearly 4-6 weeks from the date of application) Check DST website for results
3. You attend the conference and upon returning, apply with the claim sheet and necessary attachments like bills
4. They will send you the DD according to your claim. While CCSTDS sends DD to you, DST sends DD directly to Accounts officer, IGCAR along with a communication to you
5. Always scan all your documents starting from passport front-page, visa, ticket, bills and have a soft copy with you.
Going abroad
1. Always carry passport and cash along with you. Do not leave in hotel room.
2. Never hand your passport to any unauthorised person except immigration officers at Airport
3. If you are changing two or more flights from different airlines, then always make sure at the airline counter that your baggage is checked in. In many chances they may miss your baggage in transit airport and you’ll have to struggle for a day or two.
4. Do not exchange foreign currency from airport or nearby places or Thomas Cook. Always take it before hand from SBI or other banks or else you will lose lot of money in exchange. (I got IGCAR advance money just few minutes before departure and exchanged at Chennai airport resulting in loss of nearly Rs.2000)
5. Better to carry map of the city/locality and also routes. Language dictionary necessary if you are going to a non-English country]
6. You can avail international roaming facility in your mobile (Airtel, Vodafone) if you are staying there for longer time. Incoming will be free to you and it will be local call tariff to the caller (See the respective website)
7. Keep all original bills of expenses met during the travel
Visa and Immigration
1. Check the website and enquire with the Visa issuing authority like Embassy or VFS on which Visa you require – student or tourist, etc.
2. Some countries require travel insurance, health certificates, etc.
3. Also take note of things not to be carried out into the country
On the flight and airport
1. Most agencies require you to travel only by Air-India flights. If the destination is not connected by Air India then you have to take an Air-India flight to the nearest place and take some other airline to the conference city or nearest airport
2. Keep the toll free phone number of your airline for emergency
3. You can block your ticket with the travel agency without giving money. Only if you confirm it, then you have to pay. (you may not get the tickets by the time you get permission from DAE and travel grants from other agencies)
4. Always keep one set of dress in your hand baggage – it will be highly useful if your baggage is delayed
5. By chance, if your baggage is delayed/missed write a complaint along with hotel address at the airline counter in airport and demand for compensation. They will give some cash and later they will also deliver the baggage at your hotel (My baggage was delayed during transit and I spent my pocket money to buy dress in Australia – I did not know about compensation then)
6. Do not carry any liquids in hand baggage – water, perfume, etc. during flight travel.
7. Carry light and good baggage. If your bag/handle tears in handling or it is very heavy it leads to fines
8. You can ask for second time food/drinks in flights – they won’t mind (??)
Conference/symposium
1. First, one can request the conference organizers for waiver in registration fee, possible funding for air travel and lodging. Mostly they’ll give one of these since they want student participation and it is one way of encouraging. (They gave me registration fee waiver – it is a advantage while applying for funding to DST/DAE)
2. Carry a laptop if you have one. Most conference venues and airports have wireless internet facility or internet ports. Also you can make a short presentation, if you are explaining your work to a someone
3. Better to carry your CV, published papers and visiting card
4. YOU ARE THE OFFICIAL REPRESENTATIVE OF YOUR UNIVERSITY/CENTRE AND OUR COUNTRY AT THE CONFERENCE – ALWAYS REMEMBER THAT
Friday, March 5, 2010
Why did the American Economy collapse? Part 1: Belated post mortem report
It has been more than 18 months since the financial meltdown started. Several arguments have been made from both capitalists and the anti-capitalists , both communists and non-communists and others. One side claims it as the total failure of capitalism while the other defend it is not so.
American economy was widely considered as very strong and although there have been glitches here and there, it is still considered superior and robust. However, the economic downturn in 2008/09 has challenged this status quo.
Is the American economy still stronger ? Will it come out of the worst economic crisis it has faced since the Great Depression of 1930's ?
The answer is not necessarily.
The savings rate of Americans is among the lowest in the world. Consumerism is the mantra for the companies and the US government also follows the same. The govt. feels bad if the consumers don't buy things as they are expected to - spend and more spend. Also American business executives and government are always obsessed with such data - unemployment, consumer index, market sales, etc., etc. . Nowhere is the world, media chews more data than in US. Every first week of the month or new quarter, millions of graphs/data is sliced, diced and sold to the viewers.
These all means the market is more spending-driven thus resulting is almost zero savings. To add more fuel to the fire, the American family system collapsed during the same time resulting in more individualistic thought and lifestyle than ever.
A man saves for two reasons - one, fear about future requiring a margin of safety either for the person or the family, and two, when people take a holistic view of money and avert consumerism to follow a simple and minimum lifestyle. An American doesn't worry about his future nor he raised a family to worry about them. Nor he can live a holistic lifestyle because he never heard of it.
Since a typical American doesn't have a family to run, he never cared about his parents or older generation. Who else will care? Ans: The US government. Health care became a burden to the US government whereas the family system should have born it. To make things worse, health care was not available to all Americans also.
Unemployment is a problem to any country as its wastes human resources, productivity and also offshoots crime, fraud, etc. But there exists a different perspective in the US - if more unemployed are there in the country, they will buy/consume less and market will be down. A truly enterprising idea of a enterprising country.
Also constant wars costing trillions (http://costofwar.com/) has only made things worse.
Nett Result: The American federal government, has borrowed large amounts from external sources since the 1980's. This has accumulated to over 13 trillion dollars of external debt by 2009.
Inspiration:
India's well-known economic expert - S. Gurumoorthy's talk at the 30th annual reader meeting of Tughlaq weekly on 14 Jan 2010 in Chennai, India
Sources:
1.https://www.cia.gov/library/publications/the-world-factbook/rankorder/2079rank.html
2.http://www.globalresearch.ca/articles/FRA501A.html
3.http://en.wikipedia.org/wiki/Economy_of_the_United_States
American economy was widely considered as very strong and although there have been glitches here and there, it is still considered superior and robust. However, the economic downturn in 2008/09 has challenged this status quo.
Is the American economy still stronger ? Will it come out of the worst economic crisis it has faced since the Great Depression of 1930's ?
The answer is not necessarily.
The savings rate of Americans is among the lowest in the world. Consumerism is the mantra for the companies and the US government also follows the same. The govt. feels bad if the consumers don't buy things as they are expected to - spend and more spend. Also American business executives and government are always obsessed with such data - unemployment, consumer index, market sales, etc., etc. . Nowhere is the world, media chews more data than in US. Every first week of the month or new quarter, millions of graphs/data is sliced, diced and sold to the viewers.
These all means the market is more spending-driven thus resulting is almost zero savings. To add more fuel to the fire, the American family system collapsed during the same time resulting in more individualistic thought and lifestyle than ever.
A man saves for two reasons - one, fear about future requiring a margin of safety either for the person or the family, and two, when people take a holistic view of money and avert consumerism to follow a simple and minimum lifestyle. An American doesn't worry about his future nor he raised a family to worry about them. Nor he can live a holistic lifestyle because he never heard of it.
Since a typical American doesn't have a family to run, he never cared about his parents or older generation. Who else will care? Ans: The US government. Health care became a burden to the US government whereas the family system should have born it. To make things worse, health care was not available to all Americans also.
Unemployment is a problem to any country as its wastes human resources, productivity and also offshoots crime, fraud, etc. But there exists a different perspective in the US - if more unemployed are there in the country, they will buy/consume less and market will be down. A truly enterprising idea of a enterprising country.
Also constant wars costing trillions (http://costofwar.com/) has only made things worse.
Nett Result: The American federal government, has borrowed large amounts from external sources since the 1980's. This has accumulated to over 13 trillion dollars of external debt by 2009.
Inspiration:
India's well-known economic expert - S. Gurumoorthy's talk at the 30th annual reader meeting of Tughlaq weekly on 14 Jan 2010 in Chennai, India
Sources:
1.https://www.cia.gov/library/publications/the-world-factbook/rankorder/2079rank.html
2.http://www.globalresearch.ca/articles/FRA501A.html
3.http://en.wikipedia.org/wiki/Economy_of_the_United_States
Saturday, January 31, 2009
Satyam, Raju and Indian business
It has been three weeks since Satyam's ex-chairman, Ramalinga Raju, through his confession to the public, shattered the corporate responsibility and accountablity. There are several rumours over the very existance of the Co. and the takeover attempts on the way. But the event that still leaves several questions and debates, which do not seem to end for sometime..
#1. All business houses perform malpractises - Audit all of them
In business world, like the today's real world, competition rules the roost and people do commit mistakes and frauds once in a while. There are more than 4000 company listed in Bombay Stock Exchange and each company will have atleast 100's of pages of accounts. Can govt. verify and ? What about the thousands of other companies which are unlisted?
But the biggest debacle with Raju is that he cheated his OWN COMPANY. He founded the Co, built brick by brick, but later inflated the profits and balance sheets, sold out the sky-rocketed shares he then owned, and bought "real" estates. There are cases in the past that employees cheated a company, but an founder-chairman betraying his own Cos and shareholders is path-breaking. Heartbreaking too. 54,000 employees and lakhs of shareholders are left on the streets, fearing and wondering about their jobs and future and investments..
#2. Business is bad and businessmen are evil
This appears to be the first word I hear with many of the people.
Yes. Not just business, life itself in many forms is evil. We all came from the animal world, not heaven. Jeans may come and go, but not the survival instinct in our Genes. Everyone wants money in this world, but earning money is thought to be sin. That is the case not only in India but also in several Asian countries. Being an employee is OK, atleast with people coming from non-business backgrounds. If one builts factories and employees lakhs of people, earning them a livelihood and contributing to the nation, he is a devil. If one peeps into files, moves them up and down for his earnings, he is noble. The latter generates nothing - than dust involving petty politics. But the former brings from hairoil to shoes, nail polish to railway lines, but always hailed as underdog and fraudster.
Almost everyone does malpractises. Size varies, that's all. For eg. we were all taught in school - 'Honesty is the best policy' but "how many lies did you tell today?" That just explains that the world is not a noble men's court. Business world is run by people from this world - not aliens and we cant expect them to be surreal. Many of us lie, cheat, betray, dont we? ? Only in public life we expect people to be noble and also able - but the more things one is ashamed of, the great he becomes (Bernard Shaw).
So do not expect the world to be different from what we are and what we were.
So how to conclude?
It leaves us to one point - world just exists on individual integrity and mutual trust. One can cheat in relationship, till one confesses or the other discovers the truth. If both of these do not happen, the person still lives and roams, free on earth, with no regret at all. But most of us in this world do not commit such immoral thing only because of personal integrity. That is the way world has been. One can succumb to pessimism seeing such heartless incidents, there are 6.4 billion souls on earth and how many of them are criminals, may be 1/100 or 1/1000, thats all. But whatever happens life moves on, with higher hopes and wider compromises.
#1. All business houses perform malpractises - Audit all of them
In business world, like the today's real world, competition rules the roost and people do commit mistakes and frauds once in a while. There are more than 4000 company listed in Bombay Stock Exchange and each company will have atleast 100's of pages of accounts. Can govt. verify and ? What about the thousands of other companies which are unlisted?
But the biggest debacle with Raju is that he cheated his OWN COMPANY. He founded the Co, built brick by brick, but later inflated the profits and balance sheets, sold out the sky-rocketed shares he then owned, and bought "real" estates. There are cases in the past that employees cheated a company, but an founder-chairman betraying his own Cos and shareholders is path-breaking. Heartbreaking too. 54,000 employees and lakhs of shareholders are left on the streets, fearing and wondering about their jobs and future and investments..
#2. Business is bad and businessmen are evil
This appears to be the first word I hear with many of the people.
Yes. Not just business, life itself in many forms is evil. We all came from the animal world, not heaven. Jeans may come and go, but not the survival instinct in our Genes. Everyone wants money in this world, but earning money is thought to be sin. That is the case not only in India but also in several Asian countries. Being an employee is OK, atleast with people coming from non-business backgrounds. If one builts factories and employees lakhs of people, earning them a livelihood and contributing to the nation, he is a devil. If one peeps into files, moves them up and down for his earnings, he is noble. The latter generates nothing - than dust involving petty politics. But the former brings from hairoil to shoes, nail polish to railway lines, but always hailed as underdog and fraudster.
Almost everyone does malpractises. Size varies, that's all. For eg. we were all taught in school - 'Honesty is the best policy' but "how many lies did you tell today?" That just explains that the world is not a noble men's court. Business world is run by people from this world - not aliens and we cant expect them to be surreal. Many of us lie, cheat, betray, dont we? ? Only in public life we expect people to be noble and also able - but the more things one is ashamed of, the great he becomes (Bernard Shaw).
So do not expect the world to be different from what we are and what we were.
So how to conclude?
It leaves us to one point - world just exists on individual integrity and mutual trust. One can cheat in relationship, till one confesses or the other discovers the truth. If both of these do not happen, the person still lives and roams, free on earth, with no regret at all. But most of us in this world do not commit such immoral thing only because of personal integrity. That is the way world has been. One can succumb to pessimism seeing such heartless incidents, there are 6.4 billion souls on earth and how many of them are criminals, may be 1/100 or 1/1000, thats all. But whatever happens life moves on, with higher hopes and wider compromises.
Saturday, December 13, 2008
Never ending conflicts
From the day#1 of our life, there are some never ending conflicts.. man Vs Women, worldly ambitions vs. holistic ideas, profession vs personal things, etc. Lets take one after another here..
Here we go.
Here we go.
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