Vijay Kumar Gaba

Tuesday, January 10, 2017

Advantage BJP in UP

"The belief that youth is the happiest time of life is founded on a fallacy. The happiest person is the person who thinks the most interesting thoughts, and we grow happier as we grow older."

—William Lyon Phelps (American, 1865-1943)

Word for the day

Fallal (n)

A bit of finery; a showy article of dress.

Malice towards none

In his attire, PM emulates the popular leaders like Jawaharlal Nehru and Indira Gandhi and not the great leaders like Gandhi, Shastri and JP.

Surely, he will be mentioned in the history books as a great prime minister who changed the course of economic policy and foreign policy of India. But not as a leader who was venerated by 125cr Indians.

But who cares!

First random thought this morning

Budget 2017: Under the given circumstances, the government could take either of two approaches in the forthcoming budget:

(a) Give a big dose of steroid to abate the pain caused by the currency ban in an already slowing economy.

(b) Inflict a bigger pain, so that people forget the pain caused by the currency ban.

Advantage BJP in UP

The general elections in India are famously projected as the final match of a tournament, in which many semi-finals are played. The strange part is that most of these semi-finals are inconsequential for the final match.

One such semi-final for the final match schedule to be played in summer of 2019, is going to start soon. In this five game match, the game to be played in Lucknow is being cited as the most important. The popular projection is that the winner in Lucknow game will be the favorite to win 2019 final. There is though little empirical evidence to substantiate this claim. In past three decades in particular, the results of the Lucknow game were mostly inconsequential for the subsequent finals in New Delhi.

In my view, the semi-finals to be played later this year in Gandhi Nagar, and next year in Bhopal and Raipur would be more interesting and relevant for the 2019 finals.

Anyways, since the Lucknow game is trending these day, it is better that I talk about that game only.

I visited the battlefield UP during my year end break. Incidentally, this was the time when the team currently holding the title (Samajwadi Party or SP) announced major injuries.

While driving through the vast expanse of the state glittering with the golden mustard flowers, I met many people, observed a lot things and formed some opinions. I may share some of the key observations and opinion with the readers.

Politics

1. The political consciousness of the people of Uttar Pradesh, has evolved materially in past one decade. Contrary to the popular narrative, the caste and religion, though still relevant, are not the primary considerations in the voters' mind. Nowhere, the voters are inclined to elect a candidate purely on the basis of caste or religion.

2. SP has been successful in projecting a strong personal identity of the CM Akhilesh Yadav, as distinct from the traditional caste-religion based political identity of Mulayam Singh Yadav and his brothers. BSP chief Mayawati has mostly failed in getting out of the old caste-religion paradigm. Rahul Gandhi led Congress continues to be as confused as ever. BJP is going into the fray hiding behind Pm Modi mask.

3 It is clear that the main contest is between Akhilesh Yadav led SP and PM Modi motivated BJP. A Congress and BSP alliance could add a third dimension to the contest, but such alliance would not be in contention. The only positive in favor of BSP is the better law and order record of previous BSP government.

4. In the last elections, the principle opposition SP had set the agenda and all other parties just responded to it. This time agenda has been set by PM Modi himself. Financial inclusion, compliance and fight against corruption is the primary agenda, with the usual development plank providing an active sub-plot.

5. I observed good support for PM Modi amongst the youth, in the Yadav majority areas of Central UP; women in the BSP's stronghold areas in Bundelkhand and Rohillkhand and Congress pocket Burroughs of Amethi, Sultanpur and Rai Bareilly. Leaders like Uma Bharti, Smriti Irani (surprise!), Rajnath Singh, Kalyan Singh are known and remembered. Atal Bihari Vajpayee continues to be popular, especially amongst minorities. Amit Shah is unpopular with the locals. Like 2014 general elections, RSS is working overtime in these elections, unlike the 2012 assembly elections.

6. Mayawati appears losing support amongst her core dalit support group, especially young women.

Economy

1. The economy of the state is tough to understand. The trade and industry (except sugar) are generally stressed, like in other states. The rural sector does not appear buoyant either. But that might have something to do with recent factors like poor realization of potato crop; poor quality of cane crop and less than expected rise in cane support price. Otherwise, rural populace appears satisfied with the development on the front of electricity, road connectivity, primary education, government support for old, girls, and minorities. This is visible in stable public and private sector consumption.

2. Employment condition continues to be poor. The tendency to migrate is rising much faster amongst the educated.

3. The currency ban has been mostly forgotten and forgiven, except by traders. There is little impact on the farm sector, but trade is hurting badly.

4. Real estate sector in the state is in distress. But it has more to do with the excessive rise in prices and euphoria during 2007-2010 phase, and less with the change in normalized demand. The urbanization is progressing well and demand for housing remains good, especially in urban areas. The lower interest rates are seen helping the demand further.

Society

1. The social divide on religious lines has strengthened in past few years.

2. The social divide on caste line is weakening.

3. Contrary to the popular perception, the social divide appears stronger in urban areas, as compared to rural areas. College going youth appears to be in favor of discrimination on the basis of religion.

To sum up, though it is still early days, I would give my customary assessment of the election outcome.

In my view BJP will emerge as the single largest party, if Congress allies with SP or BSP. Otherwise, BJP is poised to get a strong majority on its own.

Friday, December 23, 2016

Can't stop an idea whose time has come

Thought for the day

"Then not only an old man, but also a drunkard, becomes a second time a child."

—Plato (Greek, 427-347BC)

Word for the day

Genuflect (v)

To express a servile attitude.

Malice towards none

Hurricane RaGa has now been downgraded from level 5 to level 0.

First random thought this morning

We have adopted a lot many things from the Europe and US in past one century - ranging from constitution, administration practices, language, food, fashion, TV shows, technology, education system, legal system, architecture, system of medicine, accounting practices, taxation practices, profligacy, violence, and intolerance to music, art, movie plots etc.

Many of these imports violate the conventional concept of Indianness, and many have since been abandoned by the originators themselves.

Our exports to the western cultures include yoga, spirituality, classical dance & music, food, tolerance, non violence, frugality, and altruism.

This trade deficit is blunderous, just like the proverbial gorilla in the room that no one is talking about.

Can't stop an idea whose time has come

Pursuant to my request yesterday (see here), I have received a number of suggestions as to the topics I should be delving upon while formulating my investment strategy for next year or so.

Not surprisingly, most of the people want to know my views on the likely impact of 'Demonetization', 'GST', and 'Trumponomics' on the investment strategy of an Indian investor. Some have asked for stocks ideas to implement the changes in the strategy.

I would like to make it very clear, that in my firm opinion, all these ideas are popular today just because their time has come and not for any other reason. These are culmination of a long drawn process involving a number of socio-economic and political changes. Most investment strategies in fact are already oriented to assume the full implementation of these events.

Any businessman in India would tell you that ever since global financial crisis of 2008-09 (GFC) there has been a concerted effort on part of the government, enforcement agencies and regulators to check money laundering and accumulation of black money. Holding large sum of cash had become seriously difficult for past many years.

In last 3-4years particularly, a number of steps have been taken to curb generation of black money. Fraudulent agriculture income (e.g., Himachal CM Birbhadra Singh); fraudulent real estate deals (e.g., Robert Vadra deals) and regulation of real estate sector; Hawala deals (HSBC Swiss account disclosures, taxation of Vodafone deal, revision of Mauritius and Cyprus treaties; transparency in Defense and Railway purchases; regulation of bullion transactions through TDS and excise duty; AIR for transactions exceeding Rs10lacs; information sharing deals with foreign regulators; curbing of money laundering through fraudulent long term capital gain in penny stocks; FATCA disclosures; etc. are just a few of the steps taken to achieve the objective.

Abolition of high denomination currency notes is certainly a step with widest possible repercussions. But it is in no way the first or the last step in the process. It is a step whose time has just come.

After living with a fractured political mandate for most part of last three decades, we had been consistently witnessing clear and full mandates for past few years. BJP as a political party is ruling in over half the country, and this is what makes it the most appropriate time to implement GST.

The economy is definitely headed towards a more organized and structured business environment in the coming decade or so. The businesses mostly based on tax arbitrage (or evasion) opportunities and non-compliance are going to get extinct in next one decade. That has been my strategy for past couple of years and would continue to be so.

Insofar as Trumponomics is concerned, I believe people are bored from eight of status quo and want a change. They have got the change and are obviously excited. I am too naive to judge the impact on global economics and politics just as now. But the itch to make a guess is certainly there....more next week.

Thursday, December 22, 2016

Driven by hope, lacking in optimism

Thought for the day

" Honesty is for the most part less profitable than dishonesty"

—Plato (Greek, 427-347BC)

Word for the day

Humbuggery (n)

Pretense; sham

Malice towards none

I am no big fan of either Saif or Kareena.

The young Taimur has so far done nothing to draw my notice.

First random thought this morning

All of you must have seen students who are not confident of what they have learned in the past many months, and want to revise the entire syllabus just minutes before entering the examination hall. I have even heard some parents complaining that their ward could not do well in exams because he/she woke up late on the exam day and could not revise the notes just before the exams.

The CMs and other senior government functionaries of the five states where polls are likely to be held in next few months these states are behaving just like these students. In just two months, they want to make their respective states look developed, people friendly, business friendly, safe, best place to live for minority communities & the backwards, and much more.

Driven by hope, lacking in optimism

As the 2016th year of Christ draws to a close, it's again time for reflection, reassessment, and restrategizing for investors.

Despite a setback in 4Q2016, the year has been largely satisfactory for Indian investors.

While the benchmark indices are almost unchanged for the year, diversified equity portfolios have yielded 6 to 10% return for the calendar year. The return in hybrid funds has been better in 9-11% range as the fall in bond yields led to outperformance of bond funds which yielded 12-15%.

In other asset classes, global commodities have done really well with crude gaining over 50%, and industrial metals and coal gaining from 15-70% during the year. Despite sharp fall in last couple of months, precious metals are also higher by 7-11% yoy.

Real estate has seen a mixed trend this year. While the housing prices have remain mostly subdued, the commercial and retail assets have seen a revival in many markets.

Standing at the doorsteps of the new year 2017, however, the investors are a worried lot. The optimism seen since March of 2016 is nowhere to be seen.

The fear of unknown is inarguably the dominant sentiment. The impact if changes in US and European politics on global economics and markets is not known yet. But most forecasts are hinting at acceleration in popularity of nationalist agenda against the globalization.

A careful reading of the past few statements of many large central bankers highlights their frustration with the current "new normal" and "whatever it takes" stance, that has been the hallmark of their policy since 2009. US federal reserve has made a beginning to normalize the unconventional zero rate policy. ECB and BoJ too seem to be willing, circumstances permitting. 2017 will be keenly watched for any "disorderly normalization" of the extant policy stance of many central bankers.

So far, most positive statements from market experts, appear based more on hope rather than optimism. The slight tremor in the voice and worries hidden between forehead wrinkles though evidently belies the conviction.

I do unconditionally believe in what Andy said to Red in Shawshank Redemption (1994) "Remember, Red, hope is a good thing, maybe the best of things. And no good thing ever dies". I personally therefore do not mind driving into 2017 with a tank-full of hope. Though I would keep the seatbelt tightly fastened, speed well within limits, and be mostly driving in slow lane.

Next week, I will be sharing my views on investment strategy for 2017 and beyond with the readers.

Would be glad to receive suggestions as to what specific points I should be dealing in my strategy write up. Thanks!

Wednesday, December 21, 2016

In search of solutions - 12

Thought for the day

"The community which has neither poverty nor riches will always have the noblest principles."

—Plato (Greek, 427-347BC)

Word for the day

Cordate (adj)

Heart-shaped, e.g., a cordate shell.

Malice towards none

Heard RaGa speech in Jaunpur on Moday.

Not a grain of truth.

Wonder who is the King Liar who writes his speeches.

First random thought this morning

Flipkart, SnapDeal, PayTM, Ola and sundries are poor versions of Amazon, PayPal, Uber etc. just the way KBC, Indian Idol, Voice of India, Big Boss etc. are poor copies of the similar American TV reality shows.

A large part of our whole start-up ecosystem distressingly appears to be based on the business models and ideas conceived, tested, and already commercially exploited in other parts of the world.

Respect for IPR and innovation is amongst the few things still missing from the picture.

In search of solutions - 12

At the risk of sounding irritatingly repetitive, I would like reiterate that in past 6 decades we have focused too much on our weaknesses and tried hard to overcome by importing technology, energy, intellectual property, capital and consumption patterns. The root cause of many economic problems, e.g., current account deficit, fiscal deficit, energy deficiency, excessive dependence on external IPR & capital flows, etc. could be traced to this misplaced focus.

In my view, just by focusing on our intrinsic strengths, we can not only conveniently reverse the flow of trade to pre British era but also be successful in achieving our secular goals of sustainable and faster economic growth.

For example, the following programs, if implemented earnestly, could improve the balance of payment and employment conditions, substantially and structurally by 2025 by focusing on our intrinsic strengths like abundant sun shine, large number of middle class youth, amazing landscape, strong and rich tradition (food, religion, etc.) & culture (music, dance, arts, festivals):

(a) Indians spend more than $25bn annually on education and related overseas travel. Creating 5 Special Education Zones (SEZ) with liberal VISA, forex, taxation and real estate ownership rules, and allowing foreign institutions to freely set up campuses in these zones, could potentially reverse this flow. Students from India, far-east, middle-east and Africa who find it difficult to get VISA for US/UK etc., or find that unaffordable, could also benefit from this. Our politicians have spoken about recreating Nalanda and Takshila. This in my view is the easiest way to do that.

(b) India holds tremendous potential for tourism. However lack of proper infrastructure has traditionally constricted the growth of this sector. On the other hand Indian outbound tourists flow is rising fast. Developing some world class self-contained international tourism centers, e.g., on lines of Macau, Disney, Las Vegas, etc. with liberal VISA, Forex, taxation and real estate ownership rules could potentially reverse these flows.

(c) Vindavan, Tirupati, Varanasi, Gaya, etc. all have potential to be as desirable, venerable and popular destinations as Mecca, Vatican and Jerusalem. Converting these centers of Indian religion and culture into self contained special zones with international airport, adequate lodging facilities and annual event calendar could get substantial forex revenue.

(d) Including sports, music & dance, arts in the main curriculums upto secondary school level, with adequate focus, could annually produce 10x more (self) employable students than 500 higher institution of learnings would do in next two decades,

These projects also have the potential to generate large scale productive employment opportunity for local talent, besides contributing to economic growth and true globalization of Indian economy.

Tuesday, December 20, 2016

In search of solutions - 11

Thought for the day

"No one ever teaches well who wants to teach, or governs well who wants to govern."

—Plato (Greek, 427-347BC)

Word for the day

Ignominy (n)

Disgrace; dishonor; public contempt.

Malice towards none

Santa: I know the prime minister.

Banta: I know the cashier of SBI branch in market.

Santa: Wow, you are so lucky!

First random thought this morning

The pace at which the focus of public discourse is shifting from one "burning issue" to another "burning issue" is perplexing. Sometimes it seems our society and country actually do not have a problem to earnestly worry about.

In search of solutions - 11

The young demography is inarguably the core strength of the Indian economy. My concern is that, if not managed properly this may as well prove to be the nemesis of the fabled India story.

We must accept that despite being one of the fastest growing economies in the world during past decade, we have utterly failed in creating adequate number of productive jobs for the burgeoning workforce. MNREGA has helped to some extent, but it is bound by fiscal constraints, leakages and lower productivity. Besides, disguised/underemployment continue to characterize the India's occupation structure; perennially impacting the productivity and earnings potential.

I have been highlighting that the vast reservoir of youth energy on which Indian economy is sitting presently, could potentially explode if not channelized appropriately. It is therefore extremely critical to evolve an integrated youth policy that include mission scale programs to educate and skill the youth, inculcate enterprise skills in them from early stages, enable them to engage in productive self employment, deal empathetically with their concerns, anguish, frustration and disillusionment.

The following is the minimum that needs to be urgently implemented, I feel:

(a) Overhaul education system to make it job oriented. Inculcate enterprising skills in students from primary level. It is high time that we do some zero base planning regarding our education rather than just incremental tinkering. Post middle (8^th standard) job oriented education, training and skilling programs should be made more popular with active participation of industry. RTE should be amended to provide for a Uniform and Standard education to all the children. Bringing social changes like “respect for work” would be quintessential to this.

(b) The trained and skilled youth should be adequately supported and enabled to engage in productive self employment. The present model of MSME promotion may not be adequate to create massive employment needed, as this model may not be competitive in the emerging scenario where the Indian industry will have to increasingly compete with large global players. Co-operation movement in industry on the lines of AMUL where a large number of trained youth can create, own and profitably manage large globally competitive enterprise should be promoted and encouraged. Giving equity in natural resources to local population would be quintessential to this.

(c) Agriculture and allied activities are still at the core of Indian socio-economic structure. Promoting collective and commercial farming would add significant employment opportunity with better earnings potential.

(d) Success of IPL has suggested that sports can potentially generate large scale employment opportunity if managed in industry like manner.

(e) Last but not the least police reforms are absolutely necessary to manage the agitated & disillusioned youth compassionately and ensuring that they do not stray into prohibited territory of violence and sedition...to continue

Friday, December 16, 2016

In search of solutions - 9&10

Thought for the day

"We do not learn; and what we call learning is only a process of recollection."

—Plato (Greek, 427-347BC)

Word for the day

Clarion (adj)

Clear and shrill, e.g., the clarion call of a battle trumpet.

Malice towards none

Did Mahesh Shah or any of his accomplice know about impending abolition of HDNs, and just created a bucket where Rs13800cr worth of old currency could be washed, if needed?

First random thought this morning

The popular narrative these days is straight copy from the blockbuster Deewar - "भाई पहले उसका sign ले कर आओ, मैं तभी sign करूंगा."

Politicians are busy highlighting misdeeds of each other.

Tax evaders are justifying their deeds, on the pretext of corruption in administration and leakages in the public spending and delivery system.

No one is willing to admit their own failings.

In search of solutions - 9&10

“History shows that where ethics and economics come in conflict, victory is always with economics. Vested interests have never been known to have willingly divested themselves unless there was sufficient force to compel them.”

—B. R. Ambedkar

In my view, the sustainable solution for India’s economic problems could be found only by looking within. Borrowing from the thoughts of Mahatma Gandhi, economics needs to follow ethics and not the vice versa. The primary consideration needs to be “man” and not “money”.

To achieve this means Gandhi advocated trusteeship, decentralization of economic activities, labor intensive technology and priority to weaker sections. Many criticize Gandhian economic ideas based on altruism, self reliance, and non-violence as an impractical alternative to free market economics. I believe this criticism is unfair and suffers from prejudice.

I believe borrowing blindly from the western economic models would not work in Indian context. The Indian model will have to be quintessentially Indian. It has to effectively tackle the problems of class conflict, unemployment and poverty while attempting to preserve the lifestyle and values of rural Indians, which are eroding fast with unmindful urbanization, industrialisation and modernisation.

A self-reliant, free, just and progressive society is integral to the idea of Swaraj. Self-reliance in no way violates the need for technological advancement in the areas like healthcare, communication, etc. It just wants the scale to tilt in favor of ethics and ecology conservation if a conflict arises. Self-reliance also does not infringe the idea of free market. It just promotes a non-violent and non-exploitive trade and commerce.

For those who find Gandhi completely irrelevant in the current context, it is pertinent to note that “the literature survey of Gandhian economic ideas gives similar conclusions. 258 thinkers, who have reviewed his economic ideas, have been taken into consideration. Among them, London group of Professionals and The Club of Rome are considered as individual thinkers. Even the opinion of 53 noble prize winners is also considered in this literature survey. 96% of these thinkers admire his economic thoughts. They consider his ideas practical, useful and relevant in the present world.

A growth model for economic development is shown on the basis of Gandhi economic thoughts. This model is applicable to developing economies and India. His ideas are helpful for backward and developing economies in the world. His ideas are also useful for solving problems in capitalist economies. This proves Gandhi as a unique and practical economist of the world”. (see here for more details)

In short, the economic model of India, in my opinion, should be based on the following three principles:

(a) It should develop an environment of equality and mutual trust through decentralization.

(b) It should focus on the strengths on Indian economy rather than overemphasizing the weaknesses.

I strongly feel that the most valuable resource for India is her people. In not implementing the recommendation of Balwant Rai Mehta committee (1957) on local self governance, our political system has failed in developing an environment of mutual trust and transparency and thus failed the people of India. Despite, Narasimha Rao government ensuring 73^rd constitutional amendment in 1992, the political establishment has obdurately refused to share power with the local bodies and common people.

As per NCAER Devolution of Power Index – only a handful of States have done meaningful devolution of power to Panchayati Raj Institutions - Maharashtra, Karnataka, Tamil Nadu and Kerala being the notable one.

A series of irregularities that have come to light in past two decades suggest that lack of transparency in government functioning and substantial discretionary powers enjoyed by elected representative in appointments, procurement, resource allocation etc. have been the primary reasons for governance deficit.

In my Utopian (though certainly not out of the realm of possibilities) view, the following should be done:

(a) The ownership of public resources should be earnestly handed over to “the public”. Instead of few federal ministers controlling the resources in feudal manner, the trusteeship of all the natural resources should be vested in the District Council (see here). The local people should determine how these resources should be exploited, given their sustainability and development requirements. Industry based on these resources should be developed on co-operative model with equitable ownership of local people, the financier and the entrepreneur.

(b) Urbanization (provision of adequate civic amenities and connectivity) and industrialization (employment) should be managed at town/village level instead of further promoting India-Bharat divide. 6,60,000 urbanized villages would be much more productive than 500 smart cities with inadequate infrastructure.

(c) District councils should be empowered to decide appropriate direct taxation structure and incentive formulae to achieve the objective of social, economic and gender equalities, sustainability and development.

Each local council shall determine which are the minority communities, or socially and economically backward classes in that locality and extend reservation accordingly. Similarly, each local council shall determine the development priorities and allocate resources accordingly.

Given the diversified demographic, ecological and socio-economic profile, efficient policies for energy, education, employment, industrial development, ecology conservation etc could be worked out only at the local level.

Districts with 1% Schedule Tribe population and 89% Schedule tribe population cannot have same reservation criteria.

As per the census data, almost one fourth villages in India do not have any Schedule Caste population. In another one third villages the Scheduled caste population is less than 20%.

We have seen a large number of instances in past three decades where the so called upper caste people have protested violently against the reservation formula enshrined in the Constitution.

The litigation on the matter is also endless.

It would only be appropriate and more productive if the issue of reservation is decided at the Local Council (see here) level, in accordance with the socio-economic conditions of that region.

(d) The role of the National Council (see here) should be restricted to managing national defence, foreign relations, Trans District Rivers, dispute resolution, and developing model rules and regulation that may be adopted by the Local and District Councils with appropriate modifications.

Wednesday, December 14, 2016

In search of solutions - 8

Thought for the day

"States are as the men, they grow out of human characters."

—Plato (Greek, 427-347BC)

Word for the day

Vainglory (n)

Excessive elation or pride over one's own achievements, abilities, etc.; boastful vanity.

Malice towards none

As per Expedia's 2016 global vacation survey - "India is the fourth most vacation deprived country in the world."

The joke ended up there.

First random thought this morning

As a deeply religious community, we strongly believe that our Gods are always there to help us out of any trouble. Gods on their part have not disappointed us. Indeed, Lord Krishna (Gita), Mother Durga (Durga Saptshati) et. al. assured us that they will incarnate themselves in human form, whenever there is any threat to our survival.

The problem that has arisen out of this assurance is that we are always searching for God's incarnations, even during normal times. We want all our leaders to be God like. Be it Indira, Rajiv, Modi, Dhoni, Tendulkar, or Bachchan - we cannot tolerate their failing in any test.

In search of solutions - 8

As indicated yesterday (see here), in my view, the root of the economic problems of India could be easily traced to the continuation of the exploitive colonial economic model post independence. We have consistently failed in exploiting our strengths and allowed outflow of precious resources both natural and human.

Even after 69years of independence from British rule, India continues to be mostly an exporter of raw material and cheap labor and importer of technology and end products. Though in recent past we have excelled in a few areas like automobile, pharma and space research, still most of our industry is built around arbitrage opportunities available in terms of natural resources and abundance of cheap labor.

Consequently, a strong structural base for the Indian economy is yet to evolve. We have not been particularly successful in the areas such as technological advancement, productivity gains, innovation and localization and mostly continue to be an economy largely dependent on labor & resource arbitrage and trading.

In my view, we have focused too much on our weaknesses and tried hard to overcome these weaknesses by importing technology, energy, intellectual property, capital and consumption patterns. As noted Swadeshi economic thinker S. Gurumrthy highlighted in one of his writings, the primary cause of structural imbalance in trade account appears to be humongous capital goods import in past decade or so rather than gold or oil import as widely believed.

In particular the following five “mistakes” have created many structural problems for Indian economy, in my view:

(a) “Feudal ownership” of resources in the garb of “public ownership” has led to criminal waste, misuse and misappropriation of scarce resources.

(b) Neglect of sustainability concerns in developing industry has led to concentration of economic power and therefore political power. Besides, the accelerated environmental degradation has caused serious damage to the ecology and livelihood of millions.

(c) Lack of a holistic education and training policy has created serious demographic distortions. On one hand we have a huge pool of unemployed youth, while on the other hand entire industry is facing shortage of skilled workers.

(d) The colonial mindset has destroyed the traditional knowledge and skills. Lord McCauley still successfully rules the education system, making India a perennial importer of technology and other intellectual property.

(e) A faulty approach to urbanization has created immense inequalities. The famous India and Bharat divide is now part of folklore in international studies. Instead of providing civic amenities to the quintessential Indian village that was center of traditional industry, the industrial policy has caused destruction of rural economies causing large scale migration.....to continue tomorrow

Tuesday, December 13, 2016

In search of solutions - 7

Thought for the day

"He who steals a little steals with the same wish as he who steals much, but with less power."

—Plato (Greek, 427-347BC)

Word for the day

Festschrift (n)

A volume of articles, essays, etc., contributed by many authors in honor of a colleague, usually published on the occasion of retirement, an important anniversary, or the like.

Malice towards none

The rise in currency demand in the economy in past 25years is not exclusively due to rise in corruption and other illegal activities.

It is also outcome of rise in trade and commerce without matching growth in banking infrastructure and financial literacy.

There were obviously better ways to achieve the objectives of HDN abolition.

First random thought this morning

After 35days, I wonder this morning - How currency notes could be the cause of naxalism, terrorism, drug trade, corruption and other vices in the society. Hoard of currency at best is the outcome of loot, plunder and illicit trade. In many cases it could be tool of execution. But seldom it is the cause of such activities. Are we ready for material rise in crime that the abolition of old currency may entail?

As a businessman in Bihar tells me - with no currency to feed their army of misguided youth, the mafia dons will accelerate their activities. Get ready for 3x the number of kidnapping and extortion cases and much larger amount of ransom per case!!

I seriously wish the government had invoked Article 352 of the constitution and revived MISA before taking this step.

In search of solutions - 7

Before we discuss the India's economic problems any further and begin exploring for solutions to these problems, I would like to narrate a short story.

It was a beautiful afternoon. Spring had just handed the baton out to summer. Farmers fresh from celebrating their harvest were preparing the fields for sowing the next crop. Everything seemed perfect.

A young man was lying idle under a banyan tree when a wise man passed by. He wondered why such a young man is wasting precious time when everyone else is working in the fields.

He approached the young man and queried “why are you sitting idle?” The young man countered with an assuring grin on his face “what am I supposed to do?” “Do not waste time. Go, find yourself some productive work”, the wise man suggested. “Why should I do that?” the young man asked nonchalantly. Taken aback a little, the wise man continued “you could earn some money, buy means of comfort and luxury, feel comfortable, be happy and rest peacefully”. “That is exactly what I was doing before you came here”, the young man answered exasperatedly and dozed off again.

Stated above is an old bedtime story. Various people derive different inference from it. My conclusion is that each individual or group of individuals have different social, psychological and physical needs and therefore respond differently to similar economic conditions.

For some, money beyond a point becomes a passion. For some other, it completely ceases to be a motivator beyond the same point. Yet for some others, it becomes a negative stimulus beyond the very same point.

From my experience gained through my extensive travels through hinterlands of India, I understand that many Indians, due to a variety of religious, social, cultural, historical, traditional, behavioral and/or economic reasons are akin to the young man in our story. Most of these are hard working, intelligent, and complacent. For many accumulating “excess” wealth is a sin. Passion for money is mostly an urban upper and upper middle class phenomenon.

When asked “why don't you expand your business?” many SME owners, traders and shop owners, responded “what will I do with more money?”

The roots of this detachment with money, in my view, could be traced to agrarian culture and traditions of India. All our religions proscribe accumulation of excess money as sin and strongly advocate sharing of wealth with society.

The agrarian mindset makes most of us work hard and pray to God for rains; wish only for a good crop so that we get enough food and seeds for next crop. We consider growing good healthy crop as our pious duty. We treat the land on which crop is grown, river and clouds that irrigates the land, and mountains and woods that make the conditions conducive for cultivation as sacred deities. Altruism, socialism, austerity, and concern for environment are at the core of Indian society.

However, it cannot be denied that a there are significant number of youth, especially those who were born in late 80s or later and have not seen long queues for kerosene, cement, food, two wheelers, telephone connection, LPG etc.; who could get forex easily to travel and study abroad; and who have worked in developed countries as engineer, manager, banker and not as construction labor, driver and nurse.

These young people have a mindset different from the traditional agrarian mindset. These are easily able to think in terms of billion dollars, global businesses and comfortable factoring "high leverage", "failure", "bankruptcy" and "default on repayment obligation" in their business plans.

Some of these young people have done well for themselves. But since the most follow business models & ideas which are poor copies of the existing businesses in the developed countries, and lack originality and innovation - I am hesitant in accepting it as a sustainable trend as yet.

In my view, any economic model that violates the core principles of the Indian society is bound to fail.

The Industrial development model adopted post independence era, which is mostly an extension of the exploitive colonial model used by British Empire, has promoted inequalities, injustice and unsustainability. And that is the economic problem we need to address first and foremost.

...to continue tomorrow