Thursday, 30 March 2017

eCommerce majors post huge losses

Amazon's entry in India in mid-June 2013, the party ended prematurely for home-grown companies like Flipkart and Snapdeal. The global giant has quickly amassed a good share of the growing Indian ecommerce market - mostly at the expense of Snapdeal. While Amazon has got deep pockets, the Indian companies like Flipkart and Snapdeal need to depend on other strategies to fight it.

Flipkart being a first mover, have spent a lot in converting offline shoppers to online, but 10 years later (Flipkart was founded in 2007), it seems to be a case of diminishing returns. Flipkart’s valuation was down to just $5.54 billion, from its peak valuation of $15 billion.

One reason ecommerce companies make losses is because CoD is an expensive option for these companies. Product returns have been a cause of worry for the ecommerce players with both Flipkart and Amazon making multiple changes in their return and refund policies to bring down the number.

With the battle intensifying, the top three players in the Indian ecommerce arena, Flipkart, Amazon and Snapdeal, their combined losses are mounting at an alarming pace. Snapdeal recently posted a loss of Rs 2,960 crore (2015-16),  Flipkart's Rs 5,223 crore and Amazon's Rs 3,571 crore, the combined losses are colossal at Rs.11,754 crore. 

Last year, the combined losses were Rs.6,031 crore (Amazon: Rs 1,724 crore, Flipkart: Rs 2,979 crore, Snapdeal: Rs 1,328 crore). 

While keeping up the fight is bleeding all the players and with coexistence not an option, it is time for the Big Three to change track before mounting losses bury them all. 

In Feb 2017, Snapdeal has laid off 500-600 employees.The founders also declared that they had decided to forego their salary. It will leave the company with a permanent workforce of around 1,000 employees. Company’s founders admitted to making mistakes. Snapdeal CEO said that the company would turn profitable in the next two years. As part of our overall path to profitability we will be reorganizing the company into a lean, focused, and entrepreneurial one by combining teams, reducing layers, eliminating non-core projects and strengthening the focus on profitable growth. 

Crisis is never communicated. 
It has to be gauged from the tell-tale signs that lie just about everywhere.

My View:
There is no space for too many players in eCommerce arena in India. Amazon with deep pockets is going to stay. Flipkart and Snapdeal with cash fast running out, will extinguish if they don't do anything. They best they can do is to amalgamate or merge into one entity, streamline and compete with Amazon. The innovative & efficient one will make profits and the other will just survive.

Nuzvid Seeds Vs Monsanto

  • Mr. Mandava Prabhakara Rao has been Managing Director of Nuziveedu Seeds Limited since June 16, 2010. 
  • Maharashtra Hybrid Seeds Company Limited (MAHYCO) is a pioneer and leader in the private seed sector in the country. It is the largest private sector seed company in India with a strong focus on developing quality hybrid seeds for the Indian farmers. Founded in 1962 by Dr. B. R. Barwale, the father of seed industry in India and an entrepreneur who leveraged his farming background to carry out pioneering work in seed development, the company has grown four-fold in last two decades achieving various milestones. Mahyco’s achievements have been recognized and rewarded over the years both at national and international levels. In 2001, Dr Barwale was conferred the Padma Bhushan award.
  • The PPVFRA (Protection of Plant Varieties and Farmers' Rights Authority) has a representative from the seed industry and Prabhakar Rao is there today by virtue of being the president of NSAI. In the past the industry was represented by Usha Barwale Zehr, Director of Maharashtra Hybrid Seeds Company(MAHYCO), Monsanto’s partner in the 50:50 joint venture (Mahyco-Monsanto Biotech MMBL) through which the BG-II technology is being sublicensed. Thus conflict of interest arose!
  • The government has recast the Protection of Plant Varieties and Farmers Right Authority, replaced Mrs. Usha Barwale Zehr by appointing as its member M Prabhakar Rao, chairman of Nuziveedu Seeds, the President of National Seed Association of India (NSAI) and thus eliminated conflict of interest.
  • Monsanto sells cotton seeds in India through its joint venture Mahyco Monsanto Biotech Ltd (MMBL). MMBL has sub-licensed Bt cotton seed technology since 2002 to various domestic seed companies. Monsanto has sublicensed its BG-II Bt technology — which was granted an Indian patent in February 2008 – to 49 companies including Nuziveedu Seeds Ltd.
  • In November 2015, the multinational terminated its license agreement for the technology with Nuziveedu Seeds, alleging that the latter, had pending trait value dues of over Rs 165 crore despite having collected the full retail price from farmers. 
  • The National Seed Association of India (NSAI), representing domestic seed firms such as Nuziveedu Seeds, Ankur Seeds and Kaveri Seed Company, has claimed that the power to fix royalty or ‘trait value’ payable to the developer of any plant genetic modification (GM) technology lies with the Protection of Plant Varieties & Farmers’ Rights (PPVFR) Authority.
  • Monsanto maintains that, trait fees are governed by technology licensing agreements bilaterally executed between it and individual seed companies. Bringing in the PPVFRA — when GM traits are patentable and Monsanto clearly has a patent for Bollgard-II Bt technology — is only aimed at wriggling out of payment of contractual liabilities.
  • The Competition Commission of India (CCI) has prima facie found Indian subsidiary of Monsanto (MMBL)  in violation of competition regulation and has ordered Director General (DG) to conduct detailed investigation into the matter. The CCI had initiated the investigation into the matter following November 2015 directive of the agriculture ministry to look into alleged monopoly practices by the Mahyco-Monsanto Biotech (MMBL). The complainant claims that MMBL is abusing it's position by putting, "...conditions in the sub-license agreements, charging of unfair price, discriminatory treatment, limiting and restriction of technical and scientific development relating to Bt cotton technology and cotton seeds market, denial of market access and leveraging of dominant position in the Bt cotton technology market to protect cotton seeds market." Agriculture Ministry had asked the regulator to investigate the alleged monopolistic practices of the seed company following the representations from farmer bodies and National Seed Association of India (NSAI). 
  • On Mar 06, 2016, Monsanto's joint venture firm in India MMBL said that it would be difficult to bring new technologies to India because it was becoming difficult for the company to recoup its investments in research and development of genetically modified seeds. The chief of Monsanto's India unit, said in a statement that if the committee recommends imposing a cut in the fees that local seed companies pay to use Monsanto's crop genes then the company will have no choice but to reevaluate every aspect of our position in India.
  • Around 7 million cotton farmers in India use their seeds, the company said. Over the last two decades, millions of small farmers have adopted genetically modified cotton seeds, making India one of the world's biggest producers of cotton. Genetically modified plants are grown from seeds that are engineered to resist insects and herbicides, add nutritional benefits or otherwise improve crop yields and increase the global food supply. Advocates say these new strains will boost yields and stabilize supply by also improving drought resistance. 
  • India has allowed the use of genetically modified seeds only to grow cotton. It says further study needs to be done to guarantee consumer safety before genetically modified food crops can be cultivated in the country. 
  • On Tue Mar 28, 2017, the Delhi high court ruled that MMBL should not have cancelled the contract in the first place and said it must be restored. It also said royalty payments agreed under the original contract must be reduced in accordance with a change in Indian government policy last year. “The parties shall remain bound by their respective obligations under the terms and conditions of the 2015 sub-licence agreements,” R.K. Gauba, the judge. Under the contract, Nuziveedu Seeds made genetically modified cotton seeds using Monsanto technology. 
He who has the gold makes the rules.

My View:
Not withstanding what the law says, why did Mr. Prabhakar Rao signed Monsanto agreement that included payment of "Trait Fees" and defaulted on signed agreement after BT technology was transferred for cotton seed production to his company? Having signed agreement, instead of defaulting, he should have negotiated or terminated the agreement as per provisions of the contract. Needless to say every contract will be one sided only. There is no such thing called balanced contract between two parties. 

Saturday, 25 March 2017

Managing money wisely

  • Inflation, taxes, government policies, geo-political situations and economic cycles affect all investments. 
  • The day you part with your money, you have taken a risk. Bigger the risk the greater scope for higher returns.
  • Holding cash is worst form of investment, which depreciates with time in an inflationary economy like India.
  • Understanding risk and managing prudently helps protect wealth and generate higher returns. Saving at the beginning of career alone is not enough. What you do with savings that will help staying ahead is more important.
  • Bank fixed deposits are fairly safer but its interest rates falls short of inflation rate.
  • Debt mutual funds that invest in bonds for short-term goals returns increase as bank FD interest rates fall. The average returns of such funds over a period of five years are around 12-17%. While FD interest is taxable, debt mutual funds held for three years or longer, you can adjust your gains against inflation, with indexation. Any capital loss can also be offset against capital gains on other investments, like shares or properties sold. 
  • Debt is not a bad thing, if used correctly. While education or home loans are good debts, credit card debt or a personal loan, to buy something you could live without, is a bad debt.
  • Staying debt free is important because debts carry much higher interest burden than what you earn on your investments. As retirement approaches one must become completely debt free to have peaceful retired life.
  • Stocks carries considerable risk although liquidity is good. Hence invest that much money which you can afford to lose. Stock or commodities trading, while returns could be high, risks are also higher if traded without research & strategy.
  • It is always good to buy blue chip stocks when the markets are down, at a time when nobody is buying and everybody's selling, for long term holding. Investing in long-term equity mutual funds (MFs) is an option. The risk is higher if your holding them is for few weeks or months.
  • Overall, the Indian stock markets have returned a good 10-11% compounded annually over a 10-year period, despite the ups and downs.
  • Opting for a systematic investment plan (SIP) where you invest a fixed amount of money every month regardless of market fluctuations suits for investing salary surplus amounts.
  • The basic principle of investing is to reduce your risk as you get older. A common thumb rule is that individuals should hold a percentage of stocks equal to their age in bonds, government debt and other safe assets and rest in equities. For a 30-year-old, 30% of the portfolio should be in bonds, government debt and other safe assets and rest 70% in equities.
  • If you are in your 20s, 30s or even 40s and have years before you retire then "take some risks and opt for more volatile investment that will potentially give you more returns in the long term". However, if you are retiring in the next few years, depending on your circumstances, invest in a conservative manner.
  • Always look at big-ticket expenses (child's education or marriage, retirement) that you could incur over the years. Keep aside money for contingencies and have a plan for a fixed monthly income after retirement (through pension, post office or mutual funds monthly income plans, senior citizen savings schemes, FDs and bonds). Not everything will go as per plans, but planning is imperative.
  • Insurance is a premium for someone to pay your family a big sum of money, if you die. That premium is just a cost. For peace of mind, it is important to take insurance that covers health, disability, accident, life and property, you should only buy the cover you really need. The life insurance cover's simple thumb rule is to multiply monthly expenses by 300. You may not need life insurance if no one is dependent on you.
  • Remember insurance payments are not investments. Insurance is good. Investment is good. Combined into a single product, they make you poorer.
  • Real estate, with low risk over long term, is great investment usually with very high returns but with very poor liquidity. Therefore invest into real estate that much money which you may never need it. 
  • Investing in rentable properties is a good idea to get some monthly income.
  • Spread the Risk. Research carefully and diversify your investments, placing pre-decided amounts in different asset classes: equity, mutual funds, bonds, FDs and property. Rebalancing and realigning your portfolio at definite intervals, according to your goals and risk appetite, is a good idea.
  • Invest in tax saving instruments like PPF, ELSS etc for minimizing tax outgo.
  • Spend wisely. Overspending is a bad habit. Before you buy anything ask yourself: Am I buying this because I want it or do I really need it? Can I live without it? And, can I really afford it?
    Remember the words of Warren Buffett: "If you buy things you don't need, soon you will have to sell things you need."
  • As lifespans lengthen, the need for money between the ages 70 and 85 increases because of medical expenses, medical insurance premium etc increases. At this age, people need house help and insurance doesn't cover everything. The costs involved in maintaining an older person, who is not fit, is much higher than the expenses of an average person.
  • Beware of credit cards which are good, if used judiciously. Otherwise small print terms and service charges are bound to make you poorer, in case of reckless spending using card.
Whatever you decide to invest in, do it regularly. Do not watch your investment too often. Do not speculate. Stay invested for the long term. Your money will not only be safe, it will grow many times over. 

Neither a borrower nor a lender be,
for loan often loses both itself and friend ... Polonius

Modi’s Perilous Embrace of Hindu Extremists

By New York Times Editorial Board March 23, 2017

Since he was elected in 2014, Prime Minister Narendra Modi of India has played a cagey game, appeasing his party’s hardline Hindu base while promoting secular goals of development and economic growth. Despite worrying signs that he was willing to humor Hindu extremists, Mr. Modi refrained from overtly approving violence against the nation’s Muslim minority.

On Sunday, Mr. Modi revealed his hand. Emboldened by a landslide victory in recent elections in India’s largest state, Uttar Pradesh, his party named a firebrand Hindu cleric, Yogi Adityanath, as the state’s leader. The move is a shocking rebuke to religious minorities, and a sign that cold political calculations ahead of national elections in 2019 have led Mr. Modi’s Bharatiya Janata Party to believe that nothing stands in the way of realizing its long­held dream of transforming a secular republic into a Hindu state.

Mr. Adityanath has made a political career of demonizing Muslims, thundering against such imaginary plots as “love jihad”: the notion that Muslim men connive to water down the overwhelming Hindu majority by seducing Hindu women. He defended a Hindu mob that murdered a Muslim man in 2015 on the suspicion that his family was eating beef, and said Muslims who balked at performing a yoga salutation to the sun should “drown themselves in the sea.” Uttar Pradesh, home to more than 200 million people, badly needs development, not ideological showmanship. The state has the highest infant mortality rate in the country. Nearly half of its children are stunted. Educational
outcomes are dismal. Youth unemployment is high.

Mr. Adityanath has sounded the right notes, saying, “My government will be for everyone, not specifically for any caste or community,” and promising to make Uttar Pradesh “the dreamland” of Mr. Modi’s development model.

But the appointment shows that Mr. Modi sees no contradiction between economic development and a muscular Hindu nationalism that feeds on stoking anti­ Muslim passions. Mr. Modi’s economic policies have delivered growth, but not jobs. India needs to generate a million new jobs every month to meet employment demand. Should Mr. Adityanath fail to deliver, there is every fear that he — and Mr. Modi’s party — will resort to deadly Muslim­ baiting to stay in power, turning Mr. Modi’s dreamland into a nightmare for India’s minorities, and threatening the progress that Mr. Modi has promised to all of its citizens.

My View:
Modi has cheated people of UP with his cunningness and charisma by not declaring CM face prior to elections. Had he declared Yogi Adityanath as CM candidate ahead of polls, probably all secular forces (SP, Cong & BSP) would have been compelled to form 'Grand Allaince' and BJP would not have won more than 60-70 seats. Elections are all about falsehoods, strategies (read cheating) and narratives (read charisma) rather than principles, truths and realities.

Wednesday, 22 March 2017

No evidence of Muslim voted for BJP In UP

  • Despite political statements and some stories in the media, there is no evidence for that a single Muslim voted for BJP.
  • In all SEVEN Muslim majority (> 50% Muslims) constituencies in UP, SP won all seven.
  • Of 82 constituencies (>30% Muslims), the BJP won 62. Muslim vote was split between the SP and the BSP, in all these 60 constituencies, their combined vote share was higher than that of the Muslim population. It is very likely that the Muslim vote got split between the SP and the BSP.
  • So rather than strategically voting to keep the BJP out, it could be argued that UP's Muslims actually failed at strategic voting.
Massive Hindu vote polarization led to BJP's remarkable winning of 312 of 403 seats in UP Assembly elections 2017 with unprecedented 39.61% vote share. The entire Muslim votes (19.61%) were shared between SP+Cong and BSP with combined vote share in excess of 50%. Their failure to form pre-poll alliance paved way for BJP's winning, otherwise BJP's winning seats would have been below 100 mark.

Monday, 20 March 2017

When real estate become liability

It will be the middle class that accepted the notion that "real estate is the foundation of family wealth" that will be strip mined by higher taxes on immobile assets such as real estate. 
At law courts throughout Greece, people are lining up to file papers renouncing their inheritance. They are turning their backs on what used to be a pillar of Greece’s economy and society i.e. real estate. Growing personal debt, declining incomes and ever higher taxes as Greece’s depression grinds on have turned property and the dream of easy money into dread of a catastrophic burden. Many Greeks went from paying almost no taxes on real estate to not having enough money to pay. 

Assets that once held or gained value now carry high costs of ownership and lose value.
  1. Governments desperate for tax revenues raise property taxes, which depresses sales and future price appreciation.
  2. High debt levels and high property taxes trigger foreclosures and forced sales that further depress the market with high inventories of unsold & unrented homes.
  3. As sales decline, appreciation can no longer be counted on to enrich owners. Instead, owners fear declines in value and higher taxes. This further depresses sales.
  4. High debt levels become even more burdensome as property values fall.
  5. Rather than offer a means of building and protecting wealth, real estate becomes a liability that destroys wealth via payment of taxes and declines in value.
While it can be argued that Greece is a unique situation, a cumbersome, costly bureaucracy of land transfer coupled with soaring taxes, perhaps Greece is simply early to the party.

Governments everywhere are facing fast-rising pension and healthcare costs, and the need for more tax revenues will skyrocket once the global recession trims income, payroll, business and sales taxes. Additional taxes on assets that can't flee the country i.e. real estate become extremely attractive.  

            Sunday, 19 March 2017

            Yogi Adityanath is CM of UP, but ...

            Yogi Adityanath elected as BJP LP leader and ascending to CM of UP, after BJP's remarkable victory in 2017 assembly elections is fine but definitely relegates Muslims of UP as second rated citizens with all their civil rights more or less stripped off.

            Modi's master plan of not announcing CM candidate in advance has attracted gullible young & unorthodox Muslim voters vote for development plank but what they got is 'hardcore anti-Muslim' Hindu fanatic as their Chief Minister. With anoyher bigger fanatic Modi as PM and absolute majorities in UP, LS and RS very soon, constructing Ram Mandir at Babri Majid demolition site is a certainty in next 1-2 years. While there is no disputing that sooner or later Ram Mandir construction will happen, the question is that the same should happen after convincing Muslim community and their religious leaders. Now only process of law will be followed by BJP but not with the consent of Muslims of UP/India. There are 4 crore Muslims in UP (19%) and ~17 crore Muslims (14%) in India and alienating them makes no sense. In coming months, if LK Advani becomes President, rumored as gift by Modi for appointing him as Gujarat CM in 2001, and protecting him during Gujarat riots 2002 etc, RSS hardcore activists as Prez, PM & UP CM construction of Ram Mandir becomes unstoppable whether Muslim community agrees or not.

            Few criminal cases are pending against Yogi Adityanath for his anti-Muslim militant activities and his becoming CM, as per my sense, is improper and drives minorities towards helplessness. The least he should have done is to get these cases closed exonerating him prior to ascending to powerful constitutional positions.

            Modi's India will very soon become an "Hindu Nation" shedding its secular character preserved so far and minorities, especially Muslims, will have to forget their legitimate rights and get habituated to lead second rate citizen life.

            Alienating 20% minorities, BJP UP government will never get legitimacy to rule the state. It remains to be seen if India’s democracy can withstand the religious and fascist forces that seem to reign supreme now.

            Muslims suffering discrimination in India is a hard fact.

            Muslim leaders lacked sense to foresee the future and should have magnanimously volunteered agreeing for Ram Mandir construction and extracted guarantees for preservation of other disputed Masjids across nation, when they had upper hand on these issues.

            Saturday, 18 March 2017

            Neocon - Neoliberalism is a disaster

            The cold reality is America's 25 years of neocon-neoliberalism has been great for the top 5% and an unmitigated disaster for everyone else in the U.S. and in the nations it has targeted for intervention. The neocon-neoliberalism of democratic party's 16 years and the republican party's 8 years is a system that benefited the few at the expense of the many. Neoconservatism's malignant spores spread quickly after the collapse of the Soviet Union. It is American exceptionalism turned into a global entitlement to intervene anywhere in the world and defend its interests, and a right to impose their version of democracy and a market economy on other nations. Self-interest melds seamlessly with moral superiority in neocon-neoliberalism. Since it is the best possible system, it is a favor tearing down institutions and imposing the system on others. The self-interest is that the market extracts others resources and benefits their banks and corporations. Is this how "free markets" benefit everyone? The neoliberalism is that it transformed everything for the better when turned into a market. Once buyers and sellers can meet in a transparent marketplace, everybody prospers and everything becomes more efficient. Neoliberalism's markets has features of "real" markets that are rigged to favor those at the top of the wealth-power pyramid. Neoconservatism and neoliberalism are both inherently global, and so globalization is the necessary outcome. There is no market that cannot be skimmed for outsized profits once it has been globalized. Neoconservatism entitles the U.S. to have a "profitable interest" in every nook of the planet. It's in their "interest" to monitor those policy changes in Lower Slobovia and intervene if the policies are "not in their interests." Neocon-neoliberalism is brilliantly evil because it masks its true objectives behind such warm and fuzzy PR. Those looking for enemies of the people will find them not on the streets of America in cartoonish display but in the corridors of financial and policy power.

            Profound changes in technology, automation, and geopolitics have influenced finance and wealth, but it cannot be merely coincidental that the incomes and wealth of the top 5% have pulled away from the stagnating 95% in the 25 years dominated by neocon-neoliberalism.

            The illusion of progress

            This is precisely what you'd expect of a self-serving elite that was desperate to cloak the unhappy reality that the relative few are benefiting immensely at the expense of the many. The core narrative of politics everywhere is progress. If progress isn't being made, politicians and the system are failing. In the past, "progressive" movements sought to advance both social and economic opportunities for marginalized groups. Now a days, social progress has been decoupled from economic progress.

            Progress is defined as the social advancement of a marginalized populace into the mainstream. When the marginalized populace is comprised of many millions of individuals, social progress and economic progress are mutually reinforcing dynamics: opportunities for social advancement in the mainstream created economic opportunities, and vice versa. For variety of reasons social progress has been effectively decoupled from economic progress. Woeful lack of economic progress for the bottom 90% proves financial progress is now limited to an elite comprised of oligarchs, technocrats and entrepreneurs. Everyone else has been losing ground in wages, wealth and opportunity. The movement for the vast majority is now backward, not forward.

            This self-serving elite is desperate to cloak the potentially explosive reality that the relative few are benefiting immensely at the expense of the many. If we measure progress solely by participation in and ownership of the most productive parts of the current mode of production, a much different snapshot emerges: economic stagnation is not progress.

            There is no progress without corresponding digression ... Swami Vivekananda

            Taxation has dual purpose of raising money for governance & development and also funding welfare activities to provide dignified life for the downtrodden. The current trend of lowering taxes benefits upper classes and facilitates them in amassing more and more wealth and widening of rich-poor divide. Poor remaining poor, middle classes becoming rich and upper classes becoming oligarchs is neither democracy nor desirable. 

            Excess debt is self destructive

            When money is free, discipline evaporates and decisions are disastrous

            Whatever is free is squandered. Money that can be borrowed for very low interest and in unlimited quantities is essentially "free". Nothing enduringly productive can be built without discipline and a steady focus on the bottom line. What USA has accomplished by borrowing and blowing $9 trillion in additional national debt over the past eight years other than funding medicare and medicaid costs that are largely skims, scams, and fraud? With interest rates near-zero and the credit line of the nation unlimited, Fed has created $3.5 trillion of additional paper money only to buy federal bonds to avoid difficult choices that is, discipline. Politicians are only too willing to borrow trillions from future generations to assure their re-election, and let future taxpayers figure out what to do about the crushing burden of debt we're leaving them? With "free" money, there's no need for justification of the expenditure. With the need for discipline eliminated, there's no motivation not to gamble wildly, fund every special interest group's demand, and grease the palms of every insider, every crony and every oligarch. This is how a great nation will self-destruct itself. The only possible output of a system lacking any discipline is self-destruction.

            The same is very true for India and its states as well resulted in many white elephants, massive corruption, crony capitalists, fragile banks, loss making infra companies etc, resulting in wider rich-poor divide and depriving basic amenities to poorer classes. India's rating is near junk with fragile banks and excessive debt.

            Friday, 17 March 2017

            Modi, the Prime Minister of Gujarat & UP

            Centre announced waiver of farmer loans in UP in fulfillment of Modi's election promise in the just concluded UP Assembly election winning with huge majority, at an expense of Rs.50,000 crores. BJP is still unable to finalize CM candidate and new government yet to be formed and union agriculture minster announced in parliament that central government will pick up the bill. While helping distressed farmers is appreciable the same would have been for all farmers in the country, not just UP.
            • This is in contradiction of Centre's outright rejecting the demand of AP & Telangana government's request, 3 year ago, for RBI & Banks assistance in rescheduling the loans and eventual waiver by state governments citing banking norms and credit discipline.
            • Farmers are in distress and debt ridden in the entire country, not just in UP. This Centre's loan waiver for UP only is grossly discriminatory.
            • Going forward, farmers will never pay back loans, even if they can, awaiting waiver in next elections within 5 years.
            • This will destroy public sector banks, which are already saddled with over Rs. 6 lakh crores NPAs mainly due to defaults by industrialists.
            • Just 3 days ago, SBI Chairman Arundhati Bhattacharya said such sops may disrupt credit discipline among borrowers.
            Apart from plethora of issues being faced by farmers, the foremost & utmost is the MSP (Minimum Support Price) of Centre which doesn't even cover expenses where as logically MSP should cover all expenses plus 50% profit margin for decent farmer livelihood. Lower MSP enables produce buyers to buy below MSP prices pushing weak farmers into distress and debt ridden. Mechanism must ensure that farmer is enabled to sell his produce at above MSP, which was forgotten several years ago. Other problems are non-timely availability of fertilizers and substandard seeds, pesticides, non availability of labour due to MNREGA, storage facilities etc. Erratic rains compounds farmers risk. Crop insurance with easy process of claims is a must.

            Crop loan waiver has a major devastating effect of non availability of bank credit in future with fear of non-recovery and farmer will slip into hands of ruthless money lenders with interest rates 4-6 times bank rates. Today only 25% farmers (who are owners of land only) gets bank credit for crops and it must be ensured all farmers whether land owner or not must get crop loan if he is genuinely cultivating. Unless all these issues are resolved within short time frame, farmers will continue to be in distress and nation's future food security comes under threat. And uncontrolled rural to urban migration will not only increase rural distress but also stresses weak urban infrastructure.  

            The practice of attending farmers issues once in 5 years during election and forgetting them thereafter must be stopped. It must be on year to year basis at budget time and uniform for all farmers of the country.

            My View:
            Farm loan waiver and rural focus are policies of Congress, never of BJP. Now I see BJP shifting towards rural issues and copying Congress. Anyway, 70% of population are rural & agriculture based and can't be ignored by rulers. All constitutional office bearers must remember that they are oath & constitution bound, not their election promises which are often senseless and mindless.

            Modi, Jaitley & RBI have forgotten all the rules, regulations & principles cited while rejecting cooperation to AP & Telangana for farmer loan rescheduling & eventual waiver by state governments where as now centre waiving UP farmer loans without even being asked by UP Government is height of their arrogance & stupidity and doesn't go well with preservation of unity & integrity of India. Centre's discriminating attitude between states ruled by BJP and non-BJP will ignite north-south divide apart from being unconstitutional, illegal and violation of oath. Shamelessness & arrogance at its peak with Modi reducing himself as Prime Minister of Gujarat & UP.

            14th finance commission has not made any provision for this type of money transfer from centre to UP and Budget 2017 has no mention about this item at all. How will this be done? When centre could do UP farmer loan waiver without budget & 14th Finance commission provision, why cant it grant special status to AP as promised while passing AP Reorganization Bill in Parliament in 2014? Any answer from Modi, Jaitley, Venkaiah Naidu etc? They won't answer because they are answerable to none.

            PS: Unless rules are modified restricting spending money strictly as per provisions of approved budget and discretionary spending money is restricted only during war & natural calamity times by executive orders, irresponsible and unmonitored spending through banks and PSU's will go un-audited by CAG and unnoticed by parliament and is detrimental to fiscal discipline.

            Monday, 13 March 2017

            Modi's India in economical fix

            • In true sense, our GDP growth is ~4% and inflation ~8%, even though fudged economic data indicates 7.1% and 5.88%, released by CSO (Central Statistical Office) with new series.
            • PSU Banks NPAs rose from over 1 lakh crores to ~6 lakh crores and are virtually paralysed.
            • Recent demonetization resulted in Banks expenditure rose by over Rs.50,000 crores which is not compensated by Central Government.
            • Even though demonetization resulted in lots of cash deposits during demonetization period, the same is being steadily withdrawn due to low interest rates, tax liability etc.
            • Fiscal & Revenue deficits for 2017-18 were pegged at 3.2% and 1.9% of GDP in the Budget Estimates, but the realistic figures would be much higher. No one trusts Govt figures, as so much expenditure will be incurred by executive orders, later.
            • With excessive national debt and revenue deficit, our ratings remained just above junk and our recent request for ratings upgrade was bluntly turned down by the rating agencies. They remarked that unless banks are sufficiently capitalized by over 2 lakh crores and NPAs reduced to safe levels, national debt reduced, Govt expenditure contained and fiscal reforms implemented speedily, ratings upgrade is at least 2 years away. This has hampered cheap credit flow to India and discouraged FDIs.
            • Modi's fancy projects like Ahmedabad-Mumbai bullet train requires investment of 1.30 lakh crores. Despite soft loans by Japan, an amount of about Rs.50,000 crores needed to be incurred by us which will remain white elephant for many more years.
            • In third year, Modi was compelled to opt for welfare budget due to demonetization impacting lower classes adversely.
            • In 4th year & 5th year, he will hardly get any chance to push reforms to reduce expenses and increase income due to continuing impact of demonetization and fresh obligation arising out of electoral promises of 5 states for which he just has 2 years.
            • Waiving of farmer loans as fulfillment of UP Election campaigning promises will alone need ~Rs.10 lakhs crores. But where is the money? Neither government has nor banks have. Any attempt to increase revenue deficit will push inflation upwards and becomes uncontrollable.
            • Not the least, fiscal reforms would also need lots of budget support but where is the money.
            • Hence increase of taxes payable by upper middle & upper classes and taxing petrol, diesel & LPG is imperative which would push inflation up and retards economic activity. If crude oil prices gets increased even this can't be done.

            My View:
            Modi will surely establish BJP with all the majority needed in Rajya Sabha for passage of any bill he wants and also chose President & Vice President of his choice. But bleak economic situation will tie his hands. So far he spent time delivering charismatic speeches and ridiculing Congress and its leaders but that mantra wont work any more. With tight cash situation, inability to mobilize internally or externally, reforms and development will take a beating. We will be heading for situation of 1990-91 in which VP Singh has landed the country after Mandal Commission report fiasco. Modi made gullible masses, educated middle class and elite rich that his magic wand will do wonders but he doesn't any such thing. If situation remains stable till 2019, he must thank his stars. Trump, China and Oil prices are major external factors which can destabilize Modi.

            In the light of these realities it is worth while to revisit our economic development model and priorities and make sure it aligns with the development definition "creation of environment in which all people can expand their capabilities for enlargement of healthy life, education, and standards of living".

            Sunday, 12 March 2017

            Modi wins UP Assembly Elections 2017

            Riding on the backdrop of bungled Demonetization, Modi & BJP secures stunning victory in the UP Assembly polls 2017 trampling opposition parties.

            Here are some pertinent facts
            • BJP's massive victory of 312/403 (39.7% vote share) betters its earlier 221/423 victory of 1991 after Ramajanmabhoomi agitation but falls short Janata Party winning 352/403 (47.8% vote share) after Emergency lifting in 1977.
            • SP 47 (21.8%), Cong 7 (6.2%) and BSP 19 (22.2%), even though far exceeds BJP vote share, failed to get even 75 seats.  
            • Fragmented opposition enabled BJP trample opposition parties SP, Cong & BJP.
            • Even though Demonetization was a bungle, benefiting none, destroyed informal sector, retarded economy, Modi with charisma was able to convince gullible masses that it delivered stated objectives and black money holding rich people were having sleepless nights. In fact it was Modi who was suffering sleepless nights since Nov 8, 2016.
            • Despite economic mismanagement & fudging economic data during the past 32 months, none of the indicators are looking up especially with Banks NPAs rising & unbearable and Country's debt unmanageable, revenue deficit at ~5% and growth rate no more than 4%, ratings at near junk remain unaltered, he was able to deliver bright picture for future, which in fact was bleak.
            • Anyone making critical observation of Modi's election speeches will discover that his utterances were far from truths, his body language awkward, his promises unrealistic, his promises inconsistent with his actions and his facial expressions artificial. Yet he was able to mesmerize gullible masses including middle classes and intellectuals that his invisible magic wand will deliver his promises.  
            • In the backdrop of Babri Masjid demolition by BJP in 1992, Modi's controversial role in massacre of 2000 Muslims by Bajarangdal during Gujarat riots in 2002 when he was CM of Gujarat, Modi and BJP were hated by Muslims.
            • Massive BJP victory can not be possible without Muslims voting in large numbers, if not enmasse. The reasons for Muslims voting BJP, absence CM face, winning slogan, burden of failed demonetization, large Muslim voters 19.1%, zero Muslim candidates are minus points for BJP. Absence of anti incumbency wave, opinion & exit polls showing neck to neck contest and yet BJP winning with landslide victory is just unexplainable. The truths of this massive victory will never be known.
            • Modi's UP election promises fulfillment requires massive Rs.10+ lakh crores spending by UP Government including farmers debt waiver. Earlier Modi & co have shown plethora of rules when AP CM Chandrababu Naidu seeked RBI help in rescheduling farmer loans to be eventually paid up state government as fulfillment of his election promise. With ~5% revenue deficit and banks already sunk with NPAs, how Modi will fulfill his promise to UP farmers is to be seen. Needless to say Modi's past is promise & forget. Modi & co haven't fulfilled most of the commitments made to AP in the AP Reorganization Act 2014 and election promises are only promises not commitments.
            • While the truths resulting in this unprecedented BJP victory will never be clearly known, many theories will be written by analysts fundamentally reflects their state of mind and nothing more. Whether it is end of vote bank politics or Muslims vote shift or end of dynastic politics or shift from caste politics or something else. If BJP was so much serious for enforcing change, let them try to abolish Reservations which was one of the most abused constitutional provisions incompatible to the principles of democracy and equality. At the end of the day, for common man, it same old fight for day to day survival.
            • Unless Modi & BJP learns lessons and amend their ways of autocratic decisions, respect democracy principles and constitution in letter & spirit, discard obtaining advice of quacks and rope in experienced intellectuals in matters of public policy and administration, this country will heading for disaster. 
            • My advise to Modi is to shed hypocrisy and rule properly. Respect people on your way up because you will see the same faces on your way down. Stop baiting opponents, self aggrandizement and do some good work aligning with principles of democracy.
            • Finally, the election outcome is clearly anti-establishment, neither pro-BJP nor pro-Congress vote. Otherwise BJP & SAD would not have lost in Punjab & Goa to Congress. Wins & loses are common in elections. Neither are permanent. There is no need for so much elation. Modi too has lot of past with holes and he should introspect and improve upon. 

            You can fool all the people some of the time, and some of the people all the time, 
            but you cannot fool all the people all the time ... Abraham Lincoln

            PS: Indira Gandhi's massive victory during parliament midterm polls in 1971 after winning Pakistan war and liberation of Bangladesh ended up in Emergency in 1975. Absence of strong opposition is detrimental to democracy & people's interests.

            Modi suffers from worst possible type of corruption; an insatiable desire for personal glory at any cost; an extremely deep moral and spiritual corruption. Modi belongs to the line of autocratic ideologues rather than the western tradition of revolutionary neo liberalism, or marxist rationalism. He also represents the worst aspect of democracy: a demagogue who caters to an irrational populace’s cravings for self-identity and release from self-responsibility. He might not have taken any bribes in recent years but there is no way he could have risen to his position without having made massive and horrendous economic & moral compromises. All his massive campaign expenses, funded by industrialist friends or party or government are eventually borne by common man.

            Saturday, 11 March 2017

            Cashless transactions is a bane for Indians

            It is natural for Government departments to expects citizens leave trail of transactions they make for the purpose of efficient tax realizations and crime investigations.

            Cashless transactions offers the following advantages to Government and citizenry and results in higher investments in infrastructure and efficient fiscal management of nation.
            • Leaves a long trail of transactions
            • Efficient tracking for effective tax realizations and evasion of taxes
            • Reduces expenses and burden of monetary system management
            • Eliminates risk of carrying cash safely
            • Helps businesses and people manage their financial transactions safely & with ease, efficiently and reduces reckless spending
            • Reduces physical visits to Banks
            • Eliminates black money menace 
            • Reduces corruption
            • Controls money laundering
            • Reduces pick pocketing, robberies and thefts of money

            But the disadvantages with Indian perspective are
            • People are used to cash traditionally and over 90% transactions are in cash
            • Unreasonable tax rates, corruption, reckless public spending, bureaucratic apathy & abuse, irresponsible politicians, lack of transparency & accountability in administration, business cheating etc justifies tax evasion and reinforces cash as a secure possession of wealth
            • Need for a bank account, Aadhaar card & PAN Card for every person
            • Requires higher levels of education & banking education
            • Every person must have smart phone & data connection
            • Internet & 3G spread must reach nook & corner of entire country
            • Every transaction entails charges 1-2% apart from Data costs
            • Non cash transaction results in increased tax payments
            • Less secure internet and less secure banking systems exposes risks of hacking and losing money for customers
            • Lack of privacy laws, grievance redress systems, high cost & inaccessible courts poses serious hurdle for acceptance & growth of cashless transaction systems.
            Tax evasion, black money menace etc are largely urban phenomenon. Most rural habitants are with earnings that are within no tax or 10% tax bracket. With 90% of country out of internet/mobile map, 40% illiterate, 40% poorer classes, ineffective privacy laws & grievance redress systems, cashless transactions shall remain largely an urban phenomenon for few more decades.

            My View:
            With very low per capita income, poverty, illiteracy, citizen rights largely unprotected, weak infrastructure, poor privacy laws etc and Government suffering lack of citizen confidence (reflected by Mafia gangs resorting to quick settlements for huge cuts) and unreasonable tax regimes etc cash systems will prevail for few more decades. Modi in order to increase tax revenues resorting to autocratic methods, destroying institutions and unleashing police-raj will only create chaos & confusion and detrimental to stability & growth. Government attempting to force gullible & weak citizenry to adopt cashless systems is not only a bane and is bound to fail.

            Plebiscite in Kashmir?

            Hard hitting reply by Ms. Christine Fair, American professor 
            to a Pakistani scholar in USA over UN resolution on Kashmir

            The UN Resolution conditions are:
            1. Pakistan to withdraw military, tribesman & its nationals in Kashmir who have entered Kashmir for the purpose of Kashmir to the satisfaction of UN.
            2. India to demilitarize to the extent of defending any aggression and provide security too Kashmir to the satisfaction of UN.
            3. Govt of J &K shall appoint Plebiscite Administrator for conduct of free and impartial plebiscite.

            Pakistan never withdrew its army/tribesmen/nationals from POK and hence question of plebiscite in Kashmir doesn't arise.

            Thursday, 9 March 2017

            The high cost of cheap food

            • Never-ending quest for cheap food is the root cause of the transformation of agriculture from a system of small, diversified, independently operated, family farms into a system of large-scale, industrialized, corporately controlled agribusinesses.
            • The production technologies that supported specialization, mechanization, and ultimately, large-scale, contract production, were all developed to make agriculture more efficient, to make food cheaper for consumers. Millions of farmers have been forced off the land, those remaining are sacrificing their independence, and thousands of small farming communities have withered and died all for the sake of cheap food.
            • The agricultural establishment has boasted loudly that fewer farmers have been able to feed a growing nation with an decreased share of consumer income spent for food. The increases in economic efficiency have been impressive, but not without human costs. 
            • There were tremendous savings for consumers from lower food costs, but economists have never bothered to place a value on the lives of farm families that have been destroyed by the loss of their farms, their way of life and their heritage. They have never bothered to consider the value of the lives of rural people with roots in rural schools, churches and businesses who were forced to abandon their communities as farm families were forced off the land. 
            • The human costs of cheap food have been undeniably tremendous, but since they couldn't be measured, they have gone uncounted.
            • The ecological costs of cheap food is also not measurable and has gone ignored. Today we have degraded the productivity of the land through erosion and contamination, and that we have polluted the environment with agricultural chemicals in our never-ending pursuit of cheaper food. Farms are still losing topsoil at rates far exceeding rates of soil regeneration. Farmers increasingly reliant on herbicides that pollute streams and groundwater and that disrupt or destroy the biological life in the soil.
            • All life on earth is rooted in the soil. As farmers destroy the natural productivity of the land, they are destroying the ability of the earth to support life. We are destroying the future of humanity to make agriculture more efficient. What is the value of the future of humanity? We are in fact risking the future of human life on earth just so to have cheap food.
            • The globalization of agriculture means that food in future will be grown wherever in the world it can be produced at the lowest cost. High costs of land and labor in the US and favorable urban employment opportunities may keep production costs in the US well above the costs in other food producing regions of the world. The multinational food corporations will produce or buy agricultural commodities wherever they can produce or buy at the lowest cost. Continuing quest for cheap food could mean the end of agriculture in USA.
            • The US in the future will become food importer like oil. But imports are subjected huge volatility of prices. Through its military might US might fight wars for maintaining cheap food imports. But what will be the real costs? 
            • The costs of making food quick and convenient are no less that the cost of making food cheap. In US, nearly 80% goes to pay for marketing services processing, packaging, transportation, storage, advertising, etc. and only 20% goes to farmers who produce it. So by far the greatest part of the total cost of food is the cost of convenience.
            • Most processed foods contain high amounts of sugar, sodium and saturated fat. Consumed in excess they can lead to a myriad of problems, including obesity, diabetes, cardiovascular disease, high blood pressure. cancer and other chronic diseases.
            • Addiction to convenience is placing control of our food supply in the hands of a few giant, multinational corporations.The global food supply today is dominated by a handful of giant agribusiness firms, allied and forming three global food clusters. The greatest cost of convenient food has been the loss of control of food supply.
            • The fast food industry has lured low-income consumers, along with the affluent, into paying ridiculously high prices for low-quality meats, potatoes, vegetable oil, and sugar. The true costs of quick food must include the costs of poor health, lost dignity in work, degraded landscapes etc, a tremendously high price for the time saved by choosing quick food.
            • As long as people buy the junk, companies will make the junk. Changing a system is harder than changing own habits. There is a high cost to buying cheap food. Poor health comes at a big price: diminished quality of life, fatigue and stress for self & family, lack of productivity, lost work days & income, and expensive medical bills.
            • Still there are alternatives at least for many of the things we eat. We can buy from local farmers who are committed to producing foods by ecologically sound and socially responsible means i.e. sustainable agriculture. We can shop at farmers markets, seek out restaurants that buy from local farmers, or buy those few items in the supermarkets that are supplied by local sustainable growers.
            • The food we buy from these local people may not be as quick, convenient, or cheap. But, it may well be more than worth the time, effort, and money that we have to spend to get it. It is said that, eating is a moral act. It is the food we choose has an impact upon the lives of other people, upon the earth, and upon the future of humanity. When all of the costs are counted, we simply cannot afford the high costs of cheap food. 

                          You never fully know how valuable your health is until you lose it.

                          My View:
                          In India, agriculture supports 70% of population, less educated & less skilled, living villages with meagre infra and facilities. Even after 25 years of reforms, agriculture is still in the crutches of govt and suppliers and middlemen and farming became risky and non-remunerative. Minimum Support Price, which doesn't even cover input costs, is aimed at looting the farmers to serve vested interest of politicians providing cheap food to lower classes at the expense of farmers. It is imperative to liberate agriculture and enable & empower them recover costs plus 50% as profit margin and lead dignified lives. Otherwise villages and agriculture will perish and that would be disastrous. No country in the world will be able to feed 1.2 billion Indians except Indian farmers.

                          Tuesday, 7 March 2017

                          Inflation: Causes, Effects & Mitigation

                          • Inflation is the long term rise in the prices of goods and services due to currency devaluation. 
                          • The effects of inflation are both gradual and profound. 
                          • Inflation creeps up on us and as we continue our normal spending and consumption habits, the increase of consumer prices doesn’t seem to make a huge difference in our day to day finances.
                          • Food prices go up, transportation prices increase, petrol prices rise, and the cost of various other goods and services skyrocket over time. All of these factors impacts your long-term savings and ability to fund your retirement planning.
                          • Inflationary problems arise when it is not matched by a rise in income. If incomes do not increase along with the prices of goods, everyone’s purchasing power gets reduced, leading to a slowing or stagnant economy. 
                          • Excessive inflation can also wreak havoc on retirement savings as it reduces the purchasing power of the money that savers and investors have squirreled away.
                          • Inflation is caused by increased money supply outpacing economic growth.
                          • Ever since nations moved away from the gold standard, the value of money is determined by the amount of currency that is in circulation and the public’s perception of the value of that money. When more money is put into circulation at a rate higher than the economy’s growth rate, the value of money can fall because of the changing public perception of the value of the underlying currency. This devaluation will force prices to rise due to the fact that each unit of currency is now worth less.
                          • A macroeconomic way of looking at the negative effects of an increased money supply is that there will be more currency chasing the same amount of goods in an economy, which will lead to increased demand and therefore higher prices.
                          • High national debt is a bad thing actually drives inflation to higher levels over time. As a country’s debt increases, the government can either raise taxes or print more money to pay off the debt.
                          • A rise in taxes will force businesses to raise their prices. 
                          • Government printing more money will lead directly to an increase in the money supply, which will in turn lead to the devaluation of the currency and increased prices.
                          • As wages increase within an economic system in a growing economy people will have more money to spend on consumer goods. This increase in liquidity and demand for consumer goods results in an increase in demand for products and companies will raise prices to the level the consumer will bear in order to balance supply and demand.
                          • When companies are faced with increased input costs of raw materials or wages, they will preserve their profitability by passing this increased cost of production onto the consumer in the form of higher prices.
                          • Inflation can be made worse by our increasing exposure to foreign marketplaces. In global economy, exchange rates are one of the most important factors in determining our rate of inflation. When exchange rate suffers imports become expensive and exports cheaper.
                          • Economists argue that a healthy rate of inflation is considered to be approximately 2-3% per year. The goal is for inflation to outpace the growth of the underlying economy by a small amount per year. 
                          • A healthy rate of inflation is considered a positive because it results in increasing wages and corporate profitability and keeps capital flowing in a presumably growing economy. As long as things are moving in relative unison, inflation will not be detrimental.
                          • Small amounts of inflation encourages consumption which can further stimulate the economy and create more jobs.
                          • When it comes to long-term investments, sometimes spending money now can allow you to benefit from inflation down the road. Mortgage to purchase a home when you consider you can repay the mortgage down the line with inflated dollars that are worth less than they are now, then you are using inflation to your benefit. Other areas where you can take advantage of inflation include home improvement projects, capex for a business, or major investments.
                          • Commodities have an inherent worth that is resilient to inflation. Unlike money, commodities will always remain in demand and can act as an excellent hedge against inflation. In case purchasing commodities is a daunting task, you can consider commodity-based Exchange Traded Funds (ETFs) which offer the liquidity of stocks with the inflation hedging power of commodity investments. Just be careful of the problems of ETFs.
                          • Gold, silver, and other precious metals also have an inherent value that allows them to remain immune to inflation. In fact, gold used to be the preferred form of currency before the move to paper currency took place. With that said, even precious metals are liable to being a part of speculative bubbles.
                          • Real estate offers an inflationary hedge. Investing in real estate provides a real asset. Rental property can offer the landlord the option of increasing rent prices over time to keep pace with inflation. The added ability to sell the real assets in the open market for a return that generally keeps pace with or outstrips inflation. However we all know that real estate bubbles can and do exist.
                          • Equities have historically beat bonds because of the ability of corporations to pass price increases along to their consumers, resulting in higher income and returns for both the company and its investors.
                          • Large cap, dividend paying stocks have provided an inflation-adjusted 7% per year for long term investors. If you have the investment risk tolerance for the volatility and a time horizon of greater than 20 years until retirement, consider dividend-paying securities. Dividend stocks offer a hedge against inflation because dividends normally increase on an annual basis at a rate which outpaces that of inflation. 
                          • You are probably need a lot more money for retirement than you think you will. There are two ways to get to your new benchmark: Save more, or invest more aggressively. Saving more is probably the easiest and most proactive thing you can do to ensure your ability to fund a comfortable retirement. 
                          • Like it or not, inflation is real. Ignoring the effects that inflation can and will have on your long-term savings is probably one of the biggest mistakes that many investors make. Understand the detrimental causes and effects of inflation to make long-term decisions to mitigate the risks. Consider the above tips to overcome the devastating effects inflation can have on your future retirement.
                          My View:
                          In India, inflation is primarily caused by RBI printing more currency to meet the revenue deficits of central government arising due to tax evasion, black money & corruption. In 1947 USD and INR were at par and today in 2017 it is Rs.67 per USD. Some years inflation was in excess of 10% thus hurting wage earners and salaried class people most. Governments tend to believe that printing currency is a matter of right which is in other words is another worst from of indirect tax effecting essential commodities and poor as well. Inflation impoverishes savers and enriches borrowers, which is an absurd. National debt and external borrowings have crossed manageable levels and thus ratings reached near junk status and effecting foreign investments. Irrational taxation and poor monitoring systems has resulted in rich people maintaining their wealth in foreign countries illegally effecting our economy. Even though reforms are conceived 25 years ago, distortions, abuse and politics have resulted in benefits for only upper classes while others mostly rural habitants and uneducated remained poor. In the absence of political will & bureaucratic honesty and rampant greed, elimination of poverty and economic prosperity for all is a distant mirage. Worst, inflation can be viewed as government robbing away your wealth and earnings.

                          Sunday, 5 March 2017

                          Modi's blatant lies

                          Never in the past we had heard such a blatant lies from a Prime Minister, like that of Modi. Here are some examples
                          • Modi in his UP election campaign stated that, Kanpur train accident of November 20, 2016 which took more than 150 lives had been a case of cross border terrorism conflating terrorism with Muslims. Railway Board Chairman AK Mittal stated that "We never said sabotage has caused accident at Kanpur. Someone else said it".
                          • In another speech trying make fun of Rahul Gandhi as fool, Modi said that Mr.Gandhi announced in Manipur that they would start Coconut juice packaging plant in Manipur even though coconuts were not grown in Manipur. The fact is that Rahul Gandhi has spoken of fruits grown in Manipur and never referred to coconuts.
                          • SP and Congress challenged both these absurd lies & distortions but BJP maintained stoic silence.
                          • Junior politicians are notorious for blatant lies or over exaggeration but never from senior leaders that too holding office of Prime Minister.
                          My View:
                          Ever since 2002 Gujarat riots, Modi has never displayed dignified statesmanship, but always remained hardcore RSS pracharak. Never there is any case of truthfulness or sincerity of purpose in his utterances at any time in the past. Nor he is as honest as he projects himself. In those days, even though not outright corrupt like his predecessors, he was notorious as 4% Chief Minster. Demonetization fiasco and in its aftermath, innumerable lies were doled out with the sole aim of confusing masses and make them believe that everything was going right. Only fascist dictators depended on heavy propaganda in the history and today Modi & BJP are doing exactly the same. Fudging economic data - inflating GDP by +2 points, GDP Growth by +3 points and inflation by -3 points Modi went on projecting India's 'struggling economy' as a 'racing economy' and ironically world hadn't believed it. Modi, the worst economic manager, a blatant liar is very dangerous to the nation. Modi will do anything to win election and stay put in power. His revolting against Vajpayee in 2002 and his dumping Advani & Joshi in 2014 are classic examples. Alienating & excluding 16% Muslims and 2% Christians, Modi Government will never get legitimacy to rule the nation. Individuals might carried away by his verbal histrionics but electorate as a mass will always deliver right verdict.

                          Friday, 3 March 2017

                          Beware of BJP & Patriotism

                          • Patriot is defined  as one whose ruling passion is the love of his country. It is sometimes used for a factious disturber of the government.
                          • A patriot is he whose public conduct is regulated by one single motive, the love of his country; who has, for himself, neither hope nor fear, neither kindness nor resentment, but refers every thing to the common interest.
                          • The claim of patriotism by an acrimonious and unremitting opposition is infallible.
                          • The quality of patriotism is to be jealous and watchful, to observe all secret machinations, and to see public dangers at a distance. The patriot professes to be disturbed by incredibilities.
                          • A patriot is lover of the people. But this mark is deceptive. The people is a very heterogeneous and confused mass of the wealthy and the poor, the wise and the foolish, the good and the bad. 
                          • It is unpleasing to represent our affairs to our own disadvantage; yet it is necessary to shew the evils which we desire to be removed.
                          • Before we confer on a man, who caresses the people, the title of patriot, we must examine to what part of the people he directs his notice. The people is a confused mass of the wealthy and the poor, the wise and the foolish, the good and the bad. It is he who dissembles his own character, may be known by that of his companions. He may, among the drunkards, be a hearty fellow and sober handicraft men, a free-spoken gentleman; but he must have some better distinction, before he is a patriot.

                          Patriotism is the last refuge of a scoundrel ... Samuel Johnson
                          Pseudo-patriotism is the last resort of the incompetent Modi government

                          My View:
                          BJP is a confused lot of pseudo patriots. Patriotism is to be invoked during war time or terrible internal disturbances, not during stable and prospering times. Modi instead of plugging loop holes in the system to reduce corruption, increase tax collections by plugging evasions without raising taxes and invest in infrastructure for development did nothing during first two years except foreign jaunts, speeches, slogans, anti-congress rhetorics, raised taxes, reckless borrowings, spending on fancy projects, hobnobbing with his industrial friends who funded his expensive 2014 election campaign and  pushed banks to near collapse. Suddenly he found time running out for 2019 elections and saw an opportunity in quack advised single pill demonetization medicine to solve all the ills which resulted in blunder & plunder and destroyed fragile economy of the nation. To cover up his debacles, he started fudging economic data and invoked 'patriotism' to divert public attention away from teething issues. India with huge population and consumption base has enormous resilience and will survive all these shocks at the expense of burdening the poor & lower classes but beware of pseudo patriots like Modi & co of BJP who has no understanding of the realities and aspirations of poor, peasants and lower classes especially living in rural villages.

                          While Congress was certainly bad, but they had sanity of mind never to disturb lives & livelihoods of poor & peasants. Modi's senseless demonetization effected lives & livelihoods of poor & peasants most and little bit to other classes. Beware of slogans and rhetoric of Modi & co of BJP who will do anything to mislead people and survive in power, worse than Congress. Modi harping on Congress failures even after 11 quarters is unacceptable nonsense. 

                          Thursday, 2 March 2017

                          The great GDP fudge

                          The great GDP fudge; Same data; Opposite conclusions.
                          • GDP growth in 2013-14 was 4.7%, as per old series. 
                          • GDP growth in 2013-14 was 6.9%, as per new series rolled out by Modi Administration.
                          • This had meant that India was the second fastest growing economy, after China. This was in dissonance with the actual macro-economic reality.
                          • Under the old method, GDP was calculated at factor cost; now it will be done at consumer prices. Factor cost includes wages, profits, rents and capital - known factors of production. The consumer price includes taxes that are paid to the government. 
                          • This resulted in share of the industrial sector moving up by 5.6 points from 26.1% in the old series to 31.7% under the new series, for 2013-14.
                          • Inflation needs to be adjusted to arrive at GDP at constant market prices. GDP deflator is the ratio of nominal to real GDP. The decline in inflation measured by the GDP deflator has turned the modest deceleration in the growth of GDP at current prices into higher growth in GDP at constant prices.
                          • The statistical picture being presented doesn’t reflect ground realities.
                          • In Sep 2016, India’s imports have fallen for 20 straight months. In April 2016, India’s imports touched a six-year low. Exports are still at 2011 levels, down significantly from the 2013 peak. Industrial production which creates real jobs in the economy is actually shrinking.
                          • There are visible signs of widespread distress in rural areas; the most visible manifestation is the rural migration to cities in search of jobs. Yet, the agriculture data suggests an optimism that flies in the face of the reality.
                          • Economies don't shift trajectories easily and quickly. India has shown the ability to be on a high trajectory before. The decade-long UPA rule witnessed growth, averaging 7.8%.
                          • Government claimed savings of Rs 15,000 crore in the LPG subsidy scheme due to Aadhaar based DBT. Later CAG pointed out that only Rs 1,764 crore (~10%) of the subsidy savings was due to DBT and the remaining 90% of the savings was due to the fall in global oil prices. 
                          • The government and its CEA (Chief Economic Adviser) were simply disingenuous and resorted to such misleading claims to falsely justify their decision to table the Aadhaar bill as a money bill and pummel it through Parliament. 
                          • With new GDP series Manmohan Singh government's growth for 2013-14 would have been a good-looking 6.9% instead of the dismal 4.7%. 
                          • But if you remove this 2.2% bonus that came from changing the calculation method and then the discrepancies portion of GDP growth which accounts for a massive 3.2% and you’ll find that the GDP growth for the fourth quarter of 2016-17 is just 4.7% in place of much boasted 7.9%.
                          • It is easy to bump up consumption (largely informal, hence poorly measured) numbers or 'discrepancies' to boost growth. It's tough to hide actual figures. The most frightening is a Rs 17,000 crore-plus drop in investment, which reflects a lack of confidence in Modi's India. Take away the rubbish in data, our actual growth rate is around 4%, about half of what is being claimed. 
                          • Fudging economic data will lead us to nowhere and impact credibility badly.

                          Spin is a powerful tool in both cricket and politics but not in economics. 
                          In the land of the blind, the single eyed man is the king.

                          My View:
                          For developing economies below 5% growth is 'struggling', 6% growth 'satisfactory' and 7% growth is 'good'. Govt modifying GDP growth computations thus projecting higher growth and reduced inflation and presenting our 'struggling' economy as 'good' economy is outright cheating. However lending agencies have their way of assessing the realistic situation. Despite high voltage campaign of racing economy by Modi & Co, ratings haven't been upgraded and FDIs stagnant. Despite favorable oil prices benefiting India to the tune of over Rs.2 lakh crores for the past 3 years in a row, ground situation remained alarming with fragile banks indicating gross economic mismanagement by Modi & Jaitley during past 3 years. Government publishing false and misleading reports dents our credibility as a nation. Modi's noise of hard work and rapid progress have turned out shallow. Excepting visiting half of the world with slogans & speeches nothing has happened. Our per capita income is $1,700 pa only is way below poverty eradication level of $6,000. With realistic GDP growth below 5% and retail inflation at more than 7%, it is long way to prosperity and poverty eradication. Urgent need is fiscal reforms, debt reduction, corruption control, enhance tax realization, and many more consistently for several years. Instead Modi attempting demonetization hoping as a single pill to solve all economic ills has turned out a blunder & plunder, flabbergasted the whole India and world. Ignoring pitfalls of struggling economy without any corrective steps and pursuing fancy things and day dreaming everything will be better tomorrow will only end up in utter chaos and fiasco. Lesson to Modi: There are no shortcuts. 

                          Emulating Chinese system of inflating economic data does no good. When drop in figures are to be admitted, at a later stage, it would be disastrous.