Blog: June 2015

Tuesday, 30 June 2015

Export Strategy ?

News reports are agonizing over the declining figures of exports for the past 6 months - month after month

There is no doubt , among many corrective actions being undertaken by the Central Government , promoting exports from MSME , is one

No need to look far, for a reason for this emphasis

Just look at how much MSME in our neighboring countries are exporting :

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Country / No of MSME / Ave Export / year ( $ )

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Singapore / 9,296 / 6.74 Million

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Malaysia / 28,840 / 2.05 Million

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S.Korea / 2.9 million / 45 , 000

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India / 30 million / 4, 000

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Now , even if each of our MSME succeeds in exporting just $ 40,000 worth of exports per year , that would amount to ,

$ 40,000*30 million !

Currently each MSME ( on an average ) employs 2.5 persons

How many more persons would 30 million MSME need to employ , if each were to raise exports by 10 times ? ( from $ 4000 to $ 40,000 )

It is reported that , even at the current level of operations , India's MSME sector creates 1.3 million jobs every year

For raising (ave) MSME exports by 10 times , would that figure go up to 13 million new jobs / year ?

Enough to absorb the 12 million persons joining our job market each year ?

It is time for re-thinking our Export Strategy

By emulating smaller neighbors , we could solve two problems , at one time !

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hemen parekh

01 July, 2015

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Hire , when you need : Fire , when you don't !

What is the amount of investment required to create 1 Million jobs per month ? ( = No of jobseekers joining India's labour market each month )

That would depend upon the " Industry " for investment

There are some , " Capital Intensive " industries which would require a huge investment , whereas , there are some " Labour Intensive " industries , where a much smaller investment can generate 1 Million jobs

For example , to generate 1 Million jobs would need :

* Industrial Instruments ( Labour Intensive )................... Rs 10,000 Cr

* Boilers / Steam Generating Plants ( Capital Intensive )... Rs 500,000 Cr

{ Source : DIPP , Investment and Job Creation from Aug 1991-Mar 2014

as reported in Times of India / 17 March , 2015 }

Of course , we don't have to create all of those 1 Million jobs per month , in just one or two industries

If we take an " Average Investment " required across ALL the industries , then , may be , we need :

Rs 200,000 Cr to generate 1 Million jobs every month

ie : Rs 2 Lakh*Crores per month

ie : Rs 24 Lakh*Crores every year

Now , who has got that kind of money to invest , even if we assume that

> there is a " Ready Market " for all of those products , here and now ?

> this market will not shrink in the foreseeable future ?

Obviously , the Governments ( Central + States ) , don't !

If we include FDI , may be Private Sector can raise that kind of money

But will it invest in " Capital Intensive " industries or in " Labour Intensive " industries ?

Given the current labour laws , it is clear that the investors will choose to invest in Capital Intensive industries

Even if that means , creation of only 1 Lakh jobs instead of 10 Lakh jobs !

At this point , it is worth researching whether USA succeeds in creating some 150,000 / 200,000 new jobs every month , due to its policy of :

" Hire when you need : Fire when you don't "

Before hiring , do USA industrialists ask of themselves :

" If things go wrong and I am forced to trim my work-force , will this recruit

become a permanent burden ? "

Question that the Labour Laws must answer :

" What comes first ? Creation of new jobs , or , retention of existing jobs ? "

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hemen parekh

June 30 , 2015

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Sunday, 28 June 2015

The Greek Tragedy

With a public debt of $ 320 Billion , and unable to raise fresh loans ( to pay off old loans ) , Greece is on the verge of bankruptcy - and exit from Euro-Zone

Dire predictions are being made by the Economists / Bankers / Politicians etc , as to what will be the impact on :

* Other debt-ridden countries like Portugal / Italy / Spain etc

* Economies of the European lender-countries

* Balance Sheets of Financial Institutions ( eg : IMF / European Common Bank etc )

* Economies of Developing countries , unable to export to Europe

But hardly anyone seems to be asking :

* Why did Greece land itself in such a trouble ?

* Will Spain / Portugal / Italy - and other debt-ridden countries - soon find themselves in a similar condition ?

You don't need to have a Ph D in Economics to know the obvious answer !

Greece finds itself in this trouble for the same reason that a person would , if he starts spending far in excess of his income

Usually by borrowing lots of money from friends / relatives , who , oblige without asking :

> What is your current income ? What is your current savings ?

> What is likely to be your future income ?

> What do you need this loan for ? When - and how much - will you repay ?

If there are no satisfactory answers , then you know that either the borrower has no capacity to repay

or , ( worse ) , no intention to repay !

Apparently , Greeks have been living beyond their means ( income ) for many many years

Generation after generation of Greeks thought :

> Let us enjoy today . Why worry about tomorrow ? Let our children worry about that !

The 20+ something Greek youth ( of which , 26 % are unemployed ) , have " inherited " that debt of $ 320 billion , from their fore-fathers

Hence , it is reasonable for them to say :

" Hey , I did not borrow / spend all that money ! Why should I be made to suffer for the sins committed by my parents / grand parents ? "

Problem is not that the lenders cannot accept this argument and agree to , even write-off $ 320 billion

All that the lenders are telling the Greek Youth ( thru Greek Government ) , is :

" No problem , but no more money either ,

Just learn to live within your own income . Learn to fend for yourself .

Stop living on borrowed time ( - and borrowed money ) "

Here , there is a lesson for us Indians , as well !

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hemen parekh / 29 June, 2015

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Tuesday, 23 June 2015

Bank Recapitalization ?

Bank Re-Capitalization ?

Here is a layman's understanding :

> Bank executives give Rs 4 Lakh Crores worth loans to Industrialists / Businessmen ( who , sometimes happen to be close relatives / friends )

> Bankers " forget " to examine past records of loan-repayments by these individuals

> Banks do not share among themselves info about " black-listed " borrowers

> Banks " forget " to inquire if a loanee is a " Benami " company

> Banks do not incorporate stringent clauses in loan agreements (on purpose )

> Banks adopt " Forget & Forgive " approach to defaulters

> For loan recovery , bankers wait for other bankers to take the lead

> Before taking action , bankers check-out with people in power

> When sinking under the burden of NPA , bankers run to Government of India to bail them out through " Bank Re-Capitalization "

> Government oblige by giving money to stressed banks, so that they can survive

> Government rationalize its bail out by saying, " depositors must be protected " . Sounds so reassuring !

> Government then goes out and raises taxes ( direct + indirect ) to balance its books ( Current Account Deficit ? )

In a nutshell :

> Eventually , honest tax-payers foot the bill, one way or the other

> 7,000 + loan-defaulting swindlers spend vacation in Switzerland with family ( and their politician friends ) - till they are ready to borrow more !

> Bankers vie with each other to " Re-Schedule Payments " and advance fresh loans to pay off old loans ( Rs 4 lakh Crores of NPA ).

If EU / IMF can do this for Greece , why cannot we ?

> Government will take pride in " Bold Banking Reforms "( to please IMF ? )

> As a Nation , we are very compassionate ! We cannot let any institution die !

We are obsessed with keeping it alive at any cost . We must ,

forever , keep it alive with artificial ventilation / blood transfusion !

It is time to re-think :

When a person or an Institution just cannot be kept alive , it must be allowed to die , in a dignified way !

Would it not be far better to protect the small bank-depositors by returning their deposits , rather than infuse Rs 4 lakh Crores into these banks , by way of re-capitalization ?

Am I missing out on something that economists know better ?

- hemen parekh

hcp@RecruitGuru.com

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June 24 , 2015

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Sunday, 21 June 2015

Growing Faster Than China ?

There is no denying that India has made a lot of progress on the economic front during past 12 months , under structural reforms undertaken by the NDA government

But when Economists and leading Rating Agencies talk of " India's economy is growing at a rate , faster than China's " , some clarifications become necessary

Just look at the following comparison between China and India :

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Parameter / China / India

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Population / 1.36 billion / 1.25 billion

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GDP / $ 9.24 Trillion / $ 1.88 Trillion

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Life Expectancy / 75.35 years / 66.46 years

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Area / 9.57 million Sq Km / 2.97 million Sq Km

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Per Capita GDP / $ 6,807 / $ 1,498

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GDP Increase / @ 7% = $ 647 Billion / @ 8% = $ 150 Billion

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Now , of course , it is entirely possible for India's absolute GDP increase to overtake China's absolute GDP increase , if

> China's growth-rate keeps declining ( > 6 % > 5 % > 4 % > 3 % .... )

and ,

> India's growth-rate keeps accelerating ( > 9 % > 10 % > 11 % ......... )

Except that you don't have to be an Economist to guess that no such thing will ever happen !

It is not that I love NDA less

It is just that I love enlightenment more !

--- hemen parekh

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21 June 2015

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Monday, 8 June 2015

World Migration Day

In 5 months ( Jan-May 2015 ), some 50,000 migrants from North Africa , crossed Mediterranean Sea in rickety boats, to land on shores of Italy

That is some 10,000 per month ( soon reaching 100,000 per month ? )

Irrespective of EU countries' decision to admit only 20,000 per year , by 2020 this figure could reach 1 MILLION per month !

Why this huge migration ?

Apparent Reasons :

> ISIL is terrorizing Syria / Iraq

> Boko Haram are doing the same in Nigeria

> Houthies are following both in Yemen

> Libya is facing a civil war

> North and South Sudans are at war

> Tunisia is boiling with massive unrest

> Taliban is rearing its ugly head in Afghanistan

> Egypt is simmering with angst against Muslim Brotherhood

> Pakistan is becoming terrorists' training ground

> Turkey / Lebanon / Jordan are getting overrun with refugees

> All over Mid-East , Shias and Sunnis are fighting

In short , most of African and Mid-East countries are exploding with local wars , under Europe's soft underbelly and porous right borders

Real Reasons :

Millions of citizens of these countries are facing unemployment and consequent starvation ( when not getting killed by terrorists )

It is no different with migrants from Bangladesh and Myanmar trying to find shelter in Indonesia / Philippines / Australia / Thailand

Closer At home :

Of entire World's 800 million " malnourished " ( euphemism for " starving " ) people , 200 million are in India

Only , instead of calling them " Starving " people , we choose to call them , " Naxalites / Maoists " etc !

We fail to realize that there can be no political solution to " Starvation " !

Where can they migrate ? There is no " Promised Land " on India's borders !

Solution ?

Since no developed country wants to admit migrants from poor countries , let UNO declare , Antarctica as " United States of Migrants " - USM

And fix quotas of migrants that each poor country can dispatch to USM each year ( - roughly in proportion to " Starving " population of each poor country )

Then contribute funds for creating settlements in Antarctica ( - in any case , due to Global Warming , ice-shelves are melting and soon Antarctica will become habitable ) .

For the rich countries , this would be the most , economically and socially viable solution

Let a beginning be made by declaring 27 June , as

" World Migration Day "

hemen parekh

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09 June 2015

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Sunday, 7 June 2015

The Bitter Truth

After 44 years , India and Bangladesh have settled their boundary dispute by exchanging a few thousand acres of land

Hopefully , this will end illegal migration / export of militancy etc , besides giving legitimate citizenship to 50,000 , so far stateless , persons

Will this settlement lead to ,

> huge economic loss to either of the countries ?

> increase in terrorist activities / illegal infiltration ?

> significant reduction of national security ?

Clear answer is : NO !

If anything , it will vastly improve neighborly relations and benefit the people of both the countries

Why can't we resolve our " Kashmir Border Dispute " with Pakistan , in a similar manner ?

By both countries accepting the Line of Actual Control ( LaC ) as an International Boundary ?

In the past 60 years , I remember only 3 Indians to have the courage to suggest / support such a solution ( not counting insignificant , myself ). They were :

> Vasant Sathe

> Faroukh Abdullah

> Prashant Bhushan

Reason is simple as to why a military action to regain lost territory ( both sides claim to own the entire Kashmir ) , just won't work for the following reasons :

> An all out war will cause loss of millions of lives on both sides

> Intervention of UN / America / Russia / China will create a fresh limbo

( political stalemate / comma ) without a permanent resolution

> It may end-up creating an independent country of " Kashmir " - something

that neither India / Pakistan want, nor will help the Kashmiris

If this is so crystal-clear , then what is stopping the politicians of both the countries to pursue this path ?

Simple !

Lack of courage due to fear of losing power !

Unless Shri Narendra Modi and Shri Nawaz Sharif muster the courage to tell - and sell - this bitter truth to their countrymen !

What next ? Arunachal Pradesh vs Aksai Chin ?

--- hemen parekh

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08 June 2015

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Saturday, 6 June 2015

Barking Up The Wrong Tree ?

Not having eaten Maggi in past 10 years , I have no love lost for this packaged food

But I keep asking myself :

" Aren't we barking up the wrong tree ? "

What about :

> Hundreds of other so-called packaged foods being sold by millions of tons by Farsanwalas
on every street corner , under filthiest of conditions ?

> Thousands of tons of Pav-Bhaji / Vada Pav , being sold by hawkers on every footpath , with
swarms of bees / mosquitoes camping right on these foods ?

> Tons of Papad being " manufactured " in most unhygienic conditions - on top of gutters to enable
quick drying ?

> And what about the way your favorite Bhel Puri / Chat get made on Mumbai beaches ?

> Hundreds of tons of adulterated Ghee being sold in open market ?

> Have you seen the aluminum containers in which your milk is delivered by Bhaiyyaji ?

> Have you ever peeped inside a road-side " Bakery " ?

I can go on and on ! The list would motivate you to give-up on all food articles sold in India !

Of course , there can be no forgiveness for Maggi , if it contains more than permitted levels of lead /
MSG etc

But is anything being done for adulterated hooch which kills hundreds every year ?

Is this some kind of a motivated campaign by rivals or have we just lost all sense of proportion ?

Then , it is also possible that some politicians / netas / bureaucrats , are trying to impress the gaulible
people !

- hemen parekh

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07 June 2015

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