Epilogue of Exit ?

If Referendum was the Prologue , Exit will be the Epilogue

And George Osborne ( Chancellor of Exchequer - UK ) fired the first salvo yesterday by announcing :

"  In UK , we will reduce Corporate Income Tax from 20 % to 15 % "

Earlier last week , he told his countrymen :

" We will have to learn to live within our means "

He wants UK to avoid the mistake ( of expenses exceeding the earning ) which is forcing many European countries ( and some South American countries ) , to launch a series of unpopular " Labour Reforms "

Osborne knows that for 45 % of its world-wide exports , UK depends upon " Tariff Free " entry of its goods into EU

Once UK exits , EU will impose 20% - 30 % tariff on British goods , making them uncompetitive

That will force many current UK factories ( British-owned or EU / USA / India owned ) , to relocate inside EU , leading to massive job losses in UK

By reducing Corporate Income Tax , Osborne hopes to retain those units in UK , thereby saving these jobs

This is just the beginning !

As the full impact of BREXIT unfolds , expect the following tougher / unpopular measures :

*   Freeze wages / salaries of government employees, and / or cancel annual salary increments / leave etc

*   Cutting back on free ( or highly subsidized ) Public Services ( Health - Transport - Education etc )

*   Freeze on recruitment in government departments , and / or increase working hours

*   Pull out of expensive overseas military interventions ( eg: Syria )

*   Negotiate for reduction in UK's contribution to various Word Organizations

*   Cut out " Social Security " available to EU immigrants ( eg; 850,000 from Poland )

*   Stop immigrants from Iraq / Syria / Pakistan / Afghanistan etc from coming in

*   Without violating WTO rules , introduce all kinds of indirect subsidies for goods manufactured in UK

*   Go into overdrive to " Sell " British Goods to India

In short , Osborne will leave no stone unturned to make UK , a " Low Cost Economy " to remain competitive and not lose the " Export Market " when EU tariffs go up . And make inroads into new markets

Although not faced with any kind of " Exit Crisis " , we in India , need to take following steps RIGHT NOW , to ensure that our economy, does not become a " High Cost Economy " leading to a crisis :

*  Abolish Personal Income Tax ( to eliminate CORRUPTION )

*  Introduce RFID sensors in Rs 500 / 1000 ( plastic ) currency notes  ( to eliminate BLACKMONEY )

*  Introduce decreasing Corporate Income Tax , linked to rising Employee Count for companies ( JOB CREATION )

*  Introduce EB-3Scheme to bring back $ 500 billion of Black Money stashed abroad by Indians

*  Create Self Employment ( See my blog : A NewEconomic Order - Start Up Act , 2015 )

*  Enable Indians to remotely operate / maintain , factories / offices around the World , (  BackFactory )

*  Increase accountability of Govt Officers by implementing mobile app " ISIN > < U SIN "  

Right now , new Ministers are being sworn in Rashtrapati Bhavan

Our only hope is that , some of those new faces will have the courage to introduce the above-mentioned reforms , without worrying about " losing face "

It is better to have tried and failed rather than having failed to try !

Or will this NDA government also get consigned to history's dustbin when 2019 elections arrive ?

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05  July  2016

www.hemenparekh.in / blogs

   

How to break the Vicious Circle ?

After recent announcement of 7th Pay Commission recommendations , there were many debates and " Expert Interviews " on TV channels

When asked :

" Will placing of Rs 1 lakh*crore into the pockets of government employees , push up the prices of all kinds of products ? " ,

experts ( including Shri Jaitleyji ) agreed that there is a good chance that the prices may go up by 1.5% to 2%

Of course , the common man has known this for ages !

Every time he got Diwali bonus or annual salary increment , the prices in shops invariably went up !

It was , as if the Shopkeepers ( and the Manufacturers too ) , were just waiting for these announcements 

Of course , when product prices go up , the CPI goes up 

In turn , the CPI linked wages / salaries go up , raising the cost of manufacture

It is a vicious circle of prices chasing the salaries / wages !

Now take a look at any " product " in your house ( Consumable or Durable )

And ask :

"  How much of its manufacturing cost is  Manpower Cost  ( wages / salaries paid to the people engaged in manufacturing it )  ? 

For most " products " , 

#  Salaries and wages would range from 10 % to 30 % 

#  Overheads of approx 30 % ( once again,mostly comprising salaries / wages )

#  Raw Material  + Bought Out Component would cost ( 40 % - 60 % )

And it is the same break-up ( of cost ) for the company which supplied that raw material or that component 

This Cost Structure repeats again and again , as you continue to " drill down " the entire " Supply Chain "  !

Not surprising , if you consider that eventually , everything that we see around us ( in the form of products ) , comes out of Mother Earth - and FREE !

World has no material cost  !

At each stage of processing ( from digging out that earth or cutting down that tree ) , all that adds " value " is nothing more than the wages / salaries of people who added that " value " and increased its usefulness 

Now , you get the big picture 

If , somehow , those salaries / wages remained " low " at each stage of processing / manufacturing , then the final product would come out " Cheap " 

And lesser product cost would lead to a lower selling price and consequently , a smaller increase in CPI 

Smaller increase ( or no increase ? ) in CPI , would mean smaller ( or no ) rise in CPI-linked wages / salaries

No problem ! 

People would need to earn lesser wages / salaries , to buy that product  !

There will be less demand to raise those salaries !

But , question is :

How can we ,

*  break the " Vicious Circle " ( of ever rising product-prices chasing rises in

    wages / salaries ) , and

*  turn it into a  " Virtuous Circle " ( of ever decreasing cost of manufacturing

   leading to lower selling prices , leading to lower CPI rise , leading to lower

   demand for salaries / wages ) ?


Can we learn something from the following lessons ?


In 1986 , inflation ( price rise / CPI etc ) , climbed to 9.2 % in Australia , forcing PM , Bob Hawke to tell his countrymen :

"  We have , for the time being , to accept reduced Standard of Living , and permanently , increased Standard of Effort "

Then he went on to :

#  Limit workers wage-increases to around 2.3 % per year

#  Appealed to Directors / Senior Managers , not to raise their own salaries

#  Reduce Public Services ( Government owned / operated services )


In same year , PM Lee of Singapore was facing 0 % growth in GDP !

So , he ordered one year WAGE FREEZE for all employees ( government as well as private sector )

Despite the fact that in 1986 , Singapore ( with a population of just 4 million ) , exceeded India's exports of approx $ 9 billion(with a population of 800 million !)

Why was Lee worried so much ?

Having no natural resources ( that can be dug out of earth ) , Singapore's entire " Value Addition " consisted of salaries / wages of its citizens !

He could not afford to let Singapore become a " High Cost Economy "

Right now , many European countries are trying to copy PM Lee  - albeit in a very diluted way - by introducing " Austerity Measures / Labor Reforms ", in their high cost economies

Governments of these countries are telling their citizens :

"  We have been living beyond our means and spending far more than we earn.

   To maintain our high Standard of Living , we have borrowed heavily from 
   
   everyone , raising our external debt to several times our GDP 

   With our high cost economy ( welfare nation ) , our product costs are so high

   that no one wants to buy these and our exports are shrinking !

   We are even forced to sell our infrastructure assets and companies to the 
   
   Chinese ! "


And with rapidly rising wages , even the Chinese are getting worried !

Chinese manufacturers ( government + private ) are going all out to replace high paid workers with robots ! Some 65,000 robots in 2015 alone - nearly 85 % of all the robots installed world-wide !

Now of course , freezing wages / salaries across the board cannot be the answer for India to avoid becoming a High Cost Economy

But that does not mean we cannot try some " Out of the Box " innovations such as :

#  Wages / Salaries

    Assuming that A-B-C Analysis ( 10 % at the top / 80 % in the middle / 10 %

    at  bottom of the pyramid ) holds good for the our country's wage-bill as a 

    whole , it would follow that the TOP 10 % ( of the working class ) , take away

    90 % of wages / salaries of the entire country ( mostly in private sector )

    If they accept a 10 % cut in their salaries / wages for one year , that would 

    lead to , 9 % reduction in costs !

    Let us reward companies adopting this salary-cuts with 2 % reduction in 

    their Corporate Income Tax - a very powerful motivation !

    

#  For those the middle 80% of the working population , abolish Personal

    Tax , with the condition of NO wage increases ( increments + bonuses ) , for 

    2 years  ( this will effectively increase their take-home pay by 10 % per 
     
    year , allowing them to maintain their standard of living , without pressing

    for higher wages and running to labour unions  ! )



#  For the bottom 90 % of the people ( taking just 10 % of the total wage bill ),

     let us implement the just framed proposals of the Labour Ministry , for 

     raising their minimum wages in 45 economic activities covered by the 

     Minimum Wages Act , 1948 . Also , exempt them from Personal Income Tax


Unless we act fast to reduce our " Wage / Salary " bill , following consequences

are inevitable :


#   Our products will become noncompetitive in the export market , which has

      been continuously shrinking for the past 18 months


#   Instead of exporting " finished products " , we will end up exporting our Raw

     Materials to " Low Wage Cost " economies , for processing / value-addition


#   More and more Indian Manufacturers will switch over to automation through

     wide spread installation of Robots , eliminating high wage workers


#   Our goal of raising share of manufacturing in our GDP from 16 % to 25 % ,

     will not materialize



I believe , we must stop getting caught up in some " Ideological " debate , just

because we are a Democracy and cannot act like China 


If my suggestion is implemented ( with whatever modifications considered

necessary ) within the next 12 months , we still have a fighting chance to keep

ours , a " Low Cost Economy " and avoid the fate of those developed countries 

which are realizing their mistakes , 30 years too late !


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04  July   2016

www.hemenparekh.in / blogs

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Make    Yourself    Heard

Dear Visitor :

It is time for YOU to speak up - and demand that YOU are heard

By emailing this suggestion - incorporating your OWN improvements - to the following Policy Makers

(  Just multiple copy all the following Email IDs into the Recipient column of your Outlook and Copy / paste this suggestion in the Message Box ) :

    narendramodi1234@gmail.com; 38ashokroad@gmail.com;ajaitley@del5.vsnl.net.in; jayant.sinha19@sansad.nic.in;piyush.goyal@gov.in;nitin.gadkari@nic.in; spprabhu1@rediffmail.com;bandaru@sansad.nic.in;smritizirani@nic.in;nsitharaman@nic.in; ravis@sansad.nic.in;sureshprabhu@irctc.co.in;prakash.j@sansad.nic.in;secy-ipp@nic.in; amitabh.kant@nic.in; shaktikanta.das@nic.in; rsecy@nic.in; adhia1981@gmail.com; ceo-niti@nic.in; atul-chaturvedi@nic.in; uma.bharati@sansad.nic.in; d.pradhan@sansad.nic.in; rprudy.office@gmail.com; rudypr@rediffmail.com; eam@mea.gov.in; mosvks@mea.gov.in; mvnaidu@sansad.nic.in; mnaqvi@sansad.nic.in; rao.inderjit@sansad.nic.in; mljoffice@gov.in; sadananda.gowda@sansad.nic.in; ministerminority@gov.in; najmah@sansad.nic.in; minister-ca@nic.in; ramvilas.paswan@sansad.nic.in; gandhim@sansad.nic.in; akumar-alpha@sansad.nic.in; jpnadda@sansad.nic.in; hm.moca@nic.in; geete@sansad.nic.in; simratbadal@yahoo.com; ns.tomar@nic.in; rmsingh@sansad.nic.in; tc.gehlot@sansad.nic.in; dr.harshvardhan@sansad.nic.in   

    

     



    







  

FDI : By any other name ?

Many years ago , Shakespeare wrote :

" A Rose by any other name , would smell as sweet "

English-speaking Americans have turned this around to say :

" FDI by any other means , would work as well "

They are calling their FDI , " Invest in US and get Green Card " scheme

Officially called , " The EB-5 Immigrant Investor Program " , it invites foreigners to invest in USA , through following routes :

#   " Direct Investment Route " , which requires,

     *  Starting a new Business and creating at least 10 full time local jobs by bringing in $ 1 million

        But this process is very cumbersome

#   " Central Investment Program " , which requires,

     *  Bringing in and investing $ 500,000 in a Government approved EB - 5 project in America

     *  Get your full money back after 5 years

     *  If you are lucky , you may earn 0.5 % - 1 % return every year

In 2015 , 18,000 foreign citizens invested ( approx ) $ 9 Billion in US under these programs  - peanuts compared to a total of over $ 231 billion worth of FDI in USA in 2014 . Among these were 111 Indians

Now , I admit that no foreigner is dying to get a " Green Card " in India - and therefore unlikely to take advantage of a similar scheme , if we were to launch one !

But , we can come up with a scheme that will motivate 111,000 Indians to bring in and invest $ 500 billion within ONE YEAR ! ( remember that amount siphoned out of India illegally and stashed abroad by Indians , between 2005-2015 ? )

MY  SUGGESTION :

#  NAME  OF  THE  SCHEME :

    EB-3 Scheme ( Earn by Bring Back Black )

#  WHO  CAN  INVEST  ? 

    Any Indian citizen who has stashed away undisclosed / illegal assets abroad

#  WHERE  CAN  THEY  INVEST  ? 

    Scheme A >  Repay those loans taken from Indian Banks forming Rs 7 lakh*crore of NPA

                        Willful Defaulters repaying bad loans will be spared prosecution

                        No need for Govt money ( er , Tax-Payer Money ) , to bail out those banks !

  

    Scheme B >  Invest in State-wise Infrastructure SPVs ( not Central SPVs ) , managed by Private Sector

                       These will be approved by each state for implementation of the following projects within the state:

    *  Roads / Bridges / Ports / Airports / Smart Cities / Dams / Lakes-Ponds for water conservation / Forestation

    *  Healthcare / Education / Skills Development / Swatchh Bharat / Methane from Garbage  / Digital India

    *  Renewable Energy / Manufacture of Electric Vehicles / Setting up of Electric Charging Stations etc 

   

    All such State SPVs will need to be approved by the Central Government , for which the State will need to agree

    for full cooperation in implementation of the Central River Interlinking Project

#  HOW  MUCH  MUST  THEY  INVEST  ?

    No upper limit but a minimum of Rs 10 crores

#  WHAT  PROTECTION FOR  INVESTORS  ?

    No questions asked as to the source of funds , whether brought in from abroad using official channels or

    deposits made in CASH from local lockers ! No penalty , nor any civil / criminal action against investors

#  WHAT  INCENTIVE  FOR  INVESTORS  ?

    All interest / dividends paid out by the SPV , will be tax-free for 10 years if re-invested in any other similarly

    approved SPV

#  HOW  LONG  CAN  THEY  AVAIL  OF  THIS  SCHEME  ?

    This scheme will open on 01 April 2017 and close on 31 March 2018

#  HOW  CAN  INDIA  BENEFIT  FROM  THIS  SCHEME  ?

    *  Inflow of $ 500 Billion ( Rs 34 lakh*crore ) within ONE YEAR

    *  Generate 50 million jobs by 2020

    *  State Governments will go all out to

        >   Motivate private sector to set-up Infrastructure SPVs within their State

        >   Vastly simplify government approval process

        >   Eliminate / Reduce , rules , procedures and permissions

        >   Introduce " State level Incentives " to attract those BLACK MONIES into SPVs

I believe , with introduction of EB-3 Scheme , there will be such fierce competition between the States that India's rank in " Ease of Doing Business " will jump from current 130 to within TOP FIVE !

And all of this without having to pass any law in the Parliament - and with least dependence on bureaucrats !

Dear Policy Makers :

With two years already gone without making much of a dent ,  I urge you to stop tinkering with INCREEMENTAL IMPROVEMENTS

Promising freebies before State Elections , won't take you beyond 2019 !

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02  July  2016

www.hemenparekh.in / blogs

   

       

         

     

10 Day Deadline ?

DNA ( 30 June ) reports :

In a meeting to review PRAGATI ( Pro-Active Governance and Timely Implementation ) , Prime Minister Shri Modi , pulled up officials for the large volume of complaints related to the e-commerce sector and asked for taking steps to decisively address issues and an effective follow-up action within next 10 days

There is no doubt , the concerned officers will , in turn , pull-up those e-com companies , all of which are in private sector

Are we barking up the wrong tree ?

If they fail to quickly resolve customer complaints , managers of those private sector firms stand to lose their jobs when their bosses discover that such non-redressal means losing sales and market-share

But citizen's complaints to Government officers are perhaps , a thousand times more !

And when these go un-attended , no one knows and no Government officer need fear losing his job !

But , on the other hand , if they perform and deliver , no citizen will grudge that Rs 1 lakh*crore annual burden that 7th Pay Commission recommendation will impose on the treasury

Whether we like it or not , nothing motivates a person to perform , as much as the " FEAR INCENTIVE " - which is sadly missing in the Government Sector !

The only way this terrible situation can get corrected is to implement following Mobile App ( I SIN > < U SIN ) , repeatedly sent by me to NDA ministers , over past 2 years

What is more , there will be no need to fill-up those 2 lakh planned vacancies in various government departments , over the next 2 years !

Allow me to " prophesize " :

There will be no need to even fill up vacancies arising out of resignations / retirements / terminations / deaths etc , during next 2 years  !

Expect current govt employee strength to shrink from 32 lakhs to 30 lakhs by Dec 2018 !

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Sunday, 18 August 2013 ( Blog date )

I   SIN  >  <  U  SIN

That could be the name of an android app ( I Seek It Now > < U Solve It Now )

To be developed by India’s Central Home Ministry for successful implementation of proposed,

“ Delivery  of  Services  Act “

The app will come pre-installed on those mobile phones which Government of India plans to distribute FREE , to some 400 million “ Poor People “ of India , before the 2014 National Election ( and on those 220 million Aakash Tablets )

Issuer will enter the Mobile No and that person’s Aadhar Card No, in a computerized central database , before issuing the phone

Hence , no need to login to the App , whose screen will read,

I WISH  TO  SEND  MY  COMPLAINT  TO  THE  FOLLOWING  DEPARTMENT  :

·                  National Commission for Women

·                  Garbage Clearance

·                  Water Supply

·                  Electricity Supply

·                  Roads Repair

·                  Rationing ( Food Distribution )

·                  Police

·                  Bus Transport

·                  Railways

·                  Post

·                  Employment

·                  Education

·                  Irrigation

·                  Building Permits

·                  Revenue / Land Records

·                  Anti Corruption

·                  Other ……………………………………….etc

·                   

(List should not exceed 50)

Touching name of any department name will open a SMS message box where the user will type out his complaint ( in a language of his choice )

There will be option to speak-out and record voice message , for illiterate users

Touching SEND button will transmit the complaint and within minutes, user will receive SMS reply , giving,

·                  Name of Officer responsible

·                  Office Landline No

·                  Mobile No

·                  Email Id

·                  Complaint No

·                  Expected date of solving

Bingo !

Then publish online , a tabulation of departments , arranged in the descending order of the no of complaints received / cleared / pending!

This frugal innovation will bring in Good Governance all over India

Request Nandan Nilekani / Sam Pitroda to help out , even though they may be busy implementing my earlier suggested app , 

“ VotesApp “

I have no doubt that the political party which promises , “ I SIN >< U SIN “ ,  will get voted to power in 2014


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01  July  2016

www.hemenparekh.in / blogs