Blog

Saturday 11 June 2016

Level Playing Field ?

It just does not exist - so forget about it and make the most of what you have !

For Corporate , it is absurd to demand and for a Government , it is futile to attempt to provide a Level Playing Field

There are no two countries where ALL the resources and the ENTIRE industrial Eco-system , is identical or even closely similar

Inputs for any industry are :

# MANPOWER

* Ave age / Education Level / Skills / Work Ethics / Productivity / Working
Hours / Holidays / Salaries

# RAW MATERIALS / COMPONENTS AVAILABILITY

* Local vs Imported / Supply Chain / Logistics / Duties & Taxes / Quality

# FINANCE / BANK INTEREST RATES

* Equity / Loans / Interest Rates / Collateral / Duration / Terms

# LAND / LOCATION ( of manufacturing unit )

* Availability / Prices / Transport / Availability of Skilled Manpower

# INDUSTRIAL POLICY ( Central and State Governments )

* Exemptions / Incentives / Restrictions / Inspections / Permissions /
Compliance

# MARKET

* Domestic / Overseas

# TECHNOLOGY

* IPR / Patents Regime / Copy-Rights / Home-Grown / Licensing / Royalty

# TAXATION

* High / Low Corporate Income Tax / Capital Gains Tax

# INFRASTRUCTURE

* Internal ( Road-Rail Network / Air-Sea connectivity ) / Warehouses

# COMPETITION

Monopoly / Oligopoly / Cartels / Fierce & Free competition of many

Now , Industrialists / Businessmen , all over the World , will continue to compare the INDUSTRIAL INPUTS existing in their own country with the following BENCHMARKS :

# Most Business Friendly ................................... Ireland

# Lowest Corporate Tax...................................... Kuwait ( 0 % )

# Lowest Hourly Wages ( PPP basis ).................... Bangladesh ( $ 0.25/hr )

# Highest Working Hours.................................... Mexico ( 42.5 / week )

# Least Govt mandated paid holidays................... USA ( Nil )

# Highest Manpower Productivity......................... Switzerland

# Lowest Bank Interest Rates............................. Denmark ( 0.05 % )

# Demographic Advantage of a Young Population....India

# Ease of Introducing unpopular reforms.............. China ( Dictatorship )

There is , quite likely , some parameter on which a Country can claim to have distinct advantage over all the other countries

It could have something to do with its Geographical situation / Historical evolution / Political System / Legal Frame-work / Societal Norms etc

It is not possible to replicate advantages of all of these Benchmark Countries , into any one single country

At the same time , it is very important to keep studying these Benchmarks and ask ourselves :

" How have these countries managed to reach , where they are ?

What REFORMS can we introduce in our own system to catch-up ?

Are there any parameters in which we ourselves are a Benchmark to others ?

What should we do so that we do not slip-up where we are ourselves , some

kind of a Benchmark , to the rest of the World ?

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12 June 2016

www.hemenparekh.in / blogs

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Thursday 9 June 2016

A Question and an Answer ?

THE QUESTION :

Speaking at the launch of a book "World 2050" in Mumbai on 09 June 2016 , Reserve Bank Governor Raghuram Rajan said :

" The technological progress is making the middle class anxious about job security globally.

The emerging threat is it's not the guy in Bengaluru but the robot next door who's going to take your job

There's

* flexible manufacturing,

* big data,

* connectivity, and

* robotics

which are changing the entire landscape, wherein only professionals in the hi-tech sector or those lower down like security guards are feeling secure, while leaving the middle class anxious.

There's a sense that middle class jobs are disappearing either because of technology or globalization and as a result, something has to be done.

Nobody knows what, but the populists have the answer," he said, adding this results in attitudes like keeping out immigrants and also technology.

Increasingly, the debate is moving to emerging markets, where there is a worry, perhaps industrial countries will get right this time and perhaps won’t need us to produce stuff.

What happens if all these robots, flexible manufacturing, 3d printers... They no longer need mass production that was ladder to growth in emerging markets.... What happens to countries like Vietnam, India and Africa if the ladder for steady growth is removed ? ”

This is a QUESTION rather than a STATEMENT, something we have to think about when we are looking forward 35 years,” he added.

THE ANSWER ( but certainly , not " Populist ) :

My blog dt : 9 September 2015

" BACK FACTORY " OF THE WORLD ?

China is known as the " Factory " of the World

India is known as the " Back Office " of the World

Can India become the " Back Factory " of the World ?

Wrong question !

Right question is : WHEN can we become the " Back Factory " of the World ?

Answer is " hiding in plain sight " !

This week , an astronaut , sitting in a satellite 400 km above the earth and hurtling through space at 16,000 km per hour , operated a robot on the earth

Earlier , scientists sitting in NASA space centre or in Shri Harikota space centre , have operated Mars Rovers / MOM ( Mars Orbital Mission ) remotely

From a distance of millions of miles

And soon , astronauts will be sending emails to earthlings from millions of miles away , using " Space Internet " on their Mobile phones

Invariably , each such team of scientists , comprised Indians !

So , WHEN can our scientists - and software Start Ups - enable Indian workers , sitting in Hyderabad / Chennai etc , to operate / manipulate , machinery in factories of Europe / America / China ?

I believe this can become a reality by 2020 , if Central Government and State Governments , just get out of the way of our scientists / Start Ups and leave them alone !

Then tell them :

" You are our next generation of Freedom Fighters . Free our millions from

poverty / starvation / jobless depression / ignominy / suicides

Like war - ravaged people of North Africa , Indians cannot invade Europe / Australia / Canada , in search of jobs / better life

We depend upon you to bring the jobs to India - jobs such as ,

* Operating Machinery in Factories abroad

* Controlling Air Traffic at Airports around the World

* Operating upon patients in Hospitals , all over

* Teaching students in Schools , in remote Africa

* Any job that currently requires immediate presence of a worker

And , if you set up a " Back Factory " , you don't need to pay Corporate Income Tax for next 10 years !

Simply register on web site of Income Tax Department as a " Back Factory " owner and file annual " Zero Corporate Tax Return "

When this happens ,

> Millions of skilled Indian workers will operate factories around the World ,

sitting in , internet connected " Back Factories " in small Indian towns

> Foxcon will not need to replace its high-wage Chinese workers with one

million robots ( as officially announced sometime back )

At half the wages of those Chinese workers , Indians will operate Foxcon

factories , all over the World , remotely !

> " Contract Labour Act " will need to be replaced with " Back Factory " Act

> " Minimum Wages Act " will need to be scrapped !

> India will not need to fight with WTO on " Manpower / Service Exports "

> " Make in India " will morph into " Make from India "

I hope NDA Ministers and members of NITI Aayog will ask , Narayan Murthy / Sam Pitroda / Azim Premji / Sundar Pichai / Satya Nadela / Ray Kurzweil etc :

" How soon can this be done ? How can you help ? "

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10 June 2016

www.hemenparekh.in / blogs

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Wednesday 8 June 2016

Wealth of India ?

DNA ( 01 June 2016 ) carries a news snippet titled :

" India , a wealthy country but Indians quite poor : Survey "

It quotes figures of " Total Individual wealth-2015 " of top ten countries

as follows :

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Country / Total Individual Wealth ( $ Billion ) / Population ( Million ) / Per Capita Wealth ( $ )

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# USA / 48,700 / 322 / 151,242

# China / 17,300 / 1360 / 12,700

# Japan / 15,200 / 126 / 120,634

# Germany / 9400 / 82 / 114,634

# UK / 9200 / 64 / 143,750

# France / 7600 / 64 / 118,750

# India / 5200 / 1290 / 4,031

# Italy / 5000 / 61 / 81,967

# Canada / 4800 / 35 / 137,142

# Australia / 4500 / 23 / 195,652

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Seeing India's rank at 7th place , I got elated - just for a moment !

Then wondered :

" What would be our rank , if we were to figure out PER CAPITA wealth of these countries ? "

That made me add in above table , last 2 columns ( to the DNA figures )

This threw up following surprises :

* We would move down to the bottom of the heap on PER CAPITA basis !

* In terms of PER CAPITA wealth , Australia moves up from bottom to TOP !

* Australia's PER CAPITA wealth would be 48.5 times our per capita wealth !

That reminded me that , the Supreme Court appointed Special Investigation Team on black money has asked the Directorate of Revenue Intelligence (DRI) to verify whether USD 505 billion had flown out of the country during 2004-13, when Congress-led UPA was in power.

Now , assuming that this figure is true and that NDA government succeeds ( don't ask for a target date ! ) in bringing back , ALL of these USD 505,000 million , how much would our PER CAPITA wealth go up ?

505,000 Million / 1290 Million = $ 391 ( approx Rs 27,000 / - only )

In the meantime , following news appeared yesterday :

India's black money economy is estimated to be over Rs 30 lakh crore or about 20% of total GDP, a number that a new study says has been contracting gradually - still bigger than the overall economic size of countries like Thailand and Argentina.

So the BLACK MONEY generation works out to approx Rs 23,256 / - PER PERSON PER YEAR !

Year after Year !

QUESTION :

Should we be spending time on trying to bring back those Rs 27,000 per person , stashed abroad ( a ONETIME BENEFIT , if it ever materializes ! ),

Find a way to eliminate the generation of Rs 23,256 / - worth of BLACK MONEY per person, YEAR AFTER YEAR ?

ANSWER :

As repeatedly requested by me , let us focus on future by

# Replacing existing paper Currency Notes of Rs 500 / 1000 , by PLASTIC currency

notes , each embedded with RFID micro-sensors ( no need for demonetization )

# Assigning each NEW note with a UNIQUE, IP V 6.0 web address , linked to Serial

Number of each note ( in " Internet of Things - IoT " mode )

# Launch of mobile app " BLACK-MAIL ", for exclusive use of IT / ED etc, to track

accumulation of ( say ) , Rs ONE crore worth of notes in any ONE sq meter area !

# Generate automatically / dynamically , CURRENCY MAPS of INDIA , to track

money ( read my earlier blog for details )

I leave it to the Economists and Experts to figure out the amount by which our GDP will go up due to this SIMPLE INTERVENTION , which does not require passing of any law !

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08 June 2016

www.hemenparekh.in / blogs

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Monday 6 June 2016

Skill Capital of the World ?

While announcing major reforms in, " Apprenticeship Training Scheme " ,

Shri Narendra Modi said :

" Let's make India the Skill Capital of the World "

He went on to add :

" By next decade, India will have 50 million surplus manpower for export "

But , we all know that :

# NSDC ( National Skills Development Corporation ) has a target to impart

" Skills " to 300 million youth by 2022 ( approx 50 million / year )

# As of now , only some 27 % of college graduates are " employable "

# 50 % of our current population (approx 550 million) are under age of 27

In light of the foregoing , the reforms ( in Apprentice Scheme ) announced are most welcome , especially in respect of the following :

# Inclusion of " SERVICE " sector

# Inclusion of Graduates / Post Graduates from Arts / Science / Commerce

# Self Assessment by Companies

# Freedom to Companies to introduce own NEW courses

# Freedom to engage apprentices from ANY state

# Doing away with trade-wise ratios

It could have been still better if :

# Offset against CSR ,( of the expense incurred by Companies on

Apprentice Scheme ) was NOT restricted to only those Companies

which engaged apprentices in excess of mandatory 2.5 % of employee

strength

# For 6 trades , training duration was NOT reduced from 3 to 2 years

# Stipend payable was lower than specified 70% / 80 % / 90 % of

Semi-Skilled minimum wages ( of approx Rs 6000 per month )

# Minimum Mandatory limit was raised from 2.5 % to 5 %

# There was NO upper limit for engaging ( currently 10 % of employees )

But , all of these , will still be " tinkering " !

Nothing bold enough to turn India into , " Skill capital of the World "

None of the above-mentioned reforms will enable us to train / skill , 50 million youth , EVERY YEAR !

Now consider the following :

# If current diasporas of 21 million Indians working abroad , remit $ 70

Billion annually , then how much can 50 million surplus manpower

remit to their relatives in India , by 2026 ?

Can current 21 million plus another 50 million ( a total of 71 million ) ,

remit , $ 250 Billion , by 2026 ? Let there be NO doubt !

# Are Government machineries / incentives , enough to train 50 million

youth each year , even under this " Reformed Scheme " ?

# If one training Institute can train ( say ) , 1,000 trainees each year ,

we would need some 50,000 Training Institutes , each with an

investment of Rs 100 Crores ( Land + Building + Plant and Machinery ) ,

entailing , a total investment of Rs 50 lakh*crore !

# Government has neither such funds , nor an administrative machinery to

set up 50,000 training institutes , even in next 5 years !

There is only one way

This can be made to happen , as follows :

* Turn this entire exercise into a PROFIT MAKING proposition in the

hands of PRIVATE SECTOR ( Individuals + Corporate + Start Ups )

* Enable BLACK MONEY to be invested in private sector SPVs called,

" XYZ Manpower Skilling SPV ",

with no questions asked as to the source of funds invested ( domestic

or Foreign )

* Grant INDUSTRY status to such SPVs

* In order to attract PRIVATE Individuals / Corporate, to come forward

and set up these 50,000 SPVs ( before March 2018 ), provide a 10 year

TAX HOLIDAY , to " Manpower Skilling Industry "

Much in the same way NITI Aayog has recommended for companies

investing in Electronics manufacturing activities . And as against

expected creation of 20,000 jobs due to this proposed policy in

Electronic Industry , my suggestion would create 50 LAKH jobs @ 100

jobs / SPV !

Also worth noting that :

NITI Aayog is recommending this tax-holiday policy for only NEW units

being set up , without any estimate as to the amount exchange likely

to be earned through exports from these NEW units

On the other hand , my suggestion has a definitive potential to bring in

remittances worth $ 250 Billion by 2026 !

# Just like various IIMs ( and other reputed Management Training

Colleges ) , permit these SPVs to charge to the Companies conducting

Campus Interviews ,

* Fixed Participation Fees

* Variable Student Support Fees ( per student hired )

# SPVs will be allowed to devise their own courses / curriculum and

conduct their own exams / award their own certificates / diplomas

# SPVs will be free to charge their own fees and compete for placement

of their graduating students , in an atmosphere of open and free

competition ( much as it works today for most educational institutes )

# Government may continue to provide STIPEND SUBSIDY as proposed

in the Reforms , but only to Indian MSMEs

My proposal has the potential to bring back those Rs 35 lakh*crore that Indians have siphoned abroad , between 2003-13

As far as I can see , there is no other way , India can either become the Skill Capital of the World or be in a position to export 50 million surplus Skilled persons

I envisage an alternate scenario under which Europe , in order to overcome its shrinking population and resultant " Skill Shortage ", starts , intensive " Skills Training " of those millions of unskilled migrants from Middle East and Africa , who are flooding the shores of Italy and Greece

That will put to rest , Shri Modiji's dream of exporting surplus skilled manpower !

It is still not too late for some " Out of the Box / Bold " decisions !

A shining example of what a PROFIT MOTIVATED / PRIVATE sector can achieve is Elon Musk ( of TESLA motors ) , who , within a short span of 2 years , has landed a re-usable rocket on a floating platform in sea 4 times - something which NASA could not achieve in 50 years !

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08 June 2016

www.hemenparekh.in / blogs

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Make Yourself Heard

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