Wrong Economic priorities ,lop sided growth & flawed statistics

This is the follow up blog on my views dated 15th June 2010 & 27th June 2010 on the topic of “High GDP but low GDP per capita”.

Focussing on statistics , in April-May 2010, IIP witnessed a decent growth of 14 % but this did not cover some vital sectors . Only one sector , machinery and equipment , alone contributed 37 % to this high growth. Transport equipment , metal products and mining contributed another 32 % to IIP growth. This implies that around 70 % growth of IIP was a result of high growth in just 4 out of a total of 19 sectors . Also , that these growth rates have an important factor ‘Low base effect’ . Like manufacturing sector achieved one of the highest growth rates of 19.4 % in April 2010 over a low base of 0.4 % in 2009. Similarly, Capital goods sector’s high growth of 72.8% in April 2010 was over a negative base of 6 % in 2009.

Time to balance out. Else , we will blame Greece, Italy , Europe , China , poor rainfall etc. Etc. for all our ills, forgetting that we never looked at "REAL India" for growth

Get the priorities right and actions STRAIGHT

BJP must be focussed more on right issues than routine struggles !!

Rajendra Pratap Gupta
Email : office@rajendragupta.in

What next ? Rajendra Pratap Gupta

50 years of Congress Misrule : Decline of India as a super power - Rajendra Pratap Gupta

Congress has ruled this nation for more than fifty years. Let’s examine what it did to this nation ?

In the last fifty years , the congress leaders have contributed immensely to deteriorating the economy and suppressing the rights of the common man by denying him the right education and running the economy on the ‘Self serving’ license raj. It was only in the 1990’s that the congress policies led India towards Bankruptcy, and under the instructions of the World Bank , Congress had to liberalise the economy.  We should not forget that as a single party running the nation for more than 50 years, it did not let the common man to get proper education , as ‘The Common Man’ would have protested for change, and this, the shrewd leaders in congress never wanted . BJP was the first government that started the “Sarva Shiksha Abhiyaan” to bring about the change ! Population under the congress misrule has just remained a mere statistics and a vote bank to be used during elections and abused thereafter. Let us also not forget that , congress due to its ‘Single family rule’ got divided into many parts and no one knows which is the original congress and still they talk of unity ? There is a Congress (i) , Congress Nationalist Party  etc . Congress has followed only one game in the name of government , prepare the nation to take on the next Gandhi inheritor no matter what . Respect for talent and merit has never been a norm in the congress party . The party that cannot practice democracy at home , how can it practice Democracy in the party, leave alone democracy in the nation.  Respect for democracy and talent in congress is a cruel joke . Congress is nothing but the rule of Gandhi family .  

Below is an ‘Eye Opener’ on what Congress’s contributed to this nation :

A Failed Judiciary :

 

On Feb 6, 2009, the Supreme court said that , the Criminal justice system has collapsed – Making the chilling observation, which to many only confirmed the widely held perception of the erosion of the system, a Bench comprising Justices B N Agrawal, G S Singhvi and Aftab Alam also said that the lower judiciary had decayed. "The courts of magistrate and munsif have ceased to be an option for the common man," the Bench said and compared the lower courts to ill-equipped and ill-staffed public health centres (PHCs) in rural areas.

Only those people go there who have no other option," said the Bench as an apparent indicator of the low measure of public faith in these courts, which are the first points of dispute settlement for the masses.

While the last Election manifesto of congress in 2004 quoted ‘  Immediate measures will be taken to drastically cut the delays in courts, particularly in the high courts and in lower levels of the judiciary’.

 

Central Bureau of Investigations : “Only God can save the situation”.

 

On Tuesday 11^th Feb , 2009, the Supreme Court  said the CBI was acting at the behest of the law ministry while investigating the disproportionate assets case against SP chief Mulayam Singh Yadav and his family members. An exasperated Bench said, “Only God can save the situation”.

“You are acting at the behest of the law ministry. You are not acting on your own,” said the bench comprising Justice Altamas Kabir and Justice Cyriac Joseph ‘

 

Ironically, the last election manifesto of congress quoted ‘ An administrative reforms commission will be established to prepare a detailed blueprint for revamping the public administration  system completely so as to make it more performance oriented and accountable’.

 

Divided Election Commission : Fading hopes !!

 

The Chief Election Commissioner's recommendation for removal of Election Commissioner , Navin Chawla ahead of the general elections brings to the fore the differences among the three-member body which has often been marred by clashes over crucial decisions. This is the second pillar after the Judiciary that safe guards the democracy . Under the current Congress rule ,The Election commissions decisions cannot be trusted anymore . Apparently , looks like, that the system has lost its credibility . Whereas , the Election Manifesto of Congress quoted ‘ Congress is deeply committed to electoral reforms’.

 

 Congress is not in favour of Aam Aadmi  ??? Poor accountability on spending :

 

The CAG( Comptroller and auditor general )  report released on 20^th February 2009 said that the centre’s Aam Aaadmi Bill was highly inflated. According to CAG, the funds meant for social and infrastructure development were diverted to celebrations and giving aid to NGO’s and other expenditure rather than creating infrastructure .

 

Remember Rajiv Gandhi saying , out of every rupee meant for the poor only fifteen paisa reaches the common man. This is what the leader of party said , whose family ruled this nation as its fiefdom since the very independence !

 

Congress has failed to act against terrorism – We are living at the mercy of the terrorists.

 

The less we talk the better. This government has failed utterly against terror . We had all kinds of attacks at all the places – Air , Land & Sea. It is not just Kashmir , it is all across . We are totally at the mercy of the terrorists . Congress has let the nation down badly.

 

Financially , our economy is at its worst :

 

The fiscal deficit for 2009 would be in around 11 % .  The Fiscal deficit budgeted at 2.5 % of the GDP this year , will end up at 6 % , to which should be added another 1.5 % of the GDP for the off-budget items like dues on oil and fertilizers companies . Throw in another 3.5 % of GDP of state government deficits , and India will have a consolidated fiscal deficit of 11 % in 2008-9. Remember, during the BJP led NDA , Revenue deficit never crossed 4.5 %.  Congress took over from BJP, an Indian Economy growing at 8 % every year and after five years. We are just a step away from being rated as a ‘Junk status’ under the congress policies and misrule.

 

Congress regime has seem unchecked inflation . Even we are not sure whether the low inflation numbers we see today are correct or cooked up . Economy is sliding day by day.  Companies are getting into voluntary shut downs, expected job losses till March 09 are expected to cross one crore.  Last Election manifesto of Congress reiterated “its firm commitment to eliminating the revenue deficit of the central government in five years time” & actually gave India the worst ever revenue deficit since its independence .   According to S&P’s ( Standard & Poor’s ratings ) , India’s fiscal position is unsustainable in the middle term, reduced the outlook on long term debt from stable to negative for four government entities , and , in turn, the UPA government .  In the 3^rd Week of Feb’ 09, even Fitch ratings  had called India’s finances in to question. 

 

Urban Poverty :

 

According to the 'India: Urban Poverty Report, 2009',The poverty in cities is not an overflow of the poverty in villages but has happened because of the faulty nature of urbanisation in India, says the country's first report on Urban Poverty released today. According to the study, an estimated 23.7 per cent of the urban population was living in slums amid squalor, crime, disease and tension, but not all slum dwellers exist below the poverty line.

They have been marginalised because of the poor city planning and poorer urban land management and legislation.

The urban poverty was not about only nutritional deficiency but deficiencies in the basic needs of housing, water, sanitation, medical care, education, and opportunity for income generation. As many 81 million or 25.7 per cent people(2004-05) subsist in urban areas on incomes that are below the poverty line. Eighty per cent of their meagre income goes towards paying for food and energy, leaving very little for meeting the cost of living in an increasingly monetised society

Congress Election Manifesto of 2004 quoted ‘ The Congress is conscious of the havoc that corruption at all levels adds to the harassment of the common man’.

In fact, fifty years of Congress misrule is a naked , sordid & ruthless saga of Gareebi , Bhrashtachaar and Aantakwaad and not the Roti , Kapda aur Makaan that has just remained a slogan after 50 years of rule. Congress is all words and no substance !

Overall , Congress led UPA is a failure on all fronts.  Giving it even five hours is against the interest of the nation and the common man . All including , wise men in Congress will agree to this along with the fact that, Congress only talks of sacrifices by the Gandhi family and does not even acknowledge that others have also contributed to this nation. Is it that except the Gandhi family, no one has sacrificed in Congress ? The last manifesto of congress read ‘ It is the congress leaders like Gandhi ji, Indiraji and Rajive ji who have sacrificed their lives in the services of the country’ . 

Fifty years of misrule has certainly achieved one thing; ethics has been eroded in politics and no one trusts a politician. BJP is committed to change this by you participating actively in bringing about this change and creating an India for the common man

Decline of India as a Global power :

Source : Angus Maddison, The World Economy, Paris , OECD, 2001, P.261, Table B-18

The Changing share of world GDP 1600-1870 ( In million 1990 International $ )

Geography	1600 A.D.	%  of total	1700 A.D.	% of total	1870 A.D.	% of total
Britain	6007	1.80	10709	2.88	100179	9.10
Western Europe	65955	20.02	83395	22.46	370223	33.61
China	96000	29.14	82800	22.30	189740	17.23
India	74250	22.54	90750	24.44	134882	12.25
World	329417		371369		1101369

 

This chart proves that India was a world leader in trade after China with 22.54 % of the world GDP.  East India company changed the global equations and reduced it to 12.25 % . Congress did the rest . Today , we are less than 2 % .

 What next  ? It depends on what you and I will do next ?

Rajendra Pratap Gupta

President

Country First

Email: President@countryfirst.org

                Rajendra.india@gmail.com

Indian Government Clueless on the Economic Crisis- Rajendra Pratap Gupta

India is clueless about how to resolve the current economic crisis?

For over a year, the world has been sliding into the grip of recession.  First it was America, then Europe and now Japan. It was naive of our Harvard and Oxford educated FM & PM to keep denying that India would not be affected from the crisis. They kept shouting that India was fundamentally strong and that the crisis would not impact the Indian economy. Even after issuing a ‘Token Bailout’ package the Congress government believed India was better compared to the rest of the crisis affected economies. But of late, congress has accepted the fact that 2009 would be worse.

The height of irresponsibility and lack of knowledge is evident from the fact that Indian Government also did what America was doing i.e. issue a bailout package. India should have acted differently. But why apply brains? Just copy what USA is doing – copying others is the biggest folly of our selfish and mindless politicians !! Way back in August 2008, i wrote for Financial Express supplement – SME World about the impending crisis. This article got published in November 08 issue of the magazine (download the original article from www.rajendra.collectivex.com ). But the contents were very much available on my blogs much earlier. I had clearly mentioned that the crisis in India started much earlier and the government was a silent spectator. It did nothing to correct it. Now it is acting posthumously. The moment banks started hiring recovery agents , the crisis has started. After all , banks don’t hire recovery agent for small NPA’s.

I see quite a few reasons for this illogical and irresponsible bailout step. Why should bailout be avoided and what did the current government to the economy. Listing a few view points

·         Indian government and our foreign educated PM & FM are totally clueless about the crisis ,  so leave alone management of the crisis

·         They quickly hired foreign experts in their advisory council. Irony is that these foreign experts have rarely stayed in India and know little about the realities on the ground. Adding to this , they had the so called Knowledge commission , P.M’s advisory council, Economic advisory council and many such sinecure posts to keep the sycophants and power hungry corrupt people on benches on our tax payers money

·         Political compulsions  & uncertainty keep the government & the public  guessing for the future moves and the markets will never gather momentum

·         Real issues have not been addressed so far, and i don’t see any signs of revival in the economy with such an irrelevant approach to this crisis which will worsen with time passing

Now let’s examine what the government is doing:

·         Pumping more liquidity in the banking system

·         Decreasing interest rates

·         Announcing sops for exporters

·         Announcing increase in NREGA scheme

·         Making tall statements of strong fundamentals etc.....

Now let’s see what each of the above mentioned steps would lead to:

·         Putting more liquidity in the system.  But Indian financial system was never cash strapped, Banks were growing very well. We have enough of money available! Now, the bank and financial institutions are becoming risk averse. Who trusts these crooked politicians? If the banks dole out loans and they turn out to be NPA’s. Manmohan and PC Would be gone by then , and the poor branch manager or the M.D. of the bank will become the scapegoat. So in as much as these measures are announced with much fanfare, the implementation is poor.  No one is trusting each other. It is a ‘crisis of lack of trust and transparency in our System’. PM can increase liquidity by repo rate cut, but he cannot force the local branch manager of State Bank of India to start lending tomorrow from 9.30 AM till 5.30 P.M.  Imagine, even if this was a reality. Would you and i take this loan? For what & Why? We are concerned about the uncertainty of income and job. Liquidity in the system is not the remedy, right? So clearly, government is not taking the right step as it does not know or acknowledge the problem in reality. Today, even corporates like TATA are finding it difficult to raise money. Let’s see why? TATA’s went overboard, and brought big businesses abroad for billions of dollars, and mostly, in all cash deals!! Wrong strategy? When they brought these companies, the stock markets were racing around 20000. Their stocks were really valuable. Had they done a cash and stock deal for all its acquisitions, they would have been better off even when the markets tanked. Now for the price they brought Land Rover and Jaguar, they could have bargained to buy the entire company!!! Any ways, the companies that owned these brands are fast becoming history or getting bailouts and kind of getting nationalised or filing for bankruptcy. Same is the case with Arcelor Mittal. What a deal it was. Now the question is, was it structured in the right manner?? Wait for another quarter, Iconic Ambani’s are likely to tell a similar story. Indian systemic corruption has created mammoth business houses, and the future of this natural imbalance is a foregone conclusion. It was just a coincidence that Satyam got caught. No big corporate can exist without political patronage, and this political patronage comes at a price in cash and with moral flexibility . Satyam is just the tip of the Iceberg. Each and every corporate has shady spots somewhere or the other. Difference is that they have not been caught like Satyam. 

·         Lowering interest rates: Still the loan port folio of financial institutions is not increasing. Reason , people believe that companies due to drop in sales going forward, and increasing inventory pile up, will dole out better discounts and so are deferring the buying decisions, till the prices drop further.  The recession has taught people that, cash in hand is better than ‘Notional money’ in real estate etc.... People are pretty sure that times ahead will not be easy. Assume for a while that, even if the corporates go for taking a loan and increasing the production. Who will bring the buyers? People are in no mood for discretionary spending. All in all, lowering interest rates is also not working in isolation. The problem is totally different and not getting addressed here at all. In today’s tour economy is akin to cycling, either we are peddling or we will fall!

·         Announcing Sops for exporters: Suppose, i am an exporter and i am exporting to USA, Europe and Russia. My order books have dried up as the economy is headed for trouble in these countries. Will Sops help me bring orders? Is this not an eye wash for the public? Sops will only work when orders start pouring in. This is again a misfired weapon.

·         Announcing increase of funds for NREGA (National rural employment guarantee Scheme) Schemes: This scheme was already in place.  We have never been able to quantify the positive impact of this scheme on poverty alleviation. Albeit , our politicians have become richer ! We all know the fake musters made and the amount eaten by the babu’s and ministers. What poor need is not money, but training to earn money consistently. It is like if you feed fish to poor; you can feed him fish a few times, better teaching him how to fish and he can earn for himself every day. How long will NREGA spend our hard earned money on feeding people? This is a misguided and misplaced scheme. What we need is a NYVTS – National Youth Vocational Training Scheme & NRSS – National Re-Skilling scheme – to re-skill and retrain people in better earning vocations and not NREGA. We must create – SEZ’s – Skilled Entrepreneur Zone in every tehsil / district to empower the rural –real India. Still 68 % of the population lives outside urban India. Mind you, urban poor are worse off than rural poor. What schemes are meant for them?

  Solution to the Crisis:

Essence of this is that printing & pushing ‘Notional money’ in the system is not the solution. It is an illusionary step. Creation of money by the hands of people is the right solution. How will that happen? I believe that government (Even the US Govt.) should not have resorted to bailouts. If Lehrman Brothers collapsed, it collapsed. So what? Let all the financial institutions and auto majors be left to meet within themselves and come out with a solution. They could have formed a practical consortium to deal with the problem, shared resources and planned a better crisis management. Now each of these corporates will get a bailout package, they will go out on the rampage with cut throat Competition and crisis will aggravate, a few of the bailed out companies will eventually cease to exit. We are just giving a palliative care through bailouts. Competition and collaboration are two ways to save the economy. We need collaboration now. Today the government is patronizing inefficiency and paying the price for poor regulation as bailouts and it will cost it dearly.

Even after the bailout, i fail to understand, how 16 or 25 billion dollars will save General Motors? About a year back , GM had about 30 billion dollar as cash and it was burning billions of dollars every month and finally they fell on the knees.People are not going to buy a Chevy due to the fact that the GM motors has a government bailout plan and package!  History was a witness to Enron collapse, World Comm collapse, and IT Sector bust after the boom. Well that’s in a business cycle. All that goes up comes down. If the government wanted to do well. It could definitely take some practical steps like.

·         Put a moratorium on corporate , housing  and other loan EMI’s for the next 3 years or part payment instead of full EMI’s for the next 2-3 years a nominal interest be added, so that even banks do not suffer loss. But public should be relieved of the burden of payments substantially and immediately

·         Automobile industry should be happy as the crude oil is cheaper. What the government could do is to step in and make the cab drivers replace taxi’s older than 10 years  by a bank loan for 10 years duration at reduced interest rates like 7.5  % for any duration i.e. fixed rate of interest for the entire term of the loan . The duties and other taxes should be cut by 50 % for all the taxi’s that are older than 10 years, by 75 % for vehicles that are more than 5 years to less than 10 year old. Would this not boost both the auto industry and the banks? Also, this would increase collection of the government as road tax. Which could be reduced by a good 50 % for all purchases made in the next three years? It would boost a whole lot of industries associated with Auto , fuel, Iron and steel , rubber , etc .......Make the small car ‘Nano’ and the ‘electric car & scooters’ totally duty free . Any ways, the government collections are down. At least, here it will not lose anything, but only gain as whatever taxes it can collect directly. But indirect collection of taxes will get a boost as a host of activities will increase with this push. It will lead to substantial increase in employment

·         Business and Real estate : Service tax on rental be abolished , Increase the tax slab for interest payments to Rs.2 lacs, issue home loans at fixed rate of interest from 7 % till 8.5 % for any amount of time . Appoint immediately a Housing regulator to check inflated real estate cost and check the cartelization to keep the prices low. One thing that government can do is that, all buildings under construction and not sold, in those buildings, 70% of the units can be sold and remaining 30 % have to be rented only. Government must construct flats & shops for poor and low income groups for rental occupancy only. This will not only boost the demand but also keep the real estate prices low. The stamp duty and other government charges should be reduced by about 50 %. Any ways, government is not making any money due to poor or nil demand in real estate sector. 50 % taxes would be good enough at this point in time. Even the biggest real estate company by market cap, DLF has reduced the prices of their projects due to poor sales and their prices have dropped by a good 32 % in one of the Bangalore projects. Most of the real estate co’s are abandoning the projects.

·         Alternative Energy: Wind power and solar power is to be immediately pursued in every house hold, town & district. This can be financed by banks and will lead to a cleaner and greener countryside and improve the economy and generation of power for households and communities

·         SME: this sector is contributing to just 39 % of the manufacturing output. In developed economies, this sector contributes about 90 % of the manufacturing output. Government needs to push this sector into growth mode by setting up nodal growth centres for SME’s manned by professionals from the corporate world. Setting up incubation centres in major national & regional institutes for providing technical support and professional guidance. For detail steps , read the article that i have recently written for The Financial Times supplement – SME World

·         Transport & Logistics:  Approx 90 % of all the commercial vehicles sold in India is via loans. According to Deepak Sachdeva , President of the Delhi Goods Transport association , between April and December alone, close to 158000 commercial vehicles were repossessed or either surrendered due to loan defaults.  This impacts the employment of drivers, helpers and host of other people who run the road side businesses dependent on the truck movements. We need to incentivise these set of people and relieve them from the loan burden with moratorium on EMI payments. Reduce tax on road permits , remove penalty for late payments of EMI for up to 2 years . Octoroi tax must be abolished immediately.

·         Agriculture:  The government needs to push this sector with more reforms and technical innovations considering that more than 80 % of the farms are of small size holdings less than five acres. We need to bring a sigh of relief to these farmers by host of measures

These are just a few of the steps that government can start with. Rest later

Rajendra Pratap Gupta

President

Country First

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Global Recession- An opportunity for India to course correct

January 16th, 2009

Dr. Manmohan Singh
Prime Minister &
Minister for Finance
Government of India
New Delhi

Subject: Economic policies and the current turmoil- Recommendations

Dear Dr.Singh,

I am writing this letter to draw your attention to the issues affecting the nation and some practical solutions

On the outset, I wish to place it on record that I am neither a world renowned Economist nor a Nobel Laureate but have spend 12 successful years at the helm of many corporate companies more so because of my approach rather than some other qualification. As an ever lasting student of the corporate world, my focus has been on constant innovations and prioritizations in order to simplify complex situations and search for practical, achievable and sustainable solutions. The spirit and essence of this communiqué flow from these thoughts.
and trust me, if you follow my advice, we can certainly come out of the recession faster and emerge stronger. There are lessons to be learned to make India stronger

Let me clear you that India is in a recession and that we are headed for a severe recession if we don’t take immediate steps. I wish to quote you the following data to enlighten you about the same.

• Exports :According to the President ,Federation of Indian Export Organizations ( FIEO), Mr.A.Sakthvel, 2009 is going to be the worst year in history and the Indian Exporters may cut 10 million jobs by March as the orders are drying up
• Slow down in the leather industry is likely to axe 5 lakh workers in leather units in the next three to four months with worsening market scenario in US and Europe . The industry employs almost 2.5 million people. Ref: The Economic Times dated Jan 2009.
• Tax Collections :The Tax collections for December quarter dropped by 22 % ( Ref: The Economic Times dated 27th Dec 2008 )
• Corporate - Domestic slowdown Net profit of India Inc. likely to decline by almost 46 % in the 3rd Quarter of third fiscal .Ref: The Economic Times dated 28th Dec 08.
• The private sector abandoned projects worth 44 billion in the third quarter of 2008
• Insurance Sector April to Nov 08 , the insurer’s first premium income and number of policies sold were down by 14 % - Ref : The Economic Times dated 3rd Jan 2009
• Banking SectorFor a leading private bank , between Nov and Dec 08 the credit card delinquency increased to 26 %
• The gross NPA’s of banks will reach 4.7 % of the total loans in FY10 from the current of 2.3 %. Credit card delinquency has gone up to as high as 14 %. Loan defaults would follow shortly and this will be a big blow to the banking / loan system. In the first half of Dec 2008, in Bangalore itself there have been defaults to the tune of Rs.80.23 crore at Corporation Bank . Out of the total home loan portfolio exposure of Rs.1000 cr , 50 % is in the IT sector. Defaults will start increase going forward. We will see the real impact in April 09.
• Aviation Sector Jet airways and Jet lite have defaulted in payments of Rs. 32.78 Cr to AAI TOI 29th Dec 08. Airline industry is expected be in deep red this year
• Hospitality Sector The hotel occupancy has dropped by 50 %. Ref : The Economic Times dated 28th Dec 2008
• Diamond Sector 60 % of the 8000 units into diamond polishing and cutting business went on forced holiday leaving 100,000 people without jobs. (Times of India 27th Dec 2008). There is a 40 % reduction in demand according to Gems and Jewellery Promotion Council (GJEPC). Exports account for $ 20 billion in the industry. Ref: The Economic Times dated 28th Dec 2008
• Auto & transport Sector Approx 90 % of all the commercial vehicles sold in India is via loans. Kotak Mahindra Bank has repossessed about 200 vehicles. Deepak Sachdeva, President of the Delhi Goods Transport association said that between April and Dec alone, close to 158000 commercial vehicles were either surrendered or repossessed due to loan defaults. Ref The Mint – Wall street Journal dated Dec 26th 2008
• IT sector is likely to lay off 50,000 people in the next 6 months. Already layoffs are happening across sectors

Let’s look back as to why we have had a problem ? We built an economy on dollars, FDI and stock market and not on 600 million people who live on 2.5 USD a day. We have tried to compete with China or serve the developed world. The outsourcing business is not build on merits other than low costs of human capital. We don’t have a lasting story if we bank on cheap labour only!! We need to capitalize on our resources internally and not become a body shopping country. But till now, we have let others capitalize on our strengths. You will have to change this. Common minimum programme has to be Common man’s programme

India has always been a land of ‘Rishi’ and ‘Krishi’. We forgot this aspect of India. We still have not done much for the farmers of this nation. We know for sure that 18 % of the GDP (agriculture) supports 60 % of the population. Kamal Nath believes that this might not be possible. I must correct him. What we need is value addition to agriculture and connecting the value chain of agriculture business to farmers at the place of produce. We need to think more about farmers producing cash crops besides staple crop. We need to increase the value of 18 %. We must note that 80 % farms in India are smaller than 5 acres. From 1971-96, the average size of the farms has reduced from 2.3 to 1.4 acres. Whilst, in the developing countries the average farm size has decreased, same has increased in developed world.

Having given the above mentioned data let me inform you that in abnormally tough times you cannot take routine decisions. Baby steps would not help. Severe crisis needs several big interventions. You need to take drastic steps. Some of which i am putting for your immediate consideration

Just lowering the interest rate or some small duty cuts would not raise the morale of the countrymen. This is a crisis of comfort and confidence both. You are testing waters by lowering the rates in monthly reviews and at intervals. Not realising that that these SOPS in instalments are deteriorating the economy and the morale of the people is suffering as time is passing. We are drifting in the ‘quick sand of recession’. Please consider, people do not buy because a particular product or service is cheap. But the buying decision is dependent on certainty of income and availability of cheap capital coupled with host of other social and market factors. Seeing what is happening in the country, i don’t see a positive mood till you take drastic steps like,

1. Replace the portfolio of Minister of Finance with the Minister for economic development
2. Have a dedicated secretariat to monitor the economic indicators and look to prevent surprises and signal disasters much in advance- in short to do a overall risk assessment across sectors in the economy. They should have no other job than to forecast and warn against the impending threats to the economic growth
3. Have a dedicated minister for modern agriculture practices
4. Dedicate a separate ministries for each innovation ,poverty alleviation and PPP- Public Private partnerships . PPP must be encouraged in all sectors
5. Economic policies should be more inward looking than foreign dependent
6. Tax rates must be reduced for individuals in one go and in a massive manner and not in instalments
7. Fuel rates should be reduced immediately and be made market driven
8. We need to focus and take immediate steps for setting up Agri and processed foods SEZ on an urgent basis.
9. Announce incentives for organic farming.
10. Announce incentives for tourism
11. Government must give big push to vocational training and employment for students
12. Increase recruitment for teachers , police and other government staff
13. Scholarships for education and R&D must be given
14. Lower the bank interest rates for corporate lending to around 9 % at one go.
15. Home loan rates be immediately reduced to 7.5 % for amount up to Rs. 5 lac, 8 % above 5 Lac till 20 Lac, 8.5 % for amount above Rs. 20 lac till Rs.50 Lac and 9 % for amounts above Rs. 50 Lac. The customers must be allowed to get these at fixed rates and not floating rates for a period of 20 years. Construction boom will increase activity in a lot of infrastructure industries like construction workers, cement, iron and steel and paints etc. which will add to the economy in a big way. All these must be lowered in one go rather in instalments
16. While you give incentives to the infrastructure , you must appoint a housing regulator to bring in confidence of a fair play amongst the investors
17. Government must build houses for weakest sections of the society to be leased on rentals and not be sold
18. Banks must be mandated for giving loans to students for vocational courses without any guarantor .This will lead to enhancement of skills and employment and the loan amounts will be small. Plus the bank will secure the loans as the students cannot get the job without clearance from banks !! So safer loans. People can earn and pay along
19. IT sector must focus on agriculture sector & education– This one step will take India to a better placed economy
20. Big corporates must be mandated to outsource 2.5 % of their requirement to SSI (Small scale industries).
21. Encourage Small scale industries and incentivise them by making them tax free for 3 years
22. SSI based SEZ must be considered for every state
23. Agriculture and food processing SEZ must be established near ports and in every state
24. Don’t transform Mumbai to Shanghai. Create more Mumbai’s in India. Have realistic goals
25. Remove bureaucratic hurdles to set up small businesses like removing multiple approvals. Let it be a single window clearance for setting up a shop or small business

We must be focussed on servicing our population and not be dependent on globalization. We have learned now that building an economy based on just FDI will not be a stable economy. We need to learn a lesson from the BJP’s Swadeshi strategy. Albeit in a different manner. Let the financing be local and focus on intrinsic industries. Agriculture, and SSI is good enough to give stable growth to the economy

Unchecked capitalism has failed in USA . Now America is fast moving towards being a socialistic economy – American government is funding and buying into big defaulting and bankrupt corporations thus socialising the economy. It is clear that you can’t build a great economy on capitalist lines. I have my serious doubts on Barack being able to revive US capitalist economy. In India, we have only four five major corporates in a land of a billion people. This indicates that the policies of the government have favoured or controlled by a privileged few !! This needs to be changed immediately. Encourage entrepreneurship and SSI in an institutionalised manner and support them.

Give a push to communication, Infrastructure, healthcare, education and PPP to grow India to the next level. Have a robust pension system and a culture of long term investments and savings. This is critical to avoiding America like defaults and disaster

I must also take you through the US failure and where it might head for. The failure of America is due to lack of culture of savings and greedy & unnatural growth strategies. It is the start of the historical shift of power equation. Historically, Greek & Roman empires dominated the world. Then came the turn of Britain that controlled the world , It shifted the power equation to USSR & USA. Now it is the USA. Future undoubtedly is of China. If you care to correct the situation with drastic measures, India will be back in to glory by the year 2020 as the world’s top most power.

We have faltered due to our myopic policies. You have the opportunity to change this nation’s future by taking appropriate measures or get caught in the web of political compulsions or electoral policies. Needless to mention, peace is a precondition to progress.

See the date of different states, this tells us a lot. I have arranged in ascending order w.r.t. population

S. No State Population Per capita net state domestic product in INR No. of M.P.’s
Lok Sabha No. of M.P’s Rajya Sabha No. of Assembly seats
1 Lakshadweep 60650 N.A. 1
2 Daman & Diu 1.58 Lac NA 1
3 Dadra & Nagar Haveli 2.2 Lac N.A. 1
4 Andaman & Nicobar 3.56 Lac 28340 ( 2002-3) 1
5 Sikkim 5.4 Lac 21586 (2003-4) 1 1 32
6 Mizoram 8.88 Lac 22207 (2002-3) 1 1 40
7 Chandigarh 9 Lac 57621 (2003-4) 1
8 Poducherry 9.74 Lac 50936 (2003-4) 1 1 30
9 Arunachal Pradesh 11 Lac 17393 ( 2003-4) 2 1 60
10 Goa 13.47 Lac 53092 (2002-3) 2 1 40
11 Nagaland 19 Lac 18911 (2001-2) 1 1 60
12 Manipur 21.66 Lac 14766 (2003-4) 2 1 60
13 Meghalaya 23.18 Lac 18135 (2003-4) 2 1 60
14 Jharkhand 26.9 Lac 12509 (2003-4) 14 6 81
15 Tripura 31 Lac 18676 (2002-3) 2 1 60
16 Himachal Pradesh 60 Lac 24903 (2003-4) 4 3 68
17 Uttaranchal 84 Lac 13260 (2001-2) 5 3 70
18 J&K 1 Crore 13320 ( 2001-2) 6 4 87
19 Delhi 1.38 Crore 51.664 (2003-4) 7 3 70
20 Chhattisgarh 2.0 Crore 14863 ( 2003-4) 11 5 90
21 Haryana 2.11 Crore 29963 ( 2003-4) 9 5 90
22 Punjab 2.4 Crore 27851 (2003-4) 13 7 117
23 Assam 2.65 Crore 13139 ( 2003-4) 14 7 126
24 Kerala 3.18 Crore 24492 ( 2003-4) 19 9 140
25 Orissa 3.68 Crore 12388 (2003-4) 21 10 147
26 Gujarat 5 Crore 26979 ( 2003-4) 26 11 182
27 Karnataka 5.28 Crore 21696 (2003-4) 28 12 225
28 Rajasthan 5.60 Crore 15486 (2003-4) 25 10 200
29 M.P. 6 Crore 14011 (2003-4) 29 11 230
30 Tamilnadu 6.2 Crore 23358 (2003-4) 39 18 234
31 Andhra Pradesh 7.6 Crore 20,757 (2003-4) 42 18 295
32 West Bengal 8 Crore 20896 (2003-4) 42 16 294
33 Bihar 8.29 Crore 5780 ( 2003-4) 40 16 243
34 Maharashtra 9.68 Crore 29204 (2003-4) 47 19 288
35 Uttar Pradesh 16.61 Crore 10817 (2003-4) 80 31 403

I must also advice that you convince your colleagues on increasing the salary of M.P.’s, and this is one thing that they might or might not agree. 545 Member of parliaments run this country. Let them have the best salaries. I will recommend for them salaries starting Rs.2.5 Crores with a larger bonus on performance. Reasonable cause for this high salary is that;

1. We will get the best brains drawn to politics
2. Public will not let incompetent people to be elected to such ‘high paying offices’ and public outcry will question non performance for the high salaries
3. Bribes ‘might’ stop
4. People taking such salaries will have guilt if they did not deliver (at least we can hope so !!).

Recently, I interviewed more than 100 students of a top internationally renowned management institution at Mumbai and was both happy and felt at a loss. I am glad that we have a logical and a responsible youth contrary to media perception. But i felt sorry that, they are lacking proper guidance and so they are disillusioned. We must unleash the power of youth, more so, of women power. Then only we will begin a new era of growth.

Recession is equally big an opportunity as robust economic growth.

Economic Forecast for 2009: If the Indian economy grew at 8 -9 % in 2007-8. I must believe that, about half of this came due to intrinsic or local market factors that is about 4 to 4.5 % . So we will continue with that growth with some downward slide in 2009, and also that the remaining half was due to foreign or extrinsic factors. Which i believe, will reduce by a good 50 % . So intrinsic or internal growth will contribute between 3.5 to 4.5 % and remaining 2- 2.5 % will come from the extrinsic factors. So in all , i guess this year we will witness growth somewhere around 6.0 to 7.0 %. If the World economies shrink badly , which is expected, this might impact this growth a little more and bring it down well under 6.0 %

You will not be remembered for how you managed the crisis of the 90’s but how you manage 09. That time, we were alone in the crisis and compulsions left with you with only one option. Now it is a Global crisis . Only intelligent and effective leadership can work. I see so many opportunities and endless possibilities. Hope see that as well. Good Luck !

Dr.Singh, we cannot drive our car looking at other cars rear view mirror. We must drive our car from within and people cannot steer it from outside. This has a message for you. Look inside and drive India to glory, out of recession

I hope i have made a point


Best regards


Rajendra Pratap Gupta
President
Country First
Email: rajendra.india@gmail.com
Mobile: 09323109456 / 9867300045