Truth and nothing else - Rajendra Pratap Gupta

Worst for the economy is over – Senior Congress Minister – Fooling Indians to vote ???

On 28^th December 2008, I had written on this blog, that the GDP growth will be less than 6 % , I had also given the reasons as to why it would fall below 6 % for sure, when the government was firm that GDP growth would be 7.1 %. The fact is out now , and our GDP has grown as low as 5.3 % in the Q3, 2008.

We will have lacs of suicides from job losers ! Earlier it was the farmers , now it will corporate people and workers who will commit suicides or commit crimes or suffer a nervous break-down. Why are we sleeping now . We just have 45 days – Please check the congress score card on my blog , They are a bunch of inefficient & dishonest people ! Can we entrust them our nation ?

As per the latest data ,

· India had an external debt of $221.3 Bn at the end of June 2008, 20 % of it is the short term debt, this will be hurt badly due to weak rupee .

· NRI deposits declined by as much as 1.1 Bn USD at the end of June 2008 compared to end – March 08 level.

· India’s foreign exchange reserves declined by 62.35 Billion dollars to 249.53 Bn USD as on Feb 20, 2008 from 311.88 Billion as on April 4, 2008.

· Agriculture is reporting negative growth at -2.2 % in Q3 , 2008,

· Exports have plummeted and people in export oriented companies are being fired every minute

· Industrial production is at a record low

· Fiscal deficit is highest since independence

· Sensex is at a record low in the last 40 months , Investors have lost more than 2/3^rd of their investments

· Real estate sector is facing worst crisis ever

· GDP fell to 5.3 % in Q3 , 2008

· Rupee is weakest at about Rs.52 to a dollar

· Tax collections and revenue earners for government are dipping every day due to the above mentioned factors

Is what we call an economy of strong fundamentals ? When US , Europe and Japan sank into recession, immediately our growth story withered away, and we had been fooled to believe that India had strong fundamentals and we will not be affected . Is this not severe recession ?

At the top of all this , our learned writer of the book ‘India’s Century’ & also our Union trade and commerce Minister , Kamalnath had said just 3 days ago, that the ‘Worst time for the economy is over’. And just three days after the rupee is about 52 to the dollar and the sensex is on its 40 months low !! How clueless is our Union Minister ? Do we give such people to run our trade and commerce for the next five years ? If his words cannot last even a week , how come he writes a book on India’s century ?

We are into an unprecedented crisis , if we let congress win , I am sure that some of us will not even survive to vote !!

Here is the Congress Scorecard . This has the verbatim statements of what Congress wrote in its last manifesto and next to it is what it did for its promises .

Congress Scorecard 2004-2009

No.	Key Result areas	What Congress promised in the last Manifesto	What it did
1	Agriculture	Annual growth of less than 4-4.5 % is unacceptable	Agriculture Growth in Q3 2008-09 is Negative -2.2 %
2		Intensive agricultural development program will be started in 100 districts	???
3	Farmers insurance	Farm insurance schemes for both crops and cattle will be implemented	???
4	Employment	Accelerate employment Generation	More than 2 crores jobs lost till March 2009
5	Fiscal Policy	Committed to eliminating the revenue deficit of central govt. By 2009	In Feb 09, the revenue deficit reached at 11.4 % , highest ever since Independence
6	Growth	Growth of below 10 % in industry is simply unacceptable	Growth figures in Q3 2008-09 was around 5.3 %
7	Education	To spend 6 % of GDP and set up Education Development Finance Corporation	???
8	Khadi & Village Industries	to be modernised	???
9	Block level	Establish at least one industrial training institute in each development block of the country	???
10	Annual Rozgar report	To be released every 1st May	???
11	A great thrust on Exports of textiles , handicrafts , Gems & Jewelry , leather , software & engineering		Painful slowdown in all this sectors and the government is clueless on what to do ? Units are shutting down and much more than one crore people are expected to be out of Job by March end in these sectors
12	Farm labour	Ensure the fullest implementation of wage laws for farm labour	???
13	Landless	Congress to Redouble its efforts to distribute surplus productive land to the landless	???
14	Women	Congress pledges to press for the constitutional amendment to reserve one third of seats in Lok Sabhi and in Vidhan Sabha’s for Women	???
15	Healthcare	Congress will raise public spending on healthcare to at least 2-3 % of GDP	???
16	Reservation	Congress pledges to extend reservations for the economically deprived persons belonging to communities that are at present not entitled to such reservations	???
17	Weavers & artisans	New middle level technical institutions will be started in places where for example weavers and artisans are concentrated	???
18	Food scarce areas	Grain Banks in chronically food scarce areas will be started	???
19	Girl Child	Nutrition program for the girl child particularly will be expanded on a significant scale	???
20	Organised , Informal & Unorganised sector Urban Poor	Every initiative will must and will be taken to expand the proportion of employment in the organised sector, congress will ensure the well being and welfare of all workers in unorganized sector	Only job losses have been reported in the last few years in all these sectors and Congress has remained a silent spectator
21		Congress to establish a National Commission to examine problems facing enterprises operating in the unorganised sector	???
22		A national fund will be created	???
23		A single , simplified law will be enacted to set out the obligations of these enterprises to labour and for safety	???
24		Congress will create legal space in towns and cities for hawkers , vendors , food sellers etc......so that they are spared the risk of extortion , eviction, confiscation and harassment	???
25		Social housing schemes will be launched to meet the needs of the urban poor	???
26	Security of the nation	Congress will strengthen the intelligence network	Most gruesome 19 attacks . A records of 63 blasts in 35 days . Assam, Oct 30, 2008 – 63 people killed, Imphal , Oct 21, 2008 – 17 people killed , New Delhi, Sept 13 , 2008- 26 people killed, New Delhi, Sept 27, 2008 – Three people Killed , Ahmedabad , July 26, 2008 – 57 people killed after 20 bombs went off in two hours, Bangalore , July 25, 2008 – One person killed, Jaipur, May 13, 2008 – 68 people killed in serial bombings, Faizabad , November 23, 2007- 15 people killed in Court bombings, Hyderabad , August 25,2007- 42 people killed in two blasts, Samjhauta Express , Feb 19, 2007- 66 people killed , Malegaon , Sept 8, 2006- 40 people killed in two blasts, Mumbai , July 11, 2006 – 209 people killed in seven blasts on sub-urban trains – the lifeline of Mumbai , Varanasi , March 7, 2006- 21 people killed in three blasts including one at the temple and another at the crowded railway station, New Delhi, Oct 29, 2005- 61 people killed in three blasts on the eve of Diwali
27	Judiciary	Immediate measures will be taken to drastically cut delays in courts , particularly in the high court’s and in lower levels of judiciary	On Feb 6, 2009, the Supreme court said that , the Criminal justice system has collapsed .. 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
28	Manufacturing Sector	Congress will establish a National Manufacturing Competitiveness Council	???
29	Yearly report card – Jan Dastavejh	Every year on October 2nd , the congress pledges to present to the people of India a Jan Dastavejh on the progress of the implementation of the manifesto	???
		All Words	No Substance

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 the next 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 under 6.0 %


Rajendra Pratap Gupta
President
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Indian Economy

Indian Economy – two sides of the same coin

Why is Indian economy in recession? Indian economy was known as the most intriguing economy for the last three years. There was a lot of hype and hoopla created around the same, everyone wanted to ride the booming India. Some called it the ‘rise of the east’ or ‘a billion under-served customers’. It was the country no one wanted to miss. What happened? What went wrong and why at all?

Firstly, a few things led to a sudden hype. Rise of Infosys and Wipro’s, TATA Tetley acquisition, Arcelor Mittal takeover, Indra Nooyi taking over PepsiCo as CEO, Arun Sarin over Vodafone etc... This was backed by a lot of media coverage.

Secondly, the triumvirate of Manmohan Singh , P. Chidambaram & Montek Singh talking of a double digit growth excited a lot enthusiasm of politically connected ( and not so politically connected ) business groups to enter into ‘businesses of future’ like infrastructure , power, retail etc... This was based on ‘Big Talk’ of the triumvirate. We all know how many people pumped in money at unrealistic valuations and market was heated up beyond logic, banks were also enjoying the party, share market was expanding like a balloon, manpower was charging anything and still jumping for tempting offers, retail was spotting everywhere. Result: competition became suicidal. Money got pumped into real estate and supply increased and the prices soared. Brands started fighting for space and not profits. Finally, reality was surfacing; growth was not double digits; which the triumvirate shouted for three years. We saw profits were not as projected, corporates were missing numbers, shutting the outlets and man power layoffs. Just forcing Jet airways to take back air hostesses will not cover the reality............how unfortunate!!!

Thirdly, the ‘Big consulting majors’ were talking in 2007 -8 about the multi-billion dollar markets suddenly growing three fold or four fold by 2012-15. How stupid of CEO’s who believed these news releases of these so called ‘big consulting majors’ and spent millions to buy their reports & finally presented their boards with these rosy projections and raised funds. Now they are shying about the current share prices and valuations (let’s not even talk about growth achievements versus plan or the crazy profits numbers!!!)

All the three factors basically did no good but just created a ‘sexy story’ about a nation like India, where more than 70 % people don’t have access to basic healthcare, only 3 % dabble in stock markets, only 10 towns can boast of a retail revolution, has 36 billionaires and more than 800 million living on about a dollar a day.

Let’s evaluate a little more ........When people talked of India in 2007 they talked about big IT giants , call centre’s high paying jobs to teen agers, overseas acquisitions of TATA’s & Mittal’s, Mumbai becoming like Shanghai, Big malls coming , dollars flowing as FDI, Big brands coming to India , MNC’s coming to India, ballooning stock markets, BPO’s multi million outsourcing contracts & the great retail revolution. Now with US / Europe in recession and may be, with Barack taking over as the next US President. India will have to take a big hit. We just saw the first wave of negative effects of the US Financial market collapse. India’s stock market crashed almost to a third of its high. With India’s IT / BPO shying and taking to lay off’s, we know the real estate sector would be hit as the entire 2 BHK ( Two bed room , hall & Kitchen ) flat story was built on these young ‘Ripe aged’ employees buying flats at the age of 25-30. Splurging on mobiles and white goods by credit cards ............all this is over (believe me!!)

The hype was more of a story of 36 billionaires , Infosys, TATA, Arcelor, stock market manipulations , FDI and not the story of economic development & and the 800 million population. What we see happening was a foregone conclusion. It was not a ‘bubbling economy’ but an ‘economic bubble’. And it got burst

When the banks started hiring recovery agents, it was the start of the default / delinquency crises (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. When the government has to get in to pump in money or the so called confidence, It’s a sure shot sign of crisis or recession or both.

I wish that congress leaders should have thought well before announcing a Rs.60000 crore write off for farmers. This has put a pressure on banks and it will manifest in banking / loan crises. Now imagine, I am a farmer with an Rs.10000 loan for my sister’s marriage or due to a crop failure (trust me, farmers crisis has come due to rise in social costs as much as crop failure). If my loan was waived off what it did to me? Firstly, it gave me nothing to raise a healthy crop and earn for the season so my problem would be standing as such on my head. Has it given me seeds or irrigation which i needed? I could have earned and paid for the loans in the next few years (a moratorium on payments & Interest was more than enough). Moreover, it has set a precedent for me not to pay my loans and hope for future waivers. When politics drives finance, chaos is the only outcome.

Take a cue from USA . They have pumped 700 billion dollars ( India cannot think of even a tenth of this amount in the case of a crises !!! ). This pumping of funds actually helped the banking system in the US and not the economy as people have been made to believe in !

We can knock off any crises if India develops an indigenous model for growth in which technology only becomes the enabler and not the key driver or determinant. What i am pointing is that, we need not depend on FDI totally. When FDI came in, we were roaming the whole world and shouting about it. Now that these economies are under crises, they will take care of their home first, and may even exit from our country as we have seen in the case of FII’s exiting the stock market and leading to a sudden crash. We must have started our economy with 75 % dependence on domestic and 25 % on foreign fund generation besides a host of infrastructure & ground level measures. We need a ‘self reliant India growth model’ and not a USA – Europe dependent-driven growth model. Hope the policy makers will learn from the crises & take steps to correct it.

Now a day’s the most talked about line from the ruling politicians is, that India is fundamentally strong economy. Which ‘Fundamentals’ are they referring to ? Our consumer sentiment is low, stock markets have crashed, industrial production is low , inflation is high, uncertainty is looming over every corporate , retrenchment is happening , rupee is weak against the dollar, farmers that constitute 65-70 % of the population are committing suicides , IT & BPO industry is hit hard due to US –Europe recession, terrorism and lawlessness is rampant. I am still trying to get which fundaments appear to be strong !!! Is it the large suffering population that is being referred to ?

Coming to the most happening sector – The great Indian retail story : I see some retailers having burnt their fingers in metros , now are planning of moving to class II & III towns for the next cycle of growth. Let me express boldly, that this will be a big loss making proposition. In towns like Mumbai and Gurgaon, retailers are having a tough time, how come they will survive in smaller towns with more ‘service class’ & ‘Small time traders’ people. At least , bigger towns have industries and other corporates to support higher spending opportunities. Some learned Advisors have informed these retailers that 70 % of India lives in rural areas so rural India is a bigger market than urban India (calculating that rural India with USD 530 income per capita is three times the population of urban India with the per capita income of USD 1200). What an ‘unintelligent logic’. The 530 USD that the rural India earns is not even enough to spend on basics, unlike urbanites who have the basics already and can afford to spend on the new class of products which supports the modern retail formats. It is analogous to three boys of seven years marrying a girl of eighteen years (3 boys x 7 years = 21 Years, marriageable age!!!). Intelligent logic isn’t!!! That’s what our great retailers are trying to do . Only smart ones are Pantaloon and Wal-mart. Rest all are smart looking idiots !!!

Retailers must realise that they are making investments for 2012-15 market projections. The figures of these projections are not even validated. But the cash burnout is happening now. Imagine this , rentals going up by 5 % every year , salaries by 20-30 % , cash burnout for new openings , increasing offering –SKU’s, reducing margins to attract customers or wash off old inventory. However can a retailer survive ? Adding to this , move to class II towns!!!

Just to make a note that if in towns like Panvel in Navi Mumbai, the two supermarkets owned by Foodland have closed within a year due to opening of ‘MORE’ supermarkets, D’mart & Reliance Fresh stores, how can small kirana stores survive? If i don’t go wrong, even ‘More’ & Reliance will have to shut down in the times to come in the area or make perpetual losses . So the retail story in its current form is not a lasting one. But the lessons are to be learnt . One thing that has happened in India which is totally wrong is that, we have tried to CCP (cut, copy and paste) foreign retailers. But we have missed to note the most important point , that foreign retailers were pretty slow in the first ten years in their country. Even Mukesh Ambani made a strategic mistake; he announced 5 billion dollar investment in retail only to face the back lash from local traders. No one expected seasoned businesses houses to make such tall claims ....This gives us a clear feeling that Indians are unaware and unprepared for the hype that has been created by the media and neither are they guided by the realities . I would call Wal-Mart the smartest retailer in India. They have just done a retail tie up in India without using its brand name . So that the Indian partner has the expense & experience and Wal-mart has the learning’s. Moreover, their growth plans are practical. Just 15 stores now compared to 600 + stores of Reliance and Birla’s. What if the Ambani’s & Birla’s want to change the strategy or make changes backwards because of their learning’s?? It is easier to correct and make changes in 15 stores of Wal-Mart then 600+ stores of Reliance or Birla’s.




We must note:

85 % of the rural India does not have the power to consume very much at the prices that currently prevail in the market.
30 % of urban India constitutes 75 % of the GDP.
70 % of the rural India constitutes 23 % of GDP
According to the Central Statistical organization, in 2001, 48 % of the rural GDP was agricultural.

In 2001, the NDP contributors were: agriculture 46 % , industry 21 % and services 33 %.

If India needs to grow sustainably, we need to make a prudent choice between education, vocational training and SSI. Needless to mention that, India’s growth will be driven by creating more jobs in lowest rungs of the society. They will build the real consumption led growth for a ‘Shining India’. The earlier, the better.

India today is in a recession and we must accept the fact. By closing our eyes the problems will still remain. We must build growth models not based on dollars , stock markets , urban India but go in for holistic models of growth that suit the local conditions and requirements , are broad based for all sections of society and industry , and just don’t reflect isolated figures .

Indian economy enters recession

India has already entered a recession . It is how we define it , how we see it and when we accept it. It is a matter of choice and nothing else. We must accept the harsh reality about the state of Indian economy. Industrial production has slowed down, unemployment is increasing, rather retrenchment is happening at a hectic pace, consumer sentiment is negative, stock markets are crashing and moreover, the government has put the economy on the ventilator by dong repo rate cuts etc.

All this clearly indicates that India has entered a phase of recession. The earliet we accept and start working , the better prepared we will be to survive the same

email me @: mail@rajendragupta.org cell: 09323109456 / 9867300045