Archive for Finances

admin | September 22, 2024
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“ULTIMATELY, IT’S A GAME THAT WE CHOOSE TO PLAY”

There are a few questions that keep propping up in our mind. For seeking answers to the same, we set our mind, our intellect, our experiences, our observations, our believes, our prejudices etc all in a pot churn them and still crave to find a satisfactory answer.

One such question is :

Why a person after having earned tens and thousands crore of rupees keep amassing more and more wealth despite knowing that ultimately at the end of life he or she is not going to carry any up. Even after perhaps knowing very well that money, wealth is not everything in life.

After a bit of churning my mind I tend to feel that in actual practice, more by default than by design people behave as if life ultimately is the game that we play. We as sapiens are good at developing imaginations and we set up various races. This thought came to my mind while playing my favorite game of “Temple Run” on my tablet. One imagines oneself as the person on the track who runs, crosses hurdles, gains points and ultimately falters which ends the game. We immediately set up the next race with an attempt to score more points.

In actual life, we being sapiens even set up more than one race simultaneously. Race to earn more money, race to have a social status, race to keep our family happy, race to marry the most suitable loved partner, race to acquire lot of power and so many such races.

And , if we take life as a game, like the one on our mobile, in which one can run simultaneous races then life continues to be interesting. If you fail to score in a particular race, you can try again or you concentrate more on the other games or set up the race again.

In such situation, one does not feel excessively happy nor excessively sad by winning or losing a particular race since, one understands that there are many games that he or she is playing and many a times you can set up the race again.
Interestingly, this matches quite well with the KARMA theory propagated by Lord Krishna in GITA.

Why worry because ultimately, it’s all in a game.

Category: Finances, General, Political | Tags:
admin | September 10, 2024
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SIMPLE THOUGHTS ON THE GALA INTERNSHIP PROGRAM ANNOUNCED IN BUDGET 2024

The latest budget presented by Hon’ble Finance Minister has tried to earn many brownies (credits) for introducing the concept of internship.It is stated in the budget speech itself that Rs.5000/- per month per intern will be financed through the budget in addition to Rs.6000/- to be paid extra for worker on his or her enrollment as an intern. In other words, the trainees will get at least Rs.5000/- per month for a duration of 1 year. It is further stated that the top 500 companies (employers) will be able to employ such trainees and the total number to trainees anticipated is 10 million over the next five years. This means 2 million additional jobs will be created each year by top 500 companies. In other words, on an average each one of the 500 companies will employ 40,000 interns every year.

A simple look at these numbers indicates that this is a highly ambitious and probably impossible target to meet for the 500 companies. Even if 5000 companies are identified then the annual target of additional employment will come to 4000 interns.

This is also almost as ambitious as before.This also raises a number of questions, the answers of which are still awaited.

1.What exactly will be the administrative arrangement to decide who is entitled (employer and employee)? What would be the selection process and how the funds will be disbursed? Direct to the intern or to the employer?

2.This will create room for nearly 40,000 interns per employer if we take the budget’s speech as reference which states that 500 employers are identified. This will be a huge number and feasibility is a question.

3.If the employer gets such support (indirect subsidy) would it not lead to a temptation to reduce their existing employment strength of unskilled and skilled workforce and filling up the vacancy through such interns who are willing to work at very low and almost nil cost?

I will only be too happy to stand corrected if there is any gross error in my understanding because to my mind the announcements made by the Finance Minister are too big, too vague and too good!

Category: Finances, General, Political | Tags: , ,
admin | April 29, 2024
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SOME SUGGESTIONS IN THE ACTUAL INTEREST OF THE MSME SECTOR

Slogans like “ MSMEs are the backbones of our economy” and many such slogans praising and highlighting the importance of the role that MSMEs  in the economic development are well known to all of us particularly because we have been hearing that almost since several decades.

Though I admit that beside dishing out slogans, a lot of efforts have been placed by the Government and the Banks to encourage and help the MSME sector so as to enable them to successfully survive in the fiercely competitive world and withstand the competition from the larger units despite facing funds and infrastructural challenges.

The government has also enacted MSME Act so as to provide a strong legal entitlements and reliefs. Various amendments and additions have been made in the Income Tax and Companies Act with the intention of easing and ensuring some comforts to the MSME sector.

But still, a lot more needs to be done .There is a huge distance between the cup and the Lips.

Some of the glaring issues that remain unresolved so far are highlighted below;

  1. 1. FINANCIAL SUPPORT :

As far as providing easier finances are concerned, it has been consistently observed that the bankers, who by themselves are in highly competitive environments, find it less attractive to finance an MSME unit as compared to the larger units. They rightly feel that efforts involved in financing and monitoring an MSME unit are much more than the margins that they earn as against financing a larger unit. Despite constant instructions etc from RBI and Government, it has remained a challenge to motivate larger banks to finance MSME sector, particularly the Small and Micro units.

One possible solution is to encourage specialized Banks or Cooperative Banks who cater only to this sector. I saw a good hope in channelizing the Cooperative Banks towards financing the Micro and Small scale sector. Unfortunately, after successfully gaining experience in the banking business even cooperative banks also turn their attention towards the larger units.

The NBFCs too are trying to fill up this gap but it has been noticed that they take advantage of the vulnerability of the borrower and extract higher interest and levy additional fees etc.

In short, as far as financing of significant amount is concerned, the MSME sector remains sidelined in reality. They have to resort to extremely exploitative and costly sources of finance   when it comes to substantial and critical need.

There is ,no doubt that there are numerous schemes offred by Banks and Governments. But each bank and diffrerent Governments have their varied schemes and it is a time consuming and complex situation even to know how many schemes exist and which scheme is good for an MSME unit .

What pains the most is that such is a situation when there is a constant tomtoming about encouraging and supporting the MSME sector.

Somehow one sees a situation where one is reminded of the story of a crow who was thirsty and was offered water in a jug where the water was in the lower half of the jug and his beak could not reach.

  1. LEGAL SUPPORT :

The government with a good intention has constantly been trying to introduce / amend the existing Acts so as to make them “MSME friendly”. But as the proverb goes, “help from an ill informed person is more harmful than the harm from a well informed person.”

Let me tell you how this is true. Section-16 of the MSME Act presents a draconian help and i.e. that if any payment to an MSME unit is delayed beyond 45 days then the MSME unit is empowered and enabled to collect interest at the rate which is three times more than the bank rate with a monthly rest. Converting this into simple equation   it amounts to more than 24% per annum rate of interest ( three times a bankrate ) and since it is on a monthly rest it would amount to nearly effective 27% per annum with annual rest.

At the same time the Income Tax Act,1961 {Section 43B(h)} is now amended to ensure that expenses incurred by paying to, MSME would be allowed as an expense only when they are actually paid.

As if this is not enough the Companies Act is also amended to ensure that any over due to MSME and the purchases from MSME are clearly and separately reported in a company’s annual account.

The above appears to be favorable steps. But the reality is exactly the opposite. The large units are now trying to avoid doing any business with MSME units because of the rigid legal approach and consequences. They feel that they are inviting potential heavy liability and exploitation from the MSME sector. This is likely to effect the business potential of the MSME sector.

  1. 3. General :

If one tries to collect an exhaustive list of the benefits and preferences which are offered to MSME sector by Central Government, State Government, Local Bodies, Banks and Financial Institutions one will find that one is lost in a jungle. This reminds me again of a proverb which says that, “Unscheduled, erratic and excessive rain is more harmful than a drought.”

 

One will find varying definitions of M(Micro).S(Small and).M(Medium).E( Enterprise)  not only that the definitions in reality varies from bank to bank, from state to state, from scheme to scheme and they themselves are again subjected to frequent amendments.

 

One of the standard practice of denying an entitlement is to make the preconditions so difficult that the claimant either gives up his claim or is denied the help  and only the lucky few MSME units land up getting the intended help.

The Exit Decision

Besides what is stated above, one thing that strikes while thinking about MSME sector is their reliance and endurance capacity . Somehow, this is noticed in case of many Non MSME units also . An entrepreneur is a good entrepreneur not only when he sets up or runs his enterprise well and successfully . To my mind, he is equally good entrepreneur when he decides to quit at the right time and right way.Many a times emotional and Ego issues prevent many entrepreneurs from quitting at the right time .

At the same time we have to also look at the issue that does our existing legal and banking framework makes the task of quitting easy?

The answer is an emphatic No The current labour laws are so much in favour of labourer s that  the cost of closing a unit and the formalities attached thereto will discourage many entrepreneurs from closing the units which are unviable . This  leads to distressed sales and unfavourable mergers  . The bankers also tend to pressurize regularization of accounts for a long period in order to keep their balance sheets and performance stable

 

The Way Ahead

 

A basic question is, does any sector need a lot of support to be successful , profitable and sustainable ? In an open market economy, a sector will survive against many odds if the basic profitability and strength is present in its business model. All that is required is to allow a peaceful, disturbance and obstacle free atmosphere for them to operate. Whether the unit is MSME or not, it does not matter. All units deserve and need obstacle free , peaceful and disturbance free environment to operate. I feel what we have achieved in case of MSMEs is a “ concentrated bundle of confusion” as far as incentives and supports are concerned. Let’s have a look at our own experience in the past . Look at the rapid development of the Information technology sector which took place during the ninetees and thereon  and carefully note that the unparalled growth of the sector took place during the period when the Government machinery was blissfully in the dark as far as nitty gritty of the sector was concerned . There were no Special Packages offered to them . The market forces and the entrepreneurial attitude of our businessmen drove the momentum .

In other words, encourage all the sectors and please don’t try to give special treatment in a complicated, half hearted manner

All that is needed to foster the growth of MSME sector is a decent , easy and fair atmosphere for all sectors which helps to set up , survive and also provides ease in closing down the operation if it is so required.

In brief, keep the environment of doing business cooperative , predictable,transparent and simple . without any exra special pumping.

 

Category: Finances, General, Taxation |
admin | May 1, 2021
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Tackling COVID in India : An Overview

Everyone is aware about the catastrophically spread of COVID in India in its Second Phase. Much is said, written and shown  by the media and public, to the extent that we are literally made to believe that we are the worst performers as far as combating CORONA is concerned  .  Everyday, such views are floated with improved editing and  stronger flavor.

I do not wish to indulge into that regime of criticism and its debate , which many a times takes political colors.But I would like to state that we should appreciate that India is a huge,highly populated poor country. World over, many advanced countries are also finding the task of tackling COVID to be herculean. India is no exception.

It is time now that we  realise that we can not defeat COVID, but the best we can do is to tackle it in a way that it does least harm to the citizens and the economy as a whole .

 

A     How scary are the numbers, really ?


To my mind, in absolute terms, the numbers are really scary. But speaking in terms of ratios, it is not as scary as the media and experts make it out to be. But the fact remains that the issue is very serious and the recent spread of the virus in the rural sector will make the issue worse and virtually unmanagable with limited resources and skills .

Taking the position as of now, say, at the current level of nearly 3.5 lakh new patients each day , it amounts to 1 patient per 40,000 person per day.

The mortality rate of the patients is at most 2 % ( currently in India it is nearing 1.3 % )

So the mortality will be 1 person per 200,000 persons per day

So, nearly 360 persons p.a. per 200,000 persons will not survive the decease .

This equates to a death rate of 1.8 persons per thousand p.a , as against the average death rate of 7.2 in India .

And, remember, this is at a near peak time situation that prevails today and at very high mortality assumption.

Looking to the population of India the numbers are not as large and the recovery rate and mortality is also not worse than many developed nations .

Than, the question is, why such a huge chaos and fear that prevails in the entire country.

To my mind,the current crisis is quite a man made crisis created due to a sheer mismanagement, improper and ill prepared handling of the pandemic and irresponsible behavior and actions of the so called leaders .

It is this managerial mess up that has accelerated the fear spreading that has picked up at a faster rate. But let us also know that the situation , the world over, is quite similar. Despite the lack of resources , large , illiterate and poverty ridden population, India is giving a commendable fight against COVID.

But this should not absolve us from many lapses and blunders that we have made.

 

B     The situation would have been much better if……


1.. if the election commission had at least bothered to either postpone or at least control the rallies during campaigns

2..  if the high courts and supreme court had activated themselves  a couple of months earlier to give serious warnings while taking stock of the situation that prevailed and likely to prevail if sufficient steps are not taken in time.

3…  if the bureaucrats had realized the seriousness of the likely second phase by taking clues from the European experience, where the second phase had already started. At least enough stocking of oxygen , ventilators, critical medicines, creation of temporary make shift facilities to treat not so serious  patients etc was certainly expected from them . They could have created these facilities during a near slow down period of the pandemic .

4,,, if the vaccines supply had been planned better had the government resisted itself from being penny wise

5..  if the politicians had shown retrain in their campaigns,by not allowing Melas and matches,etc,looking to the infectious nature of the virus and seriousness of the situation

6 ..  if the Disaster Management Authorities had played  their proactive role of establishing disaster mitigation preparedness, as required by their own charters

7.. if media and the all time critics had behaved a bit with restraint in not spreading fear and rumors just to win a race of TRPs. Their role in creating a confusion and fear is not to be taken lightly .

8.. if the traders and fast buck chasers had not rushed to corner essential medicines and oxygen , the situation for the common man would have been much better and even mortality would not have shot us as steeply as it did . Such persons should not be spared either .

9… if we had taken care to establish primary centers for not so serious patients by creating such facilities in Hostels, Halls and open grounds well in advance, more not so critical patients could have been accommodated and hospitals would have faced lesser pressure

and the list will go on and on  ..

Yes,these are bygones and more of after thoughts, but they are certainly quite serious and missing out on taking proper precautions are errors which are unpardonable.

A third wave is also being expected and India should do well to correct the grievous errors once committed  .

 

C… Impact of the Second Phase on the Indian Economy


My attempt here is to understand the  impact of COVID and the measures being taken during the Second Phase of COVID on the average citizen and the economy .

1.. A good part of the Second Phase is that the governments have not preferred to declare a complete lock down as done during during 2020, The employments, therefore will be hit a bit less. Though the impact on the sectors which are under lock down during 2021 and the sectors which are crumbling due to the fear psychoses that has engulfed us all can not be overlooked , Sectors like restaurants, street vendors, miscellaneous shop keepers, malls, travel and tourism , miscellaneous business service providers etc will be hit at least as severely as during 2020. These  unorganized/semi organised / MSME sectors contribute a large part of our GDP , cover large population and provide huge employment. Their slow down will have substantial dampening effect on the GDP and economy as a whole.

2… The Government does not appear to be in any mood to declare any SOPs / concessions this time . Even timeline for compliance , moratoriums/ relaxations in Interest and repayments are not even under consideration so far.

3… Taking a clue from the above, it appears that the public and the businesses at large, are expected  to handle the crisis by themselves . The government machinery have their hands full in barely managing the pandemic spread and chaos that gets created.The large expenditures involved will not leave much room for hem to announce any further relaxations/ reliefs. On the contrary there will be a pressure towards resource mobilization.

4…   The pressure on resources of the government will be felt due to increasing expenses along with reducing tax collection along with rising expectations from the masses.  Though the uproar will pick up a little later, but with rising prices due to shortages and black marketing many industrial units will find it hard to keep going. The industries where the workers have voluntarily returned to their villages, will find it very tough to continue their operations and  restart after there is a bit of respite from the pandemic. The restart cost and the labour costs are bound to go up, giving a further fuel to inflationary trends.

 

D … So what do we expect ?


1..  There will be a slow down for sure .GDP will not drop as much as 2020( 23%) but will certainly drop to  near 0 to  – 4 % in the second and also third quarter of 2021.The slow down will be all pervasive since the public and the business community has already started feeling  dejected and helpless .

This  GDP estimate presupposes and is based upon an optimism that though late, the desperate measures being taken now will start yielding results soon by end of the second  quarter of 2021 itself. As a result, for the entire year 2021,the downfall will not be as steep as seen in the 2020 .Non declaration of Complete Lock Down, despite strong demand for the same, is a welcome step as far as economic impact is concerned

2..  For the Government, the expenses will skyrocket and the revenues will be taking a dip for sure. This will give rise to deficits which will fuel inflation . Inflation, coupled with crumbling MSME and small services sectors, will be a major issue to tackle for the Government.The citizens, already deprived of income, will be hard hit .

3… The Government will have to address the issue of the disparity of income, which has worsened after COVID . The sporadic rise in the wealth of a few is eye catching . One can easily predict the reinstatement of Wealth Tax and Estate duty with some modifications .

4.. The new concepts of WFH and On Line Education will gain further popularity . The decades to come will clearly belong to those who are Tech Savvy . This will make it difficult to impart a comparable level of education and provide jobs to the under privileged class. The real impact of this will soon start becoming visible.

5… And for the stock market, it will continue to be bullish, not only because India will somehow pass through the tough times but also because a bullish market will make disinvestment task a lot more easier for the Government.

6… As citizens and as a country as a whole, we need to firstly accept that COVID is there to stay and we will have to learn to live with it . Meaning thereby, that the precautions will have to be continued . The Mantra,” Prevention is Better Than cure” will have to be really implemented not only in individual capacity but also for the economy as a whole .

7..Adaption of a new life style will be essential . Certain industries/ sectors like pharma, IT ,On Line education, DTH services will flourish as being seen and sectors like restaurants, travels , tourism, etc will have to evolve a new business model to survive. One sees many closures / amalgamation /mergers /insolvencies /rise in NPAs in near future .

After all this, as we eventually come out, the economy is bound to get back to its track and start moving. But,  the prime thing now is to somehow swim through and survive the crisis.

E… Conclusion

1… The current anxiety and crisis like situation is quite man made crisis . It is a managerial failure which has been over hyped by the media , including international media without considering the population pressure and poverty factors so unique for India . In international comparison also our actual performance is not as bad as it is being projected .

2… There are certain glaring errors which must be taken seriously and at any cost should not be repeated when the third phase begins soon . Disaster mitigation steps towards such health disasters must be identified and implemented asap . Remember chemical disaster and reputation of such health disasters are quite likely again in years to come

3… By not declaring complete lock down even during such huge sufferings has protected the economy well , but  impact of the wide spread decease and partial lockdoen on MSME, small entrepreneurs, salaried class is bound to be felt.

4… Inflation and unemployment is looming large at least in the short run. A common man will be hit hard in the quarters to come. Black marketing, hoarding and corruption will add fuel to the sufferings unless dealt with stronger arm.

5…  There will be palpable increase in inequality since the pandemic has brought in significant changes in the consumer preference and way of conducting business.

6 … Expecting any direct support from Government appears to be a piped dream. Increase in taxes for the rich class, introduction of Wealth Tax, death duty,  on the contrary are likely.

7…. The stock market will flourish since there are sectors which will gain a lot , e.g. pharma, Infrastructure, banking and IT .

7… But the situation is not too grim and within a short time, it is possible to come back to the growth path .The confidence in India story will be reestablished if we pass through this crisis.


Category: Finances, General, Political, Uncategorized |
admin | July 17, 2020
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Amal Datt Dhru Show

So happy to share my YouTube channel – Amal Datt Dhru Show on the finance fundas with you..It is.my humble attempt to simplify the understanding of the complex world of finance.. The series of 5 lectures will cover various aspects to demystify the complex world of Finance.

Kindly Click below to watch our latest youtube video…..

Please Subscribe, Like, Share and Comment and give your valuable feedback…!!

Part 1 – Introduction to Finance

Amal Datt Dhru Show – Part 1 – Introduction to Finance

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Category: Finances, General |
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