Archive for Political

admin | October 7, 2024
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ARTIFICIALITY IN EXCHANGE RATES

The foreign exchange rates have always puzzled me.

A few questions remain inadequately answered.

For instance, on independence, one rupee was equal to one dollar and was quite near to being equal to one pound. Isn’t it surprising that despite being a very poor nation we had a very favorable exchange rate. It meant that it made imports more attractive.

But we could not sustain the same conversion rate. Rupee got drastically hammered and soon enough even before the fifties we saw the exchange rate moving against Rupee.
In the international market, during those days we followed a fixed exchange rate. Our imports continued to rise and the exports could not match up, leading to huge trade deficits.

The pressure to devaluate Rupee went on increasing because, the demand for Dollars was very high as against the demand for Rupee. This led to a series of devaluation until the nineties when Rupee was priced at Rs.32 against the Dollar.

It was in late nineties, that a decision was taken to make Rupee partly convertible. For revenue transactions it was freely convertible except some restrictions. And for capital transactions stricter restrictions were placed.

Today, the exchange rates are staggering at Rs.82+ against a dollar and 100+ against a pound.

If we look at the purchase power parity the exchange rate would be somewhere near Rs.25+ against a dollar and Rs.30+ against a pound.

Does it mean that after independence India has performed so badly as compared to USA and UK? Answer is obviously No.

There are a few reasons which I have in mind for the drop in the exchange rate:

1. The exports of some scarce materials at very low price which were taking place prior to independence seem to have been reduced or stopped.

2. To catch up technologically and to meet bare essential needs, we have allowed more imports.

3. The strong currencies have created huge demand for their currencies through soft paddling and allowing the tax havens to grow and prosper. We are aware that most of these tax havens provide almost zero tax, nearly complete secrecy about the monitory transactions and they are fully blessed and under the control of USA and UK. The large transactions of illegal trade and corruption tainted money are routed through these tax heavens, creating a spike in the demand for dollars and pounds as compared to most of the other currencies including naturally rupee.

I think the third reason plays the most important role in pushing down the value of rupee in international trade. Surprisingly, almost all trading companies prefer to trade in the “popular” currencies, which further accelerate the downward pressure. Making any other currency “popular” without resorting to unfair means as explained above seems to be an almost impossible task. The developing countries will have to live with these artificially padded exchange rates God knows for how long.

What say you?

Category: Finances, Political, Taxation |
admin | September 28, 2024
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Part-2 “AND A FAIR GAME AT THAT”

Part-1
“ULTIMATELY, IT’S A GAME THAT WE CHOOSE TO PLAY”

Part-2
“AND A FAIR GAME AT THAT”

In part one I merely summarized that life is a game and one should carry on the honest, good and ethical KARMA and offer the same to Lord Krishna. Our duty is to perform KARMA that is destined for us, without worrying about the future, which is in the hands of The Lord Krishna.

This sounds simple but in reality we make our life highly complex by entering into far too many races in the game of life. 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, fame and wealth. We want to achieve all ASAP. We are in a hurry. And the race is highly competitive. We are willing to easily sacrifice even morals and ethics. We stop trusting everybody and lose no opportunity of back stabbing.

Such feelings, situations and mindset, if not prevented from going out of control, would lead to anarchy. No society can sustain and progress unless there is some discipline in adhering to certain rules, dos and don’ts with standard sets of morals and ethics.

Wise people of earlier generation of the sapiens therefore created the wonderful concept of God and basically stated that good behavior will be rewarded and bad behavior will be punished by God. The idea was wonderfully marketed by the saints. They delivered lectures, created stories and poems, wrote numerous scholarly, exhaustive, innovative and still simple scriptures. This movement led to different versions in different parts of the world in which the same concept was marketed and as the time passed, they got to be known as different religions.

Unfortunately, it is a fact that the fear of God and faith in God gets shaken since the mad race to achieve the targets and attain worldly success lures even the best of us to enter this unhealthy competition.

For an individual it is not possible to exist without performing his KARMA and wise people try to stay out of the races and do a solo run because, they realize that life is a game and wining or loosing does not make any difference in the overall scheme of things in the universe. They enjoy the game to the fullest non the less because that is your KARMA.

What say you ?

Category: Finances, General, Political | Tags:
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 | 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 |
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