Archive for the ‘Economy’ Category

It’s not the United States or UK or Germany or India!  It definitely should be Zimbabwe, where every common man deals with billions of dollars (Z$ of course!)

Zimbabwe is reeling under serious inflation, hovering around 2.2 Million % as per official figures.  Unofficial figures put it higher.  These high value bills couldn’t even buy a loaf of bread.  They could get only 4 oranges, as claimed by the CNN website.

With 80% unemployment rate, chronic shortages of food and fuel and in the midst of political crisis, Zimbabwe is surely in dire straits.  Many blame it on the President Mugabe’s political moves.

It’s high time they put an end to their political motives and work towards the nation’s welfare.  They should take some consulting help from bigger minds in the world (why not Chidambaram!) on the immediate steps to tackle inflation and improving lives of their citizens.  God save this country!


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Future of Indian IT

We have been seeing ups and downs in the Indian IT Arena, connected mainly with the slump in the US Economy.  This is a very much anticipated outcome, as a major share of the revenues of Indian IT Majors come from the US.  So what really does the future hold for the Indian IT Population?  Can the industry survive long as a “low-cost” destination?

To rationally analyze these questions, we must understand why India is viewed as an ideal destination for IT MNCs all over the world.  I would attribute this to two main reasons – Good quality of labor and Work getting done at a lower cost.  

First, let us consider the latter for discussion.  Getting work done at a lower cost, is purely an economic phenomenon.  Today India might appear to be the low-cost haven for many economic super powers.   But in the future course, if some country ‘X’ offers to do similar work at a much lesser cost, these super powers are sure to be lured.  Even with the appreciation of rupee, India still holds the top spot among countries which can do quality IT work, at a low cost.  But we cannot rely on this alone, as economy is bound to change over a period of time.

Next comes the discussion about the quality of work done.  It is a widely known fact that Indians are good with their logical and analytical skills.  These skills are so vital for the IT industry.  Further, Indians are very good at grasping stuff taught to them and are also excellent in adapting to changes.  These essential skills and the low cost have been attracting the international IT majors towards India.  (Please note that this post is limited to only IT Technical labor in India.  I am not considering the people working in other fields, who attract international majors).  But again, with the evolution of the Internet and the knowledge spreading its wings to all parts of the world, what is the assurance that India would not be pushed back in this aspect too?  China proves to be a prime competitor for India in both these fronts (low cost and quality).

So after discussing both these factors, we can clearly see one thing.  Going forward, India cannot be a leader in providing IT services, only with both these qualities.  I think there is a dire need to concentrate on the third aspect too – Innovative and Creative population.  So this has more to do with research and development, than with providing quality work.

I can see many Ph.D. fellowships offered in India by few IT Majors like HP and Microsoft.  Also IBM have their research labs located in New Delhi.  But, I still do not see a major thrust or interest in the younger generation to take part in innovative and research related activities.  Many MNCs call India as a hub for their research, but I can only see the economic reasons behind this.

I think one of the ways to make the future certain for the IT Industry, is for the Indian companies to concentrate on research activities.  They must encourage and support their employees to be innovative.  I would love to see more patents filed by Indians, related to Information Technologies.   India should really become a hub, for research related activities.  Right now our IT industry depends mainly on the US economy.  This must change and the international investors must look at India as a source of innovation.  They must come here only because of the creative stuff we do and which they would get nowhere else in the world.  This coupled with low cost and quality, would make India a real super power.

Thus learning new technologies is essential but creating and innovating new technologies must be our vision.  Now we have reached a stage where we are known to the world as good service providers.  It is high time to move to the next level, where we would be viewed as innovators and those who cannot be ignored even if the Rupee appreciates 🙂

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Group of people who depend on agriculture and the monsoon in India, are in shambles. With so many relief activities carried out by the UPA Government, the suicide rate in Maharashtra is still shocking, at about 3 deaths per day. This is really heart breaking.

Also the policy to provide compensation to the affected families seem to be flawed. A thorough investigation is done for all the claim applications and this cannot be ruled out. But comparing the trend between 2006 and 2007, a lot more applications have been rejected this year due to the reasons that the deaths were not related to ‘agricultural suicides’. According to the policy, eligible reasons for the suicide must be the following – farmers who committed suicide must have taken a bank loan, must have a cultivated land and defaulted on the loan before death. But, how does it take into account those farmers who are not provided loans because of their bad financial status and those who committed suicide because of family commitments like daughter marriage, that are indirectly related to agricultural grievance?

Government directive to the banks to provide loans for those farmers who already have open loans and unable to repay, only increases their debt. They are in double debt now! Also the farmers are not properly guided to make the best use of the existing money. They invest their money in stuff like Bt Cotton seeds, which turn out to be a failed strategy.

I think, the following should be the strategy to make sure that the distribution system improves

  • Make a complete survey of the worst affected villages. Take a list of all farmers and provide then unique identification numbers
  • Record the status of each farmer like whether he has a land, he has taken a bank loan, etc.
  • Match all claim applications against this database and take appropriate decisions
  • Plan all subsidies based on the data collected. Instead of providing additional loans and burdening the farmers, better strategy would be to provide subsidies
  • With the help of leading agricultural institutions in the country, educate the farmers about the best strategy in worst times. This will make sure that all money the farmers get would be used in the best possible manner

Government is so busy providing subsidies to wheat imports and other forms of export.  But there is a whole class of people waiting for them, within our country.  India has bought wheat at very high rates, in the recent past.  The justification was to save it for the future.  But, please consider the present grievance!  Saving for the future is necessary, but ignoring the present plight is far more serious.

I greatly admire the steps taken by the Government to help these farmers.  But what is needed is a bit of tweaking, so that the policy really makes sense to these farmers and make them live longer!

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I have always been a regular reader of articles written by Swaminathan S. His natural style of writing and expressions remind me a lot of R.K. Narayan. Though their areas of interest are different, I can sense some similarity in their writing.

Couple of his recent articles were too good. I just enjoyed reading them

Non-strategy can be a blessing

Who’s afraid of Walmart?

In the first article he beautifully brings out the instances when the Government strategies have failed but India, as a country, gained a lot on those failures. His writing in this article is very true to the topic. It appears that non-strategies, sometimes, have resulted in huge success. Take the brain-based industries for instance. Also the GDP growth of 9% has not come out of any hi-funda strategy by the Government. So as he says, Non-strategy may be a blessing too!

After reading the second article, I have my strong doubts whether Wal-Mart model will succeed in a country like India. They are better off providing back-end support, as they are planning to do, with Bharti at the front-end. But I have my misgiving on their success as an independent retailer. Wal-Mart has always been a company which targets the lower-middle-class population. They rely strongly on their ‘low-price’ strategy, which is achievable through various strategies like Cheap Labor, Location outside the city, etc. But though it is cheaper, consumers will prefer the local shopkeepers to traveling all the way to Wal-Mart. Also the consumer-centric approach of Wal-Mart would not fare well with the Indian economy which is more employee-centric. So overall, the Communist party has over-hyped the arrival of Wal-Mart to India.

Both these are very good reads. To subscribe from Google Reader for posts, use this RSS feed link: http://timesofindia.indiatimes.com/rssfeeds/21649661.cms

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Nowadays the buzzwords in IT are paving way to the ones in economics. Terms like inflation, CRR etc. are becoming more common. With no formal economics knowledge, I found it pretty difficult to correlate these terms and understand them. The objective of this post is to give my understanding of some buzzwords in common man terms. Pardon and correct me if I am wrong in certain cases.

Inflation: Today I go out with 100 Rupees. I first head to my favorite restaurant, have wonderful dishes, pick up a couple of magazines on the way and come back home. I find a balance of 30 Rupees in my pocket. After 3 years, when I go out with 100 Rupees and have the same dishes (of course in the same restaurant), I find that I have no money left to get the magazines (same magazines…). This is called inflation. Reason is that the dishes cost more now, because of the increased prices of raw materials for cooking, which in turn is due to lack of supply.

CRR: Popularly known as Cash Reserve Ratio!! My father gives me a pocket money of 100 Rupees every month. I can comfortably meet all my expenses with 80 Rupees. So I have a surplus of 20 Rupees every month. My friend Suresh gets a pocket money of only 50 Rupees and he needs 10 more Rupees to meet his expenses. So I used to give him 10 Rupees as a loan every month, which he promises to repay after a particular period of time. My father (a.k.a RBI) came to know about this and did not like this agreement. He does not want me to lend 10 Rupees to Suresh. So he cut my pocket money by 10 Rupees (he also promised me that he will keep it with him under my name and give it to me when I need) and now I get only 90 Rupees. So after meeting my expenses, if I give Suresh all the remaining 10 Rupees, I have no savings left. So the maximum I can lend him is only 5 Rupees. This 10 Rupees which my father is withholding on my sake is called Cash Reserve Ratio.

Fiscal Deficit: I get a salary of 10000 Rupees every month. My basic expenditures like rent, electricity, house hold articles etc. amounts to 6000 Rupees every month. I constantly find that the other expenses exceed the balance 4000 Rupees. I have to use my Credit card for about 2000 Rupees on average, every month. Now the fiscal deficit in this case is 2000 Rupees. Simply put “Fiscal Deficit = 2000 – (10000-6000-4000) or Borrowing – (Earning – Fixed expenditure – Variable expenditure)”. Whenever this formula gives a positive number, it means that there is fiscal deficit. It can be overcome only by increasing the earning or decreasing the variable expenditure.

Prime Lending Rate (PLR) – You are into credit business. You lend money to people, in small scale and nominal interest rates. You have a very well known circle of people, who borrow money from you regularly. Assume that the rate at which you lend them is 7%. A less known person comes to you asking for a loan. His financial history is not known to you and for that matter not to anybody in the lending business, in your locality. To be on safer side, you ask for guarantees and also for higher interest rate at 9%. He has no option to agree to your condition, as he has no others who can lend him at a lower rate. Here the 7% is called PLR. When PLR moves up (that is you charge more interest even for your trustworthy customers), the normal lending rate moves up too.

More buzzwords when I add them to my kitty!!

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