Is P. Chidambaram Sleeping……?

Is P. Chidambaram Sleeping……? (21st November 2007)

“Trade Deficit dips to seven month low”; and am talking about U.S. and not India. Since the last few months all the news that is catching my attention is the rising rupee and the steep rise of the share market indices, both gaining heights unimaginable till the beginning of this year. This rise has stirred up much of euphoria in the trading sectors with the FM starting to feel the heat only recently. Such a meteoric rise is unwarranted and is not because of the strong fundamentals as Mr. Chidambaram has rightly pointed out. It is because of an external stimulus so strong that it can break the very flow of the growth path that India has charted on. The rise of the rupee has already started to take its toll on our economy, and the markets are all treading a path to a massive showdown and a brutal correction.

The Indian economy is mainly fuelled by the service sector and the manufacturing is still very much in the back seat. The economic model that we follow is mainly internal consumption based with the funds for the same coming from abroad, mainly the US in the form of revenues from the service sector. All those in the software, BPO business earn big money which is used up in the consumption of goods and services in India giving stimulus, however small to other sectors. The rising rupee, though is something many people are happy about, is not so good if it continues to rise this way.

What I feel is that it is a big political gimmick by the U.S. of A to stifle the growth of countries and make money none the less. Most of the oil companies in the west Asian region are owned and controlled completely by US or US has a major stake in them. This applies to almost all the companies operating from there except the national ones. Not only west Asia but wherever there is oil the US companies have stake in it. The recently inflated oil prices have more than added to the US’ kitty. Even though it shows a huge fuel import bill, US is primarily circulating the money amongst its own and making more of it on the high ruling oil prices. The more the oil prices rise the more it earns and more clout it can have in the various markets around the world.

These petro-dollars are invested heavily in the world markets, especially of the Asian region. This heavy investment drives up the markets and when they have got the profits they wanted they can simply pull off without any remorse, leaving the markets disillusioned of what happened. This pouring in of money results in excess liquidity in the markets, and the extra money that is there in the system jacks up the currency threatening the very core of our economic growth engine. Also the sudden meteoric rise of the markets fuels speculations and sucks in money from other potential investment avenues, leading to a sudden rush of all in one direction. This aggravates the situation as everyone wants to earn money from the rally and in the end it will be just the collusion of the foreign funds that had parked there money here who will be laughing back home.

The weak dollar is one of the ways by the US to counter its burgeoning trade and budget deficits that had spiralled out of its control. The weaker the currency the cheaper is that country, and the export led model that US works on will give it more than a thrust to help improve its situation. Already the results are showing in the form of the falling trade deficits, and a budget deficit that dropped almost 50% of its present value of $162 billion. This has resulted in a rise of exports by the US, though miniscule by the current standards (the rise is just 0.4%). And this rise is mainly because of the rise in the farm produce, industrial supplies and the consumer goods sale. Also the weak dollar will make the imports to the country more expensive giving rise to usage of more domestic products affecting the countries dependent mainly on the US for their markets, India being one of them. The US import bill actually dropped (.4%). The trade deficit with the Chinese dropped by 5.3%, a huge figure considering the trade volumes between the two countries. The annual trade deficit is also down 6.7% for the US.

How a weak dollar is affecting us is anybody’s guess. We deal mainly in dollar terms and lower the value of the currency the more it is a problem for us. The top lines are getting eroded and the bottom lines are in red for our service industry. The more the rise is there the more we are going to get hurt. Because of our model, what it has come to be, is the main problem for us. We are happy chirping our growth songs as long as we keep on getting money from US, once this stops, we are all in for a toss. The US is investing heavily in the markets dependent on it for the sole reason of the congress elections being round the corner and it has to present a clean sheet to its citizens. And India is one of the biggest losers in this power game. The more this trend continues the more we will be pushed back. Already some 500,000 people of the service sector have lost their jobs and this number can just go on increasing if the trend continues. For our economy, this is the right time, actually we are late, to shift to an export led model in this flat, fast globalising world. Only Indian demand cannot fuel our growth to time infinitum.

China, our neighbours are also living in the same world but they have not been affected by this fall in the dollar, on the contrary this year their trade gap rose 56% to $23.9 billion this month with the total of the first nine months of this fiscal at $185 billion already way ahead of the last fiscal results. One of the reasons of this is the fixed Yuan which is not affected by the falling dollar; on the contrary this fall may prove to be beneficial for them as they are able to maintain their cost advantage vis-à-vis the US markets and the businesses just keep on slipping from our hands to their shores. If this continues and the Chinese learn to speak English then we are doomed and may well again be a land of elephants and snake charmers. Also China along with some major mineral producing countries is shifting from dollar to more stable currencies like the euro to lessen the damage. Why are we still too-tooing the dollar is something not understandable. Is it because we are so sub-servient to the US politico’s whimsical attitude that we have put our country on the back burner and blindly following what US says, or is it that a shift will affect our businesses for a short term and this is not warranted with the people already talking of a mid term polls in the India, again a situation of keeping India on the back burner. China too may be involved in this game so as to regain its clout as the only major country in this region. The Chinese have a geographical motive is what everyone knows since the 60’s. China has never been our friend and even now it is friendlier with our enemies, so deeming china to be a Buddhist lama is not the right thing to do. It was, is and will remain our biggest competitor. We took away its pie in the service industry and it will do anything to get it back. The falling dollar along with the fixed Yuan is a double trouble for the economy. The weak dollar is eroding our wealth and the fixed Yuan is taking away new orders. A double whammy India has to counter. Unlike India the Chinese growth is fuelled more by the external stimulus rather than the internal demands, which again are very high. The Chinese exported some 2.2 billion pairs of shoes, whereas India just a measly 250,000. In India the internal consumption forms a major revenue source where as in china it’s just to augment the already booming growth.

Our economic policies have more or less remained the same then how come all this is happening. The extra liquidity in the markets has led to a problem of surplus. The money is just being pumped into the system, with no outlet and this may lead to an explosion. The high ruling interest rates are another deterrent to help mop up the extra liquidity that has come in. The high interest rates are stopping us from using the free flow of money that has come in. a reduction in the consumer interest along with the reduction in CRR would help us. Also the policies for the funds may be changed to something more inline with our interests than those of the funds that are coming in. Investment in stock markets may be restricted to those funds that buy into our bonds and the money hence raised may be used to fuel or infrastructure and public needs. This will help us getting the much needed cash in the right direction and also the money that comes in will get time to work for the Indian economy instead. The money invested this way cannot be retrenched as fast and as damaging a way that it can be from the markets. The rupee rise this way will be helpful as we will be funding the basics to fuel our economy. The FII should be taxed at par or even more than the Indian funds to gain from their profits and allow only the genuine funds to flourish. The fall in interest rates will make more people to borrow money and the banks would be forced to raise more capital. This would help fuel growth and mop up extra money that is there in the system.

Along with these we have to take care that the people don’t take advantage of this opportunity and invest in speculation. Also shifting from a predominantly dollar based basket of currencies we should shift to more currencies so as to de-risk our profile. This would take some pressure off us and buy us some time to shift to more areas other than just service. Also in software we should try to move to higher end jobs and enter the designing arena rather than just staying in the BPO testing sphere. The government should give more thrust to areas of research and development and help improve the literacy level of the country, not just on paper but in real term to make use of the huge human capital that we have. This alone would help us survive in the long run. Also a push to the manufacturing sector is necessary so as to gain an edge in that sector too. We need to learn a lot from our neighbours: China and Japan. Both these Asian giants took up a model not dependent on the internal demands and have used it to leverage their growth to high and sustainable levels. We should try and not get trapped in the politics of the US and try not use the nuclear carrot that they are dangling in front of us. And our politicos should get a bit more realistic and see that this nuclear deal will not nuke us, not only on the security front but also on the economic front while trying to please US. We should clearly mark our policies so as to help our economy rather than please US for fulfilling the political fiasco by the Indian politicians. As of always our basic goal still remains roti, kapda aur makaan rather than a nuke bomb for everyone.

The Chinese dump us.... !!! (!7th September 2007)

Dumping, we keep on hearing this quite often especially after the advent of the Chinese on the global manufacturing stage. The Chinese are not the first one to take to this kind of un-loading of the goods. Before the Chinese many others, especially Japan, have been accused of this. India also has been accused of dumping of shrimps by the US. What exactly is dumping, according to Wikipedia, a leading online encyclopedia, dumping is an act of exporting and selling of goods to a country at a price lower than the price of the same in ones own country. We can also call it to be “predatory pricing”, as many economists call it. So, what is so bad about it, we are getting goods at a cheaper price than we would other wise, this will lead to more savings and the benefits of the same thereof.

When will you sell some thing at a price lower than the price at which you sell it to your own people? There must be some reason for this act of philanthropy. It is not everyday that we get discounts. One of the reasons may be that the demand of that product has flagged in the domestic market and the excess has to be cleared and the losses covered up as much a possible. A very plausible cause, but if the demand for that product has declined in the domestic market, maybe it is the case in other markets too. A very possible thing to happen, if we have extra with us which cannot be sold in the domestic market as the market is saturated, we can sell it in limited numbers to customers in other countries. There is a possibility of people wanting to buy it, but not going for it maybe because they feel that the value for money and the requirement of the same is not that much, so if we make it available at a cheaper price maybe they will grab them up, in turn making the balance sheets of manufacturers look happier, and also get brownie points from their government for improving the trade balance of the county in their favor.

A reason for the same can be creation of a market in another country when the same has been developed in the domestic market. This early entry ensures a major share in a potential market giving obvious advantages. But then this cannot be called dumping in the real sense of the word. Another reason can be to overwhelm the domestic market with cheap goods so as to cripple the industry, and fracture the economy. A very innovative way to invest in the downfall of an economy and act innocent at the same time. More often than not this is the reason why all of a sudden a country becomes benevolent. In India, China is the main culprit, and damaging the local markets is the only notion. The Chinese have flooded Indian markets with cheap toys, electronics, items of daily utility, to industrial products. All this has had an effect on our industry, especially the toys sector. Now you can easily buy watches by Kg. in a Mumbai market, and get brand new bikes at fraction of the cost at which they are available in the country. The latest case in consideration is that of tires being dumped by the Chinese.

How and when can we say that we have become dumping grounds of any good, only when some one who is getting affected comes up and complains about it. Any country can not just arbitrarily blame any other country or its industry, but has to prove it that its own industry is getting affected by the exports of the other country. There is a long procedure that has to be followed in order to maintain a healthy trade relationship between the countries. Other wise this can be very easily used to hamper the exports of another country and damage its trade. Another way to curb international competition in this increasingly globalized/flat world. The method which is widely followed is to impose a high anti dumping duty/countervailing duty on the dumped products so that they are priced competitively and are sold on merit rather than pricing, this has an advantage of letting the local industry face global competition without letting it get damaged. Recently India imposed a duty of $135, raised from $95 on tyres imported from china.

All that we keep on hearing about dumping is its detrimental effects, but there are some positives as well which we have to find out. This dumping gives the consumer a sneak peek into what is available in the world market, how is it better than the ones that they use, and they getting to use the products which they did not use initially because of lack of availability or price. This increased level of aspiration of the customers then reflects on the manufacturers who start to manufacture goods of better quality, take up lean manufacturing methods, and use more effective means like six sigma and value engineering to cut costs. This has benefits for the customers and the industry alike. The customers get better products at more reasonable prices and the industry more customers. Dumping has helped many a industries to find new customer bases in the lower strata of the society without spending much on the development of the same. A good example will be the bikes market in the country. Lifan, a Chinese manufacturer of bikes started selling 100cc bikes for as low as Rs20000, much lower than the ones available in the country; this helped in tapping a market that was served by bicycles and mopeds. These people graduated to bikes. Ones a customer graduates to a product of a higher value, his aspiration levels are increased and he demands more of the products, luckily the dumped bikes cannot fulfill these for long and then the same customer looks up to models available in the country and helps the industry. Why the bike market is now reducing is a reason totally different, its more to do with the four wheeler market growth, and the second hand market amongst others. Another is the case of watches.

Government subsidies can also lead to products being deemed dumped onto other countries. As the production costs go down, manufacturers can get more profit for a lesser price and these subsidies can be used as a tool by governments to fare an economic war on other countries. Subsidies makes the products manufactured in the country cheap and the one manufactured in other countries seem overpriced by the consumer, who goes in for goods that are cheaper, and some times can also overlook quality if that is not a critical product like health care equipment. This hampers the growth of the industry which is importing to serve its needs, and as the demand for the imported product keeps on growing, the local industry suffers; the government exchequer suffers with increasing import bills. These subsidies have been a bone of contention for many developing countries at the various WTO meets. Many developed nations like the US and Europe pour in subsidies for their farmers bringing down the total cost to unattainable levels. Then the countries dependent on them for food supply suffer. Similar is the case with China, theirs is an export led manufacturing economy, the more they manufacture, the more they export and the more they grow, one of the reasons for the artificially high Yuan prices. So it is but obvious, with globalization being the mantra these days, that they will scavenge markets at the global level, and collapse the weak industries wherever possible. This helps them to find more markets and grow more. “Economic Colonization” we can call it.

Another way to look at it, from the point of view of the government providing subsidy, it is so as to protect a new industry, which is still to grow, or to get it out of a depression. In U.S. and Europe it is agriculture whereas in India it can be taken to be the IT and ITES industry. The Indian government has given tax sops to the IT/ITES industries which have brought down the costs of the goods and services to one of the lowest in the world. Can we deem it to be dumping of services? I think we can. Outsourcing has become one of the major industries and revenue earner in our country and a major issue in the developed nations for they say it has taken a toll on their employment levels. Once the tax sops will be lifted the cost of services will be comparable to the ones around the globe, blunting our competitive edge. If we advocate for the services sector of our country, then instead of crying over dumping we should take steps to take the bull by its horn, and let the tiger overwhelm the dragon.

Lost and Found (20th July 2008)

ALONE

Alone, with no one? None. Hmm… you sure? Yes, a million dollar, a billion dollar sure. I see out of the window, so many people out there, but yes, still I am alone. Right out side the room where I sit typing this I can see three people but then why am I alone? Or am I, or is this just another figment of my weird imagination which I conjure every now and then to feel the way I want to. Why do I need to do this? I have no reason but still I keep on doing it every now and then. And the best part is I have started to enjoy this being alone thing. Why have I started to enjoy this which I used to hate and almost landed up in a disaster to avoid it? May be it would have been better if I would have controlled myself then, at least now it would not have been the way it is.

Being alone is a good thing in itself. I have finally started to look into self, to find myself. I get to spend all the time with myself, and whenever you need someone to feel that you are a human, use technology to connect with people, again with the flexibility of giving only as much time as required, no more, no less. The introspection has led to many discoveries which make me feel good and bad in equal measure. The good is that I have learnt is that it may not be necessary that if we stay alone we end up doing drugs or booze. It may be that we learn to find peace with ourselves. People feel, this way of staying uninvolved is not a good sign, but then can you stay involved with everyone? No. I have found so many qualities in myself which I was unaware of and used to search for them in others. It’s only now that I have seen that I too have many a good qualities, which I always wished I had.

The best is making decisions. Earlier I always looked upon my parents to make decisions for me. Now I go to them for advice and discussions. Still I love them the same, just that now there is an element of extra understanding that has come in. Initially all the decisions made by them had to be followed, they never forced me to, but then I never challenged any. I took them as it is and followed them blind folded, holding their hands. And what I did was very correct, I know if I would not have done that maybe I would not have reached where I am today. True there may be many opportunities that I lost; but then many a disasters have also been done with. Now that I am more mature I know what is good and what is not, still I am prone to mistakes, and I know I have backing to help me in any case. My parents have very beautifully transformed from being great manufacturers to great consultants. They know exactly when, what to do. When they saw that I am good enough to make choices I was left. Thank you for that.

The values that I have are the one which I know will always help me. Sometimes I feel that always doing good will never help me. Being true to all is crap, and help others only if they can help you in future. I was wrong, and it is because of my values I know that I am. The values that are drilled into me are what help me sustain myself the way I am. Many a times when things happen the way we don’t want them to we take everything to be negative, but then it is these values and habits that have been imbibed that make you look at all the aspects and then take decisions. A late decision is way better than a wrong decision. I had a big fight with one of my dearest friends, a big one at that, because I started to look for names, for things which have none. I kept quite, analysed the situation and now have my friend back, less in intimacy, but none the less there, and much better than not being there at all.

Also I learned on how to be self satisfied and keep you within the boundaries and respect limits of other people. I learned it from another friend of mine. Not that I do not maintain my limits, that I always do, but the harm it causes, I learnt from her. Never ever do things that upset others, that is what causes more problems to you in future. How small misunderstanding can get bloated up to a level that they end up spoiling everything, I learned it the hard way. Keeping quite helps a lot. The words “if speech is silver, then silence is gold” are so true I never believed them. The silence, I it feel now. I have started to hear things that were unheard of earlier. I have understood what I never did, what I never wanted to and always took for granted and now I have finally found someone, the most precious of all, Anant. Mysely.

18th of August

18^th august 2006, the day I will always remember. This is the date when I joined L&T, and how happy I was and still am. This is the day when I for the first time felt that I have grownup and am independent and responsible. Till now I always had my parents as my support, I still have the support just that their role has changed from being great sculptors to great consultants. This life is full of surprises and so it was on this day.

Unknown and uninitiated about the company I landed up late by misjudging the distances involved from my flat in Kandivali to office in powai. Still in the college mode, I got up late and then hurried towards the office. The very first day I got to travel in the much famed BEST bus and was more than motivated to be on time from now on ( I am still trying to be up on time, but I don’t miss the office bus what so ever)

Anyways, after the horrid bus ride I reached the office and then reported to the corporate HR at Gate 5. Reaching there was a relief, I had forgotten that all those who are joining with me are none other but the students of yesterday, and many were late. Dressed up as we all were to our best, we could have easily passed off as an executive than a new joinee, and I took advantage of the situation.

After the orientation, and into the department (Switchgear Design and Development Centre, SDDC), I was asked by my IS to sit in the library and fish out some technical information for an ongoing project. I went in, sat with a few journals and technical papers and got bored. All new in the department I knew no one but my IS and GM and no one else knew me. So what to do? I already knew that many fellow joinees will be in a dilemma similar to mine. So I used this as an opportunity to entertain myself. I waited for a person to enter and plastered a serious look on my face. The guy who entered the library saw me and then looked around. There were a few hundred books and me. He took my permission to sit down, and I graciously granted him one. After all here I had an opportunity to make a new friend and have some fun. So as soon as he started reading a journal, I looked up and in a very serious tone asked him details about his college and the like, and in between the conversation all of a sudden, questioned him if he had wished me. Perturbed by the suddenness of the question and it being so off the topic he fumbled. I got an angry look on my face and there he was all flushed red with shame of not wishing a “senior” and his head drooped. After this small act of mine I graciously forgave him only to know that he was a senior who had seen me with my IS and this group had decided to have some fun so as to make me get along with them. All of a sudden the tables turned and I was more violet than red with shame. Could not breathe at the very thought of acting unprofessionally in an organisation and that too on the first day. My seniors had a good time looking at the face of a moron who tried acting smart and we have been “enjoying” each other ever since. After this small prank as if it was not enough I was told a task to be completed by next morning as a way out to the act I committed in the morning. Anyways I worked harder that day and ran all over and finally when I thought I had completed the work came to know that it was a project completed a few years back and I was doing things already done. Again all had a gala time enjoying innocence of a kid. But then I got to learn a lot and know a lot of people. The next day I was assigned to a project and a team and since then it has been a dream run in this organisation.