India


In an article in Business Standard titled How to combat inflation , the author provides the simplest of solutions to tackle Indias problems for the short term.,

a. Allow a 10% appreciation in INR  (to USD/INR = 36) to quell inflation

b. Reduce Interest rates by 3% (to say 4% p.a)

 My Take : I wish the policy makers were this straight forward. They always want complicated untested methods employed like the below

a. Ban Rice exports

b. Subsidise maize imports

c. Cut Steel prices

All the above activities are naive and useless. I wish the policy makers knew,

“If the prices of volatile commodities are rising, and the prices of finished goods and services are rising at a slower rate than would be warranted by their commodity content (which is to say, the price of value added above those component commodities is not rising, at least not any faster than is considered normal), how does this resemble a balloon blowing up? Most of the balloon is not expanding.”

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For those of you who are wondering what is happening with Indian Economy, here is a quick update.

We know inflation is alive and kicking. Food prices are at a high.
Growth has slowed down from 9% (which we saw over this year).

A slowing growth and rising inflation is called STAGFLATION.  

S-T-A-G-F-L-A-T-I-O-N is the word that I am humming now. I was discussing this with an eminent economist here in the US and he quickly told me… “In order for stagflation to really take hold, you would need some concrete evidence that unemployement is increasing — otherwise, we’re just talking about inflation.”

A very good point indeed. The trouble I have is, Indian govt doesn’t produce the unemployment numbers like US. I won’t be able to make a reasonable judgement with unemployment.

OK, now govt has two things to do. (it always had a twin mandate)

a. Keep up growth (And hence employment to masses).
b. Contain Inflation.

For (a), the easiest thing that Govt can do is to lower interest rates but that will hamper (b).

Now its all about playing the cards right, which of the above is important now ? (b) seems to be the priority now ****, contain price rise, ward of Communists wrath, put up a good face in the elections next year.
Now that the direction is clear, here are my predictions

a. If US situation continues to detoriate, govt could let lose the USD/INR a bit more. USD/INR = 38 looks a possibility in the near term
b. Once (a) plays out and US situation continues to detoriate and goes past the recession zone, inflows into India go pale and USD/INR could appreciate past 40.

So USD/INR volatility is here to stay which is why FM is worried.  ****** ( How nicely a straddle can work )

In short, India is in the problem zone which I have been talking about for the last 2 years.
We are COMPLETELY at the mercy of US / Global growth.

How is this going to affect us ? Thats a topic for the next article.

Business is obviously booming in India and China.  This is the common perception, India ranks 2nd in IPO, 4th in M&As.   Villages don’t seem to be left behind. Last week, I heard from one of my friends that a barber (usually considered a lower class of economic strata) has put his son on the “management seat” in an engineering college. 

Ysterday, On my way to office, I went past the American School , a FORD Endevor (costs around 15L ?) pulled up near the school gate. There was a lonely looking girl who got out and went inside the school. The driver parked the vehicle there and had to wait.

 When I rode few yards further, there was an MTC bus which had around 70 passengers broke down. All of them were stranded and shouting. I could only think of the time the passengers were wasting and they trouble and tension they had to undergo when they reach their work locations (or anyother destinations they were set to). Productivity !!!

Two Inferences :

1.  Economic Divide is massive.  A ford Endevor for a school girl vs a dilaphitated MTC bus for masses.

2. India and Productivity growth are Antonyms

Having returned to India, the most apalling thing I find in India presently is the healthcare condition.

 Chikun Guniya is sweeping accross the states. I thought TN was the worst hit, but high denisty state of kerala is reeling under the virus consuming 40 people already.

Other dangers lurking :

 Dengue claims AIIMS student, 2 are in ICU

12 fresh polio cases reported

MindTree out to teach errant staff a lesson

MindTree, a $100 million software services company based in Bangalore, announced to have taken initiatives to stem the malpractices indulged in by a section of employees hoodwinking the employers for gains by any means. 
 
The move comes close on the heels of the initiatives undertaken by some frontline companies like Wipro. 
 
According to MindTree, the company asked around 10 per cent of the people it had hired during the last financial year to leave the organisation as they were found to be indulging in malpractices – ranging from false experience certificates to fake payslips. MindTree hired close to 800 people during 2005-06. 
 
“What is shocking is that they had the required expertise to get through our recruitment process and earn pretty well. They did not need to resort to such malpractices,” Subroto Bagchi, COO, MindTree, said.  

MindTree, on its part, has come out with a book titled ‘All About Integrity’ for all stakeholders of MindTree, including its employees and partners. 
 
This book will also be circulated to other organisations, including educational institutions so that issues are understood at a larger social level. 

This doesn’t sound correct. If they had the required experience/expertise are they FOOLS to put fake experience ?

They mention the loosely used “I” word. INTEGRITY…

If mindtree goes public with this sacking etc, they are going to be out of business soon.

With the talent shortage that indian companies are facing now (and companies recruiting BSc grads from villages) all these sacking will make most people avoid joining mindtree.

Suppose I am looking for a switch, will I think about attending Mindtree interview after reading the news (even though I haven’t put fake ex) ? Not a chance ,coz I never know what they will use the “I” word for.  

Oh yeah, I don’t want to receive books on Integrity. I have enough to read already.

My Verdict : 

SACKING is their prerogative. They better stop with that. Preaching integrity is overcooking it.

Of many things that “suck” in India the most irritating are the ideas of the policy makers. Here is another one Panel suggests scaling up convertibility

How does it plan to do that ? This is how

“revenue deficits of the states should be eliminated by 2008-09 and fiscal deficits of the states should be reduced to 3% of GDP. “

How ridiculous, we don’t know what the oil price could be next month and we are talking about eliminating deficits.  Sigh !

From LA Time

****

The Food and Drug Administration on Tuesday proposed banning over-the-counter sales of skin-lightening products, triggering a four-month comment period likely to provoke strong protests from dermatologists and other skin experts.

Publishing the proposed rule in the Federal Register, the FDA said that the creams contained hydroquinone, a drug that, according to studies on rodents, showed “some evidence” of possibly causing cancer.
****

Indian women are sure not going to be aware of this news and will continue to apply all sorts of cosmetics to make them look like “westerners” 😉

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