India Shining is the new campaign by the Government. Aimed towards the urban dweller, primarily. That talks about the current economic feel good factor. But as a trained economist I see some trends that are truly worrying. They are, in no particular order of importance:

Low Interest Rates. While this may have been a boost for industry. It really has been a mixed blessing for the consumer.

However, lower Interest Rates allow you to get into long term debt easier. And while, Much of the middle class is earning better than usual. But they are also spending better than usual. debt is becoming a very real facet of Indian life. Especailly in the last 10 years. Call it liberalisation, call it globalisation, call it conspicious consumption. But the undeniable fact is that individual borrowing is up. Also companies are preferring debt to equity. Not really a good idea. While it may reflect as a “feel good factor” now - it has the potential for disaster.

The value of savings has eroded - especially for senior citizens. My father and mother - who have squirrelled away resources all their lives suddenly find - bingo they get two thirds of what was planned.

Employment: The face of modern employment in India seems to be call centres. centres staffed by empty headed, gum chewing, american accented 18 year olds, who get a 5 figure salary per month. This face hides a different truth. Unemployment is up. we have over a 100 million - in the employable age out of work. Key sectors such as textiles, oil, gas, utilities, government jobs -are on the decline. And these are sectors that provided employment to the socio economically weaker sections. Today with the disappearence of jobw - we will come to a situation where more are being added to “below the poverty line” than subtracted.

Infrastructure: The one thing that the recent state elections proved was that the issues are BSP - Bijli, Sadak aur Paani. Electricity, Roads and Water. I would add to this Health, Education and Sanitation. All of them are woefully lacking. There are more TV sets in India than access to a closed washroom.

I live in Mumbai. The commercial/financial/cinema capital. The roads are truly terrible. Pot holes, illegal constructions. affordable health care is still a dream for most. Education quality is shakey at best, with no standardisation except for the Board. Parents are increasingly spending upto a fourth of their disposable income on high quality education. My maid servant who earns Rs.2600 spends Rs.600 on education. My driver who earns Rs.4500 spends Rs.1500. My friend who earns Rs.30,000 spends Rs.8000 a month on education. All of them are uniformly dissatisfied with what their kids get.

FII Investments: it is my gut feel that much of this FII investment is hot money in the chase of the best possible return. In a world of low exchange rates, India probably offered a slightly competitive advantage. Money came here. Let someone else go a quarter of a percentage higher the money will move there. The RBI else has to spend a considerable chumk of its well earned foreign reserves to prop up the Rupee. that could have the intended corrective action, but it would be a very painful correction for all of us.

Inflation: Screw the wholesale price index and the Retail Price index, and ask yourself one question. Do things cost more this year than last year. Not things like mobiles or cars. But things like onions and potatoes, meat and milk. education and entertainment:) The answer is simple. Much more. And that really is inflation. Salaries are not going to be able to keep up, if companies want to be competitive. We are going to face a major pinch here.

Exchange Rate: The rupee has gained crazily against the dollar. so less rupees now buy a dollar. conversely, more dollars are required to pay for their imports from India - either goods or services. Which means that Indian goods would be dearer abroad.

What does that say for future balance of trade issues. what does it say for Western countries continuing to find our products and services “competitive in price”. What does it say for our BPO industry that is already begun to face tough competition from China.

Over and above this is the deficit. Sooner or later the Government would have to take corrective action. My guess is that who ever comes to power, tough economic times are ahead. They have already begun for some sections of society, but the down turn chain reaction is still some step away. If this government possessed moral fortitude and respect for its people - it would start the corrective measures now. But morality and politics are like the earth and the skies. appearing to meet - but not quite.

Mrs. Sonia Gandhi and the Congress Party need to focus their election campaign. It is truly the “economy, stupid”:)

Tags: Economics

I was a student in the UK, when British Aerospace (the guys who mak(d)e Rolls Royce) decided to move some x thousand jobs to Taiwan or some such place. And there was a toon in the Guardian the next morning. Two workers at a fence which reads ” you are here, your job is 5000 miles away” or something very similar. There was a pathos to the cartoon that stuck in my mind and stayed for all these years.

Today I read this really interesting Op-Ed in the New York Times. Basically talking about white collared jobs that have moved to India and China. And talking about how globalisation would harm the American economy.

t’s funny, the world economy has almost turned a full circle.
as a student in the late 1980’s the burning issue was globalisation. How 1st world companies (primarily American) were going to come into our countries, and their products and product lines going to kill our manufacturing. How jobs were going to disappear, and how a skilled workforce would become deskilled labour. And how collective intelligence and wisdom would die away.

It happened. In India and elsewhere. The early 1990’s saw liberalisation of the economy. Saw the coming in of foreign companies. Saw the death of some old time companies and brands, and saw unemployment in key sectors. but we were told - being efficient is part of the magic mantra to success and development. And we bought that argument. Didn’t have a choice. The US government with its super301, the World Bank and the IMF with a gun to one’s head - you had no choice but to agree.

Today the burning topic is globalisation. But the jobs being talked about are American jobs. The trouble is you (one) can’t have it both ways. Can’t have the world opening its doors to your (one’s) products, industries and businesses. And refuse to reciprocate.

What you are seeing today is the culmination of the (in)famous Uruguay round of GATT negotiations, where free trade in services was pushed down the third world’s throat. Presumably the aim was to get major western Insurance, banking companies the right to compete in our markets.
Today countries like India and China providing services to companies elsewhere. Cost efficient services. It will be very difficult if not impossible for any one to really restrict the flow of services.

The solution may be neither unionisation nor protectionism. The solution probably is to provide more cost efficient services. One probable of way of doing that is to get US prices down to the 1950’s level. Another is to stop consuming so much. If the average middle class Indian or Chinese consumed as much as the average middle class American does, there would be no resources in the world.

Tags: Economics

There is a joke that goes around media circles in Mumbai. It is about a survey conducted by a baby food manufacturer on mothers and their attitudes towards children. The agency spends a fair chunk of the clients money to do cutting edge research in Metros’, mini-metros’, semi rural and rural areas across the country.

A bunch of eager beavers travel to different parts of the country pouncing on unsuspecting mothers for their views. And ofcourse there are focus groups. And there are phone interviews. All in all, what one can call a “good billable” survey. Comes D-day and the agency is going to reveal its collective gyan to the client firm’s management. And comes the bit gyan “mothers in India love their children.”

This weeks’ leaked Congress report on their election failure reminds me somewhat of that story. The conclusion that the 130 odd year party reached was:

a) the chief ministers’ in the state basically fucked up

b) they should spend less money on helicopter rides to various constituencies, and spend more time trying to reach the voter through mass media - like radio and television.

Amazing. And they needed a high level committee and three lost states to tell them that. If they worked for your company you would sack them for gross neglect and grosser (if such a word exists) incompetence.

How does a party with such lack of touch with where the country is going hope to get elected. And if they do get elected how will they administer and govern?

Recent surveys show that over 50% of Indian homes have access to Televsion. More households have TV than have accessible sanitary facilities. Indians spend around 14 to 16 hours a week watching television. Both in rural areas and in urban areas.

Which time warp is the Congress stuck in. I cannot stand the Hidutva Brigade. But one has to admit that they ran a professional election campaign. In their campaign they spoke the people’s language. That is not Hindutva, it is not secularism. It was about the economy. Something that is called the BSP factor - Bijli, Sadak aur Pani - (electricity, roads and water). And they stuck to that mantra. Almost like Clinton hammering away It’s the economy, stupid. The Congress needs to find the people touch. Otherwise they might as well disband.

Tags: Economics, Society

In a Guardian Comment, George Monbiot says that the jobs that are moving from the United Kingdom to India - are essentially a return of the jobs stolen by the British over 200 years ago. He talks about how the ghosts of colonies past are back to haunt the British economy today. And how all this is karma (retribution - as u sow, so u reap - if not in this life then the next). ( i wonder if the Trade Unions are Scrooge - and one day the ghost of colony past will lead them to enlightenment:)

But..

Historically:

The Indian economy - which was self sustaining, self reliant and self sufficient - was ruined by colonization. Raped would be a more accurate term. This paved way not just for an “industrial” class in the UK, but also an emergent middle class.
The “industrial” class made the profits, the middle class a decent stardard of living. It was the industrial class of that time that led the world economy forward. However, both worked together to create wealth for the nation (ably assisted by colonies across the world).

Today:
Today India has the emergent middle class - but not a mushrooming equivalent of the “industrial class”.

Wealth is not being created here (or is being created here in a very minor fashion), nor is control manifested here. Nor do we control the rules of the game. The people who do that are the same that did so 300 years ago. We were dockyard/plantation coolies then, we are backoffice/cyber coolies now.

Control of Land, Labour and Capital- said Adam Smith - determines how the profits are shared (and i am paraphrasing). We only control Labour - and that too till a cheaper English speaking alternative is found.

While we may see the moving of jobs from the UK to India as poetic justice and it may make one “feel good” - there also has to be a certain level of stock taking. If an Abbey National - A British company - can get rid of British jobs because India is cheaper, how long before they dump India for Ghana or China - which is cheaper still.

And will it still be Karma?:)

Tags: Economics

The Hindu rate of growth has been a term applied to the Indian economy since Independence till the early 1990’s. A slow but steady economic growth. Hindu rate of growth simply becaus economic planners predicted that it will happen in the next cycle.

Now comes the Guardian with an article that claims that not only is economic growth Hindu, Economic History is Karmic - with the Brits of today reaping what the East India Company (and then the Raj) sowed over a 300 year period in India.

The article says that the Brits wiped out employement in India - by dumping cheap factory made mass produced stuff, and taxing local produce. Today India - with its large pool of English speakers is doing much the same to the Brits - cheap mass produced “stuff”

except that the mass produced stuff this time around is people. People who may live in Gurgaon and speak like a Geordie. Make conversation about Eastenders, and Top of the Pops (does that still run?). 22 year old who try to talk with a Brit accent, and know more about football league matches, than about what’s up in their own neighbourhoods. People are churned out of “finishing schools” that prepare them for the accent, the monitoring, the polite conversation, and the inane platitutes.

A friend of mine who heads HR at one of the largest call centres in India - talks about recruiting 24*7 - the drop out rate from the industry is huge. It is the cyber equivalent of tossing burgers at a fast food place - deskilled, and depersonalised.

Tags: Economics

Like a Phoenix rising from the ashes, “thirld world” unity has again reared its head. Reminiscent of the New World Information & Communication Order (NWICO) movements - against cultural imperialism, and the LDC trade blocs to negotiate at GATT and UNCTAD through the 1970’s

this new unity has seen leaders of different political and economic dogma’s come together to fight against the developed world’s unfair trade practices.

The US has played its usual “I’m losing so i am not playing” completely forgetting that it is more fun to play together.

And when America sulks, the world goes into depression.

Some interesting features of this round (we are group of 21, they are developed nations):

They are net consumers, we are net producers - and now the produce has gone beyond raw materials.

Our countries are developing fast (in education, in consumer base, in technology) and have a large proportion of young people. They are getting to be a rapidly illiterate society that is greying rapidly

We own the means of production, they own the means of distribution and delivery, and the cosumers

Both us and them agree that free trade is a good idea - but with elections galore next year - it simply isn’t possilbe. real politik intervenes in real economic.

We are going to live in interesting times.

Tags: Economics, International Occurings, Society