Thursday, April 30, 2020

Should the Lockdown Continue?




In the words of Rahul Gandhi, Lockdown in a Pandemic like Covid19 is a pause button, to temporarily arrest its spread, but is not going to kill or eradicate it.
It can only buy us some time to prepare ourselves to fight it and many State Govts have really done a commendable job. Billion thanks to our Front line heroes and the State Chief Ministers.

Almost 40 days since the Janata Curfew, India has been under complete lockdown for 37 days now…137 crore population is eagerly awaiting the Govt’s next decision on the Lockdown.

The Principle of Binary is mostly dicey…

Unfortunately we have only two possible options: Lift or Extend the lockdown

If we lift up the Lockdown, chances of sudden surge in the number of cases will choke the entire system.
If we extend the Lockdown, a large population will be forced to sleep hungry or cut on their basic necessities.

Had there been a way to assure us that by extending the Lockdown for another 30 or 40 days, the Pandemic will die its natural death…India will be more than willing to cooperate for another phase of lockdown extension. Unfortunately there’s no such principle or theory to support the argument.

Lockdown may not really effect many, but will be life and death issue and for some it might escalate their health issues. Unemployment rate is reaching almost 25%, threat of hunger deaths is rising with every passing day.


14 Crore Migrant workers & daily wagers have lost their livelihood.
11 Crore people employed by 6.3 crore MSMEs have not gone to work for over a month now, which translates into loss of pay or even lay off as the entire sector is under Extreme Liquidity Shock.
Economy has come to a stand still and we cannot rule out job cuts in other sectors like the IT, Telecom, Hospitality etc. March salaries are yet to be credited, April salaries will be nothing less than a Bonus even with a 25% reduction, as their bills are mounting.


But still it is not advisable to lift the lockdown completely and expose the entire population to the Pandemic, because our Health care system is not equipped to handle a larger magnitude of the outbreak.

Hence it is wiser to think wisely and practically and carve a middle path by planning a Staggered or Graded Lockdown Exit.

What is the Magnitude of Covid19 in India?

As per ICMR guidelines India is Testing only those with severe symptoms, but we are not testing people with no symptoms or even those with mild symptoms.


Dr. Jay Prakash, a renowned Epidemiologist, has given his opinion based on the pattern reported so far. There are 60% positive cases who have not shown any symptoms of influenza or Covid19. Which means the ratio of tested +ve samples Vs untested +ve samples is 1: 60, this directly says that India is not testing enough samples.


By underplaying the Epidemic, Govt is trying to hide its unpreparedness for so many days. Let us not forget the PPE procurement was reported to be faulty so was the Rapid Testing Kits procurement.

Owing to the lack of preparedness of our Govt and the possible Cure or Vaccine for the Disease, India cannot choose to opt for “Herd Immunity” principle.



Herd Immunity is a method under which at least 40% of the population is exposed to the Viral Infection at various levels of intensity…by virtue of which their auto immune system becomes active and starts producing Anti Bodies against the Viral Antigen, like it happened in the case of Swine Flue. Probably this also could be one of the reasons behind our resistance against Covid19.

But there’s a catch to this method….between the exposure to the infection to the production of antibodies and the recovery there’s a considerable time span, could be up to 4 weeks or more, during which the individual requires medical help to hospitalisation. But we are not having enough hospital beds or isolation wards to accommodate huge number of patients. Boris Johnson has taught us what not to do.

As per the data Mortality rate of Covid19 in India is little above 3% of which elderly people are more. So we have a duty to safeguard our older generation, next generation and those with comorbidity or people with multiple conditions co-occurring with a primary condition.

What is the immediate Requirement?

Test, Identify and Isolate

By now State Govts have identified the Red, Orange and Green Zones in their respective states. Containment and monitoring of these zones with a Dynamic approach because today’s Red zone may become Orange zone tomorrow and vis a versa. And the only way this can be identified is by continuous monitoring and aggressive testing.
Testing can be done by random or pooled samples methods in the Red and Orange Zones in particular.



Red Zones must be strictly contained from mingling with Orange or Green Zones.
Same thing applies to the other two zones also.




Can Economic Activities Resume?

Central Govt may have the luxury of time and might be finding it more convenient to extend the Lockdown, with some emotional pep talk.

But Central Govt has the duty of extending Financial Assistance to the State Govts and the MSMEs by announcing:

  • Wage protection assistance
  • Credit guarantee fund


Economic activities in the Green Zones must be allowed to resume. Sectors which are essential for the people need to spring back to action and the supporting linked activities also must be allowed to resume. A scientific approach is required to identify and prioritise the activities which can be allowed to restart, with a reduced workforce…increase the number of shifts instead.
Work from Home must continue for some more time.

This will have double benefit:

  • Our Economy we start rolling.
  • The process of Herd Immunity will begin some where.


The decision should be left to State Govt’s jurisdiction, with a strict surveillance by the Central Govt.

Crowds must be avoided in public places, Cinema, Shopping Malls, Hotels, Travel etc can wait.

Collectively with a Scientific and Practical approach India will definitely win the Covid19 war.

Wednesday, April 29, 2020

Modi ‘Waive’




Prime Minister of India Narendra Modi calls himself a Chaiwala, son of a poor mother.
But does this make him pro poor or anti poor PM?

He came to power with the help of his Crony friends who spent lot of money on his Election Campaign and contributed considerably to BJP through Electoral Bonds. Today BJP is the richest party in India.

Modi is indebted to his Crony friends and has gone out in every possible way to help them in everything they put their finger on…because he’s so addicted to his publicity and lifestyle.

He has not only promoted Crony Capitalism but also killed many prestigious PSUs only to keep his friends happy. He has repaid his favours to his cronies by writing off their loans worth lakhs of crores.

In 5 and a half years of his Govt, PM Modi has waived off (Written Off) ₹6.66 lakh crores.
Total Write Offs from 2014-15 to Sep 2019, Bank loans of wilful defaulters of over and above ₹100 crores was ₹5.1 lakh crores.

Year wise break up is as follows:

2014-15 :    40,800 Crores
2015-16 :    29,178 Crores
2016-17 :    57,821 Crores
2017-18 :    89,400 Crores
2018-19 : 2,12,000 Crores
2019-20 :    80,893 Crores (till Sep 2019)
__________________________
Total    :   ₹5,10,092 Crores
__________________________

Add the ₹68,607 crores write off revealed through the latest RTI list, the total adds up to
₹6.66 Lakh Crores. Remaining ₹87,300 crores are of the loans written off below ₹100 crores.

To add to this whopping Modi Waive, there has been a tremendous increase in the number of Banking Frauds during the last 5.5 years.
For a Record the number of Frauds registered were 32,868 in which a total amount of ₹2,17,513 crores were whacked away.

But sources say that the Dormant Accounts were cleaned up with the help of expert Hackers…and it was done with the knowledge of the Bankers and Govt, the booty was delivered in different parts of the world.


India Braves all Odds

State Govts are yet to receive any Covid package or a confirmed assurance. Their own dues are still awaited from the Central Govt. no guidelines given on increasing the limit from 3% to at least 4.5% under Fiscal Responsibility and Budget Management (FRBM) or allowing them to Monetise Fiscal Deficit. Lockdown and Prohibition on Alcohol have made State Treasuries almost dry.

MSMEs have not received any Revival Plan. 6.5 Crore units which employ 11 crore people are helplessly staring at Lock outs. Not a word of assurance from the Govt.

Farmers are struggling with the Harvest. No financial help or relaxation in the parameters of procurement of the crop on a better MSP.

Govt Employees’ Dearness Allowances have been rolled back, apart from the pay cuts and mandatory contribution to PM Care.

Pensioners including the Ex Servicemen will not receive their DA for over a year. How can a Govt be so cruel to its Soldiers who dedicated their lives for the country? Old veterans have to foot their medical bills.
Migrant workers are stranded in different states with no help from the Govt. They are not having any shelter to live and are not receiving food to stay alive. Local people are helping where ever possible, but Govt is mute.

Front Line Heroes are fighting multiple battle…Lack of Safety Gears, Lack of infrastructure and their personal problems. Testing Kits procurement has become the biggest international joke of India.

Private Employees are losing their jobs, those working from home are working 7 days a week with reduced pay cheques and March Salaries still to be credited. No job protection or credit assurance from the Govt.


What is Modi Govt doing?

Modi Govt is always hungry for money.
So seeking as much as $6 billion of loans from multilateral institutions such as Asian Development Bank and Asian Infrastructure Bank.
World Bank has already sanctioned $1 billion.

I will write on how External Borrowing or borrowing in USD becomes very dear with volatility of INR by the time we repay it.

Enhanced its borrowing from the RBI which was limited to ₹75,000 crores only, but Modi govt had enhanced it to ₹1,20,000 crores on 1st April 2020…it wasn’t enough so they further increased it to ₹2,00,000 crores on 20th April 2020.

If we see how much money Modi govt has taken from the RBI

2014-15:    65,869 Crores
2015-16:    30,669 Crores
2016-17:    58,000 Crores
2017-18:    63,000 Crores (50,000 Surplus + 13,000 extra)
2018-19: 1,76,000 Crores (52,637 Surplus + 1,23,336 extra)

2019-2020: 2,00,000 Crores (not aware of if this includes 69,000 dividend)
_______________________
 Total:  5,93,538 Crores
_______________________


Interestingly PM Modi is very busy filling up his PM Cares fund by hook or by crook in the name of Covid 19.

Where is my money going is the question on every Taxpayer’s mind because if the banks and the Reserve Bank are eroding their reserves by writing off so many lakhs of crores, the burden will directly or indirectly fall on our shoulders in the form of additional Taxes or Cess….we know Finance Minister is very efficient in shutting people up.

The “Modi Wave” which transformed into “Modi Waive”  to ruin even the RBI!!

Monday, April 27, 2020

Test more to Resume India





The first Positive case of Covid-19 was Reported on the 30th January 2020, and the Janata Curfew was observed on the 22nd March. On the 23rd March the total number of cases were 271 and 15,000 samples tested. The first Lockdown of 21 days was announced on the 23rd March followed by an extension till 3rd May 2020.

Today after 89 days from the day first case was Reported, lets see what do the figures say:


  • Total Confirmed Cases: 28,380
  • Recovered Cases: 6,361
  • Deaths: 886


Very impressive Covid (Data) Management

Now comes the tricky part:

From 28th January to 26th April 2020 total samples Tested were 5,80,000 only, with an average of 6444.4 samples per day…for a population of 137 crores!!

Report says that the Labs roped in for Covid Testing have the capacity of Testing 1,00,000 samples per day, but Govt is comfortable with 39,000 sample per day…why?

Why is Govt not willing to Test More?


While the World Health Organisation is recommending rapid Testing of samples, Indian Govt doesn’t seem to worry at all.

Best part is that the Testing Kits imported from China turn out to be faulty, Sate Govts are labelled anti National for raising the issue.

As if everything was going perfectly, today we learnt that GoI paid a whopping 145% higher price for the Imported Kits.



Let’s not forget same thing was Reported about the PPEs also...”not to the required standards.”

Forget the Chinese substandard goods but what happened to the claims of Rapid Testing Kits made in UP?

A report on 25th April says, that in a meeting GoM decided to stall the use of Rapid Testing Kits, because “as a result of taking so many precautions, situation in India is under control”….very good if its under control.

Then why import Testing Kits at 145% higher price? Is the GoI trying to make some quick money on this?
Or is there something more to what meets the eye?
Grapevine says the Rapid Testing Kits prompted GoI to do some mix and match, Procure Chinese kits with over invoicing and add the Domestic product to the lot and export money abroad.
Grapevine also tells that there was a raid on some godown….shhhhh.
Was PPEs also similar set up?

Good that GoI cancelled orders of 2 Chinese firms…but how will India Test?

Chief Ministers of some States are not ready for relaxation of Lockdown, do they fear sudden surge in cases?…then why is India not Testing enough?

Is he underplaying for something bigger like the Nobel Prize?

PM Narendra Modi is not willing to discuss anything with the Opposition, we can understand that, but he’s not passing on correct information to the people either.

A pandemic cannot be defeated without people’s cooperation, for that transparency is the primary requirement. Unless people are aware how will they support the Govt in its plan to fight this Virus?

It will not end here, even for Resuming normal activities, people of India will have to play a vital role.

I hope Modi Govt understands the gravity of the situation and increases the sample testing.

Let me hope against hope that Modi ji takes the Nation into confidence in this fight against Covid19 and India is back to its pink of Health.

Thursday, April 23, 2020

Why PM CARES when we have PMNRF?



PMNRF or the Prime Minister National Relief Fund was formed in the year 1947 by Pt Jawahar Lal Nehru with the suggestion of Mr. J R D Tata, primarily to help Migrants from Pakistan.

These funds were meant to be spent under the directions of the Prime Minister for providing Relief to people in different situations.
For over 72 years PMNRF has been functional and has garnered the trust and acceptance of everyone.

Never in these 7 decades did we see the spending going more than the available balance. The account is active and functioning in the desired manner... I presume. Gross balance as on 31st March 2020 is around ₹3800 Crores.

If everything was perfect and clean, then what was the need to form Prime Minister Citizens Assistant and Response in Emergency Situation (PM CARES) Funds with basically similar objectives?
Prime Minister has not clarified and his Cabinet talks everything but will never reply to the questions asked.

Is it exclusive for COVID19 pandemic? The answer is no, PM Cares will continue to exist in future as well.



Similarities between PMNRF & PM CARES


  1. Headed by Prime Minister and the nominated Trustees.
  2. Primary function is to provide relief to the people in distress.
  3. Donations are exempted from Income Tax.
  4. Eligible for exemptions under CSR Funds.


 Differences between PMNRF & PM CARES


  1. PM Cares is basically an NGO in its organisational structure.
  2. Charitable Trusts are not bond to follow strict Audits.
  3. Lacks transparency.
  4. Lacks answerability.

Possible theories floating around

PMNRF was started by Pandit Nehru and Modi does not like him.
A part of building Brand Modi agenda for future political gains.

Unfortunately this not the complete truth.

Since 2014 after Modi Govt came to power, a lot of things started changing dramatically more so in the transparency of the Govt spending.

Modi is anything but not benevolent…we are aware that 250 crore rupees are still lying unspent while the families of Pulwama victims are yet to receive monetary compensation.

What Exactly are we missing?

Till the FY 2015-16 the PMNRF was managed in a very transparent manner with CAG auditing it and the report being published on the official website.

The audited balance sheet of PMNRF from the year 2009 to 2019 is available on the official website.

Till the FY 2013-14 the PMNRF was managed in a very transparent manner with CAG auditing it and the report being published on the official website.

Then why am I writing this article?

Till the year 2015-16 Modi followed the rules. But from 2016-17 he got to his dirty work of implementing Gujarat Model, unfortunately that was the year of Demonetisation also.

What happened in the PMNRF was really shocking, he not only reduced spending the funds for Relief Measures but also started doing things which never happened before.

In the year 2016-17 a total amount of ₹2750 crores was invested in Tier-II Bonds & FDs.




Tier-II bonds are sort of unofficial bonds which promise to give better returns with higher risk and the Banks do not mention them in their books. So they cannot be traced unless PMO gives the details.


In the year 2017-18 the invested 1000 crores Bonds of the total 2750 crores, were either sold off or given away, there’s no mention of the details in the balance sheet, while it shows 1750 crores still invested in Tier-II Bonds.



In the year 2018-19 opening balance shows 1750 crores in Tier-II Bonds, but in the closing balance it has become zero, how and where was it spent is not listed.

One more interesting point is that in 2017-18 he gave 1300 crore loans to the States from PMNRF.

His spending on the Relief Activities has been shamefully low.

Questions which we need answers for are:

  • Why did PM choose to invest Relief Fund in Tier-II bonds which give higher interest but are highly risky?


  • What happened to the 2750 crore rupees? Were they spent away or given away to some one?


  • How can Central Govt give loans from the PMNRF?


  • Why was PMNRF not audited by the CAG?



  • Why was SARC Associates given the responsibility to audit the PMNRF?



  • What is that Modi is trying to hide from the country?



  • Is this the reason why PM Cares was formed with minimum transparency?



  • Why is HRD Minister routing mandatory voluntary donations of employees into PM Cares and diluting the existence of PMNRF?



  • Is the PM Cares Fund synonymous to Bihar West Bengal Election Funds?


There’s one page website, no idea if SARC associates will be the privileged auditors, not under RTI Act…what’s cooking?

Is India still a Democracy?

I have asked the questions but every one knows we will not get any answers.



Wednesday, April 22, 2020

Is Modi Govt Doing Enough to help India Fight Covid-19?


Exactly after one month since the first Janata Curfew was imposed, followed by total Lockdown 1.0 and the continuing Lockdown 2.0, the Strategy of Modi Govt has become more than clear.

Central Govt has very carefully excused itself from taking the lead role or even extending required financial or material help to the States.

Our Covid-19 Heros are:


  • State Govts
  • Govt Employees direct and indirect
  • Medical Staff
  • Police Force
  • Cleaning Staff
  • Supply Chains
  • NGOs
  • Social Workers


State Govts are working day and night and ensuring essential commodities, monetary help, food for the migrant workers etc. are reaching the needy people with maximum efficiency.
They are also shouldering that the responsibility of successful and peaceful Lock down.

State CMs are fighting many battles at a time…

  • Financial Crisis
  • Sourcing Testing Kits
  • Sourcing PPEs and disposables
  • Quarantine to Isolation
  • Maintaining Essential Services
  • Finding ways to contain the spread
  • Most importantly maintaining an overall positive atmosphere


Keeping people healthy both medically and emotionally is more challenging than fighting a war…must appreciate each and every individual contributing towards the better tomorrow.

Now let’s see what has Modi Govt done for the States!!

Allowed 17,289 Crores to be utilised from the State Disaster Response Funds of 28,983 Crores, still holding over 11,500 Crores.

When GST was implemented States had asked for GST Compensation in should the State income reduce, for which a GST Cess was levied on us and over 53,000 Crores are lying in the consolidated funds. Two month’s GST compensation dues are still pending to the States from the Central Govt.

Under National Health Mission the normal allocation has been released, there’s nothing from the Centre to fight Corona Pandemic.

Modi ji made us all Clap, Bang Utensils.
Gave emotional speeches.
Worked on his PR
Made us light Diyas, Candles.
Gave 500/- to some distinguished Jandhan account holders for PR.

During the meeting with the Prime Minister, all the State Chief Ministers requested him to extend Financial help, because Sates cannot fight this pandemic without active support from the Central Govt.





What are the bottlenecks for State Govts?

Post GST States have lost their rights to levy additional taxes.

Their primary sources of income are Petroleum, Alcohol, Motor Vehicles, Land Registrations etc.

Due to lockdown there are no Registrations, no Alcohol sales and very negligible Petroleum products  consumption.

GST dues from the Centre also don’t come in time. Other dues under various heads are also not being cleared by the Centre.


States are not allowed to borrow more than 3% of their GST revenue under Fiscal Responsibility and Budget Management FRBM.

States are not having the powers to Monetise the Fiscal Deficit, which means they cannot ask RBI to print Currency equivalent to the Fiscal Deficit.

States do not have additional income sources like the Customs Duty, Direct Taxes, Corporate taxes.

They also do not have the facilities to access surplus fund or reserves from the RBI


What should the Central Govt do to help the States in this difficult deficit times?

Allow the State’s to borrow upto 5% of GST revenue.
Increase the borrowing limits and extend loans at very low rate of Interest if not zero% from the RBI.
Create Covid19 Grants to the States.

Central Govt will be quick in saying where is the money?

Well we have the answer to that also

Due to low Crude prices in the international market Modi Govt made 3.5 lakh crores only in 2019-20 and the total revenue since 2014 is 20 lakh crores. Which govt has not told us where was it spent.

Collection of different types of Cess has over 3.6 lakh crores lying in the consolidated funds.

Modi Govt is receiving International Covid-19 Donations and Grants which are being carefully routed into PM Care funds..

Through CSR exemptions only on donations to PM Care Funds, he has ensured non of the Corporate houses in India donate to CM Relief Fund.


Will Modi Govt take the lead role in this fight against pandemic or will it be busy buying MLAs and toppling Govts?

Let’s wait and watch!!

Tuesday, April 21, 2020


Is only Corona Responsible for Economic Crisis in India?


World leaders have acknowledged that Dr Manmohan Singh steered India through 2 Major Slow Downs. Yet he made Indian Economy world’s third largest and fastest growing Economy.

When he handed over PMO to Narendra Modi India was a Robust Economy with its wheels well oiled and galloping gloriously.

Then came the 8PM of November 2016 when Modi appeared on our Television Screens and declared Demonetisation. Indian Economy came to a screeching halt all of a sudden. But he didn’t stop there he celebrated the midnight “Independence Day” and launched flawed GST.

Indian Economy could not recover after that because Modi Govt is clueless about what needs to be done to correct the path of our Development. They don’t have a plan and are too egoistic to take suggestions from the experienced and knowledgeable.

Lets do a case study on the Revenue esteems of 2019-20 to understand what was the magnitude of Economic Crisis before Covid19 was first identified in Wuhan.


GTR or Gross Tax Revenue drops by 15% highest in 20 yrs

Budget Estimates for the year 2019-20 are estimated to dip by a whopping 3.5 lakh crores.


In this the dip in Direct Tax revenue alone will be 1.8 lakh crores.

Out of which 1.05 lakh crores will be on State Revenue, 2.45 lakh crores will be for Central Revenue alone.

For Past 5-6 yrs Centre has been strategically increasing Surcharge and Cess, the Revenue generated through these is not shared with the States.

In other words we can say that the joint collection of Revenue ( Centre and States) has been nose diving while the exclusive revenue for the Centre has been on the rise.

Govt has always rubbished Economic Slow Down.


Then why this drastic dip in GTR?

In the reduced Revenue, Govt Expenditure will also reduce…which will directly impact Demand.

Govt is clueless on how to create the demand.

                               

Lets see the Reasons behind the decline:


1. At 4.5% GDP, its the Lowest Economic Growth ever in the history of India…we know this number is with the new magical method.

2. When the Growth Rate is the lowest, instead of creating a demand by increasing the Govt Expenditure, Modi Govt chose to give Tax rebates of upto 1.45lakh crores, to Corporates and ensured their profits don’t decrease. Today India’s Corporate Taxes are at par with American Taxes, but Is India anywhere close to the size of the American Economy?

3. GST collections have not met the targets, reason is Tax Evasion continues.

4. Due to Loksabha and State Elections Govts have worked on reducing GST slabs on many commodities.

5. Import Duty Revenue also declined due to reduced consumption, Oil is highest imported commodity, unfortunately the crude prices have fallen so has the consumption.

6. To paint a ‘All is Well” picture Modi Govt has fudged figures to show better GDP % (Subhash Garg has written in his blog) unrealistic assumptions.


Is it wise to say that Corona killed Indian Economy?

Won’t it be factually correct if we say Corona disconnected the ventilator of the critically ill Indian Economy?

This financial year India will create history with 1.6% GDP if not Zero....I must add Modi hai to mumkin hai.



Understanding Economic Crisis

Understanding Economic Crisis



Reserve Bank of India announced series of measures to combat Economic Crisis.

What are those Liquidity Boosting Measures?


  1. Reduced Reverse Repo Rate from 4 to 3.75 points
  2. Reduced Liquidity coverage Ratio
  3. Allocated 50,000 crore Rupees to NBFCS like NABARD, SIDBI and MFIs (Micro Financing Institutions) to enhance availability of Liquidity to MSMEs because 30% Domestic Product comes from MSMEs.


For common people to understand these measures they must know some basic:


  • Liquidity: Cash in hand or money available to spend.
  • Repo Rate: Interest paid by the Banks to RBI on money borrowed from RBI.
  • Reverse Repo Rate: Interest paid by RBI to the Banks on the funds parked with RBI.



Reduced Reverse Repo Rate from 4 to 3.75 points 

Every Bank or NBFC has FDs, unclaimed or surplus idle funds which they try to put to generate some interest by parking them with RBI….an estimate says a whopping 7 Lakh crore rupees of funds of different banks are parked with RBI, which were generating 4% interest till 17th April 2020.

Now that RBI has reduced the Reverse Repo Rate to 3.75%, banks will definitely think on reducing the parkings in RBI, because Banks pay us 5-8% on FDs and 3-4% on Savings.

This will increase the Liquidity of the Banks.

Reduced Liquidity coverage Ratio

Every Banking Institution is required to keep some % of its money in the form of ready available cash or High Quality Liquid assets like lending to Govt or PSUs for very short term. By reducing this Liquidity Coverage Ratio RBI has directly helped in increasing the Liquidity with the Banks.


This is not Financial Crisis

In an ideal condition this theory of Liquidity Boosting would have helped Industries and Businesses to avail more liquidity from the banks and increase their business activities. This in turn would have boosted our Economy and generated more Jobs.
In other words these measures are good in a Financial Crisis.

This is Economic Crisis

Why is this an Economic Crisis?
RBI fails to understand why are the Banks parking 7 Lakh crore rupees for just 4% rate of interest?
RBI thinks Banks are not wiping to take risk by lending the money and generate higher rate of interest.

Who will tell them that it is because there’s no Demand….there  is no Consumption.
Even if the Banks increase credits, the borrowers are unable to generate business and service the interest to the Banks.

Result: Increasing number of NPAs or Non Performing Assets.


Post Demonetisation and ill implemented GST, many businesses have taken dual near fatal blows, and many people have lost their existing source of income, to add to the crisis Govt has failed miserably in generating new Jobs. The Unemployment Ratio is all time high in 45yrs.

Govt has not thought of measures to Remonetize people, all they understand is to keep the Corporates cushioned by reducing the Tax burdens on them.

Today with the “ Chakka Jaam” situation due to Covid-19, can the Boost in Liquidity in Banks help in Boosting the Demand?
Absolutely no!!!

Reason: Demand can be created only by Boosting the Consumption.


What will Cheaper Bank Credit do?

With very low demand many people are finding it very difficult to service the interest for the existing borrowings, they will queue up for the cheaper or advances with lower rate of interest and  repay their old loans which were taken on higher rates of interest. But will not expand business activities.
In short Boosting Liquidity in Banks and extending it to the existing clients will actually not yield the desired results in the absence of Consumption.


How can we Boost Consumption?

Post DeMo people have gradually eroded their Savings as most of them lost their regular source of income due to Job losses or losses in business.

As a result the masses, the employed class, the farmers, the daily wagers all fighting cash crunch or reduced spending capacity.

Unless Govt thinks of ReMonetising the common man Consumption cannot be boosted and Demand will never be increased, no hope for Exports in near future.


Is NYAY the only way ahead?

Rahul Gandhi had suggested Remonetisation of the 25% population of India by ensuring a monthly income of 7500/- per family, he reiterated on his idea and was kind enough to let Modi Govt to rename it but ensure its implementation.

The Consulting Committee of Indian National Congress has asked for an immediate direct money transfer of 7500/- to increase Consumption and create Demand.

To Fight Economic Crisis with methods of combating Financial Crisis is like Band Aid treatment for severe injury in Pawan Khera’s words.

Looking forward to better GDP and Employment.

This too shall pass but we have to work in the right direction.

Monday, April 20, 2020

Foreign Direct Investment or Chinese Indirect Intervention

Is India in the Grip of Dragon Claw?


Economic Liberalisation has made it necessary for every Govt to attract Foreign Direct Investments or FDIs. And the FDIs became an indication of Economic Growth and Development of the Country.

Previously FDIs permissions were controlled by the Govt.
Modi Govt eased the norm further to an automatic approval system for upto 100% FDI.
This resulted in Companies sourcing out Foreign Equities or borrowings and started paying off Domestic loans with higher rate of Interest.

This has its adverse effects as well...the exposure to foreign borrowings has not only increased considerably, but is becoming burdensome because Indian Rupee is all time weak.

In past five years of Modi Govt, India has recorded steep Economic Slowdown, which the Govt has been trying to window dress through Tax Rebates or Write offs etc.

After the Corona Pandemic hit India, Modi Govt got an excuse to blame lockdown for Economic collapse. But the fact remains that the GDP was the lowest at 4.5% as calculated in the new magical method, the growth rate predicted were as low as 2.5% also.

But lucky Modi got away this time also because of Corona, GDP will break it own lowest record and be 0% for 2020-21.

On the 12th of April Rahul Gandhi had Tweeted to the Govt requesting not to allow Foreign Investors to make use of this massive economic slow down to take control of any Indian Corporate.
He said this because the Indian Blue Chip companies are now very vulnerable to Foreign Take Overs as a result of FDIs liberalisation MNCs have captured 25% of our non Banking Stocks.

Stock Market is bleeding everyday and anyone can make use of this situation to buy considerable number of shares like how the 1.01% HDFC shares were bought by Central Bank of China.

This actually alarmed the Govt of India to think and make necessary amendments in the FDI norms under which the FDIs coming through Automatic Approval route especially from those countries which share their borders with Indian Sub Continent, such as Pakistan, Bangladesh, Myanmar, Bhutan, Nepal, China and Afghanistan are subjected to mandatory scrutiny and approvals.

We all know that China is the only Potential threat for Corporate India. China has strategically increased its investments in Indian Corporates ever since Narendra Modi Govt came to power in 2014.

                 

The total investments from China since 2000 to 2019 are approximately only 0.5%, out of which only $1.6 Billion were invested till 2014, post 2014 their investments have increased by 500% to $8 Billion . Only in the most popular Start ups like Swiggy, Zomato, Ola, Big Basket, FlipKart etc they have invested around $4 Billion.

As per a report of Investment Bank of China, 42% investment is in Manufacturing Sector, 25% in the Infra Structure, rest are in Telecom, Energy, IT, Pharma etc.

Fosun Pharma has already acquired 74% stake in Gland Pharma, as China is aggressively investing in Active Pharmaceutical Ingredients API.

The new amended FDI norms may curb direct Investments from China, but can they plug indirect investments routed through Singapore, Malaysia or any other country??

Only time will tell us, because China is cash rich and Modi Govt has been very liberal in allowing Chinese products to capture our markets. He also kept quiet while China captured considerable part of Doklam.

The CM Narendra Modi was attacking Dr. Manmohan Singh’s Govt on Chinese intervention, but ironically PM Narendra Modi has opened his doors wide open for China.

Jhoola Huglopmacy to uninvited unofficial meeting with Chinese President only indicate that Modi is following Xi Jinping’s guidelines.

Because I remember before 2019 General Elections Amit Shah had said I quote “If BJP wins this Elections, BJP will be in power for next 50 years”.

I say this because India has lost its Democracy and Fundamental Rights of the people have been hijacked.

It is even more important now for India to uproot this proxy Dragon ASAP.

Sunday, April 19, 2020

Revival of MSMEs


Reviving India



But where is the money?


MSMEs are the life line of India Inc. As per reports there are about 6.5 crore MSMEs in India & approx 11 crore people are directly employed by them apart from the indirect employment.

It is very important for the revival of India that these MSMEs are infused with new life.

How do we do this? By creating a stimulus corpus.

Central Govt has been finding innovative ways to impose different types of Taxes and Cess such as
  • Education Cess
  • Swatch Bharat Cess
  • Oil Industry Development Cess
  • Krishi Kalyan Cess


As per Finance Commission Recommendations Centre is bound to share the Tax revenue to the States for eg 14th Finance Commission has recommended 42% revenue sharing.

But the Revenue generated through Cess is exclusively for Central Govt to spend, but they have to be spent only for that specific purpose for which it was collected from the people.

All these funds get accumulated in the consolidated fund of India, but cannot be utilised for anything other than its specific purpose.

Between 2015-2020 a whopping 3.59 lakh crores are lying unutilised.

In the FY 2019-20 alone 2.76 lakh crores were collected through different types of Cess and Surcharge.

In the FY 2020-21 the estimate was of 3.16 lakh crores, but corona ruined the game.

When questioned why isn’t govt spending that money…Govt says there’s no need to spend more than that.
If that is the case why don’t they reduce the burden on the people? Govt has no answer

The percentage of Cess collected by the government spent for the specific purpose is very marginal as if everything has been accomplished.
For eg
  • Primary Edu Cess: 20% spent
  • Oil Industry Development Cess: 1% / 900 crores spent
  • Infra Structure Development Cess: 7% spent
  • Research and Development Cess: 10%/ 800 crores spent
  • Clean Energy Cess: 30% spent
  • Swachh Bharat Cess: 30% spent
  • Highest % of Cess spent is 72% (don’t know which head)
The unspent Cess under different head which need immediate infusion of funds have been neglected, while the collected funds are kept idle.
For eg
  • Higher/Secondary Edu Cess: 94,000 crores unspent since 2006-07
  • Oil Industry Development Cess: 1.80 lakh crores lying idle
  • R& D Cess: 7,200 crores unspent
  • GST Cess: 53,000 crores unspent
*Data as per CAG report

We have seen Modi govt withdraw 1.76 Lakh crores from the reserves of the Reserve Bank which no government in independent India has ever touched. Similarly they will try to siphon of these  unused funds also.

Before that its our duty to ensure they pass GO under Epidemic Act and utilise these funds exclusively for Revival of the MSMEs

Plan for Revival of MSMEs


Theories won’t work in this Pandemic Lockdown
Only and only practical approach will save us to fight back

1. Save the Industries First, most of them are sure to be flagged NPAs due to non payment of the Interest on CC limits or working capital or evenTerm loans.

2. Give them necessary liquidity or stimulus to breathe first by paying their immediate bills like rents, power (in SSIs its Slab not meter reading) so minimum bill is generated in any case, wages etc.

3. Once the Banks reopen in their full capacity write off these month’s interest etc.

4. Renew the limits both fund based and non fund based, wherever they are due with eased norms and lower Rates, as most of them will be either NPAs or underperforming and won’t be able to meet their targeted projections.

5. Create Demand by monetising the people and increasing Govt Expenditure.

6. Provide necessary support for Raw Material procurement, Logistics, storage and warehousing, cold storage for perishables.

7. Encourage industries that produce tools, spares, raw material, ancillaries and interconnect them through a virtual network.

8. As we don’t foresee much on the Exports, help them diversify and produce domestically consumable products.

9. There are lot of exemptions given to EoUs in Duty and Taxes, why not extend those facilities for our non EoUs and help reducing the cost of the end product.

10. Finally INR must be strengthened or banks should help them freeze the exchange rate for the importers.

I know that the Govt tricked us on the Employment figures by showing us the increase in PF contributions…but actually Govt was paying for the Employer and the Employee, why not do the same thing now to uplift the MSMEs?

As people are forced to Pay cuts and delayed payments, why not give tax holiday for all?

Just fix GST at 5% on all essential goods that attract over and above 5% GST and make those with 5% GST as Tax free.

Encourage Exports but not Imports.

Remember Indian Jugad can be our biggest asset now, interlink our interdependent industries or services to create business for all.

Help genuine Entrepreneurs to stay alive as they are the wealth creators of India apart from generating direct and indirect employment.

To save our MSMEs from biting the dust or taken over for peanuts...lending banks should become Stake holders, with an exit plan once the industry stabilises.