Migration not the Sign of Modernization and Development

In developing countries, people flock to capital cities for better opportunities. India is no exception to it. These migrations, sometimes willingly and sometimes unwillingly, have obvious but very simple reasons. There are hardly a few cities that have basic amenities and can offer opportunities that can satisfy the needs and expectation of people. Globalization and flow of information has increased this flow and government has coupled this trend. Also for many consider that migration from villages to cities is the sign of modernization and development both. Though, I am hardly convinced. The reasons I find is the failure of governments to respond to the needs of the people and it is the only government who is to blame. And yes migration to cities is not sign of modernization and development but an escape route.

Indian Stock Market in 2012

Indian stock market has been very volatile for more than a year. One day the stock indices rise steeply and on the next day they fall sharply. This has made things difficult for the investors. They are confused and this can be affirmed by the participation of retail investors in the market. The current trends in the markets give signals of unexpected future and high volatility. And this has made investors confused.
The Indian stocks are very volatile. Even the blue-chip stocks are not safe now for investment purpose. For the long term investors the Indian stock market has provided no incentive to invest in the market. Instead the long term investors who invested during the fall of 2008 expecting that they were getting blue chip or value stocks cheaper have not been able to get back the invested capital till now leave any real returns on the investments apart.
The situations and trends of Indian stock markets are such that investing in stocks has just turned out to be gamble. For example if the Sensex of BSE is taken as indicator of the stock market performances in Indian stock market, then it is crystal clear that the stock markets are offering no incentive to invest. The Sensex of Bombay Stock Exchange is in the same range for more than a year. What happens is that on a day or for a week the Sensex and other indices rise by 1000 to 1500 points then in few trading sessions the market is down by 1000 to 1500 to the same levels of last weeks. Again after few weeks on some positive news the same story is repeated. This has been continuing since long and it is expected that the same will continue for even longer time. 
The IMF report and many other reports about the European Union and Euro as well as the rest of world are forecasting some troubled future for the world economy. The future of Euro is uncertain. In recent times, the US economy has been showing some signs of recovery in economy but those indicators are still very weak to believe that revival of the US economy is near future goal. Any negative new regarding world economy or the US economy will reverse the trend in all the positive indicators that are now being said to be signs of recovery. All depends on how the Europe deals with the Euro problem and what policies the US government initiates as well as how emerging economies fare in next few quarters. 
The world is not same as it was during the times of the Great Depression in 1930s. The world was not an integrated entity then but now it has integrated to huge extent and events in any part of the world are going to have negative impact. These will impact the Indian economy as well besides the domestic issues.
Since August 2011 the Indian rupee has depreciated sharply against all the major currencies in the world because of persistent high inflation in Indian economy and huge fiscal deficits. Also the expected GDP growth will be less than 7% for the current fiscal year of 2011-2012. This is lower than the last year figures. Though the inflation has fallen but this fall in inflation cannot be termed as permanent as the fuel prices may move upwardly in international markets in response to the bans on Iran by the US and Europe and Iran’s expected counter response of not supplying oil to European countries. So any increase in price of oil will increase the inflation rate in economy again. On the other hand this is election year and elections are going on 5 states of India. That means huge increase in government expenditure that will eventually increase the fiscal deficit more. So the overall fiscal conditions are expected to remain bearish. There is huge infrastructural bottleneck in the economy. There are so much structural problems in Indian agricultural sector and government’s responses are lukewarm and unsatisfactory. There has been policy paralysis in New Delhi regarding the future course of economic reforms. This is leading to to slow down the Indian economy. And all these factors make the picture of Indian economy gloomy in comparison to last years.
It is well known fact to everyone that the Indian stock market has huge international institutional investor’s participation and negative trends in the Euro zone and the US will result into outflow of foreign portfolio investments from the Indian stock markets. The recent trends in the portfolio investment prove this as the whenever there are problems in the developed world the portfolio investment had gone to the developed world. The recent fall in industrial growth and weak rupee has resulted into dramatic fall in the portfolio investments in Indian markets including stock markets.
The overall picture of Indian economy as well as the economies of rest of the world is not very positive but if the current trends continue on the same path and Europe is able to figure out some satisfactory solution to the Euro problem, things will start improving across the world. So the stock markets including Indian stock markets will witness some positive changes and will rise. But if things reverse and probability of this negative trend is very high, the stock markets across the world will fare negatively. And in Indian context, the Indian stocks will remain in the same volatile zones as they were in 2011.

Efforts and Economic Policies are Making Situation More Problematic

The whole world is facing economic crisis. The US economy is not in shape. European Union may fall and Euro may cease to exist if the crisis in EU extends for some more time. The emerging economies like China and India are slowing down. The Africa is facing social unrest. Russia is also witnessing some domestic problems relating to elections. Other emerging economies like Brazil, South Africa and Indonesia etc. have also been showing signs of weakness in the economic growth. Overall conditions of the whole world are worrisome making people worried.
"No doubt it is tough time and everyone is worried. So everyone is trying his best to ensure that his interest remains safe from individuals to companies to economies. To achieve this most sought after so called the sacred goal people are doing anything ignoring some basic rules. And their ignorance about the results of their actions, they instead are making things worse and forcing the world economy to suffer more."
All the countries are taking some steps to safeguard their domestic economies. And to achieve the goals they are coming up with rules, laws and regulations that can hurt their business partner countries. Everywhere in the world the protectionism is on rise. Countries like the USA and Britain that were champion of free market economy are now talking about protectionism and safeguarding their domestic businesses. The US President wants to ensure that outsourcing of jobs is reversed and no job goes to other countries so that problems of unemployment can be solved. But he is not thinking about the impact of this protectionism. This will hit emerging countries like India, China, Philippines, Indonesia and Brazil etc. that have half of consumers of the whole world and also have purchasing powers. But the consumers in these countries will hit most by such moves of banning outsourcing by the USA or other developed countries. And eventually the consumers in these economies will stop spending and the businesses in these developed countries will hit most as in these countries export has very huge portion in their consumption.
On the same line Indian government could not allow foreign direct investment in retail sector as there was cry by the opposition parties. This has hit the Indian economy more than any one else. Indian retail sector needs money and expertise both that can be availed by opening up the economy. The aviation sector too needs money to avoid any future problems like Kingfisher.
Like the economies and countries, companies too are taking steps to ensure that they don’t face problems. For this purpose they are firing their people for purpose of cutting the cost and increasing competitive advantages. Because of lackluster demands and uncertain future, companies are either postponing their investment plans or cancelling at all. These actions of companies are leading to more problems. 
"The firing is leading to increased unemployment in economies and postponement and cancellation of investment is also helping in increasing unemployment rates in economies. The increasing the unemployment is leading to falling expenditure by consumers seeing uncertain future. And this is eventually leading to low demands in the economies. So finally it is hurting the businesses too. So this strategy of cutting cost is not a right strategy."
So I think that the rising protectionism in developed as well as emerging world and firing by corporations to cut the cost is not right strategy. This strategy instead is making the conditions even more problematic.
"In this integrated world where everyone now gets affected by any happening in any corner of the world, it is better to hold hand and walk together than making others suffer to remain afloat or revive economies or businesses to finally die."

Upgrade of Indian Bonds by Moody’s to Benefit Indian Economy

There had been spates of upgrades and downgrades about Indian economy for some time by credit rating agencies, Standard & Poor’s and Moody’s. The Indian banks and rupee bond have been rated by these rating agencies over last few weeks.
S & P has upgraded the Indian banking sector contrary to Moody’s and Moody’s have upgraded the long term rupee bonds to investment categories.
These two upgrades when the Indian economy is facing the slowdown in economy and lack of confidence in Indian economy by the investors (domestic as well as foreign), the weak rupee, political uncertainty at policy level as well as the social unrest that India has been witnessing since last one year will boost the confidence in the Indian economy.
India is expected to grow at a rate of 6.9% this fiscal year and has capacity to grow even at higher rates but the political reasons, policy paralysis as well as social unrest are making things worse for Indian economy for long time. The economy needs second phase of economic and financial reforms to the increase its growth rates but the government has failed to keep its promises.
In such events the bonds upgrade will helps a lot Indian economy in many aspects from foreign investment to management of fiscal deficit to issue of weakening rupee. This is expected to increase the capital inflow to Indian shores from other economies that are witnessing higher volatility as the investors are getting a promising investment in relatively strong bonds. So in coming days Indian economy is going to witness some increase in its portfolio investment and a stronger rupee compared to 2011 in 2012.

Fallacy of MGNREGA

The rules economics are very simple for everyone and don’t change in almost all the circumstance. But when one tries to makes it complicated, results are often unwanted and sometimes disastrous. For any economy it is normal and fundamental rule that it must reinvest what it earns from all the economic activities into various types of assets from human to material (physical and virtual) to grow and maintain that growth. But in our country in case of MGNREGA, this is not true. 

No doubt MGNREGA is a very good and most inclusive social security scheme that a government can offer to its people but when we look into the structure of this scheme as well as implementation part, a lot of questions start pouring in the minds about its sustainability and role in economic growth. 

Till now, under MGNREGA, no physical asset is being created and all the money is spent on operational expenditure in forms of wages. That means thousands of crores are spent just to create no asset. Also the employment it generates is disguised in nature not permanent. Besides increasing consumption, it seems to play no other role in economy, at least no capital building at all. This nature of this scheme makes it unsustainable until all the future governments are ready to spend more and more money every year. 

It would be better if the some asset creation is made part of this scheme and for that some other schemes may be combined with these. MGNREGA would be used to pay wages to labourers and proceed from other scheme could be used for material sourcing for asset creation. This will help to increase growth as some real assets would be created over time, which would sustain the growth. Not only this, but MGNREGA will get real economic value than just entitlement.

Economic Problems in the US

The rules are simple for everyone in economics and when one tries to makes things complicated, results are often disastrous. For any economy it is normal and fundamental rule that it must reinvest what it earns from all the economic activities into various types of assets from human to material (physical and virtual) to grow and maintain growth.
And when markets start saturating, reinvestment is the most important function for any economy and there is no other way to escape or ignore it. Reinvest helps to maintain the growth by keeping the demand and supply in balance.
The same basic rules are haunting the US economy today. The US has been not reinvesting its earnings back into its economy and people since very long. Instead it has been wasting into some adventures in Asia and Africa and in some other military campaigns. This is simple economics but the US (political and administrative classes) is not ready to understand it. Since long the US has been investing billions of dollars in so called strategic future interests and plans for 21th century and so. But it is miserably failing to plan for its present. 
It is sending huge money out of the US monetary system to some projects and missions that hardly have any significant returns for the US economy in short and medium term, leave apart long term, by ignoring spending on some basic social security programs. This is leading to problems like unemployment, insecurity and lack of confidence in its people. Also the growth rate in the US economy had been lower than many emerging economies in Asia and Latin America. The scope for expansion in the US markets for private corporations is limited as the market has saturated. This has led to capital and intellectual outflows in huge amounts to these emerging countries for expansion, better returns and opportunities. These factors have resulted into drastic fall in reinvestment in the US economy by both the government as well as private sector. This is hitting hard the economic system in the US. 
Besides the lack of reinvestment, there are some policy issues in the economy as well. The innovation that has been USP of the US economy has fallen sharply. There has been fall in entrepreneurship in the US. The immigration and visa policies have made flow of human capital difficult to the US from other parts of world. Over the decades, the ever increasing income gaps between the poor and rich and concentration of wealth in few hands is leading to dissatisfaction in common Americans After 9/11, the image of ‘The Land of Dreams’ has been damaged because of some political decisions and deteriorating social cohesiveness. The falling government expenditure on social services, visa and immigration policy, falling entrepreneurship, saturated markets, lack of innovation, deteriorating social cohesiveness, some popular political decisions and unchecked capitalism are some of the important reasons for the problems in the US economy. So there is need to rethink about the models and modules of free market economy or capitalism.
It is very important for any economy that is becoming saturated in terms of domestic demands that it must put efforts to increase the domestic demands for goods and services so that domestic consumption increases over time. The reinvestment in economy serves this purpose as it tends to increase the per capita income and so demands for the goods and services.
The US, a champion of free market economy, is a different economy altogether. Whatever happens in the US has immediate and significant effects on other economies too. 
The US economy is the largest economy in the world and has huge business and economic exposure to a number of economies across the world and vice-versa. The proportion of the exports and imports of goods and services in the GDP of the US economy is very large. So it is important for the US economy to maintain this balance between the exports and the imports as if any of the exports or imports is affected adversely while trying to revive the economy will hurt the interests of the US economy in short, medium and long term. If the import from other countries to the US falls, the per capita income of those related economies will fall and as a result the demands for export from the US in those countries will fall and that will lead to fall in the overall demands for goods and services in the US economy. This overall fall in the demands will lead to increase in unemployment in the US as the private corporations will not reinvest their profits in the US and this reinvestment by the private corporations are very important to increase the employment rate and tackle the current problems of increasing unemployment rates. This will also affect the fiscal positions. 
So it is important for the policy makers in the US (political and administrative classes) to be careful while drafting and implementing any policies and whatever policy decisions are taken must not hurt its associate countries. 
"As of now the US does not need some political decisions but a set of balanced fair economic decisions. Else it will be victim it own champion cause of free market economy."

Unethical Practices by India Inc. in Red Zones

The Naxal problem is one of the most critical internal security and democratic threats that India is facing today besides the problems in the North East and Kashmir. It is has become common for Indian people to read news about the struggle between Indian security forces and Maoists. The Maoists strike and security forces respond. When Indian security forces starts search operations they are brutally killed by the Maoists and again one more operations by security forces. This cycle of attack and counter attack is continuing for many decades. And all over there is only blood and tears in the eyes of people for whom both the security forces and Naxalites claim to be fighting for. 

The continuous struggle between the security forces and the Maoists has worsened the situation in the Naxal zones. The Indian government has failed on every count in these areas. Neither the governments (central and state) have been able to control and balance the Maoists; nor has they been able to strike any peace deals. Because of these, the life and business has been impacted adversely in these areas of Naxal or Red zones. 

Indian Economy Headed for Slowdown

For years India has been seen as one most promising economies in world. But things are changing swiftly and India is losing its position in world economy mainly in minds of the investors. It is not that the basics of India's economic growth story have changed. No it has not changed. The basics are the same and now that have become problem for Indian economy. It is true that India as an economic destination has huge potential and also strengths as well. But only India being a promising and place of huge opportunities cannot help us.

Business Environment in India and Entrepreneurship

Doing business in India as just business seems to have become something inferior and politics and business has become two sides of same coin although they simply are not even the same coin. In the recent times, we have seen so many unpleasant incidents taking place in business world of India. There have been so many revelations about the relationships between businesses and the politics in one way or other. 

There was 2 G scam sometimes back this year that had huge negative impact on the business environment in which people like Mr. Ratan Tata and Reliance ADAG became party. Then Mr. Jagan from Andhra Pradesh was said to have made money because his father’s political influences and now it is time for Bellary’s Reddy brothers.