Friday, September 17, 2010

ONCE UPON A TIME IN BIHAR …….NOW…..




The IMF very recently revised the outlook of the world economic growth along with the other countries that will cilluminate the growth of the world GDP. The fund raised its 2010 global output forecast to 4.6% from 4.2% in April's review of the global economy, but kept its 2011 view unchanged at 4.3%. Similarly for India the growth rate was pegged at 9.5% for the year 2010. The IMF hiked its growth projection from the earlier estimate of 8.8% it made in April. GDP growth forecasts for Asia have been revised upward for 2010, from about 7% in the April WEO (World Economic Outlook) to about 7.5%Even our finance minister have raised the growth rate of Indian GDP to 9%.If Indian economy goes according to the estimated figures one can then imagine the growth one will find on the business street of India.

We all know that world GDP will grow when India and other Asian countries (China, India, Indonesia)  will participate as the western world is struggling to keep its head up. Likewise did we ever went for a thought that from where the Indian economy will get its growth rate of 9.5% or 9% as addressed by the powerful finance heads. It means which states will bring the growth of 9.5% for India likewise the cilluminate growth of the world GDP.

Once up on a time Bihar used called as naam hi kaafi hai". Actually, the name itself is good enough to infuse good amount of terror and insecurity amongst the majority. Screwed up law and order, politically incorrect education system, a state more owned than run by shrewd politicians good enough to feed fodder amounting more than you can earn in your 7 lives, Bihar the name that makes every one count the nights and days of terror of living an normal life.
After SHRI LALOO PARSAD YADAV became the minister of railway Bihar still was under the threat of dacoit and air of other crimes. Each time he flagged off a new train in Bihar the brass of the Government Railway Police (GRP) anticipated more trouble. The anxiety kept of climbing higher and higher. The trains passing through Bihar have witnessed 963 incidents of dacoity and looting (439 dacoities and 524 lootings) in the last eight years. This boils down roughly to at least one train robbery every third day. Add to this 506 murders, over 6,000 burglaries, more than 850 cases of drugging and overall 20,000 cognizable offences committed on running trains during this period. The conclusion: more than seven crimes take place everyday on trains passing through Bihar.

One will be shocked to read all these statistics and imagining the quantum of terror one have witnessed particularly who lived in the state. All the above statistics make one thing clear about the healthy condition of the law and enforcement within the state circle. In fact Indian railways did not earn so much as compared to the dacoits who did the robbery and other practices on the trains passing in an around Bihar. This is the Bihar called out before 20 years back. This might be called as ONCE UPON A TIME IN BIHAR.

After the emergence of the Jharkhand, Chhattisgarh and the New Bihar one will be compelled to say in real terms ONCE UPON A TIME IN BIHAR ……………. NOW……..
The recent developments in Chhattisgarh have changed the status and outlook of the globalised world as a new invented state. Today it is one the top ladder of investments and the growth imagined, not by the Indian corporate but by the global giants sitting across the world. In fact Jharkhand and Chhattisgarh and the New Bihar is witnessing the turn around of its fortunes once the legal system became under real control of peace. The recent data by CSO indicates that from 2004-05 to 2008-09, Bihar on an average grew by a staggering 11.03% annually, almost neck to neck with India's fastest growing state. States like Bihar, Jharkhand and Chhattisgarh which were ranked once upon a time as poor have now being crowned with growth rate of 11%, 8.5% and 7.5% respectively. This is not the pride of a state it's the pride of Indian that once upon time these states were avoided form any important discussion tables are now on the top of the table. One might say the growth of these states is very low as compared to the other states of India's. I must argue that any thing which comes out from the dark is positive. If India need to achieve the growth rate of 9.5% then these states needs to come up with flying growth numbers to amplify the growth of India.
If we look at some of the investments and growth dreamt by the Indian and global corporate for these three states we will find some proud making stories and the invisible growth and foresight of ONCE UPON A TIME IN BIHAR.

Big names like Vedanta Resources, Tata Steel, Mesco Steel and Bhushan Steel are all set to invest more than Rs.40,000 crore in these three states. All these might sound as foreseeable future activities . But some statistic will make you see clearly the real growth.

As per a study by ASSOCHAM ECO PULSE on "States Performance in Per Capita Income Growth" – Jharkhand's per capita income grew to Rs.14,990 (16.6% growth), Orissa to Rs.14,795 (11.5% growth) and Chhattisgarh to Rs.16,365 (8.8% growth).these numbers reveals the financial discipline being applied and followed in these three states. Their is balance being played in all corners of these states which makes these states to generate growth and attracting investments. One example of financial discipline being followed is that foreign travel has been banned to avoid unnecessary expenditures.

The Bihar Chief Minister Nitish Kumar has recently said, Love for Hindi does not necessarily mean to oppose English. English cannot be ignored. However, English could not be made compulsory language in schools, but all facilities should be made available to students to learn and read English. After almost four decades, Bihar has woken up to English education in the state, making English a compulsory subject in Board Examinations from the commencement of the academic session 2010. The Government of Bihar has taken the initiative to hone the spoken English skills of the government high school teachers  and thereby their students in the state to keep pace with the time.  This will change the upcoming new generation of Bihar. After a decade Bihar will be having equal quality students with skilled force to tackle the corporate jungles of India and global too.
Adequate steps have been implemented to stop reckless expenditure in administrative departments in these states. Expenditures are planned in such a way that where only guarantee growth of these State's GDP and improvement in productivity is achieved.

So now it can be said that I am proud to be from the state of Bihar and being a Bihari  I feel more pride. In fact in the coming days I might get more things to fill up the gap of ONCE UPON A TIME IN BIHAR………NOW………

Saturday, September 11, 2010

OUTSOURCING A SMALL PROBLEM...........BIGGER ONE IS ABOUT TO BEGIN

"Let's stop giving tax breaks to companies that are shipping jobs overseas. Let's stop incentivizing that and let's give tax breaks to companies that are investing right here in the United States of America," Obama said in response to a question at his White House news conference on Saturday.


Finally the bell rang and US economy has figured their first tranches of measures to boost the economic activity of their own through real identification of problems. Its now well clear that the $700billion dollars stimulus followed with other small stimulus declared by US to fight the recession have only got its way to the equities and other assets classes of the emerging economies. The result of the flow of the stimulus funds into merging economies is that today we are having the Nifty at 5800 range from the lows of 2008 November. This article is not about the nightmare of double dip recession or any thing throwing light to that platform.Neither the article depicts any picture on the outsourcing business affects after this verdict.This article depicits a diffrent more dangerous frothcoming nightmare. The decision of outsourcing is the first step taken by US which will create job for its won citizens. One have to understand the underline principal that Asian economies are growing at the cost of Western and once the tide turns back tough times begins for Asian economies.

Many of my readers will not agree since we will start scouting for domestic growth drivers. But wait a minute. Do you believe truly that Asian economies are fully domestically driven after the recession? The reply will be no and even yes I have many points to bring the hidden invisible facts.

The flow of capital is the most important prime driver behind any activity starting from the goods being produced in the factory to buying of the goods by us. This flow of capital started from the stimulus package declared by US in 2008.Since if one could remember in 2008 when the recession touched the floors of Indian markets specially the Indian industries cash crunch was the word which has humming at that point of time. Indian banks became reluctance to loans and foreign inflow dried up. Once the stimulus was declared and the time it took to reach Indian markets and other Asian markets the game of turnaround happened leaving all of us will pockets filled with strong growth and revival numbers.

But what happens when this fund will be winded up. Any reply from speculators.

BALLOON GROWTH
Can any one explain me how Dow Jones climbed the level of 10000 mark when the US economy is suffering with its lungs choked with deep problems. Even if I take that the part of the stimulus was deployed in to the US economy still then that investments should not have been able to boost up the US stock prices.ROI in business takes time and in an deep economic problem country the ROI will take longer time frame than an ordinary healthy economic country.Now it will be very interesting to watch that what speculators does to keep the show of Indian browsers going on.
DEATH OF SPECULATORS ABOUT TO ................................................................
Speculators filled the air with expectation of future probable growth of the US companies and this filled up gas balloon made the US market to cross 10000 mark. Now when the unemployment is still high which reflects that business is happening very less in US then how the US market climbed 10000 mark. I must salute the speculators for their active participation to fool the world markets. They are fuelling hopes of speculative growth for 2011 and once this goes off the real picture comes up. If we take the growth as projected by Dow Jones then why Us is not having its unemployment numbers coming down. As long as unemployment will remain high and job creation will not happen as a result the US economy tax revenue will generate and more unemployment benefits will be dispersed from the pocket .

Lets come back to the topic of Indian market now. We always ignored the bad numbers and catch up the good ones. In fact we have mastered the art of discounting risk and bad indicators signals and always prefer to remain in the fool’s paradise. We always measure the growth of the market and industry with manufacturing and GDP numbers and investments growth. Good but did we ever peep into the consumption style and methods. If US have done this activity much before rather than discounting the bad signals of the economy the whole world should not have faced the dark nights of recession.


OASIS CREATED OF BORROWED GROWTH.
Today India is having a good growth of consumption. Since sales numbers are climbing with leaps and bounds and forcing every one to produce more and more. If we catch the real estate sector we find the prices of the sector is not jumping rather galloping like a horse. Demand is increasing is the caller tune of the real estate industry. Buyers are buying the flats and properties on bank loans.
 
Repayment of the loan will be made form the salary or from business profits. Now if tomorrow the flow of capital gets winded up even in small tranches do you believe that your business or the company where you are drawing salary will not face any hiccups? Moreover if the hiccups increases then one might loose the job and other might have to stop the production in that case how one will mange to pay the loans of the banks taken for real estate. Now you can imagine this is the same story for all sectors where consumption is happening on borrowed capital.An immedate example is automobile space where figuresa nd production is galloping.

Consumption and demand is picking up but all on borrowed capital and that’s too with higher percentage of risk in uncertain global times. Who ever counter fights the opine that Indian market is free market and domestically demand should give a second thought and moreover should understand that 2010 is an globalised market where growth and death both are shared in equal tranches.

Same story was prevailing in US when consumption was high and demand too but with borrowed capital. So we are now clear that Indian growth is based on borrowed capital and we are getting the inflow of this huge capital from US stimulus. We are discounting too many indications which are showing roads of precaution and speculators are playing with them and are waiting for the right time to exit their own portfolios and leave us in an Oasis.
Now it will be very interesting to watch that what speculators does to keep the show of Indian browsers going on.How long will be game of Discounting will be played is the watching movie.Nifty have reached the level of 5700 and now its time to have another round of tough times as indications are coming  of a slowdown in the Indian economic activities.Outsourcing is a small a matter from the palce where we are standing originally.
In short, we could be on the verge of a major sell-off. We've said this several times before, but to protect your portfolio as much as possible, it's a time to hold cheap defensive shares with good yields.

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