Wednesday, September 30, 2015

RBI GAME IS OVER What Next???

Management science theories are changing like a anything post 2008. Today I find that companies or manufacturing don’t need capital as live blood. They need consumers or rather demand. Creating demand has been the biggest and toughest task for every economy across the globe and the central banks across the globe played all its game to get the same. But the strangest part is that people are more connected sand more knowledgeable and they are more skeptical regarding consumption.  They don’t want to get into the trap of exploitation of resources. RBI game is over and now what next to be taken in consideration is the quest.These are short term strategies to growth but not sustainable economic growth models. Just today China goes for another bold step and I fear that this might be the beginning of a cold war between the developed and emerging economies with China. As I discussed in my previous article that the different economies are fighting over drawing capital inflows. Interest rates have been lowered in some countries in anticipation of US FED rate hike. Hence cost of operation has come down in many economies and also cost of borrowing. Now the only factor which will decide the fate of the economies is the demand which will come from consumers across all industries. The recent step of China throws this competition where it has halved sales tax on small cars to revive growth in the world's biggest auto mobile market. It’s not alone china who is in the game of lowering taxes and spooking demand of manufacturing and consumption. Countries like Japan, Russia, Brazil, Korea, and Australia have been going at steady fast speed to cut down on taxes across various segments to spook growth within their economies. On the other hand Central Bank interest rates have also been reduced by various countries to spook consumption growth. But the surprising fact which will come up later is that today’s investors are well informed about the global economy. They know the pains and death of temptation of borrowed death. Today’s investors are more concerned about protecting wealth rather than going for doubling the same.

India practically has done delay in its Make In India theory. Today every country is trying to offer freebies to attract investments. India has one big advantage which they need to work upon is low cost of living, young population and low cost of production. But the biggest risk India might face is that it is being taken as a consumption market rather than a production hub.  We are standing at a key juncture and every time we ask RBI to lower interest rates. Well don’t you think we are getting into the game of borrowed based consumption? Just think over that in the historic recession when govt pumped billion in the system jobs and demand spooked up but no this time it did not work. The reason behind investors or consumers is more cautious than the historical ones.Today you forced RBI to go for rate cut,but what after this? 

Mere interest rates cut down will not be of much help. We are looking for demand and hence we need prices to come down which would lead to more surplus in hand for buying something more. When the behaviour of the people has changed towards consumption then these strategies will not work. India needs demand where manufacturing gets its live blood. Inflow of capital has become cheap now since there are more sources and less demand. Every country wants a pie of global export and its country to be an exporting country. Well that’s not possible hence focus on domestic markets and strategies your policies accordingly. Government of India should think deeply on the same. Just think that despite of rate cut people are reluctant to borrow and spend,in that case whats your next step.You need demand not capital neither you need short term growth strategies.

Monday, September 28, 2015

INDIA GOES SHOPPING AND WORLD IS ALSO LOOKING FOR SHOPPING

Our Prime Minister have went for shopping an being an Indian we are proud for the same. But my article is not to be taken for criticism but for a thought to be provoked in the minds of my readers. If all investments flows comes to India from the Silicon Valley then don’t you think that US investments in its own country would come down which will lead to cut down on jobs as all jobs will be coming to India. Unemployment in US will start increasing which will lead to slow down for the Indian manufactures as export would come down due to no job -no consumptions atmosphere.   Now lest get into some more further question where investments comes but what about the local state level corruptions since Big Giants will be managed by Central Govt but what about the ancillaries. Indian political structure itself is confusing since development is required but the Name on the same should be of the ruling party only. If I am opposition forget to dream about investments coming to India. Indian legal system is also weak where the number of crimes is increasing and one should take it more seriously that a crime on a Indian fellow and on an FDI fellow will have different ramifications from the same CRIME. Now we want FDI and PPP model investments. Existing PPP have been a nightmare the only question is that why to change the constitution of India where a fixed PPP model is enrolled without any change irrespective of any government ruling the centre.

What I am trying to say is that in this 3rd industrial revolution world every economy knows that in order to develop we need investments. The developed economy needs money at home so that they can start growing their inflation and consumption demand whereas the developing economies  needs investments to keep growing their economies. The world population is increasing and financial crisis like 2008 and stock market crash like in china are increasing the burden on the different government across the globe to keep ahead in the race of investments. On the other hand Fund Managers across the globe are busy in attracting inflow into financial and commodity based products.  Now the interesting part is that the war is in between Fund Managers and Corporate Investment strategies since both are fighting to attract investments and show that financial investments would draw more gains compared to investments in PPP or any P- project based investments. The funniest part is that governments across the globe have failed to generate healthy returns in PPP projects (Particularly India) where as Fund Managers through speculative investments calls made their clients money grow by double.


One part of the world needs inflation and consumption to pick up, another part of the world needs PPP investments to grow and another part of world needs Fund Mangers salaries to jump. The biggest question is where to go where my investments don’t lose.   Governments need to come actively in a positive environment which also includes opposition to carry on such massive investments being drawn by our Prime Minister.  Further, focus on domestic investments and their pains of stories of not getting the platform of developing entrepreneurship. Indian entrepreneurs have more into Silicon Valley since they could not find India to be conducive enough to make their dreams come true. Hence India still has more entrepreneurs more than Silicon Valley to grow Indian economy. From Upanishad I will quote one meaning of an text. Blind Follows the Blind and remains ignorant.

Sunday, September 20, 2015

A Story of Cost Accountant Recognition

Before you all start hearing my story I would like to say that I am a cost accountants residing in an Ties 3 city of India and currently unemployed and driving auto rickshaw to feed my family. I am ashamed to do the same work but i have to feed my mother and younger brother who have sacrificed a lost for me becoming a cost accountant. I am just sharing one of the real life pains which often remains unheard. I am coming from a middle class family where education is the prime factor behind success of life. Since we cannot adopt the path of illegal life since time and generation thinking is changing. My dad was an auto driver and my mother used to work in a nursing home as sister taking care of patients. We were two brothers and I am the elder one. My dad and mother both valued education with a high esteem and they did everything and took huge pain to get us educated in proper school and college. Their only dream was that what sufferings they did for us they don’t want for their grand children. The family earning was not up to the mark of making us Doctor or Engineer. Having full stomach meal was a difficult proposition. After doing my graduation in commerce and got a part time job of maintaining book keeping. 
My younger brother did not went for much studies and opted for driving an auto to support me and my family for their dreams to come true. In between I came to know about the course of Cost Accountancy. With much pain and much more problem at home I got the money for admission and registration for the course. I did not have the money to buy so many books and also neither could afford a teacher who will act as a guide for teaching me. I spend much of the time in library. In between my dad passed away due to malnutrition and excessive suffering thorough out his life.  His dream of getting his son highly educated remained in dark when he passed away. My mother was strong she kept the hope of light alive. My younger brother also added fuel to the file of ray of hope. The time of my father’s death was tough as I was just going to sit for my exam over the next two days for my intermediate. I thought that my exam fee which was heard earned money would go for a wild toss as I was not in mental condition to sit for my exam. My biggest moral support was my father’s soul which kept whispering that sit for the exam and pay tribute by passing the same to me. That will give my father soul much peace rather than doing the Hindu rituals. 
With much pain in mind and heart I went for the exam and cleared them with good marks. I remember that during that time many of my library friends informed me that after qualifying intermediate I will get a job of Rs 5000. This was another strong factor for me to pass out my exam since I wanted my younger brother to finish his studies which he left off due to my dreams. But when I went to the outside world every one said that unless I qualify for my finals I will not get a job. More over I am fresher hence zero work experience leads to lot of humiliation in this professional world. Still I managed to get a job of Rs 3000 working as an assistant to the auditor. During my tenure I realized very avidly that being cost accountant has wide scope but less recognized. This is one of the biggest problems of this profession. 
But with much determination I moved ahead with finals and cleared the same. I passed my exam in 2011 and till date my salary is only Rs 10000 pm. Unlike other profession this profession has wide scope but the reorganization and acceptance is a very big blow to the aspirants like us. In my latest interaction with members of the cost accountancy profession I released that I am fortunate to get a job of Rs 10000. Huge numbers of students are unemployed and also practicing opportunity is less for the newly passed students in the profession. Most practicing members are coming from the age bracket of 45 to 55.  Moreover in my office humiliation of being a cost accountant is huge when a newly employed Chartered Accountant gets a starting package of 6 lacs in that case a Cost Accountants takes years to reach to that CTC. 
Can anyone tell me that what is the value of burning of such midnight oil and taking so much pain to become cost accountant? Student who are in the Tier 2 or 3cities have more problems in their wings to fly. They are paid little attention from the chapters end and more focus only on the Ties 1 cities where the regional councils are present. The middle class segment of the society cannot afford to got for an MBA which cost 5 to 6 lacs average hence they opt for Chartered Accountancy. Now we all know that Chartered Accountancy is difficult to pass and more expensive compare to Cost Accountancy. Now this huge middle class segment of the society which enrolls for Cost accountancy has to struggle for jobs and career growth. I have found many teachers and senior council members speaking about orientation and presentation skill but is the job market recognize cost accountants and also for how many years and how many council members we will await to see the turn around. Frustration of lack of recognition and quick promotion of being chartered Accountants keeps many of my friends under intense pressure.

 Pressure of family pressure of being getting recognized kills us. Recognition of cost accountants is so bleak in India that we prefer to move in overseas markets like Dubai, Bangaladesh etc. But how many are fortunate enough to get such contacts and opportunities. The mass of fresher are struggling and only conducting one campus placement is not sufficient. The question is of recognition and your slow and lazy action has created pains for these families who are trying hard to come forward from the dark nights if their families. By the way I lost my job last month as a the company found chartered accountants are more better and competitive in terms of Cost Accountants. I got this job through campus placement arranged by the institute  
Recognition and acceptance is the key for any profession to develop. You don’t needs research like NASA scientist neither you need to arrange grand invitation for campus placements- all you needs is let the emblem of the profession get respect. You need to get into the root of the problem but we are only focusing on those areas where we are losing our ground. 

Friday, September 11, 2015

Illiterate governments...Speculation...FED Interest rate Hike

I am not God to predict that whether interest rates would increase in US economy but the symptoms of the disease could well spell out the probability of the disease which is going to come up. Illiterate governments across the globe have taken Stock Market as the barometer for economic prosperity.  Government have turned every economy as an gambling place just like the stock market  In India we are currently doing the same thing where we are trying to control RBI policies and decision makings and also exploit them for investments where growth is negligible or stagnant over the past several years.  They think only interest rate cut down will bring growth.Everything has a time and one should act accordingly.
In continuation to my previous articles its well clear that US treasuries are on the biggest risk. US might smartly kill Russian economy but fighting with the dragon might be a tough job. If US hike its interest rates then the biggest boon will go to the US economy. Further as US Presidential election is about to begin and just 1 year 2 months are left , 80% of the investments held by 20% of the US  Ultra Special HNI then obviously funds needs to come out from the pockets of the emerging economies. 

Through various routes US corporate took the advantage of zero interest rates and parked the money in overseas or emerging markets bond. Currency depreciation mixed with volatility gave long term gains to these bonds investments. This also proves that US corporate were doing fewer investments in manufacturing and also less towards wage hikes for the US economy. This is also the reason why wages and per capita wage growth was slow and part time jobs were preferred more.  Further as Presidential election comes ahead every US political party will ask its private corporate supporters to invest money in infrastructure, healthcare facilities and all those where Presidential election contest.

There are couples of surprising things to follow where US treasuries have now become one of the sweet pots for investments by many scholar people across the globe.  A former Yale University math whiz has been buying tens of billions of dollars of U.S.  The below graph will speak a lot about the current trend of the US treasury buyers.
As an economist I find that US should go for increasing its interest rates since the consequences of not going for interest rate hikes would be more damaging in the long term
1.       Asset bubbles would start picking up
2.       Speculative valuations will spook asset prices where a huge gap between expected performance and returns would create mass bubble
3.       Loss of huge capital for the common people across the globe since herd philosophy of investments is followed and hence speculation will kill them
4.       Income and wealth inequalities will widen up as more risk taking appetite will grow followed with speculation
5.       Reverse inflow of capital will lead to significant delay in planning strategies of investments when funds will dry up.
The above 5 points are going to be a massive problem for the economic growth of the world in the long term. The biggest boon of interest rates hike would be that common investors across the globe and the various asset classes will find their feet touching the land and moving accordingly rather than flying in speculative air.

Well Interest rates have to hike at any point of time its inevitable but my only concern is that income and wealth inequalities are widening up and social cost of destruction is increasing. Loss of capital ultimately affects the long term growth of the society. It results to significant growth of taxes across the globe to meet the ends of losses. Banks and  NBFC and other financial institutions invest through different routes to exploit asset classes and finally they land up with losses which hit backs the economy of any country by double or triple times. The economic cost of loss is significant when speculative asset prices goes for wild toss. We should be prepared for these type of losses in the near future as greed and illiterate governments across the globe has taken Stock Market as the barometer for economic prosperity. Rather than designing policies for investments these governments should look for developing the society and the people within the system. They have turned the economy into a gambling zone like the stock market.Common investor have juts become a pawn.

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