Monday, December 10, 2018


Well, Raghuram Rajan went where his 2nd  term was not extended which was highly required and now Mr. Urjit Patel immediate resignation. Shock for the global economy and loose of the face in front of the global central banks. Both the incident happened during the current government. A lot of suspicion behind such an immediate resignation but the main factor is that a certain segment of the economy should be given an autonomous free hand where any influence should be avoided. 

In the history of the Indian economy, this is the 3rd case where a Governor did not serve his full term. The other two resignations both happened before 1960, with Sir Osborne Smith and Sir Benegal Rama Rau quitting before the end of their tenures.  The government is simply slapped with this resignation. It shows very clearly that any central Bank Top position cannot be influenced by any government or from a political aspect.

Since 1992, all RBI governors have received full-five year terms. These include R.N. Malhotra, C. Rangarajan, Bimal Jalan, Y.V. Reddy and D. Subbarao. Under the Modi government, Raghuram Rajan and now Urjit Patel has not served five-year terms.

  In my many previous articles, I wrote that neither any auditing standard neither any regulation can control the influence of political system on the banking industry.

Well, the prime reasons for the resignation are many but among them, the major cause for tension between the governor and the finance ministry was a reported demand by the central government to pay a higher dividend from the RBI's reserves. The RBI has an excess reserve of Rs. 3.6 lakh crore. The central bank officials had opposed the move on the grounds that the reserves were required for maintaining the country's financial stability.  Well if there is a global liquidity crunch of another recession then this surplus of RBI will be injected to save the economy from such worst situation. The current trade war and rising crude prices followed with rupee depreciation create immense pressure on the fiscal condition of the Indian economy. RBI is well placed for its decision.

Well, economy and politics are different subjects when it comes to National interest.

These resignations raise many fingers and question about the strength of influence of the government or political influence on the banking industry. There is no audit system to control such influence and block the loopholes.

We knew later on that what Mr. Raghuram Rajan wanted and communicated to the government for the NPA resolution and also the various policy reforms required for the Indian banking system. In a similar fashion one fine day, we will come to know what made Mr. Urjit Patel resign and go away in such a hurry. The current government behaviour towards the central bank chiefs is an indication that they are reluctant to go with macroeconomic and monetary theory and more inclined to develop their own theorems.

The latest fiasco between NBFC-RBI –Govt raises many questions that the central bank is hardly given any liberty in its decision-making process. The biggest question which comes in mind is that does RBI have any independence in its policy decisions. Why did the present government behave in such a way where Raghuram Rajan and Urjit both went off like this way.

Why does RBI have to inject liquidity within the NBFC segment? Does the NBFC situation is worst enough and from the back end it’s being repaired?  Well, one of the clear roads which can be seen is that as the general elections are coming up these NBFCs plays a huge role in funding the election. Rest I don’t need to elaborate.

This is the same influence which created the NPA of around Rs 10.39 lakh cr. The influence of the political system on the banking industry is not new. We have seen in the US that how the mortgage carnage was created under the leadership of many US Presidents. India is not apart from such acts.

We all know how the PSU banking industry moves under the guidance of the government are the last several years. The senior position of the banks is being filled under the influence of political recommendation. This recommendation comes on the basis of providing loans to leveraged companies who are the parents of NPA.

This is a matter of shame for the Indian economy that such high-level governors have moved under such situations. The Global investor community and various assets class come under immense threat from this sudden resignation.

The domestic, as well as the FII sentiments, are now on the verge of collapse after this immediate action of the governor.

His resignation is a question mark on the Indian economy. 

Sunday, December 9, 2018

US-China 90days Deadline …is the time taken by U.S to save US Farm Bailout

Well, 2 years have passed for Mr Trump and now it’s going to be a high priority of closing the trade war or else intensifying the same. He has now a lot of pressure since he has promised several times in the last of a couple of years that he will bring down the deficit with China.  If he wants to continue his term during the next election he has to do something with China. At the same time, he has to manage his rural vote count and cant be dependent solely on US corporate vote banks.

He cannot afford to have a healthy relationship with China since that will impact his position. On the other hand, the US economy is more dependent on Chinese manufacturing. The latest economic data reflects the same story. The gap between US imports and exports grew 1.7 per cent month-over-month to $55.5bn, the most since October 2008 and the fifth straight month of deficit expansion. Data for September was revised to show the deficit rising to $54.6 billion instead of the previously reported $54.0 billion. Consumer goods imports, increased by $2.0 billion to a record high of $57.4 billion, boosted by a $1.5 billion jump in imports of pharmaceutical preparations.

Much of the import happened due to the fear of tariff hike post 1st January 2019. But this fear belongs to what? US economy has turned into a service and banking industry whereas the share of manufacturing is secondary. US economy faces many problems which will not support the manufacturing sector to grow.

The US lacks skilled manpower further in a recent statistical survey by the joint Deloitte-Manufacturing Institute study finds that more than 4.6 million manufacturing jobs need to be filled in the next 10 years. About 2.7 million vacancies will be left by retirees and almost two million other new jobs will come with expected economic growth. Yet only 2.2 million likely will be filled, the study says, leaving more than half open.

In addition, according to the report, an ongoing skills shortage resulting from wider use of advanced technology could also mean that up to $2.5 trillion in manufacturing economic output may be at risk in the next decade.
This what happens when economic growth is being focused on financial industry growth, the mortgage industry and service industry growth. The US will remain dependent on foreign import. The import may come from China or may be formed any third world or developing economy but at the utmost it will take another decade to have its own manufacturing base.

If US 90 days deadline fails then the impact of the failure will be more on the US rather than China. There will be two scenarios where the US-China Trade war might take its shape.

1)      These 90days truces will be taken as a shield by the US economy and trump to rework on the deficit where US inflation is not affected.  Trump will use to place agri and farm products to be the negotiation instrument in exchange for Chinese import.

2)      In order to save his own face from his earlier promise, he will end the 90 days timeline with zero results.

Trump now has to face the challenge of controlling the inflation once that remaining tariff is being hiked. His own country agri and farm sector are under immense threat. Farms that produce corn, soybeans, milk and beef were suffering due to low global demand and low prices.  In September, the government cut $25 million worth of bailout checks to the agriculture industry. Farmers in Illinois, Indiana, Iowa, Kansas and Minnesota have been the biggest recipients of assistance. As per the U.S.D.A. soybeans, wheat, corn, dairy and hogs being the goods most in need of support.  This is the grey area where the US or rather Trump have to work so that it can safeguard.  The farm industry is battling with rising interest rates and hence the topping of a trade war has made it impossible for the sector to maintain its growth.

The biggest threat for Trump is now to manage the rural vote. The question for 2020 is whether rural voters will continue to swallow the continuous stream of lies they’ve been fed by a fast-talking city slicker.

The Wisconsin Farmers Union, representing small- and medium-sized farms, said a 55-cow dairy farm would receive $725 from Trump’s bailout while losing some $36,000 to $48,000 this year. On the high end, a 290-cow dairy farm would get $4,905 but could lose as much as $400,000 this year. In the first round of payments, 11 of the state’s largest corporate farms received between $50,000 and $81,000. But, the average payment for Wisconsin farmers was only $2,145, with 237 of them receiving less than $100 each.

According to the report of Agriculture Department’s economic research service predicts net farm income in the United States this year will fall by $9.8 billion, to $65.7 billion, a 13 per cent drop from 2017. The mostly new list of negotiation of products would come where the US will try to safeguard the farm and agri sector.

Saturday, December 8, 2018


Government across the world should understand that whimsical policies will not be accepted by the people. The 2008 recession and post that one lesson which has been learned by any generation of any age is that how and where the crisis is happening and which policies are governing the same. Reforms do not need sacrifices. This is the wrong myth developed by the capitalist mind. Many strategies can be developed to create new growth momentum provided complex trade deals and economic ties are cut out. The major concern for the society across the globe is the learning and the message being given post-2008 recession about providing a proper living standard.

You create austerity policies and expect people to suffer. You don’t cut down on expenses and you increase taxes and expect people to accept are now old traditions. People are now more connected and more knowledgeable than what it was in the last 10 or 15 years. Smartphone and technology have changed the landscape of connectivity. I am sitting in India is supporting those who have come up on the street against the France policy of increasing taxes on fuel.

 The world is yet to come out of the 2008 crisis although cooked economic numbers and stock market strength are not the real growth post-2008. Most of the economies are struggling with growth and sustainable growth has become a dream.  Post-2008 Economic policies malice has led to a revolt within the next generation. They are unemployed and unemployment never gives a good standard of living.

The ILO unemployment rate for metropolitan France was 9.1%, unchanged from the second quarter. The youth unemployment rate, which applies to the 15-24 year-olds, also increased to 20.6% from 20.2% in the previous quarter. If one digs further into the economic data of France one will find that the top 20 percent of the population earns nearly five times as much as the bottom 20 percent.

You cut taxes for the rich to make them richer and you tax the poor for paying the gap. France has done the same thing. The recent tax cut policy of France has led to €3.2 billion, or $3.6 billion of less amount of revenue the state received this year. France has a value-added tax of 20 percent on most goods and services. Over this tax, you impose more tax on a particular product or asset which is going to impact the society is bound to face a revolt.

Declining living standards and eroding purchasing power have now turned into a violent revolt. People will not accept whimsical policy burdens impacting the life of the citizens. When easy economic policies and steps can be accepted to safeguard the citizens then why cruel policies are taken into account.

The median monthly income of France is about 1700 euros or $1,930. France is the third biggest economy in Europe after Britain and Germany but its economic growth is very slow. Large numbers of permanent jobs were wiped out, especially in rural and former industrial areas. New jobs numbers which are being cheered by the readers are only temporary or contractual jobs and have nothing permanent in the same. This weak job market leads to more pain for having a healthy family and living standard. The promises by a political party are at risk now. The Britain Referendum speaks enough that any government can be thrown and people will not accept any policy which is detrimental to the citizen’s growth.

The point is clear that economic growth is not above the citizen’s growth. If the society does now grow and delve into more pain in the long term then imbalances and revolt are bound to come. Remember that in the last 10 years many every citizen of every age has gone through mixed phases of life and hence taking them granted for accepting any policy which will impact their life is now a page of history.

In many countries, the tax structure for the wealth is designed in such a way that they only become rich every year whereas the middle class of the society delves into below middle class or poverty line. Society imbalances are now becoming wider and each day its getting widening that now it’s going to beyond control of any government.

Cost management highly Required for Farmers Series 1

Before I begin I would like to highlight that I have segmented the subject so that one can get a better conceptual idea of the various angles of the Indian farm production and farmers problem and cost management requirement. When farm commodity prices fall and costs of production rise, farmers can get caught in a “farm price-cost squeeze. 

Despite having various programmes where farmers can make a profit and sustainable growth from farm production we are still at the point where too many producers don’t understand their cost structure Farmers struggle for better pricing and cost management does not seem to end. 

The farm waiver has become now habit to save from cost and low price burden for the end product. Lower commodity prices have forced many farmers to eat away at working capital. If the farmer’s cash flow is negative and one run out of working capital, one has a real problem.

Farmers are just waiting for another waiver to be declared soon as elections are around the corner. This has become the most common thing for the farmers where they very well that farmer loan waiver is the best tool used by the Indian political system to win votes. The biggest immediate suffers are the NBFC and the Banks and in the long term, the biggest suffers will be the taxpayers. The problem with the farmers is the pricing of the products which are available and based on that designing the product mix accordingly. We find that product mix concept is lacking as well as target-based production and pricing link is missing.

Another factor which is affecting the farmers is that the low prices for the farm output. When this happens they look for waiver schemes.   Waiver of loans has impacted the Indian economy in many ways where the deficit is being met from the common people who pay taxes. The Union Budget reflects this story in many ways.

In some cases, it is being found that farmers are doing less production due to irrigation or poor farm prices. The government is just not able to get any justification as the political war is just busy focusing on highlighting the issue and not on the solution. As a result, many farmers have stopped production of many crops and hence price has gone up. The government is still silent despite prices going up since they want high prices for these crops so that middlemen could have their shares.

This is game which needs the attention of the pricing strategy of crops so that this loan waiver could be avoided. The Indian government has come up with the new policy aims to double the nation's farm exports to $60 billion by 2022 and gives a "greater thrust" to value-added products, promotion, and branding of India's produce. All restrictions on the export of organic and processed food items will be lifted. These include mandi (wholesale) taxes, minimum export prices, duties and quota restrictions.

Now for doubling the farm production and giving them space export market is no doubt is winning situation but how many farmers are literate enough and how many of the farmers can really en-cash the opportunity is going to be the next hurdle for the growth. From government to technocrat all are failing to understand that the education level of the farmers in terms of export needs to be uplifted. If the level of knowledge is restricted and controlled by a few knowledgeable farmers then the whole motive behind freeing up the framers from the clutches would go for a toss.

I find apart from educating the farmers for export-oriented production the cost management strategies should be imparted. Cost management lessons will improve the production efficiency which leads to improved efficiency in profit margins. In my research, I find that efficient knowledge about crop mix and production mix would be the key way to survive from the plummeting prices of producing any one crop.

The economies of production need to be identified so that every farmer gets proper valuation of its production. A farmer uses various types of ingredients to produce crops. Now cost management You have to understand all of your cost categories, then look at where you have excess. Is it equipment, family living? Should you seek off-farm income, or add custom farming?

As farm production is always volatile hence cost management becomes an imperative tool. As commodity prices began to tumble after 2014, more farmers came to the conclusion they needed better financial skills and hence learning the cost management have become a necessity.

Friday, November 30, 2018


The NBFC business has grown stupendously in the last 5 years time frame In India.  Rs 10 trillion bad loan mess of the Indian banking industry created by political influence at different times created the opportunity for the NBFC industry to capitalize on the same. 11,500-odd non-banking finance companies grew their business significantly taking this opportunity. Eight of the 10 NBFCs posted handsome growth in their profits before tax in the five years.  The stellar performance of the NBFC came at the cost of NPA of the banking industry.

The NBFC growth cannot be a sustainable economic growth contributor. Their intricate deals and business model are quite dependent on the economy and once there is slowdown it will impact the assets of the Indian economy. Banks, on the other hand, are liquidated easily by various modes where NBFC have many limitations.

NBFCs plays a pivotal role behind elections and hence I leave the rest for my readers to calculate. All NBFC somehow of the other are PE financed which raises further question who is giving them and why.

The tussle between NBFC, RBI and Government stand to be a complicated situation. But this complication has a logical reason if we look from the RBI point of view.  The Indian banking sector has mostly been cleaned and under Basel III norms liquidity injection will be required into the industry. The current government wants NBFC to be financed and given easy of doing lending etc. Now after the books of the banking industry have been cleaned the banks needs to grow so that they can grow profits and also increase their business.

The huge amount of NPA which were created was mainly driven by political influence on the banking industry.  The same influence is being created now to favor the NBFC. The RBI has taken justified a step of not getting under any influence and be vigilant enough to save the economy.

The NBFC model of business has been very much supportive for the Indian economic growth and they have been filling up the gap of unbanked but the unbanked happened due to political influence. This influence on the banking industry has been so strong that they have kept damaging the industry and let other Financing industries grow.

Today if the Indian banking industry grows and fills up the gap of unbanked then there is substantial change over for the long-term growth of the Indian economy. When an NBFC fails hardly anyone comes for rescue but when a bank fails the government comes to save.

This has a significant impact on the long-term growth of an economy. The recent clean up of books has resulted in enough expansion opportunity and efficient utilization of resources by the banking industry.  More branches and more technological advancements will lead to filling up the gap of unbanked in the coming days. NBFC have been growing their business in a reckless manner and their intricate business deals and models are quite a surprising threat for the Indian economy.

The RBI mode of operation should be free from any government or political influence. The election raises many questions about giving leeway to corporate India. But this may not happen now.

If the NBFC is better placed and doing correct business keeping the regulatory aspect in mind then any storm can be faced. Support by RBI should be given but not under any influence but under the business and economic feasibility sense.

Sunday, November 25, 2018


Do Greed and asset allocation have any relationship?  Do your investments make you feel stressed? Spending sleepless nights and looking often towards price is nothing but stressed investments decisions taken based on greed.  How does investment turn out to be stressed investments might appear to be strange but it happens due to greed which drives us to take the decision away from our own objective of investments and strategy mapped according to our various factors? 

Stressed investments are nothing new but we have never thought about the same. Either it was hidden under the glorified carpet of success or eloped under the mounting losses. Stressed investments damage might be beyond numbers and asset allocation. It can damage human life too.

Greed takes control of asset allocation and takes the final shape into stressed investments. Greed threatens and amplifies the risk of asset allocation. Well according to behavioral science greed may rule over asset allocation. Greed takes control of the principles of investing when the market scales new highs. This is one of the most common things we witness when people trend to buy at high levels and stay away when then the market fall.

 Greed also compels investor not to rebalance the portfolio despite warnings from a particular asset class.  Greed compels an investor to create a different mindset for them where the world only looks rosy. This rosy world has a calculative mindset and everything is based on greed driven expectation and calculation of investing or not taking the call of rebalancing.

Investor often follows the herd mindset while doing investing. They always ask their neighbors, friends to get an idea about where and when to invest. Individual risk and financial goals are often forgotten since the other person is making a quick short-term return in the market. Greed-based investments often take one investor into a stressed position. This stressed position can also be termed as stressed investments.

Asset allocation principles depend upon the risk analysis of an individual which varies from one person to another. Further, every individual has different financial goals and has different time frames of achieving the financial goals.  The birth of greed comes when one trend to achieve the financial goal by leveraging the asset allocation road map. This is the place where greed takes control of one’s decision and hence financial planning gets into danger.

Financial planning is a strategy based game where patience and control of greed is one of the most important tools. For example, getting on the nerves of greed, one takes an investment decision beyond his asset allocation map, following the herd. Now when the market goes for a swing since the existing asset allocation has swelled in one asset class he takes more leverage to make more money out of the same overvalued asset class. This leverage is nothing but greed. Similarly when the market falls often this greed compels investor not to sell and stay with his portfolio despite losses mounting over the portfolio. The greed which takes control over here is that the markets will turn around and hence my profit will be back.    The greed factor did not allow selling. In both, the scenario the investment turned into stressed investments. Stressed investments damage might be beyond numbers and asset allocation. It can damage human life too.

In my own real life, I have seen that many investors are under so strongly influenced by greed that they don’t rebalance their portfolio despite the markets alarm of rebalancing. They have a strange perception that investments will grow again from the low levels and on an immediate basis.  The debate of time correction and price correction comes into play and hence greed starts making new calculations of returns which have no signs of reality.

Stressed investments destroy families and even in many cases, it spills over to the next generation where the greed-based losses are being borne. A legacy of losses are high which becomes a nightmare for the family. Greed kills and destroys families when investments are not taken into with proper control.

Asset allocation is completely wiped out in both the scenario. Now the most immediate question will be what should be the strategy for these types of situations. Well, greed will try to control the mind. The only way to avoid it is sticking with the objective of investments and the road map as decided upon on the investment charter.

Yes, the value of the investment charter is immense and one of the most important values is that it acts a mind protector. Reviewing the investment charter is not greed. It’s an important step in financial planning. Greed opportunities may lead to short-term gains but the probability is that in most cases it erodes the value of an investment and finally the financial planning take set back.

Well, how many of you have fallen under the prey of Greed? Do your investments are stressed?

Saturday, November 24, 2018


Recently the Mutual Fund TER has come down significantly for the benefit of clients from the low-cost perspective. Well, this is really a great thing for the investors who are looking ahead for long-term wealth creation. Low-cost products increase the returns of the investments in the long run.  Well as investors get benefit from the low cost it comes at a cost for the distributors/agents or your so-called Broker. For them, it’s a loss since their earnings come down significantly.

For your broker, this business of Mutual fund selling is no longer much lucrative business compared to what it used to be in the past 10 years. The government and every regulatory part are concerned about improving the client return on his investments and this is the place where servicing or approaching clients for Mutual Fund investments becomes detrimental from the revenue side of the broker.

Churning of portfolio and investments might soon be a quality check for your agent/broker. According to the new Total Expense Ratio guideline, many top performing funds where the corpus or AUM  size is significantly high the expense ratio also has been reduced significantly in these funds.  Vice-versa those funds where the corpus or AUM is low the expense ratio has been reduced marginally.

Hence your agent or broker might soon come to you for churning your portfolio from these funds where the corpus or AUM size is too big. They will try to get you invested in other funds where the corpus or AUM size is less. This churning advise would give you a litmus paper test of your brokers or agent about their intention behind managing your funds.

Investment advice should always be unbiased and should be free from any brokerage based influence. The advice of investments should always be on the benefit side of the client and not in favor of the high commission. Commission based sales often led to the mis-selling of products.  

Now in case your brokers/agent approaches you for the churning of the portfolio then ask him these few questions to get the clear picture about his advice. These questions can act as a litmus paper test for your broker/agent.

·        Why is your broker advising you for exiting from existing funds/schemes?
·        What will be the impact if the said actions are not taken on the portfolio?
·        How does the churning of portfolio helps to achieve your financial goals?

·        During investment time did the brokers /agent disclose about this churning at any point in time?

Investment philosophy stands on long-term investment theory and has a negligible place for any brokerage or any other type of biased advice. Many of my friends might mix up churning and rebalancing. Well, rebalancing is getting back to the basics of asset allocation where one shifts his portfolio from one asset class to another. Churning, on the other hand, is buying and selling numerous times where asset allocation basics rules are violated and it has more to impact to dilute the principle of the client. Churning should always be for the benefit of the client provided the same is not acted upon frequently. Frequent churning indicates clearly that your broker/agent is making money at your cost of investments.

An advice of churning can also be beneficially provided the agent/broker has substantial reasons and logic to justify the same. Keep an eye on your agent /broker churning advice.

Wednesday, October 3, 2018


Soaring crude prices stands out to be an opportunity for the election campaign for every country where elections are about to be held. Rising crude disrupts stable government and creates a losing stance for them. Historically and even in the present, it is being found that the crude process plays a huge role behind the political party and particularly favoring the opposition party to win. Reduction of taxes and other levies on crude oil are the most promises to attract votes. Well, when crude goes up the inflation automatically shoots up which impacts every corner of the society. 

 The winning government remains under the perception that its economic development will supersede their policies regarding crude taxes. These blind thoughts have to lead to loss of position.  The common citizen of every country wants little savings to grow and a decent consumption where one does not have to cut down on expanses which lead to cut down on living standard. When this simple desire comes under risk then obviously the society will rebel and would look forward for an alternative person who will hear them out and will give them relief even if it is for the short term. It’s a human behavior which cannot be changed under any ages.

If we look around the world we will get an idea about how the crude is being a determining factor for winning the election. In Mexico, it contributed to the political rebirth of Andres Manuel Lopez Obrador, who won the July 1 presidential election on the back of a promise to hold fuel prices in real terms for three years by building more refineries and increasing subsidies. In Brazil the political rise of far-right populist Jair Bolsonaro, who could be within sight of the country’s presidency in the upcoming election. Further in  Indonesia, whose President Joko Widodo abolished gasoline subsidies after coming to office in 2014 might have to get back on the reverse course as he is heads toward next year’s polls. These change over speaks that crude is an very sensitive issue for every country irrespective of its financial condition.

Well taking a short term hit at the economic factors like CAD and Fiscal deficit sounds to be prudent where trillions of funds are being bailed out as shadow loans and shadow banking. In one route you let smart corporate to play with public funds and on the other part, you squeeze the  same people for filling up the government kitty through taxes on rising crude. When crude prices some leeway should be given so that the common people particularly the one son the verge of growing consumption are not affected. Rising crude creates global Inflation to grow which leads to interest rates to go up to control the inflation demon. This control process leads to impact gross fixed assets and also a slowdown in the expansion of industries and business impacting the same society.

Crude can lead to a massive fall out for the current government who is set to go for election in early 2019.  When the society suffers with high inflation then frustration within the economy builds up which gets reflected through election polls. Many economies took many steps to restore back the leeway’s given after winning the elections just to manage their fiscal condition. In the last couple of years many economies who imported crude were able to reduce their fiscal deficit and CAD but with changing times one has to look into balancing the economic growth.

 If we look the at the global subsidy given by various economies its being found that  the figure stood at $105 billion of oil subsidies  were given in 2016, according to the International Energy Agency . This figure is going to increase significantly in the coming days as crude is climbing new heights.   India is currently under the stable economic condition and hence it needs support from the government to reduce the taxes so as to pass on the benefits to the same to the end user. Farm output will turn out to be expensive keeping the current taxes on crude prices.

Now, these subsidies are criticized, since they are given as freebie well, when the tax payer funds are being bailed out through forged and shadow banking where does the value model stands at that point of the place. This argument will continue but as I said earlier that a common citizen wants the  savings to grow and his social consumption to remain same irrespective of any event. He demands protection in exchange of the vote one has given.

Sunday, September 30, 2018


The capitalist will never want the government, not to provide tax sops or export incentives. Their focus will be how to squeeze the government and amplify the shareholder's wealth. I might sound harsh but the fact goes that many industries did not want cost efficiency and cost management since the final report goes to the government. If the government becomes educated enough to read the recommendations then doubling the shareholder's wealth will be set back as sops and incentives will dry down. Indian economy is now standing an inflection point where many new opportunities will open up for the economy.   This raises the point that did work for the betterment of the society lead to dropdown or it should have been focused on doubling the profits of the Industries.  No one can control pricing decisions.  The day pricing decisions are being controlled dilution of the segment begins for every profession. It is better to hire as a consultant and employ rather becoming an obstacle for the shareholders. Well, I will come to this point later.

Brexit and Trade war both are an opportunity for India to grow their exports and create new trade agreements. But giving tax sops and export incentives are not going to make the trade relationships affected in the long term keeping the global change in trade mindset by different countries. Donald has been clever enough to pass this information to the global economy that trade might be creating an impact on individual economic growth and creating more growth for exporting countries at the cost of the domestic economy. Well, many might say that this is too early to speak but the tune is set and it's going to be played accordingly.

When one’s economic cost of production is not strong enough we find these sops and incentives to play their game. These are actually a cost to the taxpayers and revenue to the exporters. Lack of adoption of new cost management practices leads to cost for the society. As well all know that cost management and cost efficiency is for the betterment of the society at the same time lack of adopting the same creates a burden on the economy. The adjustment of tax sops and tax incentives given to the exporters is adjusted from higher taxes in the other vertical which reduces the purchasing power of the society and more importantly pushes up the inflation of the economy as taxes go up.

This is a vicious cycle which can be eliminated only through the adoption of cost management strategies. Many will debate that adoption of advanced technology, replacing the traditional cost of production would automatically lead to low cost of production. Well, this technology adoption comes with a significant cost which cannot be taken up by many companies and further technology adoption will make the product competitive buy it will be a myopic sight.  

Product costing, efficient pricing of goods to make the product affordable for the larger society is the key requirement of the society. In most cases, it has been found that cost methods are not appropriate and strategic cost management is not in place. Life cycle costing, transfer pricing mechanisms, target costing has not been implemented. Only cost appropriation following the guidebooks of cost allocation.  In many industries as per the threshold of the government notification cost audit is not required. Well, the point is how the government will come to know that how much export incentive and to which sector to be given. Even if cost audit is not applicable cost accountants can be hired to get their help. Growing complexity of running a business deters many from adopting twin audits in their organization.  This might have been the reason why cost audit was curtailed down from the earlier historic level. Well in these circumstances the company can appoint cost accountants as a consultant or employ them within the organization so as their expertise can be utilized within the organization.

Well, the cost accountants profession thinks for the betterment of the society but the companies of industries are capitalist minds and hence they would want export incentives and sops to improve their profitability and shareholders wealth. This might be the reason behind why the cost accounting has been diluted in the recent past. If the government does not get any report then industries can demand whatever their shareholders want them to double their earnings.  

Cost management consultants can be adopted as an employee or as a consultant to get in-house reviews of strategic cost management and cost can be improvised for the benefit of the organization. Well, no profession can control pricing decisions but it can amplify the revenue growth of the organization and can make the industry to be more competitive. It’s better to double the revenue of the corporate rather making the suggestions for the betterment of the society at the cost of the corporate profits.  I find Indian Industries should use the professional expertise of cost management for making their profits to grow by many folds. 

Tuesday, September 25, 2018

Indian export Future..Price of Ignoring the Cost Accounting Series 1

The trade war has opened up the prospects for the cost accountants provided they are well prepared to generate outcome form the same. If the cost accounting tools do not have any myopic vision hence India needs to capitalize on the opportunity provided by such tools through cost accountants.    But does India is taking the advantage of the professional expertise and acumen.   I doubt.  The below historical data analysis and the rationales speak loud that the cost accounting tools, strategies and profession, and professional acumen both faced the delay of recognition and is yet to get its credits. I hope the readers would agree to the same point after reading the same. Trade restriction will grow more in the future as I have been telling in my previous articles that the doors of globalization will be closed when they have been exploited the trade. Down the line again some new trade wars would come up which might impact the Indian exports in the long term.  Indian has been losing the export competitiveness a hence always scouting for new countries and new trades. The volume of export has picked up but does not reveal Indian export is competitive.

In 2013/14, India's merchandise exports stood at $314.4 billion. In the next year, it fell to $310.3 billion. And the next year, 2015/16 saw a further fall to $262.3 billion before it improved marginally to $275.9 billion in 2016/17.
The strategy of jumping from Agriculture to services and not into manufacturing would not be a long-term sustainable economic growth for India from the current global market conditions.    The reason being that services in the long term would be controlled by Artificial Intelligence and Block-chain and hence export of services would not be required. Further new countries competitiveness in services could replicate Indian exports.  Now the biggest question is where India will stands in the long term in terms of the export market.

India is a very small player on the global landscape of export. India’s share of total world merchandise exports was 0.6% in 1995 rising to 1.7% by 2014. On the other hand, its neighboring country China’s rise is astonishing, accounting for 12.4% of the world’s merchandise exports, more than four times its share in 1995. To gain some perspective on total merchandise exports in China was $ U.S 2.3 billion in 2014, compared to India’s $U.S 17.5 million. Thus, India’s exports were only 14% of China’s.

If we look within the Asian countries about the growth of merchandise export we find that Japan showed the way initially when its manufacturing techniques powered it to become a global manufacturing powerhouse in sectors ranging from autos to consumer durables to imaging. Later the Asian Tigers, especially Taiwan and South Korea grew rapidly because of their engineering and manufacturing competitiveness. After that came the rise of China, which became the production base for all sorts of products from steel to solar panels, and from mobile phones to computers.

In India, we find that giving tax sops have been taken as the competitive tool but with currency volatility and fiscal and Current account deficit going for wild toss the leeway of export sops through taxation gets negligible pressure. In other words exports, sops stand out to be the taxpayer’s money. Tax sops for promoting export is not cost management neither its tool sustainable for the long term.  This speaks that efficient cost management and cost accounting tools are not being practiced. Cost Accountants knowledge is not being fully recognized and this is a big gap for the society.

Cost Accounting tools were never accepted in broader fashion and the professional expertise was suppressed since competitive rival profession took the easy steps of promoting tax sops to make the Indian export competitive.  

Cost measurement and efficient utilization of resources would lead to the make Indian goods affordable and competitive without indulging in any trade manipulative practices.   Cost Accountants who are joining the industry should focus on strategic cost management aspect where they can create an impact on bridging the gap within the society. Focusing on labor cost competitiveness would be a long-run game hence one has to accept that for the sustainable export competitiveness to grow.   Rising inflation over the long-term changes in the dynamics of labor cost competitiveness. Hence it's not a sustainable economic growth.

The Indian Foreign Trade Policy (FTP) Statement of 2015-2020 has a number of dimensions including enhancing market access; upgrading product quality and product/service diversification; building key transport links internationally; enhancing the efficiency of India’s export and trading infrastructure, and enhancing India’s reputation abroad. But I don’t find much on the part of cost efficiency and cost reduction and adoption of costing tools within the policy framework to create the competitiveness.

If we focus on Asian economy we find India has to compete with countries like China and Japan, the former is trade manipulator and the later is the mother of many new cost accounting strategies. The competition for India is too high in terms of making its export grow within the Asian economies.  Efficient cost management and efficient pricing would be the only path for keeping the Indian exports to remain competitive.   On the other hand, making the goods affordable to bridge the gap between the societies is the biggest opportunity for a long-term sustainable economy.

Adopting advanced technology does not mean resources are utilized efficiently or the product would become competitive if you don’t adopt cost pricing methodology. Currently Indian economy has been focusing on increasing the volume of export but not much on the competitiveness. The 4th Industrial revolution will not only change the dynamics but would make Indian export to less competitive.

Indian might be paying the cost for delayed identification or yet to recognize the full potential of the cost accounting profession and professionals.

Monday, September 24, 2018

PATH To National Company Law Tribunal

Those who are doing work related to NCLT I find them to be the next level of teachers for the corporate world where they can share the various angles of strategic management failures. I will not be surprised if I find a few authors of corporate failures coming out from the professional who is doing the work of NCLT. Its huge lesson book for the upcoming generation that how corporate failures have eroded the goodwill and converted them same is a bankrupt company or down with debt my many times compared to their profits.   The most surprising the thing is that when the debt was climbing new heights how did the management keep moving ahead despite knowing that the surging debt is hundred times more than the profits. How could long-term overvalued leveraged presentation and books of accounts be taken forward by the financial institutions?  Corporate governance has been a nowhere. It’s a collapse at every angle of the economy with breach of trust of the leaders of the Industry.

 I know many cost accountants were auditors of these companies who have reached to the door of NCLT today but the biggest question is that did those audit reports raised the red flag for the faulty decision making and wrong short-lived myopic strategic decision adopted by the management. Even if so then they have been ignored by whom and what was their intention for hiding the facts of the audit reports.  The current cases at NCLT and the way they are rising speaks audit have been a failure and they have failed to alert anyone in the system or no one bothered to listen. Practically auditors and audit report have simply remained as a compliance part and not being taken as an efficient report to judge the direction of how the company is moving ahead. Risk management has been a big failure.

Cheap debt, unsustainable business plans, extravagant valuations, myopic short-term vision, created a huge trouble for the Indian corporate.  The management strategy has been so short-lived and so hypersensitive without accessing the various risk of diversifying the business. Well, diversification of risk is the key matter but shifting the focus from the core business and getting into noncore business is not a blue ocean strategy to move ahead.   The cases like Ruia’s ,Singal, Gaur’s ,Dhoots and many more Icon of the Indian industries reveals that somewhere they had adopted decision wrong decisions in management due to which they have ended up with NCLT. Government policy has been one of the reasons behind the collapse but at the same time over leveraged foreign assets take over turns out to be a huge lesson where strategic decision went for a toss.

In many cases as per the media and other public domain sources I find that corporate frauds were created in some places but in many places, the whole management planning and decision was so myopic that at any volatile movement of any of the factors of the economy has eroded their goodwill and creditability for the long term.  Those managers and senior team management people who took hefty packages and lavish corporate presentation and myopic decision making have now mostly moved into a new organization and are currently behind the crowd of corporate India.

I find that execution of strategic decision has been a significant risk for these companies. Yes, execution is not a cup of tea for everyone.  The failure at various angles for these companies who went through NCLT speaks loud and clear that execution has been a failure and measured steps and efficient cost management was a failure.  Management decision making can go wrong but not to the level of mounting debt where the whole system comes under collapse.

 These management decision failures raise my thought that whistleblowers need to come up ahead for raising the red flag when decision making goes wrong and insiders could find the same. These whistleblowers would at least save the Banks and Financial intuition and minority shareholder stakes. Whistleblowers would keep these managements under vigilance when they don’t care about a wrong decision. Over-leveraged valuations and taking quantum leaps without accessing the risk management within the decision or policy which have been taken is a significant threat and risk for the economy when the mounting loss spills over the economy.  

Cross-border transactions have turned out to be a failure for the corporate. There is endless reason for the same but the biggest of them is lack of risk measurement and lack for another Plan B in case of failure of the earlier strategy. Measured and efficient strategic decision making have not been taken by any of these NCLT cases.

The biggest burden for these failures is that trust and risk-taking ability on the global platform comes under a question mark. Financial institutions might not back the upcoming growth opportunities and diversification of business would come under regulatory approval in the long term. The back of license raj might erupt again.  More than the credit it’s the depth of loss which spills over in the long term decreases the Indian corporate stability in the near term.

Sunday, September 23, 2018


Managing the passive investments is now going to be a nightmare for the global fund managers. Trade war and uncertainty about the global market arising from the same has kept a nightmare for the global fund management.  Pessimism about the global markets in the next 6 months to 12 months has kept the fund managers awake at night.  The long-term investments avenues continue to pour its trillions into the kitty of the investment pots without thinking about where the inflow will be invested. Contrarian investment strategies have now turned into a nightmare.  

 It’s true that accumulation of long-term portfolio happens during the worst time of the markets but when the time itself is going to be prolonged then the risk of investment amplifies at every lower level of the global markets.  According to some market reports the Money market funds were holding $2.84 trillion through July, an increase of 7.1 percent from the same point a year ago, according to the Investment Company Institute. Taxable bond mutual funds had assets of $3.46 trillion, a 12-month rise of 5.7 percent. The global markets are at tough times and hence every fall is an opportunity but that opportunity itself is now turning to be a nightmare since the fall is going to be steep keeping the global macros in mind.

The biggest challenge for the fund managers across the globe is that they cannot hold in cash and they have to deploy after a certain level of cash levels increases to comply with the regulatory aspect. Now falling market has every time new low levels and this investment deploy increases the risk at ever new level created.  Inflows will dry with falling market to match the sentiments but it will not dry down. Further when redemption pressure would amplify when global markets go for a toss then the risk of selling quality stocks and scripts comes into play which further amplifies the problem for the fund managers. Passive investments which are benchmark linked would face stiff tough times as global market outlook looks pretty scared with ongoing global macro factors.  If the broader market goes for wild swing then investing in passive would be a nightmare since ever new low will erode the capital invested at the earlier low.

If we look at the global market we find that the September ‘Global Fund Manager Survey’ had 244 respondents with $742 billion in assets under management. The Bank of America Merrill Lynch (BoAML) fund manager survey, which is published each month, found the percentage of fund managers that expect the global economy to slow down in the next year had jumped from 7% in August to 24% in September. On the other hand, cash balances climbed just one percentage point to 51% between August and September, BoAML said this level was an 18-month high.

Apart from trade war China slowdown, Winding up of QE, Credit Crisis, Brexit has kept the fund managers awake at night since all these events are having a global impact on the different asset class. Any credit downgrade of an economy or company can create a contagion call on the investments.  When cheap money is being pulled back and currency volatility intensifies the risk of credit slippage just a part of the game.

Rebalancing also seems to be a difficult task since for rebalancing one needs another asset class.  Debt market yields are another shock due to a trade war and currency volatility.  The rebalancing stands out to be another herculean task at these turbulent outlooks of the global macro makes every asset class to have a downfall.

Cash is king but in the hands of the investor alone. But doe this means that the periodically auto investments should be called off the answer is left for the global fund managers and not to an economist. Investing in passive is tough a job now as global complicacy intensifies.

Thursday, September 20, 2018


Anup Jalota has become the new session of the Indian stardom where he is at both ends of controversy as well as inspiration for the who are underestimated after the age of 50 or 60. The concept of being treated as old haggard after the age of 50 needs relook now. I have been hearing everywhere that Anup Jalota used to be a father like a figure and how a person like him who used to sing Bhajans can have a life like this and with lots of funny jokes in WhatsApp and Facebook and other social networking places. Well, don't have to find father within Anup Jalota or anyone else, better take care of  your old age father who is kept like an old furniture in your home or neighbors house.

 Thanks to all of them that they have revived and increased the TRP of the programme and also of Anup Jalota. I am a little worried about how the whole of India has been reacting to the same. I find  Anup Jalota passing a lesson to all those who are being taken as old haggard as Gold Mines. The beginning of life has no age. We Indians are always half western and half primitive. The problem is that we are nowhere 100% committed to any lifestyle. Does anyone think about others who are left alone in life after a certain age? If old age home is the place for them then it's better to begin life again.
My 1st point is that after this disclosure will everyone stop listening Anup Jalota Bhajans. Well, how Many of us have real time to listen to Bhajan. Prior to coming in front of Public with this type of lifestyle how many people have thought about Anup Jalota. How many teenagers and new generation people knew about Anup Jalota. Well we know that we have very short memory at the same time we hardly remember these type of people like Anup Jalota. We hear numerous times songs of Arijit, Atif Aslam etc but do we ever remember or respect to these singers who have raised the bar of Bhajan to such an attitude which cannot be touched by anyone.   

Anup Jalota has a personal life of him. Singing is his profession and he masters in singing Bhajan. Hence kindly don’t mingle his personal and professional life.  If you say that both the life have a relationship then please stop casting vote against all those MP’s who are corrupt and have a criminal background.  You cannot have a cake and eat it two.  Every person at whatever age he is has some life of how own. This message is well clear and ice breaking lesson for those who think life is over.  Duties and responsibilities are at their place and once they are over every person is free.  The freedom does not come with age but with a sense of the dynamics of life pattern.

What is troubling the people who are throwing pots and pans to Anup Jalota for his current lifestyle? Do these people have loved that this old veteran famous Bhajan singer was starving to death? Would it have been fine for these people that Anup Jalota was begging on street and all of you are taking selfie with him and sharing his current begging status on FB and whats app?   Do you all want to share his poor begging life story as masala with your morning cup of tea? Well all those who are throwing pots and pans on him need to check in how they have kept their won parents. I have seen in many families that at the 60 or 65 these families keep their parents just a old furniture.  I don’t need to accentuate on these aspects since you all know your neighbors very well.  

You are all surprised and now feeling jealous that life can begin at any point in time. There are ups and downs in life and one has to fight back to get that position in life.

Anup Jalota life is just a part of this new budding generation. Wait by generation I am not marking only the ones who are within the age bracket of 16 to 30. Well, who told these age people that this modern world only belongs to them and only they can have shorts and Bermuda with red shoes and dangling jacket.  This new generation belongs to everyone.  As you have rights to wear and behave and live as per the modern world rules why not a 50 to 65 aged person.

 We easily adapt to western culture not only with a dress but with living style and even replacing marriage with living in relationship. Well, a person aged 50 to 65 can even get into live a relationship. It's his choice and his way of thinking just like the way of thinking you have not got into marriage and just have a relationship. We love western foods, we love western lifestyle, we love western products then why it's being restricted or ignored or not appropriate for a person of 65 years.
In foreign countries or you so-called western life, there is no such age bar of not having any relationship. A relationship is a decision between two appropriate matured people. Where the whole world does come in between them.

I a country like India parents are neglected and the situation becomes more painful when one of the partners passes away and the other one is left at the mercy of God. This so-called young generation does not have time for family and hence they take their parents as a burden.

Well, a relationship has its own importance varying from person to person hence better not to argue on that part with a limited capacity of understating the depth of the subject. I am not able to understand where the people are having a problem with the current status of Anup Jalota. Many pundits of the society who are white-haired would say that this is against the laws of the society and they will drive the society towards the ill path.

Well for them I have few things to ask and I can challenge none of them will have the strength in the balls to say revert on the same. These white-haired pandits of the society – are you all able to stop rape. Does the society of white-haired people have developed the courage of accepting raped girl? Does this society is able to stop child marriage and dowry? Well is these people are able to bring down the brothels where human trafficking live examples are pointed out clearly.

We don’t know about the life background of Anup Jalota except what we read as gossips in print media. We don’t have any rights to criticize the person for his current status. He is a part of the modern world which is half western and half primitive. Yes, primitive we are since there are many things in society which have been developed for the benefit of certain people of the society and not on the large scale.

I remember a story where I went for an event in a school for a financial planning course and I was explaining to them what is the difference between asset and liability. After the programme came to an end one of the class boys came and asked me is my grandfather is a liability or an asset. Do you still think that all aged person between 50 to 65 should pray for death as their own one ’s have forgotten them and have left them at the mercy.

Tuesday, September 18, 2018


I have found that human force always runs on the wheel of the fear factor. The fear of not getting a job, fear of losing job and fear of not getting promoted fear of stability lives within the people which drives them for any professional course.  The point is that education has been linked with pay cheques and long-term sustainable career growth vision either never existed or they are short-lived. Today my article speaks about a few of the observation I had with students who were doing some professional courses.

Executive MBA one of the most demanding courses for a working professional who has corporate experience of around 2 to 5 years and is looking ahead for some course to give more shape to their career. This market has huge demand since most of the early education was not stable due to various factors and after some stability in the job, they look to get into some good education qualification so as to get a pay hike and more stability.

Well pay hike remains the prime focus for joining these courses rather focusing on the actual knowledge-based approach where one will add value to the organization.  I have witnessed in many places students change their preference for selected specialization subject changes as they go through the classes. Doing a work and study balance is significant activity and hence most of them change the subject just to get the degree and not becoming a master in the subject.

The change of subject and specialization is not always for a better degree or knowledge achievement but more driven by where I will get more pay hike remains the key factor.  Linking the salary growth with education simply limits the area of focus. One needs to have a broader vision for education and knowledge since the changing dynamics of the global economy and Indian economy keeps nothing unchanged even for a limited period of time.

An educational degree should be always linked with the long-term vision of one’s life and not influenced by the current state of influential factors. The problem is within the Indian mindset where every education is linked with job and pay scale.  Even in skill development, I find that the key focus is getting a job and let the rest of knowledge gaining come to an end.   Technology is also changing the dynamics of skill development and hence one needs to be with an academic touch over the length of the career.

Career is not for 5 years or 10 years time frame. It spans over a period of 30 to 40 years and hence one needs to understand the dynamics of changes in job life. Doing MBA and getting into a job and securing a position –well all these are myths as on today. Nothing is permanent and hence continuous learning is the only survival lifeboat.

Once a good job or hike in pay scale is achieved the course is forgotten and the studies are winded up. This mindset leads to the slow growth of fear factor within the people that one fine day they will lose a job. The fear of losing a job creates many repulsive activities which are less knowledgeable and more diplomatic in nature.  

I further find that often courses are chosen by one based out of others view and less on one’s own understanding. This is another grey area where I find the change of courses happens when one gets enrolled in one course and finds the subject to be beyond his limits. In many cases, one changes the course since they just want to get the tag of MBA just beside their CV to uplift there pay scale.

Candidates lack vision for their career and this lack of vision leads to more problem where series of job changes comes into play. Courses should be chosen with deep insight about where one finds the position to grow in the next 10 to 15 years. Further doing one course will not be sufficed to live the life. With changing times periodic courses needs to be adopted.

Monday, September 17, 2018


Well I am not much concerned about the Trade war but more about the domino effect on Chinese economy which might become worldwide carnage. The Tariff domino effect is back and this will again create volatility across the Globe and markets will again go for a roller coaster ride. The U.S will put 10% s tariffs on a $200 billion in Chinese goods, which will go up to 25 percent at the end of the year. These new tariff will create massive blow to the global trade and manufacturing and the biggest point to be noticed is that there is no end of the same as per the statement from U.S President as he plans to make the total amount to scale beyond $300 billion.

There will be further tariff in the long term. Currency volatility and China currency devaluation strategies would be coming back. Further I would not be surprised to witness that China comes up with further stimulus to keep its economy afloat. In fact logically it is expected that china soon will come up with relaxation of funding  guidelines so that liquidity is kept alive. Many of friends would argue that china does not have such room keeping the debt to GDP number in mind. Well, I beg to differ with them and I am confident that China will inject liquidity massively.

China has enough ammunition to keep its economy going ahead but the tariff affect on the global economy cannot be ruled out. It’s true that the Chinese economy has 260% Debt to GDP but they will prefer to go further to save their economy from slowdown of manufacturing which will impact their GDP. Lending ropes will be eased by china soon across all verticals so that the supply of liquidity keeps the economy alive. Remember if they don’t go for any liquidity measures then this deficit will impact the Chinese economy in a broader way.

Well as said in the beginning that I am more concerned about the Chinese stock market rather that the stock market china. Any massive fall in the Chinese stock market will be carnage for the Chinese financial system and also for the Asian economy. Chinese companies’ use of their stock as collateral for loans. Chinese financial institutions had nearly $220 billion in such loans at the end of July. The contagion call will massive trigger. China is already looking ahead for buyback of shares to keep the debt market afloat and to save from any carnage.

Till now in 2018 more than 700 Chinese firms, which turns out to be 20 percent of actively traded stocks, has announced plans to spend money on their own shares.  The 24 billion yuan ($3.5 billion) have been deployed. This number will grow more in the coming days due to the ongoing trade war which will impact the profitability of the Chinese company which will lead to fall down in the stock price. Now if stock process goes for a toss then these banks and financial institution loans would be under intense threat.  

Short term loans are the biggest risk as of now which will get more intensified as these new tariffs comes into effect. In China, 22% of listed companies have at least 30 percent of their shares pledged as short-term loans. In the second half, a staggering 1 trillion yuan of share-pledged loans will be due.  Hence its proves that Refinancing activities within the Chinese economy will begin faster to save the economy from any collapse which gets reflected in the stock market. Anyone default within Chinese company would spook a massive fire for the stock market and economic weakness will be exposed.

China will come up with more steps to create the bubble so much that not only Asian economy but the whole global. China is on a massive risky level. Asset bubbles would create major blow the day it's beyond manipulation.

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