Social Reforms

Globally, economies tend to grow faster if there exists a right social fabric that encourages innovation and out of box thinking. During medieval times, churches had strong influence on the western societies and it was taboo to challenge exiting ideas. The Renaissance started in Europe in the fifteenth century and it inspired people to expand the existing knowledge through reasoning and experiments. Consequently, Europe became a leader in the scientific knowledge and it led the development of the entire globe.

                               However, India is still engulfed in religious dogma that has stifled the growth of the Indian society. People still attribute sufferings/diseases to result of their past actions. The believe on Horoscope and Kundli has created a mediocre society that believes that success can be achieved through rituals. Many self proclaimed god-men take advantage of this fear and greed prevalent in society and the result is the emergence of a backward society that is unproductive and ossified. India needs to take a lot of steps to create a society that is based on scientific temper, as envisaged by our first Prime Minister, Pt Jawaharlal Nehru.

Promoting economic growth!

It has been almost 7 years since the world was hit by financial crisis unleashed by the collapsed of  Lehmann brothers. Global growth is still sluggish around 3%. Europe is struggling with its own set of problems causing by huge debt burden in countries like Greece, Italy, Iceland. Chinas economy  has found a new normal and is growing at 6-7% pa. Unemployment is a big issue globally as  low demand environment does not incentivise investments. Automation and use of robots has been taking away low skilled jobs in both developed and developing countries. We have almost plucked all low hanging fruits as far as technological innovation is concerned

The path ahead is not easy and will require joint effort from the international community. We should shun trade protectionism and promote free trade of goods and services. This will provide employment opportunities and the wealth created in the process can lift millions out of poverty.

 Secondly, low cost technological solutions for  problems facing mankind should be developed by collaborative effort of scientist across the world. Example: LED based bulbs have changed the lighting industry. These bulbs are much more effective in term of lumen output and they consume just fraction of power compared to conventional bulbs. Similar GPS enabled mobile phone with an Internet connection has made it extremely easy to move around in a foreign locations. These are just a few examples to show the impact technology can have on economic growth of the world.

2010 budget..!!

Finally,the budget has been presented by the government. It has evoked mixed reactions from various stakeholders. The industry has welcomed the budget as a fine balance between growth and fiscal consolidation. The salaried class has got bonanza of about Rs 30,000 through reduction in income taxes. But,the common man has been hit hard through imposition of taxes on petrol,steel,coal etc. Moreover,the number of services under the ambit of service tax has been increased. The intention of the government to curb fiscal deficit is clearly visible but it could have been done in a better way. The government could have reduced expenditure through reduction in subsidies and improving the delivery mechanism. Time has come to get rid of the practice of issuing oil and fertilizer bonds. The announcement of GST and direct tax code was a welcome feature of the budget.

However, the budget still failed to have a clear vision. With elections 4 years down the line, the government could have been more bold with regard to various reform measures. However, it can be attributed to the compulsions of a democratic set up and the pressure to please everyone. Lets hope,the FM comes with a better one next time..!!

spectre of sovereign default..!

It appears that the financial tsunami unleashed by the sub-prime crisis had not been enough that the world is faced with possibility of sovereign defaults by countries like Greece. The debt burden on Greece is about 125% of its revenue receipts. It has sparked fears of default on its sovereign bonds. It has been well captured by rising credit default swaps on such bonds and has put heavy pressure on the euro which has depreciated against dollar in recent times. Moreover,it has made the global economic environment jittery as a default can be lethal to the fledgling world economy. Earlier ,Iceland had to face similar problems whose entire economy was on the verge of collapse. However, the crash could be avoid on account of assitance from IMF.

Such fears have already increased volatility in European stock markets . The possibility of double dip recession can't be ruled out. It is expected that other European powerhouses like France and Germany would come to the rescue of Greece as any default may shatter investors' faith and the situation might spread like contagion in the EU. We can only hope that the world economy doesn't have to face such tremors as the aftermath will be disastrous for the future of capitalism.

Bihar is back..!

Its official: Bihar is the fastest growing state in India ,clocking a growth rate of 11% in 2008-09. Moreover, the state has been maintaining a growth rate of about 10 % since 2004. The event is closely correlated with change in government at the state. It is a reflection of what good governance and pragmatic leadership can do to the fortunes of a state. There has been drastic improvement in the law and order condition and this government has given strong emphasis on infrastructure development. The govt has spent close to 36000 crores on various projects compared to just 25000 crores during the entire Lalu's regime of 1990-2005. The chief minister has led from the front in attracting investments from different business houses.

The state has also seen a marked increase in new entrepreneurial activities. Many youths have resorted to starting their own ventures and it has given rise to positive dynamism which is driving the state forward in the 21st century. However, the state has still to do a lot of catching up and it will take time before this great state gets to occupy its rightful position in India. The winds of change have begun to blow and and its just a matter of maintaining the momentum through right policy decisions.

inching towards mobile banking..!!

Mobile banking has become a buzzword in many western economies. It envisages an infrastructure based on information technology whereby payments for small ticket items like cinema or plane ticket can be made through one's mobile phone. Moreover, money can be transferred from one person to another across geographies. It will offer sweeping advantages as it will reduce transaction costs and increase the speed of flow of money. Thus , a person in London will be able to send money to his parents in a remote village in India just by the use of mobile technology.

However, there are some demerits which can derail the phenomena of mobile banking. The task of ascertaining the identity of the customer can prove to be difficult and as such the technology can be misused by terrorists for funding of clandestine operations. Secondly, it can instigate fraudulent tendencies with regard to flow of capital in a country like india whose currency is not capital account convertible.

Moreover, the increased velocity of money transfer due to mobile banking can create unlimited amount of credit and thus it may severely hamper the duty of RBI with regard to taming of inflationary expectations by controlling credit.

The unique identity project recently launched by the government can be used along with mobile banking to ensure inclusive growth by ensuring the transfer of credit to the desired target segment through mobile phones and thus getting rid of middlemen.

investment mantras..!

Equities are back and with it comes the thrill and accompanied pressure of producing above average returns. Business pundits have come up with lots of advice about new investment avenues. Most of them are pure common sense and some of them can be easily deciphered if we use little of our grey cells. However, a systematic approach based on pure fundamental analysis can easily produce returns of the the order of 30 to 50 % in 2010. Lets look at some of them.

The solution to the last years's financial crisis has created excess liquidity in the system. Most of them will be absorbed in the commodities. We can already see such signs in the prices of gold and crude oil. Secondly, as the world economy recovers and especially Chinese demand for raw materials to power its throttling growth rate, we can safely assume commodities will easily produce handsome returns in the next year. So , it won't be foolish to invest in steel and other metals.However, gold appears to be overvalued and its time to book profits . The world financial system is not going to break down and thus this rush to gold is pure panic driven without driven by strong fundamentals. Finally, infrastructure stocks like power and real estate will do well for quite sometime. However, we need to be cautious as real estate assets often get caught in vicious cycles of counter productive bubbles which result in irrational pricing . Similarly, all this hype around power sector needs to be closely examined before we land up into another type of dot-com bust.