People with character not for sale

                                     

Many ancient sages have also said what James Allen said in his book ‘As a Man Thinketh’: A man’s mind is like a garden. If we don’t plant anything, something will grow and that will be weeds. This is nature’s law. Our thoughts are causes. You sow a thought, you reap an action. You sow an action, you reap a habit. You sow a habit, you reap a character. You sow a character, you reap a destiny. It all starts with a thought.

The credibility of a person gets communicated more eloquently through his deeds than his words. Therefore character is nothing but consistency in conduct. The essence of a person is his character – it makes you unique, unblemished and strong. Weakness of attitude becomes weakness of character.

Money cannot buy everything. People with character and integrity and the right values are not for sale.

Money will buy:
• Amusement, but not happiness.• A bed, but not sleep.
• A clock, but not more time• Books, but not wisdom.
• Finery, but not beauty.• Companions, but not friends.
• Medicine, but not health.• Food, but not appetite. • A house, but not a home.
• A ring, but not marriage.

Drdd

An undisturbed mind is the key...

Upanishads describes the nature of our senses through the metaphor of horses pulling a chariot. 

It says-
“Know the body as the chariot itself,
 Know the reason is the charioteer,
 And the mind indeed is the reins,
 The horses they say are the senses,
 And their paths are the objects of senses..
It continues..
“He who has not the right understanding and whose mind is never steady is not the ruler of his life, like a bad     driver with wild horses.
 But he who has right understanding and whose mind is ever steady is the ruler of his life, like a good writer   with well-trained horses”

An undisturbed mind is the key...

The western concurrence to this( some of the left wing intellectuals always look for western confirmations)

Emerson said - “ Great men are those who see that thoughts rule the world”

Milton in Paradise lost wrote - “The mind is its own place and in itself can make a heaven of hell or hell of heaven”

Shakespeare wrote - “There is nothing either good or bad except that thinking makes it so”

Clarity emerges where the mind is undisturbed.
These are embedded into our conscience.

It is said -“The voice of conscience is so delicate that it is easy to stifle it but is so clear it is impossible to mistake it”.
Conscience is the endowment that senses our congruence or disparity with correct principles and lifts us towards them- when it is in shape. 

Drdd

History repeats itself, where Rupee Dives - Dollar Thrives

Dr. DD’s speech at the IIFT Conclave, Dubai, UAE, sep 2013..Recalled now: history repeats...
Indian Institute of Foreign Trade (IIFT) that marked its Golden Jubilee this year, recently, for the first time, held a conclave in Dubai’s Dhow Palace Hotel, UAE. Eminent Speakers from diversified industries viz; Banking, Shipping, Steel, Commodity etc. were invited to present their thoughts on the World Trade - Its Challenges and Implications. Dr. Durgadoss chose to Enlighten on the falling Rupee and Increasing TradeGap and the way forward.
“Rupee Dives Trade Gap Thrives – Where do we Go From Here?”
Good Evening Ladies & Gentleman
​At the outset, let me clarify that I do not have the privilege of elongating my greetings session, since I had to honor my time slot of 10 minutes.
​Hence, without burning too many Calories on exchange of pleasantries, let me take you to the topic straight!
​There is a saying – if you speak for 10 hours, you can prepare for just 10 minutes. But if you speak for 10 minutes, you have to prepare 10 days! I confess I have not prepared for ten days, but yet I try to convey and share my thoughts withyou today.
​There is a joke floating in the world of web on Indian Rupee. A bunch of Indian Cricket Fans said that more than the match they like the process of toss – They were asked why? They said that was the only time they see the Indian Rupee (the coin) going up.
​Jokes apart – let us come to reality. The Rupee started at 1 USD = 1 Re in 1947. Now it reached near 70 Rupees per USD recently. The depletion pack was lead by Indian Rupee 20% drop since 2013 Jan, Brazil 15%, Indonesia 12-13%, Philippines 7-8%, Vietnam 10% and so on. The currencies of some countries like South Korea & Taiwan have in fact appreciated against the US Dollar. Are we so bad? Why this bleeding of Indian Rupee in recent days.

Reasons
The USA connection:
In the 1970’s, the Fed Governor of USA said, ‘it is our currency (US Dollar) and your problem’, when he was asked about the newly printed US dollar spreading to other parts of world.
Since 2008, to get over the economic crisis, USA started pumping money by buying bonds every month – today at 85 Billion USD per month. The deficit during the first term of current USA president crossed 1 Trillion USD. The national debt was increased during his first term, more than the previous 43 presidents combined!
Hear out this story from USA. Four Years back One of the rich tourists walks into a tourist island in USA. The whole country was in recession, there was gloomy outlook, the town was deserted. The tourist went to a hotel. He deposited USD 100 note at the counter. He said he will go up to the fourth floor room and see, if he likes it, he will take it. If he does not like, he will go back. He went upstairs.
During this time the hotel manager used the currency of 100 USD for paying the meat supplier. The meat supplier in turn used this 100 USD to pay his dues to energy supplier. The energy supplier in turn used this 100 USD note to pay back his dues to the Hotel, for the rent he owed.
Now hotel owner got back the same 100 USD. Meanwhile, the tourist came back to the cashier and said he did not like the room, got back his 100 USD note and walked out.
Nothing changed – but this 100 USD note discharged the debts of three stakeholders and everyone’s credit limit got restored, got enhanced, as the banks were happy that the debts were settled.
All these stakeholders decided to seek offshore high yielding investments using these new enhanced limits, they bought a beach town in India. The property prices in the beach town of India went up with the demand from dollar backed Americans. Dollar coming to India, rupee got strengthened. The Indian owners who sold the beach town were lured to get cheap USD loan and bought luxury goods from abroad. They used the sale proceeds that they already got, for buying another beach town in India. Rupee strengthened, property prices went up in India, Luxury goods freely imported on new American Loans, Americans bought beach town in India-allround euphoria. When US applied breaks on pumping of new printed notes, interest rates went up in USA. These American owners of beach town sold the property in India, fled India, Dollar going away – Indian Rupee bleeding – the India owner got stuck with foreign loans & new properties they bought at new low market value. Chaos commenced.
This is how business was done in the various so called, “developed nations”.
The nations confused between motion & progresses.
A Rocking Horse moves but does not progress. Nations thought the debt movements were progress, but they were only motions. Net result was a economic chaos. USA had to bail out their economy. They started printing USD Dollars. US Dollar once was linked to gold. But today 1 USD can buy only 0.02 gram gold.
Federal reserve flooded the market with some 2.75 Trillion USD over past five years. USD started looking for higher returns outside. The excess money printed, instead of just creating jobs in USA market, flowed out to emerging markets like India. The US Dollar started flowing into India chasing – stocks, bonds, properties and Indian currencies. Our prices started going up. We were living in the illusory world (The Maya) of rising property prices, strong Rupee and we thought we were growing – but we were only moving not progressing.
Since USA is now showing signs of recovery, their domestic money pumping tap getting closed, the US Dollar already came to emerging markets started a reverse flow. The result – Carnage in the currency market of emerging markets.

Reason 2
Current Account Deficit (CAD)
India ranks third in CAD deficit following USA & UK at about 90 Billion USD, last year
A deficit on the current account (CAD, in short) means that India has to pay out more dollars than it receives from exports. The deficit can be bridged either using the country’s foreign exchange reserves or from foreign capital inflows.
India actually had a surplus on its current account until 2004-05. Since then, the current account deficit (CAD) has increased at a very rapid rate.
CAD is financed by -
✓ Direct FDI
✓ Portfolio Investments
✓ Overseas Corporate Loans
✓ NRI deposits
All these capital flows are not only influenced by opportunities in India but also global environment.
The immediate consequences of this excess dependence on foreign capital inflows are volatility and rapid depreciation of the rupee.
Nearly 25 per cent of foreign capital in India as of March 2013 - is portfolio investment. This is the money that can be withdrawn very quickly when investors perceive better opportunities elsewhere. Can we continue to finance CAD by hot money? Is it sustainable ? We have to think…
So why is the CAD growing so rapidly?
Import Growth: CAGR of 22% since 2004-2005 why? Import duty was reduced since 2003-2004 considerably.
Import Basket​-  Oil
​​​Gold
​​​Commodities
​​​Capital Goods​​        Luxury Goods
​​​Consumer Products​        Gold Jewelry
​​​​​​​         Mobiles
​​​​​​​         Low end manufactured goods from ​​​​​​​         China
How to Arrest CAD?
Earn more dollars than spend. How?
Well, there is no magic – we have to
✓ Increase Exports
✓ Decrease Imports
Till we arrest CAD, Finance it out of long term FDIs not out of hot money
There are other reasons for the Rupee Fall
✓ Increasing Capital goods imports since 2004 – 2005 – From 25 Billion USD to 100 Billion USD Last year
✓ Manufacturing Sector declining in India
✓ Foreign investors losing faith due to Policy Paralysis
✓ We promote charity, not empowerment – “We feed fish for the poor but do not teach them how to fish” – populist schemes cut down our ratings.
Measures
Immediately we have to arrest Volatility even at the Cost of GDP growth. Cutting down imports, increasing FDI/NRI remittances are the short term measures.
In the medium term
Fuel subsidy reforms, monetizing gold, better fiscal discipline, better investment climate creation are on the cards.
In the long term, we should raise our exports, solar Power to be focused, shed Populist schemes & Promote manufacturing.
Where do we go from here?
I prefer to duck any question on the prediction of the rupee. There could be two way movements in the range of Rs.60-70 band.
​These days, interventionary policies deprive us of the precision in our predictive abilities.
The other day my wife – a micro biologist was following the Sep 17-18 Federal Governor Meeting. I asked why on earth she is following this. She said depending upon her prediction on whether FED will withdraw the pumping of dollars into the market, she will decide her gold purchase or taking Rupee draft. She predicted FED will not alter any of their current printing plans.
She was bang on target. I realized the professional predictions gave me harmful Companions viz; Diabetics/Blood pressure. But my uncomplicated harmless companion gave her best prediction and strengthened our harmony.
The moral of the story – If the predictions of the professionals ask you to go “North”, you opt for going “South” – You will be right!
Finally, 
Criticism apart – Is there any hope? Yes, we need to take a call on these…
Greed or Need?
Conviction or Compromise?
Present day happiness or potential sacrifice for future generation?
When something can’t be cured – it has to be endured. Sacrifice is the Key! Momentum leaders will build the waves and ride on it.
They don’t wait for the waves …..

Let me conclude -
​The leaders are to be guided by the hope of a saint -
​In Crucial things, Unity – (Economic Agenda)
​In Important things, Diversity – (Culture & Skill)
​In all things Generosity – (Inclusive growth)
​How do we align Unity / diversity and generosity? I am not taking a fresh guard for the next 10 minutes. I do not want to earn the wrath of my next speaker.
​Well, I reserve this topic for yet another day at yet another forum.
Until Then
Bye ! Bye !

Be a master of your will & a slave of your conscience

“The creation of the world is not an accidental combination of atoms. It is a stage built for the soul to take birth, act and attain its cherished goal of liberation in which it releases its true nature.

Rebirth and Karma are the twin pillars of Indian spiritual thinking.. Everything depends on its cause. The cause happening, the effect happens. Our present life, therefore, is the result of our past life and its actions. Similarly, our actions in this life determine the nature and course of our next life. Man is the architect of his own destiny. It was precisely this that the Buddha meant when he said “atmadipo bhav”. The Law of Karma is based on the concept of justice (good deeds produce good results while bad deeds produce bad results) which is to be enjoyed or suckered by the concerned.

Are we made of glass or steel?
The hammer shatters the glass but forges steel, so are we made of glass or steel?”
Testing times are like a hammer in real life. These testing times challenge our souls. If our soul is like that of glass, it succumbs. If it is like that of steel, these testing times bring out the best in you. The big thing is not what happens to us in life – but what we do when something happens to us. A smooth sea never produces a skillful mariner!

In today’s showbiz, the exterior of the building is decorated with smooth structural glazed glass, but the foundation is made of steel. The building made of steel structure should be rock solid, only then can the aesthetic glass shine and soar like a star piece. The same way you may garnish yourself with nice outer wear and pleasant manners. But your soul should be rock-solid to observe the core values.

The core values are framed by your mind, your soul — your conscience is the custodian of such values. Be a master of your will and a slave of your conscience.

Drdd

Have a big heart not a big head...

To an ego-centric person, the world begins, ends and revolves around him. In the words of Knute Rockne, “Egoism is the anesthetic that deadens the pain of stupidity”.

Let me tell you an interesting story. One day, the owner of a house purchased some kitchen equipment, read all the information in the instruction manual and tried to use it. But he just could not operate it. His servant saw this and asked, “Sir, can I try it?” The owner smirked and said, “But what do you know about this?” Noticing the confident look on her face, he reluctantly gave her the equipment. The owner was shocked to see that she had fixed the equipment with ease and started operating it. In utter disbelief, he asked her, “How did you fix it?’ Her reply took him by surprise, “Sir, I do not know how to read and write and therefore I did not confuse myself”. Many times we tend to think that it is only we who know everything. It is ego that induces these thoughts in our mind and often these thoughts get disproved by ordinary people in the most unexpected quarters.


Have a big heart not a big head. God bless


Drdd

Skill India: Align skill needs & availability.

The Make in India is not a magic lamp. To be successful it will take lot of ground level changes. It will give result only in medium term. We need structural changes on the ground on the following lines:

- We have to be competitive for export penetration. It could be cost advantage or innovation advantage. But currently we have neither of them.

- For getting there we need Skill India, Digital India, Innovation India and Startup India. All these are inter linked and all of these have to take off.

- Instead of competing on export basket first, we are concentrating on import substitution with Make in India program . Defense buying from Make in India is focused upon first.

- As far as skills, there is a huge job on hand.The research agencies just say that young demographics of India will lift India. It is an over simplistic statement. We need a SWOT ( Strengths- Weaknesses- Opportunities & Threats) analysis for each village, that has to culminate into a district level SWOT. Every district collector has to operate as a CEO of the district. They have to report to the CEO like pm of the country.

We need to have thematic clusters clearly defined. Some for agriculture, agro based industries, light engineering, heavy engineering, chemicals, textiles, mining, spritual tourism, cultural tourism and so on...

At ninth std level at school, we have to give option to students

- do they want to be localised, then develop their skills to align with that district theme

- if they want to be in same state but willing to go other state, then develop their skills for the themes of other clusters

- if they want to go abroad, then develop their skills to the requirements of the global regions.

In short we need to have skill requirement forecast that has to get aligned to skill supply. Otherwise “too many engineers but no takers” situation arises.

We have a long way to go. But for doing these we need to see eye to eye at every level and operate with the single goal of reaching G3 status in next ten years.

One political party has to aim at winning max states, and laying down a national foot print. Each five year they have to come back overcoming the noises of several vested interests. If the states do not converge with the pattern of the centre, then national alignment may only be a distant dream. If multiple parties run the states, atleast we should have a common minimum goal as a base foundation.

We should converge every one towards one theme - “to reach G3 status in ten years”. We have to define it as the basic minimum programme against which the political parties have to evolve their election manifestos. The goal of reaching G3 status in ten years should be the single point agenda on which there should be a national convergence. Every one should wear this vision on their sleeves. Rest of the issues should revolve around that vision.

DrDD.

All that glitters are US dollars?

USA's growth impressive these days...

-There are a lot of criticisms on the kind of growth that comes out of USA today.. by increasing fiscal deficit heavily and offering too much tax concessions, momentary growth is shown. It is not a sustainable model with continued deficits in long run, according to many experts view. Note that the cumulative deficit under last President of USA was higher than the collective deficit of his 30 predecessors (Presidents) (1 trillion USD per year). He had to do that to bail out the economy from sub- prime disasters with an understanding that the deficits will be unwound in future. 

The future, which is the current one is of-course only adding further deficits.

- While in short term - GDP growth, consumption, employment numbers may be rosy in USA now, all these are coming from borrowings. If you leverage beyond your capacity to repay, you have taken more than what you can chew. Already debt to GDP ratio has crossed 100%. in USA. A leader looks at his next term. But a statesman is seeing the generations to follow.

-We need more statesman today. He should have the political guts to say that when something can not be cured, it has to be endured and sacrifice is the key.

-We should not make the future generation to pay their present debt, past debt and so on. A father need not pass on a legacy of assets to his children, but he should never pass on his debts to his children.

-Even USA has heavy trade deficits with China & EU inspite of the new additional tariff restrictions. Also against a GDP of 16 trillion, the permissible 2% level current account deficit is much higher than what we have on a 2.5 trillion USD GDP.

-USA dollar strength (strength is sometimes triggering a new weakness) is curbing export competitiveness and increasing import penetration due to other currencies becoming cheaper.

- Dollar strength is not due to any extra ordinary brilliance. The dollar is the only accepted universal currency and many countries place their money in dollars. China is still navigating in shallow waters, afraid to internationalise their currency since it may affect their trade competitiveness with limitations imposed on their currency manipulative capability. 

-For next decade no other country currency can aim at nearing the strength of US dollars. That gives them ample cushion to have more dollar preference from all countries. Even oil is priced in dollar not in other currencies. Many middle east currencies are pegged to the USA dollar.

People should not confuse dollar strength denotes country strength.

- having said these, USA attracts best talents and best innovations come from there. That is because it is a land of immigrants with best brains and the meritocracy is rewarded unhesitatingly. But India is a land of people from organic roots and it needs to reward meritocracy with an equal focus on social justice. We can not get away from this. People who feel that merit is not recognised well in India are going abroad to the land that rewards meritocracy. But they should create mega companies like google etc in India and pass on their loyalty to their country of origin by making "Make in India" successful. We need atleast one new business model in emerging fields in India that creates disruptive innovation and become a global company on the likes of google etc.

The bottom line - "All that glitters are not gold, all those that are not bright are not bad, as the lotus blossoms even on the mud."

- Now, we need governance to be carried out by people who are not afraid of taking bold decisions and those who have the conviction to implement. Who is there to give such governance - take your call after an unbiased introspection.

God bless India. Drdd

Rupee fall: Where do we go from here?

At the outset, let us be clear on this - whosoever comes to government, they should not criticize the other on oil and rupee price behaviour. That is wrong as several structural factors play role on these issues.

Short term remedies can only postpone the problem. We need to understand that offering Forex swap by RBI against the Forex from FCNR(B) deposits like last time, NRE bonds, NRNR deposit at higher rates, high NRE interest are all short term solutions. We postpone the problem to future or we encourage NREs to borrow abroad and make advance remittances to avail high interest rates (arbitrage). But the fact is India needs to enhance its Forex earnings. Making it only from software is not sustainable in the long run.

What do we do in long run?

- Raise the export sector, manufacturing sector, agri sector to a 25% level with service also at 25% level. Today 80% population giving 20% GDP and vice versa. Service led growth can not make our GDP double in five years. If we have to grow to a 5 trillion USD economy, we need to double in five years. Domestic demand driven model alone is not enough. It has to be export, manufacture, services and agri. Just saying we grow at 8% continuously will not do. We can not sustain that level of growth on as is where is basis. We need structural corrections.

- Export cannot be increased just like that. We need to make us competitive, innovative. That also needs radical changes in outlook, skill mapping, discipline , digitalisation, disruptive innovation, start up cultures and so on.

- We should think out of box for enhancing manufacture role (it is just a thought thrown away) say— made in India tag is not a very rosy one. In that case can we ride on the shoulders of Japan? They have an aging population. We have a sizable working population. We can synergise our strengths. We can do manufacture outsourcing for them in medium term. But we need a national consensus on allying with them and a disciplined work ethics. Organically improving our manufacturing sector to double our manufacturing share in GDP is a difficult process- it may never happen with our current work ethics. On manufacture I faced the problems of labour productivity and lost heavily as a manufacturing entrepreneur in India in the nineties. I have a first hand experience on facing this.

·  Such partnering nations can be aimed at for manufacturing (with japan) bringing disruptive innovation in emerging areas (with USA & Israel )

- On oil we may need to understand when something can not be cured, it has to be endured. We need to have penalty for using more oil and both punitive (high price) & incentive measures to move us away from oil. We have fixed targets on using solar energy, electric cars and so on.

We should also utilise some of our uncommitted Forex reserves to acquire offshore shale oil fields and develop strategic reserves in non-tsunami ports.

The bottom line-

I only try to emit positive rays around me. I encourage youngsters to be positive but at the same time understand the big tasks on hand.. just being too noisy by crying rupee is depreciating and oil prices going up is not enough.

In my life time I want India to become a G3 nation. USA, China and then India. That means we have to topple UK (this year we will do), then Germany and then Japan. This means we double our GDP to 5 trillion level. I am optimistic we can do it in my life time. But I also know to achieve that, we need to have excellent discipline, high work ethics, less noises and more focus and finally number of structural changes along with a conviction to implement.

“In crucial things, unity. In important things, diversity. In ALL things, generosity.”

God bless India. -Drdd

Is sinless wealth an optic illusion? _ Are all parties clean in collecting donations?

“Democracy is a costly affair to developing nations”- once a former Malaysian PM said. In our country with plethora parties and the voters being bought over by tactical means, you can not vouch for donation free environment. 

What can be ideal for us till we reach at least G3 status? - 

1.A bennovalent dictator who spends 24/7 for the nation operating as CEO of the nation- regional CEOs having similar characteristics for each state- all districts to be headed by top class IAS or professionals who have "nation first" in their mind as district CEOs- the district CEOs to have SWOT (strengths, weakness , opportunities and threats) for each village evolved with people participation- develop each district as a thematic district revolving around the strength of the district-the skill development to start from age 10 with options to kids (those who want to be around the skill of the district or around the skill of the neighbour district or around  overseas country skills)- the academic/ industry/ govt alignment on skill development-

2. The people representative at village level/ district level, state level and national level to operate  only as a jury assessing the performance of these CEOs and serving as the conscience of the nation-

3. Media to be assigned sector specific roles focussing on only sectoral inputs and research avoiding media competition and trial and unwanted TRP  rating wars-

4.All cases to be decided by only one sitting at one level with no appeal and disputes to be resolved in one week-   If such a thing happens and the people efforts are unified towards one mission of reaching G3 status in ten years. ....

5.  Then you can have Rama Rajya.. you can then talk of no political donation and  two party system operating within the government allocated  state election budget for selecting one of two national CEOs-  ---

5.  Till such dream happens election funding will continue to happen. There are many forms- collecting informal donations, kickbacks on favours in overseas markets, collection and whitening of funds in the name of leader birthday celeberations... so many intellectuals lending their brain for conceiving such schemes--

6. All these will continue to happen and no party can claim to work with all sinless wealth- Sineless wealth is an optic illusion!

7. But within the exisiting ones, who is less tainted one seems to be the only factor we are reckoning  I suppose -

Currently we are all trying to visualise a value led society in our life time- is that a mirage or possibility... time alone can answer.

Are we ready for G3 status?

Dear friends,

We criticise either way- for or against our present government. Can we deliberate on these brainstorming ideas and float it as our group suggestions to the concerned ministry? We as a group can present it by fixing appointment with relevant minister as Fb group suggestions. Before that, we deliberate it!

May be you are tired of only criticizing or favouring already appeared articles.  Here are some brain storming virgin ideas for deliberations-

1. Why don’t we take away MGNREGA outlay from government budget by offloading it as regional branding rights to brand advertisers. Say 5 year right for MGNREGA west region can be branded by say TATA  called as “TATA MGNREGA west". Then TATA have to foot that bill. Against this they have branding rights for 5 years. The outlay goes out of government budget. Government only overseas the distribution. The rights can be priced. Currently corporate branding money and CSR budgets go for some private pockets or it can be a new branding opportunity. The government saves the MGNREGA outlay and also gets revenue for selling rights like spectrum auction.

2. Why don’t we auction the branding rights of railway platforms. Today they are called platform 1,2 etc. Collect this fee based income and use this revenue for bettering the service. Even new metro stations to be branded and such rights to get more money for government.

3. Boldly withdraw 50 billion USD from forex reserves, currently above 400 billion USD (economists have inflation arguements against such move. But use them to foot your imports to check inflation) use it for cleaning public sector balance sheets including banks at one stroke and for infrastructure. Also denationalise most of the government undertakings against disinvestment proceeds. The best government is the one that is least governed with its own assets. The government should be a nodal agency.

4. Activate all internal domestic software industry - all property docs to go digital, all libraries to go digital and create domestic mega size digital product companies, create data bases of all sectors. Huge job opportunity will arise domestically. Fund it from withdrawn forex reserves. Only China did in the past.

5. Create village level SWOTs with district collectors and create thematic districts revolving against their strengths. Align skill generation to district SWOT and enable students from  the age of ten to decide in taking up district skill driven or neighbour district driven or oversea skill driven jobs. Make academic -industry and government alignment mandatory.

6. Atleast as a token of rewarding honesty put minimum Rs.15k into the accounts of individual assesses who paid taxes consistently over last five years in the threshold of 3-10 lakhs.

7 . Let banks constantly do stress tests on business models and go by merits of business models than past cooked up payment history or accounting history. Every business model has some shades of grey today. (I refused to sign any balance sheet as soon as I came out of my CA) We need to put them to stress tests periodically and the risk radars of banks to be very active. The horse should drive the cart than the other way round. The business model should drive the businesses than the accounting models. The best brains should refuse to find holes to circumvent rules. Value based champions should be awarded padmashrees etc apart from experts in different field. There are many unsung heros who are great ethical heros living amongst us today. They are to be showcased.

8. 80% of GDP services coming from 20% population, while 20% GDP comes from 80% of population in India. This anomaly has to be changed so that jobs can occupy all sections. Industry to be elevated to contribute 25% of GDP to begin with. Make in India can not become successful unless we make India better investment destination than ASIAN countries. Allow zero tax for ferex cos for five years if they create minimum local  jobs. We have to offer red carpet to those business which have high labor content and high export content.

Much more can come as out of box thoughts based on members interests. Many of these were directly posted in PM’s website. More out of box thoughts may be brought in by you all. Let us build the nation by positivity than by fighting amongst us which only wastes our energy. On nationally important things- practice unity, on social sector specefic issues- have diversity and against all things practice dignity. Let us see our country reaching G3 status in our life time!!

What is G3?

We are now in group of nations GDP wise called G10. We are in sl no. G7. This year end we are likely to reach G5 crossing UK.

-With  GDP 16 trillion plus USA at no.1

-With About 9 trillion China no.2

-With about 3.5/4  trillion Japan G3

-Then Germany G4.

India likely to reach G5 replacing UK and France.

-With GDP growing at 7% pa plus on a continuous basis India can reach G 3 status.

-Crossing China and USA is not expected in my life time. I leave it for now.

-The question is can we sustain growth of 7% pa with reforms, digitalisation etc. That is a question that brings in the political debate.

Noises on PNB scam: My take.

Even in year 2005, many approached outside India scouting for bank finance in overseas markets against bank guarantees from India. I used to be surprised even for many projects in India they used to come out seeking overseas loans. They used to argue that risks are evaluated by banks issuing guarantees and overseas banks need not worry about the risks.

This kind of financing is not new. But the question is such Lou's and guarantees clubbed under non funded limits must have escaped proper scrutiny.

Once the blame game starts every one including RBI oversight mechanism is also not out of criticisms. Then can we blame former governor for this?

Please note the thief is an artist while police is only a critic. Newer ways will always be found. Now this way has thrown up. Even so many foreign banks issue such letters and people try out borrowings against such letters.

The risk radars of the banks, their systems and reviews need constant scrutiny and updation. The governance has to be value driven from the top. There are banks like Hdfc bank which has the lowest NPAs against  a big ticket size portfolio of advances.

We start blaming government immediately these days. Because we want instant solution from Narendra Modi for everything. They say Bhaktas will come for rescue. In the recorded history we see many corporate disasters- many due to ethical failures- be it India or USA. How many times government was charged. Even the global disasters were blamed due to the system failures and failure of oversight mechanism. The board of PNB to take the responsibility, publish what went wrong and fraudulent persons to be charged and brought to books. The media trials and half backed analysis without facts should stop. We have to find ways to catch the guys running away after bank default. These running away has been happening for so many years now. I know many NPA's of UAE banks caused by many expatriate businessmen running away. This risk is there bothering the bankers. I know countries issuing passports for an investment of 100k US dollars. If this can not be avoided bankers may go for 100% security for lending. That will be difficult for businessmen.

Out of box thinking for NPA funding of bankers.

At the outset, it is relevant to mention that this blog avoids statistical details, as the intention is to keep it simple for common man. There is no point in engaging statistical wars by either side of the political parties. In short, we do not want to be bogged down in too many numbers and move away from a statistician’s paradise. 

Background of Legacy:

The high growth rates of GDP of past ten years of UPA government has ended up in a huge legacy of NPA of banks passed on to NDA government. People claim of huge GDP growth rates have to always factor NPA effect on GDP created. Not only the fact that the GDP growth of UPA was cash driven, speculative jobless growth rate, but it also led to mind boggling risks and the consequent NPA menace. It is like selling by a corporate showing a huge growth rate in one year, but all their sales later ended up in bad debts.

Remedial measures:

-People talk about “bail in” and “bail out” strategies. ‘Bail in’ involves hair cut for deposit holders of the bank. ‘Bail in’ is ruled out as hard earned money of depositors cannot be subjected to the mad risks of the policy makers. Under current regulations, only RS one lakh  is the amount depositor gets if any bank fails. 

-“ bail out “ involves deployment of tax payer money for the mad growth ended in bad debt pile up. Even this is a strain on tax payer. For no fault of them they had to bear the problems caused by few defaulters.

Then what is the way forward?

Way forward:

- Typically the regulators ask for dividing these bad debts into

   - those caused by strategic failures

   - those caused by sector failures

   - those caused by system failures

   - those caused by ethical failures

and so on. 

The sector failure units need to be kept in ICU with the carrot of special facilities, while the ethical failure units need to be shown the stick for recovery. 

This is the typical regulator’s copy book recommendation. 

But will it be enough?

- even if the stick is taken against bad units how much recovery is possible? Some hair cuts are imminent. Who will bear that?

Way forward:

- we need a definite one time fund for bail out

- the debt monitoring has to be vigilant in future by all stakeholders (the  monitoring system to be revisited by regulators). Any single default of a unit should trigger a default alarm for the whole group funding and the radars of monitoring should not be lazy in exhibiting the detective signals. Also, the monitoring bodies should pick up the signals quickly and act as an agile watch dog and not as a pet dog wagging tails.

- the banks with low NPAs should be recognized, recorded, and rewarded with best bank award   They should be given special incentives for their branch expansion needs , preferential repo rates and such other incentives while the high NPA banks should be demoted in status. 

- the GDP growth of a period say five years has to be corroborated with NPA of that time horizon and the review  mechanism should change accordingly. No point in showing a huge GDP growth by one government and walk away with laurels, while the new government takes over the legacy of NPAs. The people should ask for a score card on both fronts of GDP growth and NPA score.

Are there any avenues other than tax payer money?

Out of box thoughts

These are brain storming thoughts which are just thrown at. They are subject to debates, deliberations before adoption. They are not copy book ideas of text books. They can be shot at first sight by puritans, but we feel throwing up such ideas is a continuing necessity, given the huge backlog of the bad debts we face through the banks. 

What are they?

The bail out funds can come from the new sources as below-

 - As far as sector failure driven genuine bad debts, the banks may look at conversion of such corporate’s entire debt as a zero coupon bonds of 7/14 years. This will enable the continuation of the debt without interest servicing for the affected units. With zero interest the unit may come into profit zone quickly and such profit can be used for pay back of such zero coupon bonds

The banks may be allowed to get refinance of these bonds from a newly constituted recovery fund institution. The recovery fund institution can be funded by drawl from foreign exchange reserves held by government (say 1 billion dollar out of 400 billion dollars).

The money declared bad today becomes good with sectoral changes over a long 7/14 year span. The long period of such funding can come from forex reserves held by the government. This can be used to fund today’s bad debt, which can turn into good tomorrow for sure. 

- As far as those which are bad for sure, what are the ways to finance other than tax payer’s money? Can we think of some such possibilities? Some of them are tossed up below:

- Allow a new stream of earnings for bankers which will fund such bail out requirements. What is it? If a bail out funds full or part of say “x bank” can given by a brand owner for a consideration against permitting such brand owner to co-brand the deposit schemes. Say the fd scheme of the bank can be called “x bank Reliance fixed deposit” or even a branch branding - “ x bank Tata Anderi branch” 

The co-branding rights say for five years can be a consideration for the bail out funds offered by the brand owner. The mutual valuation of such co-branding rights have to be arrived at by both either on one to one or at an auction. Anyway, the brand owners spend a huge sum for brand building. Or the CSR budgets of healthy corporates can use this opportunity of combining CSR (bail out as a cause) and branding benefits.

- An additional portion of disinvestment of government holdings can be earmarked for one time bail outs. 

- A portion of natural resource sale say spectrum/ coal mine or such other auctions can be reserved for one time bail outs. 

- Think of new fee based income that can accrue from sale of any new naming right/ branding right and use those proceeds for funding one tome options. (this new fee based income can be from any government depts including railways (for example naming a train by a brand etc..) Even the capture of black money sitting in overseas areas can be used. 

To sum up-One time bail out is imminent. Funding them from innovative methods can relieve tax payer’s burden. Further, the tightening up of system to reduce the  recurring NPA menace is also equally vital.