An aam aadmi's lament.

I am a Mango People, not a son or daughter or son in law
Don't have any protection or pension or healthcare, never had any rights
Taxed on everything that I may need to somehow just survive
As I look up from my burdens I see an Embraer and AW101 in their flights.

I am a Mango People, a species found only in India
Required every five years from meaningless symbols to select
A hand, a cycle, a lantern who cares what they stand for
Murderers, bandits, rapists are among those I am forced to elect.

I am a Mango People, when it costs crores  for the tiniest shed
How can I afford proof of address that they ask for all the time
Mug shots, prints of all ten fingers and retinal scan they demand
If only they would tell me what I am guilty of, just to be born seems to be my crime.

I am a Mango People, they promised wealth and economic growth
Trade and Fiscal and Current Account deficits are the ones that are growing
CPI at over 10% invites downgrade to junk credit rating
To enjoy spending tens of crores to Davos they are going.

I am a Mango People, it is for my protection they say
Hundreds of billions of dollars on defence they do spend
When China is damming the Brahmaputra and Pakistan our soldiers behead
On " bended knees " they go our enemies to befriend.

Will today's budget make any difference? It will try to entice people into shares, make it difficult to buy gold and protect black money in properties. Same old, same old.

A hocus-pocus budget.

India is the only country in the world with a separate budget for its railways and yesterday it was presented for us to admire by the Railway Minister, apparently the first from Congress in 17 years. So obviously it was full of hocus-pocus to confuse the public. We are told that passenger fares have not been increased. Not true. Fares have been increased twice already before the budget. The Congress being expert at increasing taxes on every aspect of life the same expertise has been applied to train fares. This time they are called charges. So Reservation Fee has been increased from Rs 35 to Rs 60 in AC First Class and from Rs 25 to Rs 50 in AC Second Class. Likewise Reservation Charges for AC Chair Car, AC 3-Tier and AC 3- Economy have been increased from Rs 25 to Rs 40. This is in accordance with Congress philosophy which is that ordinary people in India are no better than animals and do not aspire to travel in comfort. They will be deeply grateful to be able to travel in overcrowded, non-AC coaches, unable to lie down, boiling in summer and with stinking, filthy, fly ridden toilets. Hence these have been rightly called " Cattle Class ". Cancellation charges of all classes have been increased from between Rs 5 and 50. Trains are always full because we Indians cannot afford air travel so to make sure we book our tickets 3-4 months in advance. This often necessitates cancellation of tickets because of medical or other emergencies. So, we end up paying for cancelling our tickets and the Railways then sells these seats to new customers with Reservation Charges. That is double taxation. Supplementary Charges on superfast trains trains, which would mean Rajdhanis and Shatabdis, have been raised from between Rs 5 and 25. This is only possible because under this Congress government taxes on air travel have been raised so high that ticket prices have more than doubled and so called low cost fares are now as high as normal fares. Secondly, Kingfisher was forced out of business to force Vijay Mallya to sell majority stake in United Breweries, which controls 50% of the drinks market in India, to Diageo while the highly corrupt Air India, with debts of over Rs 500 billion, is being kept alive with taxpayer money. Finally, Tatkal charges on all AC coaches have been raised from between Rs 15 to 100. This is a highly corrupt business practice wherein a large number of seats in any train is withheld from sale till 48 hours before departure, apparently to help people who have to travel urgently. These tickets are highly priced and you do not get any refund in case of cancellation. This is a blatant case of black-marketing and price gouging by a monopoly service. Freight charges have been increased by 5.8% because of increased price of diesel. This will naturally add to inflation especially on food. You have to admire the Congress.

The market is rigged.

Around noon time yesterday shares in mid-cap and small-cap stocks suddenly plunged, some by as much as 62% in value. At first the selling was limited to 10-12 stocks but soon spread to all other companies in these sectors. Apparently the promoters of many of these companies have borrowed money against their shares from banks or other financial institutions. When a promoter of a company is already heavily into debt so that no financial institution is willing to lend to him he may pledge his shares to raise capital. Usually a bank will lend between 25 and 50% of the market value of the shares pledged with it. To limit its risk the bank will maintain its total lending to the agreed percentage of the shares pledged. Which means that if a bank has agreed to lend 30% of the value of the shares pledged it will always try to maintain that ratio. So, if a bank has lent Rs 300 against shares valued at Rs 1000 and the price falls to Rs 800 the bank will reduce its lending to Rs 240 to keep its exposure at 30% of market value. The bank does it in 2 ways - either by asking the promoter to pay back Rs 60 in cash or by selling shares if the promoter is unable to pay. This is called margin-call. The trouble is that if a bank sells a large number of shares the value is depressed further, forcing the bank to sell even more. Seems that a rumor went round yesterday that margin-calls had been triggered in many of these companies which led to the sell off. The Securities Exchange Board of India is investigating to see if a rogue trader placed large orders to sell certain shares to bring down their prices and trigger margin-calls. This is a common practice in all share markets where someone may sell a large number of shares that he does not possess to bring down the price of those shares and then buy them back at a lower price to make profits. This is called short selling. Trouble is that SEBI always probes a fall in value of shares but not when values keep rising for no reason.  After all, manipulation in the value of shares can occur in both directions. In August 2012 some companies lost 20-26% of their value and SEBI banned 19 entities from trading. So, why does the government want to trap ordinary people into such a manipulated market? The government has announced the Rajiv Gandhi Equity Savings Scheme in which a first time investor with annual income of less than Rs 1 million will get tax relief of 50% of investment up to Rs 50,000. Asset Management Companies are paying commissions up to 6% to Mutual Fund distributors to sign up customers. " The commissions paid by some fund houses are indeed very high. It is a mad rat race," said Nilesh Sathe, Chairman of LIC Nomura AMC. HT, 20 February. The share market is a gamble and there is a risk that people will get hooked and risk all their money in it. With disastrous results. We could see a lot of suicides in future. 

The worst of both worlds.

In 2007 Michael Moore filmed a documentary, Sicko in which he showed how rescuers who volunteered after 9/11 were refused treatment in the US for physical and psychological problems unless they were able to pay. He took some of them to Havana in Cuba where they were treated free in the elite Hermanos Ameijeiros Hospital and were able to purchase inexpensive medicines. Although poor Cuba provides cheap but very high quality education and medical care to all its citizens. Indeed, when President Fidel Castro had bleeding in his intestines in 2006 he was treated in Cuba and was recently seen voting in elections. President Hugo Chavez of Venezuela has had 4 operations in Havana for a cancer in his pelvis since last year and is now receiving follow up therapy in Caracas. China is a communist country like Cuba but has adopted an aggressive form of capitalism where the government has gone for a very high growth in the economy, with huge spending on infrastructure, but without spending anything on social services. Hundreds of millions found jobs in factories as China became the manufacturing center of the world and is today the second largest economy in the world. In India we have a combination of socialism, where the government spends vast sums of borrowed money on bogus social schemes to win elections, and crony capitalism, where friends and relatives are given licenses to exploit our enormous mineral wealth while we continue buy expensive coal for power plants. A party leader is designated as VVIP and flies off to the US for medical advice in a special luxury plane with son in law and grandchildren while advocating reservation in institutions of higher learning. In 2004 the government had 42 ministries with 3.22 million employees costing Rs 310 billion. Today it has 53 ministries with 3.41 million employees costing Rs 1.15 trillion every year. A reduction of 5% in the number of employees will save Rs 60 billion and a reduction of 10% will save Rs 120 billion every year, which is 6% of total income tax revenue. A mid-level officer cots Rs 200,000 every month in salary, phone, car and fuel bill, subsidized accommodation and medical benefits. The costs have sky rocketed after the Congress awarded 80% salary increases in 2008 to win the general elections in 2009. " What were earlier divisions in a ministry ( headed by a joint secretary ) are now full-fledged departments ( with a secretary and several joint secretaries )," said a former Expenditure Secretary. ET, 19 February.While the government has set up regulators for various sectors there has been no reduction in the size of the ministry concerned. The Security and Exchange Board of India was set up in the 1990s but the Finance Ministry still has a Capital Markets Division with 19 officers. And so it goes. Parasites multiplying on our blood.

It's not about Intelligence but about Patriotism.

Following the twin bomb attacks in Hyderabad on 21 February our most revered Home Minister rushed out to assure us that they had received Intelligence that terrorists were planning attacks but nothing specific, hence the bombings could not be prevented and lives saved. We thought that it was the responsibility of police and Intelligence services to work round the clock to apprehend the criminals before they had a chance to kill. This is the same Home Minister who thinks that all Hindus are terrorists and, while body parts were being collected for funerals, the Congress was insisting that he had merely expressed regret for his remark but definitely had not apologised. Of course. Anyone can make a mistake but it takes character to apologise. We also remember that the Congress Loudmouth still insists that Hindu terrorists killed Hemant Karkare, Chief of Mumbai Anti-Terrorist Squad on 26 November, 2008. The Intelligence Bureau issued 3 terror alerts on 16, 19 and 20 February especially cautioning cities which have been hit previously and mentioned the Indian Mujahiddeen in one alert. HT, 23 February. Hyderabad has been attacked twice in 2002 and 2007 and the alert was discussed at a fortnightly meeting of the Multi Agency Centre at Hyderabad and was attended by senior officers of Andhra Pradesh Police. A senior MHA official said," This should have rung a bell, especially since the police knew that parts of the city had been surveyed by the IM." But the Police Commissioner, Anurag Sharma said smugly," We received an alert which stated that there could be possible terrorist strike in cities like Mumbai, Hyderabad, Bangalore, Hubli. There was no actionable intelligence available, specifically for Hyderabad." Police are controlled by state governments who have consistently blocked a National Counter Terrorism Centre which would gather intelligence and carry out counter strikes. They say that it will reduce their power. An MHA official said," Intelligence is about joining the dots. After Kashmir, Hyderabad was the only city which saw protests after Afzal's hanging. Security should have been stepped up, especially since the same area ( Dilsukhnagar ) has been targeted in the past." Indian politicians welcome terrorist attacks because it gives them an excuse for a police state which forces law abiding citizens to avail of biometric cards, to provide address proof for every service while they swank around as VIPs protected by a posse of policemen and allow Pakistanis free entry into India. While our Home Minister was helpless because of lack of " specific intelligence ", 9 men were being sentenced to prison terms from 8 to 16 years in Britain for planning terrorist attacks. British police had been following them and collecting evidence for a long time. It is not about intelligence. It is about patriotism. Sadly, Mir Jafar still lives.

If UK is down, are we next?

Yesterday Moody's downgraded Britain's credit rating to Aa1 from AAA because of its huge debt and poor growth prospects. The same problems apply to us, only in our case we will go down from BBB+ to junk grade. India's Trade Deficit was $20 billion for the month of January, which is the second highest after October 2012 when it was $21 billion. " India's widening trade deficit is credit negative....These rising deficits are financed by increased foreign-currency borrowing, raising India's vulnerability to to international financial volatility," warned Moody's. ET, 18 February. The British Sterling is a traded currency but we are depending on borrowed money, which is money invested by foreign investors in shares and bonds, to buy foreign goods, especially oil and gold. The fear is that this money can disappear overnight which is why the Sensex plunged by 300 points and the rupee by 45 paise couple of days ago when the US Federal Reserve indicated that it would start cutting its easy monetary policy, also called Quantitative Easing. In his State of the Union address Obama mentioned his resolve to negotiate a free trade agreement with Europe which we have failed to do for years. This will create a huge free market between NAFTA, which comprises the US, Canada and Mexico, on the one hand and the 27 member Eurozone on the other and is clearly an attempt to bypass Asian economies like China and India. What this will do to our trade and growth is a chilling thought. Our Trade Deficit averaged $13.5 billion per month in 2011 and  $16 billion in 2012. Our foreign currency debt is $365 billion while our foreign currency reserve is $295 billion. Moody's blamed 3 factors for India's problems - 1. Slow global growth hitting our exports, 2. Rising prices of oil and gold and 3. Loose fiscal policy which stimulates local demand and increases imports. There is nothing the government can do about growth in other countries and commodity prices. Indeed if global growth increases price of oil could rise further, although gold could fall a little. The government is culpable for its irresponsible spending on social programs to win elections, leading to fiscal deficit and inflation. " Wider trade deficit can also weaken the currency, raising domestic prices of imported commodities, further fueling India's already high inflation rate," said Atsi Sheth, Vice President Moody's Investor Services. The Prime Minister of Japan, Shinzo Abe is visiting the US to see if Japan could import cheaper shale gas from the US to reduce its deficit. Japan had a deficit of $17.4 billion in January and a total of $78.24 billion in 2012. Japan is worried about its deficit with foreign exchange reserves of $1.268 trillion while we are buying 12 luxury helicopters for Rs 37 billion for our VVIPs. If we are reduced to junk status it will be because our politicians are junk, led by the World Famous Economist.

A looming danger to the world.

The American computer security company Mandiant has tracked a group of hackers called the " Comment Crew " or the " Shanghai Group " to a nondescript building on the outskirts of Shanghai in China. In this 12- storey office tower in a rundown neighborhood off Datong Road, surrounded by restaurants, massage parlors and a wine importer, is the headquarters of Unit 61389 of the People's Liberation Army which is China's growing army of cyber warriors. New York Times, 19 February. One hacker is called " Ugly Gorilla " and another is called " DOTA " who used the same IP address which was linked back to Unit 61389. This is the unit which was responsible for the attack on the New York Times after it revealed that Prime Minister Wen Jia Bao's family had accumulated $2.7 billion during his term in office. Recently Facebook reported that it was a victim of an attack by the same group but that no data had been compromised. This group was responsible for attacking at least 100 clients of Mandiant and stole technology blueprints, manufacturing processes, clinical trial results, pricing documents, negotiation strategies and other proprietary information. On average the group stayed in a company network for 1 year stealing data and passwords. In one case it stayed for 4 years and 10 months. What most alarmed the Americans was its attack on Talvent which is the Canadian arm of Schneider Electric. Talvent stores detailed blueprints of more than half of all oil and gas pipelines in North and South America. The potential for a devastating attack on US infrastructure has made  President Obama set up a cyber protection unit which will seek to protect vital installations. The US should know. In 2010 the US partnered Israel in infecting computers in Iran with the Stuxnet virus which caused uranium centrifuges to spin out of control. This was a highly specialized malware designed to target only Siemens supervisory control and data acquisition systems which the Iranians had acquired surreptitiously in spite of sanctions. Kaspersky Lab said that such a sophisticated malware could only have been designed " with nation-state support ". Stuxnet was followed by Flame and Duqu which were found to have the same sort of source code linked to Israel. As wages have gone up and the Renminbi has become stronger against the dollar China is finding it tough to continue with its explosive growth based on cheap exports. It wants to climb up the value chain not by research and hard work but by stealing commercial secrets which will allow its businesses to vault into high value production. Just as it is attacking western countries China is hostile against India over Arunachal Pradesh, against Japan over the Senkaku Islands, claims the entire South China Sea as its own and is eradicating Tibetan culture. It is the greatest danger to the world. Cockroach eaters.

You have to make money to spend money.

The government has decided not to borrow Rs 120 billion from the market on 22 February to limit the fiscal deficit to within 5.3% of the GDP as promised. Apparently it has been saving money through a reduction in spending and has decided that it does not need to raise more money. We do not know whether to swallow this statement because the present Finance Minister was responsible for the huge rise in spending in 2008 to win elections in 2009 so it maybe that he is just postponing expenditure to the new financial year due to start on 1 April to avoid a credit downgrade to junk status. It could be a case of April Fool. In 2007-08 total government revenue was Rs 5.4 trillion and spending was Rs 7.1 trillion giving a deficit of Rs 1.7 trillion. The criminal waste of 2008 showed up in 2011-12 when revenue was Rs 7.7 trillion and expenses were Rs 13.2 trillion giving a deficit of Rs 5.2 trillion. The relation in growth and deficit was shown by Mr Vivek Debroy in the ET of 14 February. He wrote that in 2007-08 fiscal deficit was 2.55% of GDP and growth was 9.30%. That was when these fellows thought that they were the cat's whiskers and went round the world proclaiming the promised land was at hand and that the US and China could give up the chase. In 2008-09 deficit was 6.4% and growth 6.07%. This was partly due to the sudden global slowdown. In 2009-10 deficit was 6.48% and growth was 8.40%. This was because of the huge stimulus to the economy because of increased spending and hundreds of billions of black money spent on the elections. In 2010-11 deficit was 4.90% and growth was 8.37%. Growth in the previous year had increased tax collections. In 2011-12 deficit was 5.90% and growth 6.53%. This is when the hangover is beginning to catch up. This year deficit is expected to be 5.3% and growth 5.37%. Mr Debroy makes the point that a low deficit is essential for growth to rise which means that, just as a family or a business cannot spend more than it earns because it will go bankrupt, so a government has to cut its coat according to the cloth available. But just when we were about to heave a sigh of relief we learn that the Food Security Bill which is due to be passed by parliament will cost Rs 2.38 trillion in one year. In the current financial year the government spent Rs 753.66 billion on food subsidies which is 0.74% of the GDP so Rs 2.38 trillion will add 2.3% to the spending and hence to the deficit. This is clearly an invitation to the poor to breed even more because the amount of grain is distributed per member of a family which means that children get the same amount as adults. This may allow parents to eat more or sell off the surplus. No country in the world can feed an infinitely growing population so the deficit will continue to increase. By that time the next elections will be over. But what happens after that?

What are we giving away?

The British looted India for over 200 years and 7 million died in the engineered famine in Bengal so what are we going to give David Cameron this time? Cameron has come with an entourage of over 100 people consisting of businessmen, university vice chancellors and health service providers. Apparently India needs billions of dollars worth of defence equipment, upgrading of infrastructure and quality education so that the millions of children growing up today can get productive, paying jobs. Trouble is that there are too many ministries, a total of 53, with too many politicians and too many civil servants busily filling too many pockets to get anything done. While other countries are setting up 4G we are still to find a way of awarding 2G licenses to real telecom companies, we are still having to buy expensive coal from Indonesia and Australia because coal mines were presented to friends and relatives, highway construction is coming to a halt because companies are unable to realise their costs from toll because petrol is so highly taxed that no one wants to drive and every defence deal yields suitcases filled with cash because of the secrecy surrounding defence. That leaves foreign investment in retail. The government has passed a bill allowing 100% foreign ownership in single brand retail and 51% in multi- brand retail provided they buy 30% of products locally but already IKEA has been allowed an exemption to that rule and also allowed to set up cafeterias, which makes it multi-brand, with 100% license. Seems that Walmart is still unhappy about something because they are lobbying lawmakers in Washington because open lobbying is forbidden in India. Our lot likes to have black bags full of cash so that they do not have to pay tax. But will the likes of Walmart and Tesco be such a good thing even if they invest $100 million of which $50 million is in back end infrastructure, such as cold storage? In Britain 1 in 3 high street shop is lying empty because supermarkets have sucked away all business. Daily Mail, 19 February. For every pound spent in a British shop 60 pence goes to a supermarket giant such as Tesco, Sainsbury's, Asda and Morrisons. Supermarkets used to sell only food but now they sell everything from washing machines to garden furniture, from clothes to sauce pans. Well known chains such as Jessops, HMV, Comet, Blockbuster, Clintons, JJB, Peacocks and Game have collapsed. Last December dairy farmers in Britain were protesting outside dairy plants producing milk for these giants because they were paying 26-27 pence for each liter of milk which cost farmers 32 pence to produce. " The FDI in retail can promote instability by way of the exploitative and corrupt ways of the MNCs to hold sway over retail markets," said Nobel Prize winner, Joseph Stiglitz. So what are we promising to give Cameron?

Hang on to power at any cost.

Silvio Berlusconi has been Prime Minister of Italy 3 times so he should know what he is saying when he said that " Bribes are necessary " because " those are the rules in that country ". He was talking about bribes paid to Indian officials and politicians to secure the deal to sell 12 AW 101 luxury helicopters for our VVIPs. This has led to much derision and consternation but it is something every Indian knows. He said," Bribes are a phenomenon that exist. It's useless to deny the existence of these situations. These are not crimes." Exactly. Everyone around the world knows that Indian politicians and civil servants are criminal beggars with one hand permanently outstretched, no matter the harm done to the nation. If these villains are not bothered about the safety of the nation why should foreigners care? After all, taking a bribe is 100 times more serious offence than giving one. The government actively encourages these criminals by interfering with investigations so that in the last 3 decades our much celebrated Central Bureau of Investigation has failed to bring even one to justice. TOI, 18 February. There was Bofors, in which CBI officials had enormous fun chasing Ottavio Quattrocchi across all the continents, including the millionaire playground of St Kitts. There was the HDW scandal in which a German company admitted to the Indian embassy in Germany of having paid 7% in commission. The CBI closed the case without even charging anyone. The Tehelka tapes revealed the Barak missile scandal in which the former Defence Minister, George Fernandes and the former Navy Chief, Admiral Sushil Kumar were charged. Admiral Kumar later used the Right to Information Act to prove that the charges brought by the CBI were totally false. In 2007 the CBI charged the Israeli firm Soltam of paying bribes to arms dealer, Sudhir Choudhrie but closed the case in 2010 by saying that payments received by Choudhrie were for " electric and non-electric stainless steel kitchen utensils ". Every time a crime comes to light a high ranking armed forces officer is blamed so that all the blame falls on him and the real criminals escape. This time the former Chief of the Air Force, SP Tyagi is being blamed. Why are the criminals so brazen? About 1 week back the government filed an affidavit in the Supreme Court saying that MPs and MLAs convicted of crime could not be disqualified because it would have " serious consequences " if the government is " surviving on razor thin majority ". HT, 13 February. So, it is alright for murderers, rapists and armed robbers to be lawmakers just to hang on to power. Does that mean that if a Pakistanis terrorist with false papers, which are easy to get, becomes an MP he will be immune because he supports the government? It is hard to imagine any human being saying that. There is no creature lower than a human with no sharam and no izzat.

Who created VIPs?

In September 2003 the government spent Rs 7.27 billion in buying 5 mid-sized Embraer 135BJ Legacy jets and in October 2005 another Rs 9.37 billion on 3 Business Boeing jets for VVIPs to travel around in. TOI, 14 February. For foreigners, who are innocent of who this strange creature is who requires such extravagant luxury, a VVIP is a special Indian disease called Very Very Important Person. This person has achieved this very exalted rank not because he or she has made a tremendous sacrifice for the country, invented something earning a fortune, such as Google does for the US, or achieved enormous honor for the country, such as winning a Nobel Prize. Oh no. These are people either born into families which have a vice like hold on political power or by years of shamelessly strenuous boot licking, also known as sycophancy, or have won an election by spending huge amounts of black money, earned through criminal activities with the help of armed goons. In 2009 Obama turned down a deal to buy AugustaWestland-101 helicopters for his use because they were too expensive. Obama, by the way, is the President of the US of A which is a $15 trillion economy. However, the Congress led government had no hesitation in ordering 12 AW-101 helicopters in 2010, 8 in VVIP configuration and the other 4 just non-VVIP. Of these 3 have already been inducted in the IAF's elite Communication Squadron. The cost of this deal is a mere Rs 37 billion when every deficit, whether it is fiscal, trade or Current Account, is dangerously red. This leads to 2 questions which may sound silly but is vitally important to us - 1. Where are these VVIPs spawning from and 2. Who flies these insanely expensive planes. Seems that Indian Air Force pilots have been tasked with flying these people around. Between April 2009 and May 2012 VIPs travelled by IAF planes and helicopters on 1888 occasions for a total cost of Rs 288.30 million. msn.com, 8 May 2012.Apparently our most revered Prime Minister is entitled to use IAF planes for non official purposes. For us of lower rank and intellect we would be grateful to know what non official means. Does it mean attending a somebody's marriage ceremony, a football match or a movie? Why are highly trained IAF pilots being used as chauffeurs when Air India pilots, earning over Rs 10 million per year, are sitting around doing nothing because Air India has cut services but not its staff? No wonder Pakistan can send in terrorists and behead our soldiers in complete certainty that we will go on " bended knees " begging for peace. Who has created this super class of people called VVIPs who dismiss us as aam aadmi to be taxed into poverty so that they can show off? God definitely has not. Is it the Constitution then? If so, it must be junked and, if not, they must be. Time for another Sepoy mutiny?

How will they be able to cover up?

The Current Account Deficit, which is the balance of foreign exchange spent against money earned,  rose to  5.3% in the second quarter of last year. " Last year CAD was 4.2% of GDP, but this year we expect it would be significantly higher than that. It's going to be historically the highest CAD measured as a proportion of GDP," said the Governor of the RBI, Duvvuru Subbarao without saying what the figure is likely to be. ET, 12 February. " We would not worry if the widening CAD is on account of capital goods but here it is on account of import of oil and gold. The other concern is the way we are financing it. We are financing our CAD through increasingly volatile flows. Instead we should be getting as much FDI as possible to finance CAD," he said. The governor is unhappy for 2 reasons. First, the rising deficit is because of import of oil and gold. At least oil is for the transport of goods and people and hence essential for business but gold is a completely unproductive asset. People buy gold as ornaments, especially for marriages, or for hedging against inflation and store them in safety boxes in banks. If this money was spent on capital goods, which are machines used for producing consumer goods, then it would boost productivity, create jobs and increase tax collections. The solution to this problem would be to maintain interest rates at 100-200 basis points above the Consumer Price Index. This will reduce inflation and give real returns to savers, taking away any need to buy gold. Bank savings would jump allowing banks to lend money for business. However, this would cause a collapse in property prices, where politicians and civil servants have hidden all their black money, and so it will not be done.  Secondly, a large part of our foreign exchange reserves are due to Foreign Institutional Investors buying into our share or bond markets. With interest rates at near 0% in the west and Japan FIIs can borrow for nothing abroad and invest in India for handsome gains. FIIs bought $24.4 worth of shares in 2012 and total investment in Participatory Notes, which is an anonymous route for foreign investment in the stock market, reached $28 billion which is equal to Rs 1.51 trillion, down from Rs 1.77 trillion in November. This is hot money and can disappear overnight causing the rupee and the share market to plunge. The governor wants Foreign Direct Investment in which foreign companies build factories to produce goods. This money is stable and increases wealth of the country. Problem is that the government is broke because of corrupt social schemes and needs money to institute more such schemes to win the next general elections. It has made tax demands on Shell, Vodafone and Nokia which these companies dispute. Vodafone has already won in the Supreme Court but the Congress passed a retrograde tax bill called GAAR to gouge money out of it. How long will they be able to cover up the huge mess? We wait in fear.

Growth needs honesty.

A high growth rate seems to have become a fairy tale like a pot of gold at the end of a rainbow. Everyone, including economists, keeps guessing whether we can attain 8.13% growth or we should be aiming at a dizzy 8.33%. With a big " if " added on. If the government can reduce spending, if subsidies are reduced, if the fiscal deficit can be controlled, if the price of oil comes down, if tax collections increase, if the world economy starts growing again which may increase exports bringing down the Current Account Deficit then we could achieve 8.17% growth and our credit rating will not be cut to junk status. No one has the honesty or the courage to say that all of it is linked. Government spending cannot be reduced because you cannot take back 80% rise in salaries of useless civil servants or stop the various social schemes, including NREGA. Indeed the food security bill will add another Rs 1 trillion to the deficit and already there is talk of forgiving all loans to farmers which will add to Non Performing Assets of banks which are already high. If NPAs increase banks will refuse to reduce deposit rates to attract savings and so will not be able to pass on the cut in interest rates. Government spending will remain high resulting in high deficit and inflation which will reduce buying power of consumers leading to reduction in tax collections. Even though growth in the US is around 2%, shale oil and gas production is increasing daily and there is recession in Europe, with even the powerful German economy contracting, Nymex crude is still at $96 a barrel. If growth picks up in the west all commodity prices, including oil, will jump putting greater stress on our CAD. Tax collection cannot be increased by increasing taxes as this hurts consumer spending, especially if this is based on lies. Price of petrol was increased this morning by Rs 1.50 which will take a liter of petrol to around Rs 78 at the pump. Yet today petrol is selling at $3.70 per gallon, which is 3.8 liters in the US, where petrol is prices are free of government control, which means 1 liter is less than $1 or Rs 54. For growth to increase we have to be honest about the reasons for growth 3-4 years ago. It was because of very low interest rates in the west resulting in large amounts of foreign currencies flooding into our market looking for better returns. This pushed up the Sensex and made our foreign currency reserves look healthy. This is hot money and may flee any time. The second was the rise in property prices by 1000% creating a huge construction boom boosting profits in related companies such as cement and iron. The construction company DLF had a debt of Rs 242.59 billion as on 30 June 2012 which was 2.4 times its total income. Interest outgo was Rs 30.13 billion while cash flow was Rs 24.92 billion. Is there no one in India with the courage to be honest?

We are so much alike.

Once more Italians are in the news in connection with India. In 1986 India entered into a $15 billion contract with Swedish firm Bofors to supply 400 155mm howitzer field guns. In 1987 Swedish radio claimed massive kickbacks had been paid to secure the contract and a Joint Parliamentary Committee was set up which took 2 years to report. In 1990 CBI registered a first complaint. In 1991 Rajiv Gandhi was assassinated and a full 2 years later Quattrocchi left India to avoid arrest. Following his trail CBI officers traveled all over the world from Malaysia to Argentina to the millionaire playground, St Kitts. But to no avail. In 2011 after spending billions of rupees in a fruitless but highly enjoyable chase a Delhi Court allowed the CBI to drop the case. No doubt big Q had a fairy godmother in India looking out for him. In April, 2012 the former Swedish Police Chief, Sten Lindstrom said that there was massive cover up in India and Sweden. " The evidence against Ottavio Quattrocchi was conclusive. Through a front company called AE Services, bribes paid by Bofors landed in Quattrocchi's account which he subsequently cleaned out because India said there was no evidence linking him to the Bofors deal." " Under pressure from Swedish and Indian media and with the threat of a cancellation of the contract hanging over them, Bofors sent its top executives to India with the one-point task of giving out the names. Nobody of any consequence received them." On 11 February, Giuseppe Orsi, the head of Finmeccanica was arrested by the Italian police. " He is suspected of involvement in the payment of bribes regarding the sale to the Indian government of 12 helicopters produced by Finmeccanica's subsidiary AugustaWestland," said the Italian news agency, Ansa. In a deal worth a total of Rs 37.60 billion 400,000 Euros were handed over to middlemen in Italy in 2005 to bribe Indian officials. HT, 15 February. Subsequent tranches were sent via Mauritius. IDS India, IDS Tunisia and Aeromatrix based in Chandigarh were used as front companies. An additional amount of Rs 4 billion were paid as bribes of which Rs 2.4 billion went to Tyagis, of whom SP Tyagi was a former Indian Air Force Chief, and Rs 1.6 billion to middlemen, Carlo Gerosa, former CEO of Finmeccanica, and Ralph Hashkhe. When Hashkhe was apprehensive Gerosa told him," Look at the legal process against Berlusconi. ( By the time they catch us ) we may already be dead." Former Italian Prime Minister, Bettino Craxi had to run away to Tunisia to escape jail while Andreotti has been tried many times but always managed to wriggle free. Berlusconi has been sentenced to 1 year in prison but was celebrating Valentine's Day with new girl friend. Our politicians are criminals as are the Italians and their justice system is just as helpful as ours. We are so much alike. Brothers.

Don't wait for the market.

The Index of Industrial Production fell by 0.6% in December, compared to the year before, when a growth of 0.8% had been expected. Manufacturing fell by 0.7% while capital goods fell by 0.9% showing that as sales have dropped so companies have cut production and reduced investment. The fall in demand is reflected by the fall in the Wholesale Price Index in January to 6.62% from 7.2% in December. To keep their profit margins from going down companies are increasing prices which is reflected in the Consumer Price Index which was 10.79% in January compared to 10.56% in December and 9.75% in November. As retail prices increase consumers are likely to reduce domestic expenditure further resulting in a further fall in consumer demand. The other loser in this cycle of rising prices and falling demand is the government as indirect tax collections will fall or remain static when the government desperately needs to raise revenue to reduce fiscal deficit. New taxes have been created on services and charges on electricity,water and fuel increased substantially. While some of these were probably necessary the timing, when growth is falling, was lousy. Politicians were dazzled by 8% growth in 2007 and 08 not realising that this was due to very low interest rates abroad and foreign money coming to emerging markets. Instead of taking advantage of high growth to balance the budget the Congress chose to give away money to win the elections in 2009 resulting in huge increase of spending. This coincided with the sudden collapse of the sub-prime mortgage bubble in the west and suddenly growth started to drop while inflation and deficit shot up. The rupee fell, adding to inflation and consumer spending dropped. It is impossible to understand why the government was taken by surprise and keeps blaming foreign markets for the dire state of the economy when there are clear examples in other countries. Venezuela has one of the largest oil reserves in the world. Its exports are around $57 billion dollars per year with a population of just 28 million. It should have low inflation with a strong currency supported by so much foreign exchange earnings. But President Hugo Chavez is a socialist and has embarked on enormous spending giving free education, health care and houses to the poor. The result was inflation at 30% and the Bolivar has just been devalued by 50% from 4.3 to 6.3 to the dollar. The black market rate is 18.39 Bolivars to the dollar. In Japan there has been deflation for a decade with prices falling and the Yen reached 76 to the dollar. The present Prime Minister has decided to induce inflation by massive spending and the Yen has fallen to 94. If the market decides that enough is enough the rupee could fall to 65 or 70 to the dollar. Does the Congress want the market to decide? The result could be brutal.

The country always comes last.

In the run up to the annual circus, called The Budget, the Commerce and Industry Ministry is asking the Finance Minister to lower corporate taxes from 30% to 25% and the Minimum Alternate Tax to 7.5%, as it was in 2005-06, from 18.5% since last year. TOI, 8 February. Such reduction, along with an increase in the rate of depreciation, will allow companies to increase investment and bring in new technology, it is argued. Companies would also like a reduction of the Dividend Distribution Tax from 15% to 10% to increase compliance. Every year a similar farce is played out with the people and companies on one side, begging for any slight relief from extortionate taxes, and politicians on the other, determined to suck out the last drop of blood for personal gain. Meanwhile the Companies Bill to be shortly passed by the parliament has a Corporate Social Responsibility clause which will suck more than Rs 100 billion from the net profit of companies. TOI, 11 February. This section will force companies to spend at least 2% of net profits on philanthropy. " The private companies may engage in promoting education, constructing toilets in schools, reducing child mortality and any other area contributing towards social welfare,'" said one Corporate Affairs Minister. Is it philanthropy if it is forced out of you at gun point or is it naked extortion? Why do we have a government at all with 47 ministries spending hundreds of billions of rupees if it cannot even provide basic fundamentals such as education or toilets or child health. " There is requirement or only Rs 1.5 billion to construct toilets in all higher secondary schools for girls. We expect the companies to come forward and spend in the areas such as health, education and sanitation," said the minister expecting applause before the coming elections. Meanwhile the government has Rs 30 billion to buy luxury helicopters for self appointed VIPs which even the US found too expensive. So while one ministry is asking for a reduction in taxes on companies another one is adding 2% on its net profits. Talk about one hand not knowing what the other is up to. With earnings dropping because of falling consumer demand due to inflation companies will naturally pass on the added costs to customers, adding to inflation. This is the same sort of slimy trick which the Congress played when it forced private schools to reserve 25% of seats for poor students forcing them to increase fees for other students. Just last month they were howling for the RBI to reduce interest rate to stimulate investment to increase growth while planning a noose for industry. Is it any wonder that while our trade deficit keeps on rising China has posted a $29.2 billion surplus in January. Why would anyone invest in India if taxes keep changing wildly? All to somehow win elections. Who cares for the country?

We have learnt only bad things from the Brits.

Using the Freedom of Information Act the Daily Mail in Britain has learnt that a website for adultery which calls itself " Out of Town Affairs " was accessed a total of 52,375 times in 7 months by MPs and their employees. The website promises," We connect you with thousands of other married men and women looking for a marital affair or more heat in the bedroom. The variety of new members is fantastic." For a signing up fee of 25 pounds per month you will be able to contact " thousands of horny cheaters ready to get some action ". You will also be able " to write you own sex date diary " and " read and send filthy messages ". In December there were 8457 page views from parliament, 7533 in November and 8971 in October, which works out to 299 per day. No doubt our esteemed MPs will be horrified by such lecherous behavior of the British, proclaiming loudly that our parliament is the " light pillar of democracy " but, while a member of the Congress would be forced to resign his seat in the prudish US of A, in Britain it is not considered such a serious offense. More a " tut tut " than an " off with his head ". However, any infraction of the law invites swift punishment. Chris Huhne, member of the Liberal Democrat party and Secretary of State for Energy and Climate Change, has had to resign his post as minister and his seat in the House of Commons after pleading guilty to a charge of perverting the course of justice on 4 February. He forced his then wife to accept penalty points on her driving license after being caught speeding in 2003. She ratted on him last year when he confessed to an adulterous affair. In 2009 the Daily Telegraph leaked details of fraudulent expenses claimed by MPs resulting in several MPs going to prison. They had to resign their seats and their political careers were ruined. Over here 163 out of 543 members of the Lok Sabha have criminal charges against them but because of our munificent judges their cases are never resolved, allowing them to continue lording it over us. The charges are not trivial, such as speeding or nicking a few thousand rupees, but murder, kidnapping, armed robbery and rape. This makes the remaining 380 MPs accessories to heinous crime. Looting taxpayer money is not considered a crime by our politicians; indeed it is considered a legitimate perk of the job much like bonus payments to company executives. Not only are these criminals able to continue with their careers in crime as well as rake in the generous allowances paid out to MPs, including free laundry, they are protected by our police. There are 47,557 policemen protecting 14,842 VIPs which is 15,000 more police than sanctioned. This amounts to 3 per VIP while there is just one policeman for 761 ordinary people who vote these villains to power. TOI, 9 February. There is much to learn from the Brits but we have learnt only the bad.

Research or drivel?

A think-tank of the Planning Commission, impressively named the Institute of Applied Manpower Research has published a paper titled " Joblessness and Informalization: Challenges to Inclusive Growth in India ". TOI, 9 February. This claims that the number of jobs added under this government has been casual labor with little or no social security. It says that between 2005-10, 15 million jobs shifted out of agriculture, whose share of total employment fell from 57% to 53%, while 18 million jobs were added in the construction industry because the government made huge investments in infrastructure. " Out of 44 million total employment in construction by 2010, 42 million ( informal labour ) hardly have any kind of social security benefit attached with it. In other words, 95% of workers in the construction sector hardly have any kind of social security coverage," said the report. We know that the Planning Commission is an arm of the government so its reports are highly suspect but even by its standards this has to qualify as absolute drivel. No taxpayer in India has any social security support in case of loss of job or medical expenses, which have become exorbitant. Agricultural labor have the security of the NREGA scheme which pays for 100 days of fictitious employment every year, which means that a couple can avail of payment for 200 days every year. This has been shown to be responsible for the double digit food inflation as labor costs have soared. If people are still choosing to move into construction then they must be making more money as casual labor in this industry than in agriculture where they are paid for doing nothing. Construction has exploded in India not so much because of infrastructure, which is way behind schedule, but because of the rise in property prices by a factor of 10. Apartments which were selling for Rs 3 million in 2002 are now being priced at Rs 30 million. Every company, no matter what its core competence, rushed into construction. Greedy state governments have seized this opportunity to increase what is known as " Circle Rate " which is the official price for any property depending on its location and size. This has meant that most of the price has now got to be paid in white money and the government rakes in vast amounts in registration charges and stamp duty. At some point the market will seize up when the proverbial will really hit the fan. The paper says that manufacturing lost 5 million jobs while the services sector added only 4 million jobs between 2005-10. Surely due to inflation. It calls for " inclusive growth " which is just an excuse for bribing what the Congress sees as its " vote bank ". Already our most revered Minister for Corporate Affairs has promised farmers that all loans will again be forgiven. Are they going to sacrifice the entire nation just to win the next election?

Politics is a curse on us.

Workers at Hero MotoCorp in Haryana, which manufactures motorbikes, are demanding doubling of salaries to Rs 100,000 per month. TOI, 8 February. At present the Cost-to-company for an experienced shop floor worker works out to between Rs 47,000 and Rs 50,000 per month. Only very few highly educated people in India can even dream of such levels of salaries but now they are demanding an increment of Rs 45,000 per month along with subsidised housing and interest-free loans up to Rs 1 million. Perhaps we should be thankful that they are not demanding fully paid holidays to a foreign country by first class flights and stay in 5 star hotels, including wife and family. The demand is not only breathtakingly brazen but unbelievable in its stupidity. No company can pay such levels of salaries and stay in business in the face of cutthroat competition. Not only will Hero be affected but the contagion will spread to other companies in the area as well as to suppliers of auto ancillaries. Clearly politicians are behind this ludicrous demand. Unions are affiliated to political parties and will create a strike and then extort money from the management to get workers back to work. This is what resulted in the decimation of all factories in Bengal and will surely happen in Haryana. On 18 July 2012 workers at a Maruti plant in Manesar, Haryana went on a rampage after a worker called Jiya Lal was suspended for slapping a supervisor. Very conveniently Lal claims that the supervisor abused him regarding his low caste, a division created by politicians so that they can appeal for votes on the basis of handouts to lower castes. Around 600 workers armed with iron rods and door frames of cars went hunting for managers and supervisors, beating up people, destroying property, and setting fire to offices. One Human Resources Manager was burnt to death and 100 people, including 2 Japanese, were injured. Maruti has sacked 500 workers who are now agitating to get their jobs back. Unions were thus responsible for the death of one man, injuries to 100 others, loss to the company for repairs and lost productivity and, worst of all, loss of jobs for 500 workers. The trouble started because permanent workers are paid Rs 17,000 per month while contract workers get Rs 7,000 per month, provided they do not take any holidays. Companies prefer to take contract workers because of lower costs, less union troubles and because labor laws are so rigid in India that it is impossible to sack a worker for any reason whatsoever. Yesterday Afzal Guru, convicted of being involved in the attack on Parliament on 13 December, 2001, was hanged. On the very day the attack occurred ordinary people expressed sorrow that 10 policemen were killed but not one politician. Such is the contempt for politicians in India. Politics is a curse on us.

A makeover worth Rs 2 billion.

One of the bribes used by the Congress to win the elections in 2009 was forgiving all loans to farmers costing Rs 520 billion to the taxpayer. The Comptroller and Auditor General has revealed that of the 100,000 loans it has studied at least 30% worth Rs 1.5 billion was siphoned off. TOI, 8 February. This money was paid to half a dozen Micro Finance Institutions by corrupt bank managers. Under the scheme banks were supposed to deal directly with farmers and not through MFIs which have not provided any relevant records to show where the money went. Since the Congress seized power in 2004 hundreds of billions have been looted from the exchequer through various scams such as the telecom licenses scam, the coal mine scam and the Commonwealth Games scam. Not a single person has gone to jail because of our frozen justice system. Indeed it is not yet sure if our most revered Finance Minister won his seat from Sivaganga in 2009. His opponent Mr. Raja Kannappan of the AIADMK has filed a case claiming that he received 3,34,348 votes as opposed to Mr Chidambaram's 3,30,994 but votes were transferred by corrupt election officials so that Mr Chidambaram ended up winning by 3,354 votes. We do not know when our gracious judges will decide the case but even if the result is annulled and a new election announced it will be too late. Mr Chidambaram has been swanning around as Finance Minister, Home Minister and Finance Minister again, giving high sounding speeches and travelling all over the world with our money. With so much filth washing up against the government the Congress has decided that the government needs a makeover. With our money of course. The Finance Ministry has released Rs 2 billion to the Information and Broadcasting Ministry to try and whitewash the government before the elections in 2014. HT, 5 February. So, first politicians loot our money and when they are tarred by protests, courtesy of Mr Anna Hazare, they decide to use more of our money for misinformation to brainwash the public. Surely it should be a criminal offence to use taxpayer money for electioneering but in India politicians stand for elections only to loot.  Meanwhile athletes training at the National Institute of Sports in Patiala for the Rio Olympics in 2016 have seen their diet cut because of the rising prices of food. Intake of meat, dry fruits and milk have all been reduced. " We had no option but to drop some items from the menu. There should be at least a hike of Rs 100 in the food money, only then can we provide the diet we were giving preparing for the London games," said one official who wanted to remain anonymous. If the hockey team does not qualify most of our athletes will be wrestlers or weight lifters who need a lot of calories. When hundreds of billions have been looted another Rs 2 billion is nothing. Surely!

How do you square the circle.

When people become poorer they cut non-essential expenses such as holidays, especially involving air travel.  Numbers of people travelling by air has fallen sharply all over India. Gujarat is one of the states with the highest growth rates and Gujaratis have large numbers of relatives living abroad. Data from the Airport Authority of India reveals that numbers of passengers dropped by 17.2% between April and November 2012 at international airports in Gujarat. TOI, 6 February. Delhi had a drop of 10% in the same period while Mumbai saw a drop of 7.3%. In October of last year Sardar Vallabhbhai Patel International Airport in Ahmedabad, Gujarat saw a massive drop of 32% in the number of passengers while in the month of November the decline was 18% as compared to November 2011. Gujaratis celebrate new year after Diwali and everything is closed for at least 3 days when people like to visit relatives. However, in November number of tourists was 297,000 as compared to 365,000 in 2011. Domestic travel rose 35% at Ahmedabad in 2011 but has fallen 17% this year. Officials say that number of passengers has fallen because of the steep increase in fares which was because of the failure of Kingfisher Airlines, reducing competition and allowing other airlines to increase fares, and also because of extortionate taxes. Kingfisher was deliberately pushed into bankruptcy for a debt of Rs 40 billion while the highly corrupt Air India. with a debt of over Rs 400 billion, is being rescued by injecting taxpayer money. While banks are looking to restructure debt of Rs 840 billion in 126 companies last year Vijay Mallya was forced to sell controlling interest in Untied Breweries, the largest drinks maker in India, to a foreign company, Diageo. Why is the government killing the airlines with such taxes? One reason is that it increases the price difference between airfares and first class train fares which has allowed the government to increase train fares without the fear of losing passengers. The second reason is to cover wasteful spending of our money. So dire is the situation that the government has had to slash spending, called Gross Budgetary Support, by 20% in 2012-13 from Rs 5.21 trillion to Rs 4.16 trillion and wants to reduce it even further in 2013-14. HT, 31 January. The GBS has been reduced by Rs 200 billion for the Rural Development Ministry, by Rs 100 billion for the Defence Ministry, by Rs 100 billion for the HRD Ministry and by Rs 50 billion for the Women and Child Development Ministry. This means that all the ministers and civil servants will be sitting around in there air conditioned offices and drawing their huge salaries, with perks, while doing nothing. Trouble is that the less people spend the less taxes they get which makes the situation worse. How to square the circle?

We the losers.

A report by Nomura predicts that savings rate in India will plunge to its lowest level in 10 years by the end of this fiscal. ET, 4 February. " Based on the available investment data, we estimate that savings will plunge even further to a 10-year low of 27% of GDP in FY 13," said Nomura India Economist, Sonal Verma. Domestic savings rate was 36.9% in 2007-08, 34% in 2010-11 and will fall to 30.8% this year. This is bad news because it will push up the Current Account Deficit to at least 5% this year and banks will have less money to lend. With the Consumer Price Index above 10% and the RBI cutting interest rates savers see the value of their money being steadily eroded. To protect their savings against the ravages of inflation people are buying gold which has to be imported from abroad raising the CAD even more. To discourage the purchase of gold the government has increased tax on gold from 2% to 6% forcing people to lose more money. Faced with inflation and a fall in income from savings people have been forced to cut down on spending. This is reflected in the third quarter earnings reports of 362 top companies. Between October-December revenue growth has been 10.6%, the lowest in 2 years, because of poor sales. The low growth in volumes is seen all sectors dependent on consumer demand such as FMCG, automobiles and consumer durables. TOI, 5 February. A survey of 2602 men and women across 10 locations in India carried out by Credit Suisse and reported by wsj.com on 4 February says that income has declined by 3% in urban areas while it has grown 6% in rural areas. There has been zero growth in purchase of cars, fashion apparel, spirits or mobile phones. Spending on food is up from 28% to 32% and people are buying more generic products and unbranded clothes. " People from rural areas are still buying more branded products," the India-specific report said. Numbers expecting the financial situation to improve in the next year is down from 28% to 8% and those who believe that the government is effective in solving problems is down from 50% to 35%. It is surprising that 35% still have some faith in the government because the government is the sole cause of the looming financial disaster. Only 35 million out of a population of 1,200 million pay tax. With so few people paying taxes the only way to finance spending is to raise indirect taxes on all goods and services which only adds to inflation and makes us poorer. Rural people are exempt from all taxes which is why a majority of politicians show their occupation as farmers. Also the government spends humongous amounts on handouts to rural people to buy votes. This is shown in rising incomes and spending in rural areas. However, since these are not based on increased productivity they increase poverty instead. We lose, politicians win.

The RBI puzzle.

The Reserve Bank has issued tighter guidelines for Non Performing Assets, as bad loans are described by banks, and restructured loans, where a new loan is issued to cover an old loan to provide more time for repayment. TOI, 4 February. As banks will be required to set aside more money to cover bad loans this will reduce Rs 150 billion from banks' earnings. Which explains why banks are reluctant to reduce lending rates despite the Cash Reserve Ratio being cut by 25 basis points to release Rs 180 billion to banks for lending. So on the one hand the RBI has loudly signaled that banks have to keep less cash in reserve to cover bad loans while on the other it has quietly told banks that they had better keep more money in reserve. Ratings agency, ICRA expects that the new guidelines will increase NPAs from 3.6% as on 30 September, 2012 to 6.5-7.5% on 30 June, 2015. So, is the RBI playing games with banks? Seems that a record 126 companies have approached banks to restructure their debts up to a total of Rs 840 billion. ET, 4 February. When a company is unable to repay its debt or the mounting interest banks will often issue a new loan with a longer repayment period to cover the debt. This converts a bad loan into a new one so the bank is able to show it as new business instead of reducing the amount from its earnings and the company has to pay a lower EMI helping it to avoid defaulting on its repayment. This may work in some cases but very often ends up in increasing the amount of bad loans in the future. In 2001 the RBI set up a Corporate Debt Restructuring system to help banks and companies deal with problem loans " due to factors beyond their control and due to certain internal reasons ". In the last quarter of 2012, ending 31 December 25 cases were referred to the CDR system for a total of Rs 200 billion. In 2010-11 the total amount of distressed loans was Rs 230 billion which has risen by more than 3 times to Rs 840 billion while the number of cases has risen by 78% in the same period. We are not told which companies are in trouble or the sectors where losses are being incurred so we are allowed to exercise our imagination. Private equity firm Blackstone is selling its stake in Embassy Property Developments in Bangalore for Rs 2.1 billion making a profit of 28% on its investment in just 18 months. Embassy is constructing 467 luxury apartments costing Rs 30-100 million each at Hebbal which is 30 minutes from Bangalore International Airport and the city center. Blackstone had invested by buying non convertible debentures which allows it to avoid a lock-in period under government rules. These mind numbing figures give an indication of size of the property price bubble in India but while a correction in property prices has occurred in other countries there has been no correction in India. With bad loans mounting will the bubble pop? We wait with bated breath.

Can you bluff the economy?

Last week the Reserve Bank cut interest rate by 25 basis points to 7.75% and the Cash Reserve Ratio, which banks have to hold to guard against bad loans, also by 25 basis points to great rejoicing by politicians and business fellows. " It is a positive step which will infuse liquidity and help in catalysing growth," said Industry Minister, Anand Sharma. TOI, 30 January. " A weak consumption and investment demand has been derailing the growth momentum of the economy and today's announcement would help improve consumption and investor sentiments," said CII director, Chandrajit Bannerjee. Will it? The State Bank has reduced its base lending rate by only 5 basis points. Since January 2012 the RBI has reduced interest rates by 75 basis points while CRR has been reduced by 200 basis points releasing a whopping Rs 1.4 trillion to banks for lending. Last week's 25 points reduction released Rs 180 billion to banks. The Statutory Liquidity Ratio, the amount banks are required to invest in government bonds, has also been reduced to 23%. All this to increase liquidity into the system, bring down lending costs and make it easy for banks to lend for business or personal loans. But banks have chosen to keep their money in government bonds so the SLR has stayed at 30%, a full 7% more than required, because there is no demand for loans, keeping money as cash earns nothing while investing it in government bonds earns interest and they are safe. " Now we can earn 8-8.5% by simply parking it as SLR which would not have been possible if CRR was not cut," said a bank chief. TOI, 1 February. With Consumer Price Index at over 10% people are seeing their buying power being eroded and are reluctant to take loans for large purchases. With diesel prices being raised every month, electricity bills becoming exorbitant and food prices rising daily the biggest enemy to the economy is inflation. To control inflation interest rate should be raised to 12%. This will encourage savings as people will take advantage of real returns on their money. The attraction for gold will decrease saving huge amounts of foreign exchange and improving the Current Account Deficit and property prices will fall to realistic levels. In 1994-95 interest rate was 10%, 1995-96 it was 12% and from 1998-99 it was 10.5%. Growth rate was 5.5% from 1996-2000 which is the same as now. Why was the economy growing despite such high rates? Because with low inflation people were not worried about spending and industry could expand knowing that demand was strong. Narasimha Rao was the Prime Minister from 1991-1996. He had the courage to do what is good for the country. That is why he is hated by the Congress which exists only to worship The Family. You can bluff the people but can you bluff the economy?

The Congress has won elections in 2014.

Congress supporters can start celebrating. The Congress has already won the elections by sheer cunning. Whether it is Garibi Hatao or massively bribing the " vote bank " with taxpayer money or accusing all Hindus of being terrorists the Congress knows how to brainwash the great unwashed. In 2009 it resorted to naked bribery by increasing salaries of useless, thieving civil servants by 80% and forgiving all loans to farmers but the masterstroke was the NREGA scheme which pays villagers for 100 days a year for fictitious work. This caused double digit inflation, forcing the RBI to raise interest rates, and soaring fiscal deficit which forced the government to raise taxes on everything which, in turn, reduced consumer spending and economic growth. However, a lot more money was needed to win in 2014 so petrol, cooking gas,electricity and railway ticket prices were increased. Now diesel price is being raised by 50 paise per month and electricity is set to rise again. The freeloading press hailed it as " big bang reform " and the stock market surged, although mostly because of foreign investors. To be sure some of these prices had to rise but how much of the rise is due to excess taxes we do not know. Certainly petrol is severely taxed and should be lowered as the diesel price is raised to bring them to parity. The Congress is gambling on the fact that all these changes are hurting the urban population while rural people, its real " vote bank ", are protected by the handouts. There was one little catch, which was that state governments were taking credit for the NREGA scheme, so to bypass the state governments, many of which are controlled by other parties, the Congress started a Direct Cash Transfer scheme under which cash would be transferred directly to bank accounts of rural people who will then withdraw it through ATM. Now there should be no confusion where the money is coming from. The second weapon is the Food Security bill which will be passed in the budget session of the parliament and cost Rs 1 trillion but the masterstroke this time is called the Backward Grant Fund which will dish out Rs 700 billion to 1500 backward sub-districts in the next 4 years. Rs 450 billion will be spent in the first 2 years after which another Rs 300 billion given to those who have achieved certain levels of development and introduced governance reforms. HT, 4 February. Small programs, such as those in Kalahandi, Balangir and Koraput in Orissa and in 80 Naxal districts will be scrapped. Apparently this will also shut up Bihar Chief Minister's demand for special status. A vast amount of money to bribe the electorate and to be used as campaign finance. Anyone objecting will be branded as a heartless brute wanting to harm the poor. Absolutely brilliant. No wonder the Congress has had a vice like grip on us since 1947. Start distributing laddoos.

Morsi means more sick.

The revolution in Egypt which brought down the Mubarak government was secular but had no real leader. The Muslim Brotherhood took advantage of the vacuum and won the election to parliament. One third of seats in parliament were reserved for individual candidates, instead of party lists, and which they promised not to contest but surreptitiously put up their candidates as independents and won 100 of 235 seats. The election of those seats was annulled by the Supreme Constitutional Court which annulled the entire parliament. The Brotherhood promised not to contest the Presidential election but put up Mohamed Morsi who won easily. To bypass the courts Morsi took over all powers by decree in December and got a new constitution written in haste which was passed by a referendum. The Muslim Brotherhood was winning all the battles easily and it seemed that they would rule Egypt for a long time to come. This has naturally created enormous mistrust in a large portion of the people. On 1 February 2012, 72 fans of El Ahly football club were killed during a match with Port Said's Masry club in Port Said. On 26 January 2013, 21 of 75 Port Said fans were sentenced to death for their part in the riots last year. The families of the convicted men went on the rampage which spread to the whole town.  Two policemen were killed. When the new Interior Minister went to attend the funeral police officers cursed him and chased him away. Morsi declared a one month emergency in Port Said, Suez and Ismailia and curfew starting every evening at 9 pm. This provoked the protesters and huge protests took place just as the curfew started. People of Port Said did not vote for Morsi in both rounds of the election and blame him for the death sentences. Meanwhile In Cairo protesters managed to steal a police armored vehicle on 28 January and made a bonfire of it. On 1 February protesters hurled firebombs inside the Presidential Palace setting a gatehouse on fire. The police response has been inept and brutal. The police have barricaded themselves inside police stations and have been shooting back at protesters. Yesterday a video of a middle aged man being stripped and beaten by the police before being loaded onto a black police vehicle went viral on the internet. The man was shown on TV saying that the police were trying to save him but his family has rejected this view saying that he was coerced. Morsi said," We stress that such violent practices hive nothing to do with the principles of the revolution or legitimate means of expression." The people understand that their revolution was hijacked by the Brotherhood and it has no intention to be truly democratic. Morsi is never going to resign and the Brotherhood sees immense power in the future as Syria falls to it followed by Jordan and then maybe the oil rich gulf states. We enjoy. the fun.

Learn from a 14 year old.

A former principal adviser to the Planning Commission, Pronab Sen writes that since the mid 2000s there has been a shift in terms of trade from manufacturing to agriculture and a redistribution of income from urban to rural areas. HT, 01 February. Data shows that the growth rate of production in rural areas has slowed but income growth has remained the same and there has been a shift in income from land-owners to landless  labor due to the NREGA scheme. Rural wages have gone up faster than rural agricultural prices and trade has shifted from groups with relatively high savings to groups with relatively high consumption. Rural people consume more and the landless consume the most which is one reason for the high food prices that has led to the high wage-price spiral. He recommends raising excise duty from 12% to 14% which will reduce fiscal deficit by increasing tax collections and decrease inflation by reducing demand. There is no excise duty on food so his advice is to penalise manufacturing which will hit job creation and waste more money in unproductive handouts. While politicians are howling for lower interest rates to increase demand he wants to increase taxes to lower demand. Genius. If this is the caliber of people in the Planning Commission we can understand why all the 5 year plans have been failures. To find a real solution to India's poverty we should listen to a 14 year Australian girl called Bindi Irwin. She is the daughter of the famous wild life enthusiast, Steve Irwin who was killed when a stingray's tail stabbed straight into his heart in 2006. Bindi submitted a 1000 word essay to Hilary Clinton's e-journal called Go Wild Coming Together for Conservation. In her essay Bindi blamed unchecked growth in human population for global warming and loss of species. She wrote of a friend of hers who is 104 years old and was born at a time when there were no cars, TVs, computers or airplanes. At that time the entire population of earth was 1.5 billion while today it is over 7 billion and growing. She wrote," I believe that most problems in the world today, such as climate change, stem from one immense problem which seems to be the ' elephant in the room ' that no one wants to talk about. That is our ever expanding human population. We are experiencing earth's sixth mass extinction right now." news.com.au. Her essay was returned for her approval with large sections deleted out which has made her furious and determined to fight Ms Clinton's journal. There seems to be a massive mental blind spot when it comes to growing numbers of people. While educated people have few children poor people are growing at reckless speed and there is not enough money or food in the world to feed, educate and give medical care to all. It takes a child to speak the truth. Is anyone listening?

Something has to give.

In other countries a fall in demand leads to a fall in prices which explains why Japan has suffered deflation for over a decade. As demand fell prices came down which tempted people to wait for prices to fall even further leading to a cycle of ever falling demand - lower prices - a further fall in demand. This severely reduced company profits leading to loss of jobs which again led to fall in demand as people became fearful of spending. Not here in India. Although demand has not grown in the last quarter of last year profit margins have stayed the same because companies have increased prices as well as cut costs. An analysis by Crisil Research into 163 top companies listed on the National Stock Exchange shows that revenues of these manufacturing and services companies ( excluding banks ) grew by 15.3% compared to last year while their net profit grew by a whopping 41.5%. TOI, 29 January. Excluding oil companies, Earnings Before Tax or Ebidta grew by 12.2% while net profit grew by 18.2%. " The tepid revenue growth was due to continued pressure on volume growth in sectors like auto, IT, cement, and FMCG. Ebidta margins have remained flat on a Y-o-Y basis, supported by price increases and tight cost control by India Inc.," said Mukesh Agarwal, President of Crisil Research. These figures reveal 2 lies that are fed to us constantly by politicians and the freeloading press - 1. Oil companies are not making losses as claimed and 2. Company profits were not being affected by the high interest rates. So why was there a hysterical clamor for cutting interest rates in spite of CPI at over 10%. The real reason is the real estate sector which wants even further reduction in rates to boost demands. " Although RBI has made a good beginning, the repo rate cut of 25 basis points is just not enough," said one Lalit Kumar Jain. But even if interest rates were reduced to 1% would it see a jump in property sales and prices as these fellows think. Everyone talks about the enormous pent up demand for housing as the middle class grows in number to 20% of the population or some 200 million people. Trouble is that as per our Finance Minister only 35 million people pay tax which means most properties are sold on black money. State governments, greedy for tax collections, have increased Circle Rates, which is the minimum amount that has to be paid in white, to such high levels that the Circle Rate is now almost the same as the market rate. Any buyer will have to prove the source of his income to tax fellows and this is scaring buyers. Also the pent up demand is in properties in the range of Rs 1-3 million whereas builders have built luxury apartments selling at over Rs 10 million. The market is so skewed that something has to give. Either property prices have to fall by 90% or the rupee will. Economics is maths after all.