Byapaar.com -The Indian Business Blog

First of all, I would like to beg your pardon for not updating this blog for so long. It has been quite a long story – but in short “Politics” kept me pre-occupied for close to two months.

From declaration of Indian General Election to announcement of results and till the full Central Ministry formation – I got soaked into Indian national politics.

Some of my regular readers might wonder what do I have to do with politics as I work in a school! Well, here is my clarification:

I work in a semi-government school which means – all the expenditures of the school is borne by the government and we enjoy all the benefit of a government employee. But our school administration is run by a Managing Committee whereas that of a fully government school is run by the School Education department of the government. We can also participate into active politics unlike government employees who are forbidden to participate in active politics. For being involved with a particular political party- we don’t have to put in any declaration or resignation papers.

Under the circumstances, I joined Bharatiya Janata Party (BJP) just one month before election. Being a teacher does help a great deal in politics as I was immediately given the post of Vice-President in our Mondol Committee (state assembly segment level). So I had to get involved into high-voltage election campaigns. My responsibity was more as the Member of Parliament (MP) candidate from our party comes from same village – barely few hundred meters far from my house.

I am not here to justify BJP policies – but I must say that I had no option but to join them. In our state Congress (I) is in total organizational disarray, and I can never ever join in the Communist Party of India (Marxist) or CPI(M) – as they are totally non-communist in practice. They are more bourgeoisie than even hardcore Capitalist of USA. To be frank – they are communist just by name – in practice all those big capitalist captains of the west would pale before them.

BJP is still in a nascent stage in my state – so I can join them and try to influence them. That has been my rationale.

Let forget it now – for the time being. My heartiest congratulation goes to the United Progressive Alliance (UPA) for the decisive mandate they got. I look forward to them taking the economic reforms forward with more human touch so that all poor of India benefit from the economic boom the county has been witnessing for more than one decade now.

The business communities and investors across boundaries have also been rejoicing for the way Indians have shown a decisive mandate for the UPA and the way they discarded the problematic, out-of-date ideas of the present Left Front. The UPA win taste much sweeter as they got the mandate after literally demolishing the ever opportunistic and negative politics of the Left parties. The election has thrown a big question over survival of the Left politics in India. The sooner they are extinct, the better for Indian poor and deprived people. Because their politics is that of keeping people hungry for want of government help– so that they are forced to join them which tantamount to deception.

The mood of the Indian business and investment community can be seen in the way they stock market has responded. The main market sentiment indicator “Bombay Stock Exchange Sensitive Index (BSE SENSEX) has gained more than 5,000 points since the election result was announced. In between, the Reserve Bank of India also announced that – Indian economy (Gross Domestic Product or GDP) has grown by 5.8 percent during last financial year (2008-2009). It is a big decrease from the previous year – but still very good considering the financial turmoil that has engulfed the world during last year when most big economies saw negative growth of their GDP.

The international business communities have also shown positive responses over the outlook of Indian economy. Recently, renowned international credit rating agency has given Indian economy a “STABLE” status. It seems other agencies will soon bring out their ratings and by all indications they will move in the positive directions instead of negative directions.

That’s for today now. I have serious plans to resume my regular online routine very soon. So “HANG ON” friends –more posts with mix of Indian business and politics will follow on the blog on regular basis.

First of all, Happy and Prosperous New Year -2009 to all my readers and others. Hopefully, the New Year will bring much joy to all of us which were gone in 2008 due to economic downturn that occurred suddenly. And it seems governments are not sitting idle – indeed Indian government is trying its best to lessen the effect of global economic meltdown on Indians. Last Friday, the Prime Minister cum Finance Minister of India, Dr. Manmohan Singh announced second round of packages meant to stimulate the economy and protect it from global slowdown. In the first package , the government mainly focused on releasing more funds in the market by way of reducing interest rates and thereby improving liquidity. It also offered soaps to exporters. It seems the first package was aimed at immediate goals whereas the second package is more fundamental and might go a long way in reviving the economy.

In the first place the government doubled the cap on foreign investors in bonds and made ways for states to raise around Rs. 300 billion market loans. Moreover, the new initiative has given special emphasis on the automobile industry that has gone back gear after the economic crisis started. A plan of depreciation of fifty percent on car finance has been announced to shore up demand for the beleaguer industry. Exporters have seen rollback of entitlement passbook scheme rates amidst negative export growth in experienced in November.

On the financial sector, The Reserve Bank of India has announced further reduction in REPO and reverse-REPO rates. Special vehicle has been announced for improving liquidity in the non-banking financial market that may raise up to 250 billion Rupees. Rs 200 billion has been earmarked for state owned banks over net two years.

The government says it is not possible for more stimulus packages within this financial year that ends on March 31^st due to political and electoral compulsions. Over all, the two packages announced will take the country’s fiscal deficit to 5-6 percent from a comfortable 2.5 percent now.

Industry has more or less welcomed the anticipated second round of package and the stock market gained more than around 3 percent. But as always, industry want more from the government and argues that these schemes are not enough to push industrial growth which has come down to 0.4 percent from 5 percent at this time last year.

First thing first!

Congratulations Mr. Barack Obama for the history making thumping victory and become the first colored President of the United States of America. My best wishes for your successful Presidency. May you make historical judgments in this difficult situation and shape a brighter future not only of America but also the whole world. No wonder the most challenging task by the new US Administration will be to bail out the US economy which is in tatters. It is another matter altogether that Nobel Laurette Dr. Amartya Sen thinks Obama is little bit of a protectionist for comfort!

Amidst this global financial turmoil and looming recession, countries around the world are trying to make the impact as less painful as they can. In a recent G20 (a group of developed and emerging economies that represent almost 90 percent of the world economy) meeting finance ministers, advisers and central bank governors of the member countries gathered and tried to find a solution in the Brazilian city of Sao Paolo. The US is again mulling a proposal of $700 billion bailout bill which was not approved by the congress initially. China has already announced a plan worth to the tune of $600 billion to stimulate the economy by supporting domestic demand. The European Union is not far behind. More is expected to come out a the following G20 summit in Washington in a couple of days time from today

So what has been the impact here in India and what is it doing?

Well, due to the nature of Indian economy which has been a closed one till few years back and only recently opening to the world slowly but surely, there was little immediate impact in the financial and banking sector. But it has taken its tool on stock trading and export figures. The benchmark indicator, the Bomaby Stock Exchange Sensex has crashed to bellow 10000 mark from a high of 21000 plus in January. The government has already trimmed the expected GDP growth to seven percent while leading consultancy firm Goldman Sachs put the figure at 6.7 percent. These figures are still very good compared to other countries which are already experiencing contraction in their growth rate. The Indian government has also taken measured and responsible steps to thwart the impact of the turmoil. It has already released huge funds in the financial market by way of bringing down interest rates in order to induce demand and thus stimulate and maintain current rate of growth. So, one can hope that India could escape with fewer scars in the immediate future.

On the other hand Indian Inc. is nervous about the long-term impact of the current phenomenon. Ratan Tata, Chairman of the $62 billion Tata Group of Companies has already asked his CEOs to put off new acquisition plans unless it is highly strategic in nature. Software companies like Wipro Ltd. has already made plans to emphasize on the domestic market rather than depend on exports to the US and the EU.

One industry that has taken most of the pinch is the BPO industry. As global financial giants like fall, their outsourcing and call centers which cater to jobs such as credit card processing and factoring loans are in danger of closure. Already, there are media reports that workers in those centers are spending sleepless nights and suffering from depression.

One can only hope that leaders at the G20 summit, where Indian Prime Minister Dr. Manmohan Singh is also attending, find a suitable solution to the crisis.