Do we need silver lining when we like Gold?

Silver lining gave dark clouds and no rain?

Rupee on the downhill:

When the Banker’s bank in India assiduously avoided a cut in its CRR rates, playing over caution, Rupee made bold to venture into new lows (falling around 1.5% against the dollar) and plummeting to 58.77/78 against the Dollar. Another danger await us: tinkering with US monetary stimulus by Federal Reserve, would cascade into further erosion in dollar value. Appreciating Yen has further weakened Rupees strength. Rupee also might become q victim of carry trade unwind, as Rupee has become a pain in the neck for investors. It is not surprising that Rs 750 Cr moved out of India in the last two days.

Though there were inflows of around $ 3.6 billion during FY 2013-14, the pull out by FII was $ 3.5 billion. This has put tremendous pressure of the Rupee.  The cascading effect was dampening of sentiment in BSE, NIFTY.

Current a/c deficit:

The experts argue that the widening was due to concerns of high Current A/c deficit, widening trade deficit, which has already impacted the Rupee. India’s exports were $ 48.67 billion against India’s import of US $ 86.6 billlion.India’s reckless import of Crude Oil ($15.6 billion), non crude oil ($ 29.62 billion). This has created trade deficit. For the month of May alone, the deficit was $ 20.1 billion while it was $ 17.8 billion in April, 2013. The gap was $ 16.9 billion in the corresponding month of the previous year. Input imports, and machinery import has come down considerably as export units are not working to 60% of their capacities leaving an idle capacity of more than 40%.

Son-in-law status for Gold import:

Government treated Gem and Jewellery industry as a key growth oriented industry. The votaries of Gold import saw a gold lining. But it remained only as clouds fleeting away because of the strong wind!  This has resulted in massive availability of Gold with prices running above Rs 20,000/a sovereign. Gold import stood at a high of 89.7% to import figure of $ 8.4 billion. Many firms in the SEZ were importing gold and there are many instances when the gold imported instead of export found itself in the DTA. With abundant supply, and Rupee reeling and prices of land falling correspondingly, Gold prices rose steadily; this did not hurt the gold shops, as there were enough buyers as they felt Gold was the best asset to appreciate.  Purchasers thought we need to preserve wealth. Gold was the best option because of lavish appreciation. This logic was spread by the Gold merchants and government did nothing to dispel the impression.

The import of gold drained the Foreign Exchange Reserves. Only belatedly, the Government has woken from its slumber to declare that Gold imported should have a minimum 3% value addition and 5% value addition in gold and precious stone studded jewellery.

Reckless import; no balancing act:

Thanks to our policy of importing crude edible oil valued Rs 65,000 Cr, we have helped the South East Asian economies to substantially increase their exports. They have become large scale proucers of edible oil, and their economic growth of 40% comes from this oil sales. When the GoI distributes imported Palm oil through the Public distribution system by offering 25% subsidy to benefit 1 million stakeholders, are we not helping Philippines, Malaysia, Indonesia, god sent opportunity to revive their economic growth while putting down India’s domestic India, which receives rather ‘nil’ support from the Planning Commission to increase output of edible seed growth, enhance the area of edible sees sowing, getting better productivity.

Planning Rethinking:

 From 15% in the First Plan, we have descended to provide 5.4% in the 12^th Plan for the entire agriculture. The efficiency in the rationalizing of such actions need to be put to test by asking s simple question- have we forgot our foundations? The bench mark of our growth will lie in giving excessive importance to agriculture. We talk about Food Security, while we destroy the foundation of Agriculture that would provide Food. Farmers are as important as consumers, because without the farm output consumption will reach a zero end. 

India, thy name is paradox!

We hear government telling us that the high presence inflation in food has dwarfed economic growth. We also hear government telling us that in view of the perilous production of oil seeds and their conversion into edible oil, we needed to import a high quality to break-even between supply and demand. Our Planning experts are telling us that food grains growth would stabilize once the monsoon hits India. Monsoon did hit India, and very severely that the flood devastated many areas with its fury. Even the national capital was not spared.

The Supreme Court had faulted the government for having amassed food grains more than the stock required and due to clumsy storing, the entire stores got devastated by the rats that ate what was supposed to be given for distribution amongst the poor through Public Distribution System and through Antodya Anna Yojana. The Court ordered their free distribution with a time tag. But our iron clad bureaucracy is sitting tight and is in the process of devising a plan to distribute the food grains. When and how will be the reason that there will be delay?

The Planning Commission is of the view that the total BPL families in India are around 6.25 Cr. However, the States do not agree. They estimate the BPL families at 10.7 Cr. Why a head count was not taken is any body’s guess. As against Antdodya Anna Yojana, the beneficiaries entitled to benefits has been reackoned as 2.5 Cr. However, the State government has been able to enlist 1.82 Cr households, and they have been given Ration cards. While 0.68 Cr needs to be accounted, the subsidy for 2.5 Cr households have been calculated, and the amount budgeted and will be released pro rata. What will happen to the budget relating to 0.68 Cr will lie in the wilderliness.

Government, according to Economic Survey (Page 205, Table 8.29) says that in 2008-9, the production of oil seeds was 281.57 lakh tones of which edible oil was produced to the extent of 85.98 lakh tones, while 67.20 lakh tones was imported of which 83% was accounted by Palm Oil. So the available oil was 153.18 lakh tones when the actual requirement was only 132.80 lakh tones. The imported oil in surplus was 20.38 lakh tones which accounted for 15.34% excess. During 2009-10, 255.09 lakh tones was the production of oil seeds and converted into edible oil was 82 lakh tones. The import figures went staggering to 101 lakh tones. The total available oil was 183 lakh tones against the requirement of 138.18 lakh tonne. The difference was 44.82 lakh tones which accounted for 32.44% in excess of demand. Another factor was these oil were imported at ‘nil’ duty for Crude and 7.5% for Refined against the normal 45% and 52.5% and the loss on this account was in the region of Rs 25,000 Cr. Added to this, government thought it wise to release Rs 15 per Kg on imported oil for release through PDS. The recurring expenditure stand at Rs 1,500 Cr!

The question that comes to the fore is why are we importing in excess of what is required. There will inevitably be a closing stock which will become next year’s opening stock. What happened to that? The excess of import during the next year, what will happen to that? To whom do these reserves sold or given?

During 2008-09 an amount of Rs 43,668.08 Cr was released as agricultural subsidies which grew by a staggering 39.69 % over 2007-8 and upto Dec 29, 2009, Rs 46,906.68 Cr was spent which was in excess of 7.42 % over the full year’s spending of 2008-9. This was the time, the Government announced time and again, food inflation going to double figures and crossing 16%. During the same period, our Planning Commission stood ground with the theory that India’s agricultural growth will be 4% and to reduce it in the last quarter to negative 0.20%. Just to upset them, the agricultural growth turned positive and recorded 0.20% growth.

Our Government talks of austerity. Government is committed to fiscal consolidation. Bringing down the fiscal deficit from 5.5%. Our Planning Commission talks of apparatus to enhance growth through paradigm change growth models. While all these are professed, there is waste, excess expenditure, unexplainable imports, poor support to India’s domestic sector which is in the wilderliness.India, paradox, thy name?

The figures provided by Economic Survey, Planing Commission, Ministry of Agriculture, never meets. What growth? What expenditure? Will anybody correct the anomoly?

Petroleum companies are fleecing people?

Indian petroleum companies are shedding crocodile tears for no apparent reason.

Myth: 1] Indian oil Corporation has gone on record and stated that it incurred a loss of Rs 3,388.89 Cr in the first quarter of current fiscal as against a nett profit of Rs 3,682.83 Cr recorded in the first quarter of last year.

2] The Company made a net profit of Rs 10,000 Cr in 2009-10 and the Dy Chairman, Plg Commission states that this is inclusive of the 50% subsidies provided by the Government to the tune of Rs 20,000 Cr during 2009-10.
3] It is a fact that Government revised the prices of petroleum products by Rs 3/- in the last quarter of 2009-10, the benefit of which would have cascaded to 2010-11, and in the second instance, another adhoc increase, just a month ago, raising the price of petrol by Rs 3.50/litre, diesel by Rs 2.00, LPG Cylinder by Rs 35/-, Rs 3/per litre for kerosene. Kerosene is mostly used by the Below the Poverty Line families.

4] Oil companies contend that they incur $ 3 barrel on processing of every barrel of Crude oil. This year (April-June, 2010), they state that their gross refining margin (GRM) was Rs 7.36 per barrel.

5] The oil Companies admit that ‘refining margins were low due to inventory losses on oil as oil prices had come down compared to the closing stock(April 1).

While oil companies put forward such arguments to prove the acute under pricing in the import of crude, and the under recovery caused by the sale of oil, which is only 50% subsidized by the Government, they argue for increased prices from the consumer. Simple Law of demand and Supply pricing.

Reality: 1] One should go into the mathematical calculations of the purchase of Crude oil, quantity of Crude oil purchased, what is the demand: supply position of Petroleum products in India, how is the pricing done in the existing circumstances, and when there has been no appreciable increase in the petroleum prices in the international market, why are the Petroleum Companies in India are on a song, and hungry for more revenue? Now, how could the profit of Rs 3,682.82 Cr during the last first fiscal, turn into a loss, assuming that Government did not part with Rs 1,694.45 Cr as 50% of its share in the loss. This is only a notional adjustment in the balance sheet. Loss is a loss, whether it is subsidized by people or Government.

Dr B K Chaturvedi Committee went into the issue of usage of Kerosene oil in the Country. His findings have been documented. The study revealed that the use of kerosene has come down from 40% to 51% used earlier, only 1% is used for cooking purposes; out of 39% PDS Kerosene, 18% finds a way to the black market to adulterate diesel, 24% of rural consumption used for lighting is in villages where there is 100% electrification. Only 40% of the kerosene finds use. The rest is not used. Government’s subsidy for kerosene is Rs 17.92/a litre. What happens to the kerosene which is said to be distributed? The distribution is only in paper. Why can’t the Planning Commission do a detailed study to unearth the truth?

2] The truth is Petroleum companies’ profits are notched. They are virtual profits. How can any body say that factoring government subsidies, Companies make profit? These are monopoly Companies who are answerable to nobody.

3] During the year, the Government revised the petroleum prices at least on two occasions. Yet, why should there be a steep loss. Is it operational efficiency? Seepage? Misue?

4) How come such a vast change in refining? Has the government gone into the pricing of refining? In the first instance, they use the term cost of processing of Crude oil, and in the second case, they say gross refining margin. What does these two mean? Let the Economists of North bloc ponder over this aspect

5) The oil inventory showed it held excess stock. This stock had a price that was higher than the prevailing price as on 1 April 2010. The Oil Companies also admit that negatives on account of exchange losses due to Rupee depreciation and higher provisioning of bonds(the Government bonds that was given in lieu of 50% of the under recoveries). If they contend that these anomalies must be factored into the price of petroleum products, it is not fair and decent price determination.
.
Due to dollar depreciation, the invoice value of crude import should have come down, as the prices are paid in dollars. There is a comfortable cushion in this. In India, you are selling in Rupees. You don’t link the price to the Dollar. Hence twin advantage. Please use the same matrix for comparison.

The Company argues that the nett revenue lost by IOC was Rs 11,013.58 Cr. It was compensated Rs 3,671.26 Cr from upstream firms like Oil & Gas Corporation, GAIL and Oil India. Consequent to non revision of retail selling price in line with the international prices, net under realization was Rs 7,341.59 Cr. The usual practice was that the Government reimbursed Rs 20,000 Cr for under recoveries of IOC, BP, and HP during 2010-11.

The oil Companies agree that the net sales during 2010-11 went up by 23% to Rs 71,257 Cr. IOC alone had 17.254 million tones of petroleum products against 16.703 million tones duing the corresponding period (April-June 2009) while it exported 1.058 million Tonnes. The Refineries refined 13.278 million tones of Crude oil against 12.466 million tones a year ago during March-June of 2010 and 2009. The refineries are said to have clamped Rs 6.50 per litre as charges.

The oil Companies do not do any homework and incapable of working an alternate strategy. One aspect that Planning Commission should look into the capacity of motor cars being sold in India during a year, and whether the present infrastructure has capacity to withstand them. Secondly, if the demand for petroleum products could be brought down through planning, it will have a cascading effect on the supply and pricing. Merely to boost the manufacturing output, if uneven growth in manufacture of motor cars is made, the infrastructure would break down. It is good to draw a road map to build 7,000 km of highway Roads. But the wear and tear, its optimum capacity and longevity are factors that needed to be factored in. It can’t be utopian. Banks find it easy to provide vehicle loan as the motorcar is a tangible asset. But whatever incremental growth that is achieved should be practical and long withstanding otherwise, it will become Robinson Crusoe paradox situation.

Kochi Port wants a Patron

We talk about Imports and Exports. We talk about shipping capacities. We also talk about containerization. Seldom is break bulk cargo shipped, as the modern ships are not built to carry break bulk cargo. Mother ships call at various Ports. There are voyages to Europe and United States once in a week. As transshipment Ports were not available, the Indian cargo bound for Europe/America had to go through hub Ports like Sri Lanka and/or Dubai, and then they are dispatched to Europe/USA. What happens in such situations is, the turn round time for cargo diversion is more, making shipping costs high, and the time schedule in respect of receipt of Cargo also about a month. The feeder vessels who make journey to and fro Colombo and/or Dubai, will be costlier compared to the shipping cost, if the merchandise is conveyed through a mother vessel. There is also no break off time at the hub Port.

Cochin Port is one of the best ports, an all-weather Port in India. With the fact that there were regular visitors through sea to Kerala from time in memorial, sea routes have been designed, mapped, and virtually available. Yet, in terms of income from cargo, why is Kochi lagging behind other Ports like Tuticorin, which was set up in 1985 only. People attribute it to the labour strife. But the fact of the matter is, labour strife is prevalent but the more important aspect is political apathy to the development of Cochin Port. The Port authorities are vexed that around 60 lakh tones of Palmoil is imported into India; but its import through Cochin port is banned. Inspite of the territorial ban, palm oil is abundantly available in Kerala. Why to deprieve revenue for the Cochin Port only. On what basis or logic? What is Cochin’s loss is Mangalore, Chennai and Tuticorin Ports gain.

Kerala historically is a neglected state. There have been top political bosses in Kerala who had a hand in running the Government of the day. Shri R K Shanmugham Shetty, the last Diwan of Cochin was India’s first Finance Minister. Another great name was that of Shri V K Krishna Menon, who was left and right hand of Mr Nehru.. Kerala had surplus electricity, which it sold to neighbouring states. The income from sale of electricity was a revenue head in the State budget. Kerala has 44 rivers, and water everywhere. Today, in terms of per capita consumption of water, it is in the 20th place, lower down to Rajasthan. The National Highway stretch is very bad compared to the stretches elsewhere.

Kerala’s more than 1.5 million educated have migrated to West Asia, Europe, America, etc. Around 0.7 million are working in different parts of India. According to Government’s statistics, of 20 million expats from India, 8 million are in West Asia (most of them from Kerala). The remittances from West Asia are higher in volume (no of transactions) while United States NRIs lead in absolute value. It is also a fact that India account for about 20% of remittances to developed countries. A recent phenomenon noticed is that the people abroad do not use the money in share market operations and real estate deals, though valuation are at such amazing levels, but invest in risk free capital guaranteed deposits in banks. That is why, despite the low interest rates offered, the Deposits in Banks are swelling. AP (IT) accounts for 22% of the remittance, Maharashtra has 15%. Kerala constitute the highest 55%. RBI acknowledges that $ 40.296 billion is the inward remittance which in value is higher than the Foreign Direct Investment in India.

New generation ships are not coming to India, least of all to Kerala. Newer ships coming on-line are able to hold 2/3 times as many TEUs as ships as old as a decade. New ships are faster, undertaking more voyages than the older ships. The number of containers sucked up by new ships is manifold compared to the older ones.

There are destination wise Ports. Ports which have imports and exports in tandem. Some are only Ports having export consignments. There are some other Ports which have import priority. There are Internal Container Depots and Container Freight stations. ICDs are beyond 100 Kms of a Port while CFS is set up adjoining the port also to avoid congestion. Now, if the two ways (Import/Export) from a Port is brisk, then the problem of availability of Containers is not a problem. Otherwise, the container gone, or the container that has been off loaded, has to be transferred in an empty state, for which railways charge freight, if by Road transport it is uneconomical. Ages of the containers are also going down. So, there can be a compartitative cost only if the net imported container trade in volume compares well with net export portion.

The problem of Ports is compounded by the interpretation of tertiary policing agency like the Customs, Central Excise, DGFT, etc. Indian government publishes tariffs and import tax rates, but they are not transparent. There is no single official publication that includes all necessary information. Importers must consult separate tariff and excise tax schedules as well as any applicable additional public notifications and notices to determine current tariff and tax rates. Furthermore, different classification nomenclatures for tariffs and excise taxes cause confusion, even though they are aligned at the 4 digit and 6 digit levels. . India continues to maintain a negative import list. The negative list is currently divided into three categories: (1) banned or prohibited items; (2) restricted items which require an import license; and (3) "canalized*" items, importable only by government trading monopolies subject to cabinet approval regarding timing and quantity. India has liberalized many restrictions on the importation of capital goods. The government allows imports of second-hand capital goods by actual users without license, provided the goods have a residual life. The laws governing customs duties are the Customs Act, 1962 and the Customs Tariff Act, 1975. The Customs Act, 1962 is the basic Statute which empowers, under Section 12, duties to be levied on goods imported into or exported from India. The categories of items and the rates of duties which are leviable have been specified in two schedules in the Customs Tariff Act, 1975. The first Schedule to the said Act specifies the various categories of import items in a systematic and well considered manner, in accordance with an international scheme of classification of internationally traded goods – termed ‘harmonized system of commodity classification’. Different rates of duties are prescribed by the legislature on different commodities/group of commodities mentioned in the first Schedule. The duties are levied both on specific and ad-valorem basis, while there are few cases where at times both specific and ad-valorem duties are also collected on imported items. The Government of India applies discretionary customs valuation criteria to import transactions. U.S. exporters have reported that India’s customs valuation methodologies do not reflect actual transaction values and effectively raise tariff rates. Indian Customs requires extensive documentation. Processing delays often occur. In large part the delays are a consequence of India’s complex tariff structure and multiple exemptions, which may vary according to product, user, or specific Indian export promotion programme. The Government of India fixes minimum import prices for certain imported products.

The exporter/importer may have to study a lot of theory to do foreign trade. Our government, even though the export value had quadrupled from $ 44 billion in 2003-4 to US $ 185 billion in 2009-10, fails to give importance neither to the export sector nor improving its logistics and infrastructure.

Contradictions in Planning

Indian economy has withstood the torrential economic crisis of 2007-9. That is what the Government wants us to believe. Double dip growth cruve, we are at the fag end of the curve, and what remains is an inclined growth. It is raining cats and dogs, and our agricultural growth looks promising. In the end of the last fiscal, contrary to the Planning Commission’s expected growth of (-) 0.20% while, the agricultural growth posted (+) 0.20%. Quite often, planning commission’s growth figures are not only wrong but goes astray notwithstanding that they are only supposed to Plan, write the guidelines, question the achievable or non progress made. A project is included it in the
Plan, but the Commission is unable to ear-mark actual outlays due to funds’ volatility or shortage. Like sure sciences, economic planning is subject to rational or irrational human behaviour which can be contradictory to what could have been imagined. What are Plans? Mere estimates or one’s real assessment of growth, development in mathematical form.

The Union Finance Minister when he unveiled the budget, pictured a scenario of modest to good growth based on his premise that the world economy was growing, blooming, and zooming. However, in view of the carry over of the crisis-riddled economy, he had to impose certain taxes, increase certain surcharges, maintain the equilibrium in some areas, be considerate in some other areas, and be tight fisted in areas where lot of help has been given. The first step was when the prices of petroleum products were increased in March. The feeble voice of the Opposition, who became men of straw, did not have the vigour to shout. Hence kept quiet. Emboldened by this silence, again, on June 25, the Group of Minsiters (like the proverbial monkeys- see me not, hear me not, no speak) decided to increase the petroleum prices at the rate of Rs 3.50 per petrol, Rs 2.00 per diesel, Rs 3/- per kerosene and Rs 35 per LPG Cyclinder. Government’s argument was, though the oil companies showed profit in their balance sheets, it was factoring the subsidy given by government, which was causing a drain on the exchequer. Why not use it for some more productive exercises. And even after this added pricing, the inflation would enhance by less than 1%. Headline inflation was 10.16%, which government corrected as 11%, while food inflation touched 12.92% falling from 16%. No doubt, ONGC got a whopping Rs 5,400 Cr by way of bonanza because of this raise while Oil India’s additional income is expected to rise by Rs 800 Cr. In addition government got a share of central levies at the raised prices. The Railways would incur heavy losses while gas based power would have to incur an additional of Re 1/ unit (kWh).

The Fiscal deficit envisaged by the Finance Minister was 5.5% of GDP. He had budgeted an expenditure of Rs 11.09 lakh crore, while tax and non tax revenue was expected to yield Rs 6.82 lakh Cr. He had to resort to borrowing of Rs 3.81 lakh Crore. He was on a strong wicket, as his deficit pitched at 5.5%, while 2009-10 (6.8%) (revised 6.9%). The Finance Minister had proudly announced that the rolling targets for fiscal deficit was plugged at 4.8 %( 2011-12) & (2012-13). Finance Minister is in a tearing hurry to jump the fence.

We can heave a sigh of relief that our headline inflation (10.16%) and food inflation which dwindled to 12.92% from 16% have become even, after WPI and CPI had 10% difference between them. So leveling of the inflation, has given comfort to our Finance Ministry.

The first casualty of the guillotine of the stimulus was the Technology Upgradation Fund of the Textiles Ministry which has been withheld temporarily. He may cut down DEPB, reduce DDB, and other fiscal stimulus offered to various segments of Exports which did exceptionally well in spite of several shortcomings.

Under the targeted Public Distribution System, only 57% of the 652.03 lakh BPL families (up from 596.23 lakh) are covered by it. The amount of subsidies for food, fertilizer and petroleum is expected to be Rs 64,929 Cr. Central Issue price (CPI) for Above Poverty Line will be 100% of the commercial FCI’s commercial cost, while 50% subsidy was provided for Below Poverty Line people. The difference between APL and BPL prices provide strong incentives for illegal diversions to the market. The Government had identified BPL families through select geographical targeting which they found unrealistic, hence abandoned.

Dr Montek Singh Ahluwalia, Dy Chairman, Plg Commission when questioned the rationale, replied that the Government is not supposed to subsidize the oil companies. Somebody has got to pay for it (cheaper kerosene and LPG) - either through general revenues or from jacking up petrol prices. Subsidies need to be utilized for building schools, education, hospital, etc. He candidly said that people building roads should have knowledge of building roads, while Planning Commission members provided guidelines, econometrics, and implementation strategy. But the implementation was by some other body. He concurred that the Planning Commission had targeted 7000 Kms of National Highways @ 20 kms per day. But funds have to be found for it. He said regarding building of Delhi Airport, the role of the Commission was just selecting the Operator.

Regarding the point that under Road Transport, Planning Commission had targeted 7000 Kms of national highways without allocating funds would mean that the non availability of planned allocation would halt the project. There cannot be discussions on it. Secondly, the Planning Commission deputy chief should be aware that around Rs 70,000 Cr were pumped to the Government account by the Spectrum auction. The expected and anticipated bringing down of stimulus for sectors which had done well last year, would yield another Rs 50,000 Cr. Already the announcement of ‘base rate’ would help the Banks to mobilize more money and more income, which would be pro rata given back to the Government as dividend. India accounts for about 20% of remittance to developed countries. Overseas investment to India is directed at not the share markets and real estate markets, but to risk-free capital guaranteed deposits in India. That is why, Banks deposit base is soaring in spite of poor RoI (Return-on-Investment). If Indian Oil Corporation has been patronized through subsidies and if they had made profits to the extent of Rs 10,220 Cr in 2009-10, how much of it was granted to government by way of dividend. In Rs 10,220 Cr, what was the percentage of subsidy that the Government shelled out? Dr B K Chaturvedi Committee appointed by the Plg Commission has clearly pointed out that subsidy for BPL families in 100% electrified villages found way to black market, and 26% of the total kerosene was used to adulterate diesel, what action did the Planning Commission or Government of India do? If the Plg Commission was so concerned for money, why are they importing Crude Palm oil at ‘nil’ Customs duties and edible palm oil at 7.5% which account for a loss of income to the tune of Rs 24,000 Cr. Further 3 lakh tones of Palmoil is distributed through PDS by subsidizing 1 litre of Palm oil by Rs 15/- which amounts to around Rs 500 Cr. Planning Commission targets a growth rate, then mid-course changes it, and at the end of the year alters it, and what is achieved is a different percentage? How does Planning Commission Deputy Chairman endorse this? Accountability rests with the Commission. It cannot absolve/abdicate itself of the responsibility. If Planning Commission should consist of Accountants only, why put intellectuals, economists, scientists, thinkers, sociologists, and pay astronomical sum to them? Better disband Plg Comm?

Awake and arise, Indian Commerce Minsitry

United States of America which had bi-lateral trade to trillion worth of Dollars is slowly on the ebb. These goods are no more seen on the shelves of the biggest and largest retail malls. China can fret and fume as its exports to United States dipped by 20.5% to US$957.36 billion. The prime reason for such a decline was the falling Dollar. . More the dollar falls, the more costly the export becomes. Trade value between China and the country’s three major trade partners, the EU, the U.S. and Japan, was US$292.42 billion, US$239.36 billion, and US$182.34 billion during the first ten months of 2009, which averaged a drop in growth of 18.7%, 14.9% and 19.3%.

Did not this do a bit of good to the United States as it gained a lot due to compressed imports from other Countries?

Will it not pave the wave for higher consumer consumption? When exports of choked, the production from inland market is expected to rise. The demand will chase the supply. The consumer index which showed much improvement in the first ten months of 2009 proves this point.

The US domestic sector has been given a boost and it has acquired space to their own local producers to manufacture the goods and supply to their own people which has resulted in lesser imports.

So long as the Dollar remains weak, the Asian countries and China which has made a deep dent into American markets at a quick pace will tarry. They will stop exporting to the United States, and this will result in a commercial boom for the local industry which would be able to capture the markets vacated by these aggressive players, as a weak dollar would not be an advantage for these countries to continue with exporting their goods. At the same time US GDP growth is pegging up as more domestic products will be consumed and this would naturally diminish exports. .

One would be tempted to ask, Is America deliberately trying to downsize the Dollar, so that American economy which is in the doldrums will recover, there will be free float of money, the loss of employment can be prevented drastically. By artificially keeping the Dollar value low, US will encounter fiscal deficit if Dollar gets downsized.

The ambitious China is to go for mass production, GDP had an average growth rate of 10.5%.The economy is also getting back on its feat of maintaining the average rate. In the comings days china will face one of the hard times to push its products in other economies. China is running beyond 100% productivity which will result to cheap prices and lower profitability for the goods of Chinese origin. When as and when Dollar depreciates and stays at such a level, China will find it hard to find space to dispose off their products; this will result in their looking at new markets, nascent markets, and emerging markets .When this happens, the domestic industry in these places will suffer severe heat from Chinese imports and they may have to slap anti dumping duties. This would result in countries which look for replacement of American markets at short to medium level facing anti dumping charges and naturally, they will have to knock at the door of WTO. The over capacity bubble will put brakes on the revival path of Recession which will reverberate across the countries and continents and will devastate the economies of these countries who have excessive dependence on exports especially to America. Asian economies will have to cut back on many things from manufacturing to industry growths. Moreover new economies need to be developed so that the loss from trade to US market is compensated by the growth in exports to emerging, nascent and new markets. Otherwise Asian economies will have severe structural problems in trade, export, employment, economy, Foreign Exchange, etc.

China has taken serious cognizance of the situation and in the recent past has increased its industrial investments to record levels. Chinese fixed asset investment was 15.07 trillion Yuan ($ 2.21 trillion). This investment have resulted to increased productivity beyond 100% and antidumping their goods to other economies. Chinese investment in the Agricultural sector especially the primary sector covering farming, fishing and forestry jumped 54.1% year on year. The industrial sector, or the secondary sector, posted a 26.8% growth in investment and the tertiary industry, including commerce, finance and services saw investment up 37.8%. This shows that not only Government stimulus resulted in China’s higher growth even in the worst of Recession times, but steady investment has resulted in higher growth. Industrial production has not decelerated but has progressed with a higher percentage.

If China needs to find new vendors across the globe to convert their manufactured products to money, they need to depend on other economies. The Chinese government conscious of the dangers of the external markets, have taken caution to stabilize their internal manufacturing set up by going in for A & M and restructuring the steel sector to create three globally competitive steel making giants who can withstand the global cartels. They have also taken care to stick to the environmental concerns, reduce energy consumptions, putting the end products to standards and quality, optimum but careful use of resources and carefully watching the production scale. Another industry which they plan to merge through M&A is the Automobile industry. Two conglomerate Chinese automakers with an annual production of 2 million vehicles will be planned from dozens of small domestic car manufacturers to bring and strengthen global competitiveness.

It is a fact of economic history that when the United States car makers are struggling with their financial sheets, China made a remarkable feat by getting their Car sales soaring by 72% from the same period of last year when 1.2 million vehicles were sold.

The mergers and acquisition deals in China grew from $ 1.3 billion in the first quarter of 2009-10 to US $ 8.9 billion in the thirds quarter. The increase in economy of scale, expansion and growth of their business size will give these giants competitive strength and power to go in for overseas expansion. China’s planning is meticulous, it has got wind of the changed times, it is aware of quality, price and competitiveness will play an improved role in the new world. Chinese steel and auto exports will remain a threat to the American steel and auto companies, as the meticulous precision with which China has expanded the capacities of all the steel/automotive companies so that they can venture into the international arena with full fledged strategy, planning and execution.

Our Indian Comrades, who are opposing the integration of Banks into three or four strong banks through mergers and acquisitions, should take a leaf out of the Chinese comrades instead of saying what is good for china is not good for India. When will one learn?

Indian Government, Indian organizations, Indian institutions dealing with commerce and exports should plan, strategize, with meticulous scheduling , the way export route must be executed instead of wailing that give us stimulus otherwise we will perish, give us support like China etc. We need to stand on our own legs. We need to plan for the future. We must have a Disaster Plan Management on our hand or an alternate strategy. . Neither our Exporter giants nor the Commerce Ministry has any inkling as to how to conquer the problems, how to exploit the Strengths, how to overcome the weaknesses, how to use the advantages of opportunities and how to face the threats. Better late than never. Awake and arise Commerce Ministry!