Kerala's crisis? Why?

Kerala’s notoriety of excessive Greed

Kerala does not have an economy of its own. Nor is there, any favourable industrial climate which attracts investment. Its insipid industrial Policy does not generate confidence amongst investors, while money order economy places lot of money in the hands of families who have workman abroad. Recently, Kerala based economists and broadcasters wanted Rupee devaluation to continue so that the remittances in foreign exchange from abroad will lead to more exchange rates when converted to Rupee. These experts even asked the Gulf employed Malayalees to raise loans and send the money to Kerala to beget higher returns.  Kerala’s thriving economy depends on the sweat of the brow of these hapless people who are all over the Middle East eking out their livelihood. Kerala does not labour, hence migration from Bengal, Bihar, Orissa, Tamilnadu, Andhra Pradesh, etc. This is cheap labour for you.

          How can you become an entrepreneur without a base? Kerala’s highly literate population can easily be fooled. That is Kerala model for you. Like the Dengi dengue, fly by night blade companies minted money from this highly literate people. These blade companies looted the public money, and left without a trace. No lessons were learnt from the fearsome collapse of the money lending blade companies which one after another failed in the 90s because, they could not afford to pay interest. Even top level companies which floated money lending companies fled, pulled their shutters and the middle class, pensioners lost a tidy Rs 10,000 Cr or more. There were many companies which promised plantation cum animal farms. There were multi level marketing firms, and money chain companies. Now, the green initiative companies have taken over. Why do all these companies flourish? Because they offer higher returns of around 30-50% against Bank’s 8.5% for a five year deposit.  It is because, people have corpus money, wealth, which they want to invest. There may be black money, too. Gold selling companies had variety of schemes; they offered gold by paying in installments.

          Take Kerala’s dubious business marketing strategies of some of the successful firm which failed to deliver after amassing wealth. Total 4 u scam consumed Rs 200 Cr with alleged cheating of investors of around 700 investors. Tycoon Money fooled  24,000 investors who lost Rs 410 Cr.Nans Excel, multinational marketing Company deprived 250 investors of a near Rs 500 Cr. Apple a Day, a construction company is alleged to have collected Rs 100 Cr by promising housing to around 700 people. All the cheated, belonged to the middle class. Why are they gullible? Greed?

          Today, if you want to make a fast buck, go for Green Energy initiatives. This is what Team Solar did. People are said to have been cheated to the tune of Rs 35 lakhs and Rs 40 lakhs. All these monies were collected by the Team Solar management in Cash.

          Literate Kerala, park their funds in dubious paper companies. People who have large liquid cash, which they want to multiply in good time select these companies unaware of the dangers. They lose lot of cash but never complain, because they have to revel the source of hard cash which they had.

          RBI has come out with stringent Gold loan policy. This has helped the private banker to double/treble his business. They seek 12-15% interest per annum. Before the granting of loan, they deduct 3-5% as service charges from the loan amount. The craze for gold goes on, inspite of the cost of glittering gold which no longer glitters.  In spite of higher Tariff value imposed by Customs, there are no diminishing imports. Why? In spite of higher prices, there is demand for gold. This is simple Economics, my dear Watson (PC).

          These incidents have brought bad name to the state; no genuine investor wants to come to Kerala to set up an industry. Entrepreneurial cult is conspicuous by its absence. With global recession, there is lot of investors including NRIs looking around. Nobody has in their list Kerala as a destination because of state’s poor entrepreneurial heritage. Money order economy may boost consumption because of excessive spending, which will post a higher State Domestic product growth but will not create permanent assets which will recycle investment and spending. No new jobs will be created because of absence of industrialization. The colleges who spun out more graduates add to the unemployment picture of the state. They desert the state to greener pastures.

          Kerala’s poor political leadership has been responsible for the mess it finds itself in. It needs people who will avoid chaos in the investment front

RBI Monetary Policy and fall in Indian Rupee

Mid quarter review of RBI Monetary Policy: Will they prescribe lending or mending monetary Policy

When the RBI wise men release the midterm quarterly Monetary Policy, will they stick to status quo or be ebullient to course a new path?

Will they reduce CRR as demanded by many banks including SBI? Already there are strong arguments that money parked by Banks with the monetary authority is ‘dead money’ and no economic activity results from this. If RBI reduces 25 basis points, the banks will get around Rs 3000 Cr which can be recirculated into the system by way of interest cuts or new loans can be sanctioned. Today, CRR stipulation detests them with tinkering with the base rate. The brazen policy of no CRR cut, and if done will fuel inflation has been the cause for less money for loans, less circulation of money, production cuts, and decrease in consumption, which retards growth rate.

RBI is in the excessive caution mode, which results in stifling of economic growth which is around 5.2%.

The Rupee’s has been gathering reverse momentum. It is set to touch Rs 60 to a dollar and may even climb higher to touch Rs 65-Rs 70 sooner or later. RBI’s intervention of buying dollars may at best be a short term effort; it will not give effect to a permanent solution. It may even back-fire, as contended by RBI Governor.

The easy argument is that all currencies are under pressure. There is a silver lining that American economy is starting to glow. It is a sign of recovery. Even if American economy dazzles, what is the guarantee that there will be trade inflows and capital inflows to India. It may be in the reverse direction.

Importers buy dollars and transact while the exporters hold on to their dollars hoping for an even better exchange rate.

Does market sentiment play a role in the diminishing value of the Rupee? It is unlikely because India has a herd mentality among market participants.

Indian Government encouraged commercial borrowings by companies from external sources. Currency risks and asset liability mismatch proved the blunder of Government Policy.

India has Foreign Exchange Reserves of around $ 290 billion. This did not come from export dealings. Foreign exchange from exports were eaten away by the imports which was $ 150 billion more ($450 billion) against export receipt of ($300 billion).This residue of $ 290 billion, are dollars accumulated by RBI through short term flows. They are in the nature of ‘debt’ assets. A portion of the reserves were spent by the benign Government of India  to fund infrastructure.

We have bad economic advisors who do not have the prodigal wisdom to take the right decisions. Country’s economy suffers in the bargain, both in the short- to medium- to long term.

Where is Kerala's Coir industry heading?

Sulking Coir industry travels towards jolt

Coir industry has been one of the mainstay traditional industries which raked in foreign exchange to Kerala in abundance. During the time of the British, most of the factories were owned by them, and they produced mats and mattings and these were in abundance use in their own residences where, the first floor mostly consisted of wooden floors. A play of colours carpets gave a special artistic touch to the interiors.

Coir door mats and mattings were used immensely in the household of Europeans and the Coir mats and mattings that were manufactured by the Alleppey factories found their way to Europe. Alleppey, which was christened Venice of the East, thrived on Coir industry.

Most of the Britishers who ran the companies left India along with their counterparts in Fort Kochi(1960). They left the residue of the industry in the hands of Indian masters who were left with the opportunity of turning round an industry which was a legacy of the Britishers.

Kerala had a unique white fibre, which was famous for the mat industry. The industry lived in its primitive form, until a doyen Ravi Karunakaran, went abroad and tried to modernize some of the Coir operations. Tufted mats became a reality thanks to this far sighted man.

Kerala had the highest Coconut trees, but the productivity was steadily declining due to variety of causes including shrinkage of the area of its crop. Slowly Tamilnadu took over, with factories located in Kerala while the coconut husk was available in Tamilnadu. Kerala did not nourish de-fibering units, as a result 80% of the Coir fibre has to come from Tamilnadu. Chineese agents beseech Pollachi and began to buy from them directly through local agents. Now the fibre manufacturers owe allegiance to Chinese merchants with the result, Coir fibre does not find way to Kerala. 80% of Chinese purchase of coir fibre jacked up domestic price considerably. The option should have been to ban export of coir fibre from India. Either the authorities did not find the need nor know about the serious consequences this would put to, if the indiscriminate at throw away prices continued.

When the demand for Coir door mat and matting decreased, the local industry went for Rubber based coir mat, as architectural changes abroad, and shedding of fibre made coir mat loose its quality and market, which sealed forever, the coir mat and matting market. They were unknown victims to destroy the very product they had created! The owners felt that soaring production costs, lower productivity, overall dwindling contribution of overall value added products to country’s coir exports, has done the industry to its fall. Is not country’s coir industry sulking without markets and margins. One exporter commented dryly that revision of sourcing price 4 times over five years which witnessed increase from 15% to 30% production costs destroyed the coir industry comprehensively, speaks for itself.

The spokesmen of the body which should develop coir industry was of the view that coir competed with replacement products and synthetic products which had a lesser value. He was of the view that school bags, women bags, chapels, conference bags, gift items would bail out the industry. These items suggested by him were craft items, and their sale price would not compensate running of the huge industries for which crores of rupees have been invested. Handicraft items have their own demand but they are cheap priced products which can at best sustain a cottage industry and not the coir industry which has ploughed in more than Rs 1000 Cr in investment costs and the same cost for creating the infrastructure.

If a new paradigm shift should overtake the industry, there is need for infusion of fresh capital including FDI. The outdated rats and looms should be replaced by modern machines, and a long term solution should be put in place instead of short term programmes which will not revive the industry.New thinking entrepreneurs should be in saddle in drive a resurgent Coir industry.

If the Coir industry should be some industry manufacturing innovative products, it should get out of the Domotex mind set, and move on, and bring out innovative products which match the need of the people.  There are still people in the Coir industry who can reengineer their capacities, end products and usher in a revolution. The earlier it is done, it is better.

Election of 2014 in India- a forecast

Who will rule India in 2014?

India is expected to go to the Polls by 2014. Every political party has arrayed with one another, most of them waiting for the outcome to forge an post election alliance to derive maximum advantage.

In the present context, leading the pack of cards is UPA which has been in rule since 2004. Opposing them is the NDA which has lot of space in much state as well as in various union territories.

The elections of 2014 are expected to bring out queer results. Both the national formations UPA, NDA have lost touch with the people and their aspirations. But, both of them are confident of sweeping the Polls. There is also clamour for the third front, as both NDA and UPA seem to be the bird of the same feather which flocks together. The extreme eagerness amongst the regional parties, who would want to forge a federal front has been getting clamour. But it looks non starter since inception. Their divergence is the moot point that they cannot come together. They have fundamental differences, that will inhibit becoming part of a front, even if formed can be found to suffer longevity.

Each state has two fronts, each enemy of one another

DMK/AIDMK

Nitish Kumar/Lalu Prasad Yadav

Mamata/Communists

SP/Mayawati

Abdulla/Mehabooba (JK)

In Karnataka, we have a Yedurappa factor, which can spoil sport. Even Gowda, the spent sport can also rejuvenate at times. NCP will be coy to any developments in Maharashtra. BJP/Shiva Sena can send shock waves in Maharashtra, but Shiv sena divided, may be not be invincible as it was.

North East may play considerable role which may not be significant but important to both the fronts.

The fresh infighting in the BJP due to NaMo factor may see cross voting. But who will stab who remains to be seen. This will rule true in MP, Rajasthan, Himachal, Haryana, and other places. Congress too, will be struck with in-fighting. There may be permutations and combinations on the eve of elections. Subsequent to the elections, Aya ram, Gaya Ram, will come to play. But stable government is ruled out. The electoral moods of people, if taken as of today, the people are a worried lot. They do not expect any miracle.

A new alignment mat manifest.

Based on our intricate study, following will be the electoral success in the 2014 elections.

State	Lok Sabha seats	Third Front	Congress	BJP	Left Parties	Independent	Others	Unknown
Andhra Pradesh	42		5	2	3	6	26
Arunachal	2					2
Assam	14		5	4	3	2
Bihar	40	20	18	2
Chhattisgarh	11		4	7
Goa	2			2
Gujarat	26		1	23	1		1
Haryana	10		5	4	1
HP	4		2	2
J&K	6		3				3
Jharkhand	14		7	4	2
Karnataka	28		14	9			5
Kerala	20		11		8	1
MP	29		7	22
Maharashtra	48		21	27
Manipur	2		2		1	1
Meghalaya	2		1			1
Mizoram	1					1
Nagaland	1		1
Orissa	21	15	2	4
Punjab	13		4	9
Rajasthan	25		14	11
Sikkim	1		1
Tamilnadu	39		5		2	1	32
Tripura	2				2
Uttarakhand	5		2	2		1
UP	80		15	20	4		41
West Bengal	42	25	8		9
Delhi	7		3	3		1
Andaman Nicobar	1		1
Chandigarh	1	1
Dadra Nagarhavali	1					1
Daman Diu	2							2
Lakshadweep	1	1
Pondicherry	1						1
Total	574

If there is a Third front consisting of Trimool Congress, BJD (Biju), BJ(U) Nitish Kumar, they stand to bag 80 seats out of 574 parliament seats in the 2014 Poll. Jayalalitha’s AIDMK is expected to bag 25 setats, also 1 seat in Puducherry, while DMK may win 7 seats, while SP/Mayawati may win positively in 41 seats.  Chandra Babu Naidu may wrest 26 seats. Left front may romp home with 36 invaluable seats, while the tally of independents posting wins will be around 18. Two seats may go to anyone.

Congress may bag 162 seats, while BJP will emerge as the large single party with a mandate of 169.

The seat position in the 15^th Lok SDabha will be as follows:

Sl Number	Party	Strength
1.	Congress led UDF	162
2.	BJP led Front	169
3.	Third Front	80
4.	Left Parties	36
5.	Others*	109
6.	Independents	18
7.	Unknown	2
	Total:	576

Let us hope, the election of 2014 will crop up new leadership decisive to lead the nation to prosperity and Rama Rajya.