Topics for discussion: 001, Trickledown Economics, West Bengal, China, PPP TRICKLEDOWN ECONOMICS
INDUSTRIAL DEVELOPMENT
WEST BENGAL IS IMITATING CHINA
The CPM Government in West Bengal is imitating China in clamoring for foreign investment. Its CM is visiting US to invite American Companies to invest in his State. Hitherto, CPM at Centre is extremely critical of India allowing foreign investment. Now, a volta facie.
PUBLIC PRIVATE PARTNERSHIP
The Prime Minister of India revels in canvassing Public Private Partnerships. But, in fact, the PPP in India has become "Pirates in Public Properties". Proof: The Private Sector Industrial magnets mismanaged their industrial empires and enriched themselves, leaving the public (common small shareholders) subscribed units high and dry. They have also simultaneously saddled the Public Sector Banks with thousands of sick units blocking billions of Rupees in Non Performing Assets.
The Public Sector Banks coolly wrote off those amounts from the profits earned by them on advances to healthy units and moved the bad debts to Off-Balance Sheets assets so that they do not get closely scrutinised by the Auditors or the Parliament, with afflux of time. This is a punishment to disciplined borrowers, and reward to willful defaulters.
Now, the PM Mr. Manmohan Singh expects the industrialists to participate in joint sector, manage the public sector units profitably. This is against the very nature of the industrialists. The PPP is going to be a sort of buffalo. Govt. will feed the buffalo with grass. The industrialist will milk the buffalo. Hey! What a healthy partnership?
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INSURANCE SECTOR
INSURANCE VERSUS SECURITY: INSURANCE IS NOT A SUBSTITUTE FOR ARRANGING SECURITY
Yesterday, (Dec. 26, 2006), when a Bank at Narasaraopet, Andhra Pradesh, India, opened its doors after Christmas vacations, it found that its FIRE AND BURGLARY RESISTANT SAFE was broke open with gas cutters and gold worth about USD 1 million was burgled. 4 kg. of molten gold was untouched. Large cash was also not touched. The Bank had insured its valuables and will get itself indemnified. The Insurance Company may be safe because it would be paying from the pool of premia collected from thousands of banks. The Bank did not have any security guards posted at the locked shutters. If the burglars melt the gold and sell it, the people who kept their gold in bank will only get an approximate value of the gold ornaments. Definitely, not the actual jewellery ornaments which may have personal attachment to the citizens.
'PR'>Is it a national loss? As long as the gold does not move out of a country, it cannot be called a national loss. Instead of individuals holding it, the thieves or buyers from them hold it. Gross Domestic Product (GDP) may not change.
But Can we say that insurance really serve any purpose?
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'INVESTORPROTECTION'>INVESTOR PROTCTION
SEBI (Securities Exchange Board of India) is planning to create an Investor Protection Fund, to protect the small investors. It proposes to use the fines and penalties collected from listed Companies for the purpose. SEBI also wants to initiate an Investor Awareness Programme.
'PR'>Spreading investor awareness is always welcome. But creating a protection fund may not serve any purpose, because 1. the number of fly-by-night operator Companies is very large. 2. Investors are supposed to be on their guard. Most of them want speculative profits and burn their fingers.
If SEBI can take really punitive action against the defaulting Companies, it should be sufficient. The premia collected in Initial Public Offers is very high vis-a-vis performance of the Companies and the promoters. Still, they get oversubscribed several times only with a speculative motive. The Companies cannot collect astronomical sums and vanish in thin air. Investor Protection Fund is a sort of insurance. It protects inefficient investors. It penalises listed Companies. Real defaulting Companies prefer to get themselves delisted.
Company failures and disappearances have become routine. SEBI does not know even the addresses of the Directors of the closed Companies. Its preventive as well as corrective investigative wings are to be strengthened.
'CHINAINDIATAIWANKOREA'>CHINA, INDIA, TAIWAN, KOREA
(Feb. 16, 2007) Marketwatch.com reported that Funds Managers are shifting their investment preferences from China and India to Korea and Taiwan.
COMMENT: If this really happens, will the Indian Stock Exchanges dry up?
NEW YORK STOCK EXCHANGE - NATIONAL STOCK EXCHANGE
NEWS:
New York Stock Exchange (NYSE) acquiring 26% stake in National Stock Exchange (NSE) is being touted as a great achievement and recognition for India. Following the que, Bombay Stock Exchange (BSE) according to news reports, is falling at the feet of the London Stock Exchange, NASDAQ, Deutsche Bourses, Singapore Stock Exchange to buy 26% stake in BSE.
PR'>COMMENT: What a shameful downfall? The famous Moghul emperor of 1627, tempted by gifts and gold coins, permitted the English merchants to build their godowns at Surat. Venkatapati Rayalu II and his vassal leased out Chennai to East India Company and permitted them to build a fort. The Europeans occupied the whole country and robbed it for 250 years.
What did we learn from history?
AMARTYA SEN'S RIDE ON TWO HORSES
Nobel Laureate Amartya Sen rides on two horses. 1 Market Economy. 2. Welfare Economics.
'PL'>The West recognised his talents. It gave him Professorships, awards and rewards. It gave him a cousy shelter. Hence he cannot afford to neglect Market Economy. Fortunately he has a Government of India and a Government of Bengal who are equally devoted to the Market Economy.
Whenever he visits India, he gets worried about hospitals, hostels and schools He feels that Government is not spending adequately on welfare. He is fair enough to recognise that Market Economy will not build hospitals, hostels and schools, because the Market gets nothing from such generosity. Yet the sametime, he raised a question that Market Economy should consider the benefits by addressing to issues of rural poverty. This suggestion will be overlooked by the market economy, while at the sametime it does not mind to shower some awards on Sen. Because, Market Economy today wants Super Profits and not normal profits which were part of cost of production, discussed by the classical economists like Adam Smith. Indian Rural Economy is emaciated, has no flesh to generate super profits. Showering awards is easier for the Market Masters.
Governments will not spend more on welfare. The early Govts. after freedom 1947 were led by freedom fighters. Hence, they had a genuine zeal and honest thinking to raise the Nation. Today's rulers are industrialists and mafia leaders who send millions just to get elected to Parliament. They have to get back their investment. Every Rupee spent by the Govt. will, therefore, be their private capital generating profits for them. Where is the place for welfare? Probably welfare of their own party workers and supporters whose services they have to use for booth capturing and rigging.
'TRICKLEDOWNECONOMICS'>TRICKLEDOWN ECONOMICS
'PL'>Mr. Joseph Stiglitz, Nobel Laureate Economics 2001, in an interview felt that Trickledown Economics did not work in USA. Implication: US has a very high GDP growth rate; but its poor are not receiving the benefits of growth in US.
Prime Minister and Finance Minister always sing the song "Our growth rate is going to 10% p.a." . The PM himself admitted that there are gross income and wealth inequalities and the benefits of development have not reached the minorities, SCs and STs. Their party ruled 50 years out of 59 years of independent India. Another study report indicates that 200 million Indians survive on a daily wage of less than Rs. 12/-. If this true, then it implies that the fruits of development have been pocketed by the Congress rulers and the bureaucrats. As a former Finance Secretary and Governor of Reserve Bank of India, our PM should also accept his share of responsibility.
Since, he pledged to remove the inequalities, it will be apt if he donates 50% of his wealth for the welfare of minorities.
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