Which Will Be the Fastest Growing Country in the Coming Decade?

“The old forecasting rule was to make as many forecasts as possible and publicize the ones you got right. The new rule is to forecast so far into the future that no one will know if you got it wrong.” - Ruchir Sharma.

Which is the world’s fastest growing economy currently? Without doubt, it’s China. But will China continue on the path of 9-10% growth for the next few years? Most economists think it will, but China is slowing down due to multiple reasons. It may soon witness a recession, which won’t be anywhere close to what the rest of the world encountered in 2008. China’s recession is more like a slowdown to 6% growth.

So which country will bag the gold medal for growth in the coming decade? Ruchir Sharma attempts to answer this question through his masterpiece ‘Breakout Nations’. He has analyzed the history, political scenario and sentiment of a lot of emerging markets and correlated them to the countries’ economic conditions. In this book, renowned economist Ruchir Sharma meticulously dissects countries like India, Russia, Brazil, China, South Africa, South Korea, Mexico, Turkey and others. He offers valid insights, backed up with sound stats, into the strengths, weaknesses and areas of opportunities for these emerging nations.  

'Breakout Nations' - Ruchir Sharma

Every nation has its fair share of obstacles. Whether it’s infrastructure, government overspending, policy paralysis, the refusal of political figures to give up power, stagnation or something else, each country is battling problems which have occurred due to decades of following the same patterns. Some countries like Russia, Brazil, Nigeria and South Korea have used difficult times to revamp the way they functioned, and have been rewarded handsomely. Others have chosen to stick to tried and tested (and purely functional) models which have restricted their opportunities for growth.

Ruchir Sharma isn’t just shooting from the hip like many so-called economists do.  He has toured each country extensively. He brings out astonishing details of day-to-day functioning the emerging nations. For instance, the strategy being adopted by companies in China to woo workers back from their villages after Christmas vacations. Or corporate head honchos in Brazil using helicopters to travel from one office to another within the city because of excessive traffic. Or that Russia is heavily dependent on oil prices to secure its future. Each problem (and more) has stemmed from conditions which have been building over long, and continue develop. Since this book was written in 2011, scenarios have changed a little. But most of his predictions seem on track for the coming decade.

This book is a pleasant and entertaining read for anyone who is remotely interested in economics. The language is simple yet elegant. Facts are made interesting with the help of short stories and anecdotes. It reminds me so much of Gurcharan Das’ ‘India Unbound’, another gem. Of course, after having spent years interacting with the world’s most powerful politicians and writing umpteen research papers, nothing less is expected of Ruchir Sharma. I couldn’t find a single shortcoming in the book. Partly because of my love for macro economics and also because I don’t have even 0.1% of the knowledge which the author has. Read the book to find out which are the ‘Breakout Nations’ according to the author. You will be surprised to know that they’re from among the usual suspects.

A Verdict on the AAP v/s BJP v/s Congress Debate

The AAP v/s BJP v/s Congress debate has taken the country by storm! It's like Sri Lanka v/s India v/s Zimbabwe (where the Congress is Zimbabwe). Well, it doesn't matter. The country has given its verdict. While most are overjoyed with the result, a lot of us are sour. Some call it the 'death of democracy', yet others are claiming that it's a bubble waiting to burst, and then there are those who believe that the most controversial party would've done a much better job at the helm.

This post is not for bragging about the BJP's victory. It offers insights into what transpired. It is an analysis (without statistics) of each party's actions and their repercussions.

A friend said that his relatives in Ahmednagar were happy with the Congress. The Congress had waived off farmers’ loans and electricity bills. These subsidies are what has kept them in power for 55 out of the 67 years, and will continue to do so. You see, the Congress has spoiled people below the middle class so much that they don’t want to work hard anymore. The MGNREGA has given the lower strata the easier choice of being paid without working. As a result, labour for agriculture has become expensive, indirectly impacting the price of food grains. The PDS has, as usual, led to hoarding of food grains by middlemen creating an artificial shortage. Again, prices rise. This time, the middlemen make money. Policy paralysis, countless scams and almost 0% accountability has frustrated almost everyone.

Most of India (including me) was delighted with AAP’s dominating victory in Delhi. I must admit, however, that I was sceptical of AK ever since Anna Hazare claimed that his Jan Lokpal proposition was being diluted by Kejriwal and used for selfish reasons. After forming a government over much brouhaha, the repeated U-turns made by AK and company, mindless dharnas and unfeasible economic decisions left Delhi worse off than it was. Water tankers earlier would charge 800 bucks per round. After Kejriwal’s resignation, ungoverned, they started charging 1,500 bucks per round. Imagine the plight of common man who believed in AK. Plus the number of resignations from party members and mud being slung them, the vehement abuse of all politicians by AAP members; these left a lot of people disillusioned.

It is true that most people support AAP for its cause – wiping out corruption. But in a country like India, where corruption has penetrated every aspect of our lives, it will take a mammoth effort. A mere resignation within 50 days and blaming other parties for it won’t suffice. Hell, office politics is tough because of colleagues. What gave Kejriwal the feeling that running India’s capital would be any easier?

Corruption is a major issue for the middle class and bourgeoisie, not for the lower economic classes. Their concerns are jobs, wages and prices – primarily of food items. While we were crying about Salman Khan mistreating Gauhar in Big Boss, the poor man barely had food to eat because of job losses and food prices shooting through the roof. He was left exasperated. Consequently, he turned to the only man who talked the language he wanted to hear – Narendra Modi. More than the media, immigrant workers in Gujarat carried word of his good work around. Labourers would let their friends and family in Bihar, MP, UP and other places know about how efficient the governance in Gujarat is. Lower strata people (including Delhi’s slum dwellers) then decided to vote for Modi. “Wo tarakki laayega” was their reasoning. They are hoping Modi will bring more jobs and empower them to live a better life. They’re hoping this will make them earn more so that they can live in better houses, eat better and send their children to English medium schools.

The Congress’s definition of inclusive growth is flawed. Imagine an organization paying money to its employees for years regardless of shoddy jobs being done (or none at all). How long will it survive? Apply that concept to a whole country. Now imagine an organization providing its employees a conducive environment, giving them the necessary tools to perform well, bringing in business to ensure they have work, rewarding them accordingly and expanding consistently. Now apply that concept to a whole country. Which model will succeed?

The BJP has its flaws too – lots of them. No government is clean.  Nor will they make all of India’s issues disappear. For all we know, Modi’s model might fail miserably because other states don’t have the same entrepreneurial DNA as Gujarat. But the man deserves a chance. Narendra Modi comes with a proven track record – that of 12 years. He already has made the cabinet leaner, which will hopefully lead to project approvals faster.

Indian citizens are not in favour of the BJP; they’re in favour of growth and development, which currently only 1 man seems capable of delivering. Narendra Modi has sold us Indians the only feeling which is stronger than fear – Hope! It is this emotion that has led to BJP’s landslide victory. This is a humble request to put aside all bad blood and get behind the current Prime Minister of your country. He needs your support to help you live a better life. And I think he deserves it.

Why This Fuss Over the Rupee?

The rupee is tantalizingly close to the 70 mark against the dollar. But why are so many Indians talking about it? Why this ruckus? Does it mean anything to us? Do we need to panic? Our lives won’t change much, will they? We still can go about watching reality shows and spending on expensive gadgets. What do we care if the SENSEX has tanked almost 2000 points in 2 months? Who invests in the stock exchange anyway? Right?

Actually, the weakening rupee will impact all our lives a lot. Let me tell you how.

Most Indian companies borrow from foreign banks because it means a huge savings in interest rates for them. While Benchmark Prime Lending Rate (BPLR) for commercial borrowing offered by Indian banks ranges between 9-11%, interest rates offered by foreign banks may be as low as 3-4%. Telecom companies like Bharti Airtel took loans as large as $52 million through External Commercial Borrowings (ECB). Almost all companies are debt laden; some more than the others. Now that the rupee has weakened, their savings due to lower interest rates have been wiped out. This not only translates to lesser pay hikes for employees but also leads to downsizing. Many blue chip companies in India are already laying people off. Imagine the stress on midsized and smaller firms. So, for one, the weakening rupee jeopardizes increments and jobs.

Now, 70% of India’s imports comprise of crude oil. This crude oil provides our country with petrol, diesel, cooking gas and more. With the rupee weakening, the government will have to shell out more for these crude oil barrels. And they’re not kind enough to bear the brunt themselves. It will be passed on to common man. As a result, we will have to shell out more for these commodities along with vegetables and daily goods. Hence the talk of increasing diesel’s price by Rs. 5 at once. Also, other imports like cars, electronic gadgets (mobile phones, cameras, TVs, etc.) will get expensive. So while our salaries won’t increase, the cost of everything else will. We won’t be able to protect ourselves from the ever increasing inflation.

Rupee v/s Dollar since 2011

Foreign funds and entities will not invest in India. They would rather prefer staying invested in a safe haven like the dollar instead of investing in India and running the risk of losing money.

The economy has spiralled out of control. It is now out of the Congress’ hands. They’ve made ½ the population so dependent upon them that getting out of this gloom doesn’t seem possible for the next year. The Food Security Bill will bleed the country’s coffers of 70,000 crore bucks. As always, it will be ridded with corruption and very few of the deserving poor will get food. Plus, schemes like MGNREGA have made labourers in villages leave farming and sit at home. By registering for this scheme, people are assured of Rs. 100 per day for 100 days. Farmers now find it very hard to get daily wage workers to toil on their farms. Even if they do, the labour is expensive. This means the cost of crops (and invariably, food) increases. Plus, labourers get used to earning without working. This leads to a slowdown in farming, infrastructure projects, fishing, manufacturing and other sectors.

While we can’t guarantee that another party will perform better than the Congress, we should give them a chance. If Modi can drive growth in our country, reduce the leeches in our economy, clear some cobwebs among pending projects, shouldn’t we give the BJP a chance? Even if they don’t do a phenomenal job and the Congress returns to power 5 years later, the latter will at least know that they can’t take their seats for granted. The Congress is complacent now. We need to do something to give them a jolt.

image Courtesy: Google images

The Real Story Behind the Biggest Revolution in Indian Politics...

Manmohan Singh did not free the Indian economy; P.V. Narasimha Rao did... Let's get that bit straight... I’ll tell you how.

A human bomb killed Rajiv Gandhi in 1991. Narasimha Rao was just about to retire from politics, but the Congress had other ideas. They wanted to make the – according to them, 70 something, unassuming, dull, and balding – politician to be the ‘stopgap PM’ of a government no one thought would last the whole term. But Narasimha Rao unleashed India’s biggest revolution since 1947 during his stint.

He understood India was bankrupt. Yes, WE WERE BANKRUPT! Our currency reserves wouldn’t let us buy oil for more than 2 weeks, especially with crude prices skyrocketing. There were talks of a bailout from the IMF like some EU countries are offered now. Gold reserves worth $2.2 billion had been flown from India to London as collateral for the bailout! The day after he was sworn into office, Rao stated that the government wanted to ‘remove the cobwebs that come in the way of rapid industrialisation... make India internationally competitive, taking full advantage of... opportunities offered by the evolving global economy’. Rao hired non–politicians to do the job – Manmohan Singh as FM and P. Chidambaram as Commerce Minister.

P.V. Narasimha Rao - our nation's hero

Singh devalued the Indian currency by about 20% in 2 days and proposed to abolish export subsidy, which reduced the fiscal deficit by a mammoth 0.4%. Chidambaram, a Harvard M.B.A. graduate, spent a week burning the midnight oil understanding the major issues India faced. Then, with MMS and Montek Singh Ahluwalia, he dismantled the 40 year old ‘Licence Raj’ in about 8 hours. They hurried to Rao’s house at 9 p.m. and he signed the policy. Rao wanted to further delicence all industries except the sensitive ones related to security. But he didn’t go the whole hog immediately. Instead, he arranged for reforms to be released in a phased manner. He had Chidambaram and MMS reword the policies so they seemed in continuation of Rajiv Gandhi’s work. He had friends in the opposition, whom he covertly convinced to support the new policies. He provided incentives to industries for progress. Consequently, India survived an embarrassment and is today viewed as a potential superpower.

It pains to see Rao not credited for the work he did in liberating the Indian economy; the Congress is always mum. Most experts don’t know the names of cabinet ministers of that time. That’s because Rao held those portfolios himself. If it wasn’t for Rao’s grit, political suaveness and in–depth understanding of India’s problems and their solutions, we would all have been neck deep in crap. Neither Manmohan Singh nor Chidambaram or Ahluwalia could have pulled off what they did without backing and support from Rao. No one else could’ve done what he did. Not Gandhi, not Nehru, not his daughter and neither her son.

Here’s a salute to the visionary named P.V. Narasimha Rao; one of the best things that could happen to India. Thanks to him, today we drive good cars, own fancy gadgets and watch English channels on widescreen TVs. India needs more leaders like him to grow, indeed.

Congress Now Fighting Terrorism For Us?

Afzal Guru and Ajmal Kasab hanged within 80 days! I don’t know what’s more amusing; them being hanged or how gleefully we Indians have lapped this up.

Where did the Congress suddenly get these balls from? Until a few days ago, this very party running the government was ordering lathi charges on citizens. It sat twiddling its thumbs while the youth demanded justice for the gang rape victim. The Congress sat on its huge ass since 2009 while the Indian economy almost hit rock bottom. Policy paralysis was talked about daily in newspapers. The government failed to bring about a consensus on retail FDI, GST and other policies which should have been implemented long ago. CWG, the telecom spectrum, coal mine allocation... all these scams and more came to light when the Congress was in power since 2009. Mamata Banerjee dumped the Congress, Mayawati’s support was listed by dropping CBI investigations against her; there was no respite from the Naxalite issue either. Instead, the Congress went around trying to implement Section 144 and banning books which they claimed hurt religious sentiment. Pakistani soldiers beheading Indians was also publicized in the media to distract the Indian population from the Delhi gang rape issue. It was easier to make Pakistan look the villain and shift focus from a matter we called our government to action on. Did that party really find the guts to hang terrorists; something which wasn’t done since 12 years?

Kasab & Afzal Guru hanged?

The biggest terrorists are Congress party leaders themselves. In this article, I’ve pointed out how twisted and malicious Sonia Ghandi is. The news of the terrorists being hanged is a political gimmick. Just like the Americans claiming to have killed Bin Laden and buried his body at sea. So fucking predictable! Why would the Indian government have the terrorists hanged and burn their bodies in a hush – hush manner? Wouldn’t they want to display the dead bodies to showcase what they’ve done? Isn’t that normal human tendency? In my opinion, the jailed terrorists have not being hanged. They are alive and well; probably moved to secret location. The government merely wants to earn some brownie points from us citizens ahead of the 2014 elections.

The Congress has repeatedly violated my motherland in this stint. True, other parties have done and will do the same. But when awareness has increased, why must we behave like we used to a decade ago? The Congress needs a jolt like one they got when they lost out to the BJP. They must realize that they can’t take their power for granted. The jolt in 1996 was enough to galvanize them to action when they came to power in 2004. Our GDP grew substantially and people started predicting India’s bright future. Where are we now?

One thing is certain – I’m not voting for the Congress this time. Fuck that, I’ve never voted for them. Instead, I vote for some independent party worker who will be more passionate about development in my area. We need to show politicians that they cannot live their lives battling accusations of corruption, allow crime to continue and try to distract us from core matters by focusing on petty ones. We expect them to provide us a secure environment – economically and personally. What are you going to do?

image: Courtesy Google Images