Does India Really Need an Annual Budget?

Another budget. As the cloud settles over the annual financial ritual I can't but help wonder why we still need this relic from the past.
We are no longer a planned economy in the true sense of the term, 5-year Plans not withstanding. And policy changes now cannot wait for the annual acrobatics; they need to be announced to catch the fast-changing economic landscape.
So why do we need annual budget? Frankly I don't know.
But there is serious money in celebration of this annual rite -- for the media. Just as our elections are a way for the media to mint money.
Apart from that I see no need for this exercise. But then, when has India shown that it can break away from the burdens of the past?

Indian economy: a lot of denials and some crooks

So Ramalinga Raju of Satyam actually siphoned off money from the software services giant, contrary to what he said in his open letter to the company's Board before his arrest. Well, I had all along held that while Raju might have been doing a con job, he was unlucky in getting caught and there are bigger villains in corporate India who are not caught because they are smarter. I still hold to that view.
That apart, I think the economic scene is going to get much worse and the worst is yet to come. I still can't understand how analysts and thier ilk can say Indian business is going to do well in 2009. I suspect this is an attempt to fish in murky waters. A stockbroker recently told me how he had a difficult time fending off people who approached him wanting to invest in stocks, even with borrowed money. And mind you, these were just ordinary lower middle class people with average incomes of 10-12k per month. With their being no dearth of people willing to be taken for a ride, I am not surprised at the pundits prophesying that India will rock in 2009 while the world economy will crumble!
And here is a NYT article about how investors may be losing patience with Google and Microsoft. Yes, the same New Economy giants who many other companies are hoping to model themselves after. And here we are talking about a rosy picture for the economy.! View through rose-tinted glasses, I would say.

It is going to get worse, not just for the IT crowd

The Satyam fiasco has hit India, Inc. hard, or it is not the case, depending on who you are talking to. But a lot of people in the know say Ramalinga Raju was caught out because he was unlucky. They say a lot of big companies in India, among them some real heavy hitters, are doing exactly what Raju has been caught for doing. Just that they are a lot more smarter and are better connected.
The thing is the IT crowd is worried. For some years now they were the high-fliers in India - in professional and social circles. But all that has changed. There are reports from Bangalore that IT pros have lost their sheen in the marriage market, the most important indicator of social status in India. Well, that has been happening for a couple of years now, but has gained momentum with the setting in of the slowdown and now with the Satyam scandal.
The IT sector is not the only one affected by the slowdown, but a lot of people in others sectors are still in denial. They seem to think India won't be affected much by the downturn and things will be as hunky-dory as they have been.
Wrong. I was talking to a stock broker yesterday and he confirmed my worst fears: the downturn is yet to reach India and things will be pretty bad by March this year. Of course, a lot of companies still have the money to weather the slowdown but it would be a grave mistake to think the party of the yesteryears will continue.
And you have to worry about the millions of youngsters who will graduate from our colleges this year, some of them having taken courses promising jobs in the sunrise sectors, after paying huge fees. They will add to the unemployment and social problems in the country; the surplus in the labour market will see salaries take a dive. Especially in such blotted sectors as retail. Someone told me a couple of months back that a retail professional with just 2 years experience was commanding a salary of Rs 36 lakh a year! Those are definitely going to be rationalised and it will have an effect on consumer spending.
I am sure we haven't even seen the beginning of this downturn yet. And a lot of people think we won't be affected by it. More scary, think of all those expats, especially from the Gulf countries, who may start to return if that area of the globe is hit by the recession.

Headwinds for the economy, but there's a silver lining

Just 20 years back, the average Indian would have known pretty much nothing about the economic state of the country or the world, and even cared less about it. But the last 10 years have changed that so much that now almost everyone one meets is worrying about the impact of the current economic slowdown on their lives. At the very least, the economy is now racking up the worry quotient in Indian society.
That apart, the economy is a cause of concern. The boom, though most of it powered by the black money flowing into sectors such as real estate, is slowing visibly. The job scene is getting cloudier by the day -- today someone called me from Delhi to say the Times group is planning to fire 1,200 people. Well, even the media scene which showed so much irrational exuberance is getting dark. How will this impact the country and its people?
Of course, not everything is going to be bad. Here are two areas where I think the slowdown is going to be good. Think of the ecology. For the last 10 years we were more interested in exploiting to the hilt what Mother Nature had offered us. Now, the slowing down of the economy would mean the pace of exploitation would slow down too. That is going to be definitely good for the earth and its environment.
Also in the last 10 years our politicians have managed to get away with their corrupt and inept governance of this country as the boom offered jobs and riches to more people than they ever could hope to. Now things are going to change. Once again these effete class of people will come under the scanner; if they don't deliver (and I very much doubt they can), it won't be long our ossified political system could be washed away by the rage of the people.
Will all this lead to a new way of life? I hope it does. If we have to suffer some pain for something that is going to immensely benefit all of us, all living beings, then it would be something worth suffering.

Crossing The Rs 12 Red Line

I started this blog to express my views about happenings in India but have been concentrating lately on Kerala and the theatrics happening in the state's political scene. But something has jolted me back to focus on my original goal.
There is this government-commissioned report that says 836 million Indians live on less than Rs 20 a day, or about 50 cents in US dollars. That figure comes to around 75 per cent of the Indian population. And some of them are not even considered poor by our government or planners because our own poverty threshold is around Rs 12 a day! Now, which one of us can survive on Rs 20 a day, let alone Rs 12? Still millions in this country lead such a terrible life.
The silver lining in their lives is that living standards and income levels are increasing and, if not they, their children can hope to be out of this terrible burden on their lives.
But it is not an easy road to that destination. Because, for one, the current rise in incomes is due to a strong global economy and outsourcing boom. The first one is already under threat with hedge funds and speculators trying to spoil the party. The second one, too, is not going to be there always. Because of job pressures from the West, and because our own politicians are trying to make life difficult for companies that are tapping into outsourcing in India.
I run such a company, and I cannot explain how much I am perturbed by the frequent stop-works and strikes our political parties indulge in. I am answerable to my clients and I cannot tell them every day that "oh, we got a bandh here".
There is a vested interest for the political parties here to see the poor remain poor - as permanent vote banks. So they don't care about raising them above the Rs 12 red line of poverty.
Just think of this: which of our politicians, including the Communists, would be able to survive on Rs 12 a day? But then, the poor have no voice!